8 March 2023
BREEDON GROUP PLC
Annual results 2022
Growth strategy delivers record earnings, higher returns and reduced leverage
Breedon Group plc (Breedon or the Group), a leading vertically-integrated construction materials group in Great Britain and Ireland, announces audited annual results for the year ended 31 December 2022.
| Statutory highlights | Underlying 1 highlights | |||||||||||
| £ mexcept where stated | 2022 | 2021 | % change | 2022 | 2021 | % change | % LFL 2 | |||||
| Revenue | 1,396.3 | 1,232.5 | 13% | 1,396.3 | 1,232.5 | 13% | 11% | |||||
| EBIT | 148.0 | 127.4 | 16% | 155.0 | 133.6 | 16% | 15% | |||||
| EBIT margin | 10.6% | 10.3% | 11.1% | 10.8% | 30bps | |||||||
| Profit Before Tax | 135.8 | 114.3 | 19% | 142.8 | 120.5 | 19% | ||||||
| Basic EPS3 | 6.65p | 4.65p | 43% | 7.08p | 5.98p | 18% | ||||||
| Dividend per share | 2.1p | 1.6p | 31% | |||||||||
| Net Debt4 | 197.7 | 212.5 | (7)% | |||||||||
| Covenant Leverage5 | 0.7x | 0.8x | (0.1)x | |||||||||
| FCF conversion6 | 29% | 59% | (30)ppt | |||||||||
| ROIC7 | 10.8% | 9.5% | 130bps | |||||||||
FINANCIAL HIGHLIGHTS
Successful implementation of our growth strategy delivers record revenue and earnings
· Full year results ahead of expectations8
· Revenue increased 13%; timely implementation of our dynamic pricing strategy contributed +20ppt, partially offset by a 10ppt volume reduction which normalised in line with the market
· Full input cost recovery supported Underlying EBIT growth of 16%, and margin expansion of 30bps to 11.1%
Thoughtful capital allocation has led to higher returns and a strengthened financial position
· ROIC increased 130bps to 10.8%, ahead of our medium term target of 10%
· Strong financial position maintained, enabling investment for growth; Covenant Leverage reduced to 0.7x (2021: 0.8x) while net capital expenditure increased to £102m (2021: £71m)
· Working capital outflow as forecast, reflecting strong cash collection offset by the effects of inflation and the purchase of carbon requirements for 2023
Full year dividend increased 31% to 2.1p;
· Total cash returned to shareholders in 2022 from dividends increased to £30.5m (2021:£8.4m) reflecting a raised payout ratio of 30% (2021: 27%)
OPERATING HIGHLIGHTS
Each division contributed to advancing strategy, revenue and earnings
· GB revenue increased 15%; we completed three bolt-on transactions, and our surfacing business was awarded a place on the National Highways Pavement Delivery Framework
· Ireland tendering accelerated noticeably in the second half; we won high-quality infrastructure contracts and successfully recovered input costs
· Cement had a record year; revenue increased 22% and operating margin expanded 40bps to 17.3% supported by resilient end-markets, dynamic pricing and full cost recovery
Sustainability agenda progressing
· We committed to the Science Based Targets initiative and disclosed our first TCFD analysis
· We achieved our highest ever rate of alternative fuel substitution, increased sales of reduced clinker content product and committed to further exploration of the Peak Cluster carbon capture and storage project
Seeking admission to the Main Market of the London Stock Exchange
· As a reflection of our scale, maturity and growth ambitions, in the coming months we intend to seek admission to the Premium Listing segment of the London Stock Exchange – see separate announcement issued today
CURRENT TRADING AND OUTLOOK
Breedon has begun 2023 positively and in a strong position
· The UK economic backdrop remains uncertain, particularly with regard to residential housebuilding
· UK Infrastructure and industrial construction end-markets are still expected to grow in 2023, underpinned by large ongoing projects
· Breedon’s Ireland operations are expected to benefit from a strong macroeconomic backdrop, coupled with the structural need for housing and infrastructure investment
· Our successful dynamic pricing strategy, forward hedging programme and careful approach to cost management remain in place
· Our strong balance sheet and thoughtful approach to capital allocation provides strategic optionality with scope for investment and acquisition activity focused on the UK and Ireland
· Overall, the Board expectations for 2023 remain unchanged
Rob Wood, Chief Executive Officer, commented :
“2022 was another record year. Each division progressed and we made meaningful headway on our growth strategy, expanding organically, acquiring strategically important assets, and moving our sustainability agenda forward.
“We grew sustainably through replenishing and optimising our mineral assets, investing in our colleague’s safety and wellbeing, and reducing our carbon footprint while maintaining a secure financial position. We have a mineral pipeline in excess of 100 million tonnes, we achieved the highest substitution of fossil fuels at our cement plants in our history, and we invested for growth while still reducing our leverage.
“In recent years our local and entrepreneurial operating model has been tried and tested, keeping our people safe while growing high-quality earnings, and maintaining a strong balance sheet. Despite the uncertain economic and geopolitical landscape, 2023 has begun positively and we are in a strong position. We will continue to supply essential materials to growing end-markets, and we remain confident in our ability to deliver.”
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Notes:
1. Underlying results are stated before acquisition-related expenses, redundancy and reorganisation costs, property gains and losses, amortisation of acquisition intangibles and related tax items. References to an Underlying profit measure throughout this announcement are defined on this basis.
2. Like-for-like reflects reported values adjusted for the impact of acquisitions and disposals.
3. EPS in the Underlying Highlights is adjusted Underlying Basic EPS, which is Underlying Basic EPS adjusted to exclude the impact of changes in the deferred tax rate of £1.1m (2021: £17.3m).
4. Net Debt including IFRS 16 lease liabilities.
5. Covenant Leverage is defined as the ratio of Underlying EBITDA to Net Debt, with both Underlying EBITDA and Net Debt amended to reflect the material items which are adjusted by the Group and its lenders in determining leverage for the purpose of assessing covenant compliance. In both the current and prior periods, the only material adjusting item was the impact of IFRS 16.
6. FCF conversion: Free Cash Flow relative to Underlying EBITDA.
7. ROIC: post-tax return on average invested capital.
8. Information for investors, including analyst consensus estimates, can be found on the Group’s website at www.breedongroup.com/investors .
RESULTS PRESENTATION
Breedon will host a results presentation for analysts and investors at 08:30am today at the offices of Numis, 45 Gresham Street, London EC2V 7BF, or online via www.breedongroup.com/investors . The presentation will be followed by Q&A, where it will be possible to participate through the following dial-in details:
| Event Title: | Breedon Full Year Results 2022 |
| Start Time/Date: | 08:30 Wednesday, 8 March 2023 – please join the event 5-10 minutes prior to scheduled start time. When prompted, provide the confirmation code or event title |
| Confirmation Code: | 6306831 |
| United Kingdom, Toll-free: | 0808 109 0700 |
| United Kingdom, Local: | +44 (0) 33 0551 0200 |
| ENQUIRIES | |
| Breedon Group plc | +44 (0) 1332 694010 |
| Rob Wood, Chief Executive OfficerJames Brotherton, Chief Financial Officer | |
| Louise Turner-Smith, Head of Investor Relations | +44 (0) 7860 911909 |
| Numis (NOMAD and joint broker) | +44 (0) 20 7260 1000 |
| Oliver Hardy (NOMAD), Ben Stoop | |
| HSBC (Joint broker) | +44 (0) 20 7991 8888 |
| Sam McLennan, Joe Weaving | |
| MHP (Public relations adviser) | +44 (0) 20 3128 8193 |
| Reg Hoare, Rachel Farrington, Charles Hirst | breedon@mhpgroup.com |