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Fri April 23 2021

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Second-half rally softens Forterra's losses

9 Mar Masonry products manufacturer Forterra saw its revenues fall 23% in 2020 and the company booked a financial loss

Forterra – previously Hanson Brick – made a loss of £5.4m before tax in 2020. Operating profit collapsed from £60.7m in 2019 to £1.4m in 2020.

However, having reported a pre-tax loss of £23.3m for the first six months of the year, the full year results represent a recovery for the business.

Revenue dipped 23% to £291.9m (2019: £380m). The drop was mainly due to site closures in April and May during the first national lockdown. Sales steadily recovered through the summer and autumn and by the end of the year they were ahead of 2019 levels. Overall, sales in the second half of the year were 91% of 2019 levels.

The decline in Forterra revenues matches the decline in UK brick industry sales volumes – both fell by around 23% (although Forterra also makes blocks).

While sales fell 23%, Forterra’s brick production in 2020 fell by a steeper 35%. As the business emerged from lockdown, sales increased more quickly than production, driving a reduction in inventories and a release of working capital. The decision to delay the reopening of factories was successful in managing both inventory and cashflow but had the effect of reducing profits for the year as it was unable to fully absorb fixed cost.

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During the first lockdown, Forterra consolidated the manufacture of all precast concrete flooring products at its Hoveringham facility in Nottinghamshire and mothballed the Swadlincote hollowcore flooring factory in Derbyshire. This resulted in 160 job losses.

At the height of the first lockdown approximately 75% of the workforce was placed on furlough, a total of approximately 1,500 people. Between March and October Forterra  claimed £9.9m under the coronavirus job retention scheme (CJRS).

The results for the year ended 31st December 2020 include £22.8m of exceptional items, comprising impairment, restructuring and refinancing costs.

Chief executive Stephen Harrison said: "Clearly, our full year financial performance was impacted by Covid-19, notably in the first half, however our trading performance steadily improved as the year progressed. Operating cash flow benefited from disciplined working capital management and we were pleased to complete a successful equity placing and refinancing in July.

"The much-improved trading conditions seen through the second half of 2020 have continued into 2021. This trend, alongside the lengthening order books of our housebuilding customers, offer support for a continued recovery in our key markets in the first half of the year. While there is growing optimism about the end of the Covid-19 pandemic, there remains ongoing uncertainty over its continuing economic implications, which leads us to maintain a cautious outlook for the year as a whole.”

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