Forterra plc (LON:FORT), a leading UK producer of manufactured masonry products, has today provided this update and further detail on the measures it is taking to mitigate the impact of Covid-19.
Trading and operational update
Since our announcement of 28 April 2020, we have been encouraged by a gradual increase in despatches as our customers reopened their operations. Daily despatches of our brick & block products have now recovered to approximately 50% of corresponding 2019 levels. Group revenue declined by 39% for the five months to 31 May 2020 compared with the corresponding period in 2019, with a year-on-year decline of 86% in April and 62% in May.
We are currently manufacturing at twelve of our eighteen facilities and are preparing to further increase production as demand requires. We anticipate recommencing production at most of our remaining facilities by the end of July and retain full flexibility to reopen facilities sooner should demand increase at a faster rate than expected.
Economic and industry forecasts indicate a prolonged impact from Covid-19 on the UK economy and more specifically the construction sector. Although the Construction Products Association’s most recent forecast anticipates the residential construction market will recover during 2021, output in 2021 is forecast to be approximately 20% lower than in 2019.
Accordingly, we are taking steps to restructure the Group’s operations in line with the anticipated decline in medium-term demand. In the coming weeks we will consult with employees on our plans, which include proposed changes to shift patterns and adjustments to the size and structure of support functions. Additionally, these proposals include consolidating the manufacture of all precast concrete flooring products at our Hoveringham facility in Nottinghamshire. This proposal will necessitate the mothballing of our hollowcore flooring manufacturing facility at Swadlincote in Derbyshire once the current order book is completed. These proposals will not affect our ability to service key customers or our specialist precast concrete facility at Swadlincote. These actions, if implemented, will regrettably lead to the loss of approximately 225 jobs, primarily from our concrete products facilities.
Balance sheet and liquidity
The Group entered the Covid-19 crisis with net debt (pre IFRS 16) of £43.2m at 31 December 2019.
The Group has access to a £150m revolving credit facility which runs to July 2022, which is presently fully drawn. At 31 May 2020 the Group had cash reserves of £79m as well as access to an undrawn overdraft facility of £10m.
In addition, Forterra plc has been confirmed as eligible for the joint HM Treasury and Bank of England Covid Corporate Financing Facility (CCFF) with an issuer limit of £175 million and is now able to access the liquidity available under this facility. The Board does not have any present intention to draw upon this facility, which provides the Group with additional headroom if required.
Despite the economic circumstances created by Covid-19, the Board remains confident that the Group is well positioned to take advantage of the attractive long-term market fundamentals in order to continue delivering sustainable shareholder value.