12 April 2017

Ibstock plc ("the Company")

2016 Annual Report and Accounts and Notice of Annual General Meeting 2017

Further to the release of the Company's preliminary results announcement on 7 March 2016, the Company announces that it has today published its full Annual Report and Accounts for the year ended 31 December 2016.

The Company also announces that it has today posted copies of the documents listed below to shareholders:

The Annual General Meeting 2017, will be held at 2:00 p.m. on Wednesday 24 May 2017 at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY.

A copy of each of these documents has also been submitted to the UK Listing Authority via the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm 

The 2016 Annual Report and Accounts and Notice of Annual General Meeting 2017 will also be accessible later today via the Company's website at www.ibstockplc.com/investors

This information should be read in conjunction with the Company's preliminary results announcement. A condensed set of the Company's financial statements and information on important events that have occurred during the financial year and their impact on the financial statements, were included in the preliminary results announcement released on 7 March 2017. That information, together with the information set out below, which is extracted from the 2016 Annual Report and Accounts, is provided in accordance with the Disclosure and Transparency Rule 6.3.5, which requires it to be communicated to the media through a Regulatory Information Service. This announcement is not a substitute for reading the full 2016 Annual Report and Accounts. Page and note references in the text below refer to page numbers and note numbers in the 2016 Annual Report and Accounts.

Risk management

Risk arises from the operations of, and strategic decisions taken by, every business and 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 processes 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.

In considering the Group's appetite for risk, this is set depending upon the particular risk associated to our Group strategy:

The Group's risk management process includes both top-down and bottom-up elements to the identification, evaluation and management of risks.

As noted in our 2015 Annual Report & Accounts, the Audit Committee had commissioned a third party review of the Group's internal control processes. This independent "health-check" of the Group's risk management was completed during the first half of 2016 and concluded that the Group's internal control framework was fit for purpose. The exercise helped establish a base line of internal controls and subsequently RSM LLP were appointed as the Group's outsourced Internal Audit provider to deliver a programme of internal audits to continue to monitor the processes and controls in operation.

The outsourced provider designed an independent programme of audits, which was approved by the Audit Committee, and commenced these audits in the second half of the year, supplementing the Group's own operational audit activities.

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, and are refreshed at least once per annum. 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.

During the year, the Audit Committee approved a Group Risk Committee comprising senior managers from across the Group. The Committee participated in a risk workshop facilitated by the Group's outsourced Internal Auditor, and considered the risk matrices prepared; ranked the identified risks at a Group level; and determined the extent of Group-wide mitigating actions currently being undertaken.

Following the Risk Committee's meeting, a Group risk assessment was formulated and validated by the Executive Directors prior to approval by the Board. This formed a key component of the Directors' robust assessment of the principal risks facing the Group - including those that would threaten its business model, future performance, solvency or liquidity, set out below.

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. During 2016, no significant failings or weaknesses in the Group's internal controls were found.

The Audit Committee is assisted in evaluating the design and operating effectiveness of our risk strategies and the internal controls implemented by management by the Group's outsourced Internal Audit function.

Principal Risks

Viability Statement

Background

The Directors, have undertaken a comprehensive assessment of the Group's 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 the Group over a long-term horizon.

Assessment

The Directors' assessment of the longer term viability of the business, as part of the year-end review for the preparation of the 2016 Annual Report & Accounts, has assessed the business model, strategy, market conditions,  business planning, risks and the liquidity and solvency of the Group.

The Group has a strong position in the markets in which it operates, as noted on pages 6 and 7 of the 2016 Annual Report & Accounts, and its strategy (see pages 11 to 17 of the 2016 Annual Report & Accounts) is aimed at continuing to strengthen its position in those markets and create value for its shareholders. The Group's global operations (see pages 26 and 27 of the 2016 Annual Report & Accounts) exposes it to a number of risks and the Group's principal risks and uncertainties are noted on pages 34 to 36 of the 2016 Annual Report & Accounts. 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 page 36.

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 industry 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. Following the facilities' refinancing subsequent to the year-end, described in Note 34 to the Group consolidated financial statements, 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 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.

Assumptions

In determining the viability of the Group, the Board made the following assumptions:

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.

Statement of Directors' responsibilities

Director' responsibilities

The Directors are responsible for preparing the Annual Report & Accounts in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group consolidated 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 Annual Report & 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:

In preparing the Group consolidated financial statements, International Accounting Standard No.1 requires Directors to:

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.

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.

Directors' Responsibility Statement

The Directors who were in office as at 31 December 2016 and whose names and functions are given on pages 38 and 39 of the 2016 Annual Report and Accounts confirm that to the best of their knowledge:

Related party transactions

In the year ended 31 December 2016:

On 2 September 2016, Diamond (BC) S.à r.l., (a wholly-owned subsidiary of Bain Capital Investors LLC) announced the sale of 40,500,000 ordinary shares in the capital of the Group. Following the sales, Bain Capital Investors LLC holds 150,200,435 Ordinary Shares representing approximately 37.0% of the entire issued share capital. As at 31 December 2016 the Board of Directors of the Company, consider, based on the facts and circumstances, that Bain Capital Investors LLC continues to have significant influence over, but does not control, the Group.

In the period ended 31 December 2015:

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 Investors LLC, was therefore the immediate parent of the Group and Bain Capital Investors 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., had significant influence over but does not control the Group.

The shareholder loan notes and preference shares held by the Group during the prior period (Note 8) were owed to Diamond (BC) S.à r.l., a subsidiary to Bain Capital Investors LLC and 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 24 of the 2016 Annual Report & Accounts. There are no balances with Bain Capital Investors 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 Capital Investors LLC). Additionally, on Ibstock plc issued 50,000 ordinary shares on incorporation to Diamond (BC) S.à r.l., (wholly-owned by Bain Capital Investors LLC). A shares were converted as part of the Group reorganisation during the period. See Note 24 of the Group consolidated financial statements.

Transactions with related parties during the period also include management subscriptions for shares of £0.6 million, see Note 27 of the Group consolidated financial statements and the Directors' Remuneration Report on pages 58 to 73 of the 2016 Annual Report & Accounts.

See Note 7 of the Group consolidated financial statements for details of key management personnel remuneration.

During the prior 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 was paid back before the prior year-end

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