Breedon ups full-year expectations, shares spark

Breedon Group expects full-year numbers to come in at the top end of forecasts, the construction materials specialist said on Thursday, after a strong first-half performance.

Revenues in the six months to 30 June were £600.9m, against £335.3m a year previously and £447.4m in the first half of 2019.

Underlying earnings before interest and tax were £56.4m, compared to last year’s first-half loss of £600,000 and up 9% on 2019.

Net debt was £291.5m as at the end of June, compared to £253.6m in June 2020 and £318.3m for the end of 2020.

Aim-listed Breedon, which operates cement factories, quarries, asphalt plants and ready-mix concrete plants in the UK and Ireland, said trading had benefited from volume growth across all its key products and regions, as construction activity continued to recover.

Rob Wood, chief executive, said: "Our first half performance, current trading conditions and improved visibility for the remainder of the year combine to give us greater confidence in the outlook for 2021 and we now expect underlying EBIT for 2021 to be at the top end of market expectations.

"The outlook for our end markets remains positive, with the UK and Irish governments committed to significant investment in infrastructure, combined with sustained structural demand for new build residential housing. With a strong balance sheet and new financing facilities we are well positioned to continue to invest in the growth of the business and to create value for all our stakeholders."

As at 1215 BST, shares in Breedon were trading 5% higher at 108.9p.

Numis called the results "robust", noting: "Management now guides to 2021 EBIT being at the top end of market expectations. We therefore increase our forecast by 17% to this level, with 2022 moving up by 9% to £136m. We would note that management guidance implies a 7% year-on-year EBIT decline in the second half, which in our view suggests scope for further upside.

"Breedon trades on a 2022 PE ratio of 17.5x, an attractive multiple for a company with an impressive track record and significant exposure to infrastructure activity. We therefore reiterate our ‘buy’ recommendation on a higher target price of 125p."