CRH Plc (LON:CRH) today provided the following 2018 interim results.
Key Points
· H1 performance in line with guidance
· Continued profit growth despite Q1 weather disruption and currency headwinds; margin in line amid inflationary cost environment
· Active portfolio management; divestments of €2.9 billion and acquisitions of €3.4 billion (including 28 bolt-on transactions) year-to-date
· Phase 1 of share buyback programme completed; €350 million returned to shareholders to date
Trading Highlights
· Sales of €11.9 billion, 1% ahead of 2017
· Like-for-like sales1 ahead 2%; up 1% in Europe, up 3% in the Americas and down 2% in Asia
· EBITDA of €1.13 billion, 1% ahead of 2017
· Like-for-like EBITDA ahead 1%; up 1% in Europe, up 3% in the Americas and down 59% in Asia
· EBITDA margin of 9.5% (H1 2017: 9.5%)
· EPS from continuing operations of 45.0c per share, 11% ahead of 2017
· Dividend per share increased 2% to 19.6c
Albert Manifold, CRH plc Chief Executive, said today: “We have had a good first half despite significant weather disruption in Europe and North America in the first quarter. Construction markets continued to recover and pricing gathered momentum in key European markets while there was solid volume and price growth against a positive economic backdrop in the Americas. Active portfolio management remains an important element of our ongoing strategic focus on capital allocation while integration of our recent acquisitions is progressing as planned. I am also pleased to report that the first phase of our share buyback programme has been completed, with €350 million returned to shareholders to date. In addition, the Board has decided to increase the interim dividend by 2.1% to 19.6c per share. For the second half of the year, despite continuing currency headwinds and challenging conditions in the Philippines, we expect an improvement in the momentum experienced in Europe in the first half of the year and further EBITDA growth in the Americas, which will result in another year of progress for the Group.”
2018 Interim Results
Overview
Trading results for the first half of 2018 were impacted by severe and prolonged winter weather conditions early in the year. The European construction market continued to recover and satisfactory growth was experienced in the Americas; in Asia, the Philippines continued to experience challenging market conditions. Sales of €11.9 billion for the period were 1% ahead of the same period last year and were 2% ahead on a like-for-like basis. In Europe, like-for-like sales growth of 1% reflected continued recovery in some key markets, while volumes in certain countries did not fully recover by the end of the period, following the harsh early weather. In the Americas, like-for-like sales were 3% ahead of the first six months of 2017, despite less favourable weather conditions across certain regions. Like-for-like sales in Asia were 2% below the first half of 2017.
Overall EBITDA was 1% ahead of the first half of 2017. On a like-for-like basis, first half EBITDA for the Group was also 1% ahead, with Europe up 1% supported by modest price recovery in a number of major markets. In the Americas, like-for-like EBITDA was 3% ahead, reflecting volume growth and price improvements with regional variations. Like-for-like EBITDA in Asia was 59% below the first half of 2017 on the back of a very competitive trading environment and higher input costs. Despite the inflationary cost environment, with continued focus on performance in all our businesses, margin remained in line with prior year at 9.5% (H1 2017: 9.5%).
Depreciation and amortisation charges of €518 million were broadly in line with last year (H1 2017: €513 million). In addition, in July 2018, the Group completed the divestment of our DIY business in the Netherlands and Belgium, together with certain related property assets, for a total consideration of c. €510 million which resulted in an impairment charge of €20 million at 30 June 2018.
Divestments and asset disposals from continuing operations during the period generated total profit on disposals of €46 million (H1 2017: €43 million), as the ongoing recycling of capital continues to be embedded in the business. The profit after tax on the divestment of our Americas Distribution business in January 2018 amounted to €1.1 billion and is included in profit after tax from discontinued operations.
The Group’s €19 million share of profits from equity accounted investments was ahead of the first half of 2017 (H1 2017: €14 million), reflecting improved results in a number of our associates.
Net finance costs for the period were below the first six months of 2017 at €160 million (H1 2017: €189 million), due to lower average debt levels in the period compared with 2017, together with the non-recurrence in 2018 of a one-off charge of €19 million relating to the early redemption of a portion of US dollar bonds in 2017.
First half profit before tax was €497 million, compared with a profit of €475 million in the first half of 2017. The interim tax charge, which represents an effective tax rate of 24% of profit before tax, has been estimated, as in prior years, based on current expectations of the full year tax charge. Earnings per share from continuing operations for the period were 11% higher than last year at 45.0c (H1 2017: 40.4c). Earnings per share from continuing and discontinued operations for the period were significantly higher than last year at 174.0c (H1 2017: 43.5c).
Dividend
The Board has decided to increase the interim dividend to 19.6c per share, an increase of 2.1% compared with last year’s level of 19.2c per share. It is proposed to pay the interim dividend on 26 September 2018 to shareholders registered at the close of business on 7 September 2018.
In connection with the share buyback programme, CRH announced the suspension of the scrip dividend scheme on 2 May 2018. Therefore the interim dividend will be paid wholly in cash.
Finance
Net debt of €8.1 billion at 30 June 2018 was €1.7 billion higher than the figure reported at 30 June 2017, reflecting the significant net acquisition spend in the last twelve months. A first half cash outflow of €0.3 billion from operations reflects the normal seasonal pattern of the Group’s trade working capital. As in prior years, we expect a strong operating cash inflow in the second half of 2018 and, given the focused approach to portfolio management and with the Group’s strong track record in converting a significant proportion of its EBITDA into operating cash flow, we expect year-end 2018 debt metrics to be in line with normalised levels.
In March 2018, the Group successfully issued a total of US$1.5 billion dollar bonds, comprised of a US$0.9 billion 10-year bond at a coupon rate of 3.95% and a US$0.6 billion 30-year bond at a coupon rate of 4.5%. Net debt at 30 June 2018 included US$0.7 billion issued under the US Commercial Paper Programme and €0.2 billion issued under the Euro Commercial Paper Programme. These programmes add to the funding sources available to the Group and are used to fund working capital and short-term liquidity needs.
Capital Allocation
During the first half of the year, the Group completed the acquisition of Ash Grove Cement Company (‘Ash Grove’) for €2.85 billion (net of cash acquired), primarily funded by the divestment of our Americas Distribution business. In addition, 21 bolt-on acquisitions and two investment transactions were completed, resulting in a total development spend of c. €3.24 billion (including deferred and contingent consideration in respect of prior year acquisitions). On the divestment front, the Group completed the divestment of our Americas Distribution business in January 2018 and combined with a further six transactions, realised total business and asset disposal proceeds of €2.4 billion.
2018 Acquisitions and Investments
The Ash Grove acquisition gives CRH a market leadership position in the North American cement market for the first time, allowing for greater vertical integration with our existing aggregates, asphalt and readymixed concrete businesses. Further to the acquisition of Ash Grove, our Americas Materials Division completed 15 bolt-on acquisitions and one investment throughout the United States (US) and Canada for a total spend of c. €265 million. Our Americas Products Division also completed two bolt-on acquisitions in the first half of 2018, through the acquisition of a precast manufacturer in Utah and an architectural glass business operating in the South East of the US.
In Europe, four acquisitions and one investment with a total spend of c. €80 million were completed. Our Heavyside business completed two acquisitions in the United Kingdom (UK) and one investment in Poland. In the UK, we acquired a regional construction and surfacing contractor operating in South Wales, along with a readymixed concrete business in the South West of England. Our Lightside Division completed an acquisition in the UK and in Australia, complementing our existing operations in both countries.
Since 30 June 2018, the Group has completed seven bolt-on acquisitions for a total spend of c. €150 million bringing total development spend to date in 2018 to c. €3.4 billion.
2018 Divestments and Disposals
Business divestments and disposals of surplus property, plant and equipment generated net proceeds of c. €2.4 billion in the first half of the year, with the majority relating to the divestment of our Americas Distribution business in January 2018. Our Americas Materials business divested a cement plant in Montana and a sand and gravel operation in Nebraska as a regulatory requirement from the Ash Grove acquisition. A small divestment was also completed in relation to an asphalt plant in Iowa. In Europe, our Heavyside business completed three small divestments in the UK, Serbia and Poland.
In July 2018, the Group completed the divestment of our DIY business in the Netherlands and Belgium, together with certain related property assets, for a total consideration of c. €510 million, bringing total proceeds to date in 2018 to c. €2.9 billion.
Share Buyback Programme
On 25 April 2018, the Group announced its intention to repurchase ordinary shares of up to €1.0 billion over the forthcoming 12 months. Between 2 May and 31 July 2018, 11.4 million ordinary shares were repurchased on the London Stock Exchange at an average discount of 0.5% to the volume weighted average price over the period. The first phase of the share buyback programme has now been completed, whereby €350 million was returned to shareholders. The Group remains committed to the announced programme and it is expected that the programme will complete over the timeframe indicated.
Outlook
In Europe, we expect the momentum experienced in the first half to improve and second half EBITDA to be ahead of 2017, amid an inflationary cost environment. In the Americas, against a backdrop of positive economic indicators, we continue to anticipate an improvement in housing and non-residential construction and with improving infrastructure, we expect EBITDA to show further growth. In Asia, our expectation is that challenging market conditions in the Philippines will continue in the second half and that EBITDA will remain at a similar level to the first half of the year. Against this backdrop and despite continuing currency headwinds, we continue to expect another year of progress for the Group.
