TIDMBRCK
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 GBP324m (H1 FY23: GBP352.7m).
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
GBP24.0m, 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
GBP45m 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 GBP21.2m and adjusted EBITDA of c.GBP8.0m.
The consideration payable for the Acquisition comprises an
initial cash consideration of GBP27.3m 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 GBP17.7m. 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 GBP100m 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.GBP500m 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)
Ben Jeynes, George Lawson (Corporate
Finance)
Julian Morse, Michael Johnson (Sales) +44 (0) 207 220 0500
Montfort Communications +44 (0) 203 514 0897
James Olley 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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END
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