Forterra plc
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Description
Forterra is the former UK operation, Hanson Building Products, part of the UK-US conglomerate. It is the UK’s second largest brick producer, selling principally to the UK new build housing and residential repair, maintenance & improvement (RMI) markets. It also manufactures concrete blocks and specialist clay and concrete products. It returned to the stock market in April 2016.
Our view
We believe that UK new build housing production will be boosted by major government initiatives to address under-supply. Brick pricing power should be underpinned by reductions in industry stock levels and import penetration. Forterra’s strong cash generation should boost returns and support dividend growth over our forecast period, in our view.
Recent Research
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Financial Summary
Year end: December (£m unless shown)
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Revenue | 294.5 | 331.0 | 367.5 | 380.0 | 272.5 |
| Adj EBITDA | 70.6 | 75.4 | 78.8 | 82.7 | 29.9 |
| Fully Adj PBT | 54.3 | 61.1 | 64.8 | 62.5 | 8.9 |
| Fully Adj EPS (p) | 21.4 | 24.3 | 26.1 | 25.5 | 3.4 |
Profit & Loss
Year end: December (£m unless shown)
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Revenue | 294.5 | 331.0 | 367.5 | 380.0 | 272.5 |
| Adj EBITDA | 70.6 | 75.4 | 78.8 | 82.7 | 29.9 |
| Adj EBIT | 60.2 | 64.5 | 67.1 | 65.0 | 11.9 |
| Reported PBT | 37.1 | 59.3 | 64.8 | 58.2 | (15.1) |
| Fully Adj PBT | 54.3 | 61.1 | 64.8 | 62.5 | 8.9 |
| NOPAT | 47.7 | 52.0 | 54.7 | 52.3 | 9.7 |
| Reported EPS (p) | 13.8 | 23.8 | 26.5 | 23.8 | (5.9) |
| Fully Adj EPS (p) | 21.4 | 24.3 | 26.1 | 25.5 | 3.4 |
| Dividend per share (p) | 5.8 | 9.5 | 10.5 | 11.5 | 0.0 |
Cash Flow & Balance Sheet
Year end: December (£m unless shown)
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Operating cash flow | 56.2 | 90.2 | 79.8 | 63.8 | 16.8 |
| Free Cash flow | 28.8 | 69.2 | 49.5 | 30.1 | 4.3 |
| FCF per share (p) | 14.4 | 34.6 | 24.8 | 15.3 | 2.1 |
| Acquisitions | (0.1) | (21.8) | (2.1) | (1.8) | 0.0 |
| Disposals | N/A | N/A | N/A | N/A | N/A |
| Shares issued | |||||
| Net cash flow | 32.0 | (27.2) | (3.0) | 0.6 | 24.7 |
| Overdrafts / borrowings | 148.5 | 89.8 | 64.8 | 83.9 | 83.9 |
| Cash & equivalents | 56.2 | 29.0 | 26.0 | 26.6 | 51.3 |
| Net (Debt)/Cash | (92.3) | (60.8) | (38.8) | (57.3) | (32.6) |
Nav & Returns
Year end: December (£m unless shown)
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Net asset value | 69.2 | 104.7 | 134.2 | 156.2 | 196.5 |
| NAV/share (p) | 34.6 | 52.2 | 67.0 | 77.9 | 85.9 |
| Net Tangible Asset Value | 55.5 | 88.9 | 116.9 | 138.0 | 178.3 |
| NTAV/share (p) | 27.8 | 44.3 | 58.3 | 68.8 | 78.0 |
| Average equity | 214.6 | (7.0) | (219.5) | (70.7) | 87.0 |
| Post-tax ROE (%) | 12.8% | (680.4%) | (24.0%) | (66.2%) | (14.2%) |
Metrics
Year end: December (£m unless shown)
| 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|
| Revenue growth | 1.5% | 12.4% | 11.0% | 3.4% | (28.3%) |
| Adj EBITDA growth | 0.1% | 6.8% | 4.5% | 4.9% | (63.8%) |
| Adj EBIT growth | (1.5%) | 7.1% | 4.0% | (3.1%) | (81.7%) |
| Adj PBT growth | 59.3% | 12.5% | 6.1% | (3.5%) | (85.8%) |
| Adj EPS growth | 44.0% | 13.5% | 7.4% | (2.3%) | (86.5%) |
| Dividend growth | N/A | 63.8% | 10.5% | 9.5% | (100.0%) |
| Adj EBIT margins | 20.4% | 19.5% | 18.3% | 17.1% | 4.4% |