REG - Breedon Group PLC - Interim results 2023
26/07/2023 07:00
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RNS Number : 1659H Breedon Group PLC 26 July 2023
26 July 2023
BREEDON GROUP PLC
Interim results 2023
Strong first half; full year expectations maintained
Strategic execution and operational focus deliver robust performance
Breedon Group plc (Breedon or the Group), a leading vertically-integrated
construction materials group in Great Britain and Ireland, announces unaudited
interim results for the six months ended 30 June 2023.
Statutory highlights Underlying(1) highlights
£m H1 2023 H1 2022 % change H1 2023 H1 2022 % change % LFL(2)
except where stated
Revenue 742.7 671.1 11% 742.7 671.1 11% 7%
EBIT 62.1 65.5 (5)% 70.5 66.9 5% 4%
EBIT margin 8.4% 9.8% (140)bps 9.5% 10.0% (50)bps
Profit Before Tax 56.5 59.5 (5)% 64.9 60.9 7%
Basic EPS(3,4) ( ) 13.0p 14.5p (10)% 15.3p 15.0 2%
Dividend per share(4) 4.0p 3.5p 14%
Net Debt(5) 220.4 256.7 (14)%
Covenant Leverage(6) 0.7x 1.0x (0.3)x
ROIC(7) 10.0% 10.0% -
FINANCIAL HIGHLIGHTS
Operational focus and agile delivery generated a strong first half financial
performance
· Resilient end-markets continued to be supported by long-term
structural growth drivers
· Dynamic pricing tailwind more than offsets expected lower
volumes, leading to revenue increase of 11% or 7% on a like-for-like basis
· Underlying EBIT growth of 5% reflects revenue drop through,
partially offset by higher energy costs as hedges moved back into line with
market pricing
Financial flexibility maintained while investing for growth
· ROIC maintained at 10%
· Investment in three strategic bolt-on acquisitions
· Significantly lower Covenant Leverage at 0.7x due to lower
seasonal working capital outflow, good control of inventories and strong cash
collection
Interim dividend increased significantly ahead of earnings by 14% to 4.0p
· Reflecting our confidence in the prospects of the Group and in
keeping with our progressive dividend policy
OPERATING HIGHLIGHTS
Emphasis on operational excellence and cost recovery
· Self-help; all divisions initiated operational excellence
reviews, Cement executed two scheduled kiln maintenance shutdowns on time and
within budget
· GB revenue increased 10%; completed two bolt-on transactions and
delivered a solid first half through nimble execution, strong pricing tailwind
and careful cost management
· Ireland grew revenue 11%; traded well through tendering season,
winning work on quality, and completed the acquisition of Robinson Quarry
Masters
· Cement increased revenue 18%; strong pricing was sustained,
enabled by resilient end-market demand
Significant sustainability milestones achieved
· Key partner in the launch of the Peak Cluster initiative, an
innovative carbon capture and storage collaboration aiming to reduce industry
emissions significantly
· 'Breedon Balance', our range of products with sustainable
attributes, continued to gain traction, accounting for 30% of revenue
· Further improvement in our rate of Cement alternative fuel
substitution to 50% (2022: 48.5%)
ADMITTED TO THE MAIN MARKET OF THE LONDON STOCK EXCHANGE
Breedon shares now traded on the Main Market
· We expect to be eligible for inclusion in the FTSE 250 and
FTSE-All share indices at the next index review in September 2023
CURRENT TRADING AND OUTLOOK
Well-positioned for the second half; full year expectations maintained
· The end-markets we serve have remained resilient. End-market
visibility beyond 2023 remains limited in light of the uncertain economic
outlook
· In response, we have increased our emphasis across the Group on
operational excellence and agility to ensure Breedon is as competitive as it
has ever been
· Well-positioned for the second half of the year; the Group is
trading in line with the Board's expectations which remain unchanged
Rob Wood, Chief Executive Officer, commented:
"In the first half our vertically-integrated and local operating model has
again come to the fore, leveraging our long-term customer relationships and
deep market knowledge. Our first class team has operated with great agility to
deliver a strong start to 2023 for which I thank them sincerely and we are
well-positioned for the second half of the year.
"The long-term structural dynamics driving infrastructure spending and
housebuilding in GB and Ireland have not changed. To ensure we can efficiently
and sustainably meet long-term demand for our essential construction
materials, we have re-doubled our focus on those factors under our control;
keeping our people safe and well while minimising the cost of production and
maximising the value of the extensive portfolio of assets we own and acquire.
"By emphasising the operational factors we can influence, we will ensure we
remain competitive and continue to deliver outstanding results. By challenging
our procedures and practices, we can be sure we will be in the strongest
possible position when our end-markets return to growth."
Notes:
1. Underlying results are stated before acquisition-related expenses,
redundancy and reorganisation costs, property gains and losses, amortisation
of acquisition intangibles, AIM to Main Market costs 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. 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 £0.1m (HY 2022: £0.6m).
4. Comparative values for Earnings and Dividend per share measures
have been restated to reflect the impact of the 5:1 share consolidation
undertaken during the period.
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. ROIC: post-tax return on average invested capital.
8. 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 Interim Results 2023
Start Time/Date: 08:30 Wednesday, 26 July 2023 - please join the event 5-10 minutes prior to
scheduled start time. When prompted, provide the confirmation code or event
title
United Kingdom, Toll-free: 0808 109 0700
United Kingdom, Local: +44 (0) 33 0551 0200
Password: Quote 'Breedon interim results' when prompted
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) 20 3128 8193
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 3,800 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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STRONG FIRST HALF BENEFITS FROM AGILE EXECUTION
Markets
The construction materials market is contending with a number of conflicting
forces. Long-term structural growth drivers remain in place, supporting the
need for investment in infrastructure and housing. However, inflation-impacted
government budgets, political instability and housing affordability present
near-term headwinds.
Breedon's focus remains on charting our own clear course to ensure we are as
competitive and agile as we can be. By faithfully implementing our sustainable
growth strategy and maintaining our financial flexibility, focusing on the
quality of our products and customer service, we have executed well through
the first-half and delivered a strong financial performance.
Financial performance
During the first half we grew revenue 11% to £742.7m (H1 2022: £671.1m) or
7% on a like-for-like basis when adjusting for the six bolt-on acquisitions
completed in the last twelve months. Volumes declined as expected, however
were more than offset by a 12 ppt increase in pricing.
Underlying EBIT of £70.5m (H1 2022: £66.9m) grew 5% reflecting the benefits
of the pricing tailwind carried through from 2022 and full input cost recovery
achieved in the first half, partially offset by higher energy costs as hedges
moved back into line with market pricing. Consequently, Underlying EBIT margin
of 9.5% reduced by 50bps when compared to the same period in the prior year
(H1 2022: 10.0%).
The Group generated free cash inflow of £20.8m (H1 2022: outflow of £22.0m)
following stable capital investment and lower seasonal working capital
outflows of £40.9m (H1 2022: outflow of £77.2m), assisted by strong cash
collection. Following the completion of three strategically significant
bolt-on acquisitions for a combined enterprise value of £19m, closing
Covenant Leverage was significantly lower at 0.7x (H1 2022: 1.0x). Post-tax
return on invested capital remained at 10.0% (H1 2022: 10.0%), reflecting a
robust trading outcome, partially offset by the impact of the increased UK
corporate tax rate from the second quarter.
Dividend
The Board regularly reviews capital allocation scenarios, balancing capital
investment and M&A with reducing debt and returning cash to shareholders,
while prioritising profitable growth and ROIC. As a consequence of our strong
financial performance, the Board intend to pay an interim dividend of 4.0p (H1
2022 restated: 3.5p), an increase of 14% and significantly ahead of earnings.
This reflects our confidence in the prospects of the Group and is in keeping
with our progressive dividend policy. The dividend timetable will be published
in due course.
Move to the Main Market
On 17 May 2023 Breedon Group plc shares were admitted to the Premium Listing
Segment of the Official List and to trading on the Main Market of the London
Stock Exchange. At the same time, Breedon completed a five for one share
consolidation which reduced the number of shares in issue. Comparative
earnings per share and dividend per share figures have been restated as a
consequence.
STRATEGY REVIEW
Sustain
Our sustainability strategy is gaining momentum and we were pleased to achieve
significant milestones during the first half towards ensuring the long-term
sustainability of the Group. During the period we made progress towards
meeting our commitment to the Science Based Targets initiative. In addition,
we have committed to securing a rating from CDP with the rating process
underway.
Breedon is a key partner in the Peak Cluster initiative and in May we hosted
the launch at our Hope cement plant in the heart of the Peak District. This is
an innovative collaboration to capture, transport and permanently store CO(2)
emissions from the cement and lime industry in Derbyshire and Staffordshire,
as well as neighbouring industries in Cheshire. It is expected the project
will remove over three million tonnes of carbon dioxide emissions each year by
2030, a move that will reduce UK emissions from cement and lime manufacture by
around 40%.
The performance of our cement business is remarkable in the context of the
high proportion of alternative fuels utilised, a factor which adds complexity
to the production process. Fossil fuel replacement reached a combined rate of
50%; our Kinnegad cement plant continued to push the boundaries of alternative
fuel use, achieving a rate of 82%, and at times exceeding 90%.
At Breedon, we have nearly 15,000 hectares of land, strong relationships with
the nature groups and communities around our sites, and our colleagues are
enthusiastic advocates of the ecosystems surrounding our operations. We hosted
a biodiversity week in May to raise awareness of our commitment to nature and
biodiversity, highlight good practice, and to accelerate our biodiversity
action plans across the Group.
Our highest priority is ensuring that our 3,800 colleagues return 'Home Safe
and Well' each day. We constantly strive to improve our outcomes in this area,
so we were pleased to see industry body, MPA, recognise our colleagues'
achievements with regional awards for health and safety initiatives on site.
We undertook a pulse engagement survey to understand cultural perceptions
around our safety behaviours and inform the training we implement throughout
the rest of the year.
We continue to strive to make Breedon a great place to work. We partnered with
a leading wealth and benefits advisor to host regular personal finance
seminars, and in April we awarded a pay increase of at least 6%, acknowledging
the cost of living pressures many of our colleagues are facing. In May,
Breedon Ireland achieved an outstanding 12(th) place on the Sunday
Independent/Statista list of Ireland's 150 Best Employers, the highest placed
company in the construction related sectors, which is testament to our
commitment to our colleagues' overall health, safety and wellbeing.
Optimise
Our core values emphasise self-help, seeking to improve the efficiency of our
operations by 'keeping it simple' and 'striving to improve'. Following more
than a decade of growth, an active M&A programme and more than 300 sites
across the Group, each division initiated operational excellence reviews in
2023.
GB created a new role to drive operational improvement and standardise quarry
operations. Ireland, under a new leadership team and structure, reorganised
support functions and is taking the opportunity to implement solar energy
solutions where possible. Cement, which has a clear programme of scheduled
maintenance, sustained its market-leading reliability performance.
Expand
Many of our acquisition opportunities come to us through our local knowledge
and personal engagement with the asset owners. During the first half we
completed three transactions in GB and Ireland, with a combined enterprise
value of up to £19m, as our active M&A pipeline continued to yield high
quality, earnings enhancing opportunities.
In Ireland the acquisition of Robinson Quarry Masters, a family-run quarrying
and concrete block business, has extended our footprint North of Belfast.
Robinson Quarry Masters, with nearly 40 million tonnes of mineral reserves and
resources, has enhanced our mineral footprint in Ireland and has a
well-established customer base with exposure to housing, commercial and
infrastructure end-markets.
In GB we acquired two downstream businesses. Broome Bros., a leading
manufacturer of concrete blocks based in Doncaster, is adjacent to one of our
existing ready-mixed concrete sites. Minster Surfacing, an award-winning
regional surfacing business based in Lincoln with strong sustainability
credentials, delivers a diverse portfolio of works from the Midlands to
London. Each of the acquired businesses has started promisingly under Breedon
ownership.
Our M&A pipeline remains healthy and active. We are a trusted partner for
asset owners in GB and Ireland where we have looked to build and strengthen
relationships as we seek to in-fill our existing capability and footprint.
Longer-term, we continue to explore the possibility of selectively
establishing a platform in the US, a large fragmented market that offers
attractive growth prospects.
Our vertically-integrated model is backed by around one billion tonnes of
mineral reserves and resources making us one of the largest heavyside building
materials suppliers in GB and Ireland, with reserves under our stewardship
equivalent to over 30 years of production. Our mineral planning pipeline is
currently in excess of 100 million tonnes.
OUTLOOK
We entered 2023 in a good strategic and financial position, supplying
structurally growing end-markets with essential materials. We have had a
strong start to the year, benefitting from the dynamic pricing strategy
implemented in recent years while maintaining a sharp focus on operational
excellence.
The UK economic landscape remains uncertain with limited visibility beyond
2023, particularly with respect to residential housebuilding from which c.20%
of our revenues are derived. While recent UK construction PMI data indicates
infrastructure and non-residential building (end-markets that account for
c.70% of our revenues) remain in expansionary territory, CPA growth forecasts
have been reduced, indicating construction output will return to muted growth
in 2024.
Similarly for Republic of Ireland, Euroconstruct construction output forecasts
were reduced during the period. Although growth expectations for 2023 were
reduced by 0.4% to 2.1%, this remained one of the fastest growth rates in
Western Europe. Encouragingly, the construction PMI returned to growth
territory, increasing to 50.4 in June 2023, the first upturn in activity since
September 2022.
Our forward hedging programme, which has moved back into line with market
pricing, continues to provide visibility of our cost base and support our
careful approach to cost and risk management.
Due to the timing of price increases in 2022, the phasing of Underlying EBIT
in 2023 will continue to be weighted towards the second half, although to a
lesser extent than in prior years
The Breedon model is resilient and continues to deliver a solid operational
performance with continued strong cash generation, irrespective of the
macroeconomic or political backdrop. We are well-positioned for the second
half of the year; the Group is trading in line with the Board's expectations
which remain unchanged.
OPERATIONAL REVIEW
Product volumes
m' tonnes except where stated H1 2023 H1 2022 H1 2021 H1 2020 H1 2019
Aggregates 13.0 13.6 15.0 8.0 9.9
Asphalt 1.8 1.9 2.0 1.0 1.4
Cement 1.1 1.2 1.2 0.8 1.0
Ready-mixed concrete (m(3)) 1.5m 1.5m 1.7m 1.0m 1.5m
Volumes performed broadly in line with industry forecasts. On a like-for-like
basis, aggregate volumes reduced 6%, asphalt 3%, cement 3% and ready-mixed
concrete was marginally lower compared with the first half of 2022.
Great Britain
£m except where stated H1 2023 H1 2022 Change % LFL %
Revenue 519.6 473.1 +10% +5%
Underlying EBIT 42.8 41.5 +3% +1%
Underlying EBIT margin 8.2% 8.8% (60)bps
Our GB team delivered a solid performance in a softening market. Revenue
increased 10% or 5% on a like-for-like basis when adjusting for the five
transactions completed by the division since 30 June 2022.
Aggregate and asphalt volumes declined in line with the broader market while
volumes of ready-mixed concrete were stable. Pricing, which benefitted from
the prior year tailwind, remained well-underpinned by resilient end-markets
and was sufficient to offset input cost inflation. Underlying EBIT margin
decreased by 60bps to 8.2%, primarily attributable to product mix and the
impact of operating leverage from reduced volumes.
Our enhanced focus on operational excellence yielded positive outcomes. At
Dowlow, our largest rail-connected limestone quarry, the team relocated the
mobile crushing plant to a new processing area, reducing fuel usage and cycle
times while creating additional maintenance windows. They also improved
blasting efficiency by increasing the size of shot-fires, which in turn
reduced fuel consumption, drill rig wear and the safety risk associated with
extracting mineral from the active face. Elsewhere, our Naunton quarry
installed a 0.5km pipeline from our own borehole, directly into the concrete
plant, reducing vehicle movements and fuel costs whilst saving personnel time
and improving safety.
Following the award of a position on the North Super Region of the National
Highways Pavement Delivery Framework in 2022, we secured a good portfolio of
work in the first year of delivery. After nearly a year of reliably supplying
high quality asphalt to the A11 Wymondham resurfacing project, we have
delivered nearly 150,000 tonnes to the largest project on the National
Highways concrete roads framework.
In recent years we have developed a successful airport runway resurfacing
business. We have a strong pipeline of work and during the period we were
active on Islay and Southampton airport runways. Delivering our own high
quality materials, pulled through our vertically-integrated model and
delivered reliably by our in-house teams, has positioned us well to pursue and
win other major national surfacing works where the client's focus is
increasingly on quality and sustainability measures where we score highly.
Great Britain outlook
Markets remain unpredictable and so we are taking actions to enhance our
competitive position and maximise the benefit of our vertically-integrated
model. We recognise that recent decisions to delay or cancel major
infrastructure projects, alongside growing pressure on local authority road
maintenance budgets, has reduced visibility. We will remain close to our
customers and deliver a high quality, sustainable service while continuing to
review our asset portfolio for efficiencies.
Ireland
£m except where stated H1 2023 H1 2022 Change % LFL %
Revenue 109.1 98.4 +11% +10%
Underlying EBIT 10.0 9.0 +11% +9%
Underlying EBIT margin 9.2% 9.1% 10bps
Our business in Ireland is strategically located within markets that have
significant pent-up demand, long-term infrastructure deficits and a material
shortfall in residential housing, enabled by strong client relationships and a
long track record of high quality delivery.
We have performed well in the first half of 2023. While the market in Northern
Ireland remains impacted by the absence of a governing Assembly, we continued
to secure new work, winning the Limavady term surfacing contract, and
resecured two street lighting maintenance contracts. The market in RoI was
healthy with a positive tendering season, reflecting clients' increasing
tendency to award work on quality measures where we perform well.
Consequently, revenue for the six months to 30 June 2023 increased 11% to
£109.1m. On a like-for-like basis, adjusting for the acquisition of Robinson
Quarry Masters, revenue increased 10%. Softness in aggregate and ready-mixed
concrete volumes reflected the market decline in NI while increased asphalt
volumes were attributed to tendering activity in RoI.
Average selling prices remained well supported and we continued to benefit
from the price increases achieved in 2022. As a result, we were able to fully
recover input costs, generate Underlying EBIT of £10.0m and sustain an
Underlying EBIT margin of 9.2%.
The economic and social infrastructure requirements in Ireland are driven by a
growing population. The region enjoys long-term government infrastructure
spending commitments as well as significant private foreign direct investment.
Consequently our Ireland growth strategy is focused on ensuring we have the
right assets and services in the right locations. To meet the demand for the
essential construction materials and services that we foresee, our active
organic mineral pipeline is complemented by a healthy M&A channel.
Ireland outlook
In NI, where our business is underpinned by multi-year frameworks and term
contracts, the pace of activity remains impacted by the absence of the
governing Assembly, with a growing pipeline of pent-up demand. We continue
to deliver high quality work for repeat customers in RoI which is forecast to
remain the fastest growing economy in Western Europe.
Cement
£m except where stated H1 2023 H1 2022 Change %
Revenue 176.8 150.1 +18%
Underlying EBIT 25.9 23.7 +9%
Underlying EBIT margin 14.6% 15.8% (120)bps
Our cement plants in GB and Ireland delivered a strong first half, achieving a
significant milestone towards our net zero objective with the launch of the
Peak Cluster carbon capture and storage project.
Revenue increased 18% as the diverse end-markets we serve remained resilient,
underpinned by long-term structural growth drivers. While cement volumes
declined 3%, the pricing environment was supported by robust fundamentals
alongside the tailwind of price increases achieved during 2022. Consequently,
Underlying EBIT increased 9%. A high proportion of the cost base associated
with cement production is fixed and, as a result of reduced volumes,
Underlying EBIT margin declined 120bps.
Our teams at Hope and Kinnegad carried out two planned kiln maintenance
shutdowns during January, both concluding on schedule and within budget. Each
plant maintained an outstanding reliability record, in excess of 96%, due to
the rigorous forward planning and exceptional commitment of our Cement
colleagues. Hope sustained plant mastery status into its fifth year, a rare
occurrence in the industry, while the expertise and dedication of the team at
Kinnegad was recognised by the Ireland Operational Excellence Awards 2023,
winning Operations Team of the Year.
We continued to reduce the clinker content of our products, supporting our
clients' sustainability objectives; CEM II sales out of Kinnegad exceeded 50%
(2022: 50%) while in GB we are well-positioned for the rapid uptake we expect
to see in CEM II once British concrete standards are reviewed.
Cement outlook
Our cement business remains resilient. End-market demand is underpinned by
large ongoing infrastructure projects in the UK where industry fundamentals
are well balanced. In RoI, housing and infrastructure are supported by the
government's development plans to accommodate a rapidly growing population.
FINANCE REVIEW
The Group delivered a strong trading performance in the first half.
Favourable tailwinds from our dynamic pricing strategy more than offset
expected lower volumes and resulted in revenue for the half-year increasing by
11% to £742.7m (H1 2022: £671.1m). The revenue improvement includes 12ppt
of pricing combined with volume reductions of 5ppt. On a like-for-like basis,
excluding the impact of the six acquisitions completed since H1 2022, revenue
in the period increased by 7%.
Underlying EBIT benefited from the drop through on increased revenues,
partially offset by higher energy costs as hedges moved back into line with
market pricing, to increase by 5% to £70.5m (H1 2022: £66.9m). Underlying
EBIT margin in the first half was 9.5% (H1 2022: 10.0%).
Non-underlying items
The Group recorded £8.4m of non-underlying items during the period (H1 2022:
£1.4m, net of £0.4m of profits realised on property transactions). This
comprised £5.0m of professional fees incurred in connection with the
re-domiciliation of the Group's parent company and the move from AIM to the
Main Market of the London Stock Exchange; £3.0m amortisation of intangible
assets and £0.4m of acquisition expenses.
Interest
Net interest costs in H1 were £5.6m (H1 2022 £6.0m) with the benefit of
increased returns on surplus cash holdings being largely offset by non-cash
increases in risk free rates used to unwind discounts on the Group's
provisions. 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 20.3% on
profits arising in the Group's UK and RoI subsidiary undertakings, with the
increase in the effective rate (FY 2022: 16.0%) primarily attributable to the
impact of the increased UK corporation tax rate from the second quarter.
Earnings per share
Adjusted Underlying Basic EPS for the period improved by 2% to 15.3p (H1 2022
restated: 15.0p), Statutory Basic EPS was 13.0p (H1 2022 restated: 14.5p).
Statement of financial position and ROIC
Net assets at 30 June 2023 were £1,060.1m (FY 2022: £1,043.8m).
Using average invested capital over the past twelve months, ROIC remained at
10.0% (H1 2022: 10.0%) reflecting a robust trading outcome, partially offset
by the impact of the increased UK corporate tax rate. This remains in line
with our medium term target and reflects disciplined capital allocation across
our business.
Free cash flow
£m H1 2023 H1 2022 Change
Underlying EBITDA 112.3 107.0 5.3
Working capital (40.9) (77.2) 36.3
Net interest (3.5) (4.5) 1.0
Income taxes paid (15.9) (15.3) (0.6)
Net capex (31.9) (32.5) 0.6
Other 0.7 0.5 0.2
Free cash flow 20.8 (22.0) 42.8
Acquisitions (11.1) - (11.1)
Dividends paid (23.7) (18.6) (5.1)
Non-underlying items (5.4) 0.4 (5.8)
Other (3.3) (4.0) 0.7
(Increase)/decrease in net debt (22.7) (44.2) 21.5
The Group's free cash flow in H1 2023 was an inflow of £20.8m (H1 2022:
outflow of £22.0m) reflecting increased earnings and reduced seasonal working
capital outflows. The improvement in working capital reflects strong cash
collections, good control over inventories and the timing of purchases of
carbon emission trading credits.
The spend on acquisitions relates to the initial payments and associated
transaction costs for the three bolt-on acquisitions completed during the
period. Further payments for these acquisitions, estimated at c.£6.1m and
subject to the agreement of completion balance sheets, fall due within the
second half of the year.
Net debt
Closing Net Debt at 30 June 2023 was £220.4m (H1 2022: £256.7m, FY 2022:
£197.7m) and Covenant Leverage was 0.7x, in line with the year end and
significantly lower than June 2022 (H1 2022: 1.0x, FY 2022: 0.7x).
Borrowing facilities
The Group's facilities total £600m and are unchanged from those disclosed in
the 2022 Annual Report. All covenants were comfortably met in the period.
The Group has exercised a one year extension option in respect of its £350m
Revolving Credit Facility, with the consequence that the facility will now
fall due for repayment in June 2026 rather than June 2025. Arrangement fees of
£0.7m have been incurred and capitalised within loan arrangement fees.
Dividend
We have announced our intention to pay an interim dividend of 4.0p per share
(H1 2022 restated: 3.5p per share) reflecting our confidence in the prospects
of the Group and in keeping with our progressive dividend policy. The dividend
timetable will be announced in due course.
Group restructuring and share consolidation
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
UK holding company for the Group was established with one share in the new
company issued to shareholders in exchange for every five shares held in the
previous Group holding company.
The Group's equity has been adjusted to reflect that of the new holding
company, with earnings and dividend per share measures restated throughout
this announcement to reflect the impact of the five for one share
consolidation. In all other aspects, the Group results and financial
position are unaffected by this change and reflect the continuation of the
Group.
Further details in relation to the restructuring have been included under the
basis of preparation note in the Interim Financial Statements accompanying
this announcement.
2023 technical guidance
The Group is trading in line with the Board's expectations which remain
unchanged.
Net interest expense for the full year will be c.£12m, of which £8m will be
cash interest.
We expect an effective tax rate for the full year of c.20% (2022: 16%), rising
to c.22% in 2024, which will impact our post tax performance measures
(including ROIC), with cash taxes higher than the effective rate.
The net cash cost of the three-bolt on acquisitions completed in H1 2023 will
be c.£17m and total capital expenditure for the full year will be c.£100m.
The cash cost of the interim dividend paid in the second half of the year will
be £13.6m, resulting in a total cash cost of dividends paid during 2023 of
£37.3m.
We continue to expect a modest inflationary increase in working capital over
the full year cycle.
RISK
The Group's principal risks in alphabetical order (by risk category) are:
Strategic Operational Financial
· Acquisitions · Environmental impact · Credit risk
· Climate change · Failure of a critical asset · Currency risk
· Digitalisation · Health, safety and wellbeing · Financing and interest rate risk
· Market conditions · Input costs
· Mineral reserves · IT and cyber security
· People · Legal and regulatory
· Product specification
Further details of the principal risks facing the Group are set out on pages
44-49 of the Group's Annual Report for the year ended 31 December 2022 which
is available on the Group website.
The Board consider that these are the risks that could impact the performance
of the Group in the remaining six months of the current financial year.
Although the nature of the risks as described in the 2022 Annual Report are
unchanged for the half year, current market conditions has increased the
overall level of risk faced by the Group. 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 2022 Annual
Report on pages 96-97.
Since the publication of the 2022 Annual Report, there have been no changes to
the composition of the Board.
Rob Wood James Brotherton
Chief Executive Officer Chief Financial Officer
26 July 2023
Condensed Consolidated Income Statement
for the six months ended 30 June 2023
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
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 742.7 - 742.7 671.1 - 671.1 1,396.3 - 1,396.3
Cost of sales (505.2) - (505.2) (449.2) - (449.2) (910.1) - (910.1)
Gross profit 237.5 - 237.5 221.9 - 221.9 486.2 - 486.2
Distribution expenses (116.6) - (116.6) (109.1) - (109.1) (231.0) - (231.0)
Administrative expenses (52.0) (8.4) (60.4) (47.6) (1.4) (49.0) (103.7) (7.0) (110.7)
Group operating profit 68.9 (8.4) 60.5 65.2 (1.4) 63.8 151.5 (7.0) 144.5
Share of profit of associate and joint ventures 1.6 - 1.6 1.7 - 1.7 3.5 - 3.5
Profit from operations 70.5 (8.4) 62.1 66.9 (1.4) 65.5 155.0 (7.0) 148.0
Financial income 0.7 - 0.7 - - - 0.2 - 0.2
Financial expense (6.3) - (6.3) (6.0) - (6.0) (12.4) - (12.4)
Profit before taxation 64.9 (8.4) 56.5 60.9 (1.4) 59.5 142.8 (7.0) 135.8
Tax at effective rate (13.2) 0.7 (12.5) (10.0) 0.3 (9.7) (22.9) 0.8 (22.1)
Changes in deferred tax rate (0.1) - (0.1) (0.6) - (0.6) (1.1) - (1.1)
Taxation (13.3) 0.7 (12.6) (10.6) 0.3 (10.3) (24.0) 0.8 (23.2)
Profit for the period 51.6 (7.7) 43.9 50.3 (1.1) 49.2 118.8 (6.2) 112.6
Attributable to:
Breedon Group shareholders 51.6 (7.7) 43.9 50.3 (1.1) 49.2 118.7 (6.2) 112.5
Non-controlling interests - - - - - - 0.1 - 0.1
Profit for the period 51.6 (7.7) 43.9 50.3 (1.1) 49.2 118.8 (6.2) 112.6
* Non-underlying items represent acquisition-related expenses, redundancy and
reorganisation costs, property gains or losses, amortisation of acquisition
intangibles, AIM to Main Market costs and related tax items.
Earnings per share
(restated**)
Basic 13.0p 14.5p 33.2p
Diluted 12.9p 14.5p 33.1p
Underlying earnings per share are shown in note 8.
Dividends in respect of the period
(restated**)
Dividend per share 4.0p 3.5p 10.5p
** Restated comparatives to reflect the impact of the 5:1 share consolidation
undertaken during the period. See note 1.
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2023
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Profit for the period 43.9 49.2 112.6
Other comprehensive (expense)/income
Items which may be reclassified subsequently to profit and loss:
Foreign exchange differences on translation of foreign operations, net of (5.6) 5.5 10.2
hedging
Effective portion of changes in fair value of cash flow hedges (0.1) 0.3 (1.3)
Taxation on items taken directly to other comprehensive income - - 0.2
Other comprehensive (expense)/income for the period (5.7) 5.8 9.1
Total comprehensive income for the period 38.2 55.0 121.7
Total comprehensive income for the period is attributable to:
Breedon Group shareholders 38.2 55.0 121.6
Non-controlling interests - - 0.1
38.2 55.0 121.7
Condensed Consolidated Statement of Financial Position
at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Non-current assets
Property, plant and equipment 790.5 749.9 787.9
Right-of-use assets 47.3 46.8 47.1
Intangible assets 519.4 503.2 518.2
Investment in associate and joint ventures 15.3 13.4 13.7
Trade and other receivables 1.8 5.3 3.8
Total non-current assets 1,374.3 1,318.6 1,370.7
Current assets
Inventories 87.1 74.1 94.8
Trade and other receivables 322.6 291.3 218.6
Current tax receivable - 0.5 -
Cash and cash equivalents 76.9 39.2 101.7
Total current assets 486.6 405.1 415.1
Total assets 1,860.9 1,723.7 1,785.8
Current liabilities
Interest-bearing loans and borrowings (7.8) (7.3) (7.9)
Trade and other payables (323.8) (277.2) (263.8)
Current tax payable (1.9) (1.5) (3.8)
Provisions (9.4) (9.6) (9.2)
Total current liabilities (342.9) (295.6) (284.7)
Non-current liabilities
Interest-bearing loans and borrowings (289.5) (288.6) (291.5)
Provisions (78.0) (65.0) (76.8)
Deferred tax liabilities (90.4) (87.0) (89.0)
Total non-current liabilities (457.9) (440.6) (457.3)
Total liabilities (800.8) (736.2) (742.0)
Net assets 1,060.1 987.5 1,043.8
Equity attributable to Breedon Group shareholders
Share capital 3.4 - -
Stated capital - 554.8 555.0
Hedging reserve - 1.5 0.1
Translation reserve (5.2) (4.3) 0.4
Merger reserve 80.5 - -
Retained earnings 981.1 435.3 488.0
Total equity attributable to Breedon Group shareholders 1,059.8 987.3 1,043.5
Non-controlling interests 0.3 0.2 0.3
Total equity 1,060.1 987.5 1,043.8
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2023
For the six months ended 30 June 2023
Share capital 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
Balance at - 555.0 0.1 0.4 - 488.0 1,043.5 0.3 1,043.8
31 December 2022
Dividends paid - - - - - (23.7) (23.7) - (23.7)
Corporate 474.5 (555.0) - - 80.5 - - - -
reorganisation
(note 1)
Capital reduction (471.1) - - - - 471.1 - - -
(note 1)
Total comprehensive income for the period - - (0.1) (5.6) - 43.9 38.2 - 38.2
Share-based payments (inclusive of deferred tax recognised in equity) - - - - - 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
For the six months ended 30 June 2022
Stated capital Hedging reserve Translation reserve Retained earnings Attributable to Breedon Group shareholders Non-controlling interests Total
equity
£m £m £m £m £m £m £m
Balance at 31 December 2021 553.0 1.2 (9.8) 405.2 949.6 0.2 949.8
Shares issued 1.8 - - - 1.8 - 1.8
Dividends paid - - - (18.6) (18.6) - (18.6)
Total comprehensive income for the period - 0.3 5.5 49.2 55.0 - 55.0
Share-based payments (inclusive of deferred tax recognised in equity) - - - (0.5) (0.5) - (0.5)
Balance at 30 June 2022 554.8 1.5 (4.3) 435.3 987.3 0.2 987.5
For the six months ended 31 December 2022
Stated capital Hedging reserve Translation reserve Retained earnings Attributable to Breedon Group shareholders Non-controlling interests Total
equity
£m £m £m £m £m £m £m
Balance at 31 December 2021 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 period - (1.1) 10.2 112.5 121.6 0.1 121.7
Share-based payments (inclusive of deferred tax recognised in equity) - - - 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
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2023
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Cash flows from operating activities
Profit for the period 43.9 49.2 112.6
Adjustments for:
Depreciation and mineral depletion 43.4 41.8 83.5
Amortisation 3.0 1.8 4.8
Financial income (0.7) - (0.2)
Financial expense 6.3 6.0 12.4
Share of profit associate and joint ventures (1.6) (1.7) (3.5)
Net gain on sale of property, plant and equipment (1.0) (1.8) 2.4
Gain on stepped acquisition - - (0.3)
Share-based payments 1.8 - 1.2
Taxation 12.6 10.3 23.2
Operating cash flow before changes in working capital and provisions 107.7 105.6 236.1
Increase in trade and other receivables (99.7) (84.8) (0.2)
Decrease/(increase) in inventories 7.8 (11.6) (31.7)
Increase/(decrease) in trade and other payables 51.3 19.3 (9.1)
(Decrease)/increase in provisions (0.3) (0.1) 7.7
Cash generated from operating activities 66.8 28.4 202.8
Interest paid (3.0) (3.3) (6.7)
Interest element of lease payments (1.2) (1.2) (2.5)
Interest received 0.7 - 0.2
Income taxes paid (15.9) (15.3) (25.8)
Net cash from operating activities 47.4 8.6 168.0
Cash flows used in investing activities
Acquisition of businesses (11.1) - (12.6)
Dividends from associate and joint ventures - 0.5 1.7
Purchase of property, plant and equipment (33.8) (35.1) (106.8)
Proceeds from sale of property, plant and equipment 1.9 2.6 4.8
Net cash used in investing activities (43.0) (32.0) (112.9)
Cash flows used in financing activities
Dividends paid (23.7) (18.6) (30.5)
Proceeds from the issue of shares (net of costs) - 1.8 2.0
Revolving Credit Facility extension costs (0.7) (0.7) (0.7)
Repayment of lease obligations (4.7) (4.1) (8.8)
Net cash used in financing activities (29.1) (21.6) (38.0)
Net (decrease)/increase in cash and cash equivalents (24.7) (45.0) 17.1
Cash and cash equivalents at beginning of period 101.7 83.9 83.9
Foreign exchange differences (0.1) 0.3 0.7
Cash and cash equivalents at end of period 76.9 39.2 101.7
Notes to the Condensed Consolidated Interim Financial Statements
1 Basis of preparation
Breedon Group plc 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 2022.
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
2022.
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. Under the scheme of arrangement, shares with a 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 - Business combinations excludes common control transactions and group
reconstructions. The Interim Financial Statements therefore incorporate the
results of the reorganisation using the merger accounting method, whereby the
results and cashflows of all the combining entities are brought into the
Interim 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 as follows:
Stated capital Share capital Merger reserve Retained earnings
£m £m £m £m
As at 31 December 2022 555.0 - - 488.0
Impact of corporate reorganisation (555.0) 474.5 80.5 -
Capital structure post reorganisation - 474.5 80.5 488.0
Earnings and Dividend per share measures have been restated to reflect the
impact of the five to one share consolidation, but in all other aspects the
Group's results and financial position are unaffected by the change and
reflect the continuation of the Group.
Capital reduction
Further to the corporate reorganisation outlined above, on 9 June 2023 New
Breedon 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.
1 Basis of preparation (continued)
New IFRS Standards and Interpretations
The Group has adopted the following standards from 1 January 2023:
- IFRS 17 - Insurance Contracts
- Amendments to IAS 1 - Presentation of Financial Statements -
Classification of Liabilities
- Amendments to IAS 1 - Presentation of Financial Statements -
Disclosure of Accounting Policies
- Amendments to IAS 8 - Accounting Policies, Changes in Accounting
Estimates and Errors - Definition of Accounting Estimates
- Amendments to IAS 12 - Income Taxes - Deferred Tax Related to
Assets and Liabilities Arising from a Single Transaction
The adoption of these standards has not had a material impact on the Interim
Financial Statements.
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 comprise 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 7 to these Interim Financial Statements.
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 £56.5m. 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 2023, the Group had
cash of £76.9m and undrawn banking facilities of £350.0m, and at the date of
this report, retains similar levels of liquidity 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 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. There have been
no material additional significant judgements made by management in applying
the Group's accounting policies, nor key sources of estimation uncertainty
compared to those applicable to the Consolidated Financial Statements for the
year ended 31 December 2022 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 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.
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
Revenue Underlying Revenue Underlying EBITDA* Revenue Underlying
EBITDA* EBITDA*
Income statement £m £m £m £m £m £m
Great Britain 519.6 69.0 473.1 66.3 972.4 136.1
Ireland 109.1 13.2 98.4 12.0 226.2 34.4
Cement 176.8 39.8 150.1 37.7 300.7 79.6
Central administration - (9.7) - (9.0) - (15.1)
Eliminations (62.8) - (50.5) - (103.0) -
Group 742.7 112.3 671.1 107.0 1,396.3 235.0
Reconciliation to statutory profit
Group Underlying EBITDA as above 112.3 107.0 235.0
Depreciation and mineral depletion (43.4) (41.8) (83.5)
Great Britain 42.8 41.5 86.4
Ireland 10.0 9.0 28.3
Cement 25.9 23.7 52.1
Central administration (9.8) (9.0) (15.3)
Underlying Group operating profit 68.9 65.2 151.5
Share of profit of associate and joint ventures 1.6 1.7 3.5
Underlying profit from operations (EBIT) 70.5 66.9 155.0
Non-underlying items (note 5) (8.4) (1.4) (7.0)
Profit from operations 62.1 65.5 148.0
*Underlying EBITDA is earnings before interest, tax, depreciation,
amortisation, non-underlying items (note 5) and before our share of profit
from associate and joint ventures.
4 Segmental analysis (continued)
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
2023 2022 2022
£m £m £m
Sale of goods
Great Britain 441.1 413.3 829.0
Ireland 48.0 38.4 82.0
Cement 176.8 150.1 300.7
Eliminations (62.8) (50.5) (103.0)
603.1 551.3 1,108.7
Surfacing
Great Britain 78.5 59.8 143.4
Ireland 61.1 60.0 144.2
139.6 119.8 287.6
Total 742.7 671.1 1,396.3
Timing of revenue recognition
All revenues from the sale of goods relate 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
2023 2022 2022
Total Total Total Total Total Total
assets liabilities assets liabilities assets liabilities
£m £m £m £m £m £m
Great Britain 950.6 (251.8) 881.4 (213.5) 900.9 (228.0)
Ireland 296.6 (55.9) 275.3 (46.3) 260.6 (40.5)
Cement 531.9 (77.4) 524.1 (73.5) 519.7 (62.0)
Central administration 4.9 (26.1) 3.2 (18.5) 2.9 (19.3)
Total operations 1,784.0 (411.2) 1,684.0 (351.8) 1,684.1 (349.8)
Current tax - (1.9) 0.5 (1.5) - (3.8)
Deferred tax - (90.4) - (87.0) - (89.0)
Net debt 76.9 (297.3) 39.2 (295.9) 101.7 (299.4)
Total Group 1,860.9 (800.8) 1,723.7 (736.2) 1,785.8 (742.0)
Net assets 1,060.1 987.5 1,043.8
5 Non-underlying items
Non-underlying items are those which are either unlikely to recur in future
periods or which distort the underlying trading performance of the business,
including non-cash items. The directors monitor the performance of the Group
using alternative performance measures which are 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 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
2023 2022 2022
£m £m £m
Included in administrative expenses:
Acquisition costs 0.4 - 0.7
Property (gains)/losses - (0.4) 1.5
Amortisation of acquired intangible assets 3.0 1.8 4.8
AIM to Main Market costs (note 1) 5.0 - -
Total non-underlying items (before tax) 8.4 1.4 7.0
Non-underlying taxation (0.7) (0.3) (0.8)
Total non-underlying items (after tax) 7.7 1.1 6.2
6 Taxation
The tax charge at effective rate for the six months ended 30 June 2023 is
based on the estimated effective weighted average rate applicable for existing
operations for the full year.
This reflects a combined underlying effective rate of 20.3% per cent on
profits arising in the Group's UK and Irish subsidiary undertakings.
7 Interest-bearing loans and borrowings
Net debt
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Cash and cash equivalents 76.9 39.2 101.7
Current borrowings (7.8) (7.3) (7.9)
Non-current borrowings (289.5) (288.6) (291.5)
Net debt (including IFRS 16) (220.4) (256.7) (197.7)
IFRS 16 lease liabilities 49.5 48.5 49.3
Net debt (excluding IFRS 16) (170.9) (208.2) (148.4)
Analysis of borrowings between current and non-current
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Lease liabilities 7.8 7.3 7.9
Current borrowings 7.8 7.3 7.9
Bank and USPP debt 247.8 247.4 250.1
Lease liabilities 41.7 41.2 41.4
Non-current borrowings 289.5 288.6 291.5
7 Interest-bearing loans and borrowings (continued)
Facilities
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 margin on the RCF
was charged in the period at rates of between 1.7% and 1.8%.
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 period, the Group exercised an option to extend the RCF for a
further 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 period.
8 Earnings per share (restated)
30 June *30 June *31 December
2023 2022 2022
pence pence pence
Adjusted Underlying Basic EPS 15.3 15.0 35.4
Underlying Basic EPS 15.2 14.9 35.1
Statutory Basic EPS 13.0 14.5 33.2
Underlying Diluted EPS 15.2 14.8 34.9
Statutory Diluted EPS 12.9 14.5 33.1
* Comparative figures restated to reflect the impact of the 5:1 share
consolidation undertaken in the period. See note 1.
Adjusted Underlying Basic EPS is calculated based on Underlying profit for the
period attributable to Breedon Group shareholders of £51.6m (30 June 2022:
£50.3m, 31 December 2022: £118.7m), adjusted to exclude the impact of
changes in the deferred tax rate of £0.1m (30 June 2022: £0.6m, 31 December
2022: £1.1m). The weighted average number of ordinary shares in issue during
the period was 338,882,282 (*30 June 2022: 338,237,544, *December 2022:
338,553,497).
Underlying Basic EPS is calculated based on the Underlying profit for the
period attributable to Breedon Group shareholders of £51.6m (30 June 2022:
£50.3m, 31 December 2022: £118.7m) and on the weighted average number of
ordinary shares in issue during the period as above.
Statutory Basic EPS is based on the profit for the period attributable to
Breedon Group shareholders of £43.9m (30 June 2022: £49.2m, 31 December
2022: £112.5m) and on the weighted average number of ordinary shares in issue
during the period as above.
Diluted earnings per ordinary share is based on 339,548,658 shares (*30 June
2022: 339,495,425, *31 December 2022: 339,812,882) and reflects the effect of
all dilutive potential ordinary shares.
9 Related party transactions
The nature of related party transactions is consistent with those disclosed in
the Annual Report for the year ended 31 December 2022. Related party
transactions are conducted on an arm's length basis.
10 Acquisitions
The Group completed three acquisitions in the period, acquiring:
· 80% of the ordinary share capital of Minster Surfacing Limited on
5 May 2023
· 100% of the ordinary share capital of Broome Bros. (Doncaster)
Limited on 1 May 2023; and
· 100% of the ordinary share capital of Robinson Quarry Masters
Limited on 16 May 2023.
The provisional fair values of the assets and liabilities acquired are set out
as below:
Book value Fair value adjustments Provisional fair value on acquisition
£m £m £m
Intangible assets - 2.8 2.8
Property, plant and equipment 4.7 6.5 11.2
Inventories 1.2 - 1.2
Trade and other receivable 5.4 - 5.4
Cash and cash equivalents 6.0 - 6.0
Trade and other payables (3.3) - (3.3)
Provisions (0.3) - (0.3)
Current tax payable (0.7) - (0.7)
Deferred tax liabilities (0.7) (2.2) (2.9)
Total 12.3 7.1 19.4
Cash consideration on completion 17.1
Deferred consideration 8.2
Goodwill arising 5.9
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 remaining deferred consideration relates to payments to be made in the
second half of 2023 subject to agreement of final completion accounts.
Fair value adjustments
The fair value adjustments primarily comprised:
- Intangible assets, including the value of acquired customer
lists;
- Mineral valuations relating to acquired quarries; and
- 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.
Impact of current year acquisition
Income statement
During the period, the combined acquisitions contributed revenues of £2.4m,
Underlying EBIT of £0.4m and profit before tax of £0.4m to the Group. If
these acquisitions had occurred on 1 January 2023, the results of the Group
for the six months ended 30 June 2023 would have shown revenue of £750.0m,
Underlying EBIT of £71.6m and Profit before tax of £57.6m.
10 Acquisitions (continued)
Cash flow
The cash flow impact of acquisitions in the year can be summarised as follows:
£m
Consideration - cash 17.1
Cash and cash equivalents acquired (6.0)
Net cash consideration shown in the consolidated statement of cash flows 11.1
Acquisition costs
The Group incurred acquisition related costs of £0.4m which included external
professional fees in relation to these acquisitions. See note 5.
11 Stated and Share capital
Number of Ordinary Shares (m) Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
Issued ordinary shares at the beginning of period 1,694.4 1,689.7 1,689.7
Issued in connection with:
Exercise of savings-related share options - 2.8 3.1
Vesting of Performance Share Plan awards - 1.6 1.6
5:1 share consolidation as part of corporate reorganisation (note 1) (1,355.5) - -
338.9 1,694.1 1,694.4
12 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 Britain Ireland Cement Central administration Share of profit of associate Total
and joint ventures
30 June 2023 £m £m £m and
£m
£m
eliminations
£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 profit 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
12 Reconciliation to non-GAAP measures (continued)
Six months ended Great Britain Ireland Cement Central administration Share of profit of associate Total
and joint
30 June 2022 £m £m £m and ventures £m
eliminations £m
£m
Revenue 473.1 98.4 150.1 (50.5) 671.1
Profit from operations 65.5
Non-underlying items (note 5) 1.4
Underlying EBIT 41.5 9.0 23.7 (9.0) 1.7 66.9
Underlying EBIT margin 8.8% 9.1% 15.8% 10.0%
Underlying EBIT 41.5 9.0 23.7 (9.0) 1.7 66.9
Share of loss of associate - - - - (1.7) (1.7)
and joint ventures
Depreciation and mineral depletion 24.8 3.0 14.0 - - 41.8
Underlying EBITDA 66.3 12.0 37.7 (9.0) - 107.0
Year ended Great Britain Ireland Cement Central administration Share of profit of associate Total
and joint
31 December 2022 £m £m £m and ventures £m
eliminations £m
£m
Revenue 972.4 226.2 300.7 (103.0) 1,396.3
Profit from operations 148.0
Non-underlying items (note 5) 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
Six months ended Six months ended Year ended
30 June 30 June 31 December
2023 2022 2022
£m £m £m
Net cash from operating activities 47.4 8.6 168.0
Net cash used in investing activities (43.0) (32.0) (112.9)
Acquisition of businesses 11.1 - 12.6
Cash impact of non-underlying items 5.3 1.4 1.0
Free Cash Flow 20.8 (22.0) 68.7
12 Reconciliation to non-GAAP measures (continued)
Return on invested capital
Twelve months ended Twelve months Year
30 June ended ended
2023 30 June 31 December
£m
2022 2022
£m
£m
H2 2021 Underlying EBIT - 77.2 -
H1 2022 Underlying EBIT - 66.9 66.9
H2 2022 Underlying EBIT 88.1 - 88.1
H1 2023 Underlying EBIT 70.5 - -
LTM Underlying EBIT 158.6 144.1 155.0
Underlying effective tax rate 20.3% 16.4% 16.0%
Taxation at the Group's underlying effective rate (32.2) (23.6) (24.8)
Underlying earnings before interest 126.4 120.5 130.2
Net assets 1,060.1 987.5 1,043.8
Net debt (note 7) 220.4 256.7 197.7
Invested capital 1,280.5 1,244.2 1,241.5
Average invested capital* 1,262.4 1,203.3 1,201.9
Return on invested capital** 10.0% 10.0% 10.8%
* 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 1 January 2022 was
£1,162.3m.
** Return on invested capital is calculated as underlying earnings before
interest for the previous twelve months, divided by average invested capital
for the period.
Covenant Leverage
Twelve months Twelve months Year
ended ended ended
30 June 30 June 31 December
2023 2022 2022
£m
£m
£m
As reported
H2 2021 Underlying EBITDA - 118.2 -
H1 2022 Underlying EBITDA - 107.0 107.0
H2 2022 Underlying EBITDA 128.0 - 128.0
H1 2023 Underlying EBITDA 112.3 - -
LTM Underlying EBITDA 240.3 225.2 235.0
Impact of IFRS 16 (11.0) (11.8) (11.3)
Underlying EBITDA for covenants 229.3 213.4 223.7
Net debt (excluding IFRS 16) (170.9) (208.2) (148.4)
Covenant leverage 0.7x 1.0x 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 debt. In both the current and prior periods,
the only material adjusting item was the impact of IFRS 16.
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.
Breedon Breedon Group plc
CDP CDP, formerly known as the 'Carbon Disclosure Project', is a not-for-profit
charity that runs the global disclosure system for investors, companies,
cities, states and regions to manage their environmental impacts.
CEM II CEM II is a composite cement; comprising Portland cement and up to 35% of
other single constituents to reduce 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
EBIT Earnings before interest and tax
EPS Earnings per share
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 Standards
Invested capital Net assets plus net debt
Ireland The Island of Ireland
IT Information Technology
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.
LTM Last twelve months
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 gains and losses, amortisation of acquisition intangibles, AIM
to Main Market costs 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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