Shares in Breedon Aggregates (BREE:AIM) gain 2.7% to 68p, taking week-to-date gains up to 7%, as its management provides a bullish assessment of the company's prospects in a half-year results update.

A bellwether for UK construction activity, Breedon shifted 4.6 million tonnes of aggregates in the first six months of the year, up from 4.5 million in the same period last year.

Revenue gained 2% to £163 million, underlying operating profit improved 21% to £20.9 million and executive chairman Peter Tom says the business is in good shape despite increasing concern about the state of the UK economy.


'Whatever the prognosis for the UK economy, we remain confident that we can continue to generate value for our shareholders,' said Toms.

'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.'

The UK's biggest independent aggregates business after the four global majors is pressing ahead with a proposed £336 million acquisition of Hope Construction Materials despite uncertainty created by the UK's vote to leave the EU. The deal remains subject to clearance from the Competitions and Markets Authority.


'Commentators have been quick to highlight the uncertainties created by the EU referendum result,' adds Toms.

'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.'


Ian Osburn, an analyst at Breedon's house broker Cantor Fitzgerald, says the results are impressive despite a number of headwinds underneath the surface.

'The company's interim results this morning show the continued progress at the group, and management remains positive: "We remain confident of meeting 2016 market expectations',' writes Osburn in commentary published today.

'That is key to me as some input costs are likely increasing, especially bitumen and other hydrocarbons, and demand from some market segments, such as local councils, is likely weakening.

'In a typically positive response, the group was able to offset these by finding new customers and in operating efficiencies.

'With the Hope Construction acquisition expected to close by 1st August, we think Breedon will be ready with immediate integration steps and should see further synergies and market opportunities, including bolt on acquisitions, as a result.

'We think the group continues to be a stand-out performer in the sector and is the only natural buyer of assets in a sector where opportunities remain.'

Issue Date: 21 Jul 2016