Breedon Group PLC - Annual Results 2018

Annual Results 2018

 

Breedon, a leading construction materials group in Great Britain and Ireland, announces its audited annual results for the year ended 31 December 2018.

 

 

2018

2017

Change

Revenue

£862.7 million

£652.4 million

+32%

Underlying EBIT

£103.5 million

£80.4 million

+29%

Profit before taxation

£79.9 million

£71.2 million

+12%

Underlying basic EPS

      4.70 pence

      4.14 pence

+14%

Net debt

£310.7 million

£109.8 million

 

   Underlying results are stated before acquisition-related expenses, redundancy and reorganisation costs, property items, amortisation of acquisition intangibles and related tax items.  References to an underlying profit measure throughout this announcement are defined on this basis.

19.4 million tonnes of aggregates sold (2017: 16.0 million tonnes)

2.8 million tonnes of asphalt sold (2017: 1.9 million tonnes)

3.2 million cubic metres of ready-mixed concrete sold (2017: 3.3 million cubic metres)

2.0 million tonnes of cement sold*

Highlights

·      Strong performance delivered in the face of difficult trading conditions

·      Improved revenue and earnings, underpinned by contributions from recent acquisitions

·      Strong cash flow resulting in closing Leverage of 2.0

·      Transformative acquisition of Lagan, taking us into new markets with significant growth potential

·      Asset swap with Tarmac streamlined our concrete network, strengthened our asset base and improved the quality of our earnings

·      A further £50 million invested in operational improvements, increased capacity and extensions to reserves

·      New operating segments reflect change in the Group's structure following the acquisition of Lagan

·      Confident of making further progress in the current year

Chairman's statement

 

Financial results

2018 was not the easiest of years. It began with severe winter weather conditions and, despite some recovery in the second half of the year, ended with confirmation that over the full 12 months there was little growth in construction output in GB.

Against this challenging backdrop, we can be justifiably proud of our results. We outperformed the GB market in sales volumes of all our key products, grew our revenues and Underlying EBIT, and once again generated strong cash flow, enabling us to pay down a material proportion of our post-Lagan debt by the year-end.

Expanding our horizons

The acquisition of Lagan in April was transformative. It took us into an attractive new market with significant growth potential, also helping to offset a muted GB performance in the year under review. In addition, the Tarmac asset swap was important as it enabled us to streamline our concrete network by relinquishing 23 peripheral plants in exchange for 25 million tonnes of reserves in four quarries, together with an asphalt plant, thereby further strengthening our asset base and improving the quality of our earnings.

Making Breedon safer

As our Group Chief Executive reports in his review, we were disappointed by our safety performance in 2018. Too many of our colleagues were hurt, almost always avoidably. It is the measure of a successful heavyside construction materials company that we are not only profitable, but safe, and we have an obligation to ensure that our colleagues are not put at risk and that they take care of themselves and one another. We will be focusing our efforts this year on ensuring that Breedon is a safer place to work and that we make better progress towards our ultimate target of Zero Harm.

Board changes

As we signalled at the half-year, Peter Cornell joined us as a non-executive director on 1 October. Peter brings a wealth of corporate experience to Breedon and we are delighted to have him on our Board. We are making good progress towards the appointment of a further new non-executive director.

At the end of the year, David Warr retired from the Board. David had been a non-executive director of Breedon since the company's shares were admitted to AIM in 2008 and served the Group with great dedication and professionalism. Once again, I would like to thank him for his considerable contribution and wish him well for the future.

Engaging with our stakeholders

We welcome the amendment to the AIM Rules, which requires all member companies to adopt a recognised corporate governance code. We have always sought to comply as far as appropriate with the QCA's guidance on governance and to align with best practice, and we acknowledge that one of the QCA's key requirements in light of the changes is for us to improve communication with our stakeholders, especially in terms of broadening understanding of our purpose and culture.

Looking ahead

Our company is in excellent shape and well placed to benefit from the medium-term growth predicted for our markets. We have a strong asset base, a highly cash-generative business and a talented management team, all of which give us a significant competitive advantage whatever the market conditions.

Clearly we face continued uncertainty pending the final outcome of the Brexit negotiations. However, the majority of our businesses are essentially local, with local customer bases and supply chains, and they therefore rarely cross national borders.

Whatever the outcome, we will adapt our business to ensure that any impact on our service to our customers is kept to a minimum.

As we have consistently stated, we keep our dividend policy under review and continue to believe that, by reinvesting our resources in the organic development of our business and in earnings-enhancing acquisitions, and by maintaining our focus on debt reduction, we can continue to reward our shareholders by delivering capital growth. Similarly, we feel no pressing need to transfer to the main market whilst AIM provides us with an appropriate platform from which to pursue our growth ambitions.

We owe our colleagues a special debt of gratitude for their commitment and hard work in a very demanding year. Our strong performance in difficult trading conditions was entirely down to them and I thank them all on behalf of the Board and our shareholders.

We are confident of making further progress in the current year.

Peter Tom CBE

Executive Chairman

6 March 2019