REG - Breedon Group PLC - Final Results
06/03/2024 07:00
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RNS Number : 7204F Breedon Group PLC 06 March 2024
6 March 2024
BREEDON GROUP PLC
Annual results 2023
Record Revenue and Underlying EBIT; ahead of upgraded expectations
Dividend payout significantly increased
Breedon Group plc (Breedon or the Group), a leading vertically-integrated
construction materials group in Great Britain and Ireland, announces audited
annual results for the year ended 31 December 2023.
Statutory highlights Underlying(1) highlights
£m 2023 2022 % change 2023 2022 % change % LFL(2)
except where stated
Revenue 1,487.5 1,396.3 7% 1,487.5 1,396.3 7% 4%
EBIT(3) 145.7 148.0 (2)% 156.2 155.0 1% (1)%
EBIT(3) margin 9.8% 10.6% (80)bps 10.5% 11.1% (60)bps
Profit Before Tax 134.4 135.8 (1)% 144.9 142.8 1%
Basic EPS(4) ( ) 31.1p 33.2p (6)% 34.0p 35.4p (4)%
Dividend per share 13.5p 10.5p 29%
Net Debt(5) 169.9 197.7 (14)%
Covenant Leverage(6) 0.5x 0.7x (0.2)x
FCF conversion(7) 39% 29% 10ppt
ROIC(8) 9.9% 10.8% (90)bps
FINANCIAL HIGHLIGHTS
Disciplined execution of our sustainable growth strategy delivered
high-quality earnings
· Full year results ahead of upgraded expectations(9)
· Record revenue increased 7%; pricing contributed 9ppt, offset by
2ppt volume reduction reflecting challenging macroeconomic conditions
· Record Underlying EBIT due to disciplined focus on cost recovery
and self-help measures
Strengthened financial position underpins strategic flexibility
· Balanced financial position maintained; Covenant Leverage reduced
to 0.5x (2022: 0.7x), net capital expenditure of £103m (2022: £102m)
supporting further investment for growth
· Working capital outflow as forecast; good control of inventories
and strong cash collection
· Post-tax ROIC broadly in-line with target; impacted by increased
corporation tax rates
Full-year dividend significantly increased by 29% to 13.5p;
· Payout ratio now at target of 40% (2022: 30%); total cash
returned to shareholders in 2023 through dividends increased to £37.3m (2022:
£30.5m)
· Increased payout delivers on our commitment to return capital to
shareholders, reflects the health of our balance sheet, confidence in our cash
generation and ability to deliver our strategy
OPERATING HIGHLIGHTS
Resilient performance in tough markets, delivering excellent service to our
customers
· GB revenue increased 6%; solidified our robust market position,
delivered excellent customer service, completed two bolt-on transactions and
strengthened our airfield surfacing capability
· Ireland revenue increased 4%; market conditions improving during
the year, we completed an important bolt-on acquisition, increased our mineral
reserves and grew our aggregate and asphalt volumes
· Cement delivered another record year, increasing revenue 10%;
robust pricing, diversified end-market exposure, market-leading quality and
reliability drove a strong performance
STRATEGIC HIGHLIGHTS
Sustainability gaining momentum
· We kept our colleagues and contractors safer on our sites
· Group-wide net zero targets submitted to Science Based Targets
initiative (SBTi) for formal validation
· First CDP rating secured; Climate Change achieved B rating, Water
Security received C rating
· Increased sales of lower clinker content cement and
industry-leading levels of alternative fuel substitution achieved
· Launch of the landmark Peak Cluster carbon capture and storage
project hosted at Hope
Delivering growth through optimisation and expansion
· Tailored operational and commercial efficiency programmes
implemented
· Mineral reserves and resources replenished, maintaining valuable
asset base at 1bn tonnes
· Completed three earnings enhancing transactions with a combined
enterprise value of £22m
Listing on the Main Market of the London Stock Exchange and entry to the FTSE
250 index
· Listing moved to the Main Market and entry to a series of UK FTSE
indices
Earnings enhancing acquisition of BMC Enterprises Inc.; launching Breedon's
scalable third platform
· Announcing our entry to the US through the acquisition of BMC
Enterprises Inc. (BMC) for US$300 million - see separate announcement issued
today www.breedongroup.com/investors (http://www.breedongroup.com/investors)
CURRENT TRADING AND OUTLOOK
Resilient model, strategically well-positioned
· The near-term macroeconomic and geopolitical landscape remains
uncertain
· Infrastructure and housing end-markets are forecast to return to
growth in the medium-term
· Our proven strategy offers substantial optionality and multiple
routes to growth, underpinned by our healthy balance sheet, diversified
funding and thoughtful approach to capital allocation
· Expect BMC to be earnings enhancing in the first full year of
ownership
· Post-acquisition Pro Forma Covenant Leverage for the Group of
c.1.4x; enabling flexibility for dividends and future bolt-on acquisitions
across each of our platforms
Rob Wood, Chief Executive Officer, commented:
"The record results we delivered in 2023 are a real accomplishment and
something I am extremely proud of. The challenging trading conditions our team
faced required agile and bold responses which they took with discipline and
determination. As a result we kept our workforce safe and well, reinforced our
market positions and were recognised by our clients for the quality of our
products and services. For this I sincerely thank the whole team.
"Breedon has proved itself to be dependable and consistent, regardless of the
short-term headwinds. Although the near-term outlook remains uncertain, when I
take stock I am reassured. The markets we serve, particularly infrastructure
and housing, are supported by long-term structural deficits with spending
ambitions that are upheld by cross-party government support in the UK and
Ireland, where I am further encouraged by the recent progress in Stormont. The
mineral of which we are stewards is hundreds of millions of years old and
securing additional reserves requires careful planning and committed local
engagement, something we excel at. We occupy strong and growing market
positions and operate a valuable portfolio of integrated assets, delivering
essential construction materials to customers who trust us to provide an
excellent service.
"We made further progress on our strategic growth priorities in 2023, our
vertical model is maturing and provides us with a strong platform for our
future growth. Today I am delighted to announce the acquisition of BMC. This
transaction will give us a platform that is well-placed to grow in the
highly-fragmented US construction market, is culturally aligned with Breedon
and has a familiar performance track record. We are excited for what this new
chapter will bring to the Group and we look forward to welcoming the BMC team
to the Breedon family."
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 (as amended).
Notes:
1. Underlying results are stated before acquisition-related expenses,
property gains and losses, AIM to Main Market costs, 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 and tax, which equates to profit from
operations.
4. 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 of £0.7m (2022: £1.1m).
5. Net Debt including IFRS 16 lease liabilities.
6. 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. In both the current
and prior periods, the only material adjusting item was the impact of IFRS 16.
7. FCF conversion: Free Cash Flow relative to Underlying EBITDA.
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
(http://www.breedongroup.com/investors)
RESULTS PRESENTATION
Breedon will host a results presentation for analysts and investors at 08:30am
today at the offices of Numis, 45 Gresham Street, London EC2V 7BF, or online
via www.breedongroup.com/investors (http://www.breedongroup.com/investors) .
The presentation will be followed by Q&A, where it will be possible to
participate through the following dial-in details:
Event Title: Breedon Full Year Results 2023
Start Time/Date: 08:30 Wednesday, 6 March 2024 - please join the event 5-10 minutes prior to
scheduled start time. When prompted, provide the event title
Confirmation Code: Breedon Results
United Kingdom, Toll-free: 0808 109 0700
United Kingdom, Local: +44 (0) 33 0551 0200
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 and Ireland, delivers essential products to the
construction sector. Breedon holds 1bn 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 3,900 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.
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RECORD REVENUE AND UNDERLYING EBIT
Recent years have presented Breedon with a broad spectrum of challenges. To
succeed in these markets has required a clear strategy, a strong business
model and an agile team with focus and discipline. At Breedon we have worked
hard to ensure we have all three. As a business, we are maturing and our move
from AIM to the Main Market in 2023 is evidence of the scale and market
position we have achieved in the last decade.
The strong 2023 results were delivered in tough markets and are testament to
the resilience of our vertically-integrated model and sustainable growth
strategy. Although our key end-markets experienced a number of short-term
headwinds during the year, volume contraction was moderate and pricing
remained sufficient to fully recover costs.
Infrastructure spending remained stable with major projects making steady
progress. Housebuilding was impacted by the macroeconomic landscape and
changes to building standards which affected the seasonality of our earnings.
Nonetheless, the long-term structural growth drivers remain in place,
underpinning the outlook for our key end-markets which continue to experience
cross-party political support in Great Britain and Ireland.
The macroeconomic conditions which drive volumes are beyond our direct
influence. Therefore, we increased our focus on carefully managing all factors
within our control. In 2023, in addition to our deliberate pricing strategy,
we emphasised operational and commercial excellence across the Group to
maximise the value of our products and services and increase productivity.
Consequently, we delivered results ahead of expectations(9), growing revenue
7% to £1,487.5m (2022: £1,396.3m), or 4% on a like-for-like basis when
adjusting for the three bolt-on acquisitions completed in the last year.
During the year we invested in central functions in order to support our
growth ambitions and delivered record Underlying EBIT of £156.2m (2022:
£155.0m). Our Underlying EBIT margin of 10.5%, which reflects the impact of
operating leverage on reduced volumes, is 60bps lower than 2022, a year which
benefitted materially from our forward energy hedging policy.
Two years ago we established a financial framework with a balanced suite of
medium-term targets. Return on invested capital (ROIC), a post-tax measure,
moderated during the year to 9.9% (2022: 10.8%, target 10%), reflecting the
increase in the UK corporation tax rate. Cash generation remained healthy
during the period, enabling us to invest for growth. We maintained our net
capital expenditure at £103m (2022: £102m) and completed three bolt-on
transactions, investing £20m during the year. As anticipated, working capital
experienced an outflow of £9m, primarily due to inflation. Consequently, Free
Cash Flow conversion for the year improved to 39% (2022: 29%, target 50%).
Sustaining a robust balance sheet underpins our strategic optionality as we
pursue both organic and inorganic routes to growth. During the year Covenant
Leverage reduced further to 0.5x (2022: 0.7x), below our medium-term target of
1x to 2x.
To reflect the confidence we have in our vertical model, the strength of our
team and our market position, the Board has approved a full-year dividend of
13.5p (2022: 10.5p), a significant increase of 29%. In addition to investing
for growth and maintaining sustainable leverage, we have progressed our
dividend payout ratio to our target of 40% of Underlying EPS (2022: 30%).
STRATEGY REVIEW
Our team makes the most material difference
The Breedon team is entrepreneurial and adaptable, dedicated to providing our
customers with best in class service. They frequently operate in harsh
physical conditions, going the extra mile to ensure we deliver high-quality
products to our customers on time.
2023 was one of the warmest and wettest years on record, presenting a material
limitation to meeting our clients' needs. Yet regardless of this disruption,
our first-class team delivered for our customers and their performance was
recognised in our latest Net Promoter Score (NPS) surveys; we provided a
service classified as 'extremely good' by NPS, with trust scores frequently
rated as 'outstanding'.
We never take this performance for granted and continually strive to make
Breedon a great place to work. During the year we awarded a pay increase of 6%
to our colleagues and partnered with a leading wealth and benefits adviser to
support our team through the cost of living crisis. We welcomed 70 new
graduates and apprentices (2022: 60) and supported an additional 37 colleagues
through further and higher education (2022: 22), receiving enhanced silver
membership of The 5% Club which recognises our determination to play our part
in the development of a workforce for the future.
Our commitment to our people was reflected in our 2023 colleague engagement
survey which delivered its best results ever. With 76% of our colleagues
taking part (2022: 75%), 80% felt engaged, an improvement of 3ppt on the prior
year. Going forward we will invest further in our team and seek to grow our
talent to ensure we can deliver an excellent service to our customers.
Sustain
Our Sustainability Framework has made further tangible progress, delivering
some significant milestones in 2023 towards the long-term sustainability of
the business.
Our highest priority remains ensuring our 3,900 colleagues and all those that
attend our sites go 'Home Safe and Well' every day. In 2023 we made real
progress, enhancing the cultural perceptions around our safety behaviours,
encouraging reporting and sharing of learnings across the Group.
In 2023, although the lost time injury frequency rate for our colleagues and
contractors increased to 3.5 per million hours worked (2022: 3.1), the
severity of those injuries diminished, and the broader total injury frequency
rate reduced to 17.0 (2022: 17.2). Leading indicators, such as the Visible
Felt Leadership visits that we undertake to audit safety behaviour on our
sites, increased 7% which should be positive for future outcomes.
In 2021 we established a roadmap to achieve net zero by 2050, setting medium
and long-term targets to reduce the carbon footprint of our Cement division,
the principal contributor of the Group's CO(2) emissions. In 2023 we extended
our net zero plans and our Group-wide targets were submitted to the SBTi for
formal validation which will take place in 2024. In 2023 we made our first
submission for assessment by CDP which has since been awarded a rating of B
for Climate Change and C for Water Security.
Our cement business operates with industry leading levels of alternative fuel
substitution, achieving a combined rate of nearly 50% fossil fuel replacement
with our modern plant in Kinnegad exceeding over 90% at times. We increased
our sales of CEM II cement, a lower clinker content product, and invested
further in a network of CEM II silos in GB where regulation has been modified
to permit its wider use. Consequently, CEM II now comprises roughly a quarter
of our cement sales, increasing by over 50% from the prior year.
Throughout 2023, we increased the proportion of concrete and asphalt sales
with sustainable attributes by 3ppt to 40%. Furthermore, we launched the
'Breedon Balance' brand which promotes a broad range of products with
sustainable attributes.
Through a combination of these actions we reduced our Group carbon emissions
per tonne of product by 5% during 2023 while our carbon intensity by revenue
reduced 15%.
Securing a sustainable future for the UK cement industry is vital if we are to
achieve net zero as a country. In line with this ambition, during the year we
hosted the launch of the Peak Cluster carbon capture and storage initiative, a
collaborative project that aims to store over three million tonnes of carbon
dioxide emissions each year by 2030, a move that will reduce UK emissions into
the atmosphere from cement and lime manufacture by around 40%. This is a
landmark project for the industry and for it to be successful it requires
significant commitment from the UK Government.
Further detail of the progress our sustainability strategy has delivered to
make a material difference to Planet, People and Places will be available upon
publication of our Annual Report 2023 on Monday 18 March 2024 at
www.breedongroup.com/investors (http://www.breedongroup.com/investors) .
Optimise
At Breedon each site has unique characteristics and we continually review the
performance of the team and plant to ensure we produce our materials with
maximum efficiency and minimum cost. In 2023, each business implemented an
operational and commercial excellence programme, revisiting the entire process
from quarry to customer.
Using a broad diagnostics benchmark of operational efficiency indicators and
financial measures, we conducted site reviews to identify underperforming
assets and bottlenecks and establish a plan for training, improvement and
investment. Often a few small interventions have a material impact on
productivity with rapid payback. Actions have included revisiting quarry
architecture, adjusting maintenance schedules to minimise downtime and
overtime, and investing in productivity enhancing equipment.
In 2022, we implemented an electronic proof of delivery system, advancing its
use across the Group during 2023. By removing c.1.5 million paper tickets each
year we have already saved 529 trees, reduced queries by 58% and generated a
material working capital improvement with further progress planned for 2024.
Expand
We have once again delivered balanced revenue growth, supported by deliberate
pricing, ongoing internal investment and strategic acquisitions.
In 2023 we replenished our strategically valuable asset base of mineral
reserves and resources at one billion tonnes, which equates to around 35 years
of production. We believe our diligent approach to land management and mineral
planning sets us apart and we have identified further mineral planning
opportunities in excess of 125 million tonnes.
Our M&A pipeline remains healthy and active with many bolt-on
opportunities originating from our local presence and personal engagement with
the asset owners. In 2023 we completed three earnings enhancing transactions
in GB and Ireland with a combined enterprise value of £22m.
In Ireland the acquisition of Robinson Quarry Masters (Robinsons), a
family-run quarrying and concrete block business, has enhanced our mineral
footprint north of Belfast. In GB we acquired two downstream businesses;
Broome Bros., a leading manufacturer of concrete blocks based in Doncaster,
and Minster Surfacing, an award-winning regional surfacing business based in
Lincoln. Each of the acquired businesses has integrated well and is performing
in line with our expectations.
On 6 March 2024 we announced the acquisition of BMC for an enterprise value of
c.US$300m. This is an exciting opportunity to replicate the Breedon model in
the highly fragmented US construction materials market through a culturally
aligned team.
OUTLOOK
The macroeconomic and geopolitical landscape remains uncertain. While the
near-term outlook for our industry is finely balanced, the longer-term outlook
for our main end-markets, infrastructure and housebuilding, is well supported
by structural growth dynamics and we are confident we will see them return to
growth in the medium-term.
As we lap the base effects of 2023, we expect volumes and pricing to
stabilise. In the UK the CPA forecasts construction output will contract by
2.1% in 2024 as stable infrastructure production is offset by ongoing weakness
in housebuilding, with both sectors expected to return to growth in 2025.
Euroconstruct forecasts RoI GDP growth will remain the highest in Western
Europe, leading to construction output of 4.4% as significant foreign direct
investment and population growth drive investment in housing and
infrastructure.
The construction industry is widely recognised to be an important economic
contributor, benefiting from cross-party support. Therefore, we welcome the
clarity that will follow the UK general election and we are encouraged by the
recent reinstatement of a governing Assembly in Northern Ireland.
Our M&A pipeline remains well populated with active discussions and, with
leverage of 0.5x, our healthy balance sheet, diversified funding and
thoughtful approach to capital allocation will enable us to respond swiftly
when the right transactions become available. Encouragingly, 2024 has begun
with the acquisition in January of Eco-Asphalt Supplies, a Merseyside asphalt
supplier with strong sustainability credentials, located within the region
where we service the National Highways Pavement framework.
The Breedon local model has once again proved its resilience, delivering an
outstanding performance in challenging conditions and we are confident in our
ability to rapidly respond to the evolving economic and political backdrop.
Our growth strategy is well-established, our forward hedging policy remains in
place providing cost visibility, and we expect the commercial and operational
excellence reviews we implemented in 2023 will generate further productivity
gains.
We expect the acquisition of BMC will be earnings enhancing in its first full
year of ownership. BMC will be consolidated for fractionally less than ten
months in 2024 and our Pro Forma Covenant Leverage on acquisition is c.1.4x,
enabling flexibility for dividends and future bolt-on acquisitions across each
of our platforms. The acquisition is an exciting opportunity that will enhance
the longer-term growth profile of the Group.
OPERATIONAL REVIEW
Product volumes
million tonnes except where stated 2023 2022 Change % LFL %
Aggregates 25.7 26.3 (2)% (4)%
Asphalt 3.8 3.8 - -
Cement 2.1 2.2 (4)% (4)%
Ready-mixed concrete (m(3)) 2.9m 3.0m (3)% (4)%
Note: Reported percentage movements are based on non-rounded data.
Our volume performance reflects the markets in which we operate, in particular
the cyclical slowdown in construction activity in the UK through the course
of 2023.
Great Britain
£m except where stated 2023 2022 Change % LFL %
Revenue 1,033.8 972.4 6% 3%
Underlying EBIT 86.4 86.4 - (2)%
Underlying EBIT margin 8.4% 8.9% (50)bps
The GB business successfully navigated challenging market conditions
throughout the year to deliver a solid performance. Our vertical model,
entrepreneurial culture and extensive local market knowledge enabled us to
grow revenue 6% to £1,033.8m (2022: £972.4m). Adjusting for the acquisitions
of Minster Surfacing and Broome Bros. in the first half, like-for-like revenue
increased 3%.
Volumes moderated during the course of the year. Changes in housebuilding
regulations in the summer caused ready-mixed concrete volumes to soften in the
second half. Although infrastructure remained resilient, volumes for
aggregates and asphalt were impacted by clients' budget constraints after a
long period of building materials cost inflation.
Our key end-markets of infrastructure and housing are structurally
under-invested while the supply of the essential heavyside building materials
we provide is constrained by planning practices. Consequently, pricing
remained robust with average selling prices sufficient to recover rising input
costs. Underlying EBIT margin decreased by 50bps to 8.4%, principally due to
product mix and the impact of reduced volumes on operating leverage.
Although a culture of continual improvement is embedded throughout the team,
in 2023 we reinvigorated our self-help measures, implementing tailored
programmes in our materials and surfacing operations. By closely monitoring
plant efficiency and with carefully targeted investment we have been able to
identify and resolve bottlenecks across our sites. We improved asset run time,
reducing the need for overtime working, improving fuel consumption and
reducing safety risks.
The location and age of crushing equipment is influential to the efficiency of
a site. We upgraded our crushing capability at Dowlow, Leaton and Cloud Hill,
enabling plant alterations and productivity gains and were able to remove
contractors from the process while maintaining output.
We built out our downstream capability in 2023 further still, pulling more
material through the business. We have built a strong reputation for quality
and reliability in airfield surfacing leading to a four year pipeline of
commercial work with strong partners, and military work for the Defence
Infrastructure Organisation. During our first year delivering the National
Highways Pavement Delivery framework we have secured a good portfolio of work,
and the acquisition of Minster Surfacing has reinforced our regional
surfacing, airfields and recycled asphalt capability.
In 2023 we continued to explore opportunities to repurpose depleted quarries
and recycle materials. In select locations we are building specialist local
partnerships, enabling us to capture recyclable material while taking a fee
for receiving inert landfill.
We have invested further in CEM II silos ahead of the building regulation
change that occurred in November and extended our ability to receive and store
recycled asphalt planings.
Great Britain outlook
The macroeconomic and political backdrop remains unpredictable, leading to
budget pressures and delayed project commitments. In our latest NPS survey our
customers classified our service as 'extremely good' while trust scores were
rated 'outstanding'. This is a consequence of the quality of our products and
service and places us in a strong competitive position which we intend to
reinforce through our ongoing excellence programmes.
Ireland
£m except where stated 2023 2022 Change % LFL %
Revenue 235.5 226.2 4% 3%
Underlying EBIT 29.0 28.3 2% (1)%
Underlying EBIT margin 12.3% 12.5% (20)bps
Our business in Ireland has a strong reputation for delivering high-quality
service to loyal customers, often through frameworks and long-term contracts.
We are well positioned to deliver materials to markets that benefit from
significant foreign direct investment and rapid population growth while
suffering structural infrastructure and housing deficits.
Market conditions varied by region and improved through the course of the
year. In Northern Ireland, although significant pent-up demand exists, the
absence of a governing Assembly limited the volume of tenders coming to
market. Nonetheless, we won work on a number of frameworks. In RoI, tendering
and pricing remained resilient; we approached completion of the Dunkettle
Interchange, a three-year project in partnership with Sisk, and secured
further high-quality new work.
Aggregate volumes increased 11% following the acquisition of Robinsons,
asphalt volumes grew 9% due to strong downstream activity in RoI, while
ready-mixed concrete volumes declined.
As a result, revenue in 2023 increased to £235.5m. On a like-for-like basis,
revenue increased 3% and aggregate volumes increased 5%. We entered the year
with a positive pricing tailwind which we sustained in the second half,
supporting Underlying EBIT of £29.0m and a margin of 12.3%.
Our land and minerals team work closely with planning authorities to
reactivate dormant quarries and extend existing sites. Since 2018 we have
successfully extended our reserves and resources from 60 million tonnes to 153
million tonnes today. In 2023 through the acquisition of land adjoining three
existing quarries, combined with the addition of Robinsons, we added over 50
million tonnes of mineral with nearly 40 million tonnes at various stages of
planning.
Building on the re-branding to Breedon Ireland we undertook the prior year, we
reviewed our Ireland growth strategy in 2023 with the intention to be a leader
in every market we serve. We implemented an excellence programme promoting
optimised processes and enhanced sustainability credentials. Consequently, we
aligned operations within materials and surfacing under a single director
respectively, dedicated to maximising efficiency across Ireland, further
emphasising the pull of materials through the business.
In 2023 we signed up to the Business in the Community Ireland Low Carbon
Pledge. We are exploring opportunities for solar farms on our sites,
increasing our warm-mix asphalt and materials recycling capabilities, and
increasing our electric vehicle fleet. We have an active M&A pipeline to
increase our mineral independence, and we work closely with long-term partners
on major projects to meet growing market demand.
We work closely with local authorities, national agencies such as Transport
for Infrastructure Ireland, and the whole spectrum of contractors. It is
increasingly evident that tenders are awarded on quality measures where we
perform well. In our latest NPS report our service was classified as 'very
good' while our trust score was 'outstanding'. Therefore, we are confident our
Ireland business is well positioned to deliver our strategic objectives of
growth and market leadership.
Ireland outlook
We deliver high quality work to repeat customers in markets with growing
populations and structural housing and infrastructure deficits. RoI is
forecast to remain the fastest growing region in Western Europe, driving
demand for construction projects and materials. In NI, where there is
significant pent-up demand, we are optimistic the recent return of the
governing Assembly to Stormont will enable the budget process to be
reinstated.
Cement
£m except where stated 2023 2021 Change %
Revenue 331.2 300.7 10%
Underlying EBIT 55.2 52.1 6%
Underlying EBIT margin 16.7% 17.3% (60)bps
Breedon is a prominent operator in the GB and Ireland cement markets. With
Kinnegad, the most modern plant in Ireland, leading the market for fossil fuel
replacement and Hope, the largest cement plant in GB, setting the pace for
reliability, Breedon Cement is well positioned.
In 2023, as demand from the housebuilding and commercial sectors declined,
volumes reduced 4% to 2.1 million tonnes. Pricing increased by 17% leading to
an overall revenue increase of 10%.
We take a rigorous approach to plant maintenance, planning years ahead to
maximise the benefit of our investment and the productivity of our plants.
During the period we undertook the customary annual planned maintenance
programme that enables us to sustain our exceptional reliability. Both winter
and autumn programmes were completed on schedule and within budget.
Plant Mastery status, an industry recognised measure, is awarded to operations
that maintain plant reliability in excess of 96% for three consecutive years
and is typically associated with excellent cost and quality control and
accompanied by outstanding health, safety and environmental records. In 2023
Hope sustained its Plant Mastery status for a remarkable fifth consecutive
year. Kinnegad maintained its strong reliability record, a creditable outcome
as the high use of alternative fuels increases the engineering complexity of
the cement production process.
Our customers appreciate our consistent quality and reliability and this was
recognised in our latest customer survey where our NPS result was classified
as 'extremely good' while our trust measure was 'outstanding'.
Within our Sustainability Framework, Breedon has committed to achieve net zero
by 2050 and we have a variety of projects under way to reduce our carbon
emissions. In 2023, by maximising the use of waste derived alternative fuels
which would otherwise enter landfill, we achieved a combined fossil fuel
replacement rate of nearly 50% with Kinnegad utilising 79% alternative fuels,
exceeding 90% at times. Kinnegad commenced construction of a 17MW solar farm
while Hope is undertaking a feasibility study to examine the possibility of a
small solar farm that would benefit the wider local community.
Reducing the clinker intensity of our cement with the use of low carbon
supplementary cementitious materials will also contribute to reducing our
carbon footprint. Approximately 60% of Kinnegad sales are now CEM II (2022:
50%), a product range with lower clinker content. In GB, building standards
were modified in November 2023 to permit the wider use of CEM II. More than
10% of Hope sales are already CEM II and, as our customers incorporate the new
standards into their designs, we expect this will increase still further.
Reduction of CO(2) emissions is a significant challenge for the cement
industry and so we have established innovative partnerships to tackle this
objective. Graphene is an extremely versatile material, known to improve the
performance of low clinker factor cements. Working in collaboration with our
graphene supply partners, we participated in successful field trials of
graphene enhanced cement which demonstrated up to a 10% increase in
compressive strength and a potential route to further reductions in carbon
emissions.
As the UK cement industry works to secure a sustainable future, carbon capture
and storage has a vital role to play in reaching our net zero objective. The
Peak Cluster carbon capture and storage initiative was launched at our Hope
plant during the year; as a key partner we now have a clear path to achieve
our carbon reduction goal. The project is in its early stages, considering
feasibility and design options.
Cement outlook
Demand for cement remains resilient and we occupy a robust market position. In
the UK, short-term softness in housebuilding is balanced by large ongoing
infrastructure projects. In RoI, housing and infrastructure are supported by
the Government's long-term development plans to accommodate a strong economy.
FINANCE REVIEW
In 2023 we delivered a further year of strong performance, advancing revenue
and Underlying EBIT through robust pricing, disciplined cost management and
improvements in operations.
Revenue for the year at £1,487.5m increased by 7% compared to 2022
(£1,396.3m), with pricing of 9% continuing to more than offset the impact of
2% lower volumes. As the year progressed, our markets slowed, with 11% revenue
growth in the first half of the year followed by a more modest 3% in the final
six months of the year. On a like-for-like basis, excluding the impact of
acquisitions, revenue increased by 4% (2022: 11%).
Against this more challenging backdrop we delivered resilient earnings growth
with Underlying EBIT of £156.2m up £1.2m on 2022 (£155.0m), with a strong
performance from each division and after further investment into our central
support functions. On a statutory basis, Group profit from operations of
£145.7m reduced by £2.3m from £148.0m in 2022, primarily as a result of the
costs associated with the move from AIM to the Main Market which have been
presented as non-underlying.
Underlying EBIT margin of 10.5% was below the 11.1% reported in 2022, due to
reduced operational gearing in a lower volume environment and the impact of
our energy hedges moving back into line with market pricing, having provided a
significant benefit throughout 2022. We remain confident in our medium-term
ambition to generate an Underlying EBIT margin of between 12% and 15% once
volume growth returns to our markets.
Impact of acquisitions and Joint ventures
Three bolt-on acquisitions completed during the year for an aggregate
Enterprise Value of £22.0m and contributed £19.0m revenue and £1.8m
Underlying EBIT during the period of ownership.
Our share of profit from our associate and joint ventures was lower at £2.6m
(2022: £3.5m), primarily due to reductions in Scottish Government road
maintenance spending impacting the performance of BEAR Scotland.
Interest
Net finance costs in the year totalled £11.3m (2022: £12.2m) and included
interest on the Group's debt facilities, lease liabilities, amortisation of
bank arrangement fees, and the unwinding of discounting on provisions, net of
interest received from short-term cash deposits and money market funds. Net
cash interest of £6.5m (2022: £9.0m) reduced in line with debt levels
throughout the year. We incurred a higher non-cash charge to unwind the
discount on provisions as a result of higher risk free rates in the year.
Non-underlying items
Non-underlying items in the year amounted to a pre-tax cost of £10.5m (2022:
£7.0m), of which the largest item was £6.0m (2022: £4.8m) amortisation of
acquired intangible assets. Other non-underlying items comprised £3.6m of AIM
to Main Market costs and £0.9m of acquisition-related costs.
Tax
The Group recorded an Underlying tax charge at an effective rate of 20.4%
(2022: 16.0%), which equated to a charge of £29.5m (2022: £22.9m). The
year on year increase in tax charges was primarily attributable to the
increase in the effective UK corporation tax rate from 19% in 2022 to 23.5% in
2023.
The statutory tax charge, calculated relative to statutory profit before tax
and inclusive of deferred tax rate changes, was 21.4% or £28.8m (2022: 17.1%
or £23.2m).
Alongside a further increase in the UK tax rate to 25%, which will increase
the future effective tax rate of the Group from 2024, in December 2021, the
OECD released model rules for a new global minimum corporate tax framework
applicable to multinational enterprise groups with global revenues of over
€750 million (Pillar Two rules).
The UK substantively enacted legislation implementing these Pillar Two rules
on 20 June 2023 and they apply to the Group with effect from 1 January 2024.
The Group is reviewing this legislation together with developing guidance. At
1 January 2024 the impact of Pillar Two rules on the Group is limited to the
Group's taxable profits generated in RoI. Based on the information currently
available, the impact of the Pillar Two rules on the Group tax position is not
expected to be material.
We complied effectively with our stated tax strategy, and we make a
significant contribution to the economies in which we operate through
taxation, either borne by the Group or collected on behalf of, and paid to the
tax authorities. In 2023 the total taxes borne and collected by the Group
amounted to c.£210m (2022: c.£210m).
Earnings per share
The increase in UK corporation tax rates offset the impact of earnings growth
and resulted in a decrease of 4% in Underlying Basic EPS for the year to 33.8p
(2022: 35.1p), while Statutory Basic EPS was 31.1 p (2022: 33.2p). Adjusted
Underlying Basic EPS, calculated using Underlying earnings and adjusted to
exclude the impact of the £0.7m (2022: £1.1m) charge recognised in respect
of deferred tax rate changes, decreased by 4% to 34.0p (2022: 35.4p). The
Group has no significant dilutive instruments, and diluted EPS measures
closely tracked non-diluted measures for the year.
Return on invested capital
The increase in UK corporation tax rates and a higher average capital employed
offset the impact of earnings growth, resulting in ROIC of 9.9% for 2023
(2022: 10.8%) using average invested capital. This is in line with the Group's
cost of capital and sits broadly in-line with our medium-term target to
deliver ROIC in excess of 10%.
Statement of financial position
Net assets at 31 December 2023 were £1,110.7m (2022: £1,043.8m). Total
non-current assets of £1,397.9m (2022: £1,370.7m) increased as a result of
capital investment in excess of depreciation and the acquisitions completed
during 2023. Current assets were £59.8m higher than December 2022; reflecting
the impact of inflation on working capital balances, higher cash holdings and
purchases of UK ETS credits which are held on balance sheet in inventory.
Total liabilities increased year-on-year, with provision balances increasing
to reflect increased expected costs of future restoration compared to 2022,
partially offset by increases in discount rates as a result of external market
movements during the year.
Impairment reviews
We completed our annual impairment review of goodwill and retain comfortable
levels of headroom relative to the carrying value of our asset base.
Group restructuring, share consolidation and capital reduction
In connection with the move from AIM to the Main Market, a new holding company
was incorporated during 2023, which obtained control over the Group via a
court approved scheme of arrangement on 17th May 2023. This restructuring
does not impact reported earnings, cash flows or net assets.
On 17 May 2023 the Group undertook a share consolidation at a ratio of five to
one. Earnings and dividend per share measures have been restated to reflect
this.
On 9 June 2023 the Group completed a capital reduction which increased the
Company's distributable reserves by £471.1m.
Input costs and hedges
Input cost inflation had a less significant impact on our results than in
2022. Although energy (gas and electricity), fuels, bitumen and carbon
credits reduced in price throughout the year, the impact of our energy hedges
moving back in line with market rates added around £25m of additional cost in
2023 compared with 2022. In 2022 our hedges provided a significant degree of
protection from high levels of energy inflation experienced during that year.
Our strategy is to hedge substantially all energy and carbon requirements for
at least one year in advance, with further layered purchases extending into
future years, to deliver near-term cost certainty. A proportion of our bitumen
requirements are hedged in the short-term, typically for larger contracts
where pricing is agreed up front. Remaining purchases are made at spot; the
market for asphalt, in which bitumen is the primary purchased raw material,
has historically responded quickly to bitumen price changes. Most other fuels
are purchased at spot and passed on. For 2024, we are hedged substantially in
line with our policy.
Free cash flow and conversion
Our Free Cash Flow increased by 38% year-on-year to £94.8m (2022: £68.7m)
despite investing significant amounts of capital expenditure, ahead of
depreciation. Net capital expenditure increased by £1.4m to £103.4m (2022:
£102.0m) comprising capital investment of £106.8m offset by £3.4m of
proceeds from specific asset disposals. Working capital flows reflected strong
cash collection, offset by the purchase of UK ETS credits.
Free Cash Flow conversion for the year improved by 10 ppts to 39% (2022: 29%)
reflecting strong working capital management and lower cash interest costs
offset by a higher cash tax charge. This remains lower than our medium-term
average target, principally due to our capital investment programme and the
impact of increasing statutory rates of taxation. Over the past 5 years our
Free Cash Flow conversion has averaged 54%.
Net Debt and borrowing facilities
At 31 December 2023, Net Debt was £169.9m (2022: £197.7m). Net Debt
includes IFRS 16 lease liabilities of £48.0m (2022: £49.3m). Covenant
Leverage at the year-end was 0.5x (2022: 0.7x) reflecting the resilience of
the Group's balance sheet and allows significant flexibility in pursuing our
sustainable growth strategy.
The Group's borrowing facilities comprise a £350m multi-currency revolving
credit facility (RCF) and a £250m US Private Placement (USPP). During the
year, we exercised our option to extend the RCF for a one-year period.
Arrangement fees of £0.7m were capitalised in the year and will be amortised
over the period of the additional borrowing. Following the exercise of the
extension option, the RCF is available to the Group until June 2026.
Interest on the RCF is calculated as a margin referenced to the Group's
Covenant Leverage plus the base rate applicable to the currency of borrowing.
The USPP, issued in 2021, provides long-term financing at low fixed interest
rates with an average fixed coupon of approximately 2%. The USPP comprises
£170m sterling and £80m drawn in euro, with a maturity profile between 2028
and 2036.
Our borrowing facilities are subject to leverage and interest cover covenants
which are tested half-yearly, and we remained fully compliant with all
covenants during the year. The Group maintains a strong liquidity position and
at 31 December 2023 had total available liquidity of over £475m comprising
undrawn borrowing facilities of £350m and cash and cash equivalents of
£126.9m.
Dividend
Subject to shareholder approval, we intend to pay a dividend in respect of the
2023 financial results of 13.5p, an increase of 29% from 2022 (10.5p). This
delivers a payout ratio of 40% (2022: 30%) of Underlying Basic EPS, achieving
our committed target payout ratio. Since starting to pay a dividend in 2021,
we have declared nearly £110m of cash dividends to shareholders.
Assuming further strong financial performance and cash generation, our
intention is to maintain the payout ratio at around 40% of Underlying Basic
EPS. An interim dividend of 4.0p (2022: 3.5p) was paid on 10 November 2023
and, subject to shareholder approval, the remaining 9.5p (2022: 7.0p) will be
paid as a final dividend on 17 May 2024.
Dividends are recorded in the financial statements of the accounting period in
which they are paid. Accordingly dividend payments to Breedon Shareholders
amounting to £37.3m (2022: £30.5m) have been recognised in the 2023
financial statements. Thoughtful capital allocation is core to our financial
strategy, and we remain confident that our progressive dividend policy will
not compromise the Group's ability to execute on our strategic objectives.
Capital allocation
Conservative and disciplined financial management and the maintenance of a
strong balance sheet are at the core of our thoughtful approach to capital
allocation. The Board will always seek to deploy our capital responsibly,
focusing on organic investment in our business to ensure that our asset base
is well invested. We will look to pursue further selective acquisitions which
will accelerate our strategic development and that we are confident will
create long-term value.
This conservative approach to financial management enables us to pursue
capital growth for our shareholders through active development of our
business, while supporting our progressive dividend policy.
RISK
The Group's principal risks in alphabetical order (by risk category) are:
Strategic Operational
· Acquisitions and material capital projects · Competition
· Climate change · Failure of a critical asset
· Markets · Health and safety
· Land and mineral management · IT and cyber security
· People · Laws, regulations and governance
Financial · Supply chain and input costs
· Treasury
Further details of the principal risks facing the Group for the year ended 31
December 2023 are set out in the Group's Annual Report which will be made
available at the Group website once published.
The Board consider that these are the risks that could impact the performance
of the Group in the current financial year. The Board continues to manage
these risks and to mitigate their expected impact.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and the Group
and parent Company financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group and parent Company
financial statements for each financial year. Under that law they are required
to prepare the Group financial statements in accordance with UK-adopted
international accounting standards and applicable law and have elected to
prepare the parent Company financial statements in accordance with UK
accounting standards and applicable law, including FRS 101 Reduced Disclosure
Framework.
Under company law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and parent Company and of the Group's profit or loss for
that period. In preparing each of the Group and parent Company financial
statements, the directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant, and
reliable and, in respect of the parent Company financial statements only,
prudent;
· for the Group financial statements, state whether they have been
prepared in accordance with UK-adopted international accounting standards;
· for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject to any material
departures disclosed and explained in the parent Company financial statements;
· assess the Group and parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern;
and
· use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to cease operations, or
have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent Company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
Company and enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal control as
they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably open to
them to safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that complies with that law and
those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
In accordance with Disclosure Guidance and Transparency Rule (DTR) 4.1.16R,
the financial statements will form part of the annual financial report
prepared under DTR 4.1.17R and 4.1.18R. The auditor's report on these
financial statements provides no assurance over whether the annual financial
report has been prepared in accordance with those requirements.
Responsibility statement of the directors in respect of the annual financial
report
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the company and
the undertakings included in the consolidation taken as a whole; and
· the strategic report includes a fair review of the development
and performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
Rob Wood James Brotherton
Chief Executive Officer Chief Financial Officer
6 March 2024
condensed Consolidated Income Statement
for the Year ended 31 December 2023
2023 2022
Underlying Non-underlying* Total Underlying Non- underlying* Total
(note 4) (note 4)
£m £m £m £m £m £m
Revenue 1,487.5 - 1,487.5 1,396.3 - 1,396.3
Operating expenses (1,333.9) (10.5) (1,344.4) (1,244.8) (7.0) (1,251.8)
Group operating profit 153.6 (10.5) 143.1 151.5 (7.0) 144.5
Share of profit of associate and joint ventures 2.6 - 2.6 3.5 - 3.5
Profit from operations 156.2 (10.5) 145.7 155.0 (7.0) 148.0
Financial income 2.6 - 2.6 0.2 - 0.2
Financial expense (13.9) - (13.9) (12.4) - (12.4)
Profit before taxation 144.9 (10.5) 134.4 142.8 (7.0) 135.8
Tax at effective rate (29.5) 1.4 (28.1) (22.9) 0.8 (22.1)
Changes in deferred tax rate (0.7) - (0.7) (1.1) - (1.1)
Taxation (30.2) 1.4 (28.8) (24.0) 0.8 (23.2)
Profit for the year 114.7 (9.1) 105.6 118.8 (6.2) 112.6
Attributable to:
Breedon Group shareholders 114.6 (9.1) 105.5 118.7 (6.2) 112.5
Non-controlling interests 0.1 - 0.1 0.1 - 0.1
Profit for the year 114.7 (9.1) 105.6 118.8 (6.2) 112.6
* Non-underlying items represent acquisition-related expenses, property gains
or losses, amortisation of acquisition intangibles, AIM to Main Market costs
and related tax items.
Earnings per share**
Basic 31.1p 33.2p
Diluted 31.0p 33.2p
Dividends in respect of the year**
Dividend per share 13.5p 10.5p
** Restated comparatives to reflect the impact of the 5:1 share consolidation
undertaken during the year. See note 1.
condensed Consolidated Statement of Comprehensive Income
for the year ended 31 december 2023
2023 2022
£m £m
Profit for the year 105.6 112.6
Other comprehensive (expense)/income
Items which may be reclassified subsequently to profit and loss:
Foreign exchange differences on translation of foreign operations, net of (4.1) 10.2
hedging
Effective portion of changes in fair value of cash flow hedges (0.7) (1.3)
Taxation on items taken directly to other comprehensive income 0.1 0.2
Other comprehensive (expense)/income for the year (4.7) 9.1
Total comprehensive income for the year 100.9 121.7
Total comprehensive income for the year is attributable to:
Breedon Group shareholders 100.8 121.6
Non-controlling interests 0.1 0.1
100.9 121.7
condensed Consolidated Statement of Financial Position
at 31 December 2023
2023 2022
£m £m
Non-current assets
Property, plant and equipment 817.2 787.9
Right-of-use assets 45.1 47.1
Intangible assets 520.2 518.2
Investment in associate and joint ventures 14.5 13.7
Trade and other receivables 0.9 3.8
Total non-current assets 1,397.9 1,370.7
Current assets
Inventories 120.1 94.8
Trade and other receivables 227.9 218.6
Cash and cash equivalents 126.9 101.7
Total current assets 474.9 415.1
Total assets 1,872.8 1,785.8
Current liabilities
Interest-bearing loans and borrowings (8.1) (7.9)
Trade and other payables (278.6) (263.8)
Current tax payable (0.1) (3.8)
Provisions (8.8) (9.2)
Total current liabilities (295.6) (284.7)
Non-current liabilities
Interest-bearing loans and borrowings (288.7) (291.5)
Provisions (85.8) (76.8)
Deferred tax liabilities (92.0) (89.0)
Total non-current liabilities (466.5) (457.3)
Total liabilities (762.1) (742.0)
Net assets 1,110.7) 1,043.8
Equity attributable Breedon Group shareholders
Share capital 3.4 -
Share premium 0.7 -
Stated capital - 555.0
Hedging reserve (0.5) 0.1
Translation reserve (3.7) 0.4
Merger reserve 80.5 -
Retained earnings 1,030.0 488.0
Total equity attributable to Breedon Group shareholders 1,110.4 1,043.5
Non-controlling interests 0.3 0.3
Total equity 1,110.7 1,043.8
condensed Consolidated Statement of Changes in Equity
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 1 January 2022 - - 553.0 1.2 (9.8) - 405.2 949.6 0.2 949.8
Shares issued - - 2.0 - - - - 2.0 - 2.0
Dividends paid - - - - - - (30.5) (30.5) - (30.5)
Total comprehensive income for the year - - - (1.1) 10.2 - 112.5 121.6 0.1 121.7
Share-based payments(1) - - - - - - 0.8 0.8 - 0.8
Balance at 31 December 2022 - - 555.0 0.1 0.4 - 488.0 1,043.5 0.3 1,043.8
Shares issued - 0.7 - - - - - 0.7 - 0.7
Corporate Reorganisation 474.5 - (555.0) - - 80.5 - - - -
Capital reduction(2) (471.1) - - - - - 471.1 - - -
Transfer to - - - - - - (0.2) (0.2) 0.2 -
non-controlling interests
Dividends paid - - - - - - (37.3) (37.3) (0.3) (37.6)
Total comprehensive income for the year - - - (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 presented inclusive of deferred tax
recognised in equity.
2 On 9 June 2023, New Breedon (see note 1) 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 Year ended 31 december 2023
2023 2022
£m £m
Cash flows from operating activities
Profit for the year 105.6 112.6
Adjustments for:
Depreciation and mineral depletion 88.7 83.5
Amortisation 6.0 4.8
Financial income (2.6) (0.2)
Financial expense 13.9 12.4
Share of profit of associate and joint ventures (2.6) (3.5)
(Gain)/loss on sale of property, plant and equipment (1.4) 2.4
Gain on stepped acquisition - (0.3)
Share-based payments 3.0 1.2
Taxation 28.8 23.2
Operating cash flows before changes in working capital and provisions 239.4 236.1
Increase in inventories (24.6) (31.7)
Increase in trade and other receivables (1.0) (0.2)
Increase/(decrease) in trade and other payables 8.8 (9.1)
Increase in provisions 8.3 7.7
Cash generated from operating activities 230.9 202.8
Interest paid (6.8) (6.7)
Interest element of lease payments (2.3) (2.5)
Interest received 2.6 0.2
Income taxes paid (32.5) (25.8)
Net cash from operating activities 191.9 168.0
Cash flows used in investing activities
Acquisition of businesses (18.8) (12.6)
Dividends from associate and joint ventures 1.8 1.7
Purchase of property, plant and equipment (106.8) (106.8)
Proceeds from sale of property, plant and equipment 3.4 4.8
Net cash used in investing activities (120.4) (112.9)
Cash flows used in financing activities
Dividends paid (37.6) (30.5)
Proceeds from the issue of shares (net of costs) 0.7 2.0
Repayment of interest-bearing loans (0.9) -
Revolving Credit Facility extension costs (0.7) (0.7)
Repayment of lease obligations (8.1) (8.8)
Net cash used in financing activities (46.6) (38.0)
Net increase in cash and cash equivalents 24.9 17.1
Cash and cash equivalents at 1 January 101.7 83.9
Foreign exchange differences 0.3 0.7
Cash and cash equivalents at 31 December 126.9 101.7
Notes to the Condensed consolidated Financial Statements
1 Basis of preparation
Breedon Group plc (the 'Company') is a company domiciled in England. The
address of the Company's registered office is Pinnacle House, Breedon Quarry,
Breedon on the Hill, Derby, England, DE73 8AP. These condensed consolidated
financial statements of the Company as at and for the year ended 31 December
2023 consist of the consolidation of the financial statements of the Company
and its subsidiaries (collectively the 'Group') and include the Group's
interest in jointly controlled and associated entities.
These condensed consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards (IAS) and
interpretations issued by the IFRS Interpretations Committee applicable to
companies reporting under UK adopted IFRS. They do not include all the
information required for full annual statements and should be read in
conjunction with the 2023 Annual Report.
The Board of Directors approved the condensed consolidated financial
statements on 5 March 2024. They are not statutory accounts within the meaning
of section 435 of the Companies Act 2006.
The Group's financial statements for the year ended 31 December 2023 were
approved by the Board on 5 March 2024. They have been reported on by the
Group's auditors and will be delivered to the registrar of companies in due
course. The report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
The comparative figures for the financial year ended 31 December 2022 have
been extracted from the statutory accounts for that financial year other than
Earnings and Dividends per share which have been restated due to the five to
one share consolidation undertaken in the period (see Corporate Reorganisation
below). 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.
Corporate Reorganisation (AIM to Main)
In connection with the Group's move from AIM to the Premium Segment of the
Main Market of the London Stock Exchange during the first half of 2023, a new
holding company for the Group was established. Breedon Group plc ('New
Breedon'), a company registered in England & Wales with registration
number 14739556 was incorporated on 17 March 2023 to act as the new parent
company for the Group, in place of Breedon Group plc ('Old Breedon'), a
company incorporated in Jersey with registration number 98465.
New Breedon obtained control of the Group on 17 May 2023 via a court approved
scheme of arrangement (the 'Corporate Reorganisation'). Under the scheme of
arrangement, shares with nominal value of £1.40 were issued in exchange for
all the shares in Old Breedon at a ratio of one share in New Breedon for every
five shares in Old Breedon. There were no changes in rights or proportion of
control exercised as a result of the transaction.
IFRS 3 excludes common control transactions and group reconstructions. These
condensed consolidated financial statements therefore incorporate the results
of the reorganisation using the merger accounting method, whereby the results
and cash flows of all the combining entities are brought into the condensed
consolidated financial statements from the beginning of the financial year in
which the combination occurs and comparative figures also reflect the
combination of the entities. The Group's equity is adjusted to reflect that of
the new holding company, with the difference between stated capital reported
by Old Breedon under Jersey company law and share capital reported by New
Breedon recognised as a merger reserve. See note 7 for further disclosure.
Earnings and Dividend per share measures have been restated to reflect the
impact of the five to one share consolidation. In all other aspects the
Group's results and financial position are unaffected by the change and
reflect the continuation of the Group.
New IFRS Standards and Interpretations
The Group adopted IFRS 17 and amendments to IAS 1, IAS 8 and IAS 12 from 1
January 2023. The adoption of these standards has not had a material impact on
the condensed consolidated financial statements.
1 Basis of preparation (continued)
Alternative performance measures
The following non-GAAP performance measures have been used in the financial
statements:
- Underlying Earnings Before Interest and Tax (EBIT) - Like-for-like revenue - Free Cash Flow conversion
- Underlying EBIT Margin - Underlying Basic & Diluted Earnings Per Share (EPS) - Return on invested capital
- Underlying EBITDA - Adjusted Underlying Basic & Diluted EPS - Covenant Leverage
- Like-for-like Underlying EBIT - Free Cash Flow - Net Debt
- Net Debt (excluding IFRS 16)
Management uses these terms as they believe these measures allow an
understanding of the Group's underlying business performance. These
alternative performance measures are well understood by investors and
analysts, are consistent with the Group's historic communication with
investors and reflects the way in which the business is managed.
A reconciliation between these alternative performance measures to the most
directly related statutory measures is included within note 10.
2 Going concern
These condensed consolidated 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 comprise a £350m multi-currency RCF, which runs to June 2026 and
£250m of USPP loan notes with maturities between 2028 and 2036.
The Group comfortably met all covenants in 2023 and other terms of its
borrowing agreements in the period, and maintained a track record of
profitability and cash generation, with an overall profit before taxation of
£134.4m and net cash from operating activities of £191.9m.
The Group has prepared cash flow forecasts for a period of 12 months from the
date of signing these condensed consolidated financial statements, which show
a sustained trend of profitability, cash generation and retained covenant
headroom, even under a 'severe but plausible' downside scenario of forecast
cash flows. The impact of the proposed acquisition discussed in note 11 on the
group's borrowings and covenant headroom has been considered in making this
assessment.
The base case assumes a trading performance delivered in line with market
consensus over the forecast period, while the downside scenario models a 10%
reduction in revenues, which the Group believes is an extremely severe
sensitivity relative to likely outcomes and historic experience.
As at 31 December 2023, the Group had cash of £126.9m and undrawn banking
facilities of £350.0m. At the date of this report, the Group retains a
similar level of liquidity. Following the proposed acquisition discussed in
note 11, the level of undrawn facilities will reduce to c.£175m. The
remaining cash and facility is expected to provide sufficient available funds
for the Group to discharge its liabilities as they fall due.
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 condensed consolidated financial
statements and therefore have prepared the condensed consolidated financial
statements on a going concern basis.
3 Segmental analysis
The principal activities of the Group are the quarrying of aggregates and
manufacture and sale of construction materials and buildings products,
including cement, asphalt and ready-mixed concrete, together with related
activities in GB and Ireland.
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.
Cement: our cementitious operations in Great Britain and Ireland.
2023 2022
Revenue *Underlying Revenue *Underlying
EBITDA EBITDA
Income statement £m £m £m £m
Great Britain 1,033.8 138.6 972.4 136.1
Ireland 235.5 35.9 226.2 34.4
Cement 331.2 84.5 300.7 79.6
Central administration - (16.7) - (15.1)
Eliminations (113.0) - (103.0) -
Total 1,487.5 242.3 1,396.3 235.0
Reconciliation to statutory profit
Underlying EBITDA as above 242.3 235.0
Depreciation and mineral depletion (88.7) (83.5)
Underlying Group operating profit 153.6 151.5
Great Britain 86.4 86.4
Ireland 29.0 28.3
Cement 55.2 52.1
Central administration (17.0) (15.3)
Underlying Group operating profit 153.6 151.5
Share of profit of associate and joint ventures 2.6 3.5
Underlying profit from operations (EBIT) 156.2 155.0
Non-underlying items (note 4) (10.5) (7.0)
Profit from operations 145.7 148.0
*Underlying EBITDA is earnings before interest, tax, depreciation and mineral
depletion, amortisation, non-underlying items (note 4) and before our share of
profit of associate and joint ventures.
Disaggregation of revenue from contracts with the customers
Analysis of revenue by geographic location of end-market
The primary geographic market for all Group revenues for the purpose of IFRS
15 is the UK and RoI. In line with the requirements of IFRS 8, this is
analysed by individual countries as follows:
2023 2022
£m £m
United Kingdom 1,296.8 1,217.3
Republic of Ireland 188.1 176.5
Other 2.6 2.5
1,487.5 1,396.3
3 Segmental analysis (continued)
Analysis of revenue by major products and service lines by segment
2023 2022
£m £m
Sale of goods
Great Britain 855.8 829.0
Ireland 96.5 82.0
Cement 331.2 300.7
Eliminations (113.0) (103.0)
1,170.5 1,108.7
Surfacing
Great Britain 178.0 143.4
Ireland 139.0 144.2
317.0 287.6
Total 1,487.5 1,396.3
Eliminations primarily comprise sales from Cement to the Great Britain and
Ireland segments.
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
2023 2022
Total Total Total Total
assets liabilities assets liabilities
£m £m £m £m
Great Britain 920.6 (238.3) 900.9 (228.0)
Ireland 282.8 (40.6) 260.6 (40.5)
Cement 539.2 (73.8) 519.7 (62.0)
Central administration 3.3 (20.5) 2.9 (19.3)
Total operations 1,745.9 (373.2) 1,684.1 (349.8)
Current tax - (0.1) - (3.8)
Deferred tax - (92.0) - (89.0)
Net Debt 126.9 (296.8) 101.7 (299.4)
Total Group 1,872.8 (762.1) 1,785.8 (742.0)
Net assets 1,110.7 1,043.8
4 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.
2023 2022
£m £m
Included in operating expenses:
Acquisition costs 0.9 0.7
Property losses - 1.5
Amortisation of acquired intangible assets 6.0 4.8
AIM to Main Market costs 3.6 -
Total non-underlying items (before tax) 10.5 7.0
Non-underlying taxation (1.4) (0.8)
Total non-underlying items (after tax) 9.1 6.2
5 Taxation
Recognised in the condensed consolidated income statement
2023 2022
£m £m
Current tax
Current year 30.5 23.6
Prior year (2.1) 1.0
Total current tax 28.4 24.6
Deferred tax
Current year (1.9) (1.8)
Change in deferred tax rate 0.7 1.1
Prior year 1.6 (0.7)
Total deferred tax 0.4 (1.4)
Total tax charge in the condensed consolidated income statement 28.8 23.2
Recognised in equity
2023 2022
£m £m
Deferred tax
Derivatives (0.1) (0.2)
Share-based payments 0.1 0.4
Total tax charge in equity - 0.2
5 Taxation (continued)
Reconciliation of effective tax rate
2023 2022
£m £m
Profit before taxation 134.4 135.8
Tax at the Company's domestic rate of 23.5% (2022: 19%) 31.6 25.8
Difference between Company and subsidiary statutory tax rates (4.0) (2.6)
Expenses not deductible for tax purposes 1.4 0.6
Enhanced capital allowances (0.1) (1.4)
Share-based payments 0.1 0.8
Unrecognised deferred tax assets - (0.7)
Income from associate and joint ventures already taxed (0.5) (0.7)
Chargeable gain on property disposal 0.1 -
Change in deferred tax rate 0.7 1.1
Adjustment in respect of prior years (0.5) 0.3
Total tax charge 28.8 23.2
The Company is tax resident in the UK, with a 23.5% tax rate. The Group's
subsidiary operations pay tax at a rate of 23.5% (2022: 19%) in the UK and
12.5% (2022: 12.5%) in RoI.
Excluding the impact of non-underlying items and the change in deferred tax
rate, the Group's Underlying effective tax rate is 20.4% (2022: 16.0%).
Including these items, the Group's reported tax rate for the year is 21.4%
(2022: 17.1%).
Global Minimum Corporate Tax Framework
In December 2021, the OECD released model rules for a new global minimum
corporate tax framework applicable to multinational enterprise groups with
global revenues of over €750 million (Pillar Two rules). The UK
substantively enacted legislation implementing these rules on 20 June 2023 and
the rules apply to the Group as of 1 January 2024.
The Group is reviewing this legislation together with developing guidance. At
1 January 2024 the impact of Pillar Two rules on the Group is limited to the
Group's taxable profits generated in RoI. Based on the information currently
available, the impact of these rules on the Group tax position is not expected
to be material.
In accordance with the mandatory exception under Amendments to IAS 12, the
Group has not remeasured deferred tax assets and liabilities as a result of
the implementation of the Pillar Two rules.
6 Interest-bearing loans and borrowings
Net Debt
2023 2022
£m £m
Cash and cash equivalents 126.9 101.7
Current borrowings (8.1) (7.9)
Non-current borrowings (288.7) (291.5)
Net Debt (169.9) (197.7)
IFRS 16 lease liabilities 48.0 49.3
Net Debt (excluding IFRS 16) (121.9) (148.4)
Analysis of borrowings between current and non-current
2023 2022
£m £m
Lease liabilities 8.1 7.9
Current borrowings 8.1 7.9
Bank and USPP debt 248.8 250.1
Lease liabilities 39.9 41.4
Non-current borrowings 288.7 291.5
6 Interest-bearing loans and borrowings (continued)
The Group's borrowing facilities comprise a £350m multi-currency RCF and a
£250m USPP.
The RCF is available to the Group until June 2026. Interest on the RCF is
calculated as a margin referenced to the Group's Covenant Leverage plus SONIA
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%.
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.
During the year, the Group exercised an option to extend the RCF for a
one-year period. Arrangement fees of £0.7m were capitalised in the year and
will be amortised over the period of the additional borrowing.
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 year.
7 Stated and share capital
Following the Corporate Reorganisation, all shares issued by Breedon are
ordinary shares which have a par value of £0.01 and are fully paid. The
Company has no limit to the number of shares which may be issued.
The holders of ordinary shares are entitled to receive dividends as declared
and are entitled to one vote per share at meetings of the Company.
millions
Issued ordinary shares
Old Breedon at 1 January 2022 1,689.7
Exercise of savings-related share options 3.1
Vesting of Performance Share Plan awards 1.6
Old Breedon at 31 December 2022 1,694.4
5:1 share consolidation as part of Corporate Reorganisation (1,355.5)
New Breedon opening shares 338.9
Exercise of savings-related share options 0.2
Vesting of Performance Share Plan awards 0.6
New Breedon at 31 December 2023 339.7
Movements during 2023 (New Breedon):
The Company issued 0.2 million shares for cash raising £0.7m in connection
with the exercise of certain savings-related share options, with £0.7m
recognised as share premium. The Company issued 0.6 million shares for
non-cash consideration of 1 pence per share, satisfied through the
capitalisation of retained earnings, in connection with the vesting of awards
under the Performance Share Plans.
Movements during 2022 (Old Breedon):
Old Breedon issued 3.1 million shares for cash raising £2.0m in connection
with the exercise of certain savings-related share options and issued 1.6
million shares for nil consideration in connection with the vesting of awards
under the Performance Share Plans.
8 Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the
year attributable Breedon Group shareholders by the weighted average number of
ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing profit for the
year attributable to Breedon Group shareholders by the weighted average number
of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
potential dilutive ordinary shares into ordinary shares.
8 Earnings per share (continued)
Calculations of these measures and reconciliations to related alternative
performance measures are as follows:
Basic EPS to adjusted Underlying Basic EPS
2023 2022 (*restated)
Earnings Shares EPS Earnings Shares EPS
£m millions pence £m millions pence
Basic EPS 105.5 339.148 31.1 112.5 338.553 33.2
Adjustments to earnings
Earnings impact of change in deferred tax rate (note 5) 0.7 - 0.2 1.1 - 0.3
Non-underlying items (note 4) 9.1 - 2.7 6.2 - 1.9
Adjusted Underlying Basic EPS 115.3 339.148 34.0 119.8 338.553 35.4
Basic EPS to Underlying Basic EPS
2023 2022 (*restated)
Earnings Shares EPS Earnings Shares EPS
£m millions pence £m millions pence
Basic EPS 105.5 339.148 31.1 112.5 338.553 33.2
Adjustments to earnings
Non-underlying items (note 4) 9.1 - 2.7 6.2 - 1.9
Underlying Basic EPS 114.6 339.148 33.8 118.7 338.553 35.1
Diluted EPS to adjusted Underlying Diluted EPS
2023 2022
Earnings Shares EPS Earnings Shares EPS
£m millions pence £m millions pence
Diluted EPS 105.5 339.849 31.0 112.5 339.399 33.2
Adjustments to earnings
Earnings impact of change in deferred tax rate (note 5) 0.7 - 0.2 1.1 - 0.3
Non-underlying items (note 4) 9.1 - 2.7 6.2 - 1.8
Adjusted Underlying Diluted EPS 115.3 339.849 33.9 119.8 339.399 35.3
Diluted EPS to Underlying Diluted EPS
2023 2022 (*restated)
Earnings Shares EPS Earnings Shares EPS
£m millions pence £m millions pence
Diluted EPS 105.5 339.849 31.0 112.5 339.399 33.2
Adjustments to earnings
Non-underlying items (note 4) 9.1 - 2.7 6.2 - 1.8
Underlying Diluted EPS 114.6 339.849 33.7 118.7 339.399 35.0
* Comparative figures restated to reflect the impact of the 5:1 share
consolidation undertaken in the year. See Corporate Reorganisation disclosed
within note 1.
Dilutive items in both the current and prior year related to share-based
payments.
9 Acquisitions
Current year acquisitions
The Group completed three individually immaterial acquisitions in the current
year, being Broome Bros. (Doncaster) Limited (1 May 2023), Robinson Quarry
Masters Limited (15 May 2023) and Minster Surfacing Limited (5 May 2023).
Total consideration for these acquisitions was £27.1m.
9 Acquisitions (continued)
Current year acquisitions (continued)
The fair value of the assets and liabilities acquired is set out as follows:
Book value Fair value adjustments Provisional fair value on acquisition
£m £m £m
Intangible assets - 3.9 3.9
Property, plant and equipment 4.5 6.5 11.0
Right-of-use assets 0.2 - 0.2
Inventories 1.2 - 1.2
Trade and other receivables 6.2 - 6.2
Cash and cash equivalents 6.2 - 6.2
Trade and other payables (3.5) - (3.5)
Provisions (0.3) - (0.3)
Lease liabilities (0.2) - (0.2)
Borrowings (0.9) - (0.9)
Current tax payable (0.4) - (0.4)
Deferred tax liabilities (0.7) (2.5) (3.2)
Total 12.3 7.9 20.2
Consideration - cash 25.0
Deferred consideration 2.1
Goodwill arising 6.9
Consideration
Deferred consideration includes £1.1m relating to an earnout arrangement and
£1.0m relating to a put liability over the remaining 20% of the ordinary
shares of Minster Surfacing Limited. The put liability has been accounted for
using the anticipated acquisition method. The earnout will be paid to the
former owner based on the performance of the acquired entity over a two year
period.
Fair value adjustments
The fair value adjustments comprised:
- Intangible assets, including the value of acquired customer lists;
- Revaluation of certain items of property, plant and equipment; and
- Associated deferred tax balances.
The goodwill arising represents expected synergies, the potential for future
growth, access to new markets and the skills of the existing workforce.
Goodwill is not deductible for tax purposes.
10 Reconciliation to non-GAAP measures
Non-GAAP performance measures are used throughout the Annual Report and the
condensed consolidated financial statements. This note provides a
reconciliation between these alternative performance measures to the most
directly related statutory measures.
Reconciliation of earnings based alternative performance measures
2023 Great Britain Ireland Cement Central administration Share of profit of associate Total
and joint ventures
and
eliminations
£m £m £m £m £m £m
Revenue 1,033.8 235.5 331.2 (113.0) - 1,487.5
Profit from operations 145.7
Non-underlying items (note 4) 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
10 Reconciliation to non-GAAP measures (continued)
2022 Great Britain Ireland Cement Central administration Share of profit of associate Total
and joint
and ventures
eliminations
£m £m £m £m £m £m
Revenue 972.4 226.2 300.7 (103.0) - 1,396.3
Profit from operations 148.0
Non-underlying items (note 4) 7.0
Underlying EBIT 86.4 28.3 52.1 (15.3) 3.5 155.0
Underlying EBIT margin 8.9% 12.5% 17.3% 11.1%
Underlying EBIT 86.4 28.3 52.1 (15.3) 3.5 155.0
Share of profit of associate - - - - (3.5) (3.5)
and joint ventures
Depreciation and mineral depletion 49.7 6.1 27.5 0.2 - 83.5
Underlying EBITDA 136.1 34.4 79.6 (15.1) - 235.0
Free Cash Flow
2023 2022
£m £m
Net cash from operating activities 191.9 168.0
Net cash used in investing activities (120.4) (112.9)
Acquisition of businesses 18.8 12.6
Cash impact of non-underlying items 4.5 1.0
Free Cash Flow 94.8 68.7
Underlying EBITDA 242.3 235.0
Free Cash Flow conversion 39% 29%
Return on invested capital
2023 2022
£m £m
Underlying EBIT 156.2 155.0
Underlying effective tax rate 20.4% 16.0%
Taxation at the Group's underlying effective rate (31.9) (24.8)
Underlying earnings before interest 124.3 130.2
Net assets 1,110.7 1,043.8
Net Debt (note 6) 169.9 197.7
Invested capital as at 31 December 1,280.6 1,241.5
Average invested capital* 1,261.1 1,201.9
Return on invested capital** 9.9% 10.8%
* Average invested capital is calculated by taking the average of the
opening invested capital at 1 January and the closing invested capital at 31
December. Opening invested capital at 1 January 2022 was £1,162.3m.
** Return on invested capital is calculated as Underlying earnings before
interest, divided by average invested capital for the year.
10 Reconciliation to non-GAAP measures (continued)
Covenant Leverage
2023 2022
£m £m
Underlying EBITDA 242.3 235.0
Impact of IFRS 16 (10.3) (11.3)
Underlying EBITDA for covenants 232.0 223.7
Net Debt (excluding IFRS 16) 121.9 148.4
Covenant Leverage 0.5x 0.7x
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 overdrawn borrowings. In both the current
and prior year, the only material adjusting item was the impact of IFRS 16.
11 Post balance sheet events
Acquisition of BMC Enterprises Inc
On 6 March 2024 the Group announced the proposed acquisition of the entire
share capital of BMC Enterprises Inc, a supplier of aggregates and ready mixed
concrete headquartered in St Louis, Missouri, USA. The acquisition is expected
to complete by 7 March 2024.
Consideration payable is based on an enterprise value of US$300m, of which
US$285m is payable in cash and the remaining US$15m through the issue of newly
created shares in Breedon Group plc. The consideration is subject to customary
closing adjustments and retentions.
The cash element of the consideration will be satisfied through the
utilisation of surplus cash balances and drawdown on the Group's existing
borrowing facilities.
The acquisition is expected to have a material impact on the Group's results
for the year ended 31 December 2024.
Given the proximity of the acquisition date to the date on which the Financial
Statements were authorised, the Group is not yet able to provide certain
disclosures required by IFRS 3, including the initial fair values of assets
and liabilities acquired, which have not yet been ascertained. These
disclosures will be presented as part of the Group's Interim Statement made up
to 30 June 2024.
Acquisition of Eco-Asphalt Supplies Limited
On 31 January 2024 the Group acquired the entire share capital of Eco-Asphalt
Supplies Limited, an asphalt supplier based in the UK, for an enterprise value
of £5.5m. This acquisition is not expected to materially impact the earnings
of the Group for the year ended 31 December 2024.
Given the proximity of the acquisition date to the date on which the Financial
Statements were authorised, the Group is not yet able to provide certain
disclosures required by IFRS 3, including the initial fair values of assets
and liabilities acquired, which have not yet been ascertained. These
disclosures will be presented as part of the Group's Interim Statement made up
to 30 June 2024.
Cautionary Statement
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 (which forms part of domestic UK law pursuant to the
European Union (Withdrawal) Act 2018 ("EUWA")) ("UK MAR"). In addition, market
soundings (as defined in MAR) were taken in respect of certain matters
contained in this announcement with the result that certain persons became
aware of inside information (as defined in MAR), as permitted by MAR. This
inside information is set out in this announcement. Therefore those persons
that received inside information in a market sounding are no longer in
possession of such inside information relating to the Company and its
securities.
GLOSSARY
The following definitions apply throughout this announcement, unless the
context requires otherwise.
Adopted IFRS International Financial Reporting Standards as adopted by the UK
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, disposals and the timing of cement plant maintenance shutdowns
compared to the comparable period.
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
SONIA Sterling Overnight Index Average
UK United Kingdom (GB & NI)
Underlying Stated before acquisition related expenses, redundancy and reorganisation
costs, property items, amortisation of acquisition intangibles and related tax
items
Underlying EBITDA Earnings before interest, tax, depreciation and amortisation non-Underlying
items and before our share of profit from associate and joint ventures
USPP US Private Placement
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