Morning, everybody. Welcome to this presentation to be hosted today by Peter Tom, our Chairman, Pat Ward, Group Chief Executive, and Rob Wood, our Group Finance Director, who I'll hand over to now.
Well, thank you, Steve. Thank you, everyone, for coming. It's obviously a very exciting morning for Breedon and our new colleagues at Lagan. We've had a relationship with the Lagan business and with Kevin for probably 25 years. Pat and I, in our former life, were importing the Whitemountain high PSV chips into the aggregate industry asphalt business. Currently, of course, we have a joint venture with Whitemountain working on the Aberdeen ring road. As will come out in the presentation, it's an absolutely superb business. Very, very well invested, and in many respects, a very, very similar DNA to Breedon. So we are really looking forward to the next few years all working together. I'll now pass you over to Pat, who will run through the details of the business, and then Rob will obviously do the financial stuff.
Good morning. As Peter said, exciting transaction for us. I have to say that if we could have designed a transaction that would be complementary as the next strategic step for Breedon, it would be this transaction. It's a very elegant solution for us and for the Lagan Group. We're creating a leading independent construction materials group in the U.K. and Ireland. Lagan itself is a leading supplier of construction materials and contract surfacing in Ireland and in the U.K., as Peter talked, joint venture partners in Aberdeen. They've also been active in several other major projects in the mainland. It's a total cash consideration of GBP 455 million on a cash and debt-free basis. I'll talk about it at the end, there's strong strategic rationale for the combination.
It gives us an expansion into a very attractive Irish construction market. It gives us that expansion in a meaningful way, a meaningful size. It gives us a critical mass for a sustainable business. It's underpinned by many significant assets, but two of the main ones are the modern cement manufacturing facility at Kinnegad, about 40 odd km outside Dublin, and significant reserves in resources. Within the document, we've identified a figure of 120 million tons. Potentially, that number should increase as we convert some of the prospect to resource or reserves. Again, solid assets for the business. Complementary downstream businesses and strong development potential. It gives us an enhanced platform for further organic growth and bolt-on acquisitions. The avenue that Breedon has had on the mainland for organic growth and bolt-on acquisitions is not diminished. The opportunities are still there.
This gives us a parallel market that affords us the same opportunities. It's almost like replicating what Breedon's been achieving on the mainland. It's expected to be double-digit earnings accretive in the first full year post-acquisition. We've identified synergies of approximately GBP 5 million by year three. Same as Hope, the basis for those synergies are primarily overhead, group office changes at Lagan. They don't take any account commercial or operational synergies. Potentially, there could have been further opportunities, but we see this business not as a business where we want to strip costs out. We very much see this as a platform for growth, and we want to make sure that we have the resources in place that we can grow this business. The next page. I won't dwell on it too much. It's essentially the Breedon footprint.
Many people here I think are familiar with that. I'll move on to giving a brief description of how the businesses are currently run. They're currently run as four separate businesses, Lagan Cement or Lagan Products, which includes the cement plant, Construction Materials in the Republic of Ireland, Construction Materials in Northern Ireland, and Welsh Slate. The cement division, as I mentioned before, great cement asset, one of the youngest plants in Europe, certainly one of the youngest, the youngest plant on the mainland in Ireland. It has also within that is the ready-mix businesses in the north and south of Ireland. It has a sand dredging business in Lough Neagh, just outside Belfast. It has the only Irish-based brick plant, clay brick plant, which produces about 12 million bricks per year.
It's several concrete product facilities which utilize some of the reserves that the production capability that the business has. Solid business, and from our perspective, complements very well on the mainland. Hope Cement plant, as you knew, we ran with one individual plant and two cement terminals. This will be very complementary. The Republic of Ireland business is a very well-developed, high-performing asphalt and paving business. Significant market share in the general market, little bit greater market share on major projects. The business itself had identified a lack of aggregates business supporting the asphalt and the ready-mix business within cement. They had started a process about four years ago where they'd been acquiring some aggregate reserves and distressed assets and were about to undertake development of this aggregate business. From Breedon's perspective, that's the perfect launching pad to grow that aggregate business.
The Northern Irish business, reputationally, is a well-developed aggregate business that operates under the Whitemountain brand. It exports high quality, high PSV aggregate to the mainland through port agreements and potentially up to 17 ports throughout the mainland. That's a great resource to have within the overall group. Reputationally, they have a well-developed asphalt and contracting business. That's a sustainable business in the north of Ireland, underpinned by several framework agreements that run through 2020. It's well invested in. Again, we believe, and the local management within the Northern Irish business believe there's significant opportunity to organically invest or grow the business through bolt-on acquisitions. The Welsh Slate business is, again, they're very lucky. Not lucky. They've created such a good business that the brands, there's a lot of quality in the brand.
The Welsh Slate brand is predominantly associated with the very high quality slate that creates roofing slate and architectural products. These products are sold in Australia, Europe and throughout the U.K., and have been for over 100 years. That business itself, I believe, will be complementary as far as the architectural products go. It'll be complementary as far as the specialist decorative aggregates go, which will dovetail nicely with our special aggregate business within Breedon. A further opportunity is potentially dealing with the waste product that you exploit in order to yield a high quality value slate. Maybe one more opportunity I should talk about is the Republic of Ireland business and the Northern Irish business both have bitumen terminals. Bitumen import terminals, and in the south they have an emulsions plant.
They import raw material from Europe, they self-supply bitumen throughout their business in Northern Ireland, Republic of Ireland, and they have during 2017 supplied projects in the west of Scotland and in Wales. For us, over the years, we've always worked hard to minimize any potential risk on increased hydrocarbon costs through our strategic procurement plan for bitumen. This gives us further opportunities to either, by bringing in this technical resource and the operational resource, we have the knowhow. If we choose, we can export bitumen from Belfast or from Dublin to the mainland and support our asphalt business in Breedon. If we decided to replicate those facilities on the mainland, that's available to us as well. Potentially, it's always a tool that will allow us to be more strategic in our procuring of bitumen.
That's a significant asset for us and something we're very pleased to have on board. Over the years, when we're asked about as Breedon grows, a question's always been, how do you grow and how do you remain Breedon? Our view is it's always about the people. It's about the business, but it's about the people. It's about the people understanding our culture. It's about the complementary natures of the businesses. I'm delighted to say, I don't think you could have two businesses that are more aligned as far as culture and really the way we go about our everyday business. We've had the ability to see each other up and close in the joint venture project in Aberdeen, in the AWPR. So we've got to understand each other's DNA. Which then brings us to integration.
In my two years here, I've been absolutely delighted at how Breedon integrates businesses. They've been very successful for the last six, seven years in integrating businesses. Hope, I think, demonstrated the ability to take a large business, a business that was a bit diverse from Breedon because it was the first move into cement. That business, the integration went as well as anybody could expect, and I think Breedon have delivered in every level in that integration. I actually feel that this integration is no more difficult, in some respects, probably a little easier because we have the cement business which will align completely and will be merged with our existing Hope Cement business, which is fundamentally the Hope Cement plant and the two terminals. That will be run by Jude Lagan, who's the current managing director of that business.
For us, that's a quick win, bringing those businesses together. The Welsh Slate business, because of the alignment with special aggregates and the architectural stone, will be integrated into our Southern business. Breedon Southern will absorb Welsh Slate and allow Welsh Slate to have more of a national reach, and that will be under the guidance of Mike Pearce. What that essentially leaves us with are two construction material businesses, two distinct regional construction material businesses which are very like our Breedon Northern business. There are no activities that are carried out in these businesses that we do not or have not carried out in our careers or in Breedon currently. For me, when we break the integration down into these four components, it is a low risk. It is a low risk integration as far as I am concerned.
For us, again, it is an exciting time to welcome our new colleagues, our 750 colleagues. I fail to see where it can go wrong. It is a great business. It is in a great market. The assets are superb, not to be missed, the people I think will be complementary, but I think we are getting a great, very talented group of individuals in the business. There are some slides on maps. I think maybe the only one I would refer to is the Republic of Ireland one because if you look at the This is the most basic way I can explain it. If you look at the blue dots, which are the asphalt plants, and the red dots are the aggregate facilities. In an ideal world, you would want them sort of cohabiting a site.
You can see how strategic the business in the south has been by bringing up some of these aggregate facilities in the area of their asphalt plants. That, to me, is the aggregate business at an embryonic state, and it will move forward from there. They have done a wonderful job setting up that launchpad, we are excited to get in and help develop that business. I think the other maps really just speak for themselves. Rob?
Okay. Thank you, Pat. Morning, everybody. Lagan Group has had strong growth over the last couple of years. Revenue in 2017 was just shy of EUR 250 million, EBIT has been increasing on the back of the improving Irish market, also due to the repatriation of cement volumes from continental Europe to the domestic market following the sale of their cement terminal in the Netherlands in 2016. Underlying EBIT margin at 10.4%. Lagan's are 2017, 12.3%, post synergies, they are comparable.
I'll just forget that.
Looking forward, the outlook for the Irish market in the next few years is positive. The latest Irish government's capital investment plan, published a couple of months ago, anticipates a doubling of investment between 2017 and 2021. Euroconstruct are forecasting that construction growth will increase by 28% by 2020, this being the second highest growth out of the 19 Euroconstruct member countries. It is also worth noting that the Irish cycle tends to lag the U.K. construction cycle, and that the indexed output is at a level comparable to only the pre-Celtic Tiger years. Growth in Northern Ireland is more modest but still encouraging. Turning to how we're going to finance the transaction. The cash consideration of GBP 455 million will be financed by a combination of debt and equity.
In respect of debt, we have entered into a new GBP 500 million facility with Barclays, HSBC, RBS, Santander, and First Trust, which is part of AIB. The new facility has a GBP 150 million amortizing term element and a GBP 350 million revolving element. It replaces our existing GBP 300 million facility and has a four-year term. The pricing of the new facility is marginally better than our existing facility. In terms of equity, the placing of approximately GBP 170 million has been conditionally placed by our brokers with institutional investors at a price of GBP 0.765. Approximately GBP 50 million is subject to clawback by other institutional investors, our brokers will today commence the book-building process in respect of this. We will provide other shareholders the opportunity to participate in the equity raise at the placing price to raise up to GBP 4 million through an open offer.
The open offer is an addition to and separate from the placing and is conditional upon completion. The acquisition will significantly increase Breedon's scale and profitability. We expect to achieve annual cost synergies of approximately GBP 5 million by the third full year following completion, and also expect the acquisition to be double-digit accretive to our underlying EPS in 2019. Pro forma opening leverage is expected to be approximately 2.6x underlying pro forma EBITDA and is expected to fall to less than 1x in 2020. Pro forma financials are revenue of GBP 901 million, underlying EBITDA of GBP 163 million, underlying EBIT of GBP 106 million, as already mentioned, pro forma opening leverage is expected to be approximately 2.6x. The enlarged group will provide us with a stronger platform for further investment and growth.
We anticipate admission and settlement of the placing shares on Thursday and completion of the acquisition on Friday. The open offer will follow and close in mid-May. I'll pass you back to Pat now.
Okay. I'll state our strategy for the enlarged Breedon Group. It's quite simple because this was the objectives for Breedon Group prior, and if you asked the Lagan Group, this would be their objectives for the Lagan Group. For me, this is how complementary this transaction is for both individuals. As you can see over the years, and as you get to know the assets in Lagan, they've delivered on this. They've delivered on this constantly. Okay. I'll just read our trading update. In common with the rest of our industry, we have experienced disruption from the severe weather in the first quarter, which has impacted the phasing of some of our works. However, with the worst of the weather behind us, we have seen an improvement in recent weeks and anticipate a continuing recovery in activity. The board's expectations for the full year remain unchanged.
In summary, maybe I'll reiterate what we believe is a compelling strategic rationale for this transaction. It's an enhanced market position. As I talked before, it creates a leading independent construction materials group in the U.K. and Ireland. It gives us extended geographic coverage. It strengthens our cement capability, which was always an objective of ours, and we now feel that with the Hope plant that we took on board, was in good condition, well invested. We're now bringing in a more modern cement plant, well invested, no legacy capital investment required. We're in a very strong position with our cement capability. It gives us an expanded range of products and services. We talked about Whitemountain High PSV, emulsions, bitumen, import, and export.
Another area of expertise the group brings is both the Republic of Ireland business and the Northern Irish business have a successful track record of working within airport infrastructure projects. Breedon has a fairly limited track record on that, predominantly in Stornoway Airport. I feel that as we bring these three businesses together, we'll accelerate our ability to perform in that sector by about three or four years. Synergy benefits, we talked about GBP 5 million by year three. It gives us further vertical integration opportunities, the significant potential to expand upstream and downstream on Ireland, as well as continuing the pipeline of potential acquisitions that we have on the mainland. Greater financial capacity. The expected increase in cash flow and strong balance sheet will provide capacity to pursue further growth opportunities. Strengthen management and complementary culture.
We're delighted that Jude Lagan, Terry Lagan, who runs the Republic of Ireland business, and Mark Kelly, who runs the Northern Irish business, will join us. As I say, we've got to know each other over the past year or so, and we're very, very comfortable that both parties will work well together going forward. We have brought a lot of new talent into our organization, as well as the colleagues throughout Northern Ireland, Republic of Ireland, and the Welsh Slate business. Underpinning all of that is the very favorable economic conditions that are projected to continue in the north of Ireland, but predominantly in the south of Ireland over the course of the next four or five years. I think that concludes the presentation.
Okay. Thanks, Pat. Could I just ask people in the room, as usual, just to give their names and firms just for the benefit of the people on the webcast, as you ask your questions. Many thanks. There's a microphone coming around.
Hi, Rob Chantry, Berenberg. Just two questions. Firstly, could you just give a brief comment on the broader market structure in Ireland and Northern Ireland, so the presence of any big firms in that industry, what broad market share this firm is. I suppose secondly, in the past two, three years since the big acquisition of Hope and now this, I guess there's been less frequent small bolt-ons. Could you just give a view on what your aspiration is? Because clearly now with a substantial EBITDA level, the incremental 10, 20 million EV type assets are much less relevant, I guess. Just your view on your scope and ambition to do bolt-ons of that size. Thanks.
Yeah, obviously, in the Republic of Ireland, there's a very strong player called CRH. The Lagan business has a good market share position on asphalt. It's probably in the region of 20% on general works and a little bit higher on major projects because of the capability of the business. I feel that the foundation of that market share is solid. What it really doesn't have in the Republic of Ireland is any significant market share on aggregates or ready-mix, and that's clearly an opportunity. In the north, the asphalt framework agreements, I would suggest are spread between four or five businesses that compete vigorously and are all capable of performing within these framework agreements. There's also the mechanism as they release these framework agreements, you're only allowed to win a certain amount. If there's four agreements, you're only allowed to win two at any given time.
That keeps a degree of competitiveness in the marketplace. In describing the business in the North, again, I would say a very solid foundation on asphalt, a very solid foundation on paving, and a reasonably good position on aggregate, but clearly opportunity to grow aggregates. What was the second part of your question?
I just asked about small bolt-ons.
I think we've been quite active since Hope. If you take Sherburn and you take Pro Mini Mix and you take Staffs and what else?
There's the Tarmac deal that's still.
The Tarmac deal with the CMA. Of course, we have the added advantage as we know what other transactions are in the pipeline.
Yes.
I talked earlier, Robert, our appetite for bolt-ons or even small bolt-ons in the U.K. is not diminished. We're as active as ever we have been there. We'll manage the leverage which will dictate, obviously, if there was a larger transaction. Maybe more importantly, I talked a year ago, about six months after we got Hope, and I said I felt from a management bandwidth perspective, we were ready for the next acquisition. We said that the integration had gone smoothly, we're ready for the next acquisition. I have no doubt that in six months' time, we'll be saying the same thing. At that point, it'll be managing the leverage because I think we're-
He meant managing the integration, not the big bear.
Yeah. If we finish a year and our assets are better and our people are better and our management team is more talented, we're ready to go forward. I feel this does that again.
It's worth mentioning, Robert, too, that it's not just the U.K. now for bolt-ons. There's a whole opportunity in Ireland now.
Okay. Howard Seymour, Numis. Two, first one was, actually my second one, but it follows on from that. You've historically given a figure that you'd sort of suggest to spend per annum on bolt-ons. Looking forward, do you look to potentially increase that number, or is it now that the sort of the two Irish divisions have to compete alongside the U.K. divisions for that money? That's the first one, second one just on the Irish market.
I think for us, the appetite's still there. I think over the last few years, we probably went from GBP 20 million to GBP 30 million to GBP 30 million to GBP 40 million to GBP 40 million to GBP 50 million. I think for the right deals, we have the capacity.
Yeah.
I think the next few months very much will be about delivering and deleveraging. When we get to the end of this year, our leverage should be in a much more comfortable space, we should have significant capacity.
Okay. Thank you. Secondly, really just onto the Republic of Ireland business. I suppose the general question is, you allude to the reserves you've got. Are the reserves specifically one area? Are they relatively well distributed relative to the size of the businesses?
Well, obviously, there'll be a predominance of reserves associated with the cement plant, which we're happy about.
Yeah.
Other than that, the market in the Republic of Ireland, I think the way we would operate that's akin to how we operate in the north and particularly on the west coast of Scotland. There's a lot of small sites. Instead of investing in infrastructure in every site, the way we run these sites in the north is we have a dedicated crushing train and employees who travel with that train. Essentially what they'll do, Howard, is they'll move from site to site, and they'll campaign crush, and they'll put the product where the product's required. Cleverly, I think, the group have also acquired certain facilities on, we believe, the alignment of future capital investment. I think they've done a really good job of putting the sort of foundation in place to build that business.
Sure.
They would have executed on that without this deal. We just want to help.
On that point, Pat, you allude to the fact that there's nine dormant quarries in Ireland. What is a dormant quarry in terms of the capability to get that up and running on timescale investment, and sort of tonnage as well? What can it take you up to?
They're all different, but you can open a dormant quarry. If the faces have been left in reasonable condition, you can open a dormant quarry within weeks with very little investment because you can contract crush. You can bring in third parties to carry out some of that work. As I said, that activity is happening in certain areas there. Other quarries may have been sort of abused towards the end of their life, and it takes a little bit longer to get the faces in a workable condition. For me, I would rather take time to ensure that we get the right equipment and the right development of the faces, because quarries are developed for the long term, not for-
Correct
Not for the eight months. Importantly, there really aren't any earnings associated in this transaction with an aggregate business in the ROI. Everything we do there is a step forward.
Yeah. If you look at there's two actives and nine dormants, could you end up in a situation where would the nine dormants be potentially larger than the two actives as they stand at the moment? If you see what I mean, on a size basis? Are they relatively small operations as they stand?
No. Actually, some of them are dormant because quite successfully, they wanted to ensure that they acquired some minerals around it to give it a long life.
Yeah.
That's where they've been active. Because they're dormant, doesn't mean they're inferior.
Yeah.
It just means that in their evolution, they decided before we go in and before we operate, we want to make sure we've got the long life required for the investment.
Yeah.
Have been very prudent in that.
Yeah. Excellent. Thank you.
Thanks. Clyde Lewis at Peel Hunt. I think I've got six, but I'll do three and then hand the mic on.
Could you do them slowly?
Exactly. Rob, can you give us some sort of idea of a divisional split, those four businesses that you are acquiring within the group? Just revenue, hopefully, and maybe.
Yeah
fingers crossed, we get an idea of profitability as well.
Yeah.
That would be very useful. Second, what sort of tax rate should we be assuming for the
Yeah
combined group or the business you have just bought? The third financial one was on CapEx. It looks like about GBP 25 million of depreciation. I don't know if that is depreciation and amortization. If you can give us an idea as to, A, how that is likely to evolve, and also what sort of CapEx we should be looking at for the new group as well going forward.
Okay. Divisional splits, just broadly. Welsh Slate's probably about 10% of revenues. The other three divisions are broadly equal at about 30% each. At the EBIT level, plus or minus a bit, that is a pretty similar split. I think that just gives you a flavor of the relative size of the business. The tax rates, approximately half their earnings are ROI. There will be a benefit between the difference between the U.K. rate and the Irish rate. At the group level, in a full year, it is probably going to be equivalent to 1%. Then CapEx. The depreciation charge in the business is high. It is about GBP 20 million a year in the business being acquired. It does reflect the modern nature and the investment in the cement plants. Pre-fair value adjustments, we anticipate that that will continue to run at that level.
In terms of guidance for CapEx, it's a well-invested business. I think Pat mentioned, whether it's the cement or whether it's the asphalt element of the business, it's well invested, and we expect sort of probably sustainable sort of CapEx to be sort of 50%-60% of depreciation, so GBP 10 million-GBP 12 million a year for that business. I think on an overall basis, depreciation for the enlarged group will be modestly less than probably 100% of depreciation. I think they were your three. You got three more now.
I'll let anybody else go first. I'll go again.
Here you go.
Okay, I will go again. Firstly, are there any compliance clearance issues that you've got to go through at all? Obviously, it's an Irish cement plant, but you're importing into the U.K., so I'm just wondering if there are any issues on that front. Presumably going forward, the U.K. authorities, if you wanted to do something else related to cement, I suspect they will look at it slightly differently than they currently do.
Yeah. Obviously there's filing, we don't anticipate any implications from the CMA perspective that would have any impact on the transaction. Going forward, whether this transaction happened or not, the CMA would always, and rightly so, be very active in looking at any potential deals that we would do.
Okay.
I don't think that changes anything.
Okay. The second one, it touched on the bolt-ons, this is really the first sort of step outside the mainland U.K., sort of GB. Is this the sort of opening of the door for other overseas acquisitions, either Europe or sort of America? Has that process started?
It'd be nice if you let us do this one before something else.
The third one I had.
Our point has always been, our focus was on this, the pipeline in the mainland. If something developed outside of that, we would always look at it and evaluate it. We weren't terribly active in Europe. I think now we can say that we have two parallel markets that we can look at bolt-ons and organic growth. As leverage gets to the right level, if something else occurred and something came in and it was right and it was complementary and added value, then absolutely, we're comfortable to look at it.
The third one I had was on whether you can disclose it or not, is the seller, is Kevin going to take any shares through the placing at all? Will he be an ongoing investor in Breedon?
No, he's not. No.
Okay. He's selling out completely?
Yeah. Completely.
Okay.
Kevin's built a great business there.
Yeah.
I think he's passionate about the business, and I think it's probably easier for Kevin and probably easier all around that he's going to go and do his own thing.
Yeah.
I think he'll be passionately watching it because he's very proud of what he's achieved and what he wants that business to deliver he has.
Yeah.
Hi, sorry, Rob Chantry again. Very, very quick question. I know you mentioned it briefly in your statement, Rob, just talking about the step up in EBITDA margins from 2016 to 2017. Could you just talk a bit more about where that margin has been historically? Then secondly, just run through the dynamics of why it stepped up from 14.8 to 18.5, and underlying whether you see that as a ex-Breedon, if that was going to progress at that level.
I think the most material step up will be on the back of the repatriation of the cement. The Lagan business were very successful in finding an outlet for cement in the downturn, and they have their terminal in the Netherlands. As the domestic markets improved, they have repatriated that. They closed the terminal in 2016, and the benefit's gone straight through to margin. I think there is a backdrop, too, of the improving market in Ireland. I think the big step change has happened. Going forward, we're confident of making further progress.
Thanks.
Kevin Cammack at Cenkos. Two, please. Firstly, the group previously had a stated target of getting sort of 15% EBIT margin. Does this alter that in terms of that being an achievable target still for the enlarged group? That's the first thing. Secondly, I just wonder if either theoretically or in practice, you can just talk us through a bit more what the advantages of the bitumen facilities physically do mean to the group. To what extent, how rapidly can it change the face of what you're currently doing? In effect, I suppose one other thing I'm asking is if you were to use that facility to the benefit of the U.K. or the mainland business, is there enough capacity existingly in that facility over and beyond what's used within Ireland, or does it physically mean you have to replicate another business in the mainland to do that?
On the margin one first, by the time you achieve the GBP 5 million in synergies, then the margin in the sort of Lagan business that's coming in is very similar to Breedon at what, 12.3-
Yeah
12.4%, in that range. From our perspective, 15% was a target for 2020. We've all achieved it in prior businesses. I think I talked about Lagan looks very similar to Breedon in the makeup and structure of its business. We'll look at it, but it wouldn't surprise me if our view is the 15% is achievable and it's a question of when. It's very much like when we bought Hope, we said we're still maintaining the 15%. It's just a matter of when. Does it delay the achievement? I think we'll be seeing the same thing here. As far as the bitumen terminals go, they've supplied a lot more bitumen than they're currently supplying. Really, the capacity constraints there are more about how often you turn ships and how often you move the product out, rather than the physical constraints of the tanks.
Clearly, those two terminals could supply the U.K. if we decided, or the mainland, if we decided that's what we wanted to do. If it was a value-enhancing investment, we can look at it for the mainland as well. Really, Kevin, that's a day one priority for us, is really to evaluate that and decide where's the best bang for our buck in operating those terminals and how can they complement our business in the mainland. I think that's the additional benefit in this business. I think somebody mentioned at the start, it's our first foray out of the mainland. It's a business in Ireland that's got enough critical mass to be a sustainable business itself that can be developed, but also has links to the mainland. It supplies high PSV stone. The group do paving projects on the mainland.
Bitumen comes into the mainland from there, so it's not completely autonomous. It's not completely independent. The businesses can work well together, and they can grow together. That'll be particularly useful as we bring talent across the businesses. Whitemountain, one of the areas we've noticed in Aberdeen, is they have a lot of talented young engineers who have come from university in Northern Ireland. A lot of good paving engineers. Particularly when the airports are concerned, that's something we can certainly learn from and leverage in Breedon.
I think the other important bit, Kevin, is that Pat and I, in our previous life, were involved in importing bitumen into the USA. When I left, we had 2 terminals. I know Pat opened another one in Denver. We are quite familiar with how that market works. Interesting enough, a significant amount of the supplies we were then bringing in were coming from the same supplier that Kevin uses today.
Does it literally all come from one source or?
No. Some of it used to come from Venezuela. Not now. Most of it comes out of Spain.
Thank you.
Thanks. John Messenger from Redburn. Can I just follow on with bitumen? Sorry, an ignorance on my part, just to understand a bit more. Are you effectively just doing clever things with raw bitumen in terms of obviously the description around binders and what you're doing? I assume, is this effectively you've got a boat interest, obviously, so you've got your shipping capabilities. Storage, I assume, as well. Is there actually a plant there that's doing clever things with a basic grade of bitumen that you're adding value to as well, or is that overcomplicating it?
No, no. In the Republic of Ireland, there is an emulsion facility as well, so they can modify bitumen to create more specialist value-enhancing products. They have that technical capability within the organization. That's something we don't have within our group. We would procure those specialist products in the external market. That certainly gives us further opportunity, John.
Just on cement, am I right in thinking that the plant's been running pretty much full tilt, to your point, you were shipping it, or they were shipping it to the Netherlands, a bit to the U.K., I assume. The product flow, where is that now? I know it's who knows, but what have you assumed in terms of the world, the trading status quo in terms of Brexit and what might happen, just in terms of where the ultimate 650,000 tons will be sold?
Yeah, I think we'll continue to help execute the sort of plan Lagan were on. They've been quite innovative. When the recession was on, they were moving product to Europe, they were moving product to the mainland, they were also aggressively executing their alternative fuels plan. As you know, the higher you put alternative fuels, you restrain your capacity somewhat, which is fine when the market's a bit slower. If I look forward, John, I would expect that as the market continues to grow in Ireland, the tons that move to the U.K. could be repatriated towards Ireland. If the market slows again, because we're on the mainland and a significant presence, we have that opportunity to bring product onto the mainland as well. I think that's how we see it going forward. That's just being consistent with the strategy Lagan had themself.
Got you. Then finally, just Rob, that guidance you gave earlier on the sales split, was the split at EBITDA or at EBIT when you said it was broadly the same?
EBIT.
You said EBIT.
EBIT. EBITDA, you'd expect the cement business to have.
To be.
have higher.
Fantastic. Thanks.
John, the markets kind of sustain themselves, so if there's a hard border on Brexit, we don't know what's going to happen there. I don't see that as significant because the aggregate facilities in the North will come to the Mainland, and they feed the north plants, and the South will feed the plants there. I don't see a lot of cross-border if it became a hard border.
Any further? Howard.
Just to confirm. Howard Seymour from Numis. Just actually on bricks. Did you mention the brick sales at the moment are about GBP 13 million, sorry, GBP 12 million. What's the size of the plant?
Well, that's the capacity at the moment. I know the group had plans in place to accelerate development of that facility, that's something we'll need to evaluate.
Got you.
kind of day one as well.
Maybe early days, bricks are a different business. I suppose cement is as well. As you look at it's something that you'd like to continue in this space of the group?
Yeah. What's particularly pleasing that at this point, everything within this transaction, we're very comfortable retaining. We don't have anything slated that we would like to exit. As far as we are concerned, if we're building on this platform from now going forward, we'll be delighted with that.
Thank you.
Thank you very much. If there are no further questions, there's still some bacon sandwiches, some rather cold now, and some coffee, thank you all very much for coming.
For the benefit of those on the call, just a reminder that you can access the presentation again on the website. A recording of this webcast will be up on the site late this morning. Thank you, everybody, for joining us.