Breedon delivered a strong performance in the 10 months to 31 October 2019, with increased revenues, improved underlying EBIT and continuing robust cash generation, including a 10-month contribution from the former Lagan Group (“Lagan”), acquired in April 2018.
These results were achieved against the backdrop of a flat construction market in Great Britain (“GB”), where lower industry sales volumes were recorded for all major heavyside construction materials in the nine months to 30 September 2019.
Group sales volumes of aggregates increased by four per cent, asphalt by eight per cent and cement by six per cent, while ready-mixed concrete volumes declined by five per cent. As a result, Group revenues grew by eight per cent to approximately £800 million.
The integration of Lagan is now largely complete and we remain confident of delivering the anticipated annual cost synergies. Roadway Civil Engineering & Surfacing Ltd, acquired on 1 October, is performing as expected.
Assuming no materially adverse weather conditions for the remainder of the year, the Group’s Underlying EBIT for the full year is expected to be in line with current market expectations1.
Breedon continues to be a well-invested business, with capital expenditure maintained in line with depreciation, which is enabling us to continue to enhance our operational performance and improve our productivity. Our cash generation is allowing us not only to maintain this high level of investment, but also quickly to pay down our borrowings, and we expect year-end leverage to fall further to approximately 1.5 times underlying EBITDA on a pre-IFRS 16 basis.
Looking ahead, while the upcoming General Election and ongoing Brexit negotiations create near-term uncertainty, the longer-term outlook for our markets remains encouraging with forecasters expecting GB construction to grow modestly in 2020 whilst Ireland is expected to see further double digit growth. Furthermore, we have consistently proved that we can produce superior results irrespective of market conditions. Our focus on driving organic improvement, together with a healthy acquisition pipeline, gives us confidence that we will make further progress in 2020.