Breedon is still aggregating

Progress has been helped by having heavyweight names on the board, including executive chairman Peter Tom, formerly chairman of Aggregate Industries, and chief executive Pat Ward, who worked at both Hanson and Aggregate Industries.

The timing has been good, too, because in 2011 the aggregates sector was on its knees, and assets were cheap to acquire. This has been important for two reasons. First, regulatory hurdles make it almost impossible to boost reserves by opening new quarries. That also means there are high barriers to new entry into the market. Second, transporting aggregates around the country is an expensive business. So having a decent geographical spread of quarries helps to reduce costs.

Acquisitions in 2017 included Pro Mini Mix Concrete, Mortars and Screeds in the West Midlands, and Humberside Aggregates, which brought with it 3m tonnes of reserves and opened up new markets in East Yorkshire and Humberside. And towards the end of the year Breedon announced plans to acquire four quarries and an asphalt plant from Tarmac (now part of CRH) in exchange for 27 of its ready-mixed concrete plants and £4.9m in cash. Part of the attraction was that the move helps Breedon replace third-party aggregate providers with its own sources of supply.

Perhaps the biggest game changer was the acquisition of Hope Construction in 2016, which meant that between 2015 and 2017 group turnover more than doubled (see table). So Breedon is now the UK’s largest independent construction materials group, comprising around 60 quarries, 25 asphalt plants, 200 ready-mixed concrete and mortar plants and three concrete-block plants. And there is considerable asset backing from the 750m tonnes of mineral reserves in the ground.

All this amounts to very little, as Ennstone found out, unless there is a good demand for construction products, which at the moment there is. Worries over the UK's economy and Brexit have been overplayed as far as infrastructure spending goes – in 2017, aggregate sales for Breedon jumped by 40 per cent to 16m tonnes, while ready-mixed concrete sales jumped 74 per cent to 3.3m cubic metres.

Breedon Northern operates in Scotland, and trading there has been more of a challenge because of much tougher competition. This was not helped by local authorities reining in expenditure. Even so, the division's underlying cash profits managed to register a 3 per cent increase to £20.4m in 2017, thanks in part to Breedon's role in supplying materials for the first phase of the £3bn A9 dual-carriageway project from Perth to Inverness. The gap left by the collapse of Carillion has been filled by its joint-venture partners, so no financial impact is expected to fall on Breedon, which expects Transport Scotland to begin preparations for the next stage of the A9 project. 

Breedon’s finances have been transformed since it started out. Net debt as a percentage of net assets was over 100 per cent in 2011, but since then it has fallen to a much more manageable 21 per cent. In number terms, net debt in 2017 fell 31 per cent from a year earlier to £110m.