Lagan acquisition helps Breedon’s Irish revenues rise 153%

British construction materials company Breedon saw revenue rise 153 per cent in Ireland in the first half of 2019 on the back of its acquisition of Northern Ireland's Lagan Group last year.

Revenue across Ireland rose to £93.5 million (€104.8 million), up from £36.9 million a year earlier, for the six months to the end of June. The increase helped overall revenue growth of 18 per cent to £447.4 million and a 30 per cent increase in profit before tax to £39.5 million.

Shares in early morning trade rose almost 4 per cent albeit on light volumes.

Breedon acquired Belfast-based Lagan in April last year in a £455 million cash deal to extend its geographic footprint. The company financed the deal through a £150 million term loan, a £350 million revolving credit facility and a £170 million equity placing.

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The Lagan business, Breedon said, "experienced continued growth against a strong economic background with new surfacing and maintenance contracts won in a number of city and county councils including Dublin, Sligo, Waterford, Cork and Kilkenny".

Whitemountain, a quarry business in Northern Ireland, "also experienced a busy period, with numerous term contract orders received".

Synergies

Breedon anticipates synergies from the Lagan acquisition of about £5 million per year, something with the company on track to deliver on this by the end of 2019.

On its future outlook, while Brexit is seen as denting construction growth in the UK, Breedon sees “particularly strong growth” in the Republic both this year and next.

"Our performance in the second quarter was adversely impacted by lower volumes in Britain due to a flat construction market, ongoing project delays and competitive trading conditions. However demand in Ireland remained robust," said Breedon chief executive Pat Ward.

Davy analyst Robert Gardiner said the results were "solid...despite a marked slowdown in activity levels in the UK".

“Management is clearly executing well in a difficult trading environment with debt levels falling and full year expectations unchanged. Our stock view remains clouded by the broader political uncertainty in the UK and the negative impact that is having on construction activity,” he added.