Forterra H1 2026 Earnings Report

Forterra EPS Results

• Actual EPS: GBX 5.10
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Forterra Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Forterra Announcement Details

• Quarter: H1 2026
• Date: 7/28/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 28, 2026
• Conference Call Time: 4:00AM ET

Forterra (LON:FORT) is a leading UK manufacturer of essential clay and concrete building products, with a unique combination of strong market positions in clay bricks, concrete blocks and precast concrete flooring. Our heritage dates back many decades and the durability, longevity and inherent sustainability of our products is evident in the construction of buildings that last for generations; wherever you are in Britain, you won't be far from a building with a Forterra product within its fabric. Our clay brick business combines our extensive secure mineral reserves with modern and efficient high-volume manufacturing processes to produce large quantities of extruded and soft mud bricks, primarily for the new build housing market. We are also the sole manufacturer of the iconic Fletton brick, sold under the London Brick brand, used in the original construction of nearly a quarter of England's housing stock and today used extensively by homeowners carrying out extension or improvement work. Within our concrete blocks business, we are one of the leading producers of aircrete and aggregate blocks, the former being sold under one of the sector's principal brands of Thermalite. Our precast concrete products are sold under the established Bison Precast brand, and are utilised in a wide spectrum of applications, from new build housing to commercial and infrastructure.

Forterra H1 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: Resilient first-half performance despite weak demand: Like-for-like revenue fell 9% to £169 million as volumes declined, while adjusted EBITDA was £27 million and the margin improved 70 basis points to 16%. Adjusted PBT declined 12.7% to £14.5 million, and management expects full-year performance to remain in line with market consensus.
• Negative Sentiment: Market conditions remain challenging: Domestic brick dispatches fell 8%, NHBC housing starts excluding flats and apartments were down 9%, and RMI activity remained subdued amid higher interest rates, reduced mortgage availability and weak consumer confidence. Management expects second-half demand to be broadly consistent with the first half.
• Positive Sentiment: Pricing and energy hedging are supporting margins: Forterra implemented low-single-digit brick price increases plus transport and energy surcharges, while approximately 80% of expected 2026 gas usage and 2027 coverage is secured at pre-conflict pricing. The company also has layered energy positions through 2030 and electricity price certainty from its solar operations through 2040.
• Positive Sentiment: Capital discipline and shareholder returns remain priorities: Net debt was £74.5 million, keeping leverage below 1.5x, and the £20 million share buyback is expected to be completed in the second half. Forterra also extended its £170 million revolving credit facility to July 2030, with lower interest costs and a move from secured to unsecured borrowing.
• Positive Sentiment: Strategic growth initiatives are progressing: Desford continues to ramp up, Omnia brick slips have secured initial projects and a growing pipeline, and Forterra is exploring a calcined-clay joint venture. The company is also evaluating a roughly £60–£65 million Aircrete replacement facility, partly funded by the potential £25 million sale of the Hams Hall site, although no final investment decision has been made.

Presentation

[Neil Ash, CEO at Forterra]

Good morning. Thank you for joining us, welcome to Forterra's 2026 half-year results presentation. I'm Neil Ash, and I'm joined today by Ben Guyatt, our CFO. After many years with the business, this will be the last time Ben takes the opportunity to present a set of results before leaving the company later this year. Despite a challenging market backdrop, I'm pleased to report we've delivered a resilient set of results, and I'd like to thank the entire Forterra team for their hard work in achieving this. I'm not going to use this slide to talk about the high-level numbers. Ben will do that in detail later. I'd like to talk through what we've been focusing on despite a tough market. First, commercial excellence.

[Neil Ash, CEO at Forterra]

By selecting the right customers and working with those who can offer growth, we've managed to outperform the wider brick market, pleasingly, we also delivered inflationary price increases. We've taken a long, hard look at our cost base, through more streamlined ways of working, we've removed around GBP 2 million of back-office and commercial costs whilst keeping service and delivery to our customers at the right levels. Operationally, we've continued to make good progress. Desford's output continues to increase. Commissioning at Wilnecote is progressing, we're also getting a great response from our Omnia range of brick slips, with the first projects now underway and a strong pipeline being built. Our sustainable operational excellent program continues to add real value. The fact we're improving our margin as a percentage of sales in a market like this demonstrates that our actions and strategy are delivering.

[Neil Ash, CEO at Forterra]

Finally, we've maintained a tight grip on cash management, keeping leverage below 1.5x. I'll now pass over to Ben, who will walk you through the numbers in a bit more detail.

[Ben Guyatt, CFO at Forterra]

Thanks, Neil. Morning, everyone. It's good to see you all again, I'm pleased to be here this morning presenting a resilient set of 2026 half-year results delivered against a backdrop of challenging market conditions. Like-for-like revenue was GBP 169 million, a fall of 9% against the prior year comparative. With this primarily a function of lower sales volumes. We delivered a credible adjusted EBITDA of GBP 27 million, only GBP 2.9 million less than the GBP 29.9 million comparative that was achieved last year under very different trading conditions. We've increased our adjusted EBITDA margin by 70 basis points to 16%, with this achieved through the closure of our non-core businesses, which had previously been a drag on margins. Adjusted PBT falls by 12.7% to GBP 14.5 million, although the benefit of the ongoing share buyback helps mitigate the impact on adjusted EPS, which is only 12.1% down at GBP 0.051 per share.

[Ben Guyatt, CFO at Forterra]

Net debt has increased to GBP 74.5 million, remaining below 1.5x leverage in line with our capital allocation priorities. Applying our mechanical dividend policy, which targets approximately 2x dividend coverage, we are today declaring an interim dividend of GBP 0.017, fractionally below the prior year figure of GBP 0.019. Moving on to look at our bricks and blocks segment in more detail. Like-for-like revenue here fell by 8%. We continue to benefit from our capacity bias toward extruded brick, with this allowing us to outperform the wider brick market. Domestic dispatches, as reported by the Department for Business and Trade, fell by 8% in the first five months of the year. Bricks remained our most resilient product, with block dispatches falling by a greater amount. We implemented a low-single-digit brick price increase, recovering underlying cost inflation.

[Ben Guyatt, CFO at Forterra]

This is an important milestone after several years of being unable to obtain meaningful brick price increases. Pricing in blocks was more challenging, however, although in the case of Aircrete, we did deliver significant price increases in the previous year. In the face of a significant increase in fuel and transport costs, we have remained agile and have implemented further price increases and surcharges to ensure we maintain our margins. The conflict in the Middle East also led to a significant increase in energy prices. Starting with the year with over 80% of our full-year 2026 gas demand fixed at competitive prices, our proven strategy of forward purchasing energy has insulated us from what would have been a significant cost increase.

[Ben Guyatt, CFO at Forterra]

During the period, we implemented the necessary actions to ensure our production output remained aligned to current market demand, implementing modest production reductions in both London Brick and Aircrete block. Whilst this reduces our cost base, as production also reduces, these cash savings won't drop through to the bottom line, but are essential in maintaining disciplined management of working capital and cash flow. With our performance also benefiting from our continued focus on operational excellence and efficiency, we delivered a segmental adjusted EBITDA of GBP 25.7 million, compared to GBP 27.5 million last year. With the EBITDA margin increasing by 70 basis points as we exited the unprofitable Formpave block paving business. Even with underlying margins broadly flat, this is a creditable achievement given the volume decline that we have faced. Moving on to look at bespoke products.

[Ben Guyatt, CFO at Forterra]

Following the closure of the Bison Bespoke precast operation during the prior year, this segment now solely comprises our Bison Precast concrete flooring business, a leading supplier of beam and block insulated ground floor flooring systems for single family homes and hollow core flooring used for the construction of upper floors in multifamily or commercial construction applications. Again, driven by lower sales volumes, we see like-for-like revenue falling by 14% to GBP 31 million. The pricing environment in this business was competitive, but we did implement surcharge price increases in order to recover the significant increase in transport costs that we faced during the period. Segmental EBITDAR in the period before the allocation of central overheads was GBP 4 million, compared to GBP 5.4 million last year. Allocated central costs are primarily fixed in their nature and unfortunately don't automatically flex with volume.

[Ben Guyatt, CFO at Forterra]

Although, as Neil has mentioned, we have recently restructured our central and management functions, saving around GBP 2 million per annum. Moving on to look at working capital. Our working capital is historically seasonal in its nature, with a higher balance to be expected in June relative to December, consistent with what we're seeing here. Total working capital increased by GBP 20 million in the first half of the year to GBP 66 million. Outside of normal seasonal movements, changes to accounting standards in respect of the recognition of electronic banking receipts have added GBP 4.5 million to our working capital. With these customer receipts now only recognized as cash on the first day of July. We are working with our customers to address this going forward. Weak demand has led to GBP 3 million of inventory growth in the first half, following a further GBP 3 million in the second half of last year.

[Ben Guyatt, CFO at Forterra]

Our recent modest production adjustments are designed to address this by keeping production aligned to current demand. Moving on to look at our cash flow. Our cash flow performance in the period reflects the market conditions we presently face, along with the impacts of seasonality. Adjusted operating cash flow in the period was GBP 8.5 million, which compares to GBP 30 million in the prior period. Although the prior period performance was atypical and benefited from an inventory reduction driven by particularly strong half one sales. Half one 2026 performance is closer to that seen in 2024. We are confident of a stronger operating cash performance in H2, driven by the seasonality of our working capital movements.

[Ben Guyatt, CFO at Forterra]

Our capital expenditure in the period was GBP 4.1 million, and we expect a full year total capital outflow of around GBP 10 million as we carefully control our maintenance spend in the current market conditions alongside completing our strategic projects. Following the announcement of the share buyback in March, we returned GBP 8.5 million to shareholders in the first half, and will complete the GBP 20 million buyback in the second half. The IFRS amendments I referred to earlier increase our net debt by GBP 4.5 million, and with other being mainly lease repayments, we end the period with net debt before leases of GBP 74.5 million, which is an increase of GBP 19 million on the year-end figure. As I've just explained, we ended the period with net debt excluding leases of GBP 74.5 million.

[Ben Guyatt, CFO at Forterra]

This equates to leverage of just under 1.5x on a pre IFRS 16 banking covenant basis, which is in line with our capital allocation target of keeping leverage under or around 1.5x. I'm delighted to say that we've recently extended our GBP 170 million revolving credit facility. The facility now extends until July 2030 with the option for a further one-year extension, which is subject to lender consent. This facility affords us significant optionality and flexibility looking forward. I'm grateful for the support shown by our lender group and the confidence that they have shown in our business. The facility was renewed with an unchanged group of lenders and allows the company to benefit from a small reduction in interest rate, whilst also moving from a secured to an unsecured facility. In addition, the group continues to benefit from a GBP 10 million overdraft facility.

[Ben Guyatt, CFO at Forterra]

Our current expectation is for both net debt and leverage at the year-end to remain at similar levels to that seen in June. This next slide summarizes the more technical aspects of our guidance in a single place. Importantly, given the current situation in the Middle East, with gas prices now back to the highest levels since the conflict began, we are well positioned with around 80% of our expected year-to-end usage secured at pre-conflict pricing. We also have good coverage beyond this with around 80% of our gas coverage for 2027 already secured, again at competitive pre-conflict pricing. We then have decreasing layered positions in place out to 2030. Reassuringly, our solar PV arm provides us with price certainty over the bulk of our electricity consumption for the next 14 years out to 2040.

[Ben Guyatt, CFO at Forterra]

When we announced the closure of the Bison Bespoke Precast facility last year, we did say that it was located on a relatively valuable piece of land. We still expect to generate around GBP 7 million of property disposal proceeds in the second half of 2026, although this is obviously transaction dependent. Any exceptional profit on disposal will be excluded from our adjusting result. We still expect appreciation to be in the region of GBP 21 million, with financing costs of around GBP 6 million and our effective tax rate remaining at around 26%. I won't read out the rest of the content on this slide, as you can digest these details in your own time. I'll now hand back to Neil, who will discuss the market development in more detail, along with our strategic progress.

[Neil Ash, CEO at Forterra]

Thank you, Ben. As I mentioned earlier, we continue to make great progress on our two strategic priorities. First, strengthening the core. This is all about making sure we are the best business we can be. Our sustainable operational excellence program is becoming embedded across our plants, with continuous improvement and the sharing of best practice driving higher levels of efficiency. Alongside this, our commercial excellence program is supporting stronger returns. We've refined our route to market to better reflect customer needs, whilst maintaining price discipline and resilient margins. Operationally, Desford continues to increase its output and since September of last year has been operating with both kilns in production. We've also made excellent progress with our Beyond the Core initiatives, including calcined clay and the launch of our Omnia brick system, both of which I'll come back to later in the presentation.

[Neil Ash, CEO at Forterra]

We believe our focused product portfolio provides a significant competitive advantage. Whilst brick remains our largest product category, our block and Bison businesses play an important role in the value we create for customers. The breadth of our offering enables us to provide more integrated solutions, strengthen customer relationships, and create commercial synergies across the business. More recently, those synergies have also allowed us to streamline our commercial organization, improving efficiency whilst continuing to support our customers effectively. If we move to the market update now, we've included two charts which, in our view, summarize the key challenge facing the market. Higher interest rates and a significant reduction in mortgage product availability continue to weigh on both our customers and the wider house building sector. The chart on the left shows mortgage approvals falling sharply in May as interest rates increased. Consumer confidence also remains weak.

[Neil Ash, CEO at Forterra]

As a result, the RMI market continues to be subdued, with many extensions projects typically funded through additional borrowing secured against existing mortgages. One additional point of data not shown on the slide is the NHBC housing starts, excluding flats and apartments. These are 9% down versus last year. It is, however, encouraging to see the new prime minister maintaining a strong focus on the U.K.'s housing shortage. Looking back, the last time the U.K. consistently built more than 300,000 homes a year was in the late 1960s, when just under half of all new homes were delivered by councils. This does suggest there may be merit in the argument that increasing council house building needs to be part of the long-term solution, and we feel these homes will favor extruded bricks, lending itself to our product strength. Domestic brick volumes are 8% down versus last year.

[Neil Ash, CEO at Forterra]

Against this backdrop, Forterra has again outperformed the market. Imported brick volumes have remained broadly stable at around 20% of the market, and we estimate that more than half of these imports are for architecturally specified products for one-off projects. It's also worth remembering that one of the other manufacturers in the U.K. optimizes its European production footprint rather than supplying exclusively from U.K. factories. Today, we're operating at about 60% of our installed capacity. As I said earlier, Desford is ramping up towards full production while Claughton remains mothballed. Overall, U.K. brick capacity is now estimated at just over 2 billion bricks. The blue line on the chart is probably the most relevant as it shows the brick demand generated by 2022 housing volumes. As you can see, this sits well above the current U.K. brick manufacturing capacity.

[Neil Ash, CEO at Forterra]

It's worth remembering that no other U.K. manufacturer has increased its brick capacity to the same extent as Forterra, and importantly, all that additional capacity is extruded brick, the part of the market that continues to grow share. If we move to brick slips now, we continue to make great progress in this exciting part of our business and remain confident in the long-term growth opportunity. Our Omnia system allows us to offer architects and specifiers a fully accredited facade system, supplying not only brick slips, but also the supporting rails. This is particularly important as the largest end markets are high-rise residential, student accommodation, and commercial buildings, where complete system certification is essential. To complement our range of extruded brick slips manufactured at Accrington, we've also invested GBP 2 million in a dedicated brick slip cutting facility adjacent to our Measham soft mud factory.

[Neil Ash, CEO at Forterra]

This will allow us to offer customers both extruded and soft mud brick slips, significantly broadening our products offering, whilst minimizing transport costs and improving operational efficiency. We've received excellent feedback from the first projects we've supplied and continue to build a strong pipeline of future opportunities. We also see opportunities to accelerate our growth through selective bolt-on acquisitions, supporting our strategy of growing beyond the core and building a leading position in this attractive market. As previously mentioned, we continue to evaluate a potential investment in our Aircrete business. This investment would strengthen our market position, improve our long-term competitiveness, and enhance future profitability. We also intend to offset a significant proportion of the capital investment by maximizing the value of existing property assets. No final decision has been made, and any development would also be subject to planning approval.

[Neil Ash, CEO at Forterra]

We also continue to make good progress with our calcined clay project. Having successfully commercialized the use of London Brick waste as a calcined clay substitute, we have engaged with a number of potential partners and are moving forward with one preferred partner to explore the scope for a potential joint venture. Sustainability remains firmly focused on meeting the needs of our customers. As a result, we are moving away from reporting high-level carbon reduction targets, and more towards the amount of carbon emission per square meter, reflecting the way our house building customers increasingly assess embodied carbon at home level. Delivering decarbonization over the longer term will depend on technologies such as carbon capture and hydrogen, and we continue to work with a range of partners to develop a credible roadmap. In the meantime, we remain focused on the actions within our control.

[Neil Ash, CEO at Forterra]

Through product innovation, we continue to reduce the amount of clay and concrete required in our products, we believe there remains further opportunity to optimize size and geometry without compromising performance. If we move to the outlook now. We expect market demand in the second half to be broadly consistent with the first, as a result, continue to expect full year performance to be in line with market consensus. We remain committed to capital discipline and expect to complete our GBP 20 million share buyback during the second half of this year. In the meantime, we continue to focus on the things within our control, strengthening the core of our business whilst growing beyond the core. You will have also seen that we announced Lisa Oxenham, who will join Forterra as our new CFO. Ben will leave the business at the end of October.

[Neil Ash, CEO at Forterra]

We are still waiting for Lisa's actual start date, which will be no later than January of next year. As a Board, we remain confident that our investments in new production capacity, combined with our clear strategic direction, leave Forterra exceptionally well-positioned to benefit from the market's long-term structural growth drivers and the recovery in demand. We will now move to the question and answer session. As usual, please remember to state your name and institution for the recording. Thank you. Aynsley.

[Aynsley Lammin, Analyst at Investec]

Thanks. Aynsley Lammin from Investec. Just two from me, please. Maybe on the pricing front, just a bit more color, if you could elaborate. Is it competitive market, or are the competitors also raising prices? Is it supported to continue to cover costs for the rest of the year? Secondly, just on the cost savings, obviously took, I think, saving GBP 2 million out. If the market stayed flat into next year, is there more scope to take more cost out? Or are you where you are at and you need to be in terms of flat demand, maybe for even for next year?

[Neil Ash, CEO at Forterra]

Okay. I'll maybe pick up on the pricing, Ben, and you cover cost savings? Look, I think the really positive thing this year, at the beginning of the year, is we landed an inflationary price increase. Before the backdrop of the Middle East and the rise in inflation, I think that was something that we've always tried to drive through systematically for certainly the last three years I've been in the organization and beyond that. It's pleasing to see that kind of rational behavior has played out, and we've managed to deliver that price increase at the beginning of the year. Now, fast-forward to the situation we face with rise in transport costs, energy as a backdrop, although Ben's mentioned we are well hedged.

[Neil Ash, CEO at Forterra]

We've driven through either surcharges in the case of our concrete businesses or a further increase from the middle of the year with brick. We expect those to have to remain in place for as long as the crisis continues, and looking at the fact we delayed these increases to make sure customers didn't query invoices. We will have to probably run them on an extra few months, even if the crisis and fuel prices went to a normal level. As a result, I today imagine at the end of the year, when we announce a price increase for inflation impact into next year, we'll be rounding all those surcharges and already announced increase into our annual increase and see what we announce in the beginning of 2027. Ben, do you want to pick up cost savings?

[Ben Guyatt, CFO at Forterra]

I guess you can look at cost savings in two ways. There is continuous improvement in the business, the operational efficiency that we talk about, taking cost out of everything we do, making our factories more efficient. That will always continue. That's within our DNA. There's also the market related cost reductions, the brutal decision of taking heads out of the business. The business is already pretty lean. We're not a fat business. We never have been. We've had a long hard look at our cost base this year, and we've found GBP 2 million of annualized savings. We'll get about half of that benefit this year. There isn't a great deal more to go.

[Ben Guyatt, CFO at Forterra]

If the market stays like this, we'll obviously have to keep the cost base under review, but I wouldn't be expecting further headcount reduction savings, but we will obviously try to make our business as efficient as possible.

[Neil Ash, CEO at Forterra]

Thanks, Aynsley. Next one. Gentleman there. Thanks.

[Rob Chantry, Analyst at Berenberg]

Hi. Rob Chantry, Berenberg. Thanks for the presentation. Just two questions from me. Firstly, could you just comment a bit more on the exit of the two divisions at the end of last year. Only the flooring business remains in bespoke products. How strategically do you see that going forward? Do you see it as a core part of the business you'll look to ultimately grow and add things on in time, or is that also under review? Secondly, there was a slide mentioning a bit more detail on investment in the Aircrete business. Just cognizant that in the first half just gone, you reported more difficult time for blocks.

[Rob Chantry, Analyst at Berenberg]

Can you just talk a bit more about the rationale for investing in that business, the type of scale and scope and exactly what you would be investing in? Thanks.

[Neil Ash, CEO at Forterra]

Okay. I'll carry both of those, Ben, and then you want to just maybe drop in on the Aircrete if you want to add anything. Yeah. We announced last year we would exit two non-core areas of our business. One was Formpave, which was a very, very small block paving business that had struggled to make profitability for a number of years. We tried to turn it around. We tried to see if there was an opportunity, but the CapEx required to invest in that business made it the right decision to exit the business there. Within Bison, we had Bison Bespoke and we had Bison Flooring. The bespoke side of things, again, struggled to see a pathway for profitability. What's remaining now is the Bison Flooring business, and that is a key part of our overall product offering that we bring to customers.

[Neil Ash, CEO at Forterra]

If you think about the illustration we show and draw of a home, or maybe a mid-rise set of apartment blocks, you can see our flooring solutions really play into the same customer type for brick and Aircrete. Therefore, we view that as part of our offering. Some of those synergies, we've managed to change into cost savings. When we look at how we go to market, we've managed to say, look, well, what's the point of having two people from Forterra going to visit the same house builder? If we pull that together, we can sell more system solutions and give a better offering. We view Bison Flooring very much as a strategic part of Forterra's offering. Aircrete. Look, Aircrete is a product that we have a great position in.

[Neil Ash, CEO at Forterra]

We have a very, very strong, market leading brand, I believe, in Thermalite, and our factories are very, very close to end of life. We've got to take the decision whether or not we invest further in our oldest factory, which is Hams Hall, or whether we take the opportunity to relocate that factory on another site within the Forterra network. Hams Hall does, as we've mentioned, sit on a very valuable piece of land. As a result, we're thinking to move it to a factory where we already have space, which will be next to Measham Brick, which is very close to Hams Hall. That will allow us to sell the land for around about GBP 25 million.

[Neil Ash, CEO at Forterra]

We're looking at an investment in the new facility at around about GBP 60 million-GBP 65 million, but we've not finished dotting the i's and crossing the t's on that. That's the overall plan. If you were sitting with a house builder, they may say they're increasing their reach into timber frame. We've done a lot of modeling on the capacity that's been installed around timber frame. Bear in mind, 50% of our sales also go into the merchant channel, which often ends up in RMI. We believe this product does have a future. If we don't invest and reinforce our competitive positioning, we will find ourselves struggling to compete in the market. That's why we're taking that as a strategic question.

[Neil Ash, CEO at Forterra]

There is a question on timing and capital allocation, but we're not going to come to that yet until probably in the full-year results when we come back on that, and we should have made some more progress around decisions or not on Aircrete. No planning has been applied for at this stage. We're just looking at the project on paper. Stephen

[Stephen Rawlinson, Analyst at Applied Value]

Hi, Stephen Rawlinson from Applied Value. Just two from me. Could you just talk a little bit, give us more color on what's going on in Flettons? RMI is down quite a lot in London and new build in London in particular, I've always seen Flettons as one of the higher margin products in the portfolio, and therefore actually crucial to profitability. Is there any chance if you just give us a bit more color on that? Secondly, you've always been reasonably good and bought energy forward. Ben's face always lights up whenever he talks about longer term energy pricing and forward buying. Would it be the intention to continue to do that when Ben departs? Some thoughts in around that, if you don't mind, please.

[Neil Ash, CEO at Forterra]

Sure. Shall I take the LBC Fletton question?

[Ben Guyatt, CFO at Forterra]

Yeah.

[Neil Ash, CEO at Forterra]

You do energy hedging? You're absolutely right. I would describe London Brick as one of our jewel in the crown brands within our business, and you're absolutely right to say it's a large driver of profitability. As we've said, we've seen that market pretty depressed, so much so that due to our stock position, we've decided to adjust some capacity at the beginning of this year, and we've now got that equilibrium between sales and stock. We've got great position in the merchants, and one of the questions we were always asking ourselves is, are we winning or losing share? You can't really get very much transparency on the LBC or the Fletton market. Through using GfK data on sales outs from a merchant's point of view, we can see that we've actually maintained market share, and we're not losing share.

[Neil Ash, CEO at Forterra]

That's an important piece of insight for us. It remains a key focus. We've got a very strong merchant team out there pushing that. In the market, like I mentioned earlier, with housing extensions being funded by additional borrowing in many cases, that market remains subdued. I think the trigger for that is getting some consumer confidence back in the market. Apparently, we do have disposable income in our pockets and our bank accounts to spend. I read a statistic on that recently. The money is there. It's just the confidence to take it out of the bank and start to spend it. Ben, do you want to cover energy?

[Ben Guyatt, CFO at Forterra]

Obviously, future energy policy will be something for the Board. I'm sure, you're right. We've done pretty well over the years of forward buying energy. The only times that really went wrong was the combination of COVID, followed by Ukraine. When the crisis in Ukraine hit, we were buying gas at relatively high prices because we were worried they'd go even higher. If you buy far enough ahead at pretty low prices, it's a fairly low risk strategy in my book. Look, I'll leave with pretty good hedging in place. As I said earlier, we're about 80% covered for next year. We've got layered positions down to kind of 2030. We've recently just extended our energy procurement contract to 2031, and I was actually talking with our energy advisors yesterday about purchasing some energy for 2030 and 2031.

[Ben Guyatt, CFO at Forterra]

Obviously, that's gone up a little bit with the current volatility in the Gulf. Beyond that, I think there is still value. Yeah, I'm sure the Board will look at it, from my perspective, I don't think there's a real reason to change that policy.

[Neil Ash, CEO at Forterra]

Clyde

[Clyde Lewis, Analyst at Peel Hunt]

Thank you. Clyde Lewis at Peel Hunt. I think I've got four for maybe, I think quite quick. Probably one for Ben to kick off. The cash receipts issue that you flagged for the first half, does that unwind by the end of the year in terms of that GBP 4.5 million that you flagged? Second one was probably for you, Neil, on stocks in the channel. Obviously, we see the industry numbers, be interested to hear your view as to level of stocks you think the merchants are currently carrying. You talked about pricing generally for your business, it'd be interesting to hear your take on import pricing as to where things have moved on that front, given, again, the higher logistic costs that we'll be seeing. The last one was on the Future Homes Standard.

[Clyde Lewis, Analyst at Peel Hunt]

You just touched on timber frame, I suppose in the sort of wider take of where do you think the outcome from the Future Homes Standard, clearly, there are still some moving parts without the software, do you think that's good news, bad news for your business and sort of, I suppose, where, which parts?

[Neil Ash, CEO at Forterra]

Ben, do you want to kick things off with cash then?

[Ben Guyatt, CFO at Forterra]

Yeah, the GBP 4.5 million from a change in accounting standards, that's around kind of the timing of receipts at the period end. We are working with our customer base to educate them of the importance of actually paying on time and basically so we can book that as cash. Ultimately, as with any business, kind of look, there's always a game going on. Everyone's trying to manage their own working capital. It will depend on the exact date of customer payments at the end of the year as to whether that's a one-off or a recurring difference.

[Neil Ash, CEO at Forterra]

Moving on to the stocks in the channel. I think in the merchant side of things, given their current ownership and a lot of it being kind of PE-backed, cash is a really, really strong focus for them. I think they're managing their stocks very, very closely. You can see that when you get to half years, and you get some order variations, and then it kind of goes again once they've got through their half year. I would say a lot of them know that their products are available on next day delivery that they want. They're managing their stock accordingly and cash as a result of that. Price impacts on imports.

[Neil Ash, CEO at Forterra]

Look, you could say that the bricks coming from Europe are coming further, therefore they've had the biggest impact on fuel, which I think was the point you're mentioning, that they've not woken up to that, it would seem. That part of the market remains quite challenging, I would say, in terms of price. It's very, very competitive. We need to be very, very careful to make sure that, say 500,000 bricks and 250 million coming in into merchants, that doesn't set the price for the soft mud market. We're not massively exposed to soft mud in merchants, we've managed to kind of deal with that at arm's length. Our soft mud sales are more of a, I would say, simplified offer in a soft mud versus the competition that predominantly goes into the house builders and that house builder market.

[Neil Ash, CEO at Forterra]

Although they're using slightly less soft muds, we still manage to keep our price and our position in there. We're watching from the outside and not deciding to roll our sleeves up and get involved in that kind of a fight with some of the import prices coming in. Future homes. Look, it's something we watch carefully, and I think, if you look at sustainability, of what that means to customers and what that means to homeowners going forward, and if we are going to see ourselves in a position where you see more and more social housing, I think some of the lightweight solutions that are offered from a sustainability point of view don't always lend themselves to long longevity of the home.

[Neil Ash, CEO at Forterra]

If you looked at a composite panel on the outside of a house or a render on the outside of a house or, goodness forbid, a composite brick slip. All those products in terms of longevity, do not match up to the longevity that brick can bring. I think when you're looking at social environments with social homes, brick really has a very strong position there. I think there will be some innovative house builders for some types of homes who embrace that new way of building, and there will be some who remain the more traditional side of things.

[Neil Ash, CEO at Forterra]

I think when you're looking at cost models and total ownership through the cycle, and whereas you're not selling that home to you and I in the market, and we're responsible for maintenance, I think when you're doing that to housing associations and councils, I think they're looking much more closely on longevity. I think that's the defense that we've got against some of the new ways of building which are coming in from that point of view. It's something we're watching closely, but we're not over concerned about it at the moment. Thanks. Alastair.

[Alastair Stewart, Analyst at Progressive Equity Research]

Alastair Stewart, Progressive Equity Research. A couple of questions on council housing. First of all, you obviously mentioned extruded bricks were ideal for that and other affordable tenures. Which other products do you think will particularly suit denser council house buildings? That's the first question. Second one is, based on who specifies, the PM's preferred route, at least so far, is it should be local authorities driving it, but since there are quite a few that haven't built in years, they're going to need a lot of help from existing housing authorities. Do you feel you need to talk to new people and new councils to get the message across to advise them?

[Neil Ash, CEO at Forterra]

Right. Let me pick those up. Other products, I think it comes back to what I was saying to Clyde earlier. It is suddenly the way you look on the return of an investment of a council home versus a home you just buy as an individual is quite different. I think longevity is really that message there. Robustness. It is kind of when someone decides to put their washing line or whatever it may be on the side of a house and screws it against it. How do these things work when you have got maybe a fiber cement board behind it, which suddenly starts getting moisture penetration. I think the robustness and the longevity of the products are the types of things that will win.

[Neil Ash, CEO at Forterra]

We are perfectly placed for that with Bison Flooring, with Aircrete, with agg Block, and also with the bricks side of our business, of course. On the question of who specifies it is a good one, and I think one of the things where I can work with my competitors on certain subjects is in the Brick Development Association. We are really collectively starting to think about how we work as an association. I think a lot of the, this is my view, that a lot of the work that the BDA have done so far is about the beauty of brick. I think what we really need to focus on the message, as I said, that robustness, that longevity, think about mortgage. Even if you are buying a home made out of brick, you are going to have 30-year-plus mortgages. You need to be able to remortgage afterwards.

[Neil Ash, CEO at Forterra]

Getting stronger on that messaging to decision-makers. I dare say local authorities, if they are flagged as one of those key decision makers, will be on our list of people to focus and target on with a bit more emphasis. Alastair. Christen, I think you have raised your hand and then you put it down again.

[Ben Barrow, Analyst at RBC]

Where do we go?

[Neil Ash, CEO at Forterra]

Go on. You're there now, so you may as well.

[Ben Barrow, Analyst at RBC]

It's Ben Barrow, RBC. Just on the relationship between extruded and soft muds, can you give a bit of color there? Have you seen customers switching over? Is it anything structural or purely just a cyclical factor? Second point on volumes. Assuming they remain stable into next year, are you happy with your current production output levels where they are?

[Ben Guyatt, CFO at Forterra]

Yeah. I'll pick these up. On the soft mud, there's a couple of things. Soft mud bricks cost more to manufacture than extruded bricks. There are more moving parts in the process. There's greater energy usage. There's greater repair costs. A soft mud brick may cost 20%-30% more than an extruded brick to make.

[Ben Guyatt, CFO at Forterra]

Kind of our customers, some of them are facing increasing margin squeezes. Obviously, they're looking at ways to save costs. Looking at an extruded brick over a soft mud brick would be one way they might want to achieve that. Beyond that, soft mud historically is more prevalent in the southeast of England. That's where naturally kind of the soft mud market is strongest. If you look at the various kind of regional data at the moment, affordability is most squeezed in the southeast, and that's limiting demand in the southeast and therefore kind of outside of the southeast, in the Midlands and further north, the market is stronger. I think it's a combination of both of those factors.

[Ben Guyatt, CFO at Forterra]

I'm not sure you can accurately kind of break it down into the individual ones, but those two factors are both leading us kind of to selling more extruded brick at the moment, and that's shown in the market data. As Neil said, look, as the government will obviously. We don't know what they're going to do exactly on housing yet, but it's pretty sure whatever their housing policies are going to be focused towards social and affordable housing. Again, the most cost competitive brick is obviously going to be well-positioned for that. In terms of output into next year, look, we're constantly tweaking our output to make sure that we don't build significant inventory. Look, we've seen as a small inventory build in the first half.

[Ben Guyatt, CFO at Forterra]

We've taken actions to reduce production of Aircrete and London Brick to make sure that inventories remained aligned to sales. On the other hand, we're still ramping-up Desford, that's making extruded bricks, and we still, if you look at our inventories, we've got very low levels of extruded brick, but higher levels of London and soft mud. I think broadly production is where it needs to be, the whole point of this business and the management team will be agile. If the market demand improves, they'll have to increase production. If the market demand kind of doesn't improve, I think we're in a pretty good place. It's managed constantly.

[Neil Ash, CEO at Forterra]

I think what kind of was challenging in 2023 was we were building stock in some of the factories at the same time as starting Desford and making sure Desford could work. We kind of probably ended up with too much inventory at the end of the year. If we did have to cut production, we can be very, very quick, because it would mainly be in extruded brick. That would involve taking a shift off or two shifts off in Desford and just running back with one kiln again. Now we don't foresee that as being the need going forward. I think CPA numbers came out yesterday with a forecast for 2027 on starts going up 7% overall. I was slightly cheerful to read that on the plane, on the train on the way to London last night, they have been wrong before.

[Neil Ash, CEO at Forterra]

It is difficult to forecast, but I think we can remain very agile. Our reaction speed to be able to take two shifts off is much faster than it would be, say, mothballing a factory, which goes for a longer process. Hopefully we don't have to do that, but that's what our reaction would be.

[Christen Hjorth, Analyst at Deutsche Bank]

Thank you. Christen Hjorth from Deutsche Bank. A couple of questions. Just the first one, obviously very strong performance in bricks in terms of volumes, particularly versus the market, but quite a wide variance, I think in volumes in some of the other product categories. Could you just sort of give a bit of color in terms of the moving parts there? Second one, this may be too early, but sounds like you've made some progress on calcined clay, so any sort of more color on potential scale of the opportunity?

[Neil Ash, CEO at Forterra]

Yeah. Ben, do you want to do volumes of other products?

[Ben Guyatt, CFO at Forterra]

Yeah. As we said, bricks is our most resilient product. Obviously we're even in the market, but also we've outperformed that market. Beyond that, you've got aggregate blocks, aircrete blocks, and flooring. Aircrete blocks on a year-by-year volume basis has probably shown the weakest performance, but that's probably as much a function of what was happening in 2024 and early 2025 than what's actually happening right now in 2026. 2024 and 2025, our competitors had some pretty major production issues, allowing us to significantly increase our market share in 2024, which fed through into early 2025. That process or those production issues have now been normalized for quite a while, but on a year-on-year comparator, we're still seeing the back end of that. Similarly within flooring, that is a more competitive market. It probably isn't quite the same oligopoly as you've got in bricks.

[Ben Guyatt, CFO at Forterra]

There probably is a little bit more fluctuation of market share. There's obviously a lot less data in that market as well, so it's harder to know exactly what's going on. It's probably a function of kind of a less structured market in flooring and some unwind of the previous dynamics in aircrete rather than anything specifically happening in aircrete right now.

[Christen Hjorth, Analyst at Deutsche Bank]

Thanks. Given I've got the mic, I might just say a few words to Ben on behalf of the analyst community. Clearly, it's been a whirlwind 10 years from the heady days of Help to Buy and two U.K. brick IPOs. You, of course, had already been at Forterra, I think for 10 years, or at least the predecessor organizations. It didn't take long for you to step up to CFO. You've been a steady hand through the aftermath of Brexit, COVID, Russia, Ukraine, inflation spikes, and a Middle East war as well. Despite those macro, a lot's happened. Despite the macro challenges, Forterra has taken major strategic steps forward, including successfully building the largest brick plant in Europe at Desford.

[Christen Hjorth, Analyst at Deutsche Bank]

I think on behalf of everyone in the analyst community, just want to say thank you for all your help over the years and good luck with your next challenge.

[Ben Guyatt, CFO at Forterra]

Thanks, Christen, and thanks everyone. It's been great to work with you all. Didn't expect that.

[Neil Ash, CEO at Forterra]

The calcined clay, actually. You were preparing yourself for your speech. I love that. Calcined clay. Look, this is going beyond just taking some LBC waste, which only has a certain amount available because we don't plan to make too much waste, but we found a good use for it. This is about taking virgin clay from the ground and working with someone to turn that into a cement substitute material. We've been doing a lot of extensive discussions, talking to major cement players and some of the innovative in the marketplace, learning from what's happening in Europe, and the rest of the world, as well as the U.K. Where we've got to is kind of having kissed a lot of frogs along the way, so to speak. We think we found someone which has the right synergies to work with.

[Neil Ash, CEO at Forterra]

They've got a good understanding of the go-to market elements of calcined clay, which I think will be something which we don't have in our DNA as Forterra. As a result, we're going to start progressing conversations with that one individual entity to see how and what a JV could look like, starting with a set of heads of terms, and we'll keep you informed as the process progresses really.

[Christen Hjorth, Analyst at Deutsche Bank]

Thank you.

[Neil Ash, CEO at Forterra]

Just one more this time. I should have put my glasses on because I can't actually see everyone from this. I see close up, but not far away, can I?

[Harry Dow, Analyst at Rothschild & Co]

Thank you. Yeah, Harry Dow from Rothschild & Co. I think just to follow up on that, I suppose, with the calcined clays, would the idea be a dual branded kind of bagged cement type business or as a calcined clay type business? Maybe we're not at that stage yet, but just intrigued to know what maybe the vision would be around that, whether it would be selling as a raw input to another manufacturer?

[Neil Ash, CEO at Forterra]

Yeah

[Harry Dow, Analyst at Rothschild & Co]

unnamed as Forterra maybe, or branded as Forterra. Secondly, just coming back on the Aircrete investment. I think obviously you said it'd be around GBP 60 million-GBP 65 million. Would that be expanding, I suppose, the capacity or is that a replacement cost of the existing facility in its current scale? I think you said you got GBP 25 million of land, which maybe leaves about GBP 40 million of cost, I think. Would that be covered within the maintenance CapEx sort of annually spread over a couple of years, or is that something that would fall into kind of the expansion bucket? I suppose that's linked to the other one. Would the new factory have a margin uplift? I suppose just more general color on the returns, I suppose, of that investment.

[Neil Ash, CEO at Forterra]

Ben, do you want to pick up Aircrete, I'll just talk for a little bit on calcined clay route to market. Without giving away too much in terms of who we've been speaking to, you kind of got two options. One is you go with some of the cement players, almost take an approach to dilute cement at source, that goes to the rest of the big cement users in the market. You could choose to take a different decision and sell to the ready-mix companies, the kind of individual players out there who have got their own formulation consultancies to help them optimize costs.

[Neil Ash, CEO at Forterra]

Very often, the optimization of how much you can use and how much you can blend in, if you work with one player, they will generally try and force through their full solution, whereas some of them are very happy to buy from different companies. I'll get my admixture from here, I'll get my cement from here, I'll get my SCM from here, I'll take the value engineering for myself. We're working through that, we've come to a conclusion, I don't want to go too much further with it because it starts to kind of give clear indications as to the route we would probably end up taking. That's the two questions you've got to work through on the project. Aircrete, Ben, do you want to?

[Ben Guyatt, CFO at Forterra]

I guess just to add to that, obviously having used to work for a cement manufacturer, look, 90% of the cement sold in the U.K. is bulk plus that. We're talking about a bulk product for kind of in construction. We're not necessarily talking about bags and being here or whatever, at least initially. The bulk is by far the most important thing. Looking at Aircrete. Yeah, we've got this potential investment. We've got two Aircrete factories at the moment, as Neil said, the one at Hams Hall is getting close to end of life. The GBP 65 million is roughly the cost of a new factory. As you say, basically, we've got the valuable land that we could sell to reduce that to a net spend of somewhere in the region of GBP 40 million. It might be a little bit higher, we're still working on it.

[Ben Guyatt, CFO at Forterra]

In terms of capital allocation, in terms of CapEx spend, We have previously guided to GBP 15 million a year of maintenance CapEx. As you see this year, we're going to spend a lot less than that. This year, we're going to spend probably GBP 10 million of total CapEx, of what probably about GBP 3 million will be kind of strategic, and then the remaining GBP 7 million is maintenance. We're able to flex that. In reality, the factory would probably get built over a two and a half year period. You'd have to split that outlay over the few years. I think it's probably ambitious to assume that it will be done entirely within the GBP 15 million maintenance allowance. There will be some extra spend on top of that.

[Ben Guyatt, CFO at Forterra]

That's what Neil said earlier, with the Board are going to have to look at the sort of the timing of that project relative to the other capital allocation priorities. That's obviously, I think, something they'll probably give you more color on next year.

[Neil Ash, CEO at Forterra]

Any other questions, or are we Stephen, just go on.

[Stephen Rawlinson, Analyst at Applied Value]

Stephen Rawlinson, can I just ask another one, please? On slips, could you just help us out a little bit as to the way that market is panning out? Obviously you've spoken positively about progress to date, but is it a market where you're selling into factors who are building wall sections? Are you building wall sections yourself? Do you see that as an opportunity for added value? Where does it lie in terms also, you're selling a system here, and therefore the actual risk that you're taking of selling a system rather than selling just a plain brick is a little bit different. If you could just sort of explore that a little bit with us. Obviously, I recognize the constraints of a results meeting on this particular topic. Nonetheless, you've spoken positively about it. You've made the investment.

[Stephen Rawlinson, Analyst at Applied Value]

Just sort of how do you see the market playing out as an opportunity to sell products, an opportunity to sell systems, and how that might work, please?

[Neil Ash, CEO at Forterra]

When it comes to slips, we're seeing lots of different opportunities in the market. There are tiny things from accent walls sold through merchant customers. The thing we're more interested in is we've got what we call the Omnia system. When you go into more higher-rise buildings, you can't easily use glue to fix those slips, so it needs to go on a railing system. Therefore, we have not only the brick and the railing system with an external accreditation for its performance and use if installed as per our manufacturer recommendations. From an insurance point of view, we are guaranteeing the performance of our system correctly installed in the right applications rather than guaranteeing the installation of the element. Most of the projects we're supplying at the moment are being installed on site one slip at a time.

[Neil Ash, CEO at Forterra]

We are thinking and reflecting about how do we go into more panelized solutions, because no one wants to be 14 floors up putting one slip at a time with the cost of labor over time. We feel that's an opportunity to grow and develop. That's the kind of the Omnia system side of things. We also have an interesting group of customers, which are the EWI-type companies. They're the external wall insulation manufacturers, improving the thermal efficiency of existing housing stock, existing buildings where they want brick on the outside of those, and they don't need to be grooved with a rail system, but they can be thin slips to use for those applications. We're also working through from that point of view. I think your question on the warranties and insurance around it, we're quite clear on that.

[Neil Ash, CEO at Forterra]

We've taken good legal advice. It's something which I was quite exposed to in my previous career, that's helped, and we've got some good strategic people who are helping make sure we've got all the bases covered from that point of view. It's a growing market. It's growing, we estimate about 5% year-on-year. When you get some of these projects out of gateway, the market's only going to get bigger. We're coming from nothing, entering a market that is in its infancy, and we just see opportunity to grow and develop, really. It's quite exciting. Great. I think we're all done for questions. Thanks for those questions and your support as always. Thank you very much.

[Ben Guyatt, CFO at Forterra]

Thanks, everyone

Participants

Executives

• Neil Ash, CEO
• Ben Guyatt, CFO

Analysts

• Aynsley Lammin, Analyst at Investec
• Rob Chantry, Analyst at Berenberg
• Stephen Rawlinson, Analyst at Applied Value
• Clyde Lewis, Analyst at Peel Hunt
• Alastair Stewart, Analyst at Progressive Equity Research
• Ben Barrow, Analyst at RBC
• Christen Hjorth, Analyst at Deutsche Bank
• Harry Dow, Analyst at Rothschild & Co