Table of Contents
- Ibstock intends to pay shareholders an interim dividend of 1.5 pence per share
- The head of a building materials company expects a boost from the government’s initiative to build new homes
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 fell 60 per cent to £112m in the first six months of 2024, with turnover down by a fifth to £178m.
Ibstock said the result came against a backdrop of “continued challenging market conditions”, with the UK brick industry estimated to have contracted by around 10 per cent over the reporting period.
Weak foundations: Building products maker Ibstock has cut its interim dividend after the group’s first-half profits plummeted due to weak demand for bricks.
The UK construction sector has been hit by high interest rates as well as economic and political uncertainty.
Investors in the sector are now hoping for a recovery 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 also attributed its lower sales to “exceptionally wet weather” during the first quarter and the “disciplined approach to pricing” it took to protect margins.
The FTSE 250 company intends to pay investors an interim dividend of 1.5p a share, a 56 per cent drop on last year’s equivalent payout.
Labour Party chief sets house building targets
Demand for new-build and refurbishment homes in Britain has been held back over the past two years by high mortgage rates and cost-of-living pressures.
It has also been plagued in the long term by strict planning rules that make it difficult to build large-scale housing developments.
The new Labour government has promised to build 1.5 million new properties over five years, through planning reform and development on lower-quality “grey belt” land.
Just 212,570 new homes were built across England in the 12 months to March 2023, well short of the previous government’s target of delivering 300,000 homes a 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 demand in the medium term.
‘The fundamental factors underpinning demand in our markets are firmly in place and our outlook remains robust, supported by our strong balance sheet.’
However, the company expects 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 starting to improve, it is very early days and their impact on the current financial year is likely to be limited.”
Ibstock shares rose 5.1 per cent to 181 pence on Wednesday morning, making them the second-best performers in the FTSE 250 and taking their gains since the start of the year to 21 per cent.
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