Amid the current environment of fear created by the coronavirus outbreak there was a rare piece of positive news on Wednesday as construction materials firm Breedon (BREE:AIM) announced plans to introduce its first dividend in 2021.
This news, which helped drive the shares 5.9% higher to 92p, accompanied a strong set of 2019 results with pre-tax profit up 18% to £94.6m on revenue up 8%.
Breedon is the UK’s leading aggregates play. Aggregate is a term given to material frequently used in construction as a means of stabilising and reinforcement and includes items like sand, gravel and concrete.
The company has grown rapidly through acquisitions, announcing the £178m purchase of UK assets from Mexican cement firm Cemex in January 2020. Although the competition authorities are looking at the transaction, Breedon reiterated hopes for its completion in the second quarter of 2020.
Management were bullish on the outlook, as well as announcing plans for a maiden dividend. They pointed to a boost to demand for its products from increased infrastructure spending in the UK.
The company has also signed up to the Global Cement and Concrete Association sustainability charter, reinforcing ESG credentials, and said it is considering a move from AIM to the Main Market.
Davy analyst Robert Gardiner comments: ‘Breedon has reported an impressive full-year result despite challenging market conditions in the UK. Consistent trading performance, combined with strong cash generation (net debt better than forecast), has become a calling card for the group.
‘An interesting addition this morning is updated strategic targets, which include a first dividend and the possibility of a move from the AIM to the Main list. We see Breedon as a winner in the sector given the likelihood of increased infrastructure spending in the UK and continued strong growth in Ireland.’
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