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Ibstock hints at US weakness

The brick maker highlighted a structural weakening in its US markets, although sales at home are doing well
August 11, 2017

Everyone agrees that we are not building enough, but the imbalance between supply and demand is keeping the new-home market profitable for housebuilders. That's good news for brick maker Ibstock (IBST). First-half revenue grew in line with expectations (see table), reflecting a robust performance on home turf. The domestic business, which accounts for the lion’s share of group revenue, saw sales rise 8 per cent to £186m following strong volume growth. This translated into a 7 per cent rise in adjusted UK cash profit to £57m.

IC TIP: Buy at 239.8p

But there were pockets of weakness. In the UK, capacity constraints within soft mud bricks meant volume growth actually wasn’t as high as it could have been, while a general softening in the US market held back progress there.

Across the pond revenue grew by 11 per cent at actual exchange rates, although this was largely the result of a £5m foreign exchange tailwind. Exclude this and revenue actually fell, as did cash profit. US volumes also reported a mid-single-digit decline during the first half, which the company blamed on a market slowdown in the both multi-family and non-residential projects across the north-east and mid-west regions of the country.

Analysts at Peel Hunt expect pre-tax profit of £96m for the year ending December 2017, giving EPS of 18.3p, compared with £88.7m and 16.9p in 2016.

IBSTOCK (IBST)   
ORD PRICE:239.8pMARKET VALUE:£975m
TOUCH:239.5-240p12-MONTH HIGH:261pLOW: 157p
DIVIDEND YIELD:3.3%PE RATIO:11
NET ASSET VALUE:96p*NET DEBT:41%
Half-year to 30 JuneTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201621037.97.42.4
201722838.97.62.6
% change+9+3+3+8
Ex-div:17 Aug   
Payment:22 Sep   
*Includes intangible assets of £120m, or 29p a share