9.3 million tonnes of aggregates sold (30 June 2017: 7.9 million tonnes)
1.2 million tonnes of asphalt sold (30 June 2017: 0.9 million tonnes)
1.6 million cubic metres of ready-mixed concrete sold (30 June 2017: 1.7 million cubic metres)
Highlights
· Resilient performance in challenging market: underlying EBIT margin maintained at 11.1%
· Continued strong cash generation and organic investment
· Acquisition of Lagan Group, a key strategic step outside Great Britain; integration progressing well
· Two bolt-on acquisitions completed in England and Scotland
· Further progress on safety improvement: Lost Time Injury Frequency Rate reduced from 1.41 in the first half of 2017 to 0.94 in the first half of 2018
· Completion of Tarmac asset swap on 1 July, rebalancing aggregates/readymix portfolio
· Positive outlook in Ireland offsetting continued short-term challenges of GB market
· Remain confident of meeting 2018 market expectations
Peter Tom CBE, Executive Chairman, commented:
“This was one of the busiest periods in the Group's history, with four acquisitions completed by 1 July including our first outside Great Britain, coupled with continued organic investment in a number of key projects. We had anticipated a challenging 2018 and so it proved in the first half, with testing trading conditions exacerbated by the severe weather in the first quarter and rising input costs throughout the period. Despite these headwinds, we delivered a resilient performance.
“We did much in the first six months of this year to rebalance the Group, both geographically and operationally. Our new businesses in Ireland provide a valuable economic counterpoint to the continuing short-term challenges of our markets in GB and our asset swap with Tarmac has expanded our aggregates base and further reduced our reliance on the ready-mixed concrete market, thereby improving the quality of our earnings.
“We continue to view the medium- to long-term outlook in GB positively, with infrastructure spending forecast to increase steadily over the next three years and Government strategies to address our chronic housing shortage expected to fuel continued growth in the residential sector. Market conditions in Ireland are expected to be even healthier, with construction output in the Republic of Ireland forecast to grow by approximately 28 per cent in the three years to 2020 and NI expected to sustain construction output at approximately £3 billion per annum from 2018 to 2022.
“In the more immediate term, taking into account our more balanced geographical exposure, we remain comfortable with current market expectations for 2018.”
Outlook
In the three months since our purchase of Lagan Group (May-July) our revenues were up 46 per cent (excluding acquisitions 4 per cent) compared to the same period of 2017, in part reflecting recovery of some of the first-quarter shortfall.
We expect the GB market to remain challenging for the remainder of 2018, compounded by persistent uncertainties around the nature and timing of our exit from the European Union, with the Construction Products Association forecasting a 0.6 per cent decline in output this year. This contrasts, however, with a more positive outlook for the rest of 2018 in the island of Ireland.
Against this background, and being mindful of the continuing pressure from rising input costs, we will continue to practise the strategy of self-help which has served us well in previous economic slowdowns, bearing down on expenditure and extracting maximum value from every tonne of material we produce, whilst continuing to invest carefully for the long term. We also continue to actively review potential acquisition opportunities.
We did much in the first six months of this year to rebalance the Group, both geographically and operationally. Our new businesses in Ireland provide a valuable economic counterpoint to the continuing short-term challenges of our markets in GB and our asset swap with Tarmac has expanded our aggregates base and further reduced our reliance on the ready-mixed concrete market, thereby improving the quality of our earnings.
We continue to view the medium- to long-term outlook in GB positively, with infrastructure spending forecast to increase steadily over the next three years and Government strategies to address our chronic housing shortage expected to fuel continued growth in the residential sector.
Market conditions in Ireland are expected to be even healthier, with construction output in RoI forecast by Euroconstruct to grow by approximately 28 per cent in the three years to 2020 and NI expected to sustain construction output at approximately £3 billion per annum from 2018 to 2022, according to the CITB Construction Skills Network.
In the more immediate term, taking into account our more balanced geographical exposure, we remain comfortable with current market expectations for 2018.
Finally, as always we would like to thank everyone at Breedon, colleagues old and new, for their contributions to our results.
Peter Tom CBE Pat Ward
Executive Chairman Group Chief Executive