TIDMBREE
RNS Number : 3875U
Breedon Group PLC
29 July 2020
29 July 2020
Breedon Group plc
("Breedon" or "the Group")
Interim results (unaudited) for the six months ended 30 June
2020
Breedon Group plc, a leading construction materials group in
Great Britain and Ireland, announces its unaudited interim results
for the six months ended 30 June 2020.
30 June 2020 30 June 2019 Change
Revenue GBP335.3 million GBP447.4 million -25%
Underlying EBIT GBP(0.6) million GBP49.5 million -101%
(Loss)/profit before GBP(10.1)
tax million GBP39.5 million -126%
Underlying basic EPS (0.65) pence 2.03 pence -132%
Net debt GBP253.6 million GBP343.7 million
Underlying results are stated before acquisition-related
expenses, redundancy and reorganisation costs, property items,
amortisation of acquisition intangibles and related tax items.
References to an underlying profit measure throughout this
announcement are defined on this basis.
8.0 million tonnes of aggregates sold (30 June 2019: 9.9 million
tonnes)
1.0 million tonnes of asphalt sold (30 June 2019: 1.4 million
tonnes)
1.0 million cubic metres of ready-mixed concrete sold (30 June
2019: 1.5 million cubic metres)
0.8 million tonnes of cement sold (30 June 2019: 1.0 million
tonnes)
Highlights
-- Encouraging performance in first 12 weeks of the year
-- COVID-19 lockdown at end of March prompted immediate fall in
demand and managed shutdown of most operations
-- Early and decisive action taken to keep colleagues safe and preserve liquidity
-- Site reopenings commenced in early May as demand improved
-- Recovery led by RoI, underlining the benefit of Breedon's geographical spread
-- June revenues recovered to 99 per cent of June 2019
-- Strong balance sheet, with net debt reduced to GBP253.6 million: Leverage of 1.9x
-- Financial headroom of GBP344.0 million at 30 June
-- Acquisition of CEMEX assets expected to complete imminently
-- Recovery well underway and outlook remains positive
Pat Ward, Group Chief Executive, commented:
"Following the encouraging performance of our businesses in the
first 12 weeks of the year, the move into lockdown and immediate
fall in demand in the latter part of March led us into a swift and
managed shutdown of the majority of our operations, leaving open
only those which were servicing critical needs. This decisive
action ensured the protection of our employees, left our sites in a
safe condition and also positioned us to return quickly to
production when demand began to return in early May.
"The recovery in our markets now appears to be well underway,
and we have seen continued improvement into July. The great
majority of our sites are now open, including both our cement
plants. While near-term uncertainty remains, there is significant
pent-up demand to be satisfied in both housing and infrastructure,
reinforced by the substantial programme of investment confirmed by
the Chancellor earlier this month. Looking to the longer-term, we
believe the outlook for our markets remains positive, supporting
our confidence in the prospects for the Group."
- ends -
The full text of the Group's interim statement is attached,
together with detailed financial results.
Breedon will host a virtual meeting for invited analysts at
9.00am today and there will be a simultaneous webcast of the
meeting. Please use this link to join the webcast:
https://webcasting.brrmedia.co.uk/broadcast/5f1555164c167c1215797e87
The webcast will also be available to view on our website later
today at www.breedongroup.com/investors .
Enquiries Tel: 01332 694010
Breedon Group plc
Pat Ward, Group Chief Executive
Rob Wood, Group Finance Director
Stephen Jacobs, Head of Communications Tel: 07831 764592
Cenkos Securities plc (Nomad and joint broker) Tel: 020 7397 8900
Max Hartley
Numis Securities (Joint broker) Tel: 020 7260 1000
Heraclis Economides/Ben Stoop
Teneo (Public relations adviser to Tel: 020 7420 3180
Breedon)
Matt Denham
Rachel Miller
Note to Editors
Breedon Group plc is a leading construction materials group in
Great Britain and Ireland. It operates two cement plants and an
extensive network of quarries, asphalt plants and ready-mixed
concrete plants, together with slate production, concrete and clay
products manufacturing, contract surfacing and highway maintenance
operations. The Group employs nearly 3,000 people and has nearly
900 million tonnes of mineral reserves and resources.
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Overview
We are reporting on an unprecedented period in Breedon's
history, during which the economy and our industry faced their
greatest challenge for many years. We are immensely proud of all
our colleagues, who confronted the challenge with great
determination. Some of them continued to work providing essential
services during the lockdown, for which we owe them a great debt of
gratitude. Our overriding priority throughout was to ensure that
all our colleagues and customers, together with the communities we
serve, remained safe and unharmed, and we are pleased that the
rigorous safety protocols we put in place at all our sites enabled
this to happen. We continue to adapt and evolve these protocols in
line with government guidance.
Following the encouraging performance of our businesses in the
first 12 weeks of the year, the move into lockdown and immediate
fall in demand in the latter part of March led us into a swift and
managed shutdown of the majority of our operations. Thanks to the
high levels of investment in the Group in recent years, we were
able immediately to restrict capital expenditure to committed and
critical projects without compromising the longer-term performance
of our operations. In addition, we halted all discretionary
expenditure and applied robust discipline to our management of
working capital.
We moved quickly to furlough more than 80 per cent of our
colleagues, topping up their wages to 100 per cent, and immediately
embarked on a comprehensive review of safety measures at all our
sites, preparing detailed COVID-19 protection protocols and
back-to-work induction programmes to ensure that as our colleagues
returned they could do so safely and confidently.
As demand recovered, we were able to swiftly reopen our sites in
early May and this process gathered pace throughout the ensuing two
months. By the end of June, over 90 per cent of our sites were
open, including both our cement plants, with 82 per cent of our
colleagues back at work.
The pace of reopening differed from division to division,
determined in part by the needs of our customers and in part by the
differing timelines by which the various governments and devolved
administrations eased restrictions on movement. The timing of the
recovery accordingly varied across the Group, with our operations
in RoI recovering strongly from late May onwards, while volumes in
England, Wales and NI also showed a steady improvement. Scotland
remained subdued until well into June as a result of the delayed
lifting of restrictions by the Scottish Parliament.
Group results
Trading in the first quarter was progressing broadly in line
with our expectations until the latter part of March when the
pandemic began to take hold. The impact on demand and consequently
on our business was immediate and significant.
Our revenues in April fell to 19 per cent of those recorded in
the same month of 2019, followed by 45 per cent in May, before
improving to 99 per cent in June as the recovery began to gather
pace.
Group aggregates volumes for the half-year totalled 8.0 million
tonnes (2019: 9.9 million tonnes), asphalt volumes stood at 1.0
million tonnes (2019: 1.4 million tonnes), ready-mixed concrete
volumes totalled 1.0 million cubic metres (2019: 1.5 million cubic
metres) and cement volumes stood at 0.8 million tonnes (2019: 1.0
million tonnes).
Revenue for the half-year was GBP335.3 million (2019: GBP447.4
million) and Underlying EBIT was a loss of GBP0.6 million (2019:
profit of GBP49.5 million).
We have also reflected the UK Government's decision to cancel
the planned reduction in the corporation tax rate in 2020 from 19
per cent to 17 per cent. This has resulted in an increase of GBP5.5
million in the Group's deferred tax liabilities.
Financial highlights
Six months Six months
ended ended
30 June 30 June
2020 2019
GBPm GBPm Variance
Revenue
Great Britain 214.9 298.1 -28%
Ireland 69.2 93.5 -26%
Cement 75.6 93.4 -19%
Eliminations (24.4) (37.6)
Total 335.3 447.4 -25%
--------------------------------------- ----------- ----------- ---------
Underlying EBIT
Great Britain (1.4) 30.8 -105%
Ireland 1.8 8.9 -80%
Cement 6.1 15.8 -61%
Central administration (7.0) (6.8)
Share of associate and joint ventures (0.1) 0.8
Total (0.6) 49.5 -101%
--------------------------------------- ----------- ----------- ---------
Underlying EBIT margin (0.2)% 11.1%
Balance sheet and cash flow
Net assets at 30 June 2020 were GBP842.7 million, compared to
GBP839.1 million at 31 December 2019 and GBP805.9 million at 30
June 2019.
Net cash from operating activities was GBP55.2 million,
benefiting from tax deferrals and the absence of the usual seasonal
increase in working capital. Net cash used in investing activities
was GBP15.1 million, after capital expenditure of GBP16.1 million.
Finally, net cash generated from financing activities was GBP60.2
million, including the exercise of an accordion option to increase
our existing banking facilities by GBP80 million in anticipation of
the imminent completion of the acquisition of certain UK assets
from CEMEX.
Net debt at 30 June 2020 was GBP253.6 million, compared to
GBP290.3 million at 31 December 2019 and GBP343.7 million at 30
June 2019, and Leverage was 1.9 times. This clearly demonstrates
how well the Group has managed its cash flow in these very
challenging circumstances.
Liquidity management
As we moved into lockdown, immediate action was taken to
maximise liquidity through restricting capital expenditure to
committed and critical projects, halting all discretionary
expenditure and applying robust discipline to our management of
working capital, including obtaining deferrals for tax payments
where available.
Although the recovery in May and June allowed us to remain
comfortably within our original covenants, in April we agreed with
our banks a relaxation of our 30 June 2020 covenants and a deferral
of GBP35 million of loan amortisation to April 2022. Our banks have
also indicated their intention to agree a relaxation of covenants
for December 2020 if required. Additionally, in May we were
confirmed as being eligible for the Covid Corporate Financing
Facility (CCFF), with an issuer limit of GBP300 million, although
we have no current intention of utilising this facility.
This meant that as at 30 June 2020 we had GBP124.6 million of
cash and an undrawn committed bank facility of GBP219.4 million,
combining to give headroom of GBP344.0 million excluding the
CCFF.
Sustainability
Following our commitment last year to the Sustainability Charter
of the Global Cement & Concrete Association, we increased our
engagement with shareholders on the Group's plans to ensure a
positive environmental, social and economic impact in the coming
years.
In June we appointed our first Group Head of Sustainability, who
is now working closely with our management teams, our functional
teams and our wider stakeholders to develop and embed a
sustainability vision and strategy with clear performance criteria
and targets across the full range of our businesses.
We look forward to reporting our progress and our contribution
to creating a sustainable built environment in our 2020 Annual
Report.
CEMEX acquisition
We are looking forward to the completion of our acquisition of
certain of CEMEX's UK assets, which we expect to take place
imminently. Following completion, these assets will be held
separate from Breedon pending completion of the Competition and
Markets Authority's investigation, which could take several more
months.
This acquisition will strengthen our regional footprint in the
UK and also provide a platform for organic expansion and future
acquisitions in areas of the country where we do not currently have
a presence.
These assets are high-quality, well-located, with a great team,
and bring us a further 170 million tonnes of mineral reserves and
resources. Whilst they have inevitably been impacted by the
protracted transaction process, compounded by the effects of
COVID-19, they are fundamentally strong operations whose
performance we believe we can substantially improve in the future,
as we have demonstrated with previous acquisitions.
Outlook
The near-term outlook for our business is clearly dependent on
the speed at which demand from our customers recovers and we return
to more normal levels of activity. We are encouraged by recent
announcements from a number of contractors, housebuilders and
merchants which broadly point to a steady improvement in trading
conditions in the UK, whilst in RoI the market has returned to near
pre-COVID-19 levels of demand. We have demonstrated that we can
reopen sites very quickly in line with increased demand, enabling
us to continue responding almost instantaneously as our markets
recover.
We have a fundamentally robust and diversified business. Our
balance sheet remains strong, we have more than adequate liquidity
and our strong cashflow will enable us to continue to quickly pay
down our debt as trading improves. Although COVID-19 has been
challenging, it has given us the opportunity to revisit a number of
self-help measures and we are confident that we will emerge from
this pandemic more efficient than we entered it.
We would like to take this opportunity once again to thank all
our colleagues, who have so readily risen to the challenge over the
last few months.
Given the uncertainties we still face, we remain unable at this
stage to provide market guidance. However, we will update the
market as soon as we have sufficiently robust information to be
able to do so.
The recovery in our markets now appears to be well underway, and
we have seen continued improvement into July. The great majority of
our sites are now open, including both our cement plants. While
near-term uncertainty remains, there is significant pent-up demand
to be satisfied in both housing and infrastructure, reinforced by
the substantial programme of investment confirmed by the Chancellor
earlier this month. Looking to the longer-term, we believe the
outlook for our markets remains positive, supporting our confidence
in the prospects for the Group.
Pat Ward Rob Wood
Group Chief Executive Group Finance Director
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Condensed Consolidated Income Statement
for the six months ended 30 June 2020
Six months ended 30 Six months ended 30 Year ended 31 December
June 2020 June 2019 2019
Underlying Non-underlying* Total Underlying Non- Total Underlying Non- Total
(note underlying* underlying*
6) (note (note
6) 6)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 335.3 - 335.3 447.4 - 447.4 929.6 - 929.6
Cost of sales (243.9) - (243.9) (294.9) - (294.9) (587.2) - (587.2)
-----------------
Gross profit 91.4 - 91.4 152.5 - 152.5 342.4 - 342.4
Distribution
expenses (58.6) - (58.6) (70.6) - (70.6) (163.8) - (163.8)
Administrative
expenses (33.3) (3.1) (36.4) (33.2) (2.6) (35.8) (63.6) (8.0) (71.6)
Group operating
(loss)/profit (0.5) (3.1) (3.6) 48.7 (2.6) 46.1 115.0 (8.0) 107.0
Share of
(loss)/profit
of associate
and joint
ventures (0.1) - (0.1) 0.8 - 0.8 1.6 - 1.6
----------------- ---------- --------------- ------------ -------------- ------------------ ------------ ------------------ ----------------- ------------
(Loss)/profit
from operations (0.6) (3.1) (3.7) 49.5 (2.6) 46.9 116.6 (8.0) 108.6
Financial expense (6.4) - (6.4) (7.4) - (7.4) (14.0) - (14.0)
-----------------
(Loss)/profit
before taxation (7.0) (3.1) (10.1) 42.1 (2.6) 39.5 102.6 (8.0) 94.6
Taxation - at
effective rate 1.5 0.3 1.8 (7.9) 0.4 (7.5) (17.3) 0.7 (16.6)
Taxation - change
in deferred
tax rate (5.5) - (5.5) - - - - - -
----------------- ---------- --------------- ------------ -------------- ------------------ ------------ ------------------ ----------------- ------------
(Loss)/profit
for the period (11.0) (2.8) (13.8) 34.2 (2.2) 32.0 85.3 (7.3) 78.0
----------------- ---------- --------------- ------------ -------------- ------------------ ------------ ------------------ ----------------- ------------
Attributable
to:
Equity holders
of the parent (11.0) (2.8) (13.8) 34.1 (2.2) 31.9 85.2 (7.3) 77.9
Non-controlling
interests - - - 0.1 - 0.1 0.1 - 0.1
-----------------
(Loss)/profit
for the period (11.0) (2.8) (13.8) 34.2 (2.2) 32.0 85.3 (7.3) 78.0
----------------- ---------- --------------- ------------ -------------- ------------------ ------------ ------------------ ----------------- ------------
Basic earnings
per ordinary
share (0.65p) (0.82p) 2.03p 1.90p 5.08p 4.64p
Diluted earnings
per ordinary
share (0.65p) (0.82p) 2.03p 1.90p 5.07p 4.63p
----------------- ---------- --------------- ------------ -------------- ------------------ ------------ ------------------ ----------------- ------------
* Non-underlying items represent acquisition-related expenses,
redundancy and reorganisation costs, property items, amortisation
of acquisition intangibles and related tax items.
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 30 June 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
(Loss)/profit for the period (13.8) 32.0 78.0
Other comprehensive income/(expense)
Items which may be reclassified
subsequently to profit and loss
:
Foreign exchange differences on
translation of foreign operations,
net of hedging 15.6 (0.8) (13.3)
Effective portion of changes in
fair value of cash flow hedges 0.5 - (1.5)
Taxation on items taken directly
to other comprehensive income (0.1) - 0.2
Other comprehensive income/(expense)
for the period 16.0 (0.8) (14.6)
------------------------------------- ---------- ---------- ------------
Total comprehensive income for
the period 2.2 31.2 63.4
------------------------------------- ---------- ---------- ------------
Total comprehensive income for
the period is attributable to:
Equity holders of the parent 2.2 31.1 63.3
Non-controlling interests - 0.1 0.1
------------------------------------- ---------- ---------- ------------
2.2 31.2 63.4
------------------------------------- ---------- ---------- ------------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Condensed Consolidated Statement of Financial Position
at 30 June 2020
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 690.3 699.9 698.6
Intangible assets 472.2 461.6 464.2
Investment in associate and
joint ventures 10.3 7.1 10.8
---------------------------------------
Total non-current assets 1,172.8 1,168.6 1,173.6
--------------------------------------- -------- -------- ------------
Current assets
Inventories 51.1 59.6 58.5
Trade and other receivables 146.2 195.3 164.7
Current tax receivable 4.3 - -
Cash and cash equivalents 124.6 23.5 23.8
Total current assets 326.2 278.4 247.0
--------------------------------------- -------- -------- ------------
Total assets 1,499.0 1,447.0 1,420.6
---------------------------------------
Current liabilities
Interest-bearing loans and borrowings (61.6) (45.3) (43.9)
Trade and other payables (189.1) (182.9) (177.9)
Current tax payable - (6.9) (7.6)
Provisions (2.2) (2.7) (2.5)
--------------------------------------- -------- -------- ------------
Total current liabilities (252.9) (237.8) (231.9)
---------------------------------------
Non-current liabilities
Interest-bearing loans and borrowings (316.6) (321.9) (270.2)
Provisions (33.4) (34.7) (32.2)
Deferred tax liabilities (53.4) (46.7) (47.2)
--------------------------------------- -------- -------- ------------
Total non-current liabilities (403.4) (403.3) (349.6)
--------------------------------------- -------- -------- ------------
Total liabilities (656.3) (641.1) (581.5)
--------------------------------------- -------- -------- ------------
Net assets 842.7 805.9 839.1
--------------------------------------- -------- -------- ------------
Equity attributable to equity
holders of the parent
Stated capital 551.0 549.9 550.0
Hedging reserve (0.9) - (1.3)
Translation reserve 8.9 5.8 (6.7)
Retained earnings 283.6 250.0 297.0
---------------------------------------
Total equity attributable to
equity holders of the parent 842.6 805.7 839.0
Non-controlling interests 0.1 0.2 0.1
--------------------------------------- -------- -------- ------------
Total equity 842.7 805.9 839.1
--------------------------------------- -------- -------- ------------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 June 2020
For the six months ended
30 June 2020
Attributable
to equity Non-controlling
Stated Hedging Translation Retained holders interests Total
capital reserve reserve earnings of parent equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31
December
2019 550.0 (1.3) (6.7) 297.0 839.0 0.1 839.1
Shares issued 1.0 - - - 1.0 - 1.0
Dividend to - - - - - - -
non-controlling
interests
Total
comprehensive
income for the
period - 0.4 15.6 (13.8) 2.2 - 2.2
Share-based
payments - - - 0.4 0.4 - 0.4
Balance at 30
June
2020 551.0 (0.9) 8.9 283.6 842.6 0.1 842.7
----------------- ----------- --------- -------------------- -------------- -------------------- ----------------- --------
For the six months ended
30 June 2019
Stated Attributable Non-controlling
capital Hedging Translation Retained to equity interests Total
reserve reserve earnings holders equity
of parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31
December
2018 549.0 - 6.6 217.5 773.1 0.2 773.3
Shares issued 0.9 - - - 0.9 - 0.9
Dividend to
non-controlling
interests - - - - - (0.1) (0.1)
Total
comprehensive
income for the
period - - (0.8) 31.9 31.1 0.1 31.2
Share-based
payments - - - 0.6 0.6 - 0.6
Balance at 30 June
2019 549.9 - 5.8 250.0 805.7 0.2 805.9
------------------- ------------ ---------- -------------- ----------- ------------- ---------------- ---------
For the year ended 31 December 2019
Attributable Non-controlling
Stated Hedging Translation Retained to equity interests Total
capital reserve reserve earnings holders equity
of parent
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 31
December
2018 549.0 - 6.6 217.5 773.1 0.2 773.3
Shares issued 1.0 - - - 1.0 - 1.0
Dividend to
non-controlling
interests - - - - - (0.2) (0.2)
Total
comprehensive
income for the
year - (1.3) (13.3) 77.9 63.3 0.1 63.4
Share-based
payments - - - 1.6 1.6 - 1.6
Balance at 31
December
2019 550.0 (1.3) (6.7) 297.0 839.0 0.1 839.1
------------------ ----------- ----------- -------------- ----------- ------------- ---------------- ---------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Condensed Consolidated Statement of Cash Flows
for the six months ended 30 June 2020
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Cash flows from operating activities
(Loss)/profit for the period (13.8) 32.0 78.0
Adjustments for:
Depreciation 33.1 32.4 65.2
Amortisation 1.8 1.5 3.1
Financial expense 6.4 7.4 14.0
Share of loss/(profit) of associate
and joint ventures 0.1 (0.8) (1.6)
Net gain on sale of property, plant
and equipment (0.1) (0.7) (0.8)
Share-based payments 0.4 0.6 1.6
Taxation 3.7 7.5 16.6
------------------------------------------ ----------- ----------- -------------
Operating cash flow before changes
in working capital and provisions 31.6 79.9 176.1
Decrease/(increase) in trade and
other receivables 20.2 (34.5) (0.8)
Decrease/(increase) in inventories 8.3 (4.8) (5.7)
Increase/(decrease) in trade and
other payables 10.0 8.1 (1.8)
Decrease in provisions (0.1) (1.7) (2.0)
------------------------------------------ ----------- ----------- -------------
Cash generated from operating activities 70.0 47.0 165.8
Interest paid (3.7) (4.7) (8.4)
Interest element of lease payments (1.1) (1.4) (2.6)
Dividend paid to non-controlling
interests - (0.1) (0.2)
Income taxes paid (10.0) (8.7) (18.1)
------------------------------------------
Net cash from operating activities 55.2 32.1 136.5
------------------------------------------ ----------- ----------- -------------
Cash flows used in investing activities
Acquisition of businesses - - (8.9)
Purchase of share in joint venture - - (3.0)
Purchase of property, plant and
equipment (16.1) (19.3) (56.3)
Proceeds from sale of property,
plant and equipment 0.5 2.2 3.3
Issue of loan to joint ventures - - (4.0)
Dividends from associate and joint
ventures 0.5 - 0.8
------------------------------------------ ----------- ----------- -------------
Net cash used in investing activities (15.1) (17.1) (68.1)
------------------------------------------ ----------- ----------- -------------
Cash flows from/(used in) financing
activities
Proceeds from the issue of shares
(net of costs) 1.0 0.9 1.0
Proceeds from new interest-bearing 143.7 -
loans (net of costs) -
Repayment of interest-bearing loans (80.0) (23.9) (69.2)
Repayment of lease obligations (4.5) (6.6) (12.9)
Net cash from/(used in) financing
activities 60.2 (29.6) (81.1)
------------------------------------------ ----------- ----------- -------------
Net increase/(decrease) in cash
and cash equivalents 100.3 (14.6) (12.7)
Cash and cash equivalents at beginning
of period 23.8 37.6 37.6
Foreign exchange differences 0.5 0.5 (1.1)
------------------------------------------ ----------- ----------- -------------
Cash and cash equivalents at end
of period 124.6 23.5 23.8
------------------------------------------ ----------- ----------- -------------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial
Statements
1 Basis of preparation
Breedon Group plc is a company domiciled in Jersey. These
Condensed Consolidated Interim Financial Statements (the "Interim
Financial Statements") consolidate the results of the Company and
its subsidiary undertakings (collectively the "Group").
These Interim Financial Statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting, as adopted by
the EU. The Interim Financial Statements have been prepared under
the historical cost convention except where the measurement of
balances at fair value is required. The Interim Financial
Statements have been prepared applying the accounting policies and
presentation that were applied in the presentation of the Company's
Consolidated Financial Statements for the year ended 31 December
2019.
These Interim Financial Statements have not been audited or
reviewed by auditors pursuant to the Auditing Practices Board's
guidance on the review of interim financial information. These
statements do not include all of the information required for full
annual financial statements and should be read in conjunction with
the full Annual Report for the year ended 31 December 2019.
The comparative figures for the financial year ended 31 December
2019 have been extracted from the Company's statutory accounts for
that financial year. 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.
New IFRS Standards and Interpretations
The Group has adopted the following standards from 1 January
2020:
- Amendments to References to Conceptual Framework in IFRS Standards
- Amendments to IAS 1 and IAS 8 - Definition of material
- Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform
The adoption of these standards has not had a material impact on
the Interim Financial Statements.
2 Going concern
The Interim Financial Statements have been prepared on a going
concern basis.
As a result of the COVID - 19 lockdown, the Group suffered an
immediate fall in demand for its products and services at the end
of March 2020, resulting in the temporary closure of most
operations. The Group's operations began to resume in early May as
demand improved, with revenues in June recovering to 99 per cent of
the same month in 2019. The adverse impact of COVID-19 on trading
in the first half of 2020 has been significant, and the near-term
outlook is clearly dependent on the speed at which demand from our
customers recovers and we return to more normal levels of
activity.
The directors have prepared updated cash flow forecasts for a
period of at least 12 months from the date of approval of these
Interim Financial Statements which indicate that, taking account of
severe but plausible downsides, the Group will have sufficient
funds, through its banking facilities, to meet its liabilities as
they fall due for that period. In addition, the Group has confirmed
its eligibility to access an additional GBP300m of liquidity under
the UK Governments Covid Corporate Financing Facility scheme,
although it has no current plan to utilise this facility.The
Group's banking facilities require compliance with bank covenants
which are measured against the Group's trading performance at June
and December each year. At June 2020, the Group remained
comfortably within these covenants. However, the limited clarity
over the near-term future results in uncertainty as to whether the
Group will be able to continue to comply with its banking covenants
at December 2020.
The Group's lenders remain highly supportive and have indicated
their intention to agree a relaxation of covenants for December
2020 if required. Whilst the directors acknowledge there can be no
certainty without a legal agreement in place, they have no reason
to believe the Group's covenants will not be relaxed for the
December 2020 assessment and therefore have concluded that it
remains appropriate to prepare the Interim Financial Statements on
a going concern basis.
3 Accounting estimates and judgements
In preparing these Interim Financial Statements, management have
been required to make assumptions, estimates and judgements that
affect the application of accounting policies and the reported
amounts of assets and liabilities and income and expense. Actual
results may differ from estimates. There have been no material
additional significant judgements made by management in applying
the Group's accounting policies, nor key sources of estimation
uncertainty compared to those applicable to the Consolidated
Financial Statements for the year ended 31 December 2019 as set out
in note 27 of the Annual Report for that year.
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
4 Principal risks
The Group's principal risks in alphabetical order are:
-- Acquisitions
-- Competition and margins
-- Environment and climate change
-- Financing, liquidity and currency
-- Health and safety
-- IT and cyber security
-- Legal and regulatory
-- Market conditions
-- People
Impact of COVID-19
The Group's Annual Report for the year ended 31 December 2019
noted that the UK and Ireland had reported initial cases of
COVID-19, but that it was too soon to be able to quantify the
extent of the risk. Subsequent events rapidly provided additional
clarity and the Board has recently completed a review of the
principal risks.
The Group does not consider that COVID-19 presents a principal
risk in isolation, but instead impacts on a number of the existing
principal risks as follows:
Competition and margins Health and safety measures put in place
at the Group's production sites in
response to COVID-19 may negatively
impact efficiency and profitability.
Financing, liquidity and The COVID-19 pandemic has placed additional
currency strain on the Group's financial resources,
which may negatively impact the Group's
liquidity or ability to comply with
banking covenants.
---------------------------------------------
Health and safety Failure to successfully adapt workplaces
to prevent the spread of COVID-19,
in line with government guidance, could
cause further disruption to operations.
---------------------------------------------
IT and cyber security Failure to maintain systems and hardware
which are able to be securely accessed
remotely could impact the Group's ability
to service the increased demand for
remote working caused by the COVID-19
pandemic.
---------------------------------------------
Market conditions The forecast recession in the economies
in which the Group operates increases
the level of risk that adverse market
conditions could suppress demand for
the Group's products.
This could be further impacted by any
subsequent peaks of the virus or delay
in lifting existing government restrictions
which have a negative impact on the
macro-economic environment.
---------------------------------------------
People A second wave of COVID-19 may result
in higher levels of staff absence.
---------------------------------------------
Impact of Brexit
The Group also continues to manage the potential impacts Brexit
could have on it. Brexit is not presented as an additional
principal risk but adds an additional level of uncertainty that
increases the overall risk profile of the Group. There have been no
significant changes in the Group's assessment of Brexit risk
subsequent to publication of the Group's Annual Report for the year
ended 31 December 2019.
Further details of the main risks for the year ended 31 December
2019 are set out on pages 24 - 27 of the Group's Annual Report for
the year ended 31 December 2019. The directors consider that these
are the risks that could impact the performance of the Group in the
remaining six months of the current financial year. They continue
to manage these risks and to mitigate their anticipated impact.
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
5 Segmental analysis
Segmental information is presented in line with IFRS 8 -
Operating Segments. The Group is split into the same reportable
units as it was for the Consolidated Financial Statements for the
year ended 31 December 2019, which are as follows:
Great Britain comprising our construction materials and
contracting services businesses in Great Britain.
Ireland comprising our construction materials and contracting
services businesses on the Island of Ireland.
Cement comprising our cementitious operations in Great Britain
and Ireland.
Six months ended Six months ended Year ended
30 June 30 June 31 December
2020 2019 2019
Revenue Underlying Revenue Underlying Revenue Underlying
EBITDA* EBITDA* EBITDA*
Income statement GBPm GBPm GBPm GBPm GBPm GBPm
Great Britain 214.9 15.9 298.1 48.6 615.1 98.4
Ireland 69.2 5.6 93.5 12.4 202.0 33.8
Cement 75.6 18.0 93.4 26.9 186.4 58.8
Central administration - (6.9) - (6.8) - (10.8)
Eliminations (24.4) - (37.6) - (73.9) -
------------------------- -------- ---------- -------- ---------- ------- ----------
Group 335.3 32.6 447.4 81.1 929.6 180.2
------------------------- -------- ---------- -------- ---------- ------- ----------
*Underlying EBITDA is earnings before interest, tax, depreciation,
amortisation, non-underlying items (note 6) and before our share
of (loss)/profit from associate and joint ventures.
Reconciliation to statutory
(loss)/profit
Group Underlying EBITDA
as above 32.6 81.1 180.2
Depreciation and mineral
depletion (33.1) (32.4) (65.2)
Underlying operating
(loss)/profit
---------- ---------- ----------
Great Britain (1.4) 30.8 62.8
Ireland 1.8 8.9 26.8
Cement 6.1 15.8 36.3
Central administration (7.0) (6.8) (10.9)
---------- ---------- ----------
(0.5) 48.7 115.0
Share of (loss)/profit
of associate and joint
ventures (0.1) 0.8 1.6
Underlying (loss)/profit
from operations (EBIT) (0.6) 49.5 116.6
Non-underlying items
(note 6) (3.1) (2.6) (8.0)
(Loss)/profit from
operations (3.7) 46.9 108.6
Financial expense (6.4) (7.4) (14.0)
(Loss)/profit before
taxation (10.1) 39.5 94.6
Taxation - at effective
rate 1.8 (7.5) (16.6)
Taxation - change
in deferred tax rate (5.5) - -
------------------------- -------- ---------- -------- ---------- ------- ----------
(Loss)/profit for
the period (13.8) 32.0 78.0
------------------------- -------- ---------- -------- ---------- ------- ----------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
6 Non-underlying items
Non-underlying items are those which are either unlikely to
recur in future periods or which distort the underlying performance
of the business, including non-cash items. In the opinion of the
directors, this presentation aids understanding of the underlying
business performance and references to underlying earnings measures
throughout this report are made on this basis. Underlying measures
are presented on a consistent basis over time to assist in the
comparison of performance.
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Included in administrative expenses
:
Redundancy and reorganisation costs 0.2 0.6 1.1
Acquisition costs 0.8 - 3.3
Loss on property disposals 0.3 0.5 0.5
Amortisation of acquired intangible
assets 1.8 1.5 3.1
Total non-underlying items (pre-tax) 3.1 2.6 8.0
Non-underlying taxation (0.3) (0.4) (0.7)
-------------------------------------- ------------------- ---------- ------------
Total non-underlying items (post-tax) 2.8 2.2 7.3
-------------------------------------- ------------------- ---------- ------------
7 Financial expense
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Bank loans and overdrafts 3.7 4.7 8.4
Amortisation of prepaid bank arrangement
fee 0.7 0.6 1.2
Lease liabilities 1.1 1.4 2.6
Unwinding of discount on provisions 0.9 0.7 1.8
-----------------------------------------
Financial expense 6.4 7.4 14.0
----------------------------------------- ---------- ---------- ------------
8 Taxation
Recognised in the Condensed Consolidated Statement of
Comprehensive Income
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Taxation - at effective rate (1.8) 7.5 16.6
Taxation - change in deferred tax
rate 5.5 - -
Total tax charge 3.7 7.5 16.6
---------------------------------- ---------- ---------- ------------
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
8 Taxation (continued)
The tax charge at effective rate for the six months ended 30
June 2020 has been based on the estimated effective weighted
average rate applicable for existing operations for the full year.
This is based on a combined effective rate of 18 per cent on
profits arising in the Group's UK and Irish subsidiary
undertakings.
In addition, legislation was passed on 17 March 2020 which
substantially enacted a cancellation of the planned reduction in
the UK corporation tax rate from 19 per cent to 17 per cent. A
deferred tax charge of GBP5.5m has been recognised to remeasure the
Group's UK deferred tax liabilities at 30 June 2020 at this higher
rate.
9 Interest-bearing loans and borrowings
Net Debt
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Net debt comprises the following items:
Cash and cash equivalents 124.6 23.5 23.8
Current borrowings (61.6) (45.3) (43.9)
Non-current borrowings (316.6) (321.9) (270.2)
---------------------------------------- ---------- ---------- ------------
Statutory net debt (253.6) (343.7) (290.3)
---------------------------------------- ---------- ---------- ------------
IFRS 16 adjustments 42.2 45.9 43.6
---------------------------------------- ---------- ---------- ------------
Net debt excluding the impact of IFRS
16 (211.4) (297.8) (246.7)
---------------------------------------- ---------- ---------- ------------
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
Current borrowings
Secured bank loans 55.0 35.0 35.0
Lease liabilities 6.6 10.3 8.9
----------------------- ---------- ---------- ------------
61.6 45.3 43.9
----------------------- ---------- ---------- ------------
Non-current borrowings
Secured bank loans 278.1 278.1 230.6
Lease liabilities 38.5 43.8 39.6
----------------------- ---------- ---------- ------------
316.6 321.9 270.2
----------------------- ---------- ---------- ------------
In the first half of 2020, the Group exercised an accordion
option to increase its existing banking facilities by GBP80m in
anticipation of the completion of the acquisition of certain UK
assets from CEMEX (see note 13).
At 30 June 2020, the Group's banking facilities comprise a term
loan of GBP205m (30 June 2019 and 31 December 2019: GBP125m) and a
multi-currency revolving credit facility of GBP350m (30 June 2019
and 31 December 2019: GBP350m). Interest was paid on the facilities
during the period at a margin of between 1.30 per cent and 1.95 per
cent above LIBOR or EURIBOR according to the currency of
borrowings. The facility is secured by a floating charge over the
assets of the Company and its subsidiary undertakings. The term
loan is repayable in two further annual instalments up to April
2022. The revolving credit facility is repayable in April 2022.
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
10 Earnings per share
The calculation of earnings per share is based on the loss for
the period attributable to ordinary shareholders of GBP13.8m (30
June 2019: profit of GBP31.9m, 31 December 2019: profit of
GBP77.9m) and on the weighted average number of ordinary shares in
issue during the period of 1,683,650,088 (30 June 2019:
1,680,338,704, 31 December 2019: 1,681,584,352).
The calculation of underlying earnings per share is based on the
underlying loss for the period attributable to ordinary
shareholders of GBP11.0m (30 June 2019: profit of GBP34.1m, 31
December 2019: profit of GBP85.2m) and on the weighted average
number of ordinary shares in issue during the period as above.
Diluted earnings per ordinary share is based on 1,685,991,560
shares (30 June 2019: 1,683,917,318, 31 December 2019:
1,684,825,454) and reflects the effect of all dilutive potential
ordinary shares.
11 Related party transactions
The nature of related party transactions is consistent with
those disclosed in the Group's Annual Report for the year ended 31
December 2019. All related party transactions are on an arm's
length basis.
12 Stated capital
Number of Ordinary Shares (m)
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2020 2019 2019
Issued ordinary shares at the beginning
of period 1,682.9 1,679.2 1,679.2
Issued in connection with:
Exercise of savings-related share
options 1.8 1.8 2.1
Vesting of Performance Share Plan
awards 1.8 1.6 1.6
1,686.5 1,682.6 1,682.9
---------------------------------------- ---------- ---------- ------------
During the period, the Company issued 1,801,130 ordinary shares
of no par value raising GBP1.0m in connection with the exercise of
certain savings-related share options. The Company also issued
1,757,078 ordinary shares of no par value raising GBPnil in
connection with the vesting of awards under the Performance Share
Plans.
13 Acquisitions
On 8 January 2020 the Group entered into a conditional agreement
with CEMEX to acquire certain assets and operations in the UK for a
total consideration of GBP178m on a cash and debt free basis.
Completion of the transaction is anticipated imminently. The cash
consideration is due on completion and will be financed by the
Group's existing bank facility (see note 9).
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
14 Reconciliation to non-GAAP measures
A number of non-GAAP performance measures are used throughout
this Interim Report and these Interim Financial Statements. This
note provides a reconciliation between these alternative
performance measures to the most directly related statutory
measures.
Reconciliation of earnings based alternative performance
measures
Six months ended Central Share of
30 June 2020 administration loss of associate
and and joint
Great Britain Ireland Cement eliminations ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Loss from operations (3.7)
Non-underlying items
(note 6) 3.1
--------------------- -------------- --------- ------ -------------------------- ------------------------ ------
Underlying EBIT (1.4) 1.8 6.1 (7.0) (0.1) (0.6)
Underlying EBIT
margin* (0.7%) 2.6% 8.1% (0.2%)
--------------------- -------------- --------- ------ -------------------------- ------------------------ ------
Underlying EBIT (1.4) 1.8 6.1 (7.0) (0.1) (0.6)
Share of loss of
associate
and joint ventures - - - - 0.1 0.1
Depreciation and
depletion 17.3 3.8 11.9 0.1 - 33.1
--------------------- -------------- --------- ------ -------------------------- ------------------------ ------
Underlying EBITDA 15.9 5.6 18.0 (6.9) - 32.6
--------------------- -------------- --------- ------ -------------------------- ------------------------ ------
Six months ended Share of
30 June 2019 Central profit of
administration associate
and and joint
Great Britain Ireland Cement eliminations ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Profit from operations 46.9
Non-underlying items
(note 6) 2.6
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBIT 30.8 8.9 15.8 (6.8) 0.8 49.5
Underlying EBIT
margin* 10.3% 9.5% 16.9% 11.1%
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBIT 30.8 8.9 15.8 (6.8) 0.8 49.5
Share of profit
of associate
and joint ventures - - - - (0.8) (0.8)
Depreciation and
depletion 17.8 3.5 11.1 - - 32.4
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBITDA 48.6 12.4 26.9 (6.8) - 81.1
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Year ended Share of
31 December 2019 Central profit of
administration associate
and and joint
Great Britain Ireland Cement eliminations ventures Total
GBPm GBPm GBPm GBPm GBPm GBPm
Profit from operations 108.6
Non-underlying items
(note 6) 8.0
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBIT 62.8 26.8 36.3 (10.9) 1.6 116.6
Underlying EBIT
margin* 10.2% 13.3% 19.5% 12.5%
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBIT 62.8 26.8 36.3 (10.9) 1.6 116.6
Share of profit
of associate
and joint ventures - - - - (1.6) (1.6)
Depreciation and
depletion 35.6 7.0 22.5 0.1 - 65.2
----------------------- ------------- --------- ------ -------------------------- --------------- -----
Underlying EBITDA 98.4 33.8 58.8 (10.8) - 180.2
----------------------- ------------- --------- ------ -------------------------- --------------- -----
* Underlying EBIT margin is calculated as Underlying EBIT
divided by revenue
Breedon Group plc
Interim results (unaudited) for the six months ended 30 June
2020
Notes to the Condensed Consolidated Interim Financial Statements
(continued)
Cautionary Statement
This announcement contains forward looking statements which are
made in good faith based on the information available at the time
of its approval. It is believed that the expectations reflected in
these statements are reasonable but they may be affected by a
number of risks and uncertainties that are inherent in any forward
looking statement which could cause actual results to differ from
those currently anticipated.
Glossary
The following definitions apply throughout both this
announcement and the 2019 Annual Report, unless the context
requires otherwise.
Adopted IFRS International Financial Reporting Standards as
adopted by the EU
AGM Annual General Meeting
AIM Alternative Investment Market of the London Stock
Exchange
Alpha Resource Management Alpha Resource Management Limited
BEAR Scotland BEAR Scotland Limited
Breedon Breedon Group plc
Breedon Whitemountain Breedon Whitemountain Ltd
CGU Cash Generating Units
CI Channel Islands
CIF Construction Industry Federation
CITB Construction Industry Training Board
CMDO Cement Market Data Order 2016
CPA Construction Products Association
EBIT Earnings before interest and tax
EBITDA Earnings before interest, tax, depreciation and
amortisation and before our share of profit from associate and
joint ventures
EPS Earnings per share
EU ETS European Union Emissions Trading System
EURIBOR Euro Inter-bank Offered Rate
FCA Financial Conduct Authority
FRC Financial Reporting Council
GAAP Generally Accepted Accounting Principles
GB Great Britain
HMRC Her Majesty's Revenue & Customs in the UK
IAS International Accounting Standards
IFRS International Financial Reporting Standard
Invested Capital Net assets plus net debt
Ireland The Island of Ireland
ISO International Organisation for Standardization
KPI Key Performance Indicator
Lagan Lagan Group (Holdings) Limited
The construction materials and contracting services
brand under which Breedon now trades in the Republic of
Ireland
Leverage Net debt expressed as a multiple of LTM Underlying
EBITDA
LIBOR London Inter-bank Offered Rate
LTIFR Lost Time Injury Frequency Rate
LTM Last twelve months
MPA Mineral Products Association
MPQC Mineral Products Qualifications Council
NI Northern Ireland
NISRA Northern Ireland Statistics Research Agency
OHSAS Occupational Health and Safety Assessment Standard
QCA Quoted Companies Alliance
the Revenue Office of the Revenue Commissioners in Ireland
RoI Republic of Ireland
ROIC Post-tax Return on Invested Capital
Sterling Pounds sterling
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
Whitemountain Whitemountain Quarries Limited
The construction materials and contracting services brand under
which Breedon now trades in NI
WTO World Trade Organisation
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.
END
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