Cost-cutting measures including redundancies and mothballing of factories will help brick-maker Ibstock achieve up to £20 million of annual fixed cost savings in 2021 and put it in a good position to take advantage of the market recovery.
That’s according to an Interim Results Statement for the six months to 30 June 2020.
Since the temporary cessation of production activities in late March and the phased re-opening of production from May, clay sales volumes have recovered to around 60% of prior year levels in June, from 10% in April, with recovery via the merchant sector outpacing that from house builder.
The concrete business delivered a more resilient performance, underpinned by RMI and infrastructure markets, with volumes at 80% of prior year levels in June from 30% in April. In July, clay sales volumes rose to around 80% and concrete sales volumes to around 85% of prior year levels.
Revenue still declined by 36%, with the Clay Division falling 43% and the Concrete Division 15%.
The company is looking at a pre-tax loss of £52 m (2019: £41 million profit) that reflect its weaker performance and costs of £41m related to the COVID-19 crisis and restructuring.
CEO Joe Hudson said: “The COVID-19 pandemic has created unprecedented challenges for our industry and the wider UK economy. In response, we have taken swift and wide-ranging action to safeguard the future of the business, including some difficult decisions about the future shape of our manufacturing network. Throughout this period, the health and safety of our colleagues has been our key priority, and I would like to thank them all for their dedication and support over the last few months.
“We entered the crisis with a strong balance sheet. Decisive management action at the outset of the pandemic to control costs and preserve cash ensured the Group was adjusted free cash flow positive during the second quarter and we remain in a solid financial position. With new safe working procedures in place, the majority of our manufacturing plants have now reopened and we are encouraged by recent market trends.
“The fundamentals for our markets remain positive, with a substantial housing deficit in the UK and Government policy which is supportive of the role the construction sector will play in the UK economic recovery. The action we have taken to strengthen the business and improve liquidity, including measures to reduce costs and restructure our operations, provide further flexibility and position us well both to meet current challenges and benefit from recovery in our core markets.”