Ibstock plc (IBST) Earnings Call Transcript & Summary

So good morning, and welcome to the 2022 half year results presentation for Ibstock plc. To those of you who are able to make it into the I-Studio today, welcome. And for those of you dialing in, thank you for joining us. So with me is normal today is Chris McLeish, our CFO. Turning to the agenda. After the initial overview, Chris will walk us through the financials and cover divisional performance, after which I'll provide a market update about progress we've been making both operationally and strategically as a business over the last 6 months. Having covered the outlook, Chris and I will be very happy to take your questions. So turning first to the overview. I'm very pleased to report that the group has delivered a strong first half performance with both profit and cash materially ahead of the prior year. All lines in our P&L were ahead with EBITDA up 29% and earnings per share up by over 40%. These represent very strong results, and I'd like to pay tribute to everyone at Ibstock for their commitment and focus in delivering this performance. Demand in our end markets was robust throughout the period and the business executed well in spite of challenging supply chain conditions. The market backdrop remains encouraging in the early weeks of the second half, increasing our confidence in full year performance. We also achieved good progress on our strategy with core organic growth projects progressing well and momentum continuing in Ibstock Futures. We remain committed to managing capital dynamically and initiated a GBP 30 million share buyback in the first half, which is progressing well. And we're also declaring an interim dividend of 3.3p on, representing a 32% increase on the prior year. Overall, we continue to execute on our growth strategy, building operational momentum alongside our committed investment-driven growth. And as a result, we are confident in the group's ability to deliver on our ambitious medium-term financial targets. Trading has been strong in the first half and having revised our 2022 forecast upwards in April, we're pleased to be raising them again today. With that, let me hand you over to Chris to take us through the financials.

Thanks, Joe, and good morning, everyone. Turning to cover the financial summary. Revenues of GBP 259 million represented an increase of 28% on last year, driven by a significant pricing benefit in both divisions and volume growth in Clay. Adjusted EBITDA also increased strongly, up by around 29% to GBP 71 million. I will provide more detail on the divisional margin drivers later in the presentation, but overall, group margins moved forward by 20 basis points to 27.3% after operational costs of around GBP 1.5 million in the new Ibstock Futures business and a charge of GBP 4 million for a one-off cost of living payment, which will be paid to employees during the second half. Adjusted earnings per share of 11.3p increased sharply from 7.9p in the equivalent period last year, an increase of 43%. With a continuing focus on cash management, we delivered a further reduction in net debt which reduced to GBP 36 million by the end of June, representing leverage of 0.3x. And in light of the performance, strong financial position and prospects of the business, we have declared an interim dividend of 3.3p, representing an increase of 32%. Moving now to revenue. We set out on this slide the progression of group revenue compared to the comparative period in 2021. As Joe said at the outset, with demand in our end markets remaining strong throughout the period, revenues of GBP 259 million were materially ahead of the prior period. Clay revenues were up by over 30% with a mid-single-digit volume increase and a strong pricing benefit. The current period included around GBP 2 million of revenue from Telling GRC, which was broadly breakeven in terms of EBITDA for the period. Concrete revenues also moved forward well, up 16% on the prior year period with a strong pricing benefit on broadly flat volumes. Both divisions priced dynamically through the period to ensure that cost inflation was priced through fully into the top line. Turning now to cover divisional financial performance, starting with Clay. The Clay division executed really well in the first half. Against the backdrop of robust market demand, the division delivered sales volumes modestly ahead of our expectations, up by around mid-single digit versus the comparative period. The business also achieved in full the network output growth targeted being a 5% increase by the midyear point, and was able to price through significant levels of variable cost inflation to move margin percentage forward by 60 basis points on a significantly stronger top line. We also report the activities of the Futures business within this segment and the adjusted EBITDA of GBP 64 million included an incremental GBP 1.5 million of operating costs relating to research, innovation and commercial capability within Futures. Turning to cover Concrete. Performance in this division was more mixed. Although demand remained strong across all end markets, roof tile volumes were lower as operational challenges held back output at our tile factory in Leighton Buzzard. The top line grew by 16% as the business benefited from material pricing gains, passing through significant double-digit cost inflation. Overall, sales volumes in Concrete were in line with the comparative period as growth in fencing, walling and well categories were broadly offset by lower roofing volumes. EBITDA margin percentage was around 3 percentage points below the comparative period with around half of this being attributed to the roofing performance. The cost of living payment recognized during the first half had a relatively more significant impact in Concrete amounting to around GBP 1.5 million. As the supply chain challenges recede, we expect the EBITDA margin percentage in Concrete to start moving closer to our medium-term ambition for the division during the second half. Moving to cover cash flow. As I said at the outset, the business delivered another excellent cash performance, benefiting from the very strong trading result as well as disciplined working and fixed capital management. Adjusted operating cash flow totaled GBP 49 million, representing a 69% cash conversion on EBITDA of GBP 71 million. The investment of GBP 10 million in working capital reflected the typical seasonal build of raw materials as well as the increased selling prices, which increased the value of receivables period-on-period,and higher variable costs, which increased the unit value of finished goods inventories. The volume of finished goods inventories was modestly lower, principally as a result of the clay sales volumes being slightly ahead of production. The tax cash paid was below the prior period. As I guided at the full year results announcement in March, cash tax benefited from the U.K. tax super deduction on qualifying capital expenditure with some of the benefit in respect of prior year CapEx flowing through into cash tax benefit in half 1 this year. Cash tax in the second half remains dependent on the level of qualifying spend in half 2, but I would expect cash tax to remain below the P&L rate until this incentive comes to an end, expected to be in April 2023. Capital expenditure of GBP 19 million was materially above the comparative period and included some GBP 11 million of growth investment. I would expect CapEx in the second half to accelerate bringing full year growth investment closer to our original expectation of around GBP 50 million. Moving to the balance sheet. This excellent cash performance enabled us to strengthen further our financial position with net debt reducing modestly despite significant returns of capital and investment for growth. As well as the operational cash flow drivers I set out on the previous slide, the group paid dividends totaling GBP 20 million during the period and paid GBP 6 million to buy back our own shares. Leverage reduced to 0.3x, below the bottom end of our range, although the accelerated growth capital spend and the continuing share buyback would lead us to expect net debt to move up into the lower end of the range in half 2. Before I hand back to Joe, I would like to briefly update the moving parts of guidance for the 2022 year. The immediate demand outlook remains encouraging with resilient demand across end markets. Backed by strong forward order visibility, we expect good year-on-year progress in half 2 despite capacity slightly below half 1 due to the phasing of planned maintenance shutdowns and some inventory rebuild. We are now over 90% covered for half 2 energy but remain committed to our dynamic pricing strategy in the face of continuing inflation as the period unfolds. And on cash, I now expect sustaining capital expenditure for the year to be around GBP 20 million to GBP 22 million, reflecting the in-year inflationary impact on labor and materials, and as I said earlier, the pace of growth investments to accelerate during the second half. Overall, whilst we remain mindful of the broader macroeconomic uncertainties, the Board now expects to deliver adjusted EBITDA for the full year modestly ahead of the expectations communicated in April. With that, let me pass back to Joe.

Thanks, Chris. So let me first present an update on some of the structural drivers in our core business, which reinforce our confidence in delivering on our medium-term targets. I'll pick up on some of these themes as we move through the section. It's widely acknowledged that we have a structural undersupply of new housing stock in the U.K. and this cross-party political commitment to addressing this issue. Demand drivers are still strong with a tight secondhand market, the U.K. still needs to build more homes. Facing clay bricks provide a unique aesthetic and giving the longevity of a house built with clay brick, the life cycle carbon footprint from cradle to grave is materially lower than alternative products. Imported clay bricks have increased in volume and share over recent months, reflecting the domestic capacity constraint, but the increasing transportation cost and the Scope 3 carbon differential means that our additional capacity, when it comes on stream towards the end of next year, will be competing from a strongly advantaged position, both economically and environmentally. I'll talk about the progress against our operational strategy of sustain, innovate and grow a little bit later, but we believe that our unrivaled asset base, including the lowest carbon clays in the industry, our product range and service proposition will underpin Ibstock's U.K. market leadership. So let me turn now to an update on activity in our core markets. In our core markets, starts and completions in the first half remained broadly in line with the comparative period, with the expectation of modest growth over the near term. Within the new build housing, our customers continue to report strong forward order books and reservation rates. Mortgage availability and affordability remains relatively healthy despite recent moves in interest rates. We believe that recent increases in energy bills are causing the U.K. public to prioritize energy efficiency when thinking about buying a house and the superior EPC rating of new build is therefore becoming a more significant advantage over the less efficient secondhand housing stock. Within RMI markets, although overall demand has been stable rather than growing, level -- activity levels remain similar to pre-pandemic levels of 2019. The outlook for RMI over the medium term remains steady. So let me move to provide an update on our key diversified growth markets. The cladding element of the U.K. mid- to high-rise facades market is around GBP 1.5 billion, which is larger than the traditional low-rise residential market. The pace of growth and the penetration of brick and masonry products make this segment very interesting for us. In H1 2022, 78% of the new planning applications were specified wholly or partially with brick or masonry. And this trend is due to preferences driven by aesthetics, fire resistance, durability and increasing cost benefits when compared to other forms of cladding, like glass curtain walling. As well as attractive subsegments like student accommodation and commercial space, the build-to-rent sector is becoming an important driver in this market. The number of build-to-rent homes completed, under construction or going through planning increased again in H1 by 12% to 237,000 by -- versus the prior year. And we see this as a key market for the products and systems being developed by the Ibstock Futures business. Overall, you can see that whilst our traditional markets are expected to remain robust over the medium term, it's these new diversified markets where growth is expected to be most rapid and where we are focused on building scale to deliver faster growth for Ibstock overall. So turning now to cover the brick supply side dynamics focused on industry inventory and production levels. So on this chart, you can see the ONS stats for monthly -- for domestic brick production as a percentage of prior year. Total domestic production of some 0.8 billion bricks in the first 5 months to May 2022 was marginally ahead of the prior year. Domestic dispatches were slightly above domestic production, meaning industry inventories in May '22 were below the equivalent level in May last year. Inventories are now around 140 million bricks below peak 2019 levels. Imported brick has increased its penetration moving to above 20% of the total U.K. market and this brick is coming from a wider range of geographies with traditional markets running at higher utilization levels. Overall, industry dynamics remain positive. So moving now to provide a strategic and operational update. First, let me remind you of our overall strategic vision, which we presented this slide in March, it summarizes our path for growth. So we have a strong, well-invested core business today across both our clay and concrete divisions. Our business delivers structurally high margins and cash generation. And the operational strategy, combined with our commitment to environmental sustainability and social progress, has built an even stronger platform for growth and value creation. As we think about growth opportunities in front of us, we're focused on 2 areas: firstly, in capacity, efficiency and sustainability enhancements to optimize the performance of our existing business; and secondly, on innovation and extension into new markets to diversify our revenue base within construction. To that end, we see 2 strong forces that will transform the markets we operate in, an intensifying focus on sustainability and a new wave of industrialization and construction. And this diversified growth is the focus for Ibstock Futures. So by way of a reminder, you can see on this next slide, the medium-term targets that we set out in March. We believe that this growth strategy will translate into significant earnings growth, delivering attractive returns for our shareholders into the future. In terms of revenue, we're targeting an increase from the level of just over GBP 400 million in 2021 to GBP 600 million by 2026. Diversified growth is central to this strategy, and we're therefore targeting revenues outside the traditional clay brick business to represent 40% of group revenues by 2026 from the level of around 30% last year. We expect Clay EBITDA margins over the medium term to exceed 35% and for EBITDA margins for the group as a whole to be at least 28%. And we're committed to retaining our capital discipline, targeting return on capital employed of 20% into the medium term. I'm very pleased with our initial progress we've made towards these targets, and our operational strategy along with our investment-driven growth plans underpin our confidence in delivering in full against them in the years ahead. As we all set out in March, we have significant firepower to support both further investment and shareholder returns. As a reminder, in line with our capital allocation framework, we initiated a GBP 30 million share buyback during the first half, whilst also deploying capital into both the core business and into Ibstock Futures in the service of growth. We continue to expect over GBP 200 million of cash available over the next 5 years, providing us with an excellent platform to deliver this attractive growth and shareholder returns in the future. So with this backdrop, I'll now give you an update on our operational strategy of sustain, innovate and growth. Within the sustain pillar, we've made further progress in advancing our culture of health and safety, delivering a further reduction in lost time accident frequency rates. And although there can be never any grounds for complacency here, I'm delighted to say that we're well on track to deliver our 2023 target of a 50% reduction over the 2016 baseline. The work we've been doing on maintenance continues to pay off with our asset transformation program delivering improved reliability during the period, and with an ever-increasing focus on predictive and preventative rather than reactive asset maintenance. We took further steps to enhance the environmental performance of our business, embedding detailed factory level targets for carbon, water and material usage, which will support the delivery of our ESG targets and ambitions going forward. Acting sustainably and responsibly as part of who we are, and we remain committed to sector leadership for ESG. It was very pleasing that we were just recently awarded the Manufacturer of the Year in the Business Green Awards last month. Turning to our second pillar. Innovation is at the heart of our growth plans, and we are committed to the continued enhancement of our product portfolio and customer proposition to strengthen our market positions. We've taken some important steps to improve the resilience and reliability of our customer service, both by broadening our nationwide distribution capabilities and investing in outbound scheduling. We've seen an encouraging reduction in cancellation rates as a result of this investment, and we expect further improvements over the current months. And we continue to explore ways to digitize our business, developing a customer portal to drive service performance and efficiency over the near to medium term. Turning to our third strategic pillar, growth. During the period, we completed the last of our capital enhancement projects at the 3 clay factories, delivering a 5% capacity uplift versus 2021 by the mid-year. Our growth investments in our wire cut factories in the West Midlands at Atlas and Aldridge, which will bring around 115 million of brick -- new brick capacity to the market are progressing well. Much of the civils work is completed now and equipment and machinery fit-out will commence in H2. We now expect the project to deliver significantly higher annualized EBITDA of GBP 18 million from 2025 compared to the GBP 12 million previously announced with higher capital costs of up to GBP 75 million compared to the initial view of GBP 60 million, reflecting the significant inflation for both labor and materials over the last 12 months. So this represents a big improvement in the return profile of the investment, which we still expect to start commissioning from the end of 2023. Our people and our culture are absolutely central to the delivery of our growth plans. We're committed to creating a culture where every one at Ibstock has the opportunity to fulfill their potential, and we've increased our investment in development and training this year as we optimize the employee experience. We're also committed to supporting our people financially. And in response to the nationwide challenges being faced with the sharply elevated cost of living, we've committed to make a one-off payment to those employees most heavily impacted during the second half of the year, recognizing a total cost of around GBP 4 million during the first half. Turning now to cover Ibstock Futures. We launched our new diversified growth engine just over 6 months ago, and I'm pleased with the pace of progress over the last few months. And with both the team and the pipeline, investment opportunities are building very well. We're focused on building a leadership position in brick slips systems and are seeking ways to accelerate our growth in slips ahead of our major growth project at Nostell coming on stream. More generally, there are a number of growth areas which will be central to Futures over the next few years. So in terms of products, we're looking to grow our position in differentiated markets including an offer with slips, but also encompassing different phasing -- differentiated facing bricks centered on the mid- to high-rise market. Outside of clay, we are committed to broadening our -- into other modernized, panelized solutions. Glass reinforced concrete with Telling is the first step towards building our product offering here. We offer existing rail and fixed systems in -- with MechSlip and our Nexus products but we're interested in growing this position through other facade systems and solutions to cater for the different needs and applications in this segment. And we continue at pace of pursuing a step change in sustainability opportunities. As well as piloting tests for use of alternative fuels, we are advancing in our efforts to produce cementitious replacements and lightweight aggregates from clay with the expectation that we'll move into the development phase with one exciting opportunity in the second half. We've built capability amongst the leadership and commercial team, and we're well set to accelerate progress over the medium term. And Future's pipeline of M&A opportunities also continues to build with a range of targets under review that have the potential to accelerate our R&D and our positions in these attractive growth markets. So to summarize, we've delivered a strong performance in the first half, driven by robust demand and solid execution. We continue to manage inflation and supply challenges well with decent forward energy cover and a commitment to manage pricing dynamically moving forward. We do not see any change in near-term demand patterns. With markets remaining solidly underpinned over the medium term, we're remaining focused on delivering investment-driven growth with our core organic projects progressing well and increasing momentum in futures. And we're driving progress in all areas of our ESG strategy with targets across all levels of the business to ensure everyone in Ibstock can contribute to delivering on these ambitious goals. Building on these solid foundations we've laid, the investments we have made and the strategic plans we have in place, I have increasing confidence about the significant upside potential of the business in the years ahead. And with that, Chris and I are going to be very happy to take your questions. As normal for the record, I'd be grateful if you could state your name and institution first when asking your question. And we'll start with questions in the room to begin with.

Aynsley Lammin from Investec. Just 3 from me, I think. First of all, on the energy costs, just wondered if you could give us a bit more kind of insight into how you're managing that. Obviously, 50% covered for next year, just what you're seeing in the forward market and your intentions of how much more you cover and when. And if you were to cover everything today, what would be the kind of pounds million increase in energy costs in FY '23 versus what you expect in '22? Secondly, if you could just give maybe a bit more color on kind of trends you're seeing between new housing and the RMI market? You seeing any more caution, particularly on that RMI side, kind of more on the ground, I guess. And then just with the planned shutdowns for the second half, how much capacity will come out relative to what you had in the first half in terms of volume?

Okay. Thanks, Aynsley. So I'll take a bit of the energy. Chris will fill a bit more details in around next year. And I'll probably take the new housing, and, Chris, you can probably do the planned shutdowns. So the energy market at the moment, obviously, had a lot of risk priced in for the future. We think that most of the risk are priced into the forward energy curve. And we think there's a danger at actually purchasing a new -- the danger of being too long. So we operate this on a weekly basis. We're looking at this. We've got lots of energy advisers, and we continue to monitor our position. Obviously, we've got decent cost of ownership with that 50% for next year, but we believe that there's a danger of not going too hard, too early because you don't want to be left with having a cost of ownership too much of it for next year. So we're just really working dynamically on that at this stage. I don't know if you want to say anything more on that.

Yes, I think that's right. I mean clearly, with energy at elevated prices, there is risk to buying that out at this point. Actually, we think the right thing to do is continue to monitor closely, lowering cover as we see opportunities to take it. But I think the really important message is, look, we see a positive demand backdrop and we would expect to continue to move pricing forward to recover that as we go through '23.

In terms of new housing, talking to all of our larger customers, there's very strong demand. And the forward order books well into 2023 are visible and strong. Customers are telling us that reservation rates are high. And unless people cancel their deposits and lose their deposits, they've got a very, very strong build-out rates. They're telling us that they need more sales outlets because they didn't have enough through the COVID period. So they need to open more sales outlets. And we're seeing it's very strong. And house price growth has still continued. It might moderate a little bit. But while that house price growth is still ticking upwards, it's good. And it's better to buy a house at this stage than renting a house. It's cheaper. So there's a lot of demand for new housing. Secondhand market is very tight. If you try to find a house on the secondhand market recently, there's not a lot available. So that's good. And then in terms of the RMI, activity levels are still very high. Talking about 20 -- between GBP 22 million, GBP 24 billion worth of spend. You heard some stuff yesterday about DIY, which I think has probably slowed down a bit. But that's not really our market. We're more the RMI. And with the amount of people that moved house in the COVID period, there's a lot of projects that are still pent-up, couldn't get contractors to do the work. So we still think activity levels are still going to be quite high there. Planned shutdowns?

Yes, sure. So just to give you a sense, I mean, we've got in close 16 locations across the U.K. And typically, you would shut each one of the factories down for a meaningful period of time once a year to maintain those assets, call that sort of 20 days in any given 12 months. Now we clearly have optionality about the timing in which we do that. And with energy prices being where they are, it makes sense for us to optimize that pattern. So you're taking them down in the period where gas cost is relatively most expensive. So the fixed cost load in clay is, call it, circa GBP 100 million. Doing things in the way that we have done to optimize that sort of cost can lead to a sort of 4% to 5% swing between the 2 halves. But just to be absolutely clear, the network is where it should be. This is about balancing the half 1 versus half 2. As we look into '23, we'll actually annualize that 5% that we've now got into the network. So we'll move forward a little bit in terms of output '23 versus '22. But that's the impact half 1 and half 2 this year eventually.

Okay. Gregor, I think you're next.

Greg Kuglitsch from UBS. I think you alluded to in the past, and now it seems like we're moving closer to it. And I'm talking about the sort of new product, I'm not sure whether you're talking about lightweight aggregates or cementitious substitutions. So just give us an update there what the plan is. Appreciate maybe you don't want to disclose everything, but -- and I guess, I'm sort of interested in the scale of it, basically. Secondly, on M&A, again, you're calling out sort of more opportunities. Can you just give us a sense, again, quantum or sort of scale that you're potentially thinking of and what the seller market or what the sellers are demanding at this stage?

Yes. So we've mentioned before that certainly in the cementitious market, the reduction in availability of cementitious products, such as fly ash and slag, which go into the concrete and both reduce the carbon footprint and act as a filler, they are -- they've dwindled. The supply bases are drying up. Cement also needs to find new ways of reducing carbon footprint and calcined clay presents a very good opportunity. We've been working on that for over a year now, and we continue to work on research and development and looking at our clay types to see how we can convert that and the market structures and how we go to market and what the capital costs would be. That's been an interesting, really interesting project. We've also got clay, which can go into -- which can make expanded clay. There's a shortage of lightweight aggregates in the U.K., and a lot of the expanded clay that comes in, comes in from Europe. There's -- we see a market of 2.5 million meters. And we've got clays that are very good for that. And the great thing about it is you can also look at the whole energy source and using alternative energy sources to do that. So I can't really say much more than that. We are looking at a potential for an investment project that will be subject to Board approval, but we are quite excited about that. And it's just another way of maximizing your assets from your existing asset base and getting greater returns with the whole view of making things more sustainable. So we believe that clay is great opportunities for that. And our clay reserves are phenomenal, and we won't use some of those clays in the clay brick business. So we see that as a great opportunity. In terms of M&A, obviously, at the moment, valuation has always been a very key thing for us when we look at M&A, strategic fit, valuation, what are we doing. The Futures business has obviously accelerated our focus on this. And we see in the space that I mentioned, in the diversified markets update, quite a lot of fragmentation and ability to buy businesses and scale up those small businesses. With the size of Ibstock and the potential of some small businesses that find it difficult to grow, the combination of the 2 make some very interesting things. Not all big acquisitions, not sizable, we're not talking betting the run share, we're talking small acquisitions but very strategic and focused on that mid high-rise market and increasing our penetration into the facades area. So we'll probably talk more about that in the second half of the year. We've also got our concrete business, which continues to look for opportunities. But at this stage, it has to compete with things like a share buyback, which return on capital and the valuation of that compared to paying high multiples, I'd be a bit more cautious about. So -- but at the moment, we keep an open mind.

Clyde Lewis, Peel Hunt. Four, if I may, 3 are fairly straightforward, I think. Can I just double check on the Futures cost for the year? I think you gave a guidance of the GBP 4 million or GBP 4.5 million for the full year, whether that's changed? Second one was on -- and another one for you, Chris. I think on sustaining CapEx. I think you've guided to sort of GBP 20 million to GBP 22 million now for this year. Is that the number we should be thinking about going forward for the business? Third one was on concrete. Can you give us a rough split in terms of revenue by rail, tiles, fence panels, et cetera, to keep it in there would be lovely. And the last one then was on sort of the import bricks and sort of the difference in costs. And also carbon as well, if you can talk a little bit about their carbon footprint against your carbon footprint, clearly, differences in transport, but where are their plants versus yours in terms of efficiencies?

Do you want to take the first 3?

First 3, and then I'll leave you to do the last one, Joe. Thanks, Clyde. Yes, Futures costs, you're right, GBP 4 million was what we said in March. GBP 4 million continues to be the expectation. We ran a little bit below that. We were GBP 1.5 million in half 1. The reality is actually the team that we're building and the cost of that team will annualize as we move forward. So pace will pick up a little bit and there will also be a little bit more investment around research and development, as Joe was referring to, on some of the sustainability investments that the Futures team is looking at. So that's the way to think about the full year. Sustaining, yes, GBP 20 million to GBP 22 million, a little bit higher than we guided to at the beginning of the year. The reality is that, that reflects now the inflationary impact of both materials and labor. So if you like, in sort of constant currency, that is the number that we came into the year expecting to spend. I think let's see what happens to those markets over time, and whether that comes back down again. But I think we certainly overview that nearer to GBP 20 million than GBP 25 million. We've now got a well-invested asset base. We've done some of the work that we needed to around enhancement CapEx. So I think it's that GBP 20 million or so is a decent proxy to think about run rate going forward. And then the third question, Clyde, around concrete. Actually, if you look in the back of the deck that we've published this morning and that you'll have access to a copy of, we've actually given the concrete revenue analysis in there. So you can see, for example, fencing and building around GBP 17 million, rail infrastructure was GBP 7 million, roofing, GBP 16 million and the flooring business, including Longley about GBP 18 million. So those are the biggest components, you've got the breakout there. Joe?

Yes. So obviously, imports have increased. They're about 23% of the market at the moment. We've always known that you add on about 20% to 25% in terms of cost for transportation. However, those bricks are coming from further and further afield now. So that will probably increase. I think also, you've seen a reduction, for example, in German imports this year. So efficiencies of plants that will probably -- or inefficiencies of plants relatively will probably increase the costs as well there. And I think gas availability going forward as well and cost -- gas costs in Europe from traditional Europe markets will be higher. So all in all, we need imports. We need them to come in at the moment. They've always been imports. We would expect those levels to probably tail off as local capacity comes in because most people want the surety of where these products are coming from and also the cost competitiveness. In terms of carbon, probably older factories coming from outside. So we've got more -- we've invested quite a lot in U.K. capacity recently. So that tends to bring a carbon advantage. And then you have the Scope 3 emissions. Clay bricks in the U.K. typically travel 60 miles, 60 to 70 miles. And our customers are really interested in the whole carbon footprint and especially Scope 3. So I think both in terms of Scope 1 and 2 carbon much lower in the U.K. relatively and then you've got the Scope 3 effect as well. So I think we've got a competitive advantage there. Okay. Any other questions? What about questions from the phone lines.

[Operator Instructions] We'll take a question now from George Speak from BNP Paribas Exane.

So maybe just a quick one on demand and order visibility. So you say you've got good forward visibility, but could you just give us a bit of an indication of how many months ahead you can typically see in the business? And then when you speak to customers, are you having sort of any more incrementally negative discussions or any signs of a slowdown in terms of postponements or cancellation or anything that might suggest any softening in the macro environment?

Yes. So at this stage, as I said earlier on, we've got visibility for the rest of this year and into 2023. We're talking to customers about orders for next year now. And all the customers we're talking to, whether they're merchants or they're house builders are asking for more product. So at this stage, I don't have any reason to have any negative conversations at all. It's positive conversations. People are busy. And across the patch, people want more product for more categories. That might differ with other categories, but in our business, both concrete and clay, we're seeing very strong demand.

Okay. Then maybe another question just on gas actually. So as we roll into the heating season, do you see any sort of risks in terms of the gas supply with respect to your hedging contracts? Is there any risk to delivery if we get sort of further supply disruptions with respect to Russian gas?

George, it's Chris here. So in terms of gas, we have an offtake agreement with a big international supplier of energy. So in terms of that contract, we lock in forward pricing. We take delivery from that customer. So I think that gives us a degree of confidence. Now I think in a world where at a national level, gas was to start to be rationed then clearly, that would affect everyone across industry and not just in our sector. But I would make a couple of points of context there. The first one is clearly in the event that any regional rationing did happen, we've got a broad geographically diversified footprint of factories that gives us a strong degree of natural protection there. And I think the likelihood of any of that type of thing happening is greater in mainland Europe than it is in the U.K., where we have relatively more independent sources of physical supply. So I think on those scores, relatively more comfortable. But clearly, we understand the wider world in which we operate today, and we don't dismiss that as a risk.

Our next question comes from Christen Hjorth from Numis.

A couple of questions. Actually, 3 questions from me, if that's okay. First of all, I mean, clearly, very confident in the outlook. I mean in a scenario where perhaps as we get through the rest of the year, housing starts to moderate quite a lot and maybe sort of reservations do slow down. How do you think about the ability to price in the start of 2023, particularly given that, obviously, costs will be increasing and you've seen quite big price increases this year as you referenced? The second one, you sort of touched on the maintenance side of things, obviously, before your time, but there was a point where I think Ibstock run a little bit too hard and, therefore, had to do incremental maintenance. Just how are you managing it from that point of view? And then just the third one, you've obviously got the Atlas project. I was just wondering if there's sort of any opportunities beyond that, which you perhaps are talking about in detail now, but sort of on the agenda for midway through this decade?

Yes. So I'll take the first one, probably we'll share that a bit, and then Chris can do the second, and I'll take the last one, Chris. So yes, I mean, look, as we think about -- I think your point was about the outlook. And as you think about that outlook into 2023, what gives us reason to believe, I still think there's a strong demand sort of outlook there. But if you look at the supply and demand dynamics for our industry in particular, I think we're very strongly underpinned with our volume. And I don't see volume reduction from Ibstock or indeed the other brick suppliers in the U.K. There is a structural deficit. We've got 500 million imports. We've got low stock levels. And we've got an imbalance there. So I don't see any of that. Even if there's a slight drop off in the market, which we're not seeing at this stage, we don't expect any major swings in volume. We've got that dynamic to help the pricing situation. We've been able to push prices forward and work with our customers. The cost of the product and the overall build of the house also bring a little bit of elasticity with our ability to price because they're quite low relative to other components. And yes, I mean, I think costs, we'll continue to manage. So I think -- I don't know if there's anything you else would say about that, Chris?

No, I think -- I mean, Joe, you made the point around the degrees of insulation within our business model. And I think I'd reference back to those and I believe that fundamentally, as we look through the cycle, the competitive characteristics of our business are very, very strong. So I think that's all I'd say in context there, Christen. In terms of the second question on the maintenance of plants, we have focused on this over recent years. We have an enterprise-wide program, the asset transformation program that is focused on driving from a reactive view on maintenance to a predictive and preventative view. And a greater proportion of activity is focused on addressing asset maintenance before it breaks rather than after it breaks. So I think we're seeing good behavioral improvement there. I think another point that I would make is we rationalized our fleet in 2020. Actually, as we've renewed that, we have seen better levels of reliability as well. And the business has continued to benefit from some of those fixed costs that were removed when we rationalized the business in 2020. So I think those will all go well. We'll continue to do the right things. That's why taking factories down in the second half and actually optimizing against the energy price that we would be paying is the right thing to do to make sure that the assets are well maintained going forward.

Yes. And obviously, the Atlas project and returns you get from these big organic projects, they're very -- we're very confident in them and we execute on them well. We've done the enhancement projects. We've got Atlas. We've had Eclipse. And there are -- we work on this. This is a long-term business. So we're constantly working on where is the next capacity coming from. Not to say that we're going to announce something next year or in the immediate future, but we're constantly working on this. And because of our clay reserves, and because of the optionality we've got with the factory asset base we've got, it does mean, in particular, brownfield opportunities are there. And we've got -- we're working on one now for example, but we're not announcing anything today, and we just keep that in view. The capability to deliver those projects is -- we've got 2 big projects on go at the moment. So you need capability to deliver that, and that's an issue. So we try to manage that carefully so we don't overextend ourselves.

And after -- Christen, after the investments that we've already committed to, as we said, we've got over GBP 200 million of available cash. Now the core business competes for that capital alongside Futures and other alternative uses for it. But we believe that over medium term, we have the ability to invest further in the core business and grow Futures and return capital to shareholders. So we're very rigorous in the way that we apply our financial and strategic criteria to any investment opportunity.

Yes. And I think the last thing I'd say on that is one of the great things about this business is the ability to recycle, to invest in other brownfield projects. You saw through the pandemic, we made some closures of some factories. Two of those sites are now being redeveloped into highly accretive return profile investments. And one of the others is now being recycled into sales of land, which we expect significant cash inflows from in the second half of the year. So it's a great business model, and we continue to work on it in a long-term view. I think we've got a couple of questions from the...

Our next question is from Stephen Rawlinson from Applied Value. Stephen asks is the higher cost of Atlas and Aldridge due to inflation or other factors? And is the incremental return of GBP 6 million extra EBITDA on GBP 15 million of extra CapEx spend due to marginal extra output or some other factor? It looks a great investment, but just want to understand the new information.

Let me take that. So in terms of the incremental cost, it is absolutely related to inflation. When you look at some of the indices that drive cost of materials. If you look at steel and that sort of thing, clearly, you're talking about something that's gone up by 20% relative to the time back in April '21 when the project was initially approved. So absolutely, that's driving it there. In terms of the value, moving that forward now, really 3 things. We have increasing confidence in the ability of that factory to place that volume. So that's 115 or told across -- GBP 115 million across Atlas and Aldridge. So from a volume perspective, higher levels of confidence there. In terms of pricing and the expressions of interest around the U.K.'s first net zero carbon brick, increasing confidence in the commercial outlook there. And I would say having completed design, tendering, and now well underway with procurement, increasing confidence about where that plant will sit on the cost curve. So I think all of those 3 things together give us a sense of confidence in the returns that we're now talking about.

Okay. And I think we have one last one.

The final question is from Florence O'Donoghue from Davy. Florence asks, would you remind us of your current brick production capacity following the recent enhancements project completion? And secondly, will zero carbon brick attract a price premium? And if so, to what extent?

Thanks, Florence. So I mean, the first question, we don't disclose in aggregate, the total volume of our clay capacity. If you think about the total market, we talk about being in the region of sort of 40%. So you can sort of back solve to that number, but we don't disclose that. Joe, in terms of the net zero carbon brick.

Yes. I mean we think that there's an opportunity. If you think about -- when you talk to large house builders now, the pressure and the need that they have to get on the carbon agenda and the targets they've actually got for 2025 and 2030, we believe there's a premium here. I'm not going to tell you exactly what premium because that's a bit market-sensitive, but we think it's a very listing premium, and that's built into part of the enhanced return profile that you've seen from the announcement of GBP 18 million. So to give you more specifics would be to give you too much detail. Well, thank you very much for your time today. Just to reiterate, our business is performing really well. We've got really strong foundations. We're excited about the path for growth that we've had and look forward to updating you on more progress as we move forward through the year. So thank you very much for coming for those of you who have been in the strikes, and have a great day.