Breedon report strong first-half results
Group delivers robust performance in first six months with full-year expectations maintained
BREEDON Group plc have announced their unaudited interim results for the six months ended 30 June 2023.
The Group delivered a strong trading performance in the first half, with favourable tailwinds from a dynamic pricing strategy more than offsetting expected lower volumes. As a result, first-half revenue grew by 11% to £742.7 million (H1 2022: £671.1 million) or 7% on a like-for-like basis when adjusted for the six bolt-on acquisitions completed during the last 12 months. Volumes declined by 5ppt as expected but were more than offset by a 12ppt increase in pricing.
Underlying EBIT of £70.5 million (H1 2022: £66.9 million) grew by 5%, reflecting the benefits of the pricing tailwind carried through from 2022 and full input cost recovery achieved in the first half, partially offset by higher energy costs as hedges moved back into line with market pricing. Consequently, underlying EBIT margin of 9.5% reduced by 50bps compared with the same period of 2022 (H1 2022: 10.0%).
Following the completion of three strategically significant bolt-on acquisitions in the first half of 2023 for a combined enterprise value of £19 million, closing covenant leverage was significantly lower at 0.7x (H1 2022: 1.0x), while post-tax return on invested capital remained at 10.0%, reflecting the robust trading outcome, but partially offset by the impact of the increased UK corporate tax rate from the second quarter.
Looking ahead, whilst end-market visibility beyond 2023 remains limited in light of the uncertain economic outlook, particularly with respect to residential house building from which around 20% of Breedon’s revenues are derived, the board says the Breedon model is resilient and continues to deliver a solid operational performance with continued strong cash generation, irrespective of the macroeconomic or political backdrop. As such, the Group is well-positioned for the second half of the year with trading in line with the board’s expectations, which remain unchanged.
Commenting on the half-year results, chief executive officer Rob Wood said: ‘In the first half our vertically integrated and local operating model has again come to the fore, leveraging our long-term customer relationships and deep market knowledge. Our first-class team has operated with great agility to deliver a strong start to 2023 for which I thank them sincerely; we are well-positioned for the second half of the year.’
He continued: ‘The long-term structural dynamics driving infrastructure spending and house building in GB and Ireland have not changed. To ensure we can efficiently and sustainably meet long-term demand for our essential construction materials, we have re-doubled our focus on those factors under our control; keeping our people safe and well while minimizing the cost of production and maximizing the value of the extensive portfolio of assets we own and acquire.
‘By emphasising the operational factors we can influence, we will ensure we remain competitive and continue to deliver outstanding results. By challenging our procedures and practices, we can be sure we will be in the strongest possible position when our end-markets return to growth.’
