As expected by management, Ibstock plc (LON:IBST) saw volumes tail off in the fourth quarter due to reduced activity among its client base in the construction sector. Nonetheless, it described performance in the quarter as resilient, driven by a continued focus on price and margin management and good operational execution.
Ibstock now expects a 25% increase in 2022 revenues to about £510m, with cash profits (EBITDA) modestly ahead of management’s prior expectations. Cash generation is also better than expected, with net debt at the year-end of about £46m.
Q4 2022 hedge fund letters, conferences and more
Ibstock is continuing to invest in its Futures division which focuses on the shift to sustainability and industrialisation in the construction industry.
In 2023 Ibstock cautioned that higher interest rates, inflation and heightened market uncertainty are likely to impact demand for its products. However, it remains confident in its medium-term financial targets.
The shares were broadly flat in early trading.
Ibstock Will Face Hurdles In 2023
Derren Nathan, Head of Equity Research at Hargreaves Lansdown:
Two upgrades in as many trading updates is no mean feat for Ibstock in the current environment. But 2023 is likely to see some bumps in the road. We are already seeing signs that construction activity is being held back among the housebuilders.
However, Ibstock has shown that it is an excellent operator, and its focus on innovative products, such as the recent launch of the UK's first net zero bricks should help soften the impact from a weaker housing market. The balance sheet is also in relatively good shape following the disposal of non-core property assets.
With darkening clouds on the horizon though, we may not see an expansion of the share buy-backs seen last year. We think the valuation doesn’t price much in for future growth prospects, but there may not be much in the way of catalysts for the shares over 2023.
