RE: Breedon Set to Beat Full Year......24 Jul 2015 10:19
Breedon Aggregates confident after bumper first half
14:30 23 Jul 2015
Buoyant demand, good weather, acquisitions chipping in and the fall in oil prices all contributed.
Aggregates group Breedon (LON:BREE) saw exceptional performances in both England and Scotland as interim sales and profits surged ahead.
Buoyant demand, good weather, acquisitions chipping in and the fall in oil prices all contributed to make it a bumper half, said the quarry owner.
Underlying profits [EBITDA] jumped by 54% to of £27.3mln in the six months to June, which was ahead of expectations, while revenues climbed 28% to £160.5mln. Pre-tax profits rose 92% to £17.5mln.
The group sold 4.5mln tonnes of aggregates (3.6mln tonnes), 0.9mln tonnes of asphalt (0.7mln) and 0.4mln cubic metres of ready-mixed concrete (0.3mln).
Peter Tom, executive chairman, said it had been a strong half with March a record month for the group.
"Assuming that current trading conditions continue through the second half of 2015, we believe that market expectations for the year will be exceeded," he added.
The group also exceed its EBITDA margin target of 15% and is now targeting around 20% by 2020, which was the sector norm pre-recession, he said.
Trade body forecasts are for volume growth of around 5% over the next few years, a rate of growth that would take aggregates consumption back to pre-recession levels by 2020.
Breedon had several potential acquisition opportunities under review, Tom added.
Chief executive Simon Vivian told Proactive that the business tended to follow GDP and economic activity and the UK's underlying economic recovery meant the firm reckoned its prospects for the next few years were "pretty good".
He pointed for example to the recent Budget, in which a major programme for refurbishing England's roads was unveiled.
"The election result and the certainty that produced have meant things have moved forward well. The political environment is good. The government seems very keen on investing in infrastructure going forward. That is going to be good for our products."
House broker Peel Hunt said the first half numbers were "well ahead" of expectations.
It has repeated a 'buy' rating on the shares and lifted its price target to 60p from 53p.
The City firm has also lifted its estimates for pre-tax profit by 23% for 2015, 16% for 2016 and 21% for 2017.
On revised 2016 forecasts, the broker said the group was trading on 17.6 times PE (price-earnings).
Analyst Clyde Lewis said: "We continue to believe this represents very good value for a business which looks well set to outperform its peer group organically in an attractive market place. Any deals on top will be jam."
Breedon shares rose 2.38% to 53.75p on Thursday. They are up 9% on the year-to-date, after a 16% rise in 2014.
"While this is better than the market, this performance has seen the shares under