CRH: Acquisition-led growth strategy to last for decades

CRH: Acquisition-led growth strategy to last for decades
Albert Manifold

By Geoff Percival

CRH has immediate room to spend in the region of €650m-€700m per year on acquisitions, and the company envisages no change to its acquisition-led growth strategy for decades to come.

Speaking on the back of a strong set of annual results for 2017 - a year which saw the building materials group commit around €5bn on acquisitions - chief executive Albert Manifold said CRH's acquisition pipeline remains strong, but that the group can afford to be "selective" with regard to the deals it pursues.

Mr Manifold said the group will always add bolt-on acquistions - €700m worth of which were added last year - but will probably focus, during 2018, on integrating its large purchases from last year into the existing group structure and making a start on realising synergy targets.

CRH generated approximately €2bn in cash last year. While much of that will go towards re-investment in the existing business and dividend payments - the group yesterday announced a 5% rise in annual shareholder awards to 68c per share for 2017 - about a third will be available for further acquisitions. In the last four years CRH has spent around €13bn on acquistions and recouped around €5bn from disposals. Its capacity for more deals remains strong, with net debt only 1.8 times earnings as of the end of December.

Mr Manifold said CRH has grown, over the years, on the back of acquisitions and that the model still has "many years to run". He also confirmed that CRH will benefit to the tune of around three percentage points from President Trump's recent corporate tax cuts in the US, meaning it will now have a basic tax rate of 24%, in that country, rather than 27%, which had seen it pay around €500m in US taxes.

CRH's share price rose by around 1% on the back of the strong set of annual results and a positive outlook for this year. Total sales - including discontinued operations such as the $2.6bn sale of the Americas Distribution division - rose 2% to €27.6bn, with earnings up 6% at €3.3bn. Mr Manifold said he expects continued growth in 2018.

"With a balanced portfolio of businesses CRH is well-positioned to capitalise on ongoing economic recovery and our focus remains on consolidating and building upon the gains made in 2017. Against this backdrop we believe that 2018 will be a year of continued growth for the group," he said.

While CRH recently suggested its near-term acquisition focus will centre on mainland Europe and North America, rather than emerging markets, Mr Manifold defended its struggling Philippines division - acquired as part of its 2015 mega-purchase of assets offloaded to make way for the merger of peers Lafarge and Holcim. He said the fundamentals of that business remain good and that it has solid underlying profitable growth opportunities.

Aside from its annual results, CRH also yesterday announced the appointment of former Bank of Ireland chief executive Richie Boucher to its board as a non-executive director.

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