Breedon Group PLC · LSE:BREE
Breedon — FY2023 Earnings Presentation
48 slides from Breedon's earnings presentation, Mar 6, 2024
Slide 1: Breedon Group plc Annual Results 2023
Breedon Group plc Annual Results 2023 6 March 2024
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 Acquisition of Summary and Q&A highlights review review BMC Outlook Rob Wood, James Brotherton, Rob Wood Rob Wood Rob Wood Chief Executive Chief Financial James Brotherton Officer Officer 3 Breedon Annual Results 2023 • March 2024
Slide 4: Highlights
Record revenue and Underlying EBIT Full year results ahead of upgraded expectations Resilient end-markets Long-term structural growth drivers remain in place providing supportive backdrop to mitigate short-term headwinds Highlights Managing factors within our control Disciplined focus on carefully m
Slide 5: Highlights: Sustainable asset-backed growth model
Sustainable asset-backed growth model Sustainability framework delivers tangible progress Sustain Tangible progress; safety outcomes improved, targets submitted to SBTi, CDP rating awarded, carbon emissions reduced, Peak Cluster launched Highlights Optimise Excellence programmes launched; site optim
Slide 6: Financial review
Financial review 6 Breedon Annual Results 2023 • March 2024
Slide 7: 2023 Financial Highlights
2023 Financial Highlights Record underlying EBIT and increased dividend payout Revenue Underlying EBIT ROIC £1,488m +7% £156.2m 10.5% 9.9% 20% Revenue Margin Effective 2022: £1,396m growth 2022: £155.0m 2022: 11.1% 2022: 10.8% Tax Rate 2022: 16% Free Cash Flow Net Debt Dividend per share £94.8m 39%
Slide 8: Revenue and EBIT bridges
Revenue and EBIT bridges Price tailwinds and M&A offset lower volumes REVENUE BRIDGE EBIT BRIDGE £ million £ million +7% +1% 125.7 125.7 39.1 1,487.5 1,396.3 (73.6) 155.0 2.7 156.2 (102.1) (25.1) 2022 Sales Volume M&A 2023 2022 Sales Costs Volume M&A 2023 Price & Mix price & Mix EBIT Margin10.8% EBI
Slide 9: Divisional contribution
Divisional contribution All divisions contributed to 2023 performance Great Britain Ireland Cement Group £1,033.8m £235.5m £331.2m £1,487.5m Revenue 2023 1,033.8 2023 235.5 2023 331.2 2023 1,487.5 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
Slide 10: 2023 Net debt and cash flow
2023 Net debt and cash flow Further deleveraging alongside continued investment Inflow Outflow £ million Free Cash Flow +£94.8 million 242.3 (8.5) (6.5) £0 (32.5) 3.4 (103.4) (19.9) (121.9) (37.6) (9.5) (169.9) 48.0 (197.7) Opening Underlying Working Interest Tax Net capital Other Acquisitions Divid
Slide 11: Delivering our strategy
Delivering our strategy Further 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 Outcomes Note: FCF conversion: Free
Slide 12: Operational review
Operational review 12 Breedon Annual Results 2023 • March 2024
Slide 13: UK market; finding a floor
UK market; finding a floor Construction activity to stabilise from lower levels UK GDP; weak but resilient UK Construction forecast Residential Infrastructure Industrial • UK GDP +0.1% in 2023 Commercial All Work • In technical recession in the second half 150 UK construction market softened in 2023
Slide 14: RoI market; soft landing
RoI market; soft landing Construction activity normalising RoI construction forecast Total Construction Building (excl. civil engineering) Modified Domestic Demand stablising Civil Engineering Non-res building Residential building • Estimated MDD growth 2.2% 150 • Growth forecast to reaccelerate 140
Slide 15: Great Britain
Great Britain Solid performance in softening markets Solid performance • Successfully navigated challenging market conditions to grow revenue and maintain earnings Aggregates Asphalt Concrete Million tonnes Million tonnes Million m³ Volumes moderated, pricing remained robust (3)% (3)% • Volumes refl
Slide 16: Ireland
Ireland Robust performance in mixed markets Delivered high-quality service to loyal customers • Market conditions varied by region • Absence of governing Assembly limited tenders coming to Aggregates Asphalt Concrete market Million tonnes Million tonnes Million m³ • Activity and tendering remained r
Slide 17: Cement
Cement Prominent operator, well positioned Resilient growth • Revenue +10%; strong pricing offset reduced volumes • Volumes impacted by GB housebuilding Cement Million tonnes Exceptional reliability • Rigorous plant maintenance completed on time and to (4)% budget 2.4 2.2 2.1 • Hope kiln reliability
Slide 18: $300m Acquisition of BMC Enterprises inc.
$300m Acquisition of BMC Enterprises inc. 18 Breedon Annual Results 2023 • March 2024
Slide 19: Earnings enhancing US entry
Earnings enhancing US entry Strategic highlights • Leading US regional ready-mixed concrete, aggregates and building products business • Headquartered in St Louis, Missouri • Strong track record of organic and transaction-led growth • Well-regarded management team, remaining with the business • Cult
Slide 20: Evaluating a third platform
Evaluating a third platform What we said Market with long-term growth prospects A robust legal system Confidence in replicating the A reliable planning regime Breedon model in a A benign local culture third platform With minimal political risk 20 Breedon Annual Results 2023 • March 2024
Slide 21: The US opportunity
The US opportunity High relative growth and highly fragmented Construction Starts (US) $ volume growth; 2023A-2026E CAGR US 6.3% US market remains Total Construction Output (Europe) Real growth; 2023E-2026E CAGR highly fragmented Ireland 3.1% Norway 3.1% Switzerland 2.2% Top 10 comprising UK 1.6% gl
Slide 22: BMC at a glance
BMC at a glance The beachhead for our US platform Ready-mixed concrete 2023 m3: c.740k Number of Plants: 44 St Louis Aggregates 2023 tonnes: c.2.8m Number of Locations: 12 > 400m tonnes reserves and resources 50% Residential 76% Ready-mixed concrete Building products Sales mix Markets 25% Non-reside
Slide 23: Strong growth track record
Strong growth track record A familiar profile 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 $56.4m Revenue CAGR* 12% $178.9m $4.8m Adjusted EBITDA CAGR* 22% $35.5m Note: Strafe financials are unaudited and have been prepared under US GAAP. * CAGR: Compound Annual Growth Rate 2013-2023 23 Br
Slide 24: The BMC team
The BMC team Experienced Management who have grown the business Andy Arnold John Crumrine Mark Jacobs CEO Designate CFO GC and CHRO 29 years of concrete and Experienced CFO Qualified Lawyer and aggregates experience experienced CHRO Previously with Previously with Holcim Sensient Technologies Previo
Slide 25: North-West Central construction market
North-West Central construction market Regional growth outpacing the broad US growth rate North-West Central Construction Put-in-Place ($ in Billions) Grey bars denote recessions, Blue bars denote forecast $100 $80 Residential The North-West Central region $60 Regional growth $40 Non-residential out
Slide 26: Acquisition of BMC
Acquisition of BMC Meeting Breedon’s transaction returns criteria Financial performance EBITDA Margin % Sales Transaction Highlights • Enterprise Value - $300m • Cash Consideration - $285m $m $120.1 $151.5 $178.9 % • Share Consideration - $15m (held for at least 1 year) 40 • Customary adjustments an
Slide 27: Acquisition of BMC: 2024 Technical Guidance
Acquisition of BMC 2024 Technical Guidance BMC Guidance Group Guidance • Consolidated for 10 months of 2024 • Capital Expenditure £130m - £140m • Transaction costs c.$15m (non-underlying) • Working Capital £20m - £30m • Integration costs $2 - 5m (non-underlying) • Interest Charge £25m - £30m • Opex
Slide 28: Summary and Outlook
Summary and Outlook 28 Breedon Annual Results 2023 • March 2024
Slide 29: Enter 2024 in a strong position
Enter 2024 in a strong position Well-established model and growth strategy Welcome political clarity Well-positioned to respond Reinstatement of governing Deliberate pricing and forward Assembly in Northern Ireland hedging strategies Outlook and Summary Economic contributor Supportive end-markets Co
Slide 30: Q&A
Q&A Breedon Annual Results 2023
Slide 31: Appendix
Appendix Breedon Annual Results 2023 31 Breedon Annual Results 2023 • March 2024
Slide 32: Our track record: Financial KPIs
Our track record Financial KPIs Revenue Underlying Adjusted Underlying Dividend per share £million EBIT Margin Basic EPS £ pence £ % pence 2023 1,487.5 2023 10.5 2023 34.0 2023 13.5 2022 1,396.3 2022 11.1 2022 35.4 2022 10.5 2021 1,232.5 2021 10.8 2021 29.9 2021 8.0 2020 928.7 2020 8.2 2020 15.9 202
Slide 33: Our track record: Non-financial KPIs
Our track record Non-financial KPIs Combined LTIFR Combined TIFR Reserves Emissions intensity – per million per million and resources Revenue hours worked hours worked billion tonnes kgCO2e per £ revenue 2023 3.53 2023 16.99 2023 1.0 2023 1.1 2022 3.10 2022 17.23 2022 1.0 2022 1.3 2021 3.05 2021 19.
Slide 34: Balanced financial framework delivering
Balanced financial framework delivering Benefitting from strategic execution and operational focus Return on capital Proactive Meeting strategic Excess capital broadly in-line with investment objectives distributed medium-term target Replenished reserves and ORGANIC Record Underlying Dividend payout
Slide 35: 2023 Income Statement
2023 Income Statement £ million 2023 2022 Revenue 1,487.5 1,396.3 Underlying EBITDA 242.3 235.0 Depletion & depreciation (88.7) (83.5) Share of associate and joint ventures 2.6 3.5 Underlying EBIT 156.2 155.0 Net Interest (11.3) (12.2) Non-underlying items (10.5) (7.0) Profit before tax 134.4 135.8
Slide 36: 2023 Balance Sheet
2023 Balance Sheet £ million 2023 2022 Property, plant and equipment 817.2 787.9 Right-of-use assets 45.1 47.1 Intangible assets 520.2 518.2 Investment in associate and joint ventures 14.5 13.7 Inventories 120.1 94.8 Trade and other receivables 228.8 222.4 Total assets (excluding cash) 1,745.9 1,684
Slide 37: 2023 Free Cash Flow
2023 Free Cash Flow £ million 2023 2022 Underlying EBITDA 242.3 235.0 Working capital and provisions (8.5) (33.3) Net interest paid (6.5) (9.0) Income taxes paid (32.5) (25.8) Net capex (103.4) (102.0) Other 3.4 3.8 Free cash flow 94.8 68.7 Acquisition of businesses (19.9) (15.1) Dividends paid (37.
Slide 38: Impact of 5:1 share consolidation
Impact of 5:1 share consolidation Restated 2019 2020 2021 2022 2023 Adjusted Underlying Basic EPS 25.4p 15.9p 29.9p 35.4p 34.0p Underlying Basic EPS 25.4p 14.1p 24.8p 35.1p 33.8p Statutory Basic EPS 23.2p 10.0p 23.2p 33.2p 31.1p Underlying Diluted EPS 25.3p 14.1p 24.7p 35.0p 33.7p Statutory Diluted
Slide 39: Disciplined cost management
Disciplined cost management Flexible cost base supported by forward hedging programme 34% - materials & other direct costs 21% - Other • Includes imported cement, bitumen, • Depreciation subcontractor and direct mineral costs • Repairs & maintenance • Cost inflation moderated during 2023; successful
Slide 40: 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 Dec 23 RCF 1.75% +SONIA at <1x Leverage Pro Forma l
Slide 41: Moderating input cost inflation
Moderating 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 42: MPA volumes
MPA volumes MPA Aggregates volumes (million tonnes) (40)% 170 150 130 110 12% 90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 MPA Asphalt volumes (million tonnes) 31 (36)% 26 21 11% 16 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 43: 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, 1955-2023 and resources million tonnes Crushed rock 1bn tonnes 300 Sand and gravel 1.0 200 Recycled and secondary 100 0 Source:
Slide 44: Market consensus
Market consensus Company compiled - February 2024 2023 2024 Average Range Average Range Revenue £1,489m £1,470m - £1,501m £1,513m £1,460m - £1,553m Underlying EBIT £152m £145m - £156m £157m £151m - £163m £ Underlying basic 32.2p 31.3p - 33.1p 32.7p 31.3p – 34.0p earnings per share Net debt £176m £15
Slide 45: Track record of sustainable growth
Track record of sustainable growth Six bolt-on CEMEX Six bolt-on Breedon transactions Hope Lagan UK assets transactions 20111 20121 20131 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 UK 87% Rol 13% £169m Revenue CAGR2 20% £1,488m £6m Underlying EBIT3 CAGR 31% £156m Covenant Leverage 5.6 times I
Slide 46: Midwest infrastructure needs
Midwest infrastructure needs Substantial increase in Federal infrastructure spending Regional Infrastructure Investment Missouri and Jobs Act funding Illinois • $6.5B for federal-aid highway apportioned programs • $ 9.8B for federal-aid highway apportioned programs • $484M for bridge replacement and
Slide 47: Track record of value-added transactions
Track record of value-added transactions Leading regional business BMC expands into building products Key Business Events RMC, LLC develops a greenfield ready mix Key Company Acquisitions operation in Base Rock’s Fruitland, MO quarry Acquires Eureka BMC Enterprises, Inc. Materials acquires S&S Quarr
Slide 48: 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