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CRH is on a growth kick (£6bn of acquisitions helps)

The building materials supplier spent a truckload on acquisitions last year, and the full benefits are expected to start coming through this year.
March 7, 2016

CRH (CRH) is on a significant growth path, having spent nearly €8bn (£6.2bn) on investments and acquisitions last year. That included 20 bolt-on acquisitions as well as substantial assets up for grabs as part of the LafargeHolcim mega merger, and the €1.3bn purchase of materials wholesaler CR Laurence.

IC TIP: Buy at 1,928p

As a result, operating profit jumped by 39 per cent to €1.28bn, although the increase in earnings per share was more modest following a 74m share placement in February 2015. Net debt was up at €6.6bn, but this was down from a peak of €8bn after divestments and disposals brought in €1bn. Net finance costs were higher, though, up from €288m to €389m.

Demand for building materials in the group's US market remained strong both in residential and non-residential construction. It managed to push through price increases on aggregates and ready-mixed concrete, and while asphalt prices declined, this was more than offset by lower input costs as energy prices fell.

Assets bought from Lafarge and Holcim cost €6.5bn, spanning 11 countries, and after the completion in July all the acquired assets traded ahead of expectations, although some more than others. Trading conditions were more of a challenge in France, Germany and Brazil in particular. At the time of the acquisition, CRH identified cost synergies of €90m achievable in three years, but this has now been revised up to €120m.

Trading in Europe was more of a mixed bag. As well as France and Germany, market conditions remained tough in Switzerland and Finland, which more than offset increased activity in Poland, Denmark and the Netherlands. On the heavy side, aggregate sales fell 8 per cent, but on the light side construction accessories were stronger, helping to lift sales by 5 per cent. CRH also operates a string of builders' merchants sites where strong competition led to a slight decline in like-for-like sales.

Analysts at Numis Securities are forecasting pre-tax profit for 2016 of €1.78bn and EPS of 158¢, compared with €1.08bn and 94¢ in 2015.

 

CRH (CRH)
ORD PRICE:1,928pMARKET VALUE:£15.9bn
TOUCH:1,926-1,928p12-MONTH HIGH:2,000pLOW: 1,581p
DIVIDEND YIELD:2.5%PE RATIO:28
NET ASSET VALUE:1,581¢*NET DEBT:49%

Year to 31 DecTurnover (€bn)Pre-tax profit (€bn)Earnings per share (¢)Dividend per share (¢)
201118.10.7082.662.5
201218.10.6074.662.5
201318.0-0.20-40.662.5
201418.90.7678.962.5
201523.61.0389.162.5
% change+25+36+13-

Ex-div: 10 Mar

Payment: 6 May

*Includes intangible assets of €7.8bn, or 950¢ a share £1=€1.282