Breedon

This stock is not currently held in the Woodford portfolios

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Commentary

Good interim results

Good interim results from Breedon today, with revenue +16%, earnings per share +7% and stable margins. Organic growth is perhaps slightly lighter than we may have anticipated, but this is largely the result of transitory factors and considerable strategic progress has been made. Four transactions were completed during the period, one of which – the acquisition of Lagan – is transformative for the group.

Unsurprisingly, Breedon was not immune to the weather-related disruption that has affected recent results for many of our construction-related investments (housebuilders, Forterra etc). Notably and positively, organic performance picked up to the +4% level in the May-July period which partially reflected ‘catch-up’ demand as weather normalised.

In terms of outlook, management was cautious on short-term trading in the UK (as many have been) but pointed to a positive mid/long run domestic environment. They were considerably more upbeat on the Irish market. All acquisitions and transactions announced have been completed, are performing in-line with expectations and the integration plans are underway.

Alex Correia
5 September 2018

Lagan Group acquisition

On 17 April 2018, Breedon announced the purchase of Lagan Group (a construction materials business based in Belfast) for £455m, on a cash and debt free basis. The deal is supported by a strong strategic rationale – it will provide Breedon with a platform to replicate internationally the company’s successfully executed consolidation approach in the UK. Additionally, the acquisition is expected to be highly accretive to Breedon’s underlying earnings per share, in the first full year following completion.

Alex Correia
19 April 2018

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