REG - Brickability Group - Trading Update & Acquisition

BrickabilityAnnouncement

11/10/2023 07:15

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RNS Number : 7634P  Brickability Group PLC  11 October 2023

11 October 2023

 

Brickability Group plc

 

("Brickability" or "the Group")

 

Trading Update

 

 
Acquisition of Group Topek Holdings Limited

 

Significant increase in presence in cladding remediation market through
acquisition of high margin business, further diversifying Group product
portfolio

 

Brickability Group plc (AIM: BRCK), the leading construction materials
distributor, issues the following trading update for the six-month period to
30 September 2023 and is also pleased to announce the acquisition of Group
Topek Holdings Limited, a specialist cladding installation and remediation
contractor (the "Acquisition").

 

Following the Acquisition, the Group's cladding portfolio now has a full range
of cladding capabilities including design, fabrication, supply, and
installation.

 

 

Trading Update

 

The performance for the first six months of the year was in line with Board
expectations and underlines the resilience that the Group's diversified,
multi-business strategy provides in the face of a challenging UK housebuilding
market, with Group revenue for H1 FY24 expected to be approximately £324m (H1
FY23: £352.7m).

 

Adjusting for the impact of acquisitions, H1 FY24 Group revenue on a
like-for-like basis represents a decrease of c.14% compared to the same period
in the prior year.

 

As a result, the Board currently anticipates reporting adjusted EBITDA* for
the six months to 30 September 2023 of at least £24.0m, in line with Board
expectations.

 

The impact on the UK housebuilding market of interest rates remaining high
will continue to provide headwinds into the second half of the year, with the
September UK Construction PMI index highlighting a significant contraction in
residential work and, as noted in the Group's AGM statement, the Board remains
cognisant of volume reductions experienced by certain housebuilders and
manufacturers due to the macro-economic conditions. In July 2023, the
Construction Products Association forecast that private housing starts and
completions would reduce by 25% and 19% respectively in 2023.

 

Whilst the Group has traded in line with Board expectations through H1 FY24,
and the Acquisition will be immediately earnings accretive in the current
year, forecast reductions in newbuild volumes are expected to have a
corresponding impact upon the performance of the Group's existing businesses
throughout the second half of the current financial year.

 

The Group will notify the expected date of publication of its unaudited
interim results for the six months ended 30 September 2023 in due course.

 

 

Acquisition of Group Topek Holdings Limited

 

The Group is also pleased to announce that it has completed the acquisition of
Topek Limited ("Topek") for a consideration of up to £45m through the
acquisition of the entire issued share capital of Group Topek Holdings
Limited.

 

Topek offers a range of services which will complement the Group's existing
cladding portfolio, including Taylor Maxwell Cladding, SBS Cladding, and
Architectural Facades, meaning that the Group now has a full range of cladding
capabilities including design, fabrication, supply, and installation.

 

The Acquisition of Topek will also significantly increase the Group's presence
in the cladding remediation market. Since 2017, the requirement for cladding
remediation in the UK has been of huge importance.

 

Established in 1981, Scottish-based commercial building contractor Topek
installs cladding and rainscreen systems to improve insulation, comply with
fire safety standards, and add to the visual appearance of a building for its
blue-chip client base.

 

In the 12 months to 31 August 2023, Topek generated unaudited revenue of
£21.2m and adjusted EBITDA of c.£8.0m.

 

The consideration payable for the Acquisition comprises an initial cash
consideration of £27.3m payable on completion, subject to final working
capital adjustments to acquire the business on a cash-free, debt-free basis,
and deferred contingent consideration of up to £17.7m. The deferred
contingent consideration is payable subject to adjustments for performance
against target performance criteria over the next three years. To provide the
Group with flexibility in the future, the Group has the ability, but not the
obligation, to settle deferred contingent consideration payments in connection
with the Acquisition by way of the issue of new ordinary shares in the Group
at the then prevailing price per ordinary share at the time of the deferred
consideration payment.

 

The Acquisition is expected to be immediately earnings accretive
post-completion. The Acquisition consideration is being funded from the
Group's existing cash resources and from newly amended and restated bank
facilities which now mature in October 2026 (the "Amended Facility").
Following initial draw down and on completion of the Acquisition, the Amended
Facility will have significant headroom within its initial £100m borrowing
capacity to fund the Group's working capital requirements and potential
further acquisitions.

 

The Acquisition marks another step in the continuing diversification of
Brickability since IPO. Since joining the public markets in 2019 Brickability
has now completed 12 acquisitions, pursuing a diversified multi-business
strategy to broaden and deepen the Group's product portfolio. This is
reflected in the Group's revenue growth which, since IPO, increased by
c.£500m to the year ending 31 March 2023 while the proportion of brick
revenue moved from c.80% to c.60%.

 

 

John Richards, Chairman, Brickability, said:

 

"It is pleasing to report that the Board will be reporting H1 FY24 performance
in line with Board expectations in spite of more challenging trading
conditions. Whilst the second half of the year is anticipated to see industry
wide volume reductions, from which the Group is not immune, the Board believes
that Brickability's diversified, multi-business, approach enables the Group to
continue to perform well in the current market backdrop and that this strategy
best positions the Group for the future.

 

"This Acquisition is the Group's second largest to date, and a very exciting
one in our continued diversification strategy.

 

"The acquisition of Taylor Maxwell in 2021 delivered a significant increase in
exposure to public and commercial end markets, and the addition of Topek
further increases our presence in these markets.

 

"We believe this Acquisition will deliver significant value for our
shareholders".

 

 

 

Alan Simpson, CEO, Brickability, added:

 

"We've seen in our Bricks and Building Materials division how cladding
products supply has gone from strength to strength. With Topek, which will sit
in our Contracting division, we will be building on that and expanding our
existing product and services range into supply and installation as we
continue to pursue our diversified multi-business strategy.

 

"The team is excited about the new opportunities this brings and we're looking
forward to welcoming and working alongside Topek's team of experts."

 

 

Douglas Bryce, Managing Director, Topek, commented:

 

"We are excited to be joining the Brickability Group, adding our excellent
product to their portfolio and allowing us the opportunity to provide our
clients a broader offering of solutions.  The team at Brickability has built
a formidable operation and we look forward to working alongside them in
exploring new opportunities."

 

Change of Name of Nominated Adviser

 

The Company also announces that its Nominated adviser and broker has changed
its name to Cavendish Securities plc following completion of its own corporate
merger.

 

 

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and other non-underlying items.

 

ENDS

 

This announcement contains inside information.

 

For further information please contact:

 

 Brickability Group plc                                   via Montfort Communications

 John Richards, Chairman

 Alan Simpson, Chief Executive Officer

 Mike Gant, Chief Financial Officer

 Cavendish Securities plc (Nominated adviser and broker)  +44 (0) 207 220 0500

 Ben Jeynes, George Lawson (Corporate Finance)

 Julian Morse, Michael Johnson (Sales)

 Montfort Communications                                   +44 (0) 203 514 0897

 James Olley                                              brickability@montfort.london (mailto:brickability@montfort.london)

 Ella Henderson

 

About Brickability

Brickability is a leading construction materials distributor, serving
customers across the UK and Europe for over 37 years through its national and
local networks. The Group operates from more than 70 locations across the
country with over 700 employees.

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