Much of the commentary on Breedon (BREE) over the last year has focused on the potential for growth following its acquisition of Hope Construction materials in 2016. The group’s results for 2017 reflect the impact on the scale of operations, with revenue up 43 per cent and a similar step up in operating cash flow.
The business has now been fully integrated and two further acquisitions have been made, strengthening operations in the West Midlands, East Yorkshire and Humberside. Breedon has also announced plans to acquire four quarries and an asphalt plant from Tarmac for £4.9m, which should complete in the next couple of months subject to approval from the Competition and Markets Authority.
Concerns over the construction sector have weighed on the share price in recent months, but the group said its bias towards housebuilding and infrastructure would provide protection. Its 2017 volumes certainly back this up, with aggregates sold rising 40 per cent to 16m tonnes and ready-mixed concrete sold rising 74 per cent to 3.3m cubic metres. Asphalt stayed level at 1.9m tonnes.
The group beat EPS forecasts from analyst Numis by 10 per cent. While 2018 forecasts remained unchanged, with adjusted pre-tax profit of £78m and EPS of 4.3p (from £74m and 4.1p in 2017), analysts noted the possibility for outperformance due to organic and acquisitive growth.
| BREEDON (BREE) | ||||
| ORD PRICE: | 78p | MARKET VALUE: | £1.13bn | |
| TOUCH: | 78-78.6p | 12-MONTH HIGH: | 93p | LOW: 74p |
| DIVIDEND YIELD: | nil | PE RATIO: | 20 | |
| NET ASSET VALUE: | 36p* | NET DEBT: | 21% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 225 | 11 | 1.1 | nil |
| 2014 | 270 | 21.4 | 1.7 | nil |
| 2015 | 319 | 31 | 2.3 | nil |
| 2016 | 455 | 47 | 2.9 | nil |
| 2017 | 652 | 71 | 4.0 | nil |
| % change | +43 | +52 | +36 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £195m, or 13p a share | ||||
