FORTERRA PLC ANNUAL REPORT AND ACCOUNTS 2023

HELPING

CREATE

LASTING

LEGACIES

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

OUR PURPOSE IS HELPING

CREATE LASTING LEGACIES THAT

GO BEYOND CONSTRUCTION OR

HOUSEBUILDING TO DELIVER

GROWTH AND FOSTER A LEGACY

OF BUILDING TODAY, TOMORROW

AND INTO THE FUTURE.

In this report

Strategic report

02 Forterra at a Glance

04 Investment Case

06 Chairman’s Statement

12 Chief Executive’s Statement

20 What We Do and Our Impacts

22 Our Business Model

24 Market Overview

28 Section 172 Statement

30 Our Strategy

38 Key Performance Indicators

40 Chief Financial Officer’s Review

48 Sustainability Report

86 Risk Management and Key Risks

Governance

98 Board of Directors

101 Executive Committee

102 Corporate Governance Statement

116 Nomination Committee Report

118 Audit Committee Report

125 Risk and Sustainability

Committee Report

128 Remuneration Committee Report

157 Directors’ Report

160 Statement of Directors’

Responsibilities

Financial Statements

162 Independent Auditor’s Report

170 Consolidated Statement

of Total Comprehensive Income

171 Consolidated Balance Sheet

172 Consolidated Statement

of Cash Flows

173 Consolidated Statement

of Changes in Equity

174 Notes to the Financial Statements

208 Company Balance Sheet

209 Company Statement

of Changes in Equity

210 Notes to the Company

Financial Statements

213 Group Five-Year Summary

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

FINANCIAL HEADLINES

STATUTORY

Revenue

£346.4m

2022: £455.5m

Profit before tax

£17.1m

2022: £72.9m

Earnings per share

6.2p

2022: 27.2p

ADJUSTED

Revenue

£346.4m

2022: £455.5m

Profit before tax

£31.1m

2022: £70.6m

Earnings per share

11.4p

2022: 26.4p

EBITDA

£58.1m

2022: £89.2m

Net debt before leases

£93.2m

2022: £5.9m

1. See non-GAAP measure reconciliation

in section U ofSummary of material

accounting policies onpage180.

FORTERRA AT A GLANCE

Our expertise lies in building products

made from clay andconcrete, and our

portfolio contains some of the most

recognised and respected names in the

construction industry. Some of them,

such as London Brick and Butterley,

dateback to the 19th century while

others, suchas Ecostock and Thermalite,

are far more recent; butwhether

historic or modern, traditional or cutting

edge, theyall have the needs of the

21stcentury attheir core.

OUR LOCATIONS

Map key

Manufacturing facilities

1,600

Employees

Head office Aggregate Blocks (2)/

Concrete Pavers (1)

Precast Concrete

Products (2)

Bricks (8)

of which

mothballed (2)

Aircrete Blocks (2) Roofing and

Chimney Products (1)

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Residential New Build

66%

Residential RM&I

25%

Commercial & Infrastructure

OUR MARKETS

OUR PRODUCTS

Residential NewBuild

Residential is at our core and the new

build sector of this market is a significant

portion of our business. There remains

a long-term shortage of housing in

the UK and through our bricks, blocks

and flooring product lines, we provide

essential products to the majority of

the country’s housebuilders, builders’

merchants and distributors.

Residential RM&I

The repair, maintenance and

improvement (RM&I) market forms an

additional segment of the residential

market through sales to distributors.

Weoffer a range of RM&I products in

support of this area, most notably our

London Brick range used in extensions

across the country, reducing our

relianceon new build construction.

Commercial & Infrastructure

The commercial and specification

market focuses on architecturally driven

projects such as schools, hospitals,

stadia, offices, universities and other

public buildings. We supply a wide range

of products into this sector through

our Bison Precast business, and the

redevelopment of our Wilnecote brick

factory will see an enhanced range of

bricks also supplying this market.

Bricks

Our clay brick range includes the iconic

London Brick, and is complemented

by a comprehensive range of wire-cut,

pressed, thrown and special shaped

products to satisfy avariety of end-

use markets.

Blocks

Our inner leaf walling products include

Thermalite, a leading lightweight,

thermally efficient block used within

residential construction, and the Conbloc

range of dense and lightweight aggregate

blocks. Landscaping solutions are

provided by our Formpave concrete

block paving range.

Bespoke Products

Bison Precast spearheads our bespoke

products offering, providing a range of

offsite manufactured concrete walling,

flooring and ancillary products.

Jetfloor, our insulated ground floor

system, leads our offering in the

newbuild residential market.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

INVESTMENT CASE

DELIVERING LONG-TERM SHAREHOLDER VALUE

INVESTMENT CASE

DELIVERING LONG-TERM SHAREHOLDER VALUE

Established leading market positions

in core products

• Broad, complementary product

rangecomprising clay bricks, aircrete

and aggregate blocks, flooring

products and more

• Unique, trusted and respected

heritagebrands including London

Brickand Thermalite

• High barriers to entry supported by

secure long-term mineral reserves

• Well-invested, efficient and profitable

asset base

• Strong customer relationships

enhancing order-book visibility

Long-term structural demand

andsupply factors underpin

marketgrowth despite short-term

cyclical challenges

• Market demand driven by structural,

through-cycle new housing shortage

and resilient RM&I markets

• Structural undersupply of domestically

produced bricks and other key

buildingproducts provides opportunity

for growth

• Diversification through exposure to

RM&Imarket

• Consolidated brick and block

marketstructures

• Competitive cost of brick production

driven by investments in asset base

Longstanding shortage

of quality housing

Structural undersupply of

domestically produced bricks

offsets historical cyclicality

Structurally attractive

market structure

Secure long-term

mineral reserves

Efficient well-invested manufacturing

base with large factory size

Established market position and

customer relationships

Resilience provided through

exposure to RM&I market

Synergy driven by

complementary products

Established and

recognisable brands

Strong and experienced

leadership team

MARKET COMPANY

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

STRATEGY AND

INVESTMENT

Investment pipeline to deliver

capacity growth, efficiency and

decarbonisation

• Three large-scale projects will be

completed in 2024 and will progressively

deliver significant profit and cash

returns as market recovers

• Attractive pipeline of optional organic

investment projects as market

and balance sheet allow over the

nextdecade

• Proven delivery of innovation,

manufacturing excellence and

productivity improvement underpins

profit growth

Commitment to sustainability

leadership

• Inherently sustainable and durable

products

• Ambitious ESG targets to 2030 and

beyond under the ‘Planet Product

People’ framework

• Achieved 22% reduction in carbon

emissions between 2010 and2019

• Commitment to commercially robust

ESG agenda, including afurther

32%carbon emissions reduction

targetbetween 2019 and 2030

Strong profitable growth,

cashgeneration and disciplined

capitalallocation

• History of strong cash generation

supports organic investment model

• Attractive dividend policy with mid-term

pay-out ratio of 55% of earnings

• Scope for selective bolt-on acquisitions

• Pipeline of further organic investment

projects with timing subject to market

and balance sheet

• Leverage expected to fall below

1.5xEBITDA in medium-term

• Longer-term opportunity for

supplementary returns to shareholders

as appropriate

Longstanding shortage

of quality housing

Structural undersupply of

domestically produced bricks

offsets historical cyclicality

Structurally attractive

market structure

Secure long-term

mineral reserves

Efficient well-invested manufacturing

base with large factory size

Established market position and

customer relationships

Resilience provided through

exposure to RM&I market

Synergy driven by

complementary products

Established and

recognisable brands

Strong and experienced

leadership team

MARKET COMPANY

KEY PERFORMANCE INDICATORS

Revenue EBITDA Margin Total Shareholder Return (TSR)

Short-term earnings

growth supports

greater investment

enabling greater still

earnings growth

Sustained earnings growth

Strong free cash flow conversion

Attractive dividend

Shareholder returns

LONG-TERM SHAREHOLDER VALUE

Large scale investment

in new capacity

– Strengthen the core

– Beyond the core

– Safety and engagement

– Sustainability

Opportunistic bolt-on M&A

in complementary markets

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

2023 has been a very challenging year for our

industry. Economic turbulence has suppressed

demand for new housing resulting in a marked

reduction in demand for our products.

Despite UK brick industry despatches falling to levels

last seen in the Global Financial Crisis (GFC), we

were still able to deliver a resilient financial result.

Notwithstanding these challenging market conditions,

we have made continued progress against our

strategic objectives. After a construction period of

more than three years, 2023 saw the commissioning

of our new Desford brick factory. With a production

capacity of 180 million bricks per annum, we believe

it to be the largest brick factory in Europe and once

fully commissioned, the most efficient.

The commissioning of a new brick factory, least so

the largest in Europe, should not be underestimated

and I would like to take this opportunity to thank

everyone involved in bringing the Desford project

to life. In delivering this asset, we have overcome

a number of headwinds including the disruption of

Covid-19, supplier insolvency and now a cyclical

reduction in demand. We are incredibly proud

to have constructed a fantastic factory that will

set the standard for brick production for years

tocome, addressing our capacity constraint and

leaving uswell positioned to take full advantage

ofamarketrecovery.

Results

Group revenue for the year totalled £346.4m

(2022: £455.5m), areduction of 24.0%. Adjusted

EBITDA was £58.1m (2022: £89.2m). Adjusted

profit beforetax decreased from £70.6m to £31.1m.

Statutory profit before tax decreased to £17.1m

(2022:£72.9m).

Adjusted earnings per share (EPS) reduced to 11.4p

(2022: 26.4p). Basic EPS was 6.2p (2022: 27.2p).

The Group ended the year with net debt (stated

before leases) of £93.2m (2022: £5.9m).

NON-EXECUTIVE CHAIRMAN

JUSTIN ATKINSON

CHAIRMAN’S STATEMENT

A VERY CHALLENGING YEAR

❝

In the face of extremely difficult

marketconditions we have

delivered aresilient result.”

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Response to market conditions

Faced with a significant reduction in demand for our

products, decisive action was necessary to align

output with demand.

We entered 2023 with inventories at record low

levels but with these replenished by the spring and

with the Desford factory becoming operational,

we acted to reduce output. In making decisions

regarding output, the Board considered multiple

factors including the impact on affected employees,

working capital management, production efficiency,

maintaining our product offering and profitability.

Regrettably, with market conditions not improving as

we had hoped, as we entered the second half of the

year we had to make further production reductions

resulting in more redundancies. In total we have

announced almost 300 redundancies, mothballed

two brick factories and reduced output across many

other facilities.

In making these necessary reductions to output,

we have retained both our full product range and

our ability to quickly and cost effectively reinstate

production as our markets recover. As demand for

our products recovers, our organic investments at

Desford and elsewhere will mean that the capacity

restraints that hadpreviously hindered us will no

longer be present, leaving us well placed to deliver

future growth.

Our people

As always, it is important to recognise that our

success is driven by the ongoing commitment and

enthusiasm of our colleagues. It is deeply regrettable

that we have had to make painful but necessary

decisions to reduce our workforce and we recognise

the impact this has on those who have lost their jobs.

Once again, our employees have been asked

to step forward and deal with another set of

unexpected challenges.Following the strong

demand experienced in 2022, which will be

remembered for shortages of supply, to 2023,

which has seen a significant cyclical drop in demand

just as we increased capacity with the opening of

the new Desford brick factory. These circumstances

have created a great deal of uncertainty for our

workforce and the Board has been impressed by

the continued dedication and resilience displayed

by our employees.

Despite this difficult backdrop, we have continued

to make progress on our employee engagement

journey with our latest employee survey attracting a

record 78% response rate and showing a continuing

year-on-year improvement in employee engagement.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Revenue

£346.4m

2022: £455.5m

Adjusted profit beforetax

£31.1m

2022: £70.6m

Adjusted EPS

11.4p

2022: 26.4p

Net debt beforeleases

£93.2m

2022: £5.9m

Board changes

As previously reported, after 10 years in role and

a total of 21 years with the Company, Stephen

Harrison stepped down as Chief Executive Officer

in April 2023.Having led the carve out from our

former parent, steered the Company on to the

publicmarket and embarked on a strategy of

organic investment with Desford at its heart,

Stephen has left a positive legacy. 

The Board were delighted to appoint Neil Ash

as Chief Executive Officer after a short handover

period. Neil has almost three decades’ experience

in the building materials sector and brings an

impressive track record of improving performance

and delivering growth at Etex, the Belgian lightweight

building materials manufacturer. Neil’s extensive

building materials sector knowledge gained

throughout previous economic cycles equips him

tolead the Group through the current challenging

times and into the recovery phase as he joins

a business well placed to benefit from recent

investments. He has certainly hit the ground running.

We also welcomed Gina Jardine to the Board in

April as an Independent Non-Executive Director.

Gina is an HR professional with extensive experience

gained within global building materials and mining

companies. 

Through her experience and significant knowledge,

obtained in some of the largest global corporates,

Gina complements and adds to the existing skillset

of our Board, and has already offered valuable

insight as we redefined our values and continue

upon our employee engagement journey. The Board

is committed to furthering diversity at all levels.

Financial Conduct Authority guidance is that at

least 40% of the Board within FTSE 350 companies

should be female. Although not currently within

the FTSE 350, our Board composition is presently

38% female. In addition, the Senior Independent

Director is female and one member of the Board

is from a non-white ethnic minority background.

Notwithstanding the foregoing, I believe that the

skills, knowledge, experience, educational background

and upbringing of the individual members of this

Board bring a diverse contribution to the debate

anddiscussion around the Board table.

Strategy

Our strategy for growth together with clear capital

allocation priorities positions the Group to deliver

long-term shareholder value.

One of Neil Ash’s first priorities was to undertake a

refresh of our strategic narrative encompassing our

vision, mission and purpose, and our values. Whilst

our strategy remains consistent, and is already well

understood by our shareholder base, Neil wanted to

bring the strategy to life. This will aid our colleagues

not only to better understand our strategy but also

to define our clear purpose as a business which is,

“Helping create lasting legacies”, encouraging our

employees in working towards common goals.

Alongside this we have chosen values which drive

the specific behaviours that we believe are necessary

to facilitate the successful delivery of our strategy.

Our strategy, outlined in more detail on pages 30

to37, is to capitalise on the UK’s long-term shortage

of housing supply, along with astructural shortfall

in the supply of the domestically manufactured

building products necessary to address this housing

shortage, leveraging our extensive mineral reserves

and strong market positions.

This strategy encapsulates the following strategic

imperatives, the achievement of which will deliver

sustained shareholder value:

• Strengthen the core: Investing in new capacity

to deliver growth in sales volumes along with

enhanced efficiency;

• Beyond the core: Expanding our product range

beyond our traditional focus of mainstream

residential construction focusing on new and

evolving solutions such as brick slips;

• Sustainability: Making our business more

sustainable in everything we do; and

• Safety and engagement: Safety remains our

number one priority and through prioritising

employee engagement we will maximise the

potential of our workforce.

Whilst we are now expressing our strategy in

aslightly different manner, adding capacity and

improving efficiency and sustainability through

organic investment remains at its core.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHAIRMAN’S STATEMENT

CONTINUED

Our new Desford brick factory is now operational

and has been delivered within its original £95m

budget. The factory has been designed with the

cyclically of our markets in mind, allowing us to

efficiently adjust output which has already been

necessary in the current market. The demolition

of the old factory is now complete and the whole

project will be finished when a further stockyard

isconstructed in its place.

The redevelopment of our Wilnecote factory will offer

a product range targeted at the commercial and

specification market. This will provide diversification

away from new-build housing which has suffered

most from the market decline in the last year.

The project continues to progress although has

been delayed beyond its original timetable as a

consequence of supplier challenges. We now expect

to re-commission the factory in the second half

of2024.

At the heart of the ‘Beyond the core’ pillar of

our strategy sits an investment of approximately

£12m in brick slip manufacture at our Accrington

factory. This will allow us to capitalise on the

growing opportunities presented by the high-rise

and modular construction markets. Installation

of the equipment is progressing in line with our

expectations with the manufacture of brick slips

expected to commence in 2024.

In addition, we continue to progress a pipeline of

further projects that offer further opportunity for

growth, the timing of which will depend on the

recovery of our markets along with our balance

sheet position.

Capital allocation

Our capital allocation policies are clearly stated

anddesigned to maximise shareholder value:

• Strategic organic capital investment to deliver

attractive returns;

• Attractive ordinary dividend with a mid-term

pay-out ratio of 55% ofearnings;

• Bolt-on acquisitions as suitable opportunities

arisein adjacent or complementary markets; and

• Supplementary shareholder returns as

appropriate.

We are currently coming to the end of our £140m

investment in our three exciting expansion projects

at Desford, Wilnecote and Accrington. Desford

isvirtually complete and our priority is to complete

each of these investments in 2024.

The challenging markets we have experienced in

2023 have contributed to a significant inventory build

which alongside our capital expenditure has driven

an increase in our net debt. We expect production

output to be aligned with market demand in 2024

leading us to anticipate ourindebtedness will remain

broadly static, with leverage subsequently reducing

as our earnings recover through thecycle.

Dividends

Our established dividend policy has been to

distribute 55% of our adjusted earnings. In light of

current trading conditions and the Group’s presently

elevated levels of indebtedness, the Board have

considered the Group’s dividend policy and have

elected to temporarily reduce the level of dividend

distribution. The Board is proposing to distribute

40% of adjusted earnings for 2023 and accordingly

is recommending a final dividend of 2.0p per

share (2022: 10.1p) which, in addition to the interim

dividend of 2.4p per share paid in October (2022:

4.6p), will bring the total dividend to 4.4p per share

(2022: 14.7p). Subject to approval by shareholders,

the final dividend will be paidon 5July 2024 to

shareholders on the register as at 14June 2024.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

The Board remain confident in the long-term

prospects of the Group and in its ability to benefit

from the recent capacity investments as the market

recovers, although retains a degree of caution in the

short-term with borrowings expected to peak in mid-

2024 before reducing steadily thereafter. The Board

intends to keep its dividend policy under review

and will look to return the level of distribution to the

previous 55% as soon as market conditions permit.

Sustainability

Our carbon reduction journey should be seen as

amarathon not a sprint facilitated by investments in

new, more efficient manufacturing capacity coupled

with ongoing research into emerging technologies. 

We have clear targets including a 32% reduction

in our carbon emissions intensity (from a 2019

baseline) by the end of the decade. 2023 saw

a significant reduction in our absolute carbon

emissions relative to the prior year although this

wasprimarily driven by a reduction in production

andthe mothballing of factories, highlighting exactly

why we focus on the output adjusted measure of

carbon emissions intensity.

Whilst our total carbon emissions fell by 13% relative

to the prior year as a result of our reduced output,

our carbon emissions intensity did increase marginally

during 2023, partially as a consequence of our

decision not to "green" our grid supplied electricity

as explained below, along with a variation in product

mix following the reductions in production described

in more detail in the Sustainability Report on page 60.

These short-term fluctuations should not distract

from our longer-term carbon reduction targets.

Each of our organic investments provides a

meaningful sustainability benefit with the new

Desford and Wilnecote brick factories both reducing

carbon emissions by approximately 25% relative

to their predecessor factories. Our innovative brick

slip production facility at Accrington offers real

sustainability benefits in manufacturing brick slips with

a c.75% reduction in energy and raw material usage

and embodied carbon relative to traditional bricks.

2023 saw the commissioning of roof mounted

solar panels at our new Desford factory. At a cost

of £2.5m they will generate around 16% of the

factory’s electricity requirement at full production

going forwards. Our investment in renewable energy

extends beyond on-site solar panels. The 150-acre

Forterra solar farm, the construction of which was

enabled by our 15-year Power Purchase Agreement,

will supply almost 70% of our Group electricity

demand assuming our business is operating at full

production output and an even higher percentage

atcurrent levels of output, and will begin supplying

us in the coming weeks.

The majority of our year-on-year increase in our

carbon emissions intensity is driven by our decision

not to "green" our grid supplied electricity by

purchasing Renewable Energy Guarantee of Origin

(REGO) certificates. When we first adopted this

policy in 2020, the cost of these certificates was

less than £20,000, whereas in 2023 this cost would

have increased to approximately £1m. With the

forthcoming commissioning of our solar farm and

the recent installation of our on-site solar generation

at Desford, we determined that in the current

economic environment this additional spend would

not have represented the most appropriate use of

capital. Going forward, our own renewable energy

generation will substantially negate our need to

purchase REGOs and a decision will be taken as

towhether to purchase any shortfall in due course. 

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHAIRMAN’S STATEMENT

CONTINUED

Corporate governance

The Board remains committed to the highest

standards of Corporate Governance, not only at

Board level but throughout the Group. The Group

continues to comply in full with the requirements

ofthe UK Corporate Governance Code as if it were

aconstituent of the FTSE 350.

The Corporate Governance section of this Annual

Report outlines the Board’s approach to corporate

governance arrangements and includes reports from

each of the Committee Chairs, providing details on

key matters addressed by each of the Committees

during the year.

Each of the Directors will be standing for re-election

at the forthcoming AGM. Our s172(1) statement as

required by the Companies Act is included in the

Strategic Report on pages 28 and 29, and further

referenced in the Corporate Governance Statement

on p age 111.

During the year we undertook an internal evaluation

of the Board and its Committees, the summarised

findings of which are laid out in the Governance

section on page112.

During the year the Board considered the

arrangements for the provision of internal audit

services and from the beginning of 2024, the existing

co-source provider, PwC, will now provide internal

audit services on a fully outsourced basis. More

information is provided in the report of the Audit

Committee on page123.

Recognising the ever-increasing focus on

sustainability, the Board has elected to amend the

structure of its Committees toensure that it is able

to clearly focus upon the oversight of sustainability

matters without distraction. Accordingly, from

1January 2024, the Risk and Sustainability

Committee has become the Sustainability

Committee with risk management now falling

underthe remit of the Audit and Risk Committee

(formerlythe Audit Committee).

Corporate culture

The Board is aware of its responsibility to foster a

corporate culture based upon strong leadership and

transparency, ensuring we do business responsibly,

adhering to the highest ethical standards, whilst

minimising the impact our business has on the

environment. 

As noted earlier, we have recently revised and

relaunched our corporate values being the principles

of behaviour that will allow us to achieve our

strategic goals. These are defined as follows and

have been rolled out to all employees in early 2024:

• Innovate to lead: We’re empowered to continuously

improve;

• Pride in excellence: We relish achievement and

success; and

• Collaborate and care: We work in partnership

andlook after each other.

Our purpose is to manufacture and supply building

products used to construct homes and other

structures, helping to create lasting legacies in

theform of communities that will exist for centuries

tocome. 

Health and safety remains our number one priority

and the Board is determined to lead by example in

ensuring that everyone in our business is under no

doubt as to our commitment to zero harm. To this

end, the Board continued to ensure it remains highly

visible in the business, with each Director completing

two factory health and safety walks in addition to full

Board visits to four of our factories during the year.

Outlook

The outlook for our industry remains subject to

considerable uncertainty and, with a general election

expected in 2024, demand is anticipated to remain

subdued in the near-term. Trading conditions at the

beginning of 2024 continued to be challenging with

Department for Business and Trade (DBT) figures

suggesting that UK industry brick despatches in

January were 5% behind of the 2023 comparative

with our own despatches in February slightly ahead

of the prior year comparative.

We continue to expect demand through 2024 to

be broadly aligned to that seen in 2023 although

unusually wet weather in the first two months of

theyear makes underlying demand more difficult

togauge.

We take some encouragement from recent trading

updates from our housebuilding customers reporting

greater levels of customer activity in recent months

with a downward trend in mortgage interest rates

through 2024 expected to improve the affordability

of new homes, hopefully increasing demand for

ourproducts.

With the long-term under-supply of housing in the

UK continuing to worsen, and with our previous

capacity constraints now addressed, the Board

remains confident in the Group’s ability to benefit

significantly as our key markets recover. The Board's

expectations for 2024 remain unchanged with the

Group's performance expected to be H2 weighted

with this being driven by cost base and efficiency

rather than demand.

Justin Atkinson

Non-Executive Chairman

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHIEF EXECUTIVE’S STATEMENT

LOOKING BEYOND THE CURRENT CHALLENGES

❝

I am pleased to present my first statement as Chief

Executive Officer of Forterra. Having joined the

Group in April, I cannot deny that the last year has

been one of the most challenging of my career. The

market conditions that we have faced over the last

year have been incredibly difficult. As a firm believer

that any business is only as strong as its people,

I have been impressed by the dedicated team of

colleagues that I found at Forterra and Iwish to take

this opportunity to thank all of our employees for

their efforts over the last year.

Alongside focusing upon identifying and

implementing the short-term actions necessary

to respond to the significant fall in demand for our

products, which unfortunately led to almost 300

redundancies, my focus and that of our Executive

Committee has also been on the future.

When deciding to join the Company, I was

convinced that the business had a bright future

and having now been in position for a year I remain

steadfast in this conviction. I joined a business which

had made sound investment decisions, in fact my

first public appearance as CEO was to welcome

our customers, suppliers, shareholders and lenders

to an event marking the opening of our new £95m

brick factory at Desford which will be the largest,

most efficient brick factory in Europe.

In addition, during my first year I have also seen

theprogress made on the complete redevelopment

of our Wilnecote brick factory which will begin

production in the second half of 2024. Providing

uswith a broader product range and increase our

penetration of the commercial and specification

market, a market where our relatively low presence

has hindered our performance in 2023, with the

mainstream house building sector having been

worstimpacted by economic conditions.

I am also truly excited by the opportunity presented

by the innovative investment in brick slip manufacturing

capability at our Accrington factory. Having spent

much of my career in the lightweight building

materials sector, I see the potential for brick slip

demand to grow significantly bringing the much-

loved appearance of traditional brick façades to

buildings constructed using modern methods

ofconstruction. In fact, we have made the gaining

ofa leadership position in UK brick slips a key

strategicgoal.

My focus has been divided

between addressing the

short-term challenges

andequipping thebusiness

tobeahead oftomorrow.”

NEIL ASH

CHIEF EXECUTIVE OFFICER

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Regardless of how successful a business may have

been in the past, I believe that a business can always

be improved. Having reviewed all aspects of the

business, I have seen many things that are done

wellbut I firmly believe that there are anumber of

areas where we can be better still.

I have joined a well invested business with almost

£140m committed to our three strategic projects,

thevast majority of which will be spent by the middle

of 2024. It is also reassuring to see a pipeline of

further attractive projects that are being developed

behind the scenes. I am mindful, however, that it

takes more than capital investment to make the

bestof anybusiness.

We have a well-established and clear strategy based

upon investing to deliver for organic growth and this

is well understood by our shareholders.

However, joining with a fresh pair of eyes, I felt that

the strategy needed bringing to life so as to truly

inspire and motivate our colleagues, helping them

understand how they can personally contribute in

helping the business achieve its goals.

We have set a clear purpose for our business which

is ‘Helping create lasting legacies’. Our vision of

‘Brilliant today, ahead of tomorrow’ recognises that

our customers and stakeholders demand the best

from us today but also that we need to continually

innovate and improve, adapting to a changing world

as we look ahead.

As I said above, the success of any business is

dependent on its people. We have identified the

following values that are the principles of behaviour

that we expect all our colleagues to liveby:

• Innovate to lead: We’re empowered to

continuouslyimprove;

• Pride in excellence: We relish achievement

andsuccess; and

• Collaborate and care: We work in partnership

andlook after eachother.

I bring with me a commitment to do everything

within my power to improve our health and safety

performance. Safety has long been the Group’s

number one priority and I can assure you that this

will not change under my leadership. Our ambition

is to achieve zero harm and we will not rest whilst

we still have accidents and injuries happening

inourbusiness.

Sustainability and our responsibility for the

environmentare extremely important to me and

quite simply, I could not have joined a business that

I did not believe was living up to its responsibilities in

this area. I have been impressed by the longstanding

work and sizeable investment that has already gone

into reducing the negative impact that our operations

leave on the environment, although we recognise

that we are still only at the beginning of a journey

that will take us to 2050.

2023 results

Revenue for the year ended 31 December 2023

was£346.4m (2022: £455.5m), a decrease of 24.0%.

Adjusted earnings before interest, tax, depreciation

and amortisation (EBITDA) were £58.1m (2022:

£89.2m). Adjusted profit before tax fell to £31.1m

(2022: £70.6m), a decrease of 55.9%.

Adjusted earnings per share (EPS) were 11.4p

(2022: 26.4p). Basic EPS after adjusted items was

6.2p (2022: 27.2p).

Our markets

Demand for new housing in the UK fell substantially

in 2023 driven by increasing interest rates adversely

impacting affordability and therefore demand for

new homes.

£30m

investment in

redeveloping

ourWilnecote

brickfactory

c.70%

of our electricity

needs tobe sourced

from asolarfarm

in centralEngland

from2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

This decline in housing demand is evidenced by

a19% fall in housing starts and a 15% fall in housing

completions. The relationship between these

statistics and the demand for the building products

we manufacture is a complex one, with housebuilder

order books, work in progress, and the inventory

they hold of our products all having an impact.

Government statistics demonstrate that this fall in

housing output has driven a significant decline in

demand for building products with total UK brick

consumption (including imports) falling from 2.5 billion

bricks in 2022 to a figure of 1.7 billion in 2023, a fall

of 32%. Our own brick despatches in the year fell

by a greater percentage as a result of our exposure

to mainstream housebuilding, the sector of the

market most impacted by increasing mortgage

rates. Demand for our other products also fell by

approximately 30%.

Imports of bricks into the UK totalled 329 million

bricks in 2023, a fall of 42% from the 2022 figure

of 570 million bricks. Imports as a percentage of

total UK brick demand fell from 23% in 2022 to

19% in 2023, although it is likely that imports of

architecturally differentiated bricks, where demand

is less susceptible to the increases in interest rates

will havebeen most resilient, meaning that the fall

in imports of bricks which are directly competing

with our own products is likely to be greater than

suggested by these figures. 

Despite current and announced capacity

investments, the UK brick industry still lacks the

capacity required to meet underlying demand.

Current domestic production capacity of

approximately 2.2 billion clay bricks per annum

remains lower than the pre-financial crisis figure

of2.6 billion.

2023 Business review

Bricks and Blocks

We possess a unique combination of strong market

positions in both clay brick and concrete blocks.

We are the only manufacturer of the iconic and

original Fletton brick sold under the London Brick

brand. Fletton bricks were used in the original

construction of nearly a quarter of England’s existing

housing stock and are today used to match existing

brickwork by homeowners carrying out extension

or improvement work. We operate eight brick

manufacturing facilities across the country with a

total installed production capacity of approximately

675 million bricks per annum.

We are also a leader nationally in the aircrete block

market, operating two Thermalite block facilities

inthe Midlands and South of England. In addition,

our aggregate block business has a leading position

in the important Southeast and East of England

markets with two well-located manufacturing

facilities in this geography. This segment also

includes Formpave, the Group’s concrete block

paving business and following the combination of

our Cradley Special Brick business with our Red

Bank chimney and roofing components business

on a single site, this segment now includes the

results of the Red Bank business with the prior year

comparatives being restated to reflect this.

Our clay reserves are the foundation that our brick

business is built upon and are the primary raw material

used in manufacturing our bricks. Each ofour brick

factories is located adjacent to a quarry supplying

locally sourced clay directly into the manufacturing

process. Sourcing material locally is sustainable and

therefore preferable wherever possible as it avoids

the costs and carbon emissions associated with

transportation. Our mineral reserves also provide

anatural barrier reducing the threat of new entrants

entering the market, as the planning process to secure

consent for a ‘green-field’ quarry and associated

brick factory could take as long as 10years.Each

ofthe new brick factories built in the UK over the last

two decades have been redevelopments of existing

facilities utilising established quarries. We have access

to over 90million tonnes of minerals, on average,

these reserves are sufficient to sustain manufacturing

operations for 50 years. The majority of our minerals

are owned, although a small amount are secured

by way of lease with a royalty payable at the point

ofextraction.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHIEF EXECUTIVE’S STATEMENT

CONTINUED

Bricks and Blocks

Restated

2023

£m

2022

£m

Revenue

277.4 376.1

Adjusted EBITDA before overhead allocations 70.0 109.6

Overhead allocations (17.9) (24.0)

Adjusted EBITDA 52.1 85.6

Adjusted EBITDA margin before overhead allocations 25.2% 29.1%

Adjusted EBITDA margin after overhead allocations 18.8% 22.8%

1. Restated to report Red Bank results within Bricks and Blocks segment as a result of an internal

restructure. Further details on page 40.

2. Revenue is stated before inter-segment eliminations.

OUR STRATEGY

STRENGTHEN THE CORE SAFETY AND ENGAGEMENTSUSTAINABILITYBEYOND THE CORE

Trading and results

The performance of the Bricks and Blocks segment

was principally driven by the fall in demand

highlighted above. Bricks and Blocks sales revenues

were £277.4m, a decrease of 26.2% on the prior

year (2022: restated £376.1m). The decline in sales

volumes was partially offset by a pricing benefit,

primarily driven by the significant mid-year price

increases implemented in 2022. Segmental adjusted

EBITDA totalled £52.1m (2022: restated £85.6m),

adecrease of 39.1%. Adjusted EBITDA margin was

18.8% (2022: restated 22.8%). 

Pricing and costs

Following a period of extreme inflation during

2022, our cost base did stabilise somewhat

in 2023, although we continued to see cost

inflation, particularly at the beginning of the year.

Our energy costs increased year-on-year in line

with expectations, with our strategy of forward

purchasing energy in order to achieve price certainty

limiting our ability to capitalise on falling energy

prices in the second half of the year.

Our pricing remained resilient during the year

despite the marked reduction in despatches.

We implemented modest price increases at the

beginning of 2023 and whilst there was a slight

erosion of pricing in a very competitive market

through the year, pricing remained firm overall,

withthe exceptional increases of up to 50%

implemented during 2022 remaining intact. 

Whilst more in line with normalised levels of inflation,

we do still see inflation in our cost base as we enter

2024, with business rates seeing a particularly large

increase. Accordingly, we have recently announced

a modest increase in pricing to take effect from

April2024.

Operations

Faced with a material decline in demand for our

products at the same time when we were also

commissioning the new brick factory at Desford,

weneeded to act swiftly to limit inventory growth.

We have highlighted previously that with a high

fixed cost base, it is more difficult to efficiently

flex production output in the brick business than

elsewhere. Accordingly, alongside the closure of the

old Desford factory which was always planned, we

mothballed both our Howley Park and Claughton

brick factories in the year, and have implemented

further cuts to production across our network of

factories through a combination of shift reductions

and extended maintenance shutdowns.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

READ MORE ON PAGE 31

We must not, however, allow the depressed demand

backdrop to overshadow a key highlight of the year

which was the opening of the new Desford brick

factory. The factory, which, when fully commissioned

and running at full output, will be the largest and

most efficient brick factory in Europe, capable of

producing 180 million bricks per annum with a carbon

footprint per brick 25% less than the old factory it

replaces. Unfortunately, market demand presently

dictates that we are not able to utilise the full

production capacity of the new factory but we are

confident that having now addressed the capacity

constraint that has impeded us for many years, we

are well placed to benefit significantly as market

demand recovers.

Commissioning a new brick factory is never a simple

process and we have faced challenges during the

year. It is however pleasing to see the progress

made during the second half of the year, with the

output of the factory steadily increasing and with

the initial product range fully commissioned. We are

currently expanding the product offering.

Alongside our investment at Desford, the complete

redevelopment of our smaller Wilnecote brick

factory at a cost of approximately £30m continues

to progress, albeit the project has been subject to

some supplier driven delays, with recommissioning

now expected in the second half of 2024.

This investment will strengthen our position in the

architect-led commercial and specification market

which includes residential, commercial, school,

and hospital developments in a sizeable market of

around 400 million bricks per annum in a normalised

market (approximately 16% of the UK brick demand).

This investment will expand the product range

manufactured at the factory, providing a degree of

diversification, reducing our reliance on mainstream

housebuilding whilst also increasing our total brick

production capacity by around 1%.

Our third strategic investment is an innovative

brick slip (or ‘thin bricks’ as they are also known)

production line within our Accrington brick factory.

The investment of approximately £12m will facilitate

the manufacture of up to 48 million brick slips per

annum, minimising our investment through utilising

an existing kiln with only a small reduction in the

number of traditional bricks that will continue to

be manufactured alongside the new slips. The UK

market for brick slips is currently estimated at around

120 million units annually with significant growth

expected to be driven through growth of the modular

construction market along with growing demand for

firesafe façade solutions suitable for use in high-rise

construction. 

Brick slips also offer sustainability benefits,

reducingraw material and energy usage relative

tothe manufacture of traditional bricks with many

slips currently being cut from traditional bricks

withahighdegree of wastage.

Bespoke Products

Following the restructuring that combined our

RedBank chimney and roofing solutions business

with the Cradley Special Brick business, the

Bespoke Products segment now solely consists

ofour precast concrete operations.

Precast concrete products are designed,

manufactured and shipped nationwide under the

Bison Precast brand from two facilities situated in

the Midlands. Our products include beam and block

flooring including Jetfloor, which was the UK’s first

suspended ground floor system to use expanded

polystyrene blocks combined with a structural

concrete topping to provide high levels of thermal

insulation; hollowcore floors alongside accompanying

staircases and landings are used for upper floors of

multi-family and commercial developments, structural

precast components including precast concrete

walls used in applications such as hotels and prisons,

and concrete beams used in the construction of

building frames as well as stadia components;

architectural precast concrete façades, in a variety

offinishes including brick facings.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHIEF EXECUTIVE’S STATEMENT

CONTINUED

Trading and results

Precast concrete flooring solutions represent by far

the largest component of this segment by revenue

and profitability. Despite a weak demand backdrop

across our entire range of products, the Bison

flooring business demonstrated a high degree

ofresilience with the delivery of a result ahead of

theprior year comparative.

Segmental turnover in the year was £72.7m

(2022:restated £84.2m). Floor beam sales volumes

decreased in line with the rest of our product

range although we were able to shift production

toincrease our output of hollowcore flooring.

Again pricing has remained stable with the input

cost inflation seen in the prior year easing. Alongside

this, we have efficiently flexed our cost base with

falling demand, something which is easier to achieve

in this business than in our brick operations.

Segmental adjusted EBITDA stated before allocation

of Group overheads was £10.5m (2022: restated

£9.6m), meaning the segment delivered a result

ahead of the prior year which, given market conditions,

is a fantastic result of which we are extremely proud. 

After an allocation of Group overheads totalling

£4.5m(2022 restated: £6.0m) the segment reports

an adjusted EBITDA of £6.0m (2022: restated £3.6m).

Strategy and capital allocation

Our strategy, which is designed to deliver long-term

earnings and cash flow growthlaid out in more detail

on page 31 and can be summarised as follows:

• Strengthen the core: Investing in new capacity

to deliver growth in sales volumes along with

enhanced efficiency;

• Beyond the core: Expanding our product range

beyond our traditional focus of mainstream

residential construction focusing on new and

evolving solutions such as brick slips;

• Sustainability: Making our business more

sustainable in everything we do; and

• Safety and engagement: Safety remains our

number one priority and through prioritising

employee engagement we will maximise the

potential of our workforce.

This, along with our capital allocation policy, which

is centred on providing compelling returns for our

shareholders, leaves the Group well placed to deliver

long-term shareholder value.

The Group’s capital allocation priorities are

summarised as follows:

• strategic organic capital investment to deliver

attractive returns;

• attractive ordinary dividend policy with a mid-term

pay-out ratio of 55% of earnings; 

• bolt-on acquisitions as suitable opportunities

arisein adjacent or complementary markets; and

• supplementary shareholder returns as

appropriate.

During 2023 we returned cash in the form

of dividends totalling £25.7m (2022: £24.2m)

to shareholders whilst spending total capital

expenditure of £34.1m (2022: £44.1m), which

includes spend of £19.3m (2022: £33.6m) on

our strategic projects at Desford, Wilnecote

andAccrington.

This strategic investment, together with an

investment of £52.8m in inventory has driven an

increase in our net debt before leases to £93.2m

atthe year end. Our present capital allocation

priority is to reduce this level of leverage, and with

our strategic capital projects nearing completion,

weare confident we will reduce our debt levels in

2025 even with only a modest market recovery. 

Beyond the current strategic capital investment

projects, we continue to work on our pipeline of

attractive organic investment opportunities although

any decision to commit to these will be taken with

both our balance sheet as well as market conditions

in mind. Similarly, whilst we remain open to the

possibility of bolt-on acquisitions, we will only

progress such opportunities where there is a clear

strategic rationale and where the acquisition would

not put pressure on the balance sheet.

Bespoke Products

Restated

2023

£m

2022

£m

Revenue

72.7 84.2

Adjusted EBITDA before overhead allocations 10.5 9.6

Overhead allocations (4.5) (6.0)

Adjusted EBITDA 6.0 3.6

Adjusted EBITDA margin before overhead allocations 14.4% 11.4%

Adjusted EBITDA margin after overhead allocations 8.3% 4.3%

1. Restated to report Red Bank results within Bricks and Blocks segment as a result of an internal

restructure. Further details on page 40.

2. Revenue is stated before inter-segment eliminations.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Health, safety and wellbeing

The continuous improvement of our health and

safety performance remains our number one

priority, working towards our goal of zero harm.

Werecognise that our workforce is our greatest

asset, and we aim to provide a working environment

that is free of accidents and ill health. 

Our Lost Time Incident Frequency Rate (LTIFR)

in2023 showed an improvement, running at 3.24

incidents for every million man hours worked,

compared to 3.79 in 2022. Of the 29 separate

business areas monitored, 20 were Lost Time

Incident (LTI) free during 2023, 7 have been LTI

freefor over five years and three for over 10 years.

2024 is the final year of planned zero harm strategy

that we set out in 2020, our focus in this final year

will be on visible felt leadership.

Sustainability

Sustainability is embedded at the heart of everything

we do and sits at the core of every investment

decision we make. We are focused on achieving

challenging 2030 carbon reduction targets whilst

increasing our focus on the game-changing

technologies which will allow our business to

become net zero by 2050.

During 2023, whilst we have made further progress

towards our sustainability targets, achieving these

targets is a proverbial marathon, not a sprint, with

short-term changes in our business, driven by the

sudden reduction in demand for our products which

then enforces changes in our product mix, have

the ability to impact carbon reduction figures in the

short-term.

During the year, we opened the new Desford

factorywhich will deliver a 25% reduction in carbon

emissions relative to the old factory it replaces,

although it is worth noting that year one carbon

emissions are adversely impacted by the

commissioning process. During the year we

commissioned roof-mounted solar panels at

acostof £2.5m which will provide 16% of the

factory’s energy demand at full output.

Alongside Desford, the redeveloped brick factory

atWilnecote will offer a similar 25% reduction in

carbon emissions per brick.

We are now only weeks away from the

commencement of our green electricity supply from

the Forterra solar farm, a facility covering around

150acres located in Nottinghamshire. Having signed

a Power Purchase Agreement (PPA) in 2022, this

impressive facility has now been completed and we

have entered into an agreement to receive energy

a year ahead of the commencement of the 15-year

PPA in 2025.

Whilst we continue to broadcast our sustainability

message and communicate our positive actions and

the initiatives we are pursuing, it is also important

that we continue to remind everyone that our

products themselves are inherently sustainable,

lasting well over a century they require no maintenance

throughout their lifetime.The bricks used to build an

average family home have the same carbon footprint

as a single passenger ticket flying from London

to Singapore, however, unlike this 13-hour flight,

thebricks will last for around 150 years and provide

family housing for generations to come.

As well as making investments to make our business

greener today, for us to achieve our net zero

commitment and be ahead of tomorrow, we

need to identify alternative fuels to fire our kilns.

Following delays in 2022 driven by difficulties in

sourcing sufficient hydrogen, we were pleased

to finally undertake a programme of hydrogen

trials during 2023. These trials undertaken at our

Red Bank facility using a small factory kiln rather

than laboratory equipment, were successful,

demonstrating that hydrogen as a zero carbon future

fuel can be used to make the bricks that we know

and love. The ability to produce and transport the

amounts of hydrogen necessary to run a large-scale

brick factory remain a long way off, however we are

engaging with a number of bodies looking to make

hydrogen networks a reality.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHIEF EXECUTIVE’S STATEMENT

CONTINUED

Alongside hydrogen, we are continuing to explore a

wide range of alternative fuels. We continue to make

progress with trials aimed at introducing biomass as

a fuel alongside natural gas in the unique hoffman

kilns used to manufacture the iconic London Brick

and we are also exploring synthetic gas as an

alternative to natural gas.

The challenge of decarbonising our businessis

unlikely to be met with a single solution so alongside

alternative fuels, weare continuing to develop

ourunderstanding of carbon capture and storage

solutions. These technologies remain in their infancy

and somewhat frustratingly from our perspective,

many currently demand emissions with higher

concentrations of carbon dioxide than are emitted

from our factories to be effective. We have always

known that it would be necessary to engage with

anumber of technology providers and unfortunately,

an early such partner with whom we had previously

engaged has not yet been able to develop their

technology in the manner we had hoped. We have

since engaged with a number of other providers,

and during 2023 obtained a design for a carbon

capture facility that could be added to our next new

brick factory, such as the opportunity we retain at

Swillington. Whilst an exciting prospect, the current

cost of this technology means it is not presently

commercially viable for our business but we do

expect the costs of these solutions to fall significantly

looking forward.

Neil Ash

Chief Executive Officer

25March 2024

INNOVATE TO LEAD

We’re empowered to continuously improve

We enjoy bringing initiatives to the table, big or small.

We never stand still; we are creative, passionate, and

innovative, always looking to improve our business.

We play our part in working towards a more

sustainable future, through investments in carbon

emissions reduction, product innovation and

energyefficiency.

PRIDE IN EXCELLENCE

We relish achievement and success

We are proud of what we do, and the part that we

play. We strive to be our best for our customers,

delivering unrivalled products, outstanding quality,

and leading customer service and technical support.

We work hard to build strong relationships with

ourstakeholders and take great satisfaction in

ajobwelldone.

COLLABORATE AND CARE

We work in partnership and look out

foreachother

We are one team. We thrive when working together

and supporting one another. We learn and adapt,

and believe in communicating openly, honestly,

andwith integrity.

People’s safety is always our number one priority.

We always strive to do the right thing, and actively

engage with our local communities.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

OUR VALUES

WHAT WE DO AND OUR IMPACTS

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

OUR RESOURCES

MANUFACTURING

Security from the ground

Our brick business is built upon our clay reserves.

We have access to over 90 million tonnes of clay which

assuming normalised production, will on average sustain

our manufacturing operations for 50 years. Our brick

factories are each adjacent to a quarry ensuring the

rawmaterial travels the shortest possible distance to

thefactory.

Our mineral reserves also act as a barrier to entry,

with there being extensive hurdles to any new entrant

gaining the necessary permissions to extract mineral.

Our mineral reserves represent our future and we

employ a highly skilled team to oversee their continued

management and development. We are investing to

ensure we have the clay reserves to sustain and grow

ourbusiness into the future.

Efficiency and scale

Our manufacturing facilities are at the heart of our

business, providing both scale and efficiency of output

to support our leading market positions. Our factories

are well invested and over time we plan to spend an

average of £14m each year to ensure this remains the

case, and that wecontinue to modernise and update

ourmanufacturingfootprint.

We are also currently completing a programme of three

large-scale capital investment projects costing almost

£140m and continue developing a pipeline ofattractive

projects beyond this although the timing offurther

commitments will be dependent both on market

conditions and our balance sheet.

Dedicated support

Distribution of our products on a national scale is enabled

through our own fleet of c.130 specialist delivery vehicles.

Operating our own vehicle fleet differentiates us from

our competition and gives fullend-to-end control of our

distribution and customer service function. Our field-

based commercial teams provide account management

to customers, supported by a centralised support

function and technical service team equipped toadvise

on appropriate applications of ourproducts.

End-to-end service

With many of our products, we offer further service

enhancements in the form of design, specification and

installation services, especially where products are of a

more bespoke nature, including our offsite manufactured

range of precast concrete products. This comprehensive,

end-to-end service ensures we remain easy to do

business with and are a trusted delivery partner.

DISTRIBUTION

AND SERVICE

BUILDING

SUSTAINABLE

COMMUNITIES

Residential at our core

Our products service a wide range of markets, however,

the majority of our output is directed towards the

residential new build, and residential repair, maintenance

and improvement (RM&I) markets. Ourcomplementary

range of flooring and walling productscoupled with

thescale to supply on a national basis sets us apart

frommany other manufacturers.

Weenjoystrong, longstanding relationships with our

customers, including major housebuilders, distributors

and builders’ merchants. Being agile to our customers’

needs and the demands of the market are key

contributors to oursuccess.

WHAT WE DO

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

• Quarrying has a lasting impact on the landscape.

All of our quarries are carefully managed in

accordance with our operating permits.

• We are only able to quarry clay and other minerals

once the appropriate planning consents are obtained,

a process that can take many years. Our planning

constraints define restoration plans for our quarries,

defining how we must leave the site when our

extraction obligations have ceased. Restoration

schemes may include bodies of water, wetlands,

and woodland which all benefit biodiversity along

with, in some instances, areturn to agricultural use.

• By extracting clay from quarries next to the factories

where it is turned into bricks, we minimise the impact

oftransporting our raw material.

• It is now mandatory in the UK for new development

to improve biodiversity through the Biodiversity Net

Gain. Forterra already contribute to improvements

to biodiversity where more diverse and better quality

habitats are left following restoration of our quarries.

In addition to the baseline 10% Biodiversity Net

Gain improvements to new developments, Forterra

are undertaking a review of all land stock to identify

opportunities where land management techniques

can result in improvements to existing habitats and

the creation of new ones.

• Our factories and especially our kilns do emit

greenhouse gases. We are investing in our business

to enhance efficiency and reduce these emissions.

Ourstrategy focuses on efficient manufacturing,

allowing us to reduce our energy usage making

ourbusiness more sustainable.

• We limit our mains water usage through rainwater

harvesting and recycling systems.

• Almost all of our manufacturing process waste

isrecycled back into our products.

• We are making large reductions in our use of

plasticpackaging.

• We purchase raw materials from suppliers, supporting

jobs in our supply chain. The vast majority of our

raw materials are either obtained from our adjacent

quarries or are purchased from UK suppliers.

• We aim to invest further in electric powered mobile

plant where current technology allows.

• We are constantly investing in delivery vehicles

and cars with the latest emission-reducing engine

technology. Our delivery fleet is now 100% compliant

with the latest Euro VI emissions regulations. Our

latest vehicles also have significantly reduced fuel

consumption relative to their older equivalents.

• We continue to explore the use of biodiesel and other

alternative fuels where cost and availability allow.

• We use state-of-the-art vehicle optimisation and

scheduling software to ensure we maximise the

efficiency of our delivery fleet, reducing unladen

mileage as far as wecan.

• Our products help build high-quality, energy-efficient

homes that last for generations.

• With a shortage of domestically manufactured bricks

in the UK (under normalised market conditions),

our products are essential in building the houses

the country needs.

• We provide employment for approximately 1,600

people, often in rural areas with few employers,

playing an integral role in our local communities.

OUR IMPACTS

90m

tonnes of clay

reserves

years of production

25%

reduction in carbon

per brick from the

new Desford factory

100%

Euro VI compliant

delivery fleet

OUR PEOPLE

Their commitment,

expertise and diversity

are key to our success

OUR RESERVES

In 2023 over 90% of the clay

we used in our manufacturing

processes was sourced from

our own reserves

OUR PARTNERS

We have longstanding

relationships with our

supplychain partners

andourcustomers

OUR BRANDS

Our strong portfolio of

brandsisa keyasset

WHAT WE DO

OUR BUSINESS MODEL

—

READ MORE ABOUT WHAT WE DO

AND OUR IMPACTS ON PAGES 20 AND 21

INPUTS/STRENGTHS

A SUSTAINABLE

APPROACH

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

VALUE CREATION

An attractive dividend policy, supported by

strong cash generation over the medium-term.

We work collaboratively with our supply

partners to ensure value is delivered

throughout our supply chain.

Through equity ownership, and committed

investment in career and personal

development, we ensure our people prosper.

We supply the materials to build sustainable

communities, creating local employment and

ensuring we do business in asustainable way.

By continuously engaging with our

longstanding, loyal customer base, we offer

industry-leading customer service.

Sustainability is embedded at the heart of

our business. Ourpurpose is to create lasting

legacies andour strategy focuses on doing

soinasustainable manner.

Oursustainability framework guides our

approachtosustainability with three pillars:

Planet,ProductandPeople.

• We have set stretching decarbonisation and

plastic reductiontargets with these embedded

in our long-term incentive Performance Share

Plan, as well as our credit facility which is

sustainabilitylinked.

• We are investing in adding our own dedicated

renewable generation capacity to the grid

with our dedicated solar farmnow generating

electricity.

• At the end of their life our products

are recyclable.

• Wearecommitted to training and developing

both our currentworkforce and our workforce

oftomorrow.

• We seek to limit waste, recycling wherever

possible andare now effectively a zero waste

tolandfill business.

A SUSTAINABLE APPROACH

SHAREHOLDERS

EMPLOYEES

SUPPLIERS

COMMUNITIES

CUSTOMERS

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

25%

New build segment of

UK construction market

37%

RM&I segment of

UK construction market

In the short-term we expect

our markets to remain

challenging but alonger-term

structural undersupply of both

new housing and domestically

manufactured bricks provides

confidence of future recovery.

2023 has been an extremely challenging year for

the housebuilding sector and this has resulted in

asignificant reduction in demand for our products.

Whilst the cyclical short-term decline in demand

wepresently face is frustrating, we remain confident

that in the medium-term, demand for housing in

the UK will continue to benefit from not only the

compounding shortage in supply, but also from

agrowing focus on the energy efficiency that new

homes provide.

Our markets

Our products are used almost exclusively in

construction within the UK. Demand for these

products is therefore directly related to levels

of UK construction activity. Levels of, and

growth in, construction activity are influenced

by macroeconomic factors, including general

economic prosperity, consumer confidence,

Government policy, house prices, interest rates and

mortgage availability. The UK construction market

can be segmented between new build and repair,

maintenance and improvement (RM&I), as well as

residential or non-residential; withour products

predominantly being used within theresidential

construction sector.

In 2023, approximately92% of the Group’s revenue

was derived from sales to residential construction

applications, of this we believe c.67% of our revenue

was driven by new build residential construction with

c.25% directed to RM&I. In addition to large-scale

housebuilders, the Group’s customers also include

builders’ merchants and distributors who sellour

products to a broad range of end-users, soadegree

of estimation is inherent within these end-use figures.

On this basis, the performance of the UK housing

market is of key importance to the future success

of our business, however our portfolio of RM&I

products, most notably our London Brick range

widely used in home extensions across the South

of England, Midlands and beyond, provides some

mitigation to exposure to the cyclical new-build

housing market.

UK housing market

The residential construction sector in the UK

comprises private and public (social) housing

and includes both new build and RM&I of existing

properties. New build activity is generally measured

by the number of housing starts and the number

of housing completions. According to estimates

provided by the Construction Products Association

(CPA), GB housing starts fell 19% in 2023 from

approximately 202,000 in 2022 to 164,000 in 2023.

Housing starts are forecast to total approximately

156,000 in 2024, afall of a further 5%.

Correlating movements in starts and completions

can be challenging with completions benefiting

from the pre-mini budget order books that the

housebuilders carried into 2023. GB housing

completions in 2023 are estimated to have totalled

approximately 176,000 homes, a fall of 15% on the

prior year.

It is believed that the 2023 housing starts statistic

is influenced by changes to Part L of the Building

Code, which led to a number of housebuilders

starting plots ahead of this change which took effect

from July 2023. Although it is not clear how many

of these additional plots have actually been built-

out, we believe many remained at foundation level

awaiting a recovery in demand. If proven, this would

help the housebuilding sector quickly respond to

anysudden recovery in demand.

MARKET OVERVIEW

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Government target (less conversions) Source: CPA Winter Forecast 2023/24Starts

Starts

300,000

250,000

200,000

150,000

100,000

50,000

0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024F 2025F

HOUSING STARTS VS. GOVERNMENT TARGET

The new build housing market has always been

cyclical and as such we are confident that demand

for housing will recover from its current low with

apersistent long-term shortage of housing remaining

unaddressed with increasing housing supply

acurrent political issue ahead of a forthcoming

general election.

Demand for new housing in the UK is highly

dependent on interest rates and with significant

falls in available mortgage rates at the beginning

of2024 providing some cause for optimism of

afasterrecovery.

Political backdrop

A lack of availability and affordability of quality

housing remains a key political issue and is expected

to be an area of focus ahead of the upcoming

general election that will take place either later in

2024 or in early 2025. There is a degree of optimism

within the industry that ahead of the election there

may be some modest support to help stimulate

housing demand. More significantly, post election,

dependent on the result, there could be greater

priority placed on improving the supply of new

housing including social housing removing some

of the current impediments to increased supply

including planning system bottlenecks.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

38%

Commercial &

Specification segment

of UK construction

market

5 year fixed 95% LTV Source: Deutsche Numis analysis2 year fixed 95% LTV

Mortgage Interest Rate (%)

7.7

6.7

2.7

3.7

4.7

5.7

Aug 22 Oct 22 Dec 22 Feb 23 Apr 23 Jun 23 Aug 23 Oct 23 Dec 23

MORTGAGE INTEREST RATE

Demand for our products

Driven by the decline in housebuilding outlined

above but also a slowdown in the RM&I market,

demand for our products remained subdued

throughout 2023. Our housebuilding customers

saw a sharp drop in demand for their new homes

following the disastrous September 2022 mini-

budget, and whilst demand for our products did

initially remain resilient for the remainder of 2022,

we experienced a sharp drop in demand from

thebeginning of 2023.

Figures from the Department for Business and Trade

(DBT) show that domestic despatches of bricks

fell from approximately 1.9bn in 2022 to 1.4bn in

2023 a fall of approximately 30%. Our own brick

despatches fell by a higher percentage year-on-year

as a result of our sales bias towards the large scale

housebuilders whose own businesses were most

impacted by the increase in interest rates.

Whilst hard to accurately quantify, despatches of

bricks in the year have undoubtedly been impacted

by our customers seeking to reduce the volumes

of our products they hold in stock. As a response

tothe industry supply constraints that have been

well documented, bricks have been in short supply

for much of the last decade, resulting in customers

holding higher levels of inventory to ensure their

operations are not disrupted by an inability to secure

sufficient supplies. In 2023, with bricks more readily

MARKET OVERVIEW

CONTINUED

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Imports

Source: Department for Business and Trade, HMRC.

Million bricks

% of market

600 25%

20%

15%

10%

500

400

300

200

100

0 0

2022 2023

23%

19%

BRICK IMPORTS

available, customers sought to optimise their own

working capital by reducing the levels of inventory

they held, reducing their purchases in 2023.

This is evidenced by industry brick despatches falling

by a greater percentage (c.30%) than the fall in

housing starts (c.19%), also supporting the assertion

that the 2023 housing starts figure was inflated by

technical starts initiated ahead of the change in the

Building Code but not completed.

UK demand versus domestic capacity

Due to the weight of our products, transport costs

are high and the penetration of imported bricks into

the UK was primarily driven by shortage of domestic

supply. Imported bricks fall into two categories:

a core element of specialist, often architecturally

driven products not manufactured in the UK, and

additional imports that service demand that cannot

be met due to capacity constraints of the UK brick

manufacturing industry, where domestic production

capacity remains below the pre-financial crisis

levelsof c.2.6 billion bricks per annum despite

ongoing investment.

This second category fluctuates depending on

availability of domestically produced bricks and

assuch, in line with the fall in demand seen in 2023

these imports have decreased.

Figures from the His Majesty’s Revenue Customs

(HMRC) show that imports of bricks to the UK

fellfrom 570 million in 2022 to a level of 329 million

in2023, afallof 43%. Imports have fallen by

agreater percentage than domestic despatches

resulting intheir share of total demand falling from

23% in2022 to 19% in2023.

In a normal year it is estimated that around

150-200 million architecturally differentiated bricks

are imported into the UK and with this market

being lesssusceptible to the increases in interest

rates seenin2023, these imports are expected to

have remained more resilient and as such the fall

inimports that are directly substitutable by Forterra

isgreater thanthe43% headline fall above.

Commercial market

The commercial and specification segment of the

UK brick market accounts for an estimated 400

million bricks per annum, compared to a total

normalised clay brick market of c.2.5 billion. This

sector focuses on architecturally-driven projects

such as hospitals, schools, offices, universities, and

other public buildings; and is an area of the market

inwhich Forterra are historically under-represented.

Our redeveloped Wilnecote brick factory, scheduled

to be recommissioned in 2024, will allow further

penetration into this market that currently utilises a

significant level of imports, broadening our offering

and diversifying the end-use markets that we serve.

Sustainable buildings

Whilst it is important to recognise that our products

are inherently sustainable, lasting for well over a

century and requiring no maintenance throughout

their lifetime; we can always do more. Facilitating

the move to sustainable buildings through support

of offsite, and modern methods of construction is

key to our strategy, enabling improved construction

efficiency and less wastage. These products can

facilitate ambitious accelerated build targets for

UK construction, whilst also recognising the role of

our products in supporting the transition to a lower

carbon economy. Our TCFD disclosure shown on

pages 78 to 85 details the perceived opportunities

as well as risks relevant to this transition, andwhilst

offsite construction may demand fewer traditional

products such as bricks and blocks, we continue

to innovate and develop new products to serve

this growing market and have further increased

our resource in this area. Our £12m investment at

our Accrington factory to enable the manufacture

of brick slips is a prime example of seizing these

opportunities, with the significant sustainability

benefits that this project brings relative to current

brick slip production, which often involves cutting

the face from a traditional brick and discarding the

rest of the brick.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

The Board consider, both individually

and collectively, that they have acted in

good faith to promote the success of the

Company for the benefit of the Company’s

members as a whole in their decision-

making throughout 2023.

In making a declaration that they have

fulfilled their responsibilities in this matter

the Board have considered the matters

detailed in s172(1) paras (a-f). The table

opposite highlights examples of how the

Directors have satisfied their duty under

s172 during the year.

’

(

)

PEOPLE CUSTOMERS SUPPLIERS COMMUNITY AND

ENVIRONMENT

SHAREHOLDERS

We aim to create an

engaging workplace,

attracting and retaining

talented people

Our customers are essential

to our business, and evolving

to meet their changing

needs is core to our success

Working collaboratively with

our supply partners to ensure

value is delivered throughout

our supply chain

We believe in putting

communities at the heart

ofeverything we set out

to achieve

The core of our strategy

is to create sustainable

shareholder value

Our values Aligning with our values Aligning with our values Aligning with our values Aligning with our values Aligning with our values

Innovate to lead

Pride in excellence

Collaborate and care

Business engagement

• Provision of regular employee

updates across a number of

channels including social media,

featuring regular podcasts from

the CEO and other members of

theExecutive Committee

• New CEO Neil Ash undertook

his inaugural tour of the business

conducting face to face ‘town hall

talks’ at each location

• Our Employee Forum gives

employees the opportunity

to engage directly with senior

leadership, including members

oftheBoard

• Monthly ‘town hall talk’ management

briefings equip local management to

disseminate information to the wider

workforce on a face-to-face basis

• ‘HearMe’ employee engagement

survey conducted

• In making difficult but necessary

decisions to cut production and

reduce our workforce in response

to reduced demand, we consulted

with the individuals impacted as

wellas trades unions in anopen

andtransparent manner

Business engagement

• Our commercial team continually

engage directly with customers

and our sales office form the first

point of customer contact

• Regular, often weekly, structured

meetings with customer

procurement teams to review

forward orders, availability and

any service issues

• Clear communication was vital

as we informed customers of our

decisions to reduce production

in response to reduced demand,

reassuring customers that where

factories were being mothballed,

our product range would not be

diminished with production moving

to other factories

Business engagement

• Direct engagement with suppliers

through the procurement team

• Increased forecasting of

requirements and management of

bottlenecks

• Working with supply partners to

minimise inflationary impacts

• The Executive Committee

maintains relationships with

directors of the Group’s key

suppliers with discussions

covering health, safety and

wellbeing and longer-term

sustainability goals alongside day-

to-day trading

Business engagement

• Supported numerous local clubs,

organisations and charities with

donations through the Forterra

Community Fund

• We engaged in regular dialogue

with local communities across

our manufacturing locations

• Charity match funding available

to employees, aiding fundraising

efforts

Business engagement

• Results presentations were

delivered on release of full year

and interim results

• Meetings were held between

management and both current

and potential shareholders

• The investor relations section

onour website has facilitated

easyaccess to announcements,

keydates and publications

• Our management regularly

engaged with the analyst

community who then

disseminated research to

both current and potential

shareholders

Board engagement

• Board members undertake regular

health and safety walks at factory

sites presenting the opportunity for

1-1 engagement

• Martin Sutherland (Non-Executive

Director) attends theEmployee

Forum held up to fourtimes per year

• Defining culture and leading from the

top is a key Board priority

Board engagement

• Executive Directors regularly

meet with customers

• Corporate event held where

Non-Executive Directors met

with key customers gaining

insight into their perspectives

Board engagement

• Sustainability is a key priority

for the Board. The Risk and

Sustainability Committee became

a dedicated Sustainability

Committee from 1 January 2024

• Risks to the supply chain including

energy procurement are regularly

discussed at both Board and

Risk and Sustainability Committee

meetings

Board engagement

• Board actively involved in

sustainability strategy and regularly

updated regarding progress in

thisarea

• Risk and Sustainability Committee

actively engaged in consideration

of both transitional and physical

climate risks

Board engagement

• Our AGM enabled shareholders

direct access to the Board

• Our Chairman continued to offer

and hold meetings with major

shareholders

• The Remuneration Committee

Chairman was available to meet

with shareholders to discuss

remuneration matters

Outcomes

• The Employee Forum met ona

quarterly basis, discussing arange

of topics including healthand

wellbeing and charitable giving

Outcomes

• Continued to meet our customers’

requirements. Open and

transparent dialogue with our

customers regarding their own

businesses and their demand

projections for our products

informed the decisions we

needed to make regarding

production output

Outcomes

• Managing supply chain pressures

through secondary and multiple

sources of supply

Outcomes

• Donated over £63,000 to

charitable causes in 2023

Outcomes

• Shareholders are kept informed

of Group performance

• Sustainability metrics of

decarbonisation and plastic

reduction incorporated into

ourlong-term incentive

Performance Share Plan

• Enhanced engagement with ESG

ratings agencies including CDP,

MSCI and Sustainalytics

• Fully compliant TCFD disclosure

continues to develop, ensuring

stakeholders are informed of the

climate risks facing our business

SECTION 172 STATEMENT

ENGAGING WITH OUR STAKEHOLDERS

We are committed to

engaging with all of our

stakeholders, ensuring that

strong relationships are

built and maintained. These

relationships are essential

toour ongoing success.

Our key stakeholders are at the core of everything

we do. The Board remain fully appreciative of the

impact of our strategy and business model across

our stakeholder group and recognise that different

stakeholders may have opposing views.

More information about our strategy can be found on pages 30 and 31,

and the business model can be found on pages 22 and 23. The following

details engagement across our stakeholder group, both throughout the

business and at Board level.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

PEOPLE CUSTOMERS SUPPLIERS COMMUNITY AND

ENVIRONMENT

SHAREHOLDERS

We aim to create an

engaging workplace,

attracting and retaining

talented people

Our customers are essential

to our business, and evolving

to meet their changing

needs is core to our success

Working collaboratively with

our supply partners to ensure

value is delivered throughout

our supply chain

We believe in putting

communities at the heart

ofeverything we set out

to achieve

The core of our strategy

is to create sustainable

shareholder value

Our values Aligning with our values Aligning with our values Aligning with our values Aligning with our values Aligning with our values

Innovate to lead

Pride in excellence

Collaborate and care

Business engagement

• Provision of regular employee

updates across a number of

channels including social media,

featuring regular podcasts from

the CEO and other members of

theExecutive Committee

• New CEO Neil Ash undertook

his inaugural tour of the business

conducting face to face ‘town hall

talks’ at each location

• Our Employee Forum gives

employees the opportunity

to engage directly with senior

leadership, including members

oftheBoard

• Monthly ‘town hall talk’ management

briefings equip local management to

disseminate information to the wider

workforce on a face-to-face basis

• ‘HearMe’ employee engagement

survey conducted

• In making difficult but necessary

decisions to cut production and

reduce our workforce in response

to reduced demand, we consulted

with the individuals impacted as

wellas trades unions in anopen

andtransparent manner

Business engagement

• Our commercial team continually

engage directly with customers

and our sales office form the first

point of customer contact

• Regular, often weekly, structured

meetings with customer

procurement teams to review

forward orders, availability and

any service issues

• Clear communication was vital

as we informed customers of our

decisions to reduce production

in response to reduced demand,

reassuring customers that where

factories were being mothballed,

our product range would not be

diminished with production moving

to other factories

Business engagement

• Direct engagement with suppliers

through the procurement team

• Increased forecasting of

requirements and management of

bottlenecks

• Working with supply partners to

minimise inflationary impacts

• The Executive Committee

maintains relationships with

directors of the Group’s key

suppliers with discussions

covering health, safety and

wellbeing and longer-term

sustainability goals alongside day-

to-day trading

Business engagement

• Supported numerous local clubs,

organisations and charities with

donations through the Forterra

Community Fund

• We engaged in regular dialogue

with local communities across

our manufacturing locations

• Charity match funding available

to employees, aiding fundraising

efforts

Business engagement

• Results presentations were

delivered on release of full year

and interim results

• Meetings were held between

management and both current

and potential shareholders

• The investor relations section

onour website has facilitated

easyaccess to announcements,

keydates and publications

• Our management regularly

engaged with the analyst

community who then

disseminated research to

both current and potential

shareholders

Board engagement

• Board members undertake regular

health and safety walks at factory

sites presenting the opportunity for

1-1 engagement

• Martin Sutherland (Non-Executive

Director) attends theEmployee

Forum held up to fourtimes per year

• Defining culture and leading from the

top is a key Board priority

Board engagement

• Executive Directors regularly

meet with customers

• Corporate event held where

Non-Executive Directors met

with key customers gaining

insight into their perspectives

Board engagement

• Sustainability is a key priority

for the Board. The Risk and

Sustainability Committee became

a dedicated Sustainability

Committee from 1 January 2024

• Risks to the supply chain including

energy procurement are regularly

discussed at both Board and

Risk and Sustainability Committee

meetings

Board engagement

• Board actively involved in

sustainability strategy and regularly

updated regarding progress in

thisarea

• Risk and Sustainability Committee

actively engaged in consideration

of both transitional and physical

climate risks

Board engagement

• Our AGM enabled shareholders

direct access to the Board

• Our Chairman continued to offer

and hold meetings with major

shareholders

• The Remuneration Committee

Chairman was available to meet

with shareholders to discuss

remuneration matters

Outcomes

• The Employee Forum met ona

quarterly basis, discussing arange

of topics including healthand

wellbeing and charitable giving

Outcomes

• Continued to meet our customers’

requirements. Open and

transparent dialogue with our

customers regarding their own

businesses and their demand

projections for our products

informed the decisions we

needed to make regarding

production output

Outcomes

• Managing supply chain pressures

through secondary and multiple

sources of supply

Outcomes

• Donated over £63,000 to

charitable causes in 2023

Outcomes

• Shareholders are kept informed

of Group performance

• Sustainability metrics of

decarbonisation and plastic

reduction incorporated into

ourlong-term incentive

Performance Share Plan

• Enhanced engagement with ESG

ratings agencies including CDP,

MSCI and Sustainalytics

• Fully compliant TCFD disclosure

continues to develop, ensuring

stakeholders are informed of the

climate risks facing our business

OUR STRATEGY

BRILLIANT

TODAY,

AHEAD OF

TOMORROW

Our strategy supports the

delivery ofour purpose,

recognising the keyrole our

products play in shaping the

built environment.

Our strategy is centred around value creation for

ourthree keystakeholder groups: our shareholders,

ourcustomers andour employees.

A strong core business

Supported by favourable underlying market

dynamics of a long-term undersupply of new

housing in the UK, our business is centred on

supporting the UK construction industry and

the residential sector specifically withquality

products. We are well-equipped for long-term

futuregrowth through our organic investments in

newfactorycapacity, and enhanced efficiency.

Adapting for the future

Recognising the evolving needs of our customers

toprovide more sustainable and efficient methods

ofconstruction, our strategy identifies areas of

product development in higher growth sectors,

focused on delivering lower carbon and offsite

solutions for the buildings of tomorrow.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

£140m

Investment programme

32%

Target for a reduction

in carbon intensity

SAFETY AND ENGAGEMENT

Create an engaged, healthy and safe workforce

Safety performance remains at the heart of our business and

strategy. In 2023 we continued on the journey of ourroadmap

to zero harm, which was focused on leadership behaviours

and the development of a best-in-class safety culture. It was

pleasing to see a marked improvement in the number of lost

time accidents recorded in the business in 2023, and we will

strive to continue this momentum into 2024 through a focus

onvisible felt leadership.

2023 also saw us undertake our annual employee survey,

enabling benchmarking of results against industry peer groups.

Group participation rates in the survey increased substantially

from 53% to 78%. We truly believe that an engaged workforce

improves business performance, and in 2024 wewill implement

our action plans throughout the business based on the survey

feedback to further enhance engagement.

SUSTAINABILITY

Leave the lightest touch on the world we live in

Through our three key sustainability pillars of People, Planet

andProduct we ensure that sustainability remains at the heart

of our strategy. Our carbon emissions reduction roadmap set

a clear target of 32% reduction in carbon emission intensity

against a 2019 baseline, and we have already made strong

progress against this aspiration. Plastic packaging reduction

remains a further key focus forthe business, with dedicated

capital investments made to deliver real change of 50%

reduction in our plastic consumption by 2025.

STRENGTHEN THE CORE

Make our current business even better than itistoday

We have a strong track record of investing in our asset base

to grow capacity and improve efficiency. We are coming to

the end of an investment programme totalling almost £140m

and removing the capacity constraints that have hindered the

business in recent years, with ourflagship £95m Desford brick

factory commencing production in 2023 and our Wilnecote

factory recommissioning in 2024. We continue to invest in

our core business with a pipeline of further attractive projects,

the timing of which will be driven by both market conditions

andour balance sheet.

We also strive for the highest levels of operational and

commercial performance, embedding best practice and

investing in technology and skills to truly deliver best in

classefficiency.

BEYOND THE CORE

Provide the products and solutions for the buildings

oftomorrow

Whilst our heritage and core business is centred around

traditional masonry construction, we believe that façade

systems will continue to grow their presence, particularly in

mid to high-rise construction settings. Our investment in a brick

slip manufacturing facility at our Accrington plant will provide

aleading sustainable supply of high-quality UK manufactured

brick slips from 2024, maintaining the aesthetic qualities of

traditional brick inamodern, lightweight system solution.

DELIVERED THROUGH OUR

STRATEGIC IMPERATIVES

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

OUR PURPOSE

Our purpose is helping

create lasting legacies that

go beyond construction

orhousebuilding to deliver

growth and foster alegacy

ofbuilding today, tomorrow

andinto the future.

With a foundation built on heritage brands and

exceptional people, we invest in the best talent

todeliver unparalleled customer service and

technical support, fostering strong relationships

withourcustomers.

Our commitment to sustainability propels us towards

a greener future. With every investment we make

we are investing in sustainability, and wecontinue

to embrace new technology to ensure wemeet the

future challenges that face our industry.

BUILDINGS

Helping our customers

create buildings that

spangenerations.

OUR PEOPLE

Continuously developing

and supporting our teams.

OUR BRANDS

Caring for our brands

with strong heritage and

bright futures.

FUTURE

GENERATIONS

Supporting the next

generation of skilled

construction workers.

COMMUNITIES

Strengthening the

communities in which

weoperate.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

HELPING

CREATE

LASTING

LEGACIES

FOR

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

BUILDINGS

HELPING CREATE BUILDINGS

THAT SPAN GENERATIONS

The products we supply help our customers create buildings that span

generations. History in the making, we are immensely proud to play our

part in helping to create something that stands the test of time.

£140m

investment programme to keep Britain building

OUR PEOPLE

CONTINUOUSLY DEVELOPING AND

SUPPORTING OUR TEAMS

We are committed to developing and supporting our teams and know

thatan engaging employee experience is key to a successful business.

Wealso champion employee development, aiming to have 5% of our

workforce in ‘earn and learn’ positions.

2,945

completed hours of leadership training in 2023

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

OUR BRANDS

CARING FOR OUR BRANDS WITH

STRONG HERITAGE AND BRIGHT FUTURES

Our portfolio contains some of the most recognised and respected names

in the construction industry. It’s our responsibility to treat those brands with

respect toensure that their legacy is retained for years to come.

146

years London Brick has been in production

OUR PEOPLE

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

COMMUNITIES

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

FUTURE

GENERATIONS

SUPPORTING THE NEXT GENERATION OF SKILLED

CONSTRUCTION WORKERS

We champion construction colleges under our Construction Hubs scheme,

providing much-needed materials for bricklaying courses to inspire

ambition and foster raw talent in the next generation of bricklayers.

78,000

bricks donated in 2023 via the

Forterra Construction Hubs scheme

COMMUNITIES

STRENGTHENING THE COMMUNITIES

IN WHICH WE OPERATE

We strive to be a good neighbour, helping our local communities to

prosper. We regularly support local charities, clubs, groups, societies,

andprojects, whether that be through monetary contributions

orproductdonations.

77

community and charity initiatives supported in 2023

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

FUTURE

GENERATIONS

2022

2021

2020

2019

2023

346.4

370.4

291.9

380.0

455.5

Links

2022

2021

2020

2019

2023

3.98

2.52

7.10

3.79

3.24

Links

2022

2021

2020

2019

2023

137

233

108

(53)

Links

2022

2021

2020

2019

2023

50.7

17.4

62.5

70.6

31.1

Links

Remuneration

Safety and engagement

Strengthen the core

Sustainability

Beyond the core

STRATEGY LINKS

REMUNERATION LINKS

KEY PERFORMANCE INDICATORS

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Definition

Our lost time incident frequency rate (LTIFR)

is calculated using contracted working hours

and is stated as the number of lost time incidents

suffered per million man-hours worked.

Performance

Our LTIFR was 3.24 incidents for every million

man-hours worked in 2023, representing a

decrease on 2022. Of the 29 separate business

areas monitored, 20 were Lost Time Incident (LTI)

free during 2023, seven have been LTI free for

over five years and three for over 10 years.

Revenue (£m)

Definition

Revenue represents the sale of our products,

net of rebates, discounts and value added taxes.

Performance

Revenue decreased by 24.0% compared to 2022.

The impact of declining sales volumes on revenue

was partially offset by a positive pricing benefit.

Lost time incident frequency rate

Operating cash conversion (%)

Definition

Operating cash conversion is calculated as

adjusted operating cash flow less capital

expenditure (excluding spend on the strategic

projects) divided by adjusted operating profit.

We have removed the capital expenditure related

to strategic projects from this KPI as these are

long-term projects that will generate cash flows

over a period in excess of 30 years.

Performance

The Group has a long history of strong operating

cash conversion although challenging trading

conditions leading to large increase in inventory

along with adverse movements on payables have

significantly impacted cash generation in 2023.

Adjusted profit before tax (£m)

Definition

Profit before tax adjusted for exceptional items

and other adjusting items.

Performance

Adjusted profit before tax decreased by 55.9%

to £31.1m. This was driven by a fall in customer

demand along with the inefficiencies associated

with reducing output, as well as an increase in

depreciation driven by the new Desford factory

in addition to increased interest rates on higher

borrowings.

2022

2021

2020

2019

2023

238.0

237.1

255.7

244.9

248.7

2022

2021

2020

2019

2023

19.9

21.4

20.9

20.7

25.6

Links

2022

2021

2020

2019

2023

17.5

6.6

25.5

26.4

11.4

Links

2022

2021

2023

2020

2019

(43.2)

16.0

40.9

(5.9)

(93.2)

Links

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Adjusted EPS (pence)

Definition

Basic earnings per share (EPS) adjusted for

exceptional items.

Performance

Adjusted EPS was 11.4p compared with 26.4p

in 2022, this directly relates to the decrease in

operating profit and increased finance costs.

Net (debt)/cash before leases (£m)

Definition

Net (debt)/cash comprises cash and cash

equivalents less the balance of short and long-

term borrowings, excluding lease liabilities.

Performance

The Group ended the year with a significant

debt balance as a consequence of reduced

profitability, coupled with a significant adverse

working capital variance of £62.4m of which

£52.8m related to inventory build, coupled with

capital expenditure of£34.1m which included

£19.3m in respect of our three strategic projects.

Clay carbon intensity ratio

(CO

e per tonne)

Concrete carbon intensity ratio

(CO

e per tonne)

Definition

It is important to recognise that the amount of

carbon we emit is directly related to the volume

of product we manufacture. Intensity ratio,

defined as CO

e per tonne of manufactured

product, allows this. We believe the most

transparent way of reporting our carbon footprint

is to separately report our greenhouse gas

intensity ratio (CO

e) for our clay and concrete

products and that this will provide the most

meaningful information from which to measure

our carbon emissions over time.

Performance

Carbon intensity targets were first set in 2010,

and between 2010 and 2019 decreased by

22%. Since setting challenging targets in 2020

(against a2019 benchmark), a variation in the

mix of products that we have produced, as well

as the decision to not offset our 2023 scope 2

emissions with Renewable Energy Guarantee

of Origin (REGO) purchases on grounds of cost

where previously we had done so, means that

the carbon emission intensity at Group level has

increased by 6.3%. This is despite a reduction

within our clay business of 2.7%, reflecting the

positive work we are doing to decarbonise.

Looking ahead, our new solar farm will largely

negate the need to purchase REGOs which

haverisen in cost dramatically.

CHIEF FINANCIAL OFFICER’S REVIEW

RESPONDING TO A CHALLENGING MARKET

CHIEF FINANCIAL OFFICER

BEN GUYATT

We have taken decisive

management action in

response to a significant

decline in demand for

ourproducts.”

❝

Our financial performance in 2023 is heavily

influenced by the challenging market conditions we

have faced. These market conditions have guided

our decision making in identifying and implementing

strong management actions in the face of

uncertainty.

2023 Results

Alternative performance measures

In order to provide the most transparent

understanding of the Group’s performance, we use

alternative performance measures (APMs) which

are not defined or specified under IFRS. The Group

believes that these APMs provide additional helpful

information on how the trading performance of the

business is reported and reviewed internally by

management and the Board, allowing non-trading

items which are less likely to recur to be assessed

separately.

Management and the Board use several profit

related APMs in assessing Group performance and

profitability. These are considered before the impact

of exceptional and adjusting items.

Restatement of prior year comparatives

During 2023 we were required to implement multiple

actions to align our production with reduced market

demand. One of these actions was the combination

of our Cradley Special Brick business with our Red

Bank terracotta operation. Historically, Red Bank

was included within Bespoke Products, with Cradley

consolidated into Bricks and Blocks. Management

have determined that the restructured combined

'Cradley Red Bank' business will operate from the

Red Bank site at Measham, and be included within

the Bricks and Blocks reporting segment. The full

year 2023 results of both operations have been

included within the Bricks and Blocks segment

and the prior year comparative has been restated

accordingly, with 2022 Bricks and Blocks revenues

increasing by £5.9m and adjusted EBITDA by £0.1m,

with the opposite adjustment in Bespoke Products.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Revenue

Sales volumes varied somewhat by product

although overall our despatches in the year were

alittle over 30% down on 2022.

Total revenue of £346.4m represents a decrease

of 24.0% on the prior year (2022: £455.5m). The

impact of declining sales volumes on revenue

was partially offset by a positive pricing benefit.

After significant price increases, which for some

products totalled almost 50% during the prior year,

pricing was more stable in 2023. We implemented

low single digit price increases at the beginning

of 2023 and although there was a slight erosion

in some of our prices over the course of the year,

pricing remained resilient in the face of a significant

drop in demand which has seen UK brick industry

despatches at levels last seen around the time of

the Global Financial Crisis. Overall, the year-on-year

pricing comparison benefits from the full year effect

of themultiple in-year price increases implemented

during 2022.

Bespoke Products and in particular Bison Flooring

delivered a particularly resilient performance with

the combined tonnage of the products despatched

falling only 23.3% relative to 2022 with a growth in

hollowcore despatches partially offsetting the fall in

floor beam despatches.

Adjusted earnings before interest, tax,

depreciation and amortisation (EBITDA)

Adjusted EBITDA was £58.1m (2022: £89.2m) with

profitability impacted by the significant reduction

indemand for our products leading to a sizeable

year-on-year decrease in our sales volumes as

outlined above.

Our business is managed as two segments and

we allocate our central overheads to each segment

based on a historic revenue-driven allocation

mechanism, with central overheads allocated to

Bricks and Blocks and Bespoke Products in the ratio

80%:20% respectively. In practice, the allocation

of overheads to Bespoke Products exceeds the

level of overheads that are directly applicable

tothis segment, such that if this segment was to

be discontinued or divested then the saving of

overheads, would in reality, be modest. Accordingly,

we also disclose the allocation of central overheads

to give greater visibility of the underlying profitability

of our segments, in particular Bespoke Products.

Bricks and Blocks segmental adjusted EBITDA

was £52.1m (2022: restated £85.6m) and Bespoke

Products contributed an adjusted EBITDA of £6.0m

(2022: restated £3.6m).

For the second year running, we are very pleased

with the performance delivered by the Bespoke

Products segment. Prior to a £4.5m (2022: restated

£6.0m) allocation of Group overhead, this segment

delivered an adjusted EBITDA of £10.5m (2022:

restated £9.6m).

Adjusted profit before tax

Adjusted profit before tax was £31.1m (2022: £70.6m)

driven primarily by the fall in EBITDA as highlighted

above. Further factors included an increase in

depreciation in respect of the new Desford factory

and an increase in borrowing costs resulting from

acombination of a significant increase in borrowings

and rising interest rates.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

CHIEF FINANCIAL OFFICER’S REVIEW

CONTINUED

Statutory profit before tax

On a statutory basis profit before tax (PBT) was

£17.1m (2022: £72.9m). This is stated after charging

adjusting and exceptional items as set out under the

sections for exceptional and adjusting items below.

Results for the year

Revenue EBITDA

2023

£m

2023

£m

Exceptional

items

2023

£m

Adjusting

items

2023

£m

Adjusted

EBITDA

2023

£m

Bricks and Blocks 277.4 38.4 13.7 – 52.1

Bespoke Products 72.7 5.7 0.3 – 6.0

Inter-segment eliminations (3.7)

Group total 346.4 44.1 14.0 – 58.1

Results for the prior year

Revenue EBITDA

Restated

2022

£m

Exceptional

items

2022

£m

Adjusting

items

2022

£m

Adjusted

EBITDA

2022

£m

2022

£m

Bricks and Blocks 376.1 87.9 (2.3) – 85.6

Bespoke Products 84.2 3.6 – – 3.6

Inter-segment eliminations (4.8)

Group total 455.5 91.5 (2.3) – 89.2

1. Restated to report Red Bank results within Bricks and Blocks as a result of internal restructure. Further details on page 40.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Management actions

Our factories faced a number of challenges during

2023. We began the year with record low levels of

inventory with production in recent years restricted

by our capacity constraint.

We began the commissioning of the new Desford

brick factory at the start of 2023 and gradually

ramped up production throughout the year, with

awell-attended opening event taking place in May.

The commissioning of any new factory is a complex

process and new Desford has had its challenges in

this respect. We did however make good progress

in the second half, increasing our rate of production

and also expanding the range of products that the

factory can produce.

Faced with difficult market conditions and with

inventories replenished by the end of the first

quarter, we took action to limit our inventory to

appropriate levels. 

Decisions regarding output are taken with many

factors in mind, although retaining manufacturing

efficiency is a key priority. Brick factories especially

are high-fixed-cost operations and as such can be

inefficient to run at lower levels of output and we

have taken decisions at factory level to maximise

efficiency whilst reducing output. These decisions

are not easy, the mothballing of factories and the

making of redundancies have a lasting impact on

the lives of affected colleagues and for the Company

leads to significant one off costs which are detailed

further in the exceptional items section of this report.

Making decisions to reduce output are challenging,

especially where market demand in the near-term

is uncertain. With our markets showing signs of

recovery in the late spring 2023, we held back

in taking some actions. In addition, we faced the

complexity of adding new capacity in the form of the

new Desford factory, knowing we would ultimately

need to reduce output elsewhere but not until we

were comfortable Desford was capable of meeting

customer demand.

Ultimately, we implemented three separate

rounds of restructuring which together will lead to

annualised fixed cost savings totalling over £20m

with a reduction in our workforce of almost 300

people. These savings have been achieved through

the mothballing of two brick factories as well as

implementing shift reductions and production

breaks at a number of other facilities. In addition,

we undertook a restructuring of our sales and back

office functions.

Operating costs

Following the unprecedented increases in our cost

base seen in 2022, our cost environment was more

stable through 2023 although we did still see further

cost increases including labour and energy.

As a result of our forward purchasing, we had good

forward visibility with regards to energy costs in

2023 and had expected them to increase relative to

2022, which they did. Whilst spot prices fell through

the year, our forward purchasing did not allow us to

benefit from these lower prices. In addition, following

our reductions in production output, towards the

end of the year we had purchased more energy than

we were able to consume, with this surplus energy

being sold back to the market. Losses realised in

respect of this surplus energy have been disclosed

as adjusting items.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Bricks and Blocks

Restated

Adjusted

2023

£m

Statutory

2023

£m

Adjusted

2022

£m

Statutory

2022

£m

Revenue

277.4 277.4 376.1 376.1

EBITDA

before overhead

allocations

70.0 56.3 109.6 111.9

Overhead allocations (17.9) (17.9) (24.0) (24.0)

EBITDA

52.1 38.4 85.6 87.9

EBITDA

margin before

overheadallocations

25.2% 20.3% 29.1% 29.8%

EBITDA

margin after

overheadallocations

18.8% 13.8% 22.8% 23.4%

1. Restated to report Red Bank results within Bricks and Blocks segment as a result of internal restructure.

Further details on page 40.

2. Revenue is stated before inter-segment eliminations.

3. Both EBITDA and adjusted EBITDA are APMs, with EBITDA presented above under statutory being

calculated with reference to statutory results without adjustment.

Bespoke Products

Restated

Adjusted

2023

£m

Statutory

2023

£m

Adjusted

2022

£m

Statutory

2022

£m

Revenue

72.7 72.7 84.2 84.2

EBITDA

before overhead

allocations

10.5 10.2 9.6 9.6

Overhead allocations (4.5) (4.5) (6.0) (6.0)

EBITDA

6.0 5.7 3.6 3.6

EBITDA

margin before

overheadallocations

14.4% 14.0% 11.4% 11.4%

EBITDA

margin after

overheadallocations

8.3% 7.8% 4.3% 4.3%

1. Restated to report Red Bank results within Bricks and Blocks segment as a result of internal restructure.

Further details on page 40.

2. Revenue is stated before inter-segment eliminations.

3. Both EBITDA and adjusted EBITDA are APMs, with EBITDA presented above under statutory being

calculated with reference to statutory results without adjustment.

CHIEF FINANCIAL OFFICER’S REVIEW

CONTINUED

Our combined gas and electricity spend in the year

was approximately £57m, in line with the prior year,

with reduced usage in 2023 being offset by higher

unit costs.

We take a risk-based approach to energy

procurement, layering forward purchase positions

where we see value ahead of planned usage and

providing cost certainty. The Group generally

purchases up to 80% of expected energy usage

inthis manner. 

Under normal circumstances the Group takes

delivery of and consumes all the gas and electricity

under each contract, and in doing so the costs

associated with the purchase of gas and electricity

are accounted for in the profit and loss at the

point of consumption. However, following our

substantial reductions in output, based on our

current expectations of production, we have over-

purchased energy and as such, any surplus will be

sold back to the market, crystallising a gain or loss

at that point. Contracts where this is the case are

accounted for as derivative assets or liabilities at

thebalance sheet date with any associated fair value

gains or lossesrecognised in the profit and loss and

presented as adjusting items.

Looking ahead, we have forward purchased around

90% of our energy requirement in 2024 providing

a high degree of price certainty. We will begin to

receive electricity from the Forterra solar farm in

April 2024, with the full financial benefits accruing

from April 2025 when the 15-year Power Purchased

Agreement (PPA) begins.

Exceptional items

Exceptional items in 2023 primarily relate to

redundancy and termination costs associated with

the restructuring of our operations in order to reduce

output in response to the decline in demand for

ourproducts.

Redundancy and termination costs totalled £8.8m

of which £5.1m was paid in 2023 with the balance

tobe paid in early 2024.

In addition, non-cash impairment losses of £5.0m

have been recognised in respect of the carrying

value of the Howley Park and Claughton brick

factories which were mothballed in the year.

The exceptional item in the prior year related to the

sale of surplus land for gross proceeds of £2.5m,

realising an exceptional profit of £2.3m.

Adjusting items

In addition to exceptional items we have also

identified further adjusting items, the separate

disclosure of which allows us to present our results

in a manner that will allow users of our financial

statements to understand the underlying trading

performance of the business applying consistent

treatments as used by management to monitor the

performance of the Group.

Adjusting items in the current year relate to

both realised and open energy positions where

committed energy purchased by the Group has or

is expected to exceed consumption. This is a direct

result of reductions to production made in the year.

In 2023, the Group realised a £0.8m loss in respect

of surplus energy sold back to the market in the

year, alongside a £0.8m gain, being the fair value of

open positions at the balance sheet date. For these,

the Group expects to sell a portion of the committed

volume back to the market and as a result is no

longer able to benefit from the own use exemption

detailed within IFRS 9 Financial Instruments.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Finance costs

Finance costs totalled £7.0m (2022: £2.1m). The

significant increase in our finance costs in the period

was the result of a growth in borrowings driven by

lower earnings, a significant investment in inventory,

and continued strategic capital spend, coupled with

an increase in borrowing costs driven by SONIA

which increased from 3.43% to 5.19% over the

course of 2023. 

Under the terms of the credit agreement, interest

is payable according to a margin grid dependent

on leverage starting with a margin of SONIA plus

1.65% applicable whilst leverage (net debt/adjusted

EBITDA, pre IFRS 16) is less than 0.5 times, rising

to a margin of 3.5% if leverage is greater than

3.5times. A commitment fee of 35% of the margin

was payable on the undrawn credit facility.

Taxation

The effective tax rate (ETR) including adjusted items

was 25.0% (2022: 19.3%) and 24.5%excluding

adjusted items (2022: 19.3%). The increase in the

ETR is mainly driven by the increase in the UK

statutory rate of corporation tax to 23.5% (2022:

19.0%). The ETR is higher than the UK main rate

of corporation tax due to the permanent impact of

non-deductible items such as depreciation on non-

qualifying assets. Profit before tax in 2023 was lower

than that in 2022, therefore the impact of permanent

non-deductible as a percentage of profit is higher

and has increased the ETR. The 2022 ETR was also

more in line with the statutory rate of corporation

tax due to the permanent benefit of the UK tax

super deduction on qualifying plant and machinery

expenditure as announced in the 2021 Budget

which ceased in March 2023.

Earnings per share (EPS)

Adjusted basic EPS was 11.4p (2022: 26.4p).

Statutory basic EPS was 6.2p (2022: 27.2p). EPS

is calculated as the weighted average number of

shares in issue during the year (excluding those held

by the Employee Benefit Trust (EBT)) which in 2023

was 206.6m shares (2022: 216.2m).

Cash flow

Adjusted operating cash outflow totalled £5.3m

compared to a cash inflow of £89.0m in the prior

year, with the decline due predominantly to a £31.1m

decrease in adjusted EBITDA and a significant

working capital outflow driven by an increase

ininventory.

Inventories increased by a total of £52.8m primarily

as a result of increases in the quantity of inventory

on hand but also due to an increase in valuation

driven in part by the full year impact of the cost

inflation which impacted the cost of production

through 2022.

The cash flows driven by movements in receivables

and payables are primarily a function of a reduction

in activity, with lower sales and purchases reduced

with falling production. 

The new lease liabilities primarily relate to new

distribution vehicles as we regularly renew our fleet

with efficient and cleaner delivery vehicles.

Net payments to the Employee Benefit Trust (EBT)

in the year totalled £1.0m (2022: £11.8 m). With the

EBT well positioned to satisfy vesting awards under

the Group’s employee benefit schemes, the number

of shares purchased in 2023 fell significantly relative

to 2022 and further shares are not currently being

purchased. As at the year end, the EBT held 5.5m

shares with a market value of £9.7m, with 3.3m

of these shares likely to be used to satisfy vesting

Sharesave awards in the first half of 2024.

It remains our policy to provide shares for settlement

of our share-based employee reward schemes

through open market purchases as opposed to

theissue of new share capital.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Adjusted PBT reconciliation

2023

£m

2022

£m

Adjusted PBT 31.1 70.6

Exceptional costs

Restructuring costs (9.0) –

Impairment of plant and equipment (5.0) –

Profit on sale of surplus land – 2.3

Adjusting items

Realised loss on the sale of surplus energy (0.8) –

Derivative gains on future energy contracts 0.8 –

Statutory PBT 17.1 72.9

CHIEF FINANCIAL OFFICER’S REVIEW

CONTINUED

Cash flow – highlights

2023

£m

2022

£m

Adjusted EBITDA 58.1 89.2

Purchase and settlement of carbon credits 3.1 (5.6)

Other cash flow items (4.1) 6.3

Changes in working capital:

– Inventories (52.8) (10.2)

– Trade and other receivables 13.3 (5.2)

– Trade and other payables (22.9) 14.5

Adjusted operating cash flow (5.3) 89.0

Payments made in respect of adjusting items (5.9) –

Operating cash flow after adjusting items (11.2) 89.0

Interest paid (6.1) (2.4)

Tax paid (2.7) (11.0)

Capital expenditure:

– Maintenance (14.8) (10.5)

– Strategic (19.3) (33.6)

Dividends paid (25.7) (24.2)

Net cash flow from sale and purchase of shares by

Employee Benefit Trust

(1.0) (11.8)

Payments made to acquire own shares – (40.3)

New lease liabilities (12.3) (6.8)

Other movements (0.7) 0.8

Proceeds from sale of property, plant and equipment 0.3 2.5

Increase in net debt (93.5) (48.3)

Debtor days 33 36

Capital expenditure

Capital expenditure in the year totalled £34.1m

(2022: £44.1m) with strategic capital expenditure

totalling £19.3m (2022: £33.6m) and maintenance

capital expenditure totalling £14.8m (2022: £10.5m).

Spend on the new Desford brick factory totalled

£5.2m, bringing the total cumulative project spend

to £91.0m. There is a small amount of spend still to

incur in 2024 and we expect to complete the factory

within the original £95m budget. In addition, our

2023 maintenance capital spend includes £2.0m for

the installation of roof mounted solar panels which

will generate around 16% of the factory’s electricity

requirement going forward, providing cost effective,

transmission cost free, on-site renewable energy.

As Desford nears completion, the ongoing strategic

projects comprising the redevelopment of the

Wilnecote brick factory and the construction of the

slips facility at Accrington will become the largest

contributors to capital spend in 2024. Although the

project is running a little behind schedule as a result

of supplier delays, spend on Wilnecote during 2023

totalled £10.9m (2022: £5.3m) bringing the total

spend to £17.9m. The factory is due to recommence

production in the second half of 2024 and is

expected to be delivered at a total cost of £30m.

Spend to date on the slips facility at Accrington

now totals £3.2m with the facility expected to be

completed within the £12m original budget and with

the first slips expected to be produced in Q3 2024.

Our capex spend in 2024 is expected to be £27m,

with £21m of this related to the completion of the

strategic projects and £6m of maintenance capex

which is sufficient for current needs given the

currently mothballed factories and one-off items

in the 2023 comparative. We expect this capital

outflow to be weighted toward H1 as the strategic

projects approach completion.

Maintenance capital spend totalled £14.8m (2022:

£10.5m) and included significant one-off items of

£4.0m on renewing our HGV fleet and also £2.0m

inrespect of the solar panels at Desford. 

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Borrowings and facilities

At 31 December 2023 net debt (before leases)

was £93.2m (2022: £5.9m). Net debt after adding

lease liabilities of £24.2m (2022: £18.0m) was

£117.4m (2022: £23.9m). These leases primarily

relate toplant and equipment, in particular the fleet

ofheavygoods vehicles used to deliver our products

toourcustomers.

The Group’s credit facility comprises a committed

revolving credit facility (RCF) of £170m extending to

January 2027 with an option for an extension to July

2028 subject to lender consent. At the year-end a

total of £110m was drawn on the facility. In addition

£9.5m of the facility was carved out to provide a

letter of credit related to the construction project

atAccrington leaving facility headroom of £50.5m.

Of the £9.5m carved out of the facility, the balance

outstanding on the letter of credit at the year

endwas approximately £6.5m. The obligations

subjecttothe letter of credit are expected to be

dischargedthrough 2024 allowing the element

ofthefacility required for letters of credit to be

reduced ifnecessary.

The facility is normally subject to covenant

restrictions of net debt/EBITDA (as measured before

leases) of less than three times and interest cover

of greater than four times. The Group also benefits

from an uncommitted overdraft facility of £10m.

The business has traded comfortably within these

covenants throughout 2023 and whilst the Group

expects to remain within these covenants during

2024, amended covenants have been agreed with

the Group’s lenders to provide additional headroom

given the combination of the Group’s reduced

EBITDA, increased net debt driven by inventory

build, capital outflows and higher interest rates.

Accordingly, the Group’s leverage covenant has

increased to 4 times in June 2024 and 3.75 times

in December 2024 with interest cover decreasing

to 3 times in December 2024. In addition, quarterly

covenant testing has been introduced for the period

of the covenant relaxation. As such, in September

2024, leverage is set at four times and interest cover

three times and in March 2025 leverage is set at

3.75 times and interest cover at three times. The

covenants return to normal levels from June 2025

with testing reverting to half yearly. The existing

restriction prohibiting the declaration or payment of

dividends should leverage exceed 3 times EBITDA

has been amended to 4 times EBITDA in 2024

before returning to 3 times in 2025.

The facility is linked to our sustainability targets with

the opportunity to adjust the margin by 5 bps subject

to achieving annual sustainability targets covering

decarbonisation, plastic reduction and increasing

thenumber of employees in earn and learn positions.

Unfortunately, primarily as a consequence of our

response to market conditions and the subsequent

changes to our manufacturing footprint these targets

were not achieved in 2023. Further information is

included in our Sustainability Report.

Dividend

Our established dividend policy has been to

distribute 55% of our adjusted earnings. In light of

current trading conditions and the Group’s presently

elevated levels of indebtedness, the Board have

considered the Group’s dividend policy and have

elected to temporarily reduce the level of dividend

distribution. The Board is proposing to distribute

40% of adjusted earnings for 2023 and accordingly

is recommending a final dividend of 2.0p per

share (2022: 10.1p) which, in addition to the interim

dividend of 2.4p per share paid in October (2022:

4.6p), will bring the total dividend to 4.4p per share

(2022: 14.7p). Subject to approval by shareholders,

the final dividend will be paidon 5July 2024 to

shareholders on the register as at 14June 2024.

The Board remain confident in the long-term

prospects of the Group and in its ability to benefit

from the recent capacity investments as the market

recovers although retains a degree of caution in

the short-term with borrowings expected to peak

inmid-2024 before reducing steadily thereafter.

The Board intends to keep its dividend policy under

review and will look to return the level of distribution

to theprevious 55% as soon as the market

conditionspermit.

Pensions

The Group has no defined benefit pension liabilities.

There is a defined contribution arrangement in place

and pension costs for the year amounted to £7.0m

(2022: £6.9m).

Forward-looking statements

Certain statements in this Annual Report are forward

looking. Although the Group believes that the

expectations reflected in these forward-looking

statements are reasonable, we can give no assurance

that these expectations will prove to have been

correct. Because these statements contain risks

anduncertainties, actual results may differ materially

from those expressed or implied by these forward-

looking statements.

We undertake no obligation to update any

forward-looking statements, whether as a result

ofnew information, future events or otherwise.

Ben Guyatt

Chief Financial Officer

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

In this section

TCFD Disclosure Navigation

50 Letter to Stakeholders

52 Our approach to Sustainability

54 Materiality assessment

56 Our Targets

58 Planet

68 Product

72 People

77 Our Reporting Retail

78 Climate-Related Risks and Governance

SUSTAINABILITY

REPORT

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Governance

Disclose the organisation’s governance around climate-related

risks and opportunities.

Recommended Disclosure

Page

a) Describe the Board’s oversight of climate-related risks and

op portunities.

52, 78

b) Describe management’s role in assessing and managing

climate-related risks and opportunities.

Strategy

Disclose the actual and potential impacts of climate-related risks and

opportunities onthe organisation’sbusinesses, strategy, and financial planning

where such information ismaterial.

Recommended Disclosure

Page

Describe the climate-related risks and opportunities the organisation

has identified over the short, medium, and long term.

81-85

Describe the impact of climate-related risks and opportunities on

the organisation’s businesses, strategy, and financial planning.

81-85

Describe the resilience of the organisation’s strategy, taking into

consideration different climate-related scenarios, including a 2°C

or lower scenario.

78-80

Risk Management

Disclose how the organisation identifies, assesses, and manages

climate-related risks.

Recommended Disclosure

Page

Describe the organisation’s processes for identifying and assessing

climate-related risks.

79, 81

Describe the organisation’s processes for managing

climate-related risks.

81-85

Describe how processes for identifying, assessing,

and managing climate-related risks are integrated into

the organisation’s overall risk management.

Metrics and Targets

Disclose the metrics and targets used to assess and manage relevant

climate-related risks andopportunitieswhere such information is material.

Recommended Disclosure

Page

Disclose the metrics used by the organisation to assess

climate-related risks and opportunities in line with its strategy

andrisk management process.

56, 57, 77

Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse

gas (GHG) emissions, and the related risks.

59-61, 66

Describe the targets used by the organisation to manage climate-related

risks and opportunities and performance against targets.

56-57

TCFD DISCLOSURE NAVIGATION

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

❝

SUSTAINABILITY REPORT

LETTER TO STAKEHOLDERS

Our commitment to meeting our 2030 sustainability

targets and ultimately reaching Net Zero remains

steadfast. Despite a tumultuous period in 2023

where softening demand has required production

reductions and resultant inefficiencies, we continue

to work to ensure that our longer-term targets

are met. At the core of our ability to achieve our

ambitions is the sustainability framework that we

developed alongside these targets. Formed of three

pillars: Planet, Product and People, which guide our

future decision-making, ensuring we are successful

in our overall objective of being a good neighbour

and responsible employer, for generations to come.

Three years into the 10-year time horizon defined in

our targets, we are starting to deliver investments

that will drive a tangible reduction in emissions

in the near-term whilst continuing to expand the

time and resources we devote to the research and

development of new and innovative technologies

that will help us reach net zero in the longer-term.

The reduction in production output seen in 2023

has reduced our absolute carbon emissions by 13%

since 2022; however, associated inefficiencies and a

further variation in the mix of products that we have

manufactured means that carbon emissions intensity

of both our clay (2%) and concrete (23%) products

increased vs. the prior year, leading to a marginal

increase in overall emissions intensity at Group level.

We do not expect this to impact the achievement

of our 2030 target to reduce our carbon emission

intensity by 32% relative to the 2019 baseline.

An additional factor in our overall emissions

footprint for 2023 was the decision to not purchase

Renewable Energy Guarantees of Origin (REGOs),

something we have done since 2020 in order to

‘green’ our electricity supply. In a year that saw

considerable progress made in the construction

ofthe Forterra solar farm, which will start to deliver

renewable power to the business in April 2024,

we also saw significant increases in the costs

associated with purchasing REGOs. Deciding to

forego this increased expense (in excess of £1m)

andfocus our efforts on delivering genuine

reductions in our emissions will see a temporary

increase in Scope 2 emissions as we look forward

to the new renewable energy generation capacity

being delivered in the coming months.

DIVYA SESHAMANI

CHAIRMAN OF THE SUSTAINABILITY COMMITTEE

We remain committed to

ourdecarbonisation journey

and whilst this will not always

be linear, we continue to

deliver progress against

oursustainability targets.”

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

In this Sustainability Report, as well as an update

to our previously published Carbon Management

Plan, laying out our medium-term roadmap as to

how we expect to meet our 2030 decarbonisation

targets; we also, for the first time, report a detailed

calculation for our Scope 3 emissions. Better

understanding the emissions generated not just

by our own operations, but throughout our supply

chain, will allow us to focus on areas for further

reductions. Further information on these are detailed

as part of this Report.

Whilst our Carbon Management Plan recognises

that our decarbonisation journey will not be linear,

with 2023 being a prime example of this; we continue

to investigate new and innovative ways in which

we can deliver on these plans. Whilst some areas

are more developed than others, we recognise the

need to deliver multiple projects in order to do this,

and our ‘Brick Factory of the Future’ case study

presented later in this Report aims to show just what

the ultimate implementation of our ongoing areas of

innovation could eventually look like.

Crucial to our plan is making our business more

efficient, and therefore more sustainable. Our new

Desford brick factory, offering industry leading levels

of efficiency, is now operational and an excellent

demonstration of our sustainability strategy in action.

Beyond Desford, we are also delivering two further

investment projects both with strong sustainability

credentials. The redevelopment of our Wilnecote

brick factory will reduce the carbon footprint of each

brick manufactured, and the construction of a brick

slip manufacturing facility at our Accrington plant

will allow us to bring a new sustainable product

tomarket.

The previous transition of the Board’s Risk

Committee becoming the Risk and Sustainability

Committee, has continued to be successful in

elevating the importance of sustainability throughout

the business, so much so that from the start

of 2024 sustainability matters will be governed

by a standalone Sustainability Committee. The

Committee will devote its time to the continuance

of Group’s sustainability strategy and governance

thereof. The Board takes all areas of governance

seriously and as well as reporting full compliance

with the requirements of the Task Force on Climate-

Related Financial Disclosure (TCFD), the Board has

additionally started to consider the requirements

of the Task Force on Nature-Related Financial

Disclosure (TNFD) and we look forward to reporting

further progress in this respect in future periods.

The importance attached to sustainability both

within our own business and by our stakeholders is

evidenced by the inclusion of sustainability-related

targets within both the Group’s banking facility

(which if met, secures a reduction in borrowing

costs) as well as within the performance targets

applied to the long term incentives granted under

the Performance Share Plan. These targets cover

decarbonisation, plastic reduction, and employee

development. Whilst the wider macro challenges

faced during the year have meant our progress

has not quite been at the level hoped for, these

targets remain in place and will further drive our

sustainability journey going forwards.

Included within this Report is an overview of

our key sustainability initiatives and credentials

highlighting the progress made in the year, along

with providing everything necessary to understand

our sustainability journey. As always, we welcome

feedback regarding our approach to sustainability

and the appropriateness and transparency of our

disclosures.

Divya Seshamani

Chairman of the Sustainability Committee

Absolute carbon

emissions

20%

reduction (vs. 2019)

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

OUR APPROACH TO SUSTAINABILITY

Sustainability governance

Sustainability sits at the heart of everything we

do as a business, and as such is at the core of

our strategy. Delivery on this strategy, as well as

governance and oversight responsibility around

climate-related risks and opportunities ultimately sits

with the Board. The Board’s Risk and Sustainability

Committee (which from 1 January 2024 will be a

standalone Sustainability Committee) discharges this

responsibility on behalf of the Board.

The Risk and Sustainability Committee receives

twice yearly progress updates as to the execution

of the Group’s sustainability strategy, reviewing

ongoing compliance with TCFD requirements

and progress against targets. As well as receiving

feedback from the Executive Directors, and

members of the Executive Committee, the Head of

Sustainability regularly attends Committee meetings.

The Group’s Head of Sustainability leads the day-

to-day sustainability activity and reports to the

Technical Projects Director, who holds accountability

for delivery of the key investments that will facilitate

the achievement of our sustainability targets,

including reduction of greenhouse gas emissions

and reducing our use of plastic packaging. The

Group also utilises a Sustainability Steering Group,

comprising the Chief Executive Officer and Chief

Financial Officer as well as a number of senior

managers representing other functions of the

business including strategy, finance, marketing and

investor relations. The steering group meets monthly

and is tasked with ensuring that the Company’s

sustainability ambitions and targets are on track,

and that climate-related risks are reported upwards

to the Risk and Sustainability Committee.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

OUR APPROACH TO SUSTAINABILITY

SUSTAINABILITY GOVERNANCE STRUCTURE

Robust and transparent governance is essential to delivering our sustainability ambitions

Board of Directors

Ultimate responsibility for sustainability-related matters through the

Sustainability Committee

Executive Committee

Review and approve climate strategy, scrutinise performance,

review progress on climate strategy and targets

Sustainability Steering Group Cross Functional Working Groups

Tasked with ensuring that the

Company’s Sustainability ambitions

and targets are on track, and that all

climate-related risks are reported to

the Sustainability Committee

Task-specific working groups focusing

on specific climate-related challenges

e.g. Plastic Reduction Steering Group

Our sustainability framework guides all aspects of our

approach to sustainability. Our framework identifies the

key areas of focus to ensure we operate our business

with sustainability at its core; and these are highlighted

as material topics.

Details of our materiality assessment can be found

laterin this Report, however, the material topics are

grouped to allow abalanced approach through three

sustainability pillars.

We continue to investigate additional opportunities to

contribute to sustainable development and have linked

our framework to the United Nations SDGs that most

closely align to each pillar.

SUSTAINABILITY FRAMEWORK

Link to United Nations Sustainable Development Goals (UNSDGs)

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

The People pillar highlights our

social responsibility objectives,

including our utmost priority

of ensuring health, safety and

wellbeing across our business.

Material topics include:

• Equality, diversity and inclusion

• Employee experience

• Succession and skills

development

• Community and charity

engagement

• Data protection and privacy

• Health, safety and wellbeing

• Human and labour rights

PEOPLE

Ensure access to affordable,

reliable, sustainable, and

modern energy for all

Take urgent action to combat

climate change and its impacts

Ensure sustainable

consumption and production

patterns

The Planet pillar frames our wider

environmental responsibilities,

with aparticular focus upon

greenhouse gasemissions.

Material topics include:

• Climate change adaption

• Greenhouse gas emissions

• Water management

• Air quality

• Waste management

• Energy management

• Biodiversity

PLANET

The Product pillar focuses upon

some more specific industry and

company-level topics, including

new product development, and

the wider supply chain. Material

topics include:

• Product lifecycle: environmental

impacts

• Plastic packaging

• Ethical and sustainable

procurement

• Product innovation

• Pricing integrity and

transparency

PRODUCT

Protect, restore and promote

sustainable use of terrestrial

ecosystems

Make cities and human

settlements inclusive, safe,

resilient and sustainable

Build resilient infrastructure,

promote inclusive and

sustainable industrialisation

End poverty in all its forms

everywhere

Ensure healthy lives and

promote wellbeing for all

at all ages

Ensure inclusive and equitable

quality education and promote

life-long learning for all

Achieve gender equality and

empower all women and girls

Promote sustained, inclusive

and sustainable economic

growth

Reduce inequality within and

among countries

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

MATERIALITY ASSESSMENT

STEP 1

STEP 2

STEP 3

STEP 4

Materiality assessment process

In defining our materiality assessment, we worked

alongside external consultants with the intention of

providing an overview of our priority sustainability

topics, in turn enabling our focus and resources

to be appropriately deployed in these areas. The

viewpoints of key stakeholder groups were critical

to the creation of this assessment, and we sought

feedback and insight from multiple perspectives,

including those of shareholders, local communities,

employees and customers.

We are constantly engaging with stakeholders and

these material topics evolve as such. The views from

our regular conversations with shareholders, and

the opinions of our employees having conducted

our annual engagement survey, are all taken into

account when management have reviewed the

output of the below process to ensure it remains

representative.

Identifying issues

We created a long list of potentially material

topics through the review of sustainability

reporting publications, internal policies

and management insight. This was

supplemented by an evaluation of relevant

sustainability frameworks including

the Sustainable Accounting Standards

Board (SASB) and the Global Reporting

Initiative (GRI). It was important at this

stage to ensure we had covered social,

and governance factors alongside purely

environmental impacts.

Broadening and refining the scope

Our external consultants provided a broader

perspective of macro sustainability topics,

assessing their relevance and application

to our business, such as the United Nations

Sustainable Development Goals (SDGs).

Specific feedback from shareholder

meetings was also included, as well as

research from relevant industry bodies.

Assessment and scoring

We assessed our material topics and

provided a scoring criterion based upon

two factors. Firstly, the importance ofthe

topic to stakeholders, and secondly, the

impact of(including financial) the topic upon

future business performance. Our external

consultants assisted us in this process,

providing a consistent framework for the

basis ofassessment.

Prioritisation and validation

An assessment of the ability of the business

to influence each topic provided further

perspective to the prioritisation process and

was a key further dimension brought into

our analysis. The outcome of the materiality

assessment was reviewed at Board level to

ensure appropriate challenge, validation and

alignment to the Group strategy.

MATERIALITY MATRIX

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Our materiality matrix below summarises

the outcomes of the materiality assessment,

providing a visual overview of our key topics.

We recognise that the matrix contains an

element of subjectivity; impact can be defined in

various ways including risk of non-compliance,

impact to reputation or financial implications.

Equally, importance may vary between different

stakeholder groups. The matrix should therefore

be viewed in this context, as an indicative

overview and insight to management’s

perspective on the subject. Our materiality

assessment was first undertaken in 2021

and was subject to a review by Management

in early 2024 to ensure this remains applicable.

A full materiality assessment covering double

materiality is planned for 2024.

PLANET

1 Climate change adaption

2 Greenhouse gas emissions

3 Air quality

4 Energy management

5 Water management

6 Waste management

7 Biodiversity impacts

PEOPLE

13 Health, safety and wellbeing

14 Equality, diversity and inclusion

15 Succession and skills

development

16 Employee experience

17 Local community engagement

18 Human and labour rights

19 Data protection and privacy

PRODUCT

8 Product innovation

9 Pricing integrity and transparency

10 Product lifecycle environmental

impacts

11 Ethical procurement

12 Packaging

Key

Very high

High

Medium

Low

Our ability to

influence is

dictated by

bubble size

Impact rating

Importance rating

0.00 1.00 2.00 3.00 4.00 5.00 6.00

1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50

6.00

Collectively, our three pillars guide our future

decision-making, ensuring we are successful in

our overall objective of being agood neighbour

and responsible employer, for generations tocome.

Our ambitions and targets

The ability to track our progress is essential to

realising our sustainability goals and we have

considered the most appropriate metrics and targets

necessary for users to understand the impacts of

our business. In addition to disclosing our absolute

greenhouse gas (GHG) emissions, we also provide

additional disclosure showing the GHG intensity

ratio (level of emissions per tonne of output) for

both our clay and concrete products, recognising

that absolute emissions vary with the level of our

production according to market demand, shown

clearly in 2023, and as such are not necessarily

ameaningful measure of our progress against

ourtargets.

Our metrics and targets were set in 2021 and

informed by the outcome of our materiality

assessment which identifies the subject areas

deemed most relevant to our stakeholders.

In identifying further measures and targets

for publication we have also considered the

requirements of the Sustainable Accounting

Standards Board (SASB) standard on construction

materials and have sought to comply with the

disclosure requirements of this standard in as far

aswe believe the information provided will be useful

and meaningful to our stakeholders.

The table opposite details our key ambitions and

targets, how they map from our framework as well

as our status andprogress against each to 2023.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

OUR TARGETS

Pillar Topic Target

Target

year Metric 2019 2022 2023 Target

Progress

vs. 2019 Comment

PLANET

Group CO

emissions 27.5% reduction

v 2019 baseline

2030 tonnes 319,296 295,371 255,740 231,489

-20%

Market driven production reductions

have decreased absolute emissions.

A good example of why we present

intensity measures.

Group CO

emissions/

tonne

32% reduction

v 2019 baseline

2030 Kg CO

tonne

123.4 124.5 131.2 83.9

+6%

Change in product mix, exacerbated by

additional Scope 2 emissions in theyear

that will not repeat once our solar farm

comes on stream.

Clay Products CO

emissions/tonne

33% reduction

v 2019 baseline

2030 Kg CO

tonne

255.6 244.9 248.7 171.3

-3%

Unfavourable product mix within brick,

exacerbated by additional Scope 2

emissions in the year that will not repeat

once our solar farm comes onstream.

Concrete Products CO

emissions/tonne

80% reduction

v 2019 baseline

2030 Kg CO

tonne

21.0 20.7 25.6 4.2

+22%

Influence of aircrete production as well

as the above scope 2 impact.

Power Sourced from

On Site Renewables

10% Group

Power Usage

2025 % 0.00 0.00 0.69 10%

Given the higher proportion of generation

expected from the ForterraSolar Farm

from 2024, thistarget may be re-visited.

Waste to Landfill Zero Process

Waste

n/a Kg

tonne

0.16 0.01 0.09 0.00



+56%

Increase on prior year relates to site

clearance at Cradley.

PRODUCT

New Product Index 10% Group

Revenue

2025 % 0.6% 3.7% 8.9% 10%



Driven by the use of CEM II within the

business. c.90% of the way to achieving

our target.

Plastic Packaging

Consumed

50% reduction

v 2019 baseline

2025 Tonnes 1,802 1,643 1,322 901

-27%

Broadly on track with reduction plan.

Plastic Packaging 50% reduction

v 2019 baseline

2025 Kg/

tonnes

0.82 0.76 0.74 0.41

-9%

Broadly on track with reduction plan.

PEOPLE

Health and Safety –

Lost Time Incident

Frequency Rate (LTIFR)

Zero Harm

Ambition

n/a N

7.3 5 3.79 3.24 0



Positive reduction seen with the ultimate

target remaining zero.

Membership of 5% Club 5% of employees

in earn & learn

positions

2025 % 3.2 3.6 3.6 5%



On track to meet 5% target. c.70%

towards achieving our target.

1. Three of our targets have been incorporated into the Sustainability Linked Loan (SLL) following the refinancing completed in January 2023.

2. Two of our targets have been applied to the 2023 Performance Share Plan (PSP) award.

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STRATEGIC REPORT

Pillar Topic Target

Target

year Metric 2019 2022 2023 Target

Progress

vs. 2019 Comment

PLANET

Group CO

emissions 27.5% reduction

v 2019 baseline

2030 tonnes 319,296 295,371 255,740 231,489

-20%

Market driven production reductions

have decreased absolute emissions.

A good example of why we present

intensity measures.

Group CO

emissions/

tonne

32% reduction

v 2019 baseline

2030 Kg CO

tonne

123.4 124.5 131.2 83.9

+6%

Change in product mix, exacerbated by

additional Scope 2 emissions in theyear

that will not repeat once our solar farm

comes on stream.

Clay Products CO

emissions/tonne

33% reduction

v 2019 baseline

2030 Kg CO

tonne

255.6 244.9 248.7 171.3

-3%

Unfavourable product mix within brick,

exacerbated by additional Scope 2

emissions in the year that will not repeat

once our solar farm comes onstream.

Concrete Products CO

emissions/tonne

80% reduction

v 2019 baseline

2030 Kg CO

tonne

21.0 20.7 25.6 4.2

+22%

Influence of aircrete production as well

as the above scope 2 impact.

Power Sourced from

On Site Renewables

10% Group

Power Usage

2025 % 0.00 0.00 0.69 10%

Given the higher proportion of generation

expected from the ForterraSolar Farm

from 2024, thistarget may be re-visited.

Waste to Landfill Zero Process

Waste

n/a Kg

tonne

0.16 0.01 0.09 0.00



+56%

Increase on prior year relates to site

clearance at Cradley.

PRODUCT

New Product Index 10% Group

Revenue

2025 % 0.6% 3.7% 8.9% 10%



Driven by the use of CEM II within the

business. c.90% of the way to achieving

our target.

Plastic Packaging

Consumed

50% reduction

v 2019 baseline

2025 Tonnes 1,802 1,643 1,322 901

-27%

Broadly on track with reduction plan.

Plastic Packaging 50% reduction

v 2019 baseline

2025 Kg/

tonnes

0.82 0.76 0.74 0.41

-9%

Broadly on track with reduction plan.

PEOPLE

Health and Safety –

Lost Time Incident

Frequency Rate (LTIFR)

Zero Harm

Ambition

n/a N

7.3 5 3.79 3.24 0



Positive reduction seen with the ultimate

target remaining zero.

Membership of 5% Club 5% of employees

in earn & learn

positions

2025 % 3.2 3.6 3.6 5%



On track to meet 5% target. c.70%

towards achieving our target.

Ahead of target/target currently met

On track

Behind target on pro-rated basis

SLL target

PSP target

Key

Our priority is to deliver a significant reduction in

our emissions by 2030 and we have committed

to reducing our carbon intensity per tonne by

32% relative to 2019. This target forms part of our

commitment to the Race to Zero, formalising our

ambition to reach net zero by 2050.

A key component of our decarbonisation strategy

is capital investment projects such as the new

Desford brick factory, more efficient and greener

manufacturing capacity which alongside a number

of other initiatives, including fuel switching, will

deliver a meaningful reduction in emissions.

We are also committed to researching breakthrough

technologies including carbon capture and storage

and hydrogen fuel which will likely provide the

longer-term pathway to net zero.

The Commission on Climate Change (CCC) sets

out a recommended strategy for the UK to reach

net zero by 2050 and in this report they state that

‘most sectors will need to reduce emissions to close

to zero without the use of offsetting.’ Reliance on

offsetting does not reduce the burning of fossil fuels

which is the primary contributor to climate change.

Our strategy focuses on maximising the investment

in our own business to deliver a tangible and

transparent reduction in carbon emissions. We will

continue to evaluate the benefits carbon offsetting

can provide and whilst it is possible that in the future

there will be a need to use these in some form in

order to reach net zero, we feel that at present we

can have the greatest impact through investing to

reduce our own emissions.

Using the latest technology as we are doing within

our new Desford, Wilnecote and Accrington projects,

rather than purchasing offsets and allocating them

to the emissions from a particular factory, is the

most transparent and effective way of meeting our

challenging carbon reduction targets and in the

longer-term moving towards net zero by 2050.

More information on our approach and progress

in this area is available in the ‘Brick Factory of the

Future’ section of this Sustainability Report.

Greenhouse gas emissions

We manufacture two broad categories of products

– those made from clay and those made from

concrete. These products are supplied hand-in-hand

to our customers and are used together in building

high-quality homes and buildings. However, the

manufacturing processes are very different and their

carbon footprints, whilst similar overall, are built up in

different ways.

Clay products

Clay is the primary raw material used to make

bricks. The clay istypically sourced locally from our

own quarries, limiting the environmental impacts of

transportation to factories. The clay is freely ground

and then formed into a brick shape using a variety

of methods. The grinding and forming process uses

electrical energy.

At this stage bricks contain significant amounts of

moisture which must be removed before they can be

fired. This drying process utilises recycled heat from

our kilns.

The next stage is the firing of the brick which

transforms the relatively weak dried clay into

strong durable bricks that will last for generations.

During the firing process, the bricks are heated to

temperatures of over 1,000°C, triggering chemical

reactions in the clay. Our kilns are fired by burning

natural gas, whilst the clay itself also emits carbon

dioxide as a result of a chemical reaction; we refer to

this as process emissions. Once cooled, the bricks

are packaged ready for despatch to our customers.

As a result of the emissions created by the burning

of gas, as well as the embodied carbon released

from the clay during the firing process, the majority

of emissions from our clay brick manufacture fall into

scope 1.

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Our journey to net zero

PLANET

Concrete products

We make a range of concrete products, from aircete

blocks to precast concrete floor beams, using

anumber of different manufacturing techniques.

Concrete is made by mixing aggregates, cement,

and water. It is then left to undergo a chemical

reaction known as curing which can be accelerated

by adding additional heat.

Our Thermalite lightweight aircrete blocks use

pulverised fuel ash (PFA), a waste product from

coal-fired power stations; with power generation

from coal drastically diminishing in recent years we

now recycle previously landfilled ash in a process

very similar to quarrying. Water, cement and other

materials are mixed with the PFA. The cake, as it’s

known, undergoes a chemical reaction and begins

to cure such that it can be removed from the mould

and be wire-cut into blocks. The blocks are then

cooked in a high-pressure steam oven known as an

autoclave, which, like our brick kilns, is heated by

burning natural gas. The blocks are removed from

the autoclave, separated, packaged and once they

have passed a strength test are ready to be supplied

to our customers.

We purchase all of these raw materials, with cement

having by far the largest carbon footprint. As such,

the majority of the emissions from manufacturing

concrete fall into scope 3.

It is important to emphasise that both our clay and

concrete products contain similar levels of overall

carbon dioxide emissions per tonne of product.

However, the way in which these emissions are

reported within the Greenhouse Gas Protocol

scopes is very different.

The majority of the emissions associated with the

manufacture of clay bricks are direct emissions

under our control and are therefore disclosed in

scope 1. The majority of the emissions associated

with the manufacture of our concrete products are

indirect emissions under the control of our suppliers

and included in scope 3, and therefore not disclosed

in our figures. This year we report a full breakdown

of our scope 3 emissions (see pages 60 and 61) for

the first time having undertaken a detailed exercise

with assistance from expert consultants.

Scope 1

When reporting our emissions and setting targets to

reduce these emissions, it is necessary to consider

our product mix. To ensure full transparency looking

forward, and when reviewing our past progress,

we provide emissions figures for both our clay

and concrete businesses. The scope 3 emissions

associated with our concrete manufacture (and to

a lesser extent clay) make the direct comparison

between our total clay and concrete reported

emissions more challenging; however more detail on

our calculations and first time disclosure of scope 3

emissions can be found later in this Report.

Any change in product mix in our output between

clay brick and concrete products could materially

distort the comparability of our total reported scope

1 emissions year on year. Accordingly, we disclose

the carbon emissions for our clay and concrete

businesses separately providing much greater

transparency on our carbon reduction progress.

It is important to recognise the amount of carbon

weemit is directly related to the volume of product

wemanufacture.

Our key markets have historically exhibited a trend

of cyclicality and as such it would not be meaningful

to measure our performance solely on absolute

emissions. Never more relevant than in 2023 where

we saw significant absolute emission reductions

driven by the reduced output that market forces

dictated, we believe the most transparent way

ofreporting our carbon footprint is to separately

report our greenhouse gas intensity ratio CO

(thecarbon emitted per tonne of production output)

for our clay and concrete products. We believe

this will provide the most meaningful information

from which to measure the reduction in our carbon

emissions overtime.

19%

reduction in Scope 1

emissions (vs. 2019)

We are committed to supporting the UK’s ambition to reach net

zero by 2050 and to demonstrate this we declared a near-term

carbon reduction target of 27.5% (using the SBTi well below 2°C

scenario) running from 2019 through to 2030 which is supported

by our Carbon Management Plan. First published in our 2022

Annual Report, this maps out our decarbonisation plan to 2030,

including both ongoing projects as well as the further technologies

and process changes which are required for us to meet this target

– some of them are already commercially available such as solar

panels and electric vehicles whereas others such as hydrogen

and carbon capture are still emerging within our sector.

Our plan focus areas

0.5%

| Energy efficiency

2.5%

| Process change

27.5%

ABSOLUTE REDUCTION

TARGET BY 2030

4.0%

| Green electricity

4.5%

| Fuel switching

8.0%

| Efficient new factories

8.0%

| Emerging technologies

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ANNUAL REPORT AND ACCOUNTS

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STRATEGIC REPORT

FORTERRA CARBON

MANAGEMENT PLAN

We recognise that carbon dioxide emissions are an

inherent result of our manufacturing processes. The

majority of our emissions are covered by the UK

Emissions Trading Scheme (UKETS). The increasing

cost of UKETS credits as well as a reduction in the

number of freely allocated credits will increase our

operating costs and by reducing our emissions we

can deliver a reduction in these compliance costs.

In developing our sustainability framework and

setting ambitious targets, we additionally identified

the measures would be required to achieve these.

Since presenting our implementation roadmap in

last year’s Annual Report, The Forterra Carbon

Management Plan, we have additionally challenged

ourselves around how that roadmap looks in a

practical environment. This year we therefore

present our view of ‘The Brick Factory of the Future’,

shown later in this Report and amalgamating all of

the decarbonisation activities and new and evolving

technologies we are working with, and looking

towards how our business will operate in years

tocome.

Scope 2

Since 2020 we have reported zero scope 2

emissions, enabled through the purchase of

Renewable Energy Guarantees of Origin (REGOs).

In2022, having acknowledged the requirement

forfurther new capacity within the grid itself,

workingwith Lightsource bp, a global leader in

themanagement and development of solar energy

projects, we committed to purchasing around

70%(at full production levels) of our electricity

requirement from a dedicated solar farm, exceeding

150 acres in size situated in Nottinghamshire.

Further detail on the progress at the Tiln site can

befound later in this Report, and in this year of

transition towards generation of our own zero

carbon power, we have made the decision to not

purchase REGOs as we previously have done,

withthe cost of these increasing significantly,

choosing instead to focus our resources on driving

our sustainability agenda forward in other areas.

Therefore there has been an associated increase

inour scope 2 emissions as a result, this is viewed

as temporary and will reverse once our solar farm

comes on stream in2024.

Scope 3

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PLANET CONTINUED

Much of our focus to date has been on the

reporting of Scope 1 and 2 carbon emissions

and last year we committed to carry out a full

review of scope 3 emissions. We are pleased

to report that this was carried out in 2023,

using 2022 data as a baseline across the 15

scope 3 categories using an independent third

party provider to ensure that the exercise was

carried out in a manner that was both accurate

and in line with best practice. The results

wereconfirmatory as opposed to revelationary,

validating our prior assumptions that the goods

and services that we purchase account for

c.75% of our scope 3 emissions.

One of the interesting discussions raised

during the exercise focused on ‘end of life’

treatment of our products. Currently our

products would be recycled into secondary

aggregate and whilst this is positive within

the circular economy, we have still accounted

for the current emissions impact of recycled

aggregate. However, due to the longevity

ofourproducts (>150 years) it is highly

likely that there will be no carbon emissions

associated with their recovery when the time

eventually comes.

As per our 2022 calculation, in 2023 cement

continues to be the most significant contributor

to our scope 3 emissions. Our technical team

has been working alongside our procurement

function and our suppliers to transition our

concrete production from CEM I (regular

Ordinary Portland Cement (OPC)) to CEM II

(amixture of OPC and various additives)

cements where possible, saving around

3,400tonnes of carbon in the last 12 months.

We are also developing a cement replacement

from production waste generated within our

clay business which will deliver even greater

carbon reductions.

SCOPE 3

Purchased goods and services 2023

Cement – CEM I 62,385

Cement – CEM II (13% limestone) 34,421

Hydrated Lime 31,625

Steel 29,780

Insulation 10,765

Plastic 4,120

Other 11,095

Total 184,190

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STRATEGIC REPORT

As well as working with our cement suppliers

(major global and UK-listed cement manufacturers

including Heidelberg Materials and Breedon plc) to

reduce carbon in this respect, our ‘Product’ section

later in this Report gives further details around our

innovations in cement reduction and replacement.

Looking ahead, sustainability will form an even

greater element of our supplier selection and

accreditation process into 2024 and beyond.

Fuel and energy related activities

End-of-life treatment of sold products

Other

Purchased goods and services

Capital goods

Employee commuting

Transportation and distribution (downstream)

Transportation and distribution (upstream)

2023 Scope 3 breakdown

Other

12%

74%

2023 Scope 3

breakdown

Other

Category 2023 2022

1. Purchased goods and services 184,190 219,996

2. Capital goods 5,650 8,240

3. Fuel and energy related activities 28,573 35,100

4. Transportation and distribution (upstream) 6,912 8,665

5. Waste from operations 216 262

6. Business travel 75 80

7. Employee commuting 5,136 5,477

8. Leased assets 225 328

9. Transportation and distribution (downstream) 4,622 5,828

10. Processing of sold products – –

11. Use of sold products – –

12. End-of-life treatment of sold products 11,749 14,396

13. Leased assets – –

14. Franchises – –

15. Investments

– –

Total Scope 3

247,348

298,372

kg/tonne

127.1

126.1

THE BRICK

FACTORY OF

THE FUTURE

Hydrogen

STORAGE TANKS

awaiting export

MAIN FACTORY

PLANT ROOM

For carbon capture

CARBON CAPTURE

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Raw materials

Water usage

Product innovation

Packaging

Renewable energy

Mobile plant

Efficiency

Zero carbon firing

Carbon capture

Distribution

Our vision is to take the

learnings from the carbon

journey ofourexisting

factories and future proof

any new developments

tomakesure all of the

potential carbon savings can

be incorporated, ultimately

achieving azero carbon

production facility.

We acknowledge that significant reductions in our

carbon footprint can be made by being proactive

when designing our new factories; our new Desford

factory has reduced its energy consumption per

brick by c.30% relative to the old factory it replaced.

This is, however, only the start of our ambitions.

Applying our Carbon Management Plan to this

design process contributes to the blueprint for what

could come next: the brick factory of the future.

Raw Materials

The clays we use can be responsible for up

to80% of the carbon emissions of a brick factory

depending on the type of clay seam that the factory

is situated on. Our technical team is working to

identify inert materials, that when fired, will not emit

carbon, that can be substituted for these clays

without compromising the look and performance

characteristics of our products.

Challenge –There is a finite amount of substitution

possible before the performance and the aesthetic

appearance is compromised and as such this

approach must be deployed in combination with

other emerging technologies to further reduce

ourimpact.

Water Usage

Water scarcity will become increasingly topical

in future years, particularly during drier summer

months. Our factories are generally in close proximity

to the quarries that supply their clay and as such we

would take advantage of quarry lagoons to capture

and recycle rain and process water, installing water

treatment plants using technologies such as reverse

osmosis to clean any captured water for reuse in the

manufacturing process or welfare facilities.

Challenge – Water is currently a low-cost raw

material and the high energy demand of treatment

plants can increase this significantly, as well as the

carbon footprint of producing water in this manner,

however this could mostly be offset by the use of

renewable energy generated on site.

Product Innovation

“As much from less” – the goal of our project to

ensure that we use as little raw material as possible

whilst maintaining our high standards of quality.

A focus of our research and development approach

is the refinement of the products we make, a brick

has a specified length, width and height. However,

our innovation team continue to investigate how

we can produce the lightest and most material

efficient brick whilst still maintaining its strength

anddurability.

Challenge – Product standards dictate the

proportion of a brick that can be a void and therefore

a joined up approach across the industry would be

key to making changes in these areas.

Packaging

Plastic reduction is a key objective; aiming to halve

the amount of single use plastic used to package our

products whilst maintaining the integrity of the pack

to ensure that our products can be delivered safely

and undamaged. The brick factory of the future will

minimise the amount of plastic used and substitute

with alternatives wherever practicable.

Challenge – Plastic is a strong, light, relatively

inexpensive material and finding an alternative

with all of these characteristics is challenging.

When products are fully wrapped storing them on

a building site is relatively easy, once the wrap is

removed they need to be stored on hardstanding

and in some case some weather protection to

prevent the product becoming saturated during

periods of heavy rainfall.

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Renewable Energy

For the UK to reach its net zero ambitions the

electricity grid, which still relies upon significant fossil

fuel based generation, needs to be decarbonised.

Working with Lightsource bp, a global leader in

the management and development of solar energy

projects, we have committed to purchasing around

70% (at full production levels) of our electricity

requirement from a dedicated solar farm, exceeding

150 acres in size situated in Nottinghamshire. This

commitment approximating to £50m over 15 years

from 2025 will facilitate the delivery of 60 GWh of

additional solar generation capacity to the UK,

enough to power 17,000 average homes. This

arrangement will provide us with secure renewable

energy with price certainty for a 15-year period

commencing in 2025. Construction of the solar farm

is near completion and we have agreed an option to

take power from April 2024, a year early.

Alongside this, we are investing in on-site

renewable electricity generation at a number of

our factories in order to generate a portion of

our electricity requirement from 2025. Again, this

adds incremental renewable energy generation

capacity whilst also providing a low-cost electricity

supply avoiding the sizeable transmission charges

associated with having power delivered through

the grid. Further progress was made in 2023

as we completed the installation of a rooftop

solar array at our new Desford factory which will

contribute furtherreductions on our reliance on

gridsourcedpower.

Onsite renewable energy will be intrinsic to the

design brief for a new factory whether this be

solar and/or wind. Whilst harder to integrate

retrospectively due to space/location requirements,

wind turbines are preferential due to their more linear

generation profile meaning they can provide power

in the winter months and at night.

Challenge – Identifying a location and gaining

permission for one or more wind turbines even

on a new site can be difficult due to planning

constraints. The UK electricity network is also

heavilyconstrained, often making it difficult to

securea grid connection to export unused power.

Mobile Plant

The majority of our yellow plant is capable of running

on biodiesel and this takes place at a number of our

sites already. However, we see electric and hydrogen

powered vehicles as the best options for the future,

our new facility at Desford already has one of the

largest electric forklifts in the UK.

Challenge – Plant and equipment manufacturers are

still developing hydrogen cell solutions and electric

vehicles are currently best suited to moving lighter

and smaller loads.

Efficiency

Reducing energy usage is the easiest way to reduce

our carbon footprint and any future factory would

utilise the most energy efficient equipment.The kilns

at our new Desford facility arec.30% more efficient

than the ones in the old factory they replaced. The

redevelopment of our Wilnecote brick factory is

ongoing and will reduce the carbon footprint of

each brick manufactured, and the construction of

a brick slip manufacturing facility at our Accrington

factory will allow us to bring a new, more sustainable

product to market.

We currently utilise an IT system to monitor and

measure the availability and functionality of key

pieces of equipment in our factories, helping identify

when equipment may be running inefficiently or

consuming excessive energy as well and identifying

when preventative maintenance needs to be

carriedout helping productivity and making sure

ourproducts are made as efficiently as possible.

Thekiln is by far the most energy intensive part

ofour brick manufacturing process and currently

thetemperatures are overseen by an operator.

Atour Kirton factory we have handed control

toAItoconstantly monitor and adjust the

temperatures in each firing zone to ensure that

thedesired temperature is reached using as little

gasas possible.

Challenge – Our main challenge when investing in

our factories to improve efficiency is the down time

required to implement a significant change. For

example the most significant efficiency improvement

at our Wilnecote factory is the new kiln which had

it been upgraded in isolation, would have resulted

in the closure of the factory for several months;

adecision that would not be taken lightly.

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SUSTAINABILITY REPORT

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Zero Carbon Firing

The drying and firing process is responsible for up

to 60% of the carbon emissions from a brick factory

and is therefore a fundamental area of focus for us.

We have been undertaking trials of both biomass

and hydrogen blends and we see both fuels playing

a key role in decarbonising our business.

Hydrogen was initially identified as an emerging

(future) technology in our carbon management plan

and has as such been an important research focus.

A project to understand how hydrogen performs

when used as a fuel source in a brick kiln is a key

first step in our utilisation of any future grid-based

hydrogen and we have commenced trials on this

basis. Having successfully completed trials at

a20% blend (intended eventual grid levels) we have

confidence that we can replicate our current range

of products from both an aesthetic and performance

point of view.

The manufacturing process at our Kings Dyke

factory which produces the Fletton brick sold

under the London Brick brand is unique in the UK

due to both the Lower Oxford clay that the brick is

produced from, and the hoffman kiln used to dry and

fire it. Now fired using natural gas the hoffman kiln

was designed to be fired using solid fuel, primarily

coal, and consists of a number of interconnected

static chambers and the fire then moves around

the kiln passing through each chamber. With this in

mind, we have looked to sustainable biomass as an

alternative fuel as it is a net zero carbon fuel and just

as importantly, it behaves in a similar manner to coal,

the fuel the kilns were initially designed to utilise.

Based on current production, if biomass could

replace the use of natural gas in full, this could

deliver up to an 11,000 tonne saving in carbon

emissions which is the equivalent of driving around

the world over 100 times.

Challenge – Our factories are located on the clay

deposits from which the bricks are made, generally

in fairly rural locations. Currently these lie outside

of the UK’s proposed hydrogen clusters meaning

hydrogen would need to be brought to us with the

most obvious solution a networked supply. It is likely

that this will not come to fruition until at least the end

of the decade.However, as part of the East Coast

Hydrogen consortium, we ensure that we are up to

date with the latest developments and ready to take

advantage when opportunities present themselves.

Carbon Capture

The ability to capture carbon remains an emerging

technology for our sector and to ensure that any

factory we design is ready to incorporate this

technology we have undertaken, alongside experts

in the field, a feasibility study to identify space and

power requirements in order to allow the installation

of a carbon capture plant at later date.

Challenge – From this study we know that further

to the significant cost of developing and building a

carbon capture plant there is also a technical barrier

to being an early adopter in that the technology

is currently most efficient where emissions have

a greater than 10% CO

content; with our brick

factories currently at 3-4% CO

rather perversely

meaning that we don’t emit enough CO

for carbon

capture to presently work efficiently.

Distribution

Around 5% of our carbon footprint can be attributed

to our distribution fleet and we have made great

strides over recent years in improving the fuel

economy of our vehicles. In order to achieve zero

carbon emissions we would need to transition to

either electric or hydrogen.

Challenge – Both electric and hydrogen delivery

vehicles for our sector are in their early phase of

development and as such are markedly more

expensive than a diesel equivalent, and particularly

in the case of electric vehicles, have significantly

reduced range especially when carrying heavy

loads.The weight of our products generally

determines that the vehicles carrying our products

reach legal maximum weights for UK roads with

electric vehicles better suited to delivering lighter

products such as consumer goods.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Streamlined energy and carbon reporting (SECR)

We have used the operational control approach to

determine our organisational boundary for emissions

purposes and calculated these emissions based

on the UK Government’s Environmental Reporting

Guidelines (2019) and emission factors from the

DEFRA 2023 Green House Gas (GHG) Conversion

Factors for Company Reporting. Scope 2 emissions

have been reported using both the location-based

method of calculation and, to account for our use

of renewable electricity through the purchase of

REGOs in prior years, the market-based method

for calculation. Our underlying energy use figure

has been reported in GWh and includes fuel used

in mobile plant, on-site generators, and company

vehicles. All our facilities are covered by the scope

of our ISO 50001 certification which we have

held since 2015. This is a third party audited and

certified scheme and has continual improvement

at its core. We adopt a number of approaches to

maximise energy efficiency; from LED lighting and

the installation of variable speed drives on motors,

through to the recycling ofwaste process heat from

our kilns to power other areas of theplant.

Engagement

We are proud of our progress and are keen to place

our sustainability information in the public domain

ensuring the highest levels of transparency as we

engage with our stakeholders.

We are committed to actively engaging with a

number of sustainability disclosure bodies and rating

agencies including the Carbon Disclosure Project

(CDP), MSCI and Sustainalytics.

Internally, 2023 also saw the formation of the

Forterra Sustainability Advocates Group, an

employee based forum created to leverage our

colleagues’ passion for sustainability to further

disseminate messaging and drive the sustainability

agenda throughout the business.

Air quality

We strive to minimise emissions of air pollutants

created through our manufacturing and distribution

operations, complying with legislation as a

minimum standard. All our operations are subject

to Environmental Permitting Regulations and must

operate in accordance with a permit issued by

either the Environment Agency or the local authority.

Each permit has at least one section focusing

on emissions to air, with the regulating authority

carrying out inspections to ensure compliance.

Inaddition, the majority of our brick manufacturing

facilities are required to carry out annual monitoring

on the exhaust from the kiln to demonstrate

compliance with any emission limits set out in

the permit. Our larger sites submit a return under

theUKPollutant Release and Transfer Register.

Streamlined energy and carbon reporting 2023 2022 2021 2019

Scope 1 emissions (location-based) (tCO

e) 241,598 294,352 280,381 299,679

Scope 2 emissions (location-based) (tCO

e) 14,142 14,144 15,576 19,617

Scope 1&2 emissions (location-based) (tCO

e) 255,740 308,495 295,957 319,296

e intensity Kg per tonne 131.2 130.1 124.1 123.4

Total energy used GWh 791.6 969.7 952.8 956.3

Scope 1 emissions (market-based) (tCO

e) 241,598 294,352 280,381 299,679

Scope 2 emissions (market-based) (tCO

14,142

– – 19,617

Scope 1&2 emissions (market-based) (tCO

255,740

294,352 280,381 319,296

e intensity Kg per tonne

131.2

124.1 117.5 123.4

Scope 3 emissions (tCO

e) 247,348 298,372 n/a n/a

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

PLANET CONTINUED

Our Kings Dyke brick factory is located in an air

quality management area, and as a requirement of

our permit we haveinvested in, and operate, two

ambient air quality monitoring stations. Since their

installation in 2008 we have operated inaccordance

with our permits with no breaches ofairqualitylimits.

Waste management

As a business we recognise the value of our raw

material resources. Our waste quantities are

low(100,000 tonnes) relative to our production

output (5%),with large volumes of process waste

streams diverted and recycled for use in other

products. For example, brick waste created at our

Kings Dyke London Brick factory is crushed on-site

and becomes a raw material for the neighbouring

aggregate block plant and will soon be further

processed and used more widely as a cement

substitute. Our entire aircrete block waste is recycled

in other products in the business.

As a responsible operator we comply with all

waste management legislation and apply the waste

hierarchy using segregation of wastes to ensure that

the most appropriate disposal routes are utilised.

Following recent amendments to our recycling

partnership contract, we now divert all non-process

waste from landfill, an achievement we look forward

to continuing in the future.

Biodiversity

Fragile habitats and associated biodiversity are at

risk from climate change and deforestation across

the globe. Within the UK, the Government has

recognised our diverse range of natural landscapes

and habitats, setting out a 25-year environmental

plan focused on their protection and enhancement.

We are responsible for almost 2,000 acres of

mineral bearing land and are therefore aware of our

important role in supporting these national ambitions

through the ongoing management, treatment, and

final restoration of this land after these minerals

have been exhausted. Our quarrying operations

are covered by planning consents which include

conditions for site restoration in accordance with

the local mineral planning authority and taking into

consideration local and wider environmental needs.

Depending on future use proposals, the quarry

development will often lead to an improvement

in the biodiversity value of the land involved,

both during operation and when it moves into its

restoration phase. The Kings Dyke nature reserve

near Peterborough is an excellent example of how

exceeding the requirements of the restoration plan

has provided a local community asset and enabled

adiverse range of habitats tothrive.

Whilst we are not yet reporting in line with the

Taskforce on Nature-related Financial Disclosures

(TNFD) an internal working group has met regularly

during 2023 in consideration of our wider biodiversity

agenda and the considerations required around

future alignment in this area. We have identified

a number of indicators to provide a framework

for consideration of land use and environmental

change as a result of our quarrying activities, and

we support the Council for Sustainable Business

Biodiversity commitment.

FORTERRA PLC

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STRATEGIC REPORT

PRODUCT

Product innovation

Product development and innovation is a key pillar

within our carbon reduction initiatives, crucial to our

efforts in supporting the UK’s ambition to transition

to a lower carbon economy and meeting our target

to be net zero carbon by 2050. Additionally, as the

needs of our customers continue to change, we are

working to adapt our product offer to meet these

future requirements.

Several key housebuilder customers are focusing

heavily on developments in build efficiency and

waste reduction, with increasing interest in lifetime

carbon implications of the materials and solutions

being used in builds. Alongside this, there is growing

demand for lighter weight façade solutions which

retain the aesthetic quality of brick and can be

installed more rapidly onto buildings.

One of our primary objectives is to open new

applications for our core product offer; clay facing

bricks. Continuing development in construction

technologies and growing focus on material

efficiency is leading to some changes in the

structure of the market. Adaptation of our core offer

to take advantage of emerging trends has driven

development of façade solutions such as SureBrick,

a lightweight mechanically retained brick system,

which meets all regulatory requirements for high-rise

use and structural brick faced precast systems,

designed for high-speed on-site assembly that retain

the aesthetic of brick and form the structural element

of a build.

These solutions have been developed specifically

to meet the changing needs of construction and

provide a brick aesthetic finish in an alternative

manner where construction methodology has

moved away from onsite bricklaying or where a

lower carbon solution is being sought.

Many façade systems are reliant on using a brick

slipor thin brick solution, to provide the aesthetic

finish of a brick. Typically, this is achieved by cutting

standard bricks down, removing the ‘face’ to use

anddisposing of the remainder, leading to high

levels of waste. In 2024 we will commence

manufacture at our new slip manufacturing facility

inour Accrington factory, allowing manufacture of

brick slips without the waste element. This facility

willsave up to 75% of raw material and energy and

will be a step change in the sustainability credentials.

As we continue to develop systems and solutions

forthis emerging area, we are looking to continually

optimise our products and designs to use less raw

material and energy.

We continue to undertake numerous initiatives

with the goal of reducing the material content of

our products. Reducing the mass of traditional

products can reduce the energy required in

production, makes them easier to handle and use

on site, and will also help to reduce vehicle journeys

and the associated emissions through increasing

the amount carried on each vehicle. Changes in

building regulation also brings opportunity. The

revision to ‘Part-L’ of the building regulations in 2022

has resulted in increased requirements for energy

efficiency in the fabric of new homes. Our reduced

section T-Beams for our Jetfloor insulated floor

system, not only reduce the amount of concrete

in the floor but provide an improved insulation

performance, helping our customers meet the more

challenging requirements of both Part-L and the

future homes standard that is expected in 2025.

It is globally recognised that production of cement is

a keycontributor to the emission of CO

and climate

change. Anumber of our products are manufactured

using cement. Cement which is, as shown in our

newly published calculations, the largest contributor

to our scope 3 carbon emissions and is a key

contributor to our overall carbon footprint. We have

already migrated much of cement consumption

to a reduced carbon blend, CEMII. The CEMII

cement product is a blend of cement and limestone

which has up to 16% lower embodied CO

per

tonne. Through 2023 we have taken amore active

approach and our material scientists have continued

to work with a consortium of industry participants,

trade bodies and academic researchers to prove

the viability of calcined clay from waste bricks as an

alternative cementitious binder. Our development

16%

lower embodied

carbon from

CEM II vs. CEM I

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

work has proven positive, and we will launch

the firstproducts using a proportion of calcined

clay, from brick waste, as a cement substitute in

the earlypart of 2024. We have undertaken an

assessment ofour clay reserves alongside available

and emerging technologies to assess the best

possible solution to meet wider demand for calcined

clay asacement substitute.

We continue to seek out opportunities to deliver

further innovation to the market and are targeting

10% of our revenues to be delivered from new

andsustainable products by 2025 (9.0% this year).

Our focus continues to be on new building solutions

and raw material developments, both being areas

where we can clearly demonstrate significant

positive impacts upon our carbon footprint.

Continued investment in product development

and innovation iscritical to our future success.

We continue to work to increase our spend in this

area as previously communicated, aswe suitably

resource our business to dedicate additional time

to our future state without having to compromise

our current operational performance and customer

service levels.

The clay brick: inherently sustainable

The history of the clay brick can be traced back for

centuries, itsversatility and longevity proven through

countless historic buildings that are centuries old.

Development of new technologies and improvements

in efficiency have significantly reduced the energy

intensity required during manufacture.

Typical buildings constructed from clay brick have

lifetimes exceeding 150 years, the streets of the UK

are lined with homes constructed in Victorian times.

These robustly built homes are now highly sought

after due to their well-proportioned interiors, and

typically larger than average outside spaces. The

clay brick construction alongside the availability of

outside space has allowed extension and structural

adaption of these buildings to modify and modernise

them as needs have changed. The timeless beauty

and longevity of these buildings is a continuous

advert for clay brick construction, however, times

do change and on occasion brick buildings reach

the end of their useful life and are demolished. The

bricks themselves can be reclaimed and reused if

ingood condition, or alternatively be crushed and

fed back into construction activity as an alternative

raw material.

Our latest factories are significantly less carbon

intensive than previous generation facilities, however,

the carbon intensity of clay brick manufacture

remains significant, due to kilns that are fired by

natural gas and the carbon released from the clay

during the firing process.

When considering the longevity of a clay brick

building, the full lifecycle impact of the embodied

carbon is incredibly low, alongside this, brick

structures require little to no maintenance through

their lives, whilst other comparable materials may

require additional applications of protective coatings

or surface treatments to enhance their lifetime.

As our climate changes, with more extremes of

temperature, clay brick is well placed to construct

buildings suitable for such a changing environment.

The thermal mass properties of clay bricks naturally

absorb heat, creating a heat buffer and helping

prevent the inside of buildings overheating during the

summer. During the colder months, bricks store heat

through sunny days and slowly release this back as

the temperature falls, helping to warm the building.

150+

years expected lifetime

of a clay brick

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

350g375g

<1 day150 years

350g0.007g

Single brick

55g

All bricks in average

house (8,000)

Carbon footprint

Lifespan

Carbon generated per day of product’s life

CLAY BRICK VERSUS YOUR DAILY COFFEE

It is apparent that clay brick is inherently sustainable

when its longevity is considered against that of

alternative solutions. Our challenge is to refine

and develop this versatile building product, further

reducing the embodied carbon. With this focused

effort, we are confident that the clay brick will

continue to be the sustainable building material

ofchoice long into the future.

Plastic packaging

Reducing the plastic packaging supplied with our

products provides an opportunity to support the

wider global environmental goal for the reduction

of single use plastics, and the associated harmful

impact upon natural habitats when these materials

are not disposed of appropriately.

Whilst our current packaging provides numerous

benefits including ease of product identification,

stability during transportation, and ensures our

products are clean, dry, and fit for installation upon

construction sites, it is not seen to be acceptable

in the medium-term to be shipping construction

products wrapped in plastic.

Our aggregate blocks and a number of specific

brick ranges are already shipped without being

wrapped in large volumes of plastic, and we have

also significantly increased the recycled content of

the plastic strapping which is essential to ensure

stability of our products in transit. However, as a

business we have generally experienced overall

increases in plastic packaging in the last 20 years,

consistent with the wider trends in society across

other everyday products.

Our targets in meeting this challenge are ambitious,

with a commitment to reduce our total volume of

plastic packaging by at least 50% by 2025, whilst

also ensuring that the safety and quality credentials

provided by our current packaging methods are

not compromised. At present, at the majority of our

brick factories, it is not possible to simply remove the

plastic wrapping as the wrapping provides the pack

of bricks with its integrity when transported.

Following on from the installation of alternative

packaging equipment at our Accrington facility

during 2022, we have installed the same packaging

solution in both our flagship new Desford facility and

our Measham soft mud facility. This ‘belly banding’

solution reduces plastic per pack by 38% and we

will look to utilise a similar approach in Wilnecote

when it returns to manufacturing in 2024. Whilst

progress has continued to be made in this area, the

project has been slower than originally anticipated,

recognising the need to ensure that safety standards

are in no way compromised by any changes made

to the way we package and supply our products.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

PRODUCT CONTINUED

-vs-

Clay brick

Latte

To ensure compliance with the requirements of our

customers’ supply chains, we recognise the change

to packaging standards is a topic that requires full

industry engagement and collaboration. We continue

to engage with customers across all our key markets

to ensure our solutions meet their needs. This is

not without its challenges; whilst the majority of

our customers are supportive of our initiative, there

are a number of behaviours and changes that the

construction industry as a whole need to adopt to

manage the storage and handling of our products

whilst ensuring safety, which is of critical importance,

is not compromised.

Pricing integrity and transparency

We recognise that in many of our product categories

our markets are characterised by a small number of

large businesses, operating nationally, and enjoying

large market share positions. In order to ensure the

highest standards of integrity we enforce a zero-

tolerance approach to any anti-competitive activity.

All relevant managers and commercial employees

are required to undertake annual online compliance

training on both competition law and anti-bribery,

with controls in place to record correspondence

andcommunications with competitors.

The fines that can be levied on companies which

are found to have breached competition law can

reach 10% of annual turnover and companies

can face damages claims from those wronged

byanti-competitive actions. The risk of such fines,

even if senior management were unaware of such

behaviours, mean that compliance and monitoring

obligations are taken extremely seriously.

Ethical and sustainable procurement

The procurement of third-party materials and

services are critical to our value chain. In 2023 this

expenditure totalled over £258m, including materials

such as steel, insulation, cement, aggregates,

pulverised fuel ash (PFA) and products used in

our flooring solutions. Our environmental footprint

is minimised through a focus on local sourcing

with the majority of our materials procurement

(excludingcapital items) being UK-sourced,

minimising environmental impacts of cross border

transport logistics.

Our procurement management system is audited as

part of our ISO 14001 and ISO 9001 accreditations.

Compliance plays a key role within the system,

covering over 1,400 suppliers’ strict adherence with

a range of governance topics including anti-slavery,

bribery, competition law, data protection, and equal

opportunities. We adopt the Ethical Trading Initiative

code of practice to ensure that worker rightsare

protected as part of the supplier onboarding process,

and this is continuously reviewed.

Larger suppliers are required to meet relevant ISO

standards including ISO 9001, ISO 14001 and

IS0 45001, or equivalent, for example, all timber

procured is FSC accredited. Our health and safety

team assists and develops suppliers’ standards

to help them improve their own safety procedures

where necessary.

Sustainable sourcing

Local sourcing of raw materials isn’t always possible

and where we do need to transport materials longer

distances, we seek to do this in the most sustainable

way possible. We utilise the rail network to transport

pulverised fuel ash (a key raw material which is a

waste product used in manufacturing our Thermalite

aircrete blocks) to our factory. Since 2015 we have

transported over half a million tonnes of material by

rail, removing over 5 million heavy goods vehicle

miles from the UK road network whilst also reducing

carbon emissions.

5 million

heavy goods vehicle

miles removed since

2015 with rail transport

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Health, Safety and Wellbeing

The continuous improvement of our health and

safety performance remains our number one priority,

working towards our goal of zero harm. We recognise

that our workforce is our greatest asset, and we

aim to provide a working environment that is free

of accidents and ill health. Our four-year zero harm

strategy is designed to take us on a journey to an

‘interdependent’ safety culture where all colleagues’

mantra is ‘Idon’t want anyone to gethurt’.

Culture

In 2023 we continued to focus on health and safety

behaviours and culture working with our training

provider Juice Learning. We delivered two further

phases of the training, phase 3 was delivered to all

our supervisory colleagues and higher with the focus

on ‘stepping up’ to manage and promote health,

safety and well-being. Phase 4 was delivered in

twoparts and focused on ‘speaking up’.

We have invested over 2,600 hours of face-to-face

behavioural safety training through providers,

Juice Learning.

2024 is the last year of our planned zero harm

strategy that we set out in 2020 and we shall be

moving our behavioural health and safety focus

towards visible felt leadership, ensuring our senior

leaders are fully equipped to continue having

effective safety conversations when out in the

business. We shall be building the next strategy plan

to take us from 2024 to 2027 throughout the year to

continue the journey to health and safety excellence

and embed wellbeing at the heart of our business.

Safety

In 2023, we maintained our certification to ISO45001

occupational health and safety management system

standard. All our facilities were internally audited to

this standard and six facilities plus central systems

were externally audited. Auditing is seen as a driver

to continuous improvement and all sites were

challenged throughout the year to drive continued

compliance to procedures and ensure that

documentation is a reflection of the reality of work

inoperational environments.

Our Lost Time Incident Frequency Rate (LTIFR)

in2023 showed an improvement, running at

3.24incidents for every million-man hour worked,

compared to 3.79 in 2022. Of the 29 separate

business areas monitored, 20 were Lost Time

Incident (LTI) free during 2023, seven have been LTI

free for over five years and three for over 10 years.

Our lost time incident severity rate (number of days

lost per lost time incident) increased to 139 as a

result to two more serious injuries resulting in longer

absence. This continues an upward trend which is

disappointing but does remain overall at a fairly low

level compared to historic performance.

We continued to provide a range of health and

safetyrelated training, with key highlights within

theyearbeing:

• Two further phases of behavioural H&S training

conducted, one specifically for managers and

supervisors and the other for all colleagues in

thebusiness;

• Running an in-house National Examining Board

for Occupational Safety and Health (NEBOSH)

Certificate course5;

• A number of Institute of Occupational Safety and

Health Managing Safely courses run; and

• Our colleagues continued to be provided with

training, specifically the Institute of Occupational

Safety and Health (IOSH) one day working safely

course alongside the traditional risk assessment

and standard operating procedure training.

FORTERRA PLC

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PEOPLE

SUSTAINABILITY REPORT

We held another successful national health and safety

day at our Measham facility. Over 100 colleagues

and managers came together to cover off topics

including risk awareness, the importance of control

of silica dusts, how to improve sleep, mental health

and mindfulness and the consequences of an

accident if things go wrong not only to the injured

party, but all those around them as well.

Health and wellbeing

2023 saw us partner with RPS Occupational Health

for all statutory medical and management referral

health support. This new relationship continued

thegood work performed in previous years to

ensure colleagues are fit and well in the workplace.

We continued to offer proactive physiotherapy

services with a blend of on-site and network

clinicsolutions to deal with musculoskeletal issues

before they result in significant pain or absence

fromthe business.

We continued our journey to promote positive mental

health throughout 2023. We targeted three specific

campaigns where the business brought colleagues

together to discuss mental health and encourage

healthy conversations. These were:

• ‘Brew Monday’, an event linked to Samaritans

dispelling the myth of it being the most difficult

day of the year and encouraging positive

conversations every day of the year;

• Mental Health Awareness Week, covering the

topic of anxiety and how this can lead to negative

mental health; and

• World Mental Health Day, with the theme of

‘mental health is a universal human right’.

The business engaged with Healthy Performance,

aprovider that offers wellbeing medicals and held

sessions at all our office locations, to encourage

office and home-based colleagues to have a medical

and check on their physical health. This was in

addition to the statutory medicals received by all

operational colleagues at our sites, ensuring all

colleagues had the opportunity for a medical in2023.

Health and safety awards

British Ceramic Confederation Pledge –

As in previous years, we submitted best practice

entries into the BCC pledge awards. In 2023

we received five individual recognition awards,

eightopen category awards and one award in

conjunction withone of our contractors.

Mineral Products Association Health and Safety

Awards – wesubmitted several entries to the MPA

best practice awards and attended the ceremony in

January 2023. We received several mentions in the

Safer Production category, including being finalists

for improvements in safe stressing processes at

our Hoveringham site. The Health and Safety team

received certificates of merit for contractor control

improvements, national health and safety day

initiative as well as Forterra’s Mental Health and Well-

being initiative. They also were highly commended

for work on their Golden Rules Implementation and

became a finalist in the Fatal 6 submission.

Two employees were individually appreciated for

their active work on improving health and safety

and Forterra also received the John Crabbe

Trophy Special Award, a new award to the event

recognising Forterra’s focus on health and safety

culture and projects to make the workplace safer

forall.

Equality, diversity and inclusion

Our commitment to developing a more diverse,

equal and inclusive culture remained a key focus

during the year, as we continue to recognise the

benefits a diverse workforce brings to our business.

Further information about diversity at Board level

canbe found in the Corporate Governance

Statement on page 114.

Whilst our industry continues to be male dominated,

attracting female candidates into the sector

remained a challenge but we were successful in

appointing a number of females to key roles.

To ensure talent management remains high on the

people agenda, in 2023 we continued work on

our Forterra Talent Board and focused on our new

automated performance appraisal system aimed at

all employees (‘PDP for all’) to identify training needs,

generate career conversations and to drive high

performing teams across the business. To further

enhance the talent management process, work

commenced on compiling a competency framework

and the roll out of this programme will commence

in2024.

Work continues on our welfare improvement project

to upgrade welfare and rest facilities across the

business, making them more gender inclusive.

The charts overleaf show our headline gender

diversity statistics. Currently, 11% of our total

workforce were female, with 25% of management

positions (defined as direct reports to Executive

Committee members) filled by females. Gender Pay

reporting is detailed within the Annual Report on

Remuneration on page 154.

2,600

hours of specialist

‘Juice Learning’ health

and safety training

across 2023

FORTERRA PLC

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2023

STRATEGIC REPORT

GENDER DIVERSITY

Human and labour rights

We understand our responsibility to help eliminate

slavery and human trafficking, both in our business

and wider supply chain. We undertake our

responsibilities under the Modern Slavery and

Human Rights acts, including clear Company

policies and relevant declarations. Our anti-slavery

policy specifically covers the role of suppliers in

meeting the same standards which we set ourselves.

The Board values and appreciates the contribution

made by all employees at every level and is

committed to protecting and respecting human

rights. Each employee is treated fairly and equally

and the Company has measures in place to

ensurethat the Group is free from discrimination.

Throughout the Group there is a zero-tolerance

approach to any form of harassment or bullying,

forced or involuntary labour, and child labour in any

form. The Board is invested in the development of

employees and has put in place measures to protect

both their physical and mental wellbeing. The Group

embeds its commitments to the protection of

humanrights through its Anti-Slavery and Human

Trafficking Policy.

We are proud to be an accredited member of

theLiving Wage Foundation, with a firm belief that

ahard day’s work deserves afair day’s pay.

Our commitment to pay the real living wage to all

employees is unwavering and being a recognised

Living Wage employer, will help us attract and

retainemployees.

Data protection and privacy

The public is more aware than ever of the role

businesses play in their lives through targeted

use ofour personal data, and all businesses

are expected to act in accordance with a higher

standard oftransparency.

The protection and privacy of our employees’,

customers’ and suppliers’ data is of paramount

importance and we fully recognise the increased

risk to businesses across the world from cyber

attacks using ever sophisticated means. As part

ofour ongoing commitment to information security,

wemaintain the ISO 27001 accreditation. This

respect for others’ data extends to using this

information only for reasons of which they explicitly

agree, aslaidout within the General Data Protection

Regulations(GDPR).

62%

38%

Directors of

the Company

14%

86%

Executive

Committee

75%

25%

Direct reports

of Executive

Committee

79%

21%

Combined

Executive

Committee and

direct reports

89%

11%

Total employees

of the Group

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

PEOPLE CONTINUED

Male Female

1. Company Secretary has been included under Executive Committee.

People development

During the year we continued with our Forterra

Leadership Development Programmes. Over2,900

training hours during 2023 have been dedicated to

these so far.

Level 1 Leadership Development Programme

Level 2 Essential Leadership Development

Programme

Level 3 Advanced Leadership Development

Programme

The programmes focus on experiential learning

giving leaders practical tools to be more engaging,

and inclusive leaders as well as driving change and

creating high performing teams.

Employee experience

The Employee Forum continued to run during the

year. Attending the Employee Forum meetings were

CEO; Neil Ash, Head of HR; Sharon Harris, and Non-

Executive Director; Martin Sutherland who provided

feedback to the Board.

Our employee engagement survey was run in

September 2023 with a continuation of the trend

of improving participation rates rising from53%

to 78%. Similar themes arose compared to the

previous year, namely employee recognition and

employee development and we continue to strive

for improvement in these areas. A key example is

our continued focus on leadership development,

designed to equip our leaders with the skills to

have better and more meaningful conversations

within their teams and further facilitate employee

recognition and development as a result.

Responses to questions centred around health and

safety remained positive for a third consecutive year,

reaffirming that employees understand our Golden

Rules, feel safe at work and that Forterra lives by the

core value of ‘Safety First’.

Local community and charity engagement

Our responsibility of being a good neighbour means

we foster strong relationships with the communities

surrounding our sites to ensure we make a positive

contribution to the local area.

The Forterra Community Fund helps us to do

this. To apply for the Fund, applicants must detail

what support they require and how the project

will benefitthe local community. Each month,

allapplications are reviewed, and a decision

madetoapportion donations.

We have supported communities and charities both

locally and nationally and, following the successful

launch of the Fund in 2022, we are pleased that

throughout 2023 we have helped many more worthy

causes and initiatives. Some examples include:

Kirton Parish Council

We provided £1,000 towards a local project to

restore what was once a historic animal pound,

called a pinfold, in the village close to our Kirton

factory in Nottinghamshire. Our donation went

towards hiring a specialist stonemason capable

of repairing it’s historic walls, for which we also

supplied a number of bricks.

The village council hope the restored pinfold

willreconnect the village with its history to

becomeaplace of reflection and meditation

forthelocal community.

Nailstone Trim Trail

We supported a local initiative to install a ‘trim trail’

for children in the village of Nailstone, close to our

Desford factory.

We contributed £1,000 towards a wooden obstacle

course, designed to help children with physical and

social skills development, including reducing social

isolation and increasing community engagement.

Ithas been a worthy addition to the only green

space in the village, and is accessible by all homes.

Theodora Children’s Charity – Giggle Doctors

The Giggle Doctors help children in challenging

times feel better using the power of laughter.

Through the magic of music, play and storytelling,

Giggle Doctors visit children in hospital who endure

numerous lengthy stays, with the aim to reduce

stress and anxiety. They create opportunities for

them to play, smile and laugh.

Our £1,000 donation helped the Giggle Doctors

to bring smiles and laughter to approximately

60children in hospital who are living with a serious

illness, a long-term health condition or disability.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Whittlesey Poppy Blitz

We donated £490 to the Whittlesey Poppy Blitz,

a charity group who create blazing displays of

purple poppies across the town of Whittlesey,

inPeterborough, near our Kings Dyke factory.

Designed to bring the community together and

raise funds for the Royal British Legion, the knitting

group also helps local pensioners from feeling lonely

andlistless.

Waingroves Community Woodland Trust

We donated £1,000 towards the replacement

and repair of the boundary fences at Waingroves

community woodland, located next to our

Waingroves quarry site.

Purchased by the local residents in 2011, the

woodland is now run by a group of local volunteers

and provides a haven for all.

The updated boundaries will protect and conserve

the wildlife, flora and fauna that live there, as well

as improving the experience of recreational and

educational visits from locals and visitors alike.

Construction Hubs

We have continued to support further education

colleges under our Construction Hubs scheme,

designed to forge links between education and

industry to support young people as they make

their first step in the construction sector. In 2023,

weprovided eight colleges with Construction Hub

status and donated over 75,000 bricks, along

with blocks and other products helping to train

and inspire the next generation to make a positive

contribution to UK productivity.

Fundraising events

Each year, we facilitate a number of fundraising

events across the company to raise money for our

corporate charity, from family and friends events to

raffles, colouring competitions for family members

and photography competitions, all to raise money for

our chosen charity, selected by colleagues, which in

2023 was Cancer Research UK.

One highlight was our Family Fun Day in August

for our colleagues and their friends and family

from our Hams Hall and Wilnecote sites. The event

raised£2,900 for Cancer Research UK.

Finally, as a healthy, happy and safe workforce is

important to us, we ran internal monthly awareness

campaigns focused on wellbeing. Topics shared

ranged from the signs and symptoms of different

types of cancer to drive early detection, to tips to

get a good night’s sleep, healthy eating habits,

eyehealth, caffeine dependency and many more.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

PEOPLE CONTINUED

Group sustainability reporting

The following table covers our wider sustainability metrics, which are aligned where possible to the SASB disclosure for

construction materials. We will continue to review this data suite on an ongoing basis for future reporting periods.

Targets

Pillar Topic Metric 2023 2022 2019

Planet Group CO

e emissions (Scope 1 and 2) Tonnes 255,740 295,371 319,296

Planet Group CO

e emissions (Scope 1 and 2) Kg CO

e/tonne 131.2 124.5 123.4

Planet Clay products CO

e emissions (Scope 1 and 2) Kg CO

e/tonne 248.7 244.9 256

Planet Concrete products CO

e emissions (Scope 1 and 2) Kg CO

e/tonne 25.6 20.7 20.9

Planet Electricity sourced from on-site renewables % 0.7 – –

Planet Electricity from renewable sources % 0.7 100 –

Planet Waste to landfill Kg/tonne 0.09 0.01 0.16

Product New product index (revenue from new products) % of revenue 8.9 3.7 0.6

Product Plastic packaging consumed Tonnes 1,322 1,643 1,802

Product Plastic packaging per tonne of packaged product Kg/tonne 0.74 0.76 0.82

People Health and safety – Lost time incident

frequency rate (LTIFR)

No. of accidents per

million-man hoursworked

3.24 3.79 7.35

People Percentage of employees in ‘earn & learn’ positions % 3.61 3.57 3.20

Additional disclosure

Pillar Topic Metric 2023 2022 2019

Planet Carbon emissions (Scope 1, 2 and 3) Tonnes 503,087 592,724 n/a

Planet Carbon emissions (Scope 1) Tonnes 241,598 294,352 299,679

Planet Carbon emissions (Scope 2) Tonnes 14,142 – 19,617

Planet Carbon emissions (Scope 3) Tonnes 247,348 298,372 –

Planet Energy consumption (absolute) MWh 791,638 973,315 956,266

Planet Energy consumption (kWh/tonne) kWh/tonne 406 410 369

Planet Percentage from grid electricity % 99 100 100

Planet Air quality – SO

emissions Tonnes 4,746 5,877 5,783

Planet Ultra low emission vehicles (cars) % of Fleet 81 47 n/a

Planet Delivery Fleet Efficiency mpg 8.4 8.0 7.5

Planet Mains water (absolute) m

259,856 264,200 287,101

Planet Mains water (litres/tonne) Litres/Tonne 133 111 111

Planet Waste generated Tonnes 99,989 86,755 107,609

Planet Waste recycled % 99.0 100.0 99.1

Planet Hazardous waste generated Tonnes 376 265 88

People Apprentices No. 36 27 31

People Graduates No. 4 7 7

People Charitable contributions £ 63,517 140,985 41,370

Product Output clay products Tonnes 922,642 1,092,508 1,129,173

Product Output concrete products Tonnes 1,026,961 1,273,729 1,459,242

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

OUR REPORTING DETAIL

Task Force on Climate-Related Financial Disclosures

Climate-Related Financial Disclosures

The Task Force on Climate-Related Financial

Disclosures (TCFD) has developed a suite of

consistent climate-related financial disclosures

that are useful to investors, lenders and other

stakeholders in understanding material climate-

related risks facing businesses. TCFD compliance

is mandatory for UK premium listed companies,

including Forterra, and we are pleased to be

disclosing in line with this, including scenario

analysis highlighting how different increases in

globaltemperatures could impact on our business.

The Task Force recommends that these climate-

related financial disclosures are provided in public

annual filings and as such we have provided a

comprehensive Sustainability Report covering the

topics specified by TCFD along with others across

the wider environment, social and governance

(ESG)field.

The Task Force structured its recommendations

around four thematic areas that represent core

elements of how organisations like ours operate:

• Governance;

• Strategy;

• Risk management; and

• Metrics and targets.

The Group can state that in accordance with the

Listing Rule 9.8.6 R, these Annual Report and

Accounts include climate-related financial disclosures

consistent with the TCFD recommendations.

To further assist in navigating our TCFD disclosure,

disclosure navigation table can be found on page 49.

Governance

Governance and oversight responsibility around

climate-related risks and opportunities ultimately

sits with the Board. The Board’s Sustainability

Committee is responsible for oversight of the

Group’s sustainability approach and includes the

following within its terms of reference:

a. Defining the level of the Group’s ambitions with

regard to reducing its environmental impact and

addressing climate risk;

b. Overseeing the development of the Group’s

sustainability policies, covering both

environmental and wider social (people) matters;

c. Setting challenging environmental targets in

order to meet the Group’s goals and monitoring

progress against these;

d. Monitor the Group’s reporting under TCFD,

Sustainable Accounting Standards Board (SASB)

and other protocols as appropriate; and

e. Ensuring that sustainability policy still

satisfies its desired outcomes and evaluating

management’s performance in implementing

policy and achievement against the targets set.

Strategy

We have a clear strategy to grow our business

and create shareholder value whilst at the same

time reducing our impact on the environment.

Ourstrategy recognises that sustainability is critical

in ensuring our longevity as a business. Our long-

held strategic priorities sit hand-in-hand with our

goal of reducing our impact on the environment.

Increased use of modern methods of manufacturing

improve efficiency, reducing both energy use and

waste, reducing not only our costs but the impact

we have on the environment. We have embedded

challenging sustainability targets within our strategy

(for more information please see our targets on

pages 56 and 57).

We have described in detail on pages 78 to 85 the

key climate-related risks that may impact upon our

business in the future. We also highlight the climate-

related opportunities that may present themselves

and where, if we are able to adapt quickly enough,

we may be able to gain competitive advantage.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

CLIMATE-RELATED RISKS AND GOVERNANCE

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

SCENARIO ANALYSIS

Methodology

We have undertaken a scenario analysis exercise to better

understand the possible range of risks and opportunities our

business could face under different future climate forecasts.

The approach consisted of two stages, the first being a

qualitative analysis to identify and assess the likely risks, and

the second including quantitative modelling. In line with TCFD

recommendations, we examined three scenarios (+1.5ºC,

+2.0ºC, +4.0ºC above pre-industrialised levels by 2100) in

order to capture the widest range of plausible impacts on our

business. Both qualitative and quantitative analyses included

a thorough assessment of transition and physical risks, and

were modelled around the widely recognised Representative

Concentration Pathways (RCPs) and Shared Socio-economic

Pathways (SSPs).

During the qualitative phase, granular assumptions about the

policy (Government), built environment, technological, and

physical changes associated with each warming pathway were

examined by a working group comprised of the respective

heads of relevant business functions (Strategy, Operations,

Finance, Sustainability, Marketing). The risks and opportunities

identified in the qualitative phase were then transferred to the

quantitative modelling in order to assess the scale of their

potential impact.

The quantitative modelling was undertaken with support from

a specialist corporate climate modelling consultancy, and

interrogated the warming pathways, modelling impacts across

four categories: Operations, Supply Chain, Demand, and

Physical Effects. The outputs of this quantitative process allow

us to better understand the relative impacts and opportunities

arising from climate change, and a shift to a lower carbon

macroeconomic model.

A note on warming pathways

We have used the Representative Concentration Pathways

(RCPs) as our framework for modelling different emissions

pathways and their associated impact on the climate. Toexplore

the associated market and customer trends underpinning our

commercial resilience, we have also included aview of different

socioeconomic futures (known as the Shared Socioeconomic

Pathways, SSPs).

Middle of the road – 2°C warming

The 2°C warming scenario is considered the most likely scenario, and assumes the UK remains on its current path

todecarbonisation,broadly meeting its stated policy goals, with a range of adherence to targets by other nations.

Inspecificterms, this means the UK achieves net zero by 2050 and meets its other environmental industrial strategy aims.

The scenario assumes some demand-led growth in low carbon masonry products, driven by carbon prices inflating the

costofemissionsheavy products.

Policy: The UK integrates product carbon labelling

across sectors in the near-term, although these labels do

not become mandatory until the medium-term. The UK

phases out coal usage completely by the mid 2020s and

it establishes its first net zero industrial cluster by 2040.

Building regulations stipulate that public buildings and

infrastructure must meet both embodied and whole life

carbon targets.

Built environment: Building designs become more energy

efficient, helping to drive down emissions and heating costs.

Demand for high thermal mass products such as bricks

and blocks continues to grow accordingly. Renovation and

retrofitting increase in importance as growth drivers in the

medium-term, especially as a response to green building

regulations and rising electricity prices. As buildings become

more thermally efficient, the component of embodied

emissions from materials in the whole-life carbon footprint

of buildings increases. This helps to drive steady demand

for low carbon products and sustainable alternatives, with

potential pricing premiums for the lowest emissions products.

Technology: The carbon intensity of the electricity grid

is assumed to hit current targets, and is modelled on a

linear basisto 2050. Within the building products sector,

landfilled pulverised fuel ash (PFA) is being utilised as

coal plants begintoshut down and in the long-term, the

UK’s Government support package directs funds towards

carbon capture, utilisation and storage (CCUS) technology,

CCUS-enabled ‘blue’ hydrogen, and electrolytic ‘green’

hydrogen. Carbon-cured concrete and lighter bricks become

increasingly common.

Physical: Physical impacts of climate change appear

gradually over the period, though effects on the UK are

relatively minor to2050. These effects include having eight

days per month above 25°C in summer months. Damage to

UK non-residential property is expected to increase by 26%

and flooding damage to facilities in UK coastal regions is

expected to increase by 48%.

Factors SSP1 – Steady path to sustainability SSP2 – Middle of the road SSP5 – Fossil-fuelled global growth

RCP 2.6 3.4 8.5

SSP 1 2 5

Temperature rise 1.5ºC 2-2.4ºC 4ºC

Likelihood Low High Medium

Societal response Proactive, Orderly Proactive, Disorderly Reactive

Carbon price 2030: £150/tCO

2050: £400/tCO

2030: £100/tCO

2050: £300/tCO

2030: £70/tCO

2050: £80/tCO

Share of free UK ETS

allowances

2030: 15%

2050: 0%

2030: 20%

2050: 0%

2030: 35%

2050: 10%

Grid intensity/

Energymix

Directed away from fossil fuels, towards

efficiency and renewables

Some investment in renewables but

continued reliance on fossil fuels

Directed towards fossil fuels; alternative

sources not actively pursued

Steady path to sustainability ~ 1.5°C warming

The 1.5ºC pathway assumes significant proactive public and

policy support for climate action, and a broadly unified global

response. It assumes a wide range of factors including stronger

regulatory interventions; enabling and disrupting technologies

emerging sooner; and demand-led effects being more material.

Rather than a predictive exercise in modelling, the scenario

allows us to examine the various impacts of a faster shift

towards addressing climate change.

Fossil-fuelled global growth ~ 4°C warming

The 4ºC warming scenario assumes that the global growth

continues to be driven by fossil fuels, with limited changes to

current economic models. Regulatory interventions are delayed

or absent, with a broad range of achievement of national

decarbonisation targets. Towards 2050, the effects of climate

change become readily apparent to electorates, and rapid

reactive change is effected late in the period. The pathway has

limited impact on Forterra’s near and medium-term operations,

with significant impact in the long-term.

Implications for products (under 2°C – exaggerated under

1.5°C and delayed under 4°C)

• Bricks and blocks that are manufactured at a lower carbon

intensity are likely to gain popularity

• Environmental product declarations (EPDs) and lifecycle

assessments are likely to become the norm as product labels

become mandatory

• Products that are geared toward refurbishment are likely to

gain popularity

• Products with strong thermal characteristics are likely to gain

popularity as rising energy costs increase the drive for better

insulation

• Production facilities that are close to CCUS cluster zones,

orthat have hydrogen as part of their decarbonisation plans

will likely benefit from lower costs as carbon prices increase

Resilience of our strategy

The scenario analysis we have undertaken has assisted

inbetter understanding the risks and opportunities across

abroad range of climate scenarios.

We would likely be subject to transition risks in a 1.5°C and 2°C

warming scenario, which, if left unmitigated, would likely lead

to potentially higher operational costs and lower revenues. This

is especially true if demand for low carbon products rises, a

government penalty is implemented on high-carbon products,

competitors are better able to access low carbon sources of

energy and carbon costs rise. These financial impacts would

be higher in a 1.5°C compared to a 2°C scenario as public and

policy support for climate mitigation is assumed to be stronger.

In order to avoid these risks, our strategy includes reducing the

carbon intensity of our products and factories, as demonstrated

by our targets (on pages 56 and 57), and actively pursuing the

opportunities outlined within this TCFD statement.

We would assume more physical risks in a 4°C warming

scenario, resulting in increased cost from operational disruption.

However, the majority of our factories are at low risks of extreme

weather events such as flooding and so the overall financial

impact of these risks is considered manageable.

Our strategy will continue to respond to evolving climate risk

projections, with established procedures in place to identify and

escalate climate-related risk as described on pages 52 and 78.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

SCENARIO ANALYSIS CONTINUED

Risk Management

Our wider risk management protocols are explained in detail within the risk section of this Annual Report

andcan be found in the Risk Management section starting on page 86.

Climate-related risks are captured within our existing risk management process. As part of the work originally

undertaken in 2021, we have amended our risk scanning horizon to allow the capture of longer-term climate-

related risks which may not have an immediately measurable financial impact. In identifying climate-related

risks, in accordance with the recommendations of TCFD, we have identified both the transitional risks

associated with adapting our business to a lower carbon economy, along with both the longer-term acute

risks associated with increasing severe weather events and the physical risks of long-term climate change

such as sea level rise. Our scenario based analysis considers both risks and opportunities as well as the

different time horizons over which they may impact.

Risk Potential impact (including financial) Possible mitigation/action

Scenarios

1.5°C 2°C 4°C

TransitionalRisk

Policy and legal

We recognise a number of policy and legal risks that may stem from changes to existing requirements or additional requirements being imposed on

our business. Each of the policy and legal risks could lead to an increase in our operating costs but can also be mitigated by continuing to operate

above levels demanded by our regulators and continuing to pre-empt potential changes and seek to make reductions in our emissions.

Metric link – relevant metrics around carbon intensity, electricity sourced from renewable sources, and low emissions vehicles can be found on page 77.

Enhanced or changing

reporting obligations

Increased costs due to changes

in scope and detail required as

third parties verify our emissions

and compliance

Continue to operate above the

levels demanded by regulators and

obtain third party verification where

appropriate

Short Mid Long

New or changing

legislation that may impact

our existing products;

potential for mandatory

embodied carbon limits

Loss of market share if we fail

to keep pace with changes,

movements in architectural trends

and difficulty inselling higher

carbon products tocustomers

with regulatory constraints; early

closure of existing plants due to

changes in legislation

Continue to pre-empt potential

changes and make reductions in

our emissions. Invest in improving

carbon efficiency of production, enter

partnerships for carbon capture

and storage, and use of renewable

energy. Communicate actions clearly

to stakeholders. Undertake lifecycle

assessments to provide evidence

of longevity and reusability reducing

embodied carbon over time

Short Mid Long

Exposure to litigation

in relation to our past

activities

Financial and reputation damage

tothe business

Continue to operate above the levels

demanded by regulators

Long Long Long

Increased prices of carbon

credits or reductions

in the amount of ‘free’

allowances

Rising operational costs; reduced

competitiveness against lower

carbon products

Invest in improving carbon efficiency

of production, partnerships for

carboncapture and storage, and

useof renewable energy

Short Mid Long

Limitations on availability

of suitable fuels

Inability to source sufficient lower

emission fuels to continue our

manufacturing processes

Seeking to reduce our reliance

on fossil fuels by procuring green

electricity through long-term supply

contracts and also reducing our

gas usage by improving efficiency

and utilising alternate fuels such as

hydrogen

n/a Short Mid

Limitations on availability

of suitable raw materials

Increasing costs of materials

such asPFA; increasing cost of

alternative raw materials where

demand increases

Establish alternative PFA supply

chains; source PFA alternatives and

innovate product recipes

Short Short Short

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

RISK MANAGEMENT

Key

Short: 2021 – 2024

Mid: 2025 – 2034

Long: 2035 – 2050

Risk

Opportunity

Risk Potential impact (including financial) Possible mitigation/action

Scenarios

1.5°C 2°C 4°C

TransitionalRisk (continued)

Market

As society continues to recognise the importance of sustainability and the risks that climate change presents, there is an expectation of a trend

towards greener processes and products. The risk of failing to make changes at the expected rate can be mitigated by effectively making a case

forthe sustainability credentials of our existing products, whilst at the same time investing to reduce the environmental footprint of our products

andsupply chains, and adding further greener products to our range through innovation.

Metric link – relevant metrics around carbon intensity and new product index can be found on page 77.

Customers substitute our

products with greener

alternatives, should they

exist

Reduced demand for our existing

product range and a consequential

closure of existing facilities

Focus on effective emissions

reduction taking advantage of new

market opportunities driven by

demand for lower carbon products

Mid Mid Long

We are ineffective

when investing in new

technology; either in terms

of achieving the desired

outputs or overspending

inthe process

Excessive capital expenditure may

be required where our investment is

not right first time

Ensuring that our efforts to mitigate

climate-related risks are well

resourced; especially in respect

ofproviding the highest level of

management support

Short Mid Long

Broader technology

innovation such as carbon

capture, utilisation and

storage (CCUS) and

Hydrogen usage do not

progress swiftly enough

Forterra unable to reach long-term

emission reduction targets; loss of

carbon-competitiveness to other

building products

Maintain and extend approach

topiloting transformational

technologies in the manufacture

ofbuilding products

n/a Mid Mid

Industrial cluster zones

(netzero industrial hubs

whereby all industries in a

region collectively reduce

their carbon)

Forterra sites excluded from cluster

zones; rising costs; reduced

competitiveness

Source operations near clusters

or other low carbon heat sources;

invest in decarbonising current

products or alternative products

Short Long Long

Thermal mass (the ability

of a material to absorb,

store and release heat)

recognition

Architectural trends; increased

demand for products; increased

popularity with customers needing

to reduce operational carbon

emissions of buildings

Ensure thermal properties of

masonry products are well

communicated; clearly demonstrate

energy cost savings for standard

homes

Short Mid Mid

CCUS research Potential for increased carbon-

competitiveness; increased access

to capital; increased ability to react

to demand for low carbon product

Establish partnerships and pilot

schemes

Mid Mid Long

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

RISK MANAGEMENT CONTINUED

Risk Potential impact (including financial) Possible mitigation/action

Scenarios

1.5°C 2°C 4°C

TransitionalRisk (continued)

Technology

As greener technologies emerge or existing technologies evolve we want to ensure we are in a position where we can use the latest technologies

toreduce climate-related risks and make these changes effectively, something we can mitigate by continuing to engage with technology innovators

and how they can help our business in its sustainability goals.

Metric link – relevant metrics around carbon intensity, onsite renewables, and low emissions vehicles and fleet efficiency can be found on page 77.

Changing customer

behaviour and additional

scrutiny of higher carbon

products

Reduced demand for some or all of

our products if new products cause

the desirability of masonry homes

to decrease

Continue selling products until

demand decreases; invest in

sustainable technologies, energy

oralternative product ranges

Short Mid Long

Changes in our supply

chain

Operational costs increase as

aresult of scarce raw materials,

increased energy costs or

increased taxation; increasing

theattractiveness of alternatives

Effectively engage with all

stakeholders, specifically within the

supply chain, continuing to invest

where new and innovative raw

material solutions can be utilised

Mid Mid Long

Uncertainty in our markets

and fears of economic

uncertainty damaging the

housing market

Changes in our revenue mix could

impact profitability; our reserves

of raw materials, our plant and

machinery or facilities could become

less valuable

Effectively making a case for the

sustainability credentials of our

existing products whilst ensuring

we innovate in line with changing

market trends and expectations

Mid Mid Mid

Prioritisation of energy

efficiency over additional

space in home

improvement market

Core product offering becomes

more difficult to sell; new products

focusing on thermal properties are

required to meet demand

Focus on thermal property of

products should energy efficiency

gain more popularity/regulatory

emphasis

Mid Long Long

Increased ESG weighting

from investors

Potentially reduced access to capital Ensure Forterra’s ESG disclosures

and decarbonisation plan are well

communicated to investors

Short Mid Long

Emergence of eco-brick

market

Increased demand for eco

products; pricing premiums for

low carbon products; new revenue

streams from new markets

Invest in improving carbon

efficiency of production,

partnerships for carbon capture

and carbon curing, and use of

renewable energy

Mid n/a n/a

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Risk Potential impact (including financial) Possible mitigation/action

Scenarios

1.5°C 2°C 4°C

TransitionalRisk (continued)

Reputation

We have developed the Forterra brand in recent years and possess a collection of product specific brands that are long established and well

regarded. There is an opportunity to further strengthen these brands with a sustainability focus however if we fail to do so the reputational cost

couldbe significant. This can be achieved through effective action on climate-related matters and the increased education of the sustainability

attributes of our products.

Metric link – relevant metrics around carbon intensity and waste generated can be found on page 77.

Shifts in consumer

preferences

Reduced demand for our products

due to change in customer

perception. Architectural trend

changes; greater difficulty in

selling our products compared to

alternatives

Focus on reducing carbon intensity

ofclay bricks, whilst also building

outa more sustainable alternative

product range

Mid Mid Long

Negative perceptions

of our business/sector;

restrictions in access to

debt and capital

Have greater difficulty in obtaining

planning permissions for new

capacity and struggle to attract

employees. Increasing cost of

equity and debt as investors and

lenders switch to perceived greener

investments

Fully engaging with our stakeholders

and increasing the education

around the sustainability credentials

of our products with a >100-year

life if homes built from brick, our

products are inherently sustainable

Mid Mid Long

Competitors engage

in ‘greenwash’

communication

(communication that

misleads people as to

the green credentials of

certain products)

Difficulty in selling products

to environmentally conscious

customers; reduced access to

capital with ESG-driven investors

Communicate widely on industry

challenges; establish industry

standards for lower carbon

products; provide detailed

decarbonisation plans to ensure

credibility

n/a Mid Long

Alternative building

materials

Potential for new revenue streams;

Increased access to capital;

Increased ability to react to demand

for low carbon products

Invest in low carbon material

alternatives and increase

communications spend to promote

use of innovative sustainable

materials

Mid n/a n/a

Population increase

through migration

Increased demand for products Opportunity to build more homes,

ensuring materials are able to meet

increasingly stringent sustainability

focused building regulations

n/a Long Long

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

SUSTAINABILITY REPORT

RISK MANAGEMENT CONTINUED

Risk Potential impact (including financial) Possible mitigation/action

Scenarios

1.5°C 2°C 4°C

PhysicalRisk

Acute

We have seen a number of weather-related events (such as flooding) in recent years and recognise that these risks have the potential to

increaseinlikelihood and have a greater impact in the coming years. We recognise that we cannot stop these events from occurring alone.

However,wecanensure that we are better prepared for them or can mitigate their impact through suitable planning.

Site flood risk Increased insurance premiums;

both short-term and prolonged

inability to operate facilities

potentially causing damage that

could be expensive to repair and

leading to lost sales

Suitable planning, capital

expenditure and preventative

maintenance

n/a n/a Long

Increased operating

temperatures

Increased operational costs for

heating and cooling and/or lack

ofmains water

Suitable planning, capital

expenditure and preventative

maintenance

n/a n/a Long

Chronic

We also recognise that the impact of rising sea levels over time triggered by increasing temperatures, may lead to some low-lying areas of the

country becoming unsuitable for housing.

Variability in weather

patterns

Loss of working days; Loss of

productive days; stock shortages

Increase production during winter;

new supplier partnerships in lower

risk zones

n/a n/a Long

Rising sea levels Low-lying areas of the country

becoming unsuitable for housing

and driving demand for use of our

product elsewhere

Ensure ability to supply at level

the market demands whilst also

continuing to manufacture the

products we do that sacrificially

address flooding issues

n/a n/a Long

1. Noting their long term time horizon we do not currently report any relevant metrics in relation to our physical risks.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

NON-FINANCIAL AND SUSTAINABILITY INFORMATION STATEMENT

This section of the strategic report constitutes Forterra plc’s Non-Financial and Sustainability Information Statement, produced

to comply with Section 414CB of the Companies Act 2006. The requirements are addressed in this section by means of cross

referencing to indicate which sections of the narrative they are embedded.

Non-Financial Information Section Pages

Description of our Business Model Our Business Model 22-23

Principal Risks and Uncertainties Risk Management and Key Risks 86-94

Non-Financial KPIs Key Performance Indicators / Sustainability Report 38-39, 56-57

Climate Related Financial Disclosures Sustainability Report 49, 78-85

Area Key policies

Further information regarding

related risks and performance

Employees Health and Safety Policy, Health and Wellbeing Policy,

Flexible Working Policy, Maternity Leave Policy,

Paternity Leave Policy, Adoption Leave Policy,

Bereavement Policy, Diversity, Inclusion and

Respect at Work Policy

72-77

Climate Related Matters including TCFD disclosures Sustainability Policy 48-85

Human Rights Anti-Slavery and Human Trafficking Policy 74

Social matters Code of Business Conduct Policy 72-76

Anti-bribery and corruption Bribery Act Policy, Conflicts of Interest Policy,

Whistle Blowing Policy, Competition Law Policy,

Gifts and Hospitality Policy

71, 124

Business Model — 22-23

Principal Risks — 86-94

Overview

Effective risk management is critical to successfully

meeting our strategic objectives and delivering

long-term value to our shareholders. Instilling a

risk management culture at the core of everything

we do is a key priority. Our risk management

policy, strategy, processes, reporting measures,

internal reporting lines and responsibilities are

wellestablished.

In a year where we have experienced a macro-

economic shock, impacting demand with high

inflation and the associated increases to interest

rates, we remain watchful of further impacts to our

core markets and how demand for our products

continues to develop.

We continue to monitor this alongside numerous

other rapidly evolving business risks; implementing

mitigating controls and actions as appropriate.

Details of our principal key risks are shown further

in the table overleaf.

Our risk management objectives remain to:

• embed risk management into our management

culture and cascade this down through the

business;

• develop plans and make decisions that are

supported by an understanding of risk and

opportunity; and

• anticipate change and respond appropriately.

Sustainability

Sustainability continues to be a key focus within

our business with the increasing need to make

Forterra more resilient against the potential effects

of climate change, and evolving sustainability driven

risks are highlighted within extensive disclosure in

this Annual Report. These reflect both the impact

ofour operations on the environment but also

thechallenging targets we have set to reduce this,

targeting net zero by 2050 in line with the Race

toZero.

The Board is committed to compliance with the

requirements of the Task Force on Climate-Related

Financial Disclosure (TCFD) and comprehensive

disclosure on both short and long-term climate

risks are included in our Sustainability Report.

Throughout 2023, the Board’s Risk and Sustainability

Committee provided oversight and governance

over the most significant risks the business faces in

the short, medium and long-term, and recognising

the importance of the subject matter, from January

2024 this will become the a standalone Sustainability

Committee.

Key risks

Key risks are determined by applying a standard

methodology to all risks, considering the potential

impact and likelihood of a risk event occurring, before

then, considering the mitigating actions in place, their

effectiveness, their potential to be breached and the

severity and likelihood of the risk that remains. This

is a robust but straightforward system for identifying,

assessing and managing key risks in a consistent

and appropriate manner.

Management of key risks is an ongoing process.

Many of the key risks that are identified and

monitored evolve and new risks regularly emerge.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

RISK MANAGEMENT AND KEY RISKS

RISK MANAGEMENT FRAMEWORK

The foundations of the internal control system are the

first line controls in place across all our operations.

This first line of control is evidenced through monthly

responsible manager self-assessments and review

controls are scheduled to recur frequently and

regularly. Policies, procedures and frameworks in

areas such as health and safety, compliance, quality,

IT, risk management and security represent the

second line of controls and internal audit activities

represent the third.

Management continue to monitor risk closely and

put in place procedures to mitigate risks promptly

wherever possible. Where the risks cannot be

mitigated, management focus on monitoring the risks

and ensuring the Group maximises its resilience to

the risks, should they fully emerge.

Risk appetite

The Group’s risk appetite reflects the fact that

effective risk management requires risk and reward

to be suitably balanced. Exposure to health and

safety, financial and compliance risks are mitigated

as far as is reasonably practicable.

The Group is however prepared to take certain

strategic, commercial and operational risks in pursuit

of its objectives; where these risks and the potential

benefits have been fully understood and reasonable

mitigating actions have been taken.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

The Board (through the Risk and Sustainability Committee and

Audit Committee) have:

• Received updates from management on specific key risks

• Continued to review progress against risk management

actions and internal control priorities

• Considered the effectiveness of the risk management

andinternal control environment

• Regularly reviewed all principal risks, heat maps

andemerging risks

• Engaged with management on internal project risksregularly

The Executive Committee and the Risk Steering Group have:

• Met frequently to discuss the risk environment, Group risk

management activity, identify risks and gaps, and appraise

likelihood, impact and risk mitigation

• Identified risk priority areas and focused on the key risks

inthese areas

• Accepted risk exposure in other areas to ensure appropriate

prioritisation of key risks

Risk and Internal Audit have:

• Followed a risk-based internal audit plan

• Supported appointed risk owners throughout theyear

• Continued to track responses of monthly control self-

assessments from operational control owners and closure

ofinternal control improvement actions

Operational managers have:

• Taken ownership of key local risks

• Completed internal control self-assessments monthly

toevidence operational controls are inplace

• Escalated risks as appropriate

BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

RISK AND INTERNAL AUDIT

OPERATIONAL MANAGEMENT

Top downBottom up

1. Health and Safety

Principal Risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

We continue to work

toensure the safety

ofemployees exposed

to risks such as the

operation of heavy

machinery, moving

parts and noise, dusts

and chemicals.

Safety remains our number one priority. We target an accident-free

environment and have robust policies in place covering expected levels

ofperformance, responsibilities, communications, controls, reporting,

monitoring and review.

Our safety focus in 2023 continued to be around effective employee

engagement and communication focused on our Golden Rules and Zero

Harm. In the period we have delivered a further programme of behavioural

safety awareness training emphasising the importance of our safety related

golden rules.

Executive sponsor:Neil Ash

Link to strategy

Appetite

Gross change

Net change

Safety first is

embedded in all

decision-making and is

never compromised.

Reducing accidents

and ill-health is critical

to strategic success.

2. Sustainability/climate change

Principal Risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

We recognise the

importance of

sustainability and

climate change

andboth the positive

and negative impacts

our products and

processes have on

theenvironment.

We recognise the positive impact that our products have on the built

environment across their lifespan and are keen for the durability, longevity

andlower lifecycle carbon footprint of our products to be championed and

better understood.

Short-term transitional sustainability risks include increasing regulatory

burdenor cost, an inability to adapt our business modelto keep pace

with new regulation or customer preferences changing more quickly than

anticipated ortoo quickly for our R&Dto keep pace.

Several longer-term physical risks could have a material impact onthe

business. These risks include more severe weather impacts, such as flooding,

and potentially changes to the design of buildings in order to adapt to different

climatic conditions.

A comprehensive sustainability report is included within this AnnualReport

andis also available as a separate document, providing detailed disclosure

ofthe sustainability related risks facedby our business.

Our desire to reduce our impact upon the environment sits hand-in-hand

withmaximising the financial performance of our business; by investing

inmodernising our production facilities not only do we reduce energy

consumption and our CO

emissions, but we also benefit financially from

reducing the amount of energy and carbon credits we need to purchase.

Acknowledging the continued importance of the subject matter, from January

2024, all sustainability risks will be governed by the newly formed standalone

Sustainability Committee.

Executive sponsor:NeilAsh and George Stewart

Link to strategy

Appetite

Gross change

Net change

Focus from all

stakeholders has been

maintained in 2023

andsustainability

remains a high priority

for management both

inthe short, medium

and long-term.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

RISK MANAGEMENT AND KEY RISKS

Link to strategy Risk appetite Change

Safety and engagement

Strengthen the core

Sustainability

Beyond the core

Low appetite

Balanced appetite

High appetite

Increased

Decreased

No change

3. Economic conditions

Principal Risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Demand for

our products is

closely correlated

with residential

and commercial

construction activity.

Changes in the wider

macro-economic

environment can have

significant impact in

this respect and we

monitor these closely

as a result.

Understanding business performance in real-time, through our customer

order book, strong relationships across the building sector, and a range of

internal and external leading indicators, help to inform management and

ensure that the business has time to respond to changing market conditions.

2023 saw the continuation of the cyclical downturn in the UK housing market,

driven by Government economic policy which resulted in significant increases

in borrowing costs and accordingly mortgage affordability; impacting

demand for housing in the short-term. However, we recognise that ultimately

there remains a shortage of housing in the UK, financing is accessible

(though now more expensive) and the population continues to grow and

as such we remain confident in the medium to long-term outlook and have

decreased this risk accordingly. We additionally remain watchful of the wider

geopolitical landscape, accepting the impact that changes in this respect

canhave on our business.

Across 2023 we displayed our ability to flex output and slow production when

customer demand requires this. This has been effective in the past and we

believe the changes made to our operational footprint during the year leave

us well positioned to take advantage of attractive market fundamentals in the

medium to long-term.

Executive sponsor: Neil Ash

Link to strategy

Appetite

Gross change

Net change

Macro-economic

conditions have

deteriorated in the past

year and demand for

our products has fallen

as a result.

UK brick despatches

have fallen to levels

not seen since 2009

and as such the risk

of further decline has

reduced. We expect

this to be the bottom

of the cycle and as

such have adapted

our business to align

production to sales.

4. Government action and policy

Principal Risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

The general level and

type of residential and

other construction

activity is partly

dependent on the

UK Government’s

housebuilding policy,

investment in public

housing and availability

of finance.

Changes in

Government support

towards housebuilding

could lead to a

reduction in demand

for our products.

Changes to

Government policy or

planning regulations

could therefore

adversely affect

Group performance.

We participate in trade associations, attend industry events and track

policy changes which could potentially impact housebuilding and the

construction sector. Such policy changes can be very broad, covering

macro-economic policy and including taxation, interest rates, mortgage

availability and incentives aimed at stimulating the housing market. Through

our participationin these trade and industry associations we ensure our

views are communicated to Government and our Executive team often meet

with both ministers and MPs.

Where identified, we factor any emerging issues into models of anticipated

future demand to guide strategic decision-making.

As we head into an election year in the UK, lack of quality housing

remains akey political issue and as such we anticipate current and future

governments willcontinue to incentivise construction of new homes, even

ifdifferent political ideologies demand different models of home ownership.

Changes in monetary policy and the rapid associated increase to interest

rates has had a significant impact on mortgage affordability, an additional

challenge ina period that has also seen the end of the Help to Buy scheme.

We therefore consider a lack of broader support in the longer term unlikely

should it risk a reduction in the supply of new high-quality homes where

asignificant shortfall still exists.

Government policy around planning reform also has the potential to influence

demand for our products and we remain watchful as to any further potential

changes in this area and their impact on the construction of new homes.

Executive sponsor:Neil Ash

Link to strategy

Appetite

Gross change

Net change

We continue to invest

significantly in growth

– in terms of both

capacity and range.

This investment is

made despite the

uncertainty presented

by changes in

Government policy.

Whilst the looming

general election

could have both

positive (impact on

housebuilding) and

negative (increased

uncertainty) impacts,

current levels of

demand, being as

they are have led to

management’s view

that the risk of further

deterioration has

decreased.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

5. Residential sector activity levels

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Residential

development

(bothnewbuild and

repair, maintenance

and improvement)

contributes the

majority of Group

revenue. The

dependence of Group

revenues on this

sector means that

any change in activity

levels in this sector

will affect profitability

and in the longer-term,

strategic growth plans.

We closely follow the demand we are seeing from our key markets, along

with market forecasts, end user sentiment, mortgage affordability and credit

availability in order to identify and respond to opportunities and risk. Group

strategy focuses upon our strength in this sector whilst also continuing to

strengthen our commercial and specification offer.

The impact of increasing interest rates and the wider macroeconomy on this

sector had a notable impact on demand levels across 2023. Whilst we remain

watchful entering 2024, we are seeing evidence from our customers that this

decline has plateaued and have reduced this risk accordingly.

The investment in the redevelopment of the Wilnecote brick factory which

willsupply the commercial and specification market will provide a degree

ofdiversification away from residential construction, further insulating the

Groupfrom the impact of future demand cycles.

Executive sponsor:Neil Ash

Link to strategy

Appetite

Gross change

Net change

Serving the residential

construction market

lies at the heart of our

strategy.

Whilst we will seek

opportunities to

broaden our offering,

we continue to see

residential markets

ascore.

With demand levels

reduced to those

seen in the global

financial crisis, the risk

of further reductions

in residential

construction has

been deemed to

bedecreased.

6. Inventory/working capital management

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Ensuring sufficient

inventories of our

products is critical

to meeting our

customers’ needs,

though this should not

be at the expense of

excessive cash tied

up in working capital.

Whilst the ability to

serve our customers is

key, where excessive

inventory starts to be

built, management

must ensure that

production is aligned

to forecast demand.

Cash tied to surplus

working capital

increases financing

costs and could

ultimately impact

the Group’s liquidity,

restricting the amount

of cash available for

other purposes.

After a long period of historically low stock levels, the recent softening in

demand has allowed these stocks to be replenished.

Strong customer relationships and some degree of product range

substitution have historically mitigated the risk of inventory levels being

toolow, and now that levels are growing these relationships remain key,

ensuring that visibility of our customers' needs and demand levels can

accurately be matched to our production levels.

Where demand does fall, it is crucial to manage working capital levels

carefully and ensure excessive cash is not tied up in inventory. We have

historically demonstrated our ability to flex capacity effectively, allowing

optimum efficiency and utilisation of our operational footprint. This has

beenfurther exemplified inthe period with the mothballing of our Howley

Park and Claughton brick production facilities, reducing our fixed cost base

whilst ensuring our customers' needs can still be met.

Executive sponsor:Adam Smith, Darren Rix and Steve Jeynes

Link to strategy

Appetite

Gross change

Net change

Managing capacity

sufficiently to prevent

tying up excessive

amounts of working

capital in stock, but

ensuring that customer

demand can continue

to be met is crucial

to our success. Due

to declining demand

in 2023 and the time

necessary to efficiently

adjust production we

have invested over

£50m in building

inventories in the

period. It is important

we do not build

further inventory and

as such have taken

management actions

to reduce production

and realise fixed cost

savings, increasing this

risk to reflect this.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

RISK MANAGEMENT AND KEY RISKS

CONTINUED

7. Customer relationships and reputation

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Significant revenues

aregenerated from

sales to a number

of key customers.

Where a customer

relationship

deteriorates there is

arisk to revenue and

cash flow.

One of our strategic priorities is to be the supply chain partner of choice

for our customers. By delivering excellent customer service, enhancing our

brands and offering the right products, we seek to develop our long-standing

relationships with our customers. Regular and frequent review meetings

focus on our effectiveness in this area.

In a softer demand environment, an inability to maintain these relationships

could manifest itself in loss of market share, and if not managed correctly,

bedetrimental in the longer term in periods of stronger demand.

To mitigate these risks we remain in constant communication with our

customers ensuring they are well informed of the challenges faced by

ourbusiness. We remain particularly conscious of potential impacts on

ourcustomer service and selling prices as we aim to retain our margins

in a time where our customers are also facing challenging conditions.

Executive sponsor:Adam Smith and Darren Rix

Link to strategy

Appetite

Gross change

Net change

Customer focus is

a key priority for all

employees. Having

increased across

recent periods of

strong demand, in a

softening market this

risk remains equally

heightened.

8. Attraction, retaining and developing employees

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

We recognise that our

greatest asset is our

workforce and a failure

to attract, retain and

develop talent will be

detrimental to Group

performance.

We understand where key person dependencies and skills gaps exist and

continue to develop succession, talent acquisition, and retention plans.

We continue to focus on safe working practices, employee support and

strong communication/employee engagement.

Notwithstanding a softer demand environment, challenges associated

withlabour availability remain across the business in key skilled areas and

it is crucial that this continues to be addressed to ensure the continued

success of the Group which is dependant on our people.

Executive sponsor:Neil Ash

Link to strategy

Appetite

Gross change

Net change

Our people have

always been pivotal

to our business and

we must remain

cautious of the

previously increased

risk associated with

ensuring we attract,

retain and develop

ouremployees.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

9. Innovation

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Failure to respond to

market developments

could lead to a fall

in demand for the

products that we

manufacture. This

in turn could cause

revenue and margins

to suf fer.

Strong relationships with customers as well as independently administered

customer surveys ensure that we understand current and future demand.

Close ties between the Strategy, Operations and Commercial functions

ensure that the Group focuses on the right areas of research and

development.

In a period of softer demand for our products, providing innovative products

for both our core markets and the wider construction market is of increased

importance and we strive to ensure that we are in a position to do so.

New product development and related initiatives therefore continue and we

continue to commit to further investment in research and development with

clear links between investment in R&D and the work undertaken in relation

tosustainability.

Executive sponsor:Neil Ash

Link to strategy

Appetite

Gross change

Net change

The Group is willing

to invest in order

to grow where the

right opportunities

present themselves.

We have invested in

the appropriate skills

so that opportunities

can be identified and

progressed, and

we are committed

to deploying R&D

to reduce the

environmental footprint

of our operations.

10. IT infrastructure and systems

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Disruption or

interruption to IT

systems could

have a material

adverse impact on

performance and

position.

We have undertaken a period of investment in consolidating, modernising

and extending the reach of our IT systems in recent years, maintaining ISO

27001 Information Security accreditation. This investment has ensured our

ability to maintain the level of customer service that our customers expect,

one of our core business values.

We continue to increase our resilience in this area, ensuring that our people

understand their role in any attempt to compromise our cyber security and

regular training and tests are carried out as such.

Executive sponsor:Ben Guyatt

Link to strategy

Appetite

Gross change

Net change

Investment in IT

has been a priority

in recent years to

mitigate risk. The

downside to IT risks

significantly outweigh

any upside and our

risk appetite reflects

this. Our assessment

of the risk in this area

remains unchanged.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

RISK MANAGEMENT AND KEY RISKS

CONTINUED

11. Business continuity

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

Performance is

dependent on key

centralised functions

operating continuously

and manufacturing

functions operating

uninterrupted. Should

we experience

significant disruption

there is a risk that

products cannot be

delivered to customers

to meet demand

andall financial KPIs

may suf fer.

Having made plans to allow key centralised functions to continue to operate

in the event of business interruption, remote working capabilities have been

maintained and continually strengthened in recent years, ensuring the

business is able to continue operating with minimal disruption.

Where a scenario without a pre-envisaged plan is faced, our business

continuity policy allows managers to apply clear principles to develop plans

quickly in response to emerging events.

We consider climate-related risks when developing business continuity plans

and have learnt lessons from weather related events in recent years which

inform these plans.

Loss of one of our operating facilities through fire or other catastrophe

would impact upon production and our ability to meet customer demand.

Working with our insurers and risk advisors we undertake regular factory

risk assessments, addressing recommendations as appropriate. We accept

it is not possible to mitigate all the risks we face in this area and as such we

have a comprehensive package of insurance cover including both property

damage and business interruption policies.

Executive sponsor:Neil Ash and Ben Guyatt

Link to strategy

Appetite

Gross change

Net change

The business’s

ability to operate

uninterrupted atall

times is pivotal to its

ongoing success.

Assuch, in 2023

this risk remains

unchanged.

12. Project delivery

Principal risk and

whyit is relevant

Key mitigation, change and sponsor Rationale for appetite

/ rating

We have an extensive

program of capital

investment ongoing

within our business

which will see three

large projects to add

production capacity.

Ensuring these

projects are delivered

as intended is essential

tothe future success

of thebusiness.

The 2023 commissioning of our Desford brick factory represents the largest

capital investment that we have ever made. Despite the virtually complete

Desford project, our vigilance in managing project delivery across the

business has not diminished and the focus of this risk has in turn shifted

toongoing projects at both Wilnecote and Accrington.

Management closely monitor all current strategic projects for potential

challenges, cost over-runs and delays and act promptly to ensure that risks

are mitigated.

Unexpected supplier delays have delayed the recommissioning of the

newWilnecote factory into H2 of 2024 with management actively liaising

withsuppliers to ensure delays are mitigated wherever possible.

Management recognise the additional risks posed by running concurrent

major projects, and to mitigate, separate project management structures

are in place for each respective project and where common suppliers are

involved procedures are in place to ensure they retain sufficient capacity

todeliver on both projects without significant risk.

Executive sponsor:George Stewart

Link to strategy

Appetite

Gross change

Net change

Management and

the Board are closely

monitoring the

ongoing expansion

projects atWilnecote

and Accrington. Risk

rating maintained

recognising the

strategic imperative

of both projects to

thefuture success

oftheGroup.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

Risk heat map reflecting evolving

natureofcertain risks

Recognising that impact and likelihood are

equally important when assessing risk, the

chart below demonstrates both of these

characteristics. Netimpact is a financial

measure of severity and netlikelihood reflects

the chance of the risk occurring within the

next three years. Given the risk environment

that we are currently operating in, wehave

additionally highlighted those risks deemed

to beevolving.

KEY RISKS

1 Health and safety

2 Sustainability/climate

change

3 Economic conditions

4 Government action

and policy

5 Residential sector

activity levels

6 Inventory/working

capital management

7 Customer relationships

and reputation

8 Attracting, retaining and

developing employees

9 Innovation

10 IT infrastructure and

systems

11 Business continuity

12 Project delivery

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

RISK MANAGEMENT AND KEY RISKS

CONTINUED

Evolving risk

Impact rating

HighLow

Likelihood rating

HighLow

RISK HEAT MAP

In accordance with the provisions of The UK Corporate Governance

Code 2018 the Board have assessed the prospects of the Company

in order to develop a reasonable expectation that the Company will

be able to continue in operation and meet its liabilities as they fall due.

The Board have reviewed the Company’s position and principal risks

over a period of three years commencing from the balance sheet

date in order to form this expectation. The Board believe that this

is an appropriate timeframe to consider as it aligns with its current

strategic and financial planning horizon. In making this statement,

the Board have considered the principal risks facing the Group, as

detailed within the Risk Management and Key Risks section of the

Annual Report on pages 86 to 94, as well as the climate-related risks

as detailed on pages 81 to 85 of the Sustainability Report.

The Group’s debt facility comprises a committed revolving credit

facility (RCF) of £170m extending to January 2027 with an option for

an extension to July 2028 subject to lender consent. At the balance

sheet date, the cash balance stood at £16.0m and after allowing for

£9.5m of the facility which is currently carved out to be used for the

provision of letters of credit, an undrawn balance of £50.5m was

available against the Group’s facility, with reported net debt before

leases of £93.2m (2022: £5.9m) (net debt is presented inclusive

of capitalised arrangement fees). The facility is normally subject

tocovenant restrictions of net debt / EBITDA (as measured before

leases) of less than three times and interest cover of greater than

fourtimes. The Group also benefits from an uncommitted overdraft

facilityof £10m.

The Group has traded comfortably within these covenants

throughout 2023 and whilst it anticipates remaining within these

covenants during 2024, given the combination of the Group’s

reduced EBITDA and increased net debt, driven by inventory build,

capital outflows and higher interest rates, amended covenants

have been agreed with the Group’s lenders to provide additional

headroom in the short-term. Accordingly, the Group’s leverage

covenant has increased to four times in June 2024 and 3.75 times

in December 2024 with interest cover decreasing to three times in

December 2024. In addition, quarterly covenant testing has been

introduced for the period of the covenant relaxation. As such,

inSeptember 2024, leverage is set at four times and interest cover

three times and in March 2025 leverage is set at 3.75 times and

interest cover at three times. The covenants return to normal levels

from June 2025 with testing reverting to halfyearly.

The Board have reviewed the Group’s financial forecasts and any

consequential future funding requirements against committed

external borrowing facilities regularly to confirm ongoing viability.

The scenarios modelled include a base case, a severe but plausible

downside scenario and a reverse stress test scenario, which is

considered remote. These scenarios have been modelled using

management’s experience of the business, including the impact of

the 2008 global financial crisis on the Group and more recently, the

impact of the pandemic. The plausible downside scenario modelled

for viability purposes is aligned to the more severe of the two used for

going concern modelling, from the perspective of assumed EBITDA.

Assumptions underpinning these scenarios are detailed below.

Base case

• 2023 was characterised by a large growth in inventory and the

management actions taken in 2023 will address this such that

in2024 production will be more closely aligned to sales.

• Capex outflows on the Group’s three strategic investments will

be almost complete during 2024 with capital spend significantly

reduced thereafter until a recovery in market conditions facilitates

a reduction in the Group’s net debt.

• The base case scenario is aligned to our current demand

expectations with short-term market conditions remaining

challenging, with volumes for 2024 that modelled as 24%-36%

lower than 2022 (product dependent). This is followed by

amodest but steady recovery commencing in 2025, where

volumes remain 20%-27% lower than 2022, which continues

through into 2026 with volumes 11-17% behind 2022 levels.

• Under this scenario, net debt is forecasted to remain broadly

inline with December 2023 levels at the end of 2024, returning,

toa net cash (before leases) position by the end of 2026.

Plausible downside

• The Group’s plausible downside scenarios take into account the

current levels of market demand which are already approximately

30% below levels last seen in 2022, meaning current demand is

in line with levels last seen in the global financial crisis. As such

isit is not considered plausible that demand could fall further than

within this scenario.

• The plausible downside scenario assumes that, product

dependent, demand falls by 29-40% in 2024 relative to 2022,

alongside a 2% sales price erosion, before increasing to levels

stillremaining 25-37% behind 2022 in 2025, and 21-31% lower

than 2022 in 2026.

• Under this scenario, net debt (before leases) is still forecasted

todecrease to c.£70m by the end of 2026.

• As referred to in the going concern note on pages 158 and 159,

given the short-term market dynamics which when coupled

with committed capital expenditure elevates borrowings in the

short-term, management have also separately modelled, for

2024 and 2025, the impact of a drop in sales volumes which

are 29-43% lower than those experienced in 2022 in 2024. In

this scenario, management have also assumed a number of

cost-saving mitigations will be implemented across the business.

Due to the quantum of management mitigations modelled, the

covenants testing under this alternative 2024 downside have

greater headroom than the original plausible downside, providing

comfortto management over the Group’s ability to adapt as

required to more severe scenarios.

Reverse stress test

• The reverse stress test is modelled to support management and

the Board in understanding what the quantum of fall in Group

trading and performance would need to be to result in a covenant

breach. The reverse stress test indicated, that should volumes

fall by between 36% and 46% (product line dependent) versus

those seen in 2022, the Group would be at risk of breaching its

covenants. This scenario is considered remote.

The scenarios modelled above allow for the consideration of several

of the Group’s key risks occurring, with potential contributing factors

that include Government policy, particularly uncertainty associated

with the forthcoming general election, a continuing economic

downturn, a prolonged reduction in residential sector activity levels

ornew product development in the sector.

Management are comfortable confirming that the Group remains

profitable under both the base and plausible downside scenarios.

In addition, there remains the option to further flex the cost base

through production reductions, curtailment of dividend distributions

and the sale of land and buildings. Should market conditions

deteriorate further. The Directors can confirm that they have a

reasonable expectation that the Group will continue in operation

andmeet its liabilities as they fall due over the period of assessment.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

STRATEGIC REPORT

VIABILITY STATEMENT

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

In this section

Board of Directors

101 Executive Committee

102 Corporate Governance Statement

116 Nomination Committee Report

118 Audit Committee Report

125 Risk and Sustainability Committee Report

128 Remuneration Committee Report

157 Directors’ Report

160 Statement of Directors’ Responsibilities

GOVERNANCE

Remuneration

Committee

Nomination

Committee

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

GOVERNANCE AT A GLANCE

Attendance

B A RS R N

Justin Atkinson 8/8 n/a 4/4 3/3 2/2

Neil Ash 6/6 n/a 3/3 n/a n/a

Stephen Harrison 2/2 n/a 1/1 n/a n/a

Ben Guyatt 8/8 n/a 4/4 n/a n/a

Katherine Innes Ker 8/8 4/4 4/4 3/3 2/2

Vince Niblett 8/8 4/4 4/4 3/3 2/2

Divya Seshamani 8/8 4/4 4/4 3/3 2/2

Martin Sutherland 8/8 4/4 4/4 3/3 2/2

Gina Jardine 6/6 2/2 3/3 1/1 1/1

Board composition and changes

Neil Ash joined the Board as Chief Executive Officer and

Gina Jardine as an Independent Non-Executive director,

both effective April 2023.

Audit

Committee

Risk and

Sustainability

Committee

Board

Risk Management

Strategy

M&A

Manufacturing

Finance

Commercial

Corporate governance

Construction sector

Health & Safety

HR and talent development

Sustainability

See page 114 for further information.

BOARD SKILLS MATRIX

Justin Atkinson

Non-Executive Chairman

Neil Ash

Chief Executive Officer

Ben Guyatt

Chief Financial Officer

Katherine Innes Ker

Senior Independent

Non-Executive Director

Vince Niblett

Independent

Non-Executive Director

Martin Sutherland

Independent

Non-Executive Director

Divya Seshamani

Independent

Non-Executive Director

Gina Jardine

Independent

Non-Executive Director

Frances Tock

Company Secretary

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

BOARD OF DIRECTORS

0604

0907 08

0301 02

JUSTIN ATKINSON

Non-Executive Chairman

Appointment

Justin Atkinson joined the Board on 11 April 2016 and

was appointed as Chairman in May 2019.

Skills, experience and qualifications

Justin has a proven track record of driving performance

with over 30 years of experience at senior management

or director level of businesses, across a range of

disciplines, including engineering and construction.

Justinprovides the Board with strong leadership skills

having spent 11 years as CEO of Keller Group plc, the

international ground engineering contractor, where prior

to this he served as CFO and Chief Operating Officer.

More recently, Justin has also gained a wealth of Non-

Executive Director experience in a variety of industries.

Justin is a Chartered Accountant and holds a Bachelor’s

degree in Accountancy from Glasgow University and

theadvanced management programme qualification

fromINSEAD.

Other Directorships

Senior Non-Executive Director of Kier Group plc,

Non-Executive Director of James Fisher and Sons plc.

NEIL ASH

Chief Executive Officer

Appointment

Neil Ash was appointed Chief Executive Officer of

Forterraplc on 23 April 2023.

Skills, experience and qualifications

Neil has almost three decades’ experience in the

buildingmaterials sector and an impressive track

recordof improving performance and delivering growth.

Previously at Etex, the Belgian lightweight building

materials manufacturer, he led the €2.4bn revenue

Building Performance division. During his time at

EtexNeiloversaw major capex projects, significant

acquisitions, and developed its sales approach which

delivered strong top line growth.

His experience includes 15 years at Lafarge, where

heundertook many roles, including the role of Vice

President International Business Development and

Salesand Commercial Director UK & Ireland of

LafargePlasterboard.

Neil has attended executive education programmes

atINSEAD (France) and IMD (Switzerland).

BEN GUYATT

Chief Financial Officer

Appointment

Ben Guyatt was appointed to the Board on 1 January

2020 and prior to this, served as Director of Finance

andCompany Secretary.

Skills, experience and qualifications

Prior to his appointment as CFO, Ben held the role of

Director of Finance and Company Secretary, playing

akey role in the separation of the business from

HeidelbergCement and the subsequent listing on the

London Stock Exchange. Drawing upon his extensive

experience with the business and financial acumen,

Benkeeps the Board updated enabling informed

decision-making. Ben joined Hanson plc in 2006 and

held a variety of senior finance and strategy roles within

Hanson and HeidelbergCement. Previously, Ben held

financial management roles at insurance broker, Heath

Lambert. Ben is a Chartered Accountant and holds a

Bachelor of Arts degree with honours in Accounting and

Finance from the University of the West of England.

KATHERINE INNES KER

Senior Independent Non-Executive Director

Appointment

Katherine Innes Ker was appointed to the Board on

1September 2017 as an Independent Non-Executive

Director and was appointed as Senior Independent

Non-Executive Director in May 2019.

Skills, experience and qualifications

Katherine has gained extensive executive and non-

executive experience across a range of sectors in a

career spanning over 30 years. Katherine began her

business career as a city financial analyst and has since

held many non-executive directorships with a particular

wealth of experience in the housebuilding sector.

Katherine was a Non-Executive Director of Taylor

Woodrow/Taylor Wimpey for 10 years and subsequently

of St Modwen Properties and Vistry Group plc. This

experience allows Katherine to provide valuable

insightinto our markets from a customer perspective.

Katherine has over 20 years’ experience as a Chair

ofRemuneration Committees, and as a Senior

Independent Director. Katherine is a Graduate ofOxford

University, holding a Masters degree in Chemistry and a

Doctorate inMolecular Biophysics.

Other Directorships

Non-Executive Chairman of Mortgage Advice Bureau plc,

Non-Executive Director at Ground Rents Income Fund

plc and Senior Independent Non-Executive Director at

Stelrad Group Plc.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

VINCE NIBLETT

Independent Non-Executive Director

Appointment

Vince Niblett was appointed to the Board on 8 February

2019 as an Independent Non-Executive Director.

Skills, experience and qualifications

Vince was previously a Partner at Deloitte where he held

a number of senior roles including membership of the UK

Board of Directors and Global Managing Director, Audit &

Enterprise Risk Services before retiring in 2015.

During his career at Deloitte, he served some of the firm’s

most significant public company clients, working with

them on commercial and strategic issues as well as

providing audit services. Vince uses his significant

financial experience to both guide and challenge the

Board on important decisions as well as offering advice

on governance and compliance matters. Vince is a

Chartered Accountant and holds a Bachelor of Arts

degree in Economics from Reading University.

Other Directorships

Non-Executive Director at Big Yellow Group plc and

Non-Executive Director at Target Healthcare REIT plc.

MARTIN SUTHERLAND

Independent Non-Executive Director

Appointment

Martin Sutherland was appointed to the Board on 23 May

2017 as an Independent Non-Executive Director.

Skills, experience and qualifications

Martin has over 20 years of international experience at

senior management or director level in technology and

manufacturing businesses, focused on the government

and commercial sectors. Martin was previously CEO of

IT security business Reliance acsn. Prior to this Martin

held the position of CEO at De La Rue plc and various

roles at Detica plc, Andersen Consulting and British

Telecom. Martin brings his experience as a CEO in both

public and private companies to Board discussions on

operational and strategic matters, as well as providing

practical advice based on his expertise in the application

of technology. As the Non-Executive Director responsible

for employee engagement he attends and feeds back

from the Employee Forum. Martin holds a Masters

degree in Physics from Oxford University, and a Masters

degree in Remote Sensing from University College and

Imperial College London.

Other Directorships

Non-Executive Director at Alliance Pharma plc and

Non-Executive Director at XPS Pensions Group Plc.

DIVYA SESHAMANI

Independent Non-Executive Director

Appointment

Divya Seshamani was appointed to the Board as an

Independent Non-Executive Director on 11 April 2016.

Skills, experience and qualifications

Divya has over 20 years of experience at partner, senior

management or director level in sustainable infrastructure,

energy and manufacturing, with organisations like

Singapore’s sovereign wealth fund (GIC) and TPG

(theglobal Private Equity firm), where she was Partner.

She is currently Managing Partner of Greensphere Capital

LLP, a sustainable investment private equity firm.

Divya has a particular strength in environment and

sustainability and has been appointed by the Secretary

ofState to Her Majesty’s Government Council of

Sustainable Business where she leads the Net-Zero

Carbon Initiative. Divya holds a Bachelor of Arts degree

inPolitics, Philosophy and Economics from Oxford

University and a Master of Business Administration

degree from Harvard University.

GINA JARDINE

Independent Non-Executive Director

Appointment

Gina Jardine was appointed to the Board as an

Independent Non-Executive Director on 3 April 2023.

Skills, experience and qualifications

Gina has over 25 years of experience in senior human

resources roles in both Australia, Canada, and the UK.

She has worked in publicly listed and private

organisations across multiple sectors, from building

products to mining, logistics, automotive and telecoms.

Previously Gina held the position of Chief Human

Resources Officer at global materials business CRH plc,

and before that held roles at Kinross Gold Corp, Rio Tinto

Group, Linfox Logistics, Sensis Pty Ltd and Honda Motor

Co Ltd. Her global experience brings insight and helps

guide the Board in the areas of corporate culture, talent

management, organisation design and safety. Ginaholds

a BA in Social Sciences from Monash University and an

MBA from Melbourne Business School.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

100

BOARD OF DIRECTORS

CONTINUED

VINCE NIBLETT

Independent Non-Executive Director

Appointment

Vince Niblett was appointed to the Board on 8 February

2019 as an Independent Non-Executive Director.

Skills, experience and qualifications

Vince was previously a Partner at Deloitte where he held

a number of senior roles including membership of the UK

Board of Directors and Global Managing Director, Audit &

Enterprise Risk Services before retiring in 2015.

During his career at Deloitte, he served some of the firm’s

most significant public company clients, working with

them on commercial and strategic issues as well as

providing audit services. Vince uses his significant

financial experience to both guide and challenge the

Board on important decisions as well as offering advice

on governance and compliance matters. Vince is a

Chartered Accountant and holds a Bachelor of Arts

degree in Economics from Reading University.

Other Directorships

Non-Executive Director at Big Yellow Group plc and

Non-Executive Director at Target Healthcare REIT plc.

MARTIN SUTHERLAND

Independent Non-Executive Director

Appointment

Martin Sutherland was appointed to the Board on 23 May

2017 as an Independent Non-Executive Director.

Skills, experience and qualifications

Martin has over 20 years of international experience at

senior management or director level in technology and

manufacturing businesses, focused on the government

and commercial sectors. Martin was previously CEO of

IT security business Reliance acsn. Prior to this Martin

held the position of CEO at De La Rue plc and various

roles at Detica plc, Andersen Consulting and British

Telecom. Martin brings his experience as a CEO in both

public and private companies to Board discussions on

operational and strategic matters, as well as providing

practical advice based on his expertise in the application

of technology. As the Non-Executive Director responsible

for employee engagement he attends and feeds back

from the Employee Forum. Martin holds a Masters

degree in Physics from Oxford University, and a Masters

degree in Remote Sensing from University College and

Imperial College London.

Other Directorships

Non-Executive Director at Alliance Pharma plc and

Non-Executive Director at XPS Pensions Group Plc.

DIVYA SESHAMANI

Independent Non-Executive Director

Appointment

Divya Seshamani was appointed to the Board as an

Independent Non-Executive Director on 11 April 2016.

Skills, experience and qualifications

Divya has over 20 years of experience at partner, senior

management or director level in sustainable infrastructure,

energy and manufacturing, with organisations like

Singapore’s sovereign wealth fund (GIC) and TPG

(theglobal Private Equity firm), where she was Partner.

She is currently Managing Partner of Greensphere Capital

LLP, a sustainable investment private equity firm.

Divya has a particular strength in environment and

sustainability and has been appointed by the Secretary

ofState to Her Majesty’s Government Council of

Sustainable Business where she leads the Net-Zero

Carbon Initiative. Divya holds a Bachelor of Arts degree

inPolitics, Philosophy and Economics from Oxford

University and a Master of Business Administration

degree from Harvard University.

GINA JARDINE

Independent Non-Executive Director

Appointment

Gina Jardine was appointed to the Board as an

Independent Non-Executive Director on 3 April 2023.

Skills, experience and qualifications

Gina has over 25 years of experience in senior human

resources roles in both Australia, Canada, and the UK.

She has worked in publicly listed and private

organisations across multiple sectors, from building

products to mining, logistics, automotive and telecoms.

Previously Gina held the position of Chief Human

Resources Officer at global materials business CRH plc,

and before that held roles at Kinross Gold Corp, Rio Tinto

Group, Linfox Logistics, Sensis Pty Ltd and Honda Motor

Co Ltd. Her global experience brings insight and helps

guide the Board in the areas of corporate culture, talent

management, organisation design and safety. Ginaholds

a BA in Social Sciences from Monash University and an

MBA from Melbourne Business School.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

100

BOARD OF DIRECTORS

CONTINUED

VINCE NIBLETT

Independent Non-Executive Director

Appointment

Vince Niblett was appointed to the Board on 8 February

2019 as an Independent Non-Executive Director.

Skills, experience and qualifications

Vince was previously a Partner at Deloitte where he held

a number of senior roles including membership of the UK

Board of Directors and Global Managing Director, Audit &

Enterprise Risk Services before retiring in 2015.

During his career at Deloitte, he served some of the firm’s

most significant public company clients, working with

them on commercial and strategic issues as well as

providing audit services. Vince uses his significant

financial experience to both guide and challenge the

Board on important decisions as well as offering advice

on governance and compliance matters. Vince is a

Chartered Accountant and holds a Bachelor of Arts

degree in Economics from Reading University.

Other Directorships

Non-Executive Director at Big Yellow Group plc and

Non-Executive Director at Target Healthcare REIT plc.

MARTIN SUTHERLAND

Independent Non-Executive Director

Appointment

Martin Sutherland was appointed to the Board on 23 May

2017 as an Independent Non-Executive Director.

Skills, experience and qualifications

Martin has over 20 years of international experience at

senior management or director level in technology and

manufacturing businesses, focused on the government

and commercial sectors. Martin was previously CEO of

IT security business Reliance acsn. Prior to this Martin

held the position of CEO at De La Rue plc and various

roles at Detica plc, Andersen Consulting and British

Telecom. Martin brings his experience as a CEO in both

public and private companies to Board discussions on

operational and strategic matters, as well as providing

practical advice based on his expertise in the application

of technology. As the Non-Executive Director responsible

for employee engagement he attends and feeds back

from the Employee Forum. Martin holds a Masters

degree in Physics from Oxford University, and a Masters

degree in Remote Sensing from University College and

Imperial College London.

Other Directorships

Non-Executive Director at Alliance Pharma plc and

Non-Executive Director at XPS Pensions Group Plc.

DIVYA SESHAMANI

Independent Non-Executive Director

Appointment

Divya Seshamani was appointed to the Board as an

Independent Non-Executive Director on 11 April 2016.

Skills, experience and qualifications

Divya has over 20 years of experience at partner, senior

management or director level in sustainable infrastructure,

energy and manufacturing, with organisations like

Singapore’s sovereign wealth fund (GIC) and TPG

(theglobal Private Equity firm), where she was Partner.

She is currently Managing Partner of Greensphere Capital

LLP, a sustainable investment private equity firm.

Divya has a particular strength in environment and

sustainability and has been appointed by the Secretary

ofState to Her Majesty’s Government Council of

Sustainable Business where she leads the Net-Zero

Carbon Initiative. Divya holds a Bachelor of Arts degree

inPolitics, Philosophy and Economics from Oxford

University and a Master of Business Administration

degree from Harvard University.

GINA JARDINE

Independent Non-Executive Director

Appointment

Gina Jardine was appointed to the Board as an

Independent Non-Executive Director on 3 April 2023.

Skills, experience and qualifications

Gina has over 25 years of experience in senior human

resources roles in both Australia, Canada, and the UK.

She has worked in publicly listed and private

organisations across multiple sectors, from building

products to mining, logistics, automotive and telecoms.

Previously Gina held the position of Chief Human

Resources Officer at global materials business CRH plc,

and before that held roles at Kinross Gold Corp, Rio Tinto

Group, Linfox Logistics, Sensis Pty Ltd and Honda Motor

Co Ltd. Her global experience brings insight and helps

guide the Board in the areas of corporate culture, talent

management, organisation design and safety. Ginaholds

a BA in Social Sciences from Monash University and an

MBA from Melbourne Business School.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

100

BOARD OF DIRECTORS

CONTINUED

FRANCES TOCK

Company Secretary

Appointment

Frances Tock was permanently appointed to the position

of Company Secretary on 14 December 2023 having

previously held the position on a temporary basis.

Skills, experience and qualifications

Frances qualified as a Certified Accountant with

GrantThornton and worked in finance positions across

anumber of industries including leisure, renewable

energy and IT services before joining Forterra in 2015.

Inher previous roleas Group Financial Controller, Frances

played akeyrole inthe separation of the business from

HeidelbergCement and the subsequent listing on the

London Stock Exchange, more recently project managing

the Group’s IT and business change projects before

taking on the role ofCompanySecretary.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

101

NEIL ASH

Chief Executive Officer

See Neil Ash’s biography on page 99.

BEN GUYATT

Chief Financial Officer

See Ben Guyatt’s biography on page 99.

DARREN RIX

Strategy Director

Darren previously held the roles of Managing Director –

BisonPrecast, Development Director, and prior to this was

Group Controller. Darren joined Hanson plc in2007 andheld

anumber of senior finance roles, including FinancialController

for Building Products, the business which is now Forterra.

Darren is a Chartered Management Accountant and holds

aBachelor of Arts Degree with honours in Economics from

theUniversity ofLeicester.

ADAM SMITH

Commercial Director

Adam joined the Group in 2016 as Commercial Director.

Priorto this, Adam was National Sales Director at Jewson,

Sales and Marketing Director atTata Steel and held the

roleofManaging Director, as well as various other senior

management positions at Corus Colorsteels. Adam holds

aMasterof Business Administration degree from Warwick

Business School and aBachelor of Sciencewithhonours

degree inPhysics from Manchester University.

GEORGE STEWART

Technical Projects Director

George joined Forterra in 2013 as Operations Director.

Priorto this, George was UK Industrial Director for

Monier Redland UK Limited, and held anumber

ofsenior operations roles, including withNestlé UK,

Smith and Nephew Medical and Motorola UK.

Georgeholds a Bachelor of Science with honours

degree in Chemical and Process Engineering from

theHeriot-Watt University, Edinburgh.

STEVE JEYNES

Production Director

Steve joined Forterra in 2014, initially as Factory

Manager atour Kings Dyke London Brick factory.

Afterthis he held the position of Senior Operations

Manager for bricks for five years before being

promotedto Production Director and joining the

Executive Committee. Before joining Forterra, Steve

was Head of Operations at Hargreaves Services and

prior to this he held manufacturing and engineering

roles in the UK and internationally with Nippon

ElectricGlass and BPExploration. Steve holds

aBachelor ofScience with honours degree from

theOpen University and a Bachelor ofPsychology

fromUNITARInternational University inMalaysia.

JUSTIN ATKINSON

NON-EXECUTIVE CHAIRMAN

On behalf of the Board, Iampleased

to introduce the Corporate Governance

Statement, which sets out how the

Board hasprovided stewardship and

governance, along with highlighting

principal activities of the Boardand

itsCommittees forthe yearended

31December 2023.”

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

102

Introduction from the Chairman

The Board operates in accordance with the UK

Corporate Governance Code 2018 (the Code) which

was issued by the Financial Reporting Council and

which is available on their website: www.frc.org.uk

The Board has embedded best practice governance

throughout the business and is committed to

delivering long-term sustainable value to our

stakeholders whilst complying with the requirements

of the Code.

This Corporate Governance Statement, together

with the reports of the Nomination, Audit, Risk and

Sustainability and Remuneration Committees on

pages 116 to 156 sets out in detail how the principles

and provisions of the Code have been fulfilled and

how the Board and its Committees have discharged

their responsibilities for ensuring robust governance

practices operate across the Group.

CORPORATE GOVERNANCE STATEMENT

CHAIRMAN’S INTRODUCTION

2023 Board highlights

The Board and its Committees have played a key role in

guidingthe Group through a challenging year, both supporting

management and, where appropriate, holding them to account.

The following summarises the areas of specific Board focus

during the year and is not intended to reflect the wide-ranging

recurring responsibilities of the Board.

Executive and Non-Executive induction

Following successful recruitment of Neil Ash into the position

ofChief Executive Officer and Gina Jardine as an Independent

Non-Executive Director, both in April 2023, the Board conducted

a comprehensive and tailored induction process to ensure

theyhad sufficient information regarding the business and its

governance structure to support the effective operation of the

organisation. Neil Ash’s induction included a comprehensive

handover with outgoing CEO, Stephen Harrison, with Stephen

being available to assist Neil during his first two months with

thebusiness.

Board committee management

Following the publication of the UK Corporate Governance Code

2024, the requirements of which will take effect from 2025 and

2026 the Board recognise the increasing requirement to align the

Company’s approach to audit and risk management as well as the

ever-increasing stakeholder focus on sustainability. In anticipation,

the Board has aligned the terms of reference of its Committees, with

the responsibilities of the Audit Committee expanded to cover risk,

becoming the Audit and Risk Committee. This also allows the Board

to give even greater attention to effective sustainability governance

and provide critical assessment of the implications of sustainability

on the Company’s corporate strategy through a dedicated

Sustainability Committee.

Strategic investment

In May 2023,we opened the doors of our newly commissioned

Desford brick factory to customers, suppliers, shareholders,

lenders and analysts. Opening the new factory against a

backdrop of reduced market demand has given rise to many

challenges requiring Board stewardship. The Board regularly

received project updates and critically reviewed the progress

ofthe project, including individual Director visits to the

construction site.

The Board continues to provide oversight to the ongoing

strategic projects at Wilnecote and Accrington, which will

support expansion of our brick product range as well as leaving

us well positioned to establish a leadership position in the

growing brick slips market.

Response to market conditions

Suppressed demand for our products meant it was necessary

to take tough decisions to reduce production at many of the

Group’s factories including Desford.

The Board were actively involved in assessing the rapidly

evolving challenges the business faced, reviewing the responses

put forward by management and considering many factors

including; the impact on affected employees, working capital

management, production efficiency, maintaining our product

offering and profitability.

Vision and values

Following Neil Ash’s appointment as CEO, the Board supported

a strategic review involving workshops with the Executive

Committee and senior management, resulting in the refresh

ofthe Group’s strategic narrative including our vision, mission,

purpose and values.

Whilst the Group’s strategy remains fundamentally unchanged,

a clear and transparent vision, mission, purpose and values are

key to ensuring employees fully understand the goals of the

Group and are aligned to the culture that the Board wish to

promote. The Board will receive regular updates through newly

developed dashboards to ensure the business is successfully

progressing towards its goals.

Board priorities for 2024

In 2024 the Board expects to focus upon the following

non-recurring priorities.

Response to Market Conditions

The Board will continue to closely monitor the Group’s key

markets ensuring management continue to take appropriate

action to ensure the Group is able to weather the current

cyclical downturn in demand, ensuring that key risks and

mitigating actions are clearly understood.

Board succession planning

The Board, through its Nomination Committee, will focus

attention on succession planning. It is now eight years since our

IPO in 2016, with the Board initially formed at this time with

other Directors joining in the following year or so. Accordingly,

the Board includes a number of Independent Non-Executive

Directors who will reach their nine-year appointment anniversaries

(after which, by the requirements of the Code, theyare no

longer deemed to be independent) within the next two years.

The first to reach that nine-year tenure milestone will be

myselfas Chairman and Independent Non-Executive Director,

DivyaSeshamani in April 2025. Our succession planning will

consider the composition and mix of skill sets and backgrounds

represented on the Board, along with the importance of gender

and ethnic diversity.

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103

Capitalinvestment programme

With the Desford project virtually complete and the Wilnecote

and Accrington projects expected to be completed during the

coming year, the Board will continue to focus on the delivery

ofthese projects ensuring that they are delivered to time and

budget with the appropriate governance oversight.

Board effectiveness

We monitor Board effectiveness in accordance with the

requirements of the Code and will conduct an externally

facilitated review in 2024. The Board expects to appoint

aprovider who has not previously provided this service to

theCompany ensuring a fresh and independent perspective.

Corporate governance

The Board have ensured that, through the work of the Audit

Committee, they have continued to be fully appraised of

developments in corporate governance arising from the

Government’s ‘Restoring Trust in Audit and Corporate

Governance’ consultation. Whilst there has been a great deal of

uncertainty around the nature and timing of the implementation

of any reforms, The Company, through the work undertaken on

its internal control framework is well placed to respond to the

new requirements of the UK Corporate Governance Code 2024.

Sustainability

Sustainability is critical in ensuring our longevity as a business

underpinning all elements of our strategy and we recognise

theincreasing importance placed on sustainability by all of

ourstakeholders. Recognising this increased significance,

theBoard have elected to amend the structure of its

Committees toensure that the Board is able to clearly focus

upon the oversight of sustainability matters without distraction.

Accordingly, in 2024, the Risk and Sustainability Committee

willbecome the Sustainability Committee with risk management

now falling under the remit of the Audit and Risk Committee

(formerly the Audit Committee).

Sustainability progress during the year is laid out in our

comprehensive Sustainability Report included on pages 48

to85. This Report includes the scenario-based climate

modelling required by the Task Force on Climate-Related

Financial Disclosure (TCFD) which, whilst subjective in its nature,

helps to identify how rising temperatures could possibly impact

our business in the future, along with identifying opportunities

resulting from a changing climate.

Culture

The Board has supported the business through a revision and

re-launch of its corporate values in the year, understanding the

role it plays in driving culture through strong leadership.

The Board believes the new values, defined below, will support

the business to achieve its strategic goals:

• Innovate to Lead will empower us to continuously improve,

never standing still. Through investment in carbon emission

reductions, product innovation and energy efficiency, the

business will strive towards a more sustainable future.

• Pride in Excellence indicates our continued aim to be the

bestfor our customers, delivering unrivalled products and

outstanding quality and relishing in our achievements.

• Collaborate and Care manifests our belief that we are one

team and that we thrive when we are working together and

supporting each other. People’s safety is always our number

one priority.

The values have been rolled out to all employees in early 2024

and the Board will play a pivotal role in oversight of managements

success at embedding them throughout the organisation.

To monitor the success of our culture within the business

andensure compliance with the Code, Martin Sutherland

hascontinued as the Non-Executive Director responsible for

employee engagement, attending meetings of the Employee

Forum and reporting back to the Board following each meeting.

The Forum meets quarterly at different locations to discuss

subject matters raised by our colleagues to their forum

constituency representative including culture, operational and

commercial performance, customer feedback, health and safety

and mental health awareness.

In addition Board members undertake regular health and safety

walks, including Board site visits across thebusiness. Each of

these occasions provide Board members with opportunity for

one-to-one engagement with the workforce.

Board members also take the opportunity to attend and

participate in health and safety related events including training

courses and Building Safety Together (BST) meetings at factories.

Diversity

The Board remains committed to furthering all aspects of diversity

throughout the organisation and further information is included

within this Corporate Governance Statement on page102.

Justin Atkinson

Non-Executive Chairman

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

104

CORPORATE GOVERNANCE STATEMENT

CONTINUED

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

105

The Code focuses on the

application of principles and

supporting provisions that

emphasise the value of good

corporate governance to

long-term sustainable success.

Therelationship between

companies, shareholders and

stakeholders are critical to this,

asis a focus on culture through

alignment of purpose, strategy,

integrity and diversity.

Certain provisions of the Code do not apply to

smaller companies defined as those, like Forterra

plc, outside of the FTSE 250. The Board is,

however, committed to sustaining the higher

standards of corporate governance and the

application of these principles, provisions and

outcomes achieved are disclosed in the Annual

Report as required for companies with a UK

premium listing. The Board confirms that

throughout the year ended 31 December 2023,

and as at the date of this report, the Company

has complied with all relevant provisions set out

inthe Code.

The key components of the Code are:

1. Board leadership and purpose

Led by an experienced Chairman, supported

bya decisive and diverse Board with a broad

range ofexperience setting the values, culture

and purpose which are embedded across

thebusiness.

Engagement with shareholders and stakeholders

enables the Board to understand their views and

promote the long-term sustainable success of the

Company, generating value for shareholders and

contributing to wider society, particularly regarding

sustainability and our roadmap to netzero.

2. Division of responsibilities

The board has an appropriate mix of Executive

and Non-Executive Directors for balanced

decision-making, with clear lines of communication

to receive accurate and timely information to make

informed decisions.

There is a clear division of responsibilities between

the leadership of the Board and the executive

leadership of the business, and the Non-Executive

Directors have sufficient time to meet their Board

responsibilities.

3. Composition, succession and evaluation

The Board and its Committees have a combination

of skills, experience, and knowledge to discharge

their duties, and undergo an annual evaluation as

to their effectiveness.

Succession planning remains high on the

agendafor the Nomination Committee whilst

acknowledging the increased need to promote

diversity of gender, social and ethnic backgrounds

and how effectively members worktogether

toachieve objectives.

4. Audit, risk and internal controls

The Board has a structured oversight of the

internal and external audit function through the

establishment of the Audit and Risk Committee.

Inaddition, the Committee monitors the Company’s

risk register with a focus on emerging risks.

Thework of the Audit and Risk Committees

arecovered in more detail from pages 118.

5. Remuneration

The Remuneration Committee aligns executive

remuneration to the Company’s purpose and

values by setting clear objectives, which are

linkedwith the successful delivery of the long-term

strategy, including environmental, social and

governance factors. This is covered in more

detailon pages 128 to 156. The Committee also

has thediscretion to override formulaic outcomes

to remuneration calculations.

The Remuneration Committee has retained

remuneration advisors, Willis Tower Watson

whoare independent of both the Company and

the individual Directors, to assist the Committee

inmaking informed remuneration decisions.

THE BOARD

Provides high level oversight and supports strategy setting

Remuneration

Committee

Audit and Risk

Committee

Nomination

Committee

Sustainability

Committee

EXECUTIVE COMMITTEE

Responsible for day-to-day management of the business

Oversees the

composition

of the Board

andCommittees,

considering succession

planning, balance

of skills and experience

anddiversity in making

recommendations

to the Board.

Oversees the Group’s

corporate financial

reporting, the internal

control system, risk

management and the

relationship with both the

External Auditor and the

Internal Audit Function.

Review and monitor

the company’s attitude

andapproach to

environmental, social

and governance matters

andrisks and ensure

compliance with related

reporting requirements.

Responsibility for

recommending overall

remuneration policy

and thesetting of

executive andsenior

management

remuneration.

— SEE PAGE 116 — SEE PAGE 125 — SEE PAGE 118 — SEE PAGE 128

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

106

CORPORATE GOVERNANCE STATEMENT

DIVISION OF RESPONSIBILITIES

Board Committees

The Board operates four Committees

to which it delegates responsibility:

the Audit and Risk Committee,

Nomination Committee,

RemunerationCommittee and

Sustainability Committee. Each of

these Committeesprovides a Report

within the Governance section of this

Annual Report, detailing information

asto their responsibilities, activities

inthe past year and future priorities.

Chairman

The Chairman, Justin Atkinson, leads

the Board and is responsible for its

overall effectiveness. The Chairman

sets the Board’s agenda, encourages

theDirectors to contribute openly

to debate and ensures the Directors

receive accurate, timely and clear

information via the Company Secretary

to stimulate this debate.

CEO

The CEO, Neil Ash, isresponsible

forthe day-to-day management

oftheGroup, including embedding

thepurpose, values and strategic

objectives established by theBoard.

Executive Committee

The Executive Committee has been

established to support the CEO in

his management of the business and

in exercising the authorities delegated

to him by the Board. Membership

of the Executive Committee is laid

out on page 101.

CFO

The CFO, Ben Guyatt is responsible for

the Group’s financial matters andalso

supports the CEO in the achievement

of the Group’s strategic objectives and

also manages the relationships with

investors, lenders and research analysts.

Senior Independent

Non-Executive Director

In the Senior Independent

Non-Executive Director role,

Katherine Innes Ker provides

asounding board for the Chairman,

serves as an intermediary for the

other Directors and meets the other

Independent Non-Executive Directors

without theChairman present to

appraise theChairman’s performance.

The Senior Independent Non-Executive

Director is available to shareholders

if they wish to meet todiscuss any

matters related to theGroup.

Independent

Non-Executive Directors

Independent Non-Executive Directors

are not involved in the day-to-day

running of the business and as such

are able to provide an external

perspective alongside sound

judgement and objectivity. Non-

Executive Directors receive a fixed

level of remuneration for their services

and do not benefit from variable

remuneration based on Group

performance. Given the size of the

Group and its Board, it is thought

appropriate and beneficial that each

Non-Executive Director sits on each

Committee. This better allows the

Non-Executive Directors to effectively

fulfil their responsibilities in providing

constructive challenge, strategic

guidance, specialist advice and holding

Executive Directors to account for both

the Group’s and their own personal

performance. All Non-Executive

Directors have the required time to

devote to Forterra with the Chairman

regularly keeping this under review.

Company Secretary

Frances Tock, appointed to the role of

the Company Secretary in December

2023, works closely with and supports

the Chairman, and the Chairs of the

Board Committees insetting agendas

and planning meetings, ensuring

efficient distribution of the complete,

accurate and timely information

necessary tofacilitate Board and

Committee discussion. She also

advises the Boardand management

on all matters relating to corporate

governance and isresponsible for

the management ofthe AGM.

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2023

GOVERNANCE

107

Independence of the Board

The Company recognises the importance of its Non-Executive

Directors remaining independent throughout their appointment,

as it enables them to provide objective advice and guidance to

the Executive Directors and senior management.

In considering the independence of each Non-Executive Director,

the Board has taken into consideration the guidance provided

by the Code, and as such, considers all Non-Executive

Directors to be independent in accordance with Provision 10

ofsuch Code, as they each:

i. have not been employed by the Company or Group;

ii. have no material business relationship with the Company

orGroup;

iii. do not participate in the Company’s employee share

plansor pension scheme;

iv. have not received additional remuneration beyond the

Director’s fee reported in this Annual Report;

v. have no close family ties with any of the Company’s

Directors, Executive Management, or advisers;

vi. have no significant links with other Directors through

involvement in other companies;

vii. do not represent a significant shareholder; and

viii. have not served on the Board for more than nine years

from the date of their first appointment.

Summary of matters reserved for the Board

The Board has a formal schedule of matters reserved for its

decision which is reviewed annually to ensure it remains

appropriate and which is summarised below:

• approval of the Group’s long-term objectives and strategy;

• approval of the Group’s business plans, operating and

capitalbudgets;

• approval of the Group’s sustainability targets and reporting;

• approval of the annual and interim accounts;

• changes in the Group’s capital or financing structure;

• approval of significant transactions including acquisitions

anddisposals;

• approval of the dividend policy and any changes thereto;

• ensuring the maintenance of a sound system of internal

control and risk management;

• Board appointments;

• succession planning and setting terms of reference for

BoardCommittees; and

• approval of the Remuneration Policy and remuneration

arrangements for the Executive Directors and senior

management.

To assist in discharging its responsibilities the Board is

supported by specialist Committees. The Board has

establishedfour such Committees: the Nomination Committee,

the Audit Committee, the Risk and Sustainability Committee,

and the Remuneration Committee. The terms of reference of

each ofthese Committees are each reviewed on an annual

basis. TheBoard believes each of the Committees has the

necessary skills and resources to fulfil its brief and each of the

Committees has access to appropriate legal and professional

advice where necessary.

The Nomination Committee Report on pages 116 and 117

outlines the Board’s approach to succession planning.

TheAudit Committee Report on pages 118 to 124 outlines

howtheBoard has applied the Code in respect of financial

reporting and internal controls. The Risk and Sustainability

Committee Report on pages 125 to 127 explains how the Board

has applied the Code in respect of risk management. The

Remuneration Committee Report on pages 128 to 156 provides

details of the Directors’ remuneration received in the year.

Day-to-day management and implementation of strategies

approved by the Board is delegated to the Executive Committee

which currently comprises six senior managers including the two

Executive Directors. Membership of the Executive Committee

along with biographies is detailed on page 101.

Recognising the ever increasing focus on sustainability, the

Board have elected to amend the structure of its Committees

from 1 January 2024, toensure that the Board is able to clearly

focus upon the oversight of sustainability matters without

distraction. Accordingly, in 2024, the Risk and Sustainability

Committee willbecome the Sustainability Committee with risk

management now falling under the remit of the Audit and Risk

Committee (formerly the Audit Committee). For the purpose

ofreporting performance in the year, the Committee reports

have been compiled based on the structure during the year

underreview.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

108

CORPORATE GOVERNANCE STATEMENT

DIVISION OF RESPONSIBILITIES CONTINUED

Conflicts of interest

Directors have a statutory duty to avoid situations in which they

may have interests which conflict with those of the Company.

The Board has adopted procedures as provided for in the

Company’s Articles of Association for considering and if

appropriate, authorising any potential conflicts of interest and

forthe consideration of, and if appropriate, authorisation of

newsituations which may arise.

The Company maintains a conflict register which is reviewed

atevery Board meeting. Currently the only situations authorised

and listed on the register are the Directors holding directorships

and other similar appointments in companies or organisations

notconnected with the Company where no conflict of interest

has been identified.

Board meetings

It is the intention of the Board to meet on at least eight occasions

a year. In 2023 the Board met on eight scheduled occasions.

The Directors regularly communicate and exchange information

regardless of the timing of meetings and should the need arise,

a meeting of the Directors can be convened at short notice.

Inaddition to the scheduled meetings the Board also held

anumber of updates and briefings by video conference during

theyear.

There were four meetings of the Audit Committee, four

oftheRisk and Sustainability Committee, three meetings

oftheRemuneration Committee and two of the Nomination

Committee during the year under review.

The table below only includes attendance where each

Directorattended as a member. The Chairman, CEO and

CFOalso attended certain Committee meetings, or parts

thereof, as invitees.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

109

Attendance

Board

Audit

Committee

Risk and

Sustainability

Committee

Remuneration

Committee

Nomination

Committee

Justin Atkinson

8/8 n/a 4/4 3/3 2/2

Neil Ash

6/6 n/a 3/3 n/a n/a

Stephen Harrison

2/2 n/a 1/1 n/a n/a

Ben Guyatt

8/8 n/a 4/4 n/a n/a

Katherine Innes Ker

8/8 4/4 4/4 3/3 2/2

Vince Niblett

8/8 4/4 4/4 3/3 2/2

Divya Seshamani

8/8 4/4 4/4 3/3 2/2

Martin Sutherland

8/8 4/4 4/4 3/3 2/2

Gina Jardine

6/6 2/2 3/3 1/1 1/1

Promoting long-term sustainable success

TheBoard is responsible for successfully leading the Group

indelivering long-term sustainable value to shareholders and

formaking a positive contribution to wider society. The Board

establishes the Company’s purpose, values and strategic

objectives and ensures that sufficient financial and human

resources are in place for the Group to meet its objectives.

TheBoard ensures that a framework of effective controls are

inplace to enable risk to be assessed and managed.

Monitoring culture

The Board ensures that the Group’s culture aligns with the

Company’s purpose, values and strategy and that Directors

lead by example in promoting the right culture.

The Board has supported the business through a revision and

re-launch of its corporate values in the year, understanding the

role it plays in driving culture through strong leadership.

The values have been rolled out to all employees in early 2024

and the Board will play a pivotal role in oversight of managements

success at embedding them throughout the organisation.

The Board monitors culture through feedback from the

Employee Forum, discussions with employees during site

visitsand evaluation of employee survey results.

Stakeholder engagement

Board members engage with stakeholders directly to ensure

that the Group is meeting its responsibilities towards them. This

engagement with stakeholders allows any matters of concern to

be raised and addressed by the Board. Stakeholders not only

include shareholders but our workforce (many of whom are also

shareholders), lenders, suppliers, customers and the communities

in which we operate.

In performing their duties under S172(1) of the Companies Act

2006, the Directors give careful consideration to any concerns

which the Group’s key stakeholders may have, and how these

matters are factored into decisions and proposals requiring

Board approval.

Shareholder engagement

The CEO and CFO meet regularly with major shareholders and

work together with the joint corporate brokers to ensure there is

effective communication with shareholders on matters including

business performance, strategy, and sustainability.

As part of the Group’s investor relations programme, meetings

with major shareholders are scheduled to discuss the Group’s

interim and full year results. The Brokers obtain feedback from

these meetings and this is considered by the Board allowing

allBoard members to gain a better appreciation of shareholder

views and expectations.

The Chairman wrote to major shareholders in the year offering

tomeet them and held a number of meetings covering topics

including corporate governance, capital allocation and

sustainability. The Chairman and Senior Independent

Non-Executive Director are always available to meet major

shareholders on request. In addition, the Senior Independent

Non-Executive Director wrote to major shareholders in her

capacity as Chair of the Remuneration Committee seeking

shareholder feedback on proposed amendments to the

Company’s Remuneration Policy with this feedback being

reflected in the policy that was approved by shareholders.

Factory tours are provided for major institutional shareholders

who express an interest in visiting our facilities and we invited

major shareholders along with other stakeholders to the official

opening of our new Desford brick factory in May 2023.

Engaging with employees

Engagement with our employees is an area which we have

continued to develop throughout the year, enabled directly

viathe Employee Forum which met four times in 2023. Martin

Sutherland is the Non-Executive Director designated with

responsibility for understanding the views of the workforce,

heattends meetings of the Employee Forum in this capacity

andhas built a rapport with the forum over his tenure. The CEO

and other members of the management team have continued

topresent regular podcasts to keep employees updated on

theGroup’s progress.

In partnership with Gallup, we again conducted our HearMe

employee engagement survey in 2023, with significantly

improved participation rates versus previous years. Similar

themes arose compared to the previous year, relating to

employee recognition and employee development and we

continue to strive for improvement in these areas.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

110

CORPORATE GOVERNANCE STATEMENT

BOARD LEADERSHIP AND COMPANY PURPOSE

Details of how the Group engages with all of its stakeholders are shown on pages 28 and 29 alongside the Directors’ statement

inrelation to their statutory duty in accordance with S172 (1) of the Companies Act, however engagement specifically at Board level

isdetailed in the below table:

Attendance

Board

Board engagement

Employees

Health, safety,

andwellbeing

Culture, equality,

anddiversity

Talent development

Board members undertake regular health and safety walks, including Board site visits across

thebusiness. Each of these occasions provide Board members with opportunity for one-to-one

engagement with the workforce.

Board members also take the opportunity to attend and participate in health and safety related

events including training courses and Building Safety Together (BST) meetings at factories.

Non-Executive Director Martin Sutherland attends the Employee Forum meeting up to four

timesper year.

Defining culture and leading from the top is core to the Board’s activities.

The Board considers the results of employee engagement surveys.

The Board meets with senior managers at Board Meetings and working dinners including

anannual dinner with high potential employees.

Customers

Customer service

andsatisfaction

New product

development

The Executive Directors regularly meet with customers.

An annual corporate event is held where Non-Executive Directors meet with key customers.

Suppliers

Sustainable and

ethicalsourcing

Maintaining supply

chainsecurity

Sustainability is a key focus for the Board and delivering against the challenging targets set

in2020 remains a priority. Scope 3 emissions are becoming an area of increased focus which

willprompt additional supplier engagement.

The Executive Directors regularly meet with key suppliers with a focus on health, safety and

wellbeing and on occasion, it may be appropriate for other Board members to meet with

keysuppliers.

Community

Being a good

neighbour

Delivering against the sustainability targets approved by the Board which will improve the

environment we live in.

Shareholders

andlenders

Group performance

ESG matters

Strategy

Executive Directors, along with the Chairman and Senior Independent Director regularly meet

withlarge shareholders. Executive Directors regularly meet with lenders.

Our full Sustainability Report is included within this Annual Report on pages 48 to 85.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

111

Boardevaluation

In 2023, in line with our review cycle, we undertook an internal

evaluation of the Board and it’s Committees. The outcome of

the review was discussed by the Board collectively and areas

arising will be incorporated as standing Board agenda items

sothat progress against these can be monitored throughout

theyear.

As in previous years, the evaluation concluded that the Board

continues to operate effectively, collegiately and with strong

relationships between Directors. The review also identified

strong leadership from the Chairman and an effective mix of

skills and experience to support the business, strengthened

inthe year by the welcoming of Neil Ash and Gina Jardine to

theBoard. The comprehensive board induction process was

highlighted as an area of success in the year, with both new

Directors feeling that they were given sufficient access to

information and board members time to fully understand the

requirements of the role and the business.

The evaluation identified specific areas for development,

including the following recommendations:

• To further shift focus from backward looking results to

futurestrategy.

• To better utilise site visits to interact with colleagues within

different areas of the business and gain insight.

• To consider how to support the business in the development

and monitoring of key performance indicators which support

the business strategy.

The Board is able to conclude that it continues to understand its

strengths and weaknesses and will address the actions arising

from the internal evaluation. Notwithstanding these actions,

theBoard can conclude that its composition and that of its

Committees is appropriate, procedures in place are effective,

responsibilities are clearly divided, and that the Directors have

the skills, experience, independence and knowledge to allow

theBoard and its Committees to successfully and effectively

discharge their duties.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

112

CORPORATE GOVERNANCE STATEMENT

BOARD COMPOSITION, SUCCESSION AND EVALUATION

During the year the Senior Independent Non-Executive Director

met the other Non-Executive Directors without the Chairman

being present; and the Chairman met at least once with each

Director on a one-to-one basis. These meetings allowed a full

discussion of each Board member’s contribution, any feedback

from the Board evaluation process and a focus on personal

development.

Appointment and re-election of Directors

The Company’s Articles of Association contain certain powers

of removal, appointment, election and re-election of Directors

and provide that each Director should retire at the Annual

General Meeting if they had been a Director at each of the two

preceding Annual General Meetings and are not re-appointed

bythe Company in the general meeting or since such meeting.

A retiring Director shall be eligible for reappointment. In practice

it is intended that all Executive and Non-Executive Directors

willretire and put themselves forward for re-election annually

ateach Annual General Meeting and as such all Directors will

stand for re-election at the 2024 Annual General Meeting.

On appointment, Board members disclose their other

commitments and agree to allocate sufficient time as necessary

to the Company in order to discharge their duties effectively.

The current disclosable external commitments of the Board

areshown on pages 99 and 100. Any conflicts of interest are

dealt with in accordance with the Board’s conflict procedures,

however this situation has not arisen this year.

Induction

A structured induction programme is in place to ensure new

Directors are quickly integrated into the Board and given the

necessary insight and information to allow them to quickly

become effective. The induction programme includes:

• meetings with the Directors, Company Secretary,

membersofthe Executive Committee and other members

ofmanagement;

• guided visits to the Group’s manufacturing facilities;

• meetings with external advisers including corporate brokers,

auditors, and remuneration consultants as appropriate; and

• being given access to historic Board papers and minutes.

Neil Ash and Gina Jardine both joined the Board in April 2023

and underwent a full induction programme.

Board diversity

The Board is committed to furthering diversity at all levels. The

Board acknowledges the recommendations of the Hampton-

Alexander Review which recommends that at least 33% of the

Board should be female. In addition, the Board recognises that

the Financial Conduct Authority (FCA) Listing Rules targets for

atleast 40% of the Board to be female, at least one senior

member of the Board to be a woman and at least one member

of the Board to be from a non-white ethnic minority background.

At present 38% of the Board are female. One of the senior

Board members is a woman and one member of the Board

isfrom a non-white ethnic minority background. The Board

willseek to address the FCA targets as part of its succession

planning. Diversity covers many facets other than gender

andrace. The Board has astrong balance of diverse skills,

knowledge, experience, upbringing and education.

The Hampton-Alexander Review also recommends that at least

33% of senior managers (defined as Executive Committee and

their direct reports) should be female. Within Forterra this figure

currently stands at 25%.

Gender diversity is a wider issue within our industry. Presently

only 11% of our employees are female with many of our roles,

especially those which are factory based, traditionally being

lesspopular with women and we remain committed to further

improvement of our diversity statistics. The Company is seeking

to improve diversity in factory based roles and currently has two

female plant managers.

The Company does not presently track statistics of ethnicity

below executive management level.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

113

Board and Executive Committee reporting on ethnic background

No of Board

members % of the Board

No of senior

positions on the

Board

No in the

Executive

Committee

% of Executive

Committee

Male

5 62% 3 6 86%

Female

3 38% 1 1 14%

Total

8 100% 4 7 100%

No of Board

members % of the Board

No of senior

positions on the

Board

No in the

Executive

Committee

% of Executive

Committee

White British or other White

7 88% 4 7 100%

Asian/Asian British

1 12% – – –

Black/Black British

– – – – –

Other Ethnic group, including Arab

– – – – –

Mixed/Multiple Ethnic Groups

– – – – –

Not specified/prefer not to say

– – – – –

Total

8 100% 4 7 100%

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

114

CORPORATE GOVERNANCE STATEMENT

BOARD COMPOSITION, SUCCESSION AND EVALUATION CONTINUED

Internalcontrols and risk management

The Board acknowledges its responsibility under Principle O of

the Code for establishing procedures to manage risk, oversee

the internal control framework and determine the nature and

extent of the principal risks it is willing to take to achieve its

long-term strategic objectives.

In order to allow the Board to discharge its obligations with

regard to Principle O of the revised Code, the Board requested

that the co-sourced Internal Audit provider carry out a review

ofthe effectiveness of the Group’s entity level controls. This

waspresented alongside an internally prepared paper on risk

and internal control systems, which management prepare on

anannual basis.

The Board confirms that:

• there is an ongoing process for identifying, evaluating,

andmanaging the principal risks faced by the Group;

• the systems have been in place for the year under review

andup to the date of the approval of the Annual Report

andAccounts;

• they are regularly reviewed by the Board along with the

Riskand the Audit Committees where appropriate; and

• the systems accord with the Financial Reporting Council

(FRC) guidance on risk management, internal control,

andrelated financial business reporting.

The key risks faced by the Group together with their potential

impact and mitigating actions are laid out in the Risk Management

section of the Strategic Report on pages86 to95.

Directors’ and Officers’ insurance

The Company maintains Directors’ and Officers’ liability

insurance policies to cover against legal proceedings taken

against its Directors and Officers acting in their capacity as such.

The Company has also granted indemnities to its Directors to

theextent permitted by the law in respect of liabilities incurred

asa result of their office. Neither the insurance cover or the

indemnities would provide any coverage in the event that a

Director is proven to have acted fraudulently ordishonestly.

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 previously published in the

Listing Rules. The Code adopted applies to the Directors and

other relevant employees of the Group.

Approved by the Board and signed on its behalf:

Justin Atkinson

Chairman

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

115

CORPORATE GOVERNANCE STATEMENT

RISK MANAGEMENT

JUSTIN ATKINSON

NON-EXECUTIVE CHAIRMAN

With a number of Non-Executive

Directors due to step down in the

coming years, the Committee will

ensure a structured process is put

inplace to ensure that succession

plansare developed for all Board

appointments and that recruitment

processes commence in good time.”

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

116

NOMINATION COMMITTEE REPORT

MEMBERSHIP

The members of the Committee are appointed

bytheBoard. At 31 December 2023 the

members ofthe Committee were as follows:

Justin Atkinson (Chairman)

Katherine Innes Ker

Divya Seshamani

Martin Sutherland

Vince Niblett

Gina Jardine

DearShareholder

I am pleased to present the report of the Nomination Committee

(the Committee) for 2023. The content below describes the main

responsibilities of the Committee. I chair Nomination Committee

meetings but would not participate in a meeting when the

Committee is dealing with my own position as Chairman.

RESPONSIBILITIES

The principal responsibilities of the Committee are as follows:

• to regularly review the structure, size, and composition

(including the skills, knowledge, experience, and diversity)

of the Board and to make recommendations to the

Boardwith regard to any changes;

• to plan for succession for both Executive and Non-

Executive Board roles along with senior management

positions; to identify and recommend to the Board for

approval candidates to fill Board and senior management

vacancies as they arise; and

• to make recommendations to the Board in respect of

theperformance of Directors standing for election or

re-election in advance of the Annual General Meeting.

The full responsibilities of the Committee are set out

initsTerms of Reference which are available on the

Company’s website.

The terms of reference are approved by the Board and are

reviewed annually to ensure they remain appropriate.

Activities during the year

The Committee has two standing meetings a year. There were

no further meetings necessary during the year as all decisions

regarding changes to Board composition were concluded in

theprior year.

Induction of new CEO and Non-Executive Director

The Board were delighted to welcome new Chief Executive

Officer, Neil Ash who joined the business in April. We also

welcomed Gina Jardine to the Board as an Independent

Non-Executive Director. Both new Directors underwent

astructured induction programme to ensure they quickly

integrated into the Board. This included meetings with the

Directors, the Company Secretary, members of the Executive

Committee, other members of management and external

advisors, as well as guided visits of the Group’s manufacturing

facilities and access to historic Board papers and minutes.

Feedback on the induction process from the new members

wasvery positive, both feeling they received sufficient

information regarding the Company and the strategy to

allowthem to support the business from the outset.

Executive performance and succession planning

The Committee reviewed the Executive Committee and each

member’s departmental structure to identify for the purpose

ofsuccession planning, future potential candidates for the

Executive Committee and how those candidates could develop

into the role over time with the appropriate training and support.

This was supported by feedback from Neil Ash following his first

months with the Company.

Priorities for 2024

Board succession planning will be a significant focus area for

the Committee in 2024. It is now eight years since the IPO

in2016, with the Board initially formed at this time and with

otherDirectors joining in the following year or so. Accordingly,

the Board includes a number of Independent Non-Executive

Directors who will reach their nine-year appointment anniversaries

(after which, by the requirements of the Code, they are no

longer deemed to be independent) within the next two years.

The Committee will ensure a structured process is put in place

to ensure that succession plans are developed for all Board

appointments and that recruitment processes commence in

good time. Our succession planning will consider the composition

and mix of skill sets and backgrounds represented on the

Board, along with the importance of gender and ethnic diversity.

Executive skills and succession planning

A key role of the Committee is ensuring the effectiveness of

theBoard and its ability to deliver long-term success for the

business. Included in this is the continual review of the skills,

experience, independence and knowledge required to ensure

the right individuals are in place to support the Company’s

continued progression and effective implementation of the

Group’s strategy. See the Board Skills Matrix on page 97.

As described above, the executive succession plan is monitored

by the Committee, alongside the development initiatives to

identify and nurture future leaders for the business.

Diversity and equality

The Group has an Equality and Diversity Policy and is committed

to encouraging diversity across the business at all levels and

tobeing inclusive. Following the appointment on Gina Jardine

inthe year, the Board contained three female Directors,

representing 38% of the Board. In addition, one of our senior

Board members is a woman and one of the Board members

isfrom a non-white ethnic minority background.

Justin Atkinson

Chairman

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

117

VINCE NIBLETT

NON-EXECUTIVE CHAIRMAN

At the request of the Board, the Audit

Committee has considered whether the

2023 Annual Report is fair, balanced

and understandable and whether it

provides the necessary information for

the Group’s shareholders to assess

the Group’s position, performance,

business model and strategy.”

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

118

AUDIT COMMITTEE REPORT

MEMBERSHIP

The members of the Committee are appointed

bytheBoard. At 31 December 2023 the

members ofthe Committee were as follows:

Vince Niblett (Chairman)

Katherine Innes Ker

Divya Seshamani

Martin Sutherland

Gina Jardine

Dear Shareholder

I am pleased to present my Audit Committee Report, which

setsout how the Audit Committee (the Committee) has

discharged its responsibilities during the year and provides

anunderstanding of work done to provide assurance over

theintegrity of the Annual Report and Accounts for the year

ended 31 December 2023.

RESPONSIBILITIES

The principal responsibilities of the Committee are as follows:

Financial reporting

• Monitor the integrity of the Financial Statements, interim

report, and any other announcements relating to the

Group’s financial performance or position.

• Review significant estimates and judgements disclosed

within the Financial Statements and how each was

addressed.

• Review and challenge where necessary the consistency

ofand any changes to significant accounting policies.

• Review the Annual Report and Accounts and provide

assurance to the Board that they present a fair, balanced

and understandable assessment of the Group’s position

and prospects.

External audit

• Review the effectiveness and independence of the

external auditors, negotiate, and agree their remuneration

and make recommendations to the Board in respect of

their appointment.

Internal audit

•

Review and approve the Group’s internal audit plan and

monitor progress against it.

• Determine the structure and operating model of the

Group’s Internal Audit Function and evaluate its

effectiveness.

Internal control

• Keep under review the adequacy and effectiveness

oftheGroup’s internal financial control and risk

management systems.

• Monitor the effectiveness of the Group’s procedures on

whistleblowing, anti-bribery, corruption and anti-money

laundering.

• Review modelling and analysis used to support the going

concern assessment and long-term viability of the Group.

The full responsibilities of the Committee are set out in its

Terms of Reference which are available on the Company’s

website. The terms of reference of the Audit Committee are

approved by the Board and are reviewed annually to ensure

they remain appropriate.

Meetings

During 2023 the Committee formally met on four occasions.

Inaddition to the members of the Committee, other members

ofthe Board and senior management, including the CEO,

CFO,the Head of Financial Accounting and Internal Audit,

representatives from internal audit provider PwC, and the

external auditor Ernst & Young joined the Committee meetings

by invitation. The External Auditor was invited to and attended

each meeting of the Committee in 2023. The Company Secretary

provided secretarial services to the Committee and attended

meetings in this capacity.

In addition to the scheduled meetings, the Committee Chairman

meets regularly with the CFO, Group Financial Controller, the

Internal Audit Function and External Auditor, providing additional

opportunity for open dialogue and feedback.

Key activities and highlights during the financial

reportingcycle

During the year under review and to the date of this Annual

Report the agenda items and principal activities of the

Committee are outlined below.

Financial reporting

• Review of the Group’s annual and interim Financial Statements

and preliminary results’ announcements, including accounting

policies and compliance with accounting standards.

• Review of significant financial reporting issues and matters

ofjudgement within the Financial Statements (further details

ofthese can be found on pages 121 and 122).

• Review of trading updates issued during the year.

• Review and approval of the viability statement, including the

scenarios modelled and assumptions made within.

• Review and approval of the going concern statement for the

Group, and recommendation to the Board that the Directors

can justifiably state that they have a reasonable expectation

that the Group will be able to continue in operation and meet

its liabilities for at least the next 12 months.

• Review and approval of the Group’s tax strategy.

• Review of the Annual Report and Accounts and advice to the

Board on whether, taken as a whole, these are fair, balanced

and understandable and provide the information necessary

forshareholders to assess the Group’s financial position and

performance, business model and strategy.

• Consideration and challenge of the Group’s use of alternative

performance measures (APMs) and their appropriateness

within the Annual Report and Accounts.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

119

External audit

• Consideration of the External Auditor’s 2023 audit plan

includingthe scope of audit work and approval of the auditfee.

• Consideration of the annual letter to those charged with

governance and other reports prepared by the external auditor.

• Following the inclusion of the Company’s Annual Report and

Accounts to 31 December 2022 in a thematic review by the

Financial Reporting Council (FRC), covering climate-related

metrics andtargets and net zero plans, the FRC wrote to

theChairmen of both the Board and Audit Committee setting

out the scope of itsreview, its principal findings and areas

ofgood practice identified.

• Receipt of updates from the External Auditors on the UK

Government’s response to the ‘Restoring Trust in Audit and

Corporate Governance’ consultation and understanding of

theimplications this may have on the Group and Committee

going forward.

Internal audit

• Monitoring of progress against the 2023 internal audit

programme, following consideration of the risks facing

theGroup.

• Setting of the 2024 internal audit programme.

• Deciding to transition from a co-sourced to fully outsourced

internal audit function with PwC following a restructure of

roles with the Group’s finance function.

• Review of the audit reports prepared by the internal audit

function with subsequent oversight of the implementation

ofrecommended improvements.

• Received updates from the Internal Audit Function on the UK

Government’s response to the ‘Restoring Trust in Audit and

Corporate Governance’ consultation and understanding of

theimplications this may have on the Group and Committee

going forward.

Internal control

• Challenge and review of control reporting updates presented

to the Committee by management.

• Received regular updates from management on the progress

ofthe project to strengthen the Group’s control framework.

• Reviewed a paper setting out the effectiveness of the internal

control and risk management framework during the year.

Other

• Received compliance updates from the Company Secretary

inrelation to whistleblowing.

• Reviewed an update of the Committee’s Terms of Reference,

ensuring they remain in line with best practice.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

120

AUDIT COMMITTEE REPORT

CONTINUED

Significant financial reporting risks and judgement

areasconsidered

The Committee, in carrying out its responsibilities, is required to

assess whether suitable accounting policies have been adopted

and consistently applied in the preparation of the Financial

Statements.

The Committee consider the following to be the most significant

financial reporting matters based on their potential effect on the

Group’s Financial Statements. During the year and to the date

of this report, the Committee have reviewed and challenged

papers prepared by management, confirming these remain

appropriate for the Group and relevant in the approval of the

Financial Statements for the year ended 31 December 2023.

Revenue recognition

The Group recognises revenue on a point in time basis when

performance obligations are met, which is usually on delivery

tothe customer, but may vary by product and under different

agreements. In addition to this, a number of contracts also

contain volume driven rebate mechanisms.

Committee action

The Committee reviewed and understood the Group policy

covering the recognition of revenue and the recording of rebate

obligations, recognising this was unchanged from prior periods.

Following discussion, and further considering the summarised

result of substantive testing and data analysis performed by

theExternal Auditor, the Committee is satisfied that, under all

arrangements, the point at which control passes to the customer

has been suitably considered and reflected and there are

appropriate systems and controls in place to ensure revenue

isrecognised appropriately.

Restoration and decommissioning provisions

The Group makes provisions for liabilities in respect of restoration

and decommissioning based upon both third-party advice and

management’s judgement of the appropriate level ofliability

likely to arise in the future.

Committee action

The Committee considered the work performed by management

and the steps taken to ensure accuracy of provision, including

use of third-party experts and comparisons of estimate to actual

costs incurred. This was presented alongside reporting from

theexternal auditor, which detailed work performed over the

appropriateness of the discount rates applied by management,

useful lives attached to sites, management input data and the

work of independent experts engaged.

This allowed the Committee the ability to critically review

andchallenge the basis and amounts of provisions as at

31December 2023, understand Group policy and be satisfied

that there are appropriate systems and controls in place

toensure the restoration and decommissioning provision

isappropriately stated in the Financial Statements.

Inventory valuation and provisioning

Inventory carrying value in the Financial Statements is stated

after recognising inventory provisions, with particular reference

to the judgemental nature of the obsolescence provision,

referred to as the capping provision. The capping provision

usespast sales data, with manual adjustments as determined

necessary (an example of this being new product ranges) to

calculate the provision. This requires a degree of commercial

judgement when determining saleability and price of certain

finished goods.

Committee action

The Committee reviewed a summary of work performed by

management, outlining the Group’s valuation of its finished

goods inventory, including the level of provisions recognised

against potential obsolescence. Provisions were discussed by

the Committee, with consideration to the current economic

uncertainties and their impact on stock held by the Group.

In addition, the work of the External Auditor was considered,

including the procedures carried out in relation to the carrying

value of the Group’s inventory. This included attending stock

counts, assessing reasonableness of adjustments and

sampletesting.

Taking this into consideration, the Committee was able

toconcur with management’s assessment that there are

appropriate policies, systems and controls in place to

ensurethe carrying value of the Group’s inventories is

appropriately stated.

Impairment

The Group holds significant assets in the form of brands, land

and buildings and plant and machinery. At the interim and

year-end balance sheet dates, these assets were considered

forindicators of impairment. In considering this, management

performed an assessment of indicators of impairment, followed

by full assessments for certain cash-generating units within the

Group as required, and determined that an impairment of the

plant and machinery at our mothballed sites during the year was

necessary, totalling £5.0m.

Committee action

The Committee has critically reviewed the processes adopted

by management in assessing whether, in their judgement,

anyindicators of impairment existed and whether any detailed

impairment testing should be undertaken, with consideration to

the current economic uncertainties and their impact on market

conditions. The Committee have carefully considered these

reviews and the associated impairment assessments as well

asthe assumptions and sensitivities applied by management

inundertaking the impairment testing.

Following this review, the Committee concurred with

management’s conclusion that a current year impairment of

£5.0m was necessary, and are satisfied that the estimates

adopted, and the accounting treatments applied in the

preparation of the Financial Statements are appropriate.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

121

Alternative performance measures: exceptional items

Exceptional items have historically been disclosed separately

inthe Financial Statements where management believes it is

necessary to show an alternative measure of performance

(APM) in presenting the financial results of the Group.

Management assesses the nature, size and incidence of

itemswhen judging what should be disclosed separately.

Committee action

The Committee assessed the categories of items proposed

forinclusion as exceptional items and considered their

appropriateness in line with regulatory guidance. In doing so

theCommittee sought views from the external auditor as to

theappropriateness of items categorised by management as

exceptional. Upon conclusion of this review, the Committee

concurred with management’s analysis of proposed items and

their disclosure as an APM.

Alternative performance measure: adjusting items

In addition to exceptional items, in the current year the Group

isdisclosing certain adjusting items separately within the

AnnualReport and Accounts. In doing so, this has led to the

presentation of ‘adjusted’ results, which are presented before

both exceptional and adjusting items. Management believe the

presentation of this APM is beneficial and necessary in allowing

users of the accounts to understand performance.

Committee action

The Committee assessed the categories of items proposed

forinclusion as adjusting items and considered their

appropriateness. In doing so the Committee sought views from

the external auditor and noted this treatment was aligned to

Group banking covenants. Upon conclusion of this review, the

Committee concurred with management’s analysis of proposed

items and their disclosure as an APM.

Alternative performance measure: accounting for carbon credits

Under the UK Emissions Trading Scheme, the Group receives

an annual allocation of free carbon credits, which are used to

satisfy a portion of the Groups carbon emissions liability as

incurred over the compliance period, which falls in line with the

accounting period of the Group. These are recorded at nil value

within the Financial Statements. As this allocation is less than

the total carbon compliance liability incurred by the Group over

the compliance period, additional carbon credits are purchased

to satisfy the shortfall.

The liability for the shortfall is measured, up to the level of

creditspurchased, at the cost of the purchased credits. Where

the liability to surrender carbon credits exceeds the carbon

allowances purchased, the shortfall is measured at the prevailing

market price and remeasured at the reporting date. The Group’s

free allocation of carbon credits is based on expected emissions

over the full compliance period, which is in line with the Group’s

financial year. As such, management believes the operationally

aligned method for measurement recognises these free

allowances over the full financial year using a weighted average

basis, aligned proportionately with the production which drives

carbon emissions, in line with management reporting. This

weighted average basis was presented as an APM in the interim

financial statements.

The interim statutory results showed carbon credits as being

utilised on a first in, first out basis, fully utilising the Group’s free

allocation of carbon credits before recognising any liability to

purchase further credits. The above differing treatments only

affect the interim results for the Group and had no impact on

thefull year Financial Statements.

Committee action

The Committee received an update from management and the

external auditor on the appropriateness of the Group accounting

policy for the treatment of carbon credits, including the

measurement basis at both interim and year-end reporting

dates. The Committee reviewed and understood the relevant

accounting standards underpinning the policy and discussed

with both the external auditor and management the

appropriateness of disclosing measurement on a weighted

average basis as an APM within the interim Financial Statements.

The Committee concluded that its presentation provided

additional clarity on performance and that sufficient

reconciliation and disclosures were provided by management

with sufficient prominence.

Risk management and internal controls

The Audit Committee has historically, and for the period ended

31 December 2023, focused upon financial risks and controls,

with operational risk management contained within the Terms

ofReference of the Risk and Sustainability Committee. During

2023, the Audit Committee and the Risk and Sustainability

Committee worked closely together, and members of the Audit

Committee also serve on the Risk and Sustainability Committee.

In addition, keymembers of the Internal Audit function may,

byinvitation, also attend meetings of the Risk and Sustainability

Committee. Details regarding the activities of the Risk and

Sustainability Committee can be found on pages 126 and 127.

With the changes made to Committee structure from January

2024, the Audit and Risk Committee will going forwards assume

responsibility for financial, operation and compliance risk across

the Group.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

122

AUDIT COMMITTEE REPORT

CONTINUED

Restoring Trust in Audit and Corporate

Governanceconsultation

During the year, assisted by both the External Auditor and the

Internal Audit Function, the Committee continued to closely

monitor the UK Government’s response to the ‘Restoring Trust

in Audit and Corporate Governance’ consultation so as to

determine the potential future impact upon the Group and any

additional obligations this may place on the Board and Committee.

Indoing so, management continued work to strengthen financial

controls through aformalised Group control framework and the

Committee continued to receive updates onprogress, control

findings and actions during the year.

Following revisions to the Corporate Governance Code,

published by the FRC in January 2024, the Committee will

support the Board in ensuring the Group is aligned and

ultimately compliant with the provisions outlined within the

Codeahead of effective dates.

Risk management and internal control systems

In order to allow the Board to discharge its obligations with

regard to Principle O of the revised Code the Board requested

that the co-sourced Internal Audit provider carry out a review of

the effectiveness of the Group’s entity level controls. This was

presented to the Committee alongside an internally prepared

paper on risk and internal control systems, which management

prepare on an annual basis. The Audit Committee assessed the

findings of this review and is able to confirm to the Board that:

• there is an ongoing process for identifying, evaluating, and

managing the principal risks faced by the Group;

• the systems have been in place for the year under review

andup to the date of the approval of the Annual Report

andAccounts;

• they are regularly reviewed by the Board along with the

Riskand Sustainability and the Audit Committees where

appropriate; and

• the systems accord with the Financial Reporting Council

(FRC) guidance on risk management, internal control,

andrelated financial business reporting.

Internal audit

The Internal Audit Function exists to provide the Board and

management with independent assurance that internal controls

and risk management processes are both appropriate and

operating effectively.

During the year a co-sourced internal audit function was in

place, headed by an in-house Head of Internal Audit and

supplemented by auditing resource and expertise from PwC

asrequired. Following changes within the Group’s finance team,

the Committee made the decision to move to an outsourced

internal audit function, with this coming into effect for 2024.

Theoutsourced internal audit function will be supported by

members of the senior finance team.

The Committee believes that the operating model now in place

will continue to work effectively, providing the Group with a wide

pool of external experience and specialist skill sets to deliver the

most effective and responsive solution, alongside strong internal

business support provided by the senior finance team.

The Internal Audit Function operates to an agreed 12-month

audit programme which is set by the Committee after

considering recommendations from the Internal Audit Function

as well as Executive Management. Internal audit programmes

are designed following an assessment of risk and materiality.

The Internal Audit function also retains the ability to bring in

independent specialists to assist with audit work where more

specialist knowledge and understanding is required.

During 2023 and to the date of this report the function

performed work covering areas, including: payroll processes;

controls over procurement processes, and a further review over

purchase to pay, which included a review of the updated and

strengthened control framework in place.

The outcomes of these were presented to the Audit Committee

ahead of approval of the Financial Statements for the

yearended 31 December 2023. These set out any control

weaknesses identified as well as management’s actions

toaddress control recommendations.

The Chairman of the Audit Committee regularly met with the

Head of Internal Audit and the co-sourced provider. Other

members of the Committee and the Board also met with the

Head of Internal Audit on a periodic basis. The Head of Internal

Audit and the co-sourced provider had regular and confidential

access to the Chairman of the Committee. This process will

continue with the outsourced provider following the transition

toan outsourced internal audit function.

Committee experience and competence

Provision 24 of the revised Code requires that the Board should

satisfy itself that at least one member of the Audit Committee

has recent and relevant financial experience. The Committee

asa whole shall have competence relevant to the sector in

which it operates.

The Board have concluded that Vince Niblett meets the recent

and relevant financial experience requirement. Vince Niblett

waspreviously a Partner at international professional services

firm Deloitte, where he held a number of senior roles including

membership of the UK Board of Directors and Global Managing

Director, Audit & Enterprise Risk Services before retiring in 2015.

Vince is a Chartered Accountant and also a Non-Executive

Director and Chairman of the Audit Committee at Big Yellow

Group plc and Target Healthcare REIT plc.

The Board also considers the wider Committee to have the

required competence, skills, and experience and that it is

operating effectively and is providing robust challenge to the

Executive Directors and the wider business.

Fair, balanced and understandable

At the request of the Board, the Audit Committee has

considered whether the 2023 Annual Report is fair, balanced

and understandable and whether it provides the necessary

information for the Group’s shareholders to assess the Group’s

position, performance, business model and strategy.

As part of its review the Committee considered:

• the messaging and balance of key disclosures in the

strategicreport;

• presentation of APMs, including the balance between

statutory and non-statutory measures;

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• advice from external professional advisers on complex

matters where appropriate;

• reviews performed by senior management over the Annual

Report and Accounts;

• disclosures related to the Group’s sustainability objectives,

aswell as climate risk and opportunities; and

• consistency of reporting within the Annual Report and

Accounts, including disclosure of judgements and estimates.

The Committee has concluded that the disclosures, and the

process and controls underlying their production, were

appropriate to enable it to determine that the 2023 Annual

Report and Accounts is fair, balanced and understandable.

Viability statement and going concern

Ahead of the publication of the full year financial results for

2023, the Committee undertook a detailed review of the

prospects of the Group to ensure ongoing viability. A viability

statement was prepared which carefully considered possible

adverse scenarios resulting from current economic uncertainties,

against a budgeted base case. This was used to support

arecommendation to the Board that the Directors can justifiably

state that they have a reasonable expectation that the Group

willbe able to continue in operation and meet its liabilities to

theend of 2026. The viability statement is included in the risk

management and key risks section of the Strategic Report.

The Committee also reviewed and challenged the going concern

statement included in the Directors’ Report along with the

underlying assessment prepared to support this statement.

External audit, auditor independence and objectivity

The Committee is responsible for making recommendations

tothe Board regarding the appointment, reappointment, and

removal of the external auditor. It keeps under review the scope

of the audit, the audit findings, its cost effectiveness and the

independence and objectivity of the auditor.

The Company has complied with the Competition and Markets

Authority final order on mandatory tendering and the requirements

of the Audit Directive (2014/56/EU). It is the Company’s

intention to put the audit out to tender at least once every

10years. Ernst & Young have held the appointment as Auditor

since the Company was incorporated in 2016.

The Group’s policy is to rotate the lead audit partner every five

years. Anup Sodhi was appointed as audit partner in 2021.

The Committee receives the formal letter addressed to those

charged with governance provided by the external auditors on

completion of the annual external audit which summarises the

key findings and observations arising from the audit along with

how management have responded to these findings. In addition,

the external auditors provide confidential feedback to the

Committee as to how members of the management team have

conducted themselves during the audit process.

In addition, the Chairman of the Committee regularly meets withthe

external audit partner outside of the formal committee meetings.

Non-audit services policy

The Group’s non-audit services policy restricts the external

auditor from performing certain non-audit services in

accordance with the Revised Ethical Standard 2016 issued by

the Financial Reporting Council. The Revised Ethical Standard

2019 introduced further restrictions on services not closely

linked to the audit, law or regulation and the Group is operating

in compliance with these regulations.

The amounts paid to Ernst & Young for non-audit services

during the year are disclosed in note 5 of the Financial Statements.

The only non-audit service provided in the year was in respect

ofthe review of the interim financial statements and results

announcement. Ernst & Young also has its own policies and

procedures in place to ensure it maintains its independence

andobjectivity and regularly reports to the Committee on its

independence.

Whistleblowing, fraud and the Bribery Act

The Board has reviewed and approved the Group’s policies and

procedures covering whistleblowing, anti-bribery and corruption

including the controls in place to detect fraud and to ensure

compliance with both competition and anti-bribery legislation.

The Group maintains a zero-tolerance approach to breaches

ofthis legislation and certain employees in commercial roles,

selected using a risk-based approach, are provided with

dedicated training and guidance appropriate to their roles.

The Group operates a MySafeWorkplace anonymous incident

reporting system, allowing employees to report any wrongdoing

or concerns with confidentiality assured. There were no concerns

notified to the Group that required the attention of the Committee

during the year and up to the date of this report.

The Report of the Audit Committee has been approved by the

Board and signed on its behalf by:

Vince Niblett

Chairman of the Audit Committee

25March 2024

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AUDIT COMMITTEE REPORT

CONTINUED

DIVYA SESHAMANI

INDEPENDENT NON-EXECUTIVE DIRECTOR

The purpose of the Committee is to

assist the Board in ensuring that all

key business risks, including health

and safety, sustainability, operational

and commercial are identified in a

timely manner and, where possible,

mitigated effectively and proactively

throughout the Group.”

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RISK AND SUSTAINABILITY

COMMITTEE REPORT

MEMBERSHIP

The members of the Committee are appointed

bytheBoard. At 31 December 2023 the

members ofthe Committee were as follows:

Divya Seshamani (Chairman)

Justin Atkinson

Neil Ash

Ben Guyatt

Katherine Innes Ker

Vince Niblett

Martin Sutherland

Gina Jardine

DearShareholder

I am pleased to present the report of the Risk and Sustainability

Committee (the Committee) for 2023. The purpose of the

Committee is to assist the Board in ensuring that all key

business risks, including health and safety, sustainability,

operational and commercial are identified in a timely manner

and, where possible, mitigated effectively and proactively

throughout the Group.

Activities during the year

The Committee met on four occasions during the year,

alternating in focus between health and safety risk and

sustainability-related risks, alongside wider risk

managementtopics.

In addition to the Committee members, other members of the

management team with responsibilities covering health and

safety, risk management, sustainability, commercial, operations

and internal audit regularly attended and actively contributed

tothe meetings.

RESPONSIBILITIES

Working in conjunction with the Audit Committee, the role of the Committee is to assist the Board in fulfilling its oversight

responsibilities ensuring the Group properly identifies and manages the key risks it faces, alongside the implementation of its

sustainability policy and monitoring ofthose targets. Responsibilities of the Committee are summarised as below:

Risk management

• Define and continually review the Group’s appetite for risk.

• Review the effectiveness of risk management processes in

determining whether all risks are being identified, evaluated,

monitored, and managed appropriately.

• Review of the Group risk register and consider its

appropriateness and completeness along with the

appropriateness of the mitigating actions being taken.

• Consider emerging risks which have the potential to impact

the business.

• Review the effectiveness of the Group’s risk management

function, ensuring that sufficient resources are devoted to

this area and that these resources are appropriately skilled.

Health and safety

• Review of the health and safety policy, considering whether

it complies with legislation and best practice, and

recommend improvements as appropriate.

• Implement changes in the health and safety policy

asnecessary.

Sustainability

• Oversee the Group’s sustainability policies.

• Define the level of the Group’s ambitions with regards to

reducing environmental impact and addressing climate-

related risk.

• Set challenging environmental targets and monitor progress

against these.

• Monitor the Group’s compliance with the requirements

ofTCFD and other reporting protocols as appropriate.

• Ensure that the Group’s sustainability policy satisfies its

desired outcomes and monitor achievement against the

targets set.

The Committee’s full Terms of Reference are available on

theCompany’s website.

The Terms of Reference of the Risk and Sustainability

Committee are approved by the Board and are reviewed

annually to ensure they remain appropriate.

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RISK AND SUSTAINABILITY

COMMITTEE REPORT CONTINUED

Risk management

Throughout the year and to the date of this Annual Report, the

risk register for the Group has been reviewed and updated by

management, considering completeness, likelihood, and impact

of risks, along with controls and actions in place to mitigate risks.

Emerging and principal risks for the Group (as described in the

Strategic Report on pages 86 to 95) are reviewed regularly and

the full risk register is presented to the Board at least annually.

During 2023, Committee attention has been directed towards

anumber of evolving risks, with significant focus on the Group’s

markets, with change in fiscal policy leading to increased borrowing

costs for home buyers and a corresponding slowdown in new

housebuilding. The Committee considered the likely implications

and potential mitigations of each risk and reviewed the Group’s

overall approach to determining risk appetite.

In reviewing emerging risks and management’s response to the

changing risk environment, the Committee considered how well

risk management was embedded throughout the business, and

how increasing focus on risk management is better equipping

the business to identify and respond to the rapidly emerging

threats posed by the fast-evolving market and supply chain

conditions. The Committee continue to review emerging risks

alongside the Group’s principal risks to provide assurance that

all risks continue to be afforded proper attention.

Further information regarding the risks faced by the Group is

included in the Strategic Report on pages 86 to 95.

Health and safety

Health and safety remains our number one priority and

accordingly continued to be an area of significant focus for the

Committee during the year. The Committee considered and

provided input into the Group’s health and safety strategy,

which in the year saw a focus on safety behaviours and culture,

with a continuation of external behavioural training delivered

across the whole business.

In 2023 we continued to focus on health and safety behaviours

and culture working with our training provider Juice Learning.

We delivered two further phases of the training, phase 3 was

delivered to all our supervisory colleagues and higher with the

focus on ‘stepping up’ to manage and promote health, safety

and well-being. Phase 4 encouraged all employees to ‘speak

up’ and challenge unsafe behaviours.

During the year, the health and safety team continued to make

progress in delivering the Road Map to Zero Harm.

The Committee carried out the following health and safety

related duties in the year:

• considered health and safety policy and practices against

developments in best practice;

• reviewed health and safety incidents along with management’s

response to these incidents, identifying key learnings and

further improvements that can be made to existing practices;

• reviewed the outcomes of the safety walks undertaken by

members of the Board during the year; and

• evaluated the effectiveness of the Group’s health and

safetyfunction.

Sustainability

Sustainability was the focus of two of the four Committee

meetings held during the year, with these meetings also being

attended by the Group’s Head of Sustainability and other

members of management as appropriate.

The Committee has undertaken the following sustainability-

related tasks during the year:

• review and monitor of the Group’s performance against its

sustainability targets;

• consideration of and review of the Group’s long-term energy

supply strategy and evaluation of the risks and benefits of

investing in renewable energy generation;

• receipt of updates regarding the Group’s progress on

sustainability initiatives including reduction of plastic

packaging and the adoption of emerging technologies.

Thelatter including the use of hydrogen and biomass as

replacement fuels for natural gas along with carbon capture

and storage; and

• review of the Group’s sustainability and climate reporting and

disclosure including the scenario-based modelling required by

TCFD and considered the upcoming requirements of the Task

Force on Nature-Related Financial Disclosure (TNFD).

Health and safety walks

Throughout 2023 the Board continued to engage in visible felt

leadership with the workforce, something that is seen as critical

in positively influencing culture from the top.

Each Board member is expected to undertake at least two

safety focused site visits, ‘safety walks’, at the Group’s

operating facilities. During these visits the Directors take the

opportunity to engage directly and informally with employees on

matters relating to health and safety. The Committee considers

the feedback from each of these safety walks and regularly

reviews progress against identified actions.

These safety walks are well received by our employees and

demonstrate the Board’s commitment towards visible felt

leadership. In addition, consistent with the objective of fostering

a greater awareness of, and responsibility for risk management

at an operating site level, the visits also consider wider site-

specific risks and mitigations without diminishing the importance

placed on health and safety. In 2023 the Committee members

were also invited to attend the Group’s externally presented

behavioural safety programme, which was rolled out across the

business during the year.

Committee responsibility

The previous transition of the Board’s Risk Committee becoming

the Risk and Sustainability Committee, has continued to be

successful in elevating the importance of sustainability throughout

the business, so much so that from the start of 2024 sustainability

matters will be governed by a standalone Sustainability

Committee. The Committee will devote its time to the continuance

of Group’s sustainability strategy and governance thereof.

Divya Seshamani

Chairman of the Risk and Sustainability Committee

25March 2024

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KATHERINE INNES KER

SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR

On behalf of the Board, I am pleased to present

our Directors’ Remuneration Report for the

financial year ended 31 December 2023, which

sets out our role and provides details of our

application of the Remuneration Policy which

was last approved by shareholders in 2023.

This Report provides details on the link between

remuneration and the Group’s long-term strategic

goals, and how it aligns to the interests of

the Executive Directors, senior management,

employees and our shareholders.”

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REMUNERATION COMMITTEE REPORT

MEMBERSHIP

The members of the Committee are appointed

bytheBoard. At 31 December 2023 the

members ofthe Committee were as follows:

Katherine Innes Ker (Chairman)

Justin Atkinson

Martin Sutherland

Divya Seshamani

Vince Niblett

Gina Jardine

Structure of the report

– Remuneration

Committee Report,

pages 128 to 156

– Remuneration at a

Glance, page 133

– Summary of

Remuneration Policy,

pages 134 to 144

– Annual Report on

Remuneration, pages

145 to 156

Dear Shareholder

I am pleased to present, on behalf of the Board, the 2023

Directors’ Remuneration Report.

The Group aims to attract and retain talented people to deliver

sustainably high levels of performance ensuring the ongoing

success of the Group. Our Remuneration Policy aligns the

Group’s strategic goals with the pay and incentives of Executive

Directors, senior management, employees, and with the long-

term interests of our shareholders. Alongside this, the Policy is

designed to create an environment of achievement and delivery,

with appropriate reward for good performance and for behaviours

which support the culture promoted throughout the Group,

without incentivising the taking of unnecessary risks, and is

designed to be both transparent and understandable.

The Remuneration Policy was approved by Shareholders at the

2023 AGM, and received 98.14% of the votes cast in favour.

Full details of the Policy can be found on pages 134 to 144.

The Committee is comfortable that the Policy has operated as

intended during the year and that no major changes are

required. The Policy shall continue to apply until the 2026 AGM

at which point the Committee shall review its contents and table

the Policy, including any revisions, for Shareholder approval.

RESPONSIBILITIES

The principal responsibilities of the Committee are as follows:

• Design and implement remuneration policy and practices

of the Company to support strategy and promote long-

term sustainable success;

• Ensure executive remuneration is aligned to company

purpose and values and linked to delivery of the

Company’s long-term strategy;

• Ensure the engagement and independence of external

remuneration advisers; and

• Review of workforce remuneration and related policies and

the alignment of incentives and rewards with culture.

The full responsibilities of the Committee are set out

initsTerms of Reference which are available on the

Company’s website.

The Terms of Reference of the Remuneration Committee

areapproved by the Board and are reviewed annually to

ensure they remain appropriate.

2023 overview

Trading performance

2023 was characterised by a sharp deterioration in trading

conditions with increasing mortgage rates, reducing affordability

and limiting the demand for new homes and accordingly

demand for our products. This cyclical decline in our markets

has impacted the Group, reducing revenues and profits but also

requiring decisive management action to align output to market

demand, limiting the growth of inventory.

Strategic progress

Whilst the primary management focus during the year was

response to the rapidly changing market conditions, progress

continued to be made against our strategic objectives.

Whilst our strategy remains unchanged, during the year we

refreshed our strategic narrative including redefining our vision,

mission and purpose, and values.

The following highlights the key achievements against our

strategic objectives in 2023:

• Opening of the new Desford brick factory within the original

£95m budget.

• Progressing the redevelopment of the Wilnecote brick factory

with commissioning expected in the second half of 2024.

• Progressing the construction of our innovative brick slip

manufacturing facility which will also commence production

inthe second half of 2024.

Chief Executive Officer succession

On 25 April 2023 Chief Executive Officer Stephen Harrison

stepped down as a Director of the Company. Stephen remained

as an employee of the Company until 24 May 2023. Neil Ash

was appointed as Chief Executive Officer designate on 3 April

2023 and was subsequently appointed to the Board as Chief

Executive Officer on 25 April 2023.

Payments for loss of office

Salary and benefits

Stephen Harrison continued to receive his salary and

contractual benefits up to 24 May 2023. No compensation

forloss of office was payable.

2023 bonus

The Committee determined that Stephen Harrison was

agoodleaver.

As a part financial year had been worked, Stephen was eligible

to participate in the 2023 annual bonus scheme as detailed on

page 146, with entitlement pro-rated for his period of service.

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Share-based payments

The following treatments applied to in-flight share-based

payment, in line with the Company’s Remuneration Policy:

• Deferred Annual Bonus Plan (DABP)

Share options granted under the 2022 and 2023 DABP vested

on the date of cessation of employment.

• Performance Share Plan (PSP)

In line with the scheme rules applicable to good leavers, awards

granted in 2020, 2021 and 2022 have or will vest at normal

vesting date, pro-rated for time served and tested for

performance. Noawards were granted in respect of 2023.

In line with the Remuneration Policy, Stephen is required to hold

the lower of 200% of his in-post share ownership requirement

orhis actual holding on departure two years post-cessation.

Shares acquired by or granted to an Executive Director prior

to1January 2020 will not be counted towards the requirement.

Shares purchased by an Executive Director along with any

shares granted or acquired prior to appointment to the Board,

will also not be counted towards the requirement.

Payments to new Director

Salary and benefits

Neil Ash’s remuneration package was set by the Committee

following a review of external benchmarks and is believed to

becompetitive taking into account the size of the Company

andthe breadth of the role. The package provided to Neil is

consistent with that provided to former CEO, Stephen Harrison.

Neil’s annual base salary from 3 April 2023 was £477,750.

2023 bonus

Neil was eligible to participate in the 2023 annual bonus

scheme, pro-rated form 3 April and subject to performance

criteria being achieved as detailed on page 146.

Share-based payments

Neil was eligible to participate in share-based payments,

in line with the Company’s Remuneration Policy from 2023.

In addition, the Committee made an award of 207,784 Forterra

ordinary share options on 3 April 2023 as compensation for

amounts foregone from Neil’s former employer in respect of

long-term incentives due to vest in April 2023. No consideration

was paid for the grant of the award which was structured as

nominal cost options at an option exercise price of £0.01 per

ordinary share. These options were exercised on 3 April 2023

with sufficient shares sold to cover income tax and national

insurance liabilities.

In addition, on 3 April 2023, Neil was awarded a further 126,904

ordinary share options along with his 2023 PSP award in place

of the cash value of his 2022 bonus forgone on the termination

of his previous employment.

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REMUNERATION COMMITTEE REPORT

CONTINUED

Remuneration in context

In making decisions in relation to the Executive Directors’

remuneration outcomes for 2023, the Committee has taken into

account key measures of the Group’s performance, as well as

the experience of wider stakeholders as outlined below.

Employees

We are committed to the provision of an inclusive working

environment and ensuring the fair reward of all employees,

regardless of seniority across the business. In addition to the

Executive Directors and senior management, the Committee

considers wider workforce remuneration and conditions.

The Committee also continued its commitment to encouraging

employee share ownership by approving the offer and

subsequent grant of share options under the Forterra Sharesave

Plan. There was continued uptake of this offer from employees

with over half of our workforce continuing to save in this way.

In line with established protocols, wages and salaries were

reviewed at the beginning of 2023 with an increase of 5%

awarded to salaried employees. Following collective pay

negotiations with the shop floor workforce, an increase for

allnon-salaried employees of 5.5% was agreed in June 2023

andbackdated to January 2023.

During the year the Company met with representatives from

theEmployee Forum on a quarterly basis, with discussion topics

including employee reward amongst many others.

Shareholders

We remain in close contact with major shareholders with the

Executive Directors regularly meeting shareholders to discuss

business performance, strategy, capital allocation, sustainability

and other matters. During 2023 shareholder discussion was

inevitably focused upon market conditions and their impact

ontrading results along with management’s response and the

mitigating actions taken.

The Chairman of the Board is always available to discuss

matters with major shareholders and held a number of meetings

during the year.

2023 salary and fees

The base salaries of the outgoing Chief Executive Officer,

Stephen Harrison; the Chief Financial Officer, Ben Guyatt; the

Chairman’s fee; and the Non-Executive Directors’ base fee were

increased by 5% in January 2023 in line with the increase for

salaried employees. The base salary of Neil Ash was set upon

his appointment as outlined above.

2023 annual bonus

Reflecting the fulfilment of personal objectives, the 2023 annual

bonus will be paid in March 2024.

The profit before tax (PBT) as stated before adjusting items of

£31.1m did not meet the minimum threshold of £46m and the

Executive Directors will not receive a payment of the profit-

related element of their bonus. The achievement against the

personal objectives element has been determined at 50% for

both the outgoing and incoming Chief Executive Officer,

Stephen Harrison and Neil Ash, making their bonus earnings

12.5% of their maximum potential annual bonus for 2023. Ben

Guyatt, Chief Financial Officer (CFO) was also determined to

have achieved 50% of his personal objectives, also making his

2023 bonus earnings 12.5% of his maximum potential annual

bonus. No adjustments or discretion has been applied to the

formulaic outcome for the 2023 annual bonus.

Under the rules of the annual bonus plan the first 10% of salary

is payable in cash, with up to half of the remainder of any bonus

being normally deferred into shares under the DABP. Inlight of

the modest bonus achievement in the year and in recognition

ofthe disproportionate administrative burden of deferring small

amounts into shares, the Committee has elected not to defer

any of the bonus into shares and the entire 2023 bonus will be

paid in cash.

Performance Share Plan (PSP) awards vesting in 2023

The 2020 PSP award vested on 17 September 2023. This

award was granted with all of the award subject to a total

shareholder return (TSR) performance condition measured

overthree financial years from grant. The TSR performance

condition was met and vested at 53.9%.

Performance Share Plan (PSP) awards granted

duringtheyear

The 2023 grant of awards under the PSP was made in

accordance with the Policy at 150% of salary for the CEO,

NeilAsh, and 125% of salary for the CFO, Ben Guyatt.

StephenHarrison did not participate in the 2023 PSP.

The performance targets applicable to this award are disclosed

within this Report. The awards are structured with 40% of the

awards granted subject to an EPS performance condition,

40%of the awards granted subject to a TSR performance

condition and 20% of the award subject to sustainability targets.

2023 Remuneration Policy and implementation

Implementation of the Remuneration Policy in 2024 was

approved by shareholders at the 2023 AGM, and received

98.14% of the votes cast, in favour.

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2024 overview

2024 salary and fees

In line with the Policy, the Committee considered the base

salaries of the Executive Directors, Neil Ash (CEO) and Ben

Guyatt (CFO) and awarded a 2% increase effective 1 January

2024. This was in line with the increase awarded to both the

salaried employees and shop floor workforce of the Group.

TheExecutive Directors determined that the base fee payable

tothe Non-Executive Directors should be increased by the

same percentage. The additional fees payable for chairing

acommittee and for the Senior Independent Director

remainedunchanged.

In line with the increases awarded to the salaried employees of

the Group, the Committee recommended that the fee payable

to Chairman was increased by 2% effective 1 January 2024.

Therefore in 2024 the Executive and Non-Executive Directors

received annual increases in common with the wider workforce.

2024 annual bonus

The Committee reviewed the operation of the Annual Bonus

Plan during the year. The objective is to achieve a balance

between financial performance and, through a clear link with

objectives and reward, ensure that the right behaviours are

being driven. It was agreed that financial performance and

personal business objectives continue to form the basis of

the2024 annual bonus.

The following metrics and weighting will apply for the 2024

annual bonus:

• 75% of maximum opportunity: profit before tax; and

• 25% of maximum opportunity: non-financial/strategic

objectives.

With challenging market conditions expected to continue

through 2024 and with this reflected in the analysts’

expectations of 2024 performance, thresholds will be set

accordingly with a significant stretch to the maximum

opportunity. These targets will be reported retrospectively

following the end of the performance period, as they are

considered to be commercially sensitive.

2024 Performance Share Plan (PSP) awards

Grant levels for the 2024 PSP are expected to be in line with

theprior year at 150% of salary for Neil Ash (CEO) and 125%

ofsalary for Ben Guyatt (CFO).

The performance targets to be applied to the 2024 PSP

awardshave yet to be finalised by the Committee although

these measures are expected to be consistent with the 2023

PSP awards which incorporate performance targets based

onsustainability metrics accounting for 20% of the award with

EPSat 40% and TSR at 40% respectively.

The EPS target measure will be set recognising that the current

downturn in our markets is more severe and longer lasting

thanwas envisaged when the targets for the 2023 PSP awards

weredetermined. In respect of the portion of the award subject

to aTSR performance condition the index is again expected

tocomprise the unweighted FTSE 250 participants (excluding

investment trusts).

Once finalised the 2024 PSP targets will be communicated by

way of an Regulatory News Services (RNS) announcement.

Shareholder engagement

We take a keen interest in our shareholders’ views on executive

remuneration and welcome any feedback on the Remuneration

Committee Report.

This Remuneration Committee Report will be subject to an

advisory vote at the 2024 AGM. Our goal has been to be clear

and transparent in the presentation of this report and I look

forward to your support on these resolutions.

Katherine Innes Ker

Chair of the Remuneration Committee

25March 2024

Note:

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 UK Corporate Governance Code and the Listing Rules.

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REMUNERATION COMMITTEE REPORT

CONTINUED

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Introduction

This Director’s Remuneration Policy provides an overview of the

Company’s policy on Directors’ pay that was applied in 2023

and will continue to apply until the 2026 AGM. It sets out the

pay structures that the Company will operate and summarises

the approach that the Committee will adopt in certain

circumstances such as the recruitment of new Directors

and/orthe making of any payments for loss of office.

Policy overview

The Committee has responsibility for determining the

remuneration of the Chairman, Executives and Non-Executive

Directors and other senior management. The Committee’s

terms of reference are available on the Company’s website.

The Company’s Remuneration Policy has been designed based

on the following key principles:

• to promote the long-term success of the Group, with

stretching performance targets which are rigorously applied;

• to provide appropriate alignment between the Group’s

strategic goals, shareholder returns and executive reward;

and

• to have a competitive mix of base salary and short and

long-term incentives, with an appropriate proportion of

thepackage determined by stretching targets linked to

theGroup’s performance.

The remuneration arrangements have been structured with due

consideration of the UK Corporate Governance Code and both

best practice and market practice for UK listed companies.

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REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY

Factor

How our remuneration policy aligns

Clarity

Remuneration arrangements should

betransparent and promote effective

engagement with shareholders and

theworkforce.

Martin Sutherland remains the designated Non-Executive Director to represent the views of

employees to the Board, and when appropriate this will include decisions on remuneration across

the business. This is facilitated through the Employee Forum.

We proactively consult our shareholders on any changes to the Remuneration Policy and seek

their views.

Simplicity

Remuneration structures should avoid

complexity and their rationale and operation

should be easy to understand.

The Remuneration Policy includes a single annual bonus plan and a single long-term incentive

plan (the Performance Share Plan) which are clearly communicated.

The rationale for each element of the policy is clearly explained in the Remuneration Policy tables.

Risk

Remuneration arrangements should ensure

reputational and other risks from excessive

rewards, and behavioural risks that can

arisefrom target-based incentive plans,

areidentified and mitigated.

The Committee has discretion to override formulaic out-turn of performance incentives and scale

back if it considers it appropriate to do so.

Awards made under long-term incentive plans are subject to malus and clawback provisions.

Post-vesting holding periods and shareholding requirements align the interests of management

and shareholders and promote a long-term approach to performance and risk management.

Performance metrics are aligned with the Company’s strategy, incentivising delivery of sustained

performance over the long-term.

Defined limits are set on the maximum awards which can be earned.

Predictability

The range of possible values of rewards to

individual directors and any other limits or

discretions should be identified and explained

at the time of approving the policy.

The Remuneration Policy sets out potential levels of vesting available for varying degrees

ofperformance.

The Remuneration Report illustrates the total remuneration opportunity for Executive Directors

under various performance scenarios.

There is full and transparent retrospective disclosure of targets within the Remuneration Report

and the degree to which long-term incentive awards were achieved.

Proportionality

The link between individual awards, the delivery

of strategy and the long-term performance

ofthe Company should be clear. Outcomes

should not reward poor performance.

The use of long-term incentive plans and post-vesting holding periods ensure focus on sustained

performance over the long-term.

The Committee has discretion to override formulaic out-turn of performance incentives and scale

back if it considers it appropriate to do so to ensure poor performance is not rewarded.

Alignment to culture

Incentive schemes should drive behaviours

consistent with Company purpose, values

andstrategy.

The Remuneration Policy places a focus on share ownership through shareholding requirements

and incentive plans, incentivising delivery of sustained, long-term performance in the Company.

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The Remuneration Policy for Directors

The following table summarises the key aspects of the Company’s Remuneration Policy for Executive and Non-Executive Directors.

Element

Purpose and link to strategy

Operation

Maximum opportunity

Framework used to

assess performance

Salary

Salary is a fixed payment

that reflects an

individual’s experience

and role and may be

increased to reflect

capability and

performance.

To recruit and retain

executives.

Salaries are paid monthly and are

normally reviewed annually with

changes effective from 1 January but

by exception may be reviewed more

frequently if the Committee determines

this is appropriate.

In reviewing salaries, the Committee

considers:

• remuneration practices within

theGroup;

• market benchmarks based

oncompanies of broadly

comparable size and/or operating

insimilar sectors;

• role, competence and performance;

and

• the general increase awarded to

salaried employees.

Higher increases may be awarded

tonew Executive Directors who were

hired at below market rates but with

theintention to move to a market

competitive rate over time, subject

toindividual performance.

It is anticipated that salaries

will generally be increased in

line with increases awarded to

salaried employees.

However, in certain situations

such as where there has

beenan increase in the scope,

responsibility or complexity

ofthe role or there has been

asignificant change in the

size, value or complexity of

theGroup, increases may

behigher to remain market

competitive.

Individual and Group

performance is taken into

account when determining

theannual increase.

The rationale for any such

increase will be disclosed

inthe Annual Report on

Remuneration.

Benefits

The Company’s aim is

tooffer competitive and

cost-effective benefits

valued by participants

and to help recruit and

retain executives.

A range of benefits are provided to

Executive Directors that may include

acompany car (or car allowance),

private medical and permanent

healthinsurance, business travel

insurance and life assurance/death

inservice cover. Relocation (or other

related expenses) and tax equalisation

arrangements may be offered as

appropriate to ensure Directors

arenoworse or better off in a case

ofrelocation.

Any reasonable business-related

expenses (including tax thereon)

maybe reimbursed if determined

tobea taxable benefit.

Executive Directors are eligible for

otherbenefits which are introduced

forthe wider workforce on broadly

similar terms.

The cost of providing market

competitive benefits may vary

from year-to-year depending

on the cost to the Company

from third party providers.

The Committee will continue

to monitor the cost of benefits

to ensure that the overall

benefit costs do not increase

by more than the Committee

considers appropriate in the

circumstances.

No performance

metricsapply.

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REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY CONTINUED

TheRemuneration Policy for Directors continued

Element

Purpose and link to strategy

Operation

Maximum opportunity

Framework used to

assess performance

Pension

To provide a market-

competitive cost-effective

contribution towards

post-retirement benefits.

Executive Directors receive a

contribution towards their retirement

provision which may be paid as a

contribution to a personal pension

scheme or a cash allowance in lieu of

pension or a mix of both.

The Company contribution

toretirement allowances is

upto 10% of salary, which

isaligned to that offered to

allemployees.

No performance

metricsapply.

Annual bonus

The Annual Bonus Plan

isto incentivise Executive

Directors to achieve

annual financial and/or

strategic targets.

Bonus deferral provides

aretention mechanism

and provides further

alignment with

shareholders’ interests.

Bonus payments are determined by

theCommittee after the year-end,

based on performance against the

targets set around the start of the year.

The Committee aims to set out in the

Annual Report on Remuneration the

nature of the targets and their

weighting for the forthcoming financial

year and details of the performance

conditions, the weightings and targets

applied and the level of achievement

against these targets for the financial

year being reported on.

The first 10% of salary is payable in

cash. Up to half of any remainder of

the bonus may then be deferred into

shares as either conditional awards

ornominal cost options under the

Deferred Annual Bonus Plan (DABP).

Such awards vest after a period of

three years subject to continued

employment. No further performance

conditions apply.

In line with good practice, recovery

and withholding provisions apply

(seenote 1).

An additional payment (in the form

ofcash or shares) may be made in

respect of shares that vest to reflect

the value of dividends that would have

been paid on those shares during the

vesting period.

The maximum opportunity

under the annual bonus

scheme is 100% of salary.

Bonus starts to be earned at

the threshold level (up to 25%

of the maximum depending

onthe performance metric).

The bonus may be based

onthe achievement of an

appropriate mix of challenging

financial, operational or

strategic measures.

Typically, financial measures

will account for the majority

ofthe bonus opportunity and

may include measures such

asprofit or cash flow. Other

financial measures that

support the key short-term

priorities of the business may

be used. The targets applying

to financial metrics will take

into account the internal plan

and external expectations of

the business at the time they

are set.

If operational, individual or

strategic measures are

included, where possible a

performance range will be set

although this will depend on

the measure chosen.

The measures, targets and

weightings may be varied by

the Committee year-on-year

based on the Company’s

strategic priorities at the time

(see note 2).

The payment of any bonus

isat the absolute discretion

ofthe Committee which

mayscale-back the formulaic

out-turn of the bonus if it

considers itappropriate to

doso.

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The Remuneration Policy for Directors continued

Element

Purpose and link to strategy

Operation

Maximum opportunity

Framework used to

assess performance

Long-term

incentives

The Performance Share

Plan (PSP) incentivises

Executive Directors and

selected senior

management to deliver

sustained performance

over the long-term.

The Plan also acts as a

method of retaining key

management over the

medium-term.

Aligns the interests of the

Executive Directors and

shareholders and assists

Executive Directors in

building up a substantial

shareholding.

Awards are granted annually in the

formof nominal or nil cost options

under the PSP and vest after no less

than three years.

Stretching performance conditions

measured over a period of three

yearsdetermine the extent to which

awards vest.

A holding period may apply to vested

PSP awards under which Executive

Directors will be required to retain the

net of tax number of vested awards for

at least two years from the date of

vesting. In exceptional circumstances,

the Committee may, at its discretion,

allow participants to sell or dispose of

some or all of these vested shares

before the end of the holding period.

Details of performance conditions for

grants made in the year will be set out

in the Annual Report on Remuneration.

Award levels are reviewed annually

(subject to the PSP individual limits)

taking into account matters such as

market practice, overall remuneration,

the performance of the Company

andthe Executive Director being made

the award.

In line with good practice, recovery

andwithholding provisions may apply

(see note 1).

Dividends may accrue based on the

value of dividends paid during the

three-year vesting period and two-year

holding period (if applicable).

The maximum annual award

under the PSP that may be

granted to an individual in any

financial year is 200% of salary

in normal circumstances

(250% of salary in exceptional

circumstances).

The Committee expects to

retain the current grant levels

of 150% of salary for the CEO

and 125% of salary for the

CFO and these will be kept

under review over the life of

the policy.

For each measure, up to

25%of the relevant part of

theaward would vest for

achieving the threshold level

ofperformance, normally

increasing on a straight-line

basis to 100% for achieving

maximum performance.

Vesting is based on the

achievement of one or more

challenging performance

targets set by the

Remuneration Committee

atthe time of grant and

measured over a three-year

period.

Measures may include EPS

growth (or another financial

metric) or TSR. TSR will apply

for at least part of each award

under the life of this policy.

Inaddition, from 2023 part of

the award will be assessed on

sustainability-driven targets

such as decarbonisation and

plastic reduction.

In determining the target range

for any financial measures that

may apply, the Committee

ensures they are challenging

by taking into account current

and anticipated trading

conditions, the long-term

business plan and external

expectations.

The Committee retains the

flexibility to vary the mix of

metrics for each year’s award

in light of the business

priorities at the time or to

introduce new measures

tosupport the long-term

business strategy (see note3).

All-employee

share plans

To increase alignment

between employees and

shareholders in a tax

efficient manner.

All-employee share schemes may

beoperated.

• Current schemes include:

• Sharesave Plan (SAYE);

• Share Incentive Plan (SIP); and

• Other HMRC approved all-employee

schemes may be introduced at the

Committee’s discretion.

Consistent with prevailing

HMRC limits.

No performance

metricsapply.

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REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY CONTINUED

TheRemuneration Policy for Directors continued

Element

Purpose and link to strategy

Operation

Maximum opportunity

Framework used to

assess performance

ownership

policy

To align interests of

management and

shareholders and

promote a long-term

approach to performance

and risk management.

In-post

Executive Directors are required to build up

ashareholding in the Company equal to 200%

of salary. Half of the net of tax number of vested

PSP and DABP awards are expected to be

retained until the guideline is met.

The value of vested but unexercised awards

subject to a two-year holding period will count

towards the guideline on a net of tax basis.

Post-cessation

Leavers will be required to hold the lower

of200% of their in-post share ownership

requirement or their actual holding on departure

two years post-cessation.

Shares acquired by or granted to an Executive

Director prior to 1 January 2020 will not be

counted towards the requirement. Shares

purchased by an Executive Director, along with

shares granted or acquired prior to appointment

to the Board will also not be counted towards

the requirement.

Not applicable.

No performance

metricsapply.

Non-Executive

Directors’ fees

To attract and retain high-

quality and experienced

Non-Executive Directors.

The fees of the Non-Executive Directors are set

by the Board and the Chairman’s fee is set by

the Committee (the Chairman does not take

partin any discussion regarding his own fees).

Fees are reviewed periodically.

Non-Executive Directors receive a fee for

carrying out their duties. Additional fees may

bepayable in relation to extra responsibilities

undertaken such as chairing a Board

Committee and/or a Senior Independent

Director or other designated Non-Executive

Director role.

The Chairman and Non-Executive Directors

areentitled to reimbursement of reasonable

business-related expenses (including any tax

thereon). They do not participate in any

incentive arrangements and they do not receive

a pension contribution.

The level of fees reflects the time commitment

and responsibility of their respective roles.

Details of current fees are

set out in the Annual

Report on Remuneration.

As set out in the

Company’s Articles of

Association, the total fees

paid to Non-Executive

Directors must not

exceed £1m a year or

anyhigher amount agreed

by ordinary resolution at

ageneral meeting.

No performance

metricsapply.

Note 1: Recovery and withholding provisions. Recovery and withholding provisions apply to the Annual Bonus Plan, the DABP and the PSP. If, within three years of the payment of

abonus, grant of a deferred bonus award and/or vesting of a PSP award, it transpires that payment or vesting should not have occurred as a result of a material misstatement, error

incalculation, gross misconduct has been discovered, corporate failure, material damage to the Company’s reputation, failure of risk management, or any other circumstances that the

Board considers to have a similar nature or effect the payment or vesting can be recovered or withheld, in part or in full, as appropriate.

Note 2: Annual bonus performance metrics. The annual bonus measures are reviewed annually and reflect key financial, strategic and operational priorities of the Group. Stretching

financial targets are set by the Committee by taking account of the Company’s business plan and external expectations. For 2024, it is intended that these will be based on profit and

non-financial/strategic objectives reflecting the short-term priorities of the Group.

Note 3: PSP metrics. For 2024 awards the performance condition is expected to be relative TSR, EPS and sustainability-driven targets of decarbonisation and reduction in plastic packaging.

The use of relative TSR provides a measure of the long-term success of the Company relative to appropriate peer or index comparators. EPS growth is a measure of the overall profitability

of the business for investors over the longer-term and therefore helps align the interests of management with shareholders. The sustainability targets are aligned to the Group’s previously

stated sustainability targets and are also consistent with those recently incorporated into the Group’s sustainability-linked credit facility.

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Recovery and withholding provisions

Recovery and withholding provisions apply to the Annual Bonus

Plan, including the DABP, and the PSP. If, within three years of

the payment of a bonus, grant of a deferred bonus award and/

or vesting of a PSP award, it transpires that payment or vesting

should not have occurred as a result of a material misstatement,

error in calculation, gross misconduct has been discovered,

corporate failure, material damage to the Company’s reputation,

failure of risk management, or any other circumstances that the

Board considers to have a similar nature or effect the payment

or vesting can be recovered or withheld, in part or in full, as

appropriate.

Incentive plan discretions

The Committee will operate the Annual Bonus Plan, including

the DABP, and the PSP according to their respective rules

andsummarised in the policy set out on previous pages.

TheCommittee, consistent with market practice, retains

discretion over a number of areas relating to the operation

andadministration of these plans. These include, but are not

limited to, the following:

• who participates in the plan;

• the timing of grant and/or payment;

• the size of an award and/or payment;

• the choice of performance measures and targets for each

incentive plan in accordance with the policy set out on

previous pages and the rules of each plan;

• the ability to vary any performance conditions if circumstances

occur which cause the Remuneration Committee to determine

that the original conditions have ceased to be appropriate

provided that any change is fair and reasonable and in the

Committee’s opinion, not materially less difficult to satisfy

thanthe original condition;

• discretion to override formulaic outcomes and scale-back

outcomes under the annual bonus and PSP;

• discretion relating to the measurement of performance in the

event of a change of control or reconstruction; and

• determination of a good leaver (in addition to any specified

categories) for incentive plan purposes based on the rules of

each plan and the appropriate treatment under the plan rules.

Any use of the above discretions would, where relevant,

beexplained in the Annual Report on Remuneration and may,

as appropriate, be the subject of consultation with the

Company’s major shareholders.

Remuneration policy for other employees

The Policy described above applies specifically to the

Company’s Executive and Non-Executive Directors and is

designed with regard to the policy for employees across

theGroup as a whole. The Company aims to apply similar

principles to the design of the remuneration arrangements for

allemployees. Executive Directors are entitled to receive a

similar package of benefits and participate in the pension plan

atthe same level as other employees. However, differences

doexist between the Company’s policy for the remuneration

ofthe Executive Directors and its approach to the payment

ofemployees generally, reflecting market practice and different

levels of seniority:

• there are differences in salary levels and in the levels of

potential reward depending on seniority and responsibility,

although a key reference point for executive salary increases

is the average increase across the general workforce;

• a lower level of maximum annual bonus opportunity

(or zero bonus opportunity) may apply to employees;

• performance metrics attached to the annual bonus may

differto reflect the precise roles and responsibilities of the

employee; and

• participation in the PSP is limited to the Executive Directors

and certain selected senior employees.

In general, these differences arise from the development of

remuneration arrangements that are market competitive for the

various categories of employee. They also reflect that, in the

case of the Executive Directors and selected senior employees,

a greater emphasis is placed on performance-related pay

reflecting their influence over the Company’s performance.

How the views of employees and shareholders

aretakeninto account

In setting the remuneration for the Executive Directors, the

Committee takes note of the overall approach to reward for

employees in the Group, and salary increases will ordinarily be

(in percentage of salary terms) in line with those of the wider

workforce. The Committee does not formally consult directly

with employees on executive pay but does receive periodic

updates on employee remuneration within the Group as

necessary. In line with the UK Corporate Governance Code,

Martin Sutherland remains the designated Non-Executive

Director to represent the views of employees to the Board, and

when appropriate this will include decisions on remuneration

across the business. This is facilitated through the Employee

Forum. During the year the management met with representatives

from the Employee Forum on a quarterly basis. At each meeting

a business performance update was provided, together with

pay included within general topics addressed by the forum.

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REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY CONTINUED

TheCommittee takes keen interest in shareholders’ views on

executive remuneration and welcomes any feedback on the

approach taken. Sustainability targets were added to the PSP

in2023 following consultation with shareholders.

Service contracts and letters of appointment

Service contracts and letters of appointment are available for

inspection at the Company’s registered office.

Service contracts

The service contracts for the Executive Directors are terminable

by either the Company or the Executive on 12 months’ notice.

The Company can terminate either Executive Director’s service

contract by payment of a cash sum in lieu of notice equivalent

tothe base salary and the cost that would have been incurred

inproviding the Executive Director with contractual benefits for

anyunexpired portion of the notice period (or alternatively the

Company can choose to continue providing the contractual

benefits). The payment in lieu may be paid as one lump sum

orin monthly equal instalments over the notice period. If the

Company chooses to pay in instalments the Executive Directors

are obliged to seek alternative income over the relevant period

and the payment of each monthly instalment will be reduced

bythe amount of such income earned. There are no enhanced

provisions on a change of control.

At the discretion of the Committee, a contribution to reasonable

outplacement costs in the event of termination of employment

due to redundancy may also be made. The Committee also

retains the ability to reimburse reasonable legal costs incurred

inconnection with a termination of employment and may

makea payment for any statutory entitlements or to settle

orcompromise claims in connection with a termination of

employment of any existing or future Executive Director as

necessary. Relevant details will be provided in the Annual Report

on Remuneration should such circumstances apply.

The table overleaf sets out, for variable pay elements, the

Company’s policy on payment for loss of office in respect of

Executive Directors. In general, treatment will depend on the

circumstances of departure and in particular whether a leaver

isa ‘good leaver’. Good leaver reasons include:

• death;

• injury;

• retirement;

• disability;

• redundancy;

• the employing company being sold outside the Group; or

• other circumstances at the discretion of the Committee.

In any other circumstance, the leaver will be treated as

a‘badleaver’.

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Notes:

• Minimum is equivalent to fixed pay which comprises salary levels applying for 2024, the value of benefits in 2023 and a 10% retirement allowance.

• Target comprises fixed pay plus the value of the on-target bonus at 50% of the maximum bonus opportunity (100% of salary) plus the value of the

on-target level of vesting under the PSP which is taken to be 50% of the expected 2023 grant level.

• Maximum comprises fixed pay plus maximum bonus plus the maximum value of the PSP (equal to 100% of the face value of the award at grant

using the 2023 grant policy of 150% of salary for the CEO and 125% of salary for the CFO).

• Maximum + 50% share price growth comprising fixed pay plus maximum bonus plus the maximum value of the PSP at a 50% higher share price

than when the PSP award was granted.

REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY CONTINUED

Policyonpayment for loss of office

The following table summarises the key aspects of the Company’s Remuneration Policy for Executive and Non-Executive Directors.

Element

Treatment

Annual Bonus Plan

Remuneration arrangements should

betransparent and promote effective

engagement with shareholders and

theworkforce.

No automatic or contractual right to bonus payment.

Good leavers:

a pro-rata bonus may become payable at the normal payment date for the period

of employment and based on full-year performance. With rationale set out in the Annual Report

on Remuneration.

Bad leavers:

no bonus is payable for the year of cessation.

Discretions:

to determine whether to pro-rate the bonus for time. It is the Committee’s normal

policy to pro-rate for time, however, there may be circumstances where this is not appropriate.

Where this is the case it will be fully disclosed to shareholders.

Deferred Annual Bonus Plan

The use of post-vesting holding periods and long-term incentive plans ensure focus on sustained

performance over the long-term.

Good leavers:

all deferred shares vest at the date of cessation.

Bad leavers:

awards lapse.

Discretions:

to vest deferred shares at the end of the original deferral period or to defer vesting

inconnection with a potential clawback event.

Performance Share Plan

Good leavers:

awards vest at normal vesting date and pro-rated for time and tested for

performance in respect of each subsisting PSP award.

Bad leavers:

awards lapse.

Discretions:

to vest and measure performance over the original performance period or vest and

measure performance at the date of cessation or to defer vesting in connection with a potential

clawback event.

To determine whether to pro-rate the maximum number of shares for the time from the date of

grant to the date of cessation (the Committee may need to round up to the nearest whole year).

Normal policy is to pro-rate for time, however there may be circumstances where this is not

appropriate. Where this is the case it will be fully disclosed to shareholders.

Shareholding requirements

All leavers will be required to hold the lower of 200% of their in-post share ownership requirement

or their actual holding on departure for two years post-cessation. Shares acquired by or granted

to an Executive Director prior to 1 January 2020 will not be counted towards the requirement.

Shares purchased by an Executive Director along with any shares granted or acquired prior to

appointment to the Board, will also not be counted towards the requirement.

Change of control

The Committee’s policy on the vesting of incentives on a change of control is summarised below:

Element

Treatment

Annual Bonus Plan

Pro-rated for time and performance to the date of the change of control.

Deferred Annual Bonus Plan

Subsisting DABP awards will vest on a change of control.

Performance Share Plan

The number of shares subject to existing PSP awards will vest on a change of control pro-rated

for time and performance to the date of the change of control.

Discretions:

to determine whether to pro-rate the maximum number of shares from the time

fromthe date of grant to the date of the change of control (the Committee may round-up to the

nearest whole year). Normal policy is to pro-rate for time, however there may be circumstances

where this is not appropriate.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

143

Letters of appointment

The Chairman and Non-Executive Directors have letters of

appointment and are subject to annual re-election at the AGM.

The appointment letters for the Non-Executive Directors

providethat no compensation is payable on termination.

Theappointments are terminable by the Company on not

lessthan 30 days’ notice or immediately in the event that

theappointment is terminated by the shareholders (or where

shareholder approval is required but not forthcoming).

Approach to recruitment and promotions

The recruitment package for a new Executive Director would be

set in accordance with the terms of the Company’s approved

Remuneration Policy. Currently, this would facilitate a maximum

annual bonus payment of no more than 100% of salary and

PSP award of up to 200% of salary (other than in exceptional

circumstances (including recruitment), where up to 250% of

salary may be made).

On recruitment, salary may (but need not necessarily) be set

below the normal market rate, with phased increases as the

Executive Director gains experience. The rate of salary should

be set so as to reflect the individual’s experience and skills.

Thepension offered to new Executive Directors will be set in

linewith the current policy and in alignment with the majority

ofemployees in the Group.

In addition, on recruitment the Company may compensate

foramounts foregone from a previous employer (using the

exemption to the requirement for prior shareholder approval

under Listing Rule LR 9.4.2R if necessary) taking into account

the quantum foregone and, as far as reasonably practicable,

theextent to which performance conditions apply, the form

ofaward and time to vesting date.

For an internal appointment, any variable pay element

awardedin respect of their prior role should be allowed to

pay-out according to its outstanding terms. Any other ongoing

remuneration obligations existing prior to appointment may

continue, provided that, if they are outside the approved

policy,they are put to shareholders for approval at the

earliestopportunity.

For all appointments, the Committee may agree that the

Company will meet appropriate relocation costs.

For the appointment of a new Chairman or Non-Executive

Director, the fee arrangement would be set in accordance

withthe approved Remuneration Policy in force at that time.

Policy on external appointments

Subject to Board approval, Executive Directors are permitted

totake on a single paid non-executive position with an

unconnected company and to retain their fees in respect of

such position. Where appropriate, details of outside directorships

held by the Executive Directors and any fees that they received

are provided in the Annual Report on Remuneration.

Legacy arrangements

For the avoidance of doubt, any remuneration or loss of office

payments that are not in line with this Policy may be made

iftheterms were agreed before the approval of this Policy,

including those disclosed in the Prospectus. In addition,

authority is given to the Company to honour any commitments

entered into at a time when the relevant employee was not

aDirector of the Company.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

144

REMUNERATION COMMITTEE REPORT

SUMMARY OF REMUNERATION POLICY CONTINUED

Singletotal figure of remuneration (audited)

Executive Directors

Fixed Variable

Executive

Directors

Period

Salary and

fees

Taxable

benefits

Retirement

allowance

Annual

bonus

Long-term

incentives

Share-based

Payments

Total

Total fixed

remuneration

Total variable

remuneration

Neil Ash

2023 £358,313 £10,990 £35,831 £44,789 – £409,334 £859,257 £405,134 £454,123

2022 n/a n/a n/a n/a n/a n/a n/a n/a n/a

Stephen

Harrison

2023 £193,983 £6,356 £20,078 £25,097 £323,893 – £569,407 £220,417 £348,990

2022 £458,923 £14,654 £45,893 £410,736 – – £930,206 £519,470 £410,736

Ben Guyatt

2023 £341,975 £9,357 £34,197 £42,747 £212,723 – £640,999 £385,529 £255,470

2022 £325,690 £12,079 £32,569 £297,192 – – £667,530 £370,338 £297,192

Percentage of maximum

value achieved Bonus achieved

Weighting

Threshold

performance

required

Maximum

performance

required

Actual

performance

achieved Neil Ash

Stephen

Harrison

Ben

Guyatt Neil Ash

Stephen

Harrison

Ben

Guyatt

PBT (before exceptional items)

75% £46.0m £66.0m £31.0m – – – – – –

Strategic objectives

25% 50% 50% 50% £44,789 £25,097 £42,747

Total (% of maximum)

100% 12.5% 12.5% 12.5%

Total

£44,789 £25,097 £42,747

1. Taxable benefits in the year comprised a company car/allowance and private medical insurance.

2. Details of the bonus targets and their level of satisfaction and resulting bonus earned are set out below.

3. The long-term incentives reported against 2023 comprises the total amount vested under the TSR condition of the 2020 PSP grant which vested on 17 September 2023 at 53.9%

(the2020 PSP was measured on TSR only). The above amounts are calculated using the share price at vesting of £1.692. The EPS and TSR conditions of the 2021 PSP were

calculated overthe three year reporting period to 31 December 2023 therefore are known at the year end date, however the performance conditions have vested at nil.

4. Neil Ash received share options on joining the Company to compensate for amounts foregone from his previous employer. 207,784 Forterra ordinary share options were awarded

on3April 2023 and vested immediately at a share price of £1.97.

5. Stephen Harrison stepped down as CEO on 25 April 2023, he continued to be an employee of the company until 24 May 2023. Stephen continued to receive his salary and

contractualbenefits up to 24 May 2023 which are included in the above table.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

145

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION

2023 Strategic objectives

Participants

Objectives

Assessment of achievement

% Bonus

payable

Neil Ash

Objectives linked to:

Delivery of long term strategy including the ramp up

and optimisation of the new Desford brick factory and

delivery of a clear innovation roadmap; continuing to

progress the pipeline or organic growth projects and

inthe shorter term, responding to both uncertain

market conditions and the commissioning of Desford

to ensure production output is adjusted to reflect

market demand and improving factory performance

through delivery of manufacturing excellence.

The new Desford brick factory has been commissioned

and although this process was more challenging than

initially expected, good progress has been made in the

second half. A much sharper and prolonged downturn

in market conditions relative to that anticipated a year

ago has developed and management have taken

decisive action to address the fixed cost base

although inventory levels still rose substantially.

A strategic review was undertaken, reconfirming the

existing strategy and refreshing the Group’s strategic

narrative including the vision, mission and purpose and

values. This process included a validation and review

of the pipeline of organic investment projects and

anassessment of innovation progress and priorities.

Current market conditions and the elevated levels

ofdebt that they have driven, determined that only

limitedprogress was possible in progressing the

pipeline of potential projects to commitment stage.

50%

Stephen Harrison

Objectives linked to:

The commissioning and ramp up of the new Desford

brick factory and the induction and handover to

NeilAsh prior to departure.

A successful event to mark the opening of the new

Desfordbrick factory took place shortly before

Stephen’s departure although the ramp up in

production was more challenging than had been

anticipated.

A comprehensive and thorough handover was

provided to Neil Ash.

50%

Ben Guyatt

Objectives linked to:

Delivery of long-term strategy including the ramp up

and optimisation of the new Desford brick factory and

responding accordingly to uncertain market conditions

ensuring production output is adjusted to reflect

market demand and that inventory levels remain

appropriate; delivery of a new IT system to the Bison

flooring business ensuring the level of embedded

controls are raised to the same level as the brick

andblock business; optimisation of key back office

processes including payroll and delivery of further

elements of the Group’s internal control framework

ensuring the Group is well prepared for the proposed

reforms associated with the ‘Restoring Trust in Audit

and Corporate Governance’ consultation.

The new Desford brick factory has been commissioned

and although this process was more challenging than

initially expected good progress has been made in the

second half. A much sharper and prolonged downturn

in market conditions relative to that anticipated a year

ago has developed and management have taken

decisive action to address the fixed cost base

although inventory levels still rose substantially.

The IT system was successfully implemented within

the Bison flooring business and demonstrable

enhancements have been made to the operation

ofback office functions including the payroll.

Continued progress was made on the development of

the control framework although many of the proposed

reforms have not yet been progressed, although the

Group remains well placed to respond to the changes

in the UK Corporate Governance Code that have

recently been announced.

50%

A full breakdown of the bonus and payments and share award deferral is set out below:

Bonus total Paid in cash Paid in shares

Neil Ash

£44,789 £44,789 Nil

Stephen Harrison

£25,097 £25,097 Nil

Ben Guyatt

£42,747 £42,747 Nil

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

146

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

With the first 10% of salary payable in cash and up to half of the remaining bonus under normal circumstances being deferred into

shares under theDABP, in light of the modest bonus achievement in the year and in recognition of the disproportionate administrative

burdenofdeferring small amounts into shares, the Committee has elected not to defer any of the 2023 bonus into shares.

Longtermincentives (audited)

2020 Performance Share Plan

The 2020 PSP awards vested on 17 September 2023. This award is measured on total shareholder return (TSR) only and

isincluded in this year’s single figure table.

2020 PSP

Performance condition Weighting

% vesting

(max. 100%)

Date of

end of

performance

period

Date of

vesting

price on

vesting

Total

vesting

Value of

vesting

Stephen Harrison

TSR

100% 53.9% 17-Sep-23 17-Sep-23 £1.69 167,375 £283,199

Dividend equivalent on TSR

24,051 £40,694

Total

53.9% 191,426 £322,893

Ben Guyatt

TSR

100% 53.9% 17-Sep-23 17-Sep-23 £1.69 109,927 £185,996

Dividend equivalent on TSR

15,796 £26,727

Total

53.9% 125,723 £212,723

Performance condition

% of award

subject to condition Growth

% of PSP award

which will vest

Company’s total TSR against Index TSR

100%

<Index TSR

At Index TSR

Index TSR plus 25 percentage points

25%

100%

Vesting is measured on a straight-line basis between the above performance points.

The index comprises the following companies: Barratt Developments, Bellway, Berkeley Group Holdings, Countryside Properties,

Crest Nicholson Holdings, Grafton Group, Grainger, Howdon Joinery Group, Ibstock, Kingspan Group, Marshalls, Michelmersh

Brick Holdings, Persimmon, Polypipe Group, Redrow, SIG, St. Modwen Properties, Taylor Wimpey, Travis Perkins and Vistry Group.

2021 Performance Share Plan

PSP awards granted in 2021 are subject to following the performance conditions:

Performance condition

% of award

subject to condition Growth

% of PSP award

which will vest

Absolute EPS (before exceptional items) reported for the

year ended 31 December 2023

50%

<18.2p

Equal to 18.2p

23.5p or above

25%

100%

Company’s total TSR against index TSR – measured at

31December 2023

50%

<Median

Median

Upper quartile or above

25%

100%

Vesting is measured on a straight-line basis between the above performance points.

The Index comprises the unweighted FTSE 250 participants (excluding investment trusts).

The 2021 PSP awards have a vesting date of 30 April 2024. The EPS and TSR conditions of the 2021 PSP are calculated over

thethree year reporting period to 31 December 2023 therefore are known at the year end date, and the performance conditions

have not been achieved and accordingly none of the awards shall vest.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

147

Performance Share Plan awards made during the year

On 3 April 2023 the following awards were granted to Executive Directors.

Type of award

Basis of award

granted

Share price used

to determine

number of

options granted

Number of

shares over

which award

was granted

Face value

of award

% of face

value that would

vest at threshold

performance

Vesting

determined by

performance

over

Neil Ash

Nominal (1p)

cost option

150% of

salary of

£477,750

£1.97 490,673 £966,626 25% Three years to

3 April 2026

Ben Guyatt

Nominal (1p)

cost option

125% of

salary of

£341,975

£1.97 216,989 £427,468 25% Three years to

3 April 2026

1. The number of options granted was calculated using the salary in place for each Executive Director at the date of grant on 3 April 2023. The number of options granted to Neil Ash

includes an additional 126,904 shares in place of the cash value of his 2022 bonus foregone from his previous employer. These additional options are granted as part of the 2023

PSPand are subject to the same performance conditions.

Performance condition

% of award

subject to condition Growth

% of PSP award

which will vest

Annual basic EPS growth (before exceptional items)

over a 2022 EPS of 26.4p

40% <4%

Equal to 4%

11% or above

25%

100%

Company’s total TSR against TSR of index members –

measured at 31 December 2025

40% <Median

Median

Upper quartile or above

25%

100%

Reduction in Group’s clay product carbon emissions intensity

versus 2019 baseline measured at 31 December 2025

10% <10%

10%

18% or above

25%

100%

Reduction in Group’s plastic packaging intensity versus 2019

baseline measured at 31 December 2025

10% <25%

25%

50% or above

25%

100%

Vesting is measured on a straight-line basis between the above performance points.

1. The number of options was determined using a share price of £1.97 being an amount equal to the average mid-market closing price for the five days prior to grant.

The Index comprises the unweighted FTSE 250 participants (excluding investment trusts).

The EPS targets were set based on the Board’s expectations for the future performance of the business and the wider economy

inApril 2023 and were considered stretching at the time.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

148

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

Non-Executive Directors (audited)

The table below sets out the single total figure for remuneration and breakdown for each Non-Executive Director.

Roles

Period Fees Total

Justin Atkinson

Non-Executive Chairman

2023 £161,469 £161,469

2022 £153,780 £153,780

Divya Seshamani

Independent Non-Executive Director

2023 £66,052 £66,052

2022 £63,240 £63,240

Martin Sutherland

Independent Non-Executive Director

2023 £59,052 £59,052

2022 £56,240 £56,240

Katherine Innes Ker

Senior Independent Non-Executive Director

2023 £76,052 £76,052

2022 £73,240 £73,240

Vince Niblett

Independent Non-Executive Director

2023 £66,052 £66,052

2022 £63,240 £63,240

Gina Jardine

Independent Non-Executive Director

2023 £44,289 £44,289

2022 n/a n/a

Directors’ shareholding and share interests

Share ownership plays a key role in the alignment of our Executive Directors with the interests of shareholders. Our Executive

Directors are expected to build up and maintain a 200% of salary shareholding in Forterra. Where an Executive Director does not

meet this guideline, then they are required to retain at least 50% of the net of tax vested shares under the Company’s share plans

until the guideline is met. The number of shares held by the Directors as at 31 December 2023 are as follows.

Shareholding

requirement

(% salary)

Current

shareholding

(% salary)

Beneficially

owned

Deferred

shares not

subject to

performance

conditions

Unvested

PSP

(nominal

cost

options

subject to

performance

conditions)

Unvested

PSP

(nominal

cost

options not

subject to

performance

conditions)

Vested PSP

(nominal cost

options not

subject to

performance

conditions)

not yet

exercised

Unvested

DABP

(nominal

cost

options not

subject to

performance

conditions)

Outstanding

Sharesave

awards

Shareholding

requirement

met

Executive

Directors

Neil Ash

200% 53% 143,554 – 490,673 – – – 14,053 No

Stephen Harrison

200% 176%

481,300 – 273,858 – – – – No

Ben Guyatt

200% 53%

35,217 461 524,584 – 125,723 124,257 26,133 No

Non-Executive

Directors

Justin Atkinson

n/a – 35,256 – – – – – – n/a

Divya Seshamani

n/a–7,538––––––n/a

Martin Sutherland

n/a – 10,064 – – – – – – n/a

Katherine Innes Ker

n/a–3,564––––––n/a

Vince Niblett

n/a – 11,946 – – – – – – n/a

Gina Jardine

n/a–7,000––––––n/a

1. As at 31 December 2023. This is based on a closing share price of £1.766 and the year-end salaries of the Executive Directors. Values are not calculated for Non-Executive Directors

asthey are not subject to shareholding requirements.

2. Includes shares owned by connected persons.

3. This relates to shares awarded granted under the Forterra All-Employee Share Incentive Plan (SIP) and does not include dividend shares accrued on the free share awards. The balance

includes the free share awards made in May 2016 of 277 shares, and the free share award from 2021 of 184 shares.

4. This relates to PSP awards granted in the form of nominal (1p) cost options and subject to performance criteria.

5. This relates to DABP awards relating to the partial deferral of the 2022 and 2023 annual bonus granted in the form of nominal (1p) cost options which are not subject to performance criteria.

6. During 2020, grants were made under the 2020 Sharesave Scheme with an exercise price of £1.49, resulting in a 20% discount at grant date and a vesting date of 1 December 2023.

These options were not exercised by the year end. During 2023 grants were made under the 2023 Sharesave Scheme with an exercise price of £1.32, resulting in a 20% discount

atgrant date and a vesting date of 1 December 2026.

7. Shareholding percentage calculated at date of departure.

8. Current shareholding includes beneficially owned (35,217) plus the net of tax vested PSP (66,633).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

149

Summary of share option awards

Type of

award

Date

granted

At 1 January

2023

Awarded

during the

year

Vested

during the

year

Vested

during the

year but not

exercised by the

year end

Lapsed/

cancelled

during the

year

At 31 December

2023

Neil Ash

PSP Apr-23 – 490,673 – – – 490,673

SAYE Oct-23 – 14,053 – – – 14,053

Total

504,726

Ben Guyatt

SAYE Oct 23 – 14,053 – – – 14,053

PSP Apr-23 – 216,989 – – – 216,989

DABP Mar-23 – 64,542 – – – 64,542

PSP Mar-22 176,239 – – – – 176,239

DABP Mar-22 59,715 – – – – 59,715

PSP Apr-21 131,356 – – – 131,356

PSP Sep-20 203,947 – (125,723) 125,723 (78,224) 125,723

SAYE Oct-20 12,080 – (12,080) 12,080 – 12,080

Total

800,697

PSP awards granted in 2022 are subject to the following performance conditions:

Performance condition

% of award

subject to condition Target

% of PSP award

which will vest

Absolute EPS (before exceptional items) reported for the

year ended 31 December 2024

50% <11%

Equal to 11%

26% or above

25%

100%

Company’s total TSR against Index TSR – measured

at 31 December 2024

50% <Median

Median

Upper quartile or above

25%

100%

Vesting is measured on a straight-line basis between the above performance points.

The Index comprises the unweighted FTSE 250 participants (excluding investment trusts).

Payments to past Directors/payments for loss of office (audited)

Stephen Harrison stepped down as Chief Executive Officer in April 2023, no compensation for loss of office was payable. Stephen

continued as an employee of the Company until 24 May 2023 for which Stephen continued to receive his salary and contractual

benefits. Loss of office details can be found in the Remuneration Committee Chairman’s letter on pages 129 and 130.

Implementation of the Remuneration Policy for the year ending 31 December 2024

A summary of how the Directors’ Remuneration Policy will be applied during the year ending 31 December 2024 is set out below.

Base salary

The 2024 review of Executive Directors’ and all employees’ salaries took place in January 2024 and a 2.0% increase has been

applied in line with the general increase awarded to all salaried staff. The increases took effect from 1 January 2024.

2024 2023 % Increase

Neil Ash

£487,305 £477,750 2%

Ben Guyatt

£348,814 £341,975 2%

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

150

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

Pension and benefits

The Committee intends that the implementation of its policy in relation to pension and benefits will be in line with the proposed

Remuneration Policy for the year ended 31 December 2024.

Annual bonus

The maximum annual bonus for the year ending 31 December 2024 will be 100% of salary for Executive Directors. Awards will be

determined based on a combination of the Group’s financial results, being profit before tax (75%) and strategic performance (25%).

The specific financial targets were confirmed in early 2024. These are considered commercially sensitive. However, the Committee

intends to disclose these retrospectively in next year’s Annual Report on Remuneration along with details as to their achievement

tothe extent that they do not remain commercially sensitive. The strategic objectives for 2024 are also considered commercially

sensitive. Stretching targets aligned to the Group’s strategy have been set.

In determining the level of any bonus award to be deferred into shares under the Deferred Annual Bonus Plan, the first 10% of salary

of any bonus and 50% of any further bonus earned will be paid in cash with the balance deferred in shares for three years.

Performance Share Plan (PSP)

The Committee expects to grant 2024 awards under the PSP in April 2024. In addition to traditional performance metrics,

theseawards will continue to include stretching targets aligned to the Group’s previously announced sustainability targets of

decarbonisation and a reduction in the use of plastic packaging. These are also aligned to the sustainability targets recently

embedded into the Group’s new sustainability-linked credit facility.

40% of the awards shall be subject to a stretching EPS performance condition which reflects the Board’s aspirations for growth

supported by the investments in the brick factories at Wilnecote and Desford but also recognising the recent contraction in the

Group’s key markets which is proving to be deeper and longer-lasting than previously anticipated. Accordingly, the growth targets

are expected to be lower than those set in the prior year.

40% of the awards will be subject to a TSR performance condition with the comparator group being the unweighted FTSE 250

participants (excluding investment trusts). The final 20% of the awards will be determined by sustainability-based targets of decarbonisation

and a reduction in the use of plastic packaging aligned to the Group’s stated sustainability targets (as laid out in the Sustainability Report

on pages 56 and 57). The sustainability targets are intensity-based and reflect a reduction in the intensity (emissions and plastic usage

pertonne of output) so as outcomes are not distorted by fluctuations in production driven by market demand.

The performance targets to be applied to the 2024 PSP awards have yet to be finalised by the Committee. Once finalised the

targets will be communicated by way of an RNS announcement.

Type of award Expected basis of award granted

Vesting determined by performance over

Neil Ash

Nominal (1p) cost option

150% of salary of £487,305 Three years to December 2026

Ben Guyatt

Nominal (1p) cost option

125% of salary of £348,814 Three years to December 2026

1. The number of options will be determined using a share price equal to mid-market closing price for the five days prior to grant.

Fees for Chairman and Non-Executive Directors

The Company’s approach to Non-Executive Directors’ remuneration is set by the Board with account taken of the time and

responsibility involved in each role, including where applicable the chairmanship of Board Committees.

2024 2023 % Increase

Non-Executive Chairman

£164,698 £161,469 2%

Non-Executive Director base fee

£60,233 £59,052 2%

Additional fees:

Senior Independent Director

£10,000 £10,000 –

Audit and Risk Committee Chairman

£7,000 £7,000 –

Remuneration Committee Chairman

£7,000 £7,000 –

Sustainability Committee Chairman

£7,000 £7,000 –

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

151

Chief Executive Officer’s remuneration history

The table below sets out the total Chief Executive Officer’s remuneration for 2023, together with the percentage of maximum annual

bonus awarded in that year. A summary of remuneration paid will be provided and built up over time until 10 years of data is shown.

2023 2022 2021 2020 2019 2018 2017 2016

Single total figure

£1,428,665 £930,206 £939,074 £748,689 £1,052,599 £893,054 £762,476 £985,806

Annual bonus (% of maximum)

12.5% 89.5% 97.8% – – 60.5% 72.0% 50.3%

PSP vesting (% of maximum)

53.9%

–

– 45.0%

72.0%

36.9%

––

1. Includes one-off bonus agreed prior to IPO of £400,000.

2. 2020 PSP award subject to the TSR measure with the period ending 17 September 2023, vested at 53.9%. 2021 PSP award both EPS and TSR measure at 31 December 2023,

vested at nil.

3. 2019 PSP award subject to the TSR measure with the period ending 29 March 2022, vested at nil.

4. Relates to the average of 2018 PSP award subject to an EPS growth performance measure with a measurement period ending 31 December 2020 and the element of the

2017 PSP award subject to the TSR measure with the period ending 26 April 2019.

5. Relates to the element of 2017 PSP award subject to an EPS growth performance measure with a measurement period ending 31 December 2019 and the element of the

2016 PSP award subject to the TSR measure with the period ending 26 April 2019.

6. Relates to element of 2016 PSP award subject to an EPS growth performance measure with a measurement period ending 31 December 2018.

Change in Executive and Non-Executive Directors’ remuneration compared with employees

The Committee ensures that the Executive Directors’ remuneration outcomes remain appropriate and consistent with the wider

workforce. The pay awards and bonus outcomes in the year are consistent with the wider workforce.

Changes 2022 to 2023 Changes 2021 to 2022 Changes 2020 to 2021

Base salary

change

Benefits

change

Annual

bonus

Base salary

change

Benefits

change

Annual

bonus

Base salary

change

Benefits

change

Annual

bonus

Neil Ash (CEO)

n/a n/a n/a n/a n/a n/a n/a n/a n/a

Stephen Harrison (CEO)

(57.7) % (56.6)% (93.9)% 3.5% (5.8)% (5.8)% 6.8% (9.7)% 100.0%

Ben Guyatt (CFO)

5.0% (22.5)% (85.6)% 3.5% 1.0% (3.4)% 6.8% 0.1% 100.0%

Martin Sutherland (NED)

5.0% – – 3.5% – – 6.8% – –

Katherine Innes Ker (NED)

5.0% – – 3.5% – – 6.8% – –

Justin Atkinson (NED)

5.0% – – 3.5% – – 6.8% – –

Vince Niblett (NED)

5.0% – – 3.5% – – 6.8% – –

Divya Seshamani (NED)

5.0% – – 3.5% – – 6.8% – –

Gina Jardine (NED)

n/a n/a n/a n/a n/a n/a n/a n/a n/a

Average for all other employees

5.0% (1.5)% (79.7)% 5.4% 23.5% (11.4)% 1.5% 4.8% 215.9%

1. The Executive and Non-Executive Directors received a 3.0% increase in 2022 but when full year earnings are compared to 2021 where an increase was awarded mid year, the year

on year increase was 3.5%.

2. The percentage presented is calculated using base salary considering the three month voluntary deduction in salary of 20% taken by the Executive and Non-Executive Directors during

2020 due to the Covid-19 pandemic.

3. No bonus was payable to Ben Guyatt or Stephen Harrison in 2020. The bonus for 2021 is therefore presented as a 100% increase.

4. Neil Ash joined in April 2023 therefore there is no percentage change to prior years.

5. Stephen Harrison left the Company in May 2023.

6. The average base salary increase for all other employees is based on the average increase awarded in 2020 and 2021 and does not include the impact of furlough.

Performance graph

The graph opposite illustrates the Company’s total shareholder return (TSR) performance relative to the constituents of the FTSE Small

Cap index excluding investment companies and against the FTSE All-Share Construction and Materials index both of whichthe Company

is a constituent of, from the start of conditional share dealing on 20 April 2016. The graph shows performance ofahypothetical £100

invested and its performance over that period.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

152

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

Totalshareholder return

This graph shows the value, by 31 December 2023, of £100 invested in Forterra plc on 20 April 2016, compared with the value

of£100 invested in the FTSE Small Cap (excluding Investment Trusts) and the FTSE All Share Construction and Materials on a daily

basis. The other points plotted are the values at intervening financial year-ends.

Chief Executive Officer pay ratio

The CEO to average employee pay ratio in 2023 was 29.6 times. This is measured as the ratio of the CEO single total figure of

remuneration earned in the year to average (mean) employee remuneration. The Remuneration Committee is steadfastly committed

to ensuring that the reward of the CEO and other senior executives is commensurate with performance. Accordingly, as laid out

graphically in the Remuneration Policy, a significant element of the Chief Executive’s total pay is variable and is determined based

on the performance of the Company and is dependent on share price performance.

2023 2022

Ratio of CEO single total figure remuneration to average employee remuneration

30:1 22:1

The Regulations require us to disclose the ratio of the Chief Executive’s pay, using the amount set out in the single total figure table,

to that of the median, 25th and 75th percentile total remuneration of full-time equivalent UK employees.

The table below shows the relevant data for Forterra’s employees for 2023, calculated using Option B as set out in the legislation.

Year

Method of

calculation

adopted

25th percentile

pay ratio

(Chief Executive:

UK employees)

Median pay ratio

(Chief Executive:

UK employees)

75th percentile

pay ratio

(Chief Executive:

UK employees)

2023

Option B 33:1 28:1 26:1

2022

Option B 32:1 23:1 19:1

2021

Option B 27:1 24:1 21:1

2020

Option B 19:1 19:1 18:1

Pay details for the individuals whose 2023 remuneration is at the median, 25th percentile and 75th percentile amongst UK-based

employees are as follows:

Chief Executive 25th percentile Median 75th percentile

Salary

£552,296 £39,015 £46,818 £49,539

Total pay and benefits

£1,428,664 £42,917 £51,500 £54,493

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

153

The median, 25th percentile and 75th percentile employees used to determine the above ratios were identified by using gender

paygap data and full-time equivalent annualised remuneration (comprising salary, benefits, pension, annual bonus and long-term

incentives) of all UK-based employees of the Group as at April 2023 (i.e. Option B) under the Regulations. The Committee selected

this calculation methodology as it was felt to produce the most consistent result.

Gender Pay Reporting

Forterra continues to be committed to ensuring its policies and practices adopt fair and equal principles when it comes to all

aspects of diversity and inclusion. Our Gender Pay Reporting statistics (adhering to reporting guidelines) for the year ended

April2023 are as follows:

2023 Mandatory Metrics

Metric

1,2

2023 2022 2021 2020

Mean gender pay gap in hourly pay (%)

16.7% 15.1% 11.4% 7.8%

Median gender pay gap in hourly pay (%)

25.4% 25.1% 21.6% 7.6%

Mean gender bonus gap (%)

(18.3)% 7.3% 66.2% 46.7%

Median gender bonus gap (%)

(24.8)% 6.4% 70.0% 59.2%

1. The mean and median gender pay gap has been calculated using April 2023 pay, allowances, bonuses, share exercises, recognition awards and other relevant metrics.

2. Executive and Non-Executive Directors are excluded from the gender pay gap report as they are employed by Forterra plc and not Forterra Building Products Ltd.

3. 2020 Gender Pay Gap report not representative due to employees being placed on furlough as a direct consequence of the global pandemic.

The mean hourly rate pay gap has increased by 1.6% in 2023 compared to 2022. This is due to the majority of the females in the

workforce being in non-operational roles and therefore do not attract shift allowance. However there has been a significant increase

in the mean gender bonus gap due to there being more females in senior roles and bonus stretch targets being met in 2022

resulting in higher bonus payments made in March 2023.

The percentage of females receiving bonus has risen from 83.1% in 2022 to 96.6% in 2023.

Metric

2023 2022 2021 2020

Male employees receiving bonus (%)

96.7% 66.2% 48.6% 70.7%

Female employees receiving bonus (%)

98.0% 83.1% 32.2% 81.8%

1. The mean and median gender pay gap has been calculated using April 2022 to March 2023 bonuses, share exercises, recognition awards and other relevant metrics.

We continue our commitment to increase gender diversity and, in particular, within operational roles.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

154

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

155

Relative importance of total spend on pay

The following table shows the Company’s actual spend on pay for all employees compared to distributions to shareholders in 2023.

Disbursements from profit

Metric

2023

£m

2022

£m

Total spend on pay, including Directors

106.2 113.6

Distributions to shareholders by way of dividend

25.7

24.2

1. Final 2022 dividend of £0.101 per share paid in July 2023 and interim dividend of £0.024 per share paid in October 2023.

2. Final 2021 dividend of £0.067 per share paid in July 2022 and interim dividend of £0.046 per share paid in October 2022.

Cascade of incentives

The remit of the Remuneration Committee includes not only the remuneration of the Executive Directors but also the members

ofthe Executive Committee. In making remuneration decisions in respect of the Executive Directors and senior management the

Committee also monitors and considers the remuneration of the wider workforce to ensure that pay is fair throughout the Group.

Level

Participation in

PSP

Participation in

bonus

Participation in

SAYE

Executive Directors

✓ ✓ ✓

Executive Committee

✓ ✓ ✓

Senior Managers

✓ ✓ ✓

Managers

✓ ✓

Employees

✓

1. All salaried staff participate in the Forterra staff bonus scheme. Arrangements for hourly paid staff vary by location with a number of facilities offering production-related bonuses

as part of a total remuneration package. Other facilities may have a higher level of base pay and no bonus arrangements.

Advisers to the Remuneration Committee

The Remuneration Committee has access to independent advice where it considers it appropriate. During the year, the Committee

sought advice from Willis Towers Watson (WTW). WTW also provides other remuneration and benefits services to the Group and

the Committee is satisfied no conflict of interest exists in the provision of these services. The Committee is satisfied that the advice

received by WTW in relation to executive remuneration matters during the year was objective and independent. WTW is a member

of the Remuneration Consultants Group and abides by the Remuneration Consultants Group Code of Conduct, which requires its

advice to be objective and impartial. The fees paid to WTW during the year totalled £33,768.

Statement of shareholder voting

A high level of shareholder support was received for our Remuneration Report at our 2023 AGM, as summarised below:

Level

Votes for Votes against Votes withheld

An advisory vote on the approval of the 2023 Annual Report on Remuneration

143,216,609

97.83%

3,183,645

2.17%

9,914

Approval

This Remuneration Committee Report, comprising the Annual Statement, Remuneration Policy Summary and Annual Report

onRemuneration has been approved by the Board of Directors.

Signed on behalf of the Board of Directors.

Katherine Innes Ker

Chair of the Remuneration Committee

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

156

REMUNERATION COMMITTEE REPORT

ANNUAL REPORT ON REMUNERATION CONTINUED

TheDirectors present their report for the financial year ended 31 December 2023. The information required by the Listing Rules

(DTR 4.1.8R) is contained in the Strategic Report and the Directors’ Report. Forterra plc is incorporated in England and Wales

withcompany number 09963666.

Dividends

An interim dividend was paid on 13 October 2023 to shareholders on the register at 22 September 2023. Subject to securing

shareholder approval at the 2024 AGM, the Directors are proposing a final dividend for the financial year ended 31 December 2023

of 2.0p per Ordinary Share, this brings the total dividend for the year to 4.4p. If approved at the AGM, payment of the final dividend

will be made to shareholders registered at the close of business on 14 June 2024 and will be paid on 5 July 2024.

Directors

The Directors of the Company who served during the year and to the date of this report are listed on page 98. Details of the

Directors’ interests in the share capital of the Company are set out on page 149 of the Annual Report on Remuneration.

Articles of Association

The Company’s Articles of Association give powers to the Board to appoint Directors. Newly appointed Directors are required

toretire and submit themselves for re-election by the shareholders at the first Annual General Meeting following their appointment.

Inpractice however, all Directors are expected to retire and seek re-election on an annual basis.

The Board of Directors may exercise all of the powers of the Company subject to the provisions of relevant laws and the Company’s

Memorandum and Articles of Association. These include specific provisions and restrictions regarding the Company’s ability to

borrow money and to issue and repurchase shares.

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 included within note 26 of the Consolidated Financial Statements on page 204.

As at 31 December 2023 there were 212,803,389 Ordinary Shares of 1p nominal value in issue. The Company has one class of

shares, Ordinary Shares of 1p nominal value, which carry equal rights to dividends, voting and return of capital on winding up of the

Company. There are no restrictions on the transfer of securities in the Company and there are no restrictions on any voting rights

other than those prescribed by law, nor is the Company aware of any arrangement which may result in restrictions on the transfer

ofsecurities or voting rights nor any arrangement whereby a shareholder has waived or agreed to waive dividends.

The Company has established two separate employee benefit trusts for the purposes of satisfying awards under the Company’s

share-based incentive schemes. The Company has established a Trust in connection with the Group’s Share Incentive Plan (SIP)

which holds Ordinary Shares in trust for the benefit of employees of the Group. The Trustees of the SIP Trust may vote in respect of

Forterra shares held in the Trust but only as instructed by participants in the SIP in accordance with the deed and rules governing

the scheme. The Trustees will not otherwise vote in respect of the shares held in the SIP Trust. As at 31 December 2023 the Trust

held a total of 392,825 shares in the Company, with a nominal value of 3,928

p and at a weighted average purchase consideration

of 165p per share.

The Company has also established The Employee Benefit Trust (EBT) to satisfy awards vesting under the Performance Share

Plan(PSP), the Deferred Annual Bonus Plan (DABP) and the Sharesave Scheme. As at 31 December 2023 the EBT held a total

of5,512,425 shares in the Company, with a nominal value of 55,124p and at a weighted average purchase consideration of

249ppershare.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

157

DIRECTORS’ REPORT

Substantial shareholdings

At 31 December 2023 the Company, in accordance with the Disclosure Guidance and Transparency Rules, has been notified of the

following interests of greater than 3% in its Ordinary Share capital. This information is correct at the date of notification and it should

be noted that these holdings may have changed since they were notified to the Company.

31 December 2023 25 March 2024

Nature

of holding

Number of

disclosed

% interest in

voting rights

Number of

shares disclosed

% interest in

voting rights

Vulcan Value Partners

Indirect 28,744,777 13.51 26,475,173 12.44

Lansdowne Partners

Indirect 22,802,737 10.72 22,802,737 10.72

Jupiter Asset Management

Indirect 11,231,572 5.27 11,231,572 5.27

FitzWalter Capital Partners

Indirect 11,189,441 5.26 11,189,441 5.26

MFS Investment Management

Indirect 10,550,158 4.96 10,550,158 4.96

Mondrian Investment Partners

Indirect 10,499,315 4.93 10,499,315 4.93

Information provided to the Company in accordance with the Disclosure Guidance and Transparency Rules is publicly available via

the Regulatory News Service and on the Company’s website.

Significant agreements (change of control)

The Company’s committed credit facilities as described in note

19 of the Consolidated Financial Statements on page 195 are

subject to provisions that require the mandatory prepayment of

the facilities on a change of control. For this purpose, a change

of control is defined as any person or group of persons acting

inconcert gaining direct or indirect control of the Company.

Forthe purposes of this definition, control of the Company

means the holding beneficially (directly or indirectly) of the issued

share capital of the Company having the right to cast more than

30% of the votes capable of being cast in general meetings of

the Company.

There are no agreements between the Group and its Directors

and employees providing for compensation for loss of office or

employment (whether through resignation, purported

redundancy or otherwise) in the event of a takeover bid.

Political donations

The Group made no donations during the year to any political

party or other political organisation.

Going concern

The Group’s debt facility comprises a committed revolving credit

facility (RCF) of £170m extending to January 2027 with an

option for an extension to June 2028 subject to lender consent.

At the balance sheet date, the cash balance stood at £16.0m

and after allowing for £9.5m of the facility which is currently

carved out to be used for the provision of letters of credit, an

undrawn balance of £50.5m was available against the Group’s

facility, with reported net debt before leases of £93.2m (2022:

£5.9m) (net debt is presented inclusive of capitalised

arrangement fees).

The Group meets its working capital requirements through these

cash reserves and facilities and closely manages working capital

to ensure sufficient daily liquidity and prepares financial

forecasts under various scenarios to ensure sufficient liquidity

over the medium-term.

The facility is normally subject to covenant restrictions of

leverage (net debt / EBITDA) (as measured before leases) of less

than three times and interest cover of greater than four times.

The Group also benefits from an uncommitted overdraft facility

of £10m.

The Group has traded comfortably within these covenants

throughout 2023 and whilst it anticipates remaining within these

covenants during 2024, given the combination of the Group’s

reduced EBITDA and increased net debt, driven by inventory

build, capital outflows and higher interest rates, amended

covenants have been agreed with the Group’s lenders to

provide additional headroom in the short-term. Accordingly, the

Group’s leverage covenant has increased to four times at June

2024 and 3.75 times at December 2024 with interest cover

decreasing to three times at December 2024. In addition,

quarterly covenant testing has been introduced for the period of

the covenant relaxation. As such, for September 2024, leverage

is set at four times and interest cover three times and in March

2025 leverage is set at 3.75 times and interest cover at 3 times.

The covenants return to normal levels from June 2025 with

testing reverting to half yearly.

Management has modelled three financial scenarios for the

period to 30 June 2025, comprising a base case and two

plausible downside scenarios, reflecting both macroeconomic

and industry-specific projections. In addition to this, a reverse

stress test has also been modelled.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

158

DIRECTORS’ REPORT

CONTINUED

Assumptions underpinning these scenarios are outlined as follows:

• the base case scenario is aligned to our current demand

expectations with short-term market conditions remaining

challenging and demand in 2024 being broadly consistent

with that seen in 2023;

• 2023 was characterised by a large growth in inventory and

the management actions taken in 2023 will address this such

that in 2024 production will be more closely aligned to sales;

• capex outflows on the Group’s three strategic investments

willbe almost complete during 2024, with capital spend

significantly reduced thereafter until a recovery in market

conditions facilitates a reduction in the Group’s net debt; and

• the Group’s plausible downside scenarios take into account

the current levels of market demand which are already

approximately 30% below the levels last seen in 2022,

meaning current industry demand is presently in line with

levels last seen in the global financial crisis. As such, it is not

considered plausible that demand could fall further than

withinthe assumptions within the scenarios laid out below.

Scenario

Sales volume

assumptions

Management

mitigations

Base

Volumes reducing by

24-36% in 2024 relative

to 2022, recovering in

2025 but remaining

20-27% below 2022

None necessary

Plausible downside

Volumes reducing by

29-40% in 2024 relative

to 2022, recovering in

2025 but remaining

25-37% below 2022

None necessary

Plausible downside

with management

mitigations

Volumes reducing by

29-43% in 2024 relative

to 2022, recovering in

2025 but remaining

24-37% below 2022

A number of

controllable

management

mitigations assumed

Under each of the above scenarios, there is no breach in

covenants throughout 2024 and in the period up to June 2025.

Inaddition to this, the Group has prepared a reverse stress test to

determine the level of market decline that could potentially breach

covenants, before further mitigating actions are taken. The reverse

stress test indicated, that should volumes fall by between 36%

and46% (product line dependent) versus those seen in 2022,

theGroup would be at risk of breaching its covenants. This is

viewed by the Board to be a highly unlikely scenario, taking

intoconsideration encouraging recent trading updates from

housebuilding customers which report greater levels of customer

activity in recent months, with a downward trend in mortgage

interest rates throughout 2024 expected to increase affordability of

new homes. Alongside this, the continuing under-supply of housing

in the UK continues to worsen, and the Board are confident in

theGroup's ability to benefit significantly as markets recover and

strategic investments generate returns. Additionally, in the event

ofthe volumes falling in line with those modelled in the reverse

stress test, the Group would seek to enact further mitigating

actions including additional cost savings, production reductions,

curtailment in the quantum of dividend distribution and the sale

ofland and buildings.

Taking this into consideration, alongside trading performance

forthe first two months of 2024 which has seen subdued levels

in line with 2023 volumes, the Directors have a reasonable

expectation that the Group has adequate resources to continue

in operational existence for the going concern period to 30 June

2025. The Group therefore adopts the going concern basis in

preparing these Consolidated Financial Statements.

Statement of disclosure of information to the auditor

Each Director of the Company confirms that as far as they

areaware, there is no relevant audit information of which the

Company’s auditors are unaware and that each of the Directors

has taken all the steps they ought to have taken individually as a

Director in order to make themselves aware of any relevant audit

information and to establish that the Company’s auditors are

aware of that information.

Annual General Meeting (AGM)

The 2024 AGM will be held on 21May 2024. Full details are

contained in the Notice convening the AGM, which is being sent

to shareholders with this Annual Report.

Approved by the Board and signed on its behalf by:

Frances Tock

Company Secretary

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

159

TheDirectors are required by the Companies Act 2006 to

prepare Financial Statements for each financial year that give

atrue and fair view of the state of affairs of the Group and the

Company as at the end of the financial year, and of the profit

orloss of the Group for the financial year. Under that law, the

Directors are required to prepare the Consolidated Financial

Statements in accordance with the requirements of the

Companies Act 2006 and UK-adopted international accounting

standards and have elected to prepare the Company Financial

Statements in accordance with United Kingdom Generally

Accepted Accounting Practice, including FRS 102, the Financial

Reporting Standard applicable in the United Kingdom and the

Republic of Ireland and applicable law.

In preparing these 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;

• in respect of the Consolidated Financial Statements, state

whether UK-adopted international accounting standards have

been followed, subject to any material departures disclosed

and explained in the Financial Statements;

• in respect of the Company Financial Statements, state

whether applicable UK Accounting Standards, including FRS

102, have been followed, subject to any material departures

disclosed and explained in the Financial Statements;

• 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 IFRS (and in respect of the Company

Financial Statements, FRS 102) 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

• prepare the Financial Statements on the going concern basis,

unless it is inappropriate to presume that the Group and the

Company will continue in business.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Group’s

transactions and disclose with reasonable accuracy, at any

time, the financial position of the Group and the Company,

andwhich enable them to ensure that the Financial Statements

and the Directors’ Remuneration Report comply with the

Companies Act 2006 and as regards the Consolidated

FinancialStatements, Article 4 of the IAS Regulation. They

alsohave general responsibility for taking such steps as

arereasonably open to them to safeguard the assets of the

Group and the Company, and to prevent and detect fraud

andother irregularities.

The Directors are responsible for the maintenance and integrity

of the Company’s website. Legislation in the UK governing

thepreparation and dissemination of Financial Statements may

differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Financial

Statements, taken as a whole, is fair, balanced and

understandable and provides the information necessary

forshareholders to assess the Group’s and the Company’s

performance, business model and strategy.

Each of the Directors, whose names and functions are set out

on pages 98 to 101 confirm that, to the best of their knowledge:

• the Consolidated Financial Statements of the Group, which

have been prepared in accordance with UK-adopted

international accounting standards in conformity with the

requirements of the Companies Act 2006 give a true and fair

view of the assets, liabilities, financial position and profit of the

Group; and

• the Strategic Report contained within this document includes

a fair review of the development and performance ofthe

business and the position of the Group together with

adescription of principal risks and uncertainties that the

Groupfaces.

Approved by the Board and signed on its behalf by:

Neil Ash

Chief Executive Officer

25March 2024

Ben Guyatt

Chief Financial Officer

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

GOVERNANCE

160

STATEMENT OF DIRECTORS’

RESPONSIBILITIES

FINANCIAL

STATEMENTS

In this section

162 Independent Auditor’s Report

170 Consolidated Statement of

Total Comprehensive Income

171 Consolidated Balance Sheet

172 Consolidated Statement of Cash Flows

173 Consolidated Statement of Changes in Equity

174 Notes to the Financial Statements

208 Company Balance Sheet

209 Company Statement of Changes in Equity

210 Notes to the Company Financial Statements

213 Group Five-Year Summary

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

161

Opinion

In our opinion:

• Forterra plc’s Consolidated Financial Statements and Company Financial Statements (the “Financial Statements”) give a true

andfairview of the state of the Group’s and of the parent company’s (the Company) affairs as at 31 December 2023 and

oftheGroup’s profit for the year then ended;

• the Consolidated Financial Statements have been properly prepared in accordance with UK adopted international

accountingstandards;

• the Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted

Accounting Practice; and

• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the Financial Statements of Forterra plc (the ‘Company’) and its subsidiaries (the ‘Group’) for the year ended

31December 2023 which comprise:

Group

Company

Consolidated Balance Sheet as at 31 December 2023

Company Balance sheet as at 31 December 2023

Consolidated Statement of Total Comprehensive Income for the year

ended 31 December 2023

Company Statement of Changes in Equity for the year ended

31December 2023

Consolidated Statement of Changes in Equity for the year ended

31December 2023

Related notes 1 to 13 to the Company Financial Statements including

asummary of significant accounting policies

Consolidated Statement of Cash Flows for the year ended

31December 2023

Related notes 1 to 30 to the Consolidated Financial Statements,

including material accounting policy information

The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and

UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the

company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 102 “The Financial

Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities

under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Statements section

ofourreport. We are independent of the Group and the Company in accordance with the ethical requirements that are relevant

toouraudit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities,

and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the

financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled

our other ethical responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the company and we remain

independent of the Group and the Company in conducting the audit.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

162

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF FORTERRA PLC

Conclusions relating to going concern

In auditing the Financial Statements, we have concluded that the Directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Company’s

ability to continue to adopt the going concern basis of accounting included:

• We obtained an understanding of management’s going concern assessment process by performing our walkthrough of the

Group’s financial statement close process to assess as to whether it was appropriate.

• We performed a review of all borrowing and other financing facilities, including the revised covenant agreement included in the

cash forecasts and covenant calculations. This included obtaining evidence of the terms of the bank loan facilities and assessing

their continued availability to the Group through the going concern period and reviewed the forecast covenants compliance.

• We obtained management’s going concern assessment, including the cash forecast and covenant calculations for the going

concern period which covers a period up to 30 June 2025. The Group has modelled base case and severe but plausible

scenarios in their cash forecasts and covenant calculations in order to incorporate unforeseen fluctuations in the performance and

liquidity of the group.

• We tested the clerical accuracy of the model used to prepare the Group's going concern assessment.

• Using our understanding of the business, we evaluated and challenged the historical accuracy of management’s forecast by

performing the comparison of prior year actual results with the forecasts.

• We have obtained and performed an analysis on post year end results and compared this against management’s budget.

• We had discussion with the commercial team to understand future trading and in particular the April order book for bricks.

• We have tested the main assumptions that included trading volumes and underlying EBITDA in each modelled scenario by

comparing them with Group’s historical performance, economic and industry forecasts including the potential impact of climate

change on the Group’s business. Management subsequently incorporated further downside in the severe but plausible scenario.

• We obtained management’s reverse stress test to assess the reduction in EBITDA required to eliminate liquidity headroom or

breach bank loan facility covenants and whether the reduction in EBITDA required has no more than a remote possibility of

occurring. We also considered the mitigating factors included in the reverse stress test that are within control of the Group.

Thisincluded review of the Group’s non-operating cash outflows and evaluating the Group’s ability to control these outflows

asmitigating actions if required. We engaged with the EY internal specialist to assess the group’s ability to obtain a further

covenants relaxation should that be necessary.

• We reviewed the Group and the Company’s going concern disclosures included in the Annual Report in order to assess that the

disclosures were appropriate and in conformity with the reporting standards.

Key observations

• The Directors’ assessment forecasts that the Group will maintain sufficient liquidity and covenant compliance through the going

concern period to 30 June 2025. We observed that in management base case and both severe but plausible scenarios there is

liquidity and covenant compliance.

• Management’s assessment was further supported by a reverse stress scenario with a more severe decline across the non brick

products. Management considers such a scenario remote, however, in such an unlikely scenario, management considers that the

impact can be mitigated by implementing further mitigations in their control.

Going concern has also been determined to be a key audit matter.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for

theperiod up to 30 June 2025.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections

ofthis report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the

Group’s ability to continue as a going concern.

In relation to the Group and Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing

material to add or draw attention to in relation to the Directors’ statement in the Consolidated Financial Statements about whether

the Directors considered it appropriate to adopt the going concern basis of accounting.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

163

Overview of our audit approach

Audit scope

• The Group comprises of three components which represent the principal business units.

Weperformed a full scope audit of the complete financial information for the main trading

componentand full scope audit procedures for the Company. For the other remaining component,

we have performed review procedures.

•

The components where we performed full audit procedures accounted for 100% of profit before

taxation and exceptional items, 100% of revenue and 100% of total assets.

Key audit matters

• Revenue.

• Impairment of tangible and intangible assets.

• Going concern.

Materiality

• Overall Group materiality of £1.6m which represents 5% of profit before tax and exceptional items.

An overview of the scope of the Company and Group audits

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope

for each company 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, changes in the

business environment, the potential impact of climate change and other factors such as recent internal audit results when assessing

the level of work to be performed at each company.

In assessing the risk of material misstatement to the Consolidated Financial Statements, and to ensure we had adequate

quantitative coverage of significant accounts in the Financial Statements, we selected three components (2022: three components)

covering entities, which represent the principal business units within the Group.

Of the three components selected, we performed an audit of the complete financial information (“full scope components”) for two

ofthem (2022: two components) which were selected based on their size or risk characteristics. For the other component we have

performed review procedures over the specific accounts within that component.

The reporting components where we performed audit procedures accounted for 100% (2022: 100%) of the Group’s profit before

tax and exceptional items, 100% (2022: 100%) of the Group’s revenue and 100% (2022: 100%) of the Group’s total assets.

The remaining component did not contribute to the Group’s profit before tax and exceptional items, revenue or total assets. For

thiscomponent, we performed other procedures, including analytical review, testing of consolidation journals and intercompany

eliminations to respond to any potential risks of material misstatement to the Consolidated Financial Statements.

Involvement with component teams

All audit work performed for the purposes of the audit was undertaken by the Group audit team.

Climate change

Stakeholders are increasingly interested in how climate change will impact Group. The Group has determined that the most

significant future impacts from climate change on its operations will be from both the transitional risks associated with adapting its

business to a lower carbon economy, along with both the longer-term acute risks associated with increasing severe weather events

and the physical risks of long-term climate change such as sea level rise. These are explained on pages 81 to 85 in the required

Task Force on Climate Related Financial Disclosures and on pages 86 to 95 in the principal risks and uncertainties. They have also

explained their climate commitments on pages 56 and 57. All of these disclosures form part of the “Other information,” rather than

the audited Financial Statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether

they are materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit or otherwise

appear to be materially misstated, in line with our responsibilities on “Other information”.

In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any

consequential material impact on its financial statements.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

164

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF FORTERRA PLC

CONTINUED

The Group has explained in its basis of preparation note their articulation of how climate change has been reflected in the financial

statements including how they have reflected the impact of climate change in their financial statements, including how this aligns

with their commitment to achieve net zero emissions by 2050. As explained in the basis of preparation note, there are no significant

judgements and estimates relating to climate change.

Our audit effort in considering the impact of climate change on the Financial Statements was focused on the adequacy of the Group’s

disclosures, supported by our climate change internal specialists, and the conclusion that there is no material impact from climate

change on the carrying values of assets with indefinite or long lives, or on the Consolidated Financial Statements for the Group.

We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and

associated disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are

described above.

Based on our work we have not identified the impact of climate change on the Financial Statements to be a key audit matter

ortoimpact a key audit matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial

statements of the current period and include the most significant assessed risks of material misstatement (whether due to fraud)

that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources

in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the

Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.

Risk

Our response to the risk

Key observations communicated to

the Audit Committee

Revenue recognition (Revenue net of

rebates £346.4m, 2022: £455.5m)

Refer to the Audit Committee Report

page121; Accounting policies page 176;

and note 2 of the Consolidated Financial

Statements page 174.

We believe that there may be an incentive

for management to manipulate revenue.

There is a risk that management may

override controls to overstate revenue by

recording fictitious revenue transactions

through inappropriate manual journals

posted to revenue.

We have understood the accounting for revenue

recognition which included identifying key controls

over the process and reviewing the revenue

recognition policy. We also assessed that the

policy for all revenue streams is in compliance with

IFRS 15, the revenue accounting standard.

We performed data analytic techniques over the full

amount of revenue recognised in the year and tested

the correlation of revenue to receivables and cash.

We traced a sample of transactions through to

cashreceipts to verify the occurrence of revenue.

Where the process did not follow our expectations,

we investigated and tested a sample of transactions

to ensure their validity by agreeing back to source

documentation.

We have tested journal entries posted to revenue

throughout the year, applying a number of

parameters designed to identify and test entries

thatwere not in accordance with our expectations.

We verified the selected journals to originating

documentation to confirm that the entries were valid.

We performed full scope audit procedures over this

risk area, which covered 100% of the risk amount.

Based on our procedures we did not identify

any evidence of material misstatement in the

revenue recognised.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

165

Risk

Our response to the risk

Key observations communicated to

the Audit Committee

Impairment of tangible and

intangibleassets

At 31 December 2023 property, plant and

equipment totalled £249.7m (2022:

£233.7m) and intangible assets were

£19.2m (2022: £23.6m). Refer to the Audit

Committee Report page 121; and note 13

and 14 of the Consolidated Financial

Statements pages 191 and 192. Tangible

and intangibles assets are maintained

between 15 identified cash generating units

(CGUs). The CGUs which are allocated

intangible assets with indefinite useful lives

are subject to annual impairment tests and

remaining CGUs are assessed for

indicators of impairment annually.

Management has recognised an impairment

charge of £5.0m during the year.

The Group has been impacted in the year by

the disruption from the economic turbulence

that has suppressed demand for new housing

resulting in a marked reduction in demand for

their products. Revenue decreased

significantly during this period. Given the

uncertainty that the current macroeconomic

environment presents to forecasting on which

the impairment assessment relies, this risk has

increased in the year.

As such, there is a risk that the identified

CGUs may not achieve the anticipated

business performance to support their carrying

value and therefore the value of these assets

could be overstated.

We assessed whether management’s

identification of cash generating units was in

accordance with IAS 36 – Impairment of Assets.

We understood the methodology applied by

management in performing its impairment test for

each of the relevant CGUs and walked through

the key controls over the process.

We obtained management’s assessment for each

CGU determining whether there are any indicators of

impairment on any CGUs such as underperformance

against budget and long payback periods (total

assets divided by actual EBITDA).

We have challenged the identified indicators of

impairment using market data and our own

knowledge of the business to confirm the

completeness of the identified indicators of

impairment.

We tested the clerical accuracy of the VIUs models

for the CGU’s which have been identified as having

indicators of impairment or have indefinite useful live

intangible assets.

We have assessed whether management’s basis for

allocation of overheads to each CGU is appropriate

and in accordance with IAS 36.

We obtained management’s value in use calculation

for the CGU’s which have been identified as having

indicators of impairment or having indefinite useful

live intangible assets and challenged management’s

assumptions by obtaining market data and other

available evidence to determine whether the

assumptions for the estimated cash flows and the

future growth rates are reasonable.

We engaged EY specialists to assess the

appropriateness of the WACC used and calculated

an appropriate range based on their independent

assessment to compare to management’s

calculation.

We engaged EY specialists to assess the

appropriateness of the valuation reports prepared

bymanagement’s external specialist to determine

thefair value less costs to sell model (FVLCTS) of

theidentified CGUs.

We performed sensitivity analysis on the estimated

cash flows, future growth rates and WACC to

ascertain the extent of change in those assumptions

that either individually or collectively would result in

animpairment.

We reviewed the disclosures in the Financial

Statements for compliance with IAS 36 requirements.

We performed full scope audit procedures over this

risk area, which covered 100% of the risk amount.

Based on our procedures, we conclude that

• we have identified no evidence of

management bias in the Group’s

impairment assessment;

• for the assets where management’s

impairment assessment did not result in

animpairment charge, the assessment

was accurate; and

• key assumptions are appropriately

disclosed.

Based on the findings from our audit

procedures we are satisfied that no additional

impairment charges are required in

accordance with the requirements of IAS 36.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

166

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF FORTERRA PLC

CONTINUED

The key audit matters set out in the table above are consistent with those reported in 2022, with the exception of the addition of

‘Impairment of tangible and intangible assets’. During the current year, risk of impairment of tangible and intangible assets has been

increased due to challenging market conditions driven by increasing interest rates adversely impacting affordability and therefore

demand for new homes. Based on the change in risk profile, we consider this to be a key audit matter.

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 £1.6m (2022: £3.5m), which is 5% (2022: 5%) of profit before tax and exceptional items. We believe that profit before tax and

exceptional items provides us the most relevant performance measure to the main users of the Consolidated Financial Statements

and therefore have determined materiality on that number.

We determined materiality for the Company to be £1.0m (2022: £1.6m), which is 0.5% (2022: 0.5%) of total assets.

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 75% (2022: 75%) of our planning materiality, namely £1.2m (2022: £2.6m). We have set

performance materiality at this percentage due to our understanding of the Group and Company and our past experience with the

audit, which indicates a lower risk of misstatements.

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 year, the range of performance materiality allocated to components was £1.0m to £1.2m (2022: £1.1m

to £2.6m).

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 £0.8m (2022:

£0.17m), 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.

Other information

The other information comprises the information included in the annual report set out on pages 1 to 212, including the Strategic

report, set out on pages 1 to 95, Governance, set out on pages 96 to 160 and additional information set out on page 214, other

than the Financial Statements and our auditor’s report thereon. The directors are responsible for the other information contained

within the annual report.

Our opinion on the Financial Statements does not cover the other information and, except to the extent otherwise explicitly stated

inthis report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent

with the Financial Statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives

riseto a material misstatement in the Financial Statements themselves. If, based on the work we have performed, we conclude

thatthere is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

167

Opinions 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.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements

areprepared is consistent with the Financial Statements; and

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and the Company and its environment obtained in the course of

theaudit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report

toyou if, in our opinion:

• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received

from branches not visited by us; or

• the 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.

Corporate Governance Statement

We have reviewed the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate

Governance Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance

Code specified for our review by the Listing Rules.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the Financial Statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material

uncertainties identified set out on page 158;

• Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period

isappropriate set out on page 95;

• Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets

itsliabilities set out on page 159;

• Directors’ statement on fair, balanced and understandable set out on page 123;

• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 127;

• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems

setout on pages 122 and 123; and

• The section describing the work of the Audit Committee set out on page 119.

Responsibilities of Directors

As explained more fully in the Directors’ responsibilities statement set out on page 160, the Directors are responsible for the preparation

of the Financial Statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors

determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to

fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Group and Company’s ability to continue

asagoing concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting

unless the Directors either intend to liquidate the Group or the Parent company or to cease operations, or have no realistic

alternative but to do so.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

168

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF FORTERRA PLC

CONTINUED

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,

they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to

fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,

forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting

irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests

with both those charged with governance of the company and management.

• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the

most significant are directly relevant to the specific assertions in the Financial Statements are those that relate to the reporting

frameworks (IFRS, FRS 102, the Companies Act 2006 and UK Corporate Governance Code) and the relevant tax compliance

regulations in the UK. In addition, we concluded that there are certain significant laws and regulations which may have an effect in

the determination of the amounts and disclosures in the Financial Statements being the Listing Rules of the UK Listing Authority,

and those laws and regulations relating to occupational health and safety, environmental laws and data protection.

• We understood how Forterra plc is complying with those frameworks by making enquiries of management, internal audit and

those responsible for legal and compliance procedures. We corroborated our enquiries through our review of Board minutes,

papers provided to the Audit Committee and any correspondence received from regulatory bodies where appropriate.

• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by

meeting with management from various parts of the business to understand where it considered there was susceptibility to fraud.

We also considered performance targets and the risk of management override of controls to manage earnings or influence the

perceptions of analysts. We considered the programmes and controls that the Group has established to address risks identified,

or that otherwise prevent, deter, and detect fraud; and how senior management monitors those programmes and controls.

Where the risk was considered to be higher, we performed audit procedures to address each identified fraud risk. These

procedures, as mentioned in the key audit matters section for revenue recognition included testing journal entries and were

designed to provide reasonable assurance that the Financial Statements were free from fraud or error.

• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations to the

extent that this could result in a material misstatement to the financial statements. Our procedures involved understanding the

process and controls to identify non-compliance, identifying journals indicating large or unusual transactions, enquiries of legal

counsel, Group management, internal audit, divisional management, and focused testing, as referred to in the key audit matters

section above.

A further description of our responsibilities for the audit of the Financial Statements is located on the Financial Reporting Council’s

website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Other matters we are required to address

• Following the recommendation from the Audit Committee we were re-appointed by the Company at the AGM on 23 May 2023.

The engagement letter was signed on 18 July 2023 to audit the Financial Statements for the year ending 31 December 2023 and

subsequent financial periods.

• The period of total uninterrupted engagement including previous renewals and reappointments is eight years, covering the years

ending 31 December 2016 to 31 December 2023.

The audit opinion is consistent with the additional report to the Audit Committee.

Use of our report

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.

Anup Sodhi

(Senior statutory auditor)

for and on behalf of Ernst & Young LLP,

Statutory Auditor Luton

25March 2024

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

169

CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

		2023	2022
	Note	£m	£m
Revenue	4	346.4	455.5
Cost of sales		(245.7)	(292.9)
Gross profit		100.7	162.6
Distribution costs		(48.6)	(57.7)
Administrative expenses		(28.5)	(33.6)
Other operating income	6	0.5	3.7
Operating profit	5	24.1	75.0
EBITDA before exceptional items		58.1	89.2
Exceptional items	8	(14.0)	2.3
EBITDA		44.1	91.5
Depreciation and amortisation	13, 14, 24	(20.0)	(16.5)
Operating profit		24.1	75.0
Finance expense	9	(7.0)	(2.1)
Profit before tax		17.1	72.9
Income tax expense	10	(4.3)	(14.1)
Profit for the financial period attributable to equity shareholders		12.8	58.8
Other comprehensive (loss)/income
Effective portion of changes of cash flow hedges (net of tax impact)		(0.7)	0.8
Total comprehensive income for the period attributable to equity shareholders		12.1	59.6
Earnings per share		Pence	Pence
Basic earnings	12	6.2	27.2
Diluted earnings	12	6.2	26.8

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

170

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2023

		2023	2022
	Note	£m	£m
Non-current assets
Intangible assets	13	19.2	23.6
Property, plant and equipment	14	249.7	233.7
Right-of-use assets	24	24.1	18.1
Derivative financial assets	22	5.0	–
		298.0	275.4
Current assets
Inventories	15	95.8	43.0
Trade and other receivables	16	31.0	44.3
Income tax asset		2.3	–
Cash and cash equivalents	17	16.0	34.3
Derivative financial assets	22	1.6	0.6
		146.7	122.2
Total assets		444.7	397.6
Current liabilities
Trade and other payables	18	(66.3)	(89.6)
Loans and borrowings	19	(0.4)	(0.2)
Lease liabilities	24	(5.7)	(4.7)
Provisions for other liabilities and charges	23	(15.7)	(14.3)
Derivative financial liabilities	22	(5.8)	–
		(93.9)	(108.8)
Non-current liabilities
Loans and borrowings	19	(108.8)	(40.0)
Lease liabilities	24	(18.5)	(13.3)
Provisions for other liabilities and charges	23	(9.4)	(10.0)
Deferred tax liabilities	25	(6.3)	(5.0)
		(143.0)	(68.3)
Total liabilities		(236.9)	(177.1)
Net assets		207.8	220.5
Capital and reserves attributable to equity shareholders
Ordinary shares	26	2.1	2.1
Retained earnings		219.8	233.4
Cash flow hedge reserve		(0.1)	0.6
Reserve for own shares	26	(14.2)	(15.8)
Capital redemption reserve		0.2	0.2
Total equity		207.8	220.5

The notes on pages 174 to 207 are an integral part of these Consolidated Financial Statements.

Approved by the Board of Directors on

25 March 2024 and signed on their behalf by:

Neil Ash

Chief Executive Officer

Ben Guyatt

Chief Financial Officer

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

171

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

		2023	2022
	Note	£m	£m
Cash (used in)/generated from operations	20	(11.2)	89.0
Interest paid		(6.1)	(2.4)
Tax paid		(2.7)	(11.0)
Net cash (outflow)/inflow from operating activities		(20.0)	75.6
Cash flows from investing activities
Purchase of property, plant and equipment		(33.0)	(42.1)
Purchase of intangible assets		(1.1)	(2.0)
Proceeds from sale of property, plant and equipment		0.3	0.4
Exceptional proceeds from sale of property, plant and equipment		–	2.5
Net cash used in investing activities		(33.8)	(41.2)
Cash flows from financing activities
Repayment of lease liabilities	24	(5.9)	(5.3)
Dividends paid	11	(25.7)	(24.2)
Drawdown of borrowings		137.0	40.0
Repayment of borrowings		(67.0)	–
Purchase of shares by Employee Benefit Trust		(2.1)	(12.2)
Proceeds from sales of shares by Employee Benefit Trust		1.1	0.4
Payments made to acquire own shares		–	(40.3)
Financing fees		(1.9)	–
Net cash generated from/(used in) financing activities		35.5	(41.6)
Net decrease in cash and cash equivalents		(18.3)	(7.2)
Cash and cash equivalents at the beginning of the period		34.3	41.5
Cash and cash equivalents at the end of the period	17	16.0	34.3

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

172

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

			Capital		Cash flow
		Ordinary	redemption	Reserve for	hedge	Other	Retained	Total
		shares	reserve	own shares	reserve	reserve	earnings	equity
	Note	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2022		2.3	–	(4.6)	(0.2)	23.9	213.4	234.8
Profit for the year		–	–	–	–	–	58.8	58.8
Other comprehensive income		–	–	–	0.8	–	–	0.8
Total comprehensive income for the year		–	–	–	0.8	–	58.8	59.6
Dividends paid	11	–	–	–	–	–	(24.2)	(24.2)
Movement in other reserves	26	–	–	–	–	(23.9)	23.9	–
Purchase of shares by Employee Benefit Trust		–	–	(12.2)	–	–	–	(12.2)
Proceeds from sale of shares by Employee Benefit Trust		–	–	0.4	–	–	–	0.4
Payments made to acquire own shares		(0.2)	0.2	–	–	–	(40.3)	(40.3)
Share-based payments charge		–	–	–	–	–	3.4	3.4
Share-based payments exercised		–	–	0.6	–	–	(0.6)	–
Tax on share-based payments	25	–	–	–	–	–	(1.0)	(1.0)
Balance at 31 December 2022		2.1	0.2	(15.8)	0.6	–	233.4	220.5
Profit for the year		–	–	–	–	–	12.8	12.8
Other comprehensive loss		–	–	–	(0.7)	–	–	(0.7)
Total comprehensive (loss)/income for the year		–	–	–	(0.7)	–	12.8	12.1
Dividend paid	11	–	–	–	–	–	(25.7)	(25.7)
Purchase of shares by Employee Benefit Trust		–	–	(2.1)	–	–	–	(2.1)
Proceeds from sale of shares by Employee Benefit Trust		–	–	1.1	–	–	–	1.1
Share-based payments charge		–	–	–	–	–	1.7	1.7
Share-based payments exercised		–	–	2.6	–	–	(2.6)	–
Tax on share-based payments	25	–	–	–	–	–	0.2	0.2
Balance at 31 December 2023		2.1	0.2	(14.2)	(0.1)	–	219.8	207.8

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

173

1. General information

Forterra plc (Forterra or the Company) and its subsidiaries

(together referred to as the Group) are domiciled in the United

Kingdom. The address of the registered office of the Company

and its subsidiaries is 5 Grange Park Court, Roman Way,

Northampton, NN4 5EA. The Company is the parent of Forterra

Holdings Limited and Forterra Building Products Limited, which

together comprise the Group. The principal activity of the Group

is the manufacture and sale of bricks, dense and lightweight

blocks, precast concrete, concrete block paving and other

complementary building products.

Forterra plc was incorporated on 21 January 2016 for the

purpose of listing the Group on the London Stock Exchange.

Forterra plc acquired the shares of Forterra Building Products

Limited on 20 April 2016, which to that date held the Group’s

trade and assets, before admission to the main market of the

London Stock Exchange.

The Consolidated Financial Statements of the Group for the year

ended 31 December 2023 were approved for issue by the

Board of Directors on

25 March 2024.

2. Summary of material accounting policies

(A) Basis of preparation

The accounting policies used in the preparation of the

Consolidated Financial Statements of the Group are set out

below. These accounting policies have been used consistently

in all material respects across the periods presented. The

Consolidated Financial Statements have been prepared in

accordance with UK-adopted international accounting

standards. The Consolidated Financial Statements are

presented in pounds sterling and all values are rounded to

the nearest hundred thousand unless otherwise indicated.

In preparing the Consolidated Financial Statements

management has considered the impact of climate change,

taking into account the relevant disclosures in the Strategic

Report, including those made in accordance with the

recommendations of the Taskforce on Climate-related

Financial Disclosure.

The Group has engaged in a detailed review of expected climate

change impacts on the business and its assets and liabilities to

establish any adjustments required and what reporting is

necessary in its Consolidated Financial Statements for the year

ended 31 December 2023. The explanation below of how this

has been included in the Consolidated Financial Statements

should be read in conjunction with the climate-related risk and

governance section on pages 78 to 85 of the Sustainability

Report within this Annual Report and Accounts. This process

has been completed to ensure material accuracy of the financial

reporting and that disclosure of relevant information complies

with the requirements of IAS 1. The process has involved a

review of reporting segments and each element of the Group’s

commitment to reach net zero by 2050, to identify if any of

these items is expected to be materially impacted in a negative

or positive way by weather, legislative, societal or revenue/

cost changes.

The conclusion of the review was that, while there will

undoubtedly be impacts on the Group, the 100% UK focused

nature of the operations of the business significantly reduces the

risk profile of the Group to impacts from weather-related

changes. The changes necessary to achieve net zero will not

have a materially adverse impact on the cash flows of the Group

and indeed, warmer climates may present some opportunities

as disclosed on pages 79 to 85 of the Sustainability Report

within this Annual Report and Accounts. Societal and legislative

impacts are not considered to have a material impact on any

one segment such that we need to break out reporting in a

different way to previous years. Judgements are not considered

to be significant, although clearly understanding of climate

change is developing with time. Management review has

concluded that there is no material impact for inclusion within

modelling scenarios for viability purposes and given the

profitability and short payback period of the cash generating

units (CGUs), no issues were identified that would impact the

carrying values of such tangible and intangible assets. Given

the cash generation and facilities available, no significant issues

were identified that would impact viability over the forecast

period and as such therefore no further disclosure is required.

The preparation of the Consolidated Financial Statements

in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise

its judgement in the process of applying the Group’s accounting

policies. The areas involving a higher degree of judgement

and complexity, or areas where assumptions and estimates

are significant to the Consolidated Financial Statements, are

disclosed in note 3.

(B) Going concern

The Group’s debt facility comprises a committed revolving credit

facility (RCF) of £170m extending to January 2027 with an

option for an extension to June 2028 subject to lender consent.

At the balance sheet date, the cash balance stood at £16.0m

and after allowing for £9.5m of the facility which is currently

carved out to be used for the provision of letters of credit, an

undrawn balance of £50.5m was available against the Group’s

facility, with reported net debt before leases of £93.2m (2022:

£5.9m) (net debt is presented inclusive of capitalised

arrangement fees).

The Group meets its working capital requirements through these

cash reserves and facilities and closely manages working capital

to ensure sufficient daily liquidity and prepares financial

forecasts under various scenarios to ensure sufficient liquidity

over the medium-term.

The facility is normally subject to covenant restrictions of

leverage (net debt / EBITDA) (as measured before leases) of less

than three times and interest cover of greater than four times.

The Group also benefits from an uncommitted overdraft facility

of £10m.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

174

NOTES TO THE FINANCIAL STATEMENTS

2. Summary of material accounting policies continued

The Group has traded comfortably within these covenants

throughout 2023 and whilst it anticipates remaining within these

covenants during 2024, given the combination of the Group’s

reduced EBITDA and increased net debt, driven by inventory

build, capital outflows and higher interest rates, amended

covenants have been agreed with the Group’s lenders to

provide additional headroom in the short-term. Accordingly, the

Group’s leverage covenant has increased to four times at June

2024 and 3.75 times at December 2024 with interest cover

decreasing to three times at December 2024. In addition,

quarterly covenant testing has been introduced for the period of

the covenant relaxation. As such, for September 2024, leverage

is set at four times and interest cover three times and in March

2025 leverage is set at 3.75 times and interest cover at 3 times.

The covenants return to normal levels from June 2025 with

testing reverting to half yearly.

Management has modelled three financial scenarios for the

period to 30 June 2025, comprising a base case and two

plausible downside scenarios, reflecting both macroeconomic

and industry-specific projections. In addition to this, a reverse

stress test has also been modelled.

Assumptions underpinning these scenarios are outlined as

follows:

• the base case scenario is aligned to our current demand

expectations with short-term market conditions remaining

challenging and demand in 2024 being broadly consistent

with that seen in 2023;

• 2023 was characterised by a large growth in inventory and

the management actions taken in 2023 will address this such

that in 2024 production will be more closely aligned to sales;

• capex outflows on the Group’s three strategic investments

will be almost complete during 2024, with capital spend

significantly reduced thereafter until a recovery in market

conditions facilitates a reduction in the Group’s net debt; and

• the Group’s plausible downside scenarios take into account

the current levels of market demand which are already

approximately 30% below the levels last seen in 2022,

meaning current industry demand is presently in line with

levels last seen in the global financial crisis. As such, it is not

considered plausible that demand could fall further than within

the assumptions within the scenarios laid out below.

	Sales volume		Management
Scenario	assumptions		mitigations
Base	Volumes reducing by		None necessary
	24-36% in 2024 relative
	to 2022,	recovering in
	2025 but remaining
	20-27% below 2022
Plausible	Volumes reducing by		None necessary
downside	29-40% in 2024 relative
	to 2022,	recovering in
	2025 but remaining
	25-37% below 2022
Plausible	Volumes reducing by		A number of controllable
downside with	29-43% in 2024 relative		management mitigations
management	to 2022,	recovering in	assumed
mitigations	2025 but remaining
	24-37% below 2022

Under each of the above scenarios, there is no breach in

covenants throughout 2024 and in the period up to June 2025.

In addition to this, the Group has prepared a reverse stress test

to determine the level of market decline that could potentially

breach covenants, before further mitigating actions are taken.

The reverse stress test indicated, that should volumes fall by

between 36% and 46% (product line dependent) versus those

seen in 2022, the Group would be at risk of breaching its

covenants. This is viewed by the Board to be a highly unlikely

scenario, taking into consideration encouraging recent trading

updates from housebuilding customers which report greater

levels of customer activity in recent months, with a downward

trend in mortgage interest rates throughout 2024 expected to

increase affordability of new homes. Alongside this, the

continuing under-supply of housing in the UK continues to

worsen, and the Board are confident in the Group's ability to

benefit significantly as markets recover and strategic

investments generate returns. Additionally, in the event of the

volumes falling in line with those modelled in the reverse stress

test, the Group would seek to enact further mitigating actions

including additional cost savings, production reductions,

curtailment in the quantum of dividend distribution and the sale

of land and buildings.

Taking the above into consideration, alongside trading

performance for the first two months of 2024 which has seen

subdued levels in line with 2023 volumes, the Directors have a

reasonable expectation that the Group has adequate resources

to continue in operational existence for the going concern period

to 30 June 2025. The Group therefore adopts the going

concern basis in preparing these Consolidated Financial

Statements.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

175

2. Summary of material accounting policies continued

The accounting policies adopted in the preparation of these

Consolidated Financial Statements are consistent with those

followed in the preparation of the Consolidated Financial

Statements for the year ended 31 December 2022, except for

the adoption of new standards effective as at 1 January 2023.

The following new standards and amendments apply for the first

time in 2023, none of which had a material impact on the

Consolidated Financial Statements:

• IFRS 17, Insurance Contracts; amendments to IAS 8,

Definition of Accounting Estimates; amendments to IAS 1,

Presentation of Financial Statements and IFRS 2 Practice

Statement; Amendments to IAS 12, Taxation.

At the date of approval of these Consolidated Financial

Statements there were a number of standards, amendments

and interpretations that have been published and are effective

for accounting periods beginning on or after 1 January 2024.

These have not been applied in these Consolidated Financial

Statements and are not expected to have a material impact

when adopted. The Group has not early adopted any standard,

interpretation or amendment that has been issued but is not yet

effective.

(D) Basis of consolidation

The Group controls an entity when it is exposed to, or has rights

to, variable returns and has the ability to affect those returns

through its power over the entity. A subsidiary is an entity over

which the Group has control. Subsidiaries are consolidated from

the date on which control is transferred to the Group. They are

deconsolidated from the date that control ceases.

Intra-Group transactions, balances and unrealised gains and

losses on transactions between Group companies are

eliminated.

(E) Foreign currency translation

The presentational currency of the Group is pounds sterling;

the currency of the primary economic environment in which the

Group operates.

Foreign currency transactions are translated into the presentational

currency using the exchange rate prevailing at the date of the

transaction. Foreign exchange gains and losses resulting from

the settlement of such transactions, or from the translation of

monetary assets and liabilities denominated in foreign currencies

at period end, are recognised in the Group’s Consolidated

Statement of Total Comprehensive Income.

(F) Revenue

Revenue is measured at the fair value of the consideration

received or receivable, and represents amounts for goods

supplied, net of rebates, discounts, returns and value added

taxes. The Group recognises revenue when performance

obligations are met, as follows:

• Bricks and Blocks – on delivery of goods.

• Bespoke Products – on delivery of goods, or, for supply and

fit contracts, on delivery and installation. Delivery and

installation are construed as two separate performance

obligations, however the pattern of installation is in a manner

that the obligation is satisfied at the same time as the delivery

of products, thus there is no time lag between the two

performance obligations and hence revenue is recognised on

installation.

• Bill and hold arrangements, for both reporting segments –

when the customer obtains control of the goods, which arises

when facts and circumstances indicate that control has

passed and when all of the following criteria are met: (i) the

reason for the arrangement is substantive; (ii) the product has

been identified separately as belonging to the customer; (iii)

the product is ready for delivery in accordance with the terms

of the arrangement; and (iv) the Group does not have the

ability to use the product or sell the product to another

customer.

The Group provides volume-based rebates to certain

customers, typically on an annual basis. Revenue is recognised

net of rebates paid or accrued. In total £16.3m (2022: £21.9m)

has been deducted from revenue in relation to rebates in

the year.

(G) Segment reporting

Operating segments are reported in a manner consistent with

the internal reporting to the Executive Committee which has

been identified as the chief operating decision maker.

(H) Property, plant and equipment

Items of property, plant and equipment are stated at cost less

accumulated depreciation and impairment losses. Cost includes

the original purchase price of the asset, costs attributable to

bringing the asset to working condition for intended use, the

initial estimate of any decommissioning obligation and

associated changes to those estimates. When components of

an item of property, plant and equipment have different useful

lives, those components are accounted for as separate assets.

Subsequent costs are included in the asset’s carrying value

where they meet the recognition criteria.

Assets are derecognised on disposal. Gains and losses on

disposal are determined by comparing the proceeds with

the carrying amount of an asset and are recognised in the

Consolidated Statement of Total Comprehensive Income.

Where estimated future economic benefit falls below the

carrying value of an asset or group of assets, the asset

is impaired.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

176

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

2. Summary of material accounting policies continued

Assets under construction are not depreciated until they are

ready for use. For the other categories of property, plant and

equipment, depreciation is charged to either cost of sales,

distribution or administrative expenses within the Consolidated

Statement of Total Comprehensive Income on a straight-line

basis over the estimated useful life of the asset. The estimated

useful lives of assets are as follows:

• Buildings: up to 50 years

• Plant and machinery: 2 to 40 years

Asset residual values are reviewed, and adjusted if appropriate,

at each balance sheet date. The carrying amount of an asset is

written down if it is in excess of it’s recoverable amount.

Repairs and maintenance expenses do not meet the recognition

criteria and are recognised as an expense in the Consolidated

Statement of Total Comprehensive Income.

(I) Intangible assets

(I) Goodwill

Goodwill arises on the acquisition of businesses, trade and

assets where consideration paid exceeds the fair value at the

acquisition date.

For the purpose of impairment testing, goodwill acquired in

a business combination is allocated to each of the cash

generating units (CGUs) that benefit from the synergies of

the combination. Each unit to which the goodwill is allocated

represents the lowest level within the entity at which the

goodwill is monitored for internal purposes.

Goodwill impairment reviews are undertaken annually or more

frequently if events or changes in circumstances indicate a

potential impairment. The carrying value of the CGU containing

the goodwill is compared to the recoverable amount, which is

the higher of fair value less costs to sell and value in use. Any

impairment is recognised immediately as an expense in the

Consolidated Statement of Total Comprehensive Income and

is not subsequently reversed.

(II) Brand

Intangible assets relating to brands are not amortised as all held

by the Group have an indefinite useful life but are tested annually

for impairment or more frequently if events or changes in

circumstances indicate a potential impairment.

(III) Carbon credits

Purchased carbon credits are recorded at cost within intangible

assets. The asset is surrendered at the end of the compliance

period reflecting the consumption of the economic benefit and

is recorded as being utilised. As a result, no amortisation is

booked but an impairment charge may be recognised. Further

details of the Group’s policy in accounting for carbon credits are

disclosed under section (U) of this note.

(IV) Other intangible assets

Other intangibles consist of clay rights, acquired merchant

relationships and software development costs. These are

attributable to both reportable segments. All other intangible

assets have finite lives and are carried at cost less accumulated

amortisation. Amortisation for all intangible assets, including

those internally generated, is charged to administrative

expenses within the Consolidated Statement of Total

Comprehensive Income on a straight-line basis over the

estimated useful lives of the assets.

• Software: up to 7 years

• Clay rights: up to 12 years

• Merchant relationships: up to 8 years

(V) Impairment of tangible and intangible assets

The Group continues to evaluate tangible and intangible assets

for indicators of impairment whenever events or changes

in circumstances indicate that the carrying value may not

be recoverable. Judgements have remained consistent with

prior periods.

The recoverable amount is defined as the higher of fair value

less costs to sell and value in use, which in turn is the present

value of the future cash flows expected to be derived from

the asset.

Management sensitise value in use models to assess the level

of sensitivity to each assumption. Within each model, accounting

for reasonably possible changes in assumptions such as a 1%

increase in discount rate, decrease in long-term growth rates,

or a 10% fall in annual EBITDA does not eliminate headroom.

(VI) Research and development costs

Research costs are expensed as incurred. Development

expenditures on an individual project are recognised as an

intangible asset when the Group can demonstrate:

• the technical feasibility to complete the development so that

the asset will be available for use or sale;

• its intention to complete and its ability and intention to use

or sell the asset;

• that the asset will generate future economic benefits;

• the availability of resources to complete the asset; and

• the ability to reliably measure development expenditure.

(J) Leases

The Group leases various premises, land, fleet vehicles, cars and

plant and equipment. Lease terms are negotiated on an individual

basis and contain a wide range of different terms and conditions.

Lease terms are typically made for the following fixed periods:

• Land and property: up to 60 years

• Fleet vehicles, cars and plant and machinery: 2 to 7 years

Lease assets are recognised as a right-of-use asset, with a

corresponding liability also recognised at the date at which the

leased asset is available for use by the Group.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

177

2. Summary of material accounting policies continued

(I) Lease liabilities

Assets and liabilities arising from a lease are initially measured

on a present value basis. Lease liabilities for the Group include

the net present value of fixed lease payments due over the lease

term. The Group remeasures lease liabilities if there is a change

in the cash flows resulting in a change in index or rate used to

determine lease payments.

Lease payments are discounted using the interest rate implicit in

the lease if readily available. If that rate cannot be determined,

the lessee’s incremental borrowing rate is used, being the rate

that the lessee would have to pay to borrow the funds

necessary to obtain an asset of similar value in a similar

economic environment with similar terms and conditions.

Payments made in relation to lease interest charges are

presented within interest paid within cash flows from operating

activities in the Consolidated Statement of Cash Flows. Principal

lease repayments made are recognised within cash flows from

financing activities.

(II) Right-of-use assets

Right-of-use assets for the Group are measured at cost. This

is determined as the initial measurement of the lease liability

and the balance of any lease payments made at or before the

commencement date. Right-of-use assets are depreciated on

a straight-line basis over the shorter of the lease term and the

estimated useful life of the asset. The useful life of right of use

assets are as follows:

• Land and buildings: 8 to 14 years

• Plant, fleet and motor vehicles: 2 to 7 years

(III) Short-term leases and leases of low value assets

The Group applies the short-term lease recognition exemption

to its short-term leases of machinery and equipment (leases

that have a lease term of 12 months or less from the

commencement date and do not contain a purchase option). It

also applies the lease of low-value assets recognition exemption

to leases that are considered to be low-value. Low-value assets

comprise tools, IT equipment and small items of office

equipment. Payments associated with short-term leases and

leases of low-value assets are recognised on a straight-line

basis as an expense in the Consolidated Statement of Total

Comprehensive Income and presented within cash flows from

operating activities within the Consolidated Statement of

Cash Flows.

(K) Financial instruments

The Group determines the classification of financial assets and

financial liabilities at initial recognition.

The principal financial assets and liabilities of the Group are

as follows:

(I) Trade and other receivables (excluding prepayments)

Trade and other receivables are initially stated at fair value and

subsequently measured at amortised cost.

Trade receivables are amounts due from customers for goods

sold in the ordinary course of business. All trade receivables are

expected to be settled in one year or less.

Trade and other receivables are reported net of an allowance for

expected credit losses. Losses are calculated by reviewing

lifetime expected credit losses using historic and forward-

looking data on credit risk. Expected loss allowances are

recorded in a separate provision account with the loss being

recognised within administrative expenses in the Consolidated

Statement of Total Comprehensive Income. On confirmation

that the receivable will not be collectable, the gross carrying

value of the asset is written off against the associated provision.

(II) Trade and other payables (excluding statutory

non-financial liabilities)

Trade and other payables are initially stated at fair value and

subsequently measured at amortised cost using the effective

interest method.

(III) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and short-

term deposits. Short-term deposits are those deposits with a

maturity of three months or less, held for the purpose of meeting

short-term cash commitments, that are readily convertible to

a known amount of cash and subject to an insignificant risk

of changes in value.

(IV) Loans and borrowings

Loans and borrowings are initially recognised at fair value, net of

attributable transaction costs and are subsequently measured at

amortised cost using the effective interest rate method. Gains

and losses arising on the repurchase, settlement or otherwise

cancellation of liabilities are recognised respectively in finance

income and finance expense.

(V) Derivative financial instruments (excluding those

designated as cash flow hedges)

The Group uses derivative financial instruments, in particular

forward foreign exchange contracts and options, to manage

the financial risks arising from the business activities and the

financing of those activities. The Group does not use derivative

financial instruments for speculative purposes. Such derivative

financial instruments are initially recognised at fair value on the

date on which a derivative contract is entered into and are

subsequently remeasured at fair value. Derivatives are carried

as financial assets when the fair value is positive and as financial

liabilities when the fair value is negative.

The energy costs of the Group are closely managed to ensure

the impact of fluctuating energy costs is minimised. As such,

forward contractual commitments are in place for both gas

and electricity.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

178

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

2. Summary of material accounting policies continued

Under normal circumstances, the Group takes delivery of all

energy purchased under each contract, meeting the requirements

under IFRS 9 Financial Instruments of the own use exemption.

These are then accounted for as executory contracts through

the Consolidated Statement of Total Comprehensive Income

in line with consumption.

If, due to unforeseen circumstances, the Directors do not at

the balance sheet date expect to take delivery of all volumes

committed for future periods, thus necessitating excess volumes

to be sold back to the market, any open contracts for which

this applies are valued at their fair value with any gain or loss

recognised in the income statement for the period then ended.

(VI) Cash flow hedges

When a derivative financial instrument is designated as a hedge

of the variability in cash flows of a recognised asset or liability,

the effective portion of the gain or loss on the hedging

instrument is recognised in Other Comprehensive Income in

the cash flow hedge reserve, while any ineffective portion is

recognised immediately in the Consolidated Statement of

Total Comprehensive Income. The cash flow hedge reserve is

adjusted to the lower of the cumulative gain or loss on the

hedging instrument and the cumulative change in fair value of

the hedged item.

The amounts accumulated in Other Comprehensive Income are

accounted for, depending on the nature of the underlying

hedged transaction. If the hedged transaction subsequently

results in the recognition of a non-financial item, the amount

accumulated in equity is removed from the separate component

of equity and included in the initial cost or other carrying amount

of the hedged asset or liability. For any other cash flow hedges,

the amount accumulated in Other Comprehensive Income is

reclassified to profit or loss as a reclassification adjustment in

the same period or periods during which the hedged cash flows

affect profit or loss.

(L) Inventories

Inventories are stated at the lower of cost and net realisable

value. Net realisable value is based on estimated selling price

less any costs expected to be incurred in production and sale.

The Group applies an inventory provision for damaged,

obsolete, excess and slow-moving inventory.

Raw materials are measured at the weighted average cost.

This method perpetually applies a cost weighting to obtain an

average cost of purchased inventory and inventory on hand in

proportion to quantity.

Finished goods are measured at standard cost. Cost comprises

direct materials, direct labour and an appropriate proportion

of variable and fixed overhead expenditure, the latter being

allocated on the basis of normal operating capacity.

(M) Provisions

Provisions are recognised in the Consolidated Balance Sheet

when the Group has a present legal or constructive obligation

as a result of a past event, it is probable that an outflow of

economic benefits will be required to settle that obligation and

the amount can be reliably measured. If the effect is material

the provisions are determined by discounting the expected

future cash flows at a pre-tax rate that reflects current market

assessments of the time value of money and the risks specific

to the liability. The change in provisions due to passage of time

is recognised as a net finance expense.

Provisions for rebates are included within accrued liabilities and

other payables.

Provisions are not made for future operating losses.

Provisions for restructuring cots, product liability, legal claims

and carbon emissions obligations are all made based on the

best estimate of the likely committed cash outflow, using

relevant information available at the reporting date. Management

engages third- party valuation experts, as appropriate, when

material and complex estimates are required.

(N) Share capital

Ordinary shares are classified as equity. Incremental costs

directly attributable to the issue of new shares are shown in

share premium as a deduction from the proceeds.

(O) Net finance expense

Finance expense

Finance expense comprises interest payable on borrowings

from external and related parties, direct issue costs, interest

paid on lease liabilities and unwinding of discount on long-term

provisions. Finance expense is recognised in the Consolidated

Statement of Total Comprehensive Income as it accrues using

the effective interest method.

Finance income

Finance income comprises interest receivable on funds invested.

(P) Current and deferred income tax

Income tax for the periods presented comprises current and

deferred tax. Tax is recognised in the Consolidated Statement

of Total Comprehensive Income, unless it relates to items

recognised directly in equity.

The current income tax charge is the expected tax payable

on the taxable income for the year, using tax rates enacted

or substantively enacted at the balance sheet date, and any

adjustment to tax payable in respect of previous years.

Deferred income tax is recognised on temporary differences

arising between the tax bases of assets and liabilities and their

carrying amounts in the Consolidated Financial Statements.

Deferred income tax assets are recognised only to the extent

that it is probable that future taxable profit will be available

against which the temporary differences can be utilised.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

179

2. Summary of material accounting policies continued

(Q) Employee benefits

The Group operates a defined contribution pension plan under

which the Group pays fixed contributions. The Group has

no further payment obligations once the contributions have

been paid. The contributions are recognised as an employee

benefit expense.

(R) Share-based payments

The Group operates a number of equity-settled share-based

compensation plans. The fair value of the employee services

received in exchange for the grant of shares or options is

recognised as an expense over the vesting period. The total

amount to be expensed over the vesting period is determined

by reference to the fair value of shares or options granted.

At each balance sheet date the Group revises its estimates

of the number of shares or options that are expected to vest

and recognises the impact of the revision on original estimates,

if any, in the Consolidated Statement of Total Comprehensive

Income, with a corresponding adjustment to equity.

(S) Own shares held by employee benefit trust

The Group has established two separate employee benefit

trusts for the purposes of satisfying awards under the Group’s

share-based incentive schemes. Shares in the Group acquired

by the Trusts are deducted from equity until shares are

cancelled, reissued or disposed.

(T) Accounting for carbon credits

The Group’s factories operate under the UK (Emission Trading

Scheme) carbon pricing system. Purchased carbon credits are

recorded at cost within intangible assets. A liability is recognised

based on the level of emissions recorded in the relevant

compliance period. Up to the level of allowances held, the

liability is measured at the cost of purchase. Where the liability

to surrender carbon credits exceeds the carbon allowances

held, the provision is recognised for the shortfall measured at

the prevailing market price and remeasured at the reporting

date. Subsequent movements in the provision are recognised

in the Statement of Total Comprehensive Income.

Due to the nature of carbon credits purchases being to satisfy

obligations incurred through the Group’s operations, the

purchase and settlement of carbon credits are included in cash

flows from operating activities within the Consolidated

Statement of Cash Flows.

(U) Alternative performance measures

In order to provide the most transparent understanding of the

Group’s performance, the Group uses alternative performance

measures (APMs) which are not defined or specified under IFRS

and may not be comparable with similarly titled measures used

by other companies. The Group believes that its APMs provide

additional helpful information on how the trading performance of

the business is reported and internally assessed by

management and the Board.

(I) Profit related APMs

Management and the Board use several profit related APMs in

assessing Group performance and profitability. Those being

adjusted EBITDA, adjusted EBITDA margin, adjusted operating

profit (EBIT), adjusted profit before tax, adjusted earnings per

share and adjusted operating cash flow. These are considered

before the impact of exceptional and adjusting items as outlined

below.

Exceptional items

The Group presents as exceptional items on the face of the

Consolidated Statement of Total Comprehensive Income,

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.

In the current year, management considers restructuring costs

incurred as a result of market decline to meet this definition.

Exceptional items are further detailed in note 8.

Adjusting items

Adjusting items are disclosed separately in the Annual Report

and Accounts where management believes it is necessary to

show an alternative measure of performance in presenting the

financial results of the Group. The term adjusted is not defined

under IFRS and may not be comparable with similarly titled

measures used by other companies. In the current year,

management has presented the below as adjusting items:

• the realised loss recognised within the Statement of Total

Comprehensive Income for the sale of excess energy volumes

in 2023, where committed volume exceeded actual

consumption by the Group £(0.8)m; and

• the fair value of forward energy contracts held where

committed future volume is expected by management, as at

31 December 2023, to exceed total consumption by the

Group. For these future contracts, the Group can no longer

apply the own use exemption under IFRS 9 and instead

recognise these as derivatives held at fair value on the

balance sheet at 31 December 2023. The fair value gain of

£0.8m, recognised in the Statement of Total Comprehensive

Income, has been presented as an adjusting item for the year

ended 31 December 2023. Further details around future

forward energy contracts classified as derivative financial

instruments can be found in note 22.

For reporting purposes, ‘adjusted results’ are those presented

before both adjusting and exceptional items. A full reconciliation

through to statutory results is shown as follows.

Although both EBITDA and adjusted EBITDA are APMs, EBITDA

presented as below under the statutory heading is calculated

with reference to statutory results without adjustment.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

180

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

2. Summary of material accounting policies continued

Group: Revenue, EBITDA, EBITDA margin, operating profit, profit before tax

	Adjusted	Exceptional items	Adjusting items	Adjusting items	Statutory
	£m	£m	£m	£m	£m
			Realised loss on	Fair value of
		Restructuring and	sale of surplus	energy contract
2023		impairment costs	energy	derivatives
Revenue	346.4	–	–	–	346.4
EBITDA	58.1	(14.0)	(0.8)	0.8	44.1
EBITDA margin %	16.8 %	–	–	–	12.7 %
Operating profit (EBIT)	38.1	(14.0)	(0.8)	0.8	24.1
Profit before tax	31.1	(14.0)	(0.8)	0.8	17.1

	Adjusted	Exceptional items	Statutory
	£m	£m	£m
		Sale of disused
2022		land
Revenue	455.5	–	455.5
EBITDA	89.2	2.3	91.5
EBITDA margin %	19.6 %	–	20.1 %
Operating profit (EBIT)	72.7	2.3	75.0
Profit before tax	70.6	2.3	72.9

Segmental: Revenue, EBITDA, EBITDA margin

Bricks and Blocks

	Adjusted	Exceptional items	Adjusting items	Adjusting items	Statutory
	£m	£m	£m	£m	£m
			Realised loss on	Fair value of
		Restructuring and	sale of surplus	energy contract
2023		impairment costs	energy	derivatives
Revenue	277.4	–	–	–	277.4
EBITDA	52.1	(13.7)	(0.8)	0.8	38.4
EBITDA margin %	18.8 %	–	–	–	13.8 %

		Restated
	Adjusted	Exceptional items	Statutory
	£m	£m	£m
		Sale of disused
2022		land
Revenue	376.1	–	376.1
EBITDA	85.6	2.3	87.9
EBITDA margin %	22.8 %	–	23.4 %

1. Restated to report Red Bank results within the Bricks and Blocks segment as a result of internal restructure. Further details on page 40.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

181

2. Summary of material accounting policies continued

Bespoke Products

	Adjusted	Exceptional items	Adjusting items	Adjusting Items	Statutory
	£m	£m	£m	£m	£m
			Realised loss on	Fair value of
		Restructuring and	sale of surplus	energy contract
2023		impairment costs	energy	derivatives
Revenue	72.7	–	–	–	72.7
EBITDA	6.0	(0.3)	–	–	5.7
EBITDA margin %	8.3%	–	–	–	7.8%

The Bespoke Products segment did not contain exceptional or adjusting items in 2022.

Reconciliation of adjusted operating cash flow to statutory operating cash flow:

			Before
		Adjusting	exceptional	Exceptional
	Adjusted	items	items	items	Statutory
	£m	£m	£m	£m	£m
EBITDA	58.1	–	58.1	(14.0)	44.1
Impairment of property, plant and equipment	–	–	–	5.0	5.0
Purchase and settlement of carbon credits	3.1	–	3.1	–	3.1
Other cash flow items 1	(4.1)	(0.8)	(4.9)	3.9	(1.0)
Changes in working capital:
– Inventories	(52.8)	–	(52.8)	–	(52.8)
– Trade and other receivables	13.3	–	13.3	–	13.3
– Trade and other payables	(22.9)	–	(22.9)	–	(22.9)
Operating cash flow	(5.3)	(0.8)	(6.1)	(5.1)	(11.2)

1. For reconciliation purposes, ‘Other cash flow items’ is reported as the sum of: loss/(profit) on disposal of property, plant and equipment and leases,

movement on provisions, share-based payments and other cash items as are detailed within note 20.

(II) Other APMs

Net debt before leases: Net debt before leases is presented as

the total of cash and cash equivalents and borrowings, inclusive

of capitalised financing costs and excluding lease liabilities

reported at the balance sheet date. This calculation is included

as a KPI in the Group’s Annual Report and Accounts.

Operating cash conversion: Operating cash conversion is

calculated as operating cash flow before exceptional items,

less capital expenditure (excluding spend on strategic projects),

divided by adjusted operating profit. This calculation is included

as a KPI in the Group’s Annual Report and Accounts.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

182

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

3. Significant accounting estimates and judgements

The preparation of the Consolidated Financial Statements under

IFRS requires management to make judgements, estimates and

assumptions that affect the application of policies and reported

amounts of assets and liabilities, income and expenses. The

estimates and associated assumptions are based on historical

experience and other factors that are believed to be reasonable

under the circumstances, the results of which form the basis of

making the judgements about carrying values of assets and

liabilities that are not readily apparent from other sources. Actual

results may differ from these estimates.

(A) Accounting estimates

(I) Provisions

Provisions for restoration and decommissioning obligations are

made based on the best estimate of the likely committed cash

outflow. Management seeks specialist input from third-party

experts to estimate the cost to perform necessary remediation

work at the reporting date. These experts undertake site visits

in years where scoping identifies there is a change in operations

in the year which could suggest a change in these estimates,

or at sites that have not been visited recently. Desktop reviews

are undertaken to inform the estimates for other sites. If the cost

estimates increased by 10% the value of provisions would

change by c.£1.2m (2022: c.£1.2m). The useful lives of

quarrying sites are based on the estimated mineral reserve

remaining and manufacturing facilities linked to the useful life

of site property, plant and equipment. Changes to these useful

lives do not have a significant impact on the provision.

The estimation of inflation and discount rates is also considered

to be judgemental and can have a significant impact on net

present value. Management reference information from the

Bank of England when making such estimates. If the inflation

or discount rate were changed and the spread between them

increased by 1% the value of provisions would increase and

decrease respectively by c.£2.2m (2022: c.£2.5m).

(B) Accounting judgements

(I) Inventory valuation and provisioning

Inventory carrying value is stated after recognising inventory

provisions. The accounting for potential inventory obsolescence

is assessed using past sales data, with manual adjustments for

new products to calculate provisions for slow moving inventory.

This requires a degree of commercial judgement when

determining saleability and price of certain finished goods.

(II) Exceptional and adjusting items

As referenced in note 2, the Group has disclosed certain

exceptional and adjusting items within the Annual Report and

Accounts. In determining whether something is classified as

exceptional or adjusting, management make reference to

nature, size and expected infrequency, with the decision to

include or exclude being a matter of judgement.

4. Segmental reporting

Management has determined the operating segments based on

the management reports reviewed by the Executive Committee

that are used to assess both performance and strategic

decisions. Management has identified that the Executive

Committee is the chief operating decision maker in accordance

with the requirements of IFRS 8 ‘Operating segments’.

The Executive Committee considers the business to be split into

three operating segments: Bricks, Blocks and Bespoke

Products.

The principal activity of the operating segments are:

• Bricks: Manufacture and sale of bricks to the construction

sector;

• Blocks: Manufacture and sale of concrete blocks and

permeable block paving to the construction sector; and

• Bespoke Products: Manufacture and sale of bespoke

products to the construction sector.

Segmental revenue and results

The Executive Committee considers that for reporting purposes,

the operating segments above can be aggregated into two

reporting segments: Bricks and Blocks and Bespoke Products.

The aggregation of Bricks and Blocks is due to these operating

segments having similar long-term average margins, production

processes, suppliers, customers and distribution methods.

In 2023 the Red Bank business was reclassified from the

Bespoke Products segment to the Brick and Block segment

after an internal restructure that combined the Cradley Special

Brick and Red Bank operations. The segmental revenue and

results, assets and other information that follows have been

restated to reflect this change comparatively across periods.

The Bespoke Products range includes precast concrete

(marketed under the ‘Bison Precast’ brand), chimney and

roofing solutions, each of which are typically made-to-measure

or customised to meet the customer’s specific needs. The

precast concrete products are complemented by the Group’s

full design and nationwide installation services.

Costs which are incurred on behalf of both segments are held

at the centre and these, together with general administrative

expenses, are allocated to the segments for reporting purposes

using a split of 80% Bricks and Blocks and 20% Bespoke

Products. Management considers that this is an appropriate

basis for the allocation.

The revenue recognised in the Consolidated Statement of

Total Comprehensive Income is all attributable to the principal

activity of the manufacture and sale of bricks, both dense and

lightweight blocks, precast concrete, concrete paving and other

complementary building products.

Substantially all revenue recognised in the Consolidated

Statement of Total Comprehensive Income arose within the UK.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

183

4. Segmental reporting continued

Segmental revenue and results
						Restated
			2023			2022
		Bricks and	Bespoke		Bricks and	Bespoke
		Blocks	Products	Total	Blocks	Products	Total
	Note	£m	£m	£m	£m	£m	£m
Segment revenue		277.4	72.7	350.1	376.1	84.2	460.3
Inter-segment eliminations				(3.7)			(4.8)
Revenue				346.4			455.5
EBITDA before exceptional items		52.1	6.0	58.1	85.6	3.6	89.2
Depreciation and amortisation	13, 14, 24	(18.6)	(1.4)	(20.0)	(15.1)	(1.4)	(16.5)
Operating profit before exceptional items		33.5	4.6	38.1	70.5	2.2	72.7
Exceptional items	8	(13.7)	(0.3)	(14.0)	2.3	—	2.3
Operating profit		19.8	4.3	24.1	72.8	2.2	75.0
Finance expense	9			(7.0)			(2.1)
Profit before tax				17.1			72.9

1. Restated to report Red Bank results within the Bricks and Blocks segment as a result of internal restructure. Further details on page 40.

Segmental assets

						Restated
			2023			2022
		Bricks and	Bespoke		Bricks and	Bespoke
		Blocks	Products	Total	Blocks	Products	Total
	Note	£m	£m	£m	£m	£m	£m
Intangible assets	13	16.8	2.4	19.2	21.7	1.9	23.6
Property, plant and equipment	14	240.8	8.9	249.7	224.7	9.0	233.7
Right-of-use assets	24	22.9	1.2	24.1	17.6	0.5	18.1
Inventories	15	92.1	3.7	95.8	37.6	5.4	43.0
Segment assets		372.6	16.2	388.8	301.6	16.8	318.4
Unallocated assets				55.9			79.2
Total assets				444.7			397.6

1. Restated to report Red Bank results within the Bricks and Blocks segment as a result of internal restructure. Further details on page 40.

Property, plant and equipment, intangible assets, right-of-use assets and inventories are allocated to segments and considered

when appraising segment performance. Trade and other receivables, income tax assets, cash and cash equivalents and derivative

assets are centrally controlled and unallocated.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

184

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

4. Segmental reporting continued

Other segment information

						Restated
			2023			2022
		Bricks and	Bespoke		Bricks and	Bespoke
		Blocks	Products	Total	Blocks	Products	Total
	Note	£m	£m	£m	£m	£m	£m
Intangible asset additions	13	5.3	0.8	6.1	11.4	1.1	12.5
Property, plant and equipment additions	14	32.6	0.9	33.5	40.3	1.1	41.4
Right-of-use asset additions	24	11.2	1.1	12.3	6.6	0.2	6.8

1. Restated to report Red Bank results within the Bricks and Blocks segment as a result of internal restructure. Further details on page 40.

Customers representing 10% or greater of revenues

					Restated
		2023			2022
	Bricks and	Bespoke		Bricks and	Bespoke
	Blocks	Products	Total	Blocks	Products	Total
	£m	£m	£m	£m	£m	£m
Customer A	40.1	0.2	40.3	50.0	1.5	51.5
Customer B	–	–	–	43.8	1.0	44.8

1. Restated to report Red Bank results within the Bricks and Blocks segment as a result of internal restructure. Further details on page 40.

5. Operating profit

Profit from operations is stated after charging

		2023	2022
	Note	£m	£m
Depreciation and amortisation	13, 14, 24	20.0	16.5
Lease expense	24	3.7	3.6
Impairment of property, plant and equipment	14	5.0	–
Share-based payments	27	0.9	3.4

Depreciation and amortisation in the current year includes depreciation on right-of-use assets recognised through IFRS 16. Lease

expenses relate to short-term leases and leases of low-value assets outside of the scope of IFRS 16, as detailed within note 24.

Auditor’s remuneration

	2023	2022
	£m	£m
Audit and non-audit services:
Fees payable for the audit of the Company and Consolidated Financial Statements	0.1	0.1
Fees payable for the audit of the subsidiary Financial Statements	0.4	0.3
	0.5	0.4

Non-audit services in the year totalled £0.1m (2022: £0.1m).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

185

6. Other operating income

		2023	2022
	Note	£m	£m
(Loss)/profit on sale of property, plant and equipment		(0.2)	0.4
Exceptional profit on sale of disused land	8	–	2.3
Other income		0.7	1.0
		0.5	3.7

The other income balance contains amounts relating to rental income, revenue from waste contracts and foreign exchange gains/

losses incurred on operating expenses.

7. Employee costs

Employment costs for the Group during the year

		2023	2022
	Note	£m	£m
Wages and salaries		89.4	94.3
Pension costs		7.0	6.9
Social security costs		8.9	9.0
Share-based payments	27	0.9	3.4
		106.2	113.6

The total share-based payment charge in the year includes a release of national insurance accruals of £0.3m (2022: charge of £0.4m).

Average number of employees

	2023	2022
	Number	Number
Administration	190	202
Production and distribution	1,597	1,667
	1,787	1,869

Pension costs

Throughout the period under review the Group provided pension benefits to employees through defined contribution schemes and

by way of a retirement allowance to some members of senior management.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

186

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

8. Exceptional items

		2023	2022
	Note	£m	£m
Sale of disused land		–	2.3
Restructuring costs		(9.0)	–
Impairment of plant and equipment	14	(5.0)	–
		(14.0)	2.3

2023 exceptional items

Exceptional items in 2023 relate to costs associated with the restructuring of our operations. Restructuring activities were

undertaken to reduce output in response to the decline in demand for our products. Cash restructuring costs totalled £9.0m,

of which £8.8m related to redundancies and terminations made across the Group. In addition to this, non-cash impairment losses

of £5.0m have been recognised in respect of the carrying value of plant and equipment at the Howley Park and Claughton brick

factories which were mothballed in the year. Further details of these impairments can be read in note 14.

2022 exceptional items

In March 2022 the Group completed the sale of an area of disused land for total proceeds of £2.5m. Taking into account asset net

book values and associated costs of sale, profit on disposal totalled £2.3m.

Presentation of exceptional items

					Other
		Cost of	Distribution	Administrative	operating
		sales	costs	expenses	income	Total
	Note	£m	£m	£m	£m	£m
2023
Restructuring costs		(7.0)	(1.6)	(0.4)	–	(9.0)
Impairment of plant and equipment	14	(5.0)	–	–	–	(5.0)
		(12.0)	(1.6)	(0.4)	–	(14.0)
2022
Sale of disused land		–	–	–	2.3	2.3

Tax on exceptional items

The restructuring costs incurred in the year including redundancies, legal costs and onerous leases were tax deductible. The asset

impairment of plant and machinery is not deductible against corporation tax however it reduces the deferred tax liability on qualifying

plant and machinery.

9. Finance expense

	2023	2022
	£m	£m
Interest payable on loans and borrowings	5.7	1.6
Interest payable on lease liabilities	0.7	0.4
Other finance expense	–	0.1
Amortisation of capitalised financing costs	0.6	–
	7.0	2.1

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

187

10. Taxation

		2023	2022
	Note	£m	£m
Current tax
UK corporation tax on profit for the year		3.5	12.3
Prior year adjustment on UK corporation tax		(0.7)	0.5
Total current tax		2.8	12.8
Deferred tax
Origination and reversal of temporary differences	25	0.9	1.3
Effect of change in tax rates	25	0.1	0.3
Effect of prior period adjustments	25	0.5	(0.3)
Total deferred tax		1.5	1.3
Income tax expense		4.3	14.1

	2023	2022
	£m	£m
Current tax
Profit before taxation	17.1	72.9
Expected tax charge	4.0	13.9
Expenses not deductible for tax purposes	0.4	(0.3)
Effect of prior period adjustments	(0.1)	0.2
Effect of change on deferred tax rate	–	0.3
Income tax expense	4.3	14.1

The expected tax charge is calculated using the statutory tax rate of 23.5% (2022: 19%) for current tax. Deferred tax is calculated at

the rate at which the provision is expected to reverse. The UK main rate of corporation tax increased to 25% on 1 April 2023. There

has been no change in the Finance Bill 2023.

11. Dividends

	2023	2022
	£m	£m
Amounts recognised as distributions to equity holders in the year
Interim dividend of 2.4p per share (2022: 4.6p)	4.9	9.6
Final dividend of 10.1p per share in respect of prior year (2022: 6.7p)	20.8	14.6
	25.7	24.2

The Directors are proposing a final dividend for 2023 of 2.0p per share, making a total payment for the year of 4.4p (2022: 14.7p).

This is subject to approval by the shareholders at the AGM and has not been included as a liability in the Consolidated

Financial Statements.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

188

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

12. Earnings per share

The calculation of earnings per Ordinary Share is based on profit or loss after tax and the weighted average number of Ordinary

Shares in issue during the year. Adjusted earnings per share is presented as an alternative performance measure to provide an

additional year-on-year comparison. A reconciliation between adjusted and statutory results is presented within note 2.

For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of

all dilutive potential Ordinary Shares. The Group has four types of dilutive potential Ordinary Shares: those share options granted

to employees under the Sharesave scheme; unvested shares granted under the Deferred Annual Bonus Plan; unvested shares

granted under the Share Incentive Plan; and unvested shares within the Performance Share Plan that have met the relevant

performance conditions at the end of the reporting period. If, for any of the above schemes, the average share price for the year

is greater than the option price, these shares become anti-dilutive and are excluded from the calculation.

		Adjusted		Statutory
		2023	2022	2023	2022
	Note	£m	£m	£m	£m
Operating profit for the year		38.1	72.7	24.1	75.0
Finance expense	9	(7.0)	(2.1)	(7.0)	(2.1)
Profit before taxation		31.1	70.6	17.1	72.9
Income tax expense	10	(7.6)	(13.6)	(4.3)	(14.1)
		23.5	57.0	12.8	58.8
Weighted average number of shares (millions)		206.6	216.2	206.6	216.2
Effect of share incentive awards and options (millions)		1.4	3.2	1.4	3.2
Diluted weighted average number of shares (millions)		208.0	219.4	208.0	219.4
Earnings per share		Pence	Pence	Pence	Pence
Basic earnings		11.4	26.4	6.2	27.2
Diluted earnings		11.3	26.0	6.2	26.8

Adjusted earnings per share is presented as an APM and is calculated by excluding both exceptional and adjusting items as

detailed within note 2 to these Consolidated Financial Statements. The associated adjusted tax charge is calculated using the rate

excluding these exceptional and adjusting items of 24.5% (2022: 19.3%).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

189

13. Intangible assets

			Carbon	Other
	Goodwill	Brand	credits	intangibles	Total
	£m	£m	£m	£m	£m
Cost
At 1 January 2023	405.7	11.1	12.0	24.2	453.0
Additions	–	–	5.2	0.9	6.1
Disposals	–	–	(8.3)	(0.5)	(8.8)
At 31 December 2023	405.7	11.1	8.9	24.6	450.3
Accumulated amortisation and impairment
At 1 January 2023	(405.7)	(4.7)	–	(19.0)	(429.4)
Charge for the year	–	–	–	(2.0)	(2.0)
Disposals	–	–	–	0.3	0.3
At 31 December 2023	(405.7)	(4.7)	–	(20.7)	(431.1)
Net book value
At 1 January 2023	–	6.4	12.0	5.2	23.6
At 31 December 2023	–	6.4	8.9	3.9	19.2

			Carbon	Other
	Goodwill	Brand	credits	intangibles	Total
	£m	£m	£m	£m	£m
Cost
At 1 January 2022	405.7	11.1	6.4	22.0	445.2
Additions	–	–	10.3	2.2	12.5
Disposals	–	–	(4.7)	–	(4.7)
At 31 December 2022	405.7	11.1	12.0	24.2	453.0
Accumulated amortisation and impairment
At 1 January 2022	(405.7)	(4.7)	–	(17.1)	(427.5)
Charge for the year	–	–	–	(1.9)	(1.9)
Disposals	–	–	–	–	–
At 31 December 2022	(405.7)	(4.7)	–	(19.0)	(429.4)
Net book value
At 1 January 2022	–	6.4	6.4	4.9	17.7
At 31 December 2022	–	6.4	12.0	5.2	23.6

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

190

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

13. Intangible assets continued

The brand category comprises the acquired Thermalite and Bison Precast brands, components of the Bricks and Blocks and

Bespoke Products reportable segments respectively.

The other intangibles category consists of purchases of clay rights, merchant relationships, order book, patent and software

development costs. These are attributable to both reportable segments. Additions in the period relate to the upgrading of Group

IT systems.

Carbon credits have been purchased to satisfy compliance obligations of the Group, and whilst there is no obligation to utilise this

within the next 12 months; a proportion of the year-end balance is expected to be surrendered within 2024. Due to the nature

of carbon credits being part of the Group’s operating activities, the purchased balance is included in cash flows from operating

activities within the Consolidated Statement of Cash Flows.

Included in software additions is £0.1m (2022: £0.5m) of own work capitalised.

Impairment of intangible assets

Goodwill and intangible assets with indefinite useful lives

The Group no longer holds any carrying value associated with goodwill. Other intangible assets with indefinite useful lives consist

of the Thermalite brand which is allocated to the Aircrete blocks CGUs within the Brick and Block reportable segment and the

Bison Precast brand which is allocated to the Bespoke Products segment. These are subject to annual impairment tests. The

Group estimates recoverable amount using a value in use model by projecting pre-tax cash flows over the estimated useful life.

The key assumptions underpinning recoverable amounts are forecast revenue, EBITDA margin, capital expenditure and the

discount rate. The forecast revenues and EBITDA in the models are based on management’s past experience and future

expectations of performance. Maintenance capex is based on planned levels in the short-term and recent trends in the longer-term.

A pre-tax discount rate of 12.9% in 2023 (2022:12.8%) has been derived from a weighted average cost of capital (WACC)

calculation and benchmarked against similar organisations operating within the sector and used to discount cash flows. EBITDA

growth rates over the next five years vary by CGU between 0.2% and 8.1% and are based on management’s past experience and

expectations of future market performance. These compare to growth rates at 31 December 2022 of between (7.1)% and 6.7%.

Terminal growth rate of 2.0% for 2023 (2022: 2.0%) is consistent across CGUs and reflect management’s past experience,

expectations of future market performance, longer-term industry forecasts and inflationary expectations.

The recoverable amounts in respect of indefinite life intangibles, as assessed by management using the above assumptions,

is greater than the carrying amount and therefore no impairment has been recognised in 2023 (2022: £nil).

The Group has considered the assumptions used within the scenario analysis exercise undertaken to better understand the

possible range of risks and opportunities our business could face under different future climate forecasts made in accordance with

the recommendations of the Taskforce on Climate-related Financial Disclosure. In doing so, the Group has concluded that there is

no material impact necessary for inclusion within modelling scenarios for impairment purposes. Given the profitability and short

payback period of the CGUs of the Group, no issues were identified that would impact the carrying values of either tangible or

intangible assets.

Should the costs associated with carbon emissions increase over time, this would be experienced across the industry and the

Group would therefore expect to be able to recover this through it’s pricing strategy where possible. Primary mitigation however,

remains the focus on reducing our emissions and delivering on the plan and targets outlined within the Sustainability Report within

this Annual Report and Accounts.

Whilst recognising the risks associated with the longer-term demand for our products, our commitment to innovation and

developing to meet the evolving needs of our customer base, paired with the acknowledged climate related opportunities that

the thermal properties of our products offer, leads the Group to the believe that the useful lives of it's brands are not currently

impacted by climate related risk.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

191

14. Property, plant and equipment

	Land and	Plant and
	buildings	machinery	Total
	£m	£m	£m
Cost
At 1 January 2023	184.1	277.1	461.2
Additions	7.1	26.4	33.5
Asset reclass 1	(10.7)	10.7	–
Disposals	–	(3.9)	(3.9)
Change in the value of decommissioning assets	(0.4)	–	(0.4)
At 31 December 2023	180.1	310.3	490.4
Accumulated depreciation and impairment
At 1 January 2023	(56.4)	(171.1)	(227.5)
Charge for the year	(2.8)	(9.2)	(12.0)
Asset impairment	–	(5.0)	(5.0)
Disposals	–	3.7	3.7
Change in the value of decommissioning assets	0.1	–	0.1
At 31 December 2023	(59.1)	(181.6)	(240.7)
Net book value
At 1 January 2023	127.7	106.0	233.7
At 31 December 2023	121.0	128.7	249.7

1. Asset reclasses in the period relate to reallocations of assets previously under construction across land and buildings and plant and machinery, following the

commissioning of the New Desford brick factory.

	Land and	Plant and
	buildings	machinery	Total
	£m	£m	£m
Cost
At 1 January 2022	173.3	255.5	428.8
Additions	11.1	30.3	41.4
Disposals	(0.8)	(8.7)	(9.5)
Change in the value of decommissioning assets	0.5	–	0.5
At 31 December 2022	184.1	277.1	461.2
Accumulated depreciation and impairment
At 1 January 2022	(55.0)	(172.4)	(227.4)
Charge for the year	(2.1)	(7.4)	(9.5)
Disposals	0.7	8.7	9.4
At 31 December 2022	(56.4)	(171.1)	(227.5)
Net book value
At 1 January 2022	118.3	83.1	201.4
At 31 December 2022	127.7	106.0	233.7

Land and buildings comprise sites used for administration, distribution, manufacturing and mineral extraction. Each asset is used to

generate operating cash flows and rates of depreciation reflect this use. Quarries and manufacturing facilities are classified under

land and buildings. Quarrying enables manufacturing and is not carried out for any other economic purpose. The two are therefore

not considered to be distinct.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

192

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

14. Property, plant and equipment continued

At 31 December 2023, capital commitments not yet incurred totalled £20.6m (2022: £34.3m).

Included within property, plant and equipment are assets under the course of construction of £36.3m (2022: £95.5m), comprising

of £5.5m (2022: £47.3m) for land and buildings and £30.8m (2022: £48.2m) for plant and machinery.

	Land and Buildings			Plant and machinery
	2023	2022	2023	2022
	£m	£m	£m	£m
Strategic:
New Desford brick factory	0.4	45.0	10.8	40.0
Wilnecote brick factory redevelopment	4.7	1.8	13.9	5.2
Accrington brick slip development	–	–	3.2	–
Maintenance:
Other assets	0.4	0.5	2.9	3.0
	5.5	47.3	30.8	48.2

Impairment of tangible assets

Any impairment of tangible assets is determined in line with Group accounting policies. In the current year, following restructuring

actions taken by the Group and the mothballing of both sites, plant and machinery associated with the Howley Park brick factory

CGU and the Claughton brick factory CGU, which both sit within the Bricks and Blocks reportable segment, has been impaired.

The plant and machinery at both sites has been fully written down as it is not expected to generate cash flows in the medium-term

or have a material and readily realisable market value. In total £0.9m was impaired at Howley Park and £4.1m at Claughton.

Following the decision to mothball the factories, the associated land and buildings are not being utilised in generating cash flows

and management have estimated, supported by management experts and through undertaking ‘Red Book’ assessments, fair value

less costs to sell for both sites. The fair value less costs to sell are estimated to be above the carrying values held at 31 December

2023 and the Group has therefore not recognised any impairment of land and buildings in the year. At 31 December 2023 the

property, plant and equipment of these mothballed factories held carrying values of £4.5m in relation to Howley Park and £0.5m

in relation to Claughton.

The Group has considered the assumptions used within the scenario analysis exercise undertaken to better understand the

possible range of risks and opportunities our business could face under different future climate forecasts made in accordance with

the recommendations of the Taskforce on Climate-related Financial Disclosure. In doing so, the Group has concluded that there

is no material impact necessary for inclusion within modelling scenarios for impairment purposes. Given the profitability and short

payback period of the CGUs of the Group, no issues were identified that would impact the carrying values of either tangible or

intangible assets.

15. Inventories

	2023	2022
	£m	£m
Raw materials	11.2	12.4
Work in progress	2.4	2.0
Finished goods	79.7	25.4
Other inventory	2.5	3.2
	95.8	43.0

Costs relating to raw materials and consumables included within cost of sales during the year were £70.3m (2022: £98.4m).

Employment expenses within cost of sales totalled £57.4m (2022: £73.4m).

The balance in other inventory mainly comprises packaging and consumables.

Write-downs of inventories recognised as an expense in the year were £1.4m (2022: £1.8m). Reversals of previous inventory

write-downs in the period were £1.5m (2022: £1.9m). Reversals of inventory write-downs are primarily due to changes in provision

estimates and judgements for obsolete or slow moving inventory. There is no significant difference between the replacement cost

of inventories and their carrying amounts.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

193

16. Trade and other receivables

	2023	2022
	£m	£m
Trade receivables	25.2	40.2
Other receivables	1.4	0.8
Prepayments	4.4	3.3
	31.0	44.3

The ageing profile of trade receivables is:

	2023	2022
	£m	£m
Trade receivables not yet due	19.7	29.7
1 to 30 days past due	4.0	8.1
31 to 60 days past due	0.8	1.3
61 to 90 days past due	0.3	0.4
Over 90 days past due	0.4	0.7
	25.2	40.2

Included within trade receivables are balances which are past due at the balance sheet date but have not been provided for.

These balances relate to customers who have no recent history of default and whose debts are considered to be recoverable.

Procedures are in place to ensure that customer creditworthiness is assessed and monitored sufficiently and that appropriate

credit limits are in place and enforced. Provisions for impairment are calculated by reviewing lifetime expected credit as further

detailed in note 22. An analysis of the provision movement in the current year is as follows:

	2023	2022
	£m	£m
At 1 January 2023	1.0	1.0
Statement of Total Comprehensive Income charge	(0.2)	–
Written off	(0.1)	–
At 31 December 2023	0.7	1.0

17. Cash and cash equivalents

	2023	2022
	£m	£m
Cash at bank and in hand	16.0	34.3

Cash at bank and in hand is held in Pounds Sterling and Euros. As at 31 December 2023, £1.3m was held in Euros (2022: £1.8m).

18. Trade and other payables

	2023	2022
	£m	£m
Trade payables	37.5	44.0
Payroll tax and other statutory liabilities	4.5	10.2
Accrued liabilities and other payables	24.3	35.4
	66.3	89.6

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

194

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

19. Loans and borrowings

	2023	2022
	£m	£m
Current loans and borrowings:
Interest	0.4	0.2
Non-current loans and borrowings:
Capitalised financing costs	(1.2)	–
Revolving credit facility	110.0	40.0
	109.2	40.2

In the prior period and until January 2023, the Group operated under a £170m revolving credit facility which was committed until

1 July 2025. The interest rate under this facility was calculated based on SONIA plus a margin with a credit spread adjustment.

In January 2023 the Group completed a refinancing of these existing banking facilities. The facility remains at £170m until

January

2027 with an extension option, subject to bank approval, extending the facility to June 2028. The interest rate is calculated using

SONIA plus a margin, with the margin grid ranging from 1.65% at a leverage of less than 0.5 times to 3.5% where leverage is

between 3.5 times and 4 times (in line with the covenant relaxations outlined below).

The facility is normally subject to covenant restrictions of net debt/EBITDA (as measured before leases) of less than three times and

interest cover of greater than four times. The Group also benefits from an uncommitted overdraft facility of £10m. The business has

traded comfortably within these covenants throughout 2023 and whilst the Group expects to remain within these covenants during

2024, amended covenants have been agreed with the Group’s lenders to provide additional headroom given the combination of the

Group’s reduced EBITDA, increased net debt driven by inventory build, capital outflows and higher interest rates. Accordingly, the

Group’s leverage covenant has increased to 4 times in June 2024 and 3.75 times in December 2024 with interest cover decreasing

to 3 times in December 2024. In addition, quarterly covenant testing has been introduced for the period of the covenant relaxation.

As such, in September 2024, leverage is set at four times and interest cover three times and in March 2025 leverage is set at 3.75

times and interest cover at three times. The covenants return to normal levels from June 2025 with testing reverting to half yearly.

The existing restriction prohibiting the declaration or payment of dividends should leverage exceed 3 times EBITDA has been

amended to 4 times EBITDA in 2024 before returning to 3 times in 2025.

In addition to the above, the loan facility is sustainability-linked and subject to a margin adjustment of 5 bps if the annual

sustainability targets are met. There has also been a change to the lenders with Santander being replaced by Sabadell and Virgin Money

(Clydesdale Bank plc).

Debt issue costs incurred in relation to the refinancing, being £1.8m in total, were capitalised at the date of refinancing and are

being amortised over the period of the facility.

The facility remains secured by fixed charges over the shares of Forterra Building Products Limited and Forterra Holdings Limited.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

195

20. Notes to the Consolidated Statement of Cash Flows

		2023	2022
	Note	£m	£m
Cash flows from operating activities
Profit before tax		17.1	72.9
Finance expense	9	7.0	2.1
Exceptional items	8	14.0	(2.3)
Operating profit before exceptional items		38.1	72.7
Adjustments for:
Depreciation and amortisation	13, 14, 24	20.0	16.5
Loss/(profit) on disposal of property, plant and equipment and leases		0.2	(0.4)
Movement in provisions		(3.7)	4.1
Purchase of carbon credits	13	(5.2)	(10.3)
Settlement of carbon credits	13	8.3	4.7
Share-based payments	27	0.9	3.4
Other non-cash items		(2.3)	(0.8)
Changes in working capital:
Inventories		(52.8)	(10.2)
Trade and other receivables		13.3	(5.2)
Trade and other payables		(22.9)	14.5
Cash (used in)/generated from operations before exceptional items		(6.1)	89.0
Cash flows relating to operating exceptional items	23	(5.1)	–
Cash (used in)/generated from operations		(11.2)	89.0

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

196

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

21. Net debt

		2023	2022
	Note	£m	£m
Cash and cash equivalents	17	16.0	34.3
Loans and borrowings	19	(109.2)	(40.2)
Lease liabilities	24	(24.2)	(18.0)
Net debt		(117.4)	(23.9)

Reconciliation of net cash flow to net debt

		2023	2022
	Note	£m	£m
Cash flow (used in) / generated from operations before exceptional items		(6.1)	89.0
Payments made in respect of exceptional items		(5.1)	–
Cash flow (used in) / generated from operations after exceptional items		(11.2)	89.0
Interest paid		(6.1)	(2.4)
Tax paid		(2.7)	(11.0)
Net cash outflow from investing activities		(33.8)	(41.2)
Dividends paid	11	(25.7)	(24.2)
Purchase of shares by Employee Benefit Trust		(2.1)	(12.2)
Proceeds from sale of shares by Employee Benefit Trust		1.1	0.4
New lease liabilities	24	(12.3)	(6.8)
Payments made to acquire own shares		–	(40.3)
Other financing movement		(0.7)	0.4
Increase in net debt		(93.5)	(48.3)
Net debt at the start of the period		(23.9)	24.4
Net debt at the end of the period		(117.4)	(23.9)

22. Financial instruments

		2023	2022
	Note	£m	£m
Financial assets
Cash and cash equivalents	17	16.0	34.3
Trade and other receivables (excluding prepayments)	16	26.6	41.0
Derivative financial assets		6.6	0.6
		49.2	75.9

		2023	2022
	Note	£m	£m
Financial liabilities
Trade and other payables (excluding non-financial liabilities)	18	61.8	79.4
Loans and borrowings	19	109.2	40.2
Lease liabilities	24	24.2	18.0
Derivative financial liabilities		5.8	–
		201.0	137.6

Cash and cash equivalents, trade and other receivables, trade and other payables and derivative financial instruments as referenced

above are derived directly from operations. Loans and borrowings and lease liabilities are arranged periodically to finance operating

and investing activities.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

197

22. Financial instruments continued

All financial assets and liabilities are held at amortised cost, with the exception of derivatives which are held at fair value.

Capital management

The Group manages capital (being loans and borrowings, cash and cash equivalents and equity) to ensure a sufficiently strong

capital base to support the Group remaining a going concern, maintain investor and creditor confidence, provide a basis for future

development of the business and maximise the return to stakeholders.

The Group manages its loans and borrowings to ensure continuity of funding. A key objective is to ensure compliance with the

covenants set out in the Group’s bank facility agreements.

In managing capital, the Group may purchase its own shares on the open market. These purchases meet the Group’s obligation

to employees under the Group’s share-based payment schemes.

There has been no change in the objectives, policies or processes with regard to capital management during the years ended

31 December 2022 and 31 December 2023.

Financial risk management

The Group’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk. The Group uses

derivative financial instruments to periodically manage risks if it is judged to be prudent. The risk management framework governing

the management of these and all other business risks is set by the Board.

Foreign exchange risk

The functional and presentational currency of the Group is pounds sterling, although some transactions are executed in euros

and US dollars. The transactional amounts realised or settled are therefore subject to the effect of movements in these currencies

against pounds sterling. Foreign currency exposure is centrally managed by the Group’s Treasury function using forward foreign

exchange contracts and currency options.

Principal rate of exchange: euro/sterling

	2023	2022
	£m	£m
Period end	1.15	1.16
Average	1.15	1.18

Cash flow hedges

The Group enters into forward currency contracts which are designated as cash flow hedges. These are entered into to mitigate

the Group’s exposure to fluctuations in foreign currency exchange rates in relation to committed spend on property, plant and

equipment. The Group has established a 1:1 hedge ratio for these hedging relationships, as the underlying risk of the forward

currency contract is identical to the risk for the plant and equipment hedged.

The Group has entered into foreign forward contracts over purchases of equipment for the redevelopment of its Wilnecote facility,

the payments for which are denominated in euro. At 31 December 2023, a total of €10.8m remained undrawn under forward

contracts. The contracts have staggered maturity dates over the next two months. There has been no change in the expected

value or timing of future purchases of plant and equipment such that the Group has recognised any hedge as ineffective in the year.

Similarly, the Group has also entered into a foreign forward contracts over purchases of equipment for its Accrington facility, the

payments for which are denominated in euro. At 31 December 2023, a total of €6.7m remained undrawn under these forward

contracts. The contracts have staggered maturity dates over the next six months. There has been no change in the expected value

or timing of future purchases of plant and equipment such that the Group has recognised any hedge as ineffective in the year.

The Group classifies its forward foreign exchange contracts as cash flow hedges and states them at fair value. The fair value

of the cash flow hedges in place at 31 December 2023 is a liability of less than £0.1m (2022: asset of £0.6m), which is adjusted

against the cash flow hedge reserve. During the year, a loss of £0.7m (2022: income of £0.8m) has been recognised in Other

Comprehensive Income.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

198

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

22. Financial instruments continued

Interest risk

The Group has secured its borrowings from a group of leading banks under a revolving credit facility. These facilities allow the

Group to meet short, medium and long-term financing requirements at a margin over SONIA. The Group manages interest risk

on an ongoing basis and reviews options available to hedge part of the variable rate risk.

A sensitivity analysis has been performed based on the exposure to interest rates at the balance sheet date. Based on the average

borrowings drawn down in 2023, a 1.0% increase or decrease in interest rates, with all other variables held constant, will increase

or decrease profit before taxation by £0.8m (2022: £0.2m) for the year ended 31 December 2023.

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.

Credit risk arises on cash balances (including bank deposits and cash and cash equivalents) and credit exposure to customers

through trade and other receivables. A financial asset is in default when the counterparty fails to pay its contractual obligations.

Financial assets are impaired when there is no reasonable expectation of recovery.

To dilute and mitigate the financial credit risk associated with cash balances, the Group deposits cash and cash equivalents with

multiple highly-rated counterparties.

Credit risk associated with trade receivables results from normal commercial operations. Procedures are in place to ensure that

customer creditworthiness is assessed and monitored sufficiently and that appropriate credit limits are in place and enforced.

Trade and other receivables are stated net of management estimated expected credit losses.

With respect to trade and other receivables, an impairment analysis is performed at each reporting date using a provision matrix to

measure expected credit losses. The calculation reflects the probability-weighted outcome, the time value of money and reasonable

and supportable information that is available at the reporting date about past events, current conditions and forecasts of future

economic conditions. Impairments of trade receivables in the period were less than £0.1m (2022: less than £0.1m).

Commodity price risk

Forward purchased energy contracts

The substantial energy requirements of the Group are closely managed to ensure that the impact of fluctuating energy costs can be

removed as far as possible; allowing management to have some certainty over likely energy costs and providing a reasonable basis

to budget. Contracts with energy suppliers are entered into which fix prices, by month, for volumes the Group expects to use.

Under normal circumstances, the Group takes delivery of and consumes all the gas and electricity under each contract, and in

doing so satisfies the requirements under IFRS 9 to follow the own use exemption in accounting for these. As such, the costs

associated with the purchase of gas and electricity are accounted for in the Statement of Total Comprehensive Income at the point

of consumption, and contracts are not held at fair value on the balance sheet.

Due to the decline in market conditions during 2023, and resulting reductions made to production across the Group, there are

open contracts where the purchased volume of gas will exceed budgeted total consumption for the Group. In these instances,

the quantities which have been ‘over purchased’ will be sold back to the market, crystallising a realised gain or loss at this point.

Any open contracts where this is expected to be the case at 31 December 2023 fail the own use exemption, and in accordance

with IFRS 9, are accounted for as derivative assets and liabilities at the balance sheet date. As at 31 December 2023, the Group

recognised a current liability of £5.8m, a current asset of £1.6m and a non-current asset of £5.0m in relation to these contracts.

These values are calculated with reference to total forward purchased contracts, and reflect not only the portion of such contracts

expected to be sold make to the market, but also the fair value of the remaining quantity, which is expected to be consumed by the

Group in the normal course of business. As such, the fair value of these derivatives have been presented by the Group as adjusting

items. The term adjusted is not defined under IFRS and may not be comparable with similarly titled measures used by other companies.

The Group has no plans to intentionally purchase gas or electricity to sell and these current circumstances are solely the direct

result of market conditions.

Liquidity risk

The Group’s borrowing facilities are available to ensure that there is sufficient liquidity to exceed maximum forecast cash flow

requirements in all reasonably possible circumstances. The Group monitors cash flow on a weekly basis to ensure that headroom

exists within current agreed facilities and updates the Executive Committee on liquidity and the sources of cash flow performance

and forecasts.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

199

22. Financial instruments continued

The maturity profile of contractual undiscounted cash outflows, including expected interest payments, which are payable under

financial liabilities at the balance sheet date is set out below:

						Greater
	Less than	One to	Two to	Three to	Four to	than five
	one year	two years	three years	four years	five years	years	Total
2023	£m	£m	£m	£m	£m	£m	£m
Trade and other payables (excluding non-financial liabilities)	61.8	–	–	–	–	–	61.8
Loans and borrowings	8.7	57.4	61.9	1.0	–	–	129.0
Lease liabilities	6.6	5.8	5.6	4.9	2.3	1.3	26.5
Derivative liabilities	5.8	–	–	–	–	–	5.8
	82.9	63.2	67.5	5.9	2.3	1.3	223.1

						Greater
	Less than	One to	Two to	Three to	Four to	than five
	one year	two years	three years	four years	five years	years	Total
2022	£m	£m	£m	£m	£m	£m	£m
Trade and other payables (excluding non-financial liabilities)	79.4	–	–	–	–	–	79.4
Loans and borrowings	41.3	1.1	1.1	1.1	1.1	–	45.7
Lease liabilities	5.1	3.9	3.1	2.9	2.5	1.7	19.2
	125.8	5.0	4.2	4.0	3.6	1.7	144.3

There is no material difference between the carrying value and fair value of the Group’s financial assets and liabilities.

A reconciliation of liabilities arising from financing activities has been detailed below:

		At				At
		1 January		Interest		31 December
		2023	Cash flow	charge	New leases	2023
2023	Note	£m	£m	£m	£m	£m
Loans and borrowings	19	40.2	62.7	6.3	–	109.2
Lease liabilities	24	18.0	(6.8)	0.7	12.3	24.2

		At				At
		1 January		Interest		31 December
		2022	Cash flow	charge	New leases	2022
2022	Note	£m	£m	£m	£m	£m
Loans and borrowings	19	0.6	38.0	1.6	–	40.2
Lease liabilities	24	16.5	(5.7)	0.4	6.8	18.0

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

200

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

23. Provisions for other liabilities and charges

	Restoration and	Other	Carbon	Restructuring
	decommissioning	provisions	credits	costs	Total
	£m	£m	£m	£m	£m
At 1 January 2023	12.0	1.7	10.6	–	24.3
Charged/(credited) to the Consolidated Statement of Total Comprehensive Income:
– Additional provision	0.8	0.4	7.0	9.0	17.2
– Release of provision	(1.3)	(0.2)	–	–	(1.5)
– Utilised amounts	(0.1)	(0.4)	(9.4)	(5.1)	(15.0)
– Unwind of discount	0.1	–	–	–	0.1
At 31 December 2023	11.5	1.5	8.2	3.9	25.1

Analysed as:

	2023	2022
	£m	£m
Current	15.7	14.3
Non-current	9.4	10.0
	25.1	24.3

The other provisions balance is made up of provisions for lease dilapidations and product liability provisions.

Non-current provisions are discounted at a rate of 3.3% (2022: 2.8%).

The unwind of discount in the period is shown as a finance expense. Restructuring costs have been presented as exceptional items

as detailed within note 8.

Restoration and decommissioning

The Group is required to restore quarrying sites to a state agreed with the planning authorities after extraction of raw materials

ceases, and to decommission manufacturing facilities that have been constructed. Provisions for restoration and decommissioning

obligations are made based on the best estimate of the likely committed cash outflow. Management seeks specialist input from

third-party experts to estimate the cost to perform any necessary remediation work at the reporting date. These experts undertake

site visits during the year, either where scoping identifies there is a change in operations which could change estimates, or to sites

that have not been visited recently. Desktop reviews are undertaken to inform the estimates for remaining sites.

The useful lives of quarrying sites are based on the estimated mineral reserve remaining and manufacturing facilities linked to the

useful life of site property, plant and equipment. Estimates of appropriate inflation and discount rates can also be judgemental,

and can have a significant impact on net present value. Management reference information from the Bank of England when making

such estimates. These provisions are discounted by applying a discount rate that reflects the passage of time. Estimates are revised

annually and in the case of decommissioning provisions, are adjusted against the asset to which the provision relates, which is then

subject to an impairment assessment. Future costs are expected to be incurred over the useful life of the sites, which is a period of

up to 51 years.

The following table shows the timeline in which undiscounted costs in relation to the restoration and decommissioning provision are

expected to become current:

		1 to 20	21 to 40	40 years
	Current	years	years	plus	Total
	£m	£m	£m	£m	£m
Restoration and decommissioning	2.1	2.2	7.0	0.2	11.5

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

201

24. Leases

The Group leases various premises, land, fleet vehicles, cars and plant and equipment. Lease terms are negotiated on an individual

basis, and terms and conditions can vary.

In addition, the Group also leases machinery on a short-term basis (less than 12 months) and office equipment of low financial value.

These leases are recognised on a straight-line basis as an expense in the Consolidated Statement of Total Comprehensive Income.

Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year:

	Land and	Plant and
	buildings	machinery	Total
	£m	£m	£m
At 1 January 2022	2.4	14.1	16.5
Additions	–	6.8	6.8
Disposals	(0.1)	–	(0.1)
Depreciation expense	(0.5)	(4.6)	(5.1)
At 1 January 2023	1.8	16.3	18.1
Additions	0.8	11.5	12.3
Disposals	—	(0.3)	(0.3)
Depreciation expense	(0.5)	(5.5)	(6.0)
At 31 December 2023	2.1	22.0	24.1

Set out below are the carrying amounts of lease liabilities and the movements during the period:

	2023	2022
	£m	£m
At 1 January 2023	(18.0)	(16.5)
New leases	(12.3)	(6.8)
Interest	(0.7)	(0.4)
Payments	6.6	5.7
Disposal of leases	0.2	—
At 31 December 2023	(24.2)	(18.0)

Payments above of £6.6m (2022: £5.7m) include £5.9m (2022: £5.3m) of capital repayment and £0.7m (2022: £0.4m) of interest paid.

	2023	2022
	£m	£m
Current	(5.7)	(4.7)
Non-current	(18.5)	(13.3)
	(24.2)	(18.0)

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

202

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

24. Leases continued

The following are the amounts recognised in the Statement of Total Comprehensive Income:

	2023	2022
	£m	£m
Depreciation of right-of-use-assets	6.0	5.1
Interest payable on lease liabilities	0.7	0.4
Expenses relating to short-term leases	3.7	3.6
	10.4	9.1

Leases of low financial value for the year ended 31 December 2023 were less than £0.1m (2022: less than £0.1m). During the years

ended 31 December 2023 and 31 December 2022, the Group did not hold any lease contracts with variable payment terms.

The Group has several land and property lease contracts that include termination options, known as ‘break clauses’. These options

are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business

needs. Management exercises judgement in determining whether these clauses are reasonably certain to be exercised.

At 31 December 2023, the Group has determined it is unlikely any break clause would be exercised, and full lease terms have been

considered within the present value calculations.

At 31 December 2023, lease commitments that were contracted but had not yet commenced totalled £nil (2022: £1.0m).

25. Deferred tax

The analysis of deferred tax liabilities is as follows:

	2023	2022
	£m	£m
Deferred tax liabilities to be incurred after more than 12 months	6.3	5.0

The movement in deferred tax assets/ (liabilities) is as follows:

				Share-
	Fixed		Intangible	based
	assets	Provisions	assets	payments	Other	Total
	£m	£m	£m	£m	£m	£m
At 1 January 2022	(6.2)	3.2	(1.0)	1.4	(0.1)	(2.7)
(Charged)/credited to Consolidated Statement
of Total Comprehensive Income	(1.9)	–	–	0.6	–	(1.3)
Effect of changes in tax rates	(0.6)	0.2	–	0.1	–	(0.3)
Effect of prior period adjustments	0.3	–	–	–	–	0.3
Tax on items taken directly to equity	–	–	–	(1.0)	–	(1.0)
At 31 December 2022	(8.4)	3.4	(1.0)	1.1	(0.1)	(5.0)
(Charged)/credited to Consolidated Statement
of Total Comprehensive Income	(0.9)	–	–	(0.1)	0.1	(0.9)
Effect of changes in tax rates	(0.1)	–	–	–	–	(0.1)
Effect of prior period adjustments	(0.4)	–	–	(0.1)	–	(0.5)
Tax on items taken directly to equity	–	–	–	0.2	–	0.2
At 31 December 2023	(9.8)	3.4	(1.0)	1.1	–	(6.3)

Deferred tax is calculated on temporary differences between the tax base of assets and liabilities and their carrying amounts, using

the corporation tax rate applicable to the timing of their reversal.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right to offset and there is an intention to settle

the balances net.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

203

26. Share capital and other reserves

Share capital

Called up issued and fully paid Ordinary Shares.

	2023	2023	2022	2022
	Number	£m	Number	£m
Allotted, called up and fully paid 1p Ordinary Shares
At 1 January 2023	212,803,389	2.1	228,647,196	2.3
Shares cancelled through share buyback	–	–	(15,843,807)	(0.2)
At 31 December 2023	212,803,389	2.1	212,803,389	2.1

In the prior year the Company announced a share buyback programme to purchase its own Ordinary Shares. The aggregate

purchase cost of all Ordinary Shares acquired under this programme was £40.0m (excluding stamp duty and expenses) and all

Ordinary Shares purchased under this programme were immediately cancelled. The share buyback programme completed in

October 2022 and in total resulted in the repurchase and cancellation of 15,843,807 shares, representing 7.7% of the Ordinary

Shares in issue at 31 December 2022 (excluding shares held in the Employee Benefit Trusts). The maximum and minimum prices

paid were 299.0p and 198.6p per share respectively. The average price paid was 254.6p. Share-related expenses in relation to

stamp duty and expenses were £0.3m.

Other reserve

In 2020, the Group raised net proceeds of £53.0m via an equity raise (consisting of £55.0m of gross proceeds less transaction

costs incurred on issue of £2.0m). There was no tax impact on the fees. The placing was undertaken using a cash box structure.

As a result, the Group was able to take relief under section 612 of the Companies Act 2006 from crediting share premium and

instead transfer the net proceeds in excess of the nominal value to retained earnings as an other reserve. The net proceeds of

£53.0m were immediately passed to Forterra Buildings Products Ltd by way of an intercompany loan and as such were not

immediately distributable. The reserves qualify as distributable on settlement of intercompany funding arrangements. In 2022,

a remaining balance of £23.9m (2021: £17.6m) became distributable and was presented within retained earnings, leaving a total

other reserve balance of £nil, there has been no change since this date.

Reserve for own shares

Own shares represent the cost of Forterra plc shares purchased in the market and held by employee benefit trusts to satisfy

the future exercise of options under the Group’s share option schemes. At 31 December 2023, two trusts were in place and

consolidated within the Consolidated Financial Statements.

The first trust holds 392,825 Ordinary Shares (2022: 450,684), relating to shares granted under two free share awards. The first

of these was granted on 25 May 2016, the second on 10 February 2021. Shares granted under the 2016 award were issued by

the Company. To satisfy the 2021 award, a total of 291,483 shares were purchased by the Company through the Trust. The total

weighted average cost for shares held by the Trust at 31 December 2023 was 165p per share (2022: 165p), which is reflected in

the reserve for own shares within the Consolidated Statement of Changes in Equity. The market value of shares held by the Trust

at 31 December 2023 was £0.7m (2022: £0.8m).

The second trust holds 5,512,425 (2022: 5,853,928) shares at an average cost of 249p per share (2022: 259p), reflected within the

reserve for own shares within the Consolidated Statement of Changes in Equity. The market value of these shares at 31 December

2023 was £9.7m (2022: £10.9m).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

204

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

27. Share-based payments

Total cost of share schemes:

	2023	2022
	£m	£m
Share Incentive Plan (SIP)	0.3	0.2
Performance Share Plan (PSP)	(0.4)	1.7
Sharesave Plan (SAYE)	0.6	1.4
Deferred Annual Bonus Plan (DABP)	–	0.1
Share-based Incentive	0.4	–
	0.9	3.4

The total cost of share schemes in the year includes a credit to national insurance contributions of £0.3m (2022: cost of £0.4m).

The total national insurance liability held within the Consolidated Balance Sheet as at 31 December 2023 was £0.1m (2022: £0.4m).

Summary of share option and share award arrangements

The Group operates a number of share schemes for the benefit of employees, all of which are equity-settled (although the rules

of the PSP and DABP allow for cash settlement in exceptional circumstances).

Share awards

Share Incentive Plan (SIP)

On 25 May 2016, 442,068 deferred free shares were awarded to all employees in service at this date. Shares to the value of £500

were issued which vested in May 2019, three years after the date of grant, subject to a three-year service condition. Further to this,

on 10 February 2021, an additional £500 award was made to all serving employees, subject to the same service condition as in

2016. A total of 314,075 shares were granted under this award. Unexercised shares are held by the Employee Benefit Trust on

behalf of the Group’s employees and detailed within note 26.

Share options

Share-based incentive

An award of 207,784 Ordinary Share options was granted to Neil Ash (CEO) on 3 April 2023 as compensation for amounts

foregone in respect of long-term incentives in his previous employment. The award was structured as nominal cost options with

immediate vesting at an exercise price of £0.01 per Ordinary Share. These options were exercised on 3 April 2023. Due to their

immediate vesting, the fair value of these awards was taken as their market value on the date of grant, being 197p per share.

Performance Share Plan (PSP)

Performance based awards granted to the Executive Directors and designated senior management which vest three years after the date

of grant at 1p per share. The total number of shares vesting is dependent upon both service conditions being met and the performance

of the Group over the three-year period. The most recent PSP, being that granted in 2023, is structured with 40% of the award subject

to an EPS performance condition, 40% of the award subject to a TSR performance condition and 20% of the award subject to

sustainability targets. In addition to this, a holding period applies to vested PSP awards for the Executive Directors of Forterra plc,

under which they are required to retain the number of vested awards, net of tax, for at least two years from the date of vesting.

Deferred Annual Bonus Plan (DABP)

A portion of the Executive Directors’ annual bonus award is deferred into shares under a DABP, with a deferral period of three years.

These awards are accrued as a bonus in the year to which they relate and are converted into deferred share awards after the year-

end. During 2023, £0.3m (2022: £0.4m) has been removed from accruals and recognised directly within equity to reflect grants

made under the scheme in relation to 2022 bonuses. At 31 December 2023, no annual bonus is expected to be deferred into

shares under the DABP (2022: £0.3m).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

205

27. Share-based payments continued

Sharesave (SAYE)

This HM Revenue and Customs approved scheme is available to all employees, with schemes offered annually since 2016.

Employees make monthly contributions of up to £500 per month into a linked savings account where these may be exchanged

three years from each grant date for shares at an option price discounted by 20% from the offer date.

The aggregate number of share awards outstanding for the Group is shown below:

	PSP	DABP	SAYE
	Number of	Number of	Number of
	options	options	options
At 1 January 2022	2,482,641	35,652	7,204,615
Awards granted	1,025,793	144,402	1,338,245
Awards exercised	(61,245)	(35,652)	(205,673)
Awards lapsed/forfeited	(627,019)	–	(667,841)
At 31 December 2022	2,820,170	144,402	7,669,346
Awards granted	1,416,394	153,528	5,580,402
Awards exercised	(217,639)	(173,673)	(757,937)
Awards lapsed/forfeited	(1,053,183)	–	(2,908,689)
At 31 December 2023	2,965,742	124,257	9,583,122

Options were exercised on a regular basis throughout the year. The average share price during the year was 171p (2022: 244p).

Share options either outstanding or not yet exercised at the end of the year have the following vesting dates:

	2023	2022
	Number of	Number of
	options	options
PSP
24 April 2020	3,874	3,874
17 September 2023	296,592	1,053,124
30 April 2024	615,409	747,439
17 March 2025	776,119	1,015,733
3 April 2026	1,273,748	–
DABP
17 March 2024	59,715	144,402
17 March 2025	64,542	–
SAYE
1 December 2022	810	517,145
1 December 2023	3,281,930	5,106,608
2 December 2024	374,770	748,912
1 December 2025	595,759	1,296,681
1 December 2026	5,329,853	–
	12,673,121	10,633,918

The weighted average remaining contractual life of share options outstanding at 31 December 2023 was 2 years (2022: 1.5 years).

The average exercise price for share options outstanding ranged from 1p to 238p (2022: 216p).

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

206

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

27. Share-based payments continued

The fair value per option granted in the year has been calculated using the following assumptions:

	2023		2022
	PSP	SAYE	PSP
	(Performance		(Performance	SAYE
	and service	(Service	and service
	condition)	condition)	condition)	(Service condition)
Date of grant	3/4/2023	19/10/2023	17/3/2022	4/10/2022
Option pricing model	Monte Carlo	Black-Scholes	Monte Carlo	Black Scholes
Share price on grant date (pence)	199.20	133.60	239.50	247.00
Exercise price (pence)	1.00	132.00	1.00	210.00
Expected volatility (%)	46.7%	34.3%	46.8%	48.5%
Vesting period (years)	3.00	3.15	3.00	3.15
Expected option life to exercise (years)	3.00	3.40	3.00	3.40
Expected dividend yield (%)	–	5.2%	–	2.2%
Risk-free interest rate (%)	3.4%	46.1%	1.4%	4.1%
Fair value per option (pence)	165.10	27.60	195.90	96.00

Fair value per option under the PSP is calculated as the average for the TSR and non-market conditions.

Expected volatility is a measure of expected fluctuations in the share price over the expected life of an option. The measures of

volatility used by the Group in its pricing model has been derived as the median volatility of companies within the comparator index

that have been listed for the commensurate length of time.

28. Contingent liabilities

HSBC Bank plc has issued, on behalf of Forterra plc, the following irrevocable letter of credit relating to the Group’s investment

in Accrington brick slip development:

	Amount
Beneficiary	£m	Period	Purpose
Capaccioli Innovating Industries	9.5	28th Feb 2023 to 31 May 2024	Accrington brick slips development

Of the £9.5m carved out of the facility, the balance outstanding on the letter of credit at the year end was approximately £6.5m.

The obligations subject to the letter of credit relate are expected to be discharged through 2024 allowing the element of the facility

required for letters of credit to be reduced if necessary.

29. Related party transactions

Transactions with key management personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities

of the Group. The Directors of the Company and the Directors of the Group’s subsidiary companies fall within this category.

	2023	2022
	£m	£m
Emoluments including taxable benefits	2.8	3.4
Share-based payments	0.4	1.4
Pension and other post-employment benefits	0.2	0.2
	3.4	5.0

Information relating to Directors’ emoluments, pension entitlements, share options and long-term incentive plans appear in the

Annual Report on Remuneration within pages 128 to 156.

30. Post balance sheet events

With the exception of the covenant relaxations outlined within note 19, there are no events which have occurred since the balance

sheet date that would merit separate disclosure.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

207

COMPANY BALANCE SHEET

AS AT 31 DECEMBER 2023

Note

2023

£m

2022

£m

Non-current assets

Investment in subsidiary

6 312.7 311.8

Deferred tax asset

7 0.3 0.3

313.0 312.1

Current assets

Debtors

8 0.1 –

Total assets

313.1 312.1

Current liabilities

Creditors – amounts falling due within one year

9 (0.4) (0.3)

Amounts owed to Group undertakings

9 (23.4) (48.1)

Total liabilities

(23.8) (48.4)

Net assets

289.3 263.7

Capital and reserves

Ordinary shares

10 2.1 2.1

Own share reserve

(14.2) (15.8)

Capital redemption reserve

0.2 0.2

Retained earnings

301.2 277.2

Total equity

289.3 263.7

As permitted by section 408 of the Companies Act 2006, an entity profit or loss account is not included as part of the published

Financial Statements of Forterra plc. The Company profit for the financial year ended 31 December 2023 was £50.5m (2022: £0.2m).

The notes on pages 210 to 212 are an integral part of these Financial Statements.

Approved by the Board of Directors on

25March 2024 and signed on their behalf by:

Neil Ash

Chief Executive Officer

Ben Guyatt

Chief Financial Officer

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

208

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2023

Ordinary

£m

Own share

reserve

£m

Other

reserve

£m

Capital

redemption

reserve

£m

Retained

earnings

£m

Total equity

£m

Balance at 1 January

2022 2.3 (4.6) 23.9 – 315.2 336.8

Total comprehensive income for the year

– – – – 0.2 0.2

Dividends paid

– – – – (24.2) (24.2)

Movement in other reserves

– – (23.9) – 23.9 –

Purchase of shares by Employee Benefit Trust

– (12.2) – – – (12.2)

Proceeds from sale of shares by Employee Benefit Trust

– 0.4 – – – 0.4

Payments made to acquire own shares

(0.2) – – 0.2 (40.3) (40.3)

Share-based payments charge

– – – – 3.4 3.4

Share-based payments exercised

– 0.6 – – (0.6) –

Tax on share-based payments

– – – – (0.4) (0.4)

Balance at 31 December

2022 2.1 (15.8) – 0.2 277.2 263.7

Total comprehensive income for the year

– – – – 50.5 50.5

Dividends paid

– – – – (25.7) (25.7)

Purchase of shares by Employee Benefit Trust

– (2.1) – – – (2.1)

Proceeds from sale of shares by Employee Benefit Trust

– 1.1 – – – 1.1

Share-based payments charge

– – – – 1.7 1.7

Share-based payments exercised

– 2.6 – – (2.6) –

Tax on share-based payments

– – – – 0.1 0.1

Balance at 31 December

2023 2.1 (14.2) – 0.2 301.2 289.3

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

209

1. General background

Forterra plc is a public limited company which is listed on the London Stock Exchange and is domiciled and incorporated in

theUnited Kingdom under the Companies Act 2006. The registered office is 5 Grange Park Court, Roman Way, Northampton,

NN45EA.

2. Accounting policies

(A) Basis of preparation

The separate Company Financial Statements have been prepared in accordance with applicable accounting standards,

theFinancial Reporting Standard applicable in the United Kingdom and the Republic of Ireland (‘FRS 102’) and the Companies

Act2006.

As permitted by section 408 of the Companies Act 2006, an entity profit or loss account is not included as part of the published

Financial Statements of Forterra plc. The Company profit for the financial year ended 31 December 2023 was £50.5m (2022: £0.2m).

As permitted by FRS 102, the Company has taken advantage of the disclosure exemptions available under that standard in relation

to presentation of a cash flow statement, standards not yet effective and related party transactions. Where required, equivalent

disclosures are given in the Consolidated Financial Statements.

The Financial Statements are presented in pounds sterling, rounded to the nearest hundred thousand and are prepared under the

historical cost convention.

After making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in

operational existence for at least one year from the date that the Financial Statements are signed. The Company therefore adopts

the going concern basis in preparing its Financial Statements.

(B) Investments

Investments are included in the balance sheet at the deemed cost of acquisition upon the Group restructure. Where appropriate,

aprovision is made for any impairment.

Capital contributions arising where subsidiary employees are awarded share options to be settled over the Company’s equity result

in increases to the cost of investment.

Charges for income tax are based on earnings for the period and take account of deferred taxation on timing differences between

the treatment of certain items for taxation and accounting purposes.

Deferred tax is recognised without discounting, in respect of all timing differences between the treatment of certain items for

taxation and accounting purposes which have arisen but not reversed by the balance sheet date.

(D) Financial instruments

The Company determines the classification of financial assets and financial liabilities at initial recognition. The principal financial

assets and liabilities of the Company are as follows:

(I) Financial assets

Basic financial assets, including trade and other receivables and amounts due from Group undertakings are initially recognised

attransaction price, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present

value of the future receipts discounted at a market rate of interest. Such assets are subsequently carried at amortised cost using

theeffective interest method and assessed for objective evidence of impairment or impairment reversal at the end of each

reportingperiod.

Financial assets are derecognised when the contractual rights to the cash flows from the asset expire, are settled or substantially

allthe risks and rewards of ownership of the asset are transferred.

(II) Financial liabilities

Basic financial liabilities, including trade and other payables and amounts due to Group undertakings and related parties are initially

recognised at the transaction price, unless the arrangement constitutes a financing transaction, where the debt is measured at the

present value of the future receipts, discounted at a market rate of interest.

Trade and other payables and loans are subsequently carried at amortised cost, using the effective interest rate method.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

210

NOTES TO THE COMPANY FINANCIAL STATEMENTS

2. Accounting policies continued

(E) Share-based payments

The Company operates a number of equity-settled share-based compensation plans, under which the Company receive services

from the Executive Directors in exchange for equity instruments granted by the Company. The services received and corresponding

increase in equity are measured at the fair value of the equity instruments granted, on the date granted. The Company also

compensates certain key management and other employees for services provided to Forterra Building Products Limited. The

services provided are recognised as an increase in the cost of investment in subsidiaries and a corresponding increase in equity;

which is measured at the fair value of the equity instruments granted, on the date granted.

The cost of the equity-settled transactions are subsequently recognised over the vesting period, which ends at the date that the

plan participant becomes fully entitled to the award. Fair values are determined using appropriate pricing models by external valuers.

At the end of each reporting period the Company revises its estimates of the number of awards that are expected to vest based

onnon-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the profit or loss account,

with a corresponding adjustment to equity.

Further details regarding the share-based payment schemes are set out in note 27 to the Consolidated Financial Statements.

(F) Own shares held by Employee Benefit Trust

The Company has established two separate employee benefit trusts for the purposes of satisfying awards under share-based

incentive schemes. Shares in the Company acquired by the trusts are deducted from equity until shares are cancelled, reissued

ordisposed.

(G) Share capital

Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in share

premium as a deduction from the proceeds.

(H) Related parties

The Company 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 Financial Statements.

3. Significant accounting judgements and estimates

Impairment of investments

The Directors periodically review investments 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. The Company did not record

anyimpairment charges during the period ended 31 December 2023.

4. Employee information

The Company has no employees other than the Directors. Full details of the Directors’ remuneration and interests are set out in

theAnnual Report on Remuneration on pages 128 to 156 and includes the amounts received or receivable by each Director in the

period. The long-term incentives as detailed on page 145 were recognised in the Company profit and loss account as an expense

over the three-year period to which the awards relate. The Company recognised a charge of £0.1m (2022: £0.8m) in relation to

share-based payments for the period.

5. Dividends

2023

£m

2022

£m

Amounts recognised as distributions to equity holders in the year

Interim dividend of 2.4p per share (2022: 4.6p)

4.9 9.6

Final dividend of 10.1p per share in respect of prior year (2022: 6.7p)

20.8 14.6

25.7 24.2

The Directors are proposing a final dividend for 2023 of 2.0p per share, making a total payment for the year of 4.4p (2022:14.7p).

This is subject to approval by the shareholders at the AGM and has not been included as a liability in the FinancialStatements.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

211

6. Investment in subsidiary

2023

£m

2022

£m

Balance as at 1 January

2023 311.8 309.4

Capital contribution relating to share-based payments

0.9 2.4

Balance as at 31 December

2023 312.7 311.8

The companies in which the Company has an interest at the year-end are shown below:

Country of

incorporation Holding

Nature of

holding

% of class

held

Forterra Holdings Limited

England & Wales Ordinary £0.01 Direct 100 %

Forterra Building Products Limited

England & Wales Ordinary £0.01 Indirect 100 %

The address of the registered office of both Forterra Holdings Limited and Forterra Buildings Products Limited is 5 Grange Park Court,

Roman Way, Northampton, England, NN4 5EA.

7. Deferred tax

2023

£m

2022

£m

Deferred tax assets to be recovered after more than 12 months

0.3 0.3

8. Current assets

2023

£m

2022

£m

Debtors

0.1 –

9. Current liabilities

2023

£m

2022

£m

Creditors - amounts falling due within one year

(0.4) (0.3)

Amounts owed to Group undertakings

(23.4) (48.1)

Amounts owed to Group undertakings are non-interest bearing, unsecured and repayable on demand.

10. Capital and reserves

2023 2022

Number £m Number £m

Ordinary Shares of £0.01

212,803,389 2.1 212,803,389 2.1

The Ordinary Shares are voting non-redeemable shares and rank equally as to dividends, voting rights and any return of capital

onwinding up.

Movements in the share capital and reserve for own shares are set out in note 26 of the Consolidated Financial Statements.

11. Related party transactions

The Company is exempt from disclosing related party transactions with companies that are wholly owned within the Group.

Transactions with related parties which are not wholly owned are disclosed within note 29 to the Consolidated Financial Statements.

Remuneration to key management personnel has been disclosed within note 29 to the Consolidated Financial Statements.

12. Controlling party

Forterra plc is not under the control of an ultimate controlling party.

13. Post balance sheet events

With the exception of the covenant relaxations outlined within note 19 to the Consolidated Financial Statements, there are no events

which have occurred since the balance sheet date that would merit separate disclosure.

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

212

NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED

GROUP FIVE-YEAR SUMMARY

Five-year summary

2023

£m

2022

£m

2021

£m

2020

£m

2019

£m

Revenue

346.4 455.5 370.4 291.9 380.0

Adjusted EBITDA

58.1 89.2 70.4 37.9 82.7

Operating profit (before exceptional items)

38.1 72.7 54.0 20.8 65.0

Profit before tax (before exceptional items)

31.1 70.6 50.7 17.4 62.5

Profit/(loss) before tax (statutory)

17.1 72.9 56.8 (5.4) 58.2

Operating cash flow (before exceptional items)

(6.1) 89.0 81.2 53.9 64.9

Net (debt)/cash (before leases)

(93.2) (5.9) 40.9 16.0 (43.2)

Adjusted earnings per share (pence)

11.4 26.4 17.5 6.6 25.5

Dividends per share (pence)

4.4 14.7 9.9 2.8 4.0

FORTERRA PLC

ANNUAL REPORT AND ACCOUNTS

2023

FINANCIAL STATEMENTS

213

ADDITIONAL INFORMATION

FINANCIAL CALENDAR AND OTHER SHAREHOLDER INFORMATION

Calendar

The following dates have been announced:

2024 Annual General Meeting 21May 2024

Payment of final 2023 dividend 5July 2024

2024 Interim results announcement 30 July 2024

Registrars

Link Asset Services

Statutory auditor

Ernst & Young LLP

Brokers

Deutsche Numis

Investec Bank plc

Bankers

HSBC Bank plc

National Westminster Bank plc

Bank of Ireland Group plc

Banco De Sabadell

Clydesdale Bank plc (trading as Virgin Money)

Financial PR

FTI Consulting