Breedon Regulatory News (BREE)

30 March 2011

Breedon Aggregates Limited

("Breedon Aggregates" or "the Group")

Annual Results 2010

Breedon Aggregates, the UK's largest independent aggregates business, today announces its audited annual results for the year ended 31 December 2010.

* Unaudited pro forma based on the results for the full 12 months ended 31 December 2010.

† Underlying results are stated before acquisition related expenses, redundancy and reorganisation costs, property items, impairments, amortisation of acquisition intangibles and changes in the fair value of financial instruments. References to an underlying profit measure throughout this Announcement are defined on this basis.

Highlights

·; Management team strengthened with several senior appointments

·; Good progress made in repositioning group and tackling underperformance of English business

·; Increased emphasis on safety and accident reduction

·; Breedon "GoodQuarry" initiative planned for 2011 to raise operational standards

·; Procurement and credit terms improved, reducing working capital

·; Major new supply and surfacing contracts secured in England and Scotland

·; "Best of Breedon" award scheme launched to encourage innovation and business improvement initiatives

Peter Tom, Executive Chairman, commented:

"We are pleased to have delivered a satisfactory result for the full year, which includes four months under our management. The results are in line with our expectations, despite the severe weather in December, which impacted our businesses in both England and Scotland.

"We have made significant progress in improving the operational performance of the Group, cash flow has been better than we had expected and we have won some substantial new contracts. Everyone in the business is firing on all cylinders and committed to achieving our long-term objective of becoming the most profitable business in the UK aggregates industry.

"There's no doubt that 2011 will continue to be very challenging. But I'm confident that we have the right assets in place, in terms of people, minerals and management, to deliver a resilient performance even if the economic recovery takes longer than expected - and to take full advantage of the market upturn when it comes."

Enquiries:

Preliminary results for the year ended 31 December 2010

Chairman's Statement

I would like to begin by welcoming all those new shareholders who supported us in our recent fundraising and enabled us to make our maiden acquisition in the UK aggregates sector. I would also like to thank those of you who have been with us since the creation of Marwyn Materials and waited patiently for us to secure our first platform investment, including our largest investor, Marwyn Capital, whose innovative investment strategy lay behind the genesis of our business.

Our purchase of Breedon Holdings and the creation of Breedon Aggregates on 6 September 2010 represented a unique opportunity to secure a firm foothold in a sector where substantial assets become available very rarely. In doing so, we immediately took our place as the UK's largest independent aggregates producer after the five global majors, with some 180 million tonnes of mineral reserves and resources - enough to last us more than 50 years at current rates of production.

We hit the ground running as soon as the acquisition was completed. Within the first month we had completely rebranded the new groupand met the great majorityof our 700 employees at a series of roadshows in England and Scotland. We were surprised and delighted by how positively our arrival was received and even more pleased at the near 100 per cent take- up of our offer to each employee of 500 free shares in the new company, which means that almost every one of our colleagues now has a personal stake in the future of our business. I extend a special welcome to you all.

Our Group Chief Executive, Simon Vivian, and his team made great strides towards repositioning the Group in the first three months under our ownership. The senior management team was strengthened, a number of early operational improvements were made and we embarked on a rigorous programme of health and safety initiatives to ensure a safer working environment for everyone in the business.

In trading terms, 2010 presented a mixed picture. Sales volumes in England were ahead of the previous year, whilst those in Scotland were slightly down, both impacted heavily by the severe weather in December. Nevertheless, we were pleased to report a satisfactory outturn for the full year, with pro forma EBITDA of £13.7 million on pro forma revenues of £143.8 million. Year-end borrowings at £92.3 million were lower than our expectations and we remain focused on reducing this debt as quickly as possible. I would particularly like to thank our lending banks, led by Barclays, for their constructive support following completion of the acquisition.

You will find a detailed review of Breedon Aggregates' progress during the year in your Group Chief Executive's Review.

In October, we took steps to strengthen the Board and were pleased to welcome Ian Peters as Group Finance Director and Susie Farnon as an independent non-executive director. Ian is highly experienced in our industry, having worked in senior positions within Hanson for many years. He joined the senior management team of Marwyn Materials in 2008 and worked closely with us on the acquisition of Breedon Holdings. Susie was formerly banking and finance partner and head of audit with KPMG Channel Islands and is a Commissioner of the Guernsey Financial Services Commission. On behalf of shareholders, I would like to welcome them both to the Board. 

Looking ahead, our objective is simple. We want to be the most profitable business in the UK aggregates industry. We will achieve this by being nimble and flexible, and above all by providing a higher value local service than our competitors. Evidence of the success of this strategy is already apparent: we have been consistently winning new business around the Group and our commercial teams are highly motivated and energetically pursuing every opportunity available to them. 

There is no doubt that 2011 will continue to be very challenging, as the UK economy struggles to return to sustainable growth. We also face the challenge of sharply rising oil prices: these have a significant impact on the cost of bitumen, gas oil and diesel, which takes time for us to pass through in our pricing. However, with the UK and Scottish Comprehensive Spending Reviews behind us, we have at least been able to plan ahead with greater clarity. It is obviously difficult to predict within any certainty exactly where public spending cuts will fall in the current year, but the UK manufacturing sector is showing a steady recovery and we remain optimistic about the prospects for the private sector generally. I am confident that we have the right assets in place - in terms of people, minerals and management - to deliver a resilient performance even if the economic recovery takes longer than expected and to take full advantage of the market upturn when it comes. 

I said at the outset that Breedon Aggregates represents a platform for growth. We are ambitious to develop the Group both organically and through bolt-on acquisitions of earnings-accretive aggregates businesses. To this end, we continue to pursue several potential prospects and believe that promising opportunities will also be created by the continuing consolidation of the UK aggregates industry in the year ahead. 

I would like to close by thanking every one of our employees for the enthusiasm and commitment they have shown since we took control of the Group. Breedon Aggregates in its various forms has a long and distinguished heritage in the UK aggregates industry and I have been personally struck on many occasions by the pride and dedication of our people. They have earned the appreciation of every member of the Board and senior management team and we all look forward to working together to secure the promising future which we all believe lies ahead for our business.

Peter WG Tom CBE

Executive Chairman

30 March 2011

Preliminary results for the year ended 31 December 2010

Chief Executive's Review

Breedon Aggregates was established in September 2010 when Marwyn Materials Limited acquired the business from a banking group led by Barclays Bank PLC, which had owned it since the former Ennstone plc went into administration in March 2009. The directors and management team believe that the terms of the agreement with the banks, and the partial refinancing of the business, mean that we are in a strong position to improve performance and take advantage of further opportunities to grow through additional investment and acquisition.

Our Business

Breedon Aggregates is the UK's largest independent quarrying business with 23 quarries, 18 asphalt plants and 27 ready-mixed concrete plants. Operations in England extend from East Anglia, across the Midlands to mid-Wales. In Scotland, we have a strong regional presence everywhere north of the Glasgow/Edinburgh M8 corridor. We have consented mineral reserves of 95 million tonnes, sufficient for 27 years' life at current production rates. We also control a further 85 million tonnes of resources subject to planning. During the year we succeeded in getting planning consents for a further 4 million tonnes at our Cloud Hill quarry.

In the full year we sold 3.6 million tonnes of aggregates, 1.2 million tonnes of asphalt and 0.27 million cubic metres of concrete. We also manufacture a number of speciality products including the famous Breedon Golden Amber gravel which holds the Royal Warrant and has recently been specified for use on the pathways of the 2012 Olympic village.

In the UK, the market is dominated by Tarmac (owned by Anglo American) and 4 global cement companies: Lafarge (French), Heidelberg (German), Cemex (Mexican) and Holcim (Swiss). We take pride in the fact that we are a British company, based in the Midlands, focused on providing quality materials to our local customers. Our head office, regional offices and sales offices are all located in our quarries which means that staff at all levels are close to the day-to-day operations of the business.

We believe that our local presence enables us to respond quickly and effectively to our customers' needs, and central administrative functions are kept to a minimum so that maximum resource can be deployed in production and sales.

The barriers to entry in the UK aggregates market are high. Restrictions on development and planning have meant that virtually no new rock quarries have been started for many years. Opportunities to acquire these businesses are rare and we believe that our shareholders have been fortunate to secure a significant presence in the market on attractive terms.

Operational changes

Good progress has been made in repositioning the Group for the future and tackling the issues associated with the underperforming business in England, where market share has been lost and margins are significantly below those achieved in Scotland. Tim Hall, a former Tarmac director, joined us in October as Chief Executive of the English business. A number of other senior appointments have followed and we are currently recruiting a replacement safety manager as performance in this area has not been acceptable in the English business. We now have the team in place to deliver the improvements needed over the next few years. The business in Scotland continues to be led by Alan Mackenzie and we will be looking to build on the success that this region has achieved historically.

We launched Breedon Aggregates with a series of staff presentations in September which were extremely well received and we were delighted with the positive response to our vision for the future. We have a loyal, motivated and flexible workforce which is a great foundation for us to build on.

Following the refinancing of the business, we have been able to improve procurement and renegotiate credit terms with some key suppliers, reducing working capital. The rebranding of the business is complete with all costs taken in 2010. A new website has also recently been launched.

A large amount of surplus plant and equipment has been sold and we are working on several land disposals, some of which should be concluded in the current year. We have commenced a review of our haulage fleet with the intention of improving efficiency. The contracting business in England has been reorganised and scaled back. The reduced cost base, together with greater local focus, will improve the performance of this division in the coming year.

We have introduced the "Best of Breedon" award scheme which encourages employees to come up with ideas to improve our business. A tremendous response was received to the inaugural competition and 4 winners received prizes. A second competition has recently been launched.

A scheme to improve the operational, environmental and safety standards at all of our quarries is to be launched shortly. The Breedon "GoodQuarry" project will be focused on raising standards at all of our units, where we see the scope for significant improvement.

Trading Summary

Pro forma Group turnover for 2010 was 6.2% higher than the previous year. This increase was driven by the English business where sales volumes of all products were ahead of 2009. Snow and freezing temperatures affected activity in January and December, particularly in Scotland. The poor weather led to many sites closing early in December and material deliveries fell away sharply after the first week. Our associate company, BEAR Scotland, which maintains the trunk road network in the north east and south east of Scotland, had significant additional costs and incurred losses in the month of December.

Selling prices of most products increased during the year ahead of inflation, but this was insufficient to offset haulage, bitumen and fuel cost increases and as a result pro forma underlying EBITDA (before our share of associated undertakings) for the 12 months declined by £2.8 million to £13.7 million; however this was in line with the result anticipated when we undertook our due diligence in August 2010. Further price increases were notified to our customers in January and March 2011 to try and recover these costs.

A number of major contracts were supplied during the year including the Rolls Royce factory near Derby, and a major road reconstruction at Fochabers near Elgin in Scotland. House building picked up from the very low levels experienced in 2009 and a number of customers, including Barratt and Westleigh, were supplied with aggregates and ready-mixed concrete. In general, we saw a sustained recovery in private sector construction while the public sector was extremely busy in the run up to the general election but slowed gradually throughout the rest of the year.

As with most aggregates businesses, our customer base is broad and covers both public and private sectors. The business in England has a greater exposure to the private sector and maintenance markets while Scotland has greater exposure to government spending through its contracts with BEAR Scotland and Scotland Transerv which both work directly for Transport Scotland. We estimate the proportion of our business that is related to the public sector to be 60% in Scotland and 25% in England. A major success was achieved in winning the framework contract for Scottish Water and the benefit of this will build up during 2011.

Our strategy

We aim to be the safest, most profitable and best run aggregates business in the UK. Our strategic imperatives will be: safety of our employees, service to our customers and value for our shareholders. We will develop and build close trading relationships with our key customers and seek to continuously improve our service levels to them. The culture of our group will be entrepreneurial, agile and responsive. We can take decisions quickly and will not allow bureaucracy to inhibit the internal or external management of the business.

The acquisition of Breedon provides us with a great platform to build on and we believe that there will be significant opportunities to grow the business, both through acquisition and Greenfield development. A number of opportunities are currently being reviewed but we will only make additional investments where we are confident that value for shareholders can be created.

The recent announcement by Tarmac and Lafarge that they intend to merge their operations in the UK is likely to result in a number of disposals to meet regulatory requirements and this could present an opportunity for us.

Business outlook

We believe that private sector construction activity will continue to grow in 2011. The early part of the year has been busy as work delayed from last year is completed. We have secured a number of contracts, including the A9 trunk road improvement scheme at Crubenmore in Scotland.

The likely effect of the spending review on local authority maintenance budgets is difficult to predict. Our exposure to this is greater in Scotland but the severe weather has further degraded the condition of the roads and triggered a political rethink on the proposed expenditure cuts. In addition, elections to the Scottish parliament in May mean that the SNP government will want to be seen to be reacting to public concerns about road maintenance.

The latest Construction Products Association forecasts for the UK expect output to decline by 2% in 2011 and 0.7% in 2012 before increasing by 1.6% and 2.6% in the following two years. The government has recently announced an additional £100 million of funding to tackle emergency road repairs in England and the importance of maintaining core infrastructure seems to be increasingly recognised by the main political parties. Our view of the markets that we operate in is that volumes will fall slightly in Scotland and increase slightly in England.

Despite the market uncertainty and the volatility in oil related input costs, we aim to deliver improved results in 2011.

Simon Vivian

Group Chief Executive

30 March 2011

Preliminary results for the year ended 31 December 2010

Financial Review

I am pleased to report on the results and financial statements of Breedon Aggregates Limited (formerly Marwyn Materials Limited) for the year ended 31 December 2010. The acquisition of Breedon Holdings Limited ("Breedon") was completed on 6 September 2010 and therefore the Consolidated Income Statement and Statement of Financial Position incorporate the results of Breedon from that date.

Breedon is the UK's largest independent aggregates producer, which we acquired for a total consideration of £2.25 million in cash together with warrants to subscribe for 55,266,667 ordinary shares at an exercise price of 12.0 pence per share (representing 9.1 per cent of the enlarged share capital of the Company), valued on acquisition at £2.4 million.

In view of the size of Breedon, this acquisition constituted a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies and as such required the approval of shareholders, which was given at an extraordinary general meeting held on 1 September 2010. The admission document relating to this reverse takeover is available on the Company's website at www.breedonaggregates.com.

The Company also raised £50.0 million (before expenses) by the issue of 416,666,667 placing shares at 12.0 pence per share. The net proceeds of this placing were £48.3 million and were used to pay down some of Breedon's existing debt, to provide approximately £25 million to fund the ongoing working capital of the enlarged group and to finance potential future acquisitions.

Following completion of the acquisition of Breedon, the Company changed its name to Breedon Aggregates Limited.

Revenue for the year (all generated since 6 September) was £42.7 million (2009: £nil). This was adversely influenced by severe weather in December that caused major disruption to our activities in Scotland and to a lesser degree in England.

Underlying earnings before our share of associated undertakings, interest, tax, depreciation and amortisation (EBITDA) were £3.3 million (2009: loss £0.9 million). Underlying Group operating profit was a loss of £0.3 million (2009: loss £0.9 million). Of this, a loss of £0.6 million was incurred prior to the acquisition of Breedon. Underlying

results are stated before acquisition related expenses, redundancy and reorganisation costs, property items, impairments, amortisation of acquisition intangibles and changes in the fair value of financial instruments.

Divisional Performance - Unaudited Pro forma

In order to aid understanding of the business performance and provide a meaningful year-on-year performance comparison, we have included below unaudited pro forma figures for the full calendar year of 2010 and a comparison with the full calendar year of 2009.

The market environment generally remained very competitive following the significant volume declines seen in 2008 and 2009. After a challenging start to the year, exacerbated by harsh weather conditions, we began to see some benefit from the previous government's financial stimulus and from essential road maintenance.

Turnover during the second and third quarters therefore improved, driven by increased volumes - especially in asphalt - and slightly improved pricing. The return of severe weather conditions late in the year had a marked impact on the business in the final quarter, especially in Scotland.

For the 12 months as a whole, aggregates volumes were flat at 3.6 million tonnes, whilst asphalt volumes were 9.8 per cent up at 1.2 million tonnes. Asphalt volumes in England were ahead but in Scotland were down approximately 5 per cent. Higher input costs, particularly from bitumen (a key ingredient in the production of asphalt) are gradually being passed on to customers; however, EBITDA margins across the business were down year-on-year due to the inevitable time-lag between increased costs and higher selling prices.

Turnover for the pro forma 12 months was £143.8 million, a 6.2 per cent increase on the pro forma figure for the same period in 2009. Pro forma underlying EBITDA of £13.7 million was £2.8 million down year-on-year, with our challenge for the future being to restore the historic level of margin generated in the business.

Non-underlying items

Non-underlying items in the year were £4.5 million. These included £3.8 million of acquisition costs associated with the acquisition of Breedon and £0.8 million of post-acquisition reorganisation and redundancy costs together with a gain on a financial instrument of £0.3 million.

Interest and Tax

Net finance costs in the year totalled £1.6 million and included interest costs on the Group's bank finance facilities as well as interest on finance leases and hire purchase agreements. A tax credit of £0.4 million was recognised in the year, resulting in an effective tax rate for the full year of 6.8 per cent.

Earnings Per Share

Basic loss per share ("EPS") for the year was 2.19 pence (2009: 0.61 pence), struck after the non-underlying items mentioned above. Underlying basic EPS for the year was a loss of 0.58 pence.

Statement of Financial Position

Net assets at 31 December 2010 were £56.8 million (2009: £11.7 million). The Company issued 418,003,167 ordinary shares during the year; of these, 416,666,667 were issued as part of the placing to fund the Breedon acquisition, 1,000,000 were issued as settlement of transaction-related bonus payments and 336,500 were issued as a gift to employees.

The net assets are underpinned by the mineral and land and building assets of the Group.

Cash flow

Cash generated from operations was £2.8 million. The Group spent £11.4 million on acquisitions and had a cash spend on capital expenditure projects of £1.2 million. £48.3 million was raised through the placing of shares which was utilised to reduce the bank debt in Breedon and provide a fund for potential future acquisitions, and £0.3 million was raised from the disposal of surplus assets in the Group. Repayment of finance leases totalled £2.0 million, resulting in a net cash outflow for the year of £10.2 million.

Net debt at 31 December 2010 was £92.3 million (2009: net cash £11.9 million).

Bank Facilities

The Group's bank loans have a maturity date of 5 September 2015 and are subject to a floating interest rate based on LIBOR plus a margin. At 31 December 2010, total undrawn facilities available to the Group amounted to £25.4 million.

The Group's bank facility is subject to covenants which are tested quarterly. These covenants are: group interest cover, minimum underlying EBITDA and, with effect from 30 September 2011, group cash flow cover. The results of the covenant calculations at 31 December 2010 were:

Based on our current estimates, we expect to comply with the covenants in the foreseeable future.

The Group has in place an interest rate hedge purchased in September 2010 which mitigates the risk of interest rate rises on £64.5 million of bank loans. The effect of the hedge is to cap the LIBOR element of the interest rate at 1.5 per cent until 30 September 2011, at 2.0 per cent from 30 September 2011 until 28 September 2012 and at 2.5 per cent from 28 September 2012 to 28 March 2013. The net fair value of this instrument at 31 December 2010 was £0.3 million.

Dividends

Following the acquisition of Breedon, subject to availability of distributable reserves, dividends will be paid to shareholders when the Directors believe it is appropriate and prudent to do so. However, the main focus of the Group will be on delivering capital growth for shareholders.

Ian Peters

Group Finance Director

30 March 2011

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Consolidated Income Statement

for the year ended 31 December 2010

* Non-underlying items represent acquisition related expenses, redundancy and reorganisation costs, property items, impairments, amortisation of acquisition intangibles and changes in the fair value of financial instruments.

† The Consolidated Income Statement presents the results for the year ended 31 December 2010. The Group made its first acquisition on 6 September 2010. Accordingly, with the exception of £649,000 of administrative expenses, all underlying revenues and profits from operations set out above are for the period from 6 September 2010 to 31 December 2010.

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Consolidated Statement of Financial Position

at 31 December 2010

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Consolidated Cash Flow Statement

for the year ended 31 December 2010

Breedon Aggregates Limited 

Preliminary results for the year ended 31 December 2010

Notes to the financial statements

1 Basis of preparation

Breedon Aggregates Limited is a company domiciled in Jersey.

These financial statements consolidate the results of the Company and its two subsidiary undertakings, Marwyn Materials Investments Limited and Marwyn Materials (UK) Limited, for the entire financial year, together with the results of Breedon Holdings Limited and its subsidiaries with effect from acquisition on 6 September 2010, collectively the "Group".

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRS's"). The consolidated financial statements have been prepared under the historical cost convention except where the measurement of balances at fair value is required.

New IFRS standards and interpretations adopted during 2010

In 2010, the following standards had been endorsed by the EU, became effective and therefore were adopted by the Group.

·; IFRS 3 (Revised) - Business Combinations

·; IAS 27 (Revised) - Consolidated and Separate Financial Statements

·; Amendment to IFRS 2 - Group Cash Settled Share-based Payment Transactions

·; Annual Improvement Projects to IFRS's

The Annual Improvement Project to IFRS's provides a vehicle for making non-urgent but necessary amendments to IFRS's. Amendments to a number of standards have been adopted.

The adoption of IFRS 3 (Revised) - Business Combinations has resulted in a total of £3,794,000 being expensed in the Consolidated Income Statement which would previously have been capitalised as part of the investment cost when business acquisitions are completed. The impact has been included as a non-underlying item in the Consolidated Income Statement. The revised standard is only applicable prospectively for acquisitions made after 1 January 2010.

The adoption of the other standards, amendments and interpretations has not had a material impact on the Group's financial statements.

New IFRS standards and interpretations not adopted

The IASB and IFRIC have issued additional standards and interpretations which are effective for periods starting after the date of these financial statements. The following standards and interpretations have not yet been adopted by the Group.

·; IAS 24 (Revised) - Related Party Transactions (effective for periods beginning on or after 1 January 2011)

·; IFRIC 19 - Extinguishing Financial Liabilities with Equity Insurers (effective for periods beginning on or after 1 July 2010).

The Group does not anticipate that the adoption of the above standards and interpretations will have a material effect on its financial statements on initial adoption.

2 Segmental analysis

Segmental information is presented in respect of the Group's business segments in line with IFRS 8 Operating Segments which requires segmental information to be presented on the same basis as it is viewed internally. The Group's Board of Directors, considered as the Group's "Chief Operating Decision Maker", view the business on a geographical basis. As such, two operating segments (England and Scotland) have been identified as reportable segments. There are no other operating segments. The majority of revenues are earned from the sale of aggregates, related products and services.

Breedon Aggregates Limited 

Preliminary results for the year ended 31 December 2010

Notes to the financial statements (continued)

2 Segmental analysis (continued)

.

Scotland total assets include £1,070,000 (2009: £nil) in respect of investments in associated undertakings.

Non-current assets held for resale of £400,000 (2009: £nil) are included within the England segment.

Analysis of depletion, depreciation, amortisation and capital expenditure

Additions to property, plant and equipment and other intangible assets exclude additions in respect of business combinations (note 8).

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Notes to the financial statements (continued)

3 Non-underlying items

During the year, the Group acquired the entire share capital of Breedon Holdings Limited. As required by IFRS 3 (Revised), acquisition costs have been expensed as incurred. Additionally, the Group incurred redundancy costs in respect of the reorganisation of parts of the businesses acquired. Non-underlying items also include property items, impairments, the amortisation of acquisition intangible assets and changes in the fair value of financial instruments.

4 Financial income and expense

5 Taxation

Recognised in the Consolidated Income Statement

Taxation on items taken directly to Other Comprehensive Income

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Notes to the financial statements (continued)

5 Taxation (continued)

Reconciliation of effective tax rate

* The Company is resident in Jersey and has a zero percent tax rate. The Group has subsidiary operations in the UK which pay tax at a higher rate of 28%.

The UK corporation tax rate will reduce from 28% to 23% over a period of 4 years from 2011. The first reduction in the UK corporation tax rate from 28% to 27% was substantively enacted on 20 July 2010 and will be effective from 1 April 2011. This will reduce the Group's future current tax charge accordingly.

6 Interest-bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings.

As part of the acquisition of Breedon Holdings Limited, the Group renegotiated certain of the terms of the bank loans and overdrafts acquired with the business, principally to extend the final repayment date to September 2015, and repaid £49,982,000 of bank loans. The bank loans and overdrafts carry a rate of interest of 3% above LIBOR and are secured on the freehold and leasehold properties and other assets of the Company and its subsidiary undertakings.

Net debt

Net debt comprises the following items:

7 Earnings per share

The calculation of earnings per share is based on the loss for the year attributable to ordinary shareholders of £5,883,000 (2009: £829,056) and on the weighted average number of ordinary shares in issue during the period.

The calculation of underlying earnings per share is based on the loss for the year attributable to ordinary shareholders, adjusted to add back the non-underlying items, of £1,571,000 (2009: £829,056) and on the weighted average number of ordinary shares in issue during the period.

Diluted earnings per ordinary share reflects the effect of outstanding dilutive warrants.

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Notes to the financial statements (continued)

7 Earnings per share (continued)

Reconciliations of the weighted average number of shares used in the calculations are shown below:

8 Acquisitions

On 6 September 2010, the Group acquired the entire issued share capital of Breedon Holdings Limited. This transaction has been accounted for as a business combination.

All of the underlying trading results of the Group are attributable to the above acquisition (with the exception of £978,000 of administrative expenses in respect of the Company); these results are set out in note 2, segmental analysis. If this acquisition had occurred on 1 January 2010, the results of the Group would have shown revenue of £143,831,000, underlying EBITDA, before share of loss of associated undertaking, of £13,725,000 and underlying operating profit for the year of £1,441,000.

The fair value of the consideration paid and the consolidated net assets acquired, together with the goodwill arising in respect of this acquisition, is as follows:

Cash flow effect

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2010

Notes to the financial statements (continued)

8 Acquisitions (continued)

The provisional fair value adjustments comprise adjustments to:

·; revalue certain minerals and land and buildings to reflect fair value at the date of acquisition based on a valuation by the Directors, taking into account an external third party valuation performed by Gerald Eve LLP, Chartered Surveyors, as at 9 March 2009;

·; impair certain minerals, land and buildings and plant and machinery to reflect its fair value at the date of acquisition;

·; reflect the fair value of intangibles acquired, all of which have a finite life;

·; reflect the fair value of the investment in associates;

·; inventories to reflect fair value/net realisable value;

·; trade and other receivables to reflect recoverable amounts;

·; recognise assets held for resale at the date of acquisition;

·; trade and other current liabilities to reflect contractual liabilities;

·; provisions to reflect restoration costs to comply with environmental, planning and other legislation and to make provision for lease costs in respect of sites no longer being utilised;

·; deferred tax balances.

The goodwill arising represents the geographic location of the assets acquired and the skills of the existing workforce.

The Group incurred acquisition related costs of £3,794,000 relating principally to external professional fees and due diligence costs which have been included as non-underlying administrative expenses.

At acquisition, Breedon Holdings Limited was party to a put and call option with Enneurope Holdings Limited. The Directors consider that the fair value of this option at 6 September 2010 was £nil as, under the terms of the option agreement, neither the put nor the call was exercisable.

9 Subsequent events

At the year end, a call option was exercisable over the shares in Enneurope Holdings Limited with a gain in the fair value of the option of £259,000 being recognised. Enneurope Holdings Limited is the holding company of Enneurope Limited, which sold its interests in its Polish operations in November 2010. On 11 February 2011, the Group exercised this option acquiring the entire issued share capital of Enneurope Holdings Limited for a consideration of £1. On exercise of the option, the fair value of the net assets acquired was consistent with the fair value of the option at the year end.

On 25 March 2011, an agreement was reached to sell De Lank Quarry in Cornwall, a site held as a non-current asset held for resale at the year end, for £365,000 before associated costs of sale.

10 Financial Information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2010 or 2009 but is derived from those accounts. The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports.

The Annual Report and Accounts will be posted to shareholders on or before 18 April 2011 and will be displayed on the Company's website, www.breedonaggregates.com. Copies of the Annual Report and Accounts will be available from the Company's Registered Office, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE2 3RT.

This Preliminary announcement of results for the year ended 31 December 2010 was approved by the Directors on 30 March 2011.

Cautionary Statement

This announcement contains forward looking statements which are made in good faith based on the information available at the time of its approval. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of risks and uncertainties that are inherent in any forward looking statement which could cause actual results to differ from those currently anticipated.