Forterra plc (FORT) Earnings Call Transcript & Summary

Well, a very good morning to everyone, and thank you for joining our slightly impersonal results presentation. I'm Stephen Harrison, the Chief Executive of Forterra, and I have sitting with me Ben Guyatt, our Chief Financial Officer.

Good morning, everybody.

So let's jump straight to Slide 4 of the presentation pack and talk about the year a little. So I think January and February, we set off to quite an encouraging start. We had, had the general election. We've not had a hard Brexit. They -- our customers were quite buoyant and we were expecting a pretty reasonable year, and January and February were encouraging. And then probably like every other business in the country, we were overwhelmed by the pandemic very, very quickly and things changed rapidly in March. I think initially, the health, safety and wellbeing of our people were our primary concern, and we'll talk a little more about that later. And as well as that, we were very focused on protecting our cash reserves. And really, they were our 2 guiding principles: look after people and look after the cash. And then as we moved forward, we started to look at how can we take some cost out of our business. And we've taken actions that have taken GBP 10 million worth of annualized fixed costs out of our business. And then as we moved into June, we focused on our refinancing and equity raise, which I think everyone is very familiar with, which has given us the strength in our balance sheet to weather whatever storm may still come in this pandemic, we're still in the middle of it, but more importantly, allow us to continue with our capital investment and new factory that we're building at Desford in Leicestershire. And then if we look at the last couple of months, actually it's been pretty encouraging. We've got production back at all of our factories. The vast majority of our employees are back to work. And trading, in July and August were pretty good. In terms of our Brick and Block sales volumes and revenues, they were at 90% of 2019 levels. So a sort of encouraging bounce back in July and August. We've put out a forecast for the full year of an EBITDA in the range of GBP 27 million to GBP 32 million. That isn't something that we'll make a precedent of and that isn't something that we've done before. But I think as we've announced our results a couple of months later than we had in previous years, we felt that this was a good opportunity to give some guidance for the rest of 2020. So let me hand over to Ben to talk through the numbers.

Good morning, everyone. Unsurprisingly, given the disruption we face, we've seen a significant fall in revenue with our revenues falling 37% in half 1, the biggest impact seen in April. Although as I'll demonstrate in a minute, there has been an encouraging recovery since. Accordingly, our EBITDA fell to GBP 8.2 million, which is a creditable performance in these circumstances and shows the resilience of our business. We have incurred exceptional costs of around GBP 21 million as a result of the pandemic. These include noncash impairment charges of GBP 16 million as well as restructuring costs of GBP 4.4 million, which will ultimately be settled in cash. Our net debt at the end of the period was GBP 80.3 million, and that's GBP 68.6 million if you exclude the IFRS 16 lease liabilities. As Stephen mentioned, we completed the refinancing and equity placing on the first of July. This further strengthens the balance sheet. And as at the end of August, our net debt had reduced to GBP 18.1 million, again, excluding the lease liabilities. So I'll move on to the next slide, key financials. I'm not going to go into much detail here as we've already touched upon the financial highlights. Just to clarify the layout of this table, we've added back the exceptional items, and with no exceptional items in the first half of the prior year, the 2 right-hand columns of the table are effectively comparable on a like-to-like basis. After canceling our 2019 final dividend, we are not proposing to pay an interim dividend. And in fact, we don't presently envisage paying a dividend for the 2020 financial year. I think we were very clear during the equity-placing process that our priority was to secure the funding for the Desford factory, whilst ensuring we retain a strong balance sheet such that we can deal with any further COVID-related disruption should it occur. Having said that, we do recognize the importance of dividends to our shareholders, and we will, of course, look to reinstate our dividends as soon as the current uncertainty subsides and our trading results allow. We'll move on to the next slide, monthly revenue. So as I said earlier, overall, we have a revenue decline of 37% for the period, although that isn't particularly helpful in understanding the full story of how the pandemic has impacted the business. The graph on this slide shows the effects of the pandemic becoming visible at the end of March and obviously shows that we have the greatest impact felt in April. What you then see looks very much like the so-called V-shaped recovery. Brick and Block revenues are more stable than Bespoke Products, recovering to over 90% of the prior year in both July and August. Overall group revenues recovered to 89% of prior year in July and 82% in August. July had the same number of trading days as the prior year, whereas August had 1 less, explaining the small drop. Bespoke Products revenues are tracking at a lower level than Brick and Block, and there is greater volatility here driven by the rather lumpy nature of the infrastructure projects including the prison at Wellingborough. Going forward, in anticipation of reduced demand for a hollowcore flooring, which we'll talk about a little bit more later on, and then following the decision to mothball the Swadlincote hollowcore plant, the focus on the Brick and Block segment is now on margin improvement rather than revenue growth. Hence, we would not expect Bespoke Products revenues to track the Brick and Block recovery. We move on to the Brick and Block segmental results. As Stephen said earlier, trading started the year in line with expectations. As we emerged from the lockdown, we saw the recovery initially driven by the merchanting sector, although we are seeing significant strengthening of demand from the large house builders in July and August. The exceptional items include a GBP 6 million noncash impairment of the goodwill relating to the Formpave paving business with the balance related to restructuring costs. Unlike some others, we haven't recognized any other COVID-related exceptionals beyond the restructuring costs and the impairments that I previously mentioned. We have disclosed previously that we use forward contracts to provide certainty for our gas and electricity purchase -- price certainty for our gas and electricity purchases. We did incur one-off costs of GBP 2.1 million in the first half where due to lockdown, we were unable to use the energy we had forward purchased and had to sell it at a loss back to the market. This cost is included in our trading result and hasn't been disclosed as an exceptional item. Subject to there being no further significant COVID-driven disruption, we do not expect this to be an issue with the energy cost that is, to be an issue going forward, and we expect to be able to consume all of the energy we have purchased for the second half of the year. We'll then move on to the Bespoke Products segmental result. And the revenue decline percentage seen here is similar to Brick and Block. In this case, it's 35%. However, the lower operating margins means that the effects of the pandemic pushed this business into a loss-making position at an EBITDA level. As a reminder, we obviously allocate the central cost of running the overall business. I'd like to [ mind ] in Stephen's cost, we allocate a portion of those central costs to this business. GBP 2 million of central costs have been allocated to the business in the period, meaning that on a trading basis, the EBITDA loss is actually closer to GBP 1 million. We do expect that pandemic to have the biggest negative impact on the hollowcore flooring business going forward. This business serves multioccupancy residential and also commercial construction. Those are the areas that we expect least demand for going forward. Therefore, exceptional cost includes GBP 10.2 million of noncash asset write-downs on the mothballing of the Swadlincote hollowcore floor facility with the balance comprising of the restructuring costs. Management focus is now on improving margins in this segment rather than growing turnover with the expectation that this segment will report a breakeven EBITDA position for H2 2020. I move on to the next slide, exceptional items. I've already talked about exceptionals on the earlier slides, but this summarizes them all in a single place. So we've incurred restructuring costs of around GBP 4.4 million associated with the 225 job losses that, unfortunately, we had to make as a result of the pandemic. This restructuring will reduce our fixed cost base by over GBP 10 million per annum and ensure the business can adapt to the current circumstances. In addition, we recognized a GBP 16.2 million noncash impairment charge, including GBP 10.2 million relating to the mothballing of the Swadlincote hollowcore plant. And addition, a further GBP 6 million in relation to the Formpave goodwill. The GBP 6 million of Formpave goodwill was an apportionment of the goodwill created when HeidelbergCement acquired Hanson in 2007 and was carried forward into the books of Forterra. A reduction in trading profits and also a change to the discount rate, both driven by the pandemic, were the trigger -- was the trigger for this impairment. Although we have incurred a small cost of GBP 400,000 in relation to the refinancing and equity placing, we expect the bulk of the cost of this transaction to be booked in H2, and we currently estimate a further charge of GBP 2.9 million in respect of exceptional refinancing charges in the second half. Beyond the cost of refinancing, we are not currently expecting any other exceptional items in the second half of the year. As you can see from the right-hand table on the slide, we expect the bulk of the cash outflows from exceptional items to be in H2 with an outflow of around GBP 10.5 million anticipated. Moving forward into working capital. As many of you will recall, our working capital has always been seasonal with the year-end generally representing the low point. We presented the March 2020 figures here, alongside December and June, to separate the normal seasonal movement from the exceptional impacts of the pandemic. The March position shows the normal growth in working capital that is to be expected at that time of the year. Since April, we are focused on cash management. We've reduced inventories by GBP 13 million as we dispatched from stock. We worked very hard during the pandemic to collect cash from customers, and I'm pleased to say that although there were some challenges early on, we didn't experience any significant losses. And I'm pleased to say that our DSO has now returned to normal levels. We did take advantage of some tax deferrals. We negotiated with HMRC to defer a GBP 5 million of PAYE corporation tax that was due at the peak of the crisis, and we were able to defer those payments into July. We've also deferred around GBP 700,000 of VAT to March 2021, in line with the concessions available to all companies. Overall, our working capital outflow was GBP 38 million in the first quarter, although this was then followed by an inflow of GBP 25 million in the second quarter, demonstrating our strong cash discipline, particularly on inventory. In terms of guiding for H2, we expect to continue our discipline over inventory management and wish to avoid any significant growth in inventory. We also expect a normal seasonal trend in debtors and creditors to apply, which will lead to a cash inflow from working capital in the second half of the year. I'll move on to the next slide, the cash flow. We already discussed the working capital and exceptional items in detail, but I'll use this slide to just throw out a couple of other points. Looking at tax, we paid GBP 4.1 million of tax in H1. Based on our current expectations, we are not expecting any material corporation tax outflows in the second half of the year. Looking at CapEx in a bit more detail, the Desford construction project has continued through lockdown, although the majority of the other capital projects were paused. We spent GBP 12.2 million of cash on capital in the first half of the year, GBP 8.5 million of which was on the Desford project. We also used this opportunity to update our kind of expected timing of the Desford spend. For 2020, we're now expecting to spend GBP 26 million. This is fractionally below the number that we guided to at the beginning of July. This is just the timing of payments, and there is no change to the overall project timetable, which will be covered by Stephen later in his presentation. Whilst uncertainty around COVID persists, we continue to be cautious over non-Desford CapEx. Non-Desford CapEx this year is expected to be approximately GBP 6 million, so we expect a total capital spend of approximately GBP 32 million for the full year. Moving on to net debt. So as I said earlier, at the end of June, net debt was GBP 68.6 million, plus the lease liabilities of GBP 11.7 million, giving a total net debt of GBP 80.3 million. That gives a net debt-to-EBITDA ratio of 1.6x when calculated in accordance with the facility agreement, excluding IFRS 16. This, however, as all stated before the receipt of the proceeds from the placing of refinancing, which took place on the first of July. Net proceeds of GBP 53 million were received from that transaction and our revised RCF facility, now GBP 170 million, now extends to July 2024. Net debt at the 31st of August is down to GBP 18.1 million plus the lease liabilities of GBP 11 million, with a net debt-to-EBITDA ratio of 0.4x, again, calculated on an LTM basis in accordance with the facility agreement. So I'll now hand you back to Stephen to talk a little bit more about the trading.

Okay. Thanks, Ben. After all those numbers, for those of you still awake, I'll talk a little bit about what's been going on in the business in our market. So if we start on Slide 16 and look at the longer-term fundamentals for our market. They're primarily driven by new house building and we believe that the market fundamentals remain very supportive. It's well known and well documented, you don't me need to go into depth that there's a housing shortage in the U.K. and that the government has set a target of 300,000 new homes a year, of which about 50,000 are conversions. So that's 250,000 new build homes a year. And as you can see from the graph, we've made good steady progress as a wider sector getting towards that target. We see the pandemic as a bump in the road rather than a change to the fundamentals. And clearly, we're going to go backwards for a period of time in terms of achieving that government target. But the need for housing hasn't gone away. The government support hasn't gone away. And the welcome intervention of the stamp duty holiday that's currently in place will certainly help us and help our customers. Please flip through to Slide 17. I think there's clear signs at the moment that people are valuing their homes, spending money on homes and indeed looking to move. Only this morning, there was an article in the FT saying that prices for homes with gardens are at a full-year high. There's clearly a phrase that's used a lot at the moment that people want their own front door and their own backyard. So the current housing activity helps us. But so does the mix. The mix, certainly, in the short to medium term is moving away from dense in a city housing to more suburban. And very simply, in each property, in each home, there are more of our products if we move into suburban houses with, as you say -- as I said, with our front door and back garden. So we see the mix has been favorable for our business. I think the other observation is the home improvement market is strong. People that have spent a lot of time in their homes, certainly in quarter 2, have spent money. Now some of that doesn't affect us. And certainly [indiscernible] paint and garden landscaping doesn't help us, although those markets have clearly been quite buoyant. But we're now seeing strong return of tradesman back into people's homes and people spending money on home improvements, extensions, creating space, which is good for our business. So the housing market, in general, at the moment is pretty positive for our business. If I turn on to Slide 18 and look at the brick market. Our sales over the last few months reflect what's happened in the market. And clearly, sales have fallen and production has fallen too, which is good. So stocks have been well controlled across the sector. Ben talked about our control of inventory and the positive effect that's had on our working capital. And if we look at the data published by the ONS, we can see the same has happened throughout the sector. I think the other key point to make here is around brick imports. There were 400 million bricks imported into the U.K. in 2019 and approximately 200 million in the first half. Over the first half of 2020, that's fallen to approximately 130 million bricks. And in fact, in quarter 2, we saw a drop of over 50% in the number of bricks being imported. There will be a bit of a lag because bricks are still coming in to complete projects that have started. But my expectation is that we will quite quickly see the number of bricks of being imported halved to an annualized 200 million bricks a year, which again is positive for our business. So if I turn on to Page 19 and look at our sales volumes. So the 2 graphs here, on the left, the graph looks at our brick sales volumes, and on the right, our floor beam sales volumes. And they primarily -- those floor beams primarily go into the ground floors of houses. And what we've done is graphed -- using a 4-week rolling average is graphed our performance against the same period in 2019. And you can see, as I started the presentation, we started the year in January and February pretty well. And as is no surprise to anyone, pretty much dropped off a cliff in -- as lockdown came. I think where the graph differs slightly is brick includes 2 things. It includes the RMI market, but it also -- the recovery from brick came faster than the recovery from floor beam because initially, house builders, when they came back to work in May, June, focused on the completion of properties that have been started. So clearly if the floor beams are in, they're focused on building above. So we saw brick come back slightly quicker. The floor beam, there is a slight lag. But what's really encouraging is September. September is looking strong and our order intake is very encouraging. So we believe that although there's a slight lag to bricks, that, that will recover well. So moving on to Slide 20 to talk about Desford for a second. We've talked about the new project at Desford a lot. This will be the largest, most efficient brick plant in Europe when it's built. The plant, and you can see on the slide on the photograph, the new plant there, next to the old plant with the rusty roof, the new plant will have an annualized capacity of 100 million -- 180 million bricks per annum, which will -- the old plant will go, that has 85 million bricks per annum. So a significant difference about a 16% increase to our overall brick capacity and, more importantly, a significant reduction in unit cost of production. We're really pleased to have secured the funding back at the beginning of July to continue with this project. And the project continues to plan. And we are very confident that this will add long-term shareholder value. Commissioning is slightly later than the timetable that we published 1 year ago, but the timetable on here commissioning in 2020 is in line with the information that we gave at the beginning of July. So encouraging progress on the Desford project. And then my last slide, I'd like to talk about sustainability. Sustainability is really important to our business. And we published today an update just showing and sharing some of the activities that have been going on in the sustainability arena over the last year or so within our organization. And we've separated this into 3 areas: people, planet and product. So if we look at people, there's probably been no better test than this year for businesses to identify how much we value people. And the cost of protecting people and sending people home is significant, and we all know that. And I'm very grateful to all of our employees who've been incredibly supportive, committed and understanding over what's been a really difficult period. So on record, a huge thank you to everyone that works for us for your support. And then if we move on to planet. Big focus here, obviously carbon, and probably more importantly, taking plastic out of our business. So there's a lot of activity going on there. And then on product, focus on providing new solutions to our customers to speed up building, to take waste off building sites, to reduce labor on sites and to improve safety. So this is, as I say, an update on some of the activities that we've been doing. In our 2020 annual report, we'll be setting ourselves some challenging targets going forward. So much more to say as we go into the new year. And with that, I'd like to hand back to -- sorry, with that, I'm going to pick up on the outlook, nearly missed that. So let's look going forward. As I said at the start, we are confident in the long-term recovery of our core markets. Our trading since lockdown has been good and has been positive. It's exceeded the expectations that we had. If you'd asked us back in April and May, where we'd expect to be now, I think we're doing better than we'd originally expected, which is great. We're grateful for the -- the welcome intervention that the government's made in the housing market and we can clearly see that making a difference. I think probably more importantly is we have learned how to operate where COVID is present and so have our customers. So who knows what's around the corner in terms of the pandemic and the changes that we're going to have to make. But I think we and our customers have learned to be agile and learn to protect our employees were keeping our business operating. So I think even if we have another spike in terms of COVID infection, I think we -- our business and our customers' businesses will show great resilience as we've learned over the second quarter of this year. So as I started, although we're not setting a precedent, and we hope next year to revert to publishing our first half results a little earlier, we have set a full year target of GBP 27 million to GBP 32 million EBITDA. But with all of the other uncertainties, and we only have to listen to the news to know that we're still in the middle of this, we don't yet feel we're in a position to set meaningful guidance for 2021. But so far, we're pretty positive with the way the business is going. And with that, I will hand back over to the operator for questions. Thank you.

[Operator Instructions] Our first question comes in from the line of Priyal Woolf calling from Jefferies.

Steve, Ben, can you hear me okay?

We can.

Yes.

Perfect. Great. So I've got 3 questions. The first one I've got is, obviously, trading has been very good. The housebuilders have been saying the same. But as you said, there's still quite a lot of uncertainty in the market going into 2021. Are there any indications from the housebuilders yet that they may be looking to push back on pricing a little bit more as you go into negotiations in sort of Q4 time? The second question I have is in terms of the recovery post-COVID, it seems to have been better than potentially or quicker than potentially even you realized. Did that lead to any shortages of products at all where you were struggling to get these 2 customers on time? And then the last question is sort of linked to that one. So you've obviously said all of your production sites are back up and running, and Bricks and Blocks volumes are trending at around 90% or so. If that 90% sort of stays stable going forward, how does that play out in the supply/demand dynamics? I mean would you look to increase your inventories a little bit more? Or would you potentially have lower capacity utilization in some of your plants as well?

Okay. Thanks, Priyal. So let's pick them up. So we will, in quarter 4, start looking at prices for 2021. I think the reality is our business was working at capacity, so was our sector, certainly in Brick and Block before we went into the pandemic. And as I alluded earlier, there were a significant number of expensive premium price bricks being imported from Continental Europe because the U.K. brickmakers are capacity-constrained. So I think even if volumes are slightly lower, the gap between production capacity and demand is perhaps not as great as you might think. What I suspect is, with inflation being relatively benign at the moment, it's going to be challenging to get significant price increases. I'm certainly not expecting prices to go backwards, but I'm not necessarily expecting significant price increases either. I think pricing will be relatively benign going into next year with what we know today. Shortages, you asked about shortages as the markets recovered. No, I think we did go into the pandemic with fairly large levels of inventory. And we have really good, close working relationships with our customers, especially the housebuilders. And they give us a pretty good forward view. So there may be the odd product aside, but by and large, we brought back our production capacity and supported our customers as you would expect us to. So I think that's been pretty well managed by our team, actually. And then the third question, you asked around supply and demand and what happens if volumes are slightly lower than our installed capacity. And I think there's 2 -- slightly 2 different answers to there. Our concrete businesses, our concrete product lines, I should say, are much more variable cost, and we can relatively easily manage output to mirror customer demand. On the brick side, it's slightly tougher because we want to be operating a brick pant at one speed and they're pretty largely fixed costs. So if we slow them down, it costs us money. But we can play tunes with that by taking slightly longer production breaks at Christmas and where we have maintenance link on some staff holidays and particularly when the kilns are off and take slightly longer breaks there, which we would anticipate that we would do. I don't think we're ready yet to build inventory. I think that time will come when we feel we're coming -- we can see light at the end of the tunnel and we see the pandemic going, that we will build inventory. Not quite sure we're ready to do that yet. So at the moment, we'll just monitor it as we do now on a daily basis and look to keep inventory fairly level. And as I said, take a slightly different approach on the clay and concrete sites. Thanks, Priyal.

Your next question comes from the line of Ami Galla calling from Citi.

Just a few questions from me. The first one was on the RMI trends that you've seen in the month of July and August. I presume -- -- I assume that there's been a restocking effect from the merchant. But I was wondering if you could talk about the sort of data points that they flag in terms of end customer demand, how that has picked up, and whether there are any regional trends in the strength that you're seeing. My second question is on the -- on the profitability across your Bricks and Block business. If we see efficiency come back to normalized levels next year, is it reasonable for us to assume that Brick and Block margins can come back to what was there in 2019? The second -- and the third question is really a clarification. On the CapEx number that you've guided, is that the growth CapEx figure? Or is that the total CapEx figure that Ben talked about? And is that -- does that mean that there isn't really any big maintenance CapEx spend in the second half? That's it for me.

Ben, do you want to take this one?

Well, I'll do the profitability and the CapEx. And if you could talk about the RMI demand. So looking at profitability and whether our margins will get back to the 2019 levels next year, I think the key uncertain factor in there is on demand. So yes, if demand recovers such that we can run our factories efficiently and then we get back to the sort of the level of operating leverage we have pre-COVID, then yes, I agree entirely that our margins in Brick and Block should return to prepandemic levels. Where there is uncertainty is where the demand is. If the demand is lower, then we won't be able to run the factories at the same level of efficiency. And therefore, we will [ cross ] there a slight degradation in margins until we reach that point. Just picking up on the point that Priyal made previously, what we normally do is our primary focus is running the factories efficiently. And in the short term, if demand varies, we would build inventory to compensate for that. Whilst the pandemic is around and we want to retain maximum flexibility, we don't want to build inventories because that reduces our flexibility should the pandemic return or kind of we have disruption. So whilst that's question mark over future demand, it's very difficult to comment on what the future margins will be. But once demand returns to 2019 levels and we get all of our factories running efficiently, then yes, margins will return to 2019 levels. Looking at CapEx. And so what we're saying this year is that we're going to spend around GBP 26 million on Desford and a further GBP 6 million on other CapEx projects, which is a primarily stay-in business. So as we look forward, then there is some uncertainty. So our primary priority on CapEx is to complete the Desford project, and we've secured the funding to do that. Looking further forward at CapEx, we will obviously look at seeing what the markets like and where we are with the pandemic next year. So in a normal year, we would expect stay-in business CapEx in the region of GBP 12 million a year. So all things being equal, if things are looking good next year, then you would expect Desford CapEx of around GBP 24 million and then maybe GBP 12 million on top of that as kind of other projects, stay-in business and some smaller strategic projects. Where we have flexibility is that if the pandemic is returned or we're kind of facing difficult times, we happily demonstrated this year that for a short period of time, we can manage CapEx and we can reduce the non-Desford CapEx spend to the level we've seen this year, which will be about GBP 6 million.

Let me pick up on the RMI market. So the repair maintenance improvement market is quite broad. The DIY, the do-it-yourself activity, will look to, of course, include a little bit of our product. Generally, our products are installed in those RMI projects by small builders. And what we saw in April and May is people not wanting builders in their home. So those builders were not working. And that's, I guess, completely understandable. And -- but actually, what we've seen in the last couple of months is that reversed and people happy again to have tradesman working in and on their homes. And the tradesman, our customers tell us and the tradesman tell us that actually their order books are pretty good. So I think that market is set fair actually for a while, unless we have another significant lockdown and we get back to the position of people not wanting others working in their homes. So I think it's pretty hard to forecast it. But I think there is quite a big head of demand sitting there, which should be good for us and our wider sector.

Your next question comes from the line of Christen Hjorth calling from Numis.

Three questions from me if that's okay. The first one is linked to the one on RMI, but perhaps more specifically on London Brick. I know you called out in the statement that performance has been strong there. So just a bit more color on that and the recovery seen more recently. The second one is just on Bespoke. Obviously, you have done the restructuring activity. It feels like there's a bit of pause to breakeven in the second half in the EBITDA line. Can I just sort of maybe get a bit more color on what gives you that confidence and are we starting to see it coming through already? And then finally, unlike some others, you guys aren't sort of proposing to mothball or close any plants. Could you just maybe touch on sort of the age of your facilities? What should we be aware of any major sort CapEx as required to upgrade facilities as they come towards the end of their useful life, obviously, excluding the old Desford plant?

Okay. Thanks, Christen. So yes, I think your comment on the RMI, specifically London Brick, it's a good observation actually and probably something we should have covered. We saw the RMI market come back, and I said this when we're on the brick volumes, come back slightly ahead of the large builders. And clearly, our London Brick almost exclusively goes into the RMI market. So we actually saw that recover pretty quickly before our other brick products. And we've seen sales for the last couple of months maintain at a good solid level. So that product line has performed well for us. And as we came out of the pandemic, the 2 product lines that performed the best, the London Brick and basic aggregate concrete blocks. And I think a slight shortage of timber has also helped people move -- built from concrete blocks, which are readily available, whereas timber is all imported. And at the moment, there are some shortages. So I think those 2 product lines have recovered early and the performance has been pretty strong immediately after the pandemic. You asked about Bespoke Products and our sort of confidence there. So if you look at Bespoke Products and particularly precast concrete, the 3 main product lines are: the beams that go into ground floor of homes; hollowcore which goes into the upper floors of the buildings, be it a commercial or residential; and then thirdly, the larger walls facades and infrastructure projects -- products -- products that we make to go into that infrastructure projects. So where we are is the floor beam sales are recovering well. As we said, we don't think the hollowcore market will recover particularly quickly, and that's why we've mothballed the hollowcore facility. We can still make hollowcore at our Hoveringham facility, but obviously a lot less of it. But that facility is focused on beam, but we can still service that key housebuilding customers with hollowcore. And then thirdly, the products that we sell into the infrastructure market, we just picked up a significant new order to supply a new prison in Leicestershire with the walls that we've started work on. I think, yes, our revenues are going to be smaller, but we also want to steer away from some of the lower-value, lower-margin business. So our aim here is operating one less production facility is to accept the fact we'll have smaller revenues, but look to try and increase our margin. And we believe the markets that we're focused on will allow us to do that. And then you asked about CapEx to upgrade. Look, I think it's pretty well known that during the global financial crisis when this business was owned by HeidelbergCement, we were pretty brutal in taking out old, tired, underinvested and, in many cases, unprofitable manufacturing facilities. And then since we separated from HeidelbergCement 5.5 years ago, Ben and I have focused on investing in a good -- good profitable plant. That isn't to say factories last forever. And of course, they don't. And over the next 5 to 10 years, there will be some, inevitably, some larger investments that we need to make. But there's nothing pressing in the very short term that's going to cause us a headache as we manage our cash and working capital during this pandemic. Anything to add on that?

No. I think we're good.

The next question comes from the line of Jon Bell calling from Deutsche Bank.

Just 2 for me, actually. First one is on regional lockdowns. Obviously, we've seen them less, there would be a case in point. I just wonder what, if any, impact that kind of thing has? And the second one was really a follow-up to your thoughts on imported bricks. You've indicated we could see a halving of the number of those bricks that are imported. I wonder whether you think that's a permanent change. And is it being driven by conditions here or a change of attitude on the continent?

Okay. Well, let's pick up regional lockdowns first, Jon. So far, the regional lockdowns we've seen haven't seen -- haven't stopped people going to work. And if you look at our Desford facility, it's just outside Leicester. Quite a few of our employees do live in Leicester. Clearly, they had elements of their life shut down but not their ability to go to work. And if you think about our brick factories, they're huge, all of our factories, they're huge buildings. And people are pretty well spaced out. So in terms of manufacturing and delivery, we can manage that quite successfully. Offices are tougher. But we also know that we're able to shut our offices, and we have shut our offices, and we have operated our business perfectly well when our office is shut, and we may have to do that again. But unless there is legislation that says, do not go to work, I don't think that local lockdowns will particularly inhibit our business. And as I say, I think, our manufacturing basis, we can operate pretty safely and keep people well apart. In terms of imported bricks, it's an interesting question as well, will it either be a permanent change? I mean clearly, we'd like to think so. And I think it's very much demand-driven not supply-driven. Clearly, there are manufacturers in Continental Europe that have enjoyed sales of bricks into the U.K., but they are priced at a premium. And although some of those bricks are, what you might call a speciality product, that's more expensive that can be made using clays, particularly in Northern Continental Europe, where they can get colors, textures, sizes that we can't make in the U.K., I'm sure they'll continue. But the volume that's supporting the U.K. housebuilders because the industry has been at capacity, I expect to fall away. And one of our key desires for continuing our Desford project and one of the key reasons for raising the equity to enable that project to continue was to make sure that as the market recovers, we're there with good quality products right in the middle of the U.K., therefore, with relatively low distribution costs to service that market. And actually, in many ways, I think that the pandemic, and therefore the drop-off in imported bricks, will make it slightly easier to pick that market up using Desford product as the market comes back.