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Breedon Aggregates confident of clinching more acquisitions

Breedon Aggregates is expecting to clinch at least two acquisitions in the next six to 12 months, its chairman has told CN.

Chairman Peter Tom – who founded Aggregates Industries - said his company is continuing to talk to “different businesses in different regions that will be a good fit for us”.

“We now have a couple of regional deals where we continue to have dialogue with them and would be pretty disappointed if we don’t make an announcement in the next six to 12 months,” he told CN.

Mr Tom said deals are taking longer as sellers come to terms with today’s market prices and want to ensure their company is going to the right buyers. Mr Tom revealed he was speaking to C&G Concrete - which it bought in July 2011 - for more than three years.

Breedon has openly expressed its interest in the assets that Tarmac and Lafarge have been told to dispose of by the Competition Commission for their joint venture to go ahead.

Analysts at Cenkos Securities estimated the value of the Tarmac/Lafarge assets – including a cement plant in Hope, Derbyshire and six aggregates quarries - at about £230 million.

Mr Tom said his company expects to create some “serious value” for shareholders by growing the company, with or without the Tarmac/Lafarge assets.

He told CN: “We are interested in any assets that become available in the sector.

“The two key things are if we didn’t get it, we are still going to continue the development of Breedon; we will deliver serious returns for shareholders – and if we do get it, we will get it at an attractive price.”

Breedon – whose group chief executive Simon Vivian oversaw the sale of Mowlem to Carillion in 2006 – posted interim results last month, reporting turnover was down just 2 per cent to £83m, and a pre tax profit of £2.2m, ahead of analysts’ expectations.

The company said there were strong performances from acquisitions C&G Concrete and Nottingham Readymix. Turnover dropped in Scotland, where Breedon is focusing less on the public sector and more on renewable energy.  The firm also bought a sand and gravel quarry near Elgin.

The company said medium-term prospects in Scotland are good after committed spending by Scottish Water and major roads.

Breedon also reported a sound performance in English regions, “backed by commercial and industrial investment and a recovery in house building”.

Mr Tom said part of the success has been down to “a number of small changes” in the business operations which have saved money and “really upped” services to smaller customer.

Kevin Cammack, analyst at Cenkos Securities, said Breedon’s interims “have no right to be as good as they are set against a back-drop of double-digit industry volume declines across all product lines and a worsening Q2 as wet weather has played havoc, with asphalt volumes in particular”.

Howard Seymour, at Numis Securities, said the interim results demonstrate that growing organically is the ‘key drive’r of the business, “especially notable given such a weak macro environment”.

But Peel Hunt analyst Robin Hardy said: “The real attraction of this stock lies in the potential gains if (hopefully when) it is able to buy the asset disposal package from the Tarmac/Lafarge merger. This would propel Breedon from a regional player to a strong national No.5.”

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