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Building
Opportunity
Annual Report & Accounts 2015
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At a glance
Ibstock plc is a leading manufacturer of clay
bricks and concrete products with operations
in the United Kingdom (UK) and the United States
(US). Our principal products are clay bricks,
brick components, concrete roof tiles, concrete
stone masonry substitutes, concrete fencing,
pre-stressed concrete products and concrete
rail products. Our range of products are
manufactured, marketed and distributed by
Ibstock Brick, Supreme Concrete, and Forticrete
in the UK, and Glen-Gery in the US.
Financial Highlights
Statutory reported revenue
Adjusted revenue1
£358m
£413m
Statutory reported profit after taxation
Adjusted EBITDA1&2
£102m
£107m
Statutory EPS
35.2p
Net debt
£145m
Dividend per share
4.4p
1
2
Adjusted measures are the full 12-month trading
results set out in Note 24 to the financial statements
and reconciled to our statutory results on page 39.
Adjusted EBITDA is the 12-month earnings before
interest, taxation, depreciation and amortisation
after adjusting for exceptional items.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Our five key strengths
1. Market leader
Our market-leading businesses will enable
us to benefit from the expected growth
in demand in the UK and our regional
markets within the US.
• 40% of UK market share based
on volume of bricks sold in 2014
(excluding imports).
2. Scale
We have 28 clay and 15 concrete plants
throughout the UK and US manufacturing
over 500 varieties of bricks coupled
with ownership of valuable long-term
clay reserves.
• 43 manufacturing sites; 33 UK sites and
10 US sites.
• Over 150 million tonnes of clay reserves.
• Realisable production capacity of
1.2 billion bricks per annum.
3. Long-standing customer
relationships
Many of our long-standing customer
relationships have lasted over 40 years.
Our customer focus is based on quality,
service and consistency and our service-
led ethos is one of the key drivers in the
growth in our market share in bricks over
the past 10 years.
4. Growing capacity
In the UK, demand for building products is
anticipated to increase due to Government
support for new house-building, increasing
household formations and population
growth. We are investing in the latest
technology to increase capacity and to
meet the growing market demands.
• Ibstock Brick’s Chesterton plant was
built in 2013 to consolidate production
from two previous sites and increased
site capacity by approximately 67%
per annum.
• The new Leicester plant, due to be
commissioned in the second half of
2017, is expected to add capacity of
100 million bricks per annum.
5. Highly experienced
management team
Our management team has extensive
experience in the building products
market and our CEO and CFO have
combined experience of nearly 50 years
at Ibstock.
Where we operate
United Kingdom
North America
Manufacturing plants
Speciality brick
assembly sites
Manufacturing
plants
Brick centres
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Our five key strengths
Our brands
*
*
* Anderton is a brand of Supreme Concrete and Ibstock Kevington is a brand of Ibstock Brick.
Key figures
Split of revenue
Group revenue by end market
Ibstock
Supreme
Forticrete
Glen-Gery
61%
12%
8%
19%
Builders’ merchants 53%
28%
House builders
17%
Factors
2%
Other
Capital expenditure
£13.1m
Many key customer relationships exceed
Number of employees
40yrs
2,695
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XXIXXIWhat we doFaststack Chimney™ Ibstock KevingtonConcrete roof tilesForticreteRoofing accessoriesForticreteReconstructed stone wallingForticreteGlen-GerySupremeClay bricksIbstockGlen-GeryClay pavingIbstockGlen-GeryCopingsForticreteArchesIbstock KevingtonGlen-GeryConcretelintelsSupremeCast Stone Heads, Sills and QuoinsForticreteFlooring T-Beams SupremeInspectionchambersSupremeConcretefencing products SupremeRetaining wallsAndertonBrick engravingIbstock Kevington IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
1
With nearly 200 years’
experience we have the scale,
capability and ambition to
meet the growing demands of
our market. Together with our
imagination, knowledge and
insight, we make the most of
where the market is heading;
not just reacting to it but
innovating to deliver market-
leading end-to-end solutions.
In short we are continually
building opportunity.
Governance
42 Board of Directors
44
Corporate Governance
Statement
52 Nomination Committee Report
53 Audit Committee Report
56 Directors’ Remuneration Report
79 Directors’ Report
Contents
Strategic Report
Overview
IFC Financial highlights
IFC Overview of our business
10 Chairman’s Statement
12
Q&A with Wayne Sheppard, CEO
Strategy & Performance
16 Our markets
18 Our business model
22 Our strategy
24 Key Performance Indicators
26 Key resources and relationships
30 Risk management
36 How we have performed
38 Chief Financial Officer’s Report
Financial statements
81
86
87
Independent Auditor’s Report
Consolidated income statement
Consolidated statement of
comprehensive income
88 Consolidated balance sheet
Consolidated statement of
89
changes in equity
Consolidated cash flow
statement
Notes to the financial statements
91
124 Company balance sheet
125 Statement of changes in equity
125 Cash flow statement
126
Notes to the Company
financial statements
90
Other information
132 Additional information
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Opportunity
Manufacturing sites
43
With manufacturing
sites across the UK and
US, we are well placed
to meet market demand.
Further reading
qStrategy
Page 22
qRisk
Page 30
qPerformance
Page 36
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The Group’s products are widely
used in new house building.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Technology
New technology at Chesterton allows
+80m
Brick capacity – as we
invested £22m in the
latest technology
allowing us to increase
output and efficiency.
Further reading
qStrategy
Page 22
qRisk
Page 30
qPerformance
Page 36
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OVERVIEW
IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
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Advanced robots are used at Ibstock’s
brick factory at Chesterton.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Innovation
Spend on the Gemini tile line factory
£18m
Investment in innovation
allows us to develop
our product range and
maintain our market
leadership position.
Further reading
qStrategy
Page 22
qRisk
Page 30
qPerformance
Page 36
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OVERVIEW
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Manufacturing Forticrete’s Queen’s
Award winning Gemini roof tiles at
Leighton Buzzard.
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8
IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Resource
Tonnes of clay reserves
150m+
The Group has in excess
of 150 million tonnes of
clay reserves.
Further reading
qStrategy
Page 22
qRisk
Page 30
qPerformance
Page 36
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Extensive clay reserves at Ibstock.
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10
Chairman’s
Statement
The Ibstock plc
Group is a family
of building
products brands,
and a leading
manufacturer of a
diversified range of
clay and concrete
products.
This is our first Annual Report as a public
company and I am delighted to welcome
you as a shareholder.
2015 was an eventful year for the Group.
In February, Ibstock Group businesses
comprising Forticrete, Supreme, Ibstock
Brick and Glen-Gery were acquired by
Bain Capital and left the CRH plc group.
Then, in October 2015, the Group
completed a successful listing on the
London Stock Exchange, marking its
return to the public markets. I joined the
Ibstock Board in September 2015 at
what was, and continues to be, an
exciting time for the Ibstock Group.
The Group is a family of brands of building
products with a diversified range of clay
and concrete products. We are a leading
manufacturer of clay bricks and concrete
products with operations in both the UK
and the US.
The market and our strategy
The macroeconomic environment,
and specifically demand for new homes,
has a significant influence on the Group’s
performance. Housing market fundamentals
in both of our key geographies today are
positive, and I believe the Group is well
positioned to benefit from the continuing
demand for new housing.
The Group’s strategy of growth through
investment and product innovation,
together with expansion of its existing
product portfolios, has been at the heart of
its success over many years. This approach
continues today with a significant new brick
plant under construction in Leicestershire
and a new roof tile manufacturing plant
being built at Leighton Buzzard.
Our strategy is discussed in more detail
on pages 22 and 23.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 11
Our history
Ibstock plc is headquartered in the village
of Ibstock in the East Midlands of England,
where its predecessor entity, Ibstock
Collieries Ltd, was founded nearly 200
years ago. Each of the Group’s companies
are long-established businesses; in
addition to Ibstock Brick, Glen-Gery has
been operating since 1890, Forticrete since
the late 1920s and Supreme since 1979.
Ibstock was first listed on the London
Stock Exchange in 1963. It acquired
Glen-Gery in the US in 1979 and the
UK brick operations were expanded by
acquiring Tarmac Bricks in 1995, Redland
Bricks in 1996 and Hepworth Brick in
1999. Ibstock also acquired certain
concrete operations in the 1990s.
In 1999, CRH plc acquired Ibstock. Under
CRH’s ownership, the management of
Ibstock diversified the clay operations of
CRH in Great Britain with the acquisition of
Kevington Building Products Ltd in 2001 and
Manchester Brick in 2005. The management
of Ibstock also expanded CRH’s concrete
products operations in Great Britain with the
acquisition of Supreme Concrete Ltd and
Anderton Concrete Products Ltd in 2006
and 2007, respectively.
In February 2015, Bain Capital acquired
Ibstock and its subsidiaries from CRH.
Ibstock re-joined the public markets when
it listed on the London Stock Exchange in
October 2015.
Our results
The Group’s results for the period were in
line with expectations set at the time of the
IPO in October 2015. As discussed in more
detail in the CFO’s report, the statutory
results for the Group cover the period from
November 2014 to the end of 2015 and
include only 10 months’ trading results from
the operating businesses. Consequently,
to give shareholders a more representative
understanding of the Group’s underlying
performance we are also presenting our
adjusted results for the 2015 and 2014
calendar years, so that a clearer picture
of our business can be seen on a full
12-month basis with comparatives.
Reported statutory revenue was
£358,331,000 and the statutory profit after
taxation for the period was £101,574,000,
with EPS of 35.2p. Our adjusted results
for the 12-month period saw revenue of
£413,828,000 and adjusted EBITDA of
£107,014,000.
We have proposed a final dividend of 4.4p
per share, which is in line with our dividend
policy of distributing 40 to 50% of our
adjusted profit after tax over a business cycle.
Board and corporate governance
Our business is run by an extremely
experienced management team – Wayne
Sheppard, Chief Executive Officer and
Kevin Sims, Chief Financial Officer, have a
combined experience of nearly 50 years
with the Group and more within the
Building Products market. Becoming a
listed business has necessitated some
changes in the way we work, the formation
of the plc Board with strong independent
Directors being central to these changes.
As Chairman, one of my prime
responsibilities is setting and maintaining
the appropriate Corporate Governance
framework and ensuring the business puts
a qualified group of Non-Executive Directors
together to support this. I am delighted to
have had three such Directors bring their
experience to the Board to date.
Jonathan Nicholls, our Senior Independent
Director, brings over 17 years of experience
at senior management or director level of
businesses, including those in brick
manufacturing, roofing and construction,
and property development. He is a
chartered accountant and now serves as
our Audit Committee Chairman. Jonathan’s
experience within the sector and financial
background will be of great value to us.
Michel Plantevin and Matthias Boyer
Chammard both joined the Group in
February 2015 after Bain Capital acquired
the Ibstock group of businesses. Michel
serves as managing director of Bain Capital
Europe LLC, a role he has held for over
12 years, and Matthias currently serves as a
Principal of Bain Capital Europe LLC, a role
he has held for over four years. Both bring
great experience as Non-Executive Directors
to a range of companies, which will continue
to bring insight and support to the Group as
we grow as a public company.
I am grateful to Jonathan, Michel and
Matthias for their invaluable help and
support in the process that led to our listing
in October 2015. We are now tackling the
governance requirements of moving from
private equity ownership to being a Group
within the public environment. This is
discussed in more detail in our Corporate
Governance Statement on pages 44 to 50.
In February this year, we appointed
Tracey Graham and Lynn Minella to the
Board. Both have joined the Board’s
Remuneration Committee, Audit
Committee and Nomination Committee,
and Lynn has become Chair of the
Remuneration Committee. I am delighted
to welcome Tracey and Lynn to the Board.
Together they bring a wealth of experience
that will be of great benefit to Ibstock as
we continue to develop our business.
The performance of the business, and
our success, is down to the hard work
of all of our employees across the Group.
I wish to thank all of our colleagues for
their excellent work over this period.
Outlook
As is usual at this early point in the new
financial year, we have limited forward
visibility ahead of the important Spring
trading period but at this point, our full
year expectations are unchanged.
In the UK, brick sales into the UK new
build residential market, and most all
other sectors including non-residential
and infrastructure, are growing to
expectation. Sales via distributors’ yards,
which mainly flow into the RMI market,
are being impacted by some destocking.
However, we anticipate that this situation
will improve as we progress into the
Spring. The overall effect is that the UK
clay business has made a slower start
to the year than expected. Both our UK
concrete and US brick businesses
have made a good start to 2016.
Market fundamentals remain positive in
both the UK and US, with demand for
new housing remaining robust. In the UK,
the Construction Products Association
is forecasting further growth in both the
residential and RMI markets in 2016
and we are planning for another year
of progress.
Jamie Pike
Non-Executive Chairman
10 March 2016
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015OVERVIEWOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 12
Q&A with
Wayne Sheppard,
CEO
I am excited by
the increased
opportunity we now
have to develop
Ibstock, working
with the incredibly
committed teams
that we have in
the businesses.
Q. What are Ibstock’s key strengths?
A. One of Ibstock’s most important strengths
is its people. We have committed and loyal
teams in all of our businesses who tend to
develop long term careers with us. Our
strong market leading positions and focus
on quality and customer service are
fundamental to the success of the
business. We have well invested factories
and depots strategically located to serve
their respective markets and our clay
businesses have access to long term clay
reserves. We work hard to innovate both in
products and customer service and we
employ the latest technology in our
production and sales operations. These
strengths support the growing market
share we have in all our key markets.
Q. What is your value proposition
and can you describe your
typical customer?
A. Potential customers should choose
Ibstock Group companies because
our current customers tell us, through
our extensive independent surveys and
also face to face, that they choose us
because we have the best product range
and we are the easiest supplier (in our
scope of supply) to do business with.
I can’t really describe a typical customer
because it depends on whom you
consider to be the customer. We see the
initial specifier as a customer as well as
each element of the construction process
covering perhaps: main contractor,
sub-contractor, builders’ merchant,
client and so on. So our customer could
be a self-builder wanting assistance with
brick matching via his chosen merchant
or architect, through to major listed
house builders, builders’ merchants or
organisations such as Network Rail.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
13
Q. What excites you most about the
business as you move forward?
A. I am excited by the increased opportunity
we now have to develop Ibstock, working
with the incredibly committed teams that
we have in the businesses. Ibstock is
a legacy business with a near 200-year
history and it is a privilege to steward
it for a period before passing on the
Company in an improved position to the
next generation. This is why succession
planning is such an important area to me.
Q. What will Ibstock look like in
five years’ time?
A. Ibstock will continue to be regarded as
a highly customer driven business but
with an improved asset base in the UK
following the investments being made in
both clay and concrete and potentially
with a broader product portfolio through
acquisition. In the US, I have a similar view.
Q. What do you see as the key benefits
of the significant capital investment
that has been made?
A. Ibstock’s investment at Leicester
provides 100 million bricks per year of
additional capacity into a market with
strong growth fundamentals. It will be
the newest and most efficient factory
in Europe. The factory has been
designed to be the most cost efficient
and flexible stock brick facility in the
Ibstock portfolio. Along with previous
investments this project ensures that
Ibstock continues to maintain an
industry-leading factory portfolio. Our
investment in Forticrete is particularly
exciting as it will add yet another
innovative product to the roof tile
range. Forticrete has a strong history
of innovation and this new product
will continue that tradition.
Q. What are the key risks to your
growth plans?
A. The strength of underlying demand
in the UK and US new home markets
is key. With supportive demand
fundamentals in all our businesses
and, in particular, strong Government
support for new build housing in the UK,
the outlook looks encouraging. Clearly
anything impacting on homebuyer and,
for RMI markets, home owner sentiment
would be a concern.
Q. How have the competitive
environment and your market
share evolved?
A. Our markets have always been highly
competitive and will continue to be so.
New customer and technical or
regulatory challenges impacting the
competitive environment are always
present which we take in our stride –
BIM (Building Information Modelling)
capability would be an example. All our
businesses maintain strong and growing
market share positions. This is driven by
offering the best value proposition, that
is, cost with due consideration for the
value of the service, product support
and consistency provided throughout
the specification to the project
completion process.
Q. What pleased you most about this
year’s (2015) results?
I think it is important to mention that we
believe in maintaining the strong brands
within the Group and Glen-Gery with
its 125-year history will always trade as
Glen-Gery under Ibstock plc ownership.
Q. How does the strategy influence
day to day management and
priorities of the different operating
companies within Ibstock?
A. Our focus on customer service influences
the way we manage the business. For
example, the production planning team in
the UK brick company report to the Sales
Director. Our desire to service the customer
impacts all aspects of the business
including innovation and obviously our
investment in information technology,
a good example of this being our sales
teams managing much of their customer
exchange live with smart technology.
A. I was pleased that we achieved strong
Q. What are your plans for
sales growth in both the UK and US and
that all businesses performed to plan.
The pricing strength in Glen-Gery was
particularly pleasing as was the above
target cash performance and thus lower
year end debt position for the Group.
Q. What could you have done better?
A. Considering all the work necessary to
manage a successful IPO process I am
particularly pleased that we did not lose
our focus on delivering strong 2015 results.
Clearly one can always do better but
there is nothing in the 2015 performance
that did not meet our expectations.
acquisitions?
A. We continue to look for enhancing
acquisitions that will add to the UK
product portfolio and strengthen our
footprint in the US. We have worked
hard to deliver current levels of
performance so our performance
hurdles are set high. We are thus
looking for quality businesses with
good growth prospects or businesses
offering significant synergies and ideally
both. We will be taking a disciplined
approach, testing returns available
from acquisitions against enhanced
cash returns for shareholders.
Q. What difference has the IPO made
Q. How does sustainability fit into
to your business?
A. The IPO has been very motivating for
the management teams and all of our
employees. This is largely because after
a considerable period of uncertainty over
the potential disposal of the Group under
its previous public company ownership,
we are now able to invest for growth. With
supportive market fundamentals in all our
geographies and development projects
underway in both clay and concrete there
is a feeling of excitement in the business.
Our enthusiasm is shared by the investors
we meet and it is always a pleasure to
talk to people interested in our business,
we are very proud of it!
Q. How will you integrate the UK and
US businesses?
A. Glen-Gery was part of the original
Ibstock plc before separation under
CRH ownership. In view of this shared
history, cultures are similar and a strong
architectural bias is evident in both
businesses. The Glen-Gery team are
delighted to be back with Ibstock since
the start of 2015 following separation
in 1999. We are already sharing best
practice in Marketing, Technical,
Procurement and Engineering. We wish
to ensure that our people see that
careers can once again develop across
the UK and US as they did in the past.
your strategy?
A. Sustainability is very important
to Ibstock. We have employed a
sustainability manager since 1995
and issued annual sustainability
reports since 1999; the first in our
industry to do so. Our UK businesses
are accredited to ISO 14001, the
Environmental Management standard,
with the exception of our specials
business which will be accredited
by the end of the year. Ibstock and
Forticrete have also achieved ISO 6001
Responsible Sourcing compliance.
All our UK businesses are compliant
with the Energy Management Standard
ISO 50001 or the Energy Savings
Opportunity Scheme (“ESOS”). In
addition to this we continue to invest in
energy efficiency, CO2 reduction, we
generate electricity from landfill gas and
recycle raw materials such as process
water to minimise waste and cost.
Q. What should we expect from
Ibstock in the next 12 months?
A. We will be focusing strongly on our
markets and customer service as
usual. We will be managing the major
investment projects we have underway
in UK concrete and clay; our main
office site at Ibstock is now a major
construction site! We anticipate another
year of progress in all our businesses.
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STRATEGY & PERFORMANCE
IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
15
The power
to realise
potential
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qOur markets
Page 16
qOur business model
Page 18
qOur strategy
Page 22
q How our KPIs help us
maintain strategic focus
Page 24
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q Key resources
and relationships
Page 26
q How we manage
our risks
Page 30
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The new brick factory under
construction at Ibstock.
IBSTOCK_05_Strategy_Divider_DRF2.indd 15
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16
Our markets
Clay and concrete
building products are
integral components
to construction activity,
particularly housing
construction.
Demand for clay and concrete products
is directly affected by developments in the
construction markets in which we operate,
as well as the general level of construction
activity. Several macroeconomic factors
influence the levels and growth of
construction activity, including demographic
trends, the state of the housing market,
mortgage availability, mortgage interest
rates, and changes in household income,
inflation and Government policy.
United Kingdom
Total Great Britain construction output
is estimated at £132 billion in 2015
(a 3.9% increase compared to 2014).
The Construction Products Association
forecasts Great Britain construction
output growth of 3.6% in 2016 as activity
is expected to rise across the key
construction sectors of private housing,
infrastructure and commercial.
Great Britain construction output
£bn
2015E
2014
2013
2012
2011
2010
2009
2008
2007
131.6
126.7
117.9
116.0
125.5
122.8
113.1
130.1
133.5
Source: Construction Products Association and
Office of National Statistics.
United Kingdom housing construction,
recent trends and developments
The UK housing market has been structurally
undersupplied for a number of years, with
housing starts below household formations.
The UK Government commissioned the
Barker Review in 2003 which suggested
the shortage of housing in the UK at that
time was approximately 450,000 houses.
The financial crisis of 2007/2008 had a
direct impact on housing starts due to the
significant decline in construction activity.
During the period from 2008 to 2014,
Department for Communities and Local
Government (“DCLG”) information regarding
household formations compared to DCLG
information on housing starts indicated that
there were approximately 550,000 more
household formations during that time as
opposed to housing starts, suggesting that
the housing shortage had increased by that
amount by 2014 and implying a total housing
shortage at the end of 2014 of approximately
1,000,000 houses.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Annual housing starts are forecast to
increase by c10% to 177,659 by 2018.
Over the same period, the UK Government
estimates of household formations in Great
Britain are on average 254,000 new houses
per annum, continuing the structural trend
of a shortage of housing.
UK Repairs, Maintenance and
Improvement (“RMI”) market,
trends and developments
Total private residential RMI output in
Great Britain in 2015 was approximately
£17.0 billion and is forecast to increase to
£18.6 billion by 2018 (Source: Construction
Products Association). Historically, the RMI
market has been more stable than housing
starts. RMI remains primarily driven by
gross domestic product, employment,
consumer confidence and the level of
housing transactions (with individuals
renovating homes prior to a sale, or
modifying them after purchase). Current
underbuilding supports the RMI market.
United States
The Company’s primary markets in the
US are the North East and Mid West.
Housing starts in Glen-Gery’s primary
markets fell sharply (approximately 68%)
from a peak in 2005 through to 2009.
Residential starts then increased from
approximately 99,000 and 94,000 in the
North East and Mid West, respectively,
in 2009, to approximately 178,000 and
158,000 in the North East and Mid West,
respectively, in 2014, with support from
improvements in the economy and growth
in employment. Between 2015 and 2017
both the North East region and the
Mid West region are forecast to show
recovering housing volumes with growth
in Glen-Gery’s primary markets broadly
comparable to national US housing starts.
17
Key facts
Great Britain housing starts
000s of starts
240
220
200
180
160
140
120
100
2007
2008
2009
2010
2011
2012
2013
2014 2015E 2016F 2017F 2018P
Source: DCLG, Construction Products Association.
Housing starts in the Company’s primary markets in the United States
000s of starts
700
600
500
400
300
200
100
2005
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F
North East
Mid West
Total
Source: Dodge Data and analytics.
North East states: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut,
New York, New Jersey, Pennsylvania, Delaware, Maryland, District of Columbia, Virginia, West Virginia.
Mid West states: Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, North Dakota,
South Dakota, Nebraska, Kansas.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
18
Our business
model
The Group has a
strategic operational
footprint across its
UK and US markets.
Explanation of business model
The Group is a leading manufacturer
of building products with a diversified
range of clay and concrete products,
and operations in the UK and the US.
Its principal products are clay bricks,
brick components, concrete roof tiles,
concrete stone masonry substitutes,
concrete fencing, pre-stressed concrete
products and concrete products for the
rail industry.
The Group trades through operating
companies that have leading positions in
their product segments and have specific
manufacturing process skills and technical
and commercial know-how in those product
areas. The operating companies are strong
brand names in their respective areas of
operation and their commercial structures
and policies reflect the requirements of
their individual customer bases.
The operating companies are underpinned
by a Group structure that sets common
values and compliance standards and
provides financial and strategic support.
The Group’s management team has
extensive experience in the building
products market. The Group’s CEO
Wayne Sheppard and CFO Kevin Sims
have a combined experience of nearly
50 years at Ibstock and are supported
by a committed and highly experienced
senior management team. The current
management team has been instrumental
in significantly expanding the Group’s
market leadership positions over the
last decade.
Brief description of the inputs
Manufacturing facilities
The Group has a strategic operational
footprint across its UK and US markets.
Its main manufacturing locations consist of
33 manufacturing plants and six speciality
brick assembly sites in the UK and 10
manufacturing plants and 10 resale
centres in the US. The Group’s clay brick
manufacturing plants are located near
strategic raw material reserves.
The Group’s concrete manufacturing
plants providing fencing, structural
elements, rail products and building
products under the Supreme brand are
geographically distributed around the
UK creating a national plant network with
scalable production capacity. The Group’s
concrete masonry products, alternative
cladding products to natural stone
marketed under the Forticrete brand,
are manufactured across the UK at
plants located near areas where stone
has historically been used for building.
Similarly, the Group selected a plant
in Leighton Buzzard, a location in the
South East of England which is well
located to serve the active South East
building market in the UK, to produce its
concrete roof tiles. Within the UK and the
US, plants are also strategically located
close to main transportation links to
facilitate distribution.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Our business model
OUR
BRANDS
Ibstock Brick
Bricks
Glen-Gery
Bricks
Ibstock Kevington
Bricks, Prefabricated systems
Supreme
Precast concrete components
Forticrete
Concrete, Walling & Cast Stone
Anderton
Concrete, Walling & Cast Stone
INPUTS
• Know-how
• People
• Plants and factories
• Long-term
relationships
HOW WE
CREATE VALUE
Extraction
+
Procurement
+
Product design
+
Manufacturing process
HAND
CRAFT
MASS
PRODUCED
+
Technical support
+
Customer service
+
Distribution
19
OUTPUTS
• Shareholders
• Employees
• Customers
• Communities
Underpinned by:
Quality assurance (ISO) Health and Safety
Our values Sustainability
see pages 26-29
Raw materials and inputs
The raw materials required to produce the
Group’s clay and concrete products are
specific to each product and segment. The
primary material used by the Group in the
production of its products is clay. This clay
and shale is sourced from clay quarries that
the Group operates on land that it owns or
leases under long-term agreements in the
vicinity of its brick manufacturing plants in
the UK and US. The Group’s clay products
utilise fuel and power as a key part of their
manufacturing processes to dry and fire
the brick clays.
For the Group’s concrete products, the main
raw materials consist of cement, sand and
aggregates. Due to the bulky nature of these
materials and the corresponding high
transportation costs involved, the Group
tends to source materials from suppliers local
to each manufacturing facility but cement is
interchangeable between suppliers in most
circumstances, if necessary. Most of these
raw materials (as well as water, which is
another key input for the manufacturing
of both clay and concrete products) are
widely available commodities.
Clay reserves and resources
In the UK, the operation of quarries
requires planning permission. Permission
is granted in respect of a specific quarry
design, providing an allowable volume of
material which may be extracted over a
set period of time. Therefore, once the
authorised amount of material has been
extracted or the period of the permission
has expired, it is necessary to apply for
a renewal or extension of the planning
permission. The Group holds planning
permissions over portions of its clay
deposits and categorises its clay
deposits substantially on the basis
of whether or not it holds planning
permission for extraction of the clay.
Within the US, all quarry locations that
Glen-Gery leases or owns are zoned
for mineral extraction/mining. As such,
Glen-Gery has the legal right to extract
clay and shale with no time limit for a
quarry it owns and for the length of
the lease for leased quarry.
Technical support
The Group offers technical support to its
customers to assist in the use of its products
in design and application. Support is
provided by in-house technical design teams
utilising Computer-Aided Design (“CAD”)
where appropriate and by technical sales
teams, including in-house designers.
Distribution and logistics
The Group’s products are manufactured
and distributed through a network of 43
main manufacturing locations in the UK and
the US. Due to the strategic locations of the
Group’s manufacturing plants, the Group’s
brick products in the UK travel an average
of approximately 65 miles from the
manufacturing plant to the customer.
In addition, in the US, the Group operates
a network of 10 resale centres across its
primary markets. These resale centres
enhance access to customers in
markets with poor distributor coverage
and significantly increases the distribution
capabilities of the Group’s operations in
the US through these inclusive one stop
shop solutions for masonry products.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
20
Our business model
continued
Intellectual property
As at 31 December 2015, the Group
owned over 100 trademarks worldwide.
These trademarks primarily relate to the
Group’s seven main brand names and
logos as well as certain other trademarks.
The Group’s most important trademarks
are Ibstock Building Products, Ibstock,
Glen-Gery, Supreme, Forticrete, Kevington
and Anderton. In the UK, the Group’s
concrete products are sold under trade
names other than Ibstock, such as
Supreme and Anderton for the Group’s
concrete fencing, building and structural
elements and rail products, and Forticrete
for the Group’s concrete roof tiles,
architectural masonry products and
walling and cast stone. In the US, the
Group’s brick products are sold under
the trade name Glen-Gery.
Information technology
Within the UK, the Group uses a suite
of applications to manage reporting
requirements, client relationships and
sales analytics and reporting. In the US,
Glen-Gery has recently transitioned to
a Group ERP platform.
The Group also utilises information
technology systems in its manufacturing
plants. While the technology used by the
Group varies at different plants depending
on their age or time when last refurbished,
the Group believes that an appropriate
information technology infrastructure within
its manufacturing plants is important to
support its growth.
Employees
As at 31 December 2015, the Group had
over 2,600 full time equivalent employees.
In the UK, although the Group has no formal
collective bargaining agreements with any
union, there are legacy voluntary procedural
agreements in place with trade unions at
most of the Group’s manufacturing sites and
approximately 50% of the workforce in the
UK is covered by these agreements.
In the US, approximately 61% of
Group’s workforce is covered by collective
bargaining agreements. The Group has not
had any union-organised work stoppages
in the UK or US over the past ten years.
The Group believes that it has good
relationships with its employees and with
the unions representing its employees.
Brands and products
The Group’s four primary businesses are:
Ibstock Brick
The leading manufacturer by volume of
clay bricks sold (excluding imports) in the
UK. With 19 manufacturing plants and a
total realisable production capacity of
c780 million bricks per annum, Ibstock Brick
has the largest brick production capacity
based in the UK. Its network of 23 active
quarries are generally located close to its
manufacturing plants, which limits the
transportation costs of raw materials from
the quarries to the manufacturing plants.
Glen-Gery
A leading manufacturer, by despatches,
of brick in the North East and Mid West
regions of the US. Glen-Gery has a network
of 10 manufacturing plants, 10 resale centres
and 29 active quarries covered by 20 active
quarry permits in the US. Brick capacity is
c460 million bricks per annum.
Supreme
A leading UK manufacturer of concrete
fencing products and concrete lintels,
with seven manufacturing plants in the
UK. Supreme also manufactures general
precast products for the house building
and rail sectors.
Forticrete
A leading UK manufacturer of concrete
substitutes for natural stone walling and
dressings and niche concrete roof tiles,
with seven manufacturing plants in the UK.
Forticrete also manufactures concrete
architectural masonry walling blocks.
Process description at high level
Clay
The Group manufactures and sells a range
of clay products. While it has an extensive
range of clay products, the vast majority of
the Group’s clay revenue comes from the
sale of its wire cut and stock bricks which
are manufactured in two distinct production
processes. To make a wire cut brick
(also called an extruded brick), clay is
continuously extruded to a required size
and shape. The clay column is then cut by
wire into individual bricks and is dried or
loaded directly onto a kiln car and then
dried. The dried bricks are fired in a kiln.
The wire cut brick manufacturing process
is highly automated. Stock bricks are
manufactured by placing a mix of clay and
water into individual moulds to create the
brick shape, ejected from the mould and
then dried and fired in a kiln. Although
manufactured by modern machinery in
an automated process, stock bricks
retain the look of hand-moulded bricks.
These core products are complemented
by a number of innovative and specialised
products and components.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 21
Dividend policy
The Directors intend to adopt a dividend
policy based on a payout ratio of 40 to 50%
of adjusted profit after tax over a business
cycle. This dividend policy will reflect the
underlying earnings and growth of the
business and the cash conversion of the
Group. Assuming that there are sufficient
distributable reserves available at the time,
the Directors intend that the Company will
pay an interim dividend and a final dividend
in respect of each financial year in the
approximate proportions of one-third
and two-thirds, respectively, of the total
annual dividend.
Concrete
Supreme and Forticrete are the
Group’s principal concrete
manufacturing businesses.
Supreme offers a variety of precast
concrete fencing products which include
slotted posts, morticed and recessed
concrete posts, concrete posts for
chainlink or welded mesh and concrete
gravel boards or panels.
Fencing Products are “grey” concrete
products manufactured using a semi
dry or a wet cast manufacturing process.
Semi dry products are manufactured
with concrete discharged from a machine
hopper into a mould containing steel
reinforcement bars with high frequency
vibration used to compact the mixture and
then manually finished off to the required
quality standard. The products are
de-moulded using an instant de-mould
system by turning the moulds over and
allowing them to move free from the mould.
Due to the compaction of the material
through vibration, the products are free
standing. Freshly cast products are
transferred onto a curing rack where
they undertake a curing process. Cured
products are lifted from the curing pallets
using an automatic stacking system. In a
wet cast process, steel reinforcement bars
are placed into each mould and concrete
is discharged from the machine hopper
into the mould.
Forticrete manufactures concrete substitutes
for natural stone walling and dressings,
niche concrete roof tiles and concrete
architectural masonry walling blocks.
Concrete roof tiles are made from cement,
sand, admixtures, water and pigments.
These materials, with the exception of the
pigments, are deposited in a pan mixer
and blended. The mixture is conveyed to
a mechanical mixer for further blending,
adding the pigments and additional water.
From the mechanical mixer, the concrete
mix is extruded onto moving pallets and
then cut to form individual roof tiles. A
pre-cure coating is then added and the tiles
are placed in curing chambers. Post-curing,
the tiles are finished, coated and dried.
Value flowing to stakeholders
Customers
The Group sells its clay and concrete
products to a diverse group of customers
in the construction industry in the UK and
US. Builders’ merchants, housebuilders,
specialist brick distributors, and contractors
and installers are the four main customer
groups for the Group’s clay products in
the UK. In the US, clay products sold to
distributors constituted the majority of sales
for the year, with the remainder sold to
house builders, contractors and developers.
These customers are not always the same
as the individuals and organisations that are
making the buying decisions for the Group’s
products. In many cases, the preference
of the end customers dictates the choice
of product rather than the intermediary
that actually purchases the product from
the Group.
In the decision-making process for the
choice of clay and concrete products, the
Directors believe that the Group benefits
from the broad recognition of its brands,
its reputation for quality, aesthetics and
its focus on customer service.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 22
Our strategy
The Group’s aim is to
continue to develop
and invest in its market-
leading building products
businesses and to be its
customers’ partner of
choice by providing
consistent, high quality,
reliable and innovative
products.
With a constant focus on strong
customer service and value, we
evaluate opportunities to add
new complementary products
to broaden the Group’s portfolio.
The following are the key elements
of the Group’s strategy:
Strategic priority 1
Safety
Continuing to focus
on a safe working
environment that
has the development
of employees and
customer service
at its core
What we achieved in 2015
The Group continues to make Health and
Safety its number one priority. Lost Time
Accidents have been reduced significantly
over the past 10 years, recording 21 in
2015. The Group’s Health and Safety
performance compares favourably with
industry benchmarks.
Strategic priority 2
Invest
Maintain existing
capacity and invest
in new capacity to
optimise output and
take advantage
of structural
imbalances in the
Group’s markets
Strategic priority 3
Innovate
Penetrate markets
through innovative
products
Strategic priority 4
Evaluate
Evaluate
opportunities to
expand existing
product portfolio
either through
organic investments
or acquisitions
What we achieved in 2015
What we achieved in 2015
What we achieved in 2015
On 10 September 2015, the Group received
Further building on its track record of
The Group sees its development of
planning approval to build a new stock
bringing innovative products to the market,
component products, such as Faststack
brick manufacturing plant in Leicestershire.
the Group placed equipment orders for
Construction of the new plant is currently
a new concrete tile line at Forticrete, to
chimneys and pre-formed arches that
support the use of traditional building
underway and the new Ibstock plant is
produce an innovative large format design
products, as a means of maintaining its
expected to add capacity of approximately
– targeting approximately 55% of the new
products as an affordable and efficient
100 million bricks per annum (approximately
build concrete roof tiles market in the UK.
solution for on-site installers.
13% of the Group’s total annual UK realisable
brick capacity).
Our objectives for 2016
Employees are at the heart of the Group’s
business and the Group is committed
to providing continuous professional
development and training with the aim
of low turnover levels amongst its staff.
Our objectives for 2016
Our objectives for 2016
Our objectives for 2016
The investment at our Ravenhead factory
The new tile line is expected to be
The Group continues to develop its
in new packaging facilities is expected to
commissioned during the second half
existing range of components and will
be completed in the first half of 2016.
of 2016. The Group expects the launch
continue to assess opportunities to
of the new products from this line to lead
broaden its components portfolio.
The new Leicester plant is expected to be
the evolution of UK concrete tile design
commissioned in the second half of 2017.
towards more efficient products.
Relevant KPIs
q Lost Time Accidents
q Net promoter score
Relevant KPIs
Relevant KPIs
Relevant KPIs
q Return on capital employed
q Net promoter score
(once operational)
q Revenue
q Adjusted EBITDA
q Lost Time Accidents
q Net promoter score
q Return on capital employed
q Revenue
q Adjusted EBITDA
q Lost Time Accidents
q Cash flow before major projects
q Cash flow before major projects
q Net promoter score
q Return on capital employed
q Cash flow before major projects
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 23
Strategic priority 1
Safety
Continuing to focus
on a safe working
environment that
has the development
of employees and
customer service
at its core
What we achieved in 2015
The Group continues to make Health and
Safety its number one priority. Lost Time
Accidents have been reduced significantly
over the past 10 years, recording 21 in
2015. The Group’s Health and Safety
performance compares favourably with
industry benchmarks.
Strategic priority 2
Strategic priority 3
Strategic priority 4
Invest
Maintain existing
capacity and invest
in new capacity to
optimise output and
take advantage
of structural
imbalances in the
Group’s markets
What we achieved in 2015
On 10 September 2015, the Group received
planning approval to build a new stock
brick manufacturing plant in Leicestershire.
Construction of the new plant is currently
underway and the new Ibstock plant is
expected to add capacity of approximately
100 million bricks per annum (approximately
13% of the Group’s total annual UK realisable
brick capacity).
Innovate
Penetrate markets
through innovative
products
Evaluate
Evaluate
opportunities to
expand existing
product portfolio
either through
organic investments
or acquisitions
What we achieved in 2015
Further building on its track record of
bringing innovative products to the market,
the Group placed equipment orders for
a new concrete tile line at Forticrete, to
produce an innovative large format design
– targeting approximately 55% of the new
build concrete roof tiles market in the UK.
What we achieved in 2015
The Group sees its development of
component products, such as Faststack
chimneys and pre-formed arches that
support the use of traditional building
products, as a means of maintaining its
products as an affordable and efficient
solution for on-site installers.
Our objectives for 2016
Employees are at the heart of the Group’s
business and the Group is committed
to providing continuous professional
development and training with the aim
of low turnover levels amongst its staff.
Our objectives for 2016
The investment at our Ravenhead factory
in new packaging facilities is expected to
be completed in the first half of 2016.
The new Leicester plant is expected to be
commissioned in the second half of 2017.
Our objectives for 2016
The new tile line is expected to be
commissioned during the second half
of 2016. The Group expects the launch
of the new products from this line to lead
the evolution of UK concrete tile design
towards more efficient products.
Our objectives for 2016
The Group continues to develop its
existing range of components and will
continue to assess opportunities to
broaden its components portfolio.
Relevant KPIs
q Lost Time Accidents
q Net promoter score
Relevant KPIs
Relevant KPIs
Relevant KPIs
q Return on capital employed
(once operational)
q Revenue
q Adjusted EBITDA
q Cash flow before major projects
q Lost Time Accidents
q Net promoter score
q Net promoter score
q Return on capital employed
q Revenue
q Adjusted EBITDA
q Cash flow before major projects
q Lost Time Accidents
q Net promoter score
q Return on capital employed
q Cash flow before major projects
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 24
IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Key Performance
Indicators
We work hard to turn
our strategic objectives
into measurable
performance, using
individual key
performance indicators
to measure our progress.
IBSTOCK_09_KPIs_DRF2.indd 24
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25
Revenue
(2015 – 12 months)
Adjusted
EBITDA
(2015 – 12 months)
Cash flow before
major projects
(2015 – 12 months)
Net promoter
score®1
£413m £107m £92m 44
What is it?
Revenue represents the value
for the sale of our building
products, exclusive of local
sales tax and trade discounts.
What is it?
Represents profit before
interest, taxation, depreciation
and amortisation after adjusting
for exceptional items.
What is it?
Represents the net cash flow
after adjusting for capital
expenditure on major projects.
What is it?
As part of our annual satisfaction
survey, customers are asked how
likely they are to recommend the
Group to friends or colleagues.
Responses are between zero
(unlikely) and 10 (very likely).
The net promoter score (NPS®)
is derived from the proportion of
our customers scoring 9 and 10
less those scoring six or lower.
Why is it important?
Delivery of profitable revenue
growth is important to the
Group’s success.
Why is it important?
As with all businesses we
measure our financial success
by the profits we make.
Why is it important?
As part of our capital
management, we focus on the
cash available to the business
in order to achieve the Group’s
capital structure and allocation
objectives.
Why is it important?
There is a well-documented
correlation between high
customer loyalty and superior
long-term financial performance.
The NPS® is a means of
measuring this.
O
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W
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&
P
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A
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G
O
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Adjusted EPS
Return on capital
employed
(2015 – 12 months)
Net debt/
adjusted EBITDA
(2015 – 12 months)
Lost Time
Accidents
(2015 – 12 months)
16.2p 19.6% 1.35
21
What is it?
Basic earnings per share
adjusted for exceptional items,
amortisation and depreciation
of fair value uplifted assets.
What is it?
The ratio of profit before interest,
taxation, and amortisation after
adjusting for exceptional items
to net assets and debt.
What is it?
Net debt, comprising short
and long-term borrowings less
cash, over Adjusted EBITDA
(as defined above).
What is it?
The number of lost time
accidents (exceeding one day)
across our Group’s workforce
during the year.
Why is it important?
This helps us to ensure we
maintain a progressive dividend
policy and deliver annual
growth in return to our
shareholders.
Why is it important?
This reflects the returns available
for investment in the business,
and servicing of debt and equity.
This is also a measure for our
investors as to how well we are
using their money.
Why is it important?
This is a key measure of
balance sheet strength and
financial stability. It helps us
to ensure that our debt is
conservatively managed.
Why is it important?
Safety is a priority for Ibstock
plc and we constantly strive to
improve our performance. The
KPI helps us to provide a safe
workplace as a strong safety
culture is a key element to
our business strategy.
1 Net promoter, net promoter score and NPS are registered trademarks of
Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCE
26
Key resources
and relationships
Delivering continuous
improvement is the
core of our operations,
constantly looking for
more efficient ways
of doing things and
embracing technology
wherever possible.
Safe working environment
The Group employs over 2,600 people
across the UK and US and it is the
Group’s objective to provide a safe working
environment for all our employees and the
contractors at Ibstock sites. It is a strategic
priority to focus on safety in the workplace,
and Health and Safety is at the core of
our operations.
As a large employer in both the EU and
the US, the Group must comply with the
European Framework Directive on Safety
and Health at Work and Occupational
Safety and Health Act, respectively.
These guarantee minimum safety and
health requirements, and under such
laws and regulations, employers typically
must establish the conditions and the
management of work in a manner that
effectively prevents dangers to employees.
Interpretation of the legislative requirements
is further supported in the UK by Approved
Codes of Practice. These documents are
used to help define Group policies and
procedures for all employees. The Group
has training programmes in place to ensure
all employees are competent to carry out
their duties and an auditing protocol is in
place to ensure policies and procedures
are effective and adhered to. A dedicated
team of health and safety professionals
support the operational employees in all
aspects of Health and Safety management
and leadership.
The Board carefully monitors the Group’s
performance against our Lost Time
Accidents KPI, which has reduced this
measure over recent years.
Number of Lost Time Accidents by year
100
80
60
40
20
’06
’07
’08
’09
’10
’11
’12
’13
’14 ’15
Recognition and development
Our people lie at the heart of the Group’s
operations and as such we are committed
to developing an environment where
every employee can thrive and give
their very best each and every day.
Our continual investment in their training
and development contributes to a highly
engaged workforce with the skills and
experience necessary to deliver the
Group’s business objectives both now
and into the future. Delivering continuous
improvement is the core of our operations,
constantly looking for more efficient ways
of doing things and embracing technology
wherever possible.
IBSTOCK_10_Resources_and_Relationships_DRF2.indd 26
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Case study
Women in leadership
Karen Cuncliffe
Factory Manager, Chesterton UK
27
Key facts
Gender split across the Group
as at 31 December 2015
Directors
(of the Company)
Male 6
Female 0
Senior
Managers
Male 19
Female 2
All
employees
Male 2,337
Female 358
Equality and diversity
I have worked for Ibstock for 37 years,
starting my career in 1977 as a Laboratory
Assistant and then Lab Manager at the
Ravenhead factory near Skelmersdale.
I then had the opportunity to become a
Regional Technical Manager, covering a
number of factories before switching over
to the production side of the business.
I became Production Manager back at the
Ravenhead factory before moving over to
the nearby Roughdales factory as Factory
Manager in 2005.
The opportunity arose to become the
Factory Manager at Chesterton and to
oversee its redevelopment as one of
the world’s most efficient brickworks
and, at the time, Ibstock’s single biggest
investment in new plant for a decade.
Ibstock has provided both a challenging
and supportive environment to work and
develop in. There is a very supportive
culture driven from the top down and as
a manager it is very rewarding to see my
people have and take opportunities to
develop and thrive.
Running a factory, especially one as
high-profile as Chesterton brings new
and varied challenges every day, not
least hosting some of the visitors to the
site such as Boris Johnson and Amber
Rudd! However, the whole team is
focused on moving the factory forward,
achieving new records for both quality
and output but most importantly
providing a safe working environment.
I am especially proud of our safety record
which currently stands at 1,465 days
without a lost time accident.
Equality and diversity
We are committed to promoting equal
opportunities in employment. All job
applicants, employees and other workers
(such as agency staff and consultants)
will be treated with dignity and respect
regardless of their age, disability, gender
reassignment, marital or civil partner
status, race, colour, nationality, ethnic
or national origin, religion or belief, sex
or sexual orientation. We believe that
by providing a harmonious working
environment all employees should be
able to maximise their potential and
contribute to our success.
Where an employee becomes disabled,
subsequent to joining the Group, all efforts
are made to enable that employee to
continue in their current job. However if,
due to the specific circumstances, it is
not possible for an employee to
continue in their current job, they will
be given suitable training for alternative
employment within the Group or
elsewhere.
We are committed to identifying and
eliminating discriminatory practices,
procedures and attitudes and we expect
all employees, officers, consultants,
contractors, casual workers and agency
workers to support our commitment
and assist in all possible ways to
prevent discrimination.
Subsequent to the period end date,
Lynn Minella and Tracey Graham were
appointed as Non-Executive Directors
of Ibstock plc, bringing our ratio of
female Directors to 25% as at the
date of this report.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 28
Key resources and relationships
continued
Case study
Apprenticeships
Thomas Brooke
Apprentice of the Year 2015
manufacturing business and was
excited to be accepted onto the
Ibstock apprenticeship programme
as a technical apprentice. Every day
has been different! Although only in
my second year I have already seen
many different aspects of the business
including helping to run the Quality
Assurance system at the Nostell
factory and now I am working as
part of the team on the new factory
at Ibstock.
The apprenticeship programme
is tailored to suit the needs of the
individual and I am currently studying
for a foundation degree course in clay
technology at Derby University as
well as working towards my Ibstock
Technical Workplace NVQ.
Apprenticeships
I joined the Ibstock apprentice scheme
in 2014. I had taken a degree in Sports
Science and was unsure about my
future career path and after a number
of jobs I decided to take some time out
to travel. On my return, I realised that
I would like to be involved in a
Apprenticeships
At some point in time all employees will retire
and over the last 20 years the Group has run
a highly successful apprentice programme.
Since 2012 we have enhanced this
programme through central co-ordination
and standardisation of the programme to
ensure all apprentices are trained to a
consistent standard, including specific sign
off within the organisation in addition to that
of the training provider. This focus ensures
that we mitigate the risk of an ageing
workforce and harness the skills and
experience of these people so that when
they retire their replacement is fully trained
and competent to take over their role.
Employee engagement
Customer satisfaction begins and ends
with the relationship they have with our
employees and delighting our customers
can only be delivered through highly
competent, engaged and diligent people.
Ibstock Brick, the largest operating
company within the Group has run
employee opinion surveys for the last
18 years. Consistently our response rates
have been in excess of 80% and allow us
to identify specific improvement areas
and formulate action plans to consistently
improve employee engagement. Following
our successful listing, the survey will be
comprehensively revised to ensure that we
fully capture the true drivers of employee
engagement and ensure that we continue
to deliver for our customers. The revised
survey will also be implemented across all
of the Group companies to ensure we are
measuring engagement consistently across
the Group and also facilitate comparison
across the entities within the Ibstock family.
A variety of methods are used to engage
with employees, including factory and
departmental briefings, and in-house
publications. The Group will use one or
more of these channels to brief employees
on the Group’s performance and the
financial and economic factors affecting
the Group’s performance. In particular,
the Group operates a Save As You Earn
(“SAYE”) share scheme, which is open to
eligible employees, where employees are
encouraged to save a fixed monthly sum
for a period of three years.
Anti-Bribery and Corruption policies
As the laws governing business dealings
become ever more complex we need to
ensure the judgements and decisions we
make are taken with both the knowledge
and application of the highest ethical
principles. In October 2015, we updated
and re-issued our Code of Business
Conduct and Anti-Bribery and Corruption
policies to continue to ensure that we
operate in an open, fair and honest manner
in all of our business dealings. We have
also implemented our Trade Associations
Policy to help support employees in their
dealings with fellow employees, customers,
suppliers, regulators and colleagues in
competing businesses. We believe that these
sound, ethical principles will help us to act at
all times with honesty and integrity, constantly
striving to operate in the best interests of our
business. This will help ensure that Ibstock
plc continues to maintain and enhance its
excellent reputation as a Group that everyone
can trust and wants to do business with.
The Group is aware of its obligations under
the Human Rights Act and seeks to act
accordingly in all aspects of its operations.
Engagement with our local
communities
The Group is proud of its long history of being
part of the local communities in which it
operates. Each of the companies within the
Ibstock family provides financial support, and
is actively engaged in, these communities.
This involvement ranges from financial
support for community projects to stakeholder
engagement relating to quarry extensions.
As part of the recent proposal to extend
the Group’s clay quarry at Dorket Head,
a number of public information days at the
local Community Centre were held and
also a number of information leaflets were
produced providing information regarding
the proposals. Nearly 90% of employees of
the Dorket Head factory live within ten miles
of the site and it is estimated that more than
£3.5 million per annum is spent in the local
community by the factory. Our other sites
have a similarly high level of employees
who live in the vicinity of their place of work.
Recently schoolchildren from three schools
in Ibstock helped plant 900 trees in the
grounds of the Leicester site as part of the
Group’s programme to build the new Ibstock
state-of-the-art brick factory. In January
2016, more than 280 pupils took part in the
tree planting exercise over a two-day period.
Activities such as this are one example of
the way in which the Group aims to engage
the local communities around its sites.
Environment
The Group recognises its responsibilities as
a manufacturer to reduce the environmental
impact of its activities. The Group is
committed to introducing environmental
management systems and each of our UK
businesses and is currently accredited, or
working towards accreditation with, ISO
14001 – the International Environmental
Management standard. In addition to this,
we continue to invest in energy efficiency,
IBSTOCK_10_Resources_and_Relationships_DRF2.indd 28
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 29
1. Local school children
2. The innovative Gemini
planting trees at
Ibstock
roof tile
3. Ibstock apprentices
undergoing training
1 – 2
Case study
Employee engagement
Craig Wright
Process Manager, Chesterton, UK
3
to run the special and bespoke brick
making unit at the Chesterton factory
before becoming the Process Manager
for the main plant.
I have always been impressed by the
depth of knowledge and expertise at
every level within the business as well
as the willingness to listen to new ideas
and involve people. For example, I was
heavily involved in the development of
the new Chesterton factory from its
initial design and development, through
the build and commissioning stages.
Being part of the team has been very
rewarding, especially now that the
Chesterton factory is in full production.
Engagement and involvement
My background is in refractory ceramics
and the heavy clay manufacturing
industries. I joined Ibstock in 2004
CO2 reduction, the generation of electricity
from landfill gas and the recycling of raw
materials such as process water to
minimise waste and cost.
Scope 1 and Scope 2 emissions data has
been collected from the majority of locations
operated or controlled by the Group, with
some estimations used for the US subsidiary
entity’s locations and immaterial UK
subsidiaries. UK Government conversion
factors and EUETS verified emissions have
been used. Emission sources falling outside
the Group’s operational control and other
Scope 3 emissions have not been collated
and reported.
The Group has used CO2 per tonne of
production as its intensity ratio as this is
the most appropriate and relevant factor
associated with our activities and should
provide an appropriate basis on which
to compare trends over time.
Greenhouse Gas Emission
figures 2015
Greenhouse Gas Emission
Source
Tonnes of
CO2e
Scope 1 – Combustion of fuel
and operation of facilities
Scope 2 – Electricity
Intensity Ratio: Tonnes of CO2e
per tonne of production
512,854
78,186
0.21
The results provided for Greenhouse
Gas Emissions are for the year ended
31 December 2015, which differs from
the statutory period of this Annual Report
& Accounts. The Directors believe that
provision of information for the 12 months
provides a clearer baseline for our reporting
in this area in future years. As this is our
first Annual reporting, no comparative
information is provided.
Innovation
Research and development
The Group continually seeks to improve
the quality of its existing products and
processes, as well as to introduce new
products through innovation and
investments in new technology. The
Group’s innovation efforts are primarily
pursued at each of the Group’s four
primary operating businesses.
Examples of innovative products developed
include: the Ibstock Brickshield insulation
product and the extended range of
Fireborn; Glen-Gery’s thintech brick
cladding system that uses a mounting
system for thin brick; Forticrete’s Gemini
tile and the new large format tile; and
Supreme’s anti-theft device added to
protect the cables secured within its rail
cable troughs and a lightweight cable
trough to ease manual handling.
Furthermore, at the Group level, innovation
is pursued through collaborative projects
among the businesses. Ibstock Brick
developed a clay rainscreen cladding. The
Group recognised the same product could
be used by Forticrete to produce a polished
concrete rainscreen as an alternative to the
clay rainscreen and developed this product
in the alternative material.
The Group has a strong track record of
award winning products, including:
• Brick Development Association (“BDA”)
Awards – Ibstock Brick has a 10-year
track record of award wins having been
in over 70 (more than half) of the award
winning categories and six of the
“supreme” award winners;
• Queen’s Award for Enterprise – awarded in
2001 for Forticrete’s Gemini roof tile, which
was also awarded Millennium Products
status by the Design Council; and
• Brick in Architecture Awards – Glen-Gery
has won numerous awards across a broad
range of categories in the last five years.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 30
Risk
management
The Directors have carried
out a robust assessment
of the principal risks
facing the Group –
including those that
would threaten its
business model, future
performance, solvency
or liquidity.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Risk arises from the operations of,
and strategic decisions taken by,
every business. Our approach to risk
management is not to eliminate risk entirely,
but rather provide the structural means
to identify, prioritise and manage the
risks involved in our activities.
The Board of Directors is ultimately
responsible for the Group’s risk
management process and internal control
systems. The Board has considered the
nature and extent of risks it is willing to
take in pursuit of the Group’s strategic
objectives. It has assessed the Group’s
risk appetite, which is set to balance
opportunities for business development
and growth in areas of potentially higher
risk, whilst maintaining our reputation
and high levels of customer satisfaction.
The Group’s risk management process
incorporates both top-down and
bottom-up elements to the identification,
evaluation and management of risks.
The Audit Committee supports the Board
in monitoring the risk exposures and is
responsible for reviewing the effectiveness
of our risk management and internal
control systems.
Risk matrices are maintained and reviewed
by each subsidiary entity within the Group.
These matrices are the result of input
and challenge undertaken by the senior
managers within the entity and the Group’s
Executive Directors. At a Group level, the
Board reviews these matrices and the
analysis of potential exposures which exist
within them. Risks are continually evaluated
using consistent measurement criteria.
Internal Audit supports the Audit Committee
in evaluating the design and operating
effectiveness of our risk strategies and
the internal controls implemented by
management.
31
The structure of our Group risk
management process is illustrated below:
As the Group’s component subsidiaries
formed part of the CRH plc Group for
several years prior to their disposal, they
fell under the Sarbanes Oxley regime of
internal control over financial reporting.
These processes and controls have been
maintained following the divestment from
CRH plc, and the Directors believe this
stands the new Group in good stead.
However, following the listing of the Group
in October 2015, the newly formed Audit
Committee requested a third party review
of the Group’s Internal Audit function and
the internal control processes. This
independent “health-check” of the Group’s
risk management is due to be completed
in the first half of 2016.
The Directors have carried out a robust
assessment of the principal risks facing the
Group – including those that would threaten
its business model, future performance,
solvency or liquidity.
Risk management framework
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Board
Ultimate responsibility
Group Management Team
Support for the Board
Audit Committee
Review effectiveness
Entity Management Committees
Prepare risk matrices
Operation level controls embedded across the Group
Day to day activities to identify and manage risk
O
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Internal
Audit
Independent
assurance
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OVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEIBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCE
32
Risk management
continued
Principal risks
1. Economic conditions
Description
The Group’s business could be materially impacted by changes
in the macroeconomic environment in the UK and the US.
Specifically, demand for the Group’s products is strongly correlated
with residential construction and renovation activities and non-
residential construction, together with the supply chain’s attitude
to stock levels, which are cyclical.
Mitigation
The Group analyses construction statistics for the past five years
and, using independent forecasts of construction statistics,
forecasts demand for the next five years with the aim of
anticipating market movements.
The Group has historically flexed capacity and its cost base where
possible during economic downturns to allow more of the Group’s
manufacturing plants to remain open and viable, maintaining
skills, development and training. The Group believes that this has
maintained employee morale and high levels of customer service
through the last economic downturn. It also allows the Group
to respond more rapidly to increases in demand and keep
customers satisfied.
The Group’s RMI and specification product ranges diversify
end-use exposure and provide greater resilience in light of
changing market demand in any of its end-use markets.
2. Government action and policy
Description
Mitigation
The Group has an exposure to both UK or US political
developments. Material reductions in Government spending
could have a material effect on demand for the Group’s products
– reducing sales and affecting the Group’s financial results.
The Group analyses construction statistics for the past five
years and, using independent forecasts of construction statistics,
forecasts demand for the next five years with the aim of
anticipating market movements.
The change in climate post 2015’s UK General Election and
Autumn Budget are favourable to housing, as well as recent
changes to developing Brown Field land and the 200,000
affordable homes the Government is targeting to be built by 2020.
These measures, in addition to the National Planning Policy
Framework (“NPPF”) and Help to Buy scheme, show the
Government’s current commitment to house building. However,
the Group recognises the risk which can result from political
changes or economic uncertainty.
RMI and new housing demands are, to a certain extent, counter-
cyclical to each other, providing some balance to the portfolio of
offerings for the Group.
3. Government regulation and standards relating to the manufacture and use of building products
Description
Mitigation
The Group’s production, manufacturing and distribution activities
are subject to health and safety risks.
The Group is subject to environmental, health and safety laws
and regulations and these may change. These laws and
regulations could cause the Group to make modifications to how
it manufactures and prices its products. They could also require
that the Group make significant capital investments or otherwise
increase its costs or could result in liabilities.
Failure of the Group to comply with the relevant regulations
could result in the Group being liable to fines or a suspension
of operations, which would impact the Group’s financial results.
The health and wellbeing of our employees is fundamental to
our business. We have stringent Health and Safety policies and
monitor compliance regularly.
We have also invested considerable resources in employee
training across our manufacturing processes. We have invested
heavily in safe systems and facilities to protect our employees.
The Group actively monitors for any legislative changes which
it may need to comply with.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 4. Customer relationships and reputation
Description
Mitigation
33
The Group receives a significant portion of its revenue from key
customers and the loss of any such customer could result in a
significant loss of revenue and cash flow. Further, the Group does
not have long-term contracts with its customers and the Group’s
revenue could be reduced if its customers switch some or all of
their business with the Group to other suppliers.
The Group has a service-led ethos with many top customer
relationships lasting over 40 years. The Group’s customer focus is
supported by a commitment to quality, service and consistency.
The Group’s sales and production teams are highly integrated to
ensure that production aligns with customers’ needs. Sales teams
receive in-depth technical training and are assisted by a design
support service team as well as targeted marketing materials to
assist with specification and selection.
All four of the Group’s primary businesses have their own sales
teams aligned by customer group and region in order to focus on
key decision-makers and customers. Key account management is
supervised at a senior level where long-term relationships benefit
from the continuity of senior management who have the ability to
liaise across the Group’s businesses.
The Group has a broad spread of customers and no single
customer comprised more than 10% of the total Group revenue.
5. Business disruption
Description
Mitigation
A material disruption at one of the Group’s manufacturing facilities
or quarries, or at one of the Group’s suppliers’ facilities, could
prevent the Group from meeting customer demand.
The Group has the ability to transfer some of its production
across its network of plants and is able to engage subcontractors
to reduce the impact of certain production disruptions.
The Group depends on efficient and uninterrupted operations of its
information and communication technology, and any disruption to
or interruptions in these operations could have a material adverse
effect on the Group’s operations and financial performance.
Additionally, the Group is exposed to the impact of unexpected
or prolonged periods of bad weather, which could adversely
affect construction activity and, as a result, demand for the
Group’s products.
In relation to supplier disruption or failure, further third party
suppliers have been identified who can maintain service in the
event of a disruption.
In relation to IT, a major incident action plan has been developed
and the Group maintains data backups and a comprehensive
disaster recovery plan.
Although weather conditions are completely beyond the Group’s
control, in both the UK and US in 2015 adverse weather did not
impact on trading in the context of the full year. Management
do not underestimate the potential impact that future prolonged
periods of bad weather could have. The Group’s wide
geographical spread allows it to manage its production facilities
to mitigate the impact of such disruption.
6. Recruitment and retention of key personnel
Description
Mitigation
The Group is dependent on qualified personnel in key positions
and employees having special technical knowledge and skills.
Any loss of such personnel without timely replacement could
significantly disrupt business operations.
We ensure that we recognise the changing labour markets,
and packages for key and senior staff remain competitive.
The Group believes that it is essential to protect and develop the
management team, where appropriate ensuring that the team is
structured in a way which best takes advantage of the available
skills and robustly identifies the team and structure for the future.
Extensive succession plans are in place, which is key to ensuring
a managed transfer of roles and responsibilities.
Apprenticeship schemes are in operation with a yearly intake
across the business (engineering and technical based). High
potential individuals are identified with development plans
formulated. External recruits are brought in where any skill
gaps are identified and to enhance the talent pool.
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OVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEIBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCE 34
Risk management
continued
7. Input prices
Description
Mitigation
The Group’s business may be affected by volatility in extraction
expenses and raw material costs. Risks exist around our ability to
pass on increased costs through price increases to our customers.
The Group’s business may also be affected by volatility in energy
costs or disruptions in energy supplies.
Significant changes in the cost or availability of transportation
could affect the Group’s results.
Significant input costs are under constant review, with continuous
monitoring of raw material costs, energy prices and haulage
expenses, with the aim of achieving the best possible prices and
assuring stability of supply.
As competitors of the Group are likely to experience similar levels
of input price increases, we aim to have appropriate pricing policies
to remain competitive within our markets and pass on significant
increases in input costs to our customers wherever possible.
8. Product quality
Description
The nature of the Group’s business may expose it to warranty
claims and to claims for product liability, construction defects,
project delay, property damage, personal injury and other
damages. Any damage to the Group’s brands, including through
actual or alleged issues with its products, could harm our
business, reputation and the Group’s financial results.
Mitigation
The Group operates comprehensive quality control procedures
across its sites.
The Group’s Technical teams carry out regular testing of all of our
products to provide full technical data on our product range.
9. Financial risk management
Description
Mitigation
In addition to the input cost risks outlined above, the Group is
subject to the following other financial risks:
• Foreign exchange risk – As the Group has operations in the UK
and the US, exchange rate fluctuations may adversely impact the
Group’s results.
• Credit risk – Through its customers, the Group is exposed to a
counterparty risk that accounts receivable will not be settled
leading to a financial loss to the Group.
• Liquidity risk – Insufficient funds could result in the Group being
unable to fund its operations.
• Interest rate risk – Movements in interest rates could adversely
impact the Group and result in higher financing payments to
service debt.
10. Pension obligations
Description
The Group has obligations to its employees relating to retirement
and other obligations and any changes in assumptions or in interest
rate levels could have adverse effects on its financial position.
• Foreign exchange risk – The Group undertakes very limited
foreign exchange transactions, with the UK and US businesses
selling domestically with largely local input costs. Management
considers foreign exchange hedging strategies where
significant exposures may arise.
• Credit risk – Customer credit risk is managed by each
subsidiary subject to the Group’s policy relating to customer
credit risk management. The Group principally manages credit
risk through management of customer credit limits. The credit
limits are set for each customer based on the creditworthiness
of the customer and the anticipated levels of business activity.
These limits are initially determined when the customer account
is first set up and are regularly monitored thereafter.
• Liquidity risk – The Group’s policy is to ensure that it has
sufficient funding and facilities in place to meet any foreseeable
peak in borrowing requirements and liabilities when they
become due. In September 2015, the Group entered into
specific facilities of £240 million for a five-year term.
• Interest rate risk – The Group finances its operations through a
mixture of retained profits and bank borrowings. The Group’s
bank borrowings, other facilities and deposits are in Sterling
and at floating rates. No interest rate derivative contracts have
been entered into at the period end.
Mitigation
The Company plays an active role in the pension scheme –
nominating up to half of the Trustees and the Group Chief Financial
Officer attends and chairs Trustee meetings. The defined benefit
scheme is closed to new members. The Pension Trustees and
their external advisers, as well as the internal pensions team, have
significant expertise in the area and provide good quality oversight.
An agreed Statement of Investment Principles is operated to
provide appropriate security, achieve sufficient long-term growth
and achieve an appropriate balance between risk and return.
N.B. A trend direction of the significant risks and uncertainties is not provided since the 2015 Annual Report & Accounts is the first reporting of Ibstock plc.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 35
Assumptions
In determining the viability of the Group,
the Board made the following assumptions:
• The economic climate in the geographies
in which the Group operates remains
in line with a broad consensus of
external forecasts;
• There is no material change in the legal
and regulatory frameworks with which
the Group complies;
• There are no material changes in
construction methods used in the
markets in which the Group operates;
• The Group’s risk mitigation strategies
continue to be effective; and
• The Group’s past record of successfully
mitigating significant construction
industry declines can be replicated.
Conclusion
In summary, the Directors reasonably
expect, based on the evidence available,
that the Group will continue in operation
and meet its liabilities as they fall due over
the three-year period of their assessment.
Viability Statement
Background
The Directors, in preparing for the
Group’s Initial Public Offering, undertook
a comprehensive assessment of its viability
as a business – rigorously assessing its
markets, the strength of its business model
and the potential risks that could impact
its ongoing success. This process involved
carefully reviewing and assessing extensive
evidence, from both internal and external
sources, to evaluate the prospects for
Ibstock over a long-term horizon. It involved
stress testing the Group’s business model
to develop an appropriate valuation of the
business. The success of the IPO provides
confirmatory evidence that the market
considers that Ibstock will continue as
a viable business in the longer term.
The knowledge and evidence gained from
the IPO process is now embedded in the
ongoing governance of the business.
Assessment
The extensive work carried out in
preparation for the IPO, therefore, has
informed the Directors’ assessment of
the longer-term viability of the business.
In addition, the Directors, as part of
their year end review for the preparation
of this Annual Report, have assessed
the business model, strategy, market
conditions, business planning, risks and
the liquidity and solvency of the Group.
Lookout period
In determining the lookout period to assess
the prospects of the Group, the Directors
decided that three years was the appropriate
period over which to assess longer-term
viability. The nature of the building products
business is that it is particularly sensitive
to the level of economic activity, which is
influenced by factors outside of the Group’s
control, such as demographic trends, the
state of the housing market, mortgage
availability, mortgage interest rates and
changes in household income, inflation and
Government policy. Based on the evidence
available, the Directors believe that it is
reasonable to expect continued growth, and
consider that a three-year period provides
the most appropriate horizon over which
to assess viability. The Directors have also
considered the financing the Group has in
place, which is agreed for a period in excess
of the lookout period used. Refinancing is
therefore not considered a significant factor
in this current assessment, but is monitored
on a continuous basis.
Stress testing
During the challenging market conditions of
the recent past, the Group performed well,
remaining cash positive and implementing
a number of mitigating actions that allowed
it to remain viable. These mitigating actions
remain available to the Directors today.
The Group has a strong position in the
markets in which it operates as noted
on pages 16 to 17 and its strategy (see
pages 22 and 23) is aimed at continuing
to strengthen its position in those markets
and create value for its shareholders.
Ibstock’s global operations (see pages
36 and 37) exposes it to a number of
risks and its principal risks and uncertainties
are noted on pages 32 to 34. The Directors
continually review those risks and determine
the appropriate controls and further actions.
They have further reviewed the impact within
the context of the Group’s viability. The
Group has limited exposure to interest rate
risk and foreign exchange rate risk as
described on pages 38 to 41.
The budget has been stress tested
against a severe and prolonged reduction
in demand for its products, on the basis
of reduced house building activity and
therefore reduced volume of product
sold, as well as a benign environment
of prolonged price stagnation on sales.
These scenarios reflect the previous
challenging market conditions of the
2008/09 downturn, a period over which
UK construction output fell 13% (Source:
Office of National Statistics, Construction
Products Association) with sharp
reductions also in the US market. These
scenarios have been modelled alongside
input cost inflation outside of the Group’s
control, notably for energy costs.
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OVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEIBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCE 36
How we have
performed
The UK business
performed strongly in
2015 with an increase
in revenue of 9.0%
£336m
£99m
UK adjusted EBITDA (2015 – 12 months)
UK revenue (2015 – 12 months)
The US business
performed strongly in
2015 with an increase
in revenue of 9.5%
$117m
$12m
US adjusted EBITDA (2015 – 12 months)
US revenue (2015 – 12 months)
Commentary in this report refers to
the presentation of results for the year
to 31 December 2015.
United Kingdom
The UK business, which accounts for
c81% of the Group, has performed strongly
in 2015 with an increase in revenue of
9.0% to £336m. Adjusted EBITDA in the
UK has increased to £99.0m (a 71.0%
increase) in the year to 31 December 2015.
This improvement in revenue and
profitability primarily reflects a stronger
pricing environment for clay bricks and
good pricing for other products. Despite
the release and reduction of brick stocks
by some housebuilders, total UK industry
brick demand continued to exceed
reported annual domestic production
during the year. All UK businesses
performed very well operationally, working
on major projects and innovation whilst also
delivering good customer service survey
results in busy markets. This was achieved
whilst also managing the additional work
arising from the IPO.
Clay products
UK clay products has delivered strong
growth in revenue of 13% in 2015 driven
principally by increases in the levels of
UK housebuilding. This increase has
been supported by Help to Buy, improved
mortgage availability, some improvements
in local authority planning response and
strong demand for new homes.
During 2015, brick availability concerns
eased due to the release of inventory
from housebuilders who had heavily
stocked in 2014, increased UK brick
production and the continued availability
of imported bricks from continental Europe.
As domestic supply improved during the
year, imported brick volumes began to fall
from annualised peaks seen in the second
quarter of 2015.
As noted in “Our markets” on pages 16
and 17, further growth in housebuilding
volumes are forecast in 2016, again driven
by Help to Buy, the Help to Buy ISA, the
recently introduced Help to Buy London,
which offers up to 40% deposit, and the
ever growing gap between housebuilding
rates and the requirement for new homes.
Growth is also forecast in Public Non-
housing, notably in Education, Health,
Commercial and Repairs, Maintenance &
Improvement (“RMI”), all of which have a
significant influence on UK brick usage.
A number of improvement capital
projects are underway within our UK
clay operations which are focused
on improving operational efficiency,
production volume and reducing our
cost base. In addition, the construction
of our new factory at Ibstock in
Leicestershire has now commenced.
This investment will provide the most
modern, efficient and flexible stock
brick factory in the UK.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 37
1. Glen-Gery bricks are
a popular choice for
public buildings
2. Bricks being
dispatched from
Glen-Gery’s
Hanley Plant
3. Landmark Stone
cladding complements
Glen-Gery bricks
1 – 2
3
The new factory at Ibstock will commission
in the second half of 2017 and is a major
statement of Ibstock plc’s ongoing
commitment to the UK brick industry and to
servicing the future product requirements of
its customer base. The new factory will have
a capacity of c100 million bricks per annum
servicing the Housing, Public Non-housing,
Commercial and RMI markets.
UK clay products continues to develop its
product and service package across all of
its market segments and remains focused
on maintaining and developing its unrivalled
relationships with its customers.
Concrete products
UK concrete product revenues in 2015
were 1.5% lower than 2014 with increased
revenue in new build housing related
products – including roof tiles – outweighed
by lower activity in fencing related products
and rail products – where projects have been
delayed. Revenue into the UK fencing sector
in 2014 had been boosted by unusual
weather conditions in the first half of that year.
The revenue of aesthetic concrete products
targeted at the private residential and private
domestic repair and maintenance markets
increased in 2015 driven by an increase in
demand from the private residential market
which reflected the same positive trends in
private housebuilding seen in our UK clay
operations. As a result, sales of our award
winning Gemini roof tile, roofing accessories
and natural stone substitute products saw
continued growth in 2015.
A major capital project has commenced
in the concrete roof tile business which
will provide a new tile line at our Leighton
Buzzard facility to broaden our existing
concrete tile range. The design phase of the
project is complete with the manufacturing,
installation and commissioning phase
scheduled for the second half of 2016
ahead of a formal launch of the new
product range from the beginning of 2017.
The outlook for our new housing market
concrete products look positive for 2016
underpinned by the continued demand
for new housing.
Sales of concrete fencing products,
which are primarily focused on the private
domestic repair and maintenance sector,
reduced in the year to 31 December 2015.
This was largely due to 2014 comparatives
that included exceptional sales in the first
half of that year as a result of sustained
gale force wind conditions which boosted
fencing sales for that year. There has been
no change in the underlying market position
of the UK concrete business in the concrete
fencing segment which was strengthened
during the year by a two-year sole supply
deal with the UK’s largest independent
merchants buying group. In addition,
there is continued focus on maintaining
competitive position in these product
areas by reducing manufacturing costs
with further mechanisation of the
production process and commercial focus
on opportunities to broaden the core
product range and maximise the sales of
core products to established customers.
Concrete rail product sales declined during
the year as a result of the slow release
of projects following the introduction of
Network Rail’s Control Period 5 in 2014 and
subsequent internal reorganisations within
Network Rail. It is anticipated there will be an
increase in activity in these product areas as
Network Rail enters year three of its five-year
control period cycle with the overall aggregate
spend across the whole five-year control
period expected to remain unchanged
despite the current delays to projects.
The outlook across the UK concrete
businesses remains positive with strong
support for growth expected from new build
housing volumes, the benefits of new concrete
tile products in 2016 and the continued
optimisation of existing strong market positions
in concrete fencing and the rail sector.
United States
Clay products
The US business, which accounts for c19%
of the Group, performed strongly in 2015
with an increase in revenue of 9.5% to $117m.
Adjusted EBITDA in the US has increased to
$12m (a 12.7% improvement) in the year to
31 December 2015 reflecting a combination
of rising volumes and higher average prices
which include the benefit from a more
favourable product mix. With both residential
and non-residential markets in the North East
and Mid West showing growth, Glen-Gery’s
balanced exposure across these markets
drove the favourable mix.
Profitability improvement also reflects a
renewed focus on selling the complete
product bundle of manufactured and
sourced products embracing an
“engineered wall solutions” product and
service portfolio to the residential and
architecturally specified commercial
channels. These efforts were enabled
in many key markets by the combined
strength of existing independent and
Group owned distribution capabilities.
Prudent steps taken in the last economic
downturn to contain costs and right-size
the organisation are now also being
reflected in improved operational
efficiencies and profit performance as
revenues and volumes continue to recover.
With the continued gradual recovery in
the new residential construction sector,
US clay products has been aided by a
healthy improvement in sales to the
architecturally specified commercial
construction sector where revenues and
margins are more favourable. These mix
and margin gains are expected to continue
in 2016 with continued architecturally
specified commercial construction growth
in the education, retail and office sectors
together with the benefits of renewed
growth in single family and multi-unit housing
in our core geographic trading regions.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 38
Chief Financial
Officer’s Report
Group turnover
grew by 10.6% to
reach £412.8 million
(2014: £373.2 million)
for the full year.
Statutory overview
Statutory revenue was £358.3 million
and statutory profit before tax was
£94.7 million in the period from 28 November
2014 to 31 December 2015. This represents
the time from incorporation of Ibstock plc and
Figgs Topco Limited – its predecessor entity.
The Group acquired the trading entities
of Ibstock Building Products Limited in the
UK and Glen-Gery Corporation in the US,
and their respective subsidiaries on 26
February 2015, hence only 10 months of
trading performance is included in the
statutory results.
Due to the unusual nature of the statutory
financial statements period, set out
above, I have described in the following
analysis the year ended 31 December 2015
with a comparative. This assumes that the
acquisition had taken place at the beginning
of 2015. I believe this provides shareholders
with clearer information on the results of
the operating entities and their relative
performance in 2015.
Unless stated otherwise, commentary
in this report refers to the presentation of
results for the year to 31 December 2015,
as explained above. A reconciliation to
the statutory information is shown in
Table 1, opposite.
Turnover
Group turnover grew by 10.6% to reach
£412.8 million (2014: £373.2 million). On a
constant currency basis, turnover growth
was 9.1%.
Adjusted EBITDA
Management measure the Group’s
operating performance using adjusted
EBITDA, which represents Earnings
Before Interest, Taxation, Depreciation
and Amortisation and exceptional items
incurred in the period.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Table 1: Reconciliation of statutory information to adjusted results
Statutory reported for the period 28 November 2014 (on incorporation) to 31 December 20151
Pre-acquisition costs in period 28 November 2014 (on incorporation) to 31 December 20142
Period 1 January to 26 February 2015 operating result3
Period 1 January to 26 February 2015 adjustment to operating result assuming acquisition took place
on 1 January 20154
12 months ended 31 December 2015 (Note 24 to the accounts)
12 months ended 31 December 2014 (Note 24 to the accounts)5
UK
US (Revenue $117m, Adjusted EBITDA $12m)
12 months ended 31 December 2015
39
EBITDA
before
exceptional
items
£‘000
Revenue
£‘000
Operating
profit
£‘000
358,331
102,299
163,648
54,497
4,715
571
1,259
(1,490)
412,828
107,014
163,988
373,233
64,993
43,172
£m
336.3
76.5
412.8
£m
99.0
8.0
107.0
Includes trading performance for the 10 months post-acquisition of the operating companies on 26 February 2015.
1.
2. Figgs Topco Limited was incorporated on 28 November 2014 as the head company in a structure put in place as the acquisition entity of the trading companies.
No trading performance is therefore included for this period, only the pre-acquisition costs incurred in the Figgs Topco Limited structure.
3. Due to the normal seasonality of our industry, the operating results in the first two months of 2015 were lower than the remainder of the year.
4. Depreciation and amortisation on the fair value uplift on acquisition and borrowing costs relating to the new financing structure for the period from 1 January 2015
to 26 February 2015, assuming the transaction took place on 1 January 2015.
5. 2014 information has been included without any update of the fair value exercise or financing structure following the acquisition.
After taking account of exceptional items
relating to the costs of the acquisition of
Ibstock Limited in the UK and Glen-Gery
in the US and their subsidiary companies,
the resulting negative goodwill, and the
costs of the IPO transaction in October
2015 and losses on disposal of property,
plant and equipment (“PP&E”) also treated
as exceptional items. Adjusted EBITDA
improved by 64.7% from £65.0 million in
2014 to £107.0 million in the year ending
31 December 2015.
United Kingdom
Revenue of clay and concrete products
in the UK, which represents 81% of Group
revenue, increased by 9% for the 2015
full year compared to 2014. The growth in
revenue in 2015 primarily reflects the stronger
pricing environment for clay bricks.
UK clay product revenue increased by
13.0% on the equivalent period in 2014
to £253.3 million (2014: £224.2 million),
whilst concrete revenue of £82.9 million
in 2015 showed a small decrease of 1.5%.
Increased revenues in new build housing
related products (including roof tiles) were
offset by lower activity in fencing and rail
related products. After considering the
impacts of exceptional storms in 2014 and
the delayed expected sales for Network
Rail contracts, management believes that
UK concrete product revenues performed
more strongly than 2014,
In the UK, adjusted EBITDA increased
by 71.0% to £99.0 million in 2015 from
£57.9 million in 2014. This increase was
driven by the strong pricing growth in clay
products, noted above, higher utilisation of
capacity across both our clay and concrete
product manufacturing sites and reductions
in energy prices during the year.
United States
Revenue in the US increased by 9.5% in
constant currency to £77.0 million in the
year to 31 December 2015. This growth
reflects a combination of rising volumes,
and higher average selling prices in the year.
Adjusted EBITDA increased by 12.7%
to £8.0 million (2014: £7.1 million) as a
result of the lower energy costs incurred
in the year and a favourable product mix.
Cash flow and net debt
Cash generated from operations during the
year ended 31 December 2015, excluding
the impact of the exceptional operating
items, are shown in Table 2 on page 40.
Net working capital balance at
31 December 2015 of £48.0 million
compared with £35.2 million at
31 December 2014. This increase in
working capital was as a result of
rebuilding the inventories held, principally
in the UK, following the exceptional
inventory reduction in 2013 required to
service increased customer demand.
was replaced at the time of the IPO in
October 2015 with a senior facility of
£200 million. Interest on the new five-year
term loan is payable at LIBOR plus a
margin of between 125bps and 250bps
– the margin dependent on the Group’s
leverage ratio. The Group also holds a
committed Revolving Credit Facility
(“RCF”) of £40 million. The RCF has
remained undrawn since the IPO.
The Group is subject to financial covenants.
At 31 December 2015, there was significant
headroom on both requirements. See Table
3 on page 40.
Exchange rates
The Group is exposed to movements in
exchange rates when translating the results
of the US operations from US Dollars to UK
Sterling. Sterling appreciated against the
Dollar during 2015. The impact of this was
a £0.6 million benefit to EBITDA in 2015.
The following commentary relates
to our statutory performance for
the period.
Net working capital at the year end
traditionally tends to be at the lowest
position as industry activity slows in
advance of the Christmas holiday period.
Exceptional items
In line with our accounting policy for
exceptional items, we have excluded
certain items from our adjusted results.
Our pre-exceptional net interest charge
increased in 2015 due to the facilities
entered into during the year, as set
out below.
Net debt (term loan less cash) of
£144.7 million at the year end was below
management expectations as a result of
timing differences. The initial senior facility
taken on 25 February 2015 of £250 million
(LIBOR floor of 1% plus a margin of 8%)
The acquisition of the operating entities
in February 2015 resulted in a significant
distortion to the normal trading results.
Negative goodwill of £124.2 million,
together with acquisition related
expenses (£10.4 million), as described
below, have been classified as
exceptional in the period.
In October 2015, Ibstock plc floated
on the London Stock Exchange with
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
40
Chief Financial
Officer’s Report
continued
a premium listing. Non-recurring IPO costs
totalled £13.7 million in the year ended
31 December 2015, which have similarly
been classified as exceptional.
Other infrequent events, such as the
loss on disposal of PP&E in the period
of £1.4 million, have been treated as
exceptional. Exceptional items are analysed
fully in Note 4 to the financial statements.
Acquisition
On 26 February 2015, as part of the
technical accounting of the Group’s entities,
the Group acquired Ibstock Group Limited
in the UK and Glen-Gery Corporation in
the US along with their subsidiaries for
consideration of £378.0 million. The
acquisition resulted in £124.2 million of
negative goodwill, which has been credited
to the income statement in the period. On
acquisition, intangible assets representing
brands and customer contracts and
relationships were recognised, valued at
£45.4 million and £87.6 million, respectively.
Further details on the acquisition are
included in Note 24 to the financial
statements.
Finance costs
Finance costs for the period ended
31 December 2015 of £69.4 million are as
a result of the acquisition in February 2015,
along with the subsequent refinancing at the
time of the IPO. Included within the costs
are exceptional finance costs of £39.9 million
arising on the repayment of the initial senior
facility. Our expected normalised interest
charges are c£5.5 million per annum.
Taxation
The Group has recognised a tax credit
of £6.9 million on Group pre-tax profits of
£94.7 million resulting in an effective tax
rate of -7.25% compared to the standard
rate of UK corporation tax of 20.25%.
Negative goodwill, other exceptional items
and the impact of future tax rate changes
on the deferred tax provision all had a
significant impact on the effective tax
rate in Table 4 opposite.
Table 2: Cash flow and Net Debt (non-statutory)
Adjusted EBITDA
Capex before major projects
Adjusted change in working capital
Adjusted EBITDA – maintenance capex – change in WC
Cash conversion
Major project capex
Cash from operating and investing activities
Net interest1
Tax1
Post-employment benefits
Adjusted free cash flow
1. Estimated on a normalised basis.
2015
(£m)
107
(9)
(6)
92
86%
(6)
86
(6)
(9)
(2)
69
2014
(£m)
65
(3)
–
62
96%
(1)
61
(2)
(2)
(1)
56
Change
(£m)
+42
(6)
(6)
+30
(5)
+25
(4)
(7)
(1)
+13
Table 3: Financial covenants (non-statutory)
Covenant
Definition
Requirement
Position at
31 December
2015
Consolidated
net debt
Interest cover
Ratio of consolidated net debt to
consolidated adjusted EBITDA
Ratio of consolidated adjusted EBITDA
to consolidated interest expense
3.5:1
1.36:1
4:1
>16:1
Table 4: Taxation
Profit before taxation
Expected tax charge calculated at the standard rate of UK
corporation tax for the period of 20.25%
Different effective tax rate on US pre-tax profits
Non-tax deductible items
Previously unrecognised US tax losses
US withholding tax suffered
Tax charge before exceptional items and impact of rate change
on deferred tax
Rate change impact on deferred tax provision
Negative goodwill
Non-tax deductible exceptional transaction costs
£m
94.7
%
100
19.2
20.25
0.1
1.1
(0.7)
0.3
20.0
(5.1)
(25.6)
3.8
0.1
1.2
(0.8)
0.3
21.1
(5.4)
(27.0)
4.0
Tax credit recognised in the consolidated income statement
(6.9)
(7.3)
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 41
Strategic Report
Our Strategic Report from pages
1 to 41 has been reviewed and
approved by the Board.
Wayne Sheppard
Chief Executive Officer
Kevin Sims
Chief Financial Officer
10 March 2016
Within our US segment, certain
employees are members of two multi-
employer post-employment schemes.
At 31 December 2015, a liability of
£8.0 million has been recognised in
relation to these schemes.
Further details are provided in Note 19
to the financial statements.
Subsequent events
With the exception of the proposed dividend,
noted above, there have been no events
subsequent to 31 December 2015, which
management believe require adjustment
or disclosure.
Going concern
The Group continues to meet its day to
day working capital and other funding
requirements through a combination of
long-term funding and cash deposits. The
Group’s banking facilities are a £200 million
five-year loan and a £40 million committed
RCF (undrawn at 31 December 2015).
Both the term loan and the RCF expire
in October 2020.
Risks and uncertainties
The Board continually assesses and
monitors the key risks impacting our
business. Whilst the list is not intended to
be exhaustive, and some risks are outside
of the Group’s control, the principal risks
and uncertainties that could have a material
impact on the Group’s performance are set
out in detail in our Risk management report
on pages 30 to 34.
Kevin Sims
Chief Financial Officer
10 March 2016
Earnings per share
Statutory basic EPS
Adjusted basic EPS
2015
35.2p
16.2p
2014
n/a
n/a
The movement in statutory basic EPS is
distorted by the significant exceptional
non-trading items occurring during 2015,
as set out above.
Our adjusted EPS metric removes the
impact of exceptional non-trading items
relating to the acquisition, subsequent
IPO costs and other exceptional items.
Additionally, the fair value uplifts resulting
from our acquisition accounting have
been removed from the adjusted EPS
calculations. The adjusted EPS figures
have been included to provide a clearer
guide as to the underlying earnings
performance of the Group.
Dividend
A final dividend of 4.4 pence per share
is being recommended for payment on
3 June 2016 to shareholders on the register
at the close of business on 6 May 2016.
The ex-dividend date will be 5 May 2016.
Our dividend policy is based on a pay-out
ratio of 40-50% of adjusted profit after
taxation over a business cycle. The
Directors intend that the Company will
pay an interim dividend and a final dividend
in respect of each financial year in the
approximate proportions of one-third
and two-thirds, respectively, of the
annual dividend, to be announced at the
time of the announcement of the interim
and final results.
Pensions
In the UK, the Group operates a defined
benefit scheme, which is closed to new
members, together with a number of defined
contribution schemes. At 31 December 2015,
the defined benefit scheme was in an
actuarial accounting surplus position of
£17.4 million (against pension liabilities at
the year end date of £551 million), and
reflected the one-off contribution of
£60 million paid during 2015. A further
£9.0 million liability in respect of
equalisation has been recognised
reducing the surplus to £8.4 million (an
asset due from CRH plc for £9.0 million
is included separately within trade and
other receivables). Within the financial
statements, we have restricted the surplus
position to £0.3 million based on our
application of interpretation guidance
on the related accounting standard.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015STRATEGY & PERFORMANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
42
Board of
Directors
1
3
2
1. Jamie Pike MA, MBA, MIMechE
(Non-Executive Chairman and Chairman of the
Nomination Committee)
Committee memberships:
Jamie Pike is Chairman of the Nomination Committee and a
member of the Remuneration Committee.
Date of appointment:
Jamie Pike (age 60) joined the Board in September 2015 as a
Non-Executive Director, and became Non-Executive Chairman
upon Admission.
Independent: No
Skills and experience:
Jamie Pike has over 24 years of experience at the senior management
or director level of businesses, including cement manufacturing,
construction, mining and building materials industries. He currently
serves as Non-Executive Chairman at Tyman plc and RPC Group plc.
He also serves as a Senior Independent Director at Spirax Sarco
Engineering plc. He previously served as Non-Executive Chairman to
Lafarge Tarmac Limited, MBA Polymers Inc, and the Defence Support
Group and as a Non-Executive Director of two FTSE 250 companies,
RMC Group plc and Kelda Group plc. Jamie Pike served as the
Chief Executive Officer of Foseco plc from 2001 until its acquisition by
Cookson Group plc in April 2008. Prior to that, he held various roles at
Burmah Castrol from 1991 where he rose to become Chief Executive
Officer of the Chemicals division before leading the Foseco buy-out
from Burmah Castrol in 2001, which culminated in flotation on the
main market in 2005. His early career was as a consultant with Bain
and Co and A T Kearney. Jamie Pike is a member of the Institute of
Mechanical Engineers.
2 Wayne Sheppard BSc, CEng MIMechE, MIET
(Chief Executive Officer)
Committee memberships:
None.
Date of appointment:
Wayne Sheppard (age 56) joined the Board in September 2015,
prior to which he was appointed a Director of Figgs Topco Limited
in February 2015 pursuant to the Bain acquisition.
Independent: No
Skills and experience:
Wayne Sheppard has been with the Group for 20 years and has over
20 years of experience at the managing director level across a broad
range of businesses and business groups within the building and
construction products sector across Europe and latterly the United
States. He is a chartered engineer, Principal of the Construction
Products Association, Director and former President of the British
Ceramic Confederation, and Director of the Brick Development
Association. He is also a member of the Institution of Mechanical
Engineers and the Institution of Engineering and Technology.
3. Kevin Sims ACMA
(Chief Financial Officer)
Committee memberships:
None.
Date of appointment:
Kevin Sims (age 54) joined the Board in September 2015, prior
to which he was appointed a Director of Figgs Topco Limited in
February 2015 pursuant to the Bain acquisition.
Independent: No
Skills and experience:
Kevin Sims has been with the Group for 29 years and has 30 years of
experience within manufacturing businesses. Kevin Sims was appointed
Chief Financial Officer of Ibstock Building Products in October 2014,
having held various finance-related managerial roles within the Group,
including Financial Director of Ibstock Brick and CRH Product Group
Financial Director – Clay Europe. He is a chartered management
accountant and Chairman of Ibstock Pension Scheme Trustees.
4. Michel Plantevin MSc EEng, MBA
(Non-Executive Director)
Committee memberships:
Michel Plantevin is a member of the Nomination Committee.
Date of appointment:
Michel Plantevin (age 59) joined the Board in September 2015 as
a Non-Executive Director.
Independent: No
Skills and experience:
Michel Plantevin joined the Group in February 2015 as Non-
Executive Chairman of Figgs Topco Limited pursuant to the Bain
acquisition. Michel Plantevin currently serves as Managing Director
of Bain Capital, a role he has held for over 12 years. Michel
Plantevin has been involved in a wide variety of transactions in the
industrial and energy sectors over that period. In his capacity as
Managing Director at Bain Capital Europe LLC, Michel Plantevin
serves as Non-Executive Director for a number of companies
including FCI SA, IMCD N.V., Maison du Monde SAS and Trinseo
S.A. Prior to joining Bain Capital he was a Managing Director at
Goldman Sachs.
5. Tracey Graham
(Non-Executive Director)
Committee memberships:
Tracey Graham is a member of the Audit Committee,
Remuneration Committee and Nomination Committee.
Date of appointment:
Tracey Graham (age 50) joined the Board as a Non-Executive
Director in February 2016.
Independent: Yes
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 4
7
5
8
43
6
9
Skills and experience:
Tracey Graham is a Non-Executive Director of Royal London Group,
the largest mutual life insurance and pensions company in the UK,
where she is Chair of the Remuneration Committee. Tracey Graham is
also a Non-Executive Director of Link Scheme Limited, the operator of
the LINK system as set out in the Financial Services (Banking Reform)
Act 2013, where she is also Chair of the LINK Consumer Council;
a Non-Executive Director of ACAL plc, an international supplier of
customised electronics to industry; and a Non-Executive Director
of Dialight plc, an international LED lighting company. Among other
previous appointments she was a Non-Executive Director of RPS plc.
Tracey Graham was Chief Executive of Talaris Limited until 2010
where she led the company’s management buy-out from De La Rue
plc. She has also held senior positions in banking and insurance with
HSBC and AXA Insurance.
6. Lynn Minella
(Non-Executive Director and Chair of the Remuneration
Committee)
Committee memberships:
Lynn Minella chairs the Remuneration Committee and is a member
of the Audit Committee and the Nomination Committee.
Date of appointment:
Lynn Minella (age 57) joined the Board as a Non-Executive Director
in February 2016.
Independent: Yes
Skills and experience:
Lynn Minella is a member of the Executive Committee of BAE
Systems plc and Group Director of Human Resources. Prior to joining
BAE Systems, Lynn Minella was the Senior Vice President for Human
Resources and Communications for Air Products, a global industrial
gases company based in the USA. She joined Air Products in 2004
as a member of the company’s Corporate Executive Committee and
was responsible for the leadership and management of the Human
Resources and Corporate Communications functions globally.
Before joining Air Products, Lynn Minella spent 22 years at IBM,
where she served in a variety of HR leadership positions.
7. Jonathan Nicholls BA (Hons), ACA, FCT
(Senior Independent Non-Executive Director and
Chairman of the Audit Committee)
Committee memberships:
Jonathan Nicholls is Senior Independent Director, Chairman of
the Audit Committee, and is also a member of the Remuneration
Committee and the Nomination Committee.
Date of appointment:
Jonathan Nicholls (age 58) joined the Board in September 2015
as a Non-Executive Director, and became Senior Independent
Non-Executive Director and Chairman of the Audit Committee
upon Admission.
Independent: Yes
Skills and experience:
Jonathan Nicholls has over 17 years of experience at the senior
management or director level of businesses, including those
in brick manufacturing, roofing and construction, and property
development. Previously, Jonathan Nicholls served as the Chief
Financial Officer of Hanson plc from 1998 to 2006 and Chief
Financial Officer of Old Mutual plc from 2006 to 2008. Since 2009,
he has served as a Non-Executive Director at Great Portland
Estates plc and DS Smith plc, where for both companies he is the
Senior Independent Director and Chairman of the Audit Committee
and has served since 2009 as a Non-Executive Director of SIG plc
where he is Chairman of the Audit Committee. He is a member of
the Institute of Chartered Accountants in England and Wales and
a Fellowship member of the Association of Corporate Treasurers.
8. Matthias Boyer Chammard MSc, MPA
(Non-Executive Director)
Committee memberships:
None.
Date of appointment:
Matthias Boyer Chammard (age 35) joined the Board in September
2015 as a Non-Executive Director.
Independent: No
Skills and experience:
Matthias Boyer Chammard joined the Group in February 2015
as Non-Executive Director of Figgs Topco Limited, pursuant to the
Bain acquisition. Matthias Boyer Chammard currently serves as
a Principal of Bain Capital Europe LLC, a role he has held for over
four years. In his capacity as a Principal at Bain Capital Europe
LLC, Matthias Boyer Chammard also serves as a Non-Executive
Director for Brakes Bros Ltd. Prior to joining Bain Capital, he
worked at Boston Consulting Group in the energy and the
industrial goods practices.
9. Robert Douglas BSc (Econ), FCA
(Company Secretary)
Robert Douglas is a Fellow of the Institute of Chartered Accountants
in England and Wales. He joined the Group as IPO Project Manager
in June 2015 and was appointed Company Secretary in October
2015. Robert Douglas brings with him considerable experience
gained as CFO in listed and private companies. He was Deputy
Group Finance Director and Company Secretary of a FTSE 250
house builder and developer. Earlier in his career he held a number
of Finance Director and senior finance appointments in businesses
engaged in construction and engineering.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 44
Corporate
Governance
Statement
Chairman’s introduction
My responsibility as
Chairman is to ensure that
the Board operates effectively
and efficiently and that it
continues to uphold the
high standard of corporate
governance required for
the long-term success
of the Company.
Ibstock plc successfully floated on the London Stock Exchange
on 27 October 2015 and I am pleased to present this, the first
Corporate Governance Statement as a listed company,
to our shareholders.
This Statement explains key features of the Company’s governance
structure and compliance with the version of the UK Corporate
Governance Code published in September 2014 by the Financial
Reporting Council (“the Governance Code”). This Statement also
includes items required by the Listing Rules and the Disclosure
Rules and Transparency Rules (“DTR”). A copy of the Governance
Code is available on the Financial Reporting Council website at
www.frc.org.uk.
It is the Board’s intention to be fully compliant with the
Governance Code. Although the Company was not fully compliant
on Admission, significant progress is being made to ensure
compliance and much has been achieved in a relatively short
time frame. Whilst we have explained why we have not thus far
complied with certain provisions of the Governance Code, we
have also set out the actions that have or are taking place to
work towards full compliance during 2016.
While other sections of the Annual Report cover our financial and
operational achievements during the period, this section describes
the effective leadership of the Board and how it endeavours to
promote the highest standards of corporate governance
throughout the Group.
My responsibility as Chairman is to ensure that the Board operates
effectively and efficiently and that it upholds the high standards of
corporate governance required for the long-term success of the
Company. I believe the achievement of good governance is based
on the appropriate level of oversight, good communication, a focus
on risks, a commitment to transparency and ensuring a culture of
continuous improvement in standards and performance across
the business.
In future, the Board will revisit its level of oversight and the
monitoring of risks over a variety of areas including strategy,
acquisitions and disposals, capital expenditure on new projects,
finance, people and sustainability matters. The Board aims to
ensure that good governance extends beyond the Boardroom
and is continually borne in mind in the successful delivery of the
Group’s strategic priorities over both the short and long term.
Jamie Pike
Chairman
10 March 2016
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 45
The Board is committed to the highest standards of corporate
governance. We have made significant progress since Admission
and except as described in the table below, as of the date of
this Annual Report, the Company complies and intends to continue
to comply with the Governance Code. As envisaged by the
Governance Code, the Board has established Audit, Nomination
and Remuneration committees. If the need should arise, the
Board may establish additional committees, as appropriate.
Compliance with the UK Corporate Governance Code 2014
The purpose of the Governance Code is to facilitate effective,
entrepreneurial and prudent management that can deliver the
long-term success of the Company. The main principles of the
Governance Code set out standards of practice for the Board in
relation to leadership, effectiveness, accountability, remuneration
and its relations with shareholders. The Company was incorporated
on 3 September 2015 and admitted to the premium listing segment
of the Official List and to trading on the main market of the London
Stock Exchange on 27 October 2015 (“Admission”). The Governance
Code applied from Admission and the Company undertook a
significant amount of work in preparation for this and continues
to work towards full compliance.
Governance
Code provision Description
Comments
B.1.2
B.2.1
B.6
B.6.1
B.6.3
Except for smaller companies at
least half the board, excluding
the chairman, should comprise
non-executive directors
determined by the board
to be independent.
There should be a nomination
committee which should
lead the process for board
appointments and make
recommendations to the board.
A majority of members of the
nomination committee should
be independent non-executive
directors.
The board should undertake
a formal and rigorous
annual evaluation of its own
performance and that of its
committees and individual
directors.
The Governance Code recommends that, in the case of a FTSE 350 company,
at least half the Board of Directors, excluding the Chairman, should comprise
Non-Executive Directors determined by the Board to be independent for the
purposes of the Governance Code.
On Admission, the Board comprised six members, including the Non-Executive
Chairman, who was independent on appointment, the Senior Independent Director,
two Executive Directors and two Non-Executive Directors, Michel Plantevin and
Matthias Boyer Chammard who are not considered to be independent for the
purposes of the Governance Code as a result of being nominated to the Board
by Diamond (BC) S.à r.l. Accordingly, the Company has not complied with the
recommendation of the Governance Code in respect of composition of the Board.
Actions taken to achieve compliance:
The Company was not compliant on Admission, but took swift action and two
independent Non-Executive Directors were appointed in February 2016. The process
to identify an additional independent Non-Executive Director is ongoing and following
appointment the Company expects to be fully compliant with the Governance Code.
The Nomination Committee is chaired by Jamie Pike and the other members are
Jonathan Nicholls, Michel Plantevin, Tracey Graham and Lynn Minella. As at the
year-end the Company had not complied with the recommendations of the
Governance Code in respect of the number of independent Non-Executive Directors.
Action taken to achieve compliance:
Since the year end Tracey Graham and Lynn Minella became members of the
Committee and the Company has now complied with the recommendations of
the Governance Code in this respect.
Action taken to achieve compliance:
The Board and its Committees are newly formed and sufficient time has not
passed to conduct a meaningful Board evaluation process. Evaluation of the
Board’s performance will be a key issue for the attention of the Board and its
Committees during the next 12 months.
The board should state in the
annual report how performance
evaluation of the board, its
committees and its individual
directors has been conducted.
Action taken to achieve compliance:
The Board has established a timetable of Board and Committee meetings. The Board
and its Committees have also scheduled meetings at which the performance and
effectiveness of the Board and its Committees will be evaluated. The Board is committed
to conducting an externally facilitated evaluation of the effectiveness of the Board and its
Committees within a three-year time frame, as envisaged by the Governance Code.
The non-executive directors,
led by the senior independent
director, should be responsible
for performance evaluation of the
chairman, taking into account the
views of executive directors.
Action taken to achieve compliance:
This review will be performed by the Senior Independent Director during 2016.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 46
Corporate Governance
Statement
continued
Governance
Code provision Description
Comments
C.2.3
The board should monitor the
company’s risk management
and internal control systems
and, at least annually, carry out
a review of their effectiveness,
and report on that review in the
annual report. The monitoring
and review should cover all
material controls, including
financial, operational and
compliance controls.
C.3.1
The board should establish
an audit committee of at
least three independent
non-executive directors.
D.2.1
The board should establish
a remuneration committee
of at least three independent
non-executive directors.
In addition, the Company
Chairman may also be a
member of, but not chair of,
the committee if he or she
was considered independent
on appointment as Chairman.
Immediately prior to Admission the Board approved the thorough and detailed review
of material internal controls in relation to financial, operational and compliance matters,
that had been conducted during the IPO process. The Directors are comfortable that
for the period covered by the Annual Report & Accounts that the controls continued to
operate effectively. However, the Board did not conduct a formal review of the
effectiveness of the Group’s system of risk management and internal controls prior
to 31 December 2015 and hence was not compliant with the recommendations of
the Governance Code in this respect.
Action taken to achieve compliance:
In preparing the Annual Report & Accounts the Board identified the principal
risks faced by the Group and has set out ways in which they may be mitigated and
managed. The Audit Committee will monitor these controls throughout the year
and report to the Board accordingly. The Board intends to conduct a review of the
effectiveness of the Group’s system of risk management and internal control in 2016,
in accordance with the FRC’s guidance on Risk Management, Internal Control and
Related Financial and Business Reporting.
The Audit Committee is chaired by Jonathan Nicholls and its other members are
Tracey Graham and Lynn Minella. The Governance Code recommends that, in the
case of FTSE 350 companies, the Audit and Risk Committee comprises at least three
Non-Executive Directors, independent for the purposes of the Governance Code,
and that one such member has recent and relevant financial experience. Jonathan
Nicholls has recent and relevant financial experience.
As at the year-end the Company had not complied with the recommendations of the
Governance Code in respect of the number of independent Non-Executive Directors.
During the period between Admission and the year-end Jamie Pike was a member
of the Committee.
Action taken to achieve compliance:
Since the year-end Tracey Graham and Lynn Minella became members of the
Committee. Having been a member since Admission, Jamie Pike stepped down
from the Committee on 24 February 2016.
As of the date of this Annual Report the Company is compliant with the
recommendations of the Governance Code in this respect.
The Governance Code recommends that all members of the Remuneration Committee
be Non-Executive Directors, independent for the purposes of the Governance Code.
Having been a member at Admission, Wayne Sheppard stepped down from the
Committee on 24 February 2016.
During the period between Admission and the appointment of Lynn Minella,
the Committee was chaired by Jamie Pike.
Action taken to achieve compliance:
As of the date of this Annual Report the Company is compliant with the
recommendations of the Governance Code in this respect.
The Remuneration Committee is chaired by Lynn Minella and its other members
are Jonathan Nicholls, Jamie Pike and Tracey Graham.
The Listing Rules require that we state how the “Main Principles”
set out in the Governance Code have been applied. The required
detail in line with the specific provisions of the Governance Code
is set out in this Corporate Governance Statement.
Share Dealing Code
The Company has adopted a code of securities dealings in relation
to the Ordinary Shares which is based on, and is at least as rigorous
as, the model code as published in the Listing Rules. The code
adopted applies to the Directors, Persons Discharging Managerial
Responsibilities and relevant employees of the Group.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Relationship with shareholders
Leadership
47
The Board recognises the importance of creating a clear flow of
communication with all of the Company stakeholders including
shareholders, particularly with regard to business developments
and financial results. The Board aims to communicate on a regular
basis and at present the Company utilises news releases, investor
presentations and Company publications and will expand
communication channels where necessary.
All shareholders are invited to the Company’s Annual General
Meeting (the “AGM”), at which they will have the opportunity to
meet and put questions to the Board. Details of the resolutions to
be proposed at the AGM to be held on 26 May 2016 at 2:00 p.m.
at the Mercure Leicester The Grand Hotel, Granby Street, Leicester
LE1 6ES can be found in the Notice of Meeting, which, together
with explanatory notes on the resolutions to be proposed and full
details of the deadlines for exercising voting rights is contained
in a circular which will be circulated to all shareholders at least
20 working days before such meeting together with this Report.
This document will also be available on the Ibstock plc website
(www.ibstockplc.com/investors). Results of voting at the AGM will
be announced to the London Stock Exchange and will be published
on our website at www.ibstockplc.com/investors.
In line with the Governance Code, the Board has appointed
Jonathan Nicholls as Senior Independent Director (“SID”).
Jonathan is available to shareholders throughout the year if they
have concerns that contact through the normal channels of the
Chairman or other Executive Directors have failed to resolve or
for which such channels of communication are inappropriate.
The SID has met with the majority shareholders, Diamond (BC)
S.à r.l., on a regular basis through their representatives on the
Board of Directors.
Board composition
The Governance Code recommends that the board of directors
of a UK premium listed company includes an appropriate
combination of Executive and Non-Executive Directors, with
independent Non-Executive Directors (excluding the Chairman)
comprising at least half the board. As at 31 December 2015, the
Board comprised a Non-Executive Chairman, one independent
Non-Executive Director, two non-independent Non-Executive
Directors and two Executive Directors. The Company considers
that Jamie Pike was independent on appointment and regards
Jonathan Nicholls as independent for the purposes of the
Governance Code.
In February 2016, Tracey Graham and Lynn Minella were appointed
as Non-Executive Directors, whom the Board regards as
independent for the purposes of the Governance Code.
Appointment of Non-Executive Directors and observer
by the controlling shareholder
On 22 October 2015, the Company entered into a Relationship
Agreement with Diamond (BC) S.à r.l. (the “controlling shareholder”),
under the terms of which the controlling shareholder has a right
to nominate for appointment two Directors (each a “Shareholder
Director”) to the Board of the Company whilst its and its associates’
shareholding in the Company is 25% or more; and to nominate
for appointment one Shareholder Director to the Board of the
Company whilst its and its associates’ shareholding in the
Company is 10% or more. If the controlling shareholder’s
shareholding in the Company is reduced to less than 25%, but is
10% or more and two Shareholder Directors are appointed to the
Board of the Company, the controlling shareholder will, if requested
by the Board, procure that one of its nominated Directors resigns
from the Board. If the controlling shareholder and its associates’
shareholding in the Company is reduced to less than 10%, the
controlling shareholder will, if requested by the Board, procure
that all of its remaining nominated Directors resign from the Board.
In addition, for as long as the controlling shareholder and its
associates’ shareholding in the Company is 10% or more, the
controlling shareholder shall also be entitled to appoint one
Shareholder Director as a member of the Nomination Committee
and, if invited by the Chairman of the relevant committee to send
a Shareholder Director as an observer to meetings of the
Remuneration Committee and the Audit Committee.
The Board confirms that, during the period from 22 October 2015
until the date of this report:
• the Company has complied with the independence provisions
included in the Relationship Agreement;
• so far as the Company is aware, the independence provisions
included in the Relationship Agreement have been complied
with by the controlling shareholder and its associates; and
• so far as the Company is aware, the procurement obligation
included in the Relationship Agreement has been complied
with by the controlling shareholder.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE Diversity
We fully support the aims, objectives and recommendations
outlined in Lord Davies’ Report “Women on Boards” and are
aware of the need to increase the number of women on our Board
and in senior positions throughout the Group. However, we do
not consider that it is in the best interests of the Company and its
shareholders to set prescriptive targets for gender on the Board
and we will continue to make appointments based on merit,
against objective criteria to ensure we appoint the best individual
for each role. Across our business of approximately 2,700 employees,
c13.3% are female. Following the appointment of Tracey Graham
and Lynn Minella in February 2016, 25% of the Board are women.
Decision-making and Directors’ conflicts of interest
Directors have a statutory duty to avoid situations in which they have
or may have interests that conflict with those of the Company, unless
that conflict is first authorised by the Board. This includes potential
conflicts that may arise when a Director takes up a position with
another company. The Company’s Articles of Association, which
are in line with the Companies Act 2006, allow the Board to
authorise potential conflicts of interest that may arise and to impose
limits or conditions, as appropriate, when giving any authorisation.
Any decision of the Board to authorise a conflict of interest is only
effective if it is agreed without the conflicted Directors voting or
without their votes being counted. In making such a decision, the
Directors must act in a way they consider in good faith will be
most likely to promote the success of the Company.
The Company has established a procedure for the appropriate
authorisation to be sought prior to the appointment of any new
Director, or prior to a new conflict arising and for the regular review
of actual or potential conflicts of interest. An Interests Register
records any authorised potential conflicts and will be reviewed
by the Board on a regular basis to ensure that the procedure is
working effectively.
Board induction and development
On appointment, Non-Executive Directors, who are expected
to provide a time commitment to the Company of at least 25 days
a year and to recognise the need for availability in the event of
a crisis, are provided with a detailed induction programme. The
induction programme covers the Company’s operations, including
social, ethical and environmental matters, the Group’s principal
risks and internal controls in place to manage those risks, meetings
with senior management and tours of the Group’s main properties.
The Directors may, at the Company’s expense, take independent
professional advice and are encouraged to continually update
their professional skills and knowledge of the business. Senior
managers and external advisers present to the Board during the
year on a range of subjects and the Directors also individually
attend seminars or conferences associated with their expertise.
The level and nature of training by the Directors will be reviewed
by the Chairman at least annually.
48
Corporate Governance
Statement
continued
Board responsibilities and procedures
The following is a high level summary of the principal decisions
that are specifically reserved for the Board:
• Responsibility for the overall management of the Group,
including monitoring the Group’s operating and financial
performance.
• Approval of the Group’s long-term objectives, values,
standards, commercial strategy and annual budgets.
• Approval of the annual operating and capital expenditure
budgets and any subsequent material changes to them.
• Making changes to the Group’s capital, legal and corporate
structure, including reduction, consolidation, sub-division or
conversion of share capital.
• Approval of the half-yearly report, trading updates, the
preliminary announcement of the final results and the
Annual Report & Accounts.
• Approval of the dividend policy and declaration of any
interim and final dividends.
• Approval of accounting and treasury policies, the Group’s
internal control systems and risk management strategy.
• Approval of significant acquisitions and disposals and
material capital investments.
• Approval of significant borrowing facilities and other material
contracts and transactions.
• Approval of resolutions to be put forward for shareholder
approval at a General Meeting and all communications with
shareholders and the market.
• Managing membership and approving adequate succession
planning for the Board.
• Responsibility for the Group’s corporate governance,
determining the remuneration policy of the Group and
determining Directors’ remuneration.
• Approval of the Group’s health and safety and sustainability
and environmental policies.
• Ensuring a satisfactory dialogue with shareholders based
on the mutual understanding of objectives.
Matters not specifically reserved for the Board, including the day
to day management of the Group, are delegated to the Executive
Directors. To enable the Board to discharge its duties, all Directors
receive appropriate and timely information.
Board Committees
As envisaged by the Governance Code, the Board has established
three principal Committees of the Board: an Audit Committee,
a Nomination Committee and a Remuneration Committee. Each
Committee has formally delegated duties and responsibilities set out
in its written terms of reference. If the need should arise, the Board
may establish additional committees, to consider specific issues, as
appropriate. In line with each of the Committees’ terms of reference,
only members of the relevant Committee have the right to attend
and vote at its meetings. Committee meetings are also attended
by the Company Secretary, who acts as the secretary to each of
the Committees. When appropriate, non-members on the Board,
together with the Executive Directors may be invited to attend all
or any part of any Committee meeting. The matters reserved for
the Board and the terms of reference for each of the Board
Committees are available on the Company’s corporate website,
at www.ibstockplc.com/investors. Details of each of the Board-
appointed Committees and their activities during the year are set
out in the separate Committee Reports on pages 52 to 78, which are
incorporated into the Corporate Governance Statement by reference.
The Chairman of each Committee reports the outcome of the
meetings to the Board. Details of Committee memberships are
included in the Directors’ biographies on pages 42 and 43.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Effectiveness
Division of responsibilities
Chairman and the Chief Executive Officer
For the Board to remain effective, the Governance Code requires
a clear division of responsibilities between the Chairman and the
Chief Executive Officer. These positions are held by Jamie Pike
as Chairman and Wayne Sheppard as Chief Executive Officer. The
roles and responsibilities of the Chairman and the Chief Executive
Officer are set out and are available to view on the Company’s
corporate website at www.ibstockplc.com/investors.
The Chairman reports to the Board and is the guardian of
the Board’s decision-making processes. He is responsible for
leadership of the Board and ensuring its effectiveness on all
aspects of its role. The Chairman also promotes a culture of
openness and debate by facilitating the effective contribution of
Non-Executive Directors in particular and ensuring constructive
relations between Executive and Non-Executive Directors. The
Chairman is responsible for ensuring that the Directors receive
accurate, timely and clear information and that there is effective
communication with shareholders.
The Chief Executive Officer, assisted by senior management, is
responsible for proposing and developing the Company’s strategy
and commercial objectives for consideration by the Board, and
for implementing the decisions of the Board into the day to day
functions of the business.
The Chief Financial Officer
The Chief Financial Officer is responsible for the financial reporting
and management of the Group. In addition to the finance, audit,
tax and treasury functions, he is also jointly responsible with the
Chief Executive Officer for the Group’s M&A strategy, and
investor relations.
The Senior Independent Director
The Senior Independent Director is available for shareholders to
voice any concerns which may not be appropriate for discussion
through the normal channels of Chairman, Chief Executive Officer
or Chief Financial Officer. The Senior Independent Director also
leads the Chairman’s appraisal, serves as an intermediary for
the other Directors with the Chairman as necessary and acts
as a sounding board for the Chairman as required.
Non-Executive Directors
At the date of this report, Independent Non-Executive Directors
comprise 42% of the Board, excluding the Chairman. The Board
believes that these Non-Executive Directors, Jonathan Nicholls,
Tracey Graham and Lynn Minella, possess strong independent
character and judgement and bring a wide range of business
experience in some areas related to and in other areas
complementary to the activities of the Group.
Directors’ insurance cover and indemnity
The Company maintains, at its expense, a Directors’ and
Officers’ liability insurance policy to afford an indemnity in certain
circumstances for the benefit of Group personnel including,
as recommended by the Governance Code, the Directors.
This insurance policy does not provide cover where the
Director or Officer has acted fraudulently or dishonestly.
49
The Company has also provided an indemnity for its Directors to
the extent permitted by the law in respect of liabilities incurred as a
result of their office. The indemnity would not provide any coverage
to the extent that a Director is proved to have acted fraudulently
or dishonestly.
Board evaluation
As the Company has listed relatively recently, and as outlined in
our compliance statement above, a formal and rigorous Board
evaluation process, as required by the Governance Code, has
not yet been undertaken. However, an internal review of the
effectiveness of the Board and its Committees will be undertaken
during the forthcoming year and a formal independent evaluation of
the Board and its Committees will be conducted at an appropriate
stage in the Board’s development, but nevertheless within three
years, as recommended by the Governance Code. Going forward,
the Chairman will meet with the independent Non-Executive
Directors in the absence of the Executive Directors bi-annually
and the Senior Independent Director will meet with the independent
Non-Executive Directors annually, in the absence of the Chairman,
to appraise his performance.
Development and advice
The Directors of all Group companies, as well as the Board, also
have access to the advice and services of the Company Secretary.
Independent external legal and professional advice can also be
taken when necessary to do so. Furthermore, each Committee of
the Board has access to sufficient and tailored resources to carry
out its duties. A personalised induction and subsequent training
programme is provided to new members of the Board and
its Committees.
Meetings and attendance
The Board intends to meet approximately eight times a year and
may meet at other times as required or otherwise at the request of
one or more of the Directors. Where urgent decisions are required
between meetings on matters specifically reserved for the Board,
there is a process in place to facilitate discussion and decision-
making. The Directors regularly communicate and exchange
information irrespective of the timing of meetings.
The number of meetings of the Board and the attendance by the
Directors during the period between Admission and the year-end
is disclosed in the following table:
Name
Jamie Pike
Jonathan Nicholls
Michel Plantevin
Matthias Boyer
Chammard
Wayne Sheppard
Kevin Sims
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee*
2/2
2/2
2/2
2/2
2/2
2/2
1/1
1/1
n/a
n/a
n/a
n/a
2/2
2/2
n/a
n/a
2/2
n/a
0/0
0/0
0/0
n/a
n/a
n/a
Footnote:
*
All of the Board’s committees were established immediately prior to
Admission. The Nomination Committee did not meet formally during the
period of time between Admission and the year-end.
This table only shows those meetings which each Director
attended as a member rather than as an invitee. Where “n/a”
appears in the table the Director listed is not a member of the
Committee. Directors do not participate in meetings when
matters relating to them are discussed.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 50
Corporate Governance
Statement
continued
The Board aims to hold at least two Board meetings each year at
Group business locations, both in the UK and the US, to enable
Board members to gain a deeper understanding of the business.
This also provides senior managers from across the Group with
the opportunity to present to the Board as well as to meet the
Directors on more informal occasions.
Since the year-end the Board, Audit Committee, Remuneration
Committee and Nomination Committee each met on one occasion.
The meetings were attended by all those eligible to attend.
External directorships
Any external appointments or other significant commitments of
the Directors require the prior approval of the Board. The external
commitments of the Board are set out in their biographies on
pages 42 and 43. The Board is content with the level of external
directorships of its Chairman and independent Non-Executive
Directors as these do not impact on the time that any Director
devotes to the Company and we believe that this experience
only enhances the capability of the Board. None of the Executive
Directors hold external directorships save for Wayne Sheppard,
who is Principal of the Construction Products Association, a
Director of the British Ceramic Confederation, and a Director
of the Brick Development Association.
Accountability
Internal controls
The Board remains ultimately accountable for a clear number of
areas that are contained in its “Matters Reserved for the Board”,
including responsibility for the effectiveness of internal control and
risk management. The Board as a whole discuss, challenge and
give approval on the financial statements. Details of the internal
controls of the Company (including a description of the main
features of its internal control and risk management arrangements
in relation to the financial reporting process) and the manner in
which the Board and its committees assess the effectiveness of
these controls are set out as part of the Audit Committee Report
on pages 53 to 55.
The Group’s internal control is based on assessment of risk and
a framework of control procedures to manage risks and to monitor
compliance with procedures. The internal control systems are
designed to meet the Group’s particular needs and the risks
to which it is exposed and, by their nature, can provide only
reasonable, not absolute, assurance against material loss to
the Group or material misstatement in the financial accounts.
The Group has a process for the identification, evaluation and
management of significant business risks. The Board has during
the period identified and evaluated the key risks and has ensured
that effective controls and procedures are in place to manage
these risks.
The Executive Directors meet regularly with representatives from
the businesses to address financial, human resource, legal, risk
management and other control issues. During the period the
Board has performed a review of the effectiveness of internal
control and the management of risks as part of the IPO.
In relation to the Board’s responsibility to approve the financial
statements the Board sets out its Directors’ Responsibility
Statement at the end of this section. The Board also retains its
responsibility to approve the annual budget. Monitoring of the
annual budget, following approval, is carried out through regular
updates against budget circulated as part of the Chief Financial
Officer’s report to the Board. In addition, the Board reviews all
significant capital expenditure requests separately, after a general
approval for the quantum of the capital expenditure budget has
been granted. Measures such as these maintain adequate levels
of control and scrutiny over the budget and capital expenditure
at Board level. The Board recognises that its committees are
only empowered to make recommendations to the Board for
their approval, unless a specific authorisation to approve certain
matters is granted. To facilitate information flows, a verbal
update is given by the Chairman of the relevant committee in
the subsequent Board meeting following a committee meeting.
The Board intends to conduct a review of the effectiveness of the
Group’s system of risk management and internal control in 2016,
in accordance with the FRC’s guidance on Risk Management,
Internal Control and Related Financial and Business Reporting.
Fair, balanced and understandable – a matter for the
whole Board
As part of its considerations as to whether the 2015 Annual Report
& Accounts are fair, balanced and understandable, and provide
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy, the Board
takes into account the following:
• the Chairman and Chief Executive provide input to and agree
on the overall messages and tone of the Annual Report at an
early stage;
• individual sections of the Annual Report and financial statements
are drafted by appropriate senior management with regular
review meetings to ensure consistency of the whole document;
• detailed reviews of appropriate draft sections of the Annual
Report & Accounts are undertaken by the Executive Directors;
• a final draft is reviewed by the Audit Committee and the auditors
on a timely basis to allow sufficient consideration and is
discussed with the Chief Financial Officer and senior
management prior to consideration by the Board; and
• the Chief Financial Officer, in his February Board paper, includes
a checklist of areas that the Board should take into consideration
in considering the fairness, consistency and balance of the final
draft of the Annual Report and financial statements, including
whether the Board considers that there are any omissions
in information.
The Statement of Going Concern and the Viability Statement
appear on page 80.
Jamie Pike
Chairman
10 March 2016
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
The Directors are of the opinion that the Annual Report &
Accounts, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess
the Company’s position, performance, business model and strategy.
51
Directors’ Responsibility Statement
The Directors who were in office as at 31 December 2015 and
whose names and functions are given on pages 42 and 43
confirm that to the best of their knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Group and Company and the undertakings included in
the consolidation taken as a whole; and
• the Strategic Report and Directors’ Report include a fair
review of the development and performance of the business
and the position of the Group and Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
This Responsibility Statement was approved by the Board of
Directors on 10 March 2016 and is signed on its behalf by:
Wayne Sheppard
Chief Executive Officer Chief Financial Officer
10 March 2016
10 March 2016
Kevin Sims
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (“IFRS”) as adopted
by the European Union and Article 4 of the IAS Regulation and have
elected to prepare the Parent Company financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards), including FRS
102, The Financial Reporting Standard applicable in the United
Kingdom and Republic of Ireland, and applicable law. Under
company law the Directors must not approve the Accounts unless
they are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the profit or loss of the
Group for that period.
In preparing the Parent Company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable United Kingdom Accounting Standards
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard No.1 requires Directors to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions,
other events and conditions on the entity’s financial position
and financial performance; and
• make an assessment of the Group’s ability to continue as
a going concern and prepare the financial statements on
the going concern basis unless it is inappropriate to presume
that the Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and to disclose with reasonable accuracy
at any time the financial position of the Group and Company and
to enable them to ensure that the financial statements comply
with the Companies Act 2006 and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
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Activities of the Committee up to the date of this report
The Committee did not meet between Admission and the year-end.
The following matters were considered by the Committee after the
year-end to:
• Adopt the Committee’s Terms of Reference;
• Recommend the appointment of Tracey Graham and Lynn
Minella as Non-Executive Directors. Egon Zehnder, the external
search firm, which has no other connection to the Company,
worked with me to devise a long list of candidates. A short
list was then compiled and the Committee, together with the
Executive Directors, met with these candidates and was able
to formulate its recommendation to the Board; and
• Review succession planning for the Board.
Succession planning and Board diversity
The composition of the Board is constantly under review with
the aim of ensuring that it has the depth and breadth of skills
to discharge its responsibilities effectively.
The aim of the Committee is to ensure that the Board is well
balanced and appropriate for the needs of the business and
the achievement of its strategy, comprising Directors who are
appropriately experienced and are independent of character and
judgement. Before recommending new candidates to the Board,
the Nomination Committee takes account of the balance of skills,
knowledge, experience and diversity of psychological type,
background and gender. However, all Board appointments will
always be made on merit. Additional information is included in
the Corporate Governance Statement on page 48.
Ensuring the Directors’ independence and commitment
to their roles
In making recommendations to the Board on Non-Executive
Director appointments, the Nomination Committee specifically
considers the expected time commitment of the proposed
Non-Executive Director and other commitments they already have.
Agreement of the Board is also required before a Director may
accept any additional commitments to ensure possible conflicts
of interest are identified and that they will continue to have
sufficient time available to devote to the Company. Any other
conflicts of interest are also considered at each Board meeting.
Committee effectiveness
The effectiveness of the Committee will be reviewed on an annual
basis by both the Board and the Committee. It is anticipated that
the first review will take place in November 2016, at which time the
Committee will have been in existence for more than one year.
Jamie Pike
Chairman of the Nomination Committee
10 March 2016
52
Nomination
Committee
Report
Dear Shareholder,
I am pleased to present to you the report of the Nomination
Committee (the “Committee”) for the financial period ended
31 December 2015.
Committee membership
Although the Committee was not compliant with the
recommendations of the Governance Code on Admission,
following the appointment of Tracey Graham and Lynn Minella
as independent Non-Executive Directors and members of the
Committee on 3 February 2016, the Committee is now compliant.
The members of the Nomination Committee during the period
ended 31 December 2015 were as follows: myself as Chairman,
Jonathan Nicholls, the Senior Independent Non-Executive Director,
and Michel Plantevin.
The current members of the Committee are myself as Chairman,
Jonathan Nicholls, Tracey Graham, Lynn Minella (all of whom are
independent Non-Executive Directors) and Michel Plantevin.
Responsibilities
The key responsibilities of the Committee are as follows:
• Develop and maintain a formal, rigorous and transparent
procedure for making recommendations to the Board on
appointments, structure, size and composition of the Board;
• Succession planning for Directors and other senior managers;
• Evaluate the balance of skills, diversity, knowledge and
experience of the Board;
• Prepare a description of the role and capabilities required for
a particular appointment and lead the recruitment process;
• Identify and nominate, for the approval of the Board, candidates
to fill Board and senior management vacancies as and when
they arise;
• Review the time commitment required from Non-Executive
Directors and to evaluate the membership and performance
of the Board and its Committees; and
• Recommend the re-appointment of Non-Executive Directors
and re-election of Directors.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Audit
Committee
Report
Dear Shareholder,
Welcome to the first Report of the Audit Committee (the
“Committee”). The Committee reviews and makes recommendations
to the Board on the Group’s financial reporting, internal control and
risk management systems and the independence and effectiveness
of the external auditors. The Committee provides independent
monitoring, guidance and challenge to Executive Management in
these areas. Through this process the Committee’s aim is to ensure
high standards of corporate and regulatory reporting, an appropriate
control environment, risk management and compliance. The
Committee believes that excellence in these areas enhances
the effectiveness and reduces the risks to the business.
53
The Committee met formally on one occasion prior to the period end.
However, I have maintained a regular dialogue with the Chief Financial
Officer and external auditor since Admission.
The Committee met in February 2016 to consider, amongst other
matters, the Annual Report & Accounts. The Committee intends to
meet at least four times per year going forward, in alignment with
the financial reporting timetable.
Purpose and aim
The purpose of the Committee is to make recommendations on
the reporting, control, risk management and compliance aspects
of the Directors’ and the Group’s responsibilities, providing
independent monitoring, guidance and challenge to Executive
Management in these areas.
Key responsibilities include:
• To ensure the consistent application of, and any changes to,
significant accounting policies across the Group;
• To monitor the integrity of the financial statements of the Group;
• To monitor and challenge the effectiveness of the Group’s
internal financial controls, as well as the internal control and
risk management systems;
• To monitor the effectiveness of the Group’s whistleblowing
procedures;
• To evaluate the effectiveness of the Group’s Internal Audit function;
• To make recommendations to the Board on the appointment,
independence and effectiveness of the Group’s external auditor
and to negotiate and agree their remuneration; and
• To develop and implement the Group’s non-audit services policy.
The Audit Committee’s Terms of Reference are available on the
Company’s website (www.ibstockplc.com/investors).
Accounting and key areas of judgement
A key factor in the integrity of financial statements is ensuring that
suitable accounting policies are adopted and applied consistently on
a year on year basis. The Committee commenced this process at
the December 2015 meeting and intends to use the Audit Planning
meetings in May and November each year to consider proposed
accounting treatments for major transactions, significant reporting
judgements and key assumptions related to those judgements.
The Committee is appointed by the Board. The Committee will
continue to keep its activities under review to ensure that it
complies with any changes in the regulatory environment.
Audit Committee activities during the period
At the meeting held in December 2015 the Committee:
In October 2015, Ibstock plc was admitted to the premium listing
segment of the Official List of the Financial Conduct Authority
and to trading on the Main Market of the London Stock Exchange.
Prior to the Group’s flotation the Directors performed a review
which did not highlight the requirement for any significant changes
to the Group’s processes and procedures.
I shall be available at the Annual General Meeting to answer
any questions shareholders may have regarding the work of
the Committee.
Audit Committee and advisers
From Admission until February 2016, the Committee comprised
Jamie Pike and myself. During February 2016, Tracey Graham
and Lynn Minella were appointed to the Board as Non-Executive
Directors and also became members of the Committee. Following
their appointment, Jamie Pike stood down from the Committee
on 24 February 2016.
The Audit Committee provides a forum for reporting and
discussion with the Group’s external auditors in respect of the
Group’s half year and period end results and meetings are also
attended by certain Executive Directors and senior managers
by invitation.
Undertook a year-end planning update, which included:
• Meeting with the external auditors to review their proposals for
the audit of the Group for the period ended 31 December 2015;
• Review of:
– significant accounting, reporting and judgement matters
– the going concern assessment approach – see page 80
– the Group’s approach to producing a viability statement
over a three-year period
– developments in corporate governance and reporting
requirements and proposed disclosure in the 2015 Annual
Report in relation to the UK Corporate Governance Code
– areas of potential fraud and mitigating controls in place
– whistleblowing policy – see page 55
• Agreement of 2015 audit fee; and
• Approval of the policy on the engagement of the external
auditor for the provision of non-audit services.
Following the year-end the Committee met in February 2016 at
which it:
Undertook a review of the Annual Report & Accounts, which included:
• Confirmation that the Annual Report was fair, balanced,
understandable and provided the necessary information required
by shareholders to assess performance, position, business
model and strategy. The Committee recommended that the
Board approve the Annual Report & Accounts on this basis.
The names and functions of the Directors who were in office
as at 31 December 2015 are given on pages 42 and 43.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 54
Audit Committee Report
continued
Reported to the Board on how the Committee had discharged its
responsibilities, which included:
• Significant risk areas considered:
– Appropriate treatment of customer rebates linked to
revenue recognition
The Group has a number of contracts with its customers
containing volume rebate clauses based on revenue earned in
the period. Given the material nature of the Group’s rebates, the
Committee requested that management review its accounting
practices in this area which confirmed the nature of the basis
of the calculation (with reference to contractual agreements)
and the controls in place to record the rebate and settle in
cash, and input from the external auditor, the Committee was
satisfied that accounting balances at 31 December 2015 were
appropriately recorded.
– Pension accounting
The Group has a defined benefit pension scheme in the UK and
post-retirement obligations in its US operations. Judgement is
taken by management around the assumptions used, including
the impact of sensitivities to these assumptions, by its actuary to
calculate the pension scheme assets and liabilities under IAS 19(R).
The Committee considered the basis of the actuarial calculation
and the assumptions used. In the UK scheme, an actuarial surplus
has been restricted to £0.3 million based on the application of
accounting guidance. Management presented a paper to the
Committee setting out the basis of its treatment in this area and
wider pension accounting judgements and the Committee agreed
with the conclusions reached by management. The Committee
also agreed the recording of the £8.0 million liability in respect
of the US pension.
– Acquisition accounting
The significant business combination that occurred during
February 2015 required complex accounting and disclosure
within the financial statements. The Committee considered the
appropriateness of the judgements taken by management in
arriving at the Group’s acquired fair value balance sheet. The
Committee considered the independent valuations received by
management in support of the assets and liabilities recognised,
together with management’s own assessments, and received
input from the external auditor as to the adequacy of the
resulting accounting and related disclosures. The Committee
agreed with the judgements reached by management.
• Other key areas of consideration:
– Carrying value of non-current assets
The Group holds significant asset values in the form of mineral
reserves, land and buildings, and property, plant and equipment.
The Committee considered the processes adopted by
management in assessing whether, in their judgement, any
indicators of impairment existed. The Committee reviewed
management’s conclusions in this area and concurred with
management’s judgement that no indicators of impairment
existed at the balance sheet date and, as such, no detailed
impairment testing was required.
– Provisions and contingencies
The Group holds a number of provisions and contingent
liabilities as at the period end date. The Committee reviewed
the judgements made by management in this area, and
agreed that the proposed quantum of the provisions was
appropriate and that contingent liabilities had been
suitably disclosed.
– Classification of non-underlying items
The principal items recognised as exceptional are costs related
to the acquisition during the period and the subsequent IPO,
and negative goodwill arising on the acquisition of the operating
companies. The Committee considered both the nature and
the quantum of those items disclosed as exceptional within
the 2015 financial statements. Management demonstrated
that the treatment was in line with current practice and existing
guidance issued by the FRC. The Committee reviewed
management’s analysis of the classification and assessment
of items’ nature and received input from the external auditor
to confirm that such accounting treatment is consistent with
accounting guidance. The Committee concluded that treatment
of these items as exceptional was in line with the Group’s
accounting policy, and was appropriately disclosed.
– IFRS first time reporting
The 2015 Annual Report & Accounts is the Group’s first
publication since its listing in October 2015. As a result,
the Committee considered, and satisfied itself, with due
input from management and the external auditor, that the
appropriate accounting policies were in place and that
adequate disclosure had been included in the
consolidated financial statements.
• Other activities:
– Explanation of the assessment of effectiveness of the
external audit process.
– Recommendation to the Board on the reappointment and
remuneration of the external auditor.
– Consideration and recommendation to the Board to
approve the Viability Statement. The Committee reviewed and
challenged management’s underlying assertions (e.g. look out
period, assumptions and consistency with the IPO forecasts).
– Management confirmed to the Committee that they were not
aware of any misstatements, either material or immaterial, in
the documents and information underpinning their assessment.
After reviewing the reports from management and consulting
where necessary with the external auditors the Committee is
satisfied that the financial statements appropriately address the
critical judgements and key estimates, both in respect of the
amounts reported and the disclosures. The Committee is also
satisfied that the processes used for determining the value of
the assets and liabilities have been appropriately scrutinised,
challenged and are fairly stated.
Fair, balanced and understandable
It is the Board’s responsibility to determine whether the 2015
Annual Report and financial statements are fair, balanced
and understandable. The Committee’s role in that process
is covered on page 50.
Internal controls and risk management
The Audit Committee supports the Board’s assessment of
principal risks and the Board’s review of the Group’s internal
financial controls, as well as the internal controls and risk
management processes.
Internal audit
The Group has a focused internal audit function which performs
a rolling programme of key control reviews. The Committee
acknowledges the importance of an effective internal audit function
and has commissioned RSM UK Group LLP to undertake a
“health-check” of the Group’s current Internal Audit arrangements
and the wider control environment. A report on the findings is
expected to be received in May 2016 and the Committee will
act upon those recommendations as it considers appropriate.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 55
Following the IPO, a non-audit services policy has been developed
to clearly set out the non-audit services that may be provided by
the external auditor. Under the policy, prior approval is required by
the Committee for any non-statutory assignments where the fee
would exceed £100,000, or where such an assignment would take
the cumulative total of non-audit fees paid to the external auditors
over 70% of that year’s statutory audit fees. However, when
appropriate, a detailed calculation will be performed to ensure that
the Group is compliant with the European Union’s New Statutory
Audit Framework, which applies to financial years beginning on
or after 17 June 2016.
Fraud, whistleblowing and the Bribery Act
The Committee monitors any reported incidents under its
whistleblowing policy. This policy is included in the Employee
Handbook and sets out the procedure for employees to raise
legitimate concerns about any wrongdoing in financial reporting
or other matters such as:
• something that could be unlawful;
• a miscarriage of justice;
• a danger to the health and safety of any individual;
• damage to the environment; or
• improper conduct.
There were no concerns notified to the Group that required the
attention of the Committee during the period under review and up
to the date of this report. The Committee also reviews the Group’s
procedure for detecting fraud and the systems and controls in
place to prevent a breach of anti-bribery legislation. The Group
is committed to a zero-tolerance position with regard to bribery.
Anti-bribery guidance and training is provided to certain employees
applying what the Group has determined to be a risk-based and
proportionate approach. The Group maintains a record of all
employees who have received this guidance and training.
The Committee considers that it has acted in accordance with
its Terms of Reference and has ensured the independence,
objectivity and effectiveness of the external and internal auditors.
The Company has complied since Admission up to the date of
this report with the provisions of the Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee
Responsibilities Order 2014).
Jonathan Nicholls
Chairman of the Audit Committee
10 March 2016
The external audit, review of its effectiveness, non-audit
services and auditor reappointment
The Committee advises the Board on the appointment of the
external auditors and their effectiveness, independence and
objectivity, and discusses the nature and results of the audit
with the external auditors. As part of the review of the effectiveness
of the external audit process, a formal evaluation process
incorporating views from the Committee and relevant members of
management will be considered by the Committee and feedback
will be provided to the external auditors. These reviews
are expected to include:
• the effectiveness of the external audit firm;
• quality controls;
• the audit team;
• audit fee;
• audit communications and effectiveness;
• governance and independence;
• ethical standards; and
• potential impairment of independence by non-audit fee income.
The Committee also considers the effectiveness of management
in the external audit process in respect of the timely identification
and resolution of areas of accounting judgement with input from
the external auditors as appropriate; and the timely provision of
the draft half year results announcement and Annual Report
& Accounts for review by the auditors and the Committee.
Having undertaken its review, in the opinion of the Committee,
it is content with the relationship it has with the external auditors
and the Committee is satisfied that they are independent and
effective. The Committee has, therefore, recommended to the
Board that Ernst and Young LLP (“EY”) be reappointed as auditor
at the 2016 Annual General Meeting. There are no contractual
obligations restricting the Company’s choice of external auditor.
Following the sale by CRH plc, the Group has retained the existing
external auditors and therefore EY have been the Company’s external
auditors since it’s incorporation in September 2015. In accordance
with the recent changes to the UK Corporate Governance Code,
CMA order and EU Audit Directive, it is the Group’s intention to
put the audit out to tender at least once every 10 years.
The Committee has written terms of reference which have
been published on the Company’s corporate website at
www.ibstockplc.com/investors and have been summarised within
this report. In addition, the Committee intends to formalise an
annual plan in 2016 to address the key areas for review, the reports
from which will highlight to the Board any required developments
in its risk management systems.
In addition to the review of the formal management letter from the
external auditors which outlines how points raised by them have
been addressed by management, feedback is sought from the
external auditors on the conduct of members of the finance team
during the audit process. In addition, I have met with the lead
audit partner outside the formal Committee process and will
do so during the year on a regular basis.
The external auditors are responsible for the annual statutory
audits of the Group’s subsidiaries and other services which the
Committee believe they are best placed to provide.
EY provided reporting accountant services in relation to the IPO.
Details of the amounts paid to the external auditor are set in
Note 5 to the financial statements. Since Admission the auditors
have not undertaken any new assignments outside the scope of
the statutory audit. EY has provided tax compliance services in
respect of the US business, which will cease in 2016. With this
exception, and in line with good practice, EY does not provide
taxation services for the Group. Such services are currently
provided by PricewaterhouseCoopers LLP.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 56
Directors’
Remuneration
Report
Remuneration Committee
Chair’s Annual Statement
Dear Shareholder,
As the Chair of the Remuneration Committee, I am pleased to
present the report of the Board covering the Remuneration Policy
(the “Policy”) and practice for the first time as a listed company.
Work on the Policy was started following the initial share offering
on 27 October 2015. In February of 2016, I was appointed to the
Board and as Chair of the Remuneration Committee. Tracey
Graham was also appointed to the Committee in February. Since
then, the Committee has reviewed and built on the remuneration
work done by the Board in the lead up to the IPO and published in
the prospectus. Having been a member at the time of Admission,
Mr Sheppard stepped down from the Committee in February.
Our goal is to have a Remuneration Policy which supports the
Group’s goals to extend its position in the building products
industry and to deliver long-term sustainable growth. In our new
Remuneration Policy, we are striving to incentivise and motivate the
leadership team to implement the Company’s strategic goals and
to also ensure they are aligned with shareholder expectations. This
has guided our thinking and actions in our work. This report lays
out the core principles of our Remuneration Policy and our practice
over the past year. In our Policy description we have worked to
provide the transparency and clarity to enable our shareholders
to understand the intent of our remuneration.
Remuneration Committee members
Lynn Minella (Chair)
Tracey Graham
Jonathan Nicholls
Jamie Pike
Structure of the report
• Annual Statement (pages 56 and 57)
• Directors’ Remuneration Report “at a glance” (pages 58 to 60)
• Directors’ Remuneration Policy (pages 61 to 73)
• Annual Report on Remuneration (pages 74 to 78)
Our core principles of remuneration
• To ensure senior executives are attracted, retained and
motivated to drive the next stage of development in the
Company post-IPO;
• To incentivise the management team in extending the
Company’s position in the building products industry; and
• To deliver long-term sustainable growth.
Company highlights for the 2015 financial period
2015 was a transitional year for the Group as a result of the
public listing of the Company on 27 October. Extensive work
was undertaken by the senior management team in preparation
for the IPO to ensure its success.
Throughout the transition and post IPO, the CEO, the CFO and
the senior management team have continued to drive the Group’s
strategy to extend its position in the building products industry and
to be its customers’ partner of choice by providing consistent high
quality, reliable and innovative products with a constant focus on
strong customer service and value.
The effectiveness of the senior management team in implementing
this strategy has been substantiated in the level of satisfaction of
the Company’s KPIs. A number of the Company’s KPIs (Adjusted
EBITDA and Adjusted Operating Cash Flow) and operational goals
were reflected in the bonus targets for 2015. Full details of the
strategy and KPIs are contained on pages 22 to 25. For 2015
maximum bonuses were earned by the Executive Directors.
Remuneration Committee decisions and activity
following the IPO
The Group’s Remuneration Policies and practices were reviewed
extensively in preparation for the IPO to ensure appropriate
remuneration arrangements were in place to support Company
strategy following the listing of the Company.
The Remuneration Policies and practices that were outlined in the
prospectus at the time of the Company’s listing in October 2015
have been largely maintained. However, we have taken the
opportunity to review all the key components of remuneration
since the IPO to ensure that the proposed Remuneration Policy is
fit-for-purpose as a listed Company and aligns with the Company’s
strategic objectives and shareholder expectations.
In addition, we have undertaken the following activity as a
Remuneration Committee:
• determined the Committee’s Terms of Reference;
• formulated the Company’s Remuneration Policy as a listed
company; and
• completed the Company’s first Remuneration Report as a
listed company.
We shared our Policy with our top shareholders and the main
shareholder bodies in March prior to its formal publication.
It was a valuable opportunity to receive feedback on our
Remuneration Policy.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 57
Notes
This report has been prepared in accordance with Schedule 8 to The Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations
2008 as amended in 2013, the provisions of the current Corporate Governance
Code and taking into account the new UK Corporate Governance Code
(applying for financial years beginning on or after 1 October 2014) (the “Code”)
and the Listing Rules. The report consists of three sections:
• The Annual Statement by the Remuneration Committee Chairman and
associated “at a glance” section;
• The Remuneration Policy Report which sets out the Company’s
Remuneration Policy for Directors and the key factors that were taken into
account in setting the Policy. This Policy will apply for three years from its
date of approval at the 2016 AGM; and
• The Annual Report on Remuneration which sets out payments made to
the Directors and details the link between Company performance and
remuneration for the 2015 financial period.
The Chair’s Annual Statement and the Annual Report on Remuneration will be
subject to an advisory vote at the AGM. The Remuneration Policy will be subject
to a binding vote.
Two resolutions will be put to shareholders at the AGM.
We will first seek approval for the Remuneration Policy
Report (Part A: pages 61 to 73). This outlines the Company’s
Remuneration Policy for Executive Directors effective from the
2016 Annual General Meeting (AGM). The vote is binding on the
Remuneration Committee and has a duration of up to three years.
The second is seeking approval for the Annual Report on
Remuneration (Part B: pages 74 to 78). It details decisions and
actions taken by the Committee based on the performance of the
Company and remuneration consequences. This section of the
report is subject to an annual advisory vote.
Our goal has been to be thoughtful and clear in the layout of
both parts of the report and I look forward to your support on both
resolutions.
I welcome any feedback from the Company’s shareholders.
Lynn Minella
Chair of the Remuneration Committee
10 March 2016
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OVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCEIBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCE 58
Directors’
Remuneration Report
continued
At a glance
Introduction
In this section, we set out the remuneration outcomes for the 2015 financial period and an overview of our proposed Remuneration Policy
for 2016 (subject to a binding vote by shareholders at our 2016 AGM).
2015 financial period:
Remuneration outcomes
2015 was a transitional year for the Company as we successfully floated in October 2015 to become a listed company. This marks a
significant change for the Company and for the roles of our Executive Directors.
Despite the backdrop of changes for the Company in 2015, the Company delivered strong operational performance in the period. Our
2015 results and the associated bonus outcomes outlined below reflect the performance measures and targets put in place during our
2015 financial period and their level of satisfaction.
2015 bonus outcomes
Performance condition
Weighting
Adjusted EBITDA
Adjusted Operating Cash Flow
Personal objectives
Total
Total
33%
33%
33%
100%
100%
Threshold
performance
required
Maximum
performance
required
Actual
performance
£68.2m
£39.3m
£85.3m
£52.6m
£107.0m
£119.3m
Personal objectives for 2015 met in full.
Percentage of
maximum
performance
achieved
Bonus value achieved1
Wayne
Sheppard2 Kevin Sims3
100%
100%
100%
100%
£84,080
£84,080
£84,080
100%
£50,389
£50,389
£50,389
100%
100% £252,240
£151,167
Notes:
1. Under the terms of the 2015 bonus, 0% for each element is payable for achieving the threshold performance increasing to 100% for achieving maximum performance.
Achievements between these points are calculated on a straight line basis.
2. Bonus opportunity of 60% of salary pre-IPO and 125% of salary post-IPO. Bonus payment based on base salary of £308,100 pre-IPO and £425,000 following the IPO.
3. Bonus opportunity of 50% of salary pre-IPO and 125% of salary post-IPO. Bonus payment based on base salary of £200,265 pre-IPO and £290,000 following the IPO.
The detail of the outcomes can be found in the Annual Report on Remuneration on pages 74 to 78. The 2015 bonus will be paid in cash.
The only incentive arrangement operated in 2015 was the bonus plan. The first awards under the LTIP adopted prior to the IPO will be
in 2016.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Equity exposure of the Executive Directors
As a result of the IPO, both of the Executive Directors have significant shareholdings in the Company as set out below, providing them
with a material stake in the business.
The following chart sets out all subsisting interests in the equity of the Company held by the Executive Directors at 31 December 2015.
Both Executive Directors have shareholdings substantially in excess of the Company’s minimum shareholding requirements which are
currently 200% of base salary for the Chief Executive Officer and 150% for the Chief Financial Officer.
59
Shareholding requirements
as % of salary
Wayne Sheppard
Shareholding requirement
200%
Value of beneficially owned shares
Value of/gain on interests over shares
(i.e. unvested/unexercised awards)
0%
Kevin Sims
Shareholding requirement
150%
Value of beneficially owned shares
Value of/gain on interests over shares
(i.e. unvested/unexercised awards)
0%
5,907%
5,627%
The number of shares of the Company in which current Directors had a beneficial interest as at 31 December 2015 are set out in detail
on page 76.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 60
Directors’
Remuneration Report
continued
2016 financial year:
Our proposed Remuneration Policy for implementation in 2016
On the IPO, the remuneration arrangements for the Group were updated to reflect the Group’s new public status and to align with Group
strategy as it transitioned into a listed environment as a FTSE 250 company, as outlined in the IPO prospectus.
The Remuneration Committee has reviewed and considered the key components of remuneration since the IPO to ensure that the
proposed Remuneration Policy is fit-for-purpose and aligned with the expectations of a listed Company.
Our proposed Remuneration Policy (summarised below) has been designed to align remuneration of our Executive Directors with Group
strategy and to drive continued success within a remuneration framework that meets the shareholder and governance expectations of
a FTSE 250 company.
Key elements and time period
Year
+1
+2
+3
+4
+5
Overview of Remuneration Policy for 2016
Base salary
Pension
Benefits
Annual and
Deferred Bonus
Plan (“ABP”)
Cash
Deferred award
LTIP
For 2016 base salaries for the CEO and CFO will be £425,000
and £290,000 respectively. The Executive Directors’ Service
Agreements specify that a base salary review will take place
with effect from 1 January 2016 and each anniversary
thereafter. Both Executive Directors declined a January 2016
review and any further review until 1 January 2017.
The maximum contribution into the defined contribution plan
or a salary supplement in lieu of pension will be 20% of gross
basic salary.
Standard benefits will be provided. See Remuneration Policy
for further details.
The Committee can determine the proportion of the bonus
earned under the ABP provided as an award of deferred
shares.
For 2016 the maximum bonus opportunity will be 125% of
salary for the CEO and CFO.
The performance conditions and their weightings for the
2016 annual bonus are as follows:
• Adjusted EBITDA (20%);
• Adjusted Operating Cash Flow (20%);
• ROCE (20%);
• NPS (Net Promotor Score) (10%);
• LTAs (Lost Time Accidents) (10%); and
• Personal objectives (20%).
The level of deferral in shares will be one-third of the
bonus earned.
• The performance conditions for awards will be equally
weighted between Adjusted Earnings per Share (“EPS”)
growth and comparative Total Shareholder Return (“TSR”)
assessed over a three-year performance period.
• For the achievement of threshold performance, 25% of
the element will vest with straight line vesting in between
to maximum performance.
In 2016 the maximum annual LTIP award of 100% of
salary will be awarded to the CEO and CFO.
•
• The Committee is in the process of determining the targets
in respect of the above performance conditions for the first
LTIP grant at the date of this report. The detail of the
performance targets will be disclosed at the date of grant.
The Committee proposes to implement the policy for the 2016 financial year, subject to shareholder approval at our 2016 AGM. Further
details of the Remuneration Policy and how our proposed Remuneration Policy aligns to Group strategy is set out in the following section.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 61
Part A – Directors’ Remuneration Policy
Introduction
In accordance with the remuneration reporting regulations, the Directors’ Remuneration Policy (the “Policy”) as set out below will become
formally effective at the AGM on 26 May 2016 on the basis of shareholder approval and will apply for the period of three years from the
date of approval.
The Company’s core principles of remuneration are:
• to ensure top executives are attracted, retained and motivated to drive the Company in its next stage of development post-IPO;
• to incentivise management in extending the Company’s position in the building products industry; and
• to deliver long-term sustainable growth.
The Committee will review annually all elements of the remuneration including the base salary, annual bonus levels, proportion of bonus
to be deferred in shares and the annual and long-term incentive performance conditions for the Executive Directors and the selected
members of the senior management team drawing on trends and adjustments made to all employees across the Group and taking
into consideration:
• our business strategy;
• overall Ibstock performance;
• market conditions;
• views of key stakeholders of the business;
• corporate governance considerations; and
• changing views of institutional shareholders and their representative bodies.
Our Remuneration Policy and its link to our Group strategy
The Group’s strategy is laid out on pages 22 to 23.
Ensuring the alignment of the proposed Remuneration Policy to the Company strategy was key for the Remuneration Committee in
developing the proposed Policy below. The key elements of the Company’s strategy and how its successful implementation is linked
to the Company’s remuneration are set out in the following table.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 62
Directors’
Remuneration Report
continued
Strategic priorities
Invest in new capacity
and optimise output
to take advantage of
structural imbalances
in the Group’s market
Penetrate markets
further through
innovative
products
Evaluate opportunities
to expand existing
product portfolio
either through
organic investment
or acquisitions
Continuing to
focus on a safe
working environment
that has the
development of
employees and
customer service
at its core
Equity
ownership
and
retention
of shares
Retain and
reward
Executive
team to
deliver the
strategy
ROCE, Adjusted
EBITDA, Adjusted
Cash Flow, NPS
• The efficient
ROCE, Adjusted
EBITDA, Adjusted
Cash Flow
• An incentive to
grow in the core
markets is provided
through the
Adjusted EBITDA
and Adjusted Cash
low targets.
development of
innovative products
measured through
ROCE and NPS
performance
will be reflected
in increased
profitability
and cash flow.
NPS and LTA
• These measures
target customer
satisfaction and
health and safety in
the workplace and
therefore support
this objective.
TSR
• The generation
Adjusted EPS
• An incentive to
grow this market in
the longer term is
provided through
Adjusted EPS
growth targeted
by the LTIP. The
success of this
element of the
strategy should
be reflected in
long-term TSR
performance.
of cash and profit
growth targeted by
the annual bonus
will help enhance
the value of the
Company which
will be measured
through the
success of the
Company’s TSR
performance
against its
comparators
(a performance
condition under
the LTIP).
ROCE, Adjusted
EBITDA, Adjusted
Cash Flow
• The success
in maximising
operational
excellence will be
reflected through
increased
profitability and
cash flow and the
efficiency of any
investment made
through ROCE
measurement.
Adjusted EPS, TSR
• The success
in maximising
operational
excellence will
be measured
through the
long-term Adjusted
EPS growth
targeted by the
LTIP. In addition,
sustained value
generation will be
reflected in the
share price of the
Company which
will be measured
through the
Company’s TSR
performance
under the LTIP.
Remuneration Policy
(from the date of
shareholder
approval)
Annual bonus
metrics
The maximum bonus
(including any part of
the bonus deferred
into an ABP Award)
deliverable under
the ABP will not
exceed 125% of a
participant’s annual
base salary.
LTIP metrics
Maximum annual
award is normally
100% of salary.
Awards will vest
at the end of
three years.
For 2016 the
performance
conditions for awards
are equally weighted
between:
• Adjusted Earnings
per Share growth;
and
• comparative
Total Shareholder
Return (“TSR”).
Share Incentive
Plan (“SIP”)*
The Sharesave
Plan
Minimum
shareholding
requirements
• Chief Executive
Officer 200%
of salary
• Chief Financial
Officer 150%
of salary
* See Note 25c (v) on page 120.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 63
Maximum opportunity
The Committee ensures that
maximum salary levels are
positioned in line with companies
of a similar size to Ibstock, validated
against companies operating in a
similar sector.
The companies in the comparator
group are organisations in the FTSE
250 excluding financial services, real
estate and equity investment trusts.
The Committee intends to review the
comparator groups each year and
may add or remove companies from
the group as it considers appropriate.
Any changes to the comparator
group will be in the section headed
Implementation of Remuneration
Policy, in the following financial year.
In general, salary increases for
Executive Directors will be in line
with the increase for employees.
The Company will set out in the
section headed Implementation of
Remuneration Policy, in the following
financial year, the salaries for that
year for each of the Executive
Directors (see page 60).
See description of benefits in the
previous column.
Remuneration Policy table
Element of
remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Base salary
Provides a base level of remuneration
to support recruitment and retention of
Executive Directors with the necessary
experience and expertise to deliver the
Group’s strategy.
An Executive Director’s base salary
is set on appointment and reviewed
annually or when there is a change
in position or responsibility.
When determining an appropriate level
of salary, the Committee considers:
• remuneration practices within
the Group;
• the general performance of
the Group;
• salaries within the ranges paid by
the companies in the comparator
group used for remuneration
benchmarking;
• any change in scope, role and
responsibilities; and
• the economic environment.
Individuals who are recruited or
promoted to the Board may, on
occasion, have their salaries set
below the targeted policy level until
they become established in their role.
In such cases subsequent increases
in salary may be higher than the
general rises for employees until
the target positioning is achieved.
The Executive Directors receive a
company car or car allowance, private
health cover, death in service cover
and income protection.
The Committee recognises the need
to maintain suitable flexibility in the
benefits provided to ensure it is able to
support the objective of attracting and
retaining personnel in order to deliver
the Group strategy. Additional benefits
may therefore be offered such as
relocation allowances on recruitment.
The maximum will be set at the cost
of providing the benefits described.
Benefits
Provides a benefits package in line
with practice relative to its comparator
group to enable the Company to
recruit and retain Executive Directors
with the experience and expertise to
deliver the Group’s strategy.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 64
Directors’
Remuneration Report
continued
Remuneration Policy table continued
Element of
remuneration
How it supports the Company’s short
and long-term strategic objectives
Operation
Maximum opportunity
Pensions
Provides a pension provision in line
with practice relative to its comparator
group to enable the Company to
recruit and retain Executive Directors
with the experience and expertise to
deliver the Group’s strategy.
The Company operates a defined
benefit (DB) pension scheme, which is
closed to new members and a defined
contribution (DC) scheme in the UK.
The maximum contribution into the
defined contribution plan or a salary
supplement in lieu of pension will be
20% of gross basic salary.
The Company will set out in the
section headed Implementation
of Remuneration Policy, in the
following financial year the pension
contributions for that year for
each of the Executive Directors
(see pages 60 and 75).
Where the Executive Director is in
the DB scheme, they are entitled to
receive, in addition, annually a cash
lump sum payment equal to 20% of
the difference between the pensions
earnings cap and actual salary.
In the event that any Executive Director
ceases to be a member of the Ibstock
Pension Scheme (defined benefit
scheme) they will be entitled to receive
a maximum employer contribution into
the defined contribution scheme or a
salary supplement in lieu of pension
of 20% of his basic salary per annum.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Element of
remuneration
Annual and
Deferred
Bonus Plan
(“ABP”)
How it supports the
Company’s short and
long-term strategic objectives Operation
Maximum opportunity
Performance metrics
65
The ABP provides a
significant incentive to the
Executive Directors linked
to achievement in delivering
goals that are closely aligned
with the Company’s strategy
and the creation of value
for shareholders.
In particular, the ABP
supports the Company’s
objectives allowing the
setting of annual targets
based on the businesses’
strategy at the time,
meaning that a wider range
of performance metrics can
be used that are relevant
and achievable.
The Committee has
discretion to defer part of
the annual bonus earned in
shares under the ABP. The
advantage of deferral is:
• increased alignment
between Executives
and shareholders created
through deferral and
the increased equity
stake of management
in the Company; and
• amounts deferred in
shares are subject to
a Director’s continuing
employment, which
provides an effective
lock-in.
The maximum bonus (including
any part of the bonus deferred
into an ABP Award) deliverable
under the ABP will not exceed
125% of a participant’s annual
base salary.
Percentage of bonus
maximum earned for
levels of performance:
• Threshold: 0%
• On-target: 50%
• Maximum: 100%
The Board will determine
the bonus to be delivered
following the end of the
relevant financial year.
The annual bonus will
be paid in cash and
deferred shares.
The Company will set out in the
section headed Implementation
of Remuneration Policy, in the
following financial year, the
nature of the targets and their
weighting for each year (see
page 60).
Details of the performance
conditions, targets and their
level of satisfaction for the year
being reported on will be set
out in the Annual Report on
Remuneration.
The Committee can determine
that part of the bonus earned
under the ABP is provided as
an award of deferred shares.
The maximum value of
deferred shares is 50%
of the bonus earned.
The main terms of these
awards are:
• minimum deferral period
of three years, during which
no performance conditions
will apply; and
• the participant’s continued
employment at the end of
the deferral period.
The Committee may award
dividend equivalents on those
shares to plan participants to
the extent that they vest.
The Committee has
the discretion to apply a
holding period of two years
post-vesting for deferred
bonus shares.
An award under the ABP is
subject to satisfying financial
and strategic/operational
performance/personal
performance conditions and
targets measured over a
period of one financial year.
A minimum of 50% of the
targets shall be financial.
The Board will determine
the bonus to be delivered
following the end of the
relevant financial year.
The Committee is of the opinion
that given the commercial
sensitivity arising in relation to
the detailed financial targets
used for the annual bonus,
disclosing precise targets for
the ABP in advance would not
be in shareholder interests.
Actual targets, performance
achieved and awards made
will be published at the end of
the performance periods so
shareholders can fully assess
the basis for any pay-outs
under the annual bonus.
In exceptional circumstances
the Committee retains the
discretion to:
• change the performance
measures and targets and
the weighting attached to the
performance measures and
targets part-way through a
performance year if there is a
significant and material event
which causes the Committee
to believe the original
measures, weightings
and targets are no longer
appropriate; and
• make downward or upward
movements to the amount
of bonus earned resulting
from the application of the
performance measures,
if the Committee believe
that the bonus outcomes
are not a fair and accurate
reflection of business
performance.
Any adjustments or
discretion applied by the
Committee will be fully
disclosed in the following
year’s Remuneration Report.
The ABP contains clawback
and malus provisions.
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Directors’
Remuneration Report
continued
Remuneration Policy table continued
Element of
remuneration
Long-Term
Incentive
Plan
(“LTIP”)
How it supports the
Company’s short and
long-term strategic objectives Operation
Maximum opportunity
Performance metrics
Normal maximum
value of 100% of salary
p.a. based on the
market value at the
date of grant set in
accordance with the
rules of the LTIP.
In exceptional
circumstances the
Committee may
grant an award with
a maximum of 150%
of salary.
25% of the award
will vest for threshold
performance.
100% of the award
will vest for maximum
performance. There
is straight line vesting
between these points.
The purpose of the LTIP is
to incentivise and reward
Executive Directors in relation
to long-term performance
and achievement of
Group Strategy.
This will better align
Executive Directors’ interests
with the long-term interests
of the Group and act as a
retention mechanism.
The use of comparative
TSR measures the success
of the implementation of
the Company’s strategy in
delivering an above market
level of return.
The use of Adjusted EPS
ensures Executive Directors
are focused on long-term
financial performance to
ensure this flows through
to long-term sustainable
Adjusted EPS growth.
Awards are granted annually to
Executive Directors in the form
of a conditional share award,
nil cost option or restricted
share award.
Details of the performance
conditions for grants made
in the year will be set out
in the Annual Report on
Remuneration and for
future grants in the section
headed Implementation of
Remuneration Policy, in the
future financial year (see
page 60).
These will vest at the end of a
three-year period subject to:
• the Executive Director’s
continued employment at
the date of vesting; and
• satisfaction of the
performance conditions.
The Committee may award
dividend equivalents on awards
to the extent that these vest.
The Committee has the
discretion to apply a holding
period of two years post-
vesting for the LTIP.
The performance conditions
for the 2016 LTIP awards are
Adjusted EPS growth and
comparative TSR.
The Committee may change
the balance of the measures,
or use different measures
for subsequent awards,
as appropriate.
No material change will
be made to the type of
performance conditions without
prior shareholder consultation.
In exceptional circumstances
the Committee retains the
discretion to:
• vary, substitute or waive the
performance conditions
applying to LTIP Awards if the
Board considers it appropriate
and that the new performance
conditions are deemed
reasonable and are not
materially less difficult to satisfy
than the original conditions;
• make downward or upward
movements in the vesting of
the LTIP resulting from the
application of the performance
measures if the Committee
believe that the outcomes are
not a fair and accurate reflection
of business performance.
The LTIP contains clawback
and malus provisions.
The Company in accordance
with the legislation may
impose objective conditions
on participation in the SIP
for employees.
The maximums set
by legislation from
time to time.
Share
Incentive
Plan (“SIP”)
The SIP is an all-employee
share ownership plan
which has been designed
to encourage all employees
to become shareholders in
the Company and thereby
align their interests
with shareholders.
The
Sharesave
Plan
The Sharesave Plan is an
all-employee savings related
share option plan which has
been designed to enable
UK employees to acquire
an interest in the Company
and thus align their interests
with shareholders.
The Company operates a
SIP in which the Executive
Directors are eligible to
participate (which is in line with
HMRC legislation and is open
to all eligible staff).
The Executive Directors shall
be entitled to participate in any
other all employee arrangement
implemented by the Company.
The Company operates a
Sharesave Plan in which the
Executive Directors are eligible
to participate (which is in line
with UK legislation and is
open to all eligible staff).
The maximums set by
the UK legislation from
time to time.
The Company in accordance
with the legislation may impose
objective conditions on
participation in the Sharesave
Plan for employees.
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Minimum
shareholding
requirement
The Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up over
a five-year period and then subsequently hold a shareholding equivalent to a percentage of base salary. Adherence to
these guidelines is a condition of continued participation in the equity incentive arrangements. This policy ensures that
the interests of Executive Directors and those of shareholders are closely aligned.
The following table sets out the minimum shareholding requirements:
Role
Group Chief Executive Officer
Group Chief Financial Officer
Shareholding requirement (percentage of salary)
200%
150%
The Committee retains the discretion to increase the shareholding requirements.
Illustrations of the application of the Remuneration Policy
The charts below illustrate the remuneration that would be paid to each of the Executive Directors, based on salaries at the start of the
2016 financial year, under three different performance scenarios: (i) minimum; (ii) on-target; and (iii) maximum. The table below these
charts sets out the assumptions used to calculate the elements of remuneration for each of these scenarios. The elements of
remuneration have been categorised into three components: (i) fixed; (ii) annual bonus (deferred bonus); and (iii) LTIP.
Executive Directors’ performance scenarios
Chief Executive Officer
Wayne Sheppard
Minimum
On-target
Maximum
Chief Financial Officer
Kevin Sims
Minimum
On-target
Maximum
100%
£553,874
53%
37%
26%
21%
£1,031,999
35%
28%
£1,510,124
100%
£378,467
53%
37%
26%
21%
£704,717
35%
28%
£1,030,967
Fixed elements
Bonus
LTIP
Element
Fixed
Annual bonus
LTIP
Description
Salary, benefits1 and pension2.
Minimum
Included.
On-target
Included.
Maximum
Included.
Annual bonus (including deferred shares).
Maximum opportunity of 125% of salary.
No annual variable.
50% of maximum
bonus.
100% of maximum
bonus.
Award under the LTIP.
Maximum annual award of 100% of salary.
No multiple year
variable.
50% of the maximum
award.
100% of the maximum
award.
Notes:
1. Based on 2015 benefits payments and pension values as per the Single total figure of remuneration table. The actual benefits and pension contributions for 2016
will only be known at the end of the financial year.
2. See page 74 for the Single total figure of remuneration table and the accompanying notes.
3. In accordance with the regulations share price growth has not been included. In addition, dividend equivalents have not been added to the deferred share bonus
and LTIP share awards.
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Directors’
Remuneration Report
continued
Pay at risk
The charts below set out the single figure of each Executive Director based on whether the elements remain “at risk”. For example:
• payment is subject to continuing employment for a period (deferred shares and LTIP awards);
• performance conditions have still to be satisfied (LTIP awards); or
• elements are subject to clawback or malus for a period, over which the Company can recover sums paid or withhold vesting; further
details of what triggers clawback or malus are set out below.
Figures have been calculated based on on-target performance (fixed elements plus 50% of maximum annual bonus and 50% of the
maximum LTIP). The charts have been based on the same assumptions as set out above for the illustrations of the application of the
Remuneration Policy.
Pay at risk
Chief Executive Officer
Wayne Sheppard
£425,000
£478,125
Annual bonus
£265,625
LTIP
£212,500
£128,874
2016
2017
2018
2019
2020
2021
2022
Chief Financial Officer
Kevin Sims
£290,000
£326,250
Annual bonus
£181,250
LTIP
£145,000
£88,467
2016
2017
2018
2019
2020
2021
2022
At risk
Pension and benefits
Salary
Subject to malus
Subject to clawback
Malus and clawback
The ABP and the LTIP include best practice malus and clawback provisions.
Malus is the adjustment of unpaid bonus and deferred share awards under the ABP and outstanding LTIP awards as a result of the
occurrence of one or more circumstances listed below. The adjustment may result in the value being reduced to nil.
Clawback is the recovery of payments or vested awards under the ABP and vested LTIP awards as a result of the occurrence of one or
more circumstances listed below. Clawback may apply to all or part of a participant’s award and may be effected, among other means,
by requiring the transfer of shares, payment of cash or reduction of awards or bonuses.
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The circumstances in which malus and clawback could apply are as follows:
• discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any Group company;
• the assessment of any performance condition or condition in respect of an ABP and LTIP Award was based on error, or inaccurate
or misleading information;
• the discovery that any information used to determine the cash payment under the ABP or the number of shares subject to an ABP
or LTIP Award was based on error, or inaccurate or misleading information;
• action or conduct of a participant which amounts to fraud or gross misconduct; or
• events or the behaviour of a participant have led to the censure of a Group company by a regulatory authority or have had a significant
detrimental impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant was
responsible for the censure or reputational damage and that the censure or reputational damage is attributable to the participant.
Annual bonus
Deferred bonus
Long-Term Incentive Plan
Malus
Up to the date of payment of a cash bonus To the end of the 3-year deferral period To the end of the 3-year vesting period
Clawback
3 years post the bonus determination
n/a
2 years post-vesting
The Committee believes that the rules of the plans provide sufficient powers to enforce malus and clawback where required.
Discretion
The Committee has discretion in several areas of policy as set out in this report.
The Committee may also exercise operational and administrative discretions under relevant plan rules approved by shareholders as set
out in those rules. In addition, the Committee has the discretion to amend policy with regard to minor or administrative matters where it
would be, in the opinion of the Committee, disproportionate to seek or await shareholder approval.
It is the Committee’s intention that commitments made in line with its policies prior to Admission will be honoured, even if satisfaction of
such commitments is made post the Company’s first AGM following Admission and may be inconsistent with policy.
Recruitment policy
The Company’s principle is that the remuneration of any new recruit will be assessed in line with the same principles as for the Executive
Directors, as set out in the Remuneration Policy table above. The Committee is mindful that it wishes to avoid paying more than it
considers necessary to secure a preferred candidate with the appropriate calibre and experience needed for the role. In setting the
remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding one-off or enhanced
short-term or long-term incentive payments as well as giving consideration for the appropriateness of any performance measures
associated with an award.
The Company’s detailed policy when setting remuneration for the appointment of new Directors is summarised in the table below:
Remuneration element
Recruitment policy
Salary, benefits and pension
These will be set in line with the policy for existing Executive Directors.
Annual bonus
LTIP
Maximum annual participation will be set in line with the Company’s policy for existing Executive
Directors and will not exceed 125% of salary.
Maximum annual participation will be set in line with the Company’s policy for existing Executive
Directors and will not exceed 100% of salary in normal circumstances and 150% of salary in
exceptional circumstances.
Maximum variable
remuneration
The maximum variable remuneration which may be granted in normal circumstances is 225%
of salary (275% of salary if the maximum LTIP grant is made).
“Buyout” of incentives
forfeited on cessation
of employment
Where the Committee determines that the individual circumstances of recruitment justifies the
provision of a buyout, the equivalent value of any incentives that will be forfeited on cessation of
an Executive Director’s previous employment will be calculated taking into account the following:
• the proportion of the performance period completed on the date of the Executive Director’s
cessation of employment;
• the performance conditions attached to the vesting of these incentives and the likelihood of
them being satisfied; and
• any other terms and conditions having a material effect on their value (“lapsed value”).
The Committee may then grant up to the same value as the lapsed value, where possible, under the
Company’s incentive plans. To the extent that it was not possible or practical to provide the buyout
within the terms of the Company’s existing incentive plans, a bespoke arrangement would be used.
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Directors’
Remuneration Report
continued
Where an existing employee is promoted to the Board, the policy set out above would apply from the date of promotion but there
would be no retrospective application of the policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly,
prevailing elements of the remuneration package for an existing employee would be honoured and form part of the ongoing remuneration
of the person concerned. These would be disclosed to shareholders in the Remuneration Report for the relevant financial year.
The Company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the policy which applies to
current Non-Executive Directors.
Payment for loss of office
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses.
If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There
is no agreement between the Company and its Executive Directors or employees, providing for compensation for loss of office or
employment that occurs because of a takeover bid.
The Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing
legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in
connection with the termination of an Executive Director’s office or employment.
Remuneration
element
Salary,
benefits and
pension
ABP cash
awards
Treatment on cessation of employment
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Good leaver reason1
Other reason
Discretion
Performance
conditions will be
measured at the bonus
measurement date.
Bonus will normally be
pro-rated for the period
worked during the
financial year.
No bonus payable for
year of cessation.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be
explained in full to shareholders; and
• to determine whether to pro-rate the bonus to time. The
Remuneration Committee’s normal policy is that it will pro-rate
bonus for time. It is the Remuneration Committee’s intention to
use discretion to not pro-rate in circumstances where there is
an appropriate business case which will be explained in full
to shareholders.
ABP share
awards
All subsisting deferred
share awards will vest.
Lapse of any unvested
deferred share awards.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is the
Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be
explained in full to shareholders;
• to vest deferred shares at the end of the original deferral period
or at the date of cessation. The Remuneration Committee will
make this determination depending on the type of good leaver
reason resulting in the cessation; and
• to determine whether to pro-rate the maximum number of
shares to the time from the date of grant to the date of cessation.
The Remuneration Committee’s normal policy is that it will not
pro-rate awards for time. The Remuneration Committee will
determine whether or not to pro-rate based on the circumstances
of the Executive Director’s departure.
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Good leaver reason1
Other reason
Discretion
LTIP
Pro-rated to time
and performance
in respect of each
subsisting LTIP award.
Lapse of any unvested
LTIP awards.
The Committee has the following elements of discretion:
• to determine that an executive is a good leaver. It is
the Committee’s intention to only use this discretion in
circumstances where there is an appropriate business
case which will be explained in full to shareholders;
• to measure performance over the original performance period
or at the date of cessation. The Committee will make this
determination depending on the type of good leaver reason
resulting in the cessation; and
• to determine whether to pro-rate the maximum number of shares
to the time from the date of grant to the date of cessation. The
Remuneration Committee’s normal policy is that it will pro-rate
awards for time. It is the Remuneration Committee’s intention
to use discretion to not pro-rate in circumstances where there
is an appropriate business case which will be explained in full
to shareholders.
Other
contractual
obligations
There are no other contractual provisions other than those set out above agreed prior to 27 June 2012.
1. A good leaver reason is defined as cessation in the following circumstances:
• death;
• ill-health;
• injury or disability;
• redundancy;
• retirement;
• employing company ceasing to be a Group company;
• transfer of employment to a company which is not a Group company; and
• at the discretion of the Committee (as described above).
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
Change of control
The Committee’s policy on the vesting of incentives on a change of control is summarised below:
Name of incentive plan
Change of control
Discretion
ABP cash awards
Pro-rated to time and performance
to the date of the change of control.
ABP share awards
Subsisting deferred share awards
will vest on a change of control.
The Committee has discretion regarding whether to pro-rate
the bonus to time. The Committee’s normal policy is that it will
pro-rate the bonus for time. It is the Committee’s intention to use
its discretion to not pro-rate in circumstances only where there
is an appropriate business case which will be explained in full
to shareholders.
The Committee has discretion regarding whether to pro-rate
the award to time. The Committee’s normal policy is that it will
not pro-rate awards for time. The Committee will make this
determination depending on the circumstances of the change
of control.
LTIP
The number of shares subject to
subsisting LTIP awards will vest on a
change of control, pro-rated to time
and performance.
The Committee will determine the proportion of the LTIP Award
which vests taking into account, among other factors, the period
of time the LTIP Award has been held by the participant and the
extent to which any applicable performance conditions have
been satisfied at that time.
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Directors’
Remuneration Report
continued
Non-Executive Director remuneration
Element of
remuneration
Non-Executive
Director and
Chairman fees
How it supports the Company’s
short and long-term strategic
objectives
Provides a level of fees to
support recruitment and
retention of Non-Executive
Directors and a Chairman
with the necessary experience
to advise and assist with
establishing and monitoring the
Group’s strategic objectives.
Performance
metrics
None.
Operation
Opportunity
The fees for Non-Executive
Directors and the Chairman
are set at broadly the median
of the comparator group.
In general the level of fee
increase for the Non-Executive
Directors and the Chairman
will be set taking account of
any change in responsibility
and will take into account the
general rise in salaries across
the UK workforce.
The Company will pay
reasonable expenses incurred
by the Non-Executive Directors
and Chairman and may settle
any tax incurred in relation
to these.
The Board is responsible for
setting the remuneration of
the Non-Executive Directors.
The Remuneration Committee
is responsible for setting the
Chairman’s fees.
Non-Executive Directors are paid
an annual fee and additional fees
for chairmanship of committees.
The Chairman does not receive
any additional fees for
membership of committees.
Fees are reviewed annually
based on equivalent roles in
the comparator group used
to review salaries paid to the
Executive Directors. Fees are
set at broadly the median of
the comparator group.
Non-Executive Directors and
the Chairman do not participate
in any variable remuneration
or benefits arrangements.
Executive Director contracts and letters of appointment for Chairman and Non-Executive Directors
Executive Directors
Name
Wayne Sheppard
Kevin Sims
Non-Executive Directors
Name
Jamie Pike
Jonathan Nicholls
Lynn Minella
Tracey Graham
Michel Plantevin
Matthias Boyer Chammard
Date of
service contract
22 October 2015
22 October 2015
Nature of
contract
Rolling
Rolling
Notice periods
From Company
From Director
Compensation
provisions for
early termination
12 months
12 months
12 months
12 months
None
None
Date of letter of appointment
22 September 2015
22 September 2015
3 February 2016
3 February 2016
22 October 2015
22 October 2015
The Committee’s policy for setting notice periods is that a 12-month period will apply for Executive Directors.
The Non-Executive Directors of the Company (including the Chairman) do not have service contracts. The Non-Executive Directors
are appointed by letters of appointment. Each independent Non-Executive Director’s term of office runs for a three-year period.
The initial terms of the Non-Executive Directors’ positions are subject to their re-election by the Company’s shareholders at the
AGM and to re-election at any subsequent AGM at which the Non-Executive Directors stand for re-election.
All Directors will be put forward for re-election by shareholders on an annual basis.
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Statement of considerations of employment conditions elsewhere in the Company
The Remuneration Policy for all employees is determined in terms of best practice and ensuring that the Company is able to attract and
retain the best people. This principle is followed in the development of our Policy.
The remuneration strategy of the Company has been designed to ensure all employees share in its success through performance-related
remuneration and share ownership. On IPO a number of new remuneration arrangements were introduced; the LTIP for Executive
Directors and other selected members of the senior management team and a Share Option Plan for selected Senior Managers. Awards
under both these Plans will provide alignment between senior leaders and our shareholders based on overall corporate performance of
the business.
For all employees, the Company has adopted an SAYE Scheme and Share Incentive Plan (with local equivalents in other jurisdictions
intended). Under the new Plans, all employees will have the opportunity to purchase shares in the Company subject to certain restrictions.
The Company does not use remuneration comparison measurements nor have employees been consulted directly on the Policy.
In setting the Remuneration Policy for Directors, the pay and conditions of other employees of Company are taken into account,
including any base salary increases awarded.
The Committee is provided with data on the remuneration structure for management level tiers below the Executive Directors, and uses
this information to ensure consistency of approach throughout the Company.
Link to objectives
The following table demonstrates how key objectives are reflected consistently in plans operating at all levels within the Company.
Objectives
Financial
performance
Strategic and
operational
goals
Long-term
value creation
(encouraged
through equity
retention)
Share
ownership
Plan
Purpose
Eligibility
SAYE/SIP To broaden share
All employees.
ownership and share in
corporate success over
the medium term.
Annual
bonus
Share
Option
Plan
LTIP
Incentivise and reward short-
term performance. At senior
level an element of bonus is
deferred in shares.
Executive Directors,
Senior Executives,
Senior Managers
and Managers.
Broaden share ownership,
alignment, retention, long-
term performance.
Senior Managers.
Incentivise and reward
long-term performance.
Executive Directors
and Senior Executives.
Statement of consideration of shareholder views
The Committee takes the views of the shareholders seriously and these views are taken into account in shaping Remuneration Policy
and practice. Shareholder views are considered when evaluating and setting the remuneration strategy and the Committee commits
to consulting with key shareholders prior to any significant changes to its Remuneration Policy.
The Committee consulted with the Company’s key shareholders along with the Investment Association (IA) and the Institutional
Shareholder Services (ISS) on the proposed Policy set out in this report.
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Directors’
Remuneration Report
continued
Part B – Annual Report on Remuneration
Single total figure of remuneration (Audited)
Executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Executive Director in respect of the 2015
financial period from 26 February 2015 to 31 December 2015.
Comparative figures for the 2014 financial year have not been provided as the Company did not exist in this form during the year. Further
the Committee does not believe that the remuneration payable in its earlier years as a private company bears comparative value to that
which will be paid post-IPO. In the 2016 Remuneration Report comparative information will be provided.
Figures provided have been calculated in accordance with the new UK disclosure requirements: the Large and Medium-Sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations 2013 (Schedule 8 to the Regulations).
Executive Directors
Wayne Sheppard (CEO)9
Kevin Sims (CFO)9
Period
2015
2015
Salary
£
Taxable
benefits3
£
Bonus4
£
279,3811
11,280
252,240
184,2592
9,879
151,167
LTIP5
£
n/a
n/a
Pension6
£
117,594
78,588
SAYE7
£
Other8
£
Total
£
4,500
97,932
762,927
n/a
63,657
487,550
Notes:
1. Salary of £308,100 from appointment as Executive Director in February 2015 to IPO and £425,000 following the IPO to the end of the financial period. Of this sum,
£123,188 related to the period 3 September 2015 to 31 December 2015.
2. Salary of £200,265 from appointment as Executive Director in February 2015 to IPO and £290,000 following the IPO to the end of the financial period. Of this sum,
£82,747 related to the period 3 September 2015 to 31 December 2015.
3. See section below setting out details of the benefits provided. The amounts shown above include £4,344 and £3,804 for Wayne Sheppard and Kevin Sims,
respectively, in respect of the period 3 September 2015 to 31 December 2015.
4. Details of the bonus targets, their level of satisfaction and the resulting bonus earned is set out below. The amounts shown above include £127,649 and £83,681
for Wayne Sheppard and Kevin Sims, respectively, in respect of the period 3 September 2015 to 31 December 2015. No deferral of bonus was applicable in 2015.
5. No LTIP award was made in 2015. The first grant of LTIP awards will be made in 2016.
6. Comprises of the value of DB accruals and salary supplements in lieu of pension. See note on following page for further details. The amounts shown above
include £45,287 and £30,265 for Wayne Sheppard and Kevin Sims, respectively, in respect of the period 3 September 2015 to 31 December 2015.
7. SAYE grants made during the period under the Ibstock plc Sharesave Plan. 11,842 SAYE options granted on 9 December 2015 with an exercise price of
152 pence (awarded at a discount of 20% to the IPO offer price of 190 pence).
8. Contractual payment for retention of services.
9. Wayne Sheppard and Kevin Sims owned ordinary shares immediately prior to the IPO offer of 13,227,213 and 8,597,688, respectively.
Taxable benefits (Audited)
Benefits in the period comprised of a company car allowance, fuel allowance and private medical insurance.
Bonus (Audited)
In respect of the 2015 financial period, the bonus awards payable to Executive Directors were agreed by the Committee having reviewed
the Company’s results. Details of the targets used to determine bonuses in respect of the 2015 financial period and the extent to which
they were satisfied are shown in the table below. These figures are included in the single figure table.
Performance condition
Weighting
Threshold
performance
required
Maximum
performance
required
Actual
performance
Percentage of
maximum
performance
achieved
Bonus value achieved1
Wayne
Sheppard2 Kevin Sims3
Adjusted EBITDA
Adjusted Operating Cash Flow
33%
33%
£68.2m
£39.3m
£85.3m
£52.6m
£107.0m
£119.3m
Personal objectives
33% See following page – objectives outlined
100%
100%
100%
£84,080
£84,080
£84,080
£50,389
£50,389
£50,389
met in full for 2015
Total
Total £
100%
100%
100%
100%
100%
100% £252,240
£151,167
Notes:
1. Under the terms of the 2015 ABP, 0% for each element is payable for achieving the threshold performance increasing to 100% for achieving maximum
performance. Achievements between these points are calculated on a straight line basis.
2. Bonus opportunity of 60% of salary pre-IPO and 125% of salary post-IPO. Bonus payment based on base salary of £308,100 pre-IPO and £425,000 following
the IPO.
3. Bonus opportunity of 50% of salary pre-IPO and 125% of salary post-IPO. Bonus payment based on base salary of £200,265 pre-IPO and £290,000 following
the IPO.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 75
Personal objectives for the CEO and CFO for 2015:
Name
Personal objectives
Wayne Sheppard
• Strategic operational objectives and delivery of key projects
• Development of strategic plans for divisional operations
• Succession planning for the Senior Executive Team
• Successful completion of the IPO
Kevin Sims
• Lead and deliver the implementation of a key internal systems project
• Successful financial compliance and risk management
• Strategic operational review of the Finance function and delivery of key projects
• Successful completion of the IPO
The Remuneration Committee discussed the above personal objectives with the Chairman in respect of the CEO, and the CEO in respect
of the CFO. Following this feedback and an evaluation of the performance against the objectives the Committee determined that they had
been met for both Executive Directors and therefore the maximum under this element of the bonus was earned.
No discretion was exercised by the Committee in relation to the outcome of the bonus awards.
Long-term incentives awarded in 2015
No awards were made under the LTIP in 2015. The Committee is intending to grant the first LTIP awards in 2016.
Pension entitlements (Audited)
The following table provides the information required by the Regulations and gives details for each Executive Director of:
• the annual accrued pension payable on retirement calculated as if he/she had left service at the year-end;
• the normal retirement ages;
• the value of the pension benefits at the start and end of the year;
• the value of the pension benefits earned over the year, excluding any Director’s contributions and any increases for inflation; and
• any payments in lieu of retirement benefits.
None of the Executive Directors has made additional voluntary contributions.
Accrued pension
Single figure numbers
Extra information
disclosed under 2013
Directors’ Remuneration
Regulations
Age at
31/12/2015
Pensionable
service at
31/12/2015
26/02/2015
31/12/2015
Salary
supplement
Value x 20
over year
(net of
Director’s
contribution)
Total
pension
benefits
Normal
retirement
age
56
54
22
29
£85,157
£89,393
£64,448
£67,317
£32,874
£21,208
£84,720
£117,594
£57,380
£78,588
60
60
Executive Directors
Wayne Sheppard
Kevin Sims
Non-Executive Directors (Audited)
The table below sets out the single total figure of remuneration and breakdown for each Non-Executive Director. For similar reasons to the
above no comparative information has been provided for 2014. In the 2016 Remuneration Report comparative information will be provided.
Non-Executive Directors
2015 fees Roles
Jamie Pike
Jonathan Nicholls
Lynn Minella
Tracey Graham
Michel Plantevin1
Matthias Boyer Chammard1
£57,211
£19,038
Independent Non-Executive Chairman
Senior Independent Non-Executive Director
n/a Non-Executive Director – appointed in 2016
n/a Non-Executive Director – appointed in 2016
£0 Non-Executive Director
£0 Non-Executive Director
Note:
1. Michel Plantevin and Matthias Boyer Chammard represent one of the Company’s shareholders and are not remunerated by the Company.
Annual fees
Chairman
Board fee (including committee membership)
Committee Chairmanship (per committee)
2016
annual fee
£175,000
£50,000
£10,000
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 76
Directors’
Remuneration Report
continued
Payments to past Directors/payments for loss of office (Audited)
There were no payments in the financial period.
Statement of Directors’ shareholding and share interests (Audited)
Shares held directly
Other
shares held
Options
Director
Shareholding
requirement
(% salary)
Current
shareholding
(% salary)1
Beneficially
owned
Executive Directors
Wayne Sheppard
Kevin Sims
Non-Executive Directors
200%
150%
5,907% 11,307,827
5,627% 7,350,087
Jamie Pike
Jonathan Nicholls
Lynn Minella
Tracey Graham
Michel Plantevin
Matthias Boyer
Chammard
n/a
n/a
n/a
n/a
n/a
n/a
–
–
–
–
–
–
26,000
n/a
n/a
n/a
n/a
n/a
Deferred
shares not
subject to
performance
conditions
LTIP
interests
subject to
performance
conditions
Vested
Unvested
Outstanding
SAYE
awards
Shareholding
requirement
met?
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11,842
–
n/a
n/a
n/a
n/a
n/a
n/a
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
Notes:
1. As at 31 December 2015. This is based on a closing share price of £2.221 at 31 December 2015 and the year-end salaries of the Executive Directors. Values not
calculated for Non-Executive Directors as they are not subject to shareholding requirements.
2. SAYE grants made during the year under the Ibstock plc Sharesave Plan. Awards granted on 9 December 2015 with an exercise price of 152 pence (awarded at
a discount of 20% to the IPO offer price of 190 pence). The SAYE options are first exercisable on 1 February 2019.
Fees retained for external Non-Executive Directorships
Executive Directors may hold positions in other companies as Non-Executive Directors and retain the fees.
Wayne Sheppard is Principal of the Construction Products Association, a Director of the British Ceramic Confederation, and a Director of
the Brick Development Association. He receives no fees for these appointments. Kevin Sims does not hold any external directorships.
IBSTOCK_19_REM_Annual_Report_DRF2.indd 76
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 77
Comparison of overall performance and pay
The graph below shows the value of £100 invested in the Company’s shares since listing compared with the FTSE 250 index. The graph
shows the Total Shareholder Return generated by both the movement in share value and the reinvestment over the same period of
dividend income.
The Committee considers that the FTSE 250 is the appropriate index because the Company has been a member of this since listing.
This graph has been calculated in accordance with the Regulations. It should be noted that the Company listed on 27 October 2015
and therefore only has a listed share price for the period of 27 October 2015 to 31 December 2015.
Total Shareholder Return
£100 invested in the Company’s shares since listing compared with the FTSE 250 index
130
120
110
100
90
80
70
27 Oct
2015
1 Nov
2015
6 Nov
2015
11 Nov
2015
16 Nov
2015
21 Nov
2015
26 Nov
2015
1 Dec
2015
6 Dec
2015
11 Dec
2015
16 Dec
2015
21 Dec
2015
26 Dec
2015
31 Dec
2015
Ibstock
FTSE 250
Chief Executive Officer historic remuneration
The table below sets out the total remuneration delivered to the Chief Executive Officer over the period 26 February 2015 to 31 December
2015 valued using the methodology applied to the single total figure of remuneration.
The Committee does not believe that the remuneration payable in its earlier years as a private company bears any comparative value to
that which will be paid post-IPO, therefore the Remuneration Committee has chosen to disclose remuneration only for the 2015 financial
period. In the 2016 Remuneration Report comparative information will be provided.
Chief Executive Officer
Single total figure
Annual bonus payment level achieved (% of maximum opportunity)
LTIP vesting level achieved (% of maximum opportunity)
Note:
No award has currently been made under the LTIP which was adopted on IPO.
2015
£762,927
100%
n/a
Relative importance of spend on pay
The table below sets out the relative importance of spend on pay in the 2015 financial period. The Company did not exist in its current
form in 2014 and therefore there are no relevant comparators for 2014. All figures provided are taken from the relevant Company
Accounts. In the 2016 Remuneration Report comparative information will be provided.
Profit distributed by way of dividend
Overall spend on pay including Executive Directors
Disbursements from profit in
2015 financial year (£m)
0
75.2
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
Advisers to the Remuneration Committee
Following a selection process carried out by the Board prior to
the IPO of the Company, the Committee has engaged the services
of PricewaterhouseCoopers LLP (“PwC”) as independent
remuneration adviser.
During the financial period, PwC advised the Committee on all
aspects of the Remuneration Policy for Executive Directors and
selected members of the senior management team. PwC also
provided the Company with tax and accountancy advice during
the period, including support of the IPO. The Committee is
satisfied that no conflict of interest exists or existed in the
provision of these services.
PwC is a member of the Remuneration Consultants Group and
the voluntary code of conduct of that body is designed to ensure
objective and independent advice is given to remuneration
committees. Fixed fees of £12,000 (2014: none) were provided to
PwC during the period in respect of remuneration advice received.
Statement of voting at general meeting
The 2016 AGM will be the first AGM of the Company and
therefore there is no historic voting information.
Lynn Minella
Chair of the Remuneration Committee
10 March 2016
78
Directors’
Remuneration Report
continued
Change in the Chief Executive Officer’s remuneration
compared with employees
The Company cannot provide this information for 2014 as it did not
exist in its current form nor were the current Executive Directors
employed by the Company. In the 2016 Remuneration Report
comparative information will be provided.
Statement of implementation of the remuneration policy
in financial year 2016
See table on page 60.
Consideration by the Directors of matters relating to
Directors’ remuneration
The Board has delegated to the Committee, under agreed terms
of reference, responsibility for the Remuneration Policy and for
determining specific packages for the Executive Directors and
other selected members of the senior management team. Prior to
the establishment of the Remuneration Committee, remuneration
decisions were made by the Board of the Company. The Company
consults with key shareholders in respect of Remuneration Policy
and the introduction of new incentive arrangements.
The terms of reference for the Committee are available on the
Company’s website, www.ibstockplc.com/investors, and from the
Company Secretary at the registered office.
Our main responsibilities are:
• To determine and agree with the Board the broad Remuneration
Policy for the Executive Directors and other selected members
of the senior management team;
• To review the ongoing appropriateness and relevance of the
Remuneration Policy; and
• To review any major changes in employee benefit structures
throughout the Company or Group and to administer all aspects
of any share scheme.
The Committee receives assistance from the Group HR Director
and Company Secretary, who will attend meetings by invitation,
except when issues relating to their own remuneration are being
discussed. The Chief Executive Officer and Chief Financial Officer
attend by invitation on occasions.
IBSTOCK_19_REM_Annual_Report_DRF2.indd 78
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Directors’
Report
The Directors present their report for the financial period ended
31 December 2015.
Cautionary statement
This Annual Report has been prepared for, and only for the
members of the Company, as a body, and no other persons.
The Company, its Directors, employees, agents or advisers do
not accept or assume responsibility to any other person to whom
this document is shown or into whose hands it may come and
any such responsibility or liability is expressly disclaimed. By their
nature, the statements concerning the risks and uncertainties
facing the Group in this Annual Report involve uncertainty,
since future events and circumstances can cause results and
developments to differ materially from those anticipated. The
forward-looking statements reflect knowledge and information
available at the date of preparation of this Annual Report and the
Company undertakes no obligation to update these forward-
looking statements. Nothing in this Annual Report should be
construed as a profit forecast.
Corporate Governance Statement
The information that fulfils the requirements of the corporate
governance statement for the purposes of the Disclosure and
Transparency Rules can be found in the corporate governance
information on pages 42 to 78 (all of which forms part of this
Directors’ Report) and in this Directors’ Report.
Information included in Strategic Report
The Company’s Strategic Report is on pages 1 to 41 and includes
the following information that would otherwise be required to be
disclosed in this Directors’ Report:
Subject matter
Important events since the financial period end
Likely future developments in the business
Research and development
Employment of disabled persons
Employee involvement
Disclosures concerning greenhouse gas emissions
Page
reference
41
11,22,23
29
27
28
29
Disclosure of information under LR 9.8.4R
The information that fulfils the reporting requirements relating to the
following matters can be found on the pages identified.
Subject matter
Information about the relationship agreement
with Diamond (BC) S.à r.l.
Page
reference
47
Dividends
Subject to shareholder approval, the Directors have proposed a
final dividend for the financial period ended 31 December 2015
of 4.4 pence per ordinary share.
79
Directors
The names of the Directors who served during the period and up
to the date of this report are on pages 42 to 43. Of those Directors,
Tracey Graham and Lynn Minella have been appointed as
Non-Executive Directors of the Company since the year-end.
Details of the Directors’ interests in the share capital of the Company
are set out in the Directors’ Remuneration Report on page 76.
The powers given to the Directors are contained in the Company’s
Articles of Association and are subject to relevant legislation and,
in certain circumstances, including in relation to the issuing or
buying back by the Company of its shares, subject to authority
being given to the Directors by shareholders in general meeting.
The Articles of Association also govern the appointment and
replacement of Directors.
Articles of Association
The Articles of Association may be amended in accordance with
the provisions of the Companies Act 2006 by way of a special
resolution of the Company’s shareholders.
Share capital and control
Details of the Company’s share capital are in Note 22 to the
consolidated financial statements. The rights attaching to
the shares are set out in the Articles of Association.
Diamond (BC) S.à r.l. has entered into a lock-up period of 180 days
from Admission and the Company’s Directors and certain of the
Company’s senior managers have entered into a lock-up period
of 365 days from Admission. During the lock-up periods, Diamond
(BC) S.à r.l., the Directors and the relevant senior managers agree
not to dispose of any securities held in the Company. All lock-up
arrangements are subject to customary exceptions. There have
been no movements in the Directors’ shareholdings post the
year-end.
The Company has established a trust in connection with the Group’s
Share Incentive Plan (the “SIP”), which holds ordinary shares on trust
for the benefit of employees of the Group. The trustees of the SIP trust
may vote in respect of Ibstock shares held in the SIP trust, but only as
instructed by participants in the SIP in accordance with the SIP trust
deed and rules. The trustees will not otherwise vote in respect of
shares held in the SIP trust.
Purchase of own shares
At the general meeting held prior to Admission, shareholders
passed a special resolution in accordance with the Companies
Act 2006 to authorise the Company to purchase in the market
a maximum of 10% of the Company’s issued share capital. No
shares have been purchased under this authority since Admission.
The Directors are seeking renewal of the authority at the AGM
2016, in accordance with relevant institutional guidelines.
Substantial shareholdings
As at 31 December 2015, the Company had been notified, in
accordance with the Disclosure and Transparency Rules, of the
following interests in its ordinary share capital.
Name of shareholder
Number of
shares
disclosed
% interest in
issued share
capital
Nature of
holding
Diamond (BC) S.à r.l
190,700,435
47.03%
Direct
In addition to the above holding, the Company is aware of
32,885,824 shares (8.11%) held by The Bank of New York
(Nominees) Limited UK REITS account.
IBSTOCK_20_Directors_Report_DRF2.indd 79
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015GOVERNANCEOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 80
Directors’
Report
continued
In the period from 31 December 2015 to the date of this report,
no further notifications were received.
Information provided to the Company under the Disclosure
and Transparency Rules is publicly available via the regulatory
information service and on the Company’s website.
Significant agreements (change of control)
The Company is required to disclose any significant agreements
that take effect, alter or terminate on a change of control of the
Company following a takeover bid.
The Company has committed debt facilities all of which are
directly or indirectly subject to change of control provisions,
albeit the facilities do not necessarily require mandatory
prepayment on a change of control.
In the event of a takeover or other change of control (usually
excluding an internal reorganisation), outstanding awards under
the Group’s share plans vest and become exercisable, to the
extent any performance conditions (if applicable) have been met,
and subject to time pro-rating (if applicable), in accordance with
the rules of the plans. In certain circumstances, the Board may
decide (with the agreement of the acquiring company) that awards
will instead be cancelled in exchange for equivalent awards over
shares in the acquiring company.
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set
out in the business review on pages 36 to 37. The financial position
of the Company, its cash flows, liquidity position and borrowing
facilities are described in the Directors’ Report on pages 79 to 80.
In addition, Note 21 to the financial statements includes the
Company’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures
to credit risk and liquidity risk.
The Group regularly reviews market and financial forecasts, and
has reviewed its trading prospects in its key markets. As a result
it believes its trading performance will demonstrate continued
improvement in the coming periods, and that liquidity will
remain strong.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate
resources to continue in operational existence for a period of
at least 12 months from the date of approval of the financial
statements. The Board has concluded that the going concern
basis of accounting of its financial statements is appropriate.
Viability Statement
The Group’s Viability Statement is set out on page 35.
Disclosure of information to auditors
Each person who is a Director of the Company as at the date of
approval of this report confirms that:
(a) so far as the Director is aware, there is no relevant audit
information of which the Company’s auditors are unaware; and
(b) the Director has taken all the steps that he or she ought to have
taken as a Director in order to make him/herself aware of any
relevant audit information and to establish that the Company’s
auditors are aware of that information.
Directors’ Responsibility Statement
The Directors’ Responsibility Statement is included on page 51.
Directors’ and Officers’ liability insurance and indemnities
The Company has purchased and maintains appropriate insurance
cover in respect of Directors’ and Officers’ liabilities. The Company
has also entered into qualifying third party indemnity arrangements
for the benefit of all its Directors, in a form and scope which
comply with the requirements of the Companies Act 2006. These
indemnities came into force on 22 October 2015 and remain in
force up to the date of this Annual Report.
Financial instruments
Details of the financial instruments used by the Group are set out
in Note 21 to the Group financial statements, which are incorporated
into this Report of the Directors by reference. The Group’s financial
risk management objectives and policies are included in the Risk
management overview on pages 30 to 35, and in Note 21 of the
Group financial statements.
Political donations
No political donations were made during the period ended
31 December 2015.
Annual General Meeting 2016
The Annual General Meeting will be held on 26 May 2016, at
2:00 p.m. at the Mercure Leicester The Grand Hotel, Granby Street,
Leicester LE1 6ES. The Notice convening the meeting together with
explanatory notes on the resolutions to be proposed and full details
of the deadlines for exercising voting rights is contained in a circular
which will be circulated to all shareholders at least 20 working days
before such meeting together with this Report.
The Company’s Articles of Association require that a Director
shall retire from office if he or she has been appointed since the
previous Annual General Meeting or if it is the third Annual General
Meeting following that at which he or she was elected or last
re-elected. However, in accordance with the UK Corporate
Governance Code the Directors will all retire and will offer themselves
for election or re-election at the forthcoming Annual General Meeting.
The Chairman has confirmed that the performance of all of the
Directors continues to be effective and to demonstrate their
commitment to the role.
On behalf of the Board
Robert Douglas
Company Secretary
10 March 2016
IBSTOCK_20_Directors_Report_DRF2.indd 80
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Independent Auditor’s Report
to the Members of Ibstock plc
81
Our opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December
2015 and of the Group’s profit for the period then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
What we have audited
Ibstock plc’s financial statements as at 31 December 2015 and for the period then ended comprise:
Group
Consolidated balance sheet
Consolidated income statement
Parent Company
Company balance sheet
Statement of changes in equity
Consolidated statement of comprehensive income
Statement of cash flow
Consolidated statement of changes in equity
Related notes 1 to 14 to the financial statements
Consolidated cash flow statement
Related notes 1 to 31 to the financial statements
The financial reporting framework that has been applied in the preparation of the Group Financial Statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been
applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice) including FRS 102 “The Financial Reporting Standard applicable in the United
Kingdom and Republic of Ireland”.
Overview of our audit approach
Risks of material misstatement
• Revenue recognition and accounting for customer rebates.
• Accounting for pension liabilities.
• Acquisition accounting.
Audit scope
• We performed a full scope audit of the complete financial information of all four trading
components and the head office entities.
• The full scope audit procedures accounted for 100% of each of Revenue, Earnings before
interest, tax, depreciation and amortisation and before exceptional items (‘EBITDA before
exceptional items’), Profit before tax and Total assets.
Materiality
• Group materiality of £2.0m which represents 2% of EBITDA before exceptional items.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 82
Independent Auditor’s Report
to the Members of Ibstock plc
continued
Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy,
the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we performed the
procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express
any opinion on these individual areas.
Risk
Our response to the risk
Revenue recognition
(£358.3m stated net of
rebates for the period) and
accounting for customer
rebates
Refer to the Audit Committee
Report (page 53); Accounting
policies Note 1; and Note 3
of the Consolidated Financial
Statements.
Revenue recognition is a
significant audit risk across
all entities within the Group.
Specifically there is a risk
of inappropriate revenue
recognition if revenue is
recorded within the wrong
accounting period, if bill and
hold transactions (Glen-Gery
only) are recognised
prematurely or if
customer rebates are
incorrectly recorded.
Accounting for pension
liabilities (£550.5m as at
31 December 2015)
Refer to the Audit Committee
Report (page 53); Accounting
policies Note 1; and Note 19
of the Consolidated Financial
Statements.
As at the period end, the Ibstock
Defined Benefit Pension Scheme
had a net surplus of £8.4m
(restricted to £0.3m) with assets
of £558.9m offset by liabilities of
£550.5m. The liability component
is sensitive to small movements
in the input parameter
assumptions which could
materially change the valuation.
We identified and assessed key controls over the revenue process (i.e.,
that deliveries are recorded as revenue which are then collected into cash)
for Ibstock Brick, Forticrete and Glen-Gery and concluded the controls to
be effective. We relied on these controls in our audit approach. We walked
through the controls at Supreme to confirm they were designed and
operating effectively although we undertook a substantive audit as this
approach was deemed to be more efficient.
We substantively tested revenue throughout the period by selecting a sample
of transactions, including bill and hold transactions at Glen-Gery to ensure
they met the IFRS revenue recognition criteria, and traced them to source
documentation to ensure they were appropriately recorded.
We inspected the financial impact of transactions around the period end and
tested a sample of these to ensure they were recorded in the correct period.
We set expectations of revenue recorded for the period by assessing
market expectations (e.g., by using data from the UK Construction Products
Association), the budgets of the trading entities and other factors such as
contracted changes in sales price and customer rebate agreements in the
period. We investigated and corroborated any variances from our expectations.
We selected a sample of customer rebate contracts for significant customers,
inspected the terms, confirmed the sales data on which the rebate is based
and recalculated the rebate.
To assess the completeness of rebates, we considered aged debtors, post
period end credit notes and reviewed journal postings recorded for evidence
of any unrecorded amounts. We also made enquiries of management as to
the existence of any other rebate arrangements.
We used computer aided audit techniques to review journals for the period to
identify for any manual journals resulting in an inappropriate posting to revenue.
We reviewed significant manual journals for movements in revenue and rebates
around the acquisition date and period end.
We evaluated the output of the actuary used by management by giving due
consideration to their competence, experience and independence.
We involved our pension advisory experts to assist us in evaluating the validity
of the input assumptions including in respect of the discount rate, inflation rate
and mortality assumptions. The assumptions have been assessed with respect
to appropriateness of methodologies, market data and consistency with
actuarial practice, scheme profile and market developments.
Our analysis produced a ‘heat map’ of the various assumptions benchmarked
against market data which we used to evaluate whether the assumptions were
within an acceptable range.
We checked participant data to underlying information sources such as the
payroll system.
We tested the calculation of the recoverable surplus, as prepared by the
actuary (management’s expert) in accordance with IFRIC 14, by independently
modelling the calculation including corroborating the data inputs.
What we concluded to
the Audit Committee
Our audit procedures
did not identify any
differences regarding
revenue recognition or
accounting for rebates.
Our journals testing did
not identify any manual
adjustments to revenue
or inappropriate
adjustments to rebates.
The actuarial
assumptions used in
the valuation of the
period end liabilities are
considered to be within
an acceptable range.
The valuation
of pension scheme
liabilities and related
disclosures (including
sensitivities) are
appropriate.
The surplus
recognised is
calculated in
accordance
with IFRIC 14.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Risk
Our response to the risk
Acquisition accounting
Refer to the Audit Committee
Report (page 53); Accounting
policies Note 1; and Note 24
of the Consolidated Financial
Statements.
During the period a significant
business combination occurred
with the acquisition of the
trading entities prior to the
Group’s initial public offering
(‘IPO’). The fair values of assets
and liabilities acquired were
assessed by management as
provisional at the time of the
IPO in October 2015.
For the period ended
31 December 2015 these
have been finalised, resulting
in negative goodwill of £124.2m
credited to the income
statement on acquisition
(26 February 2015). Due to the
size and nature of the business
combination, we consider
acquisition accounting to be
an area with a higher risk of
misstatement.
In conjunction with our valuation experts we performed an assessment of
the fair value of assets and liabilities identified at acquisition. We discussed
the approach to the determination of fair value of assets and liabilities with
management (and their experts) to understand and corroborate their rationale
for estimates and judgements used in the calculations. We performed
sensitivity testing on these inputs. We ensured the methodology used by
management was in line with IFRS 3 Business Combinations.
Where management sought to rely on external expert opinions for the fair value
recorded we assessed the competence, methodology and independence of
the experts and understood how the reports have been used by management
in finalising the balances recorded.
We corroborated key inputs into the recording of the fair value of intangible
assets and property, plant and equipment (e.g., rate of return factors, growth
rates, discount rate) and provisions and contingencies (e.g., likelihood of
occurrence of claims and timing and magnitude of provisions).
Where assets and liabilities acquired have been recorded at existing book
value, we considered management’s process to ensure the original carrying
value is equal to fair value.
We discussed with management the changes recorded as part of finalising
the fair values and corroborated the assumptions used in determining the
revised fair values.
We evaluated the disclosure of the business combination and of the
exceptional costs to ensure the presentation is in accordance with IFRS and,
in respect of exceptional items, whether it followed the guidance provided by
the FRC.
83
What we concluded to
the Audit Committee
We concur with the
fair values recorded
including the
adjustments
processed to the
provisional amounts
recorded in the IPO
prospectus. We are
satisfied that these
updated amounts
appropriately reflect
the existence and
valuation of liabilities
at the acquisition date.
The disclosures
in relation to the
acquisition accounting
in the consolidated
financial statements
are appropriate.
The scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for
each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take
into account size, risk profile, the organisation of the Group and effectiveness of group-wide controls and changes in the business
environment when assessing the level of work to be performed at each entity.
The Group operates from four trading entities, three in the UK and one in the US. In assessing the risk of material misstatement to the
Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements,
we performed an audit of the complete financial information (‘full scope’) of the Ibstock Brick, Forticrete, Supreme (all located in the UK)
and Glen-Gery (located in the US) trading components.
We also performed full scope procedures on the Figgs head office entities, comprising various holding companies in the Group structure
(together the ‘Figgs companies’) because of the acquisition and IPO related transactions recorded in these entities within the period.
As all components were designated full scope in the current period this provides 100% coverage of the Group’s Revenue, EBITDA before
exceptional items, Profit before tax and Total assets.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the
components by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating
under our instruction. Of the full scope components, audit procedures were performed on Ibstock Brick by the primary team and three
by component teams, being Forticrete, Supreme and Glen-Gery. We determined the appropriate level of primary team involvement in
the work of the component team to enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion
on the Group as a whole.
A team planning event was held at which senior audit team members of the primary team and component teams each attended to
discuss the key risks and audit approach.
As part of the closing audit procedures, the senior statutory auditor visited the component team in the US. This visit involved discussing
the audit approach with the component team including issues arising from their work, reviewing key audit working papers on risk areas,
meeting with local management, visiting local manufacturing operations and attending the closing meeting.
The primary team interacted regularly with each of the component teams where appropriate during various stages of the audit, reviewed
key working papers and were responsible for the scope and direction of the audit process. A member of the primary team attended the
closing meeting of each of the in scope component audits.
These procedures together with the additional procedures performed at Group level gave us appropriate evidence for our opinion on
the consolidated financial statements.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 84
Independent Auditor’s Report
to the Members of Ibstock plc
continued
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined materiality for the Group to be £2.0 million, which is 2% of EBITDA before exceptional items. EBITDA before exceptional
items for the period is £102.3m as per Note 3 to the consolidated financial statements. We believe this is the most appropriate measure to
demonstrate the underlying operating and profit performance of the Group. This was the metric used in the marketing material for the IPO
process and is the metric management use in their presentations to stakeholders.
During the course of our audit, we reassessed initial materiality and there was no change in the final materiality from our original
assessment at planning.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% of our planning materiality, being £1.0m. We have set performance materiality at this percentage as
these are the Group’s first listed accounts under IFRS.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is
undertaken based on a percentage of total performance materiality. The performance materiality set for each component is based on
the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component.
In the current period, performance materiality allocated to components was:
• Ibstock Brick
• Forticrete
• Supreme
• Glen-Gery
• Figgs companies
£850,000
£300,000
£450,000
£450,000
£200,000
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £100,000, which is set
at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report
and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 51, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
85
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial period for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
ISAs (UK and
Ireland) reporting
We are required to report to you if, in our opinion, financial and non-financial information in
the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Group acquired in the course of performing our audit; or
• otherwise misleading.
We have no exceptions
to report.
Companies Act
2006 reporting
In particular, we are required to report whether we have identified any inconsistencies
between our knowledge acquired in the course of performing the audit and the directors’
statement that they consider the annual report and accounts taken as a whole is fair,
balanced and understandable and provides the information necessary for shareholders
to assess the entity’s performance, business model and strategy; and whether the annual
report appropriately addresses those matters that we communicated to the Audit
Committee that we consider should have been disclosed.
We are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have no exceptions
to report.
Listing Rules
review
requirements
We are required to review:
• the directors’ statement, set out on page 51, in relation to going concern set out on
We have no exceptions
to report.
page 80, and longer term viability set out on page 35; and
• the part of the Corporate Governance Statement relating to the company’s compliance
with those provisions of the UK Corporate Governance Code specified for our review.
Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity
We have no exceptions
to report.
ISAs (UK and
Ireland) reporting
We are required to give a statement as to whether we have anything material to add or to
draw attention to in relation to:
• the directors’ confirmation in the annual report that they have carried out a robust
assessment of the principal risks facing the entity, including those that would threaten
its business model, future performance, solvency or liquidity;
• the disclosures in the annual report that describe those risks and explain how they are
being managed or mitigated;
• the directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the entity’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements;
and
• the directors’ explanation in the annual report as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they have a reasonable
expectation that the entity will be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Adrian Roberts (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
10 March 2016
1. The maintenance and integrity of the Ibstock plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration
of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially
presented on the web site.
2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
IBSTOCK_21_Independent_Auditors_Report_DRF2.indd 85
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 86
Consolidated income statement
Revenue
Cost of sales before exceptional items
Gross profit before exceptional items
Exceptional cost of sales
Gross profit
Distribution costs
Administrative expenses before exceptional items
Exceptional administrative items
Administrative expenses
Negative goodwill on acquisition
Loss on disposal of property, plant and equipment
Other income
Other expenses
Operating profit
Finance costs
Finance income
Net finance cost
Profit before taxation
Taxation
Profit for the financial period
Profit attributable to:
Owners of the parent
Earnings per share (from continuing operations)
Basic
Diluted
Period from
28/11/2014 to
31/12/2015
£’000
Notes
3
358,331
(213,587)
144,744
4
(15,977)
128,767
(29,265)
(36,814)
(24,138)
(60,952)
4
4/24
124,191
5
7
8
9
(1,403)
2,998
(688)
163,648
(69,441)
498
(68,943)
94,705
6,869
101,574
101,574
Notes
pence
10
10
35.2
35.2
The notes on pages 91 to 123 form an integral part of these consolidated financial statements.
All amounts relate to continuing operations.
The consolidated income statement includes trading activities from 26 February 2015 following the acquisition of the
trading business. Note 24, Business combinations, includes the performance of the Group as if the trading business had
been owned for a full 12-month period.
IBSTOCK_22_Consolidated_Statements_DRF2.indd 86
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Consolidated statement
of comprehensive income
Profit for the financial period
Other comprehensive income/(expense):
Items that will not be reclassified to the profit or loss
Remeasurement of post-employment benefit assets and obligations
Remeasurement of post-employment benefits – surplus restriction
Related tax movements
Items that may be subsequently reclassified to profit or loss
Currency translation differences
Other comprehensive income for the period net of tax
Total comprehensive income for the period, net of tax
Profit attributable to:
Owners of the parent
The notes on pages 91 to 123 form an integral part of these consolidated financial statements.
Non-GAAP measure
Reconciliation of EBITDA before exceptional items to Operating profit for the financial period
EBITDA before exceptional items
Add back exceptional items
Less loss on disposal of property, plant and equipment
Less depreciation and amortisation
Operating profit
87
Period from
28/11/2014 to
31/12/2015
£’000
101,574
Notes
19
19
9/20
11,709
(8,037)
(734)
2,938
1,097
1,097
4,035
105,609
105,609
Notes
4
5
5
Period from
28/11/2014 to
31/12/2015
102,299
84,076
(1,403)
(21,324)
163,648
IBSTOCK_22_Consolidated_Statements_DRF2.indd 87
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 88
Consolidated balance sheet
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Post-employment benefit asset
Current assets
Inventories
Trade and other receivables
Current tax recoverable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Net current assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Post-employment benefit obligations
Deferred tax liabilities
Provisions
Net assets
Equity
Share capital
Share premium
Retained earnings
Merger reserve
Other reserves
Currency translation reserve
Total equity
31 December
2015
£’000
Notes
11
12
19
13
14
15
16
18
17
18
19
20
17
22
22
23
23
23
127,803
346,885
331
475,019
83,057
58,623
918
51,024
193,622
668,641
(79,236)
(14,097)
(1,291)
(94,624)
98,998
574,017
(181,658)
(8,007)
(54,662)
(13,182)
(257,509)
316,508
4,055
–
679,366
(369,119)
1,109
1,097
316,508
The notes on pages 91 to 123 form an integral part of these consolidated financial statements.
These financial statements were approved by the Board on 10 March 2016 and were signed on its behalf by:
W Sheppard
Director
K Sims
Director
IBSTOCK_22_Consolidated_Statements_DRF2.indd 88
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
Consolidated statement of
changes in equity
89
Share
capital
£’000
Share
premium
£’000
Notes
Preference
shares
recognised
as equity
£’000
Retained
earnings
£’000
Merger
reserve (see
Note 23)
£’000
Other
reserves
(see
Note 23)
£’000
Currency
translation
reserve (see
Note 23)
£’000
Total equity
attributable
to owners
£’000
Profit for the period
Other comprehensive
income
Total comprehensive
income for the
financial period
Transactions with
owners:
Issues of shares of Figgs
Topco Limited on
incorporation as at
28 November 2014
Figgs Topco Limited
shares issued in exchange
for shareholder loan notes
Issue of Figgs Topco
Limited share capital
Ibstock plc share capital
issued on incorporation
Ibstock plc shares issued
in exchange for shares in
Figgs Topco Limited
Establishment of merger
reserve and elimination of
Figgs Topco Limited capital
Issue of share capital
Share issue costs
Share capital and share
premium reduction
Share based payments
Deferred tax on share
based payment
Contingent consideration
on acquisition
Transactions with
owners
Balance at
31 December 2015
–
–
–
–
–
–
–
101,574
–
2,938
–
104,512
–
–
–
–
–
–
–
–
573,710
10
9,990
–
–
–
56,078
80
524
22
50
22
482,668
–
–
–
–
–
(90)
(10,514)
(56,078)
22
22
526
99,473
–
(4,952)
22
(479,189)
(94,521)
25
20
4,055
–
–
–
4,055
4,055
–
–
–
–
–
–
–
–
–
–
–
–
–
573,710
(369,119)
1,199
(55)
–
–
–
–
–
–
–
–
–
–
–
–
(369,119)
–
–
–
–
–
–
101,574
1,097
4,035
–
1,097
105,609
–
–
–
–
–
–
–
–
–
–
–
–
1,109
–
10,000
–
–
–
56,078
604
50
–
482,668
–
–
–
–
–
–
–
–
(435,801)
99,999
(4,952)
–
208,646
1,199
(55)
1,109
–
574,854
(369,119)
1,109
–
210,899
–
679,366
(369,119)
1,109
1,097
316,508
The notes on pages 91 to 123 form an integral part of these consolidated financial statements.
IBSTOCK_22_Consolidated_Statements_DRF2.indd 89
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 90
Consolidated cash flow statement
Cash flow from operating activities
Cash generated from operations
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries, net of cash acquired
Interest received
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issuance of equity shares
Equity issue costs
Dividends paid
Drawdown of borrowings
Repayment of borrowings
Debt issue costs
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Exchange gains/losses on cash and cash equivalents
Cash and cash equivalents at end of period
The notes on pages 91 to 123 form an integral part of these consolidated financial statements.
Note
27
Period from
28/11/2014
to
31/12/2015
£’000
91,567
(46,143)
(3,460)
41,964
(9,401)
13
24
(365,384)
12
(374,760)
110,654
(3,202)
–
569,000
(274,000)
(18,737)
383,715
50,919
–
105
51,024
IBSTOCK_22_Consolidated_Statements_DRF2.indd 90
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Notes to the
financial statements
1. Summary of significant accounting policies
Authorisation of financial statements
The consolidated financial statements of Ibstock plc, which
has a premium listing on the London Stock Exchange, for the
period ended 31 December 2015 were authorised for issue
in accordance with a resolution of the Directors on 10 March
2016. The balance sheet was signed on behalf of the Board
by W Sheppard and K Sims.
Ibstock plc is a company incorporated and domiciled in England
whose shares are publicly traded.
Basis of preparation
The consolidated financial statements of Ibstock plc for the
period from 28 November 2014 to 31 December 2015 have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and as
applied in accordance with the provisions of the Companies
Act 2006.
Ibstock plc was incorporated on 3 September 2015 to serve as
a holding company for the purposes of listing on the London
Stock Exchange. Ibstock plc was admitted to public trading on
27 October 2015.
On 26 February 2015, wholly-owned subsidiaries of Figgs Topco
Limited acquired all of the shares of Ibstock Group Limited and
Glen-Gery Corporation from CRH plc. Ibstock plc acquired Figgs
Topco Limited and its subsidiaries in a share for share exchange
prior to admission to public trading and as a result replaced Figgs
Topco as the ultimate holding company in the group structure; this
resulted in no ultimate change in control of the acquired companies.
Under predecessor accounting, the results of Ibstock plc have been
adjusted as if the entity had always been merged with Figgs Topco
Limited, which was the holding company of other subsidiaries prior
to the introduction of Ibstock plc into the group structure as the
ultimate holding company. The consolidated financial statements
of Ibstock plc (‘the Group’) therefore comprise the results of Figgs
Topco Limited and its subsidiary companies from its incorporation
on 28 November 2014. This represents the first period of account
following the incorporation of Ibstock plc, and as such no
comparative figures are presented.
Its subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. Therefore, the financial statements
include the results of the operating companies which were
acquired by Figgs Topco Limited on 26 February 2015 (see
Note 24), from that date.
The consolidated financial statements are presented in Sterling
and all values are rounded to the nearest thousand (£’000) except
where otherwise indicated. The significant accounting policies are
set out below.
91
Basis of consolidation and acquisition accounting
The consolidated financial statements comprise the financial statements
of Ibstock plc and its subsidiaries as at 31 December 2015. The
financial statements of subsidiaries are prepared for the same reporting
period as the Parent Company, using consistent accounting policies.
All intra-group balances, transactions, income and expenses and profit
and losses resulting from intra-group transactions have been eliminated
in full. Subsidiaries are consolidated from the date on which the Group
obtains control and cease to be consolidated from the date on which
the Group no longer retains control. Details of all the subsidiaries of the
Group are given in Note 28.
The acquisition method of accounting is used to account for
business combinations by the Group. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair
value at acquisition date. The excess of the consideration transferred
over the fair value of the identifiable net assets acquired is
recognised as goodwill. If the consideration transferred is less than
the fair value of the net assets acquired, negative goodwill arises
and is recognised directly in the income statement.
An estimation of the fair value is made for contingent consideration
in accordance with IFRS 3 at the time of a business combination.
Where there is a contractual obligation to settle the liability in cash
based on events outside the Company’s control this is accounted
for as a financial liability and subsequent changes to the fair value
of contingent consideration recognised as a financial liability are
recognised in the income statement. Otherwise contingent
consideration is accounted for as a credit to equity within other
reserves and is not subsequently adjusted.
Acquisition expenses of £9,392,000 have been taken to the
consolidated income statement during the year and recognised
in administrative expenses.
Going concern
The Group’s business activities, together with the factors likely to affect
its future development, performance and position are set out in the
business review on pages 36 to 37. The financial position of the
company, its cash flows, liquidity position and borrowing facilities are
described in the Directors’ Report on pages 79 to 80. In addition, Note
21 to the financial statements include the Company’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity risk.
The Group regularly reviews market and financial forecasts, and has
reviewed its trading prospects in its key markets. As a result it believes
its trading performance will demonstrate continued improvement in
the coming periods, and that liquidity will remain strong.
The Board has reviewed the latest forecasts of the Group and
considered the obligations of the financing arrangements. Given
the continued strong liquidity of the Group, the Board has
concluded that the going concern basis of accounting of its
financial statements is appropriate.
In addition, see the Group’s Viability Statement set out on page 35.
IFRS 1 – First time adoption
These consolidated financial statements for the year ended
31 December 2015, are the first set of financial statements the
Group has prepared in accordance with IFRS as adopted by the
European Union. As Ibstock plc and its subsidiary Figgs Topco
Limited have not previously prepared financial statements, no
transition exemptions or exceptions have been applied and no
reconciliations are presented.
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Notes to the
financial statements
continued
New standards, amendments and interpretations not
yet adopted
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning after
1 January 2015, and have not been applied in preparing these
consolidated financial statements. None of these is expected to
have a significant effect on the consolidated financial statements
of the Group, except the following set out below:
IFRS 9 ‘Financial instruments’ addresses the classification,
measurement and recognition of financial assets and financial liabilities.
The complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and measurement
of financial instruments, including impairment of financial assets and
hedge accounting. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through other comprehensive
income (‘OCI’) and fair value through profit and loss (‘P&L’). The basis
of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. Investments
in equity instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present changes
in fair value in OCI with no subsequent reclassification of cumulative
gains and losses to profit or loss. There is now a new expected credit
losses model that replaces the incurred loss impairment model used in
IAS 39. For financial liabilities there were no changes to classification
and measurement except for the recognition of changes in own credit
risk in other comprehensive income, for liabilities designated at fair value
through profit or loss. IFRS 9 relaxes the requirements for hedge
effectiveness by replacing the bright line hedge effectiveness tests.
It requires an economic relationship between the hedged item and
hedging instrument and for the ‘hedged ratio’ to be the same as the
one management actually use for risk management purposes.
Contemporaneous documentation is still required but is different to
that currently prepared under IAS 39. The standard is effective for
accounting periods beginning on or after 1 January 2018. Early
adoption is permitted subject to EU endorsement. The Group is
assessing the impact of IFRS 9.
IFRS 15 ‘Revenue from contracts with customers’ deals with
revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity’s contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has
the ability to direct the use and obtain the benefits from the good
or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11
‘Construction contracts’ and related interpretations. The standard
is effective for annual periods beginning on or after 1 January 2018
and earlier application is permitted subject to EU endorsement.
The Group is assessing the impact of IFRS 15.
IFRS 16 ‘Leases’ sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both
parties to a contract, i.e., the customer (‘lessee’) and the supplier
(‘lessor’). IFRS 16 requires lessees to recognise a lease liability
reflecting future lease payments and a ‘right of use asset’ for
virtually all lease contracts. IFRS 16 is effective from 1 January
2019. A company can choose to apply IFRS 16 before that date
but only if it also applies IFRS 15 ‘Revenue from Contracts with
Customers’. The Group is assessing the impact of IFRS 16.
There are no other IFRSs, Annual improvements or IFRIC
interpretations that are not yet effective that would be expected
to have a material impact on the Group.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker (CODM), who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors of the
Group. The CODM reviews the key profit measure, ‘Adjusted
EBITDA’ disaggregated by the UK and US based on geographical
location and the organisational structure of the Group. No
aggregation of segments has been applied.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated financial statements are presented in Sterling (£),
which is the Group’s presentation currency.
On consolidation, the assets and liabilities of foreign operations
(i.e., subsidiaries with a functional currency that is not Sterling) are
translated into Sterling at the exchange rate prevailing at the
reporting date and their results are translated at the actual rates
prevailing at the date of the transactions (or average rates, with a
reasonable approximation) and the effect of fair value adjustment
on the assets and liabilities are treated as part of the assets and
liabilities of a foreign operation. The currency translation differences
are recorded in the currency translation reserve within other
comprehensive income and accumulated in equity in the currency
translation reserve.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement, except when deferred in other
comprehensive income as qualifying cash flow hedges and qualifying
net investment hedges. Foreign exchange gains and losses that relate
to borrowings and cash and cash equivalents are presented in the
income statement within net finance costs. All other foreign exchange
gains and losses are presented in the income statement.
Borrowing costs
Borrowing costs are expensed as incurred, except for borrowing
costs directly attributable to the acquisition, construction or
production of a qualifying asset that necessarily takes a substantial
period of time to get ready for its intended use, in which case they are
capitalised as part of the cost of that asset. Capitalisation of borrowing
costs commences when expenditures for the asset and borrowing
costs are being incurred and the activities to prepare the asset for its
intended use are in progress. Borrowing costs are capitalised up to
the date when the project is completed and ready for its intended use.
There were no borrowing costs capitalised during the period.
Property, plant and equipment
Property, plant and equipment is stated at the cost to the Group
less depreciation. The cost of property, plant and equipment
includes directly attributable costs.
Depreciation is provided on the cost of all other assets (except
assets in the course of construction and land), so as to write off the
cost, less residual value, on a straight line basis over the expected
useful economic life of the assets concerned, as follows:
Asset classification
Land
Freehold buildings
Plant, machinery and equipment
Mineral reserves
Useful life
Not depreciated
20 – 50 years
5 – 40 years
Amortised on a usage basis
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93
Exploration expenditure relates to the initial search for mineral
deposits with economic potential and is not capitalised. Evaluation
expenditure relates to a detailed assessment of deposits or other
projects that have been identified as having economic potential and
in obtaining permissions to extract clay. Capitalisation of evaluation
expenditure within ‘Mineral reserves’ commences when there is a
high degree of confidence that the Group will determine that a project
is commercially viable, i.e, the project will provide a satisfactory return
relative to its perceived risks, and therefore it is considered probable
that future economic benefits will flow to the Group.
Mineral reserves may be declared for an undeveloped project
before its commercial viability has been fully determined.
Evaluation costs may continue to be capitalised during the period
between declaration of reserves and approval to extract clay as
further work is undertaken in order to refine the development case
to maximise the project’s returns.
The carrying values of capitalised evaluation expenditure are
reviewed for impairment by management. Mineral reserves are
amortised on a usage basis.
Useful lives and residual values are reviewed at each balance sheet
date and revised where expectations are significantly different from
previous estimates. In such cases, the depreciation charge for
current and future periods is adjusted accordingly.
The carrying values of property, plant and equipment are reviewed
for impairment if events or changes in circumstances indicate the
carrying value may not be recoverable.
Intangible assets
Separately acquired brands and non-contractual customer
relationships are shown at historical cost. Brands and customer
relationships have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the
straight line method to allocate the cost of brands and customer
relationships over their estimated useful lives as follows:
Asset classification
Brands
Customer relationships
Useful life
10 – 50 years
10 – 20 years
Financial assets
Classification
The Group classifies its financial assets in the following categories:
at fair value through profit or loss and loans and receivables.
The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification
of its financial assets at initial recognition.
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the
short term. Derivatives are also categorised as held for trading
unless they are designated as hedges. Assets in this category
are classified as current assets if expected to be settled within
12 months, otherwise they are classified as non-current.
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than
12 months after the end of the reporting period. These are classified
as non-current assets. The Group’s loans and receivables comprise
‘trade and other receivables’ and ‘cash and cash equivalents’ in the
balance sheet (Notes 14 and 15, respectively).
Regular purchases and sales of financial assets are recognised on
the trade-date – the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value
through profit or loss. Financial assets carried at fair value through
profit or loss are initially recognised at fair value, and transaction
costs are expensed in the income statement. Financial assets are
derecognised when the rights to receive cash flows from the
investments have expired or have been transferred and the Group
has transferred substantially all risks and rewards of ownership.
Financial assets at fair value through profit or loss are subsequently
carried at fair value. Loans and receivables are subsequently carried
at amortised cost using the effective interest method.
Trade and other receivables
Trade receivables are amounts due from customers for merchandise
sold or services performed in the ordinary course of business.
If collection is expected in one year or less, they are classified as
current assets. If not, they are presented as non-current assets.
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. These costs are amortised over their estimated useful
lives of three to five years.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
For further details see Note 11.
Impairment of non-financial assets
Assets that are subject to amortisation or depreciation such as
brands and non-contractual customer relationships and property,
plant and equipment are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs of disposal and value-in-use. For the
purposes of assessing impairment, assets are grouped at the
lowest levels for which there are largely independent cash inflows
(cash-generating units). Prior impairments of non-financial assets
(other than goodwill) are reviewed for possible reversal at each
reporting date.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost includes all costs incurred in bringing each product to its
present location and condition. Raw materials, consumables and
goods for resale are recognised on an average cost basis, while
work in progress and finished goods are held at direct cost and an
appropriate proportion of production overheads. Net realisable
value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses.
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention
to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the normal
course of business and in the event of default, insolvency or
bankruptcy of the company or the counterparty.
Cash and cash equivalents
In the consolidated balance sheet, cash and cash equivalents includes
cash in hand, deposits held at call with banks, other short-term highly
liquid investments with original maturities of three months or less and
bank overdrafts (if any). In the consolidated balance sheets, bank
overdrafts are shown within borrowings in current liabilities.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if
payment is due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as
non-current liabilities.
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
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94
Notes to the
financial statements
continued
Borrowings
Borrowings are recognised initially at fair value, net of directly
attributable transaction costs incurred. All other costs are expensed
as incurred. Borrowings are subsequently carried at amortised cost;
any difference between the fair value initially recognised and the
redemption value is recognised in the income statement over the
period of the borrowings using the effective interest method. The
effective interest method takes into account estimations of future
cash flows associated with the instrument. Management are
required to re-assess these estimates at each reporting date and
where the expectations of the nature and timing of cash flows
change a one-off adjustment is required to alter the carrying value
of the instrument in accordance with those new expectations.
Borrowings are classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Finance cost on borrowings is treated as an expense in the income
statement, with the exception of interest costs incurred on the
financing of major projects, which are capitalised within property,
plant and equipment.
Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some
or all of the facility will be drawn down. In this case, the fee is deferred
until the draw-down occurs. To the extent there is no evidence that it
is probable that some or all of the facility will be drawn down, the fee is
capitalised as a pre-payment for liquidity services and amortised over
the period of the facility to which it relates.
An exchange of debt instruments with substantially different terms
is accounted for as an extinguishment of the original financial
liability and the recognition of a new financial liability. Similarly, a
substantial modification of the terms of an existing financial liability
is accounted for as an extinguishment of the original financial
liability and the recognition of a new financial liability.
Employee benefits
The Group operates various post-employment schemes, including
both defined benefit and defined contribution pension plans.
Pension obligations
A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. The Group
has no legal or constructive obligations to pay further contributions
if the fund does not hold sufficient assets to pay all employees
the benefits relating to employee service in the current and prior
periods. A defined benefit plan is a pension plan that is not a
defined contribution plan.
Typically defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on one
or more factors such as age, years of service and compensation.
The amount recognised in the balance sheet in respect of defined
benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan
assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The
present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of
high-quality corporate bonds that are denominated in the currency
in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation.
Where defined benefit schemes have a surplus, the surplus is not
recognised if future economic benefits are not available to the entity
in the form of a reduction in the future contributions or a cash refund.
The current service cost of the defined benefit plan, recognised in
the income statement in employee benefit expense, except where
included in the cost of an asset, reflects the increase in the defined
benefit obligation resulting from employee service in the current
year, benefit changes curtailments and settlements.
Past-service costs are recognised immediately in income. The net
interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of
plan assets. This cost is included in interest expense in the
income statement.
Remeasurement gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged
or credited in other comprehensive income in the period in which
they arise.
A reimbursement asset has been recognised representing an
indemnity receivable from a former parent undertaking which will
be directly contributed to the pension scheme. A related liability
for any additional pension liabilities that may arise as a result of
the equalisation of pension benefits has been recognised within
post-employment benefit obligations (see Note 19).
For defined contribution plans, the Group pays contributions to
publicly or privately administered pension insurance plans on a
mandatory, contractual or voluntary basis. The Group has no further
payment obligations once the contributions have been paid. The
Group recognises contributions payable to defined contribution plans
in exchange for employee services in employee benefit expense.
Provisions
Provisions are recognised when: the Group has a present legal or
constructive obligation as a result of past events; it is probable that
an outflow of resources will be required to settle the obligation;
and the amount has been reliably estimated. Provisions are not
recognised for future operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as interest expense.
The restoration provision is to fund future obligations at a number of
sites that the Group is associated with and where the Group has any
constructive obligation to restore once it has fully utilised the site.
Provisions for dilapidations are recognised on a lease by lease basis
and are based on the Group’s best estimate of the likely committed
cash outflow. The restructuring provision covers current and former
employees who have ceased working on grounds of ill health and is a
liability payable to their normal retirement date. Other provisions relate
to provisions for sites used for landfill and for onerous contracts to
cover the exposure that the Group has for both current property
leases where the rent being paid is significantly higher than the current
market rents and also vacant properties. All of these provisions are
discounted on an annual basis.
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Revenue
Revenue represents the fair value of consideration receivable for
goods and services supplied by the Group, exclusive of local
sales tax and trade discounts and after eliminating sales within
the Group. All of revenue is attributable to the principal activities
of the Group being the manufacture and sale of concrete
products, clay facing bricks and associated special shaped
and fabricated clay products.
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer, which is usually
on despatch of goods. For ‘bill and hold’ sales, in which delivery
is delayed at the buyer’s request but the buyer takes title and
accepts billing, revenue is recognised when the buyer takes title,
provided: (a) it is probable that delivery will be made; (b) the item is
on hand, identified and ready for delivery to the buyer at the time
the sale is recognised; (c) the buyer specifically acknowledges the
deferred delivery instructions; and (d) the usual payment terms
apply. Revenue is not recognised when there is simply an intention
to acquire or manufacture the goods in time for delivery.
Customer rebates
Provisions for rebates to customers are based upon the terms of
individual contracts and are recorded in the same period as the
related sales as a deduction from revenue. The Group estimates
the provision for customer rebates based on the terms of each
agreement at the time the revenue is recognised.
Other income
Other income is attributable to rental income from properties, landfill
and gas activity. Other expenses represents associated expenses.
This is not deemed to be a principal activity of the Group.
Research and development
Research and development expenditure is written off as incurred,
except that development expenditure incurred on an individual
project is carried forward when its future recoverability can
reasonably be regarded as assured. Any expenditure carried
forward is amortised in line with the expected future sales from the
related project. Research and development costs capitalised are
not material.
Exceptional items
The Group presents as exceptional items on the face of the income
statement, those material items of income and expense which,
because of the nature and the expected infrequency of the events
giving rise to them, merit separate presentation to allow
shareholders to understand better elements of financial
performance in the financial period, so as to assess better trends
in financial performance. Further detail on exceptional items are
given within Note 4.
The Directors believe that the adjusted EBITDA and earnings per
share measures provide useful information for shareholders.
These measures are consistent with how the underlying business
performance is measured internally. The adjusted EBITDA is not a
recognised profit measure under IFRS and may not be directly
comparable with adjusted profit measures used by other companies.
The adjustments made to profit are described within Note 4.
Taxation
Tax on the profit or loss for the period comprises current and
deferred tax. Tax is recognised in the income statement except for
tax relating to items recognised in other comprehensive income
or directly in equity.
Current tax is the expected tax payable or recoverable on the
taxable income or loss for the period, using tax rates enacted
or substantively enacted at the balance sheet date, and any
adjustment to tax payable in respect of previous periods.
recognised if they arise from the initial recognition of goodwill;
deferred tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
The amount of deferred tax is calculated using tax rates that have
been enacted or substantively enacted at the balance sheet date
and are expected to apply when the related deferred tax asset is
realised or deferred tax liability is settled. Deferred tax assets and
liabilities are not subject to discounting.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available, against which
the temporary difference can be utilised.
Deferred tax liabilities are provided on taxable temporary
differences arising from investments in subsidiaries, associates
and joint arrangements, except for deferred tax liabilities where the
timing of the reversal of the temporary difference is controlled by
the Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred tax assets are recognised on deductible temporary
differences arising from investments in subsidiaries, associates
and joint arrangements only to the extent that it is probable the
temporary difference will reverse in the future and there is sufficient
taxable profit available against which the temporary difference can
be utilised.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets against current tax
liabilities where these have been levied by the same tax authority
on either the same taxable entity or different taxable entities within
the Group where there is an intention to settle the balances on a
net basis.
Operating leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight line basis over the period of the lease.
Share capital
Ordinary shares are classified as equity. Mandatorily redeemable
preference shares are classified as liabilities. Incremental costs
directly attributable to the issue of new ordinary shares or options
are shown in equity as a deduction from the proceeds.
Dividend distribution
Dividend distributions to Ibstock shareholders are recognised
in the Group’s financial statements in the period in which the
dividends are approved in general meeting, or when paid in the
case of an interim dividend.
Share based payments
The Group operates a number of equity-settled share based
compensation plans, under which the entity receives services from
employees as consideration for equity instruments (for example
options or shares) of the Group. The fair value of the employee
services received in exchange for the grant of the equity
instruments is recognised as an expense. The total amount to
be expensed is determined by reference to the fair value of the
instruments granted:
• including any market performance conditions (for example,
an entity’s share price);
• excluding the impact of any service and non-market
performance vesting conditions (for example, profitability, sales
growth targets and remaining an employee of the entity over a
specified time period); and
Deferred tax is provided on temporary differences between the tax
bases of assets and liabilities and their carrying amounts included
in the financial statements. However, deferred tax liabilities are not
• including the impact of any non-vesting conditions (for example,
the requirement for employees to save or holding shares for a
specific period of time).
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Notes to the
financial statements
continued
At the end of each reporting period, the Group revises its
estimates of the number of instruments that are expected to
vest based on the non-market vesting conditions and service
conditions. It recognises the impact of the revision to original
estimates, if any, in the income statement, with a corresponding
adjustment to equity. In addition, in some circumstances
employees may provide services in advance of the grant date and
therefore the grant date fair value is estimated for the purposes
of recognising the expense during the period between service
commencement period and grant date.
For the equity-settled share based payment transactions, the fair
value of the share instruments granted is derived from established
option pricing models. Further details on share based payments
are set out in Note 25.
2. Critical accounting judgements and estimates
The preparation of the financial statements requires management
to exercise judgement in applying the Group’s accounting policies.
It also requires the use of estimates and assumptions that affect
the reported amounts of assets, liabilities, income and expenses.
Due to the inherent uncertainty in making these critical judgements
and estimates, actual outcomes could be different.
Estimates
Estimates and underlying assumptions are reviewed by
management on an ongoing basis, with revisions recognised in the
period in which the estimates are revised and in any future period
affected. The areas involving significant risk resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are as follows:
Residual values and asset lives
Management has applied judgement in selecting the depreciation
rates applied to depreciate property, plant and equipment, to
depreciate tangible fixed assets over their useful economic lives.
Following the acquisition of the operating companies, property,
plant and equipment values were recognised at fair value and
useful economic lives assessed at that date. These were derived
from the operation of comparable equipment. The carrying value
of property, plant and equipment, and a table showing the useful
economic lives of these assets is disclosed in Note 12.
Taxation
The Group is subject to tax in the different tax jurisdictions in which
it operates. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax determination
may be uncertain. The calculation of the Group’s total tax charge
therefore necessarily involves a degree of estimation and judgement.
The Group’s tax liabilities are based on estimates of whether additional
taxes will be due and tax assets are recognised on the basis of
probable future recoverability. This requires management to exercise
judgement based on their interpretation of country specific tax laws
and the likelihood of settlement of tax liabilities or recoverability of tax
assets. To the extent that the final outcome differs from the estimates
made, tax adjustments may be required which could have a material
impact on the Group’s total tax charge and profit for the period in
which such a determination is made.
Provisions
Provisions are recognised when: the Group has a present legal or
constructive obligation as a result of past events; it is probable that
an outflow of resources will be required to settle the obligation; and
the amount has been reliably estimated. Where there are a number
of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations
as a whole.
Provisions are established by the Group based on the
management’s assessment of relevant information and advice
available at the time of preparing the consolidated financial
statements. Outcomes are uncertain and dependent on future
events and are reviewed regularly. Where outcomes differ from
management’s expectations, differences from the amount
initially provided will impact profit or loss in the period the
outcome is determined.
The Group’s provisions principally relate to obligations arising
from PP&E dilapidation and restorations, provisions for the
Supplemental Executive Retirement Plan, product warranties,
landfill and onerous lease property provisions. Further details
of specific estimates used in arriving at these provisions are
provided in Note 17.
Business combinations
When the Group completes a business combination, the fair values
of the identifiable assets and liabilities acquired, including intangible
assets and contingent liabilities, are recognised at their fair value.
The determination of the fair values of acquired assets and
liabilities is based, to a considerable extent, on management’s
judgement. In estimating fair value, particularly in relation to
identifiable intangible assets, management is required to estimate
the useful economic life of each asset and the future cash flows
expected to arise from each asset and to apply a suitable discount
rate. The carrying value of intangible assets is disclosed in Note 11.
Additionally, management has made judgements and estimations
in relation to the expected ultimate payments which will occur, and
their timings, in respect of contingent consideration and liabilities
arising on the business combination in the period. Contingent
consideration and related assumptions are disclosed in Note 24.
Mineral reserves
Upon acquisition by Figgs Topco Limited on 26 February 2015,
mineral reserves were recorded at their fair value. The
determination of the mineral reserves requires significant
judgements and estimates to be applied, and these are reviewed
regularly and updated.
Factors such as the availability of geological and extraction data,
material performance and both the assessment of compliance with,
and likelihood of extensions to, planning permissions, all impact
upon the determination of the Group’s estimates of its mineral
reserves. Management’s valuations are based on the expected
future usage of reserves using production data, information from
in-house geologists and input from external consultants.
Mineral reserves also have a direct impact on the assessment
of the recoverability of asset carrying values reported in the
consolidated financial statements. Estimates of mineral reserves
are also used to calculate depreciation charges for the Group’s
mineral reserves. The impact of changes in minerals is dealt with
prospectively by amortising the remaining carrying value of the
asset over the expected future production.
IBSTOCK_23_Notes_1_to_9_DRF2.indd 96
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 97
Defined benefit pension schemes
The Group’s accounting policy for defined benefit pension schemes
requires management to make judgements as to the nature of
benefits provided by each scheme and thereby determine the
classification of each scheme. For defined benefit schemes,
management is required to make annual estimates and assumptions
about future returns on classes of scheme assets, future
remuneration changes, employee attrition rates, administration
costs, changes in benefits, inflation rates, life expectancy and
expected remaining periods of service of employees.
In relation to the Group’s post-employment obligations in the US,
management make estimations relating to employee numbers,
inflation rates, discount rates and future contribution rates.
These assumptions are based on the environment in the respective
country. The assumptions used may vary from year to year, which
would affect future net income and net assets. Any differences
between these assumptions and the actual outcome also affect
future net income and net assets. In making these estimates and
assumptions, management considers advice provided by external
advisers, such as actuaries. These assumptions are subject to
periodic review.
In the current period, management made a specific judgement
in relation to the application of International Financial Reporting
Interpretations Committee guidance IFRIC 14 and its applicability
to Ibstock plc. This judgement concerns the Group’s ability to
recognise the actuarial surplus on the UK defined benefit pension
scheme. In applying this interpretation, the Group restricted its
pension surplus as at 31 December 2015 from £8,368,000 to
£331,000 in recognition of the minimum funding requirements
after management. Management has recognised the Barber
equalisation liability of £9,000,000 together with a separate
reimbursement asset from CRH plc of £9,000,000, which is held
within trade and other receivables.
Additionally, management has exercised judgement in the
treatment of the multi-employer US pension as a defined
contribution scheme during the current year.
Note 19 describes the assumptions used together with an analysis
of the sensitivity to changes in key assumptions.
Deal costs
Deal costs of £5.0m were offset against the share premium
of £99.5m created on the issue of shares during the period.
Management has exercised judgement in assessing the allocation
of deal costs incurred between equity and the current period
income statement.
Judgements
Judgements are made by management in the process of applying
the Group’s accounting policies that have the most significant
effect on the amounts recognised in the financial statements.
Impairment of intangible and non-current assets
Determining whether intangible and other non-current assets
are impaired requires judgement and estimation. The Group
periodically reviews intangible and non-current assets, for possible
impairment when events or changes in circumstances indicate, in
management’s judgement, that the carrying amount of an asset
may not be recoverable. Such indicating events would include
a significant planned restructuring, a major change in market
conditions or technology, expectations of future operating
losses, or negative cash flows.
The Group did not record any impairment charges during the
period ended 31 December 2015 as management’s judgement,
based on a rigorous assessment, was that there were no
indicators of impairment.
Non-GAAP items
Exceptional items are disclosed separately in the financial statements
where management believes it is necessary to do so to provide
further understanding of the financial performance of the Group.
The Group presents as exceptional items on the face of the
income statement, those material items of income and expense
which, because of the nature and expected infrequency of the
events giving rise to them, merit separate presentation to allow
shareholders to understand better elements of financial
performance in the period, so as to facilitate comparison with
future periods and to assess trends in financial performance.
Management has considered the materiality, infrequency and
nature of the cost associated with the Group’s Initial Public Offering
in October 2015 against the requirements and guidance provided
by IAS 1, Group accounting policies and recent press releases
from the FRC. Management judged that classifying the scale and
nature of the transaction and the related expense as an exceptional
item in the income statement provides the best guidance as to the
underlying profitability trends within the Group and to present the
results of the Group in accordance with the policy above.
Exceptional items are disclosed in Note 4.
Borrowing costs
During the period ended 31 December 2015, the Group
raised significant funds during refinancing the Group’s debt.
In establishing borrowing costs, using the effective interest rate
method, management is required to exercise judgement over
the period in which the debt will be utilised and repaid. Currently,
management considers that debt will be held to maturity and
transaction costs of raising debt are included in the effective
interest rate over those periods. The amount of transaction
costs included in debt are disclosed in Note 7.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 98
Notes to the
financial statements
continued
3. Segment reporting
As explained in Note 1, the management team considers the reportable segments to be the UK and the US. The key Group performance
measure is Adjusted EBITDA, as detailed below, which is profit before net finance cost, tax, exceptional items, depreciation and
amortisation and other non-underlying items. Transactions between segments are carried out at arms’ length.
Total revenue from external customers
EBITDA before exceptional items
Acquisition costs: Transaction costs
Acquisition costs: Retention and compensation payments
IPO costs: Transaction costs
IPO costs: Compensation payments
Loss on disposal of property, plant and equipment
Exceptional cost of sales
EBITDA after exceptional items
Depreciation and amortisation pre fair value uplift
Incremental depreciation and amortisation following fair value uplift
Negative goodwill on acquisition
Net finance costs
(Loss)/profit before tax
Total assets
Total liabilities
Non-current assets
Intangible assets
Property, plant and equipment
Total
Revenue by product type
Revenue by product type, split by geographical location.
Clay
Concrete
Period ended
31 December 2015
UK
£’000
US
£’000
287,796
70,535
91,167
(9,392)
(623)
11,132
–
(363)
(10,276)
(2,221)
(1,263)
(1,389)
–
(14)
(13,491)
(2,486)
54,733
6,048
(10,796)
(3,056)
(7,306)
(166)
Negative
goodwill on
acquisition
£’000
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
358,331
102,299
(9,392)
(986)
(12,497)
(1,263)
(1,403)
(15,977)
60,781
(13,852)
(7,472)
–
–
124,191
124,191
(68,188)
(31,557)
(755)
–
(68,943)
2,071
124,191
94,705
566,236
102,405
(328,152)
(23,981)
–
–
668,641
(352,133)
118,127
9,676
299,280
47,605
417,407
57,281
–
–
–
127,803
346,885
474,688
UK
£’000
US
£’000
Total
£’000
216,339
70,535
286,874
71,457
–
71,457
287,796
70,535
358,331
IBSTOCK_23_Notes_1_to_9_DRF2.indd 98
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 4. Exceptional items
Exceptional cost of sales
Exceptional administrative expenses:
Acquisition costs
Transaction costs
Retention and compensation payments
IPO costs
Transaction costs
Retention and compensation payments
Total exceptional administrative expenses
Loss on disposal of property, plant and equipment
Negative goodwill on acquisition
Total exceptional items
99
Period ended
31 December
2015
£’000
(15,977)
(9,392)
(986)
(10,378)
(12,497)
(1,263)
(13,760)
(24,138)
(1,403)
124,191
82,673
Acquisition costs
Exceptional cost of sales
In accordance with IFRS, the inventory value was uplifted to fair value at the date of the acquisition, and this adjustment increased cost
of sales in the post-acquisition period. The £15,977,000 cost incurred for the utilisation of the fair value uplift adjustment on inventory is
considered an exceptional cost of sale as it is a non-cash and non-recurring item. The inventory fair value uplift has fully unwound as at
31 December 2015.
Transaction costs
Professional fees and other costs directly of £9,392,000 have been classified as exceptional in the current period. These costs directly
attributable to the acquisition transaction which occurred in February 2015 have been classified as exceptional due to their material
nature and as they are not expected to recur.
Retention and compensation payments
Other adjusting items of £986,000 in the period to December 2015 relate to retention bonuses due to key staff members which were
committed to as part of our acquisition by Bain and the settlement of ‘B’ shares held by management.
IPO costs
Transaction costs
Costs of £12,497,000 have been incurred during the process of our Initial Public Offering. This represents professional fees, management
fees incurred prior to our listing and other transaction costs. Due to the non-recurring and material nature of such costs, they have been
classified as exceptional in the current period.
Compensation and retention payments
Upon the successful IPO of the Group, senior management were provided with bonuses (£540,000) and share options (£723,000), which
vested immediately under the Long-Term Incentive Plan (LTIP) scheme. Since the bonus and cost of the award are fully recognised in the
period, are not expected to recur and are intrinsically linked to the IPO transaction, they have been treated as exceptional in the current
period. See Note 25c (i) for further details of the award. All other employee share schemes have been treated as recurring costs.
Negative goodwill
For further details of how negative goodwill of £124,191,000 was generated on the business combination, see Note 24.
All exceptional items have been settled in cash, other than certain deal costs, share based payments, negative goodwill and the cost of sales
adjustment that are non-cash in nature due to being items that are either equity settled, or items arising solely from fair value accounting in the
Group accounts.
Tax on exceptional items
Apart from the following items, exceptional items are taxable or deductible in full in the current period.
(i) Negative goodwill of £124,191,000 is non-taxable and therefore does not impact the reported tax credit for the period
(ii) Acquisition costs of £7,039,000 and IPO transaction costs of £11,769,000 have been treated as non-tax deductible and increase the
current tax charge by £3,808,000
(iii) A deferred tax asset of £150,000 has been recognised in respect of IPO-related share based payments totalling £723,000.
Loss on disposal of property, plant and equipment is non-tax deductible.
Exceptional finance costs detailed in Note 7 are tax deductible in full in the current period.
IBSTOCK_23_Notes_1_to_9_DRF2.indd 99
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 100
Notes to the
financial statements
continued
5. Operating profit
Operating profit includes the effect of (crediting)/charging:
Changes in inventories of finished goods and work in progress
Raw material and consumable used
Employee benefit expense (Note 6)
Depreciation and amortisation (Notes 11 and 12)
Fair value unwind of inventories (Note 4)
Other production costs
Total cost of sales
Transportation expenses
Other employee benefit expense (Note 6)
Loss on disposal of property, plant and equipment (Note 12)
Advertising costs
Operating lease payments
Operating lease income
Exceptional administrative expenses (Note 4)
Negative goodwill on acquisition (Note 4)
Period ended
31 December
2015
£’000
(8,400)
(74,820)
(74,541)
(21,324)
(15,977)
(34,502)
(229,564)
(29,265)
(22,573)
(1,403)
(1,475)
(5,771)
550
(24,138)
124,191
Auditor remuneration
During the period the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor:
Group
Fees payable to the Company’s auditor and its associates for the audit of parent company and consolidated financial statements:
100
Fees payable to Company’s auditor and its associates for other services:
– Audit of the company’s subsidiaries
– Tax compliance services
– Tax advisory services
– Audit related and transaction advisory services in respect of the initial public offering
Total
385
18
16
1,500
2,019
Period ended
31 December
2015
£’000
IBSTOCK_23_Notes_1_to_9_DRF2.indd 100
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 6. Employees and Directors
Staff costs for the Group during the period:
Wages and salaries
Social security costs
Pensions costs-defined benefit plans (Note 19)
Pensions costs-defined contribution plans (Note 19)
Share based payments (Note 25)
Average monthly number of people (including Executive Directors) employed:
Sales staff
Administrative staff
Production staff
Key management compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Termination benefits
Share based payment
101
Period ended
31 December
2015
£’000
75,034
9,612
9,895
1,374
1,199
97,114
Period ended
31 December
2015
326
200
2,110
2,636
Period ended
31 December
2015
2,052
99
–
–
1,181
3,332
Key management personnel has been defined as the Board of Ibstock plc, together with Directors of the Group’s largest subsidiary.
Details of Directors’ remuneration are presented in the Remuneration Report on pages 56 to 78. The aggregate remuneration for the
purposes of the financial statements is £1,180,000.
7. Finance costs
Interest costs:
Interest payable on shareholder loan notes (i)
Interest payable on preference shares (i)
Interest payable on revolving credit facility (ii)
Interest payable on bank borrowings (old facility) (iii)
Interest payable on bank borrowings (new facility) (iii)
Exceptional finance charge on extinguishment of secured borrowings and loss
on early settlement of revolving credit facility (iii)
Total interest payable on bank borrowings
Cash payable interest
Net interest costs arising on the UK pension scheme (Note 19)
Net interest costs arising on the US pension scheme
Unwinding of discount on provisions/changes in discount rate (Note 17)
Non-cash payable interest
Total finance costs
Period ended
31 December
2015
£’000
(4,327)
(3,617)
(797)
(18,744)
(1,095)
(39,922)
(60,558)
(68,502)
(31)
(417)
(491)
(939)
(69,441)
IBSTOCK_23_Notes_1_to_9_DRF2.indd 101
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 102
Notes to the
financial statements
continued
The shareholder loan notes, preference shares, old bank borrowings and revolving credit facility, each taken out on acquisition of the
trading group in February 2015, were financial instruments held at amortised cost using the effective interest method. The amortised cost
method is based upon expected cash flows of each instrument.
(i) The loan notes attracted interest of 12% per annum on the principal plus any unpaid interest. Interest is payable on a quarterly basis.
The notes are repayable at par on maturity in February 2021 or earlier at the option of the Company. The par value of the shareholder
loan notes was £51.8m. In October 2015 the shareholder loan note and accrued interest were repaid, the consideration being in the
form of B preference shares and deferred shares. These newly issued shares were subsequently converted into ordinary and deferred
shares as part of capital reorganisation that took place immediately prior to the IPO.
The 43,250,000 £0.001 preference shares bore a 12% annual fixed yield, compounding quarterly on 31 March, 30 June,
30 September and 31 December. On any redemption of these shares, the Articles of the Company provided that all arrears and
accruals (if any) of the dividend should be paid. There was no fixed date of repayment; the shares could be redeemed at par at any
time at the agreement of both the Company and the holder, or the shares are mandatorily redeemable at par on a triggering event,
including the sale of the business. There was no premium payable on the redemption and the preference shares carried no votes
at general meetings. In October 2015 the preference shares were converted into ordinary and deferred shares as part of a capital
reorganisation that took place immediately prior to the IPO.
(ii) The old revolving credit facility (RCF) provided available funding of £40m until it was repaid and extinguished in October 2015.
Interest was charged at an annual rate of margin plus LIBOR (floored at 1%); the margin ranged from 2.75% – 3.50% dependent on
the prevailing earnings of the Group on a rolling 12 months basis. Interest was payable at either one, two, three or six-monthly
intervals, as appropriate. A commitment fee was payable on the undrawn element of the facility based on 35% of applicable margin.
In October 2015 the old RCF was repaid.
The revolving credit facility was repaid and extinguished earlier than previously planned in October 2015 leading to an acceleration of
transaction costs and an exceptional loss on early settlement of £1,877,000.
(iii) The bank borrowings are a financial instrument classified as ‘other financial liabilities’ and held at amortised cost using the effective
interest method. The amortised cost method is based upon expected cash flows of each instrument. Where the expectations of the
nature and timing of cash flows change a one-off adjustment is required to adjust the carrying value of the financial instrument to
reflect actual and revised estimated cash flows.
The old bank borrowings attracted interest of 8% plus LIBOR (floored at 1%) per annum, payable six monthly. The borrowings were
repayable at par in February 2021. A voluntary early repayment exit charge of £38,045,000 was levied based on the nature and timing
of the settlement. The initial drawdown value of the borrowings was £250m in February 2015.
On 30 June 2015 management revised the estimated lives and maturity dates for the securitised debt to October 2015 (previously to
March 2018) after considering plans for an expected refinancing and associated ‘make whole’ premium, resulting in an exceptional
finance charge. On repayment of this debt in October 2015 this facility was extinguished.
A new bank borrowing facility was entered into in September 2015 with new lenders and was first drawn in October as disclosed
in Note 18. This financial instrument is also classified as ‘other financial liabilities’ and held at amortised cost using the effective
interest method.
For further details on these facilities, see Note 18.
8. Finance income
Interest income:
Other interest receivable
Fair value gain on financial instrument
Period ended
31 December
2015
£’000
16
482
498
IBSTOCK_23_Notes_1_to_9_DRF2.indd 102
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
9. Taxation
Analysis of income tax charge
Current tax on profits for the period
Foreign withholding tax suffered
Total current tax
Deferred tax on profits for the period
Impact of change in tax rate
Total deferred tax (Note 20)
Income tax credit
The total tax credit comprises:
UK
US
Tax on items charged to other comprehensive income
Deferred tax adjustment arising on the pension scheme assets and liabilities
103
Period
ended
31 December
2015
£’000
1,878
291
2,169
(3,942)
(5,096)
(9,038)
(6,869)
(6,567)
(302)
(6,869)
Period
ended
31 December
2015
£’000
734
The tax credit for the period differs from the applicable standard rate of corporation tax in the UK of 20.25% in the period ended
31 December 2015. The differences are explained below:
Profit before tax
Profit before tax multiplied by the rate of corporation tax in the UK of 20.25% in the period ended
31 December 2015
Effects of:
Other expenses not deductible
US withholding tax suffered
Different effective tax rate on US current period earnings
Adjustment in respect of previously unrecognised tax losses
Total tax charge before deferred tax rate change and exceptional items
Other expenses not deductible – exceptional items
Negative goodwill arising on acquisition
Rate change on deferred tax provision
Total taxation expense/(credit)
Period
ended
31 December
2015
£’000
Percentage
94,705
100%
19,178
20.25%
1,133
291
137
(738)
20,001
1.20%
0.31%
0.14%
(0.78)%
21.12%
3,809
4.02%
(25,584)
(27.01)%
(5,095)
(6,869)
(5.38)%
(7.25)%
The tax credit for the period includes a deferred tax credit of £738,000 relating to the recognition of US state tax losses acquired as part of the
business combination. These tax losses were not recognised at the acquisition date due to the historic tax loss position of the US business.
The US business has reported a taxable profit for the period and is expected to remain profitable in the foreseeable future. A deferred tax
benefit has been recognised accordingly.
There are no income tax consequences for the Company in respect of dividends declared prior to the date of authorisation of these financial
statements and for which a liability has not been recognised.
The Group expects its effective tax rate in the future to be affected by the geographical mix of profits and the different tax rates that will apply
to those profits, the use of brought forward tax losses, the outcome of any future tax audits as well as the impact of changes in tax law.
The reduction in the standard rate of corporation tax in the UK from 21% to 20% effective from 1 April 2015 was substantively enacted on 2 July
2013. The further reductions to 19% effective from 1 April 2017 and to 18% from 1 April 2020 were substantively enacted on 26 October 2015
and the impact of these tax rate changes are reflected in these financial statements accordingly.
IBSTOCK_23_Notes_1_to_9_DRF2.indd 103
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 104
Notes to the
financial statements
continued
10. Earnings per share
Period from 28 November 2014 to 31 December 2015
Earnings per share:
Basic earnings per share
Effect of share incentive awards and options
Diluted earnings per share
Weighted
average no.
of shares
(000’s)
Per share
amount
(pence)
Earnings
(£000’s)
101,574
288,236
35.2
60
101,574
288,296
35.2
Earnings per share are calculated on 288,236,000 number of ordinary shares in issue for the period ended 31 December 2015. Diluted
earnings per share assumes conversion of all potential dilutive ordinary shares which arise from share incentive scheme awards granted
to employees. The effect of this dilution is to increase the weighted average number of ordinary shares to 288,296,000.
Adjusted earnings per share:
Reconciliation from profit to Adjusted profit
Profit
Add back exceptional items
Add back tax credit on exceptional items
Add back fair value adjustments
Add tax credit on fair value adjustments
Basic adjusted earnings per share
Effect of share incentive awards and options
Diluted Adjusted earnings per share
11. Intangible assets
Cost
At 28 November 2014
Arising on business combination (Note 24)
Exchange movements
At 31 December 2015
Accumulated amortisation and impairment
At 28 November 2014
Charge for the period
Exchange movements
At 31 December 2015
Net book amount
At 31 December 2015
Amortisation is included in administrative expenses in the income statement.
Notes
Earnings
(£000’s)
Weighted
average no.
of shares
(000’s)
Per share
amount
(pence)
4
101,574
(42,751)
(13,595)
7,546
(6,007)
46,767
288,236
16.2
60
46,767
288,296
16.2
31 December 2015
Customer
contracts and
relationships
£’000
Brands
£’000
Total
£’000
–
–
–
87,600
45,400
133,000
–
242
242
87,600
45,642
133,242
–
–
–
(4,505)
(934)
(5,439)
–
–
–
(4,505)
(934)
(5,439)
83,095
44,708
127,803
IBSTOCK_24_Notes_10_to_21_DRF2.indd 104
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
The remaining amortisation period of customers’ relationships is 10 to 20 years. The remaining amortisation period of brands is
outlined below:
105
Brands
Ibstock Brick
Forticrete
Supreme
Glen-Gery
12. Property, plant and equipment
Cost
At 28 November 2014
At
31 December
2015
£’000
Remaining
amortisation
period (Years)
31,464
732
2,831
9,681
44,708
49.2
9.2
14.2
49.2
Land and
buildings
£’000
Mineral
reserves
£’000
2015
Plant,
machinery
and
equipment
£’000
Assets in the
course of
construction
£’000
Total
£’000
–
–
–
–
–
Arising on business combination (Note 24)
176,484
72,239
97,976
3,248
349,947
Additions
Transfers
Disposals
Exchange movements
At 31 December 2015
Accumulated depreciation
At 28 November 2014
Total charge for the period
Disposals
At 31 December 2015
Net book amount
At 31 December 2015
820
–
(884)
316
257
–
(28)
195
9,929
2,102
13,108
–
(6,979)
609
–
–
11
–
(7,891)
1,131
176,736
72,663
101,535
5,361
356,295
–
–
(4,824)
(2,277)
777
4
–
(8,784)
5,694
(4,047)
(2,273)
(3,090)
–
–
–
–
–
(15,885)
6,475
(9,410)
172,689
70,390
98,445
5,361
346,885
A loss on disposal of property, plant and equipment of £1,403,000 has been recognised in the period ended 31 December 2015.
There are no assets which are used as security.
Management reviews the business performance based on segments reported in Note 3. In the current year impairment tests have not
been conducted as management believes that there is no indication of impairment of an asset.
13. Inventories
Raw materials
Work in progress
Finished goods
31 December
2015
£’000
18,445
2,639
61,973
83,057
The replacement cost of inventories is not considered to be materially different from the above values.
Inventory values were uplifted to fair value at the date of the acquisition, and the unwind adjustment increased cost of sales in the
post-acquisition period (see Note 4 for further details). All of the fair value uplift has now unwound.
At 31 December 2015, a provision of £2,670,000 is held against the inventory balance.
IBSTOCK_24_Notes_10_to_21_DRF2.indd 105
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 106
Notes to the
financial statements
continued
14. Trade and other receivables
Trade receivables
Provision for impairment of receivables
Net trade receivables
Prepayments and accrued income
Other receivables
Reimbursement asset
Total trade and other receivables
31 December
2015
£’000
46,085
(654)
45,431
3,266
926
9,000
58,623
The reimbursement asset represents an indemnity receivable from former parent undertaking which will be directly contributed to the
pension scheme. Subsequent to 31 December 2015 this amount was received. A related liability for any additional pension liabilities that
may arise as a result of the equalisation of pension benefits has been recognised within post-employment benefit obligations (see
Note 19). The assessment of the valuation of this indemnity is linked to an assessment of the additional pension liabilities that may arise.
There are no material differences between the fair values and book values stated above.
15. Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents include the following for the purposes of the statement of cash flows:
Cash at bank and in hand
Cash and cash equivalents
16. Trade and other payables
Trade payables
Contingent consideration on acquisition (Note 24)
Other tax and social security payable
Accruals and other payables
31 December
2015
£’000
51,024
31 December
2015
£’000
51,024
51,024
31 December
2015
£’000
35,899
4,000
4,976
34,361
79,236
There are no material differences between the fair values and book values stated above. Included in accruals and other payables above is
deferred income, due to unwind in more than one year, of £214,000.
IBSTOCK_24_Notes_10_to_21_DRF2.indd 106
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 17. Provisions
Restoration (i)
Dilapidations (ii)
Restructuring (iii)
Other (iv)
Current
Non-current
107
31 December
2015
£’000
4,905
8,005
183
1,380
14,473
1,291
13,182
14,473
At 28 November 2014
Arising on business combination (Note 24)
Utilised
Charged to income statement
Unwind of discount/change in rate
Reversed unused
Other movements
Translation adjustment
At 31 December 2015
31 December 2015
Restoration
(i)
£’000
–
4,418
(61)
75
394
(12)
(137)
228
Dilapidations
(ii)
£’000
–
8,000
–
–
–
–
–
5
Restructuring
(iii)
£’000
–
238
(63)
–
33
(25)
–
–
Other
(iv)
£’000
–
Total
£’000
–
1,666
14,322
(505)
216
63
–
(38)
(22)
(629)
291
490
(37)
(175)
211
4,905
8,005
183
1,380
14,473
(i) The restoration provision comprises obligations governing site remediation and improvement costs to be incurred in compliance with
applicable environmental regulations together with constructive obligations stemming from established practice once the sites have
been fully utilised. The key estimates associated with calculating the provision relate to the cost per acre to perform the necessary
remediation work as at the reporting date together with determining the year of retirement. Estimates are updated annually based on
the total estimated available reserves and the expected extraction rates. Whilst a significant element of the total provision will reverse in
the medium term (two to 10 years), the majority of the legal and constructive obligations applicable to mineral-bearing land will unwind
over a 30-year timeframe. In discounting the related obligations, expected future cash outflows have been determined with due regard
to extraction status and anticipated remaining life.
(ii) Provisions for dilapidations are recognised on a lease by lease basis and are based on the Group’s best estimate of the likely
committed cash outflows.
(iii) The restructuring provision covers current and former employees who have ceased working on grounds of ill health and is a liability
payable to their normal retirement date.
(iv) Other provisions relate to provisions for the Supplemental Executive Retirement Plan (SERP), product warranties, landfill and onerous
contracts. The SERP is a defined contribution retirement plan in respect of basic salary entitlements for executive directors. The
product warranties are based on the estimate of the cost of fulfilling customer warranty claims. The estimate is derived principally from
historical data appropriately adjusted for specific risk factors. Under the Group’s standard sales terms, the Group repairs or replace
items that fail to perform satisfactorily for one year from the date of delivery to the customer. It is expected that the most of this
expenditure will be incurred within one year of the balance sheet date. The landfill provision relates to the restoration of the associated
sites and environmental remediation required by legislation. The onerous contract provision provides cover for the exposure that the
Group has for both current property leases where the rent being paid is significantly higher than the current market rents and vacant
properties at acquisition.
Amounts arising on acquisition of the trading business include contingent liabilities to reflect present obligations that existed at the date of
acquisition. This includes certain legal claims in the UK of £1,100,000 which have been included in Other. For further details see Note 24.
The Group holds insurance performance bonds with Liberty Mutual Insurance Company in respect of the Group’s maintenance and
remediation obligations in respect of sites from which materials are being extracted. The bonds are typically in favour of the Department
of Environmental Protection within the relevant jurisdictions. At 31 December 2015 the value of the bonds amounted to £1,230,000.
The maximum term on the bonds outstanding at that date is September 2016. The bonds are typically renewed on an annual basis at
comparable levels.
Bank of America has provided a letter of credit of £50,000 on behalf of the Group to the National Union Fire Insurance Company.
This letter of credit renews on an annual basis.
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Notes to the
financial statements
continued
18. Borrowings
Current
Bank borrowings (i)
Non-current
Revolving credit facility (ii)
Bank borrowings (i)
Total borrowings
31 December
2015
£’000
14,097
–
181,658
181,658
195,755
A £240m facilities agreement covering the following financial instruments was entered into as part strategic planning for the Initial Public
Offering in October 2015:
(i) New bank borrowings
A five-year £200m facility was entered into in September 2015 and first drawn in October with mandatory repayments of £15m due on the
1st, 2nd, 3rd and 4th anniversary dates subject to the Company’s right to elect not to make one of the repayment instalments due during
the term of the loan. The borrowings attracted interest of between 1.25% and 2.50% depending on leverage ratio (defined as consolidated
total net debt as a proportion of consolidated EBITDA) plus LIBOR (or EURIBOR for any loan in Euro) per annum, payable either three or six
monthly at the option of the Group. A commitment fee is payable on the undrawn element of the facility based on 35% of applicable margin.
(ii) New revolving credit facility (‘New RCF’)
A New RCF for £40m over five years was entered into in September 2015. The borrowings attract interest of between 1.25% and 2.50%
depending on leverage ratio (defined as above) plus LIBOR (or EURIBOR for any loan in Euro) per annum, payable either one, three or six
monthly at the option of the Company. Throughout the period and as at 31 December 2015 the New RCF was undrawn.
The carrying value of financial liabilities have been assessed as materially in line with their fair values.
19. Post-employment benefit obligations
(a) Defined benefit plan
Analysis of movements in the net obligation during the period:
Funded plan at 31 December 2015
Opening balance at 28 November 2014
Arising on acquisition
Charge within labour costs and operating profit
Interest expense
Remeasurement gain recognised in the statement of comprehensive income
Pension scheme surplus restriction recognised in the statement of comprehensive income
Contributions
Carried forward at 31 December 2015
31 December
2015
£’000
–
(4,704)
(9,730)
(31)
11,709
(8,037)
11,124
331
The Group participates in the Ibstock Pension Scheme (the ‘Scheme’), a defined benefit pension scheme in the UK. The Scheme has
four participating employers – Ibstock Brick Limited, Forticrete Limited, Anderton Concrete Products Limited, Figgs Bidco Limited (from
26 February 2015) and Tyrone Brick Limited (up to 26 February 2015). The Scheme is funded by payment of contributions to a separate
trustee administered fund. The Scheme is a revalued earnings plan and provides benefits to its members based on their length of
membership in the Scheme and their average salary over that period.
The Scheme is administered by trustees who employ independent fund managers for the investment of the pension scheme assets.
These assets are kept entirely separate from those of the Group.
Total annual contributions to the Scheme are based on independent actuarial advice, and are gauged to fund future pension liabilities
(including projected increases in earnings and pensions) in respect of service up to the balance sheet date. The Scheme is subject to
independent actuarial valuation at least every three years using the projected unit method.
IBSTOCK_24_Notes_10_to_21_DRF2.indd 108
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 109
The valuation used as at 31 December 2015 has been based on the initial results of the 30 November 2014 valuation.
This Scheme has a surplus that is not fully recognised on the basis that future economic benefits are not unconditionally available to
the Group in the form of a reduction in the future contributions or a cash refund.
Given the contribution plan adopted, the present value of the economic benefits of the IAS 19 surplus in the pension scheme of
£17,368,000 available on a reduction of future contributions is £331,000. As a result the Group has not recognised the full IAS 19 surplus
on the balance sheet and has restricted the full actuarial surplus by £17,037,000 in the statement of other comprehensive income.
Through its defined benefit pension plan, the Group is exposed to a number of risks that are inherent in such plans and arrangements.
There are, however, no unusual, entity-specific or plan-specific risks, and no significant concentrations of risk. The risks can be
summarised as follows:
• asset value volatility, with the associated impact on the assets held in connection with the funding of pension obligations and the
related cash flows;
• changes in bond yields, with any reduction resulting in an increase in the present value of pension obligations, mitigated by an increase
in the value of plan assets;
• risk of volatility in inflation rates as pension obligations are generally linked to inflation; and
• life expectancy, as pension benefits are provided for the life of beneficiaries and their dependents.
Balance sheet assets/(obligations):
Equities
Bonds
Properties
Liability driven investment
Cash
Total market value of assets
Present value of scheme liabilities
Net scheme asset
Pension scheme surplus restriction
Post-employment benefit asset after surplus restriction
Other pension commitments
Post-employment benefit obligation
31 December
2015
£’000
236,100
270,767
24,285
23,787
3,947
558,886
(550,518)
8,368
(8,037)
331
(8,007)
(8,007)
All equities and bonds have a quoted market price in an active market. Properties and cash and cash equivalents are unquoted.
The amounts recognised in the income statement are:
Current service cost
Administrative expenses
Multi-employer scheme contributions
Defined contribution scheme
Charge within labour costs and operating profit
Interest expense
Total charge to the income statement
Remeasurements recognised in the statement of comprehensive income:
Remeasurement loss on defined benefit scheme assets
Remeasurement gain from changes in financial assumptions
Remeasurement gain from changes in demographic assumptions
Experience adjustments
Other comprehensive income
31 December
2015
£’000
9,389
341
165
1,374
11,269
31
11,300
31 December
2015
£’000
(24,569)
22,020
14,648
(390)
11,709
IBSTOCK_24_Notes_10_to_21_DRF2.indd 109
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110
Notes to the
financial statements
continued
Changes in the present value of the defined benefit obligations are analysed as follows:
Present value of defined benefit obligation at 28 November 2014
Arising on business combination
Current service cost
Interest cost
Contributions by scheme participants
Experience losses
Benefits paid
Remeasurement gain arising from change in financial assumptions
Remeasurement gains arising from change in demographic assumptions
Insurance premium for risk benefits
Present value of defined benefit obligations carried forward at 31 December 2015
Changes in the fair value of plan assets are analysed as follows:
Fair value of pension scheme assets at 28 November 2014
Arising on business combination
Interest income
Remeasurement loss on pension scheme assets
Employer contributions
Contributions by scheme participants
Benefits paid
Administrative expenses
Insurance premium for risk benefits
Fair value of pension scheme assets carried forward
Plan assets are comprised as follows:
Equity Instruments
– UK equities
– Overseas equities
– Emerging market equities
Debt Instruments
– UK corporate bonds
– Index linked gilts
Property
– Property
Liability driven investment
Cash and net current assets
Total
31 December
2015
£’000
–
(575,041)
(9,389)
(16,015)
(64)
(390)
13,530
22,020
14,648
183
(550,518)
31 December
2015
£’000
–
570,337
15,984
(24,569)
11,124
64
(13,530)
(341)
(183)
558,886
Quoted
£’000
Unquoted
£’000
236,100
65,348
129,521
41,231
270,767
148,056
122,711
–
–
–
–
–
–
–
Total
£’000
236,100
65,348
129,521
41,231
270,767
148,056
122,711
24,285
–
24,285
–
–
23,787
3,947
23,787
3,947
%
12%
23%
7%
27%
22%
4%
4%
1%
531,152
27,734
558,886
100%
IBSTOCK_24_Notes_10_to_21_DRF2.indd 110
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
The Group continued to contribute 16.0% of pensionable salaries to the Scheme during the period reported. A payment schedule has
been agreed with the Trustees of the Ibstock Pension Scheme so that the Scheme’s deficit can be eliminated. This includes the Group
continuing to contribute 16% of pensionable salaries to the Scheme as well as a further £7.0m per annum until May 2021. The weighted
average duration of the defined benefit obligation is 19 years.
At the 31 December 2015 balance sheet date, a reimbursement asset is recorded which will be directly contributed to the Scheme. Refer
to Note 14 ‘Trade and other receivables’.
The principal assumptions used by the actuary in his calculations were:
111
Discount rate
RPI inflation
CPI inflation
Rate of increase in salary
Rate of increase in pensions in payment
Mortality assumptions: life expectancy from age 65
For a male currently aged 65
For a female currently aged 65
For a male currently aged 40
For a female currently aged 40
31 December
2015
Per annum
3.85%
3.10%
2.10%
3.10%
3.60%
22.9 years
25.5 years
25.3 years
28.0 years
The post-retirement mortality assumptions allow for expected increases to life expectancy. The life expectancies quoted for members
currently aged 40 assume that they retire at age 65 (i.e., 25 years after the balance sheet date).
The principal financial assumption is the real discount rate, being the excess of the discount rate over the rate of inflation. The discount
rate is based on the market yields on high-quality corporate bonds of appropriate currency and term to the defined benefit obligations.
The obligations are primarily in Sterling and have a maturity of some 19 years. If the real discount rate increased/decreased by 0.25%,
the defined benefit obligations at 31 December 2015 would decrease/increase by approximately 4%.
The impact on the defined benefit obligation to changes in the financial and demographic assumptions is shown below:
0.25% increase in discount rate
0.25% decrease in discount rate
0.25% increase in salary growth rate
0.25% decrease in salary growth rate
0.25% increase in pension growth rate
0.25% decrease in pension growth rate
0.25% increase in inflation rate
0.25% decrease in inflation rate
One-year increase in life expectancy
One-year decrease in life expectancy
31 December
2015
£’000
24,327
(26,091)
(16,370)
15,547
(19,588)
16,467
19,588
(16,467)
(20,130)
20,159
A special contribution of £60m was paid in the pre-acquisition period. Refer to Note 24 for further details.
(b) Multi-employer scheme
The Group participates in two multi-employer defined benefit pension schemes, being Aluminium, Brick and Glass Workers International
Union (‘AB&GW’) and National Integrated Group Pension Plan (‘NIGPP’), which are both held in the United States. As the Group is unable
to identify its share of the assets and liabilities for these schemes as insufficient information is available on which to calculate this split (as
confirmed with the schemes actuaries), they are accounted for on a defined contribution basis. The charge for the period to December 2015
is £390,000. The Group is not liable for any other contributing entities within either scheme. For exit from the schemes by the Group at the
most recent actuarial valuation, it was estimated that the withdrawal liability for the schemes equalled £13,981,000 and £1,281,000 for the
AB&GW and NIGPP, respectively, although management currently do not have any plans on withdrawing from either scheme.
The minimum contribution requirements for the AB&GW scheme are based on a minimum monthly charge per active employee, with
the minimum contribution requirements for the NIGPP scheme being based on a minimum charge per hour worked. The expected
contributions to the plan for the next annual reporting period, being the year ending December 2016, is £450,000. In respect of the
AB&GW scheme, based on the total contributions made in 2015 to the multi-employer schemes, the level of participation the Group made
compared to other participating entities was 86% and the Group has 71% of all members (active, deferred and retired). In respect of the
NIGPP scheme, based on the proportion of the withdrawal liability against total plan liabilities, the level of participation the Group made
compared to other participating entities was less than 1%.
IBSTOCK_24_Notes_10_to_21_DRF2.indd 111
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112
Notes to the
financial statements
continued
The AB&GW plan has a deficit as at 31 December 2014 of £5,901,000. The contribution rates agreed to be paid by the Group include an
element of rehabilitation funding with respect to the total plan deficit. For this scheme, the arrangements gives rise to a present obligation
and as such a liability has been recognised of £8,007,000 (26 February 2015: £7,538,000) for future committed contribution amounts as
at 31 December 2015, with an associated recognised deferred tax asset of £3,052,000. This has been calculated by discounting the
future cash flows, which accrete at 7% per annum in line with the rehabilitation funding plan as set by the scheme Trustees, at a rate
commensurate with the time value of money using a 20-year US treasury rate given the duration of the rehabilitation funding plan runs
to 2034. This calculation is based on management’s estimated number of employees in future years. The Trustees meet annually to
reassess the funding contribution increase – this has been set at the 7% rate since 2012. Based on the contribution rates and total
withdrawal liability for the NIGPP plan, management have determined any present obligation arising from the plan is immaterial.
(c) Defined contribution plan
The Group operates defined contribution schemes under the Ibstock pension scheme, the Supreme Concrete Limited pension scheme,
the Anderton Concrete pension scheme and the Supreme Concrete Group Personal Plan. Contributions by both employees and Group
companies are held in externally invested, externally administered funds.
The Group contributes a specified percentage of earnings for members of the above defined contribution schemes, and thereafter has no
further obligations in relation to the scheme. The total cost charged to income in relation to the defined contribution scheme in the period
was £1,374,000.
20. Deferred tax assets/liabilities
The movement on the deferred tax account is shown below:
Deferred tax liability at 28 November 2014
Arising on business combinations
Differences on exchange
Tax credited/(charged) to the Group income statement
Tax recognised within other comprehensive income
Tax credited/(charged) directly to equity
Net deferred tax liability at period-end
Deferred tax asset
Deferred tax liability
Net deferred tax liability at period-end
Deferred tax asset expected to unwind within one year
Deferred tax asset expected to unwind after one year
Deferred tax liability expected to unwind within one year
Deferred tax liability expected to unwind after one year
31 December
2015
£’000
–
(62,773)
(138)
9,038
(734)
(55)
(54,662)
18,830
(73,492)
(54,662)
3,686
15,144
18,830
(4,153)
(69,339)
(73,492)
IBSTOCK_24_Notes_10_to_21_DRF2.indd 112
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
113
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 28 November 2014
31 December 2015
Intangible
assets
Accelerated
tax
depreciation
Land
revaluation
Rolled over
and held
over gains
Employee
pensions
liabilities
Other
including
reimburse-
ment asset
–
–
–
–
–
–
Total
–
Arising on business combinations
(28,340)
(48,270)
(1,104)
(1,786)
(859)
(3,814)
(84,173)
Differences on exchange
–
(288)
(43)
–
–
–
(331)
Ta x credited/(charged) to the Group
income statement
Ta x recognised within other
comprehensive income
At 31 December 2015
3,133
4,893
59
260
1,527
1,874
11,746
–
–
–
–
(25,207)
(43,665)
(1,088)
(1,526)
(734)
(66)
–
(734)
(1,940)
(73,492)
Deferred tax assets
At 28 November 2014
Arising on business combination
Differences on exchange
Ta x credited/(charged) to the Group
income statement
Ta x credited/(charged) directly to equity
At 31 December 2015
Accelerated
tax
depreciation
Employee
pensions
liabilities
Share
incentive
plans
Pension
contribution
spreading
Tax losses
Other
including
provisions
31 December 2015
–
–
–
–
–
2,874
379
12,061
1,063
5,023
21,400
Total
–
82
96
–
3,052
–
–
(112)
(55)
212
(2,819)
–
38
22
–
73
193
(46)
–
(2,708)
(55)
9,242
1,123
5,050
18,830
–
–
–
151
–
151
A deferred tax asset of £227,000 in respect of State net operating losses has not been recognised in these consolidated financial
statements. These unrecognised tax losses expire within a period of between five and 20 years.
21. Financial instruments – risk management
Financial assets
Trade and other receivables (Note 14)
Cash and cash equivalents (Note 15)
Total
Financial liabilities
Trade and other payables (Note 16)
Provisions (Note 17)
Borrowings (Note 18)
Total
Loans and
receivables
31 December
2015
£’000
55,798
51,024
106,822
Loans and
payables
31 December
2015
£’000
74,260
13,373
195,755
283,388
All financial assets are classified as loans and receivables.
Credit risk
Credit risk arises from cash and cash equivalents, credit sales and deposits with banks and is managed on a Group basis. This risk
arises from transactions with banks, such as those involving cash and cash equivalents and deposits. To reduce the credit risk, the
Group has concentrated its main activities with a Group of banks that have strong, independently verified credit ratings. For each bank,
individual risk limits are set based on its financial position, credit ratings, past experience and other factors. The utilisation of credit limits
is regularly monitored.
The Group has significant sales contracts with a number of ‘blue-chip’ companies and accordingly the Directors believe there is a limited
exposure to credit risk, but this is actively monitored at Board level. The Group’s policy on credit risk requires appropriate credit checks
on potential customers before sales commence.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 114
Notes to the
financial statements
continued
The ageing analysis of the trade receivables (from date of past due) not considered to be impaired is as follows:
Not past due
Less than one month past due
One to six months past due
Six to 12 months past due
More than 12 months past due
31 December
2015
£’000
33,949
9,324
1,997
149
12
45,431
Other receivables are due to be received within the next 12 months. The reimbursement asset was received after the year end.
The ageing analysis of the trade receivables (from date of past due) determined to be impaired is as follows:
Less than one month past due
One to six months past due
Six to 12 months past due
More than 12 months past due
Movements on the provision for impairment of trade receivables are as follows:
Arising on business combination (Note 24)
Charged to the income statement
Utilised
Exchange movements
Closing impairment provision
31 December
2015
£’000
6
414
108
126
654
31 December
2015
£’000
(495)
(254)
104
(9)
(654)
Market risk
Market risk is defined as the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risk comprises three types of risk, being currency risk, interest rate risk and other price risk. In the post-IPO period the
Group’s interest rate risk arises principally from the revolving credit facility and bank borrowings which attract floating rate interest, see Note
18. The Group manages its interest rate risk by using a floating rate debt with varying repayment terms. The Group also does not trade in
derivative financial instruments and so is not considered to be exposed to other price risk. The exposure to currency risk is considered low.
The exposure in different currency of financial assets and liabilities is as follows:
At 31 December 2015
Financial assets
Cash and cash equivalents (Note 15)
Trade and other receivables (Note 14)
Financial liabilities
Borrowings (Note 18)
Trade and other payables (Note 16)
Provisions (Note 17)
Sterling
£’000
US$
£’000
Euro
£’000
Total
£’000
42,264
8,420
44,926
10,360
87,190
18,780
340
512
852
51,024
55,798
106,822
(195,755)
–
–
(195,755)
(63,755)
(9,657)
(848)
(74,260)
(12,465)
(908)
–
(13,373)
(271,975)
(10,565)
(848)
(283,388)
There are no material differences between the fair values and the book values stated above.
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115
The Group has negligible risk to currency fluctuations as the majority of assets and liabilities are held in the same functional currency.
Liquidity risk
The Group has generated sufficient cash from operations to meet its working capital requirements and finance its investing activities.
The Group manages liquidity risk by entering into committed bank borrowing facilities to ensure the Group has sufficient funds available,
and monitoring cash flow forecasts to ensure the Group has adequate borrowing facilities.
The maturity of the Group’s borrowings is as follows:
At 31 December 2015
Borrowings
Bank borrowings
Total
Less than
six months
£’000
Six months
to one year
£’000
Two to five
years
£’000
Greater
than five
years
£’000
Total
£’000
–
–
14,097
181,658
14,097
181,658
–
–
195,755
195,755
The Group has an RCF facility of £40m over five years that was entered into in September 2015. At 31 December 2015 the full facility was
undrawn. See Note 18 for further details.
For details of the maturity of other financial liabilities, see Note 16.
The contractual non-discounted minimum future cash flows in respect of these borrowings are:
At 31 December 2015
Borrowings:
Bank borrowings
Total
Less than
one year
£’000
Two to five
years
£’000
Greater
than five
years
£’000
Total
£’000
20,622
202,629
20,622
202,629
–
–
223,251
223,251
Fair value hierarchy
IFRS 13 ‘Financial Instruments: Disclosures’ requires fair value measurements to be recognised using a fair value hierarchy that reflects
the significance of the inputs used in the measurements, according to the following levels:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is,
as prices) or indirectly (that is, derived from prices).
Level 3
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
All of the Group’s fair value measurements have been categorised as Level 2 except for contingent consideration which has been
categorised as Level 3. There were no transfers between levels during the period.
Financial instruments in Level 3
The Group’s financial instruments that are categorised under Level 3 are contingent consideration and the techniques used to value are
provided in Note 24.
The following table presents the changes in Level 3 instruments for the period ended 31 December 2015.
At 28 November 2014
Arising on business combination
Gains and losses recognised in profit and loss
At 31 December 2015
Contingent
consideration
£’000
–
4,000
–
4,000
Capital risk management
The Group’s objectives when managing capital, defined as net funds, are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares, or borrow additional debt.
Following the issue of the new banking facilities in September 2015 the Group must comply with two covenants each quarter from
30 June 2016. The covenants are certain ratios of interest cover and leverage, which are monitored on a regular basis by the Board.
At the period end date, management believes significant headroom exists on both covenant conditions.
Immediately prior to and following the Group’s admission to the London Stock Exchange, a capital reorganisation took place. Further
details are provided in Note 22.
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Notes to the
financial statements
continued
22. Called up share capital
Issued, called up and fully paid:
Ordinary shares of £1 each
Total share capital on incorporation on 3 September 2015
Consolidation of shares followed by designation into A ordinary shares
(50,000 ordinary shares of £1 each into 6,250 ordinary shares of £8 each)
Capital reorganisation involving:
(i) Allotment of shares as part of the share for share exchange
A ordinary shares of £8 each
B ordinary shares of £8 each
A preference shares of £8 each
B preference shares of £8 each
Deferred shares of £0.01 each
Total share capital following the share for share exchange
(ii) Sub-division of ordinary and preference shares from £8 each into £0.01 each
A ordinary shares of £0.01 each
B ordinary shares of £0.01 each
A preference shares of £0.01 each
B preference shares of £0.01 each
Deferred shares of £0.01 each
Total share capital following the sub-division of shares
(iii) Redesignation of shares into ordinary and deferred shares of £0.01 each
Ordinary shares of £0.01 each
Deferred shares of £0.01 each
Total share capital immediately prior to IPO
Number of shares
Share
capital
£’000
Share
premium
£’000
50,000
50,000
6,250
50
50
50
9,993,750
79,950
80,000
640
43,250,000
346,000
7,009,738
56,078
648
–
60,334,136
482,668
60,340,386
482,718
8,000,000,000
80,000
64,000,000
640
34,600,000,000
346,000
5,607,790,400
56,078
48,271,790,400
482,718
648
–
48,271,791,048
482,718
352,868,422
3,529
47,918,922,626
479,189
48,271,791,048
482,718
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Ordinary shares of £1 each issued in the primary offering
52,631,578
526
94,521
Total share capital following primary offering
Ordinary shares of £0.01 each
Deferred shares of £0.01 each
Total share capital on IPO
Capital reduction
At 31 December 2015
Comprised of:
Issued, called up and fully paid:
Ordinary shares of £0.01 each
405,500,000
4,055
94,521
47,918,922,626
479,189
–
48,324,422,626
483,244
94,521
(47,918,922,626)
(479,189)
(94,521)
405,500,000
4,055
405,500,000
4,055
–
–
The Group’s capital structure was reorganised during the period in preparation for the IPO.
On 22 October 2015, the existing share capital structure was reorganised as set out above to consist of a single class of ordinary shares
and a single class of deferred shares. Following the capital reorganisation, 352,868,422 new ordinary shares of £0.01 each and
47,918,922,626 new deferred shares of £0.01 each were in issue.
At IPO (on 27 October 2015), the Company issued 52,631,578 new ordinary shares of £0.01 each at a premium of £1.89 per share.
Share issue costs of £5.0m were offset against the share premium of £99.5m created on the issue of these shares.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 117
On 16 December 2015, a capital reduction was completed in accordance with the terms of a special resolution passed on 21 October
2015 under which:
(i) 47,918,922,626 deferred shares of £0.01 each were cancelled and extinguished; and
(ii) the sum standing to the credit of the Company’s share premium account (an amount of £94,521,000) was cancelled.
Following the capital reduction, the issued share capital of the Company consists of 405,500,000 ordinary shares of £0.01 each.
23. Reserves
Currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements
of foreign subsidiaries.
Other reserves
Other reserves relate to contingent consideration arising on acquisition where there is no contractual obligation to settle the liability in
cash based on events outside the Group’s control.
Merger reserve
The merger reserve of £369,119,000 arose on the acquisition of Figgs Topco Limited by Ibstock plc and is the difference between the
share capital and share premium of Figgs Topco Limited and the nominal value of the investment and preference shares in Figgs Topco
Limited acquired by the Company. Further details are provided in Note 1.
24. Business combinations
On 26 February 2015, Figgs Topco Limited acquired 100% of the voting shares of Ibstock Group Limited and its subsidiaries, and
Glen-Gery Corporation and its subsidiaries (together ‘the acquired operations’). The entities acquired specialise in the manufacture of clay
and concrete building products. The acquisition of these entities establishes the Group as a leading building products manufacturer in the
UK and in the North East and Mid West regions of the US.
Assets acquired and liabilities assumed:
The fair value of the identifiable assets and liabilities of the acquired operations as at the date of acquisition were:
Assets
Customer contracts and relationships
Brands
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Post employment benefit obligations
Deferred tax liabilities
Provisions
Total liabilities
Total identifiable net assets at fair value
Negative goodwill arising on acquisition immediately recognised within the income statement
Purchase consideration transferred
Fair value
recognised
on acquisition
£’000
87,600
45,400
349,947
89,518
80,408
7,465
660,338
(67,932)
(508)
(408)
(12,242)
(62,773)
(14,322)
(158,185)
502,153
(124,191)
377,962
The fair value of the trade and other receivables amounts to £80,408,000, which equates to a net amount of trade receivables. The gross
amount due under contracts is £80,903,000 of which £495,000 is expected to be uncollectable.
The full analysis of the deferred tax arising on business combination is set out in Note 20.
The consideration paid in association with the purchase of the Ibstock Group of companies was based on a multiple of earnings and not an
assessment of the fair value of the assets of the business. As there is considerable value associated with intangible assets that only arise in the
consolidated financial statements, and our tangible assets reflect the current market demand for building products and production capacity,
the fair value of the acquired net assets are in excess of the consideration paid, and therefore negative goodwill has arisen, which has been
immediately taken to the income statement. There are no expected taxation consequences in relation to the negative goodwill recognised.
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118
Notes to the
financial statements
continued
Provisions and contingent liabilities at fair value of £7,000,000 were recognised at the acquisition date resulting from various legal claims
in the UK of £1,100,000, UK property risks of £3,300,000 and an environmental claim of £2,600,000 in the US. These fair values were
provisional pending the receipt of final valuations of the potential liabilities. As at 31 December 2015, a final external valuation of the UK
property risks has been received and the fair value increased from £3,300,000 to £7,850,000, and an internal valuation exercise identified
increased US property risks of £151,000. Subsequent to the acquisition date, management has also received external legal advice that
no liability in relation to the US environmental claim is required – resulting in a reduction in contingent liabilities of £2,600,000. Additionally,
management identified a £2,151,000 liability in respect of employee compensation previously recognised as a post-acquisition
exceptional period cost. The related deferred taxation liability uplift of these final fair value adjustments is £210,000. As at the reporting
date, all other fair values were determined to remain as originally determined at the acquisition date.
Purchase consideration
Initial cash consideration
Pension contribution
Contingent land proceeds
Contingent pension tax benefit
Total consideration
£’000
312,853
60,000
1,109
4,000
377,962
As part of the acquisition, the Group agreed to make a one-off contribution of £60,000,000 to the Ibstock Brick Limited pension scheme
on completion of the transaction. As the transaction was conditional on the contribution being made the payment cannot be separated
from the business combination and therefore, in accordance with IFRS 3, is treated as part of the acquirer’s consideration paid for the
business. The post-employment benefit obligation includes this £60,000,000 contribution.
Additionally, in accordance with the Share Sale Agreement (SSA), half of any tax relief, over a contracted amount, received by the
acquired business as a result of the one-off pension payment, shall be payable to the seller. The fair value of the future obligation was
estimated at £4,000,000, with a range being nil to £4,000,000.
As part of the purchase agreement with the previous owner of the acquired operations, half of all proceeds above a contracted amount,
received by the acquired business on the sale of certain land assets in the future, shall be payable to the seller. Sale of land assets is in
the control of the Group and accordingly is recognised in equity. Contingent consideration was recognised in relation to this, based on
management’s best estimate of £1,109,000 from an estimated range of nil to £3,800,000.
Transaction costs in relation to the acquisition of £9,392,000 were expensed and are included within administrative expenses.
From the date of acquisition, the acquired operations contributed £358,331,000 of revenue and £96,004,000 to profit before taxation of
the Group. If the combination had taken place at the beginning of the financial statement period, revenue would have been £438,435,000
and profit before taxation of the Group would have been £80,383,000. To provide the users of the accounts with a comparable view of
performance, we have analysed below the performance of the acquired entities from 1 January 2015 to 31 December 2015. The
information for this period has been adjusted to include the impact of the fair value exercise and new financing structure as if it had been
in place since the start of the period. The period ending 31 December 2014 has been included as comparative information, but has not
been updated for the impact of the fair value exercise or financing structure following the acquisition.
IBSTOCK_25_Notes_22_to_31_DRF2.indd 118
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Revenue
Cost of sales before exceptional items
Gross profit before exceptional items
Exceptional cost of sales
Gross profit
Distribution costs
Administrative expenses before exceptional items
Other administrative exceptional items
Net administrative expenses
Negative goodwill on acquisition
Profit/(loss) on disposal of property, plant and equipment
Other income
Other expenses
Operating profit
EBITDA before exceptional items
Less/add exceptional items
Less/add profit/(loss) on disposal of property, plant and equipment
Less depreciation and amortisation
Operating profit
119
2015
£’000
2014
£’000
412,828
373,233
(255,035)
(255,333)
157,793
117,900
(15,977)
–
141,816
117,900
(34,108)
(44,841)
(24,329)
(34,601)
(37,922)
(5,355)
(69,170)
(43,277)
124,191
(1,399)
3,474
(816)
–
492
3,709
(1,051)
163,988
43,172
107,014
64,993
83,885
(1,399)
(25,512)
163,988
(5,355)
492
(16,958)
43,172
25. Share incentive plans
(a) Old scheme arrangements held by subsidiaries on acquisition
The acquisition of the trading entities of the Group on the 26 February 2015 triggered a modification to certain existing share incentive
plans. The schemes in place became cash settled on acquisition and the respective liabilities of these awards have been accounted
within the fair value of net assets acquired.
(b) Management equity arrangements issued on acquisition
Ordinary B shares options
On 26 February 2015 certain members of management were issued with 80,000 ordinary B shares in Figgs Topco Limited for a
consideration of £7.55 per share. See Note 22 for details of the share reorganisation which took place in the period.
B shareholders are entitled to a certain percentage of any proceeds received in the event of a sale of the business. The percentage
receivable is dependent on the level of return on investment made by the ultimate parent and can range from 0% to 12.5%.
Holders of vested B shares are entitled to receive the proceeds as set out above, holders of unvested B shares are only entitled to ever
receive the original equity cost paid by management for the shares at grant. Provided that the holder remains in employment a proportion
of the shares vest on each anniversary from grant until the fifth anniversary when all awards will have vested. All unvested awards will
automatically vest on an exit event.
At the beginning of the period
Granted
Vested
At the end of the period
Number of
awards
–
80,000
(80,000)
–
The fair value of the awards at the date of grant has been measured using a binomial option pricing model which takes into account a
number of possible outcomes and weights the likelihood of each.
Term
Equity price
Risk-free rate
Volatility
Dividend yield
Fair value per share
Subscription price
Assumptions
1–3 years
£7.55
0.56%–0.77%
400%
0%
£12.97
£7.55
These options vested in full on IPO and the total charge for the period relating to the management equity issued on acquisition
is £434,000.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 120
Notes to the
financial statements
continued
(c) New employee arrangements issued on IPO
Following the IPO of the Group on 27 October 2015, the Group entered into a new share incentive plans; the Ibstock plc Long Term
Incentive Plan (the ‘LTIP’), the Ibstock plc Annual and Deferred Bonus Plan (the ‘ABP’) and the Ibstock plc Share Option Plan (the ‘SOP’).
In addition, the Group has also established three all-employee share incentive plans, the Ibstock plc Share Incentive Plan (the ‘SIP’) and
the Ibstock plc Sharesave Plan (the ‘SAYE’). The LTIP, ABP and SOP are, together, the ‘Discretionary Plans’, and the Discretionary Plans,
the SIP and the SAYE, together, the ‘New Plans’.
The Group recognised total expense in the consolidated statement of income of £765,000 relating to the new employee arrangements
issued on IPO during the period.
(i) LTIP
The Group has introduced a LTIP during the period for key management at the discretion of the Board and this has been approved by the
shareholders at the General Meeting. Awards under the scheme are granted in the form of nil-priced share options. As part of the IPO
process, 337,665 number of shares were issued and immediately vested. The full loss of £723,000 has been treated as exceptional in the
current period.
(ii) SOP
The Group has introduced a Share Option Plan during the period for all eligible employees at the discretion of the Board and this has
been approved by shareholders at the Annual General Meeting. Awards under the scheme have a specified exercise price with an
employment condition of three years. The total number of awards issued under this scheme during the period equalled 848,312.
(iii) SAYE
In order to participate in the Sharesave Plan, an employee must enter into a linked savings contract with a bank or building society to
make contributions from salary on a monthly basis over a three or five-year period. A participant who enters into a savings agreement is
granted an option to acquire ordinary shares under the Sharesave Plan at a specified exercise price. The total number of awards issued
under this scheme during the period equalled 3,416,496.
The assumptions used to calculate the fair value of the LTIP, SOP and SAYE awards during the period are detailed below:
Grant date
Share price at grant date
Exercise price
Number of shares issued
Vesting period
Pricing model
% expected to vest
Expected share price volatility
Expected dividend yield
Fair value per share
Risk-free rate
LTIP
SOP
SAYE
04-Dec-15 04-Dec-15 10-Dec-15
2.14
–
2.14
2.12
2.11
1.52
337,665
848,312
3,416,496
Immediately
3 years
3 years
Binomial
Binomial
Binomial
100%
n/a
n/a
2.14
0.89%
95%
27.38%
3.26%
0.43
0.89%
95%
27.38%
3.26%
0.59
0.89%
In assessing the expected volatility level, due to Ibstock plc’s short share price history, volatility of similar listed companies have been
used as a proxy.
The following post-IPO awards were issued and the number of awards granted during the period is yet to be determined.
(iv) ABP
The ABP incorporates the Company’s executive bonus scheme as well as a mechanism for the deferral of bonus into awards over
ordinary shares. The ABP will operate in respect of the annual bonus earned for the financial period with a mandatory maturity of 50%
of the annual bonus deferred into shares, with the first deferred awards over ordinary shares under the ABP to be made in 2016. The awards
will have a £nil exercise price with an employment condition of three years.
(v) SIP
The Company introduced a Share Incentive Plan on flotation. All employees were entitled to apply for free shares up to a value of £800
depending on their period of service, although the offer was declined by the Executive Directors. The number of shares issued is yet to be
determined however is considered to be wholly immaterial in the current period.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
26. Operating leases and commitments
The Group as lessee
Commitments under non-cancellable operating leases due are as follows:
Within one year
Between two and five years
After five years
121
31 December 2015
Land and
buildings
£’000
2,553
8,188
20,898
31,639
Other
£’000
3,744
Total
£’000
6,297
6,099
14,287
80
20,978
9,923
41,562
The Group is lessee on a number of properties in addition to plant and machinery which it uses in its operations. The operating leases run
for a variety of terms and their non-cancellable commitments are set out above. There is no material contingent rent payable, renewal or
purchase options, escalation clauses or restrictions imposed by the lease agreements. £2,500,000 of the non-cancellable operating
leases relate to the leased assets above.
The Group as lessor
The future minimum lease payments receivable under non-cancellable operating leases are as follows:
Within one year
Between two and five years
After five years
31 December
2015
£’000
561
818
1,391
2,770
The Group acts as lessor on a number of properties where it leases surplus land not currently utilised by the business. The operating
leases run for a variety of terms and their future minimum lease payments receivable are set out above.
Capital commitments
Capital expenditure contracted for but not yet incurred at the balance sheet date is as follows:
Amount contracted for which has not been provided
27. Notes to the Group cash flow statement
Cash flows from operating activities
Profit before taxation
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Negative goodwill on acquisition
Unwind of inventory fair value
Finance costs
Loss on disposal of property, plant and equipment
Other
Share based payments
Deferred income
Post-employment benefits
(Increase)/decrease in inventory
Decrease/(increase) in debtors
Increase/(decrease) in creditors
Increase/(decrease) in provisions
Cash generated from operations
31 December
2015
£’000
64,553
Period ended
31 December
2015
£’000
Notes
4
4
7
4
94,705
15,885
5,439
(124,191)
15,977
68,943
1,403
118
1,199
(179)
(1,556)
77,743
(8,989)
19,543
3,123
147
91,567
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
122
Notes to the
financial statements
continued
28. Group subsidiaries
Ibstock plc had the following subsidiaries as at 31 December 2015:
Entity
Figgs Topco Limited*^
Figgs Midco Limited*
Figgs Newco Limited*
Principal activity
Holding company
Holding company
Holding company
Ibstock Building Products Limited*
Holding company
Figgs Bidco Limited*
Figgs Bidco 2 Limited*
Ibstock Group Limited
Forticrete Ltd
Holding company
Holding company
Holding company
Manufacturer of concrete products
Home Building Supplies Ltd
Sale and distribution of building materials
Baldwin Industries Ltd
Holding company
Anderton Concrete Products Ltd
Manufacturer and supplier of precast and prestressed
concrete products
Oakhill Holdings Ltd
Supreme Concrete Ltd
Holding company
Manufacturer and supplier of precast and prestressed
concrete products
Gee-Co Holdings Ltd
Dormant
Ibstock Brick Holding Company Ltd
Holding company
Ibstock Brick Ltd
Ibstock Leasing Ltd
Ibstock Management Services Ltd
Ibstock Finance Co Ltd
Kevington Building Products Ltd
Ibstock Brick Leicester Ltd
Ibstock Brick Aldridge Ltd
Ibstock Brick Himley Ltd
Ibstock Westbrick Ltd
Ibstock Brick Aldridge Property Ltd
Moore & Sons Ltd
Manchester Brick & Precast Ltd
Ibstock Brick Nostell Ltd
Ibstock Brick Roughdales Ltd
Ibstock Brick Cattybrook Ltd
Ibstock Hathernware Ltd
Ibstock Bricks (1996) Ltd
Wealdbeam Systems Ltd
Loopfire Systems Ltd
Glen-Gery Corporation
Brick manufacturer
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Brick manufacturer
Landmark Stone Products LLC
Stone manufacturer
Redfield Quarry LLC
Dormant
The country of incorporation is the same as the place of business for all the above entities.
Proportion
of ordinary
shares
held directly
by the
Parent
Proportion
of ordinary
shares
held by the
Group
Country of
incorporation
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Jersey
Jersey
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
USA
USA
USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
* These companies were incorporated on 28 November 2014 with the exception of Figgs Bidco 2 Limited which was incorporated on 30 January 2015.
^ Figgs Topco Limited is owned directly by Ibstock plc. All other companies are indirectly owned.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 All subsidiary undertakings are included in the consolidated financial statements. The proportion of the voting rights in the subsidiary
undertakings held directly by the Parent Company do not differ from the proportion of ordinary shares held. The Parent Company does
not have any shareholdings in the preference shares of subsidiary undertakings included in the Group.
As at 31 December 2015, the Group held a 100% beneficial interest in the ordinary shares of Figgs Topco Limited, which it acquired as
part of the reorganisation prior to admission onto the official list of the London Stock Exchange, which took place on 27 October 2015
(see Note 1). Legal ownership of the Figgs Topco Limited’s share capital has transferred to Ibstock plc on 9 February 2016.
123
29. Related party transactions
Purchase of services:
Bain Capital Partners LLC
Transaction
amount for
period ended
December
2015
£’000
8,995
Diamond (BC) S.à r.l owned a majority shareholding of the Group prior to completion of the IPO transaction. Diamond (BC) S.à r.l, a wholly
owned subsidiary of Bain Capital Partners LLC, was therefore the immediate parent of the Group and Bain Capital Partners LLC was the
ultimate parent and ultimate controlling party of the Group prior to the IPO transaction. On 27 October 2015, its shareholding reduced
to 53.03% and on 4 November 2015, its shareholding reduced to 47.03% following the exercise of an over-allotment option in respect of
24,330,000 ordinary shares.
Subsequent to 4 November 2015 and as at 31 December 2015 the Board of Directors of the Company, consider, based on the facts and
circumstances, that Diamond (BC) S.à r.l has significant influence over, but does not control the Group.
The shareholder loan notes held by the Group during the period (Note 7) which were owed to Diamond (BC) S.à r.l , a subsidiary of Bain
Capital Partners LLC, were converted to ordinary shares. The preference shares held by Diamond (BC) S.à r.l and converted to ordinary
shares are disclosed in Note 22. There are no balances with Bain Capital Partners LLC at the period end date.
During the period Figgs Topco Limited issued 10,000,000 ‘A’ shares to Diamond (BC) S.à r.l (wholly owned by Bain Partners LLC).
Additionally, Ibstock plc issued 50,000 ordinary shares on incorporation to Diamond (BC) S.à r.l (wholly owned by Bain Partners LLC).
‘A’ shares were converted as part of the Group reorganisation during the year. See Note 22.
Transactions with related parties during the period also include management subscriptions for shares of £0.6m, see Note 25 and the
Directors’ remuneration report on pages 56 to 78.
See Note 6 for details of key management personnel remuneration.
During the period, an interest free loan totalling £346,000 was outstanding from a UK director of a UK subsidiary company that was
provided for relocation purposes. This has been paid back to the Group before year end.
30. Contingent liabilities
Contingent liabilities were provided for on acquisition in line with IFRS 3. See Note 24 for further details. There are no further contingent
liabilities as at 31 December 2015.
31. Post balance sheet events
The Directors are proposing a final dividend in respect of the financial period ended 31 December 2015 of 4.4 pence per ordinary share
which will distribute an estimated £17,800,000 of shareholders funds. It will be paid on 3 June 2016 to those shareholders who are on the
register at 6 May 2016 subject to approval at the Company’s Annual General Meeting.
Since the balance sheet date no further subsequent events requiring further disclosure or adjustments to these financial statements have
been identified.
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124
Company balance sheet
(prepared in accordance with UK GAAP – FRS 102)
as at 31 December 2015
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called-up share capital
Share premium account
Profit and loss account
Total equity
The notes on pages 126 to 131 are an integral part of these financial statements.
These financial statements were approved by the Board on 10 March 2016 and were signed on its behalf by:
W Sheppard
Director
K Sims
Director
31 December
2015
£’000
Notes
4
5
6
484,195
98,404
50
98,454
(15,649)
82,805
567,000
567,000
10
4,055
–
562,945
567,000
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
125
Total
equity
£’000
–
Statement of changes in equity
Share
capital
£’000
Share
premium
£’000
Share based
payments
£000
Retained
earnings
£’000
Notes
Balance as at 28 November 2014
Loss for the period
Other comprehensive income
Total comprehensive income for the financial period
Transactions with owners:
On incorporation
Capital reorganisation
Share based payments
Shares issued in the period
Share issue costs
Share and share premium capital reduction
Transactions with owners
Balance at 31 December 2015
–
–
–
–
50
482,668
–
–
–
–
–
–
–
–
526
99,473
–
(4,952)
(479,189)
(94,521)
4,055
4,055
–
–
10
10
9
10
10
10
–
–
–
–
–
–
765
–
–
–
765
765
The notes on pages 126 to 131 form an integral part of these financial statements.
Cash flow statement
Cash generated from operations
Net cash outflow from operating activities
Cash flows from financing activities
Proceeds from issuance of equity shares
Equity issue costs
Net cash inflow from financing activities
Loans to/from Group companies
Net cash outflow from investing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of period
The notes on pages 126 to 131 form an integral part of these financial statements.
–
(11,530)
(11,530)
–
–
(11,530)
(11,530)
–
–
–
–
–
50
482,668
765
99,999
(4,952)
573,710
–
573,710
578,530
562,180
567,000
Notes
8
31 December
2015
£’000
(9,345)
(9,345)
10
10
5/6
100,049
(3,202)
96,847
(87,452)
(87,452)
50
–
50
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE
126
Notes to the
Company financial
statements
1. General background
Ibstock plc was incorporated on 3 September 2015 to serve as
a holding company for the purposes of listing on the London
Stock Exchange. Ibstock plc was admitted to public trading on
27 October 2015. These financial statements form the Company’s
first period of accounts and the first period as ultimate holding
company for the Group following its acquisition of Figgs Topco
Limited and the Group subsidiary companies.
Summary of significant accounting policies
Basis of preparation
The financial statements have been prepared under the historical
cost convention and in accordance with applicable accounting
standards, the Financial Reporting Standard applicable in the
United Kingdom and the Republic of Ireland (‘FRS102’) and the
Companies Act 2006.
These financial statements are prepared on a going concern basis,
under the historical cost convention.
The preparation of financial statements requires the use of certain
key estimates and assumptions. It also requires management
to exercise its judgement in the process of applying Company
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed.
The Company has not disclosed the information required by
regulation 5(1)(b) of the Companies (Disclosure of Auditors
Remuneration and Liability Limitation Agreements) Regulations
2008 as the Group accounts of the Company are required to
comply with regulation 5(1)(b) as if the undertakings included in
the consolidation were a single group.
Fixed asset investments
Investments in subsidiaries are included at cost stated at the historical
value at the time of investment less any provisions for impairment and
net of merger and Group reconstruction relief available.
Share based payments
The Company operates a number of equity-settled share based
compensation plans on behalf of the Group. The fair value of the
employee services received under such plans is capitalised as an
investment in the Company’s subsidiary. The amount to be
recognised over the vesting period is determined by reference to the
fair value of share based payments.
Dividend distribution
Dividend distributions to Ibstock’s shareholders are recognised in
the Company’s financial statements in the periods in which the final
dividends are approved in the annual general meeting, or when
paid in the case of an interim dividend.
Financial instruments
(i) Objectives and policies
The Company, in common with its Group subsidiaries, must
comply with the Group’s finance guidelines that set out the
principles and framework for managing Group-wide finances.
Further information on the Group’s policies and procedures is
available in the Group financial statements. The Company does
not enter into speculative treasury arrangements.
(ii) Price risk, credit risk, liquidity risk and cash flow risk
Foreign exchange risk management
The Company primarily trades in Sterling and therefore exposure
to foreign exchange risk is regarded as low.
Credit risk management
For the Company this risk arises from cash and cash equivalents
and deposits with banks. This is managed on a Group basis and
there are a number of initiatives underway to mitigate this risk.
These include concentrating activities with a group of banks that
have strong, independently verified credit ratings. For each bank,
individual risk limits are set based on its financial position, credit
ratings, past experience and other factors.
Going concern
The Company’s business activities, together with the factors likely
to affect its future development, performance and position are set
out in the business review on pages 36 to 37. The financial position
of the Company, its cash flows, liquidity position and borrowing
facilities are described in the Directors’ Report on pages 79 to 80.
Liquidity planning, trends and risks
The Company has sufficient committed borrowing facilities to meet
planned liquidity needs with headroom, through facilities provided
by the Group.
The Company has adopted IAS 39 for ‘recognition and
measurement of financial instruments’.
The Company regularly reviews market and financial forecasts, and has
reviewed its trading prospects in its key markets. As a result it believes
its trading performance will demonstrate continued improvement in the
coming periods, and that liquidity will remain strong.
(iii) Financial assets
Financial assets, including preference shares, trade and other
receivables, loans to fellow Group companies and cash and bank
balances, are initially recognised at fair value.
The Board has reviewed the latest forecasts of the Company and
considered the obligations of the financing arrangements. Given
the continued strong liquidity of the Company the Board has
concluded that a going concern basis of preparation of its financial
statements is appropriate.
In addition, see the Group’s Viability Statement set out on page 35.
FRS 102 – First time adoption
These financial statements for the period ended 31 December 2015
are the first set of financial statements the Company has prepared
in accordance with FRS 102. As the Company has not previously
prepared financial statements, no transition exemptions or exceptions
have been applied and no reconciliations are presented.
Such assets are subsequently carried at amortised cost using the
effective interest method.
(iv) Financial liabilities
Financial liabilities, including trade and other payables and loans
from fellow Group companies, are initially recognised at fair value.
Debt instruments are subsequently carried at amortised cost,
using the effective interest rate method in accordance with IAS 39.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 127
Taxation
Taxation expense for the period comprises current and deferred
tax recognised in the reporting period. Tax is recognised in the
profit and loss account, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity.
In this case tax is also recognised in other comprehensive income
or directly in equity respectively.
Critical accounting judgements and estimates
The preparation of the financial statements requires management
to exercise judgement in applying the Company’s accounting
policies. It also requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities. Due to the
inherent uncertainty in making these critical judgements and
estimates, actual outcomes could be different.
(i) Current tax
Current tax is the amount of income tax payable in respect of the
taxable profit for the year or prior years. Tax is calculated on the
basis of tax rates and laws that have been enacted or substantively
enacted by the period end.
Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
(ii) Deferred tax
Deferred tax arises from timing differences that are differences
between taxable profits and total comprehensive income as stated
in the financial statements. These timing differences arise from
the inclusion of income and expenses in tax assessments in
periods different from those in which they are recognised in
financial statements.
Deferred tax is recognised on all timing differences at the
reporting date. Unrelieved tax losses and other deferred tax
assets are only recognised when it is probable that they will be
recovered against the reversal of deferred tax liabilities or other
future taxable profits.
Deferred tax is measured using tax rates and laws that have been
enacted or substantively enacted by the period end and that are
expected to apply to the reversal of the timing differences.
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new ordinary shares or options are
shown in equity as a deduction, from the proceeds.
Related parties
The Group discloses transactions with related parties which
are not wholly owned within the same Group. Where appropriate,
transactions of a similar nature are aggregated unless, in the opinion
of the Directors, separate disclosure is necessary to understand the
effect of the transactions on the Group financial statements.
Foreign currency
(a) Functional and presentation currency
Items included in the financial statements are measured using the
currency of the primary economic environment in which the entity
operates (‘the functional currency’). The financial statements are
presented in Sterling (£), which is the Company’s functional and
presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement.
Estimates
Estimates and underlying assumptions are reviewed by
management on an ongoing basis, with revisions recognised in the
period in which the estimates are revised and in any future period
affected. The areas involving significant risk resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are as follows:
Taxation
During the ordinary course of business, there are transactions
and calculations for which the ultimate tax determination may be
uncertain. The calculation of the tax charge therefore necessarily
involves a degree of estimation and judgement. The tax liabilities are
based on estimates of whether additional taxes will be due and tax
assets are recognised on the basis of probable future recoverability.
This requires management to exercise judgement based on their
interpretation of tax laws and the likelihood of settlement of tax
liabilities or recoverability of tax assets. To the extent that the final
outcome differs from the estimates made, tax adjustments may be
required which could have a material impact on the tax charge and
profit for the period in which such a determination is made.
Judgements
Judgements are made by management in the process of applying
the Company’s accounting policies that have the most significant
effect on the amounts recognised in the financial statements.
Impairment of non-current assets
Determining whether non-current assets are impaired requires
judgement and estimation. The Company periodically reviews
non-current assets, for possible impairment when events or
changes in circumstances indicate, in management’s judgement,
that the carrying amount of an asset may not be recoverable. Such
indicating events would include a significant planned restructuring,
a major change in market conditions or technology, expectations
of future operating losses, or negative cash flows.
The Company did not record any impairment charges during the
period ended 31 December 2015 as management’s judgement,
based on a rigorous assessment, was that there were no indicators
of impairment.
Deal costs
Deal costs of £5.0m were offset against the share premium
of £99.5m created on the issue of shares during the period.
Management has exercised judgement in assessing the allocation
of deal costs incurred between equity and the current period
income statement.
2. Result for the financial period
As permitted by Section 408 of the Companies Act 2006, the
Parent Company’s profit and loss account has not been presented
in these financial statements. The Parent Company’s loss after tax
for the financial period was £11,530,000.
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128
Notes to the Company
financial statements
continued
3. Employee information
The Company has no employees. Non-Executive Directors of the Company are employed under letters of appointment. Full details of the
Executive and Non-Executive remuneration is disclosed in the Annual Report on Remuneration on pages 74 to 78. For further details of
Directors Remuneration, refer to Note 6 of the Group financial statements.
Key management compensation
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments of £765,000 have been included within fixed asset investments during the period (see Note 4).
4. Fixed asset investments
Additions – ordinary shares in subsidiary undertakings
Additions – A preference shares in subsidiary undertakings
Additions – fair value of share incentives issued to Group employees
Preference shares include accreted interest of £762,000.
5. Debtors
Amounts owed by subsidiary undertakings
Current tax receivable
Period ended
31 December
2015
£’000
419
11
430
Period ended
31 December
2015
£’000
435,801
47,629
765
484,195
Period ended
31 December
2015
£’000
98,250
154
98,404
The loan receivable is unsecured, repayable on demand and accrues interest at a rate of 8% per annum. Interest only starts accruing
once the loan is called for repayment and is payable on the repayment date.
6. Creditors – amounts falling due within one year
Trade creditors
Amounts owed to subsidiary undertakings
Accruals and other creditors
Amounts owed to subsidiary undertakings are unsecured, repayable on demand and interest free.
Period ended
31 December
2015
£’000
–
10,798
4,851
15,649
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
7. Financial instruments
The Company has the following financial instruments:
Financial assets that are debt instruments measured at amortised cost:
Amounts owed by subsidiary undertakings
Cash and bank balances
Financial liabilities measured at amortised cost:
Amounts owed to subsidiary undertakings
Accruals and other creditors
129
Loans and
receivables
31 December
2015
£’000
98,250
50
98,300
Loans and
payables
31 December
2015
£’000
10,798
4,851
15,649
The Company has no derivative financial instruments. The fair value of the financial instruments is equal to their carrying values.
8. Notes to the cash flow statement
Cash flows from operating activities
Loss before taxation
Preference dividend
Increase in creditors
Cash generated from operations
Period ended
31 December
2015
£’000
(11,685)
(761)
3,101
(9,345)
9. Share based payments
Following the IPO of the Group on 27 October 2015, the Company entered into new share incentive plans including the Ibstock plc Long
Term Incentive Plan (the ‘LTIP’) for key management which was approved by the Board at Annual General Meeting. Awards under the
LTIP scheme are granted in the form of nil-priced share options and, as part of the IPO process, 337,665 number of shares were issued
on 4 December 2015 and immediately vested. The shares have been valued using a binomial model, with a price of £2.14 at grant date
and a fair value of £2.14. The full share based payment charge relating to the LTIP of £723,000 has been capitalised in the current period.
The Company capitalised a total charge of £765,000 relating to the new employee arrangements issued on IPO during the period. As the
numbers of shares or options granted or outstanding under other plans and the related charge to the Company are not significant, no further
disclosures are included within these Company financial statements. See Note 25 of the Group financial statements for further information.
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015FINANCIAL STATEMENTSOVERVIEWSTRATEGY & PERFORMANCEOTHER INFORMATIONFINANCIAL STATEMENTSGOVERNANCE 130
Notes to the Company
financial statements
continued
10. Called up share capital
Issued, called up and fully paid:
Ordinary shares of £1 each
Total share capital on incorporation on 3 September 2015
Consolidation of shares followed by designation into A ordinary shares
(50,000 ordinary shares of £1 each into 6,250 ordinary shares of £8 each)
Capital reorganisation involving:
(i) Allotment of shares as part of the share for share exchange
A ordinary shares of £8 each
B ordinary shares of £8 each
A preference shares of £8 each
B preference shares of £8 each
Deferred shares of £0.01 each
Total share capital following the share for share exchange
(ii) Sub-division of ordinary and preference shares from £8 each into £0.01 each
A ordinary shares of £0.01 each
B ordinary shares of £0.01 each
A preference shares of £0.01 each
B preference shares of £0.01 each
Deferred shares of £0.01 each
Total share capital following the sub-division of shares
(iii) Redesignation of shares into ordinary and deferred shares of £0.01 each
Ordinary shares of £0.01 each
Deferred shares of £0.01 each
Total share capital immediately prior to IPO
Number
of shares
Share
capital
£’000
Share
premium
£’000
50,000
50,000
6,250
50
50
50
9,993,750
79,950
80,000
640
43,250,000
346,000
7,009,738
56,078
648
–
60,334,136
482,668
60,340,386
482,718
8,000,000,000
80,000
64,000,000
640
34,600,000,000
346,000
5,607,790,400
56,078
48,271,790,400
482,718
648
–
48,271,791,048
482,718
352,868,422
3,529
47,918,922,626
479,189
48,271,791,048
482,718
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Ordinary shares of £1 each issued in the primary offering
52,631,578
526
94,521
Total share capital following primary offering
Ordinary shares of £0.01 each
Deferred shares of £0.01 each
Total share capital on IPO
Capital reduction
At 31 December 2015
Comprised of:
Issued, called up and fully paid:
Ordinary shares of £0.01 each
For further details refer to the Group financial statements Note 22.
405,500,000
4,055
94,521
47,918,922,626
479,189
–
48,324,422,626
483,244
94,521
(47,918,922,626)
(479,189)
(94,521)
405,500,000
4,055
405,500,000
4,055
–
–
IBSTOCK_26_Company_Financials_DRF2.indd 130
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015
131
11. Contingent liabilities
The Company has guaranteed all Group bank borrowings as detailed in Note 18 of the Group financial statements.
12. Controlling party
The ultimate parent company and the smallest and largest group to consolidate these financial statements is Ibstock plc.
There is no ultimate controlling party – see Note 29 of the Group financial statements.
13. Related party transactions
The Company is exempt from disclosing related party transactions with other companies that are wholly owned within the Group.
See Note 29 of the Group financial statements.
Share awards to key management personnel resulted in an amount of £723,000 in the period, which has been taken to fixed asset
investment. See Note 9, ‘Share based payments’, for further details.
During the period IPO related transaction costs totalling £4,320,000 were charged by Bain Capital Partners LLC to the Company.
14. Dividend
The Directors are proposing a final dividend in respect of the financial period ended 31 December 2015 of 4.4 pence per ordinary share
which will distribute an estimated £17,800,000 of shareholder’s funds. It will be paid on 3 June 2016 to those shareholders who are on the
register at 6 May 2016 subject to approval at the Company’s Annual General Meeting.
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Additional information
Board of Directors
Jamie Pike (Non-Executive Chairman)
Jonathan Nicholls (Senior Independent Non-Executive Director)
Tracey Graham (Independent Non-Executive Director)
Lynn Minella (Independent Non-Executive Director)
Michel Plantevin (Non-Executive Director)
Matthias Boyer Chammard (Non-Executive Director)
Wayne Sheppard (Chief Executive Officer)
Kevin Sims (Chief Financial Officer)
Company Secretary
Robert Douglas
Auditors
Ernst & Young LLP
No. 1 Colmore Square
Birmingham
B4 6HQ
Joint corporate brokers
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
UBS Limited
1 Finsbury Avenue
London
EC2M 2PP
Financial PR
Citigate Dewe Rogerson
3 London Wall Buildings
London Wall
London
EC2M 5SY
Solicitors
Allen & Overy LLP
One Bishops Square
London
E1 6AD
Principal bankers
Lloyds Bank Plc
Butt Dyke House
33 Park Row
Nottingham
NG1 6GY
Remuneration consultants
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Actuary
Xerox HR Services
160 Queen Victoria Street
London
EC4V 4AN
Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
UK: 0871 664 0300
International: +44 (0)20 8639 3399
(Calls cost 12 pence per minute plus your phone company’s
access charge. Calls outside the United Kingdom will be charged
at the applicable international rate). Lines are open between
9:00 a.m. – 5:30 p.m., Monday to Friday, excluding public holidays
in England and Wales.
Company registration number
09760850
Registered office
Leicester Road
Ibstock
Leicestershire
LE67 6HS
United Kingdom
Tel: +44 (0)1530 261 999
Corporate website
www.ibstockplc.com
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IBSTOCK PLC ANNUAL REPORT & ACCOUNTS 2015 Design and production:
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+44 (0)20 7610 6140
www.gather.london
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Environmental Management System is certified to ISO 14001. 100% of the inks
used are vegetable oil based, 95% of press chemicals are recycled for further
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Ibstock plc
Leicester Road
Ibstock
Leicestershire
LE67 6HS
T: +44 (0)1530 261 999
www.ibstockplc.com
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