Ibstock slashes divi as development slowdown hits earnings

Ibstock has cut its dividend after the building materials group’s first-half profits were hit by subdued demand for bricks.

Leicestershire-based Ibstock’s pre-tax profits tumbled by 60 per cent to £112million in the opening six months of 2024, with turnover down by a fifth to £178million.

Ibstock said the result came against the backdrop of ‘continued challenging market conditions’, with the UK brick industry estimated to have contracted by about 10 per cent during the reporting period. 

Weak foundations: Building products maker Ibstock has reduced its interim dividend after the group’s first-half profits plummeted due to subdued demand for bricks

The UK’s construction sector has been weighed down by high interest rates, as well as economic and political certainty.

Dirms in the sector are now hoping for a bounceback after the conclusion of the general election led to the construction industry growing at its fastest pace in more than two years in July, according to the latest S&P Global PMI data.

Ibstock additionally blamed its lower sales on ‘exceptionally wet weather’ during the first quarter and the ‘disciplined approach to pricing’ it pursued to protect margins.

The FTSE 250 firm intends to pay investors a 1.5p per share interim dividend, a 56 per cent drop on the equivalent payout last year. 

Boss sets sights on Labour housebuilding targets  

Demand for new-build housing and renovations in Britain has been dampened over the past two years by elevated mortgage rates and cost-of-living pressures.

It has also been impacted over the long term by stringent planning rules making it difficult to build large-scale housing developments.

The new Labour government has vowed to construct 1.5 million new properties over five years, via planning reform and developing on lower-quality ‘grey belt’ land.

Only 212,570 new homes were built across England in the 12 months to March 2023, far below the previous government’s target to deliver 300,000 houses per year.

Joe Hudson, chief executive of Ibstock, said: ‘The new government’s commitment to increasing the supply of new homes creates a more positive backdrop for medium-term demand.

‘The fundamental drivers underpinning demand in our markets are firmly in place, and our prospects remain strong, underpinned by our robust balance sheet.’

However, the company forecasts a ‘modest reduction’ in market volumes this year and is cautious about how some positive trends ‘will translate into improvements in market demand.’

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘While some leading indicators are beginning to improve, it’s very early days and their impact on the current financial year is likely to be limited.’

Ibstock shares rose 5.1 per cent to 181p on Wednesday morning, making them the FTSE 250’s second-best performer and taking their gains since the year started to 21 per cent.