viewIbstock PLC

Ibstock receives boost from sterling's collapse

Revenues from US operations are more weighty when converted into sterling, while the pound's collapse has made foreign bricks dearer to import

Sterling on the slide
Sterling's slide has been good news for the bricks maker

Bricks maker Ibstock Plc (LON:IBST) expects underlying earnings (EBITDA) for the year just gone will be in line with expectations.

Group revenue for 2016 was up 5% year-on-year, helped by some favourable exchange rate movements, which contributed to an 18% rise in US revenues; the rise would have been only 4% had exchange rates remained constant.

Revenue from clay and concrete products in the UK, which represents around 80% of group revenue, was up 2% on 2015.

The increase in revenue in 2016 reflects low single digit volume growth for clay brick and further volume and price growth in the concrete businesses, Ibstock said.

The increase in volumes was despite the previously reported release of brick inventory by distributors.

Growing house builder activity supported a stronger second half and national brick imports declined significantly over the year, as the buying power of sterling depreciated markedly following the EU referendum vote.

Price negotiations for 2017 with all of Ibstock’s major UK brick customers have been concluded and are in line with management expectations.

Net debt at the end of 2016 was heading in the right direction, despite the group splashing out significant sums on major projects.

Shares were little changed on the news, despite broker Peel Hunt moving from an ‘add’ recommendation to ‘hold’.

The broker increased its target price to 190p, which is about 4p above Friday’s close.

The shares trade on a price/earnings multiple of 10.7, based on peel Hunts earnings forecast for 2017, and the dividend yield is 4.2%.

Quick facts: Ibstock PLC

Price: 195.6 GBX

Market: LSE
Market Cap: £801.1 m

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