UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) | WASHINGTON, D.C. 20549 |
FORM 20-F
(Mark One)☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended: December 31, 20142017
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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period fromto
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☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report
Commission file number:001-32846
CRH public limited company
(Exact name of Registrant as specified in its charter)
Republic of Ireland
(Jurisdiction of incorporation or organisation)
Belgard Castle, Clondalkin, Dublin 22, Ireland
(Address of principal executive offices)
Maeve CartonSenan Murphy
Tel: +353 1 404 1000
Fax: +353 1 404 1007
Belgard Castle, Clondalkin, Dublin 22, Ireland
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of Each Class | Name of Each Exchange On Which Registered | |
CRH plc | ||
Ordinary Shares/Income Shares of€0.34 each | The New York Stock Exchange* | |
American Depositary Shares, each representing the right to receive one | The New York Stock Exchange | |
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CRH | ||
8.125% Notes due 2018 guaranteed by CRH plc | The New York Stock Exchange | |
5.750% Notes due 2021 guaranteed by CRH plc | The New York Stock Exchange |
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* | Not for trading but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Ordinary Shares/Income Shares of€0.34 each ** | 838,958,469 | ||||
5% Cumulative Preference Shares of€1.27 each | 50,000 | ||||
7% ‘A’ Cumulative Preference Shares of€1.27 each | 872,000 |
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Each Income Share is tied to an Ordinary Share and may only be transferred or otherwise dealt with in conjunction with such Ordinary Share. |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesX No¨☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes¨☐ NoX
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesX No¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*** Yes¨ X No¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, or an emerging growth company. See definition of “accelerated filer and large“large accelerated filer”, “accelerated filer”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer X Accelerated filer ☐ Non-accelerated filer ☐ Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act Yes☐ No X
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Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP | International Financial Reporting Standards as issued by the | Other | ||
International Accounting Standards BoardX |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17¨☐ Item 18¨☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐ NoX
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THIS PAGE INTENTIONALLY LEFT BLANK
Cross Reference to Form 20-F Requirements
This table has been provided as a cross reference from the information included in this Annual Report to the requirements of this 20-F.
4. | Governance | |||||||||
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Corporate Governance Report | 62 | |||||||||
Directors’ Report | 96 | |||||||||
5. | Financial Statements | |||||||||
Independent Auditor’s Reports | 118 | |||||||||
Consolidated Financial Statements | 120 | |||||||||
Accounting Policies | 125 | |||||||||
Notes on Consolidated Financial Statements | 135 | |||||||||
6. | Additional Information | |||||||||
Supplementary 20-F Disclosures | 206 | |||||||||
Shareholder Information | 232 | |||||||||
Other Information | 244 | |||||||||
Cross Reference to Form 20-F Requirements | 253 | |||||||||
Index | 254 |
CRH is now the number one building materials company in Florida following its acquisition of Suwannee American Cement together with certain other materials assets, in 2017. This dry batch plant at Prestige Concrete Products, Port Manatee (south of Tampa), is one of 18 readymixed concrete plants acquired as part of the deal. Florida is one of the fastest growing states in the United States.
CRH plc is a leading global diversified building materials group, employing 85,000 people at over 3,600 operating locations in 32 countries worldwide.
CRH is the second largest building materials company worldwide and the largest in North America. The Group has leadership positions in Europe, where it is the largest heavyside materials business, as well as established strategic positions in the emerging economic regions of Asia and South America.
CRH is committed to improving the built environment through the delivery of superior materials and products for
the construction and maintenance of infrastructure, housing and commercial projects.
A Fortune 500 company, CRH is a constituent member of the FTSE 100 index, the EURO STOXX 50 index, the ISEQ 20 and the Dow Jones Sustainability Index (DJSI) Europe. CRH’s American Depositary Shares (ADSs) are listed on the New York Stock Exchange (NYSE).
CRH’s market capitalisation at 31 December 2017 was approximately€25 billion.
Our Vision
To be the leading building materials business in the world | ||||
2017 Performance highlights
During 2017 the Americas Distribution segment was classified as discontinued operations under IFRS 5Non-Current Assets Held for Sale and Discontinued Operations (refer to note 2 to the Consolidated Financial Statements for further information). Accordingly, all references to income statement data are on a continuing operations basis throughout the Overview, Strategy Review and Business Performance sections (pages 2 to 53), unless otherwise stated.
Visit our Investor Relations Centre www.crh.com/investors View Annual Report and Form 20-F Online www.crh.com/reports/2017-annual-report-20-f.pdf | |||||||
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Dear Shareholder,
In the Chief Executive’s introduction to last year’s Annual Report, Albert Manifold set out the areas of focus for management in 2014. He highlighted dynamic portfolio management together with maintaining CRH’s traditional tight cost control, capital discipline and focus on returns as being key to driving growth and to rebuilding margins in the coming years.
A significant amount of progress has been made in the past 12 months, which is reflected in the results and performance for 2014. In particular, we are pleased with progress in the multi-year divestment programme and the related reshaping of the Group’s portfolio.
The Group’s financial strength was further enhanced during the year by two bond issuances, co-ordinated by Maeve Carton, our Finance Director, and her team, in the amounts of €600 million and CHF330 million. The record low coupons achieved by the Group for these bonds reflect our track record in debt markets and the value that results from our investment grade credit ratings.
In respect of 2014, the Board is recommending a final dividend of 44c per share. If approved at the 2015 Annual General Meeting, this will maintain the full-year dividend at 62.5c per share.
During the last year, my non-executive colleagues and I have spent a considerable amount of time working with the executive Directors and the wider management team on reviewing and refining the Group’s strategy in the context of the evolution of key markets and products over time and in setting the priorities for the Group. On 1 February 2015 we announced that CRH had entered into a binding commitment to acquire certain assets from Lafarge S.A. (“Lafarge”) and Holcim Ltd (“Holcim”) for a total enterprise value of €6.5 billion, subject to: (i) CRH shareholder approval at an Extraordinary General Meeting to be held on 19 March 2015; (ii) the successful completion of the
2 CRH
proposed merger of Lafarge and Holcim; and (iii) the completion of certain local reorganisations by Lafarge and Holcim in advance of the acquisition. The Board believes that this acquisition, which arises from regulatory requirements for industry deconsolidation in connection with the merger of Lafarge and Holcim, represents a compelling strategic opportunity for the Group, and that our financial, capital and operational discipline has positioned the Group to take advantage of this unique opportunity at this time. The placing of approximately 74 million shares in CRH plc, which completed on 5 February 2015, raised €1.6 billion as part of the financing of this acquisition. Further details are set out on page 44 and in note 33 to the Consolidated Financial Statements.
In 2015, in addition to the integration plan for the Lafarge/Holcim assets, on the approval of shareholders, the Board will continue to focus on talent management, cyber security, and working towards the achievement of sustainability, safety and environmental priorities. In relation to safety, 2015 will see the introduction of a new Chairman’s award for safety excellence in the Group.
During 2014, the Board redoubled its ongoing focus on the area of compliance and ethics to ensure that CRH’s processes are robust and in line with best practice across the Group. In the current training cycle a further 32,000 employees participated in Code of Business Conduct training. A further 11,000 also undertook advanced instruction on changing regulatory environments, anti-bribery rules, competition law and other relevant areas such as corruption and fraud. We remain vigilant in our business practices in this area and are responsive to all regulatory agencies.
Notwithstanding this work, as we announced in May 2014 the Swiss Competition Commission has an open investigation in respect of practices in the sanitary building products sector in Switzerland and its Secretariat has recommended that the industry, of which certain CRH group companies are members, be fined. Engagement with the Swiss Competition Commission is ongoing and CRH is responding vigorously to the allegations made by the Secretariat. In doing so, we maintain our initial assessment that the case is ill-founded and that the proposed fine in respect of the Group is unjustified.
Two new non-executive Directors joined the Board in recent months. Pat Kennedy was appointed in January 2015 while Lucinda Riches has been appointed with effect from 1 March 2015. Their biographies, along with those of the rest of the Board are set out on pages 87 to 89. Further details on the ongoing process of Board renewal are set out in theNomination & Corporate Governance Committee Report on page 93.
All Directors will retire at the Annual General Meeting on Thursday, 7 May 2015, with those eligible offering themselves for re-election. I strongly recommend that shareholders vote in favour of each of the individuals putting themselves forward for re-election.
As part of the Board’s planned renewal process, John Kennedy and Dan O’Connor will step down from the Board at the conclusion of the 2015 Annual General Meeting on 7 May 2015. On behalf of the Board, I would like to thank John and Dan for their commitment and great service to CRH over many years.
Finally, I would like to take the opportunity to thank Albert and his team for their significant achievements over the past year.
Nicky Hartery,Chairman
4 CRH
Introduction and Performance Measures
Reconciliation of EBITDA (as defined)* and Operating Profit (by segment) to Group Profit
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Continuing operations - year ended 31 December
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Group operating profit before depreciation and amortisation (EBITDA (as defined)*)
| Depreciation, amortisation and impairment
| Group operating profit1
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2014 €m | 2013 €m | 2012 €m | 2014 €m | 2013 €m | 2012 €m | 2014 €m | 2013 €m | 2012 €m | ||||||||||||||||||||||||||||
Europe Heavyside | 380 | 326 | 426 | 229 | 721 | 239 | 151 | (395 | ) | 187 | ||||||||||||||||||||||||||
Europe Lightside | 94 | 71 | 78 | 23 | 43 | 29 | 71 | 28 | 49 | |||||||||||||||||||||||||||
Europe Distribution | 190 | 186 | 217 | 78 | 80 | 72 | 112 | 106 | 145 | |||||||||||||||||||||||||||
Europe | 664 | 583 | 721 | 330 | 844 | 340 | 334 | (261 | ) | 381 | ||||||||||||||||||||||||||
Americas Materials | 609 | 557 | 555 | 254 | 331 | 276 | 355 | 226 | 279 | |||||||||||||||||||||||||||
Americas Products | 263 | 246 | 204 | 118 | 178 | 118 | 145 | 68 | 86 | |||||||||||||||||||||||||||
Americas Distribution | 105 | 89 | 83 | 22 | 22 | 24 | 83 | 67 | 59 | |||||||||||||||||||||||||||
Americas | 977 | 892 | 842 | 394 | 531 | 418 | 583 | 361 | 424 | |||||||||||||||||||||||||||
Total Group | 1,641 | 1,475 | 1,563 | 724 | 1,375 | 758 | 917 | 100 | 805 | |||||||||||||||||||||||||||
Profit on disposals | 77 | 26 | 230 | |||||||||||||||||||||||||||||||||
Finance costs less income | (246 | ) | (249 | ) | (256 | ) | ||||||||||||||||||||||||||||||
Other financial expense | (42 | ) | (48 | ) | (49 | ) | ||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit/(loss) |
| 55 | (44 | ) | (84 | ) | ||||||||||||||||||||||||||||||
Profit/(loss) before tax | 761 | (215 | ) | 646 | ||||||||||||||||||||||||||||||||
Income tax expense | (177 | ) | (80 | ) | (106 | ) | ||||||||||||||||||||||||||||||
Group profit/(loss) for the financial year | 584 | (295 | ) | 540 | ||||||||||||||||||||||||||||||||
1 Throughout this document, Group operating profit as shown in the Consolidated Financial Statements excludes profit on disposals.
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Calculation of EBITDA (as defined)* Net Interest Cover
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2014 €m | 2013 €m | 2012 €m | ||||||||||
Interest | ||||||||||||
Finance costs1 | 254 | 262 | 271 | |||||||||
Finance income1 | (8 | ) | (13 | ) | (15 | ) | ||||||
Net interest | 246 | 249 | 256 | |||||||||
EBITDA (as defined)* | 1,641 | 1,475 | 1,563 | |||||||||
Times | ||||||||||||
EBITDA (as defined)* net interest cover (EBITDA (as defined)* divided by net interest) | 6.7 | 5.9 | 6.1 | |||||||||
1 These items appear on the Consolidated Income Statement on page 135.
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p | Details of how non-GAAP measures are calculated are set out on pages 210 to 213. | ||||
‡ | Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120. |
CRH Annual Report and Form 20-F | 2017
CRH’s global footprint spans 32 countries and over 3,600
operating locations, serving customers across the entire
building materials spectrum, on five continents, worldwide.
2 «Our discontinued operations Americas Distribution employed approximately 3,900 people, across over 200 locations in 31 US states in 2017. |
CRH Annual Report and Form 20-F | 2017
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CRH Annual Report and Form 20-F | 2017
Building a balanced portfolio is a core constituent of our strategy and a key determinant of value creation for CRH.
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CRH Annual Report and Form 20-F | 2017
Dear Shareholder, I am pleased to report that 2017 was a year of further growth for CRH, with improvements in sales and profits in our Americas and Europe Divisions. 2017 has also been another significant year of development for CRH, with a total of 34 acquisition and investment transactions. In line with the Group’s strategy of continually pursuing value creation opportunities through the efficient allocation and reallocation of capital, in August we announced the divestment of our Americas Distribution business (Allied Building Products). The sale, to a highly respected industry player, for US$2.6 billion, was concluded in January 2018. Subsequently, in late 2017, we acquired Suwannee American Cement together with certain other materials assets in Florida and announced an agreement to purchase Ash Grove Cement, a leading cement producer in the United States (US), which is due to close during 2018. Combined with the acquisition of Fels, a leading European lime producer, these transactions position the Group to pursue further growth opportunities in key markets. As you would expect, financial discipline continued to be a key focus for the Board, with year-end net debt/EBITDA (as defined)*◆ cover remaining strong at 1.8x (2016: 1.7x). Further details on the performance of the Group, its strategy and business model are set out on pages 6 to 53. Based on the performance in 2017, the Board is recommending a final dividend of 48.8c per share, which, if approved at the 2018 Annual General Meeting (AGM), will result in an increase in the full year dividend of 5% to 68.0c per share. I look forward to the opportunity to update you further on the Group’s performance at the AGM, which will be held on Thursday, 26 April 2018. Notice of the AGM will be posted to shareholders on 28 March 2018 and is available on the CRH website. | Details in relation to the business of the meeting are set out in the Directors’ Report on pages 96 to 100. The Governance section of the Report on pages 59 to 71 provides biographical details for each Director and details of the priorities and focus of the Board. In addition, this section contains important updates in relation to board renewal and diversity, the tendering of CRH’s external audit, the implementation of CRH’s remuneration policy and shareholder engagement. In August, Maeve Carton retired from the Board and CRH. Maeve joined CRH in 1988, joined the Board in 2010 and held a number of senior executive roles, including Finance Director and Group Transformation Director. Throughout her exemplary career with the Group, she contributed to the development and progress of CRH, and we wish her well in her retirement. In December 2017, Ernst Bärtschi resigned from the Board. Ernst joined the Board in October 2011. Over his two terms of three years as a non-executive Director and, in particular, as Chairman of the Audit Committee since September 2013, Ernst committed significant time and effort to CRH. I would like to thank him for his exemplary service and I wish him every success in the future. I am delighted that Richie Boucher will join the Board with effect from 1 March 2018. I believe that he will be an excellent addition and I look forward to working with him. I would like to express my appreciation to my non-executive colleagues on the Board for their input and time commitment in 2017. Finally, on behalf of the Board, I would like to thank the CRH management team, led by Albert Manifold, for the progress and significant achievements made over the past year. Nicky Hartery Chairman 28 February 2018 | |||||||||||||
Financial discipline continued to be a key focus for the Board Nicky Hartery, Chairman | ||||||||||||||
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. ◆Net debt/EBITDA (as defined)* from continuing and discontinued operations is a non-GAAP measure as defined on page 212. The GAAP figures that are most directly comparable to the components of net debt/EBITDA (as defined)* include: interest-bearing loans and borrowings (2017: €7,976 million; 2016: €7,790 million) and profit after tax (2017: €1,919 million; 2016: €1,270 million). Details of how non-GAAP measures are calculated are set out on pages 210 to 213. |
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Chief Executive’s Review | 8 | |||
Strategy | 10 | |||
Business Model | 12 | |||
Measuring Performance | 14 | |||
Sustainability | 16 | |||
Risk Governance | 20 |
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CRH WebsiteChief Executive’s Review†
InformationAt CRH, one of the key factors in our success, is a proven track record in taking the right step forward at the right time. For almost 50 years, the Group has carefully taken each of the steps that have built CRH into the global leader it is today. With a portfolio balanced across geography, sector and end-use, our businesses serve the needs of customers right across the building materials spectrum. In doing so, we create new opportunities for growth, while preserving existing shareholder value.
In 2017, we continued to focus on or accessibleidentifying, acquiring and integrating businesses that enhance and add value to our existing portfolio. We also pursued opportunities to reallocate capital from low growth to high growth areas. This included our decision to crystallise the value we had built up in our Americas Distribution business, where we saw limited prospects for further growth. Instead, through our website, www.crh.com,acquisition of Suwannee American Cement together with certain other thanmaterials assets in Florida, and our agreement to purchase Ash Grove Cement, we are investing in cement and aggregates businesses in the item identifiedSouth of the US and west of the Mississippi, where there is a broader base, high population growth, and thus, high demand.
We also maintained our emphasis on continuous improvement across our existing businesses through operational and commercial excellence initiatives. With this dual approach to developing our business, we continued to make progress towards our goal of making CRH the leading building materials business in the world and a leading global industrial company.
Performance Highlights
The Group delivered a strong performance again in 2017 with revenues increasing 2% to€25.2 billion, driven primarily by the continuing strength of the economy in the US, along with ongoing recovery in our key European markets.
Good profit growth continued, with the Group generating record EBITDA (as defined)* of€3.3 billion, from continuing and discontinued operations, a 6% increase on the previous year (2016:€3.1 billion), despite significant
currency and weather headwinds. Profit after tax‡ increased 51% to€1.9 billion (2016:€1.3 billion).
Our continued focus on performance initiatives, along with improvements in pricing in certain key markets, resulted in strong operational leverage, which saw a further increase in margins and returns. Return on Net Assets (RONA)∎ for the year improved from 9.7% in 2016 to 10.6%.
Despite significant acquisition activity, net debt/EBITDA (as defined)* remained strong at 1.8x (2016: 1.7x).
Earnings per share (EPS)‡ for the year advanced 51% to 226.8c (2016: 150.2c) and the Board has proposed to increase the dividend to 68.0c per share, an increase of 5% compared with last year’s level of 65.0c per share.
Operational Highlights
Overall trading conditions across all Divisions remained broadly positive. In the Americas, where total sales increased 4% to€12.3 billion, a strong US economy with good momentum in the residential and non-residential market segments, underpinned increased revenues.
In our Americas Materials Division, revenues increased 5% to€8.0 billion. Infrastructure activity remained stable in our markets, while our Americas Products Division benefited from stable market fundamentals in southern and western US states.
Despite the impact of significant weather headwinds, the trading environment in the US remained positive overall, with volume growth achieved.
In Europe, where overall sales increased 1% to€12.5 billion, our Heavyside Materials Division benefited from increased demand in certain key markets as the Annual Report onForm 20-F, does not form partEuropean economy continued to recover at a modest pace. Challenges remained in Switzerland, while in the United Kingdom (UK), despite uncertainty around the impact of and is not incorporated into this document. References in this document to other documents onBrexit, the CRH website such as the Circular to shareholders in respectperformance of the proposed Acquisition, are included only as an aid to their location. The Group’s website provides the full text of the Annual and Interim Reports, the Annual Report on Form 20-F,our materials business, Tarmac, remained resilient.
Our European Lightside Division, which is filed annually withfavourably exposed to export activity, benefited from growth in key markets. In our European Distribution Division, sales were broadly stable overall and slightly ahead in certain key markets.
In Asia, we continue to take a long-term view in relation to the United States SecuritiesPhilippines, where the challenging pricing environment persisted throughout 2017, despite robust underlying market fundamentals. Our equity accounted investments in China and Exchange Commission, trading statements, interim management statements, copiesIndia both benefited from improvements in pricing during the year.
Overall, a very satisfactory year and while our materials businesses currently account for almost two-thirds of presentationsGroup operating profit, the strategic importance of our products businesses continues to analystsincrease as market demand for building materials evolves and investorsconstruction methods and circularstechnologies change.
Sustainability and Safety
Sustainability and Corporate Social Responsibility (CSR) are essential components of our business and our ongoing commitment to shareholders. News releases are made available,global sustainable development resulted in the News & Events sectionGroup’s inclusion in the 2017 Dow Jones Sustainability Index (DJSI) Europe. The index represents the gold standard for corporate sustainability and CRH’s inclusion comes as a result of the website, immediately after release to the Stock Exchanges.a lengthy evaluation based on strict economic, environmental, social and long-term shareholder related criteria.
The Consolidated Financial Statements of CRH plc have been preparedWe also maintained our uncompromising focus on making our work environments safe for our people. This approach has yielded very positive outcomes in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the International Accounting Standards Board.
Selected financial data has been presented for the five years ended on 31 December 2014 on page 8. For the three years ended 31 December 2014, the selected financial data is qualifiedrecent years. Despite our progress however, in its entirety by reference to, and should be read in conjunction with, the audited Consolidated Financial Statements, the related Notes and the Business Performance Review section included elsewhere in this Annual Report on Form 20-F (“Annual Report” or “Form 20-F”).
Non-GAAP Performance Measures
CRH uses2017 a number of non-GAAP performance measuresfatalities at our operations underlined the need for us to monitor financial performance. These are summarised below and discussed later in this report.do even more to ensure that all of our people return home safe to their families at the end of each working day.
Development
Having paused major acquisition activity during 2016, to focus our efforts on effectively integrating the businesses acquired during the previous 12 months, CRH again returned
Net Debt.† See cautionary statement regarding forward-looking statements on page 97. Net debt is used by management as it gives a more complete picture of the Group’s current debt situation than total interest-bearing loans and borrowings. Net debt is provided to enable investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. Net debt is a non-GAAP measure and comprises current and non-current interest-bearing loans and borrowings, cash and cash equivalents and current and non-current derivative financial instruments. A reconciliation of total interest-bearing loans and borrowings to net debt is set out in note 20 to the Consolidated Financial Statements.
EBITDA (as defined).* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ resultprofit after tax.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
∎ RONA from continuing and discontinued operations is quoted by managementa non-GAAP measure as defined on page 211. The GAAP figures that are most directly comparable to aid investorsthe components of RONA include: Group operating profit (2017: €2,095 million; 2016: €1,908 million), total assets and total liabilities respectively (2017: €31,633 million and €16,656 million respectively; 2016: €31,594 million and €17,151 million respectively). Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
8 |
CRH Annual Report and Form 20-F | 2017
to significant acquisition activity during 2017, completing 34 deals. Total acquisition spend for the period was€1.9 billion, while proceeds from disposals amounted to€222 million. In Europe, the acquisition of Fels, a leading German lime and aggregates business, is an excellent addition to our portfolio of heavyside businesses and gives us a platform for further growth in the highly attractive European lime market. Lime is a resilient, high-margin business with a customer base extending beyond construction to applications in agriculture and industry. Fels had been an acquisition target for CRH for many years, and our patience and persistence ensured that we acquired it at the right time and at the right multiple. In the Americas we made a decision to divest our Americas Distribution business, Allied Building Products. The sale of Allied, which closed in January 2018, generated US$2.6 billion and provided the Group with the opportunity to exit the business at a high multiple and recycle the proceeds into opportunities that offer better long-term prospects for value creation and growth. We reached an agreement with the Board of Ash Grove Cement to acquire a significant portfolio of cement and other materials assets. This deal is due to close in 2018 and will give CRH a leading market position in the North American cement market for the first time. Like many of the businesses we have acquired in the US over the years, Ash Grove is a family run business with similar values to CRH. Our Americas Materials business is currently the biggest customer of Ash Grove and CRH’s relationship with the company extends back as far as the 1970s. | Ash Grove is the number two cement producer west of the Mississippi. Its eight cement plants, extensive readymixed concrete, aggregates and associated logistics operations are excellent assets, providing important exposure to high-growth urban environments in states such as Texas. In Florida, another strategically important state due to its strong population growth, CRH became the largest supplier of building materials following our acquisition of Suwannee American Cement together with certain other materials assets. Our focus now is on integrating these businesses. We will, however, continue to identify value-adding bolt-on acquisitions that we can quickly integrate into our business and that offer good potential for synergies, vertical integration and downstream opportunities. This value-creating acquisition activity, along with CRH’s strong operational performance during 2017, ensures the Group is well positioned for further growth in 2018. Outlook In the US, GDP growth in 2018 is expected to be similar to 2017, supported by steady gains in overall job creation, improving consumer confidence and a slight easing of credit terms. We anticipate continued growth in US housing construction and that non-residential construction will also improve. While the infrastructure market remains broadly stable, there is upside potential due to the growing economy and increased state spending on transportation improvements. With a continuing favourable pricing environment, a sustained emphasis on operating efficiency and benefits from our recent development activity, we expect progress to continue in 2018 in our Americas business. | In Europe, we expect that economic recovery will gather momentum in most countries in 2018. Against a backdrop of increasing demand, particularly in the residential sector, our focus is building upon pricing improvements and efficiency gains achieved in 2017 and as a result, we expect our European business to advance further in 2018. In Asia, with expectations for continued economic growth in the Philippines, we anticipate some stabilisation of the cement market in 2018, however results from our business will remain challenged. With a balanced portfolio of businesses, CRH is well positioned to capitalise on ongoing economic growth and our focus remains on consolidating and building upon the gains made in 2017. Against this backdrop, we believe 2018 will be a year of further progress for the Group. Albert Manifold Chief Executive 28 February 2018 |
We will continue to identify value-adding bolt-on acquisitions that we can quickly integrate into our business and that offer good potential for synergies, vertical integration and downstream opportunities. | ||||||
Albert Manifold, Chief Executive | ||||||
9 |
CRH Annual Report and Form 20-F | 2017
Becoming the global leader in their analysis ofbuilding materials
Our vision is to become the performance ofleading building materials business in the world and in doing so, to maximise long-term value and deliver superior returns for all our stakeholders.
At CRH our operations benefit from a relentless focus on continuous improvement, which enables us to build better businesses and generate enhanced returns for shareholders. By maximising the value we extract from our core businesses we ensure the Group is positioned to take advantage of opportunities that arise to strategically develop new platforms for investment and growth.
In pursuing our growth agenda, we maintain a constant focus on financial discipline and strong cash generation. At the heart of this approach is ensuring that above all we protect the customer loyalty and trust we have built up over decades of operation. To do so, we work hard to assist investorsbetter understand the unique needs
of customers in the comparisonlocal markets in which we operate. This allows us to deliver in a better way for our customers and provide them with a locally tailored service underpinned by a level of quality and excellence consistent with a global company of our scale.
As we have grown in scale and diversified into new product areas and geographic markets, we have evolved and optimised our approach accordingly. The scale of our operations allows us to pursue economies across a range of operational areas. In addition, a pivotal feature of our approach to development is the identification and integration of bolt-on acquisitions which strengthen existing market positions and provide opportunities for vertical integration.
To continue to successfully execute our strategy in pursuit of our vision of becoming the global leader in building materials, we maintain an ongoing focus on identifying, recruiting, developing and retaining individuals with the potential to become the next generation of leaders for our businesses.
Delivery of the Group’s strategy is centred on:
We are guided by a number of strategic imperatives: | ||||
Continuous Improvement | ||||
Drive continuous improvement and value realisation through operational, commercial and financial excellence | ||||
Disciplined and Focused Growth | ||||
Maintain a constant focus on financial discipline and strong cash generation, which in turn supports our ability to fund new value-creating acquisitions and returns for shareholders | ||||
Extracting the Benefits of our Scale | ||||
Leverage Group capabilities and scale to build leadership positions in local markets | ||||
Leadership Development | ||||
Attract, develop and empower the next generation of performance-orientated, innovative and entrepreneurial leaders | ||||
10 |
CRH Annual Report and Form 20-F | 2017
Strategy in action
11 |
CRH Annual Report and Form 20-F | 2017
How we create value and growth
CRH delivers its strategy through a dynamic business model which is focused on value creation and growth. Since 1970 CRH has delivered an industry-leading compound Total Shareholder Return (TSR) of 15.8%.€100 invested in CRH shares in 1970, with dividends reinvested, would now be worth€97,000.
12 |
CRH Annual Report and Form 20-F | 2017
CRH’s business model is centered on making its core businesses better through continuous improvement so that they realise their full potential and create further value.
This is in addition to a continuous focus on the identification of other companies. EBITDA (as defined) and operating profit results by segment are monitored by managementnew geographical platforms in orderour core businesses along with complementary product opportunities which support our efforts to allocate resources between segmentsmaintain a balanced portfolio and to assess performance. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for
establish additional platforms from which to deliver performance and growth.
By balancing our portfolio across geography, product, sector and end-use, we seek to ensure the purposeGroup is protected from the impact of low demand at the information presentedbottom of any one economic cycle.
The recycling of capital into areas offering better returns and/or superior growth is deeply
embedded into our business model. In this way, we constantly monitor how capital is deployed to the Chief Operating Decision-Maker.create maximum long-term value.
Our focus on maintaining strong financial discipline and cash generation allows us to further invest in our businesses and to take advantage of opportunities for value-adding investments as they arise.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
p 2016 comparatives for EBITDA (as defined)* Net Interest Cover.and RONA were €3.0 billion and 9.7% respectively.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
13 |
CRH Annual Report and Form 20-F | 2017
CRH believes that measurement fosters positive behaviour and performance improvement. As part of the Group’s strategic focus on continuous business improvement, CRH uses a number of financial and non-financial Key Performance Indicators (KPIs) to measure progress across our organisation.
14 |
CRH Annual Report and Form 20-F | 2017
* EBITDA netis defined as earnings before interest, cover is used by management as a measure which matchestaxes, depreciation, amortisation, asset impairment charges, profit on disposals and the earnings and cash generated by the business to the underlying funding costs.Group’s share of equity accounted investments’ profit after tax.
● EBITDA (as defined)* net interest cover is a non-GAAP measure as defined on page 212. The GAAP figures that are most directly comparable to the components of EBITDA (as defined)* net interest cover include: profit after tax: €1,919 million (2016: €1,270 million), finance costs: €301 million (2016: €325 million) and finance income: €12 million (2016: €8 million). Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
15 |
CRH Annual Report and Form 20-F | 2017
Achieving long-term success through sustainability
We believe that a strong sustainability performance is fundamental to achieving our vision of becoming the leading building materials business in the world. As part of our strategy to maximise long-term value and deliver superior returns, we embed sustainability principles in all areas of our business. As we deliver on our strategy, we have a unique opportunity to contribute to some of the key sustainable development challenges facing society.
Our approach
We take a risk-based, collaborative, strategic approach to responding to global trends in the areas of demographic change, urbanisation, climate change, resource scarcity and technological developments. Risks related to sustainability, including climate-related risks, are fully embedded in our Enterprise Risk Management (ERM) Framework, described on page 20, and details of sustainability risks are given on page 104.
Sustainability principles are embedded in all areas of our business strategy. At Group level, we set policies in key sustainability areas and the delivery of these is the responsibility of management.
We have strong governance structures in place. Policy implementation, effectiveness
and performance against our medium-term objectives as well as long-term ambitions is monitored and reviewed regularly by the Board of Directors. Acquired businesses are rapidly integrated into our processes.
Our annual Sustainability Report, which is prepared in line with the Global Reporting Initiative Standards, is published following external independent assurance and is available at www.crh.com.
We are committed to reporting on the breadth of our sustainability performance in a comprehensive and transparent manner and to publishing performance indicators, ambitions and outcomes in key sustainability areas.
Our view
With our extensive global presence and industry leadership positions, we are very aware of our role in the many communities in which we operate. Our materials and products are found throughout the built environment – from critical infrastructure and iconic commercial real estate buildings to family homes in suburban neighbourhoods.
Our business activities provide materials that are needed to fulfil the basic human need of shelter, together with the infrastructure that is needed for our societies to thrive. We believe that meeting these needs in a manner that respects sustainability principles will create long-term value for all our stakeholders including; investors, customers, employees, partners, suppliers, neighbours and local communities.
CRH Americas Products businesses Oldcastle Architectural, Oldcastle BuildingEnvelope® and Oldcastle Precast all provided products to the Mercedes-
Benz Stadium in Atlanta, Georgia. The stadium is the first professional stadium in North America to achieve Leadership in Energy and Environmental Design (LEED®)
platinum certification.
16 |
CRH Annual Report and Form 20-F | 2017
Our sustainable value
creation model
As we work towards our vision of becoming the leading building materials business in the world, we are careful to ensure that this is not simply about achieving size and scale. It is about building resilient businesses that are the best at what they do, that create sustainable value for all stakeholders and that deliver growth for our shareholders.
Our aim is to create sustainable value by providing industry-leading products and solutions to satisfy the construction needs of our customers around the world. By considering the full life cycle of our products and innovating to drive more sustainable
outcomes in the built environment, we can have a positive impact on wider society and the environment while delivering profitable growth.
As well as being beneficial for our business, these ambitions also have an outward focus. In collaboration with our stakeholders, our actions also contribute to the delivery of key initiatives. These include the World Business Council for Sustainable Development’s Low Carbon Technology Partnership Initiative, to which we are a signatory, and the United Nations’ (UN) Sustainable Development Goals.
CRH is ranked among sector leaders by leading Environmental, Social and Governance (ESG) rating agencies. We are a constituent
member of indices including the FTSE4Good Index, the STOXX® Global ESG Leaders Indices and the Dow Jones Sustainability Indices. In addition, many operating companies have achieved accolades for excellence in sustainability achievements.
Our sustainable products in the built environment
1 Balcony connector products that reduce thermal bridging, delivering energy saving 2 Concrete Masonry Units with recycled content 3 Concrete with low embodied energy and carbon savings supported by life cycle analysis and locally sourced 4 Skylights with energy saving from solar heat gain 5 Glass with energy saving from solar heat gain 6 Precast concrete flooring and walling elements delivering energy savings 7 High performance glass and glazing products that incorporate innovative thermal break technologies for superior thermal performance and solar heat gain control while providing essential daylight and ventilation for the building 8 Vaulted ceilings with improved thermal comfort, daylight and ventilation, containing recycled content and lower embodied energy 9 Lower carbon warm-mix asphalt with high recycled content and sustainable run-off design 10 Permeable paving connected to sustainable urban drainage systems 11 Shutters and awning products, reducing solar heat gain |
17 |
CRH Annual Report and Form 20-F | 2017
Sustainability - continued
Progressing our key priority areas
Embedding a culture of safety |
Safety has long been a strategic priority for CRH. There are multiple safety risks and hazards associated with our industry, therefore, our focus on safety is unrelenting. Our global network of safety officers works closely with our businesses in implementing policy and best practice across all of our operations.
In 2017, 94% of active locations were accident free. The accident frequency rate (number of accidents per million manhours) continued to decline and has reduced by an average of 12% per annum over the last decade. We are however deeply saddened to report that there were three employee fatalities and seven contractor fatalities at our operations during 2017. Of these fatalities, three were road traffic accidents. We deeply regret this loss of life and extend our sincere sympathies to the families of each individual. All fatalities are independently investigated and we continue to implement our Fatality Elimination Plan, which remains a cornerstone of our safety strategy and which proved effective in eliminating employee fatalities in both 2014 and 2015.
We also continue to invest in initiatives targeted at promoting and maintaining a strong culture of safety and in the past five years over€160 million has been invested in this area.
Creating solutions for our customers |
Every day, in 32 countries worldwide, our employees deliver solutions for customers in the residential, non-residential and infrastructure market segments. We work with our customers to create products that deliver specific sustainability and performance goals, solve problems through innovative design, products and processes, and create added value for their businesses.
We maintain a strong focus on the development of climate-friendly building materials such as lower carbon cements, warm-mix asphalt and recycled aggregates. Not only does this help to reduce CO2 emissions, it also minimises construction waste. Approximately 75% of our US asphalt volume in 2017 was lower carbon warm-mix asphalt, as defined by the National Asphalt Pavement Association, and recycled asphalt pavement and shingles provided a fifth of raw materials requirements in this business. In addition, products such as concrete and building envelope products can also contribute to a more energy-efficient, resilient and sustainable built environment.
Collaborating and engaging for sustainability |
Business is about people, and at CRH we believe success is built on developing transparent and trusting relationships with all stakeholders. We take an inclusive, collaborative and responsive approach to developing stakeholder relationships, taking care to maintain transparency throughout.
Our businesses are rooted in local communities and it is our aim to create real and lasting value for our stakeholders. Whether serving our customers, participating in community initiatives or partnering with each other, we know that in today’s increasingly complex world, we can achieve much more when we collaborate with others.
In 2017 our Group companies hosted 1,100 stakeholder events in keeping with our policy to engage in an open, honest and proactive way. The outcomes from these stakeholder engagement processes inform our continuous improvement activities.
18 |
CRH Annual Report and Form 20-F | 2017
Developing and empowering our people |
With operations in 32 countries, CRH is not only multinational but also multicultural. Our aim is to attract and develop a workforce that is as diverse as our customers and our communities, recognising that people are critical to sustaining competitive advantage and long-term success. We believe that employing people from a broad range of ethnicities, backgrounds, experiences and perspectives creates an inclusive workforce, which provides us with competitive advantage.
The building materials industry traditionally attracts more male than female employees. In 2017, 17% of employees overall were female, while of operational staff, 11% were female and of clerical and administrative staff, 41% were female. Within senior management, 9% were female. As at 28 February 2018, 30% of the Directors of CRH plc were female.
In 2017, we continued with our focused diversity programmes, which are aimed at increasing social diversity, not only of employees, but also of the pool of talent available to take up opportunities in CRH. Going beyond this, we endeavour to ensure equal access to rewarding career and personal development experiences for employees worldwide.
In 2017, we continued to place an emphasis on training and skills learning, as well as developing and recruiting talented leaders to guide our evolving and growing Group.
Protecting the environment |
While potential impacts and risks vary across our businesses, excellence in environmental management, together with a proactive approach to addressing the challenges and opportunities of climate change, is fundamental to our continuous improvement approach.
We work with stakeholders including customers and the wider building materials industry in promoting energy and resource efficiency, emissions reductions and biodiversity enhancements. For example, by incorporating alternative raw materials into our products we reduced our reliance on virgin raw materials by 30 million tonnes in 2017.
Climate change is a key societal challenge and we have governance structures that provide oversight, assessment and management of climate-related risks and opportunities. Our climate strategy, which is integrated with our business strategy, focuses on providing building solutions that reduce emissions and promote climate resilience, recognising the long-term durability, resilience and carbon benefits of concrete construction during the lifetime of buildings. We also focus on reducing our own emissions and hence the carbon footprint of our products.
We are on-track to achieve our commitment to reduce specific net CO2 emissions by 25% on 1990 levels by 2020; 2017 emissions were 22% below 1990 levels. Key performance indicators in this area are included on page 14.
Building a resilient and sustainable business |
We view integrity and good governance as fundamental to long-term business success and we are committed to meeting the highest standards of business conduct and corporate governance.
We implement our comprehensive Code of Business Conduct (CoBC), which is underpinned by our policies including Anti-Fraud & Anti-Theft, Anti-Bribery and our Competition Code. In addition, we have implemented an Ethical Procurement Code and Supplier Code of Conduct, with the aim of extending our positive influence along the value chain.
We endorse human and labour rights and support the principles set out in the articles of the UN’s Universal Declaration of Human Rights and the International Labour Organisation’s Core Labour Principles. We continue to improve our processes and policies in line with evolving best practices and ensure our coverage incorporates all stakeholder groups, paying special attention to vulnerable groups such as children, women, minorities and migrant groups.
We foster an open culture of ethical behaviour driven from the top of the business, communicating to employees what is expected of them and equipping them with the tools they need to ensure compliance. We embrace a ‘speak-up’ culture where employees are encouraged to inform us immediately of any actual or suspected unethical behaviour or a possible breach of conduct.
19 |
CRH Annual Report and Form 20-F | 2017
Creating value through risk management
The goal of Enterprise Risk Management is to deliver increased shareholder value for CRH. Effective governance, which is considered fundamental in CRH, is critical to success, supporting management in executing strategy, managing costs, responding to risks, capturing opportunities, achieving regulatory compliance and in promoting effective decision making.
Effectively managing risk is of vital importance in CRH and the Group’s Enterprise Risk Management (ERM) Framework is the basis for identifying, assessing and managing risks associated with business and strategic corporate decisions. ERM in CRH is a forward-looking, strategy-centric approach to managing the risks inherent in decision making. It recognises the linkage between business objectives and strategies and their associated risks and opportunities, and integrates
strategic decision making and risk taking in order to preserve and/or enhance value and reputation.
With our balanced portfolio, the decentralised and geographically dispersed structure of the Group provides some natural mitigation for some of the significant risks and uncertainties faced, such as industry cyclicality, political and economic uncertainty and damage to corporate reputation.
ERM Framework
The ERM Framework (the ‘Framework’) addresses risks across the various strands of CRH’s strategy, driving performance, executing organic and acquisitive growth, protecting information assets, monitoring compliance with all laws and regulations (including an unwavering commitment to Health & Safety), sustainability, leadership development and talent management and finance.
CRH Risk Management Framework
Our Three Lines of Defence
20 |
CRH Annual Report and Form 20-F | 2017
In formalising CRH’s approach to risk management through ERM, a key requirement has been to ensure that the Framework continues to deliver value for management by providing visibility on strategic priorities and the linkages to the associated risks and opportunities. The key risks identified are reported periodically to the Audit Committee and the Board, with the risks being subject to common, standardised and repeatable processes of assessment, evaluation, management and monitoring.
In line with international best practice, CRH follows a “three lines of defence” model for risk management and internal control which is highlighted on page 20.
Roles and Responsibilities
The Board is ultimately responsible for risk management within CRH. The Board has delegated responsibility for the monitoring of the effectiveness of the Group’s risk management and internal control systems to the Audit Committee. Such systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives.
The Audit Committee in turn monitors the activities of various functions including; Group Regulatory, Compliance & Ethics, Group IT Governance, Group Finance and Group Risk. Group Internal Audit is charged with independently assessing and reporting on the risk management initiatives implemented by these functions.
The Board and Audit Committee receive, on a regular basis, reports from management on the key strategic, operational, compliance, financial and other risks to the business and the steps being taken to manage/mitigate such risks. They also consider whether the significant risks faced by the Group are being identified, evaluated and appropriately managed. The Audit Committee reviews the list of principal risks and uncertainties disclosed on pages 102 to 107.
Our Risk Assessment Process
CRH’s risk management process operates to ensure a comprehensive evaluation of risks is performed and is the subject of continuous improvement. CRH operates both a top-down and bottom-up risk assessment to ensure that risks presented to providethe Audit Committee and Board are representative of the risks faced by our business in strategy execution. The risk management cycle operates as follows:
Identify and Assess
Management identifies risks as part of their day-to-day activities and is required to conduct a greater understandingrobust assessment of these risks. The following factors are taken into consideration:
Management is required to assess all risks which could have an impact on the current or future operation of the business and to document these risks in a standardised template. Risks are assessed in terms of their financial and operational impact should they occur and their likelihood of occurrence, using a defined risk scoring methodology.
Risk velocity, the speed at which a risk impacts the business, is an important constituent of this evaluation.
Manage and Monitor
In line with our ongoing focus on continuous process improvement, risks are assessed by management on an inherent/gross basis (prior to mitigation strategies) and a residual/net basis (post mitigation strategies). Where the gross risk score determines the risk to be material, appropriate mitigation strategies are implemented to bring the residual risk to a level which is within risk appetite and tolerance levels approved by the Board.
The Risk Appetite and Tolerance Framework is a critical component of CRH’s risk governance system through defining the key risk parameters within which strategic decision making takes place. The Board approves the Risk Appetite and Tolerance Framework on an annual basis in line with best corporate governance practice.
Report
The Group level Risk Register, which is compiled by the Group Risk function, highlights those risks which may impede the realisation of core strategic objectives. The risks are fed up from our businesses through the bottom-up assessment which forms the basis of our Register. Additional strategic and Group-related risks are added to ensure the risks highlighted on pages 102 to 107 of this report are reflective of the barriers to the realisation of our business strategy. These risks form the basis of Board and Audit Committee communications and discussions.
21 |
22 |
Business Performance | ||||
Business Overview | 24 | |||
Finance Director’s Review | 25 | |||
Segmental Reviews | 30 |
23 |
CRH Annual Report and Form 20-F | 2017
The percentage of Group revenue and operating profit for each of the reporting segments for 2017, 2016 and 2015 is as follows:
Revenue
Operating Profit
(i) | During 2017 the Americas Distribution segment was classified as discontinued operations. Comparative amounts for 2016 and 2015 have been restated. |
(ii) | During 2017, our dedicated European landscaping businesses previously included within our Europe Heavyside segment were reorganised to form a new platform, Architectural Products, within our Europe Lightside segment. Comparative segment amounts for 2016 and 2015 have been restated where necessary to reflect the new format for segmentation. |
24 |
CRH Annual Report and Form 20-F | 2017
Finance Director’s Review 2017†
2017 was a year of growth for CRH with increases in underlying demand in the Americas, and continued positive momentum in Europe, while very competitive market conditions remained in Asia. With a constant focus on performance in all our businesses, coupled with our vertically integrated business model for heavyside materials, good operational leverage underpinned improved margins and returns in our American and European Divisions. The Group also maintained a focus on cash generation and appropriate deployment of capital as operating cash flow for the year amounted to€2.2 billion (2016:€2.3 billion) and year-end net debt increased by€0.5 billion to€5.8 billion (2016:€5.3 billion) despite acquisition spend net of disposal proceeds increasing to€1.7 billion (2016: net inflow€0.1 billion). Key Components of 2017 Performance The overall sales movement in the year was a combination of the performance of each of the individual segments as noted below. Despite hurricane activity and record levels of rainfall during the year, our Americas operations benefited from the continuation of stable market fundamentals in the US and good underlying demand. An organic salesp increase of 3% in our Americas Materials Division was supported by continued growth in the residential and non-residential sectors, while infrastructure remained relatively stable in our markets. In Americas Products, sales were broadly in line with prior year as good growth along the West Coast and parts of the South and Southeast were partly offset by more modest trading in Canada and parts of the Northern US. In Europe, total sales were up 1% compared with 2016 and organic sales were 2% ahead due to continued recovery in key markets. Europe Heavyside’s outturn was positive, with a broad-based recovery in Ireland, France, Poland and Finland more than offsetting more subdued activity in Switzerland and the UK. Europe Lightside experienced a year of further progress as good performances in a number | of our main markets resulted in sales finishing 3% ahead of 2016. The backdrop at Europe Distribution was stable as a strong contribution from the Netherlands together with solid demand in Belgium and Germany was partly offset by continued challenges in Switzerland. In Asia, economic growth and market fundamentals remained robust in the Philippines, with both residential and non-residential demand stable, though infrastructure investment was slower than expected and pricing remained very competitive. In India, a favourable economic backdrop continued to drive demand, while reduced construction activity in China had a negative impact on volumes but this was more than offset by stronger pricing. Americas Distribution, which has been classified as discontinued operations for reporting purposes, benefited from good underlying demand, particularly for Exterior Products. EBITDA (as defined)* from continuing and discontinued operations for the year amounted to€3.3 billion, a 6% increase on 2016 (2016:€3.1 billion) and reported profit after tax‡ was€1.9 billion (2016:€1.3 billion). The euro strengthened against most major currencies during 2017, particularly towards the end of the year resulting in the average euro/Pound Sterling rate weakening from 0.8195 in 2016 to 0.8767 in 2017 and the US Dollar weakening from an average 1.1069 in 2016 to 1.1297 in 2017. Overall currency movements resulted in an unfavourable net foreign currency translation impact on our results as shown on the table on page 26. The average and year-end 2017 exchange rates of the major currencies impacting on the Group are set out on page 134. The underlying results for the year were augmented by two one-off items; a past service credit of€81 million due to changes in a Swiss pension scheme and a€447 million | reduction in the Group’s net deferred tax liabilities‡‡ due to changes in tax legislation related to the enactment of the “Tax Cuts and Jobs Act” in the US during 2017. | ||||||||||||
2017 was a year of growth for CRH, with increases in underlying demand in the Americas and continued positive momentum in Europe Senan Murphy, Finance Director | ||||||||||||||
† See cautionary statement regarding forward-looking statements on page 97. * EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. p Details of how non-GAAP measures are calculated are set out on pages 210 to 213. ‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120. ‡‡ Net deferred tax liabilities reduction of €447 million is stated on a continuing (€440 million) and discontinued (€7 million) basis. |
25 |
CRH Annual Report and Form 20-F | 2017
Finance Director’s Review 2017 - continued
Key Components of 2017 Performance
Sales | EBITDA | Operating | Profit on | Finance | Assoc. and | Pre-tax | ||||||||||||||||||||||
€ million | revenue | (as defined)* | profit | disposals | costs (net) | JV PAT (i) | profit | |||||||||||||||||||||
2016 | 24,789 | 2,980 | 1,908 | 53 | (383) | 42 | 1,620 | |||||||||||||||||||||
Exchange effects
|
| (479)
|
|
| (74)
|
|
| (53)
|
|
| (1)
|
|
| 6
|
|
| 1
|
|
| (47)
|
| |||||||
2016 at 2017 rates | 24,310 | 2,906 | 1,855 | 52 | (377) | 43 | 1,573 | |||||||||||||||||||||
Incremental impact in 2017 of: | ||||||||||||||||||||||||||||
- 2016/2017 acquisitions | 596 | 60 | 14 | - | (8) | - | 6 | |||||||||||||||||||||
- 2016/2017 divestments | (204) | (21) | (14) | (3) | 1 | - | (16) | |||||||||||||||||||||
- LH Assets integration costs (ii) | - | 45 | 45 | - | 15 | - | 60 | |||||||||||||||||||||
- Swiss pension past service credit (iii) | - | 81 | 81 | - | - | - | 81 | |||||||||||||||||||||
- Early bond redemption | - | - | - | - | (18) | - | (18) | |||||||||||||||||||||
- Organic
|
| 518
|
|
| 75
|
|
| 114
|
|
| 7
|
|
| 38
|
|
| 22
|
|
| 181
|
| |||||||
2017
|
| 25,220
|
|
| 3,146
|
|
| 2,095
|
|
| 56
|
|
| (349)
|
|
| 65
|
|
| 1,867
|
| |||||||
% Total change
|
| 2%
|
|
| 6%
|
|
| 10%
|
|
| 15%
|
| ||||||||||||||||
% Organic change
|
| 2%
|
|
| 3%
|
|
| 6%
|
|
| 12%
|
|
(i) | CRH’s share of after-tax profits of joint ventures and associated undertakings. |
(ii) | LH Assets integration costs of€45 million were incurred in 2016. In addition, following the related debt restructuring, finance costs reduced by€15 million in 2017. |
(iii) | 2017 includes a one-off past service credit of€81 million due to changes in the Group’s pension scheme in Switzerland. |
Liquidity and Capital Resources - 2017 compared with 2016
The comments that follow refer to the major components of the Group’s cash flows for 2017 and 2016 as shown in the Consolidated Statement of Cash Flows on page 124.
Throughout 2017 the Group remained focused on cash management. Operating cash flow decreased marginally to€2.2 billion (2016:€2.3 billion) with net working capital outflow for the year of€209 million (2016:€56 million inflow) reflecting trends in overall sales, seasonal weather patterns and the impact of CRH’sacquisitions in the final quarter of the year. Working capital of€1.8 billion at year end (2016:€2.1 billion) represented just 7.2% of sales (2016: 8.5%), continuing the downward movement in this metric for the Group since 2011. CRH believes that its current working capital is sufficient for the Group’s present requirements.
Focused spending on property, plant and equipment in markets and businesses with increased demand backdrop and efficiency requirements, particularly in the Americas, resulted in higher cash outflows of€1.0 billion (2016:€853 million), with spend in 2017 representing 104% of depreciation (2016: 85%).
During the year the Group spent€1.9 billion on 34 transactions (2016:€213 million) which was partly financed by divestment and disposal proceeds of€222 million (net of cash disposed and deferred proceeds) (2016:€283 million).
Cash dividend payments of€477 million (2016:€360 million) reflect the Group’s continued focus on returns to shareholders. Net proceeds of€42 million from share issues in 2017 were similar to last year (2016:€52 million).
Year-end interest-bearing loans and borrowings increased by€0.2 billion to€8.0 billion (2016:€7.8 billion). At year end,
the stronger euro against both the US Dollar and Pound Sterling had a positive translation impact on net debt.
Reflecting all these movements, net debt of€5.8 billion at 31 December 2017 was€0.5 billion higher than year-end 2016 (€5.3 billion). The Group is in a good financial position. It is well funded and financing arrangements and, as discussednet interest cover (EBITDA (as defined)*/net debt related interest costs) is 10.9x (2016: 9.4x). As set out in note 2324 to the Consolidated Financial Statements the Group is a metric usedsignificantly in lender covenants. It is the ratio of EBITDA (as defined)* to net interest and is calculated on page 6.
The definitions and calculations used in lender covenant agreements include certain specified adjustments to the amounts included in the Consolidated Financial Statements. The ratios as calculated on the basisexcess of the definitions in those covenants are disclosed in note 23 to the Consolidated Financial Statements.minimum requirements of its covenant agreements.
Organic Revenue, Organic Operating Profit. CRH pursues a strategy of growth through acquisitions and investments, with €188 million spent on acquisitions and investments in 2014 (2013: €720 million). Acquisitions completed in 2013 and 2014 contributed incremental sales revenue of €237 million and operating profit of €4 million in 2014. Proceeds from divestments and non-current asset disposals amounted to €345 million (2013: €283 million). The sales impact of divested activities in 2014 was a negative €25 million and because these operations generated net losses in 2013, the disposal impact at operating profit level was a contribution of €1 million compared to 2013.
During 2014, the US Dollar remained relatively stable at approximately 1.33 against the euro, however the weakening of currencies like the Ukrainian Hryvnia and Canadian Dollar, partly offset by the strengthening of Sterling, were the principal factors behind the exchange effects disclosed on page 67. Because of the impact of acquisitions, divestments, exchange translation and other non-recurring items on reported results each year,In May 2017, the Group uses organic revenuesuccessfully issued a total of US$1.0 billion dollar bonds comprised of a US$0.6 billion 10-year bond at a coupon rate of 3.4% and organic operating profit as additional performance indicators to assess performancea US$0.4 billion 30-year bond at a coupon rate of pre-existing (also referred to as underlying, heritage, like-for-like or ongoing) operations each year.
Organic revenue and organic operating profit is arrived at by excluding the incremental revenue and operating profit contributions from current and prior year acquisitions and divestments, the impact of exchange translation and the impact of any non-recurring items. In the Business Performance Review section which follows, changes in organic revenue and organic operating profit are presented as additional measures of revenue and operating profit to provide a greater understanding of the performance of the Group. A reconciliation of the changes in organic revenue and organic operating profit to the changes in total revenue and operating profit4.4%. Concurrently, an any-and-all tender offer was made for the Group and by segment is presentedUS$0.65 billion bond due in 2018, with the discussion of each segment’s performance in tables contained in the segment discussion commencing on page 70.final result being that US$0.36 billion were validly tendered and accepted for purchase, which
* |
26 |
gave rise to a one-off charge of€18 million. The early redemption of these Notes results in overall net interest savings for the Group in 2017 and 2018.
The bond issues reflect CRH’s commitment to prudent management of our debt and the timing of the related maturities and also to maintaining an investment grade credit rating.
The Group ended 2017 with total liquidity of€5.7 billion comprising€2.1 billion of cash and cash equivalents on hand and almost€3.6 billion of undrawn committed facilities (which are available until 2022). At year end the cash balances were enough to meet all maturing debt obligations for the next 3.6 years and the weighted average maturity of the remaining term debt was 10.5 years.
CRH also has a US$1.5 billion US commercial paper programme and a€1.5 billion Euro commercial paper programme. The purpose of these programmes is to provide short-term liquidity at attractive terms. There was no commercial paper outstanding under either of these programmes at 31 December 2017.
Contractual obligations and Off-Balance Sheet arrangements are disclosed on page 214 of this Annual Report and Form 20-F.
Segmental Reviews
The sections on pages 30 to 53 outline the scale of CRH’s continuing operations in 2017, and provide a more detailed review of performance in each of CRH’s reporting segments. As set out in note 1 to the Consolidated Financial Statements (page 135), following the agreement to sell the Americas Distribution business, the Group has six reporting segments. A review of the discontinued operations, Americas Distribution, is also included on pages 54 and 55 for information.
Development Review
2017
In 2017, the Group spent a total of€1.9 billion (including deferred and contingent consideration in respect of prior year acquisitions) (2016:€0.2 billion) on 34 (2016: 24) acquisition/investment transactions. On the divestment front, the Group realised business and asset disposal proceeds of€0.2 billion (2016:€0.3 billion).
In the Americas, c.€1.3 billion was spent on 21 acquisitions and one investment. Our Materials Division completed the largest 2017 acquisition at the end of November with the acquisition of Suwannee American Cement together with certain other materials assets in Florida. The total assets acquired consist of a 1 million tonne cement plant in North Central Florida, 18 readymixed concrete plants, an aggregates quarry, two block plants and nine gunite facilities. The Materials Division also completed 12 further bolt-on acquisitions, including two in Canada, adding c. 2.5 billion tonnes of additional aggregates reserves. The Products Division completed eight acquisitions and one investment in 2017 at a cost of c.€0.2 billion.
In Europe, c.€0.6 billion was spent on ten acquisitions and two investments. This is split between eight acquisitions and one investment in Europe Heavyside and two acquisitions and one investment in Europe Distribution.
IntroductionThe largest acquisition in Europe in 2017 was that of the Fels lime business which was acquired at the end of October 2017. Fels has significant high-quality limestone reserves and Performance Measures |continued11 production locations; nine in Germany and one in both the Czech Republic and Russia. The majority of production capacity is situated in the Harz region of East Germany, providing a strong platform for future growth.
Business divestments during 2017, all in Europe, generated net proceeds of c.€85 million. The remaining clay products businesses in Europe (Belgium, Germany, Netherlands and Poland) were divested and our Heavyside Division also sold its civil prefabricated concrete businesses in the Benelux, along with seven other small non-core businesses. In addition to these business divestments, the Group realised proceeds of c.€137 million from the disposal of surplus property, plant and equipment.
As previously announced, CRH completed the sale of its Americas Distribution business on 2 January 2018 for proceeds of US$2.6 billion. In addition, we reached an agreement with the Board of Ash Grove Cement to acquire a portfolio of cement and other materials assets. The deal is due to close in 2018 and will give CRH a market leadership position in the North American cement market for the first time.
| ||||||||||||||||||||
Year ended 31 December (amounts in millions, except per share data and ratios)
| ||||||||||||||||||||
2014 | 20131 | 20122 | 20112 | 20102 | ||||||||||||||||
€m | €m | €m | €m | €m | ||||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||||
Revenue | 18,912 | 18,031 | 18,084 | 18,081 | 17,173 | |||||||||||||||
Group operating profit | 917 | 100 | 805 | 871 | 698 | |||||||||||||||
Profit/(loss) attributable to equity holders of the Company | 582 | (296 | ) | 538 | 580 | 432 | ||||||||||||||
Basic earnings/(loss) per Ordinary Share | 78.9c | (40.6c | ) | 74.6c | 81.2c | 61.3c | ||||||||||||||
Diluted earnings/(loss) per Ordinary Share | 78.8c | (40.6c | ) | 74.5c | 81.2c | 61.2c | ||||||||||||||
Dividends paid during calendar year per Ordinary Share | 62.5c | 62.5c | 62.5c | 62.5c | 62.5c | |||||||||||||||
Average number of Ordinary Shares outstanding3 | 737.6 | 729.2 | 721.9 | 714.4 | 704.6 | |||||||||||||||
Ratio of earnings to fixed charges (times)4 | 2.6 | 0.75 | 2.6 | 2.4 | 2.1 | |||||||||||||||
All data relates to continuing operations | ||||||||||||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||||
Total assets | 22,017 | 20,429 | 20,900 | 21,384 | 21,461 | |||||||||||||||
Net assets6 | 10,198 | 9,686 | 10,589 | 10,593 | 10,411 | |||||||||||||||
Ordinary shareholders’ equity | 10,176 | 9,661 | 10,552 | 10,518 | 10,327 | |||||||||||||||
Equity share capital | 253 | 251 | 249 | 247 | 244 | |||||||||||||||
Number of Ordinary Shares3 | 744.5 | 739.2 | 733.8 | 727.9 | 718.5 | |||||||||||||||
Number of Treasury Shares and own shares3 | 3.8 | 6.0 | 7.4 | 8.9 | 9.5 | |||||||||||||||
Number of Ordinary Shares net of Treasury Shares and own shares3 | 740.7 | 733.2 | 726.4 | 719.0 | 709.0 |
|
27 |
Forward-Looking StatementsFinance Director’s Review 2016
The overall trading backdrop in 2016 was positive with good momentum in both the Americas and Europe, albeit at different paces, supported by a good performance from the newly established Asia Division. In order to utiliseaddition, our businesses benefited from favourable weather patterns in the “Safe Harbor” provisionsAmericas at the start of 2016. With a relentless focus on performance in all our businesses, coupled with our vertically integrated business model for heavyside materials, good operational leverage underpinned improved margins and returns. Following the two major acquisitions of the United States Private Securities Litigation Reform ActLH Assets and CRL in the second half of 1995, CRH public limited company (the “Company”)2015, the Group focused in 2016 on completing their integration, extracting synergies and on prudent financial management to return debt metrics to nomalised levels. With this focus,€89 million of synergies were realised while operating cash flow for the year amounted to€2.3 billion (2015:€2.2 billion) and year-end 2016 net debt finished at€5.3 billion (2015:€6.6 billion).
Key Components of 2016 Performance
Overall sales of€24.8 billion for 2016 were 16% ahead of 2015 reflecting the inclusion of full-year 2016 results from the two major acquisitions, while organic sales from operations were up 3%, reflecting positive momentum in the Group’s major markets.
An increase of 9% in the Americas’ sales reflected the inclusion of the Canadian element
of the LH Assets and its subsidiaries (collectively, “CRH” orCRL. Organic sales from operations increased 2% in 2016 benefiting from favourable early weather with more normalised demand patterns experienced in the “Group”) is providingsecond half of 2016. Americas Materials benefited from stable federal funding underpinned by increased state spending and improved non-residential activity. At Americas Products, continued positive momentum in construction markets was supported by low interest rates and increasing employment. With higher sales and good cost control, profits and margins improved in our Americas segments. Our former reporting segment Americas Distribution (now disclosed as discontinued operations) also benefited from the following cautionary statement.good underlying demand.
This document contains certain forward-looking statementsIn Europe total sales were up 20% compared with respect2015 and organic sales were 4% ahead on the back of continued recovery in some key markets. In addition to the financial condition, results of operations and business of CRH and certain offull-year 2016 contributions from the plans and objectives of CRH including the statements under: “Strategy Review – Chief Executive’s Introduction – Outlook for 2015”;LH Assets in the “Business Performance Review – Finance Director’s Introduction” with respect to our belief that the Group has sufficient resources to meet its debt obligationsUK and capital and other expenditure requirements in 2015; in the “Business Performance Review” section with respect to our expectations regarding economic activity and fiscal developments in our operating regions; our expectations for the residential, non-residential and infrastructure markets, our expectation for operating profits and/or margins in 2015 under the heading ‘Outlook’ in each of the six operating segment reviews; under the heading “Strategy Review - Proposed Acquisition - Announced February 2015” with respect to the expected benefits and reasons for the proposed Acquisition, the timing of regulatory approvals and other conditions and the timing for completion of the proposed Acquisition; under the heading “China and India – Equity Accounted Investments – Outlook” with respect to future market conditions in China and India; and under the heading “Risk Factors – Financial instruments” with respect to the expected PBITDA/net interest cover asmainland Europe, Europe Heavyside faced a result of the proposed Acquisition. These forward-looking statements may generally, but not always, be identified by the use of words such as “will”, “anticipates”, “should”, “expects”, “is expected to”, “estimates”, “believes”, “intends” or similar expressions.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and reflect the Company’s current expectations and assumptions as to such future events and circumstances that may not prove accurate. A number of material factors could cause actual results and developments to differ materiallymixed backdrop, benefiting from those expressed or implied
by these forward-looking statements, certain of which are beyond our control and which include, among other things: economic and financial conditions generally in various countries and regions where we operate; the pace ofa broad-based recovery in the overallNetherlands, Ireland, Finland and Ukraine with more subdued activity in Switzerland and Poland. Europe Lightside experienced strong demand in key markets while Europe Distribution benefited from improving demand in the Netherlands with a more challenging backdrop in Switzerland.
The Asia Division reflects results from the Philippines operations acquired as part of the
LH Assets in the second half of 2015 together with CRH Asia’s divisional costs. Separately, the Group’s investments in India and China are equity accounted. In the Philippines, construction demand was supported by good economic growth, strong domestic consumption and building materials sector;low inflation. In India, a favourable economic backdrop continued to drive construction demand for infrastructure, residential and non-residentialbut pricing remained challenging while reduced construction activity in our geographic markets; increased competition and itsChina had a negative impact on prices; increases in energy and/or raw materials costs; adverse changes to lawsvolumes and regulations; adverse political developments in various countries and regions; failure to complete or successfully integrate acquisitions; and the specific factors identified in the discussions accompanying such forward-looking statements and under “Risk Factors” in this document.prices.
Statements Regarding Competitive Position and Construction Activity
Statements made in the Description of the Group and in the Business Performance Review sections referring to the Group’s competitive position are based on the Group’s belief, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and the Group’s internal assessment of market share based on publicly available information about the financial results and performance of market participants.
Unless otherwise specified, references to construction activity or other market activity relate to the relevant market as a whole and are based on publicly available information from a range of sources, including independent market studies, construction industry data and economic forecasts for individual jurisdictions.
Seasonality
Activity in the construction industry is characterised by cyclicality and is dependent to a considerable extent on the seasonal impact of weather in the Group’s operating locations, with activity in some markets reduced significantly in winter due to inclement weather. First-half sales accounted for 44% of full-year 2014 (2013: 44%), while EBITDA (as defined)* for 2016 amounted to€3.0 billion, a 43% increase on 2015 (€2.1 billion) and reported profit after tax‡ was€1.3 billion (2015:€0.7 billion).
In 2016, the first six monthseuro strengthened versus most major currencies, particularly the Pound Sterling which weakened from an average 0.7258 in 2015 to 0.8195 in 2016. The effect of 2014 represented 31%this was only partially offset by a small change in the average euro/US Dollar rate, which, despite strengthening towards the end of 2016, averaged 1.1069 for 2016 and was broadly similar to 2015 (1.1095). Overall currency movements resulted in an unfavourable net foreign currency translation impact on our results as shown in the table below. The average and year-end 2016 exchange rates of the full-year out-turn (2013: 27%).major currencies impacting on the Group are set out on page 134.
Key Components of 2016 Performance
Sales | EBITDA | Operating | Profit on | Finance | Assoc. and | Pre-tax | ||||||||||||||||||||||
€ million | revenue | (as defined)* | profit | disposals | costs (net) | JV PAT (i) | profit | |||||||||||||||||||||
2015 | 21,406 | 2,079 | 1,166 | 99 | (389) | 44 | 920 | |||||||||||||||||||||
Exchange effects | (338) | (29) | (11) | (7) | 3 | 1 | (14) | |||||||||||||||||||||
2015 at 2016 rates | 21,068 | 2,050 | 1,155 | 92 | (386) | 45 | 906 | |||||||||||||||||||||
Incremental impact in 2016 of: | ||||||||||||||||||||||||||||
- 2015/2016 acquisitions | 3,624 | 546 | 337 | - | (33) | 2 | 306 | |||||||||||||||||||||
- 2015/2016 divestments | (506) | (29) | (13) | (51) | 3 | (14) | (75) | |||||||||||||||||||||
- LH Assets integration costs (ii) | - | 152 | 152 | - | - | - | 152 | |||||||||||||||||||||
- Swiss fine | - | 32 | 32 | - | - | - | 32 | |||||||||||||||||||||
- Early bond redemption | - | - | - | - | 38 | - | 38 | |||||||||||||||||||||
- Organic | 603 | 229 | 245 | 12 | (5) | 9 | 261 | |||||||||||||||||||||
2016 | 24,789 | 2,980 | 1,908 | 53 | (383) | 42 | 1,620 | |||||||||||||||||||||
% Total change | 16% | 43% | 64% | 76% | ||||||||||||||||||||||||
% Organic change | 3% | 11% | 21% | 29% | ||||||||||||||||||||||||
CRH’s share of after-tax profits of joint ventures and associated undertakings. |
(ii) | LH Assets integration costs of€45 million were incurred in 2016 (2015:€197 million). |
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ |
‡ | Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120. |
Introduction and Performance Measures |continued
Exchange Rates
In this Form 20-F, references to “US$”, “US Dollars” or “US cents” are to the United States currency, references to “euro”, “euro cent”, “cent”, “c” or “€” are to the euro currency and “Stg£” or “Sterling” are to the currency of the United Kingdom of Great Britain and Northern Ireland (“United Kingdom” or “UK”). Other currencies referred to in this Form 20-F include Polish Zloty (“PLN”), Swiss Franc (“CHF”), Canadian Dollar (“CAD”), Chinese Renminbi (“RMB”), Argentine Peso (“ARP”), Turkish Lira (“TRY”), Indian Rupee (“INR”), Ukrainian Hryvnia (“UAH”) and Israeli Shekel (“ILS”).
For the convenience of the reader, this Form 20-F contains translations of certain euro amounts into US Dollars at specified rates. These translations should not be construed as representations that the euro amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated. The Federal Reserve Bank of New York Noon Buying Rate (the “FRB Noon Buying Rate”) on 31 December 2014 was €1 = US$1.2101 and on 6 March 2015 was €1 = US$1.0855.
The table below sets forth, for the periods and dates indicated, the average, high, low and end-of-period exchange rates in US Dollars per €1 (to the nearest cent) using the FRB Noon Buying Rate. These rates may vary slightly from the rates used for translating foreign currencies into euro in the preparation of the Consolidated Financial Statements (see page 145).
For a discussion on the effects of exchange rate fluctuations on the financial condition and results of the operations of the Group, see the Business Performance Review section beginning on page 66.
Exchange Rates
| ||||||||||||||||
Years ended 31 December
| Period End
| Average Rate1
| High
| Low
| ||||||||||||
2010 | 1.33 | 1.32 | 1.45 | 1.20 | ||||||||||||
2011 | 1.30 | 1.40 | 1.49 | 1.29 | ||||||||||||
2012 | 1.32 | 1.29 | 1.35 | 1.21 | ||||||||||||
2013 | 1.38 | 1.33 | 1.38 | 1.28 | ||||||||||||
2014 | 1.21 | 1.32 | 1.39 | 1.21 | ||||||||||||
2015 (through 6 March 2015) | 1.09 | 1.11 | 1.20 | 1.09 | ||||||||||||
Months ended
| ||||||||||||||||
September 2014 | 1.26 | 1.29 | 1.31 | 1.26 | ||||||||||||
October 2014 | 1.25 | 1.27 | 1.28 | 1.25 | ||||||||||||
November 2014 | 1.24 | 1.25 | 1.26 | 1.24 | ||||||||||||
December 2014 | 1.21 | 1.23 | 1.25 | 1.21 | ||||||||||||
January 2015 | 1.13 | 1.16 | 1.20 | 1.13 | ||||||||||||
February 2015 | 1.12 | 1.14 | 1.15 | 1.12 | ||||||||||||
March 2015 (through 6 March 2015) | 1.09 | 1.11 | 1.12 | 1.09 |
|
History, Development andOrganisational Structure of the Company
CRH public limited company is the parent company of a diversified international group of companies which provide building materials across the spectrum of the construction industry – from building foundations to frame and roofing, to fitting out the interior space and improving the exterior environment, onsite works and infrastructural projects, our materials and products are used extensively.
The Group resulted from the merger in 1970 of two leading Irish public companies, Cement Limited (established in 1936) and Roadstone, Limited (incorporated in 1949). Cement Limited manufactured and supplied cement while Roadstone, Limited was primarily involved in the manufacture and supply of aggregates, readymixed concrete, mortar, coated macadam, asphalt and contract surfacing to the Irish construction industry.
The Company is incorporated and domiciled in the Republic of Ireland. CRH is a public limited company operating under the Companies Acts of Ireland, 1963 to 2013 and the Investment Funds, Companies and Miscellaneous Provisions Act, 2006, each as amended. The Group’s worldwide headquarters are located in Dublin, Ireland. Our principal executive offices are located at Belgard Castle, Clondalkin, Dublin 22 (telephone: +353 1 404 1000). The Company’s registered office is located at 42 Fitzwilliam Square, Dublin 2, Ireland and our US agent is Oldcastle, Inc., 900 Ashwood Parkway, Suite 600, Atlanta, Georgia 30338. The Company is the holding company of the Group, with direct and indirect share and loan interests in subsidiaries, joint ventures and associates. From Group headquarters, a small team of executives exercise strategic control over our decentralised operations.
CRH, which has a premium listing on The London Stock Exchange Limited (“London Stock Exchange”), is also one of the largest companies, based on market capitalisation, quoted on The Irish
Stock Exchange Limited (“Irish Stock Exchange”) in Dublin.
CRH’s American Depositary shares are listed on the New York Stock Exchange (“NYSE”) in the United States. The market capitalisation of CRH as of 31 December 2014 was €14.7 billion.
CRH is a constituent member of the FTSE 100 index and the ISEQ 20.
As outlined in note 1 to the Consolidated Financial Statements, in conjunction with the ongoing portfolio review, the Group reorganised its European business in 2014 and is organised into six business segments which form the operational organisational structure and are outlined further in the sections that follow.
In the detailed description of the Group’s business that follows, estimates of the Group’s various aggregates and stone reserves have been provided by engineers employed by the individual operating companies. Details of product end-use by sector for each reporting segment are based on management estimates.
As a result of planned geographic diversification since the mid-1970s, and most particularly in the period 2001 to 2008, the Group has expanded by acquisition and organic growth into an international manufacturer and supplier of building materials. CRH is a leading global building materials group employing approximately 76,000 people at over 3,300 locations worldwide. For over four decades, CRH has developed and implemented a proven model of business improvement. By building better businesses across our international operations, we have grown to be a leader in the global building materials industry. We operate in 34 countries and we are the largest building materials company in North America, a regional leader in Europe, and have strategic positions in Asia.
The principal subsidiary undertakings and equity accounted investments are listed in Exhibit 8 to this Annual Report on Form 20-F.
The percentage of Group revenue and operating profit for each of the six reporting segments for 2014, 2013 and 2012 is as follows:
Business Overview
| ||||||||||||||||||||||||||||
2014
| 2013
| 2012
| ||||||||||||||||||||||||||
Operating | Operating | Operating | ||||||||||||||||||||||||||
Revenue
| profit
| Revenue
| profit
| Revenue
| profit
| |||||||||||||||||||||||
Share of revenue and operating profit | ||||||||||||||||||||||||||||
Europe Heavyside1 | 21% | 16% | 21% | (395% | ) | 22% | 23% | |||||||||||||||||||||
Europe Lightside | 5% | 8% | 5% | 28% | 5% | 6% | ||||||||||||||||||||||
Europe Distribution | 21% | 12% | 22% | 106% | 22% | 18% | ||||||||||||||||||||||
Americas Materials | 27% | 39% | 26% | 226% | 27% | 35% | ||||||||||||||||||||||
Americas Products | 17% | 16% | 17% | 68% | 15% | 11% | ||||||||||||||||||||||
Americas Distribution | 9% | 9% | 9% | 67% | 9% | 7% | ||||||||||||||||||||||
Total | 100% | 100% | 100% | 100% | 100% | 100% |
|
The two major 2015 acquisitions (the LH Assets and CRL) account for the vast majority of the acquisition impact included in the table on page 28.
Liquidity and Capital Resources – 2016 compared with 2015
The comments that follow refer to the major components of the Group’s cash flows for 2016 and 2015 as shown in the Consolidated Statement of Cash Flows on page 124.
Following the significant acquisition spend in 2015, prudent financial management to return debt metrics to normalised levels was a key objective for 2016. The Group focused on working capital in particular, and operating cash flow increased to€2.3 billion (2015:€2.2 billion). Year-end 2016 working capital of€2.1 billion delivered a net positive movement (inflow) for the year of€56 million (2015:€585 million).
Strong control of spending on property, plant and equipment concentrating on markets and businesses with increased demand backdrop and efficiency requirements resulted in lower cash outflows of€853 million (2015:€882 million).
During 2016 the Group spent€213 million on 24 bolt-on transactions (2015:€7.4 billion) which was financed by divestment and disposal proceeds of€283 million (net of cash disposed and deferred proceeds) (2015:€889 million).
Cash dividend payments of€360 million (2015:€383 million) reflect the Group’s continued focus on returns to shareholders. Net proceeds of€52 million from share issues in 2016 was significantly less than 2015 proceeds of€1.6 billion due to the 74 million shares placed in February of that year in connection with the acquisition of LH Assets.
Year-end 2016 interest-bearing loans and borrowings decreased by€1.4 billion to€7.8 billion (2015:€9.2 billion). The strengthening of the US Dollar versus the euro at 31 December 2016 (versus 31 December 2015) had a negative impact on net debt, but this was offset by the positive translation impact of a weakening Pound Sterling, such that the net translation impact was broadly neutral.
Operational Snapshot |sector exposure and end-use based on 2014 EBITDA (as defined)*
14 CRH
CRH 15
Business Operations in Europe
Europe Heavyside
Development Review
2016
In 2014,2016, the Group reorganised its Europeancompleted 21 bolt-on acquisitions and three investment transactions for a total spend of€213 million (including deferred and contingent consideration in respect of prior year acquisitions). In Europe, eight acquisitions and two investments with a total spend of c.€43 million were completed. Our Heavyside business by integrating its former Materials Division with theacquired 11 readymixed concrete and clay businesses of the former Products Division into one Heavyside organisation. The purpose of this reorganisation is to enable CRH to maximise the benefits and synergies of our operating plant network in both Western and Eastern European markets.
Europe Heavyside’s strategy is to build leading regional positions in businesses that are vertically integrated and which have the potential to grow furtherplants in the large European construction markets. We deliver our strategy throughUK, three quarries in Ireland, an aggregates terminal in Belgium and entered into a focus onsand & gravel joint venture in France, adding reserves of 11 million tonnes. Further investments were also made to buy out a balanced exposure to demand, product penetration and on maximising the benefits of scale and best practice. Our business is differentiated and achieves competitive advantage through a commitment to constant product, process and end-use improvement.
Europe Heavyside is organised into two regional divisions: Western Europe, which comprises our cement, aggregates, asphalt, concrete and clay operations primarilyminority position in Switzerland, Germany, UK, Benelux, France, Denmark, Ireland and Spain and Eastern Europe which includes our cement, aggregates, asphalt and concrete businessesadd to an existing joint venture in Poland, Ukraine and Finland. The business model of vertical integration is founded in resource-backed cement and aggregates assets, which support the manufacture and supply of cement, aggregates, readymixed and precast concrete, concrete landscaping and asphalt products. Consequently, a key focus for the HeavysideIreland. Our Lightside Division is the ongoing process of extending and adding to reserves. We operate a network of well-invested facilities
and place great emphasis on excellence initiatives across the business. CRH’s approach to Building Better Businesses ensures a focus on achieving greater production efficiencies and realising operational, logistical and procurement synergies across our network. A commitment to a sustainable future results in greater use of alternative fuels and the manufacture of low carbon cements.
Our development focus is centred on bolt-oncompleted two acquisitions for synergies, reserves and further vertical integration, in addition to opportunities in contiguous regions to extend and strengthen regional positions; this includes developing markets in Eastern Europe that offer long-term growth potential, with entry via cement and aggregates assets and the potential to roll out operational excellence programmes and a vertical integration approach over time. In the context of the detailed review of the portfolio undertaken by the Group during 2014, CRH announced in December 2014 that it had reached agreement to dispose of its clay and concrete businesses in the UK. The transaction closedDistribution Division acquired a small builders merchant in Austria. In the Americas, c.€170 million was spent on 13 acquisitions and one investment. Our Materials Division completed eight bolt-on acquisitions and one investment in 2016. The principal acquisition was of a significant aggregates and asphalt operation in Utah. Seven further bolt-on acquisitions were completed. In total 93 million tonnes of permitted reserves were added during the year. The Products Division completed five acquisitions, the largest of which was of a Canadian exterior surfaces company which was a strong addition to the core hardscape business of our Architectural Products Group (APG). Three precast bolt-on operations were also acquired. Finally, a glass hardware company was added in Perth, Australia.
On the divestment front, the Group completed 13 transactions and realised total business and asset disposal proceeds of€283 million in 2016. Business divestments during 2016 generated net proceeds of€123 million. In Europe, our Distribution Division disposed of a roofing products company in the first quarterNetherlands while the Heavyside business divested of 2015.
Europe Heavyside employs approximately 19,100 people at close to 800 locationsoperations in 21 countries.Poland, Switzerland and Romania. Two small joint venture holdings in France and Germany were also divested. The Americas Materials Division disposed of select aggregates and asphalt operations in Missouri, a small waterproofing business in Michigan and a readymixed concrete operation in Iowa and Minnesota. Certain aggregates assets in Oregon and Montana were also disposed in a cash
Cementisneutral swap. Finally, our Americas Products Division disposed of a primary building material usedpavement products operation, certain precast operations in the construction industry. It is manufactured by reacting limestone with small quantities of other materials in a kiln through a carefully controlled high temperature process. This produces clinker, which is then milled into a fine powder to become cement. Cement production is capital-intensive. Cement is used principally as a binding agent to bind other materials together – most commonly it is mixed with sand, stone or other aggregates and water. Cement customers primarily comprise concrete producers and merchants supplying construction contractors and others. Where CRH has both cement and concrete operations, a significant portion of cement sales is typically supplied to those concrete operations. While cement or clinker may be imported from other countries, competition comes mainly from other large cement producers located within each country. CRH’s cement activities in BelgiumCanada and the Netherlands relate to cement transport and trading.assets of a burial vaults business.
Aggregates are naturally occurring sand, gravel or crushed stone deposits such as granite, limestone and sandstone. Recycled (end-of-life) concrete increasingly features as an aggregate. CRH cement plants are generally located at or near the limestone reserves used to supply the plants. 2015
In Finland, CRH buys the aggregate raw materials for its two cement plants as2015, the Group does not own limestone reserves nearcompleted 20 bolt-on acquisition and investment transactions. These deals, together with the plants. For additional information on the location and adequacy of allacquisition of the Group’s mineral reserves, seeLH Assets, the Mineral Reserves section on pages 28CRL acquisition and 29.net deferred consideration payments, brought development spend for 2015 to approximately€8 billion (including debt arising in acquired companies).
Concrete ProductsIn Europe, four bolt-on acquisitions and Readymixed Concrete:one investment with a total cost of€ In addition to readymixed20 million were completed. Our Lightside business completed two acquisitions; one in Australia and a concrete CRH manufactures other concrete products for two principal end-uses: pavers, tiles and blocks for architectural use, and floor and wall elements, beams and vaults for structural use. In addition, sand-lime bricks are produced for the residential market. Principal raw materials include cement, crushed stone and sand and gravel, all of which are readily available locally.
TheClay Products group principally produces clay facing bricks, pavers, blocks and rooftiles.
Aggregates, asphalt and related services are sold principally to local governmental highway authorities and to contractors. Readymixed concrete, concrete products (manufactured mainly at locations with aggregates on site and including block, masonry, pipe, rooftiles and paving) and clay products are sold to both the public and private construction sectors. Competition comes mainly from other large aggregates, asphalt, readymixed concrete, concrete products producers and clay producers,paviour production plant in Poland, as well as from a variety of smaller manufacturerssmall further investment in local economies.
Joint Venture Interests
CRH holdsthe Netherlands. Our Heavyside operations set up a 50% equity interest in My Home Industries Limited (“MHIL”), a cement producer headquartered in Hyderabad serving the Andhra Pradesh and Telangana regions of southeast India. In November 2014, CRH disposed ofnew joint venture with its 50% equity interest in Denizli Çimento, an integrated cement andexisting readymixed concrete business in Turkey. Details of this disposal are set out in note 4 to the Consolidated Financial Statements on page 151.
Associate Interests
CRH holds a 26% equity interest in Yatai Building Materials Company’s cement operations (“Yatai Cement��), with cement and concrete operations in Jilin, Heilongjiang and Liaoning provinces in northeastern China. CRH has a 25% equity interest in Mashav,St. Petersburg, Russia. Our Distribution business acquired the holding company for the sole producer of cement in Israel.
Products and Services - Locations1
Cement
Belgium, Finland, Ireland, Netherlands, Poland, Spain, Switzerland, Ukraine, United Kingdom
Aggregates
Estonia, Finland, Ireland, Latvia, Netherlands, Poland, Slovakia, Spain, Switzerland, Ukraine
Asphalt
Ireland, Poland, Switzerland
Readymixed Concrete
Belgium, Estonia, Finland, Ireland, Netherlands, Poland, Russia, Spain, Switzerland, Ukraine
Lime
Ireland, Poland
Concrete Products
Belgium, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Netherlands, Poland, Romania, Slovakia, Spain, Switzerland, United Kingdom, Ukraine
Clay Products
Germany, Netherlands, Poland, United Kingdom
Business Operations in Europe| continued
Europe Lightside
Europe Lightside produces and supplies high-value, award-winning products, expert solutions and other technologies for often challenging construction projects. The Division is organised into four business areas: Construction Accessories, Shutters & Awnings, Fencing and Cubis (composite access chambers). We buy, build and grow business units with market-leading positions and strong growth prospects, selling through a range of flagship brands at a regional and European level.
The Lightside Division grows both organically and by acquisition to create leading positions within our chosen markets. We maximise synergies across the business in the areas of performance improvement, procurement, talent management and product development.
We have a relentless focus on innovation. Lightside customers are specialist end-users, including architects and engineers. Using our pan-European presence and scale, we work closely with them to develop design solutions that are approved and certified for individual target markets.
We draw upon an outstanding record of enabling mature and high-growth businesses alike to expand their offerings, and develop their markets. Lightside has achieved consistently attractive returns. The resilience of these returns reflects active, balanced management of our product range and our geographic and business-cycle exposures.
Our development strategy is to deepen our positions in existing markets and technologies in developed European markets, to broaden our product range in selected growth categories, and to expand our presence in developing regions outside Europe as construction markets in those areas become more sophisticated.
This strategy complements CRH’s aim to provide innovative solutions that meet the longer-term opportunities presented by economic development, changing demographics and sustainability.
Employees total approximately 5,000 people at circa 100 operating locations in 17 countries.
OurConstruction Accessories businesses supply a broad range of connecting, fixing and anchor systems to the construction industry.
Shutters & Awnings serve the attractive RMI and residential end-use markets, supplying sun protection, energy-saving, and outdoor living technologies.
Fencing designs, manufactures and installs fully integrated perimeter security solutions.
Cubis manufactures composite access chambers and access covers for telecoms, rail, roads, water and power.
Competition comes mainly from a limited number of multi-country Lightside suppliers as well as from a variety of smaller manufacturers in local economies and some from more traditional products/solutions (substitutes).
Products and Services - Locations
Construction Accessories
Australia, Austria, Belgium, China, Czech Republic, France, Germany, Ireland, Italy, Malaysia, Netherlands, Norway, Poland, Spain, Switzerland, Sweden, United Kingdom
Shutters & Awnings
Germany, Netherlands, United Kingdom
Fencing and Cubis (Composite Access Chambers)
France, Germany, Ireland, Netherlands, Sweden, United Kingdom
Europe Distribution
Europe Distribution’s strategy is to grow its network presence in the largely unconsolidated core European markets while also investing in other attractive segments of building materials distribution. Operational excellence is delivered through optimising the supply chain and providing superior customer service.
We have leading General Builders Merchant positions in the Netherlands, Switzerland, northern Germany, Austria and France which service the growing repair, maintenance and improvement construction sector. Our businesses cater to the needs of small and medium-sized builders, selling a range of bricks, cement, roofing and other building products.
Our specialist Sanitary, Heating and Plumbing (“SHAP”) business services the needs of plumbers, heating specialists and installers in Belgium, Germany and Switzerland.
In addition, Europe Distribution operates under four DIY brands: GAMMA (Netherlands and Belgium), Karwei (Netherlands), Hagebau (Germany) and Maxmat (Portugal) selling to DIY enthusiasts and home improvers.
Significant opportunities remain to expand our existing network and to gain exposure to rising RMI demand and new growth platforms.
Europe Distribution employs over 11,600 people at 659 locations.
Professional Builders Merchants
Professional Builders Merchants cater to the heavyside sector and competition is encountered primarily from other merchanting chains and local individual merchants. CRH operates 167 branches in the Benelux and in Switzerland, the Group has a strong position as the largest builders merchant. CRH is a major regional distributor in France, with 52 locations. The Group also has a strong regional presence in the northwest of Germany.
Sanitary, Heating and Plumbing (SHAP)
Our SHAP business has been key to strengthening our exposure to growing RMI market demand. It operates in Belgium, Germany and Switzerland with a total network of 132 branches. In Switzerland, the Group has a strong position as the only country-wide supplier of SHAP products.
DIY
CRH operates 135 Karwei and GAMMA DIY stores in the Netherlands and 19 GAMMA stores in Belgium. The stores operate within the Intergamma franchise organisation, the largest DIY group in the Benelux. Buying and advertising is undertaken by Intergamma, which is owned by its franchisees. In Germany, Bauking operates 30 DIY stores under the brand name Hagebau. In Portugal, Maxmat is a 50% joint venture cash and carry DIY chain with 30 stores.
Associate Interests
CRH holds a 21.13% equity interest in Samse S.A., a publicly-quoted distributor of building materials to the merchanting sector in the Rhône-Alpes region.
Products and Services - Locations1
Professional Builders Merchants
Austria, Belgium, France, Germany, Netherlands, Switzerland
Sanitary, Heating and Plumbing (“SHAP”)
Benelux, Germany, Switzerland
DIY Stores
Belgium, Germany, Netherlands
CRH 21
Business Operations in the Americas
Americas Materials
Americas Materials’ strategy is to build strong regional leadership positions underpinned by well-located, long-term reserves. We are the largest producer of asphalt and the third largest producer of both aggregates and readymixed concrete in the United States. We operate nationally in 44 states with over 13 billion tonnes of permitted aggregates reserves of which circa 80% are owned. The business is vertically integrated from primary resource quarries into aggregates, asphalt and readymixed concrete products. With 60% exposure to infrastructure, the business is further integrated into asphalt paving services through which it is the leading supplier of product to highway repair and maintenance demand in the United States.
Our national network ofplumbing operations and deep local market knowledge drive local performance and national synergies in procurement, cost management and operational excellence. In a largely unconsolidated sector where the top ten industry participants account for just 30% of aggregates production, 25% of asphalt production and 25% of readymixed concrete production, CRH’s strategy is to position the business to participate as the industry consolidates further.
Americas Materials employs approximately 18,400 people at close to 1,200 operating locations.
For additional information on the location and adequacy of all of the Group’s mineral reserves, see the Mineral Reserves section on pages 28 and 29.
Americas Materials is broadly self-sufficient in aggregates and its principal purchased raw materials are liquid asphalt and cement used in the manufacturing of asphalt and readymixed concrete respectively. These raw materials are available from a number of suppliers. There is a continued focus on improving bitumen and energy purchasing and we continue to source the lowest cost alternative energy for use in asphalt production.
Federal, state and local government authority road and infrastructural projects awarded by public bid represent a significant proportion of work carried out by the Division. Americas Materials also has a broad commercial base, supplying stone, readymixed concrete and asphalt for industrial, office, shopping mall and private residential development and refurbishment.
Americas Materials is organised geographically into East and West, divided into four and three further sub-regions respectively.
East:
Northeast (including operations in Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, New York, New Jersey and Connecticut);
Mid-Atlantic (Pennsylvania, Delaware, Virginia, West Virginia, Maryland, Kentucky and North Carolina);
Central (Ohio, Indiana and Michigan); and
Southeast (Alabama, Georgia, Mississippi, South Carolina and Florida).
West:
Central West (Oklahoma, Arkansas, western Tennessee, Missouri, Kansas, Iowa, Nebraska, Minnesota, Illinois, South Dakota and Texas);
Mountain West (Colorado, Wyoming, Utah, New Mexico, southern Idaho, Nevada and Arizona); and
Northwest (Washington, Oregon, Montana and northern Idaho).
Products and Services - Locations
Aggregates
United States
Asphalt
United States
Readymixed Concrete
United States
Americas Products
Americas Products’ strategy is to build a portfolio of businesses which have leading market positions across a balanced range of products and end-use segments. Our activities are organised into three product groups under the Oldcastle brand: Architectural Products (concrete masonry and hardscapes, clay brick, packaged lawn and garden products, packaged cement mixes, fencing); Precast (utility, drainage and structural precast, construction accessories); and BuildingEnvelope® (architectural glass and aluminium glazing systems). The Group’s commitment to Building Better Businesses ensures a coordinated approach at national and regional levels to achieve economies of scale and to facilitate the sharing of best practices which drive operational and commercial improvement. Innovation is a hallmark of the business, and through Oldcastle’s North American research and development centres, a pipeline of value-added products and design solutions is maintained.
In the context of the detailed review of the portfolio undertaken by the Group during 2014, CRH announced in December 2014 that it had reached agreement to dispose of its Glen-Gery clay business in the United States. The transaction closed in the first quarter of 2015.
A national business operating in 39 US states, six Canadian provinces, Mexico and South America. CRH has the breadth of product range and national footprint that combines providing a national service to customers with the personal touch of a local supplier. Focussing on strategic accounts and influencers in the construction supply chain, the Oldcastle Building Solutions group provides an additional avenue for growth as it is uniquely positioned in the industry to create value for stakeholders across all phases of construction.
The number of employees in this division totals approximately 17,700 at nearly 400 locations.
Building Products
Architectural Products Group (“APG”) services the United States and Canada from 249 operating locations in 39 states and six Canadian provinces. The residential and non-residential sectors combined account for 95% of APG’s output, a significant proportion of which is used in the RMI and Do-It-Yourself (“DIY”) sectors. Competition for APG arises primarily from other locally-owned products companies. Principal raw material supplies are readily available.
APG’s concrete masonry products are used for cladding, walls and foundations. Hardscape products comprise pavers, retaining wall products and patio products. Lawn and garden products, mainly bagged and bulk mulch, soil and specialty stone products, are marketed to major DIY and homecenter chains across the United States. Cement mixes, marketed under brands such as Sakrete®, and lightweight aggregates are also important product lines. Merchants Metals is also part of APG, a leading manufacturer and distributor of fencing and related products, used by the residential, non-residential and infrastructure sectors.
Business Operations in the Americas| continued
Americas Productscontinued
The Precast group produces precast, prestressed and polymer concrete products, small plastic box enclosures and concrete pipe in the United States and Canada with 79 operating locations in 24 states and the province of Quebec.
The most significant precast concrete products are underground vaults sold principally to water, electrical and telephone utilities. Other precast items include drainage and sanitary sewer products such as pipe, manholes, inlets and catch basins, and street and highway products such as median barriers, culverts and short span bridges. In many instances, precast products are an alternative to poured-in-place concrete, which is a significant competing product. Plastic enclosures are also supplied to water, electrical and telephone utilities. Polymer trench is sold to the electric and railroad market.
The Precast group’s Building Systems and Modular business manufactures and installs prestressed concrete flooring plank, modular precast structures and other products. These products are used mainly in structures such as hotels, apartments, dormitories and prisons.
Concrete pipe is used for storm and sanitary sewer applications, which are largely local government projects. Competing materials include corrugated steel pipe and high-density polyethylene pipe in storm sewer applications and plastic pipe in sanitary sewer applications.
Precast also includes the Meadow Burke operations, which supplies thousands of specialised products used in concrete construction activities.
BuildingEnvelope® (“BE”) custom manufactures architectural glass and engineered aluminium glazing systems for multi-storey commercial, institutional and residential construction. With approximately 4,800 people and 52 locations in 22 states and four Canadian provinces, BE is the largest supplier of high-performance glazing products and services in North America, delivering to all of the top 50 Metropolitan Statistical Areas (MSAs) in the United States and to Canada.
Tempered glass and engineered aluminium glazing systems are building products with major applications in the RMI construction sector and have a wide range of architectural applications. The architectural glass product range includes insulated, spandrel, laminated, security and sound control glass manufactured in a
variety of shapes, thicknesses, colours and qualities. Engineered aluminium glazing systems include a broad range of storefront and entrances, curtain wall and architectural windows.
South America
CRH operates six companies in Argentina and Chile. Canteras Cerro Negro is a clay roofing, wall and floor tiles producer. It owns two state-of-the-art production facilities in Olavarría, 330 kilometres southwest of Buenos Aires and a greenfield manufacturing facility in Cordoba. Cormela produces clay block at a facility in Campana, 60 kilometres from Buenos Aires. Ladrillos Olavarria (LOSA), acquired in 2013, produces clay blocks and floor tiles from a plant located in Olavarría. Superglass (Argentina) and Vidrios Dell Orto (Chile) fabricate tempered, laminated and insulated glass. Comercial Duomo is a specialised construction products retailer and wholesaler in Chile.
Products and Services - Locations
Architectural Concrete
Canada, United States
Clay
Argentina, United States
Precast Concrete, Pipe and Prestress Products
Canada, United States
Glass Fabrication
Argentina, Canada, Chile, United States
Glazing Systems
Canada, United States
Concrete Accessories
United States
Fencing Products
Mexico, United States
Americas Distribution
Americas Distribution strategy is focussed on being the leading supplier to contractors of Exterior Products such as roofing and siding. We also apply this successful distribution model to Interior Products such as ceilings and walls.
Demand in the Exterior Products business is largely influenced by residential and commercial replacement activity with the key products having an average lifespan of 25 to 30 years.
Demand for Interior Products is driven by the new residential, multi-family and commercial construction markets.
Through CRH’s commitment to continuous business improvement, we employ state-of-the-art IT systems, disciplined and focussed cash and asset management, and well-established procurement and commercial systems which support supply chain optimisation and enable us to provide superior customer service.
Americas Distribution operates in 31 states, and growth opportunities include investment in new and existing markets, in complementary private label and energy-saving product offerings, and in other attractive building materials distribution segments that service professional dealer networks.
The Division employs approximately 3,800 people at 198 locations.
Americas Distribution, trading as Allied Building Products (“Allied”), is a large distributor in the roofing, siding and interior products segments in the United States. Allied’s Exterior Products segment distributes both commercial and residential roofing, siding and related products and accounts for approximately 60% of annualised Distribution sales. Allied’s Interior Products segment distributes primarily to specialised contractors who are involved in new residential, multi-family and commercial construction.
Products and Services - Locations
Exterior Products
United States
Interior Products
United States
26 CRH
China and India– Equity Accounted Investments
China
Market conditions in China remained challenging during 2014 as government policies to rebalance the economy towards a more sustainable growth model impacted on industrial and real estate activity. This resulted in a slowdown which created an unfavourable short-term environment for the construction sector. Profitability at our 26% associate, Yatai Building Materials, which is a market leader in Northeast China with a capacity of 32 million tonnes of cement, was affected by lower volumes and selling prices; partially offset by improved operational efficiencies and reduced costs.
India
CRH has a cement capacity of 8 million tonnes across three locations in Southern India, where it operates through a 50% joint venture; My Home Industries Limited (“MHIL”). The regional market has a cement consumption of 75 million tonnes and MHIL is the market leader in the southern states of Andhra Pradesh and Telangana.
In 2014, MHIL posted a 25% increase in volumes following the acquisition of Sree Jayajothi Cements Limited in late 2013 and has also made significant gains in adjoining states. Prices were under pressure in the first half due to poor demand, but improved later in the year. Volume growth and acquisition synergies resulted in higher trading profit in 2014.
Outlook
In China trading conditions looking forward are expected to recover as the country’s underlying urbanisation trends drive investment in infrastructure and property. Business performance will be further helped by stricter government measures to reduce overcapacity combined with internal commercial and operational excellence initiatives.
Demand for cement in India is expected to show strong growth of over 8% with the government providing a boost to public infrastructure spending and various housing projects in both urban and rural areas.
Products and Services - Locations
Cement
China, India
Aggregates
China, India
Readymixed Concrete
China, India
Precast Concrete
China
Construction Accessories
China
Activities with Reserves Backing1
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Property acreage (hectares)2 | Percentage of mineral reserves by rock type | |||||||||||||||||||||||||||||||||||||||
Physical Location | Number of quarries/ pits | Owned | Leased | Proven & probable reserves3 | Years to depletion4 | Hard rock | Sand & gravel | Other | 2014 Annualised extraction5 | |||||||||||||||||||||||||||||||
Europe Heavyside | ||||||||||||||||||||||||||||||||||||||||
Cement | Ireland | 2 | 249 | - | 217 | 133 | 100% | - | - | 2.0 | ||||||||||||||||||||||||||||||
Poland | 2 | 293 | - | 185 | 49 | 93% | 6% | 1% | 4.0 | |||||||||||||||||||||||||||||||
Spain | 1 | 32 | - | 86 | 602 | 100% | - | - | 0.2 | |||||||||||||||||||||||||||||||
Switzerland | 3 | 165 | 6 | 26 | 17 | 92% | - | 8% | 1.6 | |||||||||||||||||||||||||||||||
Ukraine | 8 | 871 | - | 164 | 62 | 98% | - | 2% | 3.0 | |||||||||||||||||||||||||||||||
Aggregates | Finland | 157 | 685 | 399 | 190 | 15 | 70% | 30% | - | 11.6 | ||||||||||||||||||||||||||||||
Ireland | 128 | 5,091 | 70 | 897 | 85 | 84% | 16% | - | 10.8 | |||||||||||||||||||||||||||||||
Poland | 10 | 466 | - | 182 | 20 | 70% | 30% | - | 8.5 | |||||||||||||||||||||||||||||||
Spain | 11 | 172 | 184 | 98 | 43 | 99% | 1% | - | 2.3 | |||||||||||||||||||||||||||||||
Other | 40 | 287 | 526 | 173 | 22 | 74% | 26% | - | 7.7 | |||||||||||||||||||||||||||||||
Lime | Ireland, Poland | 2 | 105 | - | 46 | 46 | 100% | - | - | 0.8 | ||||||||||||||||||||||||||||||
Clay6 | UK, Poland | 51 | 2,793 | 189 | 109 | 49 | - | 5% | 95% | 2.4 | ||||||||||||||||||||||||||||||
Subtotals | 415 | 11,209 | 1,374 | 2,373 | 82% | 13% | 5% | |||||||||||||||||||||||||||||||||
Americas Materials | ||||||||||||||||||||||||||||||||||||||||
Aggregates | East | 274 | 24,793 | 5,095 | 9,181 | 125 | 87% | 13% | - | 77.3 | ||||||||||||||||||||||||||||||
West | 469 | 20,651 | 16,067 | 4,042 | 76 | 44% | 56% | - | 58.5 | |||||||||||||||||||||||||||||||
Subtotals | 743 | 45,444 | 21,162 | 13,223 | 74% | 26% | - | |||||||||||||||||||||||||||||||||
Americas Products | ||||||||||||||||||||||||||||||||||||||||
Clay6 | United States | 25 | 1,640 | 308 | 76 | 59 | - | - | 100% | 1.6 | ||||||||||||||||||||||||||||||
Group totals | 1,183 | 58,293 | 22,844 | 15,672 | 75% | 24% | 1% |
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The Group’s reserves for the production of primary building materials (which encompass cement, lime, aggregates (stone, sand and gravel), clay products, asphalt, readymixed concrete and concrete products) fall into a variety of categories spanning a wide number of rock types and geological classifications – see the table above setting out the activities with reserves backing.
Reserve estimates are generally prepared by third-party experts (i.e. geologists or engineers) prior to acquisition; this procedure
is a critical component in the Group’s due diligence process in connection with any acquisition. Subsequent to acquisition, estimates are typically updated by company engineers and/or geologists and are reviewed annually by corporate and/or divisional staff. However, where deemed appropriate by management, in the context of large or strategically important deposits, the services of third-party consultant geologists and/or engineers may be employed to validate reserves quantities outside of the aforementioned due diligence framework on an ongoing basis. The Group has not
employed third-parties to review reserves over the three-year period ending 31 December 2014 other than in business combination activities and specific instances where such review was warranted.
Reserve estimates are subject to annual review by each of the relevant operating entities across the Group. The estimation process distinguishes between owned and leased reserves segregated into permitted and unpermitted as appropriate and includes only those permitted reserves which are proven and probable. The term “permitted” reserves refers to those tonnages which can currently be mined without any environmental or legal constraints. Permitted owned reserve estimates are based on estimated recoverable tonnes whilst permitted leased reserve estimates are based on estimated total recoverable tonnes which may be extracted over the term of the lease contract.
Proven and probable reserve estimates are based on recoverable tonnes only and are thus stated net of estimated production losses and other matters factored into the computation (e.g. required slopes/benches). In order for reserves to qualify for inclusion in the “proven and probable” category, the following conditions must be satisfied:
None of CRH’s mineral-bearing properties is individually material to the Group.
Property, Plants and Equipment
At 6 March 2015, CRH had a total of 2,380 building materials production locations and 857 Merchanting and DIY locations. 1,461 locations are leased, with the remaining 1,776 locations held on a freehold basis.
The most significant subsidiary locations are the cement facilities in Ireland, Finland, Poland, Switzerland, Ukraine and Spain. The capacity for these locations is set out in the table to the right. Further details on locations and products manufactured are provided in the Business Operations sections on pages 14 to 25. None of CRH’s individual properties is of material significance to the Group.
CRH believes that all the facilities are in good condition, adequate for their purpose and suitably utilised according to the individual nature and requirements of the relevant operations. CRH has a continuing programme of improvements and replacements to properties when considered appropriate to meet the needs of the individual operations. Further information in relation to the Group’s accounting policy and process governing any impairment of property, plant and equipment is given on page 141 and in note 13 to the Consolidated Financial Statements on page 158.
Significant Locations – Clinker Capacity
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Subsidiary
| Country
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| Clinker Capacity
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Irish Cement | Ireland | 2 | 288 | |||||||||
Finnsementti | Finland | 2 | 181 | |||||||||
Grupa Ożarów | Poland | 1 | 342 | |||||||||
JURA-Holding | Switzerland | 2 | 116 | |||||||||
OJSC Podilsky Cement | Ukraine | 1 | 313 | |||||||||
Cementos Lemona | Spain | 1 | 92 |
Sources and Availability
of Raw Materials
CRH generally owns or leases the real estate on which its main raw materials, namely aggregates and clay reserves, are found. CRH is a significant purchaser of certain important materials or resources such as cement, liquid bitumen, steel, gas, fuel and other energy supplies, the cost of which can fluctuate significantly and consequently have an adverse impact on CRH’s business. CRH is not generally dependent on any one source for the supply of these materials or resources, other than in certain jurisdictions with regard to the supply of gas and electricity. Competitive markets generally exist in the jurisdictions in which CRH operates for the supply of cement, bitumen, steel and fuel.
The information concerning mine safety violationstool merchant in Switzerland. Ten bolt-on acquisitions and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 99.1 to this Annual Report on Form 20-F.
2014
Total acquisition and investment activity for 2014 amounted to €188 million on a total of 21 bolt-on transactions which will contribute annualised sales of approximately €182 million, of which €122 million has been reflected in our 2014 results.
Our Heavyside operations in Europe acquired selected readymixed concrete and aggregates assets of Cemex Ireland (including 12 million tonnes of high quality reserves) and a precast concrete business in Denmark. Our Europe Distribution business completed six acquisitions in the Benelux, France and Germany which added a total of nine branches to our network.
Eight bolt-on acquisitionstwo investments were completed by our Americas Materials Division in 2014 across the United States2015 adding over 230253 million tonnes of aggregates reserves. Our Americas Products Division completed fivethree transactions in the Precast, Architectural Products and Construction Accessories businesses.2015.
A total of 1630 divestments, together with asset disposals during the year, generated proceeds of €345 million.
In€1 billion in 2015; the largest of which was the sale of clay and certain concrete products operations in the UK and the Group’s clay business in the US for€0.43 billion. Our Europe Heavyside business completed 13 further divestments in 2015, the largest of which was the disposal of CRH’s 50%25% equity stake in Denizli Çimento, the Group’s only involvement in the Turkish construction market, was the largest single divestment to complete in 2014, realising proceeds of €170 million. The Heavyside Division also disposed ofits Israeli operation. Other disposals comprised a number of non-core readymixed concrete and concrete products businesses,businesses. One small disposal was completed by the Europe Lightside Division, while all three European Divisions realised proceeds from the disposalDistribution Division disposed of surplus assets. As most of the divested entities had been equity-accounted by CRH, the impact of these divestments on Group sales is not material.
its 45% stake in Doras, a builders merchant in France. In the Americas, our Materials Division disposed of severalfive non-core operations. Our Products Division sold six operations across the United States.US, including the disposal of Merchants Metals, a national distributor of fencing systems and perimeter control products. The Products Division sold five operations in the Precast, Architectural Products and Building Envelope businesses.
Transactions amounting to a further €0.58 billion were signed in 2014. The disposalalso divested of the Group’s clay and concreteall of its businesses in the UKArgentina and the US closed in the first quarter of 2015.
2013
Total acquisition and investment activity for 2013 amounted to €720 million on a total of 28 bolt-on transactions. Eight transactions were completed by our Europe Heavyside operations, including the acquisition of Cementos Lemona in Spain as part of the asset swap in which we divested our 26% stake in Corporacion Uniland. In September 2013 the Group became the leading cement producer in Ukraine with the acquisition of Mykolaiv Cement in the Lviv region. Two other transactions strengthened our aggregates position in Northern Ireland and expanded our network of cement import facilities in Britain while an acquisition in Belgium established the Group as market leader in the prestressed hollowcore flooring segment. Three acquisitions in the Europe Distribution segment added 13 branches to our network of builders merchants across the Benelux and France. Our joint venture business in India also strengthened its market position in Southern India with the acquisition of Sree Jayajothi Cements in August 2013.
In the Americas, the Materials Division completed 10 bolt-on transactions across its operations in 2013, adding 457 million tonnes of strategically-located aggregates reserves, primarily in the Eastern region of the United States. Our Products business significantly expanded its presence in the high growth region of Western Canada with an acquisition which complements the footprint of our existing North American architectural products business and forms a platform for further bolt-on opportunities. Three other acquisitions in the Products segment strengthened our local market positions. The Distribution business completed three acquisitions adding eight locations to our network.
Proceeds from divestments during 2013, including €144 million relating to the transfer of Uniland, amounted to €283 million.
2012
The €669 million of development activity during 2012 reflected CRH’s long-term, value-based approach to developing the Group’s balanced portfolio. Excluding net deferred payments, total acquisition spend for 2012 amounted to €548 million on a total of 36 bolt-on transactions. Expenditure of €263 million in the first half of 2012 included 18 acquisition and investment initiatives which strengthened our existing market positions and added valuable and well-located aggregates reserves. In the second half of 2012 the Group completed 18 transactions at a total cost of €404 million (€285 million cash spend excluding deferred payments), with the largest transaction being a majority stake in Trap Rock Industries, an integrated aggregates and asphalt business in New Jersey. Total proceeds from completed disposals in 2012 amounted to €784 million. The major disposals were the divestment in May 2012 of our 49% stake in Portuguese cement producer Secil and the sale in April of our wholly-owned Magnetic Autocontrol business.Chile.
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Segmental Reviews | ||||||
Europe Heavyside | 32 | |||||
Europe Lightside | 36 | |||||
Europe Distribution | 40 | |||||
Americas Materials | 44 | |||||
Americas Products | 48 | |||||
Asia | 52 | |||||
Americas Distribution (Discontinued Operations) | 54 |
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The EnvironmentCRH Annual Report and Government RegulationsForm 20-F | 2017
The most important environmental government regulations relevant to CRH as a building materials company are those environmental laws and regulations relevant to our extractive and production processes. In the European Union, operations are subject to national environmental laws and regulations, most of which now emanate from European Union Directives and Regulations. In the United States, operations are subject to Federal and State environmental laws and regulations. In other jurisdictions, national environmental laws apply.
Environmental Compliance Policy
In order to comply with environmental regulations, CRH has developed the following Group environmental policy, approved by the CRH Board and applied across all Group companies, which is to:
Achieving our environmental policy objectives at all our locations is a management imperative; this line responsibility continues right up to CRH Board level. Daily responsibility for ensuring that the Group’s environmental policy is effectively implemented lies with individual location managers, assisted by a network of Environmental Liaison Officers (“ELOs”). At each year-end, the ELOs assist the Group sustainability team in carrying out a detailed assessment of Group environmental performance, which is reviewed by the CRH Board.
Addressing Climate Change
CRH recognises that climate change is a major challenge facing humanity and is committed to playing its part in developing practical solutions. CRH is a core member of the Cement Sustainability Initiative (“CSI”) of the World Business Council for Sustainable Development (“WBCSD”). The CSI is a voluntary initiative by the world’s major cement producers, promoting greater sustainability in the cement industry.
Having achieved its initial CO2 reduction commitment three years ahead of target in 2012, CRH has now pledged a 25% reduction in specific net CO2 cement plant emissions by 2020, compared to 1990 levels. The Group is progressing towards achieving this commitment, which covers a defined portfolio of Group cement
plants, and is confident that its ongoing strategic programmes will deliver this commitment by the target date.
Through its membership of the CSI of the WBCSD and regional industry associations including the European Cement Association (CEMBUREAU) and the European Lime Association (EuLA) in Europe and the National Asphalt Pavement Association (NAPA) and the Portland Cement Association (PCA) in the United States, CRH is actively involved in global and regional discussions on the climate change agenda. Relevant facilities in Europe operate within the EU Emission Trading Scheme for Greenhouse Gas emissions through actively implementing carbon reduction strategies.
CRH has implemented capital expenditure programmes in its cement operations in Europe to reduce carbon emissions in the context of the European Union commitment to reduce greenhouse gas emissions by 20% by 2020. The European Union is committed to increasing this target to 30% should an international agreement be concluded. In addition, the European Union is targeting reductions of 40% by 2030 and suggesting further reductions for 2040 and 2050. Achieving such reductions would represent a significant extra constraint on cement operations in Europe.
US Federal and State laws are developing proactively to address carbon emissions. The Group will incur costs in monitoring and reporting emissions. Ultimately a “cap and trade” scheme may be implemented; depending on the scope of the legislation, this could significantly impact asphalt operations in the United States. As of 6 March 2015, the Group is not aware of any schemes that would materially affect its US operations.
Possible Environmental Liabilities
At 6 March 2015 there were no material pending legal proceedings relating to site remediation which are anticipated to have a material adverse effect on the financial position or results of operations or liquidity of the Group, nor have internal reviews revealed any situations of likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital expenditures and the allocation by state entities of available funds to different projects, as well as interest rate and tax policies, directly affect the overall levels of construction activity. The terms and general availability of government permits required to conduct Group business also has an impact on the scope of Group operations. As a result such governmental decisions and policies can have a significant impact on the operating results of the Group.
Group companies are parties to various legal proceedings, including some in which claims for damages have been asserted against the companies. Having taken appropriate advice, we believe that the aggregate outcome of such proceedings will not have a material effect on the Group’s financial condition, results of operations or liquidity.
Details regarding the pending investigation by the Competition Commission in Switzerland involving CRH plc’s Swiss subsidiaries BR Bauhandel AG, Gétaz-Miauton SA and Regusci Reco SA are set out in note 32 to the Consolidated Financial Statements on page 185.
In May 2012 the Group disposed of its 49% investment in its Portuguese joint venture Secil to our former joint venture partner, Semapa (SGPS, S.A.), following the ruling of the Arbitral Tribunal in Paris that the exercise of a call option for the purchase of CRH’s 49% shareholding in Secil by Semapa was valid and both parties were therefore obligated to complete the sale and purchase of CRH’s share in Secil. As disclosed in our previous Annual Reports, Semapa initiated legal proceedings in November 2011 to appeal against the Tribunal ruling and these proceedings were dismissed by the Cour D’Appel on 10 September 2013. On 12 February 2014, Semapa filed an appeal with the Cour de cassation and this appeal is ongoing. No provision has been made in respect of these proceedings in the Consolidated Financial Statements.
Research and development is not a significant focus of the Group. CRH’s policy is to expense all research and development costs as they occur.
The average number of employees for the past three financial years is disclosed in note 5 to the Consolidated Financial Statements on page 152. No significant industrial disputes have occurred at any of CRH’s factories or plants during the past five years. The Group believes that relations with its employees and labour unions are satisfactory.
Strategy ReviewEurope Heavyside
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| Europe Heavyside’s vertically integrated business is founded in resource-backed cement and aggregates assets, which support the manufacture and supply of aggregates, asphalt, lime, cement and readymixed concrete. Our materials are used extensively in a wide range of construction projects from major public infrastructure, to commercial buildings and residential structures. Customers typically range from national, regional and local governments, to building contractors and other construction product and service providers. In addition to an ability to leverage the benefits of scale and best practice, our businesses are differentiated in their markets by a proven track record in understanding the unique needs of local customers and successfully delivering for those customers. How we create value: Our portfolio of businesses is managed through a focus on value creation. We place great emphasis on performance improvement initiatives across our businesses and seek to create value through optimisation of the asset base, maximising Group synergies and leveraging commercial and operational excellence. | |||||
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economies of scale, with a small number of central support functions. The regions are 1) Tarmac (UK); 2) UK Cement & Lime, Ireland and Spain; 3) France, Benelux and Denmark; 4) Switzerland and Germany; 5) North East: Finland, Estonia, Poland, Ukraine; 6) South East: Hungary, Romania, Serbia and Slovakia. Europe Heavyside employs approximately 24,400 people at close to 1,150 locations. |
Strategy Review1
Chief Executive’s Introduction
When I joined CRH in 1998, I quickly learned that a philosophy of business improvement is ingrained in the history of the Group. At CRH, we seek to build better businesses each and every day. As the construction industry emerges from a tumultuous few years, our approach has never been more relevant and there is nowhere I would rather be at this moment in time than in this Group, in this industry, at this point in the business cycle.
2014 was a year of good progress for CRH. We were able to use the underlying strength of our business to capitalise on the recovering markets and deliver a return to profit and margin growth.
This progress was made possible by the hard decisions and hard work undertaken by the Board, management and staff of CRH over the course of the previous seven years since the onset of the global financial crisis. As a result of this, the Group ended 2014 in a position of real strength across our key metrics – strategic, operational and financial.
It is particularly pleasing to report that improvements in performance were achieved last year across all of our Divisions, leading to a double-digit percentage increase in EBITDA (as defined)*.
The year began well in Europe, aided by favourable early-season weather conditions compared with the prolonged winter of the previous year. Conversely, first-half trading in the Americas was impacted by very severe weather conditions for a second consecutive year. However, strengthening economic recovery in the United States drove construction activity as the year progressed and enabled our Americas businesses to perform strongly in the second half, when we began to see an easing of trends in Europe.
Like-for-like sales were ahead by 5% in the first half of the year and rose by 3% in the second, resulting in a full-year increase of 4%. The US Dollar/euro average exchange rate of 1.3290 (2013: 1.3281) was relatively unchanged from prior year. Overall sales of €18.9 billion were achieved, an increase of 5%. EBITDA (as defined)* for the year was €1.641 billion, up 11%.
Throughout recent times, the Group has maintained its commitment to ongoing cost control, strong cash generation efficiency and disciplined financial management. Further progress was achieved in these areas in 2014 including an additional €118 million of targeted cost savings delivered by year-end.
The reorganisation of our European businesses was largely completed during the year and we now have an integrated heavyside materials and products organisation that is providing synergies across our operating plant network in European markets.
Development spend in 2014 was €0.19 billion on 21 transactions, a lower spend than in previous years. During 2014 we completed a detailed review of our portfolio and commenced a multi-year divestment programme, of businesses which no longer meet our returns and growth criteria, or for which we believe CRH is no longer the best long-term owner. We remain focussed on optimising our portfolio to meet our financial objectives and prioritising the allocation and reallocation of capital as we reset for growth and restore margins and returns to peak levels.
Portfolio Management is now embedded in our business model as a core competency and a key enabler of value creation within the Group. The discipline of this process encourages optimal capital efficiency and provides new opportunities for investment and acquisition, the drivers of value creation in our business.
On 1 February 2015, the Group announced that it had entered into a binding commitment to acquire certain assets from Lafarge and Holcim for an enterprise value of €6.5 billion. As noted by the Chairman in his review on pages 2 and 3 the transaction is subject to CRH obtaining shareholder approval and certain other conditions. Assuming these conditions are satisfied, we expect the acquisition to complete in mid-2015.
The acquisition involves a portfolio of quality assets with broad geographical and product spread. The businesses represented by these assets have market leading positions and
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cover a range of segments in the building materials sector in both developed and emerging markets. On completion, the acquisition will strengthen our presence in important markets across North America, Western, Central and Eastern Europe in addition to providing new platforms for growth in the Philippines and Brazil. Further details are set out on page 44 and in note 33 to the Consolidated Financial Statements.
Acquiring these businesses represents a compelling opportunity for the Group to employ our proven strategy in a transformative way. Our approach to value creation is straightforward – we deploy capital efficiently, to support vertically integrated businesses, which we then improve with our unrelenting commitment to operational excellence. Through this systematic process, we create significant and sustainable shareholder value. We have followed this model successfully for decades and, we believe that this acquisition will deliver enhanced opportunities to roll out our vertical integration and bolt-on acquisition models.
Throughout the period of recession and downturn in construction activity that followed the global financial crisis, the Group maintained strict financial discipline. This discipline has served us well and has positioned us strongly to avail of the opportunity to acquire these businesses at an attractive valuation and at the right point of the business cycle. Upon completion, CRH will become the third largest building materials company in the world.
Outlook for 2015
In the United States, the pace of GDP growth is expected to pick up in 2015 and we believe that the fundamentals are in place for continued positive momentum in the economy. Demand in the residential construction market continues to expand, albeit at a more moderate rate, while recovery in the non-residential market is starting to gather pace. While the infrastructure market remains broadly stable, there is upside potential due to the growing economy and increased state spending.
In Europe, the general market environment continues to normalise across our main markets. The outlook for 2015 is somewhat mixed, particularly in the first half for which the 2014 comparatives reflect the benefit of very benign weather conditions. In our generally stable markets in Western Europe we expect to see some improvement in overall demand in 2015, particularly in residential activity. While the outlook in Ukraine remains very uncertain, we anticipate that demand will increase in Eastern Europe, driven primarily by an expected pick up in the roads programme in Poland towards the second half of the year.
With the improvements expected in market conditions across our main geographies, together with easing commodity prices, the benefits of cost efficiencies and a favourable foreign exchange translation effect, we expect 2015 to be a further year of progress.
Albert Manifold,Chief Executive
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36 CRH
CRH 37
CRH Footprint
The Group has good balance across its operations in North America and Western Europe. Our heavyside building materials operations give us exposure to new-build and also to infrastructure repair, maintenance and improvement (RMI) construction. Elsewhere, our lightside and distribution businesses are mainly exposed to residential and non-residential markets, where we also have positions of scale, global brands and potential for growth.
Our strategic priority in these mature markets is to develop our businesses further through a dynamic allocation and reallocation of capital, investment in greenfield projects and
in acquisitions which meet our criteria of achieving vertical integration, and which add to reserves and expand our regional and product positions.
Elsewhere, in developing regions, such as Asia, our entry platforms tend to be in cement. Industrialisation, urbanisation and population growth are key drivers in these markets and CRH targets businesses that have the potential to develop further downstream into integrated building materials businesses as construction markets become more sophisticated.
Portfolio Review
In 2014, in light of a vastly changed environment following the global financial crisis and recession of the previous seven years, CRH undertook a comprehensive review of its entire portfolio of businesses to determine which of those businesses offered the most attractive returns and potential for growth in the emerging new cycle. Following this review, a multi-year divestment programme has been initiated for up to €1.5 billion - €2 billion of assets. Portfolio Management is now an intrinsic part of the Group’s strategy and value creation model, which is outlined in the next section.
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CRH’s business model has played an instrumental role in the consistent delivery by the Group of industry leading return on invested capital through the cycle. In the period 1970 – 2014, CRH has, in euro terms, delivered a formidable compound annual Total Shareholder Return (TSR) of 15.7%.
At the heart of this enduring performance is our long standing and relentless commitment to our value creation model, which is delivered by an international team of dedicated people.
The five elements of the model are:
Balanced Portfolio
Building a balanced portfolio is a core constituent of our philosophy and a key determinant of value creation for CRH. The Group is a broad-based building materials business that is diversified with many products, geographies and sector end-uses. We are a multi-product company and the breadth and depth of our product range differentiates our positioning relative to peers in the industry.
Maintaining a balanced portfolio enables the Group to take advantage of differing demand cycles across our businesses. Diversification also opens up a greater number of opportunities for acquisitions, while having vertically integrated businesses creates potential for synergies and operational leverage.
Acquisition Model
Each year, the Group’s balanced portfolio grows, primarily by way of acquisition. For over four decades, CRH has successfully employed its unique acquisition model with a focus on adding small to mid-sized companies that complement and add value to our existing portfolio. On occasion, larger and/or step-change acquisitions are made when the value proposition and strategic rationale are compelling. Details of a proposed major acquisition in 2015 are set out on page 44 and in note 33 to the Consolidated Financial Statements.
Many of our core end markets in mature economies remain fragmented or relatively unconsolidated and will continue to offer growth opportunities via our proven acquisition model in the decades ahead.
Our acquisition model for creating new value and growth platforms also offers considerable long-term potential in developing economies, in particular those in Asia, where the Group is currently building select leading regional positions.
Building Better Businesses
Building Better Businesses is a core CRH competency. With over 3,300 operating locations in 34 countries worldwide, the potential for value creation is significant.
Through the extraction of inherent value in newly acquired businesses, and a focus on delivering organic performance improvement in existing businesses, our commitment to Building Better Businesses is a key component of the CRH value creation model.
Every day we strive to make improvements. Attention to detail by our 76,000 strong team, together with the multiplier effect of businesses involving millions of tonnes of aggregates, asphalt and cement, and millions of units of construction accessories and distribution stock keeping units, has a material and cumulative impact over time.
By leveraging the scale of the Group, benefits accrue in the areas of procurement, merchandising, selling prices, category management, distribution and IT. Through the sharing of knowledge, ongoing people development, optimisation of our networks, operational leverage and utilisation of the Group’s
financial strength, we can deliver greater value from these businesses.
CRH’s operations benefit from an active philosophy of continuous improvement. The Group provides guidance, support, functional expertise and control in the areas of performance measurement, financial reporting, cash management, strategic planning, business development, talent management, governance and compliance, risk management, sustainability, health & safety and environment.
Portfolio Management
Through the past number of very difficult years for the global construction industry, CRH has worked hard to position itself to maximise the opportunities presented by the coming growth cycle.
An objective of the ongoing Portfolio Management process is to create a narrower and deeper suite of businesses that are positioned either by virtue of size, product mix, location or
operational expertise to benefit most from improvements in demand activity and pricing in their respective markets.
The impact of Portfolio Management on value creation is twofold: capital will be continuously released from low growth areas and reallocated to core businesses for growth, while balance sheet capacity will be enhanced to boost acquisition capabilities.
Financial Strength
Maintaining a position of financial strength is a cornerstone of the CRH business model and the Group adopts a rigorous commitment to financial discipline, strong cash generation and retaining balance sheet capacity.
Financial strength enables the Group to create value in two key ways: to provide the resources to fund value enhancing investments and long-term growth; and to reduce the cost of capital which ultimately translates into higher margins and profitability.
The combination of two key financial measures – robust cash generation and solid interest cover – support the investment grade credit ratings CRH enjoys. These ratings enable the Group to gain access to multiple sources of funding.
In recent times, our financial discipline has enabled the Group to secure lower and more diversified long-term interest rates on our debt, which will reduce the Group’s average interest rate from above 5% in 2012 to circa 3% from 2018 onwards.
Financial strength is a fundamental tenet of the business and has given CRH the capacity to increase or maintain the dividend payment to shareholders in each of the last 31 years.
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Proposed Acquisition – Announced February 2015
Definitions:the following definitions apply throughout this Annual Report on Form-20-F, unless the context otherwise requires:
“NewCo Group”:the collection of newly incorporated or pre-existing subsidiaries of the Sellers which hold the assets for sale pursuant to the proposed Acquisition.
“proposed Acquisition”:the acquisition by CRH of the NewCo Group.
“Combined Group”:the CRH Group and the NewCo Group.
“Sellers”:Lafarge and Holcim.
On 7 April 2014, Lafarge S.A. and Holcim Ltd announced their intention to merge their businesses. In order to obtain the regulatory clearances necessary to complete the Merger, they agreed to divest certain of their businesses. The assets for sale are held by newly incorporated or pre-existing subsidiaries of the Sellers, collectively referred to as the NewCo Group.
As outlined in note 33 to the Consolidated Financial Statements, CRH announced on 1 February 2015 that it had entered into a Binding Offer Letter and Philippines SPA dated 31 January 2015 in which it has made a binding irrevocable offer to acquire the NewCo Group for an enterprise value of €6.5 billion. The cash consideration will be paid in a combination of euro, Sterling and Canadian Dollars.
The proposed Acquisition is subject to: (i) CRH shareholder approval at an Extraordinary General Meeting to be held on 19 March 2015; (ii) the successful completion of the proposed merger of Lafarge and Holcim; and (iii) the completion of certain local reorganisations by Lafarge and Holcim in advance of the proposed Acquisition.
A Circular has been distributed to shareholders to seek their approval of the proposed Acquisition and is available on the CRH website, www.crh.com1.
Information on the NewCo Group
The NewCo Group comprises a global portfolio of assets in the buildings materials industry. It is a global producer of cement, aggregates, ready-mix and related construction activities across four regional platforms in North America, Western Europe, Central and Eastern Europe and Emerging Markets. In 2013 the NewCo Group produced 23mt of cement, 79mt of aggregates, 8mt of asphalt and 10m m³ of ready-mix concrete. Approximately two-thirds of the NewCo Group’s revenue is generated in the European region. Outside Europe, Canada is the largest country in terms of estimated revenue for 2014.
The NewCo Group has market-leading positions and covers all segments of the building materials sector in developed, transition and emerging markets. It operates 24 integrated cement plants together with 10 grinding stations for a total capacity of approximately 36mt per annum. The NewCo Group has assets and approximately 15,000 employees across 11 countries:
Reasons for the proposed Acquisition
The NewCo Group represents high quality assets which are core strategic parts of both Lafarge’s and Holcim’s global portfolios. CRH believes the proposed Acquisition provides a compelling strategic fit for the Group for a number of reasons including:
Balance sheet strength remains a key focus for the Group. CRH remains strongly committed to investment grade credit ratings. Following CRH’s announcement confirming discussions were taking place with Lafarge and Holcim and the announcement, on 2 February 2015, of the proposed Acquisition, Standard and Poor’s Ratings Services and Moody’s Investors Service affirmed their pre-announcement investment grade ratings and their outlooks remain stable. Fitch Ratings put CRH’s pre-announcement ratings on Rating Watch Negative (changed from Negative Outlook).
1 Information on or accessible through our website such as the Circular does not form part of this document.
CRH has a strategy of active portfolio management which will continue post acquisition of the NewCo Group. CRH is exploring options to involve partners for certain of the assets acquired to meet local regulatory requirements or our strategic objectives, though we have not entered into any such agreement concerning the assets of the NewCo Group as of 11 March 2015.
Principal terms and conditions of the proposed Acquisition
The CRH Group has (i) made a binding irrevocable offer to acquire the NewCo Group (excluding the Philippines business), and (ii) entered into the Philippines SPA to acquire the Philippines business.
Lafarge and Holcim may elect to accept the offer and have full discretion whether to do so. The offer will remain open for acceptance until the earlier of (a) two weeks following the conclusion of the works council consultation process and (b) 31 August 2015. If the Sellers accept the offer, the proposed share purchase agreement to be entered into between the parties will come into effect. This proposed agreement (the “Global SPA”) is conditional on:
The long stop date for the Global SPA is the earlier of (a) three months following completion of the merger between Lafarge and Holcim and (b) 31 December 2015 but in any case no earlier than 31 August 2015. The Global SPA provides for the payment of a termination fee by either side in certain circumstances as described in note 33 to the Consolidated Financial Statements.
CRH has committed to the Sellers to do all things necessary to obtain regulatory approvals required for certain parts of the NewCo Group. If certain approvals are not obtained by the long stop date, then the proposed Acquisition will proceed to completion in all jurisdictions other than those where regulatory approval has not been obtained and a divestiture trustee will be appointed to sell the businesses in those jurisdictions. Any loss or profit on such sale will be for the account of CRH.
The CRH Group has agreed to acquire the NewCo Group on a cash-free, debt-free basis, with normalised levels of working capital. The agreement contains customary warranties, including compliance with law, antitrust, environmental matters, litigation, tax and material contracts. It also indemnifies the CRH Group against any pre-closing tax liabilities subject to certain exclusions and limitations.
CRH has agreed that, for a period of not less than one year from closing of the agreement between the parties, it will maintain NewCo Group employee benefits on at least as favourable terms to the current terms, to not close a plant in that period, and not to engage in any collective redundancy programme or mass lay-off.
Where CRH disposes of any business within the NewCo Group within 18 months of closing of the agreement, it has agreed to share any profit on disposal equally with Lafarge and Holcim.
The Philippines SPA is a put and call options agreement dated 31 January 2015 between CRH International, CRH plc, Lafarge Holdings (Philippines) Inc., Calumboyan Holdings, Inc., Southwestern Cement Ventures, Inc., and Round Royal Inc. for the sale and purchase of the Philippines business being sold in connection with the proposed merger of Lafarge and Holcim. It is conditional on CRH entering into arrangements with a local partner in the Philippines so as to comply with the laws of the Philippines in relation to restrictions on foreign ownership of certain Philippine assets and if a local partner is not found on or before 15 August 2015, the assets will be sold with any profit on disposal split equally between CRH and the sellers under the Philippines SPA but any loss for the account of CRH. The Philippines SPA contains conditions to closing which are consistent with the conditions in the Global SPA and is also conditional upon completion of the Global SPA.
Financing
CRH proposes to finance the proposed Acquisition through existing cash resources, new bank facilities and the proceeds of a placing of new Ordinary Shares in CRH plc. The drawn amount of the loan facilities shall bear interest at the rate of EURIBOR plus a margin, which is subject to certain step-ups according to a time and credit ratings based schedule. The facilities consist of a €0.4 billion tranche with a maturity date of 31 December 2015, a €1.5 billion tranche with a maturity date of 30 June 2016, and a €1.0 billion tranche with a maturity date of 30 June 2018. Further details of the placing and the loan facilities are set out in note 33 to the Consolidated Financial Statements.
Dividend policy of the Combined Group
CRH has a strong dividend track record, being one of the few companies within the sector to have maintained its dividend throughout the downturn. Following completion of the proposed Acquisition, the dividend will remain a key focus for CRH. In this regard, while each dividend decision is made based on current trading and expectations regarding future performance, the Board anticipates that the proposed Acquisition will result in significant earnings accretion and enhanced cash generation for the Combined Group.
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Environment & Climate Change
With a global base, CRH recognises the part it can play in improving the sustainability of the built environment. CRH is committed to the highest standards of environmental management and to addressing proactively the challenges and opportunities of climate change.
The Group implements programmes across its worldwide operations to promote energy and resource efficiency, achieve targeted air emission reductions, enhance biodiversity, restore worked-out quarries and, in addition, realise environmentally driven product and process innovation and new business opportunities.
In 2012, three years ahead of the target date, CRH achieved its commitment to reduce specific net carbon dioxide (CO2) emissions from cement plants by 15% on 1990 levels. CRH is now on track to achieving its 2020 commitment to a 25% reduction in specific net CO2 cement plant emissions on 1990 levels.
Further progress was made in 2014. CRH continued to increase sales of lower carbon products such as warm-mix asphalt, which now accounts for approximately 40% of CRH’s US asphalt sales. In Europe, CRH provides low carbon cement for sustainable construction and approximately one third of CRH’s cement plant fuel requirements are met by alternative fuels, generating cost benefits in addition to carbon savings.
As well as being recyclable themselves, many CRH products incorporate significant quantities of recycled and other alternative materials. In 2014, the Group used 19 million tonnes of externally sourced alternative materials to replace raw materials, including recycled asphalt pavement and shingles which together provide a fifth of asphalt requirements in US operations.
People & Community
CRH believes that continued sustainable business success is built on maintaining excellent relationships with all stakeholders.
The Group is committed to fostering respect in the workplace and to developing an inclusive workforce based on merit and ability. Good people are at the heart of all successful organisations. It is a guiding Group philosophy to develop and nurture all employees, to provide training and skills learning, offering strong career paths and upskilling opportunities.
The Group endorses human and labour rights and supports the principles set out in the articles of the United Nations’ Universal Declaration of Human Rights and the International Labour Organisation’s Core Labour Principles. CRH operates a comprehensive Code of Business Conduct and has additionally implemented an Ethical Procurement Code and Supplier Code of Conduct.
The building materials industry traditionally attracts more male than female employees. In 2014, 18% of CRH’s employees were female. At Board level, CRH has three female directors including the Finance Director. Following the Annual General Meeting 25% of the CRH Board will be female.
CRH also recognises a wider responsibility beyond core business activities in the communities in which Group companies operate. It is Group policy to actively support and engage with our neighbours. In 2014, Group companies hosted over 600 stakeholder engagement events.
CRH assists local neighbourhood and community initiatives, in addition to supporting programmes in education, environmental protection and job creation. For example, during 2014, CRH’s US subsidiary, Oldcastle, continued in its national partnership with Habitat for Humanity and also continues to support the Wildlife Habitat Council.
Delivering Best-in-Class Governance
CRH is committed to adopting and maintaining best-in-class governance, which is a hallmark of successful organisations and businesses. At CRH, our values based approach to building and running a global business places an emphasis on respect for the law and an unrelenting commitment to compliance with the highest standards of business ethics.
CRH adopts an open and transparent environment in the workplace and we have developed an internal principle of conduct for all employees that there is ‘never a good reason to do the wrong thing’. Within this environment, we also foster a ‘speak up’ culture to empower and encourage participation among employees.
CRH’s Compliance & Ethics teams implement a Code of Business Conduct programme and work to ensure its
success. The Code of Business Conduct sets out policies and guidelines, training, and monitoring and review mechanisms.
In the current training cycle a further 32,000 employees participated in Code of Business Conduct training. A further 11,000 also undertook advanced instruction on changing regulatory environments, anti-bribery rules, competition law and other relevant areas such as corruption and fraud.
Further information is provided in the Corporate Governance section of this report on page 106.
Managing Risk
Managing risk is an area of vital importance to CRH and the Group has adopted a formal Enterprise Risk Management (ERM) framework as a basis for assessing and mitigating risks associated with our range of businesses and corporate decisions.
The Group adopts the best international practice of incorporating the ‘three lines of defence’ structure into our corporate risk management: (i) local management,(ii) divisional and corporate oversight, and (iii) the internal audit function.
The principal risks and uncertainties faced by the Group are outlined on pages 52 to 63 and are reported to the Audit Committee on a biannual basis.
Performance Reporting
CRH has formal structures in place to identify, evaluate and manage potential risks and opportunities in sustainability areas. Group performance in this regard, together with the effectiveness of actions, is reviewed regularly by the Board of Directors. CRH is committed to reporting on the breadth of its sustainability performance in a comprehensive and transparent manner and to publishing performance indicators and ambitions in key identified sustainability areas.
This section describes the principal risks and uncertainties that could affect the Group’s (and if the proposed Acquisition (see page 44) is completed, the Combined Group’s) business. The risks and uncertainties listed below should be considered in connection with any forward-looking statements in this Form 20-F and the cautionary statements contained in “Introduction and Performance Measures – Forward-Looking Statements”. The Risk Factors have been grouped to focus on key strategic risks and key financial and reporting risks.
The definitions set out on page 44 apply throughout the Risk Factors that follow, unless the context otherwise requires.
Aggregates Aggregates are naturally occurring mineral deposits such as granite, limestone and sandstone. Our Europe Heavyside businesses extract these deposits and process them for sale. They are supplied as a range of aggregates products principally for use in general construction and civil engineering projects and are also used in a variety of additional CRH product lines including asphalt and readymixed concrete. Recycled concrete also increasingly features as an aggregate. For additional information on the location and adequacy of all of the Group’s mineral reserves, see the Mineral Reserves section on pages 216 and 217. | ||||||||
Cement Cement is a primary building material used in the construction industry. It is used principally as an agent to bind other materials together. Most commonly it is mixed with sand, stone or other aggregates and water to form concrete. The Europe Heavyside Division has cement operations in 15 countries across Europe. Cement customers are mainly concrete producers, including CRH concrete operations and builders merchants supplying construction contractors and others. While cement may be imported from other countries, competition comes mainly from other large cement producers located within each country. | ||||||||
Lime
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Risks and Uncertainties Related to the Proposed Acquisition
This section documents the principal transaction-specific risks and uncertainties presented by the proposed Acquisition.
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64 CRH
Business Performance Review | ||||||
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Finance Director’s Introduction
2014 was a year of growth for CRH, with improved performance in the first half driven by favourable weather in Europe, and the second half benefiting from improved momentum in the United States. The Group continued to focus on cash generation finishing the year in a strong and flexible financial position. Net debt at year-end 2014 reduced by €0.5 billion compared to 2013. This was achieved with strong cash inflows from operations, and proceeds of €0.35 billion from disposals, partly offset by spend of €0.62 billion on acquisitions, investments and capital expenditure, and dividend payments of €0.36 billion.
Key Components of 2014 Performance
Overall sales for 2014 were 5% ahead of 2013, while organic sales from underlying operations were up 4%, reflecting strong favourable weather-impacted demand in Europe in the first half and increasing activity in the United States.
In Europe, after the encouraging start to the year which saw like-for-like sales increase by 6% helped by favourable early-season weather, trading in the second half was impacted by moderating trends across all three segments. Overall like-for-like sales for the year increased by 2%. * EBITDA(as defined)* margin increased due to increased capacity utilisation, efficiency measures and cost saving actions.
Against an improving market backdrop as the year progressed, like-for-like sales in the Americas were up 8% in the second half, compared with a first half increase of 4%. In our Materials business, like-for-like sales improved throughout the year and finished 7% ahead. Our Products and Distribution businesses which were impacted by unfavourable weather patterns in the early part of the year, benefited from improving demand in the second half particularly from new residential construction, and like-for-like sales were 5% ahead of 2013. With higher sales and good cost control, EBITDA (as defined)* margins improved in all three Americas segments.
1 See cautionary statement regarding forward-looking statements on page 9.
* Defined is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ resultprofit after tax.
** Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Geography, sector exposure and end-use balance are based on sales.
32 |
CRH Annual Report and Form 20-F | 2017
66 CRH
Products and Services Locations
During 2014, the US Dollar remained relatively stable at approximately 1.33 against the euro, however the weakening of currencies like the Ukrainian Hryvnia and Argentine Peso, partly offset by the strengthening of Sterling, were the principal factors behind the exchange effects shown in the table below. The average and year-end 2014 exchange rates of the major currencies impacting on the Group are set out on page 145.
We continued to advance the significant cost-reduction initiatives which have been progressively implemented since 2007 and which by year-end had generated cumulative annualised savings of over €2.5 billion. Total restructuring costs associated with these initiatives (which generated savings of €118 million in 2014) amounted to €51 million in 2014 (2013: €71 million) and were once again heavily focussed on our European Divisions.
Liquidity and Capital Resources – 2014 compared with 2013
The comments that follow refer to the major components of the Group’s cash flows as shown in the Consolidated Statement of Cash Flows on page 138.
Throughout 2014 the Group continued to keep a focus on cash management, targeting in particular working capital and capital expenditure. Year-end working capital of €2 billion represented just 10.6% of sales, an improvement compared with year-end 2013 (11.2%). This performance delivered a net positive movement (inflow) for the year of €35 million (2013: €77 million). CRH believes that its current working capital is sufficient for the Group’s present requirements. Strong control of spending on property, plant and equipment resulted in lower cash outflows of €435 million (2013: €497 million), with spend in 2014 representing 69% of depreciation (2013: 74%).
Key Components of 2014 Performance
| ||||||||||||||||||||||||||||
€ million
| Revenue
| EBITDA
| Operating
| Profit on
| Finance
| Equity
| Pre-tax
| |||||||||||||||||||||
2013 | 18,031 | 1,475 | 100 | 26 | (297 | ) | (44 | ) | (215 | ) | ||||||||||||||||||
Exchange effects | (62 | ) | (11 | ) | (4 | ) | - | (1 | ) | 5 | - | |||||||||||||||||
2013 at 2014 exchange rates | 17,969 | 1,464 | 96 | 26 | (298 | ) | (39 | ) | (215 | ) | ||||||||||||||||||
Incremental impact in 2014 of: | ||||||||||||||||||||||||||||
- 2014 and 2013 acquisitions | 237 | 16 | 4 | - | - | (2 | ) | 2 | ||||||||||||||||||||
- 2014 and 2013 divestments | (25 | ) | - | 1 | 43 | - | (1 | ) | 43 | |||||||||||||||||||
- Restructuring costs | - | 20 | 20 | - | - | - | 20 | |||||||||||||||||||||
- Pension/CO2 gains | - | (23 | ) | (23 | ) | - | - | - | (23 | ) | ||||||||||||||||||
- Impairment charges | - | - | 601 | - | - | 105 | 706 | |||||||||||||||||||||
Ongoing operations | 731 | 164 | 218 | 8 | 10 | (8 | ) | 228 | ||||||||||||||||||||
2014 | 18,912 | 1,641 | 917 | 77 | (288 | ) | 55 | 761 |
Readymixed concrete is a highly versatile building material comprised of | Concrete Products In addition to readymixed concrete, CRH manufactures other concrete products, primarily floor and wall elements, beams and vaults for structural use. Principal raw materials include cement, crushed stone and sand and gravel, all of which are readily available locally. Readymixed concrete and concrete products are sold to both the public and private construction sectors. Competition comes mainly from other readymixed concrete and concrete products producers, as well as from a variety of smaller manufacturers in local economies. | Asphalt Asphalt is the primary building material used in road surfacing and other infrastructure including airport runways. It consists of aggregates bound together with bitumen, a by-product of the oil industry. Europe Heavyside’s businesses in the UK (under the Tarmac brand), Ireland, Poland and Switzerland are involved in the production and supply of asphalt. Customers are typically government and local authorities involved in the construction and maintenance of national road networks. | ||||||
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including the Group’s share of equity accounted investments.
33 |
CRH Annual Report and Form 20-F | 2017
Operations Review - Europe Heavyside
Prior Year 2016
Results | Analysis of change | |||||||||||||||||||||||||||||||
€ million | 2015 | Exchange | Acquisitions | Divestments | LH Costs | Organic | 2016 | % change | ||||||||||||||||||||||||
Sales revenue | 4,813 | -224 | +2,129 | -111 | - | +338 | 6,945 | 44% | ||||||||||||||||||||||||
EBITDA (as defined)* | 424 | -21 | +299 | -11 | +89 | +1 | 781 | 84% | ||||||||||||||||||||||||
Operating profit | 120 | -3 | +183 | -7 | +89 | +4 | 386 | 222% | ||||||||||||||||||||||||
EBITDA (as defined)*/sales | 8.8% | 11.2% | ||||||||||||||||||||||||||||||
Operating profit/sales | 2.5% | 5.6% |
LH integration costs of €32 million were incurred in 2016 (2015: €121 million)
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
During 2017, our dedicated European landscaping businesses previously included within our Europe Heavyside segment were reorganised to form a new platform, Architectural Products, within our Europe Lightside segment. Comparative segment amounts for 2016 and 2015 have been restated where necessary to reflect the new format for segmentation.
Trends were mixed across our major European markets in 2016 with more challenging conditions in our businesses in Switzerland and Poland contrasted by evident market recovery in Ireland, Ukraine, Finland and the Netherlands.
Sales and operating profit were well ahead of 2015, reflecting stable results in our heritage businesses and a full year’s trading and synergy benefits of 2015 acquisitions. Organic profit in the heritage businesses was assisted by volume improvements and by ongoing cost saving and efficiency measures which largely offset the impact of a challenging pricing environment in some of our key markets.
Tarmac (UK)
With a full year of trading included in the results, volumes in our aggregates and readymixed concrete business lines in the UK grew in 2016 against a stable construction backdrop. Price increases were achieved in all products except asphalt where the impact of lower prices was compensated by lower input (bitumen) costs. Despite uncertainty surrounding the UK construction market in light of the decision of the electorate in June to exit the European Union, 2016 was a year of progress for Tarmac.
UK Cement & Lime, Ireland and Spain
Despite an overall backdrop of modest growth in the cement market, the UK cement and lime operations delivered strong volumes and prices in all product categories. Together with the Irish and Spanish cement businesses, the focus on network optimisation resulted in the achievement of synergies in 2016.
In Ireland, while cement volumes grew strongly (18%), domestic pricing in particular remained under pressure due to overcapacity in the market.
With the benefit of improved cement pricing on exports to the UK, stronger overall volumes and improved domestic concrete and aggregates prices, operating profit was ahead of 2015.
In Spain, the macroeconomic situation remained weak but stable, with some regional recovery. Prices remained under pressure, and despite some improvement in cement and readymixed concrete volumes, operating profit was lower than 2015.
France, Benelux and Denmark
Our French cement operations delivered growth in volumes, primarily due to the inclusion of a full year of ownership of the LH Assets, as well as the positive impact of synergies with CRH heritage businesses and a modest recovery in the cement market, although prices remained under pressure due to strong competition and overcapacity.
Continued challenging pricing also impacted our precast business in France, although a focus on cost reduction initiatives across the business more than offset the underlying operating profit impact.
In the Netherlands, strong recovery of the residential market and an increase in centrally funded infrastructure projects delivered higher volumes in our readymixed and structural concrete operations. Readymixed concrete prices remained under continued pressure. There was some improvement in volumes and prices in Belgium.
In Denmark, with the benefit of a strong non-residential market and a year of growth in new residential construction, both volumes and prices in our structural business improved. Sales and operating profit were well ahead of 2015.
Switzerland and Germany
Stable economic and construction output combined with an early start to the season in Switzerland led to growth in readymixed concrete volumes. However, cement prices declined
against a backdrop of continued pricing pressure arising from imports, and sales and operating profit were below 2015.
Strong cement volumes in our German operations reflected a full year of ownership of the LH Assets and growth in construction output, boosted mainly by new build multi-family housing. However, pricing remained under pressure in our cement business.
North East
In Poland, weaker than expected activity adversely affected pricing in our cement and readymixed concrete products. Both sales and operating profit were behind 2015 due to the significant decline in cement volumes year-on-year.
In Finland, construction activity recovered strongly in 2016, and all our product categories reported growth in volumes; pricing remained under pressure due to overcapacity in readymixed concrete and increased cement imports. With the benefit of continued cost and efficiency initiatives, overall operating profit was ahead of 2015.
Despite the ongoing political conflict, construction activity in Ukraine increased year-on-year and our operations delivered strong trading, and operating profit was ahead of 2015. Cement volumes were up 11%, with prices also increasing in 2016. Inflation stabilised somewhat, positively impacting costs and operating profit.
South East
After a promising start, 2016 was a mixed year in Romania, and mid-year construction activity slowed as a result of lower government spending and unfavourable weather conditions.
Strong growth in volumes and prices was delivered by our cement operations in Serbia due to ongoing large motorway projects in the south of the country. Similar to 2015, overcapacity and import pressure remained a threat in the region.
Although both Hungary and Slovakia experienced a drop in infrastructure spend, growth was solid in the residential market, with improved cement volumes and prices.
* DefinedEBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ result
profit after tax.
Business Performance Review| continued
Other major movements in net debt during the year comprised acquisition spend of €181 million on 21 transactions which was more than offset by divestment and disposal proceeds of €345 million.
Cash dividend payments of €357 million and proceeds of €22 million from exercise of share options were similar to last year.
Year-end interest-bearing loans and borrowings increased by €0.3 billion to €5.9 billion (2013: €5.5 billion). Net debt of €2.5 billion† at 31 December 2014 was €0.5 billion lower than year-end 2013. At year-end the stronger US Dollar (1.2141 versus the euro compared with 1.3791 at year-end 2013) was the main factor in the negative translation and mark-to-market impact of €181 million on net debt.
The Group is in a strong financial position. It is well funded and interest cover (EBITDA (as defined)*/Net Interest) of 6.7 times is significantly higher than the minimum requirements in the Group covenant agreements – further details are set out in note 23 to the Consolidated Financial Statements.
We successfully completed two bond issues during 2014: in July €600 million of 7-year euro bonds were issued with a coupon of 1.75% and in September we completed our first Swiss Franc bond issuance for a further CHF330 million of 8-year bonds with a coupon of 1.375% . These were the lowest-ever coupons obtained by the Group and reflect CRH’s commitment to managing debt and maintaining an investment grade credit rating.
The Group remains in a very strong financial position with total liquidity at end 2014 of €5.9 billion comprising €3.3 billion of cash and cash equivalents on hand and €2.6 billion of committed undrawn facilities which do not mature until 2019. These cash balances were enough to meet all maturing debt obligations for the next five years and the weighted average maturity of the remaining term debt was eight years.
On 1 February 2015, CRH announced that it had made a binding irrevocable offer to acquire certain businesses and assets of Lafarge S.A. (“Lafarge”) and Holcim Ltd (“Holcim”) for a total enterprise value of €6.5 billion. The proposed Acquisition is subject to: (i) CRH shareholder approval at an Extraordinary General Meeting to be held on 19 March 2015; (ii) the successful completion of the proposed merger of Lafarge and Holcim; and (iii) the completion of certain local reorganisations by Lafarge and Holcim in advance of the acquisition.
The Board believes that this acquisition, which arises from the decision by Lafarge and Holcim to divest certain of their businesses and assets in order to obtain regulatory clearances necessary to complete their merger, represents a compelling strategic opportunity for CRH. The acquisition will be funded through a combination of €2 billion from existing cash resources, the proceeds of €1.6 billion from the placing, which completed on 5 February 2015, of 74,039,915 Ordinary Shares in CRH plc (which rank pari passu in all respects with the existing Ordinary Shares including the right to receive all future dividends declared or paid after the date of the placing) and by new debt facilities in the amount of €2.9 billion. Further details are set out on page 44 and in note 33 to the Consolidated Financial Statements.
Other than the events above, no significant changes have occurred since the balance sheet date.
Business Performance Reviews
The sections on pages 70 to 76 outline the scale of CRH’s business in 2014, and provide a more detailed review of performance in each of CRH’s six reporting segments.
Quantitative and Qualitative Information about Market Risk
The Group addresses the sensitivity of the Group’s interest rate swaps and debt obligations to changes in interest rates in a sensitivity analysis technique that measures the estimated impacts on the income statement and on equity of either an increase or decrease in market interest rates or a strengthening or weakening in the US Dollar against all other currencies, from the rates applicable at 31 December 2014, for each class of financial instrument with all other variables remaining constant. The technique used measures the estimated impact on profit before tax and on total equity arising on net year-end floating rate debt and on year-end equity, based on either an increase/decrease of 1% and 0.5% in floating interest rates or a 5% and 2.5% strengthening/weakening in the US$/€ exchange rate. The US$/€ rate has been selected for this sensitivity analysis given the materiality of the Group’s activities in the United States. This analysis, set out in note 21 to the Consolidated Financial Statements, is for illustrative purposes only as in practice interest and foreign exchange rates rarely change in isolation.
Quantitative and Qualitative information and sensitivity analysis of market risk is contained in notes 20 to 24 to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
CRH does not have any off-balance sheet arrangements that have, or are reasonably likely to have a, current or future effect on CRH’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
An analysis of the maturity profile of debt, finance and operating leases, purchase obligations, deferred and contingent acquisition consideration and pension scheme contribution commitments at 31 December 2014 is as follows:
Contractual Obligations
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Payments due by period
| Total
| Less than
| 1-3 years
| 3-5 years
| More than
| |||||||||||||||
Interest-bearing loans and borrowings1
| 5,742 | 452 | 1,372 | 1,036 | 2,882 | |||||||||||||||
Finance leases
| 13 | 2 | 4 | 3 | 4 | |||||||||||||||
Estimated interest payments on contractually-committed debt and finance leases2
| 1,149 | 253 | 364 | 227 | 305 | |||||||||||||||
Deferred and contingent acquisition consideration
| 207 | 59 | 118 | 16 | 14 | |||||||||||||||
Operating leases3
| 1,390 | 310 | 414 | 249 | 417 | |||||||||||||||
Purchase obligations4
| 263 | 226 | 30 | 3 | 4 | |||||||||||||||
Retirement benefit obligation commitments5
| 154 | 26 | 49 | 31 | 48 | |||||||||||||||
Total
| 8,918 | 1,328 | 2,351 | 1,565 | 3,674 |
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Europe HeavysideCurrent Year 2017
Results
|
|
|
Analysis of change
|
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€ million
| % Change
| 2014
| 2013
| Total Change
| Organic
| Acquisitions
| Divestments
| Restructuring/ Impairment
| Pension/ CO2 gains
| Exchange
| ||||||||||||||||||||||||||||||||||||||
Sales revenue | 4% | 3,929 | 3,786 | 143 | 105 | 51 | -4 | - | - | -9 | ||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 17% | 380 | 326 | 54 | 47 | 2 | 1 | 22 | -11 | -7 | ||||||||||||||||||||||||||||||||||||||
Operating profit | 138% | 151 | -395 | 546 | 73 | -2 | 1 | 489 | -11 | -4 | ||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 9.7% | 8.6% | |||||||||||||||||||||||||||||||||||||||||||||
Operating profit/sales |
| 3.8% | -10.4% | |||||||||||||||||||||||||||||||||||||||||||||
No pension restructuring gains were recorded (2013: €12 million) Gains from CO2trading amounted to €9 million (2013: €8 million) |
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Restructuring costs amounted to €15 million (2013: €37 million) Impairment charges of €35 million were incurred (2013: €502 million) |
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Results | Analysis of change | |||||||||||||||||||||||||||||||
€ million | 2016 | Exchange | Acquisitions | Divestments | LH Costs/ Pension Credit | Organic | 2017 | % change | ||||||||||||||||||||||||
Sales revenue | 6,945 | -203 | +95 | -110 | - | +175 | 6,902 | -1% | ||||||||||||||||||||||||
EBITDA (as defined)* | 781 | -26 | +3 | -17 | +52 | +46 | 839 | 7% | ||||||||||||||||||||||||
Operating profit | 386 | -16 | -3 | -14 | +52 | +73 | 478 | 24% | ||||||||||||||||||||||||
EBITDA (as defined)*/sales | 11.2% | 12.2% | ||||||||||||||||||||||||||||||
Operating profit/sales | 5.6% | 6.9% | ||||||||||||||||||||||||||||||
Swiss pension plan past service credit of €20 million in 2017
LH integration costs of €32 million were incurred in 2016
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
The commentary below excludes the impact of impairment charges on operating profit.
Excellent weather conditions, especially in the first quarter, provided a platform for a like-for-like sales increase of 7% in the first six months. With sales marginally behind 2013 in the second half, overall like-for-like sales for the year increased by 3%. The EBITDA (as defined)* margin improved significantlypast service credit due to increased capacity utilisation, efficiency measures, cost savings and relatively stable input costs.pension plan amendments in Switzerland.
Western Europe
Sales increased by 4% in 2014Overall the 2017 outturn for Heavyside was positive with double-digit growthmarket recovery in Ireland, France, Poland and Finland in particular compensating for more subdued trading conditions in Switzerland and the UK partly offset by declines in the Benelux and France. EBITDA (as defined)* increased significantly, mainly driven by excellent results in the UK.
With the residential construction market remaining strong in Switzerland, our cement volumes were 8% ahead of 2013, although we continued to experience price pressure. Prices in the downstream businesses were stable while volumes Although total sales declined, slightly. Overall operating profit declined. In the UK the residential market remained very strong both for our clay and concrete businesses, and sales and operating profit increased during the year. There was a mixed outcome in the Benelux. While overall demand in the Netherlands was weak, resulting in lower volumes for readymixed concrete and landscaping products, cement volumes remained in line with the prior year and in Belgium were better than in 2013. Both markets experienced significant price pressure and operating profit was lower than prior year. In Ireland an increase in residential activity in Dublinmodest year-on-year organic growth resulted in higher volumes, however prices remained competitive due to overcapacity in the market. Overallimproved operating profit, was in line with 2013.
Construction output in France continued to decline and precast concrete volumes fell sharply resulting in lower operating profit. In Germany, volumes were higher in our concrete landscaping activity and prices remained under pressure; underlying operating profit was in line with 2013. Residential activity in Denmark improved, and although pricing remained difficult due to the overcapacity in the market; operating profit increased. In Spain, the decline in national cement volumes moderated, while volumes for our cement business in the Basque region were slightly ahead of 2013; overall operating profit was ahead of the 2013 outcome.
Eastern Europe
Our operations benefited from favourable weather at the start of the year, with like-for-like sales up 9% in the first half. However, sales fell by 6% in the second half, resulting in a marginal increase in like-for-like sales for the year overall. The slight improvement was achieved against a backdrop of political turmoil in Ukraine offset by improved demand in Poland. A relatively stable input cost environment, together with ongoing efficiency measures, resulted in an overall stable EBITDA (as defined)* margin.
Construction output in Poland increased by 5% in 2014, reflecting an early start to the season due to very mild weather in the first quarter, stronger economic growth and a pick-up in the previously sluggish residential sector. National cement volumes for the year increased by 6%. Our readymixed concrete and landscaping volumes also increased. While prices for many of our products remained under pressure, operating profit in Poland increased due to strong volumes and the benefit of previously implemented cost-reduction programmes. Despite the uncertain political backdrop in Ukraine and a 13% reduction in national construction output, our like-for-like cement volumes were only down 1% on 2013 reflecting the concentration of our plants in western Ukraine and the ongoing commitment and dedication of our Ukrainian-based team. Due to better pricing, continued focus on cost efficiencies and the full-year benefit of the acquisition of Mykolaiv, operating profit in local currency was ahead of 2013. Construction output in Finland remained relatively weak in 2014 mainly as a result of a continuing decline in housing starts and a 2% drop in our cement volumes. Volumes and prices in readymixed concrete and aggregates were also under pressure and operating profit was below 2013. Sales and operating profit were ahead in 2014 in our concrete products operations in Romania, Hungary and Slovakia as a result of improved activity.
Outlook
Western Europe: In the Netherlands we expect to see further improvements in the residential sector, which should have a positive impact in 2015, while the non-residential and infrastructure sectors are expected to improve marginally. In Switzerland construction activity is expected to decline slightly but remain on a relatively high level with some improvementleverage arising from larger infrastructure (tunnel) projects, which are expected to
commence in 2015. The outlook for construction output in Belgium is flat. Ireland should continue to grow with overall construction activity mainly driven by the residential segment. France is expected to decline further especially in the infrastructure sector. The outlook for Germany and Denmark is positive, but showing only modest growth. Spain remains challenging and we expect that 2014 was the bottom of the cycle, with moderate improvements anticipated in 2015.
Eastern Europe: Thevolume growth in activity in Poland during 2014 is expected to continue to be led by a pick-up in road programme activity in the second halfsome key countries, signs of 2015. The outlook for Ukraine is uncertain; we expect construction activity to decline,progress on pricing and the local currency is expected to remain very weak. The outlook remains challenging for Finland, although with the benefits of cost efficiencies we expect to improve margins. Further growth is expected in Romania, Hungary and Slovakia.
Europe Lightside
Results
|
|
Analysis of change
|
| |||||||||||||||||||||||||||||||||||||||||
€ million
| %
| 2014
| 2013
| Total
| Organic
| Acquisitions
| Restructuring/
| Pensions
| Exchange
| |||||||||||||||||||||||||||||||||||
Sales revenue | 7% | 913 | 856 | 57 | 53 | - | - | - | 4 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 32% | 94 | 71 | 23 | 22 | - | 1 | -1 | 1 | |||||||||||||||||||||||||||||||||||
Operating profit | 154% | 71 | 28 | 43 | 31 | - | 14 | -1 | -1 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 10.3% | 8.3% | |||||||||||||||||||||||||||||||||||||||||
Operating profit/sales |
| 7.8% | 3.3% | |||||||||||||||||||||||||||||||||||||||||
Restructuring costs amounted to €5 million (2013: €6 million) | ||||||||||||||||||||||||||||||||||||||||||||
No pension restructuring gains were recorded (2013: €1 million)
|
| No impairment charges were recorded (2013: €13 million) |
The commentary below excludes the impact of impairment charges on operating profit.
2014 saw good progress for Europe Lightside, with our portfolio of businesses benefiting from mild weather early in the year. Like-for-like sales were 6% ahead of 2013, helped by good export levels to markets outside of Europe. Market demand in the Netherlands and France remained weak, while activity in Germany, Belgium and Switzerland was more resilient. The UK experienced robust growth, particularly in residential construction. With the benefit of new product innovation, market share gains and cost reduction initiatives, the Division achieved substantial growth in both EBITDA (as defined)* and operating profit margins.
Construction Accessories
This division supplies a broad range of connecting, fixing and anchor systems to the construction industry. Like-for-like sales grew by almost 6% in 2014, with a significant increase in operating profit.Engineered Accessories benefited from new product innovation and previous restructuring initiatives. Our businesses in Germany and the UK delivered strong growth in operating profits, while Switzerland also performed well. The more commodity-focussedBuilding Site Accessories businesses had a mixed year, with better performances in the UK, Belgium and Spain offset by rationalisation costs and more difficult trading conditions in Germany and France.
Shutters & Awnings
Our operations in this division serve the attractive RMI and residential end-use markets, supplying sun protection, energy-
saving, and outdoor living technologies. The Netherlands business benefited from the introduction of innovative new products with strong margins. The UK business also delivered improved sales and margins. In Germany, strong demand for our awnings products was offset by a weaker performance in the shutters business due to lower exports to France and restructuring measures. Overall, like-for-like sales and operating profits increased.
Fencing & Cubis
OurPermanent Fencing business again experienced difficult markets, especially in the Netherlands, although a number of initiatives contributed to improved sales and operating profits. Despite challenging market conditions, results forMobile Fencing were only slightly lower year-on-year, as a result of various operational excellence measures.Cubis, our composite access chamber business, had another good year in which sales and operating profits increased due to strong UK demand and the introduction of a range of new products.
Outlook
While we are positive about the UK and Switzerland in 2015, we expect France to remain challenging, and are cautious about the outlook for Germany and the Netherlands. Given Europe Lightside’s robust business mix, we anticipate further organic growth in 2015, achieved through new products, maximising export opportunities and a continued RMI focus. This growth, combined with commercial and operational excellence programmes, is expected to deliver further improvement in our operating profit in the year ahead.
Europe Distribution
Results
|
|
|
Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||
€ million
| %
| 2014
| 2013
| Total
| Organic
| Acquisitions
|
Restructuring/
| Pensions
| Exchange
| |||||||||||||||||||||||||||||||||||
Sales revenue | 2% | 3,999 | 3,936 | 63 | 7 | 41 | - | - | 15 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 2% | 190 | 186 | 4 | 15 | - | - | -11 | - | |||||||||||||||||||||||||||||||||||
Operating profit | 6% | 112 | 106 | 6 | 14 | -1 | 4 | -11 | - | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 4.8% | 4.7% | |||||||||||||||||||||||||||||||||||||||||
Operating profit/sales |
| 2.8% | 2.7% | |||||||||||||||||||||||||||||||||||||||||
No pension restructuring gains were recorded (2013: €11 million)
|
| Restructuring costs amounted to €4 million (2013: €4 million) No impairment charges were recorded (2013: €4 million)
|
|
With the benefit of mild weather in the early months of 2014, first-half like-for-like sales increased by 4%. Although the Netherlands saw some recovery in consumer confidence as the year progressed, financing conditions remained tight; our other key markets, particularly Switzerland, France and Germany, experienced more subdued demand and intense competition. While sales in the third quarter declined by 4% on a like-for-like basis, by December activity had flattened to a level similar to last year, resulting in a full-year like-for-like sales outturn that was broadly similar to 2013. With the benefit of procurement and other commercial excellence initiatives, and in spite of the absence in 2014 of the once-off pension gain of €11 million reported in 2013, overall operating profit and margin was ahead of last year.
Six builders merchants acquisitions were completed in 2014 at a total cost of €27 million. In the Benelux, we acquired seven branches mainly to expand our footprint in our growing builders merchants platform in Belgium. We also acquired two branches in northern France, strengthening our network in Normandy.
Professional Builders Merchants
Overall operating profit for our wholly-owned professional builders merchants business, which operates 343 branches in six countries, was ahead of 2013. Mild first-quarter weather together with the incremental contribution from acquisitions offset weaker demand as the year progressed, resulting in full-year sales in line with the previous year. Operating profit advanced mainly due to procurement initiatives in the Benelux and France and ERP optimisation in Austria. Sales in the Benelux ended slightly ahead of 2013 due mainly to our recent Belgian acquisitions with operating profit well ahead as a result of procurement and cost savings initiatives. In Switzerland, sales finished slightly behind 2013, with the main driver for lower sales being a softening of local residential markets in particular; operating profit was impacted by lower volumes and pricing pressure partly coming from the strong Swiss Franc. Our builders merchants activities in Germany made a strong start to the year in mild weather; this moderated as the year progressed leaving full-year sales and operating profit slightly ahead of prior year. Sales in France were slightly ahead of 2013 due to acquisition contributions, while operating profit improved following a continued focus on pricing, purchasingperformance improvement initiatives and cost control. Sales levelssynergies.
Tarmac (UK)
Despite ongoing political and economic uncertainty in Austria were slightly behind 2013, although operating profit was ahead due to measures taken to leverage the recently implemented ERP system.
Sanitary, Heating and Plumbing (“SHAP”)
SalesUK, organic sales in our SHAPTarmac business which operates 132 branches, were ahead of 2013 due to an organic improvement in our Belgian businesses which continue to perform strongly. Sales in our German business moderated in the second half, finishing broadly in line2016, with prior year. Due to the challenging market conditions in Switzerland, results were lower compared with 2013. Underlying operating profit for our SHAP activities in 2014 was broadly in line with 2013 as organic improvement in Belgium was offset by weaker Swiss results.
DIY
Our wholly-owned DIY business operates 184 stores in the Netherlands, Germany and Belgium. Similar to our other businesses, DIY made a strong start to 2014 with garden sales in particular benefiting from mild weather conditions. Despite improving consumer confidence and mild weather, competition remained intense in the Dutch market with high levels of price discounting featuring prominently during the year. Overall sales ended broadly in line with 2013 in both the Netherlands and Belgium. Sales in our DIY business in Germany were higher than the previous year in part due to recent greenfield investments. Overall operating profit for the DIY business was ahead of the prior year with weaker pricing in the Netherlands more than offset by cost savings initiatives, lower restructuring costs and a good performance in our German DIY business.
Outlook
While the Dutch economy continues to show progress, as seen in improving consumer confidence indicators, underlying financing conditions remain somewhat constrained and therefore we expect measured progress in 2015. The German market outlook remains broadly positive despite some moderation in economic growth. Markets in Austria are expected to be flat in 2015. In Switzerland, consistent with recent Euroconstruct indicators, residential markets in particular are expected to be subdued, so we remain cautious for 2015. Construction activity in France is also expected to be constrained in the near term. Overall 2015 is likely to be another challenging year, but we expect improved operating profit due mainly to further initiatives in commercial and operational excellence programmes and our continued focus on cost-reduction measures.
Americas Materials
Results
|
|
|
Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||
€ million
|
%
| 2014
| 2013
| Total
| Organic
| Acquisitions
| Divestments
| Restructuring/
| Exchange
| |||||||||||||||||||||||||||||||||||
Sales revenue | 7% | 5,070 | 4,721 | 349 | 317 | 37 | -2 | - | -3 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 9% | 609 | 557 | 52 | 42 | 7 | - | 3 | - | |||||||||||||||||||||||||||||||||||
Operating profit | 57% | 355 | 226 | 129 | 61 | 5 | - | 63 | - | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 12.0% | 11.8% | |||||||||||||||||||||||||||||||||||||||||
Operating profit/sales |
| 7.0% | 4.8% | |||||||||||||||||||||||||||||||||||||||||
| Restructuring costs amounted to €9 million (2013: €12 million) No impairment charges were recorded (2013: €60 million)
|
|
The commentary below excludes the impact of impairment charges on operating profit.
After the early months of 2014 which were impacted by harsh winter weather, trading conditions improved as the year progressed, led by improved residential and non-residential segments and stable infrastructure. Americas Materials delivered another year of growth, with like-for-like sales revenues growing 7% and overall EBITDA (as defined)* increasing 9% compared to 2013. Positive trends in pricing continued for the third year in a row for aggregates and readymixed concrete, with asphalt pricing also improving in 2014.
Americas Materials completed eight acquisition transactions in 2014 at a total cost of €91 million, adding over 230 million tonnes of aggregates reserves, 2 operating quarries, 6 asphalt plants and 2 aggregates terminals, with annual production of 4.3 million tonnes of aggregates and 0.2 million tonnes of asphalt. In addition divestments during the year generated proceeds of €12 million.
Energy and related costs: The price of bitumen, a key component of asphalt mix, increased by 3% in 2014 following a 4% decrease in 2013. Prices for diesel and gasoline, important inputs to aggregates, readymixed concrete and paving operations, decreased by 2% and 3% respectively. The price of energy used at our asphalt plants, consisting of fuel oil, recycled oil, electricity and natural gas, remained flat. Recycled asphalt and shingles accounted for approximately 22% of total asphalt requirements in 2014, lessening demand on virgin bitumen.
Aggregates:Like-for-like volumes increased 6% from 2013 while total volumes including acquisitions increased 10%. Average prices increased by 2% on a like-for-like basis and 1% overall compared with 2013. These price and volume increases, together with efficient cost control, resulted in improved margin for our aggregates business.
Asphalt: Volumes increased 5% on a like-for-like basis and 6% overall compared to 2013. Volume increases together with pricing increases of 1% contributed to an overall asphalt margin expansion.
Readymixed Concrete: Like-for-like volumes increased 6% while total volumes including acquisitions were up 7% compared with 2013. Average prices increased 4% on both a like-for-like and an overall basis, contributing to margin expansion for this business.
Paving and Construction Services: With flat federal funding and pockets of increased state infrastructure spending, like-for-like sales increased 2% and overall sales including acquisitions increased 3%. Bidding continued to be under pressure in a competitive environment. However, efficient cost controls enabled overall margin to improve by 0.5% in 2014.
Regional Performance
East
The East region comprises operations in 23 states, the most important of which are Ohio, New York, Florida, Michigan, New Jersey, Pennsylvania and West Virginia. After a harsh winter, the Northeast division was able to take advantage of favourable weather and improving economic conditions during the remainder of the year with operating profit growing strongly compared with 2013. Operating profit was more stable in the Mid-Atlantic and Central divisions where very wet conditions hampered activity in the peak production months. The strong residential and non-residential markets in Florida contributed to higher volumes, better prices and margin growth in the Southeast division. Overall operating profit for the East region was higher thanbuilding products and contracting sales and modest improvements in 2013, with overall volumes 7%, 6% and 5% ahead of prior yearpricing for aggregates, asphalt and readymixed concrete respectively.compensating for a slight decline in overall volumes. Operating profit was slightly behind the prior year, with increased bitumen costs in the asphalt division not fully compensated by increased sales and the impact of performance improvement initiatives.
WestUK Cement & Lime, Ireland and Spain
The West region hasUK cement and lime operations maintained stable pricing against a backdrop of modest economic growth, while improvements in 21 states, the most important of which are Utah, Texas, Washington, Iowa, Kansasproduction processes and Colorado. All three divisions, Central West, Northwest,synergies, achieved through network optimisation, further contributed to operating profit growth.
In Ireland, both sales and Mountain West reported higher operating profit. Early season earnings improvements throughout the West continued into the autumn and early winter, with modest price gains building on strong operating and overhead cost management across the product lines. Recovery in construction margins provided very positive year-on-year improvements from this line of business. Overall West volumes increased 15%, 4% and 9%profit were ahead of 2013 for2016 mainly due to market recovery, particularly in the residential and commercial sectors, and the resulting growth in cement, aggregates asphalt and readymixed concrete respectively.
volumes; positive trends on pricing across key products also contributed to sales and operating profit.
France, Benelux and Denmark
Organic sales in the Benelux grew in 2017 with a strong contribution from some larger projects in the Belgian structural business and continued growth in the Dutch residential sector; operating profit declined, impacted by a one-off cost in the structural business.
The 2017 outturn in Denmark was positive, with sales and operating profit significantly ahead of prior year supported by residential construction in major cities, some large non-residential projects and overall modest economic growth.
Switzerland and Germany
Both sales and organic operating profit were behind prior year in Switzerland due to difficult market conditions, with overall domestic cement consumption also impacted by poor weather early in the year. With continued pricing pressure arising from imports, cement prices declined.
Lower cement volumes were experienced in our German operations due to reduced demand in key rural markets, a competitive landscape and individual project delays; results were behind 2016. Our new lime acquisition, Fels, performed in line with expectations.
North East
Improvement in the residential sector and an overall positive economic backdrop resulted in cement volumes in Finland finishing ahead of 2016 and, despite competition from importers negatively affecting cement pricing, operating profit increased.
Americas Materials |continued
Outlook
We expect that US GDPOverall economic growth was experienced in Poland, driven by private consumption and supported by EU-financed public spending. In addition, execution of previously delayed infrastructure projects resulted in growth in 2015 will be similar to 2014cement volumes and that housing will continue to recover. We also expect non-residential construction to show modest gains. Federal funding for infrastructure is expected to be flatboth sales and operating profit were well ahead of 2016.
Both sales and operating profit in 2015. A more robust federal highway bill is being explored by Congress and has the support of the President, but if passedUkraine increased in 2017, with pricing improvement mitigating the impact would most likely be evidentof inflation and compensating for a decline in 2016cement volumes, which were affected by an increased level of imports.
South East
Our operations in Hungary and beyond. State fiscal conditions are improving with certain states passing infrastructure funding measures.
We expect 2015 volumes for aggregatesSlovakia benefited from solid economic and asphalt to show single-digitconstruction growth in 2017. Improved sales and operating profits were driven by higher cement and readymixed concrete volumes, to be up slightly
more due to improving residential markets. Targeted price increases in all product lines, combined with cost controls and stable/improving energy markets are expected to lead to another year of margin expansion in 2015.
Americas Products
Results
|
|
| Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||
€ million
|
%
| 2014
| 2013
| Total
| Organic
| Acquisitions
| Divestments
| Restructuring/
| Exchange
| |||||||||||||||||||||||||||||||||||
Sales revenue | 5% | 3,225 | 3,068 | 157 | 169 | 75 | -19 | - | -68 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 7% | 263 | 246 | 17 | 24 | 6 | -1 | -7 | -5 | |||||||||||||||||||||||||||||||||||
Operating profit | 113% | 145 | 68 | 77 | 24 | 2 | - | 50 | 1 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 8.2% | 8.0% | |||||||||||||||||||||||||||||||||||||||||
Operating profit/sales |
| 4.5% | 2.2% | |||||||||||||||||||||||||||||||||||||||||
Restructuring costs amounted to €18 million (2013: €11 million) Impairment charges of €14 million were incurred (2013: €71 million)
|
|
The commentary below excludes the impact of impairment chargessome positive signs on operating profit.
Our Products business in the Americas is located primarily in the United States but also in Canada, Mexico and South America. Construction activity in the eastern and northern parts of North America was hampered by unseasonably wintry weather into May. Good weather in the second half of the yearpricing and an ongoing pick-up in US macroeconomic fundamentals, particularly stronger labour markets and consumer confidence, led to improved trading results inemphasis on performance improvement.
Although the remaindermix of the year. Overall like-for-like sales increased by 6%. With improving market conditions, input cost pressures accelerated but were more than offset by the effects of improved operational efficiencies and targeted price increases. Combined with the benefits of organic growth, cost reduction initiatives and contributions from acquisitions, Americas Products achieved a 7% increase in EBITDA (as defined)* and improved margins.
Five bolt-on acquisitions were completed in 2014 at a total spend of €60 million. The acquisition by our Architectural Products Group (“APG”) of Hope Agri Products, a supplier of packaged mulches and soils, extended our footprint into the growing Texas market; while five divestments in 2014 generated net proceeds of €50 million.
Architectural Products
APG is a leading supplier of masonry and hardscape products, packaged lawn and garden products, clay brick and fencing solutions. In addition to contractor-based new construction, the DIY and professional RMI segments are significant end-users. The business benefited from improving private residential and non-residential construction and increasing RMI spend. In general, activity was more robust in the West and South, while trading in the Midwest, Northeast, and Eastern Canada started slowly during the first four months due to unseasonably bad weather. The strengthening housing market, together with product innovation and commercial initiatives, drove gains across nearly all business segments resulting in a 7% increase in like-for-like sales compared with 2013. While our markets remain competitive, the combination of cost reduction measures and selected price improvements broadly offset the impact of higher input costs. Overall, APG recorded strong improvements in operating profit and margin for the year.
Precast
The Precast group manufactures a broad range of value-added concrete and polymer-based products primarily for utility
infrastructure applications. In addition, the business is a leading manufacturer of accessories to the concrete construction industry. While public infrastructure spend remained subdued, the business saw an otherwise improved market environment in 2014 and registered solid sales gains as growth initiatives continued to deliver. Operating profit increases were achieved in most precast markets although selected areas were slow to recover from the weather-impacted start to the year. Our utility enclosures and construction accessories businesses also continued to grow and improve. Overall, like-for-like sales rose by 5%, operating profit was marginally ahead and backlogs continued to improve.
BuildingEnvelope®
The BuildingEnvelope® group is North America’s leading supplier of architectural glass and aluminium glazing systems that close the building envelope. New non-residential building activity, a key market segment for this business, experienced improved market conditions and healthy increases in demand in 2014. Sales growth was also driven by ongoing initiatives to gain market share and differentiate the business through innovative product and technology offerings. Organic sales rose 2%, slightly less than the overall market, as our Engineered Glazing Systems (“EGS”) division
concentrated on completing existing major project work. The Architectural Glass and Storefront division continued to benefit from an improved pricing environment, resilient non-residential RMI activity and a generally more favourable product mix. With a tight focus on cost control, product quality and improved processes, the business delivered operating profit and margin improvements.
South America
Our South American operations were negatively impacted by challenging economic conditions and operating profit was lower than in 2013. Slow economic growth and high inflation led to lower volumes and higher operating costs in the Argentine clay products businesses. Our Chilean business also recorded reduced profits due to soft demand in a very competitive market.
Outlook
Based on the improving macroeconomic backdrop, which will benefit both residential and non-residential construction demand, we expect further organic sales growth in 2015. Combined with the impact of 2014 acquisitions and divestments, and the benefits of internal growth and cost initiatives, we expect to record improved operating profit and margin in 2015.
Americas Distribution
Results
|
|
| Analysis of change
|
| ||||||||||||||||||||||||||||||||||||
€ million
|
%
| 2014
| 2013
| Total
| Organic
| Acquisitions
| Restructuring
| Exchange
| ||||||||||||||||||||||||||||||||
Sales revenue | 7% | 1,776 | 1,664 | 112 | 80 | 33 | - | -1 | ||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 18% | 105 | 89 | 16 | 14 | 1 | 1 | - | ||||||||||||||||||||||||||||||||
Operating profit | 24% | 83 | 67 | 16 | 15 | - | 1 | - | ||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin | 5.9% | 5.3% | ||||||||||||||||||||||||||||||||||||||
Operating profit/sales | 4.7% | 4.0% | ||||||||||||||||||||||||||||||||||||||
No restructuring costs were recorded (2013: €1 million)
|
|
Americas Distribution, trading as Allied Building Products (“Allied”), experienced improved performance across its activities in 2014, leading to strong overall reported results. Both business divisions benefited from sales growth providing increased operating profit compared to 2013. Performance in our Exterior Products business was led by strong demand in our Midwest (Chicago) and Mountain (Colorado) markets aided by early storm activity. The Northeast and West Coast markets experienced modest setbacks due to the completion of Hurricane Sandy rebuilding efforts in New York/New Jersey and exceptionally dry and drought-like weather patterns experienced in California.
The Interior Products business continued to show growth as both volumes and pricing improved throughout the year. The strongest gains were experienced in our Atlantic markets, in part due to the full-year effect of our prior year acquisitions, and also the
Southwest and West markets which were driven by multi-family construction.
In 2014, Allied management maintained its focus on improving employee safety, controlling variable costs, streamlining administrative procedures and eliminating redundant processes. The simplification of our business processes, along with the ongoing evolution of our organisational structure and go-to-market strategies, is aimed at improving business integration and enhancing operating leverage, allowing for greater economies of scale as our business, and the overall market, grows.
While no acquisitions were completed within the Americas Distribution group in 2014, we have continued to build on our organic greenfield and service centre strategy by opening six bolt-on locations within some of our key existing markets. Our service
Americas Distribution |continued
centre model enables us to improve customer service, consolidate fixed costs and more efficiently leverage branch assets. Progress continued to be made in 2014 to increase brand awareness ofTri-Built, our proprietary private label brand, as both sales and product offerings grew. The addition of our new service centre locations combined with the continued growth of our Tri-Built private label brand and our commitment to developing our people continued to differentiate Allied in the marketplace.
Exterior Products
The Exterior Products business is largely comprised of both commercial and residential roofing, siding and related products and is the third largest distributorprojects in the United States. Exterior Products demand is greatly influenced by residential and commercial replacement activity (75% of sales volume is RMI-related). Commercial roofing experienced modest industry-wide growth while residential roofing shipments saw a slight decline leading to anSerbia negatively affected cement pricing, overall flat market from 2013. As a result, product mix shifted more towards lower-margin commercial products. Additionally, with no volume growth, markets across the industry remained very competitive leading to pricing pressure in all regions. In spite of flat market conditions and the pressures mentioned above, the Exterior Products division reported modest sales growth and operating profit just slightly behind prior year.
Interior Products
The Interior Products business, which is the third largest specialty distributor in the United States, sells gypsum wallboard, acoustical ceiling systems and related products to specialised contractors. The primary market is new construction including residential, multi-family and commercial, with limited exposure to the repair and remodel market. Performance in this business was strong in all markets with increased volumes and prices of core products contributing to higher sales and improved operating margins. In addition, a more favourable mix toward higher-margin core products combined with efficiency initiatives implemented in recent years, helped to drive improved sales and operating profit for 2014.were ahead of 2016, supported by both ongoing infrastructure projects and some residential growth.
Outlook
The overall outlook for 2015 is encouraging as commercial and residential construction is expected to grow. While headwinds are expected to continueOrganic sales in our Exterior Products business, as pricing pressures remain and only modest growth is expected, our Interior Products business continues to experience favourable markets,Romania were slightly ahead of 2016, with another year of sales and profit growth expected. Overall, the expected benefits of the six service centre additions in 2014 combined with our continued focus on efficiency and cost control should provide a year of further improvement in operating performance in 2015.
Business Performance Review – Prior Year
Trading conditions in 2013 proved challenging, especially in the first half of the year, and the Group continued to focus on cash generation finishing the year in a strong and flexible financial position. With increased cash inflows from operations and proceeds from disposals, net debt at year-end 2013 remained broadly in line with 2012 despite a total spend of €1.2 billion on acquisitions, investments and capital expenditure and cash dividend payments which at €368 million were similar to 2012.
While reported sales for 2013 were similar to 2012, organic sales from underlying operations fell by 2%, reflecting difficult market conditions in Europe and poor weather across the Group in the first half.
In Europe the decline in like-for-like sales moderated to less than 1% in the second half of 2013, a significant improvement on the weather-impacted decline of 10% in the first half. This resulted in a full-year reduction of 5% in underlying European sales in 2013, which was partly offset by contributions from acquisitions to give a 3% overall decline. Lower sales impacted EBITDA (as defined)* margin, which despite intense management focus and internal actions, fell in all European segments in response to competitive market pressures.
Against an improving backdrop as 2013 progressed, like-for-like sales in the Americas were up 5% in the second half, compared with a first half which saw organic volumes down by 1%. In our Materials business, which was impacted by unfavourable weather patterns in the early part of 2013, like-for-like salesthe year and slower than anticipated commencement of major infrastructure projects compensated by stronger volumes in the last quarter. Operating profits were 3% lower than 2012; however, with good contributions from
acquisitions overall US Dollar sales revenue was in line with 2012. Our Products and Distribution businesses continued to benefit from improving demand, particularly from new residential construction, and like-for-like sales were 8% ahead of 2012. With higher sales and good cost control, EBITDA (as defined)* margins improved in all three Americas segments.
Operating profit fell significantly from 2012, due principally to the non-cash impairment charge of €650 million taken largely as a result of the comprehensive portfolio review in 2013. The initial phase of this review identified business units that would not meet our returns criteria, and an orderly disposal process is underway. The Europe segment accounted for the majority of the write-down. The portfolio review also identified further impairments of €105 million in respect of equity accounted investments.
During 2013 the euro strengthened by more than 3% against the US Dollar, resulting in an adverse translation impact on the Group’s results; this is the principal factor behind the exchange effects shown in the table below.
We continued to advance the significant cost-reduction initiatives which have been progressively implemented since 2007 and which by year-end 2013 had generated cumulative annualised savings of almost €2.4 billion. Total restructuring costs associated with these initiatives (which generated savings of €195 million in 2013) amounted to €71 million in 2013 (2012: €60 million) and were once again heavily focussed in our European Divisions.
Key Components of 2013 Performance
| ||||||||||||||||||||||||||||
€ million
| Revenue
| EBITDA
| Operating
| Profit on
| Finance
| Equity
| Pre-tax
| |||||||||||||||||||||
2012 | 18,084 | 1,563 | 805 | 230 | (305 | ) | (84 | ) | 646 | |||||||||||||||||||
Exchange effects | (404 | ) | (36 | ) | (19 | ) | (1 | ) | 5 | (2 | ) | (17 | ) | |||||||||||||||
2012 at 2013 exchange rates | 17,680 | 1,527 | 786 | 229 | (300 | ) | (86 | ) | 629 | |||||||||||||||||||
Incremental impact in 2013 of: | ||||||||||||||||||||||||||||
- 2013 and 2012 acquisitions | 672 | 73 | 43 | - | (3 | ) | 3 | 43 | ||||||||||||||||||||
- 2013 and 2012 divestments | (42 | ) | - | 2 | (191 | ) | (2 | ) | 4 | (187 | ) | |||||||||||||||||
- Restructuring costs | - | (11 | ) | (11 | ) | - | - | - | (11 | ) | ||||||||||||||||||
- Pension/CO2 gains | - | (29 | ) | (29 | ) | - | - | - | (29 | ) | ||||||||||||||||||
- Impairment charges | - | - | (622 | ) | - | - | 41 | (581 | ) | |||||||||||||||||||
Ongoing operations | (279 | ) | (85 | ) | (69 | ) | (12 | ) | 8 | (6 | ) | (79 | ) | |||||||||||||||
2013 | 18,031 | 1,475 | 100 | 26 | (297 | ) | (44 | ) | (215 | ) | ||||||||||||||||||
† CRH’s share of after-tax profits of joint ventures and associated undertakings
|
|
Business Performance Review – Prior Year |continued
Liquidity and Capital Resources – 2013 compared with 2012
The comments that follow refer to the major components of the Group’s cash flows as shown in the Consolidated Statement of Cash Flows on page 138.
Throughout 2013 the Group continued to keep a very sharp focus on cash management, targeting in particular working capital and capital expenditure. Year-end 2013 current working capital of €2.0 billion represented just 11.2% of sales, an improvement compared with year-end 2012 (11.5%). This performance delivered net inflows for 2013 of €77 million (2012: outflows of €58 million). Strong control of spending on property, plant and equipment resulted in lower cash outflows of €497 million (2012: €544 million), with spend in 2013 representing 74% of depreciation (2012: 79%).
Other major cash flow movements during 2013 comprised acquisition spend of €676 million on 28 transactions, including €144 million in respect of the asset exchange in Spain which is also included in the total proceeds from disposals and investments of €266 million.
Cash dividend payments of €368 million and proceeds of €19 million from exercise of share options were very similar to 2012.
Year-end 2013 interest-bearing loans and borrowings increased by €0.7 billion to €5.5 billion (2012: €4.8 billion). At year-end 2013, net debt of €2.97 million† was just €64 million higher than year-end 2012. The weaker US Dollar (1.3791 versus the euro at year-end 2013 compared with 1.3194 at year-end 2012) was the main factor in the positive translation and mark-to-market impact of €87 million on net debt.
CRH’s share price increased by 20% in 2013 to €18.30 at year-end; combined with the maintained dividend of 62.5c, shareholder returns were 24% in 2013 and resulted in net debt as a % of market capitalisation decreasing to 22% (2012: 26%).
† As disclosed in note 20 to the Consolidated Financial Statements, net debt comprises interest-bearing loans and borrowings, cash and cash equivalents, and derivative financial instruments.
Europe Heavyside – 2013
Results
|
|
|
Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||||||
€ million
| %
| 2013
| 2012
| Total
| Organic
| Acquisitions
| Divestments
|
Restructuring/
| Pension/
| Exchange
| ||||||||||||||||||||||||||||||||||||||
Sales revenue | -5% | 3,786 | 3,972 | -186 | -258 | +125 | -8 | - | - | -45 | ||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | -23% | 326 | 426 | -100 | -61 | +9 | +1 | -2 | -41 | -6 | ||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 8.6% | 10.7% | |||||||||||||||||||||||||||||||||||||||||||||
Operating profit | n/m | -395 | 187 | 582 | -58 | +1 | +3 | -483 | -41 | -4 | ||||||||||||||||||||||||||||||||||||||
Pension restructuring gains amounted to €12 million (2012: €30 million) Gains from CO2trading were €8 million (2012: €31 million)
|
| Restructuring costs amounted to €37 million (2012: €35 million) Impairment charges of €502 million were incurred (2012: €21 million)
|
|
EBITDA (as defined)* above includes pension restructuring gains and gains from CO2 trading. Operating profit is also stated after impairment charges; the net €482 million adverse impact of these items has been excluded from the commentary that follows.
Adverse weather in the first half of 2013, combined with significant overcapacity in very competitive markets, resulted in like-for-like sales for the year overall being down by 7% versus 2012. Our cement operations experienced weak volumes in Poland, Finland and Benelux, in particular, combined with further, albeit more modest, declines in construction activity in Ireland. The UK market was the only major market showing growth in 2013, benefiting from strong residential markets. However, our continued cost reduction and efficiency measures partly offset the impact of lower demand. Overall, EBITDA (as defined)* margin excluding pensions and CO2 gains was 8.1% compared with 9.2% in 2012.
On the development front during 2013, we concluded an asset swap in February in which we acquired Cementos Lemona in the Basque region in Spain in exchange for our 26% stake in Corporacion Uniland. In September 2013 we became the market leader in Ukraine through the acquisition of Mykolaiv Cement. We completed two smaller transactions in 2013 strengthening our presence in Northern Ireland and expanding our network of cement import facilities in Britain. In addition, we acquired a manufacturer of pre-stressed hollow core elements in Belgium, expanding and strengthening our position as market leader in Belgium’s pre-stressed hollow core flooring segment.
Western Europe
Construction spend in Switzerland increased again in 2013 with the residential market remaining one of the major drivers of activity and infrastructure spend continuing at good levels. With the benefit of mild weather in the fourth quarter of 2013, construction remained strong to the end of the year. Our cement volumes were 12% higher than 2012 benefiting both from increased infrastructure projects and large individual projects. Aggregates and readymixed concrete volumes continued the slightly upward trend of recent years. Sales prices, particularly cement, saw some slippage in 2013 due to the continued strong Swiss Franc. Operating profit was ahead of 2012. New residential markets in the UK experienced significant growth due to the government’s “Help to Buy” scheme and industry brick volumes finished 9% ahead of 2012. Selling price increases were
also achieved and, despite higher natural gas costs, operating profit was ahead of 2012. Our clay businesses in the Netherlands were2016, positively impacted by weaker residential demand in very competitive markets, with volumescontinued price improvement and prices under pressure. In 2013, we decided to close part of our clay business in the Netherlands, contributing to the overall increase in restructuring charges compared with 2012. Operating results for our Clay business overall were broadly in line with 2012. Our cement and readymixed concrete businesses in the Netherlands and Belgium were impacted by falling construction activity in 2013. Lower volumes, together with pricing pressure in very competitive markets, resulted in lower operating profit in spite of the benefits from ongoing cost reduction programmes. Profitability in our Structural Concrete business in the Benelux was in line with 2012 with lower organic results offset by the contribution from the acquisition during 2013. Our operations in Denmark, Germany and France all saw weaker activity levels in 2013. The decline in construction activity in Ireland moderated in 2013 and cement volumes were similar to 2012 levels. With a lower cost base, operating losses declined. In Spain, while construction activity fell by a further 23% with declines across all sectors, our like-for-like results were in line with 2012 due to the benefit of previously-implemented cost reduction programmes. Trading in our newly-acquired cement business Cementos Lemona was in line with expectations.
Eastern Europe
A pick-up in second-half construction activity in Poland was insufficient to offset the weather-impacted first half of 2013; national construction output fell by an estimated 11% in 2013 and cement volumes fell 9%. The residential sector remained sluggish throughout 2013 with new starts down over 11%. Infrastructure activity picked up as the year progressed and the second half of 2013 saw the restart of a number of stalled projects. Mild weather late in 2013 enabled construction to continue until year-end. Against the improving backdrop our second-half cement volumes increased by 8% compared with 2012, reducing the decline in our full-year 2013 volumes to 11%. Our aggregates and readymixed concrete volumes also declined year-on-year. Prices for all products remained under pressure in very competitive markets, and overall operating profit in Poland was lower than 2012. In Ukraine, while the first half of 2013 was negatively impacted by the prolonged winter conditions, demand was much stronger in the second halfperformance improvement initiatives.
* Defined EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ result
profit after tax.
35 |
CRH Annual Report and Form 20-F | 2017
CRH’s Europe Lightside Division is comprised of businesses engaged in the manufacture and supply of high quality, value-added, innovative products and solutions for customers in construction markets globally. | ||||
What we do: We operate a portfolio of value-added product platforms across four business areas; Construction Accessories, Shutters & Awnings, Network Access Products & Perimeter Protection and Architectural Products. Customer understanding, product and process innovation and the relative ease with which certain of our products can be transported long distances, are all key features of this Division’s business. Our strategy is to build and grow scalable businesses, balanced across a range of products, geographies and end-use sectors, through increasing the penetration of our range of value-added products and creating competitive advantage through strong customer relationships, brand leadership and service. Our development strategy is to deepen our positions in existing business platforms, to broaden our differentiated product portfolio through selected new growth platforms that are exposed to attractive global megatrends, and to expand our presence in developing regions as construction markets in those regions become more sophisticated. This strategy complements CRH’s aim to provide innovative solutions that meet the longer-term opportunities presented by economic development, changing demographics and sustainability. | How we create value: We realise commercial, operational and procurement synergies across the wider CRH network to benefit from scale and best practice. We also leverage a range of flagship brands at a regional, European and global level. There is a continuous focus on product innovation and development and we work with specialist end-users, such as architects and engineers, to develop design-solutions that are approved and certified for individual target markets. We draw upon an established record of enabling mature and high-growth businesses to expand their offerings and develop their markets. Lightside has consistently achieved attractive returns; this reflects active, balanced management of our product range and our geographic and business cycle exposures. How we are structured: CRH Europe Lightside is organised into four business areas: Construction Accessories, Shutters & Awnings, Network Access Products & Perimeter Protection and Architectural Products. The Division employs approximately 7,300 people at close to 180 locations. |
Construction Accessories CRH’s Construction Accessories business is a leading global manufacturer and supplier of high-value innovative products and engineered solutions for challenging construction projects. Construction Accessories products include a broad range of engineered anchoring, fixing and connection solutions as well as lifting systems, formwork accessories and general accessories for construction applications. | From our manufacturing footprint located mostly in Northern Europe, we export products across the world, targeting large-scale projects through project specification. Construction Accessories products have been specified and used in many high-profile projects globally including skyscrapers, stadiums and infrastructure developments. | Network Access Products & Perimeter Protection The Network Access Products operation designs and manufactures technical systems for the access and protection of buried and above ground infrastructure, including composite access chambers and covers, and meter boxes. Due to the lightweight composite design, these products offer a time-saving alternative to traditional methods of construction. |
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted
investments’ profit after tax.
** Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Products, sector exposure and end-use balance are based on sales.
36 |
Europe Heavyside – Prior Year |continuedProducts and Services Locations
and national cement volumes for the year were down 3% compared with 2012. Our like-for-like volumes were 13% ahead of 2012 in the second half of 2013, bringing our full-year volumes almost in line with 2012 (down 1%) and overall operating profit in Ukraine was broadly similar to 2012.
In Finland, construction spend was down in 2013 mainly due to reduced residential activity. The government introduced two stimulus packages related mainly to the residential and RMI sectors, but execution was slow. With increasing levels of public debt,
spending on infrastructure was reduced and progress on a number of large projects was delayed. While our businesses delivered modest price increases in cement, aggregates and readymixed concrete, cement and aggregates volumes were lower in 2013 and overall operating profit was below 2012. In South-Eastern Europe, our concrete and clay operations were negatively impacted by fragile markets and strong competition, with 2013 operating profit and margins down versus 2012.
Europe Lightside – 2013
Results
|
|
|
Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||||
€ million
| %
| 2013
| 2012
| Total
| Organic
| Acquisitions
|
Divestments
| Restructuring/
| Pension
| Exchange
| ||||||||||||||||||||||||||||||||||||
Sales revenue | -4% | 856 | 888 | -32 | -30 | +33 | -28 | - | - | -7 | ||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | -9% | 71 | 78 | -7 | -7 | +2 | -1 | -1 | +1 | -1 | ||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* |
| 8.3% | 8.8% | |||||||||||||||||||||||||||||||||||||||||||
Operating profit | -43% | 28 | 49 | -21 | -10 | - | -1 | -11 | +1 | - | ||||||||||||||||||||||||||||||||||||
Pension restructuring gains amounted to €1 million (2012: nil)
|
|
| Restructuring costs amounted to €6 million (2011: €5 million) Impairment charges of €13 million were incurred (2012: €3 million)
|
|
EBITDA (as defined)* above includes pension restructuring gains and operating profit is also stated after impairment charges; the net €12 million adverse impact of these items has been excluded from the commentary that follows.
Our Lightside business in Europe is located primarily in Germany, the UK, Netherlands, Switzerland, Belgium and France. The division is one-third exposed to repair activity and two-thirds exposed to new build work. Construction activity in most of these markets was severely impacted by the prolonged winter conditions in the early months of 2013. Although the Lightside business was less impacted due to its greater exposure to the repairs sector, weaker trading in key markets in the first half led to a reduction in overall operating profit in 2013. Trading levels in the second half of 2013 were broadly in line with 2012, leading to an overall full-year like-for-like sales decline of 3% versus 2012. Our markets remained weak in the Netherlands where new-build activity continued to deteriorate, while Switzerland, Belgium and France were somewhat more resilient. In Germany the market backdrop was more mixed with declines in non-residential and infrastructure activity offset by improving residential RMI activity. The UK was the only major market showing growth in 2013, benefiting from strong residential markets. Despite a sharp focus on continued cost discipline, overcapacity in some more competitive markets led to margin erosion, impacting negatively on overall profitability. In response to these challenging markets, as in prior years, we continued to engage in a number of restructuring measures to help realign our cost base to lower volumes.
Construction Accessories
With lower construction activity in our major markets, 2013 operating profit was behind 2012 due to lower volumes and continuing margin pressure in parts of the business. Difficult European markets, combined with the adverse weather effect in the first half of 2013, negatively impacted profits. However, the export side of our business and the UK performed solidly.
Shutters & Awnings
This business, which is concentrated in Germany and the Netherlands, benefited from stable demand in 2013, despite difficult markets, and with the contribution from 2012 acquisitions, 2013 operating profit was ahead of 2012.
Fencing & Cubis
Our Fencing business in the Netherlands suffered declining sales in 2013 due to intense competition and a weather-impacted first half of the year. Price pressure was a key feature in this market, but a recovery in the German side of this business offset this somewhat. We also benefited from a shift in product mix in our UK Fencing & Security businesses, which helped to improve margins. The Mobile Fencing business also experienced difficult markets, however, due to cost reduction measures, 2013 operating profit and margin were in line with 2012. Cubis, our composite access chambers business, benefited from a robust UK market which drove higher sales and profits in 2013.
Our Perimeter Protection business designs, manufactures, installs and services fully integrated outdoor security and detection solutions. This includes permanent and temporary fencing, entrance control and perimeter intrusion detection systems (PIDs). | Architectural Products CRH’s landscaping businesses in Europe (formerly reported as part of Europe Heavyside) are now structured as a new Architectural Products platform within Europe Lightside. The Architectural Products business is a leading producer of exterior hardscape products across six European countries. It produces pavers, kerbs, retaining walls and slabs for both private and public use. Products are sold to General Builders Merchants and Do-It-Yourself (DIY) outlets as well as to municipalities and large contractors. | Shutters & Awnings The Shutters & Awnings business designs, manufactures and supplies roller shutters, awnings, terrace roofs and related products for sun protection and outdoor living. Our companies offer energy-efficient products and solutions which contribute to a secure, sustainable and comfortable environment. Shutters & Awnings is well positioned to take advantage of a number of trends in the European building industry such as higher RMI spending, energy-efficiency, heightened security concerns, outdoor living and the emergence of “smart” homes. |
Europe Distribution – 2013CRH Annual Report and Form 20-F | 2017
Results
|
|
|
Analysis of change
|
| ||||||||||||||||||||||||||||||||||||||||
€ million
| %
| 2013
| 2012
| Total
| Organic
| Acquisitions
|
Restructuring/
| Pensions
| Exchange
| |||||||||||||||||||||||||||||||||||
Sales revenue | -1% | 3,936 | 3,956 | -20 | -175 | +180 | - | - | -25 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | -14% | 186 | 217 | -31 | -47 | +7 | -1 | +11 | -1 | |||||||||||||||||||||||||||||||||||
EBITDA (as defined)* margin |
| 4.7% | 5.5% | |||||||||||||||||||||||||||||||||||||||||
Operating profit | -27% | 106 | 145 | -39 | -48 | +4 | -5 | +11 | -1 | |||||||||||||||||||||||||||||||||||
Pension restructuring gains amounted to €11 million (2012: nil)
|
|
| Restructuring costs amounted to €4 million (2012: €3 million) Impairment charges of €4 million were incurred (2012: nil)
|
|
Operations Review - Europe Lightside
Prior Year 2016
Results | Analysis of change | |||||||||||||||||||||||||||
€ million | 2015 | Exchange | Acquisitions | Divestments | Organic | 2016 | % change | |||||||||||||||||||||
Sales revenue | 1,404 | -32 | +30 | -50 | +40 | 1,392 | -1% | |||||||||||||||||||||
EBITDA (as defined)* | 136 | -4 | +2 | -3 | +6 | 137 | 1% | |||||||||||||||||||||
Operating profit | 90 | -9 | +2 | -1 | +10 | 92 | 2% | |||||||||||||||||||||
EBITDA (as defined)*/sales | 9.7% | 9.8% | ||||||||||||||||||||||||||
Operating profit/sales | 6.4% | 6.6% |
EBITDA (as defined)* above includes pension restructuring gainsDuring 2017, our dedicated European landscaping businesses previously included within our Europe Heavyside segment were reorganised to form a new platform, Architectural Products, within our Europe Lightside segment. Comparative segment amounts for 2016 and 2015 have been restated where necessary to reflect the new format for segmentation.
Although reported sales declined 1% driven by exchange and divestments, 2016 was a year of good underlying sales growth for Europe Lightside due to strong performances in key markets combined with some favourable weather patterns in the first-half of 2016. Our UK-based businesses continued to benefit from strong activity levels, with a robust residential construction sector in particular. In the Netherlands and France, recovery in construction activity was evident. Swiss market circumstances were challenging, while Germany and Belgium were ahead. Operating profit increased through a combination of growing demand, continuous product innovation, delivery on cost optimisation initiatives and margin expansion activities.
Construction Accessories
Like-for-like sales in the Construction Accessories platform grew by 5%, mainly resulting from a combination of continued innovation in key product lines and strong demand in some of our main markets, such as the UK and Germany. While competitive pressure in Switzerland intensified, activity levels in our other European markets and Australia picked up, resulting in strong organic growth across the platform. Our Southeast Asia business recorded a solid performance despite challenging trading conditions. Overall operating profit progressed well, reflecting a combination of organic sales growth and the positive impact arising from internal efficiency improvement initiatives undertaken in 2016.
Shutters & Awnings
The Shutters & Awnings business recorded flat like-for-like sales in 2016. The German Awnings business saw an increase in sales through a combination of benign weather patterns and the introduction of a number of new products to the market. The German Shutters business delivered a solid performance in relatively flat markets, increasing profitability as a result of the impact of continued performance optimisation measures. The UK business reported a stable organic performance, which was further aided by a complementary acquisition. Despite a decline in like-for-like sales, the Netherlands showed solid profit performance as margins increased in a competitive environment.
Network Access Products
& Perimeter Protection
Network Access Products recorded an increase in both organic sales and operating profit isthrough positive demand trends in the UK market in particular. Results were also stated after impairment charges; the net €7 million impact of these items has been excludedsupported by a positive contribution from the commentary that follows.its newly acquired UK-based business.
The Distributionpermanent Perimeter Protection business was also impacted bysaw a decline in sales, but still showed improvement in performance and continued progress following the adverse first-half weather conditions in 2013. This together with weak construction activityrestructuring of both its German and low consumer confidence,UK businesses. Our mobile fencing operation benefited from good demand particularly in the Netherlands (which accounts for almost 30%its export business with a resultant increase in sales and profitability.
Architectural Products
Architectural Products sales progressed on 2015, however overall operating profit was behind. At our German business, sales were ahead of 2013 Distribution sales), contributed to a 4% reduction in like-for-like sales in 2013, the impact of which was largely offset by the incremental impact of acquisitions completed in 2012 and 2013. Following sharp profit reductions in the first half of 2013, the second half saw a moderation in the rate of decline which, combined with previous restructuring efforts and cost saving initiatives and certain pension curtailment benefits, limited the overall decline in full-year EBITDA (as defined)* to 14%.
Our professional builders merchants network was strengthened by three acquisitions during 2013. In the Benelux, we acquired a well-established seven-branch builders merchant, which complements our existing Dutch business, and a two-branch Belgian operator. We also acquired four branches in northern France increasing our Normandy network to 19 locations.
Professional Builders Merchants
Overall 2013 results for our wholly-owned professional builders merchants business, which operates 349 branches in six countries, were lower than in 2012. The incremental contribution from acquisitions more than offset the shortfall in like-for-like sales in the Benelux where weak markets, especially in Dutch residential and new-build, continued to impact performance. Despite strong cost control and economies of scale from acquisitions,2015 but operating profit was behind 2012. Sales levelsmainly as a result of product mix. Our Polish business experienced lower sales than 2015 whilst in France were slightly lower for 2013 overall but operating profit improved due to the continued focus on pricing, purchasingBelgium and cost control. In Switzerland, the strength of the Swiss Franc continued to affect competitiveness contributing to a decline in sales and, despite the ongoing roll-out of various excellence programmes, both operating margin and profit were also lower than 2012. Sales levels in Austria were severely impacted by the bad weather in the first quarter of 2013 and operational challenges due to a system implementation, resulting in operating
profit that was significantly behind 2012. Despite the severe impact of the bad weather in early 2013, our builders merchants activities in Germany saw improved trading from April onwards and, together with better margins and good cost control, resulted in operating profit for the year that was in line with 2012.
DIY
Our wholly-owned DIY business operates 196 stores in the Netherlands Germany and Belgium. Operating profit for 2013 was lower than in 2012. In the Netherlands, the combination of the very severe weather during the first quarter of 2013 and the continued weakness in consumer confidence resulted in sales levels in our Dutch DIY business that were significantly lower than 2012 and operating profit declined despite restructuring and cost-saving measures. In Belgium, our DIY activities proved more resilient and reported similar sales and operating profit in 2013 to those achieved in 2012. In a challenging environment for the German DIY sector, sales in our German DIY business were also impacted by the adverse weather and, despite continued cost focus, operating profit and margin were lower than 2012.
Sanitary, Heating and Plumbing
2013 sales for our SHAP business, which operates 126 branches, were ahead of 2012 due to an organic improvement in our German and Belgian businesses together with the incremental impact of the two Belgian acquisitions completed in the second half of 2012. Due to the challenging market conditions in Switzerland, 2013 results were lower compared with 2012. Overall operating profit for our SHAP activities was ahead of 2012 assisted by the contribution from acquisitions.2015 reflecting improving economic conditions.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit
CRH Annual Report and Form 20-F | 2017 Current Year 2017
Europe Lightside experienced a year of further growth as good performances in a number of key markets resulted in total sales for the Division finishing 3% ahead of 2016. Strong activity levels in the UK market underpinned demand, particularly for our Construction Accessories and Network Access Products businesses. Economic recovery continued in the Netherlands and Poland resulting in good growth, while activity in other key markets, including Belgium and Germany, was stable. Against this overall favourable market backdrop, a focus on continued cost optimisation and margin enhancement resulted in an 11% operating profit increase for the Division. Construction Accessories The year was one of progress for the Construction Accessories platform with strong organic sales due to robust activity levels across core markets and further product innovation. Operating profit also expanded, despite restructuring charges taken as part of the platform’s optimisation of its production network. Our UK-based engineered accessories business experienced strong demand for its products, supported by good activity levels and both sales and operating profit were ahead of prior year. In Germany, the business also advanced, as positive trading conditions resulted in increased demand. For our Swiss business, reasonable activity levels saw sales finish ahead of prior year. Activities in the Netherlands and France benefited from ongoing economic recovery while sales in our Belgian business advanced in competitive markets. Our export markets proved challenging as project delays impacted performance, though our Australian business saw organic growth due to good demand for its products. Shutters & Awnings The Shutters & Awnings business recorded a 3% increase in sales compared with the prior year. The Netherlands, supported by underlying market activity and benefiting from operational improvements, reported a good trading performance. Our German businesses experienced challenges arising from tighter labour markets and increasing input costs; however, sales across the businesses advanced. The UK business reported a solid trading performance despite currency pressure. Operating profit for the platform remained in line with 2016. Network Access Products & Perimeter Protection The Network Access Products business, with operations in the UK, Ireland and Australia and a growing export base, had another year of growth in both sales and operating profit. Positive underlying infrastructure demand continued, particularly in its UK-based business; in addition, ongoing focus on optimising costs and product profile resulted in positive margin development for the business. The permanent fencing business overall had a positive year as it reported both sales and operating profit ahead of prior year. Continued cost focus at our UK businesses resulted in improved sales and profitability and margins advanced in the Netherlands, despite competitive markets. The mobile fencing business, after a strong prior year, experienced another year of growth benefiting from improved building activity in its core markets. Architectural Products Despite a good demand backdrop across the platform’s main markets and sales progression, operating profit finished behind last year as a result of a lower margin product profile in some markets. In the Benelux, trading advanced in an overall positive economic environment. For our German business, trading was broadly in line with last year while results were positively impacted by improved pricing and operational performance. In Poland, our operations experienced strong demand, albeit for some lower margin products, and with good volume growth sales finished ahead of the prior year. * EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F | 2017
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. ** Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements. *** Activities, sector exposure and end-use balance are based on sales.
CRH Annual Report and Form 20-F | 2017 Products and Services Locations
CRH Annual Report and Form 20-F | 2017 Operations Review - Europe Distribution Prior Year 2016
General Builders Merchants Overall, like-for-like sales for our General Builders Merchants business declined in 2016 but operating profit remained stable. Challenging market circumstances in the Swiss business, where margin improvements and strong cost control could not fully compensate for lower sales levels, resulted in a decline in profitability. Trading in the Netherlands was strong as a result of increasing overall demand and delivery on performance improvement projects. Sales at our German business were stable, in line with market circumstances. Despite a recovering trend in the new residential market, performance in the French business was impacted by unfavourable weather patterns (including flooding) in the Paris area and a competitive market which resulted in a decline in sales and profitability compared to 2015. In Austria, improvements in pricing and product mix, as well as the closure of some branches led to improved results. DIY (Do-It-Yourself)
Sanitary, Heating and Plumbing (SHAP) Sales for our SHAP business were flat compared to 2015, with good progress in Belgium and Germany offset by the challenging market backdrop in Switzerland. Significant cost reductions were realised in Switzerland, which partially compensated for the lower sales. Operating profit in the German and Belgian businesses improved, benefiting from higher sales levels in addition to operational improvements and procurement initiatives. * EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F | 2017 Current Year 2017
Swiss pension plan past service credit of €61 million in 2017
The commentary below excludes the Europe Distribution experienced stable sales and profit development but with mixed performances across our businesses. Overall sales were slightly ahead with a strong contribution from our General Builders Merchants business in the Netherlands which benefited from an increase in residential building volumes. In addition, our SHAP businesses in Germany and Belgium continued to gain market share in consolidating markets. These positive developments were partly offset by difficult market conditions in Switzerland. General Builders Merchants Our General Builders Merchants business showed 3% sales growth in 2017, with stable operating profit excluding depreciation. Continued increasing demand in the Netherlands combined with delivery on performance improvement projects resulted in further growth of the Dutch operating profit. Our German business showed sales growth against a flat RMI market backdrop, with profit impacted by acquisition-related costs. Market conditions in Switzerland remained challenging due to sluggish residential demand, and cost savings initiatives could not fully offset the impact of lower sales and increased pressure on trade margins. Our French business benefited from an improving residential sector and the performance in our Austrian business improved due to continued focus on our cost base. DIY (Do-It-Yourself) Our DIY business operates in the Netherlands, Belgium and Germany. Despite improving consumer confidence in these countries, competitive pressures and an increasing trend towards online sales contributed to declining store sales. Operating profit in our Netherlands business improved due to a continued focus on overhead costs and personnel productivity initiatives. Despite the opening of a new store in the Brussels area, sales and operating profit remained stable in a competitive environment. Our German DIY business performed in line with 2016, although trading was impacted by some unfavourable weather conditions at the beginning of the year. Sanitary, Heating and Plumbing (SHAP) Continued sales growth from additional pick-up locations and further investments in showrooms led to market share improvement in our German and Belgian SHAP businesses. Operating profit decreased due to declining results in Switzerland, which were partly offset by operational improvement, procurement initiatives and growth in Belgium and Germany. * EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F | 2017
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. ** Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements. *** Geography, sector exposure and end-use balance are based on sales.
CRH Annual Report and Form 20-F | 2017 Products and Services Locations
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold. †† Including the Group’s share of equity accounted investments.
CRH Annual Report and Form 20-F | 2017 Operations Review - Americas Materials Prior Year 2016
LH integration costs of €7 million were incurred in 2016 (2015: €57 million) The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015 With continued volume improvement, operational efficiencies and reduced energy costs, Americas Materials had another year of good profit growth in 2016 and delivered a strong organic operating profit.
Total volumes, including acquisition effects, increased 9% for aggregates, 3% for asphalt and 22% for readymixed concrete. This volume growth, together with a 3% average price increase in aggregates, a 4% average price increase in readymixed concrete in the US and efficient cost control resulted in While the main focus in 2016 was
cost of United States Like-for-like aggregates
Operations in the US were reorganised at the beginning of 2016 into four divisions; North, South, Central and West. The North division’s sales were down from 2015; however, with the benefit of operating efficiencies, strong cost controls and lower energy costs, operating profit in the division improved significantly in 2016. Heritage sales in the South division were 1% ahead in 2016, despite record flooding in West Virginia and Kentucky, and the impact of hurricane Matthew. Operating profit was also well ahead in the division with increased volumes contributing to margin growth. With resilient market growth in Texas in both the public and private sectors, the Central division delivered a heritage sales increase of 8% along with strong margin improvement. Like-for-like volumes in the division were ahead of 2015, with Texas in particular showing strong growth. With strong operating and overhead cost management across each product line, the West division reported heritage sales 2% ahead of 2015 along with margin and operating profit increases. Canada Sales and operating profit were ahead of 2015 with the impact of a full year of ownership of the LH Assets in 2016 augmented by a series of major projects including the Highway 407 extension in Ontario and the Turcot Highway Interchange in Montreal as well as strong backlogs. There were mixed results across different product lines and regions, with improvements in our core markets of Ontario and Quebec partially offset by margin pressures and weaker demand in our Western Canada businesses. Brazil The construction market weakened in 2016 as a result of deteriorating macroeconomic and political conditions, with overall cement consumption down 12% in the Southeast region and selling prices under continued pressure in a very competitive environment. * EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F | 2017 Current Year 2017
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015 2017 was a year of progress in Americas Materials, supported by continued economic growth across residential and non-residential sectors, while infrastructure remained stable in our markets. Despite record levels of rainfall during the year and hurricane activity experienced in Florida and Texas, both sales and operating profit increased 5%, as selling price increases were achieved across all products in North America. Aggregates had a strong finish to 2017 and together with the positive impact of acquisitions during the year, total volumes were 7% ahead, while like-for-like volumes were flat. Average price increases of 6% on a like-for-like basis combined with efficient cost control resulted in margin expansion. Margin improvement was also experienced in our readymixed concrete operations as like-for-like volumes increased 4% while overall volumes were 3% ahead, impacted by 2016 divestments in our Central division. Both like-for-like and total average prices increased by 3%. Although like-for-like asphalt volumes increased 2% and 6% on an overall basis, asphalt margins were under pressure with like-for-like average price increases unable to offset higher input costs. With pockets of increased state infrastructure spending, like-for-like sales for paving and construction services increased 1% with overall sales 7% ahead. Construction margin improved Our cement business in
United States Trading benefited from solid demand in the US and, despite some unfavourable weather, total volumes and prices increased across all products. Like-for-like sales saw a resulting 4% increase in 2017. Operating profit also increased though margin expansion in aggregates and readymixed concrete was partly offset by a decline in asphalt margins due to higher bitumen prices, a key component of asphalt mix. Our US operations are divided into four main divisions: North, South, Central and West. The North division comprises operations in 13 states, with key operations in Ohio, New York, New Jersey and Michigan. With significant precipitation as well as softer markets in Michigan and Connecticut, volumes were down across all products, although increased pricing and improved construction sales resulted in a like-for-like sales increase. Operating profit was further impacted by increased input costs, and margin declined. The South division comprises operations in 12 states with key operations in Florida, North Carolina and West Virginia. Like-for-like South division sales and operating The Central division
Canada The overall Canadian economy expanded in 2017, led by robust gains in the core markets of Ontario, Quebec and Alberta. The pace of growth was largely fuelled by improvements in oil prices and continued spending by Canadian consumers. Despite the positive environment and increases of volumes across all products, like-for-like sales were muted by regional variations in pricing and the performance within the construction business, which was impacted by adverse weather conditions Brazil Weakness in the construction market continued during 2017 due to
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. ** Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements. *** Products, sector exposure and end-use balance are based on sales.
CRH Annual Report and Form 20-F | 2017 Products and Services Locations
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
CRH Annual Report and Form 20-F | 2017 Operations Review - Americas Products Prior Year 2016
Input cost
Architectural Products
BuildingEnvelope®
Integration of the Precast In 2016, strong sales growth was achieved as specific commercial initiatives continued to deliver, along with improved demand for both private construction and public infrastructure. Operating profit increases were achieved in most markets across all concrete product
The Corporate Governance report
CRH
‘2016 Code’) and complied with its provisions in 2017. A copy of the
During the course of
year with shareholders who expressed an interest in continuing our dialogue. The broad areas of discussion during these meetings were the resolutions to be considered at the 2017 AGM, auditor independence, succession planning for the Board and the policy for non-executive Director appointments, the Board’s role in the area of talent management, CRH’s focus on diversity, both in terms of Board appointments and across the Group generally, the timing of the During the course of 2018, the Audit
The Directors’ Remuneration Report (on page 72) provides further detail in relation to shareholders’ perspectives on CRH’s remuneration structures. Board Focus Areas and Priorities During the course of 2017, the Board continued to focus on risk management, IT and cyber security, talent management, succession planning and strategy. In relation to talent management, in particular, the Board receives regular updates from the Chief Executive and a committee of a small group of non-executive Directors works closely with him in relation to key senior executive appointments. The Board Safety continues to be a key area of focus for the Diversity and Board Renewal
is a key factor when considering Board renewal. The
Independence and The
2018 AGM. Conclusion
Chairman February 2018
* The
The primary (premium) listing of CRH plc is on the London Stock Exchange (LSE),
70.
CRH Annual Report and Form 20-F | 2017
Corporate Governance Report Audit Committee Report
The Board has On behalf of the Committee, I am pleased to introduce the Audit Committee Report for the year ended 31 December 2017. The purpose of this report is to provide shareholders with an insight into the workings of, and principal matters considered by, the Committee in 2017. General details in relation to the roles and responsibilities of the Committee, its operation and the policies applied by it can be found in the Governance Appendix. Table 1 on page 65 outlines the key areas that
The Committee currently consists of three non-executive Directors considered by the Board to be independent*. The biographical details of each member are set out on pages 60 and 61. Together, the members of the Committee bring a broad range of relevant experience and expertise from a variety of industries which is vital in supporting effective governance. External Auditors Tender/Rotation of Audit As outlined in last year’s Audit Committee Report, the Committee has recommended to the Board that a tender process for the external audit be conducted during 2018. During 2017, the Committee considered the Effectiveness The Committee, on behalf of the Board, is responsible for the relationship with EY and for monitoring the effectiveness and quality of the external audit process. The Committee’s primary means of assessing the effectiveness of the external audit process is by monitoring performance against the Non-audit Fees In order to ensure auditor independence and objectivity, the Committee has a policy on the provision of audit and non-audit services by the
In 2017, the external auditors provided a number of audit-related services, including Sarbanes-Oxley Section 404 attestation**, and non-audit services, including due diligence services associated with proposed acquisitions and disposals. EY were also engaged during 2017 in a number of jurisdictions in which the Group operates to provide help with local tax compliance, advice on taxation laws and
Internal Audit
The Committee also considered and approved the proposed Internal Audit strategy for the next five years, which included detailed consideration of the focus, structure and resources required by the Internal Audit function. Audit Committee Effectiveness and Priorities for 2018 During 2017, the Committee and the Board reviewed the operation, performance and effectiveness of the Committee and I am pleased to confirm that the Committee continues to operate effectively. As outlined in the Nomination & Corporate Governance Committee section, an external
William J. Teuber, Jr. Chairman of Audit Committee Audit Committee Financial Expert (as determined by the Board)
CRH Annual Report and Form 20-F | 2017 I would like to thank my fellow Committee members for their commitment and input to the work of the Committee during 2017. While the external audit tender process will obviously be an important issue for the Committee in 2018, the Committee will also continue to focus on internal control, external audit planning, IT governance and cyber security and enterprise risk management. William J. Teuber, Jr. Chairman of Audit Committee February 2018
CRH Annual Report and Form 20-F | 2017
Corporate Governance Report Audit Committee
Report - continued
Nomination & Corporate Governance Committee Report
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Corporate Governance Report - continued
Nomination & Corporate Governance Committee Membership
The HeadNomination & Corporate Governance Committee consists of Internal Audit reportsfive non-executive Directors, considered by the Board to be independent. The biographical details of each member are set out on pages 59 to 61. The Chief Executive normally attends meetings of theAudit Committee Committee.
Board of Directors
Membership Structure of the Board
We consider the current size and composition of the Board to be within a range which is appropriate. The spread of nationalities of the Directors reflects the geographical reach of the Group and we consider that the Board as a whole has the appropriate blend of skills, knowledge and experience, from a wide range of industries, regions and backgrounds, necessary to lead the Group. Section 1 of the Governance Appendix on the findings of internal audit reviews and related follow-upsCRH website (www.crh.com) contains further details on the Board’s structures and the outcomeBoard’s policies with regard to the appointment and retirement of control testing in connection with Section 404Directors.
Role and Responsibilities of the Sarbanes-Oxley Act 20022.Board
In recent years, there has been a significant increase inThe Board is responsible for the resources allocated to IT Audit. The Committee meets regularly with the senior IT Audit Manager to discuss IT Audit strategy, the key areas of focusleadership, oversight, control, development and agrees the annual IT Audit workplan.
Assessmentslong-term success of the Internal Audit function have been carried out periodically by managementGroup. It is also responsible for instilling the appropriate culture, values and validated by an independent third party assessor. An external assessment, which principally involved a series of interviews with key stakeholdersbehaviour throughout the organisation, includingorganisation. There is a formal schedule of matters reserved to the members of theAudit Committee, was commenced in December 2014. The results of that assessment will be presented to theAudit CommitteeBoard for consideration and decision. This includes the matters set out in table 4.
The Group’s strategy, which is regularly reviewed by the first half of 2015.
Risk managementBoard, and internal controlsbusiness model are summarised on pages 10 to 13.
The Board has delegated some of its responsibilities to Committees of the Board. While responsibility for monitoring the effectiveness of the Group’s risk management and internal control systems has been delegated to theAudit Committee. Further detailsCommittee*, the Board retains ultimate responsibility for determining the Group’s risk appetite and tolerance, and annually considers a report in relation to the Committee’smonitoring, controlling and reporting of
identified risks and uncertainties. In addition, the Board receives regular reports from the Chairman of the Audit Committee in relation to the work in this area are set outof that Committee in the section on Risk Management and Internal Controls on page 105.area of risk management.
External Auditors
There are no contractual obligations which act to restrictIndividual Directors may seek independent professional advice, at the Committee’s choice of external auditor. The Committee periodically considers the risk of withdrawal by Ernst & Young from the market and the potential impact on the Group, were that eventuality to materialise.
TheAudit Committee has put in place safeguards to ensure that the independenceexpense of the audit is not compromised. Such safeguards include:
Corporate Governance Report| continued
The Group external audit engagement partner is replaced every five years and other senior audit staff are rotated every seven years.Company, in the furtherance of their duties as a Director.
The Group has a Directors’ and Officers’ liability insurance policy governing the conductin place.
Chairman
Nicky Hartery was appointed Chairman of non-audit work by the auditors1. The policy, which was updated in 2012, is available on the CRH website. Under the policy, the external auditors are prohibited from performing services where they:
Other than the above, the Group doesin 2012. On his appointment as Chairman, he met the independence criteria set out in the 2016 Code. Although he holds a number of other directorships, the Board has satisfied itself that these do not impose an automatic banimpact on his role as Chairman. Changes in Mr. Hartery’s time commitments in the external auditors undertaking non-audit work. The external auditorspast 12 months are permittedoutlined in the Nomination & Corporation Governance Committee section on page 67.
Policy on Diversity
We are committed to provide non-audit servicesensuring that are not, or are not perceived to be, in conflict with auditor independence or prohibited by Rule 2-01 of SEC Regulation S-X, provided they have the skillBoard is sufficiently diverse and competence to carry out the work and are considered by the Committee to be the most appropriate party to undertake suchappropriately balanced. In its work in the best interestsarea of Board renewal, the Group.Nomination & Corporate Governance Committee looks at the following four criteria when considering non-executive Director candidates:
The engagement of
In 2014, the external auditors provided a number of audit-related services, including Sarbanes-Oxley Section 404 attestation, and non-audit services, including due diligence services associated with proposed acquisitions and disposals. Ernst & Young were also engaged during 2014 in a number of jurisdictionsregions in which the Group operates or into which it intends to provide help with local tax compliance, advice on taxation lawsexpand;
During the ongoing process of Board renewal, each, or a combination, of these factors can take priority.
In 2014, the Board set itself a goal of increasing the number of female Directors to 25%. The progress made since is shown in table 6.
11%To date, the Board has not set any policy regarding age. The ages of the total feeDirectors range from 49 to 67, which the Nomination & Corporate Governance Committee believes is appropriate at the current time.
Committees
The Board has established five permanent Committees to assist in 2014, did not compromise their independence or integrity. Detailsthe execution of its responsibilities. The current permanent Committees are:
In addition, a Safety, Environmental & Social Responsibility Committee will be set up during the course of 2018. Ad-hoc Committees are formed from time to time to deal with specific matters.
Each of the amounts paidpermanent Committees has Terms of Reference**, under which authority is delegated to them by the Board. The Chairman of each Committee reports to the external auditors during the year for auditBoard on its deliberations and other servicesminutes of all Committee meetings are set out in note 3circulated to the Consolidated Financial Statements on page 150.
all Directors. TheAudit Committee’s primary means of assessing the effectiveness Chairmen of the external audit process is by monitoring performance againstCommittees attend the agreed audit plan. In addition, each year the Committee considers (i) the experienceAGM and knowledgeare available to answer questions from shareholders.
Each of the Ernst & Young audit team; (ii) the resultsCommittees has reviewed their respective Terms of post-audit interviews with management and theAuditReference.
The Terms of Reference of each Committee Chairman; (iii) the transparency reports issued under EU regulations by Ernst & Young Ireland; and (iv) where applicable, relevant reports by regulatory bodies are available on the performance of Ernst & Young. These annual procedures are supplemented by periodic formal reviews of the performance of Ernst & Young, the most recent of which took place in late 2014. The 2014 review captured the views of relevant stakeholders across the Group and members of the Committee. The preliminary results indicated a high level of satisfaction with Ernst & Young and the services provided by them to CRH. TheAudit Committee will consider a full report on the findings and recommendations arising from the review in the first half of 2015.
Matters reserved to the Board
Table 4 | ||||||||
• Appointment of Directors | ||||||||
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102 CRH
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* In accordance with Section 167(7) of the Companies Act 2014.
** The Terms of Reference of these Committees comply fully with the 2016 Code; CRH considers that the Terms of Reference are generally responsive to the relevant NYSE rules, but may not address all aspects of these rules.
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Corporate GovernanceCRH Annual Report and Form 20-F | continued2017
Nomination & Corporate Governance Committee Members
The biographies of the members of theNomination & Corporate Governance Committee are set out on pages 87 to 89.
The tenure of each Committee member is as follows:
Membership of the CRH Board (as at 28 February 2018) | Table 5 | |||
% Female Directors at 31 December
| Table 6
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2013
| 2014
| 2015
| 2016
| 2017
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15%
| 23% | 29% | 33% | 30% |
Attendance at meetings during the year ended 31 December 2017
| Table 7
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Name | Board | Acquisitions | Audit | Finance | Nomination & Corporate Governance | Remuneration | ||||||||||||||||||
Total | Attended | Total | Attended | Total | Attended | Total | Attended | Total | Attended | Total | Attended | |||||||||||||
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E.J. Bärtschi (i) | 6 | 6 | - | - | 7 | 7 | 5 | 5 | - | - | - | - | ||||||||||||
M. Carton (ii) | 4 | 4 | 4 | 4 | - | - | 3 | 3 | - | - | - | - | ||||||||||||
N. Hartery | 6 | 6 | 5 | 5 | - | - | 5 | 5 | 5 | 5 | - | - | ||||||||||||
P.J. Kennedy | 6 | 6 | 5 | 5 | - | - | - | - | 5 | 5 | 9 | 9 | ||||||||||||
D.A. McGovern, Jr. | 6 | 6 | - | - | - | - | - | - | 5 | 5 | 9 | 9 | ||||||||||||
H.A. McSharry | 6 | 6 | - | - | 7 | 7 | - | - | - | - | 9 | 9 | ||||||||||||
A. Manifold | 6 | 6 | 5 | 5 | - | - | - | - | - | - | - | - | ||||||||||||
S. Murphy | 6 | 6 | 5 | 5 | - | - | 5 | 5 | - | - | - | - | ||||||||||||
G.L. Platt (iii) | 6 | 6 | - | - | - | - | - | - | 4 | 4 | 6 | 6 | ||||||||||||
L.J. Riches | 6 | 6 | - | - | - | - | - | - | 5 | 5 | 9 | 9 | ||||||||||||
H. Th. Rottinghuis | 6 | 6 | 5 | 5 | 7 | 7 | - | - | - | - | - | - | ||||||||||||
W.J. Teuber, Jr. | 6 | 6 | - | - | 7 | 7 | 5 | 5 | - | - | - | - | ||||||||||||
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(i) | Resigned December 2017 |
(ii) | Retired August 2017 |
(iii) | Appointed January 2017 |
All Directors attended the 2017 AGM.
69 |
CRH Annual Report and Form 20-F | 2017
Ms. L. Riches joined theNomination &Corporate Governance Committee following her appointmentReport - continued
Substantial Holdings
The Company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. The major shareholders do not have any special voting rights. Details of the substantial holdings as at 31 December 2017 are provided in table 8. The Company has not been advised of any changes in holdings since 31 December 2017.
Stock Exchange Listings
CRH, which is incorporated in Ireland and subject to Irish company law, has a premium listing on the London Stock Exchange (LSE), a secondary listing on the Irish Stock Exchange (ISE) and its American Depositary Shares are listed on the New York Stock Exchange (NYSE).
Regulatory, Compliance
& Ethics
CRH’s Regulatory, Compliance & Ethics (RCE) programmes support the Group in operating sustainably and consistently to its core values of integrity, honesty and respect for the law.
RCE provides support on a range of matters including compliance risk assessments, export controls and sanctions processes, monitoring of hotline calls, competition/antitrust law as well as preparation for the implementation of the European Union General Data Protection Regulations (GDPR).
Awareness and Training
In line with our commitment to maintain high ethical business standards, the Code of Business Conduct (CoBC) and Advanced
Compliance Training (ACT - including Anti-bribery, Anti-Fraud, Anti-theft and Competition/Antitrust) e-Learning modules were reviewed, redesigned and distributed in 23 languages during the year.
In addition, new GDPR and Data Privacy e-Learning modules were developed for general awareness amongst the CRH businesses and also for specific business functions.
During 2017, RCE has worked with HR, IT, legal and business teams to develop policies, guidance and implementation plans as part of preparations to address the impact of GDPR. A robust communication plan is in place to complement the training programmes and promote awareness among employees.
Hotline
A 24/7 multi-lingual confidential “Hotline” facility called “Speak Up” is available to employees to report issues that concern them, for example issues concerning business ethics or conduct. The “Hotline” is maintained by an independent operator.
All reports received via the Hotline (or through other channels) are investigated with appropriate actions taken based on investigation findings. The collective goal is to ensure that the message is clearly understood that at CRH “there is never a good business reason to do the wrong thing”.
Communications with Shareholders
Communications with shareholders are given high priority and the Group devotes considerable time and resources each year to
shareholder engagement. We recognise the importance of effective dialogue as an integral element of good corporate governance. The Investor Relations team, together with the Chief Executive, Finance Director and other senior executives, regularly meet with institutional shareholders (each year covering over 60% of the shareholder base). Detailed reports on the issues covered in those meetings and the views of shareholders are circulated to the Board on 1 March 2015.
The factors taken into account by theNomination & Corporate Governance Committee in considering the compositionafter each group of meetings. Table 10 provides a brief outline of the Boardnature of the activities undertaken by our Investor Relations team.
In addition to the above, major acquisitions are notified to the Stock Exchanges in accordance with the requirements of the Listing Rules and development updates, giving details of other acquisitions completed and major capital expenditure projects, are issued periodically.
During 2017, the Chairman, Senior Independent Director and Company Secretary again participated in a number of meetings with some of the Group’s major shareholders, details of which are set out in the policy for Board renewal which is detailedChairman’s letter on page 93.62.
The Committee reviewed its TermsWe also respond throughout the year to correspondence from shareholders on a wide range of Reference in December 2014issues.
Substantial Holdings | Table 8 | |
As at 31 December 2017, the Company had received notification of the following interests in its Ordinary Share capital, which were equal to, or in excess of, 3%: |
31 December 2017 | 31 December 2016 | 31 December 2015 | ||||||||||
Name | Holding/ Voting Rights | % at year end | Holding/ Voting Rights | % at year end | Holding/ Voting Rights | % at year end | ||||||
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Baillie Gifford Overseas Limited and Baillie Gifford & Co. | Holding below 3% | 33,171,299 | 3.98 | 41,193,797 | 5.00 | |||||||
BlackRock, Inc. (i) | 75,119,286 | 8.95 | 74,809,499 | 8.98 | 74,030,167 | 8.99 | ||||||
Standard Life Aberdeen plc. | 25,643,747 | 3.05 | Holding below 3% | Holding below 3% | ||||||||
UBS AG | 26,380,604 | 3.14 | 26,380,604 | 3.16 | 26,380,604 | 3.20 | ||||||
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(i) | BlackRock, Inc. has advised that its interests in CRH shares arise by reason of discretionary investment management arrangements entered into by it or its subsidiaries. |
70 |
CRH Annual Report and determined that no changes were required. The Terms of Reference, which were last updated in December 2013, are available on the CRH website.
Form 20-F | Remuneration Committee2017
The Directors’ Remuneration Report on pages 108 to 131 contains an overview of the responsibilities and activities of theRemuneration Committee during 2014.
Under its Terms of Reference, theRemuneration Committee must be made up of at least three members, all of whom must be independent non-executive Directors. Members of the Committee can serve for up to a maximum of three terms of three years. The Group Chairman may be a member of the Committee provided he was independent on appointment as Chairman and the Board
continues
US Listing - Additional Information | Table 9 |
Additional details in relation to consider him to be independent. Only members of the Committee have the right to attend Committee meetings. However, other individuals such as the Chairman, if not a member of the Committee, the Chief Executive, the Group Human Resources and Talent Development Director and external advisers may be invited to attend for all or part of any meeting as and when appropriate. The Chief Executive is fully consulted about remuneration proposals.
Remuneration Committee Members
The biographies of the members of theRemuneration CommitteeCRH’s general corporate governance practices are set out in the Governance Appendix, which has been filed as an exhibit to the Annual Report on pages 87 to 89.Form 20-F as filed with the SEC. For the purposes of the Annual Report on Form 20-F, the Governance Appendix, and in particular the following sections thereof, are incorporated by reference herein:
The tenure of each Committee member is as follows:Section 1 - Frequently Asked Questions
Section 2 - Operation of the Board’s Committees
In addition, details of the executive Directors’ service contracts and the policy for loss of office are set out in the 2016 Directors’ Remuneration Policy, a copy of which has been filed as an exhibit to the Annual Report on Form 20-F as filed with the SEC and is incorporated by reference herein.
Investor Relations Activities | ||
Table 10
Ms. L. Riches joined theRemuneration Committee following her appointment to the Board on 1 March 2015.
The Committee reviewed its Terms of Reference in December 2014 and determined that no changes were required. The Terms of Reference, which were last updated in December 2013, are available on the CRH website.
Acquisitions Committee
Acquisitions Committee Members
The biographies of the members of theAcquisitions Committee are set out on pages 87 to 89.
The tenure of each Committee member is as follows:
Mr. P. Kennedy and Mr. H. Rottinghuis were appointed to the Committee on 25 February 2015.
The attendance atAcquisitions Committeemeetings is set out in table 11 below.
Role and Responsibilities
TheAcquisitions Committee has been delegated authority by the Board to approve acquisitions and disposals and large capital expenditure projects up to agreed limits.
Finance Committee
Finance Committee Members
The biographies of the members of theFinance Committeeare set out on pages 87 to 89.
The tenure of each Committee member is as follows:
Mr. E.J. Bärtschi and Ms. H.A. McSharry were appointed to the Committee on 25 February 2015.
The attendance atFinance Committeemeetings is set out in table 11 below.
Role and Responsibilities
TheFinance Committee is responsible for:
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Attendance at Board and Board Committee meetings during the year ended 31 December 2014
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Table 11
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Board
| Acquisitions | Audit | Finance | Nomination | Remuneration | |||||||||||||||||||||||
No. of Meetings | No. of Meetings | No. of Meetings | No. of Meetings | No. of Meetings | No. of Meetings | |||||||||||||||||||||||
Total | Attended | Total | Attended | Total | Attended | Total | Attended | Total | Attended | Total | Attended | |||||||||||||||||
E.J. Bärtschi | 8 | 8 | 10 | 10 | ||||||||||||||||||||||||
M. Carton | 8 | 8 | 8 | 8 | 7 | 7 | ||||||||||||||||||||||
W.P. Egan | 8 | 7 | 7 | 7 | 8 | 8 | ||||||||||||||||||||||
U-H. Felcht | 8 | 7 | 8 | 8 | 7 | 7 | ||||||||||||||||||||||
N. Hartery | 8 | 8 | 8 | 8 | 7 | 7 | 7 | 7 | 8 | 8 | ||||||||||||||||||
J.M. de Jong* | 2 | 2 | 1 | 1 | 2 | 2 | ||||||||||||||||||||||
J.W. Kennedy | 8 | 8 | 2 | 2 | 5 | 5 | 7 | 7 | ||||||||||||||||||||
D.A. McGovern, Jr. | 8 | 8 | 10 | 10 | ||||||||||||||||||||||||
H.A. McSharry | 8 | 8 | 10 | 10 | ||||||||||||||||||||||||
A. Manifold | 8 | 8 | 8 | 8 | 7 | 7 | ||||||||||||||||||||||
D.N. O’Connor | 8 | 8 | 5 | 5 | 7 | 7 | 8 | 8 | ||||||||||||||||||||
H. Th. Rottinghuis** | 8 | 8 | 5 | 4 | ||||||||||||||||||||||||
M.S. Towe | 8 | 8 | ||||||||||||||||||||||||||
* Retired May 2014 | ||||||||||||||||||||||||||||
** Appointed to Board February 2014 | ||||||||||||||||||||||||||||
Note: See summary of Board Committee changes in table 10 on page 103.
|
Corporate Governance Report| continued
Risk Management and Internal Control
The Board has delegated responsibility for the monitoring of the effectiveness of the Group’s risk management and internal control systems to theAudit Committee1. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, in the case of internal control systems, can provide only reasonable and not absolute assurance against material misstatement or loss.
The Consolidated Financial Statements are prepared subject to oversight and control of the Finance Director, ensuring correct data is captured from Group locations and all required information for disclosure in the Consolidated Financial Statements is provided. An appropriate control framework has been put in place around the recording of appropriate eliminating journals and other adjustments. The Consolidated Financial Statements are reviewed by the CRH Financial Reporting and Disclosure Group prior to being reviewed by theAudit Committee and approved by the Board of Directors.
The Directors confirm that the Group’s ongoing process for identifying, evaluating and managing its principal risks and uncertainties (as outlined on pages 52 to 63) is in accordance with the updated Turnbull guidance(Internal Control: Revised Guidance for Directors on the Combined Code) published in October 2005. The process has been in place throughout the accounting period and up to the date of approval of the Annual Report and financial statements.
Group management has responsibility for major strategic development and financing decisions. Responsibility for operational issues is devolved, subject to limits of authority, to product group and operating company management. Management at all levels is responsible for internal control over the business functions that have been delegated. This embedding of the system of internal control throughout the Group’s operations ensures that the organisation is capable of responding quickly to evolving business risks, and that significant internal control issues,
should they arise, are reported promptly to appropriate levels of management.
During the year, the Board andAuditCommitteereceived, on a regular basis, reports from management on the key risks to the business and the steps being taken to manage such risks. They also considered whether the significant risks faced by the Group were being identified, evaluated and appropriately managed, having regard to the balance of risk, cost and opportunity. In addition, theAudit Committee met with internal auditors on a regular basis and satisfied itself as to the adequacy of the Group’s internal control system; met with the Chairman of theRemuneration Committee to ensure that the Group’s remuneration policies and structures were appropriate and in line with the Group’s risk tolerance; and reviewed the principal risks and uncertainties outlined on pages 52 to 63. TheAudit Committee also met with, and received reports from, the external auditors. The Chairman of theAudit Committee reported regularly to the Board on all significant issues considered by the Committee and the minutes of its meetings were circulated to all Directors.
The Directors confirm that, in addition to the monitoring carried out by theAudit Committee under its Terms of Reference, they have reviewed the effectiveness of the Group’s risk management and internal control systems up to and including the date of approval of the financial statements. This had regard to all material controls, including financial, operational and compliance controls that could affect the Group’s business.
Management’s Report on Internal Control over Financial Reporting
In accordance with the requirements of Rule 13a-15 of the US Securities Exchange Act, the following report is provided by management in respect of the Company’s internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
|
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the US Securities Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Company’s published Consolidated Financial Statements for external purposes under generally accepted accounting principles.
In connection with the preparation of the Company’s annual Consolidated Financial Statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of 31 December 2014, based on criteria established inInternal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organisations of the Treadway Commission.
As permitted by the Securities and Exchange Commission, the Company has elected to exclude an assessment of the internal controls of acquisitions made during the year 2014. These acquisitions, which are listed in note 30 to the Consolidated Financial Statements, constituted 0.7% of total assets and 1.2% of net assets, as of 31 December 2014 and 0.6% and 0.8% of revenue and Group profit for the financial year, respectively, for the year then ended.
Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of 31 December 2014, the Company’s internal control over financial reporting is effective.
Our auditors, Ernst & Young, a registered public accounting firm, who have audited the Consolidated Financial Statements for the year ended 31 December 2014, have audited the effectiveness of the Company’s internal controls over financial reporting. Their report, on which an unqualified opinion is expressed thereon, is included on page 134.
Changes in Internal Control over Financial Reporting
During 2014, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15 that occurred during the period covered by this Annual Report that
1 In accordance with Regulation 91(6)(b) of the European Communities (Statutory Audits) (Directive 2006/43) Regulations 2010.
Corporate Governance Report| continued
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Evaluation of Disclosure Controls and Procedures
Management has evaluated the effectiveness of the design and operation of the disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) as of 31 December 2014. Based on that evaluation, the Chief Executive and the Finance Director have concluded that these disclosure controls and procedures were effective as of such date at the level of providing reasonable assurance.
In designing and evaluating our disclosure controls and procedures, management, including the Chief Executive and the Finance Director, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
The Group Compliance & Ethics (C&E) programme continues to develop in scope and reach. The structure of the C&E organisation was realigned in 2014 to serve the new CRH Europe organisation. A CRH Europe Head of C&E was appointed from the existing Compliance pool. Business Unit Compliance Coordinators (BUCCs) were also appointed for Heavyside East, Heavyside West, Lightside and Distribution and a European Compliance Officer was appointed to assist the European Head of C&E.
CRH’s Code of Business Conduct1 (COBC) and related policies were updated and approved by the Board and the C&E team’s primary focus since then has been to ensure all relevant employees receive appropriate training. In the current training cycle over 32,000 employees have participated in COBC training and a further 11,000 have also undertaken advanced instruction on competition law and anti-bribery, corruption and fraud.
In addition, our development teams and procurement teams have received appropriate instruction on both our C&E Mergers, Acquisitions and Joint Venture Due Diligence Programme and our Ethical Procurement Code. Our Supplier Code of Conduct was developed to communicate our minimum Corporate Social Responsibility requirements to existing and new suppliers to the Group and to outline how we ensure compliance with these requirements. Similar procedures have been developed for any engagements
• |
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Formal |
• | Investor |
• | Industry Conferences: |
• | Investor Briefings: |
• | Media Briefings: |
with business partners. Further guidelines developed during the year include a Competition Law Toolbox – which gathers into one place various CRH guidelines, policies and notes to help the businesses comply with Competition Law requirements.
The following existing policies are under review;
The COBC has scored an “A” rating by New York Stock Exchange Governance Services and incorporates some welcome new features, including learning aids, an ethical-decision making guide and a clear focus on the core values of the Group: Integrity, Honesty and Respect for the law. It was translated and distributed during 2014 and related training is being migrated to an on-line module. A robust communication plan is in place to complement the training programme. A multi-lingual “hotline” facility – “Speak Up” is also available to employees as a secure channel to report ethical issues that concern them or suspected violations of our Codes. All hotline reports received are fully reviewed and investigated by appropriately qualified personnel.
The C&E programme has been integrated into our standard Internal Audit procedures and forms part of an annual management certification process. Its effectiveness is also regularly reviewed by the C&E function with appropriate oversight from senior management and theAudit Committee. The collective goal is to ensure the message is clearly understood that at CRH “there is never a good business reason to do the wrong thing”.
Sustainability and Corporate Social Responsibility
Sustainability and Corporate Social Responsibility (CSR) concepts are embedded in all CRH operations and activities.
Excellence in the areas ofhealth & safety, environment & climate change, governance and people & community is a daily priority of line management. The Group’s policies and implementation systems are summarised on pages 47 to 51. During 2014, CRH was again recognised by several leading socially responsible investment (SRI) agencies as being among the leaders in its sector in these important areas.
Communications with Shareholders
Communications with shareholders are given high priority and the Group devotes considerable time and resources each year to shareholder engagement. We recognise the importance of effective dialogue as an integral element of good corporate governance. The Investor Relations team, together with the Chief Executive, Finance Director and other senior executives, meet regularly with institutional shareholders (each year covering over 50% of shareholder base). Detailed reports on the issues covered in those meetings and the views of shareholders are circulated to the Board after each group of meetings. Table 12 above provides a brief outline of the nature of the activities undertaken by our Investor Relations team.
During 2014, the Chairman, Senior Independent Director and Company Secretary participated in a number of conference calls with some of the Group’s major shareholders in advance of the 2014 Annual General Meeting. The meetings were organised to provide those shareholders with an opportunity to discuss the resolutions on the 2014 Annual General Meeting agenda and corporate governance matters generally.
In addition to the above, major acquisitions are notified to the Stock Exchanges in accordance with the requirements of the Listing Rules and development updates, giving details of other acquisitions completed and major capital expenditure projects, are issued periodically (typically in January and July each year).
In addition, we respond throughout the year to
|
|
correspondence from shareholders on a wide range of issues.
The Chief Executive made a presentation to shareholders at the 2014 Annual General Meeting on CRH’s businesses.
General Meetings
The Company’s Annual General Meeting (AGM), which is held in Ireland, affords individual shareholders the opportunity to question the Chairman and the Board. All Directors attended the 2014 AGM. The Notice of the AGM, which specifies the time, date, place and the business to be transacted, is sent to shareholders at least 20 working days before the meeting. At the meeting, resolutions are voted on by way of a poll using an electronic voting system. The votes of shareholders present at the meeting are added to the proxy votes received in advance and the total number of votes for, against and withheld for each resolution are announced. This information is made available on the Company’s website following the meeting.
All other general meetings are called Extraordinary General Meetings (EGMs). An EGM called for the passing of a special resolution requires at least 21 clear days’ notice.
A quorum for a general meeting of the Company is constituted by five or more shareholders present in person and entitled to vote. The passing of resolutions at a meeting of the Company, other than special resolutions, requires a simple majority. To be passed, a special resolution requires a majority of at least 75% of the votes cast.
Shareholders have the right to attend, speak, ask questions and vote at general meetings. In accordance with Irish company law, the Company specifies record dates for general meetings, by which date shareholders must be registered in the Register of Members of the Company to be entitled to attend. Record dates are specified in the notes to the notice of a general meeting. Shareholders may exercise their right to vote by appointing, by electronic means or in writing, a proxy/proxies to vote some or all of their shares. The requirements for the receipt of valid proxy forms are set out in the notes to the notice convening the meeting and in the notes on the proxy form. A shareholder, or a group of shareholders, holding at least 5% of the issued share capital of the Company, has the right to requisition a general meeting. A shareholder, or a group of shareholders, holding at least 3% of the issued share capital of the Company, has the right to put an item on the agenda of an AGM or to table a draft resolution for inclusion in the agenda of a general meeting, subject to any contrary provision in Irish company law.
Going Concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategy Review section on pages 34 to 43. The financial position of the Company, its cash flows, liquidity position
and borrowing facilities are described in the Business Performance Review on pages 66 to 76. In addition, notes 20 to 24 to the Consolidated Financial Statements include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit, currency and liquidity risks.
The Company has considerable financial resources and a large number of customers and suppliers across different geographic areas and industries. In addition, the local nature of building materials means that the Group’s products are not usually shipped cross-border.
Having assessed the relevant business risks, the Directors believe that the Company is well placed to manage these risks successfully, and they have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Consolidated Financial Statements.
Compliance Statement
Non-US companies such as CRH are exempt from most of the corporate governance rules of the NYSE. In common with companies listed on the Irish Stock Exchange and the London Stock Exchange, CRH’s corporate governance practices reflect, inter alia, compliance with (a) domestic company law; (b) the Listing Rules of the UK Listing Authority and the Irish Stock Exchange; and (c) the Code, which is appended to the listing rules of the London and Irish Stock Exchanges.
CRH has adopted a robust set of Board governance principles, which reflect the Code and its principles-based approach
to corporate governance. Accordingly, the way in which CRH makes determinations of Directors’ independence differs from the NYSE rules. The Board has determined that, in its judgement, all of the non-executive Directors are independent. In doing so, however, the Board did not explicitly take into consideration the independence requirements outlined in the NYSE’s listing standards.
Shareholder Approval of Equity Compensation Plans
The NYSE rules require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. CRH complies with Irish requirements, which are similar to the NYSE rules. The CRH Board, however, does not explicitly take into consideration the NYSE’s detailed definition on what are considered “material revisions”.
The following are available on the CRH website |
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| Table 11 |
Corporate Governance
Investors
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CRH Annual Report and Form 20-F | 2017
The main focus of the Committee is to:
– determine and agree with the Board the Group’s policy on executive remuneration;
– seek shareholder approval for the policy at least every three years;
– ensure that CRH’s remuneration structures are fair and responsible; and
– consider and approve remuneration packages for the executive Directors and the Chairman.
In addition, the Committee:
– recommends and monitors the level and structure of remuneration for senior management; and
– oversees the preparation of this Directors’ Remuneration Report.
In considering remuneration levels for executive Directors particularly, the Committee takes into account remuneration trends across the CRH Group, which has a diverse range of operations in 34 countries, in geographic regions which are often at different stages in the economic cycle.
Additional details in relation to the Committee, its role and responsibilities and how it operates are included in the Remuneration Committee section of the Corporate Governance report on page 104.
The Chief Executive attends meetings except when his own remuneration is being discussed.
Directors’ Remuneration Report
108 CRHDirectors’ Remuneration Report
Chairman’s Overview
Introduction
As Chairman of the Remuneration Committee, I am pleased to present the Directors’ Remuneration Report for the year ended 31 December 2017. As in previous years, the main report is split into three sections:
We have also included a remuneration summary on page 73, which provides an overview of the key remuneration outcomes for 2017, as well as the proposed remuneration arrangements for 2018.
2017 Performance
2017 was a year of continued profit growth for CRH. With a focus on performance improvement and operational delivery, margins
and returns were ahead of 2016 in our Americas and Europe Divisions. Supported by strong operational cash generation we continued to deliver value through efficient capital management.
2017 Performance Highlights | |||||||
| 226.8 cent | ||||||
Operating Cash Flow: | €2.2 billion | ||||||
Return on Net Assets: | 10.6% | ||||||
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| 17.2%
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Incentive Outcomes for 2017
The Group’s performance in 2017, as well as individual performance during the year, has translated into annual bonus payouts of between 90% and 96% of the maximum opportunity.
The Committee also determined that 78.7% of the awards made in 2015 under the 2014 Performance Share Plan (PSP) had met the relevant performance criteria as performance in relation to TSR (75% of the award) and cumulative cash flow (25% of the award) metrics exceeded the relevant threshold targets for vesting. The Committee considers that the vesting outcome is reflective of the Group’s underlying performance over the applicable performance period (1 January 2015 to 31 December 2017). In accordance with the Policy, the 2015 awards for the executive Directors will vest in 2020 on completion of an additional two-year hold period (see page 84 for more details).
Further details in relation to the remuneration received by the executive Directors are set out in the Annual Report on Remuneration on pages 75 to 95.
Shareholder Engagement
The Committee is committed to engaging with shareholders to understand their views on remuneration. Prior to the AGM in 2017 we received feedback from investors holding approximately one third of the shares in issue on a range of topics including the Policy and its implementation. We continued to engage with shareholders in 2017; we subsequently contacted investors holding 70% of the shares in issue and received valuable feedback not only on the Committee’s specific proposals for 2018 but on our
approach to remuneration generally. I appreciate the time taken by shareholders to engage with the Committee on remuneration matters.
The outcome of the vote on the Annual Report on Remuneration at the 2017 AGM is shown in table 15. We will consider the full range of views from shareholders when we begin the process of reviewing the Remuneration Policy, which is scheduled to be voted on by shareholders at the 2019 AGM.
Remuneration in 2018
In 2017, the Committee carried out a review of Senan Murphy’s Finance Director remuneration package. The drivers for the review were as follows:
The review highlighted that Senan’s current overall remuneration package was significantly below market when compared to similar roles in FTSE 50 companies (excluding financial services) and sector peer companies, driven primarily by a lower quartile salary compared with market.
The Committee, therefore, believed an adjustment was necessary and consulted with shareholders on a proposal to increase his base salary to broadly bring him into line with the market. While the majority of shareholders who responded to the consultation were in favour of the proposal put forward, a number
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report |continued
individualof shareholders queried whether the level of salary increase proposed was appropriate in a single year, particularly following the percentage increase he received in 2017. In addition, we received feedback suggesting that any adjustments should increase shareholder alignment.
Taking all of the feedback into account, the Committee decided to increase Senan’s salary by 9.8%, which is materially less than initially proposed. In addition, the Committee has taken steps to increase shareholder alignment by increasing Senan’s PSP award level in 2018 by 25% of salary, while at the same time increasing his shareholding requirement from one times salary to two times salary to be achieved within five years. The revised proposal results in a position whereby Senan’s total expected remuneration remains significantly below market. Overall, the Committee believes that the changes are fair, balanced and business performance, to €675,000the extent possible are reflective of the full range of feedback received from the consultation process.
For 2018, Albert Manifold will receive an increase in two steps. Her salary increasedof 3%, which is broadly consistent with the average increases for executives in CRH’s core geographies and the increase for the wider workforce. The other elements of his remuneration will remain unchanged.
As outlined above, Senan Murphy’s salary will increase by 9.8%, taking his salary to €625,000 (+9.7%)€775,000. In addition, his PSP award for 2018 will increase to 225% of salary (previously 200% of salary).
2018 Annual Bonus Plan
The metrics for the 2018 annual bonus are unchanged from last year, and are set out in 2014. table 13.
2018 Performance Share Plan Awards
TheRemuneration Committee has determined that it is appropriate metrics and targets for awards to makebe made under the second increase (to €675,000)PSP in respect of 2015 (+8%).2018 are set out in table 29 on page 87.
The Committee has also reviewedis aware that a number of shareholders would like to see a returns based metric introduced when possible. At present, the salary levels for Albert Manifold and Mark Towe and determined that increases of 7.5% to €1,290,000 and 3% to US$1,420,000 respectively are appropriate. The increase for Albert Manifold reflects the speed with which he has developed in the Chief Executive role, demonstrated by the progress in the delivery of strategy and the improvement in returns and margins referred to above. TheRemuneration Committee also noted believes that the salaryfocus on TSR and Cashflow remains appropriate in terms of Albert Manifoldthe Group’s current strategic priorities. Return on Net Assets (RONA) remains belowa core element of the level of €1,450,000 awarded to the Chief Executive of CRH in 2008. The increase for Mark Towe is in line with increases across the general employee population in the United States.
2015 Awards under the 2014 Performance ShareAnnual Bonus Plan
Awards under the 2014 Performance Share Plan in 2015 will be made at the same level as in 2014 and will continue to be based onan underpin for the TSR and adjusted cash flow. The adjusted cash flow targets have not yet been set byelement of PSP
awards made in 2018, whereby at theRemuneration Committee and will be set when the outcome end of the proposed acquisition of assets from Lafarge S.A. and Holcim Ltd is known. As in previous years, the targets will be demanding and aligned to value creation for shareholders, with significant stretch ensuring that only exceptional performance will result in maximum payout.
Remuneration Policy
As referred to in the Chairman’s introduction to the Annual Report on page 2, CRH has entered into a binding commitment to acquire certain assets from Lafarge S.A. and Holcim Ltd for a total enterprise value of €6.5 billion. In the context of this proposed acquisition,period the Committee will reviewcarefully consider the remuneration policy duringRONA performance of the
course business. The PSP outcome may be adjusted downwards if RONA performance has not met the expectations of 2015the Board.
The Committee will continue to ensure it remains appropriateevaluate the mix of metrics for the needs ofPSP and, in particular, will take this issue into consideration when considering the business.
Conclusion
Shareholders play a crucial role in the design of appropriate, balanced and fair remuneration structures and, as I will retire from the Board of CRH following the 2015 Annual General Meeting, I would like to thank all those who have engaged with CRH during my tenure asRemuneration Committee Chairman, for their constructive approach to dialogue with the Company. I have no doubt that my successor, Don McGovern, will benefit from your continued strong support for CRH.
Dan O’Connor
Remuneration Committee Chairman
Directors’ Remuneration Report |continued
Annual Statement on Remuneration
The following section sets out details of:
The Directors’ Remuneration Report, excluding theupdated Remuneration Policy summary on pages 126 to 131, will be
put to shareholders for consideration in 2019.
Board changes
Maeve Carton retired from the purposesBoard and from CRH on 31 August 2017. All elements of Maeve’s remuneration have been treated in line with the Remuneration Policy and relevant plan rules. Details are outlined in table 16 on page 74. Maeve has also entered into an advisory voteagreement to provide consultancy services to the Group for a maximum of 40 days per year at a rate of€2,500 per day. As a result, the Annual General MeetingGroup will retain
access to be held on 7 May 2015.Maeve’s significant knowledge of the industry and she may continue to represent CRH in key strategic relationships.
Conclusion
The Company is not seeking shareholder approval for a revised Remuneration Policy this year and, therefore, we have not includedCommittee believes that the full policy in this report. We have, however, includedremuneration paid to the executive Director and non-executive Director policy tables, as well as details of the Chief Executive’s service contract as information for shareholders.
Executive Directors
Remuneration received by executive Directors in respect of 2014
Details2017 is appropriate and is well aligned with the performance of individual remunerationthe Company and the value delivered for executive Directorsshareholders. We hope to receive your support for the year ended 31 December 2014, including explanatory notes, are given in table 18 below. DetailsAnnual Report on Remuneration at the 2018 AGM. In addition, I look forward to engaging further with shareholders as we undertake a review of Directors’ remuneration charged against profit in the year are given in table 49 on page 125 in theour Policy later this year.
Donald A. McGovern, Jr.
Other DisclosuresChairman of Remuneration Committeesection.
28 February 2018
Individual remuneration for the year ended 31 December 2014 (Audited)
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Table 18
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Annual Bonus Plan |
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Retirement |
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Basic Salary | Cash | Deferred | Long-Term | Benefits | ||||||||||||||||||||||||||||||||||||||
and Fees | Benefits | Element | Shares | Incentives | Expense | Total | Total | Total | ||||||||||||||||||||||||||||||||||
(a) | (b) | (c) | (c) | (d) | (e) | |||||||||||||||||||||||||||||||||||||
€ 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | € 000 | ||||||||||||||||||||||||||||||||||
| 2014
|
|
| 2014
|
|
| 2014
|
|
| 2014
|
|
| 2014
|
|
| 2014
|
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| 2014
|
|
| 2013
|
|
| 2012
|
| ||||||||||||||||
| Executive Directors | |||||||||||||||||||||||||||||||||||||||||
Maeve Carton | 625 | 16 | 703 | 234 | - | 260 | 1,838 | 1,412 | 921 | |||||||||||||||||||||||||||||||||
Albert Manifold | 1,200 | 39 | 1,350 | 450 | - | 559 | 3,598 | 2,088 | 1,385 | |||||||||||||||||||||||||||||||||
Mark Towe | 1,036 | 59 | 1,166 | 389 | - | 207 | 2,857 | 2,965 | 1,983 | |||||||||||||||||||||||||||||||||
| 2,861
|
|
| 114
|
|
| 3,219
|
|
| 1,073
|
|
| -
|
|
| 1,026
|
|
| 8,293
|
|
| 6,465
|
|
| 4,289
|
|
Executive Directors’ Remuneration Summary
2017 Remuneration Snapshot
(full details of 2017 remuneration are set out in table 17 on page 75)
| Table 12
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Fixed |
Performance Related Variable Remuneration | |||||||
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Director | Salary | Annual Bonus (% of max) |
Value of PSP awarded in 2015 (ii) (% of max)
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Albert Manifold | €1,442,000 | 96% | 78.7% | |||||
Maeve Carton (i) | €470,475 | 90% | 78.7% | |||||
Senan Murphy
| €705,713
| 96% | Not applicable (iii) | |||||
|
(i) | Retired from the Board and from CRH on 31 August 2017. The salary in the table above is pro-rated for service to her retirement. The equivalent salary for 12 months would be€705,713. Details of her remuneration arrangements on retirement are set out in table 16 on page 74. |
(ii) | The awards, for which performance was measured over the three-year period to end 2017, will vest at 78.7% in 2020 following the completion of a two-year holding period. Further details in relation to the estimated value of the awards, split between the value created for performance and the value created through share price growth, are included in table 17 on page 75. The market value per share on the date of award (March 2015) was€24.42. |
(iii) | Appointed to the Board in January 2016. |
2018 Remuneration Snapshot
| Table 13
| |||||||||||||||||||
Director | Salary |
Max. Annual Bonus (% of salary) | Metrics for 2018 Award |
2018 PSP Award (% of salary) | Metrics for 2018 PSP Award | |||||||||||||||
Albert Manifold | €1,485,260 +3% | 225% |
| • EPS (25%)
• RONA (25%) |
| 365% | ||||||||||||||
| • Operating cash flow (30%) | |
| • TSR (50%) (i)
• Cash flow (50%) |
| |||||||||||||||
Senan Murphy | €775,000 +9.8% | 150% | | • Personal/ Strategic (20%) | | 225% | ||||||||||||||
(i) Subject to a RONA underpin. |
73 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
| Table 14 |
(i) | For the purposes of comparability, the FTSE100 Index is converted to euro using the closing exchange rate at each year-end. |
2017 AGM – Remuneration Related Votes (i) | Table 15 |
Year of | % | % | No. of | Total No. of Votes Cast | % of issued share | |||||||||||||||||||
| AGM
|
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| in Favour
|
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| Against
|
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| votes withheld
|
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| (incl. votes withheld)
|
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| capital voted
|
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Directors’ Remuneration Report (“Say on Pay”)
| 2017 | 82.31 | 17.69 | 8,260,492 | 522,037,881 | 62.45 |
(i) | The |
Maeve Carton – Remuneration Arrangements on Retirement
| Table 16 | |||
Salary | Maeve received her normal salary up to the date of her retirement. | |||
Bonus | Maeve received a pro-rated bonus in respect of performance from 1 January 2017 to her date of retirement. The bonus was paid entirely in cash. | |||
Pension | As outlined in table 17 on page 75, Maeve received her normal supplementary taxable non-pensionable cash allowance, pro-rated for service from 1 January 2017 to her date of retirement. | |||
2014 Performance Share Plan | Unvested Awards: Maeve’s oustanding unvested awards (i.e. the awards made in 2015, 2016 and 2017) will be released on their normal release dates subject to performance (to be measured at the normal time) and will be subject to the normal two-year holding period. | |||
Vested Awards: Maeve’s vested awards (i.e. the award made in 2014) will be released at the normal release date following the completion of the two-year holding period. | ||||
Deferred Share Awards | Maeve’s outstanding awards (i.e. the awards in relation to her 2015, 2016 and 2017 bonuses), adjusted for dividends accruing from the date of award, were released to her in November 2017. | |||
2010 Savings-related Share Option Scheme | Maeve’s outstanding award (i.e. the award granted in 2014) will remain in force and will vest at the normal vesting date in 2019. |
74 |
CRH Annual Report and Form 20-F | 2017
Individual Executive Remuneration for the year ended 31 December 2017 (Audited) | Table 17 |
Albert Manifold | Maeve Carton(i) | Senan Murphy(ii) | Mark Towe(iii) | |||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||||||||||
Fixed Pay | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | €000 | ||||||||||||||||||||||||||||||||||||||||||
Basic Salary (iv) | 1,442 | 1,400 | 1,290 | 470 | 689 | 675 | 706 | 625 | - | - | 1,309 | 1,280 | ||||||||||||||||||||||||||||||||||||||||||
Benefits (v) | 35 | 22 | 22 | 18 | 10 | 10 | 25 | 22 | - | - | 74 | 72 | ||||||||||||||||||||||||||||||||||||||||||
Retirement Benefit Expense (vi) | 677 | 671 | 607 | 135 | 252 | 282 | 176 | 156 | - | - | 262 | 256 | ||||||||||||||||||||||||||||||||||||||||||
Total Fixed Pay | 2,154 | 2,093 | 1,919 | 623 | 951 | 967 | 907 | 803 | - | - | 1,645 | 1,608 | ||||||||||||||||||||||||||||||||||||||||||
Performance Related Pay | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Annual Bonus (vii): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Element | 2,338 | 2,323 | 1,451 | 634 | 748 | 734 | 762 | 679 | - | - | 1,447 | 1,416 | ||||||||||||||||||||||||||||||||||||||||||
Deferred Shares | 779 | 774 | 484 | - | 250 | 245 | 254 | 227 | - | - | 483 | 472 | ||||||||||||||||||||||||||||||||||||||||||
Total Annual Bonus | 3,117 | 3,097 | 1,935 | 634 | 998 | 979 | 1,016 | 906 | - | - | 1,930 | 1,888 | ||||||||||||||||||||||||||||||||||||||||||
Long-term Incentives (viii): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Performance Share Plan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
- value delivered through performance | 2,720 | 3,171 | 907 | 1,138 | 1,320 | 630 | - | - | - | - | 2,155 | 1,134 | ||||||||||||||||||||||||||||||||||||||||||
- value delivered through share price growth | 668 | 1,622 | 466 | 280 | 675 | 323 | - | - | - | - | 1,102 | 588 | ||||||||||||||||||||||||||||||||||||||||||
Vested Share Options | - | - | 209 | - | - | 145 | - | - | - | - | - | 266 | ||||||||||||||||||||||||||||||||||||||||||
Total Long-term Incentives | 3,388 | 4,793 | 1,582 | 1,418 | 1,995 | 1,098 | - | - | - | - | 3,257 | 1,988 | ||||||||||||||||||||||||||||||||||||||||||
Total Performance Related Pay | 6,505 | 7,890 | 3,517 | 2,052 | 2,993 | 2,077 | 1,016 | 906 | - | - | 5,187 | 3,876 | ||||||||||||||||||||||||||||||||||||||||||
Total Single Figure | 8,659 | 9,983 | 5,436 | 2,675 | 3,944 | 3,044 | 1,923 | 1,709 | - | - | 6,832 | 5,484 | ||||||||||||||||||||||||||||||||||||||||||
(fixed and performance-related) |
(i) | Maeve Carton retired as a Director and from CRH on 31 August 2017. |
(ii) | Senan Murphy was appointed as a Director with effect from 1 January 2016. |
(iii) | Mark Towe retired as a Director on 31 December 2016. |
(iv) |
(v) | Benefits: For executive Directors these relate principally to the use of company cars, medical insurance and life assurance and, where relevant, the value of the non-taxable discount on the grant of options under the Group’s 2010 |
(vi) | Retirement Benefit Expense: As noted on page
| service in the period from 1 January 2017 to 31 August 2017. Senan Murphy receives a supplementary taxable non-pensionable cash supplement equivalent to 25% of his annual base salary in lieu of a pension contribution. |
(vii) | ||
Directors’ Remuneration Report| continued
2015 Salaries - Executive Directors
| Table 19 | |||||||||
Director |
2014 |
2015 |
% Change | |||||||
Albert Manifold (Chief Executive) | €1,200,000 | €1,290.000 | +7.5% | |||||||
Maeve Carton (Finance Director) | €625,000 | €675,000 | +8% | |||||||
Mark Towe (Chief Executive, Oldcastle, Inc.) | US$1,377,000 | US$1,420,000 | +3% | |||||||
Basic Salary and Benefits
Details of executive Directors’ salaries for 2015 compared with 2014 are set out in table 19 above.
The background to the increases in respect of 2015 are set out in theRemuneration Committee Chairman’s introduction on pages 109 and 110.
Salary level increases for executive Directors since 2009 are shown in table 14 on page 108.
Details in relation to employment-related benefits are set out in note (b) in table 18 on page 111.
Annual Bonus Plan
A summary of the structure of CRH’s Annual Bonus Plan is set out in table 20 below.
2014 Annual Bonus Outcomes
CRH’s Annual Bonus Plan for 2014 was based on a combination of financial targets and personal/strategic goals. The specific weightings for each executive Director are shown in table 21 on page 113. In terms of the relative weighting of the components of the plan, the Committee has increased the focus on returns on net
assets, with a corresponding reduction in the percentage of the plan based on earnings per share to ensure that there is sufficient focus on delivering sustainable growth. Indicative performance for each measure is given in tables 22 and 23 on page 113. Specific targets for the 2014 Annual Bonus Plan have not been disclosed in this report as they are considered by the Board to be commercially sensitive. However, it is intended that Group-related targets for 2014 will be disclosed in the 2015 Directors’ Remuneration Report.
Overall, strong performance against the 2014 Annual Bonus Plan metrics resulted in bonus payments of 150% of salary for Albert Manifold, Maeve Carton and Mark Towe. In accordance with the Group’s remuneration policy, 25% of the bonus amount will be deferred into shares for a period of three years. Deferred Shares are not subject to any additional performance conditions during the deferral period.
Similar to 2014, CRH’s Annual Bonus Plan for 2013 was based on a combination of financial targets and
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(viii) | ||||||||||
Long-term Incentives: In February 2018, the Remuneration Committee determined that 78.7% of the performance conditions which applied to the PSP awards made in 2015 have been met. The awards are subject to a two-year holding period and will vest in 2020. For the purposes of this table, the value of these awards (including accrued dividend equivalents), which were subject to a three-year performance period ending in 2017, has been estimated using a share price of€30.42, being the three-month average share price to 31 December 2017. Amounts in the long-term incentive column for 2016 reflect the value of long-term incentive awards with a performance period ending in 2016 (i.e. the PSP awards granted in 2014), which the Remuneration Committee determined in February 2017 had met the applicable performance targets. The awards are scheduled to vest in 2019 following the completion of a two-year holding period. For the purposes of this table, the value of these awards (including accrued dividend equivalents) has been estimated using a share price of€30.97, being the three-month average share price to 31 December 2016. Amounts in the long-term incentive column for 2015 reflect the value of PSP and share option awards granted in 2013, which the Remuneration Committee determined in 2015 had met the applicable performance targets. For the purposes of this table, the awards have been valued based on the market value of the shares on the respective date of vesting, which was€24.50 in the case of the 2013 PSP award and€25.11 in the case of the 2013 options, less, in the case of the 2013 options, the total exercise cost. |
personal/strategic goals. Due to commercial sensitivity, specific targets were not disclosed in the 2013 Directors’ Remuneration Report. TheRemuneration Committee considers that Group-related targets for 2013 have ceased to be commercially sensitive and, accordingly, these are set out in table 24 on page 114. Indicative performance against Oldcastle targets for 2013 is shown in table 25 on page 114; the actual targets have not been disclosed as it is considered that the information remains commercially sensitive. Please see table 11 on page 93 of the 2013 Annual Report on Form 20-F for performance in 2013 against personal/strategic measures.
The 2015 Annual Bonus Plan will be operated broadly in line with the 2014 Annual Bonus Plan. However, in line with the requirements of the 2014 UK Corporate Governance Code, theRemuneration Committee has decided that, in addition to the malus provisions already in place, clawback provisions for the cash element of the Annual Bonus Plan will apply for 2015 onwards (see pages 116 and 117 for more details).
Share Scheme Awards
A summary of share scheme awards made to executive Directors in 2014 is set out in table 27 on page 115. Details of outstanding performance share awards and share options held by executive Directors are shown in tables 36, 37 and 38 on pages 118 and 119.
In addition to the awards set out in table 27 on page 115, Maeve Carton was granted an option under the Group’s 2010 Savings-related Share Option Scheme. Further details in relation to that award are set out in table 38 on page 119.
Long-Term Incentives
2014 Performance Share Plan
A summary of the structure of CRH’s 2014 Performance Share Plan is set out in table 26 on page 115.
In 2014, shareholders approved the introduction of the 2014 Performance Share Plan (the “2014 PSP”). Following approval by shareholders, awards were made to the executive Directors, details of which are summarised in table 37 on page 118. It is anticipated that awards in 2015 under the 2014 PSP will be on broadly the same basis as those made in 2014.
Directors’ Remuneration Report | continued
2014 Annual Bonus - Measures and Weightings
| Table 21 | |||||||||||||||||||
Albert Manifold | Maeve Carton | Mark Towe | ||||||||||||||||||
% of salary | % of salary | % of salary | ||||||||||||||||||
Measure | Target | Maximum | Target | Maximum | Target | Maximum | ||||||||||||||
CRH EPS | 18.75% | 37.5% | 18.75% | 37.5% | 15.0% | 30.0% | ||||||||||||||
CRH Cash Flow | ||||||||||||||||||||
(i) Operating Cash Flow | 11.25% | 22.5% | 11.25% | 22.5% | - | - | ||||||||||||||
(ii) Divestments | 11.25% | 22.5% | 11.25% | 22.5% | - | - | ||||||||||||||
CRH Return on Net Assets | 18.75% | 37.5% | 18.75% | 37.5% | 7.5% | 15.0% | ||||||||||||||
Oldcastle* Group PBIT** | - | - | - | - | 15.0% | 30.0% | ||||||||||||||
Oldcastle Cash Flow
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(i) Operating Cash Flow | - | - | - | - | 15.0% | 30.0% | ||||||||||||||
(ii) Divestments | - | - | - | - | 7.5% | 15.0% | ||||||||||||||
Personal/Strategic | 15.00% | 30.0% | 15.00% | 30.0% | 15.0% | 30.0% | ||||||||||||||
Total | 75.0% | 150.0% | 75.0% | 150.0% | 75.0% | 150.0% | ||||||||||||||
* Oldcastle is the holding company for the Group’s operations in the Americas ** PBIT is defined as earnings before interest and taxes
|
2014 Annual Bonus - Achievement against targets*
| Table 22 | |||||||||||||||||||||||||||||||||||||||||
Performance achieved relative to targets | ||||||||||||||||||||||||||||||||||||||||||
Measure |
Threshold** |
Target |
Maximum | Performance achieved*** | Payout % of max | |||||||||||||||||||||||||||||||||||||
CRH EPS | 78.9c | 100% | ||||||||||||||||||||||||||||||||||||||||
CRH Cash Flow | ||||||||||||||||||||||||||||||||||||||||||
(i) Operating Cash Flow**** | €1,477m | 100% | ||||||||||||||||||||||||||||||||||||||||
(ii) Divestments | €345m | 100% | ||||||||||||||||||||||||||||||||||||||||
CRH Return on Net Assets | 7.4% | 100% | ||||||||||||||||||||||||||||||||||||||||
Oldcastle Group PBIT | N/D | 100% | ||||||||||||||||||||||||||||||||||||||||
Oldcastle Cash Flow | ||||||||||||||||||||||||||||||||||||||||||
(i) Operating Cash Flow | N/D | 100% | ||||||||||||||||||||||||||||||||||||||||
(ii) Divestments | N/D | 100% | ||||||||||||||||||||||||||||||||||||||||
* Specific targets have not been disclosed as these are deemed commercially sensitive at this time. Target will be disclosed retrospectively when no longer sensitive. ** 0% of each element is earned at threshold. *** Oldcastle cash flow targets have not been disclosed as it would result in the disclosure of information which is not generally available and is commercially sensitive. **** For this purpose, operating cash flow has been defined as reported internally.
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Directors’ Remuneration Report| continued
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Performance needed for payout at | ||||||||||
Measure
| Threshold
| Target
| Maximum
| Performance Achieved
| Payout % of max
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CRH EPS | 74c | 80c | 84c | 59.5c* | 0.0% | |||||
Operating Cash Flow** | €1,075m | €1,240m | €1,340m | €1,204m | 52.0% | |||||
CRH Return on Net Assets | 6.0% | 6.5% | 7.0% | 5.9% | 0.0% | |||||
* Adjusted EPS, excluding the impact of non cash impairment recorded in 2013. | ||||||||||
**For this purpose, operating cash flow has been defined as reported internally.
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CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
75%Structure of each award made in 2014 is subject to a Total Shareholder Return (TSR) performance measure, with performance being measured against sector peers (see table 30 on page 116). The vesting schedule is shown in table 28 on page 116. The Committee believes that, for a cyclical business such as CRH, TSR is the most appropriate performance measure at present and is a key measure of the value generated for shareholders.Directors’ Remuneration Report
The TSR performance measure will be subject to a financial underpin. This means that when determining vesting under the 2014 PSP,report, including the Committee will review whether the TSR performance has been impacted by unusual eventsChairman’s introduction on pages 72 and whether it is, therefore, an appropriate reflection of underlying performance. In addition, the Committee will consider EPS performance in the period to ensure that TSR performance was consistent with the objectives of the performance criteria and had not been distorted by extraneous factors.
The remaining 25% of each award is subject to a cumulative cash flow metric. This Group financial measure supports dividend delivery, development activity and, in the context of the Group’s €1.5 - €2.0 billion multi-year divestment programme, provides an emphasis on asset/business disposals. The cash flow73, sets out details of:
target is based on a cumulative adjusted cash flow figure over three financial years. The definition of cash flow is adjusted to exclude:
Thethe Directors’ Remuneration Committee considers that it is appropriate to make these adjustments in order to remove items that do not reflect the quality of management’s operational performance, or are largely outside of management control. This is to ensure that management remains incentivised to make decisions which are in the best long-term interests of the business and shareholders.
The cumulative adjusted cash flow target for the award made in 2014 under the 2014 PSP are set out in table 29 on page 116.
The adjusted cash flow target for awards in 2015 under the 2014 PSP have not yet been set by theRemuneration Committee. The target will be set once
the outcome of the proposed acquisition of assets from Lafarge S.A. and Holcim Ltd is known. The targets will be demanding with significant stretch ensuring that only exceptional performance will result in a maximum payout.
Vested awards will be required to be held for a further two years post-vesting.
2006 Performance Share Plan
The 2006 Performance Share Plan (the “2006 PSP”), which was approved by shareholders in May 2006, is tied to TSR over a three year performance period. It has been replaced by the 2014 PSP (see page 112),Policy, which was approved by shareholders at the 2014 Annual General Meeting. Consequently, 2016 AGM;
The Directors’ Remuneration Report, excluding the Summary of Directors’ Remuneration Policy on pages 76 to 83, will be put to shareholders for the purposes of an advisory vote at the AGM to be held on 26 April 2018.
The performance criteria forRemuneration Committee
The Remuneration Committee consists of five non-executive Directors considered by the 2006 PSPBoard to be independent. They bring the range of experience of large organisations and public companies, including experience in the area of senior executive remuneration, to enable the Committee to fulfil its role. Their biographical details are set out in table 31 on page 116. Participants are not entitled to any dividends (or other distributions made)pages 60 and have no right to vote in respect61. A schedule of the shares subject to the award, until the shares vest.
The rules of the 2006 PSP provide that no award, or portion of an award, which
Directors’ Remuneration Report| continued
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has satisfied the TSR performance criteria should be released unless theRemunerationattendance at Committee has confirmed the validity of the TSR performance and reviewed EPS performance to assess its consistency with the objectives of the assessment.
In respect of the award made in 2012 (with a performance period 2012-2014), in February 2015, theRemuneration Committee determined that the award would lapse as, over the three-year period 2012 -2014, CRH’s TSR performance was below the median of both the peer group and the Eurofirst Index. The Company’s TSR performance was reviewed by theRemuneration Committee’s remuneration consultants.
During 2014, theRemuneration Committee determined that 49% of the award made under the 2006 PSP in 2011 (with a performance period 2011-2013) had vested. Details of the value of that award are set out in table 18 on page 111. Further details are provided in the 2013 Directors’ Remuneration Report.
Details of outstanding awards to Directors under the 2006 PSP are provided in table 36 on page 118. Outstanding awards are subject to the performance conditions outlined above.
2010 Share Option Scheme
At the 2010 Annual General Meeting, shareholders approved the introduction of the Earnings Per Share (EPS) based share option scheme (the “2010 Scheme”). Following the approval by
shareholders for the introduction of the 2014 PSP, no further awards will be made under the 2010 Scheme. Consequently, the last award under the 2010 Scheme was made in 2013.
Options were granted at the market price of the Company’s shares at the time of grant. The vesting period for options is three years, with vesting only occurring once an initial EPS performance target has been reached. Awards under the 2010 Scheme were limited to 150% of salary.
The performance criteria for the 2010 Scheme were agreed with the Irish Association of Investment Managers (the “IAIM”) and are set out in table 32 on page 116. The performance targets were designed to provide for proportionately more vesting for higher levels of EPS growth.
Vesting levels are subject to any reduction which theRemuneration Committee deems appropriate in the context of the overall results of the Group.
The grant of options under the 2010 Scheme made in 2010 and 2011 did not meet the EPS performance criteria set out above and, accordingly, the options lapsed on the third anniversary of the date of grant. Similarly, the grant of options made in 2012, having failed to meet the appropriate EPS criteria, will lapse in full in April 2015.
Summary of Scheme Interests Granted in 2014
| Table 27
| |||||||||||||||||
Directors
| Scheme
| Basis of award
| Number of
| Face value*
| Exercise
|
Percentage vesting at threshold performance (% of maximum)
|
Performance end date
| Expected date of
| ||||||||||
2014 PSP | ||||||||||||||||||
Albert Manifold | (conditional shares)
| 250%
| 142,900
| € 2,928,021
| n/a
| 25%
| 31-Dec-16
| Feb-2019
| ||||||||||
2014 PSP | ||||||||||||||||||
Maeve Carton | (conditional shares)
| 200%
| 59,500
| € 1,219,155
| n/a
| 25%
| 31-Dec-16
| Feb-2019
| ||||||||||
2013 Annual Bonus** | 5%
| 2,561
| € 54,000
| n/a
| n/a
| n/a
| Mar-2017
| |||||||||||
Mark Towe | (deferred shares)
| |||||||||||||||||
2014 PSP (conditional | 200% | 97,100 | €1,989,579 | n/a | 25% | 31-Dec-16 | Feb-2019
| |||||||||||
shares) | ||||||||||||||||||
* Face value has been calculated using the share price at the date of grant for 2014 PSP awards (€20.49). | ||||||||||||||||||
** See table 9 on page 93 of the 2013 Annual Report on Form 20-F for the structure of the 2013 Annual Bonus Plan.
|
Directors’ Remuneration Report| continued
Details of outstanding awards to Directors under the 2010 Scheme are provided in tables 38 and 39 on page 119.
TheRemuneration Committee has discretionary powers regarding the implementation of the rules of the 2010 Scheme. These powers have not been exercised since the adoption of the 2010 Scheme.
2000 Share Option Scheme
At the Annual General Meeting held in 2000, shareholders approved the introduction of a share option scheme (the “2000 Scheme”). This scheme was superseded by the 2010 Scheme referred to above. No awards have been made under the 2000 Scheme since 2009. Details of outstanding awards and the performance criteria for the 2000 Scheme are set out in tables 38 and 39 on page 119.
Other employee share plans
Maeve Carton and Albert Manifold also participate in the 2010 Savings-related Option Scheme (Republic of Ireland) (the “2010 SAYE”) and in the Group’s Irish Revenue approved Share Participation Scheme (the “Participation Scheme”).
The 2010 SAYE is an Irish Revenue approved plan open to all Irish employees. Participants may save up to €500 a month from their net salaries for a fixed term of three or five years and at the end of the savings period they have the option to buy CRH shares at a discount of up to 15% of the market price on the date of invitation of each savings contract. Details of the outstanding awards of Maeve Carton and Albert Manifold under the 2010 SAYE are set out in tables 38 and 39 on page 119.
The Participation Scheme is open to all employees in Ireland, and grants can be made to participants up to a maximum of €12,700 annually in CRH shares.
Malus and Clawback
From 2015 all incentive awards to executive Directors are subject to recovery provisions. Annual bonus awards will be subject to recovery provisions for three years from the date of payment (cash awards) or grant (deferred awards). Performance Share
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Plan awards will be subject to malus for the three years prior to performance assessment and the two further years of the holding period.
Malus or clawback provisions may be triggered in the event of:
Retirement Benefit Expense
Maeve Carton and Albert Manifold are participants in a contributory defined benefit plan which is based on an accrual rate of 1/60th of salary* for each year of pensionable service and is designed to provide two-thirds of career average salary at retirement for full service. If either Maeve Carton or Albert Manifold leave service prior to Normal Retirement Age (60) they will become entitled to a deferred pension, payable from Normal Retirement Age, based on the pension they have accrued to their date of leaving.
The Finance Act 2006 effectively established a cap on pension provisions by introducing a penalty tax charge on pension assets in excess of the higher of €5 million (in the Finance Act 2011, this threshold was reduced to €2.3 million and reduced further to €2 million by the Finance Act (No. 2) Act 2013) or the value of individual accrued pension entitlements as at 7 December 2005. As a result of these legislative changes, theRemuneration Committee decided that executive Directors should have the option of continuing to accrue pension benefits as previously, or of choosing an alternative arrangement - by accepting pension benefits limited by the cap - with a similar overall cost to the Group. Maeve Carton and Albert Manifold have opted for an arrangement whereby their pensions are capped in line with the provisions of the Finance Acts and receive a supplementary taxable non-pensionable cash supplement in lieu of pension benefits forgone. There was, therefore, no additional accrual in 2014. The cash pension supplements for 2014 are detailed in table 18 on page 111. These supplements are similar in value to the reduction in the Company’s
Pension Entitlements - Defined Benefit (Audited)
|
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Table 33
|
| ||||||||||||||||
Increase in accrued personal pension during 2014 (i) € 000
| Transfer value of increase in dependents’ pension (i) € 000
| Total accrued personal pension at year-end (ii) € 000
| ||||||||||||||||||
Executive Directors | ||||||||||||||||||||
Albert Manifold | - | 208 | 273 | |||||||||||||||||
Maeve Carton | - | 29 | 266 |
|
Pension Entitlements - Defined Contribution (Audited)
|
Table 34
| |||||||||||||||||||||||||||
The accumulated liablilities related to the unfunded Supplemental Executive Retirement Plans for Mark Towe are as follows: |
| |||||||||||||||||||||||||||
As at 31 December 2013 € 000
| 2014 contribution € 000
| 2014 Notional interest (iii) € 000
| Translation adjustment € 000
| As at 31 December 2014 € 000
| ||||||||||||||||||||||||
Executive Director | ||||||||||||||||||||||||||||
Mark Towe | 1,923 | 194 | 97 | 288 | 2,502 |
|
liability represented by the pension benefits foregone. They are calculated based on actuarial advice as the equivalent of the reduction in the Company’s liability to each individual and spread over the term to retirement as annual compensation allowances.
The contributory defined benefit plan in which Albert Manifold and Maeve Carton participate is closed to new entrants.
Mark Towe participates in a defined contribution retirement plan in respect of basic salary; and in addition he participates in an unfunded defined contribution Supplemental Executive Retirement Plan (SERP) also in respect of basic salary, to which contributions are made at an agreed rate (20%), offset by contributions made to the other retirement plan.
Details regarding pension entitlements for the executive Directors are set out in tables 33 and 34 above.
There is no change to the pension arrangements for 2015.
Directors’ Remuneration Report| continued
Directors’ Interests in Shares and Share Scheme Awards
Deferred Share Awards under the Annual Bonus Plan (i) (Audited)
|
Table 35
| |||||||||||||||||||||||||||||||||
31 December 2013
| Awards in 2014 (ii)
| Alloted under the scrip dividend scheme in 2014
| Released in 2014
| 31 December 2014
| Release Date
| |||||||||||||||||||||||||||||
Mark Towe | - | 2,561 | 65 | - | 2,626 | Feb 2017 |
|
Directors’ awards under the 2006 Performance Share Plan (i) (Audited)
| Table 36
| |||||||||||||||||||||||||||||||||
Market | ||||||||||||||||||||||||||||||||||
31 December | Granted in | Released in | Lapsed in | 31 December | Performance | Release | Price in euro | |||||||||||||||||||||||||||
2013
| 2014
| 2014 (ii)
| 2014 (ii)
| 2014
| Period
| Date
| on award
| |||||||||||||||||||||||||||
Maeve Carton | 42,000 | - | 20,626 | 21,374 | - | 01/01/11 - 31/12/13 | ||||||||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 01/01/12 - 31/12/14 | 15.19 | ||||||||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 01/01/13 - 31/12/15 | February 2016 | 16.19 | |||||||||||||||||||||||||||
142,000 | - | 20,626 | 21,374 | 100,000 | ||||||||||||||||||||||||||||||
Albert Manifold | 62,000 | - | 30,448 | 31,552 | - | 01/01/11 - 31/12/13 | ||||||||||||||||||||||||||||
70,000 | - | - | - | 70,000 | 01/01/12 - 31/12/14 | 15.19 | ||||||||||||||||||||||||||||
72,000 | - | - | - | 72,000 | 01/01/13 - 31/12/15 | February 2016 | 16.19 | |||||||||||||||||||||||||||
204,000 | - | 30,448 | 31,552 | 142,000 | ||||||||||||||||||||||||||||||
Mark Towe | 68,000 | - | 33,394 | 34,606 | - | 01/01/11 - 31/12/13 | ||||||||||||||||||||||||||||
90,000 | - | - | - | 90,000 | 01/01/12 - 31/12/14 | 15.19 | ||||||||||||||||||||||||||||
90,000 | - | - | - | 90,000 | 01/01/13 - 31/12/15 | February 2016 | 16.19 | |||||||||||||||||||||||||||
248,000 | - | 33,394 | 34,606 | 180,000 |
| ||||||||||||||||||
|
Directors’ Awards under the 2014 Performance Share Plan (i) (Audited)
| Table 37
| |||||||||||||||||||||||||||||||||||||
Market | ||||||||||||||||||||||||||||||||||||||
31 December | Granted in | Dividend Equivalents | Released in | Lapsed in | 31 December | Performance | Release | Price in euro | ||||||||||||||||||||||||||||||
2013
| 2014
| 2014 (ii)
| 2014
| 2014
| 2014
| Period
| Date
| on award
| ||||||||||||||||||||||||||||||
Maeve Carton | - | 59,500 | 618 | - | - | 60,118 | 01/01/14 - 31/12/16 | February 2019 | 20.49 | |||||||||||||||||||||||||||||
Albert Manifold | - | 142,900 | 1,484 | - | - | 144,384 | 01/01/14 - 31/12/16 | February 2019 | 20.49 | |||||||||||||||||||||||||||||
Mark Towe | - | 97,100 | 1,008 | - | - | 98,108 | 01/01/14 - 31/12/16 | February 2019 | 20.49 |
| ||||||||||||||||||
|
Directors’ Remuneration Report| continued
Directors’ Share Options (Audited)
| Table 38
| |||||||||||||||||||||||||||||||||||
Details of movements on outstanding options and those exercised during the year are set out in the table below | Options exercised during 2014 | |||||||||||||||||||||||||||||||||||
31 December
| Granted in
| Lapsed in
| Exercised in 2014
| 31 December
| 6 March 2015
| Weighted average option price at €
| Weighted €
| Weighted market €
| ||||||||||||||||||||||||||||
Maeve Carton | 55,831 | - | - | - | 55,831 | 55,831 | (a | ) | 25.75 | - | - | |||||||||||||||||||||||||
13,308 | - | 13,308 | - | - | - | (b | ) | - | - | - | ||||||||||||||||||||||||||
139,500 | - | 42,500 | - | 97,000 | 97,000 | (c | ) | 15.67 | - | - | ||||||||||||||||||||||||||
- | 1,726 | - | - | 1,726 | 1,726 | (d | ) | 17.67 | - | - | ||||||||||||||||||||||||||
Albert Manifold | 166,445 | - | - | - | 166,445 | 149,810 | (a | ) | 21.97 | - | - | |||||||||||||||||||||||||
16,635 | - | 16,635 | - | - | - | (b | ) | - | - | - | ||||||||||||||||||||||||||
200,000 | - | 62,500 | - | 137,500 | 137,500 | (c | ) | 15.68 | - | - | ||||||||||||||||||||||||||
2,236 | - | - | - | 2,236 | 2,236 | (d | ) | 13.64 | - | - | ||||||||||||||||||||||||||
Mark Towe | 155,425 | - | - | 22,344 | 133,081 | 105,356 | (a | ) | 24.38 | 15.09 | 21.53 | |||||||||||||||||||||||||
49,905 | - | 49,905 | - | - | - | (b | ) | - | - | - | ||||||||||||||||||||||||||
245,000 | - | 70,000 | - | 175,000 | 175,000 | (c | ) | 15.68 | - | - | ||||||||||||||||||||||||||
1,044,285 | 1,726 | 254,848 | 22,344 | 768,819 | 724,459 | |||||||||||||||||||||||||||||||
|
Option by price (Audited)
| Table 39 | |||||||||||||||||||||||||||||||||
31 December | Granted | Lapsed | Exercised | 31 December | Earliest | |||||||||||||||||||||||||||||
€
| 2013
| in 2014
| in 2014
| in 2014
| 2014
| exercise date
| Expiry date
| |||||||||||||||||||||||||||
15.0674 | 29,943 | - | 29,943 | - | - | (b | ) | |||||||||||||||||||||||||||
15.0854 | 22,344 | - | - | 22,344 | - | (a | ) | |||||||||||||||||||||||||||
15.0854 | 49,905 | - | 49,905 | - | - | (b | ) | |||||||||||||||||||||||||||
18.7463 | 16,635 | - | - | - | 16,635 | (a | ) | February 2015 | April 2015 | |||||||||||||||||||||||||
18.8545 | 27,725 | - | - | - | 27,725 | (a | ) | February 2015 | April 2015 | |||||||||||||||||||||||||
| 26.1493 | 72,085 | - | - | - | 72,085 | (a | ) | April 2016 | |||||||||||||||||||||||||
29.4855 | 53,232 | - | - | - | 53,232 | (a | ) | April 2017 | ||||||||||||||||||||||||||
29.8643 | 36,043 | - | - | - | 36,043 | (a | ) | April 2017 | ||||||||||||||||||||||||||
21.5235 | 99,637 | - | - | - | 99,637 | (a | ) | April 2018 | ||||||||||||||||||||||||||
16.58 | 50,000 | - | - | - | 50,000 | (a | ) | April 2019 | ||||||||||||||||||||||||||
16.38 | 175,000 | - | 175,000 | - | - | (c | ) | |||||||||||||||||||||||||||
15.19 | 210,000 | - | - | - | 210,000 | (c | ) | April 2022 | ||||||||||||||||||||||||||
16.19 | 199,500 | - | - | - | 199,500 | (c | ) | April 2023 | ||||||||||||||||||||||||||
13.64 | 2,236 | - | - | - | 2,236 | (d | ) | August 2017 | January 2018 | |||||||||||||||||||||||||
17.67 | - | 1,726 | - | - | 1,726 | (d | ) | August 2019 | January 2020 | |||||||||||||||||||||||||
1,044,285 | 1,726 | 254,848 | 22,344 | 768,819 |
|
Directors’ Remuneration Report |continued
Shareholding guidelines for executive Directors
TheRemuneration Committee adopted a policy in 2013 whereby executive Directors are required to build up (and maintain), within five years of appointment a minimum holding in CRH shares which is equivalent to one times basic salary. For existing executive Directors this level must be achieved by 31 December 2015, unless the executive Director has a significant change in role which results in a step change in salary in which case the one times salary level
must be achieved within five years of the change. The shareholding levels as a multiple of basic salary are shown in table 40.
Following his appointment as Chief Executive on 1 January 2014, theRemuneration Committee determined that Albert Manifold will be required to meet the shareholding guideline by 31 December 2017.
As part of the remuneration review carried out in 2013, theRemuneration
Committee considered whether the shareholding level should be increased, particularly in relation to the Chief Executive role. TheRemuneration Committee concluded that, as the guidelines were only recently introduced, it was not appropriate to increase the requirement at this time. However, the Committee will look to increase shareholding guidelines in the future as the Chief Executive builds on his existing holding.
Directors’ Remuneration Report |continued
Shareholdings of Directors and Company Secretary as at 31 December 2014
|
The interests of the Directors and Secretary in the shares of the Company, which are beneficial unless otherwise indicated, are shown below. The Directors and Secretary have no beneficial interests in any of the Group’s subsidiary, joint venture or associated undertakings.
|
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6 March | 31 December | 31 December | ||||||||||||||
Ordinary Shares
|
| 2015
|
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| 2014
|
|
| 2013
|
| |||||||
Directors | ||||||||||||||||
E.J. Bärtschi | 25,200 | 25,200 | 7,200 | |||||||||||||
M. Carton | 82,546 | 82,036 | 60,100 | |||||||||||||
W.P. Egan | 16,112 | 16,112 | 16,112 | |||||||||||||
- Non-beneficial | 12,000 | 12,000 | 12,000 | |||||||||||||
U-H. Felcht | 1,285 | 1,285 | 1,285 | |||||||||||||
N. Hartery | 12,265 | 12,265 | 1,430 | |||||||||||||
J.W. Kennedy | 1,083 | 1,083 | 1,049 | |||||||||||||
P.J. Kennedy | 2,000 | - | - | |||||||||||||
D.A. McGovern, Jr. | 5,131 | 5,131 | 4,000 | |||||||||||||
H.A. McSharry | 3,886 | 3,886 | 3,789 | |||||||||||||
A. Manifold | 42,518 | 39,998 | 38,981 | |||||||||||||
D.N. O’Connor | 17,344 | 17,344 | 16,915 | |||||||||||||
H. Th. Rottinghuis | 15,124 | 15,124 | - | ** | ||||||||||||
M. Towe | 105,276 | * | 100,276 | * | 77,117 | |||||||||||
Secretary | ||||||||||||||||
N. Colgan | 9,463 | 15,549 | 10,836 | |||||||||||||
351,233 | 347,289 | 250,814 | ||||||||||||||
Of the above holdings, the following are held in the form of American Depository Receipts:
|
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6 March |
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|
31 December |
|
|
31 December |
| ||||||||
| 2015
|
|
| 2014
|
|
| 2013
|
| ||||||||
W.P. Egan | 15,000 | 15,000 | 15,000 | |||||||||||||
- Non-beneficial | 12,000 | 12,000 | 12,000 | |||||||||||||
D.A. McGovern, Jr. | 5,131 | 5,131 | 4,000 | |||||||||||||
Patrick J. Kennedy became a Director on 1 January 2015.
Lucinda Riches became a Director on 1 March 2015. She does not have a holding of CRH shares.
* Excludes awards of Deferred Shares, details of which are disclosed in table 35 on page 118. ** Holding at date of appointment
|
|
Directors’ Remuneration Report |continued
Non-executive Directors
Remuneration paid to non-executive Directors in 2014 meetings is set out in table 42 below.7 on page 69.
The remuneration of non-executive Directors is determined by the Board of Directors as a whole. In determining
the remuneration, the Board receives recommendations from a committeemain focus of the Chairman and the executive Directors. TheRemuneration Committeedetermines the remuneration of the Chairman.
Fees for the non-executive Directors were reviewed during 2014. It was concluded that CRH’s fees are competitively positioned at present and should remain unchanged in 2015.
Fees for 2015 are set out in table 43 below.
|
Basic | Other | |||||||||||||
Salary and Fees | Benefits | Remuneration | Total | Total | Total | |||||||||
(a) | (b) | (c) | ||||||||||||
€ 000 | € 000 | € 000 | € 000 | € 000 | € 000 | |||||||||
2014 | 2014 | 2014 | 2014 | 2013 | 2012 | |||||||||
Non-executive Directors | ||||||||||||||
E.J. Bärtschi | 68 | - | 71 | 139 | 116 | 105 | ||||||||
W.P. Egan | 68 | - | 52 | 120 | 120 | 120 | ||||||||
U-H. Felcht | 68 | - | 37 | 105 | 105 | 105 | ||||||||
| N. Hartery (d) | 68 | 10 | 382 | 460 | 473 | 305 | |||||||
J.M. de Jong (e) | 24 | 5 | 13 | 42 | 128 | 139 | ||||||||
J.W. Kennedy | 68 | - | 37 | 105 | 105 | 105 | ||||||||
D.A. McGovern Jr. (f) | 68 | - | 52 | 120 | 60 | - | ||||||||
K. McGowan (d) | - | - | - | - | - | 145 | ||||||||
H.A. McSharry (g) | 68 | - | 22 | 90 | 90 | 77 | ||||||||
D.N. O’Connor | 68 | - | 56 | 124 | 124 | 112 | ||||||||
H.Th. Rottinghuis (h) | 59 | - | 27 | 86 | - | - | ||||||||
627 | 15 | 749 | 1,391 | 1,321 | 1,213 |
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In addition, the Committee:
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Directors’ Remuneration Report |continued
Relative importance of spend on pay
Table 47 across sets out the amount paid by the Group inIn considering remuneration to employees compared to dividend distributions made to shareholders in 2013 and 2014. The average number of employees is set out in note 5 to the Consolidated Financial Statements on page 152. We have also shown the change in EBITDA (as defined)* performance year on year to provide an indication of the change in profit performance.
TheRemuneration Committee and Advisors
The non-executivelevels for executive Directors who were members of theRemuneration Committee during 2014, together with their record of attendance at Committee meetings, are identified on page 104. Don McGovern joinedparticularly, the Committee with effect from 1 January 2015.
Risk policies and systems
During 2014,takes into account remuneration trends across the CRH Group, which has a diverse range of operations in 32 countries, in geographic regions which are often at different stages in the economic cycle. Annually, the Chairman of theRemuneration Committee reviewed reviews with theAudit Committee the Group’s remuneration structures from a risk perspective.
Remuneration consultants
Deloitte LLP was appointed as the Committee’s remuneration consultants in 2013 following a tender process. The Committee has satisfied itself that the advice provided by Deloitte is robust and independent and that the Deloitte LLP engagement partner and team that provide remuneration advice to the Committee do not have connections with CRH plc that may impair their independence. Deloitte are signatories to the Voluntary CodeSummary of Conduct in relation to executive remuneration consulting in the UK.
During 2014, Deloitte provided the following remuneration services:
|
% in Favour
| % Against
| No. of votes withheld
| Total No. of votes cast (incl. votes withheld)
| % of issued share capital
| ||||||
Directors’ Remuneration Report (“Say on Pay”) | 98.1% | 1.9% | 13,587,697 | 511,227,387 | 69.6% | |||||
Remuneration Policy Report | 95.2% | 4.8% | 3,648,186 | 511,208,343 | 69.6% | |||||
Deloitte also provide other consultancy services to the Company in relation to support for Internal Audit, when required and in respect of talent management and human resources, taxation and sustainability.
In respect of work carried out by Deloitte on behalf of theRemuneration Committee in 2014, fees in the amount of €49,000 were incurred.
2014 Annual General Meeting votes on remuneration matters
The voting outcome in respect of the remuneration related votes at the 2014 Annual General Meeting is set out in table 48 above.
Shareholder Engagement
The Chairman and theRemuneration Committee Chairman met with a number of the Group’s major shareholders in advance of the 2014 Annual General
Meeting. No issues of concern in relation to remuneration arose. As the voting was overwhelmingly in favour of the “Say on Pay” resolution, following the meeting theRemuneration Committee determined that there were no concerns with the Group’s remuneration structures that required investigation.
Following the 2014 Annual General Meeting we also met with a major shareholder to discuss the metrics used for CRH’s long-term incentive structures and we received correspondence from another shareholder regarding their perspectives in relation to the disclosure of annual targets (which we believe our disclosures on pages 113 and 114 address).
| ||
Directors’ Remuneration Report |continuedPolicy
Details of remuneration charged against profit in 2014
|
2014 | 2013 | 2012 | ||||||||||||
€ 000 | € 000 | € 000 | ||||||||||||
| ||||||||||||||
Executive Directors | ||||||||||||||
Basic salary | 2,861 | 3,591 | 3,512 | |||||||||||
Performance-related incentive plan | ||||||||||||||
- cash element | 3,219 | 1,833 | 1,540 | |||||||||||
- deferred shares element | 1,073 | 54 | - | |||||||||||
Retirement benefits expense | 1,026 | 1,660 | 1,645 | |||||||||||
Benefits | 114 | 126 | 128 | |||||||||||
8,293 | 7,264 | 6,825 | ||||||||||||
Provision for Chief Executive long-term incentive plan2 | - | (1,062) | 460 | |||||||||||
Total executive Directors’ remuneration | 8,293 | 6,202 | 7,285 | |||||||||||
Average number of executive Directors | 3.00 | 4.00 | 4.00 | |||||||||||
Non-executive Directors | ||||||||||||||
Fees | 627 | 578 | 557 | |||||||||||
Other remuneration | 749 | 720 | 656 | |||||||||||
Benefits | 15 | 23 | - | |||||||||||
Total non-executive Directors’ remuneration | 1,391 | 1,321 | 1,213 | |||||||||||
Average number of non-executive Directors | 9.30 | 8.50 | 8.20 | |||||||||||
Payments to former Directors3 | 23 | 23 | 29 | |||||||||||
Total Directors’ remuneration | 9,707 | 7,546 | 8,527 |
| ||
| ||
|
Directors’ Remuneration Report |continued
Remuneration Policy Summary
The following summarises the key elements of CRH’s Remuneration Policy (the “Policy”), which was approved by shareholders at the 2014 Annual General Meeting. A copy of the Policy is available on the Group’s website, www.crh.com.www.crh.com, and was included in full in the 2015 Annual Report. As the Company is not seeking shareholder approval for any revision to the Policy in 2018, the full text has not been reproduced in this report. The following paragraphs and tables 18 to 22 on pages 78 to 83 provide a summary of the key elements of the Policy.
As an Irish incorporated company, CRH is not required to comply with section 439A of the UK Companies Act 2006 which requires UK companies to submit their remuneration policy to a binding shareholder vote. However, maintaining
Maintaining high levels of corporate governance is important to CRH and,
therefore, the Company intends to operate within the Policy unless it is not practical to do so in exceptional circumstances. However, asAs an Irish incorporated company, CRH cannot rely on the statutory provisions applicable to UK companies under the 2013 UK Regulations which, in certain circumstances, can resolve any inconsistency between a remuneration policy and any contractual or other right of a Director. In the event there werewas to be such an inconsistency, the Company may be obliged to honour any such right, notwithstanding it may be inconsistent with the Policy.
TheRemuneration Committee’sCommittee’s aim is to make sure that CRH’s pay structures are fair, responsible and competitive, in order that CRH can attract and retain staff of the calibre necessary for it to compete in all of its markets.
The Group’s remuneration structures are designed to drive performance and link rewards to responsibility and the individual contribution of executives. It is policy to grant participation in the Group’s performance-related plans to key management to encourage identification with shareholders’ interests and to create a community of interest among different regions and nationalities.
The policy on Directors’ remuneration, which is derived from the overall Group policy, is designed to:
In setting remuneration levels, theRemuneration Committee takes into consideration the remuneration practices of other international companies of similar size and scope and trends in executive remuneration generally, in each of the regions in which the Company operates. TheRemuneration Committee also takes into account the EUEuropean Union Commission’s recommendations on remuneration in listed companies.
CRH’s Approach to Remuneration | ||||||
The purpose of the Policy is to: | ||||||
Attract andretain Directors of the highest calibre | Foster entrepreneurship in regional companies by rewarding the creation of shareholder value through organic and acquisitive growth | |||||
Properlyreward andmotivate executive Directors to perform in the long-term interests of the shareholders | Reflect the spread of the Group’s operations so that remuneration packages in each geographical area are appropriate and competitive for that area | |||||
Provide an appropriateblend of fixed and variable remuneration andshort and long-term incentives for executive Directors | Reflect therisk policies of the Group |
76 |
Executive Director service contractsCRH Annual Report and policy on payment for loss of officeForm 20-F | 2017
When determining leaving arrangements
77 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
The purpose, operation, opportunity and performance measures for anthe five components of executive Director,Directors’ remuneration are summarised in table 18 below. Further details and explanatory notes are included in the Committee takes into account any contractual agreements (including any incentive arrangements)
full Policy, a copy of which is available on the CRH website, www.crh.com. The components of remuneration comprise three fixed elements: basic salary, pension and benefits, and two variable elements: annual bonus and PSP.
Details regarding the implementation of the Policy in 2017 can be found on pages 84 to 93 of the Annual Report on Remuneration.
Policy for Executive Directors | Table 18 | |||
Element | Fixed Base Salary | Fixed Pension | ||
Purpose and link to strategy | • Competitive salaries help to attract and retain staff with the experience and knowledge required to enable the Group to compete in its markets | • Pension arrangements provide competitive and appropriate retirement plans • Given the long-term nature of the business, pension is an important part of the remuneration package to support creation of value and succession planning | ||
Operation | • Base salaries are set by the Committee taking into account: – the size and scope of the executive Director’s role and responsibilities; – the individual’s skills, experience and performance; – salary levels at FTSE listed companies of a similar size and complexity to CRH and other international construction and building materials companies; and – pay and conditions elsewhere in the Group • Base salary is normally reviewed annually with changes generally effective on 1 January, although the Committee may make an out-of-cycle increase if it considers it to be appropriate | • Ireland-based executive Directors can participate in a defined contribution scheme, or in certain circumstances can opt for a taxable, non-pensionable, supplementary cash alternative in lieu of pension contributions. Ireland-based executive Directors who joined the Group prior to 31 December 2011 participate in a contributory defined benefit scheme which closed to new entrants on that date • US-based executive Directors can participate in a defined contribution scheme and in an unfunded Supplemental Executive Retirement Plan (SERP) • For new appointments to the Board the Committee may determine that alternative pension provisions will operate (for example a cash contribution). When determining pension arrangements for new appointments the Committee will give regard to existing entitlements, the cost of the arrangements, market practice and the pension arrangements received elsewhere in the Group | ||
Maximum opportunity | • Base salaries are set at a level which the Committee considers to be appropriate taking into consideration the factors outlined in the Operation row above • While there is no maximum base salary, normally increases will be in line with the typical level of increase awarded to other employees in the Group, but may be higher in certain circumstances. These circumstances may include: – where a new executive Director has been appointed at a lower salary, higher increases may be awarded over an initial period as the executive Director gains in experience and the salary is moved to what the Committee considers is an appropriate positioning; – where there has been a significant increase in the scope or responsibility of an executive Director’s role or where an individual has been internally promoted, higher salary increases may be awarded; and – where a larger increase is considered necessary to reflect significant changes in market practice | • The entitlement of individuals participating in defined contribution schemes reflects the accumulated individual and matching company contributions paid into the schemes. At present no Ireland-based executive Directors are members of a defined contribution scheme • For the two Ireland-based executive Directors on the Board during 2017 who joined the Group prior to 31 December 2011, the defined benefit pension is provided through an Irish-revenue approved retirement benefit scheme (the ‘Scheme’). Accrued benefits for service to 31 December 2011 are based on pensionable salary and years of service as at that date (annual accrual of 1/60ths), with this tranche being revalued annually at the Consumer Price Index subject to a 5% ceiling. For service subsequent to that date a career-average revalued earnings system was introduced with each year of service being subject to annual revaluation on the same basis as outlined above. Ireland-based executive Directors have elected to cease accruing pensions benefits and to receive a supplementary taxable non-pensionable cash allowance in lieu of pension benefits foregone as a result of the pension cap (see page 92 for more details). These allowances are similar in value to the reduction in the Company’s liability represented by the pension benefit foregone. Whilst there is no absolute maximum to the quantum of these payments they are calculated based on actuarial advice as the equivalent of the reduction in the liability the Company would otherwise have had under the Scheme in respect of each individual’s benefits and spread over the term to retirement as annual compensation allowances • US-based executive Directors can participate in a defined contribution retirement plan in respect of basic salary; and in addition can participate in a SERP also in respect of basic salary, to which contributions are made at an agreed rate (20%), offset by contributions made to the other retirement plan | ||
Performance measure | Not applicable | Not applicable |
78 |
CRH Annual Report and Form 20-F | 2017
Policy for Executive Directors - continued
Element | Fixed Benefits | |
Purpose and link to strategy | • To provide a market-competitive level of benefits for executive Directors | |
Operation | • The Committee’s policy is to set benefit provision at an appropriate market-competitive level taking into account market practice, the level of benefits provided for other employees in the Group, the individual’s home jurisdiction and the jurisdiction in which the individual is based • Employment-related benefits include the use of company cars (or a car allowance), medical insurance for the Director and his/her family and life assurance • In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or disablement so that the Chief Executive could not work for a period of more than six months, in lieu of the early ill-health retirement provisions in the pension scheme which would otherwise operate in such cases, he shall be entitled to receive a disability salary of€1,000,000 per annum. Such payment would cease when the Chief Executive reaches age 60, returns to work or if the service agreement is terminated • US-based executive Directors can also receive benefits in relation to club membership and short-term disability insurance • Benefits may also be provided in relation to legal fees incurred in respect of agreeing service contracts, or similar agreements (for which the Company may settle any tax incurred by the executive Director) and a gift on retirement • The Committee may remove benefits that executive Directors receive or introduce other benefits if it is considered appropriate to do so. The Company may also pay the tax due on benefits if it considers that it is appropriate to do so • Executive Directors are eligible to participate in the Company’s all-employee share schemes on the same terms as other employees. Executive Directors may also receive other benefits which are available to employees generally • Relocation policy: where executive Directors are required to relocate to take up their role, the Remuneration Committee may determine that they should receive appropriate relocation and ongoing expatriate benefits. The level of such benefits would be determined based on individual circumstances taking into account typical market practice | |
Maximum opportunity | • The level of benefit provided will depend on the cost of providing individual items and the individual’s circumstances, and therefore the Committee has not set a maximum level of benefits | |
Performance measure | Not applicable |
79 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Policy for Executive Directors - continued | Table 18 - continued |
Element | Performance-related Incentive Annual Bonus | |
Purpose and link to strategy | • The Annual Performance-related Incentive Plan is designed to reward the creation of shareholder value through operational excellence and organic and acquisitive growth. The Plan incentivises executive Directors to deliver Group and individual goals that support long-term value creation | |
• The deferred element of the Plan links the value of executive Directors’ reward with the long-term performance of the CRH share price and aligns the interests of executive Directors with shareholders’ interests | ||
• ‘Malus’ and clawback provisions enable the Company to mitigate risk | ||
Operation | • The Annual Performance-related Incentive Plan rewards executive Directors for meeting Company performance goals over a financial year of the Company. Targets are set annually by the Committee | |
• The annual bonus is paid in a mix of cash and shares (structured as a deferred share award) | ||
• For 2018: | ||
– 75% of the bonus will be paid in cash; and | ||
– 25% will be paid in shares (deferred element) | ||
• In future years, the Committee may determine that a different balance between cash and shares is appropriate and adjust the relevant payments accordingly | ||
• When assessing performance and determining bonus payouts the Committee also considers the underlying financial performance of the business to ensure it is consistent with the overall award level | ||
• The deferred element of the bonus will be structured as a conditional share award or nil-cost option and will normally vest after three years from grant (or a different period determined by the Committee). Deferred share awards may be settled in cash | ||
• Dividend equivalents may be paid on deferred share awards in respect of dividends paid during the vesting period. These payments may be made in cash or shares and may assume the reinvestment of dividends on a cumulative basis | ||
• For deferred awards, ‘malus’ provisions apply. Cash bonus payments are subject to clawback of the net amount paid for a period of three years from payment | ||
Maximum opportunity | • Maximum annual opportunity of 225% of base salary | |
• For 2018, the intended maximum award levels are: | ||
– 225% of base salary for Chief Executive; and | ||
– 150% of base salary for Finance Director. The Committee may increase the percentage in the future up to a maximum of 225% | ||
Performance measure | • The Annual Performance-related Incentive Plan is based on achieving clearly defined and stretching annual targets and strategic goals set by the Committee each year based on key business priorities | |
• The performance metrics used are a mix of financial targets including return goals and personal/strategic objectives generally. Currently 80% of the bonus is based on financial performance measures. The Committee may vary the weightings of measures but no less than 50% shall be based on financial performance measures | ||
• A portion of the bonus metrics for any Director may be linked to his/her specific area of responsibility | ||
• Up to 50% of the maximum bonus will be paid for achieving target levels of performance | ||
80 |
CRH Annual Report and Form 20-F | 2017
Policy for Executive Directors - continued
Element | Performance-related Incentive Performance Share Plan (PSP) | |
Purpose and link to strategy | • The purpose of the PSP is to align the interest of key management across different regions and nationalities with those of shareholders through an interest in CRH shares and by incentivising the achievement of long-term performance goals • ‘Malus’ provisions enables the Company to mitigate risk | |
Operation | • Awards (in the form of conditional share awards or nil-cost options) normally vest based on performance over a period of not less than three years. Awards may also be settled in cash | |
• Awards are normally subject to an additional holding period ending on the fifth anniversary of the grant date (or another date determined by the Committee) | ||
• Dividend equivalents may be paid on PSP awards that vest in respect of dividends paid during the vesting period until the end of the holding period. These payments may be made in cash or shares and may assume reinvestment on a cumulative basis | ||
• ‘Malus’ provisions (as set out in the rules of the 2014 Performance Share Plan) will apply to awards | ||
Maximum opportunity | • Maximum annual opportunity of up to 365% of salary • For 2018 the intended award levels are: – 365% of base salary for Chief Executive; and – 225% of base salary for Finance Director. The Committee may increase the percentage in the future up to a maximum of 365% | |
Performance measure | • Awards to be granted in 2018 will vest based on a relative TSR test compared to a tailored group of key peers (25%) and an index comparator (25%), and cumulative cash flow performance (50%) (see page 93 for details in relation to the 2018 awards) | |
• For threshold levels of performance, 25% of the award vests | ||
• Where applicable, when determining vesting under the PSP the Committee reviews whether the TSR performance has been impacted by unusual events and whether it reflects the underlying performance of the business. In addition, the Committee considers financial performance (including RONA) in the period to ensure that TSR performance is consistent with the objectives of the performance criteria and was not distorted by extraneous factors | ||
• The Committee may in future years change performance measures including introducing additional performance measures for awards made under this Policy, for example, returns-based measures | ||
• The Committee may amend the performance conditions if an event occurs that causes it to consider that an amended performance condition would be more appropriate and would not be materially less difficult to satisfy |
81 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Remuneration outcomes in different performance scenarios
Remuneration at CRH consists of fixed pay (salary, pension and benefits), short-term variable pay and long-term variable pay. A significant portion of executive Directors’ remuneration is linked to the delivery of key business goals over the short and long-term and the performance and conductcreation of shareholder value.
Table 21 shows hypothetical values of the individual.remuneration package for executive Directors under three assumed performance scenarios.
No share price growth or the payment of dividend equivalents has been assumed in these scenarios. Potential benefits under all-employee share schemes have not been included.
Remuneration outcomes in different performance scenarios | Table 19 |
Performance scenario | Payout level | |
Minimum | • Fixed pay (see table 20 for each executive Director) | |
• No bonus payout | ||
• No vesting under the Performance Share Plan | ||
On-target performance | • 50% annual bonus payout (112.5% of salary for the Chief Executive and 75% for the Finance Director) | |
• 25% vesting under the Performance Share Plan (91.25% of salary for the Chief Executive and 56.25% for the Finance Director) | ||
Maximum performance | • 100% annual bonus payout (225% of salary for the Chief Executive and 150% of salary for the Finance Director) | |
• 100% Performance Share Plan vesting (365% of salary for the Chief Executive and 225% for the Finance Director) |
Hypothetical remuneration values | Table 20 | |||||||||||||||
Salary | Benefits | |||||||||||||||
With effect from | Level paid | Estimated | Total | |||||||||||||
1 January 2018 | in 2017(i) | Pension(ii) | Fixed Pay | |||||||||||||
Chief Executive (Albert Manifold) | €1,485,260 | €35,000 | €743,000 | €2,263,260 | ||||||||||||
Finance Director (Senan Murphy) | €775,000 | €25,000 | €193,750 | €993,750 |
(i) | Based on 2017 expenses. |
(ii) | See page 92 for details in relation to retirement benefit arrangements. |
Performance-related remuneration outcomes | Table 21 |
82 |
CRH Annual Report and Form 20-F | 2017
Policy for Non-Executive Directors | Table 22 |
Approach to setting fees | Basis of fees | Other items | ||
• The remuneration of non-executive Directors is determined by a Board committee of the Chairman and the executive Directors • The Remuneration Committee determines the remuneration of the Chairman within the framework or broad policy agreed with the Board • Remuneration is set at a level which will attract individuals with the necessary experience and ability to make a substantial contribution to the Company’s affairs and reflect the time and travel demands of Board duties • Fees are set taking into account typical practice at other companies of a similar size and complexity to CRH • Fees are reviewed at appropriate intervals | • Fees are paid in cash • Non-executive Director fees policy is to pay: – a basic fee for membership of the Board; – an additional fee for chairing a Committee; – an additional fee for the role of Senior Independent Director (SID) (if the SID is not the Chairman of the Remuneration Committee); – an additional fee to reflect committee work (combined fee for all committee roles); and – an additional fee based on the location of the Director to reflect time spent travelling to Board meetings • Other fees may also be paid to reflect other Board roles or responsibilities • In accordance with the Articles of Association, shareholders set the maximum aggregate amount of the fees payable to non-executive Directors. The current limit of€875,000 was set by shareholders at the AGM held in 2016 | • The non-executive Directors do not participate in any of the Company’s performance-related incentive plans or share schemes • Non-executive Directors do not receive pensions • The Group Chairman is reimbursed for expenses incurred in travelling from his residence to his CRH office. The Company settles any tax incurred on this on his behalf • Non-executive Directors do not currently receive any benefits. However, benefits may be provided in the future if, in the view of the Board (for non-executive Directors or for the Chairman), this was considered appropriate. The Company may settle any tax due on benefits |
83 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Annual Report on Remuneration
Remuneration received by executive Directors in respect of 2017
Details of individual remuneration for executive Directors for the year ended 31 December 2017, including explanatory notes, are given in table 17 on page 75. Details of Directors’ remuneration charged against profit in the year are given in table 40 on page 95.
2017 Annual Bonus Plan
CRH’s Annual Bonus Plan for 2017 was based on a combination of financial targets and personal/strategic goals. The relative weighting of the components of the plan, together with indicative performance for each measure is given in table 23 on page 85. The performance by the Group in 2017 translated to annual bonus payouts of between 90% and 96% of maximum. Specific financial targets for the 2017 Annual Bonus Plan have not been disclosed in this report as they are considered by the Board to be commercially sensitive. However, it is intended that Group-related financial targets for 2017 will be disclosed in the 2018 Directors’ Remuneration Report, subject to the information no longer being commercially sensitive at that time.
Details of each executive Director’s personal/strategic objectives and their achievement against these objectives are set out in table 24 on page 85, with total bonus payments of 216% of salary for Albert Manifold, 135% of salary for Maeve Carton (pro-rated for service from 1 January to her retirement on 31 August 2017) and 144% of salary for Senan Murphy representing a percentage against the maximum payable of 96%, 90% and 96% respectively.
In accordance with the Policy, 25% of the bonus amounts for Albert Manifold and Senan Murphy will be deferred into shares for a period of three years. Deferred Share awards are not subject to any additional performance conditions during the deferral period and are adjusted for dividend equivalents based on dividends paid by CRH during the deferral period. Annual bonus awards are subject to recovery provisions for three years from the date of payment (cash awards) or grant (deferred awards).
Following her retirement in 2017, the Remuneration Committee has determined that the 2017 bonus for Maeve Carton will be paid entirely in cash.
2016 Annual Bonus – Retrospective Disclosure of Targets
Similar to 2017, CRH’s Annual Bonus Plan for 2016 was based on a combination of financial targets and personal/strategic goals. Due to commercial sensitivity, specific targets were not disclosed in the 2016 Directors’ Remuneration Report. The Remuneration Committee considers that Group-related targets for 2016 have ceased to be commercially sensitive and, accordingly, these are set out in table 25 on page 85.
Long-term Incentives
Performance Share Plan (the ‘PSP’)
Service contracts2015 awards
In 2015, the executive Directors were granted conditional awards under the 2014 PSP. The Chief Executive has entered into a service contractawards were based on TSR (75% of the award) and Cumulative Cash Flow (25% of the award), and performance was measured over the three-year period 1 January 2015 to 31 December 2017. Based on performance, 53.7% out of 75% will vest in respect of the TSR element, and 25% out of 25% will vest in respect of the Cumulative Cash Flow element (resulting in an overall vesting level for the 2015 awards of 78.7%). The Committee considers that the vesting outcome is reflective of the Company’s underlying performance over the performance period. In accordance with the Company.Policy, the 2015 awards to executive Directors will vest in 2020 on completion of an additional two-year holding period. Vested awards will be adjusted for dividend equivalents based on dividends in the period from grant to the date of vesting in 2020. Table 5126 on page 12786 sets out the key remuneration termsrelevant targets. Table 28 on page 86 sets out details of this contract.the awards.
2017 awards
During 2017 awards under the PSP were made to the executive Directors, details of which are summarised in table 31 on page 87. 50% of each award made in 2017 is subject to a TSR measure, with 25% being measured against a tailored sector peer group (see table
30 on page 87) and 25% against the FTSE All-World Construction & Materials Index (as at the start of the relevant performance period). Given the importance of returns-based measures to a number of our shareholders, the TSR measure will be subject to a RONA underpin. At the end of the three-year performance period, the Remuneration Committee will consider the RONA performance of the business and the outcome for the TSR element may be adjusted (downwards only) if RONA performance has not met the expectations of the Board and the Remuneration Committee. The other 50% of each award made in 2017 is subject to a cumulative cash flow metric. The definition of cash flow is the net increase/decrease in cash and cash equivalents adjusted to exclude:
The Remuneration Committee considers that it is appropriate to make these adjustments in order to remove items that do not reflect the quality of management’s operational performance, or are largely outside of management control. The Remuneration Committee will also consider whether any adjustments are required to cash flows, for example, resulting from any significant acquisitions completed during the performance period or a significant underspend or delay in budgeted capital expenditure, both ordinary and extraordinary.
Performance for the awards made in 2017 will be assessed over the three-year period to 31 December 2019. Details of the performance targets are set out in table 29 on page 87. Awards, to the extent that they vest, will be adjusted for dividend equivalents based on dividends in the period from grant to the date of vesting in 2022. ‘Malus’ provisions apply to the awards.
84 |
CRH Annual Report and Form 20-F | 2017
Annual Bonus Plan - 2017 | ||||||||||||||
2017 Annual Bonus - Achievement - Financial Targets (i)
| Table 23 | |||||||||||||
Performance achieved relative to targets (ii)
| ||||||||||||||
Measure | Weighting | Threshold | Target | Maximum | Performance Achieved | Percentage of Maximum Awarded | ||||||||
CRH EPS | 25% | 166.2c (iv) | 25% | |||||||||||
CRH Cash Flow (iii) | 30% | €2,234m | 30% | |||||||||||
CRH RONA | 25% | 10.3% (iv) | 24% | |||||||||||
Personal/Strategic | 20%
|
|
| See table 24
|
| 11%-17%
| ||||||||
Total
| 100%
| 90%-96%
|
(i) | Due to commercial sensitivity, 2017 targets will be disclosed in the 2018 Directors’ Remuneration Report. |
(ii) | 0% of each element is earned at threshold, 50% at target and 100% at maximum, with a straight-line payout schedule between these points. |
(iii) | For the purpose of the annual bonus, operating cash flow has been defined as reported internally. The figure differs from the net cash inflow from operating activities of€2,189 million reported in the Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows on the purchase of property, plant and equipment (PP&E), net of proceeds for the disposal of PP&E, and before deducting interest and tax payments. |
(iv) | Reported EPS and RONA have been adjusted by the Remuneration Committee to exclude one-off benefits. |
2017 Annual Bonus - Achievement - Personal/Strategic Targets
| Table 24
| |||||
Directors
| Weighting
| Achievements
| Percentage of Maximum Awarded
| |||
Albert Manifold | 20%
|
Good progress in relation to the continued development of the Group Leadership team; effective leadership for the Group’s talent management process with a particular focus on management succession for senior leadership roles; ongoing co-ordination of the assessment of strategic alternatives for the Group; ensuring alignment of CRH’s organisation structure with evolving strategy.
| 17% | |||
Maeve Carton | 20% |
Continued development of the Group’s regulatory, ethics and compliance functions; responsibility for the roll out of CRH’s IT security strategy and ensuring a cross-Group approach to cyber and information security; supporting Internal Audit in relation to the development of an updated strategy; the development of a medium-term strategy for Investor Relations, including the establishment of new offices.
| 11% | |||
Senan Murphy | 20% |
Supporting the development and application of strategic initiatives for key lines of business; providing an increased focus on talent management across the finance function for new and existing roles and continued development of succession planning processes; sponsorship of a Group project initiative in relation to the use of CRH branding by operating entities; continued maintenance of a strong risk and control environment; effective management of relations with investors, banks, rating agencies and other key stakeholders.
| 17% |
Annual Bonus Plan - 2016 | ||
2016 Annual Bonus - Achievement - Financial Targets (i) | Table 25 |
Performance needed for payout at
| ||||||||||||||
Measure | Weighting | Threshold | Target | Maximum |
Performance Achieved
|
Percentage of Maximum Awarded
| ||||||||
CRH EPS | 25% | 76.7c | 83.4c | 87.6c | 150.2c | 25% | ||||||||
CRH Cash Flow (ii) | 30% | €1,782m | €1,937m | €2,034m | €2,444m | 30% | ||||||||
CRH RONA
| 25%
| 6.2%
| 6.7%
| 7.2%
| 9.7%
| 25%
|
(i) | Due to commercial sensitivity, 2016 bonus targets were not disclosed in the 2016 Directors’ Remuneration Report. |
(ii) | For the purpose of the annual bonus, operating cash flow has been defined as reported internally. The figure differs from the net cash inflow from operating activities of€2,340 million reported in the 2016 Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows on the purchase of property, plant and equipment (PP&E), net of proceeds for the disposal of PP&E, and before deducting interest and tax payments. |
85 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Long-Term Incentives - Awards 2015
Performance Share Plan Metrics | Table 26 |
(i) | The methodology for calculating TSR assumes all dividends are reinvested on the ex-dividend date at the closing share price on that day; the open and close price is based on the three-month average closing price on the last day before the start of the performance period and the final day of the performance period respectively. |
(ii) | See page 84 for further information on how cash flow is calculated for 2016, 2017 and 2018 awards. |
(iii) | For the purposes of the 2015 Award, TSR performance was in the 66th percentile against the tailored peer group (see table 27 below) and the cumulative cash flow for the three years to end 31 December 2017 was€4.8 billion. |
Peer Group for TSR Performance Metric for PSP Awards in 2015 | Table 27 |
Boral | Heidelberg Cement | Martin Marietta Materials | Vulcan Materials | |||
Buzzi Unicem | Italcementi | Holcim | Travis Perkins | |||
Cemex | Kingspan Group | Saint Gobain | Wienerberger | |||
Grafton Group | Lafarge | Titan Cement | Ferguson (formerly Wolseley) |
2015 PSP Award - Vesting Details | Table 28 |
Executive Director | Interests Held | Vesting Outcome (%
| Interests
| Date of Vesting | Assumed
| Estimated Value | ||||||
Albert Manifold | 141,531 | 78.7% | 111,385 | March 2020 | €30.42 | €3,388,329 | ||||||
Maeve Carton | 59,246
| 78.7%
| 46,627
| March 2020
| €30.42
| €1,418,381
|
(i) | As the share price on the date of vesting is not yet known, for the purposes of this table, the value of these awards, which were subject to a three-year performance period ending in 2017, has been estimated using a share price of€30.42, being the three-month average share price to 31 December 2017. |
86 |
CRH Annual Report and Form 20-F | 2017
Long-Term Incentives - Awards in 2016, 2017 and 2018
Performance Share Plan Metrics | Table 29 |
(i) | and (ii) see footnotes to table 26. |
(iii) | the cumulative cash flow target for the 2018 award includes the impact of the Ash Grove acquisition, the conclusion of which is subject to regulatory approval. |
Peer Group for TSR Performance Metric for PSP Awards in 2016, 2017 and 2018 | Table 30 |
ACS | Braas Monier | LafargeHolcim | Skanska | Vinci | ||||
Boral | Cemex | Rockwool | Titan Cement | Wienerberger | ||||
Buzzi Unicem | Heidelberg Cement | Saint Gobain | Vicat |
2017 PSP Award Details | Table 31 |
Executive Director | Date of Grant
| Number of Shares
| Market Price on which
| Face Value at Date
| Face Value at Date of Award (% of salary)
| |||||||||||
Albert Manifold | 6 March 2017 | 163,254 | €32.24 | €5,263,309 | 365% | |||||||||||
Maeve Carton | 6 March 2017 | 43,779 | €32.24 | €1,411,435 | 200% | |||||||||||
Senan Murphy
|
| 6 March 2017
|
|
| 43,779
|
| €32.24
| €1,411,435
|
| 200%
|
|
87 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Summary of Outstanding Share Incentive Awards (Audited) | Table 32 |
Year of Award | Performance Period | Release Date | Market Value at Date of Award | Exercise Price | Balance at 31 December 2016 | |||||||||||||||||||
Albert Manifold | ||||||||||||||||||||||||
Annual Bonus Plan (Deferred Share Awards) (i) | 2015 | 01/01/2014 - 31/12/2014 | 2018 | €18.05 | n/a | 24,928 | ||||||||||||||||||
2016 | 01/01/2015 - 31/12/2015 | 2019 | €25.60 | n/a | 18,900 | |||||||||||||||||||
2017 | 01/01/2016 - 31/12/2016 | 2020 | €30.97 | n/a | - | |||||||||||||||||||
2014 Performance Share Plan (ii) | 2014 | 01/01/2014 - 31/12/2016 | 2019 | €20.49 | n/a | 142,900 | ||||||||||||||||||
2015 | 01/01/2015 - 31/12/2017 | 2020 | €24.42 | n/a | 132,064 | |||||||||||||||||||
2016 | 01/01/2016 - 31/12/2018 | 2021 | €24.56 | n/a | 208,104 | |||||||||||||||||||
2017 | 01/01/2017 - 31/12/2019 | 2022 | €32.24 | n/a | - | |||||||||||||||||||
2010 Savings-Related Share Option Scheme | 2012 | n/a | 2017 | n/a | €13.64 | 2,236 | ||||||||||||||||||
2017 | n/a | 2022 | n/a | €27.86 | - | |||||||||||||||||||
Maeve Carton | ||||||||||||||||||||||||
Annual Bonus Plan (Deferred Share Awards) (i) | 2015 | 01/01/2014 - 31/12/2014 | 2018 | €18.05 | n/a | 12,983 | ||||||||||||||||||
2016 | 01/01/2015 - 31/12/2015 | 2019 | €25.60 | n/a | 9,560 | |||||||||||||||||||
2017 | 01/01/2016 - 31/12/2016 | 2020 | €30.97 | n/a | - | |||||||||||||||||||
2014 Performance Share Plan (ii) | 2014 | 01/01/2014 - 31/12/2016 | 2019 | €20.49 | n/a | 59,500 | ||||||||||||||||||
2015 | 01/01/2015 - 31/12/2017 | 2020 | €24.42 | n/a | 55,283 | |||||||||||||||||||
2016 | 01/01/2016 - 31/12/2018 | 2021 | €24.56 | n/a | 56,078 | |||||||||||||||||||
2017 | 01/01/2017 - 31/12/2019 | 2022 | €32.24 | n/a | - | |||||||||||||||||||
2010 Savings-Related Share Option Scheme | 2014 | n/a | 2019 | n/a | €17.67 | 1,726 | ||||||||||||||||||
Senan Murphy | ||||||||||||||||||||||||
Annual Bonus Plan (Deferred Share Awards) (i) | 2017 | 01/01/2016 - 31/12/2016 | 2020 | €30.97 | n/a | - | ||||||||||||||||||
2014 Performance Share Plan (ii) | 2016 | 01/01/2016 - 31/12/2018 | 2021 | €24.56 | n/a | 50,906 | ||||||||||||||||||
2017 | 01/01/2017 - 31/12/2019 | 2022 | €32.24 | n/a | - |
The market price of the Company’s shares at 31 December 2017 was€29.96 and the range during 2017 was€28.48 to€34.53.
(i) | Dividend equivalents accrue on Deferred Share Bonus Awards under the Remuneration Policy. Such dividend equivalents will be released to participants on the date of release of the Deferred Shares. As outlined on page 74, following her retirement on 31 August 2017, all deferred share awards granted to Maeve Carton were released to her on 3 November 2017. |
(ii) | Dividend equivalents accrue on awards made under the 2014 Performance Share Plan under the Remuneration Policy. Subject to satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares on vesting. |
88 |
CRH Annual Report and Form 20-F | 2017
Granted in 2017 | Vested in 2017 | Exercised in 2017 | Lapsed in 2017 | Balance at 31 December 2017 | Dividends Awarded & Vested | Market Value on Date of Exercise/Vesting | ||||||||||||||||||||||
- | - | - | - | 24,928 | - | - | ||||||||||||||||||||||
- | - | - | - | 18,900 | - | - | ||||||||||||||||||||||
25,007 | - | - | - | 25,007 | - | - | ||||||||||||||||||||||
- | - | - | - | 142,900 | - | - | ||||||||||||||||||||||
- | - | - | - | 132,064 | - | - | ||||||||||||||||||||||
- | - | - | - | 208,104 | - | - | ||||||||||||||||||||||
163,254 | - | - | - | 163,254 | - | - | ||||||||||||||||||||||
- | - | 2,236 | - | - | - | €30.80 | ||||||||||||||||||||||
1,085 | - | - | - | 1,085 | - | - | ||||||||||||||||||||||
- | 12,983 | - | - | - | 928 | €31.45 | ||||||||||||||||||||||
- | 9,560 | - | - | - | 433 | €31.45 | ||||||||||||||||||||||
8,060 | 8,060 | - | - | - | 165 | €31.45 | ||||||||||||||||||||||
- | - | - | - | 59,500 | - | - | ||||||||||||||||||||||
- | - | - | - | 55,283 | - | - | ||||||||||||||||||||||
- | - | - | - | 56,078 | - | - | ||||||||||||||||||||||
43,779 | - | - | - | 43,779 | - | - | ||||||||||||||||||||||
- | - | - | - | 1,726 | - | - | ||||||||||||||||||||||
7,316 | - | - | - | 7,316 | - | - | ||||||||||||||||||||||
- | - | - | - | 50,906 | - | - | ||||||||||||||||||||||
43,779 | - | - | - | 43,779 | - | - |
89 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Shareholdings of Directors and Company
| Table 33
| |||||||
Beneficially Owned (i) | ||||||||
|
| |||||||
Name | 31 December 2016 | 31 December 2017 | ||||||
|
| |||||||
Executive Directors | ||||||||
A. Manifold | 76,597 | 20,170 | ||||||
S. Murphy | 1,021 | 1,039 | ||||||
Non-executive Directors | ||||||||
N. Hartery | 16,987 | 17,309 | ||||||
P.J. Kennedy | 2,000 | 2,000 | ||||||
D.A. McGovern, Jr. (ii) | 5,375 | 5,481 | ||||||
H.A. McSharry | 4,043 | 4,111 | ||||||
G.L. Platt (iii) | - | 1,019 | ||||||
L.J. Riches | 2,000 | 5,000 | ||||||
H.Th. Rottinghuis | 15,645 | 1,000 | ||||||
W.J. Teuber, Jr. (ii) | 1,000 | 1,000 | ||||||
Company Secretary | ||||||||
N. Colgan | 9,993 | 10,416 | ||||||
|
| |||||||
Total | 134,661 | 68,545 | ||||||
|
|
(i) | Excludes awards of Deferred Shares, details of which are disclosed on pages 88 and 89. The Directors and Company Secretary do not have any special voting rights. |
(ii) | Holdings in the form of American Depositary Receipts (ADRs). |
(iii) | Appointed with effect from 1 January 2017. Gillian Platt did not have a holding of CRH shares on her appointment. |
There were no transactions in the above Directors’ and Secretary’s interests between 31 December 2017 and 28 February 2018.
90 |
CRH Annual Report and Form 20-F | 2017
Executive Director Shareholdings as a % of 2018 base salary (i)
| Table 34
| |||||||
Guideline
|
To be
| Holdings as of 28 February 2018
|
Total Interests | |||||
A. Manifold |
250% |
December 2020 |
|
402% | ||||
S. Murphy |
200% |
December 2022 |
34% | |||||
Estimated after tax value of Deferred Share Awards made in 2016, 2017 and 2018 (as applicable) |
Estimated after tax value of PSP awards subject to a two-year hold period only |
Beneficially Owned Shares (includes the Deferred Share Awards made in 2015 which the Remuneration Committee has determined will vest on 5 March 2018) |
(i) | For the purposes of this table, the interests have been valued using the three-month average share price to 31 December 2017 (€30.42). |
Non-executive Directors
Individual remuneration for the year ended 31 December 2017 (Audited) | Table 35 |
Basic salary and fees (i) | Benefits (ii) | Other remuneration (iii) | Total | |||||||||||||||||||||||||||||||||||||||||||||
€000 | €000 | €000 | €000 | |||||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||||||
Non-executive Directors | ||||||||||||||||||||||||||||||||||||||||||||||||
E.J. Bärtschi (iv) | 78 | 78 | - | - | 81 | 81 | 159 | 159 | 139 | |||||||||||||||||||||||||||||||||||||||
W.P. Egan (v) | - | 26 | - | - | - | 19 | - | 45 | 120 | |||||||||||||||||||||||||||||||||||||||
U-H. Felcht (v) | - | 26 | - | - | - | 14 | - | 40 | 105 | |||||||||||||||||||||||||||||||||||||||
N. Hartery | 78 | 78 | 1 | 7 | 512 | 512 | 591 | 597 | 456 | |||||||||||||||||||||||||||||||||||||||
P.J. Kennedy | 78 | 78 | - | - | 42 | 42 | 120 | 120 | 105 | |||||||||||||||||||||||||||||||||||||||
R. McDonald (vi) | - | 59 | - | - | - | 43 | - | 102 | 40 | |||||||||||||||||||||||||||||||||||||||
D.A. McGovern, Jr. | 78 | 78 | - | - | 96 | 96 | 174 | 174 | 153 | |||||||||||||||||||||||||||||||||||||||
H.A. McSharry | 78 | 78 | - | - | 42 | 42 | 120 | 120 | 90 | |||||||||||||||||||||||||||||||||||||||
G.L. Platt (vii) | 78 | - | - | - | 53 | - | 131 | - | - | |||||||||||||||||||||||||||||||||||||||
L.J. Riches (viii) | 78 | 78 | - | - | 42 | 42 | 120 | 120 | 88 | |||||||||||||||||||||||||||||||||||||||
H.Th. Rottinghuis | 78 | 78 | - | - | 42 | 42 | 120 | 120 | 105 | |||||||||||||||||||||||||||||||||||||||
W.J. Teuber, Jr. (ix) | 78 | 65 | - | - | 57 | 47 | 135 | 112 | - | |||||||||||||||||||||||||||||||||||||||
702 | 722 | 1 | 7 | 967 | 980 | 1,670 | 1,709 | 1,401 |
(i) | Further information in relation to the non-executive Director fee structure is set out in table 37 on page 93. |
(ii) | Benefits: In the case of Nicky Hartery the amount reflects the reimbursement of travel expenses from his residence to his Chairman’s office in Dublin, which have been grossed up for Irish tax purposes. |
(iii) | Other Remuneration: Includes remuneration for Chairman, Board Committee work and allowances for non-executive Directors based outside of Ireland. |
(iv) | Ernst Bärtschi resigned as a Director on 20 December 2017. |
(v) | Bill Egan and Utz Felcht retired as Directors on 28 April 2016. |
(vi) | Rebecca McDonald retired as a Director on 28 September 2016. |
(vii) | Gillian Platt became a Director on 1 January 2017. |
(viii) | Lucinda Riches became a Director on 1 March 2015. |
(ix) | Bill Teuber became a Director on 3 March 2016. |
91 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Other employee share plans
Executive Directors are eligible to participate in the 2010 Savings-related Option Scheme (Republic of Ireland) (the ‘2010 SAYE Scheme’) and in the Group’s Irish Revenue approved Share Participation Scheme (the ‘Participation Scheme’).
The 2010 SAYE Scheme is an Irish Revenue approved plan open to all Irish employees. Participants may save up to€500 a month from their net salaries for a fixed term of three or five years and at the end of the savings period they have the option to buy CRH shares at a discount of up to 15% of the market price on the date of invitation of each savings contract. Details of the outstanding awards of executive Directors under the 2010 SAYE Scheme are set out in table 32 on pages 88 and 89.
The Participation Scheme is an Irish Revenue approved plan and is open to all employees in Ireland. Grants can be made to participants up to a maximum of€12,700 annually in CRH shares. Albert Manifold and Maeve Carton participated in the Participation Scheme in 2017.
Retirement benefit expense
Albert Manifold and Maeve Carton are participants in a contributory defined benefit plan which is based on an accrual rate of 1/60th of salary* for each year of pensionable service and is designed to provide two-thirds of career average salary at retirement for full service. Following her retirement in 2017, Maeve Carton will receive a deferred pension, payable from her Normal Retirement Age (60), based on the pension she accrued to her date of retirement. Albert Manifold will become entitled to a deferred pension, payable from Normal Retirement Age, if he leaves service
prior to Normal Retirement Age. The Finance Act 2006 established a cap on pension provisions by introducing a penalty tax charge on pension assets in excess of the higher of€5 million (in the Finance Act 2011, this threshold was reduced to€2.3 million and reduced further to€2 million by the Finance (No. 2) Act 2013) or the value of individual accrued pension entitlements as at 7 December 2005.
As a result of these legislative changes, the Remuneration Committee decided that executive Directors should have the option of continuing to accrue pension benefits as previously, or of choosing an alternative arrangement - by accepting pension benefits limited by the cap - with a similar overall cost to the Group. Albert Manifold and Maeve Carton have opted for an arrangement whereby their pensions are capped in line with the provisions of the Finance Act 2006 and receive a supplementary taxable non-pensionable cash supplement in lieu of pension benefits foregone. There was, therefore, no additional accrual in 2017. The cash pension supplements for 2017 are detailed in table 17 on page 75. In the case of Maeve Carton, the cash pension supplement for 2017 has been pro-rated for service in the period between 1 January 2017 and the date of her retirement in August 2017. These supplements are similar in value to the reduction in the Company’s liability represented by the pension benefits foregone. They are calculated based on actuarial advice as the equivalent of the reduction in the Company’s liability to each individual and spread over the term to retirement as annual compensation allowances.
The contributory defined benefit plan in which Albert Manifold and Maeve Carton participate closed to new entrants at the end of 2011.
Senan Murphy receives a taxable non-pensionable cash supplement equivalent to 25% of his annual base salary in lieu of a pension contribution.
Details regarding pension entitlements for the executive Directors are set out in table 36.
Shareholding guidelines for executive Directors
Pursuant to the Policy, executive Directors are required to build up (and maintain) a minimum holding in CRH shares.
The shareholding guideline for the Chief Executive is 2.5 times basic salary. The Remuneration Committee has determined that the Chief Executive will have until 31 December 2020 to meet the guideline.
As outlined in the Chairman’s introduction on pages 72 and 73, the shareholding guideline for the Finance Director (Maeve Carton) andhas been increased from 1 times basic salary to 2 times basic salary. Following the increase, the Remuneration Committee has determined that the Finance Director will have until 31 December 2022 to meet the guideline.
The current shareholdings of executive Directors as a multiple of basic salary are shown in table 34 on page 91. The table includes, for illustrative purposes, shares beneficially owned by the executive Directors as at 28 February 2018 (which includes, in the case of the Chief Executive, Oldcastle, Inc. (Mark Towe)the 2015 Deferred Share awards which the Remuneration Committee has determined will vest on 5 March 2018), the estimated after tax vesting of the 2014 and 2015 PSP awards, which will be released in 2019 and 2020 respectively, and the estimated after tax vesting of Deferred Share awards granted in respect of 2015, 2016 and 2017, as appropriate.
Pension Entitlements - Defined Benefit (Audited)
| Table 36
| |||||||||||
Executive Directors |
Increase in accrued personal pension
during 2017 (i)
€000 | Transfer value of increase in dependants
pension (i)
€000 | Total accrued
personal pension at year-end (ii)
€000 | |||||||||
|
| |||||||||||
Albert Manifold | - | 104 | 273 | |||||||||
Maeve Carton
|
| -
|
|
| 18
|
|
| 266
|
|
(i) | As noted above, the pensions of Albert Manifold and Maeve Carton have been capped in line with the provisions of the Irish Finance Acts. However, dependants’ pensions continue to accrue resulting in Greenbury transfer values which have been calculated on the basis of actuarial advice. These amounts do not represent sums paid out or due in 2017 in the event of these Directors leaving service. |
(ii) | The accrued pensions shown are those which would be payable annually from normal retirement date. |
* | Salary is defined as basic annual salary and excludes any fluctuating emoluments. |
92 |
CRH Annual Report and Form 20-F | 2017
Non-executive Director Fee Structure | Table 37 | |||
Role | 2017 | |||
Group Chairman (including non-executive Director salary and fees for committee work) | €575,000 | |||
Basic non-executive Director fee | €78,000 | |||
Committee fee | €27,000 | |||
Additional fees | ||||
Senior Independent Director/Remuneration Committee Chairman (i) | €39,000 | |||
Audit Committee Chairman | €39,000 | |||
Fee for Europe-based non-executive Directors | €15,000 | |||
Fee for US-based non-executive Directors | €30,000 |
(i) | If the roles of Senior Independent Director and Remuneration Committee Chair are not combined, fees of€25,000 and€15,000 apply respectively. |
Non-executive Directors
The remuneration of non-executive Directors is determined by the Board of Directors as a whole. The fees were increased in 2016. Details of the remuneration paid to non-executive Directors in 2017 are set out in table 35 on page 91. There is no proposed change in fees for non-executive Directors for 2018. See table 37 for the current fee structure.
Implementation of Remuneration Policy for 2018
Basic salary and benefits
Details of executive Directors’ salaries for 2018 compared with 2017 are set out in the Committee Chairman’s introduction on pages 72 and 73.
Executive Directors will receive benefits in line with the Policy in 2018. The level of benefits provided will depend on the cost of providing individual items and the individual circumstances.
2018 Annual Bonus Plan
The Remuneration Committee has determined that the 2018 Annual Bonus Plan will be operated broadly in line with the 2017 Annual
Bonus Plan. 80% of the bonus will be based on financial targets and the remaining 20% on individual objectives aligned to key strategic areas for each executive Director (the metrics, weightings and opportunity under the 2018 Annual Bonus Plan are summarised in table 13 on page 73). The Committee intends to disclose the targets for the 2018 Annual Bonus Plan in the 2019 Directors’ Remuneration Report.
2018 PSP Awards
For the 2018 PSP awards, performance will be assessed over the three-year period to 31 December 2020. The metrics, weightings and opportunity for the 2018 PSP awards are summarised in table 13 on page 73.
As was the case in 2017, 50% of the 2018 awards will be subject to TSR performance, with 25% being measured against a tailored sector peer group (see table 30 on page 87) and 25% against the FTSE All-World Construction & Materials Index. Vesting between the threshold and maximum levels will be calculated on a straight-line basis. The TSR measure will also be subject to a RONA underpin.
For the cash flow measure, vesting is calculated on a straight-line basis between 25% and 80% for cash flow of between
€3.3 billion and€3.8 billion and between 80% and 100% for an outturn between€3.8 billion and€4.3 billion. The Remuneration Committee has reviewed the cash flow target in detail and is satisfied that the target for maximum payout represents a significant stretch. The target includes the impact of the Ash Grove acquisition, the conclusion of which is subject to regulatory approval. The Committee will consider whether adjustments are required to cash flows, for example, resulting from any significant acquisitions during the period.
Retirement Benefit Expense
No changes in pension arrangements are proposed in 2018.
93 |
CRH Annual Report and Form 20-F | 2017
Directors’ Remuneration Report - continued
Other Disclosures
Fees paid to former Directors
The 2013 Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment Regulations) Regulations in the UK, require disclosure of payments to former Directors in certain circumstances. No payments have been made to individual former Directors in those circumstances which exceed the de minimis threshold of€20,000 per annum set by the Remuneration Committee.
As reported in the 2016 Directors’ Remuneration Report, following his retirement from the Board on 31 December 2016, the Remuneration Committee determined that Mark Towe’s outstanding Deferred Share and PSP awards should be released to him at the applicable normal release dates. Accordingly, during 2017 2,772 shares were released to him in respect of his 2014 Deferred Share Award.
Executives’ external appointments
The executive Directors may accept external appointments with the prior approval of the Board provided that such appointments do not currentlyprejudice the individual’s ability to fulfil their duties at the Group. Whether any related fees are retained by the individual or remitted to the Group is considered on a case-by-case basis.
Total Shareholder Return
The value at 31 December 2017 of€100 invested in CRH in 2008, compared with the value of€100 invested in the Eurofirst 300 Index and the FTSE100 Index (which CRH joined in December 2011) is shown in table 14 on page 74.
TSR performance has been compared against the FTSE100 and the Eurofirst 300 as these are broad general market indices of
Relative Importance of Spend on Pay | Table 38 |
which CRH is a constituent. The Committee, therefore, considers that they offer a reasonable comparison for performance.
Compound TSR growth since the formation of the Group in 1970 (assuming the reinvestment of dividends) is 15.8%.
Remuneration paid to Chief Executive 2009 – 2017
Table 39 shows the total remuneration paid to the Chief Executive in the period 2009 to 2017 inclusive and shows bonuses and vested long-term incentive awards as a percentage of the maximum bonus and award that could have service contracts. Theybeen received in respect of each year. Albert Manifold succeeded Myles Lee as Chief Executive in January 2014.
Excluding the impact of vested share-based awards and the non-taxable benefit associated with participation in the Group’ssavings-related share option scheme, the percentage change in the Chief Executive’s salary, benefits
and bonus between 2016 and 2017 was as follows:
Salary +3%
Benefits +36%
Bonus +1%
The combined percentage change was 2%.
There was a 1% increase in the total average employment costs in respect of employees in the Group as a whole between 2016 and 2017.
Relative Importance of Spend on Pay
Table 38 sets out the amount paid by the Group in remuneration to employees compared to dividend distributions made to shareholders in 2016 and 2017. We have also shown the change in EBITDA (as defined)* performance year-on-year to provide an indication of the change in profit performance.
Remuneration Paid to Chief Executive - 2009 to 2017 inclusive
| Table 39
| |||||||||||||||||||||||||||||||||||||||
2009
| 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | ||||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||||||||||
Single figure Remuneration (€m) (i) | €2.6m | €2.6m | €2.9m | €2.5m | €4.2m | €4.2m | €5.4m | €9.9m | €8.7m | |||||||||||||||||||||||||||||||
Annual Bonus (% of max) | 22% | 21% | 39% | 28% | 30% | 100% | 100% | 98% | 96% | |||||||||||||||||||||||||||||||
Long-term incentive award vesting (% of max) | 50% | 46% | 17% | 0% | | PSP: 49% LTIP: 34% |
| | PSP: 0% Options: 75% | | | PSP: 78% Options: 37% | | 100% | 79% | |||||||||||||||||||||||||
(i) | Single figure remuneration comprises the total fixed pay, annual bonus and the value of long-term incentives vesting in respect of each year. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
94 |
CRH Annual Report and Form 20-F | 2017
Advisers to the Remuneration Committee
Mercer Kepler, a brand of Mercer, are the Committee’s independent remuneration consultants. The Committee has satisfied itself that the advice provided by Mercer Kepler is robust and independent and that the Mercer Kepler engagement partner and team that provide remuneration advice to the Committee do not have a notice periodconnections with CRH plc that may impair their independence.
Mercer Kepler are signatories to the Voluntary Code of Conduct in excessrelation to executive remuneration consulting in the UK. During 2017, Mercer Kepler provided the following remuneration services:
In 2017, Mercer Kepler’s parent, the MMC Group, provided pensions advice and related services to the Company. In 2017, the total fees paid to Mercer Kepler were Stg£62,000.
2017 Annual General Meeting
The voting outcome in respect of the remuneration-related votes at the 2017 AGM is set out in table 15 on termination of employment. Thepage 74. Further details in relation to the voting outcome are set out in the Committee will determine the amount, if any, paidChairman’s introduction on termination taking into account the circumstances around departurepages 72 and the prevailing employment law.73.
The Committee’s policy in this area is that service contracts will be put in place for newly appointed executive Directors and in cases where there is a significant step change in Directors’ responsibilities. It is currently anticipated that these terms will be similar to those agreed with the Chief Executive.
Under Irish company law, CRH is not required to make service contracts available for inspection as the notice period is less than 12 months. Service contracts will only be available with the executive Director’s consent due to data protection reasons.
On behalf of the Board
Dan O’ConnorDonald A. McGovern, Jr.
Chairman of Remuneration Committee Chairman
28 February 2018
Details of remuneration charged against profit in 2017
Directors’ Remuneration (i) (Audited)
| Table 40
| |||||||||||
2017 €000 | 2016 €000 | 2015 €000 | ||||||||||
|
| |||||||||||
Executive Directors | ||||||||||||
Basic Salary | 2,618 | 4,023 | 3,245 | |||||||||
Performance-related Incentive Plan | ||||||||||||
- cash element | 3,734 | 5,197 | 3,601 | |||||||||
- deferred shares element | 1,033 | 1,734 | 1,201 | |||||||||
Retirement Benefits Expense | 988 | 1,341 | 1,145 | |||||||||
Benefits | 78 | 128 | 104 | |||||||||
|
| |||||||||||
Total executive Directors’ remuneration | 8,451 | 12,423 | 9,296 | |||||||||
|
| |||||||||||
Average number of executive Directors | 2.67 | 4.00 | 3.00 | |||||||||
Non-executive Directors | ||||||||||||
Fees | 702 | 722 | 672 | |||||||||
Other remuneration | 967 | 980 | 794 | |||||||||
Benefits | 1 | 7 | 6 | |||||||||
|
| |||||||||||
Total non-executive Directors’ remuneration | 1,670 | 1,709 | 1,472 | |||||||||
|
| |||||||||||
Average number of non-executive Directors | 9.00 | 9.24 | 9.75 | |||||||||
Payments to former Directors (ii) | 9 | 124 | 95 | |||||||||
|
| |||||||||||
Total Directors’ remuneration | 10,130 | 14,256 | 10,863 | |||||||||
|
|
(i) | See analysis of 2017 remuneration by individual in tables 17 and 35 on pages 75 and 91 respectively. |
(ii) | Consulting and other fees paid to a number of former Directors. |
For the purposes of Section 305 of the Companies Act 2014, the aggregate gains by Directors on the exercise of share options during 2017 was€38,370 (2016:€994,651).
95 |
Directors’ RemunerationCRH Annual Report and Form 20-F |continued
Remuneration Policy for non-executive Directors2017
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The Directors submit their report and the audited Consolidated Financial Statements for the year ended 31 December 2017.
Principal Activity, Results for the Year and Review of Business
CRH is a leading global diversified building materials group which manufactures and distributes a diverse range of products servicing the breadth of construction needs, from the fundamentals of heavy materials and elements to construct the frame, through value-added exterior products that complete the building envelope, to distribution channels which service construction fit-out and renewal. The Group has approximately 1,300 subsidiary, joint venture and associate undertakings; the principal ones as at 31 December 2017 are listed on pages 246 to 251.
The Group’s strategy, business model and development activity are summarised on pages 10 to 13 and 25 to 29 and are deemed to be incorporated in this part of the Directors’ Report.
As set out in the Consolidated Income Statement on page 120, the Group reported a profit before tax for the year of€1.87 billion. Comprehensive reviews of the financial and operating performance of the Group during 2017 are set out in the Business Performance section on pages 22 to 55; key financial performance indicators are also set out in this section and on pages 14 and 15.
The treasury policy and objectives of the Group are set out in detail in note 22 to the Consolidated Financial Statements
Dividend
CRH’s capital allocation policy reflects the Group’s strategy of generating industry leading returns through value-accretive allocation of capital while delivering long-term dividend growth for shareholders. For the period 1984 to 2009 the Group maintained a progressive dividend policy delivering dividend growth in each of these years. The Group maintained the dividend at 62.5c per share for each of the subsequent six years while in 2016 the full-year dividend was increased 4% to 65c.
Further to the dividend increase in 2016, an interim dividend of 19.2c (2016: 18.8c) per share was paid in November 2017. The Board is recommending a final dividend of 48.8c per share. This would give a total dividend of 68.0c for the year, an increase of 5% over last year (2016: 65.0c). The earnings per share for the year were 226.8c representing a cover of 3.3 times the proposed dividend for the year. Excluding the one-off impact of changes in corporate tax rates in the US and the past service credit from the Swiss pension plan amendment, adjusted basic earnings per share for the year would have been 166.2cp, representing a cover of 2.4 times the proposed dividend for 2017.
It is proposed to pay the final dividend on 4 May 2018 to shareholders registered at the close of business on 9 March 2018. Subject to the
approval of resolutions 7 and 12 at the 2018 Annual General Meeting, shareholders are being offered a scrip dividend alternative.
While the Board continues to believe that a progressive dividend policy is appropriate for the Group, our target is to build dividend cover to three times before one-off items, and accordingly any dividend increases in coming years will continue to lag increases in earnings per share.
2018 Outlook
The 2018 outlook set out in the Chief Executive’s Review on page 9 is deemed to be incorporated in this part of the Directors’ Report.
Principal Risks and Uncertainties
Pursuant to Section 327(1)(b) of the Companies Act 2014, Regulation 5(4)(c) (ii) of the Transparency (Directive 2004/109/ EC) Regulations 2007, the principal risks and uncertainties that could affect the Group’s business are set out on pages 102 to 107 and are deemed to be incorporated in this part of the Directors’ Report. These risks and uncertainties reflect the international scope of the Group’s operations and its decentralised structure. If any of these risks occur, the Group’s business, financial condition, results of operations, liquidity and/or prospects could be materially adversely affected.
Location of Information required pursuant to Listing Rule 9.8.4C
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Listing Rule
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The Trustees of the Employee Benefit Trust have elected to waive dividends in respect of certain holdings of CRH shares. See page 184 to the Consolidated Financial Statements. |
(i) | No information is required to be disclosed in respect of Listing Rules 9.8.4 (1), (2), (4), (5), (6), (7), (8), (9), (10), (11) and (14). |
pAdjusted basic earnings per share from continuing and discontinued operations is a non-GAAP measure as defined on page 213. The GAAP numerator that is most directly comparable is profit attributable to ordinary equity holders of the Company, €1,895 million. Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
96 |
Directors’ RemunerationCRH Annual Report and Form 20-F |continued2017
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Table 42 |
Companies Act 2014 | For the purpose of Section 1373, the Corporate Governance Report on pages 62 to 71, together with the Governance Appendix located on the CRH website (www.crh.com), which contains the information required by Section 1373(2) of the Companies Act 2014 and the risk management disclosures on pages 20, 21 and 102 to 107, are deemed to be incorporated in the Directors’ Report and form part of the corporate governance statement required by section 1373 of the Companies Act. Details of the Company’s employee share schemes and capital structure can be found in notes 8 and 30 to the Consolidated Financial Statements on pages 144 to 146 and 182 to 184 respectively. | |
2006 Takeover Regulations | For the purpose of Regulation 21 of Statutory Instrument 255/2006 European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006, the rules relating to the appointment and replacement of Directors are summarised in the Governance Appendix. The Chief Executive and the Finance Director have entered into service contracts, the principal terms of which are summarised in the 2016 Directors’ Remuneration Policy which is available on the CRH website (www.crh.com) and are deemed to be incorporated in this part of the Directors’ Report. The Company’s Memorandum and Articles of Association, which are available on the CRH website, are also deemed to be incorporated in this part of the Directors’ Report. The Group has certain banking facilities and bond issues outstanding which may require repayment in the event that a change in control occurs with respect to the Company. In addition, the Company’s Share Option Schemes and Performance Share Plan contain change of control provisions which can allow for the acceleration of the exercisability of share options and the vesting of share awards in the event that a change of control occurs with respect to the Company. | |
2007 Transparency Regulations | For the purpose of Statutory Instrument 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007, the Sustainability Report as published on the CRH website (www.crh.com) is deemed to be incorporated in this part of the Directors’ Report*, together with the following sections of this Annual Report and Form 20-F: the Chairman’s Introduction on page 5, the Strategy Review section on pages 6 to 21, the Principal Risks and Uncertainties section on pages 102 to 107, the Business Performance section on pages 22 to 55, the details of earnings per Ordinary Share in note 13 to the Consolidated Financial Statements, the details of derivative financial instruments in note 25, the details of the reissue of Treasury Shares in note 30 and the details of employees in note 6. | |
Non-Financial Reporting | For the purpose of Statutory Instrument 360/2017 European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017, the Sustainability Report* as published on the CRH website (www.crh.com) is deemed to be incorporated in this part of the Directors’ Report, together with the following sections of this Annual Report and Form 20-F: the Business Model section on pages 12 and 13, the Sustainability section, including greenhouse gas emissions, on pages 16 to 19, the Risk Governance section on pages 20 and 21, the Principal Risks and Uncertainties section on pages 102 to 107, the Measuring Performance section on pages 14 and 15 and the Business Performance section on pages 22 to 55. | |
Disclaimer/Forward-Looking Statements | In order to utilise the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, CRH plc (the ‘Company’), and its subsidiaries (collectively, ‘CRH’ or the ‘Group’) is providing the following cautionary statement. This document contains certain forward-looking statements with respect to the financial condition, results of operations, business, viability and future performance of CRH and certain of the plans and objectives of CRH including the statements under: “Strategy Review – Chief Executive’s Review – Outlook”; the “Strategy Review” about our vision to be the leading building materials business in the world; in “Measuring Performance” with regard to our 2018 focus; in the “Business Performance – Finance Director’s Review” with respect to our belief that the Group has sufficient resources to meet its debt obligations and capital and other expenditure requirements in 2018; in “Business Performance” with respect to our expectations regarding economic activity and fiscal developments in our operating regions; our expectations for the residential, non-residential and infrastructure markets; and our potential future growth in Asia; and the statements relating to our strategies for individual segments and business lines in the section entitled “Segmental Reviews”. These forward-looking statements may generally, but not always, be identified by the use of words such as “will”, “anticipates”, “should”, “expects”, “is expected to”, “estimates”, “believes”, “intends” or similar expressions. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and reflect the Company’s current expectations and assumptions as to such future events and circumstances that may not prove accurate. A number of material factors could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, certain of which are beyond our control and which include, among other things: economic and financial conditions generally in various countries and regions where we operate; the pace of recovery in the overall construction and building materials sector; demand for infrastructure, residential and non-residential construction in our geographic markets; increased competition and its impact on prices; increases in energy and/or raw materials costs; adverse changes to laws and regulations; approval or allocation of funding for infrastructure programmes; adverse political developments in various countries and regions; failure to complete or successfully integrate acquisitions; and the specific factors identified in the discussions accompanying such forward-looking statements and in the Principal Risks and Uncertainties included on pages 102 to 107 of the Directors’ Report and in the Risk Factors included on pages 218 to 227 of this Annual Report and Form 20-F. You should not place undue reliance on any forward-looking statements. These forward-looking statements are made as of the date of this Directors’ Report. The Company expressly disclaims any obligation to update these forward-looking statements other than as required by law. The forward-looking statements in this Annual Report and Form 20-F do not constitute reports or statements published in compliance with any of Regulations 4 to 8 and 26 of the Transparency (Directive 2004/109/EC) Regulations 2007. |
† This table contains information which is required to be provided for regulatory purposes. * For the purposes of the Company’s Annual Report on Form 20-F as filed with the SEC, the Sustainability Report, and any reference thereto, is explicitly excluded from this Directors’ Report. | 97 |
CRH Annual Report and Form 20-F | 2017
Directors’ Report - continued
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategy Review section and in this report on pages 10 to 21 and 102 to 107 respectively. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Business Performance section on pages 22 to 55. In addition, notes 21 to 25 to the Consolidated Financial Statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit, currency, cash flow and liquidity risks.
The Group has considerable financial resources and a large number of customers and suppliers across different geographic areas and industries. In addition, the local nature of building materials means that the Group’s products are not usually shipped cross-border.
Having assessed the relevant business risks, the Directors believe that the Group is well placed to manage these risks successfully, and they have a reasonable expectation that CRH plc, and the Group as a whole, has adequate resources to continue in operational existence for the foreseeable future with no material uncertainties. For this reason, the Directors continue to adopt the going concern basis in preparing the Consolidated Financial Statements.
Risk Management and Internal Control*
The Directors confirm that, in addition to the monitoring carried out by the Audit Committee under its Terms of Reference, they have reviewed the effectiveness of the Group’s risk management and internal control systems up to and including the date of approval of the financial statements. This review had regard to all material controls, including financial, operational and compliance controls that could affect the Group’s business.
Directors’ Remuneration Report
Resolution 3 to be proposed at the 2018 AGM deals with the 2017 Directors’ Remuneration Report (excluding the 2016 Remuneration Policy Section), as set out on pages 72 to 95, which the Board has again decided to present to shareholders for the purposes of a non-binding advisory vote. This is in line with international best practice.
Changes to the Board of Directors
* | For more information in relation to the Group’s risk management and internal control systems, please see the Risk Management and Internal Control section in the Supplementary 20-F Disclosures section on pages 228 and 229. |
98 |
CRH Annual Report and Form 20-F | 2017
Under the Company’s Articles of Association, co-opted Directors are required to submit themselves to shareholders for election at the AGM following their appointment and all Directors are required to submit themselves for re-election at intervals of not more than three years. However, in accordance with the provisions contained in the UK Corporate Governance Code, the Board has decided that all Directors eligible for re-election should retire at each AGM and offer themselves for re-election.
Auditors
As required under Section 381(1)(b) of the Companies Act 2014, the AGM agenda includes a resolution authorising the Directors to fix the remuneration of the auditors.
Section 383 of the Companies Act 2014 provides for the automatic reappointment of the auditor of an Irish company at a company’s annual general meeting, unless the auditor has given notice in writing of his unwillingness to be reappointed or a resolution has been passed at that meeting appointing someone else or providing expressly that the incumbent auditor shall not be reappointed. The auditors, EY, Chartered Accountants, are willing to continue in office.
Notwithstanding the provisions of Irish company law, the Board has decided to provide shareholders with an opportunity to have a say on the continuance in office of EY and a non-binding resolution has been included on the agenda for the 2018 AGM for this purpose.
Authority to Allot Shares
The Directors require the authority of the shareholders to allot any unissued Ordinary Share capital of the Company. Accordingly, an ordinary resolution will be proposed at the 2018 AGM (Resolution 7) to renew the annual authority for that purpose. The authority will be for an amount which represents just under 50% of the issued Ordinary Share capital as at 28 February 2018. Any allotment exceeding 33% of the issued Ordinary Share capital will only be made pursuant to a fully pre-emptive issue and no issue of shares will be made which could effectively alter control of the Company without prior approval of the Company in General Meeting.
The Directors have no present intention of making any issue of shares, other than in connection with the Group’s share incentive plans and scrip dividend scheme. If approved, this authority will expire on the earlier of the date of the AGM in 2019 or 25 July 2019.
Disapplication of Pre-emption Rights
Resolutions 8 and 9 are special resolutions which, if approved by shareholders, will renew the annual authorities of the Directors to disapply statutory pre-emption rights in relation to allotments of Ordinary Shares for cash in certain circumstances.
Resolution 8 will, if approved, authorise the Directors to allot Ordinary Shares on a non-pre-emptive basis and for cash (otherwise than in connection with a rights issue or similar pre-emptive issue) up to a maximum nominal value of€14,262,000. This amount represents approximately 5% of the issued Ordinary Share capital as at 28 February 2018, being the latest practicable date prior to publication of this document. Resolution 8 will also allow the Directors to disapply pre-emption rights in order to accommodate any regulatory restrictions in certain jurisdictions.
Resolution 9 will, if approved, afford the Directors with an additional power to allot Ordinary Shares on a non-pre-emptive basis and for cash up to a further 5% of the issued share capital as at 28 February 2018. The power conferred by Resolution 9 can be used only in connection with an acquisition or a specified capital investment which is announced contemporaneously with the issue, or which has taken place in the preceding six-month period and is disclosed in the announcement of the issue.
The 5% limits in Resolutions 8 and 9 include any Treasury Shares reissued by the Company during the same period.
The Directors confirm that in respect of Resolutions 8 and 9, they intend to follow the Statement of Principles updated by the Pre-Emption Group in that allotments of shares for cash and the reissue of Treasury Shares on a non-pre-emptive basis (other than for an open offer or rights issue to Ordinary Shareholders, the operation of CRH’s employee share schemes or in connection with
an acquisition or specified capital investment) will not exceed 7.5% of the issued Ordinary Share capital within a rolling three-year period without prior consultation with shareholders.
Transactions in Own Shares
During 2017, 29,575 (2016: 711,839) Treasury Shares were reissued under the Group’s employees’ share schemes. As at 28 February 2018, 53,848 shares were held as Treasury Shares, equivalent to 0.006% of the Ordinary Shares in issue (excluding Treasury Shares).
A special resolution will be proposed at the 2018 AGM (Resolution 10) to renew the authority of the Company, or any of its subsidiaries, to purchase up to 10% of the Company’s Ordinary/Income Shares in issue at the date of the AGM.
If approved, the minimum price which may be paid for shares purchased by the Company shall not be less than the nominal value of the shares and the maximum price will be 105% of the higher of the last independent trade in the Company’s shares (or current independent bid, if higher) and the average market price of such shares over the preceding five days. A special resolution (Resolution 11) will also be proposed for the purpose of renewing the authority to set the maximum and minimum prices at which Treasury Shares (effectively shares purchased and not cancelled) may be reissued off-market by the Company. If granted, both of these authorities will expire on the earlier of the date of the AGM in 2019 or 25 July 2019.
As at 28 February 2018, options to subscribe for a total of 2,973,948 Ordinary/Income Shares are outstanding, representing 0.36% of the issued Ordinary/Income share capital (excluding Treasury Shares). If the authority to purchase Ordinary/lncome Shares was used in full, the options would represent 0.40% of the remaining shares in issue.
The Directors do not have any current intention of exercising the power to purchase the Company’s own shares and will only do so if they consider it to be in the best interests of the Company and its shareholders.
99 |
CRH Annual Report and Form 20-F | 2017
Directors’ Report - continued
Authority to Offer Scrip Dividends
An ordinary resolution will be proposed at the 2018 AGM to renew the Directors’ authority to make scrip dividend offers (Resolution 12). This authority will apply to dividends declared or to be paid commencing on 26 April 2018. Unless renewed at the AGM in 2019, this authority shall expire at the close of business on 25 July 2019.
Amendments to Articles of Association
A special resolution will also be proposed at the 2018 AGM, which, if approved, will provide the Directors with important flexibility regarding the mechanism for setting the price for scrip dividend offers. Under the existing provisions of Article 137(b)(ii) the scrip price must be set by reference to the average price of an Ordinary Share on each of the first three business days on which the Ordinary Shares are quoted “ex” the relevant dividend. There can be circumstances where setting the price using this methodology may not be appropriate or in the best interests of shareholders. In such situations the only option currently open to the Board is to exercise its discretion to withdraw the scrip offer. The amendment will also provide the Board with flexibility in relation to the way in which the scrip dividend alternative plan is operated.
Annual General Meeting
The Notice of Meeting for the 2018 AGM is available on the CRH website (www.crh.com) and will be posted to shareholders on 28 March 2018.
On behalf of the Board,
N. Hartery, A. Manifold
Directors
28 February 2018
100 |
101 |
CRH Annual Report and Form 20-F | 2017
Principal Risks and Uncertainties
Under Section 327(1)(b) of the Companies Act 2014 and Regulation 5(4)(c)(ii) of the Transparency (Directive 2004/109/EC) Regulations 2007, the Group is required to give a description of the principal risks and uncertainties which it faces. These risks and uncertainties reflect the international scope of the Group’s operations and the Group’s decentralised structure. The risks and uncertainties presented below, which are supplemented by a broader discussion of Risk Factors set out on pages 218 to 227, are reviewed on an annual basis and represent the principal risks and uncertainties faced by the Group at the time of compilation of the 2017 Annual Report and Form 20-F. During the course of 2018, new risks and uncertainties may materialise attributable to changes in markets, regulatory environments and other factors and existing risks and uncertainties may become less relevant.
Principal Strategic Risks and Uncertainties
Industry cyclicality | ||
Risk | How we Manage the Risk | |
Description: The level of construction activity in local and national markets is inherently cyclical being influenced by a wide variety of factors including global and national economic circumstances, governments’ ability to fund infrastructure projects, consumer sentiment and weather conditions. Financial performance may also be negatively impacted by unfavourable swings in fuel and other commodity/raw material prices. Impact: Failure of the Group to respond on a timely basis and/or adequately to unfavourable events may adversely affect financial performance. | • CRH’s market and product diversification strategy, in addition to its spread of activity across multiple end-use sectors, means that recession would need to be general across the US and/or Europe to have a significant impact at Group level. CRH’s geographic footprint is spread across 32 countries and multiple end-use sectors. CRH is the largest building materials company in North America and is a regional leader in Europe with strategic positions in Asia • Through an ingrained philosophy of business improvement, the Group is strongly committed to ongoing cost control, strong cash generation and disciplined financial management. This commitment, and the strength of its reporting and internal control systems, assist the Group in responding quickly and hence mitigating the volatility associated with cyclicality • The Group prioritises dynamic capital allocation and reallocation aimed at ensuring profitable growth across the Group’s network of businesses |
Political and economic uncertainty | ||
Risk | How we Manage the Risk | |
Description: As an international business, the Group operates in many countries with differing, and in some cases, potentially fast-changing economic, social and political conditions. These conditions, which may be heightened by the uncertainties resulting from the commencement of proceedings for the UK to exit the European Union, in addition to continued instability in Brazil, Philippines and Ukraine could include political unrest, currency disintegration, strikes, restrictions on repatriation of earnings, changes in law and policies, activism, and civil disturbance and may be triggered or worsened by other forms of instability including natural disasters, epidemics, widespread transmission of diseases and terrorist attacks. These factors are of particular relevance in developing/emerging markets. Impact: Changes in these conditions, or in the governmental or regulatory requirements in any of the countries in which the Group operates, may adversely affect the Group’s business, results of operations, financial condition or prospects thus leading to possible impairment of financial performance and/or restrictions on future growth opportunities. | • The annual budgeting process is undertaken in two phases with prevailing economic and market forecasts factored into performance targets • Commentaries and economic indicators are provided to senior management and the Board on a monthly basis together with trading results and forecasts to facilitate tracking of political and economic events which may create uncertainties as to financial performance • Where political tensions are heightened, or materialise, mitigation strategies are in place to protect CRH’s people and assets |
102 |
CRH Annual Report and Form 20-F | 2017
Commodity products and substitution | ||
Risk | How we Manage the Risk | |
Description: The Group faces strong volume and price competition across its product lines, stemming from the fact that many of the Group’s products are commodities. In addition, existing products may be replaced by substitute products which the Group does not produce or distribute, or new construction techniques may be devised. Impact: Against this backdrop, if the Group fails to generate competitive advantage through differentiation and innovation, market share, and thus financial performance, may decline. | • CRH endeavours to counter the competitive positioning difficulties posed by low barriers to entry across many of its markets, products and services through focusing on customer service and other means of differentiation • Innovation and research and development are aimed at ensuring that the Group is constantly aligning its products and services to the demands of customers. These activities are business led and are guided by the Group Sustainability function • Further details are outlined in the Group Sustainability Report, issued annually and approved by the Board |
Reserves availability and planning | ||
Risk | How we Manage the Risk | |
Description: Certain of the Group’s businesses require long-term reserves backing necessitating detailed utilisation planning. Appropriate reserves are an increasingly scarce commodity and licences and/or permits are required to enable operation. There are numerous uncertainties inherent in reserves estimation and in projecting future rates of production. Impact: Failure by the Group to plan adequately for depletion may result in sub-optimalor uneconomic utilisation giving rise to unplanned capital expenditure or acquisition activity, lower financial performance and the need to obtain newlicences and/or permits to operate. Operating entities may fail to obtain or renew or may experience material delays in securing the requisite government approvals, licences and permits for the conduct of business. | • Planning for reserves enlargement and security of the requisite permits and licences is an ongoing process and a key focus for our heavy side businesses • All operating companies are required to have an effective permit management system in place to ensure compliance with permit conditions as well as ensuring timely renewal of permits • Group functions work continuously with operating entities to ensure efficient and economic utilisation of mineral reserves |
Business portfolio management: acquisition and divestment activity | ||
Risk | How we Manage the Risk | |
Description: Growth through acquisition and active management of the Group’s business portfolio are key elements of the Group’s strategy with the Group’s balanced portfolio growing year on year through bolt-on activity occasionally supplemented by larger and/or step-change transactions. In addition, the Group may be liable or remain liable for the past acts, omissions or liabilities of companies or businesses it has acquired or divested. Impact: The Group may not be able to continue to grow as contemplated in its business plans if it is unable to identify attractive targets (including potential new platforms for growth), divest non-core or underperforming entities, execute full and properdue diligence, raise funds on acceptable terms, complete such acquisition transactions, integrate the operations of the acquired businesses, retain key staff and realise anticipated levels of profitability and cash flows. If the Group is heldliable for the past acts, omissions or liabilities of companies or businesses it has acquired, or remains liable in cases of divestment, those liabilities may either be unforeseen or greater than anticipated at the time of the relevant acquisition or divestment. | • CRH has traditionally grown through acquisition and as such has developed significant expertise in identifying and evaluating appropriate targets and conducting due diligence and subsequent integration • Many of the Group’s core markets remain fragmented or relatively unconsolidated and will continue to offer growth opportunities via the proven acquisition model in the decades ahead • The Group’s detailed due diligence and integration programmes are supported by external specialists where internal expertise is insufficient • Further discussion is provided in the Business Performance section, Chairman’s Introduction and Chief Executive’s Review |
103 |
CRH Annual Report and Form 20-F | 2017
Principal Strategic Risks and Uncertainties - continued
Joint ventures and associates | ||
Risk | How we Manage the Risk | |
Description: The Group does not have a controlling interest in certain of the businesses (i.e. joint ventures and associates) in which it has invested and may invest. The absence of a controlling interest gives rise to increased governance complexity and a need for proactive relationship management, which may restrict the Group’s ability to generate adequate returns and to develop and grow these businesses. Impact: These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise its strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls for non-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment. | • Board-approved governance protocols are in place which require acquisition/investment contracts to contain appropriate provisions as regards future Board participation and ongoing management and interaction, amongst other items • In joint venture arrangements, CRH has traditionally appointed CRH personnel, by way of the legal agreement entered into, to facilitate integration, assist in best practice transfer and drive performance and growth |
Human resources and talent management | ||
Risk | How we Manage the Risk | |
Description: Existing processes to recruit, develop and retain talented individuals and promote their mobility within a decentralised organisation may be inadequate thus giving rise to employee/management attrition, difficulties in succession planning and inadequate “bench strength”, potentially impeding the continued realisation of the core strategic objectives of value creation and growth. In addition, the Group is exposed to various risks associated with collective representation of employees in certain jurisdictions; these risks could include strikes and increased wage demands. Impact: In the longer term, failure to manage talent and plan for leadership and succession could impede the realisation of core strategic objectives. | • Succession planning and talent management initiatives are implemented in an organised and concerted way in respect of all senior management positions across the Group. These exercises are promoted and co-ordinated by Group Human Resources & Talent Management with support from senior operational and HR executives across the Group • Through appropriate structures, the Group and its operating entities seek to maintain positive employee and trade/labour union relations which are key to successful operations |
Principal Operational Risks and Uncertainties
Sustainability, corporate social responsibility and climate change | ||
Risk | How we Manage the Risk | |
Description: The Group is subject to stringent and evolving laws, regulations, standards and best practices from a sustainability perspective. The Group’s use of the term “sustainability” comprises Health & Safety management (i.e. embedding a culture of safety and ensuring safe working environments), conducting business with integrity, protecting the environment, preparing for and managing the impact of climate change on business activities, managing stakeholders, attaining strong social performance credentials and, lastly, using the foregoing to generate innovation and other business opportunities to create value. Against this backdrop, the nature of the Group’s activities pose or create certain inherent risks, responsibility for which is vested with operating entity management, Group and Divisional management and the Board of Directors. Impact: Non-adherence to the many laws, regulations, standards and best practices in the sustainability arena may give rise to increased ongoing remediation and/or other compliance costs and may adversely affect the Group’s business, results of operations, financial condition and/or prospects. Failure to leverage innovation and other sustainability initiatives may shorten product life cycles or give rise to early product obsolescence thus impairing financial performance and/or future value creation. In addition, the failure to embed sustainability principles across the Group’s businesses and in the Group’s strategy may lead to adverse investor sentiment or reduced investor interest in CRH plc’s Ordinary Shares. | • CRH’s strategy and business model are built around sustainable, responsible and ethical performance. Sustainability and Corporate Social Responsibility (“CSR”) concepts are embedded in all CRH operations and activities. Excellence in the areas of Health & Safety, Environment & Climate Change, Governance and People & Community is a daily priority of line management with regular reporting to Group management and to the Board of Directors • The Group has implemented detailed policies and procedures promoting Health & Safety, Environmental Practices and Energy Efficiency • Sustainability performance is subject to rigorous external evaluation on an annual basis. The Group’s achievements have been recognised through its inclusion in a variety of leading global sustainability indices and are communicated to investors as part of the Group’s investor relations efforts • Further details are outlined in the Group Sustainability Report, issued annually and approved by the Board |
104 |
CRH Annual Report and Form 20-F | 2017
Principal Operational Risks and Uncertainties - continued
Operational continuity | ||
Risk | How we Manage the Risk | |
Description: The Group’s operating entities are subject to a wide range of operating risks and hazards including climatic conditions such as floods and hurricanes/cyclones, seismic activity, technical failures, interruptions to power supplies, industrial accidents and disputes, environmental hazards, fire and crime. Impact: The occurrence of a significant adverse event could lead to prolonged disruption of business activities and, as a result, could have a material impact on the business, results of operations, financial condition or prospects of the Group. | • In general, the geographical spread and, in many instances, the concentration of the Group’s activities in specific market areas facilitates continuity management if an adverse event was to materialise • Strong adherence to Group policies on property management, quality control, Information Security, Health & Safety and Sustainability assist in avoiding potential loss events. Captive insurance entities, which are wholly-owned subsidiaries, play a critical role in CRH’s insurable risk management strategies • Constant monitoring of the risk environment to determine whether all key risks are covered by insurance, where practicable and sensible • Insurance protection is provided at a level believed to be commensurate with the associated risks, and is maintained with leading, highly-rated international insurers with appropriate risk retention by insurance captives and by insured entities in the context of deductibles/excesses borne |
Information technology and security/cyber | ||
Risk | How we Manage the Risk | |
Description: The Group is dependent on the employment of advanced information systems (digital infrastructure, applications and networks) to support its business activities, and is exposed to risks of failure in the operation of these systems. Further, the Group is exposed to security threats to its digital infrastructure through cyber-crime. Such attacks are by their nature technologically sophisticated and may be difficult to detect and defend in a timely fashion. Impact: Should a security breach or other incident materialise, it could lead to interference with production processes, manipulation of financial data, the theft of private data or intellectual property, misappropriation of funds, or misrepresentation of information via digital media. In addition to potential irretrievability or corruption of critical data, the Group could suffer reputational losses, regulatory penalties and incur significant financial costs in remediation. | • Ongoing strategic and tactical efforts to address the evolving nature of cyber threats and the challenges posed, including the revision of internal practices and controls • Enhancement of existing information and cyber security practices towards best practices for organisational assets, which include people, processes and technology • Ongoing investment and development of risk management and governance associated with cyber security and information technology |
105 |
CRH Annual Report and Form 20-F | 2017
Principal Compliance Risks and Uncertainties
Laws and regulations | ||
Risk | How we Manage the Risk | |
Description: The Group is subject to many local and international laws and regulations, including those relating to competition law, corruption and fraud, across many jurisdictions of operation and is therefore exposed to changes in those laws and regulations and to the outcome of any investigations conducted by governmental, international or other regulatory authorities. Impact: Potential breaches of local and international laws and regulations in the areas of competition law, corruption and fraud, among others, could result in the imposition of significant fines and/or sanctions for non-compliance, including the withdrawal of operating licences, and may inflict reputational damage. | • CRH’s Code of Business Conduct, which is in effect mandatorily across the Group, stipulates best practice in relation to regulatory and compliance matters amongst other issues. The Code is available on www.crh.com • Proactive on-the-ground engagement throughout the Group, through an extensive training programme, a dedicated whistleblowing hotline (the results of which are reported to the Audit Committee) and detailed policies and procedures to support the Code of Business Conduct • Significant internal controls and compliance policies have been implemented in order to promote strong and ongoing compliance with all laws and regulations, including the UK Bribery Act, 2010 and the US Foreign Corrupt Practices Act, 1977 |
Principal Financial and Reporting Risks and Uncertainties
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) | ||
Risk | How we Manage the Risk | |
Description: The Group uses financial instruments throughout its businesses giving rise to interest rate and leverage, foreign currency, counterparty, credit rating and liquidity risks. A significant portion of the cash generated by the Group from operational activity is currently dedicated to the payment of principal and interest on indebtedness. In addition, the Group has entered into certain financing agreements containing restrictive covenants requiring it to maintain a certain minimum interest coverage ratio and a certain minimum net worth. Impact: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. In addition, insolvency of the financial institutions with which the Group conducts business (or a downgrade in their credit ratings) may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult for the Group either to utilise existing debt capacity or otherwise obtain financing for operations. | • Fixed and floating rate debt and interest rate swaps are used to manage borrowing costs, while currency swaps and forward foreign currency contracts are used to manage currency exposures and to achieve the desired profile of borrowings • The Group seeks to ensure that sufficient resources are available to meet the Group’s liabilities as they fall due through a combination of cash and cash equivalents, cash flows and undrawn committed bank facilities. Systems are in place to monitor and control the Group’s liquidity risks, which are reported to the Board on a monthly basis. Cash flow forecasting is provided to executive management on a daily basis • The Group’s established policy is to spread its net worth across the currencies of its various operations with the objective of limiting its exposure to individual currencies • All of the Group’s financial counterparties are leading financial institutions of international scope with a minimum S&P credit rating of A- • Please see note 22 to the Consolidated Financial Statements for further detail |
Defined benefit pension schemes and related obligations | ||
Risk | How we Manage the Risk | |
Description: The Group operates a number of defined benefit pension schemes and schemes with related obligations (for example, termination indemnities and jubilee/long-term service benefits, which are accounted for as defined benefit) in certain of its operating jurisdictions. The assets and liabilities of defined benefit pension schemes may exhibit significant period-on-period volatility attributable primarily to asset values, changes in bond yields/discount rates and anticipated longevity. Impact: In addition to the contributions required for the ongoing service of participating employees, significant cash contributions may be required to remediate deficits applicable to past service. Further, fluctuations in the accounting surplus/deficit may adversely impact the Group’s credit metrics thus harming its ability to raise funds. | • Where feasible, defined benefit pension schemes have been closed to future accrual. Where closure to future accrual was not feasible for legal and other reasons, the relevant final salary schemes were transitioned to a career-average methodology for future service with severance of the final salary link and the introduction of defined contribution for new entrants • De-risking frameworks (for example, Liability-Driven Investment techniques) have been instituted to mitigate deficit volatility and enable better matching of investment returns with the cash out flows related to benefit obligations • Deficit reparation initiatives are in place for all of the defined benefit pension schemes in the Republic of Ireland. The funding proposals governing the quantum and regularity of contributions have been agreed with the Pensions Board. In most cases, on the assumption that funding levels remain on track, the reparation periods cease in 2018 • Defined benefit pension scheme exposures and the mitigation strategies in place are reviewed by the Audit Committee on a periodic basis |
106 |
CRH Annual Report and Form 20-F | 2017
Principal Financial and Reporting Risks and Uncertainties - continued
Taxation charge and balance sheet provisioning | ||
Risk | How we Manage the Risk | |
Description: The Group is exposed to uncertainties stemming from governmental actions in respect of taxes paid and payable in all jurisdictions of operation. In addition, various assumptions are made in the computation of the overall tax charge and in balance sheet provisions which may not be borne out in practice. Impact: Changes in the tax regimes and related government policies and regulations in the countries in which the Group operates could adversely affect its results and its effective tax rate. The final determination of tax audits or tax disputes may be different from that which is reflected in the Group’s historical income tax provisions and accruals. If future audits find that additional taxes are due, the Group may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on cash flows, financial condition and results of operations. | • The Group Tax Guidelines and Group Transfer Pricing Guidelines provide a tax governance framework operable throughout the Group • Group Tax is managed by in-house specialists with significant experience. The in-house expertise is supplemented by the assistance of external advisors where required • Group Tax, and the responsible individuals at operating company level, monitor potential changes in tax legislation and policy in all jurisdictions of operation • The Group Tax Director reports directly to the Group Finance Director and provides regular tax updates to the Finance Director and the Finance Committee. This ensures that the related risks are actively managed and monitored |
Foreign currency translation | ||
Risk | How we Manage the Risk | |
Description: The principal foreign exchange risks to which the Consolidated Financial Statements are exposed pertain to adverse movements in reported results when translated into euro (which is the Group’s reporting currency) together with declines in the euro value of net investments which are denominated in a wide basket of currencies other than the euro. Impact: Adverse changes in the exchange rates used to translate foreign currencies into euro have impacted and will continue to impact retained earnings. The annual impact is reported in the Consolidated Statement of Comprehensive Income. | • The Group’s activities are conducted primarily in the local currency of operation resulting in low levels of foreign currency transactional risk • The Group’s established policy is to spread its net worth across the currencies of the various operations with the objective of limiting its exposure to individual currencies and thus promoting consistency with the geographical balance of its operation • The Group manages its multi-currency borrowings through hedging a portion of its foreign currency assets • Sensitivity analysis is conducted in order to understand the impact of significant variances in currency fluctuations |
Goodwill impairment | ||
Risk | How we Manage the Risk | |
Description: Significant under-performance in any of the Group’s major cash generating units or the divestment of businesses in the future may give rise to a material write-down of goodwill. Impact: A write-down of goodwill could have a substantial impact on the Group’s income and equity. | • Economic indicators of goodwill impairment are monitored closely through the monthly reporting process and regular senior management dialogue in order to ensure that potential impairment issues are flagged on a timely basis and corrective action taken, where feasible • Detailed impairment testing in respect of each of the cash-generating units across the Group is undertaken prior to year-end for the purposes of the Consolidated Financial Statements • The goodwill impairment assessment is subject to regular review by the Audit Committee • For further information on how we manage the risk posed by Goodwill impairment, please refer to note 15 to the Consolidated Financial Statements on pages 153 to 156 |
107 |
108 |
| ||||
118 | ||||
120 | ||||
Consolidated Statement of Comprehensive Income | ||||
121 | ||||
122 | ||||
Consolidated Statement of Changes in Equity | ||||
123 | ||||
Consolidated Statement of Cash Flows | ||||
124 | ||||
Accounting Policies | ||||
125 | ||||
Notes on Consolidated Financial Statements |
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Independent Auditor’s US Reports
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors and Shareholders of CRH public limited company (CRH plc):
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of CRH plc (the Company) as of 31 December 20142017 and 2013, and2016, the related Consolidated Income Statements and Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for each of the three years in the period ended 31 December 2014. These Consolidated Financial Statements are2017, and the responsibility ofrelated notes (collectively referred to as the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)“financial statements”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Consolidated Financial Statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall Consolidated Financial Statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to abovefinancial statements present fairly, in all material respects, the consolidated financial position of CRH plcthe Company at 31 December 20142017 and 2013,2016, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended 31 December 2014,2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), CRH plc’sthe Company’s internal control over financial reporting as of 31 December 2014,2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (2013 Framework) and our report dated 11 March 201528 February 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
ERNST & YOUNG
Dublin, Ireland
11 March 2015We have served as the Company’s auditor since 1988.
Dublin, Ireland
28 February 2018
118 |
CRH Annual Report and Form 20-F|2017 |
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON INTERNAL CONTROL OVER
FINANCIAL REPORTING
To the Shareholders and the Board of Directors and Shareholders of CRH public limited company (CRH plc):
Opinion on Internal Control over Financial Reporting
We have audited CRH plc’s internal control over financial reporting as of 31 December 2014,2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (2013 Framework) (the “COSO criteria”‘COSO criteria’). In our opinion, CRH plc’splc (the Company) maintained, in all material respects, effective internal control over financial reporting as of 31 December 2017, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of business combinations during the year ended 31 December 2017, which are included in the 2017 Consolidated Financial Statements of the Company and constituted 6.4% and 10.6% of total and net assets, respectively, as of 31 December 2017 and 1.9% and (0.1)% of revenues (from continuing and discontinued operations) and group profit, respectively, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of business combinations completed during the year ended 31 December 2017.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance Sheets of CRH plc as of 31 December 2017 and 2016, the related Consolidated Income Statements and Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for each of the three years in the period ended 31 December 2017, and the related notes (collectively referred to as the “financial statements”) of the Company and our report dated 28 February 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Consolidated Financial Statementsfinancial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of Consolidated Financial Statementsfinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’sCompany’s assets that could have a material effect on the Consolidated Financial Statements.financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of business combinations completed during the year ended 31 December 2014, which are included in the 2014 Consolidated Financial Statements of CRH plc and constituted 0.7% and 1.2% of total and net assets, respectively, as of 31 December 2014 and 0.6% and 0.8% of revenues and Group profit, respectively, for the year then ended. Our audit of internal control over financial reporting of CRH plc also did not include an evaluation of the internal control over financial reporting of business combinations completed during the year ended 31 December 2014.
In our opinion, CRH plc maintained, in all material respects, effective internal control over financial reporting as of 31 December 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2014 Consolidated Financial Statements of CRH plc and our report dated 11 March 2015 expressed an unqualified opinion thereon.
ERNST & YOUNG
Dublin, Ireland
11 March 2015
28 February 2018
119 |
CRH Annual Report and Form 20-F|2017 |
for the financial year ended 31 December 20142017
2017 €m | Restated(i) 2016 €m | Restated(i) 2015 €m | ||||||||||||
Notes | ||||||||||||||
1 | Revenue | 25,220 | 24,789 | 21,406 | ||||||||||
3 | Cost of sales | (16,903) | (16,566) | (14,743) | ||||||||||
Gross profit | 8,317 | 8,223 | 6,663 | |||||||||||
3 | Operating costs | (6,222) | (6,315) | (5,497) | ||||||||||
1,4,6,7 | Group operating profit | 2,095 | 1,908 | 1,166 | ||||||||||
1,5 | Profit on disposals | 56 | 53 | 99 | ||||||||||
Profit before finance costs | 2,151 | 1,961 | 1,265 | |||||||||||
9 | Finance costs | (301) | (325) | (303) | ||||||||||
9 | Finance income | 12 | 8 | 8 | ||||||||||
9 | Other financial expense | (60) | (66) | (94) | ||||||||||
10 | Share of equity accounted investments’ profit | 65 | 42 | 44 | ||||||||||
1 | Profit before tax from continuing operations | 1,867 | 1,620 | 920 | ||||||||||
11 | Income tax expense | (55) | (431) | (276) | ||||||||||
Group profit for the financial year from continuing operations | 1,812 | 1,189 | 644 | |||||||||||
2 | Profit after tax for the financial year from discontinued operations | 107 | 81 | 85 | ||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 | |||||||||||
Profit attributable to: | ||||||||||||||
Equity holders of the Company | ||||||||||||||
From continuing operations | 1,788 | 1,162 | 639 | |||||||||||
From discontinued operations | 107 | 81 | 85 | |||||||||||
Non-controlling interests | ||||||||||||||
From continuing operations | 24 | 27 | 5 | |||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 | |||||||||||
13 | Basic earnings per Ordinary Share | 226.8c | 150.2c | 89.1c | ||||||||||
13 | Diluted earnings per Ordinary Share | 225.4c | 149.1c | 88.7c | ||||||||||
13 | Basic earnings per Ordinary Share from continuing operations | 214.0c | 140.4c | 78.7c | ||||||||||
13 | Diluted earnings per Ordinary Share from continuing operations | 212.7c | 139.4c | 78.3c | ||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. See note 2 for further details. |
|
120 |
as at 31 December 2014
2014 €m | 2013 €m | |||||||||||
Notes | ||||||||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
13 | Property, plant and equipment | 7,422 | 7,539 | |||||||||
14 | Intangible assets | 4,173 | 3,911 | |||||||||
15 | Investments accounted for using the equity method | 1,329 | 1,340 | |||||||||
15 | Other financial assets | 23 | 23 | |||||||||
17 | Other receivables | 85 | 93 | |||||||||
24 | Derivative financial instruments | 87 | 63 | |||||||||
26 | Deferred income tax assets | 171 | 107 | |||||||||
Total non-current assets | 13,290 | 13,076 | ||||||||||
Current assets | ||||||||||||
16 | Inventories | 2,260 | 2,254 | |||||||||
17 | Trade and other receivables | 2,644 | 2,516 | |||||||||
Current income tax recoverable | 15 | 26 | ||||||||||
24 | Derivative financial instruments | 15 | 17 | |||||||||
22 | Cash and cash equivalents | 3,262 | 2,540 | |||||||||
4 | Assets held for sale | 531 | - | |||||||||
Total current assets | 8,727 | 7,353 | ||||||||||
Total assets | 22,017 | 20,429 | ||||||||||
EQUITY | ||||||||||||
Capital and reserves attributable to the Company’s equity holders | ||||||||||||
28 | Equity share capital | 253 | 251 | |||||||||
28 | Preference share capital | 1 | 1 | |||||||||
28 | Share premium account | 4,324 | 4,219 | |||||||||
28 | Treasury Shares and own shares | (76 | ) | (118 | ) | |||||||
Other reserves | 213 | 197 | ||||||||||
Foreign currency translation reserve | 57 | (542 | ) | |||||||||
Retained income | 5,405 | 5,654 | ||||||||||
10,177 | 9,662 | |||||||||||
Non-controlling interests | 21 | 24 | ||||||||||
Total equity | 10,198 | 9,686 | ||||||||||
LIABILITIES | ||||||||||||
Non-current liabilities | ||||||||||||
23 | Interest-bearing loans and borrowings | 5,419 | 4,579 | |||||||||
24 | Derivative financial instruments | 3 | 34 | |||||||||
26 | Deferred income tax liabilities | 1,305 | 1,166 | |||||||||
18 | Other payables | 257 | 289 | |||||||||
27 | Retirement benefit obligations | 711 | 410 | |||||||||
25 | Provisions for liabilities | 257 | 231 | |||||||||
Total non-current liabilities | 7,952 | 6,709 | ||||||||||
Current liabilities | ||||||||||||
18 | Trade and other payables | 2,894 | 2,754 | |||||||||
Current income tax liabilities | 154 | 151 | ||||||||||
23 | Interest-bearing loans and borrowings | 447 | 961 | |||||||||
24 | Derivative financial instruments | 20 | 19 | |||||||||
25 | Provisions for liabilities | 139 | 149 | |||||||||
4 | Liabilities associated with assets classified as held for sale | 213 | - | |||||||||
Total current liabilities | 3,867 | 4,034 | ||||||||||
Total liabilities | 11,819 | 10,743 | ||||||||||
Total equity and liabilities | 22,017 | 20,429 |
CRH Annual Report and Form 20-F|2017 |
Consolidated Statement of Changes in EquityComprehensive Income
for the financial year ended 31 December 20142017
Attributable to the equity holders of the Company | ||||||||||||||||||||||||||||||||||||
Issued share capital €m | Share premium account €m | Treasury Shares/ own shares €m | Other reserves €m | Foreign currency translation reserve | Retained income €m | Non- controlling interests €m | Total equity €m | |||||||||||||||||||||||||||||
Notes | ||||||||||||||||||||||||||||||||||||
At 1 January 2014 | 252 | 4,219 | (118 | ) | 197 | (542 | ) | 5,654 | 24 | 9,686 | ||||||||||||||||||||||||||
Group profit for the financial year | - | - | - | - | - | 582 | 2 | 584 | ||||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | 599 | (351 | ) | - | 248 | |||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | 599 | 231 | 2 | 832 | ||||||||||||||||||||||||||||
28 | Issue of share capital (net of expenses) | 2 | 105 | - | - | - | - | - | 107 | |||||||||||||||||||||||||||
7 | Share-based payment expense | |||||||||||||||||||||||||||||||||||
- share option schemes | - | - | - | 1 | - | - | - | 1 | ||||||||||||||||||||||||||||
- Performance Share Plans/Restricted Share Plan | - | - | - | 15 | - | - | - | 15 | ||||||||||||||||||||||||||||
28 | Treasury/own shares reissued | - | - | 42 | - | - | (42 | ) | - | - | ||||||||||||||||||||||||||
Share option exercises | - | - | - | - | - | 22 | - | 22 | ||||||||||||||||||||||||||||
11 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (460 | ) | (4 | ) | (464 | ) | ||||||||||||||||||||||||
Acquisition of non-controlling interests | - | - | - | - | - | - | (1 | ) | (1 | ) | ||||||||||||||||||||||||||
At 31 December 2014 | 254 | 4,324 | (76 | ) | 213 | 57 | 5,405 | 21 | 10,198 | |||||||||||||||||||||||||||
for the financial year ended 31 December 2013 | ||||||||||||||||||||||||||||||||||||
At 1 January 2013 | 250 | 4,133 | (146 | ) | 182 | (169 | ) | 6,303 | 36 | 10,589 | ||||||||||||||||||||||||||
Group loss for the financial year | - | - | - | - | - | (296 | ) | 1 | (295 | ) | ||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | (373 | ) | 117 | - | (256 | ) | ||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | (373 | ) | (179 | ) | 1 | (551 | ) | |||||||||||||||||||||||||
28 | Issue of share capital (net of expenses) | 2 | 86 | - | - | - | - | - | 88 | |||||||||||||||||||||||||||
7 | Share-based payment expense | |||||||||||||||||||||||||||||||||||
- share option schemes | - | - | - | 1 | - | - | - | 1 | ||||||||||||||||||||||||||||
- Performance Share Plans/Restricted Share Plan | - | - | - | 14 | - | - | - | 14 | ||||||||||||||||||||||||||||
28 | Treasury/own shares reissued | - | - | 34 | - | - | (34 | ) | - | - | ||||||||||||||||||||||||||
28 | Shares acquired by Employee Benefit Trust (own shares) | - | - | (6 | ) | - | - | - | - | (6 | ) | |||||||||||||||||||||||||
Share option exercises | - | - | - | - | - | 19 | - | 19 | ||||||||||||||||||||||||||||
11 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (455 | ) | (1 | ) | (456 | ) | ||||||||||||||||||||||||
30 | Non-controlling interests arising on acquisition of subsidiaries | - | - | - | - | - | - | 1 | 1 | |||||||||||||||||||||||||||
Acquisition of non-controlling interests | - | - | - | - | - | - | (13 | ) | (13 | ) | ||||||||||||||||||||||||||
At 31 December 2013 | 252 | 4,219 | (118 | ) | 197 | (542 | ) | 5,654 | 24 | 9,686 | ||||||||||||||||||||||||||
for the financial year ended 31 December 2012 | ||||||||||||||||||||||||||||||||||||
At 1 January 2012 | 248 | 4,047 | (183 | ) | 168 | (119 | ) | 6,358 | 41 | 10,560 | ||||||||||||||||||||||||||
Group profit for the financial year | - | - | - | - | - | 538 | 2 | 540 | ||||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | (50 | ) | (122 | ) | (1 | ) | (173 | ) | ||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | (50 | ) | 416 | 1 | 367 | |||||||||||||||||||||||||||
28 | Issue of share capital (net of expenses) | 2 | 86 | - | - | - | - | - | 88 | |||||||||||||||||||||||||||
7 | Share-based payment expense | |||||||||||||||||||||||||||||||||||
- Performance Share Plans (PSP) | - | - | - | 14 | - | - | - | 14 | ||||||||||||||||||||||||||||
Treasury/own shares reissued | - | - | 37 | - | - | (37 | ) | - | - | |||||||||||||||||||||||||||
Share option exercises | - | - | - | - | - | 16 | - | 16 | ||||||||||||||||||||||||||||
11 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (450 | ) | (4 | ) | (454 | ) | ||||||||||||||||||||||||
Acquisition of non-controlling interests | - | - | - | - | - | - | (2 | ) | (2 | ) | ||||||||||||||||||||||||||
At 31 December 2012 | 250 | 4,133 | (146 | ) | 182 | (169 | ) | 6,303 | 36 | 10,589 |
2017 €m | 2016 €m | 2015 €m | ||||||||||||
Notes | ||||||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 | |||||||||||
Other comprehensive income | ||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||
Currency translation effects | (1,076) | (82) | 661 | |||||||||||
25 | Gains/(losses) relating to cash flow hedges | 8 | 14 | (2) | ||||||||||
(1,068) | (68) | 659 | ||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||
28 | Remeasurement of retirement benefit obligations | 114 | (61) | 203 | ||||||||||
11 | Tax on items recognised directly within other comprehensive income | (33) | 3 | (30) | ||||||||||
81 | (58) | 173 | ||||||||||||
Total other comprehensive income for the financial year | (987) | (126) | 832 | |||||||||||
Total comprehensive income for the financial year | 932 | 1,144 | 1,561 | |||||||||||
Attributable to: | ||||||||||||||
Equity holders of the Company | 969 | 1,128 | 1,538 | |||||||||||
Non-controlling interests | (37) | 16 | 23 | |||||||||||
Total comprehensive income for the financial year | 932 | 1,144 | 1,561 |
121 |
CRH Annual Report and Form 20-F|2017 |
as at 31 December 2017
2017 €m | 2016 €m | |||||||||
Notes | ||||||||||
ASSETS | ||||||||||
Non-current assets | ||||||||||
14 | Property, plant and equipment | 13,094 | 12,690 | |||||||
15 | Intangible assets | 7,214 | 7,761 | |||||||
16 | Investments accounted for using the equity method | 1,248 | 1,299 | |||||||
16 | Other financial assets | 25 | 26 | |||||||
18 | Other receivables | 156 | 212 | |||||||
25 | Derivative financial instruments | 30 | 53 | |||||||
27 | Deferred income tax assets | 95 | 159 | |||||||
Totalnon-current assets | 21,862 | 22,200 | ||||||||
Current assets | ||||||||||
17 | Inventories | 2,715 | 2,939 | |||||||
18 | Trade and other receivables | 3,630 | 3,979 | |||||||
Current income tax recoverable | 165 | 4 | ||||||||
25 | Derivative financial instruments | 34 | 23 | |||||||
23 | Cash and cash equivalents | 2,115 | 2,449 | |||||||
2 | Assets held for sale | 1,112 | - | |||||||
Total current assets | 9,771 | 9,394 | ||||||||
Total assets | 31,633 | 31,594 | ||||||||
EQUITY | ||||||||||
Capital and reserves attributable to the Company’s equity holders | ||||||||||
30 | Equity share capital | 286 | 284 | |||||||
30 | Preference share capital | 1 | 1 | |||||||
30 | Share premium account | 6,417 | 6,237 | |||||||
30 | Treasury Shares and own shares | (15) | (14) | |||||||
Other reserves | 285 | 286 | ||||||||
Foreign currency translation reserve | (386) | 629 | ||||||||
Retained income | 7,903 | 6,472 | ||||||||
Capital and reserves attributable to the Company’s equity holders | 14,491 | 13,895 | ||||||||
32 | Non-controlling interests | 486 | 548 | |||||||
Total equity | 14,977 | 14,443 | ||||||||
LIABILITIES | ||||||||||
Non-current liabilities | ||||||||||
24 | Interest-bearing loans and borrowings | 7,660 | 7,515 | |||||||
25 | Derivative financial instruments | 3 | - | |||||||
27 | Deferred income tax liabilities | 1,666 | 2,008 | |||||||
19 | Other payables | 226 | 461 | |||||||
28 | Retirement benefit obligations | 377 | 591 | |||||||
26 | Provisions for liabilities | 693 | 678 | |||||||
Totalnon-current liabilities | 10,625 | 11,253 | ||||||||
Current liabilities | ||||||||||
19 | Trade and other payables | 4,534 | 4,815 | |||||||
Current income tax liabilities | 458 | 394 | ||||||||
24 | Interest-bearing loans and borrowings | 316 | 275 | |||||||
25 | Derivative financial instruments | 11 | 32 | |||||||
26 | Provisions for liabilities | 371 | 382 | |||||||
2 | Liabilities associated with assets classified as held for sale | 341 | - | |||||||
Total current liabilities | 6,031 | 5,898 | ||||||||
Total liabilities | 16,656 | 17,151 | ||||||||
Total equity and liabilities | 31,633 | 31,594 | ||||||||
N. Hartery, A. Manifold, Directors |
122 |
CRH Annual Report and Form 20-F|2017 |
Consolidated Statement of Cash FlowsChanges in Equity
for the financial year ended 31 December 20142017
2014 €m | 2013 €m | 2012 €m | ||||||||||||||
Notes | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||
Profit/(loss) before tax | 761 | (215 | ) | 646 | ||||||||||||
8 | Finance costs (net) | 288 | 297 | 305 | ||||||||||||
9 | Share of equity accounted investments’ result | (55 | ) | 44 | 84 | |||||||||||
4 | Profit on disposals | (77 | ) | (26 | ) | (230 | ) | |||||||||
Group operating profit | 917 | 100 | 805 | |||||||||||||
2 | Depreciation charge | 631 | 671 | 686 | ||||||||||||
2 | Amortisation of intangible assets | 44 | 54 | 44 | ||||||||||||
2 | Impairment charge | 49 | 650 | 28 | ||||||||||||
7 | Share-based payment expense | 16 | 15 | 14 | ||||||||||||
Other (primarily pension payments) | (66 | ) | (96 | ) | (152 | ) | ||||||||||
19 | Net movement on working capital and provisions | 35 | 77 | (58 | ) | |||||||||||
Cash generated from operations | 1,626 | 1,471 | 1,367 | |||||||||||||
Interest paid (including finance leases) | (262 | ) | (269 | ) | (258 | ) | ||||||||||
Corporation tax paid | (127 | ) | (110 | ) | (124 | ) | ||||||||||
Net cash inflow from operating activities | 1,237 | 1,092 | 985 | |||||||||||||
Cash flows from investing activities | ||||||||||||||||
4 | Proceeds from disposals (net of cash disposed) | 345 | 122 | 782 | ||||||||||||
Interest received | 8 | 13 | 16 | |||||||||||||
Dividends received from equity accounted investments | 30 | 33 | 35 | |||||||||||||
13 | Purchase of property, plant and equipment | (435 | ) | (497 | ) | (544 | ) | |||||||||
30 | Acquisition of subsidiaries (net of cash acquired) | (151 | ) | (336 | ) | (418 | ) | |||||||||
15 | Other investments and advances | (3 | ) | (78 | ) | (56 | ) | |||||||||
19 | Deferred and contingent acquisition consideration paid | (26 | ) | (105 | ) | (30 | ) | |||||||||
Net cash outflow from investing activities | (232 | ) | (848 | ) | (215 | ) | ||||||||||
Cash flows from financing activities | ||||||||||||||||
Proceeds from exercise of share options | 22 | 19 | 16 | |||||||||||||
Acquisition of non-controlling interests | (1 | ) | (13 | ) | (2 | ) | ||||||||||
Increase in interest-bearing loans, borrowings and finance leases | 901 | 1,491 | 487 | |||||||||||||
Net cash flow arising from derivative financial instruments | (11 | ) | 64 | 13 | ||||||||||||
28 | Treasury/own shares purchased | - | (6 | ) | - | |||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (934 | ) | (586 | ) | (394 | ) | ||||||||||
11 | Dividends paid to equity holders of the Company | (353 | ) | (367 | ) | (362 | ) | |||||||||
11 | Dividends paid to non-controlling interests | (4 | ) | (1 | ) | (4 | ) | |||||||||
Net cash (outflow)/inflow from financing activities | (380 | ) | 601 | (246 | ) | |||||||||||
Increase in cash and cash equivalents | 625 | 845 | 524 | |||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||
Cash and cash equivalents at 1 January | 2,540 | 1,747 | 1,246 | |||||||||||||
Translation adjustment | 130 | (52 | ) | (23 | ) | |||||||||||
Increase in cash and cash equivalents | 625 | 845 | 524 | |||||||||||||
22 | Cash and cash equivalents at 31 December | 3,295 | 2,540 | 1,747 |
Attributable to the equity holders of the Company | ||||||||||||||||||||||||||||||||||
Issued €m | Share | Treasury | Other | Foreign | Retained | Non- | Total | |||||||||||||||||||||||||||
Notes | ||||||||||||||||||||||||||||||||||
At 1 January 2017 | 285 | 6,237 | (14) | 286 | 629 | 6,472 | 548 | 14,443 | ||||||||||||||||||||||||||
Group profit for the financial year | - | - | - | - | - | 1,895 | 24 | 1,919 | ||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | (1,015) | 89 | (61) | (987) | ||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | (1,015) | 1,984 | (37) | 932 | ||||||||||||||||||||||||||
30 | Issue of share capital (net of expenses) | 1 | 118 | - | - | - | - | - | 119 | |||||||||||||||||||||||||
Share-based payment expense | - | - | - | 62 | - | - | - | 62 | ||||||||||||||||||||||||||
30 | Treasury/own shares reissued | - | - | 2 | - | - | (2) | - | - | |||||||||||||||||||||||||
30 | Shares acquired by Employee Benefit Trust (own shares) | - | - | (3) | - | - | - | - | (3) | |||||||||||||||||||||||||
30 | Shares distributed under the Performance Share Plan Awards | 1 | 62 | - | (63) | - | - | - | - | |||||||||||||||||||||||||
11 | Tax relating to share-based payment expense | - | - | - | - | - | (5) | - | (5) | |||||||||||||||||||||||||
12 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (546) | (8) | (554) | |||||||||||||||||||||||||
31 | Non-controlling interests arising on acquisition of subsidiaries | - | - | - | - | - | - | 20 | 20 | |||||||||||||||||||||||||
Transactions involvingnon-controlling interests | - | - | - | - | - | - | (37) | (37) | ||||||||||||||||||||||||||
At 31 December 2017 | 287 | 6,417 | (15) | 285 | (386) | 7,903 | 486 | 14,977 | ||||||||||||||||||||||||||
For the financial year ended 31 December 2016 | ||||||||||||||||||||||||||||||||||
At 1 January 2016 | 282 | 6,021 | (28) | 240 | 700 | 5,800 | 529 | 13,544 | ||||||||||||||||||||||||||
Group profit for the financial year | - | - | - | - | - | 1,243 | 27 | 1,270 | ||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | (71) | (44) | (11) | (126) | ||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | (71) | 1,199 | 16 | 1,144 | ||||||||||||||||||||||||||
30 | Issue of share capital (net of expenses) | 3 | 216 | - | - | - | - | - | 219 | |||||||||||||||||||||||||
Share-based payment expense | - | - | - | 46 | - | - | - | 46 | ||||||||||||||||||||||||||
30 | Treasury/own shares reissued | - | - | 18 | - | - | (18) | - | - | |||||||||||||||||||||||||
30 | Shares acquired by Employee Benefit Trust (own shares) | - | - | (4) | - | - | - | - | (4) | |||||||||||||||||||||||||
11 | Tax relating to share-based payment expense | - | - | - | - | - | 12 | - | 12 | |||||||||||||||||||||||||
12 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (519) | (8) | (527) | |||||||||||||||||||||||||
31 | Non-controlling interests arising on acquisition of subsidiaries | - | - | - | - | - | - | 9 | 9 | |||||||||||||||||||||||||
Transactions involvingnon-controlling interests | - | - | - | - | - | (2) | 2 | - | ||||||||||||||||||||||||||
At 31 December 2016 | 285 | 6,237 | (14) | 286 | 629 | 6,472 | 548 | 14,443 | ||||||||||||||||||||||||||
For the financial year ended 31 December 2015 | ||||||||||||||||||||||||||||||||||
At 1 January 2015 | 254 | 4,324 | (76) | 213 | 57 | 5,405 | 21 | 10,198 | ||||||||||||||||||||||||||
Group profit for the financial year | - | - | - | - | - | 724 | 5 | 729 | ||||||||||||||||||||||||||
Other comprehensive income | - | - | - | - | 643 | 171 | 18 | 832 | ||||||||||||||||||||||||||
Total comprehensive income | - | - | - | - | 643 | 895 | 23 | 1,561 | ||||||||||||||||||||||||||
Issue of share capital (net of expenses) | 28 | 1,697 | - | - | - | - | - | 1,725 | ||||||||||||||||||||||||||
Share-based payment expense | - | - | - | 27 | - | - | - | 27 | ||||||||||||||||||||||||||
Treasury/own shares reissued | - | - | 51 | - | - | (51) | - | - | ||||||||||||||||||||||||||
Shares acquired by Employee Benefit Trust (own shares) | - | - | (3) | - | - | - | - | (3) | ||||||||||||||||||||||||||
11 | Tax relating to share-based payment expense | - | - | - | - | - | 5 | - | 5 | |||||||||||||||||||||||||
Share option exercises | - | - | - | - | - | 57 | - | 57 | ||||||||||||||||||||||||||
12 | Dividends (including shares issued in lieu of dividends) | - | - | - | - | - | (511) | (4) | (515) | |||||||||||||||||||||||||
31 | Non-controlling interests arising on acquisition of subsidiaries | - | - | - | - | - | - | 489 | 489 | |||||||||||||||||||||||||
At 31 December 2015 | 282 | 6,021 | (28) | 240 | 700 | 5,800 | 529 | 13,544 |
123 |
CRH Annual Report and Form 20-F|2017 |
Consolidated Statement of Cash Flows
for the financial year ended 31 December 2017
2017 €m | 2016 €m | 2015 €m | ||||||||||||
Notes | ||||||||||||||
Cash flows from operating activities | ||||||||||||||
Profit before tax from continuing operations | 1,867 | 1,620 | 920 | |||||||||||
2 | Profit before tax from discontinued operations | 146 | 121 | 113 | ||||||||||
Profit before tax | 2,013 | 1,741 | 1,033 | |||||||||||
9 | Finance costs (net) | 349 | 383 | 389 | ||||||||||
10 | Share of equity accounted investments’ profit | (65) | (42) | (44) | ||||||||||
Profit on disposals | (59) | (55) | (101) | |||||||||||
Group operating profit | 2,238 | 2,027 | 1,277 | |||||||||||
14 | Depreciation charge | 1,006 | 1,009 | 843 | ||||||||||
15 | Amortisation of intangible assets | 66 | 71 | 55 | ||||||||||
15 | Impairment charge | - | 23 | 44 | ||||||||||
Share-based payment expense | 65 | 46 | 27 | |||||||||||
Other (primarily pension payments) | (186) | (65) | (47) | |||||||||||
20 | Net movement on working capital and provisions | (209) | 56 | 585 | ||||||||||
Cash generated from operations | 2,980 | 3,167 | 2,784 | |||||||||||
Interest paid (including finance leases) | (317) | (346) | (302) | |||||||||||
Corporation tax paid | (474) | (481) | (235) | |||||||||||
Net cash inflow from operating activities | 2,189 | 2,340 | 2,247 | |||||||||||
Cash flows from investing activities | ||||||||||||||
5 | Proceeds from disposals (net of cash disposed and deferred proceeds) | 222 | 283 | 889 | ||||||||||
Interest received | 11 | 8 | 8 | |||||||||||
16 | Dividends received from equity accounted investments | 31 | 40 | 53 | ||||||||||
14 | Purchase of property, plant and equipment | (1,044) | (853) | (882) | ||||||||||
31 | Acquisition of subsidiaries (net of cash acquired) | (1,841) | (149) | (7,296) | ||||||||||
16 | Other investments and advances | (11) | (7) | (19) | ||||||||||
20 | Deferred and contingent acquisition consideration paid | (53) | (57) | (59) | ||||||||||
Net cash outflow from investing activities | (2,685) | (735) | (7,306) | |||||||||||
Cash flows from financing activities | ||||||||||||||
30 | Proceeds from issue of shares (net) | 42 | 52 | 1,593 | ||||||||||
Proceeds from exercise of share options | - | - | 57 | |||||||||||
Transactions involving non-controlling interests | (37) | - | - | |||||||||||
21 | Increase in interest-bearing loans, borrowings and finance leases | 1,010 | 600 | 5,633 | ||||||||||
21 | Net cash flow arising from derivative financial instruments | 169 | (5) | 47 | ||||||||||
9 | Premium paid on early debt redemption | (18) | - | (38) | ||||||||||
30 | Treasury/own shares purchased | (3) | (4) | (3) | ||||||||||
21 | Repayment of interest-bearing loans, borrowings and finance leases | (343) | (2,015) | (2,744) | ||||||||||
12 | Dividends paid to equity holders of the Company | (469) | (352) | (379) | ||||||||||
12 | Dividends paid tonon-controlling interests | (8) | (8) | (4) | ||||||||||
Net cash inflow/(outflow) from financing activities | 343 | (1,732) | 4,162 | |||||||||||
Decrease in cash and cash equivalents | (153) | (127) | (897) | |||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||
Cash and cash equivalents at 1 January | 2,449 | 2,518 | 3,295 | |||||||||||
Translation adjustment | (161) | 58 | 120 | |||||||||||
Decrease in cash and cash equivalents | (153) | (127) | (897) | |||||||||||
23 | Cash and cash equivalents at 31 December | 2,135 | 2,449 | 2,518 |
124 |
CRH Annual Report and Form 20-F|2017 |
(including key accounting estimates and assumptions)
This document constitutes both the Annual Report and the Financial Statements in accordance with the Irish and UK requirements, and the Annual Report on Form20-F in accordance with the US Securities Exchange Act of 1934.
Basis of Preparationpreparation
The Consolidated Financial Statements of CRH plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the International Accounting Standards Board.
CRH plc, the Parent Company, is a publicly traded limited company incorporated and domiciled in the Republic of Ireland.
The Consolidated Financial Statements, which are presented in euro millions, have been prepared under the historical cost convention as modified by the measurement at fair value of share-based payments, retirement benefit obligations and certain financial assets and liabilities including derivative financial instruments.
The accounting policies set out below have been applied consistently by all of the Group’s subsidiaries, joint ventures and associates to all periods presented in these Consolidated Financial Statements.
Certain prior year disclosures have been amended
In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual profit and loss account to conform to current year presentation. €161 millionthe Annual General Meeting and €143 million has been reclassified from costfiling it with the Registrar of sales to operating expenses in 2013 and 2012 respectively to align with current year presentation.Companies.
Adoption of IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations
The application of the aboveGroup has applied those new standards and interpretations that apply from 1 January 2017, including the Annual Improvements2014-2016 Cycle and amendments to IAS 7Statement of Cash Flows and to IAS 12IncomeTaxes. These amendments principally related to clarifications and presentation and their
application did not result in material changes to the results or financial position of the Group.Group’s Consolidated Financial Statements.
(ii)
IFRS and IFRICinterpretations being adopted in subsequent years
The Group has formed a number of project teams to evaluate and implement the following standards:
IFRS 9Financial Instruments
IFRS 9Financial Instrumentsaddresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group will adopt IFRS 9 on 1 January 2018 in accordance with the transition provisions of the standard.
The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under IAS 39Financial Instruments: Recognition and Measurement. Overall, the Group expects no material impact on the Consolidated Financial Statements. This assessment is based on internally available information and may be subject to change arising from further reasonable and supportable information being made available to the Group in 2018 when the Group adopts the new standard.
The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management practices. As a general rule, more hedge relationships may be eligible for hedge accounting, as the standard introduces a more principles-based approach.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the first year of adoption of the new standard.
IFRS 15Revenue from Contracts with Customers
IFRS 15Revenue from Contracts with Customers will replace IAS 18Revenue, IAS 11Construction Contractsand related interpretations. The new standard is applicable from 1 January 2018. IFRS 15 introduces a number of new concepts and requirements and also provides guidance and clarification on existing practice. CRH will adopt IFRS 15 by applying the modified retrospective application.
Throughout 2017, the Group performed a detailed analysis of the impact of IFRS 15; including a review of our contracts and sales arrangements. At this point, we have concluded that there is no material impact arising from transition to IFRS 15. Opening retained earnings for 2018 will not be adjusted as a result.
Revenue derived from sources other than construction contracts will continue to be recognised at a point in time.
Revenue earned in our construction contract businesses will continue to be recognised over time; principally using an input method.
The Group’s transition project had the following focus areas:
(i) Variable consideration
Some contracts with customers offer trade discounts or volume rebates. Our construction contracts can include certain bonuses and other variable consideration clauses. Based on the detailed procedures performed during 2017, a material impact on the recognition of such variable consideration under IFRS 15 has not been identified.
(ii) Warranty obligations
Warranties currently offered by the Group will continue to be accounted for under IAS 37Provisions, Contingent Liabilities and Contingent Assets.
(iii) | Bundling and unbundling of contracts to determine performance obligations |
The vast majority of our contracts contain just one performance obligation. Within our construction contract businesses, some contracts have been identified as offering two promises to a customer; however the adoption of IFRS 15 will not have a material impact on the recognition of revenue on these contracts.
125 |
CRH Annual Report and Form 20-F|2017 |
Accounting Policies - continued
(iv) Loss-making contracts
Loss-making contracts will now be accounted for under IAS 37 rather than under IAS 11. This will not have an impact on revenue recognition at transition.
(v) Principal versus agent considerations
We examined whether any revenue might be deemed to be more appropriately recorded on an agency or net basis, rather than on a gross basis, under IFRS 15 and determined that no material impact on the Group’s revenue arose.
(vi) Disclosure requirements
IFRS 15 disclosure requirements are more detailed than under current IFRS. The Group is in the process of finalising the disclosures required to be reported in 2018.
IFRS 16Leases
IFRS 16Leases was issued in January 2016 and replaces IAS 17Leases, IFRIC 4Determining Whether an Arrangement Containsa Lease,SIC-15 –Operating Leases– Incentives andSIC-27 –Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard is applicable from 1 January 2019.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for the majority of leases under a single on-balance sheet model, similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g. personal computers) and short-term leases (i.e. leases with a term of 12 months or less). It also includes an election which permits a lessee not to separate non-lease components (e.g. maintenance) from lease components and instead capitalise both the lease cost and associated non-lease cost.
At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.
Under IFRS 16 lessees will also be required to remeasure the lease liability upon the occurrence of certain events (e.g. a change in lease term or a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset.
CRH has entered into operating leases for a range of assets, principally relating to property across the US and Europe. These property leases have varying terms, escalation clauses and renewal rights including periodic rent reviews linked with a consumer price index and/or other indices. The Group also leases plant and machinery, vehicles and equipment under operating leases.
The adoption of the new standard will have a material impact on the Group’s Consolidated Financial Statements, as follows:
Income Statement
Operating expenses will decrease, as the Group currently recognises operating lease expenses in either cost of sales, selling and distribution or administration expenses (depending on the nature of the lease). The Group’s lease expense (continuing operations) for 2017 was€606 million and is subjectdisclosed in note 4 to EU endorsement. IFRS 15 providesthe Consolidated Financial Statements.
Depreciation and finance costs as currently reported in the Group’s Income Statement will increase, as under the new standard theright-of-use asset will be capitalised and depreciated over the term of the lease with an associated finance cost applied annually to the lease liability.
Balance Sheet
At transition date, the Group will determine the lease payments outstanding at that date and apply the appropriate discount rate to calculate the present value of the lease payments. CRH is currently considering adopting the new standard by applying the modified retrospective approach. In addition, CRH will perform an impairment assessment at date of adoption and any resulting impairment will impact retained earnings rather than the Consolidated Income Statement in the year of transition.
The Group’s commitment outstanding on all leases (including those relating to discontinued operations) as at 31 December 2017 is€2,191 million (2016:€2,171 million) (see note 29 to the Consolidated Financial Statements).
The Group has been assessing the impact of the new standard since it was issued in January 2016. The exact financial impact of the standard is as yet unknown, as a new five step model to be applied to revenue arising from contracts with customers. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue and maynumber of factors impact the timingcalculation of the liability, such as discount rate and amountthe expected term of revenue recognised from contractsleases including renewal options.
The Group’s commitment as at 31 December 2017 provides an indication of the scale of leases held and how significant leases currently are to CRH’s business. The Group will continue to assess its portfolio of leases to calculate the impending impact of transition to the new standard during 2018.
In addition to the impacts above, there will also be significantly increased disclosures when the Group adopts IFRS 16.
IFRIC 23Uncertainty over Income Tax Treatments
IFRIC 23 was issued in June 2017; with customers.an effective date of 1 January 2019. It clarifies the accounting for uncertainties in income taxes. The Group is currently assessingevaluating the impact of IFRS 15.this interpretation on future periods.
IFRS 9
IAS 19Financial InstrumentsEmployee Benefits reflects
In February 2018, the final phase of the IASB’s workIASB issued a narrow scope amendment to IAS 19EmployeeBenefits. The amendment will be applied prospectively for plan amendments, curtailments or settlements occurring on or after 1 January 2019. These amendments are not expected to have an impact on the replacementGroup on the effective date, but will impact how the Group determines current service cost and net interest in the event of IAS 39any plan amendments, curtailments or settlements which arise thereafter.
IFRS 17Financial Instruments: Recognition and MeasurementInsurance Contractsand applies to
In May 2017, the classification and measurement of financial assets and liabilities as defined in IAS 39, impairment, and the application of hedge accounting.IASB issued IFRS 917Insurance Contracts. IFRS 17 is effective fromfor reporting periods beginning on or after 1 January 2018 and2021, with presentation of comparative figures required. This standard is awaiting EU endorsement. The Group is currently assessingnot expected to have an impact on the impact of IFRS 9.Group.
There are no other IFRS or IFRIC interpretations that are effective subsequent to the CRH 20142017 financialyear-end that would have a material impact on the results or financial position of the Group.
Key Accounting Policies which involve Estimates, Assumptions and Judgements
The preparation of the Consolidated Financial Statements in accordance with IFRS requires management to make certain estimates, assumptions and judgements that affect the application of accounting policies and the
reported amounts of assets, liabilities, income
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and expenses. Management believes that the estimates, assumptions and judgements upon which it relies are reasonable based on the information available to it at the time that those estimates, assumptions and judgements are made. In some cases, the accounting treatment of a particular transaction is specifically dictated by IFRS and does not require management’s judgement in its application.
Management considerconsiders that their use of estimates, assumptions and judgements in the application of the Group’s accounting policies are interrelatedinter-related and therefore discuss them together below.
Estimates, and underlying assumptions, are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances or experiences on which the estimate was based or as a result of new information.
The critical accounting policies which involve significant estimates, assumptions or judgements, the actual outcome of which could have a material impact on the Group’s results and financial position outlined below, are as follows:
Impairment of long-lived assets and goodwill – Notes 1314 and 1415
Impairment of property, plant and equipment and goodwill
The carrying values of items of property, plant and equipment are reviewed for indicators of impairment at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable. Goodwill is subject to impairment testing on an annual basis and at any time during the year if an indicator of impairment is considered to exist. A decision to dispose of a business unit represents one such indicator and in these circumstances the recoverable amount is assessed on a fair value less costs of disposal basis. In the year in which a business combination is effected and where some or all of the goodwill allocated to a particularcash-generating unit arose in respect of that combination, the cash-generating unit is tested for impairment prior to the end of the relevant annual period.
Property, plant and equipment assets are reviewed for potential impairment by applying a series of external and internal indicators specific to the assets under consideration; these indicators encompass macroeconomic issues including the inherent cyclicality of the building materials sector, actual obsolescence or
physical damage, a deterioration in forecast performance in the internal reporting cycle and restructuring and rationalisation programmes.
Where the carrying value exceeds the estimated recoverable amount (being the greater of fair value less costs of disposal andvalue-in-use), an impairment loss is recognised by writing down the assets to their recoverable amount. In assessingvalue-in-use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted. The estimates of future cash flows exclude cash inflows or outflows attributable to financing activities and income tax. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined by reference to thecash-generating unit to which the asset belongs. Impairment losses arising in respect of goodwill are not reversed once recognised.
Goodwill relating to associates and joint ventures is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Where indicators of impairment of an investment arise in accordance with the requirements of IAS 39Financial Instruments: Recognition and Measurement,, the carrying amount is tested for impairment by comparing its recoverable amount with its carrying amount.
The impairment testing process requires management to make significant judgements and estimates regarding the future cash flows expected to be generated by the use of and, if applicable, the eventual disposal of, long-lived assets and goodwill as well as other factors to determine the fair value of the assets. Management periodically evaluates and updates the estimates based on the conditions which influence these variables. A detailed discussion of the impairment methodology applied and key assumptions used by the Group in the context of long-lived assets and goodwill is provided in note 1415 to the Consolidated Financial Statements.
Accounting Policies|continued
The assumptions and conditions for determining impairments of long-lived assets and goodwill reflect management’s best assumptions and estimates, but these items involve inherent uncertainties described above, many of which are not under management’s control. As a result, the accounting for such items could result in different estimates or amounts if management used different assumptions or if different conditions occur in future accounting periods.
Retirement benefit obligations – Note 2728
Costs arising in respect of the Group’s defined contribution pension schemes are charged to the Consolidated Income Statement in the period in which they are incurred. The Group has no legal or constructive obligation to pay further contributions in the event that the fund does not hold sufficient assets to meet its benefit commitments.
The liabilities and costs associated with the Group’s defined benefit pension schemes (both funded and unfunded) are assessed either on the basis of the attained age, the projected unit credit, methodthe current unit credit or the aggregate cost methods by professionally qualified actuaries and are arrived at using actuarial assumptions based on market expectations at the balance sheet date. The discount rates employed in determining the present value of the schemes’ liabilities are determined by reference to market yields at the balance sheet date on high-quality corporate bonds of a currency and term consistent with the currency and term of the associatedpost-employment benefit obligations.
The net surplus or deficit arising on the Group’s defined benefit pension schemes, together with the liabilities associated with the unfunded schemes, are shown either withinnon-current assets ornon-current liabilities in the Consolidated Balance Sheet. The deferred tax impact of pension scheme surpluses and deficits is disclosed separately within deferred tax assets or liabilities as appropriate. Remeasurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest), are recognised immediately in the Consolidated Balance Sheet with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in subsequent periods.
The defined benefit pension asset or liability in the Consolidated Balance Sheet comprises the total for each plan of the present value of the defined benefit obligation less the fair value of plan assets out of which the obligations are to be settled directly. Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Fair value is based on market price information and, in the case of published securities,securities; it is the published bid price. The value of any defined benefit asset is limited to the present value of any economic benefits available in the form of refunds from the plan and reductions in the future contributions to the plan.
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Accounting Policies - continued
The Group’s obligation in respect ofpost-employment healthcare and life assurance benefits represents the amount of future benefit that employees have earned in return for service in the current and prior periods. The obligation is computed on the basis of the projected unit credit method and is discounted to present value using a discount rate equating to the market yield at the balance sheet date onhigh-quality corporate bonds of a currency and term consistent with the currency and estimated term of the post-employment obligations.
Assumptions
Assumptions
The assumptions underlying the actuarial valuations from which the amounts recognised in the Consolidated Financial Statements are determined (including discount rates, rates of increase in future compensation levels, mortality rates and healthcare cost trend rates)trends), from which the amounts recognised in the Consolidated Financial Statements are determined, are updated annually based on current economic conditions and for any relevant changes to the terms and conditions of the pension andpost-retirement plans. These assumptions can be affected by (i) for the discount rate, changes in the rates of return on high-quality corporate bonds; (ii) for future compensation levels, future labour market conditions and (iii) for healthcare cost trend rates, the rate of medical cost inflation in the
relevant regions. The weighted average actuarial assumptions used and sensitivity analysis in relation to the significant assumptions employed in the determination of pension and other post-retirement liabilities are contained in note 2728 to the Consolidated Financial Statements.
While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the obligations and expenses recognised in future accounting periods. The assets and liabilities of defined benefit pension schemes may exhibit significantperiod-on-period volatility attributable primarily to changes in bond yields and longevity. In addition to future service contributions, significant cash contributions may be required to remediate past service deficits. A sensitivity analysis of the change in these assumptions is provided in note 28.
Provisions for liabilities – Note 2526
A provision is recognised when the Group has a present obligation (either legal or constructive) as a result of a past event, it is probable that a transfer of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Where the Group anticipates that a provision will be reimbursed, the reimbursement is recognised as a separate asset only when it is virtually certain that the reimbursement will arise. The expense relating to any provision is presented in the Consolidated Income Statement net of any reimbursement. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in the provision due to passage of time is recognised as an interest expense. ProvisionsContingent liabilities arising on business combination activitycombinations are recognised only toas provisions if the extent that they would have qualified for recognition in the financial statements of the acquiree prior to acquisition.contingent liability can be reliably measured at its acquisition date fair value. Provisions are not recognised for future operating losses. Refer to note 26 for the expected timing of outflows by provisions category.
Rationalisation and redundancy provisions
Provisions for rationalisation and redundancy are established when a detailed restructuring plan has been drawn up, resolved upon by the responsible decision-making level of management and communicated to the employees who are affected by the plan. These provisions are recognised at the present value of future disbursements and cover only expenses that arise directly from restructuring measures and are necessary for restructuring; these provisions exclude costs related to future business operations. Restructuring measures may include the sale or termination of business units, site closures and relocation of business activities, changes in management structure or a fundamental reorganisation of departments or business units.
Environmental and remediation provisions
The measurement of environmental and remediation provisions is based on an evaluation of currently available facts with respect to each individual site and considers factors such as existing technology, currently enacted laws and regulations and prior experience in remediation of sites. Inherent uncertainties exist in such evaluations primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, the protracted length of theclean-up periods and evolving technologies. The environmental and remediation liabilities provided for in the Consolidated Financial Statements reflect the information available to management at the time of determination of the liability and are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. Due to the inherent uncertainties described above, many of which are not under management’s control, the accounting for such items could result in different amounts if management used different assumptions or if different conditions occur in future accounting periods.
Legal contingencies
The status of each significant claim and legal proceeding in which the Group is involved is reviewed by management on a periodic basis and the Group’s potential financial exposure is assessed. If the potential loss from any claim or legal proceeding is considered probable, and the amount can be estimated, a liability is recognised for the estimated loss. Because of the uncertainties inherent in such matters, the related provisions are based on
the best information available at the time; the issues taken into account by management and factored into the assessment of legal contingencies include, as applicable, the status
of settlement negotiations, interpretations of contractual obligations, prior experience with similar contingencies/claims, the availability of insurance to protect against the downside exposure and advice obtained from legal counsel and other third parties. As additional information becomes available on pending claims, the potential liability is reassessed and revisions are made to the amounts accrued where appropriate. Such revisions in the estimates of the potential liabilities could have a material impact on the results of operations and financial position of the Group.Group in future accounting periods.
Taxation – current and deferred – Notes 1011 and 2627
Current tax represents the expected tax payable (or recoverable) on the taxable profit for the year using tax rates enacted for the period. Any interest or penalties arising are included within current tax. Where items are accounted for outside of profit or loss, the related income tax is recognised either in other comprehensive income or directly in equity as appropriate.
Deferred tax is recognised using the liability method on temporary differences arising at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; in addition, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. For the most part, no provision has been made for temporary differences applicable to investments in subsidiaries and joint ventures as the Group is in a position to control the timing of reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. However, a temporary difference has been recognised to the extent that specific assets have been identified for sale or where there is a specific intention to unwind the temporary difference in the foreseeable future. Due to the absence of control in the context of associates (significant influence only), deferred tax liabilities are recognised where appropriate in respect of CRH’s investments in these entities on the basis that the exercise of significant influence would not necessarily prevent earnings being remitted by other shareholders in the undertaking.
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Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are not subject to discounting. Deferred tax assets are recognised in respect of all deductible temporary differences,carry-forward of unused tax credits and unused tax losses to the extent that it is probable that taxable profits will be available against which the temporary differences can be utilised. The carrying amounts of deferred tax assets are subject to review at each balance sheet date and are reduced to the extent that future taxable profits are considered to be inadequate to allow all or part of any deferred tax asset to be utilised.
The Group’s income tax charge is based on reported profit and expected statutory tax rates, which reflect various allowances and reliefs and tax planning opportunities available to the Group in the multiple tax jurisdictions in which it operates. The determination of the Group’s provision for income tax requires certain judgements and estimates in relation to matters where the ultimate tax outcome may not be certain. The recognition ornon-recognition of deferred tax assets as appropriate also requires judgement as it involves an assessment of the future recoverability of those assets. In addition, the Group is subject to tax audits which can involve complex issues that could require extended periods for resolution.to conclude, the resolution of which is often not within the control of the Group. Although management believes that the estimates included in the Consolidated Financial Statements and its tax return positions are reasonable, there is no assurance can be givencertainty that the final outcome of these
matters will not be different than that which is reflected in the Group’s historical income tax provisions and accruals. AnyWhilst it is possible, the Group does not currently anticipate that any such differences could have a material impact on the income tax provision and profit for the period in which such a determination is made.
Property, plantmade nor does it expect any significant impact on its financial position in the near term. This is based on the Group’s knowledge and equipment – Note 13
The Group’s accounting policy for property, plantexperience, as well as the profile of the individual components which have been reflected in the current tax liability, the status of the tax audits, enquiries and equipment is considered critical because the carrying value of €7,422 millionnegotiations in progress at 31 December 2014 represents a significant portion (34%) of total assets at that date. Property, plant and equipment are stated at cost less any accumulated depreciationeachyear-end, previous claims and any accumulated impairments except for certain items that had been revalued to fair value priorfactors specific to the date of transition to IFRS (1 January 2004).relevant tax environments.
Repair and maintenance expenditure is included in an asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenditure is charged to the Consolidated Income Statement during the financial period in which it is incurred.
Borrowing costs incurred in the construction of major assets which take a substantial period of time to complete are capitalised in the financial period in which they are incurred.
In the application of the Group’s accounting policy, judgement is exercised by management in the determination of residual values and useful lives. Depreciation and depletion is calculated to write off the book value of each item of property, plant and equipment over its useful economic life on a straight-line basis at the following rates:
Land and buildings: The book value of mineral-bearing land, less an estimate of its residual value, is depleted over the period of the mineral extraction in the proportion which production for the year bears to the latest estimates of proven and probable mineral reserves. Land other than mineral-bearing land is not depreciated. In general, buildings are depreciated at 2.5% per annum (“p.a.”).
Plant and machinery:These are depreciated at rates ranging from 3.3% p.a. to 20% p.a. depending on the type of asset. Plant and machinery includes transport which is, on average, depreciated at 20% p.a.
Depreciation methods, useful lives and residual values are reviewed at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the depreciation period or method as appropriate on a prospective basis. For the Group’s accounting policy on impairment of property, plant and equipment please see impairment of long-lived assets and goodwill.
Other Significant Accounting Policies
Basis of consolidation
The Consolidated Financial Statements include the financial statements of the Parent Company and all subsidiaries, joint ventures and associates, drawn up to 31 December each year. The financial year-ends of the Group’s subsidiaries, joint ventures and associates areco-terminous.
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. A change in the ownership interest of a subsidiary without a change in control is accounted for as an equity transaction.
When the Group holds less than the majority of voting rights, other facts and circumstances including contractual arrangements that give the Group power over the investee may result in the Group controlling the investee. The Group reassesses whether it controls an investee if, and when, facts and circumstances indicate that there are changes to the elements evidencing control.
Non-controlling interests represent the portion of the equity of a subsidiary not attributable either directly or indirectly to the Parent Company and are presented separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, distinguished from Parent
Accounting Policies|continued
Company shareholders’ equity. Acquisitions ofnon-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions. On an acquisition by acquisition basis, the Group recognises anynon-controlling interest in the acquiree either at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s net assets.
Investments in associates and joint ventures – Notes 910 and 1516
An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of the arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
The Group’s investments in its associates and joint ventures are accounted for using the equity method from the date significant influence/joint control is deemed to arise until the date on which significant influence/joint control ceases to exist or when the interest becomes classified as an asset held for sale.
The Consolidated Income Statement reflects the Group’s share of profit after tax of the related associates and joint ventures. Investments in associates and joint ventures are carried in the Consolidated Balance Sheet at cost adjusted in respect of post-acquisition changes in the Group’s share of net assets, less any impairment in value. Loans advanced to equity accounted investments that have the characteristics of equity financing are also included in the investment held on the Consolidated Balance Sheet. If necessary, impairment losses on the carrying amount of an investment are reported within the Group’s share of equity accounted investments’investments results in the Consolidated Income Statement. If the Group’s share of losses exceeds the carrying amount of an associate or joint venture, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate or joint venture.
Transactions eliminated on consolidation
Intra-group balancesProperty, plant and transactions, incomeequipment – Note 14
The carrying value of property, plant and expenses,equipment of€13,094 million at 31 December 2017 represents 41% of total assets at that date. Property, plant and equipment are stated at cost less any accumulated depreciation and any unrealised gainsaccumulated impairments except for certain items that had been revalued to fair value prior to the date of transition to IFRS (1 January 2004).
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Accounting Policies - continued
Repair and maintenance expenditure is included in an asset’s carrying amount or losses arising from such transactions, are eliminated in preparingrecognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenditure is charged to the Consolidated Financial Statements. Unrealised gains arising from transactions with joint ventures and associatesIncome Statement during the financial period in which it is incurred.
Borrowing costs incurred in the construction of major assets which take a substantial period of time to complete are eliminated tocapitalised in the extentfinancial period in which they are incurred.
In the application of the Group’s interestaccounting policy, judgement is exercised by management in the entity. Unrealised losses are eliminateddetermination of residual values and useful lives. Depreciation and depletion is calculated to write off the book value of each item of property, plant and equipment over its useful economic life on a straight-line basis at the following rates:
Land and buildings: The book value ofmineral-bearing land, less an estimate of its residual value, is depleted over the period of the mineral extraction in the same manner as unrealised gains, but onlyproportion which production for the year bears to the extent that therelatest estimates of proven and probable mineral reserves. Land, other than mineral-bearing land, is no evidencenot depreciated. In general, buildings are depreciated at 2.5% per annum (“p.a.”).
Plant and machinery: These are depreciated at rates ranging from 3.3% p.a. to 20% p.a. depending on the type of impairmentasset. Plant and machinery includes transport which is, on average, depreciated at 20% p.a.
Depreciation methods, useful lives and residual values are reviewed at each financial year-end. Changes in the Group’s interestexpected useful life or the expected pattern of consumption of future economic benefits embodied in the entity.asset are accounted for by changing the depreciation period or method as appropriate on a prospective basis. For the Group’s accounting policy on impairment of property, plant and equipment, please see impairment of long-lived assets and goodwill.
Revenue recognition
Revenue represents the value of goods and services supplied and is net of trade discounts and value added tax/sales tax. Other than in the case of construction contracts, revenue is recognised to the extent that revenue and related costs incurred or to be incurred are subject to reliable measurement, that it is probable that economic benefits will flow to the
Group and that the significant risks and rewards of ownership have passed to the buyer, usually on delivery of the goods.
Construction contracts
The Group engages primarily in the performance of fixed price contracts, as opposed to cost plus contracts. Contract costs are recognised as incurred.
When the outcome of a contract can be estimated reliably the Group recognises revenue in accordance with thepercentage-of-completion method. or measured works to date methods. The completion percentage is generally measured based on the proportion of contract costs incurred at the balance sheet date relative to the total estimated costs of the contract. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred where it is probable that these costs will be recoverable.
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.
Revenue and/or costs in respect of variations or contracts claims and incentive payments, to the extent that they arise, are recognised when it is probable that the amount, which can be measured reliably, will be recovered from/paid to the customer.
If circumstances arise that may change the original estimates of revenues, costs or extent of progress towards completion, estimates are revised. These revisions may result in increases or decreases in revenue or costs and are reflected in income in the period in which the circumstances that give rise to the revision became known by management.
Segment reporting – Note 1
Operating segments are reported in a manner consistent with the internal organisational and management structure and the internal reporting information provided to the Chief Operating Decision-MakerDecision Maker who is responsible for allocating resources and assessing performance of the operating segments.
Assets and liabilities held for sale – Note 42
Non-current assets and disposal groups classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year12 months from the date of classification as held for sale.
Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. The Group ceases to use the equity method of accounting from the date on which an interest in a joint venture or associate becomes held for sale.Non-current assets classified as held for sale and liabilities directly associated with those assets are presented separately as current items in the Consolidated Balance Sheet.
Discontinued operations – Note 2
Discontinued operations are reported when a component of the Group has been disposed of, or when a sale is highly probable; and its operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the Group and is classified as held for sale or has been disposed of. The Group classifies anon-current asset or disposal group as held for disposal if its carrying value will be recovered through a sales transaction or distribution to shareholders rather than continuing use.
In the Consolidated Income Statement, discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations. Corresponding notes to the Consolidated Income Statement exclude amounts for discontinued operations, unless stated otherwise.
Prior year information
The presentation of certain prior year information has been reclassified to conform to the current year presentation. The presentation of financial information pertaining to discontinued operations has been restated retrospectively (including the Consolidated Income Statement and corresponding prior year income statement notes).
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Share-based payments – Note 78
The Group operates a number of equity-settled share-based payment plans. Its policy in relation to the granting of share options and awards under these plans, together with the nature of the underlying market andnon-market performance and other vesting conditions, are addressed in the Directors’ Remuneration Report on page 112.72. The Group has no material exposure in respect of cash-settledshare-based payment transactions andshare-based payment transactions with cash alternatives.
Awards under the Performance Share Plans
50% of the awards granted in 2017 and 2016 under the 2014 Performance Share optionsPlan are subject to a TSR (and hence market-based) vesting condition; with 25% being measured against a tailored sector peer group and 25% against the FTSEAll-World Construction & Materials index. The awards made in 2015 are subject to a TSR on 75% of the grant. Accordingly, the fair value assigned to the related equity instruments at the grant date is derived using a Monte Carlo simulation technique to model the combination ofmarket-based andnon-market-based performance conditions in the Plans; and is adjusted to reflect the anticipated likelihood as at the grant date of achieving the vesting condition. Awards are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied.
Fair
The remaining awards granted under the 2014 Performance Share Plan are subject to a cumulative cash flow target(non-market-based) vesting condition. The fair value of the awards is determinedcalculated as the market price of the shares at the date of grant. No expense is recognised for awards that do not ultimately vest. At the balance sheet date the estimate of the level of vesting is reviewed and any adjustment necessary is recognised in the Consolidated Income Statement.
Awards which vest under the 2014 Performance Share Plan are allotted to an Employee Benefit Trust. An increase in nominal Share Capital and Share Premium are recognised accordingly on allotment.
Savings-related Share Option Scheme
The fair values assigned to options under the Savings-related Share Option Scheme are derived in accordance with the trinomial valuation methodology on the basis that the services to be rendered by employees as consideration for the granting of share options will be received over the vesting period, which is assessed as at the grant date. The share options granted by the Company are at market value at date of grant and are not subject to market-based vesting conditions within the meaning of IFRS 2Share-based Payment.
The cost is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The Consolidated Income Statement expense/credit for a period represents the movement in cumulative expense recognised at the beginning and end of that period. The cumulative charge to the Consolidated Income Statement is reversed only where the performance condition is not met or where an employee in receipt of share options leaves service prior to completion of the expected vesting period and those options forfeit in consequence.
No expense is recognised for awards that do not ultimately vest, except for share-based payments where vesting is conditional upon a non-vesting condition which is treated as vesting irrespective of whether or not it is satisfied, provided that all other performance and/or service conditions are satisfied.
Where an award is cancelled, it is treated as if it is vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award wherenon-vesting conditions within the control of either the Company or the employee are not met. All cancellations of awards are treated equally.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The dilutive effect of outstanding options is reflected as additional share dilution in the determination of diluted earnings per share.
To the extent that the Group receives a tax deduction relating to the services paid in shares, deferred tax in respect of share options is provided on the basis of the difference between the market price of the underlying equity as at the date of the financial statements and the exercise price of the option; where the amount of any tax deduction (or estimated future tax deduction) exceeds the amount of the related cumulative remuneration expense, the current or deferred tax associated with the excess is recognised directly in equity.
Awards under the Performance Share Plans
All awards granted under the 2006 Performance Share Plan and 75% of the awards granted under the 2014 Performance Share Plan are subject to a total shareholder return-based (and hence market-based) vesting condition. Accordingly, the fair value assigned to the related equity instruments at the grant date is adjusted so as to reflect the anticipated likelihood as at the grant date of achieving the market-based vesting condition. Awards are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied.
The remaining 25% of awards granted under the 2014 Performance Share Plan are subject to a cumulative cash flow target (non-market based) vesting condition. The fair value of the awards is calculated as the market price of the shares at the date of grant. No expense is recognised for awards that do not ultimately vest. At the balance sheet date the estimate of the level of vesting is reviewed and any adjustment necessary is recognised in the Consolidated Income Statement.
Awards under the Restricted Share Plan
The fair value of shares granted under the Restricted Share Plan is calculated as the market price of the shares at the date of grant reduced by the present value of dividends expected to be paid over the vesting period.
Information on the models used by the Group to estimate the fair value of awards granted is included in note 7.
Business combinations – Note 3031
The Group applies the acquisition method in accounting for business combinations. The cost of an acquisition is measured as the aggregate of the consideration transferred (excluding amounts relating to the settlement ofpre-existing relationships), the amount of anynon-controlling interest in the acquiree and, in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously-held equity interest in the acquiree.
Transaction costs that the Group incurs in connection with a business combination are expensed as incurred.
To the extent that settlement of all or any part of consideration for a business combination is deferred, the fair value of the deferred component is determined through discounting the amounts payable to their present value at the date of exchange. The discount component is unwound as an interest charge in the Consolidated Income Statement over the life of the obligation. Any contingent consideration is recognised at fair value at the acquisition date and included in the cost of the acquisition. The fair value of contingent consideration at acquisition date is arrived at through
discounting the expected payment (based on scenario modelling) to present value. In general, in order for contingent consideration to become payable,pre-defined profit and/or profit/net asset ratios must be exceeded. Subsequent changes to the fair value of the contingent consideration will be recognised in profit or loss unless the contingent consideration is classified as equity, in which case it is not remeasured and settlement is accounted for within equity.
The assets and liabilities arising on business combination activity are measured at their acquisition-date fair values. Contingent liabilities assumed in business combination activity are recognised as of the acquisition date, where such contingent liabilities are present obligations arising from past events and their fair value can be measured reliably. In the case of a business combination achieved in stages, theacquisition-date fair value of the acquirer’s previously-held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit or loss. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated to the consideration, identifiable assets or liabilities (and contingent liabilities, if relevant) are made within the measurement period, a period of no more than one year from the acquisition date.
Goodwill – Note 1415
Goodwill arising on a business combination is initially measured at cost, being the excess of the cost of an acquisition over the net identifiable assets and liabilities assumed at the date of acquisition and relates to the future economic benefits arising from assets which are not capable of being individually identified and separately recognised. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. If the cost of the acquisition is lower than the fair value of the net assets of the subsidiary acquired, the
131 |
CRH Annual Report and Form 20-F|2017 |
Accounting Policies - continued
identification and measurement of the related assets and liabilities and contingent liabilities are revisited and the cost is reassessed with any remaining balance recognised immediately in the Consolidated Income Statement.
The carrying amount of goodwill in respect of associates and joint ventures is included in investments accounted for using the equity method (i.e. within financial assets) in the Consolidated Balance Sheet.
Where a subsidiary is disposed of or terminated through closure, the carrying value of any goodwill of that subsidiary is included in the determination of the net profit or loss on disposal/termination.
Intangible assets (other than goodwill) arising on business combinations – Note 1415
An intangible asset is capitalised separately from goodwill as part of a business combination at cost (fair value at date of acquisition).
Subsequent to initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The carrying values of definite-lived intangible assets (the Group does not currently have any indefinite-lived intangible assets other than goodwill) are reviewed for indicators of impairment at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable.
Intangible assets are amortised on astraight-line basis. In general, definite-lived intangible assets are amortised over periods ranging from one to ten years, depending on the nature of the intangible asset.
Amortisation periods, useful lives, expected patterns of consumption and residual values are reviewed at each financialyear-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method as appropriate on a prospective basis.
Leases – Notes 34 and 29
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Operating lease rentals are charged to the Consolidated Income Statement on a straight-line basis over the lease term.
Accounting Policies|continued
Other financial assets – Note 15
All investments are initially recognised at the fair value of consideration given plus any directly attributable transaction costs. Where equity investments are actively traded in organised financial markets, fair value is determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date. Unquoted equity investments are recorded at historical cost given that it is impracticable to determine fair value in accordance with IAS 39 and are included within financial assets in the Consolidated Balance Sheet.
Inventories and construction contracts – Note 1617
Inventories are stated at the lower of cost and net realisable value. Cost is based on thefirst-in,first-out principle (and weighted average, where appropriate) and includes all expenditure incurred in acquiring the inventories and bringing them to their present location and condition. Raw materials are valued on the basis of purchase cost on afirst-in,first-out basis. In the case of finished goods andwork-in-progress, cost includes direct materials, direct labour and attributable overheads based on normal operating capacity and excludes borrowing costs.
Net realisable value is the estimated proceeds of sale less all further costs to completion, and less all costs to be incurred in marketing, selling and distribution. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made, taking into consideration fluctuations of price or cost directly relating to events occurring after the end of the period, the likelihood ofshort-term changes in buyer preferences, product obsolescence or perishability (all of which are generally low given the nature of the Group’s products) and the purpose for which the inventory is held. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished goods, in which they will be incorporated, are expected to be sold at or above cost.
Amounts recoverable on construction contracts, which are included in receivables, are stated at the net invoiced value of the work done less amounts received as progress payments on account. Cumulative costs incurred, net of amounts transferred to cost of sales, after deducting foreseeable losses, provisions for contingencies and payments on account not matched with revenue, are included as construction contract balances in inventories. Cost includes all expenditure directly related to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.
Trade and other receivables – Note 17
Trade receivables are carried at original invoice amount less an allowance for potentially uncollectible debts. Provision is made when there is objective evidence that the Group will not be in a position to collect the associated debts. Bad debts are written-off to the Consolidated Income Statement on identification.
Cash and cash equivalents – Note 2223
Cash and cash equivalents comprise cash balances held for the purpose of meetingshort-term cash commitments and investments which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Bank overdrafts are included within currentinterest-bearing loans and
borrowings in the Consolidated Balance Sheet. Where the overdrafts are repayable on demand and form an integral part of cash management, they are netted against cash and cash equivalents for the purposes of the Consolidated Statement of Cash Flows.
Interest-bearing loans and borrowings – Note 2324
All loans and borrowings are initially recorded at the fair value of the consideration received net of directly attributable transaction costs. Subsequent to initial recognition, current andnon-current interest-bearing loans and borrowings are, in general, measured at amortised cost employing the effective interest methodology. Fixed rate term loans, which have been hedged to floating rates (using interest rate swaps), are measured at amortised cost adjusted for changes in value attributable
to the hedged risks arising from changes in underlying market interest rates. The computation of amortised cost includes any issue costs and any discount or premium materialising on settlement.
Gains and losses are recognised in the Consolidated Income Statement through amortisation on the basis of the period of the loans and borrowings.
Borrowing costs arising on financial instruments are recognised as an expense in the period in which they are incurred (unless capitalised as part of the cost of property, plant and equipment).
Derivative financial instruments and hedging practices – Note 2425
In order to manage interest rate, foreign currency and commodity risks and to realise the desired currency profile of borrowings, the Group employs derivative financial instruments (principally interest rate swaps, currency swaps and forward foreign exchange contracts). Derivative financial instruments are recognised initially at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. The carrying value of derivatives is fair value based on discounted future cash flows and adjusted for counterparty risk. Future floating rate cash flows are estimated based on future interest rates (from observable yield curves at the end of the reporting period). Fixed and floating rate cash flows are discounted at future interest rates and translated atperiod-end foreign exchange rates.
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CRH Annual Report and Form 20-F|2017 |
At the inception of a derivative transaction, the Group documents the relationship between the hedged item and the hedging instrument together with its risk management objective and the strategy underlying the proposed transaction. The Group also documents its assessment, both at the inception of the hedging relationship and subsequently on an ongoing basis, of the effectiveness of the hedging instrument in offsetting movements in the fair values or cash flows of the hedged items. Where derivatives do not fulfil the criteria for hedge accounting, changes in fair values are reported in the Consolidated Income Statement.
Fair value and cash flow hedges
The Group uses fair value hedges and cash flow hedges in its treasury activities. For the purposes of hedge accounting, hedges are classified either as fair value hedges (which entail hedging the exposure to movements in the fair value of a recognised asset or liability or an unrecognised firm commitment that could affect profit or loss) or cash flow hedges (which hedge exposure to fluctuations in future cash flows derived from a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction that could affect profit or loss).
Where the conditions for hedge accounting are satisfied and the hedging instrument concerned is classified as a fair value hedge, any gain or loss stemming from the remeasurement of the hedging instrument to fair value is reported in the Consolidated Income Statement.
In addition, any gain or loss on the hedged item which is attributable to the hedged risk is adjusted against the carrying amount of the hedged item and reflected in the Consolidated Income Statement. Where the adjustment is to the carrying amount of a hedgedinterest-bearing financial instrument, the adjustment is amortised to the Consolidated Income Statement with the objective of achieving full amortisation by maturity.
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective part of any gain or loss on the derivative financial instrument is recognised as other comprehensive income, net of the income tax effect, with the ineffective
portion being reported in the Consolidated Income Statement. The associated gains or losses that had previously been recognised as other comprehensive income are transferred to the Consolidated Income Statement contemporaneously with the materialisation of the hedged transaction. Any gain or loss arising in respect of changes in the time value of the derivative financial instrument is excluded from the measurement of hedge effectiveness and is recognised immediately in the Consolidated Income Statement.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised as other comprehensive income remains there until the forecast transaction occurs. If a hedged transaction is no longer anticipated to occur, the net cumulative gain or loss previously recognised as other comprehensive income is transferred to the Consolidated Income Statement in the period.
Net investment hedges
Where foreign currency borrowings provide a hedge against a net investment in a foreign operation, and the hedge is deemed to be effective, foreign exchange differences are taken directly to a foreign currency translation reserve. The ineffective portion of any gain or loss on the hedging instrument is recognised immediately in the Consolidated Income Statement. Cumulative gains and losses remain in equity until disposal of the net investment in the foreign operation at which point the related differences are transferred to the Consolidated Income Statement as part of the overall gain or loss on sale.
Fair value hierarchy – Note 24
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the recorded fair value are not based on observable market data.
Share capital and dividends – Notes 1112 and 2830
Treasury Shares and own shares
Ordinary Shares acquired by the Parent Company or purchased by the Employee Benefit Trust on behalf of the Parent Company under the terms of the Performance Share Plans and the Restricted Share Plan are deducted from equity and presented on the face of the Consolidated Balance Sheet. No gain or loss is
recognised in profit or loss on the purchase, sale, issue or cancellation of the Parent Company’s Ordinary Shares.
Dividends
Dividends on Ordinary Shares are recognised as a liability in the Consolidated Financial Statements in the period in which they are declared by the Parent Company.
Emission rights
Emission rights are accounted for such that a liability is recognised only in circumstances where emission rights have been exceeded from the perspective of the Group as a whole and the differential between actual and permitted emissions will have to be remedied through the purchase of the required additional rights at fair value. Assets and liabilities arising in respect of under and over-utilisation of emission credits respectively are accordingly netted against one another in the preparation of the Consolidated Financial Statements. To the extent that excess emission rights are disposed of during a financial period, the profit or loss materialising thereon is recognised immediately within cost of sales in the Consolidated Income Statement.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The Consolidated Financial Statements are presented in euro, which is the presentation currency of the Group and the functional currency of the Parent Company.
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All currency translation differences are taken to the Consolidated Income Statement with the exception of all monetary items that provide an effective hedge for a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are recognised in the Consolidated Income Statement.
Results and cash flows of subsidiaries, joint ventures and associates withnon-euro functional currencies have been translated into euro at average exchange rates for the year, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. Adjustments arising on translation of the results and net assets ofnon-euro subsidiaries, joint ventures and associates are recognised in a separate translation reserve within equity, net of differences on related currency borrowings. All other translation differences are taken to the Consolidated Income Statement. Goodwill and fair value adjustments arising on acquisition of a foreign operation are regarded as assets and liabilities of the foreign operation and are translated accordingly.
133 |
CRH Annual Report and Form 20-F|2017 |
Accounting Policies - continued
The principal exchange rates used for the translation of results, cash flows and balance sheets into euro were as follows:
Average | Year-end | |||||||||||||||||||||||
euro 1 = | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||
US Dollar | 1.3290 | 1.3281 | 1.2848 | 1.2141 | 1.3791 | 1.3194 | ||||||||||||||||||
Pound Sterling | 0.8062 | 0.8493 | 0.8109 | 0.7789 | 0.8337 | 0.8161 | ||||||||||||||||||
Polish Zloty | 4.1839 | 4.1975 | 4.1847 | 4.2732 | 4.1543 | 4.0740 | ||||||||||||||||||
Ukrainian Hryvnia | 15.8908 | 10.8339 | 10.3933 | 19.1814 | 11.3583 | 10.6259 | ||||||||||||||||||
Swiss Franc | 1.2147 | 1.2311 | 1.2053 | 1.2024 | 1.2276 | 1.2072 | ||||||||||||||||||
Canadian Dollar | 1.4664 | 1.3684 | 1.2842 | 1.4063 | 1.4671 | 1.3137 | ||||||||||||||||||
Argentine Peso | 10.7785 | 7.2892 | 5.8492 | 10.2645 | 8.9910 | 6.4890 | ||||||||||||||||||
Turkish Lira | 2.9068 | 2.5335 | 2.3135 | 2.8320 | 2.9605 | 2.3551 | ||||||||||||||||||
Indian Rupee | 81.0576 | 77.9300 | 68.5973 | 76.7190 | 85.3660 | 72.5600 | ||||||||||||||||||
Chinese Renminbi | 8.1883 | 8.1646 | 8.1052 | 7.5358 | 8.3491 | 8.2207 | ||||||||||||||||||
|
Average | Year-end | |||||||||||||||||||||||
euro 1 = | 2017 | 2016 | 2015 | 2017 | 2016 | |||||||||||||||||||
Brazilian Real | 3.6054 | 3.8561 | 3.7004 | 3.9729 | 3.4305 | |||||||||||||||||||
Canadian Dollar | 1.4647 | 1.4659 | 1.4186 | 1.5039 | 1.4188 | |||||||||||||||||||
Chinese Renminbi | 7.6290 | 7.3522 | 6.9733 | 7.8044 | 7.3202 | |||||||||||||||||||
Hungarian Forint | 309.1933 | 311.4379 | 309.9956 | 310.3300 | 309.8300 | |||||||||||||||||||
Indian Rupee | 73.5324 | 74.3717 | 71.1956 | 76.6055 | 71.5935 | |||||||||||||||||||
Philippine Peso | 56.9734 | 52.5555 | 50.5217 | 59.7950 | 52.2680 | |||||||||||||||||||
Polish Zloty | 4.2570 | 4.3632 | 4.1841 | 4.1770 | 4.4103 | |||||||||||||||||||
Pound Sterling | 0.8767 | 0.8195 | 0.7258 | 0.8872 | 0.8562 | |||||||||||||||||||
Romanian Leu | 4.5688 | 4.4904 | 4.4454 | 4.6585 | 4.5390 | |||||||||||||||||||
Serbian Dinar | 121.3232 | 123.1356 | 120.7168 | 118.3086 | 123.4600 | |||||||||||||||||||
Swiss Franc | 1.1117 | 1.0902 | 1.0679 | 1.1702 | 1.0739 | |||||||||||||||||||
Ukrainian Hryvnia | 30.0341 | 28.2812 | 24.3693 | 33.6769 | 28.6043 | |||||||||||||||||||
US Dollar | 1.1297 | 1.1069 | 1.1095 | 1.1993 | 1.0541 |
134 |
CRH Annual Report and Form 20-F|2017 |
Notes on Consolidated Financial Statements
1. Segment Information
CRH is a leading global diversified international building materials group which manufactures and distributes a range of building materials products from the fundamentals of heavy materials and elements to construct the frame, through value-added products that complete the building envelope, to distribution channels which service constructionfit-out and renewal. In conjunction with
During 2017, our dedicated European landscaping businesses, previously included within our Europe Heavyside segment, were reorganised to form a new platform, Architectural Products, within our Europe Lightside segment. Comparative segment amounts for 2016 and 2015 have been restated where necessary to reflect the ongoing portfolio review,new format for segmentation.
The Group reports across the Group reorganised its European business in 2014. Following this, the Group is now organised intofollowing six operating segments: Europe Heavyside, Europe Lightside, Europe Distribution, Americas Materials, Americas Products and Americas Distribution. Comparative segmentAsia reflecting the Group’s organisational structure and the nature of the financial information has been restated. Noreported to and assessed by the Group Chief Executive and Finance Director, who are together determined to fulfil the role of Chief Operating Decision Maker (as defined in IFRS 8Operating Segments).
The principal factors employed in the identification of the six segments reflected in this note include:
the Group’s organisational structure in 2017 (during 2017 each divisional President fulfilled the role of “segment manager” as outlined in IFRS 8, with the President of Europe Lightside and Distribution acting as “segment manager” for each of the Europe Lightside and Europe Distribution segments respectively);
the nature of the reporting lines to the Chief Operating Decision Maker (as defined in IFRS 8);
the structure of internal reporting documentation such as management accounts and budgets; and
the degree of homogeneity of products, services and geographical areas within each of the segments from which revenue is derived
The Chief Operating Decision Maker monitors the operating results of segments separately in order to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit. As performance is also evaluated using operating profit before depreciation, amortisation and impairment (EBITDA (as defined)*), supplemental information based on EBITDA (as defined)* is provided overleaf. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments have been aggregatedfor the purposes of the information presented to form these segments.the Chief Operating Decision Maker and are accordingly omitted from the detailed segmental analysis below. There are no asymmetrical allocations to reporting segments which would require disclosure.
Europe Heavyside businesses are predominantly engaged in the manufacturingmanufacture and supply of cement, lime, aggregates, readymixed and precast concrete concrete landscaping and asphalt products. The segment comprises businesses operating in 19 countries across Western, Central and Eastern Europe.
Europe Lightside businesses are predominatelypredominantly engaged in the production and supply of construction accessories, architectural products, shutters & awnings, fencing and compositeperimeter protection & network access chambers.products across 17 countries primarily in Western Europe.
Europe Distribution businesses are predominantly engaged in supplying Do-It-Yourself (DIY), General Merchants, and Sanitary, Heating and Plumbing (SHAP) andDo-It-Yourself (DIY) businesses catering to the general public and small andmedium-sized builders in the Netherlands, Belgium, France, Germany, Switzerland and Austria, selling a range of bricks, cement, sanitary, heating, plumbing and other building products.
Americas Materials businesses are predominantly engaged in the production and sale of aggregates, asphalt, cement and readymixed concrete products and provide asphalt paving services.services in the US and Canada. This segment also includes the Group’s cement operations in Brazil.
Americas Products businesses are predominantly engaged in the production and sale in the US and Canada of concrete masonry and hardscapes, clay brick, packaged lawn and garden products, packaged cement mixes, fencing, utility, drainage and structural precast products, construction accessories and glass and aluminium glazing systems and construction accessories.systems.
Americas DistributionAsia businesses are predominantly engaged in supplying Exterior Products such as roofingthe manufacture and sidingsupply of cement and Interior Products such as gypsum wallboard, metal studs and acoustical ceiling systems.
The principal factors employedaggregates in the identification ofPhilippines.
TheAmericas Distribution business has been classified as discontinued operations in the six segments reflectedcurrent year; its performance in this year and comparative years is therefore part of discontinued operations. See note include the Group’s organisational structure in 2014, the nature of the reporting lines to the Chief Operating Decision-Maker (as defined in IFRS 8Operating Segments), the structure of internal reporting documentation such as management accounts and budgets, and the degree of homogeneity of products, services and geographical areas within each of the segments from which revenue is derived.
The Chief Operating Decision-Maker monitors the operating results of segments separately in order to allocate resources between segments and to assess performance. Segment performance is predominantly evaluated based on operating profit. As performance is also evaluated using operating profit before depreciation and amortisation (EBITDA (as defined)*), supplemental information based on EBITDA (as defined)* is also provided below. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments2 for the purposes of the information presented to the Chief Operating Decision-Maker and are accordingly omitted from the detailed segmental analysis below. There are no asymmetrical allocations to reporting segments which would require disclosure.further details.
*EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ | 135 |
CRH Annual Report and Form 20-F|2017 |
1. Segment Information| - continued
A. Operating segments disclosures - Consolidated Income Statement data
Continuing operations - year ended 31 December | Year ended 31 December | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group operating profit | Revenue | Group EBITDA (as defined)* | Depreciation, amortisation and impairment | Group operating profit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
before depreciation and | Depreciation, | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 6,902 | 6,945 | 4,813 | 839 | 781 | 424 | 361 | 395 | 304 | 478 | 386 | 120 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Lightside | 1,440 | 1,392 | 1,404 | 143 | 137 | 136 | 41 | 45 | 46 | 102 | 92 | 90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Distribution | 4,145 | 4,066 | 4,158 | 269 | 206 | 171 | 62 | 76 | 77 | 207 | 130 | 94 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe | 12,487 | 12,403 | 10,375 | 1,251 | 1,124 | 731 | 464 | 516 | 427 | 787 | 608 | 304 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
amortisation (EBITDA | amortisation and | Group operating profit | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Materials | 7,970 | 7,598 | 7,018 | 1,270 | 1,204 | 955 | 412 | 386 | 335 | 858 | 818 | 620 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Products | 4,327 | 4,280 | 3,862 | 573 | 543 | 391 | 138 | 132 | 142 | 435 | 411 | 249 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas | 12,297 | 11,878 | 10,880 | 1,843 | 1,747 | 1,346 | 550 | 518 | 477 | 1,293 | 1,229 | 869 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | (as defined)*) | impairment (i) | (EBIT) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia | 436 | 508 | 151 | 52 | 109 | 2 | 37 | 38 | 9 | 15 | 71 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Group from continuing operations | 25,220 | 24,789 | 21,406 | 3,146 | 2,980 | 2,079 | 1,051 | 1,072 | 913 | 2,095 | 1,908 | 1,166 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 2,343 | 2,315 | 2,229 | 164 | 150 | 140 | 21 | 31 | 29 | 143 | 119 | 111 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Group | 27,563 | 27,104 | 23,635 | 3,310 | 3,130 | 2,219 | 1,072 | 1,103 | 942 | 2,238 | 2,027 | 1,277 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group operating profit from continuing operations | Group operating profit from continuing operations |
| 2,095 | 1,908 | 1,166 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit on disposals (i) | 56 | 53 | 99 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance costs less income | (289) | (317) | (295) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other financial expense | (60) | (66) | (94) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit (ii) | Share of equity accounted investments’ profit (ii) |
| 65 | 42 | 44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit before tax from continuing operations | Profit before tax from continuing operations |
| 1,867 | 1,620 | 920 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | (i) Profit/(loss) on disposals (note 5) | (ii) Share of equity accounted (note 10) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 3,929 | 3,786 | 3,972 | 380 | 326 | 426 | 229 | 721 | 239 | 151 | (395 | ) | 187 | 19 | 24 | 100 | 9 | 12 | 15 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Lightside | 913 | 856 | 888 | 94 | 71 | 78 | 23 | 43 | 29 | 71 | 28 | 49 | - | 1 | (22) | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Distribution | 3,999 | 3,936 | 3,956 | 190 | 186 | 217 | 78 | 80 | 72 | 112 | 106 | 145 | 4 | 13 | 8 | 15 | 13 | 15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe | 8,841 | 8,578 | 8,816 | 664 | 583 | 721 | 330 | 844 | 340 | 334 | (261 | ) | 381 | 23 | 38 | 86 | 24 | 25 | 30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Materials | 5,070 | 4,721 | 4,886 | 609 | 557 | 555 | 254 | 331 | 276 | 355 | 226 | 279 | 29 | (19) | 24 | 32 | 34 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Products | 3,225 | 3,068 | 2,806 | 263 | 246 | 204 | 118 | 178 | 118 | 145 | 68 | 86 | 4 | 34 | (11) | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 1,776 | 1,664 | 1,576 | 105 | 89 | 83 | 22 | 22 | 24 | 83 | 67 | 59 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas | 10,071 | 9,453 | 9,268 | 977 | 892 | 842 | 394 | 531 | 418 | 583 | 361 | 424 | 33 | 15 | 13 | 32 | 34 | 23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia | - | - | - | 9 | (17) | (9) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Group | 18,912 | 18,031 | 18,084 | 1,641 | 1,475 | 1,563 | 724 | 1,375 | 758 | 917 | 100 | 805 | 56 | 53 | 99 | 65 | 42 | 44 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit on disposals (ii) |
| 77 | 26 | 230 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance costs less income |
| (246 | ) | (249 | ) | (256 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other financial expense |
| (42 | ) | (48 | ) | (49 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit/(loss) (iii) |
| 55 | (44 | ) | (84 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) before tax |
| 761 | (215 | ) | 646 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(i) See notes 13 and 14 for details of the impairment charge. |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(iii) Share of equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(ii) Profit/(loss) on | accounted investments’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
disposals (note 4) | profit/(loss) (note 9) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside |
| 38 | 6 | 158 | 35 | (60 | ) | (99 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Lightside |
| 1 | 6 | 44 | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe Distribution |
| 6 | (2 | ) | 3 | 13 | 9 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe |
| 45 | 10 | 205 | 48 | (51 | ) | (85 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Materials |
| 11 | 19 | 24 | 7 | 7 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Products |
| 20 | (3 | ) | 1 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution |
| 1 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Americas |
| 32 | 16 | 25 | 7 | 7 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Group |
| 77 | 26 | 230 | 55 | (44 | ) | (84 | ) |
136 | *EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ |
CRH |
1. Segment Information|continued
B. Operating segments disclosures - Consolidated Balance Sheet data
Continuing operations - as at 31 December | ||||||||||||||||||||||||||||||||||||
Total assets | Total liabilities | As at 31 December | ||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | Total assets | Total liabilities | |||||||||||||||||||||||||||||||
€m | €m | €m | €m | 2017 €m | 2016 €m | 2017 €m | 2016 €m | |||||||||||||||||||||||||||||
Europe Heavyside | 3,864 | 4,605 | 1,468 | 1,428 | 8,932 | 8,383 | 2,641 | 2,633 | ||||||||||||||||||||||||||||
Europe Lightside | 761 | 768 | 215 | 180 | 1,100 | 1,084 | 302 | 313 | ||||||||||||||||||||||||||||
Europe Distribution | 2,221 | 2,217 | 644 | 542 | 2,178 | 2,160 | 563 | 642 | ||||||||||||||||||||||||||||
Europe | 6,846 | 7,590 | 2,327 | 2,150 | 12,210 | 11,627 | 3,506 | 3,588 | ||||||||||||||||||||||||||||
Americas Materials | 6,245 | 5,510 | 969 | 772 | 9,180 | 8,970 | 1,628 | 1,725 | ||||||||||||||||||||||||||||
Americas Products | 2,542 | 2,360 | 679 | 656 | 4,017 | 4,275 | 895 | 998 | ||||||||||||||||||||||||||||
Americas Distribution | 951 | 853 | 283 | 255 | ||||||||||||||||||||||||||||||||
Americas Distribution (i) | - | 1,152 | - | 392 | ||||||||||||||||||||||||||||||||
Americas | 9,738 | 8,723 | 1,931 | 1,683 | 13,197 | 14,397 | 2,523 | 3,115 | ||||||||||||||||||||||||||||
Asia | 1,402 | 1,557 | 172 | 224 | ||||||||||||||||||||||||||||||||
Total Group | 16,584 | 16,313 | 4,258 | 3,833 | 26,809 | 27,581 | 6,201 | 6,927 | ||||||||||||||||||||||||||||
Reconciliation to total assets as reported in the Consolidated Balance Sheet: | ||||||||||||||||||||||||||||||||||||
Investments accounted for using the equity method | 1,329 | 1,340 | 1,248 | 1,299 | ||||||||||||||||||||||||||||||||
Other financial assets | 23 | 23 | 25 | 26 | ||||||||||||||||||||||||||||||||
Derivative financial instruments (current and non-current) | 102 | 80 | 64 | 76 | ||||||||||||||||||||||||||||||||
Income tax assets (current and deferred) | 186 | 133 | 260 | 163 | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 3,262 | 2,540 | 2,115 | 2,449 | ||||||||||||||||||||||||||||||||
Assets held for sale | 531 | - | 1,112 | - | ||||||||||||||||||||||||||||||||
Total assets as reported in the Consolidated Balance Sheet | 22,017 | 20,429 | 31,633 | 31,594 | ||||||||||||||||||||||||||||||||
Reconciliation to total liabilities as reported in the Consolidated Balance Sheet: | ||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings (current and non-current) | 5,866 | 5,540 | 7,976 | 7,790 | ||||||||||||||||||||||||||||||||
Derivative financial instruments (current and non-current) | 23 | 53 | 14 | 32 | ||||||||||||||||||||||||||||||||
Income tax liabilities (current and deferred) | 1,459 | 1,317 | 2,124 | 2,402 | ||||||||||||||||||||||||||||||||
Liabilities associated with assets classified as held for sale | 213 | - | 341 | - | ||||||||||||||||||||||||||||||||
Total liabilities as reported in the Consolidated Balance Sheet | 11,819 | 10,743 | 16,656 | 17,151 |
(i) | During 2017, the Americas Distribution segment was classified as held for sale under IFRS 5Non-Current Assets Held for Sale and Discontinued Operations(refer to note 2 for further information). Accordingly its total assets and total liabilities have not been presented for 2017. |
137 |
CRH Annual Report and Form 20-F|2017 |
1. Segment Information - continued
C. Operating segments disclosures - other items
Additions tonon-current assets
Continuing operations - year ended 31 December | ||||||||||||||||||||||||||||||||||||
Property, plant and | Financial assets | Total Group | ||||||||||||||||||||||||||||||||||
equipment (note 13) | (note 15) | |||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | ||||||||||||||||||||||||||||
Europe Heavyside | 113 | 132 | 165 | - | 70 | 44 | 113 | 202 | 209 | |||||||||||||||||||||||||||
Europe Lightside | 14 | 13 | 20 | - | - | 2 | 14 | 13 | 22 | |||||||||||||||||||||||||||
Europe Distribution | 36 | 49 | 70 | - | 1 | 1 | 36 | 50 | 71 | |||||||||||||||||||||||||||
Europe | 163 | 194 | 255 | - | 71 | 47 | 163 | 265 | 302 | |||||||||||||||||||||||||||
Americas Materials | 173 | 199 | 212 | 3 | 7 | 9 | 176 | 206 | 221 | |||||||||||||||||||||||||||
Americas Products | 81 | 83 | 69 | - | - | - | 81 | 83 | 69 | |||||||||||||||||||||||||||
Americas Distribution | 18 | 21 | 8 | - | - | - | 18 | 21 | 8 | |||||||||||||||||||||||||||
Americas | 272 | 303 | 289 | 3 | 7 | 9 | 275 | 310 | 298 | |||||||||||||||||||||||||||
Total Group | 435 | 497 | 544 | 3 | 78 | 56 | 438 | 575 | 600 |
Year ended 31 December | ||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment (note 14) | Financial assets (note 16) | Total Group | ||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 349 | 260 | 238 | - | 2 | 8 | 349 | 262 | 246 | |||||||||||||||||||||||||||||||
Europe Lightside | 36 | 27 | 38 | - | - | - | 36 | 27 | 38 | |||||||||||||||||||||||||||||||
Europe Distribution | 33 | 26 | 46 | - | - | 1 | 33 | 26 | 47 | |||||||||||||||||||||||||||||||
Europe | 418 | 313 | 322 | - | 2 | 9 | 418 | 315 | 331 | |||||||||||||||||||||||||||||||
Americas Materials | 375 | 328 | 335 | 5 | 5 | 10 | 380 | 333 | 345 | |||||||||||||||||||||||||||||||
Americas Products | 167 | 142 | 153 | 6 | - | - | 173 | 142 | 153 | |||||||||||||||||||||||||||||||
Americas | 542 | 470 | 488 | 11 | 5 | 10 | 553 | 475 | 498 | |||||||||||||||||||||||||||||||
Asia | 55 | 47 | 31 | - | - | - | 55 | 47 | 31 | |||||||||||||||||||||||||||||||
Total Group from continuing operations | 1,015 | 830 | 841 | 11 | 7 | 19 | 1,026 | 837 | 860 | |||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 29 | 23 | 41 | - | - | - | 29 | 23 | 41 | |||||||||||||||||||||||||||||||
Total Group | 1,044 | 853 | 882 | 11 | 7 | 19 | 1,055 | 860 | 901 |
1. Segment Information|continued
D. Entity-wide disclosures
Section 1: Information about products and services
The Group’s revenue from external customers in respect of its principal products and services is analysed in the disclosures above. Segment revenue includes€3,3515,236 million (2013:(2016:€3,268 million, 2012:5,102 million; 2015:€3,4564,523 million) in respect of revenue applicable to construction contracts. The bulk of our construction activities are performed by our Americas Materials reportable segment, are for the most part short-term in nature and are generally completed within the same financial reporting period.
Revenue derived through the supply of services and intersegment revenue isare not material to the Group. The transfer pricing policy implemented by the Group between operating segments and across its constituent entities is described in greater detail in note 31.33. In addition, due to the nature of building materials, which exhibithave a lowvalue-to-weight ratio, the Group’s revenue streams include a low level of cross-border transactions.
Section 2: Information about geographical areas and customers
CRH has a presence in 3432 countries worldwide. The revenues from external customers andnon-current assets (as defined in IFRS 8) attributable to the country of domicile and all foreign countries of operation are as follows;set out below; individual foreign countries which exceed 10% of total external Group revenue have been highlighted separately on the basis of materiality.
Year ended 31 December | As at 31 December | |||||||||||||||||||||||||||||||||||||||||
Revenue by destination | Non-current assets | Year ended 31 December | As at 31 December | |||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | Revenue by destination | Non-current assets* | ||||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | |||||||||||||||||||||||||||||||||
Country of domicile - Republic of Ireland | 306 | 278 | 267 | 477 | 475 | 435 | 403 | 349 | 493 | 475 | ||||||||||||||||||||||||||||||||
United States of America | 9,650 | 8,991 | 8,880 | 6,948 | 6,241 | |||||||||||||||||||||||||||||||||||||
Benelux (mainly the Netherlands) | 2,350 | 2,324 | 2,327 | 1,231 | 1,280 | 2,589 | 2,576 | 2,478 | 1,162 | 1,201 | ||||||||||||||||||||||||||||||||
United Kingdom | 3,023 | 3,091 | 1,694 | 2,395 | 2,487 | |||||||||||||||||||||||||||||||||||||
United States | 10,844 | 10,415 | 9,819 | 8,749 | 8,710 | |||||||||||||||||||||||||||||||||||||
Other | 6,606 | 6,438 | 6,610 | 4,268 | 4,794 | 8,329 | 8,304 | 7,066 | 8,757 | 8,346 | ||||||||||||||||||||||||||||||||
Total Group from continuing operations | 25,220 | 24,789 | 21,406 | 21,556 | 21,219 | |||||||||||||||||||||||||||||||||||||
United States - Americas Distribution | 2,343 | 2,315 | 2,229 | 476 | 531 | |||||||||||||||||||||||||||||||||||||
Total Group | 18,912 | 18,031 | 18,084 | 12,924 | 12,790 | 27,563 | 27,104 | 23,635 | 22,032 | 21,750 |
There are no material dependencies or concentrations onof individual customers which would warrant disclosure under IFRS 8. The individual entities within the Group have a large number of customers spread across various activities,end-uses and geographies.
2. Cost Analysis
2014 | 2013 | 2012 | ||||||||||
€m | €m | €m | ||||||||||
Cost of sales analysis | ||||||||||||
Raw materials and goods for resale | 7,527 | 7,240 | 7,282 | |||||||||
Employment costs (note 5) | 1,985 | 1,974 | 1,946 | |||||||||
Energy conversion costs | 655 | 644 | 670 | |||||||||
Repairs and maintenance | 452 | 421 | 411 | |||||||||
Depreciation, amortisation and impairment (i) | 532 | 792 | 559 | |||||||||
Change in inventory (note 19) | 34 | 37 | (93 | ) | ||||||||
Other production expenses (primarily sub-contractor costs and equipment rental) | 2,242 | 2,045 | 2,243 | |||||||||
Total | 13,427 | 13,153 | 13,018 | |||||||||
Operating costs analysis | ||||||||||||
Selling and distribution costs | 3,143 | 3,054 | 3,035 | |||||||||
Administrative expenses | 1,425 | 1,724 | 1,226 | |||||||||
Total | 4,568 | 4,778 | 4,261 |
(i) Depreciation, amortisation and impairment analysis
Cost of sales | Operating costs | Total | ||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | ||||||||||||||||||||||||||||
Depreciation and depletion (note 13) | 485 | 521 | 538 | 146 | 150 | 148 | 631 | 671 | 686 | |||||||||||||||||||||||||||
Impairment of property, plant and equipment (note 13) | 47 | 271 | 21 | 2 | 4 | 4 | 49 | 275 | 25 | |||||||||||||||||||||||||||
Impairment of intangible assets (note 14) | - | - | - | - | 375 | 3 | - | 375 | 3 | |||||||||||||||||||||||||||
Amortisation of intangible assets (note 14) | - | - | - | 44 | 54 | 44 | 44 | 54 | 44 | |||||||||||||||||||||||||||
Total | 532 | 792 | 559 | 192 | 583 | 199 | 724 | 1,375 | 758 |
138 |
2. Cost Analysis|continued
Segmental analysis of 2013 impairment charges
Portfolio | ||||||||||||||||||||||||
review | ||||||||||||||||||||||||
included in | ||||||||||||||||||||||||
Annual | Included in | share of equity | ||||||||||||||||||||||
impairment | Portfolio | operating | accounted | |||||||||||||||||||||
process | review | profit | entities | Total | ||||||||||||||||||||
€m | €m | €m | €m | €m | ||||||||||||||||||||
Europe Heavyside | 58 | 444 | 502 | 101 | 603 | |||||||||||||||||||
Europe Lightside | - | 13 | 13 | - | 13 | |||||||||||||||||||
Europe Distribution | 4 | - | 4 | 4 | 8 | |||||||||||||||||||
Europe | 62 | 457 | 519 | 105 | 624 | |||||||||||||||||||
Americas Materials | - | 60 | 60 | - | 60 | |||||||||||||||||||
Americas Products | 10 | 61 | 71 | - | 71 | |||||||||||||||||||
Americas Distribution | - | - | - | - | - | |||||||||||||||||||
Americas | 10 | 121 | 131 | - | 131 | |||||||||||||||||||
Total Group | 72 | 578 | 650 | 105 | 755 |
Narrative disclosures regarding the 2013 impairments are included in section (b) of note 14.
3. Operating Profit Disclosures
2014 | 2013 | 2012 | ||||||||||
€m | €m | €m | ||||||||||
Operating lease rentals | ||||||||||||
- hire of plant and machinery | 149 | 108 | 99 | |||||||||
- land and buildings | 216 | 220 | 187 | |||||||||
- other operating leases | 48 | 47 | 69 | |||||||||
Total | 413 | 375 | 355 | |||||||||
Auditor’s remuneration | ||||||||||||
Fees for professional services provided by the Group’s independent auditor in respect of each of the following categories were: | ||||||||||||
Audit fees (i) | 14 | 14 | 14 | |||||||||
Audit-related fees (ii) | 1 | 2 | 2 | |||||||||
Tax fees | 1 | 1 | 1 | |||||||||
All other fees | - | - | - | |||||||||
Total | 16 | 17 | 17 |
|
|
CRH Annual Report and Form 20-F|2017 |
4. Business and Non-current Asset Disposals
(a) Profit on disposal | Disposal of other | |||||||||||||||||||||||||||||||||||
Business disposals | non-current assets | Total | ||||||||||||||||||||||||||||||||||
2014 (i) | 2013 | 2012 (ii) | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | ||||||||||||||||||||||||||||
Assets/(liabilities) disposed of at net carrying amount: | ||||||||||||||||||||||||||||||||||||
- non-current assets (notes 13,14,15) | 117 | 43 | 432 | 83 | 66 | 90 | 200 | 109 | 522 | |||||||||||||||||||||||||||
- cash and cash equivalents | - | - | 3 | - | - | - | - | - | 3 | |||||||||||||||||||||||||||
- working capital and provisions (note 19) | 11 | 6 | 21 | - | - | - | 11 | 6 | 21 | |||||||||||||||||||||||||||
- asset held for sale (iii) (note 15) | - | 139 | - | - | - | - | 139 | - | ||||||||||||||||||||||||||||
- interest-bearing loans and borrowings | - | (17 | ) | (2 | ) | - | - | - | - | (17 | ) | (2 | ) | |||||||||||||||||||||||
- deferred tax (note 26) | - | - | 1 | - | - | - | - | - | 1 | |||||||||||||||||||||||||||
- retirement benefit obligations (note 27) | - | - | (4 | ) | - | - | - | - | - | (4 | ) | |||||||||||||||||||||||||
Net assets disposed | 128 | 171 | 451 | 83 | 66 | 90 | 211 | 237 | 541 | |||||||||||||||||||||||||||
Reclassification of currency translation effects on disposal | 57 | 3 | 14 | - | - | - | 57 | 3 | 14 | |||||||||||||||||||||||||||
Total | 185 | 174 | 465 | 83 | 66 | 90 | 268 | 240 | 555 | |||||||||||||||||||||||||||
Proceeds from disposals (net of disposal costs) | 224 | 26 | 652 | 121 | 96 | 133 | 345 | 122 | 785 | |||||||||||||||||||||||||||
Asset exchange (iii) (note 30) | - | 144 | - | - | - | - | - | 144 | - | |||||||||||||||||||||||||||
Profit/(loss) on disposals | 39 | (4 | ) | 187 | 38 | 30 | 43 | 77 | 26 | 230 | ||||||||||||||||||||||||||
Net cash inflow arising on disposal | ||||||||||||||||||||||||||||||||||||
Cash proceeds | 224 | 26 | 652 | 121 | 96 | 133 | 345 | 122 | 785 | |||||||||||||||||||||||||||
Less: cash and cash equivalents disposed | - | - | (3 | ) | - | - | - | - | - | (3 | ) | |||||||||||||||||||||||||
Total | 224 | 26 | 649 | 121 | 96 | 133 | 345 | 122 | 782 |
2. Assets Held for Sale and Discontinued Operations
|
|
|
(b) Assets held for sale
In November 2013, a Group-wide portfolio review was initiated which identified a number of business units which did not meet our future returns objectives and which were in line for divestment. This review was completed during 2014; a multi-year divestment programme commenced during the year, with proceeds of€0.35 billion realised on business and non-current asset disposals in 2014.
On 15 December 2014,August 2017, the Group announced that it had reachedentered into a sales agreement with Beacon Roofing Supply Inc. to dispose of its clay and concrete businesses100% holding in Allied Building Products, the United Kingdom (Europe Heavyside) and its clay business in the United States (Americas Products)trading name of our Americas Distribution segment, for an Enterprise Value (EV)a consideration of Stg £414 million. As part of the transaction, the purchaser will assume certain debt and pension liabilities and accordingly, the net cash consideration payable to CRH is expected to be approximately Stg £295 million.US$2.6 billion. The transaction closed in the first quarter of 2015.on 2 January 2018. The assets associated with this transaction together with a number of smaller business units, met the “held‘held for sale”sale’ criteria set out in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as at 31 December 2014 and the relevant assets and liabilities have accordingly been reclassified as assets orand liabilities held for sale as appropriate as set out in the table below. The proceeds of the sale exceeded the carrying amount of the related net assets and, accordingly, no impairment loss was recognised on the reclassification of Americas Distribution as held for sale.
The businesses either divested in 2014 or held for sale at year-end 20142017 are not considered to be either separate major lines of business or geographical areas of operation and therefore do not constitute discontinued operations as defined inby IFRS 5.
A. Discontinued operations
The results of the discontinued operations included in the Group profit for the financial year are set out below:
2017 €m | 2016 €m | 2015 €m | ||||||||||
Revenue | 2,343 | 2,315 | 2,229 | |||||||||
EBITDA (as defined)* | 164 | 150 | 140 | |||||||||
Depreciation | (16) | (22) | (18) | |||||||||
Amortisation | (5) | (9) | (11) | |||||||||
Operating profit | 143 | 119 | 111 | |||||||||
Profit on disposals | 3 | 2 | 2 | |||||||||
Profit before tax | 146 | 121 | 113 | |||||||||
Attributable income tax expense (i) | (39) | (40) | (28) | |||||||||
Profit after tax | 107 | 81 | 85 | |||||||||
Basic earnings per Ordinary Share from discontinued operations | 12.8c | 9.8c | 10.4c | |||||||||
Diluted earnings per Ordinary Share from discontinued operations | 12.7c | 9.7c | 10.4c | |||||||||
Cash flows from discontinued operations | ||||||||||||
Net cash inflow from operating activities | 111 | 123 | 173 | |||||||||
Net cash outflow from investing activities | (27) | (22) | (39) | |||||||||
Net cash inflow/(outflow) from financing activities | 1 | (1) | - | |||||||||
Net cash inflows | 85 | 100 | 134 |
(i) | The 2017 attributable income tax expense includes a non-cash deferred tax credit of€7 million related to the enactment of the “Tax Cuts and Jobs Act” in the US during the year. |
B. Assets held for sale
2017 €m | ||||
Assets | ||||
Property, plant and equipment (note | ||||
Intangible assets (note | ||||
| ||||
Deferred income tax assets (note | ||||
Inventories (note | ||||
Trade and other receivables (note | ||||
Cash and cash equivalents (note | ||||
Assets held for sale | ||||
Liabilities | ||||
Trade and other payables (note | ||||
| ||||
| ||||
Deferred income tax liabilities (note | ||||
| ||||
Liabilities associated with assets classified as held for sale | ||||
Net assets held for sale |
Total lossesgains recognised in other comprehensive income and accumulated in equity relating to assets held for sale amounted to€16432 million at 31 December 2014.2017.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. | 139 |
CRH Annual Report and Form 20-F|2017 |
3. Cost Analysis
Continuing Operations
2017 €m | 2016 €m | 2015 €m | ||||||||||
Cost of sales analysis | ||||||||||||
Raw materials and goods for resale | 7,428 | 7,307 | 6,978 | |||||||||
Employment costs (note 6) | 2,869 | 2,725 | 2,446 | |||||||||
Energy conversion costs | 1,004 | 940 | 789 | |||||||||
Repairs and maintenance | 811 | 803 | 630 | |||||||||
Depreciation, amortisation and impairment (i) | 830 | 817 | 697 | |||||||||
Change in inventory | (142) | (33) | 37 | |||||||||
Other production expenses (primarilysub-contractor costs and equipment rental) | 4,103 | 4,007 | 3,166 | |||||||||
Total | 16,903 | 16,566 | 14,743 | |||||||||
Operating costs analysis | ||||||||||||
Selling and distribution costs | 4,236 | 4,100 | 3,593 | |||||||||
Administrative expenses | 1,986 | 2,215 | 1,904 | |||||||||
Total | 6,222 | 6,315 | 5,497 |
(i) Depreciation, amortisation and impairment analysis
Cost of sales | Operating costs | Total | ||||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||||||
Depreciation and depletion (note 14) | 830 | 817 | 667 | 160 | 170 | 158 | 990 | 987 | 825 | |||||||||||||||||||||||||||||||||||
Amortisation of intangible assets (note 15) | - | - | - | 61 | 62 | 44 | 61 | 62 | 44 | |||||||||||||||||||||||||||||||||||
Impairment of property, plant and equipment | - | - | 30 | - | - | 11 | - | - | 41 | |||||||||||||||||||||||||||||||||||
Impairment of intangible assets (note 15) | - | - | - | - | 23 | 1 | - | 23 | 1 | |||||||||||||||||||||||||||||||||||
Impairment of financial assets | - | - | - | - | - | 2 | - | - | 2 | |||||||||||||||||||||||||||||||||||
Total | 830 | 817 | 697 | 221 | 255 | 216 | 1,051 | 1,072 | 913 |
140 |
CRH Annual Report and Form 20-F|2017 |
4. Operating Profit Disclosures
Continuing Operations
2017 €m | 2016 €m | 2015 €m | ||||||||||
Operating lease rentals | ||||||||||||
- hire of plant and machinery | 292 | 262 | 200 | |||||||||
- land and buildings | 258 | 250 | 221 | |||||||||
- other operating leases | 56 | 57 | 50 | |||||||||
Total | 606 | 569 | 471 |
Auditor’s remuneration
In accordance with statutory requirements in Ireland, fees for professional services provided by the Group’s independent auditor in respect of each of the following categories were:
EY Ireland (statutory auditor) | EY (network firms) | Total | ||||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||||||
Audit fees (i) | 4 | 3 | 3 | 16 | 16 | 16 | 20 | 19 | 19 | |||||||||||||||||||||||||||||||||||
Other audit-related assurance fees (ii) | - | - | 1 | 1 | - | 4 | 1 | - | 5 | |||||||||||||||||||||||||||||||||||
Tax advisory services | - | - | - | 1 | 1 | 2 | 1 | 1 | 2 | |||||||||||||||||||||||||||||||||||
Total | 4 | 3 | 4 | 18 | 17 | 22 | 22 | 20 | 26 |
(i) | Audit of the Group accounts includes audit of internal controls over financial reporting and parent and subsidiary statutory audit fees, but excludes€2 million (2016:€2 million; 2015:€2 million) paid to auditors other than EY. |
(ii) | Other assurance services includes attestation and due diligence services that are closely related to the performance of the audit. |
(iii) | There were no other fees for services provided by the Group’s independent auditor (2016:€nil million; 2015:€nil million). |
141 |
CRH Annual Report and Form 20-F|2017 |
5. Business andNon-Current Asset Disposals
Continuing Operations
Business disposals | Disposal of other non-current assets | Total | ||||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 (i) €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||||||
Assets/(liabilities) disposed of at net carrying amount: | ||||||||||||||||||||||||||||||||||||||||||||
-non-current assets (notes 14,15,16) | 47 | 147 | 570 | 79 | 109 | 103 | 126 | 256 | 673 | |||||||||||||||||||||||||||||||||||
- cash and cash equivalents | 11 | 3 | 90 | - | - | - | 11 | 3 | 90 | |||||||||||||||||||||||||||||||||||
- working capital and provisions (note 20) | 29 | 24 | 246 | - | - | - | 29 | 24 | 246 | |||||||||||||||||||||||||||||||||||
- interest-bearing loans and borrowings | - | - | (20) | - | - | - | - | - | (20) | |||||||||||||||||||||||||||||||||||
- deferred tax (note 27) | 2 | (1) | (22) | - | - | - | 2 | (1) | (22) | |||||||||||||||||||||||||||||||||||
- retirement benefit obligations | - | - | (84) | - | - | - | - | - | (84) | |||||||||||||||||||||||||||||||||||
Net assets disposed | 89 | 173 | 780 | 79 | 109 | 103 | 168 | 282 | 883 | |||||||||||||||||||||||||||||||||||
Reclassification of currency translation effects on disposal | 9 | (44) | 39 | - | - | - | 9 | (44) | 39 | |||||||||||||||||||||||||||||||||||
Total | 98 | 129 | 819 | 79 | 109 | 103 | 177 | 238 | 922 | |||||||||||||||||||||||||||||||||||
Proceeds from disposals (net of disposal costs) | 99 | 133 | 875 | 134 | 158 | 140 | 233 | 291 | 1,015 | |||||||||||||||||||||||||||||||||||
Profit on step acquisition (note 31) | - | - | 6 | - | - | - | - | - | 6 | |||||||||||||||||||||||||||||||||||
Profit on disposals | 1 | 4 | 62 | 55 | 49 | 37 | 56 | 53 | 99 | |||||||||||||||||||||||||||||||||||
Net cash inflow arising on disposal | ||||||||||||||||||||||||||||||||||||||||||||
Proceeds from disposals from continuing operations | 99 | 133 | 875 | 134 | 158 | 140 | 233 | 291 | 1,015 | |||||||||||||||||||||||||||||||||||
Proceeds from disposals from discontinued operations | - | - | - | 3 | 2 | 2 | 3 | 2 | 2 | |||||||||||||||||||||||||||||||||||
Less: cash and cash equivalents disposed | (11) | (3) | (90) | - | - | - | (11) | (3) | (90) | |||||||||||||||||||||||||||||||||||
Less: deferred proceeds arising on disposal (note 20) | (3) | (7) | (38) | - | - | - | (3) | (7) | (38) | |||||||||||||||||||||||||||||||||||
Total | 85 | 123 | 747 | 137 | 160 | 142 | 222 | 283 | 889 |
(i) | Disposals in 2015 related principally to the divestment of the Group’s clay and certain concrete businesses in the UK (Europe Heavyside) and its clay business in the US (Americas Products) on 26 February 2015. |
142 |
CRH Annual Report and Form 20-F|2017 |
6. Employment
Continuing Operations
The average number of employees is as follows:
Year ended 31 December | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Europe Heavyside | 19,096 | 19,996 | 19,879 | |||||||||
Europe Lightside | 5,003 | 4,849 | 4,664 | |||||||||
Europe Distribution | 11,607 | 11,263 | 11,086 | |||||||||
Europe | 35,706 | 36,108 | 35,629 | |||||||||
Americas Materials | 18,457 | 18,216 | 18,106 | |||||||||
Americas Products | 17,707 | 17,276 | 15,546 | |||||||||
Americas Distribution | 3,836 | 3,709 | 3,532 | |||||||||
Americas | 40,000 | 39,201 | 37,184 | |||||||||
Total Group | 75,706 | 75,309 | 72,813 | |||||||||
Employment costs charged in the Consolidated Income Statement are analysed as follows: |
| |||||||||||
2014 | 2013 | 2012 | ||||||||||
€m | €m | €m | ||||||||||
Wages and salaries | 2,987 | 2,915 | 2,876 | |||||||||
Social welfare costs | 368 | 360 | 359 | |||||||||
Other employment-related costs | 448 | 464 | 432 | |||||||||
Share-based payment expense (note 7) | 16 | 15 | 14 | |||||||||
Total retirement benefits expense (note 27) | 215 | 201 | 181 | |||||||||
Total | 4,034 | 3,955 | 3,862 | |||||||||
Total charge analysed between: | ||||||||||||
Cost of sales | 1,985 | 1,974 | 1,946 | |||||||||
Operating costs | 2,035 | 1,959 | 1,891 | |||||||||
Finance costs (net) - applicable to retirement benefit obligations (note 8) | 14 | 22 | 25 | |||||||||
Total | 4,034 | 3,955 | 3,862 |
Year ended 31 December | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Europe Heavyside | 24,401 | 24,551 | 18,131 | |||||||||
Europe Lightside | 7,272 | 7,084 | 7,360 | |||||||||
Europe Distribution | 11,036 | 10,971 | 11,392 | |||||||||
Europe | 42,709 | 42,606 | 36,883 | |||||||||
Americas Materials | 24,077 | 22,650 | 20,125 | |||||||||
Americas Products | 17,146 | 16,259 | 16,712 | |||||||||
Americas | 41,223 | 38,909 | 36,837 | |||||||||
Asia | 1,431 | 1,374 | 466 | |||||||||
Total Group | 85,363 | 82,889 | 74,186 |
Employment costs charged in the Consolidated Income Statement are analysed as follows:
2017 €m | 2016 €m | 2015 €m | ||||||||||
Wages and salaries | 3,997 | 3,915 | 3,474 | |||||||||
Social welfare costs | 465 | 454 | 401 | |||||||||
Other employment-related costs* | 546 | 531 | 505 | |||||||||
Share-based payment expense (note 8) | 60 | 44 | 26 | |||||||||
Total retirement benefits expense (note 28) | 236 | 307 | 281 | |||||||||
Total | 5,304 | 5,251 | 4,687 | |||||||||
Total charge analysed between: | ||||||||||||
Cost of sales | 2,869 | 2,725 | 2,446 | |||||||||
Operating costs | 2,424 | 2,514 | 2,224 | |||||||||
Finance costs (net) - applicable to retirement benefit obligations (note 9) | 11 | 12 | 17 | |||||||||
Total | 5,304 | 5,251 | 4,687 |
* Other employment costs relate principally to redundancy, severance and healthcare costs.
6.Employment costs including discontinued operations were€5,588 million (2016:€5,532 million; 2015:€4,961 million). The average number of employees including discontinued operations were 89,213 (2016: 86,778; 2015: 78,106).
7. Directors’ Emoluments and Interests
Directors’ emoluments (which are included in administrative expenses in note 2)3) and interests are presented in the Directors’
Remuneration Report on pages 10872 to 131 of this Annual Report.95.
143 |
CRH Annual Report and Form 20-F|2017 |
8. Share-based Payment Expense
Continuing Operations
7. Share-based Payment Expense
2017 €m | 2016 €m | 2015 €m | ||||||||||
Performance Share Plans and Restricted Share Plan expense | 57 | 38 | 25 | |||||||||
Share option expense | 3 | 6 | 1 | |||||||||
Total share-based payment expense | 60 | 44 | 26 |
2014 | 2013 | 2012 | ||||||||||
€m | €m | €m | ||||||||||
Share option expense (i) | 1 | 1 | - | |||||||||
Performance Share Plans and Restricted Share Plan expense (ii) | 15 | 14 | 14 | |||||||||
Total | 16 | 15 | 14 |
|
|
The share-basedShare-based payment expense relates primarily to awards granted under the 2014 Performance Share Plan and the Group’s share option schemes. The expense, which also includes charges in relation to the 2013 Restricted Share Plan, is reflected in operating costs in the Consolidated Income Statement.
In May 2014, shareholders approved the adoption of a new Performance Share Plan (the “2014 Performance Share Plan”), which replaced the 2006 Performance Share Plan (approved by shareholders in May 2006), the 2010 Share Option Scheme (approved by shareholders in May 2010) and the 2013 Restricted Share Plan (together, the “Existing Plans”). Following the introduction of the 2014 Performance Share Plan, no further awards will be made under the Existing Plans. Consequently, the last awards under the Existing Plans were made in 2013. The general terms and conditions applicable to the various plans are set out in the Directors’ Remuneration Report on pages 112 to 116.
The Group also operates savings-related share option schemes. Due to the immateriality of the savings-related schemes’ expense and the level of savings-related share options outstanding, detailed financial disclosures have not been provided in relation to these schemes.
7. Share-based Payment Expense|continued
Share option schemes
Details of options granted under the share option schemes (excluding savings-related share option schemes)
Weighted average | Number of | Weighted average | Number of | Weighted average | Number of | |||||||||||||||||||
exercise price | options | exercise price | options | exercise price | options | |||||||||||||||||||
2014 | 2013 | 2012 | ||||||||||||||||||||||
Outstanding at beginning of year | €18.75 | 21,798,887 | €18.84 | 23,295,955 | €19.13 | 23,591,756 | ||||||||||||||||||
Granted | - | - | €16.19 | 3,853,400 | €15.19 | 3,889,100 | ||||||||||||||||||
Exercised (a) | €16.58 | (919,205 | ) | €13.21 | (1,245,029 | ) | €11.98 | (1,010,780 | ) | |||||||||||||||
Lapsed | €16.77 | (5,398,491 | ) | €18.53 | (4,105,439 | ) | €18.68 | (3,174,121 | ) | |||||||||||||||
Outstanding at end of year (b) | €19.58 | 15,481,191 | €18.75 | 21,798,887 | €18.84 | 23,295,955 | ||||||||||||||||||
Exercisable at end of year | €18.79 | 1,248,698 | €17.94 | 2,114,772 | €16.24 | 3,364,448 |
|
2014 | 2013 | 2012 | ||||||||||
Weighted average remaining contractual life for the share options outstanding at 31 December (years) | 4.89 | 5.54 | 5.69 | |||||||||
Euro-denominated options outstanding at the end of the year (number) | 15,389,922 | 21,683,559 | 23,182,257 | |||||||||
Range of exercise prices (€) | 15.19-29.86 | 15.07-29.86 | 11.86-29.86 | |||||||||
Sterling-denominated options outstanding at the end of the year (number) | 91,269 | 115,328 | 113,698 | |||||||||
Range of exercise prices (Stg£) | 12.80-20.23 | 10.04-20.23 | 8.17-20.23 | |||||||||
The CRH share price at 31 December 2014 was€19.90 (2013:€18.30; 2012:€15.30). The following analysis shows the number of outstanding share options with exercise prices lower/higher than the year-end share price: | ||||||||||||
Number of options with exercise prices lower than year-end price: | ||||||||||||
Exercisable | 1,248,698 | 506,581 | 1,677,365 | |||||||||
Not exercisable | 8,789,200 | 13,788,399 | 5,382,296 | |||||||||
10,037,898 | 14,294,980 | 7,059,661 | ||||||||||
Number of options with exercise prices higher than year-end price: | ||||||||||||
Exercisable | - | 1,608,191 | 1,687,083 | |||||||||
Not exercisable | 5,443,293 | 5,895,716 | 14,549,211 | |||||||||
5,443,293 | 7,503,907 | 16,236,294 | ||||||||||
Total options outstanding | 15,481,191 | 21,798,887 | 23,295,955 |
The Group measures the fair value of options granted using the trinomial model (a lattice option-pricing model in accordance with IFRS 2Share-based Payment). Due to the immateriality of the share option expense in the current and prior years, detailed fair value disclosures have not been included.
2014 Performance Share Plan
The general terms and conditions of the 2014 Performance Share Plan were set out in a circular issued to shareholders prior to the Annual General Meeting held in 2014, a copy of which is available on www.crh.com.
The structure of the 2014 Performance Share Plan is set out in the Directors’ Remuneration Report on page 112.84. An expense of€556 million was recognised in 2014.2017 (2016:€37 million; 2015:€19 million).
Details of awards granted under the 2014 Performance Share Plan
Period to | Number of Shares | |||||||||||||||
Share price | earliest | |||||||||||||||
at date | release | Initial | Net | |||||||||||||
of award | date | award | outstanding | |||||||||||||
Granted in 2014 | €20.49 | 3 years | 2,283,960 | 2,270,340 |
Number of shares | ||||||||||||||
Share price at | Period to earliest | Initial | Net outstanding at | |||||||||||
Granted in 2017 | €33.21 | 3 years | 3,342,900 | 3,156,995 | ||||||||||
Granted in 2016 | €24.87 | 3 years | 3,879,901 | 3,437,098 | ||||||||||
Granted in 2015 | €24.84 | 3 years | 2,989,371 | 2,644,593 |
75%
* | Numbers represent the initial awards including those granted to employees of Allied Building Products. The Remuneration Committee has determined that dividend equivalents will accrue on awards under the 2014 Performance Share Plan. Subject to satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares on vesting. |
50% of vestingeach award made in 2017 and 2016 is subject to Total Shareholder Return (TSR) performancea TSR measure, with 25% being measured against a tailored sector peers, whilepeer group and 25% against the remaining 25%FTSEAll-World Construction & Materials index. The other 50% of vestingeach award made in 2017 and 2016 is subject to a cumulative cash flow target. A small number ofmetric. The awards made in 2015 are subject only to a three year service period (i.e. no performance conditions).TSR (75% of each award) and cumulative cash flow (25% of each award) metrics. Further details are set out on page 84 in the Directors’ Remuneration Report.
7. Share-based Payment Expense|continued
The fair valuevalues assigned to the portion of awards which are subject to TSR performance wasagainst peers and the index were€10.88.17.43 and€14.99 respectively (2016:€11.94 and€10.52 respectively; 2015:€13.99 subject to TSR performance against peers only). The fair value of these awards was calculated using a TSR pricing model taking account of peer group TSR, volatilities and correlations together with the following assumptions:
Risk-free interest rate (%) Expected volatility (%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
The expected volatility was determined using a historical sample of 37 month-enddaily CRH share prices.
The fair value of (i) the portion of awards subject to cash flow performance and (ii) the awards with no performance conditions (which are subject to a three yearone or three-year service period) was€20.49.33.21 (2016:€24.87; 2015:€24.84). The fair value was calculated using the closing CRH share price at the date the award was granted. Awards vest only if all performance and service conditions are met. No expense is recognised for awards that do not ultimately vest. At the balance sheet date the estimate of the level of vesting is reviewed and any necessary adjustment to the share-based payment expense is recognised in the Consolidated Income Statement.
2006 Performance Share Plan
The expense of€8 million (2013:€13 million; 2012:€14 million) reported in the Consolidated Income Statement has been arrived at through applying a Monte Carlo simulation technique to model the combination of market-based and non-market-based performance conditions in the Plan.
Details of awards granted under the 2006 Performance Share Plan
Period to | Number of Shares | |||||||||||||||||||
Share price | earliest | |||||||||||||||||||
at date | release | Initial | Net | Fair | ||||||||||||||||
of award | date | award | outstanding | value | ||||||||||||||||
Granted in 2011 | €16.52 | 3 years | 1,684,250 | - | €9.72 | |||||||||||||||
Granted in 2012 | €15.63 | 3 years | 2,079,000 | 1,849,000 | €7.77 | |||||||||||||||
Granted in 2013 | €16.69 | 3 years | 1,195,500 | 1,040,500 | €8.54 |
In February 2014, 742,604 of the shares awarded under the Performance Share Plan in 2011 vested and accordingly were released to the participants of the scheme. The remaining awards granted in 2011 lapsed.
The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer group TSR, volatilities and correlations, together with the following assumptions:
2013 | 2012 | |||||||
Risk-free interest rate (%) | 0.10 | 0.33 | ||||||
Expected volatility (%) | 31.3 | 35.4 |
2013 Restricted Share Plan
Due to the immateriality of the Restricted Share Plan expense and the level of awards outstanding in this plan at 31 December 2014 and 31 December 2013, detailed financial disclosures have not been provided in relation to this share-based payment arrangement.
CRH Annual Report and Form 20-F|2017 |
Share Option Schemes
The 2010 Share Option Scheme was replaced in 2014 by the 2014 Performance Share Plan, and accordingly no options have been granted since 2013.
Details of movement and options outstanding under Share Option Schemes (excluding Savings-related Share Option Schemes)
Weighted average exercise price | Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | Number of options | |||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||
Outstanding at beginning of year | €21.51 | 2,997,495 | €21.14 | 8,620,690 | €19.58 | 15,481,191 | ||||||||||||||||||||||
Exercised (i) | €24.85 | (1,462,863) | €22.04 | (2,102,332) | €19.35 | (2,544,141) | ||||||||||||||||||||||
Lapsed | €24.14 | (92,853) | €20.27 | (3,520,863) | €16.64 | (4,316,360) | ||||||||||||||||||||||
Outstanding at end of year (ii) | €17.96 | 1,441,779 | €21.51 | 2,997,495 | €21.14 | 8,620,690 | ||||||||||||||||||||||
Exercisable at end of year | €17.96 | 1,441,779 | €21.51 | 2,997,495 | €24.18 | 5,335,290 |
(i) | The weighted average share price at the date of exercise of these options was€32.24 (2016:€29.70; 2015:€25.51). |
(ii) | All options granted have a life of ten years. |
2017 | 2016 | 2015 | ||||||||||
Weighted average remaining contractual life for the share options outstanding at 31 December (years) | 2.53 | 2.46 | 3.86 | |||||||||
euro-denominated options outstanding at end of year (number) | 1,436,115 | 2,991,831 | 8,604,776 | |||||||||
Range of exercise prices (€) | 16.19-21.52 | 16.19-29.86 | 16.19-29.86 | |||||||||
Pound Sterling-denominated options outstanding at end of year (number) | 5,664 | 5,664 | 15,914 | |||||||||
Range of exercise prices (Stg£) | 15.30-17.19 | 15.30-17.19 | 13.64-18.02 |
2010 Savings-related Share Option Schemes
The Group operates Savings-related Share Option Schemes. Participants may save up to€500/Stg£500 per month from their net salaries for a fixed term of three or five years and at the end of the savings period they have the option to buy CRH shares at a discount of up to 15% of the market price on the date of invitation of each savings contract.
Details of options granted under the Savings-related Share Option Schemes
Weighted average exercise price | Number of options | Weighted average exercise price | Number of options | Weighted average exercise price | Number of options | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||
Outstanding at beginning of year | €18.63/Stg£15.92 | 1,402,174 | €16.96/Stg£14.27 | 593,177 | €14.84/Stg£12.80 | 894,548 | ||||||||||||||||||||||||||
Exercised (i) | €15.73/Stg£14.27 | (126,472) | €13.66/Stg£11.95 | (121,242) | €13.42/Stg£12.07 | (331,925) | ||||||||||||||||||||||||||
Lapsed | €21.42/Stg£18.22 | (123,455) | €17.55/Stg£15.68 | (81,628) | €13.52/Stg£13.63 | (187,892) | ||||||||||||||||||||||||||
Granted (ii) | €27.86/Stg£24.51 | 404,052 | €20.83/Stg£16.16 | 1,011,867 | €21.12/Stg£15.54 | 218,446 | ||||||||||||||||||||||||||
Outstanding at end of year | €21.50/Stg£18.05 | 1,556,299 | €18.63/Stg£15.92 | 1,402,174 | €16.96/Stg£14.27 | 593,177 | ||||||||||||||||||||||||||
Exercisable at end of year | €15.89/n/a | 15,890 | €13.45/Stg£12.22 | 23,897 | €13.72/n/a | 15,165 |
(i) | The weighted average share price at the date of exercise of these options was€31.14 (2016:€27.90; 2015:€25.77). |
(ii) | Pursuant to the 2010 Savings-related Share Option Schemes operated by the Group, employees were granted options over 404,052 of CRH plc’s Ordinary Shares in March 2017 (2016: 1,011,867 share options in March 2016; 2015: 218,446 share options in March 2015). This figure comprises options over 304,492 (2016: 692,334; 2015: 152,312) shares and 99,560 (2016: 319,533; 2015: 66,134) shares which are normally exercisable within a period of six months after the third or the fifth anniversary of the contract, whichever is applicable, and are not subject to specified EPS growth targets being achieved. The exercise price at which the options are granted under the scheme represents a discount of 15% to the market price on the date of invitation of each savings contract. |
145 |
CRH Annual Report and Form 20-F|2017 |
8. Share-based Payment Expense - continued
Continuing Operations
2017 | 2016 | 2015 | ||||||||||
Weighted average remaining contractual life for the share options outstanding at 31 December (years) | 1.90 | 2.41 | 1.96 | |||||||||
euro-denominated options outstanding at end of year (number) | 304,963 | 320,362 | 321,059 | |||||||||
Range of exercise prices (€) | 13.64-27.86 | 12.82-21.12 | 12.82-21.12 | |||||||||
Pound Sterling-denominated options outstanding at end of year (number) | 1,251,336 | 1,081,812 | 272,118 | |||||||||
Range of exercise prices (Stg£) | 12.22-24.51 | 11.55-16.16 | 11.19-15.54 |
The weighted fair values assigned to options issued under the Savings-related Share Option Schemes, which were computed in accordance with the trinomial valuation methodology, were as follows:
3-year | 5-year | |||||
Granted in 2017 | €5.97 | € | 6.49 | |||
Granted in 2016 | €5.01 | €5.57 | ||||
Granted in 2015 | €4.59 | € | 6.08 |
The fair value of these options were determined using the following assumptions:
2017 | 2016 | 2015 | ||||||||||||||||||||||||||
3-year | 5-year | 3-year | 5-year | 3-year | 5-year | |||||||||||||||||||||||
Weighted average exercise price (€) | 27.86 | 27.86 | 20.83 | 20.83 | 21.12 | 21.12 | ||||||||||||||||||||||
Risk-free interest rate (%) | (0.72) | (0.45) | (0.48) | (0.33) | (0.22) | (0.09) | ||||||||||||||||||||||
Expected dividend payments over the expected life (€) | 2.07 | 3.55 | 1.95 | 3.32 | 1.91 | 3.25 | ||||||||||||||||||||||
Expected volatility (%) | 20.9 | 20.6 | 21.8 | 22.9 | 21.6 | 27.8 | ||||||||||||||||||||||
Expected life in years | 3 | 5 | 3 | 5 | 3 | 5 |
The expected volatility was determined using a historical sample of 37month-end CRH share prices in respect of the three-year savings-related share options and 61month-end share prices in respect of the five-year savings-related share options. The expected lives of the options are based on historical data and are therefore not necessarily indicative of exercise patterns that may materialise.
Other than the assumptions listed above, no other features of options grants were factored into the determination of fair value.
The terms of the options issued under the savings-related share option schemes do not contain any market conditions within the meaning of IFRS 2Share-based Payment.
146 |
CRH Annual Report and Form 20-F|2017 |
9. Finance Costs and Finance Income
2014 | 2013 | 2012 | ||||||||||
€m | €m | €m | ||||||||||
Finance costs | ||||||||||||
Interest payable on borrowings | 308 | 323 | 327 | |||||||||
Net income on interest rate and currency swaps | (42 | ) | (55 | ) | (47 | ) | ||||||
Mark-to-market of derivatives and related fixed rate debt: | ||||||||||||
- interest rate swaps (i) | (15 | ) | 68 | 22 | ||||||||
- currency swaps and forward contracts | - | 1 | 3 | |||||||||
- fixed rate debt (i) | 8 | (79 | ) | (34 | ) | |||||||
Net (gain)/loss on interest rate swaps not designated as hedges | (5 | ) | 4 | - | ||||||||
Net finance cost on gross debt including related derivatives | 254 | 262 | 271 | |||||||||
Finance income | ||||||||||||
Interest receivable on loans to joint ventures and associates | (3 | ) | (3 | ) | (2 | ) | ||||||
Interest receivable on cash and cash equivalents and other | (5 | ) | (10 | ) | (13 | ) | ||||||
Finance income | (8 | ) | (13 | ) | (15 | ) | ||||||
Finance costs less income | 246 | 249 | 256 | |||||||||
Other financial expense | ||||||||||||
Unwinding of discount element of provisions for liabilities (note 25) | 16 | 15 | 15 | |||||||||
Unwinding of discount applicable to deferred and contingent acquisition consideration (note 18) | 12 | 11 | 9 | |||||||||
Pension-related finance cost (net) (note 27) | 14 | 22 | 25 | |||||||||
Total | 42 | 48 | 49 |
(i) The Group uses interest rate swaps to convert fixed rate debt to floating rate. Fixed rate debt, which has been converted to floating rate through the use of interest rate swaps, is stated in the Consolidated Balance Sheet at adjusted value to reflect movements in underlying fixed rates. The movement on this adjustment, together with the offsetting movement in the fair value of the related interest rate swaps, is included in finance costs in each reporting period. Continuing Operations
2017 €m | 2016 €m | 2015 €m | ||||||||||
Finance costs | ||||||||||||
Interest payable on borrowings | 300 | 337 | 334 | |||||||||
Net loss/(income) on interest rate and currency swaps | 2 | (10) | (32) | |||||||||
Mark-to-market of derivatives and related fixed rate debt: | ||||||||||||
- interest rate swaps (i) | 16 | 14 | 12 | |||||||||
- currency swaps and forward contracts | - | (3) | 4 | |||||||||
- fixed rate debt (i) | (23) | (20) | (22) | |||||||||
Net loss on interest rate swaps not designated as hedges | 6 | 7 | 7 | |||||||||
Net finance cost on gross debt including related derivatives | 301 | 325 | 303 | |||||||||
Finance income | ||||||||||||
Interest receivable on loans to joint ventures and associates | (5) | (4) | (4) | |||||||||
Interest receivable on cash and cash equivalents and other | (7) | (4) | (4) | |||||||||
Finance income | (12) | (8) | (8) | |||||||||
Finance costs less income | 289 | 317 | 295 | |||||||||
Other financial expense | ||||||||||||
Premium paid on early debt redemption | 18 | - | 38 | |||||||||
Unwinding of discount element of provisions for liabilities (note 26) | 24 | 30 | 19 | |||||||||
Unwinding of discount applicable to deferred and contingent acquisition consideration (note 19) | 7 | 24 | 20 | |||||||||
Pension-related finance cost (net) (note 28) | 11 | 12 | 17 | |||||||||
Total | 60 | 66 | 94 | |||||||||
Total net finance costs | 349 | 383 | 389 |
9.
(i) | The Group uses interest rate swaps to convert fixed rate debt to floating rate. Fixed rate debt, which has been converted to floating rate through the use of interest rate swaps, is stated in the Consolidated Balance Sheet at adjusted value to reflect movements in underlying fixed rates. The movement on this adjustment, together with the offsetting movement in the fair value of the related interest rate swaps, is included in finance costs in each reporting period. |
147 |
CRH Annual Report and Form 20-F|2017 |
10. Share of Equity Accounted Investments’ Profit/(Loss)Profit
The Group’s share of joint ventures’ and associates’ resultprofit after tax is equity accounted and is presented as a single-linesingle line item in the Consolidated Income Statement; it is analysed as follows between the principal Consolidated Income Statement captions:
Joint Ventures | Associates | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 €m | 2013 €m | 2012 €m | 2014 €m | 2013 €m | 2012 €m | 2014 €m | 2013 €m | 2012 €m | Joint Ventures | Associates | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group share of: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 488 | 469 | 575 | 953 | 961 | 978 | 1,441 | 1,430 | 1,553 | 582 | 480 | 496 | 816 | 769 | 961 | 1,398 | 1,249 | 1,457 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 62 | 60 | 77 | 106 | 109 | 118 | 168 | 169 | 195 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EBITDA (as defined)* | 77 | 85 | 79 | 77 | 52 | 84 | 154 | 137 | 163 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortisation | (27 | ) | (27 | ) | (37 | ) | (45 | ) | (39 | ) | (50 | ) | (72 | ) | (66 | ) | (87 | ) | (28) | (26) | (27) | (39) | (40) | (55) | (67) | (66) | (82) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment (i) | - | (54 | ) | - | - | (51 | ) | (146 | ) | - | (105 | ) | (146 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit/(loss) | 35 | (21 | ) | 40 | 61 | 19 | (78 | ) | 96 | (2 | ) | (38 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating profit | 49 | 59 | 52 | 38 | 12 | 29 | 87 | 71 | 81 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance costs (net) | (6 | ) | (2 | ) | (2 | ) | (21 | ) | (22 | ) | (26 | ) | (27 | ) | (24 | ) | (28 | ) | (1) | (4) | (6) | (10) | (15) | (17) | (11) | (19) | (23) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) before tax | 29 | (23 | ) | 38 | 40 | (3 | ) | (104 | ) | 69 | (26 | ) | (66 | ) | 48 | 55 | 46 | 28 | (3) | 12 | 76 | 52 | 58 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense | (3 | ) | (5 | ) | (10 | ) | (11 | ) | (13 | ) | (8 | ) | (14 | ) | (18 | ) | (18 | ) | (5) | (4) | (5) | (6) | (6) | (9) | (11) | (10) | (14) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Profit/(loss) after tax | 26 | (28 | ) | 28 | 29 | (16 | ) | (112 | ) | 55 | (44 | ) | (84 | ) | 43 | 51 | 41 | 22 | (9) | 3 | 65 | 42 | 44 |
An analysis of the resultprofit after tax by operating segment is presented in note 1. The aggregated balance sheet data (analysed between current andnon-current assets and liabilities) in respect of the Group’s investment in joint ventures and associates is presented in note 15.
(i) See section (b) of note 14 for details of the 2013 impairment charge.16.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges and profit on disposals. |
11. Income Tax Expense
Continuing Operations
Recognised within the Consolidated Income Statement | 2017 €m | 2016 €m | 2015 €m | |||||||||
(a) Current tax | ||||||||||||
Republic of Ireland | 9 | 5 | - | |||||||||
Overseas | 312 | 443 | 320 | |||||||||
Total current tax expense | 321 | 448 | 320 | |||||||||
(b) Deferred tax | ||||||||||||
Origination and reversal of temporary differences: | ||||||||||||
Retirement benefit obligations | 16 | 8 | 7 | |||||||||
Share-based payment expense | (4) | (11) | (8) | |||||||||
Derivative financial instruments | 2 | 1 | 1 | |||||||||
Other items (including deferred tax credit associated with the “Tax Cuts and Jobs Act” and other timing differences) | (280) | (15) | (44) | |||||||||
Total deferred tax income | (266) | (17) | (44) | |||||||||
Income tax reported in the Consolidated Income Statement | 55 | 431 | 276 |
148 |
CRH Annual Report and Form 20-F|2017 |
10. Income Tax Expense
Recognised within the Consolidated Income Statement | 2014 €m | 2013 €m | 2012 €m | |||||||||
(a) Current tax | ||||||||||||
Republic of Ireland | - | (1 | ) | (4 | ) | |||||||
Overseas | 141 | 77 | 103 | |||||||||
Total current tax expense | 141 | 76 | 99 | |||||||||
(b) Deferred tax | ||||||||||||
Origination and reversal of temporary differences: | ||||||||||||
Retirement benefit obligations | 7 | 16 | 20 | |||||||||
Share-based payment expense | - | (1 | ) | 1 | ||||||||
Derivative financial instruments | 6 | 4 | (9 | ) | ||||||||
Other items | 23 | (15 | ) | (5 | ) | |||||||
Total deferred tax expense | 36 | 4 | 7 | |||||||||
Income tax expense reported in the Consolidated Income Statement | 177 | 80 | 106 | |||||||||
Recognised within equity | ||||||||||||
(a) Within the Consolidated Statement of Comprehensive Income: | ||||||||||||
Deferred tax - retirement benefit obligations | 69 | (43 | ) | 23 | ||||||||
Income tax recognised directly within equity | 69 | (43 | ) | 23 | ||||||||
Reconciliation of applicable tax rate to effective tax rate | ||||||||||||
Profit/(loss) before tax (€m) | 761 | (215 | ) | 646 | ||||||||
Tax charge expressed as a percentage of profit/(loss) before tax (effective tax rate): | ||||||||||||
- current tax expense only | 18.5% | (35.3% | ) | 15.3% | ||||||||
- total income tax expense (current and deferred) | 23.2% | (37.2% | ) | 16.4% | ||||||||
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of the Group: | ||||||||||||
% of profit/(loss) before tax | ||||||||||||
Irish corporation tax rate | 12.5 | 12.5 | 12.5 | |||||||||
Higher tax rates on overseas earnings | 9.6 | 17.8 | 3.1 | |||||||||
Other items (primarily comprising items not chargeable to tax/expenses not deductible for tax): | ||||||||||||
- arising from 2013 impairment | - | (70.2 | ) | - | ||||||||
- other items | 1.1 | 2.7 | 0.8 | |||||||||
Total effective tax rate | 23.2 | (37.2 | ) | 16.4 |
Recognised outside the Consolidated Income Statement | 2017 €m | 2016 €m | 2015 €m | |||||||||
(a) Within the Consolidated Statement of Comprehensive Income: | ||||||||||||
Deferred tax - retirement benefit obligations | (33) | 3 | (30) | |||||||||
(b) Within the Consolidated Statement of Changes in Equity: | ||||||||||||
Current tax | ||||||||||||
Current tax - share option exercises | 2 | - | - | |||||||||
Deferred tax | ||||||||||||
Deferred tax - share-based payment expense | (7) | 12 | 5 | |||||||||
(5) | 12 | 5 | ||||||||||
Income tax recognised outside the Consolidated Income Statement | (38) | 15 | (25) | |||||||||
Reconciliation of applicable tax rate to effective tax rate | ||||||||||||
Profit before tax (€m) | 1,867 | 1,620 | 920 | |||||||||
Tax charge expressed as a percentage of profit before tax (effective tax rate): | ||||||||||||
- current tax expense only | 17.2% | 27.7% | 34.8% | |||||||||
- total income tax expense (current and deferred) | 2.9% | 26.6% | 30.0% |
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of the Group:
% of profit before tax | ||||||||||||
Irish corporation tax rate | 12.5 | 12.5 | 12.5 | |||||||||
Higher tax rates on overseas earnings | 15.9 | 15.1 | 12.3 | |||||||||
Deferred tax credit relating to the enactment of the “Tax Cuts and Jobs Act” | (23.6) | - | - | |||||||||
Other items (primarily comprising items not chargeable to tax/expenses not deductible for tax) | (1.9) | (1.0) | 5.2 | |||||||||
Total effective tax rate | 2.9 | 26.6 | 30.0 |
Other disclosures
Effective tax rate
The 2017 effective tax rate is 2.9%. The 2017 reported tax charge includes a non-cash deferred tax credit of€440 million related to the enactment of the “Tax Cuts and Jobs Act” in the US during the year. The 2017 effective tax rate excluding the impact of this exceptional deferred tax credit is 26.5%.
The tax charge associated with discontinued operations during 2017 is recognised separately in “Profit after tax for the financial year from discontinued operations”. See note 2 for further details.
The 2015 Consolidated Income Statement includedone-off charges related to the LH Assets transaction of€197 million which were substantiallynon-deductible for income tax purposes. The 2015 effective tax rate excluding the impact of these costs was 25.8%.
Changes in tax rates
The total tax charge in future periods will be affected by any changes to the tax rates in force in the countries in which the Group operates.
Excess of capital allowances over depreciation
The current tax charge will also be impacted by changes in the excess of tax depreciation (capital allowances) over accounting depreciation. Based on current capital investment plans, the Group expects to continue to be in a position to claim capital allowances in excess of depreciation in future years.
Investments in subsidiaries
Given that participationmanagement’s intention not to unwind temporary differences in respect of its investment in subsidiaries or tax exemptions and tax credits would bebeing available in the context of the Group’s investments in subsidiaries in the majority of the jurisdictions in which the Group operates, the aggregate amount of temporary differences in respect of which deferred tax liabilities on temporary differences which have not been recognised would be immaterial.
Proposed dividends
There are no income tax consequences for the Company in respect of dividends proposed prior to issuance of the Consolidated Financial Statements and for which a liability has not been recognised.
149 |
CRH Annual Report and Form 20-F|2017 |
11.12. Dividends
The dividends paid and proposed in respect of each class of share capital are as follows:
2014 €m | 2013 €m | 2012 €m | ||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||
Dividends to shareholders | ||||||||||||||||||||||||
Preference | ||||||||||||||||||||||||
5% Cumulative Preference Shares€3,175 (2013:€3,175; 2012:€3,175) | - | - | - | |||||||||||||||||||||
7% ‘A’ Cumulative Preference Shares€77,521 (2013:€77,521; 2012:€77,521) | - | - | - | |||||||||||||||||||||
5% Cumulative Preference Shares€3,175 (2016:€3,175; 2015:€3,175) | - | - | - | |||||||||||||||||||||
7% ‘A’ Cumulative Preference Shares€77,521 (2016:€77,521; 2015:€77,521) | - | - | - | |||||||||||||||||||||
Equity | ||||||||||||||||||||||||
Final - paid 44.00c per Ordinary Share (2013: 44.00c; 2012: 44.00c) | 323 | 320 | 317 | |||||||||||||||||||||
Interim - paid 18.50c per Ordinary Share (2013: 18.50c; 2012: 18.50c) | 137 | 135 | 133 | |||||||||||||||||||||
Final - paid 46.20c per Ordinary Share (2016: 44.00c; 2015: 44.00c) | 386 | 363 | 359 | |||||||||||||||||||||
Interim - paid 19.20c per Ordinary Share (2016: 18.80c; 2015: 18.50c) | 160 | 156 | 152 | |||||||||||||||||||||
Total | 460 | 455 | 450 | 546 | 519 | 511 | ||||||||||||||||||
Reconciliation to Consolidated Statement of Cash Flows | ||||||||||||||||||||||||
Dividends to shareholders | 546 | 519 | 511 | |||||||||||||||||||||
Less: issue of scrip shares in lieu of cash dividends (note 30) | (77) | (167) | (132) | |||||||||||||||||||||
Dividends paid to equity holders of the Company | 469 | 352 | 379 | |||||||||||||||||||||
Dividends paid by subsidiaries tonon-controlling interests | 8 | 8 | 4 | |||||||||||||||||||||
Total dividends paid | 477 | 360 | 383 | |||||||||||||||||||||
Dividends proposed (memorandum disclosure) | ||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||
Final 2014 - proposed 44.00c per Ordinary Share (2013: 44.00c; 2012: 44.00c) | 359 | 323 | 320 | |||||||||||||||||||||
Reconciliation to Consolidated Statement of Cash Flows | ||||||||||||||||||||||||
Dividends to shareholders | 460 | 455 | 450 | |||||||||||||||||||||
Less: issue of scrip shares in lieu of cash dividends (note 28) | (107 | ) | (88 | ) | (88 | ) | ||||||||||||||||||
Dividends paid to equity holders of the Company | 353 | 367 | 362 | |||||||||||||||||||||
Dividends paid by subsidiaries to non-controlling interests | 4 | 1 | 4 | |||||||||||||||||||||
Total dividends paid | 357 | 368 | 366 | |||||||||||||||||||||
Final 2017 - proposed 48.80c per Ordinary Share (2016: 46.20c; 2015: 44.00c) | 409 | 385 | 362 |
150 |
CRH Annual Report and Form 20-F|2017 |
12.13. Earnings per Ordinary Share
The computation of basic and diluted earnings per Ordinary Share is set out below:
2014 €m | 2013 €m | 2012 €m | ||||||||||
Numerator computations | ||||||||||||
Group profit/(loss) for the financial year | 584 | (295 | ) | 540 | ||||||||
Profit attributable to non-controlling interests | (2 | ) | (1 | ) | (2 | ) | ||||||
Profit/(loss) attributable to equity holders of the Company | 582 | (296 | ) | 538 | ||||||||
Preference dividends | - | - | - | |||||||||
Profit/(loss) attributable to ordinary equity holders of the Company - numerator for basic/diluted earnings per Ordinary Share | 582 | (296 | ) | 538 | ||||||||
Denominator computations | ||||||||||||
Denominator for basic earnings per Ordinary Share | ||||||||||||
Weighted average number of Ordinary Shares (millions) outstanding for the year (i) | 737.6 | 729.2 | 721.9 | |||||||||
Effect of dilutive potential Ordinary Shares (employee share options) (millions) (i) and (ii) | 0.7 | - | 0.3 | |||||||||
Denominator for diluted earnings per Ordinary Share | 738.3 | 729.2 | 722.2 | |||||||||
Basic earnings/(loss) per Ordinary Share | 78.9c | (40.6c | ) | 74.6c | ||||||||
Diluted earnings/(loss) per Ordinary Share | 78.8c | (40.6c | ) | 74.5c |
2017 €m | 2016 €m | 2015 €m | ||||||||||
Numerator computations | ||||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 | |||||||||
Profit attributable tonon-controlling interests | (24) | (27) | (5) | |||||||||
Profit attributable to equity holders of the Company | 1,895 | 1,243 | 724 | |||||||||
Preference dividends | - | - | - | |||||||||
Profit attributable to ordinary equity holders of the Company - numerator for basic/diluted earnings per Ordinary Share | 1,895 | 1,243 | 724 | |||||||||
Profit after tax for the financial year from discontinued operations | 107 | 81 | 85 | |||||||||
Profit attributable to ordinary equity holders of the Company - numerator for basic/diluted earnings per Ordinary Share from continuing operations | 1,788 | 1,162 | 639 | |||||||||
Denominator computations | ||||||||||||
Weighted average number of Ordinary Shares (millions) outstanding for the year (i) | 835.6 | 827.8 | 812.3 | |||||||||
Effect of dilutive potential Ordinary Shares (employee share options) (millions) (i) and (ii) | 5.2 | 6.1 | 3.6 | |||||||||
Denominator for diluted earnings per Ordinary Share | 840.8 | 833.9 | 815.9 | |||||||||
Basic earnings per Ordinary Share | 226.8c | 150.2c | 89.1c | |||||||||
Diluted earnings per Ordinary Share | 225.4c | 149.1c | 88.7c | |||||||||
Basic earnings per Ordinary Share from continuing operations | 214.0c | 140.4c | 78.7c | |||||||||
Diluted earnings per Ordinary Share from continuing operations | 212.7c | 139.4c | 78.3c |
(i) | The weighted average number of Ordinary Shares included in the computation of basic and diluted earnings per Ordinary Share has been adjusted to exclude shares held by the Employee Benefit Trust and Ordinary Shares repurchased and held by the Company (CRH plc) as Treasury Shares given that these shares do not rank for dividend. The number of Ordinary Shares so held at the balance sheet date is detailed in note |
(ii) | Contingently issuable Ordinary Shares (totalling |
Subsequent to year end the Group completed a share placing. Further details are set out in note 33.
151 |
CRH Annual Report and Form 20-F|2017 |
13.14. Property, Plant and Equipment
Land and buildings (i) €m | Plant and machinery €m | Assets in course of construction €m | Total €m | Land and €m | Plant and machinery €m | Assets in course of construction €m | Total €m | |||||||||||||||||||||||||
At 31 December 2014 | ||||||||||||||||||||||||||||||||
At 31 December 2017 | ||||||||||||||||||||||||||||||||
Cost/deemed cost | 6,068 | 8,940 | 220 | 15,228 | 8,472 | 13,157 | 551 | 22,180 | ||||||||||||||||||||||||
Accumulated depreciation (and impairment charges) | (1,892 | ) | (5,914 | ) | - | (7,806 | ) | (2,248) | (6,838) | - | (9,086) | |||||||||||||||||||||
Net carrying amount | 4,176 | 3,026 | 220 | 7,422 | 6,224 | 6,319 | 551 | 13,094 | ||||||||||||||||||||||||
At 1 January 2014, net carrying amount | 4,096 | 3,214 | 229 | 7,539 | ||||||||||||||||||||||||||||
At 1 January 2017, net carrying amount | 6,157 | 6,035 | 498 | 12,690 | ||||||||||||||||||||||||||||
Translation adjustment | 329 | 64 | 1 | 394 | (483) | (460) | (33) | (976) | ||||||||||||||||||||||||
Reclassifications | 66 | 34 | (100 | ) | - | 60 | 348 | (408) | - | |||||||||||||||||||||||
Additions at cost | 45 | 264 | 126 | 435 | 87 | 481 | 476 | 1,044 | ||||||||||||||||||||||||
Arising on acquisition (note 30) | 20 | 71 | - | 91 | ||||||||||||||||||||||||||||
Arising on acquisition (note 31) | 703 | 812 | 21 | 1,536 | ||||||||||||||||||||||||||||
Reclassified as held for sale | (22) | (79) | (3) | (104) | ||||||||||||||||||||||||||||
Disposals at net carrying amount | (68 | ) | (27 | ) | - | (95 | ) | (53) | (37) | - | (90) | |||||||||||||||||||||
Reclassified as held for sale | (173 | ) | (88 | ) | (1 | ) | (262 | ) | ||||||||||||||||||||||||
Depreciation charge for year | (132 | ) | (499 | ) | - | (631 | ) | |||||||||||||||||||||||||
Impairment charge for year (ii) | (7 | ) | (7 | ) | (35 | ) | (49 | ) | ||||||||||||||||||||||||
At 31 December 2014, net carrying amount | 4,176 | 3,026 | 220 | 7,422 | ||||||||||||||||||||||||||||
Depreciation charge for year (ii) | (225) | (781) | - | (1,006) | ||||||||||||||||||||||||||||
At 31 December 2017, net carrying amount | 6,224 | 6,319 | 551 | 13,094 | ||||||||||||||||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||||||||||||||
At 31 December 2013 | ||||||||||||||||||||||||||||||||
At 31 December 2016 | ||||||||||||||||||||||||||||||||
Cost/deemed cost | 5,912 | 8,847 | 229 | 14,988 | 8,438 | 13,182 | 498 | 22,118 | ||||||||||||||||||||||||
Accumulated depreciation (and impairment charges) | (1,816 | ) | (5,633 | ) | - | (7,449 | ) | (2,281) | (7,147) | - | (9,428) | |||||||||||||||||||||
Net carrying amount | 4,096 | 3,214 | 229 | 7,539 | 6,157 | 6,035 | 498 | 12,690 | ||||||||||||||||||||||||
At 1 January 2013, net carrying amount | 4,313 | 3,371 | 287 | 7,971 | ||||||||||||||||||||||||||||
At 1 January 2016, net carrying amount | 6,396 | 6,087 | 579 | 13,062 | ||||||||||||||||||||||||||||
Translation adjustment | (129 | ) | (114 | ) | (8 | ) | (251 | ) | 9 | (62) | (4) | (57) | ||||||||||||||||||||
Reclassifications | 7 | 144 | (151 | ) | - | 41 | 340 | (381) | - | |||||||||||||||||||||||
Transfer from trade and other receivables (note 20) | 8 | - | - | 8 | ||||||||||||||||||||||||||||
Additions at cost | 46 | 350 | 101 | 497 | 82 | 451 | 320 | 853 | ||||||||||||||||||||||||
Arising on acquisition (note 30) | 132 | 210 | - | 342 | ||||||||||||||||||||||||||||
Arising on acquisition (note 31) | (17) | 51 | (15) | 19 | ||||||||||||||||||||||||||||
Disposals at net carrying amount | (30 | ) | (44 | ) | - | (74 | ) | (129) | (56) | (1) | (186) | |||||||||||||||||||||
Depreciation charge for year | (132 | ) | (539 | ) | - | (671 | ) | |||||||||||||||||||||||||
Impairment charge for year (iii) | (111 | ) | (164 | ) | - | (275 | ) | |||||||||||||||||||||||||
At 31 December 2013, net carrying amount | 4,096 | 3,214 | 229 | 7,539 | ||||||||||||||||||||||||||||
Depreciation charge for year (ii) | (233) | (776) | - | (1,009) | ||||||||||||||||||||||||||||
At 31 December 2016, net carrying amount | 6,157 | 6,035 | 498 | 12,690 | ||||||||||||||||||||||||||||
At 1 January 2013 | ||||||||||||||||||||||||||||||||
At 1 January 2016 | ||||||||||||||||||||||||||||||||
Cost/deemed cost | 5,838 | 8,694 | 287 | 14,819 | 8,471 | 12,583 | 582 | 21,636 | ||||||||||||||||||||||||
Accumulated depreciation (and impairment charges) | (1,525 | ) | (5,323 | ) | - | (6,848 | ) | (2,075) | (6,496) | (3) | (8,574) | |||||||||||||||||||||
Net carrying amount | 4,313 | 3,371 | 287 | 7,971 | 6,396 | 6,087 | 579 | 13,062 |
(i) | The carrying value of mineral-bearing land included in the land and buildings category above amounted to€ |
(ii) | The |
|
Future purchase commitments for property, plant and equipment
Future purchase commitments for property, plant and equipment | 2017 €m | 2016 €m | ||
Contracted for but not provided in the financial statements | 346 | 309 | ||
Authorised by the Directors but not contracted for | 491 | 467 |
2014 €m | 2013 €m | |||||||
Contracted for but not provided in the financial statements | 211 | 155 | ||||||
Authorised by the Directors but not contracted for | 70 | 91 |
CRH Annual Report and Form 20-F|201714. Intangible Assets
Other intangible assets | ||||||||||||||||||||
Goodwill €m | Marketing- related €m | Customer- related (i) €m | Contract- based €m | Total €m | ||||||||||||||||
At 31 December 2014 | ||||||||||||||||||||
Cost/deemed cost | 4,362 | 52 | 448 | 37 | 4,899 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (344 | ) | (40 | ) | (322 | ) | (20 | ) | (726 | ) | ||||||||||
Net carrying amount | 4,018 | 12 | 126 | 17 | 4,173 | |||||||||||||||
At 1 January 2014, net carrying amount | 3,734 | 12 | 151 | 14 | 3,911 | |||||||||||||||
Translation adjustment | 279 | 3 | 6 | 1 | 289 | |||||||||||||||
Arising on acquisition (note 30) | 31 | 2 | 10 | 4 | 47 | |||||||||||||||
Disposals | (10 | ) | (1 | ) | (2 | ) | - | (13 | ) | |||||||||||
Reclassified as held for sale | (16 | ) | - | (1 | ) | - | (17 | ) | ||||||||||||
Amortisation charge for year | - | (4 | ) | (38 | ) | (2 | ) | (44 | ) | |||||||||||
At 31 December 2014, net carrying amount | 4,018 | 12 | 126 | 17 | 4,173 | |||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||
At 31 December 2013 | ||||||||||||||||||||
Cost/deemed cost | 4,158 | 48 | 420 | 31 | 4,657 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (424 | ) | (36 | ) | (269 | ) | (17 | ) | (746 | ) | ||||||||||
Net carrying amount | 3,734 | 12 | 151 | 14 | 3,911 | |||||||||||||||
At 1 January 2013, net carrying amount | 4,067 | 17 | 177 | 6 | 4,267 | |||||||||||||||
Translation adjustment | (117 | ) | (1 | ) | (2 | ) | (1 | ) | (121 | ) | ||||||||||
Arising on acquisition (note 30) | 169 | 1 | 20 | 18 | 208 | |||||||||||||||
Disposals | (12 | ) | - | - | (2 | ) | (14 | ) | ||||||||||||
Amortisation charge for year | - | (5 | ) | (42 | ) | (7 | ) | (54 | ) | |||||||||||
Impairment charge for year | (373 | ) | - | (2 | ) | - | (375 | ) | ||||||||||||
At 31 December 2013, net carrying amount | 3,734 | 12 | 151 | 14 | 3,911 | |||||||||||||||
At 1 January 2013 | ||||||||||||||||||||
Cost/deemed cost | 4,122 | 51 | 413 | 17 | 4,603 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (55 | ) | (34 | ) | (236 | ) | (11 | ) | (336 | ) | ||||||||||
Net carrying amount | 4,067 | 17 | 177 | 6 | 4,267 |
15. Intangible Assets
Other intangible assets | ||||||||||||||||||||
Goodwill €m | Marketing- related €m | Customer- related (i) €m | Contract- based €m | Total €m | ||||||||||||||||
At 31 December 2017 | ||||||||||||||||||||
Cost/deemed cost | 7,198 | 129 | 535 | 80 | 7,942 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (293) | (54) | (331) | (50) | (728) | |||||||||||||||
Net carrying amount | 6,905 | 75 | 204 | 30 | 7,214 | |||||||||||||||
At 1 January 2017, net carrying amount | 7,396 | 89 | 229 | 47 | 7,761 | |||||||||||||||
Translation Adjustment | (593) | (10) | (22) | (4) | (629) | |||||||||||||||
Arising on acquisition (note 31) | 487 | 4 | 51 | 1 | 543 | |||||||||||||||
Reclassified as held for sale | (363) | - | (8) | (1) | (372) | |||||||||||||||
Disposals | (22) | - | (1) | - | (23) | |||||||||||||||
Amortisation charge for year (ii) | - | (8) | (45) | (13) | (66) | |||||||||||||||
At 31 December 2017, net carrying amount | 6,905 | 75 | 204 | 30 | 7,214 | |||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||
At 31 December 2016 | ||||||||||||||||||||
Cost/deemed cost | 7,701 | 142 | 659 | 87 | 8,589 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (305) | (53) | (430) | (40) | (828) | |||||||||||||||
Net carrying amount | 7,396 | 89 | 229 | 47 | 7,761 | |||||||||||||||
At 1 January 2016, net carrying amount | 7,406 | 91 | 264 | 59 | 7,820 | |||||||||||||||
Translation adjustment | (2) | 2 | 6 | 1 | 7 | |||||||||||||||
Arising on acquisition (note 31) | 71 | 3 | 11 | - | 85 | |||||||||||||||
Disposals | (56) | - | (1) | - | (57) | |||||||||||||||
Amortisation charge for year (ii) | - | (7) | (51) | (13) | (71) | |||||||||||||||
Impairment charge for year | (23) | - | - | - | (23) | |||||||||||||||
At 31 December 2016, net carrying amount | 7,396 | 89 | 229 | 47 | 7,761 | |||||||||||||||
At 1 January 2016 | ||||||||||||||||||||
Cost/deemed cost | 7,699 | 137 | 639 | 85 | 8,560 | |||||||||||||||
Accumulated amortisation (and impairment charges) | (293) | (46) | (375) | (26) | (740) | |||||||||||||||
Net carrying amount | 7,406 | 91 | 264 | 59 | 7,820 |
(i) | The customer-related intangible assets relate predominantly tonon-contractual customer relationships. |
(ii) | The amortisation charge for the year includes€5 million (2016:€9 million; 2015:€11 million) relating to discontinued operations, which primarily relates tocustomer-related intangible assets. |
153 |
CRH Annual Report and Form 20-F|2017 |
(a)
15. Intangible Assets - continued
Annual goodwill testing
The net book value of goodwill capitalised under previous GAAP (Irish GAAP) as at the transition date to IFRS (1 January 2004) has been treated as deemed cost. Goodwill arising on acquisition since that date is capitalised at cost.
Cash-generating units
Goodwill acquired through business combination activity has been allocated to cash-generating units (CGUs) that are expected to benefit from synergies in that combination. The cash-generating unitsCGUs represent the lowest level within the Group at which the associated goodwill is monitored for internal management purposes, and are not larger than the operating segments determined in accordance with IFRS 8Operating Segments. A total of 20 (2013: 19) cash-generating units25 (2016: 25) CGUs have been identified and these are analysed between the six business segments in the Groupand Americas Distribution below. The increase in the number of CGUs in 2014 relates to organisational changes in our Europe segments. As a result, a number of entities have been added to the Benelux CGU in Europe Heavyside, two new CGUs have been added (Germany - Europe Heavyside and Europe Lightside) and the Europe Products CGU has been removed. All businesses within the various cash-generating unitsCGUs exhibit similar and/or consistent profit margin and asset intensity characteristics. Assets, liabilities, deferred tax and goodwill have been assigned to the CGUs on a reasonable and consistent basis.
Significant under-performance in any
Cash-generating units | Goodwill (€m) | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Europe Heavyside* | 14 | 14 | 1,770 | 1,679 | ||||||||||||||||
Europe Lightside | 1 | 1 | 365 | 365 | ||||||||||||||||
Europe Distribution | 1 | 1 | 671 | 665 | ||||||||||||||||
Europe | 16 | 16 | 2,806 | 2,709 | ||||||||||||||||
Americas Materials* | 6 | 6 | 2,082 | 2,077 | ||||||||||||||||
Americas Products | 1 | 1 | 1,555 | 1,671 | ||||||||||||||||
Americas Distribution | 1 | 1 | - | 411 | ||||||||||||||||
Americas | 8 | 8 | 3,637 | 4,159 | ||||||||||||||||
Asia | 1 | 1 | 462 | 528 | ||||||||||||||||
Total Group | 25 | 25 | 6,905 | 7,396 |
* Within the goodwill figures included above for the Europe Heavyside and Americas Materials segments is€339 million of CRH’s major cash-generating units may give risegoodwill unallocated to a material write-downCGU due to the completion of goodwill which would have a substantial impact on the Group’s income and equity.
Cash-generating units | Goodwill (€m) | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Europe Heavyside* | 8 | 7 | 650 | 697 | ||||||||||||||||
Europe Lightside* | 1 | 1 | 346 | 313 | ||||||||||||||||
Europe Distribution | 1 | 1 | 649 | 641 | ||||||||||||||||
Europe | 10 | 9 | 1,645 | 1,651 | ||||||||||||||||
Americas Materials | 7 | 7 | 1,313 | 1,151 | ||||||||||||||||
Americas Products | 2 | 2 | 703 | 618 | ||||||||||||||||
Americas Distribution | 1 | 1 | 357 | 314 | ||||||||||||||||
Americas | 10 | 10 | 2,373 | 2,083 | ||||||||||||||||
Total Group | 20 | 19 | 4,018 | 3,734 |
|
154 |
CRH Annual Report and Form 20-F|2017 |
14. Intangible Assets|continued
Impairment testing methodology and results
Goodwill is subject to impairment testing on an annual basis. The recoverable amount of each of the 2024 CGUs is determined based on avalue-in-use computation, using Level 3 inputs in accordance with the fair value hierarchy. The held for sale assets (Americas Distribution CGU) were considered separately on a fair value less costs to sell basis, given that a market price has been agreed.
The cash flow forecasts are primarily based on a five-year strategic plan document formally approved by senior management and the Board of Directors and specifically exclude the impact of future development activity. These cash flows are projected forward for an additional five years to determine the basis for an annuity-based terminal value, calculated on the same basis as the Group’s acquisition modelling methodology. As in prior years, the terminal value is based on a20-year annuity. The projected cash flows assume zero growth in real annuity, with the exception of certain long-lived cement assets, where an assumption of a30-year annuity has been used. Projected cash flows beyond the initial evaluation period.period have been extrapolated using real growth rates ranging from 0.5% to 2.0% in Europe, 1.3% to 1.4% in the Americas and 3.5% in Asia.
Such real growth rates do not exceed the long-term average growth rates for the countries in which each CGU operates. Thevalue-in-use represents the present value of the future cash flows, including the terminal value, discounted at a rate appropriate to each CGU. The realpre-tax discount rates used range from 7.5%7.0% to 12.2% (2013: 7.8%10.3% (2016: 7.1% to 11.7%12.0%); these rates are in line with the Group’s estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model.
The 20142017 annual goodwill impairment testing process has resulted in no intangible asset impairments. The 20132016 annual goodwill impairment testing process resulted in an impairment of€5823 million being recorded in respect of our Beneluxone CGU in the Europe Heavyside due to a difficult trading environment in 2013 and a slower recovery than previously anticipated. The assumptions underlying the 2013 value-in-use model projections resulted in a present value (using a real pre-tax discount rate of 9.4%) of€segment.241 million and a related goodwill impairment being recorded of€58 million.
Key sources of estimation uncertainty
The cash flows have been arrived at taking account of the Group’s strong financial position, its established history of earnings and cash flow generation and the nature of the building materials industry, where product obsolescence is very low. However, expected future cash flows are inherently uncertain and are therefore
liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are subjective and include projected EBITDA (as defined)* margins, net cash flows, discount rates used and the duration of the discounted cash flow model.
Significant under-performance in any of CRH’s major CGUs may give rise to a materialwrite-down of goodwill which would have a substantial impact on the Group’s income and equity, however given the excess headroom on the models the likelihood of this happening is not considered a realistic possibility.
Significant goodwill amounts
The goodwill allocated to the Europe DistributionUK (Europe Heavyside segment) and the Oldcastle Building Products (Americas Products segment) CGUs accountsaccount for between 10% and 20%25% of the total carrying amount of€4,018 million.shown on page 153. The goodwill allocated to each of the remaining CGUs is less than 10% of the total carrying value in all other cases. The additional disclosures required for the two CGUs with significant goodwill are as follows:
Europe Distribution | Oldcastle Building Products | |||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||
Goodwill allocated to the cash-generating unit at balance sheet date | €649m | €641m | €699m | €615m | ||||||||||||||||
Discount rate applied to the cash flow projections (real pre-tax) | 9.4% | 9.4% | 11.9% | 11.7% | ||||||||||||||||
Average EBITDA (as defined)* margin over the initial 5-year period | 5.9% | 6.4% | 11.0% | 10.6% | ||||||||||||||||
Value-in-use (present value of future cash flows) | €2,015m | €2,201m | €2,588m | €2,380m | ||||||||||||||||
Excess of value-in-use over carrying amount | €336m | €431m | €509m | €579m |
United Kingdom | Oldcastle Building Products | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||
Goodwill allocated to the cash-generating unit at balance sheet date | €725m | €748m | €1,555m | €1,670m | ||||||||||||||||
Discount rate applied to the cash flow projections (realpre-tax) | 7.6% | 7.8% | 10.3% | 11.7% | ||||||||||||||||
Average EBITDA (as defined)* margin over the initial5-year period | 13.9% | 13.7% | 15.1% | 14.4% | ||||||||||||||||
Value-in-use (present value of future cash flows) | €3,221m | €3,549m | €5,628m | €4,695m | ||||||||||||||||
Excess ofvalue-in-use over carrying amount | €1,334m | €1,338m | €2,152m | €1,388m |
The key assumptions and methodology used in respect of these two CGUs are consistent with those described above. The values applied to each of the key estimates and assumptions are specific to the individual CGUs and were derived from a combination of internal and external factors based on historical experience and took into account the cash flows specifically associated with these businesses. The cash
flows and20-year annuity-based terminal value were projected in line with the methodology disclosed above.
Europe Distribution
The UK and Oldcastle Building Products CGUs are not included in the CGUs referred to in the “Sensitivity analysis”Sensitivity analysis section below.overleaf. Given the magnitude of the excess ofvalue-in-use over carrying amount, and our belief that the key
assumptions are reasonable, management believebelieves that it is not reasonably possible that there would be a change in the key assumptions such that the carrying amount would exceed thevalue-in-use. Consequently no further disclosures relating to sensitivity of thevalue-in-use computations for the Europe DistributionUK or Oldcastle Building Products CGUs are considered to be warranted.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. | 155 |
CRH Annual Report and Form 20-F|2017 |
15. Intangible Assets - continued
Sensitivity analysis
Sensitivity analysis has been performed and results in additional disclosures in respect of 2one CGU (in the Europe Heavyside segment) of the 20total 25 CGUs. The key assumptions, methodology used and values applied to each of the key assumptions for the two cash-generating unitsthis CGU are in line with those outlined above. The two CGUson page 155 (a30-year annuity period has been used). This CGU had goodwill of€178169 million at the date of testing. The table below identifies the amounts by which each of the following assumptions may either decline or increase to arrive at a zero excess of the present value of future cash flows over the book value of net assets in the two CGUsCGU selected for sensitivity analysis disclosures:
Reduction in EBITDA (as defined)* margin | ||||
Reduction in profit before tax | ||||
Reduction in net cash flow | ||||
Increase inpre-tax discount rate |
The average EBITDA (as defined)* margin for the aggregate of these two CGUsCGU over the initial 5-yearfive-year period was 9.2%24.0%. Thevalue-in-use (being the present value of the future net cash flows) was€619289 million and the carrying amount was€542236 million, resulting in an excess ofvalue-in-use over carrying amount of€7753 million.
While the Ukraine CGU is not considered to require additional sensitivity-related disclosures based on analysis performed, the country’s ongoing political situation remains uncertain. CRH’s activities in Ukraine are mainly located in the west of the country and are therefore not directly affected by the continuing conflict; however, the economic outlook for the country as a whole remains unclear. The net asset value of the Ukrainian CGU amounts to€267 million at year-end 2014.
156 | *EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ |
CRH Annual Report and Form 20-F|2017 |
14. Intangible Assets|continued
(b) Portfolio review update
In November 2013, a Group-wide portfolio review was initiated to identify and focus on those businesses within our portfolio which offer the most attractive future returns, and to prioritise capital allocation to ensure profitable growth across our network of businesses. This review was completed during the year and a multi-year divestment programme has commenced with proceeds of€0.35 billion realised on business and non-current asset disposals in 2014 (see note 4).
The decision to divest of these business units resulted in the need to assess them for impairment, either individually or combined where they form a new group for disposal purposes. Excluding business units divested during 2014, the remainder were assessed for impairment or reversal of previous impairments and also assessed from the perspective of the held for sale criteria set out in IFRS 5Non-current Assets Held for Sale and Discontinued Operations (see note 4).
A valuation was prepared based on the estimated fair value less costs of disposal (FVLCD) for each business unit. The valuations were then compared to the carrying value of each business and where that valuation fell below the carrying value an impairment charge was taken.
No goodwill impairments or reversal of previous impairments were recorded during the year.
In 2013, the total impairments (including financial asset impairments) arising from the portfolio review amounted to€683 million, of which€261 million related to property, plant and equipment (see note 13) and€317 million related to intangible assets. The largest impairments in 2013 arose in two business units within Europe Heavyside. Both businesses serve the residential new-build sector in mature markets. Financial asset impairments of€105 million were recorded in 2013 relating to two Europe Heavyside equity accounted investments. The additional disclosures required are as follows:
Business 1 | Business 2 | Financial Assets | ||||||||||||||
2013 | 2013 | 2013 | ||||||||||||||
Amount of impairment loss recognised in 2013 | €99m | €75m | €105m | |||||||||||||
Description of valuation technique | Income-based | Income-based | Income-based | |||||||||||||
Level of fair value hierarchy | Level 3 | Level 3 | Level 3 | |||||||||||||
Recoverable amount (FVLCD) | €182m | €34m | €172m | |||||||||||||
Discount rate applicable to cash flow projections (real pre-tax) | 8.9% | 9.2% | 9.2% - 9.8% | |||||||||||||
Average EBITDA (as defined)* margin over initial 5-year period | 13.5% | 13.7% | 20.1% - 22.5% |
16. Financial Assets
Investments accounted for using the equity method (i.e. joint ventures and associates) | ||||||||||||||||
Share of net assets €m | Loans €m | Total €m | Other (i) €m | |||||||||||||
At 1 January 2017 | 1,152 | 147 | 1,299 | 26 | ||||||||||||
Translation adjustment | (67) | (16) | (83) | (1) | ||||||||||||
Investments and advances | 5 | 6 | 11 | - | ||||||||||||
Disposals and repayments | (1) | (12) | (13) | - | ||||||||||||
Share of profit after tax | 65 | - | 65 | - | ||||||||||||
Dividends received | (31) | - | (31) | - | ||||||||||||
At 31 December 2017 | 1,123 | 125 | 1,248 | 25 | ||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||
At 1 January 2016 | 1,161 | 156 | 1,317 | 28 | ||||||||||||
Translation adjustment | (14) | 3 | (11) | - | ||||||||||||
Investments and advances | 1 | 6 | 7 | - | ||||||||||||
Reduction in joint venture loans | - | (5) | (5) | - | ||||||||||||
Disposals and repayments | 2 | (13) | (11) | (2) | ||||||||||||
Share of profit after tax | 42 | - | 42 | - | ||||||||||||
Dividends received | (40) | - | (40) | - | ||||||||||||
At 31 December 2016 | 1,152 | 147 | 1,299 | 26 |
|
15. Financial Assets
Investments accounted for using the equity method (i.e. joint ventures and associates) | ||||||||||||||||||||
Share of net assets €m | Loans €m | Total €m | Asset held for sale €m | Other (i) €m | ||||||||||||||||
At 1 January 2014 | 1,211 | 129 | 1,340 | - | 23 | |||||||||||||||
Translation adjustment | 73 | 14 | 87 | - | - | |||||||||||||||
Investments and advances | - | 3 | 3 | - | - | |||||||||||||||
Disposals and repayments | (82 | ) | (10 | ) | (92 | ) | - | - | ||||||||||||
Reclassified as held for sale | (34 | ) | - | (34 | ) | - | - | |||||||||||||
Retained profit | 25 | - | 25 | - | - | |||||||||||||||
At 31 December 2014 | 1,193 | 136 | 1,329 | - | 23 | |||||||||||||||
The equivalent disclosure for the prior year is as follows: |
| |||||||||||||||||||
At 1 January 2013 | 1,291 | 131 | 1,422 | 143 | 34 | |||||||||||||||
Translation adjustment | (72 | ) | (5 | ) | (77 | ) | (1 | ) | (1 | ) | ||||||||||
Investments and advances | 64 | 10 | 74 | - | 4 | |||||||||||||||
Disposals and repayments | - | (7 | ) | (7 | ) | (139 | ) | (14 | ) | |||||||||||
Arising on acquisition (note 30) | 2 | - | 2 | - | - | |||||||||||||||
Retained loss | (74 | ) | - | (74 | ) | (3 | ) | - | ||||||||||||
At 31 December 2013 | 1,211 | 129 | 1,340 | - | 23 |
(i) Other financial assets primarily comprise trade investments carried at historical cost.
Summarised financial information for the Group’s investment in joint ventures and associates which are accounted for using the equity method is as follows:
Joint Ventures | Associates | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 €m | 2013 €m | 2014 €m | 2013 €m | 2014 €m | 2013 €m | Joint Ventures | Associates | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2017 €m | 2016 €m | 2017 €m | 2016 €m | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-current assets | 548 | 600 | 955 | 862 | 1,503 | 1,462 | 752 | 727 | 754 | 845 | 1,506 | 1,572 | ||||||||||||||||||||||||||||||||||||||||||||
Current assets | 121 | �� | 176 | 538 | 557 | 659 | 733 | 209 | 171 | 492 | 413 | 701 | 584 | |||||||||||||||||||||||||||||||||||||||||||
Non-current liabilities | (161 | ) | (174 | ) | (209 | ) | (230 | ) | (370 | ) | (404 | ) | (348) | (285) | (73) | (182) | (421) | (467) | ||||||||||||||||||||||||||||||||||||||
Current liabilities | (73 | ) | (106 | ) | (526 | ) | (474 | ) | (599 | ) | (580 | ) | (115) | (102) | (548) | (435) | (663) | (537) | ||||||||||||||||||||||||||||||||||||||
Net assets | 435 | 496 | 758 | 715 | 1,193 | 1,211 | 498 | 511 | 625 | 641 | 1,123 | 1,152 |
A listing of the principal equity accounted investments is contained in Exhibit 8 to the Annual Report.on page 251.
The Group holds a 21.13% stake (2013:(2016: 21.13%) in Samse S.A., a publicly-listed distributor in France which is accounted for as an associate investment above. The fair value of this investment at the balance sheet date, calculated based on the number of shares held multiplied by the closing share price at 31 December 20142017 (Level 1 input in the fair value hierarchy), was€75125 million (2013:(2016:€58107 million).
157 |
CRH Annual Report and Form 20-F|2017 |
16. Inventories
2014 €m | 2013 €m | |||||||
Raw materials | 612 | 606 | ||||||
Work-in-progress (i) | 80 | 86 | ||||||
Finished goods | 1,568 | 1,562 | ||||||
Total inventories at the lower of cost and net realisable value | 2,260 | 2,254 |
17. | Inventories |
2017 €m | 2016 €m | |||||||
Raw materials | 885 | 821 | ||||||
Work-in-progress (i) | 92 | 94 | ||||||
Finished goods | 1,738 | 2,024 | ||||||
Total inventories at the lower of cost and net realisable value | 2,715 | 2,939 |
(i) | Work-in-progress includes€ |
An analysis of the Group’s cost of sales expense is provided in note 23 to the financial statements.
Write-downs of inventories recognised as an expense within cost of sales amounted to€2931 million (2013:(2016:€1917 million; 2012:2015:€12 million).
17.18. Trade and Other Receivables
2014 €m | 2013 €m | 2017 €m | 2016 €m | |||||||||||||
Current | ||||||||||||||||
Trade receivables | 1,810 | 1,725 | 2,456 | 2,773 | ||||||||||||
Amounts receivable in respect of construction contracts (i) | 476 | 422 | 773 | 792 | ||||||||||||
Total trade receivables, gross | 2,286 | 2,147 | 3,229 | 3,565 | ||||||||||||
Provision for impairment | (106 | ) | (118 | ) | (131) | (152) | ||||||||||
Total trade receivables, net | 2,180 | 2,029 | 3,098 | 3,413 | ||||||||||||
Amounts receivable from equity accounted investments | 6 | 4 | 8 | 9 | ||||||||||||
Prepayments and other receivables | 458 | 483 | 524 | 557 | ||||||||||||
Total | 2,644 | 2,516 | 3,630 | 3,979 | ||||||||||||
Non-current | ||||||||||||||||
Other receivables | 85 | 93 | 156 | 212 |
The carrying amounts of current andnon-current trade and other receivables approximate their fair value largely due to the short-term maturities and nature of these instruments.
(i) | Includes unbilled revenue and retentions held by customers in respect of construction contracts at the balance sheet date amounting to€ |
158 |
CRH Annual Report and Form 20-F|2017 |
Valuation and qualifying accounts (provision for impairment)
The movements in the provision for impairment of receivables during the financial year were as follows:
2014 €m | 2013 €m | 2012 €m | 2017 €m | 2016 €m | 2015 €m | |||||||||||||||||||
At 1 January | 118 | 123 | 136 | 152 | 161 | 106 | ||||||||||||||||||
Translation adjustment | 4 | (2 | ) | - | (7) | (1) | 5 | |||||||||||||||||
Provided during year | 28 | 36 | 40 | 32 | 43 | 40 | ||||||||||||||||||
Written-off during year | (36 | ) | (33 | ) | (50 | ) | ||||||||||||||||||
Reclassified (as)/from held for sale | (6) | - | 2 | |||||||||||||||||||||
Disposed of during year | - | (1) | (4) | |||||||||||||||||||||
Written off during year | (36) | (43) | (36) | |||||||||||||||||||||
Arising on acquisition (note 31) | 3 | 2 | 55 | |||||||||||||||||||||
Recovered during year | (6 | ) | (6 | ) | (3 | ) | (7) | (9) | (7) | |||||||||||||||
Reclassified as held for sale | (2 | ) | - | - | ||||||||||||||||||||
At 31 December | 106 | 118 | 123 | 131 | 152 | 161 |
Information in relation to the Group’s credit risk management is provided in note 2122 to the financial statements.
Aged analysis
The aged analysis of trade receivables and amounts receivable in respect of construction contracts at the balance sheet date was as follows:
2014 €m | 2013 €m | 2017 €m | 2016 €m | |||||||||||||
Neither past due nor impaired | 1,638 | 1,554 | 2,070 | 2,414 | ||||||||||||
Past due but not impaired: | ||||||||||||||||
- less than 60 days | 373 | 290 | 832 | 774 | ||||||||||||
- 60 days or greater but less than 120 days | 117 | 126 | 129 | 120 | ||||||||||||
- 120 days or greater | 45 | 53 | 67 | 105 | ||||||||||||
Past due and impaired (partial or full provision) | 113 | 124 | 131 | 152 | ||||||||||||
Total | 2,286 | 2,147 | 3,229 | 3,565 |
Trade receivables and amounts receivable in respect of construction contracts are in general receivable within 90 days of the balance sheet date.
159 |
CRH |
18.19. Trade and Other Payables
2014 €m | 2013 €m | |||||||
Current | ||||||||
Trade payables | 1,506 | 1,495 | ||||||
Construction contract-related payables (i) | 129 | 103 | ||||||
Deferred and contingent acquisition consideration (ii) | 59 | 24 | ||||||
Accruals and other payables | 1,148 | 1,093 | ||||||
Amounts payable to equity accounted investments | 52 | 39 | ||||||
Total | 2,894 | 2,754 | ||||||
Non-current | ||||||||
Other payables | 109 | 105 | ||||||
Deferred and contingent acquisition consideration (ii) | 148 | 184 | ||||||
Total | 257 | 289 |
2017 €m | 2016 €m | |||||||
Current | ||||||||
Trade payables | 2,304 | 2,531 | ||||||
Construction contract-related payables (i) | 217 | 296 | ||||||
Deferred and contingent acquisition consideration (ii) | 167 | 61 | ||||||
Accruals and other payables | 1,802 | 1,875 | ||||||
Amounts payable to equity accounted investments | 44 | 52 | ||||||
Total | 4,534 | 4,815 | ||||||
Non-current | ||||||||
Other payables | 128 | 221 | ||||||
Deferred and contingent acquisition consideration (ii) | 98 | 240 | ||||||
Total | 226 | 461 |
(i) | Construction contract-related payables include billings in excess of revenue, together with advances received from customers in respect of work to be performed under construction contracts and foreseeable losses thereon. |
Other than deferred and contingent consideration, the carrying amounts of trade and other payables approximate their fair value largely due to the short-term maturities and nature of these instruments.
Other than deferred and contingent consideration, the carrying amounts of trade and other payables approximate their fair value largely due to the short-term maturities and nature of these instruments. |
(ii) |
|
The fair value of total contingent consideration is€ |
At 1 January | 208 | 297 | ||||||
Translation adjustment | 16 | (9 | ) | |||||
Arising on acquisitions and investments during year (note 30) | 3 | 17 | ||||||
Changes in estimate | (6 | ) | (3 | ) | ||||
Paid during year | (26 | ) | (105 | ) | ||||
Discount unwinding | 12 | 11 | ||||||
At 31 December | 207 | 208 |
�� | 2017 €m | 2016 €m | ||||||
At 1 January | 301 | 288 | ||||||
Translation adjustment | (36) | 9 | ||||||
Arising on acquisitions and investments during year (note 31) | 45 | 22 | ||||||
Changes in estimate | 3 | 15 | ||||||
Paid during year | (53) | (57) | ||||||
Discount unwinding | 7 | 24 | ||||||
Reclassified as held for sale | (2) | - | ||||||
At 31 December | 265 | 301 |
CRH Annual Report and Form 20-F|2017 |
19.
20. Movement in Working Capital and Provisions for Liabilities
Inventories €m | Trade and other receivables €m | Trade and other payables €m | Provisions for liabilities €m | Total €m | ||||||||||||||||
At 1 January 2014 | 2,254 | 2,609 | (3,043 | ) | (380 | ) | 1,440 | |||||||||||||
Translation adjustment | 128 | 165 | (173 | ) | (27 | ) | 93 | |||||||||||||
Arising on acquisition (note 30) | 23 | 20 | (17 | ) | (1 | ) | 25 | |||||||||||||
Disposals | (9 | ) | (4 | ) | 2 | - | (11 | ) | ||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 30) | - | - | (3 | ) | - | (3 | ) | |||||||||||||
- paid during year | - | - | 26 | - | 26 | |||||||||||||||
Reclassified as held for sale | (102 | ) | (79 | ) | 98 | 7 | (76 | ) | ||||||||||||
Interest accruals and discount unwinding | - | - | (1 | ) | (16 | ) | (17 | ) | ||||||||||||
(Decrease)/increase in working capital and provisions for liabilities | (34 | ) | 18 | (40 | ) | 21 | (35 | ) | ||||||||||||
At 31 December 2014 | 2,260 | 2,729 | (3,151 | ) | (396 | ) | 1,442 | |||||||||||||
The equivalent disclosure for the prior years is as follows: | ||||||||||||||||||||
At 1 January 2013 | 2,333 | 2,603 | (3,052 | ) | (366 | ) | 1,518 | |||||||||||||
Translation adjustment | (74 | ) | (80 | ) | 91 | 9 | (54 | ) | ||||||||||||
Arising on acquisition (note 30) | 41 | 53 | (80 | ) | (14 | ) | - | |||||||||||||
Disposals | (9 | ) | (4 | ) | 7 | - | (6 | ) | ||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 30) | - | - | (17 | ) | - | (17 | ) | |||||||||||||
- paid during year | - | - | 105 | - | 105 | |||||||||||||||
Interest accruals and discount unwinding | - | - | (14 | ) | (15 | ) | (29 | ) | ||||||||||||
(Decrease)/increase in working capital and provisions for liabilities | (37 | ) | 37 | (83 | ) | 6 | (77 | ) | ||||||||||||
At 31 December 2013 | 2,254 | 2,609 | (3,043 | ) | (380 | ) | 1,440 | |||||||||||||
At 1 January 2012 | 2,179 | 2,602 | (2,901 | ) | (365 | ) | 1,515 | |||||||||||||
Translation adjustment | (15 | ) | (5 | ) | 8 | 2 | (10 | ) | ||||||||||||
Arising on acquisition (note 30) | 98 | 103 | (57 | ) | (1 | ) | 143 | |||||||||||||
Disposals | (22 | ) | (23 | ) | 23 | 1 | (21 | ) | ||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 30) | - | - | (151 | ) | - | (151 | ) | |||||||||||||
- paid during year | - | - | 30 | - | 30 | |||||||||||||||
Interest accruals and discount unwinding | - | - | (31 | ) | (15 | ) | (46 | ) | ||||||||||||
Increase/(decrease) in working capital and provisions for liabilities | 93 | (74 | ) | 27 | 12 | 58 | ||||||||||||||
At 31 December 2012 | 2,333 | 2,603 | (3,052 | ) | (366 | ) | 1,518 |
Inventories €m | Trade and other €m | Trade and other €m | Provisions for liabilities €m | Total €m | ||||||||||||||||
At 1 January 2017 | 2,939 | 4,191 | (5,276) | (1,060) | 794 | |||||||||||||||
Translation adjustment | (218) | (286) | 348 | 72 | (84) | |||||||||||||||
Arising on acquisition (note 31) | 114 | 129 | (149) | (49) | 45 | |||||||||||||||
Reclassified as held for sale | (266) | (334) | 306 | - | (294) | |||||||||||||||
Disposals | (34) | (16) | 20 | 1 | (29) | |||||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 31) | - | - | (45) | - | (45) | |||||||||||||||
- paid during year | - | - | 53 | - | 53 | |||||||||||||||
Deferred proceeds arising on disposals during year | - | 3 | - | - | 3 | |||||||||||||||
Interest accruals and discount unwinding | - | 1 | - | (24) | (23) | |||||||||||||||
Reclassification | (3) | (14) | 65 | - | 48 | |||||||||||||||
Increase/(decrease) in working capital and provisions for liabilities | 183 | 112 | (82) | (4) | 209 | |||||||||||||||
At 31 December 2017 | 2,715 | 3,786 | (4,760) | (1,064) | 677 | |||||||||||||||
The equivalent disclosure for the prior years is as follows: | ||||||||||||||||||||
At 1 January 2016 | 2,873 | 4,126 | (5,171) | (1,035) | 793 | |||||||||||||||
Translation adjustment | 20 | (12) | 26 | 26 | 60 | |||||||||||||||
Arising on acquisition (note 31) | 9 | 28 | (14) | 18 | 41 | |||||||||||||||
Disposals | (18) | (15) | 8 | 1 | (24) | |||||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 31) | - | - | (22) | - | (22) | |||||||||||||||
- paid during year | - | - | 57 | - | 57 | |||||||||||||||
Deferred proceeds arising on disposals during year | - | 7 | - | - | 7 | |||||||||||||||
Interest accruals and discount unwinding | - | - | (24) | (30) | (54) | |||||||||||||||
Transfer to property, plant and equipment | - | (8) | - | - | (8) | |||||||||||||||
Increase/(decrease) in working capital and provisions for liabilities | 55 | 65 | (136) | (40) | (56) | |||||||||||||||
At 31 December 2016 | 2,939 | 4,191 | (5,276) | (1,060) | 794 | |||||||||||||||
At 1 January 2015 | 2,260 | 2,729 | (3,151) | (396) | 1,442 | |||||||||||||||
Translation adjustment | 130 | 147 | (151) | (5) | 121 | |||||||||||||||
Arising on acquisition (note 31) | 621 | 1,533 | (1,549) | (581) | 24 | |||||||||||||||
Reclassified from held for sale | 102 | 79 | (98) | (7) | 76 | |||||||||||||||
Disposals | (211) | (178) | 137 | 6 | (246) | |||||||||||||||
Deferred and contingent acquisition consideration: | ||||||||||||||||||||
- arising on acquisitions during year (note 31) | - | - | (97) | - | (97) | |||||||||||||||
- paid during year | - | - | 59 | - | 59 | |||||||||||||||
Deferred proceeds arising on disposals during year | - | 38 | - | - | 38 | |||||||||||||||
Interest accruals and discount unwinding | - | - | (20) | (19) | (39) | |||||||||||||||
Decrease in working capital and provisions for liabilities | (29) | (222) | (301) | (33) | (585) | |||||||||||||||
At 31 December 2015 | 2,873 | 4,126 | (5,171) | (1,035) | 793 |
161 |
CRH Annual Report and Form 20-F|2017 |
20.21. Analysis of Net Debt
Components of net debt
Net debt is anon-GAAP measure which we provide to investors as we believe they find it useful. Net debt comprises cash and cash equivalents, derivative financial instrument assets and liabilities and interest-bearing loans and borrowings and enables investors to see the economic effects of these in total (see note 2122 for details of the capital and risk management policies employed by the Group). Net debt is commonly used in computations such as net debt as a % of total equity and net debt as a % of market capitalisation.
As at 31 December 2014 | As at 31 December 2013 | |||||||||||||||||
Fair value (i) €m | Book value €m | Fair value (i) €m | Book value €m | |||||||||||||||
Cash and cash equivalents (note 22) | 3,295 | 3,295 | 2,540 | 2,540 | ||||||||||||||
Interest-bearing loans and borrowings (note 23) | (6,302 | ) | (5,866 | ) | (5,799 | ) | (5,540 | ) | ||||||||||
Derivative financial instruments (net) (note 24) | 79 | 79 | 27 | 27 | ||||||||||||||
Group net debt | (2,928 | ) | (2,492 | ) | (3,232 | ) | (2,973 | ) |
As at 31 December 2017 | As at 31 December 2016 | |||||||||||||||||||
Fair value (i) | Book value | Fair value (i) €m | Book value €m | |||||||||||||||||
Cash and cash equivalents (note 23) | 2,135 | 2,135 | 2,449 | 2,449 | ||||||||||||||||
Interest-bearing loans and borrowings (note 24) | (8,421) | (7,981) | (8,236) | (7,790) | ||||||||||||||||
Derivative financial instruments (net) (note 25) | 50 | 50 | 44 | 44 | ||||||||||||||||
Group net debt | (6,236) | (5,796) | (5,743) | (5,297) |
(i)
(i) | All interest-bearing loans and borrowings are Level 2 fair value measurements. |
Reconciliation of opening to closing net debt | 2017 €m | 2016 €m | 2015 €m | |||||||||
At 1 January | (5,297) | (6,618) | (2,492) | |||||||||
Debt in acquired companies (note 31) | (12) | (3) | (175) | |||||||||
Debt in disposed companies | - | - | 20 | |||||||||
Increase in interest-bearing loans, borrowings and finance leases | (1,010) | (600) | (5,633) | |||||||||
Net cash flow arising from derivative financial instruments | (169) | 5 | (47) | |||||||||
Repayment of interest-bearing loans, borrowings and finance leases | 343 | 2,015 | 2,744 | |||||||||
Decrease in cash and cash equivalents | (153) | (127) | (897) | |||||||||
Mark-to-market adjustment | 9 | 21 | (1) | |||||||||
Translation adjustment | 493 | 10 | (137) | |||||||||
At 31 December | (5,796) | (5,297) | (6,618) |
The following table shows the effective interest rates onperiod-end fixed, gross and net debt:
As at 31 December 2014 | As at 31 December 2013 | As at 31 December 2017 | As at 31 December 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||
€m | Interest rate | Weighted average Years | €m | Interest rate | Weighted average Years | €m | Interest rate | Weighted average fixed period Years | €m | Interest rate | Weighted average fixed period Years | |||||||||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings nominal - fixed rate (i) | (5,657 | ) | (5,362 | ) | (7,844) | (7,417) | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments - fixed rate | 1,227 | 1,518 | 1,505 | 1,640 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net fixed rate debt including derivatives | (4,430 | ) | 4.5% | 5.2 | (3,844 | ) | 5.5% | 5.1 | (6,339) | 3.3% | 9.2 | (5,777) | 3.5% | 8.7 | ||||||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings nominal - floating rate (ii) | (63 | ) | (54 | ) | (70) | (270) | ||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment of debt from nominal to book value (i) | (146 | ) | (124 | ) | (67) | (103) | ||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments - currency floating rate | (1,148 | ) | (1,491 | ) | (1,455) | (1,596) | ||||||||||||||||||||||||||||||||||||||||||||||||
Gross debt including derivative financial instruments | (5,787 | ) | 4.1% | (5,513 | ) | 4.6% | (7,931) | 4.2% | (7,746) | 4.1% | ||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents - floating rate | 3,295 | 2,540 | 2,135 | 2,449 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Group net debt | (2,492 | ) | (2,973 | ) | (5,796) | (5,297) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash at bank and in hand reclassified as held for sale (note 22) | (33 | ) | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
Group net debt excluding cash reclassified as held for sale | (2,525 | ) | (2,973 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cash at bank and in hand reclassified as held for sale (note 23) | (20) | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank overdrafts reclassified as held for sale (note 24) | 5 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Group net debt excluding net debt reclassified as held for sale | (5,811) | (5,297) |
(i) | Of the Group’s nominal fixed rate debt at 31 December |
(ii) | Floating rate debt comprises bank borrowings and finance leases bearing interest at rates set in advance for periods ranging from overnight to less than one year largely by reference to inter-bank interest rates. |
Reconciliation of opening to closing net debt
2014 €m | 2013 €m | 2012 €m | ||||||||||
At 1 January | (2,973 | ) | (2,909 | ) | (3,335 | ) | ||||||
Debt in acquired companies | (7 | ) | (44 | ) | (42 | ) | ||||||
Debt in disposed companies | - | 17 | 2 | |||||||||
Increase in interest-bearing loans, borrowings and finance leases | (901 | ) | (1,491 | ) | (487 | ) | ||||||
Net cash flow arising from derivative financial instruments | 11 | (64 | ) | (13 | ) | |||||||
Repayment of interest-bearing loans, borrowings and finance leases | 934 | 586 | 394 | |||||||||
Increase in cash and cash equivalents | 625 | 845 | 524 | |||||||||
Mark-to-market adjustment | (3 | ) | 10 | 9 | ||||||||
Translation adjustment | (178 | ) | 77 | 39 | ||||||||
At 31 December | (2,492 | ) | (2,973 | ) | (2,909 | ) |
CRH Annual Report and Form 20-F|2017 |
20. Analysis of Net Debt|continued
Currency profile
The currency profile of the Group’s net debt and net worth (capital and reserves attributable to the Company’s equity holders) as at 31 December 20142017 and 201331 December 2016 is as follows:
euro €m | US Dollar €m | Pound Sterling €m | Swiss Franc €m | Other (iii) €m | Total €m | euro €m | US Dollar €m | Pound Sterling €m | Canadian Dollar €m | Philippine Peso €m | Polish Zloty €m | Swiss Franc €m | Other (i) €m | Total €m | ||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents (note 23)* | 743 | 714 | 215 | 140 | 43 | 99 | 61 | 100 | 2,115 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings (note 24)* | (3,827) | (3,097) | (465) | (2) | (293) | - | (281) | (11) | (7,976) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments (net) (note 25) | 2,078 | (908) | (157) | (480) | (17) | (171) | (247) | (48) | 50 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net debt* by major currency including derivative financial instruments | (1,006) | (3,291) | (407) | (342) | (267) | (72) | (467) | 41 | (5,811) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Group net debt* by major currency | (871 | ) | (1,117 | ) | (68 | ) | (250 | ) | (219 | ) | (2,525 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Non-debt assets (including cash reclassified as held for sale) and liabilities analysed as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-debt assets and liabilities (including cash and bank overdrafts reclassified as held for sale) analysed as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-current assets | 3,061 | 7,003 | 346 | 778 | 2,015 | 13,203 | 5,030 | 8,815 | 2,400 | 1,466 | 1,292 | 310 | 715 | 1,804 | 21,832 | |||||||||||||||||||||||||||||||||||||||||||||
Current assets | 1,611 | 2,558 | 489 | 326 | 466 | 5,450 | 1,935 | 3,718 | 692 | 454 | 110 | 138 | 302 | 273 | 7,622 | |||||||||||||||||||||||||||||||||||||||||||||
Non-current liabilities | (616 | ) | (1,481 | ) | (92 | ) | (270 | ) | (71 | ) | (2,530 | ) | (713) | (1,311) | (295) | (206) | (153) | (5) | (181) | (98) | (2,962) | |||||||||||||||||||||||||||||||||||||||
Current liabilities | (1,117 | ) | (1,436 | ) | (368 | ) | (191 | ) | (288 | ) | (3,400 | ) | (1,745) | (2,093) | (806) | (322) | (137) | (130) | (186) | (285) | (5,704) | |||||||||||||||||||||||||||||||||||||||
Non-controlling interests | (5 | ) | (4 | ) | - | (12 | ) | - | (21 | ) | (49) | (14) | - | - | (391) | - | (11) | (21) | (486) | |||||||||||||||||||||||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 2,063 | 5,523 | 307 | 381 | 1,903 | 10,177 | 3,452 | 5,824 | 1,584 | 1,050 | 454 | 241 | 172 | 1,714 | 14,491 | |||||||||||||||||||||||||||||||||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Group net debt by major currency | (1,304 | ) | (1,476 | ) | (57 | ) | 11 | (147 | ) | (2,973 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents (note 23) | 690 | 1,284 | 72 | 145 | 16 | 21 | 89 | 132 | 2,449 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings (note 24) | (3,840) | (2,957) | (464) | (1) | (197) | (1) | (306) | (24) | (7,790) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments (net) (note 25) | 2,397 | (1,246) | (208) | (612) | - | (80) | (209) | 2 | 44 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net debt by major currency including derivative financial instruments | (753) | (2,919) | (600) | (468) | (181) | (60) | (426) | 110 | (5,297) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-debt assets and liabilities analysed as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-current assets | 3,378 | 6,293 | 433 | 796 | 2,113 | 13,013 | 4,476 | 9,311 | 2,485 | 1,541 | 1,459 | 288 | 797 | 1,790 | 22,147 | |||||||||||||||||||||||||||||||||||||||||||||
Current assets | 1,568 | 2,138 | 234 | 330 | 526 | 4,796 | 1,809 | 3,064 | 749 | 471 | 97 | 149 | 325 | 258 | 6,922 | |||||||||||||||||||||||||||||||||||||||||||||
Non-current liabilities | (522 | ) | (1,221 | ) | (107 | ) | (169 | ) | (77 | ) | (2,096 | ) | (641) | (1,885) | (276) | (247) | (238) | (4) | (350) | (97) | (3,738) | |||||||||||||||||||||||||||||||||||||||
Current liabilities | (1,126 | ) | (1,221 | ) | (208 | ) | (198 | ) | (301 | ) | (3,054 | ) | (1,610) | (2,059) | (892) | (320) | (125) | (118) | (199) | (268) | (5,591) | |||||||||||||||||||||||||||||||||||||||
Non-controlling interests | (8 | ) | (3 | ) | - | (12 | ) | (1 | ) | (24 | ) | (46) | (16) | - | - | (472) | (1) | (12) | (1) | (548) | ||||||||||||||||||||||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 1,986 | 4,510 | 295 | 758 | 2,113 | 9,662 | 3,235 | 5,496 | 1,466 | 977 | 540 | 254 | 135 | 1,792 | 13,895 |
The principal currencies included in this category are the Chinese Renminbi, the |
* Excluding €33€20 million cash and€5 million bank overdrafts reclassified as held for sale which isare analysed by major currency in current assets and liabilities above.
163 |
CRH Annual Report and Form 20-F|2017 |
21. Analysis of Net Debt - continued
Liquidity and capital resources
The following table provides certain information related to our cash generation and changes in our cash and cash equivalents position:
2017 €m | 2016 €m | 2015 €m | ||||||||||
Net cash inflow from operating activities | 2,189 | 2,340 | 2,247 | |||||||||
Net cash outflow from investing activities | (2,685) | (735) | (7,306) | |||||||||
Net cash inflow/(outflow) from financing activities | 343 | (1,732) | 4,162 | |||||||||
Decrease in cash and cash equivalents | (153) | (127) | (897) | |||||||||
Cash and cash equivalents at beginning of year, excluding overdrafts (note 23) | 2,449 | 2,518 | 3,295 | |||||||||
Effect of exchange rate changes | (161) | 58 | 120 | |||||||||
Cash and cash equivalents at end of year, excluding overdrafts (note 23) | 2,135 | 2,449 | 2,518 | |||||||||
Bank overdrafts | (71) | (78) | (117) | |||||||||
Borrowings | (7,910) | (7,712) | (9,104) | |||||||||
Derivative financial instruments | 50 | 44 | 85 | |||||||||
Total liabilities from financing activities | (7,931) | (7,746) | (9,136) | |||||||||
Net debt at end of year | (5,796) | (5,297) | (6,618) | |||||||||
Cash at bank and in hand reclassified as held for sale (note 23) | (20) | - | - | |||||||||
Bank overdrafts reclassified as held for sale (note 24) | 5 | - | - | |||||||||
Group net debt excluding net debt reclassified as held for sale | (5,811) | (5,297) | (6,618) |
Part of the Group’s financing strategy objectives include maintenance of adequate financial resources and liquidity. During 2017 the Group’s total net cash inflow from operating activities of€2.2 billion plus net cash inflow from financing activities of€0.3 billion funded investing activities of€2.7 billion.
The Group believes that its financial resources (operating cash together with cash and cash equivalents of€2.1 billion and undrawn committed loan facilities of€3.6 billion) will be sufficient to cover the Group’s cash requirements.
At 31 December 2017, euro and US Dollar denominated cash and cash equivalents represented 35% (2016: 28%) and 34% (2016: 52%) of total cash and cash equivalents respectively.
Significant borrowings
The main sources of Group debt funding are public bond markets in Europe and North America. The following bonds were outstanding as at 31 December 2017:
Annual coupons | Outstanding millions | Final maturity | ||||||||
US Dollar bonds (i) | 8.125% | US$288 | 2018 | |||||||
euro bonds | 5.000% | €500 | 2019 | |||||||
euro bonds | 2.750% | €750 | 2020 | |||||||
US Dollar bonds | 5.750% | US$400 | 2021 | |||||||
euro bonds | 1.750% | €600 | 2021 | |||||||
Swiss Franc bonds | 1.375% | CHF330 | 2022 | |||||||
euro bonds | 3.125% | €750 | 2023 | |||||||
euro bonds | 1.875% | €600 | 2024 | |||||||
US Dollar bonds | 3.875% | US$1,250 | 2025 | |||||||
US Dollar bonds | 3.400% | US$600 | 2027 | |||||||
euro bonds | 1.375% | €600 | 2028 | |||||||
Pound Sterling bonds | 4.125% | £400 | 2029 | |||||||
US Dollar bonds (ii) | 6.400% | US$213 | 2033 | |||||||
US Dollar bonds | 5.125% | US$500 | 2045 | |||||||
US Dollar bonds | 4.400% | US$400 | 2047 |
(i) | Originally issued as a US$650 million bond in July 2008. In May 2017, US$362.13 million of the issued notes were redeemed by the issuer as part of liability management exercise. |
(ii) | Originally issued as a US$300 million bond in September 2003. In August 2009 and December 2010, US$87.445 million of the issued notes were acquired by CRH plc as part of liability management exercises undertaken. |
164 |
CRH Annual Report and Form 20-F|2017 |
21.22. Capital and Financial Risk Management
Capital management
Overall summary
The primary objectives of CRH’s capital management strategy are to ensure that the Group maintains a strong credit rating to support its business and to create shareholder value by managing the debt and equity balance and the cost of capital. No changes were made in the objectives, policies or processes for managing capital during 2014.2017.
The Board periodically reviews the capital structure of the Group, including the cost of capital and the risks associated with each class of capital. The Group manages and, if necessary, adjusts its capital structure taking account of underlying economic conditions; any material adjustments to the Group’s capital structure in terms of the relative proportions of debt and equity are approved by the Board. In order to maintain or adjust the capital structure, the Group may issue new shares, dispose of assets, amend investment plans, alter dividend policy or return capital to shareholders.
The Group is committed to optimising the use of its balance sheet within the confines of the overall objective to maintain an investment grade credit rating. Dividend cover for the year ended 31 December 2017 amounted to 3.34 times (2016: 2.31 times).
The capital structure of the Group, which comprises net debt and capital and reserves attributable to the Company’s equity holders, may be summarised as follows:
2014 €m | 2013 €m | |||||||||||||||
2017 €m | 2016 €m | |||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 10,177 | 9,662 | 14,491 | 13,895 | ||||||||||||
Net debt | 2,492 | 2,973 | 5,796 | 5,297 | ||||||||||||
Capital and net debt | 12,669 | 12,635 | 20,287 | 19,192 |
Financial risk management objectives and policies
The Group uses financial instruments throughout its businesses: interest-bearing loans and borrowings, cash and cash equivalents and finance leases are used to finance the Group’s operations; trade receivables and trade payables arise directly from operations; and derivatives, principally interest rate and currency swaps and forward foreign exchange contracts, are used to manage interest rate risks and currency exposures and to achieve the desired profile of borrowings. The Group does not trade in financial instruments nor does it enter into any leveraged derivative transactions.
The Group’s corporate treasury function provides services to the business units,co-ordinates access to domestic and international financial markets, and monitors and manages the financial risks relating to the operations of the Group. The Head of Group Financial OperationsTreasurer reports to the General Manager of Finance and the activities of the corporate treasury function are subject to regular internal audit. Systems and processes are in place to monitor and control the Group’s liquidity risks. The Group’s net debt position forms part of the monthly documentation presented to the Board of Directors.Board.
The main risks attaching to the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. Commodity price risk arising from financial instruments is of minimal relevance given that exposure is confined to a small number of contracts entered into for the purpose of hedging future movements in energy costs. The Board reviews and agrees policies for the prudent management of each of these risks as documented below.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates stems predominantly from its long-term debt obligations. Interest cost is managed using a mix of fixed and floating rate debt. With the objective of managing this mix in a cost-efficient manner, the Group enters into interest rate swaps, under which the Group contracts to exchange, at predetermined intervals, the difference between fixed and variable interest amounts calculated by reference to apre-agreed notional principal. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued fixed rate debt and the cash flow exposures of issued floating rate debt.
The majority of these swaps are designated under IAS 39Financial Instruments:Recognition and Measurementto hedge underlying debt obligations and qualify for hedge accounting; undesignated financial instruments are termed “not designated as hedges” in the analysis of derivative financial instruments presented in note 24. 25.
The following table demonstrates the impact on profit/(loss)profit before tax and total equity of a range of possible changes in the interest rates applicable to net floating rate borrowings, with all other variables held constant. These impacts are calculated based on the closing balance sheet for the relevant period and assume all floating interest rates and interest curves change by the same amount. For profit/(loss)profit before tax, the impact shown is the impact on closing balance sheet
floating rate net debt for a full year while for total equity the impact shown is the impact on the value of financial instruments.
Percentage change in | +/- 1% | +/- 0.5% | ||||||||||
Impact on | 2017 | |||||||||||
+/-€ | ||||||||||||
+/-€3m | ||||||||||||
2016 | +/-€6m | +/-€3m | ||||||||||
2015 | -/+€15m | -/+€7m | ||||||||||
Impact on total equity | 2017 | -/+ | -/+ | |||||||||
2016 | -/+€ | -/+€0.5m | ||||||||||
2015 | -/+€7m | -/+€4m | ||||||||||
(i) | ||
Sensitivity analysis for cost of borrowing has been presented for continuing operations only. |
21. Capital and Financial Risk Management|continued
Foreign currency risk
Due to the nature of building materials, which in general exhibithave a lowvalue-to-weight ratio, CRH’sthe Group’s activities are conducted primarily in the local currency of the country of operation resulting in low levels of foreign currency transaction risk; variances arising in this regard are reflected in operating costs or cost of sales in the Consolidated Income Statement in the period in which they arise.
Given the Group’s presence in 3432 countries worldwide, the principal foreign exchange risk arises from fluctuations in the euro value of the Group’s net investment in a wide basket of currencies other than the euro; such changes are reported separately within the Consolidated Statement of Comprehensive Income. A currency profile of the Group’s net debt and net worth is presented in note 20.21. The Group’s established policy is to spread its net worth across the currencies of its various operations with the objective of limiting its exposure to individual currencies and thus promoting consistency with the geographical balance of its operations. In order to achieve this objective, the Group manages its borrowings, where practicable and cost effective, to hedge a portion of its foreign currency assets. Hedging is done using currency borrowings in the same currency as the assets being hedged or through the use of other hedging methods such as currency swaps.
165 |
CRH Annual Report and Form 20-F|2017 |
22. Capital and Financial Risk Management - continued
The following table demonstrates the sensitivity of profit/(loss)profit before tax and equity to selected movements in the relevant US$/€euro/US Dollar exchange rate (with all other variables held constant); the US Dollar has been selected as the appropriate currency for this analysis given the materiality of the Group’s activities in the United States.US. The impact on profit/(loss)profit before tax is based on changing the US$/€euro/US Dollar exchange rate used in calculating profit/(loss)profit before tax for the period. The impact on total equity and financial instruments is calculated by changing the US$/€euro/US Dollar exchange rate used in measuring the closing balance sheet.
Percentage change in | +/- 5% | +/- 2.5% | ||||||||||
Impact on | 2017 | |||||||||||
-/+€ | ||||||||||||
-/+€ | ||||||||||||
2016 | -/+€54m | -/+€27m | ||||||||||
2015 | -/+€27m | -/+€14m | ||||||||||
Impact on total equity* | 2017 | |||||||||||
-/+ € | -/+ € | |||||||||||
2016 | -/+€ | -/+€ | ||||||||||
2015 | -/+€230m | -/+€115m | ||||||||||
* Includes the impact on financial instruments which is as | 2017 | |||||||||||
+/-€ | +/-€ | |||||||||||
2016 | +/-€ | +/-€ | ||||||||||
2015 | +/-€181m | +/-€91m |
(i) | Sensitivity analysis for exchange rates has been presented for continuing operations only. |
Financial instruments include deposits, money market funds, bank loans, medium termmedium-term notes and other fixed term debt, interest rate swaps, commodity swaps and foreign exchange contracts. They exclude trade receivables and trade payables.
Credit/counterparty risk
In addition to cash at bank and in hand, the Group holds significant cash balances which are invested on a short-term basis and are classified as cash equivalents (see note 22)23). These deposits and other financial instruments (principally certain derivatives and loans and receivables included within financial assets) give rise to credit risk on amounts due from counterparty financial institutions (stemming from their insolvency or a downgrade in their credit ratings). Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty primarily depending on its credit rating and by regular review of these ratings. Acceptable credit ratings are high investment-grade ratings - generallyin general- counterparties have ratings of A2/AA3/A- or higher from Moody’s/Standard & Poor’s ratings agencies.
The maximum exposure arising in the event of default on the part of the counterparty (including insolvency) is the carrying value of the relevant financial instrument.
In its worldwide insurance programme, the Group carries appropriate levels of insurance for typical business risks (including product liability) with various leading insurance companies. However, in the event of the failure of one or more of its insurance counterparties, the Group could be impacted by losses where recovery from such counterparties is not possible.
Credit risk arising in the context of the Group’s operations is not significant with the total bad debt provision at the balance sheet date amounting to 4.6%4.1% of gross trade receivables (2013: 5.5%(2016: 4.3%). Customer credit risk is managed at appropriate Group locations according to established policies, procedures and controls. Customer credit quality is assessed in line with strict credit rating criteria and credit limits are established where appropriate. Outstanding customer balances are regularly monitored and a review for indicators of impairment (evidence of financial difficulty of the customer, payment default, breach of contract etc.) is carried out at each reporting date. Significant balances are reviewed individually while smaller balances are grouped and assessed collectively. Receivables balances are in general unsecured andnon-interest-bearing. The trade receivables balances disclosed in note 1718 comprise a large number of customers spread across the Group’s activities and geographies with balances classified as neither“neither past due nor impairedimpaired” representing 72%64% of the total trade receivables balance at the balance sheet date (2013: 72%(2016: 68%); amounts receivable from related parties (notes 1718 and 31)33) are immaterial. Factoring and credit guarantee arrangements are employed in certain of the Group’s operations where deemed to be of benefit by operational management.
Liquidity risk
The principal liquidity risks faced by the Group stem from the maturation of debt obligations and derivative transactions. A downgrade of CRH’s credit ratings may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. The Group’s corporate treasury function ensures that sufficient resources are available to meet such liabilities as they fall due through a combination of cash and cash equivalents, cash flows and undrawn committed bank facilities. Flexibility in funding sources is achieved through a variety of means including (i) maintaining cash and cash equivalents only with a diversitydiverse group ofhighly-rated counterparties;
(ii) limiting the annual maturity of such balances; (iii) borrowing the bulk of the Group’s debt requirements under committed bank lines or other term financing; and (iv) having surplus committed lines of credit.
The undrawn committed facilities available to the Group as at the balance sheet date are quantified in note 23;24; these facilities span a wide number ofhighly-rated financial institutions thus minimising any potential exposure arising from concentrations in borrowing sources. The repayment schedule (analysed by maturity date) applicable to the Group’s outstandinginterest-bearing loans and borrowings as at the balance sheet date is also presented in note 23.24.
The Group has an€8 billion Euro Medium-Term Note (EMTN) Programme in place, which along with a€1.5 billion Euro Commercial Paper Programme and a US$1.5 billion US Dollar Commercial Paper Programme means we have framework programmes in the money and capital markets in place that allow the Group to issue in the relevant markets within a short period of time.
Commodity price risk
The fair value of derivatives used to hedge future energy costs was€11 million favourable as at the balance sheet date (2016:€2 million unfavourable).
166 |
CRH Annual Report and Form 20-F|2017 |
21. Capital and Financial Risk Management|continued
The tables below show the projected contractual undiscounted total cash outflows (principal and interest) arising from the Group’s trade and other payables, gross debt and derivative financial instruments. The tables also include the gross cash inflows projected to arise from derivative financial instruments. These projections are based on the interest and foreign exchange rates applying at the end of the relevant financial year.
Within 1 year €m | Between 1 and 2 years €m | Between 2 and 3 years €m | Between 3 and 4 years €m | Between 4 and 5 years €m | After 5 years €m | Total €m | Within 1 year €m | Between 1 and 2 years €m | Between 2 and 3 years €m | Between 3 and 4 years €m | Between 4 and 5 years €m | After 5 years €m | Total €m | |||||||||||||||||||||||||||||||||||||||||||
At 31 December 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
At 31 December 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial liabilities - cash outflows | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade and other payables | 2,894 | 178 | 25 | 16 | 11 | 56 | 3,180 | 4,534 | 126 | 38 | 20 | 16 | 36 | 4,770 | ||||||||||||||||||||||||||||||||||||||||||
Finance leases | 2 | 2 | 2 | 1 | 2 | 4 | 13 | 3 | 2 | 2 | 1 | 1 | 3 | 12 | ||||||||||||||||||||||||||||||||||||||||||
Other interest-bearing loans and borrowings | 452 | 1,371 | 1 | 536 | 500 | 2,882 | 5,742 | 320 | 501 | 751 | 934 | 362 | 5,082 | 7,950 | ||||||||||||||||||||||||||||||||||||||||||
Interest payments on other interest-bearing loans and borrowings | 253 | 207 | 157 | 137 | 90 | 305 | 1,149 | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest payments on finance leases | 1 | - | - | - | - | 2 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest payments on other interest-bearing loans and borrowings (i) | 283 | 260 | 231 | 200 | 184 | 1,381 | 2,539 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps - gross cash outflows | 1,729 | - | - | - | - | - | 1,729 | 2,391 | - | - | - | - | - | 2,391 | ||||||||||||||||||||||||||||||||||||||||||
Gross projected cash outflows | 5,330 | 1,758 | 185 | 690 | 603 | 3,247 | 11,813 | 7,532 | 889 | 1,022 | 1,155 | 563 | 6,504 | 17,665 | ||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments - cash inflows | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps - net cash inflows | (34 | ) | (28 | ) | (19 | ) | (14 | ) | (6 | ) | (18 | ) | (119 | ) | ||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps - net cash inflows (ii) | (26) | (14) | (13) | (13) | (13) | (16) | (95) | |||||||||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps - gross cash inflows | (1,738 | ) | - | - | - | - | - | (1,738 | ) | (2,399) | - | - | - | - | - | (2,399) | ||||||||||||||||||||||||||||||||||||||||
Gross projected cash inflows | (1,772 | ) | (28 | ) | (19 | ) | (14 | ) | (6 | ) | (18 | ) | (1,857 | ) | (2,425) | (14) | (13) | (13) | (13) | (16) | (2,494) | |||||||||||||||||||||||||||||||||||
The equivalent disclosure for the prior year is as follows: | The equivalent disclosure for the prior year is as follows: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
At 31 December 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
At 31 December 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial liabilities - cash outflows | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade and other payables | 2,754 | 140 | 20 | 22 | 22 | 128 | 3,086 | 4,815 | 311 | 46 | 72 | 14 | 41 | 5,299 | ||||||||||||||||||||||||||||||||||||||||||
Finance leases | 3 | 2 | 1 | 6 | 1 | 2 | 15 | 2 | 2 | 2 | 2 | 1 | 5 | 14 | ||||||||||||||||||||||||||||||||||||||||||
Other interest-bearing loans and borrowings | 955 | 353 | 1,203 | - | 472 | 2,445 | 5,428 | 280 | 620 | 501 | 751 | 980 | 4,589 | 7,721 | ||||||||||||||||||||||||||||||||||||||||||
Interest payments on finance leases | 1 | 1 | - | - | - | - | 2 | 1 | 1 | 1 | 1 | - | 2 | 6 | ||||||||||||||||||||||||||||||||||||||||||
Interest payments on other interest-bearing loans and borrowings | 263 | 214 | 178 | 134 | 116 | 318 | 1,223 | |||||||||||||||||||||||||||||||||||||||||||||||||
Interest payments on other interest-bearing loans and borrowings (i) | 279 | 278 | 228 | 198 | 166 | 1,154 | 2,303 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps - gross cash outflows | 2,196 | 327 | - | - | - | - | 2,523 | 2,904 | - | - | - | - | - | 2,904 | ||||||||||||||||||||||||||||||||||||||||||
Gross projected cash outflows | 6,172 | 1,037 | 1,402 | 162 | 611 | 2,893 | 12,277 | 8,281 | 1,212 | 778 | 1,024 | 1,161 | 5,791 | 18,247 | ||||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments - cash inflows | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps - net cash inflows | (40 | ) | (30 | ) | (20 | ) | (12 | ) | (13 | ) | (22 | ) | (137 | ) | ||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps - net cash inflows (ii) | (30) | (30) | (17) | (16) | (16) | (45) | (154) | |||||||||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps - gross cash inflows | (2,183 | ) | (308 | ) | - | - | - | - | (2,491 | ) | (2,894) | - | - | - | - | - | (2,894) | |||||||||||||||||||||||||||||||||||||||
Gross projected cash inflows | (2,223 | ) | (338 | ) | (20 | ) | (12 | ) | (13 | ) | (22 | ) | (2,628 | ) | (2,924) | (30) | (17) | (16) | (16) | (45) | (3,048) |
Commodity price risk
(i) | At 31 December 2017 and 31 December 2016, a portion of the Group’s long-term debt carried variable interest rates. The Group uses the interest rates in effect on 31 December to calculate the interest payments on the long-term debt for the periods indicated. |
The fair value of derivatives used to hedge future energy costs was€19 million unfavourable as at the balance sheet date (2013:€4 million unfavourable).
(ii) | The Group uses interest rate swaps to help manage its interest cost. Under these contracts the Group has agreed to exchange at predetermined intervals, the difference between fixed and variable interest amounts calculated by reference to apre-agreed notional principal. The Group uses the interest rates in effect on 31 December to calculate the net interest receipts or payments on these contracts. |
167 |
CRH Annual Report and Form 20-F|2017 |
22.23. Cash and Cash Equivalents
Cash and cash equivalents balances are spread across a wide number of highly-rated financial institutions. The credit risk attaching to these items is documented in note 21.22.
Cash and cash equivalents are included in the Consolidated Balance Sheet at fair value and are analysed as follows:
2014 | 2013 | |||||||||||||||
€m | €m | |||||||||||||||
2017 €m | 2016 €m | |||||||||||||||
Cash at bank and in hand | 689 | 582 | 737 | 1,141 | ||||||||||||
Investments (short-term deposits) | 2,573 | 1,958 | 1,378 | 1,308 | ||||||||||||
Total | 3,262 | 2,540 | 2,115 | 2,449 |
Cash at bank earns interest at floating rates based on daily deposit bank rates. Short-term deposits, which include bank and money market deposits, are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
Cash and cash equivalents at fair value include the following for the purposes of the Consolidated Statement of Cash Flows:
Cash at bank and in hand | 689 | 582 | ||||||
Investments (short-term deposits) | 2,573 | 1,958 | ||||||
Cash at bank and in hand reclassified as held for sale | 33 | - | ||||||
Total | 3,295 | 2,540 |
2017 €m | 2016 €m | |||||||
Cash at bank and in hand | 737 | 1,141 | ||||||
Investments (short-term deposits) | 1,378 | 1,308 | ||||||
Cash at bank and in hand reclassified as held for sale | 20 | - | ||||||
Total | 2,135 | 2,449 |
23.24. Interest-bearing Loans and Borrowings
Loans and borrowings outstanding
2014 €m | 2013 €m | 2017 €m | 2016 €m | |||||||||||||
Bank overdrafts | 70 | 40 | 66 | 78 | ||||||||||||
Bank loans | 16 | 28 | 295 | 200 | ||||||||||||
Finance leases | 13 | 15 | 12 | 14 | ||||||||||||
Bonds and private placements | 5,750 | 5,439 | ||||||||||||||
Bonds | 7,602 | 7,497 | ||||||||||||||
Other | 17 | 18 | 1 | 1 | ||||||||||||
Interest-bearing loans and borrowings* | 5,866 | 5,540 | ||||||||||||||
Interest-bearing loans and borrowings | 7,976 | 7,790 | ||||||||||||||
Bank overdrafts reclassified as held for sale | | 5 | | | - | | ||||||||||
Total | 7,981 | 7,790 |
Interest-bearing loans and borrowings include loans of€2 million (2016:€3 million) secured on specific items of property, plant and equipment; these figures do not include finance leases.
168 |
|
Maturity profile of loans and borrowings and undrawn committed facilities
As at 31 December 2014 | As at 31 December 2013 | |||||||||||||||||||||||||||||||||||
Loans and borrowings €m | Undrawn committed facilities** €m | Loans and borrowings €m | Undrawn committed facilities** €m | As at 31 December 2017 | As at 31 December 2016 | |||||||||||||||||||||||||||||||
Loans and borrowings €m | Undrawn €m | Loans and borrowings €m | Undrawn €m | |||||||||||||||||||||||||||||||||
Within one year | 447 | 22 | 961 | - | 316 | - | 275 | 197 | ||||||||||||||||||||||||||||
Between one and two years | 1,395 | - | 349 | 40 | 498 | - | 629 | - | ||||||||||||||||||||||||||||
Between two and three years | - | - | 1,240 | 1,625 | 746 | - | 500 | - | ||||||||||||||||||||||||||||
Between three and four years | 562 | - | 4 | 85 | 930 | - | 748 | 91 | ||||||||||||||||||||||||||||
Between four and five years | 505 | 2,641 | 506 | 200 | 359 | 3,554 | 978 | 2,746 | ||||||||||||||||||||||||||||
After five years | 2,957 | - | 2,480 | - | 5,127 | - | 4,660 | - | ||||||||||||||||||||||||||||
Total | 5,866 | 2,663 | 5,540 | 1,950 | 7,976 | 3,554 | 7,790 | 3,034 | ||||||||||||||||||||||||||||
Amounts due within one year reclassified as held for sale | | 5 | | - | | - | | - | ||||||||||||||||||||||||||||
Total | | 7,981 | | 3,554 | 7,790 | 3,034 |
The Group manages its borrowing ability by entering into committed borrowing agreements. Revolving committed bank facilities are generally available to the Group for periods of up to five years from the date of inception. The undrawn committed facilities figures shown in the table above represent the facilities available to be drawn by the Group at 31 December 2017. |
Guarantees
The Company has given letters of guarantee to secure obligations of subsidiary undertakings as follows:€5.87.7 billion in respect of loans and borrowings, bank advances, derivative obligations and future lease obligations (2013:(2016:€5.57.6 billion), and€288 million0.2 billion in respect of letters of credit (2013:(2016:€270 million) and€0.3 billion).5 million in respect of other obligations (2013:€nil million).
Pursuant to the provisions
Any Irish registered wholly-owned subsidiary of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteedmay avail of the liabilities ofexemption from filing its wholly-owned subsidiary undertakings and the Oldcastle Finance Company and Oldcastle North America Funding Company general partnerships in the Republic of Irelandstatutory financial statements for the financial year ended 31 December 2017 as permitted by Section 357 of the Companies Act 2014 and as a result, suchif an Irish registered wholly-owned subsidiary undertakings andof the general partnerships have been exemptedCompany elects to avail of this exemption,
there will be in force an irrevocable guarantee from the filing provisionsCompany in respect of all commitments entered into by suchwholly-owned subsidiary, including amounts shown as liabilities (within the meaning of Section 7, Companies (Amendment) Act, 1986 and Regulation 20357(1)(b) of the European Communities (Accounts) Regulations, 1993 respectively.Companies Act 2014) in suchwholly-owned subsidiary’s statutory financial statements for the year ended 31 December 2017.
Lender covenants
The Group’s major bank facilities and debt issued pursuant to Note Purchase Agreements in private placements require the Group to maintain certain financial covenants.Non-compliance with financial covenants would give the relevant lenders the right to terminate facilities and demand early repayment of any sums drawn thereunder thus altering the maturity profile of the Group’s debt and the Group’s liquidity. Calculations for financial covenants are completed fortwelve-month periods half-yearly on 30 June and 31 December. The Group was in full compliance with its financial covenants throughout each of the periods presented. The Group is not aware of any stated events of default as defined in the Agreements.
The financial covenants are:
(1) | Minimum interestcover defined as PBITDA/net interest (all as defined in the relevant agreement) cover at no lower than 4.5 |
(2) | Minimum networth defined as total equity plus deferred tax liabilities and capital grants less repayable capital grants being in aggregate no lower than€ |
169 |
CRH Annual Report and Form 20-F|2017 |
24.25. Derivative Financial Instruments
The fair values of derivative financial instruments are analysed by year of maturity and by accounting designation as follows:
Fair value hedges €m | Cash flow hedges €m | Net €m | Not designated as hedges €m | Total €m | ||||||||||||||||
At 31 December 2014 | ||||||||||||||||||||
Derivative assets | ||||||||||||||||||||
Within one year - current assets | - | 2 | 13 | - | 15 | |||||||||||||||
Between one and two years | 22 | - | - | - | 22 | |||||||||||||||
Between three and four years | 26 | - | - | - | 26 | |||||||||||||||
Between four and five years | - | - | - | 9 | 9 | |||||||||||||||
After five years | 30 | - | - | - | 30 | |||||||||||||||
Non-current assets | 78 | - | - | 9 | 87 | |||||||||||||||
Total derivative assets | 78 | 2 | 13 | 9 | 102 | |||||||||||||||
Derivative liabilities | ||||||||||||||||||||
Within one year - current liabilities | - | (7 | ) | (4 | ) | (9 | ) | (20 | ) | |||||||||||
Between one and two years | - | (1 | ) | - | - | (1 | ) | |||||||||||||
Between two and three years | - | (1 | ) | - | - | (1 | ) | |||||||||||||
Between three and four years | - | (1 | ) | - | - | (1 | ) | |||||||||||||
Non-current liabilities | - | (3 | ) | - | - | (3 | ) | |||||||||||||
Total derivative liabilities | - | (10 | ) | (4 | ) | (9 | ) | (23 | ) | |||||||||||
Net asset arising on derivative financial instruments | 78 | (8 | ) | 9 | - | 79 | ||||||||||||||
The equivalent disclosure for the prior year is as follows: |
| |||||||||||||||||||
At 31 December 2013 | ||||||||||||||||||||
Derivative assets | ||||||||||||||||||||
Within one year - current assets | 9 | - | 8 | - | 17 | |||||||||||||||
Between two and three years | 30 | - | - | - | 30 | |||||||||||||||
Between four and five years | 28 | - | - | - | 28 | |||||||||||||||
After five years | - | - | - | 5 | 5 | |||||||||||||||
Non-current assets | 58 | - | - | 5 | 63 | |||||||||||||||
Total derivative assets | 67 | - | 8 | 5 | 80 | |||||||||||||||
Derivative liabilities | ||||||||||||||||||||
Within one year - current liabilities | - | (2 | ) | (17 | ) | - | (19 | ) | ||||||||||||
Between one and two years | - | (21 | ) | - | - | (21 | ) | |||||||||||||
Between two and three years | - | (1 | ) | - | - | (1 | ) | |||||||||||||
Between three and four years | - | (1 | ) | - | - | (1 | ) | |||||||||||||
After five years | (11 | ) | - | - | - | (11 | ) | |||||||||||||
Non-current liabilities | (11 | ) | (23 | ) | - | - | (34 | ) | ||||||||||||
Total derivative liabilities | (11 | ) | (25 | ) | (17 | ) | - | (53 | ) | |||||||||||
Net asset arising on derivative financial instruments | 56 | (25 | ) | (9 | ) | 5 | 27 |
Fair value €m | Cash flow €m | Net €m | Not designated as hedges €m | Total €m | ||||||||||||||||
At 31 December 2017 | ||||||||||||||||||||
Derivative assets | ||||||||||||||||||||
Within one year - current assets | 2 | 11 | 19 | 2 | 34 | |||||||||||||||
Between one and two years | - | 1 | - | 3 | 4 | |||||||||||||||
After five years | 26 | - | - | - | 26 | |||||||||||||||
Non-current assets | 26 | 1 | - | 3 | 30 | |||||||||||||||
Total derivative assets | 28 | 12 | 19 | 5 | 64 | |||||||||||||||
Derivative liabilities | ||||||||||||||||||||
Within one year - current liabilities | - | (1) | (10) | - | (11) | |||||||||||||||
After five years | (3) | - | - | - | (3) | |||||||||||||||
Non-current liabilities | (3) | - | - | - | (3) | |||||||||||||||
Total derivative liabilities | (3) | (1) | (10) | - | (14) | |||||||||||||||
Net asset arising on derivative financial instruments | 25 | 11 | 9 | 5 | 50 | |||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||
At 31 December 2016 | ||||||||||||||||||||
Derivative assets | ||||||||||||||||||||
Within one year - current assets | - | 2 | 21 | - | 23 | |||||||||||||||
Between one and two years | 13 | 1 | - | - | 14 | |||||||||||||||
Between two and three years | - | - | - | 6 | 6 | |||||||||||||||
After five years | 33 | - | - | - | 33 | |||||||||||||||
Non-current assets | 46 | 1 | - | 6 | 53 | |||||||||||||||
Total derivative assets | 46 | 3 | 21 | 6 | 76 | |||||||||||||||
Derivative liabilities | ||||||||||||||||||||
Within one year - current liabilities | - | (1) | (31) | - | (32) | |||||||||||||||
Total derivative liabilities | - | (1) | (31) | - | (32) | |||||||||||||||
Net asset/(liability) arising on derivative financial instruments | 46 | 2 | (10) | 6 | 44 |
CRH Annual Report and Form 20-F|201724. Derivative Financial Instruments|continued
At 31 December 20142017 and 2013,2016, the Group had no master netting or similar arrangements, collateral posting requirements, andor enforceable right ofset-off agreements with any of its derivative counterparts.
Fair value hedges consist of interest rate swaps and currency swaps. These instruments hedge risks arising from changes in asset/liability fair values due to interest rate and foreign exchange rate movements.
Cash flow hedges consist of forward foreign exchange and commodity contracts and interest rate and currency swaps. These instruments hedge risks arising to future cash flows from movements in foreign exchange rates, commodity prices and interest rates. Cash flow hedges are expected to affect profit and loss over the period to maturity.
Net investment hedges comprise cross-currency swaps and hedge changes in the value of net investments due to currency movements.
The profit/(loss)/profit arising on fair value, cash flow, net investment hedges and related hedged items reflected in the Consolidated Income Statement is shown below:
2014 €m | 2013 €m | 2012 €m | ||||||||||
Cash flow hedges - ineffectiveness | - | - | (3 | ) | ||||||||
Fair value of hedge instruments | 15 | (68 | ) | (16 | ) | |||||||
Fair value of the hedged items | (16 | ) | 71 | 21 | ||||||||
Components of other comprehensive income - cash flow hedges | ||||||||||||
Losses arising during the year: | ||||||||||||
- commodity forward contracts | (6 | ) | (2 | ) | - | |||||||
Reclassification adjustments for losses included in: | ||||||||||||
- the Consolidated Income Statement | - | - | 1 | |||||||||
Total | (6 | ) | (2 | ) | 1 | |||||||
Fair value hierarchy | 2014 | 2013 | ||||||||||
Level 2 €m | Level 2 €m | |||||||||||
Assets measured at fair value | ||||||||||||
Fair value hedges - cross currency and interest rate swaps | 78 | 67 | ||||||||||
Net investment hedges - cross currency swaps | 13 | 8 | ||||||||||
Not designated as hedges (held-for-trading) - interest rate swaps | 9 | 5 | ||||||||||
Cash flow hedges - cross currency, interest rate swaps and commodity forwards | 2 | - | ||||||||||
Total | 102 | 80 | ||||||||||
Liabilities measured at fair value | ||||||||||||
Fair value hedges - cross currency and interest rate swaps | - | (11 | ) | |||||||||
Cash flow hedges - cross currency, interest rate swaps and commodity forwards | (10 | ) | (25 | ) | ||||||||
Net investment hedges - cross currency swaps | (4 | ) | (17 | ) | ||||||||
Not designated as hedges (held-for-trading) - interest rate swaps | (9 | ) | - | |||||||||
Total | (23 | ) | (53 | ) |
2017 €m | 2016 €m | 2015 €m | ||||||||||
Fair value of hedge instruments | (16) | (11) | (16) | |||||||||
Fair value of the hedged items | 18 | 13 | 13 | |||||||||
Components of other comprehensive income - cash flow hedges | ||||||||||||
Gains/(losses) arising during the year: | ||||||||||||
- commodity forward contracts | 9 | 14 | (2) | |||||||||
- currency forward contracts | (1) | - | - | |||||||||
Total | 8 | 14 | (2) | |||||||||
Fair value hierarchy | 2017 Level 2 €m | 2016 | ||||||||||
Assets measured at fair value | ||||||||||||
Fair value hedges - cross-currency and interest rate swaps | 28 | 46 | ||||||||||
Net investment hedges - cross-currency swaps | 19 | 21 | ||||||||||
Cash flow hedges - cross-currency, interest rate swaps and commodity forwards | 12 | 3 | ||||||||||
Not designated as hedges (held for trading) - interest rate swaps | 5 | 6 | ||||||||||
Total | 64 | 76 | ||||||||||
Liabilities measured at fair value | ||||||||||||
Fair value hedges - cross-currency and interest rate swaps | (3) | - | ||||||||||
Net investment hedges - cross-currency swaps | (10) | (31) | ||||||||||
Cash flow hedges - cross-currency, interest rate swaps and commodity forwards | (1) | (1) | ||||||||||
Total | (14) | (32) |
At 31 December 20142017 and 20132016 there were no derivatives valued using Level 1 or Level 3 fair value techniques. Valuation methods for Levels 1, 2 and 3 are described in the “fair value hierarchy” section of the accounting policies on page 145.
171 |
CRH Annual Report and Form 20-F|2017 |
26. Provisions for Liabilities
At 1 January €m | Translation adjustment €m | Arising on acquisition (note 31) €m | Provided €m | Utilised during year €m | Disposed €m | Reversed unused €m | Discount unwinding €m | At 31 December €m | ||||||||||||||||||||||||||||
31 December 2017 | ||||||||||||||||||||||||||||||||||||
Insurance (i) | 286 | (28) | 3 | 101 | (61) | - | (19) | 10 | 292 | |||||||||||||||||||||||||||
Environment and remediation (ii) | 430 | (25) | 43 | 27 | (29) | - | (14) | 9 | 441 | |||||||||||||||||||||||||||
Rationalisation and redundancy (iii) | 23 | - | - | 32 | (27) | - | (3) | - | 25 | |||||||||||||||||||||||||||
Other (iv) | 321 | (19) | 3 | 106 | (37) | (1) | (72) | 5 | 306 | |||||||||||||||||||||||||||
Total | 1,060 | (72) | 49 | 266 | (154) | (1) | (108) | 24 | 1,064 | |||||||||||||||||||||||||||
Analysed as: | ||||||||||||||||||||||||||||||||||||
Non-current liabilities | 678 | 693 | ||||||||||||||||||||||||||||||||||
Current liabilities | 382 | 371 | ||||||||||||||||||||||||||||||||||
Total | 1,060 | 1,064 | ||||||||||||||||||||||||||||||||||
The equivalent disclosure for the prior year is as follows: | ||||||||||||||||||||||||||||||||||||
31 December 2016 | ||||||||||||||||||||||||||||||||||||
Insurance (i) | 244 | 5 | - | 105 | (76) | - | (11) | 19 | 286 | |||||||||||||||||||||||||||
Environment and remediation (ii) | 450 | (21) | (16) | 38 | (17) | (1) | (9) | 6 | 430 | |||||||||||||||||||||||||||
Rationalisation and redundancy (iii) | 26 | - | 1 | 23 | (25) | - | (2) | - | 23 | |||||||||||||||||||||||||||
Other (iv) | 315 | (10) | (3) | 77 | (29) | - | (34) | 5 | 321 | |||||||||||||||||||||||||||
Total | 1,035 | (26) | (18) | 243 | (147) | (1) | (56) | 30 | 1,060 | |||||||||||||||||||||||||||
Analysed as: | ||||||||||||||||||||||||||||||||||||
Non-current liabilities | 603 | 678 | ||||||||||||||||||||||||||||||||||
Current liabilities | 432 | 382 | ||||||||||||||||||||||||||||||||||
Total | 1,035 | 1,060 |
Notes (i) to (iv) are set out overleaf.
172 |
CRH Annual Report and Form 20-F|2017 |
25. Provisions for Liabilities
Net present cost | At 1 January €m | Translation adjustment €m | Arising on acquisition (note 30) €m | Provided €m | Utilised during year €m | Reclassified €m | Reversed unused €m | Discount unwinding €m | At 31 December €m | |||||||||||||||||||||||||||
31 December 2014 | ||||||||||||||||||||||||||||||||||||
Insurance (i) | 181 | 20 | - | 52 | (50 | ) | - | (3 | ) | 8 | 208 | |||||||||||||||||||||||||
Environment and remediation (ii) | 87 | 5 | - | 12 | (4 | ) | (4 | ) | (4 | ) | 4 | 96 | ||||||||||||||||||||||||
Rationalisation and redundancy (iii) | 43 | 1 | - | 30 | (48 | ) | - | (3 | ) | 1 | 24 | |||||||||||||||||||||||||
Other (iv) | 69 | 1 | 1 | 14 | (8 | ) | (3 | ) | (9 | ) | 3 | 68 | ||||||||||||||||||||||||
Total | 380 | 27 | 1 | 108 | (110 | ) | (7 | ) | (19 | ) | 16 | 396 | ||||||||||||||||||||||||
Analysed as: | ||||||||||||||||||||||||||||||||||||
Non-current liabilities | 231 | 257 | ||||||||||||||||||||||||||||||||||
Current liabilities | 149 | 139 | ||||||||||||||||||||||||||||||||||
Total | 380 | 396 | ||||||||||||||||||||||||||||||||||
The equivalent disclosure for the prior year is as follows: |
| |||||||||||||||||||||||||||||||||||
31 December 2013 | ||||||||||||||||||||||||||||||||||||
Insurance (i) | 191 | (7 | ) | - | 42 | (50 | ) | - | (4 | ) | 9 | 181 | ||||||||||||||||||||||||
Environment and remediation (ii) | 82 | (1 | ) | 5 | 6 | (4 | ) | - | (4 | ) | 3 | 87 | ||||||||||||||||||||||||
Rationalisation and redundancy (iii) | 26 | - | 5 | 55 | (38 | ) | - | (6 | ) | 1 | 43 | |||||||||||||||||||||||||
Other (iv) | 67 | (1 | ) | 4 | 14 | (11 | ) | - | (6 | ) | 2 | 69 | ||||||||||||||||||||||||
Total | 366 | (9 | ) | 14 | 117 | (103 | ) | - | (20 | ) | 15 | 380 | ||||||||||||||||||||||||
Analysed as: | ||||||||||||||||||||||||||||||||||||
Non-current liabilities | 256 | 231 | ||||||||||||||||||||||||||||||||||
Current liabilities | 110 | 149 | ||||||||||||||||||||||||||||||||||
Total | 366 | 380 |
(i) | This provision relates to actual and potential obligations arising under the self-insurance components of the Group’s insurance arrangements which comprise employers’ liability (workers’ compensation in the |
(ii) | This provision comprises obligations governing site remediation, restoration and |
(iii) | These provisions relate to irrevocable commitments under various rationalisation and redundancy programmes, none of which is individually material to the Group. In |
(iv) |
|
Discount rate sensitivity analysis
173 |
All non-current provisions are discounted at a rate of 5% (2013: 5%; 2012: 5%), consistent with the average effective interest rate for the Group’s borrowings. There is€nil million impact (2013:€nil million; 2012:€1 million) on profit before tax of a 1% change in the discount rate applicable to provisions, with all other variables held constant.
CRH Annual Report and Form 20-F|2017 |
26.27. Deferred Income Tax
The deductible and taxable temporary differences in respect of which deferred tax has been recognised are as follows:
2014 €m | 2013 €m | 2017 €m | 2016 €m | |||||||||||||
Reported in balance sheet after offset | ||||||||||||||||
Deferred tax liabilities | 1,305 | 1,166 | 1,666 | 2,008 | ||||||||||||
Deferred tax assets | (171 | ) | (107 | ) | (95) | (159) | ||||||||||
Net deferred income tax liability | 1,134 | 1,059 | 1,571 | 1,849 | ||||||||||||
Deferred income tax assets (deductible temporary differences) | ||||||||||||||||
Deficits on Group retirement benefit obligations (note 27) | 140 | 74 | ||||||||||||||
Deficits on Group retirement benefit obligations (note 28) | 72 | 119 | ||||||||||||||
Revaluation of derivative financial instruments to fair value | 14 | 15 | 7 | 12 | ||||||||||||
Tax loss carryforwards | 97 | 98 | 132 | 150 | ||||||||||||
Share-based payment expense | 2 | 2 | 29 | 38 | ||||||||||||
Provisions for liabilities and working capital-related items | 187 | 144 | 157 | 350 | ||||||||||||
Other deductible temporary differences | 37 | 38 | 145 | 83 | ||||||||||||
Total | 477 | 371 | 542 | 752 |
Deferred income tax assets have been recognised in respect of all deductible temporary differences, with the exception of some tax loss carryforwards. The amount of tax losses where recovery is not probable and is therefore not recognised in the Consolidated Balance Sheet is€937 million (2013:1.5 billion (2016:€712 million)1.4 billion). The vast majority willeither do not expire based on current tax legislation or they expire post 2019 (2013: 2018)2022 (2016: 2021).
Deferred income tax liabilities (taxable temporary differences) | ||||||||
Taxable temporary differences principally attributable to accelerated tax depreciation and fair value adjustments arising on acquisition (i) | 1,575 | 1,400 | ||||||
Revaluation of derivative financial instruments to fair value | 18 | 13 | ||||||
Rolled-over capital gains | 18 | 17 | ||||||
Total | 1,611 | 1,430 | ||||||
(i) Fair value adjustments arising on acquisition principally relate to property, plant and equipment. | ||||||||
Movement in net deferred income tax liability | ||||||||
At 1 January | 1,059 | 1,041 | ||||||
Translation adjustment | 125 | (37 | ) | |||||
Net expense for the year (note 10) | 36 | 4 | ||||||
Arising on acquisition (note 30) | 2 | 8 | ||||||
Reclassified as held for sale | (19 | ) | - | |||||
Movement in deferred tax asset on Group retirement benefit obligations | (69 | ) | 43 | |||||
At 31 December | 1,134 | 1,059 |
Deferred income tax liabilities (taxable temporary differences) | ||||||||
Taxable temporary differences principally attributable to accelerated tax depreciation and fair value adjustments arising on acquisition (i) | 2,089 | 2,569 | ||||||
Revaluation of derivative financial instruments to fair value | 11 | 18 | ||||||
Rolled-over capital gains | 13 | 14 | ||||||
Total | 2,113 | 2,601 |
Movement in net deferred income tax liability | ||||||||
At 1 January | 1,849 | 1,874 | ||||||
Translation adjustment | (173) | 41 | ||||||
Net income for the year (note 11) (ii) | (265) | (15) | ||||||
Arising on acquisition (note 31) | 132 | (35) | ||||||
Reclassified as held for sale | (14) | - | ||||||
Disposal (note 5) | 2 | (1) | ||||||
Movement in deferred tax asset on Group retirement benefit obligations | 33 | (3) | ||||||
Movement in deferred tax asset on share-based payment expense | 7 | (12) | ||||||
At 31 December | 1,571 | 1,849 |
(i) | Fair value adjustments arising on acquisition principally relate to property, plant and equipment. |
(ii) | The net income for the year includes an expense of€1 million (2016:€2 million) relating to discontinued operations. |
174 |
CRH Annual Report and Form 20-F|2017 |
27.28. Retirement Benefit Obligations
The Group operates either defined benefit or defined contribution pension schemes in all of its principal operating areas. The disclosures included below relate to all pension schemes in the Group, including any schemes reclassified as held for sale.Group.
The Group operates defined benefit pension schemes in Belgium, Brazil, Canada, France, Germany, Italy, the Netherlands, the Philippines, the Republic of Ireland, BritainRomania, Serbia, Slovakia, Switzerland, the UK and Northern Ireland,the US. The Group has a mixture of funded and unfunded defined benefit pension schemes. The net liability of the funded schemes is€175 million (2016:€444 million). Unfunded obligations (including jubilee, post-retirement healthcare obligations and long-term service commitments) comprise of a number of schemes in Brazil, Canada, France, Germany, Italy, the Netherlands, Belgium, Germany,the Philippines, Romania, Serbia, Slovakia, Switzerland and the United States; for the purposesUS, totalling a net liability of the disclosures which follow, the€202 million (2016:€147 million).
Funded defined benefit schemes in the Republic of Ireland, the Netherlands, Belgium and Germany have been aggregated into a “Eurozone” category on the basis of common currency and financial assumptions. The majority of the defined benefit pension schemes operated by the Group are funded as disclosed in the analysis of the defined benefit obligation presented below with unfunded schemes restricted to one scheme in each of the NetherlandsSwitzerland and the United States and three schemes in Germany.
All funded defined benefit schemesUK are administered by separate funds that are legally separatedistinct from the Group under the jurisdiction of Trustees. Each of the Group’s schemes operate under broadly similar regulatory frameworks. The Trustees of the variousthese pension funds in existence across the Group are required by law and by their Articles of Association to act in the best interests of the scheme participants and are responsible for the definition of investment strategy and for scheme administration. Other schemes are also administered in line with the local regulatory environment. The level of benefits available to most members depends on length of service and either their average salary over their period of employment or their salary in the final years leading up to retirement. The Group’s pension
schemes in Switzerland are contribution-based schemes with guarantees to provide further contributions in the event that certain targets are not met, largely in relation to investment return and the annuity conversion factor on retirement.
Provision has been made in the financial statements for post-retirement healthcare obligations in respect of certain current and former employees principally in the United States and for long-term service commitments in respect of certain employees in the Eurozone and Switzerland. These obligations are unfunded in nature and the required disclosures form part of this note.
Defined benefit pension schemes - principal risks
Through its defined benefit pension and jubilee schemes, long-term service commitments and post-retirement healthcare plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
Asset volatilityvolatility:: Under IFRS,IAS 19, the assets of the Group’s defined benefit pension schemes are reported at fair value (using bid prices, where relevant). The majority of the schemes’ assets comprise of equities, bonds and property, all of which may fluctuate significantly in value from period to period. Given that liabilities are discounted to present value based on bond yields and that bond prices are inversely related to yields, an increase in the liability discount rate (which would reduce liabilities) would reduce bond values, though not necessarily by an equal magnitude.
Given the maturity of certain of the Group’s funded defined benefit pension schemes,de-risking frameworks have been introduced to mitigate deficit volatility and enable better matching of investment returns with the cash outflows related to benefit obligations. These frameworks entail the usage of asset-liability matching techniques, whereby triggers are set for the conversion of equity holdings into bonds of similar average duration to the relevant liabilities.
Discount rates:The discount rates employed in determining the present value of the schemes’ liabilities are determined by reference to market yields at the balance sheet date on high-quality corporate bonds of a currency and term consistent with the currency and term of the associated post-employment benefit obligations. Changes in discount rates impact the quantum of liabilities as discussed above.
Inflation riskrisk:: Some A significant amount of the Group’s pension obligations have an inflation linkage;are linked to inflation; higher inflation will lead to higher liabilities (although in most cases, caps on the level of inflationary increases are in place to protect the schemeschemes against extreme inflation).
Longevity riskrisk:: In the majority of cases, the Group’s defined benefit pension schemes provide benefits for life with spousal and dependent child reversionary provisions; increases in life expectancy will therefore give rise to higher liabilities.
Aggregation
For the purposes of the disclosures which follow for 2017, 2016 and 2015; the schemes in Belgium, France, Germany, Italy, the Netherlands, the Republic of Ireland and Slovakia have been aggregated into a “Eurozone” category on the basis of common currency and financial assumptions; schemes in Brazil, the Philippines, Romania, Serbia and the UK have been aggregated into an “Other” category.
175 |
CRH Annual Report and Form 20-F|2017 |
28. Retirement Benefit Obligations - continued
Financial assumptions - scheme liabilities
The major long-term assumptions used by the Group’s actuaries in the computation of scheme liabilities as at 31 December 2014 ,2017, 31 December 20132016 and 31 December 20122015 are as follows:
Eurozone | Britain and Northern Ireland | Switzerland | United States | |||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||
% | % | % | % | % | % | % | % | % | % | % | % | |||||||||||||||||||||||||||||||||||||
Rate of increase in: | ||||||||||||||||||||||||||||||||||||||||||||||||
- salaries | 3.75 | 4.00 | 4.00 | 4.00 | 4.30 | 4.00 | 2.25 | 2.25 | 2.25 | 3.50 | 3.50 | 3.50 | ||||||||||||||||||||||||||||||||||||
- pensions in payment | 1.75 | 2.00 | 2.00 | 3.00-3.20 | 3.30-3.50 | 3.00-3.40 | - | 0.25 | 0.25 | - | - | - | ||||||||||||||||||||||||||||||||||||
Inflation | 1.75 | 2.00 | 2.00 | 3.00 | 3.30 | 3.00 | 1.25 | 1.25 | 1.25 | 2.00 | 2.00 | 2.00 | ||||||||||||||||||||||||||||||||||||
Discount rate | 2.00 | 3.70 | 3.80 | 3.50 | 4.60 | 4.50 | 1.15 | 2.35 | 1.85 | 3.80 | 4.70 | 3.75 | ||||||||||||||||||||||||||||||||||||
Medical cost trend rate | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | 16.70 | 7.40 | 6.25 | ||||||||||||||||||||||||||||||||||||
The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19Employee Benefits are in accordance with the underlying funding valuations and represent actuarial best practice in the relevant jurisdictions taking account of mortality experience and industry circumstances. With regard to the most material of the Group’s schemes, the future life expectations factored into the relevant valuations, based on retirement at 65 years of age for current and future retirees, are as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||
Republic of Ireland | Britain and Northern Ireland | Switzerland | ||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||
Current retirees |
| |||||||||||||||||||||||||||||||||||||||||||||||
- male |
| 22.8 | 22.7 | 22.6 | 23.2 | 23.2 | 23.2 | 21.3 | 21.3 | 19.7 | ||||||||||||||||||||||||||||||||||||||
- female |
| 24.9 | 24.9 | 24.4 | 25.8 | 25.7 | 25.8 | 23.8 | 23.8 | 22.0 | ||||||||||||||||||||||||||||||||||||||
Future retirees |
| |||||||||||||||||||||||||||||||||||||||||||||||
- male |
| 25.8 | 25.7 | 25.7 | 25.6 | 25.5 | 24.8 | 23.5 | 23.5 | 19.7 | ||||||||||||||||||||||||||||||||||||||
- female |
| 26.8 | 26.7 | 26.7 | 28.2 | 28.2 | 27.4 | 25.9 | 25.9 | 22.0 |
Eurozone | Switzerland | United States and Canada | ||||||||||||||||||||||||||||||||||||||||||
2017 % | 2016 % | 2015 % | 2017 % | 2016 % | 2015 % | 2017 % | 2016 % | 2015 % | ||||||||||||||||||||||||||||||||||||
Rate of increase in: | ||||||||||||||||||||||||||||||||||||||||||||
- salaries | 3.59 | 3.41 | 3.64 | 1.25 | 1.25 | 1.75 | 3.27 | 3.28 | 3.29 | |||||||||||||||||||||||||||||||||||
- pensions in payment | 1.70 | 1.50 | 1.75 | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
Inflation | 1.75 | 1.50 | 1.75 | 0.75 | 0.75 | 0.75 | 2.00 | 2.00 | 2.00 | |||||||||||||||||||||||||||||||||||
Discount rate | 2.05 | 1.86 | 2.61 | 0.70 | 0.65 | 0.85 | 3.52 | �� | 4.01 | 4.22 | ||||||||||||||||||||||||||||||||||
Medical cost trend rate | n/a | n/a | n/a | n/a | n/a | n/a | 6.33 | 5.98 | 6.21 |
The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 represent actuarial best practice in the relevant jurisdictions, taking account of mortality experience and industry circumstances. For schemes in the Republic of Ireland and the UK, the mortality assumptions used are in accordance with the underlying funding valuations. For the Group’s most material schemes, the future life expectations factored into the relevant valuations, based on retirement at 65 years of age for current and future retirees, are as follows:
Republic of Ireland | Switzerland | United States and Canada | ||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||
Current retirees | ||||||||||||||||||||||||||||||||||||||||||||
- male | 22.7 | 22.5 | 22.8 | 22.4 | 22.3 | 21.5 | 20.6 | 20.5 | 21.2 | |||||||||||||||||||||||||||||||||||
- female | 24.4 | 24.3 | 24.9 | 24.4 | 24.3 | 24.0 | 23.1 | 23.0 | 23.4 | |||||||||||||||||||||||||||||||||||
Future retirees | ||||||||||||||||||||||||||||||||||||||||||||
- male | 25.5 | 25.4 | 25.8 | 24.6 | 24.6 | 23.6 | 22.3 | 22.3 | 23.0 | |||||||||||||||||||||||||||||||||||
- female | 27.0 | 26.9 | 26.9 | 26.6 | 26.6 | 26.0 | 24.7 | 24.7 | 25.1 |
The above data allowallows for future improvements in life expectancy.
176 |
CRH Annual Report and Form 20-F|2017 |
27. Retirement Benefit Obligations|continued
Impact on Consolidated Income Statement
The total retirement benefit expense from continuing operations in the Consolidated Income Statement is as follows:
2014 | 2013 | 2012 | ||||||||||||||||||||||
€m | €m | €m | ||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||
Total defined contribution expense | 152 | 149 | 142 | 237 | 232 | 204 | ||||||||||||||||||
Total defined benefit expense | 63 | 52 | 39 | |||||||||||||||||||||
Total defined benefit (credit)/expense | (1) | 75 | 77 | |||||||||||||||||||||
Total expense in Consolidated Income Statement | 215 | 201 | 181 | 236 | 307 | 281 |
At 31 December 2014,2017,€4478 million (2013:(2016:€3489 million) was included in other payables in respect ofrelating to defined contribution pension liabilities.
Analysis of defined benefit expense
Eurozone | Britain and Northern Ireland | Switzerland | United States | Total Group | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | ||||||||||||||||||||||||||||||||||||||||||||||
Charged in arriving at Group profit before finance costs: |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Current service cost | 11 | 11 | 7 | 14 | 13 | 14 | 24 | 27 | 25 | 2 | - | (2 | ) | 51 | 51 | 44 | ||||||||||||||||||||||||||||||||||||||||||||
Administration expenses | 1 | 1 | - | 2 | 1 | 2 | - | 1 | - | - | - | - | 3 | 3 | 2 | |||||||||||||||||||||||||||||||||||||||||||||
Past service costs | (5 | ) | (6 | ) | (33 | ) | - | (3 | ) | - | - | (15 | ) | 1 | - | - | - | (5 | ) | (24 | ) | (32 | ) | |||||||||||||||||||||||||||||||||||||
7 | 6 | (26 | ) | 16 | 11 | 16 | 24 | 13 | 26 | 2 | - | (2 | ) | 49 | 30 | 14 | ||||||||||||||||||||||||||||||||||||||||||||
Included in finance income and finance costs respectively: |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest income on scheme assets | (29 | ) | (27 | ) | (29 | ) | (31 | ) | (26 | ) | (26 | ) | (16 | ) | (12 | ) | (16 | ) | (9 | ) | (6 | ) | (7 | ) | (85 | ) | (71 | ) | (78 | ) | ||||||||||||||||||||||||||||||
Interest cost on scheme liabilities | 37 | 39 | 44 | 34 | 30 | 31 | 17 | 14 | 17 | 11 | 10 | 11 | 99 | 93 | 103 | |||||||||||||||||||||||||||||||||||||||||||||
Net interest expense | 8 | 12 | 15 | 3 | 4 | 5 | 1 | 2 | 1 | 2 | 4 | 4 | 14 | 22 | 25 | |||||||||||||||||||||||||||||||||||||||||||||
Net charge to Consolidated Income Statement | 15 | 18 | (11 | ) | 19 | 15 | 21 | 25 | 15 | 27 | 4 | 4 | 2 | 63 | 52 | 39 |
Charged in arriving at Group profit before finance costs:
Current service cost | 62 | 61 | 63 | |||||||||
Administration expenses | 4 | 4 | 2 | |||||||||
Past service credit (net) | (78) | (2) | (1) | |||||||||
Gain on settlements | - | - | (4) | |||||||||
Subtotal | (12) | 63 | 60 |
Included in finance income and finance costs respectively:
Interest income on scheme assets | (49) | (58) | (50) | |||||||||
Interest cost on scheme liabilities | 60 | 70 | 67 | |||||||||
Net interest expense | 11 | 12 | 17 | |||||||||
Net (credit)/expense to Consolidated Income Statement | (1) | 75 | 77 |
The composition of the net (credit)/expense to the Consolidated Income Statement is as follows:
Eurozone | 25 | 18 | 27 | |||||||||
Switzerland | (49) | 37 | 37 | |||||||||
United States and Canada | 14 | 11 | 6 | |||||||||
Other | 9 | 9 | 7 | |||||||||
Total | (1) | 75 | 77 |
Past service costs also include curtailment and settlement gains. During 2014, there were no significant curtailment or settlement gains (2013: curtailmentcredit in 2017 includes a gain of€15 million). The prior year curtailment gain arose81 million due to the implementation of changesplan amendments in Switzerland. The principal amendment related to the terms of a numberreduction of the Group’s defined benefit pension schemes in Switzerland.annuity conversion factor on retirement from 6.4% to 5.0% of accumulated savings.
No reimbursement rights have been recognised as assets in accordance with IAS 19.
177 |
CRH Annual Report and Form 20-F|2017 |
Reconciliation
28. Retirement Benefit Obligations - continued
Reconciliation of scheme assets (bid value) | 2017 | 2016 | ||||||
At 1 January | 2,556 | 2,399 | ||||||
Movement in year | ||||||||
Interest income on scheme assets | 49 | 58 | ||||||
Arising on acquisition (note 31) | 5 | - | ||||||
Remeasurement adjustments | ||||||||
- return on scheme assets excluding interest income | 112 | 81 | ||||||
Employer contributions paid | 123 | 133 | ||||||
Contributions paid by plan participants | 14 | 14 | ||||||
Benefit and settlement payments | (114) | (130) | ||||||
Administration expenses | (4) | (4) | ||||||
Translation adjustment | (119) | 5 | ||||||
At 31 December | 2,622 | 2,556 |
The composition of scheme assets (bid value)is as follows:
Eurozone | Britain and Northern Ireland | Switzerland | United States | Total Group | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||
At 1 January | 790 | 710 | 662 | 597 | 683 | 661 | 179 | 174 | 2,314 | 2,142 | ||||||||||||||||||||||||||||||
Movement in year | ||||||||||||||||||||||||||||||||||||||||
Administration expenses | (1 | ) | (1 | ) | (2 | ) | (1 | ) | - | (1 | ) | - | - | (3 | ) | (3 | ) | |||||||||||||||||||||||
Interest income on scheme assets | 29 | 27 | 31 | 26 | 16 | 12 | 9 | 6 | 85 | 71 | ||||||||||||||||||||||||||||||
Remeasurement adjustments | ||||||||||||||||||||||||||||||||||||||||
- return on scheme assets excluding interest income | 87 | 30 | 54 | 44 | 34 | 25 | 4 | 9 | 179 | 108 | ||||||||||||||||||||||||||||||
Employer contributions paid | 72 | 70 | 19 | 28 | 17 | 17 | 7 | 9 | 115 | 124 | ||||||||||||||||||||||||||||||
Contributions paid by plan participants | 3 | 3 | - | - | 10 | 10 | - | - | 13 | 13 | ||||||||||||||||||||||||||||||
Benefit and settlement payments | (45 | ) | (49 | ) | (25 | ) | (21 | ) | (30 | ) | (31 | ) | (14 | ) | (11 | ) | (114 | ) | (112 | ) | ||||||||||||||||||||
Reclassified as held for sale | - | - | (633 | ) | - | - | - | - | - | (633 | ) | - | ||||||||||||||||||||||||||||
Translation adjustment | - | - | 49 | (11 | ) | 15 | (10 | ) | 26 | (8 | ) | 90 | (29 | ) | ||||||||||||||||||||||||||
At 31 December | 935 | 790 | 155 | 662 | 745 | 683 | 211 | 179 | 2,046 | 2,314 |
Eurozone | 1,184 | 1,116 | ||||||
Switzerland | 781 | 804 | ||||||
United States and Canada | 448 | 453 | ||||||
Other | 209 | 183 | ||||||
Total | 2,622 | 2,556 |
Reconciliation of actuarial value of liabilities | ||||||||
At 1 January | (3,147) | (2,987) | ||||||
Movement in year | ||||||||
Current service cost | (62) | (61) | ||||||
Past service credit (net) | 78 | 2 | ||||||
Interest cost on scheme liabilities | (60) | (70) | ||||||
Arising on acquisition (note 31) | (57) | (1) | ||||||
Remeasurement adjustments | ||||||||
- experience variations | 11 | 20 | ||||||
- actuarial loss from changes in financial assumptions | (29) | (176) | ||||||
- actuarial gain from changes in demographic assumptions | 20 | 14 | ||||||
Contributions paid by plan participants | (14) | (14) | ||||||
Benefit and settlement payments | 114 | 130 | ||||||
Translation adjustment | 147 | (4) | ||||||
At 31 December | (2,999) | (3,147) |
The composition of the actuarial value of liabilities is as follows:
Eurozone | (1,384) | (1,338) | ||||||
Switzerland | (819) | (995) | ||||||
United States and Canada | (540) | (554) | ||||||
Other | (256) | (260) | ||||||
Total | (2,999) | (3,147) |
Recoverable deficit in schemes | (377) | (591) | ||||||
Related deferred income tax asset | 72 | 119 | ||||||
Net pension liability | (305) | (472) |
The composition of the net pension liability is as follows:
Eurozone | (168) | (188 | ) | |||||
Switzerland | (30) | (154 | ) | |||||
United States and Canada | (68) | (65 | ) | |||||
Other | (39) | (65 | ) | |||||
Total | (305) | (472 | ) |
178 |
CRH Annual Report and Form 20-F|2017 |
27. Retirement Benefit Obligations|continued
Reconciliation of actuarial value of liabilities
Eurozone | Britain and Northern Ireland | Switzerland | United States | Total Group | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||
At 1 January | (1,045 | ) | (1,054 | ) | (723 | ) | (705 | ) | (727 | ) | (765 | ) | (229 | ) | (271 | ) | (2,724 | ) | (2,795 | ) | ||||||||||||||||||||
Movement in year | ||||||||||||||||||||||||||||||||||||||||
Current service cost | (11 | ) | (11 | ) | (14 | ) | (13 | ) | (24 | ) | (27 | ) | (2 | ) | - | (51 | ) | (51 | ) | |||||||||||||||||||||
Past service costs | 5 | 6 | - | 3 | - | 15 | - | - | 5 | 24 | ||||||||||||||||||||||||||||||
Interest cost on scheme liabilities | (37 | ) | (39 | ) | (34 | ) | (30 | ) | (17 | ) | (14 | ) | (11 | ) | (10 | ) | (99 | ) | (93 | ) | ||||||||||||||||||||
Remeasurement adjustments | ||||||||||||||||||||||||||||||||||||||||
- experience variations | 20 | 23 | 1 | 2 | 7 | 17 | - | - | 28 | 42 | ||||||||||||||||||||||||||||||
- actuarial (loss)/gain from changes in financial assumptions | (306 | ) | (16 | ) | (129 | ) | (13 | ) | (142 | ) | 64 | (27 | ) | 30 | (604 | ) | 65 | |||||||||||||||||||||||
- actuarial loss from changes in demographic assumptions | - | - | - | (2 | ) | - | (51 | ) | (17 | ) | - | (17 | ) | (53 | ) | |||||||||||||||||||||||||
Contributions paid by plan participants | (3 | ) | (3 | ) | - | - | (10 | ) | (10 | ) | - | - | (13 | ) | (13 | ) | ||||||||||||||||||||||||
Benefit and settlement payments | 45 | 49 | 25 | 21 | 30 | 31 | 14 | 11 | 114 | 112 | ||||||||||||||||||||||||||||||
Reclassified as held for sale | - | - | 714 | - | - | - | - | - | 714 | - | ||||||||||||||||||||||||||||||
Translation adjustment | - | - | (56 | ) | 14 | (17 | ) | 13 | (37 | ) | 11 | (110 | ) | 38 | ||||||||||||||||||||||||||
At 31 December | (1,332 | ) | (1,045 | ) | (216 | ) | (723 | ) | (900 | ) | (727 | ) | (309 | ) | (229 | ) | (2,757 | ) | (2,724 | ) | ||||||||||||||||||||
Recoverable deficit in schemes | (397 | ) | (255 | ) | (61 | ) | (61 | ) | (155 | ) | (44 | ) | (98 | ) | (50 | ) | (711 | ) | (410 | ) | ||||||||||||||||||||
Related deferred income tax asset | 59 | 39 | 12 | 6 | 30 | 9 | 39 | 20 | 140 | 74 | ||||||||||||||||||||||||||||||
Net pension liability | (338 | ) | (216 | ) | (49 | ) | (55 | ) | (125 | ) | (35 | ) | (59 | ) | (30 | ) | (571 | ) | (336 | ) | ||||||||||||||||||||
During the year, there were no settlement payments (2013:€11 million) made in respect of the Group’s schemes. | ||||||||||||||||||||||||||||||||||||||||
Split of scheme liabilities - funded and unfunded | ||||||||||||||||||||||||||||||||||||||||
Funded defined benefit pension schemes | (1,274 | ) | (999 | ) | (930 | ) | (723 | ) | (894 | ) | (722 | ) | (297 | ) | (219 | ) | (3,395 | ) | (2,663 | ) | ||||||||||||||||||||
Unfunded defined benefit pension schemes | (52 | ) | (40 | ) | - | - | - | - | (8 | ) | (7 | ) | (60 | ) | (47 | ) | ||||||||||||||||||||||||
Total - defined benefit pension schemes | (1,326 | ) | (1,039 | ) | (930 | ) | (723 | ) | (894 | ) | (722 | ) | (305 | ) | (226 | ) | (3,455 | ) | (2,710 | ) | ||||||||||||||||||||
Post-retirement healthcare obligations (unfunded) | - | - | - | - | - | - | (4 | ) | (3 | ) | (4 | ) | (3 | ) | ||||||||||||||||||||||||||
Long-term service commitments (unfunded) | (6 | ) | (6 | ) | - | - | (6 | ) | (5 | ) | - | - | (12 | ) | (11 | ) | ||||||||||||||||||||||||
Actuarial value of liabilities (present value) | (1,332 | ) | (1,045 | ) | (930 | ) | (723 | ) | (900 | ) | (727 | ) | (309 | ) | (229 | ) | (3,471 | ) | (2,724 | ) | ||||||||||||||||||||
Reclassified as held for sale | - | - | 714 | - | - | - | - | - | 714 | - | ||||||||||||||||||||||||||||||
Actuarial value of liabilities (present value) excluding schemes reclassified as held for sale | (1,332 | ) | (1,045 | ) | (216 | ) | (723 | ) | (900 | ) | (727 | ) | (309 | ) | (229 | ) | (2,757 | ) | (2,724 | ) |
Sensitivity analysis
The impact of a movement (as indicated below) in the principal actuarial assumptions would be as follows:
Eurozone €m | Britain and €m | Switzerland €m | United States 2014 €m | Total Group 2014 €m | Eurozone €m | Switzerland €m | United States €m | Other €m | Total Group €m | |||||||||||||||||||||||||||||||||||
Scheme liabilities at 31 December 2014 | (1,332 | ) | (930 | ) | (900 | ) | (309 | ) | (3,471 | ) | ||||||||||||||||||||||||||||||||||
Scheme liabilities at 31 December 2017 | (1,384 | ) | (819 | ) | (540 | ) | (256 | ) | (2,999 | ) | ||||||||||||||||||||||||||||||||||
Revised liabilities | ||||||||||||||||||||||||||||||||||||||||||||
Discount rate | Decrease by 0.25% | (1,398 | ) | (979 | ) | (941 | ) | (320 | ) | (3,638 | ) | Increase by 0.25% | (1,325 | ) | (785 | ) | (524 | ) | (244 | ) | (2,878 | ) | ||||||||||||||||||||||
Decrease by 0.25% | (1,448 | ) | (856 | ) | (556 | ) | (269 | ) | (3,129 | ) | ||||||||||||||||||||||||||||||||||
Inflation rate | Increase by 0.25% | (1,394 | ) | (965 | ) | (900 | ) | (309 | ) | (3,568 | ) | Increase by 0.25% | (1,441 | ) | (822 | ) | (542 | ) | (262 | ) | (3,067 | ) | ||||||||||||||||||||||
Decrease by 0.25% | (1,330 | ) | (816 | ) | (538 | ) | (250 | ) | (2,934 | ) | ||||||||||||||||||||||||||||||||||
Life expectancy | Increase by 1 year | (1,376 | ) | (963 | ) | (921 | ) | (319 | ) | (3,579 | ) | Increase by 1 year | (1,430 | ) | (846 | ) | (555 | ) | (263 | ) | (3,094 | ) | ||||||||||||||||||||||
Decrease by 1 year | (1,338 | ) | (791 | ) | (527 | ) | (249 | ) | (2,905 | ) |
The above sensitivity analysis isare derived through changing the individual assumption while holding all other assumptions constant.
Split of scheme assets | 2017 €m | 2016 €m | ||||||
Investments quoted in active markets | ||||||||
Equity instruments (i) | 828 | 802 | ||||||
Debt instruments (ii) | 1,413 | 1,191 | ||||||
Property | 120 | 112 | ||||||
Cash and cash equivalents | 26 | 37 | ||||||
Investment funds | 95 | 148 | ||||||
Unquoted investments | ||||||||
Equity instruments | 2 | 1 | ||||||
Debt instruments (iii) | 8 | 102 | ||||||
Property | 92 | 120 | ||||||
Cash and cash equivalents | 13 | 18 | ||||||
Assets held by insurance company | 25 | 25 | ||||||
Total assets | 2,622 | 2,556 |
(i) | Equity instruments primarily relate to developed markets. |
(ii) | Quoted debt instruments are made up of€831 million (2016:€687 million) and€582 million (2016:€504 million) ofnon-government and government instruments respectively. |
(iii) | Unquoted debt instruments primarily relate to government debt instruments (2016: primarily non-government debt instruments). |
179 |
CRH Annual Report and Form 20-F|2017 |
27.28. Retirement Benefit Obligations| - continued
Split of scheme assets
Eurozone | Britain and Northern Ireland | Switzerland | United States | Total Group | ||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||
Investments quoted in active markets | ||||||||||||||||||||||||||||||||||||||||
Equity instruments: | ||||||||||||||||||||||||||||||||||||||||
- Developed markets | 281 | 262 | 329 | 340 | 260 | 229 | 69 | �� | 92 | 939 | 923 | |||||||||||||||||||||||||||||
- Emerging markets | 10 | 12 | 55 | 53 | - | - | - | - | 65 | 65 | ||||||||||||||||||||||||||||||
Debt instruments: | ||||||||||||||||||||||||||||||||||||||||
- Non Government debt instruments | 279 | 29 | 166 | 139 | 226 | 210 | 59 | 26 | 730 | 404 | ||||||||||||||||||||||||||||||
- Government debt instruments | 265 | 390 | 165 | 69 | 65 | 58 | 67 | 51 | 562 | 568 | ||||||||||||||||||||||||||||||
Property | 37 | 29 | 41 | 43 | 31 | 68 | - | - | 109 | 140 | ||||||||||||||||||||||||||||||
Cash and cash equivalents | 16 | 47 | 2 | 1 | - | 2 | 16 | 4 | 34 | 54 | ||||||||||||||||||||||||||||||
Investment funds | 24 | 12 | 17 | 9 | - | - | - | 6 | 41 | 27 | ||||||||||||||||||||||||||||||
Assets held by insurance company | - | - | - | - | - | 5 | - | - | - | 5 | ||||||||||||||||||||||||||||||
Unquoted investments | ||||||||||||||||||||||||||||||||||||||||
Equity instruments: | ||||||||||||||||||||||||||||||||||||||||
- Developed markets | - | - | - | - | 1 | - | - | - | 1 | - | ||||||||||||||||||||||||||||||
- Emerging markets | - | - | 6 | - | - | - | - | - | 6 | - | ||||||||||||||||||||||||||||||
Debt instruments: | ||||||||||||||||||||||||||||||||||||||||
- Non Government debt instruments | - | - | - | - | 2 | - | - | - | 2 | - | ||||||||||||||||||||||||||||||
Property | 3 | 2 | - | - | 97 | 68 | - | - | 100 | 70 | ||||||||||||||||||||||||||||||
Cash and cash equivalents | 17 | 4 | 7 | 2 | 44 | 31 | - | - | 68 | 37 | ||||||||||||||||||||||||||||||
Investment funds | - | - | - | 6 | - | - | - | - | - | 6 | ||||||||||||||||||||||||||||||
Assets held by insurance company | 3 | 3 | - | - | 19 | 12 | - | - | 22 | 15 | ||||||||||||||||||||||||||||||
Total assets | 935 | 790 | 788 | 662 | 745 | 683 | 211 | 179 | 2,679 | 2,314 | ||||||||||||||||||||||||||||||
Reclassified as held for sale | - | - | (633 | ) | - | - | - | - | - | (633 | ) | - | ||||||||||||||||||||||||||||
Total excluding schemes reclassified as held for sale | 935 | 790 | 155 | 662 | 745 | 683 | 211 | 179 | 2,046 | 2,314 |
Actuarial valuations - funding requirements and future cash flows
In accordance with statutory requirements in the Republic of Ireland and Britain (minimumminimum funding requirements),requirements in the UK, additional annual contributions and lump-sum payments are required to certain of the schemes in place in those jurisdictions. The funding requirements in relation to the Group’s defined benefit schemes are assessed in accordance with the advice of independent and qualified actuaries and valuations are prepared in this regard either annually, where local requirements mandate that this be done, or at triennial intervals at a maximum in all other cases. In the Republic of Ireland and Britain,the UK, either the attained age or projected unit credit methods are used in the valuations. In the Netherlands and Switzerland, the actuarial valuations reflect the current unit method, while the valuations are performed in accordance with the projected unit credit methodology in Germany. In the United States,US, valuations are performed using a variety of actuarial cost methodologies - current unit, projected unit and aggregate cost. In Canada, the projected unit credit method is used in valuations. The dates of the actuarialfunding valuations range from April 20112015 to January 2014.July 2017.
In general, actuarialfunding valuations are not available for public inspection; however, the results of valuations are advised to the members of the various schemes on request.
The Group’s contracted payments (on a discounted basis) to certain schemes is€18 million (2016:€35 million; 2015:€52 million) in the Republic of Ireland and€16 million (2016:€20 million; 2015:€21 million) in the UK. The maturity profile of the Group’s contracted payments (on a discounted basis) to certain schemes in the Eurozone (Ireland) and Britain and Northern Ireland is as follows:
Eurozone | Britain and Northern Ireland | Total | ||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | €m | €m | €m | ||||||||||||||||||||||||||||
Within one year | 18 | 18 | 18 | 8 | 7 | 18 | 26 | 25 | 36 | |||||||||||||||||||||||||||
Between one and two years | 17 | 17 | 17 | 8 | 7 | 7 | 25 | 24 | 24 | |||||||||||||||||||||||||||
Between two and three years | 17 | 16 | 16 | 7 | 7 | 6 | 24 | 23 | 22 | |||||||||||||||||||||||||||
Between three and four years | 17 | 16 | 16 | 7 | 6 | 6 | 24 | 22 | 22 | |||||||||||||||||||||||||||
Between four and five years | - | 15 | 15 | 7 | 6 | 6 | 7 | 21 | 21 | |||||||||||||||||||||||||||
After five years | - | - | 15 | 48 | 47 | 41 | 48 | 47 | 56 | |||||||||||||||||||||||||||
69 | 82 | 97 | 85 | 80 | 84 | 154 | 162 | 181 |
Total contracted payments disclosed above include commitments of
Total | ||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||
Within one year | 19 | 20 | 20 | |||||||||
Between one and two years | 2 | 19 | 19 | |||||||||
Between two and three years | 2 | 2 | 19 | |||||||||
Between three and four years | 2 | 2 | 2 | |||||||||
Between four and five years | 1 | 2 | 2 | |||||||||
After five years | 8 | 10 | 11 | |||||||||
34 | 55 | 73 |
€65 million in relation to schemes reclassified as held for sale. Employer contributions payable in the 20152018 financial year including minimum funding payments (expressed using year-end exchange rates for 2014)2017) are estimated at€191 million of which€112 million.96 million relates to schemes reclassified as held for sale.
Average duration and scheme composition
Eurozone | Britain and Northern Ireland | Switzerland | United States | |||||||||||||||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | |||||||||||||||||||||||||||||||||||||
Average duration of defined benefit obligation (years) | 16.0 | 15.9 | 16.9 | 17.5 | 18.1 | 20.8 | 16.0 | 16.0 | 16.0 | 12.0 | 13.3 | 13.2 | ||||||||||||||||||||||||||||||||||||
Allocation of defined benefit obligation by participant: | ||||||||||||||||||||||||||||||||||||||||||||||||
Active plan participants | 37% | 39% | 40% | 27% | 27% | 28% | 85% | 86% | 87% | 35% | 36% | 38% | ||||||||||||||||||||||||||||||||||||
Deferred plan participants | 21% | 20% | 20% | 34% | 34% | 34% | - | - | - | 30% | 30% | 30% | ||||||||||||||||||||||||||||||||||||
Retirees | 42% | 41% | 40% | 39% | 39% | 38% | 15% | 14% | 13% | 35% | 34% | 32% |
Eurozone | Switzerland | United States and Canada | ||||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||
Average duration of defined benefit obligation (years) | 17.8 | 17.1 | 14.7 | 17.2 | 18.6 | 18.0 | 12.2 | 13.1 | 14.0 | |||||||||||||||||||||||||||||||||||
Allocation of defined benefit obligation by participant: | ||||||||||||||||||||||||||||||||||||||||||||
Active plan participants | 72% | 63% | 64% | 84% | 84% | 85% | 40% | 41% | 45% | |||||||||||||||||||||||||||||||||||
Deferred plan participants | 9% | 12% | 12% | - | - | - | 16% | 17% | 17% | |||||||||||||||||||||||||||||||||||
Retirees | 19% | 25% | 24% | 16% | 16% | 15% | 44% | 42% | 38% |
180 |
CRH Annual Report and Form 20-F|2017 |
29. Commitments under Operating and Finance Leases
Operating leases
The Group has entered into operating leases for a range of assets principally relating to property across the US and Europe. Lease commitments are provided for up to the earliest break clause in the lease. These property leases have varying terms, escalation clauses and renewal rights including periodic rent reviews linked with a consumer price index and/or other indices. The Group also leases plant and machinery, vehicles and equipment under operating leases. The terms and conditions of these operating leases do not impose any significant financial restriction on the Group.
2017 €m | 2016 €m | 2015 €m | ||||||||||
Within one year | 419 | 402 | 370 | |||||||||
After one year but not more than five years | 962 | 978 | 915 | |||||||||
More than five years | 810 | 791 | 831 | |||||||||
2,191 | 2,171 | 2,116 |
28.The commitments above include€252 million of operating lease commitments (2016:€237 million; 2015:€172 million) relating to discontinued operations.
Finance leases
Future minimum lease payments under finance leases are not material for the Group.
181 |
CRH Annual Report and Form 20-F|2017 |
30. Share Capital and Reserves
Equity Share Capital | 2014 | 2013 | ||||||||||||||||
Ordinary Shares of €0.32 each (i) | Income Shares of €0.02 each (ii) | Ordinary Shares of €0.32 each (i) | Income Shares of €0.02 each (ii) | |||||||||||||||
Authorised | ||||||||||||||||||
At 1 January 2014 and 31 December 2014 (€m) | 320 | 20 | 320 | 20 | ||||||||||||||
Number of Shares at 1 January 2014 and 31 December 2014 (‘000s) | 1,000,000 | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||||||
Allotted, called-up and fully paid | ||||||||||||||||||
At 1 January (€m) | 237 | 14 | 235 | 14 | ||||||||||||||
Issue of scrip shares in lieu of cash dividends (iii) | 2 | - | 2 | - | ||||||||||||||
At 31 December (€m) | 239 | 14 | 237 | 14 | ||||||||||||||
The movement in the number of shares (expressed in ‘000s) during the financial year was as follows: | ||||||||||||||||||
At 1 January | 739,231 | 739,231 | 733,821 | 733,821 | ||||||||||||||
Issue of scrip shares in lieu of cash dividends (iii) | 5,294 | 5,294 | 5,410 | 5,410 | ||||||||||||||
At 31 December | 744,525 | 744,525 | 739,231 | 739,231 |
Equity share capital | 2017 | 2016 | ||||||||||||||||||
Ordinary Shares of €0.32 each (i) | Income Shares of €0.02 each (ii) | Ordinary Shares of €0.32 each (i) | Income Shares of €0.02 each (ii) | |||||||||||||||||
Authorised | ||||||||||||||||||||
At 1 January and 31 December (€m) | 400 | 25 | 400 | 25 | ||||||||||||||||
Number of Shares at 1 January and 31 December (millions) | 1,250 | 1,250 | 1,250 | 1,250 | ||||||||||||||||
Allotted,called-up and fully paid | ||||||||||||||||||||
At 1 January (€m) | 269 | 15 | 266 | 15 | ||||||||||||||||
Performance Share Plan Awards | 1 | - | - | - | ||||||||||||||||
Issue of scrip shares in lieu of cash dividends (iii) | 1 | - | 2 | - | ||||||||||||||||
Share options and share participation schemes | - | - | 1 | - | ||||||||||||||||
At 31 December (€m) | 271 | 15 | 269 | 15 | ||||||||||||||||
The movement in the number of shares (expressed in millions) during the financial year was as follows: |
| |||||||||||||||||||
At 1 January | 833 | 833 | 824 | 824 | ||||||||||||||||
Performance Share Plan Awards | 2 | 2 | - | - | ||||||||||||||||
Issue of scrip shares in lieu of cash dividends (iii) | 3 | 3 | 7 | 7 | ||||||||||||||||
Share options and share participation schemes | 1 | 1 | 2 | 2 | ||||||||||||||||
At 31 December | 839 | 839 | 833 | 833 |
(i) | The Ordinary Shares represent |
(ii) | The Income Shares, which represent |
(iii) | Issue of scrip shares in lieu of cash dividends: |
Number of shares | Price per share | |||||||||||||||||||||||||||
2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||
May 2017 - Final 2016 dividend (2016: Final 2015 dividend; 2015: Final 2014 dividend) | 433,046 | 5,301,827 | 5,056,633 | € | 33.08 | € | 24.69 | € | 24.60 | |||||||||||||||||||
October 2017 - Interim 2017 dividend (2016: Interim 2016 dividend; 2015: Interim 2015 dividend) | 2,130,496 | 1,243,042 | 288,769 | € | 29.24 | € | 29.41 | € | 26.16 | |||||||||||||||||||
Total | 2,563,542 | 6,544,869 | 5,345,402 |
182 |
CRH Annual Report and Form 20-F|2017 |
Share schemes
The aggregate number of shares which may be committed for issue in respect of any share option scheme, savings-related share option scheme, share participation scheme, performance share plan or any subsequent option scheme or share plan, may not exceed 10% of the issued ordinary share capital from time to time.
Share option schemes
Details of share options granted under the Company’s share option schemesShare Option Schemes and the terms attaching thereto are provided in note 78 to the financial statements and on page 112pages 88 to 89 of the Directors’ Remuneration Report. Under these schemes, options over a total of 1,589,335 Ordinary Shares were exercised during the financial year (2016: 2,223,574; 2015: 2,876,066).
Number of Shares | ||||||||
2014 | 2013 | |||||||
Options exercised during the year (satisfied by the reissue of Treasury Shares) | 1,307,406 | 1,310,187 |
Number of shares | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Options exercised during the year (satisfied by the issue of new shares) | 1,589,335 | 2,209,638 | - | |||||||||
Options exercised during the year (satisfied by the reissue of Treasury Shares) | - | 13,936 | 2,876,066 | |||||||||
Total | �� | 1,589,335 | 2,223,574 | 2,876,066 |
Share participation schemes
As at 31 December 2014, 7,509,125 (2013: 7,386,047)2017, 7,862,416 (2016: 7,729,412) Ordinary Shares had been appropriated to participation schemes. In the financial year ended 31 December 2014,2017, the appropriation of 123,078133,004 shares was satisfied by the reissueissue of Treasury Shares (2013: 113,415)new shares (2016: 116,160). The Ordinary Shares appropriated pursuant to these schemes were issued at market value on the dates of appropriation. The shares issued pursuant to these schemes are excluded from the scope of IFRS 2Share-based Payment and are hence not factored into the expense computation and the associated disclosures in note 7.8.
Performance
Preference share capital | 5% Cumulative Preference Shares of €1.27 each | 7% ‘A’ Cumulative Preference Shares of €1.27 each | ||||||||||||||||||
Number of shares ‘000s | €m | Number of shares ‘000s | €m | |||||||||||||||||
Authorised | ||||||||||||||||||||
At 1 January 2017 and 31 December 2017 | 150 | - | 872 | 1 | ||||||||||||||||
Allotted,called-up and fully paid | ||||||||||||||||||||
At 1 January 2017 and 31 December 2017 | 50 | - | 872 | 1 |
There was no movement in the number of cumulative preference shares in either the current or the prior year.
The holders of the 5% Cumulative Preference Shares are entitled to a fixed cumulative preference dividend at a rate of 5% per annum and priority in awinding-up to repayment of capital, but have no further right to participate in profits or assets and are not entitled to be present or vote at general meetings unless their dividend is in arrears. Dividends on the 5% Cumulative Preference Shares are payable half-yearly on 15 April and 15 October in each year. The 5% Cumulative Preference Shares represent 0.02% of the total issued share capital.
The holders of the 7% ‘A’ Cumulative Preference Shares are entitled to a fixed cumulative preference dividend at a rate of 7% per annum, and subject to the rights of the holders of the 5% Cumulative Preference Shares, priority in awinding-up to repayment of capital, but have no further right to participate in profits or assets and are not entitled to be present or vote at general meetings unless their dividend is in arrears or unless the business of the meeting includes certain matters, which are specified in the Articles of Association. Dividends on the 7% ‘A’ Cumulative Preference Shares are payable half-yearly on 5 April and 5 October in each year. The 7% ‘A’ Cumulative Preference Shares represent 0.39% of the total issued share capital.
183 |
CRH Annual Report and Form 20-F|2017 |
30. Share PlanCapital and Reserves - continued
Treasury Shares/own shares | 2017 €m | 2016 €m | ||||||
At 1 January | (14) | (28) | ||||||
New Shares allotted to the Employee Benefit Trust (own shares) | (63) | - | ||||||
Own Shares released by the Employee Benefit Trust under the 2014 Performance Share Plan | 63 | - | ||||||
Shares acquired by the Employee Benefit Trust (own shares) | (3) | (4) | ||||||
Treasury Shares/own shares reissued | 2 | 18 | ||||||
At 31 December | (15) | (14) |
As at the balance sheet date, the total number of Treasury Shares held was 53,848 (2016: 83,423); the nominal value of these shares was€nil million (2016: €nil million). During the year 742,604ended 31 December 2017, no shares (2016: 13,936) were reissued to satisfy exercises under the Group’s share option schemes and 29,575 (2016: 697,903) shares were reissued to the CRH Employee Benefit Trust in connection with the release of awards under the 2014 Performance Share Plan (2016: 2006 Performance Share Plan). These reissued Treasury Shares were previously purchased at an average price of€15.89 (2016:€17.23). No Treasury Shares were purchased during 2017 or 2016.
As at the balance sheet date, the CRH Employee Benefit Trust held 337,909 (2016: 284,980) Ordinary Shares were acquiredon behalf of CRH plc in respect of awards made under the 2014 Performance Share Plan, the 2014 Deferred Share Bonus Plan and the 2013 Restricted Share Plan. The nominal value of these own shares, on which dividends have been waived by the Trustees, amounted to€0.1 million at 31 December 2017 (2016:€0.1 million).
Reconciliation of shares issued to net proceeds | 2017 €m | 2016 €m | 2015 €m | |||||||||
Shares issued at nominal amount: | ||||||||||||
- Performance Share Plan Awards | 1 | - | - | |||||||||
- scrip shares issued in lieu of cash dividends | 1 | 2 | 2 | |||||||||
- share options and share participation schemes | - | 1 | - | |||||||||
- share capital issued - equity placing | - | - | 26 | |||||||||
Premium on shares issued | 180 | 216 | 1,722 | |||||||||
Total value of shares issued | 182 | 219 | 1,750 | |||||||||
Issue of scrip shares in lieu of cash dividends (note 12) | (77) | (167) | (132) | |||||||||
Shares allotted to the Employee Benefit Trust* | (63) | - | - | |||||||||
Expenses paid in respect of shares issued | - | | - | | | (25) | | |||||
Net proceeds from issue of shares | 42 | 52 | 1,593 |
* | During the year, shares were allotted to the Employee Benefit Trust to satisfy the vesting and release of awards under the 2014 Performance Share Plan to qualifying employees. An increase in nominal Share Capital and Share Premium of€63 million arose on the allotment to the Employee Benefit Trust. |
Share premium | | 2017 €m | | | 2016 €m | | ||
At 1 January | 6,237 | 6,021 | ||||||
Premium arising on shares issued | 180 | 216 | ||||||
At 31 December | 6,417 | 6,237 |
184 |
CRH Annual Report and Form 20-F|2017 |
31. Business Combinations
The acquisitions completed during the year ended 31 December 2017 by reportable segment, together with the completion dates, are detailed below; these transactions entailed the acquisition of an effective 100% stake except where indicated to the contrary:
Europe Heavyside:
Germany: Fels (31 October) and land adjacent to Saal Quarry (27 December);
Ireland: certain assets of Kilsaran RMC Ltd. (14 September); and
UK: J.B. Riney & Co. Ltd. (12 May), increased stake in Scotash Ltd. to 100% (19 July), assets of East Antrim Mini Mix (1 August), Fields Farm (15 December) and increased stake in Newhaven Roadstone Ltd to 100% (29 December).
Europe Distribution:
Germany: AGP Bauzentrum GmbH (31 August) and Kruger and Scharnberg GmbH (30 October).
Americas Materials:
Canada: Carrières St-Jacques Inc. (22 February) and K.J. Beamish Construction Co. Ltd. (26 May);
Colorado: Connell Resources (24 February);
Connecticut: Costello Industries, Inc. (4 January);
Florida: Suwannee American Cement Co., Inc., Prestige Concrete Products, Inc. and A. Mining Group, LLC (30 November);
Idaho: certain assets of Hardcore Ready Mix (12 July);
Indiana: Mulzer Crushed Stone, Inc. (10 February);
Minnesota: Hardrives, Inc. (24 February) and Chard Tiling and Excavating and Rivers Edge (24 February);
New Jersey: Byram Quarry (4 December);
Oklahoma: United Materials (28 September);
Texas: assets of Henderson Asphalt (30 August); and
Washington: Columbia Asphalt (13 February).
Americas Products:
Alabama: Block USA (29 September);
Arkansas: Advanced Environmental Recycling Technologies, Inc. (1 May);
Illinois: certain assets of Elston Materials, LLC (13 September);
Oregon:Advantage Precast, Inc. (12 July), Hansen Architectural Systems, Inc. (8 August) and Spec Industries, Inc. (14 November);
Pennsylvania: Behney Corp (31 July); and
Texas:Duravault, Inc. (11 May).
185 |
CRH Annual Report and Form 20-F|2017 |
31. Business Combinations - continued
The identifiable net assets acquired, including adjustments to provisional fair values, were as follows:
2017 €m | 2016 €m | 2015 €m | ||||||||||
ASSETS | ||||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 1,536 | 19 | 5,413 | |||||||||
Intangible assets | 56 | 14 | 298 | |||||||||
Equity accounted investments | - | - | 24 | |||||||||
Other financial assets | - | - | 5 | |||||||||
Totalnon-current assets | 1,592 | 33 | 5,740 | |||||||||
Current assets | ||||||||||||
Inventories | 114 | 9 | 621 | |||||||||
Trade and other receivables (i) | 129 | 28 | 1,533 | |||||||||
Cash and cash equivalents | 174 | 4 | 494 | |||||||||
Total current assets | 417 | 41 | 2,648 | |||||||||
LIABILITIES | ||||||||||||
Trade and other payables | (149) | (14) | (1,549) | |||||||||
Provisions for liabilities | (49) | 18 | (581) | |||||||||
Retirement benefit obligations | (52) | (1) | (87) | |||||||||
Interest-bearing loans and borrowings and finance leases | (12) | (3) | (175) | |||||||||
Current income tax liabilities | (22) | 4 | (149) | |||||||||
Deferred income tax liabilities | (132) | 35 | (627) | |||||||||
Total liabilities | (416) | 39 | (3,168) | |||||||||
Total identifiable net assets at fair value | 1,593 | 113 | 5,220 | |||||||||
Goodwill arising on acquisition (ii) | 487 | 71 | 3,187 | |||||||||
Joint ventures becoming subsidiaries | - | - | (25) | |||||||||
Non-controlling interests* | (20) | (9) | (489) | |||||||||
Total consideration | 2,060 | 175 | 7,893 | |||||||||
Consideration satisfied by: | ||||||||||||
Cash payments | 2,015 | 153 | 7,790 | |||||||||
Deferred consideration (stated at net present cost) | 45 | 21 | 97 | |||||||||
Contingent consideration | - | 1 | - | |||||||||
Profit on step acquisition | - | - | 6 | |||||||||
Total consideration | 2,060 | 175 | 7,893 | |||||||||
NET CASH OUTFLOW ARISING ON ACQUISITION | ||||||||||||
Cash consideration | 2,015 | 153 | 7,790 | |||||||||
Less: cash and cash equivalents acquired | (174) | (4) | (494) | |||||||||
Total outflow in the Consolidated Statement of Cash Flows | 1,841 | 149 | 7,296 |
Note (i) and (ii) are set out overleaf.
*Non-controlling interests are measured at the proportionate share of net assets in 2017 and 2016 and fair value in 2015.
186 |
CRH Annual Report and Form 20-F|2017 |
None of the acquisitions completed during the financial year was considered sufficiently material to warrant separate disclosure of the attributable fair values. The initial assignment of fair values to identifiable net assets (most significantly, property, plant and equipment) acquired has been performed on a provisional basis in respect of certain acquisitions; any amendments to these fair values made during the subsequent reporting window (within the measurement period imposed by IFRS 3Business Combinations) will be subject to subsequent disclosure.
(i) | The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to€132 million (2016:€30 million; 2015: €1,588 million). The fair value of these receivables is€129 million (all of which is expected to be recoverable) (2016:€28 million; 2015:€1,533 million). |
(ii) | The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and other synergies with existing entities in the Group which do not qualify for separate recognition as intangible assets. Due to the asset-intensive nature of operations in the Europe Heavyside and Americas Materials business segments, no significant identifiable intangible assets are recognised on business combinations in these segments.€260 million of the goodwill recognised in respect of acquisitions completed in 2017 is expected to be deductible for tax purposes (2016: €15 million; 2015:€254 million). |
Acquisition-related costs, excluding post-acquisition integration costs, amounting to€11 million (2016:€2 million; 2015:€152 million) have been included in operating costs in the Consolidated Income Statement (note 3).
The following table analyses the 31 acquisitions completed in 2017 (2016: 21 acquisitions; 2015: 19 acquisitions) by reportable segment and provides details of the goodwill and consideration figures arising in each of those segments:
Number of acquisitions | Goodwill | Consideration | ||||||||||||||||||||||||||||||||||||||||||
Reportable segments | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 8 | 5 | - | 155 | 2 | - | 698 | 15 | - | |||||||||||||||||||||||||||||||||||
Europe Lightside | - | 2 | 3 | - | 7 | 6 | - | 22 | 17 | |||||||||||||||||||||||||||||||||||
Europe Distribution | 2 | 1 | 1 | 17 | - | - | 30 | - | 1 | |||||||||||||||||||||||||||||||||||
Europe | 10 | 8 | 4 | 172 | 9 | 6 | 728 | 37 | 18 | |||||||||||||||||||||||||||||||||||
Americas Materials | 13 | 8 | 10 | 239 | 10 | 32 | 1,171 | 97 | 80 | |||||||||||||||||||||||||||||||||||
Americas Products | 8 | 5 | 3 | 76 | 7 | 9 | 162 | 33 | 65 | |||||||||||||||||||||||||||||||||||
Americas | 21 | 13 | 13 | 315 | 17 | 41 | 1,333 | 130 | 145 | |||||||||||||||||||||||||||||||||||
Unallocated Goodwill | ||||||||||||||||||||||||||||||||||||||||||||
LH Assets | - | - | 1 | - | - | 2,307 | - | - | 6,561 | |||||||||||||||||||||||||||||||||||
CRL | - | - | 1 | - | - | 833 | - | - | 1,169 | |||||||||||||||||||||||||||||||||||
Total Group | 31 | 21 | 19 | 487 | 26 | 3,187 | 2,061 | 167 | 7,893 | |||||||||||||||||||||||||||||||||||
Adjustments to provisional fair values of prior year acquisitions | - | 45 | - | (1) | 8 | - | ||||||||||||||||||||||||||||||||||||||
Total | 487 | 71 | 3,187 | 2,060 | 175 | 7,893 |
187 |
CRH Annual Report and Form 20-F|2017 |
31. Business Combinations - continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit for the financial year was as follows:
2017
€m | 2016
€m | 2015
€m | ||||||||||
Revenue | 532 | 101 | 2,679 | |||||||||
(Loss)/profit before tax for the financial year | (2) | 1 | (7) |
The revenue and profit of the Group for the financial year determined in accordance with IFRS as though the acquisitions effected during the year had been at the beginning of the year would have been as follows:
2017 acquisitions €m | CRH Group €m | CRH Group €m | ||||||||||
Revenue | 1,188 | 24,688 | 25,876 | |||||||||
Profit before tax for the financial year | 38 | 1,869 | 1,907 |
188 |
CRH Annual Report and Form 20-F|2017 |
32. Non-controlling Interests
The totalnon-controlling interest at 31 December 2017 is€486 million (2016:€548 million) of which€391 million (2016:€472 million) relates to Republic Cement & Building Materials (RCBM), Inc. and Republic Cement Land & Resources (RCLR), Inc. (formerly Luzon Continental Land Corporation (LCLC)).The non-controlling interests in respect of the Group’s other subsidiaries are not considered to be material.
Name | Principal activity | Country of incorporation | Economic ownership interest held by non-controlling interest | |||
Republic Cement & Building Materials, Inc. | Manufacture, development and sale | Philippines | 45% | |||
and Republic Cement Land & Resources, Inc. | of cement and building materials |
The following is summarised financial information for RCBM and RCLR prepared in accordance with IFRS 12Disclosure of Interests in Other Entities. This information is before intragroup eliminations with other Group companies.
Summarised financial information | 2017
€m | 2016
€m | ||||||
Profit for the year | 14 | 47 | ||||||
Current assets | 159 | 118 | ||||||
Non-current assets | 1,292 | 1,460 | ||||||
Current liabilities | (140) | (124) | ||||||
Non-current liabilities | (663) | (690) | ||||||
Net assets | 648 | 764 | ||||||
Cash flows from operating activities | 9 | 91 | ||||||
Dividends paid tonon-controlling interests during the year | - | (1) |
CRH holds 40% of the equity share capital in RCBM and RCLR and has an economic interest of 55% of the combined Philippines business.Non-controlling interest relates to another party who holds 60% of the equity share capital in RCBM and RCLR and has an economic interest of 45% of the combined Philippines business. CRH has obtained control (as defined under IFRS 10Consolidated Financial Statements) by virtue of contractual arrangements which give CRH power to direct the relevant non-nationalised activities of the business, in compliance with Philippine law.
189 |
CRH Annual Report and Form 20-F|2017 |
33. Related Party Transactions
The principal related party relationships requiring disclosure in the Consolidated Financial Statements of the Group under IAS 24RelatedParty Disclosurespertain to: the existence of subsidiaries, joint ventures and associates; transactions with these entities entered into by the Group; the identification and compensation of key management personnel; and lease arrangements.
Subsidiaries, joint ventures and associates
The Consolidated Financial Statements include the financial statements of the Company (CRH plc, the ultimate parent) and its subsidiaries, joint ventures and associates as documented in the accounting policies on pages 125 to 134. The Group’s principal subsidiaries, joint ventures and associates are disclosed on pages 246 to 251.
Sales to and purchases from associates and joint ventures are as follows:
Associates | Joint Ventures | |||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | |||||||||||||||||||||||
Sales | 51 | 56 | 48 | 111 | 88 | 64 | ||||||||||||||||||||||
Purchases | 400 | 401 | 422 | 55 | 54 | 56 |
Loans extended by the Group to joint ventures and associates (see note 16) are included in financial assets. Amounts receivable from and payable to equity accounted investments (arising from the aforementioned sales and purchases transactions) as at the balance sheet date are included as separate line items in notes 18 and 19 to the Consolidated Financial Statements.
Terms and conditions of transactions with subsidiaries, joint ventures and associates
In general, the transfer pricing policy implemented by the Group across its subsidiaries is market-based. Sales to and purchases from joint ventures and associates are conducted in the ordinary course of business and on terms equivalent to those that prevail in arms-length transactions. The outstanding balances included in receivables and payables as at the balance sheet date in respect of transactions with joint ventures and associates are unsecured and settlement arises in cash. No guarantees have been either requested or provided in relation to related party receivables and payables. Loans to joint ventures and associates (as disclosed in note 16) are extended on normal commercial terms in the ordinary course of business with interest accruing and, in general, paid to the Group at predetermined intervals.
Key management personnel
For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors which manages the business and affairs of the Company.
Key management remuneration amounted to: | 2017 €m | 2016 €m | 2015 €m | |||||||||
Short-term benefits | 9 | 13 | 10 | |||||||||
Post-employment benefits | 1 | 1 | 1 | |||||||||
Share-based payments - calculated in accordance with the principles disclosed in note 8 | 3 | 3 | 2 | |||||||||
Total | 13 | 17 | 13 |
Other than these compensation entitlements, there were no other transactions involving key management personnel.
Lease arrangements
CRH has a number of lease arrangements in place with related parties across the Group, which have been negotiated on an arms-length basis at market rates. We do not consider these arrangements to be material either individually or collectively in the context of the 2017, 2016 and 2015 Consolidated Financial Statements.
34. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 120 to 199 in respect of the year ended 31 December 2017 on 28 February 2018.
190 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information
The following consolidating information presents Condensed Consolidated Balance Sheets as at 31 December 2017 and 2016 and Condensed Consolidated Income Statements and Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flow for the years ended 31 December 2017, 2016 and 2015 of the Company and CRH America, Inc. as required by Article 3-10(c) of Regulation S-X. This information is prepared in accordance with IFRS with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated. CRH America, Inc. is 100% owned by the Company. The Guarantees of the Guarantor are full and unconditional.
CRH plc also fully and unconditionally guarantees securities issued by CRH America Finance, Inc., which is a 100% owned finance subsidiary of CRH plc.
CRH America, Inc. (the ‘Issuer’) has the following notes which are fully and unconditionally guaranteed by CRH plc (the ‘Guarantor’):
US$288 million 8.125% Notes due 2018 – listed on the NYSE (i)
US$400 million 5.750% Notes due 2021 – listed on the NYSE
US$1,250 million 3.875% Notes due 2025 – listed on the ISE
US$300 million 6.40% Notes due 2033 – listed on the ISE (ii)
US$500 million 5.125% Notes due 2045 – listed on the ISE
(i) | Originally issued as a US$650 million bond in July 2008. Subsequently in May 2017, US$362.13 million of the issued notes were redeemed by the issuer as part of a liability management exercise. |
(ii) | Originally issued as a US$300 million bond in September 2003. Subsequently in August 2009 and December 2010, US$87.445 million of the issued notes were acquired by CRH plc as part of liability management exercises undertaken. |
191 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2017
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
€m | €m | €m | €m | €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 13,094 | - | 13,094 | |||||||||||||||
Intangible assets | - | - | 7,214 | - | 7,214 | |||||||||||||||
Subsidiaries | 8,658 | 458 | 1,682 | (10,798 | ) | - | ||||||||||||||
Investments accounted for using the equity method | - | - | 1,248 | - | 1,248 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 3,627 | - | (3,627 | ) | - | ||||||||||||||
Other financial assets | - | - | 25 | - | 25 | |||||||||||||||
Other receivables | - | - | 156 | - | 156 | |||||||||||||||
Derivative financial instruments | - | - | 30 | - | 30 | |||||||||||||||
Deferred income tax assets | - | - | 95 | - | 95 | |||||||||||||||
Totalnon-current assets | 8,658 | 4,085 | 23,544 | (14,425 | ) | 21,862 | ||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,715 | - | 2,715 | |||||||||||||||
Trade and other receivables | - | 4 | 3,626 | - | 3,630 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,141 | - | 704 | (6,845 | ) | - | ||||||||||||||
Current income tax recoverable | - | - | 165 | - | 165 | |||||||||||||||
Derivative financial instruments | - | 4 | 30 | - | 34 | |||||||||||||||
Cash and cash equivalents | 401 | - | 1,714 | - | 2,115 | |||||||||||||||
Assets held for sale | - | - | 1,112 | - | 1,112 | |||||||||||||||
Total current assets | 6,542 | 8 | 10,066 | (6,845 | ) | 9,771 | ||||||||||||||
Total assets | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 | ||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 14,491 | 1,797 | 9,001 | (10,798 | ) | 14,491 | ||||||||||||||
Non-controlling interests | - | - | 486 | - | 486 | |||||||||||||||
Total equity | 14,491 | 1,797 | 9,487 | (10,798 | ) | 14,977 | ||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,020 | 5,640 | - | 7,660 | |||||||||||||||
Derivative financial instruments | - | 3 | - | - | 3 | |||||||||||||||
Deferred income tax liabilities | - | - | 1,666 | - | 1,666 | |||||||||||||||
Other payables | - | - | 226 | - | 226 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 3,627 | (3,627 | ) | - | ||||||||||||||
Retirement benefit obligations | - | - | 377 | - | 377 | |||||||||||||||
Provisions for liabilities | - | - | 693 | - | 693 | |||||||||||||||
Totalnon-current liabilities | - | 2,023 | 12,229 | (3,627 | ) | 10,625 | ||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | 3 | 29 | 4,502 | - | 4,534 | |||||||||||||||
Advances from subsidiary and parent undertakings | 704 | - | 6,141 | (6,845 | ) | - | ||||||||||||||
Current income tax liabilities | - | - | 458 | - | 458 | |||||||||||||||
Interest-bearing loans and borrowings | 2 | 244 | 70 | - | 316 | |||||||||||||||
Derivative financial instruments | - | - | 11 | - | 11 | |||||||||||||||
Provisions for liabilities | - | - | 371 | - | 371 | |||||||||||||||
Liabilities associated with assets classified as held for sale | - | - | 341 | - | 341 | |||||||||||||||
Total current liabilities | 709 | 273 | 11,894 | (6,845 | ) | 6,031 | ||||||||||||||
Total liabilities | 709 | 2,296 | 24,123 | (10,472 | ) | 16,656 | ||||||||||||||
Total equity and liabilities | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 |
192 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2016
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 12,690 | - | 12,690 | |||||||||||||||
Intangible assets | - | - | 7,761 | - | 7,761 | |||||||||||||||
Subsidiaries | 7,654 | 375 | 1,682 | (9,711) | - | |||||||||||||||
Investments accounted for using the equity method | - | - | 1,299 | - | 1,299 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 4,508 | - | (4,508) | - | |||||||||||||||
Other financial assets | - | - | 26 | - | 26 | |||||||||||||||
Other receivables | - | - | 212 | - | 212 | |||||||||||||||
Derivative financial instruments | - | 13 | 40 | - | 53 | |||||||||||||||
Deferred income tax assets | - | - | 159 | - | 159 | |||||||||||||||
Total non-current assets | 7,654 | 4,896 | 23,869 | (14,219) | 22,200 | |||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,939 | - | 2,939 | |||||||||||||||
Trade and other receivables | - | 6 | 3,973 | - | 3,979 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,546 | - | 704 | (7,250) | - | |||||||||||||||
Current income tax recoverable | - | - | 4 | - | 4 | |||||||||||||||
Derivative financial instruments | - | - | 23 | - | 23 | |||||||||||||||
Cash and cash equivalents | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Total current assets | 6,947 | 6 | 9,691 | (7,250) | 9,394 | |||||||||||||||
Total assets | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 | |||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 13,895 | 1,922 | 7,789 | (9,711) | 13,895 | |||||||||||||||
Non-controlling interests | - | - | 548 | - | 548 | |||||||||||||||
Total equity | 13,895 | 1,922 | 8,337 | (9,711) | 14,443 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,934 | 4,581 | - | 7,515 | |||||||||||||||
Deferred income tax liabilities | - | - | 2,008 | - | 2,008 | |||||||||||||||
Other payables | - | - | 461 | - | 461 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 4,508 | (4,508) | - | |||||||||||||||
Retirement benefit obligations | - | - | 591 | - | 591 | |||||||||||||||
Provisions for liabilities | - | - | 678 | - | 678 | |||||||||||||||
Total non-current liabilities | - | 2,934 | 12,827 | (4,508) | 11,253 | |||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | - | 46 | 4,769 | - | 4,815 | |||||||||||||||
Advances from subsidiary and parent undertakings | 704 | - | 6,546 | (7,250) | - | |||||||||||||||
Current income tax liabilities | - | - | 394 | - | 394 | |||||||||||||||
Interest-bearing loans and borrowings | 2 | - | 273 | - | 275 | |||||||||||||||
Derivative financial instruments | - | - | 32 | - | 32 | |||||||||||||||
Provisions for liabilities | - | - | 382 | - | 382 | |||||||||||||||
Total current liabilities | 706 | 46 | 12,396 | (7,250) | 5,898 | |||||||||||||||
Total liabilities | 706 | 2,980 | 25,223 | (11,758) | 17,151 | |||||||||||||||
Total equity and liabilities | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 |
193 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 25,220 | - | 25,220 | |||||||||||||||
Cost of sales | - | - | (16,903) | - | (16,903) | |||||||||||||||
Gross profit | - | - | 8,317 | - | 8,317 | |||||||||||||||
Operating income/(costs) | 22 | - | (6,244) | - | (6,222) | |||||||||||||||
Group operating profit | 22 | - | 2,073 | - | 2,095 | |||||||||||||||
Profit on disposals | - | - | 56 | - | 56 | |||||||||||||||
Profit before finance costs | 22 | - | 2,129 | - | 2,151 | |||||||||||||||
Finance costs | - | (235) | (308) | 242 | (301) | |||||||||||||||
Finance income | 2 | 242 | 10 | (242) | 12 | |||||||||||||||
Other financial expense | - | - | (60) | - | (60) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,754 | 83 | - | (1,837) | - | |||||||||||||||
Share of equity accounted investments’ profit | 65 | - | 65 | (65) | 65 | |||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Income tax expense | (55) | (29) | (26) | 55 | (55) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,788 | 61 | 1,810 | (1,847) | 1,812 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,788 | 61 | 1,786 | (1,847) | 1,788 | |||||||||||||||
From discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 24 | - | 24 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (1,015) | (186) | (890) | 1,015 | (1,076) | |||||||||||||||
Gains relating to cash flow hedges | 8 | - | 8 | (8) | 8 | |||||||||||||||
(1,007) | (186) | (882) | 1,007 | (1,068) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 114 | - | 114 | (114) | 114 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (33) | - | (33) | 33 | (33) | |||||||||||||||
81 | - | 81 | (81) | 81 | ||||||||||||||||
Total other comprehensive income for the financial year | (926) | (186) | (801) | 926 | (987) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 969 | (125) | 1,153 | (1,028) | 969 | |||||||||||||||
Non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 |
194 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2016 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer €m | Non-Guarantor €m | Eliminate and €m | CRH and | ||||||||||||||||
Revenue | - | - | 24,789 | - | 24,789 | |||||||||||||||
Cost of sales | - | - | (16,566) | - | (16,566) | |||||||||||||||
Gross profit | - | - | 8,223 | - | 8,223 | |||||||||||||||
Operating income/(costs) | 20 | - | (6,335) | - | (6,315) | |||||||||||||||
Group operating profit | 20 | - | 1,888 | - | 1,908 | |||||||||||||||
Profit on disposals | - | - | 53 | - | 53 | |||||||||||||||
Profit before finance costs | 20 | - | 1,941 | - | 1,961 | |||||||||||||||
Finance costs | - | (266) | (334) | 275 | (325) | |||||||||||||||
Finance income | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Other financial expense | - | - | (66) | - | (66) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,529 | 95 | - | (1,624) | - | |||||||||||||||
Share of equity accounted investments’ profit | 42 | - | 42 | (42) | 42 | |||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666) | 1,620 | |||||||||||||||
Income tax expense | (431) | (41) | (390) | 431 | (431) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,162 | 63 | 1,199 | (1,235) | 1,189 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,162 | 63 | 1,172 | (1,235) | 1,162 | |||||||||||||||
From discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 27 | - | 27 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (71) | 49 | (131) | 71 | (82) | |||||||||||||||
Gains relating to cash flow hedges | 14 | - | 14 | (14) | 14 | |||||||||||||||
(57) | 49 | (117) | 57 | (68) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | (61) | - | (61) | 61 | (61) | |||||||||||||||
Tax on items recognised directly within other comprehensive income | 3 | - | 3 | (3) | 3 | |||||||||||||||
(58) | - | (58) | 58 | (58) | ||||||||||||||||
Total other comprehensive income for the financial year | (115) | 49 | (175) | 115 | (126) | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,128 | 112 | 1,089 | (1,201) | 1,128 | |||||||||||||||
Non-controlling interests | - | - | 16 | - | 16 | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 |
195 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2015 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 21,406 | - | 21,406 | |||||||||||||||
Cost of sales | - | - | (14,743) | - | (14,743) | |||||||||||||||
Gross profit | - | - | 6,663 | - | 6,663 | |||||||||||||||
Operating income/(costs) | 1,473 | - | (6,970) | - | (5,497) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (307) | - | 1,166 | |||||||||||||||
(Loss)/profit on disposals | (7) | - | 106 | - | 99 | |||||||||||||||
Profit/(loss) before finance costs | 1,466 | - | (201) | - | 1,265 | |||||||||||||||
Finance costs | - | (321) | (315) | 333 | (303) | |||||||||||||||
Finance income | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Other financial expense | - | - | (94) | - | (94) | |||||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (596) | 62 | - | 534 | - | |||||||||||||||
Share of equity accounted investments’ profit | 44 | - | 44 | (44) | 44 | |||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559) | 490 | 920 | |||||||||||||||
Income tax expense | (276) | (29) | (247) | 276 | (276) | |||||||||||||||
Group profit/(loss) for the financial year from continuing operations | 639 | 45 | (806) | 766 | 644 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Profit/(loss) attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 639 | 45 | (811) | 766 | 639 | |||||||||||||||
From discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 5 | - | 5 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | 643 | 159 | 502 | (643) | 661 | |||||||||||||||
Losses relating to cash flow hedges | (2) | - | (2) | 2 | (2) | |||||||||||||||
641 | 159 | 500 | (641) | 659 | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 203 | - | 203 | (203) | 203 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (30) | - | (30) | 30 | (30) | |||||||||||||||
173 | - | 173 | (173) | 173 | ||||||||||||||||
Total other comprehensive income for the financial year | 814 | 159 | 673 | (814) | 832 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,538 | 204 | (71) | (133) | 1,538 | |||||||||||||||
Non-controlling interests | - | - | 23 | - | 23 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 |
196 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Profit before tax from discontinued operations | 146 | - | 146 | (146) | 146 | |||||||||||||||
Profit before tax | 1,989 | 90 | 1,982 | (2,048) | 2,013 | |||||||||||||||
Finance costs (net) | (2) | (7) | 358 | - | 349 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,900) | (83) | - | 1,983 | - | |||||||||||||||
Share of equity accounted investments’ profit | (65) | - | (65) | 65 | (65) | |||||||||||||||
Profit on disposals | - | - | (59) | - | (59) | |||||||||||||||
Group operating profit | 22 | - | 2,216 | - | 2,238 | |||||||||||||||
Depreciation charge | - | - | 1,006 | - | 1,006 | |||||||||||||||
Amortisation of intangible assets | - | - | 66 | - | 66 | |||||||||||||||
Share-based payment (income)/expense | (1) | - | 66 | - | 65 | |||||||||||||||
Other (primarily pension payments) | - | - | (186) | - | (186) | |||||||||||||||
Net movement on working capital and provisions | - | (11) | (198) | - | (209) | |||||||||||||||
Cash generated from operations | 21 | (11) | 2,970 | - | 2,980 | |||||||||||||||
Interest paid (including finance leases) | - | (236) | (323) | 242 | (317) | |||||||||||||||
Corporation tax paid | - | (29) | (445) | - | (474) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 21 | (276) | 2,202 | 242 | 2,189 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 222 | - | 222 | |||||||||||||||
Interest received | 2 | 242 | 9 | (242) | 11 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 31 | - | 31 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (1,044) | - | (1,044) | |||||||||||||||
Advances from subsidiary and parent undertakings | 407 | 356 | - | (763) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (1,841) | - | (1,841) | |||||||||||||||
Other investments and advances | - | - | (11) | - | (11) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (53) | - | (53) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 409 | 598 | (2,687) | (1,005) | (2,685) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 42 | - | - | - | 42 | |||||||||||||||
Transactions involving non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (763) | 763 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | 6 | 1,004 | - | 1,010 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 11 | 158 | - | 169 | |||||||||||||||
Premium paid on early debt redemption | - | (18) | - | - | (18) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (321) | (22) | - | (343) | |||||||||||||||
Dividends paid to equity holders of the Company | (469) | - | - | - | (469) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (430) | (322) | 332 | 763 | 343 | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Translation adjustment | - | - | (161) | - | (161) | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 1,734 | - | 2,135 |
197 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2016 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666 | ) | 1,620 | ||||||||||||||
Profit before tax from discontinued operations | 121 | - | 121 | (121 | ) | 121 | ||||||||||||||
Profit before tax | 1,714 | 104 | 1,710 | (1,787) | 1,741 | |||||||||||||||
Finance costs (net) | (2) | (9) | 394 | - | 383 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,650) | (95) | - | 1,745 | - | |||||||||||||||
Share of equity accounted investments’ profit | (42) | - | (42) | 42 | (42) | |||||||||||||||
Profit on disposals | - | - | (55) | - | (55) | |||||||||||||||
Group operating profit | 20 | - | 2,007 | - | 2,027 | |||||||||||||||
Depreciation charge | - | - | 1,009 | - | 1,009 | |||||||||||||||
Amortisation of intangible assets | - | - | 71 | - | 71 | |||||||||||||||
Impairment charge | - | - | 23 | - | 23 | |||||||||||||||
Share-based payment (income)/expense | (3) | - | 49 | - | 46 | |||||||||||||||
Other (primarily pension payments) | - | - | (65) | - | (65) | |||||||||||||||
Net movement on working capital and provisions | - | (1) | 57 | - | 56 | |||||||||||||||
Cash generated from operations | 17 | (1) | 3,151 | - | 3,167 | |||||||||||||||
Interest paid (including finance leases) | - | (266) | (355) | 275 | (346) | |||||||||||||||
Corporation tax paid | - | (41) | (440) | - | (481) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 17 | (308) | 2,356 | 275 | 2,340 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 283 | - | 283 | |||||||||||||||
Interest received | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 40 | - | 40 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (853) | - | (853) | |||||||||||||||
Advances from subsidiary and parent undertakings | 287 | 644 | - | (931) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (149) | - | (149) | |||||||||||||||
Other investments and advances | - | - | (7) | - | (7) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (57) | - | (57) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 289 | 919 | (737) | (1,206) | (735) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 52 | - | - | - | 52 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (931) | 931 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | - | 600 | - | 600 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 25 | (30) | - | (5) | |||||||||||||||
Treasury/own shares purchased | (4) | - | - | - | (4) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (9) | (636) | (1,370) | - | (2,015) | |||||||||||||||
Dividends paid to equity holders of the Company | (352) | - | - | - | (352) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (313) | (611) | (1,739) | 931 | (1,732) | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 408 | - | 2,110 | - | 2,518 | |||||||||||||||
Translation adjustment | - | - | 58 | - | 58 | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 2,048 | - | 2,449 |
198 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2015 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559 | ) | 490 | 920 | ||||||||||||||
Profit before tax from discontinued operations | 113 | - | 113 | (113 | ) | 113 | ||||||||||||||
Profit/(loss) before tax | 1,028 | 74 | (446) | 377 | 1,033 | |||||||||||||||
Finance costs (net) | (1) | (12) | 402 | - | 389 | |||||||||||||||
Share of subsidiaries’ loss/(profit) before tax | 483 | (62) | - | (421) | - | |||||||||||||||
Share of equity accounted investments’ profit | (44) | - | (44) | 44 | (44) | |||||||||||||||
Loss/(profit) on disposals | 7 | - | (108) | - | (101) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (196) | - | 1,277 | |||||||||||||||
Depreciation charge | - | - | 843 | - | 843 | |||||||||||||||
Amortisation of intangible assets | - | - | 55 | - | 55 | |||||||||||||||
Impairment charge | - | - | 44 | - | 44 | |||||||||||||||
Share-based payment (income)/expense | (2) | - | 29 | - | 27 | |||||||||||||||
Other (primarily pension payments) | - | - | (47) | - | (47) | |||||||||||||||
Amounts due from subsidary undertakings | (1,460) | - | 1,460 | - | - | |||||||||||||||
Net movement on working capital and provisions | - | (9) | 594 | - | 585 | |||||||||||||||
Cash generated from operations | 11 | (9) | 2,782 | - | 2,784 | |||||||||||||||
Interest paid (including finance leases) | - | (283) | (352) | 333 | (302) | |||||||||||||||
Corporation tax paid | - | (29) | (206) | - | (235) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 11 | (321) | 2,224 | 333 | 2,247 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 889 | - | 889 | |||||||||||||||
Interest received | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 53 | - | 53 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (882) | - | (882) | |||||||||||||||
Advances from subsidiary and parent undertakings | (699) | (632) | - | 1,331 | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (7,296) | - | (7,296) | |||||||||||||||
Other investments and advances | - | - | (19) | - | (19) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (59) | - | (59) | |||||||||||||||
Net cash outflow from investing activities | (698) | (299) | (7,307) | 998 | (7,306) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | - | - | 1,593 | - | 1,593 | |||||||||||||||
Proceeds from exercise of share options | 57 | - | - | - | 57 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | 1,331 | (1,331) | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | 9 | 1,584 | 4,040 | - | 5,633 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 15 | 32 | - | 47 | |||||||||||||||
Premium paid on early debt redemption | - | (38) | - | - | (38) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (968) | (1,776) | - | (2,744) | |||||||||||||||
Dividends paid to equity holders of the Company | (379) | - | - | - | (379) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (4) | - | (4) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (316) | 593 | 5,216 | (1,331) | 4,162 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 1,411 | 25 | 1,859 | - | 3,295 | |||||||||||||||
Translation adjustment | - | 2 | 118 | - | 120 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Cash and cash equivalents at 31 December | 408 | - | 2,110 | - | 2,518 |
199 |
CRH Annual Report and Form 20-F|2017 |
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CRH Annual Report and Form 20-F | 2017
The Consolidated Financial Statements of CRH plc have been prepared in accordance with IFRS as adopted by the International Accounting Standards Board.
Selected financial data is presented below for the five years ended on 31 December 2017. For the three years ended 31 December 2017, the selected financial data is qualified in its entirety by reference to, and should be read in conjunction
with, the audited Consolidated Financial Statements, the related Notes and the Business Performance section included elsewhere in this Annual Report and Form20-F.
Year ended 31 December (amounts in millions, except per share data and ratios) | ||||||||||||||||||
2017 €m | 2016 (i) €m | 2015 (i) €m | 2014 (i) €m | 2013 (i) (ii) €m | ||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||
Revenue | 25,220 | 24,789 | 21,406 | 17,136 | 16,367 | |||||||||||||
Group operating profit | 2,095 | 1,908 | 1,166 | 834 | 33 | |||||||||||||
Profit/(loss) attributable to equity holders of the Company | 1,788 | 1,162 | 639 | 520 | (344) | |||||||||||||
Basic earnings/(loss) per Ordinary Share | 214.0c | 140.4c | 78.7c | 70.4c | (47.2c) | |||||||||||||
Diluted earnings/(loss) per Ordinary Share | 212.7c | 139.4c | 78.3c | 70.4c | (47.2c) | |||||||||||||
Dividends paid during calendar year per Ordinary Share | 65.4c | 62.8c | 62.5c | 62.5c | 62.5c | |||||||||||||
Average number of Ordinary Shares outstanding (iii) | 835.6 | 827.8 | 812.3 | 737.6 | 729.2 | |||||||||||||
Ratio of earnings to fixed charges (times) (iv) | 4.5 | 3.9 | 2.8 | 2.4 | 0.6 (v) | |||||||||||||
All data relates to continuing operations | ||||||||||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||
Total assets | 31,633 | 31,594 | 32,007 | 22,017 | 20,429 | |||||||||||||
Net assets (vi) | 14,977 | 14,443 | 13,544 | 10,198 | 9,686 | |||||||||||||
Ordinary shareholders’ equity | 14,490 | 13,894 | 13,014 | 10,176 | 9,661 | |||||||||||||
Equity share capital | 286 | 284 | 281 | 253 | 251 | |||||||||||||
Number of Ordinary Shares (iii) | 839.0 | 832.8 | 823.9 | 744.5 | 739.2 | |||||||||||||
Number of Treasury Shares and own shares (iii) | 0.4 | 0.4 | 1.3 | 3.8 | 6.0 | |||||||||||||
Number of Ordinary Shares net of Treasury Shares and own shares (iii) | 838.6 | 832.4 | 822.6 | 740.7 | 733.2 |
(i) | Prior year comparative income statement data has been restated to show the results of our Americas Distribution segment in discontinued operations. See note 2 to the Consolidated Financial Statements for further details. |
(ii) | Group operating profit includes asset impairment charges of€650 million in 2013, with an additional€105 million impairment charge included in loss attributable to equity holders of the Company in respect of equity accounted investments. |
(iii) | All share numbers are shown in millions of shares. |
(iv) | For the purposes of calculating the ratio of earnings to fixed charges, in accordance with Item 503 of RegulationS-K, earnings have been calculated by adding: profit/(loss) before tax from continuing operations adjusted to exclude the Group’s share of equity accounted investments’ result after tax, fixed charges and dividends received from equity accounted investments; and the fixed charges were calculated by adding interest expensed and capitalised, amortised premiums, discounts and capitalised expenses related to indebtedness, an estimate of the interest within rental expense and preference security dividend requirements of consolidated subsidiaries. |
(v) | The amount of the deficiency in 2013 was US$183 million. |
(vi) | Net assets is calculated as the sum of total assets less total liabilities. |
208 |
CRH Annual Report and Form 20-F | 2017
In this Annual Report and Form20-F, references to “US$”, “US Dollars” or “US cents” are to the United States currency, references to “euro”, “euro cent”, “cent”, “c” or “€” are to the euro currency and “Stg£” or “Pound Sterling” are to the currency of the United Kingdom of Great Britain and Northern Ireland (UK). Other currencies referred to in this Annual Report and Form20-F include Polish Zloty (PLN), Swiss Franc (CHF), Canadian Dollar (CAD), Chinese Renminbi (RMB), Indian Rupee (INR), Ukrainian Hryvnia (UAH), Philippine Peso (PHP), Romanian Leu (RON) and Serbian Dinar (RSD).
For the convenience of the reader, this Annual Report and Form20-F contains translations of certain euro amounts into US Dollars at specified rates. These translations should not be construed as representations that the euro amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated.
The table below sets forth, for the periods and dates indicated, the average, high, low andend-of-period exchange rates in US Dollars per€1 (to the nearest cent) using the Federal Reserve Bank of New York Noon Buying Rate (the ‘FRB Noon Buying Rate’).
These rates may vary slightly from the rates used for translating foreign currencies into euro in the preparation of the Consolidated Financial Statements (see page 134).
For a discussion on the effects of exchange rate fluctuations on the financial condition and results of the operations of the Group, see the Business Performance section beginning on page 22.
Where referenced in the Supplementary20-F Disclosures and Shareholder Information sections, information is provided at the latest practicable date, 16 February 2018.
euro/US Dollar exchange rate
Years ended 31 December | Period End | Average Rate (i) | High | Low | ||||||||||
2013 | 1.38 | 1.33 | 1.38 | 1.28 | ||||||||||
2014 | 1.21 | 1.32 | 1.39 | 1.21 | ||||||||||
2015 | 1.09 | 1.10 | 1.20 | 1.05 | ||||||||||
2016 | 1.06 | 1.10 | 1.15 | 1.04 | ||||||||||
2017 | 1.20 | 1.14 | 1.20 | 1.04 | ||||||||||
2018 (through 16 February 2018) | 1.24 | 1.23 | 1.25 | 1.19 | ||||||||||
Months ended | ||||||||||||||
September 2017 | 1.18 | 1.19 | 1.20 | 1.17 | ||||||||||
October 2017 | 1.16 | 1.18 | 1.18 | 1.16 | ||||||||||
November 2017 | 1.19 | 1.17 | 1.19 | 1.16 | ||||||||||
December 2017 | 1.20 | 1.18 | 1.20 | 1.17 | ||||||||||
January 2018 | 1.24 | 1.22 | 1.25 | 1.19 | ||||||||||
February 2018 (through 16 February 2018) | 1.24 | 1.24 | 1.25 | 1.22 | ||||||||||
(i) The average of the euro/US Dollar exchange rate on the last day of each month during the period or in the case of monthly averages, the average of all days in the month, in each case using the FRB Noon Buying Rate.
The FRB Noon Buying Rate on 31 December 2017 was€1 = US$1.2022 and on 16 February 2018 was€1 = US$1.2442. |
209 |
CRH Annual Report and Form 20-F | 2017
CRH uses a number ofnon-GAAP performance measures to monitor financial performance. These measures are referred to throughout the discussion of our reported financial position and operating performance and are measures which are regularly reviewed by CRH management.
These performance measures may not be uniformly defined by all companies and accordingly they may not be directly comparable with similarly titled measures and disclosures by other companies. Certain information presented is derived from amounts calculated in accordance
with IFRS but is not itself an expressly permitted GAAP measure. Thenon-GAAP performance measures as summarised below should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
Reconciliation of Revenue, EBITDA (as defined)* and Operating Profit by segment
Year ended 31 December | ||||||||||||||||||||||||||||||||||||||||||||
Revenue | Group EBITDA (as defined)* | Depreciation, amortisation and impairment | Group operating profit (i) | |||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | �� | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 6,902 | 6,945 | 4,813 | 839 | 781 | 424 | 361 | 395 | 304 | 478 | 386 | 120 | ||||||||||||||||||||||||||||||||
Europe Lightside | 1,440 | 1,392 | 1,404 | 143 | 137 | 136 | 41 | 45 | 46 | 102 | 92 | 90 | ||||||||||||||||||||||||||||||||
Europe Distribution | 4,145 | 4,066 | 4,158 | 269 | 206 | 171 | 62 | 76 | 77 | 207 | 130 | 94 | ||||||||||||||||||||||||||||||||
Europe | 12,487 | 12,403 | 10,375 | 1,251 | 1,124 | 731 | 464 | 516 | 427 | 787 | 608 | 304 | ||||||||||||||||||||||||||||||||
Americas Materials | 7,970 | 7,598 | 7,018 | 1,270 | 1,204 | 955 | 412 | 386 | 335 | 858 | 818 | 620 | ||||||||||||||||||||||||||||||||
Americas Products | 4,327 | 4,280 | 3,862 | 573 | 543 | 391 | 138 | 132 | 142 | 435 | 411 | 249 | ||||||||||||||||||||||||||||||||
Americas | 12,297 | 11,878 | 10,880 | 1,843 | 1,747 | 1,346 | 550 | 518 | 477 | 1,293 | 1,229 | 869 | ||||||||||||||||||||||||||||||||
Asia | 436 | 508 | 151 | 52 | 109 | 2 | 37 | 38 | 9 | 15 | 71 | (7) | ||||||||||||||||||||||||||||||||
Total Group from continuing operations | 25,220 | 24,789 | 21,406 | 3,146 | 2,980 | 2,079 | 1,051 | 1,072 | 913 | 2,095 | 1,908 | 1,166 | ||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 2,343 | 2,315 | 2,229 | 164 | 150 | 140 | 21 | 31 | 29 | 143 | 119 | 111 | ||||||||||||||||||||||||||||||||
Total Group | 27,563 | 27,104 | 23,635 | 3,310 | 3,130 | 2,219 | 1,072 | 1,103 | 942 | 2,238 | 2,027 | 1,277 | ||||||||||||||||||||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||||||||||||||||||||||||||||||
Profit on disposals | 56 | 53 | 99 | |||||||||||||||||||||||||||||||||||||||||
Finance costs less income | (289) | (317) | (295) | |||||||||||||||||||||||||||||||||||||||||
Other financial expense | (60) | (66) | (94) | |||||||||||||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit | 65 | 42 | 44 | |||||||||||||||||||||||||||||||||||||||||
Profit before tax from continuing operations | 1,867 | 1,620 | 920 | |||||||||||||||||||||||||||||||||||||||||
Income tax expense | (55) | (431) | (276) | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year from continuing operations | 1,812 | 1,189 | 644 | |||||||||||||||||||||||||||||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | 81 | 85 | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 |
(i) | Throughout this document, Group operating profit is reported as shown in the Consolidated Income Statement and excludes profit on disposals. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
210 |
CRH Annual Report and Form 20-F | 2017
Return on Net Assets | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||
Group operating profit from discontinued operations | 143 | 119 | 111 | |||||||||||||
Total Group operating profit (numerator for RONA computation) | 2,238 | 2,027 | 1,277 | |||||||||||||
Current year | ||||||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | |||||||||||||
Segment liabilities (i) | (6,201) | (6,927) | (6,794) | |||||||||||||
Group segment net assets | 20,608 | 20,654 | 21,087 | |||||||||||||
Assets held for sale | 1,112 | - | - | |||||||||||||
Liabilities associated with assets classified as held for sale | (341) | - | - | |||||||||||||
Group net assets (including net assets held for sale) | 21,379 | 20,654 | 21,087 | |||||||||||||
Prior year | ||||||||||||||||
Segment assets (i) | 27,581 | 27,881 | 16,584 | |||||||||||||
Segment liabilities (i) | (6,927) | (6,794) | (4,258) | |||||||||||||
Group segment net assets | 20,654 | 21,087 | 12,326 | |||||||||||||
Average net assets including net assets held for sale (denominator for RONA computation) | 21,017 | 20,871 | 16,707 | |||||||||||||
RONA | 10.6% | 9.7% | 7.6% | |||||||||||||
Reconciliation of Segment Assets and Liabilities to Group Assets and Liabilities | ||||||||||||||||
Assets | 2017 €m | 2016 €m | 2015 €m | 2014 €m | ||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | 16,584 | ||||||||||||
Reconciliation to total assets as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Investments accounted for using the equity method | 1,248 | 1,299 | 1,317 | 1,329 | ||||||||||||
Other financial assets | 25 | 26 | 28 | 23 | ||||||||||||
Derivative financial instruments (current andnon-current) | 64 | 76 | 109 | 102 | ||||||||||||
Income tax assets (current and deferred) | 260 | 163 | 154 | 186 | ||||||||||||
Cash and cash equivalents | 2,115 | 2,449 | 2,518 | 3,262 | ||||||||||||
Assets held for sale | 1,112 | - | - | 531 | ||||||||||||
Total assets as reported in the Consolidated Balance Sheet | 31,633 | 31,594 | 32,007 | 22,017 | ||||||||||||
Liabilities | ||||||||||||||||
Segment liabilities (i) | 6,201 | 6,927 | 6,794 | 4,258 | ||||||||||||
Reconciliation to total liabilities as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Interest-bearing loans and borrowings (current andnon-current) | 7,976 | 7,790 | 9,221 | 5,866 | ||||||||||||
Derivative financial instruments (current andnon-current) | 14 | 32 | 24 | 23 | ||||||||||||
Income tax liabilities (current and deferred) | 2,124 | 2,402 | 2,424 | 1,459 | ||||||||||||
Liabilities associated with assets classified as held for sale | 341 | - | - | 213 | ||||||||||||
Total liabilities as reported in the Consolidated Balance Sheet | 16,656 | 17,151 | 18,463 | 11,819 |
(i) | Segment assets and liabilities as disclosed in note 1 to the Consolidated Financial Statements. |
211 |
CRH Annual Report and Form 20-F | 2017
Non-GAAP Performance Measures - continued
Calculation of EBITDA (as defined)* Net Interest Cover
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Interest | ||||||||||||||||
Finance costs (i) | 301 | 325 | 303 | |||||||||||||
Finance income (i) | (12) | (8) | (8) | |||||||||||||
Net interest | 289 | 317 | 295 | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
Times | ||||||||||||||||
EBITDA (as defined)* net interest cover (EBITDA (as defined)* divided by net interest) | 10.9 | 9.4 | 7.0 | |||||||||||||
(i) These items appear on the Consolidated Income Statement on page 120. | ||||||||||||||||
Calculation of Net Debt/EBITDA (as defined)* | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Net Debt | ||||||||||||||||
Cash and cash equivalents (i) | 2,115 | 2,449 | 2,518 | |||||||||||||
Interest-bearing loans and borrowings (i) | (7,976) | (7,790) | (9,221) | |||||||||||||
Derivative financial instruments (net) (i) | 50 | 44 | 85 | |||||||||||||
Group net debt excluding net debt reclassified as held for sale | (5,811) | (5,297) | (6,618) | |||||||||||||
Cash at bank and in hand reclassified as held for sale (i) | 20 | - | - | |||||||||||||
Interest-bearing loans and borrowings reclassified as held for sale (i) | (5) | - | - | |||||||||||||
Group net debt | (5,796) | (5,297) | (6,618) | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
EBITDA (as defined)* from discontinued operations | 164 | 150 | 140 | |||||||||||||
Total Group EBITDA (as defined)* | 3,310 | 3,130 | 2,219 | |||||||||||||
Times | ||||||||||||||||
Net debt divided by EBITDA (as defined)* | 1.8 | 1.7 | 3.0 | |||||||||||||
(i) These items appear in notes 21 to 25 to the Consolidated Financial Statements. | ||||||||||||||||
Adjusted Basic Earnings per Ordinary Share | ||||||||||||||||
2017 €m | ||||||||||||||||
Numerator for basic and diluted earnings per Ordinary Share (i) | 1,895 | |||||||||||||||
One-off Swiss pension past service credit (net of tax) (ii) | (59) | |||||||||||||||
One-off deferred tax credit (including credit relating to discontinued operations) | (447) | |||||||||||||||
Numerator for adjusted basic EPS excludingone-off gains per Ordinary Share from continuing and discontinued operations | 1,389 | |||||||||||||||
Average shares (i) | 835.6 | |||||||||||||||
Adjusted basic earnings per Ordinary Share | 166.2c | |||||||||||||||
Dividend declared for the year | 68.0c | |||||||||||||||
Dividend cover (adjusted basic earnings per share/dividend declared per share) | 2.4x |
(i) | These items appear in note 13 to the Consolidated Financial Statements. |
(ii) | Theone-off Swiss pension past service credit was€81 million before a tax charge of€22 million. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
212 |
CRH Annual Report and Form 20-F | 2017
EBITDA (as defined). EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax and is quoted by management in conjunction with other GAAP andnon-GAAP financial measures, to aid investors in their analysis of the performance of the Group and to assist investors in the comparison of the Group’s performance with that of other companies. EBITDA (as defined)* and operating profit by segment are monitored by management in order to allocate resources between segments and to assess performance. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for the purpose of the information presented to the Chief Operating Decision Maker.
Net Debt. Net debt is used by management as it gives a more complete picture of the Group’s current debt situation than total interest-bearing loans and borrowings. Net debt is provided to enable investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. Net debt is anon-GAAP measure and comprises current andnon-current interest-bearing loans and borrowings, cash and cash equivalents and current andnon-current derivative financial instruments.
Net debt/EBITDA (as defined)* is monitored by management and is useful to investors in assessing the Company’s level of indebtedness relative to its profitability and cash-generating capabilities. It is the ratio of net debt to EBITDA (as defined)* and is calculated on page 212.
EBITDA (as defined)*Net Interest Cover. EBITDA (as defined)* net interest cover is used by management as a measure which matches the earnings and cash generated by the business to the underlying funding costs. EBITDA (as defined)* net interest cover is presented to provide investors with a greater understanding of the impact of CRH’s debt and financing arrangements. It is the ratio of EBITDA (as defined)* to net interest and is calculated on page 212. The definitions and calculations used as a metric in lender covenant agreements include certain specified adjustments to the amounts included in the Consolidated Financial Statements. The ratios as calculated on the basis of the definitions in those covenants are disclosed in note 24 to the Consolidated Financial Statements.
RONA. Return on Net Assets is a key internalpre-tax measure of operating performance throughout the CRH Group and can be used by management and investors to measure the relative use of assets between CRH’s business segments and to compare to other businesses. The metric measures management’s ability to generate profits
from the net assets required to support that business, focusing on both profit maximisation and the maintenance of an efficient asset base; it encourages effective fixed asset maintenance programmes, good decisions regarding expenditure on property, plant and equipment and the timely disposal of surplus assets, and also supports the effective management of the Group’s working capital base. RONA is calculated by expressing total Group operating profit as a percentage of average net assets. Net assets comprise total assets by segment (including assets held for sale) less total liabilities by segment (including liabilities associated with assets classified as held for sale) as shown on page 211 and detailed in note 1 to the Consolidated Financial Statements, and exclude equity accounted investments and other financial assets, net debt (as previously defined) and tax assets & liabilities. The average net assets for the year is the simple average of the opening and closing balance sheet figures.
Organic Revenue, Organic Operating Profit and Organic EBITDA (as defined)*. CRH pursues a strategy of growth through acquisitions and investments, with€1,905 million spent on acquisitions and investments in 2017 (2016:€213 million). Acquisitions completed in 2016 and 2017 contributed incremental sales revenue of€596 million, operating profit of€14 million and EBITDA (as defined)* of€60 million in 2017. Proceeds from divestments andnon-current asset disposals amounted to€222 million (net of cash disposed and deferred proceeds) (2016:€283 million). The sales impact of divested activities in 2017 was a negative€204 million and the disposal impact at an operating profit and EBITDA (as defined)* level was a negative€14 million and€21 million respectively.
The euro strengthened against most major currencies during 2017, particularly towards the end of the year resulting in the average euro/ Pound Sterling rate weakening from 0.8195 in 2016 to 0.8767 in 2017 and the US Dollar weakening from an average 1.1069 in 2016 to 1.1297 in 2017. Overall currency movements resulted in an unfavourable net foreign currency translation impact on our results as shown on the table on page 26.
Because of the impact of acquisitions, divestments, exchange translation and othernon-recurring items on reported results each year, the Group uses organic revenue, organic operating profit and organic EBITDA (as defined)* as additional performance indicators to assess performance ofpre-existing (also referred to as underlying, heritage,like-for-like or ongoing) operations each year.
Organic revenue, organic operating profit and organic EBITDA (as defined)* is arrived at by excluding the incremental revenue, operating profit and EBITDA (as defined)* contributions from current and prior year acquisitions and divestments, the impact of exchange translation and the impact of anynon-recurring items. In the Business Performance section on pages 22 to 53, changes in organic revenue, organic operating profit and organic EBITDA (as defined)* are presented as additional measures of revenue, operating profit and EBITDA (as defined)* to provide a greater understanding of the performance of the Group. A reconciliation of the changes in organic revenue, organic operating profit and organic EBITDA (as defined)* to the changes in total revenue, operating profit and EBITDA (as defined)* for the Group and by segment, is presented with the discussion of each segment’s performance in tables contained in the segment discussion commencing on page 32.
Adjusted Basic Earnings per Ordinary Share. Adjusted basic earnings per Ordinary Share has been used by management as it presents a more accurate picture of the profit attributable to equity holders of the Group, before certainone-off items (net of related tax). Management believes adjusted basic earnings per Ordinary Share provides useful information for investors and allows more meaningfulperiod-to-period comparisons of our operating results. This is anon-GAAP measure as it removes the impact of theone-off past service credit due to changes in the Group’s pension scheme in Switzerland and theone-off benefit of a reduction in the Group’s deferred tax liabilities due to changes in US tax legislation. As these areone-off items, relating to 2017, no comparative information is required.
Revenue from continuing and discontinued operations, EBITDA (as defined)* from continuing and discontinued operations and Operating Profit from continuing and discontinued operations. As detailed in note 2 to the Consolidated Financial Statements, our Americas Distribution segment has been classified as discontinued operations in accordance with IFRS 5. In certain instances throughout the Annual Report and Form20-F we refer to revenue, EBITDA (as defined)* and operating profit from continuing and discontinued operations. Information presented on this basis is useful to investors as (i) it provides a greater understanding of the Group’s performance and (ii) assists investors in the comparison of the Group’s performance with that of other companies. A reconciliation of each of these measures is detailed in note 1 to the Consolidated Financial Statements and on page 210.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
213 |
CRH Annual Report and Form 20-F | 2017
An analysis of the maturity profile of debt, finance and operating leases, purchase obligations, deferred and contingent acquisition consideration and pension scheme contribution commitments at 31 December 2017 is as follows:
Contractual Obligations
Payments due by period | Total €m | Less than 1 year €m | 1-3 years €m | 3-5 years €m | More than 5 years €m | |||||||||||||
Interest-bearing loans and borrowings (i) | 7,950 | 320 | 1,252 | 1,296 | 5,082 | |||||||||||||
Finance leases | 12 | 3 | 4 | 2 | 3 | |||||||||||||
Estimated interest payments on contractually-committed debt and finance leases (ii) | 2,542 | 284 | 491 | 384 | 1,383 | |||||||||||||
Deferred and contingent acquisition consideration | 265 | 167 | 63 | 24 | 11 | |||||||||||||
Operating leases (iii) | 2,191 | 419 | 598 | 364 | 810 | |||||||||||||
Purchase obligations (iv) | 1,295 | 611 | 178 | 117 | 389 | |||||||||||||
Retirement benefit obligation commitments (v) | 34 | 19 | 4 | 3 | 8 | |||||||||||||
Total | 14,289 | 1,823 | 2,590 | 2,190 | 7,686 |
(i) | Of the€8.0 billion total gross debt,€0.1 billion is drawn on revolving facilities which may be repaid and redrawn up to the date of maturity. The interest payments are estimated assuming these loans are repaid on facility maturity dates. |
(ii) | These interest payments have been estimated on the basis of the following assumptions: (a) no change in variable interest rates; (b) no change in exchange rates; (c) that all debt is repaid as if it falls due from future cash generation; and (d) none is refinanced by future debt issuance. |
(iii) | Includes€252 million relating to discontinued operations. See further details in note 29 to the Consolidated Financial Statements. |
(iv) | Purchase obligations include contracted for capital expenditure. A summary of the Group’s future purchase commitments as at 31 December 2017 for capital expenditure are set out in note 14 to the Consolidated Financial Statements. These expenditures for replacement and new projects are in the ordinary course of business and will be financed from internal resources. |
(v) | These retirement benefit commitments comprise the contracted payments related to our pension schemes in the UK and Ireland. See further details in note 28 to the Consolidated Financial Statements. |
Quantitative and Qualitative Information about Market Risk
CRH addresses the sensitivity of the Group’s interest rate swaps and debt obligations to changes in interest rates in a sensitivity analysis technique that measures the estimated impacts on the income statement and on equity of either an increase or decrease in market interest rates or a strengthening or weakening in the US Dollar against all other currencies, from the rates applicable at 31 December 2017, for each class of financial instrument with all other variables remaining constant. The technique used measures the estimated impact on profit before tax and on total equity arising on netyear-end floating rate debt and onyear-end equity, based on either an
increase/decrease of 1% and 0.5% in floating interest rates or a 5% and 2.5% strengthening/weakening in the US Dollar/euro exchange rate. The US Dollar/euro rate has been selected for this sensitivity analysis given the materiality of the Group’s activities in the US. This analysis, set out in note 22 to the Consolidated Financial Statements, is for illustrative purposes only as in practice interest and foreign exchange rates rarely change in isolation.
Quantitative and qualitative information and sensitivity analysis of market risk is contained in notes 21 to 25 to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
CRH does not have anyoff-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on CRH’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
214 |
CRH Annual Report and Form 20-F | 2017
Property, Plants and Equipment
At 16 February 2018, CRH had a total of 2,960 building materials production locations and 684 Merchanting and DIY locations. 1,613 locations are leased, with the remaining 2,031 locations held on a freehold basis.
The significant subsidiary locations as at 31 December 2017 are the cement facilities in the Philippines, Poland, Ukraine, the UK, Romania, Canada, Slovakia, Ireland, Germany, France and Brazil. The clinker (the key intermediate product in the manufacture of cement) capacity for these locations is set out in the table below. Further details on locations and products manufactured are provided in the Business Performance section on pages 22 to 53. None of CRH’s individual properties is of material significance to the Group.
CRH believes that all the facilities are in good condition, adequate for their purpose and suitably utilised according to the individual nature and requirements of the relevant operations. CRH has a continuing programme of improvements and replacements to properties when considered appropriate to meet the needs of the individual operations. Further information in relation to the Group’s accounting policy and process governing any impairment of property, plant and equipment is given on page 127 and in note 14 to the Consolidated Financial Statements on page 152.
Significant Locations – Clinker Capacity
Subsidiary | Country | Number of plants | Clinker Capacity (tonnes per hour) | |||||||
Republic Cement | Philippines | 5 | 613 | |||||||
Grupa Ożarów | Poland | 1 | 342 | |||||||
Podilsky Cement PJSC | Ukraine | 1 | 313 | |||||||
Tarmac | United Kingdom | 3 | 306 | |||||||
CRH Romania | Romania | 2 | 305 | |||||||
CRH Canada | Canada | 2 | 292 | |||||||
CRH Slovakia | Slovakia | 2 | 290 | |||||||
Irish Cement | Ireland | 2 | 288 | |||||||
Opterra | Germany | 2 | 268 | |||||||
Eqiom | France | 3 | 243 | |||||||
CRH Brazil | Brazil | 3 | 200 |
Sources and Availability of Raw Materials
CRH generally owns or leases the real estate on which its main raw materials, namely aggregates, are found. CRH is a significant purchaser of certain important materials or resources such as cement, liquid bitumen, steel, gas, fuel and other energy supplies, the cost of which can fluctuate significantly and consequently have an adverse impact on CRH’s business. CRH is not generally dependent on any one source for the supply of these materials or resources, other than in certain jurisdictions with regard to the supply of gas and electricity. Competitive markets generally exist in the jurisdictions in which CRH operates for the supply of cement, bitumen, steel and fuel.
Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 16 to CRH’s Annual Report on Form20-F, as filed with the SEC.
215 |
CRH Annual Report and Form 20-F | 2017
Activities with Reserves Backing (i)
Property acreage (hectares) (ii) | % of mineral reserves by rock type | |||||||||||||||||||||||||||||||||||||||||
Physical location | No. of quarries /pits | Owned | Leased | Proven & probable reserves (iii) | Years to depletion (iv) | Hard rock | Sand & gravel | Other | 2017 Annualised extraction (v) | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | ||||||||||||||||||||||||||||||||||||||||||
France | 3 | 512 | - | 91 | 34 | 90% | - | 10% | 2.8 | |||||||||||||||||||||||||||||||||
Germany | 3 | 314 | - | 158 | 59 | 100% | - | - | 2.9 | |||||||||||||||||||||||||||||||||
Ireland | 2 | 260 | - | 208 | 82 | 100% | - | - | 2.7 | |||||||||||||||||||||||||||||||||
Poland | 2 | 293 | - | 174 | 44 | 93% | 6% | 1% | 4.1 | |||||||||||||||||||||||||||||||||
Romania | 6 | 220 | 898 | 242 | 60 | 83% | - | 17% | 4.0 | |||||||||||||||||||||||||||||||||
Cement | Serbia | 2 | 54 | 41 | 108 | 155 | 100% | - | - | 0.8 | ||||||||||||||||||||||||||||||||
Slovakia | 5 | 341 | 48 | 301 | 138 | 92% | - | 8% | 2.3 | |||||||||||||||||||||||||||||||||
Spain | 1 | 34 | - | 85 | 232 | 100% | - | - | 0.4 | |||||||||||||||||||||||||||||||||
Switzerland | 3 | 93 | 6 | 23 | 17 | 100% | - | - | 1.4 | |||||||||||||||||||||||||||||||||
Ukraine | 2 | 240 | - | 125 | 43 | 100% | - | - | 2.4 | |||||||||||||||||||||||||||||||||
United Kingdom | 6 | 500 | 154 | 273 | 69 | 97% | - | 3% | 4.1 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Finland | 111 | 520 | 335 | 146 | 13 | 68% | 32% | - | 10.0 | |||||||||||||||||||||||||||||||||
France | 52 | 638 | 953 | 254 | 30 | 70% | 30% | - | 9.0 | |||||||||||||||||||||||||||||||||
Ireland | 124 | 5,182 | 70 | 1,114 | 78 | 85% | 15% | - | 15.3 | |||||||||||||||||||||||||||||||||
Aggregates | Poland | 3 | 243 | 10 | 150 | 44 | 92% | 8% | - | 2.7 | ||||||||||||||||||||||||||||||||
Romania | 20 | 86 | 344 | 53 | 22 | 96% | 4% | - | 1.7 | |||||||||||||||||||||||||||||||||
Spain | 11 | 119 | 64 | 107 | 59 | 99% | 1% | - | 2.0 | |||||||||||||||||||||||||||||||||
United Kingdom | 168 | 11,964 | 3,014 | 1,350 | 32 | 84% | 16% | - | 42.0 | |||||||||||||||||||||||||||||||||
Other | 41 | 333 | 572 | 184 | 20 | 74% | 26% | - | 9.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Lime
| Czech Republic, Ireland, Poland, United Kingdom | 4 | 150 | 10 | 121 | 32 | 100% | - | - | 3.7 | ||||||||||||||||||||||||||||||||
Germany | 9 | 341 | - | 298 | 43 | 100% | - | - | 7.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 578 | 22,437 | 6,519 | 5,565 | 88% | 10% | 2% | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Americas Materials | ||||||||||||||||||||||||||||||||||||||||||
Brazil | 3 | 1,072 | - | 166 | 83 | 100% | - | - | 1.9 | |||||||||||||||||||||||||||||||||
Cement | Canada | 2 | 717 | - | 293 | 94 | 100% | - | - | 3.1 | ||||||||||||||||||||||||||||||||
United States | 5 | 1,175 | 19 | 85 | 53 | 100% | - | - | 1.6 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Aggregates | Canada | 41 | 5,999 | 431 | 709 | 41 | 82% | 18% | - | 18.1 | ||||||||||||||||||||||||||||||||
United States | 769 | 45,920 | 20,222 | 14,931 | 103 | 73% | 27% | - | 149.9 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 820 | 54,883 | 20,672 | 16,184 | 75% | 25% | - | |||||||||||||||||||||||||||||||||||
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Asia | ||||||||||||||||||||||||||||||||||||||||||
Cement | Philippines | 14 | 2,247 | 17 | 222 | 34 | 100% | - | - | 6.6 | ||||||||||||||||||||||||||||||||
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Aggregates | Philippines | 1 | - | 17 | 25 | 50 | 100% | - | - | 0.6 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 15 | 2,247 | 34 | 247 | 100% | - | - | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Group totals | 1,413 | 79,567 | 27,225 | 21,996 | 78% | 22% | - | |||||||||||||||||||||||||||||||||||
|
(i) | The disclosures made in this category refer to those facilities which are engaged inon-site processing of reserves in the various forms. |
(ii) | 1 hectare equals approximately 2.47 acres. |
(iii) | Where reserves are leased, the data presented above is restricted to include only that material which can be produced over the life of the contractual commitment inherent in the lease; the totals shown pertain only to amounts which are proven and probable. All of the proven and probable reserves are permitted and are quoted in millions of tonnes. |
(iv) | Years to depletion is based on the average of the most recent three years annualised production. |
(v) | Annualised extraction is quoted in millions of tonnes. |
216 |
CRH Annual Report and Form 20-F | 2017
The Group’s reserves for the production of primary building materials (which encompass cement, lime, aggregates (stone, sand and gravel), asphalt, readymixed concrete and concrete products) fall into a variety of categories spanning a wide number of rock types and geological classifications – see the table on the previous page setting out the activities with reserves backing.
Reserve estimates are generally prepared by third-party experts (i.e. geologists or engineers) prior to acquisition; this procedure is a critical component in the Group’s due diligence process in connection with any acquisition. Subsequent to acquisition, estimates are typically updated by company engineers and/or geologists and are reviewed annually by corporate and/or divisional staff. However, where deemed appropriate by management, in the context of large or strategically important deposits, the services of third-party consultant geologists and/or engineers may be employed to validate reserves quantities outside of the aforementioned due diligence framework on an ongoing basis.
The Group has not employed third-parties to review reserves over the three-year period ending 31 December 2017 other than in business combination activities and specific instances where such review was warranted.
Reserve estimates are subject to annual review by each of the relevant operating entities across the Group. The estimation process distinguishes between owned and leased reserves segregated into permitted and unpermitted as appropriate and includes only those permitted reserves which are proven and probable. The term “permitted” reserves refers to those tonnages which can currently be mined without any environmental or legal constraints. Permitted owned reserve estimates are based on estimated recoverable tonnes whilst permitted leased reserve estimates are based on estimated total recoverable tonnes which may be extracted over the term of the lease contract.
Proven and probable reserve estimates are based on recoverable tonnes only and are thus stated net of estimated production losses and other matters factored into the computation (e.g. required slopes/benches). In order for reserves to qualify for inclusion in the “proven and probable” category, the following conditions must be satisfied:
None of CRH’s mineral-bearing properties is individually material to the Group.
217 |
CRH Annual Report and Form 20-F | 2017
This section describes the principal risks and uncertainties that could affect the Group’s business. If any of these risks occur, the Group’s business, financial condition, results of operations and prospects could be materially adversely affected.
The risks and uncertainties listed below should be considered in connection with any forward-looking statements in this Annual Report and Form20-F and the cautionary statements contained in Corporate Governance - Disclaimer/Forward- Looking Statements on page 97.
The Risk Factors have been grouped to focus on key strategic, operational, compliance and financial and reporting risks.
Key Strategic Risk Factors
Industry cyclicality | ||
Risk Factor | Discussion | |
Description: The level of construction activity in local and national markets is inherently cyclical being influenced by a wide variety of factors including global and national economic circumstances, governments’ ability to fund infrastructure projects, consumer sentiment and weather conditions. Financial performance may also be negatively impacted by unfavourable swings in fuel and other commodity/raw material prices. Impact: Failure of the Group to respond on a timely basis and/or adequately to unfavourable events may adversely affect financial performance. | The Group’s operating and financial performance is influenced by general economic conditions and the state of the residential, industrial and commercial and infrastructure construction markets in the countries in which it operates. In general, economic uncertainty exacerbates negative trends in construction activity leading to postponement in orders. Construction markets are inherently cyclical and are affected by many factors that are beyond the Group’s control, including: • the price of fuel and principal energy-related raw materials such as bitumen and steel (which accounted for approximately 8% of annual Group sales revenues in 2017); • the performance of the national economies in the countries in which the Group operates, across Europe, Americas and Asia; • monetary policies in the countries in which the Group operates — for example, an increase in interest rates typically reduces the volume of mortgage borrowings thus impacting residential construction activity; • the allocation of government funding for public infrastructure programmes, such as the development of highways in the US under the Fixing Americas Surface Transportation Act (FAST Act); and • the level of demand for construction materials and services, with sustained adverse weather conditions leading to potential disruptions or curtailments in outdoor construction activity The adequacy and timeliness of the actions taken by the Group’s management team are of critical importance in maintaining financial performance at appropriate levels. Each of the above factors could have a material adverse effect on the Group’s operating results and the market price of CRH plc’s Ordinary Shares. |
218 |
CRH Annual Report and Form 20-F | 2017
Political and economic uncertainty
Risk Factor | Discussion | |
Description: As an international business, the Group operates in many countries with differing, and in some cases, potentially fast-changing economic, social and political conditions. These conditions, which may be heightened by the uncertainties resulting from the commencement of proceedings for the UK to exit the European Union, in addition to continued instability in Brazil, Philippines and Ukraine, could include political unrest, currency disintegration, strikes, restrictions on repatriation of earnings, changes in law and policies, activism, and civil disturbance and may be triggered or worsened by other forms of instability including natural disasters, epidemics, widespread transmission of diseases and terrorist attacks. These factors are of particular relevance in developing/emerging markets. Impact: Changes in these conditions, or in the governmental or regulatory requirements in any of the countries in which the Group operates, may adversely affect the Group’s business, results of operations, financial condition or prospects thus leading to possible impairment of financial performance and/or restrictions on future growth opportunities. | Whilst economic trends are on average improving across many of CRH’s markets, the UK’s decision to exit the European Union, together with the effects of unwinding the sustained monetary stimulus in the US, the ECB’s plans to scale back quantitative easing in the Eurozone and ongoing tensions in the Korean peninsula, have collectively contributed to heightened uncertainty, with possible upside and downside economic consequences. The Group currently operates mainly in Western Europe and North America as well as, to a lesser degree, in developing countries/emerging markets in Eastern Europe, the Philippines, Brazil, China and India. The economies of these countries are at varying stages of socioeconomic and macroeconomic development which could give rise to a number of risks, uncertainties and challenges and could include the following: • changes in political, social or economic conditions; • trade protection measures and import or export licensing requirements; • potentially negative consequences from changes in tax laws; • labour practices and differing labour regulations; • procurement which contravenes ethical considerations; • unexpected changes in regulatory requirements; • state-imposed restrictions on repatriation of funds; and • the outbreak of armed conflict The Group also has significant business interests in Ukraine, where the outlook remains uncertain. | |
Commodity products and substitution | ||
Risk Factor | Discussion | |
Description: The Group faces strong volume and price competition across its product lines, stemming from the fact that many of the Group’s products are commodities. In addition, existing products may be replaced by substitute products which the Group does not produce or distribute, or new construction techniques may be devised. Impact: Against this backdrop, if the Group fails to generate competitive advantage through differentiation and innovation, market share, and thus financial performance, may decline. | The competitive environment in which the Group operates can be significantly impacted by general economic conditions in combination with local factors including the number of competitors, the degree of utilisation of production capacity and the specifics of product demand. Many of the Group’s products are commodities and competition in such circumstances is driven largely by price. Across the multitude of largely local markets in which the Group conducts business, downward pricing pressure is experienced from time to time, and the Group may not always be in a position to recover increased operating expenses (caused by factors such as increased fuel and raw material prices) through higher sale prices. The cement business, in particular, is capital intensive resulting in significant fixed and semi-fixed costs. The Group’s profits are therefore sensitive to changes in volume, which is driven by highly competitive markets, and impacted by ongoing capital expenditure needs. A number of the products sold by the Group (both those manufactured internally and those distributed) compete with other building products that do not feature in the existing product range. Any significant shift in demand preference from the Group’s existing products to substitute products, which the Group does not produce or distribute, could adversely impact market share and results of operations. |
219 |
CRH Annual Report and Form 20-F | 2017
Key Strategic Risk Factors - continued
Reserves availability and planning | ||
Risk Factor | Discussion | |
Description: Certain of the Group’s businesses require long-term reserves backing necessitating detailed utilisation planning. Appropriate reserves are an increasingly scarce commodity and licences and/or permits are required to enable operation. There are numerous uncertainties inherent in reserves estimation and in projecting future rates of production. Impact: Failure by the Group to plan adequately for depletion may result insub-optimal or uneconomic utilisation giving rise to unplanned capital expenditure or acquisition activity, lower financial performance and the need to obtain new licences and/or permits to operate. Operating entities may fail to obtain or renew or may experience material delays in securing the requisite government approvals, licences and permits for the conduct of business. | Continuity of the cash flows derived from the production and sale of the related heavyside materials and products is dependent on satisfactory reserves planning and on the presence of appropriate long-term arrangements for replacement. There can be no assurance that the required licences and permits will be forthcoming at the appropriate juncture or that relevant operating entities will continue to satisfy the many terms and conditions under which such licences and permits are granted. The failure to plan adequately for current and future utilisation or to ensure ongoing compliance with the requirements of issuing authorities could lead to withdrawal of the related licence or permit and consequential disruption to operations. | |
Business portfolio management: acquisition and divestment activity | ||
Risk Factor | Discussion | |
Description: Growth through acquisition and active management of the Group’s business portfolio are key elements of the Group’s strategy with the Group’s balanced portfolio growing year on year throughbolt-on activity occasionally supplemented by larger and/or step-change transactions. In addition, the Group may be liable or remain liable for the past acts, omissions or liabilities of companies or businesses it has acquired or divested. Impact: The Group may not be able to continue to grow as contemplated in its business plans if it is unable to identify attractive targets (including potential new platforms for growth), divestnon-core or underperforming entities, execute full and proper due diligence, raise funds on acceptable terms, complete such acquisition transactions, integrate the operations of the acquired businesses, retain key staff and realise anticipated levels of profitability and cash flows. If the Group is held liable for the past acts, omissions or liabilities of companies or businesses it has acquired, or remains liable in cases of divestment, those liabilities may either be unforeseen or greater than anticipated at the time of the relevant acquisition or divestment. | The Group’s acquisition strategy focuses on value-enhancingmid-sized acquisitions, largely in existing markets, supplemented from time to time by larger strategic acquisitions into new markets or new building products. In addition, as part of its ongoing commitment to active portfolio management, the Group may, from time to time, divest businesses which are evaluated to benon-core or underperforming. The realisation of the Group’s acquisition strategy is dependent on the ability to identify and acquire suitable assets at appropriate prices thus satisfying the stringent cash flow and return on investment criteria underpinning such activities. The Group may not be able to identify such companies, and, even if identified, may not be able to acquire them because of a variety of factors including the outcome of due diligence processes, the ability to raise funds (as required) on acceptable terms, the need for competition authority approval in certain instances and competition for transactions from peers and other entities exploring acquisition opportunities in the building materials sector. In addition, situations may arise where the Group may be liable for the past acts or omissions or liabilities of companies acquired, or remains liable in cases of divestment; for example, the potential environmental liabilities addressed under the “Sustainability, Corporate Social Responsibility and Climate Change” Risk Factor on page 222. The Group’s ability to realise the expected benefits from acquisition activity depends, in large part, on its ability to integrate newly-acquired businesses in a timely and effective manner. Even if the Group is able to acquire suitable companies, it still may not achieve the growth synergies or other financial and operating benefits it expected to achieve, and the Group may incur write-downs, impairment charges or unforeseen liabilities that could negatively affect its operating results or financial position or could otherwise harm the Group’s business. Further, integrating an acquired business, product or technology could divert management time and resources from other matters. |
220 |
CRH Annual Report and Form 20-F | 2017
Joint ventures and associates | ||
Risk Factor | Discussion | |
Description: The Group does not have a controlling interest in certain of the businesses (i.e. joint ventures and associates) in which it has invested and may invest. The absence of a controlling interest gives rise to increased governance complexity and a need for proactive relationship management, which may restrict the Group’s ability to generate adequate returns and to develop and grow these businesses. Impact: These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise its strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment. | Due to the absence of full control of joint ventures and associates, important decisions such as the approval of business plans and the timing and amount of cash distributions and capital expenditures, for example, may require the consent of partners or may be approved without the Group’s consent. In addition, the lack of controlling interest may give rise to thenon-realisation of operating synergies and lower cash flows than anticipated at the time of investment, thereby increasing the likelihood of impairment of goodwill or other assets. These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise the strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment and, by corollary, the Group. | |
Human resources and talent management | ||
Risk Factor | Discussion | |
Description: Existing processes to recruit, develop and retain talented individuals and promote their mobility within a decentralised organisation may be inadequate thus giving rise to employee/management attrition, difficulties in succession planning and inadequate “bench strength”, potentially impeding the continued realisation of the core strategic objectives of value creation and growth. In addition, the Group is exposed to various risks associated with collective representation of employees in certain jurisdictions; these risks could include strikes and increased wage demands. Impact: In the longer term, failure to manage talent and plan for leadership and succession could impede the realisation of core strategic objectives. | The identification and subsequent assessment, management, development and deployment of talented individuals is of major importance in continuing to deliver on the Group’s strategy and in ensuring that succession planning objectives for key executive roles throughout its international operations are satisfied. The maintenance of positive employee and trade/labour union relations is key to the successful operation of the Group. Some of the Group’s employees are represented by trade/labour unions under various collective agreements. For unionised employees, the Group may not be able to renegotiate satisfactorily the relevant collective agreements upon expiration and may face tougher negotiations and higher wage demands than would be the case fornon-unionised employees. In addition, existing labour agreements may not prevent a strike or work stoppage with any such activity creating reputational risk and potentially having a material adverse effect on the results of operations and financial condition of the Group. |
221 |
CRH Annual Report and Form 20-F | 2017
Key Operational Risk Factors
Sustainability, corporate social responsibility and climate change
Risk Factor | Discussion | |
Description: The Group is subject to stringent and evolving laws, regulations, standards and best practices from a sustainability perspective. The Group’s use of the term “sustainability” comprises Health & Safety management (i.e. embedding a culture of safety and ensuring safe working environments), conducting business with integrity, protecting the environment, preparing for and managing the impact of climate change on business activities, managing stakeholders, attaining strong social performance credentials and, lastly, using the foregoing to generate innovation and other business opportunities to create value. Against this backdrop, the nature of the Group’s activities pose or create certain inherent risks, responsibility for which is vested with operating entity management, Group and Divisional management and the Board of Directors. Impact: Non-adherence to the many laws, regulations, standards and best practices in the sustainability arena may give rise to increased ongoing remediation and/or other compliance costs and may adversely affect the Group’s business, results of operations, financial condition and/or prospects. Failure to leverage innovation and other sustainability initiatives may shorten product life cycles or give rise to early product obsolescence thus impairing financial performance and/or future value creation. In addition, the failure to embed sustainability principles across the Group’s businesses and in the Group’s strategy may lead to adverse investor sentiment or reduced investor interest in CRH plc’s Ordinary Shares. | The Group is subject to a broad and increasingly stringent range of existing and evolving laws, regulations, standards and best practices with respect to governance, the environment, Health & Safety and social performance in each of the jurisdictions in which it operates giving rise to significant compliance costs, potential legal liability exposure and potential limitations on the development of its operations. These laws, regulations, standards and best practices relate to, amongst other things, climate change, noise, emissions to air, water and soil, the use and handling of hazardous materials and waste disposal practices. Given the above, the risk of increased environmental and other compliance costs and unplanned capital expenditure is inherent in conducting business in the building materials sector and the impact of future developments in these respects on the Group’s activities, products, operations, profitability and cash flows cannot be estimated; there can therefore be no assurance that material liabilities and costs will not be incurred in the future or that material limitations on the development of its operations will not arise. Environmental and Health & Safety and other laws, regulations, standards and best practices may expose the Group to the risk of substantial costs and liabilities, including liabilities associated with assets that have been sold or acquired and activities that have been discontinued. In addition, many of the Group’s manufacturing sites have a history of industrial use and, while strict environmental operating standards are applied and extensive environmental due diligence is undertaken in acquisition activity, some soil and groundwater contamination has occurred in the past at a limited number of sites. Although the associated remediation costs incurred to date have not been material, they may become more significant in the future. The Group may face increased remediation liabilities and legal proceedings concerning environmental and Health & Safety matters in the future. The impact of climate change may over time affect the operations of the Group and the markets in which the Group operates. This could include acute and chronic changes in weather, technological development, policy and regulatory change, and market and economic responses. Efforts to address climate change through laws and regulations, for example by requiring reductions in emissions of greenhouse gases (GHGs), can create economic risks and uncertainties for the Group’s businesses. Such risks could include the cost of purchasing allowances or credits to meet GHG emission caps, the cost of installing equipment to reduce emissions to comply with GHG limits or required technological standards, decreased profits or losses arising from decreased demand for the Group’s goods and higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls. To the extent that financial markets view the impact of climate change emissions as a financial risk, this could have a material adverse effect on the cost of and access to capital. |
222 |
CRH Annual Report and Form 20-F | 2017
Operational continuity
Risk Factor | Discussion | |
Description: The Group’s operating entities are subject to a wide range of operating risks and hazards including climatic conditions such as floods and hurricanes/ cyclones, seismic activity, technical failures, interruptions to power supplies, industrial accidents and disputes, environmental hazards, fire and crime. Impact: The occurrence of a significant adverse event could lead to prolonged disruption of business activities and, as a result, could have a material impact on the business, results of operations, financial condition or prospects of the Group. | Responsibility for business continuity management is vested in operating entity management throughout the Group to ensure that the circumstances likely to give rise to material operational disruption are addressed in a manner appropriate to the relevant operating entity. The insurance coverage provided for operating entities includes property damage and business interruption, public and products liability/general liability, employers’ liability/ workers’ compensation, environmental impairment liability, automobile liability and directors’ and officers’ liability. Adequate coverage at reasonable rates is not always commercially available to cover all potential risks and no assurance can be given that the insurance arrangements in place would be sufficient to cover all losses or liabilities to which the Group might be exposed. As at 31 December 2017, the total insurance provision, which is subject to periodic actuarial valuation and is discounted, amounted to€292 million (2016:€286 million); a substantial proportion of this figure pertained to claims which are classified as “incurred but not reported”. |
Information technology and security/cyber
Risk Factor | Discussion | |
Description: The Group is dependent on the employment of advanced information systems (digital infrastructure, applications and networks) to support its business activities, and is exposed to risks of failure in the operation of these systems. Further, the Group is exposed to security threats to its digital infrastructure through cyber-crime. Such attacks are by their nature technologically sophisticated and may be difficult to detect and defend in a timely fashion. Impact: Should a security breach or other incident materialise, it could lead to interference with production processes, manipulation of financial data, the theft of private data or intellectual property, misappropriation of funds, or misrepresentation of information via digital media. In addition to potential irretrievability or corruption of critical data, the Group could suffer reputational losses, regulatory penalties and incur significant financial costs in remediation. | Security and cyber incidents are becoming increasingly sophisticated and are continually evolving. Our systems for protecting against cyber security risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protection measures or to investigate and remediate any vulnerability to cyber incidents. Such attacks may result in interference with production software, corruption or theft of sensitive data, manipulation of financial data accessible through digital infrastructure, or reputational losses as a result of misrepresentation via social media and other websites. There can be no assurance that future attacks will not be successful due to their increasing sophistication and the difficulties in detecting and defending against them in a timely fashion. |
223 |
CRH Annual Report and Form 20-F | 2017
Key Compliance Risk Factors
Laws and regulations | ||
Risk Factor | Discussion | |
Description: The Group is subject to many local and international laws and regulations, including those relating to competition law, corruption and fraud, across many jurisdictions of operation and is therefore exposed to changes in those laws and regulations and to the outcome of any investigations conducted by governmental, international or other regulatory authorities. Impact: Potential breaches of local and international laws and regulations in the areas of competition law, corruption and fraud, among others, could result in the imposition of significant fines and/or sanctions fornon-compliance, including the withdrawal of operating licences, and may inflict reputational damage. | The Group is subject to various statutes, regulations and laws applicable to businesses generally in the countries and markets in which it operates. These include statutes, regulations and laws affecting land usage, zoning, labour and employment practices, competition, financial reporting, taxation, anti-bribery, anti-corruption, governance and other matters. The Group mandates that its employees comply with its Code of Business Conduct which stipulates best practices in relation to regulatory matters. The Group cannot guarantee that its employees will at all times successfully comply with all demands of regulatory agencies in a manner which will not materially adversely affect its business, results of operations, financial condition or prospects. There can be no assurance that the Group’s policies and procedures will afford adequate protection against fraudulent and/or corrupt activity and any such activity could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects. |
224 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) | ||
Risk Factor | Discussion | |
Description: The Group uses financial instruments throughout its businesses giving rise to interest rate and leverage, foreign currency, counterparty, credit rating and liquidity risks. A significant portion of the cash generated by the Group from operational activity is currently dedicated to the payment of principal and interest on indebtedness. In addition, the Group has entered into certain financing agreements containing restrictive covenants requiring it to maintain a certain minimum interest coverage ratio and a certain minimum net worth. Impact: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. In addition, insolvency of the financial institutions with which the Group conducts business (or a downgrade in their credit ratings) may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult for the Group either to utilise existing debt capacity or otherwise obtain financing for operations. | Interest rate and leverage risks: The Group’s exposures to changes in interest rates result from investing and borrowing activities undertaken to manage liquidity and capital requirements and stem predominantly from long-term debt obligations. Borrowing costs are managed through employing a mix of fixed and floating rate debt and interest rate swaps, where appropriate. As at 31 December 2017, the Group had outstanding net indebtedness of approximately€5.8 billion (2016:€5.3 billion). Following recent acquisition activity, the Group has significant outstanding indebtedness, which may impair its operating and financial flexibility over the longer term and could adversely affect its business, results of operations and financial position. This high level of indebtedness could give rise to the Group dedicating a substantial portion of its cash flow to debt service thereby reducing the funds available in the longer term for working capital, capital expenditure, acquisitions, distributions to shareholders and other general corporate purposes and limiting its ability to borrow additional funds and to respond to competitive pressures. In addition, the Group’s level of indebtedness may give rise to a general increase in interest rates borne and there can be no assurance that the Group will not be adversely impacted by increases in borrowing costs in the future. The prescribed minimum PBITDA/net interest (all as defined in the relevant agreements as discussed in note 24 to the Consolidated Financial Statements) cover ratio, which is the Group’s principal financial covenant, is 4.5 times and the prescribed minimum net worth, which is the Group’s other financial covenant, is€6.2 billion. For the year ended 31 December 2017, PBITDA/net interest was 11.6 times on a total Group basis (2016:10.1 times) and the Group’s net worth on a total Group basis was€16.6 billion (2016:€16.4 billion). Foreign currency risks: If the euro, which is the Group’s reporting currency, weakens relative to the basket of foreign currencies in which net debt is denominated (principally the US Dollar, Canadian Dollar, Swiss Franc, Philippine Peso and Pound Sterling), the net debt balance would increase; the converse would apply if the euro was to strengthen. The Group may not succeed in managing these foreign currency risks. Counterparty risks: Insolvency of the financial institutions with which the Group conducts business, or a downgrade in their credit ratings, may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult either to utilise existing debt capacity or otherwise obtain financing for operations. The maximum exposure arising in the event of default on the part of the counterparty (including insolvency) is the carrying amount of the relevant financial instrument. The Group holds significant cash balances on deposit with a variety of highly-rated financial institutions (typically invested on a short-term basis) which, together with cash and cash equivalents at 31 December 2017, totalled€2.1 billion (2016:€2.4 billion). In addition to the above, the Group enters into derivative transactions with a variety of highly-rated financial institutions giving rise to derivative assets and derivative liabilities; the relevant balances as at 31 December 2017 were€64 million and€14 million respectively (2016:€76 million and€32 million respectively). The counterparty risks inherent in these exposures may give rise to losses in the event that the relevant financial institutions suffer a ratings downgrade or become insolvent. In addition, certain of the Group’s activities (e.g. highway paving in the US) give rise to significant amounts receivable from counterparties at the balance sheet date; atyear-end 2017, this balance was€0.8 billion (2016:€0.8 billion). In the business environment, there is increased exposure to counterparty default, particularly as regards bad debts. |
225 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors - continued
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) - continued | ||
Risk Factor | Discussion | |
Credit rating risks: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may, among other concerns, impair its ability to access debt markets or otherwise raise funds or enter into letters of credit, for example, on acceptable terms. Such a downgrade may result from factors specific to the Group, including increased indebtedness stemming from acquisition activity, or from other factors such as general economic or sector-specific weakness or sovereign credit rating ceilings. Liquidity risks: The principal liquidity risks stem from the maturation of debt obligations and derivative transactions. The Group aims to achieve flexibility in funding sources through a variety of means including (i) maintaining cash and cash equivalents with a number of highly-rated counterparties; (ii) limiting the maturity of such balances; (iii) meeting the bulk of debt requirements through committed bank lines or other term financing; and (iv) having surplus committed lines of credit. However, market or economic conditions may make it difficult at times to realise this objective. For additional information on the above risks see note 22 to the Consolidated Financial Statements. |
Defined benefit pension schemes and related obligations | ||
Risk Factor | Discussion | |
Description: The Group operates a number of defined benefit pension schemes and schemes with related obligations (for example, termination indemnities and jubilee/long-term service benefits, which are accounted for as defined benefit) in certain of its operating jurisdictions. The assets and liabilities of defined benefit pension schemes may exhibit significantperiod-on-period volatility attributable primarily to asset values, changes in bond yields/ discount rates and anticipated longevity. Impact: In addition to the contributions required for the ongoing service of participating employees, significant cash contributions may be required to remediate deficits applicable to past service. Further, fluctuations in the accounting surplus/deficit may adversely impact the Group’s credit metrics thus harming its ability to raise funds. | The assumptions used in the recognition of pension assets, liabilities, income and expenses (including discount rates, rate of increase in future compensation levels, mortality rates and healthcare cost trend rates) are updated based on market and economic conditions at the respective balance sheet date and for any relevant changes to the terms and conditions of the pension and post-retirement plans. These assumptions can be affected by (i) for the discount rate, changes in the rates of return on high-quality fixed income investments; (ii) for future compensation levels, future labour market conditions and anticipated inflation; (iii) for mortality rates, changes in the relevant actuarial funding valuations or changes in best practice; and (iv) for healthcare cost trend rates, the rate of medical cost inflation in the relevant regions. The weighted average actuarial assumptions used and sensitivity analysis in relation to the significant assumptions employed in the determination of pension and other post-retirement liabilities are disclosed on pages 175 to 180. A prolonged period of financial market instability or other adverse changes in the assumptions mentioned above would have an adverse impact on the valuations of pension scheme assets. In addition, a number of the defined benefit pension schemes in operation throughout the Group have reported material funding deficits thus necessitating remediation either in accordance with legislative requirements or as agreed with the relevant regulators. These obligations are reflected in the contracted payments disclosure on page 214. The extent of such contributions may be exacerbated over time as a result of a prolonged period of instability in worldwide financial markets or other adverse changes in the assumptions mentioned above. |
226 |
CRH Annual Report and Form 20-F | 2017
Taxation charge and balance sheet provisioning | ||
Risk Factor | Discussion | |
Description: The Group is exposed to uncertainties stemming from governmental actions in respect of taxes paid and payable in all jurisdictions of operation. In addition, various assumptions are made in the computation of the overall tax charge and in balance sheet provisions which may not be borne out in practice. Impact: Changes in the tax regimes and related government policies and regulations in the countries in which the Group operates could adversely affect its results and its effective tax rate. The final determination of tax audits or tax disputes may be different from that which is reflected in the Group’s historical income tax provisions and accruals. If future audits find that additional taxes are due, the Group may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on cash flows, financial condition and results of operations. | The Group’s income tax charge is based on reported profit and expected statutory tax rates, which reflect various allowances and reliefs and tax planning opportunities available to the Group in the multiple tax jurisdictions in which it operates. The determination of the Group’s provision for income tax requires certain judgements and estimates in relation to matters where the ultimate tax outcome may not be certain. The recognition of deferred tax assets also requires judgement as it involves an assessment of the future recoverability of those assets. In addition, the Group is subject to tax audits which can involve complex issues that could require extended periods to conclude, the resolution of which is often not within its control. Although management believes that the estimates included in the Consolidated Financial Statements and the Group’s tax return positions are reasonable, there can be no assurance that the final outcome of these matters will not differ from estimates reflected in the Group’s historical income tax provisions and accruals. As a multinational corporation, the Group is subject to various taxes in all jurisdictions of operation. Due to economic and political conditions, tax rates in these jurisdictions may be subject to significant change. For example, the recent US Tax Cuts and Jobs Act has made significant changes to the US tax rules. The Group’s future effective income tax rate could be affected (positively or negatively) by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. In addition, recent developments, including the European Commission’s investigations on illegal state aid as well as the Organisation for EconomicCo-operation and Development project on Base Erosion and Profit Shifting may result in changes to long-standing tax principles, which could adversely affect the Group’s effective tax rate or result in higher cash tax liabilities. If the Group’s effective income tax rate was to increase, its cash flows, financial condition and results of operations could be adversely affected. |
Foreign currency translation | ||
Risk Factor | Discussion | |
Description: The principal foreign exchange risks to which the Consolidated Financial Statements are exposed pertain to adverse movements in reported results when translated into euro (which is the Group’s reporting currency) together with declines in the euro value of net investments which are denominated in a wide basket of currencies other than the euro. Impact: Adverse changes in the exchange rates used to translate foreign currencies into euro have impacted and will continue to impact retained earnings. The annual impact is reported in the Consolidated Statement of Comprehensive Income. | Given the geographic diversity of the Group, a significant proportion of its revenues, expenses, assets and liabilities are denominated in currencies other than the euro, principally US Dollar, Canadian Dollar, Swiss Franc, Polish Zloty, Philippine Peso and Pound Sterling. From year to year, adverse changes in the exchange rates used to translate these and other foreign currencies into euro have impacted and will continue to impact consolidated results and net worth. For additional information on the impact of foreign exchange movements on the Consolidated Financial Statements for the Group for the year ended 31 December 2017, see the Business Performance section commencing on page 22 and note 22 to the Consolidated Financial Statements. |
Goodwill impairment | ||
Risk Factor | Discussion | |
Description: Significant under-performance in any of the Group’s major cash generating units or the divestment of businesses in the future may give rise to a material write-down of goodwill. Impact: A write-down of goodwill could have a substantial impact on the Group’s income and equity. | An acquisition generates goodwill to the extent that the price paid exceeds the fair value of the net assets acquired. Under IFRS, goodwill and indefinite-lived intangible assets are not amortised but are subject to annual impairment testing. Other intangible assets deemed separable from goodwill arising on acquisitions are amortised. A detailed discussion of the impairment testing process, the key assumptions used, the results of that testing and the related sensitivity analysis is contained in note 15 to the Consolidated Financial Statements on pages 153 to 156. While a goodwill impairment charge does not impact cash flow, a full write-down at 31 December 2017 would have resulted in a charge to income and a reduction in equity of€6.9 billion (2016:€7.4 billion). |
227 |
CRH Annual Report and Form 20-F | 2017
Corporate Governance Practices - NYSE
Compliance Statement
Non-US companies such as CRH are exempt from most of the corporate governance rules of the NYSE. In common with companies listed on the ISE and the LSE, CRH’s corporate governance practices reflect, inter alia, compliance with (a) domestic company law; (b) the Listing Rules of the UK Listing Authority and the ISE; and (c) the 2016 UK Corporate Governance Code, which is appended to the listing rules of the LSE and ISE.
The Board of CRH has adopted a robust set of governance principles, which reflect the Code and its principles-based approach to corporate governance. Accordingly, the way in which CRH makes determinations of Directors’ independence differs from the NYSE rules. The Board has determined that, in its judgement, all of thenon-executive Directors are independent. In doing so, however, the Board did not explicitly take into consideration the independence requirements outlined in the NYSE’s listing standards.
Shareholder Approval of Equity Compensation Plans
The NYSE rules require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. CRH complies with Irish requirements, which are similar to the NYSE rules. The Board, however, does not explicitly take into consideration the NYSE’s detailed definition on what are considered “material revisions”.
Risk Management and Internal Control
The Board has delegated responsibility for monitoring the effectiveness of the Group’s risk management and internal control systems to the Audit Committee*. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, in the case of internal control systems, can provide only reasonable and not absolute assurance against material misstatement or loss.
The Consolidated Financial Statements are prepared subject to oversight and control of the Finance Director, who seeks to ensure that data is captured from Group locations and all required information for disclosure in the Consolidated Financial Statements is provided. An appropriate control framework has been put in place around the recording of appropriate eliminating journals and other adjustments. The Consolidated Financial Statements are reviewed by the CRH Financial Reporting and Disclosure Group prior to being reviewed by the Audit Committee and approved by the Board of Directors.
Group management has responsibility for major strategic development and financing decisions. Responsibility for operational issues is devolved, subject to limits of authority, to product group and operating company management. Management at all levels is responsible for internal control over the business functions that have been delegated. This embedding of the system of internal control throughout the Group’s operations is designed to enable the organisation to respond quickly to evolving business risks, and to ensure that significant internal control issues, should they arise, are reported promptly to appropriate levels of management.
Management’s Report on Internal Control over Financial Reporting
In accordance with the requirements of Rule13a-15 of the US Securities Exchange Act, the following report is provided by management in respect of the Company’s internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for
external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and Directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the Consolidated Financial Statements
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules13a-15(f) and15d-15(f) under the US Securities Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Company’s published Consolidated Financial Statements for external purposes under generally accepted accounting principles.
In connection with the preparation of the Company’s annual Consolidated Financial Statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of
31 December 2017, based on criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organisations of the Treadway Commission.
* | In accordance with Section 167(7) of the Companies Act 2014. |
228 |
CRH Annual Report and Form 20-F | 2017
As permitted by the SEC, the Company has elected to exclude an assessment of the internal controls of acquisitions made during the year 2017. These acquisitions, which are listed in note 31 to the Consolidated Financial Statements, constituted 6.4% of total assets and 10.6% of net assets, as of 31 December 2017 and 1.9% and (0.1%) of revenue (from continuing and discontinued operations) and Group profit for the financial year, respectively, for the year then ended.
Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of 31 December 2017, the Company’s internal control over financial reporting is effective.
Our auditors, EY, a registered public accounting firm, who have audited the Consolidated Financial Statements for the year ended 31 December 2017, have audited the effectiveness of the Company’s internal controls over financial reporting. Their report, on which an unqualified opinion is expressed thereon, is included on page 119.
Changes in Internal Control over Financial Reporting
During 2017, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rules13a-15 that occurred during the period covered by this Annual Report and Form20-F that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Acquisitions excluded from the 2016 assessment of internal control over financial reporting were all successfully integrated into the CRH internal control systems in 2017.
Evaluation of Disclosure Controls and Procedures
Management has evaluated the effectiveness of the design and operation of the disclosure controls and procedures as defined in Exchange Act Rules13a-15(e) as of 31 December 2017. Based on that evaluation, the Chief Executive and the Finance Director have concluded that these disclosure controls and procedures were effective as of such date at the level of providing reasonable assurance.
In designing and evaluating our disclosure controls and procedures, management, including the Chief Executive and the Finance Director, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Code of Business Conduct
The CoBC, together with its supporting policies, sets out the guiding business principles and core values of the CRH Group. The Code complies with the applicable code of ethics regulations of the SEC arising from the Sarbanes-Oxley Act and it also reinforces the fundamental CRH principle that “there is never a good business reason to do the wrong thing”. The CoBC is applicable to all employees of the CRH Group including the Chief Executive and senior financial officers. The Code promotes honest and ethical conduct; full, fair, accurate, timely and understandable disclosures; and sets out the requirements for compliance with applicable governmental laws, rules and regulations.
229 |
CRH Annual Report and Form 20-F | 2017
The Environment and Government Regulations
The most important government regulations relevant to CRH as a building materials company are environmental laws and regulations relevant to extractive and production processes. In the European Union, operations are subject to national environmental laws and regulations, most of which now emanate from European Union Directives and Regulations. In the US, operations are subject to federal, state and local environmental laws and regulations. In other jurisdictions, national environmental and local laws apply.
Environmental Compliance Policy
In order to comply with environmental regulations, CRH has developed the following Group environmental policy, approved by the Board and applied across all Group companies, which is to:
• comply, as a minimum, with all applicable environmental legislation and continuously improve our environmental stewardship, aiming all the time to meet or exceed industry best practice;
• ensure that our employees and contractors respect their environmental responsibilities;
• address proactively the challenges and opportunities of climate change;
• optimise our use of energy and all resources;
• promote environmentally driven product innovation and new business opportunities and;
• develop positive relationships and strive to be good neighbours in every community in which we operate
Achieving the Group’s environmental policy objectives at all locations is a management imperative; this line responsibility continues right up to Board level. Daily responsibility for ensuring that the Group’s environmental policy is effectively implemented lies with individual location managers, assisted by a network of Environmental Liaison Officers (ELOs).
At eachyear-end, the ELOs assist the Group Corporate Social Responsibility & Sustainability team in carrying out a detailed assessment of Group environmental performance, which is reviewed by the Board.
Addressing Climate Change
CRH has evaluated the risks and opportunities arising from climate change and has put in place a management strategy. In striving to reduce its emissions, CRH delivers carbon, energy and financial efficiencies for its businesses and helps to address climate change on a societal level. There is a focus on reducing the carbon footprint of products during manufacture and on increasing their contribution to reducing emissions during their lifetime. There are value creation opportunities for the Group, including opportunities for sales of products aimed at climate adaptation, such as sustainable drainage systems, flood defences, and more resilient structures. CRH is a core member of the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD). The CSI is a voluntary initiative by the world’s major cement producers, promoting greater sustainability in the cement industry.
Having achieved its initial CO2 reduction commitment three years ahead of target in 2012, CRH has pledged a 25% reduction in specific net CO2 cement plant emissions by 2020, compared with 1990 levels. The Group is progressing successfully towards achieving this commitment, which is supported by a strategic investment programme and covers a defined portfolio of Group cement plants.
Through its membership of the CSI of the WBCSD and regional industry associations including the European Cement Association (CEMBUREAU) and the European Lime Association (EuLA) in Europe and the National Asphalt Pavement Association (NAPA) and the Portland Cement Association (PCA) in the US, CRH is actively involved in global and regional discussions on the climate change agenda. Relevant facilities in Europe operate within the European Union Emission Trading Scheme for Greenhouse Gas emissions through actively implementing carbon reduction strategies. Relevant facilities in Canada comply with relevant “cap and trade” schemes. CRH has endorsed the WBCSD Low Carbon Technology Partnership Initiative (LCTPi), a statement of ambition, which seeks a reduction in global cement CO2 emissions in the range of20-25% by 2030.
CRH acknowledges the “Paris Climate Agreement” to limit global temperature rise to 2oC (with efforts towards 1.5oC), made at the 21st
Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. CRH has implemented capital expenditure programmes in its cement operations to reduce carbon emissions in the context of international and national commitments to reduce greenhouse gas emissions. The European Union has binding targets to reduce greenhouse gases, on 1990 levels, by 20% by 2020 and by 40% by 2030. In addition, the European Commission has suggested an objective to reduce emissions by 80% by 2050 compared to 1990. Achieving such reductions would represent a significant extra constraint on cement operations in Europe. US federal, state and local laws continue to develop to address carbon emissions. The Group may incur costs in monitoring and reporting emissions. Ultimately a “cap and trade” scheme may be implemented in the US; depending on the scope of the legislation, this could significantly impact certain operations in the US. As of 16 February 2018, the Group is not aware of any schemes that would materially affect its US operations, however, we are continuously monitoring developments in regulations.
Possible Environmental Liabilities
At 16 February 2018, there were no material pending legal proceedings relating to site remediation which are anticipated to have a material adverse effect on the financial position or results of operations or liquidity of the Group, nor have internal reviews revealed any situations of likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital expenditures and the allocation by state entities of available funds to different projects, as well as interest rate and tax policies, directly affect the overall levels of construction activity. The terms and general availability of government permits required to conduct Group business also has an impact on the scope of Group operations. As a result such governmental decisions and policies can have a significant impact on the operating results of the Group.
230 |
CRH Annual Report and Form 20-F | 2017
History, Development and Organisational Structure of the Company
CRH public limited company is the Parent Company of a diversified international group of companies which manufactures and distributes a diverse range of products servicing the breadth of construction needs, from the fundamentals of heavy materials and elements to construct the frame, through value-added exterior products that complete the building envelope, to distribution channels which service constructionfit-out and renewal.
The Group resulted from the merger in 1970 of two leading Irish public companies, Cement Limited (established in 1936) and Roadstone Limited (incorporated in 1949). Cement Limited manufactured and supplied cement while Roadstone Limited was primarily involved in the manufacture and supply of aggregates, readymixed concrete, mortar, coated macadam, asphalt and contract surfacing to the Irish construction industry.
As a result of planned geographic diversification since themid-1970s, the Group has expanded by acquisition and organic growth into an international manufacturer and supplier of building materials.
The Company is incorporated and domiciled in the Republic of Ireland. CRH is a public limited company operating under the Companies Act of Ireland 2014. The Group’s worldwide headquarters is located in Dublin, Ireland. Our principal executive offices are located at Belgard Castle, Clondalkin, Dublin 22 (telephone: +353 1 404 1000). The Company’s registered office is located at 42 Fitzwilliam Square, Dublin 2, Ireland and our US agent is Oldcastle, Inc., 900 Ashwood Parkway, Suite 600, Atlanta, Georgia 30338.
The Company is the holding company of the Group, with direct and indirect share and loan interests in subsidiaries, joint ventures and associates. From Group headquarters, a small team of executives exercises strategic control over our decentralised operations.
CRH plc is a leading global diversified building materials group employing 85,000 people at over 3,600 operating locations in 32 countries worldwide.
CRH is the second largest building materials company worldwide and the largest in North America. The Group has leadership positions in Europe, where it is the largest heavyside materials business, as well as established strategic positions in the emerging economic regions of Asia and South America.
In the detailed description of the Group’s business on pages 22 to 53, estimates of the Group’s various aggregates and stone reserves have been provided by engineers employed by the individual operating companies. Details of productend-use by sector for each reporting segment are based on management estimates.
A listing of the principal subsidiary undertakings and equity accounted investments is contained on pages 246 to 251.
Statements Regarding Competitive Position and Construction Activity
Statements made in the Business Performance section and elsewhere in this document referring to the Group’s competitive position are based on the Group’s belief, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and the Group’s internal assessment of market share based on publicly available information about the financial results and performance of market participants.
Unless otherwise specified, references to construction activity or other market activity relate to the relevant market as a whole and are based on publicly available information from a range of sources, including independent market studies, construction industry data and economic forecasts for individual jurisdictions.
Legal Proceedings
Group companies are parties to various legal proceedings, including some in which claims for damages have been asserted against the companies. Having taken appropriate advice, we believe that the aggregate outcome of such proceedings will not have a material effect on the Group’s financial condition, results of operations or liquidity.
In 2015, the Swiss Competition Commission imposed fines on the Association of Swiss Wholesalers of the Sanitary Industry and on major Swiss wholesalers including certain Swiss CRH subsidiaries; the fine attributable to these subsidiaries was CHF34 million. While the Group remains of the view that the fine is unjustified and it has appealed to the Swiss Federal Appeals Court, a provision of€29 million (2016:€32 million) is recorded in the Group’s Consolidated Balance Sheet.
Research and Development
Research and development is not a significant focus of the Group. CRH’s policy is to expense all research and development costs as they occur.
Employees
The average number of employees for the past three financial years is disclosed in note 6 to the Consolidated Financial Statements on page 143. No significant industrial disputes have occurred at any of CRH’s factories or plants during the past five years. The Group believes that relations with its employees and labour unions are satisfactory.
Seasonality
Activity in the construction industry is characterised by cyclicality and is dependent to a considerable extent on the seasonal impact of weather in the Group’s operating locations, with activity in some markets reduced significantly in winter due to inclement weather. First-half sales accounted for 47% of full-year 2017 (2016: 47%), while EBITDA (as defined)* for the first six months of 2017 represented 36% of the full-yearout-turn (2016: 36%).
Significant Changes
In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply Inc. to dispose of its 100% holding in Allied Building Products, the trading name of our Americas Distribution segment, for a consideration of US$2.6 billion. The transaction closed on 2 January 2018. See further details in note 2 to the Consolidated Financial Statements.
In 2017, we reached an agreement with the Board of Ash Grove Cement to acquire a significant portfolio of cement and other materials assets. This deal is due to close in 2018.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
231 |
232 |
Shareholder Information | ||||||||
Stock Exchange Listings | 234 | |||||||
Ownership of Ordinary Shares | 235 | |||||||
Dividends | 236 | |||||||
Share Plans | 237 | |||||||
American Depositary Shares | 238 | |||||||
Taxation | 239 | |||||||
Memorandum and Articles of Association | 241 | |||||||
General Information | 243 |
233 |
CRH Annual Report and Form 20-F | 2017
CRH has a premium listing on the LSE and a secondary listing on the ISE.
ADSs, each representing one Ordinary Share, are listed on the NYSE. The ADSs are evidenced by ADRs issued by The Bank of New York Mellon (the ‘Depositary’) as Depositary under an
Amended and Restated Deposit Agreement dated
28 November 2006. The ticker symbol for the ADSs on the NYSE is CRH.
The following table sets forth, for the periods indicated, the reported high and low closing sales prices for the Ordinary Shares in euro on the ISE
and in Pound Sterling on the LSE from 2013 through 16 February 2018. The table also sets forth, for the same periods, the high and low closing sale prices for the ADSs on the NYSE.
Pound Sterling per Ordinary Share | euro per Ordinary Share | US Dollars per ADS | ||||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||||
Calendar Year | ||||||||||||||||||||||||||
2013 | £16.17 | £12.15 | €19.30 | €14.68 | $26.26 | $19.56 | ||||||||||||||||||||
2014 | £17.88 | £12.66 | €21.82 | €15.86 | $29.72 | $20.47 | ||||||||||||||||||||
2015 | £19.80 | £14.71 | €28.09 | €18.73 | $30.95 | $22.51 | ||||||||||||||||||||
2016 | £28.30 | £16.37 | €32.96 | €21.00 | $35.18 | $23.72 | ||||||||||||||||||||
2017 | £29.20 | £25.30 | €34.53 | €28.48 | $37.86 | $33.41 | ||||||||||||||||||||
2016 | ||||||||||||||||||||||||||
First Quarter | £19.86 | £16.37 | €26.37 | €21.00 | $28.47 | $23.72 | ||||||||||||||||||||
Second Quarter | £21.85 | £19.40 | €27.47 | €23.32 | $31.49 | $26.54 | ||||||||||||||||||||
Third Quarter | £26.07 | £20.96 | €30.90 | €24.52 | $34.04 | $27.64 | ||||||||||||||||||||
Fourth Quarter | £28.30 | £25.51 | €32.96 | €28.65 | $35.18 | $31.60 | ||||||||||||||||||||
2017 | ||||||||||||||||||||||||||
First Quarter | £28.98 | £26.67 | €34.03 | €31.44 | $36.59 | $33.41 | ||||||||||||||||||||
Second Quarter | £29.20 | £26.14 | €34.53 | €30.98 | $37.76 | $33.42 | ||||||||||||||||||||
Third Quarter | £28.37 | £26.25 | €32.28 | €28.48 | $37.86 | $34.02 | ||||||||||||||||||||
Fourth Quarter | £28.61 | £25.30 | €32.47 | €28.54 | $37.58 | $33.87 | ||||||||||||||||||||
Recent Months | ||||||||||||||||||||||||||
September 2017 | £28.37 | £26.40 | €32.28 | €29.09 | $37.86 | $34.78 | ||||||||||||||||||||
October 2017 | £28.61 | £27.23 | €32.47 | €30.49 | $37.58 | $35.81 | ||||||||||||||||||||
November 2017 | £28.04 | £25.66 | €31.75 | €28.95 | $36.79 | $34.63 | ||||||||||||||||||||
December 2017 | £26.63 | £25.30 | €30.06 | €28.54 | $36.09 | $33.87 | ||||||||||||||||||||
January 2018 | £27.70 | £26.12 | €31.55 | €29.73 | $38.96 | $36.09 | ||||||||||||||||||||
February 2018 (through 16 February 2018) | £25.75 | £23.80 | €29.44 | €26.76 | $36.88 | $33.19 | ||||||||||||||||||||
Additional share price data | ||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||
LSE | ISE | NYSE | LSE | ISE | NYSE | |||||||||||||||||||||
Share price at 31 December | £26.57 | €29.96 | $36.09 | £28.30 | €32.96 | $34.38 | ||||||||||||||||||||
Market capitalisation | £22.3bn | €25.1bn | $30.3bn | £23.6bn | €27.4bn | $28.6bn |
For further information on CRH shares see note 30 to the Consolidated Financial Statements.
234 |
CRH Annual Report and Form 20-F | 2017
Shareholdings as at 31 December 2017 | ||||||||||||||
Number of shares | ||||||||||||||
Geographic location (i) | held ‘000s | % of total | ||||||||||||
United Kingdom | 269,047 | 32.07 | ||||||||||||
North America | 212,702 | 25.35 | ||||||||||||
Europe/Other | 171,900 | 20.49 | ||||||||||||
Retail | 156,267 | 18.63 | ||||||||||||
Ireland | 28,988 | 3.45 | ||||||||||||
Treasury (ii) | 54 | 0.01 | ||||||||||||
838,958 | 100 |
(i) | This represents a best estimate of the number of shares controlled by fund managers resident in the geographic regions indicated. Private shareholders are classified as retail above. |
(ii) | As detailed in note 30 to the Consolidated Financial Statements. |
Number | ||||||||||||||||
Number of | % of | of shares | % of | |||||||||||||
Holdings | shareholders | total | held ‘000s | total | ||||||||||||
1 - 1,000 | 14,583 | 60.15 | 4,618 | 0.55 | ||||||||||||
1,001 - 10,000 | 7,689 | 31.71 | 22,801 | 2.72 | ||||||||||||
10,001 - 100,000 | 1,408 | 5.81 | 43,626 | 5.20 | ||||||||||||
100,001 - 1,000,000 | 427 | 1.76 | 140,608 | 16.76 | ||||||||||||
Over 1,000,000 | 139 | 0.57 | 627,305 | 74.77 | ||||||||||||
24,246 | 100 | 838,958 | 100 |
The Company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. The major shareholders do not have any special voting rights.
As at 28 February 2018, the Company had received notification of certain interests in its Ordinary Share capital that were equal to, or in excess of, 3%. These interests are presented in Corporate Governance – Substantial Holdings on page 70.
Purchases of Equity Securities by the Issuer and Affiliated Persons
2017 | ||||||||
Month | Number purchased | Price | ||||||
March | 90,971 | €33.21 | ||||||
July | 179 | €33.33 | ||||||
November | 1,673 | €31.40 | ||||||
November | 3,960 | €31.51 |
2016 | ||||||||
Month | Number purchased | Price | ||||||
March | 81,457 | € | 24.38 (i) | |||||
August | 86,464 | € | 29.80 (i) | |||||
(i) | Shares were purchased in Stg£ at a price of £18.88 and £25.46 respectively per share. |
Other than the above, there were no purchases of equity securities by the issuer and/or affiliated persons during the course of 2017.
CREST
Transfer of the Company’s shares takes place through the CREST system. Shareholders have the choice of holding their shares in electronic form or in the form of share certificates.
Where shares are held in CREST, dividends are automatically paid in euro unless a currency election is made. CREST members should use the facility in CREST to make currency elections. Such elections must be made in respect of entire holdings as partial elections are not permissible.
235 |
CRH Annual Report and Form 20-F | 2017
The Company has paid dividends on its Ordinary Shares in respect of each fiscal year since the formation of the Group in 1970. Dividends are paid to shareholders on the Register of Members on the record date for the dividend. Record dates are set by the LSE and the ISE. An interim dividend is normally declared by the Board of Directors in August of each year and is generally paid in October. A final dividend is normally recommended by the Board of Directors following the end of the fiscal year to which it relates and, if approved by the shareholders at an AGM, is generally paid in May of that year.
The payment of future cash dividends will be dependent upon future earnings, the financial condition of the Group and other factors.
The below table sets forth the amounts of interim, final and total dividends in euro cent per Ordinary Share declared in respect of each fiscal year indicated. Each amount represents the actual dividend payable. Solely for the convenience of the reader, these dividends have been translated into US cents per ADS using the FRB Noon Buying Rate on the date of payment. An interim dividend of 19.2c was paid in respect of Ordinary Shares on 3 November 2017. The final dividend, if approved at the forthcoming AGM of shareholders to be held on 26 April 2018, will be paid on 4 May 2018 to shareholders on the Register of Members as at the close of business on 9 March 2018 and will bring the full-year dividend for 2017 to 68.0c. The proposed final dividend has been translated using the FRB Noon Buying Rate on 16 February 2018.
Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is entitled to an exemption and has submitted a properly completed exemption form to the Company’s Registrars, Link Asset Services (the ‘Registrars’). DWT applies to dividends paid by way of cash or by way of shares under a scrip dividend scheme and is deducted at the standard rate of Income Tax (currently 20%).Non-resident shareholders and certain Irish companies, trusts, pension schemes, investment undertakings and charities may be entitled to claim exemption from DWT. Copies of the exemption form may be obtained from the Registrars. Shareholders should note that DWT will be deducted from dividends in cases where a properly completed form has not been received by the record date for a dividend. Individuals who are resident in the Republic of Ireland for tax purposes are not entitled to an exemption.
Shareholders who wish to have their dividend paid direct to their bank account, by electronic funds transfer, can do so by logging on to www.signalshares.com (formerly www. capitashareportal.com), selecting CRH and registering for the share portal (the ‘Share Portal’). Shareholders should note that they will need to have their Investor Code (found on their share certificate), and follow the instructions online to register.
Alternatively shareholders can complete a paper dividend mandate form and submit it to the Registrars. A copy of the form can be obtained by logging onto the Registrar’s share portal and following the instructions as set out under Registrars on page 243. Tax vouchers will continue to be sent to the shareholder’s registered address under this arrangement.
Dividends are generally paid in euro. However, in order to avoid costs to shareholders, dividends are paid in Pound Sterling and US Dollars to shareholders whose shares are not held in the CREST system (see page 235) and whose address, according to the Share Register, is in the UK and the US respectively, unless they require otherwise.
Dividends in respect of 7% ‘A’ Cumulative Preference Shares are paid half-yearly on
5 April and 5 October.
Dividends in respect of 5% Cumulative Preference Shares are paid half-yearly on 15 April and 15 October.
Shareholders have the option of taking their dividend in the form of shares under the Company’s Scrip Dividend Scheme.
euro cent per Ordinary Share | Translated* into US cents per ADS | |||||||||||||||||||||||||||
Years ended 31 December
| Interim | Final | Total | Interim | Final | Total | ||||||||||||||||||||||
2013 | 18.50 | 44.00 | 62.50 | 25.52 | 60.54 | 86.06 | ||||||||||||||||||||||
2014 | 18.50 | 44.00 | 62.50 | 23.45 | 49.46 | 72.91 | ||||||||||||||||||||||
2015 | 18.50 | 44.00 | 62.50 | 19.88 | 50.25 | 70.13 | ||||||||||||||||||||||
2016 | 18.80 | 46.20 | 65.00 | 20.91 | 50.80 | 71.71 | ||||||||||||||||||||||
2017 | 19.20 | 48.80 | (i) | 68.00 | 22.30 | 60.72 | (i) | 83.02 | ||||||||||||||||||||
(i) | Proposed |
* | At the FRB Noon Buying Rate on the date of payment |
236 |
CRH Annual Report and Form 20-F | 2017
The Group operates share option schemes, performance share plans, share participation schemes and savings-related share option schemes (the ‘Schemes’) for eligible employees in all regions where the regulations permit the operation of such schemes. A brief description of the Schemes is outlined below. Shares issued (whether by way of the allotment of new shares or the reissue of Treasury Shares by CRH plc to satisfyShares) in connection with the release ofSchemes rank pari passu in all respects with the Ordinary and Income shares in respect of the 2011Company.
2000 Share Option Schemes
At the AGM held on 3 May 2000, shareholders approved the adoption of Share Option Schemes (the ‘2000 Share Option Schemes’) to replace schemes which were approved in May 1990. The 2000 Share Option Schemes were replaced by new schemes in May 2010 (see below).
Options granted under the 2000 Share Option Schemes vested when EPS growth exceeded the growth on the Irish Consumer Price Index by 5% compounded over a period of at least three years subsequent to the granting of options.
Options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant. Benefits under the schemes are not pensionable.
2010 Share Option Schemes
At the AGM held on 5 May 2010, shareholders approved the adoption of new share option schemes to replace the schemes which were approved in May 2000 (see above). Following the approval by shareholders of the 2014 Performance Share Plan (see below), no further awards will be granted under the 2010 Share Option Schemes. Consequently, the last award under the 2010 Share Option Schemes was made in 2013.
The 2010 Share Option Schemes are based on one tier of options with a single vesting test. The performance criteria for the 2010 Share Option Schemes areEPS-based. Vesting only occurs once an initial performance target has been reached and, thereafter, is dependent on performance. In considering the level of vesting based on EPS performance, the Remuneration Committee also considers the overall results of the Group.
Subject to the achievement of the EPS performance criteria, options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant. Benefits under the schemes are not pensionable.
2010 Savings-related Share Option Schemes
At the AGM held on 5 May 2010, shareholders approved the adoption of savings-related share option schemes (the ‘2010 Savings-related Share Option Schemes’) to replace the 2000 Savings-related Share Option Schemes.
All employees of a participating subsidiary in the Republic of Ireland or the UK, who have satisfied a required qualifying period, are invited to participate in this scheme.
Eligible employees who wish to participate in the scheme enter into a savings contract with a nominated savings institution, for a three or a five-year period, to save a maximum of€500 or Stg£500, as appropriate, per month.
At the commencement of each contract period employees are granted an option to acquire Ordinary Shares in the Company at an option price which is equal to the amount proposed to be saved plus the bonus payable by the nominated savings institution at the end of the savings period. The price payable for each Ordinary Share under an option will be not less than the higher of par or 75% (or in the case of the UK scheme 80%) of the market value of a share on the day the invitation to apply for the option is issued.
On completion of the savings contract, employees may use the amount saved, together with the bonus earned, to exercise the option.
At 28 February 2018, 679,312 Ordinary Shares have been issued* pursuant to the 2010 Savings-related Share Option Schemes to date.
Share Participation Schemes
At the AGM on 13 May 1987, shareholders approved the establishment of Share Participation Schemes for the Company, its subsidiaries and companies under its control. Directors and employees of the companies who have at least one year’s service may elect to participate in these Share Participation Schemes.
At 28 February 2018, 7,862,416 Ordinary Shares have been issued* pursuant to the Share Participation Schemes.
2014 Performance Share Plan
The 2014 Performance Share Plan was approved by shareholders at the AGM on 7 May 2014. It replaces the 2010 Share Option Schemes and the 2006 Performance Share Plan. See the 2017 Directors’ Remuneration Report on page 84 for more details.
Restricted Share PlanBusiness Combinations) will be subject to subsequent disclosure.
During 2013,
(i) | The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to€132 million (2016:€30 million; 2015: €1,588 million). The fair value of these receivables is€129 million (all of which is expected to be recoverable) (2016:€28 million; 2015:€1,533 million). |
(ii) | The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and other synergies with existing entities in the Group which do not qualify for separate recognition as intangible assets. Due to the asset-intensive nature of operations in the Europe Heavyside and Americas Materials business segments, no significant identifiable intangible assets are recognised on business combinations in these segments.€260 million of the goodwill recognised in respect of acquisitions completed in 2017 is expected to be deductible for tax purposes (2016: €15 million; 2015:€254 million). |
Acquisition-related costs, excluding post-acquisition integration costs, amounting to€11 million (2016:€2 million; 2015:€152 million) have been included in operating costs in the Employee Benefit Trust purchased 391,250 shares on behalf of CRH plc in respect of awards under the 2013 Restricted Share Plan. There were no such purchases in 2014.Consolidated Income Statement (note 3).
The nominal value of own shares, on which dividends have been waivedfollowing table analyses the 31 acquisitions completed in 2017 (2016: 21 acquisitions; 2015: 19 acquisitions) by the Trusteesreportable segment and provides details of the 2013 Restricted Share Plan, amounted to€0.1 million at 31 December 2014 (2013:€0.1 million).
(iii) Issuegoodwill and consideration figures arising in each of scrip shares in lieu of cash dividends:
Number of Shares | Price per Share | |||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 | 2013 | 2012 | |||||||||||||||||||||
May 2014 - Final 2013 dividend (2013: Final 2012 dividend; 2012: Final 2011 dividend) | 4,081,636 | 2,011,165 | 2,653,368 | € | 20.99 | € | 17.01 | € | 15.40 | |||||||||||||||||
October 2014 - Interim 2014 dividend (2013: Interim 2013 dividend; 2012: Interim 2012 dividend) | 1,212,700 | 3,398,992 | 3,270,169 | € | 17.81 | € | 15.79 | € | 14.27 | |||||||||||||||||
Total | 5,294,336 | 5,410,157 | 5,923,537 |
Number of acquisitions | Goodwill | Consideration | ||||||||||||||||||||||||||||||||||||||||||
Reportable segments | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 8 | 5 | - | 155 | 2 | - | 698 | 15 | - | |||||||||||||||||||||||||||||||||||
Europe Lightside | - | 2 | 3 | - | 7 | 6 | - | 22 | 17 | |||||||||||||||||||||||||||||||||||
Europe Distribution | 2 | 1 | 1 | 17 | - | - | 30 | - | 1 | |||||||||||||||||||||||||||||||||||
Europe | 10 | 8 | 4 | 172 | 9 | 6 | 728 | 37 | 18 | |||||||||||||||||||||||||||||||||||
Americas Materials | 13 | 8 | 10 | 239 | 10 | 32 | 1,171 | 97 | 80 | |||||||||||||||||||||||||||||||||||
Americas Products | 8 | 5 | 3 | 76 | 7 | 9 | 162 | 33 | 65 | |||||||||||||||||||||||||||||||||||
Americas | 21 | 13 | 13 | 315 | 17 | 41 | 1,333 | 130 | 145 | |||||||||||||||||||||||||||||||||||
Unallocated Goodwill | ||||||||||||||||||||||||||||||||||||||||||||
LH Assets | - | - | 1 | - | - | 2,307 | - | - | 6,561 | |||||||||||||||||||||||||||||||||||
CRL | - | - | 1 | - | - | 833 | - | - | 1,169 | |||||||||||||||||||||||||||||||||||
Total Group | 31 | 21 | 19 | 487 | 26 | 3,187 | 2,061 | 167 | 7,893 | |||||||||||||||||||||||||||||||||||
Adjustments to provisional fair values of prior year acquisitions | - | 45 | - | (1) | 8 | - | ||||||||||||||||||||||||||||||||||||||
Total | 487 | 71 | 3,187 | 2,060 | 175 | 7,893 |
187 |
CRH Annual Report and Form 20-F|2017 |
28. Share Capital and Reserves|continued
5% Cumulative | 7% ‘A’ Cumulative | |||||||||||||||||
Preference Shares of | Preference Shares of | |||||||||||||||||
Preference Share Capital | €1.27 each(iv) | €1.27 each(v) | ||||||||||||||||
Number of | Number of | |||||||||||||||||
Shares ‘000s | €m | Shares ‘000s | €m | |||||||||||||||
Authorised | ||||||||||||||||||
At 1 January 2014 and 31 December 2014 | 150 | - | 872 | 1 | ||||||||||||||
Allotted, called-up and fully paid | ||||||||||||||||||
At 1 January 2014 and 31 December 2014 | 50 | - | 872 | 1 |
There31. Business Combinations - continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit for the financial year was no movementas follows:
2017
€m | 2016
€m | 2015
€m | ||||||||||
Revenue | 532 | 101 | 2,679 | |||||||||
(Loss)/profit before tax for the financial year | (2) | 1 | (7) |
The revenue and profit of the Group for the financial year determined in accordance with IFRS as though the numberacquisitions effected during the year had been at the beginning of cumulative preference sharesthe year would have been as follows:
2017 acquisitions €m | CRH Group €m | CRH Group €m | ||||||||||
Revenue | 1,188 | 24,688 | 25,876 | |||||||||
Profit before tax for the financial year | 38 | 1,869 | 1,907 |
188 |
CRH Annual Report and Form 20-F|2017 |
32. Non-controlling Interests
The totalnon-controlling interest at 31 December 2017 is€486 million (2016:€548 million) of which€391 million (2016:€472 million) relates to Republic Cement & Building Materials (RCBM), Inc. and Republic Cement Land & Resources (RCLR), Inc. (formerly Luzon Continental Land Corporation (LCLC)).The non-controlling interests in eitherrespect of the current or the prior year.Group’s other subsidiaries are not considered to be material.
Name | Principal activity | Country of incorporation | Economic ownership interest held by non-controlling interest | |||
Republic Cement & Building Materials, Inc. |
| Philippines | 45% | |||
and Republic Cement Land & Resources, Inc. | of cement and building materials |
The following is summarised financial information for RCBM and RCLR prepared in accordance with IFRS 12Disclosure of Interests in Other Entities. This information is before intragroup eliminations with other Group companies.
Summarised financial information | 2017
€m | 2016
€m | ||||||
Profit for the year | 14 | 47 | ||||||
Current assets | 159 | 118 | ||||||
Non-current assets | 1,292 | 1,460 | ||||||
Current liabilities | (140) | (124) | ||||||
Non-current liabilities | (663) | (690) | ||||||
Net assets | 648 | 764 | ||||||
Cash flows from operating activities | 9 | 91 | ||||||
Dividends paid tonon-controlling interests during the year | - | (1) |
CRH holds 40% of the equity share capital in RCBM and RCLR and has an economic interest of 55% of the combined Philippines business.Non-controlling interest relates to another party who holds 60% of the equity share capital in RCBM and RCLR and has an economic interest of 45% of the combined Philippines business. CRH has obtained control (as defined under IFRS 10Consolidated Financial Statements) by virtue of contractual arrangements which give CRH power to direct the relevant non-nationalised activities of the business, in compliance with Philippine law.
189 |
CRH Annual Report and Form 20-F|2017 |
33. Related Party Transactions
The principal related party relationships requiring disclosure in the Consolidated Financial Statements of the Group under IAS 24RelatedParty Disclosurespertain to: the existence of subsidiaries, joint ventures and associates; transactions with these entities entered into by the Group; the identification and compensation of key management personnel; and lease arrangements.
Subsidiaries, joint ventures and associates
The Consolidated Financial Statements include the financial statements of the Company (CRH plc, the ultimate parent) and its subsidiaries, joint ventures and associates as documented in the accounting policies on pages 125 to 134. The Group’s principal subsidiaries, joint ventures and associates are disclosed on pages 246 to 251.
Sales to and purchases from associates and joint ventures are as follows:
Associates | Joint Ventures | |||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | |||||||||||||||||||||||
Sales | 51 | 56 | 48 | 111 | 88 | 64 | ||||||||||||||||||||||
Purchases | 400 | 401 | 422 | 55 | 54 | 56 |
Loans extended by the Group to joint ventures and associates (see note 16) are included in financial assets. Amounts receivable from and payable to equity accounted investments (arising from the aforementioned sales and purchases transactions) as at the balance sheet date are included as separate line items in notes 18 and 19 to the Consolidated Financial Statements.
Terms and conditions of transactions with subsidiaries, joint ventures and associates
In general, the transfer pricing policy implemented by the Group across its subsidiaries is market-based. Sales to and purchases from joint ventures and associates are conducted in the ordinary course of business and on terms equivalent to those that prevail in arms-length transactions. The outstanding balances included in receivables and payables as at the balance sheet date in respect of transactions with joint ventures and associates are unsecured and settlement arises in cash. No guarantees have been either requested or provided in relation to related party receivables and payables. Loans to joint ventures and associates (as disclosed in note 16) are extended on normal commercial terms in the ordinary course of business with interest accruing and, in general, paid to the Group at predetermined intervals.
Key management personnel
For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors which manages the business and affairs of the Company.
Key management remuneration amounted to: | 2017 €m | 2016 €m | 2015 €m | |||||||||
Short-term benefits | 9 | 13 | 10 | |||||||||
Post-employment benefits | 1 | 1 | 1 | |||||||||
Share-based payments - calculated in accordance with the principles disclosed in note 8 | 3 | 3 | 2 | |||||||||
Total | 13 | 17 | 13 |
Other than these compensation entitlements, there were no other transactions involving key management personnel.
Lease arrangements
CRH has a number of lease arrangements in place with related parties across the Group, which have been negotiated on an arms-length basis at market rates. We do not consider these arrangements to be material either individually or collectively in the context of the 2017, 2016 and 2015 Consolidated Financial Statements.
34. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 120 to 199 in respect of the year ended 31 December 2017 on 28 February 2018.
190 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information
The following consolidating information presents Condensed Consolidated Balance Sheets as at 31 December 2017 and 2016 and Condensed Consolidated Income Statements and Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flow for the years ended 31 December 2017, 2016 and 2015 of the Company and CRH America, Inc. as required by Article 3-10(c) of Regulation S-X. This information is prepared in accordance with IFRS with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated. CRH America, Inc. is 100% owned by the Company. The Guarantees of the Guarantor are full and unconditional.
CRH plc also fully and unconditionally guarantees securities issued by CRH America Finance, Inc., which is a 100% owned finance subsidiary of CRH plc.
CRH America, Inc. (the ‘Issuer’) has the following notes which are fully and unconditionally guaranteed by CRH plc (the ‘Guarantor’):
US$288 million 8.125% Notes due 2018 – listed on the NYSE (i)
US$400 million 5.750% Notes due 2021 – listed on the NYSE
US$1,250 million 3.875% Notes due 2025 – listed on the ISE
US$300 million 6.40% Notes due 2033 – listed on the ISE (ii)
US$500 million 5.125% Notes due 2045 – listed on the ISE
(i) | Originally issued as a US$650 million bond in July 2008. Subsequently in May 2017, US$362.13 million of the |
|
Treasury Shares/own shares | 2014 €m | 2013 €m | ||||||||
At 1 January | (118 | ) | (146 | ) | ||||||
Treasury Shares/own shares reissued | 42 | 34 | ||||||||
Shares acquired by Employee Benefit Trust (own shares) | - | (6 | ) | |||||||
At 31 December | (76 | ) | (118 | ) |
191 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2017
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
€m | €m | €m | €m | €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 13,094 | - | 13,094 | |||||||||||||||
Intangible assets | - | - | 7,214 | - | 7,214 | |||||||||||||||
Subsidiaries | 8,658 | 458 | 1,682 | (10,798 | ) | - | ||||||||||||||
Investments accounted for using the equity method | - | - | 1,248 | - | 1,248 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 3,627 | - | (3,627 | ) | - | ||||||||||||||
Other financial assets | - | - | 25 | - | 25 | |||||||||||||||
Other receivables | - | - | 156 | - | 156 | |||||||||||||||
Derivative financial instruments | - | - | 30 | - | 30 | |||||||||||||||
Deferred income tax assets | - | - | 95 | - | 95 | |||||||||||||||
Totalnon-current assets | 8,658 | 4,085 | 23,544 | (14,425 | ) | 21,862 | ||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,715 | - | 2,715 | |||||||||||||||
Trade and other receivables | - | 4 | 3,626 | - | 3,630 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,141 | - | 704 | (6,845 | ) | - | ||||||||||||||
Current income tax recoverable | - | - | 165 | - | 165 | |||||||||||||||
Derivative financial instruments | - | 4 | 30 | - | 34 | |||||||||||||||
Cash and cash equivalents | 401 | - | 1,714 | - | 2,115 | |||||||||||||||
Assets held for sale | - | - | 1,112 | - | 1,112 | |||||||||||||||
Total current assets | 6,542 | 8 | 10,066 | (6,845 | ) | 9,771 | ||||||||||||||
Total assets | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 | ||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 14,491 | 1,797 | 9,001 | (10,798 | ) | 14,491 | ||||||||||||||
Non-controlling interests | - | - | 486 | - | 486 | |||||||||||||||
Total equity | 14,491 | 1,797 | 9,487 | (10,798 | ) | 14,977 | ||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,020 | 5,640 | - | 7,660 | |||||||||||||||
Derivative financial instruments | - | 3 | - | - | 3 | |||||||||||||||
Deferred income tax liabilities | - | - | 1,666 | - | 1,666 | |||||||||||||||
Other payables | - | - | 226 | - | 226 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 3,627 | (3,627 | ) | - | ||||||||||||||
Retirement benefit obligations | - | - | 377 | - | 377 | |||||||||||||||
Provisions for liabilities | - | - | 693 | - | 693 | |||||||||||||||
Totalnon-current liabilities | - | 2,023 | 12,229 | (3,627 | ) | 10,625 | ||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | 3 | 29 | 4,502 | - | 4,534 | |||||||||||||||
Advances from subsidiary and parent undertakings | 704 | - | 6,141 | (6,845 | ) | - | ||||||||||||||
Current income tax liabilities | - | - | 458 | - | 458 | |||||||||||||||
Interest-bearing loans and borrowings | 2 | 244 | 70 | - | 316 | |||||||||||||||
Derivative financial instruments | - | - | 11 | - | 11 | |||||||||||||||
Provisions for liabilities | - | - | 371 | - | 371 | |||||||||||||||
Liabilities associated with assets classified as held for sale | - | - | 341 | - | 341 | |||||||||||||||
Total current liabilities | 709 | 273 | 11,894 | (6,845 | ) | 6,031 | ||||||||||||||
Total liabilities | 709 | 2,296 | 24,123 | (10,472 | ) | 16,656 | ||||||||||||||
Total equity and liabilities | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 |
192 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2016
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 12,690 | - | 12,690 | |||||||||||||||
Intangible assets | - | - | 7,761 | - | 7,761 | |||||||||||||||
Subsidiaries | 7,654 | 375 | 1,682 | (9,711) | - | |||||||||||||||
Investments accounted for using the equity method | - | - | 1,299 | - | 1,299 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 4,508 | - | (4,508) | - | |||||||||||||||
Other financial assets | - | - | 26 | - | 26 | |||||||||||||||
Other receivables | - | - | 212 | - | 212 | |||||||||||||||
Derivative financial instruments | - | 13 | 40 | - | 53 | |||||||||||||||
Deferred income tax assets | - | - | 159 | - | 159 | |||||||||||||||
Total non-current assets | 7,654 | 4,896 | 23,869 | (14,219) | 22,200 | |||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,939 | - | 2,939 | |||||||||||||||
Trade and other receivables | - | 6 | 3,973 | - | 3,979 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,546 | - | 704 | (7,250) | - | |||||||||||||||
Current income tax recoverable | - | - | 4 | - | 4 | |||||||||||||||
Derivative financial instruments | - | - | 23 | - | 23 | |||||||||||||||
Cash and cash equivalents | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Total current assets | 6,947 | 6 | 9,691 | (7,250) | 9,394 | |||||||||||||||
Total assets | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 | |||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 13,895 | 1,922 | 7,789 | (9,711) | 13,895 | |||||||||||||||
Non-controlling interests | - | - | 548 | - | 548 | |||||||||||||||
Total equity | 13,895 | 1,922 | 8,337 | (9,711) | 14,443 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,934 | 4,581 | - | 7,515 | |||||||||||||||
Deferred income tax liabilities | - | - | 2,008 | - | 2,008 | |||||||||||||||
Other payables | - | - | 461 | - | 461 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 4,508 | (4,508) | - | |||||||||||||||
Retirement benefit obligations | - | - | 591 | - | 591 | |||||||||||||||
Provisions for liabilities | - | - | 678 | - | 678 | |||||||||||||||
Total non-current liabilities | - | 2,934 | 12,827 | (4,508) | 11,253 | |||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | - | 46 | 4,769 | - | 4,815 | |||||||||||||||
Advances from subsidiary and parent undertakings | 704 | - | 6,546 | (7,250) | - | |||||||||||||||
Current income tax liabilities | - | - | 394 | - | 394 | |||||||||||||||
Interest-bearing loans and borrowings | 2 | - | 273 | - | 275 | |||||||||||||||
Derivative financial instruments | - | - | 32 | - | 32 | |||||||||||||||
Provisions for liabilities | - | - | 382 | - | 382 | |||||||||||||||
Total current liabilities | 706 | 46 | 12,396 | (7,250) | 5,898 | |||||||||||||||
Total liabilities | 706 | 2,980 | 25,223 | (11,758) | 17,151 | |||||||||||||||
Total equity and liabilities | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 |
193 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 25,220 | - | 25,220 | |||||||||||||||
Cost of sales | - | - | (16,903) | - | (16,903) | |||||||||||||||
Gross profit | - | - | 8,317 | - | 8,317 | |||||||||||||||
Operating income/(costs) | 22 | - | (6,244) | - | (6,222) | |||||||||||||||
Group operating profit | 22 | - | 2,073 | - | 2,095 | |||||||||||||||
Profit on disposals | - | - | 56 | - | 56 | |||||||||||||||
Profit before finance costs | 22 | - | 2,129 | - | 2,151 | |||||||||||||||
Finance costs | - | (235) | (308) | 242 | (301) | |||||||||||||||
Finance income | 2 | 242 | 10 | (242) | 12 | |||||||||||||||
Other financial expense | - | - | (60) | - | (60) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,754 | 83 | - | (1,837) | - | |||||||||||||||
Share of equity accounted investments’ profit | 65 | - | 65 | (65) | 65 | |||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Income tax expense | (55) | (29) | (26) | 55 | (55) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,788 | 61 | 1,810 | (1,847) | 1,812 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,788 | 61 | 1,786 | (1,847) | 1,788 | |||||||||||||||
From discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 24 | - | 24 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (1,015) | (186) | (890) | 1,015 | (1,076) | |||||||||||||||
Gains relating to cash flow hedges | 8 | - | 8 | (8) | 8 | |||||||||||||||
(1,007) | (186) | (882) | 1,007 | (1,068) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 114 | - | 114 | (114) | 114 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (33) | - | (33) | 33 | (33) | |||||||||||||||
81 | - | 81 | (81) | 81 | ||||||||||||||||
Total other comprehensive income for the financial year | (926) | (186) | (801) | 926 | (987) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 969 | (125) | 1,153 | (1,028) | 969 | |||||||||||||||
Non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 |
194 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2016 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer €m | Non-Guarantor €m | Eliminate and €m | CRH and | ||||||||||||||||
Revenue | - | - | 24,789 | - | 24,789 | |||||||||||||||
Cost of sales | - | - | (16,566) | - | (16,566) | |||||||||||||||
Gross profit | - | - | 8,223 | - | 8,223 | |||||||||||||||
Operating income/(costs) | 20 | - | (6,335) | - | (6,315) | |||||||||||||||
Group operating profit | 20 | - | 1,888 | - | 1,908 | |||||||||||||||
Profit on disposals | - | - | 53 | - | 53 | |||||||||||||||
Profit before finance costs | 20 | - | 1,941 | - | 1,961 | |||||||||||||||
Finance costs | - | (266) | (334) | 275 | (325) | |||||||||||||||
Finance income | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Other financial expense | - | - | (66) | - | (66) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,529 | 95 | - | (1,624) | - | |||||||||||||||
Share of equity accounted investments’ profit | 42 | - | 42 | (42) | 42 | |||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666) | 1,620 | |||||||||||||||
Income tax expense | (431) | (41) | (390) | 431 | (431) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,162 | 63 | 1,199 | (1,235) | 1,189 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,162 | 63 | 1,172 | (1,235) | 1,162 | |||||||||||||||
From discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 27 | - | 27 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (71) | 49 | (131) | 71 | (82) | |||||||||||||||
Gains relating to cash flow hedges | 14 | - | 14 | (14) | 14 | |||||||||||||||
(57) | 49 | (117) | 57 | (68) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | (61) | - | (61) | 61 | (61) | |||||||||||||||
Tax on items recognised directly within other comprehensive income | 3 | - | 3 | (3) | 3 | |||||||||||||||
(58) | - | (58) | 58 | (58) | ||||||||||||||||
Total other comprehensive income for the financial year | (115) | 49 | (175) | 115 | (126) | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,128 | 112 | 1,089 | (1,201) | 1,128 | |||||||||||||||
Non-controlling interests | - | - | 16 | - | 16 | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 |
195 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2015 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 21,406 | - | 21,406 | |||||||||||||||
Cost of sales | - | - | (14,743) | - | (14,743) | |||||||||||||||
Gross profit | - | - | 6,663 | - | 6,663 | |||||||||||||||
Operating income/(costs) | 1,473 | - | (6,970) | - | (5,497) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (307) | - | 1,166 | |||||||||||||||
(Loss)/profit on disposals | (7) | - | 106 | - | 99 | |||||||||||||||
Profit/(loss) before finance costs | 1,466 | - | (201) | - | 1,265 | |||||||||||||||
Finance costs | - | (321) | (315) | 333 | (303) | |||||||||||||||
Finance income | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Other financial expense | - | - | (94) | - | (94) | |||||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (596) | 62 | - | 534 | - | |||||||||||||||
Share of equity accounted investments’ profit | 44 | - | 44 | (44) | 44 | |||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559) | 490 | 920 | |||||||||||||||
Income tax expense | (276) | (29) | (247) | 276 | (276) | |||||||||||||||
Group profit/(loss) for the financial year from continuing operations | 639 | 45 | (806) | 766 | 644 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Profit/(loss) attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 639 | 45 | (811) | 766 | 639 | |||||||||||||||
From discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 5 | - | 5 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | 643 | 159 | 502 | (643) | 661 | |||||||||||||||
Losses relating to cash flow hedges | (2) | - | (2) | 2 | (2) | |||||||||||||||
641 | 159 | 500 | (641) | 659 | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 203 | - | 203 | (203) | 203 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (30) | - | (30) | 30 | (30) | |||||||||||||||
173 | - | 173 | (173) | 173 | ||||||||||||||||
Total other comprehensive income for the financial year | 814 | 159 | 673 | (814) | 832 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,538 | 204 | (71) | (133) | 1,538 | |||||||||||||||
Non-controlling interests | - | - | 23 | - | 23 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 |
196 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Profit before tax from discontinued operations | 146 | - | 146 | (146) | 146 | |||||||||||||||
Profit before tax | 1,989 | 90 | 1,982 | (2,048) | 2,013 | |||||||||||||||
Finance costs (net) | (2) | (7) | 358 | - | 349 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,900) | (83) | - | 1,983 | - | |||||||||||||||
Share of equity accounted investments’ profit | (65) | - | (65) | 65 | (65) | |||||||||||||||
Profit on disposals | - | - | (59) | - | (59) | |||||||||||||||
Group operating profit | 22 | - | 2,216 | - | 2,238 | |||||||||||||||
Depreciation charge | - | - | 1,006 | - | 1,006 | |||||||||||||||
Amortisation of intangible assets | - | - | 66 | - | 66 | |||||||||||||||
Share-based payment (income)/expense | (1) | - | 66 | - | 65 | |||||||||||||||
Other (primarily pension payments) | - | - | (186) | - | (186) | |||||||||||||||
Net movement on working capital and provisions | - | (11) | (198) | - | (209) | |||||||||||||||
Cash generated from operations | 21 | (11) | 2,970 | - | 2,980 | |||||||||||||||
Interest paid (including finance leases) | - | (236) | (323) | 242 | (317) | |||||||||||||||
Corporation tax paid | - | (29) | (445) | - | (474) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 21 | (276) | 2,202 | 242 | 2,189 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 222 | - | 222 | |||||||||||||||
Interest received | 2 | 242 | 9 | (242) | 11 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 31 | - | 31 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (1,044) | - | (1,044) | |||||||||||||||
Advances from subsidiary and parent undertakings | 407 | 356 | - | (763) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (1,841) | - | (1,841) | |||||||||||||||
Other investments and advances | - | - | (11) | - | (11) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (53) | - | (53) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 409 | 598 | (2,687) | (1,005) | (2,685) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 42 | - | - | - | 42 | |||||||||||||||
Transactions involving non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (763) | 763 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | 6 | 1,004 | - | 1,010 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 11 | 158 | - | 169 | |||||||||||||||
Premium paid on early debt redemption | - | (18) | - | - | (18) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (321) | (22) | - | (343) | |||||||||||||||
Dividends paid to equity holders of the Company | (469) | - | - | - | (469) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (430) | (322) | 332 | 763 | 343 | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Translation adjustment | - | - | (161) | - | (161) | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 1,734 | - | 2,135 |
197 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2016 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666 | ) | 1,620 | ||||||||||||||
Profit before tax from discontinued operations | 121 | - | 121 | (121 | ) | 121 | ||||||||||||||
Profit before tax | 1,714 | 104 | 1,710 | (1,787) | 1,741 | |||||||||||||||
Finance costs (net) | (2) | (9) | 394 | - | 383 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,650) | (95) | - | 1,745 | - | |||||||||||||||
Share of equity accounted investments’ profit | (42) | - | (42) | 42 | (42) | |||||||||||||||
Profit on disposals | - | - | (55) | - | (55) | |||||||||||||||
Group operating profit | 20 | - | 2,007 | - | 2,027 | |||||||||||||||
Depreciation charge | - | - | 1,009 | - | 1,009 | |||||||||||||||
Amortisation of intangible assets | - | - | 71 | - | 71 | |||||||||||||||
Impairment charge | - | - | 23 | - | 23 | |||||||||||||||
Share-based payment (income)/expense | (3) | - | 49 | - | 46 | |||||||||||||||
Other (primarily pension payments) | - | - | (65) | - | (65) | |||||||||||||||
Net movement on working capital and provisions | - | (1) | 57 | - | 56 | |||||||||||||||
Cash generated from operations | 17 | (1) | 3,151 | - | 3,167 | |||||||||||||||
Interest paid (including finance leases) | - | (266) | (355) | 275 | (346) | |||||||||||||||
Corporation tax paid | - | (41) | (440) | - | (481) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 17 | (308) | 2,356 | 275 | 2,340 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 283 | - | 283 | |||||||||||||||
Interest received | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 40 | - | 40 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (853) | - | (853) | |||||||||||||||
Advances from subsidiary and parent undertakings | 287 | 644 | - | (931) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (149) | - | (149) | |||||||||||||||
Other investments and advances | - | - | (7) | - | (7) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (57) | - | (57) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 289 | 919 | (737) | (1,206) | (735) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 52 | - | - | - | 52 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (931) | 931 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | - | 600 | - | 600 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 25 | (30) | - | (5) | |||||||||||||||
Treasury/own shares purchased | (4) | - | - | - | (4) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (9) | (636) | (1,370) | - | (2,015) | |||||||||||||||
Dividends paid to equity holders of the Company | (352) | - | - | - | (352) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (313) | (611) | (1,739) | 931 | (1,732) | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 408 | - | 2,110 | - | 2,518 | |||||||||||||||
Translation adjustment | - | - | 58 | - | 58 | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 2,048 | - | 2,449 |
198 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2015 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559 | ) | 490 | 920 | ||||||||||||||
Profit before tax from discontinued operations | 113 | - | 113 | (113 | ) | 113 | ||||||||||||||
Profit/(loss) before tax | 1,028 | 74 | (446) | 377 | 1,033 | |||||||||||||||
Finance costs (net) | (1) | (12) | 402 | - | 389 | |||||||||||||||
Share of subsidiaries’ loss/(profit) before tax | 483 | (62) | - | (421) | - | |||||||||||||||
Share of equity accounted investments’ profit | (44) | - | (44) | 44 | (44) | |||||||||||||||
Loss/(profit) on disposals | 7 | - | (108) | - | (101) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (196) | - | 1,277 | |||||||||||||||
Depreciation charge | - | - | 843 | - | 843 | |||||||||||||||
Amortisation of intangible assets | - | - | 55 | - | 55 | |||||||||||||||
Impairment charge | - | - | 44 | - | 44 | |||||||||||||||
Share-based payment (income)/expense | (2) | - | 29 | - | 27 | |||||||||||||||
Other (primarily pension payments) | - | - | (47) | - | (47) | |||||||||||||||
Amounts due from subsidary undertakings | (1,460) | - | 1,460 | - | - | |||||||||||||||
Net movement on working capital and provisions | - | (9) | 594 | - | 585 | |||||||||||||||
Cash generated from operations | 11 | (9) | 2,782 | - | 2,784 | |||||||||||||||
Interest paid (including finance leases) | - | (283) | (352) | 333 | (302) | |||||||||||||||
Corporation tax paid | - | (29) | (206) | - | (235) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 11 | (321) | 2,224 | 333 | 2,247 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 889 | - | 889 | |||||||||||||||
Interest received | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 53 | - | 53 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (882) | - | (882) | |||||||||||||||
Advances from subsidiary and parent undertakings | (699) | (632) | - | 1,331 | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (7,296) | - | (7,296) | |||||||||||||||
Other investments and advances | - | - | (19) | - | (19) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (59) | - | (59) | |||||||||||||||
Net cash outflow from investing activities | (698) | (299) | (7,307) | 998 | (7,306) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | - | - | 1,593 | - | 1,593 | |||||||||||||||
Proceeds from exercise of share options | 57 | - | - | - | 57 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | 1,331 | (1,331) | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | 9 | 1,584 | 4,040 | - | 5,633 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 15 | 32 | - | 47 | |||||||||||||||
Premium paid on early debt redemption | - | (38) | - | - | (38) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (968) | (1,776) | - | (2,744) | |||||||||||||||
Dividends paid to equity holders of the Company | (379) | - | - | - | (379) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (4) | - | (4) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (316) | 593 | 5,216 | (1,331) | 4,162 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 1,411 | 25 | 1,859 | - | 3,295 | |||||||||||||||
Translation adjustment | - | 2 | 118 | - | 120 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Cash and cash equivalents at 31 December | 408 | - | 2,110 | - | 2,518 |
199 |
CRH Annual Report and Form 20-F|2017 |
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205 |
206 |
Supplementary20-F Disclosures | ||||||
| ||||||
Selected Financial Data | 208 | |||||
Exchange Rates | 209 | |||||
Non-GAAP Performance Measures | 210 | |||||
Contractual Obligations | 214 | |||||
Property, Plants and Equipment | 215 | |||||
Mineral Reserves | 216 | |||||
Risk Factors | 218 | |||||
Corporate Governance Practices - NYSE | 228 | |||||
The Environment and Government Regulations | 230 | |||||
Other Disclosures | 231 |
207 |
CRH Annual Report and Form 20-F | 2017
The Consolidated Financial Statements of CRH plc have been prepared in accordance with IFRS as adopted by the International Accounting Standards Board.
Selected financial data is presented below for the five years ended on 31 December 2017. For the three years ended 31 December 2017, the selected financial data is qualified in its entirety by reference to, and should be read in conjunction
with, the audited Consolidated Financial Statements, the related Notes and the Business Performance section included elsewhere in this Annual Report and Form20-F.
Year ended 31 December (amounts in millions, except per share data and ratios) | ||||||||||||||||||
2017 €m | 2016 (i) €m | 2015 (i) €m | 2014 (i) €m | 2013 (i) (ii) €m | ||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||
Revenue | 25,220 | 24,789 | 21,406 | 17,136 | 16,367 | |||||||||||||
Group operating profit | 2,095 | 1,908 | 1,166 | 834 | 33 | |||||||||||||
Profit/(loss) attributable to equity holders of the Company | 1,788 | 1,162 | 639 | 520 | (344) | |||||||||||||
Basic earnings/(loss) per Ordinary Share | 214.0c | 140.4c | 78.7c | 70.4c | (47.2c) | |||||||||||||
Diluted earnings/(loss) per Ordinary Share | 212.7c | 139.4c | 78.3c | 70.4c | (47.2c) | |||||||||||||
Dividends paid during calendar year per Ordinary Share | 65.4c | 62.8c | 62.5c | 62.5c | 62.5c | |||||||||||||
Average number of Ordinary Shares outstanding (iii) | 835.6 | 827.8 | 812.3 | 737.6 | 729.2 | |||||||||||||
Ratio of earnings to fixed charges (times) (iv) | 4.5 | 3.9 | 2.8 | 2.4 | 0.6 (v) | |||||||||||||
All data relates to continuing operations | ||||||||||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||
Total assets | 31,633 | 31,594 | 32,007 | 22,017 | 20,429 | |||||||||||||
Net assets (vi) | 14,977 | 14,443 | 13,544 | 10,198 | 9,686 | |||||||||||||
Ordinary shareholders’ equity | 14,490 | 13,894 | 13,014 | 10,176 | 9,661 | |||||||||||||
Equity share capital | 286 | 284 | 281 | 253 | 251 | |||||||||||||
Number of Ordinary Shares (iii) | 839.0 | 832.8 | 823.9 | 744.5 | 739.2 | |||||||||||||
Number of Treasury Shares and own shares (iii) | 0.4 | 0.4 | 1.3 | 3.8 | 6.0 | |||||||||||||
Number of Ordinary Shares net of Treasury Shares and own shares (iii) | 838.6 | 832.4 | 822.6 | 740.7 | 733.2 |
(i) | Prior year comparative income statement data has been restated to show the |
(ii) | Group operating profit includes asset impairment charges of |
(iii) | All share numbers are shown in millions of shares. |
(iv) | For the purposes of calculating the ratio of earnings to |
(v) | The amount of the deficiency in 2013 was US$183 million. |
(vi) | Net assets is calculated as the sum of total assets less total liabilities. |
208 |
CRH Annual Report and Form 20-F | 2017
In this Annual Report and Form20-F, references to “US$”, “US Dollars” or “US cents” are to the United States currency, references to “euro”, “euro cent”, “cent”, “c” or “€” are to the euro currency and “Stg£” or “Pound Sterling” are to the currency of the United Kingdom of Great Britain and Northern Ireland (UK). Other currencies referred to in this Annual Report and Form20-F include Polish Zloty (PLN), Swiss Franc (CHF), Canadian Dollar (CAD), Chinese Renminbi (RMB), Indian Rupee (INR), Ukrainian Hryvnia (UAH), Philippine Peso (PHP), Romanian Leu (RON) and Serbian Dinar (RSD).
For the convenience of the reader, this Annual Report and Form20-F contains translations of certain euro amounts into US Dollars at specified rates. These translations should not be construed as representations that the euro amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated.
The table below sets forth, for the periods and dates indicated, the average, high, low andend-of-period exchange rates in US Dollars per€1 (to the nearest cent) using the Federal Reserve Bank of New York Noon Buying Rate (the ‘FRB Noon Buying Rate’).
These rates may vary slightly from the rates used for translating foreign currencies into euro in the preparation of the Consolidated Financial Statements (see page 134).
For a discussion on the effects of exchange rate fluctuations on the financial condition and results of the operations of the Group, see the Business Performance section beginning on page 22.
Where referenced in the Supplementary20-F Disclosures and Shareholder Information sections, information is provided at the latest practicable date, 16 February 2018.
euro/US Dollar exchange rate
Years ended 31 December | Period End | Average Rate (i) | High | Low | ||||||||||
2013 | 1.38 | 1.33 | 1.38 | 1.28 | ||||||||||
2014 | 1.21 | 1.32 | 1.39 | 1.21 | ||||||||||
2015 | 1.09 | 1.10 | 1.20 | 1.05 | ||||||||||
2016 | 1.06 | 1.10 | 1.15 | 1.04 | ||||||||||
2017 | 1.20 | 1.14 | 1.20 | 1.04 | ||||||||||
2018 (through 16 February 2018) | 1.24 | 1.23 | 1.25 | 1.19 | ||||||||||
Months ended | ||||||||||||||
September 2017 | 1.18 | 1.19 | 1.20 | 1.17 | ||||||||||
October 2017 | 1.16 | 1.18 | 1.18 | 1.16 | ||||||||||
November 2017 | 1.19 | 1.17 | 1.19 | 1.16 | ||||||||||
December 2017 | 1.20 | 1.18 | 1.20 | 1.17 | ||||||||||
January 2018 | 1.24 | 1.22 | 1.25 | 1.19 | ||||||||||
February 2018 (through 16 February 2018) | 1.24 | 1.24 | 1.25 | 1.22 | ||||||||||
(i) The average of the euro/US Dollar exchange rate on the last day of each month during the period or in the case of monthly averages, the average of all days in the month, in each case using the FRB Noon Buying Rate.
The FRB Noon Buying Rate on 31 December 2017 was€1 = US$1.2022 and on 16 February 2018 was€1 = US$1.2442. |
209 |
CRH Annual Report and Form 20-F | 2017
CRH uses a number ofnon-GAAP performance measures to monitor financial performance. These measures are referred to throughout the discussion of our reported financial position and operating performance and are measures which are regularly reviewed by CRH management.
These performance measures may not be uniformly defined by all companies and accordingly they may not be directly comparable with similarly titled measures and disclosures by other companies. Certain information presented is derived from amounts calculated in accordance
with IFRS but is not itself an expressly permitted GAAP measure. Thenon-GAAP performance measures as summarised below should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
Reconciliation of Revenue, EBITDA (as defined)* and Operating Profit by segment
Year ended 31 December | ||||||||||||||||||||||||||||||||||||||||||||
Revenue | Group EBITDA (as defined)* | Depreciation, amortisation and impairment | Group operating profit (i) | |||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | �� | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 6,902 | 6,945 | 4,813 | 839 | 781 | 424 | 361 | 395 | 304 | 478 | 386 | 120 | ||||||||||||||||||||||||||||||||
Europe Lightside | 1,440 | 1,392 | 1,404 | 143 | 137 | 136 | 41 | 45 | 46 | 102 | 92 | 90 | ||||||||||||||||||||||||||||||||
Europe Distribution | 4,145 | 4,066 | 4,158 | 269 | 206 | 171 | 62 | 76 | 77 | 207 | 130 | 94 | ||||||||||||||||||||||||||||||||
Europe | 12,487 | 12,403 | 10,375 | 1,251 | 1,124 | 731 | 464 | 516 | 427 | 787 | 608 | 304 | ||||||||||||||||||||||||||||||||
Americas Materials | 7,970 | 7,598 | 7,018 | 1,270 | 1,204 | 955 | 412 | 386 | 335 | 858 | 818 | 620 | ||||||||||||||||||||||||||||||||
Americas Products | 4,327 | 4,280 | 3,862 | 573 | 543 | 391 | 138 | 132 | 142 | 435 | 411 | 249 | ||||||||||||||||||||||||||||||||
Americas | 12,297 | 11,878 | 10,880 | 1,843 | 1,747 | 1,346 | 550 | 518 | 477 | 1,293 | 1,229 | 869 | ||||||||||||||||||||||||||||||||
Asia | 436 | 508 | 151 | 52 | 109 | 2 | 37 | 38 | 9 | 15 | 71 | (7) | ||||||||||||||||||||||||||||||||
Total Group from continuing operations | 25,220 | 24,789 | 21,406 | 3,146 | 2,980 | 2,079 | 1,051 | 1,072 | 913 | 2,095 | 1,908 | 1,166 | ||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 2,343 | 2,315 | 2,229 | 164 | 150 | 140 | 21 | 31 | 29 | 143 | 119 | 111 | ||||||||||||||||||||||||||||||||
Total Group | 27,563 | 27,104 | 23,635 | 3,310 | 3,130 | 2,219 | 1,072 | 1,103 | 942 | 2,238 | 2,027 | 1,277 | ||||||||||||||||||||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||||||||||||||||||||||||||||||
Profit on disposals | 56 | 53 | 99 | |||||||||||||||||||||||||||||||||||||||||
Finance costs less income | (289) | (317) | (295) | |||||||||||||||||||||||||||||||||||||||||
Other financial expense | (60) | (66) | (94) | |||||||||||||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit | 65 | 42 | 44 | |||||||||||||||||||||||||||||||||||||||||
Profit before tax from continuing operations | 1,867 | 1,620 | 920 | |||||||||||||||||||||||||||||||||||||||||
Income tax expense | (55) | (431) | (276) | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year from continuing operations | 1,812 | 1,189 | 644 | |||||||||||||||||||||||||||||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | 81 | 85 | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 |
(i) | Throughout this document, Group operating profit is reported as shown in the Consolidated Income Statement and excludes profit on disposals. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share |
210 |
CRH Annual Report and Form 20-F | 2017
Return on Net Assets | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||
Group operating profit from discontinued operations | 143 | 119 | 111 | |||||||||||||
Total Group operating profit (numerator for RONA computation) | 2,238 | 2,027 | 1,277 | |||||||||||||
Current year | ||||||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | |||||||||||||
Segment liabilities (i) | (6,201) | (6,927) | (6,794) | |||||||||||||
Group segment net assets | 20,608 | 20,654 | 21,087 | |||||||||||||
Assets held for sale | 1,112 | - | - | |||||||||||||
Liabilities associated with assets classified as held for sale | (341) | - | - | |||||||||||||
Group net assets (including net assets held for sale) | 21,379 | 20,654 | 21,087 | |||||||||||||
Prior year | ||||||||||||||||
Segment assets (i) | 27,581 | 27,881 | 16,584 | |||||||||||||
Segment liabilities (i) | (6,927) | (6,794) | (4,258) | |||||||||||||
Group segment net assets | 20,654 | 21,087 | 12,326 | |||||||||||||
Average net assets including net assets held for sale (denominator for RONA computation) | 21,017 | 20,871 | 16,707 | |||||||||||||
RONA | 10.6% | 9.7% | 7.6% | |||||||||||||
Reconciliation of Segment Assets and Liabilities to Group Assets and Liabilities | ||||||||||||||||
Assets | 2017 €m | 2016 €m | 2015 €m | 2014 €m | ||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | 16,584 | ||||||||||||
Reconciliation to total assets as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Investments accounted for using the equity method | 1,248 | 1,299 | 1,317 | 1,329 | ||||||||||||
Other financial assets | 25 | 26 | 28 | 23 | ||||||||||||
Derivative financial instruments (current andnon-current) | 64 | 76 | 109 | 102 | ||||||||||||
Income tax assets (current and deferred) | 260 | 163 | 154 | 186 | ||||||||||||
Cash and cash equivalents | 2,115 | 2,449 | 2,518 | 3,262 | ||||||||||||
Assets held for sale | 1,112 | - | - | 531 | ||||||||||||
Total assets as reported in the Consolidated Balance Sheet | 31,633 | 31,594 | 32,007 | 22,017 | ||||||||||||
Liabilities | ||||||||||||||||
Segment liabilities (i) | 6,201 | 6,927 | 6,794 | 4,258 | ||||||||||||
Reconciliation to total liabilities as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Interest-bearing loans and borrowings (current andnon-current) | 7,976 | 7,790 | 9,221 | 5,866 | ||||||||||||
Derivative financial instruments (current andnon-current) | 14 | 32 | 24 | 23 | ||||||||||||
Income tax liabilities (current and deferred) | 2,124 | 2,402 | 2,424 | 1,459 | ||||||||||||
Liabilities associated with assets classified as held for sale | 341 | - | - | 213 | ||||||||||||
Total liabilities as reported in the Consolidated Balance Sheet | 16,656 | 17,151 | 18,463 | 11,819 |
(i) | Segment assets and |
211 |
CRH Annual Report and Form 20-F | 2017
Non-GAAP Performance Measures - continued
Calculation of EBITDA (as defined)* Net Interest Cover
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Interest | ||||||||||||||||
Finance costs (i) | 301 | 325 | 303 | |||||||||||||
Finance income (i) | (12) | (8) | (8) | |||||||||||||
Net interest | 289 | 317 | 295 | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
Times | ||||||||||||||||
EBITDA (as defined)* net interest cover (EBITDA (as defined)* divided by net interest) | 10.9 | 9.4 | 7.0 | |||||||||||||
(i) These items appear on the Consolidated Income Statement on page 120. | ||||||||||||||||
Calculation of Net Debt/EBITDA (as defined)* | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Net Debt | ||||||||||||||||
Cash and cash equivalents (i) | 2,115 | 2,449 | 2,518 | |||||||||||||
Interest-bearing loans and borrowings (i) | (7,976) | (7,790) | (9,221) | |||||||||||||
Derivative financial instruments (net) (i) | 50 | 44 | 85 | |||||||||||||
Group net debt excluding net debt reclassified as held for sale | (5,811) | (5,297) | (6,618) | |||||||||||||
Cash at bank and in hand reclassified as held for sale (i) | 20 | - | - | |||||||||||||
Interest-bearing loans and borrowings reclassified as held for sale (i) | (5) | - | - | |||||||||||||
Group net debt | (5,796) | (5,297) | (6,618) | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
EBITDA (as defined)* from discontinued operations | 164 | 150 | 140 | |||||||||||||
Total Group EBITDA (as defined)* | 3,310 | 3,130 | 2,219 | |||||||||||||
Times | ||||||||||||||||
Net debt divided by EBITDA (as defined)* | 1.8 | 1.7 | 3.0 | |||||||||||||
(i) These items appear in notes 21 to 25 to the Consolidated Financial Statements. | ||||||||||||||||
Adjusted Basic Earnings per Ordinary Share | ||||||||||||||||
2017 €m | ||||||||||||||||
Numerator for basic and diluted earnings per Ordinary Share (i) | 1,895 | |||||||||||||||
One-off Swiss pension past service credit (net of tax) (ii) | (59) | |||||||||||||||
One-off deferred tax credit (including credit relating to discontinued operations) | (447) | |||||||||||||||
Numerator for adjusted basic EPS excludingone-off gains per Ordinary Share from continuing and discontinued operations | 1,389 | |||||||||||||||
Average shares (i) | 835.6 | |||||||||||||||
Adjusted basic earnings per Ordinary Share | 166.2c | |||||||||||||||
Dividend declared for the year | 68.0c | |||||||||||||||
Dividend cover (adjusted basic earnings per share/dividend declared per share) | 2.4x |
(i) | These items appear in |
(ii) | Theone-off Swiss pension past service credit was€81 million before a tax charge of€ |
Reconciliation of shares issued to net proceeds | 2014 €m | 2013 €m | 2012 €m | |||||||||
Shares issued at nominal amount: | ||||||||||||
- scrip shares issued in lieu of cash dividends | 2 | 2 | 2 | |||||||||
Premium on shares issued | 105 | 86 | 86 | |||||||||
Total value of shares issued | 107 | 88 | 88 | |||||||||
Issue of scrip shares in lieu of cash dividends (note 11) | (107 | ) | (88 | ) | (88 | ) | ||||||
Net proceeds from issue of shares | - | - | - | |||||||||
Share Premium | 2014 €m | 2013 €m | ||||||||||
At 1 January | 4,219 | 4,133 | ||||||||||
Premium arising on shares issued | 105 | 86 | ||||||||||
At 31 December | 4,324 | 4,219 |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
212 |
CRH Annual Report and Form 20-F | 2017
29. Commitments underEBITDA (as defined). EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax and is quoted by management in conjunction with other GAAP andnon-GAAP financial measures, to aid investors in their analysis of the performance of the Group and to assist investors in the comparison of the Group’s performance with that of other companies. EBITDA (as defined)* and operating profit by segment are monitored by management in order to allocate resources between segments and to assess performance. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for the purpose of the information presented to the Chief Operating and Finance LeasesDecision Maker.
Operating leasesNet Debt. Net debt is used by management as it gives a more complete picture of the Group’s current debt situation than total interest-bearing loans and borrowings. Net debt is provided to enable investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. Net debt is anon-GAAP measure and comprises current andnon-current interest-bearing loans and borrowings, cash and cash equivalents and current andnon-current derivative financial instruments.
Future minimum rentals payable under non-cancellableNet debt/EBITDA (as defined)* is monitored by management and is useful to investors in assessing the Company’s level of indebtedness relative to its profitability and cash-generating capabilities. It is the ratio of net debt to EBITDA (as defined)* and is calculated on page 212.
EBITDA (as defined)*Net Interest Cover. EBITDA (as defined)* net interest cover is used by management as a measure which matches the earnings and cash generated by the business to the underlying funding costs. EBITDA (as defined)* net interest cover is presented to provide investors with a greater understanding of the impact of CRH’s debt and financing arrangements. It is the ratio of EBITDA (as defined)* to net interest and is calculated on page 212. The definitions and calculations used as a metric in lender covenant agreements include certain specified adjustments to the amounts included in the Consolidated Financial Statements. The ratios as calculated on the basis of the definitions in those covenants are disclosed in note 24 to the Consolidated Financial Statements.
RONA. Return on Net Assets is a key internalpre-tax measure of operating leases at 31 December areperformance throughout the CRH Group and can be used by management and investors to measure the relative use of assets between CRH’s business segments and to compare to other businesses. The metric measures management’s ability to generate profits
from the net assets required to support that business, focusing on both profit maximisation and the maintenance of an efficient asset base; it encourages effective fixed asset maintenance programmes, good decisions regarding expenditure on property, plant and equipment and the timely disposal of surplus assets, and also supports the effective management of the Group’s working capital base. RONA is calculated by expressing total Group operating profit as follows:
2014 €m | 2013 €m | 2012 €m | ||||||||||
Within one year | 310 | 301 | 270 | |||||||||
After one year but not more than five years | 663 | 596 | 653 | |||||||||
More than five years | 417 | 357 | 398 | |||||||||
1,390 | 1,254 | 1,321 |
Total operating lease commitments disclosed above include commitmentsa percentage of€54 million in relation to businesses average net assets. Net assets comprise total assets by segment (including assets held for sale) less total liabilities by segment (including liabilities associated with assets classified as held for sale.
Finance leases
Future minimum lease payments under finance leases are not materialsale) as shown on page 211 and detailed in note 1 to the Consolidated Financial Statements, and exclude equity accounted investments and other financial assets, net debt (as previously defined) and tax assets & liabilities. The average net assets for the Group.year is the simple average of the opening and closing balance sheet figures.
Organic Revenue, Organic Operating Profit and Organic EBITDA (as defined)*. CRH pursues a strategy of growth through acquisitions and investments, with€1,905 million spent on acquisitions and investments in 2017 (2016:€213 million). Acquisitions completed in 2016 and 2017 contributed incremental sales revenue of€596 million, operating profit of€14 million and EBITDA (as defined)* of€60 million in 2017. Proceeds from divestments andnon-current asset disposals amounted to€222 million (net of cash disposed and deferred proceeds) (2016:€283 million). The sales impact of divested activities in 2017 was a negative€204 million and the disposal impact at an operating profit and EBITDA (as defined)* level was a negative€14 million and€21 million respectively.
The euro strengthened against most major currencies during 2017, particularly towards the end of the year resulting in the average euro/ Pound Sterling rate weakening from 0.8195 in 2016 to 0.8767 in 2017 and the US Dollar weakening from an average 1.1069 in 2016 to 1.1297 in 2017. Overall currency movements resulted in an unfavourable net foreign currency translation impact on our results as shown on the table on page 26.
Because of the impact of acquisitions, divestments, exchange translation and othernon-recurring items on reported results each year, the Group uses organic revenue, organic operating profit and organic EBITDA (as defined)* as additional performance indicators to assess performance ofpre-existing (also referred to as underlying, heritage,like-for-like or ongoing) operations each year.
Organic revenue, organic operating profit and organic EBITDA (as defined)* is arrived at by excluding the incremental revenue, operating profit and EBITDA (as defined)* contributions from current and prior year acquisitions and divestments, the impact of exchange translation and the impact of anynon-recurring items. In the Business Performance section on pages 22 to 53, changes in organic revenue, organic operating profit and organic EBITDA (as defined)* are presented as additional measures of revenue, operating profit and EBITDA (as defined)* to provide a greater understanding of the performance of the Group. A reconciliation of the changes in organic revenue, organic operating profit and organic EBITDA (as defined)* to the changes in total revenue, operating profit and EBITDA (as defined)* for the Group and by segment, is presented with the discussion of each segment’s performance in tables contained in the segment discussion commencing on page 32.
Adjusted Basic Earnings per Ordinary Share. Adjusted basic earnings per Ordinary Share has been used by management as it presents a more accurate picture of the profit attributable to equity holders of the Group, before certainone-off items (net of related tax). Management believes adjusted basic earnings per Ordinary Share provides useful information for investors and allows more meaningfulperiod-to-period comparisons of our operating results. This is anon-GAAP measure as it removes the impact of theone-off past service credit due to changes in the Group’s pension scheme in Switzerland and theone-off benefit of a reduction in the Group’s deferred tax liabilities due to changes in US tax legislation. As these areone-off items, relating to 2017, no comparative information is required.
Revenue from continuing and discontinued operations, EBITDA (as defined)* from continuing and discontinued operations and Operating Profit from continuing and discontinued operations. As detailed in note 2 to the Consolidated Financial Statements, our Americas Distribution segment has been classified as discontinued operations in accordance with IFRS 5. In certain instances throughout the Annual Report and Form20-F we refer to revenue, EBITDA (as defined)* and operating profit from continuing and discontinued operations. Information presented on this basis is useful to investors as (i) it provides a greater understanding of the Group’s performance and (ii) assists investors in the comparison of the Group’s performance with that of other companies. A reconciliation of each of these measures is detailed in note 1 to the Consolidated Financial Statements and on page 210.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
CRH Annual Report and Form 20-F | 2017
30. Business CombinationsContractual Obligations
An analysis of the maturity profile of debt, finance and operating leases, purchase obligations, deferred and contingent acquisition consideration and pension scheme contribution commitments at 31 December 2017 is as follows:
Contractual Obligations
Payments due by period | Total €m | Less than 1 year €m | 1-3 years €m | 3-5 years €m | More than 5 years €m | |||||||||||||
Interest-bearing loans and borrowings (i) | 7,950 | 320 | 1,252 | 1,296 | 5,082 | |||||||||||||
Finance leases | 12 | 3 | 4 | 2 | 3 | |||||||||||||
Estimated interest payments on contractually-committed debt and finance leases (ii) | 2,542 | 284 | 491 | 384 | 1,383 | |||||||||||||
Deferred and contingent acquisition consideration | 265 | 167 | 63 | 24 | 11 | |||||||||||||
Operating leases (iii) | 2,191 | 419 | 598 | 364 | 810 | |||||||||||||
Purchase obligations (iv) | 1,295 | 611 | 178 | 117 | 389 | |||||||||||||
Retirement benefit obligation commitments (v) | 34 | 19 | 4 | 3 | 8 | |||||||||||||
Total | 14,289 | 1,823 | 2,590 | 2,190 | 7,686 |
(i) | Of the€8.0 billion total gross debt,€0.1 billion is drawn on revolving facilities which may be repaid and redrawn up to the date of maturity. The interest payments are estimated assuming these loans are repaid on facility maturity dates. |
(ii) | These interest payments have been estimated on the basis of the following assumptions: (a) no change in variable interest rates; (b) no change in exchange rates; (c) that all debt is repaid as if it falls due from future cash generation; and (d) none is refinanced by future debt issuance. |
(iii) | Includes€252 million relating to discontinued operations. See further details in note 29 to the Consolidated Financial Statements. |
(iv) | Purchase obligations include contracted for capital expenditure. A summary of the Group’s future purchase commitments as at 31 December 2017 for capital expenditure are set out in note 14 to the Consolidated Financial Statements. These expenditures for replacement and new projects are in the ordinary course of business and will be financed from internal resources. |
(v) | These retirement benefit commitments comprise the contracted payments related to our pension schemes in the UK and Ireland. See further details in note 28 to the Consolidated Financial Statements. |
Quantitative and Qualitative Information about Market Risk
CRH addresses the sensitivity of the Group’s interest rate swaps and debt obligations to changes in interest rates in a sensitivity analysis technique that measures the estimated impacts on the income statement and on equity of either an increase or decrease in market interest rates or a strengthening or weakening in the US Dollar against all other currencies, from the rates applicable at 31 December 2017, for each class of financial instrument with all other variables remaining constant. The technique used measures the estimated impact on profit before tax and on total equity arising on netyear-end floating rate debt and onyear-end equity, based on either an
increase/decrease of 1% and 0.5% in floating interest rates or a 5% and 2.5% strengthening/weakening in the US Dollar/euro exchange rate. The US Dollar/euro rate has been selected for this sensitivity analysis given the materiality of the Group’s activities in the US. This analysis, set out in note 22 to the Consolidated Financial Statements, is for illustrative purposes only as in practice interest and foreign exchange rates rarely change in isolation.
Quantitative and qualitative information and sensitivity analysis of market risk is contained in notes 21 to 25 to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
CRH does not have anyoff-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on CRH’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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CRH Annual Report and Form 20-F | 2017
Property, Plants and Equipment
At 16 February 2018, CRH had a total of 2,960 building materials production locations and 684 Merchanting and DIY locations. 1,613 locations are leased, with the remaining 2,031 locations held on a freehold basis.
The significant subsidiary locations as at 31 December 2017 are the cement facilities in the Philippines, Poland, Ukraine, the UK, Romania, Canada, Slovakia, Ireland, Germany, France and Brazil. The clinker (the key intermediate product in the manufacture of cement) capacity for these locations is set out in the table below. Further details on locations and products manufactured are provided in the Business Performance section on pages 22 to 53. None of CRH’s individual properties is of material significance to the Group.
CRH believes that all the facilities are in good condition, adequate for their purpose and suitably utilised according to the individual nature and requirements of the relevant operations. CRH has a continuing programme of improvements and replacements to properties when considered appropriate to meet the needs of the individual operations. Further information in relation to the Group’s accounting policy and process governing any impairment of property, plant and equipment is given on page 127 and in note 14 to the Consolidated Financial Statements on page 152.
Significant Locations – Clinker Capacity
Subsidiary | Country | Number of plants | Clinker Capacity (tonnes per hour) | |||||||
Republic Cement | Philippines | 5 | 613 | |||||||
Grupa Ożarów | Poland | 1 | 342 | |||||||
Podilsky Cement PJSC | Ukraine | 1 | 313 | |||||||
Tarmac | United Kingdom | 3 | 306 | |||||||
CRH Romania | Romania | 2 | 305 | |||||||
CRH Canada | Canada | 2 | 292 | |||||||
CRH Slovakia | Slovakia | 2 | 290 | |||||||
Irish Cement | Ireland | 2 | 288 | |||||||
Opterra | Germany | 2 | 268 | |||||||
Eqiom | France | 3 | 243 | |||||||
CRH Brazil | Brazil | 3 | 200 |
Sources and Availability of Raw Materials
CRH generally owns or leases the real estate on which its main raw materials, namely aggregates, are found. CRH is a significant purchaser of certain important materials or resources such as cement, liquid bitumen, steel, gas, fuel and other energy supplies, the cost of which can fluctuate significantly and consequently have an adverse impact on CRH’s business. CRH is not generally dependent on any one source for the supply of these materials or resources, other than in certain jurisdictions with regard to the supply of gas and electricity. Competitive markets generally exist in the jurisdictions in which CRH operates for the supply of cement, bitumen, steel and fuel.
Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 16 to CRH’s Annual Report on Form20-F, as filed with the SEC.
215 |
CRH Annual Report and Form 20-F | 2017
Activities with Reserves Backing (i)
Property acreage (hectares) (ii) | % of mineral reserves by rock type | |||||||||||||||||||||||||||||||||||||||||
Physical location | No. of quarries /pits | Owned | Leased | Proven & probable reserves (iii) | Years to depletion (iv) | Hard rock | Sand & gravel | Other | 2017 Annualised extraction (v) | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | ||||||||||||||||||||||||||||||||||||||||||
France | 3 | 512 | - | 91 | 34 | 90% | - | 10% | 2.8 | |||||||||||||||||||||||||||||||||
Germany | 3 | 314 | - | 158 | 59 | 100% | - | - | 2.9 | |||||||||||||||||||||||||||||||||
Ireland | 2 | 260 | - | 208 | 82 | 100% | - | - | 2.7 | |||||||||||||||||||||||||||||||||
Poland | 2 | 293 | - | 174 | 44 | 93% | 6% | 1% | 4.1 | |||||||||||||||||||||||||||||||||
Romania | 6 | 220 | 898 | 242 | 60 | 83% | - | 17% | 4.0 | |||||||||||||||||||||||||||||||||
Cement | Serbia | 2 | 54 | 41 | 108 | 155 | 100% | - | - | 0.8 | ||||||||||||||||||||||||||||||||
Slovakia | 5 | 341 | 48 | 301 | 138 | 92% | - | 8% | 2.3 | |||||||||||||||||||||||||||||||||
Spain | 1 | 34 | - | 85 | 232 | 100% | - | - | 0.4 | |||||||||||||||||||||||||||||||||
Switzerland | 3 | 93 | 6 | 23 | 17 | 100% | - | - | 1.4 | |||||||||||||||||||||||||||||||||
Ukraine | 2 | 240 | - | 125 | 43 | 100% | - | - | 2.4 | |||||||||||||||||||||||||||||||||
United Kingdom | 6 | 500 | 154 | 273 | 69 | 97% | - | 3% | 4.1 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Finland | 111 | 520 | 335 | 146 | 13 | 68% | 32% | - | 10.0 | |||||||||||||||||||||||||||||||||
France | 52 | 638 | 953 | 254 | 30 | 70% | 30% | - | 9.0 | |||||||||||||||||||||||||||||||||
Ireland | 124 | 5,182 | 70 | 1,114 | 78 | 85% | 15% | - | 15.3 | |||||||||||||||||||||||||||||||||
Aggregates | Poland | 3 | 243 | 10 | 150 | 44 | 92% | 8% | - | 2.7 | ||||||||||||||||||||||||||||||||
Romania | 20 | 86 | 344 | 53 | 22 | 96% | 4% | - | 1.7 | |||||||||||||||||||||||||||||||||
Spain | 11 | 119 | 64 | 107 | 59 | 99% | 1% | - | 2.0 | |||||||||||||||||||||||||||||||||
United Kingdom | 168 | 11,964 | 3,014 | 1,350 | 32 | 84% | 16% | - | 42.0 | |||||||||||||||||||||||||||||||||
Other | 41 | 333 | 572 | 184 | 20 | 74% | 26% | - | 9.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Lime
| Czech Republic, Ireland, Poland, United Kingdom | 4 | 150 | 10 | 121 | 32 | 100% | - | - | 3.7 | ||||||||||||||||||||||||||||||||
Germany | 9 | 341 | - | 298 | 43 | 100% | - | - | 7.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 578 | 22,437 | 6,519 | 5,565 | 88% | 10% | 2% | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Americas Materials | ||||||||||||||||||||||||||||||||||||||||||
Brazil | 3 | 1,072 | - | 166 | 83 | 100% | - | - | 1.9 | |||||||||||||||||||||||||||||||||
Cement | Canada | 2 | 717 | - | 293 | 94 | 100% | - | - | 3.1 | ||||||||||||||||||||||||||||||||
United States | 5 | 1,175 | 19 | 85 | 53 | 100% | - | - | 1.6 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Aggregates | Canada | 41 | 5,999 | 431 | 709 | 41 | 82% | 18% | - | 18.1 | ||||||||||||||||||||||||||||||||
United States | 769 | 45,920 | 20,222 | 14,931 | 103 | 73% | 27% | - | 149.9 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 820 | 54,883 | 20,672 | 16,184 | 75% | 25% | - | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Asia | ||||||||||||||||||||||||||||||||||||||||||
Cement | Philippines | 14 | 2,247 | 17 | 222 | 34 | 100% | - | - | 6.6 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Aggregates | Philippines | 1 | - | 17 | 25 | 50 | 100% | - | - | 0.6 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 15 | 2,247 | 34 | 247 | 100% | - | - | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Group totals | 1,413 | 79,567 | 27,225 | 21,996 | 78% | 22% | - | |||||||||||||||||||||||||||||||||||
|
(i) | The disclosures made in this category refer to those facilities which are engaged inon-site processing of reserves in the various forms. |
(ii) | 1 hectare equals approximately 2.47 acres. |
(iii) | Where reserves are leased, the data presented above is restricted to include only that material which can be produced over the life of the contractual commitment inherent in the lease; the totals shown pertain only to amounts which are proven and probable. All of the proven and probable reserves are permitted and are quoted in millions of tonnes. |
(iv) | Years to depletion is based on the average of the most recent three years annualised production. |
(v) | Annualised extraction is quoted in millions of tonnes. |
216 |
CRH Annual Report and Form 20-F | 2017
The Group’s reserves for the production of primary building materials (which encompass cement, lime, aggregates (stone, sand and gravel), asphalt, readymixed concrete and concrete products) fall into a variety of categories spanning a wide number of rock types and geological classifications – see the table on the previous page setting out the activities with reserves backing.
Reserve estimates are generally prepared by third-party experts (i.e. geologists or engineers) prior to acquisition; this procedure is a critical component in the Group’s due diligence process in connection with any acquisition. Subsequent to acquisition, estimates are typically updated by company engineers and/or geologists and are reviewed annually by corporate and/or divisional staff. However, where deemed appropriate by management, in the context of large or strategically important deposits, the services of third-party consultant geologists and/or engineers may be employed to validate reserves quantities outside of the aforementioned due diligence framework on an ongoing basis.
The Group has not employed third-parties to review reserves over the three-year period ending 31 December 2017 other than in business combination activities and specific instances where such review was warranted.
Reserve estimates are subject to annual review by each of the relevant operating entities across the Group. The estimation process distinguishes between owned and leased reserves segregated into permitted and unpermitted as appropriate and includes only those permitted reserves which are proven and probable. The term “permitted” reserves refers to those tonnages which can currently be mined without any environmental or legal constraints. Permitted owned reserve estimates are based on estimated recoverable tonnes whilst permitted leased reserve estimates are based on estimated total recoverable tonnes which may be extracted over the term of the lease contract.
Proven and probable reserve estimates are based on recoverable tonnes only and are thus stated net of estimated production losses and other matters factored into the computation (e.g. required slopes/benches). In order for reserves to qualify for inclusion in the “proven and probable” category, the following conditions must be satisfied:
None of CRH’s mineral-bearing properties is individually material to the Group.
217 |
CRH Annual Report and Form 20-F | 2017
This section describes the principal risks and uncertainties that could affect the Group’s business. If any of these risks occur, the Group’s business, financial condition, results of operations and prospects could be materially adversely affected.
The risks and uncertainties listed below should be considered in connection with any forward-looking statements in this Annual Report and Form20-F and the cautionary statements contained in Corporate Governance - Disclaimer/Forward- Looking Statements on page 97.
The Risk Factors have been grouped to focus on key strategic, operational, compliance and financial and reporting risks.
Key Strategic Risk Factors
Industry cyclicality | ||
Risk Factor | Discussion | |
Description: The level of construction activity in local and national markets is inherently cyclical being influenced by a wide variety of factors including global and national economic circumstances, governments’ ability to fund infrastructure projects, consumer sentiment and weather conditions. Financial performance may also be negatively impacted by unfavourable swings in fuel and other commodity/raw material prices. Impact: Failure of the Group to respond on a timely basis and/or adequately to unfavourable events may adversely affect financial performance. | The Group’s operating and financial performance is influenced by general economic conditions and the state of the residential, industrial and commercial and infrastructure construction markets in the countries in which it operates. In general, economic uncertainty exacerbates negative trends in construction activity leading to postponement in orders. Construction markets are inherently cyclical and are affected by many factors that are beyond the Group’s control, including: • the price of fuel and principal energy-related raw materials such as bitumen and steel (which accounted for approximately 8% of annual Group sales revenues in 2017); • the performance of the national economies in the countries in which the Group operates, across Europe, Americas and Asia; • monetary policies in the countries in which the Group operates — for example, an increase in interest rates typically reduces the volume of mortgage borrowings thus impacting residential construction activity; • the allocation of government funding for public infrastructure programmes, such as the development of highways in the US under the Fixing Americas Surface Transportation Act (FAST Act); and • the level of demand for construction materials and services, with sustained adverse weather conditions leading to potential disruptions or curtailments in outdoor construction activity The adequacy and timeliness of the actions taken by the Group’s management team are of critical importance in maintaining financial performance at appropriate levels. Each of the above factors could have a material adverse effect on the Group’s operating results and the market price of CRH plc’s Ordinary Shares. |
218 |
CRH Annual Report and Form 20-F | 2017
Political and economic uncertainty
Risk Factor | Discussion | |
Description: As an international business, the Group operates in many countries with differing, and in some cases, potentially fast-changing economic, social and political conditions. These conditions, which may be heightened by the uncertainties resulting from the commencement of proceedings for the UK to exit the European Union, in addition to continued instability in Brazil, Philippines and Ukraine, could include political unrest, currency disintegration, strikes, restrictions on repatriation of earnings, changes in law and policies, activism, and civil disturbance and may be triggered or worsened by other forms of instability including natural disasters, epidemics, widespread transmission of diseases and terrorist attacks. These factors are of particular relevance in developing/emerging markets. Impact: Changes in these conditions, or in the governmental or regulatory requirements in any of the countries in which the Group operates, may adversely affect the Group’s business, results of operations, financial condition or prospects thus leading to possible impairment of financial performance and/or restrictions on future growth opportunities. | Whilst economic trends are on average improving across many of CRH’s markets, the UK’s decision to exit the European Union, together with the effects of unwinding the sustained monetary stimulus in the US, the ECB’s plans to scale back quantitative easing in the Eurozone and ongoing tensions in the Korean peninsula, have collectively contributed to heightened uncertainty, with possible upside and downside economic consequences. The Group currently operates mainly in Western Europe and North America as well as, to a lesser degree, in developing countries/emerging markets in Eastern Europe, the Philippines, Brazil, China and India. The economies of these countries are at varying stages of socioeconomic and macroeconomic development which could give rise to a number of risks, uncertainties and challenges and could include the following: • changes in political, social or economic conditions; • trade protection measures and import or export licensing requirements; • potentially negative consequences from changes in tax laws; • labour practices and differing labour regulations; • procurement which contravenes ethical considerations; • unexpected changes in regulatory requirements; • state-imposed restrictions on repatriation of funds; and • the outbreak of armed conflict The Group also has significant business interests in Ukraine, where the outlook remains uncertain. | |
Commodity products and substitution | ||
Risk Factor | Discussion | |
Description: The Group faces strong volume and price competition across its product lines, stemming from the fact that many of the Group’s products are commodities. In addition, existing products may be replaced by substitute products which the Group does not produce or distribute, or new construction techniques may be devised. Impact: Against this backdrop, if the Group fails to generate competitive advantage through differentiation and innovation, market share, and thus financial performance, may decline. | The competitive environment in which the Group operates can be significantly impacted by general economic conditions in combination with local factors including the number of competitors, the degree of utilisation of production capacity and the specifics of product demand. Many of the Group’s products are commodities and competition in such circumstances is driven largely by price. Across the multitude of largely local markets in which the Group conducts business, downward pricing pressure is experienced from time to time, and the Group may not always be in a position to recover increased operating expenses (caused by factors such as increased fuel and raw material prices) through higher sale prices. The cement business, in particular, is capital intensive resulting in significant fixed and semi-fixed costs. The Group’s profits are therefore sensitive to changes in volume, which is driven by highly competitive markets, and impacted by ongoing capital expenditure needs. A number of the products sold by the Group (both those manufactured internally and those distributed) compete with other building products that do not feature in the existing product range. Any significant shift in demand preference from the Group’s existing products to substitute products, which the Group does not produce or distribute, could adversely impact market share and results of operations. |
219 |
CRH Annual Report and Form 20-F | 2017
Key Strategic Risk Factors - continued
Reserves availability and planning | ||
Risk Factor | Discussion | |
Description: Certain of the Group’s businesses require long-term reserves backing necessitating detailed utilisation planning. Appropriate reserves are an increasingly scarce commodity and licences and/or permits are required to enable operation. There are numerous uncertainties inherent in reserves estimation and in projecting future rates of production. Impact: Failure by the Group to plan adequately for depletion may result insub-optimal or uneconomic utilisation giving rise to unplanned capital expenditure or acquisition activity, lower financial performance and the need to obtain new licences and/or permits to operate. Operating entities may fail to obtain or renew or may experience material delays in securing the requisite government approvals, licences and permits for the conduct of business. | Continuity of the cash flows derived from the production and sale of the related heavyside materials and products is dependent on satisfactory reserves planning and on the presence of appropriate long-term arrangements for replacement. There can be no assurance that the required licences and permits will be forthcoming at the appropriate juncture or that relevant operating entities will continue to satisfy the many terms and conditions under which such licences and permits are granted. The failure to plan adequately for current and future utilisation or to ensure ongoing compliance with the requirements of issuing authorities could lead to withdrawal of the related licence or permit and consequential disruption to operations. | |
Business portfolio management: acquisition and divestment activity | ||
Risk Factor | Discussion | |
Description: Growth through acquisition and active management of the Group’s business portfolio are key elements of the Group’s strategy with the Group’s balanced portfolio growing year on year throughbolt-on activity occasionally supplemented by larger and/or step-change transactions. In addition, the Group may be liable or remain liable for the past acts, omissions or liabilities of companies or businesses it has acquired or divested. Impact: The Group may not be able to continue to grow as contemplated in its business plans if it is unable to identify attractive targets (including potential new platforms for growth), divestnon-core or underperforming entities, execute full and proper due diligence, raise funds on acceptable terms, complete such acquisition transactions, integrate the operations of the acquired businesses, retain key staff and realise anticipated levels of profitability and cash flows. If the Group is held liable for the past acts, omissions or liabilities of companies or businesses it has acquired, or remains liable in cases of divestment, those liabilities may either be unforeseen or greater than anticipated at the time of the relevant acquisition or divestment. | The Group’s acquisition strategy focuses on value-enhancingmid-sized acquisitions, largely in existing markets, supplemented from time to time by larger strategic acquisitions into new markets or new building products. In addition, as part of its ongoing commitment to active portfolio management, the Group may, from time to time, divest businesses which are evaluated to benon-core or underperforming. The realisation of the Group’s acquisition strategy is dependent on the ability to identify and acquire suitable assets at appropriate prices thus satisfying the stringent cash flow and return on investment criteria underpinning such activities. The Group may not be able to identify such companies, and, even if identified, may not be able to acquire them because of a variety of factors including the outcome of due diligence processes, the ability to raise funds (as required) on acceptable terms, the need for competition authority approval in certain instances and competition for transactions from peers and other entities exploring acquisition opportunities in the building materials sector. In addition, situations may arise where the Group may be liable for the past acts or omissions or liabilities of companies acquired, or remains liable in cases of divestment; for example, the potential environmental liabilities addressed under the “Sustainability, Corporate Social Responsibility and Climate Change” Risk Factor on page 222. The Group’s ability to realise the expected benefits from acquisition activity depends, in large part, on its ability to integrate newly-acquired businesses in a timely and effective manner. Even if the Group is able to acquire suitable companies, it still may not achieve the growth synergies or other financial and operating benefits it expected to achieve, and the Group may incur write-downs, impairment charges or unforeseen liabilities that could negatively affect its operating results or financial position or could otherwise harm the Group’s business. Further, integrating an acquired business, product or technology could divert management time and resources from other matters. |
220 |
CRH Annual Report and Form 20-F | 2017
Joint ventures and associates | ||
Risk Factor | Discussion | |
Description: The Group does not have a controlling interest in certain of the businesses (i.e. joint ventures and associates) in which it has invested and may invest. The absence of a controlling interest gives rise to increased governance complexity and a need for proactive relationship management, which may restrict the Group’s ability to generate adequate returns and to develop and grow these businesses. Impact: These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise its strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment. | Due to the absence of full control of joint ventures and associates, important decisions such as the approval of business plans and the timing and amount of cash distributions and capital expenditures, for example, may require the consent of partners or may be approved without the Group’s consent. In addition, the lack of controlling interest may give rise to thenon-realisation of operating synergies and lower cash flows than anticipated at the time of investment, thereby increasing the likelihood of impairment of goodwill or other assets. These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise the strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment and, by corollary, the Group. | |
Human resources and talent management | ||
Risk Factor | Discussion | |
Description: Existing processes to recruit, develop and retain talented individuals and promote their mobility within a decentralised organisation may be inadequate thus giving rise to employee/management attrition, difficulties in succession planning and inadequate “bench strength”, potentially impeding the continued realisation of the core strategic objectives of value creation and growth. In addition, the Group is exposed to various risks associated with collective representation of employees in certain jurisdictions; these risks could include strikes and increased wage demands. Impact: In the longer term, failure to manage talent and plan for leadership and succession could impede the realisation of core strategic objectives. | The identification and subsequent assessment, management, development and deployment of talented individuals is of major importance in continuing to deliver on the Group’s strategy and in ensuring that succession planning objectives for key executive roles throughout its international operations are satisfied. The maintenance of positive employee and trade/labour union relations is key to the successful operation of the Group. Some of the Group’s employees are represented by trade/labour unions under various collective agreements. For unionised employees, the Group may not be able to renegotiate satisfactorily the relevant collective agreements upon expiration and may face tougher negotiations and higher wage demands than would be the case fornon-unionised employees. In addition, existing labour agreements may not prevent a strike or work stoppage with any such activity creating reputational risk and potentially having a material adverse effect on the results of operations and financial condition of the Group. |
221 |
CRH Annual Report and Form 20-F | 2017
Key Operational Risk Factors
Sustainability, corporate social responsibility and climate change
Risk Factor | Discussion | |
Description: The Group is subject to stringent and evolving laws, regulations, standards and best practices from a sustainability perspective. The Group’s use of the term “sustainability” comprises Health & Safety management (i.e. embedding a culture of safety and ensuring safe working environments), conducting business with integrity, protecting the environment, preparing for and managing the impact of climate change on business activities, managing stakeholders, attaining strong social performance credentials and, lastly, using the foregoing to generate innovation and other business opportunities to create value. Against this backdrop, the nature of the Group’s activities pose or create certain inherent risks, responsibility for which is vested with operating entity management, Group and Divisional management and the Board of Directors. Impact: Non-adherence to the many laws, regulations, standards and best practices in the sustainability arena may give rise to increased ongoing remediation and/or other compliance costs and may adversely affect the Group’s business, results of operations, financial condition and/or prospects. Failure to leverage innovation and other sustainability initiatives may shorten product life cycles or give rise to early product obsolescence thus impairing financial performance and/or future value creation. In addition, the failure to embed sustainability principles across the Group’s businesses and in the Group’s strategy may lead to adverse investor sentiment or reduced investor interest in CRH plc’s Ordinary Shares. | The Group is subject to a broad and increasingly stringent range of existing and evolving laws, regulations, standards and best practices with respect to governance, the environment, Health & Safety and social performance in each of the jurisdictions in which it operates giving rise to significant compliance costs, potential legal liability exposure and potential limitations on the development of its operations. These laws, regulations, standards and best practices relate to, amongst other things, climate change, noise, emissions to air, water and soil, the use and handling of hazardous materials and waste disposal practices. Given the above, the risk of increased environmental and other compliance costs and unplanned capital expenditure is inherent in conducting business in the building materials sector and the impact of future developments in these respects on the Group’s activities, products, operations, profitability and cash flows cannot be estimated; there can therefore be no assurance that material liabilities and costs will not be incurred in the future or that material limitations on the development of its operations will not arise. Environmental and Health & Safety and other laws, regulations, standards and best practices may expose the Group to the risk of substantial costs and liabilities, including liabilities associated with assets that have been sold or acquired and activities that have been discontinued. In addition, many of the Group’s manufacturing sites have a history of industrial use and, while strict environmental operating standards are applied and extensive environmental due diligence is undertaken in acquisition activity, some soil and groundwater contamination has occurred in the past at a limited number of sites. Although the associated remediation costs incurred to date have not been material, they may become more significant in the future. The Group may face increased remediation liabilities and legal proceedings concerning environmental and Health & Safety matters in the future. The impact of climate change may over time affect the operations of the Group and the markets in which the Group operates. This could include acute and chronic changes in weather, technological development, policy and regulatory change, and market and economic responses. Efforts to address climate change through laws and regulations, for example by requiring reductions in emissions of greenhouse gases (GHGs), can create economic risks and uncertainties for the Group’s businesses. Such risks could include the cost of purchasing allowances or credits to meet GHG emission caps, the cost of installing equipment to reduce emissions to comply with GHG limits or required technological standards, decreased profits or losses arising from decreased demand for the Group’s goods and higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls. To the extent that financial markets view the impact of climate change emissions as a financial risk, this could have a material adverse effect on the cost of and access to capital. |
222 |
CRH Annual Report and Form 20-F | 2017
Operational continuity
Risk Factor | Discussion | |
Description: The Group’s operating entities are subject to a wide range of operating risks and hazards including climatic conditions such as floods and hurricanes/ cyclones, seismic activity, technical failures, interruptions to power supplies, industrial accidents and disputes, environmental hazards, fire and crime. Impact: The occurrence of a significant adverse event could lead to prolonged disruption of business activities and, as a result, could have a material impact on the business, results of operations, financial condition or prospects of the Group. | Responsibility for business continuity management is vested in operating entity management throughout the Group to ensure that the circumstances likely to give rise to material operational disruption are addressed in a manner appropriate to the relevant operating entity. The insurance coverage provided for operating entities includes property damage and business interruption, public and products liability/general liability, employers’ liability/ workers’ compensation, environmental impairment liability, automobile liability and directors’ and officers’ liability. Adequate coverage at reasonable rates is not always commercially available to cover all potential risks and no assurance can be given that the insurance arrangements in place would be sufficient to cover all losses or liabilities to which the Group might be exposed. As at 31 December 2017, the total insurance provision, which is subject to periodic actuarial valuation and is discounted, amounted to€292 million (2016:€286 million); a substantial proportion of this figure pertained to claims which are classified as “incurred but not reported”. |
Information technology and security/cyber
Risk Factor | Discussion | |
Description: The Group is dependent on the employment of advanced information systems (digital infrastructure, applications and networks) to support its business activities, and is exposed to risks of failure in the operation of these systems. Further, the Group is exposed to security threats to its digital infrastructure through cyber-crime. Such attacks are by their nature technologically sophisticated and may be difficult to detect and defend in a timely fashion. Impact: Should a security breach or other incident materialise, it could lead to interference with production processes, manipulation of financial data, the theft of private data or intellectual property, misappropriation of funds, or misrepresentation of information via digital media. In addition to potential irretrievability or corruption of critical data, the Group could suffer reputational losses, regulatory penalties and incur significant financial costs in remediation. | Security and cyber incidents are becoming increasingly sophisticated and are continually evolving. Our systems for protecting against cyber security risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protection measures or to investigate and remediate any vulnerability to cyber incidents. Such attacks may result in interference with production software, corruption or theft of sensitive data, manipulation of financial data accessible through digital infrastructure, or reputational losses as a result of misrepresentation via social media and other websites. There can be no assurance that future attacks will not be successful due to their increasing sophistication and the difficulties in detecting and defending against them in a timely fashion. |
223 |
CRH Annual Report and Form 20-F | 2017
Key Compliance Risk Factors
Laws and regulations | ||
Risk Factor | Discussion | |
Description: The Group is subject to many local and international laws and regulations, including those relating to competition law, corruption and fraud, across many jurisdictions of operation and is therefore exposed to changes in those laws and regulations and to the outcome of any investigations conducted by governmental, international or other regulatory authorities. Impact: Potential breaches of local and international laws and regulations in the areas of competition law, corruption and fraud, among others, could result in the imposition of significant fines and/or sanctions fornon-compliance, including the withdrawal of operating licences, and may inflict reputational damage. | The Group is subject to various statutes, regulations and laws applicable to businesses generally in the countries and markets in which it operates. These include statutes, regulations and laws affecting land usage, zoning, labour and employment practices, competition, financial reporting, taxation, anti-bribery, anti-corruption, governance and other matters. The Group mandates that its employees comply with its Code of Business Conduct which stipulates best practices in relation to regulatory matters. The Group cannot guarantee that its employees will at all times successfully comply with all demands of regulatory agencies in a manner which will not materially adversely affect its business, results of operations, financial condition or prospects. There can be no assurance that the Group’s policies and procedures will afford adequate protection against fraudulent and/or corrupt activity and any such activity could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects. |
224 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) | ||
Risk Factor | Discussion | |
Description: The Group uses financial instruments throughout its businesses giving rise to interest rate and leverage, foreign currency, counterparty, credit rating and liquidity risks. A significant portion of the cash generated by the Group from operational activity is currently dedicated to the payment of principal and interest on indebtedness. In addition, the Group has entered into certain financing agreements containing restrictive covenants requiring it to maintain a certain minimum interest coverage ratio and a certain minimum net worth. Impact: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. In addition, insolvency of the financial institutions with which the Group conducts business (or a downgrade in their credit ratings) may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult for the Group either to utilise existing debt capacity or otherwise obtain financing for operations. | Interest rate and leverage risks: The Group’s exposures to changes in interest rates result from investing and borrowing activities undertaken to manage liquidity and capital requirements and stem predominantly from long-term debt obligations. Borrowing costs are managed through employing a mix of fixed and floating rate debt and interest rate swaps, where appropriate. As at 31 December 2017, the Group had outstanding net indebtedness of approximately€5.8 billion (2016:€5.3 billion). Following recent acquisition activity, the Group has significant outstanding indebtedness, which may impair its operating and financial flexibility over the longer term and could adversely affect its business, results of operations and financial position. This high level of indebtedness could give rise to the Group dedicating a substantial portion of its cash flow to debt service thereby reducing the funds available in the longer term for working capital, capital expenditure, acquisitions, distributions to shareholders and other general corporate purposes and limiting its ability to borrow additional funds and to respond to competitive pressures. In addition, the Group’s level of indebtedness may give rise to a general increase in interest rates borne and there can be no assurance that the Group will not be adversely impacted by increases in borrowing costs in the future. The prescribed minimum PBITDA/net interest (all as defined in the relevant agreements as discussed in note 24 to the Consolidated Financial Statements) cover ratio, which is the Group’s principal financial covenant, is 4.5 times and the prescribed minimum net worth, which is the Group’s other financial covenant, is€6.2 billion. For the year ended 31 December 2017, PBITDA/net interest was 11.6 times on a total Group basis (2016:10.1 times) and the Group’s net worth on a total Group basis was€16.6 billion (2016:€16.4 billion). Foreign currency risks: If the euro, which is the Group’s reporting currency, weakens relative to the basket of foreign currencies in which net debt is denominated (principally the US Dollar, Canadian Dollar, Swiss Franc, Philippine Peso and Pound Sterling), the net debt balance would increase; the converse would apply if the euro was to strengthen. The Group may not succeed in managing these foreign currency risks. Counterparty risks: Insolvency of the financial institutions with which the Group conducts business, or a downgrade in their credit ratings, may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult either to utilise existing debt capacity or otherwise obtain financing for operations. The maximum exposure arising in the event of default on the part of the counterparty (including insolvency) is the carrying amount of the relevant financial instrument. The Group holds significant cash balances on deposit with a variety of highly-rated financial institutions (typically invested on a short-term basis) which, together with cash and cash equivalents at 31 December 2017, totalled€2.1 billion (2016:€2.4 billion). In addition to the above, the Group enters into derivative transactions with a variety of highly-rated financial institutions giving rise to derivative assets and derivative liabilities; the relevant balances as at 31 December 2017 were€64 million and€14 million respectively (2016:€76 million and€32 million respectively). The counterparty risks inherent in these exposures may give rise to losses in the event that the relevant financial institutions suffer a ratings downgrade or become insolvent. In addition, certain of the Group’s activities (e.g. highway paving in the US) give rise to significant amounts receivable from counterparties at the balance sheet date; atyear-end 2017, this balance was€0.8 billion (2016:€0.8 billion). In the business environment, there is increased exposure to counterparty default, particularly as regards bad debts. |
225 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors - continued
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) - continued | ||
Risk Factor | Discussion | |
Credit rating risks: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may, among other concerns, impair its ability to access debt markets or otherwise raise funds or enter into letters of credit, for example, on acceptable terms. Such a downgrade may result from factors specific to the Group, including increased indebtedness stemming from acquisition activity, or from other factors such as general economic or sector-specific weakness or sovereign credit rating ceilings. Liquidity risks: The principal liquidity risks stem from the maturation of debt obligations and derivative transactions. The Group aims to achieve flexibility in funding sources through a variety of means including (i) maintaining cash and cash equivalents with a number of highly-rated counterparties; (ii) limiting the maturity of such balances; (iii) meeting the bulk of debt requirements through committed bank lines or other term financing; and (iv) having surplus committed lines of credit. However, market or economic conditions may make it difficult at times to realise this objective. For additional information on the above risks see note 22 to the Consolidated Financial Statements. |
Defined benefit pension schemes and related obligations | ||
Risk Factor | Discussion | |
Description: The Group operates a number of defined benefit pension schemes and schemes with related obligations (for example, termination indemnities and jubilee/long-term service benefits, which are accounted for as defined benefit) in certain of its operating jurisdictions. The assets and liabilities of defined benefit pension schemes may exhibit significantperiod-on-period volatility attributable primarily to asset values, changes in bond yields/ discount rates and anticipated longevity. Impact: In addition to the contributions required for the ongoing service of participating employees, significant cash contributions may be required to remediate deficits applicable to past service. Further, fluctuations in the accounting surplus/deficit may adversely impact the Group’s credit metrics thus harming its ability to raise funds. | The assumptions used in the recognition of pension assets, liabilities, income and expenses (including discount rates, rate of increase in future compensation levels, mortality rates and healthcare cost trend rates) are updated based on market and economic conditions at the respective balance sheet date and for any relevant changes to the terms and conditions of the pension and post-retirement plans. These assumptions can be affected by (i) for the discount rate, changes in the rates of return on high-quality fixed income investments; (ii) for future compensation levels, future labour market conditions and anticipated inflation; (iii) for mortality rates, changes in the relevant actuarial funding valuations or changes in best practice; and (iv) for healthcare cost trend rates, the rate of medical cost inflation in the relevant regions. The weighted average actuarial assumptions used and sensitivity analysis in relation to the significant assumptions employed in the determination of pension and other post-retirement liabilities are disclosed on pages 175 to 180. A prolonged period of financial market instability or other adverse changes in the assumptions mentioned above would have an adverse impact on the valuations of pension scheme assets. In addition, a number of the defined benefit pension schemes in operation throughout the Group have reported material funding deficits thus necessitating remediation either in accordance with legislative requirements or as agreed with the relevant regulators. These obligations are reflected in the contracted payments disclosure on page 214. The extent of such contributions may be exacerbated over time as a result of a prolonged period of instability in worldwide financial markets or other adverse changes in the assumptions mentioned above. |
226 |
CRH Annual Report and Form 20-F | 2017
Taxation charge and balance sheet provisioning | ||
Risk Factor | Discussion | |
Description: The Group is exposed to uncertainties stemming from governmental actions in respect of taxes paid and payable in all jurisdictions of operation. In addition, various assumptions are made in the computation of the overall tax charge and in balance sheet provisions which may not be borne out in practice. Impact: Changes in the tax regimes and related government policies and regulations in the countries in which the Group operates could adversely affect its results and its effective tax rate. The final determination of tax audits or tax disputes may be different from that which is reflected in the Group’s historical income tax provisions and accruals. If future audits find that additional taxes are due, the Group may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on cash flows, financial condition and results of operations. | The Group’s income tax charge is based on reported profit and expected statutory tax rates, which reflect various allowances and reliefs and tax planning opportunities available to the Group in the multiple tax jurisdictions in which it operates. The determination of the Group’s provision for income tax requires certain judgements and estimates in relation to matters where the ultimate tax outcome may not be certain. The recognition of deferred tax assets also requires judgement as it involves an assessment of the future recoverability of those assets. In addition, the Group is subject to tax audits which can involve complex issues that could require extended periods to conclude, the resolution of which is often not within its control. Although management believes that the estimates included in the Consolidated Financial Statements and the Group’s tax return positions are reasonable, there can be no assurance that the final outcome of these matters will not differ from estimates reflected in the Group’s historical income tax provisions and accruals. As a multinational corporation, the Group is subject to various taxes in all jurisdictions of operation. Due to economic and political conditions, tax rates in these jurisdictions may be subject to significant change. For example, the recent US Tax Cuts and Jobs Act has made significant changes to the US tax rules. The Group’s future effective income tax rate could be affected (positively or negatively) by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. In addition, recent developments, including the European Commission’s investigations on illegal state aid as well as the Organisation for EconomicCo-operation and Development project on Base Erosion and Profit Shifting may result in changes to long-standing tax principles, which could adversely affect the Group’s effective tax rate or result in higher cash tax liabilities. If the Group’s effective income tax rate was to increase, its cash flows, financial condition and results of operations could be adversely affected. |
Foreign currency translation | ||
Risk Factor | Discussion | |
Description: The principal foreign exchange risks to which the Consolidated Financial Statements are exposed pertain to adverse movements in reported results when translated into euro (which is the Group’s reporting currency) together with declines in the euro value of net investments which are denominated in a wide basket of currencies other than the euro. Impact: Adverse changes in the exchange rates used to translate foreign currencies into euro have impacted and will continue to impact retained earnings. The annual impact is reported in the Consolidated Statement of Comprehensive Income. | Given the geographic diversity of the Group, a significant proportion of its revenues, expenses, assets and liabilities are denominated in currencies other than the euro, principally US Dollar, Canadian Dollar, Swiss Franc, Polish Zloty, Philippine Peso and Pound Sterling. From year to year, adverse changes in the exchange rates used to translate these and other foreign currencies into euro have impacted and will continue to impact consolidated results and net worth. For additional information on the impact of foreign exchange movements on the Consolidated Financial Statements for the Group for the year ended 31 December 2017, see the Business Performance section commencing on page 22 and note 22 to the Consolidated Financial Statements. |
Goodwill impairment | ||
Risk Factor | Discussion | |
Description: Significant under-performance in any of the Group’s major cash generating units or the divestment of businesses in the future may give rise to a material write-down of goodwill. Impact: A write-down of goodwill could have a substantial impact on the Group’s income and equity. | An acquisition generates goodwill to the extent that the price paid exceeds the fair value of the net assets acquired. Under IFRS, goodwill and indefinite-lived intangible assets are not amortised but are subject to annual impairment testing. Other intangible assets deemed separable from goodwill arising on acquisitions are amortised. A detailed discussion of the impairment testing process, the key assumptions used, the results of that testing and the related sensitivity analysis is contained in note 15 to the Consolidated Financial Statements on pages 153 to 156. While a goodwill impairment charge does not impact cash flow, a full write-down at 31 December 2017 would have resulted in a charge to income and a reduction in equity of€6.9 billion (2016:€7.4 billion). |
227 |
CRH Annual Report and Form 20-F | 2017
Corporate Governance Practices - NYSE
Compliance Statement
Non-US companies such as CRH are exempt from most of the corporate governance rules of the NYSE. In common with companies listed on the ISE and the LSE, CRH’s corporate governance practices reflect, inter alia, compliance with (a) domestic company law; (b) the Listing Rules of the UK Listing Authority and the ISE; and (c) the 2016 UK Corporate Governance Code, which is appended to the listing rules of the LSE and ISE.
The Board of CRH has adopted a robust set of governance principles, which reflect the Code and its principles-based approach to corporate governance. Accordingly, the way in which CRH makes determinations of Directors’ independence differs from the NYSE rules. The Board has determined that, in its judgement, all of thenon-executive Directors are independent. In doing so, however, the Board did not explicitly take into consideration the independence requirements outlined in the NYSE’s listing standards.
Shareholder Approval of Equity Compensation Plans
The NYSE rules require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. CRH complies with Irish requirements, which are similar to the NYSE rules. The Board, however, does not explicitly take into consideration the NYSE’s detailed definition on what are considered “material revisions”.
Risk Management and Internal Control
The Board has delegated responsibility for monitoring the effectiveness of the Group’s risk management and internal control systems to the Audit Committee*. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, in the case of internal control systems, can provide only reasonable and not absolute assurance against material misstatement or loss.
The Consolidated Financial Statements are prepared subject to oversight and control of the Finance Director, who seeks to ensure that data is captured from Group locations and all required information for disclosure in the Consolidated Financial Statements is provided. An appropriate control framework has been put in place around the recording of appropriate eliminating journals and other adjustments. The Consolidated Financial Statements are reviewed by the CRH Financial Reporting and Disclosure Group prior to being reviewed by the Audit Committee and approved by the Board of Directors.
Group management has responsibility for major strategic development and financing decisions. Responsibility for operational issues is devolved, subject to limits of authority, to product group and operating company management. Management at all levels is responsible for internal control over the business functions that have been delegated. This embedding of the system of internal control throughout the Group’s operations is designed to enable the organisation to respond quickly to evolving business risks, and to ensure that significant internal control issues, should they arise, are reported promptly to appropriate levels of management.
Management’s Report on Internal Control over Financial Reporting
In accordance with the requirements of Rule13a-15 of the US Securities Exchange Act, the following report is provided by management in respect of the Company’s internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for
external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and Directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the Consolidated Financial Statements
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules13a-15(f) and15d-15(f) under the US Securities Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Company’s published Consolidated Financial Statements for external purposes under generally accepted accounting principles.
In connection with the preparation of the Company’s annual Consolidated Financial Statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of
31 December 2017, based on criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organisations of the Treadway Commission.
* | In accordance with Section 167(7) of the Companies Act 2014. |
228 |
CRH Annual Report and Form 20-F | 2017
As permitted by the SEC, the Company has elected to exclude an assessment of the internal controls of acquisitions completedmade during the year 2017. These acquisitions, which are listed in note 31 to the Consolidated Financial Statements, constituted 6.4% of total assets and 10.6% of net assets, as of 31 December 2017 and 1.9% and (0.1%) of revenue (from continuing and discontinued operations) and Group profit for the financial year, respectively, for the year then ended.
Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of 31 December 2017, the Company’s internal control over financial reporting is effective.
Our auditors, EY, a registered public accounting firm, who have audited the Consolidated Financial Statements for the year ended 31 December 20142017, have audited the effectiveness of the Company’s internal controls over financial reporting. Their report, on which an unqualified opinion is expressed thereon, is included on page 119.
Changes in Internal Control over Financial Reporting
During 2017, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by reportable segment,Rules13a-15 that occurred during the period covered by this Annual Report and Form20-F that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Acquisitions excluded from the 2016 assessment of internal control over financial reporting were all successfully integrated into the CRH internal control systems in 2017.
Evaluation of Disclosure Controls and Procedures
Management has evaluated the effectiveness of the design and operation of the disclosure controls and procedures as defined in Exchange Act Rules13a-15(e) as of 31 December 2017. Based on that evaluation, the Chief Executive and the Finance Director have concluded that these disclosure controls and procedures were effective as of such date at the level of providing reasonable assurance.
In designing and evaluating our disclosure controls and procedures, management, including the Chief Executive and the Finance Director, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Code of Business Conduct
The CoBC, together with its supporting policies, sets out the completion dates,guiding business principles and core values of the CRH Group. The Code complies with the applicable code of ethics regulations of the SEC arising from the Sarbanes-Oxley Act and it also reinforces the fundamental CRH principle that “there is never a good business reason to do the wrong thing”. The CoBC is applicable to all employees of the CRH Group including the Chief Executive and senior financial officers. The Code promotes honest and ethical conduct; full, fair, accurate, timely and understandable disclosures; and sets out the requirements for compliance with applicable governmental laws, rules and regulations.
229 |
CRH Annual Report and Form 20-F | 2017
The Environment and Government Regulations
The most important government regulations relevant to CRH as a building materials company are environmental laws and regulations relevant to extractive and production processes. In the European Union, operations are subject to national environmental laws and regulations, most of which now emanate from European Union Directives and Regulations. In the US, operations are subject to federal, state and local environmental laws and regulations. In other jurisdictions, national environmental and local laws apply.
Environmental Compliance Policy
In order to comply with environmental regulations, CRH has developed the following Group environmental policy, approved by the Board and applied across all Group companies, which is to:
• comply, as a minimum, with all applicable environmental legislation and continuously improve our environmental stewardship, aiming all the time to meet or exceed industry best practice;
• ensure that our employees and contractors respect their environmental responsibilities;
• address proactively the challenges and opportunities of climate change;
• optimise our use of energy and all resources;
• promote environmentally driven product innovation and new business opportunities and;
• develop positive relationships and strive to be good neighbours in every community in which we operate
Achieving the Group’s environmental policy objectives at all locations is a management imperative; this line responsibility continues right up to Board level. Daily responsibility for ensuring that the Group’s environmental policy is effectively implemented lies with individual location managers, assisted by a network of Environmental Liaison Officers (ELOs).
At eachyear-end, the ELOs assist the Group Corporate Social Responsibility & Sustainability team in carrying out a detailed below; these transactions entailedassessment of Group environmental performance, which is reviewed by the acquisitionBoard.
Addressing Climate Change
CRH has evaluated the risks and opportunities arising from climate change and has put in place a management strategy. In striving to reduce its emissions, CRH delivers carbon, energy and financial efficiencies for its businesses and helps to address climate change on a societal level. There is a focus on reducing the carbon footprint of an effective 100% stake except where indicatedproducts during manufacture and on increasing their contribution to reducing emissions during their lifetime. There are value creation opportunities for the Group, including opportunities for sales of products aimed at climate adaptation, such as sustainable drainage systems, flood defences, and more resilient structures. CRH is a core member of the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD). The CSI is a voluntary initiative by the world’s major cement producers, promoting greater sustainability in the cement industry.
Having achieved its initial CO2 reduction commitment three years ahead of target in 2012, CRH has pledged a 25% reduction in specific net CO2 cement plant emissions by 2020, compared with 1990 levels. The Group is progressing successfully towards achieving this commitment, which is supported by a strategic investment programme and covers a defined portfolio of Group cement plants.
Through its membership of the CSI of the WBCSD and regional industry associations including the European Cement Association (CEMBUREAU) and the European Lime Association (EuLA) in Europe and the National Asphalt Pavement Association (NAPA) and the Portland Cement Association (PCA) in the US, CRH is actively involved in global and regional discussions on the climate change agenda. Relevant facilities in Europe operate within the European Union Emission Trading Scheme for Greenhouse Gas emissions through actively implementing carbon reduction strategies. Relevant facilities in Canada comply with relevant “cap and trade” schemes. CRH has endorsed the WBCSD Low Carbon Technology Partnership Initiative (LCTPi), a statement of ambition, which seeks a reduction in global cement CO2 emissions in the range of20-25% by 2030.
CRH acknowledges the “Paris Climate Agreement” to limit global temperature rise to 2oC (with efforts towards 1.5oC), made at the 21st
Conference of the Parties (COP) to the contrary:United Nations Framework Convention on Climate Change (UNFCCC) in 2015. CRH has implemented capital expenditure programmes in its cement operations to reduce carbon emissions in the context of international and national commitments to reduce greenhouse gas emissions. The European Union has binding targets to reduce greenhouse gases, on 1990 levels, by 20% by 2020 and by 40% by 2030. In addition, the European Commission has suggested an objective to reduce emissions by 80% by 2050 compared to 1990. Achieving such reductions would represent a significant extra constraint on cement operations in Europe. US federal, state and local laws continue to develop to address carbon emissions. The Group may incur costs in monitoring and reporting emissions. Ultimately a “cap and trade” scheme may be implemented in the US; depending on the scope of the legislation, this could significantly impact certain operations in the US. As of 16 February 2018, the Group is not aware of any schemes that would materially affect its US operations, however, we are continuously monitoring developments in regulations.
Europe Heavyside:Denmark: selected assetsPossible Environmental Liabilities
At 16 February 2018, there were no material pending legal proceedings relating to site remediation which are anticipated to have a material adverse effect on the financial position or results of operations or liquidity of the Group, nor have internal reviews revealed any situations of likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital expenditures and the allocation by state entities of available funds to different projects, as well as interest rate and tax policies, directly affect the overall levels of construction activity. The terms and general availability of government permits required to conduct Group business also has an impact on the scope of Group operations. As a result such governmental decisions and policies can have a significant impact on the operating results of the Group.
230 |
CRH Annual Report and Form 20-F | 2017
History, Development and Organisational Structure of the Company
CRH public limited company is the Parent Company of a precast concrete business (11 August);Ireland: selected assetsdiversified international group of Cemex Ireland (31 August).companies which manufactures and distributes a diverse range of products servicing the breadth of construction needs, from the fundamentals of heavy materials and elements to construct the frame, through value-added exterior products that complete the building envelope, to distribution channels which service constructionfit-out and renewal.
Europe Distribution: Belgium: Heumatop (24 March), Costermans (2 July) and Van Den Broeck (17 July);France: assetsThe Group resulted from the merger in 1970 of two Toute Faire Materiaux branches (1 April);leading Irish public companies, Cement Limited (established in 1936) and Roadstone Limited (incorporated in 1949). Cement Limited manufactured and supplied cement while Roadstone Limited was primarily involved in the Netherlands: Hoogeveen branchmanufacture and supply of Kroon Bouwcenter (9 April).aggregates, readymixed concrete, mortar, coated macadam, asphalt and contract surfacing to the Irish construction industry.
Americas Materials: Iowa: Shipley Contracting asphalt plantAs a result of planned geographic diversification since themid-1970s, the Group has expanded by acquisition and paving assets (6 June);Kentucky: selected assetsorganic growth into an international manufacturer and supplier of MAC Construction & Excavating (5 November);Maine: Marriner quarry (10 April)building materials.
The Company is incorporated and selected assetsdomiciled in the Republic of Lane Construction (26 September);Texas: selected assetsIreland. CRH is a public limited company operating under the Companies Act of Capitol Aggregates (6 May);Virginia: Kendrick reserves (6 August);Washington: asphalt assetsIreland 2014. The Group’s worldwide headquarters is located in Dublin, Ireland. Our principal executive offices are located at Belgard Castle, Clondalkin, Dublin 22 (telephone: +353 1 404 1000). The Company’s registered office is located at 42 Fitzwilliam Square, Dublin 2, Ireland and our US agent is Oldcastle, Inc., 900 Ashwood Parkway, Suite 600, Atlanta, Georgia 30338.
The Company is the holding company of Eucon Corporationthe Group, with direct and indirect share and loan interests in Spokane (15 December);West Virginia: assetssubsidiaries, joint ventures and associates. From Group headquarters, a small team of Yellowstar Materials (7 January).executives exercises strategic control over our decentralised operations.
Americas Products: California: assetsCRH plc is a leading global diversified building materials group employing 85,000 people at over 3,600 operating locations in 32 countries worldwide.
CRH is the second largest building materials company worldwide and the largest in North America. The Group has leadership positions in Europe, where it is the largest heavyside materials business, as well as established strategic positions in the emerging economic regions of Kristar Enterprises (6 January);NorthAsia and South Carolina: concrete pipe assetsAmerica.
In the detailed description of MC Precast (19 May);Iowa: Thermomass (10 September);Texas: assetsthe Group’s business on pages 22 to 53, estimates of Hope Agrithe Group’s various aggregates and stone reserves have been provided by engineers employed by the individual operating companies. Details of productend-use by sector for each reporting segment are based on management estimates.
A listing of the principal subsidiary undertakings and equity accounted investments is contained on pages 246 to 251.
Statements Regarding Competitive Position and Construction Activity
Statements made in the Business Performance section and elsewhere in this document referring to the Group’s competitive position are based on the Group’s belief, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and the Group’s internal assessment of market share based on publicly available information about the financial results and performance of market participants.
Unless otherwise specified, references to construction activity or other market activity relate to the relevant market as a whole and are based on publicly available information from a range of sources, including independent market studies, construction industry data and economic forecasts for individual jurisdictions.
Legal Proceedings
Group companies are parties to various legal proceedings, including some in which claims for damages have been asserted against the companies. Having taken appropriate advice, we believe that the aggregate outcome of such proceedings will not have a material effect on the Group’s financial condition, results of operations or liquidity.
In 2015, the Swiss Competition Commission imposed fines on the Association of Swiss Wholesalers of the Sanitary Industry and on major Swiss wholesalers including certain Swiss CRH subsidiaries; the fine attributable to these subsidiaries was CHF34 million. While the Group remains of the view that the fine is unjustified and it has appealed to the Swiss Federal Appeals Court, a provision of€29 million (2016:€32 million) is recorded in the Group’s Consolidated Balance Sheet.
Research and Development
Research and development is not a significant focus of the Group. CRH’s policy is to expense all research and development costs as they occur.
Employees
The average number of employees for the past three financial years is disclosed in note 6 to the Consolidated Financial Statements on page 143. No significant industrial disputes have occurred at any of CRH’s factories or plants during the past five years. The Group believes that relations with its employees and labour unions are satisfactory.
Seasonality
Activity in the construction industry is characterised by cyclicality and is dependent to a considerable extent on the seasonal impact of weather in the Group’s operating locations, with activity in some markets reduced significantly in winter due to inclement weather. First-half sales accounted for 47% of full-year 2017 (2016: 47%), while EBITDA (as defined)* for the first six months of 2017 represented 36% of the full-yearout-turn (2016: 36%).
Significant Changes
In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply Inc. to dispose of its 100% holding in Allied Building Products, (20 February, also Arkansas, Louisianathe trading name of our Americas Distribution segment, for a consideration of US$2.6 billion. The transaction closed on 2 January 2018. See further details in note 2 to the Consolidated Financial Statements.
In 2017, we reached an agreement with the Board of Ash Grove Cement to acquire a significant portfolio of cement and Oklahoma) and assets of Ashley Concrete (19 May).other materials assets. This deal is due to close in 2018.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
231 |
The identifiable net assets acquired, including adjustments to provisional fair values, were as follows: | 2014 €m | 2013 €m | 2012 €m | |||||||||
Assets | ||||||||||||
Non-current assets | ||||||||||||
Property, plant and equipment | 91 | 342 | 253 | |||||||||
Intangible assets | 16 | 39 | 65 | |||||||||
Equity accounted investments | - | 2 | - | |||||||||
Deferred income tax assets | - | - | 10 | |||||||||
Total non-current assets | 107 | 383 | 328 | |||||||||
Current assets | ||||||||||||
Inventories | 23 | 41 | 98 | |||||||||
Trade and other receivables (i) | 20 | 53 | 103 | |||||||||
Cash and cash equivalents | 1 | 11 | 19 | |||||||||
Total current assets | 44 | 105 | 220 | |||||||||
Liabilities | ||||||||||||
Trade and other payables | (17 | ) | (80 | ) | (57 | ) | ||||||
Provisions for liabilities (stated at net present cost) | (1 | ) | (14 | ) | (1 | ) | ||||||
Interest-bearing loans and borrowings and finance leases | (7 | ) | (44 | ) | (42 | ) | ||||||
Current income tax liabilities | - | - | (3 | ) | ||||||||
Deferred income tax liabilities | (2 | ) | (8 | ) | (19 | ) | ||||||
Total liabilities | (27 | ) | (146 | ) | (122 | ) | ||||||
Total identifiable net assets at fair value | 124 | 342 | 426 | |||||||||
Goodwill arising on acquisition (ii) | 31 | 169 | 162 | |||||||||
Excess of fair value of identifiable net assets over consideration paid (ii) | - | (2 | ) | - | ||||||||
Non-controlling interests* | - | (1 | ) | - | ||||||||
Total consideration | 155 | 508 | 588 | |||||||||
Consideration satisfied by: | ||||||||||||
Cash payments | 152 | 347 | 437 | |||||||||
Asset exchange (note 4) | - | 144 | - | |||||||||
Deferred consideration (stated at net present cost) | 1 | 4 | 75 | |||||||||
Contingent consideration (iii) | 2 | 13 | 76 | |||||||||
Total consideration | 155 | 508 | 588 | |||||||||
* Measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. |
| |||||||||||
Net cash outflow arising on acquisition | ||||||||||||
Cash consideration | 152 | 347 | 437 | |||||||||
Less: cash and cash equivalents acquired | (1 | ) | (11 | ) | (19 | ) | ||||||
Total | 151 | 336 | 418 |
232 |
Shareholder Information | ||||||||
Stock Exchange Listings | 234 | |||||||
Ownership of Ordinary Shares | 235 | |||||||
Dividends | 236 | |||||||
Share Plans | 237 | |||||||
American Depositary Shares | 238 | |||||||
Taxation | 239 | |||||||
Memorandum and Articles of Association | 241 | |||||||
General Information | 243 |
233 |
CRH Annual Report and Form 20-F | 2017
CRH has a premium listing on the LSE and a secondary listing on the ISE.
ADSs, each representing one Ordinary Share, are listed on the NYSE. The ADSs are evidenced by ADRs issued by The Bank of New York Mellon (the ‘Depositary’) as Depositary under an
Amended and Restated Deposit Agreement dated
28 November 2006. The ticker symbol for the ADSs on the NYSE is CRH.
The following table sets forth, for the periods indicated, the reported high and low closing sales prices for the Ordinary Shares in euro on the ISE
and in Pound Sterling on the LSE from 2013 through 16 February 2018. The table also sets forth, for the same periods, the high and low closing sale prices for the ADSs on the NYSE.
Pound Sterling per Ordinary Share | euro per Ordinary Share | US Dollars per ADS | ||||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||||
Calendar Year | ||||||||||||||||||||||||||
2013 | £16.17 | £12.15 | €19.30 | €14.68 | $26.26 | $19.56 | ||||||||||||||||||||
2014 | £17.88 | £12.66 | €21.82 | €15.86 | $29.72 | $20.47 | ||||||||||||||||||||
2015 | £19.80 | £14.71 | €28.09 | €18.73 | $30.95 | $22.51 | ||||||||||||||||||||
2016 | £28.30 | £16.37 | €32.96 | €21.00 | $35.18 | $23.72 | ||||||||||||||||||||
2017 | £29.20 | £25.30 | €34.53 | €28.48 | $37.86 | $33.41 | ||||||||||||||||||||
2016 | ||||||||||||||||||||||||||
First Quarter | £19.86 | £16.37 | €26.37 | €21.00 | $28.47 | $23.72 | ||||||||||||||||||||
Second Quarter | £21.85 | £19.40 | €27.47 | €23.32 | $31.49 | $26.54 | ||||||||||||||||||||
Third Quarter | £26.07 | £20.96 | €30.90 | €24.52 | $34.04 | $27.64 | ||||||||||||||||||||
Fourth Quarter | £28.30 | £25.51 | €32.96 | €28.65 | $35.18 | $31.60 | ||||||||||||||||||||
2017 | ||||||||||||||||||||||||||
First Quarter | £28.98 | £26.67 | €34.03 | €31.44 | $36.59 | $33.41 | ||||||||||||||||||||
Second Quarter | £29.20 | £26.14 | €34.53 | €30.98 | $37.76 | $33.42 | ||||||||||||||||||||
Third Quarter | £28.37 | £26.25 | €32.28 | €28.48 | $37.86 | $34.02 | ||||||||||||||||||||
Fourth Quarter | £28.61 | £25.30 | €32.47 | €28.54 | $37.58 | $33.87 | ||||||||||||||||||||
Recent Months | ||||||||||||||||||||||||||
September 2017 | £28.37 | £26.40 | €32.28 | €29.09 | $37.86 | $34.78 | ||||||||||||||||||||
October 2017 | £28.61 | £27.23 | €32.47 | €30.49 | $37.58 | $35.81 | ||||||||||||||||||||
November 2017 | £28.04 | £25.66 | €31.75 | €28.95 | $36.79 | $34.63 | ||||||||||||||||||||
December 2017 | £26.63 | £25.30 | €30.06 | €28.54 | $36.09 | $33.87 | ||||||||||||||||||||
January 2018 | £27.70 | £26.12 | €31.55 | €29.73 | $38.96 | $36.09 | ||||||||||||||||||||
February 2018 (through 16 February 2018) | £25.75 | £23.80 | €29.44 | €26.76 | $36.88 | $33.19 | ||||||||||||||||||||
Additional share price data | ||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||
LSE | ISE | NYSE | LSE | ISE | NYSE | |||||||||||||||||||||
Share price at 31 December | £26.57 | €29.96 | $36.09 | £28.30 | €32.96 | $34.38 | ||||||||||||||||||||
Market capitalisation | £22.3bn | €25.1bn | $30.3bn | £23.6bn | €27.4bn | $28.6bn |
For further information on CRH shares see note 30 to the Consolidated Financial Statements.
234 |
CRH Annual Report and Form 20-F | 2017
Shareholdings as at 31 December 2017 | ||||||||||||||
Number of shares | ||||||||||||||
Geographic location (i) | held ‘000s | % of total | ||||||||||||
United Kingdom | 269,047 | 32.07 | ||||||||||||
North America | 212,702 | 25.35 | ||||||||||||
Europe/Other | 171,900 | 20.49 | ||||||||||||
Retail | 156,267 | 18.63 | ||||||||||||
Ireland | 28,988 | 3.45 | ||||||||||||
Treasury (ii) | 54 | 0.01 | ||||||||||||
838,958 | 100 |
(i) | This represents a best estimate of the number of shares controlled by fund managers resident in the geographic regions indicated. Private shareholders are classified as retail above. |
(ii) | As detailed in note 30 to the Consolidated Financial Statements. |
Number | ||||||||||||||||
Number of | % of | of shares | % of | |||||||||||||
Holdings | shareholders | total | held ‘000s | total | ||||||||||||
1 - 1,000 | 14,583 | 60.15 | 4,618 | 0.55 | ||||||||||||
1,001 - 10,000 | 7,689 | 31.71 | 22,801 | 2.72 | ||||||||||||
10,001 - 100,000 | 1,408 | 5.81 | 43,626 | 5.20 | ||||||||||||
100,001 - 1,000,000 | 427 | 1.76 | 140,608 | 16.76 | ||||||||||||
Over 1,000,000 | 139 | 0.57 | 627,305 | 74.77 | ||||||||||||
24,246 | 100 | 838,958 | 100 |
The Company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. The major shareholders do not have any special voting rights.
As at 28 February 2018, the Company had received notification of certain interests in its Ordinary Share capital that were equal to, or in excess of, 3%. These interests are presented in Corporate Governance – Substantial Holdings on page 70.
Purchases of Equity Securities by the Issuer and Affiliated Persons
Month | Number purchased | Price | ||||||
March | 90,971 | €33.21 | ||||||
July | 179 | €33.33 | ||||||
November | 1,673 | €31.40 | ||||||
November | 3,960 | €31.51 |
2016 | ||||||||
Month | Number purchased | Price | ||||||
March | 81,457 | € | 24.38 (i) | |||||
August | 86,464 | € | 29.80 (i) | |||||
(i) | Shares were purchased in Stg£ at a price of £18.88 and £25.46 respectively per share. |
Other than the above, there were no purchases of equity securities by the issuer and/or affiliated persons during the course of 2017.
CREST
Transfer of the Company’s shares takes place through the CREST system. Shareholders have the choice of holding their shares in electronic form or in the form of share certificates.
Where shares are held in CREST, dividends are automatically paid in euro unless a currency election is made. CREST members should use the facility in CREST to make currency elections. Such elections must be made in respect of entire holdings as partial elections are not permissible.
235 |
30. Business CombinationsCRH Annual Report and Form 20-F |continued2017
None of the acquisitions completed during the financial years 2014, 2013 or 2012 were considered sufficiently material to warrant separate disclosure of the attributable fair values.
The initial assignment of fair values to identifiable net assets acquiredCompany has been performedpaid dividends on a provisional basisits Ordinary Shares in respect of each fiscal year since the formation of the Group in 1970. Dividends are paid to shareholders on the Register of Members on the record date for the dividend. Record dates are set by the LSE and the ISE. An interim dividend is normally declared by the Board of Directors in August of each year and is generally paid in October. A final dividend is normally recommended by the Board of Directors following the end of the fiscal year to which it relates and, if approved by the shareholders at an AGM, is generally paid in May of that year.
The payment of future cash dividends will be dependent upon future earnings, the financial condition of the Group and other factors.
The below table sets forth the amounts of interim, final and total dividends in euro cent per Ordinary Share declared in respect of each fiscal year indicated. Each amount represents the actual dividend payable. Solely for the convenience of the reader, these dividends have been translated into US cents per ADS using the FRB Noon Buying Rate on the date of payment. An interim dividend of 19.2c was paid in respect of Ordinary Shares on 3 November 2017. The final dividend, if approved at the forthcoming AGM of shareholders to be held on 26 April 2018, will be paid on 4 May 2018 to shareholders on the Register of Members as at the close of business on 9 March 2018 and will bring the full-year dividend for 2017 to 68.0c. The proposed final dividend has been translated using the FRB Noon Buying Rate on 16 February 2018.
Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is entitled to an exemption and has submitted a properly completed exemption form to the Company’s Registrars, Link Asset Services (the ‘Registrars’). DWT applies to dividends paid by way of cash or by way of shares under a scrip dividend scheme and is deducted at the standard rate of Income Tax (currently 20%).Non-resident shareholders and certain acquisitions; any amendmentsIrish companies, trusts, pension schemes, investment undertakings and charities may be entitled to claim exemption from DWT. Copies of the exemption form may be obtained from the Registrars. Shareholders should note that DWT will be deducted from dividends in cases where a properly completed form has not been received by the record date for a dividend. Individuals who are resident in the Republic of Ireland for tax purposes are not entitled to an exemption.
Shareholders who wish to have their dividend paid direct to their bank account, by electronic funds transfer, can do so by logging on to www.signalshares.com (formerly www. capitashareportal.com), selecting CRH and registering for the share portal (the ‘Share Portal’). Shareholders should note that they will need to have their Investor Code (found on their share certificate), and follow the instructions online to register.
Alternatively shareholders can complete a paper dividend mandate form and submit it to the Registrars. A copy of the form can be obtained by logging onto the Registrar’s share portal and following the instructions as set out under Registrars on page 243. Tax vouchers will continue to be sent to the shareholder’s registered address under this arrangement.
Dividends are generally paid in euro. However, in order to avoid costs to shareholders, dividends are paid in Pound Sterling and US Dollars to shareholders whose shares are not held in the CREST system (see page 235) and whose address, according to the Share Register, is in the UK and the US respectively, unless they require otherwise.
Dividends in respect of 7% ‘A’ Cumulative Preference Shares are paid half-yearly on
5 April and 5 October.
Dividends in respect of 5% Cumulative Preference Shares are paid half-yearly on 15 April and 15 October.
Shareholders have the option of taking their dividend in the form of shares under the Company’s Scrip Dividend Scheme.
euro cent per Ordinary Share | Translated* into US cents per ADS | |||||||||||||||||||||||||||
Years ended 31 December
| Interim | Final | Total | Interim | Final | Total | ||||||||||||||||||||||
2013 | 18.50 | 44.00 | 62.50 | 25.52 | 60.54 | 86.06 | ||||||||||||||||||||||
2014 | 18.50 | 44.00 | 62.50 | 23.45 | 49.46 | 72.91 | ||||||||||||||||||||||
2015 | 18.50 | 44.00 | 62.50 | 19.88 | 50.25 | 70.13 | ||||||||||||||||||||||
2016 | 18.80 | 46.20 | 65.00 | 20.91 | 50.80 | 71.71 | ||||||||||||||||||||||
2017 | 19.20 | 48.80 | (i) | 68.00 | 22.30 | 60.72 | (i) | 83.02 | ||||||||||||||||||||
(i) | Proposed |
* | At the FRB Noon Buying Rate on the date of payment |
236 |
CRH Annual Report and Form 20-F | 2017
The Group operates share option schemes, performance share plans, share participation schemes and savings-related share option schemes (the ‘Schemes’) for eligible employees in all regions where the regulations permit the operation of such schemes. A brief description of the Schemes is outlined below. Shares issued (whether by way of the allotment of new shares or the reissue of Treasury Shares) in connection with the Schemes rank pari passu in all respects with the Ordinary and Income shares of the Company.
2000 Share Option Schemes
At the AGM held on 3 May 2000, shareholders approved the adoption of Share Option Schemes (the ‘2000 Share Option Schemes’) to replace schemes which were approved in May 1990. The 2000 Share Option Schemes were replaced by new schemes in May 2010 (see below).
Options granted under the 2000 Share Option Schemes vested when EPS growth exceeded the growth on the Irish Consumer Price Index by 5% compounded over a period of at least three years subsequent to the granting of options.
Options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant. Benefits under the schemes are not pensionable.
2010 Share Option Schemes
At the AGM held on 5 May 2010, shareholders approved the adoption of new share option schemes to replace the schemes which were approved in May 2000 (see above). Following the approval by shareholders of the 2014 Performance Share Plan (see below), no further awards will be granted under the 2010 Share Option Schemes. Consequently, the last award under the 2010 Share Option Schemes was made in 2013.
The 2010 Share Option Schemes are based on one tier of options with a single vesting test. The performance criteria for the 2010 Share Option Schemes areEPS-based. Vesting only occurs once an initial performance target has been reached and, thereafter, is dependent on performance. In considering the level of vesting based on EPS performance, the Remuneration Committee also considers the overall results of the Group.
Subject to the achievement of the EPS performance criteria, options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant. Benefits under the schemes are not pensionable.
2010 Savings-related Share Option Schemes
At the AGM held on 5 May 2010, shareholders approved the adoption of savings-related share option schemes (the ‘2010 Savings-related Share Option Schemes’) to replace the 2000 Savings-related Share Option Schemes.
All employees of a participating subsidiary in the Republic of Ireland or the UK, who have satisfied a required qualifying period, are invited to participate in this scheme.
Eligible employees who wish to participate in the scheme enter into a savings contract with a nominated savings institution, for a three or a five-year period, to save a maximum of€500 or Stg£500, as appropriate, per month.
At the commencement of each contract period employees are granted an option to acquire Ordinary Shares in the Company at an option price which is equal to the amount proposed to be saved plus the bonus payable by the nominated savings institution at the end of the savings period. The price payable for each Ordinary Share under an option will be not less than the higher of par or 75% (or in the case of the UK scheme 80%) of the market value of a share on the day the invitation to apply for the option is issued.
On completion of the savings contract, employees may use the amount saved, together with the bonus earned, to exercise the option.
At 28 February 2018, 679,312 Ordinary Shares have been issued* pursuant to the 2010 Savings-related Share Option Schemes to date.
Share Participation Schemes
At the AGM on 13 May 1987, shareholders approved the establishment of Share Participation Schemes for the Company, its subsidiaries and companies under its control. Directors and employees of the companies who have at least one year’s service may elect to participate in these fair values made duringShare Participation Schemes.
At 28 February 2018, 7,862,416 Ordinary Shares have been issued* pursuant to the subsequent reporting window (withinShare Participation Schemes.
2014 Performance Share Plan
The 2014 Performance Share Plan was approved by shareholders at the measurement period imposed by IFRS 3AGM on 7 May 2014. It replaces the 2010 Share Option Schemes and the 2006 Performance Share Plan. See the 2017 Directors’ Remuneration Report on page 84 for more details.
(i) | The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to€ |
(ii) | The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and other synergies with existing entities in the Group which do not qualify for separate recognition as intangible assets. Due to the asset-intensive nature of operations in the Europe Heavyside and Americas Materials business segments, no significant identifiable intangible assets are recognised on business combinations in these segments.€ |
Acquisition-related costs, excluding post-acquisition integration costs, amounting to€211 million (2013:(2016:€2 million; 2012:2015:€4152 million) have been included in operating costs in the Consolidated Income Statement (note 2)3).
No contingent liabilities were recognised on the acquisitions completed during the financial year or the prior financial years.
The carrying amounts of the assets and liabilities acquired determined in accordance with IFRS before completion of the acquisition, together with the adjustments made to those carrying values to arrive at the fair values disclosed above, were as follows:
Book values €m | Fair value adjustments €m | Accounting policy alignments €m | Adjustments to provisional fair values €m | Fair value €m | ||||||||||||||||
Non-current assets | 95 | 11 | - | 1 | 107 | |||||||||||||||
Current assets | 45 | (3 | ) | - | 2 | 44 | ||||||||||||||
Liabilities | (22 | ) | (2 | ) | - | (3 | ) | (27 | ) | |||||||||||
Identifiable net assets acquired | 118 | 6 | - | - | 124 | |||||||||||||||
Goodwill arising on acquisition (see (ii) above) | 38 | (5 | ) | - | (2 | ) | 31 | |||||||||||||
Total consideration | 156 | 1 | - | (2 | ) | 155 | ||||||||||||||
The equivalent disclosure for 2013 is as follows: | ||||||||||||||||||||
Non-current assets | 257 | 106 | - | 20 | 383 | |||||||||||||||
Current assets | 130 | (12 | ) | (2 | ) | (11 | ) | 105 | ||||||||||||
Liabilities | (107 | ) | (34 | ) | - | (5 | ) | (146 | ) | |||||||||||
Identifiable net assets acquired | 280 | 60 | (2 | ) | 4 | 342 | ||||||||||||||
Non-controlling interests | (2 | ) | 1 | - | - | (1 | ) | |||||||||||||
Goodwill arising on acquisition | 224 | (61 | ) | 2 | 2 | 167 | ||||||||||||||
Total consideration | 502 | - | - | 6 | 508 | |||||||||||||||
The equivalent disclosure for 2012 is as follows: | ||||||||||||||||||||
Non-current assets | 178 | 155 | - | (4 | ) | 329 | ||||||||||||||
Current assets | 217 | 2 | - | - | 219 | |||||||||||||||
Liabilities | (95 | ) | (19 | ) | (1 | ) | (7 | ) | (122 | ) | ||||||||||
Identifiable net assets acquired | 300 | 138 | (1 | ) | (11 | ) | 426 | |||||||||||||
Goodwill arising on acquisition | 287 | (138 | ) | 1 | 12 | 162 | ||||||||||||||
Total consideration | 587 | - | - | 1 | 588 |
30. Business Combinations| continued
The following table analyses the 31 acquisitions completed in 2017 (2016: 21 acquisitions (2013: 25 acquisitions; 2012: 322015: 19 acquisitions) by reportable segment and provides details of the goodwill and consideration figures arising in each of those segments:
Reportable segments | Number of acquisitions | Goodwill | Consideration | |||||||||||||||||||||||||||||||||
2014 | 2013 | 2012 | 2014 €m | 2013 €m | 2012 €m | 2014 €m | 2013 €m | 2012 €m | ||||||||||||||||||||||||||||
Europe Heavyside | 2 | 6 | 2 | 2 | 80 | 25 | 7 | 265 | 58 | |||||||||||||||||||||||||||
Europe Lightside | - | - | 4 | - | - | 68 | - | - | 151 | |||||||||||||||||||||||||||
Europe Distribution | 6 | 3 | 3 | 9 | 10 | 8 | 20 | 15 | 40 | |||||||||||||||||||||||||||
Europe | 8 | 9 | 9 | 11 | 90 | 101 | 27 | 280 | 249 | |||||||||||||||||||||||||||
Americas Materials | 8 | 9 | 14 | 5 | 19 | 34 | 71 | 76 | 226 | |||||||||||||||||||||||||||
Americas Products | 5 | 4 | 9 | 17 | 48 | 14 | 59 | 124 | 112 | |||||||||||||||||||||||||||
Americas Distribution | - | 3 | - | - | 8 | - | - | 22 | - | |||||||||||||||||||||||||||
Americas | 13 | 16 | 23 | 22 | 75 | 48 | 130 | 222 | 338 | |||||||||||||||||||||||||||
Total Group | 21 | 25 | 32 | 33 | 165 | 149 | 157 | 502 | 587 | |||||||||||||||||||||||||||
Adjustments to provisional fair values of prior year acquisitions |
| (2 | ) | 4 | 13 | (2 | ) | 6 | 1 | |||||||||||||||||||||||||||
Total | 31 | 169 | 162 | 155 | 508 | 588 |
The post-acquisition impact of acquisitions completed during the year on the Group’s profit/(loss) for the financial year was as follows: | ||||||||||||||||||||||||
2014 €m | 2013 €m | 2012 €m | ||||||||||||||||||||||
Revenue | 122 | 306 | 270 | |||||||||||||||||||||
Cost of sales | (89 | ) | (232 | ) | (201 | ) | ||||||||||||||||||
Gross profit | 33 | 74 | 69 | |||||||||||||||||||||
Operating costs | (26 | ) | (63 | ) | (56 | ) | ||||||||||||||||||
Group operating profit | 7 | 11 | 13 | |||||||||||||||||||||
Profit on disposals | - | - | - | |||||||||||||||||||||
Profit before finance costs | 7 | 11 | 13 | |||||||||||||||||||||
Finance costs (net) | - | (3 | ) | (2 | ) | |||||||||||||||||||
Profit before tax | 7 | 8 | 11 | |||||||||||||||||||||
Income tax expense | (2 | ) | (2 | ) | (4 | ) | ||||||||||||||||||
Group profit for the financial year | 5 | 6 | 7 |
Number of acquisitions | Goodwill | Consideration | ||||||||||||||||||||||||||||||||||||||||||
Reportable segments | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | €m | |||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 8 | 5 | - | 155 | 2 | - | 698 | 15 | - | |||||||||||||||||||||||||||||||||||
Europe Lightside | - | 2 | 3 | - | 7 | 6 | - | 22 | 17 | |||||||||||||||||||||||||||||||||||
Europe Distribution | 2 | 1 | 1 | 17 | - | - | 30 | - | 1 | |||||||||||||||||||||||||||||||||||
Europe | 10 | 8 | 4 | 172 | 9 | 6 | 728 | 37 | 18 | |||||||||||||||||||||||||||||||||||
Americas Materials | 13 | 8 | 10 | 239 | 10 | 32 | 1,171 | 97 | 80 | |||||||||||||||||||||||||||||||||||
Americas Products | 8 | 5 | 3 | 76 | 7 | 9 | 162 | 33 | 65 | |||||||||||||||||||||||||||||||||||
Americas | 21 | 13 | 13 | 315 | 17 | 41 | 1,333 | 130 | 145 | |||||||||||||||||||||||||||||||||||
Unallocated Goodwill | ||||||||||||||||||||||||||||||||||||||||||||
LH Assets | - | - | 1 | - | - | 2,307 | - | - | 6,561 | |||||||||||||||||||||||||||||||||||
CRL | - | - | 1 | - | - | 833 | - | - | 1,169 | |||||||||||||||||||||||||||||||||||
Total Group | 31 | 21 | 19 | 487 | 26 | 3,187 | 2,061 | 167 | 7,893 | |||||||||||||||||||||||||||||||||||
Adjustments to provisional fair values of prior year acquisitions | - | 45 | - | (1) | 8 | - | ||||||||||||||||||||||||||||||||||||||
Total | 487 | 71 | 3,187 | 2,060 | 175 | 7,893 |
187 |
CRH Annual Report and Form 20-F|2017 |
31. Business Combinations - continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit for the financial year was as follows:
2017
€m | 2016
€m | 2015
€m | ||||||||||
Revenue | 532 | 101 | 2,679 | |||||||||
(Loss)/profit before tax for the financial year | (2) | 1 | (7) |
The revenue and profit/(loss)profit of the Group for the financial year determined in accordance with IFRS as though the acquisitions effected during the year had been at the beginning of the year would have been as follows:
Pro-forma 2014 | ||||||||||||||||
2014 acquisitions €m | CRH Group excluding 2014 acquisitions €m | Pro-forma consolidated Group €m | Pro-forma 2013 €m | |||||||||||||
Revenue | 182 | 18,790 | 18,972 | 18,159 | ||||||||||||
Group profit/(loss) for the financial year | 7 | 579 | 586 | (300 | ) | |||||||||||
Pro-forma 2013 | ||||||||||||||||
2013 acquisitions €m | CRH Group excluding 2013 acquisitions €m | Pro-forma consolidated Group €m | Pro-forma 2012 €m | |||||||||||||
Revenue | 434 | 17,725 | 18,159 | 19,054 | ||||||||||||
Group (loss)/profit for the financial year | 1 | (301 | ) | (300 | ) | 571 |
There have been no acquisitions completed subsequent to the balance sheet date which would be individually material to the Group, thereby requiring disclosure under either IFRS 3 or IAS 10Events after the Balance Sheet Date. Details of events after the balance sheet date are set out in note 33. Development updates, giving details of acquisitions which do not require separate disclosure on the grounds of materiality, are typically published in January and July each year.
2017 acquisitions €m | CRH Group €m | CRH Group €m | ||||||||||
Revenue | 1,188 | 24,688 | 25,876 | |||||||||
Profit before tax for the financial year | 38 | 1,869 | 1,907 |
CRH Annual Report and Form 20-F|2017 |
32. Non-controlling Interests
31.The totalnon-controlling interest at 31 December 2017 is€486 million (2016:€548 million) of which€391 million (2016:€472 million) relates to Republic Cement & Building Materials (RCBM), Inc. and Republic Cement Land & Resources (RCLR), Inc. (formerly Luzon Continental Land Corporation (LCLC)).The non-controlling interests in respect of the Group’s other subsidiaries are not considered to be material.
Name | Principal activity | Country of incorporation | Economic ownership interest held by non-controlling interest | |||
Republic Cement & Building Materials, Inc. | Manufacture, development and sale | Philippines | 45% | |||
and Republic Cement Land & Resources, Inc. | of cement and building materials |
The following is summarised financial information for RCBM and RCLR prepared in accordance with IFRS 12Disclosure of Interests in Other Entities. This information is before intragroup eliminations with other Group companies.
Summarised financial information | 2017
€m | 2016
€m | ||||||
Profit for the year | 14 | 47 | ||||||
Current assets | 159 | 118 | ||||||
Non-current assets | 1,292 | 1,460 | ||||||
Current liabilities | (140) | (124) | ||||||
Non-current liabilities | (663) | (690) | ||||||
Net assets | 648 | 764 | ||||||
Cash flows from operating activities | 9 | 91 | ||||||
Dividends paid tonon-controlling interests during the year | - | (1) |
CRH holds 40% of the equity share capital in RCBM and RCLR and has an economic interest of 55% of the combined Philippines business.Non-controlling interest relates to another party who holds 60% of the equity share capital in RCBM and RCLR and has an economic interest of 45% of the combined Philippines business. CRH has obtained control (as defined under IFRS 10Consolidated Financial Statements) by virtue of contractual arrangements which give CRH power to direct the relevant non-nationalised activities of the business, in compliance with Philippine law.
189 |
CRH Annual Report and Form 20-F|2017 |
33. Related Party Transactions
The principal related party relationships requiring disclosure in the Consolidated Financial Statements of the Group under IAS 24RelatedParty Disclosurespertain to: the existence of subsidiaries, joint ventures and associates; transactions with these entities entered into by the Group; and the identification and compensation of key management personnel.personnel; and lease arrangements.
Subsidiaries, joint ventures and associates
The Consolidated Financial Statements include the financial statements of the Company (CRH plc, the ultimate parent) and its subsidiaries, joint ventures and associates as documented in the accounting policies on pages 139125 to 145.134. The Group’s principal subsidiaries, joint ventures and associates are disclosed in Exhibit 8 of this Annual Report on Form 20-F.pages 246 to 251.
Sales to and purchases from associates and joint ventures are immaterial in 2014, 2013 and 2012. as follows:
Associates | Joint Ventures | |||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | |||||||||||||||||||||||
Sales | 51 | 56 | 48 | 111 | 88 | 64 | ||||||||||||||||||||||
Purchases | 400 | 401 | 422 | 55 | 54 | 56 |
Loans extended by the Group to joint ventures and associates (see note 15)16) are included in financial assets. Sales to and purchases from associates during the financial year ended 31 December 2014 amounted to€33 million (2013:€24 million; 2012:€21 million) and€411 million (2013:€411 million; 2012:€446 million) respectively. Amounts receivable from and payable to equity accounted investments (arising from the aforementioned sales and purchases transactions) as at the balance sheet date are included as separate line items in notes 1718 and 1819 to the Consolidated Financial Statements.
Terms and conditions of transactions with subsidiaries, joint ventures and associates
In general, the transfer pricing policy implemented by the Group across its subsidiaries is market-based. Sales to and purchases from joint ventures and associates are conducted in the ordinary course of business and on terms equivalent to those that prevail in arm’s-lengtharms-length transactions. The outstanding balances included in receivables and payables as at the balance sheet date in respect of transactions with joint ventures and associates are unsecured and settlement arises in cash. No guarantees have been either requested or provided in relation to related party receivables and payables. Loans to joint ventures and associates (as disclosed in note 15)16) are extended on normal commercial terms in the ordinary course of business with interest accruing and, in general, paid to the Group at predetermined intervals.
Key management personnel
For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors which manages the business and affairs of the Company.
Key management remuneration amounted to: | 2014 €m | 2013 €m | 2012 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||
Short-term benefits | 9 | 7 | 6 | 9 | 13 | 10 | ||||||||||||||||||
Post-employment benefits | 1 | 2 | 2 | 1 | 1 | 1 | ||||||||||||||||||
Share-based payments - calculated in accordance with the principles disclosed in note 7 | 2 | 2 | 2 | |||||||||||||||||||||
Share-based payments - calculated in accordance with the principles disclosed in note 8 | 3 | 3 | 2 | |||||||||||||||||||||
Total | 12 | 11 | 10 | 13 | 17 | 13 |
Other than these compensation entitlements, there were no other transactions involving key management personnel.
Lease arrangements
32. Contingent Liabilities
On 30 May 2014, CRH announced thathas a number of lease arrangements in place with related parties across the secretariatGroup, which have been negotiated on an arms-length basis at market rates. We do not consider these arrangements to be material either individually or collectively in the context of the Competition Commission in Switzerland had invited CRH’s Swiss subsidiaries BR Bauhandel AG, Gétaz-Miauton SA2017, 2016 and Regusci Reco SA, to comment on a proposal to impose sanctions on the Association of Swiss Wholesalers of the Sanitary Industry and all other major Swiss wholesalers, including CRH’s subsidiaries, regarding the pending investigation into the sanitary (bathroom fixtures and fittings) industry in Switzerland. The secretariat alleges competition law infringements and proposes a total fine of approximately CHF 283 million on all parties, of which approximately CHF 119 million (€99 million) is attributable to CRH’s Swiss subsidiaries, based on Swiss turnover.
CRH believes that the position of the secretariat is fundamentally ill-founded and views the proposed fine as unjustified. The Group has made submissions to this effect to the Competition Commission. Any decision of the Competition Commission on this matter is not expected before April 2015. Any decision finding an infringement can be appealed to the Federal Administrative Tribunal, and ultimately to the Federal Supreme Court. No provision has been made in respect of this proposed fine in the 20142015 Consolidated Financial Statements.
34. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 120 to 199 in respect of the year ended 31 December 2017 on 28 February 2018.
190 |
33. Events after the Balance Sheet Date
On 1 February 2015, CRH announced that it had made a binding irrevocable offer to acquire certain of the businesses and assets of Lafarge S.A. (‘Lafarge’) and Holcim Ltd (‘Holcim’ and together with Lafarge the ‘Sellers’) comprising a global portfolio of assets in the building materials industry (which are complementary to CRH’s footprint) for an enterprise value of€6.5 billion (based on exchange rates at 30 January 2015). The consideration will be paid in a combination of euro, Sterling and Canadian Dollars.
The proposed acquisition constitutes a Class 1 transaction under the UKLA Listing Rules and therefore requires the approval of a simple majority of CRH’s shareholders. An Extraordinary General Meeting (‘EGM’) will be held on 19 March 2015 to seek shareholder approval of the acquisition. If the acquisition is not approved by CRH’s shareholders at the EGM, a termination fee of approximately€158 million in total will be payable by CRH to the Sellers. A termination fee of approximately€158 million will be payable by the Sellers to CRH in either of the following circumstances: 1) if the Sellers do not accept CRH’s offer; or 2) if the proposed merger of Lafarge and Holcim (the ‘Merger’) does not proceed to successful completion.
The acquisition is also conditional upon: 1) the successful completion of the Merger; and 2) the completion of certain local reorganisations that need to take place before completion of the acquisition. In addition, CRH has committed to the Sellers that it will take all steps and do all things necessary to obtain regulatory approvals required in relation to the acquisition. The long stop date for completion of the acquisition is the earlier of: 1) three months following completion of the Merger; or 2) 31 December 2015, but in any case no earlier than 31 August 2015.
In connection with the proposed acquisition, CRH completed a placing of 74,039,915 new Ordinary Shares raising gross proceeds of approximately€1.6 billion, and representing approximately 9.99% of CRH’s issued ordinary share capital before the placing. Closing of the placing and admission of the placing shares to the official lists and to trading on the main markets of the London Stock Exchange and Irish Stock Exchange took place on 5 February 2015.
On 1 February 2015, CRH agreed a€6.5 billion senior unsecured bridge loan facility which has subsequently been reduced by€1.6 billion to reflect the proceeds of the placing and by a further€2.0 billion to reflect other cash balances which are intended to fund the acquisition. The remaining€2.9 billion of the loan facilities are available to be used to complete the debt-funded portion of the proposed acquisition. Subject to certain carve-outs, the facilities contain provisions requiring mandatory prepayment from disposal proceeds and the proceeds of capital market transactions. Other terms and conditions are otherwise substantially similar to CRH’s existing€2.5 billion revolving credit facility dated 11 June 2014.
CRH Annual Report and Form 20-F|2017 |
34.35. Supplemental Guarantor Information
The following consolidating information presents Condensed Consolidated Balance Sheets as at 31 December 20142017 and 20132016 and Condensed Consolidated Income Statements and Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash FlowsFlow for the years ended 31 December 2014, 20132017, 2016 and 20122015 of the Company and CRH America, Inc. as required by Article 3-10(c) of Regulation S-X. This information is prepared in accordance with IFRS with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated. CRH America, Inc. is 100% owned by the company.Company. The Guarantees of the Guarantor are full and unconditional.
CRH plc also fully and unconditionally guarantees securities issued by CRH America Finance, Inc., which is a 100% owned finance subsidiary of CRH plc.
CRH America, Inc. (the “Issuer”‘Issuer’) has the following notes which are fully and unconditionally guaranteed by CRH plc (the “Guarantor”‘Guarantor’):
US$350 million 4.125% Notes due 2016 – listed on the New York Stock Exchange
US$1,250 million 6.000% Notes due 2016 – listed on the New York Stock Exchange
US$650288 million 8.125% Notes due 2018 – listed on the New York Stock ExchangeNYSE (i)
US$400 million 5.75%5.750% Notes due 2021 – listed on the New York Stock ExchangeNYSE
US$1,250 million 3.875% Notes due 2025 – listed on the ISE
US$300 million 6.40% Notes due 2033 – listed on the Irish Stock Exchange
US$500 million 5.125% Notes due 2045 – listed on the ISE
(i) | Originally issued as a US$650 million bond in July 2008. Subsequently in May 2017, US$362.13 million of the issued notes were redeemed by the issuer as part of a liability management exercise. |
(ii) | Originally issued as a US$300 million bond in September 2003. Subsequently in August 2009 and December 2010, US$87.445 million of the issued notes were acquired by CRH plc as part of liability management exercises undertaken. |
191 |
CRH Annual Report and Form 20-F|2017 |
34.35. Supplemental Guarantor Information| - continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 20142017
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | |||||||||||||||||||||||||||||||
€m | €m | €m | €m | €m | ||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment | - | - | 7,422 | - | 7,422 | - | - | 13,094 | - | 13,094 | ||||||||||||||||||||||||||||||
Intangible assets | - | - | 4,173 | - | 4,173 | - | - | 7,214 | - | 7,214 | ||||||||||||||||||||||||||||||
Subsidiaries | 4,239 | 218 | 1,682 | (6,139 | ) | - | 8,658 | 458 | 1,682 | (10,798 | ) | - | ||||||||||||||||||||||||||||
Investments accounted for using the equity method | - | - | 1,329 | - | 1,329 | - | - | 1,248 | - | 1,248 | ||||||||||||||||||||||||||||||
Advances to subsidiaries and parent undertakings | - | 3,923 | - | (3,923 | ) | - | - | 3,627 | - | (3,627 | ) | - | ||||||||||||||||||||||||||||
Other financial assets | - | - | 23 | - | 23 | - | - | 25 | - | 25 | ||||||||||||||||||||||||||||||
Other receivables | - | - | 85 | - | 85 | - | - | 156 | - | 156 | ||||||||||||||||||||||||||||||
Derivative financial instruments | - | 48 | 39 | - | 87 | - | - | 30 | - | 30 | ||||||||||||||||||||||||||||||
Deferred income tax assets | - | - | 171 | - | 171 | - | - | 95 | - | 95 | ||||||||||||||||||||||||||||||
Total non-current assets | 4,239 | 4,189 | 14,924 | (10,062 | ) | 13,290 | 8,658 | 4,085 | 23,544 | (14,425 | ) | 21,862 | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||||||||||
Inventories | - | - | 2,260 | - | 2,260 | - | - | 2,715 | - | 2,715 | ||||||||||||||||||||||||||||||
Trade and other receivables | - | 10 | 2,634 | - | 2,644 | - | 4 | 3,626 | - | 3,630 | ||||||||||||||||||||||||||||||
Advances to subsidiaries and parent undertakings | 5,532 | - | 1,003 | (6,535 | ) | - | 6,141 | - | 704 | (6,845 | ) | - | ||||||||||||||||||||||||||||
Current income tax recoverable | - | - | 15 | - | 15 | - | - | 165 | - | 165 | ||||||||||||||||||||||||||||||
Derivative financial instruments | - | - | 15 | - | 15 | - | 4 | 30 | - | 34 | ||||||||||||||||||||||||||||||
Cash and cash equivalents | 1,411 | 25 | 1,826 | - | 3,262 | 401 | - | 1,714 | - | 2,115 | ||||||||||||||||||||||||||||||
Assets held for sale | - | - | 531 | - | 531 | - | - | 1,112 | - | 1,112 | ||||||||||||||||||||||||||||||
Total current assets | 6,943 | 35 | 8,284 | (6,535 | ) | 8,727 | 6,542 | 8 | 10,066 | (6,845 | ) | 9,771 | ||||||||||||||||||||||||||||
Total assets | 11,182 | 4,224 | 23,208 | (16,597 | ) | 22,017 | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 | ||||||||||||||||||||||||||||
EQUITY | ||||||||||||||||||||||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 10,177 | 1,606 | 4,533 | (6,139 | ) | 10,177 | 14,491 | 1,797 | 9,001 | (10,798 | ) | 14,491 | ||||||||||||||||||||||||||||
Non-controlling interests | - | - | 21 | - | 21 | - | - | 486 | - | 486 | ||||||||||||||||||||||||||||||
Total equity | 10,177 | 1,606 | 4,554 | (6,139 | ) | 10,198 | 14,491 | 1,797 | 9,487 | (10,798 | ) | 14,977 | ||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,518 | 2,901 | - | 5,419 | - | 2,020 | 5,640 | - | 7,660 | ||||||||||||||||||||||||||||||
Derivative financial instruments | - | - | 3 | - | 3 | - | 3 | - | - | 3 | ||||||||||||||||||||||||||||||
Deferred income tax liabilities | - | - | 1,305 | - | 1,305 | - | - | 1,666 | - | 1,666 | ||||||||||||||||||||||||||||||
Other payables | - | - | 257 | - | 257 | - | - | 226 | - | 226 | ||||||||||||||||||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 3,923 | (3,923 | ) | - | - | - | 3,627 | (3,627 | ) | - | ||||||||||||||||||||||||||||
Retirement benefit obligations | - | - | 711 | - | 711 | - | - | 377 | - | 377 | ||||||||||||||||||||||||||||||
Provisions for liabilities | - | - | 257 | - | 257 | - | - | 693 | - | 693 | ||||||||||||||||||||||||||||||
Total non-current liabilities | - | 2,518 | 9,357 | (3,923 | ) | 7,952 | - | 2,023 | 12,229 | (3,627 | ) | 10,625 | ||||||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||||||||||||||||
Trade and other payables | - | 54 | 2,840 | - | 2,894 | 3 | 29 | 4,502 | - | 4,534 | ||||||||||||||||||||||||||||||
Advances from subsidiary and parent undertakings | 1,003 | - | 5,532 | (6,535 | ) | - | 704 | - | 6,141 | (6,845 | ) | - | ||||||||||||||||||||||||||||
Current income tax liabilities | - | - | 154 | - | 154 | - | - | 458 | - | 458 | ||||||||||||||||||||||||||||||
Interest-bearing loans and borrowings | 2 | 46 | 399 | - | 447 | 2 | 244 | 70 | - | 316 | ||||||||||||||||||||||||||||||
Derivative financial instruments | - | - | 20 | - | 20 | - | - | 11 | - | 11 | ||||||||||||||||||||||||||||||
Provisions for liabilities | - | - | 139 | - | 139 | - | - | 371 | - | 371 | ||||||||||||||||||||||||||||||
Liabilities associated with assets classified as held for sale | - | - | 213 | - | 213 | - | - | 341 | - | 341 | ||||||||||||||||||||||||||||||
Total current liabilities | 1,005 | 100 | 9,297 | (6,535 | ) | 3,867 | 709 | 273 | 11,894 | (6,845 | ) | 6,031 | ||||||||||||||||||||||||||||
Total liabilities | 1,005 | 2,618 | 18,654 | (10,458 | ) | 11,819 | 709 | 2,296 | 24,123 | (10,472 | ) | 16,656 | ||||||||||||||||||||||||||||
Total equity and liabilities | 11,182 | 4,224 | 23,208 | (16,597 | ) | 22,017 | 15,200 | 4,093 | 33,610 | (21,270 | ) | 31,633 |
192 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2016
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 12,690 | - | 12,690 | |||||||||||||||
Intangible assets | - | - | 7,761 | - | 7,761 | |||||||||||||||
Subsidiaries | 7,654 | 375 | 1,682 | (9,711) | - | |||||||||||||||
Investments accounted for using the equity method | - | - | 1,299 | - | 1,299 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 4,508 | - | (4,508) | - | |||||||||||||||
Other financial assets | - | - | 26 | - | 26 | |||||||||||||||
Other receivables | - | - | 212 | - | 212 | |||||||||||||||
Derivative financial instruments | - | 13 | 40 | - | 53 | |||||||||||||||
Deferred income tax assets | - | - | 159 | - | 159 | |||||||||||||||
Total non-current assets | 7,654 | 4,896 | 23,869 | (14,219) | 22,200 | |||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,939 | - | 2,939 | |||||||||||||||
Trade and other receivables | - | 6 | 3,973 | - | 3,979 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,546 | - | 704 | (7,250) | - | |||||||||||||||
Current income tax recoverable | - | - | 4 | - | 4 | |||||||||||||||
Derivative financial instruments | - | - | 23 | - | 23 | |||||||||||||||
Cash and cash equivalents | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Total current assets | 6,947 | 6 | 9,691 | (7,250) | 9,394 | |||||||||||||||
Total assets | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 | |||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 13,895 | 1,922 | 7,789 | (9,711) | 13,895 | |||||||||||||||
Non-controlling interests | - | - | 548 | - | 548 | |||||||||||||||
Total equity | 13,895 | 1,922 | 8,337 | (9,711) | 14,443 | |||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,934 | 4,581 | - | 7,515 | |||||||||||||||
Deferred income tax liabilities | - | - | 2,008 | - | 2,008 | |||||||||||||||
Other payables | - | - | 461 | - | 461 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 4,508 | (4,508) | - | |||||||||||||||
Retirement benefit obligations | - | - | 591 | - | 591 | |||||||||||||||
Provisions for liabilities | - | - | 678 | - | 678 | |||||||||||||||
Total non-current liabilities | - | 2,934 | 12,827 | (4,508) | 11,253 | |||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | - | 46 | 4,769 | - | 4,815 | |||||||||||||||
Advances from subsidiary and parent undertakings | 704 | - | 6,546 | (7,250) | - | |||||||||||||||
Current income tax liabilities | - | - | 394 | - | 394 | |||||||||||||||
Interest-bearing loans and borrowings | 2 | - | 273 | - | 275 | |||||||||||||||
Derivative financial instruments | - | - | 32 | - | 32 | |||||||||||||||
Provisions for liabilities | - | - | 382 | - | 382 | |||||||||||||||
Total current liabilities | 706 | 46 | 12,396 | (7,250) | 5,898 | |||||||||||||||
Total liabilities | 706 | 2,980 | 25,223 | (11,758) | 17,151 | |||||||||||||||
Total equity and liabilities | 14,601 | 4,902 | 33,560 | (21,469) | 31,594 |
193 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 25,220 | - | 25,220 | |||||||||||||||
Cost of sales | - | - | (16,903) | - | (16,903) | |||||||||||||||
Gross profit | - | - | 8,317 | - | 8,317 | |||||||||||||||
Operating income/(costs) | 22 | - | (6,244) | - | (6,222) | |||||||||||||||
Group operating profit | 22 | - | 2,073 | - | 2,095 | |||||||||||||||
Profit on disposals | - | - | 56 | - | 56 | |||||||||||||||
Profit before finance costs | 22 | - | 2,129 | - | 2,151 | |||||||||||||||
Finance costs | - | (235) | (308) | 242 | (301) | |||||||||||||||
Finance income | 2 | 242 | 10 | (242) | 12 | |||||||||||||||
Other financial expense | - | - | (60) | - | (60) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,754 | 83 | - | (1,837) | - | |||||||||||||||
Share of equity accounted investments’ profit | 65 | - | 65 | (65) | 65 | |||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Income tax expense | (55) | (29) | (26) | 55 | (55) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,788 | 61 | 1,810 | (1,847) | 1,812 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,788 | 61 | 1,786 | (1,847) | 1,788 | |||||||||||||||
From discontinued operations | 107 | - | 107 | (107) | 107 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 24 | - | 24 | |||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,895 | 61 | 1,917 | (1,954) | 1,919 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (1,015) | (186) | (890) | 1,015 | (1,076) | |||||||||||||||
Gains relating to cash flow hedges | 8 | - | 8 | (8) | 8 | |||||||||||||||
(1,007) | (186) | (882) | 1,007 | (1,068) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 114 | - | 114 | (114) | 114 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (33) | - | (33) | 33 | (33) | |||||||||||||||
81 | - | 81 | (81) | 81 | ||||||||||||||||
Total other comprehensive income for the financial year | (926) | (186) | (801) | 926 | (987) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 969 | (125) | 1,153 | (1,028) | 969 | |||||||||||||||
Non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Total comprehensive income for the financial year | 969 | (125) | 1,116 | (1,028) | 932 |
194 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2016 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer €m | Non-Guarantor €m | Eliminate and €m | CRH and | ||||||||||||||||
Revenue | - | - | 24,789 | - | 24,789 | |||||||||||||||
Cost of sales | - | - | (16,566) | - | (16,566) | |||||||||||||||
Gross profit | - | - | 8,223 | - | 8,223 | |||||||||||||||
Operating income/(costs) | 20 | - | (6,335) | - | (6,315) | |||||||||||||||
Group operating profit | 20 | - | 1,888 | - | 1,908 | |||||||||||||||
Profit on disposals | - | - | 53 | - | 53 | |||||||||||||||
Profit before finance costs | 20 | - | 1,941 | - | 1,961 | |||||||||||||||
Finance costs | - | (266) | (334) | 275 | (325) | |||||||||||||||
Finance income | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Other financial expense | - | - | (66) | - | (66) | |||||||||||||||
Share of subsidiaries’ profit before tax | 1,529 | 95 | - | (1,624) | - | |||||||||||||||
Share of equity accounted investments’ profit | 42 | - | 42 | (42) | 42 | |||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666) | 1,620 | |||||||||||||||
Income tax expense | (431) | (41) | (390) | 431 | (431) | |||||||||||||||
Group profit for the financial year from continuing operations | 1,162 | 63 | 1,199 | (1,235) | 1,189 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 1,162 | 63 | 1,172 | (1,235) | 1,162 | |||||||||||||||
From discontinued operations | 81 | - | 81 | (81) | 81 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 27 | - | 27 | |||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit for the financial year | 1,243 | 63 | 1,280 | (1,316) | 1,270 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (71) | 49 | (131) | 71 | (82) | |||||||||||||||
Gains relating to cash flow hedges | 14 | - | 14 | (14) | 14 | |||||||||||||||
(57) | 49 | (117) | 57 | (68) | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | (61) | - | (61) | 61 | (61) | |||||||||||||||
Tax on items recognised directly within other comprehensive income | 3 | - | 3 | (3) | 3 | |||||||||||||||
(58) | - | (58) | 58 | (58) | ||||||||||||||||
Total other comprehensive income for the financial year | (115) | 49 | (175) | 115 | (126) | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,128 | 112 | 1,089 | (1,201) | 1,128 | |||||||||||||||
Non-controlling interests | - | - | 16 | - | 16 | |||||||||||||||
Total comprehensive income for the financial year | 1,128 | 112 | 1,105 | (1,201) | 1,144 |
195 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2015 | Restated(i) | |||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Revenue | - | - | 21,406 | - | 21,406 | |||||||||||||||
Cost of sales | - | - | (14,743) | - | (14,743) | |||||||||||||||
Gross profit | - | - | 6,663 | - | 6,663 | |||||||||||||||
Operating income/(costs) | 1,473 | - | (6,970) | - | (5,497) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (307) | - | 1,166 | |||||||||||||||
(Loss)/profit on disposals | (7) | - | 106 | - | 99 | |||||||||||||||
Profit/(loss) before finance costs | 1,466 | - | (201) | - | 1,265 | |||||||||||||||
Finance costs | - | (321) | (315) | 333 | (303) | |||||||||||||||
Finance income | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Other financial expense | - | - | (94) | - | (94) | |||||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (596) | 62 | - | 534 | - | |||||||||||||||
Share of equity accounted investments’ profit | 44 | - | 44 | (44) | 44 | |||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559) | 490 | 920 | |||||||||||||||
Income tax expense | (276) | (29) | (247) | 276 | (276) | |||||||||||||||
Group profit/(loss) for the financial year from continuing operations | 639 | 45 | (806) | 766 | 644 | |||||||||||||||
Profit after tax for the financial year from discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Profit/(loss) attributable to: | ||||||||||||||||||||
Equity holders of the Company | ||||||||||||||||||||
From continuing operations | 639 | 45 | (811) | 766 | 639 | |||||||||||||||
From discontinued operations | 85 | - | 85 | (85) | 85 | |||||||||||||||
Non-controlling interests | ||||||||||||||||||||
From continuing operations | - | - | 5 | - | 5 | |||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. |
| |||||||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit/(loss) for the financial year | 724 | 45 | (721) | 681 | 729 | |||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | 643 | 159 | 502 | (643) | 661 | |||||||||||||||
Losses relating to cash flow hedges | (2) | - | (2) | 2 | (2) | |||||||||||||||
641 | 159 | 500 | (641) | 659 | ||||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 203 | - | 203 | (203) | 203 | |||||||||||||||
Tax on items recognised directly within other comprehensive income | (30) | - | (30) | 30 | (30) | |||||||||||||||
173 | - | 173 | (173) | 173 | ||||||||||||||||
Total other comprehensive income for the financial year | 814 | 159 | 673 | (814) | 832 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 | |||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 1,538 | 204 | (71) | (133) | 1,538 | |||||||||||||||
Non-controlling interests | - | - | 23 | - | 23 | |||||||||||||||
Total comprehensive income for the financial year | 1,538 | 204 | (48) | (133) | 1,561 |
196 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2017 | ||||||||||||||||||||
Guarantor | Issuer | Non-Guarantor | Eliminate and | CRH and | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,843 | 90 | 1,836 | (1,902) | 1,867 | |||||||||||||||
Profit before tax from discontinued operations | 146 | - | 146 | (146) | 146 | |||||||||||||||
Profit before tax | 1,989 | 90 | 1,982 | (2,048) | 2,013 | |||||||||||||||
Finance costs (net) | (2) | (7) | 358 | - | 349 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,900) | (83) | - | 1,983 | - | |||||||||||||||
Share of equity accounted investments’ profit | (65) | - | (65) | 65 | (65) | |||||||||||||||
Profit on disposals | - | - | (59) | - | (59) | |||||||||||||||
Group operating profit | 22 | - | 2,216 | - | 2,238 | |||||||||||||||
Depreciation charge | - | - | 1,006 | - | 1,006 | |||||||||||||||
Amortisation of intangible assets | - | - | 66 | - | 66 | |||||||||||||||
Share-based payment (income)/expense | (1) | - | 66 | - | 65 | |||||||||||||||
Other (primarily pension payments) | - | - | (186) | - | (186) | |||||||||||||||
Net movement on working capital and provisions | - | (11) | (198) | - | (209) | |||||||||||||||
Cash generated from operations | 21 | (11) | 2,970 | - | 2,980 | |||||||||||||||
Interest paid (including finance leases) | - | (236) | (323) | 242 | (317) | |||||||||||||||
Corporation tax paid | - | (29) | (445) | - | (474) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 21 | (276) | 2,202 | 242 | 2,189 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 222 | - | 222 | |||||||||||||||
Interest received | 2 | 242 | 9 | (242) | 11 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 31 | - | 31 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (1,044) | - | (1,044) | |||||||||||||||
Advances from subsidiary and parent undertakings | 407 | 356 | - | (763) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (1,841) | - | (1,841) | |||||||||||||||
Other investments and advances | - | - | (11) | - | (11) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (53) | - | (53) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 409 | 598 | (2,687) | (1,005) | (2,685) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 42 | - | - | - | 42 | |||||||||||||||
Transactions involving non-controlling interests | - | - | (37) | - | (37) | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (763) | 763 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | 6 | 1,004 | - | 1,010 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 11 | 158 | - | 169 | |||||||||||||||
Premium paid on early debt redemption | - | (18) | - | - | (18) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (321) | (22) | - | (343) | |||||||||||||||
Dividends paid to equity holders of the Company | (469) | - | - | - | (469) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (430) | (322) | 332 | 763 | 343 | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 401 | - | 2,048 | - | 2,449 | |||||||||||||||
Translation adjustment | - | - | (161) | - | (161) | |||||||||||||||
Decrease in cash and cash equivalents | - | - | (153) | - | (153) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 1,734 | - | 2,135 |
197 |
CRH Annual Report and Form 20-F|2017 |
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2016 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax from continuing operations | 1,593 | 104 | 1,589 | (1,666 | ) | 1,620 | ||||||||||||||
Profit before tax from discontinued operations | 121 | - | 121 | (121 | ) | 121 | ||||||||||||||
Profit before tax | 1,714 | 104 | 1,710 | (1,787) | 1,741 | |||||||||||||||
Finance costs (net) | (2) | (9) | 394 | - | 383 | |||||||||||||||
Share of subsidiaries’ profit before tax | (1,650) | (95) | - | 1,745 | - | |||||||||||||||
Share of equity accounted investments’ profit | (42) | - | (42) | 42 | (42) | |||||||||||||||
Profit on disposals | - | - | (55) | - | (55) | |||||||||||||||
Group operating profit | 20 | - | 2,007 | - | 2,027 | |||||||||||||||
Depreciation charge | - | - | 1,009 | - | 1,009 | |||||||||||||||
Amortisation of intangible assets | - | - | 71 | - | 71 | |||||||||||||||
Impairment charge | - | - | 23 | - | 23 | |||||||||||||||
Share-based payment (income)/expense | (3) | - | 49 | - | 46 | |||||||||||||||
Other (primarily pension payments) | - | - | (65) | - | (65) | |||||||||||||||
Net movement on working capital and provisions | - | (1) | 57 | - | 56 | |||||||||||||||
Cash generated from operations | 17 | (1) | 3,151 | - | 3,167 | |||||||||||||||
Interest paid (including finance leases) | - | (266) | (355) | 275 | (346) | |||||||||||||||
Corporation tax paid | - | (41) | (440) | - | (481) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 17 | (308) | 2,356 | 275 | 2,340 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 283 | - | 283 | |||||||||||||||
Interest received | 2 | 275 | 6 | (275) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 40 | - | 40 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (853) | - | (853) | |||||||||||||||
Advances from subsidiary and parent undertakings | 287 | 644 | - | (931) | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (149) | - | (149) | |||||||||||||||
Other investments and advances | - | - | (7) | - | (7) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (57) | - | (57) | |||||||||||||||
Net cash inflow/(outflow) from investing activities | 289 | 919 | (737) | (1,206) | (735) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | 52 | - | - | - | 52 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | (931) | 931 | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | - | 600 | - | 600 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 25 | (30) | - | (5) | |||||||||||||||
Treasury/own shares purchased | (4) | - | - | - | (4) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (9) | (636) | (1,370) | - | (2,015) | |||||||||||||||
Dividends paid to equity holders of the Company | (352) | - | - | - | (352) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (8) | - | (8) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (313) | (611) | (1,739) | 931 | (1,732) | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 408 | - | 2,110 | - | 2,518 | |||||||||||||||
Translation adjustment | - | - | 58 | - | 58 | |||||||||||||||
Decrease in cash and cash equivalents | (7) | - | (120) | - | (127) | |||||||||||||||
Cash and cash equivalents at 31 December | 401 | - | 2,048 | - | 2,449 |
198 |
CRH Annual Report and Form 20-F|2017 |
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2015 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate reclassify €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit/(loss) before tax from continuing operations | 915 | 74 | (559 | ) | 490 | 920 | ||||||||||||||
Profit before tax from discontinued operations | 113 | - | 113 | (113 | ) | 113 | ||||||||||||||
Profit/(loss) before tax | 1,028 | 74 | (446) | 377 | 1,033 | |||||||||||||||
Finance costs (net) | (1) | (12) | 402 | - | 389 | |||||||||||||||
Share of subsidiaries’ loss/(profit) before tax | 483 | (62) | - | (421) | - | |||||||||||||||
Share of equity accounted investments’ profit | (44) | - | (44) | 44 | (44) | |||||||||||||||
Loss/(profit) on disposals | 7 | - | (108) | - | (101) | |||||||||||||||
Group operating profit/(loss) | 1,473 | - | (196) | - | 1,277 | |||||||||||||||
Depreciation charge | - | - | 843 | - | 843 | |||||||||||||||
Amortisation of intangible assets | - | - | 55 | - | 55 | |||||||||||||||
Impairment charge | - | - | 44 | - | 44 | |||||||||||||||
Share-based payment (income)/expense | (2) | - | 29 | - | 27 | |||||||||||||||
Other (primarily pension payments) | - | - | (47) | - | (47) | |||||||||||||||
Amounts due from subsidary undertakings | (1,460) | - | 1,460 | - | - | |||||||||||||||
Net movement on working capital and provisions | - | (9) | 594 | - | 585 | |||||||||||||||
Cash generated from operations | 11 | (9) | 2,782 | - | 2,784 | |||||||||||||||
Interest paid (including finance leases) | - | (283) | (352) | 333 | (302) | |||||||||||||||
Corporation tax paid | - | (29) | (206) | - | (235) | |||||||||||||||
Net cash inflow/(outflow) from operating activities | 11 | (321) | 2,224 | 333 | 2,247 | |||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed and deferred proceeds) | - | - | 889 | - | 889 | |||||||||||||||
Interest received | 1 | 333 | 7 | (333) | 8 | |||||||||||||||
Dividends received from equity accounted investments | - | - | 53 | - | 53 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (882) | - | (882) | |||||||||||||||
Advances from subsidiary and parent undertakings | (699) | (632) | - | 1,331 | - | |||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (7,296) | - | (7,296) | |||||||||||||||
Other investments and advances | - | - | (19) | - | (19) | |||||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (59) | - | (59) | |||||||||||||||
Net cash outflow from investing activities | (698) | (299) | (7,307) | 998 | (7,306) | |||||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from issue of shares (net) | - | - | 1,593 | - | 1,593 | |||||||||||||||
Proceeds from exercise of share options | 57 | - | - | - | 57 | |||||||||||||||
Advances to subsidiary and parent undertakings | - | - | 1,331 | (1,331) | - | |||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | 9 | 1,584 | 4,040 | - | 5,633 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 15 | 32 | - | 47 | |||||||||||||||
Premium paid on early debt redemption | - | (38) | - | - | (38) | |||||||||||||||
Treasury/own shares purchased | (3) | - | - | - | (3) | |||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (968) | (1,776) | - | (2,744) | |||||||||||||||
Dividends paid to equity holders of the Company | (379) | - | - | - | (379) | |||||||||||||||
Dividends paid tonon-controlling interests | - | - | (4) | - | (4) | |||||||||||||||
Net cash (outflow)/inflow from financing activities | (316) | 593 | 5,216 | (1,331) | 4,162 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 1,411 | 25 | 1,859 | - | 3,295 | |||||||||||||||
Translation adjustment | - | 2 | 118 | - | 120 | |||||||||||||||
(Decrease)/increase in cash and cash equivalents | (1,003) | (27) | 133 | - | (897) | |||||||||||||||
Cash and cash equivalents at 31 December | 408 | - | 2,110 | - | 2,518 |
199 |
CRH Annual Report and Form 20-F|2017 |
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207 |
CRH Annual Report and Form 20-F | 2017
The Consolidated Financial Statements of CRH plc have been prepared in accordance with IFRS as adopted by the International Accounting Standards Board.
Selected financial data is presented below for the five years ended on 31 December 2017. For the three years ended 31 December 2017, the selected financial data is qualified in its entirety by reference to, and should be read in conjunction
with, the audited Consolidated Financial Statements, the related Notes and the Business Performance section included elsewhere in this Annual Report and Form20-F.
Year ended 31 December (amounts in millions, except per share data and ratios) | ||||||||||||||||||
2017 €m | 2016 (i) €m | 2015 (i) €m | 2014 (i) €m | 2013 (i) (ii) €m | ||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||
Revenue | 25,220 | 24,789 | 21,406 | 17,136 | 16,367 | |||||||||||||
Group operating profit | 2,095 | 1,908 | 1,166 | 834 | 33 | |||||||||||||
Profit/(loss) attributable to equity holders of the Company | 1,788 | 1,162 | 639 | 520 | (344) | |||||||||||||
Basic earnings/(loss) per Ordinary Share | 214.0c | 140.4c | 78.7c | 70.4c | (47.2c) | |||||||||||||
Diluted earnings/(loss) per Ordinary Share | 212.7c | 139.4c | 78.3c | 70.4c | (47.2c) | |||||||||||||
Dividends paid during calendar year per Ordinary Share | 65.4c | 62.8c | 62.5c | 62.5c | 62.5c | |||||||||||||
Average number of Ordinary Shares outstanding (iii) | 835.6 | 827.8 | 812.3 | 737.6 | 729.2 | |||||||||||||
Ratio of earnings to fixed charges (times) (iv) | 4.5 | 3.9 | 2.8 | 2.4 | 0.6 (v) | |||||||||||||
All data relates to continuing operations | ||||||||||||||||||
Consolidated Balance Sheet Data | ||||||||||||||||||
Total assets | 31,633 | 31,594 | 32,007 | 22,017 | 20,429 | |||||||||||||
Net assets (vi) | 14,977 | 14,443 | 13,544 | 10,198 | 9,686 | |||||||||||||
Ordinary shareholders’ equity | 14,490 | 13,894 | 13,014 | 10,176 | 9,661 | |||||||||||||
Equity share capital | 286 | 284 | 281 | 253 | 251 | |||||||||||||
Number of Ordinary Shares (iii) | 839.0 | 832.8 | 823.9 | 744.5 | 739.2 | |||||||||||||
Number of Treasury Shares and own shares (iii) | 0.4 | 0.4 | 1.3 | 3.8 | 6.0 | |||||||||||||
Number of Ordinary Shares net of Treasury Shares and own shares (iii) | 838.6 | 832.4 | 822.6 | 740.7 | 733.2 |
(i) | Prior year comparative income statement data has been restated to show the results of our Americas Distribution segment in discontinued operations. See note 2 to the Consolidated Financial Statements for further details. |
(ii) | Group operating profit includes asset impairment charges of€650 million in 2013, with an additional€105 million impairment charge included in loss attributable to equity holders of the Company in respect of equity accounted investments. |
(iii) | All share numbers are shown in millions of shares. |
(iv) | For the purposes of calculating the ratio of earnings to fixed charges, in accordance with Item 503 of RegulationS-K, earnings have been calculated by adding: profit/(loss) before tax from continuing operations adjusted to exclude the Group’s share of equity accounted investments’ result after tax, fixed charges and dividends received from equity accounted investments; and the fixed charges were calculated by adding interest expensed and capitalised, amortised premiums, discounts and capitalised expenses related to indebtedness, an estimate of the interest within rental expense and preference security dividend requirements of consolidated subsidiaries. |
(v) | The amount of the deficiency in 2013 was US$183 million. |
(vi) | Net assets is calculated as the sum of total assets less total liabilities. |
208 |
CRH Annual Report and Form 20-F | 2017
In this Annual Report and Form20-F, references to “US$”, “US Dollars” or “US cents” are to the United States currency, references to “euro”, “euro cent”, “cent”, “c” or “€” are to the euro currency and “Stg£” or “Pound Sterling” are to the currency of the United Kingdom of Great Britain and Northern Ireland (UK). Other currencies referred to in this Annual Report and Form20-F include Polish Zloty (PLN), Swiss Franc (CHF), Canadian Dollar (CAD), Chinese Renminbi (RMB), Indian Rupee (INR), Ukrainian Hryvnia (UAH), Philippine Peso (PHP), Romanian Leu (RON) and Serbian Dinar (RSD).
For the convenience of the reader, this Annual Report and Form20-F contains translations of certain euro amounts into US Dollars at specified rates. These translations should not be construed as representations that the euro amounts actually represent such US Dollar amounts or could be converted into US Dollars at the rate indicated.
The table below sets forth, for the periods and dates indicated, the average, high, low andend-of-period exchange rates in US Dollars per€1 (to the nearest cent) using the Federal Reserve Bank of New York Noon Buying Rate (the ‘FRB Noon Buying Rate’).
These rates may vary slightly from the rates used for translating foreign currencies into euro in the preparation of the Consolidated Financial Statements (see page 134).
For a discussion on the effects of exchange rate fluctuations on the financial condition and results of the operations of the Group, see the Business Performance section beginning on page 22.
Where referenced in the Supplementary20-F Disclosures and Shareholder Information sections, information is provided at the latest practicable date, 16 February 2018.
euro/US Dollar exchange rate
Years ended 31 December | Period End | Average Rate (i) | High | Low | ||||||||||
2013 | 1.38 | 1.33 | 1.38 | 1.28 | ||||||||||
2014 | 1.21 | 1.32 | 1.39 | 1.21 | ||||||||||
2015 | 1.09 | 1.10 | 1.20 | 1.05 | ||||||||||
2016 | 1.06 | 1.10 | 1.15 | 1.04 | ||||||||||
2017 | 1.20 | 1.14 | 1.20 | 1.04 | ||||||||||
2018 (through 16 February 2018) | 1.24 | 1.23 | 1.25 | 1.19 | ||||||||||
Months ended | ||||||||||||||
September 2017 | 1.18 | 1.19 | 1.20 | 1.17 | ||||||||||
October 2017 | 1.16 | 1.18 | 1.18 | 1.16 | ||||||||||
November 2017 | 1.19 | 1.17 | 1.19 | 1.16 | ||||||||||
December 2017 | 1.20 | 1.18 | 1.20 | 1.17 | ||||||||||
January 2018 | 1.24 | 1.22 | 1.25 | 1.19 | ||||||||||
February 2018 (through 16 February 2018) | 1.24 | 1.24 | 1.25 | 1.22 | ||||||||||
(i) The average of the euro/US Dollar exchange rate on the last day of each month during the period or in the case of monthly averages, the average of all days in the month, in each case using the FRB Noon Buying Rate.
The FRB Noon Buying Rate on 31 December 2017 was€1 = US$1.2022 and on 16 February 2018 was€1 = US$1.2442. |
209 |
CRH Annual Report and Form 20-F | 2017
CRH uses a number ofnon-GAAP performance measures to monitor financial performance. These measures are referred to throughout the discussion of our reported financial position and operating performance and are measures which are regularly reviewed by CRH management.
These performance measures may not be uniformly defined by all companies and accordingly they may not be directly comparable with similarly titled measures and disclosures by other companies. Certain information presented is derived from amounts calculated in accordance
with IFRS but is not itself an expressly permitted GAAP measure. Thenon-GAAP performance measures as summarised below should not be viewed in isolation or as an alternative to the equivalent GAAP measure.
Reconciliation of Revenue, EBITDA (as defined)* and Operating Profit by segment
Year ended 31 December | ||||||||||||||||||||||||||||||||||||||||||||
Revenue | Group EBITDA (as defined)* | Depreciation, amortisation and impairment | Group operating profit (i) | |||||||||||||||||||||||||||||||||||||||||
2017 €m | 2016 €m | 2015 €m | 2017 €m | �� | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | 2017 €m | 2016 €m | 2015 €m | ||||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | 6,902 | 6,945 | 4,813 | 839 | 781 | 424 | 361 | 395 | 304 | 478 | 386 | 120 | ||||||||||||||||||||||||||||||||
Europe Lightside | 1,440 | 1,392 | 1,404 | 143 | 137 | 136 | 41 | 45 | 46 | 102 | 92 | 90 | ||||||||||||||||||||||||||||||||
Europe Distribution | 4,145 | 4,066 | 4,158 | 269 | 206 | 171 | 62 | 76 | 77 | 207 | 130 | 94 | ||||||||||||||||||||||||||||||||
Europe | 12,487 | 12,403 | 10,375 | 1,251 | 1,124 | 731 | 464 | 516 | 427 | 787 | 608 | 304 | ||||||||||||||||||||||||||||||||
Americas Materials | 7,970 | 7,598 | 7,018 | 1,270 | 1,204 | 955 | 412 | 386 | 335 | 858 | 818 | 620 | ||||||||||||||||||||||||||||||||
Americas Products | 4,327 | 4,280 | 3,862 | 573 | 543 | 391 | 138 | 132 | 142 | 435 | 411 | 249 | ||||||||||||||||||||||||||||||||
Americas | 12,297 | 11,878 | 10,880 | 1,843 | 1,747 | 1,346 | 550 | 518 | 477 | 1,293 | 1,229 | 869 | ||||||||||||||||||||||||||||||||
Asia | 436 | 508 | 151 | 52 | 109 | 2 | 37 | 38 | 9 | 15 | 71 | (7) | ||||||||||||||||||||||||||||||||
Total Group from continuing operations | 25,220 | 24,789 | 21,406 | 3,146 | 2,980 | 2,079 | 1,051 | 1,072 | 913 | 2,095 | 1,908 | 1,166 | ||||||||||||||||||||||||||||||||
Discontinued operations | ||||||||||||||||||||||||||||||||||||||||||||
Americas Distribution | 2,343 | 2,315 | 2,229 | 164 | 150 | 140 | 21 | 31 | 29 | 143 | 119 | 111 | ||||||||||||||||||||||||||||||||
Total Group | 27,563 | 27,104 | 23,635 | 3,310 | 3,130 | 2,219 | 1,072 | 1,103 | 942 | 2,238 | 2,027 | 1,277 | ||||||||||||||||||||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||||||||||||||||||||||||||||||
Profit on disposals | 56 | 53 | 99 | |||||||||||||||||||||||||||||||||||||||||
Finance costs less income | (289) | (317) | (295) | |||||||||||||||||||||||||||||||||||||||||
Other financial expense | (60) | (66) | (94) | |||||||||||||||||||||||||||||||||||||||||
Share of equity accounted investments’ profit | 65 | 42 | 44 | |||||||||||||||||||||||||||||||||||||||||
Profit before tax from continuing operations | 1,867 | 1,620 | 920 | |||||||||||||||||||||||||||||||||||||||||
Income tax expense | (55) | (431) | (276) | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year from continuing operations | 1,812 | 1,189 | 644 | |||||||||||||||||||||||||||||||||||||||||
Profit after tax for the financial year from discontinued operations | 107 | 81 | 85 | |||||||||||||||||||||||||||||||||||||||||
Group profit for the financial year | 1,919 | 1,270 | 729 |
(i) | Throughout this document, Group operating profit is reported as shown in the Consolidated Income Statement and excludes profit on disposals. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
210 |
CRH Annual Report and Form 20-F | 2017
Return on Net Assets | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Group operating profit from continuing operations | 2,095 | 1,908 | 1,166 | |||||||||||||
Group operating profit from discontinued operations | 143 | 119 | 111 | |||||||||||||
Total Group operating profit (numerator for RONA computation) | 2,238 | 2,027 | 1,277 | |||||||||||||
Current year | ||||||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | |||||||||||||
Segment liabilities (i) | (6,201) | (6,927) | (6,794) | |||||||||||||
Group segment net assets | 20,608 | 20,654 | 21,087 | |||||||||||||
Assets held for sale | 1,112 | - | - | |||||||||||||
Liabilities associated with assets classified as held for sale | (341) | - | - | |||||||||||||
Group net assets (including net assets held for sale) | 21,379 | 20,654 | 21,087 | |||||||||||||
Prior year | ||||||||||||||||
Segment assets (i) | 27,581 | 27,881 | 16,584 | |||||||||||||
Segment liabilities (i) | (6,927) | (6,794) | (4,258) | |||||||||||||
Group segment net assets | 20,654 | 21,087 | 12,326 | |||||||||||||
Average net assets including net assets held for sale (denominator for RONA computation) | 21,017 | 20,871 | 16,707 | |||||||||||||
RONA | 10.6% | 9.7% | 7.6% | |||||||||||||
Reconciliation of Segment Assets and Liabilities to Group Assets and Liabilities | ||||||||||||||||
Assets | 2017 €m | 2016 €m | 2015 €m | 2014 €m | ||||||||||||
Segment assets (i) | 26,809 | 27,581 | 27,881 | 16,584 | ||||||||||||
Reconciliation to total assets as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Investments accounted for using the equity method | 1,248 | 1,299 | 1,317 | 1,329 | ||||||||||||
Other financial assets | 25 | 26 | 28 | 23 | ||||||||||||
Derivative financial instruments (current andnon-current) | 64 | 76 | 109 | 102 | ||||||||||||
Income tax assets (current and deferred) | 260 | 163 | 154 | 186 | ||||||||||||
Cash and cash equivalents | 2,115 | 2,449 | 2,518 | 3,262 | ||||||||||||
Assets held for sale | 1,112 | - | - | 531 | ||||||||||||
Total assets as reported in the Consolidated Balance Sheet | 31,633 | 31,594 | 32,007 | 22,017 | ||||||||||||
Liabilities | ||||||||||||||||
Segment liabilities (i) | 6,201 | 6,927 | 6,794 | 4,258 | ||||||||||||
Reconciliation to total liabilities as reported in the Consolidated Balance Sheet: | ||||||||||||||||
Interest-bearing loans and borrowings (current andnon-current) | 7,976 | 7,790 | 9,221 | 5,866 | ||||||||||||
Derivative financial instruments (current andnon-current) | 14 | 32 | 24 | 23 | ||||||||||||
Income tax liabilities (current and deferred) | 2,124 | 2,402 | 2,424 | 1,459 | ||||||||||||
Liabilities associated with assets classified as held for sale | 341 | - | - | 213 | ||||||||||||
Total liabilities as reported in the Consolidated Balance Sheet | 16,656 | 17,151 | 18,463 | 11,819 |
(i) | Segment assets and liabilities as disclosed in note 1 to the Consolidated Financial Statements. |
211 |
CRH Annual Report and Form 20-F | 2017
Non-GAAP Performance Measures - continued
Calculation of EBITDA (as defined)* Net Interest Cover
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Interest | ||||||||||||||||
Finance costs (i) | 301 | 325 | 303 | |||||||||||||
Finance income (i) | (12) | (8) | (8) | |||||||||||||
Net interest | 289 | 317 | 295 | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
Times | ||||||||||||||||
EBITDA (as defined)* net interest cover (EBITDA (as defined)* divided by net interest) | 10.9 | 9.4 | 7.0 | |||||||||||||
(i) These items appear on the Consolidated Income Statement on page 120. | ||||||||||||||||
Calculation of Net Debt/EBITDA (as defined)* | ||||||||||||||||
2017 €m | 2016 €m | 2015 €m | ||||||||||||||
Net Debt | ||||||||||||||||
Cash and cash equivalents (i) | 2,115 | 2,449 | 2,518 | |||||||||||||
Interest-bearing loans and borrowings (i) | (7,976) | (7,790) | (9,221) | |||||||||||||
Derivative financial instruments (net) (i) | 50 | 44 | 85 | |||||||||||||
Group net debt excluding net debt reclassified as held for sale | (5,811) | (5,297) | (6,618) | |||||||||||||
Cash at bank and in hand reclassified as held for sale (i) | 20 | - | - | |||||||||||||
Interest-bearing loans and borrowings reclassified as held for sale (i) | (5) | - | - | |||||||||||||
Group net debt | (5,796) | (5,297) | (6,618) | |||||||||||||
EBITDA (as defined)* from continuing operations | 3,146 | 2,980 | 2,079 | |||||||||||||
EBITDA (as defined)* from discontinued operations | 164 | 150 | 140 | |||||||||||||
Total Group EBITDA (as defined)* | 3,310 | 3,130 | 2,219 | |||||||||||||
Times | ||||||||||||||||
Net debt divided by EBITDA (as defined)* | 1.8 | 1.7 | 3.0 | |||||||||||||
(i) These items appear in notes 21 to 25 to the Consolidated Financial Statements. | ||||||||||||||||
Adjusted Basic Earnings per Ordinary Share | ||||||||||||||||
2017 €m | ||||||||||||||||
Numerator for basic and diluted earnings per Ordinary Share (i) | 1,895 | |||||||||||||||
One-off Swiss pension past service credit (net of tax) (ii) | (59) | |||||||||||||||
One-off deferred tax credit (including credit relating to discontinued operations) | (447) | |||||||||||||||
Numerator for adjusted basic EPS excludingone-off gains per Ordinary Share from continuing and discontinued operations | 1,389 | |||||||||||||||
Average shares (i) | 835.6 | |||||||||||||||
Adjusted basic earnings per Ordinary Share | 166.2c | |||||||||||||||
Dividend declared for the year | 68.0c | |||||||||||||||
Dividend cover (adjusted basic earnings per share/dividend declared per share) | 2.4x |
(i) | These items appear in note 13 to the Consolidated Financial Statements. |
(ii) | Theone-off Swiss pension past service credit was€81 million before a tax charge of€22 million. |
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
212 |
CRH Annual Report and Form 20-F | 2017
EBITDA (as defined). EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax and is quoted by management in conjunction with other GAAP andnon-GAAP financial measures, to aid investors in their analysis of the performance of the Group and to assist investors in the comparison of the Group’s performance with that of other companies. EBITDA (as defined)* and operating profit by segment are monitored by management in order to allocate resources between segments and to assess performance. Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for the purpose of the information presented to the Chief Operating Decision Maker.
Net Debt. Net debt is used by management as it gives a more complete picture of the Group’s current debt situation than total interest-bearing loans and borrowings. Net debt is provided to enable investors to see the economic effect of gross debt, related hedges and cash and cash equivalents in total. Net debt is anon-GAAP measure and comprises current andnon-current interest-bearing loans and borrowings, cash and cash equivalents and current andnon-current derivative financial instruments.
Net debt/EBITDA (as defined)* is monitored by management and is useful to investors in assessing the Company’s level of indebtedness relative to its profitability and cash-generating capabilities. It is the ratio of net debt to EBITDA (as defined)* and is calculated on page 212.
EBITDA (as defined)*Net Interest Cover. EBITDA (as defined)* net interest cover is used by management as a measure which matches the earnings and cash generated by the business to the underlying funding costs. EBITDA (as defined)* net interest cover is presented to provide investors with a greater understanding of the impact of CRH’s debt and financing arrangements. It is the ratio of EBITDA (as defined)* to net interest and is calculated on page 212. The definitions and calculations used as a metric in lender covenant agreements include certain specified adjustments to the amounts included in the Consolidated Financial Statements. The ratios as calculated on the basis of the definitions in those covenants are disclosed in note 24 to the Consolidated Financial Statements.
RONA. Return on Net Assets is a key internalpre-tax measure of operating performance throughout the CRH Group and can be used by management and investors to measure the relative use of assets between CRH’s business segments and to compare to other businesses. The metric measures management’s ability to generate profits
from the net assets required to support that business, focusing on both profit maximisation and the maintenance of an efficient asset base; it encourages effective fixed asset maintenance programmes, good decisions regarding expenditure on property, plant and equipment and the timely disposal of surplus assets, and also supports the effective management of the Group’s working capital base. RONA is calculated by expressing total Group operating profit as a percentage of average net assets. Net assets comprise total assets by segment (including assets held for sale) less total liabilities by segment (including liabilities associated with assets classified as held for sale) as shown on page 211 and detailed in note 1 to the Consolidated Financial Statements, and exclude equity accounted investments and other financial assets, net debt (as previously defined) and tax assets & liabilities. The average net assets for the year is the simple average of the opening and closing balance sheet figures.
Organic Revenue, Organic Operating Profit and Organic EBITDA (as defined)*. CRH pursues a strategy of growth through acquisitions and investments, with€1,905 million spent on acquisitions and investments in 2017 (2016:€213 million). Acquisitions completed in 2016 and 2017 contributed incremental sales revenue of€596 million, operating profit of€14 million and EBITDA (as defined)* of€60 million in 2017. Proceeds from divestments andnon-current asset disposals amounted to€222 million (net of cash disposed and deferred proceeds) (2016:€283 million). The sales impact of divested activities in 2017 was a negative€204 million and the disposal impact at an operating profit and EBITDA (as defined)* level was a negative€14 million and€21 million respectively.
The euro strengthened against most major currencies during 2017, particularly towards the end of the year resulting in the average euro/ Pound Sterling rate weakening from 0.8195 in 2016 to 0.8767 in 2017 and the US Dollar weakening from an average 1.1069 in 2016 to 1.1297 in 2017. Overall currency movements resulted in an unfavourable net foreign currency translation impact on our results as shown on the table on page 26.
Because of the impact of acquisitions, divestments, exchange translation and othernon-recurring items on reported results each year, the Group uses organic revenue, organic operating profit and organic EBITDA (as defined)* as additional performance indicators to assess performance ofpre-existing (also referred to as underlying, heritage,like-for-like or ongoing) operations each year.
Organic revenue, organic operating profit and organic EBITDA (as defined)* is arrived at by excluding the incremental revenue, operating profit and EBITDA (as defined)* contributions from current and prior year acquisitions and divestments, the impact of exchange translation and the impact of anynon-recurring items. In the Business Performance section on pages 22 to 53, changes in organic revenue, organic operating profit and organic EBITDA (as defined)* are presented as additional measures of revenue, operating profit and EBITDA (as defined)* to provide a greater understanding of the performance of the Group. A reconciliation of the changes in organic revenue, organic operating profit and organic EBITDA (as defined)* to the changes in total revenue, operating profit and EBITDA (as defined)* for the Group and by segment, is presented with the discussion of each segment’s performance in tables contained in the segment discussion commencing on page 32.
Adjusted Basic Earnings per Ordinary Share. Adjusted basic earnings per Ordinary Share has been used by management as it presents a more accurate picture of the profit attributable to equity holders of the Group, before certainone-off items (net of related tax). Management believes adjusted basic earnings per Ordinary Share provides useful information for investors and allows more meaningfulperiod-to-period comparisons of our operating results. This is anon-GAAP measure as it removes the impact of theone-off past service credit due to changes in the Group’s pension scheme in Switzerland and theone-off benefit of a reduction in the Group’s deferred tax liabilities due to changes in US tax legislation. As these areone-off items, relating to 2017, no comparative information is required.
Revenue from continuing and discontinued operations, EBITDA (as defined)* from continuing and discontinued operations and Operating Profit from continuing and discontinued operations. As detailed in note 2 to the Consolidated Financial Statements, our Americas Distribution segment has been classified as discontinued operations in accordance with IFRS 5. In certain instances throughout the Annual Report and Form20-F we refer to revenue, EBITDA (as defined)* and operating profit from continuing and discontinued operations. Information presented on this basis is useful to investors as (i) it provides a greater understanding of the Group’s performance and (ii) assists investors in the comparison of the Group’s performance with that of other companies. A reconciliation of each of these measures is detailed in note 1 to the Consolidated Financial Statements and on page 210.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
34. Supplemental Guarantor Information|continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2013
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Non-current assets | ||||||||||||||||||||
Property, plant and equipment | - | - | 7,539 | - | 7,539 | |||||||||||||||
Intangible assets | - | - | 3,911 | - | 3,911 | |||||||||||||||
Subsidiaries | 4,603 | 183 | 1,682 | (6,468 | ) | - | ||||||||||||||
Investments accounted for using the equity method | - | - | 1,340 | - | 1,340 | |||||||||||||||
Advances to subsidiaries and parent undertakings | - | 3,469 | - | (3,469 | ) | - | ||||||||||||||
Other financial assets | - | - | 23 | - | 23 | |||||||||||||||
Other receivables | - | - | 93 | - | 93 | |||||||||||||||
Derivative financial instruments | - | 58 | 5 | - | 63 | |||||||||||||||
Deferred income tax assets | - | - | 107 | - | 107 | |||||||||||||||
Total non-current assets | 4,603 | 3,710 | 14,700 | (9,937 | ) | 13,076 | ||||||||||||||
Current assets | ||||||||||||||||||||
Inventories | - | - | 2,254 | - | 2,254 | |||||||||||||||
Trade and other receivables | - | 9 | 2,507 | - | 2,516 | |||||||||||||||
Advances to subsidiaries and parent undertakings | 6,394 | - | 1,453 | (7,847 | ) | - | ||||||||||||||
Current income tax recoverable | - | - | 26 | - | 26 | |||||||||||||||
Derivative financial instruments | - | - | 17 | - | 17 | |||||||||||||||
Cash and cash equivalents | 175 | 174 | 2,191 | - | 2,540 | |||||||||||||||
Total current assets | 6,569 | 183 | 8,448 | (7,847 | ) | 7,353 | ||||||||||||||
Total assets | 11,172 | 3,893 | 23,148 | (17,784 | ) | 20,429 | ||||||||||||||
EQUITY | ||||||||||||||||||||
Capital and reserves attributable to the Company’s equity holders | 9,662 | 1,413 | 5,055 | (6,468 | ) | 9,662 | ||||||||||||||
Non-controlling interests | - | - | 24 | - | 24 | |||||||||||||||
Total equity | 9,662 | 1,413 | 5,079 | (6,468 | ) | 9,686 | ||||||||||||||
LIABILITIES | ||||||||||||||||||||
Non-current liabilities | ||||||||||||||||||||
Interest-bearing loans and borrowings | - | 2,279 | 2,300 | - | 4,579 | |||||||||||||||
Derivative financial instruments | - | - | 34 | - | 34 | |||||||||||||||
Deferred income tax liabilities | - | - | 1,166 | - | 1,166 | |||||||||||||||
Other payables | - | - | 289 | - | 289 | |||||||||||||||
Advances from subsidiary and parent undertakings | - | - | 3,469 | (3,469 | ) | - | ||||||||||||||
Retirement benefit obligations | - | - | 410 | - | 410 | |||||||||||||||
Provisions for liabilities | - | - | 231 | - | 231 | |||||||||||||||
Total non-current liabilities | - | 2,279 | 7,899 | (3,469 | ) | 6,709 | ||||||||||||||
Current liabilities | ||||||||||||||||||||
Trade and other payables | - | 54 | 2,700 | - | 2,754 | |||||||||||||||
Advances from subsidiary and parent undertakings | 1,453 | - | 6,394 | (7,847 | ) | - | ||||||||||||||
Current income tax liabilities | - | - | 151 | - | 151 | |||||||||||||||
Interest-bearing loans and borrowings | 57 | 147 | 757 | - | 961 | |||||||||||||||
Derivative financial instruments | - | - | 19 | - | 19 | |||||||||||||||
Provisions for liabilities | - | - | 149 | - | 149 | |||||||||||||||
Total current liabilities | 1,510 | 201 | 10,170 | (7,847 | ) | 4,034 | ||||||||||||||
Total liabilities | 1,510 | 2,480 | 18,069 | (11,316 | ) | 10,743 | ||||||||||||||
Total equity and liabilities | 11,172 | 3,893 | 23,148 | (17,784 | ) | 20,429 |
34. Supplemental Guarantor InformationCRH Annual Report and Form 20-F | continued
Supplemental Condensed Consolidated Income Statement2017
Year ended 31 December 2014 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Revenue | - | - | 18,912 | - | 18,912 | |||||||||||||||
Cost of sales | - | - | (13,427 | ) | - | (13,427 | ) | |||||||||||||
Gross profit | - | - | 5,485 | - | 5,485 | |||||||||||||||
Operating income/(costs) | 1,208 | - | (5,776 | ) | - | (4,568 | ) | |||||||||||||
Group operating profit/(loss) | 1,208 | - | (291 | ) | - | 917 | ||||||||||||||
Profit on disposals | - | - | 77 | - | 77 | |||||||||||||||
Profit/(loss) before finance costs | 1,208 | - | (214 | ) | - | 994 | ||||||||||||||
Finance costs | - | (211 | ) | (262 | ) | 219 | (254 | ) | ||||||||||||
Finance income | - | 219 | 8 | (219 | ) | 8 | ||||||||||||||
Other financial expense | - | - | (42 | ) | - | (42 | ) | |||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (504 | ) | 35 | - | 469 | - | ||||||||||||||
Share of equity accounted investments’ profit | 55 | - | 55 | (55 | ) | 55 | ||||||||||||||
Profit/(loss) before tax | 759 | 43 | (455 | ) | 414 | 761 | ||||||||||||||
Income tax expense | (177 | ) | (17 | ) | (160 | ) | 177 | (177 | ) | |||||||||||
Group profit/(loss) for the financial year | 582 | 26 | (615 | ) | 591 | 584 | ||||||||||||||
Profit/(loss) attributable to: | ||||||||||||||||||||
Equity holders of the Company | 582 | 26 | (617 | ) | 591 | 582 | ||||||||||||||
Non-controlling interests | - | - | 2 | - | 2 | |||||||||||||||
Group profit/(loss) for the financial year | 582 | 26 | (615 | ) | 591 | 584 | ||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income |
| |||||||||||||||||||
Group profit for the financial year | 582 | 26 | (615 | ) | 591 | 584 | ||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | 599 | 167 | 432 | (599 | ) | 599 | ||||||||||||||
Losses relating to cash flow hedges | (6 | ) | - | (6 | ) | 6 | (6 | ) | ||||||||||||
593 | 167 | 426 | (593 | ) | 593 | |||||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | (414 | ) | - | (414 | ) | 414 | (414 | ) | ||||||||||||
Tax on items recognised directly within other comprehensive income | 69 | - | 69 | (69 | ) | 69 | ||||||||||||||
(345 | ) | - | (345 | ) | 345 | (345 | ) | |||||||||||||
Total other comprehensive income for the financial year | 248 | 167 | 81 | (248 | ) | 248 | ||||||||||||||
Total comprehensive income for the financial year | 830 | 193 | (534 | ) | 343 | 832 | ||||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 830 | 193 | (536 | ) | 343 | 830 | ||||||||||||||
Non-controlling interests | - | - | 2 | - | 2 | |||||||||||||||
Total comprehensive income for the financial year | 830 | 193 | (534 | ) | 343 | 832 |
An analysis of the maturity profile of debt, finance and operating leases, purchase obligations, deferred and contingent acquisition consideration and pension scheme contribution commitments at 31 December 2017 is as follows:
Contractual Obligations
Payments due by period | Total €m | Less than 1 year €m | 1-3 years €m | 3-5 years €m | More than 5 years €m | |||||||||||||
Interest-bearing loans and borrowings (i) | 7,950 | 320 | 1,252 | 1,296 | 5,082 | |||||||||||||
Finance leases | 12 | 3 | 4 | 2 | 3 | |||||||||||||
Estimated interest payments on contractually-committed debt and finance leases (ii) | 2,542 | 284 | 491 | 384 | 1,383 | |||||||||||||
Deferred and contingent acquisition consideration | 265 | 167 | 63 | 24 | 11 | |||||||||||||
Operating leases (iii) | 2,191 | 419 | 598 | 364 | 810 | |||||||||||||
Purchase obligations (iv) | 1,295 | 611 | 178 | 117 | 389 | |||||||||||||
Retirement benefit obligation commitments (v) | 34 | 19 | 4 | 3 | 8 | |||||||||||||
Total | 14,289 | 1,823 | 2,590 | 2,190 | 7,686 |
(i) | Of the€8.0 billion total gross debt,€0.1 billion is drawn on revolving facilities which may be repaid and redrawn up to the date of maturity. The interest payments are estimated assuming these loans are repaid on facility maturity dates. |
(ii) | These interest payments have been estimated on the basis of the following assumptions: (a) no change in variable interest rates; (b) no change in exchange rates; (c) that all debt is repaid as if it falls due from future cash generation; and (d) none is refinanced by future debt issuance. |
(iii) | Includes€252 million relating to discontinued operations. See further details in note 29 to the Consolidated Financial Statements. |
(iv) | Purchase obligations include contracted for capital expenditure. A summary of the Group’s future purchase commitments as at 31 December 2017 for capital expenditure are set out in note 14 to the Consolidated Financial Statements. These expenditures for replacement and new projects are in the ordinary course of business and will be financed from internal resources. |
(v) | These retirement benefit commitments comprise the contracted payments related to our pension schemes in the UK and Ireland. See further details in note 28 to the Consolidated Financial Statements. |
Quantitative and Qualitative Information about Market Risk
CRH addresses the sensitivity of the Group’s interest rate swaps and debt obligations to changes in interest rates in a sensitivity analysis technique that measures the estimated impacts on the income statement and on equity of either an increase or decrease in market interest rates or a strengthening or weakening in the US Dollar against all other currencies, from the rates applicable at 31 December 2017, for each class of financial instrument with all other variables remaining constant. The technique used measures the estimated impact on profit before tax and on total equity arising on netyear-end floating rate debt and onyear-end equity, based on either an
increase/decrease of 1% and 0.5% in floating interest rates or a 5% and 2.5% strengthening/weakening in the US Dollar/euro exchange rate. The US Dollar/euro rate has been selected for this sensitivity analysis given the materiality of the Group’s activities in the US. This analysis, set out in note 22 to the Consolidated Financial Statements, is for illustrative purposes only as in practice interest and foreign exchange rates rarely change in isolation.
Quantitative and qualitative information and sensitivity analysis of market risk is contained in notes 21 to 25 to the Consolidated Financial Statements.
Off-Balance Sheet Arrangements
CRH does not have anyoff-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on CRH’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
214 |
CRH Annual Report and Form 20-F | 2017
Property, Plants and Equipment
At 16 February 2018, CRH had a total of 2,960 building materials production locations and 684 Merchanting and DIY locations. 1,613 locations are leased, with the remaining 2,031 locations held on a freehold basis.
The significant subsidiary locations as at 31 December 2017 are the cement facilities in the Philippines, Poland, Ukraine, the UK, Romania, Canada, Slovakia, Ireland, Germany, France and Brazil. The clinker (the key intermediate product in the manufacture of cement) capacity for these locations is set out in the table below. Further details on locations and products manufactured are provided in the Business Performance section on pages 22 to 53. None of CRH’s individual properties is of material significance to the Group.
CRH believes that all the facilities are in good condition, adequate for their purpose and suitably utilised according to the individual nature and requirements of the relevant operations. CRH has a continuing programme of improvements and replacements to properties when considered appropriate to meet the needs of the individual operations. Further information in relation to the Group’s accounting policy and process governing any impairment of property, plant and equipment is given on page 127 and in note 14 to the Consolidated Financial Statements on page 152.
Significant Locations – Clinker Capacity
Subsidiary | Country | Number of plants | Clinker Capacity (tonnes per hour) | |||||||
Republic Cement | Philippines | 5 | 613 | |||||||
Grupa Ożarów | Poland | 1 | 342 | |||||||
Podilsky Cement PJSC | Ukraine | 1 | 313 | |||||||
Tarmac | United Kingdom | 3 | 306 | |||||||
CRH Romania | Romania | 2 | 305 | |||||||
CRH Canada | Canada | 2 | 292 | |||||||
CRH Slovakia | Slovakia | 2 | 290 | |||||||
Irish Cement | Ireland | 2 | 288 | |||||||
Opterra | Germany | 2 | 268 | |||||||
Eqiom | France | 3 | 243 | |||||||
CRH Brazil | Brazil | 3 | 200 |
Sources and Availability of Raw Materials
CRH generally owns or leases the real estate on which its main raw materials, namely aggregates, are found. CRH is a significant purchaser of certain important materials or resources such as cement, liquid bitumen, steel, gas, fuel and other energy supplies, the cost of which can fluctuate significantly and consequently have an adverse impact on CRH’s business. CRH is not generally dependent on any one source for the supply of these materials or resources, other than in certain jurisdictions with regard to the supply of gas and electricity. Competitive markets generally exist in the jurisdictions in which CRH operates for the supply of cement, bitumen, steel and fuel.
Mine Safety Disclosures
The information concerning mine safety violations and other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act is included in Exhibit 16 to CRH’s Annual Report on Form20-F, as filed with the SEC.
215 |
34. Supplemental Guarantor Information| continued
Supplemental Condensed Consolidated Income Statement
Year ended 31 December 2013 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Revenue | - | - | 18,031 | - | 18,031 | |||||||||||||||
Cost of sales | - | - | (13,153 | ) | - | (13,153 | ) | |||||||||||||
Gross profit | - | - | 4,878 | - | 4,878 | |||||||||||||||
Operating income/(costs) | 3 | - | (4,781 | ) | - | (4,778 | ) | |||||||||||||
Group operating profit | 3 | - | 97 | - | 100 | |||||||||||||||
Profit on disposals | - | - | 26 | - | 26 | |||||||||||||||
Profit before finance costs | 3 | - | 123 | - | 126 | |||||||||||||||
Finance costs | - | (242 | ) | (270 | ) | 250 | (262 | ) | ||||||||||||
Finance income | - | 250 | 13 | (250 | ) | 13 | ||||||||||||||
Other financial expense | - | - | (48 | ) | - | (48 | ) | |||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (175 | ) | 33 | - | 142 | - | ||||||||||||||
Share of equity accounted investments’ loss | (44 | ) | - | (44 | ) | 44 | (44 | ) | ||||||||||||
(Loss)/profit before tax | (216 | ) | 41 | (226 | ) | 186 | (215 | ) | ||||||||||||
Income tax expense | (80 | ) | (16 | ) | (64 | ) | 80 | (80 | ) | |||||||||||
Group (loss)/profit for the financial year | (296 | ) | 25 | (290 | ) | 266 | (295 | ) | ||||||||||||
(Loss)/profit attributable to: | ||||||||||||||||||||
Equity holders of the Company | (296 | ) | 25 | (291 | ) | 266 | (296 | ) | ||||||||||||
Non-controlling interests | - | - | 1 | - | 1 | |||||||||||||||
Group (loss)/profit for the financial year | (296 | ) | 25 | (290 | ) | 266 | (295 | ) | ||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group (loss)/profit for the financial year | (296 | ) | 25 | (290 | ) | 266 | (295 | ) | ||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (373 | ) | (57 | ) | (316 | ) | 373 | (373 | ) | |||||||||||
Losses relating to cash flow hedges | (2 | ) | - | (2 | ) | 2 | (2 | ) | ||||||||||||
(375 | ) | (57 | ) | (318 | ) | 375 | (375 | ) | ||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | 162 | - | 162 | (162 | ) | 162 | ||||||||||||||
Tax on items recognised directly within other comprehensive income | (43 | ) | - | (43 | ) | 43 | (43 | ) | ||||||||||||
119 | - | 119 | (119 | ) | 119 | |||||||||||||||
Total other comprehensive income for the financial year | (256 | ) | (57 | ) | (199 | ) | 256 | (256 | ) | |||||||||||
Total comprehensive income for the financial year | (552 | ) | (32 | ) | (489 | ) | 522 | (551 | ) | |||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | (552 | ) | (32 | ) | (490 | ) | 522 | (552 | ) | |||||||||||
Non-controlling interests | - | - | 1 | - | 1 | |||||||||||||||
Total comprehensive income for the financial year | (552 | ) | (32 | ) | (489 | ) | 522 | (551 | ) |
34. Supplemental Guarantor InformationCRH Annual Report and Form 20-F | continued
Supplemental Condensed Consolidated Income Statement2017
Year ended 31 December 2012 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Revenue | - | - | 18,084 | - | 18,084 | |||||||||||||||
Cost of sales | - | - | (13,018 | ) | - | (13,018 | ) | |||||||||||||
Gross profit | - | - | 5,066 | - | 5,066 | |||||||||||||||
Operating income/(costs) | 1,004 | - | (5,265 | ) | - | (4,261 | ) | |||||||||||||
Group operating profit/(loss) | 1,004 | - | (199 | ) | - | 805 | ||||||||||||||
Profit on disposals | 2 | - | 228 | - | 230 | |||||||||||||||
Profit before finance costs | 1,006 | - | 29 | - | 1,035 | |||||||||||||||
Finance costs | - | (205 | ) | (279 | ) | 213 | (271 | ) | ||||||||||||
Finance income | - | 213 | 15 | (213 | ) | 15 | ||||||||||||||
Other financial expense | - | - | (49 | ) | - | (49 | ) | |||||||||||||
Share of subsidiaries’ (loss)/profit before tax | (278 | ) | 28 | - | 250 | - | ||||||||||||||
Share of equity accounted investments’ loss | (84 | ) | - | (84 | ) | 84 | (84 | ) | ||||||||||||
Profit/(loss) before tax | 644 | 36 | (368 | ) | 334 | 646 | ||||||||||||||
Income tax expense | (106 | ) | (14 | ) | (92 | ) | 106 | (106 | ) | |||||||||||
Group profit/(loss) for the financial year | 538 | 22 | (460 | ) | 440 | 540 | ||||||||||||||
Profit/(loss) attributable to: | ||||||||||||||||||||
Equity holders of the Company | 538 | 22 | (462 | ) | 440 | 538 | ||||||||||||||
Non-controlling interests | - | - | 2 | - | 2 | |||||||||||||||
Group profit/(loss) for the financial year | 538 | 22 | (460 | ) | 440 | 540 | ||||||||||||||
Supplemental Condensed Consolidated Statement of Comprehensive Income | ||||||||||||||||||||
Group profit/(loss) for the financial year | 538 | 22 | (460 | ) | 440 | 540 | ||||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that may be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Currency translation effects | (51 | ) | (26 | ) | (25 | ) | 51 | (51 | ) | |||||||||||
Gains relating to cash flow hedges | 1 | - | 1 | (1 | ) | 1 | ||||||||||||||
(50 | ) | (26 | ) | (24 | ) | 50 | (50 | ) | ||||||||||||
Items that will not be reclassified to profit or loss in subsequent years: | ||||||||||||||||||||
Remeasurement of retirement benefit obligations | (146 | ) | - | (146 | ) | 146 | (146 | ) | ||||||||||||
Tax on items recognised directly within other comprehensive income | 23 | - | 23 | (23 | ) | 23 | ||||||||||||||
(123 | ) | - | (123 | ) | 123 | (123 | ) | |||||||||||||
Total other comprehensive income for the financial year | (173 | ) | (26 | ) | (147 | ) | 173 | (173 | ) | |||||||||||
Total comprehensive income for the financial year | 365 | (4 | ) | (607 | ) | 613 | 367 | |||||||||||||
Attributable to: | ||||||||||||||||||||
Equity holders of the Company | 365 | (4 | ) | (608 | ) | 613 | 366 | |||||||||||||
Non-controlling interests | - | - | 1 | - | 1 | |||||||||||||||
Total comprehensive income for the financial year | 365 | (4 | ) | (607 | ) | 613 | 367 |
Activities with Reserves Backing (i)
Property acreage (hectares) (ii) | % of mineral reserves by rock type | |||||||||||||||||||||||||||||||||||||||||
Physical location | No. of quarries /pits | Owned | Leased | Proven & probable reserves (iii) | Years to depletion (iv) | Hard rock | Sand & gravel | Other | 2017 Annualised extraction (v) | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Europe Heavyside | ||||||||||||||||||||||||||||||||||||||||||
France | 3 | 512 | - | 91 | 34 | 90% | - | 10% | 2.8 | |||||||||||||||||||||||||||||||||
Germany | 3 | 314 | - | 158 | 59 | 100% | - | - | 2.9 | |||||||||||||||||||||||||||||||||
Ireland | 2 | 260 | - | 208 | 82 | 100% | - | - | 2.7 | |||||||||||||||||||||||||||||||||
Poland | 2 | 293 | - | 174 | 44 | 93% | 6% | 1% | 4.1 | |||||||||||||||||||||||||||||||||
Romania | 6 | 220 | 898 | 242 | 60 | 83% | - | 17% | 4.0 | |||||||||||||||||||||||||||||||||
Cement | Serbia | 2 | 54 | 41 | 108 | 155 | 100% | - | - | 0.8 | ||||||||||||||||||||||||||||||||
Slovakia | 5 | 341 | 48 | 301 | 138 | 92% | - | 8% | 2.3 | |||||||||||||||||||||||||||||||||
Spain | 1 | 34 | - | 85 | 232 | 100% | - | - | 0.4 | |||||||||||||||||||||||||||||||||
Switzerland | 3 | 93 | 6 | 23 | 17 | 100% | - | - | 1.4 | |||||||||||||||||||||||||||||||||
Ukraine | 2 | 240 | - | 125 | 43 | 100% | - | - | 2.4 | |||||||||||||||||||||||||||||||||
United Kingdom | 6 | 500 | 154 | 273 | 69 | 97% | - | 3% | 4.1 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Finland | 111 | 520 | 335 | 146 | 13 | 68% | 32% | - | 10.0 | |||||||||||||||||||||||||||||||||
France | 52 | 638 | 953 | 254 | 30 | 70% | 30% | - | 9.0 | |||||||||||||||||||||||||||||||||
Ireland | 124 | 5,182 | 70 | 1,114 | 78 | 85% | 15% | - | 15.3 | |||||||||||||||||||||||||||||||||
Aggregates | Poland | 3 | 243 | 10 | 150 | 44 | 92% | 8% | - | 2.7 | ||||||||||||||||||||||||||||||||
Romania | 20 | 86 | 344 | 53 | 22 | 96% | 4% | - | 1.7 | |||||||||||||||||||||||||||||||||
Spain | 11 | 119 | 64 | 107 | 59 | 99% | 1% | - | 2.0 | |||||||||||||||||||||||||||||||||
United Kingdom | 168 | 11,964 | 3,014 | 1,350 | 32 | 84% | 16% | - | 42.0 | |||||||||||||||||||||||||||||||||
Other | 41 | 333 | 572 | 184 | 20 | 74% | 26% | - | 9.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Lime
| Czech Republic, Ireland, Poland, United Kingdom | 4 | 150 | 10 | 121 | 32 | 100% | - | - | 3.7 | ||||||||||||||||||||||||||||||||
Germany | 9 | 341 | - | 298 | 43 | 100% | - | - | 7.0 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 578 | 22,437 | 6,519 | 5,565 | 88% | 10% | 2% | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Americas Materials | ||||||||||||||||||||||||||||||||||||||||||
Brazil | 3 | 1,072 | - | 166 | 83 | 100% | - | - | 1.9 | |||||||||||||||||||||||||||||||||
Cement | Canada | 2 | 717 | - | 293 | 94 | 100% | - | - | 3.1 | ||||||||||||||||||||||||||||||||
United States | 5 | 1,175 | 19 | 85 | 53 | 100% | - | - | 1.6 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Aggregates | Canada | 41 | 5,999 | 431 | 709 | 41 | 82% | 18% | - | 18.1 | ||||||||||||||||||||||||||||||||
United States | 769 | 45,920 | 20,222 | 14,931 | 103 | 73% | 27% | - | 149.9 | |||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 820 | 54,883 | 20,672 | 16,184 | 75% | 25% | - | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Asia | ||||||||||||||||||||||||||||||||||||||||||
Cement | Philippines | 14 | 2,247 | 17 | 222 | 34 | 100% | - | - | 6.6 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Aggregates | Philippines | 1 | - | 17 | 25 | 50 | 100% | - | - | 0.6 | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Subtotals | 15 | 2,247 | 34 | 247 | 100% | - | - | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||
Group totals | 1,413 | 79,567 | 27,225 | 21,996 | 78% | 22% | - | |||||||||||||||||||||||||||||||||||
|
(i) | The disclosures made in this category refer to those facilities which are engaged inon-site processing of reserves in the various forms. |
(ii) | 1 hectare equals approximately 2.47 acres. |
(iii) | Where reserves are leased, the data presented above is restricted to include only that material which can be produced over the life of the contractual commitment inherent in the lease; the totals shown pertain only to amounts which are proven and probable. All of the proven and probable reserves are permitted and are quoted in millions of tonnes. |
(iv) | Years to depletion is based on the average of the most recent three years annualised production. |
(v) | Annualised extraction is quoted in millions of tonnes. |
216 |
CRH Annual Report and Form 20-F | 2017
The Group’s reserves for the production of primary building materials (which encompass cement, lime, aggregates (stone, sand and gravel), asphalt, readymixed concrete and concrete products) fall into a variety of categories spanning a wide number of rock types and geological classifications – see the table on the previous page setting out the activities with reserves backing.
Reserve estimates are generally prepared by third-party experts (i.e. geologists or engineers) prior to acquisition; this procedure is a critical component in the Group’s due diligence process in connection with any acquisition. Subsequent to acquisition, estimates are typically updated by company engineers and/or geologists and are reviewed annually by corporate and/or divisional staff. However, where deemed appropriate by management, in the context of large or strategically important deposits, the services of third-party consultant geologists and/or engineers may be employed to validate reserves quantities outside of the aforementioned due diligence framework on an ongoing basis.
The Group has not employed third-parties to review reserves over the three-year period ending 31 December 2017 other than in business combination activities and specific instances where such review was warranted.
Reserve estimates are subject to annual review by each of the relevant operating entities across the Group. The estimation process distinguishes between owned and leased reserves segregated into permitted and unpermitted as appropriate and includes only those permitted reserves which are proven and probable. The term “permitted” reserves refers to those tonnages which can currently be mined without any environmental or legal constraints. Permitted owned reserve estimates are based on estimated recoverable tonnes whilst permitted leased reserve estimates are based on estimated total recoverable tonnes which may be extracted over the term of the lease contract.
Proven and probable reserve estimates are based on recoverable tonnes only and are thus stated net of estimated production losses and other matters factored into the computation (e.g. required slopes/benches). In order for reserves to qualify for inclusion in the “proven and probable” category, the following conditions must be satisfied:
None of CRH’s mineral-bearing properties is individually material to the Group.
217 |
34. Supplemental Guarantor Information| continued
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2014 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit/(loss) before tax | 759 | 43 | (455 | ) | 414 | 761 | ||||||||||||||
Finance costs (net) | - | (8 | ) | 296 | - | 288 | ||||||||||||||
Group share of subsidiaries’ loss/(profit) before tax | 504 | (35 | ) | - | (469 | ) | - | |||||||||||||
Share of equity accounted investments’ result | (55 | ) | - | (55 | ) | 55 | (55 | ) | ||||||||||||
Profit on disposals | - | - | (77 | ) | - | (77 | ) | |||||||||||||
Group operating profit/(loss) | 1,208 | - | (291 | ) | - | 917 | ||||||||||||||
Depreciation charge | - | - | 631 | - | 631 | |||||||||||||||
Amortisation of intangible assets | - | - | 44 | - | 44 | |||||||||||||||
Impairment charge | - | - | 49 | 49 | ||||||||||||||||
Share-based payment expense | - | - | 16 | - | 16 | |||||||||||||||
Other (primarily pension payments) | - | - | (66 | ) | - | (66 | ) | |||||||||||||
Net movement on working capital and provisions | - | (7 | ) | 42 | - | 35 | ||||||||||||||
Cash generated from operations | 1,208 | (7 | ) | 425 | - | 1,626 | ||||||||||||||
Interest paid (including finance leases) | - | (211 | ) | (270 | ) | 219 | (262 | ) | ||||||||||||
Corporation tax paid | - | (17 | ) | (110 | ) | - | (127 | ) | ||||||||||||
Net cash inflow/(outflow) from operating activities | 1,208 | (235 | ) | 45 | 219 | 1,237 | ||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals | - | - | 345 | - | 345 | |||||||||||||||
Interest received | - | 219 | 8 | (219 | ) | 8 | ||||||||||||||
Dividends received from equity accounted investments | - | - | 30 | - | 30 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (435 | ) | - | (435 | ) | |||||||||||||
Advances from subsidiary and parent undertakings | 414 | 17 | - | (431 | ) | - | ||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (151 | ) | - | (151 | ) | |||||||||||||
Other investments and advances | - | - | (3 | ) | - | (3 | ) | |||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (26 | ) | - | (26 | ) | |||||||||||||
Net cash inflow/(outflow) from investing activities | 414 | 236 | (232 | ) | (650 | ) | (232 | ) | ||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from exercise of share options | 22 | - | - | - | 22 | |||||||||||||||
Acquisition of non-controlling interests | - | - | (1 | ) | - | (1 | ) | |||||||||||||
Advances to subsidiary and parent undertakings | - | - | (431 | ) | 431 | - | ||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | - | 901 | - | 901 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 16 | (27 | ) | - | (11 | ) | |||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (55 | ) | (175 | ) | (704 | ) | - | (934 | ) | |||||||||||
Dividends paid to equity holders of the Company | (353 | ) | - | - | - | (353 | ) | |||||||||||||
Dividends paid to non-controlling interests | - | - | (4 | ) | - | (4 | ) | |||||||||||||
Net cash outflow from financing activities | (386 | ) | (159 | ) | (266 | ) | 431 | (380 | ) | |||||||||||
Increase/(decrease) in cash and cash equivalents | 1,236 | (158 | ) | (453 | ) | - | 625 | |||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 175 | 174 | 2,191 | - | 2,540 | |||||||||||||||
Translation adjustment | - | 9 | 121 | - | 130 | |||||||||||||||
Increase/(decrease) in cash and cash equivalents | 1,236 | (158 | ) | (453 | ) | - | 625 | |||||||||||||
Cash and cash equivalents at 31 December | 1,411 | 25 | 1,859 | - | 3,295 |
34. Supplemental Guarantor InformationCRH Annual Report and Form 20-F | continued
Supplemental Condensed Consolidated Statement of Cash Flow2017
Year ended 31 December 2013 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
(Loss)/profit before tax | (216 | ) | 41 | (226 | ) | 186 | (215 | ) | ||||||||||||
Finance costs (net) | - | (8 | ) | 305 | - | 297 | ||||||||||||||
Group share of subsidiaries’ loss/(profit) before tax | 175 | (33 | ) | - | (142 | ) | - | |||||||||||||
Share of equity accounted investments’ result | 44 | - | 44 | (44 | ) | 44 | ||||||||||||||
Profit on disposals | - | - | (26 | ) | - | (26 | ) | |||||||||||||
Group operating profit | 3 | - | 97 | - | 100 | |||||||||||||||
Depreciation charge | - | - | 671 | - | 671 | |||||||||||||||
Amortisation of intangible assets | - | - | 54 | - | 54 | |||||||||||||||
Impairment charge | - | - | 650 | - | 650 | |||||||||||||||
Share-based payment expense | - | - | 15 | - | 15 | |||||||||||||||
Other (primarily pension payments) | - | - | (96 | ) | - | (96 | ) | |||||||||||||
Net movement on working capital and provisions | - | 1 | 76 | - | 77 | |||||||||||||||
Cash generated from operations | 3 | 1 | 1,467 | - | 1,471 | |||||||||||||||
Interest paid (including finance leases) | - | (242 | ) | (277 | ) | 250 | (269 | ) | ||||||||||||
Corporation tax paid | - | (16 | ) | (94 | ) | - | (110 | ) | ||||||||||||
Net cash inflow/(outflow) from operating activities | 3 | (257 | ) | 1,096 | 250 | 1,092 | ||||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals | - | - | 122 | - | 122 | |||||||||||||||
Interest received | - | 250 | 13 | (250 | ) | 13 | ||||||||||||||
Dividends received from equity accounted investments | - | - | 33 | - | 33 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (497 | ) | - | (497 | ) | |||||||||||||
Advances from subsidiary and parent undertakings | 299 | 179 | - | (478 | ) | - | ||||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (336 | ) | - | (336 | ) | |||||||||||||
Other investments and advances | - | - | (78 | ) | - | (78 | ) | |||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (105 | ) | - | (105 | ) | |||||||||||||
Net cash inflow/(outflow) from investing activities | 299 | 429 | (848 | ) | (728 | ) | (848 | ) | ||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from exercise of share options | 19 | - | - | - | 19 | |||||||||||||||
Acquisition of non-controlling interests | - | - | (13 | ) | - | (13 | ) | |||||||||||||
Advances to subsidiary and parent undertakings | - | - | (478 | ) | 478 | - | ||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | 55 | - | 1,436 | - | 1,491 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 43 | 21 | - | 64 | |||||||||||||||
Treasury/own shares purchased | (6 | ) | - | - | - | (6 | ) | |||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | - | (601 | ) | 15 | - | (586 | ) | |||||||||||||
Dividends paid to equity holders of the Company | (367 | ) | - | - | - | (367 | ) | |||||||||||||
Dividends paid to non-controlling interests | - | - | (1 | ) | - | (1 | ) | |||||||||||||
Net cash (outflow)/inflow from financing activities | (299 | ) | (558 | ) | 980 | 478 | 601 | |||||||||||||
Increase/(decrease) in cash and cash equivalents | 3 | (386 | ) | 1,228 | - | 845 | ||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 172 | 570 | 1,005 | - | 1,747 | |||||||||||||||
Translation adjustment | - | (10 | ) | (42 | ) | - | (52 | ) | ||||||||||||
Increase/(decrease) in cash and cash equivalents | 3 | (386 | ) | 1,228 | - | 845 | ||||||||||||||
Cash and cash equivalents at 31 December | 175 | 174 | 2,191 | - | 2,540 |
This section describes the principal risks and uncertainties that could affect the Group’s business. If any of these risks occur, the Group’s business, financial condition, results of operations and prospects could be materially adversely affected.
The risks and uncertainties listed below should be considered in connection with any forward-looking statements in this Annual Report and Form20-F and the cautionary statements contained in Corporate Governance - Disclaimer/Forward- Looking Statements on page 97.
The Risk Factors have been grouped to focus on key strategic, operational, compliance and financial and reporting risks.
Key Strategic Risk Factors
Industry cyclicality | ||
Risk Factor | Discussion | |
Description: The level of construction activity in local and national markets is inherently cyclical being influenced by a wide variety of factors including global and national economic circumstances, governments’ ability to fund infrastructure projects, consumer sentiment and weather conditions. Financial performance may also be negatively impacted by unfavourable swings in fuel and other commodity/raw material prices. Impact: Failure of the Group to respond on a timely basis and/or adequately to unfavourable events may adversely affect financial performance. | The Group’s operating and financial performance is influenced by general economic conditions and the state of the residential, industrial and commercial and infrastructure construction markets in the countries in which it operates. In general, economic uncertainty exacerbates negative trends in construction activity leading to postponement in orders. Construction markets are inherently cyclical and are affected by many factors that are beyond the Group’s control, including: • the price of fuel and principal energy-related raw materials such as bitumen and steel (which accounted for approximately 8% of annual Group sales revenues in 2017); • the performance of the national economies in the countries in which the Group operates, across Europe, Americas and Asia; • monetary policies in the countries in which the Group operates — for example, an increase in interest rates typically reduces the volume of mortgage borrowings thus impacting residential construction activity; • the allocation of government funding for public infrastructure programmes, such as the development of highways in the US under the Fixing Americas Surface Transportation Act (FAST Act); and • the level of demand for construction materials and services, with sustained adverse weather conditions leading to potential disruptions or curtailments in outdoor construction activity The adequacy and timeliness of the actions taken by the Group’s management team are of critical importance in maintaining financial performance at appropriate levels. Each of the above factors could have a material adverse effect on the Group’s operating results and the market price of CRH plc’s Ordinary Shares. |
218 |
34. Supplemental Guarantor InformationCRH Annual Report and Form 20-F | continued
Supplemental Condensed Consolidated Statement of Cash Flow2017
Year ended 31 December 2012 | ||||||||||||||||||||
Guarantor €m | Issuer €m | Non-Guarantor subsidiaries €m | Eliminate and €m | CRH and subsidiaries €m | ||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||||
Profit before tax | 644 | 36 | (368 | ) | 334 | 646 | ||||||||||||||
Finance costs (net) | - | (8 | ) | 313 | - | 305 | ||||||||||||||
Group share of subsidiaries’ loss/(profit) before tax | 278 | (28 | ) | - | (250 | ) | - | |||||||||||||
Share of equity accounted investments’ result | 84 | - | 84 | (84 | ) | 84 | ||||||||||||||
Profit on disposals | (2 | ) | - | (228 | ) | - | (230 | ) | ||||||||||||
Group operating profit/(loss) | 1,004 | - | (199 | ) | - | 805 | ||||||||||||||
Depreciation charge | - | - | 686 | - | 686 | |||||||||||||||
Amortisation of intangible assets | - | - | 44 | - | 44 | |||||||||||||||
Impairment charge | - | - | 28 | - | 28 | |||||||||||||||
Share-based payment expense | - | - | 14 | - | 14 | |||||||||||||||
Other (primarily pension payments) | - | - | (152 | ) | - | (152 | ) | |||||||||||||
Net movement on working capital and provisions | - | 3 | (61 | ) | - | (58 | ) | |||||||||||||
Cash generated from operations | 1,004 | 3 | 360 | - | 1,367 | |||||||||||||||
Interest paid (including finance leases) | - | (205 | ) | (266 | ) | 213 | (258 | ) | ||||||||||||
Corporation tax paid | (1 | ) | (14 | ) | (109 | ) | - | (124 | ) | |||||||||||
Net cash inflow/(outflow) from operating activities | 1,003 | (216 | ) | (15 | ) | 213 | 985 | |||||||||||||
Cash flows from investing activities | ||||||||||||||||||||
Proceeds from disposals (net of cash disposed) | 2 | - | 780 | - | 782 | |||||||||||||||
Interest received | - | 213 | 16 | (213 | ) | 16 | ||||||||||||||
Dividends received from equity accounted investments | - | - | 35 | - | 35 | |||||||||||||||
Purchase of property, plant and equipment | - | - | (544 | ) | - | (544 | ) | |||||||||||||
Advances to subsidiary and parent undertakings | (653 | ) | (42 | ) | - | 695 | - | |||||||||||||
Acquisition of subsidiaries (net of cash acquired) | - | - | (418 | ) | - | (418 | ) | |||||||||||||
Other investments and advances | - | - | (56 | ) | - | (56 | ) | |||||||||||||
Deferred and contingent acquisition consideration paid | - | - | (30 | ) | - | (30 | ) | |||||||||||||
Net cash (outflow)/inflow from investing activities | (651 | ) | 171 | (217 | ) | 482 | (215 | ) | ||||||||||||
Cash flows from financing activities | ||||||||||||||||||||
Proceeds from exercise of share options | 16 | - | - | - | 16 | |||||||||||||||
Acquisition of non-controlling interests | - | - | (2 | ) | - | (2 | ) | |||||||||||||
Advances from subsidiary and parent undertakings | - | - | 695 | (695 | ) | - | ||||||||||||||
Increase in interest-bearing loans, borrowings and finance leases | - | - | 487 | - | 487 | |||||||||||||||
Net cash flow arising from derivative financial instruments | - | 25 | (12 | ) | - | 13 | ||||||||||||||
Repayment of interest-bearing loans, borrowings and finance leases | (1 | ) | (363 | ) | (30 | ) | - | (394 | ) | |||||||||||
Dividends paid to equity holders of the Company | (362 | ) | - | - | - | (362 | ) | |||||||||||||
Dividends paid to non-controlling interests | - | - | (4 | ) | - | (4 | ) | |||||||||||||
Net cash (outflow)/inflow from financing activities | (347 | ) | (338 | ) | 1,134 | (695 | ) | (246 | ) | |||||||||||
Increase/(decrease) in cash and cash equivalents | 5 | (383 | ) | 902 | - | 524 | ||||||||||||||
Reconciliation of opening to closing cash and cash equivalents | ||||||||||||||||||||
Cash and cash equivalents at 1 January | 167 | 962 | 117 | - | 1,246 | |||||||||||||||
Translation adjustment | - | (9 | ) | (14 | ) | - | (23 | ) | ||||||||||||
Increase/(decrease) in cash and cash equivalents | 5 | (383 | ) | 902 | - | 524 | ||||||||||||||
Cash and cash equivalents at 31 December | 172 | 570 | 1,005 | - | 1,747 |
Risk Factor | Discussion | |
Description: As an international business, the Group operates in many countries with differing, and in some cases, potentially fast-changing economic, social and political conditions. These conditions, which may be heightened by the uncertainties resulting from the commencement of proceedings for the UK to exit the European Union, in addition to continued instability in Brazil, Philippines and Ukraine, could include political unrest, currency disintegration, strikes, restrictions on repatriation of earnings, changes in law and policies, activism, and civil disturbance and may be triggered or worsened by other forms of instability including natural disasters, epidemics, widespread transmission of diseases and terrorist attacks. These factors are of particular relevance in developing/emerging markets. Impact: Changes in these conditions, or in the governmental or regulatory requirements in any of the countries in which the Group operates, may adversely affect the Group’s business, results of operations, financial condition or prospects thus leading to possible impairment of financial performance and/or restrictions on future growth opportunities. | Whilst economic trends are on average improving across many of CRH’s markets, the UK’s decision to exit the European Union, together with the effects of unwinding the sustained monetary stimulus in the US, the ECB’s plans to scale back quantitative easing in the Eurozone and ongoing tensions in the Korean peninsula, have collectively contributed to heightened uncertainty, with possible upside and downside economic consequences. The Group currently operates mainly in Western Europe and North America as well as, to a lesser degree, in developing countries/emerging markets in Eastern Europe, the Philippines, Brazil, China and India. The economies of these countries are at varying stages of socioeconomic and macroeconomic development which could give rise to a number of risks, uncertainties and challenges and could include the following: • changes in political, social or economic conditions; • trade protection measures and import or export licensing requirements; • potentially negative consequences from changes in tax laws; • labour practices and differing labour regulations; • procurement which contravenes ethical considerations; • unexpected changes in regulatory requirements; • state-imposed restrictions on repatriation of funds; and • the outbreak of armed conflict The Group also has significant business interests in Ukraine, where the outlook remains uncertain. | |
Commodity products and substitution | ||
Risk Factor | Discussion | |
Description: The Group faces strong volume and price competition across its product lines, stemming from the fact that many of the Group’s products are commodities. In addition, existing products may be replaced by substitute products which the Group does not produce or distribute, or new construction techniques may be devised. Impact: Against this backdrop, if the Group fails to generate competitive advantage through differentiation and innovation, market share, and thus financial performance, may decline. | The competitive environment in which the Group operates can be significantly impacted by general economic conditions in combination with local factors including the number of competitors, the degree of utilisation of production capacity and the specifics of product demand. Many of the Group’s products are commodities and competition in such circumstances is driven largely by price. Across the multitude of largely local markets in which the Group conducts business, downward pricing pressure is experienced from time to time, and the Group may not always be in a position to recover increased operating expenses (caused by factors such as increased fuel and raw material prices) through higher sale prices. The cement business, in particular, is capital intensive resulting in significant fixed and semi-fixed costs. The Group’s profits are therefore sensitive to changes in volume, which is driven by highly competitive markets, and impacted by ongoing capital expenditure needs. A number of the products sold by the Group (both those manufactured internally and those distributed) compete with other building products that do not feature in the existing product range. Any significant shift in demand preference from the Group’s existing products to substitute products, which the Group does not produce or distribute, could adversely impact market share and results of operations. |
219 |
CRH Annual Report and Form 20-F | 2017
Key Strategic Risk Factors - continued
Reserves availability and planning | ||
Risk Factor | Discussion | |
Description: Certain of the Group’s businesses require long-term reserves backing necessitating detailed utilisation planning. Appropriate reserves are an increasingly scarce commodity and licences and/or permits are required to enable operation. There are numerous uncertainties inherent in reserves estimation and in projecting future rates of production. Impact: Failure by the Group to plan adequately for depletion may result insub-optimal or uneconomic utilisation giving rise to unplanned capital expenditure or acquisition activity, lower financial performance and the need to obtain new licences and/or permits to operate. Operating entities may fail to obtain or renew or may experience material delays in securing the requisite government approvals, licences and permits for the conduct of business. | Continuity of the cash flows derived from the production and sale of the related heavyside materials and products is dependent on satisfactory reserves planning and on the presence of appropriate long-term arrangements for replacement. There can be no assurance that the required licences and permits will be forthcoming at the appropriate juncture or that relevant operating entities will continue to satisfy the many terms and conditions under which such licences and permits are granted. The failure to plan adequately for current and future utilisation or to ensure ongoing compliance with the requirements of issuing authorities could lead to withdrawal of the related licence or permit and consequential disruption to operations. | |
Business portfolio management: acquisition and divestment activity | ||
Risk Factor | Discussion | |
Description: Growth through acquisition and active management of the Group’s business portfolio are key elements of the Group’s strategy with the Group’s balanced portfolio growing year on year throughbolt-on activity occasionally supplemented by larger and/or step-change transactions. In addition, the Group may be liable or remain liable for the past acts, omissions or liabilities of companies or businesses it has acquired or divested. Impact: The Group may not be able to continue to grow as contemplated in its business plans if it is unable to identify attractive targets (including potential new platforms for growth), divestnon-core or underperforming entities, execute full and proper due diligence, raise funds on acceptable terms, complete such acquisition transactions, integrate the operations of the acquired businesses, retain key staff and realise anticipated levels of profitability and cash flows. If the Group is held liable for the past acts, omissions or liabilities of companies or businesses it has acquired, or remains liable in cases of divestment, those liabilities may either be unforeseen or greater than anticipated at the time of the relevant acquisition or divestment. | The Group’s acquisition strategy focuses on value-enhancingmid-sized acquisitions, largely in existing markets, supplemented from time to time by larger strategic acquisitions into new markets or new building products. In addition, as part of its ongoing commitment to active portfolio management, the Group may, from time to time, divest businesses which are evaluated to benon-core or underperforming. The realisation of the Group’s acquisition strategy is dependent on the ability to identify and acquire suitable assets at appropriate prices thus satisfying the stringent cash flow and return on investment criteria underpinning such activities. The Group may not be able to identify such companies, and, even if identified, may not be able to acquire them because of a variety of factors including the outcome of due diligence processes, the ability to raise funds (as required) on acceptable terms, the need for competition authority approval in certain instances and competition for transactions from peers and other entities exploring acquisition opportunities in the building materials sector. In addition, situations may arise where the Group may be liable for the past acts or omissions or liabilities of companies acquired, or remains liable in cases of divestment; for example, the potential environmental liabilities addressed under the “Sustainability, Corporate Social Responsibility and Climate Change” Risk Factor on page 222. The Group’s ability to realise the expected benefits from acquisition activity depends, in large part, on its ability to integrate newly-acquired businesses in a timely and effective manner. Even if the Group is able to acquire suitable companies, it still may not achieve the growth synergies or other financial and operating benefits it expected to achieve, and the Group may incur write-downs, impairment charges or unforeseen liabilities that could negatively affect its operating results or financial position or could otherwise harm the Group’s business. Further, integrating an acquired business, product or technology could divert management time and resources from other matters. |
220 |
CRH Annual Report and Form 20-F | 2017
Joint ventures and associates | ||
Risk Factor | Discussion | |
Description: The Group does not have a controlling interest in certain of the businesses (i.e. joint ventures and associates) in which it has invested and may invest. The absence of a controlling interest gives rise to increased governance complexity and a need for proactive relationship management, which may restrict the Group’s ability to generate adequate returns and to develop and grow these businesses. Impact: These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise its strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment. | Due to the absence of full control of joint ventures and associates, important decisions such as the approval of business plans and the timing and amount of cash distributions and capital expenditures, for example, may require the consent of partners or may be approved without the Group’s consent. In addition, the lack of controlling interest may give rise to thenon-realisation of operating synergies and lower cash flows than anticipated at the time of investment, thereby increasing the likelihood of impairment of goodwill or other assets. These limitations could impair the Group’s ability to manage joint ventures and associates effectively and/or realise the strategic goals for these businesses. In addition, improper management or ineffective policies, procedures or controls fornon-controlled entities could adversely affect the business, results of operations or financial condition of the relevant investment and, by corollary, the Group. | |
Human resources and talent management | ||
Risk Factor | Discussion | |
Description: Existing processes to recruit, develop and retain talented individuals and promote their mobility within a decentralised organisation may be inadequate thus giving rise to employee/management attrition, difficulties in succession planning and inadequate “bench strength”, potentially impeding the continued realisation of the core strategic objectives of value creation and growth. In addition, the Group is exposed to various risks associated with collective representation of employees in certain jurisdictions; these risks could include strikes and increased wage demands. Impact: In the longer term, failure to manage talent and plan for leadership and succession could impede the realisation of core strategic objectives. | The identification and subsequent assessment, management, development and deployment of talented individuals is of major importance in continuing to deliver on the Group’s strategy and in ensuring that succession planning objectives for key executive roles throughout its international operations are satisfied. The maintenance of positive employee and trade/labour union relations is key to the successful operation of the Group. Some of the Group’s employees are represented by trade/labour unions under various collective agreements. For unionised employees, the Group may not be able to renegotiate satisfactorily the relevant collective agreements upon expiration and may face tougher negotiations and higher wage demands than would be the case fornon-unionised employees. In addition, existing labour agreements may not prevent a strike or work stoppage with any such activity creating reputational risk and potentially having a material adverse effect on the results of operations and financial condition of the Group. |
221 |
CRH Annual Report and Form 20-F | 2017
Key Operational Risk Factors
Sustainability, corporate social responsibility and climate change
Risk Factor | Discussion | |
Description: The Group is subject to stringent and evolving laws, regulations, standards and best practices from a sustainability perspective. The Group’s use of the term “sustainability” comprises Health & Safety management (i.e. embedding a culture of safety and ensuring safe working environments), conducting business with integrity, protecting the environment, preparing for and managing the impact of climate change on business activities, managing stakeholders, attaining strong social performance credentials and, lastly, using the foregoing to generate innovation and other business opportunities to create value. Against this backdrop, the nature of the Group’s activities pose or create certain inherent risks, responsibility for which is vested with operating entity management, Group and Divisional management and the Board of Directors. Impact: Non-adherence to the many laws, regulations, standards and best practices in the sustainability arena may give rise to increased ongoing remediation and/or other compliance costs and may adversely affect the Group’s business, results of operations, financial condition and/or prospects. Failure to leverage innovation and other sustainability initiatives may shorten product life cycles or give rise to early product obsolescence thus impairing financial performance and/or future value creation. In addition, the failure to embed sustainability principles across the Group’s businesses and in the Group’s strategy may lead to adverse investor sentiment or reduced investor interest in CRH plc’s Ordinary Shares. | The Group is subject to a broad and increasingly stringent range of existing and evolving laws, regulations, standards and best practices with respect to governance, the environment, Health & Safety and social performance in each of the jurisdictions in which it operates giving rise to significant compliance costs, potential legal liability exposure and potential limitations on the development of its operations. These laws, regulations, standards and best practices relate to, amongst other things, climate change, noise, emissions to air, water and soil, the use and handling of hazardous materials and waste disposal practices. Given the above, the risk of increased environmental and other compliance costs and unplanned capital expenditure is inherent in conducting business in the building materials sector and the impact of future developments in these respects on the Group’s activities, products, operations, profitability and cash flows cannot be estimated; there can therefore be no assurance that material liabilities and costs will not be incurred in the future or that material limitations on the development of its operations will not arise. Environmental and Health & Safety and other laws, regulations, standards and best practices may expose the Group to the risk of substantial costs and liabilities, including liabilities associated with assets that have been sold or acquired and activities that have been discontinued. In addition, many of the Group’s manufacturing sites have a history of industrial use and, while strict environmental operating standards are applied and extensive environmental due diligence is undertaken in acquisition activity, some soil and groundwater contamination has occurred in the past at a limited number of sites. Although the associated remediation costs incurred to date have not been material, they may become more significant in the future. The Group may face increased remediation liabilities and legal proceedings concerning environmental and Health & Safety matters in the future. The impact of climate change may over time affect the operations of the Group and the markets in which the Group operates. This could include acute and chronic changes in weather, technological development, policy and regulatory change, and market and economic responses. Efforts to address climate change through laws and regulations, for example by requiring reductions in emissions of greenhouse gases (GHGs), can create economic risks and uncertainties for the Group’s businesses. Such risks could include the cost of purchasing allowances or credits to meet GHG emission caps, the cost of installing equipment to reduce emissions to comply with GHG limits or required technological standards, decreased profits or losses arising from decreased demand for the Group’s goods and higher production costs resulting directly or indirectly from the imposition of legislative or regulatory controls. To the extent that financial markets view the impact of climate change emissions as a financial risk, this could have a material adverse effect on the cost of and access to capital. |
222 |
CRH Annual Report and Form 20-F | 2017
Operational continuity
Risk Factor | Discussion | |
Description: The Group’s operating entities are subject to a wide range of operating risks and hazards including climatic conditions such as floods and hurricanes/ cyclones, seismic activity, technical failures, interruptions to power supplies, industrial accidents and disputes, environmental hazards, fire and crime. Impact: The occurrence of a significant adverse event could lead to prolonged disruption of business activities and, as a result, could have a material impact on the business, results of operations, financial condition or prospects of the Group. | Responsibility for business continuity management is vested in operating entity management throughout the Group to ensure that the circumstances likely to give rise to material operational disruption are addressed in a manner appropriate to the relevant operating entity. The insurance coverage provided for operating entities includes property damage and business interruption, public and products liability/general liability, employers’ liability/ workers’ compensation, environmental impairment liability, automobile liability and directors’ and officers’ liability. Adequate coverage at reasonable rates is not always commercially available to cover all potential risks and no assurance can be given that the insurance arrangements in place would be sufficient to cover all losses or liabilities to which the Group might be exposed. As at 31 December 2017, the total insurance provision, which is subject to periodic actuarial valuation and is discounted, amounted to€292 million (2016:€286 million); a substantial proportion of this figure pertained to claims which are classified as “incurred but not reported”. |
Information technology and security/cyber
Risk Factor | Discussion | |
Description: The Group is dependent on the employment of advanced information systems (digital infrastructure, applications and networks) to support its business activities, and is exposed to risks of failure in the operation of these systems. Further, the Group is exposed to security threats to its digital infrastructure through cyber-crime. Such attacks are by their nature technologically sophisticated and may be difficult to detect and defend in a timely fashion. Impact: Should a security breach or other incident materialise, it could lead to interference with production processes, manipulation of financial data, the theft of private data or intellectual property, misappropriation of funds, or misrepresentation of information via digital media. In addition to potential irretrievability or corruption of critical data, the Group could suffer reputational losses, regulatory penalties and incur significant financial costs in remediation. | Security and cyber incidents are becoming increasingly sophisticated and are continually evolving. Our systems for protecting against cyber security risks may not be sufficient. As cyber incidents continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protection measures or to investigate and remediate any vulnerability to cyber incidents. Such attacks may result in interference with production software, corruption or theft of sensitive data, manipulation of financial data accessible through digital infrastructure, or reputational losses as a result of misrepresentation via social media and other websites. There can be no assurance that future attacks will not be successful due to their increasing sophistication and the difficulties in detecting and defending against them in a timely fashion. |
223 |
CRH Annual Report and Form 20-F | 2017
Key Compliance Risk Factors
Laws and regulations | ||
Risk Factor | Discussion | |
Description: The Group is subject to many local and international laws and regulations, including those relating to competition law, corruption and fraud, across many jurisdictions of operation and is therefore exposed to changes in those laws and regulations and to the outcome of any investigations conducted by governmental, international or other regulatory authorities. Impact: Potential breaches of local and international laws and regulations in the areas of competition law, corruption and fraud, among others, could result in the imposition of significant fines and/or sanctions fornon-compliance, including the withdrawal of operating licences, and may inflict reputational damage. | The Group is subject to various statutes, regulations and laws applicable to businesses generally in the countries and markets in which it operates. These include statutes, regulations and laws affecting land usage, zoning, labour and employment practices, competition, financial reporting, taxation, anti-bribery, anti-corruption, governance and other matters. The Group mandates that its employees comply with its Code of Business Conduct which stipulates best practices in relation to regulatory matters. The Group cannot guarantee that its employees will at all times successfully comply with all demands of regulatory agencies in a manner which will not materially adversely affect its business, results of operations, financial condition or prospects. There can be no assurance that the Group’s policies and procedures will afford adequate protection against fraudulent and/or corrupt activity and any such activity could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects. |
224 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) | ||
Risk Factor | Discussion | |
Description: The Group uses financial instruments throughout its businesses giving rise to interest rate and leverage, foreign currency, counterparty, credit rating and liquidity risks. A significant portion of the cash generated by the Group from operational activity is currently dedicated to the payment of principal and interest on indebtedness. In addition, the Group has entered into certain financing agreements containing restrictive covenants requiring it to maintain a certain minimum interest coverage ratio and a certain minimum net worth. Impact: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. In addition, insolvency of the financial institutions with which the Group conducts business (or a downgrade in their credit ratings) may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult for the Group either to utilise existing debt capacity or otherwise obtain financing for operations. | Interest rate and leverage risks: The Group’s exposures to changes in interest rates result from investing and borrowing activities undertaken to manage liquidity and capital requirements and stem predominantly from long-term debt obligations. Borrowing costs are managed through employing a mix of fixed and floating rate debt and interest rate swaps, where appropriate. As at 31 December 2017, the Group had outstanding net indebtedness of approximately€5.8 billion (2016:€5.3 billion). Following recent acquisition activity, the Group has significant outstanding indebtedness, which may impair its operating and financial flexibility over the longer term and could adversely affect its business, results of operations and financial position. This high level of indebtedness could give rise to the Group dedicating a substantial portion of its cash flow to debt service thereby reducing the funds available in the longer term for working capital, capital expenditure, acquisitions, distributions to shareholders and other general corporate purposes and limiting its ability to borrow additional funds and to respond to competitive pressures. In addition, the Group’s level of indebtedness may give rise to a general increase in interest rates borne and there can be no assurance that the Group will not be adversely impacted by increases in borrowing costs in the future. The prescribed minimum PBITDA/net interest (all as defined in the relevant agreements as discussed in note 24 to the Consolidated Financial Statements) cover ratio, which is the Group’s principal financial covenant, is 4.5 times and the prescribed minimum net worth, which is the Group’s other financial covenant, is€6.2 billion. For the year ended 31 December 2017, PBITDA/net interest was 11.6 times on a total Group basis (2016:10.1 times) and the Group’s net worth on a total Group basis was€16.6 billion (2016:€16.4 billion). Foreign currency risks: If the euro, which is the Group’s reporting currency, weakens relative to the basket of foreign currencies in which net debt is denominated (principally the US Dollar, Canadian Dollar, Swiss Franc, Philippine Peso and Pound Sterling), the net debt balance would increase; the converse would apply if the euro was to strengthen. The Group may not succeed in managing these foreign currency risks. Counterparty risks: Insolvency of the financial institutions with which the Group conducts business, or a downgrade in their credit ratings, may lead to losses in derivative assets and cash and cash equivalents balances or render it more difficult either to utilise existing debt capacity or otherwise obtain financing for operations. The maximum exposure arising in the event of default on the part of the counterparty (including insolvency) is the carrying amount of the relevant financial instrument. The Group holds significant cash balances on deposit with a variety of highly-rated financial institutions (typically invested on a short-term basis) which, together with cash and cash equivalents at 31 December 2017, totalled€2.1 billion (2016:€2.4 billion). In addition to the above, the Group enters into derivative transactions with a variety of highly-rated financial institutions giving rise to derivative assets and derivative liabilities; the relevant balances as at 31 December 2017 were€64 million and€14 million respectively (2016:€76 million and€32 million respectively). The counterparty risks inherent in these exposures may give rise to losses in the event that the relevant financial institutions suffer a ratings downgrade or become insolvent. In addition, certain of the Group’s activities (e.g. highway paving in the US) give rise to significant amounts receivable from counterparties at the balance sheet date; atyear-end 2017, this balance was€0.8 billion (2016:€0.8 billion). In the business environment, there is increased exposure to counterparty default, particularly as regards bad debts. |
225 |
CRH Annual Report and Form 20-F | 2017
Key Financial and Reporting Risk Factors - continued
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) - continued | ||
Risk Factor | Discussion | |
Credit rating risks: A downgrade of the Group’s credit ratings may give rise to increases in funding costs in respect of future debt and may, among other concerns, impair its ability to access debt markets or otherwise raise funds or enter into letters of credit, for example, on acceptable terms. Such a downgrade may result from factors specific to the Group, including increased indebtedness stemming from acquisition activity, or from other factors such as general economic or sector-specific weakness or sovereign credit rating ceilings. Liquidity risks: The principal liquidity risks stem from the maturation of debt obligations and derivative transactions. The Group aims to achieve flexibility in funding sources through a variety of means including (i) maintaining cash and cash equivalents with a number of highly-rated counterparties; (ii) limiting the maturity of such balances; (iii) meeting the bulk of debt requirements through committed bank lines or other term financing; and (iv) having surplus committed lines of credit. However, market or economic conditions may make it difficult at times to realise this objective. For additional information on the above risks see note 22 to the Consolidated Financial Statements. |
Defined benefit pension schemes and related obligations | ||
Risk Factor | Discussion | |
Description: The Group operates a number of defined benefit pension schemes and schemes with related obligations (for example, termination indemnities and jubilee/long-term service benefits, which are accounted for as defined benefit) in certain of its operating jurisdictions. The assets and liabilities of defined benefit pension schemes may exhibit significantperiod-on-period volatility attributable primarily to asset values, changes in bond yields/ discount rates and anticipated longevity. Impact: In addition to the contributions required for the ongoing service of participating employees, significant cash contributions may be required to remediate deficits applicable to past service. Further, fluctuations in the accounting surplus/deficit may adversely impact the Group’s credit metrics thus harming its ability to raise funds. | The assumptions used in the recognition of pension assets, liabilities, income and expenses (including discount rates, rate of increase in future compensation levels, mortality rates and healthcare cost trend rates) are updated based on market and economic conditions at the respective balance sheet date and for any relevant changes to the terms and conditions of the pension and post-retirement plans. These assumptions can be affected by (i) for the discount rate, changes in the rates of return on high-quality fixed income investments; (ii) for future compensation levels, future labour market conditions and anticipated inflation; (iii) for mortality rates, changes in the relevant actuarial funding valuations or changes in best practice; and (iv) for healthcare cost trend rates, the rate of medical cost inflation in the relevant regions. The weighted average actuarial assumptions used and sensitivity analysis in relation to the significant assumptions employed in the determination of pension and other post-retirement liabilities are disclosed on pages 175 to 180. A prolonged period of financial market instability or other adverse changes in the assumptions mentioned above would have an adverse impact on the valuations of pension scheme assets. In addition, a number of the defined benefit pension schemes in operation throughout the Group have reported material funding deficits thus necessitating remediation either in accordance with legislative requirements or as agreed with the relevant regulators. These obligations are reflected in the contracted payments disclosure on page 214. The extent of such contributions may be exacerbated over time as a result of a prolonged period of instability in worldwide financial markets or other adverse changes in the assumptions mentioned above. |
226 |
CRH Annual Report and Form 20-F | 2017
Taxation charge and balance sheet provisioning | ||
Risk Factor | Discussion | |
Description: The Group is exposed to uncertainties stemming from governmental actions in respect of taxes paid and payable in all jurisdictions of operation. In addition, various assumptions are made in the computation of the overall tax charge and in balance sheet provisions which may not be borne out in practice. Impact: Changes in the tax regimes and related government policies and regulations in the countries in which the Group operates could adversely affect its results and its effective tax rate. The final determination of tax audits or tax disputes may be different from that which is reflected in the Group’s historical income tax provisions and accruals. If future audits find that additional taxes are due, the Group may be subject to incremental tax liabilities, possibly including interest and penalties, which could have a material adverse effect on cash flows, financial condition and results of operations. | The Group’s income tax charge is based on reported profit and expected statutory tax rates, which reflect various allowances and reliefs and tax planning opportunities available to the Group in the multiple tax jurisdictions in which it operates. The determination of the Group’s provision for income tax requires certain judgements and estimates in relation to matters where the ultimate tax outcome may not be certain. The recognition of deferred tax assets also requires judgement as it involves an assessment of the future recoverability of those assets. In addition, the Group is subject to tax audits which can involve complex issues that could require extended periods to conclude, the resolution of which is often not within its control. Although management believes that the estimates included in the Consolidated Financial Statements and the Group’s tax return positions are reasonable, there can be no assurance that the final outcome of these matters will not differ from estimates reflected in the Group’s historical income tax provisions and accruals. As a multinational corporation, the Group is subject to various taxes in all jurisdictions of operation. Due to economic and political conditions, tax rates in these jurisdictions may be subject to significant change. For example, the recent US Tax Cuts and Jobs Act has made significant changes to the US tax rules. The Group’s future effective income tax rate could be affected (positively or negatively) by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets or changes in tax laws or their interpretation. In addition, recent developments, including the European Commission’s investigations on illegal state aid as well as the Organisation for EconomicCo-operation and Development project on Base Erosion and Profit Shifting may result in changes to long-standing tax principles, which could adversely affect the Group’s effective tax rate or result in higher cash tax liabilities. If the Group’s effective income tax rate was to increase, its cash flows, financial condition and results of operations could be adversely affected. |
Foreign currency translation | ||
Risk Factor | Discussion | |
Description: The principal foreign exchange risks to which the Consolidated Financial Statements are exposed pertain to adverse movements in reported results when translated into euro (which is the Group’s reporting currency) together with declines in the euro value of net investments which are denominated in a wide basket of currencies other than the euro. Impact: Adverse changes in the exchange rates used to translate foreign currencies into euro have impacted and will continue to impact retained earnings. The annual impact is reported in the Consolidated Statement of Comprehensive Income. | Given the geographic diversity of the Group, a significant proportion of its revenues, expenses, assets and liabilities are denominated in currencies other than the euro, principally US Dollar, Canadian Dollar, Swiss Franc, Polish Zloty, Philippine Peso and Pound Sterling. From year to year, adverse changes in the exchange rates used to translate these and other foreign currencies into euro have impacted and will continue to impact consolidated results and net worth. For additional information on the impact of foreign exchange movements on the Consolidated Financial Statements for the Group for the year ended 31 December 2017, see the Business Performance section commencing on page 22 and note 22 to the Consolidated Financial Statements. |
Goodwill impairment | ||
Risk Factor | Discussion | |
Description: Significant under-performance in any of the Group’s major cash generating units or the divestment of businesses in the future may give rise to a material write-down of goodwill. Impact: A write-down of goodwill could have a substantial impact on the Group’s income and equity. | An acquisition generates goodwill to the extent that the price paid exceeds the fair value of the net assets acquired. Under IFRS, goodwill and indefinite-lived intangible assets are not amortised but are subject to annual impairment testing. Other intangible assets deemed separable from goodwill arising on acquisitions are amortised. A detailed discussion of the impairment testing process, the key assumptions used, the results of that testing and the related sensitivity analysis is contained in note 15 to the Consolidated Financial Statements on pages 153 to 156. While a goodwill impairment charge does not impact cash flow, a full write-down at 31 December 2017 would have resulted in a charge to income and a reduction in equity of€6.9 billion (2016:€7.4 billion). |
227 |
CRH Annual Report and Form 20-F | 2017
Corporate Governance Practices - NYSE
Compliance Statement
Non-US companies such as CRH are exempt from most of the corporate governance rules of the NYSE. In common with companies listed on the ISE and the LSE, CRH’s corporate governance practices reflect, inter alia, compliance with (a) domestic company law; (b) the Listing Rules of the UK Listing Authority and the ISE; and (c) the 2016 UK Corporate Governance Code, which is appended to the listing rules of the LSE and ISE.
The Board of CRH has adopted a robust set of governance principles, which reflect the Code and its principles-based approach to corporate governance. Accordingly, the way in which CRH makes determinations of Directors’ independence differs from the NYSE rules. The Board has determined that, in its judgement, all of thenon-executive Directors are independent. In doing so, however, the Board did not explicitly take into consideration the independence requirements outlined in the NYSE’s listing standards.
Shareholder InformationApproval of Equity Compensation Plans
The NYSE rules require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. CRH complies with Irish requirements, which are similar to the NYSE rules. The Board, however, does not explicitly take into consideration the NYSE’s detailed definition on what are considered “material revisions”.
Risk Management and Internal Control
The Board has delegated responsibility for monitoring the effectiveness of the Group’s risk management and internal control systems to the Audit Committee*. Such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, in the case of internal control systems, can provide only reasonable and not absolute assurance against material misstatement or loss.
The Consolidated Financial Statements are prepared subject to oversight and control of the Finance Director, who seeks to ensure that data is captured from Group locations and all required information for disclosure in the Consolidated Financial Statements is provided. An appropriate control framework has been put in place around the recording of appropriate eliminating journals and other adjustments. The Consolidated Financial Statements are reviewed by the CRH Financial Reporting and Disclosure Group prior to being reviewed by the Audit Committee and approved by the Board of Directors.
Group management has responsibility for major strategic development and financing decisions. Responsibility for operational issues is devolved, subject to limits of authority, to product group and operating company management. Management at all levels is responsible for internal control over the business functions that have been delegated. This embedding of the system of internal control throughout the Group’s operations is designed to enable the organisation to respond quickly to evolving business risks, and to ensure that significant internal control issues, should they arise, are reported promptly to appropriate levels of management.
Management’s Report on Internal Control over Financial Reporting
In accordance with the requirements of Rule13a-15 of the US Securities Exchange Act, the following report is provided by management in respect of the Company’s internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Consolidated Financial Statements for
external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Consolidated Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorisations of management and Directors of the Company; and
• provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the Consolidated Financial Statements
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules13a-15(f) and15d-15(f) under the US Securities Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our Company’s published Consolidated Financial Statements for external purposes under generally accepted accounting principles.
In connection with the preparation of the Company’s annual Consolidated Financial Statements, management has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of
31 December 2017, based on criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organisations of the Treadway Commission.
* | In accordance with Section 167(7) of the Companies Act 2014. |
228 |
CRH Annual Report and Form 20-F | 2017
As permitted by the SEC, the Company has elected to exclude an assessment of the internal controls of acquisitions made during the year 2017. These acquisitions, which are listed in note 31 to the Consolidated Financial Statements, constituted 6.4% of total assets and 10.6% of net assets, as of 31 December 2017 and 1.9% and (0.1%) of revenue (from continuing and discontinued operations) and Group profit for the financial year, respectively, for the year then ended.
Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this assessment, management has concluded and hereby reports that as of 31 December 2017, the Company’s internal control over financial reporting is effective.
Our auditors, EY, a registered public accounting firm, who have audited the Consolidated Financial Statements for the year ended 31 December 2017, have audited the effectiveness of the Company’s internal controls over financial reporting. Their report, on which an unqualified opinion is expressed thereon, is included on page 119.
Changes in Internal Control over Financial Reporting
During 2017, there has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rules13a-15 that occurred during the period covered by this Annual Report and Form20-F that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Acquisitions excluded from the 2016 assessment of internal control over financial reporting were all successfully integrated into the CRH internal control systems in 2017.
Evaluation of Disclosure Controls and Procedures
Management has evaluated the effectiveness of the design and operation of the disclosure controls and procedures as defined in Exchange Act Rules13a-15(e) as of 31 December 2017. Based on that evaluation, the Chief Executive and the Finance Director have concluded that these disclosure controls and procedures were effective as of such date at the level of providing reasonable assurance.
In designing and evaluating our disclosure controls and procedures, management, including the Chief Executive and the Finance Director, recognised that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
Code of Business Conduct
The CoBC, together with its supporting policies, sets out the guiding business principles and core values of the CRH Group. The Code complies with the applicable code of ethics regulations of the SEC arising from the Sarbanes-Oxley Act and it also reinforces the fundamental CRH principle that “there is never a good business reason to do the wrong thing”. The CoBC is applicable to all employees of the CRH Group including the Chief Executive and senior financial officers. The Code promotes honest and ethical conduct; full, fair, accurate, timely and understandable disclosures; and sets out the requirements for compliance with applicable governmental laws, rules and regulations.
229 |
CRH Annual Report and Form 20-F | 2017
The Environment and Government Regulations
The most important government regulations relevant to CRH as a building materials company are environmental laws and regulations relevant to extractive and production processes. In the European Union, operations are subject to national environmental laws and regulations, most of which now emanate from European Union Directives and Regulations. In the US, operations are subject to federal, state and local environmental laws and regulations. In other jurisdictions, national environmental and local laws apply.
Environmental Compliance Policy
In order to comply with environmental regulations, CRH has developed the following Group environmental policy, approved by the Board and applied across all Group companies, which is to:
• comply, as a minimum, with all applicable environmental legislation and continuously improve our environmental stewardship, aiming all the time to meet or exceed industry best practice;
• ensure that our employees and contractors respect their environmental responsibilities;
• address proactively the challenges and opportunities of climate change;
• optimise our use of energy and all resources;
• promote environmentally driven product innovation and new business opportunities and;
• develop positive relationships and strive to be good neighbours in every community in which we operate
Achieving the Group’s environmental policy objectives at all locations is a management imperative; this line responsibility continues right up to Board level. Daily responsibility for ensuring that the Group’s environmental policy is effectively implemented lies with individual location managers, assisted by a network of Environmental Liaison Officers (ELOs).
At eachyear-end, the ELOs assist the Group Corporate Social Responsibility & Sustainability team in carrying out a detailed assessment of Group environmental performance, which is reviewed by the Board.
Addressing Climate Change
CRH has evaluated the risks and opportunities arising from climate change and has put in place a management strategy. In striving to reduce its emissions, CRH delivers carbon, energy and financial efficiencies for its businesses and helps to address climate change on a societal level. There is a focus on reducing the carbon footprint of products during manufacture and on increasing their contribution to reducing emissions during their lifetime. There are value creation opportunities for the Group, including opportunities for sales of products aimed at climate adaptation, such as sustainable drainage systems, flood defences, and more resilient structures. CRH is a core member of the Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD). The CSI is a voluntary initiative by the world’s major cement producers, promoting greater sustainability in the cement industry.
Having achieved its initial CO2 reduction commitment three years ahead of target in 2012, CRH has pledged a 25% reduction in specific net CO2 cement plant emissions by 2020, compared with 1990 levels. The Group is progressing successfully towards achieving this commitment, which is supported by a strategic investment programme and covers a defined portfolio of Group cement plants.
Through its membership of the CSI of the WBCSD and regional industry associations including the European Cement Association (CEMBUREAU) and the European Lime Association (EuLA) in Europe and the National Asphalt Pavement Association (NAPA) and the Portland Cement Association (PCA) in the US, CRH is actively involved in global and regional discussions on the climate change agenda. Relevant facilities in Europe operate within the European Union Emission Trading Scheme for Greenhouse Gas emissions through actively implementing carbon reduction strategies. Relevant facilities in Canada comply with relevant “cap and trade” schemes. CRH has endorsed the WBCSD Low Carbon Technology Partnership Initiative (LCTPi), a statement of ambition, which seeks a reduction in global cement CO2 emissions in the range of20-25% by 2030.
CRH acknowledges the “Paris Climate Agreement” to limit global temperature rise to 2oC (with efforts towards 1.5oC), made at the 21st
Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. CRH has implemented capital expenditure programmes in its cement operations to reduce carbon emissions in the context of international and national commitments to reduce greenhouse gas emissions. The European Union has binding targets to reduce greenhouse gases, on 1990 levels, by 20% by 2020 and by 40% by 2030. In addition, the European Commission has suggested an objective to reduce emissions by 80% by 2050 compared to 1990. Achieving such reductions would represent a significant extra constraint on cement operations in Europe. US federal, state and local laws continue to develop to address carbon emissions. The Group may incur costs in monitoring and reporting emissions. Ultimately a “cap and trade” scheme may be implemented in the US; depending on the scope of the legislation, this could significantly impact certain operations in the US. As of 16 February 2018, the Group is not aware of any schemes that would materially affect its US operations, however, we are continuously monitoring developments in regulations.
Possible Environmental Liabilities
At 16 February 2018, there were no material pending legal proceedings relating to site remediation which are anticipated to have a material adverse effect on the financial position or results of operations or liquidity of the Group, nor have internal reviews revealed any situations of likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital expenditures and the allocation by state entities of available funds to different projects, as well as interest rate and tax policies, directly affect the overall levels of construction activity. The terms and general availability of government permits required to conduct Group business also has an impact on the scope of Group operations. As a result such governmental decisions and policies can have a significant impact on the operating results of the Group.
230 |
CRH Annual Report and Form 20-F | 2017
History, Development and Organisational Structure of the Company
CRH public limited company is the Parent Company of a diversified international group of companies which manufactures and distributes a diverse range of products servicing the breadth of construction needs, from the fundamentals of heavy materials and elements to construct the frame, through value-added exterior products that complete the building envelope, to distribution channels which service constructionfit-out and renewal.
The Group resulted from the merger in 1970 of two leading Irish public companies, Cement Limited (established in 1936) and Roadstone Limited (incorporated in 1949). Cement Limited manufactured and supplied cement while Roadstone Limited was primarily involved in the manufacture and supply of aggregates, readymixed concrete, mortar, coated macadam, asphalt and contract surfacing to the Irish construction industry.
As a result of planned geographic diversification since themid-1970s, the Group has expanded by acquisition and organic growth into an international manufacturer and supplier of building materials.
The Company is incorporated and domiciled in the Republic of Ireland. CRH is a public limited company operating under the Companies Act of Ireland 2014. The Group’s worldwide headquarters is located in Dublin, Ireland. Our principal executive offices are located at Belgard Castle, Clondalkin, Dublin 22 (telephone: +353 1 404 1000). The Company’s registered office is located at 42 Fitzwilliam Square, Dublin 2, Ireland and our US agent is Oldcastle, Inc., 900 Ashwood Parkway, Suite 600, Atlanta, Georgia 30338.
The Company is the holding company of the Group, with direct and indirect share and loan interests in subsidiaries, joint ventures and associates. From Group headquarters, a small team of executives exercises strategic control over our decentralised operations.
CRH plc is a leading global diversified building materials group employing 85,000 people at over 3,600 operating locations in 32 countries worldwide.
CRH is the second largest building materials company worldwide and the largest in North America. The Group has leadership positions in Europe, where it is the largest heavyside materials business, as well as established strategic positions in the emerging economic regions of Asia and South America.
In the detailed description of the Group’s business on pages 22 to 53, estimates of the Group’s various aggregates and stone reserves have been provided by engineers employed by the individual operating companies. Details of productend-use by sector for each reporting segment are based on management estimates.
A listing of the principal subsidiary undertakings and equity accounted investments is contained on pages 246 to 251.
Statements Regarding Competitive Position and Construction Activity
Statements made in the Business Performance section and elsewhere in this document referring to the Group’s competitive position are based on the Group’s belief, and in some cases rely on a range of sources, including investment analysts’ reports, independent market studies and the Group’s internal assessment of market share based on publicly available information about the financial results and performance of market participants.
Unless otherwise specified, references to construction activity or other market activity relate to the relevant market as a whole and are based on publicly available information from a range of sources, including independent market studies, construction industry data and economic forecasts for individual jurisdictions.
Legal Proceedings
Group companies are parties to various legal proceedings, including some in which claims for damages have been asserted against the companies. Having taken appropriate advice, we believe that the aggregate outcome of such proceedings will not have a material effect on the Group’s financial condition, results of operations or liquidity.
In 2015, the Swiss Competition Commission imposed fines on the Association of Swiss Wholesalers of the Sanitary Industry and on major Swiss wholesalers including certain Swiss CRH subsidiaries; the fine attributable to these subsidiaries was CHF34 million. While the Group remains of the view that the fine is unjustified and it has appealed to the Swiss Federal Appeals Court, a provision of€29 million (2016:€32 million) is recorded in the Group’s Consolidated Balance Sheet.
Research and Development
Research and development is not a significant focus of the Group. CRH’s policy is to expense all research and development costs as they occur.
Employees
The average number of employees for the past three financial years is disclosed in note 6 to the Consolidated Financial Statements on page 143. No significant industrial disputes have occurred at any of CRH’s factories or plants during the past five years. The Group believes that relations with its employees and labour unions are satisfactory.
Seasonality
Activity in the construction industry is characterised by cyclicality and is dependent to a considerable extent on the seasonal impact of weather in the Group’s operating locations, with activity in some markets reduced significantly in winter due to inclement weather. First-half sales accounted for 47% of full-year 2017 (2016: 47%), while EBITDA (as defined)* for the first six months of 2017 represented 36% of the full-yearout-turn (2016: 36%).
Significant Changes
In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply Inc. to dispose of its 100% holding in Allied Building Products, the trading name of our Americas Distribution segment, for a consideration of US$2.6 billion. The transaction closed on 2 January 2018. See further details in note 2 to the Consolidated Financial Statements.
In 2017, we reached an agreement with the Board of Ash Grove Cement to acquire a significant portfolio of cement and other materials assets. This deal is due to close in 2018.
* | EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax. |
231 |
232 |
Shareholder Information | ||||||||
Stock Exchange Listings | 234 | |||||||
Ownership of Ordinary Shares | 235 | |||||||
Dividends | 236 | |||||||
Share Plans | 237 | |||||||
American Depositary Shares | 238 | |||||||
Taxation | 239 | |||||||
Memorandum and Articles of Association | 241 | |||||||
General Information | 243 |
233 |
CRH Annual Report and Form 20-F | 2017
CRH has a premium listing on the London Stock ExchangeLSE and a secondary listing on the Irish Stock Exchange.ISE.
American Depositary Shares (“ADSs”),ADSs, each representing one Ordinary Share, are listed on the New York Stock Exchange (“NYSE”).NYSE. The ADSs are evidenced by American Depositary Receipts (“ADRs”)ADRs issued by The Bank of New York Mellon (the “Depositary”‘Depositary’) as Depositary under an
Amended and Restated Deposit Agreement dated
28 November 2006. Each ADS represents one Ordinary Share of the Company. The ticker symbol for the ADSs on the NYSE is CRH.
The following table sets forth, for the periods indicated, the reported high and low closing sales prices for the Ordinary Shares in euro on the Irish Stock Exchange from 2010 through 6 March 2015 ISE
and in Pound Sterling on the London Stock ExchangeLSE from 6 December 2011 (as the London Stock Exchange became CRH’s sole premium listing on that date)2013 through 6 March 2015.16 February 2018. The table also sets forth, for the same periods, the high and low closing sale prices for the ADSs on the NYSE.
Sterling per | Euro per | US Dollars | ||||||||||||||||||||||||||
Ordinary Share | Ordinary Share | per ADS | ||||||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||||||
Calendar Year | ||||||||||||||||||||||||||||
2010 | €22.00 | €11.51 | $29.43 | $14.77 | ||||||||||||||||||||||||
2011 | £12.80(i | ) | £11.09(i | ) | €17.00(ii | ) | €10.50(ii | ) | $24.95 | $14.38 | ||||||||||||||||||
2012 | £14.09 | £10.52 | €16.79 | €12.99 | $22.20 | $16.35 | ||||||||||||||||||||||
2013 | £16.17 | £12.15 | €19.30 | €14.68 | $26.26 | $19.56 | ||||||||||||||||||||||
2014 | £17.88 | £12.66 | €21.82 | €15.86 | $29.72 | $20.47 | ||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||
First Quarter | £15.40 | £12.15 | €17.86 | €14.68 | $23.05 | $19.56 | ||||||||||||||||||||||
Second Quarter | £14.77 | £12.59 | €17.36 | €14.81 | $22.24 | $19.62 | ||||||||||||||||||||||
Third Quarter | £15.27 | £12.92 | €18.13 | €15.19 | $24.60 | $19.86 | ||||||||||||||||||||||
Fourth Quarter | £16.17 | £14.19 | €19.30 | €16.85 | $26.26 | $23.26 | ||||||||||||||||||||||
2014 | ||||||||||||||||||||||||||||
First Quarter | £17.88 | £15.39 | €21.82 | €18.47 | $29.72 | $25.32 | ||||||||||||||||||||||
Second Quarter | £17.75 | £15.01 | €21.40 | €18.74 | $29.71 | $25.85 | ||||||||||||||||||||||
Third Quarter | £15.55 | £13.43 | €19.58 | €16.81 | $26.77 | $22.71 | ||||||||||||||||||||||
Fourth Quarter | £15.79 | £12.66 | €20.04 | €15.86 | $24.52 | $20.47 | ||||||||||||||||||||||
Recent Months | ||||||||||||||||||||||||||||
September 2014 | £14.88 | £13.85 | €18.58 | €17.47 | $24.20 | $22.81 | ||||||||||||||||||||||
October 2014 | £14.02 | £12.66 | €18.00 | €15.86 | $22.69 | $20.47 | ||||||||||||||||||||||
November 2014 | £15.11 | £13.52 | €19.00 | €17.00 | $23.45 | $21.45 | ||||||||||||||||||||||
December 2014 | £15.79 | £14.21 | €20.04 | €17.85 | $24.52 | $22.17 | ||||||||||||||||||||||
January 2015 | £16.80 | £14.71 | €22.35 | €18.73 | $25.06 | $22.51 | ||||||||||||||||||||||
February 2015 | £18.47 | £17.18 | €25.32 | €22.97 | $28.47 | $25.80 | ||||||||||||||||||||||
March 2015 | ||||||||||||||||||||||||||||
(through 6 March 2015) | £18.13 | £17.70 | €24.98 | €24.40 | $28.20 | $27.02 |
|
|
Pound Sterling per Ordinary Share | euro per Ordinary Share | US Dollars per ADS | ||||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||||
Calendar Year | ||||||||||||||||||||||||||
2013 | £16.17 | £12.15 | €19.30 | €14.68 | $26.26 | $19.56 | ||||||||||||||||||||
2014 | £17.88 | £12.66 | €21.82 | €15.86 | $29.72 | $20.47 | ||||||||||||||||||||
2015 | £19.80 | £14.71 | €28.09 | €18.73 | $30.95 | $22.51 | ||||||||||||||||||||
2016 | £28.30 | £16.37 | €32.96 | €21.00 | $35.18 | $23.72 | ||||||||||||||||||||
2017 | £29.20 | £25.30 | €34.53 | €28.48 | $37.86 | $33.41 | ||||||||||||||||||||
2016 | ||||||||||||||||||||||||||
First Quarter | £19.86 | £16.37 | €26.37 | €21.00 | $28.47 | $23.72 | ||||||||||||||||||||
Second Quarter | £21.85 | £19.40 | €27.47 | €23.32 | $31.49 | $26.54 | ||||||||||||||||||||
Third Quarter | £26.07 | £20.96 | €30.90 | €24.52 | $34.04 | $27.64 | ||||||||||||||||||||
Fourth Quarter | £28.30 | £25.51 | €32.96 | €28.65 | $35.18 | $31.60 | ||||||||||||||||||||
2017 | ||||||||||||||||||||||||||
First Quarter | £28.98 | £26.67 | €34.03 | €31.44 | $36.59 | $33.41 | ||||||||||||||||||||
Second Quarter | £29.20 | £26.14 | €34.53 | €30.98 | $37.76 | $33.42 | ||||||||||||||||||||
Third Quarter | £28.37 | £26.25 | €32.28 | €28.48 | $37.86 | $34.02 | ||||||||||||||||||||
Fourth Quarter | £28.61 | £25.30 | €32.47 | €28.54 | $37.58 | $33.87 | ||||||||||||||||||||
Recent Months | ||||||||||||||||||||||||||
September 2017 | £28.37 | £26.40 | €32.28 | €29.09 | $37.86 | $34.78 | ||||||||||||||||||||
October 2017 | £28.61 | £27.23 | €32.47 | €30.49 | $37.58 | $35.81 | ||||||||||||||||||||
November 2017 | £28.04 | £25.66 | €31.75 | €28.95 | $36.79 | $34.63 | ||||||||||||||||||||
December 2017 | £26.63 | £25.30 | €30.06 | €28.54 | $36.09 | $33.87 | ||||||||||||||||||||
January 2018 | £27.70 | £26.12 | €31.55 | €29.73 | $38.96 | $36.09 | ||||||||||||||||||||
February 2018 (through 16 February 2018) | £25.75 | £23.80 | €29.44 | €26.76 | $36.88 | $33.19 | ||||||||||||||||||||
Additional share price data | ||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||
LSE | ISE | NYSE | LSE | ISE | NYSE | |||||||||||||||||||||
Share price at 31 December | £26.57 | €29.96 | $36.09 | £28.30 | €32.96 | $34.38 | ||||||||||||||||||||
Market capitalisation | £22.3bn | €25.1bn | $30.3bn | £23.6bn | €27.4bn | $28.6bn |
For further information on CRH shares see note 2830 to the Consolidated Financial Statements.
234 |
Shareholder Information|continued
Shareholdings as at 31 December 2014
Geographic Location1 | Number of shares held ‘000s | % of total | ||||||||||||||||||||
Shareholdings as at 31 December 2017 | ||||||||||||||||||||||
Number of shares | ||||||||||||||||||||||
Geographic location (i) | held ‘000s | % of total | ||||||||||||||||||||
United Kingdom | 269,047 | 32.07 | ||||||||||||||||||||
North America | 309,829 | 41.61 | 212,702 | 25.35 | ||||||||||||||||||
United Kingdom | 185,851 | 24.96 | ||||||||||||||||||||
Europe/Other | 125,413 | 16.85 | 171,900 | 20.49 | ||||||||||||||||||
Retail | 87,458 | 11.75 | 156,267 | 18.63 | ||||||||||||||||||
Ireland | 32,198 | 4.32 | 28,988 | 3.45 | ||||||||||||||||||
Treasury | 3,776 | 0.51 | ||||||||||||||||||||
744,525 | 100 | |||||||||||||||||||||
Treasury (ii) | 54 | 0.01 | ||||||||||||||||||||
838,958 | 100 |
This represents a best estimate of the number of shares controlled by fund managers resident in the geographic regions indicated. Private shareholders are classified as retail above. |
Holdings | Number of Shareholders | % of total | Number of shares held ‘000s | % of total | ||||||||||||
1 - 1,000 | 14,973 | 60.13 | 4,989 | 0.67 | ||||||||||||
1,001 - 10,000 | 8,375 | 33.63 | 24,431 | 3.28 | ||||||||||||
10,001 - 100,000 | 1,152 | 4.63 | 31,838 | 4.28 | ||||||||||||
100,001 - 1,000,000 | 310 | 1.24 | 109,383 | 14.69 | ||||||||||||
Over 1,000,000 | 93 | 0.37 | 573,884 | 77.08 | ||||||||||||
24,903 | 100 | 744,525 | 100 |
(ii) | As detailed in note 30 to the Consolidated Financial Statements. |
Number | ||||||||||||||||
Number of | % of | of shares | % of | |||||||||||||
Holdings | shareholders | total | held ‘000s | total | ||||||||||||
1 - 1,000 | 14,583 | 60.15 | 4,618 | 0.55 | ||||||||||||
1,001 - 10,000 | 7,689 | 31.71 | 22,801 | 2.72 | ||||||||||||
10,001 - 100,000 | 1,408 | 5.81 | 43,626 | 5.20 | ||||||||||||
100,001 - 1,000,000 | 427 | 1.76 | 140,608 | 16.76 | ||||||||||||
Over 1,000,000 | 139 | 0.57 | 627,305 | 74.77 | ||||||||||||
24,246 | 100 | 838,958 | 100 |
The Company is not owned or controlled directly or indirectly by any government or by any corporation or by any other natural or legal person severally or jointly. The major shareholders do not have any special voting rights.
As at 6 March 2015,28 February 2018, the Company had received notification of the followingcertain interests in its Ordinary share capital:
6 March 2015
| 31 December 2014
| 31 December 2013
| 31 December 2012
| |||||||||||||||||||||||||||||
Name | Holding/Voting Rights | % at period end | Holding/Voting Rights | % at year end | Holding/Voting Rights | % at year end | Holding/Voting Rights | % at year end | ||||||||||||||||||||||||
BlackRock, Inc.1 | 67,412,664 | 8.26 | 40,681,647 | 5.49 | 43,857,751 | 5.98 | 28,961,677 | 3.98 | ||||||||||||||||||||||||
The Capital Group Companies, Inc. (“CGC”) | - | - | - | - | - | - | 35,763,581 | 4.92 | ||||||||||||||||||||||||
Harbor International Fund | 21,853,816 | 2.68 | 21,999,275 | 2.96 | 21,999,275 | 3.00 | 21,999,275 | 3.02 | ||||||||||||||||||||||||
Legal & General Group Plc | - | - | - | - | - | - | 22,496,003 | 3.09 | ||||||||||||||||||||||||
Norges Bank (The Central Bank of Norway) | - | - | - | - | - | - | 21,543,277 | 2.96 | ||||||||||||||||||||||||
Templeton Global Advisors Limited | 21,503,171 | 2.63 | 21,503,171 | 2.90 | 21,503,171 | 2.93 | 21,503,171 | 2.96 | ||||||||||||||||||||||||
UBS AG | 26,380,604 | 3.23 | 26,380,604 | 3.56 | 26,380,604 | 3.59 | 26,380,604 | 3.63 |
|
Share capital that were equal to, or in excess of, 3%. These interests are presented in Corporate Governance – Substantial Holdings on page 70.
Shareholder Information|continued
Purchases of Equity Securities by the Issuer and Affiliated Persons
There
2017 | ||||||||
Month | Number purchased | Price | ||||||
March | 90,971 | €33.21 | ||||||
July | 179 | €33.33 | ||||||
November | 1,673 | €31.40 | ||||||
November | 3,960 | €31.51 |
2016 | ||||||||
Month | Number purchased | Price | ||||||
March | 81,457 | € | 24.38 (i) | |||||
August | 86,464 | € | 29.80 (i) | |||||
(i) | Shares were purchased in Stg£ at a price of £18.88 and £25.46 respectively per share. |
Other than the above, there were no purchases of equity securities by the issuer and/or affiliated persons during the course of 2014.2017.
CREST
Transfer of the Company’s shares takes place through the CREST system. Shareholders have the choice of holding their shares in electronic form or in the form of share certificates.
Where shares are held in CREST, dividends are automatically paid in euro unless a currency election is made. CREST members should use the facility in CREST to make currency elections. Such elections must be made in respect of entire holdings as partial elections are not permissible.
235 |
CRH Annual Report and Form 20-F | 2017
The Company has paid dividends on its Ordinary Shares in respect of each fiscal year since the formation of the Group in 1970. Dividends are paid to shareholders ason the Register of Members on the record date for the dividend. Record dates which are determinedset by the Board of Directors.LSE and the ISE. An interim dividend is normally declared by the Board of Directors in August of each year and is generally paid in October. A final dividend is normally recommended by the Board of Directors following the end of the fiscal year to which it relates and, if approved by the shareholders at an Annual General Meeting,AGM, is generally paid in May of that year.
Each ordinary shareholder in CRH holds an Income Share which is tied to each Ordinary Share and may only be transferred or otherwise dealt with in conjunction with that Ordinary Share. The payment of future cash dividends will be dependent upon future earnings, the financial condition of the Group and other factors.
The followingbelow table sets forth the amounts of interim, final and total dividends in euro cent per Ordinary Share declared in respect of each fiscal year indicated. Each amount represents the actual dividend payable. Solely for the convenience of the reader, these dividends have been translated into US cents per American Depositary Share (“ADS”) (each representing one Ordinary Share)ADS using the FRB Noon Buying Rate on the date of payment. An interim dividend of 19.2c was paid in respect of Ordinary Shares on 3 November 2017. The final dividend, if approved at the forthcoming Annual General MeetingAGM of shareholders to be held on 7 May 2015,26 April 2018, will be paid on 124 May 20152018 to shareholders on the Register of Members as at the close of business on 9 March 2018 and will bring the full yearfull-year dividend for 20152017 to 62.50 cent.68.0c. The proposed final dividend has been translated using the FRB Noon Buying Rate on 6 March 2015.16 February 2018.
Euro cent | Translated into | |||||||||||||||||||||||||
per ordinary share | US cents per ADS | |||||||||||||||||||||||||
Years ended 31 December | Interim | Final | Total | Interim | Final | Total | ||||||||||||||||||||
2010 | 18.50 | 44.00 | 62.50 | 25.64 | 62.23 | 87.87 | ||||||||||||||||||||
2011 | 18.50 | 44.00 | 62.50 | 25.43 | 58.36 | 83.79 | ||||||||||||||||||||
2012 | 18.50 | 44.00 | 62.50 | 24.09 | 57.18 | 81.27 | ||||||||||||||||||||
2013 | 18.50 | 44.00 | 62.50 | 25.52 | 60.54 | 86.06 | ||||||||||||||||||||
2014 | 18.50 | 44.00a | 62.50 | 23.45 | 47.76a | 71.21 |
|
Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is entitled to an exemption and has submitted a properly completed exemption form to the Company’s Registrars, CapitaLink Asset Services (the “Registrars”‘Registrars’). DWT applies to dividends paid by way of cash or by way of shares under a scrip dividend scheme and is deducted at the standard rate of Income Tax (currently 20%).Non-resident shareholders and certain Irish companies, trusts, pension schemes, investment undertakings and charities may be entitled to claim exemption from DWT. Copies of the exemption form may be obtained from the Registrars. Shareholders should note that DWT will be deducted from dividends in cases where a properly completed form has not been received by the record date for a dividend. Individuals who are resident in the Republic of Ireland for tax purposes are not entitled to an exemption.
Shareholders who wish to have their dividend paid direct to atheir bank account, by electronic funds transfer, can do so by logging on to www.signalshares.com (formerly www. capitashareportal.com), selecting CRH and registering for the share portal (the ‘Share Portal’). Shareholders should note that they will need to have their Investor Code (found on their share certificate), and follow the instructions online to register.
Alternatively shareholders can complete the requireda paper dividend mandate form and submit it to the Registrars. A copy of the required form can be obtained fromby logging onto the shareholder services section of CRH website, www.crh.com,Registrar’s share portal and following the instructions as set out under “Equity Investors”. Alternatively, shareholders can contact the Registrars to obtain a mandate form (see contact details on page 207).243. Tax vouchers will continue to be sent to the shareholder’s registered address under this arrangement.
Dividends are generally paid in euro. However, in order to avoid costs to shareholders, dividends are paid in Pound Sterling and US Dollars to shareholders whose shares are not held in the CREST system (see page 199)235) and whose address, according to the Share Register, is in the UK and the United StatesUS respectively, unless they require otherwise.
Dividends in respect of 7% ‘A’ Cumulative Preference Shares are paid half-yearly on
5 April and 5 October.
Dividends in respect of 5% Cumulative Preference Shares are paid half-yearly on 15 April and 15 October.
Shareholders have the option of taking their dividend in the form of shares under the Company’s Scrip Dividend Scheme.
euro cent per Ordinary Share | Translated* into US cents per ADS | |||||||||||||||||||||||||||
Years ended 31 December
| Interim | Final | Total | Interim | Final | Total | ||||||||||||||||||||||
2013 | 18.50 | 44.00 | 62.50 | 25.52 | 60.54 | 86.06 | ||||||||||||||||||||||
2014 | 18.50 | 44.00 | 62.50 | 23.45 | 49.46 | 72.91 | ||||||||||||||||||||||
2015 | 18.50 | 44.00 | 62.50 | 19.88 | 50.25 | 70.13 | ||||||||||||||||||||||
2016 | 18.80 | 46.20 | 65.00 | 20.91 | 50.80 | 71.71 | ||||||||||||||||||||||
2017 | 19.20 | 48.80 | (i) | 68.00 | 22.30 | 60.72 | (i) | 83.02 | ||||||||||||||||||||
(i) | Proposed |
* | At the FRB Noon Buying Rate on the date of payment |
236 |
Shareholder InformationCRH Annual Report and Form 20-F |continued2017
CREST
Transfer of the Company’s shares takes place through the CREST system. Shareholders have the choice of holding their shares in electronic form or in the form of share certificates.
Where shares are held in CREST, dividends are automatically paid in euro unless a currency election is made. CREST members should use the facility in CREST to make currency elections. Such elections must be made in respect of entire holdings as partial elections are not permissible.
The Group operates share option schemes, performance share plans, share participation schemes and savings-related share option schemes (the “Schemes”‘Schemes’) for eligible employees in all regions where the regulations permit the operation of such schemes. A brief description of the Schemes is outlined below. Shares issued (whether by way of the allotment of new shares or the reissue of Treasury Shares) in connection with the Schemes rank pari passu in all respects with the Ordinary and Income shares of the Company.
2000 Share Option Schemes
At the Annual General MeetingAGM held on 3 May 2000, shareholders approved the adoption of Share Option Schemes (the “2000 Schemes”‘2000 Share Option Schemes’) to replace schemes which were approved in May 1990. The 2000 Share Option Schemes were replaced by new schemes in May 2010 (see below).
Details of the performance criteria applicable to “basic tier” and “second tier” optionsOptions granted under the 2000 Share Option Schemes invested when EPS growth exceeded the tengrowth on the Irish Consumer Price Index by 5% compounded over a period of at least three years followingsubsequent to the Adoption Date are contained in the Directors’ Remuneration Report in table 39 on page 119.granting of options.
Options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant for the basic tier and five years for the second tier.grant. Benefits under the schemes are not pensionable.
2010 Share Option Schemes
At the Annual General MeetingAGM held on 5 May 2010, shareholders approved the adoption of new share option schemes to replace the schemes which were approved in May 2000 (see above). Following the approval by shareholders of the 2014 Performance Share Plan (see below), no further awards will be granted under the 2010 Share Option Schemes (the “2010 Schemes”).Schemes. Consequently, the last award under the 2010 Share Option Schemes was made in 2013.
The 2010 Share Option Schemes are based on one tier of options with a single vesting test. The performance criteria for the 2010 Share Option Schemes areEPS-based. Vesting will only occuroccurs once an initial performance target has been reached and, thereafter, will beis dependent on performance. In considering the level of vesting based on EPS performance, the Remuneration Committee will also considerconsiders the overall results of the Group. Please refer to the Directors’ Remuneration Report in table 32 on page 116 in relation to the performance criteria for the 2010 Schemes.
Subject to the achievement of the EPS performance criteria, options may be exercised not later than ten years from the date of grant of the option, and not earlier than the expiration of three years from the date of grant. Benefits under the schemes are not pensionable.
2000 Savings-related Share Option Schemes
At the Annual General Meeting held on 3 May 2000, shareholders approved the adoption of savings-related share option schemes. CRH Group schemes were subsequently established in the Republic of Ireland and the United Kingdom (the “2000 Savings-related Share Option Schemes”), under which eligible subsidiary companies of the Group were nominated as participating subsidiaries. No further options will be granted under the 2000 Savings-related Share Option Schemes as those schemes were replaced by new savings-related share option schemes in May 2010 (see below).
At 6 March 2015, 2,158,570 Ordinary Shares have been issued1 pursuant to the 2000 Savings-related Share Option Schemes.
2010 Savings-related Share Option Schemes
At the Annual General MeetingAGM held on 5 May 2010, shareholders approved the adoption of savings-related share option schemes (the “2010‘2010 Savings-related Share Option Scheme”Schemes’) to replace the 2000 Savings-related Share Option Schemes.
All employees of a participating subsidiary in the Republic of Ireland or United Kingdom,the UK, who have satisfied a required qualifying period, are invited to participate in this scheme.
Eligible employees who wish to participate in the scheme enter into a savings contract with a nominated savings institution, for a three or a five yearfive-year period, to save a maximum of€500 or Stg£500, as appropriate, per month.
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Shareholder Information | continued
At the commencement of each contract period employees are granted an option to acquire Ordinary Shares in the Company at an option price which is equal to the amount proposed to be saved plus the bonus payable by the nominated savings institution at the end of the savings period. The price payable for each Ordinary Share under an option will be not less than the higher of par or 75% (or in the case of the UK scheme 80%) of the market value of a share on the day the invitation to apply for the option is issued.
On completion of the savings contract, employees may use the amount saved, together with the bonus earned, to exercise the option.
139,239At 28 February 2018, 679,312 Ordinary Shares have been issued1issued* pursuant to the 2010 Savings-related Share Option Schemes to date.
Share Participation Schemes
At the Annual General MeetingAGM on 13 May 1987, the shareholders approved the establishment of Share Participation Schemes for the Company, its subsidiaries and companies under its control. Directors and employees of the companies who have at least one year’s service may elect to participate in these Share Participation Schemes.
At 6 March 2015, 7,551,45328 February 2018, 7,862,416 Ordinary Shares have been issued1issued* pursuant to the Share Participation Schemes.
2006 Performance Share Plan
See the Directors’ Remuneration Report on page 114 for more details. The 2006 Performance Share Plan (the “2006 PSP”) has been replaced by the 2014 Performance Share Plan (the “2014 PSP”, see below), which
The 2014 Performance Share Plan was approved by shareholders at the 2014 Annual General Meeting. Consequently, the last award under the 2006 PSP was made in 2013.
2014 Performance Share Plan
The 2014 PSP was approved by shareholders at the Annual General MeetingAGM on 7 May 2014. It replaces the 2010 Share Option Schemes and the 2006 PSP.Performance Share Plan. See the 2017 Directors’ Remuneration Report on page 11284 for more details.
Restricted Share Plan
In 2013, the Board approved the adoption of the 2013 Restricted Share Plan (the “2013 RSP”).Plan. Under the rules of the 2013 RSP,Restricted Share Plan, certain senior executives (excluding executive Board Directors) received acan receive conditional awardawards of shares in 2013 on a time-vested basis.shares. As (i) executive Directors wereare excluded from the awardawards and (ii) no shares wereare allotted or re-issuedreissued to satisfy the awards, the listing rules of the LondonLSE and Irish Stock Exchanges didISE do not require shareholder approval offor the 2013 RSP.Restricted Share Plan.
* | Whether by way of the allotment of new shares or the reissue of Treasury Shares. |
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CRH Annual Report and Form 20-F | 2017
During 2013, the Employee Benefit Trust purchased 391,250 shares on behalf of CRH plc in respect of awards under the 2013 RSP. No further awards will be made under the 2013 RSP.
Fees and charges payable by a
holder of American Depositary Shares (“ADSs”)ADSs.
The Depositary collects fees for delivery and surrender of ADSs directly from investors or from intermediaries acting for them depositing shares or surrendering ADSs for the purpose of withdrawal.
The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.
The Depositary may generally refuse to providefee-attracting services until its fees for those services are paid.
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Shareholder Information| continued
Persons depositing or withdrawing shares must pay: | For: | |||||
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | • | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property
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• | Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates | |||||
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) (A fee equivalent to the fee that would be payable if securities distributed had been shares and the shares had been deposited for issuance of ADSs) | • | Distribution of deposited securities by the Depositary to ADS registered holders | ||||
Applicable Registration or | • | Transfer and registration of shares on our share register to or from the name of the Depositary or its agent when the holder deposits or withdraws shares | ||||
Applicable Expenses of the Depositary | • |
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• | Converting foreign currency to US Dollars | |||||
Applicable Taxes and other governmental charges the Depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes | • | As necessary | ||||
Fees and direct and indirect
payments made by the
Depositary to the Company
Category of expense reimbursed to the Company | Amount reimbursed for the year ended | |||
31 December 2017 | ||||
New York Stock Exchange listing fees | US$65,000 | |||
Investor relations expenses | US$41,460 | |||
Total | US$106,460 |
The Banktable below sets forth the types of New York Mellon, asexpenses that the Depositary has paid to third parties and the amounts reimbursed for the year ended 31 December 2017:
Category of expense waived or paid | Amount reimbursed for the year ended | |||
directly to third parties | 31 December 2017 | |||
Printing, distribution and administration costs paid directly to third parties in connection with United States shareholder communications and Annual General Meeting related expenses in connection with the American Depositary Share programme | US$2,989 | |||
Total | US$2,989 |
The Depositary has agreed to reimburse certain Company expenses related to the Company’s ADS programme and incurred by the Company in connection with the ADS programme. For the year ended 31 December 20142017 the Depositary reimbursed to the Company, or paid amounts on its behalf to third parties, a total sum of $175,192.
TheUS$109,449. This table below sets forth the category of expense that the Depositary has agreed to reimburse to the Company and the amounts reimbursed for the year ended 31 December 2014:
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The table below sets forth the types of expenses that the Depositary has paid to third parties and the amounts reimbursed for the year ended 31 December 2014:
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Shareholder Information| continued2017.
The Depositary has also agreed to waive fees for standard costs associated with the administration of the ADS programme and has paid certain expenses directly to third parties on behalf of the Company.
Under certain circumstances, including removal of the Depositary or termination of the ADS programme by the Company before November 2016,2021, the Company is required to repay the Depositary, up to a maximum of $250,000,US$250,000, the amounts waived, reimbursed and/or expenses paid by the Depositary to or on behalf of the Company.
238 |
CRH Annual Report and Form 20-F | 2017
The following summary outlines the material aspects of US federal income and Republic of Ireland tax law regarding the ownership and disposition of ADSsOrdinary Shares or Ordinary Shares.ADSs. Because it is a summary, holders of ADSsOrdinary Shares or Ordinary SharesADSs are advised to consult their tax advisors with respect to the tax consequences of their ownership or disposition. This summary does not take into account the specific circumstances of any particular holders (such astax-exempt entities, certain insurance companies, broker-dealers, traders in securities that elect tomark-to-market, investors liable for alternative minimum tax, investors that actually or constructively own 10% or more of the stock of the Company (by vote or value), investors that hold Ordinary Shares or ADSs as part of a straddle or a hedging or conversion transaction, investors that hold Ordinary Shares or ADSs as part of a wash sale for tax purposes or investors whose functional currency is not the US Dollar), some of which may be subject to special rules. In addition, if a partnership holds the Ordinary Shares or ADSs, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership and may not be described fully below. Holders of ADSsOrdinary Shares or Ordinary SharesADSs are advised to consult their tax advisors with respect to US federal, state and local, Republic of Ireland and other tax consequences of owning and disposing of Ordinary Shares and ADSs in their particular circumstances, and in particular whether they are eligible for the benefits of the Income Tax Treaty (as defined below) in respect of their investment in the Ordinary Shares or ADSs.
The statements regarding US and Irish laws set forth below are based, in part, on representations of the Depositary and assume that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with their terms.
This section is based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed US Treasury regulations, published rulings and court decisions, and the laws of the Republic of Ireland all as currently in effect, as well as the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the “Income‘Income Tax Treaty”Treaty’). These laws are subject to change, possibly on a retroactive basis.
In general, holders of ADSs will be treated as the owners of Ordinary Shares represented thereby for the purposes of the Income Tax Treaty and for US federal income tax purposes. Exchanges of Ordinary Shares for ADSs, and ADSs for Ordinary
Shares, generally will not be subject to US federal income or Irish tax.
As used herein, the term “US holder” means a beneficial owner of an ADSOrdinary Share or Ordinary ShareADS who (i) is a US citizen or resident, a US corporation, an estate whose income is subject to US federal income tax regardless of its source, or a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust, and (ii) is not a resident of, or ordinarily resident in, the Republic of Ireland for purposes of Irish taxes.
Taxation of Dividends paidPaid to USUnited States Holders
Under general Irish tax law, US holders are not liable for Irish tax on dividends received from the Company. On the payment of dividends, the Company is obliged to withhold a Dividend Withholding Tax (“DWT”).DWT. The statutory rate at present is 20% of the dividend payable. Dividends paid by the Company to a US tax resident individual will be exempt from DWT, provided the following conditions are met:
1. | the individual (who must be the beneficial owner) is resident for tax purposes in the US (or any country with which Ireland has a double tax treaty) and neither resident nor ordinarily resident in Ireland; and |
2. | the individual signs a declaration to the Company, which states that he/she is a US tax resident individual at the time of making the declaration and that he/she will notify the Company in writing when he/she no longer meets the condition in (1) above; or |
3. | the individual provides the Company with a certificate of tax residency from the US tax |
Dividends paid by the Company to a US tax resident company (which must be the beneficial owner) will be exempt from DWT, provided the following conditions are met:
Shareholder Information| continued
1. | the recipient company is resident for tax purposes in the US (or any country with which Ireland has a double tax treaty) and not under the control, either directly or indirectly, of Irish resident persons; and |
2. | the recipient company is not tax resident in Ireland; and |
3. | the recipient company provides a declaration to the Company, which states that it is entitled to an exemption from DWT, on the basis that it meets the condition in (1) above at the time of making the declaration, and that it will notify the Company when it no longer meets the condition in (1) |
For US federal income tax purposes, and subject to the passive foreign investment company (“PFIC”)(PFIC) rules discussed below, US holders will include in gross income the gross amount of any dividend paid by the Company out of its current or accumulated earnings and profits (as determined for US federal income tax purposes) as ordinary income when the dividend is actually or constructively received by the US holder, in the case of Ordinary Shares, or by the Depositary, in the case of ADSs. Any Irish tax withheld from this dividend payment must be included in this gross amount even though the amount withheld is not in fact received. Dividends paid tonon-corporate US holders that constitute qualified dividend income will be taxed at the preferential rates applicable to long-term capital gains provided certain holding period requirements are met. Dividends the Company pays with respect to Ordinary Shares or ADSs generally will be qualified dividend income.
Dividends paid by CRH will not be eligible for the dividends received deduction generally allowed to US corporations in respect of dividends received from other US corporations.
The amount of the dividend distribution includable in income of a US holder will be the US Dollar value of the euro payments made, determined at the spot euro/US Dollar rate on the date such dividend distribution is includable in the income of the US holder, regardless of whether the payment is in fact converted to US Dollars. Generally any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includable in income to the date such payment is converted into US Dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income. Such gain or loss will generally be income or loss from sources within the US for foreign tax credit limitation purposes.
Distributions in excess of current and accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as anon-taxable return of capital to the extent of the US holder’s basis in the Ordinary Shares or ADSs and thereafter as capital gain. However, the Company does not calculate earnings and profits in accordance with US federal income tax principles. Accordingly, US holders should expect to generally treat distributions the Company makes as dividends.
For foreign tax credit limitation purposes, dividends the Company pays with respect to Ordinary Shares or ADSs will generally be income from sources outside the US, and will, depending on your circumstances, generally be either “passive” or “general” income for purposes of computing the foreign tax credit allowable to a US holder.
239 |
CRH Annual Report and Form 20-F | 2017
Taxation - continued
Subject to certain limitations, the Irish tax withheld in accordance with the Income Tax Treaty and paid over to the Republic of Ireland will be creditable or deductible against your US federal income tax liability. Special rules apply in determining the foreign tax credit limitation with respect to dividends that are subject to the preferential tax rates. Any Irish tax withheld from distributions will not be eligible for a foreign tax credit to the extent an exemption from the tax withheld is available to the US holder.
Capital Gains Tax
A US holder will not be liable for Irish tax on gains realised on the sale or other disposition of ADSs or Ordinary Shares or ADSs unless the ADSsOrdinary Shares or Ordinary SharesADSs are held in connection with a trade or business carried on by such holder in the Republic of Ireland through a branch or agency. A US holder will be liable for US federal income tax on such gains in the same manner as gains from a sale or other disposition of any other shares in a company.
Subject to the PFIC rules below, US holders who sell or otherwise dispose of Ordinary Shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US Dollar value of the amount realised on the sale or disposition and the tax basis, determined in US Dollars, in the Ordinary Shares or ADSs.
Capital gains of anon-corporate US holder are generally taxed at a preferential rate where the holder has a holding period greater than one year, and the capital gain or loss will generally be US source for foreign tax credit limitation purposes.
Capital Acquisitions Tax (Estate/Gift Tax)
Althoughnon-residents may hold Ordinary Shares, the shares are deemed to be situated in the Republic of Ireland, because the Company is required to maintain its Share Register in the Republic of Ireland for Irish Capital Gains Tax purposes.
Accordingly, holders of Ordinary Shares may be subject to Irish gift or inheritance tax,
notwithstanding that the parties involved are domiciled and resident outside the Republic of Ireland. Certain exemptions apply to gifts and inheritances depending on the relationship between the donor and donee.
Under theIreland-US Estate Tax Treaty with respect to taxes on the estates of deceased persons, credit against US federal estate tax is available in respect of any Irish inheritance tax payable in respect of transfers of Ordinary Shares.
Shareholder Information| continued
Additional United States Federal US Income Tax Considerations
The Company believes that Ordinary Shares and ADSs should not be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If the Company is treated as a PFIC and you are a US holder that did not make amark-to-market election, you will be subject to special rules with respect to any gain you realise on the sale or other disposition of your Ordinary Shares or ADSs and any excess distribution that the Company makes to you. Generally, any such gain or excess distribution will be allocated ratably over your holding period for the Ordinary Shares or ADSs, the amount allocated to the taxable year in which you realised the gain or received the excess distribution, or to prior years before the first year in which we were a PFIC with respect to you, will be taxed as ordinary income, the amount allocated to each prior year will be generally taxed as ordinary income at the highest tax rate in effect for each other such year, and an interest charge will be applied to any tax attributable to such gain or excess distribution for the prior years. With certain exceptions, Ordinary Shares or ADSs will be treated as stock in a PFIC if the company was a PFIC at any time during the investor’s holding period in the Ordinary Shares or ADSs. In addition, dividends that you receive from the Company will not constitute qualified dividend income to you if the Company is deemed to be a PFIC either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.
Stamp Duty
Section 90 Stamp Duties Consolidation Act 1999 exempts from Irish stamp duty transfers of ADSs where the ADSs are dealt in and quoted on a recognised stock exchange in the US and the underlying deposited securities are dealt in and quoted on a recognised stock exchange. The Irish tax authorities regard NASDAQ and the NYSE as recognised stock exchanges. Irish stamp duty will be charged at the rate of 1% of the amount or value of the consideration on any conveyance or transfer on sale of Ordinary Shares (exemption generally available in the case of single transfers with a value of less than€1,000).
240 |
Memorandum and Articles of Association
The Company’s Memorandum of Association sets out the objects and powers of the Company. The Articles of Association detail the rights attaching to each share class; the method by which the Company’s shares can be purchased or reissued; the provisions which apply to the holding of and voting at general meetings; and the rules relating to the Directors, including their appointment, retirement,re-election, duties and powers.
A copy of the current Memorandum and Articles of Association can be obtained from the Group’s website, www.crh.com.
The following summarises certain provisions of CRH’s Memorandum and Articles of Association and applicable Irish law.
Objects and Purposes
CRH is incorporated under the name CRH public limited company and is registered in Ireland with registered number 12965. Clause 4 of CRH’s Memorandum of Association provides that its objects include the business of an investment holding company. Clause 4 also sets out other objects including the business of quarry masters and proprietors and lessees and workers of quarries, sand and gravel pits, mines and the like generally; the business of road-makers and contractors, building contractors, builders merchants and providers and dealers in road making and building materials, timber merchants; and the carrying on of any other business calculated to benefit CRH. The memorandum grants CRH a range of corporate capabilities to effect these objects.
Directors
The Directors manage the business and affairs of CRH.
Directors who are in any way, whether directly or indirectly, interested in contracts or other arrangements with CRH must declare the nature of their interest at a meeting of the Directors, and, subject to certain exemptions, may not vote in respect of any contract or arrangement or other proposal whatsoever in which they have any material interest other than by virtue of their interest in shares or debentures in the Company. However, in the absence of some other material interest not indicated below, a Director is entitled to vote and to be counted in a quorum for the purpose of any vote relating to a resolution concerning the following matters:
• | the giving of security or indemnity with respect to money lent or obligations taken by the Director at the request or for the benefit of the Company; |
• | the giving of security or indemnity to a third party with respect to a debt or obligation of the Company which the Director has assumed responsibility for under a guarantee, indemnity or the giving of security; |
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CRH Annual Report and Form 20-F | 2017
Memorandum and Articles of security or indemnity with respect to money lent or obligations taken by the Director at the request or for the benefit of the Company;
Shareholder Information| continued
The Directors may exercise all the powers of the Company to borrow money, except that such general power is restricted to the aggregate amount of principal borrowed less cash balances of the Company and its subsidiaries not exceeding an amount twice the aggregate of (a) the share capital of the Company; and (b) the amount standing to the credit of retained income, foreign currency translation reserve and other reserves, capital grants, deferred taxation andnon-controlling interest; less any repayable government grants; less (c) the aggregate amount of Treasury Shares and own shares held by the Company.
The Company in general meeting from time to time determines the fees payable to the Directors. The CRH Board may grant special remuneration to any of its number who being called upon, shall render any special or extra services to the Company or go or reside abroad in connection with the conduct of any of the affairs of the Company.
The qualification of a Director is the holding alone and not jointly with any other person of 1,000 Ordinary Shares in the capital of the Company.
Voting Rights
The Articles provide that, at shareholders’ meetings, holders of Ordinary Shares, either in person or by proxy, are entitled on a show of hands to one vote and on a poll to one vote per share. No member is entitled to vote at any general meeting unless all calls or other sums immediately payable in respect of their shares in the Company have been paid.
Laws, Decrees or other Regulations
There are no restrictions under the Memorandum and Articles of Association of the Company or under Irish law that limit the right ofnon-Irish residents or foreign owners freely to hold their Ordinary Shares or to vote their Ordinary Shares.
Liquidation Rights/Return of Capital
In the event of the Company being wound-up,wound up, the liquidator may, with the sanction of a shareholders’ special resolution, divide among the holders of the Ordinary Shares the whole or any part of the net assets of the Company (after the return of capital and payment of accrued dividends on the preference shares) in cash or in kind, and may set such values as he deems fair upon any property to be so divided and determine how such division will be carried out. The liquidator may, with a like sanction, vest such assets in trust as he thinks fit, but no shareholders will be compelled to accept any shares or other assets upon which there is any liability.
Variation in Class Rights
Subject to the provisions of the Irish Companies Acts,Act 2014, the rights attached to any class of shares may be varied with the consent in writing of the holders of not less than three-fourthsthree fourths in nominal value of the issued shares of that class, or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares.
Issue of Shares
Subject to the provisions of the Companies Act 2014 and the Articles of Association, the issue of shares is at the discretion of the Directors.
Dividends
Shareholders may by ordinary resolution declare final dividends and the Directors may declare interim dividends but no final dividend may be declared in excess of the amount recommended by the Directors and no dividend may be paid otherwise than out of income available for that purpose in accordance with the Companies Act 2014. There is provision to offer scrip dividends in lieu of cash. The preference shares rank for fixed rate dividends in priority to the Ordinary and Income Shares for the time being of the Company. Any dividend which has remained unclaimed for 12 years from the date of its declaration shall, if the Directors so decide, be forfeited and cease to remain owing by the Company.
Meetings
Shareholder meetings may be convened by majority vote of the Directors or requisitioned by shareholders holding not less than 5% of the voting rights of the Company. A quorum for a general meeting of the Company is constituted by five or more shareholders present in person and entitled to vote. The passing of resolutions at a meeting of the Company, other than special resolutions, requires a simple majority. A special resolution, in respect of which not less than 21 clear days’ notice in writing must be given,
requires the affirmative vote of at least 75% of the votes cast.
Disclosure of Shareholders’ Interests
A shareholder may lose the right to vote by not complying with any statutory notice or notice pursuant to Article 14 of the Articles of Association given by the Company requiring an indication in writing of: (a) the capacity in which the shares are held or any interest therein; (b) the persons who have an interest in the shares and the nature of their interest; or (c) whether any of the voting rights carried by such shares are the subject of any agreement or arrangement under which another person is entitled to control the shareholder’s exercise of these rights.
Issue of Shares
Subject to the provisions of the Irish Companies Acts and the Articles of Association, the issue of shares is at the discretion of the Directors.
Dividends
Shareholders may by ordinary resolution declare final dividends and the Directors may declare interim dividends but no final dividend may be declared in excess of the amount recommended by the Directors and no dividend may be paid otherwise than out of income available for that purpose in accordance with the Irish Companies Acts. There is provision to offer scrip dividends in lieu of cash. The preference shares rank for fixed rate dividends in priority to the Ordinary and Income Shares for the time being of the
Shareholder Information| continued
Company. Any dividend which has remained unclaimed for twelve years from the date of its declaration shall, if the Directors so decide, be forfeited and cease to remain owing by the Company.
Meetings
Shareholder meetings may be convened by majority vote of the Directors or requisitioned by shareholders holding not less than 5% of the voting rights of the Company. A quorum for a general meeting of the Company is constituted by five or more shareholders present in person and entitled to vote. The passing of resolutions at a meeting of the Company, other than special resolutions, requires a simple majority. A special resolution, in respect of which not less than 21 days’ notice in writing must be given, requires the affirmative vote of at least 75% of the votes cast.
Preference Shares
Details of the 5% and 7% ‘A’ Cumulative Preference Shares are disclosed in note 2830 to the Consolidated Financial Statements.
Use of Electronic Communication
Whenever the Company, a Director, the Secretary, a member or any officer or person is required or permitted by the Articles of Association to give information in writing, such information may be given by electronic means or in electronic form, whether as electronic communication or otherwise, provided that the electronic means or electronic form has been approved by the Directors.
20152018 Changes
At the Annual General MeetingAGM to be held on 7 May 2015,26 April 2018, the approval of shareholders will be sought for a proposed changeschange to the Memorandum and Articles of Association, which will become effective on commencement of the Companies Act 2014 (currently expected to be 1 June 2015), as follows:
Resolution 14 to be proposed at the Annual General Meeting13 is a special resolution, and seeks shareholder approval for certain changes to the Memorandum of Association. The proposed amendments,which, if approved, will updateprovide the statutory referencesDirectors with important flexibility regarding the mechanism for setting the price for scrip dividend offers. Under the existing provisions of Article 137(b)(ii) the scrip price must be set by reference to the average price of an Ordinary Share on each of the first three business days on which the Ordinary Shares are quoted “ex” the relevant dividend. There can be circumstances where setting the price using this methodology may not be appropriate or in the Memorandumbest interests of Association in order to be consistent withshareholders. In such situations the Companies Act 2014.
Resolution 15 to be proposed at the Annual General Meeting is a special resolution and seeks shareholder approval for certain changesonly option currently open to the Articles of Association.Board is to not make or cancel a scrip offer. The proposed changes, if approved, will:amendment will also provide the Board with flexibility in relation to the way in which the scrip dividend alternative plan is operated.
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CRH Annual Report and Form 20-F | 2017
Electronic Communications
Following the introduction of the 2007 Transparency Regulations, and in order to adopt a more environmentally friendly and cost effective approach, the Company provides the Annual Report and Form20-Fto
Shareholder Information| continued
shareholders electronically via the CRH website, www.crh.com, and only sends a printed copy to those shareholders who specifically request a copy. Shareholders who choose to do so can receive other shareholder communications, for example, notices of general meetings and shareholder circulars, electronically. However, shareholders will continue to receive printed proxy forms, dividend documentation and, if the Company deems it appropriate, other documentation by post. Shareholders can alter the method by which they receive communications by contacting the Registrars.
CRH Website
Information on or accessible through our website, www.crh.com, other than the item identified as the Annual Report and Form20-F, does not form part of and is not incorporated into the Company’s Annual Report on Form20-F as filed with the SEC (the ‘Form20-F’). References in this document to other documents on the CRH website, such as the CRH Sustainability Report, are included only as an aid to their location and are not incorporated by reference into the Form20-F. The Group’s website provides the full text of the Form20-F, which is filed annually with the SEC, interim reports, trading updates, copies of presentations to analysts and investors and circulars to shareholders. News releases are made available in the News & Events section of the website, immediately after release to the Stock Exchanges.
Electronic Proxy Voting
Shareholders may lodge a proxy form for the 2015 Annual General Meeting2018 AGM electronically by accessing the Registrars’ website as described below.
CREST members wishing to appoint a proxy via CREST should refer to the CREST Manual and the notes to the Notice of the Annual General Meeting.AGM.
Registrars
Enquiries concerning shareholdings should be addressed to the Registrars:
Link Asset Services
(formerly Capita Asset ServicesServices),
P.O. Box 7117,
Dublin 2,
Ireland Ireland.
Telephone: +353 (0) 1 553 0050
Fax: +353 (0) 1 224 0700
Website: www.capitaassetservices.comwww.linkassetservices.com
Shareholders with access to the internet may check their accounts by accessinglogging onto www.signalshares.com (formerly www. capitashareportal.com), selecting CRH plc and registering for the Registrars’ websiteshare portal. Shareholders should note that they will need to have their Investor Code (found on their share certificate) and selecting “Shareholder Portal (Ireland)”.follow the instructions online to register. This facility allows shareholders to check their shareholdings and dividend payments, registere-mail addresses, appoint proxies electronically and download standard forms required to initiate changes in details held by the Registrars. Shareholders will need to register for a User ID before using some of the services.
Financial Calendar
Announcement of final results for 2017 | 1 March 2018 | |
Ex-dividend date | 8 March 2018 | |
Record date for dividend | 9 March 2018 | |
Latest date for receipt of scrip forms | 18 April 2018 | |
Annual General Meeting | 26 April 2018 | |
Dividend payment date and first day of dealing in scrip dividend shares | 4 May 2018 | |
Further updates to the calendar can be found on www.crh.com
American Depositary Receipts
The ADR programme is administered by the Bank of New York Mellon and enquiries regarding ADRs should be addressed to:
BNY Mellon Shareowner Services,
P.O. Box 505000, Louisville,
KY 40233-5000, U.S.A.
Telephone: Toll Free Number
US residents:1-888-269-2377
International: +1201-680-6825
E-mail: shrrelations@cpushareownerservices.com Website: www.mybnymdr.com
Frequently Asked Questions (FAQs)
The Group’s website contains answers to questions frequently asked by shareholders, including questions regarding shareholdings, dividendsdividend payments, electronic communications and shareholder rights. The FAQFAQs can be accessed in the Investors section of the website under “Equity Investors”.
Certain aspects of CRH’s international monetary operations outside the EUEuropean Union were, prior to 31 December 1992, subject to regulation by the Central Bank of Ireland. These controls have now ceased. There are currently no Irish foreign exchange controls, or other statute or regulations that restrict the export or import of capital, that affect the remittance of dividends, other than dividend withholding tax on the Ordinary Shares, or that affect the conduct of the Company’s operations.
Principal Accountant Fees and Services
Details of auditors’ fees are set out in note 34 to the Consolidated Financial Statements. For details on the audit andnon-audit servicespre-approval policy see Corporate Governance – External Auditors on page 100.64.
It is possible to read and copy documents referred to in this Annual Report on Form20-F, which that have been filed with the SEC at the SEC’s public reference room located at 100 F Street, NW,NE, Washington, DC 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms and their copy charges. The SEC filings are also available to the public from commercial document retrieval services and, for most recent CRH periodic filings only, at the Internet World Wide Webweb site maintained by the SEC at www.sec.gov.
243 |
Other Information | ||||||||
Principal Subsidiary Undertakings | 246 | |||||||
Principal Equity Accounted Investments | 251 | |||||||
Exhibits | 252 | |||||||
Cross Reference to Form20-F Requirements | 253 | |||||||
Index | 254 | |||||||
Signatures | 256 |
245 |
CRH Annual Report and Form 20-F | 2017
Principal Subsidiary Undertakings
as at 31 December 2017
Europe Heavyside
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Douterloigne N.V. | 100 | Concrete floor elements, pavers and blocks | ||||
Ergon N.V. | 100 | Precast concrete and structural elements | ||||
Oeterbeton N.V. | 100 | Precast concrete | ||||
Belgium | Prefaco N.V. | 100 | Precast concrete structural elements | |||
Remacle S.A. | 100 | Precast concrete products | ||||
Schelfhout N.V. | 100 | Precast concrete wall elements | ||||
VVM N.V. | 100 | Cement transport and trading, readymixed concrete, clinker grinding | ||||
Northstone (NI) Limited (including Farrans | 100 | Aggregates, readymixed concrete, mortar, coated macadam, | ||||
Construction Limited, Materials and Cubis divisions) | rooftiles, building and civil engineering contracting | |||||
Premier Cement Limited | 100 | Marketing and distribution of cement | ||||
Britain & Northern Ireland | Tarmac Aggregates Limited Tarmac Building Products Limited | 100 100 | Aggregates, asphalt, readymixed concrete and contracting Building products | |||
Tarmac Cement and Lime Limited | 100 | Cement and lime | ||||
Tarmac Trading Limited | 100 | Aggregates, asphalt, cement, readymixed concrete and contracting | ||||
Czech Republic | Vapenka Vitosov s.r.o | 75 | Production of lime and lime products | |||
Denmark | Betongruppen RBR A/S CRH Concrete A/S | 100 100 | Concrete paving manufacturer Structural concrete products | |||
Finland | Finnsementti Oy Rudus Oy | 100 100 | Cement Aggregates, readymixed concrete and concrete products | |||
Eqiom | 99.99 | Aggregates, asphalt, cement and readymixed concrete | ||||
L’industrielle du Béton S.A.* | 100 | Structural concrete products | ||||
France & La Réunion | Stradal Teralta Ciment Reunion* | 100 82.90 | Utility and infrastructural concrete products Cement | |||
Teralta Granulat Beton Reunion* | 93.33 | Aggregates, readymixed concrete | ||||
Fels Holding Company GmbH | 100 | Holding company | ||||
Fels Netz GmbH | 100 | Logistics and owned railway infrastructure operator | ||||
Germany | Fels Vertriebs und Service GmbH & Co. KG. | 100 | Lime and limestone, development of new products | |||
Fels-Werke GmbH | 100 | Production and sale of lime and limestone | ||||
Opterra GmbH | 100 | Cement | ||||
Hungary | CRH Magyarország Kft. Ferrobeton Beton-és Vasbetonelem gyártó Zrt. | 100 100 | Cement and readymixed concrete Precast concrete structural elements | |||
Clogrennane Lime Limited | 100 | Burnt and hydrated lime | ||||
Irish Cement Limited | 100 | Cement | ||||
Ireland | Roadstone Limited | 100 | Aggregates, readymixed concrete, mortar, coated macadam, concrete blocks and pipes, asphalt, agricultural and chemical limestone and contract surfacing | |||
Calduran Kalkzandsteen B.V. | 100 | Sand-lime bricks and building elements | ||||
Cementbouw B.V. | 100 | Cement transport and trading, readymixed concrete and aggregates | ||||
Netherlands | CRH Structural Concrete B.V. | 100 | Precast concrete structural elements | |||
Dycore B.V. | 100 | Concrete flooring elements | ||||
246 |
CRH Annual Report and Form 20-F | 2017
Europe Heavyside
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Bosta Beton Sp. z o.o. | 90.30 | Readymixed concrete | ||||
Drogomex Sp. z o.o.* | 99.94 | Asphalt and contract surfacing | ||||
Grupa Ożarów S.A. | 100 | Cement | ||||
Poland | Grupa Silikaty Sp. z o.o. | 99.19 | Sand-lime bricks | |||
Masfalt Sp. z o.o.* | 100 | Asphalt and contract surfacing | ||||
Trzuskawica S.A. | 100 | Production of lime and lime products | ||||
CRH Agregate Betoane S.A. | 98.59 | Readymixed concrete | ||||
Romania | CRH Ciment (Romania) S.A. | 98.62 | Cement | |||
Elpreco S.A. | 100 | Architectural concrete products | ||||
Ferrobeton Romania SRL | 100 | Structural concrete products | ||||
Russia | LLC Fels Izvest | 100 | Production of lime and lime products | |||
Serbia | CRH (Srbija) d.o.o. | 100 | Cement | |||
Slovakia | CRH (Slovensko) a.s. | 99.70 | Cement and readymixed concrete | |||
Spain | Beton Catalan S.A. Cementos Lemona S.A. | 100 98.75 | Readymixed concrete Cement | |||
Switzerland | JURA-Holding AG | 100 | Cement, aggregates and readymixed concrete | |||
Ukraine | LLC Cement* PJSC Mykolaivcement Podilsky Cement PJSC | 100 99.27 99.60 | Cement and clinker grinding Cement Cement | |||
Europe Lightside | ||||||
Australia | Ancon Building Products Pty Ltd | 100 | Construction accessories | |||
Plakabeton N.V. | 100 | Construction accessories | ||||
Belgium | Marlux N.V. | 100 | Concrete paving and landscaping products | |||
Stradus Infra N.V. | 100 | Concrete paving and landscaping products | ||||
Ancon Limited | 100 | Construction accessories | ||||
Britain & Northern Ireland | Anchor Bay Construction Products Limited* CRH Fencing & Security Group (UK) Limited | 100 100 | Construction accessories Security fencing | |||
Security Windows Shutters Limited | 100 | Physical security, industrial and garage doors, roofing systems | ||||
France | Plaka Group France S.A.S. Marlux | 100 100 | Construction accessories Concrete paving manufacturer | |||
Alulux GmbH* | 100 | Roller shutter and awning systems | ||||
EHL AG | 100 | Concrete paving and landscape walling products | ||||
ERHARDT Markisenbau GmbH* | 100 | Roller shutter and awning systems | ||||
Germany | Halfen GmbH | 100 | Construction accessories | |||
Heras Deutschland GmbH | 100 | Security fencing and access control | ||||
Tenbrink Rolladensysteme GmbH | 100 | Roller shutter and awning systems | ||||
247 |
CRH Annual Report and Form 20-F | 2017
Principal Subsidiary Undertakings - continued
as at 31 December 2017
Europe Lightside - continued |
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Ireland | Cubis Industries Limited | 100 | Supplier of access chambers and ducting products | |||
B.V. Aluminium Verkoop Zuid | 100 | Roller shutter and awning systems | ||||
Netherlands | Heras B.V. | 100 | Security fencing and perimeter protection | |||
Struyk Verwo Groep B.V. | 100 | Concrete paving products | ||||
Poland | Polbruk S.A. | 100 | Concrete paving products | |||
Slovakia | Premac, spol. s.r.o. | 100 | Concrete paving and floor elements | |||
Sweden | Heras Stängsel AB | 100 | Security fencing | |||
Switzerland | F.J. Aschwanden AG* | 100 | Construction accessories | |||
United States | Halfen USA Inc. | 100 | Construction accessories | |||
Europe Distribution | ||||||
Austria | Quester Baustoffhandel GmbH | 100 | Builders merchants | |||
Creyns N.V. | 99.36 | Builders merchants | ||||
BMB Bouwmaterialen BVBA | 100 | Builders merchants | ||||
Lambrechts N.V. | 100 | Builders merchants | ||||
Belgium | Sax Sanitair N.V. | 100 | Sanitary ware, heating and plumbing | |||
Schrauwen Sanitair en Verwarming N.V. | 100 | Sanitary ware, heating and plumbing | ||||
Van Den Broeck BVBA | 100 | Builders merchants | ||||
Van Neerbos België N.V. | 100 | DIY stores | ||||
CRHIle-de-France Distribution* | 100 | Builders merchants | ||||
France | CRH Normandie Distribution | 100 | Builders merchants | |||
CRH TP Distribution | 100 | Builders merchants | ||||
Germany | Andreas Paulsen GmbH BauKing AG | 100 100 | Sanitary ware, heating and plumbing Builders merchants, DIY stores | |||
CRH Bouwmaten B.V. | 100 | Cash & Carry building materials | ||||
Netherlands | BMN | Bouwmaterialen B.V. | 100 | Builders merchants | |||
Van Neerbos Bouwmarkten B.V. | 100 | DIY stores | ||||
Switzerland | BR Bauhandel AG (trading as BauBedarf and Richner) Regusci Reco S.A. (trading as Regusci and Reco) | 100 100 | Builders merchants, sanitary ware and ceramic tiles Builders merchants | |||
248 |
CRH Annual Report and Form 20-F | 2017
Americas Materials | ||||||
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Canada | CRH Canada Group Inc. | 100 | Aggregates, asphalt, cement and readymixed concrete and provider of construction services | |||
APAC Holdings, Inc. and Subsidiaries | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Callanan Industries, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
CPM Development Corporation | 100 | Aggregates, asphalt, readymixed concrete, prestressed concrete and related construction activities | ||||
Dolomite Products Company, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Michigan Paving and Materials Company | 100 | Aggregates, asphalt and related construction activities | ||||
Mountain Enterprises, Inc. | 100 | Aggregates, asphalt and related construction activities | ||||
Mulzer Crushed Stone | 100 | Aggregates, asphalt, readymixed concrete, aggregates distribution and related construction activities | ||||
Oldcastle Materials, Inc. | 100 | Holding company | ||||
Oldcastle SW Group, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
United States | OMG Midwest, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | |||
Pennsy Supply, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Pike Industries, Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
P.J. Keating Company | 100 | Aggregates, asphalt and related construction activities | ||||
Preferred Materials, Inc. | 100 | Aggregates, asphalt, readymixed concrete, aggregates distribution and related construction activities | ||||
Staker & Parson Companies | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Suwannee American Cement | 100 | Cement | ||||
Tilcon Connecticut Inc. | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Tilcon New York Inc. | 100 | Aggregates, asphalt and related construction activities | ||||
The Shelly Company | 100 | Aggregates, asphalt, readymixed concrete and related construction activities | ||||
Trap Rock Industries, LLC* | 60 | Aggregates, asphalt and related construction activities | ||||
West Virginia Paving, Inc. | 100 | Aggregates, asphalt and related construction activities | ||||
Brazil | CRH Brasil Participações S.A. CRH Sudeste Indústria de Cimentos S.A | 100 100 | Holding company Cement | |||
249 |
CRH Annual Report and Form 20-F | 2017
Principal Subsidiary Undertakings - continued
as at 31 December 2017
Americas Products | ||||||
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Oldcastle BuildingEnvelope™Canada, Inc. | 100 | Custom fabricated and tempered glass products and curtain wall | ||||
Canada | Oldcastle Building Products Canada, Inc. (trading as Techniseal, Expocrete Concrete Products, Groupe Permacon, Oldcastle Enclosure Solutions and Transpavé) | 100 | Specialty masonry, hardscape and patio products, utility boxes and trench systems | |||
Advanced Environmental Recycling Technologies, Inc. | 100 | Composite building products | ||||
Americas Products & Distribution, Inc. | 100 | Holding company | ||||
CRH America, Inc. | 100 | Holding company | ||||
CRH America Finance, Inc. | 100 | Holding company | ||||
C.R. Laurence Co., Inc. | 100 | Fabrication and distribution of custom hardware products for the glass industry | ||||
Meadow Burke, LLC | 100 | Concrete accessories | ||||
Oldcastle, Inc. | 100 | Holding company | ||||
Oldcastle APG Northeast, Inc. (trading principally as Anchor Concrete Products and Trenwyth Industries) | 100 | Specialty masonry, hardscape and patio products | ||||
United States | Oldcastle APG South, Inc. (trading principally as Adams Products, Georgia Masonry Supply, Northfield Block Company, Anchor Block and Oldcastle Coastal) | 100 | Specialty masonry, hardscape and patio products | |||
Oldcastle APG West, Inc. (trading principally as Amcor Masonry Products, CentralPre-Mix Concrete Products, Jewell Concrete, Miller Rhino Materials, Sierra Building Products and Superlite Block) | 100 | Specialty masonry and stone products, hardscape and patio products | ||||
Oldcastle Architectural, Inc. | 100 | Holding company | ||||
Oldcastle BuildingEnvelope™, Inc. | 100 | Custom fabricated architectural glass | ||||
Oldcastle Building Products, Inc. | 100 | Holding company | ||||
Oldcastle Lawn & Garden, Inc. | 100 | Patio products, bagged stone, mulch and stone | ||||
Oldcastle Precast, Inc. | 100 | Precast concrete products, concrete pipe, prestressed plank and structural elements | ||||
Americas Distribution | ||||||
United States (i) | Allied Building Products Corp. | 100 | Distribution of roofing, siding and related products, wallboard, metal studs, acoustical tile and grid | |||
Oldcastle Distribution, Inc. | 100 | Holding company | ||||
(i) In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply, Inc. to dispose of its 100% holding in Allied Building Products Corp. The transaction closed on 2 January 2018. | ||||||
Asia | ||||||
Philippines (ii) | Republic Cement & Building Materials, Inc. | 40 | Cement | |||
Republic Cement Land & Resources Inc. | 40 | Cement and Building Materials | ||||
(ii) 55% economic interest in the combined Philippines business (see note 32 to the Consolidated Financial Statements).
250 |
CRH Annual Report and Form 20-F | 2017
Principal Equity Accounted Investments
as at 31 December 2017
Europe Heavyside | ||||||
Incorporated | % held | Products and services | ||||
and operating in | ||||||
Ireland | Kemek Limited* | 50 | Commercial explosives | |||
Europe Distribution | ||||||
France | Samse S.A.* | 21.13 | Builders merchants and DIY stores | |||
Netherlands | Bouwmaterialenhandel de Schelde B.V. Intergamma B.V. | 50 47.83 | DIY stores DIY franchisor | |||
Portugal | Modelo Distribuição de Materials de Construção S.A.* | 50 | DIY stores | |||
Asia | ||||||
China | Jilin Yatai Group Building Materials Investment Company Limited* | 26 | Cement | |||
India | My Home Industries Limited | 50 | Cement | |||
Americas Materials | ||||||
Canada | Blackbird Infrastructure 407 General Partnership* | 50 | Special-purpose entity on highway infrastructure construction | |||
American Asphalt of West Virginia, LLC* | 50 | Asphalt and related construction activities | ||||
American Cement Company, LLC* | 50 | Cement | ||||
Buckeye Ready Mix, LLC* | 45 | Readymixed concrete | ||||
United States | Cadillac Asphalt, LLC* HMA Concrete, LLC* | 50 50 | Asphalt Readymixed concrete | |||
Piedmont Asphalt, LLC* | 50 | Asphalt | ||||
Southside Materials, LLC* | 50 | Aggregates | ||||
* Audited by firms other than Ernst & Young
Pursuant to Sections314-316 of the Companies Act, 2014, a full list of subsidiaries, joint ventures and associated undertakings will be annexed to the Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
251 |
CRH Annual Report and Form 20-F | 2017
The following documents are filed in the SEC’s EDGAR system, as part of this Annual Report:Report on Form20-F, and can be viewed on the SEC’s website.
1. | Memorandum and Articles of Association.* |
2.1 | Amended and Restated Deposit Agreement dated 28 November 2006, between CRH plc and The Bank of New York Mellon.** |
8. | Listing of principal subsidiary undertakings and equity accounted |
12. | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002. |
13. | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002.**** |
15.1 | Consent of Independent Registered Public Accounting Firm. |
15.2 | Governance Appendix. | |
15.3 | 2016 Directors’ Remuneration Policy.*** | |
16. | Disclosure of Mine Safety and Health Administration (“MSHA”) Safety Data. | |
101. | eXtensible Business Reporting Language (XBRL). |
* | Incorporated by reference to Annual Report on Form20-F for the year ended 31 December |
** | Incorporated by reference to Annual Report on Form 20-F for the year ended 31 December 2006 that was filed by the Company on 3 May 2007. | |
*** | Incorporated by reference to Annual Report on Form20-F for the year ended 31 December 2016 that was filed by the Company on 10 March 2017. | |
**** | Furnished but not filed. | |
† | Certain terms omitted pursuant to a request for confidential treatment. |
|
CRH Annual Report and Form 20-F | 2017
Cross Reference to Form20-F Requirements
This table has been provided as a cross reference from the information included in this Annual Report and Form20-F to the requirements of this20-F.
Page | ||||||
PART I | ||||||
Item 1. | Identity of Directors, Senior Management and Advisors | n/a | ||||
Item 2. | Offer Statistics and Expected Timetable | n/a | ||||
Item 3. | Key Information | |||||
A | - Selected Financial Data | 208 | ||||
B | - Capitalisation and Indebtedness | n/a | ||||
C | - Reasons for the Offer and Use of Proceeds | n/a | ||||
D | - Risk Factors | 218 | ||||
Item 4. | Information on the Company | |||||
A | - History and Development of the Company | 2, 3, 27, 29, 231 | ||||
B | - Business Overview | 24, 30 | ||||
C | - Organisational Structure | 231 | ||||
D | - Property, Plants and Equipment | 215 | ||||
Item 4A. | Unresolved Staff Comments | None | ||||
Item 5. | Operating and Financial Review and Prospects | |||||
A | - Operating Results | 8, 22, 210 | ||||
B | - Liquidity and Capital Resources | 26, 27, 29, 214 | ||||
C | - Research and Development, Patents and Licences, etc. | 231 | ||||
D | - Trend Information | 9, 25 | ||||
E | -Off-Balance Sheet Arrangements | 214 | ||||
F | - Tabular Disclosure of Contractual Obligations | 214 | ||||
G | - Safe Harbor | 97 | ||||
Item 6. | Directors, Senior Management and Employees | |||||
A | - Directors and Senior Management | 59 | ||||
B | - Compensation | 72 | ||||
C | - Board Practices | 62 | ||||
D | - Employees | 231 | ||||
E | - Share Ownership | 90, 235 | ||||
Item 7. | Major Shareholders and Related Party Transactions | |||||
A | - Major Shareholders | 70, 235 | ||||
B | - Related Party Transactions | 190 | ||||
C | - Interests of Experts and Counsel | n/a | ||||
Item 8. | Financial Information | |||||
A | - Consolidated Statements and Other | |||||
Financial Information | 120-199 | |||||
- Legal Proceedings | 231 | |||||
- Dividends | 236 | |||||
B | - Significant Changes | 231 | ||||
Item 9. | The Offer and Listing | |||||
A | - Offer and Listing Details | 234 | ||||
B | - Plan of Distribution | n/a | ||||
C | - Markets | 234 | ||||
D | - Selling Shareholders | n/a | ||||
E | - Dilution | n/a | ||||
F | - Expenses of the Issue | n/a |
Page | ||||||
Item 10. | Additional Information | |||||
A | - Share Capital | n/a | ||||
B | - Memorandum and Articles of Association | 241 | ||||
C | - Material Contracts | None | ||||
D | - Exchange Controls | 243 | ||||
E | - Taxation | 239 | ||||
F | - Dividends and Paying Agents | n/a | ||||
G | - Statements by Experts | n/a | ||||
H | - Documents on Display | 243 | ||||
I | - Subsidiary Information | 246 | ||||
Item 11. | Quantitative and Qualitative Disclosures about Market Risk | 214 | ||||
Item 12. | Description of Securities Other than Equity Securities | |||||
A | - Debt Securities | n/a | ||||
B | - Warrants and Rights | n/a | ||||
C | - Other Securities | n/a | ||||
D | - American Depositary Shares | 238 | ||||
PART II | ||||||
Item 13. | Defaults, Dividend Arrearages and Delinquencies | None | ||||
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds | None | ||||
Item 15. | Controls and Procedures | 228 | ||||
Item 16A. | Audit Committee Financial Expert | 64 | ||||
Item 16B. | Code of Ethics | 70, 229 | ||||
Item 16C. | Principal Accountant Fees and Services | 64, 71, 243 | ||||
Item 16D. | Exemptions from the Listing Standards for Audit Committees | n/a | ||||
Item 16E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 235 | ||||
Item 16F. | Change in Registrant’s Certifying Accountant | None | ||||
Item 16G. | Corporate Governance | 228 | ||||
Item 16H. | Mine Safety Disclosures | 215 | ||||
PART III | ||||||
Item 17. | Financial Statements | n/a | ||||
Item 18. | Financial Statements | 120-199 | ||||
Item 19. | Exhibits | 252 |
253 |
CRH 208Annual Report and Form 20-F | 2017
A | ||||
Accounting Policies | 125 | |||
Acquisitions Committee | 68 | |||
American Depositary Shares | 238 | |||
Americas Distribution | 54 | |||
Americas Materials | 44 | |||
Americas Products | 48 | |||
Annual General Meeting | 100 | |||
Asia | 52 | |||
Audit Committee | 64 | |||
Auditors (Directors’ Report) | 99 | |||
Auditor’s Remuneration (note 4) | 64, 141, 204 | |||
Auditor’s Report, Independent (Irish) | 110 | |||
Auditor’s Report, Independent (US) | 118 | |||
B | ||||
Balance Sheet | ||||
- Company | 200 | |||
- Consolidated | 122 | |||
Balanced Portfolio | 4 | |||
Board Approval of Financial Statements (note 34) | 190 | |||
Board Committees | 68 | |||
Board Effectiveness | 67 | |||
Board of Directors | 59 | |||
Board Responsibilities | 68 | |||
Business andNon-Current Asset Disposals (note 5) | 142 | |||
Business Combinations (note 31) | 131, 185 | |||
Business Model | 12 | |||
Business Overview | 24 | |||
Business Performance | 22 | |||
C | ||||
Capital and Financial Risk Management (note 22) | 165 | |||
Cash and Cash Equivalents (note 23) | 132, 168 | |||
Cash Flow, Operating | 15 | |||
Cash Flow Statement, Consolidated | 124 | |||
Chairman’s Introduction | 5 | |||
Chief Executive’s Review | 8 | |||
Communications with Shareholders | 70 | |||
Company Secretary | 70 | |||
Compliance and Ethics | 70 | |||
Contractual Obligations | 214 | |||
Corporate Governance Practices - NYSE | 228 | |||
Corporate Governance Report | 62 | |||
Cost Analysis (note 3) | 140 | |||
CREST | 235 | |||
D | ||||
Debt, Analysis of Net (note 21) | 162 | |||
Deferred Income Tax | ||||
- expense (note 11) | 128, 148 | |||
- assets and liabilities (note 27) | 128, 174 | |||
Depreciation | ||||
- cost analysis (note 3) | 140 | |||
- property, plant and equipment (note 14) | 129, 152 | |||
- segment analysis (note 1) | 135 | |||
Derivative Financial Instruments (note 25) | 132, 170 | |||
Directors’ Emoluments and Interests (note 7) | 143, 205 | |||
Directors’ Interests in Share Capital | 90 | |||
Directors’ Remuneration Report | 72 | |||
Directors’ Report | 96 | |||
Directors’ Responsibilities, Statement of | 100 | |||
Directors’ Share Options | 88 | |||
Discontinued Operations (note 2) | 139 | |||
Dividend Payments (Shareholder Information) | 96, 236 | |||
Dividend per Share | 1 | |||
Dividends (note 12) | 133, 150 | |||
E | ||||
Earnings per Ordinary Share (note 13) | 151 | |||
Employees, Average Number (note 6) | 143 | |||
Employment Costs (note 6) | 143 | |||
End-use Exposure | 4 | |||
Equity Accounted Investments’ Profit, Share of (note 10) | 148 | |||
Europe Distribution | 40 | |||
Europe Heavyside | 32 | |||
Europe Lightside | 36 | |||
Exchange Rates | 134 | |||
Exhibits | 252 | |||
F | ||||
Finance Committee | 68 | |||
Finance Costs and Finance Income (note 9) | 147 | |||
Finance Director’s Review | 25 | |||
Financial Assets (note 16) | 129, 157 | |||
Financial Calendar | 243 | |||
Financial Statements, Consolidated | 120 | |||
Foreign Currency Translations | 107, 227 | |||
Frequently Asked Questions | 243 | |||
G | ||||
Gender Diversity | 14, 68 | |||
Global Business | 2 | |||
Going Concern | 98 | |||
Governance | 56 | |||
Greenhouse Gas Emissions | 14 | |||
Guarantees (note 24; note 11 to Company Balance Sheet) | 169, 205 | |||
H | ||||
Health & Safety | 18 | |||
254 |
CRH Annual Report and Form 20-F | 2017
I | ||||
Income Statement, Consolidated | 120 | |||
Income Tax Expense (note 11) | 148 | |||
Intangible Assets (note 15) | 131, 153 | |||
Inventories (note 17) | 132, 158 | |||
Investor Relations Activities | 71 | |||
K | ||||
Key Components of 2017 Performance | 26 | |||
KPIs, Financial | 15 | |||
KPIs,Non-Financial | 14 | |||
L | ||||
Leases, Commitments Under Operating and Finance (note 29) | 126, 132, 181 | |||
Listing Rule 9.8.4C | 96 | |||
Loans and Borrowings, Interest- Bearing (note 24) | 132, 168 | |||
M | ||||
Measuring Performance | 14 | |||
Memorandum and Articles of Association | 71, 241 | |||
N | ||||
Nomination and Corporate Governance Committee | 67 | |||
Non-controlling Interests (note 32) | 189 | |||
Non-GAAP Performance Measures | 210 | |||
Notes on Consolidated Financial Statements | 135 | |||
Notes to the Company Balance Sheet | 202 | |||
O | ||||
Operating Costs (note 3) | 140 | |||
Operating Leases (note 29) | 132, 181 | |||
Operating Profit Disclosures (note 4) | 141 | |||
P | ||||
Pensions, Retirement Benefit Obligations (note 28) | 127, 175 | |||
Principal Equity Accounted Investments | 251 | |||
Principal Risks and Uncertainties | 102 | |||
Principal Subsidiary Undertakings | 246 | |||
Profit on Disposals (note 5) | 142 | |||
Property, Plant and Equipment (note 14) | 129, 152 | |||
Property, Plants and Equipment | 215 | |||
Provisions for Liabilities (note 26) | 128, 172 | |||
Proxy Voting, Electronic | 243 | |||
R | ||||
Registrars | 243 | |||
Regulatory Information | 97 | |||
Related Party Transactions (note 33) | 190 | |||
Remuneration Committee | 76 | |||
Reserves | 216 | |||
Retirement Benefit Obligations (note 28) | 127, 175 | |||
Return on Net Assets (RONA) | 15, 211, 213 | |||
Risk Governance | 20 | |||
Risk Management and Internal Control | 98, 228 | |||
Risk Factors | 218 | |||
S | ||||
Sector Exposure andEnd-Use | ||||
- Americas Distribution | 54 | |||
- Americas Materials | 44 | |||
- Americas Products | 48 | |||
- Asia | 52 | |||
- Europe Distribution | 40 | |||
- Europe Heavyside | 32 | |||
- Europe Lightside | 36 | |||
Segment Information (note 1) | 130, 135 | |||
Selected Financial Data | 208 | |||
Senior Independent Director | 60 | |||
Share-based Payments (note 8) | 131, 144 | |||
Share Capital and Reserves (note 30) | 133, 182 | |||
Share Options | ||||
- Directors | 88 | |||
- Employees (note 8) | 144 | |||
Share Price Data | 234 | |||
Shareholder Communication | 70 | |||
Shareholdings as at 31 December 2017 | 70, 235 | |||
Statement of Changes in Equity, Consolidated | 123 | |||
Statement of Changes in Equity, Company | 201 | |||
Statement of Comprehensive Income, Consolidated | 121 | |||
Statement of Directors’ Responsibilities | 100 | |||
Stock Exchange Listings | 70, 234 | |||
Strategy | 10 | |||
Substantial Holdings | 70 | |||
Supplemental Guarantor Information (note 35) | 191 | |||
Sustainability | 16 | |||
T | ||||
Total Shareholder Return (TSR) | 12, 15 | |||
Trade and Other Payables (note 19) | 160 | |||
Trade and Other Receivables (note 18) | 158 | |||
V | ||||
Volumes, Annualised | ||||
- Americas Materials | 45 | |||
- Americas Products | 49 | |||
- Europe Heavyside | 33 | |||
- Asia | 52 | |||
W | ||||
Website | 71, 243 | |||
Working Capital and Provisions for Liabilities, Movement in (note 20) | 161 | |||
255 |
CRH Annual Report and Form 20-F | 2017
The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorised the undersigned to sign this Annual Report on its behalf.
CRH public limited company | |||||||
(Registrant) | |||||||
By: | /s/ S. Murphy | ||||||
| Senan Murphy | ||||||
Finance Director |
Dated: 9 March 2018
| 256 |
CRH Annual Report and Form 20-F | 2017
CRH plc Belgard Castle Clondalkin Dublin 22 D22 AV61 Ireland Telephone: +353 1 404 1000 E-mail: mail@crh.com Website: www.crh.com Registered Office 42 Fitzwilliam Square Dublin 2 D02 R279 Ireland Telephone: +353 1 634 4340 Fax: +353 1 676 5013 E-mail: crh42@crh.com CRH® is a registered trade mark of CRH plc. | Cover image: Fels’ Elbingerode Quarry in Saxony-Anhalt, Germany. CRH acquired Fels, a leading German lime and aggregates business, with nine production locations in Germany and one each in the Czech Republic and in the Moscow region of Russia, for€0.6 billion in 2017. |