CRH plc — 2020 Annual Report and Form 20-F
Reporting period: Year ended December 31, 2020. Although the request references 2020 Q4, this is an annual filing, not a quarterly report. CRH is a global building materials producer operating through Americas Materials, Europe Materials and Building Products. Financial statements are prepared under IFRS as issued by the IASB and presented in U.S. dollars; prior-year figures were translated to dollars.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue, continuing operations | $27.587 billion | $28.132 billion |
| EBITDA, as defined by CRH | $4.630 billion | $4.478 billion |
| EBITDA margin | 16.8% | 15.9% |
| Operating profit | $2.263 billion | $2.793 billion |
| Profit after tax, continuing operations | $1.165 billion | $1.647 billion |
| Basic EPS, continuing operations | 142.9 cents | 203.0 cents |
| Operating cash flow | $3.938 billion | $3.881 billion |
| Capital expenditure on property, plant and equipment | $996 million | $1.374 billion |
| Net debt | $5.941 billion | $7.532 billion |
Reported profit included $827 million of non-cash impairment charges: $673 million against property, plant and intangible assets and $154 million against an equity-accounted investment. Excluding impairment and related tax effects, CRH reported pre-impairment profit after tax of approximately $2.0 billion, up 18%, and EPS of 243.3 cents, up 19%.
Year-end liquidity was $12.1 billion, comprising $7.7 billion of cash and cash equivalents and $4.4 billion of undrawn committed facilities. Interest-bearing loans and borrowings were $12.215 billion; net debt includes lease liabilities and net derivative positions. Net debt/EBITDA was 1.3x, versus 1.7x in 2019. Cash dividends paid during 2020 were $710 million; the Board proposed a 93-cent final dividend, bringing the 2020 full-year dividend to 115 cents per share, 25% above 2019, subject to shareholder approval.
Divisional performance
- Americas Materials: Revenue $11.273 billion, down 3%; EBITDA $2.405 billion, up 10%. Pricing, cost control and lower energy costs supported margins despite lower volumes.
- Europe Materials: Revenue $9.141 billion, down 4%; EBITDA $1.055 billion, down 13%. COVID-19 restrictions and UK-related impairment weighed on results.
- Building Products: Revenue $7.173 billion, up 3%; EBITDA $1.170 billion, up 9%. North American residential repair, maintenance and improvement demand supported growth.
Material changes versus the prior period
- Revenue fell 2%, while EBITDA increased 3% and EBITDA margin expanded by 90 basis points, reflecting cost flexibility and operating improvements.
- Operating profit declined 19% and reported continuing-operations profit after tax fell 29%, principally due to the impairment charges. Pre-impairment profit increased.
- Operating cash flow was broadly stable. Net debt decreased by $1.6 billion, supported by cash generation, lower capital spending and a pause in share buybacks.
- CRH changed its reporting currency from euros to U.S. dollars from January 1, 2020. Prior-year financial statements were translated into dollars. The company also restated prior-year cash and borrowings presentation for cash-pooling arrangements; this did not affect net debt or profit.
Outlook, commentary and risks
Management said the near-term outlook remained uncertain because of the pandemic and did not provide specific short-term financial guidance. It expected recovery in North America and Europe as health conditions improved, citing infrastructure and residential demand as supportive, while non-residential markets remained mixed. CRH stated its intention to pursue margin expansion, cash generation and returns. It also planned to resume share buybacks, with a further $300 million tranche intended by the end of June 2021.
CRH agreed to sell its Brazil operations for approximately $200 million, subject to competition authority review, with closing expected in the first half of 2021. The group incurred $122 million of one-off costs, primarily COVID-related restructuring. Three workplace fatalities occurred during 2020, involving one employee and two contractors.
Principal risks include the ongoing effects of COVID-19, construction-market cyclicality, Brexit and UK demand, government infrastructure funding, commodity and energy costs, competition, acquisition integration, reserve permits, climate-related transition and physical risks, and financing and foreign-exchange exposures. The filing reports no material off-balance-sheet arrangements and no pending site-remediation legal proceedings expected to have a material adverse effect. Deloitte issued unqualified opinions on the financial statements and internal controls; key audit matters included asset impairment estimates and long-term contract revenue recognition.
Important facts for investors to verify
- Review impairment assumptions and sensitivity, especially for the UK cash-generating unit and China associate investment; goodwill stood at $9.0 billion.
- Assess the sustainability of improved EBITDA margins and cash generation amid uncertain construction demand and lower 2020 capital spending.
- Confirm liquidity, debt maturities and refinancing plans, including 2021 bond maturities, and the treatment of lease liabilities in leverage comparisons.
- Check completion and proceeds from the proposed Brazil divestment and whether the planned buyback and final dividend were implemented.
- Consider estimation risk in long-term contracts: $6.2 billion, or 22% of 2020 revenue, was recognized over time using estimated contract costs.