Breedon plans premium move

Aggregates and cement supplier Breedon (LON: BRE) is planning to move from AIM to a premier listing and it is large enough to be included in the FTSE 250 index when a space becomes available. This will bring new investors to the company, particularly index tracker funds that will need to take a shareholding.

Breedon started out as a shell on AIM in June 2008 when it was known as Marwyn Materials and through acquisitions it has been built up into a company with a market capitalisation of £1.28bn at 75.5p. The initial subscription price was 10p and the starting market capitalisation was £13.6m.  

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Volumes declined from their unusually high levels in 2021, but higher prices meant that revenues improved from £1.23bn to £1.4bn. Underlying pre-tax profit increased from £120.5m to £142.8m, while the dividend was raised from 1.6p a share to 2.1p a share. Net debt is £197.7m.

Although volumes fell, they are still well above the level in 2019. The growth in profit came from Great Britain with a flat contribution from Ireland.

Capital investment is significant although it is well covered by cash generation. There were small add-on acquisitions last year and Breedon is still interested in purchases that fill in gaps in its business. Longer-term, acquisitions could be made in North America.

The new financial year has started well with continued strong demand from infrastructure products. Breedon is less exposed to the weak residential market. Even so, profit is likely to decline this year putting the shares on just over 13 times prospective earnings.

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No date has been set for the move to the premium listing. As part of the move a new England-based holding company will be set up to replace the current Channel Islands one and there will be a share consolidation.

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