Breedon Group plc (BREE) Earnings Call Transcript & Summary

I think it's 8:30. So I think we'll make a start because I know you've all got a busy day. So good morning, everyone, and welcome to Breedon's interim results presentation. James and I will guide you through our presentation, and then we'll open things up for questions. I'm pleased to report that we've delivered another resilient performance with Liberation Day fallout, the challenging market in GB, major project delays in Ireland and weather in the U.S., it's been a difficult first half. But we've navigated the challenging conditions well, and I could not be prouder of what the Breedon team has achieved in the face of such headwinds. And I'd like to thank all my colleagues for their hard work. In parallel to delivering the resilient performance, I am pleased to report the progress we've made on our strategic priorities. And I'm delighted by what you can see here. In respect of expand, we completed the acquisition of Lionmark in the U.S. that has increased our vertical integration and diversified our U.S. exposure towards infrastructure. In respect of improve, we have continued to replenish our minerals and focus on commercial and operational excellence. Everything we do is viewed through the lenses of people, sustainability and finance. And with respect to each of those, we have changed our organizational structure from a divisional one to a country-based one to enable us to get closer to our customers and our other stakeholders. We have secured a material equity investment in the -- from the National Wealth Fund in the Peak Cluster project, which aims to deliver a decarbonized future for cement manufacturing in the U.K. and secure thousands of jobs in an industry vital for the U.K.'s construction sector. And lastly, we have issued additional USPP loan notes at attractive rates to finance the Lionmark acquisition, and we now have a strong and flexible balance sheet with RCF facilities extended to 2029. So in summary, whilst the first half has been difficult from the trading perspective, we have made good strategic progress. I'll now pass you over to James and his financial review.

Good morning, everyone, and thank you, Rob. So we've demonstrated really resilient financial performance in the first half despite those challenging end markets. Our reported revenue has increased by 7%, driven by the acquisition of Lionmark. However, on a like-for-like basis, it contracted by some 3%. Our underlying EBITDA was 3% behind the first half of 2024 and 5% lower on a like-for-like basis, with our EBITDA margin contracting slightly to 14.1%. Our post-tax return on invested capital at 7.8% is impacted by the short-term dilution from Lionmark and levels of profitability across the group as a whole. We saw a modest free cash outflow in the period that reflects our usual working capital build and the major contributor to our higher indebtedness at the half year is down to the acquisition. And in the appendices, you can find our usual detailed breakdown of the maturity profile of our facilities. Our covenant leverage at 2.2x sits just above the top end of our target range. However, bear in mind that the half year represents the peak of our in-year working capital cycle. And so all other things being equal, I would expect this to decrease across the course of the second half by around 0.25 of a turn of leverage to bring us back within the range by the end of the year. And we've continued to progress the dividend, reflecting our sustained confidence in the group's long-term prospects. Turning now to the buildup of that revenue and EBITDA. Our volumes, mix and currency combined fell by around 4%, with aggregates and asphalt volumes down 2% and cement and ready-mixed volumes down 3%. And whilst this volume performance is slightly disappointing given that we had relatively soft comparatives, the picture is considerably improved on this time a year ago. When you will recall, we were seeing double-digit cement and ready-mixed concrete volume declines and gives us comfort that 2024 -- welcome, Ken -- really was the floor for our volumes. Pricing has proved to be pretty stable in the first half across the group, with strong pricing seen in North America, offsetting the softness that we've seen in GB. The acquisitions contributed around GBP 80 million to our revenue, the majority of which relates to Lionmark. Turning to the profitability bridge. The cost environment remains relatively benign, and we saw some modest deflation across the first 6 months of the year as we manage that cost base closely. However, these self-help actions were insufficient to offset the operating leverage that we saw on those lower volumes. The drop-through on the M&A is really a function of Lionmark being a highly seasonal business that turns profitable in the May of each year, combined with the fact that BMC is typically loss-making at the very start of the year and exaggerated in 2025 by the cold weather. As you are aware, all of our businesses have an element of seasonality, reflecting the fact that we are a Northern Hemisphere building products business. And Lionmark's seasonal profile is very similar to that we found in the Lagan business in the south of Ireland on its acquisition. In terms of divisional outcomes, GB reported lower revenue, principally due to its 3% decline in volume and mix and underlying EBITDA some 9% lower than the first half of last year. The Irish business delivered a robust performance in the period, maintaining EBITDA and expanding profitability despite a 7% fall in its revenue. And in the U.S., reported revenues and EBITDA increased materially, reflecting the acquisition of Lionmark, together with a full 6 months of trading for BMC, offset by the weakening of the dollar and the impact of weather at the start of the year. The lower reported EBITDA margin in the division reflects the seasonality I mentioned earlier. Provided that the weather holds, I still expect the U.S. EBITDA margin for the full year should end up around the mid- to high teens. Our cement division saw some modest margin contraction really as a consequence of the lower GB volumes. We've seen the usual expansion in working capital for the half year, and this is slightly higher than last year in absolute terms. But again, that's principally due to the seasonal nature of the Lionmark business. Interest paid is slightly higher for obvious reasons, and our CapEx profile reflects the larger size of the group. The major capital projects are all now substantially complete, and they're in the process of being commissioned. And it's worth noting that on certain days, the Kinnegad solar farm can generate sufficient energy to power the cement plant. Overall, we saw a free cash outflow in the period of around GBP 25 million before major capital projects, which compares with GBP 6 million this time last year. The most significant movement below free cash flow is the net indebtedness that we took on to finance the acquisition of Lionmark. So as usual, I've summarized our technical guidance to cover the balance of the year. We're expecting for the year as a whole for profitability to be at the bottom end of the current range of EBITDA expectations with an indicative revenue split for the group of around 45-55 and profitability more like 40-60. Within that, the indicative U.S. revenue split will be around 35-65 and profitability 25-75. Our other income statement guidance is largely unchanged from March. CapEx guidance for the year as a whole remains at GBP 125 million to GBP 135 million, and we'll see the usual working capital unwind over the balance of the year with the overall year-on-year position expected to be an outflow of some GBP 20 million to GBP 30 million. Cash exceptionals, which principally comprise acquisition-related costs and Peak Cluster investments will total between GBP 10 million to GBP 15 million. And that should lead you to a net debt number for the full year, absent any further M&A of around GBP 590 million with leverage reducing to just below 2x. The changes to the group's management structure will lead to some consequential changes to our disclosures, and we'll keep you updated on those during the course of the second half. You will have seen that the Peak Cluster shareholder agreement has now been signed. And in terms of the financial impact on Breedon, we expect that we will need to invest over GBP 20 million over the course of the next 3 years in order to meet our obligations to the consortium and as we start to progress the front-end engineering and design phase on the capture plant at Hope. Around GBP 3 million of that will be incurred this year. And whilst the precise balance of OpEx and CapEx accounting is yet to be determined, in principle, I would expect all of these costs to be categorized as non-underlying as we move forward. So to summarize, our covenant leverage is 2.2x at the peak of our in-year working capital cycle and will reduce as the year progresses. We've continued with our differentiated program of proactive investment back into the business, such as the upgrade of our Norfolk asphalt plants, which in turn have allowed us to secure projects such as the A47 near Norwich, and we're well underway with the process of integrating BMC with Lionmark. We've extended our debt facilities, and we continue to progress returns to shareholders through the dividend, and we retain balance sheet flexibility. And whilst 2025 is likely to remain challenging for our GB business in particular, provided that the weather holds, we will see an improving performance in the U.S. Thank you. And I'll now hand you back to Rob.

Thanks, James. I'll start the operational review by highlighting a central theme that Liberation Day and everything since has impacted global economic prospects. Let's look first at our U.K. market, where there's been a weak trend in economic growth. The economy shrunk for the second month running in May, driven by a slump in industrial production and construction work. Whilst over the year to May, GDP grew by 0.7%, it declined by 0.4% over the last 2 months. Construction output over the last year also grew by 1.2%. But like GDP, the recent trend is of decline with a 0.6% fall in May. And the latest data available for the MPA volumes Q1 has confirmed that demand for mineral products is still not improving with volumes for the year to March up 2% for aggregates, but down 3% for asphalt and 1% for concrete. What is clear is that whilst we continue to consider that 2024 should still be the floor to the construction activity, there has been no improvement yet in 2025. It's also worth noting that the last time we saw such weak demand for concrete was in 1963. There's also little business confidence. The construction PMI reflects this, having fallen for the sixth straight month in June with a reading of 48.8. All this is reflected in our GB performance in the first half, and I will talk more about this in the business review shortly. I want to turn next to the market in the Republic of Ireland, where the operating environment was more positive. Modified domestic demand grew by 2.4% over the year to March. Construction output over the same period increased by 6.1%. Confidence, as measured by the construction PMI posted below the 50 no-change mark for the second month running in June on the back of broader economic uncertainty. But interestingly, new orders are rising, and there is generally an optimistic outlook. Our business in Ireland benefited from this backdrop. Next, I want to talk about the market in the U.S. At the macro level, GDP declined by 0.5% in the year to March 2025. This decline was widely considered to be due to a surge in imports as businesses rushed to stock up on goods ahead of potential tariffs. In Missouri, our home state, it declined by 1.8% and was impacted by adverse weather. Construction output to May 2025 declined by 3.5%. And whilst there is no U.S. construction PMI index, recent forecasts and surveys highlight that whilst U.S. construction spending is still growing, growth is moderating. Moving on to our businesses. Let's start with GB. Our GB business had a very challenging first half, but delivered a resilient performance. Whilst inquiries were elevated throughout the period, weak sentiment prevailed. Despite several government announcements covering housebuilding and infrastructure in recent months, there has, to date, been no real catalyst for volume inflection, and our half year earnings reflected this. However, against this backdrop, we maintained our disciplined focus on operational excellence and self-help. And our servicing business again performed well. As a reminder, our servicing business delivers our own high-quality materials pulled through our vertically integrated model. Moving to Ireland. Our business had a robust performance in the first half. Whilst the business benefited from the growth backdrop, it was impacted by major project delays, the most high profile of which is the A5 road upgrade in Northern Ireland. Stormont gave the approval for this project last year, but in June, a high court upheld a legal challenge, quashing the latest decision to proceed with the project. The ruling means that the project cannot proceed in its current form. In light of these delays and other delays, we did, like in GB, take further steps to manage the cost base and enhance profitability. Next, I will cover our U.S. business. The business had a challenging first half, impacted by some extreme weather. January and February were impacted by hard winter weather in St. Louis. There were 31 days in these 2 months where the average temperature was sub 0, more than triple the 9 days in January and February 2024. April was then the wettest April for 132 years. More positively, we have invested in the business, particularly aggregates and have secured significant work on the I70 project. Also, pricing has been positive. Cost control has been maintained and the Lionmark acquisition integration is progressing well. And whilst the first half has been impacted by weather, order books and backlogs remain strong. And when the sun shines, the business is busy. Lastly, I would like to move to cement. Our cement business had a mixed first half. The business in Ireland had a good first half. In GB, it was weaker, reflecting the lower concrete volumes. In terms of plant reliability, both plants continued to operate at world-class levels of reliability. They did this whilst at the same time, managing some major capital projects. We have now also signed the Peak Cluster shareholders agreement. And as a reminder, this triggers the commencement of a 3-year FEED on this project. I want to move away now from the first half and look forward. Given the difficult first half and the macroeconomic headwinds, our updated expectations for the full year are now at the low end of market expectations. However, I want to remind you of 3 things: that our key end markets, housebuilding and infrastructure benefit from long-term structural growth drivers across all 3 of our platforms; that the Breedon model and the Breedon team have once again proved their worth, delivering a resilient performance in challenging conditions; and lastly, that we are well positioned to benefit when construction market activity improves. Thank you. We now welcome your questions.

Rob Chantry at Berenberg. Just 2 questions. So firstly, on U.K. market volumes, I think you referenced concrete demand at this level was last in 1963. I guess it's more of a long-term question around some of the factors that you think are structurally impacting the market to get that degree of kind of depressed levels. I'm aware, obviously, of the high-level factors, but just to kind of put it into a very long-term context, what you're seeing on the ground as to why we're quite at that level? And then secondly, U.S. margin dynamics. I know you talked about the kind of dynamics in BMC and Lionmark going through Q1 into Q2. But just interested, kind of could you expand a little bit more on the kind of the mix effect that you see in the first half getting the EBITDA margin at 10% and then a bit more color around how we get to that mid- to high teen level for the full year and kind of help us bridge that gap in the U.S. margin?

Should I pick up the first one, James, and then pass over to you on the second one? Look, I think in the context, and I think the most stark one is the concrete statistic I gave you. And we're now at a level not seen since 1963. I mean the key thing behind concrete at the moment is housebuilding. And the key catalyst for growth will be the reemergence of housebuilding and opening up of new sites. And I think that's where we will see volumes starting to inflect. If you look at London, where we are all now, I mean, some of the post-Grenfell legislation, the Gateway two legislation has had a material impact on new residential high-rise projects coming to the market. And a lot of you might be aware of a number of changes that the government have made to the reporting lines of that department and the need to accelerate those projects. But it's not just in London. It's housing across the market. And if you look back to the days when pre the global financial crisis and some of the charts we have in the back of the pack, you see all our products at levels significantly higher than they are today. And the one thing that was there that isn't here today was private finance. And I think this government has made a clear statement that private finance will play a part in infrastructure and housebuilding of the future. And therefore, that's one of the things that underpins our view that the long-term future in GB as well as our other platforms is positive.

I think in terms of the U.S. margins, you've got -- there are a number of moving parts to the first half margin in particular. So the first is that we have BMC consolidated for a full 6 months in 2025. We only had it consolidated for 4 months in 2024. So essentially, the 2 loss-making months of January and February were excluded from the 2024 comparator number. In the first half of 2025, that was the period of very, very cold weather where you just cannot pour ready-mixed concrete. And BMC, as you're all aware, is predominantly a ready-mixed concrete business. You then move on to the acquisition of Lionmark. Lionmark is a slightly lower margin business than BMC in any event, but it's also a much more seasonal business than BMC. So typically, it will make the majority of its profits between early summer and early autumn. So really, this third quarter that we're currently in is the really critical factor for Lionmark as a business. When you put that together, what I expect to see across the balance of the year is a second half margin performance much more akin to what we saw in the second half of last year in the U.S. So coming in at the very high-teens level. And that's what brings you back for the year as a whole to a U.S. margin coming in, in that sort of mid- to high teens range.

Christen Hjorth from Deutsche Bank. 2 questions from me, too, as well. Just on -- again, maybe just focusing on the U.S. and that H1, H2 EBITDA split. I mean, obviously, we don't have the historical information, but I assume you've looked back historically at that business and sort of seen the split. And maybe just a bit of color around how it's historically traded in terms of phasing and whether you've seen similar splits to what you're guiding to as well as maybe just touch on current trading in the U.S. has weather been better, for example? And then the second one is just clearly, in GB infrastructure, the long-term outlook is there. There's no 2 ways about it. The government has been very clear. But on the shorter term, what are you seeing? Is volume taking a bit of a hit? Is funding coming through as expected, et cetera?

Yes. So as I touched on earlier, what we're seeing this year is an exaggerated first half, second half split for the U.S. business. So roughly 35-65 for revenue and 25-75 for profitability. I think that, that first half, second half split in terms of revenue going forward, I suspect will correct a little bit more towards the first half. And then for profitability, I expect on a pro forma basis, it will be more like 1/3, 2/3 in future years. You've got the impact of doing 2 acquisitions in relatively quick succession, both completing in the first half of the year has meant that it's slightly more distorted in 2025 than we would ordinarily expect.

I think in terms of current trading, as we said, the business is busy. The backlogs and order books are healthy. So we're positive in terms of trading. And I think in terms of the outlook, what we would say is infrastructure is still growing. Housing in the U.S. is in a difficult place as it is in GB. And I think it offers potential upside in the future. But right now, it's not strong. But we're bidding for work now in 2026. Our order books for '25 are secured. And if you look at some of the larger infrastructure projects coming through, I mean, the I70 is a good project. It's being bid. We are supplying it. It has the potential to take demand for the next 3, 4 years potentially. And there are other projects coming through as well. So we still have a very positive view on infrastructure spending. Growth is moderating, but I was very clear when I said it's still growing. So we're positive on the U.S.

Without asking you to make guidance for next year yet, I just wanted to think about some of the puts and takes for '26 that, firstly, that in the first year of big acquisitions, BMC and Lionmark, you tend to have additional costs as you're sort of getting them into plc shape perhaps. Clearly, we could also expect hopefully, more normal weather. On the other hand, we get a couple of or 3 loss-making months for Lionmark, I guess, next year still that weren't included this year. So what are the -- and the final one was going to be the A5 we thought was kind of kicked into next year, but now is sort of back to the drawing board. That, therefore, sort of takes away perhaps some of what we thought was moving into next year. So in terms of those kind of particular items, and then obviously, in addition to that, we can hope that kind of sentiment doesn't get worse and some of the planning and investment in various markets begin to come through. But what are the particular points you'd be thinking about for next year at the moment on the back of this having formed bumping along the bottom sort of low point in the GB?

Yes. I mean I think it all starts with what's your market assumption and where do you think the markets will go to. We'd all hoped, I think, coming into this year that we would see some form of volume recovery in the GB market, and that hasn't really materialized. The long-term fundamentals remain, we believe, very attractive in the GB market, and that recovery will come at some point. And I think it would not be unreasonable to -- particularly in the context of 2024, we believe having been the floor to volumes to start to see some modest volume recovery coming into 2026. I think in terms of North America, you're right, Ken, you picked up that Lionmark, we will have the -- it will be loss-making in January and February of 2026. But the activity levels in Missouri remain elevated, remain growing, and we are very well positioned to benefit from those. So I think, again, we should see some growth there. The investment phase in terms of bringing the U.S. business up to the required standards, not just of plc, but also -- and we've talked about this a number of times in the past about what we've done around health and safety, that should largely be completed by the end of this year. And one of the attractiveness of the Lionmark business model is that in any 1 year, they're bidding for the work that they're going to be doing next year. So we actually have a much greater order visibility as we come into the year. And you'll remember that we said in the acquisition announcement that for this year, essentially, the order book was underwritten and underpinned for 2025. And so we'll have a good line of sight into what the Lionmark business will do coming into 2026. So putting that all in the round, I would hope that the business as a whole, the group as a whole can resume its growth trajectory as we come into 2026. I think the unknown in Ireland remains how the National Development Plan plays out in practice. There were some very big numbers talked about yesterday. There is a clear intent to deploy capital into both the residential and infrastructure sectors in Ireland. But the pace of that and exactly how and when that will get released isn't quite clear yet.

I think what will change is that whilst the A5 is a disappointment, the sort of disappointment will be borne in our Northern Ireland business, but we think that, that National Development Plan review that came out yesterday will offer compensating upside in the South.

Only 2 questions from me, please. Just coming back to H2 expectations for GB. You've mentioned a few times you expect '24 to be in the low point in volume. Implicit in that guidance, what are you assuming about GB volumes for H2 of the EBITDA around GBP 290 million? And I guess related to that is kind of pricing discipline holding up? You mentioned softer pricing. Any color there? And then the second question, is there any self-help that you can kind of bring through maybe in GB, your divisional structure moving the cement plants that allow you to take some costs out? Any color on that as well?

So I think in terms of GB for the second half, we're not expecting a snapback in volumes. I think a core volume assumption of flat for the balance of the year is not unreasonable. Pricing has been soft, and I think it will remain soft until we see the market improve in terms of volumes. I think once that does happen, the market will tighten actually quite quickly, and then we should resume the historic long-term profile of seeing real pricing coming through sequentially year-on-year. I think in terms of self-help, there's always self-help. And actually, even in that first half number, there's quite a significant amount of self-help. But in a down volume environment, the operating leverage, the operating gearing of the business means that you can only do so much. And we've always been clear that throughout these -- and we're now in our fourth year of down volumes in GB, and you saw that on the graph earlier, that the one thing we mustn't do is compromise the recovery. And whilst we could take further cost out of the business in the short term, if we were to do that, we would compromise potentially not just the near-term recovery that we hope to see in 2026, but also potentially that longer-term bit of prospects for the business going out towards the end of the decade.

Clyde Lewis at Peel Hunt. I think I've got 2, I think maybe 3. Some suggestion about landfill tax changes in the U.K. obviously, sort of driving housebuilders in particular to sort of think about how they dispose of their material. Would that, do you think, have an impact on use of virgin material into the housing industry at all? Second one was on, I suppose, sort of competitors. Have you seen any sort of change in behavior amongst your key competitors in those key markets? And the third one, a little bit sort of going back to Aynsley's point around sort of capacity. And I'm just sort of intrigued to sort of hear your comments as to where you think you currently are in terms of utilization rates. Clearly, it varies massively quarry by quarry, ready-mixed plant, Nashville plant, et cetera. But as a sort of rough rule of thumb, if we did see a 10% increase in volumes, nice to think, maybe over a 5-year period. But what sort of cost would you have to put back into the business? I'm trying to get an idea of that operational gearing going back up from here.

Well, I'll start. I can't remember if I can remember all those questions. Landfill tax. I mean, what I would say more generally about recycling of our mineral products. In GB, we probably lead Europe. It's somewhere in the region of 25%, if not higher, of all materials is recycled. And we and the market is starting to recycle much more. I mean, you often hear of wrap being used, recycled plain is being used in asphalt. And some like in Mansfield, which is one of our more recent plants, we can get up to 50% of the product can be recycled. So it's a concept that we're used to. In London, for example, it's often a requirement to recycle in situ. So it's a growing part of the industry, but there'll always be a need for virgin materials as well. And so it's just about making sure that we move with the market and we offer the products that our customers desire. I think your second question, remind me again what it was, Clyde?

Competitors.

Competitors. And what about them?

[indiscernible]

I think -- I mean, in GB, look, I think it's been a tough market in GB. And -- but I think it's a rational market. And people are quite rightly competitive. But I do believe that those rational competitors know that they have to make a return on their investments, and they have to make those decisions rationally. So I think it's been a stable market from that point of view.

Do you think they've taken out any capacity?

I think everyone's at times taken out capacity. It's just whether it's been mothballed or whether it's been consolidated. There is capacity that can come back. I mean different parts of the business have different sort of drivers. In the cement where it's highly capital intensive, you can't just take on and add capacity. But at the ready-mixed end, it's almost a logistics operation. It's just about running more trucks and mixers through those sites. So the business and the industry has the ability to increase capacity as the market grows. The thing we've said before and we'll carry on saying is that for us, steady and modest growth for the industry is much easier than boom and bust.

Yes. I mean I wouldn't counsel putting 10% volume growth assumption into your 2026 model. But any volume growth up to that sort of level, I would expect to see a really quite significant drop-through coming through. And we've previously guided to anywhere between sort of 25% to 30% drop-through coming through on those sorts of volumes. I think as you get beyond that and if you were, say, to see mid-teens growth for sake of argument, the problem is you're starting to pay over time. You're starting to have to put on extra shifts. You're starting to have to bring in new hauliers, et cetera, et cetera. And what you find is you still make a contribution margin, but actually, you don't get the drop-through. You don't get the operational gearing effect on the way up that you've seen in a negative sense on the way down. So coming back to what Rob said, slow, steady, sustained growth is what makes this industry work the best.

Harry Dow from Rothschild & Co. I think I've got maybe 2 or 3 questions. I think you spoke about price being pretty stable. Wonder if you could give some sort of guidance on the cost side of things as well, particularly energy costs? And then also on the margin dynamic in Ireland, maybe just some color on why the margin grew much more than in GP actually? I'll leave it there.

Yes. So pricing is stable, but that's across the group. So if you disaggregate it, in the U.S., pricing is strong. And indeed, some of the majors have indicated that they might look at second half price increases. In GB, it's been soft. And given the volume dynamics in GB, I expect it to probably to remain soft, at least in the near term. In terms of the cost side, we actually saw some cost deflation across the group in the first half of the year. And energy, in particular, is at much improved levels than it was a few years ago. And I don't -- absent something happening geopolitically, which has to be a risk, I don't see that backdrop necessarily changing across the balance of the year.

Are there any calls at all?

[Operator Instructions] And we have a question from Ethan Cunningham from On Field Investment Research.

I just wanted to ask a general question about pricing in the U.K. So we're seeing 5 or 6 independent import terminals arising in the U.K., particularly around London and Bristol. Are you seeing pricing pressure in London and the U.K.? And just generally, what's your take on pricing in the U.K.? Do you think that cement producers will increase -- keep on increasing prices to -- but then risk losing market share? Or will you buy with the independent importers and keep market share, but you might lose out pricing?

There's a sort of a few bits to that question. I mean what I would say is that historically, and it will continue, the U.K. is short of cement. So imports will always play a part in that. What I would then say is that the domestic industry need to be able to invest in the future and need to invest to decarbonize. And so pricing will have to move forward to ensure that there is a domestic supply of cement. And I think the third part of the question and answer is around import price parity and particularly a U.K. CBAM. And the government have made a commitment now to try and relink the EU and the U.K. ETS and to bring in a CBAM, which means that fine for low or decarbonized cement to come in and compete, but high carbon cement pricing will be adjusted at the border to reflect its carbon intensity. And all we ask as a domestic industry is that there's a level playing field. And that's the message we've given multiple times to the government and that they are listening. So we don't mind competition. But if we're going to have a domestic industry that's going to underpin the industrial strategy in the U.K., we need a level playing field. And that is the key thing that will limit the importation of the product.

Ken Rumph. Just a follow-up on Peak Cluster and CCS. 2 things. Firstly, any sense of kind of when that spending begins and the sort of phasing of the GBP 20 million? I imagine it wrong, maybe it's back ended. But the other one also is part of it is, I understand to be an equity investment. How does that sort of get accounted for? I think you said you don't know how much was going to be, but in principle, what's the difference between the 2 types of spending or investment?

Yes. So as I touched on earlier, we haven't nailed down exactly how the accounting will flow through. In terms of the phasing, we're expecting to spend about GBP 3 million during the course of this year. And then the balance, I would expect to be pretty evenly split over the course of the next 2 years, might be a little bit back-ended towards the end of the 3-year period, but not materially. The equity investment, we have certain milestones where we will have to make incremental payments into the consortium, and that will play out over the course of the next 3 years.

I think that's about it then. I know you're all very busy. I would just like to say in closing, I mean, whilst it has been a difficult first half, I'd like you to take away those 3 messages I left you with, which were our markets are underpinned by structural long-term growth drivers; the Breedon model and the Breedon team are delivering and have continued to deliver in GB, which has been now 3.5 years of declining volumes, and there's been a huge amount of self-help deployed during that time; and last but not least, we are well positioned. We're well invested. We've continued to invest. And when that point of inflection comes, the GB business particularly will benefit from the operational gearing. So thank you very much.