Trading Update & Acquisition

Brickability Group PLC

11 October 2023

 

11 October 2023

Brickability Group plc

("Brickability" or "the Group")

Trading Update

                                        Acquisition of Group Topek Holdings Limited

Significant increase in presence in cladding remediation market through acquisition of high margin business, further diversifying Group product portfolio

Brickability Group plc (AIM: BRCK), the leading construction materials distributor, issues the following trading update for the six-month period to 30 September 2023 and is also pleased to announce the acquisition of Group Topek Holdings Limited, a specialist cladding installation and remediation contractor (the "Acquisition").

Following the Acquisition, the Group's cladding portfolio now has a full range of cladding capabilities including design, fabrication, supply, and installation.

Trading Update

The performance for the first six months of the year was in line with Board expectations and underlines the resilience that the Group's diversified, multi-business strategy provides in the face of a challenging UK housebuilding market, with Group revenue for H1 FY24 expected to be approximately £324m (H1 FY23: £352.7m).

Adjusting for the impact of acquisitions, H1 FY24 Group revenue on a like-for-like basis represents a decrease of c.14% compared to the same period in the prior year.

As a result, the Board currently anticipates reporting adjusted EBITDA* for the six months to 30 September 2023 of at least £24.0m, in line with Board expectations.

The impact on the UK housebuilding market of interest rates remaining high will continue to provide headwinds into the second half of the year, with the September UK Construction PMI index highlighting a significant contraction in residential work and, as noted in the Group's AGM statement, the Board remains cognisant of volume reductions experienced by certain housebuilders and manufacturers due to the macro-economic conditions. In July 2023, the Construction Products Association forecast that private housing starts and completions would reduce by 25% and 19% respectively in 2023.

Whilst the Group has traded in line with Board expectations through H1 FY24, and the Acquisition will be immediately earnings accretive in the current year, forecast reductions in newbuild volumes are expected to have a corresponding impact upon the performance of the Group's existing businesses throughout the second half of the current financial year.

The Group will notify the expected date of publication of its unaudited interim results for the six months ended 30 September 2023 in due course. 

Acquisition of Group Topek Holdings Limited

The Group is also pleased to announce that it has completed the acquisition of Topek Limited ("Topek") for a consideration of up to £45m through the acquisition of the entire issued share capital of Group Topek Holdings Limited.

Topek offers a range of services which will complement the Group's existing cladding portfolio, including Taylor Maxwell Cladding, SBS Cladding, and Architectural Facades, meaning that the Group now has a full range of cladding capabilities including design, fabrication, supply, and installation.

The Acquisition of Topek will also significantly increase the Group's presence in the cladding remediation market. Since 2017, the requirement for cladding remediation in the UK has been of huge importance.

Established in 1981, Scottish-based commercial building contractor Topek installs cladding and rainscreen systems to improve insulation, comply with fire safety standards, and add to the visual appearance of a building for its blue-chip client base.

In the 12 months to 31 August 2023, Topek generated unaudited revenue of £21.2m and adjusted EBITDA of c.£8.0m.

The consideration payable for the Acquisition comprises an initial cash consideration of £27.3m payable on completion, subject to final working capital adjustments to acquire the business on a cash-free, debt-free basis, and deferred contingent consideration of up to £17.7m. The deferred contingent consideration is payable subject to adjustments for performance against target performance criteria over the next three years. To provide the Group with flexibility in the future, the Group has the ability, but not the obligation, to settle deferred contingent consideration payments in connection with the Acquisition by way of the issue of new ordinary shares in the Group at the then prevailing price per ordinary share at the time of the deferred consideration payment.

The Acquisition is expected to be immediately earnings accretive post-completion. The Acquisition consideration is being funded from the Group's existing cash resources and from newly amended and restated bank facilities which now mature in October 2026 (the "Amended Facility"). Following initial draw down and on completion of the Acquisition, the Amended Facility will have significant headroom within its initial £100m borrowing capacity to fund the Group's working capital requirements and potential further acquisitions.

The Acquisition marks another step in the continuing diversification of Brickability since IPO. Since joining the public markets in 2019 Brickability has now completed 12 acquisitions, pursuing a diversified multi-business strategy to broaden and deepen the Group's product portfolio. This is reflected in the Group's revenue growth which, since IPO, increased by c.£500m to the year ending 31 March 2023 while the proportion of brick revenue moved from c.80% to c.60%.

John Richards, Chairman, Brickability, said:

"It is pleasing to report that the Board will be reporting H1 FY24 performance in line with Board expectations in spite of more challenging trading conditions. Whilst the second half of the year is anticipated to see industry wide volume reductions, from which the Group is not immune, the Board believes that Brickability's diversified, multi-business, approach enables the Group to continue to perform well in the current market backdrop and that this strategy best positions the Group for the future.

"This Acquisition is the Group's second largest to date, and a very exciting one in our continued diversification strategy.

"The acquisition of Taylor Maxwell in 2021 delivered a significant increase in exposure to public and commercial end markets, and the addition of Topek further increases our presence in these markets.

"We believe this Acquisition will deliver significant value for our shareholders".

Alan Simpson, CEO, Brickability, added:

"We've seen in our Bricks and Building Materials division how cladding products supply has gone from strength to strength. With Topek, which will sit in our Contracting division, we will be building on that and expanding our existing product and services range into supply and installation as we continue to pursue our diversified multi-business strategy.

"The team is excited about the new opportunities this brings and we're looking forward to welcoming and working alongside Topek's team of experts."

Douglas Bryce, Managing Director, Topek, commented:

"We are excited to be joining the Brickability Group, adding our excellent product to their portfolio and allowing us the opportunity to provide our clients a broader offering of solutions.  The team at Brickability has built a formidable operation and we look forward to working alongside them in exploring new opportunities."

Change of Name of Nominated Adviser

The Company also announces that its Nominated adviser and broker has changed its name to Cavendish Securities plc following completion of its own corporate merger.

* Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation and other non-underlying items.

ENDS

This announcement contains inside information.

For further information please contact:

Brickability Group plc John Richards, Chairman Alan Simpson, Chief Executive Officer Mike Gant, Chief Financial Officer	via Montfort Communications
Cavendish Securities plc (Nominated adviser and broker) Ben Jeynes, George Lawson (Corporate Finance) Julian Morse, Michael Johnson (Sales)	[phone]
Montfort Communications James Olley Ella Henderson	[phone] [e-mail]

About Brickability

Brickability is a leading construction materials distributor, serving customers across the UK and Europe for over 37 years through its national and local networks. The Group operates from more than 70 locations across the country with over 700 employees.

 

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