Breedon boosts profit despite 'difficult' trading conditions

Profits and revenue at construction materials group Breedon rose in 2018 despite "difficult" trading conditions.

In the year to the end of December 2018, pre-tax profit was up 12% to £79.9m on revenue of £862.7m, up 32%. Underlying earnings before interest and tax increased 29% to £103.5m and underlying basic earnings per share were 14% higher at 4.70p.

Meanwhile, cash generated from operating activities rose to £160.6m from £117.2m in 2017.

The company said it had delivered a "strong" performance in the face of "difficult" trading conditions, with revenue and earnings underpinned by contributions from recent acquisitions.

Breedon said 2018 was not the easiest of years. It began with severe winter weather conditions and, despite some recovery in the second half of the year, ended with confirmation that over the full 12 months there was little growth in construction output in GB.

Executive chairman Peter Tom said: "We can be justifiably proud of our results. We outperformed the GB market in sales volumes of all our key products, grew our revenues and underlying EBIT, and once again generated strong cash flow, enabling us to pay down a material proportion of our post-Lagan debt by the year-end.

"Our company is in excellent shape and well placed to benefit from the medium-term growth predicted for our markets. We have a strong asset base, a highly cash-generative business and a talented management team, all of which give us a significant competitive advantage whatever the market conditions.

"We are confident of making further progress in the current year."

Shore Capital said the prelims were slightly ahead of its forecasts, with revenues above its estimate of £850.2m and EBIT ahead of its forecast of £101.5m.

It also pointed to the company’s "very strong" cash flow of £161m versus its estimate of £129m, and said this should allow leverage to be reduced quicker than it had expected. "This should be taken well by the market," said analyst Graeme Kyle.

Numis said market headwinds should abate from here, which will put the group back onto the front foot in all divisions.

"We argue that Breedon should regain its premier rating given the double digit growth potential and quality of management and business model."

At 1430 GMT, the shares were up 1.9% to 68.98p.