LONDON (ShareCast) - (Sharecast News) - Ibstock reported a "good start" to the new financial year on Thursday, trading slightly ahead of expectations, with robust demand from both the new build housing and repairs, maintenance and improvement (RMI) end markets.
The FTSE 250 brickmaker, which was holding its annual general meeting later in the day, said sales volumes in its clay division were ahead of internal expectations for the first quarter, while concrete volumes were in line with its forecasts.

Its board said it was "encouraged" by that performance and, while mindful of the economic uncertainties and disruption caused by Covid-19, added that it remained confident for the year ahead.

Ibstock said UK housing market fundamentals remained "strongly positive", with a structural undersupply of new build housing which was expected to continue over the medium term.

As the residential housing market recovered, domestic demand for clay bricks would continue to exceed that available from domestic manufacturing capacity.

Against that backdrop, the group said it was restarting the redevelopment of its Atlas site in the West Midlands, replacing the existing mothballed facility with a new "state-of-the-art" wire cut clay brick factory.

The Atlas project had been revised and expanded since the announcement of the original proposal in early 2020, with an increase in capacity and further significant enhancements to deliver improved environmental performance.

Ibstock said the project also included investment to upgrade and expand capacity at the adjacent Aldridge brick factory.

"The new Atlas factory will have outstanding sustainability characteristics, incorporating state-of-the-art technology, with significantly reduced process emissions, resulting in a major reduction in carbon intensity," the board said in its statement.

"Ibstock believes that, in combination with a planned investment in high quality environmental projects to offset the remaining carbon, the Atlas site will be the first net-zero brick-manufacturing facility in the UK."

In total, the redeveloped facilities would deliver capacity of 115 million bricks per annum, equivalent to a net increase in its overall clay network capacity of 75 million bricks, after taking into account the existing capacity of the mothballed Atlas factory.

Together, the Atlas and Aldridge factories would benefit from the existing strong transport infrastructure, and high-quality clay reserves at the site.

The total capital cost of the project, which remained subject to final planning permission, would be around £60m , with both the new Atlas factory and the upgraded Aldridge factory expected to begin commissioning in the second half of 2023.

Ibstock said the expected timing of cash outflows was expected to be around £10m in 2021, £30m in 2022, £15m in 2023 and the balance in 2024.

At full output from late 2024, the project was expected to deliver incremental EBITDA of at least £12m per annum, and to provide a return on capital employed in line with the group's average.

"We've made an encouraging start to 2021, supported by robust demand in both the new build housing and RMI markets," said chief executive officer Joe Hudson.

"With the market outlook now clearer, we are refocusing on growth."

Hudson said redevelopment of the firm's wire cut brick facilities in the West Midlands would deliver a "significant" capacity expansion, further demonstrating the company's leadership in the clay brick market, which was expected to continue long-term growth over time.

"The project is another tangible example of our commitment to the net zero carbon journey and provides a great exemplar of British building products manufacturing.

"We have a number of additional organic investment opportunities under evaluation and expect to update shareholders on these as the year progresses."

At 0821 BST, shares in Ibstock were up 3.08% at 227.8p.

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