1st May 2020 09:10
(Alliance News) - Construction materials firm Breedon Group PLC on Friday said it plans to start to reopen some of its sites over the coming weeks and will resume clinker production at its two cement plants in May.
Although a small proportion of Breedon's sites are still open, servicing critical supply needs during the pandemic, most are shut. In total, over 80% of the company's staff have been furloughed in the UK - or temporarily laid off in the Republic of Ireland on full pay.
Breedon commented that it has been "encouraged" by news of some construction sector companies reopening operations in Great Britain and Ireland. Housebuilder Barratt Developments PLC, for example, said Friday it plans to resume construction at half of its construction sites from May 11.
Breedon said it plans to reopen some of its own sites progressively "during the coming weeks" where there is demand and where the reopening can be done safely. This includes returning to clinker production at its two cement plants over the course of May.
Breedon also said it has "taken disciplined action" aimed at shrinking its cost base and conserving cash - this includes restricting capital expenditure to only its "critical and committed projects" as well as eliminating discretionary spending and managing its working capital tightly.
Across the entire company, pay increases for 2020 have been deferred and bonus schemes withheld. Performance share plan awards have been deferred both to executive directors and the wider leadership team
"We are benefiting from the deferral of VAT payments and the reimbursement of a substantial proportion of the wages and salaries of furloughed and temporarily laid-off colleagues under the relevant government employee retention schemes," Breedon added.
Consequently, Breedon has managed to substantially shrink its cash outflows.
As of Thursday, Breedon has GBP79 million of cash plus a GBP222 million undrawn committed facility. It has obtained a relaxation of its June 30 covenants plus a deferral of GBP35 million of its term loan amortisation until April 2022.
"We continue to explore available sources of government support to further increase our liquidity headroom," said Breedon.
The company's annual general meeting, originally scheduled for Tuesday last week, has been rescheduled for May 22. It will be a closed meeting due to social distancing guidelines.
In terms of outlook, Bredon said the gradual resumption of operations in its industry is "good news" and it aims to support housebuilders, merchants, and contractors so long as it is safe to do so.
"It is still too early to predict with any certainty how quickly our markets will recover, and we therefore remain unable to provide market guidance at this time. However, we reiterate the points made in our announcement on 26 March 2020, prior to which we were trading broadly in line with our expectations. We have a fundamentally robust and diversified business with traditionally strong cashflow, and remain confident in our ability to prosper in the long term. The pending acquisition of assets from CEMEX in the UK, which has been delayed due to the difficulties caused by Covid-19, will further strengthen our position," said Breedon.
The company has also appointed a new non-executive director, Carol Hui. Hui's current directorships include Heathrow Airport Ltd, LHR Airports Ltd, Triumph Properties Ltd, and Robert Walters PLC.
Shares in Breedon were down 0.1% at 85.30 pence in London in early morning trading.
By Anna Farley; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Barratt DevelopmentsBreedon