Breedon Group PLC · LSE:BREE
Breedon — FY2022 Earnings Presentation
36 slides from Breedon's earnings presentation, Mar 8, 2023
Slide 1: Breedon Group plc Annual Results 2022
Breedon Group plc Annual Results 2022 8 March 2023
Slide 2: Forward looking statement
Forward looking statement The information contained in this presentation document (the “presentation”, which term includes any information provided verbally in connection with this presentation document) does not constitute an offer or solicitation to hold, sell or invest in any security and should
Slide 3: Agenda
Agenda Group Financial Operational Q&A highlights review review & outlook Rob Wood, James Brotherton, Rob Wood, Chief Executive Officer Chief Financial Officer Chief Executive Officer 3 Breedon Annual Results 2022 • March 2023
Slide 4: Highlights
Growth strategy delivers record results Full year results ahead of expectations Resilient end-markets Infrastructure, housebuilding and industrial end-markets are underpinned by long-term structural growth drivers Highlights Full cost recovery Dynamic pricing complemented by strategic hedging progra
Slide 5: Highlights: Progressing strategic priorities
Resilient growth platform Progressing strategic priorities Sustain Significant progress; SBTi commitment, TCFD compliance, highest ever rates of alternative fuel substitution, launched Breedon Balance Highlights Optimise Embedded self-help culture; £2m Cemex synergies delivered as planned, electroni
Slide 6: Financial review
Financial review James Brotherton, Chief Financial Officer 6 Breedon Annual Results 2022 • March 2023
Slide 7: 2022 Financial highlights
2022 Financial highlights Growth strategy delivers record earnings, higher returns and reduced leverage Revenue Underlying EBIT ROIC £1,396.3m +13% £155.0m 11.1% 10.8% +130bps Revenue Margin ROIC 2021: £1,232.5m growth 2021: £133.6m +30 bps 2021: 9.5% growth vs 2021 Free Cash Flow Net Debt Dividend
Slide 8: Revenue and EBIT bridges
Revenue and EBIT bridges Price driven growth and margin expansion REVENUE BRIDGE EBIT BRIDGE £ million £ million +13% +16% 248.6 248.6 33.4 1,396.3 (118.2) 1,232.5 1.0 155.0 133.6 (195.0) (33.2) 2021 Sales Volume M&A 2022 2021 Sales Costs Volume M&A 2022 Price & Mix price & Mix EBIT Margin10.8% EBIT
Slide 9: Significant input cost inflation
Significant input cost inflation Managed through layered hedging approach and dynamic pricing UK Electricity Bitumen Carbon 1800 250 1400 1600 1200 200 1400 1000 1200 150 1000 800 800 600 100 600 400 400 50 200 200 0 0 0 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021
Slide 10: Aggregates pricing outpaces inflation
Aggregates pricing outpaces inflation Asset base and local model provide a natural inflation hedge Breedon reserves Aggregates markets by source of supply in Great Britain, 1955-2022 and resources million tonnes Crushed rock 1bn tonnes 300 Sand and gravel 1.0 200 Recycled and secondary 100 0 Source:
Slide 11: Margin recovery: Underlying EBIT by division
Margin recovery Each division contributed to our record earnings performance Great Britain Ireland Cement Group £972.4m £226.2m £300.7m £1,396.3m Revenue 2022 972.4 2022 226.2 2022 300.7 2022 1,396.3 2021 845.2 2021 225.4 2021 245.6 2021 1,232.5 2020 602.8 2020 189.3 2020 197.2 2020 928.7 2019 597.9
Slide 12: 2022 Net Debt and cash flow
2022 Net Debt and cash flow Further deleveraging £ million Inflow Outflow Free Cash Flow +£68.7 million 235.0 £0 (33.3) (9.0) (25.8) (102.0) 3.8 (15.1) (148.4) (30.5) (8.3) (197.7) 49.3 (212.5) Opening Underlying Working Interest Tax Net capital Other Acquisitions Dividends Other Closing IFRS 16 Clo
Slide 13: 2023 technical guidance
2023 technical guidance Income statement Cash flow • Net interest expense c.£15m • Cash interest c.£9m • Effective tax rate c.20.0% • Working capital outflow c.£20m • Cash tax payments higher than effective rate • Capital expenditure c.£90m • Dividends FY23 cash outflow c.£35m 13 Breedon Annual Resu
Slide 14: Balanced financial framework delivering
Balanced financial framework delivering Driving increased return on invested capital Increasing ROIC Proactive Meeting strategic Excess capital through thoughtful investment objectives distributed capital allocation Replenished reserves and ORGANIC Profitable EBIT 2022 cash resources growth +16% div
Slide 15: Delivering our strategy
Delivering our strategy Material progress towards our strategic goals Growth Profitability Cash flow Financial Returns Dividend discipline Outperform EBIT margin FCF conversion Covenant Leverage Targets ROIC >10% Payout ratio 40% our markets 12% - 15% >50% 1x – 2x 11% organic Progressed to 29% after
Slide 16: Operational review
Operational review Rob Wood, Chief Executive Officer 16 Breedon Annual Results 2022 • March 2023
Slide 17: UK market; areas of growth
UK market; areas of growth Infrastructure and industrial demonstrate resilience UK GDP; growth slowing but ahead of expectations GB Construction output index New Housing Infrastructure Industrial • UK GDP +4.1% in 2022, flat in Q4 Commercial All Work • Slowing growth reflects inflation headwinds 140
Slide 18: RoI market; positive demand
RoI market; positive demand Breedon markets towards pre-Covid level RoI Construction output index Total Construction Building (excl. civil engineering) RoI’s Modified Domestic Demand remains robust Civil Engineering Non-res building Residential building • Growth strong but slowing; MDD +7.7% in 2022
Slide 19: Great Britain
Great Britain Successful growth and cost recovery Outstanding trading performance • Extensive network, local market knowledge and entrepreneurial culture delivered organic revenue growth and margin expansion Aggregates Asphalt Concrete Million tonnes Million tonnes Million m³ Volumes normalised in l
Slide 20: Ireland
Ireland Winning high-quality new work Resilient performance and full cost-recovery • Volumes at the half year reflected the absence of the governing Assembly in NI and tendering delays in RoI Aggregates Asphalt Concrete • Tendering in RoI accelerated noticeably in the second half Million tonnes Mill
Slide 21: Cement
Cement Most successful year on record Strong trading outcome • Volumes softened; lower concrete volumes, reduced imports • Revenue +22%; dynamic pricing and robust demand Cement Million tonnes • Full cost recovery; hedging provided near-term cost visibility Maximising plant performance (9)% 2.4 • Co
Slide 22: Outlook and summary
Outlook and summary Rob Wood, Chief Executive Officer 22 Breedon Annual Results 2022 • March 2023
Slide 23: Enter 2023 in a strong position
Enter 2023 in a strong position Significant strategic optionality Strategic optionality Economic uncertainty Robust balance sheet. Financial UK forecasts indicate shallow flexibility. Thoughtful capital allocation recession, falling construction output Outlook and Summary Active M&A pipeline Remain
Slide 24: Q&A
Q&A Breedon Annual Results 2022
Slide 25: Appendix
Appendix Breedon Annual Results 2022 25 Breedon Annual Results 2022 • March 2023
Slide 26: Our track record: Financial KPIs
Our track record Financial KPIs Revenue Underlying Adjusted Underlying Dividend per share £m EBIT Margin Basic EPS £ pence £ % pence 2022 1,396.3 2022 11.1 2022 7.08 2022 2.1 2021 1,232.5 2021 10.8 2021 5.98 2021 1.6 2020 928.7 2020 8.2 2020 3.15 2020 2019 929.6 2019 12.5 2019 5.08 2019 2018 862.7 2
Slide 27: Our track record: Non-financial KPIs
Our track record Non-financial KPIs Employee LTIFR Employee TIFR Reserves Emissions intensity – per million per million and resources Revenue hours worked hours worked billion tonnes kgCO2e per £ revenue 2022 2.10 2022 14.59 2022 1.0 2022 1.3 2021 2.19 2021 15.57 2021 1.0 2021 1.6 2020 1.95 2020 15.
Slide 28: 2022 Income Statement
2022 Income Statement £ million 2022 2021 Revenue 1,396.3 1,232.5 Underlying EBITDA 235.0 214.0 Depletion & depreciation (83.5) (83.3) Share of associate and joint ventures 3.5 2.9 Underlying EBIT 155.0 133.6 Net interest (12.2) (13.1) Non-underlying items (7.0) (6.2) Profit before tax 135.8 114.3 T
Slide 29: 2022 Balance Sheet
2022 Balance Sheet £ million 2022 2021 Property, plant and equipment 835.0 799.5 Intangible assets 518.2 501.5 Investment in associate and joint ventures 13.7 12.2 Inventories 94.8 62.0 Trade and other receivables 222.4 210.4 Total assets (excluding cash) 1,684.1 1,585.6 Trade and other payables (26
Slide 30: 2022 Free cash flow
2022 Free cash flow £ million 2022 2021 Underlying EBITDA 235.0 214.0 Working capital and provisions (33.3) 2.8 Net interest paid (9.0) (9.4) Income taxes paid (25.8) (13.6) Net capex (102.0) (71.3) Other 3.8 4.8 Free cash flow 68.7 127.3 Acquisition of businesses (15.1) (6.1) Dividends paid (30.5)
Slide 31: Disciplined cost management
Disciplined cost management Full cost recovery enabled by dynamic pricing and hedging strategy 35% - materials & other direct costs 20% - Other • Includes imported cement, bitumen, • Depreciation subcontractor and direct mineral costs • Repairs & maintenance • Cost increases in 2022 significantly ab
Slide 32: Financing Breedon's future
Financing Breedon’s future Diversified sources of finance at low interest rates Debt finance positioned to Debt Maturity profile support future growth £m Long term debt funding £m £350 million unsecured RCF 600 600 £250 million US Private Placement RCF 1.75% +SONIA at <1x Leverage 500 500 USPP avera
Slide 33: MPA volumes
MPA volumes MPA Aggregates volumes (million tonnes) (40)% 170 150 130 110 15% 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 MPA Asphalt volumes (million tonnes) 31 (36)% 26 21 16% 16 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 34: Track record of sustainable growth
Track record of sustainable growth Six bolt-on CEMEX Breedon transactions Hope Lagan UK assets 2011* 2012* 2013* 2014 2015 2016 2017 2018 2019 2020 2021 2022 UK 87% Rol 13% £169m Revenue CAGR 21% £1,396m £6m Underlying EBIT CAGR 34% £155m Covenant 5.6 Leverage times Infrastructure c.50% 3.6 1.9 Hous
Slide 35: National reach
National reach More than 320 sites across two platforms 2022 35 Breedon Annual Results 2022 • March 2023
Slide 36: We are making a material difference
We are making a material difference Our Purpose Our Vision To make a material difference to the lives of To be a leading vertically-integrated our colleagues customers and communities international construction materials group Our Values To adopt clear authentic behaviours to ensure long-term succes