Ibstock – expected profit recovery hits a wall
Aarin Chiekrie, equity analyst, Hargreaves Lansdown: “Brickmaker Ibstock has downgraded full-year profit guidance as its recovery has hit a wall. A more uncertain near-term economic and political backdrop than expected during the third quarter has led to softer demand for its products. This weakness is expected to continue over the final stretch of the year, with uncertainty around property taxes and the later-than-usual Autumn Budget due on 26 November likely to keep a lid on construction starts in the near term. As a result, second-half cash profits (EBITDA) are now expected to be in line with the first half. This points to full-year cash profits of around £72mn, below the previous guidance of £77-82mn.
The profit downgrade is the group’s second of the year. While it’s difficult to predict the pace and timing of a building market recovery, another downgrade does raise some questions around whether management’s guidance is built on shaky foundations. With high fixed costs and dividend payments having already been trimmed back, Ibstock will need to keep an extra tight grip on cash flows if it wants to avoid disappointing investors again.”