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At this price how long before SigmaRoc come sniffing? with the acquisition of Nordkalk (i know Breedon is much bigger) but they have proved they can pull off a big deal. No overlap between the two companies.
Hi Londoner7,
Thank you for sharing your thoughts for 2022. i have yet to hear the earning call. Only read the FY results presentation.
I guess we won't see the £1,500M I am hoping for in revenue, but if the EBIT margin goes up to the levels you mention then we will see the reduction in debt you forecast in your post.
The slump in SP is clearly common to companies that are energy intensive businesses (like bricks) with the explanation being the increased fuel costs, or the idea that companies won't be able to pass them on to their clients. (I have a small holding in Michelmersh. They make high end bricks which means they can pass on cost increases; yet its SP is down like BREE's...)
I had posted once or twice to ask if there were other reasons for the slump in the SP besides higher fuel costs that I was not aware of. Since you would know I am now reassured there is not.
But, I am expecting M&A activity by BREE like you wrote. It remains to be seen what BREE will acquire and how it will finance the acquisition...
Absent major events, I expect the SP to return to its level for most of 2021, i.e., above 100p.
ATB
Clearly fuel price inflation has impacted Breedon and is probably the sole reason for the dip in SP this year.
No reason to sell though, this is a great company with excellent management - still a good bet for a long term hold and when the energy market stabilises a strong buy.
Thanks for taking the trouble to post mate, I think I meant start of 2014, it then rose and like you say dipped again after. I still think this is a sensible investment and a little divi coming up in May
PS the low sp works in my favour as the Buy as you Earn scheme we have set the price every Apr for a 5 year saving plan with share options at the end. Just set up another one and will keep buying under a quid per share.
Nigc..... As Londoner will tell you as well, I drive for Breedons and in the East Mids where we're based, we have been flat out since May2020, both Cemex and Tarmac have closed plant due to (Cemex) being bought up by us, and God knows why Tarmac shut up shop. Plants running load out all day every day and the quarries in the area can't dig stuff fast enough. The only worry is fuel bills as my truck has gone from 180 to 305 quid a time to fill it up.....
Last night I listened again to the finals call. JB said the cost base is c£1B and he expected this to rise by £100m (10%) in 2022. He also said pricing would meet those cost increases. I heard a reference to low double-digit price increases this year. He was also expecting c3% growth in the market – Breedon typically exceeds market growth numbers.
In my 16th March estimate, I expect a revenue of £308m in Q1, 17% up on 2021 Q1, because of the Covid impact on ROI. I may be overestimating the 2021 impact, particularly as the ROI market is mainly about tendering in Q1 with the bulk of the work done through the rest of the year. But I’ll stick with it and won’t be too bothered by a small miss. I’ll also be listening for updated commentary on costs and pricing.
Q1 update is in two weeks, 28th April (AGM).
2014? Did you mean 2017 or have I misunderstood your post?
One of my first posts on LSE (10 Sept 2015) was on Breedon and under a title, ‘Below 50p’ , I said, “You beauty! After the interims I never expected to be able to add to Breedon below 50p. The analyst call was one of the most upbeat assessments of a business I’ve heard since the dot com bubble. But nobody could call Breedon ‘vapourware’ – ‘gritware maybe.”
I was clearly excited by the opportunity to complete my holding, though I’ve traded chunks of it many times since.
In another post the same day, I said, “For what it’s worth my expectation is 2.7p earnings versus consensus broker forecasts of 2.3p.”
Breedon posted 2.68p earnings for 2015 – close enough!
Breedon closed 2015 at 67p. A P/E of x24.
But that’s history. What’s happening today?
Either the market doesn’t expect Breedon to meet expectation or today’s market doesn’t attach a high valuation to those earnings. Or both. I think energy costs are a big concern.
Current consensus analyst estimates are for 6.34p EPS in 2022. A P/E of x12.3 @ today’s 78p. On a 2015 market valuation the SP would be 152p.
This is my personal log on Breedon since the results last month.
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16/3/22
2022
Given expected demand to continue Breedon expects to more than cover costs by pricing. I take this to mean an increase in margin from 10.8% in 2021 (2021 H2 margin was 12.2% - margins traditionally weighted to H2).
I expect revenue growth of c10% largely due to pricing, and a 12.0% to 12.5% EBIT margin.
Based on £13m interest and 16% tax guidance for 2022, I get EPS 7.4p – 7.7p.
Consensus broker estimates are much lower @ £1,286m rev and 6.18p EPS.
Highest broker on £1.3b rev and EPS @ 6.63p.
The next update is the AGM. £308 Q1 revenue (+17%) would support my FY £1,355m.
I expect 19% EBITDA margin for £255m, and net debt £70m-£90m (excl. IFRS 16)
This assumes no M&A but I’m expecting some activity this year – this is based on an expectation at the 2021 interims (CEO comment) that there would news ahead of the March finals. Didn’t happen, but perhaps interest still alive.
Like last year, I was struck by how coy the CFO was about 2022 forecast numbers. With PSP awards last year only requiring 6.5p EPS for next year (2023) and this year’s awards now under discussion, I understand why. The renumerations committee typically set low bar targets for CEO and CFO awards. Guess who guides them. Not unique to Breedon, but of all the companies I follow PCP award targets at Breedon seem particularly easy to achieve.
Update 12/4/22
EPS target for 2024 FY posted. 6.65p (25% -) to 7.4p (- 100%), over 3.5m awards (0.2% of mkt cap)– 9 participants. Current analysts’ highs, 6.8p (2022) and 7.07p (2023). Analysts now within 10% of my low-end EPS number for 2022.
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* To be clear, I don't expect a 152p SP today. Breedon are in a different phase of their growth.
Hard to believe it’s at 2014 levels
Once again there seems to be no reason for the low share price . Is this the time to buy more?
Busy every day in the East Mids. 5 trucks run out of my plant. 1 of 10 in the area. Most have between 2 and 5 depending on yard size and local demand. Also just signed up for my next employee sharesave plan.....
Passed by our Theale cement storage & ready mixed concrete plant at Theale today and mixers were heading into Reading and off towards Newbury.
Later saw a mixer at traffic lights in Newbury and gave the driver a wave and a thumbs up; he looked well happy with his prospects.
Remember...most things in this life either grow or - in our case - are dug out of the ground; we'll rally and grow.
I was expecting a piece of post balance sheet commentary; this is positive:'OUTLOOKThe demand environment remains robust with long-term commitments in place from policy makers to fund infrastructure and construction. Forecasters are predicting mid-single digit growth in 2022 and, while commodity cost volatility is expected to continue, the pricing backdrop is increasingly dynamic and we expect to fully recover input cost increases. We remain confident that Breedon will deliver profitable and cash generative growth in 2022, in line with management expectations.'Other positives include reducing covenants a year ahead of schedule, underlying EBIT up nearly 60% and layered energy hedges extending up to three years.Negaitives; a significant percent of cement growth came through importing cement [never good during conflict affected global trade].The market will hopefully react positively unless it gets spooked by the investor's presentation.
Why does anyone want to sell Breedon shares at such a low price and usually in such small numbers ?
The audited accounts for y/end 31 December are due to be issued next Wednesday morning; they should include some guidance and post balance sheet date commentary.
Tempting...
It would be reassuring to get a statement from the company . I can find no reports to suggest a major problem .
Still busy in the East Midlands. Concrete is going out the gate as fast as we can load it.
just a downward movement with the market or something else? any thoughts anyone with inside industry knowledge?
Perhaps they have received a big order for boot filling materials the men in suits..
Finally a better day, no doubt MM’s selling on those 6m sold at 82p yesterday
Dumped today ????
82 is now a solid low
Lets hope other institutions are ready to pick up the slack
RNS due for sales
Strange dump if you ask me concrete sales are booming everywhere
Who are these sellers of millions of Breedon shares today?
This share is on a watchlist of mine... I have a few slices of cheese in VANL and concrete is one of their raw materials. In their last Investor presentation, they mentioned the cost and availability pressures for UK concrete buyers at the moment. Concrete producers seem to be able to pass on price increases and operate at full / over capacity, as it is a seller's market.
The November trading update mentioned "Positive margin performance reflects dynamic pricing and cost recovery actions" & "Layered hedging policy continued to mitigate key commodity cost pressures" which both seem to indicate energy costs are under control,
A fairly safe 20% uplift seems to be on offer, but with all purchases, timing is everything. The spread is low, which certainly helps.
SP is dropping to levels last seen one year ago. I must be missing something here that relates to the construction sector... Anyone has heard anything? We all know that energy costs are going through the roof. But there was hedging in place for 2022, if I remember correctly...