Earnings Release • Jul 21, 2016
Earnings Release
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RNS Number : 7868E
Breedon Aggregates Ld
21 July 2016
21 July 2016
("Breedon Aggregates" or "the Group")
Breedon Aggregates, the UK's largest independent aggregates business, announces its unaudited interim results for the six months ended 30 June 2016.
| 30 June 2016 | 30 June 2015 | Change | |
| Revenue | £163.0 million | £160.5 million | + 2% |
| Underlying EBIT† | £22.8 million | £18.9 million | + 21% |
| Profit before tax | £20.9 million | £17.5 million | + 19% |
| Underlying basic EPS† | 1.50 pence | 1.29 pence | + 16% |
| Net cash/(debt) | £17.6 million | (£58.3) million | +£75.9m |
4.6 million tonnes of aggregates sold (30 June 2015: 4.5 million tonnes)
0.9 million tonnes of asphalt sold (30 June 2015: 0.9 million tonnes)
0.5 million cubic metres of ready-mixed concrete sold (30 June 2015: 0.4 million cubic metres)
Highlights
· Excellent first-half operating performance, with strong contributions from both England and Scotland
· Underlying EBIT margin improved to 14.0%
· Strong earnings growth and cash generation
· As planned, significant increase in capital expenditure as investment continued in expanding capacity and improving operational efficiency
· Integration planning for acquisition of Hope Construction Materials Limited well advanced and completion of acquisition expected on 1 August (subject to final clearance from the CMA)
· Further bolt-on acquisitions under consideration
· We remain confident of meeting 2016 market expectations
Peter Tom CBE, Executive Chairman, commented:
"We delivered an excellent operating performance in the first half, with both our businesses making strong contributions, improving revenues and EBIT margins.
"Whatever the prognosis for the UK economy, we remain confident that we can continue to generate value for our shareholders. We have some major contracts which will help to underpin our performance during a period of uncertainty, along with a strong balance sheet and a record of strong cash generation in challenging markets. We have also demonstrated our ability to deliver a strong performance through determined self-help and we will maintain this discipline irrespective of market conditions.
"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. 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.
"Against this background we remain confident of meeting 2016 market expectations."
- ends -
The full text of the Group's interim statement is attached, together with detailed financial results.
The information contained within this announcement is deemed by the Group to constitute inside information under the Market Abuse Regulations (EU) No. 596/2014.
| Breedon Aggregates Limited | ### Tel: 01332 694010 |
| Peter Tom, Executive Chairman Pat Ward, Group Chief Executive Rob Wood, Group Finance Director |
|
| Stephen Jacobs, Head of Communications | Tel: 07831 764592 |
| Cenkos Securities plc (Nomad and joint broker) Max Hartley |
Tel: 020 7397 8900 |
| Peel Hunt LLP (Joint broker) | Tel: 020 7418 8900 |
| Justin Jones/ Mike Bell |
Note to Editors
Breedon Aggregates is the leading independent aggregates business in the UK after the four global majors. It operates more than 50 quarries, nearly 30 asphalt plants, over 60 ready-mixed concrete plants and three concrete block plants in England, Wales and Scotland and employs around 1,200 people. The Group has strong asset backing, with over 500 million tonnes of mineral reserves and resources in the UK. Breedon Aggregates' strategy is to grow through consolidation of the UK heavyside building materials sector.
In November 2015 Breedon announced its intention to acquire Hope Construction Materials Limited for £336 million. The acquisition is expected to complete on 1 August 2016 (subject to final clearance from the CMA), creating the UK's largest independent construction materials group, with the country's largest cement plant, around 60 quarries, nearly 30 asphalt plants, approaching 200 ready-mixed concrete plants, some 2,100 employees and approximately 750 million tonnes of mineral reserves and resources.
Group Results
Breedon Aggregates, the UK's largest independent aggregates business, today announces its unaudited results for the six months to 30 June 2016.
Group revenue for the half-year of £163.0 million was 2 per cent ahead of the comparable period in 2015. Underlying earnings before interest and tax ("EBIT") increased by 21 per cent to £22.8 million (30 June 2015: £18.9 million) and the underlying EBIT margin, our principal performance measure, increased to 14.0 per cent (30 June 2015: 11.8 per cent).
Financial Highlights
| Six months ended 30 June |
Six months ended 30 June |
||
| 2016 | 2015 | ||
| £m | £m | Variance | |
| Revenue | |||
| England | 86.0 | 84.1 | +2 % |
| Scotland | 77.0 | 76.4 | +1 % |
| Total | 163.0 | 160.5 | +2 % |
| Underlying EBIT | |||
| England | 15.9 | 12.6 | +26 % |
| Scotland | 10.0 | 9.0 | +12 % |
| Head Office | (3.5) | (3.0) | |
| Share of associate and joint venture | 0.4 | 0.3 | |
| Total | 22.8 | 18.9 | +21 % |
| Underlying EBIT margin | 14.0% | 11.8% |
Operating performance
The Group delivered an excellent operating performance in the first half, with both our businesses making strong contributions, improving revenues and EBIT margins despite a slow start to the year in Scotland, temporary delays to some major projects and the uncertainty leading up to, and since, the EU Referendum.
First-half underlying earnings before our share of associate and joint venture, interest, tax, depreciation and amortisation ("EBITDA") of £31.4 million was well ahead of the comparable period (30 June 2015: £27.3 million), driven by strong operational improvements and the benefit of lower hydrocarbon costs.
In Scotland, we won our largest-ever contract, valued at up to £55 million, in a joint venture with Whitemountain Quarries Limited to supply and lay asphalt on the £745 million Aberdeen Western Peripheral Route ("AWPR"). Despite being somewhat behind schedule, the AWPR is now drawing steady volumes from our business. We also began to supply dry stone, ready-mixed concrete and asphalt, under a £10 million contract with Wills Bros John Paul JV, to the £35 million first stage of the A9 dualling project. These two major projects have yet to peak and will ensure continuity of demand for our products over the next couple of years, underpinning our performance in Scotland.
In England, we supplied a number of high-profile projects, including Jaguar Land Rover's i54 development, the expansion of DHL's cargo hub at East Midlands Airport, Amazon's new distribution centre in Leicestershire, the Midland Metropolitan Hospital near Birmingham and the Worcester Southern By-pass.
This strong performance was delivered against subdued market conditions in which construction market demand for mineral products remained generally flat in the first quarter of the year compared with the final quarter of 2015. Compared with the first quarter of 2015, first-quarter market volumes increased for aggregates by 2% and for ready-mixed concrete by 3%, but asphalt fell by 9% due to a slowdown in renewals work.
Capital investment
As planned, capital expenditure increased significantly in the first half as we continued to invest in expanding our capacity and improving operational efficiency. In Scotland, we completed the commissioning of Daviot asphalt plant near Inverness and completed construction of a second new asphalt plant at Tom's Forest near Aberdeen.
In England, we completed a major upgrade of the crushing equipment at Cloud Hill in the East Midlands. A mothballed quarry was reopened at Denbigh to expand our presence in North Wales and we erected a new concrete plant in Tewkesbury to take further advantage of the markets of Gloucestershire and the Forest of Dean.
Safety of colleagues
Safety remains a priority for the Board and senior management and our efforts in the first half were focused on a reinvigorated programme of Visible Felt Leadership. Our senior executive team have committed to spend even more time in the field, encouraging greater engagement among our colleagues as we seek to develop a strong culture of safe behaviour and push towards our goal of Zero Harm.
Acquisition of Hope Construction Materials
Following the conclusion of the Competition & Markets Authority's review, we expect to complete the acquisition of Hope Construction Materials Limited ("Hope") on 1 August 2016 (subject to final clearance from the CMA). We have made excellent progress on integration planning since the end of last year and we are confident that we can deliver the synergies to which we have committed and extract maximum value from this transformational opportunity both commercially and operationally.
On completion, the enlarged Group will be renamed Breedon Group plc, subject to approval by our shareholders at an Extraordinary General Meeting later today. The trading name of the enlarged Group will simultaneously change from 'Breedon Aggregates' to 'Breedon', which will give us greater flexibility in view of our broadening product portfolio.
All the Hope quarries, ready-mixed concrete plants and associated plant and vehicles will be rebranded 'Breedon' as soon as possible after completion. We will, however, be retaining the 'Hope' name for the cement plant and cementitious assets.
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; and
· Hope Cement will comprise all of Hope's cementitious assets.
A new visual identity for the Group will be launched to coincide with completion of the acquisition.
Balance sheet and cash flow
Net assets at 30 June 2016 were £251.2 million, compared to £233.2 million at 31 December 2015 and £181.7 million at 30 June 2015.
Cash generated from operating activities was £21.9 million, after an increase in working capital of £9.4 million as a result of the increased trading performance and the seasonal requirements of the business. Group capital expenditure totalled £11.7 million, of which £6.0 million was spent in cash, with the balance funded by way of finance leases.
The Group received £0.9 million from asset disposals and repaid £3.7 million of finance leases. The net cash inflow for the period was £9.5 million and the Group had net cash at 30 June 2016 of £17.6 million, compared to net cash of £10.3 million at 31 December 2015 (reflecting the net £39.1 million inflow from the issue of shares in November 2015) and net debt of £58.3 million at 30 June 2015.
The consideration payable for Hope will be satisfied by the payment of £202 million in cash and the issue of 259,120,245 new shares (valued at £134 million at the time of the announcement of the acquisition). The cash consideration will be primarily financed by drawing down on our new £300 million revolving credit facility.
On completion of the Hope acquisition, we expect leverage (the ratio of net debt to pro forma EBITDA) to be less than 2 times and the Board expects the Group to remain strongly cash generative.
Outlook
Commentators have been quick to highlight the uncertainties created by the EU Referendum result. Direct evidence of the potential impact on the UK construction sector has been seen in the weakening share prices of a number of leading companies in the sector.
However, the need for investment in our infrastructure remains more urgent than ever and there are encouraging signs that the Government recognises this and is prepared to loosen fiscal policy to provide the necessary funding.
Over the past couple of years the MPA has consistently forecast modest annual growth in mineral product volumes for the next few years and, although we might see some softening in these expectations, there remains a good case to be made for continued volume growth.
Hydrocarbon costs have crept up in the first half of this year and should this trend continue there obviously may be some potential impact on margins. However, we have always sought to mitigate this impact through a strategic approach to purchasing.
Whatever the prognosis for the UK economy, we remain confident that we can continue to generate value for our shareholders. We have some major contracts which will help to underpin our performance during a period of uncertainty, along with a strong balance sheet and a record of strong cash generation in challenging markets. We have also demonstrated our ability to deliver a strong performance through determined self-help and we will maintain this discipline irrespective of market conditions.
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. 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.
Against this background we remain confident of meeting 2016 market expectations.
Finally, we would like to thank everyone at Breedon for their contributions to our results in the first half of the year. We look forward to working with them, along with all our new colleagues from Hope, to continue delivering the strong performance our shareholders expect from us.
Peter Tom CBE Pat Ward
Executive Chairman Group Chief Executive
| Six months ended 30 June 2016 | Six months ended 30 June 2015 | Year ended 31 December 2015 | |||||||||||||||
| Underlying | Non-underlying* (note 5) |
Total | Underlying | Non-underlying* (note 5) |
Total | Underlying | Non-underlying* (note 5) |
Total | |||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Revenue | 162,957 | - | 162,957 | 160,529 | - | 160,529 | 318,452 | - | 318,452 | ||||||||
| Cost of sales | (102,778) | - | (102,778) | (108,107) | - | (108,107) | (211,395) | - | (211,395) | ||||||||
| Gross profit | 60,179 | - | 60,179 | 52,422 | - | 52,422 | 107,057 | - | 107,057 | ||||||||
| Distribution expenses | (23,598) | - | (23,598) | (21,610) | - | (21,610) | (43,737) | - | (43,737) | ||||||||
| Administrative expenses | (14,174) | (788) | (14,962) | (12,260) | 44 | (12,216) | (26,266) | (3,754) | (30,020) | ||||||||
| Group operating profit | 22,407 | (788) | 21,619 | 18,552 | 44 | 18,596 | 37,054 | (3,754) | 33,300 | ||||||||
| Share of profit of associate and joint venture (net of tax) | 434 | - | 434 | 329 | - | 329 | 728 | - | 728 | ||||||||
| Profit from operations | 22,841 | (788) | 22,053 | 18,881 | 44 | 18,925 | 37,782 | (3,754) | 34,028 | ||||||||
| Financial income | 35 | - | 35 | 9 | - | 9 | 25 | - | 25 | ||||||||
| Financial expense | (1,231) | - | (1,231) | (1,467) | - | (1,467) | (2,776) | - | (2,776) | ||||||||
| Profit before taxation | 21,645 | (788) | 20,857 | 17,423 | 44 | 17,467 | 35,031 | (3,754) | 31,277 | ||||||||
| Taxation | (4,395) | 16 | (4,379) | (3,744) | (63) | (3,807) | (6,347) | 33 | (6,314) | ||||||||
| Profit for the period | 17,250 | (772) | 16,478 | 13,679 | (19) | 13,660 | 28,684 | (3,721) | 24,963 | ||||||||
| Attributable to: | |||||||||||||||||
| Equity holders of the parent | 17,234 | (772) | 16,462 | 13,645 | (19) | 13,626 | 28,629 | (3,721) | 24,908 | ||||||||
| Non-controlling interests | 16 | - | 16 | 34 | - | 34 | 55 | - | 55 | ||||||||
| Profit for the period | 17,250 | (772) | 16,478 | 13,679 | (19) | 13,660 | 28,684 | (3,721) | 24,963 | ||||||||
| Basic earnings per ordinary share | 1.50p | 1.43p | 1.29p | 1.28p | 2.68p | 2.33p | |||||||||||
| Diluted earnings per ordinary share | 1.45p | 1.38p | 1.25p | 1.24p | 2.59p | 2.25p | |||||||||||
* Non-underlying items represent acquisition related expenses, redundancy and reorganisation costs, property items, amortisation of acquisition intangibles and related tax items.
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Profit for the period | 16,478 | 13,660 | 24,963 |
| Other comprehensive income Items which may be reclassified subsequently to profit and loss: |
|||
| Effective portion of changes in fair value of cash flow hedges | (10) | 48 | 19 |
| Taxation on items taken directly to other comprehensive income | 1 | (10) | (4) |
| Other comprehensive income for the period | (9) | 38 | 15 |
| Total comprehensive income for the period | 16,469 | 13,698 | 24,978 |
| Total comprehensive income for the period is attributable to: | |||
| Equity holders of the parent | 16,453 | 13,664 | 24,923 |
| Non-controlling interests | 16 | 34 | 55 |
| 16,469 | 13,698 | 24,978 | |
| 30 June | 30 June | 31 December | |
| 2016 | 2015 | 2015 | |
| £'000 | £'000 | £'000 | |
| # Non-current assets | |||
| Property, plant and equipment | 213,108 | 205,589 | 210,858 |
| Intangible assets | 22,529 | 22,566 | 22,546 |
| Trade and other receivables | - | 2,750 | - |
| Investment in associate and joint venture | 5,037 | 5,053 | 5,078 |
| Total non-current assets | 240,674 | 235,958 | 238,482 |
| # Current assets | |||
| Inventories | 11,790 | 12,858 | 12,569 |
| Trade and other receivables | 71,264 | 74,096 | 58,779 |
| Cash and cash equivalents | 33,019 | 9,722 | 23,522 |
| Total current assets | 116,073 | 96,676 | 94,870 |
| # Total assets | 356,747 | 332,634 | 333,352 |
| Current liabilities | |||
| Interest-bearing loans and borrowings | (5,666) | (6,074) | (5,338) |
| Trade and other payables | (67,072) | (60,113) | (65,110) |
| Current tax payable | (4,224) | (3,942) | (3,391) |
| Provisions | (184) | (113) | (184) |
| # Total current liabilities | (77,146) | (70,242) | (74,023) |
| # Non-current liabilities | |||
| # Interest-bearing loans and borrowings | (9,719) | (61,981) | (7,934) |
| # Provisions | (11,717) | (11,512) | (11,141) |
| # Deferred tax liabilities | (7,011) | (7,226) | (7,012) |
| Total non-current liabilities | (28,447) | (80,719) | (26,087) |
| Total liabilities | (105,593) | (150,961) | (100,110) |
| Net assets | 251,154 | 181,673 | 233,242 |
| # Equity attributable to equity holders of the parent | |||
| Stated capital | 179,139 | 139,338 | 178,637 |
| Cash flow hedging reserve | (45) | (13) | (36) |
| Capital reserve | 1,516 | 1,516 | 1,516 |
| ### Retained earnings | 70,361 | 40,686 | 52,958 |
| # Total equity attributable to equity holders of the parent | 250,971 | 181,527 | 233,075 |
| # Non-controlling interests | 183 | 146 | 167 |
| # Total equity | 251,154 | 181,673 | 233,242 |
| ###### Six months ended 30 June 2016 | |||||||
| Stated capital | Cash flow hedging reserve | Capital reserve | Retained earnings | Attributable to equity holders of parent | Non-controlling interests | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 31 December 2015 | 178,637 | (36) | 1,516 | 52,958 | 233,075 | 167 | 233,242 |
| Shares issued | 514 | - | - | (154) | 360 | - | 360 |
| Expenses of share issue | (12) | - | - | - | (12) | - | (12) |
| Dividend to non-controlling interests | - | - | - | - | - | - | - |
| Total comprehensive income for the period | - | (9) | - | 16,462 | 16,453 | 16 | 16,469 |
| Credit to equity of share-based payments | - | - | - | 1,095 | 1,095 | - | 1,095 |
| Balance at 30 June 2016 | 179,139 | (45) | 1,516 | 70,361 | 250,971 | 183 | 251,154 |
| Six months ended 30 June 2015 | |||||||
| Stated capital | Cash flow hedging reserve | Capital reserve | Retained earnings | Attributable to equity holders of parent | Non-controlling interests | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 31 December 2014 | 139,139 | (51) | 1,516 | 26,406 | 167,010 | 162 | 167,172 |
| Shares issued | 199 | - | - | (78) | 121 | - | 121 |
| Dividend to non-controlling interests | - | - | - | - | - | (50) | (50) |
| Total comprehensive income for the period | - | 38 | - | 13,626 | 13,664 | 34 | 13,698 |
| Credit to equity of share-based payments | - | - | - | 732 | 732 | - | 732 |
| Balance at 30 June 2015 | 139,338 | (13) | 1,516 | 40,686 | 181,527 | 146 | 181,673 |
| Year ended 31 December 2015 | |||||||
| Stated capital | Cash flow hedging reserve | Capital reserve | Retained earnings | Attributable to equity holders of parent | Non-controlling interests | Total equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 31 December 2014 | 139,139 | (51) | 1,516 | 26,406 | 167,010 | 162 | 167,172 |
| Shares issued | 41,194 | - | - | (252) | 40,942 | - | 40,942 |
| Expenses of share issue | (1,696) | - | - | - | (1,696) | - | (1,696) |
| Dividend to non-controlling interests | - | - | - | - | - | (50) | (50) |
| Total comprehensive income for the year | - | 15 | - | 24,908 | 24,923 | 55 | 24,978 |
| Credit to equity of share-based payments | - | - | - | 1,896 | 1,896 | - | 1,896 |
| Balance at 31 December 2015 | 178,637 | (36) | 1,516 | 52,958 | 233,075 | 167 | 233,242 |
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Cash flows from operating activities | |||
| Profit for the period | 16,478 | 13,660 | 24,963 |
| Adjustments for: | |||
| Depreciation and amortisation | 9,028 | 8,786 | 17,898 |
| Financial income | (35) | (9) | (25) |
| Financial expense | 1,231 | 1,467 | 2,776 |
| Share of profit of associate and joint venture (net of tax) | (434) | (329) | (728) |
| Net gain on sale of property, plant and equipment | (494) | (945) | (1,320) |
| Equity settled share-based payment expenses | 1,095 | 732 | 1,896 |
| Taxation | 4,379 | 3,807 | 6,314 |
| Operating cash flow before changes in working capital and provisions | 31,248 | 27,169 | 51,774 |
| (Increase)/decrease in trade and other receivables | (12,493) | (11,130) | 4,187 |
| Decrease in inventories | 779 | 169 | 458 |
| Increase in trade and other payables | 1,948 | 973 | 5,959 |
| Increase/(decrease) in provisions | 404 | 318 | (264) |
| Cash generated from operating activities | 21,886 | 17,499 | 62,114 |
| Interest paid | (660) | (839) | (1,463) |
| Interest element of finance lease payments | (246) | (331) | (624) |
| Dividend paid to non-controlling interest | - | (50) | (50) |
| Income taxes paid | (3,547) | (2,501) | (5,767) |
| Net cash from operating activities | 17,433 | 13,778 | 54,210 |
| Cash flows used in investing activities | |||
| Purchase of property, plant and equipment | (6,025) | (2,459) | (14,447) |
| Proceeds from sale of property, plant and equipment | 940 | 1,267 | 4,501 |
| Repayment of loan to joint venture | 100 | 100 | 100 |
| Interest received | 35 | 9 | 25 |
| Dividend from associate | 375 | - | 375 |
| Net cash used in investing activities | (4,575) | (1,083) | (9,446) |
| Cash flows used in financing activities | |||
| ### Proceeds from the issue of shares (net) | 348 | 121 | 39,246 |
| ### Repayment of loans | - | (15,000) | (69,000) |
| ### Repayment of finance lease obligations | (3,698) | (3,820) | (7,214) |
| ### Purchase of financial instrument - derivative | (11) | (59) | (59) |
| Net cash used in financing activities | (3,361) | (18,758) | (37,027) |
| Net increase/(decrease) in cash and cash equivalents | 9,497 | (6,063) | 7,737 |
| Cash and cash equivalents at beginning of period | 23,522 | 15,785 | 15,785 |
| Cash and cash equivalents at end of period | 33,019 | 9,722 | 23,522 |
| Cash and cash equivalents | 33,019 | 9,722 | 23,522 |
| Bank overdraft | - | - | - |
| Cash and cash equivalents at end of period | 33,019 | 9,722 | 23,522 |
Notes to the Condensed Consolidated Interim Financial Statements
Breedon Aggregates Limited is a company domiciled in Jersey.
These Condensed Consolidated Interim Financial Statements (the "Interim Financial Statements") consolidate the results of the Company and its subsidiary undertakings (collectively the "Group").
These Interim Financial Statements have been prepared in accordance with IAS 34: Interim Financial Reporting, as adopted by the EU. The Interim Financial Statements have been prepared under the historical cost convention except where the measurement of balances at fair value is required.
The Interim Financial Statements have been prepared applying the accounting policies and presentation that were applied in the presentation of the Company's Consolidated Financial Statements for the year ended 31 December 2015.
These Interim Financial Statements have not been audited or reviewed by auditors pursuant to the Auditing Practices Board's guidance on the review of interim financial information. These statements do not include all of the information required for full annual financial statements and should be read in conjunction with the full Annual Report for the year ended 31 December 2015.
The comparative figures for the financial year ended 31 December 2015 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor. The report of the auditor (i) was unqualified and (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report.
The Group meets its day-to-day working capital and other funding requirements through its banking facility, which includes an overdraft facility, which expires in July 2018. In November 2015, the Group entered into a new four year £300 million facility to become effective on the completion of the acquisition of Hope Construction Materials Limited and which will replace the existing facilities.
The Group actively manages its financial risks and operates Board approved polices, including interest rate hedging policies, that are designed to ensure that the Group maintains an adequate level of headroom and effectively mitigates financial risks.
On the basis of current financial projections and facilities available, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, consider that it is appropriate to adopt the going concern basis in preparing these Interim Financial Statements.
In preparing these Interim Financial Statements, management have been required to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities and income and expense. Actual results may differ from estimates. The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty are the same as those that applied to the Consolidated Financial Statements for the year ended 31 December 2015 as set out in note 27 of the Annual Report and Accounts for that year.
The principal risks and uncertainties the Group faces are in respect of the following:
· Market conditions
· Competition and margins
· Acquisitions
· Liquidity
· Legal and regulatory
· Health & safety and environment
· People
· IT
Further details of these main risks are set out on pages 18 to 19 of the Group's Annual Report and Accounts for the year ended 31 December 2015. The Directors consider that these are the risks that could impact the performance of the Group in the remaining six months of the current financial year. As in the previous year, these risks are being managed and their anticipated impact mitigated.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
Segmental information is presented in respect of the Group's business segments in line with IFRS 8 - Operating Segments which requires segmental information to be presented on the same basis as it is viewed internally. The Group's Board of Directors, considered as the Group's "Chief Operating Decision Maker", views the business on a geographical basis. As such, two operating segments (England and Scotland) have been identified as reportable segments. There are no other operating segments. The majority of revenues are earned from the sale of aggregates, related products and services.
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|||||
| Income statement | Revenue | EBITDA* | Revenue | EBITDA* | Revenue | EBITDA* | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| England | 86,011 | 20,190 | 84,153 | 16,894 | 170,841 | 35,837 | |
| Scotland | 76,946 | 14,689 | 76,376 | 13,402 | 147,611 | 25,092 | |
| Central administration and Group properties | - | (3,461) | - | (2,976) | - | (6,014) | |
| Group | 162,957 | 31,418 | 160,529 | 27,320 | 318,452 | 54,915 | |
| *EBITDA represents underlying EBITDA before share of profit from associate and joint venture. | |||||||
| Reconciliation to reported profit | |||||||
| Group EBITDA as above | 31,418 | 27,320 | 54,915 | ||||
| Depreciation and mineral depletion | (9,011) | (8,768) | (17,861) | ||||
| Underlying Operating Profit | |||||||
| England | 15,851 | 12,581 | 26,997 | ||||
| Scotland | 10,027 | 8,955 | 16,088 | ||||
| Central administration and Group properties | (3,471) | (2,984) | (6,031) | ||||
| 22,407 | 18,552 | 37,054 | |||||
| Share of profit of associate and joint venture | 434 | 329 | 728 | ||||
| Underlying profit from operations (underlying EBIT) | 22,841 | 18,881 | 37,782 | ||||
| Non-underlying items | (788) | 44 | (3,754) | ||||
| Profit from operations | 22,053 | 18,925 | 34,028 | ||||
| Net financial expense | (1,196) | (1,458) | (2,751) | ||||
| Profit before taxation | 20,857 | 17,467 | 31,277 | ||||
| Taxation | (4,379) | (3,807) | (6,314) | ||||
| Profit for the period | 16,478 | 13,660 | 24,963 |
As required by IFRS 3 - Business Combinations, acquisition related costs have been expensed as incurred. Additionally, the Group incurred redundancy costs in respect of the reorganisation of parts of the businesses. Non-underlying items also include property items, the amortisation of acquisition intangible assets and related tax items.
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Included in administrative expenses: | |||
| Redundancy costs | (126) | (115) | (306) |
| Acquisition costs | (704) | (249) | (3,837) |
| Gain on property disposals | 59 | 426 | 426 |
| Amortisation of other intangible assets | (17) | (18) | (37) |
| Total non-underlying items (pre-tax) | (788) | 44 | (3,754) |
| Non-underlying taxation | 16 | (63) | 33 |
| Total non-underlying items (after-tax) | (772) | (19) | (3,721) |
Notes to the Condensed Consolidated Interim Financial Statements (continued)
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Interest income - bank deposits | 35 | 9 | 25 |
| Financial income | 35 | 9 | 25 |
| Interest expense - bank loans and overdrafts | (684) | (864) | (1,567) |
| Amortisation of prepaid bank arrangement fee | (129) | (128) | (256) |
| Interest expense - finance leases | (246) | (331) | (624) |
| Unwinding of discount on provisions | (172) | (144) | (329) |
| Financial expense | (1,231) | (1,467) | (2,776) |
The Company is resident in Jersey which has a zero per cent tax rate. The tax charge for the six months ended 30 June 2016 has been based on the estimated effective blended rate applicable for existing operations for the full year. This is based on an effective rate of 20.0 per cent on profits arising in the Group's UK subsidiary undertakings with no tax deduction for expenses arising in Jersey.
A reduction in the UK corporation tax rate from 21 per cent to 20 per cent (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19 per cent (effective from 1 April 2017) and to 18 per cent (effective 1 April 2020) were substantively enacted on 26 October 2015. An additional reduction to 17 per cent (effective from 1 April 2020) was announced in the Budget on 16 March 2016. This will reduce the Group's future tax charge accordingly.
8 Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Non-current liabilities | |||
| Secured bank loans | 488 | 54,231 | 359 |
| Finance lease liabilities | 9,231 | 7,750 | 7,575 |
| 9,719 | 61,981 | 7,934 | |
| Current liabilities | |||
| Secured overdrafts | - | - | - |
| Current portion of finance lease liabilities | 5,666 | 6,074 | 5,338 |
| 5,666 | 6,074 | 5,338 |
The bank loans and overdrafts carried a rate of interest of between 1.7 per cent and 1.35 per cent above LIBOR and are secured by a floating charge over the assets of the Company and its subsidiary undertakings and have a final repayment date of 11 July 2018. In November 2015, the Group entered into a new four year £300 million facility to become effective on the completion of the acquisition of Hope Construction Materials Limited and which will replace the existing facilities.
Net cash/(debt)
Net cash/(debt) comprises the following items:
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| £'000 | £'000 | £'000 | |
| Cash and cash equivalents | 33,019 | 9,722 | 23,522 |
| Current borrowings | (5,666) | (6,074) | (5,338) |
| Non-current borrowings | (9,719) | (61,981) | (7,934) |
| 17,634 | (58,333) | 10,250 |
Notes to the Condensed Consolidated Interim Financial Statements (continued)
The calculation of earnings per share is based on the profit for the period attributable to ordinary shareholders of £16,462,000 (30 June 2015: £13,626,000, 31 December 2015: £24,908,000) and on the weighted average number of ordinary shares in issue during the period of 1,150,048,780 (30 June 2015: 1,060,836,750, 31 December 2015: 1,069,794,307).
The calculation of underlying earnings per share is based on the profit for the period attributable to ordinary shareholders, adjusted to add back the non-underlying items, of £17,234,000 (30 June 2015: £13,645,000, 31 December 2015: £28,629,000) and on the weighted average number of ordinary shares in issue during the period as above.
Diluted earnings per ordinary share is based on 1,191,589,466 (30 June 2015: 1,094,464,951, 31 December 2015: 1,106,582,360) shares and reflects the effect of all dilutive potential ordinary shares.
There have been no acquisitions in the period or in the prior period.
Related parties are consistent with those disclosed in the Group's Annual Report and Accounts for the year ended 31 December 2015. All related party transactions are on an arm's length basis.
| Number of Ordinary Shares | |||
| Six months ended 30 June 2016 |
Six months ended 30 June 2015 |
Year ended 31 December 2015 |
|
| Issued ordinary shares at the beginning of the period | 1,149,390,728 | 1,022,540,561 | 1,022,540,561 |
| Issued in connection with: | |||
| Placing | - | - | 78,782,825 |
| Exercise of savings-related share options | 2,218,684 | 723,494 | 826,524 |
| Employee bonus issue | - | - | 304,750 |
| Purchase of Participation Shares | - | 46,936,068 | 46,936,068 |
| 1,151,609,412 | 1,070,200,123 | 1,149,390,728 |
During the period, the Company issued 1,793,397 ordinary shares of no par value at 15.0 pence per share, 340,499 ordinary shares of no par value at 19.40 pence per share, 38,157 ordinary shares of no par value at 15.2 pence per share, 22,036 ordinary shares of no par value at 37.8 pence per share, 1,410 ordinary shares of no par value at 39.0 pence per share, 14,872 ordinary shares of no par value at 41.35 pence per share and 8,313 ordinary shares of no par value at 42.70 pence per share in connection with the exercise of certain savings related share options.
Cautionary Statement
This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ from those currently anticipated.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFEEDVIIFIR
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