Join our community of smart investors

Breedon Aggregates builds momentum

Breedon Aggregates runs a tight ship and is now starting to benefit from the recovery in UK infrastructure spending.
March 4, 2014

Breedon Aggregates (BREE) was floated in 2010 as just about Britain's only remaining dedicated aggregates, concrete and asphalt producer. The economic downturn has proved to be a persistent headwind, but conditions are now improving thanks to the push to boost infrastructure spending and the recovery in house building.

IC TIP: Buy

With 38 quarries containing 400m tonnes of mineral reserves, 22 asphalt plants and 50 ready-mixed concrete plants, Breedon is poised to benefit from significant operational gearing. Early evidence of this was seen last year, when the group achieved a 43 per cent increase in aggregate sales volumes and a 27 per cent increase in ready-mixed concrete volumes. The subsequent boost to cash flow, up 72 per cent at £24.9m, helped cut net debt by 27 per cent to £54m.

For the first time there is now a real prospect of driving through above-inflation price increases as demand ramps up. Overall momentum will also increase later this year when its most recent acquisitions are fully integrated. Executive chairman Peter Tom is keeping an eye out for further suitable targets; he reckons he could spend £25m this year and the same next year without having to raise equity finance.

Analysts at Numis Securities are forecasting adjusted pre-tax profits for the coming year of £16m and EPS of 1.3p (from £12.4m/1.1p).

BREEDON AGGREGATES (BREE)
ORD PRICE:41pMARKET VALUE:£413m
TOUCH:40-41p12-MONTH HIGH:42pLOW: 22p
DIVIDEND YIELD:NILPE RATIO:37
NET ASSET VALUE:15pNET DEBT:36%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201043-6.3-2.2nil
20111691.40.2nil
20121735.80.9nil
201322511.01.1nil
% change+30+90+22-

Ex-div:-

Payment:-