REG - Breedon Group PLC - Interim results 2024
24/07/2024 07:00
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RNS Number : 5351X Breedon Group PLC 24 July 2024
24 July 2024
BREEDON GROUP PLC
Interim results 2024
Strategic progress delivers a resilient performance
BMC trading ahead of plan; integration progressing well
Management expectations for the full year unchanged
Breedon Group plc (Breedon or the Group), a leading vertically-integrated
construction materials group in Great Britain, Ireland and the United States,
announces unaudited results for the six months ended 30 June 2024.
Statutory highlights Underlying(1) highlights
£m H1 2024 H1 2023 % change H1 2024 H1 2023 % change % LFL(2)
except where stated
Revenue 764.6 742.7 3% 764.6 742.7 3% (6)%
EBITDA(3) 103.4 103.9 - 118.1 112.3 5% (5)%
EBITDA(3) margin 13.5% 14.0% (50)bps 15.4% 15.1% 30bps
EBIT(4) 56.9 62.1 (8)% 71.6 70.5 2% (9)%
EBIT(4) margin 7.4% 8.4% (100)bps 9.4% 9.5% (10)bps
Profit Before Tax 46.5 56.5 (18)% 61.2 64.9 (6)%
Basic EPS(5) ( ) 10.0p 13.0p (23)% 13.9p 15.3p (9)%
Dividend per share 4.5p 4.0p 13%
Net Debt(6) 472.3 220.4 114%
Covenant Leverage(7) 1.6x 0.7x 0.9x
ROIC(8) 8.8% 10.0% (120)bps
FINANCIAL HIGHLIGHTS
Third platform launch and resilient pricing offset weather impact and market
headwinds
· Revenue increased 3% supported by our entry into the US
· Pricing contributed 2ppt, offset by 8ppt volume reduction which
principally reflects wet weather conditions across the Group and challenging
markets in GB
· Underlying EBIT increased 2% backed by disciplined operational
efficiency and cost recovery
Financial position retains strategic flexibility
· Covenant Leverage increased to 1.6x; remains comfortably within
our target range of 1x to 2x
· RCF refinanced; securing access to longer-term finance and greater
liquidity with incremental reduction in ongoing debt service costs
· Seasonal working capital outflow as expected
· Post-tax ROIC 8.8%; reflecting short-term dilution from the BMC
acquisition and impact of increased corporate tax rates
Interim dividend increased to 4.5p; demonstrating confidence in the long-term
growth outlook
OPERATING HIGHLIGHTS
Operational performance benefitted from flexible local model and agile
execution
· GB revenue decreased 5%; robust surfacing performance and modest
price progression, partially offset by volume declines related to the more
challenging market. Underlying EBIT down 17%, impacted by operational gearing
· Strong performance in Ireland where Underlying EBIT improved by
37%; successful tendering season and healthy order book with growing activity
levels following resumption of the governing Assembly at Stormont
· BMC trading ahead of prior year and plan; contributing nearly four
months of revenue and earnings with healthy markets and a robust order book
· Cement Underlying EBIT margin improved to 15.2%; soft volumes
offset by resilient pricing, lower energy costs and increased provision of
lower clinker content cement
STRATEGIC HIGHLIGHTS
Active M&A pipeline in all geographies
· Launched a scalable third platform in the fragmented and growing
US construction materials market through the acquisition of BMC
· M&A pipeline across the three platforms remains well populated
and active, completing two bolt-on transactions in GB
Sustainability agenda succeeding
· Reinvigorated our health, safety and wellbeing strategy, promoting
a proactive safety culture with clearer and firmer rules focused on risk
elimination
· First CDP ratings awarded (Climate Change: B, Water Security: C)
and targets submitted to SBTi for formal validation
· Continue to decarbonise the cement business; increased use of
alternative fuels, solar farm construction commenced at Kinnegad, increased
sales of CEM II, and further progress on Peak Cluster
Strategic initiatives and investment drive operational excellence
· Quarry operational improvement programme being implemented from
'face to gate', delivering efficiencies and process improvements
· BMC integration progressing well; investment made in health and
safety, quarry optimisation, technology and sustainability
CURRENT TRADING AND OUTLOOK
Growth expected in all our markets from 2025 as economic and political
landscape stabilises
· The new UK Government's growth agenda appears supportive of the
construction market, in particular housebuilding and infrastructure. Alongside
the resumption of a governing Assembly at Stormont, these are encouraging
developments
· In RoI, where we have secured positions on high-profile road
projects, recent reports reinforce the long-term structural need for housing
and infrastructure investment
· In the US, market fundamentals and long-term growth prospects are
underpinned by significant infrastructure and housing deficits alongside
robust stimulus funding and healthy state budgets
· All our markets are expected to benefit from falling interest
rates in the months ahead
· Our healthy balance sheet provides us with the strategic
flexibility to invest for growth, maintain our progressive dividend policy and
execute bolt-on acquisitions across each platform
· Management expectations for the full year remain unchanged with
Underlying EBIT slightly more weighted towards the second half than is
typical
Rob Wood, Chief Executive Officer, commented:
"For the team to deliver such a resilient performance given the challenging GB
market conditions we have faced is an incredible achievement.
"We achieved a major strategic objective in March, entering the US and
establishing our third platform with the transformative acquisition of BMC,
creating the foundation from which we will build out our US business. We
expanded our routes to market, delivering two bolt-on transactions in GB, and
growing organically through our downstream businesses, pulling through more of
our own material. We moved our sustainable growth strategy forward on all
fronts in the first half of 2024 and were pleased to see this recognised by
CDP with our first ratings placing us at the forefront of our sector for
Climate Change and Water Security.
"During this time the quality and flexibility of the Breedon team, of whom I
am incredibly proud, have kept us close to our customers, accelerated our
drive for efficiencies, and strengthened our operations. As the economic and
political clouds clear in GB, our markets will return to growth in time and we
will be well placed to grow and succeed.
Notes:
1. Underlying results are stated before acquisition-related expenses,
property gains and losses, amortisation of acquisition intangibles and related
tax items. References to an Underlying profit measure throughout this
announcement are defined on this basis.
2. Like-for-like reflects reported values adjusted for the impact of
acquisitions and disposals.
3. Earnings before interest, tax, depreciation and amortisation.
4. Earnings before interest and tax, which equates to profit from
operations.
5. EPS in the Underlying Highlights is adjusted Underlying Basic EPS,
which is Underlying Basic EPS adjusted to exclude the impact of changes in the
deferred tax rate.
6. Net Debt including IFRS 16 lease liabilities.
7. Covenant Leverage is defined as the ratio of Underlying EBITDA to
Net Debt, with both Underlying EBITDA and Net Debt amended to reflect the
material items which are adjusted by the Group and its lenders in determining
leverage for the purpose of assessing covenant compliance. The only material
adjusting items being the impact of IFRS 16 and a pro-forma adjustment to
include pre-acquisition EBITDA from businesses owned for less than twelve
months.
8. ROIC: post-tax return on average invested capital.
9. Information for investors, including analyst consensus estimates,
can be found on the Group's website at www.breedongroup.com/investors
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RESULTS PRESENTATION
Breedon will host a results presentation for analysts and investors at 08:30am
today at the offices of Deutsche Numis, 45 Gresham Street, London EC2V 7BF, or
online via www.breedongroup.com/investors
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. The presentation will be followed by Q&A, where it will be possible to
participate through the following dial-in details:
Event Title: Breedon Interim Results 2024
Start Time/Date: 08:30 Wednesday, 24 July 2024 - please join the event 5-10 minutes prior to
scheduled start time. When prompted, provide the event title
Confirmation Code: Breedon Half Year Results
United Kingdom, Toll-free: 0808 109 0700
United Kingdom, Local: +44 (0) 33 0551 0200
CAPITAL MARKETS EVENT
We will host a capital markets event for institutional investors and analysts
on the morning of 21 November in London. The event will include presentations
from Breedon's senior leadership team covering topics including capital
allocation and our US market strategy. Further details will be published in
due course.
ENQUIRIES
Breedon Group plc +44 (0) 1332 694010
Rob Wood, Chief Executive Officer
James Brotherton, Chief Financial Officer
Louise Turner-Smith, Head of Investor Relations +44 (0) 7860 911909
MHP (Public relations adviser) +44 (0) 7595 461231
Reg Hoare, Rachel Farrington, Charles Hirst breedon@mhpgroup.com
About Breedon Group plc
Breedon Group plc, a leading vertically-integrated construction materials
group in Great Britain, Ireland and the United States delivers essential
products to the construction sector. Breedon holds c.1.4bn tonnes of mineral
reserves and resources with long reserve life, supplying value-added products
and services, including specialty materials, surfacing and highway maintenance
operations, to a broad range of customers through its extensive local network
of quarries, ready-mixed concrete and asphalt plants.
The Group's two well-invested cement plants are actively engaged in a number
of carbon reduction practices, which include utilising alternative raw
materials and lower carbon fuels. Breedon's 4,450 colleagues embody our
commitment to 'Make a Material Difference' as the Group continues to execute
its strategy to create sustainable value for all stakeholders, delivering
growth through organic improvement and acquisition in the heavyside
construction materials market. Breedon shares (BREE) are traded on the Main
Market of the London Stock Exchange and are a constituent of the FTSE 250
index.
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.
LEI: 213800DQGNQE3X76WS92
STRATEGIC PROGRESS UNDERPINS RESILIENT PERFORMANCE
Our strategy has always focused on managing those factors within our control
and maximising the Group's competitive position. In recent years we have
invested in our teams, technology and equipment, accelerating self-help and
driving operational efficiencies, while striving to improve our health, safety
and wellbeing outcomes. We have remained active in M&A, developing our
pipeline across each of our geographies.
Those disciplined actions have enabled us to deliver a resilient performance
in the period.
The macroeconomic and political landscape in GB continued to present
significant headwinds, exacerbated by the challenging operating conditions
created by the wet weather. While inflation has returned to more normal
levels, interest rates have remained elevated and UK government policy is yet
to be established. In contrast, the Ireland and US markets remained positive
in the period and we expect conditions in these geographies will remain
supportive across the balance of the year.
Our patient search in the US has culminated in the acquisition of BMC
Enterprises Inc. for an enterprise value of US$300m. BMC is a supplier of
ready-mixed concrete, aggregates and building products, headquartered in St
Louis, Missouri, with a strong track record of organic and transactional
growth. BMC's culture is closely aligned to Breedon's local, entrepreneurial
model and the management team have extensive industry knowledge and M&A
experience. The integration is progressing well and the early results from our
new third platform are promising.
Revenue for the Group grew 3% to £764.6m (H1 2023: £742.7m) supported by our
entry into the US and an element of price growth, partially offset by reduced
volumes.
Underlying EBIT increased by 2% to £71.6m (H1 2023: £70.5m) benefiting from
a promising maiden contribution from BMC, which is trading ahead of prior year
and plan and has been reported as a new 'United States' operating segment. We
delivered strong earnings growth in Ireland and improved the margin in Cement,
which helped to mitigate the drop through from reduced volumes in GB, such
that we broadly maintained our Underlying EBIT margin at 9.4% (H1 2023: 9.5%).
On a like-for-like basis, excluding the impact of acquisitions, revenue in the
period decreased by 6% with pricing up 2ppt and volumes down 8ppt with
Underlying EBIT decreasing by 9%.
The Group's free cash flow in the period was an outflow of £9.6m (H1 2023:
inflow of £20.8m) reflecting the usual seasonal working capital expansion,
inclusive of BMC, and a step up in the level of capital investment,
principally due to the ARM project at Hope.
Post-tax ROIC of 8.8% at the half year (H1 2023: 10.0%) reflects short term
dilution from the BMC acquisition combined with the impact of increased
corporate tax rates.
Net Debt increased following the acquisition of BMC to £472.3m (2023:
£169.9m). Covenant Leverage at the half year of 1.6x remains within our
target range of 1x to 2x, providing the strategic flexibility to deploy
capital in-line with our financial framework.
In 2023 we achieved one of our medium-term financial objectives, reaching a
40% dividend payout ratio. In recognition of our confidence in the long-term
growth outlook across our three platforms, our strong market positions and
flexible balance sheet, the Board has approved an increased interim dividend
of 4.5p (H1 2023: 4.0p).
STRATEGY REVIEW
Sustain
Keeping our people safe and well is our highest priority. We carry out
frequent Visible Felt Leadership visits and regular training to reinforce the
systems, processes and tools already in place. To ensure our practices are
industry-leading, this year we have evolved our safety commitments with
clearer and firmer rules, promoting a proactive culture of safety and risk
elimination.
As an industry, the construction materials business has an ageing and
shrinking workforce so it is essential we are a great place to work. We
awarded a 4% pay rise and increased our emphasis on early stage careers,
recruiting 32 apprentices and industrial placement students.
Having set out our ambition to achieve net zero by 2050, in 2023 we submitted
our targets and methodology for validation and rating to industry bodies. This
year we have been awarded our first CDP ratings of B for Climate Change and C
for Water Security, placing us at the forefront of our sector, and we continue
to engage with SBTi as we await formal validation of our group-wide targets.
Decarbonisation of the cement business is a priority of our strategic planning
and we are progressing a number of projects in parallel to meet our net zero
targets. We trialled different alternative fuels in the clinker production
process, enabling both sites to increase the replacement of fossil fuels, with
Kinnegad achieving 80% during the period. To further offset the energy
consumption of our cement plants, Kinnegad commenced the construction of a
17MW solar farm which is on track to be commissioned in the first half of
2025. Customers are increasingly adopting CEM II following our development of
a product with an enhanced strength factor. In the first half 33% of our
cement sales were CEM II (H1 2023: 28%).
As a partner in the landmark Peak Cluster carbon capture and storage project,
our focus is now turning to FEED (front-end engineering design) but this
cannot progress without government support. Following the conclusion of the UK
general election we, together with our partners, are engaging with the new
Government.
Optimise
To maximise the efficiency and profitability of our quarries we implemented an
improvement programme from 'face to gate' to deliver efficiencies and process
improvements. Examples include process reengineering at our Leaton and Cloud
Hill quarries in GB which resulted in targeted capital investment to negate
the need for contract crushing and at Dowlow quarry, also in GB, where we
improved productivity by increasing the wash plant utilisation following a
review as part of our Running Equipment Efficiency Improvement Programme.
Expand
We have a well populated and active M&A pipeline across all three
platforms.
In January we completed the acquisition of Eco-Asphalt Supplies, a Merseyside
asphalt supplier strategically located within the region where we service the
National Highways Pavement framework. In April we acquired Phoenix Surfacing,
enhancing our presence in the Midlands and reinforcing our regional surfacing,
airfields and recycled asphalt capabilities.
In March, we established our third platform in the US through the
transformative acquisition of BMC, creating the foundation from which we will
build out our business in the Mid-West. BMC provides us with an opportunity to
extend the vertically-integrated model in the US, broaden our end-market reach
and extend our product set. Having successfully grown the business through a
blend of organic and acquisitive growth over the past decade, the BMC team
have considerable M&A experience and an active pipeline. Since completion,
the pipeline of opportunities in Missouri and the surrounding states has
continued to grow.
Our land and minerals pipeline underpins the long-term sustainability and
organic growth potential of our operations. During the first half we
successfully secured planning approval for an additional 37 million tonnes of
mineral reserves in GB and Ireland. In addition, we have more than 120 million
tonnes of mineral in various stages of the planning process, equivalent to
roughly five years of aggregates production at the current rate.
OUTLOOK
Growth expected in all our markets from 2025 as the economic and political
landscape stabilises
Following the conclusion of the UK general election, construction will be a
key aspect of the new Government's growth agenda where early indications
appear to support housebuilding and infrastructure in particular. However, it
remains to be seen how policy evolves in practice. Alongside the resumption of
a governing Assembly at Stormont, these are encouraging developments that are
starting to be recognised in confidence indicators. While the macroeconomic
and geopolitical landscape is stabilising, the outlook for the remainder of
2024 in GB remains finely balanced.
In RoI, recently published housing policy reports identify a significant
deficit of up to a quarter of a million homes with an annual building
requirement far in excess of the current rate of c.33,000 units. This
underpins the structural need for housing and infrastructure investment,
supporting the long-term growth opportunity, where we have secured positions
on a number of high-profile infrastructure projects that commence in the
second half on the high-speed road network.
Market fundamentals in the US are supported by significant housing and
infrastructure deficits. Healthy state budgets alongside robust Federal
stimulus programmes underpin the long-term growth prospects for infrastructure
spending and receive cross-party political support while population growth
continues to exceed housing starts creating a greater need for housebuilding.
All our markets are expected to benefit from falling interest rates in the
months ahead.
The long-term track record of pricing in the construction materials market is
underpinned by strong industry fundamentals and pent-up demand. Therefore,
pricing is expected to continue to increase modestly in future periods,
offsetting input cost inflation.
Our business remains highly cash generative, enabling us to reduce debt
rapidly as with previous transformational acquisitions. Our healthy balance
sheet provides us with the strategic flexibility to invest for growth,
maintain our progressive dividend policy, and execute bolt-on acquisitions
across each of our three platforms where we have well populated and active
M&A pipelines.
In 2024, Underlying EBIT will be slightly more weighted towards the second
half than is typical due to a combination of factors. The wet start to 2024
was disruptive to construction activities, affecting ready-mixed concrete and
cement in particular, and the second half will incorporate a full six months
contribution from BMC. Management expectations for the full year remain
unchanged.
OPERATIONAL REVIEW
Product volumes
million tonnes except where stated H1 2024 H1 2023 Change % LFL %
Aggregates 13.5 13.0 3% (4)%
Asphalt 1.8 1.8 (3)% (4)%
Cement 1.0 1.1 (12)% (12)%
Ready-mixed concrete (m(3)) 1.5m 1.5m (2)% (18)%
Note: Reported percentage movements are based on non-rounded data.
Great Britain
£m except where stated H1 2024 H1 2023 Change % LFL %
Revenue 492.4 519.6 (5)% (7)%
Underlying EBIT 35.6 42.8 (17)% (18)%
Underlying EBIT margin 7.2% 8.2% (100)bps
Market conditions in the first half of 2024 weakened further in GB as expected
and construction activity was impacted by the wet conditions. Furthermore,
while the macroeconomic landscape stabilised during the period and we received
a good level of enquiries, political and monetary uncertainty presented a
headwind to client decision-making, leading to near-term caution across most
end-markets.
Volumes reduced materially in ready-mixed concrete and were lower in
aggregates, reflecting the impact on housebuilding activity from the soft
market backdrop, poor weather conditions and elevated comparatives following
the change to housebuilding regulations in June 2023. Asphalt volumes were
broadly flat year-on-year, benefitting from the continued success of our
surfacing business. Pricing remained resilient and we were able to fully
recover input cost increases.
Underlying EBIT declined 17%, resulting in 100bps of margin compression due to
operating leverage. Against this backdrop we maintained our disciplined focus
on operational excellence and carefully tailored procurement, encouraging the
quarry teams to revisit the whole process from quarry face to customer
delivery to maximise the efficiency of production and quality of customer
service.
Our surfacing business integrated Phoenix Surfacing into our regional delivery
model and successfully completed high-profile airfield projects for the
Defence Infrastructure Organisation. We have built strong relationships,
creating a significant competitive advantage in this space, leading to a
multi-year pipeline of work with further high-profile frameworks in tender.
Ireland
£m except where stated H1 2024 H1 2023 Change % LFL %
Revenue 111.2 109.1 2% -
Underlying EBIT 13.7 10.0 37% 33%
Underlying EBIT margin 12.3% 9.2% 310bps
Ireland delivered a strong performance in the period, increasing revenue,
Underlying EBIT and margins. The business benefitted from a strong tendering
season in the first half of 2024. In Northern Ireland the resumption of a
governing Assembly at Stormont was an encouraging development and, as the
business of Government slowly regained momentum, construction materials
enquiries and activity levels picked up. In RoI, where the market is
underpinned by net inward migration and foreign direct investment, creating a
structural shortage of housing and infrastructure, economic growth maintained
a steady pace.
Against this encouraging backdrop, asphalt volumes stabilised after a slow
start in the first quarter as the effects of the unseasonably wet weather
restricted construction activity. Aggregates volumes increased significantly,
benefiting from the acquisition of Robinsons Quarry Masters last year, a
transaction that has reinforced our position in the North Belfast market where
we have a number of local authority framework contracts.
Pricing was robust and enabled the full recovery of input costs. As a result
revenue was stable, growing 2% and Underlying EBIT increased 37%, driven by
key project wins, excellent cost management, operating leverage and
contribution from acquisitions, leading to a significant expansion in margin.
Extending our mineral reserves and resources has been a strategic priority,
increasing the asset backing of our vertically-integrated model in Ireland.
During the period we secured planning consents at three quarries and acquired
a basalt quarry in County Derry, securing c.10m tonnes of mineral reserve. We
have applications for a further 32m tonnes of mineral in the pipeline and at
various stages in the planning system.
United States
£m except where stated H1 2024 H1 2023 Change %
Revenue 53.0 - -
Underlying EBIT 6.6 - -
Underlying EBIT margin 12.5% - -
In the 16 weeks since the transaction completed, BMC has contributed a strong
result, ahead of prior year and plan, and we are encouraged by the performance
at this early stage. Volumes in both aggregates and ready-mixed concrete have
continued to grow in 2024.
While Missouri has been impacted by volatile weather conditions during the
first half, construction activity remains robust and backlogs are healthy.
Pricing is well underpinned by the market backdrop; population growth exceeds
increases in housing completions and Federal stimulus programmes combined with
healthy state budgets support an active infrastructure end-market.
Integration is progressing well and our engagement with the whole team has
been well received, confirming our expectation that the culture of BMC is
closely aligned to Breedon's core values. The BMC team is entrepreneurial and
agile and has extensive local market knowledge.
To underline Breedon's commitment to the health, safety and wellbeing of all
our employees, on acquisition we undertook an immediate safety review;
implementing a series of modifications including hiring a new dedicated safety
manager, updating safety guidelines and increasing the regularity of safety
meetings. We are already seeing the benefit of these actions with lost time
incidents significantly reduced when compared to the same period in the prior
year.
The Breedon vertically-integrated model is asset-backed and BMC, with c.400
million tonnes of high-quality mineral reserves and resources, is aligned to
this model. We are exploring more routes to market for our minerals, investing
in plant and equipment during the period to meet additional aggregates demand.
Cement
£m except where stated H1 2024 H1 2023 Change %
Revenue 156.9 176.8 (11)%
Underlying EBIT 23.9 25.9 (8)%
Underlying EBIT margin 15.2% 14.6% 60bps
The cement market in the first half of 2024 was challenging, primarily due to
the fall in housebuilding activity in GB, exacerbated by the wet conditions
which disrupted progress on construction sites. Consequently, volumes during
the period reduced 12%.
Pricing was supported by atailwind from the prior year; although carbon
surcharges reduced in the period, reflecting the lower cost of carbon credits.
Overall margins in the period strengthened by 60bps, principally due to lower
energy costs compared with the first half of 2023.
Our cement plants operate at exceptionally high levels of reliability which
were sustained in the first half. We undertook two planned kiln maintenance
shutdowns in January. These complex engineering undertakings completed within
budget and on schedule.
The teams have continued to progress a number of major capital investment
projects. At Hope the primary crusher will be replaced in the autumn and to
ensure a smooth transition the team has carried out extensive preparatory
work. The ARM project, which will facilitate the transport of secondary
material to site via rail, continues to make good progress and is on schedule
to be commissioned in the new year as planned. At Kinnegad, as well as
progress on the new solar plant, we are constructing a new bagging plant which
will be operational early next year.
FINANCE REVIEW
The Group delivered a resilient trading performance in the first half of 2024.
Revenue for the Group grew 3% to £764.6m (H1 2023: £742.7m) supported by our
entry into the US and an element of price growth; partially offset by reduced
volumes.
Underlying EBIT increased by 2% to £71.6m (H1 2023: £70.5m) benefiting from
a promising maiden contribution from BMC, which is trading ahead of plan and
has been reported as a new 'United States' operating segment. We delivered
strong earnings growth in Ireland and improved the margin in Cement, which
helped to mitigate the drop through from reduced volumes in GB, such that we
broadly maintained our Underlying EBIT margin at 9.4% (H1 2023: 9.5%).
On a like-for-like basis, excluding the impact of acquisitions, revenue in the
period decreased by 6% with pricing up 2ppt and volumes down 8ppt and with
Underlying EBIT decreasing by 9%.
Non-underlying items
The Group recorded £14.7m (H1 2023: £8.4m) of non-underlying items during
the period comprising £9.0m of acquisition-related expenses, primarily
incurred in connection with the BMC acquisition, and £5.7m amortisation of
acquired intangibles.
Interest
Net interest costs in the period were £10.4m (H1 2023 £5.6m) with the
increase primarily due to interest payable on the debt drawn to finance the
BMC acquisition. The Group continues to benefit from longer-term fixed rates
of borrowing at a blended rate of c.2% from the £250m of US Private Placement
notes issued in 2021, with repayment dates between 2028 and 2036.
Taxation
The underlying tax charge in the period has been based on the estimated
effective weighted average rate applicable for existing operations for the
full year. This represents a combined underlying effective rate of 22.4%, with
the increase in the effective rate (FY 2023: 20.4%) a result of the increased
UK corporation tax rate and the impact of our new US operations where the
statutory tax rate is higher than the Group average at around 25%.
Earnings per share
Adjusted Underlying Basic EPS for the period fell to 13.9p (H1 2023: 15.3p)
reflecting increased interest and corporation tax rates as well as a higher
number of shares in issue. Statutory Basic EPS was 10.0p (H1 2023: 13.0p).
Statement of financial position and post-tax ROIC
Net assets at 30 June 2024 were £1,120.7m (FY 2023: £1,110.7m).
We have completed an initial exercise as required by IFRS 3 - Business
Combinations to assess the provisional fair value of assets acquired and
liabilities assumed through the three acquisitions completed in the first half
of 2024. Goodwill of £55.0m has been recognised which equates to 30% of the
equity value of the acquired businesses.
Post-tax ROIC of 8.8% (H1 2023: 10.0%) reflects short term dilution from the
BMC acquisition combined with the impact of increased corporate tax rates.
Free cash flow
£m H1 2024 H1 2023 Change
Underlying EBITDA 118.1 112.3 5.8
Working capital (63.7) (40.9) (22.8)
Net interest (8.5) (3.5) (5.0)
Income taxes paid (15.2) (15.9) 0.7
Net capex (40.9) (31.9) (9.0)
Other 0.6 0.7 (0.1)
Free cash flow (9.6) 20.8 (30.4)
Acquisitions (248.7) (11.1) (237.6)
Dividends paid (32.6) (23.7) (8.9)
Non-underlying items (9.0) (5.4) (3.6)
Other (2.5) (3.3) 0.8
Increase in Net Debt (302.4) (22.7) (279.7)
The Group's free cash flow in the period was an outflow of £9.6m (H1 2023:
inflow of £20.8m) reflecting the usual seasonal working capital expansion,
inclusive of BMC, and a step up in the level of capital investment principally
due to the ARM project at Hope.
The primary driver for the increase in Net Debt is the incremental borrowings
taken on by the Group to fund the acquisition of BMC.
Net Debt
Closing Net Debt at 30 June 2024 was £472.3m (H1 2023: £220.4m) and Covenant
Leverage was 1.6x (H1 2023: 0.7x), comfortably within our target range of 1x
to 2x.
Refinancing of borrowing facilities
The Group completed the refinancing of its RCF subsequent to the period end,
increasing the facility size from £350m to £400m and retaining the option of
a further £100m accordion. The amended facility secures access to longer-term
finance, running for an initial four-year period to at least July 2028, and
offers an incremental reduction in ongoing debt service costs.
Fees and expenses incurred in connection with the refinancing amounted to
approximately £2.0m and will be amortised over the amended life of the
facility.
The remaining facilities available to the Group comprise the £250m USPP, the
terms of which are unchanged from those disclosed in the 2023 Annual Report.
Dividend
We have announced our intention to pay an increased interim dividend of 4.5p
per share (H1 2023: 4.0p per share) reflecting our confidence in the prospects
of the Group and in keeping with our dividend policy. The dividend will be
paid on 1 November 2024 to shareholders who are on the Register of Members at
the close of business on 27 September 2024. The ex-dividend date is 26
September 2024. The latest date for registering for the Company's DRIP is 11
October 2024 and further details of how to join the DRIP are available on the
Company's website.
2024 technical guidance
Management expectations for the full year remain unchanged, with Underlying
EBIT slightly more weighted to the second half in 2024.
Net interest expense for the full year will be c.£25m, following the
refinancing of the RCF.
We expect an effective tax rate for the full year of c.22% (2023: 20.4%) which
will impact our post-tax performance measures (including ROIC), with cash
taxes materially in line with the effective rate.
Total capital expenditure for the full year will be c.£130m.
The cash cost of the interim dividend paid in the second half will be £16m,
resulting in a total cash cost of dividends paid during 2024 of £48m.
We continue to expect a modest inflationary increase in working capital over
the full year cycle of c.£30m, with Covenant Leverage reducing over the
balance of the year.
RISK
The Group's principal risks that might adversely impact the Group in the
remaining six months of the current financial year are:
Strategic Operational
· Acquisitions and material projects · Competition
· Climate change · Failure of a critical asset
· Land and mineral management · Health and safety
· Markets · IT and cyber security
· People · Legal and regulatory
Financial · Supply chain and input costs
· Treasury
Further details of the principal risks facing the Group are set out on pages
54-70 of the Group's Annual Report for the year ended 31 December 2023.
The Board has undertaken a risk review in the period to 30 June 2024, which
included specific consideration of any changes to the Group's risk profile
arising from the acquisition of BMC Enterprises and from the challenging
market conditions experienced in GB during the first half of 2024.
The nature of the Group's principal risks as described in the 2023 Annual
Report and the associated risk ratings have not changed as a result of this
assessment. The Board continues to manage these risks and to mitigate their
expected impact.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that, to the best of their knowledge:
· the condensed consolidated half-year financial statements have
been prepared in accordance with IAS 34 Interim Financial Reporting as adopted
by the UK
· the interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed consolidated half-year
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last Annual Report that could do so.
The Directors of Breedon Group plc are listed in the Group's 2023 Annual
Report on pages 112-113.
Since the publication of the 2023 Annual Report, there have been no changes to
the composition of the Board.
Rob Wood James Brotherton
Chief Executive Officer Chief Financial Officer
24 July 2024
Condensed Consolidated Income Statement
for the six months ended 30 June 2024
Six months ended 30 June 2024 Six months ended 30 June 2023 Year ended 31 December 2023
Underlying Non-underlying* Total Underlying Non- underlying* Total Underlying Non- underlying* Total
(note 5) (note 5) (note 5)
£m £m £m £m £m £m £m £m £m
Revenue 764.6 - 764.6 742.7 - 742.7 1,487.5 - 1,487.5
Operating expenses (694.5) (14.7) (709.2) (673.8) (8.4) (682.2) (1,333.9) (10.5) (1,344.4)
Group operating profit 70.1 (14.7) 55.4 68.9 (8.4) 60.5 153.6 (10.5) 143.1
Share of profit of associate and joint ventures 1.5 - 1.5 1.6 - 1.6 2.6 - 2.6
Profit from operations 71.6 (14.7) 56.9 70.5 (8.4) 62.1 156.2 (10.5) 145.7
Financial income 1.0 - 1.0 0.7 - 0.7 2.6 - 2.6
Financial expense (11.4) - (11.4) (6.3) - (6.3) (13.9) - (13.9)
Profit before taxation 61.2 (14.7) 46.5 64.9 (8.4) 56.5 144.9 (10.5) 134.4
Taxation (13.7) 1.3 (12.4) (13.3) 0.7 (12.6) (30.2) 1.4 (28.8)
Profit for the period 47.5 (13.4) 34.1 51.6 (7.7) 43.9 114.7 (9.1) 105.6
Attributable to:
Breedon Group shareholders 47.5 (13.4) 34.1 51.6 (7.7) 43.9 114.6 (9.1) 105.5
Non-controlling interests - - - - - - 0.1 - 0.1
Profit for the period 47.5 (13.4) 34.1 51.6 (7.7) 43.9 114.7 (9.1) 105.6
* Non-underlying items represent acquisition-related expenses, property gains
or losses, amortisation of acquisition intangibles, AIM to Main Market costs
(2023 only) and related tax items.
Earnings per share
Basic 10.0p 13.0p 31.1p
Diluted 10.0p 12.9p 31.0p
Underlying earnings per share are shown in note 9.
Dividends in respect of the period
Dividend per share 4.5p 4.0p 13.5p
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2024
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Profit for the period 34.1 43.9 105.6
Other comprehensive expense
Items which may be reclassified subsequently to profit and loss:
Foreign exchange differences on translation of foreign operations, net of (5.7) (5.6) (4.1)
hedging
Effective portion of changes in fair value of cash flow hedges (0.5) (0.1) (0.7)
Taxation on items taken directly to other comprehensive income - - 0.1
Other comprehensive expense for the period (6.2) (5.7) (4.7)
Total comprehensive income for the period 27.9 38.2 100.9
Total comprehensive income for the period is attributable to:
Breedon Group shareholders 27.9 38.2 100.8
Non-controlling interests - - 0.1
27.9 38.2 100.9
Condensed Consolidated Statement of Financial Position
at 30 June 2024
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Non-current assets
Property, plant and equipment 896.8 790.5 817.2
Right-of-use assets 47.2 47.3 45.1
Intangible assets 681.9 519.4 520.2
Investment in associate and joint ventures 15.6 15.3 14.5
Trade and other receivables 1.1 1.8 0.9
Total non-current assets 1,642.6 1,374.3 1,397.9
Current assets
Inventories 126.7 87.1 120.1
Trade and other receivables 344.5 322.6 227.9
Cash and cash equivalents 30.3 76.9 126.9
Total current assets 501.5 486.6 474.9
Total assets 2,144.1 1,860.9 1,872.8
Current liabilities
Interest-bearing loans and borrowings (8.4) (7.8) (8.1)
Trade and other payables (330.3) (323.8) (278.6)
Current tax payable (0.4) (1.9) (0.1)
Provisions (10.1) (9.4) (8.8)
Total current liabilities (349.2) (342.9) (295.6)
Non-current liabilities
Interest-bearing loans and borrowings (494.2) (289.5) (288.7)
Provisions (89.6) (78.0) (85.8)
Deferred tax liabilities (90.4) (90.4) (92.0)
Total non-current liabilities (674.2) (457.9) (466.5)
Total liabilities (1,023.4) (800.8) (762.1)
Net assets 1,120.7 1,060.1 1,110.7
Equity attributable to Breedon Group shareholders
Share capital 3.4 3.4 3.4
Share premium 13.8 - 0.7
Hedging reserve (1.0) - (0.5)
Translation reserve (9.4) (5.2) (3.7)
Merger reserve 80.5 80.5 80.5
Retained earnings 1,033.1 981.1 1,030.0
Total equity attributable to Breedon Group shareholders 1,120.4 1,059.8 1,110.4
Non-controlling interests 0.3 0.3 0.3
Total equity 1,120.7 1,060.1 1,110.7
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2024
For /the six months ended 30 June 2024
Share capital Share premium Hedging reserve Translation reserve Merger reserve Retained earnings Attributable to Breedon Group shareholders Non-controlling interests Total
equity
£m £m £m £m £m £m £m £m £m
Balance at 31 3.4 0.7 (0.5) (3.7) 80.5 1,030.0 1,110.4 0.3 1,110.7
December
2023
Shares issued - 13.1 - - - - 13.1 - 13.1
Dividends paid - - - - - (32.6) (32.6) - (32.6)
Total comprehensive income for the period - - (0.5) (5.7) - 34.1 27.9 - 27.9
Share-based payments(1) - - - - - 1.6 1.6 - 1.6
Balance at 30 June 2024 3.4 13.8 (1.0) (9.4) 80.5 1,033.1 1,120.4 0.3 1,120.7
For the six months ended 30 June 2023
Share capital Stated capital Hedging Translation reserve Merger reserve Retained earnings Attributable Non-controlling interests Total
reserve to Breedon Group shareholders equity
£m £m £m £m £m £m £m £m £m
Balance at 31 - 555.0 0.1 0.4 - 488.0 1,043.5 0.3 1,043.8
December
2022
Corporate 474.5 (555.0) - - 80.5 - - - -
reorganisation
Capital (471.1) - - - - 471.1 - - -
reduction(2)
Dividends paid - - - - - (23.7) (23.7) - (23.7)
Total comprehensive income for the period - - (0.1) (5.6) - 43.9 38.2 - 38.2
Share-based payments(1) - - - - - 1.8 1.8 - 1.8
Balance at 30 June 2023 3.4 - - (5.2) 80.5 981.1 1,059.8 0.3 1,060.1
Condensed Consolidated Statement of Changes in Equity (Continued)
for the six months ended 30 June 2024
For the year ended 31 December 2023
Share capital Share premium Stated capital Hedging reserve Translation reserve Merger reserve Retained earnings Attributable to Breedon Group shareholders Non-controlling interests Total
equity
£m £m £m £m £m £m £m £m £m £m
Balance at 31 - - 555.0 0.1 0.4 - 488.0 1,043.5 0.3 1,043.8
December
2022
Shares issued - 0.7 - - - - - 0.7 - 0.7
Corporate 474.5 - (555.0) - - 80.5 - - - -
reorganisation
Capital (471.1) - - - - - 471.1 - - -
reduction(2)
Transfer to - - - - - - (0.2) (0.2) 0.2 -
non-controlling
interest
Dividends paid - - - - - - (37.3) (37.3) (0.3) (37.6)
Total comprehensive income for the period - - - (0.6) (4.1) - 105.5 100.8 0.1 100.9
Share-based payments(1) - - - - - - 2.9 2.9 - 2.9
Balance at 31 December 2023 3.4 0.7 - (0.5) (3.7) 80.5 1,030.0 1,110.4 0.3 1,110.7
1 Share-based payments are shown inclusive of deferred tax
recognised in equity.
2 On 9 June 2023, Breedon Group plc undertook a capital reduction to
convert £471.1m of share capital to distributable reserves, with share
capital remaining at 338.9 million shares but with a nominal value of £0.01
per share.
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2024
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Cash flows from operating activities
Profit for the period 34.1 43.9 105.6
Adjustments for:
Depreciation and mineral depletion 48.0 43.4 88.7
Amortisation 5.7 3.0 6.0
Financial income (1.0) (0.7) (2.6)
Financial expense 11.4 6.3 13.9
Share of profit of associate and joint ventures (1.5) (1.6) (2.6)
Net gain on sale of property, plant and equipment (1.3) (1.0) (1.4)
Share-based payments 1.6 1.8 3.0
Taxation 12.4 12.6 28.8
Operating cash flow before changes in working capital and provisions 109.4 107.7 239.4
Decrease/(increase) in inventories 1.0 7.8 (24.6)
Increase in trade and other receivables (74.2) (99.7) (1.0)
Increase in trade and other payables 9.0 51.3 8.8
Increase/(decrease) in provisions 0.5 (0.3) 8.3
Cash generated from operating activities 45.7 66.8 230.9
Interest paid (8.1) (3.0) (6.8)
Interest element of lease payments (1.4) (1.2) (2.3)
Interest received 1.0 0.7 2.6
Income taxes paid (15.2) (15.9) (32.5)
Net cash from operating activities 22.0 47.4 191.9
Cash flows used in investing activities
Acquisition of businesses (160.9) (11.1) (18.8)
Dividends from associate and joint ventures 0.3 - 1.8
Purchase of property, plant and equipment (44.1) (33.8) (106.8)
Proceeds from sale of property, plant and equipment 3.2 1.9 3.4
Net cash used in investing activities (201.5) (43.0) (120.4)
Cash flows from/(used in) financing activities
Dividends paid (32.6) (23.7) (37.6)
Proceeds from the issue of shares (net of costs) 1.0 - 0.7
Proceeds from interest-bearing loans 205.8 - -
Repayment of interest-bearing loans (86.7) - (0.9)
Revolving Credit Facility extension costs - (0.7) (0.7)
Repayment of lease obligations (4.7) (4.7) (8.1)
Net cash from/(used in) financing activities 82.8 (29.1) (46.6)
Net (decrease)/increase in cash and cash equivalents (96.7) (24.7) 24.9
Cash and cash equivalents at beginning of period 126.9 101.7 101.7
Foreign exchange differences 0.1 (0.1) 0.3
Cash and cash equivalents at end of period 30.3 76.9 126.9
Notes to the Condensed Consolidated Interim Financial Statements
1 Basis of preparation
Breedon Group plc (the "Company") is a company domiciled in England. These
Condensed Consolidated Interim Financial Statements (the "Interim Financial
Statements") consolidate the results of the Company and its subsidiary
undertakings (collectively the "Group").
These Interim Financial Statements have been prepared in accordance with IAS
34 - Interim Financial Reporting, as adopted by the UK. The Interim Financial
Statements have been prepared under the historical cost convention except
where the measurement of balances at fair value is required. The Interim
Financial Statements have been prepared applying the accounting policies and
presentation that were applied in the Consolidated Financial Statements for
the year ended 31 December 2023.
These Interim Financial Statements have not been audited or reviewed by
auditors pursuant to the Auditing Practices Board's guidance on the review of
interim financial information. These statements do not include all of the
information required for full annual financial statements and should be read
in conjunction with the full Annual Report for the year ended 31 December
2023.
The comparative figures for the financial year ended 31 December 2023 have
been extracted from the statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditor. The report of the
auditor (i) was unqualified and (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their report.
New IFRS Standards and Interpretations
The Group has adopted the following standards from 1 January 2024:
- Amendments to IAS 1 - Presentation of financial statements -
Non-current liabilities with covenants
- Amendments to IFRS 16 - Leases - Lease liability in a sale and
leaseback
- Amendments to IAS 7 and IFRS 7 - Statement of cash flows and
disclosures - Supplier finance arrangements
The adoption of these standards has not had a material impact on the Interim
Financial Statements.
Exchange rates
The following exchange rates have been used in the preparation of the Interim
Financial Statements:
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
Currency Period end Average Period end Average Period end Average
EUR 1.18 1.17 1.16 1.14 1.15 1.15
USD 1.26 1.26 - - - -
2 Going concern
These Interim Financial Statements are prepared on a going concern basis which
the directors consider to be appropriate for the following reasons:
The Group meets day-to-day working capital and other funding requirements
through banking facilities, which include an overdraft facility. Longer term
debt financing is accessed through the Group's USPP loan note programme.
The facilities at 30 June 2024 comprised a £350m multi-currency RCF to June
2026 and £250m of USPP loan notes with maturities between 2028 and 2036.
Further details of these facilities are provided in note 8 to these Interim
Financial Statements. Subsequent to the period end, the Group completed a
refinancing of the RCF, increasing the facility to £400m. The amended
facility runs for an initial four year period to at least July 2028.
2 Going concern (continued)
The Group comfortably met all covenants and other terms of its borrowing
agreements in the period, and maintained its track record of profitability,
with an overall profit before taxation for the period of £46.5m. The Group
has prepared cash flow forecasts for a period of more than 12 months from the
date of signing these Interim Financial Statements, which show a sustained
trend of profitability and cash generation. At 30 June 2024, the Group had
cash of £30.3m and undrawn banking facilities of £144.6m which it is
expected will provide sufficient liquidity for the Group to discharge its
liabilities as they fall due and retain covenant headroom, even under a
'severe but plausible' downside scenario of forecast cash flows.
Consequently, the directors are confident that the Group will have sufficient
funds to continue to meet its liabilities as they fall due for at least 12
months from the date of approval of these financial statements and therefore
have prepared the Interim Financial Statements on a going concern basis.
3 Accounting estimates and judgements
In preparing these Interim Financial Statements, management have been required
to make assumptions, estimates and judgements that affect the application of
accounting policies and the reported amounts of assets and liabilities and
income and expense. Actual results may differ from estimates.
Note 11 contains information relating to the acquisition of BMC Enterprises
Inc. where significant estimates have been applied in determining the fair
value of the customer intangible acquired. The Group has utilised a third
party expert to calculate the value of the asset to mitigate estimation risk.
There have been no further material judgements or key sources of estimation
uncertainty compared to those applicable to the Consolidated Financial
Statements for the year ended 31 December 2023 as set out in note 26 of the
Annual Report for that year.
4 Segmental analysis
The principal activities of the Group are the quarrying of aggregates and
manufacture and sale of construction materials and building products,
including cement, asphalt and ready-mixed concrete, together with related
activities in Great Britain, Ireland and the United States.
The Group's activities comprise the following reportable segments:
Great Britain: our construction materials and surfacing businesses in Great
Britain.
Ireland: our construction materials and surfacing businesses on the Island of
Ireland.
United States: our construction materials business in the United States, being
the acquired BMC business (note 11).
Cement: our cementitious operations in Great Britain and Ireland.
4 Segmental analysis (continued)
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
Revenue Underlying Revenue Underlying EBITDA* Revenue Underlying
EBITDA* EBITDA*
Income statement £m £m £m £m £m £m
Great Britain 492.4 61.6 519.6 69.0 1,033.8 138.6
Ireland 111.2 17.5 109.1 13.2 235.5 35.9
United States 53.0 10.2 - - - -
Cement 156.9 38.4 176.8 39.8 331.2 84.5
Central administration - (9.6) - (9.7) - (16.7)
Eliminations (48.9) - (62.8) - (113.0) -
Group 764.6 118.1 742.7 112.3 1,487.5 242.3
Reconciliation to statutory profit
Underlying EBITDA as above 118.1 112.3 242.3
Depreciation and mineral depletion (48.0) (43.4) (88.7)
Underlying Group operating profit 70.1 68.9 153.6
Great Britain 35.6 42.8 86.4
Ireland 13.7 10.0 29.0
United States 6.6 - -
Cement 23.9 25.9 55.2
Central administration (9.7) (9.8) (17.0)
Underlying Group operating profit 70.1 68.9 153.6
Share of profit of associate and joint ventures 1.5 1.6 2.6
Underlying profit from operations (EBIT) 71.6 70.5 156.2
Non-underlying items (note 5) (14.7) (8.4) (10.5)
Profit from operations 56.9 62.1 145.7
*Underlying EBITDA is earnings before interest, tax, depreciation and mineral
depletion, amortisation, non-underlying items (note 5) and before our share of
profit from associate and joint ventures.
Analysis of revenue by major products and service lines by segment
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Sale of goods
Great Britain 397.6 441.1 855.8
Ireland 51.5 48.0 96.5
United States 53.0 - -
Cement 156.9 176.8 331.2
Eliminations (48.9) (62.8) (113.0)
610.1 603.1 1,170.5
Surfacing
Great Britain 94.8 78.5 178.0
Ireland 59.7 61.1 139.0
154.5 139.6 317.0
Total 764.6 742.7 1,487.5
4 Segmental analysis (continued)
Timing of revenue recognition
Sale of goods revenue relates to products for which revenue is recognised at a
point in time as the product is transferred to the customer. Surfacing
revenues are accounted for as products and services for which revenue is
recognised over time.
Statement of financial position
30 June 30 June 31 December
2024 2023 2023
Total Total Total Total Total Total
assets liabilities assets liabilities assets liabilities
£m £m £m £m £m £m
Great Britain 981.6 (255.8) 950.6 (251.8) 920.6 (238.3)
Ireland 298.2 (44.1) 296.6 (55.9) 282.8 (40.6)
United States 286.4 (32.5) - - - -
Cement 542.8 (66.2) 531.9 (77.4) 539.2 (73.8)
Central administration 4.8 (31.4) 4.9 (26.1) 3.3 (20.5)
Total operations 2,113.8 (430.0) 1,784.0 (411.2) 1,745.9 (373.2)
Current tax - (0.4) - (1.9) - (0.1)
Deferred tax - (90.4) - (90.4) - (92.0)
Net Debt 30.3 (502.6) 76.9 (297.3) 126.9 (296.8)
Total Group 2,144.1 (1,023.4) 1,860.9 (800.8) 1,872.8 (762.1)
5 Non-underlying items
Non-underlying items are those which, because of their nature, size or
incidence, are either unlikely to recur in future periods or which distort the
underlying trading performance of the business, including non-cash items. For
an item to be classified as non-underlying, it must meet defined criteria
which are applied consistently by the Group.
The directors monitor the performance of the Group using alternative
performance measures which are calculated on an underlying basis. In the
opinion of the directors, this presentation aids understanding of the
underlying business performance and any references to underlying earnings
measures throughout this report are made on this basis.
Underlying measures are calculated and presented on a consistent basis over
time to assist in the comparison of performance.
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Included in operating expenses:
Acquisition-related expenses 9.0 0.4 0.9
Amortisation of acquired intangible assets 5.7 3.0 6.0
AIM to Main Market costs - 5.0 3.6
Total non-underlying items (before tax) 14.7 8.4 10.5
Non-underlying taxation (1.3) (0.7) (1.4)
Total non-underlying items (after tax) 13.4 7.7 9.1
6 Operating expenses
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Costs of raw materials purchased 152.4 140.2 263.1
Employee costs 119.8 102.1 208.3
Depreciation and mineral depletion 48.0 43.4 88.7
Gain on sale of plant and equipment (1.3) (1.0) (1.4)
Other operating expenses 375.6 389.1 775.2
Underlying operating expenses 694.5 673.8 1,333.9
Non-underlying operating expenses 14.7 8.4 10.5
Operating expenses 709.2 682.2 1,344.4
7 Taxation
The tax charge at the effective rate for the six months ended 30 June 2024 is
based on the estimated effective weighted average rate applicable for existing
operations for the full year. This results in a combined underlying effective
rate of 22.4%.
8 Interest-bearing loans and borrowings
Net Debt
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Cash and cash equivalents 30.3 76.9 126.9
Current borrowings (8.4) (7.8) (8.1)
Non-current borrowings (494.2) (289.5) (288.7)
Net Debt (including IFRS 16 lease liabilities) (472.3) (220.4) (169.9)
IFRS 16 lease liabilities 49.8 49.5 48.0
Net Debt (excluding IFRS 16 lease liabilities) (422.5) (170.9) (121.9)
Analysis of borrowings between current and non-current
30 June 30 June 31 December
2024 2023 2023
£m £m £m
IFRS 16 lease liabilities 8.4 7.8 8.1
Current borrowings 8.4 7.8 8.1
Bank and USPP debt 452.8 247.8 248.8
IFRS 16 lease liabilities 41.4 41.7 39.9
Non-current borrowings 494.2 289.5 288.7
Facilities
The Group's borrowing facilities at 30 June 2024 comprised a £350m
multi-currency RCF and a £250m USPP. Interest on the RCF was calculated as a
margin referenced to the Group's Covenant Leverage plus SONIA, SOFR or EURIBOR
according to the currency of borrowing. Interest on the RCF was charged in the
period at margins of between 1.8% and 1.9%.
Subsequent to the period end, the Group completed a refinancing of the RCF,
increasing the facility to £400m. The amended facility runs for an initial
four year period to at least July 2028. Interest is calculated on the new
facility as a margin to the base rate of the currency of drawing, which varies
in line with the Group's Covenant Leverage. The opening margin payable was
approximately 1.8%.
8 Interest-bearing loans and borrowings (continued)
The USPP was issued in 2021 with an average fixed coupon of approximately 2%
and comprises £170m sterling and £80m drawn in euro, with a maturity profile
between 2028 and 2036.
Borrowing facilities are subject to leverage and interest cover covenants
which are tested half-yearly. The Group remained fully compliant with all
covenants during the period.
9 Earnings per share
30 June 30 June 31 December
2024 2023 2023
pence pence pence
Adjusted Underlying Basic EPS 13.9 15.3 34.0
Statutory Basic EPS 10.0 13.0 31.1
Adjusted Underlying Diluted EPS 13.9 15.3 33.9
Statutory Diluted EPS 10.0 12.9 31.0
Adjusted Underlying Basic EPS is calculated based on Underlying profit for the
period attributable to Breedon Group shareholders adjusted to exclude the
impact of changes in the deferred tax rate being £47.5m (30 June 2023:
£51.7m, 31 December 2023: £115.3m). The weighted average number of ordinary
shares in issue during the period was 341,879,135 (30 June 2023: 338,882,282,
31 December 2023: 339,148,164).
Statutory Basic EPS is based on the profit for the period attributable to
Breedon Group shareholders of £34.1m (30 June 2023: £43.9m, 31 December
2023: £105.5m) and on the weighted average number of ordinary shares in issue
during the period as above.
Diluted earnings per ordinary share is based on 342,248,972 shares (30 June
2023: 339,548,658, 31 December 2023: 339,848,700) and reflects the effect of
all dilutive potential ordinary shares.
10 Related party transactions
The Group has continued to supply services and materials to, and purchased
services and materials from, its associate and joint ventures on an arms
length basis. The nature of these related party transactions is consistent
with those disclosed in the Annual Report for the year ended 31 December
2023.
11 Acquisitions
The Group completed three acquisitions in the period, being BMC Enterprises
Inc., Eco-Asphalt Supplies Limited and Phoenix Surfacing Limited.
BMC Enterprises Inc. ("BMC")
The Group completed the acquisition of BMC, a supplier of ready-mixed
concrete, aggregates and building products on 6 March 2024, acquiring 100% of
the share capital.
The provisional fair values in respect of the identifiable assets acquired and
liabilities assumed are set out below:
Provisional fair value on acquisition
£m
Intangible assets 109.9
Property, plant and equipment 80.8
Right-of-use assets 1.2
Inventories 7.9
Trade and other receivables 38.6
Cash and cash equivalents 5.5
Trade and other payables (30.3)
Provisions (3.4)
Borrowings (85.9)
Total acquired net assets 124.3
Cash consideration on completion 155.2
Post-completion payment 0.5
Equity consideration 12.2
Total consideration payable 167.9
Goodwill arising 43.6
Consideration
The post-completion payment is an estimate of the amount expected to be paid
in the second half of 2024 following agreement of final completion accounts.
Equity consideration comprises 3,199,915 ordinary shares issued to the vendor,
valued based on the market price of those shares at the date of acquisition.
Fair value adjustments
The provisional fair values stated are inclusive of adjustments to:
- recognise intangible assets, including the value of acquired
customer relationships and non-compete agreements. The value of these assets
were assessed with the support of a third party corporate finance specialist;
- revalue certain items of property, plant and equipment,
including mineral reserves and resources, to reflect the fair value at date of
acquisition;
- working capital accounts to reflect fair value; and
- restoration provisions to reflect costs to comply with
environmental and other legislation.
The goodwill arising represents the strategic geographic location of assets
acquired, the potential for future growth and the skills of the existing
workforce and management team.
11 Acquisitions (continued)
Other current year acquisitions
The directors consider the remaining acquisitions completed in the period,
being 100% of the share capital Eco Asphalt Supplies Limited (31 January 2024)
and 80% of the share capital of Phoenix Surfacing Limited (1 April 2024), to
be individually immaterial, but material in aggregate.
The combined provisional fair values in respect of the identifiable assets
acquired liabilities assumed are set out below:
Provisional fair value on acquisition
£m
Intangible assets 5.5
Property, plant and equipment 3.3
Inventories 0.2
Trade and other receivable 5.0
Cash and cash equivalents 1.8
Trade and other payables (5.6)
Borrowings (1.9)
Deferred tax liabilities (1.8)
Total acquired net assets 6.5
Cash consideration on completion 13.0
Post-completion payment 1.5
Deferred consideration 3.4
Total consideration payable 17.9
Goodwill arising 11.4
Consideration
Deferred consideration includes £2.6m relating to a put liability and has
been accounted for using the assumed acquisition method.
The post-completion payment is an estimate of the amounts expected to be paid
in the second half of 2024 subject to agreement of final completion accounts.
Fair value adjustments
The fair value adjustments primarily comprised:
- intangible assets, including the value of acquired customer
relationships;
- impairment of property, plant and equipment; and
- deferred tax balances.
The goodwill arising represents expected synergies, the potential for future
growth, and the skills of the existing workforce. Goodwill is not deductible
for tax purposes.
11 Acquisitions (continued)
Impact of current year acquisitions
Income statement
During the period, the combined acquisitions contributed revenues of £60.7m,
Underlying EBIT of £6.9m and profit before tax of £6.9m to the Group. If
these acquisitions had occurred on 1 January 2024, the results of the Group
for the six months ended 30 June 2024 would have shown revenue of £795.4m,
Underlying EBIT of £72.4m and Profit before tax of £47.3m.
Acquisition costs
The Group incurred acquisition-related costs of £9.0m in the period,
primarily relating to external professional fees. These have been presented as
non-underlying operating expenses (note 5).
Cash flow
The cash flow impact of acquisitions in the year can be summarised as follows:
£m
Consideration - cash 168.2
Cash and cash equivalents acquired (7.3)
Net cash consideration shown in the condensed consolidated statement of cash 160.9
flows
12 Share capital
millions
Issued ordinary shares
31 December 2022 1,694.4
5 : 1 share consolidation as part of Corporate Reorganisation (1,355.5)
30 June 2023 338.9
Exercise of savings-related share options 0.2
Vesting of Performance Share Plan awards 0.6
31 December 2023 339.7
Exercise of savings-related share options 0.4
Vesting of Performance Share Plan awards 0.3
Issued on acquisition of BMC (note 11) 3.2
30 June 2024 343.6
13 Reconciliation to non-GAAP measures
A number of non-GAAP performance measures are used throughout this Interim
Report and these Interim Financial Statements. This note provides a
reconciliation from these alternative performance measures to the most
directly related statutory measures.
Reconciliation of earnings based alternative performance measures
Six months ended Great Ireland Cement Central Share of profit Total
administration and
30 June 2024 Britain £m £m eliminations £m of associate and joint ventures £m
£m £m
United
States
£m
Revenue 492.4 111.2 53.0 156.9 (48.9) - 764.6
Profit from operations 56.9
Non-underlying items (note 5) 14.7
Underlying EBIT 35.6 13.7 6.6 23.9 (9.7) 1.5 71.6
Underlying EBIT margin 7.2% 12.3% 12.5% 15.2% 9.4%
Underlying EBIT 35.6 13.7 6.6 23.9 (9.7) 1.5 71.6
Share of profit of associate - - - - - (1.5) (1.5)
and joint ventures
Depreciation and mineral depletion 26.0 3.8 3.6 14.5 0.1 - 48.0
Underlying EBITDA 61.6 17.5 10.2 38.4 (9.6) - 118.1
Six months ended Great Britain Ireland Cement Central administration Share of profit Total
30 June 2023 £m £m £m and of associate £m
eliminations and joint
£m ventures
£m
Revenue 519.6 109.1 176.8 (62.8) - 742.7
Profit from operations 62.1
Non-underlying items (note 5) 8.4
Underlying EBIT 42.8 10.0 25.9 (9.8) 1.6 70.5
Underlying EBIT margin 8.2% 9.2% 14.6% 9.5%
Underlying EBIT 42.8 10.0 25.9 (9.8) 1.6 70.5
Share of loss of associate - - - - (1.6) (1.6)
and joint ventures
Depreciation and mineral depletion 26.2 3.2 13.9 0.1 - 43.4
Underlying EBITDA 69.0 13.2 39.8 (9.7) - 112.3
13 Reconciliation to non-GAAP measures (continued)
Reconciliation of earnings based alternative performance measures (continued)
Year ended Great Ireland Cement Central administration Share of profit of associate Total
and joint
31 December 2023 Britain £m £m and ventures £m
£m eliminations £m
£m
Revenue 1,033.8 235.5 331.2 (113.0) - 1,487.5
Profit from operations 145.7
Non-underlying items (note 5) 10.5
Underlying EBIT 86.4 29.0 55.2 (17.0) 2.6 156.2
Underlying EBIT margin 8.4% 12.3% 16.7% 10.5%
Underlying EBIT 86.4 29.0 55.2 (17.0) 2.6 156.2
Share of profit of associate - - - - (2.6) (2.6)
and joint ventures
Depreciation and mineral depletion 52.2 6.9 29.3 0.3 - 88.7
Underlying EBITDA 138.6 35.9 84.5 (16.7) - 242.3
Free cash flow
Six months ended Six months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m £m £m
Net cash from operating activities 22.0 47.4 191.9
Net cash used in investing activities (201.5) (43.0) (120.4)
Acquisition of businesses 160.9 11.1 18.8
Cash impact of non-underlying items 9.0 5.3 4.5
Free cash flow (9.6) 20.8 94.8
Return on invested capital
Twelve months ended Twelve months ended Year ended
30 June 30 June 31 December
2024 2023 2023
£m
£m
£m
H2 2022 Underlying EBIT - 88.1 -
H1 2023 Underlying EBIT - 70.5 70.5
H2 2023 Underlying EBIT 85.7 - 85.7
H1 2024 Underlying EBIT 71.6 - -
LTM Underlying EBIT 157.3 158.6 156.2
Underlying effective tax rate 22.4% 20.3% 20.4%
Taxation at the Group's underlying effective rate (35.2) (32.2) (31.9)
Underlying earnings before interest 122.1 126.4 124.3
Net assets 1,120.7 1,060.1 1,110.7
Net Debt (note 8) 472.3 220.4 169.9
Invested capital 1,593.0 1,280.5 1,280.6
Average invested capital(1) 1,436.8 1,262.4 1,261.1
Adjustment for timing of significant acquisition(2) (41.7) - -
Adjusted average invested capital 1,395.1 1,262.4 1,261.1
Return on invested capital(3) 8.8% 10.0% 9.9%
1 Average invested capital is calculated by taking the average of the
opening invested capital at the start of the period and the closing invested
capital at the reporting date. Opening invested capital at 30 June 2022 was
£1,244.2m and at 1 January 2023 was £1,241.5m.
2 This adjustment is made to the average of opening and closing invested
capital to more accurately reflect the impact of the timing of the acquisition
of BMC Enterprises which completed on 6 March 2024. See note 11.
3 Return on invested capital is calculated as underlying earnings before
interest for the previous twelve months, divided by Adjusted average invested
capital for the period.
13 Reconciliation to non-GAAP measures (continued)
Covenant Leverage
Twelve months Twelve months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
£m
£m
£m
As reported
H2 2022 Underlying EBITDA - 128.0 -
H1 2023 Underlying EBITDA - 112.3 112.3
H2 2023 Underlying EBITDA 130.0 - 130.0
H1 2024 Underlying EBITDA 118.1 - -
LTM Underlying EBITDA 248.1 240.3 242.3
Impact of IFRS 16 (10.8) (11.0) (10.3)
Pro-forma adjustments for acquisitions 22.1 - -
Underlying EBITDA for covenants 259.4 229.3 232.0
Net Debt (excluding IFRS 16) (422.5) (170.9) (121.9)
Covenant Leverage 1.6x 0.7x 0.5x
Covenant Leverage is defined as the ratio of Underlying EBITDA to Net Debt,
with both Underlying EBITDA and Net Debt adjusted to reflect the material
items which are adjusted by the Group and its lenders in determining leverage
for the purpose of assessing covenant compliance and, in the case of our bank
facilities, the margin payable on debt. The only material adjusting items
being the impact of IFRS 16 and a pro-forma adjustment to include
pre-acquisition EBITDA from businesses owned for less than twelve months.
14 Post balance sheet event
Subsequent to the period end, the Group completed the refinancing of its RCF.
The terms of the amended facility are further disclosed in note 8.
GLOSSARY
The following definitions apply throughout this announcement, unless the
context requires otherwise.
Adopted IFRS International Financial Reporting Standards as adopted by the UK
ARM Alternative Raw Material project
Bps Basis points
BMC BMC Enterprises Inc.
Breedon Breedon Group plc
CEM II CEM II limestone cement; consists of clinker, minor additional constituents
and up to 20% of limestone which reduces the product's carbon intensity
Covenant Leverage Leverage as defined by the Group's banking facilities. This excludes the
impact of IFRS 16 and includes the proforma impact of M&A
CDP Climate Disclosure Project
EBIT Earnings before interest and tax which equates to profit from operations
EPS Earnings per share
ETS Emissions Trading Scheme
EURIBOR Euro Inter-bank Offered Rate
GAAP Generally Accepted Accounting Principles
GB Great Britain
Group Breedon and its subsidiary companies
IAS International Accounting Standards
IFRS International Financial Reporting Standard
Invested capital Net assets plus Net Debt
Ireland The Island of Ireland
Leverage Net debt expressed as a multiple of Underlying EBITDA
Like-for-like Like-for-like reflects reported values adjusted for the impact of acquisitions
and disposals
M&A Mergers & acquisitions
NI Northern Ireland
Ppt Percentage point
RCF Revolving credit facility
RoI Republic of Ireland
ROIC Post tax Return on Invested Capital for the previous twelve months
SBTi Science Based Targets initiative
SONIA Sterling Overnight Index Average
UK United Kingdom (GB & NI)
Underlying Stated before acquisition related expenses, property gains and losses,
amortisation of acquisition intangibles and related tax items, AIM to Main
market costs (2023 only)
Underlying EBITDA Earnings before interest, tax, depreciation and amortisation non-Underlying
items and before our share of profit from associate and joint ventures
US United States
USPP US Private Placement
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