Ibstock Stock

Right. Good morning, and welcome to Ibstock's 2026 Half Year Results Presentation. I'm joined today by Simon Bedford, our interim CFO, and I'd like to thank Simon for his support and leadership during his time as Interim CFO.

As previously announced, Will Wilkins has also joined Ibstock as CFO earlier this week and is with us here today in the front row. You'll have the opportunity to meet Will after the presentation today. Before I begin, it's also worth recognizing that we've been proudly marking 200 years of the original site of Ibstock and a few industrial businesses can trace their roots back over 2 centuries, and we're really proud of that.

With that, let's turn to the agenda. I'll share an overview of the first half of the year and how we're navigating what remains a very challenging market. Simon will then take us through the financials in more detail, including the divisional results, cash flow and balance sheet.

I'll then come back to update you on market dynamics and on the progress across our 5 strategic levers, and I'll then summarize our outlook for the remainder of the year before we move on to Q&A. Turning first to the overview. We entered into the year with the expectation that there would be some growth in the market.

However, poor weather and macroeconomic events led to more volatile conditions and subdued market demand across our key end markets. Against this backdrop, the business has delivered a solid performance in line with our expectations. Some key messages to point out. The Clay business delivered a resilient performance in the period.

U.K. domestic brick deliveries for the first 5 months were down around 8% year-on-year, and our comparable sales volumes were down around 7%, meaning we gained domestic clay market share in the period. While our concrete business has also been impacted by the challenging backdrop, most of our categories have outperformed the market.

We've acted decisively to manage capacity, production volumes and inventory, and we continue to align output to demand, manage inventory carefully and maintain discipline on overhead and costs. In parallel, our teams have continued to make strong progress across the 5 strategic levers that underpin our medium-term value creation plan, and I'll go into more detail on that later.

Despite not anticipating any meaningful market improvement, we expect to achieve a stronger adjusted EBITDA in H2 than in H1, supported by customer order intake and anticipated stronger performance from our Concrete and Futures businesses and normal seasonal weighting towards the second half.

With near-term conditions expected to remain challenging, the full year outturn is anticipated to be around the lower end of current market expectations. And finally, while the timing of recovery remains uncertain, Ibstock is well placed to deliver growth and value creation as market conditions improve.

We have a market-leading position, a more efficient asset base, major capital projects largely complete, further and further optionality to generate cash from our land and clay reserves.

And with that overview, let me hand you over to Simon to take you through the financials.

Thanks, Joe, and good morning, everybody. I will now take you through the financial performance for the first half. As Joe said, the market backdrop remained challenging, but the business has performed in line with our expectations with focused execution across pricing, cost, capacity, inventory and cash management.

Turning first to the financial summary. Group revenue for the first half was GBP 164.2 million compared with GBP 193.4 million in the prior year. On a reported basis, this represents a reduction of 15%, reflecting both the market backdrop and the sale of our non-core Forticrete roofing sites at the end of 2025.

On a like-for-like basis, revenue was down around 10%. Adjusted EBITDA was GBP 25.7 million compared with GBP 35.5 million last year, with the reduction driven principally by lower volumes, the fixed cost absorption impact of deliberate production and inventory management actions and continuing cost inflation.

This was partially offset by the benefit of around half the GBP 5 million annualized cost savings from the rightsizing action taken in 2025 as well as ongoing efficiency actions. Adjusted EPS was 0.7p compared with 3p in the prior period. Net debt-to-EBITDA leverage was 2.5x on a banking covenant basis at the half year compared with 1.9x in June 2025. This reflects lower earnings and a small increase in net debt.

Net debt and leverage are expected to reduce in the second half as cash generation strengthens. While ROCE was disappointing in the period, we expect to return to our target ROCE of 20% as the market recovers. The Board has proposed an interim dividend of 0.5p per share.

Moving now to cover the revenue bridge. Group revenue reduced by GBP 29.2 million year-on-year from GBP 193.4 million to GBP 164.2 million. The first quarter was particularly challenging given subdued demand and weather impacts, but we saw improving volume trends during the second quarter.

Clay revenues were 10% lower on a reported basis with core clay revenue down 8%. That reflected lower volumes in the first half, partially offset by positive pricing. We implemented annual price increases in February and introduced a temporary surcharge in June to help mitigate additional energy and fuel-related inflation.

Concrete revenues were down 26% on a reported basis and around 11% on a like-for-like basis. The reported decline reflects the Forticrete roofing sale, while the like-for-like movement reflects continued weakness in residential and RMI markets, partially offset by improving demand for rail and infrastructure projects, albeit from a relatively low base.

Overall, the bridge reflects the reality of a difficult market, but also the actions we are taking to protect value through pricing discipline. Turning now to clay. Clay delivered a resilient performance against a challenging backdrop with market share gains in the period. Total revenue was GBP 119.9 million, down GBP 13.6 million year-on-year.

Core clay revenue, excluding futures, was GBP 118.1 million, down 8%. Volumes were lower in the first half. However, as Joe mentioned earlier, that was better than the wider domestic market in the period up to the end of May. Headline pricing remained marginally positive. The February price increase and the temporary fuel and energy surcharge introduced in June helped to offset part of the cost inflation in the period.

In terms of mix, we continue to see stronger performance in new build housing and wire cut bricks, while demand for soft mud bricks remain more subdued, particularly in RMI in the South-East and London market. Adjusted EBITDA for clay was GBP 23.4 million compared with GBP 32.8 million last year with a margin reducing -- with margin reducing to 19.5%.

The reduction reflected lower volumes and the temporary fixed cost absorption headwind from our deliberate management of capacity, production and inventory levels. Those actions reduced EBITDA by approximately GBP 5 million to GBP 6 million in the period, but they are the right actions to align output with demand and manage cash.

Within Clay, the Ibstock Futures cost base increased as Nostell ramps up with net costs of GBP 2.5 million compared with GBP 1.5 million in the prior year. As Joe will cover later, customer engagement around Nostell was encouraging, and we remain confident in the long-term opportunity.

Turning to Concrete. Concrete revenue is GBP 44.3 million, down 26% on a reported basis and 11% on a like-for-like basis. The reported movement reflects the impact of the Forticrete roofing sale in Q4 2025. The market backdrop remained challenging across private residential and RMI with flooring products particularly affected by the subdued activity.

However, infrastructure demand provided some support with rail-related sales improving during the period and most other concrete categories declining less than the market. Adjusted EBITDA was GBP 3.7 million compared with GBP 6 million last year, reflecting lower volumes and continued weakness across key end markets.

EBITDA margin was 8.3%, down on the prior year. During the period, we saw continued strategic investment in selected manufacturing sites. That temporarily reduced production capacity as lines were taken offline for upgrades, but it positions the division to deliver operational and efficiency benefits in the second half and beyond.

So while the near-term market remains difficult, we continue to see medium-term opportunities in concrete, particularly as rail and infrastructure activity improves and as our investment in selected sites begins to deliver benefits.

Moving now to cash flow. Adjusted free cash flow for the -- adjusted free cash flow was an outflow of GBP 22.3 million compared with an outflow of GBP 9.6 million last year. The principal driver was the reduction in adjusted EBITDA together with seasonal working capital movements. Working capital was an outflow of GBP 17.2 million (sic) [ GBP 17.3 million ] compared with GBP 12.4 million in the prior period.

The outflow reflects the normal seasonal pattern. Inventory levels did increase modestly against the comparative period as trading volumes were softer than expected. CapEx reduced to GBP 15.2 million compared with GBP 20.9 million last year. Of this, around GBP 4 million relates to organic growth investment and GBP 11 million relates to sustaining CapEx and improvement projects.

The important point is that our major organic growth programs are largely complete. As a result, we would expect an acceleration in free cash flow generation as CapEx normalizes and as trading conditions improve. Turning to the balance sheet. Net debt at the 30th of June was GBP 151.3 million. This was in line with expectations and reflects the normal seasonal increase in working capital, lower earnings in the first half and the broader trading backdrop.

Leverage was 2.5x at the half year compared to 1.9x at June 2025. We expect net debt and leverage to reduce in the second half, supported by stronger cash generation with leverage moving towards 2x by the end of 2026. We continue to manage cash carefully with a clear focus on liquidity, cash generation and maintaining financial flexibility through the cycle. For those looking for the technical guidance for 2026, this is included in the appendix section.

With that, I will hand back to Joe to cover our market drivers and strategic progress.

Thanks, Simon. So at the full year presentation in March, we set out 5 strategic levers that will help us to drive shareholder value over the medium term. These are market leadership, growth in new market sectors, product innovation, efficiencies and strategic options.

We've made some good progress across each of the 5 strategic levers in the first half of 2026, and this is strengthening the business today as well as building additional sources of value and diversification for the medium term. Before sharing progress across the levers, let's start with an update on the market.

If we turn to the core markets, you can see from the chart that there's been a big swing in industry forecasts related to housing starts and completions. For us, housing starts are a key indicator and the CPA have moved from forecasting an 8% growth in 2026 in their winter forecast to a 9% decline now in their summer forecast.

There's a similar picture for heavy side RMI, but a more encouraging picture for infrastructure output, which is showing low single figure digit growth. The macro environment is not helping with the evolving situation in the Middle East and the U.K. changing political landscape affecting consumer confidence.

Housebuilders are experiencing build cost inflation and margin challenges, and it's difficult to see this changing meaningfully in the short term without some sort of targeted intervention from the government, such as a support for first-time buyers.

The longer-term fundamentals are still positive. The U.K. continues to face a significant housing shortage. We have also an aging housing stock that requires ongoing investment and renewal. Planning reforms and the recent announcements about building council housing are very interesting, but this will all take time, and we need a short-term action to improve the pace of recovery. So while we remain cautious about the near term, we continue to believe the medium-term opportunity is significant.

Turning to the brick market. Clearly, there's a strong correlation with the housing and RMI markets and brick dispatches. Domestic brick deliveries for the first 5 months of the year were down around 8% year-on-year. As I've mentioned, Ibstock's clay volumes were down around 7% for the same period.

Imported products were stable at around 19% of the overall market. At the same time, there's been discipline on production and inventory. U.K. manufacturing inventory levels were broadly in line with December 2025, reflecting the actions we and others have taken to align output with demand rather than allowing stock to build.

Looking at our own clay capacity. As stated, we've reduced our production in H1, and our plan for the year will continue to align production with market demand. Managing production and stock to recent volatile market conditions is a challenge, and we need to balance the short term with the need to supply a market that must see some recovery in the midterm.

At this stage, we expect to see some improvement in volumes from H1 to H2. Should that not happen, we will flex our production down further. And as Simon explained, this would create a margin headwind in the short term, but would be the right approach for cash discipline and longer-term value. Okay.

Let's turn to our first strategic lever, market leadership. With more than 200 years of trusted knowledge and expertise, the breadth of our offering, the strength of our customer relationships, our national footprint and technical capabilities gives us a very, very strong brand position.

As customer requirements continue to shift, our expertise in product performance, durability, technical specification and sustainability are important differentiators. And while many of our customers are looking increasingly -- are local, increasingly larger players are looking to have national offers across a range of clay, concrete and facade products and solutions under one unified Ibstock proposition, and we're definitely benefiting from that.

During the first half, our focused commercial strategy has gained market share, along with further deepening customer relationships, improved service and using insights more effectively to inform future growth priorities.

Turning to growth in other sectors. I mentioned in our last market update that we see significant medium-term opportunities in the areas of social and affordable housing, mid- to high-rise buildings, along with a huge pipeline of public sector buildings and infrastructure projects.

We know the government's GBP 39 billion affordable homes program provides a strong foundation with additional discussions on council housebuilding expected to drive further activity in the years ahead. While we've yet to see funding fully translate into a meaningful increase in delivery, our focus on end-user relationships and housing association engagement is helping to build share and strengthen our pipeline.

Several strategic relationships are tracking double-digit year-on-year growth, demonstrating the value of this more targeted approach. Although building safety issues have constrained recent activity levels, mid- to high-rise is an important long-term opportunity, especially for facade systems. Alongside this, the remediation market remains a sizable opportunity with thousands of buildings still needing recladding.

The third area is public sector investment. The government has committed to GBP 718 billion to infrastructure and public sector buildings over the next decade across areas, including education, health care and justice. This chart shows the anticipated spending splits, and we are increasingly targeting these markets.

You can see on this next slide an example of our proposition within the education sector. The range of Ibstock products that align to the Department for Education's construction framework is very broad and is enabling earlier engagement with customers.

As a result, we've seen strong engagement from notable Tier 1 contractors with millions of pounds of pipeline opportunities. As with the education example, we also see similar opportunities in health, social care and the recently announced defense infrastructure spend. The third strategic lever is product innovation. Innovation remains central to our growth strategy. It helps differentiate Ibstock, supports the evolving needs of our customers and opens new routes to market.

Revenue from new and more sustainable products now represents around 25% of our group revenue. Looking at the first half of 2026. Within clay, Atlas is now making 12 products, including the first from our carbon-neutral range. That's an important milestone, combining efficient production with enhanced product capability.

Atlas will continue to benefit from investment in hydrogen, subject to the forthcoming HAR2 government funding round. In concrete, we brought to market the Anderton Gen3 Cable Trough in June with Network Rail approval. This product is designed to significantly improve installation efficiency and support the demands of critical rail infrastructure projects.

And across our facades range, the new Nostell facility is creating a strong platform for growth with good customer engagement and specification activities. Taking a closer look at Nostell. This site will deliver some truly differentiated ceramic products and manufacturing capabilities unlike anything else in the U.K.

Factory acceptance testing is now completing, and we've seen a strong customer response in both the new IBricks and FastWall ranges. Orders for the core ranges are already in the low millions with inquiries in the specification pipeline in the tens of millions.

FastWall has also already received industry recognition as Housebuilder's Best New Product of the Year. We look forward to hosting investors at Nostell, showcasing its capability firsthand, and this is currently planned for early October to get your tickets.

Our fourth lever is in driving efficiencies, and this is focused on 3 main areas. Firstly, our manufacturing estate. Over the last 8 years, we've invested over GBP 3 million (sic) [ GBP 325 million ] to modernize our network. That investment has created a safer, more automated, efficient and more sustainable asset base, which will return significantly as our utilization levels improve.

As Simon mentioned, we've completed improvement projects on our concrete flooring, walling, masonry and lift shaft factories. We expect to see improving performance as some of these investments ramp up from H2 and into the future. And we've also used the current market conditions to extend shutdowns in targeted clay factories and invest in high-return upgrade projects.

An example of this is one of our largest wire cut factories in Nottingham, where we're now seeing higher output and energy savings of between 15% and 20%. We've also launched an operational excellence program, which will deliver long-term efficiencies and cost reductions across all locations. This has now started with key pilot sites and will extend more widely into 2027.

The third focus extends beyond manufacturing. We continue to drive efficiency through process simplification, systems improvement and digital enablement. During the first half, this included the implementation of a new customer relationship management platform alongside a number of initiatives using AI tools designed to improve the effectiveness across the group.

And the last area I'll touch on is further strategic optionality centered on our land and clay reserves. Just to provide a sense of scale, today, we manage over 2,700 acres of land across the U.K., spanning our factory estate, clay quarries where we have unrivaled clay reserves as well as a much wider natural estate.

We see increasing value being realized through several complementary routes. Firstly, the commercialization of calcined clay; secondly, a program of land development and sales; and thirdly, land-based income streams. Looking at these 3 routes, starting with calcined clay. Calcined clay is growing to become a key area for cementitious materials and Ibstock has invested to develop a major project of scale in the U.K.

This is an important foundation in decarbonizing the construction industry using a lower carbon, lower-cost cementitious replacement material. During the first half of the year, we've concluded further geotechnical work and investment to maximize the potential of the asset.

We also continue to progress commercialization during the period. With an exclusivity period with one counterparty now ending, discussions may broaden to include alternative partnership opportunities as we seek to maximize long-term value from this strategic asset.

We will continue to update the market on this initiative given the current live conversations taking place. Moving to look at land sales. Again, further work has strengthened our view of the opportunity, and we now expect our well-established land development and sales program to deliver from a previously expected GBP 25 million to GBP 30 million to around GBP 50 million over the next 5 years.

The final area is in our land-based income streams. Today, we already generate around GBP 2 million of annual income through inert landfill and energy. However, we see growing opportunities to create additional value with increased restoration and biodiversity net gain and believe this could more than double.

A good example demonstrating this opportunity is our former Dalton Quarry in Lancashire, which is being transformed into a biodiversity habitat bank, generating around GBP 1 million per year. We see the potential for possibly 2 or 3 more of these as well as the need for increased inert landfill projects.

Taken together, these opportunities demonstrate the breadth and quality of the asset base and the optionality it provides for long-term value creation. So bringing that all together, we continue to take all the necessary actions to manage the near term whilst keeping the long-term potential of the business intact.

Despite not anticipating any meaningful market improvement, we expect to achieve a stronger adjusted EBITDA in H2 than H1, and that's supported by our customer order intake and anticipated stronger performance from our Concrete and Futures businesses and the normal seasonal weighting towards the second half.

With near-term conditions expected to remain challenging, the full year outturn is anticipated to be around the lower end of current market expectations. Net debt and leverage are expected to reduce towards 2x by the end of 2026, supported by stronger cash flow generation.

We expect pricing actions to broadly offset cost inflation, and we'll continue to actively manage production and inventory levels. Our major organic growth projects are now largely complete, and that gives us a more efficient manufacturing network, a strengthened platform for growth and greater optionality as free cash flow improves.

Over the medium term, we remain confident in the fundamentals in the business. The long-term drivers of demand remain sound. Our market position is strong, and our 5 strategic levers provide clear routes to value creation in addition to market recovery.

And with that, Simon and I'd be very happy to take your questions. As normal for the record, I'd be grateful if you could state your name and institution before asking your question. And if you're in the room, you can press the button on the microphone on your seat so people can hear.

Aynsley Lammin from Investec. Just 2 for me, please. When we think about your guidance for the full year, are you assuming any more kind of lack of fixed cost absorption in the second half, I think GBP 5 million, GBP 6 million in H1. Is there any in H2 expected? And you mentioned you might kind of review capacity and stock.

And then the second question, just on pricing, I guess, just the way to think about that, you obviously had the price increase in February, and you're still sticking with your surcharges and you're confident they kind of cover the cost increases? Or are you thinking about another proper price rise in kind of coming into the summer and into H2?

So I'll take pricing, if you want to take the cost one. We've obviously implemented a price increase in February and then given what was happening with the inflation-based geopolitical stuff. We put one in June. We would expect that to flow through fully for the rest of the year.

At this stage, we're not planning on any other price increases. I think we've been really trying to work very closely with our customers. We ate the cost for some time to see what was going to happen. And then we communicated very effectively with them, and we're not looking to have any more. Now we'll have to wait and see what happens with the macros. But at this stage, we're not planning on any further price increases.

And on fixed costs, our aim is to balance sales demand with production demand. And with us -- with our outlook moderating on our view of demand in the second half of the year. If I just talk bricks, we'd expect probably to produce about between 45 million and 55 million less bricks in the second half of the year versus the second half of last year. So we will get, like Joe was alluding to, really that fixed cost absorption headwind in the second half as well.

You will get the full view of the full year of our cost improvement actions pulling through the second half as well.

Max Hayes from Cavendish. Just on imports, with the share holding steady, what's happened again on pricing versus domestic? And also, has there been any shift in the regional mix? Or has it been fairly consistent across the U.K.

Yes. So imports have remained fairly flat and held their share, I think. some of the importers have been quite aggressive on price. You would look at some of the pricing points and say, is that variable cost and freight and you're just trying to get cash. Some of the markets overseas are not great as well.

We are going to need imports when the market comes back because the U.K. capacity is below the normalized market volumes. And so I think a lot of customers want to keep a bit of a foothold. And then some of the incumbents have taken more capacity off in the U.K. and are flexing their wider European capacity to bring things in. So I think that's the main reason for it, but they're flat. I mean they haven't really changed in the last few years.

I think regional splits-wise, the South-East and London have been really challenged in the last few years. We're starting to see some improvement, and there's a little bit more support for making the London market move, but it hasn't really meaningfully changed at this stage. It's still a fairly similar pattern.

Ed Prest from Berenberg. On the balance sheet, you talked about working towards 2x EBITDA at the year-end. How dependent is that on market recovery? And how dependent is that essentially on achieving H2 EBITDA greater than H1? And do you have levers at your disposal that you can use to reduce debt without the market recovery coming through?

Yes. So our -- we naturally delever in the second half of the year just by how our weighting works on trading. So it is linked to our view of the market. It doesn't include any sort of strategic action to improve the balance sheet or net debt position. It is based on trading. But we're confident in what Joe said around the indicators we've got around. It's not a massive improvement in brick volumes. It's a small improvement on the first half.

We see improvement in the Concrete business and also we see further sales in futures, and that gives us confidence around our net debt just naturally coming down. And particularly, the first half was particularly difficult. So that gives us a view that we'll approach 2x leverage.

Priyal Woolf here from Jefferies. I think I've just got 3 questions. The first one is on clay. So you talked about market share gains. I think that was a similar message from your other main listed peers. So I just wanted to check where do you think those market share gains are coming from?

Second question, just on Nostell, you talked about tens of millions of revenue potentially from inquiries. How should we sort of phase that in our forecast over the next sort of couple of years?

And then the last question is just in terms of the exclusivity period ending with regards to that calcined clay, all those conversations. What were the sort of main points of attrition that led to that exclusivity ending without a contract being signed?

Good. Yes. So I mean, we've given some numbers here to show the first 5 months market share on clay. So -- and I can't really comment on other businesses and what they're saying. If they have taken share, there's not that many players in the market, so someone lost some share. So it's pretty simple math.

I think the main thing for us is really the range of products we have and the close customer connections and the strategic nature of the relationships we have deepening over time. We supply a broad diversity of the market, and that's housebuilding, RMI and other.

And I think the team has done a really good job engaging our customers and working with them. So I'm pretty confident that our brand will continue to maintain and drive share. Nostell is really interesting. I mean this is truly a differentiated factory. It's still building up. And the thing about specification products that link to the facade market is they've got a lead time.

Typically, a specification project, a mid- to high-rise building will be planned in and it will be between 12 and 18 months. So we are getting -- but they're already in the pipeline with architects and developers at Stage 1, for example. We see that and we've had inquiries come in.

The real thing for us now is to see how fast we can translate those inquiries into physical orders, which I mentioned that we've got in the low millions now and then how quickly they get called off, but there's no doubt that mid- to high-rise buildings with space constraints, speed, labor shortages really need these types of products. So we're very excited about it.

And we think that the versatility of our Nostell site and the innovation, we've had lots of customers visit already, and they're getting very, very excited about it. So this is definitely going to change the market. It's not going to cannibalize the brick market. We still are going to have lots of traditional building going on in the U.K.

But we think in the mid-high-rise space and in certain sort of government infrastructure projects, this is going to be a flyer. And I think it will ramp up over the next 2 years. It's not going to ramp up fully this year or next year, but we definitely see it ramping up within 3 years, it will be to the business case that we've talked about before.

Look, when you have discussions and complicated negotiations, there's always -- it's always quite complicated. I can't go into any detail because these conversations are confidential. We are still talking to a key counterparty. But I think given the fact that the exclusivity period is ending and in order to maintain the maximum value creation for the longer term, I'm open to broadening those conversations to other partnership potentials. Christen?

Christen Hjorth from Deutsche Bank managed to find the mic at the end. First question, just to sort of maybe help make it really simple for us. I think the full year guidance, in essence, is like a mid-single-digit EBITDA increase versus the first half. So how should we think about you sort of given the areas, but in terms of the quantitative piece, how should we think about bridging that gap?

And the second one, I think, Joe, you mentioned for the full year, you expect price and cost to broadly offset. I assume that's in absolute EBITDA terms, the way we should think about it rather than margin terms. And also, I assume that -- was that the same for H1 as well where price and costs broadly offset at the EBITDA line? Or is there a bit of catch-up to come in H2?

I'll take the second one. Simon can take the guidance one. I mean we had some benefit in the first half from pricing, but we only put the, I said we ate some cost with the inflationary-based environment, and we waited to see is this a temporary thing? Is it going to change? We didn't want to rush to sort of just put the inflationary-based environment. we waited to see, is this a temporary thing? Is it going to change? We didn't want to rush to sort of just put price increases straight away. And I think that was fair for our customers. So we ate some cost. But now that we put it in, in June, you will see that cost largely offset inflation at its current levels for the second half.

So yes, in terms of guidance, if you just talk H2 '26 versus H1 '26, we see -- just alluded to really, we see some catch-up in pricing as the sort of difference between pricing and cost is a lot more normalized in the second half of the year. So we see that. We don't -- we see some growth in clay volumes, but only low single-digit increase in clay volumes H1 to H2. So we get a little bit of benefit there.

We do see improvement in the 2 other areas of the business, one being Concrete and the other being Futures. Concrete is -- yes, we have done several investment projects in the first half of the year, which will be finalized and therefore, we'll deliver product into the market, which the market needs. And also, we expect some gain from rail infrastructure a bit more in the second half of the year.

And also as the sort of inquiries around Nostell and Futures increase, that will translate into sales and cover the fixed cost. What we're suffering from a bit in the first half is the fixed costs are in but the sales are just gaining momentum.

And therefore, we have a net cost in the first half year. We see that moderating in the second half. So you get a few of those improvements through. And therefore, that's why we believe, EBITDA in the second half, slightly better than the first half and therefore, getting to that sort of range number we've guided on.

Stephen?

Stephen Rawlinson from Applied Value. Two from me, if I may. Firstly, just thinking about calls on cash over the next 12 to 18 months. Would it be right to think that you're moving into a phase of maintenance-only CapEx during 2027? And if so, could you sort of give us a guide as to what the annualized level of maintenance CapEx might be?

And secondly, some of the routes to market that use direct and indirect seem to be under some financial strain. Could you just give us a few thoughts about your own management of credit risk in the next 12 to 18 months or so as we move forward because quite clearly, the strains start to show through more typically, sometimes on recovery than necessarily on the downturn. But just give us a clue on that, please?

Do you want to take the first one on the CapEx?

Yes. So on CapEx, we would expect our sustaining or maintenance CapEx to be around GBP 20 million going forward. I think we'd always expect a small level of improvement projects, which would be only around GBP 2 million to GBP 3 million really as we look to improve the fleet. So you can probably classify that as growth, but that would really be it. We're not anticipating to do any major growth investments in the near future. So yes, GBP 20 million to GBP 25 million would be our CapEx number going forward.

Yes. At this time, we don't have any major concerns with credit. I mean I know there was some chatter yesterday. We don't -- we obviously have good -- very good credit insurance which covers everything. We monitor that, and we're in discussions all the time.

We're not seeing any big strain with our larger customers. With the smaller customers, obviously, they go through different routes to market, as you alluded to. I think some subcontractors have probably had a tough time, and that's where there's a bit more exposure, smaller subcontractor work and they tend to be supplied by some of the distribution networks. But at this stage, we're not seeing any major credit issues in the market. Harry?

Harry Dow from Rothschild & Co. I think just 2 questions on inventories. Firstly, your own inventory, I think, was actually up slightly, I think, was what you mentioned in the presentation. Are you sort of happy with where inventories are at the moment? I know you talk about aligning production with inventories, but could there be a period where we actually see production lower than sales to potentially bring that down?

And then secondly, just on the channel inventories, do you think there was an impact in the first half from. I think maybe starting even in Q4 last year from some of the housebuilders to merchants maybe starting to destock a bit on signs of weakness, in which case that's maybe a one-off impact that we've seen potentially that might not occur in the second half?

Yes, quite insightful, Harry. I think on our own inventories, we want to be really focused. We're probably higher than we would like to be. We're not in a desperate situation, but we want to really manage that carefully. Obviously, we've been -- we built more stock last year than we would have wanted. And so our yards are fuller than it would normally be, and that's why this year, we've taken the action to destock. We'll continue to manage that.

And if there is -- if there are changes, we'll continue to flex. It's better to do that than to build more stock levels. But as you look at wider inventory levels for manufactured products in the manufacturers yards, you can see it hasn't changed that much. We obviously took some action to reduce this year, but there was quite a pronounced drop in February in the early part of the year with the weather.

And you just can't -- you can't -- so while our plan was to actually have a working capital sort of inflow, it didn't work out like that. So we'll continue to be focused on that. I think the channel, you're right, there's probably quite a bit of destocking as well because there was quite a bit of stuff in the channels. And I think that started to wind through in the first quarter. The second quarter of the year actually was quite optimistic because we start to see better dispatches. So I definitely think there was a bit of destocking going on in the first quarter. Ben?

Ben Varrow, RBC. Just on the pricing point again, was there a difference between putting through prices for soft mud versus extruded? Has it been more difficult perhaps in the soft mud area?

Next on land sales, that's obviously increased in your forecast. Could you give us a bit of an idea in terms of timing for that unwind?

Yes. I think, look, we differentiate -- prices are differentiated in the marketplace, but general price increase was fairly similar across soft mud and wire cut products in the U.K. I think some competitors may have differentiated a bit more. There's definitely a higher cost of production for soft mud products. So you need to make sure you're capturing that back. But I don't think there was any big changes in the general price increase around soft mud versus wire cut.

Around land and timing, we've obviously found there's a few more projects that we feel are coming closer. But again, these things to maximize the value, you don't want to move too quickly because you need to make sure you've got planning and the right conditions to maximize the value of the land.

So we've said in the next 5 years, I think some will come before that. I don't think we've got any big chunks this year, but unless we -- unless something changes, which it could. But I think in the next 2 to 3 years, you'll see some interesting inflows. Clyde?

Just 2 left, if I may, Clyde Lewis at Peel Hunt. There was a little note about sort of carbon credit emissions spend. It'd be interesting to sort of give us some idea of the scale of that and how you think that's likely to change going forward? And I suppose partly linked to that is obviously the sort of sustainability element of the business. And I suppose how much pull are you seeing from the customer base at the moment? Has that increased? Has that decreased? Obviously, sort of the Atlas plant is going to be a lot more energy efficient, et cetera. And things like the slips, again, have a very different sort of energy profile compared to sort of traditional bricks. So it'd be interesting to see what the customers are sort of talking to you about on that front.

Do you want to take the first one? I'll take the second.

Yes. So yes, on carbon emissions. So we will look at the market around carbon and look at our exposure in terms of free allowances versus the carbon emissions we got. We will buy carbon credits at a certain point to manage that dynamic, and that's what we did in H1. We don't see any material difference in what our carbon exposure is at the moment. But obviously, it's driven also by the market and by what -- how we are producing as well.

And then on sustainability, and I've said before, for us, sustainability is -- we're a long-term business, and we want to be a sustainable business. We believe that our products are actually standard test of time and are very sustainable anyway. If you think about a brick and the carbon footprint of a brick over the life, not just 60 years, which is what's stipulated in some of the standards, but actually over -- they're very, very efficient products.

But we use energy, we want to -- we use materials, and we want to make sure we're the most sustainable in those areas. I think the future home standard, it's still a bit of discussion around that. And it's -- there's a little bit of debate around the costs associated with it and house builders are having a real challenge. But there's definitely been a lot of work done on future home standards and what materials and what sustainability requirements are needed for that.

I think when you talk to architects, they're very conscious about sustainability, specifying the most sustainable products for the long term. But they're also talking about resilience with weather pattern changes and so on. So it's more holistic than just carbon. It's a much more holistic thing, sustainability.

We think that things like Atlas and the continuing drive to drive our carbon footprint down and other sustainability metrics is a real differentiator for us, and we'll keep doing it. How much price you're going to get for it in the short term given the challenges might be a bit debatable, but we think in the long term, having the credentials of a strong sustainable company is key. Charlie?

Charlie Campbell at Stifel. Two, but kind of related, I think. Just on the surcharges, presumably, those could come off quite quickly. I guess kind of customers will be keen to see that. So what are they watching in terms of the signal for those surcharges to come off?

And then secondly is related really. Just wondering about your hedging policy for 2026 -- 2027, sorry. And at what point -- which gas prices should we be looking at? And when is the critical point this year in terms of decision on hedging for '27?

Yes. So what the criteria we talked about with our customers when we introduced the surcharge, they asked us to look at a few things. One being, give us criteria what your cost inputs are. And largely, that was linked to the gas price. And then they said, when things change, give us a chance to make sure that this comes off. So we were very clear about that.

Obviously, we ate the costs for a few months, and we need to see where those costs go. They started to come off when we thought there was going to be peace and then they went back up again. So they're still in. The other thing to know about how quickly you can take them off, which we will do when things normalize, is you can't keep changing pricing every month. The customers don't like that either because they've got to change all of their back office, and it's really complicated, and they're often supplying other end users. So you've got to be mindful of those things. But we're working really closely with our customers, and we're talking to them regularly.

In terms of the 2027 hedge, I think we're well hedged, 60%, Simon. We will -- we normally like to be about 80% hedged by the time we get to budget. At this time, who knows what's going on. So we're not piling in or we're just staying cautious. But we've actually got gas that we buy in energy for '28 and '29 like some of our competitors. So we hedge forward and we take layers of cover as we go. But the near-term market, there's too much risk forecast in it. So we're not -- we probably wouldn't go in at the moment. I think that might be about it. Any other questions?

Good. So thank you very much for your attention today. Look, we -- it is a difficult backdrop. There's lots of potential exciting things that may come with some of the announcements from the government, maybe a bit of peace in the Middle East, hopefully, and we can get this market moving again. We are really well positioned for when this market come back. I think Ibstock is a really strong recovery play for the U.K. market, and we have to start building more, but we will continue to navigate the short-term challenges as well. So thanks very much, and we can have a bit of a chat now if you'd like to stay around.

Good morning, everyone. Nice to see everybody. Great. So good morning, and welcome to Ibstock's 2025 Full Year Results Presentation. Joining me today is Simon Bedford, our interim CFO.

So turning to the agenda. After I provide an overview and market context, Simon will walk us through the financials and cover divisional performance. I'll then focus on how we're thinking about shareholder value creation, specifically through the lens of five strategic drivers. Having covered the summary and outlook, Simon and I will then be very happy to answer your questions.

So turning first to the overview. As you'll know, 2025 was a tough year. We started well with strong volume growth in the first half coming mainly from new build residential demand. Market uncertainty in the second half resulted in progressively tougher conditions.

Revenues for the group increased by 2% to GBP 372 million with EBITDA at GBP 71 million, in line with the guidance issued in Q4 '25, but a reduction of around 10% versus '24. Despite the challenges in the market, this is a business that does not stand still, and I'm proud of the progress our teams have made at our major investment projects at Atlas and Nostell, both of which are now coming to their conclusion.

At the same time, we've taken decisive action on costs and flex capacity where needed. We've also remained disciplined in how we allocate capital. In Q4, we made the decision to dispose of our Forticrete roofing sites and we now completed a number of land disposals releasing about GBP 30 million of capital.

With major CapEx program largely complete, volume recovery and continued opportunities to release capital from our land bank will lead to an acceleration in free cash flow, and this will provide optionality on growth opportunities and shareholder returns as we move forward.

Before handing over to Simon and to provide a bit more context on our financial results, I'd like to recap on how our markets developed in 2025. As we entered 2025 with market momentum continuing from Q3 in '24, we took steps to reactivate network capacity to meet the recovering demand. It was promising double-digit growth volume in the first 2 quarters, followed by a deceleration to 4% growth in quarter 3 and as you can see from the chart, the final 3 months were challenging with brick volumes actually falling to 2% year-on-year.

Ultimately, with the initial momentum proving a false dawn, our capacity moved ahead of demand and looking back, I acknowledge that we went too early on this. Given the progressively tougher market demand dynamics in the third quarter, we readjusted capacity and acted on costs, which will position us better for the near term. Overall, in 2025, the total brick market grew 6% to 1.83 billion. And encouragingly, our market share was ahead of the market and ahead of the prior year.

And with that context, let me now hand you over to Simon to go through the financials.

Thanks, Joe, and good morning. Turning to cover the financial summary with Joe having already covered detail on our revenue and adjusted EBITDA performance. I will focus on three key metrics. Looking first at our EBITDA margin, this is reduced by 260 basis points to 19.1% as a result of inflationary pressure and increased cost as capacity is reactivated in clay. In addition, we experienced adverse product mix with lower volumes in higher-margin concrete categories of rail and infrastructure. EBITDA margin improved in H2 to around 20% as incremental costs from bringing capacity back tapered and also decisive cost management starts to kick in.

Now considering the balance sheet strength, although leverage has increased marginally from a year ago to 2x, net debt of GBP 120 million has reduced both marginally from last year and significantly from the June position despite the trading environment. This is a result of our disciplined approach on to capital allocation and a focus on priority markets, generating around GBP 30 million of proceeds through the disposal of noncore assets.

Return on capital employed at 5.8% remains well below our targeted level and reflects recent capital invested in both core and diversified platforms combined with earnings that continue to be impacted by markets well below normalized levels. With the recovery in market demand, combined with anticipated returns from our growth investments, we expect return on capital employed to revert to our targeted level of at least 20% over the medium term.

Finally, the Board has recommended a final dividend of 1.5p, bringing the total dividend to 3p, which is a payout ratio of 53%, in line with the prior year. We set out on this slide, group revenues compared to the comparative figures in 2024. Group revenue for the year was up 2% to GBP 372.1 million. Within this context, clay revenues increased by 5% to GBP 260 million, driven by strong new build growth in H1 with H2 flat year-on-year. However, these numbers mask the contrast between the quarters as the year progressed, which I won't go through again.

However, we also saw regional variation with growth more concentrated in Midlands and the North with the London and Southeast markets more subdued. Futures delivered revenues of GBP 9 million compared to GBP 10 million in the prior period as a result of our glass reinforced concrete business being closed in Q1 2025. Concrete revenue of GBP 117 million was 5% below the comparative period, largely as a result of the weakness in the U.K. rail infrastructure market.

Turning to cover the divisional financial performance in more detail, starting with the clay division. As already seen, the clay division delivered a resilient performance against a tough market backdrop. We saw growth in wire cut bricks, which are favored in new build housing markets whilst demand for soft mud bricks, which are more exposed to RMI and specification markets and more concentrated in the Southeast and London regions was more muted.

A more competitive environment constrained pricing, which, together with a negative shift in sales mix led to average pricing slightly below the comparative period. We took the decision to reactivate parts of the clay factory network during the first half of 2025. And whilst this has led to higher-than-expected incremental costs in the period, we saw these costs taper in the second half. This, combined with the cost actions taken, meant margins improved in H2.

The facade product categories within Ibstock Futures move forward with broad-based growth across the portfolio. We expect EBITDA to build from 2027 after a year of ramp-up in 2026 as our major investment in Nostell start to deliver positive returns.

Turning to cover concrete. Here, revenues decreased by 5% to GBP 112 million. Overall, residential new build sales volumes were tempered by lower growth in the RMI market and falling infrastructure sales volumes, as the U.K. rail infrastructure markets continue to be impacted by control period spending constraints. Similar to clay, we saw strong volume growth in many of the residential product categories in H1, partly offset by lower infrastructure volumes.

In H2, market uncertainty resulted in progressively tougher conditions with flooring and infrastructure categories particularly affected. Sales pricing in the residential categories mirrored the market dynamics seen in the clay brick division.

It is important to note that spending in the U.K. rail network has reduced to historically low levels. We have seen some pickup recently, but this constitutes a high-margin part of the concrete division, adversely impacting both mix and profitability. Whilst EBITDA margins remain well below historic levels achieved within our concrete business, as markets recover, we believe the division is well positioned to benefit with strong growth in both volumes and margin over the medium term.

Moving now to cover cash flow performance. Inventory levels grew as demand weakened in the second half of the year, resulting in a net working capital outflow of around GBP 14 million. Capital expenditure was in line with last year with GBP 21 million our growth projects and around GBP 24 million of sustaining spend, with major capital expenditure programs largely complete, we expect total CapEx to fall to around GBP 25 million to GBP 30 million in 2026. It is important to note that the noncore disposals of around GBP 30 million proceeds are treated as exceptional and are therefore not included in the adjusted free cash flow.

Moving to the balance sheet. Net debt reduced marginally to GBP 120 million by year-end, resulting in a leverage of 2x up on the prior year. The group has GBP 225 million of committed borrowings comprising the GBP 100 million private placement loan notes and GBP 125 million revolving credit facility, which we successfully refinanced in Q4 at improved terms. These borrowings contain leverage covenants of no more than greater than 3x tested semiannually. Based on the covenant definition, leverage at the 31st of December 2025 totaled 1.7x and the group had over GBP 100 million of available liquidity.

I will now outline the refinements we've made to our capital allocation framework to better reflect our choices for excess cash after considering balance sheet strength, organic investment considerations and dividends. This shows the balance choice between inorganic investment and shareholder returns in accordance with our strategic and financial investment criteria and they are, of course, not mutually exclusive.

With our major capital expenditure program is now largely complete, a high cash drop-through on incremental volumes and strategic options, which Joe will discuss later, this will provide significant optionality with respect to excess cash and capital allocation. For those looking for the technical guidance for 2026, this is now included in the appendix, with Joe covering how we will see 2026 developing in the summary and outlook section.

And with that, Joe, I'll hand back to you.

Thanks, Simon. So turning now to our market drivers and strategic progress. As set out on the screen, we see continuing shareholder value creation being built around these five clear strategic levers. You can see here that our leadership in our core markets remains key and has significant bearing on our financial performance. However, crucially, the remaining four levers are more within our control and are already driving progress through new market sectors, product innovation, operational efficiencies and the strategic value embedded in our land and clay reserves. .

This unique balance gives us resilience today and will be important to underpinning our midterm targets. I'll now walk through each in turn. With a 200-year heritage, we enjoy a leadership position in our core markets, and over recent years, we've been -- we've deliberately brought our brands, people and capabilities together under a single unified Ibstock.

That wasn't a branding exercise. It was about how we show up for our customers. Today, that leadership position allows us to support customers across clay, concrete and specialist building products alongside our design and technical services supporting national and regional housebuilders, the RM&I market and increasingly infrastructure and nonresidential applications.

I've talked in the past about engaging with customers across multiple categories, and that shift has picked up momentum in the last 18 months as both national and regional customers have seen the breadth of our offer and our technical capabilities.

Looking ahead, we also see a clear opportunities to grow in the 10% infrastructure and other sectors where our capabilities, assets and relationships position us well. That sector represents a significant share of the overall construction market where we are underrepresented today. And it's a space that lends itself to innovation and new products and new solutions. I'll give more details on this later.

Before I come on to the other areas, let's look at those core markets and what we're seeing on the ground. At a structural level, the long-term fundamentals that underpin demand in these housing and RMI markets remain firmly intact. The U.K. continues to face a significant housing shortage, household formations have been outstripping housebuilding for years, and we have an aging housing stock that requires ongoing investment and renewal.

Demand for social and affordable housing remains strong, supported by promising new funding allocations. Against that backdrop, we're starting to see some more supportive signals emerging. Inflation is easing from its peak and expected mortgage rates cuts should over time, help improve confidence.

Government reforms and planning initiatives are also welcome steps. However, the pace of delivery and affordability, especially for the first-time buyer on major issues. We're set to have a third year below 150,000 housing starts way off the run rate of getting to 1.5 million homes.

Even where starts are improving, build-out rates remain firmly controlled, housebuilders are prioritizing cash and aligning build programs to sales rates. As a result, we continue to take a cautious view in the near term with industry forecasts, including those from the CPA pointing to a continued subdued market conditions over the short term, and that remains consistent with what we're seeing.

However, the market will turn at some point. And importantly, we don't need to get to 300,000 housing starts to see a material improvement for our business. As a reminder, the U.K. brick fully installed capacity is around 2.1 billion. So even when we get close to this range, which equates to around 107,000 housing starts, we'll see a big improvement in industry utilization levels.

This slide shows why we're well placed to capture volume recovery by looking at our clay capacity evolution. As you can see on the slide, we break out the total network into three components: volumes manufactured in the period, further active capacity available, that's incremental volumes available through higher push rates or increasing shift patterns. And finally, an active capacity where capacity is mothballed or idled.

As we've outlined, the progressively tougher market conditions we saw in 2025 meant we build inventory and therefore, in 2026, we'll be actively managing production and inventory. This will give a margin headwind, but benefits overall cash flow generation. We've done that by adjusting soft mud capacity at our Leicester sites, which have much more operational flexibility. However, our active clay network gives us the ability to ramp up by more than 20% with very low cost additions and therefore, compelling drop-through to the bottom line.

With this network and stock levels, we're very well positioned to capture the upside as the market conditions improve. Outside of our core market exposure, there's significant medium-term opportunity in other construction market sectors. If stock is increasingly aligning with three growth market sectors, infrastructure, social and affordable housing and mid- to high-rise buildings that require cladding remediation. We're doing this by developing tailored sector solutions, broadening both our existing and new product ranges and working directly with the contractors delivering these major projects.

The challenge is well understood the U.K. is under-invested in recent years in schools, hospitals and public sector buildings. And that's why the government's 10-year infrastructure strategy includes an identified GBP 725 billion pipeline, covering work in departments such as the MOD, Department of Education and Ministry of Justice. Now that's not just theoretical opportunity for us. Over the last 12 months, we've undertaken additional product testing and assurance to enable delivery into these programs. That includes testing new products for the MOD's GBP 3 billion a year work program as well as other key public sector customers including the GBP 15 billion schools capital investment program.

Around half of the GBP 39 billion in social housing is expected to be delivered through Homes England. Housing associations are partnering with developers to unlock wider scheme, and we're already seeing this translate into activity. For example, we've received initial orders on our regeneration project in Birmingham a GBP 1 billion long-term master plan that will ultimately deliver about 3,500 homes.

In addition, challenges around the cladding remediation and the Building Safety Act requirements are creating new opportunities where Ibstock is exceptionally well positioned. Our high-quality, high-performing products in both our established ranges as well as the new innovations coming through at Nostell directly support safe, compliant and even more sustainable construction.

With that context, let me move on to our new product development pipeline and investment and how that positions us for future growth. You can see on the screen that over the last 8 years, an increasing proportion of our revenue now comes from new and sustainable products. This creates real value for our customers and helps sustain our margins. By working closely with our key customers, it's important to understand their strategic priorities, whether it's speed of build, low carbon, design flexibility or efficiency, and we focus our innovation on helping them to deliver against those aims.

Alongside our major strategic projects, we continue to strengthen and modernize our core clay and concrete product ranges through continuous product development and performance improvements. Today, I'll just focus on the Nostell redevelopment and on FastWall, which you'll have seen in the opening video. FastWall has been designed to support both existing and new markets. For existing customers, particularly housebuilders investing in panelized construction and timber frame, it delivers higher productivity and reduced weight, both critical drivers for customers adopting modern methods of construction.

Alongside FastWall, our new ceramic facade facility at Nostell is creating a further wave of innovation, delivering new facade solutions with a greatly expanded architectural range and almost unlimited design flexibility. It's the first facility of its kind to bring all of these things together in one place and initial customer interest has been really positive. We see these solutions as complementary, not competing with our core products. If there are skill gaps to meet the challenges of growing construction targets, this will be part of the answer.

To fully appreciate it, you have to really see it in operation, and we look forward to hosting another factory event similar to the one we did in Atlas last year, and we'll share more details about that soon.

Moving now to focus on our factory estate. Over the last 8 years, as already alluded to, we have invested more than GBP 325 million across our clay and concrete manufacturing network, creating a safer, more automated, more efficient and lower-cost estate. The Atlas factory is the latest of these investments, and we'll add 105 million bricks per year at full capacity, strengthening reliability, reducing cost and delivering the same high-quality, high-performing but more sustainable products, the way that we manufacture today.

In addition, we've -- having done two capital investments projects in our Concrete division recently, we see further options to invest in process automation to reduce cost. These projects are relatively capital light with quick payback. Our new multiyear operational excellence program is also well underway at our pilot factory at Aldridge and will drive further competitive advantage, improving operational performance and strengthen our ability to service our customers.

More efficient, modernized asset base positions us for higher margins, stronger cash generation and greater operating leverage as the market recovers. You'll see me reference this later as the network efficiencies are a key underpin for our midterm targets.

Moving on now to look at our fifth strategy lever, which delivers further optionality in centers on our land and clay reserves. To give some context, we manage over 2,700 acres of land across the U.K., spanning our factory estate, clay quarries and significant natural estate. From an Ibstock perspective, a large part of this asset base is not fully utilized.

We then have options to drive value through three complementary routes. Firstly, Calcined clay commercialization. This is now a proven low carbon cementitious replacement capable of materially reducing embodied carbon when used in blended cements and in concrete. And you'll know we've been exploring the commercialization of Calcined clay at scale turning an existing asset into a strategic growth option.

I'm pleased to confirm that commercial discussions with a preferred partner to get to an agreement is well advanced, and we expect to share a further update on this at the half year. Secondly, as noted before, our disciplined land disposal program will ensure capital is released where land is no longer supports long-term strategic or operational priorities. To that end, we expect to generate GBP 20 million to GBP 30 million in the next 3 to 5 years.

And thirdly, the expansion of our existing land-based income streams. Our land already generates material long-term revenue alongside core manufacturing with land-based income from quarry restoration through landfill delivering approximately GBP 2 million to GBP 3 million per year. This demonstrates the commercial value of well-managed nonoperational land. Taken together, these three routes create a diversified platform for value creation.

So to conclude, these five leaders together define our value creation strategy. And while market conditions will continue to influence near-term performance, the actions were taken across these levers are firmly within our control. In 2026, we are focused on the execution of our customer experience work, expanding into new market segments, progressing operational excellence, including pilot at our Aldridge site, fully commissioning Nostell and finalizing our Calcined clay project.

So bringing that all together, as you can see on this slide, we have the potential for significant earnings growth over the coming years. As I've said, to a large extent, this will be driven by market recovery, but it will also be supported by our market independent initiatives, including the points we've made today.

We remain confident that our revenue target of GBP 600 million when markets recover to historic levels is achievable. This should drive margins up from 19% today to 28% in the future. The dynamics -- these dynamics should ensure a strong earnings growth in the years ahead. And as Simon has said earlier, the improved cash flow from improved earnings, the strategic land disposal program and lower capital investment will provide more optionality for value creation for shareholders.

So finally, looking at the -- taking a look at the outlook. After a weather-impacted start to 2026, near-term demand remains challenging. We expect modest year-on-year volume growth in H2 2026, with volume recovery in new build and RMI markets dependent on activity gaining momentum in the spring.

Price increases implemented in February 2026 should enable us to offset anticipated cost inflation for the year. Although the timing of the market recovery is uncertain, we're confident that the long-term market fundamentals are intact. Therefore, with a well-invested, lower cost, more efficient and sustainable network, we expect to benefit from meaningful operational leverage and cash generation across the business.

And with that said, Simon and I will be happy to take your questions. If you could state your name and institution before asking the questions.

Aynsley Lammin from Investec. Just two for me, please. On the production and kind of management and stock level management for this year, maybe if you could elaborate on that a bit more where stock levels are, where you'd like them to be? And would you be kind of thinking of mothball in any plants? Or is it just stopping production and therefore, that's why you get the kind of margin headwind?

And then secondly, I guess just on the energy side, I think it's sort of 80% hedged. When does that become a concern if [indiscernible] continue and natural gas prices remain elevated, you have to be pretty confident for the next 6 to 8 months of time.

Yes. Yes. Look, we will be managing stock this year quite carefully. We're not anticipating to mothball any other sites at this stage. We've got -- part of the reason for the, the sort of headwind on the margins is the overhead recovery. We've got more shutdowns, so you just don't get the leverage, but we produced around 40 million to 50 million bricks more than we needed at the end of last year.

So we're going to manage that carefully this year. Obviously, we've got stockyards, they are limited as well. So -- we've done this. Obviously, we've had a bit of a partner of this in the last few years, so we sort of know how to do things, and I think we're well positioned. The main thing is if the market comes back faster, we can respond very, very quickly.

Energy, do you want to take energy Simon?

Yes. So in terms of energy, we've said in the statement, we're about 80% hedged. That is actually more front-end loaded. So the first 3 quarters were hedged higher than that. So really, we're more exposed in Q4. We don't see at the moment, an issue with that, and we have other options when we actually get to Q4.

Priyal Woolf here from Jefferies. I've just got two questions. Firstly, you talked about price increases, I think, from February. I think one of the issues we've had in previous years is different players going at different times and sort of having to reverse on that. Do you have any color on whether the magnitude and the timing across the market has been fairly consistent so far this year? And then the second question is just the whole shift from soft mud to wire cut last year. Do you think that's done? Or is there sort of more to go as an incremental headwind?

Good. Yes. I think we're a better place this year for sure, on pricing. Last year it was difficult. People went at different times. And frankly, it didn't stick. This year most of the industry went in February, 1. And we think that there's been a lot more discipline in that approach. So we're confident that we can cover inflation this year with our price increases around sort of 3%-ish margins.

And then soft wood, wire cut dynamics. I mean, obviously, as you had greater new build residential growth last year and more subdued RMI, it was a mix shift. So we're probably about -- the industry is about 70% wire cut, 30% soft mud. We're obviously have a greater weighting towards soft mud ourselves. I don't think that's a long-term structural change. I think it's largely because of the fact that the RMI market subdued and the southeastern London are very, very weak. So I think -- as I said earlier on, you've got an industry that only -- can only -- when it's -- when all the mothballed capacity is back on, you can only produce 2.1 billion bricks anyway. So all of the brick capacity will be used soft mud and wire cut in the U.K.

Clyde Lewis with Peel Hunt. I think I've got four. So apologies. I'll do them one at a time. Could you update us as to where you think sort of merchant levels are in terms of sort of brick stocks?

Second one, again, it can useful to get an update on imports as to what you're seeing on that front? Third was on, I suppose, stock futures and slips within that as to how you're seeing the market develop for those products, and particularly the slips, how much activity is going on there with architects and designers in particular? And then the last one was on rail. Obviously, a tough year last year. How does the rail outlook look for 2026?

I'll let you take the rail one. So merchant stocks at the moment, I think, are quite healthy. Merchants -- most merchants that we talk to are managing their balance sheet carefully, and they know they can call on stocks from the manufacturers when needed. So I'd say they're not overstocked. There's a normalized stock level at the moment, but certainly not stocking up at this stage.

Imports last year were about 350 million. So they actually -- if our markets, we went ahead by about 8%. The imports went ahead by a little bit more than that. But actually, if you look at import brick levels, they're quite consistent. They're about 19%. I think they went to about 22% in 2022, but they've been about 18% to 19% consistently. We do need imported bricks when the market comes back. And I think a lot of importers including a major player here has a mothballed bit of capacity and has got a pan-European strategy. So we're bringing a bit more of the bricks in still.

And obviously, they're still quite sticky. They want to maintain our position. And there's not much going on in Europe. So they've been a little bit more competitive last year. I think we're excited about the growth in slip systems, ceramic facade systems. It's still coming from a low base.

So it's still -- but it's -- the CAGR is very good. The growth is very good. Whether it's mechanical rain screen buildings, high-rise going up, whether it's panelized construction volumetrics with bricks going on the outside or whether it's some of the stuff like FastWall, we alluded to there on, there's a lot more change in that.

We see our own -- this year, we expect about a 40% uplift in our volumes. And in 2 to 3 years' time, we expect that to triple. I think the -- this year at Nostell, obviously, we're commissioning the factory. There's a longer lead time for these products because they're specified in their systems. So they have to be tested and there's a specification period from the time it's signed up by the developer and the architect to when actually the project gets delivered.

It's not like a brick just going off the yard. So there's a bit of a lead time there, which is probably about, I'd say, 8 to 12 months, but we're excited about it. That's why we invested in it.

We think it's not going to like cannibalize our core business. We think this is the -- these products are going to be what brings additionality to get you to the higher build rates that we need to do given the skill shortages. So we think there's room for both the cavity wall and traditional building as well as some of these new systems, but we're very excited. And the infrastructure sector as well, is very excited by them. They're very open to -- they're more open to sort of faster change. So we're working with a lot of the big contractors infrastructure people. Rail?

Yes. And if I just pick up rail, so we've suffered with rail volumes over the last few years, we reached the historical low level in 2025. We have seen recent data points which suggest that is actually turning, and therefore, we would expect some growth in 2026. It's off a low base, but it is also a high-margin business for the concrete business.

Rob Chantry, Berenberg. Just three questions from me. I guess, firstly, on the concrete business. Could you just give us an update on the weighting towards the different subdivisions within that and that the margin profile, i.e., kind of what are we actually taking a view on the next 2 to 3 years around what's going to drive the recovery there?

And secondly, affordable housing. I know a lot of the contracts have talked about building up big mixed-use development pipelines looking at affordable housing as a huge driver in the next few years and some of the contractors this week, last week saying it -- it's been quite slow, but it's starting to pick up. Just what's your kind of on the ground experience of affordable housing build rate dynamics.

And then thirdly, obviously, the Southeast London market has been exceptionally weak in terms of new starts and volume, a lot of discussion around gateway, other planning type of regulation. Can you -- again, can you give us some on the ground insight around quite the bottleneck there from your point of view and if that is looking to be released at any point?

Good. I mean our concrete business has got quite diversified. As you know, we divested the roofing business. That was a relatively small part and lower market share. But we have leading positions in most of our other categories. So we have walling stone, which is a reconstituted sort of natural stone that goes into a lot of areas, reasonably good margins there, double-digit margins.

We've got leading fencing and building business, landscaping business with very, very good margins. We've got the rail business, which obviously has rail and infrastructure business, which has suffered, but again, it's very high margins with leading positions. What else have we got, Simon?

I think that covers it.

That's the main focus of it. We think that -- and we've got a large flooring business. Flooring is -- we've got about 25% market share of the flooring business. So we think that when you put the concrete business with some of the brick business, we're seeing a lot more uptake from especially contractors and people interested in these big infrastructure projects, schools, prisons, hospitals because we can do hollowcore floors, we can do the walls. We can do lots of retaining walls, applications like that.

So it's quite complementary as well, our concrete business. Affordable housing, I mean, everyone is talking about this GBP 39 billion and it being back-end loaded. There was some news at the beginning of this year around funding allocations of about GBP 2 billion. That's promising. We're doing a lot of work with housing associations themselves and getting quite close to them. It is going to take time, but we will see some -- I mean, if you look at the stats this year, public housing has got a sort of a slightly higher growth rate than the private house building.

So we're seeing some momentum there already. But it's -- again, how much, how quick, it's not going to go crazy this year. But I will -- I do think that the sustained improvement in social housing in the U.K. is much needed and is going to create a much flatter sort of less oscillation in cyclicality for us. The Southeast in London, I think there are a lot of things that are causing issues around the Southeast in London. The main one is affordability and building safety.

I think the building safety regulator has got a much more proactive approach. They're releasing projects much faster now, and I think that will start to unwind much faster this year. But affordability is a big issue. If you think about buying a house in London and the Southeast compared to other parts of the country, there's a real issue there. And I think that's where we need some support. I think it will get a little bit better this year, but I don't think it's going to improve until we see some support for the first-time buyer.

Ben Varrow from RBC. I'll do three as well, please. First on guidance, in terms of volumes. I understand that's H2 weighted, I guess, what gives you confidence in that at the moment and the sort of spring selling season picking up? Second is on Forticrete the disposal there. Can you give a bit more color on if there's anything else in the portfolio that could go the same way, infrastructure, just so I understand correctly. Is that mainly then focused on the concrete side of the business? And do you need any investment there? And how big could that be for the group?

Good. Do you want to do the guidance one?

Yes. So just talk about volumes. So with the weather impacted first couple of months, we're sort of seeing the first half of the year to be more in line with the H2 2025 volumes. So that would mean slightly down on the comparative period, H1 '25. And then more growth in H2 2026. And based on the spring selling season, the elements, which give us confidence is affordability metrics are looking better. Inflation is stabilizing, and we could look at further interest rate cuts.

And that gives us confidence that the macro look better. And then some of the housebuilders are giving more positive updates on what the site visits are, how that's looking. So we have confidence based on the sort of demand dynamics in quarter 2 the spring period, getting better, and therefore, growth will be realized in the second half of the year.

Yes. And I think if you look at last year, I mean, we had this wonderful consumer confidence crisis with what's going to happen to tax, what's going to happen to the budget. The budget was pushed out I think that the budget was a bit of a clearing event, and I think you'll see more clarity going forward unless we get further noise from that side.

So I think there'll be more confidence and people will be building a bit more this year. But it will take some time because the second half of last year affects the first half of this year, in particular, but I think you'll start to see improving build rates. Let's see what the spring selling season does.

Look, we do -- we always look at capital allocation and what a business needs in terms of capital going forward. Our Forticrete business was a very good business, but we've had some performance challenges that I gave them some time to look at. And on low volumes where it was at the moment, we felt that with someone else who could be a better custodian of that business, it's relatively low market share, and we want to have positions where we have high market share, leading #1 or #2 positions.

So we felt it was the right thing to do. And there's not really anything else that we're thinking about right now at the moment other than land disposals, as I've mentioned.

And then on the infrastructure stuff, it's not just concrete. Actually, when you look at it's concrete, it's the facades and it's bricks. So when we're going to talk to contractors, they're looking at the whole package now, and that's what's quite exciting about it. So it's not just that. The construction infrastructure market is about GBP 35 billion, GBP 40 billion in this country. So it's something that we really need to be more aggressive. And I'd like to see that donor 10% going to 20% very soon. Alastair?

Alastair Stewart, from Progressive. A couple of related questions. First of all, you displayed refreshing candor, if I might say so, for a CEO and personally acknowledging you moved too quickly last year. In terms of this year, irrespective of -- you're saying you're able to ramp up capacity. Is there a psychological -- once bitten twice shy feeling. You're going to have to wait longer to see positives from the house builder before moving today. So that's question one.

And question two, related to that, on Slide 17, the production volumes and active capacity available, how quickly would it take to turn that gray into blue should the market pick up more convincingly?

Good. Thanks, Alastair. I thought all CEOs were very candid.

No, no. Some of them [indiscernible]

Okay. Look, I think you have to -- you have to be honest, and we're dealing with a very tough market situations. And I think we've got a lot of trust from shareholders in this community, and you've got to be open about things. I think look, you saw the graphs here. So you saw the movements. And then you saw -- so I would have done it change my mind. I think we made the decision we felt was right at the time. And of course, I'll be very cautious about bringing new capacity back and new cost back, especially with this market.

But the good thing is that gray area, we can convert that very quickly. Even the blue area on that graph, which is 65% utilization, that's got shutdowns in it, yes. We can -- if the market comes back, we can produce a lot more, and also, we've got plenty of stock on the ground. So the industry levels at the moment, there are about 550 million bricks, which is not massive, but it's healthy, and we've got a healthy share of that. So we can deploy that stock very quickly, which will be great for free cash flow generation. So we'll eat into the stock first, then we'll reduce shutdowns and then we'll bring on a bit more capacity.

Max from [indiscernible] Asset Management. Just a regional outlook. So you see London and the South is potentially being weaker in 2026 than the rest of the country. Is that correct?

London and the Southeast have been weaker from a residential housing point of view for some time. I think, as I mentioned earlier on, there are some reasons for that. Some of them are building safety, but the main one is affordability. I think it will get better. But I think until we saw at the affordability issue. That's both for buying and for costs for builders to build with land and things like Section 106, it will stay behind other areas in terms of growth. But I think it will improve a little bit this year.

So the outlook for RMI then is slightly weaker than residential construction. Is that also correct? Because I'm looking at your U.K. well, at the market U.K. construction forecast.

Yes. I mean we go on what the BNS say, we go on what the CPA says. So at this stage, it looks like it's a bit of a decline this year of about 1% on RMI markets.

What do you think is causing that on the RMI side? Is it the interest rate?

RMI is really around consumer confidence. So let's go to Stephen.

Stephen Rawlinson from Applied Value. Two for me if you don't mind. Firstly, with regard to reach market, could you just talk us through the way in which the channels to size are altering and how that might play through in the next few years to particular reference to our margins, i.e., what's going through merchants, what's actually going direct to site and the implications for margin that might have happened over the last few years and are present in these numbers, but may potentially how they may progress in the future.

And the second question is with regard to brick slips, off-site construction. Do you anticipate that you'll be doing that yourselves and is an industry emerging, you believe can absorb the capacity that you're creating for the slips production such that actually there will be -- you'll be able to satisfy that demand. How is that going to play out? Is that something that's going to be at your cost on your sites? Or is there an industry merging the satisfactory from your point of view to actually absorb the capacity you've created?

Yes, good. So our routes to market. Look, I think with infrastructure, there's definitely people are coming to talk to us because they want looking at the whole package. So I think you might see a little bit of a shift in more direct relationships with contractors than we have in the past. But the merchant industry, for example, creates a great sort of service for the U.K. because it stocks and it takes credit risk and it redistributes breaks book.

So we think there's a real value in that route to market in that supply chain. We've got great partnerships with merchants. We've got great margin with brick specialists, and we've got direct relationships with housebuilders. There's no doubt more people want to talk to us directly because they're seeing now as we've been marketing all of our product capabilities, not just bricks, oh, well, we'd like to have all of this as a package, please. And that's where we see probably more direct relationships going forward. But we have to think about cost to serve as well. So we're not going to have a myriad of millions of relationships we've got and got to think about that.

And then the whole ceramic facades there's a whole ecosystem there where you've got installers, you've got contractors, subcontractors. We won't be doing that in store ourselves. We want to provide the product and the solutions that go into -- with the installers, the developers and the contractors. We're not going to start installing ourselves. That's not our core business. It's not something I'd get into. We don't know enough about the risk factors and all outside of the market. But they are waiting to see -- this Nostell factory, they're waiting to see it because they've never seen it before. So that's why it's going to pick up momentum, and we've got the capability to really make a big Change, I think, in MMC in the U.K. with our factory.

Christen Hjorth from Deutsche Bank. Two, hopefully, pretty quick ones. Just on net debt, you normally see that the increase as you move to the half 1 stage with working capital investment, but it sounds like you're quite well invested in inventory. So just a sense of what we should expect in terms of net debt as we move through H1?

And then second, I was following up on the volume phasing piece. What's your current thinking around the EBITDA phasing H1, H2 because there's a few moving parts in terms of capacity and things like that. So those are the two for me, please.

Okay. So in terms of net debt, we would see a normal seasonal working capital build, but less so in inventory. It will be more debtors related as we have more sales in those periods versus like in November, December last year. So we see that.

And then in terms of EBITDA, yes, I think we're going to be more weighted to the second half. We've got production shutdowns and producing less inventory in the first half of the year, which gives us that margin headwind. So we're thinking about our weighting probably being between 40% and 45% in the first half of the year.

Harry Dow from Rothschild & Co. I think just two questions, if possible. So first on the concrete business, how should we think about the operating leverage as that kind of volumes recover maybe for railway comes back. I think the drop-through this year is quite high in terms of , I think we lost GBP 5 million of revenue and then GBP 5 million EBITDA. So maybe also just what happened in 2025 for such a high drop-through maybe. And then just also just a comment on other operating costs, so sort of expected wages inflation or distribution costs, things like that?

Yes. I think operating leverage in the rail business has quite a big bearing on our margins and that moving forward will really help margin improvement this year. Concrete is a little bit different to clay. Clay, you've got high fixed costs, and the deal concretes more of a batch. You've got more flexibility with it. So really, it's around volumes and it's around margin in specific categories, and that's why we believe there's reasonable momentum in concrete this year. Other costs, Simon, do you want to talk about that?

Yes. So our major cost really is around labor. So we'd expect a low single-digit sort of impact around that, which is in line with the industry and the wider positions. And then in terms of variable costs, we'd expect a similar number. We'll wait to see how things like oil pans out, how is that working? How that feeds through to say haulage costs, but I think we've got a little while to see how that's actually going to pan through.

Charlie Campbell, with Stifel. Just one. You haven't really mentioned planning as a potential opportunity this year. Clearly, there is hope that after 2 years, we -- the planning system has started to free up a bit. Just wondering what your view on that is and whether you've noticed any change in the rate of site openings maybe in the last few months or projections in the next few months?

Yes. Planning is still not great, if I'm honest. I think what is promising is that there's a focus on it. And what I think where we have seen improvements is if there's a decision on a large site, the decision -- there are people coming from above saying, let's do it. But we still have a long -- too long a time gap from planning permission to build out rates.

It's really taking too long. So I think it's an opportunity. It's an opportunity. There's definitely proactivity from the government getting involved to make decisions about it, but it's not going to -- we haven't seen any major changes in terms of site openings in the last few months. .

Okay. Do we have any questions from the Ita? No?

No. I think all the questions have been covered in the room. So Joe, I'll hand back to you for any closing remarks. .

Good. So thanks, everyone. Look, it's very -- it's a crazy time in the world. It's a difficult market that we're navigating carefully. But this is a real high-quality business, 200 years old, and we will get some recoveries soon, and when it comes, we're really well positioned, and I'm excited about that, and I'm looking forward to it greatly. But really good to see you, and we can have a chat afterwards. But thanks very much for coming today.