A clear path
for growth
2021 Annual Report and Accounts
Our purpose
We are driven by our purpose to build a better world
by being at the heart of building and have been helping
to shape the homes, places and spaces of Britain since
we began over 200 years ago.
Who we are
Ibstock is a leading manufacturer and supplier of
clay and concrete building products and solutions to
the UK construction industry specialising in products
and systems for the residential building envelope and
infrastructure markets.
What we do
Our core business focuses on the residential construction
sector and we have built strong relationships with
our house builder, developer, builders’ merchant and
distributor customers over many years.
OVERVIEW
Find out more online
ibstockplc.co.uk
Front Cover
Project name:
Lambeth Palace
Library
Product used:
Swanage Handmade
Bespoke Blend and
Ashdown Blue Grey
Headers
Inside
Front Cover
Project name:
Lambeth Palace
Library
Product used:
Swanage Handmade
Bespoke Blend and
Ashdown Blue Grey
Headers
CONTENTS
Strategic Report
02 Our 2021 Performance
04 Our Business at a glance
06 Chairman’s statement
08 Chief Executive Officer’s review
14 Our markets
16 Our purpose and business model
18 Our Strategy
28 Our Key Performance Indicators
30 Responsible Business
48 Taskforce on Climate Related Financial
Disclosures
52 Our Principal risks and uncertainties
62 Business Review
64 Financial Review
69 Non-financial information statement
70 Section 172(1) statement
72 Viability statement
Governance
76 Introduction to Governance
78 Board of Directors and
Company Secretary
80 Corporate Governance Statement
87 Nomination Committee Report
89 ESG Committee Report
92 Audit Committee Report
97 Directors’ Remuneration Report
122 Directors Report
Financial statements
125 Independent Auditor’s Report
132 Consolidated income statement
133 Consolidated statement of
comprehensive income
134 Consolidated balance sheet
135 Consolidated statement of
changes in equity
136 Consolidated cash flow statement
136 Reconciliation of changes in cash and
cash equivalents to movement in net debt
137 Notes to the consolidated
financial statements
177 Company balance sheet
178 Company statement of changes in equity
179 Notes to the Company financial
statements
183 Group five-year summary
Additional information
184 Cautionary Statement
IBC Shareholder Information
Ibstock at a glance
Ibstock is a leading UK manufacturer
of clay bricks and a diversified range
of clay and concrete products and
solutions. Find out more on page 4
Our 2021 performance
Ibstock has delivered a strong performance for the year.
Trading was robust, with good operational execution,
supported by strong demand across both clay and
concrete markets. See page 2.
Ibstock Futures
Announced in November 2021,
Ibstock Futures is a new business
unit which will be focused specifically
on fast-growing and innovative
sectors of construction markets
See pages 10 and 27
New Atlas Factory
Within the core business, we are
investing £60 million over the next two
years to redevelop our wire-cut clay
brick facilities in the West Midlands,
including the construction of a new
state-of-the-art factory at our Atlas site,
which will manufacture the UK’s first
net-zero carbon bricks from late 2023.
See page 36
Project name: Brookfield –
University of Leicester
Product used: Ivanhoe Cream
Project name: Station Road, Cambridge
Product used: Sevenoaks Yellow
Governance Financial statements Additional information
Strategic Report
01
Ibstock plc Annual Report and Accounts 2021
Financial highlights
Our 2021 results reflect both continued robust demand across
our markets and strong operational execution
Revenue +£93m
£409m
2020: £316m
2019: £409m
Total dividend per share +5.9p
7.5p
2020: 1.6p
2019: 3.2p
Adjusted free cash flow*
+£25m
£51m
2020: £26m
2019: £33m
Statutory reported profit +£89m
£65m
2020: £(24)m
2019: £82m
Adjusted EBITDA* +£51m
£103m
2020: £52m
2019: £122m
Net debt*
(£30m)
£39m
2020: £69m
2019: £85m
Statutory reported basic EPS +14.6p
7. 8p
2020: (6.8)p
2019: 16.3p
Adjusted EPS* +9.9p
13.9p
2020: 4.0p
2019: 18.3p
*Alternative Performance Measures (APMs) are described in Note 3 to the consolidated financial
statements.
All future references to APMs within the Strategic Report and Corporate Governance section are
denoted by an asterisk.
Our 2021
performance
Strategic Report
02
Ibstock plc Annual Report and Accounts 2021
A clear path for growth
Financial
Strength
Over £200 million of available cash after committed growth
investments and ordinary dividends over the next five years, allowing
further organic and inorganic growth investments and additional
shareholder returns
Responsible
Business
Launch of a new Environmental Social & Governance (ESG) strategic
framework with ambitious targets underlining our commitment to
sustainable growth. This includes targets to reduce carbon emissions by
40% by 2030 (using a 2019 baseline) and be a net zero carbon business
by 2040
Ibstock Futures
Establishment of Ibstock Futures to capture growth opportunities in
new, fast growth and innovative sectors of UK construction markets
Investment
Committed investment during 2022 in Atlas, Aldridge and Nostell
projects to support our medium-term growth
Governance Financial statements Additional information
Strategic Report
03
Ibstock plc Annual Report and Accounts 2021
Map key
I-Studio
Ibstock Clay
Ibstock Concrete
OUR BUSINESS AT A GLANCE
Ibstock plc is a leading UK
manufacturer of clay and concrete
building products and solutions.
Principal products across our two core
divisions of Ibstock Clay and Ibstock
Concrete include – clay bricks, brick
components, concrete roof tiles, concrete
alternatives for stone masonry, concrete
fencing and prestressed concrete products.
We are market leaders in the UK across
our core business – with the Group well
positioned for further strategic growth.
Through a focus on market-led
innovation, we are committed to
providing solutions to meet the evolving
needs of our customers and the built
environment over the long term.
Our business in numbers
200
Over 200 years of experience
36
Manufacturing sites across the UK
2,119
Employees across the UK
95%
Raw materials sourced in UK
400+
Over 400 different brick products
c.76m
Tonnes of consented clay reserves
No. 1
Manufacturer of clay bricks in the UK by
production capacity
Our financial objectives
In order to demonstrate the scale of our ambition and help frame
the potential of these plans, we have defined a set of medium-term
financial targets:
• Target to grow Group revenues to in excess of £600 million by 2026
• Medium-term profitability targets: Adjusted EBITDA*
margins in the
Clay business of >35%and overall Group margins of at least 28%
• Targeting revenues outside of traditional clay brick to represent >40%
of the Group
• Committed to retaining our capital discipline with (Return on Capital
Employed (ROCE*))
of at least 20% in the medium term
Our revenue target will be achieved through a combination of:
• Volume growth in our existing network and from our already committed
investments, giving us a clear pathway to revenues in excess of
£550 million
• Incremental organic and inorganic initiatives in Ibstock Futures, providing
the potential to grow beyond our overall £600 million target
Our investment levers
Investment driven growth through two areas of focus:
Grow Diversify
Grow our existing business
(capacity, efficiency,
sustainability)
Diversify the revenue base;
focused on UK residential
building envelope
Clear, consistent investment criteria
Strategic Report
04
Ibstock plc Annual Report and Accounts 2021
Sustain
Innovate
Grow
Strategy
Operating with a focus on the environmental and social
impacts of our business has been central to who we are
for many years. To drive performance in this area, we
initially developed a number of ESG targets in 2018.
We look back on our ESG progress to date, as well as
introduce our new strategic framework for the future
from page 30. This is centred around: Addressing
Climate Change, Improving Lives and Manufacturing
Materials for Life.
Ibstock Futures
In late 2021, we announced a new part of the Group that we call
‘Ibstock Futures’.
This will enable us to accelerate growth and diversify our revenue base by
targeting fast growing areas of the UK construction market, as well as
developing a stronger presence in the off-site and more modern methods
of construction markets.
As demand grows for façade products and solutions for both new build
and re-cladding products, Ibstock Futures will be focused on developing
new products suitable for a wide range of residential, commercial and
mixed-use applications.
More details on this exciting new development can be found on page 10.
Ibstock Clay
Our Clay division offers the largest range of bricks manufactured in the
UK as well as prefabricated elements, precast solutions and brick-faced
façade systems for both low-rise and high-rise developments.
A business review for the Clay division can be found on page 62.
Ibstock Concrete
Our Concrete division manufactures high quality, precast concrete
products for the residential housing and hard landscaping markets
and also has a small but valuable position in infrastructure markets.
A business review for the Concrete division can be found on page 63.
Financial highlights
Divisional Revenue
£128m
Divisional Adjusted EBITDA*
£22m
Highlights of the year
• Activity levels remained
resilient across all
product categories
• Strong levels of demand
for rail products.
Financial highlights
Divisional Revenue
£280m
Divisional Adjusted EBITDA*
£91m
Highlights of the year
• Sales building back towards
pre-pandemic levels
• Productivity and costs
well managed
Governance Financial statements Additional information
Strategic Report
05
Ibstock plc Annual Report and Accounts 2021
CHAIRMAN’S STATEMENT
A year of progress
and delivery
The Group has delivered a set of
strong results and laid out its growth
ambitions for the longer term”
Jonathan Nicholls
Chairman
Strategic Report
06
Ibstock plc Annual Report and Accounts 2021
The Group delivered a significantly improved result in 2021 compared to the
prior year and the growth plans that we now have, including investments in
the core business alongside a number of diversified growth opportunities
present really exciting developments for the future of both Ibstock and the
construction industry more generally.
Following the initial lockdown in spring 2020, the construction industry has
proved to be highly resilient with output estimated to have risen by 13.3%
in 2021, taking it back to pre-COVID levels. The Group saw strong demand
trends during 2021, with robust activity in all key end-market segments
and trading benefiting from a combination of a resilient operational
performance and the dynamic commercial approach taken by the Group
in both divisions in response to significant inflationary pressures.
Industry supply chain impacts, particularly relating to availability of freight
and labour, were well managed and product price increases were successful
in mitigating the effect of the significant input cost inflation experienced
during the second half of the year.
The results for the year showed material year-on-year improvement in all of
our key financial metrics. Sales of £409 million were 29% up on 2020 and
in line with the pre-COVID performance reported in 2019 whilst adjusted
EBITDA* grew by nearly 100% to £103 million (2020: £52 million,
2019: £122 million), returning the adjusted EBITDA* margins to over 25%,
compared to 16.5% in 2020 and 29.9% in 2019. Statutory profit was
£65 million (2020: £(24 million)) and statutory earnings per share grew to 7.8
pence (2020: loss of 6.8 pence) reflecting the strong earnings momentum
of the business.
Dividend
The Group’s performance, financial strength and prospects support the
Board’s decision to recommend a final dividend of 5.0 pence per share
(2020: 1.6p), resulting in a full-year 2021 dividend of 7.5 pence per share, up
5.9p year-on-year (2020: 1.6 p).
Our colleagues
We have continued to focus on the wellbeing of all of our colleagues, whilst
maintaining a high-quality service to our customers and delivering positive
outcomes for all our stakeholders. It is the hard work, dedication, and efforts
of those who have worked for, and with, Ibstock over the past year that have
enabled us to deliver this strong performance. On behalf of the Board, I
would like to express our gratitude to all those who have contributed to this
result, for their resilience, ongoing commitment, and their support and
patience for the evolution in working practices.
Further information concerning engagement with our workforce and some
of our achievements during the year can be found in the Responsible
Business section on pages 38 and 39.
Governance and culture
We remain committed to driving long-term sustainable performance for the
benefit of our workforce, customers, shareholders and wider stakeholders.
This includes the application of high standards of corporate governance and
making sure that these principles are embedded into our culture.
The Responsible Business section on page 40 provides insight into how the
Board engages with all key stakeholders to understand what matters to
them, further informing its decision-making and the actions taken as a
consequence. The Board made several principal decisions during the year
including that related to the construction of the first net zero carbon brick
factory in the West Midlands and further detail on decision making can be
found both the Section 172(1) Statement (S172(1)) on pages 70 and 71 and
in the Corporate Governance Statement on page 83. Our full Governance
section includes details of our application of the Principles of the UK
Corporate Governance Code 2018 (Code) and starts on page 74.
Diversity and Board changes
The Board had a number of discussions regarding composition and
succession during the year under review and concluded that it would
commence a search to identify an additional Non-Executive Director to
provide additional skills and depth to the Board. Therefore, I was delighted to
be able to announce that Peju Adebajo had joined the Board last November
and I look forward to her having a positive impact on the dynamics of our
Board discussions going forwards. We continue to work with the
management teams within Ibstock to improve and develop the Group’s
diversity and inclusion strategy as well as its practical application and this
will be a priority for 2022. Information regarding the appointment process
for Peju and what Ibstock has achieved with respect to its diversity plans
during the year can be found on page 88.
ESG and Net Zero
Our commitment to sustainability and social progress has represented a
strong unifying cause for everyone at Ibstock for a number of years and we
maintain our ambition to be the most sustainable manufacturer of clay and
concrete products in the UK, and to lead our sector in the disclosure and
transparency around Environmental, Social and Governance (ESG) issues.
We have invested significant capital over the last decade, with investment
projects, such as the Atlas re-development, across the Group’s plant network
contributing to a reduction in the carbon intensity of our manufacturing
processes. Further information can be found in the Strategy section on page
18.
After making excellent progress over the last three years towards our original
ESG targets, we announced during the final quarter of the 2021 year a
number of ambitious new commitments. These are set out in a new ESG
strategic framework including a target for the business to be net zero carbon
by 2040 and represent the product of a year of hard work and dedication
overseen by the new ESG Committee. These targets are underpinned by our
industry-leading approach to sustainable and responsible growth.
The details of this new approach can be found in the Responsible Business
section of page 32 and the work of the ESG Committee is summarised in the
ESG Committee report on page 89.
The Group is committed to increasing the transparency of reporting around
climate impacts and risks, and we have made great progress during 2021
so that we are compliant with the new Listing Rules requirements relating
to the recommendations of the Task Force for Climate-related Financial
Disclosures (TCFD).
Further information can be found in the Principal Risks section on page 52
and the TCFD disclosures on page 48.
Looking towards the future
Whilst we remain mindful of the broader macro-economic uncertainties,
particularly in light of the tragic conflict in Ukraine, the Group has made a
good start to the new financial year, with a robust demand backdrop across
end-markets. This positive momentum, along with additional brick capacity
coming on stream during the 2022 year, provides us with a strong platform
to deliver significant further financial and strategic progress in the current
financial year.
Jonathan Nicholls
Chairman
Governance Financial statements Additional information
Strategic Report
07
Ibstock plc Annual Report and Accounts 2021
CHIEF EXECUTIVE OFFICER’S REVIEW
Building for the
long term
I am pleased to report a strong performance for the year. Trading was
robust, supported by strong demand across all our key markets, and good
operational execution across the Group ensured we delivered a significantly
improved result in 2021. Industry supply chains became more challenging
during the second half of the year, making the strong financial results
particularly pleasing.
2021 was also a year of good strategic development, with important
progress across all three of our strategic pillars: Sustain; Innovate; and Grow.
We achieved this while navigating the continuing challenges presented by
the COVID-19 pandemic, ensuring that we were able to keep all of our
people safe whilst continuing to serve our customers. I am extremely proud
of the way that our people have delivered this year, and I would like to thank
them for the passion and commitment they have shown.
During the year we set out our plans to grow our business and create strong
shareholder returns in the mid-term, through a combination of growing our
existing, core business alongside significant diversified expansion into new
areas of construction markets. We are now launching a series of medium-
term financial targets to demonstrate the scale of our ambition and help
frame the potential of these plans.
Within the core business, we are investing £60 million over the next two
years to redevelop our wire-cut clay brick facilities in the West Midlands,
including the construction of a new state-of-the-art factory at our Atlas site,
which will manufacture the UK’s first net-zero carbon bricks from late 2023.
This investment is on track and expected to deliver significant earnings
growth from 2024 onwards.
Alongside this, to create the necessary focus on diversified growth
opportunities, during 2021 we also announced the creation of a new
business unit, Ibstock Futures, which will be focused specifically on fast
growing sectors of construction markets. The launch project for Ibstock
Futures, an investment of £50 million to build the UK’s first automated brick
slips factory, will enable Ibstock to take a leadership position in this market
serving the fast growing mid and high-rise construction sectors.
Our commitment to environmental sustainability and social progress
represents a strong unifying cause for everyone at Ibstock. Having made
excellent progress over the last three years towards our original ESG targets,
during the final quarter of 2021 we announced ambitious new commitments,
including a target for the business to be net zero carbon by 2040.
Introduction
As well as being a critical focus for delivering ESG progress, energy
consumption constitutes a material element of our overall cost base.
We actively mitigate energy price risk through a strategy of fixed price
forward cover, and currently have around 85% of energy requirements for
the 2022 year covered, along with around one-third of cover for 2023.
In light of the Group’s financial strength and prospects, the Board has
recommended a final dividend of 5.0 pence per share (2020: 1.6p) resulting
in a full year dividend of 7.5 pence per share, an increase of 5.9p (2020: 1.6p).
The total dividend for 2021 represents a pay-out of 54% of adjusted
earnings.
We expect to deploy significant growth capital in the business during the
2022 year and beyond, with a growing pipeline of both organic and
inorganic opportunities. The Board expects to generate capital in excess
of that required for its investment requirements and remains committed
to returning surplus capital to shareholders as part of its dynamic and
disciplined capital allocation strategy. The potential for additional returns
of capital will be kept under active review during the 2022 year.
Financial Performance
The results for the year showed significant progress on 2020, with material
year-on-year improvement in all of our key financial metrics. Sales of
£409 million were 29% up on 2020 and in line with the pre-COVID
performance reported in 2019, as the Group performed well in healthy
markets. Industry-wide supply chain challenges were well managed and the
impact of inflationary pressures on our cost base was mitigated through
a dynamic commercial approach in both divisions. Adjusted EBITDA* grew
by nearly 100% to £103 million (2020: £52 million, 2019: £122 million),
returning the adjusted EBITDA* margins to over 25%, compared to 16.5%
in 2020 and 29.9% in 2019. Statutory earnings per share grew by 14.6 pence
to 7.8 pence (2020: loss of 6.8 pence) reflecting the strong earnings
momentum of the business.
The balance sheet was further strengthened through an excellent cash flow
performance, with net debt reducing by £30 million to £39 million (December
2020: £69 million), representing a net debt to adjusted EBITDA* ratio of 0.4
times (2020: 1.5 times). The Group continued to manage capital expenditure
and working capital effectively, with finished goods inventories modestly
above 2020 year end levels, and capital expenditure of £25 million
(2020: £24 million), including the first tranche of investment in the
redevelopment of our Atlas and Aldridge factories.
Find out more
Our markets p14
Our purpose and business model p16
Our Strategy p18
Our Key performance indicators p28
Responsible Business p30
Our Principal risks and uncertainties p52
Strategic Report
08
Ibstock plc Annual Report and Accounts 2021
“These results reflect continued
robust demand across our markets
and strong operational execution.
We are also building on our ESG
ambitions with the launch of our new
strategic framework and performance
targets to take us to 2030”
Joe Hudson
Chief Executive Officer
Governance Financial statements Additional information
Strategic Report
09
Ibstock plc Annual Report and Accounts 2021
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Divisional Review
Ibstock Clay
The Clay division delivered strong progress in the year, building on the
momentum of the second half of 2020 with clay sales volumes building
back towards pre-COVID levels. Supply chain conditions became more
challenging during the second half of 2021, although the business was able
to mitigate these issues effectively with limited impact on operational
performance. Significant inflation experienced throughout the second half
of 2021 across the key cost areas of energy, freight, carbon and materials
was recovered by a price increase in the final quarter of the year. Our energy
hedging strategy, which requires us to layer in forward cover over a number
of years for both natural gas and power, provided a critical level of protection
against energy prices which spiked very sharply during the second half of 2021.
Productivity and costs were well managed during the year, with the active
network running at high levels of utilisation and committed fixed cost
savings captured in full. Planned annual shutdowns of our network
progressed as anticipated, and commissioning of our capital enhancement
projects at our Leicester Soft Mud 2 (SM2) and Laybrook factories both
advanced well in the latter stages of the year. Over the next six months we
expect to commission the enhancement project at our Ellistown site in
Leicestershire. Overall, these enhancement projects will increase clay
network capacity by around 5% by mid-2022.
Divisional financial performance was significantly above 2020, and ahead of
our expectations at the start of the year. Divisional revenue was £280 million
in the year, 31% higher year-on-year (2020: £213 million) and around 93%
of the revenue reported for 2019. Adjusted EBITDA* at £91 million in 2021
was materially higher year-on-year (2020: £44 million) and within 15% of
the £107 million reported for 2019, reflecting the substantial recovery in
sales volumes and the benefit of cost reduction actions. Overall adjusted
EBITDA* margins moved forward year-on-year to above 32% (2020: 20.6%),
back towards 2019 margin levels of 35.5%.
Ibstock Concrete
The Concrete division delivered a solid performance as it continued to benefit
from its exposure to a broad range of Repair, Maintenance and Improvement
(RMI) markets and resilient demand for its products. Divisional revenue in
2021 totalled £128 million, representing a 25% increase on 2020
(£103 million), and an 18% increase on 2019 (£109 million), with Longley
Concrete contributing from August 2019.
On a like-for-like basis*, revenue in 2021 was 6% above 2019. Activity levels
remained resilient across all product categories, with supplies of roofing,
walling and flooring products showing strong growth year-on-year.
In our infrastructure business, a new spend cycle in the rail industry resulted
in strong levels of demand for our products and we secured significant
contracts in 2021, resulting in a healthy order book as we enter 2022.
Investment in new products, focused on both sustainable solutions and
increased capacity, are expected to underpin further growth in 2022.
Adjusted EBITDA* of £22 million in 2021 was 44% higher than 2020
(2020: £15 million) reflecting improved year-on-year activity levels in
all categories.
Adjusted EBITDA* margins of 17% were materially ahead of the level
achieved in 2020, reflecting volume benefits and a dynamic commercial
approach which enabled the division to recover material levels of input cost
inflation, particularly during the second half of the year. The adjusted
EBITDA* margin in 2021 was below the level of 20.2% achieved in 2019,
due both to a change in business mix (with Longley introducing a greater
proportion of lower margin purchased product sales) and the impacts of
supply chain challenges, which reduced levels of operational efficiency
during the second half of the 2021 year.
Ibstock Futures
In November 2021 the Group announced the formation of Ibstock
Futures; a new business unit established to capture opportunities in
fast growth sectors of construction markets.
Ibstock Futures’ launch project is a £50 million investment to create
the UK’s first automated brick slip systems factory in West Yorkshire,
which will significantly increase the Group’s presence in the
fast-growing market for brick slip clad walling systems in the offsite
and modular construction sectors.
The new factory will manufacture a wide range of different brick slips
and associated systems and will incorporate the latest manufacturing
technology to deliver a very significant reduction in carbon compared
to both imported and domestically cut slips. In combination with
high-quality offset projects, this will result in the production of the
UK’s first net-zero carbon brick slip. Construction at the site
commenced during Q1 2022 and is progressing to plan, with
commissioning expected from late 2023.
Ibstock Futures has a strong pipeline of further organic and inorganic
projects, which are being progressed. These are focused on the
development or acquisition of technology solutions for specific
applications within high growth construction markets, including
potential alternative uses for its existing clay reserves. In line with this
strategy, in early 2022, Ibstock Futures completed a small acquisition
to establish a strong position within glass reinforced concrete (GRC)
panel technology, which is supplied into a wide range of façade
applications. GRC is an exciting new technology which offers the
traditional strength of concrete but with significant like-for-like
material savings, bringing environmental benefits to the construction
process. It falls firmly within the strategic scope of the Ibstock Futures
business and we look forward to developing our offering in this area.
We expect to incur operating expenditure of around £4 million within
Ibstock Futures in 2022 as we invest in research and development,
and build innovation and go-to-market capability.
Strategic Report
10
Ibstock plc Annual Report and Accounts 2021
Strategic Update
During 2021 the Group set out a clear path for significant growth and
value creation over the medium-term, with the generation of substantial
additional capital to support both incremental investment and additional
shareholder returns.
Central to our focus on longer-term growth and strong financial performance
is the evolution of the construction market as it increasingly adopts more
sustainable and industrialised processes, practices and products. Building
on the solid foundations we have laid, the investments we have made and
the strategic plans in place, we are excited about the potential of our
development pipeline and believe we are well placed to deliver robust
growth and create value for all our stakeholders.
Our operational strategy is defined across three pillars: Sustain, Innovate
and Grow. We have delivered another year of strong progress against this
strategy and have a clear view of our priorities in the years ahead.
These are detailed further below.
Sustain
As a scale industrial business, sustainable high performance is at the heart
of what we do. We are focused on three priorities: health and safety;
operational excellence; and environmental performance.
Health and safety
The health, safety and wellbeing of our employees is always our first priority.
During the year, we placed considerable focus on embedding our new health
& safety management system across the business. This system now provides
an easier and more efficient way to capture and track safety observations
and concerns, ensuring that both risks and best practices can be shared and
addressed. Overall, we achieved further progress in our key performance
measure, Lost Time Injury Frequency Rate (LTIFR), which reduced by 44%
from our 2016 baseline. We are proud that our progress around health and
safety was also recognised externally, with Ibstock receiving 35 awards from
the British Ceramics Confederation at their annual Pledge Awards.
Although our injury frequency rates are reducing, we have still had a number
of lost time accidents, reinforcing the fact that we can never be complacent
about health and safety. We remain committed to driving our business
to zero harm for everyone.
Operational excellence
During 2021, we conducted a review of the Group’s clay quarrying
operations, identifying a number of improvements to safety practices,
and delivering cost and process upgrades.
The manufacturing network performed well throughout the year, reflecting
the positive impact of our investment in enhanced plant maintenance over
the last few years.
We made good progress in commissioning our capital enhancement projects
at our SM2 and Laybrook factories and anticipate commissioning new
equipment at our Ellistown factory during the first half of 2022. In our
Concrete division we completed key projects at our Thornley, Anstone and
Northwich plants. All of these investments will deliver further operational cost
efficiencies, enhanced service to our customers and improved profitability.
Environmental performance
During the 2021 year, we made plans for the redevelopment of our wire cut
brick facilities in the West Midlands which will see our Atlas factory become
the UK’s first Scope 1 & 2 Net Zero brick factory. We also announced that
our new Nostell facility will produce the UK’s first net zero brick slips when
it comes on stream in early 2024.
Our sustainability roadmap, published in 2018, has provided a framework to
drive progress in the environmental performance of the business. By placing
environmental responsibility at the centre of everything we do, we have
managed to substantially achieve many of the key milestones we set out
back in 2018. During the year we took further steps to reduce Scope 1 and 2
carbon emissions per tonne of output, meaning that we have now achieved
in full the objective of reducing carbon by 15% from the 2016 baseline, three
years earlier than planned.
Having achieved this goal, as part of a new ESG strategic framework we have
set ambitious new environmental targets, to drive focus and action across
the business including:
• To reduce CO
2
by 40 per cent from 2019 levels by 2030;
• To become a net zero carbon business by 2040 (for Scope 1 and 2).
Innovate
Innovation is at the heart of our growth plans, and we are committed to the
continuing enhancement of our product portfolio and customer proposition
to strengthen our market-leading positions. Our initiatives are centred
on three specific areas: product innovation; customer experience;
and digital transformation.
Product innovation
As market leader in clay and concrete building materials, we have the
broadest range of products and systems available in the UK, and we
continue to invest to enhance our proposition. Highlights in 2021 included
the extension of our I-Range, an offer targeting the specification market.
This important market covers a wide range of project types across several
industry sectors spanning low-rise to high-rise buildings; new build to
renovation; and residential to commercial projects. The I-Range now
includes more than 20 new bricks, representing our largest product
launch for several years.
In the concrete division, we continue to innovate, using novel mix designs
and materials to bring exciting new products to market which have a lower
carbon footprint than established alternatives. New products in 2021
included the G-Tech railway platform coping and a lightweight polymer
cable troughing, both supplied into the rail infrastructure market.
Customer experience
Work in 2021 included enhancements to our digital marketing proposition,
enabling customers to better understand and access the functionality of
our products and services.
Digital transformation
The digitisation of our business will be a key strategic enabler over the
coming years. During 2021, the addition of advanced digital software
enabled us to enhance the way we deliver design expertise and other
services to our customers, particularly in the specification segment.
We also launched a new digital sales platform direct to customers for several
of our concrete product categories, and are developing plans to build on this
platform over the next couple of years.
Colleagues at our Chailey
site celebrating over 6,000
days without a Lost Time
Incident as part of World
H&S day in 2021.
Governance Financial statements Additional information
Strategic Report
11
Ibstock plc Annual Report and Accounts 2021
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Grow
During the year we developed our plans to deliver strong shareholder returns
over the next five years through a combination of:
• Strong execution in our core business to capitalise on attractive short and
long term growth drivers in our markets; and
• Effective diversification, which leverages the strength of our competitive
position and innovation capability, to expand our range of addressable
markets and accelerate growth within existing ones.
To achieve this objective we will focus on targeted investment projects and
acquisitions which create value and accelerate delivery.
Investments to drive growth in our existing business
We continue to invest in our Clay manufacturing assets in order to
modernise our production capability, expand capacity and improve its
environmental performance, in line with our strong commitment to
sustainability. Our broad, differentiated factory footprint provides us with
unique optionality to make targeted organic investments to support growth
over the medium-term. Our £60 million investment to redevelop the Group’s
wire cut clay brick facilities in the West Midlands is the latest example of our
commitment to invest in our core clay business, and will deliver significant
earnings growth from 2024.
Within the Concrete division, we see opportunities to deploy capital to realise
further capacity in the network as well as achieving cost savings through
greater automation, delivering faster payback at similar return levels to the
existing business.
Investments to diversify our revenue base
Alongside investments to grow our existing business, we are committed to
investing to broaden and diversify our revenue base, and have a number of
attractive opportunities, both organic and inorganic in nature.
During the year, we announced plans to build the UK’s first automated
brick slip systems factory in Nostell, West Yorkshire, enabling Ibstock to
take a leadership position in the slips market, thereby significantly increasing
our presence in the fast growing mid- and high-rise construction sectors.
The planned £50 million capital investment will provide capacity for up to
60 million brick slips per annum. An initial investment of around £38 million,
providing capacity to produce 30 million brick slips, will be spread across
2022 and 2023, with the factory commissioning from late 2023.
The factory will be constructed within the existing footprint of the Group’s
Nostell facility, which operated as a brick factory until its closure in 2020.
The facility benefits from significant adjacent clay reserves and established
infrastructure, and is well situated within the heartland of its anticipated
key markets. Construction at the site commenced during Q1 2022 and
is progressing to plan.
The new factory will manufacture a wide range of brick slip types and
associated systems, and will incorporate the latest manufacturing technology
to deliver significant reductions in carbon compared to both imported and
domestically cut slips. In combination with high-quality offset projects, this
will result in Nostell producing the UK’s first net-zero carbon brick slip.
Acquisition by Ibstock Futures of position in GRC panel technology
In January 2022, Ibstock Futures acquired a strong position within glass
reinforced concrete (GRC) panel technology, supplied into a wide range of
façade applications. The acquired assets provide Ibstock Futures with an
accelerated position in a fast-developing market which is expected to
experience strong growth over the medium-term, as the construction
In October 2021, we received external accreditation
from Best Companies, as part of our Employee
Engagement Survey results formally being recognised
as a Good star rating employee and ones to watch.
Project name: Brookfield – University of Leicester
Product used: Ivanhoe Cream
Strategic Report
12
Ibstock plc Annual Report and Accounts 2021
industry seeks lower carbon, non-combustible forms of cladding for use in
both new and existing mid and high-rise buildings. The acquired assets will
enable the Group to provide customers with a complementary offer to its
existing Mechslip and Nexus façade systems.
People
During 2021, we made a number of significant changes to our organisational
structure, to drive efficiency and promote greater collaboration across the
core business. Darren Waters joined the Group as Chief Operating Officer
(COO), responsible for both the Clay and Concrete divisions. Darren has
already had a strong positive impact, enhancing our focus on commercial
and operational execution, and we expect to benefit further from the
synergies available across the core business in the years ahead.
We also made good progress in our ambition to become a more
performance-oriented business, with investment in talent management,
succession planning and performance management systems during the
year. We are committed to making Ibstock a place where everyone has the
opportunity to reach their full potential, and we will continue to invest in the
growth of our people over the years ahead.
Environmental, Social and Governance (ESG) Update
As a long-term business, a commitment to environmental sustainability
and social progress have been central to Ibstock for many years. We have
reduced the carbon intensity of our products by over 60% since the 1970s,
and with a further year of significant progress, have now exceeded our
medium-term target of a 15% reduction per tonne, which we set back
in 2018. We also delivered further progress in other areas: for example,
achieving an 8% reduction in mains water usage; and removing over 200
tonnes of plastic packaging from our products.
The UK construction sector has undergone unprecedented change over
recent years, with increasing focus and awareness of climate change,
evolving regulatory and legislative dynamics, skills shortages and supply
chain pressures all creating both uncertainty and opportunity.
Having achieved the strong progress against our previous targets, during
2021 we reviewed our ESG strategy and ambitions in order to drive progress
and continue to show industry leadership in this area.
We understand the importance of engaging with all of our stakeholders in
establishing the areas of critical focus around ESG, and undertook a detailed
materiality assessment as part of the process of defining our new ESG strategy.
This strategy is defined across three areas, and is underpinned by responsible
business governance and practice:
Addressing Climate Change
As an energy intensive manufacturer, the main focus for our business is the
mitigation of climate change through carbon reduction. We will decarbonise
our products, processes and supply chain by focusing on carbon reduction,
water efficiency and biodiversity gains. This will drive us to achieve a 40%
operational carbon reduction by 2030 and to be Net Zero by 2040.
Improving Lives
Building our social value involves investing in our people, our culture and
our communities. We are focused on ensuring our colleagues belong, thrive
and grow and that we make a positive impact in the communities in which
we operate. To this end, we have set a target to increase female senior
leadership representation to 40% by 2027 as part of a proactive approach
to diversity and inclusion. We are also committed to providing development
and growth for all, with every employee developing their skills annually, and
have set a target for at least 10% of our employees to be in “earn and learn”
positions by 2030.
Manufacturing Materials for Life
We will focus on evolving our products, processes and services by
incorporating whole life cycle design, reserving raw materials and
future-proofing our offer to customers through a diversified portfolio.
This strategy, including our ambitious carbon reduction targets, represents
a bold step on the Company’s ESG journey, and underpins our ambition
to be the most sustainable UK producer of clay and concrete products.
Medium-Term Financial Targets
The Group has set out a clear path for growth, delivered through a
combination of investment in the core business alongside diversified
expansion in new fast-growth areas of UK construction markets. In order
to demonstrate the scale of our ambition and help frame the potential of
these plans, we have committed to a set of medium-term financial targets:
• Target to grow Group revenues to in excess of £600 million by 2026
• Medium term profitability targets:
• Adjusted EBITDA* Margins in Clay business of >35%
• Overall Group margins of at least 28%
• Targeting revenues outside of traditional clay brick to represent >40%
of the Group (from c.30% today)
• Committed to retaining our capital discipline with ROCE* of 20% into the
medium term
Our revenue target will be achieved through a combination of:
• Volume growth in our existing network and from our already committed
investments, giving us a clear pathway to revenues in excess of £550 million
• Incremental organic and inorganic initiatives in Futures, providing the
potential to grow beyond our overall £600 million target.
Growth over the period is expected to be generated from a number of sources:
• The strong fundamentals of our core business are expected to underpin
incremental volume and margin in our Clay division over the medium-term;
• Growth within the Concrete division through modest incremental capital
investments with faster paybacks at similar rates of return to the existing core;
• Investment in the redevelopment of our wire cut brick factories in the
West Midlands, which will deliver over 10% incremental capacity, building
from the end of 2023;
• The investment in our brick slips systems factory in Nostell, which will
deliver significant growth from 2024; and
• Our pipeline of further attractive diversified growth opportunities, both
organic and inorganic, within Ibstock Futures.
Disciplined allocation of capital
Our business model is inherently cash generative and, over the next five
years, based on anticipated future performance and borrowing capacity,
and after making sustaining and committed growth investments and paying
ordinary dividends, we expect to have over £200 million of cash available
which we will deploy to:
• Make further, incremental investments to grow the core;
• Grow Ibstock Futures through innovation and acquisition; and
• Supplement shareholder returns as part of a disciplined and efficient
capital management strategy.
We are confident that our strategy will deliver meaningful shareholder
returns over the period and will report on our progress against these
objectives as we move forward.
Outlook for 2022
Whilst we remain mindful of the broader macro-economic uncertainties,
particularly in light of the tragic conflict in Ukraine, we have made a good start
to 2022, with a robust demand backdrop across end markets. This positive
momentum, along with additional brick capacity coming on stream during the
2022 year, provides us with a strong platform to deliver significant further
financial and strategic progress in the current financial year.
Joe Hudson
Chief Executive Officer
Governance Financial statements Additional information
Strategic Report
13
Ibstock plc Annual Report and Accounts 2021
OUR MARKETS
We are well positioned in markets with positive fundamental drivers.
Through our deep understanding of the key drivers in our markets, we are able
to formulate our strategy based on the biggest growth opportunities for our business.
New Housing Market
1
Private house building was one of the sectors to recover quickest during
the COVID-19 pandemic. Although demand moderated during 2021,
following the surge in demand in H2 2020, housing starts are estimated
to have increased by 30% in 2021, taking them to above pre-pandemic
levels. Further growth is forecast for 2022 with house builders reporting
strong demand for the next 6-9 months.
2019 (A) 2020 (A) 2021 (E) 2022 (F) 2023 (P)
Private
Housing Starts
145,767 117,539 152,800 160,441 165,254
(8.2)% (19.4)% 30.0% 5.0% 3.0%
Private Housing
Completions
165,114 135,403 161,129 164,352 164,352
6.5% (18.0)% 19.0% 2.0% 0.0%
Public housing activity has recovered sharply since the initial lockdown,
with 2021 starts estimated to be ahead of pre-pandemic levels.
Public housing will continue to benefit from a five year Affordable Homes
Programme that is due to run until 2026.
2019 (A) 2020 (A) 2021 (E) 2022 (F) 2023 (P)
Public
Housing Starts
37,925 33,770 39,511 40,302 40,705
(0.9)% (11.0)% 17.0% 2.0% 1.0%
Public Housing
Completions
41,510 31,940 37,370 38,491 39,261
14.0% (23.1)% 17.0% 3.0% 2.0%
With continuing population growth in the UK resulting in ongoing
increases in household formation and a substantial housing deficit, the
Government remains committed to significant growth in levels of house
building over the mid to long-term.
Why are we well positioned?
• New build housing is a key strategic sector for Ibstock and we hold
leading positions in both of our divisions
• We have long-standing strategic relationships with house builders,
distributors and builders’ merchants across the UK
• Broad product range across the building envelope provides
differentiation and competitive advantage
• We focus on new product development and sustainability
• Ibstock Futures will provide opportunities for new systems and
solutions for the new build residential market
1 Construction data sourced from Construction Products Association Construction
Industry Scenarios Winter 2021/22 Edition.
Construction Market
1
The UK Government considers construction a vital sector for the UK
economy. This was evidenced during the COVID-19 pandemic where,
after the initial lockdown in spring 2020, the construction sector was
allowed to continue to operate throughout subsequent lockdowns.
As a result, the construction industry has been highly resilient over the
past two years with construction output estimated to have risen by
13.3% in 2021, taking it back to pre-pandemic levels.
£150bn
2020
£170bn
2021
UK Construction Output
The Construction Product Association (CPA) Winter 2021/22 forecast
(CPA Forecast) shows total construction output is anticipated to rise
by 4.3% in 2022 with further growth of 2.5% in 2023.
The CPA Forecast shows:
• Construction output will rise 4.3% in 2022 and 2.5% in 2023
• Private housing output will rise by 3.0% in 2022 and 3.0% in 2023
• Public housing output will rise by 3.0% in 2022 and 3.0% in 2023
• Private housing repair, maintenance and improvement (RMI) will
remain flat in 2022 and fall 2.0% in 2023
• Public housing repair, maintenance and improvement (RMI) will rise
by 7.0% in 2022 and fall 5.0% in 2023
• Infrastructure output will rise by 9.7% in 2022 and 1.1% in 2023
Our clay and concrete products and systems are integral components for
both new build housing and housing repair and maintenance. We also
have a growing position in infrastructure. The positive fundamental
drivers in these sectors are expected to underpin demand for our
products over the medium-term.
Macro trends
• Population growth 2020-2030: +2.1m people
• Household formations per annum: c.200k
• Political support for house building: +300,000
additional homes on average per annum
• Help to Buy to continue until 2023
Growth in Diversified Markets
• Brick facades taking increasing share of fast growth markets
• Mid-High Rise Sector
Sector growth driven by recladding and build to rent market, with
planning applications increasing by almost 100% since 2015.
The increasing focus on non-combustible cladding offers
opportunities for masonry products.
2015 2021
7.5
Mid to high rise active projects with approved planning permission
96% growth between
2015 and 2021
Strategic Report
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Ibstock plc Annual Report and Accounts 2021
Find out more
Our purpose and business model p16
Our Strategy p18
Our Key performance indicators p28
Responsible Business p30
Our Principal risks and uncertainties p52
Housing RMI
1
Private housing RMI was another of the sectors that showed rapid recovery
following the first lockdown. Demand remains high for home renovation,
driven by the ‘race for space’ and high levels of household savings that
have accumulated. With the forecast for activity is to remain flat at the
current high levels during 2022 before a slight fall in 2023, output will still
remain higher than pre-pandemic levels.
Growth in public housing RMI is being driven by the pipeline of cladding
remediation and fire safety work, general maintenance of social housing
stock and publicly funded energy-efficiency projects on council and
housing association properties.
2019 (A) 2020 (A) 2021 (E) 2022 (F) 2023 (P)
Private Housing
RMI
22,740 19,894 23,276 23,276 22,810
0.2% (12.5)% 17.0% 0.0% (2.0)%
Public Housing
RMI
8,157 6,784 7,666 8,203 8,613
0.3% (16.8)% 13.0% 7.0% 5.0%
Why are we well positioned?
• We have long-standing strategic relationships with builders’
merchants and distributors across the UK
• Leading range of products for housing repairs, maintenance and
improvement projects
• Our MechSlip system provides a solution for recladding projects
• Ibstock Futures will present further opportunities for new systems
and solutions for the renovation and recladding markets
Infrastructure
1
Infrastructure is a key focus area for the Government and the sector
has shown strong growth in 2021, well ahead of pre-pandemic levels.
Growth is expected to continue in the coming years driven by a ramp
up of work on HS2 and a pipeline of other major projects.
The rail sub-sector will also see strong growth driven by Network Rail’s
five-year Control Period 6 (2019-2024) providing a strong pipeline of
work as well as HS2 work. Rail is forecast to grow by 20% in 2022 and
a further 10% in 2023. The table below shows the value (£ millions) and
% annual change for the total Infrastructure sector for the forecast
period 2019-2023. The data is from the CPA Forecast.
2019 (A) 2020 (A) 2021 (E) 2022 (F) 2023 (P)
22,888 21,820 26,949 29,553 29,864
3.0% (4.7)% 23.5% 9.7% 1.1%
Why are we well positioned?
• We have strong relationships with customers across rail and infrastructure
• We focus on innovation and development of new solutions
• We manufacture bespoke products for the infrastructure sector
Group Opportunities
Strengthen leading position in core market
In the UK, the three largest brick manufacturers account for the vast
majority of UK brick production. Ibstock has the largest clay brick
production capability in the UK and continues to enjoy a market-leading
position. In a structurally undersupplied brick market, imports coming
into the UK returned to pre-pandemic levels of >450 million bricks in
2021. We believe there is a need to continue to invest in new capacity
and we are committed to do so.
Why are we well positioned?
• We have invested significantly in the expansion and improvement
of our production facilities over the past few years
• We continue to invest in organic opportunities to enhance
production capabilities for the long-term
• We our investing £60 million in our factories in the West Midlands
including the development of the world’s first net zero brick
factory, with a capacity of >100 million bricks per year by 2024
Off-site Construction
The use of off-site manufactured systems and Modern Methods of
Construction continues to grow, particularly in the off-site residential
market supported by Government commitment and investment.
2017
550
2018 2019 2020
(Est)
2021
(Fcst)
2022
(Fcst)
2023
(Fcst)
2024
(Fcst)
2025
(Fcst)
600
640
570
604
652
691
733
777
Market for Off-site Housing Systems
£m MSP
Why are we well positioned?
• Brick is the dominant façade material in residential projects
• We are investing in the UK’s first large scale brick slip factory
• We have established systems suitable for this market
• Ibstock Futures will present further opportunities for new systems
and solutions for the off-site construction market. See page 10.
Build to Rent
Build to Rent continues to be a driver of growth across UK residential
markets with the trend towards private renting forecast to grow further
over the coming years.
Build to Rent UK annual starts, completions
and cumulative completions
100,000 homes are estimated to be built by the BTR section by 2024
Completions (LHS)
20172016
Cumulative completions (RHS)
2018 2019 2020 2021 2022 2023 2024
8 8
13
9
8
10
13
16
Governance Financial statements Additional information
Strategic Report
15
Ibstock plc Annual Report and Accounts 2021
OUR PURPOSE AND BUSINESS MODEL
Purpose and vision
Ibstock exists to build a better world by being at the heart of the building through
our vision of enabling the construction of homes and spaces that inspire people to
work and live better.
Who we are
Ibstock is a leading manufacturer and supplier of clay and concrete
building products and solutions to the UK construction industry with
a focus on the environmental and social impacts of our business,
specialising in products and systems for the residential building
envelope and infrastructure markets.
Our Business Model:
What we do
Our core business focuses on the residential construction sector and
we have built strong relationships with our house builder, developer,
builders’ merchant and distributor customers over many years.
Underpinned by our values and behaviours:
Our stated values were developed internally through a series of interviews and face-to-face workshops
attended by people from every part of our business.
What we do What makes us different
Teamwork
We work together to achieve
great things
Extraction
Clay and shale used in our brick
production process is sourced
from clay quarries that the Group operates on
land that it owns or leases under long-term
agreements. The quarries are in the vicinity
of our brick manufacturing plants providing
security of supply of the key raw material
used in brick manufacture.
Principal Risk Impact: 1. Climate Change
2. Material Operational Disruption
Procurement
The Group is a major customer for
a number of its key third party
suppliers, which allows efficient purchasing
and transportation, together with the
establishment of long-term relationships.
Additionally, for the Group’s concrete products,
the main raw materials are bulky in nature and
are locally sourced. Natural gas and electricity
costs represent the greatest input costs apart
from labour. The Group regularly reviews its
energy costs and uses forward purchasing
contracts to increase pricing certainty when
favourable compared to future price
expectations in the open market.
Principal Risk Impact:
5. Financial Risk Management
Product design
The Group continually seeks to
improve the quality of its existing
products and also introduce new products
through innovation and investment in new
technology. Its new product development
programme works closely with customers
and our sales team to identify opportunities
for new products.
Principal Risk Impact: 9. Product Quality
Manufacturing
The Group has the largest brick
production capacity and a strategic
footprint across the UK. We also have the most
modern and innovative concrete roof tile line
in the UK and our concrete landscaping and
flooring manufacturing facilities provide us
with market-leading positions. The Group
manufactures bricks through two main
methods: wire cut and soft mud, which take
their names from the processes to create them.
The Group’s concrete products are made from
cement, sand, admixtures and pigments, which
are mixed together.
Principal Risk Impact:
2. Material Operational Disruption
Sales
The Group seeks to differentiate
itself as a manufacturer by
employing people to assist specifiers and
customers in their designs and efficient use
of our products. Ibstock sells its products
to a diverse group of customers in the UK
construction industry. Each business has its
own sales team that is aligned by customer
group and region in order to focus on key
decision-makers and customers. This is
monitored through extensive and regular
customer satisfaction surveys.
Principal Risk Impact:
7. Maintaining Customer Relationships
and Market Reputation
Distribution
The Group’s 36 principal
manufacturing locations across the
UK are strategically located close to main
transportation links to facilitate onward
distribution. The Group outsources the
majority of its haulage to contractors.
Market Leadership
Our market-leading businesses enable us to
benefit from the expected growth in demand
in the UK. We have over 76 million tonnes
of consented clay reserves and in excess
of 144 million tonnes of clay resources,
providing good support for production
capacity across all our clay plants.
Long-standing customer relationships
Our customer focus is based on quality, service
and consistency and our service-led ethos is
one of the key drivers in the growth in our
market share in bricks over the past 10 years
and many of our long-standing customer
relationships have lasted over 40 years.
Growing capacity
We are investing in the latest technology to
increase capacity and to meet the growing
market demands.
Highly experienced management team
Our management team has extensive
experience in the building products industry.
Strategic Report
16
Ibstock plc Annual Report and Accounts 2021
Strong heritage and brand known
for quality and consistency
Well invested manufacturing
facilities and technology to
support customer service
Highly skilled workforce
Strong design focus including
our I-Studio in Central London
High barriers to entry in our market
Strong Health and Safety (H&S)
track record
Strong balance sheet
Operational footprint and
clay reserves
Resources and relationships The value we create for our stakeholders
Find out more
Our markets p14
Our Strategy p18
Our Key performance indicators p28
Responsible Business p30
Our Principal risks and uncertainties p52
Trust
We earn the trust placed in us
by delivering on our promises
Care
We care about each other, our
customers and our wider impact
Courage
We have the courage to do
the right thing
Workforce
Alongside our focus on providing a safe and
healthy working environment, we invest in
ongoing training, development and career
progression. We also encourage employee
share ownership through our Sharesave
scheme to ensure that value flows through
to our employee stakeholders.
Customers
Builders’ merchants, house builders, specialist
brick distributors, contractors and installers
are the five main customer groups for the
Group’s clay and concrete products in the
UK. Customers play a crucial role in shaping
our growth and driving our innovation.
Building our understanding of our customers’
priorities is imperative to meeting their needs.
The unrivalled choice of products available
within the Group’s range of clay bricks provide
these customers with the widest selection
from which to choose. As a full-range supplier,
our concrete businesses provide customers
with a broad product set upon which to base
their buying decisions.
Suppliers and Partners
We forge long-term relationships with our
key suppliers, and conduct business in a fair,
open and transparent way. Our policies and
procedures are all aimed at ensuring we work
safely, equitably and in the best interests
of both parties, as well as the Group’s
other stakeholders.
Communities
In addition to being an important employer
as well as taxpayer in the many areas where
our manufacturing facilities are located, we
interact directly with the communities in
which we operate, contributing to them
through our work with local schools
and charities.
Environment
We aim to minimise our impact on the
environment wherever possible so that our
business continues to be sustainable at all
levels in the longer-term.
Investors
Following the impact on dividends during
FY2020 we have returned to our sustainable
and progressive dividend policy which is
supported by businesses with structurally high
margins and strong cash generation and a
strategy that provides a strong platform for
future growth and value creation. We are
recommending a final dividend of 5.0p per
share for the FY2021.
Governance Financial statements Additional information
Strategic Report
17
Ibstock plc Annual Report and Accounts 2021
OUR STRATEGY
We have a clear strategy that is
driven by our purpose and vision to
create value for all of our stakeholders
through three strategic pillars.
Ambition
To be the most sustainable
manufacturer of clay and concrete
building products in the UK.
Product used: N1 Architectural Masonary
Photo credit to: Ivan Jones
Project name: The Officers’ House, Royal Arsenal, London
Product used: Ashdown Function Old Chelsea Yellow
Strategic Report
18
Ibstock plc Annual Report and Accounts 2021
Group strategic
pillars
Sustain
As a scale industrial business, sustainable high performance is at the heart
of what we do. We are focused on three priorities: health and safety;
operational excellence; and environmental performance.
What this means H&S Operational excellence Environmental performance
What we have
done in 2021
• Continued focus on providing
COVID-19 secure workplace
• Further reduction in Lost Time Incident
Frequency Rate (LTIFR). Ending the
year with a 44% reduction from
the 2016 baseline (see Our KPIs
on page 28)
• Improved our processes, systems and
accelerated our safety culture, resulting
in several industry awards
• Delivered capital investment projects
at Ellistown, SM2, Thornley and
Anstone, driving operational cost
efficiencies and improved profitability
(see page 22)
• Advanced preventative maintenance
programme–with further clay sites
executing asset maintenance
transformation
• Progressed quarry optimisation project
with focused improvements on
delivering cost and process upgrades
• Achieved our goal of 15% reduction
in CO
2
per tonne of production (see
Responsible Business section and
Our KPIs on page 30 and 28)
• Sanctioned Altas and Nostell projects
leading the industry on Scope 1 & 2
net zero production (see page 36)
• Developed and launched stretching
targets to achieve 40% carbon
reduction by 2030, and become Net
Zero by 2040 (see Introducing our new
ESG Strategy on page 32)
Our priorities
in 2022
• Deliver milestones on the H&S
roadmap with completion of
site-specific action plans from
the standards and procedures
maturity matrix
• Complete wellness and health actions
• Roll out phase two of asset
transformation plan for maintenance
practices in clay sites
• Complete remaining enhancement
project at Ellistown factory
• Automation and productivity
improvements at concrete sites
• Work to reduce CO
2
by 40 per cent
from 2019 levels by 2030;
• Work to become a net zero carbon
business by 2040 (for Scope 1 and 2)
• See more in the Responsible Business
section on page 30
Our measures
of success
(see Our KPIs
on page 28)
• LTIFR
• % Completion against target actions
• % Employees trained
• Revenue
• Adjusted EBITDA*
• Return on Capital Employed (ROCE)*
• Adjusted EPS*
• Net Promoter Score (NPS)
• Carbon reduction
The risks (see Our
Principal Risks and
Uncertainties on
page 52)
• Regulatory and Compliance
• Maintaining Customer Relationships
and Market Reputation
• Material Operational Disruption
• Financial Risk Management
• Product Quality
• Climate Change
• Material Operational Disruption
ESG ambition
(see Responsible
Business on
page 34)
• Improving Lives • Addressing Climate Change
• Manufacturing Materials for Life
• Addressing Climate Change
Governance Financial statements Additional information
Strategic Report
19
Ibstock plc Annual Report and Accounts 2021
OUR STRATEGY CONTINUED
Group strategic
pillars
Innovate
Innovation is at the heart of our growth plans, and we are committed to the
continuing enhancement of our product portfolio and customer proposition to
strengthen our market-leading positions. Our initiatives are centred on three
specific areas: product innovation; customer experience; and digital transformation.
What this means Product innovation Customer experience Digital transformation
What we have
done in 2021
• Enhanced core brick range with
extensions of our I-Range – 20
new bricks targeting specification
market. See Strategy section
on page 24
• Further improved sustainability
of our existing products including:
• Introduced new rail platform
copings with 80% less carbon
• Expansion of our EcoHabitat range
to support biodiversity
• Enhanced digital marketing
proposition for our customers ,
increasing agility, solutions and
online communication support
• Development of bespoke digital
bespoke software with strategic
partners improving solutions delivery
to customers
• Introduced new digital sales platform
for concrete products. See Strategy
section on page 24
Our priorities
in 2022
• Complete transformational
projects (plastic reduction and
material optimisation)
• Deliver new and sustainable product
development in year plans
• Deliver a market development plan
and product / solution offer for
mid-high rise market segments
• Complete Clay division’s order and
service delivery project
• Complete phase two of the digital
transformation journey for customer
experience and service delivery
Our measures
of success
(see Our KPIs
on page 28)
• Revenue
• Adjusted EBITDA*
• % sales from new and
sustainable products
• Net Promoter Score (NPS) • Revenue
• Adjusted EBITDA*
The risks (see Our
Principal Risks
and Uncertainties
on page 52)
• Market Uncertainty
• Regulatory and Compliance
• Material Operational Disruption
• Maintaining Customer Relationships
and Market Reputation
• Product Quality
• Market Uncertainty
• Regulatory and Compliance
• Material Operational Disruption
ESG ambition
(see Responsible
Business on
page 34)
• Manufacturing Materials for Life • Doing Business Responsibly • Addressing Climate Change
Strategic Report
20
Ibstock plc Annual Report and Accounts 2021
Group strategic
pillars
Grow
Clear path for growth and value creation – combining expansion in our core
business and diversification into adjacent market segments
What this means Investment in our core Diversified growth People
What we have
done in 2021
• Progressed world’s first Net Zero brick
factory at our Atlas plant, West
Midlands. See Enivironment section
on page 36
• Well-differentiated footprint provides
unique optionality on further
investment
• Commitment to broadening and
diversifying our revenue base
• Establishment of Ibstock Futures to
capture growth opportunities in new,
fast growing sectors of the UK
construction markets
• Approval of £50 million Nostell
investment to build leadership position
in fast growing brick slips market
• Acquired position in GRC panel
technology in early 2022
• Invested in capability:
• Operational structure optimised
for efficiency and collaboration
• New experienced COO appointed
• Enhanced focus on commercial
and operational execution
• Invested in everyday people
performance and talent development
to attract, retain and develop our
leaders for today and tomorrow
• Progressed Board composition and
diversity improvement. See Chairman’s
Statement on page 6, Responsible
Business section on page 30 and
Corporate Governance Statement
on page 80
Our priorities
in 2022
• Complete project milestones for
the Atlas and Aldridge projects
in the West Midlands
• Complete project milestones to
develop the UK’s first automated brick
slip systems factory in Nostell, Yorkshire
• Develop organisation, strategy,
governance and mid-term goals of
Ibstock Futures
• Deliver talent and capability
outcomes for:
• early careers
• strategic recruits
• D&I project
Our measures
of success
(see Our KPIs
on page 28)
• Revenue
• Adjusted EBITDA*
• Net debt to Adjusted EBITDA*
• ROCE*
• Adjusted EPS*
• Revenue
• Adjusted EBITDA*
• Net debt to Adjusted EBITDA*
• ROCE*
• Adjusted EPS*
• Female representation at Senior
Leadership Team Level.
See Responsible Business page 38
The risks (see Our
Principal Risks
and Uncertainties
on page 52)
• Market Uncertainty
• Regulatory and Compliance
• Financial Risk Management.
• Product Quality
• Market Uncertainty
• Regulatory and Compliance
• Financial Risk Management
• Product Quality
• Market Uncertainty
• People and Talent Management
ESG ambition
(see Responsible
Business on
page 34)
• Addressing Climate Change
• Manufacturing Materials for Life
• Addressing Climate Change
• Manufacturing Materials for Life
• Improving Lives
Governance Financial statements Additional information
Strategic Report
21
Ibstock plc Annual Report and Accounts 2021
SUSTAIN: OTHER HIGHLIGHTS
19% REDUCTION IN
OPERATIONAL CARBON
8%
REDUCTION
IN MAINS
WATER
USE
SIGNIFICANT
H&S
IMPROVEMENTS
OUR STRATEGY IN ACTION: SUSTAIN
Driving efficiency
and reliability
for a sustainable
business
Strategic Report
22
Ibstock plc Annual Report and Accounts 2021
Further
operational excellence
Moving into the final stages of commissioning at our Ellistown site
Tom Blagden, Project Manager for the enhancement project, shared
the latest update on how the project has progressed.
“Ibstock is now in the final commissioning stages of the Ellistown
enhancement project and on track for completion to drive the
increased capacity, production rate efficiency and profitability
goals for the site. More importantly, the enhancements will drive
an improved health and safety environment for our colleagues.
It has been great to see the project progress – with the investment
focused on a new set of dryers, leveraging the historical infrastructure
to minimise project shutdown period, as well as an upgrade of the
setting machine and shaft mixer.
As commissioning progresses to completion, the speed of production
will increase until we hit our target of over 50 million bricks per annum
ahead of the projects final sign off.
Every project is different, with different challenges, different
technologies, different processes, and different people. One of the
most exciting aspects of any project is seeing the new equipment up
and running at full speed, which in turn brings fresh motivation and
pride for the team.”
With a proud history dating back to 1988 when the Ellistown plant
was first built, we have an exciting future ahead.
Governance Financial statements Additional information
Strategic Report
23
Ibstock plc Annual Report and Accounts 2021
200 TONNES
OF PLASTIC PACKAGING
REMOVED
80%
LESS CARBON IN
NEW RAIL PLATFORM
PRODUCTS
EXPANDED
ECO RANGE
OUR STRATEGY IN ACTION: INNOVATE
INNOVATE: OTHER HIGHLIGHTS
Driving market led
innovation
Strategic Report
24
Ibstock plc Annual Report and Accounts 2021
It’s what
specification
is made of.
The largest product launch
for several years...
Innovation is a key focus of our product development activity, both in
terms of making improvements to our existing ranges and developing
new products and systems,. We are committed to the continuous
enhancement of our product portfolio in order to underpin our
market and margin leadership.
New product development is at the heart of our growth plans, with
the emphasis this year in our Clay division focusing on enhancing our
core brick range to introduce new and exciting products targeted at
the specification market. This resulted in the significant expansion of
our I-Range of products, an extensive collection of bricks targeted at
architects and specifiers. The I-Range includes more than 20 new
bricks making a uniquely comprehensive domestic offering and
helping us strengthen our position as the number one brick
manufacturer in the UK (by production capacity).
We also made excellent progress on further improving the
environmental credentials of our existing products. For example, in
our Concrete division we have introduced new rail platform copings
with 80% lower carbon concrete. This was achieved using complex
concrete mix design utilising replacement ingredients to lower the
carbon content of the finished product. In our Clay division, our
dematerialisation project has progressed well and we have
successfully increased the void sizes at our Parkhouse factory, which
reduces consumption of raw materials and embodied carbon.
This dematerialisation project is advancing at several of our other
manufacturing sites with further products expected to reach the
market throughout 2022.
We have also enhanced our EcoHabitat product range as part of our
focus on biodiversity. The latest addition to our extensive range is our
new Bee Brick. This development was a result of our ongoing
discussions with key customers to identify new product opportunities.
The introduction of this new product is also timely with the increasing
focus on biodiversity net gain in new build developments and
supports our leading position in the market.
Governance Financial statements Additional information
Strategic Report
25
Ibstock plc Annual Report and Accounts 2021
ATLAS. WORLD’S FIRST
NET ZERO BRICK FACTORY
UK’S FIRST
BRICK SLIPS
SYSTEMS FACTORY
ANNOUNCED
IBSTOCK FUTURES
ESTABLISHED
OUR STRATEGY IN ACTION: GROW
Driving growth
through expansion
in core business
and diversification
into adjacent
market segments
GROW: OTHER HIGHLIGHTS
Strategic Report
26
Ibstock plc Annual Report and Accounts 2021
The UK’s first Brick Slips
Systems factory
The Group announced the launch of its new business unit, Ibstock
Futures, in November 2021. This will target an immediate opportunity
to increase the Group’s presence in façade products and solutions for
the fast-growing off-site and modular construction markets in both
the new build and re-cladding markets, with products suitable for a
wide range of residential, commercial and mixed-use applications.
Furthermore, Ibstock Futures is developing a range of projects across
the construction value chain and will also focus on leveraging the
Group’s competitive position to drive value through its ESG
credentials, including potential alternative uses for its existing
clay reserves.
As Ibstock Futures’ launch project, Ibstock will invest £50 million in
the construction of the UK’s first automated brick slip systems factory
in Nostell, West Yorkshire. The factory will be constructed within the
existing footprint of the facility, which operated as a brick factory
until its closure in 2020. The facility benefits from significant adjacent
clay reserves and established infrastructure, and is well situated
within the heartland of its anticipated key markets. Construction at
the site commenced during Q1 2022 and is progressing to plan.
Brick slips provide a durable, safe and energy efficient alternative to
other cladding solutions. The UK market for brick slips is significant,
with annual volumes of circa 120 million slips, and is growing fast.
The addition of a significant brick slip capability will be highly
complementary to the Group’s existing clay brick business and the
investment will enable Ibstock to take a leadership position in the
market, significantly increasing its presence in the fast growing mid
and high-rise construction sectors.
Ibstock Futures will enable us to accelerate growth and diversify our
revenue base by targeting fast growing areas of the UK construction
market. Specifically the development of products, technologies and
solutions aligned to two key trends shaping the construction sector:
sustainability and modern methods of construction.
The new factory will manufacture a wide range of different brick
slip types and associated systems, and will incorporate the latest
manufacturing technology to deliver a very significant reduction
in carbon compared to both imported and domestically cut slips.
In combination with high-quality offset projects, this will result
in Nostell producing the UK’s first net-zero carbon brick slip.
Governance Financial statements Additional information
Strategic Report
27
Ibstock plc Annual Report and Accounts 2021
Revenue £m
2017 2018 2019 2020 2021
362
391
409
316
409
Lost time injury frequency score
2017 2018 2019 2020 2021
3.3
2.8
3.4
2.2
2.1
Net promoter score %
2017 2018 2019 2020 2021
42
40
34
39
33
Adjusted EBITDA*
£m
2017 2018 2019 2020 2021
108
112
122
52
103
Description Revenue represents the value for the sale of
our building products, net of local sales tax
and trade discounts.
Represents profit before interest, taxation,
depreciation and amortisation after adjusting
for exceptional items*.
Net debt, comprising short- and long-term
borrowings less cash, over adjusted EBITDA*
(as defined) prior to the impact of IFRS 16.
The ratio of profit before interest and taxation,
after adjusting for exceptional items*, to average
net assets and debt (excluding pension).
Basic earnings per share adjusted for exceptional
items*, amortisation and depreciation on fair
valued uplifted assets and non-cash interest,
net of tax (at the Group’s effective tax rate).
Why important? Revenue provides a measurement of the
financial growth of the Group.
Adjusted EBITDA* provides a key measure to
assess the Group’s profitability.
Net debt to adjusted EBITDA* provides a
useful measure in assessing the Group’s
financial strength.
ROCE* provides an indication of the relative
efficiency of capital use by the Group over
the year.
Adjusted EPS* provides useful information in
assessing the performance of the Group and
when comparing its performance across
comparative periods.
Link to strategy
Remuneration linkage No specific linkage to remuneration structures
at present.
A key financial measure within the Annual
and Deferred Bonus Plan (ADBP).
No specific linkage to remuneration structures
at present.
A key measure within the current LTIP with a
weighting of 25% of total opportunity.
A key measure within the current LTIP construct
with a weighting of 25% of total opportunity.
2021 performance Sales of £409 million were 29% up on 2020
and in line with the pre-COVID performance
reported in 2019, as the Group performed well
in robust end markets.
Performance in 2021 compared to 2020 benefited
from increased sales volumes in both divisions,
dynamic commercial pricing to offset cost
inflation, and resilient operational performance in
the face of sector-wide supply chain challenges.
The Group maintained its intense focus on cost
and capital management, delivering an excellent
cash flow performance for the year reducing
leverage to 0.4 times.
The substantial improvement compared to the
prior year reflected both a significant increase in
profitability, as well as a modest reduction in the
capital base, as both working and fixed capital
were well managed.
Adjusted basic EPS* increased significantly from
last year, reflecting the increased adjusted
EBITDA* achieved in the year and a modest
reduction in the adjusted effective tax rate.
Non-financial
Description The number of lost time injuries occurring in our
workplace per one million hours worked.
As part of our annual satisfaction survey,
customers are asked how likely they are to
recommend the Group to friends and colleagues.
Responses are between zero (unlikely) to 10
(very likely). The Net Promoter Score (NPS) is
derived from the proportion of our customers
scoring 9 or 10 less those scoring 6 or lower.
KPI shows the amount of carbon produced per
tonne of finished production in the manufacture
of building products.
Proportion of revenue as defined above
generated from new and sustainable
products introduced to the market within
the last five years.
Why important? The measure gives a picture of how safe
a workplace is for its workforce.
It is used as a proxy for gauging our customer’s
overall satisfaction with our products, service
levels and the customer’s loyalty to the brand.
Provides a key measure of our progress against
our carbon reduction target (see page 34) and
demonstrates our commitment to addressing
our impacts on the environment through the
reduction in our use of energy.
This demonstrates our progress relative to our
new product development goals.
Link to strategy
Remuneration linkage No specific linkage to remuneration structures
at present although it is a core part of our values
and underpins personal objectives in all plans.
No specific linkage to remuneration structures
at present.
Forms one element of a new ESG performance
measure under the LTIP with 20% of opportunity
when aggregated with other elements.
Forms one element of a new ESG measure under
the LTIP with 20% of opportunity when
aggregated with other elements.
2021 performance Further reduction from the 2019 baseline. The industry wide challenges around product
availability and longer lead times have had
an impact on our NPS score for 2021
Achieved 2018 target of 15% reduction three
years early.
Continued innovation leading to increased
number of new products.
OUR KEY PERFORMANCE INDICATORS
Financial
Strategic Report
28
Ibstock plc Annual Report and Accounts 2021
2017 2018 2019 2020 2021
0.166
0.167
0.159
0.160
0.138
Carbon reduction
2019 2020 2021
Share of revenue from new products %
1
11.5
11.7
13.0
Net debt to adjusted EBITDA*
£m
2017 2018 2019 2020 2021
1.08
0.43
1.74
1.50
0.40
ROCE*
%
2017 2018 2019 2020 2021
20.6 20.6
19.3
3.7
15.8
Adjusted EPS*
Pence per share
2017 2018 2019 2020 2021
18.9
18.8
18.3
4.0
13.9
Description Revenue represents the value for the sale of
our building products, net of local sales tax
and trade discounts.
Represents profit before interest, taxation,
depreciation and amortisation after adjusting
for exceptional items*.
Net debt, comprising short- and long-term
borrowings less cash, over adjusted EBITDA*
(as defined) prior to the impact of IFRS 16.
The ratio of profit before interest and taxation,
after adjusting for exceptional items*, to average
net assets and debt (excluding pension).
Basic earnings per share adjusted for exceptional
items*, amortisation and depreciation on fair
valued uplifted assets and non-cash interest,
net of tax (at the Group’s effective tax rate).
Why important? Revenue provides a measurement of the
financial growth of the Group.
Adjusted EBITDA* provides a key measure to
assess the Group’s profitability.
Net debt to adjusted EBITDA* provides a
useful measure in assessing the Group’s
financial strength.
ROCE* provides an indication of the relative
efficiency of capital use by the Group over
the year.
Adjusted EPS* provides useful information in
assessing the performance of the Group and
when comparing its performance across
comparative periods.
Link to strategy
Remuneration linkage No specific linkage to remuneration structures
at present.
A key financial measure within the Annual
and Deferred Bonus Plan (ADBP).
No specific linkage to remuneration structures
at present.
A key measure within the current LTIP with a
weighting of 25% of total opportunity.
A key measure within the current LTIP construct
with a weighting of 25% of total opportunity.
2021 performance Sales of £409 million were 29% up on 2020
and in line with the pre-COVID performance
reported in 2019, as the Group performed well
in robust end markets.
Performance in 2021 compared to 2020 benefited
from increased sales volumes in both divisions,
dynamic commercial pricing to offset cost
inflation, and resilient operational performance in
the face of sector-wide supply chain challenges.
The Group maintained its intense focus on cost
and capital management, delivering an excellent
cash flow performance for the year reducing
leverage to 0.4 times.
The substantial improvement compared to the
prior year reflected both a significant increase in
profitability, as well as a modest reduction in the
capital base, as both working and fixed capital
were well managed.
Adjusted basic EPS* increased significantly from
last year, reflecting the increased adjusted
EBITDA* achieved in the year and a modest
reduction in the adjusted effective tax rate.
Non-financial
Description The number of lost time injuries occurring in our
workplace per one million hours worked.
As part of our annual satisfaction survey,
customers are asked how likely they are to
recommend the Group to friends and colleagues.
Responses are between zero (unlikely) to 10
(very likely). The Net Promoter Score (NPS) is
derived from the proportion of our customers
scoring 9 or 10 less those scoring 6 or lower.
KPI shows the amount of carbon produced per
tonne of finished production in the manufacture
of building products.
Proportion of revenue as defined above
generated from new and sustainable
products introduced to the market within
the last five years.
Why important? The measure gives a picture of how safe
a workplace is for its workforce.
It is used as a proxy for gauging our customer’s
overall satisfaction with our products, service
levels and the customer’s loyalty to the brand.
Provides a key measure of our progress against
our carbon reduction target (see page 34) and
demonstrates our commitment to addressing
our impacts on the environment through the
reduction in our use of energy.
This demonstrates our progress relative to our
new product development goals.
Link to strategy
Remuneration linkage No specific linkage to remuneration structures
at present although it is a core part of our values
and underpins personal objectives in all plans.
No specific linkage to remuneration structures
at present.
Forms one element of a new ESG performance
measure under the LTIP with 20% of opportunity
when aggregated with other elements.
Forms one element of a new ESG measure under
the LTIP with 20% of opportunity when
aggregated with other elements.
2021 performance Further reduction from the 2019 baseline. The industry wide challenges around product
availability and longer lead times have had
an impact on our NPS score for 2021
Achieved 2018 target of 15% reduction three
years early.
Continued innovation leading to increased
number of new products.
Key
Sustain:
sustainable performance
Innovate:
market-led innovation
Grow:
selective growth
1 No data
collected prior
to 2019.
Governance Financial statements Additional information
Strategic Report
29
Ibstock plc Annual Report and Accounts 2021
SUPPLIER
COLLABORATION
WORKSHOPS
CARBON REDUCTION
INCLUDED IN
SENIOR LEADER TARGETS
SUPPLY CHAIN
SUSTAINABILITY SCHOOL
SILVER AWARD
GOLD AWARD
HIGHLIGHTS
Responsible
Business
Strategic Report
30
Ibstock plc Annual Report and Accounts 2021
Introduction
Across the globe we have a collective
responsibility when it comes to climate
change and social inequalities. Our approach
to managing the Environmental, Social and
Governance (ESG) issues that are inherent in
running an enlightened business underpins
our corporate strategy and is critical for the
continued long-term future of our business.
Ibstock has an ambition to be the most sustainable manufacturer of clay
and concrete products in the UK, and to lead our sector in disclosure and
transparency. With over 200 years of history, being a responsible business
has always represented a strong unifying cause for Ibstock . Our activities
around quarries, energy use, long-term capital investments, as well as the
products that stay in buildings for hundreds of years, require sustainability to
be at the heart of our decisions. However, we realise that the building sector
is in the midst of further major shifts. Changing attitudes; a demand for
transparency; and a widespread need for solutions to address climate
change and social inequality, from all of our stakeholders have intensified.
We see this as an opportunity to think differently about our business.
ESG Committee
We announced the constitution of a new ESG Committee in our 2020
Annual Report and this began operating from the second quarter of the
year. The Committee is chaired by Claire Hawkings, one of our independent
Non-Executive Directors with years of experience in this space, and includes
Louis Eperjesi and myself as members. With support from our in-house
Sustainability team as well as expert external input from Isabel McAllister,
Responsible Business Director at Mace Limited, the Committee has led a full
and comprehensive agenda over the course of four meetings in 2021 and
has organised and clarified our approach going forward. The first report of
the Committee can be found in the Governance section on page 89.
Introducing the ESG Strategy 2030
For the past decade, we have been leading in this area, driving incremental
improvement and embedding change across the business. We took the bold
step of establishing an initial sustainability roadmap with targets in 2018, a
number of which we have delivered ahead of time, but we recognise a need
to go much further, much faster. Therefore I am delighted to be launching
the next stage in Ibstock’s journey through our new ESG strategic framework
including a commitment to become a net zero carbon business by 2040 –
demonstrating how serious we are in our contribution to tackling
climate change.
Based on an updated stakeholder assessment, this new ESG strategy sets out
a framework with three areas of focus for the coming years. We believe this
will help guide us to continue to take the necessary actions to future proof our
business in areas that are material for our stakeholders.
More information can be found on page 32.
FY 2021 – A year of delivery
I am very pleased to say that we are already ahead of some of those targets
that were established as part of our original sustainability roadmap in 2018.
A full review of our performance during the year can be found from page 45
and you can read more in our standalone Sustainability Report which is
available on our website.
For example, we have achieved our goal of 15% reduction in CO
2
per
tonne of production, removed over 200 tonnes of plastic waste from
our operations and broken ground to build our new Atlas factory in the
West Midlands. This will have outstanding sustainability characteristics,
incorporating state of the art technology, with significantly reduced process
emissions, resulting in a major reduction in carbon intensity. We belive 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.
Ibstock also led the way in becoming the first company in our sector to
procure 100% electricity from renewable sources. We received external
accreditation by Best Companies, as a ‘Good Company to Work For’ through
our 2021 employee engagement survey and our new COO is actively
sponsoring Diversity and Inclusion by chairing the employee led Working
Group. We know our employee population reflects the traditional nature
of our industry, and we have plans to change this. We have also achieved
a C- rating following our first submission to the Carbon Disclosure Project.
Enterprise risk and Taskforce for Climate-related Financial
Disclosure (TCFD)
We have considered climate risk as part of the business’s existing risk
management processes alongside the work that we have been doing in
order to meet the new TCFD reporting requirements. We have also reflected
that the delivery of the new ESG strategy should form part of the existing
principal risk of Climate Change.
Further information on our principal risks and TCFD can be found on page
52 and page 48.
Stakeholders
To ensure our long-term success we must take account of what is important
to all key stakeholders. Pages 40 to 42 set out details of our key stakeholder
groups and a snapshot of their principal areas of focus, how we engage
and how we respond. Consideration of our stakeholder interests forms
a significant part of the Board decision-making process and further
information on this can be found in the Section 172(1) Statement and
the Corporate Governance Statement on pages 70 and 83 respectively.
ESG and Remuneration considerations
Last year we took the important decision to include a performance condition
that tracked our carbon reduction plan progress within the business for use
within the Long Term Incentive Plan (LTIP) and to be included as one of the
Group’s non-financial KPIs. We have agreed to go further this year and
include a new ESG performance measure for the 2022 LTIP that will track
our progress against three specific targets included in the new ESG strategy.
Further information on this can be found in the Directors’ Remuneration
Report on page 99.
Structure of this section
The first part of this report sets out full details of our new ESG framework
including our new and evolved milestones and ambitions. A full review of
those material developments and achievements during 2021, including the
summary of our engagement with our key stakeholder groups, starts on
page 36 . For simplicity and clarity we have collated all key data in the
reporting section on page 45. This includes our TCFD disclosure.
Joe Hudson
Chief Executive Officer
Governance Financial statements Additional information
Strategic Report
31
Ibstock plc Annual Report and Accounts 2021
1
6
12
1
2
8
9
10
11
12
3
4
5
67
High
High
Low
Importance to stakeholder
Impact on Ibstock
Definition
1 Climate Change
2 Health, safety and wellbeing
3 Ethics
4 Resource use
5 Innovation
6 Talent and skills
7 Employee engagement
8 Biodiversity
9 Water use
10 Circularity
11 Communities
12 Diversity and Inclusion
Addressing Climate Change
Improving lives
Manufacturing Materials for Life
Governance
Introducing our new ESG strategy
The built environment sector has undergone
unprecedented change in the last five years with
climate change, regulatory and legislative
dynamics, skills shortages and supply chain
pressures creating both uncertainty and
opportunity. Ibstock’s new ESG strategy
defines a new era of responsible business
as one where Ibstock:
1
Values creativity to develop a more
diversified product portfolio
2
Invests in innovative low carbon solutions
and technologies
3
Drives mainstream circularity in the
building sector, conserving finite resources
and championing materials transparency
4
Nurtures our people and future skills
to achieve our goals in an era led
by digital technology and data
5
Develops solutions that support
affordability, climate resilience
and skills shortages
Materiality
To make our strategy relevant to all our
stakeholders we completed an assessment to
identify those issues of most importance to our
stakeholders and that had the greatest impct on
our Company. The table below illustrates the key
priorities for different stakeholders, but is by
no means exhaustive and can be subjective.
The information is based on desktop reviews,
customer feedback, people surveys and
interviews and seeks to best capture the
perspectives of all our stakeholders.
As a result of this analysis and following internal
discussion and prioritisation Ibstock’s new
strategy focuses on three key areas and is
underpinned by existing responsible business
governance and practice:
Addressing Climate Change
As we are an energy intensive manufacturer,
the main driver for change is the mitigation
of climate change through carbon reduction.
We will decarbonise our products, processes and
supply chain by focusing on carbon reduction,
water efficiency and biodiversity gains. This will
drive us to achieve the 40% operational carbon
reduction by 2030 and to be net zero by 2040.
Improving Lives
Building our social value by investing in our
people, our culture and our communities.
Ensuring our colleagues belong, thrive and
grow and that we make a positive impact
in the communities that we operate.
Manufacturing Materials for Life
Evolving our products, processes and services by
incorporating whole life cycle design, preserving
raw materials and future proofing our offer to
customers through a diversified portfolio.
We began our sustainability journey with a five-year Roadmap of 2025 targets
to tackle our key sustainability issues. We are now in a position to evolve this
into a 2030 strategy that will meet our immediate needs and drive us forward
to succeed in the longer-term.
RESPONSIBLE BUSINESS CONTINUED
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Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
RESPONSIBLE BUSINESS CONTINUED
ESG strategy summary
Focus 2030 Ambitions
Addressing
climate change
Improving lives
Manufacturing
Materials for Life
Carbon reduction
Reduce absolute Carbon by 40% (Scope 1 and 2) against
a 2019 baseline
Biodiversity Net Gain
Achieve Biodiversity Net Gain across our estate using
Biodiversity Metric 2.0
Water Efficiency
Reduce mains water use by 25% per tonne of production
against a 2019 baseline
Health, Safety and Wellbeing
Ensure all of our employees can be at their best more of
the time through our health, safety and wellbeing strategies
Inspiring Futures
Provide development and growth for all with every
employee developing their skills annually and 10% in
Earn and Learn positions
Employee Experience
Increase female senior leadership representation to
40% by 2027 as part of our proactive approach to
diversity and inclusion
Innovation
Achieve 20% sales turnover from new products
and solutions that deliver enhanced customer value
and improved sustainability
Circular Economy
Embed circular economy principles into the business,
prioritising zero waste and driving demand
for secondary materials markets
Dematerialisation
Reduce raw materials consumption with a
focus on plastics, secondary aggregate and
cementitious replacements
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Ibstock plc Annual Report and Accounts 2021
Milestones SDGs Rationale
• 2022 – Scope 3 carbon reduction strategy developed
• 2023 – Net zero (Scope 1 and 2) carbon brick factory
• 2024 – 100% of mobile plant to be hybrid and/or electric
• 2024 – On-site renewable energy generation review published
• 2026 – Biodiversity Action Plans implemented across all sites
• 2023 – Water footprint and reduction strategy implemented
• 2022 – Launch mental health programme
• 2023 – Launch wellbeing strategy
• 2022 – Establish social value framework
• 2026 – 200 Ibstock colleagues as active STEM Ambassadors
• 2022 – Launch Building Belonging
• 2023 – Commence ethnicity data pay gap reporting
• 2022 – Ibstock Futures launches
• 2024 – Net zero (Scope 1 and 2) Slips factory opens at Nostell
• 2024 – Research into alternative and secondary materials published
• 2025 – Zero waste to landfill achieved
• 2024 – Product data transparency project update
• 2022 – Impacts of clay dematerialisation project published
• 2025 – 40% plastic reduction achieved
• Water scarcity is a growing concern in the UK and risk
to our business
• Self-generation of renewable energy reduces our
carbon impacts and reliance on the national grid
• Production efficiency is at the heart of modern
manufacturing and we continuously strive to improve
by reducing energy and materials consumption
• Building climate risk and opportunity into our business
model supports our decarbonisation journey
• All sites operate with due care and consideration for
biodiversity. Moving to a net positive position will see
Ibstock introduce more proactive biodiversity programmes
• Wellbeing of our employees is paramount in enabling
them to perform, develop and thrive at work and
at home
• Education, training and development of our people is
essential for our success as is our support for future
generations entering our sector
• Proactively supporting women into the construction
sector helps tackle the skills shortage and brings diversity
of thought to the way the sector behaves
• Ibstock’s Modern Slavery Statement can be found
on our corporate website
• Innovation in building products and solutions will
support the transition to a low carbon economy
and transform the industry
• Creating sustainable products that meet the needs
of our customers to build connected, integrated and
healthy communities presents a growth opportunity
• Preserving raw materials for future generations and
sourcing responsibly safeguards our business and
our suppliers
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
RESPONSIBLE BUSINESS CONTINUED
Environment
Carbon
We achieved a 19% reduction in carbon against
the 2015 baseline that goes well beyond our
original target of a 15% reduction by 2025.
This has been possible through a combination
of leadership, factory consolidation, energy
purchasing and capital investment in major
operational improvement programmes.
Continued operational efficiency and
transformational initiatives also contributed
significantly during the year in 2021.
One of the most significant actions was our
investment in procuring 100% of our electricity
from renewable sources. This equates to around
20,000 tonnes of carbon, or the equivalent of a
6% reduction in the emissions metric.
The significance of this investment goes beyond
our own direct impacts: by taking early action we
are supporting the demand for renewable energy
sources across the UK; and setting an example
for others in our sector, our peers, customers and
suppliers, to take similar action. Our colleagues
also overwhelmingly welcomed this investment.
Product development
New product development continued to grow
with 13% of revenue coming from new and
more sustainable products, showing good
progress against our 20% target. See Our KPIs
and Our Strategy sections on pages 28 and 18
respectively for more information.
Evolving our core products to reduce carbon and
improve their sustainability credentials continued
with a focus on creative design mix for our
concrete products. Using cement alternatives
and increasing recycled content has the benefit
of reducing weight, which reduces transport
loads and improves manual handling, as well as
reducing embodied carbon.
Working more closely with our customers on
carbon reduction is also a growing opportunity.
Network Rail approached Ibstock and our partner
G Tech Ltd. with a specific request to produce a
lower carbon platform coper. The joint investment
in equipment, people, resources and trials has
enabled us to develop the product together,
sharing and learning as a team. The new product
mix provides an 80% carbon reduction and is now
available in the marketplace.
Water
We have continued to focus on improving data
collection for our mains water usage and this
will continue into 2022 so that we are able to
provide a full and more detailed picture. Data
improvements have shown that our usage has
decreased significantly from previous estimates
with an 8% reduction against the 2015 baseline.
Waste
Only 13% of our general waste goes to landfill
(total general waste in 2021 was 3,500 tonnes).
This is an improvement of 80% against the 2015
baseline. This significant improvement is in part
due to collaboration and engagement with our
waste management companies through the
provision of more meaningful and detailed
reporting data. We are currently reviewing our
waste management providers and have made it
a requirement for those companies participating
in this tender that they must be able to assist
Ibstock in achieving its zero waste to landfill
ambitions by 2025.
Plastic
In the year under review, we achieved our
short-term target to remove 200 tonnes of
Throughout 2021, we continued to take action to reduce our
carbon, waste, water and packaging impacts and to plan for
the long term by finalising our commitment to achieving net
zero operations by 2040.
Atlas redevelopment
We began the redevelopment of our new Atlas
factory in the West Midlands during 2021. The
£50 million investment in the site to produce over
100 million bricks annually will provide the market
with the first clay brick products that are net zero
carbon in their manufacture (Scope 1 and 2).
The Atlas factory will be a pathfinder project for
Ibstock, incorporating leading technology and
improving carbon efficiency of production by
50% compared to the previous factory on the site.
The site will enable us to test and learn from new
technologies and roll out successful processes
across our estate. Atlas will not only be a flagship
for decarbonisation, it will also benefit the local
economy. Local jobs and local spend during
construction and into the operational phase will
bring opportunities to enrich the local community
and recruit a new and more diverse workforce.
Strategic Report
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Ibstock plc Annual Report and Accounts 2021
L
£
£
£
£
£
£
£
preventable plastic packaging. The dual focus
of reducing the thickness of plastic shrink wrap
and moving to a cap bag for clay bricks has
contributed significantly to this reduction.
As a result we have achieved a 13% reduction
against the 2019 baseline, putting us on track
to achieve our 40% reduction target by 2025.
Supply pressures during 2021 have meant
that we have not always been able to access
lower micron product so we will be working
with suppliers to mitigate this risk for 2022.
Discussions with our customers, competitors
and sector representatives on understanding the
barriers and potential solutions for eliminating
plastic are starting to challenge some of the
cultural and historical reasons why plastic is
expected rather than required in many
packaging products.
Collaboration
Working directly with suppliers on carbon
reduction initiatives began in 2021 with Ibstock’s
first supplier engagement day. Held at our I-studio
in London, six of our key suppliers, with significant
material impact on our Scope 3 emissions, joined
us to share details of their own decarbonisation
experiences and explore opportunities for
collaboration in this area. As a result our
procurement team have added sustainability
as a standing item in all supplier quarterly
review meetings in an effort to build a mutual
understanding of challenges faced and to
identify opportunities for change.
More than three quarters of our suppliers
now meet the Sustainable Supplier Code of
Business Conduct. As one of a number of
recommendations coming out of the recent
governance and compliance review, the Code
will be relaunched in the early part of 2022.
For further information on the Governance
Compliance review see page 76.
Ibstock has been a long term member of the
Supply Chain Sustainability School achieving Gold
status in 2021. We have committed to be partners
of the School and will now be contributing
financially to the development of the School’s
offer. We will also utilise training modules
in-house for our people development and
engage in content creation for our sector
and supply chain.
Net zero commitment
Having made such strong progress, with a 19%
reduction in our carbon per tonne of production,
we announced a more stretching target at the
end of 2021. Our new target is to achieve 40%
reduction in absolute carbon by 2030, and a
commitment to become a net zero carbon
operation by 2040.
Our net zero commitment covers Scope 1 and
2 emissions – including investment in more
efficient production processes and in high quality
environmental projects to offset residual carbon.
Ibstock’s Scope 3 carbon emissions are currently
less than 40% of the business impact and our
strategy to reduce indirect Scope 3 carbon
emissions will be developed in 2022.
The announcement of Ibstock’s investment in
two new net zero carbon factories at Atlas and
Nostell as well as the creation of ‘Ibstock Futures’
demonstrate some of the actions that Ibstock is
taking in order to meet these ambitious targets.
2018
Achieving initial goals
100% electricity from
renewable sources
Solar Park at Ibstock HQ
delivering energy to site
19% reduction in CO
2
per tonne of production
against 2015 baseline
8% reduction in mains
water per tonne of
production against
2015 baseline
2022
Accelerating change
Energy from
alternative sources
100% of mobile plant
and company cars to be
hybrid and/or electric
Biodiversity Net Gain
Commissioning of
Atlas factory
(net zero operations)
Commissioning
of Nostell Brick slips
systems factory
(net zero operations)
Further major capital
investments
Develop Scope 3 emissions
strategy
2030
Scaling Solutions
Energy from
alternative sources
Expansion of
diversified portfolio
Core products =
low carbon products
Circularity embedded
Carbon capture use
and storage scaled
Balance any remaining
emissions that cannot be
eliminated with natural
or technical solutions
2040
Our journey to net zero
CONTINUED OPERATIONAL EFFICIENCY & ESTATE RENEWAL
NET
ZERO
BY 2040
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
RESPONSIBLE BUSINESS CONTINUED
Health and Safety
We are committed to building a safe, healthy and
happy workplace where our people can reach
their full potential. The Executive Leadership
Team (ELT) and the wider senior leadership
group take an active responsibility towards
our workforce health and wellbeing and play
a positive role in not only encouraging physical
wellness, but social and mental health as well.
COVID-19
The COVID-19 pandemic continues to present
challenges and drive us to prioritise the health and
safety of our colleagues, customers and partners.
Whilst the business has shown real resilience to
some of the ongoing effects of the pandemic we
have worked hard to maintain appropriate safety
measures for the whole of 2021.
Safety performance
Our ambition is to achieve zero harm for all of our
people. We are making progress against our
health and safety targets with a 44% reduction
in the LTIFR in 2021 relative to our 2016 baseline.
The continued implementation of the health and
safety roadmap this year has enabled us to drive
a sustained and focused approach through
a combination of leadership, training and
development and strong communication and
feedback. In addition to introducing several
updated health and safety standards, we also
rolled out a more comprehensive management
system to help us monitor and track health,
safety, quality and environmental activities.
Although our injury frequency rates are reducing,
we have still had a number of lost time accidents;
some with high severity. Following a serious
accident with one of our employees in 2019
which resulted in life changing injuries, we
received a significant fine from the HSE.
This reinforces the fact that we can never be
complacent about health and safety. We remain
committed to learning lessons from these
accidents and are determined to drive our
business to zero harm for everyone.
Colleagues receiving Safety awards at the
2021 British Ceramics Confederation (BCC)
Pledge Awards
Health and wellbeing
Usage of the Ibstock Employee Assistance
Programme rose from 2.9% to 4.9% during
the year. This, supplemented with ongoing
discussions with our colleagues through our
engagement forums and the Wellbeing Working
Group showed an increased need to continue to
develop our support structures to assist with our
colleagues’ wellbeing. Ibstock delivered a range
of programmes from toolbox talks, on-line yoga
and resilience training through stress awareness
month, a menopause awareness campaign and
our ‘6 Sessions of Summer’ campaign to engage
colleagues in weekly physical or mental wellbeing
challenges. We began 2022 with our first ‘How to
start a conversation about mental health’
workshop delivered to all employees as an
integral part of Ibstock’s regular Health and
Safety Safe Start process.
In addition, we engaged an external consultant
to conduct a Wellbeing and Mental Health audit
so that we could establish a clear baseline to
guide our future actions and recommendations
in this area.
Our people are central to our business success and we are
proud of our evolving culture. We continue to embed our
values that were designed and created by employees from
all areas and levels of the business. We are confident that
these values reflect what people feel Ibstock represents as
a business and a place to work and that they encompass
the behaviours necessary to underpin our culture, decision-
making and processes going forward.
Social
Male
Female
23
8
Senior Management (Executive
Leadership Team and their direct reports)
Male
Female
1,794
325
All employees
Male
Female
5
3
PLC Board Directors
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Ibstock plc Annual Report and Accounts 2021
Students at summer school 2021
People
Diversity & Inclusion (D&I)
Ibstock’s employee population reflects the
traditional nature of our industry with lower levels
of diversity across a number of characteristics.
We are making an active stand to change this.
Darren Waters, COO, is providing executive
sponsorship, chairing our D&I Working
Group which consists of 17 passionate
and inspired colleagues.
Outputs from this have included Ibstock senior
leaders experiencing a bespoke D&I disrupt
training event to explore unconscious bias and
all colleagues have been provided with access
to a range of workshops and support on this
important topic.
We appreciate how fundamental D&I is to our
ongoing cultural development and there is an
extensive programme of engagement, led by
colleagues for colleagues, planned for 2022.
Communication and Employee Engagement
This last year has seen a further shift in how we
connect and communicate with our colleagues.
We have been leveraging technology to assist
with this and the MyIbstock intranet is now
becoming well established within the business,
accompanied by a mobile app, which enables our
colleagues to access company information
quickly and efficiently. Digital display screens at
manufacturing sites provide another channel for
information sharing and interaction and our first
Ibstock Informed LIVE event reached hundreds of
colleagues – our largest single interactive event
to date. This focus on communication and wider
engagement activity is paying off, evidenced by a
significant improvement in our overall employee
engagement survey rating since the last survey in
2019. We have now officially received external
accreditation from Best Companies as a ‘Good
company to work for’.
The Listening Post, our forum established to
facilitate two-way communication with
employees met three times during the year.
This forum meets the requirements of the UK
Corporate Governance Code and provides an
opportunity for a number of Ibstock colleagues
representing different parts of the business to
get together with Joe Hudson, our CEO and an
independent Non-Executive Director from the
Board, in order to discuss issues, ideas and
concerns raised by their colleagues. The meetings
covered a range of issues including health, safety
and wellbeing, business performance and the
‘must win battles’ the employee engagement
survey, remuneration initiatives and Ibstock’s
communication approach.
Talent and Career Development
We continue to drive improvement in our talent
pipeline with talent succession planning and
development programmes in place for critical
roles. This links right through to our early careers
focus on apprentices and inspiring young people
into construction and engineering careers
through our schools and college engagement.
Science Summer School
In our third year working with the Science
Summer School we connected with local schools,
colleges and businesses in Skelmersdale and
Rotherham, both communities where we have
factories. We saw over 1,000 young people get
out of school for the first time in months and
have a truly inspirational day with Science,
Technology, Engineering and Maths careers
at the heart of the experience. Raising
aspirations and raising Ibstock’s local profile
as an employer brings value to society and
our business.
Our award winning apprentice programme was
once again shortlisted for 2021 ‘Apprenticeship
of the Year’ in the Leicestershire Business Live
awards. We are incredibly proud that 11 of our
existing engineering apprentices successfully
completed their end-point assessments in 2021
and secured permanent roles in the business,
with a new cohort of nine apprentices also
joining Ibstock during the year. In response to
skills shortages in the sector we widened our
early career talent programme with apprentice
roles now in support functions, giving us a total
of 38 currently studying on our Early Careers
programmes across the Group.
At site level, factories have been reaching out
to local colleges to offer product donations
and careers information to local learners.
Over 83,000 bricks and many tonnes of
concrete products have been donated to
support local colleges and training centres to
develop young people in construction and
engineering trades. Raising the profile of careers
in the construction sector is crucial to help tackle
the skills shortage we are facing.
Communities
Supporting disadvantage groups
Work with our charity partner Shelter has gone
from strength to strength in 2021. The realities
of the pandemic have seen a total of 222,360
households be tipped into homelessness, a
number equivalent to a city the size of Liverpool,
reinforcing the importance of our support.
The business matches all employee fundraising
for Shelter, raising nearly £130,000 since the start
of the partnership in 2019. Walking challenges,
virtual bikes rides, car washes, silent auctions
and even a socially distanced summer fête have
helped colleagues connect, through a difficult
year, behind this important cause. The impact
of this effort supports Shelter in its campaigning
work and the practical support and advice
provided for those that are homeless or at risk
of homelessness.
Colleague charity champions raising money
for our Charity partner Shelter, UK
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
RESPONSIBLE BUSINESS CONTINUED
Engaging with our local communities strengthens our business.
Our relationships with communities closest to our sites are vital and
we build trust through local dialogue.
What matters to them:
We recognise the key material issue for our communities relates to
responsiveness to local concerns, ongoing local dialogue, environmental
impacts including biodiversity and local wildlife. Our stakeholders in
education and training increasingly put value on integrating work related
learning and careers into the curriculum and experiential learning for young
people and those from more disadvantaged communities – linking to the
levelling up and social mobility agenda.
How we engage at Board level:
The members of the ESG Committee receive a quarterly summary of
material issues or points of interest from Ibstock’s communities stakeholder
champions including the Estates Team, Early Careers, Charity Champions
and Factory Managers. This enables the Board to understand how issues
are resolved and opportunities identified.
Through MyIbstock, significant content is shared by colleagues on our
community work and charitable activities. The Board are able to engage
and respond to this.
FOR EXAMPLE the ESG Committee heard a presentation on how Ibstock
is working locally in Rotherham with Wales High School to build a skills
and talent pipeline and encourage young people to consider STEM
careers in the wider construction sector.
FOR EXAMPLE in late 2021 the plc Chairman joined in the HEARTS Vs
HOMES bike race for Shelter. The teams clocked up over 1,000 miles in 2
weeks raising over £1,500 for Shelter, which is matched by the Company.
Engaging with the teams and celebrating the success gave an insight
into the power and impact that supporting a charity can have on
purpose, engagement, motivation and pride in working for Ibstock.
How we engage across the Company:
We engage with our communities in a range of ways including:
• Factory manager links with their local neighbours and community leaders
• Estates team relationships with local authorities
• Charity Champion network for Shelter
• Early Careers team engagement with training and education sector
• MyIbstock sharing community stories
Communities
Stakeholder Engagement
Our Board carefully considers the outcomes of any engagement with
stakeholders as part of their duty to act in the way, they consider, would be
most likely to promote the success of the company (s172 of the Companies
Act 2006). This results in an approach whereby decisions are made that
result in consistent high standards of business conduct and the success
of Ibstock in the long term.
By understanding and considering each key stakeholder’s interests, priorities
and views the Board is able to consider these when making decisions where
such interests and priorities conflict. Although the Board engages directly
with some stakeholders, engagement also takes place at different levels
within the business. The output from engagement below Board level is
reported back to the Board and/or Board Committees and helps to inform
both Board and other business-level decisions. During 2022 we will develop a
set of appropriate key performance indicators that will provide better insight
around the effectiveness of our engagement processes so that we can adapt
and amend our approach where necessary.
The Section 172(1) Statement can be found on page 70. Key activities and
an explanation of some of the principal decisions undertaken by the Board
in 2021 are detailed on page 83.
We are openly and actively engaging with our shareholders to build their
understanding of our business and trust in our strategy.
What matters to them:
Key material issues for our shareholders relate to: the resilience of the
business model in light of long-term sectoral and macro trends, access to
sufficient capital and long-term financial returns (including dividend levels).
ESG matters continue to increase in significance with TCFD, carbon data
disclosure and diversity considered to be high on the agenda of our investors.
How we engage at Board level:
Members of the Board including the CEO and CFO meet with shareholders
and analysts as part of the regular annual cycle. Communications are
maintained with the market in accordance with all requirements and we
publish results and trading updates through the year. Feedback from these
meetings and communications are reported to the Board on a regular basis.
FOR EXAMPLE One of our top 10 investors visited our Bedford and
Leighton Buzzard production facilities late in 2021. This visit enabled
management to demonstrate the positive steps which we are taking
to invest for sustainable growth at two of our key concrete facilities.
How we engage across the Company:
We provide market updates through Ibstock Informed which is cascaded by
senior leaders throughout the business to all of the workforce to share the
interests and priorities of our investors with the business.
Weekly updates including market performance are provided from the ELT
through ‘The Week’ video message which is accessible to all colleagues.
Investors
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Ibstock plc Annual Report and Accounts 2021
We are committed to delivering positive environmental change to help
create a sustainable future for all. Leading in sustainability requires ongoing
internal and external engagement to enable the pace of change required.
What matters to them:
Key material issues for the environment include climate change and reducing
our carbon emissions; reducing our water footprint and reducing our waste
(including packaging). Increasingly we consider circularity in the construction
sector to maintain the value of materials and preserve use of virgin
materials, biodiversity net gain and data transparency across environmental
indicators as material issues.
How we engage at Board level:
The ESG Committee reviews environmental KPIs for the business including
Carbon, Waste, Water and Plastics. The Sustainability Steering Group’s
update paper on progress and challenges is a standing agenda item on
the ESG Committee. At each Committee a ‘deep dive’ is carried out on
a specific ESG issue.
FOR EXAMPLE in May 2021 the ESG Committee focused on water
reduction taking a tour of the Eclipse factory to review the water
reuse system in place. The ESG committee requested fast tracking
implementation of Automatic Meter Readers for water at every site
to improve mains water usage data and management.
How we engage across the Company:
Our Sustainability Steering Group brings departments from across the
business together to focus on ESG KPIs. All manufacturing Operations
Reports provide metrics on their relevant ESG indicators. Issue specific
groups share challenges and progress with the Sustainability Working
Group, for example the Biodiversity Working Group and Plastic Reduction
Working Group.
Ibstock Informed covers ESG matters as a standing item. This is cascaded
by senior leaders to all colleagues.
All colleague briefings on ESG issues took place throughout 2021 with
a focus on carbon reduction.
Environment
We believe that building a safe, healthy and happy workplace where our
people can reach their full potential strengthens our business. Listening and
understanding to employees views and ideas is a key part of our culture.
What matters to them:
We understand that colleagues value our culture of caring for people
and the sense of teamwork. They want to see increased focus on personal
development, consistency and fairness around pay and benefits and
increased visibility with senior leaders.
Our colleagues value our work on social and environmental issues, especially
climate change and biodiversity.
How we engage at Board level:
The Listening Post is our formal mechanism for workforce engagement and
sharing employee views with the Board.
Our Best Companies engagement survey results are shared with the Board.
MyIbstock provides employee blogs and thought pieces which members
of the Board are able to interact with.
Board members visit our sites and senior management join meetings
for specific items.
How we engage across the Company:
Dialogue with colleagues and feedback is enabled through:
• The Week – weekly video update from an ELT member posted
on myIbstock and emailed to all colleagues for comments/
questions/feedback
• Ibstock Informed – cascaded by the senior leadership team
to all colleagues
• MyIbstock news and colleague blogs
• Best Companies Engagement Survey
• Safe Start conversations
• Lunch and Learn briefings
In 2021, each member of the ELT visited a number of different sites
as part of a Group roadshow to share priorities and hear views from
all site colleagues.
Workforce
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
RESPONSIBLE BUSINESS CONTINUED
Customers are at the centre of what we do, shaping our growth and driving
our innovation. Building our understanding of our customers’ priorities is
imperative to meeting their needs.
What matters to them:
Key material issues for our customers relate to: product value and quality,
volume and availability, the quality of customer service, and strong,
collaborative relationships. Product lead times and price levels were
particularly pertinent in 2021.
Continued increase in requests for embodied carbon data of our products
and sustainability credentials of the business as our customers pursue their
own ESG ambitions.
How we engage at Board level:
The Board receives updates on the relationships with existing customers.
Customer and employee feedback is fed into Board discussions, which
ultimately shapes strategic decisions, including plans related to capital
investment and innovation.
FOR EXAMPLE the market insight leading to the Board’s investment
approval for Ibstock Futures is based on robust understanding of
customer priorities and the future trends for the sector.
How we engage across the Company:
We engage with our customers in a variety of ways, through our:
• Account Manager Teams
• Customer Service Team
• Design and Specification Advisors
• Customer feedback
• Quality and complaints team
• Social media
Strong relationships with suppliers and industry partners are key to our
sustainable growth. Sharing challenges and opportunities helps deliver
better outcomes for all.
What matters to them:
Key material issues for our external partners relate to: being treated
fairly during the sourcing stage, solid two-way communication channels,
timely financial settlements and strong, collaborative relationships.
How we engage at Board level:
The Board receives regular updates on matters relating to:
• Partnerships and opportunities
• Procurement efficiencies and challenges
• Regulatory horizon scanning
FOR EXAMPLE the Board received an update on Project 80, a leading
pilot in collaboration with Midland Heart Housing Association,
Birmingham City University and the Building Alliance to develop
the first social housing built to Future Homes Standard 2025.
Building understanding of the direction of the sector and Ibstock’s
impact and role.
How we engage across the Company:
We engage with our suppliers and partners in a variety of ways, through our:
• Regular supplier review meetings
• Procurement Team meetings
• Supplier Sustainability Code of Business Conduct
• Knowledge sharing from key external boards and partner projects
Customers Suppliers
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Ibstock plc Annual Report and Accounts 2021
Ibstock plc Board
ESG matters are considered as a regular agenda item
ESG Committee
Manages strategy and progress against the Group’s wider ESG agenda
ELT
Reviews performance and manages the implementation and achievement of ESG strategy
Sustainability Steering Group
Drives sustainability strategy and programmes,
supports integration of sustainability across the Group and divisions
Operations
Site level targets on resource efficiency, engagement and community
Innovation and transformation
Sustainability criteria integral to all decision-making
Managers and individuals
Encouraged and supported to make sustainable changes, share ideas and best practice
How we manage ESG at Ibstock
The oversight of ESG matters is critical. It not
only allows the Board to understand more
holistically the impact of its decisions on key
stakeholders and the environment, but also
ensures it is kept aware of any significant
changes in the market. This includes the
identification of emerging trends and risks,
which in turn can be factored into its strategy
discussions. ESG is overseen principally by the
Board, the ESG Committee and the ELT.
Claire Hawkings, one of our Non-Executive
Directors, is the designated Director with overall
accountability for ESG matters. Claire oversees
the review and performance of our ESG agenda
work as Chair of the ESG Committee.
A full report of the activities of the ESG
Committee’s activities can be found on page 89.
To support management and operational
integration of sustainability throughout the
business a Sustainability Steering Group was
established during the year. This Group is
supported by a number of specific working
groups that are dedicated to specific areas of
the new ESG strategy with a responsbility for
the delivery of specific targets.
Further information on Ibstock’s sustainability
activities can be found in the separate
sustainability report which is available
on our website.
The Governance section that begins on page 74 sets out how
the Board and its Committees operate and apply the principles
the Corporate Governance Code and other regulation and
best practice. This section provides information regarding
the management of ESG issues specifically and includes key
performance data. Ibstock’s first TCFD disclosure can be found
on page 48.
Governance
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
Compliance with law and regulation
As the laws governing business dealings become
ever more complex we need to ensure the
judgements and decisions we make are taken
with both the knowledge and application of the
highest ethical principles.
Ibstock operates appropriate policies and
procedures to ensure that risks from unethical
conduct and illegal business practice are reduced
and eliminated as far as possible. These underpin
our Code of Business Conduct, which together
with our Supplier Sustainability Code of Business
Conduct, sets out the behaviours expected of our
staff and the third parties we do business with.
Oversight of the operation of the Group’s
key policies in this area has been delegated
to the Audit Committee who, in turn, make
recommendations to the Board. There have
been no reported breaches of the Group’s
Code of Business Conduct in 2021.
The Code of Business Conduct is underpinned
by a number of additional standalone policies
including those covering bribery and corruption,
competition law and data protection. Taken
together these policies ensure that we operate
in an open, fair and honest manner in all of
our business dealings.
Modern Slavery
We support the Modern Slavery Act 2015.
Our Modern Slavery Policy confirms our zero
tolerance approach to any potential or actual
breaches of the policy and sets out the steps taken
by Ibstock to prevent modern slavery and human
trafficking in its business and supply chains.
The Company’s full Modern Slavery Statement
can be accessed on the corporate website.
Whistleblowing
To help us encourage the highest standards of
ethical behaviours, corporate governance and
accountability in our business activities, the
Group operates an anonymous whistleblowing
hotline, which is available 24 hours a day, seven
days a week. A summary of whistleblowing
activity, together with details of related
investigations, is provided to the Board on a
twice-yearly basis. There were seven incidents
reported through the external whistleblowing
line during the year (2020: 7).
Anti-Bribery Policy
We prohibit any inducement which results in
a personal gain and is intended to influence
action which may not be solely in the interests
of the Code.
Sustainable Procurement Policy
We have policy and framework guidelines
for all procurement activity in order to
maintain the highest standards of integrity.
Sustainability Policy
As part of our vision for sustainable growth,
we continuously work to better measure, record
and reduce our greenhouse gas emissions.
Diversity and Inclusion Policy
We are committed to ensuring our culture is
inclusive. Any type of discrimination including
harassment, victimisation, favouritism and
bullying is not accepted.
Trade Association Policy
Our Trade Association Policy helps to support
employees in their dealings with fellow
employees, customers, suppliers, regulators
and colleagues in competing businesses.
Health and Safety Policy Statement
We are committed to ensuring the health
and safety of all our colleagues.
For more information relating to all of the
aforementioned policies please see our
corporate website.
Compliance training
Ibstock’s web-based compliance training is
completed by appropriate employees and covers
a wide range of the Group’s policies and codes
of practice, including anti-bribery, conflicts of
interest, business ethics and diversity.
Human rights
Ibstock is supported by the principles set out in
the UK Declaration of Human Rights and the
requirements of the Human Rights Act and seeks
to act accordingly in all aspects of its operations.
Tax strategy
Our tax strategy is published on the Group’s
website. This formalises the Group’s approach
to conducting its tax affairs and managing our
tax risks. Our vision for tax is to be a responsible
corporate citizen, contributing the right amount
of tax to society on time and in the right tax
jurisdiction. Ibstock resides only in the UK and
not in countries considered as partially compliant
or non-compliant according to the OECD tax
transparency report or blacklisted or grey listed
by the EU in February 2022.
RESPONSIBLE BUSINESS CONTINUED
Colleague from our head office site
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Ibstock plc Annual Report and Accounts 2021
ESG Data and Reporting
In this section we have set out all key ESG data. In addition to the summaries presented here,
we also provide disclosures in our separate Sustainability Report.
2018 Roadmap Targets
Roadmap Measure / Priority 2021 Data 2020 Data 2025 target
Product innovation % of sales turnover from new and sustainable products 13.0% 11.7% 20%
Supply chain % of procurement spend meeting Suppliers Sustainability
Code of Conduct
78% 77% 100%
Carbon % reduction in CO
2
per tonne of production (relative to 2015 baseline) 19% 6.5% 15%
Water % reduction in mains water use per tonne of production
(relative to 2015 baseline)
8% 10% increase 5%
Waste % general waste to landfill 13% 64% Zero waste to
landfill
Plastic packaging % reduction in preventable plastic packaging (relative to 2019 baseline) 13% Target set in
2020
40%
Health and Safety % reduction in LTIFR (relative to 2016 baseline) 44% 41% 50% (by 2023)
Apprentices Number of apprentices on programme 38 35 Continued
commitment to
early careers
Diversity and Inclusion Developing a culture of inclusivity and increasing our diversity Progressed Progressed Progress
Community
engagement
% sites reporting on community engagement 100% 100% 100%
Charity partner Fundraise for Shelter £130K raised since
inception of the
partnership to end of
2021
£70K raised in
year one of our
partnership
£170K over 3
year
partnership
Streamlined Energy and Carbon Reporting (SECR) disclosure
2015 2019 2020 2021
1
Scope 1 Tonnes of CO
2
e combustion of fuel and operation of facilities 329,749 349,200 223,229 288,557
Scope 2 Tonnes of CO
2
e 48,530 28,429 16,429 19,648
Electricity TWh used per annum 0.11 0.11 0.07 0.09
Intensity Ratio Tonnes of CO
2
e per tonne of production 0.170 0.159 0.160 0.138
1 All emissions and energy are consumed in the UK. For reporting purposes, Ibstock defines its organisational boundary on an operational control basis, and our Scope 1 and 2 emissions and other ESG
metrics are reported on this basis (i.e. account for 100 per cent of such emissions from operations over which Ibstock plc has operational control. ‘Scope 3’ is the term used to describe the indirect GHG
emissions resulting from activities in our value chain but outside of our operational control.
Ibstock originally set a carbon reduction target of a minimum 15% by 2025 based on a baseline of 2015 performance for Scopes 1 and 2 based on an intensity
ratio of tonnes of CO
2
e per tonne of production. Emissions are calculated by applying global warming potentials and emissions factors to the activity data.
Measurement of the reduction in carbon forms the basis of a strategic KPI that was also used as a fourth measure in the LTIP for awards granted in 2021.
Throughout 2021 Ibstock procured 100% of its electricity through Total Gas & Power’s Pure Green energy tariff. This enables us to report zero emissions
for electricity under the GHG Protocol Corporate Standards, Scope 2 as the electricity can be matched to Renewable Energy Guarantee of Origin
(REGO) certificates.
Scope 1 and 2 emissions are calculated in accordance with the methodology set out in the GHG Protocol (January 2015 revised edition). In January 2015,
the GHG Protocol published a guidance document on method used to account for Scope 2 greenhouse gas emissions, which introduces dual reporting:
• Location-based reporting, which reflects emissions due to electricity consumption from a conventional power grid. It therefore uses primarily an average
emissions factor of the country’s energy mix.
• Market-based reporting, which reflects emissions from energy consumption taking into account the specific features of the energy contacts chosen,
and also considers the impact of the use of energy from renewable sources.
• Electricity emissions factors allow the hierarchy defined in the new Scope guidance document of the GHG Protocol for market-based reporting.
Suppliers specific factors must be certified by instruments that prove the origin of electricity (guarantee of origin certificates).
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
Data Assurance
Lucideon CICS Limited (a global assurance provider) are providing independent 3rd Party Assurance to the ISAE 3000 standard over a number of the metrics
reported in this section. The full assurance statement will be available on the Company’s corporate website from 28 March 2022.
Sustainability Accounting Standards Board (SASB) table
The following table covers our wider sustainability metrics, which is aligned where possible to the SASB disclosure for construction materials. We will continue
to review this data suite on an ongoing basis for future reporting periods
CO
2
e Emissions & Energy
Topic Metric 2020 2021
Scope 1 emissions Tonnes of CO
2
e combustion of fuel and operation of facilities 223,229 288,557
Scope 2 emissions Tonnes of CO
2
e electricity 16,429 19,648
Intensity ratio Tonnes of CO
2
e per tonne of production 0.160 0.138
Other fuels for mobile plant
and company cars Litres of fuel used per annum 2,085,811 2,956,121
Water
Topic Metric 2020 2021
Mains water M
3
mains water use per annum 165,983 197,883
Intensity ratio M
3
mains water use per tonne of production from 2015 baseline 0.110 0.092
Recycled water M
3
non-mains water use per annum 834,832 962,560
Total water M
3
total water use per annum 1,000,815 1,160,443
Waste
Topic Metric 2020 2021
Tonnes of waste to landfill Tonnes of general waste sent to landfill 1,888 278
Tonnes of hazardous waste (landfill) Tonnes of hazardous waste sent to landfill 204 178
Intensity ratio Tonnes of waste sent to landfill per tonne of production from 2015 baseline 0.001 0.0002
Tonnes of waste recycled Tonnes of waste recycled and diverted from landfill 3,709 3,034
Total tonnes of waste Total tonnes of waste generated by the business 5,801 3,490
Plastic
Topic Metric 2020 2021
Packaging Total tonnes of plastic packaging 998 1,476
Intensity ratio Kg of preventable plastic per tonne of production from 2019 baseline 0.69 0.72
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Ibstock plc Annual Report and Accounts 2021
SASB table continued
Social
Topic Metric 2020 2021
Health and Safety – LTIFR No. of accidents per million of man hours worked 2.2 2.1
Employee engagement Best companies score % N/A 61.2%
Training days No. of Days 6,712 4,066
Employee population Total number of employees 2,064 2,119
Training days per employee 3.3 1.9
Employee Diversity – Gender % of women 15.7% 15.0%
Board Diversity – Gender % of women 28.5% 37.5%
SLT Diversity – Gender % of women 18.5% 19.0%
Community engagement % of sites 100% 100%
Charitable Contributions product donations Not available 83,094
Suppliers complying with
Code of Business Conduct % of Suppliers 77.0% 78.0%
Revenue from new and sustainable products % of Products 11.7% 13.0%
Apprentices Total number of apprentices mechanical, electrical, technical and management 35 38
Company cars Low emission cars as a % of the total fleet Not available 45%
Net Promoter Score % of customers likely to recommend Ibstock 39.0% 33.0%
Number of employee deaths Number of deaths recorded for employees on our sites 0 0
Number of contractor deaths Number of deaths recorded for contractors on our sites 0 0
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
Task Force on Climate-related Financial Disclosures (TCFD)
The Taskforce on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board in 2015 and published its final report in June
2017. The report set out eleven recommended disclosures under four pillars to promote better disclosure. The new climate-related disclosure Listing Rule
9.8.6R(8) is a continuing obligation for premium listed companies in annual reports for periods commencing on or after 1 January 2021 and thereafter.
Pursuant to this rule the Board of Directors confirm the following:
a) Ibstock has made disclosures that are compliant with the four recommendations and eleven recommended disclosures set out in section C of the TCFD
Final Report in their Annual Report.
b) These disclosures can be found in the table below and in the relevant sections of this Annual Report (where stated);
TCFD Recommendation
Governance
Recommended Disclosures
Describe the board’s oversight of climate-related risks and opportunities
The Board has ultimate oversight of climate related risks and opportunities although delegates the oversight and monitoring of progress to the newly
constituted ESG Committee (see ESG Committee Report on page 89 for further information on it role and responsibilities). Whilst no specific training has
been delivered to members of the ESG Committee or the Board during the year, an external consultant has provided assistance in designing some training
materials for use at different levels of the organisation. Claire Hawkings, the Chair of the ESG Committee, has significant experience in the energy sector
notably executive responsibility for sustainability issues.
The Board receives updates from this Committee following each meeting and input is provided on specific issues to the Audit and Remuneration
Committees, including confirmation of the achievement of remuneration linked KPIs or to provide assurance over processes and progress relative to climate
related metrics and targets.
Ibstock has continued to improve its governance of climate risk through the further integration of climate related considerations into the discussions and
considerations of the Board, the ELT and the senior management of Ibstock. Further information of the Company’s risk management processes can be
found in the Principal Risks and Audit, Risk and Internal Control sections on pages 52 and 85 respectively.
Priorities for 2022
The Board and ESG committee will be focussing on implementation of the new ESG strategic framework and net zero commitment.
Training on key climate related topics has been added to the Board calendar for 2022.
Recommended Disclosures
Describe management’s role in assessing and managing climate-related risks and opportunities
The assessment and management of climate-related risks and issues below Board level is the responsibility of our ELT who are charged with implementing
the Group’s climate related strategy and reporting progress back up to the ESG Committee and the Board.
The ELT is supported by an operational Sustainability Steering Group which coordinates the work of a number of issue specific working groups, each of which
is addressing a specific aspect of the ESG strategy (see Responsible Business section on page 32).
A multidisciplinary project team comprising members of our sustainability team as well as colleagues from Finance and the Company Secretariat was
established in 2020 to make sure that Ibstock would be in a position to report against the new Listing Rule requirement and drive progress with TCFD
implementation. This group will continue its work during 2022.
Ibstock has in place a number of dedicated teams that are responsible for reducing Ibstock’s operational impacts on the climate and the vulnerability of
facilities to physical climate risk. Further information can be found in the Responsible Business section, the Principal Risk section and the Viability Statement.
Priorities for 2022
We will look to enhance cross-functional collaboration on climate issues and greater climate risk training across departments within Ibstock during
2022 and continue to strengthen our governance in this area.
A suite of internal climate know-how resources will be developed that will be accessible by all of our colleagues which will operate alongside training sessions
on all areas of climate related risk and opportunity.
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Ibstock plc Annual Report and Accounts 2021
TCFD Recommendation
Strategy
Recommended Disclosures
Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
Ibstock has identified those physical and transitional climate impacts on its businesses over the short, medium and long term. For the purposes of this
assessment short, medium and long term have been defined as <1 year and 1-5 years and more than 5 years. This reflects our assessment of the business’s
existing asset base and our plans for its maintenance and replacement in alignment with Ibstock’s five-year strategic plan. An external consultant was
used to provide support and advice as part of this process and a final report on the work undertaken by Ibstock was presented to the ESG Committee
in December 2021.
The following specific transitional and physical climate risks have been identified as part of Ibstock’s risk management process:
Transitional Risks:
Policy and Legal
• Increased reporting obligations
• New or changing legislation that may impact our existing products
• Increased prices of carbon credits or reductions in the amount of ‘free’ allowances
Technology
• The ability to transfer to new energy technologies due to a lack of or failed investments
• Customers switching to alternative products
Markets
• Customer perceptions and buying decisions based on limited understanding of a products environmental impacts.
• Transition to new building technologies and approaches redefining the type and nature of materials required
Reputation
• Maintaining credibility and value of the Ibstock brand and its ESG credentials against a backdrop of changing behaviours
• Impact of changing attitudes on the capital base and structure of the business
Physical Risks
Acute
The frequency and severity of flooding and surge precipitation could increase in the medium to long term with storm and hurricane winds increasing
significantly. This could result in damage to critical infrastructure and operational facilities.
Chronic
We have identified a number of other physical risks which may develop over time or result in repeated impact including changes in global weather patterns,
rising temperatures and sea levels. We do not anticipate any significant deviations from normal climatic conditions over the short term but we anticipate
accelerated development of existing trends, such as regular floods and inundations, and a significant increase in average annual temperatures in the
medium to long term. This could lead a periodic scarcity of water resources, increased operating costs due to extremely hot and cold temperatures, and
disruption of logistics routes.
Efforts to mitigate and adapt to climate change also produce a number of opportunities for Ibstock and, as part of the work undertaken during the year, the
following opportunities were identified:
Market
• Increased access to capital, due to improved reputation with investors as a result of a strong change performance
Product & Services
• Increased revenues, due to shift in consumer preferences resulting in access to new and emerging markets and increase in demand for innovative
products and services
Energy Use
• Reduced indirect (operating) costs, due to the use of lower emission sources of energy
Resource Efficiency
• Reduced indirect (operating) costs, due to the use of more alternative raw materials, efficient production and distribution
Priorities for 2022
We will revisit and refine the set of perceived risks and opportunities in the short, medium and long-term to provide a more detailed set of data with which
to integrate these results into our ongoing financial analysis and modelling processes.
Our strategy implementation will be developed through a combination of strengthening climate risk assessment requirements, considering climate risk
in supplier/provider selection, pursuing transition finance opportunities, and evaluating sector exposures to reduce portfolio emissions over time.
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
TCFD Recommendation
Recommended Disclosures
Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
Ibstock has considered the impacts of climate related risks using three different climate scenarios all of which are based on the International Energy
Agency’s (IEAs)
World Energy Model (WEM
1
). Those considered included a 1.5°C, <2°C and a >2°C increase in pre-industrial global temperatures.
Following this work we considered our resilience to carbon costs, water and adverse weather impacts at a Group and at the factory level. All scenarios
considered risks in the short, medium and long-term.
Transitional Risk Impacts
No significant impacts are anticipated with regard to those transitional risks identified in the short term under any of the three scenarios, whilst in the
medium-term our expectation is the introduction of trans-boundary regulatory controls and national carbon regulations. In the longer-term, apart from
the implementation of international and national carbon regulatory controls, we expect the introduction of more rigorous requirements for implementing
best available technologies over a long-term horizon. We also anticipate stricter design standards and requirements, particularly those applicable to the
construction of homes.
Acute Physical Risks
There is an expectation of an increase in the frequency of extreme weather events in the short term, whilst in the medium term for both the 1.5°C and <2°C
scenarios, the frequency and severity of flooding and surge precipitation could increase. In our >2°C business-as-usual scenario, the frequency of storm and
hurricane winds could increase significantly. This could result in damage to critical infrastructure and operational facilities. The frequency of flooding and
surge precipitation will further increase significantly in the long-term significantly limiting production processes and affecting supply chains.
Chronic Physical Risks
We do not anticipate any significant deviations from normal climatic conditions over the short term but in the >2°C (business-as-usual) scenario in the
medium-term we anticipate accelerated development of existing trends, such as regular floods and inundations and a significant increase in average annual
temperatures. This could lead to a lack of water sources, increased operating costs due to extremely hot and cold temperatures and disruption of logistics
routes. In the 1.5°C and <2°C scenarios, these trends will be less prominent.
In the longer term the >2°C scenario business-as-usual scenario, we expect that negative climatic trends will continue to scale up. In the 1.5°C and <2°C
scenarios, we expect that climatic changes will gradually slow down and the climate will stabilise.
We have announced a new ESG strategy which focuses on three distinct areas with clear ambitions, targets and milestones in order to ensure we meet our
objectives. Part of this is our commitment to reduce the level of absolute carbon in the business by 40% by 2030 and to be net zero by 2040. Full details can
be found in the Responsible Business section on page 32.
As part of the risk identification process we also included the potential impacts resulting from those events, such as a prolonged weather event as a result
of climate change (such as water stress, storms or flooding), local/national restrictions on the ability to work or other unanticipated event, which prevents
production at one or more of the Group’s facilities and therefore prevents customer demand being met. This will specifically model the consequences of a
significant production facility (Eclipse) being unable to produce for a prolonged period and also an outage at factories in the South East for a period of one
month as a result of water stress, storms or flooding, which are in the high risk area defined by the Environment Agency. The impact of which would
represent around 30% of production.
Priorities for 2022
We will look in more detail at the impacts of climate related risks using its previously identified scenarios with a specific emphasis on the organisation’s acute
and chronic physical risks.
Recommended Disclosures
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C
or lower scenario
As part of the strategic planning process we have considered the possible transitional and physical risks to Ibstock with regard to the 1.5°C sustainable
development scenario. In the time horizon of the strategic plan the impacts represent less than 5% in terms of base case adjusted EBITDA*, and we
would expect our selling prices to reflect any increased carbon costs which would further reduce the potential transitional risk impact of this sensitivity.
The consequences of a significant production facility such as Eclipse in Leicester being unable to produce for a prolonged period and also an outage at
factories in the South East for a period of one month as a result of water stress, storms or flooding, which are in the high risk area defined by the Environment
Agency, would represent around 30% of production.
Priorities for 2022
The outputs from the consideration of risks relative to the three scenarios will be used to input into more detailed modelling of the organisation’s longer-term
viability and resilience in 2022.
1 The WEM is the principal tool used to generate detailed sector-by-sector and region-by-region projections for the WEO scenarios.
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Ibstock plc Annual Report and Accounts 2021
TCFD Recommendation
Risk Management
Recommended Disclosures
Describe the organisations processes for identifying and assessing climate related risk
Climate change has been one of Ibstock’s Principal Risks since 2019. This risk has been amended following the full-year risk review process so that it reflects
the additional risk related to the embedding of the new ESG strategy (see Principal Risks on page 52).
Climate related risks are identified as part of the existing risk management process through the review and updating of our operational risk registers in
order to capture new existing and emerging risks. These registers now separate climate change and ESG issues on both an individual basis and from the
perspective of their impact and influence on other Group risks.
Assessment of the impact and probability of climate related risks is undertaken before and after the effect of mitigating controls in order to understand the
implications of such risks to the business.
The Group’s existing risk management process encapsulates climate risk but the intention is to include a specialist TCFD climate related risk assessment
process which provides the strategic framework for identifying material climate related risks and opportunities. This will ensure that climate risk
considerations are considered appropriately but that the outputs and considerations are fed into the broader risk management processes of the Group.
Recommended Disclosures
Describe the organisation’s processes for managing climate-related risks
Following the completion of the risk management review, each risk is considered relative to its residual rating having taking into account all existing controls.
Each risk is assessed in order to establish appropriate actions, to be delivered by the risks owners so that each risk is managed to a level that is consistent with
Ibstock’s risk appetite. These are then monitored on a regular basis.
Recommended Disclosures
Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management
Climate change risks are considered as part of the review or operational risk registers at the half and full-year with the results being reviewed and mapped
to the Group’s principal risk register by the ELT prior to their presentation to the Audit Committee and the Board.
Priorities for 2022
Risk management processes will be further developed to provide more detailed and specific consideration of climate risks and opportunities. This will be
done as part of Ibstock’s ongoing review and development of its risk management framework and process. See principal risks and uncertainties on page 52.
During the year Ibstock received a ‘C-’ (knowledge of impacts on, and of, climate issues) for its disclosure to the CDP Climate Change programme, which
provides detail on how Ibstock identifies and manages climate related risks and opportunities. A key focus for 2022 will be to understand the areas of
improvement required to improve the overall rating and also identify opportunities for improvement in our climate related disclosures.
TCFD Recommendation
Metrics and Targets
Recommended Disclosures
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
Ibstock uses a suite of metrics to assess climate-related risks and opportunities. These include those key metrics that were originally included on our Sustainability
Roadmap (launched in 2018) and that has now evolved into the Company’s 2030 ESG Strategic framework. These metrics relate to the three ambitions of the
business that comprise the new ESG strategy; namely that Ibstock will Address Climate Change, Manufacture Materials for Life and Improve People’s Lives.
A full list of these metrics used can be found in the Responsible Business section from page 45 and in our Sustainability Report that is available on our
corporate website (www.ibstockplc.co.uk). Comparatives for prior periods have been provided where possible.
As a business that uses a large amount of energy, Ibstock’s performance against a carbon reduction metric is one of four performance conditions used
in the 2021 LTIP. From 2022, 20% of LTIP performance will be assessed on a broader ESG metric, including an element based on carbon reduction.
Carbon reduction is also a KPI of the business.
Ibstock established a further KPI in 2021 which measures the proportion of revenue generated from new and sustainable products introduced to the market
in the last five years.
Priorities for 2022
We will consider the need for any additional metrics, notably those relating to the measurement of the impact of certain physical risks.
Recommended Disclosures
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
We publicly report on our Scope 1 and 2 GHG emissions and the carbon intensity of electricity generated. Part of our new ESG strategy is to undertake
a project to assess and report on our Scope 3 emissions. These have been calculated in accordance with the GHG reporting protocol methodology.
Comparatives for prior periods have also been included. Disclosure can be found on page 45 of the Responsible Business section.
Recommended Disclosures
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
A full list of our targets to manage climate risk and opportunity can be found in the Responsible Business section on page 34. The introduction of our new
ESG strategic framework summarises these under our three ambitions and we have also provided tables setting out both our 2021 performance against
the existing roadmap targets and performance against a range of SASB aligned metrics.
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Ibstock plc Annual Report and Accounts 2021
Board
Ultimate responsibility
Audit Committee
Review effectiveness
Executive Leadership Team
Concrete Support
functions
Clay
Operational level controls
Day-to-day activities to manage and identify risk (1st line)
Internal audit (3rd line)
Management, oversight, direction and governance (2nd line)
Reporting and escalation
OUR PRINCIPAL RISKS AND UNCERTAINTIES
An established
risk management framework
Risk and risk profile
The Group’s activities expose it to a variety of risks that could impact the
business. The Board has established a robust risk management and internal
control framework that supports the effective identification, assessment and
mitigation of risk and has completed a robust assessment of the Company’s
emerging and principal risks as required by the Code for the year ended
31 December 2021. It has also carried out a review of the effectiveness of
these controls. The assessment includes those risks that would threaten
Ibstock’s business model, its future performance, solvency or liquidity.
To support the discharge of these responsibilities, the Audit Committee
reviews the company’s internal control and risk management systems
including internal financial controls and reports the outcome of this review
to the Board. Further information on the role of the Audit Committee and
details of the Group’s system of internal controls can be found in the
Corporate Governance Statement on pages 85 to 86.
Risk management framework
To effectively manage risk, operational level controls are embedded across
the Group and form a key part of day-to-day processes. The Board maintains
ultimate responsibility for the Group’s control monitoring and provided
direction to management in its assessment of Group-wide risk.
Management operate a ‘three lines of defence’ structure to its internal
controls (see diagram below). The first line of defence is operated by
management and covers the day-to-day risk management activities –
implementing and executing internal controls. The second line (health
and safety, quality control and other central functions) works alongside
the risk owners to support the design and implementation of the controls
framework, whilst the independent third line is operated by our outsourced
Internal Audit provider, RSM UK Risk Assurance Services LLP (RSM).
During the year, the Directors reviewed and challenged the Group’s
assessment of risks as presented by management. This was the final stage in
a process that included the review of the divisional and functional registers
by senior management prior to the ELT approval of the Group’s principal risks
and uncertainties for presentation to the Audit Committee and the Board.
Ibstock has set an overall low tolerance to risk, which informs its approach.
The Board is committed to a continual process of improvement and
embedding of the risk management framework within the Group.
This ensures that the business identifies both existing and emerging risks
and continues to develop appropriate mitigation strategies.
Risk Appetite
The Board is responsible for setting the level of risk that the Directors are
willing to accept in order to achieve Ibstock’s strategic objectives. Our overall
risk tolerance is low and due to our open and collaborative working style,
any potential problem or potential risk or issues are identified quickly so
that appropriate action can be taken.
COVID-19
The uncertainty around the prospect of the emergence of further strains of
COVID-19 and its impact on the economy will continue to remain a concern
for the immediate future.
The risks and responses required to address the challenges of ongoing or
future major health events continue to be monitored and managed in the
business both at central and divisional level.
Key Achievements in 2021
During the year, our Internal Audit function, provided by RSM, assisted
the Group Company Secretary in managing the year-end review of risk
management processes and principal risks. This forms part of a longer-term
commitment to improving Ibstock’s risk management approach,
management and processes. A brief summary of some of the key
achievements during the year along with two priorities for the coming year
have been set out below.
Progress in FY 2021 Priorities for FY 2022
Full evaluation and
refreshment of the risk profile
Complete Board reappraisal
of strategic and principal risks
Enhancements made to
existing risk register templates
Embed more formalised and
regular risk reporting structures
in the business
Completion of a fraud
risk assessment
Consideration of changes
to risk reporting structures
Strategic Report
52
Ibstock plc Annual Report and Accounts 2021
Climate change risk
We have an ambition to be the most sustainable manufacturer of clay and
concrete products in the UK, and to lead our sector in the disclosure and
transparency around ESG issues. We have invested significant capital over
the last decade, with investment projects across the Group’s plant network
contributing to a reduction in the carbon intensity of our manufacturing
processes. Having now substantially achieved our initial sustainability
objectives, set back in 2018, we are establishing a further, more stretching
set of goals to go farther and faster in achieving our ambition.
At the same time, in order to assess the resilience of our business model, we
have modelled the impact of both transition and physical risks of climate
change on the financial performance and position of the Company.
This exercise concluded that, in the time horizon of the strategic plan, these
net risks are expected to have a modest impact equal to less than 5% of
Group’s adjusted EBITDA*.
During the year, external consultants were engaged to assist in the Group’s
approach to the identification, assessment and quantification of climate-
related risks and opportunities under pre-defined climate scenarios.
The Group is committed to increasing the transparency of reporting around
climate impacts and risks, and we have made great progress in the first year
on our journey to achieve full compliance with the recommendations of the
TCFD. For the first time, with the publication of our Annual Report, we will
also begin reporting where possible against the SASB disclosure criteria.
Changes to Principal Risks
A principal risk is one that is currently impacting on the Group or could impact
the Group over the next 12 months. Our principal risks are not an exhaustive
list of all risks facing the Group but are a snapshot of the Company’s main risk
profile as at 31 December 2021. All risks carry equal importance and weighting
for the Board, however, additional focus and priority may be given to specific
risks for a period of time in certain circumstances.
The Group’s principal risks are broadly categorised as strategic, operational
or financial in nature. Strategic risks arise from decisions taken by the
Board and management concerning the Group’s strategy and concern
the positioning of the Group within the building products market.
Operational risks result from the failure of internal processes and controls
or external events. Financial risks arise from movements within the financial
markets in which the Group operates or the inefficient allocation of the
Group’s capital resources.
Those principal risks, reported in March 2021 and restated at the Half-Year in
August 2021 have been assessed against the revised risks agreed within the
divisional risk registers, and used to determine the principal risk disclosures
for the year ended 31 December 2021. Having completed this review and
considering the conclusions reached at the Half-Year a number of changes to
the existing principal risks were proposed and approved by the ELT and the
Board. The key amendments include a number of changes to risk titles and
the removal of input price as a standalone principal risk. This has now been
included in Financial Management Risk. Consistent with the disclosures
made at the Half-Year, an additional principal risk (11. Major Project Delivery)
has also been included. This risk reflects the Board’s view of the importance
of the successful delivery of key projects within the business, such as the
redevelopment of the Atlas site in the West Midlands and the investment
to upgrade and expand capacity at the adjacent Aldridge brick factory.
The risk has a medium and long-term impact and the Board has taken
steps to enhance existing controls to mitigate the impacts of this risk to
an acceptable level. The changes result in the total number of principal
risks remaining at 11 and are summarised in the table on page 54.
The full list of what the Board considers to be those current principal risks
and uncertainties facing the Group can be found from page 54. This reflects
the changes made during the year and that are discussed above and in
the table on page 54. Our disclosure for each Principal Risk includes the
mitigating actions for each and, where applicable, updates on any change
in the profile of each risk during the past year.
The principal risks and uncertainties should be read in conjunction with the
Business Review and the Financial Review. Additional risks and uncertainties
of which Ibstock is not currently aware or are believed not to be significant
may also adversely affect strategy, business performance or financial
condition in the future.
Emerging Risks
Emerging risks have the potential to impact Ibstock’s strategy but currently
do not have the ability to be fully defined, or are principal risks that have
been particularly elevated.
Our emerging risks are identified through horizon-scanning by the ELT and
Board in relation to industry and macro-economic trends. This is supported
by our divisional operational risk review process.
Examples of emerging risks which were considered during the year included:
Cost inflation and energy pricing
Significant inflation experienced throughout the second half of 2021 across
the key cost areas of energy, freight, carbon and materials raised the level
of focus on around this risk. Our energy hedging strategy, which requires us
to layer in forward cover over a number of years for both natural gas and
power, provided a critical level of protection against energy prices which
spiked very sharply during the second half of the 2021 year but this remains
under review.
Geo-political environment
Whilst Ibstock is a UK business, the recent tragic events in Eastern Europe
create broad macro-economic uncertainty which could impact the
Group’s operations.
Net zero carbon strategy
A failure to implement the approved net zero strategy could impact Ibstock’s
reputation with many of its stakeholders and make the business less
attractive in the longer term.
The digital agenda
A failure to embrace innovative technologies to deliver efficiencies and
enhanced ways of working to the Group and its customers.
Find out more
Our markets p14
Our purpose and business model p16
Our Strategy p18
Our Key performance indicators p28
Responsible Business p30
Governance Financial statements Additional information
Strategic Report
53
Ibstock plc Annual Report and Accounts 2021
Changes to Principal Risks
Original Principal Risk Revised Principal Risk Change
Climate change No change There has been no change in the risk title but the risk description has been
expanded to include the need to embed appropriate practices to achieve the
Group’s ESG ambitions
Operational
Disruption
Material Operational Disruption The title has been changed so that it is clear the risk relates to operational
disruption beyond the day-to-day with a focus on material events
Economic Conditions Market Uncertainty The title change provides clarity as to what risk the Group is actually facing
Anticipating the
Market and New
Product Development
Anticipating Product Demand This risk covers both the need to anticipate demands for existing products, and
also anticipate the demands for new innovative products, for instance aligned
to the ESG agenda
Government
Regulation and
Standards Relating
to the Manufacture
and use of Building
Products
Regulatory and Compliance This risk is about meeting the regulatory and compliance standards throughout
the business rather than those more narrowly defined
Customer
Relationships
and Reputation
Maintaining Customer Relationships and
Market Reputation
The risk title has been amended to highlight our customer focus and our strong
reputation in the market
Recruitment
and Retention
of Key Personnel
People and Talent Management The risk has been refined to focus on our people and the talent that we have.
The risk narrative addresses obvious recruitment challenges being faced
by all sectors
Cyber Security Cyber and Information Security The risk title has been expanded to include information security
N/A Major Project Delivery NEW RISK
Financial Risk
Management
and Input Prices
Financial Risk Management Input Prices has been removed as a separate principal risk and included
alongside Forex, Credit, Liquidity and Interest Rate Risk
OUR PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Mapping risk to our strategy
1. Climate change
O
S
2. Material Operational Disruption
O
3. Market Uncertainty
O
4. Anticipating Product Demand
S
5. Financial Risk Management
F
6. Regulatory and Compliance
O
S
7. Maintaining Customer Relationships and Market Reputation
O
8. People and Talent Management
O
9. Product Quality
O
10. Cyber and Information Security
O
11. Major Project Delivery (NEW RISK)
O
Key
S
Strategic
F
Operational
O
Financial
Sustain: Sustainable performance
Innovate: Market-led innovation
Growth: Selective growth
Strategic Report
54
Ibstock plc Annual Report and Accounts 2021
1. Climate Change
Owner: Group Company Secretary
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Delivery of ESG commitments and targets
• An inability to manage energy demand
needs against these ESG targets.
• Changes in consumer demand may
reduce our competitive advantage.
• Failure to respond to climate change risks
may result in reductions in investor interest
and support.
• Changes to laws and regulations that could
require significant capital investments
or result in increased costs and/or
material liabilities.
• Increasing focus on reporting, data
assurance and monitoring of ESG
measures, targets and performance
from all stakeholders.
• Compliance with International and British
standards including include environmental,
energy, responsible sourcing and quality.
• ESG disclosure (see page 45 onwards) provides
visibility and assurance to all stakeholders.
• Continued investment to improve the sustainability
of our operations and monitoring of internal
sustainability KPIs to track progress.
• Introduction of a carbon reduction KPI in FY 2020
and its inclusion in our LTIP. A revised ESG measure,
incorporating three targets linked to the new
ESG strategy will be included for LTIP awards
made in 2022.
• Investment in the latest systems, plant, machinery
and technology to address the need for enabling
conditions to address climate change concerns
• Investment in longer-term strategic supplier
partnerships in order to deliver longer-term
sustainable products to our customers.
• Proactive management of the sustainability
descriptions associated with the Group’s products.
• Provision of clear and strategic oversight of the
Group’s ESG strategy by the ESG Committee.
Communities
Investors
Employees
Customers
Suppliers
Pension Fund
Members and
Trustees
Strategy
Link to Business Model
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
Governance Financial statements Additional information
Strategic Report
55
Ibstock plc Annual Report and Accounts 2021
2. Material Operational Disruption
Owner: Chief Operating Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Material disruption, caused by extreme
weather, power outages or a global
pandemic, at one of the Group’s
manufacturing facilities or quarries, or at
one of the Group’s suppliers’ facilities could
prevent Ibstock meeting customer demand.
• Dependence on efficient and uninterrupted
operation of Group information and
communication technology for
continued operation.
• Failure to deliver capital enhancements
on a timely basis could extend planned
closures and adversely impact the
Group’s production capabilities.
• Exposure to the impact of unexpected or
prolonged periods of bad weather, which
could adversely affect construction
activity and, as a result, demand
for the Group’s products.
• Targeting Group’s businesses by
environmental activists due to nature
of operations resulting in impacted ability
to manufacture or despatch product or
receive supplies.
• Transfer of some production across
manufacturing network.
• Engagement of subcontractors to reduce the
impact of certain production disruptions.
• Group-wide business continuity plans have been
refreshed and improved to take account of those
learnings coming from the COVID-19 pandemic.
• Alternative third party suppliers have been
identified who can maintain service in the event
of a disruption.
• A major IT incident action plan has been developed
and the Group maintains data backups and a
comprehensive disaster recovery plan covering
Group and individual factory locations.
• The Group maintains a capital expenditure
development plan, which is focused on integrating
the latest technology and replacing end-of-life
assets to ensure continued operational capability.
This is supported by qualified project management
resource to ensure disruption is minimised.
• Maintenance of business interruption insurance.
• Physical security measures together with real-time
monitoring of social media to identify threats of
environmental activism.
Communities
Investors
Employees
Customers
Strategy
Link to Business Model
OUR PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
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Ibstock plc Annual Report and Accounts 2021
3. Market Uncertainty
Owner: Chief Executive Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Material impact on the Group’s business as
a result of changes in the macro-economic
environment in the UK.
• Correlation of demand with residential
construction and renovation activities and
non-residential construction, together with
the supply chain’s attitude to stock levels,
which are cyclical.
• Continued risk and uncertainty around the
future impact of the COVID-19 pandemic
and the introduction of further lockdowns
and restrictions could further damage the
economy with the resulting impacts on the
Group’s business.
• Negative impacts on economic conditions
through geo-political events.
• Analysis of construction data using independent
forecasts of construction statistics and forecasts
of future demand based on stated
customer requirements.
• Ability to adjust capacity and cost base where
possible during economic downturns to allow more
of the Group’s manufacturing plants to remain
open and viable, maintaining skills, development
and training.
• Maintenance of fulfilment and customer service
capabilities to support and serve customers.
• Active engagement with industry bodies to ensure
the promotion of housebuilding and construction,
whilst seeking to promote the differentiating
qualities of our business in the core markets in
which we compete.
• Diversification of end-use exposure providing
greater resilience in light of changing market
demand in any of its end-use markets.
Investors
Employees
Customers
Pension Fund
Members and
Trustees
Strategy
4. Anticipating Product Demand
Owner: Chief Executive Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Failure to identify opportunities in the
housing market or construction sector and
missing chances to maximise or exploit
opportunities ahead of our competitors.
• Loss of position as perceived market leader
with resulting impact on reputation and
ability to expand market share.
• Loss in market position or customers
resulting in declining revenue or margins.
• A lack of new product development and
failure to optimise our supply chain to
support our customers could be detrimental
to the long-term achievement of the
Group’s strategy.
• Consideration of relevant market data and trends
highlights emerging risks, providing management
with the information required to make considered
and fact-based decisions.
• Innovation culture embedded through
organisational structure, including suitably
qualified and experienced product managers.
• Launch of Ibstock Futures business unit.
Communities
Investors
Employees
Customers
Pension Fund
Members and
Trustees
Strategy
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
Governance Financial statements Additional information
Strategic Report
57
Ibstock plc Annual Report and Accounts 2021
5. Financial Risk Management
Owner: Chief Financial Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
The Group is subject to the following
financial risks:
• Foreign exchange risk: As the Group
transacts in currencies other than Sterling,
exchange rate fluctuations may adversely
impact the Group’s results.
• Credit risk: Through its customers, the Group
is exposed to a counterparty risk that
accounts receivable will not be settled
leading to a financial loss to the Group.
• Liquidity risk: Insufficient funds could
result in the Group being unable to
fund its operations.
• Interest rate risk: Movements in interest
rates could adversely impact the Group and
result in higher financing payments to
service debt.
• Input Costs: The Group’s business may be
affected by volatility in extraction expenses
and raw material costs. Risks exist around
our ability to pass on increased costs
through price increases to our customers.
• Energy pricing: The Group’s business may
also be affected by volatility in energy costs
or disruptions in energy supplies.
Significant changes in the cost or
availability of transportation could affect
the Group’s results.
• The impacts of COVID-19 and the adoption
of home working, changes to volumes and
patterns of transactional activity all served
to increase the financial control risks,
through a heightened potential for fraud
and compromising the integrity of data
within the organisation.
• Foreign exchange risk: The Group undertakes
limited foreign exchange transactions selling
domestically with largely local input costs.
Some capital expenditure requires foreign exchange
purchases and management considers foreign
exchange hedging strategies where significant
exposures arise.
• Credit risk: Customer credit risk is managed by each
subsidiary subject to the Group’s policy relating to
customer credit risk management. The Group
principally manages credit risk through
management of customer credit limits. The credit
limits are set for each customer based on the
creditworthiness of the customer and the
anticipated levels of business activity. These limits
are initially determined when the customer account
is first set up and are regularly monitored thereafter.
• Liquidity risk: The Group’s policy is to ensure that it
has sufficient funding and facilities in place to meet
any foreseeable peak in borrowing requirements
and liabilities when they become due.
• Interest rate risk: The Group finances its operations
through a mixture of retained profits and bank
borrowings and private placement loan notes.
The Group’s bank borrowings, other facilities and
deposits are in Sterling and at floating rates.
No interest rate derivative contracts have been
entered into during the year or at the year end.
• Input cost: Significant input costs are under
constant review, with continuous monitoring of raw
material costs, energy prices and haulage expenses,
with the aim of achieving the best possible prices
and assuring stability of supply. Impacts mitigated
through prcing increases.
• Carbon pricing: The Group operates forward
purchasing to mitigate the impact of sudden price
increases and monitors the carbon market on an
ongoing basis and has modelled the impact of such
rises to assess the financial implications (see
Viability Statement on page 72).
• Sales Pricing: Appropriate pricing policies to remain
competitive within our markets and pass on
significant increases in input costs.
Investors
Employees
Suppliers
Pension Fund
Members and
Trustees
Strategy
Link to Business Model
OUR PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
Strategic Report
58
Ibstock plc Annual Report and Accounts 2021
6. Regulatory and Compliance
Owner: Group Company Secretary
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Group activities are subject to
environmental, health and safety laws and
regulations and these may change.
These laws and regulations could cause the
Group to make modifications to how it
manufactures and prices its products.
• Greater regulation with an increased risk of
fines and sanctions and liability exposures
could impact the Group’s financial results,
together with any associated negative
reputational damage.
• Additional regulation and responsibilities as
a result of continuing or new COVID-19
restrictions including health and safety and
wellbeing of our workforce may also impact.
• Monitoring of the law across all markets to ensure
the effects of changes are minimised and the Group
complies with all applicable laws.
• Alignment of Company-wide policies and
procedures accordingly with training on mandatory
topics and compliance requirements.
• Appropriate health and safety policies combined
with the regular monitoring of compliance through
internal and external auditing activity.
• Restructuring of the health and safety function
to provide more coordinated, central oversight
to ensure alignment and consistency throughout
the business.
• Investment in resources in employee training across
our manufacturing processes.
• Investment in safe systems and facilities to protect
our employees. Health and wellbeing practices and
safety requirements, including those relating to
COVID-19, are embedded in our approach.
Communities
Investors
Employees
Customers
Pension Fund
Members and
Trustees
Strategy
Link to Business Model
7. Maintaining Customer Relationships and Market Reputation
Owner: Chief Operating Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• The loss of any key customer through our
failure to evolve effectively and meet the
changing needs of our customers could
result in a significant loss of revenue and
cash flow.
• Constriction in activity levels within the
construction industry introduces a risk that
price levels cannot be maintained, resulting
in dilution of margins or level of market
share and adversely impacting the Group’s
financial results.
• The Group does not have long-term
contracts with its customers and the
Group’s revenue could be reduced if its
customers switch some or all of their
business with the Group to other suppliers
or if we are unable to leverage our
customer relationships effectively.
• Service-led ethos with many top customer
relationships lasting over 40 years.
• Differentiation through the continued quality
of its products and service levels with NPS surveys
completed to build customer relationships through
proactive response to customer requirements.
• Sales and production teams are highly integrated
to ensure that production aligns with
customers’ needs.
• In-depth technical training for sales teams.
• Sales teams assist design support service team
as well as targeted marketing materials to assist
with specification and selection.
• Divisional sales teams provide focus on key
decision-makers and customers.
• Key account management is supervised
at a senior level.
• Organisational structure enables us to understand
and respond more effectively to the evolving needs
of our customers.
• Access to 220 million tonnes of clay reserves,
Ibstock Clay’s primary raw material, ensures
an ability to satisfy customer demand.
Communities
Investors
Customers
Strategy
Link to Business Model
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
Governance Financial statements Additional information
Strategic Report
59
Ibstock plc Annual Report and Accounts 2021
8. People and Talent Management
Owner: Human Resources Director
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Dependency on qualified personnel in key
positions and employees having special
technical knowledge and skills. Any loss of
such personnel without timely replacement
could disrupt business operations, damage
customer relationships or result in the loss of
corporate knowledge.
• Difficulties in attracting and retaining staff
in production roles, which are labour-
intensive and potentially less attractive to
the younger population.
• Recent experience of COVID-19 and the
impact of restructuring and redundancies
could negatively affect morale.
• Focused action plans are being put in place as
a result of the ‘Great place to work’ employee
engagement survey aimed at further building
on employee satisfaction.
• Improved methods of employee engagement
including My Ibstock and Ibstock Informed.
• Investment in people through training and
development programmes.
• Maintenance of succession plans to ensure a
managed transfer of roles and responsibilities.
• Operation and management of apprenticeship
schemes with a yearly intake across the business
(engineering and technical based).
• Identification of high potential individuals and
development plans formulated.
• External recruitment to bridge skill gaps and
to enhance the talent pool.
Communities
Employees
Strategy
9. Product Quality
Owner: Chief Operating Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Exposure to warranty claims and to claims
for product liability, construction defects,
project delay, property damage, personal
injury and other damages.
• Failure to maintain accurate product data
could place end user at risk.
• Damage to the Group’s brands, including
through actual or alleged issues with its
products, could harm our business,
reputation and the Group’s financial results.
• Maintenance and management of detailed
product information.
• Operation of comprehensive quality control
procedures across Ibstock sites with both internal
and external audit reviews of product quality
completed to ensure conformance with
internationally recognised standards.
• Training programmes on quality for
appropriate employees.
• Completion of regular testing of all products to
provide full technical data on our product range.
• Maintenance of appropriate insurance cover
against product liability related claims.
Communities
Investors
Customers
Strategy
Link to Business Model
OUR PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
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Ibstock plc Annual Report and Accounts 2021
10. Cyber and Information Security
Owner: Chief Financial Officer
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
• Damage caused by unauthorised access to
the Group’s IT systems, malware attacks
or hacking incidents or reputational
damage as a result of negative publicity
associated with control lapses in this area.
• Changes in employees’ working patterns
and use of technology as a direct result of
COVID-19, along with the resulting risks to
information security have materially
increased cyber risks. The move to hybrid
working arrangements will compound the
near term challenges.
• Achievement of the UK Government’s Cyber
Essentials accreditation, which is subject
to independent audit annually.
• All IT equipment deployed is image compliant
with Ibstock policies and standards.
• Use of new industry leading VPN services to
handle the new hybrid working arrangements.
• Use of new applications such as Microsoft Teams/
OneDrive enable virtual meetings and collaboration.
• The disablement of existing vulnerable applications
and processes ensure the business can continue
to operate effectively and efficiently.
Investors
Employees
Strategy
11. Major Projects Delivery
Owner: Chief Executive Officer/CFO
Detail Mitigation
Stakeholder
Groups impacted
Risk trend
NEW RISK
• Failure to deliver major projects such
as Atlas and Nostell.
• Reputational damage resulting from a part
or complete failure to deliver major projects.
• Fines and penalties as a result of delay or
regulatory infringements.
• Budgetary overspend and impacts on
financial position of the Group.
• Impacts on Company valuation as a
result of a failure to deliver against
growth ambitions.
• Introduction of more formalised project
governance process and procedures.
• Recruitment of expert resource to assist in
improving project management capability.
• Improved budgeting and planning processes
to address potential overspend.
• Clear and more robust monitoring and
reporting to ensure projects remain on track.
Investors
Employees
Customers
Strategy
Risk trend key:
Increase
Decrease
No
change
Strategy key:
Sustain
Innovate
Growth
Link to Business Model:
Extraction
Procurement
Product
Design
Manufacturing
Sales
Governance Financial statements Additional information
Strategic Report
61
Ibstock plc Annual Report and Accounts 2021
Project name: Brookfield – University of Leicester
Product used: Ivanhoe Cream
Ibstock Clay
Ibstock Clay is the leading clay brick manufacturer in the UK, with
an extensive product range, and 16 manufacturing sites across the
country, strategically located near to extensive Company-owned clay
reserves. The division also manufactures special brick shapes and
bespoke products, including arches, chimneys and cladding solutions
out of six sites in the UK, through its Ibstock Kevington business.
The division is a significant supplier to the new build housing sector,
the Repair, Maintenance and Improvement (RMI) market through
the builders’ merchant channel and specification sector through
a number of our direct and indirect distribution channels.
As a business, we continue to benefit from significant levels of clay reserves
located strategically across the UK providing our manufacturing sites with
longevity of supply. We own 18 active quarries with around 72 million tonnes
of proven freehold clay reserves alongside a committed interest in around
4 million tonnes of proven leasehold clay reserves, which, when combined,
would serve the current business for over 40 years. In addition, we have access
to 145 million tonnes (estimated) of clay resources, subject to the receipt of
acceptable planning permissions being granted at a point in the future
when further resources are required and we continue to assess strategic
opportunities as they arise to further enhance our clay reserve portfolio.
Building on the momentum from the second half of 2020, sales volumes
continued to move forward significantly during 2021, with annual volumes
recovering to 92% of 2019 supported by robust demand from both our
new build housing and RMI market customers. Supply chain conditions
became more challenging in the second half of the 2021 year, although
the business was able to mitigate these issues with minimal impact
on our operational performance.
Industry inventory levels remained at historic low levels throughout 2021
against the backdrop of robust demand across all market segments.
Significant cost inflation across the key cost areas of energy, freight, carbon
and materials was recovered by a price increase in the final quarter in order
to protect margin, albeit with appropriate advanced notice given to
customers. The established energy hedging policy covering fuel and power
requirements provided a critical level of protection against energy prices
which spiked very sharply during the second half of the 2021 year.
Productivity and cost were well managed during the year, with the active
network running at high levels of utilisation and committed fixed cost
savings being captured in full. Planned annual shutdowns of our network
progressed as anticipated, and the commissioning of our capital
enhancement projects at our Leicester Soft Mud 2 and Laybrook factories
both advanced well in the latter stages of the year. Over the next six months
we expect to commission the enhancement project at our Ellistown site
in Leicestershire. We extended our I-Range in October 2021, an extensive
collection of brick types targeted at Architects and Specifiers, to help them
choose the right brick type for the style of building they are looking to
achieve. The I-Range now includes more than 20 new bricks, representing
our largest product launch for several years, making our I-Range an
incredibly comprehensive offering, helping us strengthen our position
as the number one brick manufacturer in the UK.
Overall, the UK market consumed around 2.4 billion bricks in 2021, which
is within 3% of 2019 levels, following the COVID-19 impact in 2020.
Imports accounted for around 19% of this total (broadly in line with the
equivalent percentage in 2019). Closing domestic inventory levels fell for
a second consecutive year, by 7% in 2021 following a 27% fall in 2020.
Cash generation remained a critical focus for the Clay division in 2021.
We benefited from two surplus asset disposals from our estates pipeline,
generating around £4 million of operational cash inflows in the year.
Trade working capital performance was also positive as we continued to
benefit from solid, sustainable cash collections from our mature customer
base alongside inventory levels which remain broadly flat year-on-year.
We continue to invest in our Clay manufacturing assets in order to
modernise our production capability, expanding capacity and improving
environmental performance, supporting our ambition to be the most
sustainable brick manufacturer in the UK. Our broad, differentiated factory
footprint provides us with unique optionality to make targeted organic
investments to support growth over the medium term, with the Atlas
redevelopment project being the latest example. We also focused
on selective transformation projects, which are already delivering
enhancements to the management of our clay quarries and improving
materials management across our factory networks.
Results
Divisional revenue was £280 million in 2021, 31% up year-on -year
(2020: £213 million; 2019: £300 million). Adjusted EBITDA* at £91 million
in 2021 was materially higher year-on-year (2020: £44 million) and within
15% of the £107 million reported for 2019. Underlying performance was
ahead of expectations as the market recovered from the COVID-19
pandemic and the business operated well. Commercial action was
executed in the year to protect margins as supply chain pressures
intensified. Committed fixed cost savings from restructuring actions taken
in 2020 were delivered in full, notwithstanding areas where we reinvested
as volume recovery dictated. Overall adjusted EBITDA* margin moved
forward during the year to above 32% (2020: 20.6%), back towards
2019 margin levels of 35.5%. Adjusted EBITDA* margins were modestly
impacted in the second half by the timing of selling price increases
compared to the corresponding cost inflation which these increases
mitigated. Divisional statutory profit before tax was £67 million (2020:
loss of £12 million; 2019: profit of £79 million).
Business Review
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Ibstock plc Annual Report and Accounts 2021
Ibstock Concrete
Ibstock Concrete is one of the largest specialist manufacturers of
concrete construction products in the UK occupying strong positions
in the new build housing, RMI and infrastructure markets. Ibstock
Concrete consists of four well-established and strong brands:
Forticrete, Supreme, Anderton and Longley, and is organised into
three product groups: Precast Building and Landscaping; Prestressed
Flooring; and Rail and Structural products. The acquisition of Longley
Concrete, a specialist in precast concrete flooring and other precast
products, during 2019, has strengthened our national and regional
presence and product offering, and this business is now fully
integrated within our organisational structure and systems. Ibstock
Concrete operates across 14 manufacturing sites geographically
spread across the UK.
While the nature of these markets differs from those of our larger Clay
business, the products remain within our core business and strategic focus
area of the residential building envelope. The business benefits from the
same fundamental growth drivers and produces similar returns on capital
as the Clay division through the cycle. During 2021, the Concrete division
continued to benefit from strong structural demand within RMI end markets
as consumers spent a greater proportion of disposable income on their homes.
The division saw robust market conditions in all key categories during 2021 as
the recovery post the COVID-19 pandemic continued. The Concrete division
delivered strong sales growth of 18% versus 2019 and 6% on a like-for-like
basis*, recognising the partial benefit from the Longley acquisition in 2019.
This performance was achieved against a challenging backdrop of supply
chain, labour availability and cost pressures, which the business managed
dynamically. Whilst the industry continues to face these challenges, we are
well positioned to maintain our momentum in the year ahead. New product
development continues to be an important driver of growth and a number
of new products will launch in 2022, including those focused on reducing
the embodied carbon within our concrete product range.
During 2021, the business rationalised its footprint with the closure of a small
manufacturing site in order to decrease the fixed cost base and optimise our
operational network. Levels of capacity and capability were enhanced by
several small capital investments at our key operating locations.
Whilst the business continued to closely manage cash flow, we continued
to invest selectively in enhancing our capital base. This included adding
capacity and capability to our Flooring and Precast product areas and we
also made significant investments in digital and IT transformation projects
to facilitate more efficient trading relationships with customers.
Results
Concrete division revenue was £128 million in 2021, representing a 25%
increase on 2020, £103 million), and was 18% higher than 2019
(£109 million), with Longley Concrete contributing from August 2019.
Like-for-like
*
growth in 2021 versus 2019 was up 6%. Activity levels
remained resilient across all product categories, with supplies of roofing,
walling and flooring products showing strong growth year-on-year.
In our smaller infrastructure business, a new spend cycle in the rail
industry resulted in strong levels of demand for our products and we
secured significant contracts in 2021, resulting in a healthy order book as
we enter 2022. Investment in new products, focused on both sustainable
solutions and increased capacity are expected to underpin further
growth in 2022.
Adjusted EBITDA* of £22 million in 2021 was 44% higher than 2020
(2020: £15 million) reflecting improved activity levels in all categories.
2019 adjusted EBITDA* was £22 million.
Adjusted EBITDA* margins of 17% were materially ahead of the level
achieved in 2020, reflecting volume benefits and a dynamic commercial
approach which enabled the division to recover material levels of input
cost inflation, particularly during the second half of the year.
The adjusted EBITDA* margin in 2021 was below the level of 20.2%
achieved in 2019, due both to a change in business mix (with Longley
introducing a greater proportion of lower-margin purchased product
sales); and the impacts of supply chain challenges, which reduced levels
of operational efficiency during the second half of the 2021 year.
Divisional statutory profit before tax was £11 million (2020: £1 million;
2019: £11 million) as a result of more favourable trading conditions in
2021, following the worst impacts of the COVID-19 pandemic in 2020.
Project name: Apartments and Social Housing at Droylsden for
Vistry Partnerships
Product used: Longley, Hollowcore Flooring
Governance Financial statements Additional information
Strategic Report
63
Ibstock plc Annual Report and Accounts 2021
Financial Review
The Group delivered an excellent
cash flow performance in 2021,
significantly strengthening our
balance sheet.”
Chris McLeish
Chief Financial Officer
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64
Ibstock plc Annual Report and Accounts 2021
Group results
1
The table below sets out segmental sales and adjusted EBITDA* for the year
Year ended 31 December 2021
Clay
£m
Concrete
£m
Central costs
£m
Total
£m
Total revenue 280.2 128.4 – 408.7
Adjusted EBITDA* 90.6 21.7 (9.3) 103.1
Margin 32.3% 16.9% 25.2%
Year ended 31 December 2020
Total revenue 213.2 103.0 – 316.2
Adjusted EBITDA* 44.0 15.1 (6.9) 52.1
Margin 20.6% 14.6% 16.5%
Year ended 31 December 2019
Total revenue 300.5 108.8 – 409.3
Adjusted EBITDA* 106.7 21.9 (6.4) 122.3
Margin 35.5% 20.2% 29.9%
1 Due to rounding, numbers presented may not add up precisely to the totals and percentages may not precisely reflect the absolute figures.
Introduction
The Group delivered a strong trading performance in 2021, reflecting both
robust market demand and resilient operational performance. The dynamic
commercial approach taken in both the Clay and Concrete divisions was
successful in addressing significant cost inflation during the second half of
the year. Supply chain impacts, particularly relating to the availability of
freight and labour, were well managed, enabling adjusted EBITDA* margins
to increase materially to around 25.2%, compared to 16.5% in the
comparative period (2019: 29.9%).
The Group maintained its intense focus on cost and capital management,
delivering an excellent cash flow performance for the year. This was
instrumental in strengthening further the Group’s balance sheet, with
closing net debt* of £38.9 million at 31 December 2021 resulting in
leverage* of 0.4 times (2020: 1.5 times; 2019: 0.7 times).
During the final quarter of the year, the Group completed the refinancing
of its March 2023 £215 million Revolving Credit Facility (RCF), replacing
the existing facility with the issuance of £100 million of private placement
notes with maturities of between 7 and 12 years and a £125 million RCF
for an initial four year period, with a one year extension option, thereby
diversifying its credit sources at attractive rates whilst significantly
extending the Group’s debt maturity profile.
Climate Change & TCFD
We have an ambition to be the most sustainable manufacturer of clay and
concrete products in the UK, and to lead our sector in the disclosure and
transparency around Environmental, Social and Governance (ESG) issues.
We have invested significant capital over the last decade, with investment
projects across the Group’s plant network contributing to a reduction in the
carbon intensity of our manufacturing processes. Having now substantially
achieved our initial sustainability objectives, set back in 2018, we are
establishing a further, more stretching set of goals to go farther and faster
in achieving our ambition.
At the same time, in order to assess the resilience of our business model, as
part of our strategic planning process we have modelled the impact of both
transition and physical risks of climate change on the financial performance
and position of the Company. This exercise concluded that, in the time
horizon of the strategic plan, these net risks are expected to have a modest
impact equal to less than 5% of Group’s adjusted EBITDA
*.
The Group is committed to increasing the transparency of reporting around
climate impacts and risks, and we have made great progress in the first year
on our journey to achieve full compliance with the recommendations of the
TCFD. For the first time, with the publication of our Annual Report, we will also
begin reporting against the SASB disclosure criteria.
Alternative performance measures
These results contain alternative performance measures (APMs) to aid
comparability and further understanding of the financial performance
of the Group between periods. A description of each APM is included in
Note 3 to the financial statements. The APMs represent measures used
by management and the Board to monitor performance against budget,
and certain APMs are used in the remuneration of management and
Executive Directors. It is not believed that APMs are a substitute for,
or superior to, statutory measures.
In order to provide a more relevant performance commentary, comparison
in this statement has been made to the corresponding 12 month periods in
both 2020 and 2019, the latter considered to represent a more meaningful
pre-COVID baseline for performance comparisons.
Governance Financial statements Additional information
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65
Ibstock plc Annual Report and Accounts 2021
FINANCIAL REVIEW CONTINUED
Revenue
Group revenue for the year ended 31 December 2021 totalled £408.7 million
(2020: £316.2 million; 2019: £409.3 million).
The increase of 29% from 2020 reflected the steady and sustained recovery
in both new build housing and Repairs Maintenance and Improvement
(RMI) markets from the very low levels experienced in the second quarter of
2020, which were impacted by customers curtailing their operations in the
face of the initial impacts of the pandemic. 2021 reported revenues were
back to 2019 levels, with higher concrete revenues offsetting slightly lower
clay revenues.
In our Clay division, revenues of £280.2 million represented an increase of 31%
on 2020 revenues of £213.2 million and were back to within 7% of 2019
revenues, reflecting the continued recovery of market conditions back towards
pre-COVID levels. Sales volumes for the year were slightly ahead of expectations
set at the start of 2021, and performance in 2021 against comparative years
benefited from a modest increase in price. The business implemented a
significant selling price increase towards the end of the 2021 year.
In our Concrete division, revenue increased by 25% compared to 2020, with
significant volume increases in all product categories, reflecting the steady
and sustained recovery in residential and infrastructure markets. The division
employed a dynamic pricing approach throughout the 2021 year to address
the impact of significant cost inflation. The current year period included
revenues of around £22.3 million from the Longley Concrete business
(2020: £17.0 million; 2019: £8.3 million) which was acquired during the
second half of 2019. On a reported basis, concrete revenues were 18%
above 2019 and, on a like-for-like basis*, revenues were 6% higher.
This underlying improvement versus 2019 was driven principally by selling
price increases, with like-for-like sales volumes broadly in line.
The business has instituted further selling price increases in the 2022 year
in both divisions which are expected to mitigate the effect of visible cost
inflation. We continue to monitor cost impacts closely and remain
committed to taking the actions necessary to protect and maintain
margins moving forwards.
Adjusted EBITDA
*
Management measures the Group’s operating performance using
adjusted EBITDA*. Adjusted EBITDA* increased materially year on year
to £103.1 million in 2021 (2020: £52.1 million; 2019: £122.3 million).
Performance in 2021 compared to 2020 benefited from increased sales
volumes in both divisions, dynamic commercial pricing to offset cost
inflation, and resilient operational performance in the face of sector-wide
supply chain challenges.
Within the Clay division, adjusted EBITDA* totalled £90.6 million
(2020: £44.0 million; 2019: 106.7 million), representing an EBITDA* margin
of 32.3% (2020: 20.6%; 2019: 35.5%). The adjusted EBITDA* increase over
2020 reflected the significant volume increase and the associated benefit
of operational gearing, coupled with disciplined cost management.
Performance in 2021 benefited from a small property gain which largely
offset the divisional impact of voluntarily repaying to the Government
around £2 million of furlough monies initially received in 2020.
Adjusted EBITDA* in our Concrete division increased to £21.7 million
(2020: £15.1 million; 2019: £21.9 million), as the division continued to benefit
from its exposure to a broad range of residential and infrastructure markets.
Adjusted EBITDA* margins of 16.9% were materially ahead of 2020 margins,
but below 2019 margins of 20.2% on a reported basis, reflecting the
acquisition of Longley in H2 2019, which includes a higher proportion of
purchased products within its revenue mix. On a like-for-like basis* (i.e.
excluding the impact of Longley), EBITDA margins* of 19.3% were marginally
lower than 2019 levels of 21.1%, with supply chain issues having a modest
impact on operational efficiency during the second half of the 2021 year.
Central costs increased to £9.3 million (2020: £6.9 million; 2019: £6.4 million).
The increase from the prior year principally reflected higher variable
remuneration costs.
Exceptional items*
Based on the application of our accounting policy for exceptional items*,
certain income and expense items have been excluded in arriving at
adjusted EBITDA* to aid shareholders’ understanding of the Group’s
underlying financial performance.
The amounts classified as exceptional* in the period totalled a net
gain of £5.2 million (2020: charge of £35.7 million; 2019 charge
of £3.2 million), comprising:
1. Exceptional net cash cost of £0.6 million which was substantially cash
settled in the period:
a) £2.0 million of exceptional cash profits arising from disposals of land
during the 2021 year;
b) £2.3 million of costs associated with the Group’s closure of sites;
c) £0.3 million of other one-off operating costs;
2. An exceptional non-cash credit of £5.8 million arising from the reversal
of the previously recognised impairment of our Atlas and Nostell sites
which, as announced during the 2021 year, are now being re-developed.
Further details of exceptional items* are set out in Note 5 of the
financial statements.
Finance costs
Net finance costs of £5.0 million were marginally above the level of
£4.3 million in the prior year. The Group incurred costs of around £2 million
related to the refinancing of its borrowings during the second half of the
2021 year.
Profit before taxation
Group statutory profit before taxation was £64.9 million (2020: loss of
£23.9 million; 2019: £82.0 million), reflecting stronger trading and substantially
lower exceptional costs, with the current year result including an exceptional
credit* of £5.2 million (2020: charge of £35.7 million; 2019 charge of
£3.2 million).
Strategic Report
66
Ibstock plc Annual Report and Accounts 2021
Taxation
The Group recorded a taxation charge of £33.1 million (2020: £4.1 million)
on Group pre-tax profits of £64.9 million (2020: loss of £23.9 million),
resulting in an effective tax rate (ETR) of 51.0% (2020: -17.1%) compared
with the standard rate of UK corporation tax of 19%. The 2021 statutory tax
charge and ETR reflect the restatement of the Group’s net deferred tax
liabilities following the change announced in the 2021 Budget that will see
the standard rate of UK corporation tax increase from 19% to 25% from
1 April 2023.
The adjusted ETR* (excluding the impact of the deferred tax rate change) for
the full year was 18.1% (2020: 19.7%). The reduction in adjusted tax rate
from the prior year was due primarily to the permanent 30% benefit of the
tax super deduction (also announced in the 2021 budget), which provides
relief at the current UK headline rate for qualifying capital expenditure.
Earnings per share
Group statutory basic earnings per share* (EPS) increased to 7.8 pence in the
year to 31 December 2021 (2020: loss of 6.8 pence) principally as a result of
the Group’s increased profit after taxation, reflecting stronger trading and
substantially lower exceptional costs.
Group adjusted basic EPS* of 13.9 pence per share increased significantly
from the 4.0 pence reported last year, reflecting the increased adjusted
EBITDA* achieved in the year and a modest reduction in the effective tax
rate. In line with prior years, our adjusted EPS* metric removes the impact
of exceptional items*, the fair value uplifts resulting from our acquisition
accounting and non-cash interest impacts, net of the related taxation
charges/credits. Adjusted EPS* has been included to provide a clearer guide
as to the underlying earnings performance of the Group. A full reconciliation
of our adjusted EPS* measure is included in Note 7.
Table 1: Earnings per share
2021 pence 2020 pence
Statutory basic EPS –
Continuing operations 7.8 (6.8)
Adjusted basic EPS* –
Continuing operations 13.9 4.0
Cash flow and net debt*
Adjusted free cash flow* increased by £24.9 million in the year to
£51.0 million (2020: £26.1 million; 2019: £33.2 million). The increase in
adjusted EBITDA* compared to 2020 was partly offset by a more modest
working capital improvement. The adjusted working capital* improvement in
2021 was achieved in spite of increased trading volumes compared to the
prior year, with the cash conversion cycle continuing to benefit from the
Group’s strong focus on working capital management.
Tax payments in 2021 totalled £10.0 million (2020: £6.5 million;
2019: £13.3 million), as taxable profits increased year-on-year. Other cash
outflows of £15.1 million (2020: £6.8 million; 2019: £7.9 million) included
amounts totalling £6 million in respect of carbon emission credits purchased
during the year (2020: £nil; 2019: £nil).
Whilst Adjusted Operating Cash Flows* in 2021 increased materially from
prior years, the Cash conversion* percentage reduced to 74% (from 96%
in 2020; 2019: 59%), reflecting the very substantial reduction in working
capital achieved in the comparative period as clay finished goods inventories
reduced sharply during the 2020 year.
Table 2: Cash flow (non-statutory)
2021
£’m
2020
£’m
2019
£’m
Change 1Y
£’m
Change 2Y
£’m
Adjusted EBITDA* 103.1 52.1 122.3 51.0 (19.2)
Adjusted change in working capital* 5.4 17.3 (24.3) (11.9) 29.7
Net interest (5.6) (3.8) (2.6) (1.8) (3.0)
Tax (10.0) (6.5) (13.3) (3.5) 3.3
Post-employment benefits (1.8) (2.2) (2.2) 0.4 0.4
Other
1
(15.1) (6.8) (7.9) (8.3) (7.2)
Adjusted operating cash flow* 76.0 50.2 72.0 25.8 4.0
Cash conversion* 74% 96% 59% (22ppts) +15ppts
Total capex (25.0) (24.1) (38.8) (0.9) 13.8
Adjusted free cash flow* 51.0 26.1 33.2 24.9 17.8
1 Other includes operating lease payments in all years and emission allowances purchases in 2021.
The table above excludes the cash flows relating to exceptional items* in both years.
The net favourable change in working capital* of £5.4 million during 2021 (2020: favourable change of £17.3 million; 2019: adverse change of £24.3 million)
reflected a modest increase in inventories, predominantly within the concrete division, more than offset by an overall increase in creditors.
Capital expenditure of £25 million (2020: £24 million; 2019: £39 million) comprised sustaining spend of around £20 million and initial spend on the Atlas/
Aldridge redevelopment project of some £5 million. In the 2022 year, sustaining expenditure is expected to remain at around £20 million, with growth
investments in Atlas, Aldridge and Nostell totalling around £50 million.
Governance Financial statements Additional information
Strategic Report
67
Ibstock plc Annual Report and Accounts 2021
FINANCIAL REVIEW CONTINUED
During 2021, the Group completed two small land sales, generating cash
inflows of £4 million (2020: £4 million). We continue to focus on recycling
capital from the Group’s surplus property portfolio, and anticipate further
land disposals during the 2022 year. We expect to generate around
£25 million from property disposals over the medium term.
Net debt* (borrowings less cash) of £38.9 million at 31 December 2021
compared to £69.2 million at the prior year end and £53.5 million at 30 June
2021, reflects the continued benefit of strong operating cash flows
throughout the 2021 year.
Following the refinancing of our debt facilities in the final quarter of 2021,
the Group now has a £125 million RCF with a group of five banks with an
initial four year tenor (and a one year extension option), and £100 million
of private placement notes with maturities of between seven and twelve
years at a total fixed coupon of just over 2%. This refinancing has
successfully diversified the Group’s credit sources at attractive rates, whilst
simultaneously achieving a significant extension of our debt maturity profile.
Return on capital employed*
Return on capital employed* (ROCE) in 2021 recovered to around 16%
(2020: 3.7%; 2019: 19.3%). The substantial improvement compared to the
prior year reflected both a significant increase in profitability, as well as a
modest reduction in the capital base, as both working and fixed capital
were well managed.
Capital allocation
The Group’s capital allocation framework remains consistent with that laid
out in 2020, with the Group remaining committed to allocating capital
in a disciplined way.
Our capital allocation framework is set out below:
• Firstly, we will invest to maintain and enhance our existing asset base
and operations;
• Having done this, we will look to pay an ordinary dividend, setting
targeted cover of at least 2 times underlying earnings;
• Thereafter, we will deploy capital for growth, both inorganically
and organically, in accordance with our strategic and financial
investment criteria;
• And, finally, we will return surplus capital to shareholders.
Our framework remains underpinned by our commitment to maintaining
a strong balance sheet, and we will look to maintain leverage at between
0.5 and 1.5 times net debt* to adjusted EBITDA* excluding the impact
of IFRS 16, through the cycle.
We expect to deploy significant growth capital in the business during the
2022 year and beyond, with a growing pipeline of both organic and
inorganic opportunities. The Board expects there to be capital generated
in excess of that required for its investment requirements and remains
committed to returning surplus capital to shareholders as part of its dynamic
and disciplined capital allocation strategy. The potential for additional
returns of capital will be kept under active review during the 2022 year.
Dividend
In light of the Group’s financial strength and prospects, a final dividend of
5.0 pence per ordinary share (2020: 1.6 pence) is being recommended for
payment on 13 May 2022 to shareholders on the register on 19 April 2022.
This is in addition to our interim dividend paid in September 2021 of 2.5
pence per ordinary share (2020: nil pence). This full year dividend of 7.5pps
represents an increase of 5.9p (2020: 1.6p).
Pensions
At 31 December 2021, the defined benefit pension scheme (the scheme)
was in an actuarial accounting surplus position of £57.8 million
(31 December 2020: surplus of £43.6 million). At the year end, the scheme
had asset levels of £618.0 million (31 December 2020: £639.2 million)
against scheme liabilities of £560.3 million (31 December
2019: £595.6 million).
The net increase in the balance sheet surplus over the period primarily
reflects lower scheme liabilities arising from changes in market conditions,
as detailed in Note 21).
A contribution level of £1.75 million per annum continues to apply from
February 2022, increasing to £2.0 million from 1 December 2023 and then
£2.25 million from 1 December 2024, until a subsequent valuation and any
revised contribution level is agreed.
The Group continues its work with the scheme Trustees to explore steps to
further de-risk the pension scheme, and to pursue its investment strategy
of matching asset categories with the associated liabilities.
Related party transactions
Related party transactions are disclosed in Note 30 to the consolidated
financial statements. During the current and prior year, there have been
no material related party transactions.
Subsequent events
On 21 January 2022, the Group acquired certain assets of Telling
Architectural Limited. See Note 32 for further information.
Except for this acquisition and the proposed ordinary dividend, there
have been no events since the balance sheet date requiring disclosure
or adjustment to these financial statements.
Going concern
The Directors are required to assess whether it is reasonable to adopt the
going concern basis in preparing the financial statements.
In arriving at their conclusion, the Directors have given due consideration to
whether the funding and liquidity resources are sufficient to accommodate
the principal risks and uncertainties faced by the Group.
Having considered the outputs from this work, the Directors have concluded
that it is reasonable to adopt a going concern basis in preparing the financial
statements. This is based on an expectation that the Company and the
Group will have adequate resources to continue in operational existence
for at least twelve months from the date of signing these accounts.
Further information is provided in Note 1 of the financial statements.
Strategic Report
68
Ibstock plc Annual Report and Accounts 2021
NON-FINANCIAL INFORMATION STATEMENT
This section of the Strategic Report constitutes the Non-Financial Information Statement in compliance with Sections 414CA and 414CB of the
Companies Act 2006. The information listed in the table below is incorporated by cross reference to the relevant parts of the Annual Report.
Requirement Policies Additional information
Environmental matters • Sustainability Report
• Sustainable Procurement Policy
Responsible Business – pages 30 to 51
Employees • Health and Safety Policy Statement
• Diversity and Inclusion Policy
• Anti-bullying and Harassment Policy
• Code of Business Conduct
• Whistleblowing Policy
Responsible Business – pages 30 to 51
Human rights • Modern Slavery Statement
• Data Protection Policy
Responsible Business -pages 30 to 51
Social matters • Sustainability Steering Group
• ESG Strategy and Framework
Responsible Business – pages 30 to 51
Anti-corruption and bribery • Anti-bribery and Corruption Policy
• Competition Law Compliance Policy
• Supplier Sustainability Code of Business Conduct
Responsible Business – pages 30 to 51
Corporate Governance Statement– page 80
Description of the Business model Our purpose and business model – pages 16
to 17
Principal risks and impact of business activity Our Principal risks and uncertainties – pages
52 to 61
Corporate Governance Statement – page 80
Audit Committee Report – pages 92 to 96
Non-financial key performance indicators Strategic Report – pages 1 to 73
Our KPIs – pages 28 to 29
The policies mentioned above provide the link between our purpose and values and how Ibstock is managed and does business. A review of all Group
policies was concluded during 2021. These will form the basis of a relaunch of the Group’s compliance programme during the first half of 2022.
Governance Financial statements Additional information
Strategic Report
69
Ibstock plc Annual Report and Accounts 2021
The purpose of this Strategic Report is to inform members of the Company
and help them assess how the directors have performed their duty under
section 172 of the Companies Act 2006 (s.172). This s.172 Statement
incorporates information from other areas of the Annual Report to avoid
unnecessary duplication.
The Board of Directors confirm that during the year under review, it has
acted in good faith to promote the long-term success of the Company for the
benefit of its members as a whole, whilst having due regard to the matters set
out in section 172(1)(a) to (f) of the Companies Act 2006. The Company
maintains good relationships with its suppliers (see page 42) and is reviewing
all payment terms as part of its preparations for the outcomes from the
Business, Energy & Industrial strategy (BEIS) consultation.
Examples of matters discussed in the year by the Board and their impact on,
amongst others, employees, customers and shareholders are included in
the table below and discussed throughout the Strategic Report and in the
Governance Statement on page 83. The table also identifies where, in the
Annual Report, information on the issues, factors and stakeholders the Board
has considered in respect of s.172 can be found.
It is acknowledged that it is not possible for all of the Board’s decisions to
result in a positive outcome for every stakeholder group. When making
decisions, the Board considers the Company’s purpose, vision and values,
together with its strategic priorities and takes account of its role as a
responsible business. By doing this, the aim is to ensure that decisions are
robust and sustainable. Further information about how we engage with
our stakeholders and their needs can be found on pages 40 to 42.
Section 172(1) Statement
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S.172(1) factor Where to find out more
(a) the likely consequences of any decisions in the long term;
Example: as part of the Board’s review of the Group’s strategy during
the year, it considered alternative sources of growth that could create
additional value in the longer term. This manifested itself in the
Board’s decision to launch the new Ibstock Futures business.
Strategic Report
Chairman’s statement – Page 6
Chief Executive Officers’ review – Page 8
Our markets – Page 14
Our purpose and business model – Page 16
Our Strategy – Page 18
Our KPIs – Page 28
Our Principal risk and uncertainties – Page 52
Governance
Board leadership and company purpose – Page 80
(b) the interests of the Company’s employees;
Example: The Board is fully aware of the role played by all employees
in the business and considers their interests in its decisions. The safety
and wellbeing of our employees remained of utmost priority as the UK
endured further lockdowns and their interests were considered when
considering working practices and the launch of a new Sharesave plan.
Strategic Report
Our purpose and business model – Page 16
Our Strategy – Page 18
Responsible Business – Page 30
Governance
Board leadership and company purpose – Page 80
ESG Committee Report – Page 89
(c) the need to foster the Company’s business relationships with
suppliers, customers and others;
Example: Managing these relationships is critical to Ibstock’s success
and its delivery of both its corporate and new ESG strategy. Reaching
mutually agreeable and pragmatic solutions to supply chain challenges
and increasing input costs has been a key aspect of the Board’s decisions
when having regard to this factor.
Strategic Report
Our markets – Page 14
Our purpose and business model – Page 16
Our Strategy – Page 18
Responsible Business – Page 30
Governance
Board leadership and company purpose – Page 80
(d) the impact of the Company’s operations on the community
and environment;
Example: Ibstock has an ambition to be sector leading in its approach
to ESG issues and launched a new ESG strategy to maintain this position
through to 2030. The Board approved a new Health and Safety Policy
Statement and a commitment to be a net zero business by 2040.
Strategic Report
Responsible Business – Page 30
ESG Committee Report – Page 89
(e) the desirability of the Company maintaining a reputation for
high standards of business conduct;
Example: A review of the Group’s governance and compliance
framework was completed during the year and its recommendations
and findings will be implemented in the first half of 2022.
Strategic Report
Responsible Business – Page 30
Governance
Chairman’s Introduction to Governance – Page 76
(f) the need to act fairly between shareholders and the Company.
Example: the Board seeks to ensure that communications are clear and
its actions are in accordance with the Group’s stated strategic aims to
promote the long-term success of the Company. We engage with many
of our shareholders on a regular basis and the increased use of virtual
meetings as a result of the pandemic has only increased the number
of meetings that can be held.
Strategic Report
Chairman’s statement – Page 6
Responsible Business – Page 30
Governance
Board leadership and company purpose – Page 80
Directors’ Report – Page 122
Governance Financial statements Additional information
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Ibstock plc Annual Report and Accounts 2021
VIABILITY STATEMENT
Viability and Going Concern
Background
The Board’s assessment of the longer-term viability of the Group is an
intrinsic part of our business planning processes. These processes include
financial forecasting and risk management, as well as longer-term scenario
planning incorporating market trends, emerging opportunities or threats and
potential future economic conditions. The output of the Group’s business
planning processes reflects the best estimate of the future prospects of
the business based on a range of possible future scenarios. To make an
assessment of viability, these projections are rigorously tested based upon
potential adverse impacts arising from the Group’s principal risks and
uncertainties which are outlined on pages 52 to 61.
Assessment
Management’s viability exercise, reviewed by the Audit Committee on
behalf of the Board, has robustly assessed the market conditions, risks and
the liquidity and solvency of the Group. These elements were also carefully
considered in light of COVID-19. The Group has leading positions within the
markets in which it operates, as noted on pages 14 to 15, and its business
strategy (see page 18) is aimed at continuing to strengthen its position in
those markets, create value for its shareholders and ensure its operations
and finances are sustainable.
Lookout period
The Group may use longer-term time horizons for the purposes of capital
investment and capital allocation given its markets and construction
timeframes. However, the Directors believe that a three-year period provides
the most appropriate horizon over which to assess viability. The performance
of the building products industry is sensitive to the level of macro-economic
activity, which is influenced by factors outside of the Group’s control,
including demographic trends, the state of the housing market, mortgage
availability, interest rates and changes in household income, inflation and
Government policy.
Stress testing
Although each of the Group’s principal risks has a potential effect and has
been considered as part of the assessment, only those that result in a severe
but plausible scenario have been modelled. The Group’s viability modelling
has stress tested the budget and strategic plan in the following scenarios
both individually and in combination. This included the Group experiencing
reputational damage during a period of economic downturn. The Group’s
viability modelling also included reverse stress testing to understand
financial headroom that exists before viability is threatened, by reducing
profitability through reducing in sales.
Assumptions
In determining the viability of the Group, the Board made the
following assumptions:
• The economic climate in which the Group operates remains in line with
a broad consensus of external forecasts;
• There is no material change in the legal and regulatory frameworks with
which the Group complies;
• There are no material changes in construction methods used in the
markets in which the Group operates;
• The Group’s risk mitigation strategies continue to be effective; and
• The Group’s past record of successfully mitigating significant construction
industry declines can be replicated.
Scenario 1
Economic downturn
Link to risk – market uncertainty, anticipating product demand
The impact of a severe and prolonged reduction in demand for its
products on the basis of reduced house building activity; unexpected
changes to Government policy resulting in reduced volume of product
sold or future impacts on customer activities as a result of COVID-19 or
other pandemic, as well as a benign environment of prolonged price
stagnation on sales. This considered a Clay division sales reduction of
30% in 2022 versus pre-COVID levels in 2019, which is broadly in line
with that evidenced in the Clay division during 2020 and 5% thereafter,
representing a recovery after the first year. Given the current under
supply of housing stock, the Directors believe any reduction in underlying
demand above these levels would lead to Government stimulus to
underpin levels of new build housing. The Group has proven mitigating
strategies including the mothballing or closure of production facilities,
together with negotiation of workforce Voluntary Alternative
Arrangements, which could reduce operating costs whilst minimising
redundancies, allowing the retention of our highly skilled workers through
such a potential economic downturn.
Scenario 2
Production cost increases
Link to risk – financial risk management, regulatory and compliance,
climate change
A situation whereby the cost of production increases by 20% and 50%
specifically for carbon and energy costs as a result of input cost rises across
the Group or additional regulatory costs imposing additional expenditure
within the production process e.g. climate change related carbon increases
or tariffs, which the Group is unable to pass on to its customers.
This is based on historical cost inflation and price volatility seen in wholesale
energy markets. The Group operates a policy of forward purchasing its
energy requirements, which is successful in locking in the costs of production
to inform price negotiations with its customers. Further, production plans
could be flexed to reduce the available product range – either to focus upon
more energy efficient products or to reduce changeovers at factories, which
would provide mitigating production efficiencies.
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Ibstock plc Annual Report and Accounts 2021
Strategic Report
The Strategic Report on pages 1 to 73 has been approved and signed by
order of Board by:
Nick Giles
Group Company Secretary
8 March 2021
Scenario 3
Disruption in business activities
Link to risk – material operational disruption, cyber and information
security, climate change
The impact of an event, such as a prolonged weather event as a result of
climate change (such as water stress, storms or flooding), a cyber-attack,
local/national restrictions on the ability to work or other unanticipated
event, which prevents production at one or more of the Group’s facilities
and therefore prevents customer demand being met. This will specifically
model the consequences of a significant production facility (Eclipse)
being unable to produce for a prolonged period and also an outage at
factories in the South East for a period of one month as a result of water
stress, storms or flooding, which are in the high risk area defined by the
Environment Agency. The impact of which would represent around 30%
of production.
The Group aims to mitigate the risk associated with disruption through
its business continuity plans, which operate at a factory level, and its
ability to transfer some of its production across its network of facilities.
Scenario 4
Reputational damage
Link to risk – maintaining customer relationships and market reputation,
people and talent management, product quality
A scenario whereby the Group’s reputation is damaged, as a result of
customer relationship breakdown, significant employee disengagement
or product quality issues, resulting in a sudden reduction in sales activity.
The scenario modelled includes a reduction in revenue of 10% for a
period of three years, representing potential impact or price reduction to
maintain customers. The Group seeks to mitigate the risks of reputational
damage on an ongoing basis with its internal control framework and
series of independent reviews and audit.
The Group’s viability assessment also considered a compound scenario
whereby the Group experienced reputational damage during an
economic downturn.
The scenarios also consider the covenants with respect to the Group’s
borrowings, ensuring these thresholds are met.
The scenarios are hypothetical and severe for the purpose of creating
situations that have the ability to threaten the Group’s viability.
The results of the stress testing demonstrate that due to the Group’s
cash generative nature and access to its RCF, it would be able to
withstand the impacts of these scenarios and remain cash generative.
Dividend payments
The Directors considered the resultant profitability reductions associated
with each of the individual scenarios. In each instance, the Group remained
sufficiently cash generative and profitable to maintain dividend payments
to shareholders.
Viability Statement
Based on their assessment of prospects and viability above, the Directors
confirm that they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall due over
the 3-year period ending March 2025.
Going Concern
The Directors also considered it appropriate to prepare the financial
statements on the going concern basis, as explained in the Basis of
preparation paragraph in Note 1 to the financial statements
Governance Financial statements Additional information
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Governance
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Governance
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Additional informationStrategic Report
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INTRODUCTION TO GOVERNANCE
Dear
Shareholders,
I am pleased to introduce the Governance section of this year’s
Annual Report which has been structured to provide a clear
and transparent overview of the Board’s oversight of Ibstock’s
governance framework. We continue to work to improve our
disclosures this year and we welcome feedback and suggestions from
all of our stakeholders. If you would like to do so please get in touch
with our Company Secretary, Nick Giles, at our Registered Office.
This section includes the Corporate Governance Statement, the
reports of the main Board Committees, including the Directors’
Remuneration Report and a number of other disclosures that we
are required to make by law. Taken together and including cross
references to relevant parts of the Strategic Report, they contain all
of the information that is required to demonstrate how we have
applied the principles and complied with the provisions of the UK
Corporate Governance Code (the Code).
Review of the year
Our purpose is to build a better world by being at the heart of building and
we have been helping to shape the homes, places and spaces of Britain since
we began over 200 years ago. Ibstock is a leading manufacturer and supplier
of clay and concrete building products and solutions to the UK construction
industry, with a core business focused on the residential construction sector.
All of the Directors take pride in the discharge of our Board duties and
responsibilities in a transparent, open and honest manner, and 2021 has
been another year of challenge to our accepted and established way of doing
things as it has been to many other businesses. The events of the last two
years have shown us that the ability to adapt and be flexible, when facing
unprecedented challenge, are skills that continue to be extremely important.
The Board is answerable to shareholders for the successful delivery of the
Group’s strategy and financial performance; for the efficient use of resources
having regard to social, environmental and ethical matters; and for taking
account of the interests of all our other stakeholders. Our Key Performance
Indicators (KPIs) on page 28 set out our priorities. We approve the Group’s
governance framework, taking into account contributions from Board
Committees in their specialist areas such as remuneration policy, internal
controls and risk management and succession planning. On a regular basis
we review our level of oversight and the monitoring of risks over a variety of
areas including strategy, acquisitions and disposals, capital expenditure on
new projects, finance, people, and ESG matters. This process will continue to
adapt to meet the evolving needs of Ibstock. Our aim is to ensure that good
governance extends beyond the Boardroom and is continually borne in mind
as part of the successful delivery of the Group’s strategic pillars over both the
short and long term.
Governance and Compliance Review
As referenced in my report of last year, a review of the Group’s governance
and compliance processes was completed during 2021. This was considered
timely and appropriate following the experience during the pandemic
as well as a number of changes in personnel and organisation structure.
The review reached positive conclusions and produced a list of practical
recommendations which are in the process of being addressed.
Diversity and Board changes
We continue to work with all layers of management to develop the Group’s
diversity and inclusion strategy as well as its practical application and will
prioritise progress in this area in the year ahead. During the year, the Board
has had a number of conversations on this topic and Board succession
planning more generally, the results of which meant that we commenced a
search in the third quarter of the year to find an additional Non-Executive
Director to join the Board. As a result we were delighted that Peju Adebajo
agreed to join the Board in November last year and I know I speak for my
Board colleagues when I say we are looking forward to working with Peju
over the months ahead. Further information regarding Peju’s appointment
can be found in the Nomination Committee Report on page 88.
Jonathan Nicholls
Chairman
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ESG
At the beginning of 2021 we established a new Board Committee to provide
specific and focused support to better coordinate our ambitions to address
our impacts on the environment and the communities in which we live and
work. The Committee has worked hard to tackle a lengthy agenda during its
first year. My thanks to Claire Hawkings, who has chaired this Committee,
drawing on a wealth of experience in this area from a long career in the
energy industry. One of the key outputs from the Committee’s work during
the year has been the launch of a new ESG strategy and a commitment to
make Ibstock a net zero business by 2040.
Further information on this can be found in the Responsible Business section
and ESG Committee Report on pages 30 and 89 respectively.
We introduced a new Carbon Reduction KPI (see page 29) in 2021 which
was included as a fourth measure under the Group’s LTIP. The Group’s
progress against this target has been quicker than anticipated and the
Remuneration Committee, following advice from the ESG Committee has
decided to introduce a new performance condition for 2022 LTIP awards
that will encompass three separate elements that are linked to
the new ESG strategy. Further information on this can be found in the ESG
Committee Report and the Directors’ Remuneration Report on pages 89
and 98 respectively.
Remuneration Policy
We will be putting a new Remuneration Policy to our shareholders at the
AGM on 21 April 2022. This follows extensive engagement with our
shareholders, the feedback from which was valuable in informing the
decisions and conclusions of the Remuneration Committee in its finalisation
of the Policy. Full details regarding the new policy can be found in the
Directors’ Remuneration Report on page 101.
Compliance and other statements
Application and compliance with the Code
The principles set out in the Code emphasise the value of good corporate
governance to the long-term sustainable success of listed companies.
These principles, and the supporting provisions, cover five broad themes
and the Board is responsible for ensuring that the Company has
appropriate frameworks in place to comply with the requirements of
the Code. The Board believes that throughout 2021, the Company has
applied the principles and complied with the majority of the relevant
provisions of the Code with one exception set out below:
Provision 38 – Alignment of pension rates with the workforce
The CEO currently receives a cash payment in lieu of pension contribution
of 20% of base salary. This will be reduced to 10% of salary and in
alignment with the wider workforce and the Code on 31 December 2022.
The Code is available on the Financial Reporting Council website
at www.frc.org.uk.
Application of the Code Principles
References to those parts of the Annual Report and Accounts (Annual
Report) that demonstrate how we have applied the main principles of
the Code can be found below:
Board Leadership and Company Purpose
Information on the Group’s Board of Directors and Company Secretary,
the Group’s governance framework, Board responsibilities, interests and
engagement with stakeholders and its main activities during the year
can be found on pages 80.
Division of Responsibilities
The roles and responsibilities of key aspects of the Group’s governance
framework can be found on page 84.
Composition, Succession and Evaluation
Page 85 and the Nomination Committee Report on page 87 contain
information on board composition, the process for appointments to
the Board and wider succession planning, the Board evaluation and
effectiveness review procedures and the approach to induction, training
and development. The Nomination Committee Report includes a
summary of the activities undertaken during the year.
Audit, Risk and Internal Control
Pages 85 and 86 and the Audit Committee Report on pages 92 to 96
contain information on financial and business reporting, risk
management, internal control and the internal and external audit
functions. The Audit Committee Report summarises the activities
of the Committee during the year including those areas of significant
judgement for the Committee.
Remuneration
Page 86 and the Directors’ Remuneration Report on pages 97 to 121
contain information on the Company’s Remuneration Policy as well
as its application in 2021 and for the coming financial year.
Viability and going concern
Statements in respect of viability and going concern are set out on pages
72 and 73.
Robust assessment of emerging and principal risks
The Board confirms that it has carried out a robust assessment of the
emerging and principal risks facing the Group (including those which
would threaten the business model, future performance, solvency,
liquidity or reputation), its appetite with respect to those risks and the
systems required to mitigate and manage them. Details on the review
process are set out on pages 52 and 53. Further details on the emerging
and principal risks and uncertainties can be found on page 53.
Annual review of systems of risk management and internal control
The Board monitored the Group’s systems of risk management and
internal control and carried out a review of their effectiveness. The Board
concluded that overall, these systems were effective. Details on the
review process are set out on pages 86.
Fair, balanced and understandable
The Directors consider that, taken as a whole, this Annual Report is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Group’s position, performance, business
model and strategy. Details on the process for arriving at this conclusion
are set out on page 94.
Section 172(1)
The Directors have performed their duty under s172(1) of the Companies
Act 2006. The statement on how this duty has been fulfilled is contained
in the Strategic Report on pages 70 to 71.
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Additional informationStrategic Report
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1
3
5
7
9
2
4
6
8
Board tenure
>4 years 4 directors
3-4 years 3 directors
1-3 years 1 director
BOARD OF DIRECTORS
AND COMPANY SECRETARY
1. Jonathan Nicholls
BA (Hons), ACA, FCT
Chairman
Date appointed to the Board: 22 September 2015
(Chairman since 24 May 2018)
Tenure on Board: 6 years 5 months
Committee memberships: Chair of the Nomination Committee,
Remuneration Committee
Independent: On appointment
Relevant skills and experience: Degree in Economics and Accounting
awarded by Manchester University. Member of the Institute of Chartered
Accountants in England and Wales, having qualified with KPMG in 1982.
Fellowship member of the Association of Corporate Treasurers. Over 20
years’ experience at the senior management or director level of businesses,
including those in brick manufacturing, roofing and construction, and
property development. Significant experience as CFO and other senior
finance roles in public companies.
Current external appointments: Chairman of Shaftesbury PLC (appointed
September 2016).
Past board roles include: Non-Executive Director and Chairman of the
Audit Committee at SIG plc. Senior Independent Director, Chairman of the
Audit Committee and member of the Nomination and Remuneration
Committees of DS Smith plc. Senior Independent Director and Chair of
Audit Committee at Great Portland Estates plc. CFO of Hanson plc. CFO of
Old Mutual plc.
2. Joe Hudson
BA (Hons), FCIPD
Chief Executive Officer
Date appointed to the Board: 2 January 2018
(CEO since 4 April 2018)
Tenure on Board: 4 years 2 months
Committee memberships: ESG Committee
Independent: No
Relevant skills and experience: BA (Hons) Degree in Education awarded
by the University of Exeter. General Management programmes at INSEAD
and London Business School. Fellow of the Chartered Institute of Personnel
and Development. Varied international career in general management,
operations and strategic human resources in Europe, North America and
Africa. Operational line management experience in cement, plasterboard,
concrete products and construction materials. Experience of large scale
business combinations.
Current external appointments: None.
Past board roles include: Managing Director, Cement & Concrete Products,
Aggregate Industries UK. Chief Executive Officer, Lafarge Africa plc.
3. Christopher McLeish
BSc ACA
CFO
Date appointed to the Board: 1 August 2019
Tenure on Board: 2 years 7 months
Committee memberships: None
Independent: No
Relevant skills and experience: Member of the Institute of Chartered
Accountants in England and Wales. Wealth of experience in key finance
leadership roles with a broad background in manufacturing, media and
technology sectors. Extensive experience of Group finance and controls,
as well as global shared services operations. Demonstrable success in a
range of senior operational, corporate and financial communication roles.
Current external appointments: None.
Past board roles include: Finance Director, Tate & Lyle North American
Sugars
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4. Tracey Graham Senior Independent Director
Date appointed to the Board: 3 February 2016
Tenure on Board: 6 years 1 month
Committee memberships: Chair of the Remuneration Committee,
Audit Committee, Nomination Committee
Independent: Yes
Relevant skills and experience: Experience of MBO and M&A activity.
Led the management buyout of Talaris Limited from De La Rue. Proven
track record of creating successful growth in a wide variety of businesses.
Significant experience gained in senior positions in banking and insurance
with HSBC and AXA Insurance.
Current external appointments: Non-Executive Director and Chair of the
Remuneration Committee of Royal London Group (appointed March 2013).
Non-Executive Director and Chair of the Remuneration and Nomination
Committees of discoverIE Group plc (appointed November 2015). Non-
Executive Director and member of the Remuneration and Nomination
Committees of Link Scheme Limited (appointed January 2016). Chair of
LINK Consumer Council (appointed June 2016). Member of the City of
London Court of Common Council (appointed 2018).
Past board roles include: Chief Executive of Talaris Limited.
5. Justin Read
MA, MBA
Non-Executive Director
Date appointed to the Board: 1 January 2017
Tenure on Board: 5 years 2 months
Committee memberships: Chair of the Audit Committee,
Remuneration Committee,
Nomination Committee
Independent: Yes
Relevant skills and experience: Educated at Oxford University and holds an
MBA from INSEAD. Nine years as a CFO of FTSE-listed companies.
Financial and management experience working across a number of different
industry sectors, including real estate, support services, building materials and
banking. Experience of managing businesses across multiple jurisdictions.
Experience of strategy, M&A, business development, investor relations and
capital raising.
Current external appointments: Non-Executive Director and Senior
Independent Director and Chair of the Audit Committee and member of the
Remuneration and Nomination Committees of Grainger PLC (appointed
February 2017). Non-Executive Director and Chair of the Audit Committee
and member of the Nomination Committee of Affinity Water Limited
(appointed July 2020). Non-Executive Director and Chair of the Audit and Risk
Committee and member of the Remuneration and Nomination Committees
of Marshall of Cambridge (Holdings) Ltd (appointed October 2021).
Past board roles include: Non-Executive Director of Carillion plc (for a
six-week period from 1 December 2017). Group Finance Director of Segro
plc. Group Finance Director at Speedy Hire plc. Chairman of SEGRO Pension
Scheme Trustees Limited.
6. Louis Eperjesi Non-Executive Director
Date appointed to the Board: 1 June 2018
Tenure on Board: 3 years 9 months
Committee memberships: Remuneration Committee,
Audit Committee, Nomination
Committee, ESG Committee
Independent: Yes
Relevant skills and experience: Experience of manufacture and supply
of building products in international markets. 10 years’ experience in UK
roofing or brick markets. Experience of strategy development, change
management programmes and M&A activity. Strong commercial, marketing
and product background. 12 years’ experience in UK capital markets.
Current external appointments: Chairman of Trustee of The Cheltenham
Trust (appointed March 2020). Chairman of CMS Windows Ltd.
Past board roles include: Executive Director of Kingspan Group plc.
Chief Executive Officer of Tyman plc.
7. Claire Hawkings
BSc (Hons), MBA
Non-Executive Director
Date appointed to the Board: 1 September 2018
Tenure on Board: 3 years 6 months
Committee memberships: Chair of the ESG Committee,
Remuneration Committee, Audit
Committee, Nomination Committee
Independent: Yes
Relevant skills and experience: BA (Hons) Degree in Environmental
Studies awarded by Northumbria University. MBA from Imperial College
Management School. Fellow of the Energy Institute. Sustainability leadership
and management expertise. Experience in developing and delivery of
organisational strategies including business process transformation,
leadership succession, and diversity and inclusion. Significant experience
(30 years) in the energy sector in a variety of international leadership
positions including: P&L responsibilities, M&A, portfolio management
and leading complex commercial transactions.
Current external appointments: Non-Executive Director of Defence
Equipment and Support (appointed April 2021). Non-Executive Director of
James Fisher and Sons Plc (appointed January 2022). Non-Executive Director
of FirstGroup plc (appointed January 2022).
Past board roles include: Director, Tullow Oil Netherlands. Director, Tullow
Oil Bangladesh. Director, Gujarat Gas Co. Ltd. Director, British Gas India Pvt.
Ltd.
8. Peju Adebajo Non-Executive Director
Date appointed to the Board: 26 November 2021
Tenure on Board: 4 months
Committee memberships: ESG Committee, Remuneration
Committee, Audit Committee,
Nomination Committee
Independent: Yes
Relevant skills and experience: CEO with experience across a number
of industrial sectors including building materials, renewables, consulting
and banking. Over 13 years’ experience in commercial expansion and
development of products and services. Experience in sustainability
leadership, as well as corporate communications. Educated at Imperial
College London and holds a Bachelors and Masters Degree in Engineering
(Chemical Engineering). MBA from Harvard University and alumna of
INSEAD.
Current external appointments: Advisory board member of Lagos
Business School. Advisory board member of Renewable Energy Association
of Nigeria.
Past board roles include: Chair of Traxi Limited (Nigeria). MD of Lafarge
Africa PLC. CEO of Mouka Ltd (Nigeria).
9. Nick Giles
MA FCG
Company Secretary
Date appointed : 8 November 2019
Tenure: 2 years 4 months
Committee memberships: None
Independent: N/A
Relevant skills and experience: Undergraduate Degree in Business
Studies and Master’s Degree in Business Law awarded by the University
of Portsmouth. Fellow of the Chartered Governance Institute since 2008.
Nearly 20 years’ experience gained in governance and compliance roles at
FTSE listed companies operating in a range of different sectors including
publishing, FMCG, engineering, lighting and plastic products.
Current external appointments: None
Past board roles include: N/A.
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Governance framework
Board of Directors
Chief Executive Officer
Executive Leadership Team
Audit
Committee
Nomination
Committee
Disclosure
Committee
ESG
Committee
Remuneration
Committee
Board
Executive
Management
Operational
Sustainability Steering Group
Sustainability Working Groups (D&I, Carbon)
Health and Safety Steering Committee
Board attendance during the year
The number of scheduled meetings of the Board and its Committees and
the attendance by the Directors at meetings that they were eligible to
attend during the year is disclosed in the following table:
Name Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
ESG
Committee
Jonathan Nicholls 8/8 N/A 4/4 2/2 N/A
Joe Hudson 8/8 N/A N/A N/A 4/4
Chris McLeish 8/8 N/A N/A N/A N/A
Tracey Graham 8/8 4/4 4/4 2/2 N/A
Justin Read 8/8 4/4 4/4 2/2 N/A
Louis Eperjesi 8/8 4/4 4/4 2/2 4/4
Claire Hawkings 8/8 4/4 4/4 2/2 4/4
Peju Adebajo
1
1/1 1/1 1/1 0/0 1/1
1. Peju Adebajo joined the Board on 26 November 2021. One meeting took place between
26 November to 31 December 2021.
Governance framework
The Board holds seven or eight scheduled meetings during the year, one of
which will be an off-site strategy session. Following the end of the lockdown
in April 2021 the Board managed to hold two meetings at the Company’s
operating locations during the year. The intention is to increase the number
of off-site meetings during 2022. If Directors are unable to attend a meeting
because of exceptional circumstances, they continue to receive the papers
in advance of the meeting and have the opportunity to discuss with the
relevant Chair or the Company Secretary any matters on the agenda which
they wish to raise. Feedback is also provided to the Director on the decisions
taken at the meeting.
Board Leadership and Company Purpose
An effective Board
The Board is collectively responsible for the effective and entrepreneurial
leadership of the Group in order to ensure its long-term sustainable success
including the generation of value for Ibstock’s shareholders and society
as a whole. It achieves this by doing business that is consistent with its
purpose, vision and values whilst remaining clear on the interests of its key
stakeholders as well as its impacts on the environment. Each member of the
Board acts in a way which they consider to be in the best long-term interests
of the Group and in compliance with their duties under sections 170 to 177
of the Companies Act 2006. Both the Stakeholder Engagement section
and the Section 172(1) Statement on pages 70 and 71 provide further
information. The main activities of the Board are set out on page 82
including information as to which stakeholder groups were considered as
part of different agenda items during the year.
Shareholders look to the Board for the successful delivery of the Group’s
strategy and financial performance so the Board has established a
framework of prudent and effective controls that enable risk to be assessed
and managed. More information on the risk management and risk control
framework can be found in the Principal Risks and Uncertainties section on
page 52 and the Audit, Risk and Internal Control section on page 85. On a
regular basis, we review our level of oversight and the monitoring of risks
over a variety of areas including strategy, acquisitions and disposals, capital
expenditure on new projects, finance, people, and ESG matters.
Corporate Governance Statement
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Our purpose, values and culture
The construction industry plays a vital part in the UK economy. Ibstock has
a clear and simple purpose to be at the heart of building and enable the
construction of homes and spaces that help people live better lives, with its
range of innovative clay and concrete building products, as we have been
doing for over 200 years. We have a clear strategy that is informed by our
purpose and aligned with our responsible business ambitions underpinned
by a culture that is defined by our core values of Trust, Care, Teamwork and
Courage. Strategy sessions form part of the annual Board cycle that is
prepared by the Chairman, CEO and Group Company Secretary.
We monitor culture through updates on new initiatives and the development
of plans provided by the CEO and the Group Human Resources Director
(Group HRD). In addition, Claire Hawkings updates the Board following
meetings of The Listening Post, our chosen method of workforce
engagement and referenced below, as this serves as a good
bellwether for views within the wider business.
The Board monitors and assesses the culture of the Group via:
• Regular meetings with management and inviting employees to present
at Board and committee meetings.
• Reviewing the outcomes of employee surveys.
• Feedback from our wider stakeholders.
• Issues raised via the Group’s whistleblowing system.
• Health and safety data.
The Board aims to ensure that these values are integrated into decision-
making and that the policies and procedures we put in place are consistent
with and support our culture. Where behaviour is not aligned with these
values, the Board and management seek to ensure that appropriate action
is taken. The Board has not needed to seek corrective action during 2021.
Stakeholder interests
The Board has a good understanding of who are considered to be its key
stakeholders and recognises the interests, importance and value of each
relative to the Group’s business and strategy. This is based on regular
engagement with these groups over a number of years. An overview
of the group’s key stakeholders including a summary of the methods of
engagement and information on how their interests have been taken into
account in Board decision-making can be found from page 40 of the
Strategic Report. Some examples of principal Board decisions that were
discussed during the year and how the Board considered these stakeholder
groups can be found on page 71.
Workforce engagement
The Listening Post, an employee forum comprising Claire Hawkings, Chair
of the ESG Committee, the CEO, Group HRD and employee representatives,
is our method of engagement with the workforce. Whilst not one of the
methods set out in the Code, The Listening Post is a combination of being
a workforce advisory panel with Non-Executive Director representation.
More detailed information concerning our workforce engagement activities
can be found in the Responsible Business section from page 38.
Shareholder engagement
Investor meetings
As part of the Group’s annual financial calendar, the CEO and CFO conduct a
round of meetings with analysts and investors following the announcement
of the Full-Year and Half-Year results. Other meetings are arranged as and
when required. During the 2021 financial year, we held over 80 meetings
and met virtually with existing and potential investors. This included
meetings to discuss both the new Atlas factory and Ibstock Futures further
to their announcements in April and November respectively.
The Chairman seeks regular engagement with the Company’s major
shareholders in order to understand their views on governance and
performance against the strategy whilst the Committee Chairs also engage
on significant matters related to their area of responsibility. A number of
meetings were organised with the Chairman and held during November 2021.
Tracey Graham, our Remuneration Committee Chair, engaged with our top
20 shareholders, representing more than 65% of the share register, in order
to consult on the proposed new Remuneration Policy that will be submitted
to the AGM for approval in April 2022. As our Senior Independent Director
(SID), as well, Tracey is available to shareholders throughout the year if they
have concerns that contact through the normal channels has failed to
resolve or for which such contact is inappropriate.
Shareholder feedback
The Chairman ensures that the whole of the Board has a clear
understanding of the views of shareholders. There is an effective flow
of communication between the Board and all shareholders, particularly with
regard to business developments and financial results. The Board aims to
communicate on a regular basis and at present the Company utilises news
releases, investor presentations and Company publications, and will expand
communication channels as appropriate.
The Company’s brokers prepare a report that provides anonymised
objective feedback received from investors following those meetings.
The report is shared with all members of the Board who act upon the
feedback as necessary. The Executive Directors also provide feedback on
their conversations with investors which provides an opportunity for all
Non-Executive Directors to develop a better understanding of the views of
Ibstock’s major shareholders. Further information on engagement with
shareholders can be found in the Stakeholder engagement section on page 40.
Investor visits
Interested institutional investors are provided with opportunities to visit any
of the Group’s operational sites and are encouraged to do so in order to
increase their understanding of Ibstock’s business.
In addition, we are hoping to arrange and hold our first Capital Markets Day
later in the year since the Company was initially listed in 2015. This will
present an opportunity for our shareholders, analysts and other stakeholders
to meet the Board and members of Ibstock’s broader management team.
Annual General Meeting (AGM)
Ibstock’s AGM will be held on 21 April 2022 and we are planning to welcome
our shareholders in person for the first time since 2019.
Any shareholder who wishes to ask a question can do so in advance of the
meeting. Please email company.secretariat@ibstock.co.uk with any
questions prior to the start of the AGM. We endeavour to answer as many
questions as possible and will respond by email if we are unable to answer
your question during the meeting.
Details of the arrangements together with the resolutions to be proposed at
the AGM to be held on 21 April 2022 can be found in the Notice of Meeting
(Notice). The Notice, together with explanatory notes on the resolutions to
be proposed and full details of the deadlines for appointing proxies will be
circulated to all shareholders at least 20 working days before the AGM,
together with this Annual Report. This document will also be available on
our website. Results of voting at the AGM are announced to the London
Stock Exchange following the meeting and are then published on the
Company’s website.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
Annual Report
Our Annual Report is available to all shareholders and we aim to make our
Annual Report as accessible as possible. Shareholders can opt to receive a
hard copy in the post, a PDF copy via email or download a copy from our
website. In line with our sustainability ethos we encourage you to view a
digital copy of our Annual Report where possible, however, if you require
a hard copy of the Annual Report please contact the Company Secretary.
Corporate website
Our corporate website has a dedicated investor section with Company
information and results, our Annual Reports, results presentations (including
webcasts) and an investor news section including information which may
be of interest to our shareholders. We recognise that continual improvement
is necessary and in recognition of feedback received around the current
website’s suitability and ease of use we have begun a project to upgrade and
refresh the website to take account of these comments and to make it more
useful and intuitive to all users going forward.
Conflicts of interest
A register of conflicts of interest is maintained by the Company Secretary
and considered by the Board twice a year. The Company’s Articles of
Association, which are in line with the Companies Act 2006, allow the Board
to authorise potential conflicts of interest that may arise and to impose
limits or conditions, as appropriate, when giving such authorisation.
During the year, and as at the date of this report, no conflicts had been
reported to the Board.
Any concerns of the Directors around the operation of the Board or the
management of the Company and that cannot be resolved are recorded in
the Board minutes. Directors are asked to provide a written statement to the
Chairman for circulation to the Board should they have such concerns when
they resign from the Board.
Whistleblowing
Although the Audit Committee reviews the operation of Ibstock’s
whistleblowing arrangements, the Board retains responsibility and receives
a consolidated report setting out those material incidents that have been
reported under the Company’s Whistleblowing Policy on a half yearly basis.
This provides appropriate oversight of the arrangements in place for our
employees to raise legitimate concerns, in confidence, about any matter
including those related to financial reporting, health and safety or other
improper conduct. Having reviewed these reports, the Board concurred with
the actions taken by management and were satisfied that this provided an
appropriate level of assurance that confirmed the system was working and
that all members of the workforce were familiar with the procedures in place.
Activities of the Board in 2021
The key activities considered by the Board during the year are set out below.
The Board recognises the value of maintaining close relationships with
its stakeholders, understanding their views and the importance of these
relationships in delivering our strategy and the Group’s purpose. The Group’s
key stakeholders and their differing perspectives are taken into account as
part of the Board’s discussions. You can read more in our Section 172(1)
Statement on page 70 and on page 83 opposite.
Board meetings follow a clear agenda that is agreed in advance by
the Chairman, in conjunction with the CEO and Company Secretary.
Each meeting will start with a review of the Group’s progress against its
Health and Safety Roadmap and include a number of standing elements
including reports on operational and financial performance from the CEO
and CFO and legal and governance updates.
Details of the Directors’ attendance at the scheduled meetings can be found
on page 80.
Strategy
There is a dedicated two day session assigned to consideration and review
of the Group’s strategy on an annual basis. During this time the Board will
receive inputs from its key advisers, the Executive Directors as well as
members of the senior management teams.
Health and Safety
The Board considers the health and safety report from the Group’s Head of
Health and Safety covering progress relative to targets, updates on new
projects and initiatives and analysis of any incidents. A more detailed
summary round up of incidents is presented once a year.
Operational
The CEO provides regular reports to the Board providing information on
Ibstock’s performance in the preceding period with updates on all areas of
the business including people, major projects, sustainability initiatives and
stakeholder engagement.
Financial
The Board receives a pack of financial data on a regular basis that provides
sufficient information on Ibstock’s trading and financial position for historic
periods as well as forward looking forecast and budgets. Longer-term plans
and information on the Group’s banking relationships is also provided.
Legal and Governance
Formal annual updates on governance are received from the Group’s
advisers between which the Board receives regular updates on other
major legal and governance developments from the Company Secretary.
Papers regarding compliance with the Board’s administrative procedures
are also provided.
Key Stakeholder Groups
Customers
Communities
Investors
Workforce
Suppliers and Contractors
Regulators and Government
Pension Fund Members and Trustees
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Section 172(1) Approach
The needs of our different stakeholders as well as the consequences of any decision in the long term are well considered by the Board. This includes those
decisions which involve the competing interests and priorities of our key stakeholders. We remain clear on the overriding duty to promote the success of the
Company placed on the Board and other senior managers within the Group, and recognise that conflicts between differing interests will often arise.
Principal Decisions during 2021
The main areas of Board activity can be found on page 82. All of these areas involve a range of inputs from stakeholders which are communicated to the Board
in a variety of different ways. We detail below how the Board factored stakeholders, and the information we received through engagement, into three principal
decisions in 2021. When making each decision, the Board carefully considered how it impacted on the success of the Group, its long-term (financial and
non-financial) impact and had due regard to the other matters set out in s172(1)(a) to (f) of the Companies Act 2006.
Matter discussed Stakeholders considered How we considered these stakeholders Decision
Dividend Investors, Workforce,
Pension Fund Members
and Trustees
Consideration was given to:
• The need to provide support to our shareholders
following the cancellation of the dividend
in 2019.
• The Group’s ability to meet its liabilities
to employees through salary payments.
• Continuing to provide support to the defined
benefit pension scheme as part of the
recovery plan.
The decision was taken to pay a Full-Year and a
Half-Year dividend following the cancellation of
the dividend in 2019.
Ibstock Futures Investors, Workforce,
Customers and
Communities
Consideration was given to:
• Investment opportunities available
to the Group.
• How to use existing and future members
of the workforce to support this decision.
• How customers could react to a strategic change.
• Use of capital and the impact on longer-term
returns for our shareholders.
The decision was made to launch a new business
unit that would focus on diverse areas of growth
outside of the core business.
New ESG Strategy The environment,
Investors, Workforce,
Communities,
Customers and Suppliers
Consideration was given to:
• The impact of our operations on the
environment.
• Our reputation to our customers and suppliers.
• The appetite and enthusiasm of our employees
to get involved.
• Our shareholders’ perception and effect upon
their investment decisions.
A new strategy was approved including a
commitment to become a net zero business by 2040.
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Division of Responsibilities
The Board has clearly defined the roles of the Chairman, CEO and SID and, as required by the Code, the roles of Chairman and CEO are not being exercised by
the same individual. Full details of the roles and responsibilities of all parts of the Group’s governance arrangements including those concerning the Chairman,
CEO and SID can be found on the Company’s website.
The Board There are a number of key areas that are specifically reserved for the decision of the Board and a list of these, that were updated
at our December meeting, can be found on our website. Other matters, including the day-to-day management of the Group, may
be delegated to the Executive Directors. Although a wide range of the Board’s powers and authorities are delegated to the CEO, the
Board retains ultimate responsibility and authority for their exercise. Details of the number of meetings held during the year can be
found on page 80. The Board approves the Group’s governance framework, taking into account contributions from Board Committees
in their specialist areas such as remuneration policy, internal controls and risk management and succession planning. The Board is
content with the level of external directorships held by the Chairman and the independent Non-Executive Directors, as these do not
impact on the time that any Director devotes to the Company. The Board is satisfied that Directors have sufficient time to perform
their duties and furthermore, the Board believes that this external experience serves to enhance the capability of the Board.
Board Committees The Board has five main committees: the Nomination Committee, Remuneration Committee, Audit Committee, ESG Committee
and the Disclosure Committee. The terms of reference for each Committee are available on the Group’s website.
Executive
Leadership Team
The ELT has been established to support the CEO in his management of the business on a day-to-day basis and exercise any
authority delegated to him by the Board. Members of the ELT include the CFO, the COO, MD of Ibstock Futures, Group Development
Director, Group HR Director and the Group Company Secretary. Meetings are held on a monthly basis.
Chairman The Chairman is responsible for the leadership and effectiveness of the Board. The Chairman, with the CEO and the Group Company
Secretary, sets the agenda for Board meetings, manages the meetings (in conjunction with the Company Secretary) and facilitates
open and constructive dialogue during those meetings. He also holds meetings without the CEO and CFO being present.
Chief Executive
Officer
Joe Hudson, our CEO, has specific responsibility for recommending the Group’s strategy to the Board and for delivering the strategy
once approved. In undertaking such responsibilities, Joe is supported by the ELT and other Board colleagues. Together with the CFO,
he monitors the Group’s operating and financial results and directs the day to day business of the Group. The CEO is also responsible
for the recruitment, leadership and development of the ELT.
CFO Chris McLeish, our CFO, is responsible for the financial matters in the Group. Chris supports the CEO in the achievement of the Group’s
strategic objectives and manages the relationships with Ibstock’s investors and analysts. Further information can be found in the
Financial Review on page 64.
Senior Independent
Director (SID)
The SID provides advice to the Chairman and serves as an intermediary for the other Directors and shareholders. The Non-Executive
Directors meet without the Chair present at least annually to appraise the Chairman’s performance, and on other occasions
as necessary.
Independent
Non-Executive
Directors
The Non-Executive Directors provide an external perspective, sound judgement and objectivity to the Board’s deliberations and
decision-making. With their diverse range of skills and expertise, they support and constructively challenge the Executive Directors
and monitor and scrutinise the Group’s performance against agreed goals and objectives. The Non-Executive Directors are also
responsible for determining appropriate levels of executive remuneration, appointing and removing Executive Directors, and
succession planning through their membership of the Remuneration and Nomination Committees. The Non-Executive Directors
together with the Chairman meet regularly without any Executive Directors being present.
Board support
and the Group
Company Secretary
Our Group Company Secretary, Nick Giles, supports and works closely with the Chairman, the CEO and the Chairs of the Board
Committees in setting agendas for meetings of the Board and its Committees. He works to ensure there is accurate, timely and clear
information flows to and from the Board and the Board Committees, and between Directors and senior management. In addition,
he supports the Chairman in designing and delivering Directors’ induction programmes and the Board and Committee performance
evaluations. He also advises the Board on corporate governance matters and Board procedures, and is responsible for administering
the Share Dealing Code and the AGM.
The Directors of all Group companies, as well as the Board, have access to the advice and services of the Company Secretary
although independent external legal and professional advice can also be taken when necessary to do so. Furthermore, each
Committee of the Board has access to sufficient and tailored resources to carry out its duties. The appointment and the removal of
the Company Secretary is a matter for the Board as a whole.
Independence The independence of the Non-Executive Directors is considered on an annual basis by the Nomination Committee on behalf of the
Board and following this year’s review, it was concluded that all of the Non-Executive Directors continue to remain independent in
character and judgement and are free from any business or other relationships that could materially affect the exercise of their
judgement. The balance of skills and experience ensures that no one individual or small group of individuals dominates the Board’s
decision-making processes. The Board and Nomination Committee also review Committee membership annually to ensure that
undue reliance is not placed on individuals.
CORPORATE GOVERNANCE STATEMENT CONTINUED
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Composition, Succession and Evaluation
Nomination Committee
The Board has established a Nomination Committee to which it has
delegated a number of responsibilities. Information on the Committee’s
composition, together with the principal activities carried out during the
year, are included in the Nomination Committee Report on page 87.
Board composition
The Board comprised eight Directors at the year end: two Executive Directors
and six Non-Executive Directors. Over half of our Board (excluding the
Chairman) are deemed independent Non-Executive Directors and the
composition of all Board Committees complies with the Code. Additionally,
the Chairman was considered independent on his appointment.
The Committee is responsible for regularly reviewing the composition of
the Board. The Board and its Committees benefit from a combination of
skills, experience and knowledge drawn from across several industries and
functional roles. Length of tenure and the range of skills and experience of
the Board can be found in the Directors and Company Secretary section on
page 78.
Appointments and succession
The Nomination Committee leads the process for the appointment of new
Directors to the Board. Appointments are made on merit and measured
against objective criteria set with regard to the benefits of a diversified
Board. The process is a formal, rigorous and transparent procedure.
Effective succession plans are maintained for Board and senior
management.
The Board and the Nomination Committee considered Board succession and
that of the wider ELT during the course of the year to ensure that the Board
has the right mix of skills and experience, as well as the capability to provide
constructive challenge and promote diversity. Further to these discussions,
an additional Non-Executive Director was appointed to the Board during the
year. Further detail regarding the appointment process can be found within
the Nomination Committee Report on page 87.
Evaluation
Process and methodology
The Board undertook an evaluation of its own performance, and that of its
Committees and the individual Directors in respect of the year under review.
When conducting its annual evaluation, the Board considers its composition,
diversity and how effectively members work together to achieve the Group’s
objectives. The Chairman conducts individual evaluations of the Non-
Executive Directors to determine whether they have made an effective
contribution to the Board.
Having completed an external evaluation during the 2020 financial year, the
2021 evaluation was internally facilitated and supported by the Company
Secretary. To enable this, a questionnaire was completed by all members of
the Board which included questions around the Group’s explored strategy,
effectiveness and accountability. The process provided the Board with the
opportunity to make specific comments in response to a series of “open”
questions. The results were collated by the Company Secretary and a report
provided to the members of the Board for review.
Individual evaluation
The SID met with the Non-Executive Directors, in the absence of the
Chairman, to appraise the Chairman’s performance, taking into account
the views of Executive Directors. The review concluded that the
Chairman’s performance continued to be effective and that he
demonstrates commitment to the role. The SID informed the
Chairman of the review’s findings.
The Chairman met with all Non-Executive Directors individually to conduct
an appraisal of their performance. The reviews concluded that the
Non-Executive Directors continued to be effective and had demonstrated
commitment to their roles.
Outcomes
Board effectiveness reviews, by their very nature, can feel somewhat
negative given that the outcome is primarily a discussion of areas for
improvement. As a balance the review identified many positive aspects of
the current operation of the Board and showed that the Board is effective in
most areas, is well led, and that the Directors challenge constructively.
The evaluation concluded that the Board and its Committees continued to
provide effective leadership and exert the required levels of governance and
control and that each Director continued to contribute effectively and
demonstrate commitment to his or her role.
A number of recommendations coming out of the 2021 evaluation were
discussed by the Board and it was agreed that a formal action plan would
be developed with support from the Company Secretary to address the
recommendations. This plan will form a standing part of the activities of the
Board over the course of the coming year.
Induction, training and development
All new Directors receive a tailored induction programme upon joining the
Board and additional training is made available to members of the Board in
accordance with their requirements. The Nomination Committee reviewed
the training requirements of the Board and agreed upon a suitable regime
for training and information flows to enable the Directors to satisfy their
training and development needs. Information provided to the Board
included updates on developments on Corporate Governance, the regulatory
framework and accounting matters. The Chairman and the Company
Secretary will continue to identify broader areas of training for the Board as
a whole and the Chairman will discuss and agree the training requirements
with individual Directors as and when required.
Directors may, at the Company’s expense, take independent professional
advice and are encouraged to continually update their professional skills and
knowledge of the business.
Induction of Peju Adebajo
Peju Adebajo was appointed as a Director on 26 November 2021. Her induction
programme included detailed briefings from key members of the senior
management team and the Company’s brokers, external and internal auditors
and legal advisors. Peju also received comprehensive information on the
operation of the Board, its processes and governance. Visits were arranged
to a number of the Group’s principal factories and operations.
Re-election of Directors
All of the Directors are subject to annual re-election and intend to submit
themselves for re-election at the 2022 AGM. The Notice sets out the reasons
why the Board considers their respective contributions to be and to continue
to be important to the Company’s long term sustainable success.
Audit, Risk and Internal Control
Audit Committee
The Board has established an Audit Committee to which it has delegated
a number of responsibilities. Information on the Committee’s composition,
its role, together with information regarding the principal activities that it
carried out during the year, are included in the Audit Committee Report on
page 92. The Board considers that the Chairman of the Audit Committee,
Justin Read, possesses the level of recent and relevant financial experience
required and that the Committee, as a whole, has competence relevant to
the sector in which the Group operates. Additional information on the skills
and experience of the members of the Audit Committee can be found in the
Board of Directors and Company Secretary section on page 78.
Financial and business reporting
The Board has established arrangements to ensure that reports and other
information published by the Group provide a fair, balanced and
understandable assessment of Ibstock’s position and prospects. The Strategic
Report on pages 1 to 73 explains the Group’s Business Model and the strategy
for delivering the objectives of the Group and a statement on the Group as a
going concern and the Viability Statement is set out on page 72.
With the support of the Audit Committee, the Board has reviewed the 2021
Annual Report and considers that, taken as a whole, it is fair, balanced and
understandable and provides the information necessary for shareholders
to assess the Company’s position and performance, business model and
strategy. Further details of the review work carried out by the Audit
Committee in relation to the 2021 Annual Report can be found in the
Audit Committee Report on page 92.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
Risk management
The Board ensures that the necessary resources are in place for the Company
to meet its objectives and to measure performance against them. It has
established a robust risk management and internal control framework that
supports the effective identification, assessment and mitigation of risk and
completes a robust assessment of the Company’s emerging and principal
risks as required by the Code as well as a review of their effectiveness.
Please refer to page 52 for further information on the Group’s ongoing risk
management process and the Group’s principal and emerging risks and
uncertainties together with details around their related mitigating factors.
The Audit Committee provides support in the discharge of these
responsibilities by reviewing and monitoring the Group’s risk management
framework and the reporting of risk internally and externally. The Audit
Committee Report on page 92 sets out how these responsibilities have been
discharged during the year.
During the year, the Group’s Internal Auditor, RSM, provided support to the
Group Company Secretary in the operation of the full-year process for the
review of risk. This resulted in a number of changes to the articulation of the
Group’s principal risks as well as some proposed actions for the continued
development of the Group’s management of risk. These will form the basis
of an action plan for implementation by management during 2022.
Further information can be found in the Principal Risks and Uncertainties
section on page 52.
Internal control
The Group’s internal control systems are designed to manage, rather than
eliminate, the risk of failure to achieve business objectives. They are based
on assessment of risk and a framework of control procedures to manage risks
and to monitor compliance with procedures. The internal control systems
are designed to meet the Group’s particular needs and the risks to which it
is exposed and, by their nature, can provide only reasonable, not absolute,
assurance against material loss to the Group or material misstatement in the
financial accounts. The overall responsibility for Ibstock’s system of internal
control and for reviewing its effectiveness rests with the Board but this
responsibility has been delegated to the Audit Committee. Further details
of the review and monitoring procedures can be found within the Audit
Committee Report on page 96.
Audit
Details of the Internal Audit function and the External Auditors are provided
in the Audit Committee Report on page 95. The Board is satisfied that the
necessary policies and procedures are in place to ensure the independence
and effectiveness of both.
Remuneration
The Remuneration Committee
The Board has established a Remuneration Committee, which has delegated
responsibility for determining the policy for executive remuneration and
setting remuneration for the Chairman of the Board, CEO and members of
the ELT including the Company Secretary. When doing so, the Remuneration
Committee takes account of wider workforce remuneration and related
policies and the alignment of incentives and rewards with Ibstock’s culture.
Further details of the work of the Remuneration Committee are set out from
page 98.
Remuneration Policy
The proposed Executive Remuneration Policy for approval at the 2022 AGM
and details of the remuneration packages of individual Directors are set out
on pages 101 to 111. During the year no individual Director was present
when their own remuneration was determined.
Project: Fermoy Road. London
Product used: Staffordshire Slate Blue Smooth
Setting the cultural tone
Purpose
To build a better world by being at the heart of building.
Vision
We enable the construction of homes and spaces that inspire
people to work and live better.
Values
Our values reflect what people feel Ibstock represents as a
business and a place to work and encompass the behaviours
necessary to underpin our day to day activities.
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NOMINATION COMMITTEE REPORT
Jonathan Nicholls
Chair of the
Nomination Committee
Membership, meetings and attendance
Membership comprises the independent Non-Executive Directors with
support from the Group’s Company Secretary. Details of meeting
attendance can be found on page 80. The Committee met on two
occasions during the year.
Role and responsibilities
The key responsibilities of the Committee are to:
• Develop and maintain a formal, rigorous and transparent procedure
for making recommendations to the Board on appointments and on
the structure, size and composition of the Board;
• Ensure that planning is in place for orderly succession to both the
Board and senior management positions;
• Oversee the development of a diverse pipeline of talent for succession;
• Evaluate the balance of skills, diversity, knowledge and experience of
the Board;
• Prepare a description of the role and capabilities required for a
particular appointment and lead the recruitment process;
• Identify and nominate, for the approval of the Board, candidates to fill
Board and senior management vacancies, ensuring that candidates
have the necessary skills, knowledge and experience to effectively
discharge their responsibilities;
• Review the time commitment required from Non-Executive Directors
and evaluate the membership and performance of the Board and its
Committees; and
• Recommend, where appropriate, the re-election of Directors.
Introduction
I am pleased to present my report, as Chair of the Nomination Committee
(the Committee), to you for the year ended 31 December 2021.
The Committee leads the process for appointments, ensures plans are in
place for orderly succession to both the Board and senior management
positions, and oversees the development of a diverse pipeline for succession.
During the year under review the Committee held two formal meetings but
also considered a number of matters for which it is responsible as part of the
Board Strategy session in June. The Committee oversaw the recruitment
process for an additional Non-Executive Director that concluded with the
appointment of Peju Adebajo last November. I am delighted that Peju
decided to join our Board and she will provide additional perspective and
challenge which will enrich and improve our Board discussions. Following the
appointment of Peju we have no plans to appoint any additional Non-
Executive Directors.
Succession planning
The composition of the Board is constantly under review with the aim of
ensuring that it has the depth and breadth of skills to discharge its
responsibilities effectively. The Committee, through its oversight of
succession planning, applies a similar approach to the layer of management
that sits immediately below the Board.
The Committee aims to ensure that the Board and senior management
are well balanced and appropriate for the needs of the business and the
achievement of the Company’s strategy. Furthermore, the Committee
ensures that the Board includes Non-Executive Directors who are
appropriately experienced and are independent of character and judgement.
As part of the succession planning process, the Committee takes account of
the balance of skills, knowledge, experience and diversity. The Committee
reviewed the Group’s succession plan for the Board and also considered the
talent available below the Board level. The conclusion drawn from that review
was that the Company has succession planning arrangements in place.
Time commitment
In making recommendations to the Board on Non-Executive Director
appointments, the Nomination Committee specifically considers the
expected time commitment of the proposed Non-Executive Director and
their existing commitments. Agreement of the Board is required before a
Director may accept any additional commitments to ensure possible conflicts
of interest are identified at an early stage and that they will continue to have
sufficient time available to devote to the Company. Any other potential
conflicts of interest are also considered at each Board meeting.
In addition, the Nomination Committee concluded, through discussions
with the Chairman and the Board and the Committee evaluation process,
that the Non-Executive Directors had committed sufficient time to fulfil their
duties and that their performance continued to be effective.
Board and Committee evaluation
The method and outcomes from the FY 2021 internal Board evaluation
can be found in the Corporate Governance Statement on page 85.
The effectiveness of the Committee was reviewed by both the Board and
the Committee, in compliance with the Code. The evaluation in respect of
the 2021 financial year was conducted internally through a bespoke
questionnaire. The conclusion drawn from the review was that the
Committee operates effectively.
Activities and focus during 2021
The table summarises the agenda
items covered by the Committee
during the year.
Activity H1 H2
Board Diversity X X
Reviewed Committee’s terms of reference X
Reviewed size, structure and composition of the Board X
Reviewed time commitment required from Non-Executive Directors X
Reviewed the independence of Non-Executive Directors X
Annual review of the Committee’s effectiveness X
Reviewed succession planning arrangements and organisational changes X
Recommended appointment of additional Non-Executive Director X
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Board composition as at 31 December 2021
Appointment of Peju Adebajo
The Board appointed a new non-executive director during the year
which has expanded our existing collective skillset (the Board of
Directors and Company Secretary section on page 78 has more
detail). A summary of the appointment process is set out below:
Recruitment/selection
The Nomination Committee had a number of conversations
regarding Board composition and diversity during the year.
These concluded that an additional member of the Board
should be recruited. An appropriate role specification was
agreed and potential candidates discussed with input from
the Board and externally.
Interview
Meetings were arranged and held with those candidates that
were considered to have the most suitable additional skills and
experience required. These included the Chairman and SID as
well as other members of the Board. An executive search firm
assisted with this process.
Appointment
The Nomination Committee met in November to consider the
outcomes of all meetings and provided a recommendation to
the Board that Peju be appointed on 26 November.
Induction
Following her appointment Peju attended her first meeting of the
Board and a number of Committees in December 2021.
Since then, she has been in the process of completing a bespoke
induction programme that has included the provision of detailed
information regarding Board procedures, corporate governance
and regulation and a programme of visits to a number of
Ibstock’s manufacturing locations and its head office.
Specific sessions concerning the business and the manufacturing
processes have also been arranged to provide Peju with a broad
understanding of the business.
Lorem
6 2
31
5 3
4
Executive DirectorsNon-Executive Directors
FemaleMale
3-4 Years1-3 Years >4 Years
Balance of Non-Executive Directors/Executive Directors
Length of Tenure
Gender of Board
Share ownership
Joe Hudson (CEO)
(% of salary)
NOMINATION COMMITTEE REPORT CONTINUED
Diversity and inclusion
Our current employee population reflects the traditional nature of our
industry across all diversity characteristics including age, race, gender, sexual
orientation and disability. We recognise the challenge we face with 85%
of roles being occupied by men including a higher percentage of men in
factory-based production roles. Further information on diversity and
inclusion progress during the year under review can be found in the
Responsible Business section on page 39.
The Board acknowledges the aims, objectives and recommendations outlined
in the Hampton-Alexander Review and is aware of the need to achieve an
appropriate balance of women on our Board and in senior positions
throughout the Group. The Board also acknowledges and supports the aims,
objectives and recommendations of the Parker Review on ethnic diversity and
the emphasis in the Disclosure Guidance and Transparency Rules on disclosure
around diversity with regard to aspects such as age, gender and educational
and professional background. We are satisfied that we are fully compliant and
meet the recommendations of both reviews but will consider our position
relative to the proposed revised targets being considered as part of the next
stage of the FTSE Women Leaders work when appropriate.
Diversity Policy
Ibstock operates a Diversity and Inclusion Policy which is applicable to the
whole organisation and which informs the Board’s approach in this area.
The policy is accessible to everyone at Ibstock through the HR team and
on MyIbstock. The need for a specific Board Diversity policy was a
recommendation of the recent governance and compliance review and
will be launched during the coming year. We continue to work with our
recruitment partners to ensure that we are able to attract high-quality
candidates from a wide range of backgrounds, strengths and abilities.
We recognise that achievement of our strategic objectives is reliant on
the recruitment and retention of a diverse and engaged workforce and
efforts in this area will continue.
Although the Board has historically not considered that it is in the best
interests of the Group, or its shareholders, to set prescriptive diversity targets
for Board or senior management level appointments we have decided, that
in order to drive change in our industry we need to take some strong actions.
Therefore we have introduced a specific target to increase female
representation in the senior management group to 40% by 2027.
This group includes those members of the ELT and their direct reports.
Priorities for 2022
One of the areas of focus for the coming year will be to consider the need
for a new Diversity Policy and a full review of our approach in this area.
The Committee will also be working on refining its succession plans at all
levels of the organisation.
Jonathan Nicholls
Chair of the Nomination Committee
8 March 2022
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Q&A
with Claire
Hawkings
Chair of the ESG Committee
Q. Why have you decided to launch a new strategy?
Ibstock launched its Sustainability Roadmap in 2018. This included a range
of targets and milestones that would move the business towards being more
responsible and aware of its social impact. The success of the Company
against a number of these and the increasing focus on ESG matters, not
least the legal position around net zero, meant it was the right thing to do
and the right time.
Q. What work was undertaken to define the strategy?
As a heavy user of energy in order to manufacture our products, we have
always been really clear on where the Company’s major areas of impact and
effect lie which is why we have been working really hard to address the level
of carbon produced by the business. We conducted a high level materiality
assessment to understand the issues that were important to all of our
stakeholders and that impacted on the business and formulated our new
framework with these in mind. The new strategy is centred around
evolutionary changes through a rearticulation of existing priorities albeit
with some really ambitious targets included.
Q. How does the strategy integrate into the overall
Group strategy?
Our approach to ESG matters underpins the culture of Ibstock and is part
of all that we do. The targets and milestones of the new ESG strategy are
distributed across our corporate strategic pillars of Sustain, Innovate and
Grow. Further information can be found in the strategy section on page 18.
Q. What is your approach to ESG governance?
The Board continues to have ultimate responsibility for all ESG matters
but the Committee takes the lead in managing the Company’s approach
and implementation of the ESG framework to enable us to meet our
commitments to all stakeholders. The Committee is supported by an internal
sustainability team and will be appointing advisers to provide more specialist
technical advice as we move through 2022. Implementation of the strategy
is the responsibility of the Executive Leadership Team which actions this
through a number of ESG working groups that each have ownership of an
area of the strategy and that are coordinated through the Sustainability
Steering Group.
Q. What achievements are you most proud of over the
last 12 months?
For the past decade, Ibstock has been leading in this area, driving
incremental improvement and embedding change across the business and
the last year has seen us deliver on some of our original roadmap
commitments ahead of time and launch a new strategic framework which
will push our agenda out to 2030. These are fantastic achievements and
Ibstock’s commitment to becoming a net zero carbon business by 2040 only
serves to reinforce how serious we are on tackling climate change. I am
pleased with our focus on driving a culture of inclusion in Ibstock and
addressing diversity within the industry leadership is really fundamental to
success, so the executive sponsorship of D&I is an important step forwards.
ESG COMMITTEE REPORT
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ESG COMMITTEE REPORT CONTINUED
Introduction
I am extremely pleased to present the first ever report from the newly
formed ESG Committee. It has been an extremely busy year with a packed
agenda which has resulted in a number of really exciting developments for
Ibstock and its stakeholders. Despite our first meeting not taking place until
the second quarter of the year we managed to get together for a total of
four meetings, two of which were held at operational sites so that we could
meet local management and have deep dive sessions on topics relevant
to those locations. As soon as the Committee was up and running we
developed a detailed annual plan that provided clarity around what would
be considered at which meetings.
At the beginning of the year we identified two key areas that would require
real application in order to achieve our objectives. These included a need to
clarify the articulation of our approach to ESG issues and the obligation to
comply with the new mandatory TCFD reporting requirements in the UK
Listing Rules. Details of the work done in both of these areas can be
found below.
A number of attendees supported the Committee during the year and
I extend my thanks to them for all of their contributions and input.
We are fortunate to have some external support from Isabel McAllister,
Sustainability Director of Mace Limited, who provides insight and perspective
on a range of ESG issues.
Towards the end of the year the Committee welcomed Peju Adebejo as a
member and look forward to her contributions. Further detail on the key
areas covered by the Committee during the year can be found below
on the next page.
Membership, meetings and attendance
Membership of the ESG Committee (Committee) consists of three
Non-Executive Directors and the CEO. The Group Company Secretary also
attends in his capacity as the member of the ELT responsible for ESG and
Sustainability issues at Ibstock. Members of the Sustainability team and
other group functions attend meetings at the invitation of the Committee
Chair. In addition, the Committee invites an independent consultant to
regularly attend ESG Committee meetings to provide benchmarking and
industry views. The Deputy Company Secretary acted as secretary to the
Committee during its first year of operation.
Peju Adebajo joined the Committee following her appointment to the Board
on 26 November 2021 and attended her first meeting in December. Details
of meeting attendance can be found on page 80. The ESG Committee (the
Committee) met on four occasions during the year and the table setting
out the main agenda items for each meeting can be found below.
Role and responsibilities
The Committee is appointed to assist the Board in the discharge of its
duties through overseeing Ibstock’s strategies, policies and performance in
relation to environmental, social and governance matters and suggest ways
to drive improvement in these areas as appropriate.
The key responsibilities of the Committee are to:
• Develop a corporate ESG strategy and ensure it is in alignment with the
corporate strategy, purpose and values;
• Develop and recommend to the Board, ESG targets and key performance
indicators;
• Understand the impact of the Company’s operations on the environment;
• Oversee the promotion of socially responsible values and standards that
relate to the social and economic community in which the Company
operates;
• Work with the Remuneration Committee in assessing actual performance
relative to ESG;
• Performance measures used in the Company’s incentive plans; and
• Oversee Company disclosures of ESG matters in the Annual Report
and Accounts.
Activities and focus during 2021
The table summarises the agenda
items covered by the Committee
during the year. There were two
meetings during Q3 in July and
September
2021 Q2 Q3 Q4
Reviewed progress against KPIs X X X
Updates on Sustainability Working Group X X X
ESG Framework and Strategy X X X
Deep dive on water efficiency X
Deep dive on Clay facility X
Net zero strategy development X X X
Health, Safety & Wellbeing initiatives X
Stakeholder Engagement Report X X X
TCFD Implementation Updates X X X
Approve Sustainability Report (External) X
Annual Report disclosures X
LTIP Performance Condition Assessment X
Effectiveness of the ESG Committee X
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New ESG Strategy
We began our sustainability journey with a five-year Roadmap and series
of 2025 targets to tackle Ibstock’s key sustainability issues. Following the
work that was completed during the year we now have a strategy that can
both meet our immediate needs and drive us forward to succeed in the
longer term.
Our new ESG Strategy defines why we are taking a longer-term view and
shares our forward plan with our key external stakeholders, as well as our
colleagues. Bringing our people with us on this journey will enable us to make
progress more swiftly and with greater force. We need to do this together.
This strategy aims to ensure we grow as a responsible business. We have set
ourselves challenging targets to try and address the global problems of
today and tomorrow. Enabling our people to embrace and embed this
strategy will position Ibstock to challenge the norm and make the
transformation that we need. Full details of the ambitions, targets and
milestones of this new strategy are set out in the Responsible Business
section on page 32.
Net zero commitment
A key part of our new ESG strategy is the commitment to become a net zero
carbon business by 2040 and achieving a 40% reduction in Scope 1 and 2
emissions by 2030. This will be a real challenge for the business and will be
reliant on some critical actions on the road to success, which have been
summarised on page 37.
Taskforce for Climate-related Financial Disclosures (TCFD)
The Committee has overseen the work of the internal TCFD working group,
reviewing progress at each meeting. This working group comprised
representatives from the Company Secretariat, Sustainability and Finance
functions and met on a regular basis to make sure that Ibstock was
appropriately prepared in advance to meet the requirements of the UK
Listing Rules this year. The working group was supported on a number of
specific areas of compliance by an external consultant and their findings
and recommendations were considered by the Committee at its December
meeting. Our full TCFD disclosure can be found on page 48.
Priorities for 2022
The coming year will see the Committee further developing the quality of its
external reporting disclosures to ensure these are as clear and transparent as
possible for all of our stakeholders. We will be looking to make good progress
against those existing and new targets under the ESG strategy as well as
work with management to develop Ibstock’s social agenda.
Claire Hawkings
Chair of the ESG Committee
8 March 2022
EcoHabitat range – Bee Brick ESG Committee visiting Laybrook
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Activities and focus during 2021
The table summarises the main
agenda items covered at the
Committee’s meetings during
the year.
2021 Q1 Q2 Q3 Q4
Financial and narrative reporting X X X X
External Audit Planning and Reporting X X X X
Risk Management and Internal Control Processes X X X X
Independence and objectivity of the External Auditor X X
Internal Audit updates X X X X
Annual review of the Committee’s effectiveness X
Review of significant accounting matters and judgements X X X X
Consideration of incidences of fraud and whistleblowing X X X X
Review of compliance systems X
Consideration of the effectiveness of the internal
and external audit functions X X
Cyber and Information Security X
Consideration of BEIS consultation X X
AUDIT COMMITTEE REPORT
Introduction
I am pleased to present my report to you, as Chair of the Audit Committee
(the Committee), for the year ended 31 December 2021. The purpose of
the Committee is to make recommendations on the reporting, control, risk
management and compliance aspects of the Directors’ and the Group’s
responsibilities. At the same time the Committee provides independent
monitoring, guidance and challenge to management in these areas.
The Committee also provides a forum for reporting and discussion with the
Group’s External Auditor in respect of the Group’s Half-Year and Full-Year
results and certain Executive Directors and senior managers have attended
meetings during the year, as and when required, by invitation.
Amongst those activities that form the basis of the annual calendar, this
year has seen considerable time spent looking at the potential impacts and
implications of the consultation paper entitled ‘Restoring Trust in Audit and
Corporate Governance’ published by the Department for Business, Energy
and Industrial Strategy (BEIS). The Committee will continue to develop its
thinking as the final position on these issues is formalised but has already
started to implement those recommendations that are considered to be
most relevant. This has included an initial deep dive on what would be
required should a more formal assessment of the effectiveness of internal
control over financial reporting need to be undertaken to meet a potential
UK SOX regime in future.
At its July meeting the Committee received an update on the current threats
and levels of protection within the business to mitigate the risks of external
or internal cyber-attacks on the Company’s information systems and
proprietary data. This remains an area of focus as the sophistication of
methods used to exploit potential gaps in our systems continues to increase.
The Committee also undertook a deep dive session on the use and level of
customer rebates within the business.
Following the introduction of the new ESG Committee at the beginning of
the year we have been working to ensure that the relevant non-financial
disclosures in the Annual Report and any other reporting related requirements
are considered appropriately. This has included discussion around the levels
of assurance obtained on non-financial data and consideration of the TCFD
requirements that became mandatory for Ibstock this reporting year. As a
result, the Committee is now taking a more active role in considering the
impacts of climate change on the financial statements.
Following the release of the trading update in November 2021, the
Committee discussed the approach to accounting and control in the new
Ibstock Futures business. This is something that will remain on the agenda
as this part of the business develops.
Further information regarding the activities of the Committee during the
year can be found on the subsequent pages.
Membership, meetings and attendance
Membership comprises the independent Non-Executive Directors with
support from the Group’s Company Secretary. Peju Adebajo joined the
Committee following her appointment to the Board on 26 November 2021
and attended her first meeting in December. Details of meeting attendance
can be found on page 80. The Audit Committee (Committee) met on four
occasions during the year and the table setting out the main agenda items
for each meeting can be found below.
The Chairman, CEO, CFO and other senior members of the Finance team are
routinely invited to attend Committee meetings. The External Auditor and the
Internal Auditor attended all meetings during the year. Other individuals are
invited to attend the Committee’s meetings, as and when required.
The Chair has regular meetings with the CFO, External Audit partner and
Internal Audit partner to discuss key audit related topics ahead of each
Committee meeting. In addition, the Committee also holds private sessions
with the CEO, CFO, External Audit partner and RSM LLP (RSM), the Internal
Auditor, on a rotational basis after each meeting.
Role and responsibilities
The Committee is appointed by the Board and reviews and makes
recommendations to the Board on the Group’s financial reporting, internal
control and risk management systems. Its role, duties and responsibilities are
governed by a clear set of terms of reference (available in full on our website)
that are reviewed by the Committee and approved by the Board on an
annual basis with the last review having taken place in December 2021.
The Committee provides independent monitoring, guidance and challenge
to the Executive Directors. In addition, it assesses the effectiveness of the
external audit process and the External and Internal Auditor.
Through these processes the Committee’s aim is to ensure high standards of
corporate and regulatory reporting, risk management and compliance, and
an appropriate control environment. The Committee believes that excellence
in these areas enhances effectiveness, reduces risks to the business, and
protects the interests of the shareholders with regard to the integrity of
financial information published by the Group.
Justin Read
Chair of the Audit Committee
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Impairment of non-current assets
Matter considered
The Group holds significant asset values in the form of brands,
customer relationships, mineral reserves, land and buildings and
property, plant and equipment. At the interim and year-end balance
sheet date, these assets were considered for indications of impairment.
In the prior year, an impairment charge of £20.4 million was recognised
following the full impairment of assets associated with the Group’s
production facilities earmarked for closure. At 31 December 2021,
management performed an assessment of indicators of impairment and
determined that no such factors existed.
Additionally, management revisited the assessment of assets impaired
in the prior year and identified £5.8 million of assets, which, as a result of
capital investment decisions taken during 2021, indicated evidence of
impairment reversal. This reversal was proposed as an income statement
credit in the current year.
As at 31 December 2021, the value of these non-current assets was
£553 million (2020: £537 million).
Committee’s response
The Committee considered the processes adopted by management in
assessing whether, in their judgement, any indicators of impairment
existed and whether any subsequent detailed impairment testing should
be undertaken.
The Committee carefully considered management’s analysis.
Following its review, the Committee concurred with management’s
judgement that no indicators of impairment existed at the balance
sheet date and, as such, no detailed impairment testing was required.
In addition, the Committee carefully considered management’s
assessments of impairment reversals proposed in the current year, the
related investment decisions and the disclosure included within the
Group’s financial statements.
The Committee sought views from the External Auditor regarding
management’s process for recognition of impairment reversals and the
conclusions reached by management.
In conclusion, after reviewing the reports from management, the
Committee was satisfied that the financial statements appropriately
reported the value of the assets and that they were fairly stated.
Financial and narrative reporting
Financial statements
During the year the Committee:
• Reviewed the Full- and Half-Year results and associated announcements
and recommended them to the Board for approval.
• Reviewed the Group’s Annual Report to consider whether, taken as a
whole, it was fair, balanced and understandable and whether it provided
the necessary information required for shareholders to assess the
Company’s position, performance, business model and strategy and
recommended it to the Board for approval. Further information on the
format of this review can be found on page 94.
• Considered the appropriateness of the Group’s accounting policies and
practices, focusing on areas of significant management judgement or
estimation, and questioned the rationale for decisions taken in
application of the policies. Policies and practices were found to be
appropriate and correctly applied (see significant accounting and key
areas of judgement considered by the Committee during the year below).
• Received updates on corporate reporting and corporate governance from
the External Auditor.
• Considered the process for preparing the 2021 Annual Report.
• Received updates on training for Committee members, including
changes in financial reporting requirements and company law.
Significant accounting and key areas of judgement
A key factor in the integrity of financial statements is ensuring that suitable
accounting policies are adopted and applied consistently on a year-on-
year basis. The Committee specifically uses the Audit Planning meetings
in June and December each year to consider the adoption of any relevant
new standards, proposed accounting treatments for major transactions,
significant reporting judgements and key assumptions related to those
judgements. In addition, these matters are reviewed at each Committee
meeting throughout the year.
Pension liability accounting and disclosure
Matter considered
The Group operates a defined benefit pension scheme.
Management exercise their judgement around the assumptions used by
its actuary, including the sensitivities to these assumptions, to calculate
the pension scheme liabilities under IAS 19 (R) Employee Benefits.
As at 31 December 2021, the scheme had an actuarial accounting
surplus of £57.8 million (2020: £43.6 million), including liabilities of
£560.3 million (2020: £595.6 million), as detailed in Note 21 to the
financial statements.
Committee’s response
The Committee concurred with management’s assessment that the
estimates used within the valuation of the Group’s pension liability
(including future changes in discount rates, inflation, increases in pension
payments and life expectancy) represented significant sources of
estimation uncertainty, as set out within IAS 1 Presentation of Financial
Statements. A review of management’s proposed disclosure in relation
to this estimation uncertainty was completed.
Additionally, the Committee reviewed the assumptions with
management and sought views from the External Auditor before it
concluded on the appropriateness of the actuarial balances disclosed.
This review considered the financial assumptions used by management
as part of the actuarial valuation and the range of possible assumptions
using available market data to assess the reasonableness.
In conclusion, the Committee determined that the actuarial assumptions
used in the valuation of the period end pension liabilities were in an
acceptable range, disclosed appropriately and was satisfied that the
resulting presentation and disclosure was appropriate.
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Exceptional items*
Matter considered
The Group presents as exceptional items* on the face of the income
statement those items of income and expense which, because of the
materiality, nature and/or expected infrequency of the events giving rise
to them, merit separate presentation to allow shareholders to further
understand elements of financial performance in the period, so as to
facilitate comparison with future years and to assess trends in financial
performance, and in determination of Directors’ variable remuneration.
During the prior year, management clarified the Group’s accounting
policy on exceptional items* in response to the COVID-19 pandemic and
regulatory guidance issued.
Details of exceptional items* are set out in Note 5 to the financial
statements.
Additionally, the Group financial statements present a number of
alternative performance measures (APMs) within its published financial
information, including the 2021 Annual Report, with the objective of
providing readers with further understanding of financial performance in
the period, in order to facilitate comparison between periods and to
assess trends in financial performance. Definitions of APMs used are set
out in Note 3 to the financial statements.
Committee’s response
In light of the guidance issued by the European Securities and Markets
Authority and more recently the UK’s Financial Reporting Council, the
Committee continues to assess management’s rationale for including
an item as an exceptional item* and the wider use of APMs.
Regarding the Group’s accounting policy in relation to exceptional items*,
the Committee assessed the categories of items management proposed
for inclusion as exceptional items* and considered their appropriateness
in light of the prior year policy clarification and the regulatory guidance
issued. Additionally, the Committee sought views from the External
Auditor as to the appropriateness of items categorised by management
as exceptional. Upon conclusion of this review, the Committee concurred
with management’s analysis of proposed exceptional items*.
Through discussion with management and the External Auditor, the
Committee has also sought to ensure that the policy for APMs is
applied consistently and in compliance with the guidance provided.
The Committee challenged management’s rationale for the use of
specific APMs; and the link between APMs reported within the financial
statements and incentive measures within the Directors’ Remuneration
Report. The Committee concluded that the presentation of APMs gave
additional clarity on performance and were reconciled appropriately to
reported amounts, with sufficient prominence, and is satisfied that the
resulting presentation and disclosure is appropriate.
Going Concern and Viability Statements
On behalf of the Board, the Committee reviewed the Going Concern and
Viability Statements prepared by management, together with the
supporting documentation and sensitivity analyses. Details of the review
process and the conclusion reached are set out on pages 72 and 73.
Following its review, the Committee recommended the approval of both
statements to the Board.
Fair, balanced and understandable
It is the Board’s responsibility to determine whether the 2021 Annual Report
and Accounts are fair, balanced and understandable. The Committee
reviewed the process for preparing the 2021 Annual Report, reviewed
management’s analysis of the 2021 Annual Report and how this met the
objectives of providing fair, balanced and understandable disclosures that
provided the information necessary for shareholders to assess the
Company’s position, performance, business model and strategy.
The Committee took into account the following when completing this process:
• input from the CEO and CFO on the overall messages and tone of the
Annual Report;
• that individual sections of the Annual Report were drafted by appropriate
senior management with regular review to ensure consistency across the
entire document;
• that detailed reviews of appropriate draft sections of the Annual Report
were undertaken by the Executive Directors;
• that an advanced draft of the Annual Report was reviewed by the
Committee and the auditors on a timely basis to allow sufficient;
consideration and was discussed with the CFO and senior management
prior to consideration by the Board; and
• the results of an independent review by an external corporate reporting
consultant.
After consideration the Committee arrived at the decision to recommend
that the 2021 Annual Report be approved by the Board as fair, balanced
and understandable. The Board statement on a fair, balanced and
understandable Annual Report is set out on page 77.
External audit relationship
• Reviewed and concurred with Deloitte LLP’s (Deloitte) plans for their review
of the 2021 Half-Year statement and audit of the 2021 financial results.
• Reviewed and considered the reports presented by Deloitte to the
Committee following the Half-Year review and Full-Year audit.
• Reviewed the performance of the External Auditor and the effectiveness
of the external audit process.
• Discussed and approved the fees for audit and non-audit services and
obtained assurance on the objectivity and independence of the External
Auditor, taking into consideration relevant professional and regulatory
standards.
• Discussed and approved the Directors’ Letter of Representation provided
to Deloitte.
• Reviewed and approved the policy for the employment of former
employees of the External Auditor, without amendment, confirming with
management that no such employees had been appointed during 2021.
• Held planned meetings with Deloitte, following Committee meetings,
without management present, on two occasions. No material issues were
brought to the Committee’s attention at those meetings.
• Recommended to the Board that a shareholder resolution should be
proposed for the reappointment of Deloitte.
• Discussed and approved the appointment of a replacement for Jonathan
Dodworth, audit engagement partner, who would be rotating off the
Ibstock audit following the conclusion of the 2021 full-year audit.
• Considered the adequacy of the Group’s procedures with regard to the
objectivity and independence of the External Auditor. The Committee
formed the opinion that Deloitte had demonstrated their independence
and objectivity.
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Review of Internal Audit activities
• Reviewed reports presented by RSM on Internal Audit assignments that
had been completed during the year and discussed the results and agreed
actions arising from RSM’s recommendations.
• The Committee reviewed, and were satisfied with, management’s
responsiveness to RSM’s findings and recommendations.
• Agreed a plan of work for the 2022 Internal Audit programme with RSM.
In reviewing the proposed plan of work, the Committee questioned the
Internal Auditor and management as to the composition of the plan.
The Committee considered any specific areas of risk identified by either
party in formulating the schedule. Following discussion, the Committee
was satisfied that the proposed 2022 work programme was appropriate.
• The Committee met with RSM, without management present, on two
occasions. No material issues were brought to the Committee’s attention
at those meetings.
Oversight of risk and internal control
• Reviewed principal business risks, risk management processes and internal
controls. Further information can be found in the Principal Risks and
Uncertainties section on page 52.
• Received a report from the CFO on the internal controls operating in the
business and any associated action plans.
• Reviewed fraud risks (including the results of a fraud risk assessment), the
Code of Business Conduct and Whistleblowing Policy. The review did not
identify any material matters of interest.
• Considered the appropriateness of the Group’s Viability Statement at the
Full-Year, and Going Concern Statement assumptions at the Half-Year and
Full-Year, including a review of the sensitivity analysis and scenarios
prepared by management. The Viability Statement and the Going
Concern Statement are set out on pages 72 and 73.
External and Internal Audit
External Auditor
Following a competitive tender process conducted in 2016, Deloitte was
appointed as auditor, and Jonathan Dodworth became the lead audit
partner, for the financial year commencing 1 January 2017. The Committee
received formal confirmation from Deloitte itself that the audit engagement
team, and others in the firm as appropriate, and, where applicable, all
Deloitte network firms were and remained independent of the Group.
The Committee’s policy is that the role of External Auditor will be put out to
tender at least every 10 years in line with the applicable rules, or at other
times should it be required by specific circumstances.
Having now been audit partner for five years since the original appointment,
Jonathan Dodworth will hand over to Lee Highton following completion of
the audit for the year ended 31 December 2021. Mr Highton met with
members of the Board and the Committee as well as with a number of
senior members of the Group’s finance function prior to his appointment.
In addition there has been a number of discussions during the year to ensure
that an appropriate transfer of knowledge and information has been
completed so that the transition in 2022 will be executed in a smooth and
efficient fashion.
The Company has complied throughout the year under review with the
Statutory Audit Services for Large Companies Market Investigation
(Mandatory Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.
Effectiveness of the External Auditor
The Committee has the responsibility for overseeing the Group’s relationship
with the External Auditor and advises the Board on their appointment/
reappointment, their effectiveness, independence and objectivity, and
discusses the nature and results of the audit with the External Auditor.
The review of the FY 2021 external audit process included consideration of
the following:
• the effectiveness of the External Audit firm;
• quality controls;
• the audit team;
• audit fee;
• audit communications and effectiveness;
• governance and independence;
• ethical standards; and
• potential impairment of independence by non-audit fee income.
As part of the review of the effectiveness of the External Audit process, the
Committee received a report on the External Auditor’s quality control
procedures and conducted a formal evaluation procedure.
In addition to reviewing the formal report received from the External Auditor,
which outlines how points raised by them have been addressed by
management, feedback is also sought on the conduct of members of the
finance team during the audit process. The Committee Chair also met with
the lead audit partner outside the formal Committee process.
The Committee also considers the effectiveness of management in the
External Audit process in respect of the timely identification and resolution
of areas of accounting judgement with input from the External Auditor
as appropriate; and the timely provision of the draft Half-Year results
announcement and Annual Report for review by the auditor and
the Committee.
Auditor independence and non-audit services
The non-audit services policy (Policy) sets out clearly the non-audit services
that may be provided by the External Auditor. Under the Policy, prior
approval is required by the Committee for any non-statutory assignments
where the fee would exceed £10,000, or where such an assignment would
take the cumulative total of non-audit fees paid to the External Auditor over
70% of that year’s statutory audit fees. However, when appropriate, a
detailed calculation will be performed to ensure that the Group is compliant
with the European Union’s Statutory Audit Framework. This Policy is
reviewed on an annual basis and was adopted without amendment in
December 2021. The External Auditor is responsible for the annual audit of
the Group’s subsidiaries and other services which the Committee believe it is
best placed to provide.
Details of the amounts paid to the External Auditor are set out in Note 6 to
the Group consolidated financial statements. The ratio of audit fees to
non-audit fees was 1:8.
The Committee considers that the External Auditor continues to be
independent. Deloitte has indicated its willingness to continue in office and
the Committee has recommended Deloitte’s re-appointment to the Board.
A resolution to re-appoint Deloitte as the External Auditor will therefore be
proposed at the AGM to be held on 21 April 2022.
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Assessment of Principal Risks
The Committee also considered the principal risks and uncertainties and
their associated mitigation prepared by management in advance of their
submission to the Board. This formed a key component of the Board’s robust
assessment of the emerging and principal risks facing the Group, including
those that would threaten its business model, future performance, solvency
or liquidity. The Group’s principal risks are set out on pages 54 to 61.
Compliance and whistleblowing
On behalf of the Board, the Committee reviews the operation of the Group’s
procedures that are in place for the detection of fraud and the systems and
controls in place to prevent a breach of anti-bribery legislation.
The Committee receives regular updates at each meeting and discusses any
incidents brought to its attention. It also receives updates on the operation
of the Company’s confidential whistleblowing arrangements including those
material incidents raised through the whistleblowing line since that last
meeting. Whilst the Board considers a half-yearly summary of all incidents
raised through the whistleblowing line, further details of which can be found
on page 82.
The Group is committed to a zero-tolerance position with regard to
bribery. Anti-bribery guidance and training is provided to employees, as
appropriate, applying what the Group has determined to be a risk-based
and proportionate approach. The Group maintains a record of all employees
who have received this guidance and training.
Committee effectiveness
The effectiveness of the Committee was reviewed by both the Board and
the Committee, in compliance with the Code. The evaluation in respect of
the 2021 financial year was conducted internally and facilitated by the
Chairman with the assistance of the Group Company Secretary. A report on
the outcome of the evaluation of the Board and Committee’s effectiveness
was presented to the Board. Further information regarding the evaluation
process and outcomes can be found in the Corporate Governance Report on
page 85. The conclusion drawn from the review was that the Committee
continues to operate effectively.
Justin Read
Chair of the Audit Committee
8 March 2022
Internal Audit
The provision of Internal Audit services is outsourced to RSM and the
Internal Audit programme for the subsequent year is approved by the
Committee in December each year. This contains a schedule of reviews to
audit a range of processes and controls throughout the year covering each
component of the Group. Updates on the status of audits against the annual
Internal Audit plan are provided to the Committee by RSM on a regular
basis. These set out any control weaknesses identified as well as
management’s actions to address control recommendations.
RSM also provide the Committee with support and advice concerning the
Group’s assurance framework more generally and during the year provided
advice and assistance with the full-year risk management process.
Further information regarding the scope of this work and its outcomes can
be found in the Risk Management section on page 52.
Risk management and internal control
The Committee supports the Board in monitoring Ibstock’s exposure to risk
and is responsible for reviewing the effectiveness of its risk management
and internal control systems and assisting in the assessment of the Group’s
principal risks and uncertainties. The key elements that comprise the Group’s
internal control framework include a clear management structure with
appropriate authorities, robust financial controls, an appropriate enterprise
risk management system, an internal audit function and appropriate policies
and procedures.
Review of Effectiveness
The Committee completes a bi-annual review in accordance with the FRC’s
guidance on Risk Management, Internal Control and Related Financial and
Business Reporting.
Following a review by senior management in the operating business and the
Executive Leadership Team, the Committee considers papers on internal
control and risk management presented by the CFO and Group Company
Secretary respectively and provides challenge on management’s conclusions
and assertions as appropriate.
The outcomes of this review included a number of recommendations with
regard to Ibstock’s approach to risk management that have been included
along with those other areas of focus identified as a set of 2022 priorities,
further details of which can be found on page 52.
RSM completed its review of the Group’s internal financial controls in 2021
and presented their final report to the Committee at the December meeting.
No significant failings in the Group’s internal controls were identified
although a number of next steps were identified which management are
now in the process of addressing.
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DIRECTORS’ REMUNERATION REPORT
Single figure remuneration for our Executive Directors
The single total figure of remuneration table for the Executive Directors and Non-Executive Directors is set out on page 115.
Joe Hudson (CEO)
£1,104,401
£715,519
Chris McLeish (CFO)
Annual & Deferred Bonus Plan (ADBP) FY 2021 outcome
• Our 2021 ADBP outcomes outlined below reflect the performance targets and measures put in place during the 2021 financial year. The financial
objectives include KPIs and details can be found on page 28.
Adjusted
EBITDA FY*
(20%)
Adjusted
EBITDA H1*
(10%)
Adjusted
EBITDA H2*
(10%)
Adjusted
operating
cash flow*
(30%)
Non-financial
objectives
(30%)
2021 Annual
bonus outcome
(% of maximum)
Joe Hudson (CEO) £103.1m £54.8m £48.3m £80.6m 26.8% 95.5%
Chris McLeish (CFO) £103.1m £54.8m £48.3m £80.6m 26.8% 95.5%
2018 LTIP outcome
Measure Weighting (%)
Threshold
(%)
Maximum
(%)
Actual
(%)
Vesting
(% of maximum)
Relative TSR 50 11.4 52.1 -10.5 0%
Adjusted EPS* growth 50 6% 16% 0% 0%
The three-year performance period for the awards granted in 2018 expired on 9 April 2021. The Committee determined that no awards would vest due to
a failure to meet any of the performance conditions.
Share ownership
Joe Hudson (CEO)
(% of salary)
Chris McLeish (CFO)
(% of salary)
Shareholder
requirement
200%
24%
Current
shareholding
Value of/gain on
interests over shares
(i.e. unvested awards)
Total
379%
Shareholder
requirement
200%
77%
Current
shareholding
Value of/gain on
interests over shares
(i.e. unvested awards)
416%
The number of shares of the Company in which Directors had a beneficial interest as at 31 December 2021 is set out in detail on page 118.
Remuneration at a glance
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Annual Statement
In addition our continuing work on environmental sustainability and social
progress represents a strong unifying cause for everyone at Ibstock with
ambitious new commitments, including a target for the business to be net
zero carbon by 2040, announced at the end of last year.
Further details can be found in the CEO review (from page 8), Key Performance
Indicators (page 28), the Responsible Business section on page 30 and in the
Financial Review on page 64.
Remuneration Outcomes in FY 2021
At all times the Committee has carefully balanced the interests of all
stakeholders as well as the wider business and societal context in making
these decisions. Further details on our stakeholders can be found on page 40.
In line with our remuneration philosophy, incentive outcomes are largely
driven by corporate performance and shareholder value creation. The annual
bonus for our Executive Directors, which is based 70% on the Group’s
financial performance and 30% on non-financial objectives, paid out at
95.5% of maximum opportunity. Further details of the annual bonus targets
for the year and performance against those targets are provided on page
116. The Committee was comfortable that the annual bonus outcomes
reflected the strong corporate performance delivered in 2021.
Awards granted in 2018 under the LTIP vested during the year. As neither of
the two performance conditions were met the awards vested at a nil value
and were not released. Full details are provided on page 117.
The Committee carefully considered the formulaic outcomes under the
annual bonus and the LTIP and was satisfied that, taken together, there was
no basis for operating discretion (either upwards or downwards) in respect of
these outcomes. As such the payment of bonuses was felt to be appropriate
and the 2019 LTIP is expected to lapse without value.
The Executive Directors were granted awards under the LTIP in March 2021
equivalent to 150% of base salary. Full details of these awards can be found
on page 117.
We also welcomed a new non-Executive Director to the Board at the end
of the year. Details of Peju Adebajo’s remuneration arrangements are set
out on page 115 and are consistent with the terms of the current
remuneration policy.
Directors’ Remuneration Policy – 2022
The Company’s remuneration strategy is designed to motivate our senior
leaders to deliver strategic objectives, ensure customer focus based on
quality and consistency, and to drive long-term value for our shareholders.
Further details of how our incentives and their measures align to the
Company’s key strategic priorities can be found on page 101.
The current remuneration policy was approved by shareholders at our 2019
AGM and received strong support of 99.7% votes in favour, whilst our
annual report on remuneration has received an average level of support
of over 99% since our Initial Public Offering in October 2015. In 2021 the
Remuneration Committee undertook a review of the Company’s reward
framework and concluded that the current Policy, which has worked well for
the past three years, remained broadly fit for purpose for the next three
years. Therefore, the new Policy we are proposing will operate similarly
albeit with the following proposed changes:
• Post-cessation shareholding requirement (PCSR): The Committee
intends to extend the current approach such that departing Executive
Directors are required to hold the lower of their actual shareholding or
100% of their MSR (Minimum Shareholding Requirement) for 24 months
from the date of leaving. The current PCSR requires Executives to hold
100% of their MSR for 12 months but reducing down to 50% for the next
12 months.
• Pension: The CFO’s pension contribution is already aligned with the rate
offered to the wider workforce (10% of salary). Currently the CEO receives a
pension benefit of 20% of salary, however, the Committee agreed in 2020
to reduce this to 10% of salary by the end of 2022 to ensure alignment.
Full details of the proposed Policy are set out on pages 101 to 111.
As the Chair of the Remuneration Committee (the Committee), I am pleased
to present the Directors’ Remuneration Report (DRR) for the year ended
31 December 2021. The report has been prepared in accordance with
Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended in 2013, the
provisions of the Code and the Listing Rules. The report consists of three
sections:
• This Annual Statement (pages 98 to 100);
• The proposed new Remuneration Policy on (pages 101 to 111); and
• The Annual Report on Remuneration which sets out payments made to
the Directors and details the link between Company performance and
remuneration for the 2021 financial year (pages 112 to 121).
UK law requires listed companies to seek shareholder approval for the
renewal of their Directors’ Remuneration Policy (Policy) at least every three
years. As our policy was last approved by shareholders at our 2019 AGM,
we will be submitting an updated policy to shareholders at our 2022 AGM.
The Policy is set out on pages 101 to 111. This Annual Statement and the
Annual Report on Remuneration will be subject to an advisory vote at the
same meeting.
Business performance in FY 2021
Ibstock has delivered a good performance this year with strong demand
across all key markets, and good operational execution across the Group
supporting a significantly improved result in 2021. The results are particularly
positive in light of the supply chain challenges across the industry during the
second half of the year. The Group’s trading performance, showed material
year-on-year improvement in all of our key financial metrics as set out below:
• Revenue of £409 million, an increase of 29% on 2020 and in line with the
pre-COVID performance reported in 2019
• Adjusted EBITDA* of £103 million (2020: £52 million, 2019: £122 million).
Ahead of our previous expectations, driven by outperformance in our
Clay division
• Balance sheet strength enhanced with excellent free cash flow
performance; net debt to adjusted EBITDA* of 0.4 times (2020: 1.5 times)
below the bottom of our 0.5 to 1.5 target range, and liquidity headroom
increased to £186 million (2020: £145 million)
• Adjusted earnings per share grew by 9.9 pence to 13.9 pence (2020:
4.0 pence) reflecting the strong earnings momentum of the business
• Strong cash flow performance strengthened the balance sheet with net
debt reducing by £30 million to £39 million.
The year has seen commitments to major capital investments in both
the core and the new Ibstock Futures business which create exciting
opportunities for growth in the medium term.
Tracey Graham
Chair of the Remuneration
Committee
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The year ahead
Given that the CEO and the CFO have now been in role for more than three
and half and two years respectively, the Committee conducted a detailed
review of their remuneration during the last quarter of 2021. This considered a
number of different factors including their individual growth, their experience
and strong performance in their respective roles; the need to ensure continued
retention and motivation at a critical time for the business, the need to ensure
greater alignment between management and shareholders through increased
share ownership; the desire for simplicity; and the strong and effective
leadership demonstrated during the COVID-19 pandemic.
Following completion of this review the Committee consulted with the
Company’s largest 20 shareholders in order to seek their views on the
Committee’s proposed approach to executive remuneration including the
use of long-term incentive awards and one off restricted share awards for
the Executive Directors.
Having considered all shareholder feedback from the consultation
the Committee determined that the Executive Directors should receive
an increase of 9.0% to their base salary with effect from 1 April 2022.
This reflected the fact that upon appointment, both Executive Director’s
recruitment packages had been set at the lower end of the market to reflect
their experience at the time of appointment and that this level of adjustment
was appropriate in the circumstances. This approach to Executive Director
salaries was viewed positively by those shareholders consulted and the
change to base salary will position the CEO around the lower quartile and the
CFO between the lower quartile and median of the Company’s sector peer
group, which is the Company’s primary peer group comprised of companies
in the same industry as Ibstock and of a similar size. The proposed increases
will still only position both Executive Directors around the lower quartile
relative to the Company’s secondary peer group, which is a general size
comparator group based on those companies that are of a similar market
capitalisation to Ibstock (excluding financial services and technology
companies and real estate investment trusts). There were no salary
increases proposed for the CEO and the CFO in the 2021 financial year.
The Committee also decided to make an exceptional long-term incentive
award of 200% of base salary to the executive directors in 2022.
The Committee feels that this award under the existing LTIP is appropriate
and will provide a link to the delivery of the Company’s ambitious growth
strategy and the value to shareholders upon its successful delivery.
This approach was supported by major shareholders and is within the
existing approved policy in contrast to a number of alternatives that were
also considered. The performance conditions for this proposed award will
include Relative Total Shareholder Return (TSR), Adjusted Earnings Per Share
(EPS*), Return On Capital Employed (ROCE*) and a new combined ESG
measure which will comprise targets that are aligned to the new strategy
including carbon reduction, diversity and new product development.
The Committee also decided to increase the weighting applied to this
ESG performance measure to 20% (from 10%) to reflect the increasing
importance of the delivery of our new ESG strategy, and Ibstock’s ambition
to be a net zero business by 2040. The 2022 grant of long-term incentives is
intended to be made in April 2022, after the publication of this report.
We intend the bonus scheme for 2022 to operate in a similar way as for the
prior year using the same performance measures and weightings. For more
details see page 104. The maximum opportunity for the 2022 bonus will
remain at 125% of salary but with mandatory deferral of a third of any
bonus earned into deferred shares for three years. We will continue to set
challenging performance targets, whilst retaining discretion to allow the
Committee to ensure the final outcome is appropriate to the overall
performance delivered. Details of the targets for the awards to be made in
2022 can be found on page 104.
During 2022 the Committee will again review workforce remuneration
and related policies to ensure that there continues to be consistency and
alignment with the approach taken for Executive Directors. The Committee
is kept informed of pay practices across the Group and spends a considerable
amount of time reviewing incentive structures, pension arrangements and
other matters for senior management below Board level and employees
more broadly. We are committed to ensuring that Ibstock operates
remuneration practices at all levels that are fair and appropriate.
Throughout the year there has been significant engagement and a number
of initiatives to support diversity and inclusion within the business. Full details
of workforce engagement can be found in the Responsible Business section
on page 38.
The Committee’s activities during the year are described in more detail later
in this report.
Shareholder engagement
The Board regularly engages with our shareholders in a two-way
communication process to maintain their support and to ensure we have a
transparent executive reward structure aligned to shareholder experience.
I would like to take this opportunity to thank shareholders for their
engagement with our remuneration consultation process this year. If you
would like to discuss any aspect of our remuneration strategy, I would
welcome your views. I look forward to receiving your support at our 2022
AGM, where I will be available to respond to any questions shareholders
may have on this report or in relation to any of the Committee activities.
In the meantime, if you would like to discuss any aspect of our Remuneration
Policy, please feel free to contact me through the Company Secretary, Nick Giles
(telephone: +44 (0)1530 261999 or email: company.secretariat@Ibstock.co.uk)
Tracey Graham
Chair of the Remuneration Committee
8 March 2022
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Alignment of Policy with requirements under the UK Corporate Governance Code
As indicated in the compliance statement on page 77, the Board believes that Ibstock has applied the principles of the UK Corporate Governance Code (the
Code) and complied with its relevant provisions during FY2021, with one exception. As noted on page 77 , the Committee will align the pension contribution
rate for the CEO to that of the wider workforce at the end of December 2022.
The Committee has considered the principles set out in Provision 40 of the Code and explains below how these have been addressed:
Clarity Remuneration arrangements should be transparent and promote
effective engagement with shareholders and the workforce.
• We proactively consult our shareholders on any changes to the
Remuneration Policy and seek their views.
• We regularly engage with the workforce and seek to bring
employee voice in the Boardroom.
• We always seek to improve the quality of disclosure in our DRR
and conduct an annual review of disclosure provided to add
relevant information to increase transparency.
Simplicity Remuneration structures should avoid complexity and their
rationale and operation should be easy to understand.
• The structure of the ADBP and LTIP are in line with standard UK
market practice and hence should be familiar to all stakeholders.
• Performance metrics are chosen to focus on the key operational
and financial performance objectives of the business.
Risk Remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks
that can arise from target-based incentive plans, are identified
and mitigated.
The Policy helps mitigate risks as follows:
The Committee has discretion to override formulaic outcomes in
instances where payouts do not accurately reflect the overall
performance of the business.
• Malus and clawback in incentive plan rules provide flexibility
to prevent excessive payouts in exceptional circumstances.
• Post-vesting holding periods and shareholding requirements
encourage focus on sustainable performance over the
long term.
• Incentive performance metrics are aligned with the
Company’s strategy.
• Maximum award limits are set within the Policy.
Predictability The range of possible values of rewards to individual directors
and any other limits or discretions should be identified and
explained at the time of approving the Policy.
• The Policy sets out potential levels of vesting available for
varying degrees of performance (threshold, on-target and
maximum) and calculation methodology.
• The DRR illustrates graphically the potential levels of
remuneration received by Executive Directors under various
performance scenarios.
Proportionality The link between individual awards, the delivery of strategy
and the long-term performance of the Company should be
clear. Outcomes should not reward poor performance.
• The ADBP and LTIP reward Executive Directors for delivering
the Company’s strategy.
• The use of deferral and multi-year performance periods
ensure Executive Directors are focused on long-term
sustainable performance.
• The Committee’s discretion to adjust outcomes prevents
Executive Directors from being rewarded for poor underlying
business performance.
Alignment
to culture
Incentive schemes should drive behaviours consistent with
Company purpose, values and strategy.
• Alignment of our incentives structure to strategy is illustrated
on page 101. Strategic priorities are supported by the
Company’s culture.
• In addition, the Board believes that our remuneration
structure is structured to drive the right culture and
performance and is aligned with the Company’s values.
ANNUAL STATEMENT CONTINUED
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Directors’ Remuneration Policy
Introduction
In accordance with the remuneration reporting regulations, the Directors’ Remuneration Policy (the Policy) as set out below will become formally effective at
the AGM on 21 April 2022, subject to shareholder approval and will apply for the period of three years from the date of approval.
Our Remuneration Policy and its link to our Group strategy
The key elements of the Company’s strategy and how its successful implementation is linked to the Company’s remuneration are set out in the following table.
Strategic priorities
Remuneration Policy Sustain
Sustainable high
performance is at the
heart of what we do.
We are focused on three
priorities: health and
safety; operational
excellence; and
environmental
performance.
Innovate
Strengthening our
market-leading position.
Our initiatives are centred
on three specific areas:
product innovation;
customer experience; and
digital transformation.
Grow
Clear path for growth and
value creation – combining
expansion in our core
business, alongside
diversified growth.
Equity ownership
and retention
of shares.
Retain and reward
the Executive
team to deliver
the strategy.
Annual bonus
The maximum bonus
(including any part of the
bonus deferred into shares)
deliverable under the
ADBP will not exceed 125%
of a participant’s annual
base salary.
Non-financial measures
target customer
satisfaction and Health
and Safety in the
workplace and therefore
support this objective.
Adjusted EBITDA*,
Adjusted operating
cash flow*
The efficient development
of innovative products
measured through
adjusted EBITDA* will be
reflected in increased
profitability and adjusted
operating cash flow*.
Adjusted EBITDA*,
Adjusted operating
cash flow*
The success in maximising
operational excellence
will be reflected through
increased profitability
and cash flow.
LTIP
Maximum annual award is
normally 150% of salary.
Awards will vest at the end
of three years with a further
two-year holding period.
For 2022, the performance
conditions for awards are:
• Comparative Total
Shareholder Return (TSR)
(30%);
• Adjusted Earnings per
Share* (EPS) growth
(25%)*;
• Return on Capital
Employed* (ROCE) (25%);
and
• ES G (20%)
ESG
Achievement of the
Group’s key targets
contained in its new ESG
strategy. This will help
contribute to our objectives
of being the sector leader
in sustainability matters.
ROCE*, TSR
The generation of cash
and profit growth targeted
by the annual bonus will
help enhance the value of
the Company which will
be measured through the
success of the Company’s
TSR performance against
its comparators and
strong ROCE*.
ROCE*, Adjusted EPS*,
TSR
The success in maximising
operational excellence will
be measured through the
long-term adjusted EPS*
growth targeted by the LTIP
and sustained strong ROCE*.
In addition, sustained value
generation will be reflected
in the shareholder returns
of the Company which
will be measured through
the Company’s TSR
performance under the LTIP.
Sharesave Plan
(Sharesave)
Encourages employee participation in our success and encourages retention.
Minimum shareholding
requirements
200% of salary.
Creates alignment with our shareholders.
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DIRECTORS’ REMUNERATION POLICY CONTINUED
Remuneration Policy Table
The 2022 revised Remuneration Policy that will be put to a vote at the AGM on 21 April 2022 is outlined below.
Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
Base salary Provides a base level
of remuneration to
support recruitment
and retention of
Executive Directors
with the necessary
experience and
expertise to deliver
the Group’s strategy.
An Executive Director’s
base salary is set on
appointment and
reviewed annually or
when there is a change in
position or responsibility.
When determining an
appropriate level of
salary, the Committee
considers:
• remuneration
practices within the
Group;
• the general
performance of the
Group;
• salaries within the
ranges paid by the
companies in the
comparator group
used for remuneration
benchmarking;
• any change in scope,
role and
responsibilities; and
• the economic
environment.
The Committee ensures that
maximum salary levels are
positioned in line with
companies of a similar size to
Ibstock, validated against
companies operating in a
similar sector. The companies
in the comparator group are
organisations in the FTSE 250
excluding financial services,
real estate and equity
investment trusts.
The Committee intends to
review the comparator groups
each year and may add or
remove companies from the
group as it considers
appropriate. Any changes to
the comparator group will be
in the section headed
Implementation of
Remuneration Policy, in the
following financial year.
In general, salary increases for
Executive Directors will be in
line with the increase for
employees across the Group.
Individuals who are recruited
or promoted to the Board may,
on occasion, have their
salaries set below the targeted
policy level until they become
established in their role.
In such cases subsequent
increases in salary may be
higher than the general rises
for employees until the target
positioning is achieved.
The Company will set out in
the section headed
Implementation of
Remuneration Policy, in the
following financial year, the
salaries for that year for each
of the Executive Directors.
None None
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Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
Benefits Provides a benefits
package in line with
practice relative to its
comparator group to
enable the Company
to recruit and retain
Executive Directors
with the experience
and expertise to
deliver the Group’s
strategy.
The Executive Directors
receive a company car or
car allowance, private
health cover and death
in service cover.
The Committee
recognises the need
to maintain suitable
flexibility in the benefits
provided to ensure it
is able to support the
objective of attracting
and retaining personnel
in order to deliver the
Group strategy.
Additional benefits
may be offered such
as relocation allowances
on recruitment.
The maximum will be set
at the cost of providing
the benefits described.
See description of benefits in
the previous column.
The maximum will depend
on the cost of providing the
relevant benefits.
The Company has monitoring
practices in place to ensure
spend on benefits is efficient.
None None
Pensions Provides retirement
benefit to enable the
Company to recruit
and retain Executive
Directors with the
experience and
expertise to deliver
the Group’s strategy.
The Company operates
a defined contribution
pension or salary
supplement
arrangement for
Executive Directors.
The maximum contribution
into the defined contribution
plan or salary supplement in
lieu of pension is 10% of gross
basic salary for new joiners.
None Our previous policy
stated that new
executive directors
would receive 10%
contributions into
a pension scheme.
The CEO’s pension
allowance will
reduce to 10%
from 1 January
2023.
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DIRECTORS’ REMUNERATION POLICY CONTINUED
Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
ADBP The ADBP provides a
significant incentive
to the Executive
Directors linked to
achievement in
delivering goals that
are closely aligned
with the Company’s
strategy and the
creation of value for
shareholders.
In particular, the
ADBP supports the
Company’s objectives
allowing the setting
of annual targets
based on the
business’s strategy at
the time, meaning
that a wider range of
performance metrics
can be used that are
relevant and
achievable. Part of
the ADBP is deferred
into shares.
The advantage of
deferral is:
• increased
alignment
between
Executives and
shareholders
created through
deferral and the
increased equity
stake of
management in
the Company; and
• amounts deferred
in shares are
subject to a
Director’s
continued
employment,
which provides an
effective lock-in.
The maximum bonus
(including any part of the
bonus deferred into an
ADBP Award) deliverable
under the ADBP will not
exceed 125% of a
participant’s annual base
salary. The Board will
determine the bonus to
be delivered following
the end of the relevant
financial year.
The Company will set out
in the section headed
Implementation of
Remuneration Policy, in
the following financial
year, the nature of the
targets and their
weightings for each year.
Details of the
performance conditions,
targets and their level of
satisfaction for the year
being reported on will be
set out in the Annual
Report on Remuneration.
The Committee will
determine each year
what part of the bonus
earned under the ADBP is
provided as an award of
deferred shares.
The minimum value of
deferred shares is
one-third of the bonus
earned. The main terms
of these awards are:
• minimum deferral
period of three years,
during which no
performance
conditions will apply;
and
• the participant’s
continued
employment at the
end of the deferral
period.
The Committee may
award dividend
equivalents in shares to
plan participants to the
extent that they vest.
The maximum bonus
(including any part of the
bonus deferred into an ADBP
Award) deliverable under the
ADBP will not exceed 125%
of a participant’s annual
base salary. Percentage of
maximum bonus earned for
levels of performance:
• Threshold: 0%
• On-target: 50%
• Maximum: 100%.
The annual bonus will be paid
in cash and deferred shares.
An award under the ADBP is
subject to satisfying financial
and strategic/operational
performance/personal
performance conditions and
targets measured over a period
of one financial year. A minimum
of 50% of the targets will be
financial. The Board will
determine the bonus to be
delivered following the end of the
relevant financial year.
The Committee is of the opinion
that given the commercial
sensitivity arising in relation to
the detailed financial targets
used for the annual bonus,
disclosing precise targets for the
ADBP in advance would not be in
shareholders’ interests.
Actual targets, performance
achieved and awards made will
be published at the end of the
relevant performance period so
shareholders can fully assess the
basis for any pay-outs under the
annual bonus. The Committee
has discretion to:
• in exceptional circumstances
change the performance
measures and targets and the
weighting attached to the
performance measures and
targets part-way through a
performance year if there is a
significant and material event
which causes the Committee
to believe the original
measures, weightings and
targets are no longer
appropriate; and
• make downward or upward
adjustments to the amount
of bonus earned resulting
from the application of the
performance measures, if the
Committee believe that the
bonus outcomes are not a fair
and accurate reflection of
overall business performance.
Any adjustments or discretion
applied by the Committee will be
fully disclosed in the following
year’s Remuneration Report.
The Committee will consult with
leading investors if appropriate
before any exercise of discretion
to increase the bonus outcome.
The ADBP contains clawback and
malus provisions.
None
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Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
LTIP The purpose of the
LTIP is to incentivise
and reward Executive
Directors in relation
to long-term
performance and
achievement of
Group strategy.
This will better align
Executive Directors’
interests with the
long-term interests
of the Group and
act as a retention
mechanism.
Awards are granted
annually to Executive
Directors in the form of a
conditional share award,
nil-cost option or
restricted share award.
Details of the
performance conditions
for grants made in the
year will be set out in the
Annual Report on
Remuneration and for
future grants in the
section headed
Implementation of
Remuneration Policy, in
the future financial year.
These will vest at the end
of a three-year period
subject to:
• the Executive
Director’s continued
employment at the
date of vesting; and
• satisfaction of the
performance
conditions.
The Committee may
award dividend
equivalents in shares
on awards to the
extent that these vest.
A post-vesting holding
period of two years will
apply for the LTIP.
The normal maximum value is
set at 150% of salary per
annum based on the market
value at the date of grant set
in accordance with the rules of
the LTIP. In exceptional
circumstances the Committee
may grant an award with a
maximum of 200% of salary.
25% of the award will vest for
threshold performance. 100%
of the award will vest for
maximum performance.
There is straight-line vesting
between these points.
The performance conditions
for the 2022 LTIP awards
are adjusted EPS* growth,
comparative TSR, ROCE* and
ESG. The Committee may
change the balance of the
measures, or use different
measures for subsequent awards,
as appropriate. No material
change will be made to the type
of performance conditions
without prior shareholder
consultation. The Committee
has the discretion to:
• in exceptional circumstances,
vary, substitute or waive the
performance conditions
applying to LTIP awards if the
Board considers it appropriate
and that the new performance
conditions are deemed
reasonable and are not
materially less difficult to
satisfy than the original
conditions; and
• make downward or upward
adjustments to the vesting of
the LTIP resulting from the
application of the
performance measures if the
Committee believes that the
outcomes are not a fair and
accurate reflection of overall
business performance.
Any adjustments or discretion
applied by the Committee will
be fully disclosed in the
following year’s Remuneration
Report. The Committee will
consult with leading investors
if appropriate before any
exercise of its discretion to
increase the vesting outcome.
The LTIP contains clawback
and malus provisions.
The Relative Total Shareholder
Return comparator group will
include comparatively sized
construction and building
materials sector companies
The Committee may change
the balance of the measures,
or use different measures for
subsequent awards, as
appropriate.
None
Share
Incentive
Plan (SIP)
The SIP is an
all-employee share
ownership plan which
has been designed to
encourage all
employees to
become shareholders
in the Company and
thereby align their
interests with
shareholders.
The Company operates a
SIP in which the Executive
Directors are eligible to
participate (which is in line
with HMRC legislation and
is open to all eligible staff).
The Executive Directors
shall be entitled to
participate in any other all
employee arrangement
implemented by the
Company.
Maximum opportunity for
awards and purchases are kept
in line with HMRC limits.
The Company in accordance with
the legislation may impose
objective conditions on
participation in the SIP for
employees.
None
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DIRECTORS’ REMUNERATION POLICY CONTINUED
Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
Sharesave The Sharesave Plan is
an all-employee
savings related share
option plan which has
been designed to
enable UK employees
to acquire an interest
in the Company and
thus align their
interests with
shareholders.
The Company operates a
Sharesave Plan in which
the Executive Directors
are eligible to participate
(which is in line with UK
legislation and is open to
all eligible staff).
To obtain an option an
eligible individual must
agree to save a fixed
monthly amount for
three or five years up to
the maximum monthly
amount under HMRC
limits. The amount saved
will determine the
number of shares over
which the option is
granted. Options may be
exercised in a six-month
period at the maturity
of a three- or five-year
savings period, subject
to continued service.
Maximum opportunity for
awards and purchases are kept
in line with HMRC limits.
The Company, in accordance
with the legislation, may impose
objective conditions
on participation in the plans
for employees.
None
Minimum
shareholding
requirement
(MSR)
Executive Directors are expected to build up over a five-year period and then subsequently hold a shareholding equivalent to 200% of
base salary. This will include deferred shares at their net-of-tax value and shares subject to a holding period at their full value. Adherence to
these guidelines is a condition of continued participation in the equity incentive arrangements.
In addition, a post-cessation minimum shareholding requirement will apply to Executive Directors who leave the Company. Leavers will
have a requirement to hold 200% of their pre-cessation shareholding requirement for two years from leaving.
Changes
from previous
Policy
Post-cessation shareholding requirement (PCSR): The Committee intends to extend the current approach such that departing
Executive Directors are required to hold the lower of their actual shareholding or 100% of their MSR for 24 months from the date of
leaving. The current PCSR requires Executives to hold 100% of their MSR for 12 months but this reduces down to 50% for the next
12 months.
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Remuneration Policy for Non-Executive Directors
Element of
remuneration
Link to strategic
objectives
Operation Maximum opportunity Performance metrics Changes from
previous policy
Non-
Executive
Director and
Chairman
fees
Provides a level of
fees to support
recruitment and
retention of
Non-Executive
Directors and a
Chairman with the
necessary experience
to advise and assist
with establishing and
monitoring the
Group’s strategic
objectives.
The Board is responsible
for setting the
remuneration of the
Non-Executive Directors.
The Remuneration
Committee is responsible
for setting the
Chairman’s fees.
Non-Executive Directors
are paid an annual fee
and additional fees on
appointment as Senior
Independent Director or
as Chair of Board
Committees.
The Chairman does not
receive any additional
fees for membership of
Committees. Fees are
reviewed annually based
on equivalent roles in the
comparator group used
to review salaries paid to
the Executive Directors.
Fees are set at broadly
the median of the
comparator group.
Non-Executive Directors
and the Chairman do not
participate in any
variable remuneration or
benefits arrangements
other than reimbursed
expenses.
The fees for Non-Executive
Directors and the Chairman are
set at broadly the median of
the comparator group.
In general the level of fee
increase for the Non-Executive
Directors and the Chairman will
be set taking account of any
change in responsibility and will
take into account the general
rise in salaries across the UK
workforce. The Company will
pay reasonable expenses
incurred by the Non-Executive
Directors and Chairman and
may settle any tax incurred in
relation to these.
None None
Performance conditions and targets
Performance measures for the ADBP and the LTIP are chosen to ensure alignment with strategic priorities (see table on page 101) and delivery against key
financial and operational objectives. Targets are set by reference to the approved budget, market practice and analysts’ expectations.
Differences in policy from the wider employee population
The Company aims to provide a remuneration package for all employees that is market competitive and operates a similar core structure as for the Executive
Directors. The Executive Directors’ annual scorecard is devolved down into the management line with an increasing emphasis on divisional performance.
All employees are encouraged to participate in the all employee share plans operated by the Company, ensuring a consistent reward framework.
Detailed description of the cascade of incentives is presented on page 113.
Malus and clawback
The ADBP and the LTIP include best practice malus and clawback provisions. Malus is the adjustment of unpaid bonus and deferred share awards under the
ADBP and outstanding LTIP awards as a result of the occurrence of one or more circumstances listed below. The adjustment may result in the value being
reduced to nil. Clawback is the recovery of payments or vested awards under the ADBP and vested LTIP awards as a result of the occurrence of one or more
circumstances listed below. Clawback may apply to all or part of a participant’s award and may be effected, among other means, by requiring the transfer of
shares, payment of cash or reduction of awards or bonuses. The circumstances in which malus and clawback could apply are as follows:
• discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any Group company;
• the assessment of any performance condition or condition in respect of an ADBP and LTIP Award was based on error, or inaccurate or misleading
information;
• the discovery that any information used to determine the cash payment under the ADBP or the number of shares subject to an ADBP or LTIP Award was
based on error, or inaccurate or misleading information;
• action or conduct of a participant which amounts to fraud or gross misconduct; or
• events or the behaviour of a participant which have led to the censure of a Group company by a regulatory authority or have had a significant detrimental
impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant was responsible for the censure or
reputational damage and that the censure or reputational damage is attributable to the participant.
Annual Bonus Deferred Bonus Long Term Incentive Plan
Malus Up to the date of payment of a cash bonus To the end of the three-year deferral period To the end of the three-year vesting period
Clawback Three years post the bonus determination N/A Two years post-vesting
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DIRECTORS’ REMUNERATION POLICY CONTINUED
Discretion
The Committee has discretion in several areas of policy as set out in this report.
The Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set out in those rules.
In addition, the Committee has the discretion to amend Policy with regard to minor or administrative matters where it would be, in the opinion of the
Committee, disproportionate to seek or await shareholder approval.
It is the Committee’s intention that commitments made in line with its current Policy and any policies prior to Admission will be honoured. Those areas that
differ are being addressed to bring them into line with the proposed Policy, where appropriate.
Recruitment policy
The Company’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive Directors, as set out in
the Policy table. The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred candidate with the appropriate
calibre and experience needed for the role. In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder
sentiment regarding one-off or enhanced short-term or long-term incentive payments as well as giving consideration for the appropriateness of any
performance measures associated with an award.
The Company’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below:
Remuneration element Recruitment policy
Salary, benefits
and pension
Salary and benefit levels will be set in line with the policy for existing Executive Directors. New promotes and recruits to the Board
may on occasion have their salaries set below the targeted policy level while they become established in their role. In such cases
salary increases may be higher than the increase for the general workforce of the Company until the target market positioning is
achieved. Maximum pension contribution for new recruits will be set at 10% of salary.
Annual Bonus Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed
125% of salary.
LTIP Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed
150% of salary in normal circumstances and 200% of salary in exceptional circumstances.
Maximum variable
remuneration
The maximum variable remuneration which may be granted in normal circumstances is 275% of salary (325% of salary if the
maximum LTIP grant is made).
‘Buyout” of
incentives forfeited
on cessation of
employment
Where the Committee determines that the individual circumstances of recruitment justify the provision of a buyout, the equivalent
value of any incentives that will be forfeited on cessation of an Executive Director’s previous employment will be calculated taking
into account the following: – the proportion of the performance period completed on the date of the Executive Director’s cessation
of employment; – the performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied;
and – any other terms and conditions having a material effect on their value (lapsed value). The Committee may then grant up to
the same value as the lapsed value, where possible, under the Company’s incentive plans. To the extent that it was not possible or
practical to provide the buyout within the terms of the Company’s existing incentive plans, a bespoke arrangement would be used.
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there would be no retrospective
application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration
package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned. These would be disclosed to
shareholders in the Remuneration Report for the relevant financial year.
The Company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to current Non-Executive Directors.
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Payment for loss of office
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to
be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There is no agreement between the Company
and its Executive Directors or employees, providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of
an Executive Director’s office or employment.
Remuneration element Treatment on cessation of employment
Salary, benefits
and pension
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Remuneration element Good leaver
1
reason Other reason Discretion
ADBP cash awards Performance conditions will
be measured at the bonus
measurement date. Bonus will
normally be pro-rated for the
period worked during the
financial year.
No bonus payable for
year of cessation.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained
in full to shareholders; and
• to determine whether to pro-rate the bonus to time.
The Committee’s normal policy is that it will pro-rate bonus for time.
It is the Committee’s intention to use discretion to not pro-rate in
circumstances where there is an appropriate business case which will
be explained in full to shareholders.
ADBP Share awards All subsisting deferred share
awards will vest.
Lapse of any unvested
deferred share awards.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained
in full to shareholders;
• to vest deferred shares at the end of the original deferral period or
at the date of cessation. The Committee will make this
determination depending on the type of good leaver reason
resulting in the cessation; and
• to determine whether to pro-rate the maximum number of shares
to the time from the date of grant to the date of cessation.
The Committee’s normal policy is that it will not pro-rate awards for
time. The Committee will determine whether or not to pro-rate based
on the circumstances of the Executive Director’s departure.
LTIP Pro-rated to time and
performance in respect of each
subsisting LTIP award.
Lapse of any unvested
LTIP awards.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained
in full to shareholders;
• to measure performance over the original performance period or at
the date of cessation. The Committee will make this determination
depending on the type of good leaver reason resulting in the
cessation; and
• to determine whether to pro-rate the maximum number of shares
to the time from the date of grant to the date of cessation.
The Committee’s normal policy is that it will pro-rate awards for time.
It is the Committee’s intention to use discretion to not pro-rate in
circumstances where there is an appropriate business case which will
be explained in full to shareholders.
Other contractual
obligations
There are no other contractual provisions other than those set out above agreed.
1 A good leaver reason is defined as cessation in the following circumstances: – death; – ill-health; – injury or disability; – redundancy; – retirement; – employing company ceasing to be a Group
company; – transfer of employment to a company which is not a Group company; and – at the discretion of the Committee (as described above). Cessation of employment in circumstances
other than those set out above is cessation for other reasons.
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DIRECTORS’ REMUNERATION POLICY CONTINUED
Change of control
The Committee’s policy on the vesting of incentives on a change of control is summarised below:
Name of incentive plan Change of control Discretion
ADBP cash awards Pro-rated to time and performance to the date of the change
of control.
The Committee has discretion regarding whether to pro-rate
the bonus to time. The Committee’s normal policy is that it will
pro-rate the bonus for time. It is the Committee’s intention to use
its discretion to not pro-rate in circumstances only where there is
an appropriate business case which will be explained in full to
shareholders.
ADBP share awards Subsisting deferred share awards will vest on a change of control. The Committee has discretion regarding whether to pro-rate
the award to time. The Committee’s normal policy is that it will
not pro-rate awards for time. The Committee will make this
determination depending on the circumstances of the change
of control.
LTIP The number of shares subject to subsisting LTIP awards will vest
on a change of control, pro-rated to time and performance.
The Committee will determine the proportion of the LTIP award
which vests taking into account, among other factors, the period
of time the LTIP award has been held by the participant and the
extent to which any applicable performance conditions have
been satisfied at that time.
Illustrations of the application of the Remuneration Policy
The charts below illustrate the total remuneration that would be paid to each of the Executive Directors, based on salaries at the start of the 2022 financial
year, under four different performance scenarios: (i) minimum; (ii) on-target; (iii) maximum; and (iv) maximum including the impact of a 50% increase in share
price on the LTIP outcome. In addition, the chart shows the actual single figure of remuneration paid in respect of 2021.
Element Minimum On-target Maximum Maximum including share price appreciation
Fixed (salary
1
, benefits and pension
2
) Included Included Included Included
Annual bonus (125% of salary) Not included 50% of maximum 100% of maximum 100% of maximum
LTIP (150% of salary)
3
Not included 50% of maximum 100% of maximum 100% of maximum
Share price gain (50% over 3 years) Not included Not included Not included 50% of the maximum LTIP value
1 Salary is Full-Year 2022 base salary following the increase approved by the Remuneration Committee in March 2022. This increase is effective from 1 April 2022.
2 Based on 2021 benefits payments and pension values as per the 2019 Policy.
3 An exceptional grant of 200% of base salary will be awarded to both Executive Directors in 2022 following the completion of the consultation exercise with Ibstock’s top 20 shareholders.
Minimum
Chris McLeish (CFO)
£’000
On-Target Maximum Maximum
including
share price
appreciation
Actual 2021
single figure
of remuneration
£383
£383
£383 £383 £383 £350
£208
£417 £417
£250
£500 £500
£1,292
£1,197
£1,550
£716
£250
1500
1000
0
100% 47% 31% 51%
£365 49%
26%
24%
31% 26%
29%
38% 32%
16%
Fixed Annual Variable Multiple Reporting Periods Share Price Appreciation
500
Minimum
Joe Hudson (CEO)
£’000
On-Target Maximum Maximum
including
share price
appreciation
Actual 2021
single figure
of remuneration
£611
£611
£611 £611 £611
£561
£543
£310
£620 £620
£372
£744 £744
£1,292
£1,974
£2,346
£1,104
£372
2500
2000
1500
1000
500
0
100% 47% 31%
51%
49%
26%
24%
31% 26%
29%
38% 32%
16%
Fixed Annual Variable Multiple Reporting Periods Share Price Appreciation
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Statement of considerations of employment conditions elsewhere in
the Company
The Policy for all employees is determined in terms of best practice and
ensuring that the Company is able to attract and retain the best people.
This principle is followed in the development of our Policy.
The remuneration strategy of the Company has been designed to ensure all
employees share in its success through performance-related remuneration
and share ownership. Awards under both the ADBP and the LTIP will provide
alignment between senior leaders and our shareholders based on overall
corporate performance of the business.
For all UK employees, the Company has in place a Sharesave and a Share
incentive Plan. Currently, under these Plans all UK employees have the
opportunity to purchase shares in the Company subject to certain
restrictions. We provide detailed information on the pay arrangements
for the wider workforce from page 112.
The Committee’s remit extends down to Executive and senior management
for which it recommends and monitors the level and structure of remuneration.
While the Company does not directly consult with employees as part of the
process of reviewing executive pay and formulating the Policy, when making
decisions in relation to the structure of executive pay the Committee takes into
account conditions elsewhere in the Company.
The table on page 113 demonstrates how key objectives are reflected
consistently in plans operating at all levels within the Company.
Statement of consideration of shareholder views
The Committee takes the views of the shareholders seriously and
these views are taken into account in shaping Policy and practice.
Shareholder views are considered when evaluating and setting the
remuneration strategy and the Committee commits to consulting with
key shareholders prior to any significant changes to its Policy.
Following the Company’s review of policy during Q4 of 2021, we are pleased
to be able to report that the major shareholders consulted and who expressed
views were supportive of the proposed Policy and its operation.
In addition, we will continue to engage with our shareholders in a two-way
communication process to maintain their support and to ensure we have a
transparent executive reward structure aligned to shareholder experience.
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Annual Report on Remuneration
Company remuneration at Ibstock
Fairness, diversity and wider workforce considerations
Ibstock is committed to creating an inclusive working environment and
rewarding our employees throughout the organisation in a fair manner.
In making decisions on executive pay, the Committee considers wider
workforce remuneration and conditions. We believe that employees
throughout the Company should be able to share in the Company’s success.
We have, on three occasions operated a very popular Sharesave plan and we
will continue to investigate additional opportunities for our employees to
share in our success going forwards. We also believe that employees should
have the opportunity to save for their futures and to this end we operate
defined contribution Group personal pension plans into which the Company
and our employees make contributions.
As part of our commitment to fairness and in line with the evolving reporting
regulations, for the fifth year we have included this section into our Annual
Report on Remuneration which sets out more information on our wider
workforce pay conditions, our CEO to employee pay ratio, our Gender Pay
statistics, and our Diversity and Inclusion Policy. Whilst we recognise there is
much work still to do, we believe that transparency is an important first step
towards making improvements in relation to these important issues.
Membership meetings and attendance of the Committee
Membership comprises the Group’s Chairman and the independent
Non-Executive Directors with support from the Group’s Company Secretary.
Details of meeting attendance can be found on page 80. The Committee
also receives assistance from the Group HR Director who attends meetings
by invitation, except when issues relating to her own remuneration are being
discussed. The CEO and CFO attend by invitation on occasions.
Role and responsibilities
The Board has delegated to the Committee, under agreed terms of
reference, responsibility for the Policy and for determining specific packages
for the Executive Directors and members of the ELT. The Company consults
with key shareholders in respect of the Policy and the introduction of new
incentive arrangements. The annual review of the terms of reference was
conducted at the December meeting and these are available on the
Company’s website.
Our main responsibilities are:
• To determine and agree with the Board the Policy for the Executive
Directors and the ELT, including the Group Company Secretary;
• To review the ongoing appropriateness and relevance of the Policy, taking
into consideration the UK Corporate Governance Code 2018 (the Code)
and associated guidance;
• To ensure that the Policy drives behaviours consistent with Company
purpose, values and strategy;
• To ensure that the Policy promotes effective engagement with
shareholders and the workforce;
• To ensure remuneration structures and their operation are simple and
easy to understand;
• To ensure that remuneration arrangements prevent excessive rewards and
do not reward poor performance;
• To review wider workforce remuneration and related policies;
• To review and approve the gender pay gap report on an annual basis;
• To engage with the workforce regarding the Policy and wider Company
pay policy; and
• To review any major changes in employee benefit structures throughout
the Company or Group and to administer all aspects of any share scheme.
On the following pages we provide a detailed description of the 2021
Executive Directors’ pay outcomes and supporting information.
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Area Considerations
Competitive
pay and cascade
of incentives
The Committee ensures that pay is fair throughout the Company and makes decisions in relation to the structure of executive pay
in the context of the cascade of incentives throughout the business. The Committee’s remit extends down to the senior executives,
senior management and other managers and employees for which it recommends and monitors the level and structure of
remuneration.
Level
Participation
in bonus
Participation
in LTIP
Participation in
Share Option Plan/SMSP
Participation
in Sharesave
Executive Directors
Senior executives
Senior managers
Managers
Employees
Area Considerations
Remuneration
and its link to
the Company’s
objectives
Plan Purpose Eligibility
Objectives
Financial
performance
Strategic and
operational
goals
Long-term
value
creation
(encouraged
through
equity
retention)
Share
ownership
Sharesave To broaden share ownership
and share in corporate success
over the medium term
All employees
Annual bonus Incentivise and reward
short-term performance.
At senior level an element of
bonus may be deferred in shares
Executive Directors,
senior executives, senior
managers, managers
and employees
Plan Purpose Eligibility
Objectives
Financial
performance
Strategic and
operational
goals
Long-term
value
creation
(encouraged
through
equity
retention)
Share
ownership
Share Option
Plan/SMSP
Broaden share ownership,
alignment, retention,
long-term performance
Senior executives and
senior management
LTIP Incentivise and reward
long-term performance
Executive Directors
and senior executives
The Company uses a number of remuneration comparison measurements to assess the fairness of pay structures across the Group.
Detailed disclosure of our approach to fairness, diversity and wider workforce considerations is presented above on this page.
In setting the Policy for Directors, the pay and conditions of other employees of the Company are taken into account to ensure
consistency of approach throughout the Company, including data on the remuneration structure for management level tiers below
the Executive Directors, average base salary increases awarded to the overall employee population and the cascade of pay
structures throughout the business.
As a Committee, we are keenly aware of the sensitivity of shareholders and the wider public regarding executive remuneration.
The Committee will continue to monitor external remuneration developments closely and intends to embrace these changes and
continue to comply with best practice reporting requirements as they come into force.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Area Considerations
Pay comparisons CEO pay ratio
Year Method
Median
ratio
Lower
Quartile
ratio
Upper
Quartile
ratio
2018 Option A 30:1 24:1 19:1
2019 Option A 43:1 35:1 23:1
2020 Option A 21:1 16:1 13:1
2021 Option A 41:1 30:1 25:1
In line with the remuneration reporting regulations, we report the ratio of CEO single figure pay to the pay of our employees for
the third year in 2021. As in 2020, we have calculated the ratios set out above using Option A, as described in the Directors’
Remuneration Reporting Regulations, as we believe that this reflects the most comprehensive approach.
The ratios were determined as at 31 December 2021.
CEO pay in the last seven years
The table below sets out the single total figure of remuneration and incentive outcomes for the Director holding the post of CEO in
each year since Ibstock listed on the London Stock Exchange in 2015.
Wayne Sheppard
2
Joe Hudson
3
Year
2015
£’000
2016
£’000
2017
£’000
2018
£’000
2018
£’000
2019
£’000
2020
£’000
2021
£’000
Single figure remuneration 773 789 906 184 592 737 540 1.104
% of maximum annual
bonus earned
100% 33% 58% 32.5% 32.5% 33.1% 0.0% 95.5%
% of maximum LTIP
awards vesting
1
N/A N/A N/A N/A N/A N/A 0% 0%
1 Following the IPO in 2015, no award under the LTIP vested in the period 2016 to 2018.
2 Wayne Sheppard stepped down as CEO and Board Director on 4 April 2018 and his 2018 remuneration has been pro-rated to reflect this.
3 Joe Hudson became CEO on 4 April 2018. His single figure only includes compensation paid to him in 2018 in his capacity as the CEO from 4 April to
31 December 2018 and doesn’t include compensation paid to him as CEO designate before 4 April 2018.
Percentage change in CEO’s remuneration
The table below shows how the percentage change in the CEO’s salary, benefits and bonus between 2020 and 2021 compares
with the percentage change in the average of each of those components of pay for the employees.
Salary Taxable benefits Bonus
Year
2020
£’000
2021
£’000
Percentage
change
2020
£’000
2021
£’000
Percentage
change
2020
£’000
2021
£’000
Percentage
change
CEO
1
432 455 5.3% 17 16 (5.4)% 0 543 N/A
Average per eligible
employee
2
37 39 3.9% 7 7 3.8% 0 22 N/A
1 The CEO’s remuneration disclosed in the table above has been calculated to take into account base salary and taxable benefits excluding pension and annual
bonus (including any amount deferred).
2 The pay for eligible employees in continuing operations has been calculated using the following elements: annual salary – base salary and standard monthly
allowances; taxable benefits – car allowance and private medical insurance premiums; annual bonus – company bonus, management bonus, commission and
incentive payments.
Area Considerations
Gender pay The UK Government Equalities Office legislation requires employers with 250 or more employees in the UK to disclose annually
information on their gender pay gap. The fifth disclosure of the pay gap is based on amounts paid in the year to 5 April 2021.
The bonus gap is based on incentives paid in respect of the year to 5 April 2021. As Ibstock Brick is the largest employing entity,
we have chosen to report these figures in this report. We are committed to regular analysis and monitoring of pay where we will
continue to work to remedy any gap that we have.
The mean gender pay gap at Ibstock Brick is 7% which is lower than the UK average of 15.5%. We continue to work hard to
encourage more females into the business. Our current employee population reflects the traditional nature of the industry, with
85% of roles being occupied by men, including a high percentage of males employed in factory based production roles. This can
clearly be seen in the quartiles set out below, which show the number of male and female employees in each pay quartile:
Quartile A (lowest) 1 Male: 70%
2 Female: 30%
Quartile B 1 Male: 89%
2 Female: 11%
Quartile C 1 Male: 92%
2 Female: 8%
Quartile D (highest) 1 Male: 88%
2 Female: 12%
Note: The figures quoted above are for Ibstock Brick Limited, a subsidiary of Ibstock plc, only.
Area Considerations
Diversity policy We believe the diversity of our people strengthens our judgement, independence and decision-making. We also know that
attracting a more diverse workforce widens our pool of talent which is key for our succession planning and sustainable growth.
Our commitment is backed by our Diversity and Inclusion Policy and will be supported during the coming year by the commitment
to appoint a senior sponsor in the business for diversity and inclusion.
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Informing the Committee on the wider workforce
To build the Committee’s understanding of reward arrangements applicable to the wider workforce, the Committee was provided with data on the
remuneration arrangements for all employees across the Group. The Committee annually reviews the pay proposals for the senior executives/senior
management team, including annual bonus targets and outcomes and long-term incentives, and is aware of the pay increases awarded to the broader
employee population. The Committee uses this information to ensure consistency and fairness of approach throughout the Company in relation to
remuneration.
Workforce engagement
The Group operate an employee forum called The Listening Post. Under the initiative the CEO and one of the Non-Executive Directors, together with certain
members of the ELT, meets regularly during the year with nominated employee champions elected from all parts of the business to discuss the Group, how it is
performing and to identify potential areas for improvement. During the year feedback from our employees through The Listening Post and through surveys
has included topics including remuneration. Further information can be found in the Responsible Business section on page 39.
Remuneration justification
The Committee is comfortable that the pay relativity reference points set out above provide justification that the application of the Policy is appropriate.
Application of the Policy in FY 2021
Single total figure of remuneration (audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of the financial year to 31 December 2021.
Figures provided have been calculated in accordance with the UK disclosure requirements: the Large and Medium-Sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (Schedule 8 to the Regulations).
Executive Directors
Year Fixed remuneration Variable remuneration
TotalSalary/Fees
Taxable
benefits
1
Pension Sub-total ADBP Other LTIP Sub- total
Joe Hudson (CEO) 2021 £454,793 £15,627 £90,959 £561,379 £543,023 – – £543,023 £1,104,401
2020 £432,053 £16,513 £90,959 £539,524 – – – – £539,524
Chris McLeish (CFO) 2021 £306,000 £15,817 £28,338 £350,157 £365,364 – – £365,364 £715,519
2020 £290,700 £15,505 £30,600 £336,805 – – – – £336,805
Kate Tinsley 2021 – – – – – – – – –
2020 £151,597 £7,241 £10, 813 £169,651 – – – – £169,651
Non-Executive Directors
Jonathan Nicholls 2021 £182,963 – – – – – – – £182,963
2020 £173,814 – – – – – – – £173,814
Tracey Graham 2021 £72,525 – – – – – – – £72,525
2020 £71,493 – – – – – – – £71,493
Justin Read 2021 £62,730 – – – – – – – £62,730
2020 £59,594 – – – – – – – £59,594
Louis Eperjesi 2021 £52,275 – – – – – – – £52,275
2020 £49,106 – – – – – – – £49,106
Claire Hawkings
2
2021 £59,424 – – – – – – – £59,424
2020 £49,661 – – – – – – – £49,661
Peju Adebajo
3
2021 £4,959 – – – – – – – £4,959
2020 – – – – – – – – –
1 Taxable benefits in the 2021 financial year comprised a company car allowance, private health cover and death in service cover. Joe Hudson and Chris McLeish were entitled to receive car
allowances of £18,000 and £15,000 per annum, respectively. The actual amounts received for the 2021 financial year are shown as part of the total taxable benefits figure above.
2 Claire Hawkings was appointed as ESG Committee Chair in April 2021 and received an additional fee from this date.
3 Peju Adebajo joined the Board on 26 November 2021. Her remuneration is pro-rated to reflect this.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Pension entitlements (audited)
The Company’s Defined Benefit Scheme was closed in 2017. Executive Directors receive a salary supplement in lieu of pension contributions with the CEO and
CFO receiving contributions of 20% and 10% of base salary respectively. In order to ensure all executives’ contributions are at the same level as the majority of
the wider workforce, contributions payable to the CEO will reduce to 10% of base salary by the end of 2022.
ADBP (audited)
Details of the targets used to determine bonuses in respect of the 2021 financial year and the extent to which they were satisfied are shown in the table below.
Following discussions at the Committee it was agreed that the weightings for each element of the ADBP would be amended so that adjusted EBITDA* and
Adjusted Operating Cash Flow* would be worth 40% and 30% respectively. To address the continuing uncertainty as a result of the pandemic, the Committee
split the target for adjusted EBITDA* between H1 and H2. Bonuses will be paid at 0% for each element which is payable for achieving the threshold
performance, 50% for achieving target performance and 100% for achieving maximum performance. One-third of any bonus payable will be deferred for
three years into Company shares subject to continued employment.
Performance
condition Weighting
Threshold
performance
required
(£’m)
Maximum
performance
required
(£’m)
Actual
performance
(£’m)
Percentage of
maximum
performance
achieved
Bonus value achieved
Joe Hudson Chris McLeish
Adjusted EBITDA* 20% £91.0 £102.8 £103.1 100.0% £113,368 £76,500
Adjusted EBITDA
H1* 10% £49.8 £56.2 £54.8 87.0% £49,459 £33,278
Adjusted EBITDA
H2* 10% £41.3 £46.6 £48.3 100.0% £56,849 £38,250
Adjusted operating
cash flow* 30% £53.0 £59.9 £80.6 100.0% £170,547 £114,750
Non-financial
objectives 30%
A summary of the personal objectives for
2021 are outlined below. 89.4% £152,469 £102,587
Total 100% 95.5% £543,023 £365,364
The personal objectives for the CEO and the CFO along with their associated outcomes can be found set out below.
Summary of personal objectives
CEO Objective area Progress against objectives
Assessment
(% of maximum)
Joe Hudson Delivery of Ibstock’s in-year roadmap targets in health, safety and sustainability Achieved 100%
Execution of key performance measures to deliver budget and continuous
improvements
Achieved 100%
Progress actions from the strategic review on organic and M&A options Mostly Achieved 82%
Ensure Ibstock has an annual robust review process to build talent, succession and
organisational effectiveness
Mostly Achieved 82%
Progress new product development, innovation and service level improvements for
our customers
Mostly achieved 82%
The Committee determined that overall performance equates to a 89.4% achievement for this element of the bonus (26.8% of 30% of maximum annual
bonus opportunity).
CEO Objective area Progress against objectives
Assessment
(% of maximum)
Chris McLeish Deliver 2021 performance outcomes Achieved 100%
Develop and deliver refreshed equity story and ensure market expectations for 2021 are
effectively managed
Achieved 100%
Develop digital strategy alongside multi-year execution roadmap Not achieved 36%
Build Finance functional capability and impact Achieved 100%
Materially upgrade financial control environment Achieved 100%
Lead and develop the finance team so that a culture of high performance is created and
individuals are motivated, engaged and able to realise their potential
Achieved 100%
The Committee determined that overall performance equates to a 89.4% achievement for this element of the bonus (26.8% of 30% of maximum annual
bonus opportunity).
As set out above, no discretion was exercised by the Committee in relation to the outcome of the bonus awards.
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LTIP (audited)
Awards granted in 2021
The table below sets out the details of the long-term incentive awards granted in the 2021 financial year where vesting will be determined according to the
achievement of performance conditions that will be tested in future reporting periods.
Name Award type
Award size (% of
base salary) Date of grant Shares awarded
Face value on the
date of grant
1
Percentage of award
vesting at threshold
performance
Percentage
Maximum
percentage of face
value that could vest
Percentage
Performance
conditions
Joe Hudson
(CEO) LTIP 150% 25 March 2021 317,888 £680,280 25 100
Relative TSR,
EPS*, ROCE* and
Carbon
Reduction
Chris McLeish
(CFO) LTIP 150% 25 March 2021 213,886 £457,716 25 100
Relative TSR,
EPS*, ROCE* and
Carbon
Reduction
1 Share price by reference to which the awards were granted is £2.14 (closing share price on 24 March 2021).
Performance conditions
1
Vesting of the 2021 awards will be subject to the achievement of a challenging sliding scale of adjusted EPS*, relative TSR against the FTSE 250 Construction
and Building materials companies, ROCE* over a three-year performance period ending on 24 March 2024 and a reduction in the carbon intensity ratio with
25% of the award vesting for threshold performance; 100% of the award vesting for maximum performance, with straight line vesting between these points.
The performance schedule for these measures is as follows:
Measure Weighting Threshold Maximum
Relative TSR 40% Median Upper quartile
Adjusted EPS* 30% 16.0p 19.6p
ROCE* 20% 15.77% per annum 17.43% per annum
Carbon reduction (per tonne of finished production) 10% 0.152 0.142
1 Relative TSR will be measured from the date of grant over a three-year period (with one-month averaging of TSR used to derive the start and the end values for the calculation). Adjusted EPS*
will be measured over three consecutive financial years. ROCE* performance will be taken to be the average of each of the three years of the performance period. Carbon reduction is measured
over the three years ending 31 December 2023 against a 2015 baseline. A two-year post-vesting holding period applies to 2021 LTIP awards.
Awards that vested in 2021
The three-year performance period for the awards granted on 9 April 2018 expired on 9 April 2021. The Committee reviewed the performance against the two
performance conditions and determined an overall vesting level of 0%.
2018 LTIP vesting
Measure
Weighting
(%)
Threshold
(%)
Maximum
(%)
Actual
(%)
Vesting
(% of
maximum)
Relative TSR 50 11.4 52.1 -10.5 0
Adjusted EPS* 50 6% 16% 0% Nil
Total 100 – – – Nil
No awards that were granted under the LTIP in 2018 vested in 2021.
Payments of loss of office (audited)
There were no payments for loss of office during the period under review.
Payments to past Directors (audited)
Kevin Sims and Wayne Sheppard stepped down from their roles as CEO and CFO upon retirement on 4 April 2018 and 31 August 2019 respectively.
Both remained as employees of the Company until 31 December 2018 and 31 December 2019 respectively. The leaving arrangements, which were fully
disclosed in the 2018 and 2019 Annual Reports, included that any outstanding awards that were held under the Company’s share plans were retained, but
time apportioned up to 31 December 2018 and 31 December 2019 respectively.
During the period ending 31 December 2021, Wayne Sheppard and Kevin Sims 2018 LTIP vested but as explained above none of the performance conditions
were met and so neither individual received any awards.
Kate Tinsley stepped down from her role as a Director on 24 July 2020. Under the terms of her departure from the Company she was entitled to receive those
awards granted to her under a buyout arrangement that was granted to her on joining Ibstock on 2019. Having assessed the performance conditions for these
awards the Committee confirmed that the level of vesting was nil.
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ANNUAL REPORT ON REMUNERATION CONTINUED
Directors’ share interests
Executive Directors’ incentive awards at 31 December 2021
The following table shows details of those options held by the Directors under the Company’s share plans as at 31 December 2021:
Joe Hudson
Date of
Award
Interest at
1 January 2021
Awarded
during
the year
Vested
during
the year
Lapsed
during
the year
Exercised
during
the year
Interest at
31 December
2021
Market
price on
award date
Exercise/
option
price
Expiry
date
LTIP 2018 – – – 150,000 – - 2.9000
2019 170,181 – – – – 170,181 2.0351 Nil cost 03/05/29
2020 357,167 – – – – 357,167 1.9100 Nil cost 14/04/30
2021 – 317,888 – – – 317,888 2.1460 Nil cost 25/03/31
ADBP 2019 28,942 – – – – 28,942 2.0351 Nil cost 03/05/29
2020 21,571 – – – – 21,571 2.8500 Nil cost 14/04/30
Sharesave 2021 – 10,227 – – – 10,227 N/A 1.76 N/A
Chris McLeish
Date of
Award
Interest at
1 January 2021
Awarded
during
the year
Vested
during
the year
Lapsed
during
the year
Exercised
during
the year
Interest at
31 December
2021
Market
price on
award date
Exercise/
option
price
Expiry
date
LTIP 2018 – – – – – – N/A Nil cost N/A
2019 170,145 – – – – 170,145 2.2000 Nil cost 12/08/29
2020 240,314 – – – – 240,314 1.9100 Nil cost 14/04/30
2021 – 213,886 – – – 213,886 2.1460 Nil cost 25/03/31
ADBP 2019 – – – – – – N/A Nil cost N/A
2020 5,829 – – – – 5,829 2.8500 Nil cost 14/04/30
Sharesave 2021 – 10,227 – – – 10,227 N/A 1.76 N/A
Statement of Directors’ shareholdings and share interests (audited)
Directors’ share interests and, where applicable, achievement of shareholding requirements are set out below. The CEO and CFO, having only joined the
Company in 2018 and 2019 respectively, are expected to build up over a five-year period and then subsequently hold a shareholding equivalent to 200% of
base salary.
In line with the Policy, interests which count towards the shareholding requirement include deferred shares at their net-of-tax value and shares subject to a
holding period at their full value. Additionally, Executive Directors’ shares will be subject to a post-cessation of employment shareholding requirement of 100%
of pre-cessation shareholding requirement for two years following cessation.
Shares held directly Other interests held
Directors
Shareholding
requirement %
salary
Current
shareholding
1
% salary
Beneficially
owned
2
Interests subject to
performance
conditions
Interests not subject
to performance
conditions
Vested but
unexercised
interests
3
Outstanding
Sharesave awards
Shareholding
requirement met
Joe Hudson 200% 27% 9,257 845,236 50,513 21,570 10,227 No
Chris McLeish 200% 38% 50,551 624,345 5,829 106,584 10,227 No
Jonathan
Nicholls N/A N/A 10,000 N/A N/A N/A N/A N/A
Tracey Graham N/A N/A 10,000 N/A N/A N/A N/A N/A
Justin Read N/A N/A 17,500 N/A N/A N/A N/A N/A
Louis Eperjesi
4
N/A N/A 20,000 N/A N/A N/A N/A N/A
Claire Hawkings N/A N/A 10,000 N/A N/A N/A N/A N/A
Peju Adebajo N/A N/A 10,000 N/A N/A N/A N/A N/A
1 As at 31 December 2021 (unless stated otherwise). This was based on a closing share price of £2.03 at 31 December 2021 and the year end salaries of the Executive Directors. Values are not
calculated for Non-Executive Directors as they are not subject to shareholding requirements.
2 All shares held through nominees.
3 This represents those shares that vested under the buyout award made to Joe Hudson and Chris McLeish in 2018 and 2019 respectively but that have not been exercised.
4 Note that the holding is legally held by Louis Eperjesi’s spouse.
There were no changes in shareholdings from the year end to the date of this report.
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Fees retained for external Non-Executive Directorships
Executive Directors may hold positions in other companies as Non-Executive Directors and retain the fees. The current Executive Directors do not hold any
external directorships in other listed companies.
Comparison of overall performance and pay
The graph below shows the value of £100 invested in the Company’s shares since listing compared with the FTSE 250 index and the FTSE 250 Construction
and Building materials companies. The graph shows the Total Shareholder Return generated by both the movement in share value and reinvestment over the
same period of dividend income.
Total Shareholder Return
£100 invested in the Company’s shares since listing compared with the FTSE 250 index and the FTSE 250 Construction and Materials index.
0
50
100
150
200
250
21 Oct 15 31 Dec 16 31 Dec 17 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21
Ibstock FTSE 250 FTSE 250 Construction and Materials
Source: Thomson Reuters Datastream data as of 18 January 2022
The Committee considers that the FTSE 250 is the appropriate index because the Company has been a member of this index since listing. This graph has been
calculated in accordance with the Regulations. It should be noted that the Company listed on 27 October 2015 and therefore only has a listed share price for
the period of 27 October 2015 to 31 December 2021. Additionally, the FTSE 250 Construction and Building materials comparator group is shown as it reflects
the sector in which the Company operates.
Chief Executive Officer historic remuneration
The table below sets out the total remuneration delivered to the CEO over the period 26 February 2015 to 31 December 2021, valued using the methodology
applied to the single total figure of remuneration. There is no relevant data before 2015.
Chief Executive Officer
Wayne Sheppard
1
Joe Hudson
2
2015 2016 2017 2018 2018 2019 2020 2021
Single total figure £773,309 £788,685 £906,300 £183,640 £592,039 £737,287 £539,524 £1,104,401
Annual bonus payment level achieved
(% of maximum opportunity) 100% 33% 58% 32.5% 32.5% 33.1% 0.0% 95.5%
LTIP vesting level achieved
(% of maximum opportunity) N/A N/A N/A N/A N/A N/A 0% 0%
1 Wayne Sheppard stepped down as CEO and Board Director on 4 April 2018 and his remuneration for 2018 has been pro-rated.
2 Joe Hudson became CEO on 4 April 2018. His single figure only includes compensation paid to him in 2018 in his capacity as the CEO from 4 April to 31 December 2018 and doesn’t include
compensation paid to him as CEO designate before 4 April 2018.
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2021 and 2020 financial years. All figures provided are taken from the relevant
Company’s accounts.
Disbursements from
profit in 2020
financial year
£’m
Disbursements from
profit in 2021
financial year
£’m
%
change
Profit distributed by way of dividend 6.8 16.8 147%
Overall spend on pay including Executive Directors (continuing operations) 87.5 105.9 21.0%
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ANNUAL REPORT ON REMUNERATION CONTINUED
Director percentage change versus employee group
The table below shows how the percentage change in each Director’s salary/fee, taxable benefits and annual incentive plan between 2020 and 2021
compares with the average percentage change in each of those components of pay for the UK-based employees of the Group as a whole.
For the second year, disclosure for all Directors in addition to the CEO has been added this year in line with new requirements under the EU Shareholder Rights
Directive ll and over time a five-year comparison will be built up. Although the table shows increases in the actual amounts received in 2021 relative to the 2020
financial year, there were no salary increases in 2021. The table reflects the fact that all directors took a voluntary salary reduction during 2020 which impacts
the year-on-year comparison.
Director
% increased/ decreased in remuneration in 2020
compared with remuneration in 2019
% increase/(decrease) in remuneration in 2021
compared with remuneration in 2020
Salary Benefits Bonus Salary Benefits Bonus
Jonathan Nicholls (3.1)% N/A N/A 5.3% N/A N/A
Joe Hudson (3.1)% (5.5)% (100)% 5.3% (5.4)% 100%
Chris McLeish 5.3% 2.0% 100%
Tracey Graham 7.3% N/A N/A 1.4% N/A N/A
Justin Read (3.1)% N/A N/A 5.3% N/A N/A
Louis Eperjesi (3.3)% N/A N/A 6.5% N/A N/A
Claire Hawkings
1
(3.1)% N/A N/A 19.7% N/A N/A
Peju Adebajo
2
N/A N/A N/A N/A N/A N/A
All employees (8.7)% 0% (100)% 3.9% 3.8% 100%
1 Claire Hawkings was appointed Chair of the new ESG Committee in 2021 and so received an additional fee to reflect this additional responsibility.
2 Peju Adebajo was appointed to the Board in November 2021 therefore no previous year comparison is possible.
The Committee monitors the changes year-on-year between our Director pay and the average employee increase.
Statement of voting at the General Meeting
The current Policy was put to a binding vote at the AGM on 23 May 2019 and as such is due for renewal at the forthcoming AGM. The ARR was also put to an
advisory vote at the AGM on 21 April 2022. The voting outcomes are set out in the table below.
AGM resolution Votes for % of votes cast Votes against % of votes cast
Total votes cast
(excluding withheld) Votes withheld
Annual Report on Remuneration (2021) 302,006,761 99.99% 44,711 0.01% 302,051,472 19,329
Directors’ Remuneration Policy (2019) 325,074,186 99.71% 947,646 0.29% 326,021,832 2,207,066
Advisers to the Remuneration Committee
Following a selection process carried out by the Board prior to the IPO of the Company in 2015, the Committee has engaged the services of
PricewaterhouseCoopers LLP (PwC) as independent remuneration adviser. During the financial year, PwC advised the Committee on all aspects of the Policy for
Executive Directors and members of the Executive team. PwC also provided the Company with tax and accountancy advice during the year. The Committee is
satisfied that no conflict of interest exists or existed in the provision of these services.
PwC is a member of the Remuneration Consultants Group and the voluntary Code of Conduct of that body is designed to ensure objective and independent
advice is given to remuneration committees. Fees of £81,750 (2020: £59,250) were provided to PwC during the year in respect of remuneration advice received
and were charged on a fixed fee basis. There are no connections between PwC and individual Directors to be disclosed.
Implementation of our Remuneration Policy for 2022 financial year
Our proposed implementation of the new Remuneration Policy for the 2022 financial year is set out below.
Key elements and time period
Overview of Remuneration Policy implementation for 2022Year +1 +2 +3 +4 +5
Base salary Salaries that will be paid to the Executive Directors from 1 April 2022 are as follows:
• Joe Hudson: £495,740
• Chris McLeish: £333,540
Pension The maximum contribution into the defined contribution plan or salary supplement
in lieu of pension is 20% of gross base salary for Joe Hudson and 10% of gross base
salary for Chris McLeish. From 1 January 2023 this will reduce to a 10% contribution
with respect to Joe Hudson.
Benefits Standard benefits will be provided, including car allowance (£18,000 for Joe Hudson
and £15,000 for Chris McLeish), private health cover and death in service cover.
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Key elements and time period
Overview of Remuneration Policy implementation for 2022Year +1 +2 +3 +4 +5
Annual and
Deferred Bonus
Plan (ADBP)
For 2022 the maximum bonus opportunity will be 125% of salary for Joe Hudson and
Chris McLeish.
For 2022, the level of deferral in shares will be one-third of the bonus earned which
will vest after three years based on continued employment with the Company.
The Committee can determine the proportion of the bonus earned under the
ADBP provided as an award of deferred shares to a maximum of 50% of bonus
earned. The performance conditions and their weightings for the 2021 annual bonus
are as follows:
• Adjusted EBITDA* (40%).
• Adjusted operating cash flow*(30%).
• Non-financial objectives: defined operational/strategic objectives alongside other
key areas for executives (30%).
• The Committee is of the opinion that given the commercial sensitivity arising in
relation to the detailed financial targets used for the annual bonus, disclosing precise
targets for the ADBP in advance would not be in shareholders’ interests.
Actual targets, performance achieved and awards made will be published at the end
of the relevant performance period so shareholders can fully assess the basis for any
payouts under the annual bonus.
LTIP • In 2022 an exceptional LTIP award of 200% of salary will be awarded to Joe Hudson
and Chris McLeish.
• The performance conditions for awards will be weighted between Adjusted Earnings
per Share (EPS)* (25%), comparative Total Shareholder Return (TSR)(30%), ROCE*
(25%) and ESG (20%) and assessed over a three-year performance period.
• TSR performance will be measured from the date of grant over a three-year period
(with one-month averaging of TSR used to derive the start and end values for the
calculation). Performance is compared to the FTSE 250 Construction and Building
materials sector companies – with threshold vesting for median performance
against the index and full vesting for upper quartile performance.
• EPS* – Performance is measured over three consecutive financial years with
threshold performance at 16.9 pence and maximum performance at 22.1 pence,
with straight line vesting between the points.
• ROCE* – Performance will be taken to be the average of each of the three years of
the performance period with threshold performance at 17.64% and maximum
performance of 19.5% with straight line vesting between.
• ESG – The Committee recognises the importance of setting robust targets. As at
the date of this report the 2022 ESG targets are still being finalised. These will be
disclosed at the time of the grant of the 2022 awards.
• A two-year holding period will apply to the 2022 LTIP awards following vesting.
Non-Executive
Directors’ fees
The 2022 fee levels were increased by 3% in line with the wider employee population
(with effect from 1 April 2022) are:
• Chairman – £188,460
• Board fee (including Committee membership) – £53,850
• Committee Chair (per Committee) – £10,560
• Senior Independent Director – £10,300
Thank you for your continued support. I hope that you find this report to be clear in understanding our remuneration practices and that you will be supportive
at the coming AGM.
Tracey Graham
Chair of the Remuneration Committee and Senior Independent Director
8 March 2022
Cash
Deferred award
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Directors’ Report
The Directors’ Report for the year ended 31 December 2021 comprises
pages 74 to 124 together with the sections of the Annual Report
incorporated by reference. The Corporate Governance Statement on
pages 80 to 86 are incorporated into the Directors’ Report by reference.
As permitted by legislation, some of the matters required to be included in
the Directors’ Report have instead been included in the Strategic Report on
pages 1 to 73. The Strategic Report includes an indication of future likely
developments in the Company, details of important events and the
Company’s business model and strategy.
The Strategic Report and the Directors’ Report together form the
Management Report for the purposes of the Disclosure Guidance and
Transparency Rules (DTR) 4.1.8R.
Principal activity
The principal activity of the Group is the manufacture and supply of clay
and concrete building products and solutions primarily to customers in
the UK residential construction sector. Details of the Group’s principal
subsidiaries can be found in Note 29 to the financial statements.
Results and dividend
The results for the year can be found in the financial review on pages 64 to
68 and these are incorporated by reference into this report.
Going Concern and Viability Statement
Information relating to the Going Concern and Viability Statement is set out
on pages 72 and 73 of the Strategic Report and is incorporated by reference
into this report.
Research and development
Information relating to research and development is set out in the Our
Strategy section and on page 42 of the Strategic Report and is incorporated
by reference into this report.
Greenhouse gas emissions
Information relating to the greenhouse gas emissions of the Company is set
out on page 45 of the Strategic Report and is incorporated by reference into
this report.
Board of Directors and their interests
The names and biographies of the Directors as at the date of this report are
shown on pages 78 and 79. The interests of the Directors holding office at
the end of the year in the issued Ordinary Share capital of the Company and
any interests in Ibstock’s share incentive plans are given in the Directors’
Remuneration Report on page 118.
Powers of the Directors
The powers given to the Directors are contained in the Company’s Articles
of Association and are subject to relevant legislation and, in certain
circumstances, including in relation to the issuing or buying back by the
Company of its shares, subject to authority being given to the Directors by
shareholders in general meeting. The Articles of Association also govern the
appointment and replacement of Directors.
Re-election of Directors
All Directors will retire and submit themselves for election or re-election,
annually, by shareholders at the AGM. Specific reasons why each Director’s
contribution is, and continues to be, important to the Company’s long-term
sustainable success are set out in the Notice.
Amendment of the Articles of Association
The Articles of Association may be amended in accordance with the
provisions of the Companies Act 2006 by way of a special resolution of the
Company’s shareholders.
Share capital and control
Details of the Company’s share capital are contained in Note 24]to the
Group consolidated financial statements. The rights attaching to the shares
are set out in the Articles of Association.
The Company has established a trust in connection with the Group’s Share
Incentive Plan (the SIP), which holds Ordinary Shares on trust for the benefit
of employees of the Group. The Trustees of the SIP trust may vote in respect
of Ibstock shares held in the SIP trust, but only as instructed by participants
in the SIP in accordance with the SIP trust deed and rules. The Trustees will
not otherwise vote in respect of shares held in the SIP trust.
The Trustee of the Employee Benefit Trust (the Trust), which is used to
purchase shares on behalf of the Company as described in Note 25, has the
power to vote or not vote, at its absolute discretion, in respect of any shares
in the Company held unallocated in the Trust. However, in accordance with
good practice, the Trustee adopts a policy of not voting in respect of such
shares. In accordance with Listing Rule 9.8.4(c), the Company notes that the
Trustee has a dividend waiver in place in respect of shares which are the
beneficial property of the Trust.
Purchase of own shares
At the AGM held on 21 April 2021, shareholders passed a special resolution
in accordance with the Companies Act 2006 to authorise the Company
to purchase in the market a maximum of 40,955,979 Ordinary Shares,
representing 10% of the Company’s issued Ordinary Share capital as at the
latest practicable date prior to publication of the AGM circular. The Directors
are seeking renewal of the authority at the forthcoming AGM, in accordance
with relevant institutional guidelines.
Substantial shareholdings
As at 31 December 2021, the Company had been notified, in accordance
with the Disclosure Guidance and Transparency Rules, of the following
interests in its Ordinary Share capital.
Name of shareholder
Number of shares
disclosed
% interest in issued
share capital Nature of holding
Vulcan Value
Partners, LLC 35,416,275 8.65% Indirect
Aviva plc and its
subsidiaries 23,253,224 5.68% Direct and Indirect
Ameriprise
Financial, Inc. 22,436,978 5.47% Indirect
Lansdowne
Partners 20,591,969 5.21% Indirect
J O Hambro
Capital
Management
Limited 20,367,209 4.98% Indirect
Franklin
Templeton Fund
Management
Limited 17,674,986 4.32% Indirect
Norges Bank 12,218,525 2.98% Direct
Janus Henderson
Group plc – Below 5% Indirect
Blackrock, Inc – Below 5% Indirect
In the period from 31 December 2021 to the date of this report there have
been 2 notifications that have been made to the Company pursuant to DTR
5. Notifications were received in February 2022 that Vulcan Value Partners
LLC had increased their holding to 39, 817, 683 shares (9.72%) of the issued
share capital and Ameriprise Financial, Inc had reduced their holding to
20,328,605 shares (4.96%) of the issued share capital. Information provided
to the Company under the Disclosure Guidance and Transparency Rules is
publicly available via the regulatory information service and on the
Company’s website.
Significant agreements (change of control)
The Company is required to disclose any significant agreements that take
effect, alter or terminate on a change of control of the Company following a
takeover bid.
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The Company has committed debt facilities all of which are directly or
indirectly subject to change of control provisions, albeit the facilities do
not necessarily require mandatory prepayment on a change of control.
During the year the Company completed the refinancing of its March 2023
£215 million Revolving Credit Facility (RCF), diversifying its credit sources at
attractive rates, whilst simultaneously achieving a significant extension of
the Group’s debt maturity profile.
The existing facility was replaced with the issuance of £100 million of private
placement notes from Pricoa Private Capital, with maturities of between 7
and 12 years at an average total cost of funds of 2.19%, and a £125 million
RCF provided by a syndicate of five banks. The RCF is for an initial four year
tenor, with a one year extension option, at a margin of between 1.60% and
2.60%, and also includes an additional £50 million uncommitted accordion.
In the event of a takeover or other change of control (usually excluding an
internal reorganisation), outstanding awards under the Group’s incentive
plans vest and become exercisable (including Annual & Deferred Bonus Plan
(ADBP) awards, ADBP share awards and Long Term Incentive Awards (LTIP)
awards), to the extent any performance conditions (if applicable) have
been met, and subject to time pro-rating (if applicable) unless determined
otherwise by the Board in its discretion, in accordance with the rules of the
plans. In certain circumstances, the Board may decide (with the agreement
of the acquiring company) that awards will instead be cancelled in exchange
for equivalent awards over shares in the acquiring company.
Directors’ and Officers’ liability insurance and indemnities
The Company has purchased and maintains appropriate insurance cover in
respect of Directors’ and Officers’ liabilities. The Company has also entered
into qualifying third party indemnity arrangements for the benefit of all its
Directors, in a form and scope which comply with the requirements of the
Companies Act 2006. These indemnities came into force on 22 October
2015 and remain in force as at the date of this Annual Report.
Financial instruments
Details of the financial instruments used by the Group are set out in Note 23
to the Group consolidated financial statements, which are incorporated into
this Directors’ Report by reference. The Group’s financial risk management
objectives and policies are included in the risk management section on page
52 and in Note 23 of the Group consolidated financial statements.
Political donations
No political donations were made during the year ended 31 December 2021
(2020: £nil).
Annual General Meeting 2022
The AGM will be held on 21 April 2022 at 11:00 a.m. at Hatton Garden,
London. The Notice convening the meeting together with explanatory notes
on the resolutions to be proposed and full details of the deadlines for
appointing proxies is contained in a circular which will be circulated to all
shareholders at least 20 working days before such meeting together with
this report.
Employees
The average number of employees within the Group is shown in Note 7 to
the Group financial statements.
The Group is an equal opportunities employer and considers applications for
employment from disabled persons (having regard to their particular
aptitudes and abilities) and encourages and assists, wherever practicable,
the recruitment, training, career development and promotion of disabled
people and the retention of and appropriate training from those who
become disabled during their employment.
Employee engagement
Due to our commitment to transparent and best practice reporting, we have
included our section on employee engagement on page 41 of the Strategic
Report as the Board considers these disclosures to be of strategic importance
and is therefore incorporated into the Directors’ Report by cross-reference.
The Stakeholder engagement section on page 40 demonstrates how the
Directors have engaged with employees and how they have had regard to
employee interests and the effect of that regard including the principal
decisions by the Company during the financial year.
The Company is also keen to encourage greater employee involvement in
the Group’s performance through share ownership. To help align employees’
interests with the success of the Company’s performance, we operate an
HMRC approved all-employee plan, the Ibstock plc Sharesave Scheme
(Sharesave), which is offered to UK employees.
Business relationships
The Stakeholders section on pages 40 to 42 and Section 172(1) Statement
demonstrate how the Directors have had regard to its engagement with
suppliers, customers and others and how the effect of that regard had
influenced the principal decisions taken by the Company during the financial
year. The Board considers this disclosure to be of strategic importance and is
therefore incorporated into the Directors’ Report by cross-reference.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors are required to prepare the
Group consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union and
Article 4 of the IAS Regulation and have elected to prepare the Parent
Company financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards), including FRS 102, the Financial Reporting Standard applicable
in the United Kingdom and the Republic of Ireland, and applicable law.
Under company law the Directors must not approve the Annual Report
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the Group for
that year.
In preparing the Parent Company financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable United Kingdom Accounting Standards have
been followed, subject to any material departures disclosed and explained
in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
In preparing the Group consolidated financial statements, International
Accounting Standard No.1 requires Directors to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
entity’s financial position and financial performance; and
• make an assessment of the Group’s ability to continue as a going concern
and prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group will continue in business.
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The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group’s and Company’s transactions
and to disclose with reasonable accuracy at any time the financial position
of the Group and Company and to enable them to ensure that the financial
statements comply with the Companies Act 2006 and Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the Annual Report, including the
financial statements, is made available on a website. Financial statements
are published on the Company’s website in accordance with legislation
in the United Kingdom governing the preparation and dissemination
of financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s website
(at https://www.ibstockplc.co.uk) is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Disclosure of information to auditors
Each person who is a Director of the Company as at the date of approval of
this Report confirms that:
(a) so far as the Director is aware, there is no relevant audit information of
which the Company’s auditors are not aware; and
(b) the Director has taken all the steps that he or she ought to have taken as
a Director in order to make him/herself aware of any relevant audit
information and to establish that the Company’s auditors are aware of
that information.
Directors’ Responsibility Statement
The Directors in office as at 31 December 2021 and whose names
and functions are given on pages 78 and 79 confirm that to the best of
their knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group and Company
and the undertakings included in the consolidation taken as a whole; and
• the Strategic Report and Directors’ Report include a fair review of the
development and performance of the business and the position of the
Group and Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face.
The Directors consider that this Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Group’s position and performance, business
and strategy.
The Directors’ Report (pages 74 to 124) have been approved and are signed
by order of the Board by:
Nick Giles
Group Company Secretary
8 March 2022
Registered Office: Leicester Road, Ibstock, Leicestershire, LE67 6HS
Company registration number 09760850
DIRECTORS’ REPORT CONTINUED
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF IBSTOCK PLC
Report on the audit of the financial
statements
1. Opinion
In our opinion:
• the financial statements of Ibstock plc (the ‘Company’) and its
subsidiaries (together, the ‘Group’) give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31 December
2021 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with United Kingdom adopted international accounting
standards and International Financial Reporting Standards (IFRSs)
as issued by the International Accounting Standards Board (IASB);
• the Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice, including Financial Reporting Standard 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland”; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and Company balance sheets;
• the consolidated and Company statements of changes in equity;
• the consolidated cash flow statement; and
• the related notes 1 to 32 to the consolidated financial statements; and
• the related notes 1 to 12 to the Company financial statements.
The financial reporting framework that has been applied in the preparation
of the Group financial statements is applicable law and United Kingdom
adopted international accounting standards and IFRSs as issued by the
IASB. The financial reporting framework that has been applied in the
preparation of the Company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of Ireland” (United
Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the auditor’s responsibilities for the audit of
the financial statements section of our report.
We are independent of the Group and the Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements
in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We confirm
that we have not provided any non-audit services prohibited by the FRC’s
Ethical Standard to the Group or the Company.
We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
• Presentation of exceptional items; and
• Revenue recognition – rebates.
Materiality The materiality that we used for the Group financial statements was £4.2 million which was determined on the
basis of 1.0% of revenue.
Scoping We performed full scope audit procedures for the Clay and Concrete components (with the exception of Longley
Concrete) for the year ended 31 December 2021.
For Longley Concrete we performed a desktop review on the results for the year ended and the financial position
as at 31 December 2021.
The full scope procedures covered 95% of revenue, 98% of profit before tax and 96% of net assets.
Significant changes in our approach During the year ended 31 December 2020 we identified a key audit matter in relation to Going Concern as a
result of the impact of Covid-19 on the Group’s activities. Due to the improved trading performance of the Group
in the second half of 2020 and throughout 2021 and the current financing arrangements in place, we have not
classified Going Concern as a key audit matter for the year ended 31 December 2021.
Also for the year ended 31 December 2021, we have not identified inflation, discount and mortality assumptions
used in defined benefit pension scheme valuations as a key audit matter due to the absence of one-off or
unusual circumstances affecting the balance during the year.
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis of accounting included:
• assessing the appropriateness of forecasts used with reference to industry and analyst forecasts;
• reviewed the revised financing arrangements negotiated in FY2021 and the impact on covenant compliance requirements;
• challenging the appropriateness of sensitivities used in management’s low case scenario, with reference to the historical trading performance, market
expectations and peer comparison; and
• reviewed the appropriateness of disclosures within the financial statements in respect of going concern and long term viability.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the Group’s and Company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in
relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
5.1. Presentation of exceptional items
Key audit matter description The Group has identified £5.2 million of exceptional items in the consolidated income statement in 2021
(2020: £35.7 million).
The FRC and ESMA have advised companies against presenting the impacts of Covid-19 as exceptional on the
basis that the impacts are macroeconomic and likely to have a wide range of potentially long-term consequences
which will be considered to form part of underlying business performance on an ongoing basis. A key principle is
that the Group should not split discrete items on an arbitrary basis in an attempt to quantify the portion relating
to Covid-19. The preferred treatment by regulators is to explain the impact of Covid-19 through additional
narrative in the “front half” rather than exceptional items within the primary statements.
Therefore there is a risk that items are inappropriately classified as exceptional in the financial statements.
Further information on exceptional items can be found in the Audit Committee Report on page 94, the Group’s
summary of significant accounting policies in note 1 on page 142, note 2 (Critical accounting judgements and
key sources of estimation uncertainty) on page 143, note 3 (Alternative Performance Measures) on page 144 and
note 5 (Exceptional items) on page 149.
How the scope of our audit responded
to the key audit matter
We have performed the following procedures to address this key audit matter:
• obtained an understanding of the management review controls over the classification of items as exceptional;
• assessed the classification and consistency of items management proposed to include as exceptional,
assessing whether any items classified as Covid-19 exceptional items are discrete expenses, directly caused by
the Covid-19 pandemic and not relating to the ongoing macroeconomic impacts on performance;
• evaluated regulatory guidance released by the FRC and ESMA; and
• assessed the adequacy of the disclosures to explain the nature of the exceptional items.
Key observations We concur with management that the classification of items as exceptional is appropriate for the year ended
31 December 2021.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF IBSTOCK PLC CONTINUED
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5.2. Revenue recognition – rebates
Key audit matter description The Group has recognised revenue for the year ended 31 December 2021 of £408.7 million
(2020: £316.2 million). The Group enters into various agreements whereby it offers customers retrospective
rebates according to the volume of transactions with that customer. The rebate agreements are complex in
nature, with different types of rebates being offered to each customer, with the nature of those rebates differing
across different product ranges. Due to the high level of complexity involved, we have determined that there is a
potential for fraud through possible manipulation of this balance.
The key audit matter in relation to customer rebates is focussed on the completeness and accuracy of the
reduction against revenue in respect of rebates for customers in Ibstock Brick Limited and Supreme Concrete
Limited.
Further information on rebates can be found in the Group’s summary of significant accounting policies in note 1
on page 142.
How the scope of our audit responded
to the key audit matter
We have performed the following procedures to address this key audit matter:
• obtained an understanding of the relevant controls over the revenue recognition process to address the key
audit matter;
• performed a year-on-year analysis of revenue and rebates to understand any material changes in the rebate
provision at a customer level;
• selected a sample of customer rebate agreements, inspected the terms and dates, and recalculated selected
rebates in accordance with the contract terms, including evaluating the sales data on which the rebate
calculations are based;
• identified the largest customers in each of Ibstock Brick Limited and Supreme Concrete Limited and requested
written confirmation from a sample of the largest customers to confirm that the rebate provided by the Group
is the full rebate due to the customer as at 31 December 2021;
• assessed the completeness of rebates by evaluating credit notes raised during 2021 and post year-end,
assessing whether payments had been made to customers where we had been informed that no rebate
agreement was in place and made enquiries of management as to the existence of any other rebate
arrangements; and
• agreed a sample of rebates to settlement post year-end.
Key observations We concur with management that the revenue recognition in relation to customer rebates is appropriate for the
year ended 31 December 2021.
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6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Company financial statements
Materiality £4.2 million (2020: £3.3 million) £3.4 million (2020: £2.3 million)
Basis for determining
materiality
Approximately 1.0% of revenue (2020: 1.1% of revenue) 3.0% of net assets (2020: 3.0%), capped at 80% of Group
materiality (2020: 70%).
Rationale for the
benchmark applied
Given the unusual fluctuations within pre-tax profit from
continuing operations in the current and prior year,
materiality is based on Group revenue for 2021.
Net assets are considered to be an appropriate benchmark
for the Company given that it is predominantly a holding
Company. A set percentage of Group materiality was applied
to the Company based upon the scoping of components and
assessing the risk within the Company compared to others
within the Group.
Revenue £408.7m
0
20
Group materiality £4.2m
Component materiality
range £2.5m to £3.4m
Audit Committee
reporting threshold
£0.21m
Revenue
Group materiality
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements
exceed the materiality for the financial statements as a whole.
Group financial statements Company financial statements
Performance
materiality
70% (2020: 70%) of Group materiality 70% (2020: 70%) of Company materiality
Basis and rationale
for determining
performance
materiality
In determining performance materiality, we consider the following factors:
• no significant deficiencies identified within the control environment, with a controls reliance approach taken over the business
cycles noted in section 7.2 of this report;
• no significant changes in the business; and
• a low number of uncorrected misstatements identified in previous years.
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF IBSTOCK PLC CONTINUED
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6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee
all audit differences in excess of £210,000 (2020: £165,000), as well as
differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the
financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group
and its environment, including Group-wide controls, and assessing the risks
of material misstatement at a Group level.
Scope A:
Full scope audit procedures were performed on the UK Clay (Ibstock Brick)
and UK Concrete excluding Longley Concrete (Forticrete, Supreme and
Anderton) components. Component materiality was £3.4 million for UK Clay
and £2.5 million for UK Concrete. Our audit work for Ibstock Brick, Forticrete,
Supreme and Anderton was executed at levels of materiality applicable to
each individual entity which were lower than the respective component
materiality, in accordance with local GAAP. At the Group level, we also tested
the Head Office entities and the consolidation process.
Scope A Entities: UK Clay and UK Concrete components (excluding Longley
Concrete), Head Office entities and the consolidation process
Scope B:
Desktop review procedures for Longley Concrete have been performed by
the Group audit team to Group materiality.
Scope B Entity: Longley Concrete
All work has been performed by the Group engagement team. The full
scope procedures covered 95% of revenue, 98% of profit before tax and
96% of net assets.
Full audit scope 95%
Review at Group level 5%
Revenue
Full audit scope 98%
Review at Group level 2%
Profit before tax
Full audit scope 96%
Review at Group level 4%
Net assets
7.2. Our consideration of the control environment
The Group uses JD Edwards in all of its legal entities .
We involved our IT specialists to assess and test relevant controls over the
JD Edwards system.
From our walkthroughs and understanding of the entity and the controls at
the business cycle and account balance levels, we relied on controls over the
following business cycles in Scope A Entity:
• revenue;
• trade receivables; and
• payroll.
For each relevant control identified in the business cycles where we planned
to take controls reliance, we obtained an understanding of the relevant
controls and tested the relevant controls. We tested the relevant controls on
a three-year rotation cycle with at least one relevant control from each
business cycle in scope each year.
We obtained our audit assurance through a combination of testing of
controls and substantive procedures.
7.3. Our consideration of climate related risks
Our identification of climate related risks and subsequent procedures
involved the following:
• Reviewed the details of the net-zero by 2040 target announced by the
Group in January 2022;
• Made enquiries of management, including Ibstock’s Sustainability
Manager, to understand management’s process for considering the
impact of climate related risks that are relevant to the Group;
• Made enquiries of management, including Ibstock’s Sustainability
Manager, to understand the impact of the net-zero by 2040 target on the
future cash flow projections of the Group; and
• Reviewed the climate-change sensitivities presented to the Board of
Directors and considered the consistency of those sensitivities with the
cash flow forecasts prepared to support both the going concern basis of
preparation and the consideration of impairment of non-current assets
on the consolidated Group and Company’s balance sheets.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF IBSTOCK PLC CONTINUED
8. Other information
The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information contained within the
annual report. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease operations, or
have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
• the nature of the industry and sector, control environment and business
performance including the design of the Group’s remuneration policies, key
drivers for directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the Audit
Committee about their own identification and assessment of the risks
of irregularities;
• any matters we identified having obtained and reviewed the Group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they
have knowledge of any actual, suspected or alleged fraud; and
– the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations.
• the matters discussed among the audit engagement team and relevant
internal specialists, including tax, pensions, and IT specialists regarding
how and where fraud might occur in the financial statements and any
potential indicators of fraud.
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: presentation of
exceptional items and revenue recognition – rebates. In common with all
audits under ISAs (UK), we are also required to perform specific procedures
to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework
that the Group operates in, focusing on provisions of those laws and
regulations that had a direct effect on the determination of material
amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the UK Companies Act,
Listing Rules, pensions legislation, tax legislation.
In addition, we considered provisions of other laws and regulations that do
not have a direct effect on the financial statements but compliance with
which may be fundamental to the Group’s ability to operate or to avoid a
material penalty. These included employment law, occupational health and
safety regulations, the Environment Act, the Water Framework Directive,
the Waste Directive, the Environment Protection Act and the Energy
Efficiency Directive.
11.2. Audit response to risks identified
As a result of performing the above, we identified the presentation of
exceptional items and revenue recognition – rebates as key audit matters
related to the potential risk of fraud. The key audit matters section of our
report explains the matters in more detail and also describes the specific
procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified
included the following:
• reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial
statements;
• enquiring of management, the Audit Committee and the Group Company
Secretary concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected
relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance,
reviewing internal audit reports and reviewing correspondence with
HMRC; and
• in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the
normal course of business.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including internal
specialists, and remained alert to any indications of fraud or non-
compliance with laws and regulations throughout the audit.
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Report on other legal and regulatory
requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors’ Report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the
Company and their environment obtained in the course of the audit,
we have not identified any material misstatements in the Strategic
Report or the Directors’ Report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements
and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 137;
• the directors’ explanation as to its assessment of the Group’s
prospects, the period this assessment covers and why the period is
appropriate set out on page 72;
• the directors’ statement on fair, balanced and understandable set out
on page 77;
• the board’s confirmation that it has carried out a robust assessment
of the emerging and principal risks set out on page 77;
• the section of the annual report that describes the review of
effectiveness of risk management and internal control systems set
out on page 96; and
• the section describing the work of the Audit Committee set out on
page 92.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not received all the information and explanations we require for
our audit; or
• adequate accounting records have not been kept by the Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
• the Company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors’ remuneration have not been made or the part
of the Directors’ Remuneration Report to be audited is not in agreement with
the accounting records and returns.
We have nothing to report in respect of these matters
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed
by the Board of Directors on 24 May 2017 to audit the financial statements
for the year ended 31 December 2017 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals
and reappointments of the firm is five years, covering the years ended
31 December 2017 to 31 December 2021.
15.2. Consistency of the audit report with the additional report
to the audit committee
Our audit opinion is consistent with the additional report to the Audit
Committee we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the Company
and the Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance
and Transparency Rule (DTR) 4.1.14R, these financial statements form part
of the European Single Electronic Format (ESEF) prepared Annual Financial
Report filed on the National Storage Mechanism of the UK FCA in
accordance with the ESEF Regulatory Technical Standard ((‘ESEF RTS’).
This auditor’s report provides no assurance over whether the annual
financial report has been prepared using the single electronic format
specified in the ESEF RTS.
Jonathan Dodworth
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
8 March 2022
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CONSOLIDATED INCOME STATEMENT
Notes
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Revenue 4 408,656 316,172
Cost of sales before exceptional items (267,662 ) (235,667 )
Exceptional income from/(cost of) sales
1
5 3,495 (32,062 )
Cost of sales 6 (264,167 ) (267,729 )
Gross profit 144,489 48,443
Distribution costs (38,829 ) (31,427 )
Administrative expenses before exceptional items (41,511 ) (35,296 )
Exceptional administrative items
1
5 (287 ) (6,003 )
Administrative expenses (41,798 ) (41,299 )
Profit on disposal of property, plant and equipment before exceptional items 1,638 113
Exceptional profit on disposal of property, plant and equipment
1
5 2,022 2,808
Total profit on disposal of property, plant and equipment 3,660 2,921
Other income 2,524 2,118
Other expenses (112 ) (368 )
Operating profit/(loss) 6 69,934 (19,612 )
Finance costs before exceptional items (5,831 ) (5,691 )
Exceptional finance costs
1
5 – (414 )
Finance costs 8 (5,831 ) (6,105 )
Finance income 9 839 1,777
Net finance cost (4,992 ) (4,328 )
Profit/(loss) before taxation 64,942 (23,940 )
Taxation 10 (33,129 ) (4,081 )
Profit/(loss) for the financial year 31,813 (28,021 )
Profit/(loss) attributable to:
Owners of the parent 31,813 (28,021 )
Notes pence per share pence per share
Earnings/(loss) per share
Basic 11 7.8 (6.8 )
Diluted 11 7.7 (6.8 )
All amounts relate to continuing operations.
The notes on pages 137 to 176 form an integral part of these consolidated financial statements.
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Profit/(loss) for the financial year 31,813 (28,021 )
Other comprehensive (expense)/income:
Items that will not be reclassified to profit or loss
Change in fair value of cash flow hedges
2
23 (74 ) –
Related tax movements
2
10 14 –
Remeasurement of post-employment benefit assets and obligations
2
21 12,862 (45,263 )
Related tax movements
2
10 (2,525 ) 7,927
Other comprehensive income/(expense) for the year, net of tax 10,277 (37,336 )
Total comprehensive income/(expense) for the year, net of tax 42,090 (65,357 )
Total comprehensive income/(expense) attributable to:
Owners of the parent 42,090 (65,357 )
The notes on pages 137 to 176 form an integral part of these consolidated financial statements.
Non-GAAP measure
Reconciliation of adjusted EBITDA
1
to operating profit/(loss) for the financial year for continuing operations
Notes
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Operating profit/(loss) 69,934 (19,612 )
Add back exceptional items
1
impacting operating profit 5 (5,230 ) 35,257
Add back depreciation and amortisation 6 38,349 36,477
Adjusted EBITDA
1
1 Alternative performance measures are described in Note 3 to the consolidated financial statements.
2 Impacting retained earnings.
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CONSOLIDATED BALANCE SHEET
Notes
31 December
2021
£’000
31 December
2020
£’000
Assets
Non-current assets
Intangible assets 12 94,625 95,163
Property, plant and equipment 13 375,800 371,395
Right-of-use assets 27 25,114 26,653
Post-employment benefit asset 21 57,754 43,576
Current assets
Inventories 14 72,821 63,386
Current tax recoverable 3,199 –
Trade and other receivables 15 64,756 58,906
Cash and cash equivalents 61,199 19,552
Assets held for sale 16 875 1,186
Total assets 756,143 679,817
Current liabilities
Trade and other payables 18 (103,132 ) (85,423 )
Derivative financial instrument 23 (74 ) –
Borrowings 19 (333 ) (135 )
Lease liabilities 27 (6,860 ) (6,728 )
Current tax payable – (421 )
Provisions 20 (1,869 ) (5,303 )
(112,268 ) (98,010 )
Net current assets 90,582 45,020
Total assets less current liabilities 643,875 581,807
Non-current liabilities
Borrowings 19 (99,738 ) (88,601 )
Lease liabilities 27 (20,324 ) (22,348 )
Deferred tax liabilities 22 (92,352 ) (64,755 )
Provisions 20 (8,232 ) (8,232 )
(220,646 ) (183,936 )
Total liabilities (332,914 ) (281,946 )
Net assets 423,229 397,871
Equity
Share capital 24 4,096 4,096
Share premium 25 4,458 4,333
Retained earnings 785,609 759,483
Cash flow hedging reserve 25 (74 ) –
Merger reserve 25 (369,119 ) (369,119 )
Own shares held 25 (1,741 ) (922 )
Total equity 423,229 397,871
The notes on pages 137 to 176 form an integral part of these consolidated financial statements.
These financial statements were approved by the Board and authorised for issue on 08 March 2022. They were signed on its behalf by:
J Hudson C McLeish
Director Director
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Notes
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Cash flow
hedging
reserve
£’000
Merger reserve
(See Note 25)
£’000
Own shares held
(see Note 25)
£’000
Total equity
attributable to
owners
£’000
Balance at 1 January 2021 4,096 4,333 759,483 – (369,119 ) (922 ) 397,871
Profit for the year – – 31,813 – – – 31,813
Other comprehensive income/(expense) – – 10,351 (74 ) – – 10,277
Total comprehensive income/(expense) for
the year – – 42,164 (74 ) – – 42,090
Transactions with owners:
Share based payments 26 – – 890 – – – 890
Deferred tax on share based payment 22 – – 35 – – – 35
Equity dividends paid 31 – – (16,780 ) – – – (16,780 )
Purchase of own shares – – – – – (1,309 ) (1,309 )
Issue of share capital on exercise of
share options 24 – 125 – – – – 125
Issue of own shares held on exercise of
share options – – (183 ) – – 490 307
At 31 December 2021 4,096 4,458 785,609 (74 ) (369,119 ) (1,741 ) 423,229
Notes
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Merger reserve
(See Note 25)
£’000
Own shares held
(see Note 25)
£’000
Total equity
attributable to
owners
£’000
Balance at 1 January 2020 4,093 7,441 822,321 (369,119 ) (435 ) 464,301
Loss for the year – – (28,021 ) – – (28,021 )
Other comprehensive expense – – (37,336 ) – – (37,336 )
Total comprehensive expense for the year – – (65,357 ) – – (65,357 )
Transactions with owners:
Share based payments 26 – – 527 – – 527
Current tax on share based payment – – 24 – – 24
Deferred tax on share based payment 22 – – (686 ) – – (686 )
Transfer from Share premium account – (3,108 ) 3,108 – – –
Purchase of own shares – – – – (1,020 ) (1,020 )
Issue of own shares held on exercise of share options 25 – – (454 ) – 536 82
Issue of share capital to Employee Benefit Trust 24 3 – – – (3 )
At 31 December 2020 4,096 4,333 759,483 (369,119 ) (922 ) 397,871
The notes on pages 137 to 176 form an integral part of these consolidated financial statements.
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CONSOLIDATED CASH FLOW STATEMENT
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Cash flow from operating activities
Cash generated from operations (Note 28) 100,497 55,215
Interest paid (2,928 ) (4,189 )
Other interest paid – lease liabilities (1,107 ) (1,215 )
Tax paid (9,960 ) (6,478 )
Net cash inflow from operating activities 86,502 43,333
Cash flows from investing activities
Purchase of property, plant and equipment (24,960 ) (24,072 )
Proceeds from sale of property, plant and equipment 874 1,165
Proceeds from sale of property, plant and equipment – exceptional 2,882 2,808
Purchase of intangible assets (6,402 ) –
Settlement of deferred consideration (413 ) –
Interest received – 10
Net cash outflow from investing activities (28,019 ) (20,089 )
Cash flows from financing activities
Dividends paid (Note 31) (16,780 ) –
Drawdown of borrowings 170,000 100,000
Repayment of borrowings (160,000 ) (115,000 )
Debt issue costs (1,563 ) –
Repayment of lease liabilities (7,575 ) (6,848 )
Proceeds from issuance of equity shares 432 141
Purchase of own shares by Employee Benefit Trust (1,309 ) (1,020 )
Net cash outflow from financing activities (16,795 ) (22,727 )
Net increase in cash and cash equivalents 41,688 517
Cash and cash equivalents at beginning of the year 19,552 19,494
Exchange losses on cash and cash equivalents (41 ) (459 )
Cash and cash equivalents at end of the year 61,199 19,552
Discontinued operations did not have material cash flows during the current or prior period.
The notes on pages 137 to 176 form an integral part of these consolidated financial statements.
Reconciliation of changes in cash and cash equivalents to movement in net debt
1
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Net increase in cash and cash equivalents 41,688 517
Proceeds from borrowings (170,000 ) (100,000 )
Repayment of borrowings 160,000 115,000
Non-cash debt movement (1,335 ) 609
Effect of foreign exchange rate changes (41 ) (459 )
Movement in net debt
1
Net debt
1
at start of year (69,184 ) (84,851 )
Net debt
1
at end of year (Note 3) (38,872 ) (69,184 )
Comprising:
Cash and cash equivalents 61,199 19,552
Short-term borrowings (Note 19) (333 ) (135 )
Long-term borrowings (Note 19) (99,738 ) (88,601 )
(38,872 ) (69,184 )
1 Alternative performance measures are described in Note 3 to the consolidated financial statements.
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1. Summary of significant accounting policies
Authorisation of financial statements
The consolidated financial statements of Ibstock plc, which has a premium
listing on the London Stock Exchange, for the year ended 31 December 2021
were authorised for issue in accordance with a resolution of the Directors on
08 March 2022. The balance sheet was signed on behalf of the Board by
J Hudson and C McLeish.
Ibstock plc is a public company limited by shares , which is incorporated in the
is 09760850.
The principal activities of the Company and its subsidiaries (the ‘Group’) and
the nature of the Group’s operations are set out in the Strategic Report on
pages 1 to 73.
Basis of preparation
The consolidated financial statements of Ibstock plc for the year ended
31 December 2021 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and as applied in accordance with the
provisions of the Companies Act 2006. Following the end of the Brexit
transition period on 31 December 2020, IFRS Standards as adopted by the
EU were brought into UK law and UK-adopted IFRS Standards came into
effect for the period beginning 1 January 2021.
These consolidated financial statements are prepared on a going concern
basis, under the historical cost convention. The consolidated financial
statements are presented in Sterling and all values are rounded to the nearest
thousand, except where otherwise indicated.
The significant accounting policies are set out below.
Basis of consolidation
The consolidated financial statements comprise the financial statements
of Ibstock plc and its subsidiaries as at 31 December 2021. The financial
statements of subsidiaries are prepared for the same reporting period as
the Parent Company, using consistent accounting policies. All intra-Group
balances, transactions, income and expenses and profit and losses resulting
from intra-Group transactions have been eliminated in full. Subsidiaries are
consolidated from the date on which the Group obtains control and cease to
be consolidated from the date on which the Group no longer retains control.
Details of all the subsidiaries of the Group are given in Note 29.
The subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity.
Going concern
Given the continued improving trading performance of the Group, positive
external market indicators and reduced level of uncertainty looking forward,
management does not believe that the going concern basis of preparation
represents a significant judgement.
The Group’s financial planning and forecasting process consists of a budget
for the next year followed by a medium term projection. The Directors have
reviewed and robustly challenged the assumptions about future trading
performance, operational and capital expenditure and debt requirements
within these forecasts including the Group’s liquidity and covenant forecasts,
and stress testing within their going concern assessment.
In arriving at their conclusion on going concern, the Directors have given due
consideration to whether the funding and liquidity resources above are
sufficient to accommodate the principal risks and uncertainties faced by the
Group, particularly those relating to economic conditions and operational
disruption. The strategic report sets out in more detail the Group’s approach
and risk management framework.
Group forecasts have been prepared which reflect both actual experienced
impact of the pandemic and estimates of the future reflecting
macroeconomic and industry-wide projections, as well as matters specific to
the Group. Total capacity in the clay network is expected to increase by 5%
by mid-2022.
During the final quarter of the 2021 year, the Group completed the
refinancing of its March 2023 £215 million Revolving Credit Facility (RCF),
replacing the existing facility with the issuance of £100 million of private
placement notes with maturities of between seven and twelve years and a
£125 million RCF for an initial four-year tenor, with a one-year extension
option. At 31 December 2021 the RCF was undrawn.
Covenants under the Group’s RCF and private placement notes require
leverage of no more than three times net debt to adjusted EBITDA
1
, and
interest cover of no less than four times, tested bi-annually at each reporting
date with reference to the previous twelve months. At 31 December 2021
covenant requirements were met with significant headroom.
The key uncertainty faced by the Group is the industry demand for its
products in light of macroeconomic factors. Accordingly, the Group has
modelled financial scenarios which see reduction in the industry demands
for its products thereby stress testing the Group’s resilience. For each
scenario, cash flow and covenant compliance forecasts have been prepared.
In the most severe but plausible scenario industry demand for Clay products
is projected to be around 30% lower than 2019 in the 2022 year, which is
broadly in line with the sales reduction seen in the Clay division in 2020
during the height of the pandemic, recovering to around 5% lower in 2023.
In addition, the Group has prepared a reverse stress test to evaluate the
industry demand reduction at which it would be likely to breach the debt
covenants, before any further mitigating actions were taken. This test
indicates that, at a reduction of 45% in sales volumes in 2022 and 36% in
the first half of 2023 versus 2019 levels, the Group would be at risk of
breaching its covenants.
In the severe but plausible low case, the Group has sufficient liquidity and
headroom against its covenants, with covenant headroom expressed as a
percentage of annual adjusted EBITDA
1
being in excess of 38%.
The Directors consider this to be a highly unlikely scenario, and in the event
of an anticipated covenant breach, the Group would seek to take further
steps to mitigate, including the disposal of valuable land and building assets
and restructuring steps to reduce the fixed cost base of the Group.
Having taken account of the various scenarios modelled, and in light of the
mitigations available to the Group, the Directors are satisfied that the Group
has sufficient resources to continue in operation for a period of not less than
12 months from the date of this report. Accordingly, the consolidated
financial information has been prepared on a going concern basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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1. Summary of significant accounting policies continued
New or amended accounting standards
In the current year, the Group has applied the below amendments to IFRS
Standards and Interpretations issued by the Board that are effective for an
annual period that begins on or after 1 January 2021. Their adoption has
not had any material impact on the disclosures or on the amounts reported
in these financial statements.
• Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform;
and
• Amendments to IFRS 9, IAS 39 and IFRS 7 – Interest rate benchmark reform
– Phase 2.
The amendments listed above did not have any impact on the amounts
recognised in prior periods and are not expected to significantly affect the
current or future periods.
Additionally, the Group assessed the IFRS Interpretations Committee’s
March 2021 decision regarding the accounting for configuration and
customisation costs in a cloud service as immaterial.
Future accounting standards
At the date of authorisation of these financial statements, the Group has
not applied the following new and revised IFRS Standards that have been
issued but are not yet effective:
• Amendment to IFRS 16 Leases – Covid related rent concessions –
extension of the practical expedient beyond 30 June 2021;
• A number of narrow scope amendments to IFRS 3, IAS 16, IAS 37 and
some annual improvements to IFRS 1, IFRS 9, IAS 41 and IFRS 16;
• Amendments to IAS 1 – Presentation of financial statements on
classification of liabilities;
• Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8; and
• Amendments to IAS 12 – Deferred tax related to assets and liabilities
arising from a single transaction.
The Directors do not expect that the adoption of the Standards listed above
will have a material impact on the financial statements of the Group in the
current or future reporting periods.
Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-makers (CODMs).
The CODMs, who are responsible for allocating resources and assessing
performance of the operating segments, have been identified as the
Chief Executive Officer and Chief Financial Officer of the Group.
The CODMs review the key profit measure, Adjusted EBITDA
1
, as defined
in Note 3, and consider the Group’s reportable segments to be Clay and
Concrete.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment in
which the entity operates (“the functional currency”). The consolidated
financial statements are presented in Sterling (£), which is the Group’s
presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where items are remeasured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation
at year end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement, except when
deferred in other comprehensive income as qualifying cash flow hedges and
qualifying net investment hedges. Foreign exchange gains and losses that
relate to borrowings and cash and cash equivalents are presented in the
income statement within net finance costs. All other foreign exchange gains
and losses are presented within the income statement.
Property, plant and equipment
Property, plant and equipment is stated at the cost to the Group less
depreciation. The cost of property, plant and equipment includes directly
attributable costs. Costs incurred to gain access to mineral reserves (typically
stripping costs) are capitalised and depreciated over the life of the quarry,
which is based on the estimated tonnes of raw material to be extracted
from the reserves. Management assesses the Group’s assets separating their
cost into (i) the local statutory books’ historical cost and (ii) the associated
fair value uplift, which arose on the acquisition of the Group in February
2015.
Details of cost and accumulated depreciation are included in Note 13.
Depreciation is provided on the cost of all assets (except assets in the course
of construction and land), so as to write off the cost, less residual value, on a
straight line basis over the expected useful economic life of the assets
concerned, as follows:
Asset classification Useful life
Land Not depreciated
Freehold buildings 20 – 40 years
Plant, machinery and equipment 5 – 40 years
Mineral reserves Amortised on a usage basis
Exploration expenditure relates to the initial search for mineral deposits with
economic potential and is not capitalised. Evaluation expenditure relates to
a detailed assessment of deposits or other projects that have been identified
as having economic potential and in obtaining permissions to extract clay.
Capitalisation of evaluation expenditure within ‘Mineral reserves’
commences when there is a high degree of confidence that the Group will
determine that a project is commercially viable, i.e., the project will provide a
satisfactory return relative to its perceived risks, and therefore it is considered
probable that future economic benefits will flow to the Group.
Mineral reserves may be declared for an undeveloped project before its
commercial viability has been fully determined. Evaluation costs may
continue to be capitalised during the period between declaration of reserves
and approval to extract clay as further work is undertaken in order to refine
the development case to maximise the project’s returns.
The carrying values of property, plant and equipment are reviewed for
impairment if events or changes in circumstances indicate the carrying
value may not be recoverable. The carrying values of capitalised evaluation
expenditure are reviewed for impairment by management.
Useful lives and residual values are reviewed at each balance sheet date
and revised where expectations are significantly different from previous
estimates. In such cases, the depreciation charge for current and future
periods is adjusted accordingly.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Intangible assets
Separately acquired brands and non-contractual customer relationships are
shown at historical cost. Brands and customer relationships have a finite useful
life and are carried at cost less accumulated amortisation. Amortisation is
calculated using the straight line method to allocate the cost of brands and
customer relationships over their estimated useful lives as follows:
Asset classification Useful life
Brands 10 – 50 years
Customer contracts and relationships 10 – 20 years
Licences include carbon allowances, which are held at cost and surrendered,
as required, to meet carbon emissions in excess of the Group’s granted
allowances. Emissions in the year in excess of granted allowances are
recognised within accruals at the expected cost of settling the related liability.
For implementation costs in a cloud service contract which are distinct from
the related software, the costs are recognised as an expense as incurred
(as the service is received) unless it gives rise to a separate intangible asset.
The costs of services provided by the cloud vendor, which are not distinct
from access to the software are recognised as an expense over the period of
access to the software.
Goodwill is initially recognised and measured as the excess of consideration
transferred over the fair value of the net assets acquired in a business
combination. Goodwill is not amortised but is reviewed for impairment at least
annually. For the purpose of impairment testing, goodwill is allocated to the
Group’s cash-generating unit (or groups of cash-generating units) expected to
benefit from the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the cash-generating unit is less than the carrying
amount of the unit, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of
the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Any impairment loss recognised for goodwill is not reversed in a subsequent
period. On disposal of a cash-generating unit, the attributable amount of
goodwill is included in the determination of the profit or loss on disposal.
There has been no impairment of goodwill in the current or prior year.
For further details, see Note 12.
Impairment of non-financial assets
Assets that are subject to amortisation or depreciation, such as brands and
non-contractual customer relationships and property, plant and equipment,
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised immediately within the income statement
for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less
costs of disposal and value-in-use.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash inflows (cash-generating
units). Prior impairments of non-financial assets (other than goodwill) are
reviewed for possible reversal at each reporting date at which point they are
immediately recognised within the income statement.
For assets excluding goodwill, an assessment is made at each reporting date
whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the
Group estimates the asset’s or CGU’s recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the
assumptions used to determine the asset’s recoverable amount since the
last impairment was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had
no impairment loss been recognised for the asset in prior years. As the Group
has no assets carried at revalued amounts, such reversal is recognised in the
consolidated income statement.
For further details, see Note 17.
Leases
The Group as lessee
The Group leases various offices, warehouses, factories, mobile plant and
cars. Rental contracts are typically made for fixed periods of three to twenty
years, but may have extension options, as described below, and contain a
range of terms and conditions. The lease agreements do not impose any
covenants, but leased assets may not be used as security for borrowing
purposes. Management also reviews other contracts entered into during the
period to assess whether they may contain embedded leases. Such contracts
are, or contain, a lease if it conveys the right to control the use of a specified
asset (e.g., plant, property and equipment) over a period in exchange for
consideration.
Leases are recognised as right-of-use assets and a corresponding liability at
the date which the leased asset is available for use by the Group. Each lease
payment is allocated between the liability and the finance cost.
The finance cost is charged to the income statement over the lease period, so
as to produce a constant periodic rate of interest on the remaining balance
of the liability for each period. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight line basis.
Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following
lease payments:
• fixed payments (including in-substance fixed payments), less any
incentives receivable;
• variable lease payments that are based on an index or rate;
• the exercise price of a purchase option, if the lessee is reasonably certain
to exercise that option; and
• payments of penalties for terminating the lease, if the lease term reflects
the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the lessee’s incremental borrowing
rate is used, being the rate that the lessee would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any
lease incentives received;
• any initial direct costs; and
• restoration costs.
Payments associated with short-term leases and leases of low-value assets
are recognised on a straight line basis as an expense within the income
statement. Short-term leases are leases with a term of 12 months or less.
Low-value assets generally comprise IT equipment.
(i) Variable lease payments
Some property leases contain variable lease payment terms that are linked
to the extraction of raw materials. For individual properties, a percentage of
the lease payments are on the basis of the variable payment terms.
Variable lease payments that are dependent upon the level of extraction are
recognised within the income statement in the period in which the
extraction which triggers that payment occurs.
31 December 2020, the value of variable lease payments and the impact
of movements in the Group’s levels of extraction are insignificant.
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1. Summary of significant accounting policies continued
(ii) Extension and termination options
Extension and termination options are included in a small number of property
leases across the Group. The majority of such options are exercisable only by
the Group and not by the respective lessor. In determining the lease term,
management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option.
Extension options (or periods after termination options) are only included
in the future cash outflows if the lease is reasonably certain to be extended
(or not terminated). This assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this assessment
and that is within the control of the lessee. During the current financial
period, the financial effect of revising lease terms to reflect the effect of
exercising extension and termination options was insignificant.
The impact of rental concessions granted as a result of the COVID-19
pandemic are not material to the Group.
The Group as lessor
The Group enters into lease agreements as a lessor with respect to some of
its surplus properties.
Leases for which the Group is a lessor are classified as either finance or
operating leases. Whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee, the contract is classified
as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and
the sub-lease as two separate contracts. The sub-lease is classified as a
finance or operating lease by reference to the right-of-use asset arising from
the head lease.
Rental income from operating leases is recognised on a straight line basis
over the term of the relevant lease. Initial direct costs incurred in negotiating
and arranging an operating lease are added to the carrying amount of the
leased asset and recognised on a straight line basis over the lease term.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost includes all costs incurred in bringing each product to its present
location and condition. Raw materials, consumables and goods for resale are
recognised on a weighted average cost basis, while work in progress and
finished goods are held at direct cost plus an appropriate proportion of
production overheads. Net realisable value is the estimated selling price in
the ordinary course of business, less applicable variable selling expenses.
The Group records provisions for obsolete and slow-moving inventory on the
basis of historical sales values and volumes, respectively. These inventory
provisions are updated regularly to reflect management’s most recent data.
Investments and other financial assets
Classification
The Group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through other
comprehensive income (OCI) or through profit or loss); and
• those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the
financial assets and the contractual terms of the cash flows.
The Group reclassifies debt investments when and only when its business
model for managing those assets changes.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade
date, the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
On derecognition of a financial asset measured at amortised cost, the difference
between the asset’s carrying amount and the sum of the consideration received
and receivable is recognised within the income statement.
Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or loss
(FVPL), transaction costs that are directly attributable to the acquisition of
the financial asset.
Forward energy contracts
The Group has a long-standing practice of locking in prices for gas and
electricity used in its production activities and achieves this by committing
to a certain volume of consumption in future months which creates a
contractual commitment and secures a certain price.
The Group takes delivery of the energy and so the Directors believe it meets
the requirements of the own use scope exemption in IFRS 9 Financial
Instruments. As such, these contracts are not held on the balance sheet at
fair value but rather treated as executory contracts and energy purchases
are accounted for in the period in which the gas and electricity is consumed,
at the contracted price.
During the prior year, the significant reduction in activity levels, due to the
COVID-19 pandemic and resulting production facility shutdowns, resulted in
the Group having energy contracts which failed the own use scope
exemption in IFRS 9 (“the failed own use contracts”). These failed own use
contracts were fair valued (“marked to market”) and recognised as a
derivative liability on the balance sheet and any gains or losses were
recognised as a result of measuring these energy contracts at fair value.
As at 31 December 2020, all failed own use contracts had expired with all
contracted energy consumed during the year ended 31 December 2020.
The Directors concluded that the net settling of such contracts and the
resultant failed own use contracts was an isolated incident and did not
preclude the Group’s future use of the own use exemption for similar
contracts in the current or future periods. There were no failed own use
contracts in the current year.
Derivatives and hedging
The Group enters into derivative transactions to manage its exposure to
foreign exchange rate risks on major capital expenditure projects.
Derivatives are recognised initially at fair value on the date the contract is
entered into and subsequently remeasured to their fair value at each
reporting date.
A derivative with a positive fair value is recognised as a financial asset,
whereas a derivative with a negative fair value is recognised as a financial
liability. Derivatives are not offset in the financial statements unless the
Group has both the legal right and intention to offset.
A derivative is presented as a non-current asset or a non-current liability if
the remaining maturity of the instrument is more than 12 months and is not
expected to be realised or settled within 12 months. Other derivatives are
presented as current assets or current liabilities.
The Group designates certain derivatives as hedging instruments in respect
of foreign currency risk.
These derivatives are designated and effective as hedging instruments, in
which event the timing of the transfer within the balance sheet or recognition
in the income statement depends on the nature of the hedge relationship.
Hedges of foreign exchange risk on firm commitments are accounted for as cash
flow hedges. At the inception of the hedge relationship, the Group documents
the relationship between the hedging instrument and the hedged item, along
with its risk management objectives and its strategy for undertaking various
hedge transactions. The Group documents whether the hedging instrument
is effective in offsetting the hedged risk, by confirming that:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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• there is an economic relationship between hedged items and the hedging
instrument;
• the effect of credit risk does not dominate the value changes that result
from that economic relationship; and
• the planned ratio of hedge: hedge item is the same as the actual ratio of
hedge: hedge item.
The effective portion of changes in the fair value of derivatives that are
designated as cash flow hedges is recognised in other comprehensive
income and accumulated under the cash flow hedging reserve. Any gain
or loss relating to the ineffective portion of the hedge is recognised
immediately in profit or loss. Amounts previously recognised in other
comprehensive income and accumulated in equity are reclassified to the
related capital expenditure project within the balance sheet in the periods
when the underlying hedged item affects the balance sheet.
The Group discontinues hedge accounting should the hedge relationship
cease to meet the qualifying criteria, or when the hedging instrument
expires, is sold, terminated or exercised.
Debt instruments
Subsequent measurement of debt instruments depends on the Group’s
business model for managing the asset and the cash flow characteristics of
the asset. The measurement category into which the Group classifies its
debt instruments is amortised cost.
Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at
amortised cost. Interest income from these financial assets is included in
finance income using the effective interest rate method. Any gain or loss
arising on derecognition is recognised directly in the income statement.
Impairment
The Group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and fair value
through other comprehensive income. The impairment methodology
applied depends on whether there has been a significant increase in credit
risk. For trade receivables, the Group applies the simplified approach
permitted by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables, see Note 23 for further details.
No signficant impairment losses were recorded in the current or prior year.
Should they arise, impairment losses are presented as a separate line item in
the Group consolidated income statement.
Trade and other receivables
Trade receivables are amounts due from customers for merchandise sold in the
ordinary course of business. Collection is expected in one year or less and trade
receivables are classified as current assets accordingly. Trade receivables are
measured at amortised cost using the effective interest method, less provision
for impairment. In the current and prior periods, the Group did not engage in
material factoring arrangements.
Cash and cash equivalents
In the consolidated balance sheet, cash and cash equivalents reflects cash
in hand at the balance sheet date, deposits held at call with banks, other
short-term highly liquid investments with original maturities of three
months or less.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities where payment is due within one year or
less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. In the
current and prior periods, the Group did not engage in material reverse
factoring arrangements.
Borrowings
The Group’s borrowings comprise a revolving credit facility (RCF) and private
placement loan notes. Borrowings are recognised initially at fair value, net of
directly attributable transaction costs incurred. All other costs are expensed
as incurred. Borrowings are subsequently carried at amortised cost.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
Finance cost on borrowings is treated as an expense in the income statement,
with the exception of interest costs incurred on the financing of major projects,
which are capitalised within property, plant and equipment, where material.
There were no borrowing costs capitalised during the current or prior years.
Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility
will be drawn down. In this case, the fee is deferred until the draw-down occurs.
To the extent there is evidence that it is probable that some or all of the facility
will be drawn down, the fee is capitalised as a prepayment for liquidity services
and amortised over the period of the facility to which it relates. Fees relating to
short-term variations in financing conditions and terms are recognised in profit
or loss in the period in which they are incurred.
An exchange of debt instruments with substantially different terms is accounted
for as an extinguishment of the original financial liability and the recognition of
a new financial liability. Similarly, a substantial modification of the terms of an
existing financial liability is accounted for as an extinguishment of the original
financial liability and the recognition of a new financial liability.
Employee benefits
The Group operates various post-employment schemes, including both
defined benefit and defined contribution pension plans.
Pensions
A defined contribution plan is a pension plan under which the Group pays
fixed contributions into a separate entity. The Group has no legal or
constructive obligations to pay further contributions if the fund does not
hold sufficient assets to pay all employees the benefits relating to employee
service in the current and prior periods.
For defined contribution plans, the Group pays contributions to publicly or
privately administered pension insurance plans on a mandatory, contractual
or voluntary basis. The Group has no further payment obligations once the
contributions have been paid. The Group recognises contributions payable
to defined contribution plans in exchange for employee services in employee
benefit expense.
A defined benefit plan is a pension plan that is not a defined contribution
plan. Typically defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation.
The amount recognised in the balance sheet in respect of defined benefit
pension plans is the fair value of plan assets less the present value of the
defined benefit obligation at the end of the reporting period. The defined
benefit obligation is calculated annually by independent actuaries using the
projected unit credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated
in the currency in which the benefits will be paid, and that have terms to
maturity approximating to the terms of the related pension obligation.
Where defined benefit schemes have a surplus, the surplus is recognised
if future economic benefits are available to the entity in the form of
a reduction in the future contributions or a right to refund.
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1. Summary of significant accounting policies continued
Past-service costs are recognised immediately in the income statement.
The net interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of plan assets,
taking account of any changes in the defined benefit asset/liability during
the period as a result of contributions and benefit payments. This cost is
included in interest expense in the income statement.
When the benefits of a defined benefit plan are changed or when the plan is
curtailed, the change in the present value of the defined benefit obligation
arising that relates to the plan amendment or curtailment is recognised
immediately within the income statement on its occurrence.
Before determining the past service cost (including curtailment gains or
losses) or a gain or loss on settlement, the net defined benefit obligation
(asset) is remeasured using the current fair value of plan assets and current
actuarial assumptions (including current market interest rates and other
current market prices) reflecting the benefits offered under the plan before
the plan amendment, curtailment or settlement.
Remeasurement gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited in other
comprehensive income in the period in which they arise.
Provisions
Provisions are recognised when: the Group has a present legal or constructive
obligation as a result of past events; it is probable that an outflow of
resources will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the risk-assessed
expenditures expected to be required to settle the obligation using a pre-tax
risk-free discount rate to reflect current market assessments of the time
value of money. The increase in the provision due to passage of time is
recognised as interest expense.
The restoration provision is to fund future obligations at a number of sites
that the Group is associated with and where the Group has any constructive
obligation to restore once it has fully utilised the site. Provisions for
dilapidations are recognised on a lease-by-lease basis and are based on the
Group’s discounted best estimate of the likely committed cash outflows.
Revenue
Revenue represents the fair value of consideration receivable for goods
supplied by the Group, exclusive of local sales tax and trade discounts and
after eliminating sales within the Group. All of revenue is attributable to the
principal activities of the Group being the manufacture and sale of concrete
Revenue is recognised when the Group’s performance obligation is satisfied,
which is usually when the promised goods are transferred to the customer.
In a bill and hold arrangement, revenue is recognised when a customer has
obtained control of a product, which arises when all of the following criteria
are met: (a) the reason for the arrangement is substantive, (b) the product
has been identified separately as belonging to the customer, (c) the product
is ready for delivery in accordance with the terms of the arrangement, and
(d) the Company does not have the ability to use the product or sell the
product to another customer.
Customer rebates
Provisions for rebates to customers are based upon the terms of individual
contracts, with rebates granted based upon a tiered structure dependent upon
an individual customer’s purchases during the rebate period. Customer rebates
are recorded in the same period as the related sales as a deduction from revenue
and the vast majority are coterminous with the Group’s financial year end.
For those individual contracts that are non-coterminous, the Group estimates
the provision for this variable consideration based on the most likely outcome
amount determined by the terms of each agreement at the time the revenue
is recognised. At the financial year end, due to settlement of rebates with
customers, the level of remaining estimation is limited and the risk of a
significant reversal of recognised revenue is negligible.
Other income
Other income is attributable to rental income from properties, landfill and
gas activity. Other expenses represent associated expenses. This is not
deemed to be a principal activity of the Group. Rental income received under
operating leases is recognised on a straight line basis over the term of the
relevant lease. Assets leased by the Group to third parties are depreciated
in line with the Group’s normal depreciation policy.
Research and development
Research and development expenditure is written off as incurred, except
that development expenditure incurred on an individual project is capitalised
when its future recoverability can reasonably be regarded as assured.
Any expenditure carried forward is amortised in line with the expected
future sales from the related project. Development costs capitalised were
not material in either the current or prior years.
Exceptional items
1
The Group presents as exceptional on the face of the income statement
those items of income and expense which, because of the materiality,
nature and/or expected infrequency of the events giving rise to them, merit
separate presentation to allow shareholders to further understand elements
of financial performance in the period, so as to facilitate comparison with
future years and to assess trends in financial performance. Specifically,
in the prior period, management further defined its policy criteria for the
recognition of exceptional items
1
in relation to the COVID-19 pandemic.
See Note 5 for further details of exceptional items
1
recognised in the
current period.
The Directors believe that the use of alternative performance measures
(APMs), such as exceptional items
1
, provide useful information for
shareholders. The Group uses APMs to aid comparability of its performance
and position between periods. The APMs used represent measures used by
management and Board to monitor performance and plan. Additionally,
certain APMs are used by the Group in setting Director and management
remuneration. Detailed descriptions of APMs used throughout these
financial statements are included within Note 3.
APMs used by the Group are generally not defined under IFRS and may not
be comparable with similarly titled measures reported by other companies.
It is not believed that adjusted measures are a substitute for, or superior to,
statutory measurements.
Government grants
Government grants are recognised within the income statement on a
systematic basis over the periods in which the Group recognises as expenses
the related costs for which the grants are intended to compensate.
Grants are presented as part of the income statement and are deducted
in reporting the related expense.
Government grants that are receivable as compensation for expenses or
losses already incurred or for the purpose of giving immediate financial
support to the Group with no future related costs are recognised within
the income statement in the period in which they become receivable.
Government grants are not recognised until there is reasonable assurance
that the Group will comply with the conditions attached to them and that
the grants will be received.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax.
Tax is recognised in the income statement except for tax relating to items
recognised in other comprehensive income or directly in equity.
Current tax is the expected tax payable or recoverable on the taxable
income or loss for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of
previous years.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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During the ordinary course of business, there are transactions and
calculations for which the ultimate tax determination may be uncertain.
The calculation of the tax charge therefore necessarily involves a degree of
estimation and judgement. The tax liabilities are based on estimates of
whether additional taxes will be due and tax assets are recognised on the
basis of probable future recoverability. This requires management to exercise
judgement based on its interpretation of tax laws and the likelihood of
settlement of tax liabilities or recoverability of tax assets. To the extent that
the final outcome differs from the estimates made, tax adjustments may be
required which could have an impact on the tax charge and profit for the
year in which such a determination is made.
Deferred tax is provided on temporary differences between the tax bases
of assets and liabilities and their carrying amounts included in the financial
statements. However, deferred tax liabilities are not recognised if they arise
from the initial recognition of goodwill; deferred tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss.
The amount of deferred tax is calculated using tax rates that have been
enacted or substantively enacted at the balance sheet date and are expected
to apply when the related deferred tax asset is realised or deferred tax liability
is settled. Deferred tax assets and liabilities are not subject to discounting.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available, against which the temporary
difference can be utilised.
Deferred tax liabilities are provided on taxable temporary differences arising
from investments in subsidiaries except for deferred tax liabilities where the
timing of the reversal of the temporary difference is controlled by the Group
and it is probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets are recognised on deductible temporary differences
arising from investments in subsidiaries only to the extent that it is probable
the temporary difference will reverse in the future and there is sufficient
taxable profit available against which the temporary difference can be
utilised. Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets against current tax liabilities
where these have been levied by the same tax authority on either the same
taxable entity or different taxable entities within the Group where there is
an intention to settle the balances on a net basis.
Dividend distribution
Dividend distributions to Ibstock plc shareholders are recognised in the Group’s
financial statements in the period in which the dividends are approved in
a general meeting, or when paid in the case of an interim dividend.
Assets held for sale
Non-current assets and disposal groups are classified as held for sale only if
available for immediate sale in their present condition and a sale is highly
probable and expected to be completed within one year from the date of
classification. Such assets and disposal groups are measured at the lower
of carrying amount and fair value less the costs to sell. Non-current assets
classified as held for sale (or that form part of a disposal group classified
as held for sale) are not depreciated or amortised.
Share based payments
The Group operates a number of equity-settled share based compensation
plans, under which the entity receives services from employees as
consideration for equity instruments (for example options or shares) of the
Ibstock plc. The fair value of the employee services received in exchange for
the grant of the equity instruments is recognised as an expense. The total
amount to be expensed is determined by reference to the fair value of
the instruments granted:
• including any market performance conditions (for example, the Group’s
share price);
• excluding the impact of any service and non-market performance vesting
conditions (for example, profitability, sales growth targets and remaining
an employee of the entity over a specified time period); and
• including the impact of any non-vesting conditions (for example, the
requirement for employees to save or hold shares for a specific period
of time).
At the end of each reporting period, the Group revises its estimates of the
number of instruments that are expected to vest based on the non-market
vesting conditions and service conditions. It recognises the impact of the
revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity. In addition, in some circumstances
employees may provide services in advance of the grant date and therefore
the grant date fair value is estimated for the purposes of recognising the
expense during the year between service commencement period and grant
date. For the equity-settled share based payment transactions, the fair value
of the share instruments granted is derived from established option pricing
models. Further details on share based payments are set out in Note 26.
2. Critical accounting judgements and key sources of
estimation uncertainty
In applying the Group’s accounting policies, as described in Note 1, the
Directors are required to make judgements (other than those involving
estimations) that have a significant impact on the amounts recognised and to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses. Due to the inherent uncertainty in making
these critical judgements and estimates, actual outcomes could be different.
Critical judgements in applying the Group’s accounting policies
The following critical judgement, that the Directors made in the process of
applying the Group’s accounting policies, has the most significant effect on
the amounts recorded in the financial statements.
Exceptional items
1
Exceptional items
1
are disclosed separately in the financial statements
where the Directors believe it is necessary to do so to provide further
understanding of the financial performance of the Group. The Group
presents as exceptional items
1
on the face of the income statement those
items of income and expense which, because of the materiality, nature and/
or expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand elements of financial
performance in the financial period, so as to facilitate comparison with
future years and further assess underlying trends in financial performance.
Further details on exceptional items
1
are given within Note 5.
Key sources of estimation uncertainty
Estimates and underlying assumptions are reviewed by management on an
ongoing basis, with revisions recognised in the period in which the estimates
are revised, and in any future period affected. The areas that may have a
significant risk of resulting in a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are as follows:
Defined benefit pension schemes – valuation of liabilities
For defined benefit schemes, management is required to make annual
estimates and assumptions about future changes in discount rates,
inflation, the rate of increase in pensions in payment and life expectancy.
The assumptions used may vary from year to year, which would affect future
net income and net assets. Any differences between these assumptions and
the actual outcome also affect future net income and net assets. In making
these estimates and assumptions, management considers advice provided
by external advisers, such as actuaries. These assumptions are subject to
periodic review.
Note 21 describes the assumptions used together with an analysis of the
sensitivity of the defined benefit scheme liability (£560.3 million at
31 December 2021) to changes in key assumptions.
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3. Alternative performance measures
Alternative performance measures (APMs) are disclosed within the consolidated financial statements where management believes it is necessary to do so to
provide further understanding of the financial performance of the Group.
Management uses APMs in its own assessment of the Group’s performance and in order to plan the allocation of internal capital and resources. Certain APMs are
used in the remuneration of management and Executive Directors, as set out in the Directors’ Remuneration Report on page 97 to 121.
APMs serve as supplementary information for users of the financial statements and it is not intended that they are a substitute for, or superior to, statutory
measures. None of the APMs are outlined within IFRS and they may not be comparable with similarly titled APMs used by other companies.
Within the notes to the consolidated financial statements, all APMs are identified with a superscript.
Exceptional items
The Group presents as exceptional on the face of the income statement those items of income and expense which, because of their materiality, nature and/
or expected infrequency of the events giving rise to them, merit separate presentation to allow users of the financial statements to understand further
elements of financial performance in the year. This facilitates comparison with future periods and to assess trends in financial performance over time.
Specifically, in the prior period, management further defined its policy criteria for the recognition of exceptional items in relation to the COVID-19 pandemic.
Details of all exceptional items are disclosed in Note 5.
Adjusted EBITDA and Adjusted EBITDA margin
Adjusted EBITDA is the earnings before interest, taxation, depreciation and amortisation adjusted for exceptional items. Adjusted EBITDA margin is Adjusted
EBITDA shown as a proportion of revenue.
The Directors regularly use Adjusted EBITDA and Adjusted EBITDA margin as key performance measures in assessing the Group’s profitability. The measures are
considered useful to users of the financial statements as they represent common APMs used by investors in assessing a company’s operating performance, when
comparing its performance across periods as well as being used in the determination of Directors’ variable remuneration.
A full reconciliation of Adjusted EBITDA is included at the foot of the Group’s consolidated statement of comprehensive income within the consolidated financial
statements. Adjusted EBITDA margin is included within Note 4.
Adjusted EPS
Adjusted EPS is the basic earnings per share adjusted for exceptional items, fair value adjustments being the amortisation and depreciation on fair value
uplifted assets and non-cash interest, net of taxation (at the Group’s adjusted effective tax rate).
The Directors have presented Adjusted EPS as they believe the APM represents useful information to the user of the financial statements in assessing the
performance of the Group, when comparing its performance across periods, as well as being used within the determination of Directors’ variable
remuneration. Additionally, the APM is used by management when determining the proposed level of ordinary dividend.
A full reconciliation is provided in Note 11.
Net debt and Net debt to adjusted EBITDA (“leverage”) ratio
Net debt is defined as the sum of cash and cash equivalents less total borrowings at the balance sheet date. This does not include lease liabilities arising upon
application of IFRS 16 in order to align with the Group’s banking facility covenant definition.
Net debt to adjusted EBITDA is the ratio of net debt to adjusted EBITDA. The net debt to adjusted EBITDA ratio definition removes the benefit of IFRS 16
within adjusted EBITDA so as to align the definition with the Group’s banking facility covenant definition.
The Directors disclose these APMs to provide information as a useful measure for assessing the Group’s overall level of financial indebtedness and when
comparing its performance and position across periods.
Net debt is shown at the foot of the Group consolidated cash flow statement on page 136.
A full reconciliation of the net debt to adjusted EBITDA ratio (also referred to as ‘leverage’) is set out below:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Net debt (38,872) (69,184)
Adjusted EBITDA 103,053 52,122
Impact of IFRS 16 (7,171) (6,832)
Adjusted EBITDA prior to IFRS 16 95,882 45,290
Ratio of net debt to adjusted EBITDA 0.4x 1.5x
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Return on capital employed
Return on capital employed (ROCE) is defined as earnings before interest and taxation adjusted for exceptional items as a proportion of the average capital
employed (defined as net debt plus equity excluding the pension surplus). The average is calculated using the period end balance and corresponding preceding
reported period end balance (year end or interim).
The Directors disclose the ROCE APM in order to provide users of the financial statements with an indication of the relative efficiency of capital use by the Group
over the period, assessing performance between periods as well as being used within the determination of executives’ variable remuneration.
The calculation of ROCE is set out below:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Adjusted EBITDA 103,053 52,122
Less depreciation (31,409) (29,046)
Less amortisation (6,940) (7,431)
Adjusted earnings before interest and taxation 64,704 15,645
Average net debt 46,169 85,974
Average equity 412,761 394,471
Average pension (50,138) (52,396)
Average capital employed 408,792 428,049
Return on capital employed 15.8% 3.7%
Average capital employed figures comprise:
31 December
2021
£’000
30 June
2021
£’000
31 December
2020
£’000
30 June
2020
£’000
Net debt 38,872 53,466 69,184 102,764
Equity 423,229 402,293 397,871 391,070
Pension 57,754 42,521 43,576 61,216
Like-for-like revenue
The like-for-like revenue measure sets out the Concrete segment performance without the contribution of the Longley Concrete operations, which were
acquired in July 2019. When comparing the current year’s performance with that of 2019, the Directors have included this APM in order to remove the
distortions arising from ownership for a period of fewer than 12 months in a comparative period. A reconciliation of like-for-like sales and like-for-like adjusted
EBITDA margin is set out below:
Year ended
31 December
2021
£’000
Year ended
31 December
2019
£’000
Concrete segment revenue 128,421 108,787
Contribution from Longley operations (22,289) (8,328)
Like-for-like Concrete segment revenue 106,132 100,459
Like-for-like adjusted EBITDA margin
The like-for-like adjusted EBITDA measure sets out the Concrete segment performance without the contribution of the Longley Concrete operations, which
were acquired in July 2019. When comparing the current year’s performance with that of 2019, the Directors have included this APM in order to remove the
distortions arising from ownership for a period of fewer than 12 months in a comparative period. A reconciliation of like-for-like adjusted EBITDA margin is set
out below:
Year ended
31 December
2021
£’000
Year ended
31 December
2019
£’000
Concrete segment adjusted EBITDA 21,740 21,942
Contribution from Longley operations (1,272) (767)
Like-for-like adjusted EBITDA 20,468 21,175
Like-for-like revenue (defined, above) 106,132 100,459
Concrete segment like-for-like adjusted EBITDA margin 19.3% 21.1%
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3. Alternative performance measures continued
Adjusted effective tax rate (ETR)
The Group presents an adjusted effective tax rate (Adjusted ETR) within its Financial Review. This is disclosed in order to provide users of the financial
statements with a view of the rate of taxation borne by the Group prior to the impact of non-deductible exceptional items (defined above) and the changes
in taxation rates on deferred taxation. In the prior year, due to the loss before taxation, the Adjusted ETR was based upon an average rate using the two most
recent financial periods. A reconciliation of the adjusted ETR to the statutory rate of taxation in the UK is included in Note 10.
Cash flow related APMs
The Group presents an adjusted cash flow statement within its Financial Review on page 67. This is disclosed in order to provide users of the financial
statements with a view of the Group’s operating cash generation before the impact of cash flows associated with exceptional items (as set out in Note 5) and
with the inclusion of interest, lease payment and property disposal related cash flows.
The Directors use this APM table to allow shareholders to further understand the Group’s cash flow performance in the period, to facilitate comparison with
future years and to assess trends in financial performance. This table contains a number of APMs, as described below and reconciled in the following table:
Adjusted change in working capital
Adjusted change in working capital represents the statutory change in working capital adding back cash inflows associated with exceptional items arising in
the year of £2.0 million (2020: removing cash outflows of £2.7 million).
Adjusted operating cash flow
Adjusted operating cash flows are the cash flows arising from operating activities adjusted to exclude cash flows relating to exceptional items of £1.7 million
(2020: £9.7 million) and inclusion of cash flows associated with interest income, proceeds from the sale of property, plant and equipment and lease payments
reclassified from investing or financing activities of £12.2 million (2020: £4.1 million).
Cash conversion
Cash conversion is the ratio of Adjusted operating cash flow (defined above) to Adjusted EBITDA (defined above). The Directors believe this APM provides a
useful measure of the Group’s efficiency of its cash management during the period.
Adjusted free cash flow
Adjusted free cash flow represents Adjusted operating cash flow (defined above) less total capital expenditure. The Directors use the measure of Adjusted free cash
flow as a measure of the funds available to the Group for the payment of distributions to shareholders, for use within M&A activity and other investing and financing
activities.
Reconciliation of statutory cash flow statement to adjusted cash flow statement
Year ended 31 December 2021
Statutory
£’000
Exceptional
£’000
Reclassification
£’000
Adjusted
£’000
Adjusted EBITDA 108,283 (5,230) – 103,053
Change in working capital 3,330 2,028 – 5,358
Impairment charges (5,797) 5,797 – –
Net interest (4,035) – (1,563) (5,598)
Tax (9,960) – – (9,960)
Post-employment benefits (789) – (961) (1,750)
Other (4,530) (860) (9,673) (15,063)
Adjusted operating cash flow 86,502 1,735 (12,197) 76,040
Cash conversion 74%
Total capex (24,960) – – (24,960)
Adjusted free cash flow 61,542 1,735 (12,197) 51,080
Year ended 31 December 2020
Statutory
£’000
Exceptional
£’000
Reclassification
£’000
Adjusted
£’000
Adjusted EBITDA 16,865 35,257 – 52,122
Change in working capital 19,945 (2,650) – 17,295
Impairment charges 20,382 (20,382) – –
Net interest (4,189) 414 10 (3,765)
Tax (6,478) – – (6,478)
Post-employment benefits 1,584 (2,902) (870) (2,188)
Other (3,561) – (3,220) (6,781)
Adjusted operating cash flow 44,548 9,737 (4,080) 50,205
Cash conversion 96%
Total capex (24,072) – – (24,072)
Adjusted free cash flow 20,476 9,737 (4,080) 26,133
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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4. Segment reporting
The Directors consider the Group’s reportable segments to be the Clay and Concrete divisions.
The key Group performance measure is adjusted EBITDA
1
, as detailed below, which is defined in Note 3. The tables, below, present revenue and adjusted
EBITDA
1
and profit/(loss) before taxation for the Group’s operating segments.
Included within the unallocated and elimination columns in the tables below are costs including share based payments and Group employment costs.
Unallocated assets and liabilities are pensions, taxation and certain centrally held provisions. Eliminations represent the removal of inter-company balances.
Transactions between segments are carried out at arm’s length. There is no material inter-segmental revenue and no aggregation of segments has been applied.
Year ended 31 December 2021
Clay
£’000
Concrete
£’000
Unallocated &
elimination
£’000
Total
£’000
Total revenue 280,235 128,421 – 408,656
Adjusted EBITDA
1
90,634 21,740 (9,321) 103,053
Adjusted EBITDA margin
1
32.3% 16.9% 25.2%
Exceptional items
1
impacting operating profit (see Note 5) 5,347 (117) – 5,230
Depreciation and amortisation pre fair value uplift (22,101) (5,981) (135) (28,217)
Incremental depreciation and amortisation following fair value uplift (5,834) (4,298) – (10,132)
Net finance costs (809) (202) (3,981) (4,992)
Profit/(loss) before tax 67,237 11,142 (13,437) 64,942
Taxation (33,129)
Profit for the year 31,813
Consolidated total assets 547,472 145,478 63,193 756,143
Consolidated total liabilities (155,589) (56,764) (120,561) (332,914)
Non-current assets
Consolidated total intangible assets 61,084 33,541 – 94,625
Property, plant and equipment 329,288 46,512 – 375,800
Right-of-use assets 15,438 9,430 246 25,114
Total 405,810 89,483 246 495,539
Total non-current asset additions 30,834 6,035 – 36,869
Included within the revenue of our Concrete operations during the year ended 31 December 2021 were £1.2 million of bill and hold transactions.
At 31 December 2021, £0.7 million of inventory relating to these sales remained on the Group’s premises. The unallocated segment balance includes the fair
value of the Group’s share based payments and associated taxes of (£0.9 million), plc Board and other plc employment costs (£5.8 million), pension costs
(£1.0 million) and legal/administrative expenses (£3.3 million). These costs have been offset by research and development taxation credits (£1.7 million).
During the current year, one customer accounted for greater than 10% of Group revenues with £47.2 million of sales within the Clay division.
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4. Segment reporting continued
Year ended 31 December 2020
Clay
£’000
Concrete
£’000
Unallocated &
elimination
£’000
Total
£’000
Total revenue 213,197 102,975 – 316,172
Adjusted EBITDA
1
43,968 15,055 (6,901) 52,122
Adjusted EBITDA margin
1
20.6% 14.6% 16.5%
Exceptional items
1
impacting operating profit (see Note 5) (29,498) (2,518) (3,241) (35,257)
Depreciation and amortisation pre fair value uplift (20,056) (6,454) (136) (26,646)
Incremental depreciation and amortisation following fair value uplift (5,152) (4,679) – (9,831)
Net finance costs (1,687) (638) (2,003) (4,328)
(Loss)/profit before tax (12,425) 766 (12,281) (23,940)
Taxation (4,081)
Loss for the year (28,021)
Consolidated total assets 504,106 132,310 43,401 679,817
Consolidated total liabilities (127,573) (54,584) (99,789) (281,946)
Non-current assets
Consolidated total intangible assets 57,652 37,511 – 95,163
Property, plant and equipment 325,859 45,536 – 371,395
Right-of-use assets 15,993 10,279 381 26,653
Total 399,504 93,326 381 493,211
Total non-current asset additions 23,610 5,911 – 29,521
Included within the revenue of our Clay operations during the year ended 31 December 2020 were £1.2 million of bill and hold transactions. At 31 December
2020, £0.3 million of inventory relating to these sales remained on the Group’s premises. The unallocated segment balance includes the fair value of the
Group’s share based payments and associated taxes of (£0.5 million), plc Board and other plc employment costs (£3.8 million), pension costs (£0.9 million)
and legal/administrative expenses (£3.0 million). These costs have been offset by research and development taxation credits (£1.2 million). During the prior
year, no one customer accounted for greater than 10% of Group revenues.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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5. Exceptional items
1
Year ended 31
December 2021
£’000
Year ended 31
December 2020
£’000
Exceptional income from/(cost of) sales
Impairment reversal/(charge) – Property, plant and equipment 5,623 (16,263)
Impairment reversal/(charge) – Right-of-use assets 174 (1,681)
Impairment charge – working capital – (2,438)
Total impairment reversal/(charge) (Note 17) 5,797 (20,382)
Energy contract losses – (5,160)
Redundancy costs – (6,073)
Other costs associated with closure of sites (2,302) (447)
Total exceptional income from/(cost of) sales 3,495 (32,062)
Exceptional administrative expenses:
Pension closure costs – legal and actuarial costs (Note 21) – (1,902)
GMP equalisation costs (Note 21) – (1,000)
Redundancy costs (100) (2,224)
COVID-19 administrative expenses (187) (818)
Exceptional items relating to discontinued operations – (59)
Total exceptional administrative expenses (287) (6,003)
Exceptional profit on disposal of property, plant and equipment 2,022 2,808
Exceptional items
1
impacting operating profit 5,230 (35,257)
Exceptional finance costs (Note 8) – (414)
Total exceptional items
1
5,230 (35,671)
2021
Included within the current year are the following exceptional items
1
:
Exceptional income from sales
Impairment reversals arose in the current period following the Group’s announcements during 2021 to redevelop its Atlas and Nostell manufacturing sites
within the Clay segment, together with the decision to retain the leased Northwich administrative facility within the Concrete segment. These decisions
utilise assets that were impaired in the prior year following the Group’s restructuring programme in response to the deterioration in near-term demand
outlook caused by the COVID-19 pandemic. Due to the initial impairment charge treatment as exceptional items, the reversal is similarly categorised as
exceptional.
Other costs associated with the closure of sites represent other expenses incurred as a result of the Group’s restructuring programme announced during the
prior year. These costs include site security, insurance, rates and other standing charges in connection with closed sites. These costs were categorised as
exceptional due to the non-recurring nature of the event giving rise to them.
Exceptional administration expenses
Exceptional redundancy costs incurred in the current year relate to residual costs of redundancy of employees within the Group’s selling, general and
administrative (SG&A) functions following the Group’s announced restructuring programme in June 2020. The costs are net of saving achieved by the Group
as a result of decisions to retain employees, who had initially been notified of redundancy. These net costs were categorised as exceptional due to the
non-recurring nature of the event giving rise to the costs.
COVID-19 administrative costs in the current period relate to costs incurred in acquiring personal protective and health screening equipment associated with
the return to work, and the costs of acquiring information technology equipment to be used in the short-term during the COVID-19 lockdown. These costs
were categorised as exceptional in 2H 2020 and 1H 2021 due to the non-recurring nature of the event giving rise to them. It is not expected that similar costs
would be treated as exceptional in the future, due to the normalisation of operating conditions.
Exceptional profit on disposal of property, plant and equipment
The exceptional profit on disposal in the current year relates to the sale of the Group’s surplus property near Kingswinford. The profit on disposal has been
categorised as exceptional due to the materiality of the amount recorded.
2020
Included within the prior year are the following exceptional items
1
:
Exceptional cost of sales
Impairment charges arising in the prior year relate to the impairment of non-current assets and working capital items, as set out in Note 17. Due to the
materiality and non-recurring nature, these costs were categorised as exceptional.
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5. Exceptional items
1
continued
Energy contract losses arose during the prior period as a result of losses on contracts for the purchase of the Group’s energy requirements, which due to the
COVID-19 lockdown (and consequent sharp reduction in energy usage as the plant network was taken down during 2Q 2020), resulted in contractual energy
positions in excess of production needs. These costs were categorised as exceptional due to their anticipated non-recurring nature.
Redundancy costs related to employees engaged in production activities following the Group’s announced restructuring activity in response to the
deterioration in near-term demand outlook caused by COVID-19. These costs were categorised as exceptional due to their materiality, and the unusual and
non-recurring nature of the events giving rise to the costs.
Costs associated with the closure of sites related to other costs incurred as a result of the Group’s restructuring decisions during the prior year. These costs
included closed site security and decommissioning activities.
Exceptional administration expenses
Pension closure costs which arose in the prior year, comprised legal and actuarial costs associated with the pension data cleansing exercise and subsequent pension
buy-in transaction completed as part of the Group’s pension de-risking exercise following the closure of the scheme to future accrual from 1 February 2017.
These costs were categorised as exceptional due to the non-recurring nature of the event giving rise to them.
Guaranteed Minimum Pension (GMP) equalisation costs arose as a result of the High Court ruling in November 2020 requiring pension schemes to revisit
individual transfer payments since May 1990 to identify any additional value due as a result of GMP equalisation.
Further detail of exceptional pension related costs is included within Note 21. These pension costs were assessed as exceptional due to the non-recurring
nature of the event giving rise to the costs.
Exceptional redundancy costs, which arose in the prior period, related to costs of redundancy of employees within the Group’s selling, general and
administrative (SG&A) functions following the Group’s announced restructuring in June 2020. The costs were treated as exceptional due to their materiality,
and the unusual and non-recurring nature of the event giving rise to the costs.
COVID-19 related administrative costs related to costs incurred in acquiring personal protective and health screening equipment associated with the return to
work, and the costs of acquiring information technology equipment to be used in the short term during the COVID-19 lockdown. These costs were
categorised as exceptional due to the non-recurring nature of the event giving rise to the costs.
Exceptional items
1
relating to discontinued operations comprised residual costs incurred during the prior year in concluding the disposal of the Group’s
Glen-Gery operations, which were sold in November 2018.
Exceptional profit on disposal of property, plant and equipment
The exceptional profit on disposal in the prior year related to the finalisation of overage payments contained within the sale and purchase agreement
associated with the Group’s past disposal of its property in Bristol. The profit on disposal was categorised as exceptional due to the materiality of the
amounts recorded.
Exceptional finance costs
Exceptional finance costs in the prior year included professional fees associated with the Group’s renegotiation of banking covenant requirements and
application to join the CCFF (see Note 19), both of which were incurred as a result of the impact of COVID-19 on the Group’s financial position and prospects.
These costs were categorised as exceptional due to the non-recurring nature of the event giving rise to the costs.
Tax on exceptional items
1
2021
In the current period, the reversal of impairment charges relating to property, plant and equipment and right-of-use assets is not tax deductible but gives rise
to a deferred tax charge in the current period.
The costs associated with the closure of sites, COVID-19 administrative expenses and redundancy costs are tax deductible in the current period.
The profit on disposal of property, plant and equipment gives rise to a chargeable gain which is taxable in the current period.
2020
In the prior period, the COVID-19 related energy contract losses, redundancy costs, COVID-19 administrative expenses and exceptional finance costs were all
tax deductible.
The working capital impairment costs were also tax deductible, primarily in the current period.
The COVID-19 related impairment charges arising on non-current assets, pension closure costs and GMP equalisation costs are not tax deductible but gave
rise to a deferred tax credit in the prior period and as such are not tax rate impacting.
Costs associated with the closure of sites are tax deductible either in the current or a future period. A deferred tax credit was recognised for costs that are tax
deductible in a future period.
The profit on disposal of property, plant and equipment gave rise to a chargeable gain which was taxable in the prior period.
Costs associated with the discontinued operations are not tax deductible.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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6. Operating profit
Operating profit includes the effect of crediting/(charging):
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Changes in inventories of finished goods and work in progress 4,384 (20,531)
Raw material and consumables used (77,684) (50,060)
Employee benefit expense (Note 7) (77,720) (65,049)
Depreciation – Property, plant and equipment (Note 13) (24,013) (21,326)
Depreciation – Right-of-use assets (Note 27) (7,396) (7,720)
Amortisation (Note 12) (6,940) (7,431)
Exceptional cost of sales (Note 5) 3,495 (32,062)
Other production costs (78,293) (63,550)
Total cost of sales (264,167) (267,729)
Transportation expenses (38,829) (31,427)
Other employee benefit expenses (Note 7) (28,171) (22,499)
Profit on disposal of property, plant and equipment (Note 13) 1,638 113
Advertising costs (987) (931)
Operating lease income 157 198
Exceptional administrative expenses (Note 5) (287) (6,003)
Exceptional profit on disposal of property, plant and equipment (Note 5) 2,022 2,808
Auditor’s remuneration
During the year the Group obtained the following services from the Company’s auditor.
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Fees payable to the Company's auditor and its associates for the audit of Parent
Company and consolidated financial statements: 180 180
Fees payable to Company's auditor and its associates for other services to the Group:
- Audit of the Company's subsidiaries 599 530
Total audit fees 779 710
- Audit related assurance services 75 80
Total non-audit fees 75 80
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7. Employees and Directors
Employee benefit expenses for the Group during the period:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Wages and salaries – gross 90,120 80,853
Furlough payments received – (10,482)
Voluntary repayment of furlough payments 1,759 –
Wages and salaries – net amount recognised within the income statement 91,879 70,371
Social security costs 8,013 8,046
Pensions costs – defined benefit plans (Note 21) 961 3,772
Pensions costs – defined contribution plans (Note 21) 4,148 4,832
Share based payments (Note 26) 890 527
105,891 87,548
In the current year, the Group voluntarily returned £1.8 million (2020: £nil) of furlough funds received during 2020 under the UK Government’s Coronavirus
Job Retention Scheme (CJRS) in respect of colleagues subsequently made redundant.
Average monthly number of people (including Executive Directors) employed:
Year ended
31 December
2021
Year ended
31 December
2020
Sales staff 249 259
Administrative staff 209 187
Production staff 1,648 1,803
2,106 2,249
Key management compensation:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Short-term employee benefits 3,180 1,617
Post-employment benefits 216 207
Share-based payment 405 259
3,801 2,083
Key management personnel has been defined as the Board of Ibstock plc, together with the Group’s Executive Leadership Team (ELT). Members of the ELT
are set out on page 84 of the Annual Report and Accounts 2021. Details of remuneration for Ibstock plc Directors,including the highest paid director, are
presented in the Remuneration Report on pages 97 to 121. The aggregate remuneration of the Directors for the purposes of the financial statements is
£2.2 million (year ended 31 December 2020: £1.4 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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8. Finance costs
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Interest costs:
Interest payable on Revolving Credit Facility (4,184) (3,106)
Interest payable on Private Placement (338) –
Foreign exchange translations (41) (459)
Total interest payable on bank borrowings (4,563) (3,565)
Other interest payable (161) (110)
Interest expense on financial liabilities at amortised cost (4,724) (3,675)
Interest on lease liabilities (1,107) (1,215)
Unwinding of discount on provisions/changes in discount rate (Note 20) – (762)
Unwinding of discount on contingent consideration – (39)
Exceptional finance cost (Note 5) – (414)
Other interest payable (1,107) (2,430)
Total finance costs (5,831) (6,105)
2021
In the current year, Revolving Credit Facility (RCF) interest expense comprised £1.7 million of interest on funds drawn down (2020: £2.3 million), £1.0 million
of facility commitment fees (2020: £0.3 million) and £1.5 million of deal fee amortisation (2020: £0.5 million). The Group refinanced its debt facilities in
November 2021 fully repaying the existing RCF and expensing the remaining capitalised arrangement fees of £0.7 million. These facilities were replaced with
the issuance of £100 million of private placement notes from Pricoa Private Capital and a new £125 million RCF facility provided by a syndicate of five banks.
See Note 19 for additional disclosure.
2020
Included within the prior year were finance costs in respect of leasing liabilities and associated with the Group’s Revolving Credit Facility (see Note 19), which
incurred interest at a 1.00% – 2.50% margin during the course of the year and the recognition of interest in respect of leasing liabilities as a result of
the implementation of IFRS 16. Additionally, in the year ended 31 December 2020, finance costs of £0.4 million were incurred in relation to the costs of
renegotiation of the RCF’s covenant requirements and associated with the Group’s successful application for qualification for funding under the UK
Government’s Covid Corporate Financing Facility (CCFF), which were treated as exceptional.
In both the current and prior years, borrowing costs related to capital expenditure are insignificant and have not been capitalised.
9. Finance income
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Interest income:
Net interest income arising on the UK pension scheme (Note 21) 527 1,767
Net unwinding of discount on provisions/change in discount rate (Note 20) 312 –
Other interest receivable – 10
Total finance income relating to continuing operations 839 1,777
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10. Taxation
Analysis of income tax charge
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Current tax on profit/(loss) for the year 8,726 1,577
Adjustments in respect of prior period (718) 163
Total current tax 8,008 1,740
Deferred tax on profit/(loss) for the year 2,709 (5,165)
Impact of change in tax rate 21,628 7,667
Adjustments in respect of prior period 784 (161)
Total deferred tax 25,121 2,341
33,129 4,081
Income tax recognised within the consolidated statement of other comprehensive income
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Tax adjustments arising on the UK pension scheme assets and liabilities: Deferred tax charge/
(credit) 2,525 (7,927)
Tax adjustments arising on gains and losses relating to cash flow hedges: Deferred tax
charge/(credit) (14) –
Income tax recognised within the consolidated statement of changes in equity
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Current tax credit on share-based payments – (24)
Deferred tax (credit)/charge on share-based payments (35) 686
The tax expense for the period differs from the applicable standard rate of corporation tax in the UK of 19% for the year ended 31 December 2021
(2020: 19%). The differences are explained below:
Year ended
31 December
2021
£’000 Percentage
Year ended
31 December
2020
£’000 Percentage
Profit/(loss) before tax from continuing operations 64,942 100% (23,940) 100%
Profit/(loss) before tax multiplied by the rate of corporation tax in the UK 12,339 19.00% (4,549) 19.00%
Effects of:
Expenses not deductible 510 0.79% 948 (3.96%)
Accounting profit on disposal of property, plant and equipment (333) (0.51%) – –
Permanent benefit of super deduction on capital expenditure (829) (1.28%) – –
Changes in estimates relating to prior periods 66 0.10% 2 (0.01%)
Adjusted ETR 11,753 18.10% (3,599) 15.03%
Exceptional accounting profit on disposal of property, plant and equipment (252) (0.39%)
Non-tax deductible exceptional costs associated with discontinued operations – – 13 (0.05%)
Rate change on deferred tax provision 21,628 33.30% 7,667 (32.03%)
Total taxation expense from continuing operations 33,129 51.01% 4,081 (17.05%)
There are no income tax consequences for the Company in respect of dividends declared prior to the date of authorisation of these financial statements and
for which a liability has not been recognised.
On 3 March 2021, the Chancellor of the Exchequer delivered his Budget Statement. The measures announced include an increase in the standard rate of
corporation tax from 19% to 25% with effect from 1 April 2023. This rate change gives rise to an increase in the Group’s net deferred tax liabilities of
£21.6 million. This restatement is recognised in full in the current period and results in an increase in the effective tax rate from 17.7% to 51.0%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Another key measure announced in the Budget was the introduction of a new temporary enhancement to tax relief on capital expenditure on plant and
machinery, known as the ‘super-deduction’. This new measure gives rise to both a permanent and timing cash tax benefit in the year of expenditure at the
current tax rate of 19%. This overall benefit is reduced in part due to the associated deferred tax liability being recognised at 25%, being the future tax rate at
which it is expected to unwind. The overall net tax benefit of the super-deduction is £0.2 million.
The Group expects its effective tax rate in the future to be affected by the outcome of any future tax audits as well as the impact of changes in tax law.
11. Earnings per share
The basic earnings per share figures are calculated by dividing profit for the year attributable to the Parent shareholders by the weighted average number of
Ordinary Shares in issue during the year. The diluted earnings per share figures allow for the dilutive effect of the conversion into Ordinary Shares of the
weighted average number of options outstanding during the year. Where the average share price for the year is lower than the option price the options become
anti-dilutive and are excluded from the calculation.
The number of shares used for the earnings per share calculation are as follows:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Basic weighted average number of Ordinary Shares 409,118 409,333
Effect of share incentive awards and options 1,494 1,989
Diluted weighted average number of Ordinary Shares 410,612 411,322
The calculation of adjusted earnings per share
1
is a key measurement used by management that is not defined by IFRS. The adjusted earnings per
share
1
measures should not be viewed in isolation, but rather treated as supplementary information.
Adjusted earnings per share
1
figures are calculated as the Basic earnings per share adjusted for exceptional items
1
, fair value adjustments being the
amortisation and depreciation on fair value uplifted assets and non-cash interest expenses. Adjustments are made net of the associated taxation impact
at the adjusted effective tax rate. A reconciliation of the statutory profit to that used in the adjusted earnings per share
1
calculations is as follows:
Year ended
31 December
2021
Total 2021
£’000
Year ended
31 December
2020
Total
£’000
Profit/(loss) for the period attributable to the Parent shareholders 31,813 (28,021)
Add back exceptional items
1
(Note 5) (5,230) 35,671
Add back tax credit on exceptional items
1
695 (6,119)
Add fair value adjustments (Note 4) 10,132 9,831
Less tax credit on fair value adjustments (1,834) (1,693)
Less net non-cash interest (606) (954)
Add back tax expense on non-cash interest 110 164
Add back impact of deferred taxation rate change 21,628 7,667
Adjusted profit for the period attributable to the Parent shareholders 56,708 16,546
Year ended
31 December
2021
Total
pence
Year ended
31 December
2020
Total
pence
Basic EPS on profit/(loss) for the year 7.8 (6.8)
Diluted EPS on profit/(loss) for the year 7.7 (6.8)
Adjusted basic EPS
1
on profit for the year 13.9 4.0
Adjusted diluted EPS
1
on profit for the year 13.8 4.0
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12. Intangible assets
Goodwill
£’000
Customer
contracts and
relationships
£’000
Brands
£’000
Licences
£’000
Total
£’000
Cost
At 1 January 2020 and 31 December 2020 2,964 92,868 37,159 – 132,991
Additions in the year – – – 6,402 6,402
At 31 December 2021 2,964 92,868 37,159 6,402 139,393
Accumulated amortisation and impairment
At 1 January 2020 – (25,893) (4,504) – (30,397)
Charge for the year – (6,377) (1,054) – (7,431)
At 31 December 2020 – (32,270) (5,558) – (37,828)
Charge for the year – (5,884) (1,056) – (6,940)
At 31 December 2021 – (38,154) (6,614) – (44,768)
Net book amount
At 31 December 2020 2,964 60,598 31,601 – 95,163
At 31 December 2021 2,964 54,714 30,545 6,402 94,625
Amortisation is included within cost of sales in the income statement.
The remaining amortisation period of customer contracts and relationships is five to fifteen years. Licences are expected to be used within one to three years.
At 31 December 2021, the remaining amortisation period of brands is outlined below:
Brands
Net book value
at 31 December
2021
£’000
Remaining
amortisation
period (years)
£’000
Ibstock Brick 27,627 43.20
Forticrete 254 3.20
Supreme 1,634 8.20
Longley 1,030 7.60
30,545
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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13. Property, plant and equipment
Land and
buildings
£’000
Mineral
reserves
£’000
Plant, machinery
and equipment
£’000
Assets in the
course of
construction
(AICC)
£’000
Total
£’000
Cost
At 1 January 2020 191,600 74,068 177,914 11,952 455,534
Additions 1,702 966 12,249 8,822 23,739
Transfer to/(from) AICC 1,272 – 4,813 (6,085) –
Disposals (1,206) – (7,401) – (8,607)
At 31 December 2020 193,368 75,034 187,575 14,689 470,666
Additions 1,404 – 19,153 4,086 24,643
Transfer to/(from) AICC 454 – 1,564 (2,018) –
Transfer to Assets held for sale (875) – – – (875)
Disposals (625) – (5,458) – (6,083)
At 31 December 2021 193,726 75,034 202,834 16,757 488,351
Accumulated depreciation & impairment
At 1 January 2020 (27,065) (15,606) (26,608) – (69,279)
Charge for the year (7,230) (4,459) (9,637) – (21,326)
Disposals 289 – 7,308 – 7,597
Impairment (8,659) (1,083) (6,521) – (16,263)
At 31 December 2020 (42,665) (21,148) (35,458) – (99,271)
Charge for the year (6,137) (4,964) (12,912) – (24,013)
Disposals 204 – 4,906 – 5,110
Impairment reversal 5,623 – – – 5,623
At 31 December 2021 (42,975) (26,112) (43,464) – (112,551)
Net book amount
At 31 December 2020 150,703 53,886 152,117 14,689 371,395
At 31 December 2021 150,751 48,922 159,370 16,757 375,800
Management reviews the business performance based on segments reported in Note 4. Details of impairment reversals recognised in the current year are set out
in Note 17. In the current year, detailed impairment tests were not conducted as management believed that no indication of impairment of assets existed.
A profit on disposal of property, plant and equipment of £3.7 million has been recognised in the year ended 31 December 2021 (year ended 31 December 2020:
profit on disposal of £2.9 million). The current year profit on disposal of property, plant and equipment includes £2.0 million (2020: £2.8 million) of exceptional
profit, as set out in Note 5.
There are no assets which are used as security.
14. Inventories
31 December
2021
£’000
31 December
2020
£’000
Raw materials 27,839 22,994
Work in progress 3,019 2,526
Finished goods 41,963 37,866
72,821 63,386
The replacement cost of inventories is not considered to be materially different from the above values. At 31 December 2021, a provision of £2.8 million
(31 December 2020: £5.1 million) is held against the inventory balance.
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15. Trade and other receivables
31 December
2021
£’000
31 December
2020
£’000
Trade receivables 55,860 55,441
Provision for impairment of receivables (636) (691)
Net trade receivables 55,224 54,750
Prepayments and accrued income 5,383 3,745
Other receivables 4,149 411
Total trade and other receivables 64,756 58,906
16. Assets held for sale
31 December
2021
£’000
31 December
2020
£’000
Assets classified as held for sale as of the beginning of the period 1,186 1,186
Additions 875 –
Disposals (1,186) –
Assets classified as held for sale as of the end of the period 875 1,186
At 31 December 2021, the Group’s surplus property at West Hoathly was categorised as held for sale. In the prior year, the Group’s surplus property in
Staffordshire had been categorised as held for sale. The disposal of this asset was completed in January 2021.
Both the assets were held within the Clay segment.
The fair value of the asset less costs to sell is assessed as exceeding the asset’s carrying value, and there were no liabilities directly associated with the asset
categorised as held for sale in the prior year.
17. Impairment
In the prior year, as a result of the COVID-19 pandemic and the resulting significant decrease in activity levels across the UK construction industry,
management identified indicators of potential impairment and subsequently performed detailed impairment testing across the Group’s cash-generating
units (CGUs).
This assessment of impairment resulted in the recognition of an exceptional impairment charge of £20,382,000 within cost of sales within the Group
consolidated income statement for the year ended 31 December 2020. This impairment of assets valued at historical cost impacted both operating
segments of the Group in the prior year as follows:
Year ended 31 December 2020
Property, plant
and equipment
£’000
Right-of-use
assets
£’000
Working capital
£’000
Total cost of
sales
£’000
Division
Clay 16,107 411 2,363 18,881
Concrete 156 1,270 75 1,501
Total 16,263 1,681 2,438 20,382
A detailed test of impairment was not re-performed during the year ended 31 December 2021 as there were no indicators of impairment.
In the current year, the Directors have assessed whether there is any indication that the impairment loss recognised in the prior period may no longer exist or
may have decreased.
The Group’s announcements in April 2021 and November 2021 regarding the capital expenditure projects at the Atlas and Nostell sites, respectively,
represent significant changes with a favourable effect on the assets held at these sites, which were previously impaired. The site redevelopments at Atlas and
Nostell increase the estimated service potential from the use of certain assets and the Group has estimated the recoverable amounts relating to these assets
recognising an exceptional impairment reversal of £5,623,000 in the year ended 31 December 2021. This reversal recognised in cost of sales arises within the
Clay segment.
Additionally, the Group’s decision to retain the leased Northwich administrative facility within the Concrete segment triggered an impairment reversal within
cost of sales of £174,000 to the related right-of-use asset.
Goodwill
The Group’s goodwill balance of £3.0 million, relating to the acquisition of the Longley CGU in July 2019, was tested for impairment at 30 November 2021.
Based upon management’s detailed testing of the recoverable value of the CGUs to which goodwill is allocated, no impairment was indicated.
Key assumptions used within the testing of goodwill included a pre-tax discount rate of 9.4%, together with a long-term growth rate of 2%. CGU-specific cash
flows for the detailed five-year time period used by management contain a revenue compound growth rate of 4.3%.
Based on management’s projections, no reasonably possible change in key assumptions within the value-in-use (VIU) calculation supporting the impairment
calculation could cause the carrying value of goodwill to exceed its recoverable amount.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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18. Trade and other payables
31 December
2021
£’000
31 December
2020
£’000
Trade payables 55,120 53,191
Deferred consideration – 500
Other tax and social security payable 9,461 8,136
Accruals and other payables 38,551 23,596
103,132 85,423
There are no material differences between the fair values and book values stated above. As at 31 December 2021, all items are payable within six months of
the balance sheet date. At the prior year end, deferred consideration of £0.5 million related to the consideration payable to the vendor following the
acquisition of the Longley businesses completed in July 2019. This deferred consideration was paid in July 2021.
19. Borrowings
31 December
2021
£’000
31 December
2020
£’000
Current
Private placement 333 –
Revolving Credit Facility – 135
333 135
Non-current
Private placement 99,738 –
Revolving Credit Facility – 88,601
99,738 88,601
Total borrowings 100,071 88,736
The Group refinanced its debt facilities in the final quarter of 2021 repaying the existing Revolving Credit Facility (RCF) in November 2021 and expensing
the remaining capitalised arrangement fees of £0.7 million. This expense is presented within finance costs in the consolidated income statement.
These facilities were replaced with the issuance of £100 million of private placement notes from Pricoa Private Capital, with maturities of between seven
and twelve years and an average total cost of funds of 2.19% (range 2.04% – 2.27%). An additional uncommitted shelf facility of up to $88.1 million (or
equivalent in available currencies) was agreed. The facility contains debt covenant requirements of leverage (net debt to adjusted EBITDA
1
) and interest
cover (adjusted EBITDA
1
to net finance charges) of 3 times and 4 times, respectively, tested semi-annually on 30 June and 31 December in respect of the
preceding twelve-month period.
A £125 million RCF facility was provided by a syndicate of five banks for an initial four-year period, with a one-year extension option. Interest is charged at
a margin (depending upon the ratio of net debt to Adjusted EBITDA
1
) of between 160bps and 260bps above SONIA, SOFR or EURIBOR according to the
currency of the borrowing. The facility also includes an additional £50 million uncommitted accordion facility. Based on current leverage the Group will pay
interest under the RCF initially at a margin of 160bps. This facility contains debt covenant requirements that align with those of the private placement with
the same testing frequency.
As at 31 December 2020, the Group held an RCF for £215 million. The RCF, which was due to expire in March 2023, attracted interest at LIBOR plus a margin
ranging from 200 – 350bps depending upon the ratio of net debt to adjusted EBITDA
1
(prior to the impact of IFRS 16). The facility contained debt covenant
requirements of leverage (net debt to adjusted EBITDA
1
) and interest cover (adjusted EBITDA
1
to net finance charge) of 3 times and 4 times, respectively, to
be tested semi-annually.
In the prior year, in order to provide appropriate financial flexibility, the Group agreed covenant amendments with its lending banks. Under these
amendments, the leverage test as at 30 June 2021 only was amended to no more than 3.75 times net debt to adjusted EBITDA
1
. In the prior year, the Group
was confirmed as eligible to access funding under the Covid Corporate Financing Facility (CCFF). The Group did not utilise the CCFF.
The carrying value of financial liabilities have been assessed as materially in line with their fair values.
No security is currently provided over the Group’s borrowings.
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20. Provisions
31 December
2021
£’000
31 December
2020
£’000
Restoration (i) 4,749 4,575
Dilapidations (ii) 4,363 4,913
Restructuring (iii) 100 2,406
Other (iv) 889 1,641
10,101 13,535
Current 1,869 5,303
Non-current 8,232 8,232
10,101 13,535
Restoration (i)
£’000
Dilapidations (ii)
£’000
Restructuring (iii)
£’000
Other (iv)
£’000
Total
£’000
At 1 January 2021 4,575 4,913 2,406 1,641 13,535
Utilised (25) – (2,361) (387) (2,773)
Charged to the income statement 360 20 100 10 490
Unwind of discount/change in rate (161) (151) – – (312)
Reversed unused – (419) (45) (375) (839)
At 31 December 2021 4,749 4,363 100 889 10,101
The current expected timeframe of provision requirements is as follows:
Restoration (i)
£’000
Dilapidations (ii)
£’000
Restructuring (iii)
£’000
Other (iv)
£’000
Total
£’000
Within one year 461 419 100 889 1,869
Between two and five years 186 368 – – 554
Between five and ten years 747 2,544 – – 3,291
Between ten and twenty years 1,329 955 – – 2,284
Over twenty years 2,026 77 – – 2,103
4,749 4,363 100 889 10,101
(i) The restoration provision comprises obligations governing site remediation and improvement costs to be incurred in compliance with applicable
environmental regulations together with constructive obligations stemming from established practice once the sites have been fully utilised. Provisions are
based upon management’s best estimate of the ultimate cash outflows. The key estimates associated with calculating the provision relate to the cost per
acre to perform the necessary remediation work as at the reporting date together with determining the expected year of retirement. Climate change is
specifically considered at the planning stage of developments when restoration provisions are initially estimated. This includes projection of costs
associated with future water management requirements and the form of the ultimate expected restoration activity. Other changes to legislation,
including in relation to climate change, are factored into the provisions when legislation becomes enacted. Estimates are reviewed and updated annually
based on the total estimated available reserves and the expected mineral extraction rates. Whilst an element of the total provision will reverse in the short
to medium term (one to ten years), the majority of the legal and constructive obligations applicable to mineral-bearing land will unwind over a twenty+
year timeframe. In discounting the related obligations, expected future cash outflows have been determined with due regard to extraction status and
anticipated remaining life. Discount rates used are based upon similarly dated UK Government bond rates.
(ii) Provisions for dilapidations arose as contingent liabilities recognised upon the business combination in the period ended 31 December 2015, are
recognised on a lease-by-lease basis and are based on the Group’s best estimate of the likely contractual cash outflows, which are estimated to occur over
the lease term. Third-party valuation experts are used periodically in the determination of the best estimate of the contractual obligation, with expected
cash flows discounted at similarly lived UK Government bond rates.
(iii) The restructuring provision comprises obligations arising as a result of the site closures and associated redundancy costs announced during the year
ended 31 December 2020 following the completion of the Group’s review of operations. The remaining cost is expected to be incurred within one year of
the current year balance sheet date.
(iv) Other provisions include provisions for legal and warranty claim costs, which are expected to be incurred within one year of the balance sheet date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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21. Post-employment benefit obligations
(a) Defined Benefit plan
Analysis of movements in the net obligation during the year:
31 December
2021
£’000
31 December
2020
£’000
Funded plan at 31 December
Opening balance 43,576 88,656
Charge within labour costs and operating profit (961) (3,772)
Interest income 527 1,767
Remeasurement gain/(loss) recognised in the statement of comprehensive income 12,862 (45,263)
Contributions 1,750 2,188
Carried forward at 31 December 57,754 43,576
The Group participates in the Ibstock Pension Scheme (the ‘Scheme’), a defined benefit pension scheme in the UK. The Scheme closed to future accrual from
1 February 2017. The Scheme has four participating employers – Ibstock Brick Limited, Forticrete Limited, Anderton Concrete Products Limited and Figgs Bidco
Limited – and was funded by payment of contributions to a separate Trustee administered fund. The Scheme is a revalued earnings plan and provides benefits to
its members based on their length of membership in the Scheme and their average salary over that period. The Scheme is administered by Trustees who employ
independent fund managers for the investment of the pension scheme assets. These assets are kept entirely separate from those of the Group.
Total annual contributions to the Scheme are based on independent actuarial advice, and are gauged to fund future pension liabilities in respect of service
up to the balance sheet date. The Scheme is subject to an independent actuarial valuation at least every three years using the projected unit method.
The valuation used as at 31 December 2021 has been based on the results of the 30 November 2020 valuation, as updated for changes in demographic
assumptions, as appropriate.
Through its defined benefit pension plan, the Group is exposed to a number of risks that are inherent in such plans and arrangements. There are, however,
no unusual, entity-specific or plan-specific risks, and no significant concentrations of risk. The risks can be summarised as follows:
• The Scheme holds return-enhancing assets (equities) and risk-reducing assets (cash flow-driven and liability-driven investments). Long-term returns from
return-enhancing assets are expected to exceed the returns from risk-reducing assets, although returns and capital values may demonstrate higher
volatility. The return-enhancing assets are not well correlated with movement of the liabilities. As such the deficit may increase as a result of asset volatility.
The current allocation is approximately 24% return-enhancing/76% risk-reducing assets and the Trustees’ long-term target is to reach an allocation of
10% return-enhancing/90% risk-reducing assets.
• Risk of volatility in inflation rates as the majority of benefits are linked to inflation and so increases in inflation will lead to higher liabilities (although in
most cases there are caps in place which protect against extreme inflation). The Scheme’s inflation risk is further mitigated by the asset holdings in the
cash flow-driven and liability-driven investments, as well as insurance policies for the majority of the Scheme’s current pensioner members.
• Longevity risk – increases in life expectancy will increase the period over which benefits are expected to be payable, which increases the Scheme’s liabilities.
The Company and Trustees intend to de-risk the Scheme’s investment strategy by moving towards a position that is predominantly liability matching in
nature based on the Trustees’ long-term funding target. This involves an Asset Liability Management (ALM) framework that has been developed to achieve a
holding in long-term investments that are in line with the obligations under the Scheme.
Within this framework the ALM objective is to match assets to the pension obligations by investing in risk-reducing assets (such as the cash flow-driven and
liability-driven investments). The Company and Trustees actively monitor the investment strategy to ensure that the expected cash flows arising from the
pension obligations are sufficiently met.
In the prior year, the Scheme Trustees completed a partial buy-in transaction with a specialist third-party provider. This transaction, which insures just over
half of the Group’s defined benefit liability, represented a significant step in the Group’s continuing strategy of de-risking its pensions exposure. The cover for
current pensioners at the date of the transaction attracted a buy-in premium of £338.9 million, which was met by the transfer of certain Scheme-invested
assets. The difference between the buy-in premium and the IAS 19 liability for these members has been taken through the consolidated statement of other
comprehensive income in the year ended 31 December 2020 as an asset loss (£25.2 million).
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21. Post-employment benefit obligations continued
The defined benefit pension scheme (measured under IAS 19 Employee Benefits) is in a net surplus position as the Trust Deed provides Ibstock with an
unconditional right to a refund of surplus asset. This assumes the full gradual settlement of plan liabilities over time until all members have left the plan in the
event of a plan wind-up. Furthermore, in the ordinary course of business the Trustees have no right to unilaterally wind up, or otherwise augment the benefits
due to the members of the Scheme. In line with IFRIC 14, a net pension asset has been recognised. The corresponding deferred tax liability should be
measured by applying either the standard rate of corporation tax to the taxable temporary difference, or the 35% rate applicable to refunds from pension
schemes. As the Directors do not consider it likely that there will be a refund from the Scheme, the deferred tax liability of £14.4 million (2020: £8.3 million)
has been measured at the standard rate of corporation tax.
Balance sheet assets/(obligations):
31 December
2021
£’000
31 December
2020
£’000
Equities 77,718 85,337
Liability-driven investment 108,915 90,749
Bespoke cash flow-driven investment 135,431 139,143
Insured pensioners 293,253 320,856
Cash 2,687 3,094
Total market value of assets 618,004 639,179
Present value of Scheme liabilities (560,250) (595,603)
Net Scheme asset 57,754 43,576
All equities have a quoted market price in an active market, whilst cash and cash equivalents are unquoted. Liability-driven investments (LDI) are funds
constructed to reduce the risk within the Scheme. They help to mitigate against movements in inflation or interest rates by moving in a similar way to the
liabilities following market movements. The funds are constructed from gilts and swaps. Equities are valued at Level 1 in the fair value hierarchy and all other
assets held by the Scheme are Level 2 in the hierarchy. The Scheme’s LDI fund is managed by BMO. It is predominantly unquoted and is set up as a ‘bespoke
pooled fund’ with valuations undertaken on a regular basis with rebalancing occurring on a quarterly basis to reflect the movements in the Scheme’s other
assets and cash flows. To reduce volatility risk, an LDI strategy forms part of the Trustees’ management of the Scheme assets, comprising UK gilts,
repurchase agreements and derivatives. At 31 December 2021, the LDI had a net asset value of £108.9 million (2020: £90.7 million). The liabilities comprised
repurchase agreements, which are entered into to better offset the Scheme’s exposure to interest and inflation rates, whilst remaining invested in assets of a
similar risk profile. Additionally, in a prior year, the Group restructured its bond holdings and entered into a bespoke cash flow-driven investment held with
M&G Investment Managers in order to provide a flow of income to the Scheme and meet the liability requirements. This investment is structured in such a
way as to satisfy the requirements of the Ibstock Scheme member population.
The amounts recognised in the income statement are:
31 December
2021
£’000
31 December
2020
£’000
Administrative expenses 961 870
Exceptional administrative expenses (Note 5) – 1,902
Exceptional past service cost (Note 5) – 1,000
Defined contribution scheme costs (Note 21b) 4,148 4,832
Charge within labour costs and operating profit 5,109 8,604
Interest income (527) (1,767)
Total charge to the income statement 4,582 6,837
On 20 November 2020, the High Court ruled that pension schemes will need to revisit individual transfer payments made since 17 May 1990 to check if any
additional value is due as a result of Guaranteed Minimum Pension (GMP) equalisation. This latest judgement follows just over two years on from the
landmark case which confirmed that schemes need to equalise pensions for the effects of unequal GMPs. The most recent ruling is expected to increase
benefits for some members. This increased liabilities by £1.0 million in the prior year. The increase was allowed for as an exceptional past service cost in the
expense recognised in the income statement for the year ended 31 December 2020.
Remeasurements recognised in the statement of comprehensive income:
31 December
2021
£’000
31 December
2020
£’000
Remeasurement (loss)/gain on defined benefit scheme assets (6,195) 36,859
Remeasurement gain/(loss) from changes in financial assumptions 36,925 (89,088)
Remeasurement (loss)/gain from changes in demographic assumptions (1,266) 3,750
Experience (losses)/gains (16,602) 3,216
Other comprehensive income/(expense) 12,862 (45,263)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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Changes in the present value of the defined benefit obligations are analysed as follows:
31 December
2021
£’000
31 December
2020
£’000
Present value of defined benefit obligation at beginning of year (595,603) (537,293)
Past service cost – (1,000)
Interest cost (7,008) (10,396)
Experience (losses)/gains (16,602) 3,216
Benefits paid 23,304 35,208
Remeasurement gain/(loss) arising from change in financial assumptions 36,925 (89,088)
Remeasurement (loss)/gain arising from change in demographic assumptions (1,266) 3,750
Present value of defined benefit obligations carried forward at 31 December (560,250) (595,603)
Changes in the fair value of plan assets are analysed as follows:
31 December
2021
£’000
31 December
2020
£’000
Fair value of pension scheme assets at beginning of the year 639,179 625,949
Interest income 7,535 12,163
Remeasurement (loss)/gain on pension scheme assets (6,195) 36,859
Employer contributions 1,750 2,188
Benefits paid (23,304) (35,208)
Administrative expenses (961) (2,772)
Fair value of pension scheme assets carried forward 618,004 639,179
Plan assets are comprised as follows:
31 December 2021
Quoted
£’000
Unquoted
£’000
Total
£’000
%
£’000
Equity instruments 77,718 – 77,718
– UK equities 21,347 – 21,347 3%
– Overseas equities 56,371 – 56,371 9%
Liability-driven investment – 108,915 108,915 18%
Bespoke cash flow-driven investment 99,683 35,748 135,431 22%
Insured pensioners – 293,253 293,253 47%
Cash and net current assets – 2,687 2,687 1%
Total 177,401 440,603 618,004 100%
31 December 2020
Quoted
£’000
Unquoted
£’000
Total
£’000
%
£’000
Equity instruments 85,337 – 85,337
– UK equities 18,619 – 18,619 3%
– Overseas equities 66,718 – 66,718 10%
Liability-driven investment – 90,749 90,749 14%
Bespoke cash flow-driven investment 107,997 31,146 139,143 22%
Insured pensioners – 320,856 320,856 50%
Cash and net current assets – 3,094 3,094 1%
Total 193,334 445,845 639,179 100%
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21. Post-employment benefit obligations continued
During the year ended 31 December 2021, based on the previous valuation (as at November 2017), a contribution of £1.75 million was made by the
Company in line with the payment schedule agreed with the Trustees of the Ibstock Pension Scheme so that the Scheme’s deficit could be eliminated.
This schedule of contributions is revisited each time the funding valuation is finalised. Under an updated agreement with the Scheme’s trustees, a
contribution level of £1.75 million per annum continues to apply from February 2022, increasing to £2.0 million from 1 December 2023 and then to
£2.25 million from 1 December 2024 until a subsequent valuation and any revised contribution level is agreed. The updated agreement also includes certain
provisions to increase contributions to £2.5 million in the event of a material deterioration in the Scheme’s financial position.
The weighted average duration of the defined benefit obligation is 18 years (2020: 18 years). In the year ended 31 December 2020, other costs related to the
closure of the Scheme to future accrual and activities to de-risk the Scheme in preparation for a buy-in of £1.9 million were incurred and classified as
exceptional (see Note 5).
The principal assumptions used by the actuary in his calculations were:
31 December
2021
Per annum
31 December
2020
Per annum
Discount rate 1.80% 1.20%
RPI inflation 3.40% 2.90%
CPI inflation 2.70% 2.20%
Rate of increase in salary N/A N/A
Rate of increase in pensions in payment 3.75% 3.50%
Commutation factors 17.31 17.31
Mortality assumptions: life expectancy from age 65
For a male currently aged 65 21.8 years 21.6 years
For a female currently aged 65 24.5 years 23.9 years
For a male currently aged 40 23.6 years 23.5 years
For a female currently aged 40 26.3 years 25.9 years
The post-retirement mortality assumptions allow for expected changes to life expectancy. The life expectancies quoted for members currently aged 40
assume that they retire at age 65 (i.e. 25 years after the balance sheet date).
The principal financial assumption is the real discount rate, being the excess of the discount rate over the rate of inflation. The discount rate is based on the
market yields on high-quality corporate bonds of appropriate currency and term to the defined benefit obligations. The obligations are primarily in Sterling
and have a maturity in line with the duration of Scheme liabilities. If the real discount rate increased/decreased by 0.25%, the defined benefit obligations at
31 December 2021 would decrease/increase by approximately 4%.
The impact on the defined benefit obligation to changes in the financial and demographic assumptions is shown below:
31 December
2021
£’000
31 December
2020
£’000
Present value of defined benefit obligations at 31 December (560,250) (595,603)
0.25% increase in discount rate 23,432 28,983
0.25% decrease in discount rate (25,009) (31,012)
0.25% increase in pension growth rate (16,617) (15,233)
0.25% decrease in pension growth rate 15,859 14,642
0.25% increase in inflation rate (12,074) (15,804)
0.25% decrease in inflation rate 14,748 17,135
1 year increase in life expectancy (28,310) (25,960)
1 year decrease in life expectancy 27,711 25,720
(b) Defined contribution plan
The Group operates defined contribution schemes under the Ibstock Pension Scheme, the Supreme Concrete Limited Pension Scheme, the Anderton
Concrete Pension Scheme, the Supreme Concrete Group Personal Plan and the Longley Concrete Pension scheme. Contributions by both employees and
Group companies are held in externally invested, externally administered funds.
The Group contributes a specified percentage of earnings for members of the above defined contribution schemes, and thereafter has no further obligations
in relation to the Scheme. The total cost charged to income in relation to the defined contribution scheme in the year was £4.1 million (year ended
31 December 2020: £4.8 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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22. Deferred tax assets/liabilities
The movement on the deferred tax account is shown below:
31 December
2021
£’000
31 December
2020
£’000
Net deferred tax liability at beginning of period (64,755) (69,655)
Tax charged to the consolidated income statement (25,121) (2,341)
Tax (charged)/credited within other comprehensive income (2,511) 7,927
Tax credited/(charged) directly to equity 35 (686)
Net deferred tax liability at period end (92,352) (64,755)
Presented in the consolidated balance sheet after offset as:
Deferred tax assets – –
Deferred tax liabilities (92,352) (64,755)
(92,352) (64,755)
Deferred tax assets and liabilities before offsetting of balances within the same tax jurisdiction are as follows:
Deferred tax assets 4,008 3,688
Deferred tax liabilities (96,360) (68,443)
Net deferred tax liability at period end (92,352) (64,755)
Deferred tax assets expected to unwind within one year 404 233
Deferred tax assets expected to unwind after one year 3,604 3,455
4,008 3,688
Deferred tax liabilities expected to unwind within one year (1,936) (1,703)
Deferred tax liabilities expected to unwind after one year (94,424) (66,740)
(96,360) (68,443)
The movement in the net deferred tax liability analysed by each type of temporary difference is as follows:
Year ended 31 December 2021 As at 31 December 2021
Deferred tax assets/(liabilities)
Net balance at
1 January 2021
£’000
Arising on
business
combination
£’000
Recognised
in income
statement
£’000
Recognised
in OCI
£’000
Recognised
directly in equity
£’000
Net
£’000
Deferred tax
assets
£’000
Deferred tax
liabilities
£’000
Intangible fixed assets (17,518) – (3,277) – – (20,795) – (20,795)
Tangible fixed assets (40,307) – (18,004) – – (58,311) 116 (58,427)
Right-of-use assets 406 – 104 – – 510 510 –
Rolled-over and
held-over capital gains (2,051) – (648) – – (2,699) – (2,699)
Employee pension liabilities (8,279) – (3,635) (2,525) – (14,439) – (14,439)
Provisions 2,692 – 286 – – 2,978 2,978 –
Share incentive plans 302 – 53 – 35 390 390 –
Share incentive plans – – – 14 – 14 14 –
Deferred tax assets/
(liabilities) before offsetting (64,755) – (25,121) (2,511) 35 (92,352) 4,008 (96,360)
Offset of balances within
the same tax jurisdiction (4,008) 4,008
Net deferred tax liabilities – (92,352)
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22. Deferred tax assets/liabilities continued
Year ended 31 December 2020 As at 31 December 2020
Deferred tax assets/(liabilities)
Net balance at
1 January 2020
£’000
Arising on
business
combination
£’000
Recognised
in income
statement
£’000
Recognised
in OCI
£’000
Recognised
directly in equity
£’000
Net
£’000
Deferred tax
assets
£’000
Deferred tax
liabilities
£’000
Intangible fixed assets (16,971) – (547) – – (17,518) – (17,518)
Tangible fixed assets (38,612) – (1,695) – – (40,307) 288 (40,595)
Right-of-use assets 16 – 390 – – 406 406 –
Rolled-over and held-over
capital gains (1,835) – (216) – – (2,051) – (2,051)
Employee pension liabilities (15,072) – (1,134) 7,927 – (8,279) – (8,279)
Provisions 1,573 – 1,119 – – 2,692 2,692 –
Share incentive plans 1,246 – (258) – (686) 302 302 –
Deferred tax assets/
(liabilities) before offsetting (69,655) – (2,341) 7,927 (686) (64,755) 3,688 (68,443)
Offset of balances within the
same tax jurisdiction (3,688) 3,688
Net deferred tax liabilities – (64,755)
There are no unrecognised deferred tax assets or liabilities as at 31 December 2021 or the prior year end.
23. Financial instruments – risk management
Financial assets
31 December
2021
£’000
31 December
2020
£’000
Trade and other receivables (Note 15) 58,822 54,879
Cash and cash equivalents 61,199 19,552
Total 120,021 74,431
Financial liabilities
31 December
2021
£’000
31 December
2020
£’000
Trade and other payables (Note 18) 93,671 77,287
Derivative financial instruments 74 –
Lease liabilities (Note 27) 27,184 29,076
Borrowings (Note 19) 100,071 88,736
Total 221,000 195,099
With the exception of the Group’s derivative financial instruments, see below, all financial assets and liabilities are held at amortised cost.
Credit risk
Credit risk arises from cash and cash equivalents, trade receivables and deposits with banks and is managed on a Group basis. This risk arises from
transactions with banks, such as those involving cash and cash equivalents and deposits. To reduce the credit risk, the Group has concentrated its main
activities with a Group of banks that have strong, independently verified credit ratings. For each bank, individual risk limits are set based on its financial
position, credit ratings, past experience and other factors. The utilisation of credit limits is regularly monitored.
The Group has significant sales contracts with a number of ‘blue-chip’ companies and accordingly the Directors believe there is a limited exposure to credit
risk, but this is actively monitored at the operational Company level. The Group’s policy on credit risk requires appropriate credit checks on potential
customers before sales commence. The Group also maintains credit insurance.
The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss
provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics
and the days past due.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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The ageing analysis of the trade receivables (from date of past due) assessed for impairment, but concluded as no impairment is required, is as follows:
31 December
2021
£’000
31 December
2020
£’000
Not past due 31,393 28,466
Less than one month past due 18,280 17,204
One to six months past due 8,499 8,695
Six to twelve months past due 568 335
More than 12 months past due 82 50
58,822 54,750
The ageing analysis of the trade receivables (from date of past due) determined to be impaired is as follows:
31 December
2021
£’000
31 December
2020
£’000
Less than one month past due 39 81
One to six months past due 79 30
Six to twelve months past due 462 548
More than 12 months past due 56 32
636 691
Movements in the provision for impairment of trade receivables are as follows:
31 December
2021
£’000
31 December
2020
£’000
Opening balance (691) (288)
Charged to the income statement (125) (643)
Utilised – 240
Released 180 –
Exchange movements – –
Closing impairment provision (636) (691)
The gross carrying amount of trade receivables, reflecting the maximum exposure to credit risk, is £55.9 million (2020: £55.4 million).
Other financial assets at amortised cost are insignificant and the associated credit risk is considered immaterial.
Market risk
Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk
comprises three types of risk, being currency risk, interest rate risk and other price risk. The Group’s interest rate risk arises principally from the Revolving Credit
Facility, which attracts floating rate interest, see Note 19. The Group manages its interest rate risk through the use of the fixed rate Private Placement in
addition to using this floating rate RCF debt with varying repayment terms. The Group does not trade in derivative financial instruments and is not considered
to be significantly exposed to this and other price risks. The exposure to currency risk is considered low.
Interest rate sensitivity analysis:
For the Group’s borrowings, sensitivity analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole
year. A 0.25 percentage points increase or decrease represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 0.25 percentage points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December
2021 would decrease/increase by £0.2 million (2020: decrease/increase by £0.3 million), which is attributable to the Group’s exposure to interest rates on its
variable rate borrowings. Interest rate sensitivity at 31 December 2021 has reduced as the carrying value of the Private Placement borrowings and the related
service costs do not change as interest rates move.
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23. Financial instruments – risk management continued
The exposure in different currencies of financial assets and liabilities is as follows:
At 31 December 2021
Sterling
£’000
US Dollar
£’000
Euro
£’000
Other
£’000
Total
£’000
Financial assets
Cash and cash equivalents 60,165 2 1,032 – 61,199
Trade and other receivables (Note 15) 57,911 – 911 – 58,822
118,076 2 1,943 – 120,021
Financial liabilities
Derivative financial instruments (74) – – – (74)
Borrowings (Note 19) (100,071) – – – (100,071)
Lease liabilities (Note 27) (27,184) – – – (27,184)
Trade and other payables (Note 18) (92,491) (24) (1,095) (61) (93,671)
(219,820) (24) (1,095) (61) (221,000)
At 31 December 2020
Sterling
£’000
US Dollar
£’000
Euro
£’000
Other
£’000
Total
£’000
Financial assets
Cash and cash equivalents 19,265 69 218 – 19,552
Trade and other receivables (Note 15) 54,879 – – – 54,879
74,144 69 218 – 74,431
Financial liabilities
Borrowings (Note 19) (88,736) – – – (88,736)
Lease liabilities (Note 27) (29,076) – – – (29,076)
Trade and other payables (Note 18) (75,690) (289) (1,295) (13) (77,287)
(193,502) (289) (1,295) (13) (195,099)
There are no material differences between the fair values and the book values stated above.
At 31 December 2021, the Group has negligible risk to currency fluctuations as the majority of assets and liabilities are held in the same functional currency.
Liquidity risk
The Group has generated sufficient cash from operations to meet its working capital requirements and finance its investing activities. The Group manages
liquidity risk by entering into committed bank borrowing facilities to ensure the Group has sufficient funds available, and monitors cash flow forecasts to
ensure the Group has adequate borrowing facilities. Excess cash is placed on interest-bearing deposits with maturity fixed at no more than three months.
The maturity of the Group’s borrowings is as follows:
At 31 December 2021
Less than six
months
£’000
Six months to
one year
£’000
One to two
years
£’000
Two to five
years
£’000
Greater than
five years
£’000
Total
£’000
Borrowings
Borrowings 333 – – – 99,738 100,071
Total 333 – – – 99,738 100,071
At 31 December 2020
Less than six
months
£’000
Six months to
one year
£’000
One to two
years
£’000
Two to five
years
£’000
Greater than
five years
£’000
Total
£’000
Borrowings
Borrowings 135 – – 88,601 – 88,736
Total 135 – – 88,601 – 88,736
At 31 December 2020, the Group had a £215 million RCF facility. The facility was utilised throughout the prior year and current year until the point of
refinancing, resulting in an interest charge of £4,220,000 (2020: £3,565,000). During the prior year, the Group was confirmed as eligible to access funding
under the Government’s Covid Corporate Financing Facility (CCFF), although this facility remained undrawn. See Note 19 for further details.
For details of the maturity of other financial liabilities, see Notes 18 and 27.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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The contractual non-discounted minimum future cash flows in respect of these borrowings are:
At 31 December 2021
Less than one
year
£’000
One to two
years
£’000
Two to five
years
£’000
Greater than
five years
£’000
Total
£’000
Borrowings
Borrowings 2,840 2,840 7,871 109,575 123,126
Total 2,840 2,840 7,871 109,575 123,126
At 31 December 2020
Less than one
year
£’000
One to two
years
£’000
Two to five
years
£’000
Greater than
five years
£’000
Total
£’000
Borrowings
Borrowings 3,281 3,275 90,583 – 97,139
Total 3,281 3,275 90,583 – 97,139
Fair value hierarchy
IFRS 13 Financial Instruments: Disclosures requires fair value measurements to be recognised using a fair value hierarchy that reflects the significance of the
inputs used in the measurements, according to the following levels:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices).
Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Derivative financial instruments
The Group entered into forward currency contracts as cash flow hedges in November 2021 to manage its exposure of foreign currency fluctuations
associated with the future purchase of plant and equipment required for the construction of the major capital expenditure projects announced in the year.
These instruments are measured at fair value using Level 2 valuation techniques subsequent to initial recognition.
At 31 December 2021, a liability valued at £74,000 was recognised for these derivative financial instruments. No amounts have been reclassified to profit or
loss as a result of the hedged cash flow during the year. The cash flow hedging reserve within equity includes an accumulated amount of £74,000 (2020: £nil)
relating to these derivative financial instruments.
At 31 December 2021 and 31 December 2020, all of the Group’s fair value measurements have been categorised as Level 2 with the exception of (i) certain
equities within the Group’s pension scheme, which were categorised as Level 1 valuations and (ii) the insured pensioner asset, which was categorised as a
Level 3 valuation and uses assumptions set out in Note 21 to align its valuation to the related liability. During the year ended 31 December 2020, the Group’s
forward energy contracts were fair valued and categorised as Level 2. At 31 December 2020 and 2021, no energy contracts were subject to fair valuation.
Capital risk management
The capital structure of the Group consists of net debt
1
(borrowings disclosed in Note 19 after deducting cash and bank balances) and equity of the Parent
Company, comprising issued capital, reserves and retained earnings, as disclosed in Note 25.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders
and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or borrow additional debt.
The Group must comply with two covenants each half year, as set out in Note 19. The covenants are certain ratios of interest cover and leverage, which are
monitored on a regular basis by the Board. At the year end date, management believes significant headroom exists on both covenant conditions.
Dividend policy
In line with our capital allocation framework, we will look to pay ordinary dividends in line with a targeted cover of approximately 2 times adjusted profit after tax.
These are expected to grow over time in line with the Group’s earnings. This adjusted profit measure can be seen in Note 11 to the Group financial statements.
After investing to maintain, enhance and grow our assets, we will return surplus capital to shareholders.
In the current year, the Board is recommending a final ordinary dividend of 5.0 pence per share for the 2021 year (2020: 1.6 pence per share).
At 31 December 2021, the Parent maintains significant distributable reserves of c.£384 million (2020: c.£410 million). See Note 31 for further detail.
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24. Share capital
Number of shares
Share
Capital
£‘000
At 1 January 2020
Issued, called-up and fully paid:
Ordinary Shares of £0.01 each 409,259,785 4,093
Issue of Ordinary Shares of £0.01 each 300,000 3
At 31 December 2020 409,559,785 4,096
Issue of Ordinary Shares of £0.01 each 71,809 –
At 31 December 2021 409,631,594 4,096
Comprising:
Issued, called-up and fully paid:
Ordinary Shares of £0.01 each 409,631,594 4,096
In the year ended 31 December 2021, share capital increased by 71,809 shares (2020: 300,000 shares) as a result of the issue of Ordinary Share capital
of £0.01 each in order to satisfy share options exercises. The Company does not have a limited amount of authorised capital.
25. Reserves
Share premium
The share premium account is used to record the aggregate amount or value of premiums paid when the Company’s shares are issued/redeemed at a
premium (2021: £4.5 million; 2020: £4.3 million).
Cash flow hedging reserve
The cash flow hedging reserve shown as a deduction from shareholders’ equity of £0.1 million (2020: £nil) arose in the current year on derivative financial
instruments, as set out in Note 23. The accumulated balance in the cash flow hedging reserve will be reclassified to the cost of the designated hedged item in
a future period.
Merger reserve
The merger reserve of £369.1 million arose on the acquisition of Figgs Topco Limited by Ibstock plc in the period ended 31 December 2015 and is the
difference between the share capital and share premium of Figgs Topco Limited and the nominal value of the investment and preference shares in Figgs
Topco Limited acquired by the Company.
Own shares held
The Group’s holding in its own equity instruments is shown as a deduction from shareholders’ equity at cost totalling £1.7 million at 31 December 2021
(31 December 2020: £0.9 million). These shares represent shares held in the Employee Benefit Trust to meet the future requirements of the employee share
based payment plans. Consideration, if any, received for the sale of such shares is also recognised in equity with any difference between the proceeds from
sale and the original cost being taken to the profit and loss reserve. No gain or loss is recognised in the income statement on the purchase, sale, issue or
cancellation of equity shares.
26. Share incentive plans
Share based payment charges:
Year ended
31 December
2021
£000
Year ended
31 December
2020
£000
Long Term Incentive Plan 26(a)) 480 310
Share Option Plan (26(b)) 28 51
Senior Manager Share Plan (26(c)) 59 –
Annual and Deferred Bonus Plan (26(d)) 29 85
Save As You Earn (26(e)) 294 81
890 527
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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Executive share option plans
The Group operates a number of share based payment awards for selected management.
(a) Long-Term Incentive Programme (LTIP)
The Group granted LTIPs during the year for Executive Directors and other key management at the discretion of the Board and this has been approved
by the shareholders at the Annual General Meeting. Awards under the scheme are granted in the form of nil-priced share options. The LTIP awards contain
performance conditions dependent upon the growth of the Group’s Total Shareholder Return (TSR), adjusted earnings per share
1
(EPS), return on capital
employed
1
(ROCE) and certain environmental, social and governance (ESG) targets. Please refer to the information given in the Directors’ Remuneration
Report on pages 97 to 121 for details in relation to the vesting conditions in relation to the LTIP.
During the year, 894,350 options (2020: 1,042,791) over Ordinary Shares of 1 pence each were granted to management under the LTIP and no shares were
exercised (2020: 364,111 were exercised at a weighted average share price at the date of exercise of 197 pence). During the year ended 31 December 2021,
460,893 options (2020: 650,836) lapsed and at 31 December 2021, the weighted average contractual life remaining was 1.4 years (2020: 1.5 years).
(b) Share Option Plan (SOP)
The Group maintains a Share Option Plan at the discretion of the Board and this has been approved by shareholders at the Annual General Meeting. During the years
ended 31 December 2021 and 31 December 2020, no options were granted to management under the SOP.
In the year ended 31 December 2021, 150,524 options (2020: 41,603) were exercised under the historical SOP awards at a weighted average share price at the date
of exercise of 233 pence (2020: 308 pence). In the year ended 31 December 2021, 142,752 options (2020: 141,171 options) lapsed. The weighted average exercise
price of options outstanding is 243 pence (2020: 239 pence). At 31 December 2021, the weighted average contractual life remaining was 0.1 years (2020: 0.4 years).
The SOP has an employment condition of three years and no other performance conditions.
(c) Senior Manager Share Plan (SMSP)
During the year ended 31 December 2021, the Group introduced the SMSP for certain members of management. Awards under the scheme are granted
in the form of nil-priced share options. The SMSP awards contain performance conditions dependent upon the growth of the Group’s adjusted EBITDA
1
.
The SMSP has an employment condition of two years.
In the year ended 31 December 2021, 98,831 options over Ordinary Shares of 1 pence each were granted to management under the SMSP. No awards were
exercised in the current year, but 3,555 options lapsed. At 31 December 2021, the weighted average contractual life remaining was 1.3 years.
(d) Annual and Deferred Bonus Plan (ADBP)
The ADBP incorporates the Company’s executive bonus scheme as well as a mechanism for the deferral of bonus into awards over Ordinary Shares.
The ADBP operates in respect of the annual bonus earned for the financial year. The Board can determine that part of the bonus earned under the ADBP
is provided as an award of deferred shares, which take the form of a £nil cost option. The maximum value of deferred shares is 50% of the bonus earned.
In the year ended 31 December 2021, no options (2020: 90,555 options) were awarded over Ordinary Shares under the ADBP in relation to the prior year
end bonus. The main terms of these awards are a minimum deferral period of three years, during which no performance conditions will apply; and the
participants’ employment at the end of the deferral period. In the year ended 31 December 2021, 118,474 options (2020: 77,794 options) were exercised
under the ADBP at a weighted average share price at the date of exercise of 222 pence (2020: 204 pence). At 31 December 2021, the weighted average
contractual life remaining was 0.4 years (2020: 1.0 years). In the current year, no options lapsed (2020: 7,357 options) and at 31 December 2021, an amount
of £97,000 (2020: £nil) had been recorded in accruals for the award relating to the bonus earned for the year ended 31 December 2021.
All-employee share schemes
In addition to the executive share option plans, the Group has two all-employee share based payment arrangements – the Save As You Earn and Share
Incentive Plan awards:
(e) Save As You Earn (SAYE)
In order to participate in the Group’s Sharesave Plan, an employee must enter into a linked savings contract with a bank or building society to make contributions
from salary on a monthly basis over a three-year period. A participant who enters into a savings agreement is granted an option to acquire Ordinary Shares of 1
pence each under the Sharesave Plan at a specified exercise price.
In the year ended 31 December 2021, 3,724,859 awards were issued under this scheme (2020: nil). In the current year, 1,005,195 options (2020: 301,687) lapsed
and 54,992 shares were exercised (2020: nil) at a weighted average exercise price of 230 pence. As at 31 December 2021, the weighted average exercise price of
outstanding options was 176 pence (2020: 230 pence ) and the remaining option life was 2.4 years (2020: 0.3 years).
(f) Share Incentive Plan (SIP)
Following the Group’s Initial Public Offering, the Company announced a SIP. Subject to qualifying employment conditions, all employees were entitled to apply
for free shares up to a value of £800 depending on their period of service. The number of shares issued under the SIP in the year ended 31 December 2016 was
553,150. The free shares had a three-year employment condition and no further vesting conditions. In the year ended 31 December 2021, 18,550 shares
lapsed (2020: 1,650) and 80,900 shares were exercised (2020: 47,050) at a weighted average share price at date of exercise of 225 pence (2020: 189 pence).
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26. Share incentive plans continued
The assumptions used to calculate the fair value of the LTIP, SOP and ADBP awards granted during the year ended 31 December 2021 are detailed below:
SAYE LTIP SMSP
Grant date 14/04/21 25/03/21 29/4/21
Share price at grant date £2.28 £2.18 £2.22
Exercise price £1.76 nil nil
Number of shares issued 3,724,859 894,350 98,831
Vesting period 3 years 3 years 2 years
Pricing model Binomial Monte Carlo Share price
% expected to vest 60% 80% 80%
Expected share price volatility 38.41% 39.9% N/A
Expected dividend yield 3.64% N/A N/A
Expected option life 3.4 years 3 years 2 years
Fair value per share £0.67 £1.69 £2.22
Risk-free rate 0.18% 0.05% N/A
Awards under the executive share option plans and all-employee share schemes are as follows:
Executive share
options
All-employee
schemes
Outstanding at 1 January 2021 3,081,109 1,037,076
Awards granted 1,027,837 3,724,859
Awards exercised (268,998) (135,892)
Awards lapsed/forfeited (607,200) (1,023,745)
Awards outstanding at 31 December 2021 3,232,748 3,602,298
The expected volatility level has been calculated using historical daily data over a term commensurate with the expected life of each award.
27. Leases and commitments
Amounts recognised within the consolidated balance sheet
The balance sheet shows the following amounts relating to leases:
31 December
2021
£’000
31 December
2020
£’000
Right-of-use assets
Buildings 14,980 16,665
Equipment 7,428 6,157
Vehicles 2,706 3,831
Total right-of-use assets 25,114 26,653
Lease liabilities
Less than six months (3,966) (3,326)
Six months to one year (2,894) (3,402)
Current (6,860) (6,728)
One to two years (5,184) (4,920)
Two to five years (8,941) (9,254)
Greater than five years (6,199) (8,174)
Non-current (20,324) (22,348)
Total lease liabilities (27,184) (29,076)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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Movement in right-of-use asset:
Buildings
£’000
Equipment
£’000
Vehicles
£’000
Total
£’000
Cost
At 1 January 2020 20,503 13,510 2,937 36,950
Additions 2,170 – 3,643 5,813
Disposals – (238) – (238)
At 31 December 2020 22,673 13,272 6,580 42,525
Additions 327 4,421 1,076 5,824
Disposals – – (141) (141)
At 31 December 2021 23,000 17,693 7,515 48,208
Accumulated depreciation & impairment
At 1 January 2020 (2,492) (3,599) (380) (6,471)
Charge for the year (2,246) (3,105) (2,369) (7,720)
Impairment (1,270) (411) – (1,681)
At 31 December 2020 (6,008) (7,115) (2,749) (15,872)
Impairment reversal 174 – – 174
Charge for the year (2,186) (3,150) (2,060) (7,396)
At 31 December 2021 (8,020) (10,265) (4,809) (23,094)
Net book amount
At 31 December 2020 16,665 6,157 3,831 26,653
At 31 December 2021 14,980 7,428 2,706 25,114
Movement in lease liabilities:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
As at 1 January 2021 (29,076) (30,361)
Additions (5,824) (5,783)
Disposals 141 220
Interest payments (1,107) (1,215)
Cash rental payments 8,682 8,063
As at 31 December 2021 (27,184) (29,076)
Amounts recognised within the consolidated income statement
Depreciation charge of right-of-use assets
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Buildings 2,186 2,246
Equipment 3,150 3,105
Vehicles 2,058 2,369
7,396 7,720
Impairment (reversal)/charge (174) 1,681
Depreciation expense (included within cost of sales) 7,222 9,401
Interest expense (included within finance costs) 1,107 1,215
In the year ended 31 December 2021, the benefit to Adjusted EBITDA
1
as a result of IFRS 16 leases was £7.2 million (2020: £6.8 million). Operating lease
charges now expensed via depreciation increased by £6.2 million (2020: £6.1 million) and interest by £1.0 million (2020: £1.1 million) resulting in a net
reduction in profit before taxation of £0.1 million (2020: £0.3 million).
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27. Leases and commitments continued
The Group is lessee on a number of properties in addition to plant and machinery which it uses in its operations. The operating leases run for a variety of
terms and their non-cancellable commitments are set out above. There is no material contingent rent payable, renewal or purchase options, escalation
clauses or restrictions imposed by the lease agreements.
The Group as lessor
The Group acts as lessor on a number of properties where it leases surplus land not currently utilised by the business. The operating leases run for a variety
of terms and their future minimum lease payments receivable are set out as follows:
31 December
2021
£’000
31 December
2020
£’000
Within one year 64 67
Between one and five years 41 78
After five years – –
105 145
Capital commitments
Capital expenditure contracted for but not yet incurred at the balance sheet date is as follows:
31 December
2021
£’000
31 December
2020
£’000
Amount contracted for, which has not been provided 57,356 11,756
At 31 December 2021, under a letter of intent entered into in December 2021, the Group acted as guarantor to a number of lease agreements with a third
party supplier. These agreements are expected to result in delivery of leased assets during 2022 and require the Group to recognise related right-of-use
assets, estimated to be valued at approximately £9 million.
28. Notes to the Group cash flow statement
Cash flows from operating activities
31 December
2021
£’000
31 December
2020
£’000
Profit/(loss) before taxation 64,942 (23,940)
Adjustments for:
Depreciation 31,409 29,046
Asset impairment (reversal)/charge – property, plant and equipment (5,623) 16,263
Asset impairment (reversal)/charge – right-of-use assets (174) 1,681
Asset impairment charge – working capital – 2,438
Amortisation of intangible assets 6,940 7,431
Net finance costs 4,992 4,328
Gain on disposal of property, plant and equipment (3,660) (2,921)
Research and development expenditure credit (1,673) (1,167)
Share based payments 890 527
Post-employment benefits (789) 1,584
Other (87) –
97,167 35,270
(Increase)/decrease in inventory (9,435) 18,503
Increase in debtors (2,617) (877)
Increase/(decrease) in creditors 18,504 (2,537)
(Decrease)/increase in provisions (3,122) 4,856
Cash generated from operations 100,497 55,215
During the prior year, Government assistance of £10,482,000 was received in relation to the Coronavirus Job Retention Scheme (CJRS) and payment of
taxes totalling £16,525,000 relating to employment taxes, income taxes and value added tax were deferred. All deferred amounts were fully settled as at
31 December 2020. No Government assistance or payment deferrals arose during the current year although the Group voluntarily returned £1,759,000
(2020: £nil) of furlough funds received during 2020 under the CJRS in respect of colleagues subsequently made redundant.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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29. Group subsidiaries
Entity Principal activity
Registration
number
Country of
incorporation
Proportion of
Ordinary Shares
held directly by
the parent
Proportion of
Ordinary Shares
held by the
Group
Ibstock Building Products Ltd
1
Holding Company 09329395 UK 100% 100%
Figgs Bidco Ltd Holding Company 09332893 UK 100% 100%
Ibstock USA Ltd
3
Non-trading 09415340 UK 100% 100%
Ibstock Group Ltd Holding Company 00984268 UK 100% 100%
Forticrete Ltd Manufacturer of concrete products 00221210 UK 100% 100%
Home Building Supplies Ltd Non-trading 07350732 UK 100% 100%
Baldwin Industries Ltd Holding Company 01516334 UK 100% 100%
Anderton Concrete Products Ltd Manufacturer and supplier of precast
and prestressed concrete products
01900103 UK 100% 100%
Oakhill Holdings Ltd Holding Company 04077204 UK 100% 100%
Supreme Concrete Ltd Manufacturer and supplier of precast
and prestressed concrete products
01410463 UK 100% 100%
Gee-Co (Holdings) Ltd Dormant 02480251 UK 100% 100%
Ibstock Brick Holding Company Ltd Holding Company 00784339 UK 100% 100%
Ibstock Brick Ltd Sale of clay bricks and manufacture
and sale of associated special shaped
and fabricated clay products
00063230 UK 100% 100%
Ibstock Manufacturing Services Ltd Brick manufacturer 12292985 UK 100% 100%
Ibstock Leasing Ltd Intergroup leasing entity 05378321 UK 100% 100%
Ibstock Management Services Ltd
2
Dormant 11953 Jersey 100% 100%
Ibstock Finance Co Ltd
2
Dormant 51710 Jersey 100% 100%
Kevington Building Products Ltd Dormant 02122467 UK 100% 100%
Ibstock Brick Leicester Ltd Dormant 00106667 UK 100% 100%
Ibstock Brick Aldridge Ltd Dormant 00614225 UK 100% 100%
Ibstock Brick Himley Ltd Dormant 00092769 UK 100% 100%
Ibstock Westbrick Ltd Dormant 01606990 UK 100% 100%
Ibstock Brick Aldridge Property Ltd Dormant 00251918 UK 100% 100%
Moore & Sons Ltd Dormant 00118818 UK 100% 100%
Manchester Brick & Precast Ltd Dormant 02888297 UK 100% 100%
Ibstock Brick Nostell Ltd Dormant 00531826 UK 100% 100%
Ibstock Brick Roughdales Ltd Dormant 00598862 UK 100% 100%
Ibstock Brick Cattybrook Ltd Dormant 00011298 UK 100% 100%
Ibstock Hathernware Ltd Dormant 00424843 UK 100% 100%
Ibstock Bricks (1996) Ltd Dormant 00246855 UK 100% 100%
Wealdbeam Systems Ltd Dormant 06932047 UK 100% 100%
Loopfire Systems Ltd Dormant 04105160 UK 100% 100%
Longley Holdings Ltd Holding Company 02027916 UK 100% 100%
Longley Precast Ltd Dormant 00888875 UK 100% 100%
Longley Concrete Ltd Manufacturer and supplier of precast
and prestressed concrete products
00440463 UK 100% 100%
1 Ibstock Building Products Ltd is owned directly by Ibstock plc. All other companies are indirectly owned.
All entities have a place of business in the UK. The registered office address for all entities is the same as for the ultimate Parent Company, Leicester Road, Ibstock,
Leicestershire, LE67 6HS except those subsidiary entities with the following numerical superscript: 2 – 47 Esplanade, St Hellier, Jersey, Channel Isles, JE1 0BD.
All subsidiary undertakings are included in the consolidated financial statements. The proportion of the voting rights in the subsidiary undertakings held
directly by the Parent Company do not differ from the proportion of Ordinary Shares held. At 31 December 2021, the Parent Company does not have any
shareholdings in the preference shares of subsidiary undertakings included in the Group.
3 Ibstock USA Ltd was renamed as Ibstock Telling GRC Ltd on 28 January 2022.
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30. Related party transactions
Balances and transactions between Ibstock plc (the ultimate Parent) and its subsidiaries (listed in Note 29), which are related parties, are eliminated on
consolidation and are not disclosed in this note.
See Note 7 for details of Director and key management personnel remuneration.
There are no further related party transactions nor any related party balances in either the 2021 or 2020 financial years.
31. Dividends paid and proposed
Cash flows from operating activities
31 December
2021
£’000
31 December
2020
£’000
Declared and paid during the year
Equity dividends on Ordinary Shares:
Final dividend for 2020: 1.6 pence (2019: nil) 6,547 –
Interim dividend for 2021: 2.5 pence (2020: nil) 10,233 –
16,780 –
Proposed (not recognised as a liability as at 31 December)
Equity dividends on Ordinary Shares:
Final dividend for 2021: 5.0 pence (2020: 1.6 pence) 20,482 6,553
20,482 6,553
In April 2020, the Directors notified shareholders that the final dividend in relation to 2019, which was announced in March 2020 alongside the Group’s 2019
Preliminary results, was cancelled. Subsequently, no final dividend in relation to 2019 was paid by the Group.
The Directors are proposing a final dividend in respect of the financial year ended 31 December 2021 of 5.0 pence (2020: 1.6 pence) per Ordinary Share,
which will distribute an estimated £20.5 million (2020: £6.6 million) of shareholders’ funds. Subject to approval at the Annual General Meeting, this will be
paid on 13 May 2022, to shareholders on the register at the close of business on 19 April 2022.
32. Post balance sheet events
On 21 January 2022, the Group acquired certain assets of Telling Architectural Limited, a privately-owned company in liquidation based in the West
Midlands, an offsite manufacturer designing and producing a range of cladding solutions using glass reinforced concrete (GRC) technology. These panels
cater to the needs of modular construction in the mid to high-rise building segment and come in a variety of finishes from plain concrete to brick facing.
Except for this acquisition and the proposed dividend (see Note 31), no further subsequent events requiring further disclosure or adjustment to these financial
statements have been identified since the balance sheet date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
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COMPANY BALANCE SHEET
(prepared in accordance with UK GAAP – FRS 102)
Company number: 09760850
As at 31 December 2021 Notes
31 December
2021
£’000
31 December
2020
£’000
Fixed assets
Investments 4 625,581 626,722
Current assets
Debtors 5 5,100 3,793
Cash at bank and in hand 1,130 139
6,230 3,932
Creditors – amounts falling due within one year 6 (141,398) (213,604)
Net current liabilities (135,168) (209,672)
Total assets less current liabilities 490,413 417,050
Creditors – amounts falling due after more than one year 7 (99,738) –
Net assets 390,675 417,050
Capital and reserves
Called-up share capital 9 4,096 4,096
Share premium 4,458 4,333
Own shares held (1,741) (922)
Profit and loss account 383,862 409,543
Total equity 390,675 417,050
The notes on pages 179 to 182 are an integral part of these financial statements. As permitted by Section 408 of the Companies Act 2006, the Parent
Company’s profit and loss account has not been presented in these financial statements. The Parent Company’s loss after tax for the year was £8.1 million
(year ended 31 December 2020: loss of £5.4 million).
These financial statements were approved by the Board and authorised for issue on 08 March 2022. They were signed on its behalf by:
J Hudson C McLeish
Director Director
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COMPANY STATEMENT OF CHANGES IN EQUITY
At 31 December 2021 Notes
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Own shares
held
£’000
Total
equity
£’000
Balance as at 1 January 2021 4,096 4,333 409,543 (922) 417,050
Loss for the year – – (8,068) – (8,068)
Other comprehensive income – – – – –
Total comprehensive expense for the financial year – – (8,068) – (8,068)
Transactions with owners:
Issue of share capital 9 – – – – –
Share based payments – – 890 – 890
Other adjustment – – (1,540) – (1,540)
Equity dividends paid – – (16,780) – (16,780)
Purchase of own shares – – – (1,309) (1,309)
Issue of share capital on exercise of share options – 125 – – 125
Issue of own shares held on exercise of share options – – (183) 490 307
Transactions with owners – 125 (17,613) (819) (18,307)
Balance at 31 December 2021 4,096 4,458 383,862 (1,741) 390,675
At 31 December 2020 Notes
Share
capital
£’000
Share
premium
£’000
Retained
earnings
£’000
Own shares
held
£’000
Total
equity
£’000
Balance as at 1 January 2020 4,093 7,441 411,713 (435) 422,812
Loss for the year – – (5,351) – (5,351)
Other comprehensive income – – – – –
Total comprehensive expense for the financial year – – (5,351) – (5,351)
Transactions with owners:
Issue of share capital to Employee Benefit Trust 3 – – (3) –
Share based payments – – 527 – 527
Transfer from Share premium account – (3,108) 3,108 – –
Purchase of own shares – – – (1,020) (1,020)
Issue of own shares held on exercise of share options – – (454) 536 82
Transactions with owners 3 (3,108) 3,181 (487) (411)
Balance at 31 December 2020 4,096 4,333 409,543 (922) 417,050
The notes on pages 179 to 182 form an integral part of these financial statements.
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Authorisation of financial statements
The Parent Company financial statements of Ibstock plc (the ‘Company’) for
the year ended 31 December 2021 were authorised for issue by the Board of
Directors on 08 March 2022 and the balance sheet was signed on its behalf
by J Hudson and C McLeish.
Ibstock plc is a public company limited by shares, which is incorporated and
domiciled in England whose shares are publicly traded. The Company’s
Ordinary Shares are traded on the London Stock Exchange. The registered
office is Leicester Road, Ibstock, Leicestershire LE67 6HS and the Company
registration number is 09760850.
2. Summary of significant accounting policies
The financial statements have been prepared in accordance with applicable
accounting standards, the Financial Reporting Standard applicable in the
United Kingdom and Republic of Ireland (FRS 102) and the Companies
Act 2006. As a qualifying entity, as defined by FRS 102, the Company has
elected to adopt the reduced disclosure exemptions set out with paragraph
1.12 of FRS 102, as described below.
These financial statements are prepared on a going concern basis, under the
historical cost convention.
The Company has not disclosed the information required by regulation 5(1)
(b) of the Companies (Disclosure of Auditor’s Remuneration and Liability
Limitation Agreements) Regulations 2008 as the Group accounts of the
Company are required to comply with regulation 5(1)(b) as if the
undertakings included in the consolidation were a single group.
Going concern
The Directors reviewed detailed cash flows and forecasts of financial
performance and stress-tested the projections. The forecasts include
estimates of trading performance, operational and capital expenditure and
debt requirements within the period to 30 June 2023.
Throughout this review period, the Company is forecast to be able to meet
its liabilities as they fall due. Therefore, having assessed the principal risks
and all other relevant matters, the Directors consider it appropriate to adopt
the going concern basis of accounting in preparing the financial statements
of the Parent Company. The Group going concern assessment can be found
in Note 1 of the Group financial statements.
Fixed asset investments
Investments in subsidiaries are included at cost stated at the historical value
at the time of investment less any provisions for impairment and net of
merger and Group reconstruction relief available.
Share based payments
The Company operates a number of equity-settled share based
compensation plans on behalf of the Group. The fair value of the employee
services received under such plans is capitalised as an investment in the
Company’s subsidiary until such time as intra-Group recharges are levied
by the Company to recover this cost from its subsidiaries. Upon recharge,
the amounts recharged are treated as a return of capital contribution and
recorded as a credit to equity (up to the value of the initial share based
payment treated as a capital contribution). Any recharge in excess of the
capital contribution is recognised within the Company income statement.
The amount to be recognised over the vesting period is determined by
reference to the fair value of share based payments. For further details of
share based payments, see Note 26 of the Group financial statements.
Dividend distribution
Dividend distributions to Ibstock’s shareholders are recognised in the
Company’s financial statements in the periods in which the final dividends
are approved in the Annual General Meeting, or when paid in the case of
an interim dividend.
Financial instruments
(i) Objectives and policies
The Company, in common with its Group subsidiaries, must comply with
the Group’s finance guidelines that set out the principles and framework for
managing Group-wide finances. Further information on the Group’s policies
and procedures is available in the Group financial statements. The Company
does not enter into speculative treasury arrangements.
(ii) Foreign exchange, credit, liquidity and financial risks
Foreign exchange risk management
The Company primarily transacts in Sterling and therefore exposure to
foreign exchange risk is regarded as low.
Credit risk management
For the Company, this risk arises from cash and cash equivalents and
deposits with banks. This is managed on a Group basis and there are
a number of initiatives underway to mitigate this risk. These include
concentrating activities with a group of banks that have strong,
independently verified credit ratings. For each bank, individual risk limits
are set based on its financial position, credit ratings, past experience
and other factors.
Liquidity planning, trends and risks
The Company has sufficient committed borrowing facilities to meet planned
liquidity needs with headroom, through facilities provided by the Group.
The Company has adopted IAS 39 for recognition and measurement of
financial instruments.
(iii) Financial assets
Financial assets, including trade and other receivables, loans to fellow Group
companies and cash and bank balances, are initially recognised at fair value.
Such assets are subsequently carried at amortised cost using the effective
interest method.
(iv) Financial liabilities
Financial liabilities, including trade and other payables and loans from fellow
Group companies, are initially recognised at fair value.
Debt instruments are subsequently carried at amortised cost, using the
effective interest rate method in accordance with IAS 39.
Taxation
Taxation expense for the year comprises current and deferred tax recognised
in the reporting year. Tax is recognised in the profit and loss account, except
to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case tax is also recognised in other
comprehensive income or directly in equity respectively.
During the ordinary course of business, there are transactions
and calculations for which the ultimate tax determination may be uncertain.
The calculation of the tax charge therefore necessarily involves a degree of
estimation and judgement. The tax liabilities are based on estimates of
whether additional taxes will be due and tax assets are recognised on the
basis of probable future recoverability. This requires management to exercise
judgement based on its interpretation of tax laws and the likelihood of
settlement of tax liabilities or recoverability of tax assets. To the extent that
the final outcome differs from the estimates made, tax adjustments may be
required which could have an impact on the tax charge and profit for the
period in which such a determination is made.
(i) Current tax
Current tax is the amount of income tax payable in respect of the taxable
profit for the year or prior years. Tax is calculated on the basis of tax rates
and laws that have been enacted or substantively enacted by the year end.
Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis
of amounts expected to be paid to the tax authorities.
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2. Summary of significant accounting policies continued
(ii) Deferred tax
Deferred tax arises from timing differences that are differences between
taxable profits and total comprehensive income as stated in the financial
statements. These timing differences arise from the inclusion of income and
expenses in tax assessments in periods different from those in which they
are recognised in financial statements.
Deferred tax is recognised on all timing differences at the reporting date.
Unrelieved tax losses and other deferred tax assets are only recognised when
it is probable that they will be recovered against the reversal of deferred tax
liabilities or other future taxable profits.
Deferred tax is measured using tax rates and laws that have been enacted or
substantively enacted by the year end and that are expected to apply to the
reversal of the timing differences.
Share capital
Ordinary Shares are classified as equity. Incremental costs directly
attributable to the issue of new Ordinary Shares or options are shown in
equity as a deduction, from the proceeds.
Related parties
The Group discloses transactions with related parties which are not wholly
owned within the same Group. Where appropriate, transactions of a similar
nature are aggregated unless, in the opinion of the Directors, separate
disclosure is necessary to understand the effect of the transactions on the
Group financial statements.
Disclosure exemptions
In preparing the Parent Company financial statements, the Company has
elected to adopt the reduced disclosure exemptions set out in paragraph
1.12 of FRS 102, because the Company prepares Group consolidated
financial statements, as described below:
(a) Under FRS 102 (Section 1.12(b)), the Parent Company is exempt from the
requirements to prepare a cash flow statement on the grounds that its
cash flows are included within the Ibstock plc Group consolidated
financial statements.
(b) The Parent Company is a qualifying entity and has taken advantage
of the exemption from disclosing key management compensation
(other than Directors’ emoluments) under FRS 102 (Section 1.12(e)),
as it is a Parent entity whose separate financial statements are
presented alongside the consolidated financial statements, which
contain the requisite equivalent disclosures.
(c) The Parent Company is a qualifying entity and has taken advantage of
the exemption from disclosing certain financial instrument disclosures
under FRS 102 (Section 1.12(c)), as it is a Parent entity whose separate
financial statements are presented alongside the consolidated financial
statements, which contain the requisite equivalent disclosures.
(d) The Company has elected to avail itself of the disclosure exemption
within FRS 102 (Section 1.12(d)) in relation to certain share based
payment disclosure requirements as it is a Parent entity whose separate
financial statements are presented alongside the consolidated financial
statements, which contain the requisite equivalent disclosures.
(e) The Company has taken advantage of the reduced disclosure exemption
under FRS 102 (Section 1.12(a)) and is not required to follow the
requirements of paragraph 4.12(a)(iv) of FRS 102 and as such only
discloses a reconciliation of shares outstanding between the beginning
and end of the year and not the prior year.
In addition, the Company has taken the exemption within Section 33 of FRS
102 from disclosing intra-Group transactions with wholly owned subsidiaries.
Critical accounting judgements and estimation uncertainty
In applying the Company’s accounting policies, as described above, the
Directors are required to make judgements (other than those involving
estimations) that have a significant impact on the amounts recognised and
to make estimates and assumptions that affect the reported amounts of
assets, liabilities, income and expenses. Due to the inherent uncertainty in
making these critical judgements and estimates, actual outcomes could
be different.
There are no critical accounting judgements in the current year and no
critical judgements or estimates were made in applying the Company’s
accounting policies in the prior year.
3. Employee information
The Company has no employees. Non-Executive Directors of the Company
are employed under letters of appointment. Full details of Executive and
Non-Executive remuneration is disclosed in the Annual Report on
Remuneration on pages 112 to 121. For further details of Directors’
remuneration, refer to Note 7 of the Group financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
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4. Fixed asset investments
Cost
Investment in
subsidiary
undertakings
£’000
At 1 January 2020 626,195
Additions – fair value of share incentives issued to Group employees 527
At 31 December 2020 626,722
Additions – fair value of share incentives issued to Group employees 399
Other adjustment (1,540)
At 31 December 2021 625,581
The Company holds 100% of the issued share capital of Ibstock Building Products Limited.
5. Debtors
31 December
2021
£’000
31 December
2020
£’000
Amounts owed by subsidiary undertakings 2,201 2,219
Group relief receivable 980 1,284
Deferred tax asset 106 –
Prepayments and other debtors 1,813 290
5,100 3,793
Amounts owed by subsidiary undertakings are unsecured, repayable on demand and interest free.
6. Creditors – amounts falling due within one year
31 December
2021
£’000
31 December
2020
£’000
Trade creditors 208 414
Amounts owed to subsidiary undertakings 136,328 211,428
Borrowings 333 –
Accruals and other creditors 4,529 1,762
141,398 213,604
Amounts owed to subsidiary undertakings are unsecured, repayable on demand and interest free. The Group has a cash pooling arrangement with the bank.
7. Creditors – amounts falling due after more than one year
31 December
2021
£’000
31 December
2020
£’000
Borrowings 99,738 –
99,738 –
In November 2021, the Company issued £100 million of private placement notes to Pricoa Private Capital, with maturities of between seven and twelve years
and an average total cost of funds of 2.19% (range 2.04% – 2.27%).
Additionally, at the same time the Company entered into a £125 million Revolving Credit Facility (RCF) provided by a syndicate of five banks for an initial
four-year period, with a one-year extension option. This facility remained undrawn in the year ended 31 December 2021.
Further details of the Private Placement and RCF are provided in Note 19 of the Group financial statements.
The carrying values of financial liabilities have been assessed as materially in line with their fair values.
No security is currently provided over the Group’s borrowings.
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8. Financial instruments
The Company has the following financial instruments:
Loans and receivables
31 December
2021
£’000
31 December
2020
£’000
Financial assets that are debt instruments measured at amortised cost:
Amounts owed by subsidiary undertakings 2,201 2,219
Group relief receivable 980 1,284
Cash and bank balances 1,130 139
4,311 3,642
Loans and payables
31 December
2021
£’000
31 December
2020
£’000
Financial liabilities measured at amortised cost:
Trade creditors 208 414
Amounts owed to subsidiary undertakings 136,328 211,428
Borrowings 100,071 –
Accruals and other creditors 4,529 1,762
241,136 213,604
The Company has no derivative financial instruments. The fair value of the financial assets and liabilities has been assessed as materially in line with their
carrying values.
9. Called-up share capital
Number of
shares
Share
capital
£’000
Issued, called-up and fully paid:
At 1 January 2021 Ordinary Shares of £0.01 each 409,559,785 4,096
Shares issued in the year Ordinary Shares of £0.01 each 71,809 –
At 31 December 2021 409,631,594 4,096
In the current year, share capital has increased by 71,809 Ordinary Shares of £0.01 as a result of the issue of shares to satisfy share options exercised
in the year. Details of outstanding share options and other awards relating to the Company’s share awards are included in Note 26 to the Group
financial statements.
10. Contingent liabilities
The Company has guaranteed all Group bank borrowings as detailed in Note 19 of the Group financial statements. As part of the Group’s joint and several
liability, the Company is a party to the guarantee of the Group’s VAT liability.
11. Related party transactions
The Company is exempt from disclosing related party transactions as they are with other companies that are wholly owned within the Group. See Note 30
of the Group financial statements.
The ultimate Parent Company and the smallest and largest group to consolidate these financial statements is Ibstock plc.
Share awards to key management personnel resulted in an amount of £0.4 million in the year ended 31 December 2021 (year ended 31 December
2020: £0.3 million), which has been taken to the fixed asset investment. See Note 26 of the Group financial statements and the Directors’ Remuneration
Report on pages 97 to 121 for further details of share based payments.
12. Post balance sheet events
A final dividend of 5.0 pence (2020: 1.6 pence) per Ordinary share is proposed in respect of the financial year ended 31 December 2021. See Note 31 of the
Group financial statements.
See Note 32 of the Group financial statements for details of other post balance sheet events.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
CONTINUED
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GROUP FIVE-YEAR SUMMARY
Year ended 31 December
Results summary 2017 2018 2019 2020 2021
Continuing operations
Revenue 362,589 391,402 409,257 316,172 408,656
Adjusted EBITDA
1
107,899 112,371 122,265 52,122 103,053
Exceptional items
1
impacting EBITDA 1,529 8,025 (2,833) (35,257) 5,230
Depreciation and amortisation (21,005) (24,405) (35,409) (36,477) (38,349)
Operating profit/(loss) 88,423 95,991 84,023 (19,612) 69,934
Exceptional finance costs (6,386) – – (414) –
Net finance costs (4,377) (3,475) (2,032) (3,914) (4,992)
Profit/(loss) before taxation 77,660 92,516 81,991 (23,940) 64,942
Taxation (12,594) (16,102) (15,516) (4,081) (33,129)
Profit/(loss) from continuing operations 65,066 76,414 66,475 (28,021) 31,813
Profit/(loss) from discontinued operations 8,484 652 (383) – –
Profit/(loss) 73,550 77,066 66,092 (28,021) 31,813
At 31 December
Employment of capital 2017 2018 2019 2020 2021
Goodwill and intangible assets 116,010 100,587 102,594 95,163 94,625
Property, plant and equipment 400,480 365,478 386,255 371,395 375,800
Deferred tax asset 1,412 – – – –
Right-of-use assets – – 30,479 26,653 25,114
Non-current assets 517,902 466,065 519,328 493,211 495,539
Inventories 91,118 68,426 84,327 63,386 72,821
Receivables 53,416 55,733 58,088 58,906 64,756
Deferred tax asset – – – – 3,199
Assets held for sale 4,853 – 1,186 1,186 875
Current assets 149,387 124,159 143,601 123,478 141,651
Payables (85,342) (92,447) (88,150) (85,423) (103,132)
Lease liabilities – – (30,361) (29,076) (27,184)
Other liabilities excluding debt (81,407) (82,069) (83,922) (78,711) (102,527)
Net assets excluding pension and debt 500,540 415,708 460,496 423,479 404,347
Net debt
1
(117,041) (48,382) (84,851) (69,184) (38,872)
Pension 37,329 80,705 88,656 43,576 57,754
Total net assets 420,828 448,031 464,301 397,871 423,229
Called-up share capital 4,064 4,065 4,093 4,096 4,096
Reserves 416,764 443,966 460,208 393,775 419,133
Total equity 420,828 448,031 464,301 397,871 423,229
1 Alternative performance measures are described in Note 3 to the consolidated financial statements.
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Ibstock plc Annual Report and Accounts 2021
At 31 December
Business ratios 2017 2018 2019 2020 2021
Adjusted EBITDA
1
margin 29.8% 28.7% 29.9% 16.5% 25.2%
Interest cover (times) 28x 35x 37x 10x 21x
Net debt to adjusted EBITDA
1
1.08x 0.43x 0.74x 1.53x 0.41x
Return on capital employed
1
20.6% 20.6% 19.3% 3.7% 15.8%
Adjusted operating cash flow
1,2
(£m) 93 84 72 50 76
Capital expenditure (£m) (38) (31) (39) (24) (25)
Adjusted free cash flow
1,2
(£m) 55 53 33 26 51
Statutory basic earnings per share 16.0p 18.8p 16.3p (6.8p) 7.8p
Adjusted basic earnings per share
1
18.9p 18.8p 18.3p 4.0p 13.9p
Interim dividend per share 2.6p 3.0p 3.2p – 2.5p
Final dividend per share 6.5p 6.5p – 1.6p 5.0p
Supplementary dividend per share – 6.5p – – –
Total dividend per share 9.1p 16.0p 3.2p 1.6p 7.5p
Closing share price 267p 199p 315p 207p 204p
Closing market capitalisation (£m) 1,083.1 807.7 1,289.3 846.2 834.8
1 Alternative performance measures are described in Note 3 to the consolidated financial statements.
2 Adjusted operating and free cash flow measures are shown for continuing operations following the disposal of the US Glen-Gery business in November 2018. Prior periods have not been restated.
GROUP FIVE-YEAR SUMMARY CONTINUED
Cautionary statement
This Annual Report and Accounts has been prepared for, and only for, the members of the Company, as a body, and no other persons. The Company, its
Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it
may come and any such responsibility or liability is expressly disclaimed. By their nature, the statements concerning the risks and uncertainties facing the
Group in this Annual Report and Accounts involve uncertainty, since future events and circumstances can cause results and developments to differ materially
from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this Annual Report and
Accounts and the Company undertakes no obligation to update these forward-looking statements. Nothing in this Annual Report and Accounts should be
construed as a profit forecast.
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INDEPENDENT AUDITOR’S REASONABLE ASSURANCE REPORT
Independent auditor’s reasonable assurance
report on the compliance of Ibstock Plc’s
European Single Electronic Format (ESEF)
prepared Annual Financial Report with the
European Single Electronic Format
Regulatory Technical Standard (‘ESEF RTS’)
as required by the Financial Conduct
Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.14R
To the Members of Ibstock Plc
Report on compliance with the requirements for iXBRL mark up
(‘tagging’) of consolidated financial statements included in the
ESEF-prepared Annual Financial Report
We have undertaken a reasonable assurance engagement on the
iXBRL mark up of consolidated financial statements for the year ended
31 December 2021 of Ibstock Plc (the “company”) included in the
ESEF-prepared Annual Financial Report prepared by the company.
Opinion
In our opinion, the consolidated financial statements for the year
ended 31 December 2021 of the company included in the ESEF-
prepared Annual Financial Report, are marked up, in all material
respects, in compliance with the ESEF RTS.
The directors’ responsibility for the ESEF-prepared Annual
Financial Report prepared in compliance with the ESEF RTS
The directors are responsible for preparing the ESEF-prepared Annual
Financial Report. This responsibility includes:
• the selection and application of appropriate iXBRL tags using
judgement where necessary;
• ensuring consistency between digitised information and the
consolidated financial statements presented in human-readable
format; and
• the design, implementation and maintenance of internal control
relevant to the application of the ESEF RTS.
Our independence and quality control
We have complied with the independence and other ethical requirements
of Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied
to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We apply International Standard on Quality Control 1 and, accordingly,
maintain a comprehensive system of quality control including documented
policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
Our responsibility
Our responsibility is to express an opinion on whether the electronic mark up
of consolidated financial statements complies in all material respects with
the ESEF RTS based on the evidence we have obtained. We conducted our
reasonable assurance engagement in accordance with International
Standard on Assurance Engagements (UK) 3000, Assurance Engagements
Other than Audits or Reviews of Historical Financial Information (‘ISAE (UK)
3000’) issued by the FRC.
A reasonable assurance engagement in accordance with ISAE (UK) 3000
involves performing procedures to obtain reasonable assurance about the
compliance of the mark up of the consolidated financial statements with
the ESEF RTS. The nature, timing and extent of procedures selected depend
on the practitioner’s judgement, including the assessment of the risks of
material departures from the requirements set out in the ESEF RTS, whether
due to fraud or error. Our reasonable assurance engagement consisted
primarily of:
• obtaining an understanding of the ESEF RTS mark up process, including
internal control over the mark ups process relevant to the engagement;
• reconciling the marked up data with the audited consolidated financial
statements of the company dated 31 December 2021;
• evaluating the appropriateness of the company’s mark up of the
consolidated financial statements using the XBRL mark-up language;
• evaluating the appropriateness of the company’s use of iXBRL elements
selected from a permitted taxonomy and the creation of extension
elements where no suitable element in the permitted taxonomy has
been identified; and
• evaluating the use of anchoring in relation to the extension elements.
In this report we do not express an audit opinion, review conclusion or any
other assurance conclusion on the consolidated financial statements.
Our audit opinion relating to the consolidated financial statements of the
company for the year ended 31 December 2021 is set out in our
Independent Auditor’s Report dated 8 March 2022.
Use of our report
Our report is made solely to the company’s members, as a body, in
accordance with ISAE (UK) 3000. Our work has been undertaken so that
we might state to the company those matters we are required to state to
them in this report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body for our work, this report,
or for the conclusions we have formed..
Jonathan Dodworth
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
10 June 2022
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Additional information
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SHAREHOLDER INFORMATION
Company Secretary
Nick Giles
Registered office
Leicester Road
Ibstock
Leicestershire
LE67 6HS
United Kingdom
Tel: +44 (0)1530 261 999
Company registration number
09760850
Auditor
Deloitte LLP
Four Brindleyplace
Birmingham
B1 2HZ
Joint corporate brokers
UBS AG London Branch
5 Broadgate
London
EC2M 2QS
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Financial PR
Citigate Dewe Rogerson
8th Floor
Holborn Gate
26 Southampton Buildings
London WC2A 1AN
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
0371 664 0300
From overseas call +44 (0)371 664 0300.
Calls are charged at the standard geographical rate and will vary
by provider.
Calls outside the United Kingdom will be charged at the applicable
international rate.
Open between 09:00–17:30, Monday to Friday excluding public holidays
in England and Wales or email Link at enquiries@linkgroup.co.uk.
Corporate website
www.ibstockplc.co.uk
Brand websites
Ibstock Brick www.ibstockbrick.co.uk
Ibstock Kevington www.ibstockbrick.co.uk/kevington
Forticrete www.forticrete.co.uk
Supreme www.supremeconcrete.co.uk
Anderton www.andertonconcrete.co.uk
Longley www.longley.uk.com
Analysis of shareholders – 31 December 2021
2021
Number of
holdings %
Balance as at 31
December 2021 %
1-1,000 348 29.617 179,568 0.0438
1,001–5,000 336 28.5957 915,144 0.2234
5,001–10,000 104 8.8511 749,345 0.1829
10,001–50,000 156 13.2766 3,460,433 0.8448
50,001–Highest 231 19.6596 404,327,104 98.7051
Total 1,175 100.00 409,631,594 100.00
Holder type
Number of
holdings %
Balance as at 31
December 2021 %
Individuals 568 48.3404 1,785,194 0.4358
Nominee and institutional investors 607 51.6596 407,846,400 99.5642
Total 1,175 100.00 409,631,594 100.00
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Additional information
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Ibstock plc
Leicester Road
Ibstock
Leicestershire
LE67 6HS
United Kingdom
+44 (0)1530 261 999
ibstockplc.co.uk
It’s what
specification
is made of.