Breedon wary going forward after strong first half

Construction materials group Breedon reported a 12% improvement in underlying revenue in its first half on Wednesday, to £671.1m, as it also hiked its interim dividend.

The AIM-traded firm said underlying EBIT was ahead 19% year-on-year in the six months ended 30 June, at £66.9m, while its underlying EBIT margin expanded by 60 basis points to 10%.

Basic underlying earnings per share were 26% firmer at 1.02p.

Breedon said it maintained its “strong” financial position, with its covenant leverage moving to 1.0x from 1.2x a year earlier, which the board put down to increased capital investment, seasonal working capital outflow and payment of the final dividend.

The board increased the company’s interim dividend by 40%, to 0.7p per share.

During the first half, the firm said the economic and political backdrop had grown increasingly uncertain, impacting its visibility beyond 2022.

It said that while it recognised the potential for the environment to affect confidence, it was “optimistic” for the rest of 2022.

Breedon said its customers' order books were “healthy”, the mechanism for passing through cost increases had traction, and enquiry levels were “encouraging”.

As a result, it was expecting to deliver underlying EBIT at the top end of the range of consensus expectations5.

The board said the company’s longer-term prospects were underpinned by the resilience of its end-markets, with infrastructure demand “well supported” by large long-term projects and centrally-funded schemes, material industrial projects coming to market driven by the environmental agenda, and housebuilding order books “robust”.

“We enjoyed a strong start to 2022 - our teams are focused on getting pricing right, our end market exposure is supportive and that has produced excellent results, advancing our margins and returns towards our medium term targets,” said chief executive officer Rob Wood.

“We completed two in-fill transactions during July, with further merger and acquisition activity in the pipeline, and we have continued to progress a broad range of sustainability initiatives, including a commitment to the science-based targets initiative.

“Crucially, we achieved this strong outturn while keeping our people safe and well.”

Wood said the company continued to invest in its team as it prepared for the “next chapter” of growth, reflected in its recent engagement survey where response and engagement rates were the highest ever.

“Our colleagues are embracing the challenges presented by the uncertain backdrop, remaining focused on responding nimbly to local market requirements, winning new business, driving efficiencies and delivering first-class service to our customers.

“Now more than ever, our agile and entrepreneurial DNA will set us apart.”

At 1336 BST, shares in Breedon Group were down 2.94% at 69.3p.

Reporting by Josh White at Sharecast.com.