CRH plc — 2019 Annual Report and Form 20-F
Reporting period: Fiscal year ended December 31, 2019; this is an annual filing, not a standalone fourth-quarter report. CRH is an Ireland-incorporated global building-materials group operating in 30 countries. Financial statements use IFRS as issued by the IASB and are presented in euros. Reported comparisons reflect Europe Distribution as discontinued operations; segment reporting was reorganized into three divisions.
Business context and performance
CRH’s three divisions are Americas Materials, Europe Materials and Building Products. Management cited positive demand and pricing in much of North America and Europe, partly offset by poor first-half weather, higher input costs and Brexit-related weakness in the UK. The new Building Products division consolidated related global product businesses.
Key financial metrics
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue, continuing operations | €25.129bn | €23.241bn |
| Revenue, continuing and discontinued operations | €28.306bn | €26.797bn |
| EBITDA, continuing operations (company-defined) | €4.000bn | €3.216bn |
| EBITDA, continuing and discontinued operations | €4.200bn | €3.360bn |
| Operating profit, continuing operations | €2.494bn | €2.071bn |
| Profit after tax, continuing operations | €1.638bn | €1.345bn |
| Group profit after tax, including discontinued operations | €1.948bn | €2.521bn |
| Basic EPS, continuing operations | 202.2c | 161.2c |
| Basic EPS, including discontinued operations | 240.7c | 302.4c |
| Net cash inflow from operating activities | €3.466bn | €1.899bn |
| Capital expenditure on property, plant and equipment | €1.229bn | €1.121bn |
| Net debt at year end | €6.705bn | €6.984bn |
| Cash and cash equivalents | €3.755bn | €2.346bn |
Continuing-operations revenue increased 8%, operating profit 20%, EBITDA 24% and EPS 25%. Continuing-operations EBITDA margin was approximately 15.9% (2018: 13.8%); operating margin was approximately 9.9% (2018: 8.9%). Return on net assets was 10.1%, versus 9.6%. The company reported €7.4bn of total liquidity, including €3.8bn cash and €3.6bn undrawn committed facilities; net interest cover was 12.3x.
Segment results: Americas Materials revenue was €10.385bn and EBITDA €1.960bn; Europe Materials revenue was €8.494bn and EBITDA €1.079bn; Building Products revenue was €6.250bn and EBITDA €0.961bn. Segment figures are continuing operations.
Material changes and unusual items
- CRH sold Europe Distribution in October 2019 for agreed consideration of €1.6bn; it was reported as discontinued operations. It also sold European Shutters & Awnings and Perimeter Protection and disposed of its 50% interest in India’s MHIL for deferred consideration of €0.3bn.
- Total 2019 revenue including discontinued operations rose 6% and EBITDA rose 25%. Total group profit after tax fell from €2.521bn to €1.948bn, principally because 2018 included a €1.563bn after-tax disposal gain from discontinued operations; the 2019 discontinued-operations disposal gain was €224m.
- Operating cash flow increased to €3.466bn, supported by stronger profitability, lower working-capital outflow (€64m versus €463m) and non-recurrence of certain 2018 cash outflows. CRH spent €0.7bn on 62 acquisitions, received €2.1bn in disposal proceeds, and returned €1.4bn to shareholders through dividends and buybacks.
- CRH adopted IFRS 16 Leases in 2019. At transition it recognized €1.977bn of lease liabilities; year-end lease liabilities were €1.511bn. The accounting change increased EBITDA and depreciation and finance costs, and affects year-on-year comparability. Management reported a €378m EBITDA impact from IFRS 16 across continuing and discontinued operations.
- Net debt/EBITDA was 1.7x at year end, compared with 2.1x in 2018; 2018 leverage uses continuing and discontinued EBITDA for comparability. Interest-bearing loans and borrowings were €9.014bn, while total net debt also reflects leases, cash and derivatives.
Outlook, commentary and risks
Management expected further progress in 2020: growth in US residential, non-residential and infrastructure markets; positive demand in key European markets, with UK stabilization anticipated despite Brexit uncertainty; and further Building Products growth. The stated priorities were portfolio refinement, margin expansion, cash generation and shareholder returns. These are forward-looking expectations, not guarantees.
The Board proposed a final dividend of 63.0c per share, which would bring the 2019 full-year dividend to 83.0c, up 15% from 72.0c, subject to shareholder approval. A further €200m share-buyback tranche was announced for completion by March 31, 2020.
Key disclosed risks include construction-market cyclicality, weather, energy and raw-material costs, pricing competition and product substitution, acquisition integration and divestment liabilities, Brexit and geopolitical uncertainty, mineral-reserve permits, climate regulation and emissions costs, health and safety, legal and regulatory compliance, cyber incidents, foreign-exchange and interest-rate movements, liquidity and credit risks, pension assumptions, tax uncertainty and goodwill impairment. CRH reported one third-party fatality in 2019. It set a 2030 cement-emissions intensity target of 520kg CO₂ per tonne of cementitious product and an ambition for carbon neutrality across the cement and concrete value chain by 2050.
The independent auditor gave an unqualified opinion on the financial statements and internal controls. Critical audit matters included goodwill and property, plant and equipment impairment testing, and construction-contract revenue recognition. The audit did not include internal controls at 2019 business combinations, representing 1.5% of total assets, 2.3% of net assets, 0.8% of revenue and 0.1% of group profit.
Effective January 1, 2020, CRH changed its reporting currency from euros to US dollars to reduce reported-earnings foreign-exchange volatility. Deloitte was selected to replace EY as auditor for 2020.
Important facts for investors to verify
- Reconcile continuing-operations results with discontinued operations and identify the effect of the Europe Distribution sale and prior-year disposal gains.
- Assess underlying earnings and leverage after separating IFRS 16 effects; confirm the company-defined EBITDA and net-debt calculations against IFRS statements.
- Review the cash-flow bridge, including €2.1bn disposal proceeds, €1.2bn capital expenditure, acquisitions, dividends and share repurchases.
- Track the proposed dividend approval and payment, the €200m buyback tranche, and subsequent capital-allocation decisions.
- Test the 2020 outlook against construction demand, UK/Brexit developments, weather, input costs and infrastructure funding; monitor currency effects following the US-dollar reporting change.
- Review goodwill impairment headroom and assumptions, construction-contract estimates, environmental and remediation provisions, and progress on emissions targets.