Interactive Investor

ii view: CRH reports record first-half earnings

Building materials company CRH reports progress, despite Brexit uncertainties hitting its UK operations.

22nd August 2019 09:20

Keith Bowman from interactive investor

Building materials company CRH reports progress, despite Brexit uncertainties hitting its UK operations.

Half-year results  

  • Revenue up 11% to €13.2 billion
  • Profit (EBITDA) up 36% to €1.54 billion
  • Earnings per share up 51% to 67.8-euro cents
  • Dividend payment up 2% to 20-euro cents per share

Chief executive Albert Manifold said:

"On the back of our strategic initiatives, CRH has delivered significant profit growth in the first half of 2019, with a good performance in our heritage business and strong contributions from recent acquisitions. We are pleased to report that the Board plans to continue our share buyback programme with a further tranche of €350 million to be completed by year end. This will bring our total share repurchases in 2019 to €900 million. 

With our continued strong cash generation and financial discipline, we expect year-end debt metrics to be below normalised levels. We anticipate further progress in the second half of the year with benefits from positive underlying momentum in all divisions as well as good contributions from acquisitions."

ii round-up:

Formed through the merger of Irish companies Cement Limited and Roadstone Limited in 1970, today CRH (LSE:CRH) is global diversified building materials company.

Employing around 90,000 people, it has operations in over 30 countries including the US, where it has operations in more than 40 states. 

Its products range from aggregates, asphalt, lime to cement, ready mixed concrete and concrete products. 

The group’s business is separated across the three divisions of European materials, building products and Americas materials, with 2018 sales split relatively evenly. 

The company’s first-half results delivered no major surprises. Record half-year profits of €1.54 billion proved in line with prior management estimates, helped along by acquisitions and favourable currency movements. 

Like-for-like sales growth of 6% for its European business led the way, despite declining UK construction activity and continued Brexit-related uncertainty.

The share price drifted less than 1% lower in early UK stock market trading.

ii view:

Four core pillars underpin the company’s strategy to grow and improve. These are continuous improvement, focused growth, benefits of scale and developing leaders. 

Strong contributions from recent acquisitions appears to be rewarding its emphasis on focused growth, while €2 billion of business divestments underline the degree to which it regards the importance of scale. 

For investors, cash generation and a focus on shareholder returns provide attraction, with total share repurchases in 2019 at €900 million. However, a forward price earnings ratio in line with the ten-year average and a 20% plus gain in the share price year-to-date offer reasons for caution.  

Positives: 

  • Diversified both by product and geographical location
  • Continued portfolio refinement: €2 billion divestments and €0.5 billion acquisitions

Negatives:

  • Net debt rose by €2.1 billion to €10.2 billion
  • Management highlighted a challenging environment in the UK

The average rating of stock market analysts:

Strong buy

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