Construction materials firm Breedon Group plc (LON:BREE) continues its growth story with the acquisition of Sherburn Minerals Group for up to £15.7mln and reported strong trading in the last ten months.
It comes after it bought Hope Construction Materials, a group formed from the merger of rivals Tarmac and Lafarge, which almost doubled the size of the business and significantly expanded its geographical footprint in the north of England.
Sherburn complements the existing cement plant at Hope and will allow the expansion of that business through the importation of cement and ground granulated blast-furnace slag (GGBS) through Sherburn's two terminals in north-east England and eastern Scotland, the firm said.
IN AGGREGATE: The Share Centre's stocks guru gives his Breedon opinion
IN FULL: Today's trading statement
Sherburn reported underlying earnings (EBITDA) of £1.8 million on revenues of £16.1 million in the year to end March. It has more than 21mln tonnes of mineral reserves and resources.
In a separate announcement, Breedon said sales volumes of aggregates in the ten months to October 31 this year increased 25%, asphalt by 1% and concrete by 96%.
The integration of Hope is progressing well, with synergies coming through earlier than expected and if the weather remains favourable, underlying EBIT for the full year is expected to be ahead of current market expectations.
Total revenue for the ten months increased by 31% to around £361 million.
"The UK economy has generally held up well following the EU Referendum result in June," Breedon added.
"Construction activity has been broadly sustained and, although uncertainty remains about the likely timing and terms of our departure, we remain positive about the outlook for the industry.
"We were encouraged by the Chancellor's stated commitment last week to increase investment in our national infrastructure, together with continued support for housebuilding, both of which should have a beneficial impact on our business in the medium term."
Canaccord bullish
The shares marked time at 73.5p, valuing the business at just over £1bn. In the wake of the trading update, broker Canaccord Genuity raised its EBITDA forecast to £59-60mln from £54.6mln and repeated its 'buy' recommendation.
On the deal it said: "The Sherburn acquisition highlights the bigger opportunity set that is now available for the enlarged group. This continued execution of the strategy along with a strong balance sheet underpins our positive stance on stock."
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