Breedon Group Plc · LSE:BREE
Breedon — FY2021 Earnings Presentation
43 slides from Breedon's earnings presentation, Mar 9, 2022
Slide 1: Breedon Group plc Annual Results 2021
BREEDON GROUP PLC ANNUAL RESULTS 2021 9 MARCH 2022
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 2021 • March 2022
Slide 4: Highlights
Record volumes, revenue and earnings Outstanding delivery Robust demand Maiden dividend Built on the recovery that began in Progressive dividend policy introduced the second half of 2020 Highlights Cost headwinds mitigated Operating Sustainably Dynamic pricing, progressive hedging Accelerated our su
Slide 5: Financial Review
FINANCIAL REVIEW JAMES BROTHERTON, CHIEF FINANCIAL OFFICER 5 Breedon Annual Results 2021 • March 2022
Slide 6: 2021 Financial Highlights
2021 Financial Highlights Record performance balanced across key metrics Revenue Underlying EBIT ROIC £1,232.5m +33% £133.6m 10.8% 9.5% +4.0ppt Revenue Margin 2020: £928.7m growth 2020: £76.5m 2020: 8.2% 2020: 5.5% Free Cash Flow Net Debt Dividend excluding IFRS 16 per share £127.3m 59% £161.5m 0.8x
Slide 7: Strong like-for-like growth
Strong like-for-like growth Positive progression in underlying trading Revenue progression LFL vs 2019 (£m) vs same half in previous year LFL Revenue growth 2021 Increase Decrease +21% +15% vs 2019 vs 2020 Underlying EBIT progression LFL vs 2019 (£m) Margin % LFL Underlying EBIT growth 2021 +66% 12.
Slide 8: Input cost pressures
Input cost pressures Focus on cost recovery and adding value UK Electricity Bitumen Carbon 900 180 1400 800 1200 160 700 1000 600 140 500 800 120 400 600 300 100 400 200 80 200 100 0 60 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Source: Bloomberg. Note: Charts based
Slide 9: Margin recovery
Margin recovery Margins strengthening back towards 2019 levels Group Great Britain 10.0% 10.3% 8.8% 150 12.0% 12.5% 10.8% 90 11% 130 EBIT margin (%) EBIT margin (%) 12% 70 9% 110 8.2% 5.6% EBIT (£m) EBIT (£m) 90 7% 7% 50 70 133.6 74.3 5% 50 103.5 116.6 30 59.9 61.7 76.5 3% 30 2% 33.5 10 1% 10 -10 -3
Slide 10: Aggregates pricing outpaces inflation
Aggregates pricing outpaces inflation Asset base and local model provide a natural inflation hedge Reserves and resources Aggregates prices outpace inflation over time 1bn Tonnes 200 180 Aggregates Pricing* 160 140 UK CPI Index 120 100 80 2015 2016 2017 2018 2019 2020 2021 2007 2008 2009 2010 2011 2
Slide 11: 2021 Net Debt and Cash Flow
2021 Net Debt and Cash Flow Strong trading drives rapid deleveraging £ million 0 Free Cash Flow +£127.3 million 2.8 (9.4) (13.6) (161.5) (71.3) 4.8 (212.5) 51.0 (6.1) (8.4) (7.0) (241.9) (161.5) (291.5) (212.5) (318.3) 214.0 Opening Underlying Net capital Other Acquisitions Dividends Impact of Closi
Slide 12: Balanced financial framework delivering
Balanced financial framework delivering Driving increased return on invested capital Increasing return on Proactive Meeting strategic Excess capital capital through investment objectives distributed strategic deployment Replenish and extend ORGANIC Profitable EBIT Dividend reserves and resources gro
Slide 13: Technical guidance 2022
Technical guidance 2022 Income statement Cashflow • On track to realise £2m Cemex synergies • Working capital outflow c.£10m - £20m • Net interest expense c.£13m • Capital expenditure £170m over two years to 2022 • Effective tax rate c.16% • Cash cost of final dividend £18m • Cash tax slightly lower
Slide 14: Delivering our strategy
Delivering our strategy Material progress on all metrics Growth Profitability Cash Flow Financial Returns Dividend Discipline Outperform EBIT margin >50% Targets Covenant Leverage ROIC >10% Payout ratio 40% our markets 12% - 15% FCF conversion 1x – 2x 21% organic Recovered to 59% after Reduced rapid
Slide 15: Operational Review
OPERATIONAL REVIEW ROB WOOD, CHIEF EXECUTIVE OFFICER 15 Breedon Annual Results 2021 • March 2022
Slide 16: UK market; strong demand
UK market; strong demand Strong bounce back to surpass pre-pandemic levels Total construction output (£bn) UK GDP growth rebounded ahead of initial expectations • UK GDP increased 7.5% in 2021, following a 9.4% fall in 2020 18 UK construction output increased by a record 12.7% in 2021 16 • Growth dr
Slide 17: ROI market; recovery gaining traction
ROI market; recovery gaining traction Growth accelerating as pandemic restrictions fade Total construction output index RoI’s Modified Domestic Demand • Growth estimated at 5.5% in 2021 180 RoI construction returned to growth 170 • Restrictions to non-essential construction impacted Q1 160 • Activit
Slide 18: Great Britain
Great Britain Strong recovery, dynamic pricing Strong year-on-year performance • Demand recovered during the year Aggregates Asphalt Concrete Million tonnes Million tonnes Million m³ Robust market conditions +46% +58% +10% • Leading to material volume growth and price increases 25.7 3.0 3.0 2.8 Miti
Slide 19: Ireland
Ireland Bounce back from early restrictions Strong recovery • Ireland bounced back from early restrictions to non- Aggregates Asphalt Concrete essential construction activity in Q1 Million tonnes Million tonnes Million m³ +37% -1% +1% Tendering activity increased • Resilient bedrock of public author
Slide 20: Cement
Cement World class plant performance Elevated demand • Structural growth drivers and pandemic-related disruption Cement Million tonnes • Conditions in place for strong demand +19% World class plant performance • Hope achieved world class reliability for the third 2.4 consecutive year 2.0 2.0 • Kinne
Slide 21: Delivering the next chapter sustainably
Delivering the next chapter sustainably Our strategy has evolved Optimise Sustain Financial Framework Expand Creating sustainable value for all of our stakeholders over the long-term 21 Breedon Annual Results 2021 • March 2022
Slide 22: Sustain: Delivering our strategy
Sustain: Delivering our strategy Enhanced disclosure and transparency Pillar PLANET PEOPLE PLACES 30% reduction in gross carbon 50% of our concrete and asphalt sales Target 2030 Positively impact more than intensity per tonne cementitious revenue in 2030 will be from products 100,000 people by 2030
Slide 23: Optimise: Continuous improvement
Optimise: Continuous improvement Driving efficiency, increasing utilisation Hyndford quarry in Scotland • Reactivated dormant assets • New blends utilised secondary aggregate by-products to meet local demand • Replaced leased plant and trucks with modified conveyor belts • Improved efficiency and sa
Slide 24: Optimise: Continuous improvement
Optimise: Continuous improvement Driving sustainability benefits Llandudno junction • New railhead opened • Enables transport of Welsh Slate by-product to new markets • Extends our GB and Cement rail network reach Mansfield asphalt plant • New asphalt plant approved • Offers roughly 33% greater outp
Slide 25: Expand: Growth optionality
Expand: Growth optionality Multiple capital deployment options Organic • Accelerated growth-focused capital investment programme • Focus on replenishing mineral reserves and resources • Growing downstream surfacing activities M&A • Express Minimix extended reach and capability • Pipeline of bolt-on
Slide 26: Outlook and Summary
OUTLOOK AND SUMMARY ROB WOOD, CHIEF EXECUTIVE OFFICER 26 Breedon Annual Results 2021 • March 2022
Slide 27: Market outlook
Market outlook Positive prospects in the UK and RoI UK Construction output growth forecast 2022 MPA UK product outlook Aggregates Asphalt 10% 20% 9.7% Concrete 8% 15% 16% 6% 6.7% 14% 10% 12% 4% 4.3% 2% 3.0% 5% 1.9% 4% 3% 3% 3% 3% 3% 0% 0% Housing Infrastructure I&C RMI Total 2021 2022 2023 Construct
Slide 28: Summary
A year to be proud of Strong position to move forward from Summary Positive Encouraging Growing outlook enquiries confidence Underpinned by UK and Healthy order levels Pandemic related Irish Governments’ disruption fading spending plans Positioned to deliver profitable sustainable and cash generativ
Slide 29: Q&A
Q&A BREEDON ANNUAL RESULTS 2021 29 Breedon Annual Results 2021 • March 2022
Slide 30: Appendix
APPENDIX BREEDON ANNUAL RESULTS 2021 30 Breedon Annual Results 2021 • March 2022
Slide 31: 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 Our Strategy To adopt clear authentic behaviours To create sus
Slide 32: Our track record
Our track record Financial KPIs Revenue Underlying EBIT Margin Adjusted Underlying Basic EPS £m % pence £ 2021 1,232.5 2021 10.8 2021 5.98 2020 928.7 2020 8.2 2020 3.15 2019 929.6 2019 12.5 2019 5.08 2018 862.7 2018 12.0 2018 4.70 2017 652.4 2017 12.3 2017 4.14 Covenant Leverage Return on Invested C
Slide 33: Our track record
Our track record Non-financial KPIs Employee LTIFR Employee TIFR per million hours worked per million hours worked 2021 2.19 2021 15.57 2020 1.95 2020 15.42 2019 1.05 2019 17.17 2018 1.81 2018 20.54 2017 1.41 2017 14.28 Reserves and resources Emission intensity billion tonnes kgCO2 per £/revenue 202
Slide 34: Divisional performance
Divisional performance Strong revenue growth across all divisions Great Britain Ireland Cement Group £845.2m +15% LFL vs 2019 £225.4m +12% LFL vs 2019 £245.6m +15% LFL vs 2019 £1,232.5m +15% LFL vs 2019 Revenue 2021 845.2 2021 225.4 2021 245.6 2021 1232.5 2020 602.8 2020 189.3 2020 197.2 2020 928.7
Slide 35: Track record of balanced growth
Track record of balanced growth M&A complemented by organic growth Underlying EBIT components 2017-2021 (£m) Prior year underling EBIT Organic Acquisitions 2017 2018 2019 2020 2021 35 Breedon Annual Results 2021 • March 2022
Slide 36: Expand: Growing downstream activities
Expand: Growing downstream activities Growing surfacing solutions drives cumulative margin benefits Surfacing pulls-through high margin products Aggregates Asphalt Surfacing £ £ £ £ £ £ £ 36 Breedon Annual Results 2021 • March 2022
Slide 37: Financing Breedon's Future
Financing Breedon’s Future Diversified sources of finance at low interest rates Debt finance positioned to support future growth 700 RCF USPP31 Accordion USPP33 600 USPP28 USPP36 500 Cash Available 400 liquidity £434m 300 2021 Refinancing £350 million unsecured RCF 200 £250 million US Private Placem
Slide 38: 2021 Income Statement
2021 Income Statement £ million 2021 2020 Revenue 1,232.5 928.7 Underlying EBITDA 214.0 149.2 Depletion & depreciation (83.3) (74.4) Underlying operating profit 130.7 74.8 Share of associate and joint ventures 2.9 1.7 Underlying EBIT 133.6 76.5 Interest (13.1) (13.5) Non-underlying items (6.2) (14.9
Slide 39: 2021 Balance Sheet
2021 Balance Sheet £ million 2021 2020* Property, plant and equipment 799.5 812.2 Intangible assets 501.5 512.6 Investment in associate and joint ventures 12.2 11.2 Inventories 62.0 59.4 Trade and other receivables 210.4 192.9 Current tax receivable 0.9 Total assets (excluding cash) 1,585.6 1,589.2
Slide 40: 2021 Cash Flow
2021 Cash Flow £ million 2021 2020 Underlying EBITDA 214.0 149.2 Working capital and provisions 2.8 56.0 Interest paid (9.4) (10.3) Income taxes paid (13.6) (20.7) Other 0.3 (5.8) Net cash from operating activities 194.1 168.4 (Acquisition)/divestment of businesses (6.1) (142.7) Net capex (71.3) (36
Slide 41: MPA volumes
MPA volumes MPA Aggregates volumes (million tonnes) (40)% 170 150 130 110 22% 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 MPA Asphalt volumes (million tonnes) 31 (36)% 26 21 22% 16 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Slide 42: Supplying Long-Term Growth Markets
Supplying Long-Term Growth Markets Broad Government support for construction in the UK and Ireland IRELAND UK National Infrastructure and National Development Plan Construction Pipeline Investment package of Nearly €165bn 2021-2030 £650bn investment roadmap to 2030 Source: UK Government HM Treasury
Slide 43: Market consensus
Market consensus Company compiled March 2022 2021 2022 Average Range Average Range Revenue £1,219m £1,198m - £1,242m £1,278m £1,245m - £1,316m Underlying EBIT £132.9m £131m - £135m £142.2m £137m - £152m £ Underlying basic 4.9p 4.7p - 5.7p 6.2p 5.7p - 6.7p earnings per share Net debt £258m £250m - £2