CRH defends growth strategy amid activist investor interest
Building materials group CRH has defended its organic growth capabilities following recent suggestions a new activist investor views its strategy as being too heavily dependent on acquisitions.
CRH chief executive Albert Manifold said the group grew organic revenue by 3% last year and has seen organic growth of 18% in the last five years.
He was speaking as CRH reported record annual earnings for 2018 and cash generation of €2.4bn; double the amount it was generating five years ago, and enough to prompt likely further share buyback programmes.
Last month, Europe's largest activist investor Cevian Capital was revealed to have acquired a 3% stake in CRH.
Cevian is expected to keep building its stake and seek a seat on the CRH board.
The Swedish company is also understood to view CRH as being undervalued and as having little organic revenue growth and a strategy based on making acquisitions.
Cevian was quoted, last month, as saying it was looking forward to engaging with CRH's management after the publication of the Irish group's annual results.
Mr Manifold said CRH has "good interaction with all of its shareholders" and that he expected that trend to continue with Cevian.
He said management's job is to generate capital and maximise value for shareholders.
He said the group will maintain its strong acquisition strategy, but is also likely to undertake more share buyback programmes.
Its first share buyback in ten years - returning €1bn to investors - is set to conclude by the end of this month.
CRH shares - up only 4% in the past 12 months - inched up by just over 1% yesterday.
CRH's 2018 earnings came to just under €3.37bn; 7% up on the previous year and slightly ahead of expectations. Revenue for the year was 6% ahead at €26.8bn.
The proposed full-year dividend for shareholders amounts to 72c per share, a 6% increase on 2017 levels.
CRH spent more than €3.6bn on acquisitions and investments last year; the vast bulk of which went on buying US cement company Ash Grove - a deal which was initially agreed in 2017.
Some €650m was spent on more than 40 bolt-on acquisitions and the group said it will continue to make such purchases, as the pipeline of opportunities remains healthy, but it is unlikely to make bigger deals due to the need to consolidate recent large-scale acquisitions.
Mr Manifold said the group has made three big acquisitions in the last five years, with each offering the business "multiple platforms for growth" for a number of years.
