Breedon (BREE), formerly Breedon Aggregates, was born out of the ashes of Ennstone, the indebted quarry owner that went bust in 2009. And since its birth, growth has been little short of prolific. Created as a vehicle to consolidate the highly fragmented aggregates industry in the UK, where all the big operators have been swallowed up by overseas players, Breedon has been carefully expanding its geographical presence through acquisitions, in a sector where barriers to entry are extremely high.
It is now the largest independent quarry, concrete and asphalt operator in the UK, and business has been given a boost by the belated drive to improve the UK’s infrastructure, and also a concerted move to build more houses. Geographical diversification plays an important part in how profitable the operation is because aggregate is both bulky and expensive to transport. And Breedon has over 750m tonnes of it stashed away in its 60 or so quarries. On top of these, it also operates 30 asphalt plants and 200 ready-mixed concrete plants.
As well as organic expansion as a result of growing demand for its products, Breedon has been steadily making a series of bolt-on acquisitions. An even bigger transformation came with the not so little acquisition of Hope Construction, which helped to double group turnover between 2015 and 2017. Its most recent purchase came this month (April) with the acquisition of Staffs Concrete. This will add to its so-called mini-mix businesses which specialise in delivering small loads of ready-mixed concrete and screeds up to six cubic metres.
Using its fleet of eight mixer trucks and two concrete pumps, Staffs Concrete will draw material from Breedon’s local ready-mixed concrete plants. Breedon’s southern division is complemented by its operation in Scotland, where trading has been more of a challenge, mainly because of a lack of new projects.
Breedon has remained on the acquisition trail, recently making its biggest purchase ever, buying Belfast-based construction materials business Lagan for £455m. This will be part-funded through a £170m equity placing. At 83p, shares in Breedon have risen sharply from 16.5p when we first tipped them in February 2011, and with a solid demand from new-build and infrastructure market, we’re still buyers. JC
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