Brickability flags fall in revenue, announces Topek acquisition

Construction materials distributor Brickability Group announced the acquisition of Group Topek on Wednesday, further solidifying its position in the cladding market by offering capabilities such as design, fabrication, and installation services.

The AIM-traded company said the acquisition, completed for a consideration of up to £45m, would expand its presence in the cladding remediation market in the UK, providing essential services to enhance building insulation, comply with fire safety standards, and bolster aesthetic appeal, mainly through Topek’s cladding and rainscreen systems.

In the backdrop, Brickability said its trading performance for the first half was resilient amidst a turbulent UK housebuilding market, with revenue expected to come in at around £324m, reflecting a like-for-like decrease of about 14% compared to the prior year.

That downturn in revenue was attributed to prevailing high interest rates and economic conditions, impacting residential work and housing starts, which, according to the Construction Products Association, were anticipated to plunge by 25% and 19%, respectively, in 2023.

Despite that financial pressure, the acquisition of Topek, which generated unaudited revenue of £21.2m and an adjusted EBITDA of £8m up to 31 August, was anticipated to be immediately earnings accretive for the current year.

The board said the acquisition payment structure would comprise an initial cash consideration of £27.3m and a deferred contingent consideration of up to £17.7m, subject to adjustments based on performance against targeted criteria over three years.

Furthermore, the group had the discretion to settle deferred consideration payments via the issue of new ordinary shares, offering financial flexibility.

Brickability said strategic diversification had been at the heart of its approach since its initial public offering in 2019, culminating in 12 acquisitions to widen and deepen its product portfolio.

“It is pleasing to report that the board will be reporting first-half performance in line with board expectations in spite of more challenging trading conditions,” said chairman John Richards.

“Whilst the second half of the year is anticipated to see industry-wide volume reductions, from which the group is not immune, the board believes that Brickability’s diversified, multi-business approach enables the group to continue to perform well in the current market backdrop and that this strategy best positions the group for the future.

“This acquisition is the group’s second largest to date, and a very exciting one in our continued diversification strategy.”

Richards added that the acquisition of Taylor Maxwell in 2021 delivered a significant increase in exposure to public and commercial end markets, and the addition of Topek would further increase its presence there.

“We believe this acquisition will deliver significant value for our shareholders.”

At 1221 BST, shares in Brickability Group were down 1.41% at 46.09p.

Reporting by Josh White for Sharecast.com.