Following the conclusion of the Competition & Markets Authority's (CMA) review, Breedon Aggregates expect to complete the acquisition of Hope Construction Materials Limited (Hope) on 1 August 2016 (subject to final clearance from the CMA).
On completion, the enlarged group will be renamed Breedon Group plc, subject to approval by its shareholders at an Extraordinary General Meeting on 21 July 2016. The trading name of the enlarged group will simultaneously change from ‘Breedon Aggregates’ to ‘Breedon’, which will give greater flexibility with the company's broadening product portfolio.
“The strategic rationale of the acquisition of Hope remains compelling and it will present new opportunities to deliver self-help improvements. It will also give us an even stronger platform for growth through a broader geographical footprint, increased scale, improved product mix, greater financial capacity and some highly talented people", said Peter Tom CBE, Breedon Aggregates executive chairman.
"We fully intend to use this strengthened platform to continue to pursue our strategy of consolidating the UK building materials market. Indeed, we believe that market uncertainty may create further opportunities for value-creating acquisitions and we are currently considering a number of potential bolt-ons."
All the Hope quarries, ready-mixed concrete plants and associated plant and vehicles will be rebranded ‘Breedon’ as soon as possible after completion. However, the ‘Hope’ name will be retained for the cement plant and cementitious assets. A new visual identity for the group will be launched to coincide with completion of the acquisition.
The enlarged group will comprise three divisions:
• Breedon Northern will combine Breedon’s Scottish operations with Hope’s aggregates and ready-mixed concrete operations in Scotland and the north of England
• Breedon Southern will combine Breedon’s operations in England and Wales with Hope’s remaining aggregates and ready-mixed concrete operations
• Hope Cement will comprise all of Hope’s cementitious assets.
1H16 results
Breedon Aggregates’ Group revenue for the half-year of GBP163m was two per cent ahead of the comparable period in 2015. A total of 4.6Mt of aggregates were sold in the period (1H15: 4.5Mt), 0.5Mm3 of ready-mix (1H15: 0.4Mm3) and 0.9Mt of asphalt (1H15: 0.9Mt).
Underlying earnings before interest and tax (EBIT) increased by 21 per cent to GBP22.8m (1H15: GBP18.9m) and the underlying EBIT margin increased to 14 per cent (1H15: 11.8 per cent).
First-half underlying earnings before the share of associate and joint venture, interest, tax, depreciation and amortisation (EBITDA) of GBP31.4m was well ahead of the comparable period (1H15: GBP27.3m).
Net assets at 30 June 2016 were GBP251.2m, compared to GBP233.2m at 31 December 2015 and GBP181.7m at 30 June 2015.
Cash generated from operating activities was GBP21.9m, after an increase in working capital of GBP9.4m as a result of the increased trading performance and the seasonal requirements of the business. Group capital expenditure totalled GBP11.7m, of which GBP6m was spent in cash, with the balance funded by way of finance leases.
The group received GBP0.9m from asset disposals and repaid GBP3.7m of finance leases. The net cash inflow for the period was GBP9.5m and the group had net cash at 30 June 2016 of GBP17.6m, compared to net cash of GBP10.3m at 31 December 2015 (reflecting the net GBP39.1m inflow from the issue of shares in November 2015) and net debt of GBP58.3m at 30 June 2015.
The consideration payable for Hope will be satisfied by the payment of GBP202m in cash and the issue of 259,120,245 new shares (valued at GBP134m at the time of the announcement of the acquisition). The cash consideration will be primarily financed by drawing down on Breedon's new GBP300m revolving credit facility.
