Breedon reports record earnings, seeks move to main market

The AIM-traded firm said its revenue increased 13% year-on-year in 2022, to £1.4bn, with a significant contribution from the implementation of its dynamic pricing strategy.

It also achieved full input cost recovery, which supported 16% growth in underlying EBIT to £155m, and margin expansion of 30-basis points to 11.1%.

In terms of capital allocation, Breedon said its approach led to higher returns and a strengthened financial position.

Return on invested capital increased by 130-basis points to 10.8%, surpassing the company's medium-term target of 10%.

Additionally, the firm reported a strong financial position, reducing covenant leverage to 0.7x and increasing net capital expenditure to £102m.

Breedon also announced a 31% increase in its full-year dividend to 2.1p, with total cash returned to shareholders in 2022 increasing to £30.5m, reflecting a raised payout ratio of 30%.

Looking ahead, Breedon said it had started 2023 in a strong position, despite the uncertain economic backdrop in the UK, particularly around residential housebuilding.

The company's operations in Ireland were expected to benefit from a strong macroeconomic backdrop and the structural need for housing and infrastructure investment.

Its board said the firm’s dynamic pricing strategy, forward hedging program, and careful approach to cost management remained in place, adding that its strong balance sheet provided optionality for investment and acquisition activity focused on the UK and Ireland.

Overall, its expectations for 2023 remained unchanged.

In a separate announcement, Breedon also flagged its intention to move its ordinary shares to the premium segment and trading on the main market of the London Stock Exchange.

The board said the move would reflect the company's growth ambitions and maturity, and its “robust” corporate governance.

It said the move was expected to take place in the second quarter, subject to meeting the necessary conditions and regulatory approvals, with Breedon not intending to raise funds in connection with the admission.

“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,” said chief executive officer Rob Wood.

“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.”

Wood said that in recent years, the company’s “local and entrepreneurial” operating model had been “tried and tested”, keeping its people safe while growing 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.”

At 1024 GMT, shares in Breedon Group were up 4.84% at 78p.

Reporting by Josh White for Sharecast.com.