Quarrying and aggregate supply firm Breedon believes profits will “significantly exceed expectations” after margins continued to improve in the final few weeks of last year.
The company, which has its Scottish headquarters at Ethiebeaton in Angus, said market forecasts for the year look set to be significantly surpassed during a finish which escaped the disruptive influence of winter weather.
A brief statement to the markets teed-up what the firm expects will be good news when it reports results for the 12 months to the end of December early next month.
It said lower depreciation, depletion and amortisation, and an improved contribution from associate businesses like trunk road operator Bear Scotland, had helped profits leading to an even better performance than an encouraging November update had suggested.
Analyst Kevin Cammack of Cenkos Securities was enthused by Breedon’s strong finish to the year, and upgraded his pre-tax profit forecast from £4.1 million to around £5.5m.
He said he expected revenues would end the year “more or less” as anticipated at approximately £174m, but that pre-tax profits could rise by as much as a third thanks to the aggregate effect of improvements in several “relatively marginal” metrics.
Mr Cammack said depreciation would be lower than expected thanks to the spread of capital spend, while interest charges were also below expectations.
He said Bear Scotland which is responsible for many of the region’s trunk roads, including the A90 and A92, and also acts as one of the Scotland’s major roadworks contractors had been the main beneficiary of the weather, allowing the subsidiary to increase both its workload and contribution to wider group earnings.
The news comes after Breedon failed in its attempts to snap up assets from LaFarge and Tarmac, who were forced to sell off elements of their businesses to comply with a ruling over their proposed construction materials joint venture.
“The stock has performed disappointingly since failing to net anything from the Lafarge-Tarmac sell off, but this announcement should remind investors that Breedon is much more than an acquisition platform,” Mr Cammack said.
Breedon, which employs around 70 people at its base just outside Monifieth and has also been pursuing opportunities within the renewable energy sector, said revenues were broadly in line with market forecasts.
“The EBITDA (earnings before interest, taxes, depreciation and amortisation) margin has continued to improve since the trading update in November 2012, which, together with lower depreciation, depletion and amortisation and an improved contribution from our associates, means underlying profit before tax is set to significantly exceed expectations,” the company said.
Shares in the group closed the day up 1.12 at 21.