|
2017 |
2016 |
Change |
|
|
Revenue |
£652.4 million |
£454.7 million |
+43% |
|
Underlying EBIT† |
£80.4 million |
£59.6 million |
+35% |
|
Profit before taxation |
£71.2 million |
£46.8 million |
+52% |
|
Underlying basic EPS† |
4.14 pence |
3.49 pence |
+19% |
|
Net debt |
£109.8 million |
£159.3 million |
-31% |
† Underlying results are stated before acquisition-related expenses, redundancy and reorganisation costs, property items, amortisation of acquisition intangibles and related tax items. References to an underlying profit measure throughout this announcement are defined on this basis.
16.0 million tonnes of aggregates sold (2016: 11.4 million tonnes)
1.9 million tonnes of asphalt sold (2016: 1.9 million tonnes)
3.3 million cubic metres of ready-mixed concrete sold (2016: 1.9 million cubic metres)
Highlights
· A year of solid progress, with improved performances from all three divisions
· Strong organic earnings growth, supplemented by contributions from acquisitions
· Significant investment in mineral assets, capacity and operational improvements
· Two bolt-on acquisitions completed
· Planned acquisition of Tarmac quarry and asphalt assets announced
· Following full integration of 2016 Hope acquisition, growth platform strengthened, with significant scale, national reach and vertical integration
· Further 25 per cent reduction in Employee Lost Time Injury Frequency Rate (LTIFR) to 1.41
Peter Tom CBE, Executive Chairman, commented:
“2017 was one of the most productive years in our history. We completed the integration of our largest-ever acquisition, concluded two bolt-on purchases and announced an important transaction with Tarmac that, subject to approval by the competition authorities, will see us streamline our ready-mixed concrete network in exchange for a substantial new reserve of minerals and a strategically valuable asphalt plant. This did not, however, distract us from our operational focus and we once again delivered a solid financial performance.
“Our business is in great shape and we are well positioned to benefit from the medium-term growth in residential and infrastructure development, to which the majority of our material is supplied.
“We look to 2018 and beyond with confidence and optimism.”
Chairman's statement
Financial results
2017 was one of the most productive years in our history. We completed the integration of our largest-ever acquisition, concluded two bolt-on purchases and announced an important transaction with Tarmac Holdings Limited (Tarmac) that, subject to approval by the competition authorities, will see us streamline our ready-mixed concrete network in exchange for a substantial new reserve of minerals and a strategically valuable asphalt plant. This did not, however, distract us from our operational focus and we once again delivered a solid financial performance.
Group revenues for the year grew by 43 per cent to £652.4 million and underlying earnings before interest and tax (EBIT) increased by 35 per cent to £80.4 million, including a full-year contribution from Hope Construction Materials Limited (Hope). This equates to an underlying EBIT margin of 12.3 per cent and we are making good progress towards our 2020 target of 15 per cent.
Profit before tax rose by 52 per cent to £71.2 million and underlying basic earnings per share increased by 19 per cent to 4.14 pence. The Group continued to generate a healthy cash flow and, even after the substantial investments made during the year, we ended 2017 with a significantly stronger balance sheet than we entered it.
A year of further growth
We believe that what distinguishes us from our competitors is our willingness to go beyond reasonable expectations to deliver an exceptional service to our customers. This applies whether we are delivering a few metres of concrete for a garage floor, or servicing a major road scheme. In fact, as Breedon has matured, we have become increasingly involved in critical industrial, commercial and infrastructure projects which have demanded strategic partnerships with some of the country's leading national companies.
The foundations of the Group are our aggregates reserves and at the end of 2017 we had around 750 million tonnes of mineral reserves and resources, with further reserves due to be added to our portfolio following completion of our planned acquisition of a number of quarries from Tarmac.
Maximising the return from every tonne of those reserves is one of the keys to our success and in 2017 we invested a further £46 million in our quarries, cement plant and downstream operations. This has enabled us to open new quarries, extend existing operations and improve the efficiency of many of our sites. Once again, organic growth was balanced with selected bolt-on purchases. We invested around £10 million in acquisitions during 2017, which extended our market reach and added further to our reserves and resources. The Group now has an even stronger platform for growth, with a national presence, enhanced product portfolio, robust central management functions and an exceptionally strong asset base.
Progress on safety
Around 2,200 colleagues now work in the Breedon Group and in 2017 we intensified our efforts to ensure that they all go home safely at the end of every working day. This took on an even greater importance in light of the tragically high number of fatalities in our industry last year. We maintain our ambition to be the safest, as well as the most profitable, construction materials company in the UK and we firmly believe that with the right culture of safe behaviour, Zero Harm is a realistic goal. I am pleased to say that the number of serious injuries declined last year, as our new Safety Commitments became firmly embedded in the business and colleagues took greater care of themselves and each other.
Senior management changes
Ashley Bryan stepped down as Managing Director of Breedon Cement and left the Group in early 2017, to be succeeded by Interim Managing Director Tim Billingham.
Following the departure of Tim Hall from the Group in September, we were recently joined by Mike Pearce as Chief Executive of Breedon Southern. Mike was formerly Managing Director of the aggregates division of Aggregate Industries, where he had also been responsible at various times for the company's building products, asphalt, ready-mixed concrete, contracting and commercial activities.
I would like to take this opportunity to welcome Mike to the Group and to thank Colin Parke for his interim leadership of Breedon Southern over the past six months.
The Board
We are today announcing Simon Vivian's retirement from the board and he will be stepping down with immediate effect. Simon and I worked closely together on the creation of Breedon and he did distinguished service as the Group's chief executive from 2010 to 2015. He retires with our thanks for the significant contribution he made to the Group's early development and we wish him well in all his future endeavours. Following Simon's departure, and recognising the need to maintain the right mix of skills and experience, we have commenced a formal search process to seek two new independent non-executive directors.
Looking ahead
Our business is in great shape and we are well positioned to benefit from the medium-term growth in residential and infrastructure development, to which the majority of our material is supplied.
As I have said in the past, our dividend policy remains constantly under review. We still believe that continuing to deliver capital growth, by reinvesting our resources in the organic development of our business and in earnings-enhancing acquisitions, is the best way of rewarding our shareholders for the foreseeable future.
We also keep our Alternative Investment Market (AIM) quotation under review. We feel no particular pressure to transfer to the main market whilst AIM continues to provide us with a platform from which to pursue our growth ambitions, but do not rule out a full listing in the longer term.
I would like to thank everyone in Breedon, together with all our contract hauliers and the many companies who do business with us, for their continued enthusiastic support for the Group. I am particularly pleased that so many of our colleagues are themselves shareholders in Breedon, thanks in part to widespread participation in our Sharesave scheme.
We look to 2018 and beyond with confidence and optimism.
Peter Tom CBE
Executive Chairman
7 March 2018