Interim Results
CRH PLC
31 August 1999
CRH plc 1999 Interim Results
Six months ended 30th June, 1999
(Announced Tuesday, 31st August, 1999)
Euro
Sales* 2,859 m up 25%
Profit before tax
- excluding exceptional items 158 m up 46%
- including exceptional items 222 m up 105%
Basic earnings per share (after goodwill amortisation)
- excluding exceptional items 29.65 c up 40%
- including exceptional items 39.70 c up 87%
Cash flow per share 58.40 c up 41%
Dividend per share 5.90 c up 16%
Trading profit by destination* Euro m %
(excluding exceptional items)
Republic of Ireland 49.8 26 up 23%
Britain and Northern Ireland 36.8 19 up 111%
Mainland Europe 39.5 20 up 18%
The Americas 68.1 35 up 80%
----- ---
194.2 100 up 50%
===== ===
Dividend cover 5.0 times (1998 : 4.1 times)
(excluding exceptional items)
Interest cover* 5.4 times (1998 : 6.2 times) EBIT basis
(excluding exceptional items) 8.5 times (1998 : 9.9 times) EBITDA basis
* Sales, trading profit and interest cover include share of joint ventures.
Don Godson, Chief Executive, said today:
'We had a strong first half. Good markets and recent acquisitions give us
confidence that this will be a year of significant progress for our Group.'
Contact at Dublin 404 1000 (+353 1 404 1000)
Don Godson, Chief Executive
Harry Sheridan, Finance Director
Myles Lee, General Manager - Finance
Interim statement
The Directors of CRH plc report profit before tax excluding exceptional items
of Euro 158.1 million for the six months ended 30th June, 1999, an increase of
46 per cent on 1998 (Euro 108.2 million).Profit before tax including
exceptional items was Euro 222.4 million. The exceptional items amount to a
net Euro 64.3 million and comprise a profit on disposal of Keyline Builders
Merchants partly offset by a write-down in the carrying value of fixed assets
at Premier Periclase.
Basic earnings per share excluding exceptional items amounted to 29.65 cents,
an increase of 40 per cent. Basic earnings per share including exceptional
items amounted to 39.70 cents.
The Group profit and loss account separately discloses the impact of 1999
bolt-on acquisitions as well as results from discontinued operations. The
latter category includes results for Keyline, disposal of which was completed
in early June, and for Caima Ceramica, which was acquired as part of the
Ibstock transaction in 1998 and was sold in March of this year.
Exchange effects had a positive impact of Euro 0.3 million on profit before
tax compared with the first half of 1998.
Dividends
The Board has decided to pay an interim dividend of 5.90 cents per share on
the Ordinary and Income capital of the Company. This compares with an interim
dividend of 5.08 cents in 1998, an increase of 16 per cent. Dividends will be
paid on 5th November, 1999 to shareholders registered at the close of business
on 10th September, 1999. Dividends in respect of both Income Shares and
Ordinary Shares carry a nil tax credit compared with tax credits of 11/89ths
and 5/90ths respectively in 1998. Shareholders are being offered the choice of
new shares in lieu of cash dividends.
Regional review
REPUBLIC OF IRELAND
The continuing strong growth in building activity resulted in good volume
increases for cement, concrete products and basic materials although pricing
remains competitive. Irish Cement's profits advanced reflecting higher volumes
and the absence of the 1998 production disruptions associated with the
installation of the new grate cooler at the Platin plant. The Roadstone-Wood
Group also reported higher profits.
Demand and pricing in Premier Periclase's international refractory markets
remain weak and production was halted from May to early August to avoid
excess stocks in a period of low demand. As a result, Premier Periclase
reported a loss in the first half.
BRITAIN AND NORTHERN IRELAND
Ibstock turned in a good performance in its first six months with the Group.
Although brick volumes were slightly behind first half 1998 levels, better
prices and cost efficiencies contributed to the satisfactory out-turn.
Ibstock's corporate head office was closed at the end of May. The Forticrete
concrete masonry and rooftile business reported better results and has now
been integrated with Ibstock's stone walling and masonry business. Combat
Polystyrene continued to perform well in a highly competitive market.
In Northern Ireland, Farrans Limited also reported improved results but
pricing remains difficult.
These results include trading at Keyline Builders Merchants for the months
January to May as well as an exceptional profit before tax of Euro 79.6
million arising from its disposal in early June.
MAINLAND EUROPE
Trading patterns were mixed in Mainland Europe. Our Dutch distribution and
fencing activities reported better profits, but concrete and clay operations
were impacted by overcapacity and by increased competition. Our French
distribution activities improved, while in Belgium, Marlux's profits advanced
strongly. Results from our German clay products operation, now 100%-owned,
were lower than in 1998. Demand levels in Spain continued to grow resulting in
a significant rise in profits.
Higher volumes combined with improved cement pricing resulted in a substantial
profit advance at our Polish operations, the results of which are now fully
consolidated. In the first half of 1998, these results were reported on a
joint venture basis.
THE AMERICAS
Profits from our Oldcastle operations in North America advanced strongly
helped by favourable weather and the first time inclusion of Ibstock's
Glen-Gery brick division. The Precast Group benefited from further strong
profit growth in its Californian operations and continuing good demand
nationwide. The Architectural Products Group also enjoyed favourable demand
across its operations with particular progress at Groupe Permacon in Quebec.
Strong brick demand and modest price increases resulted in an excellent
initial contribution from Glen-Gery. The Materials Group enjoyed a good start
in the traditionally loss-making first half as increased TEA-21 funding began
to impact. The Glass Group reported higher first half profits despite greater
competition and increased raw glass costs. The Distribution Group met
expectations in the seasonally quieter and less profitable first half.
In Argentina, the economy has been adversely impacted by events in Brazil.
Despite a decline in underlying sales, Canteras Cerro Negro reported improved
profits partly reflecting the absence of 1998 rationalisation costs.
Finance and taxation
The higher first half interest charge reflects the financing costs of 1998 and
first half 1999 acquisition activity, in particular the purchase of Ibstock
plc. As in prior years, the interim taxation charge is an estimate based on
the current expected full year tax rate.
Acquisitions and disposals
First half total acquisition expenditure was a record Euro 424 million
principally reflecting expenditure of Euro 132 million on 16 small to
medium-sized deals in Holland, Poland, Ukraine, the United States and Chile
together with the buyout of the minority interest in Ibstock. Disposal
proceeds of Euro 300 million largely reflect the sale of Keyline and of Caima
Ceramica.
Since end-June, the completion of the Finnsementti/Lohja Rudus, and the US
Materials acquisitions Dell, Millington and Thompson-McCully have brought
total year-to-date acquisition spending to more than Euro 1.3 billion.
Year 2000
The Group's preparations for the adaptation of its information and control
systems to cope with the Year 2000 are substantially complete and we do not
anticipate any serious problems internally, nor do we have any reason to
believe that major customers or suppliers are not adequately prepared.
Outlook
In the Republic of Ireland, strong job creation, good demographics and
growing infrastructural requirements underpin buoyant construction activity.
In Britain, interest rate reductions have contributed to a modest improvement
in sector sentiment and outlook.
In Mainland Europe, the economic outlook in the Benelux is generally positive
but overcapacity in some sectors, particularly for clay and concrete products,
is impacting prices. The outlook in France and Spain is good although Germany
remains difficult. Our Polish operations continue to benefit from recent
cement price increases in a growing market.
In North America, the continuing strength of the economy and the gradual
pick-up in TEA-21 funded activity augur well for the second half of the year.
It should be noted that the second half of 1998 benefited from exceptionally
good weather in late autumn and early winter.
Following a period of intense development activity, the immediate management
focus is to ensure the successful integration of the recent major
acquisitions. Our continuing strong cash flow and interest cover will enable
us to continue our traditional programme of mid-sized bolt-on deals.
The first half of 1999 has seen further substantial increases on 1998.
Combined with benefits from plant upgrades and acquisitions of 1998 and 1999,
this gives us the confidence that 1999 will be another year of significant
progress for CRH.
Group profit and loss account
for the six months ended 30th June, 1999 (unaudited)
Continuing operations Discontinued
Acquisitions operations Total Restated
1999 1999 1999 1999 1998 Change
Euro m Euro m Euro m Euro m Euro m %
Sales, including share of
joint ventures 2,608.1 46.3 204.4 2,858.8 2,293.6 +24.6
Less: share of joint
ventures 61.2 2.6 - 63.8 86.7
------------------------------------------
Group sales 2,546.9 43.7 204.4 2,795.0 2,206.9 +26.6
==========================================
Group operating profit,
before amortisation 179.8 3.3 9.4 192.5 125.1
Goodwill amortisation (3.6) (0.5) - (4.1) (0.2)
Share of joint ventures'
trading profit 5.4 0.4 - 5.8 4.3
----------------------------------------
Trading profit, excluding
exceptional items 181.6 3.2 9.4 194.2 129.2 +50.3
Exceptional items (15.3) - 79.6 64.3 -
----------------------------------------
Profit on ordinary
activities before interest 166.3 3.2 89.0 258.5 129.2
=====================
Group interest payable and similar charges (net) (35.6) (17.7)
Share of joint ventures' net interest (0.5) (3.3)
-------------
Profit on ordinary activities before taxation 222.4 108.2 +105.5
Taxation on profit excluding
exceptional items (estimated) (42.0) (26.5)
Taxation on exceptional items (estimated) (25.2) -
--------------
Profit on ordinary activities after taxation 155.2 81.7
Profit applicable to equity minority interests (0.7) -
Preference dividends - -
--------------
Profit for the period attributable to
ordinary shareholders 154.5 81.7 +89.1
Ordinary dividends 23.1 19.8
--------------
Retained profit for the financial period 131.4 61.9
==============
Including exceptional items
Basic earnings per Ordinary Share for the period 39.70c 21.20c +87.3
Diluted earnings per Ordinary Share for the period 39.53c 21.15c
Excluding exceptional items
Basic earnings per Ordinary Share for the period 29.65c 21.20c +39.9
Cash flow per share for the period 58.40c 41.46c +40.9
Dividend per share 5.90c 5.08c +16.1
Summarised Group balance sheet (unaudited)
Restated
30th June, 30th June,
1999 1998
Euro m Euro m
Intangible assets (goodwill) 176.1 17.7
Fixed assets 2,556.8 1,797.7
Current assets 2,933.6 2,649.9
------- -------
5,666.5 4,465.3
Creditors (amounts falling due within one year) 1,593.9 1,209.7
------- -------
Total assets less current liabilities 4,072.6 3,255.6
======= =======
Creditors (amounts falling
due after more than one year)
Loans 1,909.3 1,632.8
Deferred acquisition consideration 91.2 78.5
Corporation tax 31.1 21.3
Deferred tax 92.6 86.6
Capital and reserves 1,905.5 1,412.1
Minority shareholders' equity interest 25.7 14.3
Capital grants 17.2 10.0
------- -------
4,072.6 3,255.6
======= =======
Net debt 1,041.5 * 563.6
======= =======
* Net debt comprises loans (Euro 1,909.3 million) plus advances (Euro 347.6
million) less cash, short-term deposits and liquid resources (Euro 1,215.4
million).
Supplementary information
1 Change in accounting policy
Presentation of the financial statements in Euros
In accordance with the policy adopted for the Group's full year 1998
financial statements, the 1999 interim results and summarised balance sheet
are presented in Euros. Results and cash flows of subsidiary and joint venture
undertakings outside the Euro Zone have been translated into Euros at the
average exchange rates for the period, and the related balance sheets have
been translated at the rates of exchange ruling at the balance sheet date. The
1998 comparative figures have been translated from Irish Pounds into Euros
using the fixed conversion rate of Euro 1 = IR£0.787564.
The average and period-end exchange rates used in respect of the principal
operating currencies for 1999 and 1998 are set out below.
Exchange rates used were as follows:
Average for six
months to June As at 30th June
--------------- ---------------
Euro 1 =
1999 1998* 1999 1998*
U.S. Dollar 1.0888 1.0951 1.0328 1.0996
Pound Sterling 0.6721 0.6638 0.6563 0.6593
Dutch Guilder 2.20371 2.2283 2.20371 2.2363
Belgian Franc 40.3399 40.80 40.3399 40.91
Deutschmark 1.95583 1.9774 1.95583 1.9836
Spanish Peseta 166.386 167.77 166.386 168.36
French Franc 6.55957 6.6281 6.55957 6.6489
Polish Zloty 4.2036 3.8821 4.0580 3.8274
* Exchange rates as at 30th June, 1998, and average rates for the six
months to 30th June, 1998, are based on the exchange rates for the relevant
currencies in Irish Pounds, converted into Euros at the fixed Euro / Irish
Pound conversion rate of Euro 1 = IR£0.787564.
2 Discontinued operations
On 4th June, 1999, the Group sold Keyline Builders Merchants Limited
('Keyline'), a subsidiary based in the UK, to Travis Perkins PLC. The results
of Keyline up to the date of sale are reported under 'discontinued
operations' in the Group profit and loss account for the six months ended 30th
June, 1999. The profit on sale of Keyline, net of goodwill of Euro 57.6
million previously written-off against CRH reserves, amounted to Euro 79.6
million, and taxation on the profit is estimated at Euro 26.8 million.
In addition, on 22nd March, 1999, the Group disposed of its entire holding in
Caima Ceramica e Servicos SGPS S.A. ('Caima'), a former subsidiary of Ibstock
PLC based in Portugal. The results of Caima up to the date of sale are
reported under 'discontinued operations' in the Group profit and loss account
for the six months ended 30th June, 1999. No profit or loss arises on this
transaction.
3 Geographical analysis
Analysis by destination 1999 Restated 1998
Euro m % Euro m %
Sales*
Republic of Ireland 275.8 9.6 248.7 10.9
Britain and Northern Ireland 510.8 17.9 383.5 16.7
Mainland Europe 665.4 23.3 546.3 23.8
The Americas 1,406.8 49.2 1,115.1 48.6
--------------------------------
2,858.8 100 2,293.6 100
====== =====
Less: share of joint ventures (63.8) (86.7)
------- -------
Group sales 2,795.0 2,206.9
======= =======
Trading profit*, excluding exceptional items
Republic of Ireland 49.8 25.6 40.4 31.3
Britain and Northern Ireland 36.8 19.0 17.4 13.5
Mainland Europe 39.5 20.3 33.5 25.9
The Americas 68.1 35.1 37.9 29.3
------------------------------
194.2 100 129.2 100
=== ===
Less: share of joint ventures (5.8) (4.3)
----- -----
Group trading profit 188.4 124.9
===== =====
* including share of joint ventures
4 Exceptional items
1999
-------------------
Euro m Euro m
Exceptional
items Taxation
Continuing operations
Write-down in carrying value of Premier Periclase (15.3) (1.6)
Discontinued operations
Profit on disposal of discontinued operations 79.6 26.8
-----------------
Total exceptional items 64.3 25.2
=================
Financial Reporting Standard 11 - Impairment of Fixed Assets and Goodwill
(FRS 11) requires an assessment of the carrying value of fixed assets, in
situations where impairment may have arisen, by reference to future cash flows
and estimated net realisable value. An impairment review of the fixed assets
of Premier Periclase indicated that the current carrying value is not
supported and a write-down has accordingly been reflected in these results.
5 Movements in capital and reserves
1999 Restated 1998
Euro m Euro m
At 1st January 1,554.0 1,309.6
Retained profit for the period 131.4 61.9
Currency translation effects 135.5 24.3
Issue of ordinary share capital (net of expenses) 27.0 16.3
Goodwill written-back on disposal of Keyline 57.6 -
-----------------------
At 30th June 1,905.5 1,412.1
=======================
6 Cash flow
The table below summarises the Group's cash flows for the six months ended
30th June, 1999 and 30th June, 1998.
1999 Restated 1998
Euro m Euro m
Inflows
Profit before tax (excluding exceptional items) 158.1 108.2
Depreciation and goodwill amortisation 111.9 78.0
Disposals 299.9 17.8
Share issues (net of expenses) 27.0 16.3
--------------------
596.9 220.3
--------------------
Outflows
Working capital movement 129.3 12.1
Capital expenditure 181.6 102.6
Acquisitions and investments 423.9 119.6
Dividends 47.4 40.6
Tax paid 33.2 25.3
Other 7.0 7.0
--------------------
822.4 307.2
--------------------
Net outflow (225.5) (86.9)
Translation adjustment (86.5) (11.5)
--------------------
Increase in net debt (312.0) (98.4)
=====================
7 Other
1999 Restated 1998
Dividend cover (times) 5.0 4.1
EBIT interest cover (times) * 5.4 6.2
EBITDA interest cover (times) * 8.5 9.9
Average shares in issue (millions) 389.2 385.3
Net dividend per share (cents) 5.90c 5.08c
Tax credit on net dividend payable on:
- Ordinary Shares - ** 0.282164c
- Income Shares - ** 0.627736c
Depreciation charge - Euro m 107.8 77.8
Net debt - Euro m 1,041.5 563.6
Debt ratio 53% 39%
* including share of joint ventures and excluding exceptional items
** dividend payments made on or after 6th April, 1999 do not carry a tax
credit
8 Distribution of Interim Report
These Interim results are available on the Group's Website. A printed copy is
being posted to shareholders on Wednesday, 1st September, 1999 and is
available to the public from that date at the Company's registered office.
Details of the Scrip Dividend Offer in respect of the Interim 1999 dividend
will be posted to shareholders on Tuesday, 21st September, 1999.
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