Half-year Results

BMC trading ahead of plan; integration progressing well

Management expectations for the full year unchanged

Breedon Group plc (Breedon or the Group), a leading vertically-integrated construction materials group in Great Britain, Ireland and the United States, announces unaudited results for the six months ended 30 June 2024.

FINANCIAL HIGHLIGHTS

Third platform launch and resilient pricing offset weather impact and market headwinds

• Revenue increased 3% supported by our entry into the US
• Pricing contributed 2ppt, offset by 8ppt volume reduction which principally reflects wet weather conditions across the Group and challenging markets in GB
• Underlying EBIT increased 2% backed by disciplined operational efficiency and cost recovery

Financial position retains strategic flexibility

• Covenant Leverage increased to 1.6x; remains comfortably within our target range of 1x to 2x
• RCF refinanced; securing access to longer-term finance and greater liquidity with incremental reduction in ongoing debt service costs
• Seasonal working capital outflow as expected
• Post-tax ROIC 8.8%; reflecting short-term dilution from the BMC acquisition and impact of increased corporate tax rates

Interim dividend increased to 4.5p; demonstrating confidence in the long-term growth outlook

OPERATING HIGHLIGHTS

Operational performance benefitted from flexible local model and agile execution

• GB revenue decreased 5%; robust surfacing performance and modest price progression, partially offset by volume declines related to the more challenging market. Underlying EBIT down 17%, impacted by operational gearing
• Strong performance in Ireland where Underlying EBIT improved by 37%; successful tendering season and healthy order book with growing activity levels following resumption of the governing Assembly at Stormont
• BMC trading ahead of prior year and plan; contributing nearly four months of revenue and earnings with healthy markets and a robust order book
• Cement Underlying EBIT margin improved to 15.2%; soft volumes offset by resilient pricing, lower energy costs and increased provision of lower clinker content cement

STRATEGIC HIGHLIGHTS

Active M&A pipeline in all geographies

• Launched a scalable third platform in the fragmented and growing US construction materials market through the acquisition of BMC
• M&A pipeline across the three platforms remains well populated and active, completing two bolt-on transactions in GB

Sustainability agenda succeeding

• Reinvigorated our health, safety and wellbeing strategy, promoting a proactive safety culture with clearer and firmer rules focused on risk elimination
• First CDP ratings awarded (Climate Change: B, Water Security: C) and targets submitted to SBTi for formal validation
• Continue to decarbonise the cement business; increased use of alternative fuels, solar farm construction commenced at Kinnegad, increased sales of CEM II, and further progress on Peak Cluster

Strategic initiatives and investment drive operational excellence

• Quarry operational improvement programme being implemented from 'face to gate', delivering efficiencies and process improvements
• BMC integration progressing well; investment made in health and safety, quarry optimisation, technology and sustainability

CURRENT TRADING AND OUTLOOK

Growth expected in all our markets from 2025 as economic and political landscape stabilises

• The new UK Government's growth agenda appears supportive of the construction market, in particular housebuilding and infrastructure. Alongside the resumption of a governing Assembly at Stormont, these are encouraging developments
• In RoI, where we have secured positions on high-profile road projects, recent reports reinforce the long-term structural need for housing and infrastructure investment
• In the US, market fundamentals and long-term growth prospects are underpinned by significant infrastructure and housing deficits alongside robust stimulus funding and healthy state budgets
• All our markets are expected to benefit from falling interest rates in the months ahead
• Our healthy balance sheet provides us with the strategic flexibility to invest for growth, maintain our progressive dividend policy and execute bolt-on acquisitions across each platform
• Management expectations for the full year remain unchanged with Underlying EBIT slightly more weighted towards the second half than is typical

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Rob Wood, Chief Executive Officer, commented:

"For the team to deliver such a resilient performance given the challenging GB market conditions we have faced is an incredible achievement.

"We achieved a major strategic objective in March, entering the US and establishing our third platform with the transformative acquisition of BMC, creating the foundation from which we will build out our US business. We expanded our routes to market, delivering two bolt-on transactions in GB, and growing organically through our downstream businesses, pulling through more of our own material. We moved our sustainable growth strategy forward on all fronts in the first half of 2024 and were pleased to see this recognised by CDP with our first ratings placing us at the forefront of our sector for Climate Change and Water Security.

"During this time the quality and flexibility of the Breedon team, of whom I am incredibly proud, have kept us close to our customers, accelerated our drive for efficiencies, and strengthened our operations. As the economic and political clouds clear in GB, our markets will return to growth in time and we will be well placed to grow and succeed.

Notes:

• Underlying results are stated before acquisition-related expenses, property gains and losses, amortisation of acquisition intangibles and related tax items. References to an Underlying profit measure throughout this announcement are defined on this basis.
• Like-for-like reflects reported values adjusted for the impact of acquisitions and disposals.
• Earnings before interest, tax, depreciation and amortisation.
• Earnings before interest and tax, which equates to profit from operations.
• EPS in the Underlying Highlights is adjusted Underlying Basic EPS, which is Underlying Basic EPS adjusted to exclude the impact of changes in the deferred tax rate.
• Net Debt including IFRS 16 lease liabilities.
• Covenant Leverage is defined as the ratio of Underlying EBITDA to Net Debt, with both Underlying EBITDA and Net Debt amended to reflect the material items which are adjusted by the Group and its lenders in determining leverage for the purpose of assessing covenant compliance. The only material adjusting items being the impact of IFRS 16 and a pro-forma adjustment to include pre-acquisition EBITDA from businesses owned for less than twelve months.
• ROIC: post-tax return on average invested capital.

RESULTS PRESENTATION

Breedon will host a results presentation for analysts and investors at 08:30am today at the offices of Deutsche Numis, 45 Gresham Street, London EC2V 7BF, or online via www.breedongroup.com/investors. The presentation will be followed by Q&A, where it will be possible to participate through the following dial-in details:

CAPITAL MARKETS EVENT

We will host a capital markets event for institutional investors and analysts on the morning of 21 November in London. The event will include presentations from Breedon's senior leadership team covering topics including capital allocation and our US market strategy. Further details will be published in due course.