Breedon Regulatory News (BREE)

5 March 2013

Breedon Aggregates Limited

("Breedon Aggregates" or "the Group")

Annual Results 2012

Breedon Aggregates, the UK's largest independent aggregates business, today announces its audited annual results for the year ended 31 December 2012.

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

4.3 million tonnes of aggregates sold

1.2 million tonnes of asphalt sold

481,000 cubic metres of ready-mixed concrete sold

Highlights

·; EBITDA margin up 1.5 points to 11.6%

·; Underlying earnings increased in both England and Scotland

·; Value-enhancing performances from recent acquisitions

·; Key health & safety target achieved

·; Major capital investment projects completed

·; Post year-end, St Michaels reserves secured

Peter Tom, Executive Chairman, commented:

"I am pleased to report that, despite the worst trading conditions I can remember in my 50 years in this industry, Breedon Aggregates continued to grow and prosper in 2012. Group revenues increased and our profitability improved.

"Looking ahead, the challenges in 2013 look like being every bit as tough as they were last year. The Construction Products Association is forecasting that construction output will fall by more than 2%, with no meaningful recovery until 2014. Against this backdrop, it would be easy to let the gloom get the better of us, but we have a strong and finely-tuned business which is well equipped to cope with difficult economic conditions and we remain enthusiastically committed to growing the Group in the years ahead.

"When we created Breedon Aggregates in 2010, we did so in the knowledge that we could expect little or no help from the construction market. Our models were predicated on delivering real value if necessary through self-help alone. It is this approach and mindset which give us the confidence to anticipate another year of progress in 2013."

- ends -

Enquiries:

Preliminary results for the year ended 31 December 2012

Chairman's Statement

2012 was not a vintage year for our industry. Construction output fell by more than 8%, a significantly worse outturn than even the most pessimistic forecasts, as the full impact of public sector spending cuts were felt, particularly in Scotland, and economic recovery was set back once again.

However, I am pleased to report that, despite the worst trading conditions I can remember in my 50 years in this industry, Breedon Aggregates continued to grow and prosper. Our aggregates and readymix volumes were ahead in both England and Scotland, helped by the full year effect of the C&G acquisition and positive contributions from the two small acquisitions we made during the year.

Overall, Group revenues continued to grow, by nearly 3% to £174 million. Our EBITDA margin improved by a further 1.5 points to 11.6% and we reduced our net debt from more than £96 million to just over £74 million.

This progress did not come about by accident. It was a direct result of the commitment, dedication and sheer hard work of our 800 employees. Most importantly of all, it was down to the rigorous attention to detail which prevails throughout our business. Region by region, site by site, plant by plant, our talented people are squeezing every last drop of efficiency out of our operations.

Every pound of investment we make in our business is being made to work harder than ever before. That means optimising the output from our crushers, coating plants, concrete batching plants and contracting operations and ensuring that the greatest possible proportion of our raw material goes into products with the highest possible added value.

Similarly, our prospecting, marketing and customer service have to be smarter, more cost-effective and more responsive than ever. We may be a national group, but at heart we are a collection of local businesses serving local people and local companies. Our success is built on careful selection of new business, then delivering the right product, at the right price, to the right place - on time and with courteousness and consideration.

The same is true of our health and safety performance, the number one item on every Board meeting agenda, which improved significantly in 2012 as everyone in the business redoubled their efforts to make our sites safer. Lost-time incidents continued to fall and I am very pleased to say that our target of reducing Breedon's Lost-Time Incident Frequency Rate by 50% was achieved.

We continued to seek out new market opportunities during the year and launched two new initiatives: our 1stMix 'small load' readymix business in England, which was trading profitably within six months; and Mobile Concrete Solutions, a pioneering joint venture with TSL Contractors which supplies a mobile concrete batching service to renewable energy projects in remote locations in Scotland and is already winning good, profitable business.

We made two acquisitions during the year: Nottingham Readymix in England in January and Rothes Glen quarry in Scotland in July. Both performed well, making a useful contribution to Group profit. We continue to pursue a number of other acquisition opportunities but, once again, I must emphasise that we will only buy businesses or assets which demonstrably enhance shareholder value.

We will apply the same strict criteria to all purchases, whether they are valued at £1 million, £100 million, or more. It was for precisely this reason that we withdrew from the bidding for the assets being sold by Tarmac and Lafarge as a condition of their new building materials joint venture. We could not satisfy the value expectations of the sellers, for the simple reason that they exceeded - by a significant amount - the level at which we could realise value for our shareholders.

Looking ahead, the challenges in 2013 look like being every bit as tough as they were last year. The Construction Products Association is forecasting that construction output will fall by more than 2%, with no meaningful recovery until 2014. Against this backdrop, it would be easy to let the gloom get the better of us, but we have a strong and finely-tuned business which is well equipped to cope with difficult economic conditions and we remain enthusiastically committed to growing the Group in the years ahead.

When we created Breedon Aggregates in 2010, we did so in the knowledge that we could expect little or no help from the construction market. Our models were predicated on delivering real value if necessary through self-help alone. It is this approach and mindset which give us the confidence to anticipate another year of progress in 2013.

Peter Tom CBE

Executive Chairman

5 March 2013

Preliminary results for the year ended 31 December 2012

Chief Executive's Review

Breedon Aggregates continued to make solid progress in 2012 despite extremely difficult market conditions that have seen significant declines in the national demand for all main product categories in the UK. Through a combination of tight cost control and careful selection of work we have managed to improve headline and underlying EBITDA in both England and Scotland, improving margins from 10.1% to 11.6% on revenue which was 3% ahead of last year, including acquisitions. This represents a very considerable achievement and reflects the hard work and dedication of all our employees and I am delighted that we were again able to thank them all with the payment of a modest Christmas bonus in December.

Trading summary

2012 will be remembered as one of the most difficult years in living memory for the UK building materials and construction industries. Poor demand, record rainfall in the second quarter of the year and Jubilee/Olympics holidays meant that national UK sales volumes of aggregates declined by around 10%, asphalt by 17% and concrete by 9% in the year. UK consumption of primary aggregates is now at the same level as the mid-1960s and more than 50% below the peak year of 1989. Several of our competitors have had to announce unit closures, staff redundancies and profit warnings. It is welcome to see the government finally recognising the importance of infrastructure in the Chancellor's Autumn Statement and launching a number of initiatives that we hope will help to get Britain building again in 2013 and 2014.

Against this backdrop, Breedon has performed extremely well, making good progress in both England and Scotland, improving underlying earnings in both divisions and delivering excellent performances from our three recent acquisitions, C&G Concrete, Nottingham Readymix and Rothes Glen quarry.

Sales revenue for the year was £173.5 million, 3% higher than 2011 and Group EBITDA of £20.2 million was 18% above the previous year. Margins improved by 1.5%, which represents an outstanding achievement in a declining market. Careful work selection, tight cost control and increased operational productivity have all contributed to the improved result for the year. We have worked hard to develop an ethos of "self-help", recognising that we cannot rely on a growing market to take the business forward.

Sales volumes of aggregates increased by 5% to 4.3 million tonnes, asphalt volumes declined by 13% to 1.2 million tonnes, slightly less than the national reduction, while concrete volumes increased by 18% to 0.5 million cubic metres, reflecting the contribution from C&G. Excluding the effect of acquisitions, aggregates volumes fell by 1% and concrete volumes were down by 5%, mainly due to a very large contract supplied in 2011 which was not repeated in 2012.

Several significant contracts were supplied during the year, including Tesco at West Bromwich and the A41 in England, and the Fife ITS, Peterhead Prison and the Trump golf project in Scotland. Although these contracts made an important contribution, they represent a relatively small percentage of our total sales. We are increasingly looking to supply smaller local customers with whom we can develop close working relationships and who tend to generate repeat business in our market area. We try to compete with the major suppliers by offering competitive prices but with better service and support, which we believe differentiates us from the larger global companies.

Operating Review

During the year we continued to build on the solid foundations established in 2011. We have an experienced, motivated and stable management team which gives me great confidence that we can continue to further improve the business in 2013 and beyond.

One of our key objectives for the year was to improve our safety performance, which had deteriorated significantly in the period immediately preceding our acquisition of the business in 2010. The key performance indicator we use is the Lost Time Incident Frequency Rate (LTIFR) which measures the number of lost time incidents per 200,000 hours worked. Our target was to reduce this by 50% in 2012 and I am delighted that we managed to achieve this. We will be aiming for a further significant reduction in 2013.

It is pleasing to report operational progress on all fronts in 2012 and the business today looks very different to the one that emerged following Ennstone's administration in 2009. Sales revenue has grown on the back of several successful acquisitions, EBITDA and operating profit are well ahead and net debt has been significantly reduced.

We continue to invest in the asset base of our business whilst ensuring that capital expenditure remains well below depreciation, allowing us to reduce net debt year-on-year in line with our stated strategy. A number of significant projects were completed during the year, including a new asphalt plant at our Stirlinghill quarry near Peterhead and a new mobile concrete plant to support the successful development of Mobile Concrete Solutions, the joint arrangement we launched in Scotland to take advantage of the significant on-going investment in wind farms and renewable energy. In England we replaced much of the old mobile plant acquired with C&G and refreshed its transport fleet with the acquisition of new and second-hand tippers and mixers. We also relocated the C&G sales office from rented premises in Stamford to our Norton Bottoms quarry. This is consistent with our strategy of having all support functions located on our own sites, close to operations and avoiding external rental costs.

A key part of our strategy is to actively sell surplus assets to generate cash and reduce debt. In September 2010 we set ourselves the target of generating £20 million in disposals by 2015 and we are on track to achieve this. During the year we sold surplus land and equipment worth £6.2 million, which brings our running total to nearly £10 million since our acquisition of the business.

Two small acquisitions were completed during the year. In January we purchased the business of Nottingham Readymix, a leading supplier of concrete in the Nottingham market which has been buoyant due particularly to the tram project and continuing investment at the university. The business also provides an important fixed outlet for sand and gravel from the Norton Bottoms gravel pit acquired with C&G in 2011. In July we acquired Rothes Glen sand and gravel quarry near Elgin, east of Inverness. This complements our Netherglen rock quarry two miles away and provides an important source of sand for our ready-mixed concrete business in the area. Our new mini mix service, 1stMix, launched in the spring made solid progress building market share and moved into profit in October. We are confident of further progress in 2013.

After nearly twelve months of preparation, the auction of the assets that Tarmac and Lafarge were required to divest in order to proceed with their joint venture was finally concluded. Breedon undertook a detailed review of the Hope cement plant and other assets being sold. A number of significant risk areas were identified which impacted our valuation of the business and consequently we were unable to meet the value expectations of the vendors. We continue to evaluate a number of other opportunities but, as we have frequently stated, we will only make acquisitions which we are confident will add value for our shareholders. We expect to make further progress on business development in 2013.

Our Best of Breedon business improvement scheme, where employees suggest ways of improving the business and Breedon GoodQuarry, which sets target standards for our operations, have continued to go from strength to strength. It was particularly pleasing that seven of our units achieved GoodQuarry status, including one which was one of the poorest performers in 2011 but had made dramatic improvements. Generally, standards showed a significant improvement over the previous year. Winning ideas from employees included the installation of carbon monoxide detectors in high-risk areas, procedures for controlling water added to concrete on-site and safety modifications to facilitate screen access for maintenance. The latter also won an award at the MPA industry safety conference in October.

Our Strategy

The progress made over the past two years in difficult market conditions demonstrates the resilience of our business, the strength of our management team and the effectiveness of our business model. However we are not complacent and there is more that needs to be done if we are to fulfil our objective of being the safest, most profitable and best-run aggregates business in the UK. We will continue to strive for further improvement. Areas that we intend to focus on in 2013 will be the management of complaints - how we respond when things go wrong says as much about our culture as the standard of service we provide to customers on a daily basis; and on improvements to our technical capability. The trial of recycled rubber asphalt on the A92 in Scotland shows we are capable of stealing a march on competitors with much larger technical departments than ours, but there is more we can do to increase the use of recycled materials, reduce wastage and develop innovative products.

We continue to see many growth opportunities in the UK, both through selective acquisition and organic development. Our recent moves into mobile concrete plants and the mini mix business have been successful and we have identified several interesting possibilities for new concrete and asphalt plants. A number of acquisition opportunities are under active consideration and we are excited about the prospect of further growing the business in 2013.

Business Outlook

While there is no doubt that 2013 will be another tough year with construction output forecast to decline again and MPA product volumes also forecast to be down, we are generally more optimistic than we were this time last year, although the winter conditions in January resulted in a slow start to the year. The government at last seems to have realised that switching funding from revenue to capital spending on infrastructure can have a positive effect on GDP, improve employment and deliver significant secondary economic benefits. There is a growing recognition in both public and private sectors that essential maintenance work and upgrades to production facilities cannot be postponed indefinitely.

While the recent announcements made in November 2012 will take time to feed through, the schemes that were cleared the previous year should start to materialise in 2013. The A453 upgrade between the M1 and Nottingham is a good example; this should start early in 2013 with Laing O'Rourke the successful contractor. The overall housing market remains depressed due to lack of mortgage availability but the demand for new homes is quite strong and the range of financial support measures introduced means that buying a new home is the easiest way onto the property ladder for first time buyers. Housebuilders anticipate steady demand over the next few years.

In Scotland, we believe that there will be continuing investment in the renewables sector and related infrastructure. The recently approved Aberdeen by-pass and the commitment to dual the A9 from Perth to Inverness will benefit us in the medium term. Our associate company BEAR Scotland recently secured the North West maintenance contract from Transport Scotland which will ensure we continue to benefit from material supplies in that area for the next few years. We are hopeful that transport budgets in Scotland may increase slightly from their recent low levels.

The industry landscape in the UK is set to change in 2013 with the Lafarge/Tarmac joint venture now up and running and the new Hope Construction Materials business also having commenced trading. The continuing investigation by the Competition Commission into the sector is expected to conclude towards the end of the year although we would expect any structural remedies to relate mainly to the cement market.

Breedon will remain focussed on further improving our performance in safety, operations and customer service. Our management team have demonstrated their ability to deliver solid results in the most difficult market conditions. The acquisitions we have made have all added significant value to our core business giving us confidence in our ability to repeat this with future deals. We are confident of making further progress in 2013.

Simon Vivian

Group Chief Executive

5 March 2013

Preliminary results for the year ended 31 December 2012

Financial Review

I am pleased to report on the results and financial statements of Breedon Aggregates Limited for the year ended 31 December 2012. During the year, we acquired the issued share capital of Nottingham Readymix Limited and the trade and assets of Speyside Sand & Gravel (comprising Rothes Glen quarry) and therefore the Consolidated Financial Statements incorporate the results from these operations. Total consideration for these two acquisitions was £1.6 million in cash, funded from our existing bank facilities.

Revenue for the year was £173.5 million (2011: £168.9 million). Excluding revenues from acquisitions, including the full year revenue from C&G Concrete which was acquired in July 2011, revenue would have been £154.8 million (2011: £161.7 million).

Underlying earnings before our share of associated undertakings, interest, tax, depreciation and amortisation (EBITDA) were £20.2 million (2011: £17.1 million). Of this, EBITDA of £2.1 million (2011: £0.5 million), was generated by acquisitions including a full year's earnings from C&G. Underlying Group operating profit was £8.8 million (2011: £5.7 million). Underlying results are stated before acquisition-related expenses, redundancy and reorganisation costs, property items, impairments, amortisation of acquisition intangibles, changes in the fair value of financial instruments, gains on bargain purchase and related tax items.

Profit after tax for the year was £5.3 million (2011: £1.2 million).

Divisional Performances

The market environment generally disappointed in the year with public sector cuts and very wet weather in April and June resulting in construction activity being at a very low level. Despite this we have made good progress with the Breedon business focussing on our cost performance and shaping the business to service the current market environment.

For the 12 months as a whole, aggregates volumes were up 4.6% at 4.3 million tonnes, with both England and Scotland ahead year-on-year. However, acquisitions contributed to the additional volume without which the volume of aggregates would have been down 1.3%. Asphalt volumes were 12.8% down at 1.2 million tonnes, with asphalt volumes in England down by 12.3%, and in Scotland down by 13.6%. Ready-mixed concrete volumes grew by 18.0% in the year to 0.5 million cubic metres, assisted by the inclusion of a full year of the former C&G plants and the newly-acquired Nottingham Readymix plant.

The full-year revenue of £173.5 million represented a 2.7% increase on the figure in 2011. The underlying EBITDA of £20.2 million was up £3.1 million, 18.3% year-on-year with our attention remaining focussed on the challenge of continuing to improve the margins generated in the business.

The higher input costs experienced in 2011, particularly bitumen (a key ingredient in the production of asphalt), were largely recovered during the course of 2012 and despite some volatility in oil prices we did not experience quite the same degree of cost inflation during 2012. As a consequence of the partial cost recovery and careful selection of work, EBITDA margins across the business in England and Scotland were improved year-on-year.

Non-Underlying Items

Non-underlying items in the year comprised a gain on the sale of property of £0.2 million, the release of a provision for environmental and planning of £0.6 million, acquisition-related costs, including aborted acquisitions, of £0.2million and £0.4 million of redundancy costs.

Interest And Tax

Net finance costs in the year totalled £4.3 million and included interest on the Group's bank finance facilities, as well as interest on finance leases.

An underlying tax charge of £1.4 million was recorded in the year, resulting in an underlying effective tax rate for the full year of 24.9%, influenced by the effects of income from associates already being taxed and of costs in Jersey for which no tax relief can be obtained.

The non-underlying tax credit principally relates to the satisfactory closing of prior year tax items.

Earnings Per Share

Basic earnings per share ("EPS") for the year were 0.85 pence (2011: 0.21 pence), struck after the non-underlying items mentioned above. Underlying basic EPS for the year totalled 0.67 pence (2011: 0.21 pence).

Statement of Financial Position

Net assets at 31 December 2012 were £79.3 million (2011: £59.0 million). The Company issued 86.3 million ordinary shares during the year in the form of an equity placing in April of 83.3 million shares at 18 pence per share and the balance were as a result of exercise of share options and KBC Bank exercising almost half of their holding of warrants in July at a price of 12 pence per share.

The net assets are underpinned by the mineral, land and building assets of the Group which at the end of December 2012 had a book value of £93.8 million.

Cash flow

Cash generated from operations was £14.5 million (2011: £12.8 million).

In addition to the focus on delivering short term earnings growth, we are positioning the business for the longer term and as part of that we are investing in the business, adding new acquisitions where these make sense both strategically and financially and investing in plant and machinery. During 2012 we installed a new asphalt plant at our Strirlinghill quarry in Scotland, we have purchased a new mobile concrete plant to target work in the renewables sector, launched 1stMix in England and have invested in new plant and equipment to improve our operational efficiency. The Group spent £1.5 million on acquisitions, net of cash acquired, and had a cash spend on capital expenditure projects of £7.3 million.

We raised £14.7 million through the issue of shares, which was utilised to reduce the Group's bank debt, and £6.2 million was raised from the disposal of surplus assets in the Group. Reduction of finance leases totalled £6.3 million, resulting in a net cash inflow for the year of £7.2 million (2011: outflow £3.9 million).

Net debt at 31 December 2012 was £74.1 million (2011: £96.2 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 margin. At 31 December 2012, total undrawn facilities available to the Group amounted to £29.8 million.

The Group's bank facility is subject to covenants which are tested quarterly. These covenants are: Group interest cover, minimum underlying EBITDA and Group cash flow cover. At 31 December 2012, the Group comfortably complied with all three covenants. Based on our current estimates, we expect to comply with all our covenants for the foreseeable future.

The Group has in place interest rate hedges which mitigate the risk of interest rate rises on the Group's bank loans.

Dividends

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, for now, the main focus of the Group will be on delivering capital growth for shareholders.

Ian Peters

Group Finance Director

5 March 2013

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Consolidated Income Statement

for the year ended 31 December 2012

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

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2012

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Consolidated Statement of Financial Position

at 31 December 2012

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Consolidated Statement of Changes in Equity

for the year ended 31 December 2012

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Consolidated Cash Flow Statement

for the year ended 31 December 2012

Breedon Aggregates Limited 

Preliminary results for the year ended 31 December 2012

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 subsidiary undertakings and equity account for the Group's interest in associated undertakings (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 2012

In 2012, the following standard has been endorsed by the EU, became effective and therefore was adopted by the Group:

·; Amendment to IAS 12 - Deferred Tax - Recovery of Underlying Assets

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 the above standard, 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 amendments which are effective for periods starting after the date of these financial statements. The following standards and amendments have not yet been adopted by the Group:

Effective date 1 July 2012

·; Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income

Effective date 1 January 2013

·; IFRS 13 - Fair Value Measurement

·; Amendments to IFRS 7 - Offsetting Financial Assets and Financial Liabilities

Effective 1 January 2014

·; IFRS 10 - Consolidated Financial Statements

·; IFRS 11 - Joint Arrangements

·; IFRS 12 - Disclosures of Interests in Other Entities

·; IAS 27 - Separate Financial Statements

·; IAS 28 - Investments in Associates and Joint Ventures

·; Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities

The Group does not anticipate that the adoption of the above amendments 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", views 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 2012

Notes to the financial statements (continued)

2 Segmental analysis (continued)

Scotland total assets include £887,000 (2011: £792,000) in respect of investments in associated undertakings.

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 2012

Notes to the financial statements (continued)

3 Non-underlying items

As required by IFRS 3 - Business Combinations, acquisition costs have been expensed as incurred. Additionally, the Group incurred redundancy costs in respect of the reorganisation of parts of the businesses. Non-underlying items also include property items, impairments, the amortisation of acquisition intangible assets, changes in the fair value of financial instrument, a gain on bargain purchase and related tax items.

The release of provision for environmental and planning relates to a provision created on acquisition in 2011. The current year credit in respect of non-underlying taxation principally comprises an amount in respect of the agreement of prior year items.

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 2012

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 24.5% (2011: 26.5%).

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014, and the December 2012 Autumn Statement announced a planned further reduction to 21% by 2014. A reduction in the rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011, and further reductions to 24% (effective from 1 April 2012) and 23% (effective from 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively.

This will reduce the Group's future current tax charge accordingly. The deferred tax liability at 31 December 2012 has been calculated based on the rate of 23% substantively enacted at the balance sheet date.

It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Group's future current tax charge and reduce the Group's deferred tax liability accordingly.

6 Interest-bearing loans and borrowings

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

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 and have a final repayment date of 5 September 2015.

Net debt

Net debt comprises the following items:

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Notes to the financial statements (continued)

7 Earnings per share

The calculation of earnings per share is based on the profit for the year attributable to ordinary shareholders of £5,256,000 (2011: £1,175,000) and on the weighted average number of ordinary shares in issue during the year of 619,801,185 (2010: 557,935,958)

The calculation of underlying earnings per share is based on the profit for the year attributable to ordinary shareholders, adjusted to add back the non-underlying items, of £4,176,000 (2011: £1,167,000) and on the weighted average number of ordinary shares in issue during the year as above.

Diluted earnings per ordinary share is based on 704,182,150 (2010: 574,578,561) shares and reflects the effect of all dilutive potential ordinary shares.

8 Acquisitions

On 16 January 2012, the Group acquired the entire issued share capital of Nottingham Ready Mix Limited and on 16 July 2012, the Group acquired the trade and assets of Speyside Sand & Gravel Quarries Limited (comprising Rothes Glen quarry). These transactions have been accounted for as acquisitions.

The fair value of the consideration paid and the net assets acquired, together with the goodwill arising in respect of these acquisitions are as follows:

The provisional fair value adjustments comprise adjustments to:

·; revalue certain minerals, land and buildings, and plant and equipment to reflect fair value at the date of acquisition;

·; inventories to reflect fair/net realisable value;

·; trade and other receivables to reflect recoverable amounts;

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

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 £64,000 relating principally to external professional fees and due diligence costs which have been included as non-underlying administrative expenses.

During the year, these businesses have contributed revenues of £3,067,000 and underlying EBITDA of £322,000 to the Group's results. If these acquisitions had occurred on 1 January 2012, the results of the Group would have shown revenue of £173,727,000, underlying EBITDA, before share of profit of associated undertaking, of £20,211,000 and underlying operating profit for the year of £8,863,000.

Cash flow effect

The net consideration shown in the Consolidated Statement of Cash Flows of £1,546,000 in respect of these acquisitions comprises the cash consideration paid of £1,565,000 net of the cash acquired of £19,000.

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Notes to the financial statements (continued)

8 Acquisitions (continued)

Prior year acquisitions

Enneurope Holdings Limited

On 11 February 2011, the Group acquired the entire issued share capital of Enneurope Holdings Limited. This transaction has been accounted for as an asset acquisition. Since acquisition, this company has not traded and has had no effect on the trading results of the Group but provided an immediate cash benefit.

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

The fair value adjustments comprise adjustments to reflect contractual liabilities and environmental and planning requirements.

C&G Concrete

On 22 July 2011, the Group acquired the trade and certain assets of C&G Concrete Limited. This transaction has been accounted for as a business combination.

During the prior year, this business has contributed revenues of £7,182,000 and underlying EBITDA of £462,000 to the Group's results. If this acquisition had occurred on 1 January 2011, the prior year results of the Group would have shown revenue of £176,580,000, underlying EBITDA, before share of profit of associated undertaking, of £17,464,000 and underlying operating profit for the year of £5,452,000.

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

Breedon Aggregates Limited

Preliminary results for the year ended 31 December 2012

Notes to the financial statements (continued)

8 Acquisitions (continued)

The fair value adjustments comprise adjustments to:

·; revalue certain minerals, land and buildings, and plant and equipment to reflect fair value at the date of acquisition;

·; inventories to reflect fair/net realisable value;

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

·; provisions to reflect restoration costs to comply with environmental, planning and other legislation;

·; deferred tax balances.

The Group incurred acquisition related costs of £161,000 relating principally to external professional fees and due diligence costs which have been included as non-underlying administrative expenses.

Cash flow effect

The cash flow effect of the above two acquisitions can be summarised as follows:

9 Financial Information

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The Auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Article 113B(3) or Article 113B(6) of the Companies (Jersey) Law 1991

The Annual Report and Accounts will be posted to shareholders on or before 18 March 2013 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 2012 was approved by the Directors on 5 March 2013.

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.