Business Radar | BREEDON TRADING LIMITED

Page 1

Annual Report and Accounts 2010 Essential Products Scarce Resources

Page 2

Breedon Aggregates is the UK’s largest independent aggregates We have around 180 m illion tonnes of m ineral reserves and business after the five global majors. We operate 23 quarries, resources in the UK, providing an estim ated life of approxim ately 18 asphalt plants and 27 ready-mixed concrete plants in England 50 years at current output levels. (M ineral reserves are defined as and Scotland. reserves w hich are ow ned, controlled and planned, w hereas resources are controlled by the Group but are subject to planning consent). Breedon Aggregates w as created in Septem ber 2010 follow ing the reverse takeover of Breedon Holdings Lim ited, w hich had Breedon Aggregates’ strategy is to grow through consolidation of acquired certain assets from the form er Ennstone plc, by the UK heavyside building m aterials sector. We are listed on the specialist building m aterials com pany M arw yn M aterials Lim ited. Alternative Investm ent M arket of the London Stock Exchange. CON TEN TS Highlights of the year 1 The Breedon Aggregates Product Chain 2-3 Our Areas of Operation 4-5 Chairm an’s Statem ent 6-7 Chief Executive’s Review 8-11 Financial Review 12-15 Directors 16-17 Directors’ Report 18-21 Corporate Governance 22-24 Directors’ Rem uneration Report 25-28 Statem ent of Directors’ Responsibilities 29 Independent Auditor’s Report to the M em bers 30-31 Consolidated Incom e Statem ent 32 Consolidated Statem ent of Com prehensive Incom e 33 Consolidated Statem ent of Financial Position 34 Consolidated Statem ent of Changes in Equity 35 Consolidated Statem ent of Cash Flow s 36 Notes to the Financial Statem ents 37-61 Notice of Annual General M eeting 62-64 Appendix to the Notice of Annual General M eeting 65-67 Shareholder Inform ation 68 Breedon Aggregates Annual Report and Accounts 2010

Page 3

BREED ON A GGREGATES Highlights of the year Financial highlight s Revenue (actual) £ 4 2 .7 m illion Underlying EBITDA (actual)† £ 3 .3 m illion Underlying operating loss (actual)† £ (0 .3 ) m illion Retained loss (actual) £ (5 .9 ) m illion Total non-current assets £ 1 5 5 .4 m illion Revenue (pro forma)* £ 1 4 3 .8 m illion +6 .2 % Underlying EBITDA (pro forma)* † £ 1 3 .7 m illion -1 7 .0 % 3.6 million tonnes of aggregates sold* 1.2 million tonnes of asphalt sold* 270 thousand cubic metres of ready-mixed concrete sold* * Unaudited pro forma based on 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 Annual Report are defined on this basis. Operat ional highlight s • M anagement team strengthened w ith 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 w orking capital • M ajor new supply and surfacing contracts secured in England and Scotland • “ Best of Breedon” aw ard scheme launched to encourage innovation and business improvement initiatives Breedon Aggregates Annual Report and Accounts 2010 1

Page 4

BREED ON A GGREGATES The Breedon Aggregates Product Chain We process stone from our quarries into quality aggregates, ready-mixed concrete and a comprehensive range of asphalt products. Our operations comprise tw o fully integrated, autonomous businesses, in England and Scotland, each w ith its ow n management team. The key to our business is the acquisition of external customers or for use in our ow n permitted aggregates reserves. New consents are operations. We also have a number of quarries granted sparingly and w ith stringent conditions. that produce sand and gravel both for external Breedon Aggregates has successfully accumulated sale and internal use. more than 180 million tonnes of mineral reserves and resources in the UK – enough to last around 50 Some of our aggregates are mixed w ith bought in years at current rates of extraction. bitumen to produce a variety of speciality surfacing products at our asphalt plants in England Rock is blasted from the w orking faces of our and Scotland. These are used either by our ow n hard rock quarries and passed through a series contracting teams or by external contractors to of crushers and screens to produce several types surface roads, car parks, airport runw ays and and grades of ‘dry’ aggregates for onw ard sale to racetracks around the UK. 2 Breedon Aggregates Annual Report and Accounts 2010

Page 5

Some of our aggregates are mixed w ith bought in Our fleet of nearly 200 specialist vehicles deliver cement and other additives to produce ready- the full range of our products to customers mixed concrete for sale to commercial, industrial, around the UK. infrastructure and housing developers. Through our associate company, BEAR Scotland We also supply an exclusive range of decorative Limited, w e maintain and manage much of the aggregates, sold loose or bagged, w hich is used trunk road infrastructure in Scotland. in a w ide range of domestic and commercial applications, from drives and pathw ays to We also ow n a majority interest in Alba Traffic courtyards and architectural landscaping. Breedon M anagement Limited, a leading provider of traffic Special Aggregates have been used in many of the management solutions throughout Scotland. UK’s leading tourist attractions and stately homes. Breedon Aggregates Annual Report and Accounts 2010 3

Page 6

BREED ON A GGREGATES Our Areas of Operation We have tw o fully integrated, autonomous businesses, in England and Scotland, each w ith its ow n management team. Breedon A ggregat es England Breedon A ggregat es Scot land Our English operations are headquartered at Our Scottish operations are headquartered at Breedon on the Hill, near East M idlands Airport, Ethiebeaton, near Dundee, and employ and employ approximately 300 people across the approximately 400 people across the country. country. We operate 6 quarries, 7 asphalt plants We operate 17 quarries, 11 asphalt plants and 22 and 5 ready-mixed concrete plants, supplying ready-mixed concrete plants, together w ith a primarily the West M idlands into mid-Wales, the substantial contracting services business, East M idlands and East Anglia. Our English supplying primarily the north, w est and east of contracting services business serves an area Scotland. We also ow n 37.5% of the leading road from the east coast to mid-Wales and from the maintenance and management company BEAR M 62 to the South M idlands. Breedon Aggregates Scotland Limited and a majority shareholding in England is headed by chief executive Tim Hall. specialist traffic management company, Alba Traffic M anagement Limited. Breedon Aggregates Scotland is headed by chief executive Alan M ackenzie. Pro f orm a revenue generat ed England 4 7 .8 % Scotland 5 2 .2 % 4 Breedon Aggregates Annual Report and Accounts 2010

Page 7

Scotland 1 Morefields Quarry 2 Banavie Quarry 1 3 Benderloch Quarry 4 Bonawe Quarry 14 5 West Area Contracting 12 15 10 13 Peterhead Inverness 11 6 Furnace Quarry 16 7 Shierglas Quarry 17 Aviemore 9 19 18 20 Aberdeen 8 Meadowside Quarry 8 2 9 Aviemore Concrete Plant 21 7 10 Inverness Concrete Plant 3 22 11 Daviot Asphalt Plant 4 Dundee 23 5 24 12 Netherglen Quarry Oban 25 6 13 Rothes Glen Concrete Plant Stirling 26 28 27 14 Boyne Bay Quarry 15 Stirlinghill Quarry 16 Inverurie Concrete Plant 17 Bridge of Don Concrete Plant 18 Craigenlow Quarry 19 Westhill Concrete Plant 20 Deeside Concrete Plant 21 Capo Quarry 22 Cunmont Quarry 23 Ethiebeaton Quarry 24 Balmullo Quarry Crushed Rock 25 Clatchard Craig Quarry 26 Kirkcaldy Concrete Plant 27 Orrock Quarry 28 Dunfermline Concrete Plant Lincoln England 29 29 Mansfield Asphalt Plant Derby Nottingham 30 Leaton Quarry Shrewsbury 35 32 33 38 30 31 Leinthall Quarry Leicester 37 Norwich 31 32 Breedon Quarry* Birmingham 36 34 33 Cloud Hill Quarry Ipswich Northampton Cambridge 34 Ling Hall Asphalt & Concrete Plant Worcester 35 South Witham Quarry Oxford 36 Corby Asphalt & Concrete Plant 37 Shropham Quarry** 38 Longwater Asphalt Plant *Decorative Aggregates are also available bagged **Recycled Aggregates only Breedon Aggregates Annual Report and Accounts 2010 5

Page 8

"Our objective is simple. We w ant to be the most profitable business in the UK aggregates industry" I w ould like to begin by w elcoming all those new shareholders w ho supported us in our recent fundraising and enabled us to make our maiden acquisition in the UK aggregates sector. I w ould also like to thank those of you w ho have been w ith us since the creation of M arw yn M aterials and w aited patiently for us to secure our first platform investment, including our largest investor, M arw yn Capital, w hose innovative investment strategy lay behind the genesis of our 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 w here substantial assets become available very rarely. In doing so, w e immediately took our place as the UK’s largest independent aggregates producer after the five global majors, w ith some 180 million tonnes of mineral reserves and resources – enough to last us more than 50 years at current rates of production. You w ill find a detailed overview of the Group, our products and the markets w e serve on pages 2 to 5 of this report. We hit the ground running as soon as the acquisition w as completed. Within the first month w e had completely rebranded the new group and met the great majority of our 700 employees at a series of roadshow s in England and Scotland. We w ere surprised and delighted by how positively our arrival w as 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, w hich means that almost every one of our colleagues now has a personal stake in the future of our business. I extend a special w elcome to you all. 6 Breedon Aggregates Annual Report and Accounts 2010 BREED ON A GGREGATES Chairman’s Statement Our Group Chief Executive, Simon Vivian, and his team made great strides tow ards repositioning the Group in the first three months under our ow nership. The senior management team w as strengthened, a number of early operational improvements w ere made and w e embarked on a rigorous programme of health and safety initiatives to ensure a safer w orking environment for everyone in the business. business. In trading terms, 2010 presented a mixed picture. Sales volumes in England w ere ahead of the previous year, w hilst those in Scotland w ere slightly dow n, both impacted heavily by the severe w eather in December. Nevertheless, w e w ere pleased to report a satisfactory outturn for the full year, w ith pro forma EBITDA of £13.7 million on pro forma revenues of £143.8 million. Year-end borrow ings at £92.3 million w ere low er than our expectations and w e remain focused on reducing this debt as quickly as possible. I w ould particularly like to thank our lending banks, led by Barclays, for their constructive support follow ing completion of the acquisition. You w ill find a detailed review of Breedon Aggregates’ progress during the year in your Group Chief Executive’s Review on pages 9 to 11 of this report. In October, w e took steps to strengthen the Board and w ere pleased to w elcome Ian Peters as Group Finance Director and Susie Farnon as an independent non-executive director. Ian is highly experienced in our industry, having w orked in senior positions w ithin Hanson for many years. He joined the senior management team of M arw yn M aterials in 2008 and w orked closely w ith us on the acquisition of Breedon Holdings.

Page 9

Susie w as formerly banking and finance partner I said at the outset that Breedon Aggregates and head of audit w ith KPM G Channel Islands represents a platform for grow th. We are and is a Commissioner of the Guernsey Financial ambitious to develop the Group both organically Services Commission. On behalf of shareholders, and through bolt-on acquisitions of earnings- I w ould like to w elcome them both to the Board. accretive aggregates businesses. To this end, w e continue to pursue several potential Looking ahead, our objective is simple. We w ant prospects and believe that promising to be the most profitable business in the UK opportunities w ill also be created by the aggregates industry. We w ill achieve this by continuing consolidation of the UK aggregates being nimble and flexible, and above all by industry in the year ahead. providing a higher value local service than our competitors. Evidence of the success of this I w ould like to close by thanking every one of our strategy is already apparent: w e have been employees for the enthusiasm and commitment consistently w inning new business around the they have show n since w e took control of the Group and our commercial teams are highly Group. Breedon Aggregates in its various forms motivated and energetically pursuing every has a long and distinguished heritage in the UK opportunity available to them. aggregates industry and I have been personally struck on many occasions by the pride and There is no doubt that 2011 w ill continue to be dedication of our people. They have earned the very challenging, as the UK economy struggles to appreciation of every member of the Board and return to sustainable grow th. We also face the senior management team and w e all look challenge of sharply rising oil prices: these have a forw ard to w orking together to secure the significant impact on the cost of bitumen, gas oil promising future w hich w e all believe lies ahead and diesel, w hich takes time for us to pass for our business. through in our pricing. How ever, w ith the UK and Scottish Comprehensive Spending Review s Peter Tom CBE behind us, w e have at least been able to plan Executive Chairman ahead w ith greater clarity. It is obviously difficult 30 M arch 2011 to predict w ithin any certainty exactly w here public spending cuts w ill fall in the current year, but the UK manufacturing sector is show ing a steady recovery and w e remain optimistic about the prospects for the private sector generally. I am confident that w e 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 w hen it comes. Breedon Aggregates Annual Report and Accounts 2010 7

Page 10

"Our strategic imperatives w ill be: safety of our employees, service to our customers and value for our shareholders." 8 Breedon Aggregates Annual Report and Accounts 2010

Page 11

BREED ON A GGREGATES Chief Executive’s Review Breedon Aggregates w as established in September 2010 w hen M arw yn M aterials Limited acquired the business from a banking group led by Barclays Bank PLC, w hich had ow ned it since the former Ennstone plc w ent into administration in M arch 2009. The directors and management team believe that the terms of the agreement w ith the banks, and the partial refinancing of the business, mean that w e are in a strong position to improve performance and take advantage of further opportunities to grow through additional investment and acquisition. Our Business We believe that our local presence enables us to Breedon Aggregates is the UK’s largest respond quickly and effectively to our customers’ independent quarrying business w ith 23 quarries, needs, and central administrative functions are kept 18 asphalt plants and 27 ready-mixed concrete to a minimum so that maximum resource can be plants. Operations in England extend from East deployed in production and sales. Anglia, across the M idlands to mid-Wales. In Scotland, w e have a strong regional presence The barriers to entry in the UK aggregates market everyw here north of the Glasgow /Edinburgh M 8 are high. Restrictions on development and corridor. We have consented mineral reserves of planning have meant that virtually no new rock 95 million tonnes, sufficient for 27 years’ life at quarries have been started for many years. current production rates. We also control a Opportunities to acquire these businesses are further 85 million tonnes of resources subject to rare and w e believe that our shareholders have planning. During the year w e succeeded in been fortunate to secure a significant presence getting planning consents for a further 4 million in the market on attractive terms. tonnes at our Cloud Hill quarry. In the full year w e sold 3.6 million tonnes of Operat ional changes aggregates, 1.2 million tonnes of asphalt and Good progress has been made in repositioning 0.27 million cubic metres of concrete. We also the Group for the future and tackling the issues manufacture a number of speciality products associated w ith the underperforming business in including the famous Breedon Golden Amber England, w here market share has been lost and gravel w hich holds the Royal Warrant and has margins are significantly below those achieved in recently been specified for use on the pathw ays Scotland. Tim Hall, a former Tarmac director, of the 2012 Olympic village. joined us in October as Chief Executive of the English business. A number of other senior In the UK, the market is dominated by Tarmac appointments have follow ed and w e are currently (ow ned by Anglo American) and 4 global cement recruiting a replacement safety manager as companies: Lafarge (French), Heidelberg (German), performance in this area has not been acceptable Cemex (M exican) and Holcim (Sw iss). We take in the English business. We now have the team pride in the fact that w e are a British company, in place to deliver the improvements needed over based in the M idlands, focused on providing quality the next few years. The business in Scotland materials to our local customers. Our head office, continues to be led by Alan M ackenzie and w e regional offices and sales offices are all located in w ill be looking to build on the success that this our quarries w hich means that staff at all levels are region has achieved historically. close to the day-to-day operations of the business. Breedon Aggregates Annual Report and Accounts 2010 9

Page 12

BREED ON A GGREGATES Chief Executive’s Review (cont) We launched Breedon Aggregates w ith a series Trading Sum m ary of staff presentations in September w hich w ere Pro forma Group turnover for 2010 w as 6.2% extremely w ell received and w e w ere delighted higher than the previous year. This increase w as w ith the positive response to our vision for the driven by the English business w here sales future. We have a loyal, motivated and flexible volumes of all products w ere ahead of 2009. w orkforce w hich is a great foundation for us to Snow and freezing temperatures affected activity build on. in January and December, particularly in Scotland. The poor w eather led to many sites closing early Follow ing the refinancing of the business, w e in December and material deliveries fell aw ay have been able to improve procurement and sharply after the first w eek. Our associate renegotiate credit terms w ith some key company, BEAR Scotland, w hich maintains the suppliers, reducing w orking capital. The trunk road netw ork in the north east and south rebranding of the business is complete w ith all east of Scotland, had significant additional costs costs taken in 2010. A new w ebsite has also and incurred losses in the month of December. recently been launched. Selling prices of most products increased during A large amount of surplus plant and equipment the year ahead of inflation, but this w as has been sold and w e are w orking on several insufficient to offset haulage, bitumen and fuel land disposals, some of w hich should be cost increases and as a result pro forma concluded in the current year. We have underlying EBITDA (before our share of commenced a review of our haulage fleet w ith associated undertakings) for the 12 months the intention of improving efficiency. The declined by £2.8 million to £13.7 million; contracting business in England has been how ever this w as in line w ith the result reorganised and scaled back. The reduced cost anticipated w hen w e undertook our due diligence base, together w ith greater local focus, w ill in August 2010. Further price increases w ere improve the performance of this division in the notified to our customers in January and M arch coming year. 2011 to try and recover these costs. We have introduced the “ Best of Breedon” aw ard A number of major contracts w ere supplied scheme w hich encourages employees to come up during the year including the Rolls Royce factory w ith ideas to improve our business. A tremendous near Derby, and a major road reconstruction at response w as received to the inaugural Fochabers near Elgin in Scotland. House building competition and 4 w inners received prizes. A picked up from the very low levels experienced in second competition has recently been launched. 2009 and a number of customers, including Barratt and Westleigh, w ere supplied w ith A scheme to improve the operational, aggregates and ready-mixed concrete. In general, environmental and safety standards at all of our w e saw a sustained recovery in private sector quarries is to be launched shortly. The Breedon construction w hile the public sector w as “ GoodQuarry” project w ill be focused on raising extremely busy in the run up to the general standards at all of our units, w here w e see the election but slow ed gradually throughout the rest scope for significant improvement. of the year. 10 Breedon Aggregates Annual Report and Accounts 2010

Page 13

As w ith most aggregates businesses, our customer Business out look base is broad and covers both public and private We believe that private sector construction sectors. The business in England has a greater activity w ill continue to grow in 2011. The early exposure to the private sector and maintenance part of the year has been busy as w ork delayed markets w hile Scotland has greater exposure to from last year is completed. We have secured a government spending through its contracts w ith number of contracts, including the A9 trunk road BEAR Scotland and Scotland Transerv w hich both improvement scheme at Crubenmore in w ork directly for Transport Scotland. We estimate Scotland. the proportion of our business that is related to the public sector to be 60% in Scotland and 25% in The likely effect of the spending review on local England. A major success w as achieved in w inning authority maintenance budgets is difficult to the framew ork contract for Scottish Water and the predict. Our exposure to this is greater in benefit of this w ill build up during 2011. Scotland but the severe w eather has further degraded the condition of the roads and triggered a political rethink on the proposed Our st rat egy expenditure cuts. In addition, elections to the We aim to be the safest, most profitable and best Scottish parliament in M ay mean that the SNP run aggregates business in the UK. Our strategic government w ill w ant to be seen to be reacting imperatives w ill be: safety of our employees, to public concerns about road maintenance. service to our customers and value for our shareholders. We w ill develop and build close The latest Construction Products Association trading relationships w ith our key customers and forecasts for the UK expect output to decline by seek to continuously improve our service levels 2% in 2011 and 0.7% in 2012 before increasing to them. The culture of our group w ill be by 1.6% and 2.6% in the follow ing tw o years. entrepreneurial, agile and responsive. We can The government has recently announced an take decisions quickly and w ill not allow additional £100 million of funding to tackle bureaucracy to inhibit the internal or external emergency road repairs in England and the management of the business. importance of maintaining core infrastructure seems to be increasingly recognised by the main The acquisition of Breedon provides us w ith a political parties. Our view of the markets that w e great platform to build on and w e believe that operate in is that volumes w ill fall slightly in there w ill be significant opportunities to grow the Scotland and increase slightly in England. business, both through acquisition and greenfield development. A number of opportunities are Despite the market uncertainty and the volatility currently being review ed but w e w ill only make in oil related input costs, w e aim to deliver additional investments w here w e are confident improved results in 2011. 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 Simon Vivian of disposals to meet regulatory requirements and Group Chief Executive this could present an opportunity for us. 30 M arch 2011 Breedon Aggregates Annual Report and Accounts 2010 11

Page 14

BREED ON A GGREGATES Financial Review I am pleased to report on the results and financial Underlying earnings before our share of associated statements of Breedon Aggregates Limited undertakings, interest, tax, depreciation and (formerly M arw yn M aterials Limited) for the year amortisation (EBITDA) w ere £3.3 million (2009: ended 31 December 2010. The acquisition of loss £0.9 million). Underlying Group operating Breedon Holdings Limited (“ Breedon” ) w as profit w as a loss of £0.3 million (2009: loss £0.9 completed on 6 September 2010 and therefore million). Of this, a loss of £0.6 million w as incurred the Consolidated Income Statement and prior to the acquisition of Breedon. Underlying Statement of Financial Position incorporate the results are stated before acquisition related results of Breedon from that date. expenses, redundancy and reorganisation costs, property items, impairments, amortisation of Breedon is the UK’s largest independent acquisition intangibles and changes in the fair value aggregates producer, w hich w e acquired for a of financial instruments. total consideration of £2.25 million in cash together w ith w arrants to subscribe for 55,266,667 ordinary shares at an exercise price D ivisional Perf orm ance – of 12.0 pence per share (representing 9.1 per U naudit ed Pro f orm a cent of the enlarged share capital of the In order to aid understanding of the business Company), valued on acquisition at £2.4 million. performance and provide a meaningful year-on- year performance comparison, w e have included In view of the size of Breedon, this acquisition below unaudited pro forma figures for the full constituted a reverse takeover pursuant to Rule calendar year of 2010 and a comparison w ith the 14 of the AIM Rules for Companies and as full calendar year of 2009. such required the approval of shareholders, w hich w as given at an extraordinary general 2010 2009 meeting held on 1 September 2010. The 12 months 12 months Variance admission document relating to this reverse £’m £’m takeover is available on the Company’s w ebsite Revenue: at w w w.breedonaggregates.com. Scotland 75.0 77.7 (3.5)% The Company also raised £50.0 million (before England 68.8 57.7 19.2% expenses) by the issue of 416,666,667 placing Total 143.8 135.4 6.2% shares at 12.0 pence per share. The net proceeds Underlying EBITDA: of this placing w ere £48.3 million and w ere used to pay dow n some of Breedon’s existing debt, to Scotland 10.2 14.2 (28.2)% provide approximately £25 million to fund the England 5.5 5.6 (1.8)% ongoing w orking capital of the enlarged group and Head Office (2.0) (3.3) 39.4% to finance potential future acquisitions. Total 13.7 16.5 (17.0)% M argin 9.5% 12.2% Follow ing completion of the acquisition of Breedon, the Company changed its name to Breedon Aggregates Limited. The market environment generally remained very competitive follow ing the significant volume Revenue for the year (all generated since 6 declines seen in 2008 and 2009. After a September) w as £42.7 million (2009: £nil). This w as challenging start to the year, exacerbated by adversely influenced by severe weather in December harsh w eather conditions, w e began to see some that caused major disruption to our activities in benefit from the previous government’s financial Scotland and to a lesser degree in England. stimulus and from essential road maintenance. 12 Breedon Aggregates Annual Report and Accounts 2010

Page 15

Turnover during the second and third quarters Earnings Per Share therefore improved, driven by increased volumes Basic loss per share (“ EPS” ) for the year w as – especially in asphalt – and slightly improved 2.19 pence (2009: 0.61 pence), struck after the pricing. The return of severe w eather conditions non-underlying items mentioned above. late in the year had a marked impact on the Underlying basic EPS for the year w as a loss of business in the final quarter, especially in Scotland. 0.58 pence. For the 12 months as a w hole, aggregates volumes w ere flat at 3.6 million tonnes, w hilst St at em ent of Financial Posit ion asphalt volumes w ere 9.8 per cent up at 1.2 Net assets at 31 December 2010 w ere £56.8 million tonnes. Asphalt volumes in England w ere million (2009: £11.7 million). The Company ahead but in Scotland w ere dow n approximately issued 418,003,167 ordinary shares during the 5 per cent. Higher input costs, particularly from year; of these, 416,666,667 w ere issued as part bitumen (a key ingredient in the production of of the placing to fund the Breedon acquisition, asphalt) are gradually being passed on to 1,000,000 w ere issued as settlement of customers; how ever, EBITDA margins across the transaction-related bonus payments and 336,500 business w ere dow n year-on-year due to the w ere issued as a gift to employees. inevitable time-lag betw een increased costs and higher selling prices. The net assets are underpinned by the mineral and land and building assets of the Group. Turnover for the pro forma 12 months w as £143.8 million, a 6.2 per cent increase on the pro forma figure for the same period in 2009. Pro forma Cash f low underlying EBITDA of £13.7 million w as £2.8 Cash generated from operations w as £2.8 million dow n year-on-year, w ith our challenge for million. The Group spent £11.4 million on the future being to restore the historic level of acquisitions and had a cash spend on capital margin generated in the business. expenditure projects of £1.2 million. £48.3 million w as raised through the placing of shares w hich w as utilised to reduce the bank debt in N on-underlying it em s Breedon and provide a fund for potential future Non-underlying items in the year w ere £4.5 million. acquisitions, and £0.3 million w as raised from the These included £3.8 million of acquisition costs disposal of surplus assets in the Group. associated w ith the acquisition of Breedon and Repayment of finance leases totalled £2.0 £0.8 million of post-acquisition reorganisation and million, resulting in a net cash outflow for the redundancy costs together w ith a gain on a year of £10.2 million. financial instrument of £0.3 million. Net debt at 31 December 2010 w as £92.3 million (2009: net cash £11.9 million). Int erest and Tax Net finance costs in the year totalled £1.6 million and included interest costs on the Group’s bank finance facilities as w ell as interest on finance leases and hire purchase agreements. A tax credit of £0.4 million w as recognised in the year, resulting in an effective tax rate for the full year of 6.8 per cent. Breedon Aggregates Annual Report and Accounts 2010 13

Page 16

BREED ON A GGREGATES Financial Review (cont) Bank Facilit ies Risk The Group’s bank loans have a maturity date of 5 Risk is an inherent and accepted element of doing September 2015 and are subject to a floating business. We have identified the principal risks interest rate based on LIBOR plus a margin. At and maintain and develop a risk management 31 December 2010, total undraw n facilities system that is appropriate and commensurate to available to the Group amounted to £25.4 million. our business. We set out below our key risks, together w ith the mitigating factors or action w e The Group’s bank facility is subject to covenants have taken. w hich are tested quarterly. These covenants are: group interest cover, minimum underlying The main financial risks of the Group relate to the EBITDA and, w ith effect from 30 September availability of funds to meet business needs, 2011, group cash flow cover. The results of the customer default and fluctuations in interest rates. covenant calculations at 31 December 2010 The Group finance function is tasked with managing w ere: these risks through a series of risk avoidance strategies including robust cash forecasting, performance management, credit insurance and Actual Covenant interest rate hedging. Further information is included in note 21 to the financial statements. Interest cover 2.26 1.58 The Group is heavily reliant on energy and fuel oil M inim um £13.7m £8.0m to produce its products and get them to market. EBITDA The recent fluctuations in crude oil prices underline the volatility of these products and w e Based on our current estimates, w e expect to have introduced a strategic purchasing plan w hich comply w ith the covenants in the foreseeable attempts to spread the risk by a combination of future. better buying, fixed-term contracts and spot prices. How ever w e remain exposed to the The Group has in place an interest rate hedge inflationary cost increases on bitumen, gas-oil and purchased in September 2010 w hich mitigates diesel. The solution to this is to pass on these the risk of interest rate rises on £64.5 million of additional costs to our customers through price bank loans. The effect of the hedge is to cap increases and forw ard pricing although inevitably, the LIBOR element of the interest rate at 1.5 due to the nature of the contracts w e have to per cent until 30 September 2011, at 2.0 per supply and lay materials, there w ill be a time lag cent from 30 September 2011 until 28 betw een the date w e start paying additional costs September 2012 and at 2.5 per cent from 28 and the date from w hich w e are able to recover September 2012 to 28 M arch 2013. The net fair these costs in the market. value of this instrument at 31 December 2010 w as £0.3 million. The Group has demonstrated that over time it can recover its cost increases from the end customer, helped by investment in both new products and D ividends modern, efficient plants. There is, how ever, a risk Follow ing the acquisition of Breedon, subject to in an industry dominated by large multinationals availability of distributable reserves, dividends w ill that one of the industry’s larger players may be paid to shareholders w hen the Directors attempt to gain an advantage by reducing prices in believe it is appropriate and prudent to do so. the short term to secure market share. How ever, How ever, the main focus of the Group w ill be on the Group is a low -cost producer in all its regions delivering capital grow th for shareholders. and is able to sustain short-term price erosion. 14 Breedon Aggregates Annual Report and Accounts 2010

Page 17

The Group is dependent on UK and Scottish Key perf orm ance indicat ors government spending on maintaining and The Group uses the follow ing financial and non- improving public infrastructure, buildings and financial key performance indicators (“ KPIs” ) to services. The recent government budget measure the operational and strategic announcements include large spending cuts performance of the business. alongside announcements of a commitment to transport and infrastructure. The impact on Earnings per share and m arket value grow th demand for our products is uncertain as a result The primary performance indicators are the of this. Whilst the Group is somew hat protected Group’s underlying earnings per share and from cuts in large scale projects, there is a risk market value grow th. Our aim is to increase that larger competitors w ill as a result trade dow n earnings per share each year, both through the to smaller projects, increasing the competitive grow th of our existing business and through pressure on our business. acquisition, and to increase the market value of the group at a compound annual rate of at least The Group is subject to both the environmental 12.5 per cent over the next three years. and health and safety risks inherent in the quarrying and aggregates processing industry. EBITDA M anagement, training and control systems are The Group uses business unit underlying in place to minimise and prevent these risks. EBITDA as the key performance indicator to These systems are review ed regularly and all monitor the progress of each of our business new plant and equipment is specified w ith these units tow ards our overall targets. risks in mind. Cash m anagem ent Planning consents are required in order to utilise The level of cash generation w ithin the Group is the Group’s mineral reserves and to build and monitored as a KPI to ensure that available operate added-value processing plants such as facilities meet the needs of the business. asphalt and concrete plants. The planning regime is slow and laborious and gaining permissions Non-financial KPIs becomes more onerous to achieve every year. Non-financial KPIs include the monitoring of How ever, w e adopt a very proactive approach. mineral reserves based on quarry life, taking into We involve all stakeholders in early consultation account consents gained and minerals extracted, and regularly meet w ith local communities in to ensure the sustainability of this key asset to organised liaison groups. We believe our policy of the Group. Other non-financial KPIs include early consultation w ith our various stakeholders is those in respect of health and safety, particularly the reason w hy w e have such a successful track lost time incidence rates. This is the frequency record in securing key permissions. rate of injuries resulting in an employee being absent for one or more shifts. Quarrying is highly regulated and controlled industry, w ith the standards expected of us Other KPIs continuing to increase. This is an industry-w ide The Group also monitors a range of other KPIs, issue and Breedon participates fully in the including bitumen and cement costs per tonne, industry trade associations in an effort to ensure interest cover and the ratio of net debt to that any new measures are w orkable and EBITDA. achievable, w hilst minimising the impact on the environment of delivering products w hich are Ian Peters fundamental to the economic w ell being of the Group Finance Director communities in w hich w e operate. 30 M arch 2011 Breedon Aggregates Annual Report and Accounts 2010 15

Page 18

BREED ON A GGREGATES Directors Pet er Tom CBE (Execut ive Chairm an) In 2005 Peter oversaw the negotiations w hich led to Peter has more than 50 years' experience in the the successful acquisition of Aggregate Industries by aggregates industry. He joined Bardon Hill Quarries Sw iss building materials Group Holcim Limited for Limited as a school-leaver in 1956, becoming £1.8 billion. He assumed the role of non-executive managing director in 1977 and chief executive of Chairman of Aggregate Industries in 2006, a position Bardon Group plc in 1985, overseeing the he held until his resignation in December 2007. Peter company's transition from a privately-ow ned served as chairman of the aggregates industry's regional quarrying operation to a publicly-listed trade association in 1997, managing its building materials Group. Peter expanded the amalgamation that year w ith tw o related associations Group internationally w ith a series of acquisitions in to form the Quarry Products Association. In addition, the Unites States in the late 1980s and w ent on to Peter has been Chairman of Leicester Rugby Football lead the merger of Bardon and Evered plc in 1991 Club (Leicester Tigers) since 1997. He is also and the enlarged Group's subsequent merger w ith Chairman of Leaf Clean Energy Company and of the CAM AS in 1997 to form Aggregate Industries plc. Channel Islands Property Fund. Sim on Vivian (Group Chief Execut ive) Simon has over 20 years' experience in the aggregates Prior to M ow lem, Simon w orked in a number of and construction industries. M ost recently, he w as roles w ith Hanson plc (1987 - 2003), ultimately as a Chief Executive of Mowlem plc (2004 - 2006) leading an main board director and the Chief Executive of organisation w ith over 25,000 employees, generating Hanson plc's European Building M aterials business. revenues of £2.2 billion from operations in the UK, US He oversaw operations in eight European countries and Australia. Whilst in the role, Simon implemented employing over 8,000 people and generating a Group w ide operational re-organisation reducing EBITDA of £200 million. Whilst w ith Hanson, he overheads by over £8 million and strengthening risk executed and integrated the £1.5 billion acquisition management processes in the business. In of Pioneer International Ltd and managed the December 2005, M owlem received a cash and shares disposal of the company's w aste disposal business offer from Carillion plc and Simon negotiated a final for £185 million. exit price at a premium for shareholders. Ian Pet ers (Group Finance D irect or) Ian has more than 20 years’ experience in the Director, Continental Europe and Asia, in 2004 Ian European aggregates industry, initially in financial w as appointed General M anager, Continental Europe. controller roles w ithin the UK aggregates business of Hanson. Follow ing the demerger of Hanson plc in Ian joined the senior management team of M arw yn 1997, Ian w as appointed Group Financial Controller M aterials Limited in 2008 and w orked closely w ith and w as involved in the completion of £2.5 billion of the Chairman and Chief Executive on the reverse acquisitions. He w as Finance and Development acquisition of Breedon Holdings Limited in Director of Hanson Building M aterials Europe September 2010. He w as appointed as a director of betw een 2000 and 2003. After a year as Finance Breedon Aggregates Limited on 1 November 2010. A dvisors & Com pany Com pany Secret ary Regist ered of f ice Regist ered in Jersey Inf orm at ion JTC M anagement Elizabeth House Company number Limited 9 Castle Street 98465 Elizabeth House St Helier 9 Castle Street Jersey St Helier JE2 3RT Jersey JE2 3RT 16 Breedon Aggregates Annual Report and Accounts 2010

Page 19

Jam es Corsellis (N on-execut ive D irect or) 1 James founded one of the earliest strategic 72 transactions raising close to £1.3 billion in technology consultancies in 1994 and w as Chief acquisition funding for M arw yn backed Executive Officer of icollector plc, a leading management teams and special purpose provider of live auction trading platforms. He later acquisition vehicles from 2002 to date. He is a negotiated the joint venture w ith eBay, w hich saw M anaging Partner in M arw yn Capital LLP and icollector become the exclusive partner w orldw ide M arw yn Investment M anagement LLP. James is for traditional auction houses. currently the non-executive Chairman of Entertainment One Ltd and a non-executive At M arw yn, James Corsellis has, alongside fellow Director of E-One UK Limited, M arw yn Value managing partner M ark Watts, undertaken Investors Limited, and M arw yn Capital I Limited. Susie Farnon (N on-execut ive D irect or) 1,2 Susie w as a Banking and Finance Partner w ith Guernsey Financial Services Commission and a KPM G Channel Islands from 1990 until 2001 and Director of Dexion Absolute Limited, New River Head of Audit at KPM G Channel Islands from 1999. Retail Limited, Standard Life Investment Property She has served as President of the Guernsey Income Trust, Cenkos Channel Islands Limited and Society of Chartered and Certified Accountants and Bailiw ick Investments Limited. Susie w as as a member of The States of Guernsey Audit appointed to the Board of Breedon Aggregates Commission and The Guernsey Public Accounts Limited on 1 November 2010. Committee. She is a Commissioner of The D avid Warr (N on-execut ive D irect or) 1,2 David joined the accountancy practice of Reads & positions w ithin the firm helping to develop it into Co in Guernsey in 1972. He qualified as a a broad-based financial services business w hich Chartered Accountant in 1976 and is a fellow of w as sold in 1999. David currently holds a number the Institute of Chartered Accountants in England of non-executive director positions including FRM and Wales. David became a partner in Reads & Diversified Alpha Limited, UK Select Trust Limited Co in 1981 and held a variety of executive and Invista Foundation Property Trust Limited. D avid William s (N on-execut ive D irect or) 2 David has over 36 years’ experience in the He has built a reputation for creating significant investment market. He has served as Chairman in shareholder value through both organic and executive and non-executive capacities for a acquisitive grow th, as w ell as leading turnaround number of companies, both public and private. situations. 1 M ember of the Audit Committee 2 M ember of the Renumeration Committee Independent A udit or N om inat ed A dviser Regist rars Legal A dviser KPM G Channel Islands Cenkos Securities plc Capita Registrars Carey Olsen Limited 6.7.8 Tokenhouse Yard (Jersey) Limited 47 Esplanade PO Box 453 London 12 Castle Street St Helier St Helier EC2R 7AS St Helier Jersey Jersey Jersey JE1 0BD JE4 8WQ JE2 3RT Breedon Aggregates Annual Report and Accounts 2010 17

Page 20

BREED ON A GGREGATES Directors’ Report The Directors present their report, together w ith Corporate social responsibility (CSR) the audited financial statements, for the year Breedon Aggregates Limited recognises the ended 31 December 2010. importance of balancing the interest of its key stakeholders – employees, customers, investors, suppliers and the w ider community in w hich it Principal act ivit y and Business review operates. The Group remains committed to a Breedon Aggregates Limited (previously M arw yn continuous improvement in its environmental M aterials Limited) w as established to acquire performance to ensure that its activities comply controlling interests in building materials w ith environmental standards and legislation. At the businesses, both listed and unquoted, in the UK, end of 2010, 25 of its business units had achieved Europe and US, creating shareholder value accreditation in accordance w ith BS EN ISO through market consolidation. 14001:2004 and 9 further units are actively pursuing such accreditation. It has also established a number On 6 September 2010, the Company completed a of community liaison groups to encourage dialogue reverse takeover of Breedon Holdings Limited and betw een its businesses and the communities in w as renamed as Breedon Aggregates Limited. which they operate in connection with matters such as planning and development, transport and road Since the reverse takeover of Breedon Holdings usage, and community support. Limited, the Company’s principal activity has been that of a holding company for companies involved in the quarrying, production and sale of Result s and dividends aggregates and related activities. Further details For the year to 31 December 2010, the Group’s of the Group’s activities and future developments loss before tax w as £6,304,000 (2009: £825,000) are included in the Chairman’s Statement on and after tax w as a loss of £5,873,000 (2009: pages 6 and 7, and in the Chief Executive’s £829,000). Review on pages 9 to 11. Prior to making the first acquisition, it w as the Risk m anagem ent Board’s policy that no dividends w ould be paid. The Board is ultimately responsible for risk Follow ing the acquisition of Breedon Holdings management and continues to develop polices Limited, subject to availability of distributable and procedures that reflect the nature and scale reserves, dividends w ill be paid to shareholders of the Group’s business. These are designed to w hen the Directors believe it is appropriate and identify, mitigate and manage risk, but they prudent to do so. cannot entirely eliminate it. Further details of the key areas of risk to the business identified by the Group, together w ith the Group’s operational key performance indicators, are included in the Financial Review on pages 12 to 15. 18 Breedon Aggregates Annual Report and Accounts 2010

Page 21

St at ed Capit al D irect ors’ Int erest s Details of the Company’s shares in issue are set out The directors in office at 31 December 2010 had in note 19 to the financial statements. the follow ing interests in the issued share capital of the Company: D irect ors Ordinary Shares The follow ing directors served during the year: 1 January 2010 31 December Peter or, if later, date Executive Chairman 2010 Tom CBE of appointment Sim on Peter Tom CBE 30,683,333 22,350,000 Group Chief Executive Vivian Ian Group Finance Director Sim on Vivian 3,166,667 2,500,000 Peters (appointed 1 November 2010) (and fam ily) Jam es Ian Peters 1,833,333 1,833,333 Non-executive Director Corsellis Jam es Corsellis Susie Independent Non-executive Director 5,500,000 5,500,000 (and fam ily) Farnon (appointed 1 November 2010) David Susie Farnon 989,840 989,840 Independent Non-executive Director Warr David Warr 2,500,000 2,500,000 David Non-executive Director David William s 12,012,133 11,000,000 William s Biographical details of the Directors can be found All the above interests are beneficial, unless on pages 16 and 17 and details of the Directors’ indicated otherw ise. No director has any interests service contracts are given in the Directors’ in the issued share capital or loan stock of any Remuneration Report on pages 25 to 28. subsidiary undertaking. There w ere no changes in the Directors’ interests betw een 1 January 2011 and 30 M arch 2011. Breedon Aggregates Annual Report and Accounts 2010 19

Page 22

BREED ON A GGREGATES Directors’ Report (cont) Subst ant ial Shareholdings Healt h and Saf et y The Company is aw are that, at 15 M arch 2011, The Group is committed to providing and other than the Directors, the follow ing held 3% or maintaining a safe environment for all employees, more of the issued share capital of the Company: customers and other visitors to its premises and to comply w ith all relevant health and safety Ordinary Shares legislation. Beneficial Holder Num ber % In addition, all Group businesses: Invesco Asset • aim to protect the health of employees w ith 165,000,000 29.78 M anagement Ltd suitable, specific, w ork-based strategies; M arw yn Value • seek to minimise the risk of injury from 146,223,698 26.39 Investors L.P. company activity; Cenkos Channel Islands • ensure that through senior management 53,821,535 9.72 participation, sufficient resources and Nominee Co Ltd information are made available and suitable Scottish Widow s 41,665,000 7.52 management systems are in place to address Investment Partnership health and safety matters; and • encourage the involvement of employees and Em ployees aim for continual improvement in health and The Group recognises the importance of employee safety standards through a formal structure involvement in the operation and development of w ith a reporting and review process. its business units, w hich are given autonomy w ithin a group policy and structure, to enable management Compliance w ith Group policy is monitored and to be fully accountable for their ow n actions and review ed centrally and a comprehensive health gain maximum benefit from local know ledge. and safety report is produced for each Board Employees are informed by regular consultation and meeting. Simon Vivian, Group Chief Executive, internal new sletters of the progress of both their has been designated by the Board as the director ow n business units and the Group as a w hole. responsible for Health and Safety matters. The ‘Best of Breedon’ suggestion scheme provides Breedon Aggregates has invested in a dedicated an opportunity for all employees to put forw ard health and safety computer system, Envoy, that ideas to improve the Group’s performance, and is designed to give a structure and platform to rew ards the best such suggestions. manage safety on all its sites. The modules on this system include: In October 2010, all employees of the Group • incident tracking and reporting; (except for the executive directors) w ere given a • registering non-conformities and follow -up bonus of 500 shares each in the Company. actions required; Employees are also encouraged to participate in • logging and reporting of action plans; the ow nership of the Company through an all- • maintenance of training records and employee savings related share option scheme. competencies; and • risk assessments for different tasks and The Group is committed to providing equal operations. opportunities for individuals in all aspects of employment, and considers the skills and The Group aims for continuous improvement in aptitudes of disabled persons in recruitment, Health & Safety KPIs, including in relation to its career development, training and promotion. If Accident Incidence Rate, its Lost Time Frequency existing employees become disabled, every Rate, and its Lost Time Injury Severity Rate. effort is made to retain them, and retraining is Performance against these KPIs is reported to arranged w herever possible. the Board. 20 Breedon Aggregates Annual Report and Accounts 2010

Page 23

Charit able donat ions and polit ical cont ribut ions The Group actively manages its financial risks as The Group made no charitable donations nor any set out in note 21 to the financial statements and contributions to political parties during either the operates Board approved financial policies, current or the previous year. including interest rate hedging policies, that are designed to ensure that the Group maintains an adequate level of headroom and effectively Paym ent of Credit ors mitigates financial risks. The Company is a holding company and has no external trade suppliers. It is the policy of the On the basis of current financial projections and Group’s operating businesses to negotiate facilities available, the Directors have a payment terms w hen agreeing the overall terms reasonable expectation that the Group has of transactions w ith all their suppliers, and to adequate resources to continue in operational abide by them, provided that they are satisfied existence for the foreseeable future and, that the supplier has provided the goods or accordingly, consider that it is appropriate to services in accordance w ith the agreed terms adopt the going concern basis in preparing these and conditions. The Group does not follow any financial statements. standard or external code w hich deals specifically w ith the payment of suppliers. D isclosure of Inf orm at ion t o A udit or The Directors w ho hold office at the date of this A nnual General M eet ing Report confirm that, so far as they are aw are, The Directors are seeking authority from there is no relevant audit information of w hich shareholders to permit the Company to purchase the Company’s auditor is unaw are, and each its ow n shares. Unless previously renew ed, director has taken all steps that he or she ought varied or revoked, this authority w ill expire at the to have taken to make himself or herself aw are conclusion of the Annual General M eeting of the of any relevant audit information and to establish Company to be held in 2012 or w ithin 18 months that the Company’s auditor is aw are of that from the date of approval of the authority, information. w hichever shall be the earlier. The Remuneration Committee has concluded Independent A udit or that the Company should introduce a KPM G Channel Islands Limited has expressed Performance Share Plan (the “ Plan” ) as a means w illingness to continue in office and, in of attracting, rew arding, motivating and retaining accordance w ith Article 109 of the Companies certain key senior employees. The Plan is subject (Jersey) Law 1991, a resolution to reappoint to shareholder approval at the forthcoming KPM G Channel Islands Limited w ill be proposed Annual General M eeting, and the first aw ards at the forthcoming Annual General M eeting. under it are expected to be made shortly thereafter. Full details of the Plan are contained in By order of the Board the Appendix to the Notice of Annual General M eeting on pages 65 to 67. Peter Tom CBE Simon Vivian Going Concern Executive Chairman Group Chief Executive The Group meets its day-to-day w orking capital 30 M arch 2011 and other funding requirements through its banking facility, w hich includes an overdraft facility, and w hich expires in September 2015. Breedon Aggregates Annual Report and Accounts 2010 21

Page 24

BREED ON A GGREGATES Corporate Governance The Directors recognise the value of strong The Board of direct ors corporate governance and, although AIM listed The current board comprises the Executive companies are not required to comply w ith the Chairman, tw o executive directors, tw o disclosure requirements of the UK Combined independent non-executive directors and tw o Code of Corporate Governance, as published by non-executive directors w ho are not considered the Financial Reporting Council in June 2008 (the to be independent. “ Combined Code” ), the Company has sought to comply w ith it, as far as it is appropriate, in respect The Board considers that each of the non- of the accounting period ended on 31 December executive directors brings a senior level of 2010 and intend to comply, as far as appropriate, experience and judgement to bear on issues of w ith the UK Corporate Governance Code as strategy, performance, resources (including key published by the Financial Reporting Council in appointments) and standards of conduct. June 2010 (as amended from time to time) (the “ Corporate Governance Code” ) in respect of Biographical details of the Directors are set out subsequent accounting periods. How ever, given on pages 16 and 17. its size and nature, it did not and does not seek to comply w ith those aspects of the Combined Code The Board is provided w ith regular and timely or the Corporate Governance Code (as applicable) information on the financial performance of w hich are considered to be more appropriate for a businesses w ithin the Group, and of the Group as larger public company w ith shares admitted to the a w hole, together w ith other trading reports, Official List. contract performance and market reports and data, including reports on personnel related matters The purpose of this statement is to describe the such as health and safety and environmental Company’s approach to corporate governance issues. Six formal board meetings are held each and, in particular, to explain how the Company has year to consider those matters w hich have been applied the Principles of Good Governance set out specifically reserved to the Board for review and in Section 1 of the Combined Code, including decision, including the management of assets to both the M ain and Supporting Principles. maximise performance and the control of the operation of the business, to review corporate strategy and the progress of individual business units, and to discharge the directors’ other duties. A schedule of M atters Reserved to the Board w as adopted in September 2010. The Directors explain their responsibilities for preparing the financial statements on page 29 and the Report of the Independent Auditor on pages 30 and 31 contains a statement of its reporting responsibilities. 22 Breedon Aggregates Annual Report and Accounts 2010

Page 25

Board com m it t ees independence and objectivity of the auditor and Since the acquisition of Breedon Holdings the effectiveness of internal control. Full terms Limited on 6 September 2010, the Board has of reference of the Audit Committee are available maintained tw o standing committees, the on the Group’s w ebsite. Remuneration Committee and the Audit Committee. Prior to that date, the functions of The Audit Committee invites the Executive these committees w ere carried out by the Board Chairman, the Group Chief Executive and the as a w hole. Group Finance Director, and senior representatives of the external auditor to attend part of its Rem uneration Com m ittee meetings as appropriate. Since its establishment, the Remuneration Committee has comprised solely of at least tw o The members of the Audit Committee have non-executive directors. M r Williams and M r relevant and recent financial experience at senior Warr have served on the Remuneration executive level. Committee since its establishment. M rs Farnon w as appointed to the Remuneration Committee in January 2011. M r Williams is chairman of the Int ernal cont rol Committee. The Executive Chairman makes The Board is ultimately responsible for the himself available to the Committee to discuss the Group’s system of internal control and for performance of other executives and to make review ing its effectiveness. How ever, such a proposals as necessary. The Remuneration system is designed to manage rather than Committee’s responsibilities are to make eliminate the risk of failure to achieve business recommendations to the Board on terms of objectives, and can provide only reasonable and service, remuneration and benefits of the not absolute assurance against material executive directors and senior executives of the misstatement or loss. The Directors have Group. Further details of the terms of reference review ed the effectiveness of the Group’s of the Remuneration Committee are set out in system of internal control w hich mitigate the the Directors’ Remuneration Report on pages 25 risks identified as significant, including financial, to 28 and are available on the Group’s w ebsite. operational and compliance risks. A formal Risk Register has been draw n up, and this is review ed Audit Com m ittee by the Board at least tw ice annually. M r Warr and M r Corsellis have served on the Audit Committee since its establishment, and The Group does not have an internal audit M rs Farnon became a member of the Committee function. This is presently considered appropriate in November 2010. M r Warr is chairman of the given the size of the Group and the close Committee. Written terms of reference have involvement of executive directors and senior been agreed for the Audit Committee w hich management on a day to day operational basis. include keeping under review the scope and How ever, the need for an internal audit function results of the audit, its cost effectiveness, the is kept under constant review. Breedon Aggregates Annual Report and Accounts 2010 23

Page 26

BREED ON A GGREGATES Corporate Governance (cont) M eet ings at t endance Shareholder relat ions The Board met formally 7 times during the year The Company is committed to maintaining good and the attendance of the directors at each communications w ith its shareholders. meeting together w ith attendance at committee meetings, is set out in the table below. M embers of the Board have meetings w ith institutional shareholders to aid understanding of This table show s only those meetings w hich the Group’s strategic objectives and performance, each director attended as a member rather than and all shareholders are encouraged to participate as an invitee. in the Company’s Annual General M eeting. Audit Rem uneration M essrs Williams and Warr, as chairmen of the Board Com m ittee Com m ittee Remuneration and Audit Committees respectively, Eligible Eligible Eligible w ill be available to answ er questions at the Attended Attended Attended forthcoming Annual General M eeting. In addition, to attend to attend to attend proxy votes w ill be counted and the results Peter Tom CBE 7 7 - - - - announced after any vote on a show of hands. Simon Vivian 7 7 - - - - Ian Peters 1 1 - - - - The Company complies w ith the recommendation of the Combined Code that the notice of the James Corsellis 5 7 2 2 - - Annual General M eeting and related papers Susie Farnon 1 1 - - - - should be sent to shareholders at least tw enty David Warr 7 7 2 2 2 2 w orking days before the meeting. David Williams 6 7 - - 2 2 The Executive Chairman ensures that the view s of shareholders are communicated to the Board as a w hole, and that non-executive directors develop an understanding of the view s of major shareholders. 24 Breedon Aggregates Annual Report and Accounts 2010

Page 27

BREED ON A GGREGATES Directors’ Remuneration Report The responsibility for establishing the overall Rem unerat ion policy remuneration policy lies w ith the Board as a In order to ensure that it attracts and retains a w hole. The Remuneration Committee w orks management team w ith the appropriate skills to w ithin agreed terms of reference to make provide maximum shareholder value for the future, recommendations to the Board on the Group’s the Group needs to ensure that its pay and benefit framew ork for executive remuneration. The practices are competitive but consistent w ith the terms of reference of the Remuneration Group’s circumstances; that they motivate Committee are available on the Group’s w ebsite. employees at all levels; and that they recognise and rew ard high standards of performance. Rem unerat ion Com m it t ee The Group’s remuneration policy is as follow s: The Remuneration Committee is chaired by (i) to ensure that individual rew ards and David Williams. At the end of the financial year, incentives are aligned w ith the performance of the Committee comprised David Williams and the Group and the interests of Shareholders; David Warr. Susie Farnon w as appointed to the (ii) to maintain a competitive remuneration Committee in January 2011. The Company package w hich enables the Group to attract, Secretary acts as secretary to the Committee. retain and motivate high calibre executives; and The Committee met tw ice formally in 2010. (iii) to ensure that performance related elements form a significant proportion of total The role of the Remuneration Committee is remuneration. broadly to determine the terms of employment, including remuneration and other benefits, for The Group’s non-executive directors do not directly individual directors and senior management, participate in any incentive scheme, share scheme w ithin the overall policy as agreed by the Board or pension arrangement. The remuneration of non- as a w hole. The Remuneration Committee gives executive directors is a matter for the Board as a full consideration to the provisions of the w hole, taking into account market rates and the Combined Code concerning remuneration policy, required time commitment. service contracts and compensation. The Remuneration Committee takes into account remuneration packages of comparable (i) Basic Salary companies and has access to professional advice Executive directors and senior managers’ from both internal and external sources in order individual salaries and performance incentives are to determine and develop its recommendations. determined by personal factors. These include the individual’s performance as measured by an appraisal process, and any other matters likely to affect a particular executive’s value in the employment market. Basic salaries are review ed on an annual basis or follow ing a significant change in responsibilities. Breedon Aggregates Annual Report and Accounts 2010 25

Page 28

BREED ON A GGREGATES Directors’ Remuneration Report (cont) (ii) Incent ive A rrangem ent s (iii) Pensions A nnual Cash Bonus Simon Vivian is paid a salary supplement equal to In addition to basic salary, the Group operates a 17.5% of his base salary in lieu of a pension performance related cash bonus scheme and contribution, and Ian Peters is entitled to a challenging performance goals are set w hich pension contribution equal to 17.5% of his base must be achieved before the maximum bonus salary w hich is paid to the Group’s defined becomes payable. The Company has agreed, contribution pension scheme. subject to certain performance targets being achieved, to pay Peter Tom a bonus of up to £200,000 in relation to each financial year of the Service agreements / letters of appointment Company. Commencing in 2011, for Simon Vivian The Directors are party to the follow ing service and Ian Peters, as executive directors, the agreements/letters of appointment w ith the maximum bonus opportunity is 100% of salary Company: as at the end of the year, linked to targets based on the Group’s EBITDA performance relative to budgeted targets. For other senior management (i) N on-execut ive D irect ors in the Group, the maximum bonus opportunity is The Company has entered into letters of up to 65% and is linked to targets based on appointment w ith each of David Williams, James achieving operating profit targets for the Corsellis and David Warr respectively, pursuant businesses for w hich they are responsible. to w hich each of their services as a non- Bonuses are not pensionable. executive director of the Company w ere procured w ith effect from the admission of the Company’s ordinary shares to trading on AIM on Long Term Incent ive arrangem ent s 12 June 2008. On 25 October 2010, the The Directors believe that the success of the Company entered into a letter of appointment Company w ill depend to a high degree on the w ith Susie Farnon pursuant to w hich she w as future performance of the management team. appointed as a non-executive director w ith effect The Company has therefore established from 1 November 2010. incentive arrangements w hich w ill only rew ard the participants if Shareholder value is created, The letters of appointment do not contain a fixed thereby aligning the interests of management time commitment but require each non-executive directly w ith those of the Shareholders. director to ensure that he or she has sufficient time to meet the expectations of the role. The executive directors have subscribed for Participation Shares in the Company’s w holly The appointments can be terminated by either ow ned subsidiary M arw yn M aterials Investments party w ithout notice. The non-executive directors Limited (the “ M anagement Participation Shares” ). each currently receive a fee for their services of Further details of the M anagement Participation £25,000 per annum payable in equal monthly Shares, including descriptions of the Grow th and instalments and are entitled to be reimbursed all Vesting Conditions are set out in note 20 to the reasonable expenses, properly incurred in the financial statements. course of performing their duties as non- executive directors of the Company. No other Shareholders w ill be asked, at the forthcoming benefits are payable. Annual General M eeting, to approve the establishment of a Performance Share Plan w hich w ill be used to provide long term incentives for certain senior executives of the Group other than the Directors. 26 Breedon Aggregates Annual Report and Accounts 2010

Page 29

(ii) Execut ive D irect ors Ian Peters Peter Tom On 5 June 2008, the Company entered into a On 5 June 2008, the Company entered into a service agreement w ith Ian Peters pursuant to service agreement w ith Rise Rocks Limited for w hich he is employed as Group Finance Director. the purposes of procuring the services of Peter Tom as a consultant to the Company in the role of The service agreement w ill continue until Chairman. This agreement does not render Peter terminated. The Company may terminate this as an employee, officer, w orker or partner of the agreement by giving not less than 12 months’ Company. To the extent that any liabilities arise in w ritten notice to Ian, such notice to expire no connection w ith a claim that Peter is an employee, earlier than 6 September 2013. Ian may officer, w orker or partner of the Company, Peter terminate the agreement by giving the Company agrees to indemnify the Company (and its not less than 12 months’ w ritten notice. The associates) from any such claim. Company may also terminate the agreement w ith immediate effect in certain other specified The agreement w ill continue until terminated. The circumstances. Upon termination a payment in Company may terminate this agreement by giving lieu of notice may be made to Ian. The service not less than 12 months’ w ritten notice to Peter, agreement is governed by English law. such notice to expire no earlier than 6 September 2013. Peter may terminate the agreement by During any notice period, it is the Company’s policy giving the Company not less than 12 months' to have regard to an individual’s duty to mitigate w ritten notice. The Company may also terminate his loss in respect of those contractual rights that the agreement w ith immediate effect in certain he w ould otherw ise be entitled to receive. On the other specified circumstances. The service early termination of any contract, the Board w ill act agreement is governed by English law. in Shareholders’ interests in arriving at the level of compensation to be aw arded. Sim on Vivian On 5 June 2008, the Company entered into a service agreement w ith Simon Vivian pursuant to Succession planning w hich, he is employed as Group Chief Executive. The Board recognises the requirements of the Combined Code that it should satisfy itself that The service agreement w ill continue until plans are in place for an orderly succession to terminated. The Company may terminate this Board and senior management positions. It w ill agreement by giving not less than 12 months’ continually monitor the composition of the senior w ritten notice to Simon, such notice to expire no management team, including the executive earlier than 6 September 2013. Simon may directors, and, taking into account factors such terminate the agreement by giving the Company as age, experience and career progression not less than 12 months’ w ritten notice. The opportunities, it w ill formulate plans w ell in Company may also terminate the agreement advance of potential vacancies arising. w ith immediate effect in certain other specified circumstances. Upon termination a payment in lieu of notice may be made to Simon. The service agreement is governed by English law. Breedon Aggregates Annual Report and Accounts 2010 27

Page 30

BREED ON A GGREGATES Directors’ Remuneration Report (cont) D et ails of rem unerat ion The remuneration of the Directors for the year ended 31 December 2010 w as as follow s: Total Pension Bonus Fees Benefits Contributions Salary (note 1) (note 2) (note 3) 2010 2009 2010 2009 £ £ £ £ £ £ £ £ PWG Tom CBE – – 460,240 – 460,240 135,360 – – SN Vivian 195,445 320,000 – 86 515,531 120,000 – – IAD Peters (note 4) 31,833 – – 308 32,141 – 5,104 – JM H Corsellis – – 14,626 – 14,626 10,000 – – S Farnon (note 4) – – 4,167 – 4,167 – – – DJ Warr – – 15,000 – 15,000 10,000 – – DJ William s – – 15,000 – 15,000 10,000 – – Total 227,278 320,000 509,033 394 1,056,705 285,360 5,104 – Notes 1 Pursuant to his service agreement, M r Vivian received a transaction bonus on completion of the reverse take-over of Breedon Holdings Limited. He received 666,667 ordinary shares in Breedon Aggregates Limited, valued at £0.12 per share, w ith the balance paid in cash. No other bonuses are payable for the year ended 31 December 2010. 2 Included in fees above is an amount of £140,240 (2009: £135,360) in respect of services provided by Rise Rocks Limited, a company in w hich M r Tom has a beneficial interest, and the sum of £320,000 w hich w as paid to Rise Rocks Limited as a transaction bonus upon the completion of the reverse take-over of Breedon Holdings Limited, pursuant to the consultancy agreement betw een the Company and Rise Rocks Limited. Also included in fees above, is an amount of £14,626 paid to M arw yn Capital LLP in respect of M r Corsellis’s sevices as a non-executive director. 3 Benefits for M r Vivian and M r Peters comprise the provision of private medical insurance. 4. Remuneration since appointment as a director on 1 November 2010. M anagem ent Part icipat ion Shares Details of M anagement Participation Shares issued to Directors and key employees (“ M anagement Participation Shares” ) w hich give rights to participate in an increase in the market capitalisation of the Company are set out in note 20 to the financial statements. At 31 December 2010, the Group had a number of M anagement Participation Shares outstanding. None of the M anagement Participation Shares vested during the year. On behalf of the Board D avid William s Chairman, Remuneration Committee 30 M arch 2011 28 Breedon Aggregates Annual Report and Accounts 2010

Page 31

Statement of Directors’ Responsibilities in respect of the Directors’ Report and the Financial Statements The Directors are responsible for preparing the financial statements in accordance w ith applicable law and International Financial Reporting Standards as adopted by the EU. Company law requires the Directors to prepare financial statements for each financial year w hich give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and apply them consistently; • make judgments and estimates w hich are reasonable and prudent; • state w hether applicable accounting standards have been follow ed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group w ill continue in business. The Directors are responsible for keeping proper accounting records that disclose w ith reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply w ith the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Breedon Aggregates Annual Report and Accounts 2010 29

Page 32

Independent Auditor’s Report to the M embers of Breedon Aggregates Limited (formerly M arw yn M aterials Limited) 5 St Andrew ’s Place Charing Cross St Helier Jersey JE4 8WQ Channel Islands We have audited the Group financial statements of Breedon Aggregates Limited for the year ended 31 December 2010 w hich comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flow s and the related notes. The financial reporting framew ork that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the EU. This report is made solely to the Company’s members, as a body, in accordance w ith Article 113A of the Companies (Jersey) Law 1991. Our audit w ork has been undertaken so that w e might state to the company’s members those matters w e are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, w e do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit w ork, for this report, or for the opinions w e have formed. Respect ive responsibilit ies of direct ors and audit or As explained more fully in the Statement of Directors' Responsibilities set out on page 29, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance w ith applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply w ith the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of t he audit of t he f inancial st at em ent s An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, w hether caused by fraud or error. This includes an assessment of: w hether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, w e read all the financial and non-financial information in the Annual Report to identify material inconsistencies w ith the audited financial statements. If w e become aw are of any apparent material misstatements or inconsistencies w e consider the implications for our report. Opinion on f inancial st at em ent s In our opinion the financial statements: • give a true and fair view of the state of the Group’s affairs as at 31 December 2010 and of the Group’s loss for the year then ended; • have been properly prepared in accordance w ith International Financial Reporting Standards as adopted by the EU; and • have been prepared in accordance w ith the requirements of the Companies (Jersey) Law 1991. 30 Breedon Aggregates Annual Report and Accounts 2010

Page 33

M at t ers on w hich w e are required t o report by except ion We have nothing to report in respect of the follow ing matters w here the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Group; or • the financial statements are not in agreement w ith the accounting records and returns; or • w e have not received all the information and explanations w e require for our audit. Nicholas L Stevens 30 M arch 2011 for and on behalf of KPM G Channel Islands Limited Chartered Accountants Notes: • The maintenance and integrity of the Breedon Aggregates Limited w ebsite is the responsibility of the Directors; the w ork carried out by the Auditor does not involve consideration of these matters and, accordingly, KPM G Channel Islands Limited accepts no responsibility for any changes that may have occured to the financial statements or our audit report since 30 M arch 2011. KPM G Channel Islands Limited has carried out no procedures of any nature subsequent to 30 M arch 2011 w hich in any w ay extends this date. • Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors shall remain responsible for establishing and controlling the process for doing so, and for ensuring that the financial statements are complete and unaltered in any w ay. Breedon Aggregates Annual Report and Accounts 2010 31

Page 34

Consolidated Income Statement for the year ended 31 December 2010 Note 2010 2009 Non- Underlying† underlying* Total (note 3) £’000 £’000 £’000 £’000 Revenue 1,2 42,679 - 42,679 - Cost of sales (25,069) - (25,069) - Gross profit 17,610 - 17,610 - Distribution expenses (8,332) - (8,332) - Administrative expenses (9,545) (4,456) (14,001) (927) Group operating loss 2 (267) (4,456) (4,723) (927) Share of loss of associated undertaking (net of tax) 11 (22) - (22) - Loss from operations (289) (4,456) (4,745) (927) Financial income 6 42 - 42 102 Financial expense 6 (1,601) - (1,601) - Loss before taxation (1,848) (4,456) (6,304) (825) Taxation 7 287 144 431 (4) Loss for the year (1,561) (4,312) (5,873) (829) Attributable to: Equity holders of the parent (1,571) (4,312) (5,883) (829) Non-controlling interests 10 - 10 - Loss for the year (1,561) (4,312) (5,873) (829) Basic loss per ordinary share (0.58p) (2.19p) (0.61p) Diluted loss per ordinary share (0.58p) (2.16p) (0.61p) * 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 (note 27). Accordingly, w ith 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. 32 Breedon Aggregates Annual Report and Accounts 2010

Page 35

Consolidated Statement of Comprehensive Income for the year ended 31 December 2010 Note 2010 2009 £’000 £’000 Loss for the year (5,873) (829) Other comprehensive income Effective portion of changes in fair value of cash flow hedges 74 - Taxation on items taken directly to other comprehensive income 7 (20) - Other comprehensive income for the year 54 - Total comprehensive income for the year (5,819) (829) Total comprehensive income for the year is attributable to: Equity holders of the parent (5,829) (829) Non-controlling interests 10 - (5,819) (829) Breedon Aggregates Annual Report and Accounts 2010 33

Page 36

Consolidated Statement of Financial Position at 31 December 2010 Note 2010 2009 £’000 £’000 Non-current assets Property, plant and equipment 8 150,207 - Intangible assets 9 4,079 - Investment in associated undertaking 11 1,070 - Total non-current assets 155,356 - Current assets Inventories 13 6,774 - Trade and other receivables 14 26,522 11 Cash and cash equivalents 3,294 11,866 Non-current assets held for resale 15 400 - Total current assets 36,990 11,877 Total assets 192,346 11,877 Current liabilities Interest-bearing loans and borrow ings 16 (7,095) - Trade and other payables 17 (28,372) (180) Current tax payable (5) (4) Provisions 18 (160) - Total current liabilities (35,632) (184) Non-current liabilities Interest-bearing loans and borrow ings 16 (88,457) - Provisions 18 (6,638) - Deferred tax liabilities 12 (4,788) - Total non-current liabilities (99,883) - Total liabilities (135,515) (184) Net assets 56,831 11,693 Equity attributable to equity holders of the parent Stated capital 19 61,575 13,262 Cash flow hedging reserve 19 54 - Capital reserve 19 2,369 - Retained earnings (7,261) (1,569) Total equity attributable to equity holders of the parent 56,737 11,693 Non-controlling interests 94 - Total equity 56,831 11,693 These financial statements w ere approved by the Board of Directors on 30 M arch 2011 and w ere signed on its behalf by: Simon Vivian Ian Peters Group Chief Executive Group Finance Director 34 Breedon Aggregates Annual Report and Accounts 2010

Page 37

Consolidated Statement of Changes in Equity for the year ended 31 December 2010 Stated Cash flow Capital Retained Attributable Non-controlling Total capital hedging reserve earnings to equity interests equity reserve holders of parent £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 January 2009 13,262 - - (741) 12,521 - 12,521 Total comprehensive income for the year - - - (829) (829) - (829) Credit to equity of share based payment - - - 1 1 - 1 Balance at 31 December 2009 13,262 - - (1,569) 11,693 - 11,693 Shares issued 50,000 - - - 50,000 - 50,000 Expenses of share issue (1,687) - - - (1,687) - (1,687) Acquisitions through business combinations - - 2,369 - 2,369 84 2,453 Total comprehensive income for the year - 54 - (5,883) (5,829) 10 (5,819) Credit to equity of share based payments - - - 191 191 - 191 Balance at 31 December 2010 61,575 54 2,369 (7,261) 56,737 94 56,831 Breedon Aggregates Annual Report and Accounts 2010 35

Page 38

Consolidated Statement of Cash Flow s for the year ended 31 December 2010 Note 2010 2009 £’000 £’000 Cash flow s from operating activities Loss for the year (5,873) (829) Adjustments for: Depreciation, amortisation and impairments 3,652 - Financial income (42) (102) Financial expense 1,601 - Share of profit of associated undertaking (net of tax) 22 - Gain on sale of property, plant and equipment (260) - Equity settled share based payment expenses 191 1 Change in the fair value of financial instruments (259) - Taxation (431) 4 Operating cash flow before changes in w orking capital and provisions (1,399) (926) Decrease in trade and other receivables 4,176 3 Decrease in inventories 1,203 - Decrease in trade and other payables (1,145) (117) Decrease in provisions (60) - Cash generated from operating activities 2,775 (1,040) Interest paid (1,459) - Interest element of finance lease payments (462) - Income taxes received/(paid) 31 (2) Net cash from operating activities 885 (1,042) Cash flow s used in investing activities Acquisition of businesses 27 (11,410) - Purchase of property, plant and equipment (1,232) - Proceeds from sale of asset for resale 50 - Proceeds from sale of property, plant and equipment 317 - Interest received 42 102 Dividend from associated undertaking 563 - Net cash used in investing activities (11,670) 102 Cash flow s from financing activities Proceeds from the issue of shares (net) 19 48,313 - Proceeds from new loans raised 4,500 - Repayment of loans (49,982) - Repayment of finance lease obligations (1,973) - Purchase of financial instrument - derivative (243) - Net cash from financing activities 615 - Net decrease in cash and cash equivalents (10,170) (940) Cash and cash equivalents at beginning of year 11,866 12,806 Cash and cash equivalents at end of year 1,696 11,866 Cash and cash equivalents 3,294 11,866 Bank overdraft 16 (1,598) - Cash and cash equivalents at end of year 1,696 11,866 36 Breedon Aggregates Annual Report and Accounts 2010

Page 39

Notes to the financial statements 1 A ccount ing policies The principal activities of the business are the quarrying of aggregates and the production of added value products, including asphalt and ready-mixed concrete, collectively know n as “ aggregates” , together w ith related activities in Great Britain and Jersey. Breedon Aggregates Limited (the “ Company” ) is a company domiciled in Jersey. The address of the Company’s registered office is Elizabeth House, 9 Castle Street, St Helier, Jersey, JE2 3RT. The Company w as incorporated on 15 August 2007. Basis of preparation The financial statements w ere authorised for issue by the Board of Directors on 30 M arch 2011. These financial statements consolidate the results of the Company and its tw o subsidiary undertakings, M arw yn M aterials Investments Limited and M arw yn M aterials (UK) Limited, for the entire financial year, together w ith the results of Breedon Holdings Limited and its subsidiaries w ith effect from acquisition on 6 September 2010, collectively the “ Group” . These financial statements have been prepared on a going concern basis based on the assessment made by the Directors as described in the Directors’ Report on page 21. These consolidated financial statements have been prepared in accordance w ith 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 w here the measurement of balances at fair value is required as set out below. The preparation of financial statements in conformity w ith Adopted IFRS’s requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas w here assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 28. The accounting policies set out below have, unless otherw ise stated, been applied consistently throughout the period presented in this financial information. These financial statements are presented in pounds sterling, w hich is the Group’s functional currency. All financial information presented in pounds sterling has been rounded to the nearest thousand. Parent company information has not been provided in accordance w ith Section 105 of the Companies (Jersey) Law 1991. New IFRS standards and interpretations adopted during 2010 In 2010, the follow ing standards had been endorsed by the EU, became effective and therefore w ere adopted by the Group. • IFRS 3 (Revised) – Business Combinations • IAS 27 (Revised) – Consolidated and Separate Financial Statements • Amendments 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 w hich w ould previously have been capitalised as part of the investment cost w hen 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 w hich are effective for periods starting after the date of these financial statements. The follow ing 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 w ith 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 w ill have a material effect on its financial statements on initial adoption. Breedon Aggregates Annual Report and Accounts 2010 37

Page 40

Notes to the financial statements (continued) 1 A ccount ing policies (continued) Basis of consolidation Subsidiary undertakings are entities controlled by the Group. Control exists w hen the Group has the pow er, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken into account. Ordinarily, the Group considers a company a subsidary w hen it holds more than 50% of the shares and voting rights. The financial statements of subsidiary undertakings are included in the Group financial information from the date that control commences until the date that control ceases. Associated undertakings are those entities in w hich the Group holds more than 20% of the shares and voting rights and has significant influence, but not control, over the financial and operating policies. The Group financial information includes the Group’s share of the total comprehensive income of associated undertakings on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associated undertaking. Financial instruments Financial instruments are recognised w hen the Group becomes a party to the contractual provisions of the instrument. The principal financial assets and liabilities of the Group are as follow s: Trade receivables and trade payables Trade receivables and trade payables are initially recognised at fair value and then are stated at amortised cost. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand, including bank deposits w ith original maturities of three months or less. For the purposes of the Consolidated Statement of Cash Flow s, bank overdrafts are also included as they are an integral part of the Group’s cash management. Bank and other borrow ings Interest bearing bank loans and overdrafts and other loans are recognised initially at fair value less attributable transaction costs. All borrow ings are subsequently stated at amortised cost w ith the difference betw een initial net proceeds and redemption value recognised in the Consolidated Income Statement over the period to redemption on an effective interest basis. Derivative financial instrum ents The Group uses financial instruments to manage financial risks associated w ith the Group’s underlying business activities and the financing of those activities. The Group does not undertake any trading in financial instruments. Derivatives are initially recognised at fair value on the date that the contract is entered into and subsequently re-measured in future periods at their fair value. The gain or loss on the re-measurement of fair value is recognised immediately in profit or loss. How ever, w here the derivative qualifies for hedge accounting, recognition of the resultant gain or loss depends on the nature of the item being hedged (see below ). Interest rate caps are used to hedge the Group’s exposure to movements on interest rates. The fair value of interest rate caps is the estimated amount that the Group w ould receive to terminate the cap at the reporting date, taking into account current interest rates and the current creditw orthiness of the financial derivative counterparties. Cash flow hedges Where a derivative financial instrument is designated as a hedge of the variability in cash flow s of a recognised asset or liability, the effective part of any gain or loss on the derivative financial instrument is recognised in the Consolidated Statement of Comprehensive Income and in the cash flow hedging reserve. Any ineffective portion of the hedge is recognised immediately in the Consolidated Income Statement. Amounts recorded in the cash flow hedging reserve are subsequently reclassified to the Consolidated Income Statement w hen the interest expense is actually recognised. To qualify for hedge accounting, the hedging relationship must meet several conditions w ith respect to documentation, probability of occurrence, hedge effectiveness and reliability of measurement. At the inception of the transaction, the Group documents the relationship betw een hedging instruments and hedged items, as w ell as its risk management objective and strategy for undertaking the hedge transaction. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments or forecast transactions. The Group also documents its assessment, at hedge inception and on an annual basis, as to w hether the derivatives that are used in hedging transactions have been, and are likely to continue to be, effective in offsetting changes in fair value or cash flow s of hedged items. 38 Breedon Aggregates Annual Report and Accounts 2010

Page 41

1 A ccount ing policies (continued) M inerals reserves and resources M ineral reserves and resources are stated at cost and are depreciated based on the physical unit of production method over their estimated commmercial lives. The fair value of mineral reserves and resources recognised as a result of business combinations is based on market value. Costs incurred to gain access to mineral reserves and resources are capitalised and depreciated over the life of the quarry, w hich is based on the estimated tonnes of material to be extracted from the reserves. Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Leases in w hich the Group assumes substantially all the risks and rew ards of ow nership of the leased asset are classified as finance leases. Leased assets acquired by w ay of finance lease are stated at an amount equal to the low er of their fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as described below. Depreciation is charged to the Consolidated Income Statement on a straight-line basis over their estimated useful lives to w rite off the cost or deemed costs of assets. The estimated useful lives are as follow s: • Freehold buildings - 50 years • Long leasehold land and buildings - Life of the lease • Fixtures and fittings - 10 years • Office equipment - 3-5 years • Fixed plant - 20 years • Loose plant and machinery - 5-10 years • M otor vehicles - 4 years No depreciation is provided on freehold land. Intangible assets and goodw ill The Group measures goodw ill as the fair value of the purchase consideration transferred including the recognised amount of any non- controlling interest in the acquiree, less the fair value of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. Fair value adjustments are alw ays considered to be provisional at the first reporting date after the acquisition to allow the maximum time to elapse for management to make a reliable estimate. The Group measures non-controlling interests at a proportionate share of the recognised amount of the identifiable net assets at the acquisition date. Goodw ill arising on the acquisition of subsidiary undertakings is recognised as an asset in the Consolidated Statement of Financial Position and is subject to annual impairment review. Goodw ill arising on the acquisition of associated undertakings is included w ithin the carrying value of the investment. Other intangible assets that are acquired by the Group as part of a business combination are stated at cost less accumulated amortisation and impairment losses. Cost reflects management’s judgement of the fair value of the individual intangible asset calculated by reference to the net present value of future economic benefits accruing to the Group from the utilisation of the asset, discounted at an appropriate discount rate. Other intangibles arising on the acquisition of associated undertakings are included w ithin the carrying value of the investment. Amortisation is based on the useful economic lives of the assets concerned, currently being the consumption of economic benefits over a period up to ten years. Breedon Aggregates Annual Report and Accounts 2010 39

Page 42

Notes to the financial statements (continued) 1 A ccount ing policies (continued) Impairment The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets (see separate accounting policies), are review ed at each reporting date to determine w hether there is any indication of impairment. Impairment review s are undertaken at the level of each significant cash generating unit, w hich is no larger than an operating segment as defined by IFRS 8 Operating Segments. If any such indication exists then the assets recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flow s are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss in respect of goodw ill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that w ould have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Non-current assets held exclusively w ith a view to resale Non-current assets acquired exclusively w ith a view to subsequent disposal are classified as assets held for resale at the acquisition date only w here all criteria set out in IFRS 5 are satisfied w ithin a short period follow ing the acquisition. When acquired as part of a business combination, non-current assets acquired exclusively w ith a view to subsequent disposal are initially measured at fair value less costs to sell. Subsequently, these non-current assets are measured at the low er of their current carrying value and current fair value less costs to sell. Subsequent gains or losses on re-measurement are recognised in the Consolidated Income Statement. Gains are not recognised in excess of any cumulative loss. Inventories Inventories are stated at the low er of cost and net realisable value. Cost is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and w ork in progress, cost includes an appropriate share of overheads based on normal operating capacity. Retirement benefits Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Income Statement as incurred. Provisions Restoration provisions The Group provides for the costs of restoring a site w here a legal or constructive obligation exists. The cost of raising a provision before exploitation of the raw materials has commenced is included in property, plant and equipment and depreciated over the life of the site. The effect of any adjustments to the provision due to further environmental damage is recorded through operating costs over the life of the site to reflect the best estimate of the expenditure required to settle the obligation at the end of the reporting period. Changes in the measurement of a provision that result from changes in the estimated timing or amount of cash outflow s, or a change in the discount rate, are added to, or deducted from, the cost of the related asset. All provisions are discounted to their present value at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. Property provisions A provision is recognised in the Consolidated Statement of Financial Position w hen the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits w ill be required to settle the obligation. Provisions are determined by discounting the expected future cash flow s at a rate that reflects current market assessments of the time value of money and the risks specific to the liability. Revenue Revenue from the sale of goods and services represents the amount (excluding value added and sales taxes) invoiced to third party customers, net of returns and trade discounts. Revenue is recognised by the Group w hen the significant risks and rew ards associated w ith the transaction have been transferred to the customers and the amount of revenue can be measured reliably. The timing of the transfers of risks and rew ards varies depending on the individual terms of the contract of sale. Usually transfer occurs w hen products have been delivered to, or picked up by, the customer or by reference to the degree of completion of short term contracts for the supply of services. 40 Breedon Aggregates Annual Report and Accounts 2010

Page 43

1 A ccount ing policies (continued) Expenses Operating lease paym ents Payments made under operating leases are recognised in the Consolidated Income Statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the Consolidated Income Statement as an integral part of the total lease expense. Finance lease paym ents M inimum lease payments are apportioned betw een the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Financial incom e and expense Financial income and expense comprises interest payable, finance charges, finance lease charges, interest receivable on funds invested, and gains and losses on hedging instruments that are recognised in the Consolidated Income Statement. Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method. Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in equity, in w hich case it is recognised in equity. Current tax is the expected tax payable on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Income Statement because it excludes items of income or expense that are not taxable or deductible. The Group’s liability for current tax is calculated using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax is provided in full using the Statement of Financial Position liability method and represents the tax expected to be payable or recoverable on the temporary differences betw een the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The follow ing temporary differences are not provided for: goodw ill not deductable for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and differences relating to investments in subsidiaries to the extent that they w ill probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits w ill be available against w hich the asset can be utilised. The carrying amount of deferred tax assets is review ed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit w ill be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset w hen they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Share based transactions Equity-settled share based payments to Directors, key employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based transactions are set out in note 20. The fair value determined at the grant date of the equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of equity instruments that w ill eventually vest. At each Statement of Financial Position date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, w ith a corresponding adjustment to reserves. Dividends Interim dividends are recognised w hen they are paid. Final dividends are recognised as a liability in the period in w hich they are approved by the Company’s shareholders. Breedon Aggregates Annual Report and Accounts 2010 41

Page 44

Notes to the financial statements (continued) 2 Segm ent al analysis Segmental information is presented in respect of the Group’s business segments in line w ith IFRS 8 Operating Segments w hich requires segmental information to be presented on the same basis as it is view ed internally. The Group’s Board of Directors, considered as the Group’s “ Chief Operating Decision M aker” , view the business on a geographical basis. As such, tw o operating segments (England and Scotland) have been identified as reportable segments. A description of the activities of each segment is included on pages 4 and 5. There are no other operating segments. The majority of revenues are earned from the sale of aggregates, related products and services. Incom e st at em ent 2010 2009 Revenue EBITDA* Revenue EBITDA* £’000 £’000 £’000 £’000 England 21,072 1,699 - - Scotland 21,607 2,977 - - Central administration - (1,369) - (927) Group 42,679 3,307 - (927) * EBITDA represents underlying EBITDA before share of loss from associated undertaking. Reconciliation to reported loss Segmental profit/(loss) as above 3,307 (927) Depreciation (3,574) - Non-underlying items (4,456) - Reported operating loss (4,723) (927) Share of loss of associated undertaking (22) - Net financial (expense)/income (1,559) 102 Loss before taxation (6,304) (825) Taxation 431 (4) Loss for the year (5,873) (829) 42 Breedon Aggregates Annual Report and Accounts 2010

Page 45

2 Segm ent al analysis (continued) St at em ent of Financial Posit ion 2010 2009 Total Total Total Total assets liabilities assets liabilities £’000 £’000 £’000 £’000 England 85,753 (15,838) - - Scotland 89,481 (14,183) - - Central administration 13,818 (5,154) 11 (184) Total operations 189,052 (35,175) 11 (184) Deferred tax - (4,788) - - Net debt 3,294 (95,552) 11,866 - Total Group 192,346 (135,515) 11,877 (184) Net assets 56,831 11,693 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 w ithin the England segment. A nalysis of deplet ion, depreciat ion, am ort isat ion and capit al expendit ure M ineral Depreciation Impairment Additions Additions depletion and and and to property, to other impairment impairment amortisation plant and intangible of intangible equipment assets assets £’000 £’000 £’000 £’000 £’000 2010 England 347 1,235 - 408 - Scotland 203 1,782 78 824 - Central administration - 7 - - - Total 550 3,024 78 1,232 - 2009 England - - - - - Scotland - - - - - Central administration - - - - - Total - - - - - Additions to property, plant and equipment and other intangible assets exclude additions in respect of business combinations (note 27). Breedon Aggregates Annual Report and Accounts 2010 43

Page 46

Notes to the financial statements (continued) 3 N on-underlying it em s 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. 2010 2009 £’000 £’000 Included in administrative expenses: Redundancy costs (843) - Acquisition costs (3,794) - Gain in the fair value of a financial instrument (note 29) 259 - Amortisation of other intangible assets (78) - (4,456) - 4 Expenses and audit or’s rem unerat ion 2010 2009 £’000 £’000 Group operating loss has been arrived at after charging/(crediting) Depreciation of property, plant and equipment: Ow ned assets 2,166 - Assets held under finance lease 1,408 - Amortisation of other intangible assets 78 - Gain on sale of property, plant and equipment (260) - Operating lease rentals: Plant, equipment and vehicles 29 - Other 220 - A udit or’s rem unerat ion 2010 2009 £’000 £’000 Audit of the Company’s annual accounts 11 14 Audit of the Company’s subsidiary undertakings 109 - Services relating to corporate finance transactions 110 - Tax services 66 - Other services 38 - 334 14 44 Breedon Aggregates Annual Report and Accounts 2010

Page 47

5 Rem unerat ion of k ey m anagem ent , st af f num bers and cost s Details of the remuneration received by key management is summarised below : 2010 2009 £’000 £’000 Salaries and short term employee benefits 671 200 Directors’ fees 509 165 Post employment benefits 8 - Equity-settled share based payments (note 20) 130 1 1,318 366 The average number of persons employed by the Group (including directors) during the year, analysed by category, w as as follow s: Number of employees 2010 2009 England 100 - Scotland 134 - Central administration 3 2 237 2 The average number of persons employed is based on the 2 people employed by the Group prior to the acquisition on 6 September 2010 and 706 people, being the average number of employees since acquisition. At 31 December 2010, the Group employed 707 people, being 302 people in England, 401 people in Scotland and 4 people at head office. The aggregate payroll costs of these persons w ere as follow s: 2010 2009 £’000 £’000 Wages and salaries 7,989 191 Social security costs 869 33 Other pension costs 265 - Compensation for loss of office 843 - Equity-settled share based payments (note 20) 181 1 10,147 225 Breedon Aggregates Annual Report and Accounts 2010 45

Page 48

Notes to the financial statements (continued) 6 Financial incom e and expense 2010 2009 £’000 £’000 Interest income – bank deposits 42 102 Financial income 42 102 Interest expense – bank loans and overdrafts (1,031) - Amortisation of prepaid bank arrangement fee (33) - Interest expense – other (26) - Interest expense – finance leases (462) - Unw inding of discount on provisions (49) - Financial expense (1,601) - 7 Taxat ion Recognised in the Consolidated Income Statement 2010 2009 £’000 £’000 Current tax expense 5 4 Total current tax 5 4 Deferred tax expense Origination and reversal of temporary differences (436) - Total tax (credit)/ charge in the Consolidated Income Statement (431) 4 Taxation on items taken directly to Other Comprehensive Income 2010 2009 £’000 £’000 Deferred tax expense Relating to cash flow hedges 20 - Reconciliation of effective tax rate 2010 2009 £’000 £’000 Loss for the year (6,304) (825) Tax at the Company’s domestic rate of 0% - - Effect of tax rates in foreign jurisdictions* (719) 4 Expenses not deductible for tax purposes 187 - Capital losses utilised (13) - Income from associate already taxed 6 - Effect of change in rate 16 - Unrecognised losses 92 - Tax (credit)/ charge (431) 4 * The Company is resident in Jersey and has a zero percent tax rate. The Group has subsidiary operations in the UK w hich pay tax at a higher rate of 28% . The UK corporation tax rate w ill 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% w as substantively enacted on 20 July 2010 and w ill be effective from 1 April 2011. This w ill reduce the Group’s future current tax charge accordingly. 46 Breedon Aggregates Annual Report and Accounts 2010

Page 49

8 Propert y, plant and equipm ent M ineral Plant, reserves and Land and equipment resources buildings and vehicles Total £’000 £’000 £’000 £’000 Cost Balance at 1 January 2009 and 31 December 2009 - - - - Acquisitions through business combinations (note 27) 70,685 23,670 58,251 152,606 Additions 880 143 209 1,232 Disposals - - (57) (57) Balance at 31 December 2010 71,565 23,813 58,403 153,781 Depreciation and impairment Balance at 1 January 2009 and 31 December 2009 - - - - Depreciation charge for the year 550 160 2,864 3,574 Balance at 31 December 2010 550 160 2,864 3,574 Net book value At 1 January 2009 and 31 December 2009 - - - - At 31 December 2010 71,015 23,653 55,539 150,207 Leased plant and m achinery At 31 December 2010, the net carrying amount of leased plant and machinery w as £27,506,000 (2009: £nil). Depreciation charged on these assets in the period w as £1,408,000 (2009: £nil). Details of finance lease obligations are set out in note 16. Depreciation and im pairm ent charge The depreciation and impairment is recognised in the follow ing line items in the Consolidated Income Statement: 2010 2009 £’000 £’000 Cost of sales 3,435 - Administration expenses 139 - 3,574 - Security All mineral reserves and resources and land and buildings are pledged as security for bank loans and borrow ings w ith Barclays Bank PLC as Security Agent for the Group’s lenders. Breedon Aggregates Annual Report and Accounts 2010 47

Page 50

Notes to the financial statements (continued) 9 Int angible asset s Goodw ill Other Total £’000 £’000 £’000 Cost At 1 January 2009 and 31 December 2009 - - - Acquisitions through business combinations (note 27) 3,738 419 4,157 Balance at 31 December 2010 3,738 419 4,157 Amortisation and impairment At 1 January 2009 and 31 December 2009 - - - Amortisation for the year - 78 78 Balance at 31 December 2010 - 78 78 Net book value At 1 January 2009 and 31 December 2009 - - - At 31 December 2010 3,738 341 4,079 Other intangible assets relate to acquisition intangibles, being the fair value of certain customer lists and contracts acquired as part of the acquisition detailed in note 27. These intangible assets are being amortised over the anticipated life of the underlying customer list or contract as appropriate, w ith the amortisation charge being recognised in non-underlying administrative expenses in the Consolidated Income Statement. Im pairm ent tests for cash-generating units containing goodw ill Goodw ill arising on business combinations is not amortised but is review ed for impairment on an annual basis, or more frequently if there are indications that the goodw ill may be impaired. Goodw ill is allocated to groups of cash generating units according to the level at w hich management monitors that goodw ill. At 31 December 2010, the goodw ill of £3,738,000 has been allocated entirely to Scotland. For impairment testing, the recoverable amount of goodw ill attaching to cash generating units is determined using value in use calculations. These calculations use cash flow projections based on actual operating results and budgeted forecasts for 2011 extrapolated forw ard for a 30 year period, reflecting the long term nature of the underlying assets, assuming a 2.5% inflationary grow th rate based on management’s estimate for revenue and cost grow th, discounted at a pretax rate of 10.0% and a post tax rate of 8.5% . Directors estimate discount rates reflecting current market assessment of the time value of money and the risks specific to the cash generating units. The directors have determined that there has been no impairment. The Group has applied sensitivities to assess w hether any reasonable possible changes in assumptions could cause impairments that w ould be material to these consolidated financial statements and no such impairments w ere identified. 1 0 Principal Group com panies The principal undertakings in w hich the Group’s interest at the year end w as more than 20 per cent w ere as follow s: Country of Percentage of Principal incorporation ordinary shares held activity Subsidiary undertakings Ordinary shares held directly M arw yn M aterials Investments Limited Jersey 100% Holding company Ordinary shares held indirectly Breedon Aggregates England Limited England 100% Production and sale of aggregates Breedon Aggregates Scotland Limited Scotland 100% Production and sale of aggregates Breedon Group Services Limited England 100% Service company Breedon Properties Limited England 100% Property holding company Breedon Holdings Limited England 100% Service company Alba Traffic M anagement Limited Scotland 90% Traffic management M arw yn M aterials (UK) Limited England 100% Service company Associated undertakings Ordinary shares held indirectly BEAR Scotland Limited Scotland 37.5% Road maintenance contracting 48 Breedon Aggregates Annual Report and Accounts 2010

By industry

By Role

Comprehensive

Relevant

Easy to use

Pages