Ibstock’s full-year revenue rose 2% to around £372mn, slightly below consensus forecasts as market conditions became tougher over the second half.
Cash profit (EBITDA) is expected to land broadly in line with previously downgraded guidance at around £71mn. This comes as a tight grip on costs and disposals of some non-core assets helped to improve margins and offset the revenue shortfall.
Year end net debt improved marginally from £122mn to around £120mn.
In 2026, end markets are expected to remain subdued over the first half, before growing modestly in the second half. As a result, margins are now expected to come under some pressure in 2026.
The shares fell 4.4% in early trading.
Our view
Ibstock looks set to hit its previously lowered 2025 profit guidance. But the shares fell on the day after management signalled some challenges for demand and margins in 2026, which we think may lead to some downgrades to market forecasts.
It’s been a tough couple of years. Higher mortgage rates have been weighing on housing affordability, causing housebuilders to be conservative about starting new projects. That picture’s not set to change in the near term, so demand in these end markets is expected to remain subdued over the first half of the year.
We’re cautiously optimistic that the longer-term picture is brighter though. Government policy is generally becoming more favourable towards residential building, and there’s plenty of work to be done if the target to build 1.5 million new homes this parliament is to be met. While we think the government’s target is too optimistic given the slow start, we do expect construction activity to trend higher in the coming years, which should feed through to increased demand for Ibstock’s products.
In order to be ready for this potential uplift, Ibstock’s bringing more capacity online. The group already has the largest brick-making capacity in the UK, and major investment projects to improve capacity further are nearing completion. That should relieve some strain on cash flows in the near future and means average production costs are likely to improve when production ramps back up.
But it’s difficult to map how long it will be before housing returns to full flow. The sooner the better for Ibstock, given its high fixed costs, as the kilns used to make the bricks require a lot of energy to heat up. Until production runs near full capacity, operations won’t be as efficient as the group would like, meaning profitability is likely to remain under pressure.
To help keep hold of cash, dividend payments have been trimmed. That’s a prudent move in our view and should provide more of a cushion to combat any further bumps in the road. Disposals of some non-core assets, like land and its small roofing business, have also helped to strengthen the balance sheet.
While Ibstock’s profitability is likely to remain under pressure in the near term, we’re more positive on the longer-term picture. Its market position remains strong, and it’s doing all it can to position itself well if the housing market improves. If Ibstock can avoid further disappointments, there's scope for the valuation to recover. However, Ibstock's end markets are proving more challenging than expected, meaning investor sentiment will remain fragile until signs of a sustainable improvement emerge.
Environmental, social and governance (ESG) risk
The construction industry’s ESG risk edges towards the higher end of the spectrum, especially for the Materials sector. Carbon management of company operations and the impact of its products and services is the most acute risk. Other pressing issues are resource use, community relations, labour relations, and bribery and corruption.
According to Sustainalytics, Ibstock’s management of ESG risk is strong.
There is a strong greenhouse gas emission reduction programme in place, and carbon intensity has already declined moderately in recent years. ESG-related issues are integrated into the core business strategy, with management remuneration explicitly linked to sustainability performance targets. Despite this, overall ESG-related disclosures lag behind best practice.
Ibstock key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.