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
|
|
Underlying1
highlights
|
|
£m
except where stated
|
2023
|
2022
|
% change
|
|
2023
|
2022
|
% change
|
%
LFL2
|
|
Revenue
|
1,487.5
|
1,396.3
|
7%
|
|
1,487.5
|
1,396.3
|
7%
|
4%
|
|
EBIT3
|
145.7
|
148.0
|
(2)%
|
|
156.2
|
155.0
|
1%
|
(1)%
|
|
EBIT3 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 EPS4
|
31.1p
|
33.2p
|
(6)%
|
|
34.0p
|
35.4p
|
(4)%
|
|
|
Dividend per share
|
|
|
|
|
13.5p
|
10.5p
|
29%
|
|
|
Net Debt5
|
|
|
|
|
169.9
|
197.7
|
(14)%
|
|
Covenant
Leverage6
|
|
|
|
|
0.5x
|
0.7x
|
(0.2)x
|
|
FCF
conversion7
|
|
|
|
|
39%
|
29%
|
10ppt
|
|
|
ROIC8
|
|
|
|
|
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 expectations9
· 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
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
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.
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
|
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.
This information is provided by
RNS, the news service of the London Stock Exchange. RNS is approved
by the Financial Conduct Authority to act as a Primary Information
Provider in the United Kingdom. Terms and conditions relating to
the use and distribution of this information may apply. For further
information, please contact rns@lseg.com or visit www.rns.com.
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 expectations9, 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 CO2 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.
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
(m3)
|
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 CO2
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 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
payments1
|
-
|
-
|
-
|
-
|
-
|
-
|
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
reduction2
|
(471.1)
|
-
|
-
|
-
|
-
|
-
|
471.1
|
-
|
-
|
-
|
Transfer to
non-controlling
interests
|
-
|
-
|
-
|
-
|
-
|
-
|
(0.2)
|
(0.2)
|
0.2
|
-
|
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
payments1
|
-
|
-
|
-
|
-
|
-
|
-
|
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)
- Underlying EBIT Margin
- Underlying EBITDA
- Like-for-like Underlying EBIT
|
- Like-for-like revenue
- Underlying Basic & Diluted Earnings Per Share
(EPS)
- Adjusted
Underlying Basic & Diluted EPS
- Free Cash
Flow
|
- Free Cash
Flow conversion
- Return on
invested capital
- Covenant
Leverage
- 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
EBITDA
|
Revenue
|
*Underlying
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
assets
|
Total
liabilities
|
Total
assets
|
Total
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
and
eliminations
|
Share of profit
of associate
and joint
ventures
|
Total
|
|
£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
and joint ventures
|
-
|
-
|
-
|
-
|
(2.6)
|
(2.6)
|
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
and
eliminations
|
Share
of profit of
associate
and joint
ventures
|
Total
|
|
£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
and joint ventures
|
-
|
-
|
-
|
-
|
(3.5)
|
(3.5)
|
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
|