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RNS out
Looking good
Wow quite a lot of trades today
https://www.telegraph.co.uk/investing/shares/three-bargains-found-londons-chaotic-junior-market/
Questor in the Daily Telegraph giving strong tip for Breedon. Get ready for a bumpy ride.
Has ever a very informative post by londoner 7 , just to had to joining the dots conversation its been brought to my attention that on the 1st of july breedon added R T My**** from buxton to there portfolio . Has far as im aware they have 2 concrete plants in buxton and Macclesfield and have both drum mixers and volumetric trucks aswell has concrete pumps totalling 20 + vehicles . Going forward i can see breedon doing more of these small infill deals , I dont know why this has not been made public yet so hoping for some more info on this plus the Thomas bow deal at the interim results .
Hi Londoner7,
As usual thank you for your extremely well informed opinions and thoughts on acquisitions and business activity.
It is good to see business will be very strong at least in a part of the country.
My remarks about CMA was not very precise, thus might have conveyed a wrong line of thought.
I meant that at some point, i.e., as Breedon keeps acquiring companies, the CMA will make it harder for such bolt-on acquisitions to continue when it comes to some parts of its business (which you identify in great detail, i.e., the RMC plants and quarries), as the usual remedies will be hard to put in practice in a way that makes an acquisition earnings accretive in some parts of the country.
I am sure you have been following the twists and turns of the EPL...
ATB
From the latest Annual Report:
" We reopened dormant quarries in both GB and Ireland including the Shap quarry in Cumbria which is rail-linked and provides high quality materials to regions where upcoming projects will generate incremental demand"
News yesterday:
https://www.theconstructionindex.co.uk/news/view/aggregate-starts-arriving-for-38bn-gigafactory
To close my previous post:
The phrase, “Breedon’s local business model and entrepreneurial culture”, is becoming something of a slogan. In these inflationary times pricing of material is key to margin and allowing teams to adjust pricing to local demand might give Breedon an edge over larger nationally run groups. Less than 3 weeks to the interims.
Hi L3, while I agree with your preference for small in-fill acquisitions rather than a large overseas acquisition, I disagree with your concerns about CMA restrictions on these activities.
The CMA is tasked with maintaining competition. In the context of Breedon activities that largely relates to RMX plant and quarries whose activities are conducted over relatively short distances. Much less so, Breedon’s activities in asphalt and surfacing.
I think the Cemex acquisition in Jan 2020 was a great addition to Breedon’s UK footprint. This is a comment from Cenkos at the time, “The £178m cash acquisition of 100 active UK sites from Cemex is classic Breedon doing what it does best; buying good regional assets that currently yield poor returns that Breedon can restore to more appropriate and enhanced levels using a combination of operational, investment and strategic levers, alongside its more focussed and dedicated management supervision. It is not a ‘transformational’ deal like Hope or Lagan, but is potentially more accretive long-term (especially versus the all cash consideration) and with less risk.”
I mention it here because it is a good example of the CMA’s activities. (Going back to my notes) Cemex brought in 55x RMX plant, 41x quarries and depots, and 18x asphalt sites, across 3 main regions, SW Wales, Scotland and NE England.
The result of the CMA’s deliberations was the divestment of 10x RMX plant, 2 quarries, 1x asphalt site and Breedon’s Dundee cement terminal. Not a significant number and I suspect many, particularly the RMX plant, would have gone in Breedon’s own rationalisation anyway. The Cement terminal is interesting because Breedon chose to hold onto the Cemex cement terminal at Lieth (Edinburgh) and divest their own terminal in Dundee in its place.
There are parts of the news on the Thomas Bow acquisition I find confusing, not least the comment that it was acquired from Nottingham City Council - an RNS would be more rigorous. But I found the following piece most interesting, “TBL, an East Midlands asphalt, surfacing and civil engineering business that delivered annual revenue of c.£29m in the year to March 2022, is a natural fit with Breedon’s local business model and entrepreneurial culture.”
Little to concern the CMA. I wonder if the civil engineering business will go the same way as Whitemountain’s. TBL’s c£29m revenues is significant in relation to GB surfacing in 2021 of £105m, but small in comparison to Irelands £159m considering the much larger GB market. Lots of scope for expanding the UK surfacing market through acquisitions. I wonder if retaining Alistair Bow and his team is part of the strategic push by Breedon into Highway’s England frameworks.
Quite interesting that BREE is still acquiring small companies. Much better strategy than going for a large one overseas. That would be my concern. Of course at some point the CMA might say enough is enough and they won't be able to acquire more companies here.
SP seems to have found the bottom. I know Londoner7 keeps an eye on the announcements of other players in this industry, so he might tells what if anything he learned recently.
ATB
For my input I worked in the aggregate industry until recently and prices today are approximately 40% ahead of prices two years ago and I understand another price increase letter has just gone out to customers from one of the larger suppliers
I also went thought two recessions which did not hurt us in the supply business too much
As for the sp struggling to find a reason other than market sentiment
Breedon continues to be my largest holding and with hindsight perhaps I should have sold some at 90p or above but I had no need so I am where I am but hoping
For a return to those levels soon GLA
Not sure about energy rationing, there has been big coverage recently of offices and plants having solar panels etc put up. I'm guessing the biggest increase in costs is fuel, my truck burns 3 tankfuls a week and the cost of filling it has doubled. I personally think that the market is jittery about recession, and the first thing that would hit would be construction, especially house building / sales. This would in turn affect concrete and aggregate sales. Is this whats driving the SP down? Who knows. I'm still buying through the Sharesave scheme and will continue to do so as long as I can buy under a pound a share. Simply Wall St put a fair value of 1.50 ish a share....
Hi Trencherpilot and Londoner7,
SP is now at insane levels. It is pricing in a stoppage of activity due to energy rationing... sinceI had read that energy costs for 2022 and 2023 had in part been hedged. Am i wrong?
Rationing of energy will shut down cement plants, but will hit the other activities slighly less, correct?
Thank you in advance for your answers.
ATB
A notice appeared on Thursday on our intranet system saying that the latest financial results are to be released on 28th July, we are still flat out busy. Customers complaining they can't get loads due to insufficient delivery capacity.
Hi Londoner7,
He for sure does. I am happy to add to my holding like he did.
ATB
Spindok, all paper, not real, losses for Mr. Lagan. It simply shows that only Mr. Market can time itself... no one else can time the market.
Amazing. He has lost over 5000 quid already. He is doing worse than my house!!
The Company has been notified that Jude Lagan, Managing Director - Breedon Cement has purchased 74,625 ordinary shares of no par value in the Company ('Ordinary Shares') at a price of 0.67p per Ordinary Share on 16 June 2022.
I'd like to think that Mr Lagan knows more than most about the current performance of Breedon's cement business- at least up to last Thursday - than most. He might even have some insight into other parts of Breedon's business.
Ditto, at this price surprised no bids are coming in
Hi Londoner7,
Much appreciated. That is reassuring, i.e., that it isnothing that is BREE related.
I do not expect the slowdown, at least in 2022, to be so bad that it will bring about a much reduced CF generation by BREE.
I might embrace the volatility by adding to my holding. Although, I usually buy and hold and never trade for years. This is very much a major and core holding for me.
ATB.
Correction:
compared to 2021
Nothing Breedon specific.
In a trading update on Friday Kingspan Insulation reported a deterioration in orders for May and June compared to 2020. This appears to have been the spark for some algorithmic trading sells in UK construction stocks.
“Kingspan will report its results for the first half of the year on 19 August and we expect to report a record H1 2022 trading profit in the region of €415m, strongly ahead of the €329m reported for the first half of 2021.
We have seen the mood in most end markets deteriorate over the last two months with order intake volume down significantly on the May and June period in 2021 although ahead versus the same period in 2019. Our global backlog of orders on hand in Insulated Panels is down 2% in volume at the end of May having been 19% ahead at the end of March.
Kingspan is positioned strongly overall for medium term and beyond given the global focus on energy efficiency, our high performance product suite, our distinctive Planet Passionate agenda and diversity of our end markets.”
Embrace the volatility!
I think it's due to me buying some.
Does anyone know anything that has not been communicated to shareholders with a RNS? It is hard to understand why the SP is now below Covid SP levels...
Have the cement factories stopped operating because there of a lack of energy sources?
I thought this would grow slowly post-100p (and paying a divi), but it seems to be returning to its old form (i.e. bouncing around in the 60-70p range. Pity, but can't say I'm entirely surprised. Breedon probably needs to make the leap into the main index for the sp to gain any long-term stability.