CRH Annual Report 2009 | Quarterlytics

Plain-text annual report

Annual Report 2009 PERF ORMANCE AND GRO WTH PERF ORMANCE A ND G ROWTH CRH is a diversiﬁed building materials group which manufactures and distributes building material products 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. Contents inside cover CRH at a Glance 1 2009 Key Financial Figures 2 to 3 CRH Overview 4 to 9 CRH Strategy in Action 10 to 11 Corporate Social Responsibility 12 to 13 Chairman’s Statement 14 to17 Chief Executive’s Review 18 to 35 Group Operations 36 to 39 Finance Review 40 to 41 Board of Directors 42 to 47 Corporate Governance Report 48 to 50 Directors’ Report 51 to 59 Report on Directors’ Remuneration 60 61 Statement of Directors’ Responsibilities Independent Auditors’ Report 62 to 65 Financial Statements 66 to 71 Accounting Policies 72 to 119 Notes on Financial Statements 120 to 121 Shareholder Information 122 to 123 Management 124 to 128 Principal Subsidiary Undertakings 129 Principal Joint Venture and Associated Undertakings 130 to 131 Group Financial Summary 132 to 133 Index Key Financial Figures 2009 Sales EBITDA Operating proﬁt (EBIT) Proﬁt before tax € million 17,373 1,803 955 732 -17% -32% -48% -55% Operating cashﬂow 1,160 +103% Basic earnings per share Cash earnings per share Dividend per share Net Debt/EBITDA EBITDA Interest cover Dividend cover -58% -38% – cents 88.3 214.7 62.5 times 2.1 6.1 1.4 CRH at a Glance Materials Concrete Products Exterior Products Distribution Cement Aggregates Asphalt Readymixed Concrete Structural Concrete Architectural Concrete Construction Accessories Clay Glass Entrance Control Building Products Builders Merchants DIY CRH operates vertically integrated primary materials businesses with strategically-located long-term reserves in all its major markets. CRH has permitted reserves totalling approximately 14 billion tonnes worldwide: circa 11 billion tonnes in the Americas and circa 3 billion tonnes in Europe. These materials businesses service both infrastructure and new construction demand. The Materials strategy is to build and maintain strong vertically integrated businesses with leading market positions. This is achieved by accumulating long-term permitted reserves, continuously investing in plant and equipment for quality, efﬁciency and customer service, while seeking out value-creating expansion opportunities via greenﬁeld development and acquisitions in selected markets. CRH manufactures structural and architectural concrete products for use in residential, non-residential and infrastructure applications. These include building systems and engineered concrete solutions for use in the electrical, transportation, drainage and communications industries, architectural products to enhance the facade and surroundings of buildings, while construction accessories produces components to assist in the construction process. The strategy of these businesses is to build and expand leadership positions in targeted markets in the manufacture of concrete products and related accessories. This is achieved by continuously improving the businesses with state-of-the-art IT; exchange of process and product know-how; leveraging engineering, project management, logistics and marketing skills; while also pursuing new opportunities. CRH produces a range of complementary value-added building products to complete the building envelope, each of which serves to provide a balanced exposure to demand drivers. Principal products include architectural glass, clay brick and block, and entrance control products. Additional products include insulation and climate control products. The strategy of the Exterior Products businesses is to develop current strong positions and to seek new platforms for growth in these complementary product segments. This is achieved by increasing the penetration of CRH products; edge-expansion into new architectural products and solutions; developing positions to beneﬁt from scale and best practice, and creating competitive advantage through product, process and end-use innovation. CRH distributes building materials to general building contractors and Do-It-Yourself (DIY) customers in Europe and to professional rooﬁng/siding and interior products contractors in the United States. With a network of over 700 locations in Europe and over 180 locations in the United States, CRH is a leading international player in building materials distribution. The strategy of the Distribution businesses is to build and grow a strong network of professional builders’ merchants and DIY stores, primarily in major metropolitan areas. This is achieved by focussing on organisational initiatives and best- in-class IT to realise operational excellence, optimise the supply chain and provide superior customer service, while seeking opportunities to invest in new regions and other attractive segments of building materials distribution. Geography Products End-use New/RMI Emerging Regions 15% Distribution 13% Residential 35% New Build 55% Western Europe 35% Exterior Products 7% Concrete Products 20% Materials 60% Non-residential 30% North America 50% Infrastructure 35% 45% Repair Maintenance and Improvement (RMI) Basis annualised EBITDA Key Financial Figures 2009 Sales EBITDA Operating proﬁt (EBIT) Proﬁt before tax € million 17,373 1,803 955 732 -17% -32% -48% -55% Operating cashﬂow * 1,160 +103% Basic earnings per share Cash earnings per share Dividend per share Net Debt/EBITDA EBITDA Interest cover EBIT Interest cover Dividend cover * see Finance Review table 3 -58% -38% – cents 88.3 214.7 62.5 times 2.1 6.1 3.2 1.4 CRH’s strategic vision is clear and consistent – be a responsible international leader in building materials delivering superior performance and growth. CRH shares are listed on the Irish (ISE) and London (LSE) stock exchanges and on the New York Stock Exchange in the form of American Depositary Receipts (ADRs). The Group has consistently delivered superior long-term growth in total shareholder return. A shareholder who invested €100 equivalent in 1970 and re-invested gross dividends would hold shares valued at €47,762 based on a share price of €19.01 at 31st December 2009. This represents a 17% compound annual return. EBITDA Earnings per share Dividend per share Total Shareholder Return €m 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 cent 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 cent €000 65 60 55 50 45 40 35 30 25 20 15 10 5 0 65 60 55 50 45 40 35 30 25 20 15 10 5 0 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 ’05 ’06 ’07 ’08 ’09 CRH 1 CRH Overview Europe Materials – 24% of Group Europe Products – 16% of Group Europe Distribution – 11% of Group The Europe Materials Division is a major vertically integrated producer of primary materials and value-added manufactured products operating in 20 countries. The Division is actively involved in the Group’s development efforts in Asia. Its principal products are cement, aggregates, readymixed concrete, concrete products, asphalt and lime. The major markets are Poland, Ukraine, Finland, Switzerland, Ireland, Spain and Portugal, together with India and China in Asia and Turkey in the Mediterranean. In total, the Division employs approximately 12,600 people at over 520 locations. Europe Products is organised as three groups of related manufacturing businesses involved in concrete, clay and building products. The Division operates in 20 European countries with the Netherlands, Belgium, the UK, Germany, France and Switzerland being its major markets. Europe Products seeks leadership positions in the markets and sectors in which it operates and employs approximately 18,500 people at over 500 locations. The Distribution Division in Europe encompasses professional builders merchants and Do-It-Yourself (DIY) stores. The Division operates in eight European countries with the Netherlands, Belgium, Germany, Austria, France and Switzerland being its major markets. Europe Distribution seeks leadership positions in the markets and sectors in which it operates and employs approximately 11,000 people at over 700 locations. Business Activities (EBITDA) Business Activities (EBITDA) Business Activities (EBITDA) 50% Western Europe 15% New Regions 35% Central & Eastern Europe 50% Concrete 20% Building Products 10% Clay 20% Construction Accessories 60% Benelux 40% Other End-use (EBITDA) End-use (EBITDA) End-use (EBITDA) Residential 35% New 85% Residential 50% New 75% Residential 80% New 30% Non-residential 35% Infrastructure 30% Non-residential 35% RMI 15% Infrastructure 15% RMI 25% Non-residential 20% RMI 70% Annualised Production Volumes Annualised Production Volumes Outlets Cement – 13.2m tonnes* Aggregates – 51.4m tonnes Asphalt – 3.5m tonnes Readymixed Concrete – 9.6m cubic metres* Concrete Products – 5.0m tonnes Lime – 1.5m tonnes Architectural Concrete – 6.4m tonnes Precast Concrete – 6.4m tonnes Clay – 1.9m tonnes Insulation – 5.3m cubic metres Fencing & Security – 3.0m lineal metres Rooﬂight & Ventilation – 0.9m square metres Builders Merchants – 479 branches DIY – 241 stores * Excludes CRH share of cement (circa 5.3m tonnes) and readymixed concrete (circa 0.6m cubic metres) attributable to associates, Uniland in Spain (26.34%), Mashav in Israel (25%) and Yatai Cement in China (26%). Leadership Positions Leadership Positions Leadership Positions Top 10 Cement – Western Europe Leading national positions: Aggregates and Readymixed Concrete No.1 Building Materials – Poland No.1 Cement – Northeastern China (26%)** No.2 Cement – Andhra Pradesh, India (50%)** No.1 Concrete Products – Western Europe No.2 Clay facing bricks, pavers and blocks – Western Europe No.1 Construction Accessories – Western Europe No.1 Fencing & Security – Western Europe Top 3 Building Materials Distributor – Western Europe **CRH share 2 CRH Americas Materials – 37% of Group Americas Products – 10% of Group Americas Distribution – 2% of Group The Americas Materials Division operates in 44 states in the United States. Operations are geographically organised, segmented into East and West sectors, each containing four regional business units. These comprise integrated aggregates, asphalt and readymixed concrete operations with strategically located long-term aggregates reserves. Americas Materials employs approximately 18,000 people at over 1,400 operating locations. The Americas Products Division operates primarily in the United States and also has a signiﬁcant presence in Canada. Its product groups – Architectural Products, Precast, Glass and MMI – all have leading positions in national and regional markets. The Division is also a leading producer of clay tile products in Argentina and operates glass fabrication businesses in Argentina and Chile. Employees total approximately 16,400 at over 480 locations. The Americas Distribution Division operates primarily in the United States. Its sub divisions – exterior and interior products – both have leading positions in national and regional markets. Employees total approximately 3,400 at over 180 locations. Business Activities (EBITDA) Business Activities (EBITDA) excluding MMI Business Activities (EBITDA) 60% East 40% West 45% APG 25% Precast 5% S. America 25% Glass 85% Exterior Products 15% Interior Products End-use (EBITDA) End-use (EBITDA) End-use (EBITDA) Residential Non-residential 10% 25% New 35% Residential 40% New 60% Residential 55% New 30% Infrastructure 65% RMI 65% Non-residential 55% RMI 70% RMI 40% Non-residential 45% Annualised Production Volumes Annualised Production Volumes Outlets Infrastructure 5% Aggregates – 110.1m tonnes Asphalt – 39.8m tonnes Readymixed Concrete – 5.2m cubic metres Architectural Concrete – 8.7m tonnes Precast Concrete – 0.9m tonnes Pipes & Prestressed Concrete – 0.3m tonnes Clay – 0.7m tonnes Glass Fabrication – 8.8m square metres glass and 19.4k tonnes aluminium Welded Wire Reinforcement – 77.7k tonnes Fencing Products – 7.9m lineal metres Exterior Products (Rooﬁng/Siding) – 132 branches Interior Products – 52 branches Leadership Positions Leadership Positions Leadership Positions No.1 Asphalt – US No.3 Aggregates – US Top 5 Readymixed Concrete – US No.1 Precast Concrete Products – US No.1 Architectural Concrete Products – Canada, US No.1 Architectural Glass Fabrication – US No.1 Engineered Aluminium Glazing Systems – US No.2 Construction Accessories – US No.4 Rooﬁng/Siding Distributor – US No.4 Interior Products Distributor – US CRH 3 Strategy CRH strategy is to sustain and grow a geographically diversiﬁed business with exposure to all segments of construction demand, enabling CRH to achieve its strategic vision to “be a responsible international leader in building materials delivering superior performance and growth”. In delivering this strategy, CRH excels in its business operations, develops its people, builds regional market leadership positions, reinvests in its existing assets and acquires well-run, value-creating businesses while seeking exposure to new development opportunities and creating horizons for future growth. This approach has enabled CRH to build a sustainable business model that can deliver superior performance and growth through the business cycle. In 2009, CRH had operations in 35 countries worldwide; 17 developed-world economies in Western Europe and North America which together delivered approximately 85% of Group EBITDA; and 18 developing economies in Central and Eastern Europe, the Mediterranean Basin, South America and Asia which together delivered approximately 15% of Group EBITDA. In the developed-world economies, CRH’s strategic focus is to continue to reinvest in its established platforms for operational efﬁciency, product quality and customer service, and to develop these businesses further through bolt-on acquisitions which achieve vertical integration, bolster our strong long-term permitted reserves positions and ﬁll-out regional and product level positions. In Western Europe and North America CRH has, over time, built a balanced portfolio of businesses which can service the breadth of building materials demand 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. In many of its regions, CRH’s diverse business base is uniquely positioned to provide a broad product offering to the construction industry. In the developing economies of emerging regions, CRH’s strategy is clear: to target premium assets as an initial footprint, usually in cement and often in partnership with strong local established businesses. We identify entry platforms that have well-located quality operations and good regional market positions with the potential to develop into integrated building materials businesses over time. In the mid-1990s, CRH applied this approach to its entry into the Polish market and today is the leading integrated building materials company in Poland. In 2008 and 2009, CRH established two new platforms in India and China and looks forward to developing further in these high growth regions in the future. 4 CRH Developed Regions 85%* * Basis annualised EBITDA CRH is an international group with strong regional, national and international leadership positions. With operations in 35 countries, CRH employed approximately 80,000 people at over 3,700 locations in 2009. From a strong developed-world base, CRH is growing its presence in emerging economic regions. Emerging Regions 15%* CRH 5 Shuangyang Cement plant, part of the 26% CRH-owned Yatai Cement is the largest cement plant in northeastern China. Current clinker capacity is 5 million tonnes based on ﬁve operating kilns. This will rise to 7 million tonnes following the commissioning of a sixth kiln in the fourth quarter of 2010. Shuangyang is located in Jilin Province, 100km south of the provincial capital Changchun. 6 CRH Emerging Regions – Strategy in Action . . In the early 2000s, CRH commenced a detailed review of Asian markets to identify possible opportunities to enter the building materials sector in this region. Market size and scale, population growth and GDP per capita were identiﬁed as key leading indicators for our industry. China, the largest cement market in the world, and India, the second largest, were identiﬁed as being of particular interest. With strong population growth in both countries, GDP growth of 7% to 9% p.a. and progressive urbanisation, the development potential was clear and CRH focussed on these two countries as the primary targets for entry into Asian markets. China In February 2007, CRH completed its ﬁrst transaction in China with the purchase of Harbin Sanling Cement Company (‘Sanling Cement’) in Heilongjiang province, northeast China. This single operation cement plant, with a capacity of 650,000 tonnes per annum, is located approximately 45 km southeast of Heilongjiang’s largest city, Harbin (population: 9 million). In January 2009, CRH established a more signiﬁcant position with the acquisition of a 26% associate shareholding in Yatai Building Materials Company (‘Yatai Cement’), the leading player in China’s northeastern provinces (Heilongjiang, Jilin and Liaoning) and a top 10 cement supplier in China. Yatai Cement has strong ambitions to grow and is considered to be a primary consolidator of the cement industry in northeastern China. In early 2009, Yatai Cement’s operations comprised four integrated cement plants and four separate grinding stations in Jilin and Heilongjiang, with a cement capacity of 14 million tonnes per annum. Since then, Yatai Cement has expanded its market presence by increasing its stake in Tonghua Cement in Liaoning and by acquiring Jinyuan Cement in Jilin. Following these investments, and the completion in 2010 of an extensive capital expenditure programme, the combined cement capacity of the enlarged Yatai Cement group will be approximately 21 million tonnes. With excellent assets in a high-growth region, CRH plans to work with its partner to build Yatai Cement into a signiﬁcant vertically integrated building materials group in northeastern China. India In May 2008, CRH entered the Indian building materials market through the acquisition of a 50% stake in My Home Industries Limited (MHIL), a cement producer head- quartered in Hyderabad with modern production facilities, strong market positions and excellent reserves in central and eastern Andhra Pradesh. At the time of acquisition, MHIL’s operations consisted of three cement production units at Mellacheruvu in central Andhra Pradesh with an annual production capacity of approximately 3 million tonnes. MHIL has since constructed a new grinding plant at Vishakapatnam on the coast of Andhra Pradesh, increasing annual production to 4.2 million tonnes and expanding its market footprint to include the Orissa and West Bengal markets. CRH looks forward to further developing this business with our partner as the Indian economy and building materials markets evolve. Our investment focus in Asia is driven by the creation of both long and short-term shareholder value. As the Chinese and Indian markets develop, more sophisticated construction markets will emerge and, as has been our experience in Eastern Europe, a wide range of value-added construction products will be required, enabling CRH to roll out a broader range of products across the industry. CRH 7 The Cowboys Stadium in Dallas, Texas completed in May 2009 is the largest National Football League venue in the United States. Each of Oldcastle’s six product groups provided materials for this 280,000 square metre, 100,000 seat stadium. Most impressive is the “bowl” area of the stadium which showcases a 46 metre sliding glass curtain wall, the largest in the world, supplied by Oldcastle Glass. 8 CRH Diverse Portfolio – Strategy in Action CRH is a diversiﬁed building materials group which provides the sustainable advantages of both vertical integration in manufacturing and of horizontal integration in servicing the breadth of customer demand for building materials products. CRH’s broad geographic and product footprint provides balance and stability of performance through the business cycle and provides multiple platforms for growth. This balanced portfolio of business activities allows CRH supply building materials across the construction spectrum from infrastructure to non-residential and residential; from new build to repair, maintenance and improvement (RMI); serving all aspects of demand from early to late-in-cycle products. CRH’s federal structure, strong local management teams and culture of entrepreneurship ensures a focussed approach to local markets while still capturing the beneﬁts of operating within a larger group. This uniquely positions CRH within its industry to leverage the capabilities of strong vertically integrated materials businesses with high value-added, engineered products operations and strongly franchised products and distribution networks. A recent example of CRH’s diverse portfolio in action is the development of a new stadium for the Dallas Cowboys American football team in Dallas, Texas. Operating as Oldcastle®, CRH is the leading integrated building materials company in the United States with operations in all 50 US states and in 4 Canadian provinces. By leveraging Oldcastle’s broad product portfolio, CRH’s US operations were able to offer the stadium construction team a wide variety of materials for this project and all six of CRH’s product groups in the US provided materials to this landmark stadium. Oldcastle Materials – The parking lot was paved with over 8,000 tonnes of Warm Mix Asphalt produced with Recycled Asphalt Pavement (RAP) and Recycled Asphalt Shingles (RAS) Oldcastle Precast – Underground utility boxes and pads facilitate power distribution for the stadium Oldcastle APG – Securing the luxury suites, APG’s proprietary ProSpec® crack isolation and waterprooﬁng membrane keeps football fans dry; close to 1,900 litres of acrylic sealer protect the concrete pavers; thousands of cubic metres of block ﬁll, shotcrete and other specialty concrete products support the massive structure Oldcastle Glass – Oldcastle Glass’ Engineered Products division fabricated the aluminium framing on all exterior entrance doors; all 400 luxury suites are encased by heavy tempered glass with operable sliding/swinging doors; over 6,500 pieces of clear tempered glass and aluminium framing elements enhance the many hand/guard rails; the impressive “bowl” area of the stadium showcases a 46 metre sliding glass curtain wall, the largest in the world MMI Products – More than a quarter million dollars of Meadow Burke’s reinforcing bar, supports and concrete forming accessories were used in the numerous precast elements Allied Distribution – The interior ﬁnishes of the stadium incorporate over 400,000 square metres of wallboard and over 420 tonnes of metal-stud framing and track . . . . . . With one supplier to manufacture, manage and deliver product to major construction projects, the beneﬁts to the customer include improved efﬁciency and increased on-time delivery as projects unfold. This is a unique and distinctive value proposition that is difﬁcult to replicate and is offered only by CRH/Oldcastle. CRH 9 Corporate Social Responsibility CRH’s CSR Strategy CSR embraces four key aspects of CRH’s business, namely corporate governance, environmental management and climate change, health & safety management and social performance. In each of these areas, CRH has clearly deﬁned Group policies, objectives, implementation programmes, review procedures and reporting mechanisms. CRH’s positive commitment to CSR, which is underpinned by a set of core values, is one of its deﬁning characteristics. Despite the major changes in the ﬁnancial, economic and business climate worldwide in 2009, further progress has been made as CRH pursued its ongoing mission of Sustainable Performance and Growth and strove to meet the ever-increasing expectations of all stakeholders. CRH believes that achieving these expectations will be positive for the business and will enhance its strong corporate performance. Corporate Governance Corporate governance at CRH is very highly rated by leading Socially Responsible Investment (SRI) agencies. At board level CRH complies fully with the requirements of IFRS reporting as well as those of the Combined Code on Corporate Governance and also with the provisions of the Sarbanes-Oxley Act in so far as they apply to CRH. CRH has implemented a Code of Business Conduct throughout its operations. A detailed review of corporate governance is addressed on pages 42 to 47 of this Report. Environment and Climate Change The Group Environmental Policy is implemented across all Group activities and environmental performance is reviewed annually by the Board. CRH continues, through ongoing systematic plant and system upgrading, to make progress in increasing energy efﬁciency, reducing waste, optimising water usage and recycling secondary materials and fuels. Restoration of worked- out pits and quarries is progressing where relevant and biodiversity is actively encouraged across the Group with many sites achieving public recognition in this regard. As part of its CSR commitments, CRH has been actively addressing climate change through research and through developing pragmatic solutions including signiﬁcant investments in modern energy-efﬁcient technologies in its cement, lime and clay brick plants. The production of lower carbon cements is now a priority. Furthermore, climate change is a driving force in many activities, as a substantial proportion of CRH’s product portfolio is ideally suited to assist in the implementation of strategies for adaptation to climate change. The Group is well on target to meet its commitment to reduce speciﬁc cement plant carbon emissions by 15% on 1990 levels by 2015. Health & Safety The health and safety of employees and contractors working for the Group is a priority for the Board and for management at all levels of the organisation. The implementation of Best Practice in safety management is actively promoted and implemented across the Group and accident statistics continue to improve year on year. CRH continues to commit signiﬁcant resources to improving health & safety at all its locations. 10 CRH There were eight fatalities in 2009 in Group subsidiary companies. Each fatality is a tragedy, not only for the immediate family, but also for colleagues and the broader community. CRH deeply regrets each death and during 2009, introduced a Group-wide Strategic Plan for the Elimination of Fatalities. The plan highlights the fundamental areas that must be carefully managed so that fatal accidents are eliminated. It is backed up by speciﬁc training and auditing programmes. It aims to develop a greater sense of vulnerability and to instil a no-compromise philosophy regarding working safely. This CEO-led plan is being implemented to complement existing safety initiatives and its roll-out is being accompanied by a comprehensive communication programme. Social CRH’s objective is to remain the employer of choice for all employees. CRH actively supports social and community activities local to operations. In addition, plant open days provide opportunities for neighbours living in the vicinity of production plants to see at ﬁrst hand the sustainable nature of CRH production processes and for plant management to outline the contribution to sustainable development that is made by CRH products. Communications CRH maintains an open-door policy on communications with key stakeholder groups. At Group level, CRH discusses its CSR performance with the investment community, SRI Rating Agencies and other interested parties. At plant and company level, CRH is in regular dialogue with local communities, authorities and regulatory agencies, underlining its commitment to operate as a good neighbour. Full details of CRH’s corporate social responsibility performance are published in separate annual CSR Reports, which are available for download from www.crh.com. CRH continues to ensure full independent veriﬁcation of its CSR reporting to the Global Reporting Initiative (GRI) A+ level. The veriﬁed 2009 CRH CSR Report will be available by mid-2010. External Endorsements CRH has maintained its distinguished record of being ranked among sector leaders by leading SRI rating agencies. CRH continues as a constituent member of the FTSE4Good Index and of the Dow Jones World and STOXX Sustainability Indexes. CRH has again been ranked by Sustainable Asset Management (SAM) as “Gold Class”. CRH is committed to ethically and responsibly managing all aspects of its operations in the interests of all its stakeholders – employees, customers, suppliers, neighbours, local communities and shareholders. CRH is committed to embedding Corporate Social Responsibility (CSR) as an integral component of its performance and growth strategy and to reporting annually to stakeholders on its CSR performance. Students from the local community learning about Shelly Materials’ role in local conservation at the company’s Dresden Wildlife Habitat Council “Corporate Lands for Learning” site in Ohio, USA. A restoration project at the Rudus Skogsgård gravel pit in Finland where 48,000 trees and plants were planted which are contributing to increased biodiversity in the area. CRH 11 Chairman’s Statement Proﬁtability and Earnings 2009 posed exceptionally difﬁcult operating challenges for CRH. Demand levels were severely impacted by weakened economic activity and by the most extreme winter for many years across our major markets of Europe and North America. During the year, the shift in CRH’s short-term focus, initiated as markets deteriorated during 2008, continued with the implementation of further wide-ranging cost reduction measures across the Group. Against this background, the Group produced a proﬁt before tax of €732 million and earnings per share of 88.3 cent after restructuring and impairment costs. The proﬁt and earnings outturns represent declines of 55% and 58% compared with the 2008 outturn of €1.6 billion and 210.2 cent respectively. Despite the reduction in proﬁts, net debt at the end of the year was €3.7 billion compared with €6.1 billion at the end of 2008. This was the result of an intensiﬁed focus on cash generation, excellent working capital management and restrained capital expenditure across the Group, together with reduced levels of development expenditure and the proceeds from the €1.2 billion Rights Issue in March 2009. Details of the challenges faced by the Group during 2009 and of the performances of the separate Divisions are given in the Chief Executive’s Review and in the Operations and Finance Reviews which follow. Dividend With good ﬁrst-half operating cash ﬂow delivery and expected strong second-half inﬂows, the Board decided last August that it was appropriate to maintain the interim dividend at 18.5 cent (2008 adjusted for 2009 Rights Issue: 18.48 cent). Second-half cash generation has exceeded our August expectations and the Group has delivered full year operating cash ﬂow before dividends of over €1.5 billion. Accordingly, the Board has decided that it is appropriate to pay a ﬁnal dividend of 44.0 cent per share, a slight advance on 2008’s Rights-adjusted ﬁnal dividend of 43.74 cent. This gives a total dividend for the year of 62.5 cent (2008: 62.2 cent), an increase of 0.5%, representing the 26th consecutive year of dividend growth. It is proposed to pay the ﬁnal dividend on 10th May 2010 to shareholders registered at the close of business on 12th March 2010. The dividend of 62.5 cent represents a gross cash outlay of approximately €435 million. Deducting the €57 million scrip take-up on the 2009 interim dividend, and assuming no scrip take-up on the ﬁnal dividend, would result in a net cash outlay close to €378 million, 4.1 times covered by 2009 operating cash ﬂow pre-dividends of over €1.5 billion. Reported 2009 dividend cover of 1.4 times increases to 2.0 times when asset impairment and implementation costs associated with the Group’s cost reduction efforts are excluded. Cost Reduction Programme In response to weakening markets over the past three years, the Group has implemented a range of measures, which are projected to deliver total annualised gross savings of approximately €1.65 billion over the period 2007-2010 with total costs to implement of €312 million. A total of approximately €205 million of restructuring charges were taken in 2009 and it is expected that a further €45 million of implementation costs will be incurred in 2010. Development Activity Total acquisition spend for 2009 was approximately €0.46 billion. First-half expenditure included the purchase of a 26% stake in Yatai Cement, the leading cement producer in north- eastern China, along with six other bolt-on acquisitions across the Group’s Materials and Distribution businesses. During the second half of the year a further 10 transactions were completed totalling €0.18 billion, details of which were announced in the Development Strategy Update in January 2010. These will add substantial aggregates reserves, with clear opportunities for operating and purchasing synergies, to our American Materials business, Our EHL concrete products business in Germany manufactured and supplied approximately 2,750 square metres of Cityplan slabs, 3,500 pieces of Cityplan facings and 1,800 linear metres of Concord block steps and angle steps to the Aasee- terraces development in Münster. These elements were produced in a special colour “Aasee-grey-yellow”, drawn up by the architect in cooperation with EHL. 12 CRH as well as adding to our presence in northeastern China and in Poland. Financing Expansion As a result of the Group’s intense focus on cash generation and substantial equity injection achieved by the Rights Issue in March 2009, CRH has the ﬁnancial strength to take advantage of acquisition opportunities that enhance our strategic positioning and represent exceptional value for money. CRH remains well positioned in terms of debt facilities with year-end net debt of under €4 billion, which has an attractive maturity proﬁle. In May 2009, the Group raised €0.75 billion with a debut issue on the Eurobond market. Market Indices During 2009, the Company joined the Dow Jones EURO STOXX 50® Index, which comprises 50 of the leading blue-chip companies in the Eurozone and is licensed to ﬁnancial institutions. Also in 2009, CRH was added to the Dow Jones EURO STOXX® Select Dividend 30 Index. CRH is also a com- ponent of a number of other indices, including the ISEQ 20, the FTSEuroﬁrst 300 and the S&P Europe 250. Litigation . arów S.A., had z In December, we received notiﬁcation from the Polish Ofﬁce for Competition and Consumer Protection that, arising from an investigation into the Polish cement industry, it had concluded that seven companies, including CRH subsidiary Grupa O been involved in anti-competitive practices. As a result, ﬁnes were levied, including a ﬁne of PLN 104.97 million (approximately €25.6 million) on Grupa O the investigation are a matter of serious concern to CRH. The Group’s Code of Business Conduct sets clear standards for the conduct of its operations in the various territories in which the Group operates and expressly prohibits any anti- competitive behaviour. We always . understood that Grupa Oz . arów. The conclusions of z arów conducted an independent commercial policy, which has been veriﬁed by analysis undertaken, at the request of CRH, by leading Polish economic experts. We have appealed the conclusions of the investigation and the ﬁne. Ofﬁcer of Brown and Root Services. He brings valuable international experience to the Board and his appointment continues the process of Board renewal at a pace which is consistent with the maintenance of the Board’s teamwork and core values. Corporate Governance A statement setting out CRH’s key governance principles and practices is provided on pages 42 to 47. The Board and Management of CRH are committed to achieving the highest standards of Corporate Governance and ethical business conduct and are satisﬁed that appropriate systems of internal control are in place throughout the Group. From 2010, the Board has decided to present the Report on Directors’ Remuneration to shareholders for the purposes of an advisory vote. There is no legal obligation on the Company to do this and the outcome of the vote is not binding on the Company. The Board believes that such a resolution is good practice and is an acknowledgement of shareholders’ entitlement to have a ‘say on pay’. Board and Senior Management Terry Neill will retire from the Board at the conclusion of the Annual General Meeting on 5th May 2010. Terry has been a non-executive Director since 2004 and Chairman of the Remuneration Committee since 2008. He has made a very signiﬁcant contribution to the effectiveness of the Board and I wish to thank him for his valued advice and commitment to the interests of shareholders. John Kennedy was co-opted to the Board on 24th June 2009 as a non-executive Director. John is Chairman of Wellstream Holdings plc, a UK listed company and during a 30 year career in the international industrial and energy services related sectors he has served as Executive Vice President of Halliburton Company, President of Dresser Enterprises and Chief Operations As provided for in the Company’s Articles of Association, John Kennedy is proposed for election at the Annual General Meeting on 5th May 2010. Also in accordance with the Articles of Association and best practice in relation to the re-election of Directors, Utz-Hellmuth Felcht, Dan O’Connor and Liam O’Mahony will retire from the Board and seek re-election at the Annual General Meeting. I have conducted a formal evaluation of the performance of all Directors and can conﬁrm that each of the Directors continues to perform effectively and to demonstrate commitment to the role. Notwithstanding Liam O’Mahony’s former service as an executive, the Board considers him to be independent. In forming this view, the Board has reviewed his performance in his capacity as a non-executive Director since January 2009. Based on this review, the Board is satisﬁed that Liam’s ability to exercise independent judgement, and to act in the best interests of the Group, is in no way compromised by his former service as an executive. I strongly recommend that John Kennedy, Utz-Hellmuth Felcht, Dan O’Connor and Liam O’Mahony be re-elected to the Board. Angela Malone retired as Group Company Secretary during the year after 14 years in that role and I wish to thank her for her very signiﬁcant contribution to the work of the Board over that time. She was replaced as Group Company Secretary by Neil Colgan and I wish Neil every success in that position. The Board notes with regret the death, in November 2009, of Paddy Dempsey, a former executive Director of the Company. Paddy had a record Kieran McGowan Chairman of long and distinguished service and made a major contribution to CRH over that time. Management and Staff The performance of CRH during 2009, particularly in relation to cost reduction, cash generation and overall operational excellence, demonstrated once again the strength, depth and resilience of our management and staff. There is a unique culture of performance and achievement throughout the Group and this will ensure that even in the current exceptionally difﬁcult economic environment CRH has the capacity to deliver superior performance. On behalf of the Board, I thank Myles Lee and all CRH employees for their commitment to the success of the Group. Conclusion Management’s views on the outlook for 2010 are set out more comprehensively in the Chief Executive’s Review and the various Operations Reviews. The overall trading outlook for 2010 remains challenging given forecasts for a slow pace of recovery from the global recession and the lag effect for recovery in construction markets. Against the background of this environment, our attention and efforts will be focussed strongly on ensuring that our businesses are well positioned, through continuing cost reduction, cash generation and excellence in operational management, to deal with whatever trading circumstances may evolve. Kieran McGowan 1st March 2010 CRH 13 The CRH team worldwide responded promptly in 2009 to the extremely difﬁcult trading conditions and delivered strong cash generation in a difﬁcult operating and ﬁnancial environment. For 2010, management remains focussed on operational delivery while continuing to evaluate acquisition opportunities that offer compelling value and strategic ﬁt. Myles Lee Idaho Sand & Gravel Company paving a section of the scenic State Highway 55 which follows the Payette River in Valley County, Idaho. This project included removal of 63,500 square metres of existing pavement, laying of 11,090 tonnes of asphalt, installation of 20 storm drain pipe crossings and required that single lane trafﬁc be safely maintained during weekday construction on this busy tourist route. 14 CRH Chief Executive’s Review Earnings per share fell 58% to 88.3c (2008: 210.2c adjusted for the March 2009 Rights Issue). Myles Lee Chief Executive Overview The extreme turbulence experienced in ﬁnancial markets in the second half of 2008 took its toll on world economic activity in 2009, most particularly in Europe and the US. Construction activity in these regions was hard hit as residential and non-residential markets declined, with government-funded infrastructure investment only partially compensating. Against this backdrop, and despite signiﬁcant ongoing cost reduction efforts, CRH suffered a signiﬁcant proﬁt decline. Key aspects of our 2009 results include: . . . . EBITDA for 2009 was €1,803 million, in line with the guidance provided in the Trading Update Statement of 5th January 2010, representing a decline of 32% compared with €2,665 million in 2008. EBITDA is stated after charging costs associated with the Group’s restructuring efforts of €205 million (2008: €62 million). Depreciation and amortisation costs amounted to €848 million (2008: €824 million) and include impairment charges of €41 million (2008: €14 million). Operating proﬁt fell 48% to €955 million (2008: €1,841 million) after restructuring and impairment charges of €246 million (2008: €76 million). Excluding these charges, operating proﬁt fell 37%. Proﬁt before tax and impairment charges of €773 million was 53% below 2008 but ahead of the guidance of €750 million provided in the January 2010 Trading Update. After impairment charges of €41 million (2008: €14 million), proﬁt before tax of €732 million showed a decline of 55% on 2008. . . . . . Dividend per share of 62.5c showed a slight increase on the Rights-adjusted 2008 dividend of 62.2c. 2009 represents CRH’s 26th consecutive year of dividend growth. Signiﬁcant working capital reduction together with capital expenditure restraint contributed to operating cash ﬂow of €1.2 billion, double the 2008 level of €0.6 billion. Net debt reduced to €3.7 billion (2008: €6.1 billion) reﬂecting strong operating cash ﬂow and proceeds from the March 2009 Rights Issue which raised just over €1.2 billion net of expenses. With year-end net debt to EBITDA of 2.1 times and 2009 EBITDA/net interest of 6.1 times, CRH has one of the most ﬂexible balance sheets in its sector. My thanks to all the CRH team worldwide for responding promptly to the extremely difﬁcult trading conditions and for delivering such strong cash generation in a difﬁcult operating and ﬁnancial environment. 2009 Operations Trading in the ﬁrst half of 2009 proved extremely demanding with most markets impacted by weakening economic activity, not helped by the most severe ﬁrst-quarter weather for many years in both Europe and North America. Reported sales for the ﬁrst half of 2009 declined by 15% (21% excluding acquisition and exchange translation effects), EBITDA fell 41% and operating proﬁt and proﬁt before tax were down 66% and 82% respectively. While conditions in the second half of 2009 remained challenging, a robust performance by the Americas Materials Division combined with increasing beneﬁts from cost reduction measures resulted in improvements in the rate of proﬁt decline compared to the ﬁrst half of the year despite second-half asset impairment charges. Second-half sales fell by 19% (18% excluding acquisition and translation effects), while EBITDA declined by 26% with operating proﬁt down 37% and proﬁt before tax 39% lower than the second half of 2008. Europe Materials experienced sharp proﬁt reductions in Ireland, Finland and Ukraine with 2009 cement volumes showing falls of between 35% and 45% on 2008 levels. These factors combined with adverse translation effects due to weakness in the Polish Zloty and Ukrainian Hryvnia were the main factors inﬂuencing the reported 26% reduction in sales, 46% reduction in EBITDA and 59% reduction in operating proﬁt. Europe Products & Distribution was less affected in its core Eurozone markets with reported sales down 12%, EBITDA down 25% and operating proﬁt down 39%. RMI (repair maintenance and improvement) oriented Distribution operations proved more resilient than Products operations, where an improved performance from Clay activities was more than offset by lower proﬁts in Concrete and Building Products businesses. CRH 15 Chief Executive’s Review continued Americas Materials saw second-half beneﬁts from infrastructure projects funded by the American Recovery and Reinvestment Act. However, with weaker residential and rapidly declining non-residential demand, overall aggregates volumes for the year fell 23%, with asphalt down 15% and readymixed concrete lower by 32%. As a result reported US Dollar revenues fell by 19%. However, strong pricing and lower energy costs delivered an overall improvement in margins limiting the US Dollar EBITDA and US Dollar operating proﬁt declines to 12% and 16% respectively. Americas Products & Distribution, which relies heavily on residential and non-residential activity suffered severely. High-teen percentage sales declines in Architectural Products and Rooﬁng & Siding Distribution were outweighed by more signiﬁcant declines in other segments leaving overall US Dollar sales revenue 25% lower than in 2008. US Dollar EBITDA was 58% lower, while US Dollar operating proﬁt fell 89% exacerbated by signiﬁcant losses in MMI due to steel price erosion. Throughout 2009 we continued the cost reduction efforts initiated in 2007 and progressively implemented further cost and efﬁciency measures across the Group. Combined savings from these cost actions over the four years 2007 to 2010 are estimated at €1.65 billion. These measures are outlined in the Chief Operating Ofﬁcer’s review on page 19. 2009 Rights Issue & Development Maintenance of a strong balance sheet and a disciplined and rigorous approach to acquisition activity have always been core ﬁnancial principles for CRH and this conservative approach to balance sheet management and development has ensured a solid ongoing ﬁnancial position over the long term. In March 2009, the Board decided it was appropriate to strengthen CRH’s ﬁnancial ﬂexibility to ensure that the Group could take advantage, in its traditional long-established disciplined manner, of an expected increased ﬂow of development opportunities driven by deleveraging and portfolio rationalisation across the sector. The Rights Issue, on the basis of 2 New Ordinary Shares for every 7 existing Ordinary Shares at €8.40 per New Ordinary Share, raised €1.238 billion net of expenses and was strongly supported by CRH’s broadly spread investor base. To date, the ﬂow of acquisition opportunities arising has been lower than anticipated, as the mid-2009 recovery in bond markets facilitated signiﬁcant fundraising across the sector thereby alleviating short-term ﬁnancial pressures for many participants. In addition, a greater than expected deterioration in industry trading conditions as 2009 progressed was not matched by reductions in vendor expectations. Against this background the Group invested a total of €0.46 billion during 2009 on 17 transactions. First-half expenditure included the purchase of a 26% associate stake in Yatai Cement, the leading cement manufacturer in northeastern China, plus six other acquisitions across the Group’s Materials and Distribution segments. Second-half spending of €0.18 billion principally comprised four important bolt-on transactions in our Americas Materials Division completed in November/December plus six smaller Materials transactions in Poland, China and the US. For 2010, management remains focussed on operational delivery while continuing to evaluate acquisition opportunities that offer compelling value and strategic ﬁt. CRH expects to see more acquisition opportunities as industry participants, both public and private, re-evaluate their portfolios and seek to restore ﬂexibility to their balance sheets. 2009 Organisation and People As outlined in the 2008 Annual Report, the second half of 2008 and beginning of 2009 saw signiﬁcant position changes at senior management level in CRH, all of which were ﬁlled from within the organisation. In very difﬁcult circum- stances the new leaders have stepped up to their roles with energy and commitment ensuring the continued effective functioning of the senior team and indeed the wider organisation. On July 14th 2009, Van Neerbos Bouwmarkten celebrated the opening of its ﬂagship DIY-store in Amsterdam. This new store, the largest Gamma store in the Netherlands, added 10,000m2 of selling-space, reinforcing CRH’s market-leading position with the GAMMA brand in the Netherlands. Over 8,000 people visited the store on its opening day and approximately 250,000 customers have visited the store since then. 16 CRH Responding to the evolving market environment during 2009 has obviously required a substantial re-thinking of organisation structures and stafﬁng levels with a consequent reduction in employment levels in all business segments. These reductions, while painful and regrettable, have been necessary to limit the impact on the Group of sharply lower levels of demand for our products. Corporate Social Responsibility (CSR) A positive commitment to CSR is at the centre of CRH’s philosophy and management approach. Throughout the Group we strive to operate to best international practice in the areas of corporate governance, environment and climate change, health & safety and social performance. Our commitment in this regard is set out on page 10 of this Report and in the separate annual CSR Report which is available for download from our website, www.crh.com. Once again in 2009, CRH was included in the Dow Jones World and STOXX Sustainability Indexes on the basis of a rigorous analysis of performance carried out by Sustainability Asset Management (SAM) of Zurich who have rated CRH as “Gold Class”. We are also a member of the FTSE4Good Index and have been rated amongst the world’s most highly ranked companies by GovernanceMetrics International (GMI) which focuses on performance in the area of corporate governance. Strategy CRH’s strategy continues to be focussed on the manufacture and distribution of building materials, with approximately 80% of our business in heavyside – cement, aggregates, asphalt, readymixed concrete and concrete products – and the remaining 20% split between lightside value-added building products and distribution. This mix provides a balanced exposure to residential/ non-residential/infrastructure end-uses and also to new build/RMI, each of which displays different cyclical characteristics in terms of timing, amplitude and duration. In geographical terms CRH is balanced roughly 35% Western Europe/50% North America/15% Emerging Regions, the latter comprising signiﬁcant operations in Eastern Europe built up over the last decade and more recently-established positions in Asia. With a challenging trading backdrop for many of our businesses over the past two years, management’s emphasis has been ﬁrmly concentrated on operational delivery and establishing a base from which to deliver a strong rebound in margins and earnings as markets stabilise and recover over the coming years. This was accompanied by a curtailment of development activity from mid-2008 as the economic environment deteriorated and ﬁnancial uncertainty spiked in the aftermath of the Autumn 2008 ﬁnancial crisis. However, value-enhancing acquisitions have been, and will continue to be, a core driver of CRH’s long-term development and with the re- commencement of acquisition activity since mid-2009 we believe that CRH is well positioned to deliver an improving deal ﬂow as industry valuations adjust and trading visibility improves. In addition to our development efforts we are continuing to re-evaluate elements of our existing portfolio which, given recent signiﬁcant changes in the economic environment, may no longer offer the opportunities for growth and/or returns originally envisaged. 2010 Outlook We expect a difﬁcult demand backdrop through much of 2010 with continuing declines in non-residential activity across our markets not helped by a poor start to the year as a result of prolonged severe weather in Europe and North America during January and February. In Europe, concerns remain relating to ﬁscal deﬁcits in a number of countries, although some markets have proved resilient. In Poland, which has weathered the economic downturn better than many other European countries, our operations are well-placed to beneﬁt from infrastructure-driven growth in 2010. In the United States, recent data releases on residential construction activity have been below expectations and the likely timing of recovery in US residential activity remains unclear. On infrastructure, the extension of the SAFETEA-LU Federal Highway funding programme is currently the subject of intense debate in the US Senate and House of Representatives with progress anticipated over the next 10 days. Recent euro-weakness and the relative strengthening of the Polish Zloty and US Dollar compared with 2009 will, if maintained, be beneﬁcial in 2010. The signiﬁcant adjustments to our cost base achieved over the past three years and our ongoing restructuring measures, together with our substantial balance sheet capacity, have strengthened the Group operationally and position CRH well to respond to upside demand developments and to avail of value-enhancing acquisition opportunities as these arise across our markets. Myles Lee 1st March 2010 CRH 17 Ibstock Brick’s Ashdown and Ellistown plants supplied over 150,000 Bexhill Red and 7,000 Arden Red bricks to this new retirement home at Halebarns, Cheshire, UK. These natural clay bricks were chosen to enhance the Victorian and Edwardian references in the design of the building. 18 CRH Group Operations The global economic crisis of 2008 and 2009 that destabilised markets, reduced consumer conﬁdence and tightened credit around the world, impacted almost every company in Europe and North America and CRH was no exception. Our results reﬂect the weakest economic environment in over half a century. To mitigate the impact of these conditions, we acted aggressively to manage our operations, focussing on action items that were directly within our control. Albert Manifold Chief Operating Ofﬁcer Cost Reduction As markets declined we were quick to remove excess capacity from our manufacturing and distribution networks and we scaled our operations to market demand. We were proactive in cutting costs and continued with the implementation of cost reduction programmes that are expected to produce more than €1.65 billion of savings in the four years to 2010, of which approximately €0.85 billion was realised in 2009. Some 40% of the gross savings of €1.65 billion is estimated to be permanent in nature. Restructuring costs of €205 million to implement these programmes have been expensed in 2009 and we anticipate a further €45 million of implementation costs in 2010. Incremental savings in 2010, after implementation costs, are estimated at €260 million. These initiatives have regrettably necessitated a reduction in stafﬁng levels as we structure our operations to the new market demand environment. Operational Excellence Commitment to operational excellence has been a core value of CRH for forty years. In these challenging times, we continue to focus across the Group on initiatives that maximise our operational effectiveness and eliminate inefﬁciencies. We will continue to concentrate on setting key performance indicators for the operational elements within our control that contribute most to our performance. In this way, we aim to manage our costs and improve CRH’s competitive positions. Safety Our commitment to safety is unwavering. In 2009, our operations continued to improve their overall safety performance with record results achieved on the key safety metrics. However, there were regrettably eight fatalities in Group subsidiary companies during the year. We have, therefore, launched a speciﬁc CEO-led plan to eliminate fatalities. This plan was rolled-out across all locations in 2009 and is being implemented and monitored with the highest level of commitment from management at all levels. Safety remains a key priority for the Group and will continue to receive strong focus and attention at all operating locations. Overall We have, in 2009, shown our willingness to make difﬁcult decisions and to react rapidly to changing trading conditions. For 2010, we continue to focus on the essentials of managing through these difﬁcult times, scaling our operations to the market, managing our capacity and controlling our costs. We are concentrating on the elements within our control that contribute the most to our performance, including customer satisfaction and operational excellence. The challenges we face today are signiﬁcant – but so too are our strengths. Over the medium term, we look forward to accelerating our growth and to building our leadership in low-cost efﬁcient operations, employee development and customer service. CRH 19 Signiﬁcant energy efﬁciencies, clinker factor improvements and emissions reductions are being achieved following the commissioning of the new €200 million Kiln 3 production line at Irish Cement’s Platin Works in Ireland. Lower carbon CEM II cements now account for over 80% of the company’s product portfolio. 20 CRH Europe Materials Operations Review Europe Materials experienced very challenging trading conditions in almost all markets in 2009. The ﬁnancial crisis severely impacted investment in new housing and private non-residential building. Government- funded infrastructure and public building reduced this impact somewhat. Henry Morris Managing Director Europe Materials The ﬁnancial crisis created very difﬁcult market conditions for Europe Materials leading to signiﬁcantly reduced volumes and a drop in margins. In response, initiatives launched to cut costs and reduce capacity during 2008 were intensiﬁed and helped mitigate the impact on proﬁtability. A curtailment of capital expenditure, together with a reduction in working capital, resulted in a strong cashﬂow performance for the year. Results € million % of Group 2009 2008 Change Organic Acquisitions Restructuring Impairments Exchange Analysis of Change Sales Revenue 16% 2,749 3,696 EBITDA* Operating Proﬁt* 24% 27% 434 257 (947) (372) (783) (263) 806 631 (374) (260) Average Net Assets 3,312 3,173 EBITDA Margin 15.8% 21.8% Operating Proﬁt Margin 9.3% 17.1% * EBITDA and Operating Proﬁt exclude proﬁt on disposal of non-current assets 53 14 10 – (56) (56) – – (9) (217) (67) (59) CRH 21 Europe Materials continued Ireland Construction activity in Ireland fell steeply during the year and cement volumes were down 45% on 2008 levels. Following the market contraction experienced in 2008, the residential and commercial sectors reduced further, reﬂecting the overall weakness in the wider economy, while the agriculture and infrastructure sectors, which remained resilient in 2009, weakened as the year progressed. Additional cost-reduction programmes were implemented across all the Irish businesses to reduce capacity with consequent one-off rationalisation costs. The decline in sales volumes and the impact of the signiﬁcant rationalisation costs resulted in lower margins and an operating loss after €6 million asset impairment charges and €58 million restructuring costs. Benelux Cementbouw, our cement trading, readymixed concrete and aggregates business, faced a difﬁcult second half of the year in which volumes declined. While cost reductions and lower fuel prices limited the impact of lower volumes, overall operating proﬁt declined. Central and Eastern Europe The Polish economy continued to expand with modest 1.5% GDP growth in 2009. Interest rates were reduced to 3.5% as inﬂation weakened in the second half of the year but unemployment increased. Construction activity in the ﬁrst half was impacted by a more severe winter than in previous years and by the uncertainty in international ﬁnancial markets. Activity in the second half improved, especially in infrastructure, and volumes were broadly in line with 2008 levels. Overall for the year, cement volumes were down 10% and volumes of products such as walling and readymixed concrete to the weaker residential and commercial segments were also down. This reﬂects weaker residential, commercial and industrial construction markets offset by increased public spend on infrastructure and civil engineering. However, with stiff competition in all product areas, margins were under pressure. While this was somewhat offset by signiﬁcant cost savings initiatives, overall operating proﬁt declined. In Ukraine GDP fell by 14% in 2009 and consequently construction volumes contracted signiﬁcantly in the ﬁrst half. Our cement sales volumes stabilised somewhat at a lower level in the second half to ﬁnish the year 35% below the record 2008 levels. While operating proﬁt for the year was well below 2008, stable pricing and signiﬁcant cost savings, particularly in the area of fuel, resulted in a reasonable performance in a difﬁcult year. Finland and the Baltics and is expected to increase further during 2010. Overall construction output in Finland declined by about 15%. Reductions of almost one third were seen in the new residential and new non-residential sectors which are important drivers for cement demand and which contributed to our cement volumes in Finland being 40% lower than in 2008. Central government ﬁnances are stable however, and a ﬁscal stimulus package which focussed on residential and infrastructure construction helped to mitigate somewhat the volume declines. A wide range of cost- reduction initiatives, including extensive production shutdowns and layoffs, were implemented across all businesses and price increases were applied to recover higher energy input costs. Economic output in Finland declined by 7.8% in 2009 as the international downturn negatively impacted on the export-led industrial base. Unemploy- ment reached almost 9% by year-end, Our operations in the Baltic States of Estonia and Latvia, and in St. Petersburg in Russia, suffered an unprecedented contraction in volumes. In response, signiﬁcant Northeast China Andhra Pradesh India 22 CRH operating adjustments were implemented including the temporary suspension of some business lines until such time as trading conditions improve. Overall operating proﬁt declined compared with 2008. Switzerland GDP declined by 3.4% in 2009, exports dropped by 12.5% but private consumption remained stable. Construction output rose by 3.3%, the highest growth since 2004. Civil engineering, supported by the national stimulus programme, grew by 8.8% and residential construction was up by 2.3%. Industrial construction activity declined. Lower fuel costs partly due to high usage of alternative fuels, together with increased volumes in our cement business and better margins in our downstream readymixed concrete and aggregates business, led to a proﬁt outcome ahead of 2008. Market leadership positions Cement Top 10 Western Europe No.1 Finland, Ireland No.2 Portugal, Switzerland No.3 Poland, Ukraine, Tunisia (49%)* No.1 Aegean region, Turkey (50%)* No.1 Northeast China (26%)* No.2 Andhra Pradesh, India (50%)* Aggregates No.1 Finland, Ireland Asphalt No.1 Ireland Readymixed Concrete No.1 Finland, Ireland No.2 Portugal, Switzerland Agricultural & Chemical Lime No.1 Ireland No.2 Poland Iberia Spanish construction activity continued its decline in 2009, falling by about 20%. Residential and non-residential building fell steeply, only partly compensated by infrastructure spend, resulting in a lower proﬁt outcome. The Portuguese economy declined by 2.7% in 2009; however construction fell by about 7% with the residential sector registering the largest decline. Our Secil joint venture, with three cement plants in Portugal, suffered from reduced domestic demand but increased its export volumes albeit at lower prices. While Secil enjoyed a good performance in its activities outside Portugal due to favourable demand and pricing coupled with lower fuel costs, operating proﬁt overall was down on 2008. Eastern Mediterranean As expected, the Turkish economy and domestic Turkish construction activity continued to contract in 2009. Strong export demand however helped selling prices in the Aegean region to stabilise in the second half of the year and the implementation of strong cost-control measures and improved operating efﬁciencies helped partly to offset the downturn in domestic demand. Overall operating proﬁt was lower than 2008. China Our Chinese operations performed well in 2009 with cement volumes in northeast China increasing by 12% due to strong demand from infrastructure projects which were funded by the government stimulus programme. This increased demand created a favourable pricing environment that enabled our wholly-owned Sanling Cement to improve on prior year’s performance; our new associate Yatai Cement, in which CRH has a 26% share, exceeded expectations and reached record volumes. Concrete Products No.1 blocks and rooftiles, Ireland India * CRH share My Home Industries Limited (MHIL), our 50% cement joint venture in the Andhra Pradesh region of southern India, had a strong performance in the ﬁrst half of 2009 which beneﬁted from strong government investment in housing and infrastructure. However, following the national elections, market conditions weakened in the second half with newly-commissioned cement capacity putting pressure on volumes and prices across our market. This resulted in operating proﬁt for the year broadly in line with 2008. The new grinding plant near Vishakapatnam in eastern Andhra Pradesh was commissioned in August 2009. Outlook Further declines in construction activity in Ireland are anticipated in 2010. Lower consumer conﬁdence, continuing restricted credit availability, unsold building stock and supply overcapacity will continue to put further pressure on volumes and margins. Polish GDP is forecast to grow by between 1.5% and 2% in 2010, however unemployment is expected to continue to increase. Inﬂation levels are expected to continue to decline and interest rates are likely to remain low. An increase in overall construction activity is expected, supported by a signiﬁcant increase in infrastructure contracts awarded and a number of sports and stadium projects required for the European Football Championships in 2012. In Ukraine, construction activity is forecast to increase modestly in 2010 resulting in improved volumes of cement. This together with continued focus on cost efﬁciencies should deliver improved margins. Construction demand in Finland is set to fall further by a mid single-digit percentage in 2010, with continued weak levels of activity in non-residential construction partially offset by improving residential construction and relatively stable infrastructure volumes. Switzerland is expected to stabilise at current levels. Both residential construction and infrastructure will continue to grow and are expected to compensate for a decline in non-residential activity. In Portugal, the outlook remains challenging with a further decline in residential activity likely to be offset by increased infrastructural activity. Cost efﬁciencies and improved use of alternative fuels should help maintain margins, but export markets are expected to be more challenging. Turkish GDP is forecast to grow by 2.5% in 2010 and domestic construction activity is expected to increase at a similar rate. The positive trends experienced during the second half of 2009 are forecast to continue into 2010 although cement exports are likely to face stiff competition. Cement demand is expected to grow strongly in northeast China due to the continuing Government stimulus package and an improving residential market. We anticipate further margin improvement at our Sanling Cement business. The ongoing investment programme with Yatai Cement, together with a full year’s contribution from new acquisitions, will bring Yatai Cement’s total cement capacity to 21 million tonnes. In India, we expect growth in demand in the Andhra Pradesh region to recover during 2010 and this should ease the pressure resulting from additional supply capacity. A full year contribution from MHIL’s new grinding plant is expected to add to sales growth and performance. Overall we anticipate more stable markets for Europe Materials’ products in 2010 and we expect to beneﬁt from lower energy prices and cost reductions in our operations. Industry capacity reductions and some increase in demand later in the year should be supportive to margins. However, the year has commenced with severe weather in many markets and the extent to which this will impact on demand and pricing levels for the year as a whole remains uncertain. CRH 23 Our Stradal concrete products business in France supplied 33 standard Beryl poles (reversed cylinder-cone shaped), 95 anti-parking bollards and a fountain bollard, all designed in black quartz, which were erected in Caveirac, France, during the creation of a new roundabout. 24 CRH Europe Products & Distribution Operations Review Throughout 2009, tough markets across all sectors where our businesses operate resulted in a decline in operating proﬁt. The management team responded vigorously to the challenge taking radical and effective action to mitigate these effects. We continue to focus on commercial initiatives, cost reduction and performance improvement plans across all our businesses. Máirtín Clarke Managing Director Europe Products & Distribution The squeeze on credit and falling consumer conﬁdence hit the housing sector across all regions. Non-residential activity also declined. The repair, maintenance and improvement sectors were more resilient. Overall, the Division saw sales decrease by 12%, EBITDA decline by 25% and operating proﬁt decline 39%. With few exceptions our businesses experienced volume and price pressure. Towards year-end some improvement in UK brick deliveries was evident. While some degree of stability has returned to markets in Europe, we expect trading in 2010 to be challenging. The Division carried on from 2008 with the implementation of signiﬁcant cost reduction actions. Capital expenditure was again cut back and tighter working capital management yielded a very positive outcome on cash ﬂow. Our focus continued on defending margins and conserving cash throughout our businesses. Results € million % of Group 2009 2008 Change Organic Acquisitions Restructuring Impairments Exchange Analysis of Change Sales Revenue 38% 6,635 7,498 (1,062) 191 EBITDA* Operating Proﬁt* 27% 26% 487 253 650 (137) 418 (165) (129) 16 10 (863) (163) Average Net Assets 3,877 4,096 EBITDA Margin 7.3% 8.7% Operating Proﬁt Margin 3.8% 5.6% * EBITDA and Operating Proﬁt exclude proﬁt on disposal of non-current assets – (29) (29) – – (7) 8 (13) (10) CRH 25 Europe Products & Distribution continued Concrete Products This group manufactures 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. Our businesses experienced difﬁcult market circumstances, mainly in residential- related markets and increasingly, as the year progressed, in the non- residential sector. Good progress in public sector niche markets in France and the Netherlands was outweighed by major weaknesses in Denmark and Eastern Europe. Architectural Architectural operations faced difﬁcult conditions in most markets and performed below 2008. Our Belgian, French and Danish paver and tile businesses suffered from weak residential markets and falling consumer conﬁdence. Results in our Dutch and German operations improved driven by targeted commercial initiatives. After a strong performance in 2008 the Slovakian market weakened considerably. In response to the continuing difﬁcult market conditions, further factory closures in Belgium, France, the UK and Germany were made and overhead costs were reduced signiﬁcantly. Structural Our structural concrete operations delivered operating proﬁt well below 2008. The businesses were severely impacted by difﬁcult conditions in residential markets and declining non-residential activity. Our Belgian business supplying the industrial and farming sector delivered strong results. Due to major restructuring initiatives taken at our Dutch and Swiss businesses in 2008, results in these operations were ahead in 2009. The programme of factory closures and general cost reduction continued in 2009 especially in Denmark, Belgium and Hungary where volumes and prices remained weak. Clay Products Building Products The Clay Products group principally produces clay-facing bricks, pavers, blocks and roof tiles and operates in the UK, the Netherlands, Germany, Poland and Belgium and also supplies various export markets. For the year as a whole, volumes in the UK brick industry declined considerably although some upturn was visible in the last quarter. Following the major reorganisation plans implemented in 2008, additional factory closures and production shutdowns took place. The beneﬁts from these measures coupled with strong product innovation resulted in an operating proﬁt outcome well ahead of 2008. In Mainland Europe, lower volumes and energy price increases led to lower operating proﬁt despite good progress and beneﬁts from the new country-based organisation serving two operating regions, Central Europe and Eastern Europe. The Building Products group is active in lightside building materials and is organised in three business areas: Construction Accessories, Building Envelope Products and Insulation Products. Market conditions in 2009 deteriorated with the non-residential sector slowing signiﬁcantly. With volumes declining, the operating proﬁt outcome was lower than in 2008 despite relatively robust pricing. Construction Accessories This business unit is the market leader in construction accessories in Western Europe. Falling demand, especially in the non-residential sector, offset somewhat by new innovative products brought to market, resulted in lower operating proﬁt. Our UK business acquired in 2008 exceeded our expectations aided by strong export ﬁgures. The main focus is on realising greater commercial synergies and back-ofﬁce cost reduction through a more integrated organisational structure. Market leadership positions Architectural Concrete No.1 paving products: Benelux, France, Slovakia No.1 paving/landscape walling: Germany No.1 architectural masonry: UK No.2 paving products: Denmark Structural Concrete Products No.1 precast ﬂooring: Benelux No.1 precast architectural concrete: Denmark No.1 utility precast: France No.1 precast structural elements: Hungary, Switzerland No.1 concrete fencing and lintels: UK Clay Products No.1 facing bricks: UK No.2 facing bricks, pavers & blocks: Europe Insulation Products No.1 EPS: Ireland, Netherlands, Poland, Nordic region No.1 (joint) XPS: Germany (50%)* No.1 XPE: Germany No.1 PUR/PIR: Netherlands 26 CRH Building Envelope Products These operations specialise in systems and products for entrance and climate control solutions, and are mainly active in non-residential construction focussing on the growing RMI, safety and comfort market segment. Volumes at our Entrance Control operations in fencing, security and access systems were lower than 2008. Our Rooﬂight & Ventilation business, which specialises in climate control, suffered a decline in activity although pricing remained generally robust. Sales to the industrial sector continued in line with 2008. The Roller Shutters business turned in a satisfactory performance being only marginally behind 2008 due to successful new product launches and tighter cost control. As part of our annual strategic review of businesses we have decided to exit climate control activities and concentrate on the more focussed Fencing, Security and Shutters businesses that, for the future, offer us greater market leadership potential in Europe. Construction Accessories No.1 Western Europe Fencing & Security No.1 security fencing and perimeter protection: Europe Rooﬂight & Ventilation No.1 (joint) glass structures, plastic rooﬂights, natural ventilation and smoke exhaust systems: Europe Builders Merchants No.1 Austria, Netherlands, Switzerland, France: Burgundy, Rhône-Alps and Franche-Comté, Germany: Sachsen-Anwalt, Niedersachsen, northern Nord Rhein Westfalen No.2 Ile-de-France DIY Stores No.1 Netherlands, No.2 Belgium Member of Gamma franchise No.5 Germany (48%)* Member of Hagebau franchise No.2 (joint) Portugal (50%)* * CRH share Insulation Products Our Insulation business manufactures a variety of high quality foam products for use in the residential, non- residential and industrial buildings sectors. The decline in residential markets, across Europe, and price pressure in Eastern Europe were the main reasons for lower operating proﬁt, although these effects were tempered by strong demand for RMI products driven by ongoing European legislation for energy efﬁciency. Following rigorous strategic analysis we have decided to exit the Insulation sector as we no longer see a route to becoming a pan-European leader in this sector. Distribution Trading conditions for our distribution businesses continued to be very difﬁcult in 2009 with the residential sectors across all our markets showing various degrees of decline. Price discipline and tight management in purchasing resulted in gross margins in line with 2008. However, operating proﬁt declined 29%. The principal focus is on further cost reduction at overhead level, improved category management and greater beneﬁts from operational excellence by leveraging our economies of scale. Professional Builders Merchants With 479 locations in six countries, Professional Builders Merchants has strong market positions in all its regions. Benelux: Markets were weak in 2009 and this resulted in lower sales and operating proﬁt compared with 2008. France: All regions experienced a slowdown and further restructuring costs resulted in operating proﬁt well down on 2008. Trading results at our associate Trialis (in which we acquired a 34.8% shareholding in July 2008) were below expectations as its markets in the southwest of France proved to be very difﬁcult. Switzerland: Compared with other Western European construction markets, the Swiss market was less impacted. However the combination of lower volumes in heavyside materials and additional restructuring costs resulted in a lower operating proﬁt outcome versus 2008. Austria: Despite slowing sales from a weaker residential market, our initiatives to improve gross margin and reduce overheads contributed to an increase in operating proﬁt. Germany: Bauking, in which we have a 48% joint-venture stake, operates primarily in northwest Germany. Sales in this region suffered and despite a small increase in gross margin and relentless cost control, like-for-like operating proﬁt was down. Our Sanitary, Heating and Plumbing (SHAP) business in Germany, acquired in 2008, is a leading player in the northwest part of the country. Beneﬁting from a robust demand for heating equipment, performance was in line with expectations. We see this business as a platform for further SHAP growth in Germany. DIY The DIY Europe platform has activities in ﬁve countries with 241 stores under ﬁve different brands: Gamma (the Netherlands and Belgium), Karwei (the Netherlands), Hagebau (Germany), Maxmat (Portugal) and Jelf BricoHouse (Spain). The Netherlands: Despite a sharp decrease in consumer conﬁdence, sales and operating proﬁt in the ﬁrst half of 2009 were relatively robust but thereafter demand declined further especially in the fourth quarter, with full-year operating proﬁt lower than 2008. Increased competition and promotional campaigns had a negative impact on margins; however, this was mitigated by efﬁcient store operations, tight cost control and sharp franchise formula management. Belgium: Gamma Belgium with 19 locations had lower sales and operating proﬁt mainly due to weaker consumer conﬁdence and demand. Germany: Bauking operates 51 DIY stores under the brand name Hagebau. Although Bauking managed to keep costs under tight control, operating proﬁt declined in a very competitive market. Portugal: The economic environment continued to be difﬁcult and operating proﬁt was down on 2008. Spain: We entered the Spanish DIY market in May 2007 in the Alicante/Valencia region. Market circumstances have been very challenging and results, while below expectations, were broadly in line with 2008. Outlook The markets for our businesses will continue to be difﬁcult in 2010. With the exception of the UK, the residential sector will be challenging especially in the Netherlands. The non-residential sector is expected to weaken further. Public sector investments in France and Government infrastructure initiatives in the Netherlands should provide some upturn in related concrete and distribution businesses. The RMI sector is expected to decline but at a slower pace than the new building sector. With the exception of Poland, Eastern Europe market conditions will be very demanding. The effects of our comprehensive cost-reduction programme initiated in late 2007 will be continued through into 2010. More benign energy prices should provide some relief on the cost side. CRH 27 Pike Industries, laying 181,000 tonnes of asphalt during the reconstruction of 23 miles of the I-295 highway in Maine, a project ﬁnanced under the US Federal stimulus programme. 28 CRH Americas Materials Operations Review Americas Materials faced a very challenging environment in 2009 with severe volume declines across all product lines. The beneﬁt of lower energy costs along with aggressive actions to reduce ﬁxed cost, improve operating efﬁciency and increase prices yielded higher operating margins. US Dollar sales revenue and operating proﬁt declined 19% and 16% respectively, and the operating proﬁt margin for the Division increased by 0.3 percentage points to 9.5%. Mark Towe Chief Executive Ofﬁcer The Americas Doug Black Chief Executive Ofﬁcer Americas Materials The Federal stimulus bill provided some additional public projects for our asphalt and paving business, yet continued weakness in residential, commercial and state/local infrastructure construction resulted in volume declines of 23% in aggregates, 15% in asphalt, 32% in readymixed concrete, and a 14% drop in construction revenue. Aggregates and readymixed concrete selling prices rose 6% and 3% respectively, while our asphalt operations saw prices decline 2% reﬂecting lower input costs. Efforts that began in early 2008 to systematically execute commercial and operating best practices delivered excellent results in 2009. Coupled with aggressive ﬁxed cost reductions, these fundamental changes are now ingrained in our culture and will yield more signiﬁcant beneﬁts as the economy strengthens. Results € million % of Group 2009 2008 Change Organic Acquisitions Restructuring Impairments Exchange Sales Revenue 25% 4,280 5,007 (727) (1,024) EBITDA* Operating Proﬁt* 37% 43% 670 407 724 462 (54) (55) (87) (72) 25 5 3 – (11) (11) – – – 272 39 25 Analysis of Change Average Net Assets 4,515 4,379 EBITDA Margin 15.7% 14.5% Operating Proﬁt Margin 9.5% 9.2% * EBITDA and Operating Proﬁt exclude proﬁt on disposal of non-current assets CRH 29 Americas Materials continued Overview Americas Materials faced a very challenging environment in 2009 with an overall US Dollar revenue decline of 19%. Residential construction remained weak at low levels of demand, while the non-residential sector experienced a severe decline from strong 2008 levels, reﬂecting continued tight credit and increasing unemployment. The Federal stimulus bill (American Recovery and Reinvestment Act ‘ARRA’) provided some additional public projects which had a positive impact primarily on the Division’s asphalt and paving business, but this was more than offset by lower state spending on infrastructure. Overall product volumes were down sharply and with minimal impact from acquisitions, aggregates volumes declined by 23%, asphalt was down 15% and readymixed concrete decreased 32% on 2008 levels. In order to offset lost economies of scale associated with signiﬁcantly lower volumes, the Division focussed on delivering high quality materials and service to customers and capturing maximum value for our products. As a result, aggregates and readymixed concrete selling prices rose 6% and 3% respectively, while our asphalt operations saw prices decline 2% reﬂecting lower input costs. The price of energy used at our asphalt plants, consisting of fuel oil, recycled oil, electricity and natural gas, declined by 26%. Diesel and gasoline prices, which are important inputs to aggregates, readymixed concrete and paving operations, declined by 32% and 21% respectively versus the prior year. Liquid asphalt prices overall were 14% lower in 2009, following a very volatile year in 2008. Additionally, in late 2008, we expanded our winter-ﬁll capacity (which has historically been concentrated in the east and central United States) by adding storage in Utah, Washington and Idaho, thereby further reducing our exposure to the ﬂuctuating cost of liquid asphalt. Across all business segments our teams focussed internally on implementing best operating practices and tracking real-time metrics to drive efﬁciency improvements while adjusting to signiﬁcantly reduced levels of production. These efforts helped maintain and improve our product margins. Additionally, signiﬁcant reductions were achieved in ﬁxed costs as our local and regional organisations were restructured to match the smaller market. Overall operating proﬁt margin for the Division was improved by 0.3 percentage points. Following a slow start to the year, acquisition activity picked up in the second half and we ended 2009 with a total spend of US$231 million. Major transactions included Wheeler Companies in Texas, Hilty Quarries in Missouri, Burdick Paving in Utah and selected aggregates and asphalt assets in Missouri from Lafarge. Wheeler Companies is a successful asphalt (six plants), readymixed concrete (eight plants) and paving company based in Austin, Texas and provides entry into the high-growth Austin market with opportunity for further vertical integration into aggregates. This acquisition represents a signiﬁcant expansion of our current business in Texas which we have identiﬁed as an attractive growth platform. Hilty is an excellent geographic and strategic ﬁt with our existing operations in Missouri. This integrated aggregates and asphalt business operates eight quarries and has approximately 95 million tonnes of well-located, quality aggregates reserves. Burdick Paving is a well-run vertically integrated company in eastern Utah, operating ﬁve aggregates plants, three 30 CRH asphalt plants and paving operations. This represents a geographic expansion of our proﬁtable Utah- based operations into a steadily growing, natural resource rich region of the state. The Lafarge assets in central and eastern Missouri provide 123 million tonnes of well-located reserves along the I-70 interstate between Kansas City and St. Louis. In addition, the Division completed six other transactions adding another 162 million tonnes of aggregates reserves. Our operations are geographically organised, segmented into East and West sectors, each containing four divisions. East The Northeast division (ME, NH, VT, MA, RI, NY, NJ, CT) delivered a mixed performance. The Pike group capitalised on early ARRA bid lettings in Maine and New Hampshire and Market leadership positions Aggregates No.3 national producer in United States Asphalt No.1 national producer in United States Readymixed Concrete Top 5 in United States delivered record operating proﬁts with improved margins and solid asphalt volumes and construction revenues. Massachusetts and Upstate New York also moved operating proﬁts ahead strongly with good overall infras- tructure demand. The metropolitan New York operations suffered primarily from dramatic commercial activity declines while lower volumes and intense market competition continued in New Jersey. In Connecticut, continued softness in residential and commercial activity outweighed improvements in infrastructure construction activity. Overall the Northeast division operating proﬁt was lower than the prior year. The Mid-Atlantic division (PA, DE, VA, WV, KY, TN, NC, MA) suffered operating proﬁt declines in Pennsylvania and Delaware as these markets continued to deteriorate. Operating proﬁts in Virginia, West Virginia, Kentucky, Tennessee and North Carolina also fell off from excellent levels in 2008 due to volume declines. Aggressive pricing initiatives and cost reductions resulted in margin improvement throughout the Mid-Atlantic division, moderating the operating proﬁt decline. A strong stimulus programme in Michigan along with sound pricing initiatives, good bitumen purchasing and excellent cost controls in both Michigan and Ohio enabled our Central division to achieve improved proﬁt margins. While volumes declined in line with the Materials Division averages, operating proﬁt was within 15% of the record 2008 outcome. The Southeast division (GA, AL, SC, FL) experienced another difﬁcult year leading to a sharp fall in operating proﬁt. Continued declines in the Florida residential and commercial markets negatively impacted the readymixed concrete operations acquired in late 2007 and our new cement joint venture (American Cement Company) which began production in June. Additionally, signiﬁcant state budget deﬁcits in both Florida and Alabama adversely affected highway lettings and consequently the volumes of asphalt and rail-transported aggregates in both states. West The Southwest division (MS, TX, OK, AR, MO, KS, TN) was impacted by volume declines for all products and lower construction sales. However, margin increases in all product lines, coupled with aggressive ﬁxed cost reductions, more than offset lower volumes and construction margins, leading to a good advance in overall operating proﬁt. In the Rocky Mountain/Midwest division (IA, SD, MT, WY, CO, NM, ID, MN, NE, IL), operating proﬁt declined in 2009 due to weak demand and lower construction margins. Our Midwest businesses experienced good asphalt demand in Iowa from signiﬁcant ARRA projects and achieved margin improvements from pricing and cost initiatives. However, these advances in the Midwest division were more than offset by reduced highway activity in Minnesota, Idaho and Montana, and overall operating proﬁt was below the 2008 level. In the Northwest division (ID, WA, OR), worsening economies in northern Idaho and Oregon impacted volumes and operating proﬁts despite strong pricing and signiﬁcant beneﬁts from cost controls and restructuring. The Staker Parson operations (UT, ID, AZ, NV) saw a signiﬁcant decline in volumes reﬂecting a weakening economy in all regions. The continued slide in residential and commercial construction led to reduced demand for readymixed concrete and aggregates and drew additional competition to the highway construction business. Proﬁt margins were maintained, but operating proﬁt declined. Outlook The ARRA Federal stimulus bill will provide increased construction activity in 2010, however there is much uncertainty concerning the reauthorisation of a long-term Federal highway bill and/or the passage of a second job stimulus bill. This uncertainty has caused many ﬁscally-challenged states to become even more cautious with their highway programmes. Overall, we would anticipate the combined Federal and state spending on highway construction in 2010 to be similar to 2009. Residential activity should improve modestly from a low level, likely showing gains in the second half of 2010. The important non-residential sector will decline further in 2010 from weak 2009 levels due to continued tight credit, high vacancy rates and high unemployment. Overall we expect ongoing product volumes and construction revenues to be ﬂat in 2010. Margins in construction are expected to be lower due to increased competition and intense bidding for limited work, however product margins should improve with product price increases and cost-efﬁciency improvements. These efforts coupled with continued reductions in ﬁxed overhead and contributions from 2009 acquisitions should result in a good advance in operating proﬁt for Americas Materials in 2010. CRH 31 The Omni Hotel in Fort Worth, Texas is a 34-storey, 604-room luxury hotel featuring a unique structural design and style. Oldcastle Glass supplied Insulating Glass, Solar Control Glass, Low-E Glass and Silk-screened Glass to this landmark building. 32 CRH Americas Products & Distribution Operations Review Americas Products experienced signiﬁcant demand pressures in 2009, particularly in the important residential sector, and more signiﬁcantly in the non-residential sector as the year progressed. Against this challenging backdrop and with particularly acute trading challenges in MMI, our Products businesses experienced a 91% decline in full-year US Dollar operating proﬁt. Our Distribution business also experienced a sharp downturn in activity and operating proﬁts were signiﬁcantly lower. Mark Towe Chief Executive Ofﬁcer The Americas Bill Sandbrook Chief Executive Ofﬁcer Americas Products & Distribution Americas Products & Distribution experienced signiﬁcant demand pressures in 2009 with further declines in all of our markets. While there was some stabilisation of the residential market at historically low levels, non-residential continued to weaken throughout the year. Regionally our operations in the West and Canada performed better relative to our southeastern and northeastern markets which were noticeably weaker than in 2008. The continuing focus of management remains on internal cost reductions, delivering supply chain efﬁciencies and growing revenues through product innovation and providing systems solutions to the construction market. Results € million % of Group 2009 2008 Change Organic Acquisitions Restructuring Impairments Exchange Sales Revenue 21% 3,709 4,686 EBITDA* 12% 212 485 (977) (273) (1,234) (247) Operating Proﬁt* 4% 38 330 (292) (247) 29 2 1 – (47) (47) – – (11) 228 19 12 Analysis of Change Average Net Assets 2,477 2,586 EBITDA Margin 5.7% 10.3% Operating Proﬁt Margin 1.0% 7.0% * EBITDA and Operating Proﬁt exclude proﬁt on disposal of non-current assets CRH 33 Americas Products & Distribution continued Overview Americas Products & Distribution experienced signiﬁcant demand pressures in 2009, with further declines in all of our markets, particularly the important residential sector, and more signiﬁcantly in the non-residential sector as the year progressed. Against this challenging backdrop and with particularly acute trading challenges in MMI, our Products businesses experienced a full year US Dollar operating proﬁt decline of 91%. Similarly, sales revenues in our Distribution business were signiﬁcantly lower and operating proﬁts declined, despite decisive action on cost reductions. Regionally, our Products & Distribution operations in the West and Canada performed relatively better, while our southeastern and northeastern operations continued to be noticeably weaker than in 2008. Focussed cost-reduction measures helped to mitigate somewhat the impact of sharp volume declines. Overall, the Division recorded a 25% decrease in US Dollar sales and an 89% decline in US Dollar operating proﬁt. The continuing focus of management remains on delivering internal cost reductions and supply chain efﬁciencies. Architectural Products (APG) APG, with 239 locations in 38 states and two Canadian provinces, is the leading North American producer of concrete products for the commercial masonry, professional landscaping and consumer DIY markets. The group is also a regional leader in clay brick, dry-mixes, and lawn and garden products. APG faced continued difﬁcult trading conditions in 2009 due to further deterioration in the residential construction sector and accelerated declines in non-residential markets. The construction markets in eastern Canada were more robust than those in the US. The Homecenter (DIY/retail) channel, which accounts for approximately one-third of APG sales, remained resilient despite weak consumer sentiment and spending. Reﬂecting these factors, our United States masonry and brick divisions experienced considerable operating proﬁt declines. In contrast, our Canadian masonry business performed well and our lawn and garden and dry-mix divisions delivered signiﬁcant operating proﬁt improvement. Extensive cost- reduction actions and regional consolidations were completed across APG; however, they were only able to partially offset the negative external factors. Overall, APG recorded a decline in sales and a sharp decline in operating proﬁt. Precast The Precast group is a leading manufacturer of precast, prestressed and polymer concrete products, small plastic box enclosures and concrete pipe in North America. The group has 76 locations in 25 states and the province of Québec. Signiﬁcantly lower levels of residential activity in 2009 again negatively affected demand for drainage products and plastic box enclosures nationwide. Activity in the non- residential sector also decreased considerably, further impacting sales. This trend is expected to continue into 2010, as poor business conditions and reduced access to credit weigh on demand. The group’s most steady work was in the infrastructure segment, but exposure to this segment is less signiﬁcant. Overall volumes were down approximately 33% from a relatively weak 2008. In spite of the harsh economic backdrop and an increasingly competitive market, margins were similar to 2008 as a result of pricing initiatives, operational efﬁciencies, and second-half input cost declines. Overall operating proﬁt was below 2008 levels. Backlogs declined throughout 2009, but are showing signs of recovery in 2010. Management’s focus will be to continue internal improvement and cost-reduction measures ahead of the challenging market conditions that are expected to extend into 2010. Alaska Hawaii Chile Argentina 34 CRH Glass The Glass group is the market-leading supplier of Building Envelope Solutions for commercial, institutional and multi-storey residential construction, including custom-engineered curtain wall, custom-fabricated architectural glass, high-performance windows, architectural skylights, and storefronts and doors. With 79 locations in 23 states and four Canadian provinces, the Glass group is the largest supplier of high-performance architectural glass and engineered aluminium glazing systems in North America. In 2009, the architectural glass business experienced unprecedented declines in demand, as sales volumes decreased 24% compared to 2008. Pricing was intensely competitive in all North American markets and the group’s largest privately-held competitor ﬁled for bankruptcy reorganisation in November. Also the group experienced competition from non-traditional sources as many smaller glass fabricators directed underutilised residential capacity to serving commercial markets. In this difﬁcult trading environment, the Glass group focussed on building market share, tightening cost control and closing 11 operating locations to better balance capacity with depressed market demand. Operating proﬁt fell steeply. While the engineered products business experienced a 26% decline in sales compared to 2008, operating proﬁt was near 2008 record levels due to a strong performance from our Canadian locations, favourable backlog pricing and lower aluminium costs. 2010 is expected to be a much more challenging year for the engineered products business as project backlog continues to decline. MMI MMI has 76 locations, 16 of which are manufacturing, across 29 states and a plant in Mexico. Although its fencing products are often used in residential applications, most of MMI’s products (construction accessories, welded Market leadership positions Precast Concrete Products No.1 in United States Architectural Concrete Products No.1 masonry, paving and patio in United States No.1 paving and patio in Canada No.2 packaged concrete mixes in United States No.2 packaged lawn & garden products in United States Clay Products No.1 brick producer in northeast and midwest United States No.1 rooftiles in Argentina No.2 wall and ﬂoor tiles in Argentina No.3 clay block producer in Argentina Glass Fabrication No.1 architectural glass fabrication in United States Glazing Systems No.1 engineered aluminium glazing systems in United States Construction Accessories No.2 in United States Welded Wire Reinforcement No.2 in United States Fencing Products No.2 manufacturer and distributor in United States Distribution No.4 rooﬁng/siding distributor in United States No.4 interior products distributor in United States wire reinforcement and fencing products) are used in non-residential- oriented projects, particularly in conjunction with the use of concrete. The accelerating decline in non- residential construction activity led to a 40% decrease in MMI’s sales from 2008 levels. The combination of high-priced steel inventory, lower sales volumes, and dramatically falling sales prices contributed to a signiﬁcant operating loss for the year. Management modiﬁed its steel purchasing strategy to reduce future volatility and reacted to declining volumes by instituting extensive cost-reduction measures across all businesses and scaling back the size of its distribution network. Distribution Oldcastle Distribution, trading primarily as Allied Building Products (“Allied”), has 184 branches focussed on major metropolitan areas in 31 states. It comprises two divisions which supply contractor groups specialising in Exterior (rooﬁng and siding) and Interior (wallboard, steel studs and acoustical ceiling systems) Products. Exterior Products is the group’s traditional business and Allied is one of the top four distributors in this segment in the United States. Demand is largely inﬂuenced by residential and commercial replacement activity with the key products having an average life span of roughly 25 years. This repair, maintenance and improvement aspect provides a solid underpinning of baseline rooﬁng demand. The Interior Products division, being relatively immune to weather, has low exposure to replacement activity and demand is therefore largely dependent on the new commercial construction market. Allied is the fourth largest Interior Products distributor in the United States. Both segments of the business declined greatly in 2009, roughly in proportion to the overall market. In the Exterior Products business, overall US asphalt rooﬁng shingle shipments were down 15% in 2009, a level of decline that was somewhat offset by storm activity in a number of regions. Allied did not speciﬁcally beneﬁt from these storms, but outperformed competitors in its market areas. For the Interior Products business, gypsum wallboard shipments are a barometer of activity and these declined by about 7 billion square feet or 28% in 2009, comparable with a decline of 31% in Allied’s Interior Products sales. Acquisition activity for Americas Distribution was limited to the addition of one small interior products distributor in Salt Lake City. South America The South American group faced difﬁcult economic conditions in 2009, particularly in Argentina, and management focussed on initiating signiﬁcant cost-reduction programmes. Operating proﬁt from our Argentine ceramic tile and glass businesses was at break-even for the year. The start-up of a greenﬁeld ﬂoor and wall tile manufacturing facility in Cordoba was completed in October. Our Chilean glass business experienced a more moderate decline in operating proﬁt. The Santiago- based distribution business acquired in early 2008 was negatively impacted by the adverse economic conditions and operating proﬁt declined. Outlook While there are signs that the overall US economy appears to have stabilised, the growth outlook remains weak. Homebuilding appears set to make a slightly positive contribution in the second half of the year. Further declines are however expected in non-residential construction due to continuing stresses in ﬁnancial and credit markets. While residential repair, maintenance and improvement activity is historically less cyclical, constrained consumer spending because of high unemployment, sluggish income growth and declines in household wealth will translate into weak private domestic demand. Against this backdrop, our businesses will continue to focus on new and ongoing cost-reduction initiatives and the generation of strong cash ﬂow, as we leverage further the beneﬁts of our extensive location network and the Divisions’ product diversity and broad sectoral exposure. CRH 35 Finance Review CRH continued to generate strong cash ﬂow in 2009. Our excellent working capital management and pragmatic approach to capital expenditure, together with the proceeds of €1.24 billion from the March 2009 Rights Issue, resulted in a reduction of €2.4 billion of debt. Our debt maturity proﬁle and credit ratios are among the best in the sector, leaving us with substantial ﬁnancial ﬂexibility. Glenn Culpepper Finance Director General With continued weakness in the ﬁnancial, economic and business climate worldwide in 2009, and signiﬁcant declines in construction activity in the Group’s major markets, management’s focus during the year remained ﬁrmly concentrated on cost reduction and operational initiatives. Sales revenues for 2009 amounted to €17.4 billion, a 17% decline compared with the €20.9 billion reported last year. EBITDA for the year, after once-off charges of €205 million associated with our cost reduction programme, declined by one-third to €1.8 billion, in line with the guidance provided in the Interim Management Statement of 10th November 2009 and the Trading Update Statement of 5th January 2010. Proﬁt before tax excluding impairment charges, amounted to €773 million, a decrease of 53% compared with 2008, and ahead of the guidance of €0.75 billion provided in the January Update. After impairment costs of €41 million (2008: €14 million), pre-tax proﬁt declined by 55% to €732 million. Reﬂecting the increase in average shares in issue as a result of the Rights Issue in March 2009, a slightly higher percentage decline of 58% was report- ed in earnings per share for the year. Overall operating margin fell from 8.8% in 2008 to 5.5% in 2009. Proﬁt on disposal of non-current assets at €26 million was below 2008 (€69 million). Expenditure on acquisitions and investments in 2009 amounted to €458 million. In March 2009 the Group issued approximately 152 million new Ordinary Shares by way of a Rights Issue, generating net proceeds for the Group of €1.24 billion. Key Components of 2009 Performance Table 1 below sets out the key components of the Group’s performance in 2009, analysing the change in results from 2008 to 2009. Exchange Translation Effects While the US Dollar strengthened during 2009 with the average US$/€ rate of 1.3948 being 5% stronger than in 2008 (1.4708), this was more than Table 1 Key Components of 2009 Performance Revenue EBITDA Operating proﬁt Proﬁt on disposals Trading proﬁt Finance costs Associate PAT Pre-tax proﬁt € million 2008 as reported 20,887 2,665 1,841 Exchange translation effects 291 (22) (32) 2008 at 2009 exchange rates 21,178 2,643 1,809 Incremental impact in 2009 of - 2008/2009 acquisitions - Restructuring costs - Impairment costs Ongoing operations 2009 as reported % change (i) (ii) 298 - - 37 (143) - (4,103) (734) 17,373 -17% 1,803 -32% 24 (143) (27) (708) 955 -48% 69 (3) 66 - - - (40) 26 1,910 (35) 1,875 24 (143) (27) (748) 981 -49% (343) (8) (351) (21) - - 75 (297) 61 (1) 60 9 - - (21) 48 1,628 (44) 1,584 12 (143) (27) (694) 732 -55% (i) Restructuring charges amounted to €205 million in 2009 (2008: €62 million), resulting in an incremental cost in 2009 of €143 million. (ii) Total impairment charges in 2009 were €41 million (2008: €14 million), with an incremental cost of €27 million in 2009. 36 CRH offset by the decline in the average Polish Zloty exchange rate which at 4.3276 was 19% weaker (2008: 3.5121). Currency movements in total had a net negative impact of €44 million at proﬁt before tax level. The average and year-end exchange rates used in the preparation of CRH’s ﬁnancial statements are included under Accounting Policies on page 66 of this Report. Incremental Impact of Acquisitions Acquisitions completed in 2008 and 2009 contributed incremental operating proﬁt of €24 million on additional sales of €298 million, an effective incremental operating proﬁt margin of approximately 8%. The Group’s European segments accounted for the bulk of the acquisition impact in 2009, generating an incremental €20 million in operating proﬁt on additional sales of €244 million. This reﬂected the full-year impact of the sanitary ware, heating and plumbing acquisitions by the Distribution group in Germany and Switzerland in mid-2008, and of the Group’s joint venture cement investment in India in May 2008. In the Americas, the incremental impact from acquisitions was, as expected, relatively modest, with an incremental €4 million in operating proﬁt on sales of €54 million. CRH’s 2010 results are expected to reﬂect a modest incremental impact from 2009 acquisitions, which on a combined basis, have annualised sales of approximately €200 million. Non-recurring items – Restructuring and Impairment Costs The ongoing focus on operational excellence initiatives to deliver cost savings continued throughout 2009 and the related savings generated from these initiatives are discussed by the Chief Operating Ofﬁcer on page 19 of this Report. The costs incurred to implement this 4-year cost saving programme amounted to €205 million in 2009 (2008: €62 million). Impairment charges of €41 million were recorded against the carrying value of property, plant and equipment and intangible assets – the corresponding charge in 2008 was €14 million. Ongoing Operations 2009 organic sales declined by €4,103 million, a reduction of approximately 19% following a fall of approximately 6% in 2008. Overall organic sales declined by 17% in Europe while the reduction was 22% in the Americas; this compared with 2008 which saw organic sales decline by approximately 4% in Europe and by 8% in the Americas. Underlying operating proﬁt fell by €708 million, Table 2 Key Financial Performance Indicators Operating proﬁt margin (%) Interest cover – EBITDA basis (times) – EBIT basis (times) Effective tax rate (%) Net debt as a percentage of total equity (%) Net debt as a percentage of year-end market capitalisation (%) Return on average capital employed (%) Return on average equity (%) 2009 5.5 2008 8.8 6.1 3.2 18.3 38.3 7.8 5.4 22.5 74.7 28.1 64.1 6.6 6.7 12.9 15.6 EBITDA – earnings before ﬁnance costs, tax, depreciation, impairment charges and intangible asset amortisation EBIT – earnings before ﬁnance costs and tax (trading proﬁt) Both EBITDA and EBIT exclude proﬁt on disposal of non-current assets more than double the €301 million fall in organic operating proﬁts in 2008. operating proﬁt falling €77 million behind 2008. Underlying operating proﬁt for our European operations fell by €389 million on an underlying sales reduction of €1,845 million, reﬂecting challenging trading conditions in almost all our markets. Our Materials businesses suffered from the impact of signiﬁcant volume declines in all its major markets except Switzerland and organic operating proﬁt fell by €260 million. Our businesses in the Products segment experienced difﬁcult trading conditions throughout 2009, with like-for-like sales down 19% compared with 2008; however, the beneﬁts from the ongoing restructuring programme began to come through in the second half when underlying operating proﬁt was slightly ahead of 2008, while the decline for the full year was €74 million. Declining consumer conﬁdence and weaker new residential construction activity resulted in an overall decline in underlying proﬁts of €55 million in Distribution, with the second-half decline being slightly lower than the ﬁrst half. Our operations in the Americas had a challenging year reporting a decline of €2,258 million in underlying sales and a decline of €319 million in like-for-like operating proﬁt. While lower private sector demand in 2009 had a signiﬁcant negative impact on volumes for the Materials Division, infrastructure activity gained momentum through the second half. With lower input costs for energy and the beneﬁt of targeted cost reduction measures and price increases, the Division reported improved margins in 2009 in spite of a 19% decline in ongoing sales revenues; ongoing operating proﬁt was €72 million lower than 2008. The combination of weak residential markets and ongoing reductions in non-residential construction activity had a major impact on our Products businesses in the Americas which reported falls of €881 million in sales and €170 million in operating proﬁts from underlying operations. Our Distribution operations suffered primarily from the decline in residential and commercial construction, with underlying Finance Costs Net ﬁnance costs for the year of €297 million were lower than last year (2008: €343 million) reﬂecting strong operating cash ﬂow for the year and the beneﬁts of the Rights Issue. Financial Performance Indicators Some key ﬁnancial performance indicators which, taken together, are a measure of performance and ﬁnancial strength are set out in Table 2. Operating Proﬁt Margin Overall operating proﬁt margin for the Group fell by 3.3 percentage points in 2009 to 5.5%, with all segments except Americas Materials experiencing margin declines. Interest Cover Management believes that the EBITDA interest cover based ratio is useful to investors because it matches the earnings and cash generated by the business to the underlying funding costs. As set out in note 23 on page 95 of the ﬁnancial statements, the Group’s major bank facilities and debt issued pursuant to Note Purchase Agreements in private placements require the Group to maintain EBITDA/net interest (excluding share of joint ventures) at no lower than 4.5 times for twelve-month periods ending quarterly on 31st March, 30th June, 30th September and 31st December in each year. Non-compliance with ﬁnancial covenants would give the relevant lenders the right to demand early repayment of the related debt thus impacting the maturity proﬁle of the Group’s debt and the Group’s liquidity. While EBITDA/net interest cover for the year reduced to 6.1 times (2008: 7.8 times), it remained comfortably above the Group’s covenant levels and within the Group’s comfort range of 6 to 6.5 times. Tax Rate The tax charge at 18.3% of Group proﬁt before tax decreased compared with 2008 (22.5%). The decline in the tax charge largely reﬂects lower taxable proﬁts in a number of jurisdictions where higher tax rates apply. CRH 37 Finance Review continued Net Debt Year-end net debt of €3.7 billion was €2.4 billion lower than year-end 2008; this reduction in debt, combined with the increase in equity following the March 2009 Rights Issue, resulted in a reduction in the percentage of net debt to total equity from 74.7% at year-end 2008 to 38.3% at year-end 2009. The Group’s market capitalisation at year-end 2009 was €13.3 billion, some 40% higher than at year-end 2008 (€9.5 billion); this combined with the lower net debt resulted in a fall in the debt/market capitalisation percentage from 64% at year-end 2008 to 28% at year-end 2009. Returns on Capital Employed and Equity Return on average capital employed and return on average equity both declined in 2009. Liquidity and Cash Resources Net debt for the Group at 31st December 2009, at €3.7 billion, was €2.4 billion lower than the €6.1 billion at the end of 2008. This reduction reﬂects the strong cash generation characteristics of the Group, which combined with the €1.24 billion of proceeds from the Rights Issue and a positive translation adjustment of €0.1 billion, more than offset the impact of the total €1.0 billion spent on acquisitions, investments and capital projects and the €0.4 billion cash dividends paid during the year. Table 3 summarises CRH’s cashﬂows for 2009 and 2008. The changes in operating proﬁt and interest are discussed above. The increased charges for depreciation and amortisation mainly reﬂect the impact of increased impairment charges of €41 million in 2009 (2008: €14 million). The Group has maintained an intense focus on cash generation throughout 2009, and the net working capital inﬂow of €661 million represents a further excellent performance in managing receivables and payables in a challenging environment. This compares with a net outﬂow of €62 million in 2008. 38 CRH Tax payments were lower than in 2008 as a result of the sharp reduction in pre-tax proﬁts. The increase in dividends paid reﬂects the 1% increase in the ﬁnal 2008 dividend which was paid in May 2009, together with the impact on the interim 2009 dividend paid in October 2009 of the 152 million additional shares in issue following the March 2009 Rights Issue. The interim dividend per share for 2009 of 18.5c was held in line with the interim dividend per share for 2008. Capital expenditure of over €0.5 billion represented 3% of Group revenue (2008: 5%) and amounted to 0.67 times depreciation of €794 million (2008: 1.33 times). Of the total capital expenditure, 66% was invested in Europe with 34% in the Americas. Our capital expenditure included approximately €0.15 billion and €0.25 billion of investment in major cement plants in 2009 and 2008 respectively. The caption denoted “Other” mainly reﬂects the elimination of non-cash income items, primarily share of associates’ proﬁts and proﬁt on disposal of non-current assets, and non-cash expense items such as IFRS share-based compensation expense, which are included in arriving at proﬁt before tax. Spend on acquisitions and investments in 2009 amounted to €0.458 billion, a signiﬁcant reduction compared with the €1.1 billion spent in 2008. This reﬂected a deliberate curtailment of development activity from mid-2008 as the economic environment deteriorated. The share issues caption in 2009 principally reﬂects the €1.24 billion net proceeds from the March 2009 Rights Issue, together with the take-up of shares in lieu of dividends under the Company’s scrip dividend scheme of €148 million (2008: €22 million) and issues under Group share option and share participation schemes of €60 million (2008: €37 million). shares to satisfy share option exercises. Share purchases in 2008 also reﬂected the acquisition of approximately 18.2 million shares under the share purchase programme which was announced in January 2008; the Group announced the termination of this programme in November 2008. In 2009, 3.9 million (2008: 2.0 million) of these shares were used to satisfy the exercise of share options. Exchange rate movements during 2009 reduced the euro amount of net foreign currency debt by €120 million principally due to the 3% increase in the euro exchange rate against the US Dollar from 1.3917 at end-2008 to 1.4406. The unfavourable translation adjustment of €240 million in 2008 reﬂected a 5% decrease in the euro rate versus the US Dollar from 1.4721 at end-2007 to 1.3917 at end-2008. Year-end net debt of €3,723 million (2008: €6,091 million) includes €114 million (2008: €153 million) in respect of the Group’s proportionate share of net debt in joint venture undertakings. Details of the components of net debt are set out in note 25 to the ﬁnancial statements. At the end of 2009, 77% of the Group’s net debt was at interest rates which were ﬁxed for an average period of 5.9 years. The euro accounted for approximately 31% of net debt at the end of 2009 and 117% of the euro component of net debt was at ﬁxed rates. The US Dollar accounted for approximately 59% of net debt at the end of 2009 and 69% of the US Dollar component of net debt was at ﬁxed rates. The Group ﬁnished the year in a very strong ﬁnancial position with 98% of the Group’s gross debt drawn under committed term facilities, 95% of Table 3 Cash Flow € million Inﬂows Proﬁt before tax Depreciation (including impairments) Amortisation of intangibles (including impairments) Working capital movements Outﬂows Tax paid Dividends Capital expenditure Other Operating cash ﬂow Acquisitions and investments Disposals Share issues Treasury/own shares purchased Translation 2009 2008 732 1,628 794 54 661 781 43 (62) 2,241 2,390 (104) (322) (386) (369) (532) (1,039) (59) (89) (1,081) (1,819) 1,160 571 (458) (1,072) 103 1,445 168 59 (2) (414) 120 (240) Decrease/(increase) in net debt 2,368 (928) In both 2009 and 2008 the Employee Beneﬁt Trust purchased 0.1 million Opening net debt Closing net debt (6,091) (5,163) (3,723) (6,091) These actions, combined with the Group’s strong focus on cash generation, excellent working capital management and restrained capital expenditure, leave CRH well- positioned in terms of debt facilities and maturity proﬁle. CRH remains committed to maintaining an investment grade credit rating. Currency Management The bulk of the Group’s net worth (capital and reserves attributable to equity holders) is denominated in the world’s two largest currencies – the US Dollar and the euro – which accounted for 37% and 34% respectively of the Group’s net worth at end-2009. 2009 saw a negative €96 million currency translation effect on foreign currency net worth which includes a €120 million favourable translation impact on net foreign currency debt. Sarbanes-Oxley Act As a result of its NYSE Listing, CRH is subject to the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, which requires management to perform an annual assessment of the effectiveness of internal control over ﬁnancial reporting and to report its conclusions in the Company’s Annual Report on Form 20-F, ﬁled with the Securities and Exchange Commission. For the year ended 31st December 2008, management concluded that the Company’s internal control over ﬁnancial reporting was effective. As required by US law, Ernst & Young audited the effectiveness of the Company’s controls over ﬁnancial reporting for 2008 and issued an unqualiﬁed opinion thereon. Management’s assessment and the auditors’ report on the effectiveness of internal controls for the year ended 31st December 2009 will be included in the 2009 Annual Report on Form 20-F. which mature after more than one year. In addition, at year-end the Group held €1.6 billion of undrawn committed facilities, which had an average maturity of 2 years. At year-end 2009, 96% of the Group’s cash, short-term deposits and liquid resources had a maturity of six months or less. Shareholders’ Equity The increase of €1.55 billion in total shareholders’ equity (capital and reserves attributable to CRH’s equity shareholders) during 2009 reﬂects the proceeds of €1.24 billion from the March 2009 Rights Issue. The total movements in equity for the year are analysed in the Consolidated Statement of Changes in Equity (a new primary ﬁnancial statement) on page 64 of this Report. Employee Beneﬁts The assets and liabilities (excluding related deferred tax) of the deﬁned beneﬁt pension schemes operated by various Group companies, computed in accordance with IAS 19, have been included on the face of the balance sheet under retirement beneﬁt obligations. At end-2009, the net deﬁcit on these schemes amounted to €454 million (2008: €414 million); after deducting the related deferred tax asset, the net liability amounted to €351 million (2008: €320 million). The net liability expressed as a percentage of market capitalisation decreased from 3.4% at year-end 2008 to 2.6% at year-end 2009, reﬂecting primarily the impact of the March 2009 Rights Issue. Share Price The Company’s Ordinary Shares traded in the range €12.55 to €20.70 during 2009. The year-end share price was €19.01 (2008: €16.10 restated). Shareholders recorded a gross return of 22% (dividends and capital appreciation) during 2009 following returns of -22% in 2008, -23% in 2007, +29% in 2006, +28% in 2005 and +23% in 2004. CRH is one of six building materials companies included in the FTSE Eurotop 300, a market capitalisation- weighted index of Europe’s largest 300 companies. At year-end 2009, CRH’s market capitalisation of €13.3 billion (2008: €9.5 billion) placed it among the top 3 building materials companies worldwide. Insurance Group headquarters advises manage- ment on different aspects of risk and monitors overall safety and loss prevention performance; operational management is responsible for the day-to-day management of business risks. Insurance cover is held for all signiﬁcant insurable risks and against major catastrophe. For any such events, the Group generally bears an initial cost before external cover begins. Legal Proceedings Group companies are parties to various legal proceedings, including some in which claims for damages have been asserted against the companies. The ﬁnal outcome of all the legal proceedings to which Group companies are party cannot be accurately forecast. However, 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. Financial Risk Management The Board of Directors sets the treasury policies and objectives of the Group, which include controls over the procedures used to manage ﬁnancial market risks. These are set out in detail in note 21 to the ﬁnancial statements. Financing Activity In March 2009, the Group issued approximately 152 million new Ordinary Shares at €8.40 per share under the terms of a 2 for 7 Rights Issue. The total proceeds from this issue, net of expenses, amounted to €1.24 billion. In May 2009, as part of its ongoing ﬁnancing strategy, CRH completed its ﬁrst transaction in the Eurobond market with the successful issue of €750 million notes with a coupon of 7.375% and expiring in May 2014. This issue further enhances the Group’s debt maturity proﬁle. CRH 39 Board of Directors Above - left to right J.M.C. O’Connor* B.Soc. Sc., M.Soc. Sc., PhD T.V. Neill* MA, MSc (Econ.) K. McGowan* Chairman Joyce O’Connor became a non- executive Director in June 2004. She is the founder President and President Emeritus of the National College of Ireland. She currently chairs the Dublin Inner City Partnership. She is a Board member of the Government Task Force on Active Citizenship and an Eisenhower Fellow. She is former chair of the Digital Hub Development Agency, the Expert Group on Mental Health Policy, the National Career Guidance Forum and the Further Education and Training Awards Council (FETAC). (Aged 62). Terry Neill became a non-executive Director in January 2004. He was, until August 2001, Senior Partner in Accenture and had been Chairman of Accenture/Andersen Consulting’s global board. He is a member of the Court of Bank of Ireland and a director of United Business Media Limited. He is also a member of the Governing Body of the London Business School, where he is Chair of the Finance Committee, and of the Trinity Foundation Board. (Aged 64). Kieran McGowan became Chairman of CRH in 2007 having been a non-executive Director since 1998. He is a director of Elan Corporation plc and Charles Schwab Worldwide Funds plc. He was Chief Executive of IDA Ireland (Ireland’s inward investment promotion agency) from 1990 to 1998 and has served as President of the Irish Management Institute and as Chairman of the Governing Authority of University College Dublin. (Aged 66). M. Lee BE, FCA Chief Executive Myles Lee was appointed a CRH Board Director in November 2003. He joined CRH in 1982. Prior to this he worked in a professional accountancy practice and in the oil industry. He was appointed General Manager Finance in 1988 and to the position of Finance Director in November 2003. A civil engineer and chartered accountant, he has 28 years’ experience of the building materials industry and of CRH’s international expansion. He was appointed Group Chief Executive with effect from 1st January 2009. (Aged 56). J.M. de Jong* G.A. Culpepper CPA, BA, MBA Finance Director Jan Maarten de Jong became a non-executive Director in January 2004. A Dutch national, he is Vice Chairman of the Supervisory Board of Heineken N.V. He is a former member of the Managing Board of ABN Amro Bank N.V. and continued to be a Special Advisor to the board of that company until April 2006. He is also a director of a number of European banking, insurance and industrial holding companies, including AON Groep Nederland B.V. and KBC Bank N.V. (Aged 64). Glenn Culpepper was appointed Finance Director and became a CRH Board Director in January 2009. A United States citizen, he joined CRH in 1989. From 1995 to 2008 he served as Chief Financial Ofﬁcer of Oldcastle Materials. Prior to that he held a variety of operational, development and ﬁnancial roles in the Group’s United States operations. He started his career with a leading international accountancy practice. (Aged 53). J.W. Kennedy* M.Sc, BE, C.Eng, FIEE N. Hartery* CEng, FIEI, MBA John Kennedy became a non- executive Director in June 2009. He is Chairman of Wellstream Holdings plc, a company in the energy services ﬁeld. In a 30 year career, he has served as Executive Vice President of Halliburton Company, President of Dresser Enterprises and Chief Operations Ofﬁcer of Brown and Root Services. He is a director of the UK Atomic Energy Authority, Integra Group and is non-executive Chairman of Maxwell Drummond International Limited, Hydrasun Holdings Limited, Welltec A/S and BiFold Fluid Power Limited. (Aged 59). Nicky Hartery became a non- executive Director in June 2004. He was, until October 2008, Vice President of Manufacturing, Business Operations and Customer Experience for Dell Europe, the Middle East and Africa. Prior to joining Dell, he was Executive Vice President at Eastman Kodak and previously held the position of President and CEO at Verbatim Corporation, based in the United States. He is a director of Musgrave Group plc and the Target Account Selling Group Limited and a former director of Eircom Limited. (Aged 58). 40 CRH U-H. Felcht* W.P. Egan* Board Committees Inset – top and bottom W.I. O’Mahony* BE, BL, MBA, FIEI Liam O’Mahony joined CRH in 1971 and was appointed a Board Director in 1992. He held various senior management positions in the Group, including Managing Director, Republic of Ireland and UK Group companies, Chief Executive of American operations and Group Chief Executive. He retired as an executive at the end of 2008 and continued as a Board member in a non-executive capacity. He is Chairman of Smurﬁt Kappa Group plc and IDA Ireland, a director of Project Management Limited and a member of The Irish Management Institute Council. (Aged 63). Utz-Hellmuth Felcht became a non-executive Director in July 2007. A German national, he was, until May 2006, Chief Executive of Degussa AG, Germany’s third largest chemical company. He is a partner in the private equity group One Equity Partners Europe GmbH and a member of the Supervisory Boards of Jungbunzlauer Holding AG and Süd-Chemie Aktiengesellschaft. (Aged 62). Bill Egan became a non-executive Director in January 2007. A United States citizen, he is founder and General Partner of Alta Communications and Marion Equity Partners LLC, Massachusetts-based venture capital ﬁrms. He is a director of Cephalon, Inc. and the Irish venture capital company Delta Partners Limited. He also serves on the boards of several communications, cable and information technology companies. He is Past President and Chairman of the National Venture Capital Association. (Aged 64). M.S. Towe Chief Executive Ofﬁcer, Oldcastle, Inc. A. Manifold FCPA, MBA, MBS Chief Operating Ofﬁcer D.N. O’Connor* BComm, FCA Mark Towe was appointed a CRH Board Director with effect from 31st July 2008. A United States citizen, he joined CRH in 1997. In 2000, he was appointed President of Oldcastle Materials, Inc. and became the Chief Executive Ofﬁcer of this Division in 2006. He was appointed to his current position of Chief Executive Ofﬁcer of Oldcastle, Inc. in July 2008. With 36 years of experience in the building materials industry, he has overall responsibility for the Group’s aggregates, asphalt and readymixed concrete operations in the United States and its products and distribution businesses in the Americas. (Aged 60). Dan O’Connor became a non- executive Director in June 2006. He was, until March 2006, President and Chief Executive Ofﬁcer of GE Consumer Finance - Europe and a Senior Vice President of GE. He is Executive Chairman of Allied Irish Banks plc. (Aged 50). Albert Manifold was appointed Chief Operating Ofﬁcer of CRH and to the CRH Board in January 2009. He joined CRH in 1998. Prior to joining CRH he was Chief Operating Ofﬁcer with a private equity group. He has held a variety of senior positions, including Finance Director of the Europe Materials Division and Group Development Director of CRH. Prior to his current appointment, he was Managing Director, Europe Materials. (Aged 47). *Non-executive Acquisitions K. McGowan, Chairman G.A. Culpepper M. Lee A. Manifold T.V. Neill D.N. O’Connor W.I. O’Mahony Audit J.M. de Jong, Chairman** U-H. Felcht D.N. O’Connor** J.M.C. O’Connor Finance K. McGowan, Chairman G.A. Culpepper U-H. Felcht M. Lee W.I. O’Mahony Nomination K. McGowan, Chairman W.P. Egan N. Hartery J.W. Kennedy M. Lee T.V. Neill Remuneration T.V. Neill, Chairman W.P. Egan N. Hartery J.W. Kennedy K. McGowan Senior Independent Director N. Hartery **Audit Committee Financial Expert CRH 41 Corporate Governance Report CRH has primary listings on the Irish and London Stock Exchanges and its American Depository Receipts are listed on the New York Stock Exchange (NYSE). The Directors are committed to maintaining the highest standards of corporate governance and this statement describes how CRH applies the main and supporting principles of section 1 of the Combined Code on Corporate Governance (June 2008) published by the Financial Reporting Council in the UK. A copy of the Combined Code can be obtained from the Financial Reporting Council’s website, www.frc.org.uk. Board of Directors Role The Board is responsible for the leadership and control of the Company. There is a formal schedule of matters reserved to the Board for consideration and decision. This includes Board appointments, approval of strategic plans for the Group, approval of ﬁnancial statements, the annual budget, major acquisitions and signiﬁcant capital expenditure, and review of the Group’s system of internal controls. The Board has delegated responsibility for the management of the Group, through the Chief Executive, to executive management. The roles of Chairman and Chief Executive are not combined and there is a clear division of responsibilities between them, which is set out in writing and has been approved by the Board. The Chief Executive is accountable to the Board for all authority delegated to executive management. The Board has also delegated some of its responsibilities to Committees of the Board. Individual Directors may seek independent professional advice, at the expense of the Company, in the furtherance of their duties as a Director. The Group has a Directors’ and Ofﬁcers’ liability insurance policy in place, which indemniﬁes the Directors in respect of legal action taken against them. Membership It is the practice of CRH that a majority of the Board comprises non-executive Directors and that the Chairman be non-executive. At present, there are four executive and ten non-executive Directors. Biographical details are set out on pages 40 and 41. The Board considers that, between them, the Directors bring the range of skills, knowledge and experience, including international experience, necessary to lead the Company. Directors are appointed for speciﬁed terms and subject to the Memorandum and Articles of Association of the Company. Independence All of the Directors bring independent judgement to bear on issues of strategy, performance, resources, key appointments and standards, and the Board has determined that each of the non-executive Directors is independent. In reaching that conclusion, the Board has considered the principles relating to independence contained in the Combined Code, the guidance provided by a number of shareholder voting agencies, and has taken the view that independence is determined by a Director’s character, objectivity and integrity. Those principles and guidance address a number of factors that might appear to affect the independence of Directors, including former service as an executive, extended service on the Board and cross-directorships. However, they also make clear that a Director may be considered independent notwithstanding the presence of one or more of these factors. In the case of Mr. Liam O’Mahony, the Board took account of his service as a former executive of the Company and was satisﬁed that this did not compromise his ability to exercise independent judgement and to act in the best interests of the Group. Chairman Mr. Kieran McGowan has been Chairman of the Group since May 2007. On his appointment as Chairman, Mr. McGowan met the independence criteria set out in the Combined Code. The Chairman is responsible for the efﬁcient and effective working of the Board. He ensures that Board agendas cover the key strategic 42 CRH issues confronting the Group; that the Board reviews and approves management’s plans for the Group; and that Directors receive accurate, timely, clear and relevant information. While Mr. McGowan holds a number of other directorships (see details on page 40), the Board considers that these do not interfere with the discharge of his duties to CRH. Senior Independent Director The Board has appointed Mr. Nicky Hartery as the Senior Independent Director. Mr. Hartery is available to shareholders who have concerns that cannot be addressed through the Chairman, Chief Executive or Finance Director. Company Secretary The appointment and removal of the Company Secretary is a matter for the Board. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures are complied with. Terms of appointment The standard terms of the letter of appointment of non-executive Directors is available, on request, from the Company Secretary. Induction and development New Directors are provided with extensive brieﬁng materials on the Group and its operations. Directors meet with key executives and, in the course of twice-yearly visits by the Board to Group locations, see the businesses at ﬁrst hand and meet with local management teams. Remuneration Details of remuneration paid to the Directors (executive and non-executive) are set out in the Report on Directors’ Remuneration on pages 51 to 59. The 2009 Report will be presented to shareholders for the purposes of an advisory non- binding vote at the Annual General Meeting to be held on 5th May 2010. Share ownership and dealing Details of the shares held by Directors are set out on page 59. CRH has a policy on dealings in securities that applies to Directors and senior management. Under the policy, Directors are required to obtain clearance from the Chairman and Chief Executive before dealing in CRH securities. Directors and senior management are prohibited from dealing in CRH securities during designated prohibited periods and at any time at which the individual is in possession of inside information (as deﬁned in the Market Abuse (Directive 2003/6/EC) Regulations 2005). The policy adopts the terms of the Model Code, as set out in the Listing Rules published by the Irish Stock Exchange and the UK Listing Authority. Performance appraisal The Senior Independent Director conducts an annual review of corporate governance, the operation and performance of the Board and its Committees and the performance of the Chairman. This is achieved through discussion with each Director. A review of individual Directors’ performance is conducted by the Chairman and each Director is provided with feedback gathered from other members of the Board. Performance is assessed against a number of measures, including the ability of the Director to contribute to the development of strategy, to understand the major risks affecting the Group, to contribute to the cohesion of the Board, to commit the time required to fulﬁl the role and to listen to and respect the views of other Directors and the management team. Directors’ retirement and re-election The Board has determined that a non-executive Director who has served on the Board for more than nine years, or who has been a former executive of the Company, will be subject to annual re-election. At least one-third of Directors retire at each Annual General Meeting and Directors must submit themselves to shareholders for re-election every three years. Re-appointment is not automatic. Directors who are seeking re-election are subject to a performance appraisal, which is overseen by the Nomination Committee. Directors appointed by the Board must submit themselves to shareholders for election at the Annual General Meeting following their appointment. Board succession planning The Board plans for its own succession with the assistance of the Nomination Committee. In so doing, the Board considers the skill, knowledge and experience necessary to allow it to meet the strategic vision for the Group. The Board engages the services of independent consultants to undertake a search for suitable candidates to serve as non-executive Directors. Meetings There were eight full meetings of the Board during 2009. Details of Directors’ attendance at those meetings are set out in the table on page 46. The Chairman sets the agenda for each meeting, in consultation with the Chief Executive and Company Secretary. Two visits are made each year by the Board to Group operations; one in Europe and one in North America. Each visit lasts between three and ﬁve days and incorporates a scheduled Board meeting. In 2009, these visits were to Finland and to Tampa, Florida in the United States. Additional meetings, to consider speciﬁc matters, are held when and if required. Board papers are circulated to Directors in advance of meetings. The non-executive Directors met twice during 2009 without executives being present. Committees The Board has established ﬁve permanent Committees to assist in the execution of its responsibilities. These are the Acquisitions Committee, the Audit Committee, the Finance Committee, the Nomination Committee and the Remuneration Committee. Ad hoc committees are formed from time to time to deal with speciﬁc matters. Each of the permanent Committees has terms of reference, under which authority is delegated to them by the Board. The terms of reference are available on the Group’s website, www.crh.com. The Chairman of each Committee reports to the Board on its deliberations and minutes of all Committee meetings are circulated to all Directors. The current membership of each Committee is set out on page 41. Attendance at meetings held in 2009 is set out in the table on page 46. Chairmen of the Committees attend the Annual General Meeting and are available to answer questions from shareholders. During the year each of the relevant Committees reviewed its performance and terms of reference. The role of the Acquisitions Committee is to approve acquisitions and capital expenditure projects within limits agreed by the Board. The Audit Committee consists of four non-executive Directors, considered by the Board to be independent. The Board has determined that Mr. Jan Maarten de Jong and Mr. Dan O’Connor are the Committee’s ﬁnancial experts. It will be seen from the Directors’ biographical details, appearing on pages 40 and 41, that the members of the Committee bring to it a wide range of experience and expertise. The Committee met 14 times during the year under review. The Finance Director and the Head of Internal Audit normally attend meetings of the Committee, while the Chief Executive and other executive Directors attend when necessary. The external auditors attend as required and have direct access to the Committee Chairman at all times. During the year, the Committee met with the Head of Internal Audit and with the external auditors in the absence of management. The main role and responsibilities are set out in written terms of reference and include: # monitoring the integrity of the Group’s ﬁnancial statements and reviewing signiﬁcant ﬁnancial reporting issues and judgements contained therein; # reviewing the effectiveness of the Group’s internal ﬁnancial controls; CRH 43 Corporate Governance Report continued # monitoring and reviewing the effectiveness of the Group’s internal auditors; # making recommendations to the Board on the appointment and removal of the external auditors and approving their remuneration and terms of engagement; # seeking to ensure co-ordination of the work of the external auditors with the activities of the internal audit function; # monitoring and reviewing the external auditors’ independence, objectivity and effectiveness, taking into account professional and regulatory requirements; and # reviewing the Company’s procedures for detecting fraud. These responsibilities are discharged as follows: # the Committee reviews the trading statements usually issued by the Company in January and July and the interim management statements issued in May and November; # the Committee reviews the Company’s preliminary results announcement/ Annual Report and accounts. The Committee receives reports at that meeting from the external auditors identifying any accounting or judgemental issues requiring its attention; # the Committee also meets with the external auditors to review the Annual Report on Form 20-F, which is ﬁled annually with the United States Securities and Exchange Commission; # in August, the Committee reviews the interim report; # the external auditors present their audit plans in advance to the Committee and the Committee reviews the audit engagement letter; # the Committee approves the annual internal audit plan; Ernst & Young have been the Group’s auditors since 1988. Following an evaluation carried out in 2009, the Committee has recommended to the Board that Ernst & Young be retained as the Group’s external auditors. There are no contractual obligations which act to restrict the Audit Committee’s choice of external auditor. The Committee has put in place safeguards to ensure that the independence of the audit is not compromised. Such safeguards include: # seeking conﬁrmation that the auditors are, in their professional judgement, independent from the Group; # obtaining from the external auditors an account of all relationships between the auditors and the Group; # monitoring the Group’s policy prohibiting the employment of former staff of the external auditors, who were part of the CRH audit team, in senior management positions until two years have elapsed since the completion of the audit, monitoring the number of former employees of the external auditors currently employed in senior positions in the Group and assessing whether those appointments impair, or appear to impair, the auditors’ judgement or independence; # considering whether, taken as a whole, the various relationships between the Group and the external auditors impair, or appear to impair, the auditors’ judgement or independence; and # reviewing the economic importance of the Group to the external auditors and assessing whether that importance impairs, or appears to impair, the external auditors’ judgement or independence. The Group has a policy governing the conduct of non-audit work by the auditors. Under that policy, the auditors are prohibited from performing services where the auditors: # regular reports are received from the Head of Internal Audit on reviews # may be required to audit their own work; carried out; # the Head of Internal Audit also reports to the Committee on other issues including, in the year under review, updates in relation to Section 404 of the Sarbanes-Oxley Act 2002 and the arrangements in place to enable employees to raise concerns, in conﬁdence, in relation to possible wrongdoing in ﬁnancial reporting or other matters. (A copy of Section 404 of the Sarbanes-Oxley Act 2002 can be obtained from the United States Securities and Exchange Commission’s website, www.sec.gov); and # the Committee receives copies of periodic assessments of the Internal Audit function, which are carried out by management and validated by an independent third party assessor, and receives updates on the status of the implementation of any resulting recommendations. In trading and interim management statements issued during 2009 and to date in 2010, updates on the annualised savings under Group cost-reduction programmes were announced. The Head of Internal Audit was asked to review these savings and related costs to implement, and has reported his ﬁndings to the Committee. As noted above, one of the duties of the Audit Committee is to make recommendations to the Board in relation to the appointment of the external auditors. A number of factors are taken into account by the Committee in assessing whether to recommend the auditors for re-appointment or to seek other competitive bids for the audit. These include: # the quality of reports provided to the Audit Committee and the Board, and the quality of advice given; # participate in activities that would normally be undertaken by management; # are remunerated through a ‘success fee’ structure, where success is dependent on the audit; or # act in an advocacy role for the Group. Other than the above, the Group does not impose an automatic ban on the Group auditors undertaking non-audit work. The auditors are permitted to provide non-audit services that are not, or are not perceived to be, in conﬂict with auditor independence, providing they have the skill, competence and integrity to carry out the work and are considered by the Committee to be the most appropriate to undertake such work in the best interests of the Group. The engagement of the external auditors to provide any non-audit services must be pre-approved by the Audit Committee or entered into pursuant to pre-approval policies and procedures established by the Committee. The Group audit engagement partner rotates every ﬁve years. Details of the amounts paid to the external auditors during the year for audit and other services are set out in note 4 to the ﬁnancial statements on page 76. The Terms of Reference of the Audit Committee are reviewed annually. They were updated in December 2009 in relation to membership of the Committee, fraud detection, extending the Committee’s responsibilities in overseeing the relationship with the external auditor and in respect of other minor amendments. The Finance Committee, which advises the Board on the ﬁnancial requirements of the Group and on appropriate funding arrangements: # considers and makes recommendations to the Board in relation to the issue of # the level of understanding demonstrated of the Group’s business and industry; shares/debt instruments, share/bond buy-backs and bank ﬁnancing; # the objectivity of the auditors’ views on the ﬁnancial controls around the Group and their ability to co-ordinate a global audit, working to tight deadlines; and # the results of formal evaluations of the auditors, which the Audit Committee has decided should be carried out every ﬁve years with periodic interim reviews. # considers and makes recommendations to the Board in relation to dividend levels on the Ordinary Shares; # keeps the Board advised of the ﬁnancial implications of Board decisions in relation to acquisitions; and 44 CRH # assists management, at their request, in considering any ﬁnancial (including taxation) aspect of the Group’s affairs. Substantial Holdings The Nomination Committee assists the Board in ensuring that the composition of the Board and its Committee is appropriate to the needs of the Group by: As at 1st March 2010, the Company had received notiﬁcation of the following interests in its Ordinary share capital: # assessing the skills, knowledge, experience and diversity required on the Name Holding/Voting Rights % Board and the extent to which each are represented; # establishing processes for the identiﬁcation of suitable candidates for appointment to the Board; and # overseeing succession planning for the Board and senior management. To facilitate the search for suitable candidates to serve as non-executive Directors, the Committee uses the services of independent consultants. During 2009, the Committee identiﬁed, and recommended to the Board, a suitable candidate for appointment as a non-executive Director. The Terms of Reference of the Nomination Committee, which were updated in December 2009 in relation to membership of the Committee, are reviewed annually. The Remuneration Committee, which consists solely of non-executive Directors considered by the Board to be independent: # determines the Group’s policy on executive remuneration; # determines the remuneration of the executive Directors; # monitors the level and structure of remuneration for senior management; and # reviews and approves the design of all share incentive plans. The Committee receives advice from leading independent ﬁrms of compensation and beneﬁt consultants when necessary and the Chief Executive is fully consulted about remuneration proposals. The Committee oversees the preparation of the Report on Directors’ Remuneration. In 2009, the Committee determined the salaries of the executive Directors and awards under the performance-related incentive plans; approved the terms of a long-term incentive plan (2009-2013) for the Chief Executive; set the remuneration of the Chairman; and reviewed the remuneration of senior management. It also approved the award of share options to the executive Directors and key management and the conditional allocation of shares under the Performance Share Plan. In addition, the Committee approved the partial release of awards made under the Performance Share Plan in 2006. Details of the factors taken into account when assessing the level of vesting under the Performance Share Plan are set out in the Report on Directors’ Remuneration on page 51. Also in 2009, the Committee, with the assistance of external advisers, undertook a review of the Company’s compensation arrangements for executive Directors and senior managers. Further commentary on this review is contained in the Report on Directors’ Remuneration on page 52. The Terms of Reference of the Remuneration Committee, which were updated in February 2010 in relation to membership of the Committee, are reviewed annually. Corporate Social Responsibility Corporate Social Responsibility is embedded in all CRH operations and activities. Excellence in environmental, health, safety and social performance is a daily key priority of line management. Group policies and implementation systems are summarised on page 10 and are described in detail in the CSR Report on the Group’s website, www.crh.com. During 2009, CRH was again recognised by several key rating agencies as being among the leaders in its sector in respect of sustainability performance. Code of Business Conduct The CRH Code of Business Conduct is applicable to all Group employees. The Code is available on the Group’s website, www.crh.com. Regional hotline facilities are in place, to enable employees to report suspected breaches of the Code. Capital Research and Management Company (CRMC)* UBS AG BlackRock, Inc. 84,225,434 12.06% 26,380,604 3.77% 24,701,820 3.53% * On 7th January 2010, The Growth Fund of America, Inc. (GFA) advised the Company that, with effect from 1st January 2010, it no longer exercised voting rights in respect of its holding of 30,131,457 shares (4.31%). CRMC has separately advised that, with effect from 1st January 2010, it has been granted proxy voting authority by various Capital Group funds, including GFA, that previously voted independently from CRMC. On 3rd February 2010, Capital Group International, Inc., which notiﬁes its holding independently of CRMC, notiﬁed the Company that its interest in the Company had fallen below 3%. On 22nd July 2009, Irish Life Investment Managers notiﬁed the Company that its interest in the Company had fallen below 3%. On 30th April 2009, Bank of Ireland Asset Management Limited notiﬁed the Company that its interest in the Company had fallen below 3%. On 14th April 2009, FMR LLC (Fidelity North America)(FMR) and FIL Limited Fidelity (Fidelity Asia Paciﬁc, Europe and the Middle East)(FIL), which previously advised their shareholding in a joint notiﬁcation, informed the Company that their holdings had been disaggregated and would be notiﬁed separately in future. FMR notiﬁed that its holding on 14th April 2009 was 16,081,428 shares (2.30%), while FIL notiﬁed that its holding was 15,405,831 shares (2.20%). 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. 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 re- issued; 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. Further details in relation to the purchase of the Company’s own shares are included on page 49 of the Directors’ Report. A copy of the Memorandum and Articles of Association can be obtained from the Group’s website, www.crh.com. Communications with Shareholders Communications with shareholders are given high priority and there is regular dialogue with institutional shareholders, as well as presentations at the time of the release of the annual and interim results. Conference calls are held following the issuance of trading statements, interim management statements and major announcements by the Group, which afford Directors the opportunity to hear investors’ reactions to the announcements and their views on other issues. Trading statements are usually issued in January and July and interim management statements are issued in May and November. Major acquisitions are notiﬁed to the Stock Exchanges in accordance with the requirements of the Listing Rules. In addition, development updates, giving details of other acquisitions completed and major capital expenditure projects, are usually issued in January and July each year. CRH 45 Corporate Governance Report continued Attendance at Board and Board Committee meetings during the year ended 31st December 2009 Board Acquisitions Audit Finance Nomination Remuneration G.A. Culpepper W.P. Egan U-H. Felcht N. Hartery J.M. de Jong J.W. Kennedy* M. Lee K. McGowan A. Manifold T.V. Neill D.N. O’Connor J.M.C. O’Connor W.I. O’Mahony M.S. Towe A B 8 8 8 8 8 4 8 8 8 8 8 8 8 8 8 8 8 8 8 4 8 8 8 8 7 8 8 8 A 1 B 1 1 1 1 1 1 1 1 1 1 - - 1 A B A B A B A B 14 12 14 14 5 14 14 5 12 14 5 6 6 6 5 5 6 6 6 5 4 4 1 4 4 4 4 3 1 4 4 4 8 8 2 8 8 8 8 2 8 8 Column A – indicates the number of meetings held during the period the Director was a member of the Board and/or Committee. Column B – indicates the number of meetings attended during the period the Director was a member of the Board and/or Committee. * Appointed on 24th June 2009 During 2009, the Board received reports from management on the issues raised by investors in the course of presentations following the annual and interim results. The Group’s website, www.crh.com, provides the full text of the Annual and Interim Reports, the Annual Report on Form 20-F, which is ﬁled annually with the United States Securities and Exchange Commission, the CSR Report, trading statements, interim management statements and copies of presentations to analysts and investors. News releases are made available in the News & Media section of the website immediately after release to the Stock Exchanges. Webcasts of key investor brieﬁngs are broadcast live and are made available as recordings in the News & Media section. In addition, the Company responds throughout the year to numerous letters from shareholders on a wide range of issues. 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 2009 AGM. The Notice of the AGM, which speciﬁes the time, date, place and the business to be transacted, is sent to shareholders at least twenty working days before the meeting. At the meeting, resolutions are voted on by means of 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 must be called by at least twenty- one clear days’ notice. Provided shareholders have passed a special resolution at the immediately preceding AGM and the Company continues to allow shareholders to vote by electronic means, an EGM to consider an ordinary resolution may, if the Directors deem it appropriate, be called at fourteen 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 general 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 a proxy/proxies, by electronic means or in writing, 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. 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. The Group’s website, www.crh.com, contains answers to questions frequently asked by shareholders, including questions regarding shareholder rights in respect of general meetings. The FAQ can be accessed in the Investor Relations section of the website under ‘Shareholder Services’. Internal Control The Directors have overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The Directors conﬁrm that the Group’s ongoing process for identifying, evaluating and managing its signiﬁcant risks 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 46 CRH accounting period and up to the date of approval of the Annual Report and ﬁnancial statements and is regularly reviewed by the Board. 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 respective 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. The Board receives, on a regular basis, reports on the key risks to the business and the steps being taken to manage such risks. It considers whether the signiﬁcant risks faced by the Group are being identiﬁed, evaluated and appropriately managed, having regard to the balance of risk, cost and opportunity. In addition, the Audit Committee meets with internal auditors on a regular basis and satisﬁes itself as to the adequacy of the Group’s internal control system. The Audit Committee also meets with and receives reports from the external auditors. The Chairman of the Audit Committee reports to the Board on all signiﬁcant issues considered by the Committee and the minutes of its meetings are circulated to all Directors. The Directors conﬁrm that they have conducted an annual review of the effectiveness of the system of internal control up to and including the date of approval of the ﬁnancial statements. This had regard to the material risks that could affect the Group’s business (as outlined in the Directors’ Report on pages 48 and 49), the methods of managing those risks, the controls that are in place to contain them and the procedures to monitor them. 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 Chief Executive’s Review on pages 15 to 17. The ﬁnancial position of the Company, its cash ﬂows, liquidity position and borrowing facilities are described in the Finance Review on pages 36 to 39. In addition, notes 21 to 25 to the 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 risk and liquidity risk. The Company has considerable ﬁnancial resources and a large number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The Directors 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 ﬁnancial statements. Compliance In the period under review, CRH complied with the provisions set out in section 1 of the Combined Code. The Company also complied with the rules issued by the United States Securities and Exchange Commission to implement the Sarbanes- Oxley Act 2002, in so far as they apply to the Group. CRH 47 Directors’ Report The Directors submit their Report and Financial Statements for the year ended 31st December 2009. Accounts and Dividends Sales revenue for 2009 of €17.4 billion was 17% lower than 2008. Proﬁt before tax amounted to €732 million, a decrease of €896 million (55%) on the previous year. After providing for tax, Group proﬁt for the ﬁnancial year amounted to €598 million (2008: €1,262 million). Basic earnings per share amounted to 88.3c compared with 210.2c (restated for the impact of the March 2009 Rights Issue) in the previous year, a reduction of 58%. An interim dividend of 18.5c (2008: 18.48c, restated) per share was paid in October 2009. It is proposed to pay a ﬁnal dividend of 44.0c per share on 10th May 2010 to shareholders registered at close of business on 12th March 2010. This gives a total dividend of 62.5c for the year, slightly ahead of the restated dividend of 62.2c for 2008. Shareholders will have the option of receiving new shares in lieu of cash dividends. Other net expense recognised directly within comprehensive income in the year amounted to €130 million (2008: €402 million). Some key ﬁnancial performance indicators are set out in the Finance Review on pages 36 to 39. The ﬁnancial statements for the year ended 31st December 2009 are set out in detail on pages 62 to 119. Books and Records The Directors are responsible for ensuring that proper books and accounting records, as outlined in Section 202 of the Companies Act, 1990, are kept by the Company. The Directors have appointed appropriate accounting personnel, including a professionally qualiﬁed Finance Director, in order to ensure that those requirements are met. The books and accounting records of the Company are maintained at the principal executive ofﬁces located at Belgard Castle, Clondalkin, Dublin 22. Business Review Development activity Acquisition and investment spend in 2009 amounted to approximately €0.46 billion on a total of 17 transactions. This included the €224 million purchase of a 26% associate stake in Yatai Cement, the leading cement manufacturer in northeastern China. The remaining transactions comprised ten bolt-on acquisitions in the Americas Materials business, four investments in China and Poland by the Europe Materials Division and one acquisition in each of our two Distribution segments. Results for 2009 Trading in the ﬁrst half of 2009 proved extremely demanding with most markets impacted by weakening economic activity, not helped by the most severe weather for many years in both Europe and North America. Reported sales for the ﬁrst half of 2009 declined by 15% (21% excluding acquisition and exchange translation effects), EBITDA fell 41% and operating proﬁt and proﬁt before tax were down 66% and 82% respectively. While conditions in the second half of 2009 remained challenging, a robust performance by the Americas Materials Division combined with increasing beneﬁts from cost reduction measures resulted in improvements in the rate of proﬁt decline compared to the ﬁrst half of the year. Second half sales fell by 19% (18% excluding acquisition and translation effects), while EBITDA declined by 26% with operating proﬁt down 37% and proﬁt before tax 39% lower than the second half of 2009. Full year operating proﬁt for the Group declined by 48% in 2009 to €955 million. In CRH’s European segments operating proﬁt declined by €539 million to €510 million, a decrease of 51%. In the Americas, operating proﬁt declined by €347 million (-44%) to €445 million; this decline is net of the positive €37 million exchange impact as a result of the stronger average US Dollar/euro in 2009, and 48 CRH in US Dollar terms operating proﬁt declined 47%. Overall operating proﬁt margin for the Group decreased to 5.5% (2008: 8.8%). Proﬁt on disposal of non-current assets at €26 million was well below 2008 (€69 million). Comprehensive reviews of the development and ﬁnancial and operating performance of the Group during 2009 are set out in the Chief Executive’s Review on pages 15 to 17, the separate Operations Reviews for each of the Divisions on pages 19 to 35 and the Finance Review on pages 36 to 39 (including Key Financial Performance Indicators on page 37). The treasury policy and objectives of the Group are set out in note 21 to the ﬁnancial statements. The Group is fully committed to operating ethically and responsibly in all aspects of our business relating to employees, customers, neighbours and other stakeholders. The Corporate Social Responsibility (CSR) Report available on the Group’s website, www.crh.com, sets out CRH’s policies and performance relating to the Environment and Climate Change, Health & Safety and Social & Community matters. Future development Management remains ﬁrmly concentrated on operational delivery and development activity continues to be focussed on acquisition opportunities that offer compelling value and exceptional strategic ﬁt. The Group remains very well positioned to take advantage of further appropriate development prospects and we continue to pursue opportunities in CRH’s traditional rigorous and disciplined manner. Events since ﬁnancial year-end No important events have occurred since the end of the ﬁnancial year which would have a material effect on the Group’s results for the year ended 31st December 2009 or on its ﬁnancial position at that date, or which would have a signiﬁcant impact on the Group’s operations or outlook for 2010. Outlook 2010 We expect a difﬁcult demand backdrop through much of 2010 with continuing declines in non-residential activity across our markets not helped by a poor start to the year as a result of prolonged severe weather in Europe and North America during January and February. In Europe concerns remain relating to ﬁscal deﬁcits in a number of countries, although some markets have proved resilient. In Poland, which has weathered the economic downturn better than many other European countries, our operations are well-placed to beneﬁt from infrastructure-driven growth in 2010. In the United States, recent data releases on residential construction activity have been below expectations and the likely timing of recovery in US residential activity remains unclear. On infrastructure, the extension of the SAFETEA-LU Federal Highway funding programme is currently the subject of intense debate in the US Senate and House of Representatives with progress anticipated over the next 10 days. Recent euro-weakness and the relative strengthening of the Polish Zloty and US Dollar compared with 2009 will, if maintained, be beneﬁcial in 2010. The signiﬁcant adjustments to our cost base achieved over the past three years and our ongoing restructuring measures, together with our substantial balance sheet capacity, have strengthened the Group operationally and position CRH well to respond to upside demand developments and to avail of value-enhancing acquisition opportunities as these arise across our markets. Principal Risks and Uncertainties Under Irish Company law (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 principal risks are set out below: # Current global economic conditions have negatively impacted and may continue to impact CRH’s business, results of operations and ﬁnancial condition. # CRH may suffer from decreased customer demand as a consequence of reduced construction activity. # CRH’s business may be affected by the default of counterparties in respect of money owed to CRH. # CRH operates in cyclical industries which are affected by factors beyond Group control such as the level of construction activity, fuel and raw material prices, which are in turn affected by the performance of national economies, the implementation of economic policies by sovereign governments and political developments. # CRH pursues a strategy of growth through acquisitions. CRH may not be able to continue to grow as contemplated in its business plan if it is unable to identify attractive targets, raise funds on acceptable terms, complete such acquisition transactions and integrate the operations of the acquired businesses. # CRH faces strong competition in its various markets, and if CRH fails to compete successfully, market share will decline. # Existing products may be replaced by substitute products which CRH does not produce and, as a result, CRH may lose market share in the markets for these products. # Severe weather can reduce construction activity and lead to a decrease in demand for Group products in areas affected by adverse weather conditions. # CRH is subject to stringent and evolving environmental and health and safety laws, regulations and standards which could result in costs related to compliance and remediation efforts that may adversely affect Group results of operations and ﬁnancial condition. # CRH may be adversely affected by governmental regulations. # Economic, political and local business risks associated with international revenue and operations could adversely affect CRH’s business. # A write-down of goodwill could have a signiﬁcant impact on the Group’s income and equity. # CRH does not have a controlling interest in certain of the businesses in which it has invested and in the future may invest in businesses in which there will not be a controlling interest. In addition, CRH is subject to restrictions due to minority interests in certain of its subsidiaries. # Financial institution failures may cause CRH to incur increased expenses or make it more difﬁcult either to utilise CRH’s existing debt capacity or otherwise obtain ﬁnancing for CRH’s operations or ﬁnancing activities. # A downgrade of CRH’s credit ratings may increase its costs of funding. # CRH has incurred and will continue to incur debt, which could result in increased ﬁnancing costs and could constrain CRH’s business activities. # Many of CRH’s subsidiaries operate in currencies other than the euro, and adverse changes in foreign exchange rates relative to the euro could adversely affect Group reported earnings and cash ﬂow. The Board has decided that a non-executive Director who has previously served in an executive capacity will be subject to annual re-election. Accordingly, Mr. W.I. O’Mahony retires and, being eligible, offers himself for re-election. Mr. J.W. Kennedy was appointed to the Board on 24th June 2009. In accordance with the provisions of Article 110, he retires and, being eligible, offers himself for re-election. Disapplication of Pre-emption Rights A special resolution will be proposed at the Annual General Meeting to renew the Directors’ authority to disapply statutory pre-emption rights in relation to allotments of shares for cash. In respect of allotments other than for rights issues to ordinary shareholders and employees’ share schemes, the authority is limited to Ordinary/Income Shares (excluding Treasury Shares) having a nominal value of €11,868,000, representing 5% approximately of the issued Ordinary/Income share capital at 1st March 2010. This authority will expire on the earlier of the date of the Annual General Meeting in 2011 or 4th August 2011. Purchase of Own Shares On 3rd January 2008, the Company announced the introduction of a share repurchase programme of up to 5% of the 547,227,194 Ordinary/Income Shares, with a nominal value of €0.32/€0.02 respectively, then in issue and the intention to hold the repurchased shares as Treasury Shares. Under the programme, the termination of which was announced in November 2008, 18,204,355 Ordinary/ Income Shares were purchased, equivalent to 3.3% of the Ordinary Shares in issue at 31st December 2007, at an average price of €22.30 per share. During 2009, 3,864,805 (2008: 2,000,350) Treasury Shares were re-issued under the Group’s Share Schemes. As at 1st March 2010, 12,331,671 shares were held as Treasury Shares, equivalent to 1.77% of the Ordinary Shares in issue (excluding Treasury Shares). Special resolutions will be proposed at the Annual General Meeting 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 Annual General Meeting and in relation to the maximum and minimum prices at which Treasury Shares (effectively shares purchased and not cancelled) may be re-issued off- market by the Company. If granted, the authorities will expire on the earlier of the date of the Annual General Meeting in 2011 or 4th August 2011. 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 average market price of such shares over the preceding ﬁve days. As at 1st March 2010, options to subscribe for a total of 25,989,145 Ordinary/ Income Shares are outstanding, representing 3.72% of the issued Ordinary/ Income share capital (excluding Treasury Shares). If the authority to purchase Ordinary/Income Shares was used in full, the options would represent 4.14%. 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. # CRH is exposed to interest rate ﬂuctuations. Notice Period for Extraordinary General Meetings The Group has long experience of coping with these risks while delivering superior performance and strong Total Shareholder Return. Report on Directors’ Remuneration Resolution 3 to be proposed at the Annual General Meeting deals with the Report on Directors’ Remuneration, as set out on pages 51 to 59, which the Board has decided to present to shareholders for the purposes of a non-binding advisory vote. This is in line with international best practice and the Directors believe that the resolution will afford shareholders an opportunity to have a ‘say on pay’. Resolution 9 to be proposed at the Annual General Meeting is a special resolution, which seeks shareholders’ approval to maintain the existing authority in the Articles of Association that permits the Company to convene an extraordinary general meeting on 14 clear days’ notice where the purpose of the meeting is to consider an ordinary resolution. If approved, it is the intention of the Directors only to utilise this authority where they consider it to be in the best interests of the Company and its shareholders. Articles of Association Board of Directors Mr. T.V. Neill retires from the Board by rotation and does not seek re-election. Mr. U-H. Felcht and Mr. D.N. O’Connor retire from the Board by rotation and, being eligible, offer themselves for re-election. Resolution 12 to be proposed at the Annual General Meeting is a special resolution and seeks shareholders’ approval for certain changes to the Articles of Association. The proposed amendments set out in paragraphs (a) to (f) of the resolution will update the Articles and also make them consistent with the Shareholder Rights (Directive 2007/36/EC) Regulations 2009 by: CRH 49 to 35, the Finance Review on pages 36 to 39, the details of Earnings per Share on page 84, details of derivative ﬁnancial instruments in note 24, the details of the re-issue of Treasury Shares in note 30 and details of employees in note 6. The Directors conﬁrm that to the best of their knowledge, the annual report and the ﬁnancial statements give a true and fair view of the assets, liabilities, ﬁnancial position and the proﬁt and loss of the Company and the undertakings included in the consolidation. It also includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation, taken as a whole, together with a description of the principal risks and uncertainties that they face. Subsidiary, Joint Venture and Associated Undertakings The Group has over 1,100 subsidiary, joint venture and associated undertakings. The principal ones as at 31st December 2009 are listed on pages 124 to 129. Auditors The Auditors, Ernst & Young, Chartered Accountants, are willing to continue in ofﬁce and a resolution authorising the Directors to ﬁx their remuneration will be submitted to the Annual General Meeting. Annual General Meeting Your attention is drawn to the letter to shareholders and the Notice of Meeting enclosed with this report, which set out details of additional matters to be considered at the Annual General Meeting. On behalf of the Board, K. McGowan, M. Lee, Directors 1st March 2010 Directors’ Report continued # amending the deﬁnitions to reﬂect recent legislative changes; # allowing for the convening of shareholder meetings to consider an ordinary resolution at 14 days’ notice provided that the Company offers shareholders the facility to vote electronically and provided that shareholders agree to this at a general meeting. Shareholders’ consent must be sought by way of a special resolution. Any consent given is valid only up to the date of the next annual general meeting and must, therefore, be renewed every year; # requiring that, where a member wishes to table a draft resolution in respect of an extraordinary general meeting under Section 133(1)(b) of the Companies Act 1963, notice of the resolution shall be received by the Company in hardcopy form or in electronic form at least 14 days before the extraordinary general meeting to which it relates; # removing the casting vote of the Chairman at general meetings of the Company; # clarifying that shareholders need not vote all of their shares in the same way; # allowing the Directors to implement procedures for voting electronically or by correspondence and for the real-time transmission of general meetings via the internet; and # allowing for the ﬁxing of a record date and time which shall determine the eligibility of shareholders to participate and vote at general meetings. Paragraph (g) of Resolution 12 re-numbers the Articles of Association and all cross references therein to reﬂect the amendments provided for in paragraphs (a) to (f). Corporate Governance Statements by the Directors in relation to the Company’s appliance of corporate governance principles, compliance with the provisions of the Combined Code on Corporate Governance (June 2008), the Group’s system of internal controls and the adoption of the going concern basis in the preparation of the ﬁnancial statements are set out on pages 42 to 47. For the purpose of Statutory Instrument 450/2009 European Communities (Directive 2006/46) Regulations 2009, the Corporate Governance report is deemed to be incorporated in this part of the Directors’ Report. Details of the Company’s employee share schemes and capital structure can be found in notes 7 and 30 to the ﬁnancial statements on pages 78 to 80 and 109 to 111 respectively. Regulation 21 of SI 255/2006 EC (Takeover Directive) Regulations 2006 For the purpose of Regulation 21 of Statutory Instrument 255/2006 EC (Takeover Directive) Regulations 2006, the information on the Board of Directors on pages 40 and 41, share option schemes, savings-related share option schemes and the Performance Share Plan in note 7, share capital in note 30 and the Report on Directors’ Remuneration on pages 51 to 59 are deemed to be incorporated in this part of the Directors’ Report. The Company has certain banking facilities 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. SI 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007 For the purpose of Statutory Instrument 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007, the report on Corporate Social Responsibility as published on the CRH website is deemed to be incorporated in this part of the Directors’ Report, together with the following sections of the Annual Report: the Chairman’s Statement on pages 12 and 13, the Operations Reviews on pages 19 50 CRH Report on Directors’ Remuneration The Remuneration Committee The Remuneration Committee of the Board consists of non-executive Directors of the Company. The terms of reference for the Remuneration Committee are to determine the Group’s policy on executive remuneration and to consider and approve salaries and other terms of the remuneration packages for the executive Directors. The Committee receives advice from leading independent ﬁrms of compensation and beneﬁt consultants when necessary and the Chief Executive attends meetings except when his own remuneration is being discussed. Membership of the Remuneration Committee is set out on page 41. Performance-related incentive plan The performance-related incentive plan is totally based on achieving clearly deﬁned and stretch annual proﬁt targets and strategic goals with an approximate weighting of 80% for proﬁts and cash ﬂow generation and 20% for personal and strategic goals. At target performance, payout is 80% of basic salary for Europe-based participants and 90% of basic salary for US-based participants. A maximum payout of 1.5 times these levels is payable for a level of performance well in excess of target. Remuneration Policy CRH is an international group of companies, with activities in 35 countries. CRH’s policy on Directors’ remuneration is designed to attract and retain Directors of the highest calibre who can bring their experience and independent views to the policy, strategic decisions and governance of CRH. Executive Directors must be properly rewarded and motivated to perform in the best interest of the shareholders. The spread of the Group’s operations requires that the remuneration packages in place in each geographical area are appropriate and competitive for that area. In setting remuneration levels, the Remuneration Committee takes into consideration the remuneration practices of other international companies of similar size and scope and the EU Commission’s recommendations on remuneration in listed companies. The EU Commission’s recommendations were published in December 2004 in a document entitled “fostering an appropriate regime for the remuneration of the directors of listed companies” and those recommendations were supplemented by additional recommendations issued in 2009. The Remuneration Committee supports the general objectives of the EU’s recommendations and the broad issues they aim to address. This is reﬂected in the detailed disclosures in this Report in relation to the Group’s remuneration policy, the elements of executive Directors’ remuneration (including bonus structure, deferred bonus arrangements and share incentive plans), the collective and individual remuneration of Directors and pension entitlements. The Company believes that shareholders are entitled to have a ‘say on pay’ and, accordingly, at the 2010 Annual General Meeting, this Report will be presented to shareholders for the purposes of an advisory vote. A number of the EU Commission’s recommendations, some of which are the subject of on-going consideration at government level and in investment associations, have not been implemented by the Remuneration Committee. Those areas will continue to receive the Committee’s active consideration and their relevance and practicality in the business context in which CRH operates will be assessed. Performance-related rewards, based on measured targets, are a key component of remuneration. CRH’s strategy of fostering entrepreneurship in its regional companies requires well-designed incentive plans that reward the creation of shareholder value through organic and acquisitive growth. The typical elements of the remuneration package for executive Directors are basic salary and beneﬁts, a performance-related incentive plan, a contributory pension scheme and participation in the performance share and share option plans. It is policy to grant participation in these plans to key management to encourage identiﬁcation with shareholders’ interests and to create a community of interest among different regions and nationalities. The Group also operates share participation plans and savings-related share option schemes for eligible employees in all regions where the regulations permit the operation of such plans. In total there are approximately 7,300 employees of all categories who are shareholders in the Group. Executive Directors’ Remuneration Basic salary and beneﬁts The basic salaries of executive Directors are reviewed annually having regard to personal performance, company performance, step changes in responsibilities and competitive market practice in the area of operation. Employment-related beneﬁts relate principally to relocation costs, the use of company cars and medical/life assurance. No fees are payable to executive Directors. The four components of the plan are: (i) Individual performance (ii) Earnings per share growth targets (iii) Cash ﬂow generation targets (iv) Return on net assets targets. Up to one-third of the bonus in each year is payable in CRH shares and the entitlement to beneﬁcial ownership of the shares is deferred for a period of three years, with the individual not becoming beneﬁcially entitled to the shares in the event of departure from the Group in certain circumstances during that time period. In addition, the Chief Executive, Mr. M. Lee, has a special long-term incentive plan incorporating targets set for the ﬁve-year period 2009-2013. The plan incorporates challenging goals in respect of Total Shareholder Return by comparison with a peer group, growth in earnings per share and the strategic development of the Group, with a total maximum earnings potential of 40% of aggregate basic salary. While accruals are made on an annual basis, there is no commitment to any payment until the end of the period. Details of the manner in which the earnings are provided for under the plan are set out in note 2 to the table of Directors’ remuneration on page 53. Performance Share Plan/Share Option Scheme Long-term incentive plans involving conditional awards of shares are now a common part of executive remuneration packages, motivating high performance and aligning the interests of executives and shareholders. The Performance Share Plan (PSP) approved by shareholders in May 2006 is tied to Total Shareholder Return (TSR). Half of the award is assessed against TSR for a group of global building materials companies and the other half against TSR for the constituents of the Euroﬁrst 300 Index. The maximum award under the PSP is 150% of basic salary per annum in the form of conditional shares and the vesting period is three years. The awards lapse if over the three-year period CRH’s TSR is below the median of the peer group/ index; 30% of the award vests if CRH’s performance is equal to the median while 100% vests if CRH’s performance is equal to or greater than the 75th percentile; for TSR performance between the 50th and the 75th percentiles, between 30% and 100% of the award vests on a straight-line basis. When approved by shareholders in 2006, the Performance Share Plan incorporated an earnings per share (EPS) growth underpin of the Irish Consumer Price Index plus 5% per annum, a requirement of the Irish Association of Investment Managers (IAIM) at the time. During 2009, the IAIM advised that it did not regard this ﬁnancial test as an additional hurdle but rather as a mechanism to assist the Remuneration Committee in determining whether TSR reﬂected performance. Following discussion with the IAIM, the rules of the PSP were amended to delete the underpin requirement, substituting in its place the condition that no award, or portion of an award, which had satisﬁed the TSR performance criteria would be released unless the Remuneration Committee had conﬁrmed that the TSR outcome was valid and had not been signiﬁcantly affected by unusual events or extraneous factors. In addition, the Committee reviews EPS growth to assess its consistency with the objectives of the performance assessment, for example, comparing EPS performance with that of non-ﬁnancial companies listed on the Irish Stock Exchange. CRH 51 Report on Directors’ Remuneration continued Participants in the Plan are not entitled to any dividends (or other distributions made) and have no right to vote in respect of the shares subject to the award, until such time as the shares vest. Details of awards to Directors under the Plan are provided on page 56. Under the terms of the Share Option Scheme approved by shareholders in May 2000 (the 2000 Share Option Scheme), two tiers of options have been available subject to different performance conditions as set out below: (i) Exercisable only when EPS growth exceeds the growth of the Irish Consumer Price Index by 5% compounded over a period of at least three years subsequent to the granting of the options (Basic Tier). (ii) Exercisable, if over a period of at least ﬁve years subsequent to the granting of the options, the growth in EPS exceeds the growth of the Irish Consumer Price Index by 10% compounded and places the Company in the top 25% of EPS performance of a peer group of international building materials and other manufacturing companies. If below the 75th percentile, these options are not exercisable (Second Tier). With the introduction of the Performance Share Plan, the Remuneration Committee decided that no further Second Tier share options should be granted under the 2000 Share Option Scheme; however, Basic Tier options continued to be issued. Grants of share options were at the market price of the Company’s shares at the time of grant, and were made after the ﬁnal results announcement ensuring transparency. The percentage of share capital which can be issued under the Performance Share Plan and share option schemes, and individual share option grant limits, comply with institutional guidelines. Review of Compensation Arrangements/New Share Option Scheme During 2009, the Remuneration Committee carried out a review of senior executive remuneration, to ensure that the Company’s arrangements were aligned with CRH’s business strategy and remained competitive with the external marketplace. This followed a similar review in 2005, which led to amendments to the annual bonus plan and the introduction of the Performance Share Plan. The Committee concluded that no change was required to current remuneration arrangements. However, as the 2000 Share Option Scheme expires in May 2010, it is proposed to seek shareholder approval at the 2010 Annual General Meeting (AGM) for the introduction of a new share option scheme (the New Scheme). If approved, it is intended to grant options under the New Scheme following the AGM and thereafter, subject to satisfactory performance, to award options annually ensuring a smooth progression over the life of the New Scheme. The proposed New Scheme will be based on one tier of options with a single vesting test. The performance criteria for the scheme will be EPS-based. Vesting will only occur once an initial performance target has been reached and, thereafter, would be dependent on performance. In considering the level of vesting based on EPS performance, the Remuneration Committee will also consider the overall results of the Group. Performance targets for the initial grant of options have been agreed with the Irish Association of Investment Managers, who have approved the Scheme, and are as follows: # the option award lapses if EPS growth over the three year target period is less than 12.5% compounded over the period; # 20% of the option grant shall be exercisable if compound EPS growth is equal to 12.5%, while 100% shall be exercisable if compound EPS growth is equal to 27.5%; # subject to any reduction which the Remuneration Committee deems appropriate, options vest between 20% and 40% on a straight-line basis if compound growth is between 12.5% and 17.5%; and vest between 40% and 100% on a straight-line basis if compound growth is between 17.5% and 27.5%, which provides for proportionately more vesting for higher levels of EPS growth. 52 CRH The Remuneration Committee will have authority to set appropriate criteria for each subsequent grant. The Remuneration Committee believes that the introduction of the New Scheme will continue to closely align management with shareholder goals as well as fostering the attainment of superior performance and ensure that CRH can continue to recruit, retain and motivate high quality executives across its global areas of operation. A summary of the principal features of the New Scheme is included in the circular sent to all shareholders, which includes the Notice of the 2010 Annual General Meeting. Non-executive Directors’ Remuneration The remuneration of non-executive Directors, including that of the Chairman, is determined by the Board of Directors as a whole. In determining the remuneration, the Board receives recommendations from the Remuneration Committee in respect of the Chairman and from the executive Directors in respect of the remaining non-executive Directors. 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 their Board duties. They do not participate in any of the Company’s performance-related incentive plans or share schemes. Pensions Mr. Lee and Mr. Manifold are participants in a contributory deﬁned beneﬁt plan which is based on an accrual rate of 1/60th of pensionable salary for each year of pensionable service and is designed to provide two-thirds of salary at retirement for full service. There is provision for Mr. Lee and Mr. Manifold to retire at 60 years of age. The Finance Act 2006 established a cap on pension provision by introducing a penalty tax charge on pension assets in excess of the higher of €5 million or the value of individual accrued pension entitlements as at 7th December 2005. As a result of these legislative changes, the Remuneration Committee decided that Mr. Lee and Mr. Manifold 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. Both have chosen to opt for the alternative arrangement which involves capping their pensions in line with the provisions of the Finance Act 2006 and receiving a supplementary taxable non-pensionable cash allowance in lieu of pension beneﬁts foregone. These allowances 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 allowances for 2009 are detailed in note (ii) on page 54. Mr. Culpepper and Mr. Towe participate in deﬁned contribution retirement plans in respect of basic salary; and in addition participate in unfunded deﬁned contribution Supplemental Executive Retirement Plans (SERP) also in respect of basic salary, to which contributions are made at an agreed rate, offset by contributions made to the other retirement plan. Since 1991, it has been the Board’s policy that non-executive Directors do not receive pensions. Directors’ Service Contracts No executive Director has a service contract extending beyond twelve months. No Director has a service contract that provides for any beneﬁts on termination of employment. Directors’ Remuneration and Interests in Share Capital Details of Directors’ remuneration charged against proﬁt in the year are given in the table across. Details of individual remuneration and pension beneﬁts for the year ended 31st December 2009 are given on page 54. Directors’ share options and shareholdings are shown on pages 57 to 59. Directors’ Remuneration Notes Executive Directors Basic salary Performance-related incentive plan – cash element – deferred shares element Retirement beneﬁts expense Beneﬁts (i) (ii) Provision for Chief Executive long-term incentive plan Total executive Directors’ remuneration 2009 €000 2008 €000 3,384 2,807 964 - 1,462 397 6,207 460 6,667 905 - 497 369 4,578 456 5,034 Average number of executive Directors 4.00 3.00 Non-executive Directors Fees Other remuneration 646 672 568 679 (i) Total non-executive Directors’ remuneration 1,318 1,247 Average number of non-executive Directors 9.50 8.35 (iii) Severance (iv) Payments to former Directors Total Directors’ remuneration - 59 2,160 66 8,044 8,507 Notes to Directors’ remuneration (i) See analysis of 2009 remuneration by individual on page 54. (ii) As set out on page 51, the Chief Executive has a special long-term incentive plan tied to the achievement of exceptional growth and key strategic goals for the ﬁve- year period 2009 to 2013 with a total maximum earnings potential of 40% of aggregate basic salary. While accruals are made on an annual basis, there is no commitment to any payment until the end of the ﬁve-year period. A similar plan was in place for the former Chief Executive Mr. O’Mahony for the four-year period 2005 to 2008 with a total maximum earnings potential of 40% of aggregate basic salary, amounting to a potential €2,074,000. The actual earnings under this plan came to €1,950,000, payment of which was made in 2009. Annual provisions of 40% of basic salary were made in respect of Mr. O’Mahony’s plan for the years 2005 through 2008 amounting in total to €1,494,000. Accordingly the balance of €456,000 was provided in 2008 and is reﬂected in total 2008 Directors’ remuneration. (iii) Severance payment to Mr. T.W. Hill who resigned as an executive on 31st July 2008 after 28 years service. (iv) Consulting and other fees paid to a number of former directors. CRH 53 Report on Directors’ Remuneration continued Individual remuneration for the year ended 31st December 2009 Basic salary and fees €000 609 - 1,150 800 - 825 3,384 68 68 68 68 - 34 68 68 68 68 68 646 Executive Directors G.A. Culpepper T.W. Hill M. Lee A. Manifold W.I. O’Mahony M.S. Towe (v) (vi) (v) (vii) (viii) Non-executive Directors W.P. Egan U-H. Felcht N. Hartery J.M. de Jong D.M. Kennedy J.W. Kennedy K. McGowan T.V. Neill D.N. O’Connor J.M.C. O’Connor W.I. O’Mahony (ix) (vii) Incentive Plan Cash element (i) €000 Deferred shares (i) €000 Retirement beneﬁts expense (ii) €000 Other remuneration (iii) €000 Beneﬁts (iv) €000 164 - 300 210 - 290 964 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 122 - 980 195 - 165 1,462 - - - - - - - - - - - - - - - - - - - 52 37 47 71 - 11 337 37 22 22 36 672 192 - 25 31 - 149 397 - - - - - - - - - - - - Total 2009 €000 1,087 - 2,455 1,236 - 1,429 6,207 120 105 115 139 - 45 405 105 90 90 104 Total 2008 €000 - 856 1,114 - 1,746 862 4,578 120 105 106 139 47 - 450 100 90 90 - 1,318 1,247 (i) Performance-related Incentive Plan Under the executive Directors’ incentive plan for 2009, a bonus is payable for meeting clearly deﬁned and stretch proﬁt/ cash ﬂow targets and strategic goals. The structure of the 2009 incentive plan is set out on page 51. The 2009 plan payout levels reﬂect the very strong delivery under the cash ﬂow generation component. For 2009 the bonus is payable entirely in cash. (ii) Retirement beneﬁts expense The Irish Finance Act 2006 effectively established a cap on pension provision by introducing a penalty tax charge on pension assets in excess of the higher of €5 million or the value of individual prospective pension entitlements as at 7th December 2005. As a result of these legislative changes, the Remuneration Committee has decided that Executive Directors who are members of Irish pension schemes 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. Mr. Lee, Mr. Manifold and former Chief Executive Mr. O’Mahony chose to opt for the alternative arrangement which involves capping their pensions in line with the provisions of the Finance Act and receiving a supplementary taxable non-pensionable cash allowance, in lieu of prospective pension beneﬁts foregone. These allowances are similar in value to the reduction in the Company’s liability represented by the pension beneﬁt 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. For 2009 the compensation allowances amount to €980,000 (2008: €328,847) for Mr. Lee and €195,000 for Mr. Manifold. The level of 2009 compensation allowance for Mr. Lee reﬂects the increase in salary following his appointment as Chief Executive and his relatively short time to retirement. In 2008 the compensation allowance for Mr. O’Mahony amounted to €587,240, however, as Mr. O’Mahony had waived his right to equivalent prospective beneﬁt entitlements from his beneﬁt plan arrangements, which were fully funded at end-2004, no net pension-related expense arose in his respect. (iii) Other remuneration Non-executive Directors: Includes remuneration for Chairman and Board Committee work and in the case of Mr. O’Mahony also includes payment for services unrelated to Board and Committee work. (iv) Beneﬁts These relate principally to relocation expenses, housing allowance, the use of company cars and medical/life assurance. (v) Mr. G.A. Culpepper and Mr. A. Manifold became Directors on 1st January 2009. (vi) Mr. T.W. Hill resigned from the Board on 25th June 2008. He resigned as an executive on 31st July 2008, after 28 years service, and a severance payment in this regard amounting to €2,160,000 for 2008 is included in the summary of remuneration on page 53. (vii) Mr. W.I. O’Mahony retired as CRH Chief Executive on 31st December 2008 but remains on the CRH Board in a non-executive capacity. (viii) Mr. M.S. Towe became a Director on 31st July 2008. (ix) Mr. J.W. Kennedy became a Director on 24th June 2009. 54 CRH Pension entitlements – deﬁned beneﬁt Executive Directors M. Lee A. Manifold Increase in accrued personal pension during 2009 (i) €000 Transfer value of increase in dependants’ pension (i) €000 Total accrued personal pension at year-end (ii) €000 - 7 967 105 284 273 (i) As noted on page 52, the pensions of Mr. Lee and Mr. Manifold have been capped in line with the provisions of the Finance Act 2006. 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, but are the amounts that the pension scheme would transfer to another pension scheme in relation to beneﬁts accrued in 2009 in the event of Mr. Lee or Mr. Manifold leaving service. (ii) The accrued pensions shown in respect of Mr. Lee and Mr. Manifold are those which would be payable annually from normal retirement date. Pension entitlements – deﬁned contribution The accumulated liabilities related to the unfunded Supplemental Executive Retirement Plans for Mr. G.A. Culpepper and Mr. M.S. Towe are as follows: As at 31st December 2008 €000 2009 contribution €000 2009 notional interest €000 (iii) 2009 payments €000 Translation adjustment €000 As at 31st December 2009 €000 Executive Directors G.A. Culpepper M.S. Towe 226 752 109 152 13 42 - - (11) (32) 337 914 (iii) Notional interest, which is calculated based on the average bid yields of United States Treasury ﬁxed-coupon securities with remaining terms to maturity of approximately 20 years, plus 1.5%, is credited to the above plans. Deferred Shares (iv) Executive Directors M. Lee W.I. O’Mahony Number at 31st December 2008 Awards of Deferred Shares during 2009 New Shares allotted under the Scrip Dividend Scheme during 2009 New Shares taken up in 2 for 7 Rights Issue in 2009 Number at 31st December 2009 Release date Released during 2009 (v) 6,033 7,644 13,677 13,873 17,070 30,943 - - - - - - 238 301 539 - - - 1,723 2,184 3,907 - - - - - - 13,873 17,070 30,943 7,994 March 2010 10,129 18,123 March 2011 - - - (iv) Under the executive Directors’ incentive plan, up to one-third of the bonus in each year is payable in CRH shares and the entitlement to beneﬁcial ownership of the shares is deferred for a period of three years, with the individual not becoming beneﬁcially entitled to the shares in the event of departure from the Group in certain circumstances during that time period. (v) Following his retirement as an executive Director, Mr. O’Mahony’s awards were released to him on 18th March 2009. CRH 55 Report on Directors’ Remuneration continued Directors’ awards under the Performance Share Plan (i) 31st December 2008 (ii) Granted in 2009 Released in 2009 (iii) Lapsed in 2009 (iii) 31st December 2009 Performance period Release date Market price in euro on award (iv) G.A. Culpepper (v) 11,090 M. Lee 9,981 12,199 - 33,270 22,180 19,962 27,725 - 69,867 A. Manifold (v) 9,981 16,635 27,725 - 54,341 W.I. O’Mahony 66,542 M.S. Towe 24,953 18,853 23,289 - 67,095 - - - 47,500 47,500 - - - 70,000 70,000 - - - 47,500 47,500 - - - - 76,000 76,000 8,316 2,774 - - - - - - - 8,316 2,774 9,981 01/01/07 – 31/12/09 March 2010 12,199 01/01/08 – 31/12/10 March 2011 47,500 69,680 01/01/09 – 31/12/11 March 2012 16,632 5,548 - - - - - - - 19,962 01/01/07 – 31/12/09 March 2010 27,725 01/01/08 – 31/12/10 March 2011 70,000 01/01/09 – 31/12/11 March 2012 16,632 5,548 117,687 7,484 2,497 - - - - - - - 16,635 01/01/07 – 31/12/09 March 2010 27,725 01/01/08 – 31/12/10 March 2011 47,500 01/01/09 – 31/12/11 March 2012 33.55 23.45 17.00 33.55 23.45 17.00 33.55 23.45 17.00 7,484 2,497 91,860 49,899 16,643 18,712 6,241 - - - - - - - - 18,853 01/01/07 – 31/12/09 March 2010 23,289 01/01/08 – 31/12/10 March 2011 76,000 01/01/09 – 31/12/11 March 2012 33.55 23.45 17.00 18,712 6,241 118,142 (i) Performance Share Plan This is a long-term share incentive plan under which share awards are granted in the form of a provisional allocation of shares for which no exercise price is payable. The shares scheduled for release in March 2010, March 2011 and March 2012 will be allocated to the extent that the relative TSR performance conditions are achieved. The structure of the Performance Share Plan is set out on page 51. (ii) Restated for the bonus element of the 2 for 7 Rights Issue in 2009. (iii) On 25th March 2009, the Remuneration Committee determined that 74.99% of the 2006 award vested and that portion of the award was released to participants. The balance of the 2006 award lapsed. (iv) The Trustees of the CRH plc Employee Beneﬁt Trust purchased Ordinary Shares at €24.82 per share on 21st June 2006 in respect of the 2006 award, and at €33.55 per share on 11th April 2007 in respect of part of the 2007 award. No shares were purchased in respect of the 2008 award. No dividends are payable on these shares until such time as they are released to plan participants. (v) Mr. G.A. Culpepper and Mr. A. Manifold became Directors on 1st January 2009. The opening balances above relate to the position at date of appointment restated for the bonus element of the 2009 Rights Issue. 56 CRH Directors’ interests The Company’s Register of Directors’ Interests contains full details of Directors’ shareholdings and options to subscribe for shares. Directors’ share options Details of movements on outstanding options and those exercised during the year are set out in the table below: 31st December 2008* Granted in 2009 Lapsed in 2009 Exercised in 2009 31st December 2009 Weighted average option price at 31st December 2009 € Options exercised during 2009 Weighted average market price at date of exercise € Weighted average exercised price € G.A. Culpepper** M. Lee A. Manifold** W.I. O’Mahony M.S. Towe 42,611 30,437 - - 113,673 35,000 72,085 3,580 238,435 138,625 1,752 18,262 - - 80,000 - - - 116,445 50,000 48,796 1,752 164,357 146,095 576,680 277,250 60,873 60,873 243,981 155,260 - - - - - - - - - - 2,511,822 165,000 - - - - - - - - - - - - - - - - - - - - - 42,611 12,175 - - - - - - 18,262 - - - 42,611 85,222 - - 60,873 60,873 - - - 18,262 148,673 72,085 3,580 318,435 138,625 1,752 - 166,445 48,796 1,752 121,746 60,873 576,680 277,250 - - 243,981 155,260 (a) (b) (c) (d) (b) (c) (d) (e) (b) (c) (d) (e) (a) (b) (c) (d) (a) (b) (c) (d) 322,627 2,354,195 - 16.24 20.29 14.95 15.56 19.32 14.86 18.39 - 21.97 14.65 18.39 15.56 15.56 18.31 16.99 - - 20.26 14.80 15.81 13.22 17.80 15.61 - - - - - - - - - - - - 15.56 18.17 - - - 13.22 13.22 - - 16.24 16.24 - - - - - 16.30 16.30 - - 19.38 19.38 - - * The opening balances above and in the following table have been re-stated for the bonus element of the 2 for 7 Rights Issue in 2009. ** Mr. G.A. Culpepper and Mr. A. Manifold became Directors on 1st January 2009. The opening balances above and in the following table relate to the position at date of appointment. CRH 57 Report on Directors’ Remuneration continued Options by Price € 13.2155 13.2155 15.5646 15.5646 16.2381 16.2381 16.4830 16.4830 17.7454 17.7454 11.8573 11.8573 11.9565 11.9565 15.0674 15.0674 15.0854 15.0854 18.7463 18.8545 26.1493 22.3892 29.4855 29.8643 21.5235 16.5800 17.3000 18.3946 31st December 2008* Granted in 2009 Lapsed in 2009 Exercised in 2009 31st December 2009 Earliest exercise date Expiry date 48,698 97,397 121,746 82,715 97,397 79,135 166,350 239,544 138,625 191,857 110,900 60,995 44,360 72,085 66,540 55,450 44,360 72,085 72,085 44,360 108,128 221,800 66,540 58,223 146,943 - - 3,504 - - - - - - - - - - - - - - - - - - - - - - - - - 130,000 35,000 - 2,511,822 165,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 48,698 97,397 - 18,262 97,397 60,873 - - - - - - - - - - - - - - - - - - - - - - - - 121,746 64,453 - 18,262 166,350 239,544 138,625 191,857 110,900 60,995 44,360 72,085 66,540 55,450 44,360 72,085 72,085 44,360 108,128 221,800 66,540 58,223 146,943 130,000 35,000 3,504 (a) (b) (a) (b) (a) (b) (c) (d) (c) (d) (c) (d) (c) (d) (c) (d) (c) (d) (c) (c) (c) (c) (c) (c) (c) (c) (c) (e) 322,627 2,354,195 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 March 2010 April 2010 April 2010 April 2010 April 2011 April 2011 April 2012 April 2012 April 2013 April 2013 April 2013 April 2013 April 2014 April 2014 April 2014 April 2014 April 2015 April 2015 April 2016 June 2016 April 2017 April 2017 April 2018 April 2019 April 2019 July 2013 December 2013 The market price of the Company’s shares at 31st December 2009 was €19.01 and the range during 2009 was €12.55 to €20.70. (a) Granted under the 1990 share option scheme, these options are only exercisable when earnings per share (EPS) growth exceeds the growth of the Irish Consumer Price Index over a period of at least three years subsequent to the granting of the options. (b) Granted under the 1990 share option scheme, these options are only exercisable if, over a period of at least ﬁve years subsequent to the granting of the options, the growth in EPS would place the Company in the top 25% of the companies listed in the FTSE 100 Stock Exchange Equity Index. (c) Granted under the 2000 share option scheme, these options are only exercisable when EPS growth exceeds the growth of the Irish Consumer Price Index by 5% compounded over a period of at least three years subsequent to the granting of the options. (d) Granted under the 2000 share option scheme, these options are only exercisable if, over a period of at least ﬁve years subsequent to the granting of the options, the growth in EPS exceeds the growth of the Irish Consumer Price Index by 10% compounded and places the Company in the top 25% of EPS performance of a peer group of international building materials and other manufacturing companies. If below the 75th percentile, these options are not exercisable. (e) Granted under the 2000 savings-related share option scheme. 58 CRH Directors’ Interests in Share Capital at 31st December 2009 The interests of the Directors and the Secretary in the shares of the Company as at 31st December 2009, which are beneﬁcial unless otherwise indicated, are shown below. The Directors and the Secretary have no beneﬁcial interests in any of the Group’s subsidiary, joint venture or associated undertakings. Ordinary Shares Directors G.A. Culpepper W.P. Egan - Non-beneﬁcial U-H. Felcht N. Hartery J.M. de Jong J.W. Kennedy M. Lee K. McGowan A. Manifold T.V. Neill D.N. O’Connor J.M.C. O’Connor W.I. O’Mahony M.S. Towe Secretary N. Colgan 31st December 2009 31st December 2008 32,180 16,427 12,000 1,285 1,285 13,502 1,009 * 19,170 * 15,000 12,000 1,000 1,000 10,190 - 323,027 ** 258,246 ** 21,344 11,790 89,844 15,040 2,763 1,089,431 34,420 16,167 5,742 * 69,881 11,478 2,131 827,821 ** 18,857 10,527 10,434 * 1,675,874 1,279,117 There were no transactions in the above Directors’ and Secretary’s interests between 31st December 2009 and 1st March 2010. Of the above holdings, the following are held in the form of American Depositary Receipts (ADRs): G.A. Culpepper W.P. Egan - Non-beneﬁcial M.S. Towe 31st December 2009 31st December 2008 179 10,000 12,000 3,397 179 * 10,000 12,000 3,397 * Holding as at date of appointment. ** Excludes awards of Deferred Shares, details of which are shown on page 55. CRH 59 Statement of Directors’ Responsibilities in respect of the ﬁnancial statements Company law in the Republic of Ireland requires the Directors to prepare ﬁnancial statements for each ﬁnancial year which give a true and fair view of the state of affairs of the Parent Company and of the Group and of the proﬁt or loss of the Group for that period. In preparing the Consolidated Financial Statements, the Directors are required to: # select suitable accounting policies and then apply them consistently; # make judgements and estimates that are reasonable and prudent; # comply with applicable International Financial Reporting Standards as adopted by the European Union, subject to any material departures disclosed and explained in the ﬁnancial statements; and # prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The considerations set out above for the Group are also required to be addressed by the Directors in preparing the ﬁnancial statements of the Parent Company (which are set out on pages 116 to 119), in respect of which the applicable accounting standards are those which are generally accepted in the Republic of Ireland. The Directors have elected to prepare the Parent Company’s Financial Statements in accordance with generally accepted accounting practice in Ireland (Irish GAAP) comprising the ﬁnancial reporting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland, together with the Companies Acts, 1963 to 2009. The Directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the ﬁnancial position of the Parent Company and which enable them to ensure that the Consolidated Financial Statements are prepared in accordance with applicable International Financial Reporting Standards as adopted by the European Union and comply with the provisions of the Companies Acts, 1963 to 2009 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 60 CRH Independent Auditors’ Report to the members of CRH public limited company We have audited the Consolidated and Parent Company (“Company”) Financial Statements (the “ﬁnancial statements”) of CRH plc for the year ended 31st December 2009 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the related notes 1 to 34 (Group) and the related notes 1 to 11 (Company). These ﬁnancial statements have been prepared under the accounting policies set out therein. This Report is made solely to the Company’s members, as a body, in accordance with section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this Report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors The Directors are responsible for the preparation of the Consolidated Financial Statements in accordance with applicable Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union, and for the preparation of the Company Financial Statements in accordance with applicable Irish law and Accounting Standards issued by the Accounting Standards Board and promulgated by the Institute of Chartered Accountants in Ireland (“Generally Accepted Accounting Practice in Ireland”) as set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the ﬁnancial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and have been properly prepared in accordance with the Companies Acts, 1963 to 2009 and whether, in addition, the Consolidated Financial Statements have been properly prepared in accordance with Article 4 of the IAS Regulation. We also report to you our opinion as to: whether proper books of account have been kept by the Company; whether, at the balance sheet date, there exists a ﬁnancial situation which may require the convening of an extraordinary general meeting of the Company; and whether the information given in the Directors’ Report is consistent with the ﬁnancial statements. In addition, we state whether we have obtained all the information and explanations necessary for the purposes of our audit and whether the Company Balance Sheet is in agreement with the books of account. We also report to you if, in our opinion, any information speciﬁed by law or the Listing Rules of the Irish Stock Exchange regarding Directors’ remuneration and other transactions is not disclosed and, where practicable, include such information in our Report. We are required by law to ascertain that the Company has produced a Corporate Governance Statement where this is prepared as a separate report and whether such statement contains the information required by law. We review whether the Corporate Governance Statement reﬂects the Company’s compliance with the nine provisions of the 2008 Financial Reporting Council’s Combined Code speciﬁed for our review by the Listing Rules of the Irish Stock Exchange, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. Where a separate Corporate Governance Statement is prepared, we also consider and report to you whether the information required under section 158 (6D) (d) of the Companies Act, 1963 given in the Corporate Governance Statement is consistent with the ﬁnancial statements. We read other information contained in the Annual Report and consider whether it is consistent with the audited ﬁnancial statements. The other information comprises only the Directors’ Report, the Chairman’s Statement, Chief Executive’s Review, Operations Reviews, Finance Review and the Corporate Governance Statement. We consider the implications for our Report if we become aware of any apparent misstatements or material inconsistencies with the ﬁnancial statements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the ﬁnancial statements. It also includes an assessment of the signiﬁcant estimates and judgements made by the Directors in the preparation of the ﬁnancial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufﬁcient evidence to give reasonable assurance that the ﬁnancial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the ﬁnancial statements. Opinion In our opinion the Consolidated Financial Statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of affairs of the Group as at 31st December 2009 and of its proﬁt for the year then ended and have been properly prepared in accordance with the Companies Acts, 1963 to 2009 and Article 4 of the IAS Regulation. In our opinion the Company Financial Statements give a true and fair view, in accordance with Generally Accepted Accounting Practice in Ireland, of the state of affairs of the Company as at 31st December 2009 and have been properly prepared in accordance with the Companies Acts, 1963 to 2009. We have obtained all the information and explanations we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the Company. The Company Balance Sheet is in agreement with the books of account. In our opinion the information given in the Directors’ Report is consistent with the ﬁnancial statements. In our opinion the information required under section 158 (6D) (d) of the Companies Act, 1963 given in the Corporate Governance Statement is consistent with the ﬁnancial statements. In our opinion, the Company Balance Sheet does not disclose a ﬁnancial situation which under section 40(1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the Company. Ernst & Young Chartered Accountants and Registered Auditors Dublin 1st March 2010 CRH 61 Consolidated Income Statement for the ﬁnancial year ended 31st December 2009 Notes 1 Revenue Cost of sales Gross proﬁt 3 Operating costs 1, 4, 5 Group operating proﬁt 1,16 Proﬁt on disposal of non-current assets Proﬁt before ﬁnance costs Finance costs Finance revenue Group share of associates' proﬁt after tax Proﬁt before tax 8 8 9 1 10 Income tax expense Group proﬁt for the ﬁnancial year Proﬁt attributable to: Equity holders of the Company Minority interest Group proﬁt for the ﬁnancial year Group proﬁt for the ﬁnancial year 2009 €m 17,373 (12,510) 4,863 (3,908) 955 26 981 (419) 122 48 732 (134) 598 592 6 598 2008 €m 20,887 (14,738) 6,149 (4,308) 1,841 69 1,910 (503) 160 61 1,628 (366) 1,262 1,248 14 1,262 12 Basic earnings per Ordinary Share 88.3c Restated 210.2c 12 Diluted earnings per Ordinary Share 87.9c 209.0c All of the results relate to continuing operations. Consolidated Statement of Comprehensive Income for the ﬁnancial year ended 31st December 2009 Notes 28 24 10 Group proﬁt for the ﬁnancial year Other comprehensive income Currency translation effects Actuarial loss on Group deﬁned beneﬁt pension obligations Gains/(losses) relating to cash ﬂow hedges Tax on items recognised directly within other comprehensive income Net expense recognised directly within other comprehensive income Total comprehensive income for the ﬁnancial year Attributable to: Equity holders of the Company Minority interest Total comprehensive income for the ﬁnancial year K. McGowan, M. Lee, Directors 2009 €m 2008 €m 598 1,262 (96) (67) 15 18 (130) 468 462 6 468 (97) (348) (28) 71 (402) 860 847 13 860 62 CRH Notes 13 14 15 15 24 27 17 18 24 22 22 30 30 30 30 23 24 27 19 28 26 29 19 23 24 26 Consolidated Balance Sheet as at 31st December 2009 ASSETS Non-current assets Property, plant and equipment Intangible assets Investments accounted for using the equity method Other ﬁnancial assets Derivative ﬁnancial instruments Deferred income tax assets Total non-current assets Current assets Inventories Trade and other receivables Current income tax recoverable Derivative ﬁnancial instruments Liquid investments Cash and cash equivalents Total current assets Total assets EQUITY Capital and reserves attributable to the Company's equity holders Equity share capital Preference share capital Share premium account Treasury Shares and own shares Other reserves Foreign currency translation reserve Retained income Minority interest Total equity LIABILITIES Non-current liabilities Interest-bearing loans and borrowings Derivative ﬁnancial instruments Deferred income tax liabilities Trade and other payables Retirement beneﬁt obligations Provisions for liabilities Capital grants Total non-current liabilities Current liabilities Trade and other payables Current income tax liabilities Interest-bearing loans and borrowings Derivative ﬁnancial instruments Provisions for liabilities Total current liabilities Total liabilities Total equity and liabilities K. McGowan, M. Lee, Directors 2009 €m 2008 €m 8,535 4,095 962 128 244 337 14,301 2,008 2,454 77 5 66 1,372 5,982 8,888 4,108 743 127 416 333 14,615 2,473 3,096 - 10 128 799 6,506 20,283 21,121 241 1 3,778 (279) 128 (740) 6,508 9,637 73 9,710 4,943 78 1,519 155 454 240 12 7,401 2,471 192 381 8 120 3,172 186 1 2,448 (378) 87 (644) 6,387 8,087 70 8,157 6,277 84 1,461 137 414 253 14 8,640 2,919 186 1,021 62 136 4,324 10,573 12,964 20,283 21,121 CRH 63 Consolidated Statement of Changes in Equity for the ﬁnancial year ended 31st December 2009 Issue of share capital (net of expenses) 55 1,330 At 1st January 2009 Group proﬁt for the ﬁnancial year Other comprehensive income Total comprehensive income Share-based payment expense - share option schemes - Performance Share Plan (PSP) Reclassiﬁcation of Performance Share Plan expense 10 Tax relating to share-based payment expense Treasury/own shares re-issued Shares acquired by Employee Beneﬁt Trust (own shares) Share option exercises Dividends (including shares issued in lieu of dividends) Minority interest arising on acquisition At 31st December 2009 for the ﬁnancial year ended 31st December 2008 At 1st January 2008 Group proﬁt for the ﬁnancial year Other comprehensive income Minority interest proﬁt attributable to associates - - - - - - - - - - - - - - - - - - - - - - - - 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 €m Retained income €m Minority interest €m Total equity €m 187 2,448 (378) 87 (644) 6,387 70 8,157 - - - - - - 187 2,448 (378) - - 87 - 18 10 13 - - - - - - - 592 (96) (34) 6 - 598 (130) (740) 6,945 76 8,625 - - - - - - - - - - - - 1,385 - - - 3 (114) - 60 (386) - - - - - - - - (7) 4 18 10 - 3 - (2) 60 (393) 4 - - - (13) - 114 (2) - - - 242 3,778 (279) 128 (740) 6,508 73 9,710 Total comprehensive income 187 2,420 Issue of share capital (net of expenses) Share-based payment expense - share option schemes - Performance Share Plan (PSP) Tax relating to share-based payment expense Shares acquired by CRH plc (Treasury Shares) Treasury/own shares re-issued Shares acquired by Employee Beneﬁt Trust (own shares) Share option exercises Dividends (including shares issued in lieu of dividends) Minority interest arising on acquisition - - - - - - - - - - 28 - - - - - - - - - 187 2,420 (19) 70 (547) 5,843 - - - (19) - - 7 - (411) 48 (3) - - - - - - 70 - 17 - - - - - - - - - 1,248 (97) - (305) - 66 14 - (1) 8,020 1,262 (402) (1) (644) 6,786 79 8,879 - - - - - - - - - - - - - (13) - (48) - 31 (369) - - 28 - - - - - - - (5) (4) 17 7 (13) (411) - (3) 31 (374) (4) At 31st December 2008 187 2,448 (378) 87 (644) 6,387 70 8,157 K. McGowan, M. Lee, Directors Notes 30 7 30 30 11 32 30 7 10 30 30 30 11 32 64 CRH Consolidated Statement of Cash Flows for the ﬁnancial year ended 31st December 2009 Notes Cash ﬂows from operating activities Proﬁt before tax Finance costs (net) Group share of associates' proﬁt after tax Proﬁt on disposal of non-current assets Group operating proﬁt Depreciation charge (including impairments) Share-based payment expense Amortisation of intangible assets (including impairments) Amortisation of capital grants Other non-cash movements Net movement on provisions Decrease/(increase) in working capital Cash generated from operations Interest paid (including ﬁnance leases) Irish corporation tax paid Overseas corporation tax paid Net cash inﬂow from operating activities Cash ﬂows from investing activities Inﬂows Proceeds from disposal of non-current assets Interest received Capital grants received Dividends received from associates Outﬂows Purchase of property, plant and equipment Acquisition of subsidiaries and joint ventures Investments in and advances to associates Advances to joint ventures and purchase of trade investments Increase in ﬁnance-related receivables Deferred and contingent acquisition consideration paid Net cash outﬂow from investing activities Cash ﬂows from ﬁnancing activities Inﬂows Proceeds from issue of shares (net) Proceeds from exercise of share options Decrease in liquid investments Increase in interest-bearing loans, borrowings and ﬁnance leases Net cash inﬂow arising from derivative ﬁnancial instruments Outﬂows Treasury/own shares purchased Repayment of interest-bearing loans, borrowings and ﬁnance leases Net cash outﬂow arising from derivative ﬁnancial instruments Dividends paid to equity holders of the Company Dividends paid to minority interests Net cash outﬂow from ﬁnancing activities Increase/(decrease) in cash and cash equivalents Reconciliation of opening to closing cash and cash equivalents Cash and cash equivalents at 1st January Translation adjustment Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 31st December 13 7 14 29 26 20 16 29 13 32 15 15 20 20 30 25 25 25 11 11 25 25 25 2009 €m 732 297 (48) (26) 955 794 28 54 (2) (37) (41) 783 2,534 (294) (2) (102) 2,136 103 31 - 38 172 (532) (174) (235) (9) (115) (37) (1,102) (930) 1,237 60 65 757 16 2,135 (2) (2,501) - (238) (7) (2,748) (613) 593 799 (20) 593 1,372 2008 €m 1,628 343 (61) (69) 1,841 781 24 43 (3) (15) (28) (57) 2,586 (371) (18) (304) 1,893 168 51 4 42 265 (1,039) (777) (156) (50) - (34) (2,056) (1,791) 6 31 175 1,382 - 1,594 (414) (1,024) (100) (347) (5) (1,890) (296) (194) 1,006 (13) (194) 799 A reconciliation of cash and cash equivalents to net debt is presented in note 25 to the ﬁnancial statements. K. McGowan, M. Lee, Directors CRH 65 Accounting Policies Statement of compliance The Consolidated Financial Statements of CRH plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, which comprise standards and interpretations approved by the International Accounting Standards Board (IASB). IFRS as adopted by the European Union differ in certain respects from IFRS as issued by the IASB. However, the Consolidated Financial Statements for the ﬁnancial years presented would be no different had IFRS as issued by the IASB been applied. References to IFRS hereafter should be construed as references to IFRS as adopted by the European Union. CRH plc, the parent company, is a publicly traded limited company incorporated and domiciled in the Republic of Ireland. Basis of preparation 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 the Group’s subsidiaries, joint ventures and associates to all periods presented in these Consolidated Financial Statements. The preparation of ﬁnancial statements in conformity with IFRS requires the use of certain critical accounting estimates. In addition, it requires management to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are signiﬁcant to the Consolidated Financial Statements, relate primarily to accounting for deﬁned beneﬁt pension schemes, provisions for liabilities, property, plant and equipment and goodwill impairment. The ﬁnancial year-ends of the Group’s subsidiaries, joint ventures and associates are co-terminous. Adoption of IFRS and International Financial Reporting Interpretations Committee (IFRIC) Interpretations IFRS and IFRIC Interpretations adopted during the ﬁnancial year The Group has adopted the following new and amended IFRS and IFRIC interpretations in respect of the 2009 ﬁnancial year-end: – IFRS 2 Share-based Payment – Vesting Conditions and Cancellations effective 1st January 2009 – IFRS 7 Financial Instruments: Disclosures effective 1st January 2009 – IFRS 8 Operating Segments effective 1st January 2009 – IAS 1 Presentation of Financial Statements effective 1st January 2009 – IAS 23 Borrowing Costs (Revised) effective 1st January 2009 – Amendments to IAS 32 and IAS 1 – Puttable Financial Instruments and Obligations Arising on Liquidation effective 1st January 2009 – IFRIC 9 Remeasurement of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement effective 1st July 2008 – IFRIC 13 Customer Loyalty Programmes effective 1st July 2008 – IFRIC 15 Agreements for the Construction of Real Estate effective 1st January 2009 – IFRIC 16 Hedges of a Net Investment in a Foreign Operation effective 1st October 2008 – IFRIC 18 Transfers of Assets from Customers effective for transfers on or after 1st July 2009 – Improvements to IFRSs (May 2008) with an effective date of 1st January 2009 (i.e. all except for IFRS 5 amendment) IFRS 8 Operating Segments replaced IAS 14 Segment Reporting. Following a review of its requirements, the Group has concluded that the operating segments determined in accordance with IFRS 8 are the same as the business segments previously identiﬁed under IAS 14. IFRS 8 disclosures are shown in note 1, including the related revised comparative information. IAS 1 Presentation of Financial Statements has been revised and now requires the separation of owner and non-owner changes in equity and the presentation of a 66 CRH statement of changes in equity as a primary statement (the information contained in this statement had previously been provided by the Group in the notes to the Consolidated Financial Statements). The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity. The revised standard also introduces the statement of comprehensive income; it presents all items of recognised income and expense, either in one single statement, or two linked statements. The Group has elected to present two statements, the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income (similar to the Statement of Recognised Income and Expense previously provided except that taxation relating to equity items is now shown within the Consolidated Statement of Changes in Equity). IFRS 7 Financial Instruments – Disclosures (amendment) requires enhanced disclosures about fair value measurement and liquidity risk and disclosure of fair value measurements by level of a fair value measurement hierarchy. The changes required by the amended standard are purely disclosure-related. Adoption of the remaining standards and interpretations did not result in material changes in the Group’s ﬁnancial statements. IFRS and IFRIC Interpretations which are not yet effective The Group has not applied the following standards and interpretations that have been issued but are not yet effective: – IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions effective 1st January 2010 – IFRS 3R Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) effective 1st July 2009 including consequential amendments to IFRS 7, IAS 21, IAS 28, IAS 31 and IAS 39 – IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items effective 1st July 2009 – IFRIC 17 Distributions of Non-cash Assets to Owners effective 1st July 2009 – Improvements to IFRSs (April 2009) – amendments applying in respect of 2010 ﬁnancial year-ends and thereafter The standards and interpretations addressed above will be applied for the purposes of the Group ﬁnancial statements with effect from the dates listed. IFRS 3R Business Combinations, while it continues to apply the acquisition method to business combinations, introduces a number of changes to the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results. These changes will include, but will not be limited to, the expensing of acquisition-related costs as incurred, the method of accounting for step acquisitions and the recognition and measurement of contingent consideration. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. The Group will apply IFRS 3R prospectively to all business combinations from 1st January 2010. The application of the other standards and interpretations is not envisaged to have any material impact on the Group ﬁnancial statements. 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 31st December each year. Subsidiaries The ﬁnancial statements of subsidiaries are included in the Consolidated Financial Statements from the date on which control over the operating and ﬁnancial decisions is obtained and cease to be consolidated from the date on which control is transferred out of the Group. Control exists when the Group has the power, directly or indirectly, to govern the ﬁnancial and operating policies of an entity so as to obtain economic beneﬁts from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in determining the existence or otherwise of control. Joint ventures In line with IAS 31 Interests in Joint Ventures, the Group’s share of results and net assets of joint ventures (jointly controlled entities), which are entities in which the Group holds an interest on a long-term basis and which are jointly controlled by the Group and one or more other venturers under a contractual arrangement, are accounted for on the basis of proportionate consolidation from the date on which the contractual agreements stipulating joint control are ﬁnalised and are derecognised when joint control ceases. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash ﬂows on a line-by-line basis with similar items in the Consolidated Financial Statements. Loans to joint ventures are classiﬁed as loans and receivables within ﬁnancial assets and are recorded at amortised cost. Associates Entities other than subsidiaries and joint ventures in which the Group has a participating interest, and over whose operating and ﬁnancial policies the Group is in a position to exercise signiﬁcant inﬂuence, are accounted for as associates using the equity method and are included in the Consolidated Financial Statements from the date on which signiﬁcant inﬂuence is deemed to arise until the date on which such inﬂuence ceases to exist. If the Group’s share of losses exceeds the carrying amount of an associate, 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. Equity method Under the equity method, which is used in respect of accounting for the Group’s investments in associates, the Consolidated Income Statement reﬂects the Group’s share of proﬁt after tax of the related associates. Investments in associates 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. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Where indicators of impairment arise in accordance with the requirements of IAS 39 Financial Instruments: Recognition and Measurement, the carrying amount of the investment is tested for impairment by comparing its recoverable amount with its carrying amount. Minority interests Minority interests represent the portion of proﬁt or loss and net assets not held by the Group and are presented separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, distinguished from Parent Company shareholders’ equity. Acquisitions of minority interests are accounted for using the parent entity extension method whereby the difference between the consideration and the book value of the share of net assets acquired is recognised in goodwill. Transactions eliminated on consolidation Intra-group balances and transactions, income and expenses, and any unrealised gains or losses arising from such transactions, are eliminated in preparing the Consolidated Financial Statements. Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same manner as unrealised gains, but only to the extent that there is no evidence of impairment in the Group’s interest in the entity. Revenue recognition Revenue represents the value of goods and services supplied to external customers and excludes intercompany sales, trade discounts and value added tax/sales tax. Other than in the case of construction contracts, revenue is recognised to the extent that it is 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 Revenue on construction contracts is recognised in accordance with the percentage-of-completion method with the completion percentage being computed generally by reference to the proportion that contract costs incurred at the balance sheet date bear to the total estimated cost of the contract. Contract costs are recognised as incurred. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. When the outcome of a construction contract can be estimated reliably and it is probable that the contract will be proﬁtable, contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense. 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 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 maker who is responsible for allocating resources and assessing performance of the operating segments. The Group has determined that it has six reportable operating segments based on its lines of business; materials, products and distribution in Europe and the Americas. 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 income statement. Results and cash ﬂows of subsidiaries, joint ventures and associates with non- 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 of non-euro subsidiaries, joint ventures and associates at average rates, and on restatement of the opening net assets at closing rates, are dealt with 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. On disposal of a foreign operation, accumulated currency translation differences are recognised in the Consolidated Income Statement as part of the overall gain or loss on disposal. Goodwill and fair value adjustments arising on acquisition of a foreign operation are regarded as assets and liabilities of the foreign operation, are expressed in the functional currency of the foreign operation, are recorded in euro at the exchange rate at the date of the transaction and are subsequently retranslated at the applicable closing rates. The principal exchange rates used for the translation of results, cash ﬂows and balance sheets into euro were as follows: euro 1 = 2009 2008 2009 2008 Average Year-end US Dollar Pound Sterling Polish Zloty 1.3948 0.8909 4.3276 1.4708 0.7963 3.5121 1.4406 1.3917 0.8881 0.9525 4.1045 4.1535 Ukrainian Hryvnya 11.2404 7.7046 11.4738 10.8410 Swiss Franc Canadian Dollar Argentine Peso Israeli Shekel Turkish Lira Indian Rupee 1.5100 1.5850 5.2111 5.4756 2.1631 1.5874 1.5594 4.6443 5.2556 1.9064 1.4836 1.4850 1.5128 1.6998 5.4885 4.7924 5.5134 5.3163 2.1547 2.1488 67.4271 63.7652 66.9539 67.5553 CRH 67 Accounting Policies continued Retirement beneﬁt obligations 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 on the basis of the projected unit credit method 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 associated post-employment beneﬁt obligations. When the beneﬁts of a deﬁned beneﬁt scheme are improved, the portion of the increased beneﬁt relating to past service by employees is recognised as an expense in the Consolidated Income Statement on a straight-line basis over the average period until the beneﬁts become vested. To the extent that the enhanced beneﬁts vest immediately, the related expense is recognised immediately in the Consolidated Income Statement. 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 within non-current assets or non-current liabilities on the face of 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. Actuarial gains and losses are recognised immediately in the Consolidated Statement of Comprehensive Income. 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 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. The Group’s obligation in respect of post-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 on high-quality corporate bonds of a currency and term consistent with the currency and estimated term of the post-employment obligations. Share-based payments The Group operates both Share Option Schemes and a Performance Share Plan. Its policy in relation to the granting of share options and the granting of awards under the Performance Share Plan together with the nature of the underlying market and non-market performance and other vesting conditions are addressed in the Report on Directors’ Remuneration on pages 51 and 52. Share options For equity-settled share-based payment transactions (i.e. the issuance of share options), the Group measures the services received and the corresponding increase in equity at fair value at the grant date using the trinomial model. Fair value is determined 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 not subject to market-based vesting conditions. The cost of equity-settled transactions 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 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 68 CRH 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 equity-settled transactions 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 equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Company or the employee are not met. All cancellations of equity-settled transaction 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. The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted after 7th November 2002. The disclosure requirements of IFRS 2 have been applied in relation to all outstanding share- based payments regardless of their grant date. 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. The Group has no exposure in respect of cash-settled share-based payment transactions and share-based payment transactions with cash alternatives. Awards under the Performance Share Plan The fair value of shares awarded under the Performance Share Plan is determined using a Monte Carlo simulation technique and is expensed in the Consolidated Income Statement over the vesting period. The Performance Share Plan contains inter alia a Total Shareholder Return-based (and hence market-based) vesting condition, and accordingly, the fair value assigned to the related equity instruments on initial application of IFRS 2 is adjusted so as to reﬂect the anticipated likelihood as at the grant date of achieving the market-based vesting condition. Property, plant and equipment Property, plant and equipment are stated at historical cost less any accumulated depreciation and any accumulated impairments except for certain items that had been revalued to fair value prior to the date of transition to IFRS (1st January 2004); these items are measured on the basis of deemed cost, being the revalued amount as at the date the revaluation was performed. Depreciation and depletion Depreciation 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 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. Transport: On average, transport equipment is depreciated at 20% p.a. The residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at each balance sheet date. Impairment of property, plant and equipment In accordance with IAS 36 Impairment of Assets, the carrying values of items of property, plant and equipment are reviewed for 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. Where the carrying values exceed the estimated recoverable amount (being the greater of fair value less costs to sell and value-in-use), the assets or cash-generating units are written-down to their recoverable amount. In assessing value-in-use, the estimated future cash ﬂows are discounted to their present value using a pre-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 the cash-generating unit to which the asset belongs. Repair and maintenance expenditure 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 re items of property, plant and equipment 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. Business combinations The purchase method of accounting is employed in accounting for the acquisition of subsidiaries, joint ventures and associates by the Group. The cost of a business combination is measured as the aggregate of the fair values at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued, together with any directly attributable expenses. To the extent that settlement of all or any part of 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. Where a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the amount of the adjustment is included in the cost at the acquisition date if the adjustment is probable and can be reliably measured. Contingent consideration is included in the acquisition balance sheet on a discounted basis. The assets and liabilities (and contingent liabilities, if relevant) arising on business combination activity are measured at their fair values at the date of acquisition. In the case of a business combination which is completed in stages, the fair values of the identiﬁable assets, liabilities and contingent liabilities are determined at the date of each exchange transaction. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated to the identiﬁable assets and liabilities (and contingent liabilities, if relevant) are made within twelve months of the acquisition date. Minority interest is stated at the proportionate share of the fair values of the acquired assets and liabilities recognised; goodwill is not allocated to the minority interest. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocated against the interests of the parent. Goodwill Goodwill is the excess of the consideration paid over the fair value of the identiﬁable assets and liabilities (and contingent liabilities, if relevant) in a business combination and relates to the future economic beneﬁts arising from assets which are not capable of being individually identiﬁed and separately recognised. Goodwill applicable to jointly controlled entities is accounted for on the basis of proportionate consolidation and is therefore included in the goodwill caption in the Consolidated Balance Sheet, net of any impairments assessed in accordance with the methodology discussed below. The carrying amount of goodwill in respect of associates is included in investments in associates (i.e. within ﬁnancial assets) under the equity method in the Consolidated Balance Sheet; such goodwill is not subject to annual impairment testing in accordance with IAS 28. Where a subsidiary is disposed of or terminated through closure, the carrying value of any goodwill which arose on acquisition of that subsidiary, net of any impairments, is included in the determination of the net proﬁt or loss on disposal/ termination. To the extent that the Group’s interest in the net fair value of the identiﬁable assets and liabilities (and contingent liabilities, if relevant) acquired exceeds the cost of a business combination, the identiﬁcation and measurement of the related assets and liabilities and contingent liabilities are revisited and the cost is reassessed with any remaining balance being recognised immediately in the Consolidated Income Statement. Goodwill acquired in a business combination is allocated, from the acquisition date, to the cash-generating units that are anticipated to beneﬁt from the combination’s synergies. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. The cash-generating units represent the lowest level within the Group at which goodwill is monitored for internal management purposes and these units are not larger than the operating segments determined in accordance with IFRS 8 Operating Segments. 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. In the year in which a business combination is effected, and where some or all of the goodwill allocated to a particular cash-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. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Impairment losses arising in respect of goodwill are not reversed once recognised. Intangible assets (other than goodwill) arising on business combinations An intangible asset is capitalised separately from goodwill as part of a business combination at cost (fair value at date of acquisition) to the extent that it is probable that the expected future economic beneﬁts attributable to the asset will ﬂow to the Group and that its cost can be measured reliably. 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 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. The amortisation of intangible assets is calculated to write-off the book value of deﬁnite-lived intangible assets over their useful lives on a straight-line basis on the assumption of zero residual value. In general, deﬁnite-lived intangible assets are amortised over periods ranging from one to ten years, depending on the nature of the intangible asset. Other ﬁnancial assets All investments are initially recognised at the fair value of the 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 and are included within ﬁnancial assets in the Consolidated Balance Sheet given that it is impracticable to determine fair value in accordance with IAS 39. Where non-derivative ﬁnancial assets meet the deﬁnition of “loans and receivables” under IAS 39 Financial Instruments: Recognition and Measurement, such balances are, following initial recognition, recorded at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in proﬁt or loss when the loans and receivables are derecognised or impaired as well as through the amortisation process. Leases Assets held under ﬁnance leases, which are leases where substantially all the risks and rewards of ownership of the asset have transferred to the Group, and hire purchase contracts, are capitalised in the Consolidated Balance Sheet and are depreciated over their useful lives with any impairment being recognised in accumulated depreciation. The asset is recorded at an amount equal to the lower of its fair value and the present value of the minimum lease payments at the inception of the ﬁnance lease. The capital elements of future obligations under leases and hire purchase contracts are included in liabilities in the Consolidated Balance Sheet and analysed between current and non-current amounts. The interest elements of the rental obligations are charged to the Consolidated CRH 69 Accounting Policies continued Income Statement over the periods of the relevant agreements and represent a constant proportion of the balance of capital repayments outstanding in line with the implicit interest rate methodology. 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. 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. Inventories and construction contracts Inventories are stated at the lower of cost and net realisable value. Cost is based on the ﬁrst-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 a ﬁrst-in, ﬁrst-out basis. In the case of ﬁnished goods and work-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. Amounts recoverable on construction contracts, which are included in receivables, are stated at the net sales 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 related directly 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 and payables Trade and other receivables and payables are stated at cost, which approximates fair value given the short-dated nature of these assets and liabilities. 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 in the Consolidated Income Statement on identiﬁcation. Cash and cash equivalents Cash and cash equivalents comprise cash balances held for the purposes of meeting short-term cash commitments and investments which are readily convertible to a known amount of cash and are subject to an insigniﬁcant risk of changes in value. Where investments are categorised as cash equivalents, the related balances have a maturity of three months or less from the date of acquisition. Bank overdrafts are included within current interest-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. Liquid investments Liquid investments comprise short-term deposits and current asset investments which are held as readily disposable stores of value and include investments in government gilts and commercial paper and deposits of less than one year in duration. The maturity of these investments falls outside the three months timeframe for classiﬁcation as cash and cash equivalents under IAS 7 Statement of Cash Flows, and accordingly these investments are treated as ﬁnancial assets and are categorised as either “held-for-trading” or “loans and receivables” in accordance with IAS 39. Where relevant, the fair value of liquid investments is determined by reference to the traded value of actively traded instruments. Derivative ﬁnancial instruments and hedging practices 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). 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 70 CRH Derivative ﬁnancial instruments are stated at fair value. Where derivatives do not fulﬁl the criteria for hedge accounting, they are classiﬁed as “held-for-trading” in accordance with IAS 39 and changes in fair values are reported in operating costs in the Consolidated Income Statement. The fair value of interest rate and currency swaps is the estimated amount the Group would pay or receive to terminate the swap at the balance sheet date taking into account interest and currency rates at that date and the creditworthiness of the swap counterparties. The fair value of forward exchange contracts is calculated by reference to forward exchange rates for contracts with similar maturity proﬁles and equates to the quoted market price at the balance sheet date (being the present value of the quoted forward price). 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 re-measurement 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 hedged interest-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 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. Interest-bearing loans and borrowings 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 and non-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 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. 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. Government grants Capital grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions have been complied with. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is treated as a deferred credit and is released to the Consolidated Income Statement over the expected useful life of the relevant asset through equal annual instalments. Share capital Treasury Shares Own equity instruments (i.e. Ordinary Shares) acquired by the Parent Company 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. Own shares Ordinary Shares purchased by the Employee Beneﬁt Trust on behalf of the Parent Company under the terms of the Performance Share Plan are recorded as a deduction from equity on the face of the Consolidated Balance Sheet. 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 operating proﬁt in the Consolidated Income Statement. 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. Borrowings are classiﬁed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Gains and losses are recognised in the Consolidated Income Statement through amortisation on the basis of the period of the loans and borrowings and/or on impairment and derecognition of the associated 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). Provisions for liabilities 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 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 interest expense. Provisions arising on business combination activity are recognised only to the extent that they would have qualiﬁed for recognition in the ﬁnancial statements of the acquiree prior to acquisition. Provisions are not recognised for future operating losses. Tax (current and deferred) Current tax represents the expected tax payable (or recoverable) on the taxable proﬁt for the year using tax rates enacted or substantively enacted at the balance sheet date and taking into account any adjustments stemming from prior years. Any interest or penalties arising are included within current tax. Deferred tax is provided using the liability method on all relevant temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for ﬁnancial reporting purposes. Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that are anticipated to apply in the period in which the asset is realised or the liability is settled based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences with the exception of the following: # where the deferred tax liability arises from the initial recognition of goodwill or of an asset or a liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting proﬁt nor the taxable proﬁt or loss; and # in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, where the timing of reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 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 to offset these items. The following exceptions apply in this instance: # where the deferred tax asset arises from the initial recognition of an asset or a liability in a transaction that is not a business combination and affects neither the accounting proﬁt nor the taxable proﬁt or loss at the time of the transaction; and # where, in respect of deductible temporary differences associated with investments in subsidiaries, joint ventures and associates, a deferred tax asset is recognised only if it is probable that the deductible temporary difference will reverse in the foreseeable future and that sufﬁcient taxable proﬁts will be available against which the temporary difference can be utilised. CRH 71 Notes on Financial Statements 1. Segment Information CRH is a 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 construction ﬁt-out and renewal. Based on these key strategic drivers across the value chain, the Group is organised into six business segments comprising Europe Materials (including activities in China and India), Europe Products, Europe Distribution, Americas Materials, Americas Products and Americas Distribution. No operating segments have been aggregated to form these segments. Materials businesses are predominantly engaged in the production and sale of a range of primary materials including cement, aggregates, readymixed concrete, asphalt/bitumen and agricultural and/or chemical lime. Products businesses are predominantly engaged in the production and sale of architectural and structural concrete products, clay products, insulation products, fabricated and tempered glass products, construction accessories and the provision of a wide range of inter-related products and services to the construction sector. Distribution businesses encompass builders merchanting activities and Do-It-Yourself (DIY) stores engaged in the marketing and sale of supplies to the construction sector and to the general public. The principal factors employed in the identiﬁcation of the six segments reﬂected in this note include the Group’s organisational structure, the nature of the reporting lines to the Chief Operating Decision-Maker (as deﬁned in IFRS 8 Operating 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), supplemental information based on EBITDA 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 segments for the purposes of the information presented to the Chief Operating Decision-Maker and are accordingly omitted from the detailed segmental analysis below. Although IFRS 8 is being applied for the ﬁrst time, there have been no changes to the basis of segmentation or to the basis of measurement of operating proﬁt in compiling the consolidated ﬁnancial statements in respect of the year ended 31st December 2009. In addition, there are no asymmetrical allocations to reporting segments which would require disclosure. A. Operating segments disclosures - Consolidated Income Statement data Segment revenue Europe Americas Continuing operations - year ended 31st December Materials Products Distribution Total Group 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 2,749 4,280 7,029 3,696 5,007 8,703 3,002 2,536 5,538 3,686 3,243 6,929 3,633 1,173 4,806 3,812 1,443 5,255 9,384 7,989 17,373 11,194 9,693 20,887 Group operating proﬁt before depreciation and amortisation (EBITDA) Europe Americas 434 670 806 724 1,104 1,530 Depreciation and amortisation (including asset impairment charges) 177 263 440 257 407 664 175 262 437 631 462 1,093 Europe Americas Group operating proﬁt (EBIT) Europe Americas Proﬁt on disposal of non-current assets (i) Finance costs (net) Group share of associates' proﬁt after tax (ii) Proﬁt before tax 72 CRH 283 173 456 167 150 317 116 23 139 392 369 761 168 131 299 224 238 462 204 39 243 67 24 91 137 15 152 258 116 374 921 882 1,803 1,456 1,209 2,665 64 24 88 194 92 286 411 437 848 510 445 955 26 (297) 48 732 407 417 824 1,049 792 1,841 69 (343) 61 1,628 1. Segment Information continued A. Operating segments disclosures - Consolidated Income Statement data continued Segment revenue includes €3,252 million (2008: €3,593 million) in respect of revenue applicable to construction contracts. Revenue derived through the supply of services and intersegment revenue is 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 33. In addition, due to the nature of building materials, which exhibit a low value-to-weight ratio, the Group’s revenue streams include a low level of cross-border transactions. Asset impairment charges of €41 million (2008: €14 million) relate to Europe Materials €9 million (2008: €nil million), Europe Products €19 million (2008: €12 million) and Americas Products €13 million (2008: €2 million). (i) Proﬁt on disposal of non-current assets Europe Americas (ii) Group share of associates' proﬁt after tax Europe Americas Continuing operations - year ended 31st December Materials Products Distribution Total Group 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 4 17 21 39 1 40 16 20 36 45 - 45 1 (1) - 1 - 1 15 2 17 5 - 5 5 - 5 7 - 7 15 1 16 11 - 11 10 16 26 47 1 48 46 23 69 61 - 61 B. Operating segments disclosures - Consolidated Balance Sheet Total assets Europe Americas Continuing operations - year ended 31st December Materials Products Distribution Total Group 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 4,224 5,166 9,390 4,319 5,481 9,800 2,879 2,221 5,100 3,191 2,662 5,853 1,991 611 2,602 2,174 738 2,912 9,094 7,998 9,684 8,881 17,092 18,565 Reconciliation to total assets as reported in the Consolidated Balance Sheet Investments accounted for using the equity method Other ﬁnancial assets Derivative ﬁnancial instruments (current and non-current) Income tax assets (current and deferred) Liquid investments Cash and cash equivalents Total assets as reported in the Consolidated Balance Sheet 962 128 249 414 66 1,372 20,283 743 127 426 333 128 799 21,121 Total liabilities Europe Americas 954 722 966 896 802 354 759 569 1,676 1,862 1,156 1,328 457 151 608 465 204 669 2,213 1,227 3,440 2,190 1,669 3,859 Reconciliation to total liabilities as reported in the Consolidated Balance Sheet Interest-bearing loans and borrowings (current and non-current) Derivative ﬁnancial instruments (current and non-current) Income tax liabilities (current and deferred) Capital grants Total liabilities as reported in the Consolidated Balance Sheet 5,324 86 1,711 12 10,573 7,298 146 1,647 14 12,964 CRH 73 1. Segment Information continued C. Operating segments disclosures - other items Additions to non-current assets Europe Property, plant and equipment (note 13) Financial assets (note 15) Americas Property, plant and equipment (note 13) Financial assets (note 15) D. Entity-wide disclosures Section 1: Information about products and services Continuing operations - year ended 31st December Materials Products Distribution Total Group 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 2009 €m 2008 €m 260 235 125 8 628 429 1 304 48 782 51 - 51 - 102 106 - 121 - 227 42 1 3 - 46 70 157 9 - 236 353 236 179 8 776 605 158 434 48 1,245 The Group’s revenue from external customers in respect of its principal products and services is analysed in the disclosures above. Section 2: Information about geographical areas and customers CRH has a presence in 35 countries worldwide. The revenues from external customers and non-current assets (as deﬁned in IFRS 8) attributable to the country of domicile and all foreign countries of operation are as follows; regions which exceed 10% of total external Group revenue have been highlighted separately on the basis of materiality. Country of domicile - Republic of Ireland Benelux (mainly Netherlands) Americas (mainly the United States) Other Group totals Year ended 31st December Revenues by destination As at 31st December Non-current assets 2009 €m 2008 €m 2009 €m 2008 €m 500 2,762 7,997 6,114 17,373 870 3,070 9,702 7,245 20,887 569 1,458 6,200 5,493 13,720 595 1,518 6,527 5,226 13,866 There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8. The individual entities within the Group each have a large number of customers spread across various activities, end-uses and geographies. 74 CRH 2. Proportionate Consolidation of Joint Ventures The Group’s share of the income and expenses of its joint ventures for the years ended 31st December 2009 and 2008, the assets and liabilities as at 31st December 2009 and 2008 and future purchase commitments for property, plant and equipment, which are proportionately consolidated in the Consolidated Financial Statements where appropriate, are as follows: Impact on Consolidated Income Statement Group share of: Revenue Cost of sales Gross proﬁt Operating costs Operating proﬁt Proﬁt on disposal of non-current assets Proﬁt before ﬁnance costs Finance costs (net) Proﬁt before tax Income tax expense Group proﬁt for the ﬁnancial year 2009 €m 1,095 (768) 327 (233) 94 1 95 (7) 88 (19) 69 2008 €m 1,172 (806) 366 (229) 137 1 138 (13) 125 (26) 99 Depreciation charge for year 55 50 Impact on Consolidated Balance Sheet Group share of: Non-current assets Current assets Total assets Total equity Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Net debt included above The Group’s share of net debt in joint ventures is non-recourse to the Group. Future purchase commitments for property, plant and equipment Contracted for but not provided in the ﬁnancial statements Authorised by the Directors but not contracted for A listing of the principal joint ventures is contained on page 129. 1,319 395 1,714 1,333 423 1,756 1,158 1,143 330 226 556 333 280 613 1,714 1,756 114 153 15 120 30 122 CRH 75 3. Operating Costs Selling and distribution costs Administrative expenses Other operating expenses Other operating income Total Other operating expenses and income comprise the following charges/(credits): Other operating expenses Share-based payment expense (note 7) Amortisation of intangible assets (note 14) Impairment of intangible assets (note 14) Impairment of property, plant and equipment (note 13) Mark-to-market of undesignated derivative ﬁnancial instruments (held-for-trading) Total Other operating income Excess of fair value of identiﬁable net assets over consideration paid (note 32) Mark-to-market of undesignated derivative ﬁnancial instruments (held-for-trading) Income from ﬁnancial assets Capital grants released (note 29) Total 2009 €m 2,410 1,392 112 (6) 3,908 28 43 11 30 - 112 - (1) (3) (2) (6) 2008 €m 2,753 1,486 82 (13) 4,308 24 43 - 14 1 82 (6) (2) (2) (3) (13) 4. Group Operating Proﬁt Group operating proﬁt has been arrived at after charging the following amounts (including the Group’s proportionate share of amounts in joint ventures): Depreciation - included in cost of sales - included in operating costs Total Foreign exchange gains and losses (net) - included in operating costs Total Operating lease rentals (minimum lease payments) - hire of plant and machinery - land and buildings - other operating leases Total Auditors' remuneration (included in administrative expenses) Audit fees (i) Audit-related fees (ii) Tax fees All other fees (iii) 2009 €m 570 194 764 2 2 86 152 44 282 13 1 1 - 15 2008 €m 563 204 767 (6) (6) 104 145 36 285 14 2 1 - 17 (i) Audit fees include Sarbanes-Oxley attestation. (ii) Audit-related fees include acquisition-related due diligence amounting to €nil million (2008: €1.3 million) and other attestation services that are closely related to the performance of the audit. In addition to the due diligence fees expensed in the Consolidated Income Statement and included in the audit-related fees caption above, further due diligence fees of €nil (2008: €0.6 million) paid to the auditors have been included in the fair value of purchase consideration of business combinations for the respective periods; these amounts are reﬂected in the totals presented in note 32. (iii) All other fees relate principally to transaction advisory services. 76 CRH 5. Directors’ Emoluments and Interests Directors’ emoluments (which are included in administrative expenses in note 3) and interests are given in the Report on Directors’ Remuneration on pages 51 to 59 of this Annual Report. 6. Employment The average number of employees (including CRH’s proportionate share of employees in joint ventures) is as follows: Year ended 31st December 2009 Materials Products Distribution Total Group Europe Americas Total Year ended 31st December 2008 Europe Americas Total 12,599 18,075 30,674 14,560 22,028 36,588 18,454 16,349 34,803 21,265 20,227 41,492 10,997 3,348 14,345 11,499 3,993 15,492 42,050 37,772 79,822 47,324 46,248 93,572 Employment costs charged in the Consolidated Income Statement (including the Group’s proportionate share of joint ventures’ costs) are analysed as follows: Wages and salaries Social welfare costs Other employment-related costs Share-based payment expense (note 7) Total pension costs (note 28) Total Total charge analysed between: Cost of sales Operating costs Finance costs (net) - applicable to deﬁned beneﬁt pension schemes (note 8) Total 2009 €m 2,711 340 418 28 179 3,676 1,834 1,834 8 3,676 2008 €m 3,077 377 401 24 176 4,055 2,061 2,009 (15) 4,055 CRH 77 7. Share-based Payment Expense Share option expense Performance Share Plan expense 2009 €m 18 10 28 2008 €m 17 7 24 €2 million (2008: €1 million) of the total expense reported in the Consolidated Income Statement relates to the Directors. Share Option Schemes The Group operates share option schemes, which were approved by shareholders in May 2000 (replacing the schemes which were approved in May 1990), and savings-related share option schemes, also approved by shareholders in May 2000. The general terms and conditions applicable to the share options granted by CRH under the share option schemes are set out in the Report on Directors’ Remuneration on pages 51 to 59. The Group’s employee share options are equity-settled share-based payments as deﬁned in IFRS 2 Share-based Payment. The measurement requirements of IFRS 2 have been implemented in respect of share options that were granted after 7th November 2002. As options to acquire Ordinary Shares in the Company are traditionally granted in April of each year, the expense reﬂected in operating costs in the Consolidated Income Statement of €18 million (2008: €17 million) relates to options granted in April 2003 and in the subsequent periods. The expense has been arrived at through applying a trinomial valuation technique; this is a lattice option- pricing model in accordance with IFRS 2. All unexercised options and share awards under the Group’s various share plans have been adjusted for the bonus element of the Rights Issue completed in March 2009 - see note 30 (iii). Throughout this note, prior year disclosures for options and share awards have not been restated for this bonus element. Details of options granted under the share option schemes (excluding savings-related share option schemes) A summary of activity under the Company’s share option schemes in the two years ended 31st December 2009 and 31st December 2008 together with the weighted average exercise price of the share options is as follows: Share options Outstanding at beginning of year Rights Issue adjustment - March 2009 Granted (a) Exercised (b) Lapsed Outstanding at end of year Weighted average exercise price Number of options 2009 Weighted average exercise price Number of options 2008 €21.03 / Stg£16.46 n/a €16.93 / Stg£15.30 €14.92 / Stg£10.17 €21.92 / Stg£16.31 €19.21 / Stg£15.46 24,025,246 2,594,915 2,596,000 (3,562,399) (1,027,740) 24,626,022 €20.38 / Stg£16.06 n/a €23.87 / Stg£19.06 €15.89 / Stg£13.06 €22.89 / Stg£18.22 €21.03 / Stg£16.46 23,304,553 - 2,912,000 (1,558,866) (632,441) 24,025,246 Exercisable at end of year €16.00 / Stg£11.57 11,816,179 €17.53 / Stg£12.48 14,118,956 (a) Pursuant to the 2000 share option schemes, employees were granted options over 2,596,000 (2008: 2,912,000) of the Company’s Ordinary Shares on 14th April 2009. These options may be exercised after the expiration of three years from their date of grant, subject to speciﬁed EPS growth targets being achieved. All options granted have a life of ten years. (b) The weighted average share price at the date of exercise of these options was €18.29 (2008: €23.53). The weighted average remaining contractual life for the share options outstanding as at 31st December 2009 is 5.16 years (2008: 5.24 years). The range of exercise prices for the 24,626,022 (2008: 24,025,246) options outstanding at the end of the year was €11.86 - €29.86 for the 24,478,108 (2008: 23,878,042) euro-denominated options (2008: €13.15 - €33.12) and Stg£8.17 - Stg£20.23 for the 147,914 (2008: 147,204) sterling-denominated options (2008: Stg£9.06 - Stg£22.43). The CRH share price at 31st December 2009 was €19.01 (approximately Stg£16.88) (2008: €17.85/approximately Stg£17.00). The following analysis shows the number of outstanding share options with prices lower/higher than the year-end share price: Number of options with prices lower than year-end price Exercisable Not exercisable Number of options with prices higher than year-end price Exercisable Not exercisable Total options outstanding 78 CRH 2009 2008 11,816,179 4,583,144 16,399,323 6,075,620 2,009,145 8,084,765 - 8,226,699 8,226,699 8,043,336 7,897,145 15,940,481 24,626,022 24,025,246 7. Share-based Payment Expense continued The weighted average fair values assigned to options granted in 2009 and 2008 under the 2000 Share Option Schemes, which were computed in accordance with the trinomial valuation methodology, were as follows: Granted during 2009 (amounts in €) Granted during 2008 (amounts in €) * € equivalents at the date of grant The fair values of these options were determined using the following assumptions: Weighted average exercise price (amounts in €) Risk-free interest rate (%) Expected dividend payments over the expected life (€ cent) Expected volatility (%) Expected life in years Denominated in € 3-year 3.05 4.46 2009 3-year 16.92 2.38 320.1 24.5 5 Stg£* 3-year 2.97 4.46 2008 3-year 23.87 3.61 401.26 21.7 5 The expected volatility was determined using an historical sample of 61 month-end CRH share prices. Share options are granted at market value at the date of grant. 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 option grants were factored into the determination of fair value. The terms of the options granted under the share option schemes do not contain any market conditions within the meaning of IFRS 2. No relevant modiﬁcations were effected to the share option schemes during the course of 2009 or 2008. Details of options granted under the savings-related share option schemes Savings-related share options Outstanding at beginning of year Rights Issue adjustment - March 2009 Granted (a) Exercised (b) Lapsed Outstanding at end of year Weighted average exercise price Number of options 2009 Weighted average exercise price Number of options 2008 €21.20 / Stg£15.51 n/a €11.18 / Stg£11.36 €13.23 / Stg£11.18 €18.58 / Stg£14.21 €13.85 / Stg£12.62 1,033,071 103,787 932,491 (118,477) (580,220) 1,370,652 €18.37 / Stg£12.53 n/a €20.40 / Stg£16.07 €11.07 / Stg£8.34 €22.67 / Stg£15.88 €21.20 / Stg£15.51 1,259,082 - 520,741 (487,350) (259,402) 1,033,071 Exercisable at end of year €19.60 / Stg£14.14 5,193 €11.87 / Stg£10.69 20,086 (a) Pursuant to the savings-related share option schemes operated by the Company in the Republic of Ireland and the United Kingdom, employees were granted options over 932,491 of the Company’s Ordinary Shares on 2nd April 2009 (2008: 302,405 share options on 16th May 2008 and 218,336 share options on 3rd April 2008). Options granted during the year comprise options over 511,689 (2008: 248,572) shares which are normally exercisable within a period of six months after the third anniversary of the contract. Options over the remaining 420,802 (2008: 272,169) shares are normally exercisable within a period of six months of the ﬁfth anniversary of the contract. Options granted under the savings-related share option schemes are not subject to EPS growth targets. The exercise price at which the options are granted under the schemes represents a discount of 15% to the market price on the date of grant. (b) The weighted average share price at the date of exercise of these options was €17.71 (2008: €17.21). The weighted average remaining contractual life for the savings-related share options outstanding as at 31st December 2009 is 3.34 years (2008: 2.89 years). The range of exercise prices for the 1,370,652 (2008: 1,033,071) savings-related share options outstanding at the end of the year was €11.18 - €24.25 for the 665,886 (2008: 496,634) euro-denominated options (2008: €10.63 - €26.89) and Stg£11.16 - Stg£16.78 for the 704,766 (2008: 536,437) sterling-denominated options (2008: Stg£7.18 - Stg£18.61). The weighted average 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: CRH 79 7. Share-based Payment Expense continued Granted during 2009 (amounts in €) Granted during 2008 (amounts in €) * € equivalents at the date of grant The fair values of these options were determined using the following assumptions: Weighted average exercise price (amounts in €) Risk-free interest rate (%) Expected dividend payments over the expected life (€ cent) Expected volatility (%) Expected life in years Denominated in € 3-year € 5-year Stg£* 3-year Stg£* 5-year 6.86 5.85 6.92 6.41 5.67 5.98 5.77 6.56 2009 2008 3-year 5-year 3-year 5-year 12.04 1.80 188.75 28.1 3 11.82 2.40 320.10 24.5 5 20.72 3.95/3.58 219.73 21.6/21.8 3 20.57 4.00/3.69 401.26 20.9/21.7 5 The expected volatility was determined using an historical sample of 37 month-end CRH share prices in respect of the three-year savings-related share options and 61 month-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 option 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 2. No relevant modiﬁcations were effected to the savings- related share option schemes during the course of 2009 or 2008. Performance Share Plan The Group operates a Performance Share Plan which was approved by shareholders in May 2006. The general terms and conditions applicable to shares awarded by CRH under this Plan are set out in the Report on Directors’ Remuneration on pages 51 to 59. Shares awarded under the Group’s Performance Share Plan are equity-settled share-based payments as deﬁned in IFRS 2 Share-based Payment. IFRS 2 requires that a recognised valuation methodology be employed to determine the fair value of shares awarded and stipulates that this methodology should be consistent with methodologies used for the pricing of ﬁnancial instruments. The expense of €10 million (2008: €7 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. Granted in 2006 Granted in 2007 Granted in 2008 Granted in 2009 Share price at date of award* Period to earliest release date Number of Shares Initial award Rights Issue adjustment Cumulative lapses/releases to date** Net outstanding Fair value €24.82 3 years 627,750 62,249 689,999 - €12.11 €33.29 3 years 594,750 60,122 45,218 609,654 €17.14 €23.45 3 years 741,000 76,331 43,272 774,059 €10.27 €17.00 3 years 1,658,000 - - 1,658,000 €8.29 * Share prices in respect of awards prior to the Rights Issue have not been rights adjusted. ** In March 2009, 474,997 (74.99% of the initial award net of lapses and adjusted for the Rights Issue) of the shares awarded under the Performance Share Plan in 2006 vested and accordingly were released to the participants of the scheme. The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer group total shareholder return, volatilities and correlations, together with the following assumptions: Risk-free interest rate (%) Expected volatility (%) The expected volatility was determined using an historical sample of 37 month-end CRH share prices. 80 CRH 2009 2008 1.77 28.1 3.49 21.8 8. Finance Costs and Finance Revenue Finance costs Interest payable on bank loans and overdrafts repayable wholly within ﬁve years: - by instalments - not by instalments Interest payable under ﬁnance leases and hire purchase contracts Interest payable on other borrowings Total interest payable Unwinding of discount element of provisions for liabilities (note 26) Unwinding of discount applicable to deferred and contingent acquisition consideration Income on interest rate and currency swaps Mark-to-market of derivatives and related ﬁxed rate debt: - interest rate swaps (i) - currency swaps and forward contracts - ﬁxed rate debt (i) Interest cost on deﬁned beneﬁt pension scheme liabilities Total ﬁnance costs Finance revenue Interest receivable on loans to joint ventures and associates Interest receivable on liquid investments Interest receivable on cash and cash equivalents Expected return on deﬁned beneﬁt pension scheme assets Total ﬁnance revenue Finance costs (net) 2009 €m 2008 €m 4 223 1 149 377 15 4 (77) 133 7 (135) 95 419 (3) (4) (28) (35) (87) (122) 297 11 275 2 123 411 16 5 (34) (283) 3 287 98 503 (4) (8) (35) (47) (113) (160) 343 (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 fair 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. 9. Group Share of Associates’ Proﬁt after Tax The Group’s share of associates’ proﬁt after tax is equity-accounted and is presented as a single-line item in the Consolidated Income Statement. The Group’s share of proﬁt after tax generated by associates is analysed as follows between the principal Consolidated Income Statement captions: Group share of: Revenue Proﬁt before ﬁnance costs Finance costs (net) Proﬁt before tax Income tax expense Proﬁt after tax 2009 €m 2008 €m 1,029 1,006 64 (5) 59 (11) 48 86 (3) 83 (22) 61 An analysis of the proﬁt after tax by operating segment is presented in note 1. The aggregated balance sheet data (analysed between current and non-current assets and liabilities) in respect of the Group’s investment in associates is presented in note 15. CRH 81 10. Income Tax Expense Current tax Republic of Ireland Corporation tax at 12.5% (2008: 12.5%) Less: manufacturing relief Tax on disposal of non-current assets Overseas tax Tax on disposal of non-current assets - Overseas Total current tax Deferred tax Origination and reversal of temporary differences: Deﬁned beneﬁt pension obligations Share-based payment expense Derivative ﬁnancial instruments Other items Total deferred tax Income tax expense Reconciliation of applicable tax rate to effective tax rate Proﬁt before tax (€m) Tax charge expressed as a percentage of proﬁt before tax (effective tax rate): - current tax expense only - total income tax expense (current and deferred) 2009 €m 2008 €m (5) - 1 (4) 29 11 36 11 (3) (11) 101 98 134 21 (3) 3 21 239 17 277 5 2 (1) 83 89 366 732 1,628 4.9% 18.3% 17.0% 22.5% The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of the Group: Irish corporation tax rate Manufacturing relief in the Republic of Ireland Higher tax rates on overseas earnings Other items (comprising items not chargeable to tax/expenses not deductible for tax) Total effective tax rate Current and deferred tax movements recognised directly within equity Recognised within the Consolidated Statement of Comprehensive Income: Deferred tax Deﬁned beneﬁt pension obligations Cash ﬂow hedges Recognised within the Consolidated Statement of Changes in Equity: Current tax Share option exercises Deferred tax Share-based payment expense Income tax recognised within equity 82 CRH % of proﬁt before tax 12.5 12.5 - (0.2) 3.8 10.5 2.0 (0.3) 18.3 22.5 €m €m 20 (2) 18 1 2 3 21 67 4 71 2 (15) (13) 58 10. Income Tax Expense continued Factors that may affect future tax charges and other disclosure requirements Excess of capital allowances over 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 and associates and interests in joint ventures No provision has been made for temporary differences applicable to investments in subsidiaries and interests in 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. 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. Given that participation exemptions and tax credits would be available in the context of the Group’s investments in subsidiaries and joint ventures in the majority of the jurisdictions in which the Group operates, the aggregate amount of temporary differences in respect of which deferred tax liabilities have not been recognised would be immaterial (with materiality deﬁned in the context of the year-end 2009 ﬁnancial statements). Other considerations The total tax charge in future periods will be affected by any changes to the corporation tax rates in force in the countries in which the Group operates. The current tax charge will also be impacted by changes in the excess of tax depreciation (capital allowances) over accounting depreciation and the use of tax credits. 11. Dividends As shown in note 30, the Company has various classes of share capital in issue comprising Ordinary Shares, 5% Cumulative Preference Shares and 7% ‘A’ Cumulative Preference Shares. The dividends paid and proposed in respect of these classes of share capital are as follows: Dividends to shareholders Preference 5% Cumulative Preference Shares €3,175 (2008: €3,175) 7% 'A' Cumulative Preference Shares €77,521 (2008: €77,521) Equity (i) Final - 43.74c (restated) per Ordinary Share in May 2009 (43.28c, restated paid in May 2008) Interim - paid 18.50c per Ordinary Share (2008: 18.48c, restated) Total Dividends proposed (memorandum disclosure) Equity (i) Final 2009 - proposed 44.00c per Ordinary Share (2008: 43.74c, restated) Reconciliation to Consolidated Statement of Cash Flows Dividends to shareholders Less: issue of shares in lieu of dividends (ii) Dividends paid to equity holders of the Company Dividends paid by subsidiaries to minority interest Total dividends paid 2009 €m 2008 €m - - 258 128 386 - - 260 109 369 307 258 386 (148) 238 7 245 369 (22) 347 5 352 (i) Comparative per share amounts for 2008 have been restated to reﬂect the bonus element of the March 2009 Rights Issue - see note 12 (iii) below. (ii) In accordance with the scrip dividend scheme, shares to the value of €148 million (2008: €22 million) were issued in lieu of dividends. CRH 83 12. Earnings per Ordinary Share The computation of basic and diluted earnings per Ordinary Share is set out below: Numerator computations - basic and diluted earnings per Ordinary Share Group proﬁt for the ﬁnancial year Proﬁt attributable to minority interest Proﬁt attributable to equity holders of the Company Preference dividends Proﬁt attributable to ordinary equity holders of the Company Amortisation of intangible assets (including impairments) Proﬁt attributable to ordinary equity holders of the Company excluding amortisation of intangible assets Depreciation charge (including impairments) Numerator for "cash" earnings per Ordinary Share (i) Denominator computations Denominator for basic earnings per Ordinary Share Weighted average number of Ordinary Shares (millions) outstanding for the year (ii) Effect of dilutive potential Ordinary Shares (employee share options) (millions) (ii) and (iv) Denominator for diluted earnings per Ordinary Share Basic earnings per Ordinary Share - including amortisation of intangible assets - excluding amortisation of intangible assets Diluted earnings per Ordinary Share - including amortisation of intangible assets - excluding amortisation of intangible assets "Cash" earnings per Ordinary Share (i) 2009 €m 2008 €m 598 (6) 592 - 592 54 646 794 1,440 670.8 2.7 673.5 88.3c 96.3c 87.9c 95.9c 1,262 (14) 1,248 - 1,248 43 1,291 781 2,072 Restated (iii) 593.9 3.3 597.2 210.2c 217.4c 209.0c 216.2c 214.7c 348.9c (i) “Cash” earnings per Ordinary Share, which is computed through adding amortisation of intangible assets, depreciation and asset impairments to proﬁt attributable to ordinary equity holders of the Company, is presented here for information as management believes it is a useful indicator of the Group’s ability to generate cash from operations. Cash earnings per share is not a recognised measure under generally accepted accounting principles. (ii) Basic and diluted earnings per Ordinary Share: 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 re-purchased 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 30. (iii) As set out in note 30 (iii) 152,087,952 new Ordinary/Income Shares were issued in March 2009 at €8.40 per share on the basis of two new Ordinary/Income Shares for every seven existing Ordinary/Income Shares under the terms of a Rights Issue. The actual cum rights price on 3rd March 2009, the last day of quotation cum rights, was €15.065, and the theoretical ex rights price for an Ordinary/Income Share was therefore €13.5839 per share. The comparative earnings per share ﬁgures have been calculated by applying a factor of 1.1090 to the average number of shares in issue for 2008 in order to adjust for the bonus element of the Rights Issue. (iv) The issue of certain Ordinary Shares in respect of employee share options and Performance Share Plan awards are contingent upon the satisfaction of speciﬁed performance conditions in addition to the passage of time. In accordance with IAS 33 Earnings per Share, these contingently issuable Ordinary Shares (totalling 15,851,556 at 31st December 2009 and 13,036,617 on a rights-adjusted basis at 31st December 2008) are excluded from the computation of diluted earnings per Ordinary Share where the conditions governing exercisability have not been satisﬁed as at the end of the reporting period. 84 CRH 13. Property, Plant and Equipment At 31st December 2009 Cost/deemed cost Accumulated depreciation (and impairment charges) Net carrying amount At 1st January 2009, net carrying amount Translation adjustment Reclassiﬁcations Additions at cost (ii) Arising on acquisition (note 32) Disposals at net carrying amount Depreciation charge for year Impairment charge for year (iii) At 31st December 2009, net carrying amount The equivalent disclosure for the prior year is as follows: At 31st December 2008 Cost/deemed cost Accumulated depreciation (and impairment charges) Net carrying amount At 1st January 2008, net carrying amount Translation adjustment Reclassiﬁcations Additions at cost (ii) Arising on acquisition (note 32) Disposals at net carrying amount Depreciation charge for year Impairment charge for year (iii) At 31st December 2008, net carrying amount At 1st January 2008 Cost/deemed cost Accumulated depreciation Net carrying amount Land and buildings (i) €m Plant and machinery €m Transport €m Assets in course of construction €m 5,710 (1,245) 4,465 4,321 (59) 279 70 46 (39) (146) (7) 4,465 5,434 (1,113) 4,321 4,030 61 58 141 218 (41) (140) (6) 4,321 4,963 (933) 4,030 7,113 (3,758) 3,355 3,567 (61) 164 207 51 (19) (531) (23) 3,355 6,952 (3,385) 3,567 3,416 8 128 413 179 (33) (536) (8) 3,567 6,303 (2,887) 3,416 803 (504) 299 380 (8) (2) 17 9 (10) (87) - 299 847 (467) 380 378 13 (4) 71 20 (7) (91) - 380 731 (353) 378 416 - 416 620 (5) (441) 238 4 - - - 416 620 - 620 402 (26) (182) 414 12 - - - 620 402 - 402 Total €m 14,042 (5,507) 8,535 8,888 (133) - 532 110 (68) (764) (30) 8,535 13,853 (4,965) 8,888 8,226 56 - 1,039 429 (81) (767) (14) 8,888 12,399 (4,173) 8,226 (i) The carrying value of mineral-bearing land included in the land and buildings category above amounted to €1,797 million at the balance sheet date (2008: €1,780 million). (ii) Borrowing costs capitalised during the ﬁnancial year amounted to €9.5 million (2008: €13 million). The average capitalisation rate employed to determine the amount of borrowing costs eligible for capitalisation was 5.5% (2008: 5.5%). (iii) Property, plant and equipment assets are reviewed for potential impairment at each reporting date by applying a series of external and internal indicators speciﬁc to the assets under consideration; these indicators would 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 inter alia. In the event that there is an indication that an asset (or collection of assets) may be impaired, the Group measures the potential impairment using a discounted cash ﬂow technique and records an impairment where the recoverable amount (being the higher of fair value less costs to sell and value-in-use) is less than the carrying amount. The impairment charge for 2009 of €30 million (2008: €14 million) represents charges across a number of business units in the Group, none of which is individually material. CRH 85 13. Property, Plant and Equipment continued Assets held under ﬁnance leases The net carrying amount and the depreciation charge during the period in respect of assets held under ﬁnance leases, and capitalised in property, plant and equipment, are as follows: Cost Accumulated depreciation Net carrying amount Depreciation charge for year Future purchase commitments for property, plant and equipment Contracted for but not provided in the ﬁnancial statements Authorised by the Directors but not contracted for 14. Intangible Assets At 31st December 2009 Cost Accumulated amortisation (and impairment charges) Net carrying amount At 1st January 2009, net carrying amount Translation adjustment Arising on acquisition (note 32) Disposals Amortisation charge for year (ii) Impairment charge for year At 31st December 2009, net carrying amount The equivalent disclosure for the prior year is as follows: At 31st December 2008 Cost Accumulated amortisation (and impairment charges) Net carrying amount At 1st January 2008, net carrying amount Translation adjustment Arising on acquisition (note 32) Disposals Amortisation charge for year (ii) At 31st December 2008, net carrying amount At 1st January 2008 Cost Accumulated amortisation (and impairment charges) Net carrying amount 2009 €m 2008 €m 79 (45) 34 9 91 (43) 48 8 272 433 139 133 Other intangible assets Goodwill €m Marketing- related €m Customer- related (i) €m Contract- based €m 3,976 (57) 3,919 3,884 (21) 64 (1) - (7) 3,919 3,934 (50) 3,884 3,482 37 366 (1) - 3,884 3,532 (50) 3,482 35 (20) 15 22 (1) - - (5) (1) 15 36 (14) 22 18 - 9 - (5) 22 27 (9) 18 274 (128) 146 185 (2) 2 - (36) (3) 146 278 (93) 185 175 4 42 - (36) 185 230 (55) 175 22 (7) 15 17 - - - (2) - 15 22 (5) 17 17 1 1 - (2) 17 21 (4) 17 Total €m 4,307 (212) 4,095 4,108 (24) 66 (1) (43) (11) 4,095 4,270 (162) 4,108 3,692 42 418 (1) (43) 4,108 3,810 (118) 3,692 (i) The customer-related intangible assets relate predominantly to non-contractual customer relationships. (ii) Goodwill is not subject to amortisation under IFRS. The useful lives of all other intangible assets are ﬁnite and, in general, range from one to ten years dependent on the nature of the asset. Due to the asset-intensive nature of operations in the Materials business segments, no signiﬁcant intangible assets are recognised on business combinations in these segments. Business combinations in the Group’s Products and Distribution segments do not exhibit the same level of asset intensity and intangible assets are recognised, where appropriate, on such combination activity. 86 CRH 14. Intangible Assets continued Goodwill The goodwill balances disclosed above include goodwill arising on the acquisition of joint ventures which are accounted for on the basis of proportionate consolidation. Goodwill arising in respect of investments in associates is included in ﬁnancial assets in the Consolidated Balance Sheet (see note 15). The net book value of goodwill capitalised under previous GAAP (Irish GAAP) as at the transition date to IFRS (1st 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 units 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 8 Operating Segments. A total of 29 (2008: 27) cash-generating units have been identiﬁed and these are analysed below between the six business segments in the Group. All businesses within the various cash-generating units exhibit similar and/ or consistent proﬁt margin and asset intensity characteristics. Assets, liabilities, deferred tax and goodwill have been assigned to the cash-generating units on a reasonable and consistent basis. Investments accounted for using the equity method have not been allocated given that such investments fall to be assessed for impairment under IAS 39 Financial Instruments: Recognition and Measurement. Europe Materials Europe Products Europe Distribution Americas Materials Americas Products Americas Distribution Total cash-generating units Cash-generating units Goodwill 2009 2008 11 3 1 8 5 1 29 10 4 1 6 5 1 27 2009 €m 751 707 573 1,037 586 265 3,919 2008 €m 747 708 558 992 603 276 3,884 Impairment testing methodology and results Goodwill is subject to impairment testing on an annual basis. The recoverable amount of each of the 29 cash-generating units is determined based on a value-in-use computation, which is the only methodology applied by the Group and which has been selected due to the impracticality of obtaining fair value less costs to sell measurements for each reporting period. The cash ﬂow forecasts are 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 a 20-year annuity, with the exception of certain long-lived cement assets, where an assumption of a 40-year annuity has been used in 2009. The projected cash ﬂows assume zero growth in real cash ﬂows beyond the initial evaluation period. The value-in-use represents the present value of the future cash ﬂows, including the terminal value, discounted at a rate appropriate to each cash-generating unit. The real pre-tax discount rates used range from 7.9% to 12.0% (2008: 8.1% to 13.4%); the average rate is in line with the Group’s estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model. An impairment charge of €7 million (2008: €nil million) has been recognised by the Group; this charge relates to the rationalisation of two individual sites in Europe Products. 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 (i.e. operating proﬁt before depreciation and amortisation of intangible assets) margins, net cash ﬂows, discount rates used and the duration of the discounted cash ﬂow model. Sensitivity analysis Sensitivity analysis has been performed in respect of 6 of the 29 CGUs. These 6 CGUs had aggregate goodwill of €784 million and an aggregate carrying value of €2,566 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 6 CGUs selected for sensitivity analysis testing: Reduction in EBITDA margin Reduction in proﬁt before tax Reduction in net cash ﬂow Increase in pre-tax discount rate 0.8 to 3.7 percentage points 11.1% to 34.9% 8.3% to 19.5% 1.1 to 2.6 percentage points Additional disclosures - signiﬁcant goodwill amounts The goodwill allocated to each of the 29 (2008: 27) cash-generating units accounts for between 10% and 20% of the total carrying amount of €3,919 million in one instance and less than 10% of the total carrying amount in all other cases. The additional disclosures required under IAS 36 Impairment of Assets are as follows: Carrying amount of goodwill allocated to the cash-generating unit at date of testing Carrying amount of indeﬁnite-lived intangible assets allocated to the cash-generating unit Basis on which the recoverable amount of the cash-generating unit has been assessed Discount rate applied to the cash ﬂow projections (real pre-tax) Excess of value-in-use over carrying amount Europe Distribution 2009 2008 €573m Nil Value-in-use 10.0% €307m €492m Nil Value-in-use 10.2% €938m The key assumptions, methodology used and values applied to each of the key assumptions for this cash-generating unit are in line with those addressed above. Given the magnitude of the excess of value-in-use over carrying amount, and the reasonableness of the key assumptions employed, no further disclosures relating to sensitivity of the value-in-use computations for this CGU were considered to be warranted. CRH 87 15. Financial Assets At 1st January 2009 Translation adjustment Associate becoming a subsidiary (note 32) Investments and advances (i) Disposals and repayments Retained proﬁt At 31st December 2009 The equivalent disclosure for the prior year is as follows: At 1st January 2008 Translation adjustment Arising on acquisition (note 32) Investments and advances (i) Disposals and repayments Retained proﬁt At 31st December 2008 The total investment in associates is analysed as follows: Non-current assets Current assets Non-current liabilities Current liabilities Net assets Investments accounted for using the equity method (i.e. associates) Share of net assets €m Goodwill €m Loans €m Total €m Other (ii) €m 532 (13) (7) 144 (2) 16 670 465 2 1 54 (8) 18 532 208 (3) - 90 - (6) 289 105 1 - 102 - - 208 3 - - 1 (1) - 3 4 - - - (1) - 3 743 (16) (7) 235 (3) 10 962 574 3 1 156 (9) 18 743 2009 €m 1,065 581 (302) (382) 962 127 (3) - 9 (5) - 128 78 5 2 50 (8) - 127 2008 €m 792 469 (248) (270) 743 A listing of the principal associates is contained on page 129. The Group holds a 21.23% stake (2008: 21.66%) in Groupe SAMSE, a publicly-quoted distributor of building materials to the merchanting sector in France which is accounted for as an associate investment above. The fair value of this investment as at the balance sheet date amounted to €42 million (2008: €40 million). (i) The major investment during the year was the purchase on 5th January 2009 of a 26% stake in Yatai Cement, the leading cement manufacturer in northeastern China, for a consideration of €224 million. (ii) Other ﬁnancial assets primarily comprise trade investments carried at historical cost and loans extended by the Group to joint ventures (which are treated as loans and receivables under IAS 39 Financial Instruments: Recognition and Measurement and are included within ﬁnancial assets at amortised cost). The balance as at 31st December 2009 comprises €14 million primarily in respect of trade investments and €114 million in respect of loans to joint ventures (2008: €15 million and €112 million respectively). 16. Disposal of Non-current Assets Non-current assets disposed of at net carrying amount: - property, plant and equipment (note 13) - intangible assets (note 14) - ﬁnancial assets (note 15) Total Proﬁt on disposal of non-current assets Proceeds from disposal of non-current assets - Consolidated Statement of Cash Flows 88 CRH 2009 €m 2008 €m 68 1 8 77 26 103 81 1 17 99 69 168 17. Inventories Raw materials Work-in-progress (i) Finished goods Total inventories at the lower of cost and net realisable value 2009 €m 585 82 1,341 2,008 2008 €m 749 110 1,614 2,473 (i) Work-in-progress includes €nil million (2008: €nil million) in respect of the cumulative costs incurred, net of amounts transferred to cost of sales under percentage- of-completion accounting, for construction contracts in progress at the balance sheet date. Write-downs of inventories recognised as an expense within cost of sales amounted to €41 million (2008: €17 million). None of the above carrying amounts has been pledged as security for liabilities entered into by the Group. 18. Trade and Other Receivables All current Trade receivables Amounts receivable in respect of construction contracts (i) Total trade receivables, gross Provision for impairment Total trade receivables, net Other receivables (ii) Amounts receivable from associates Prepayments and accrued income Total 2009 €m 2008 €m 1,608 350 1,958 (158) 1,800 477 1 176 2,454 2,100 458 2,558 (161) 2,397 486 - 213 3,096 (i) Unbilled revenue at the balance sheet date in respect of construction contracts amounting to €89 million (2008: €119 million). (ii) Other receivables include retentions held by customers in respect of construction contracts at the balance sheet date amounting to €82 million (2008: €94 million). Trade receivables and amounts receivable in respect of construction contracts are in general receivable within 90 days of the balance sheet date. A general discussion of the terms and conditions applicable to related party receivables is provided in note 33 to the ﬁnancial statements. The carrying amounts of trade and other receivables approximate their fair value largely due to the short-term maturities of these instruments. Provision for impairment The movements in the provision for impairment of receivables during the ﬁnancial year were as follows: At 1st January Translation adjustment Provided during year Written-off during year Recovered during year At 31st December 161 (1) 71 (68) (5) 158 158 1 63 (51) (10) 161 Information in relation to the Group’s credit risk management is provided in note 21 to the ﬁnancial statements. Aged analysis The aged analysis of gross trade receivables and amounts receivable in respect of construction contracts at the balance sheet date was as follows: Neither past due nor impaired Past due but not impaired: - less than 60 days - 60 days or greater but less than 120 days - 120 days or greater Past due and impaired (partial or full provision) Total 1,528 2,148 112 89 32 197 1,958 71 65 40 234 2,558 CRH 89 19. Trade and Other Payables Current Trade payables Irish employment-related taxes Other employment-related taxes Value added tax Deferred and contingent acquisition consideration Other payables (i) Accruals and deferred income Amounts payable to associates Subtotal – current Non-current Other payables Deferred and contingent acquisition consideration (stated at net present cost) due as follows: - between one and two years - between two and ﬁve years - after ﬁve years Subtotal – non-current 2009 €m 2008 €m 1,172 3 76 85 32 372 682 49 2,471 74 16 35 30 155 1,440 3 78 92 44 495 731 36 2,919 36 33 36 32 137 (i) Other payables include billings in excess of costs incurred together with advances received from customers in respect of work to be performed under construction contracts and foreseeable losses thereon amounting to €174 million at the balance sheet date (2008: €190 million). The carrying amounts of trade and other payables approximate their fair value largely due to the short-term maturities of these instruments. 20. Movement in Working Capital At 1st January 2009 Translation adjustment Arising on acquisition (note 32) Movement in ﬁnance-related receivables Deferred and contingent acquisition consideration: - arising on acquisitions during the year (note 32) - paid during the year Interest accruals (Decrease)/increase in working capital At 31st December 2009 The equivalent disclosure for the prior year is as follows: At 1st January 2008 Translation adjustment Arising on acquisition (note 32) Deferred and contingent acquisition consideration: - arising on acquisitions during the year (note 32) - paid during the year Interest accruals Increase/(decrease) in working capital At 31st December 2008 90 CRH Trade and other receivables €m Trade and other payables €m Inventories €m 2,473 (34) 11 - - - - (442) 2,008 2,226 8 66 - - - 173 2,473 3,096 (31) 22 115 - - 4 (752) 2,454 3,199 26 126 - - (4) (251) 3,096 (3,056) 14 (14) - (8) 37 (10) 411 (2,626) (3,097) (15) (89) (12) 34 (12) 135 (3,056) Total €m 2,513 (51) 19 115 (8) 37 (6) (783) 1,836 2,328 19 103 (12) 34 (16) 57 2,513 21. 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. 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 31st December 2009 amounted to 1.4 times (2008: 3.4 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: Capital and reserves attributable to the Company's equity holders Net debt (note 25) Capital and net debt Financial risk management objectives and policies 2009 €m 9,637 3,723 13,360 2008 €m 8,087 6,091 14,178 The Group uses ﬁnancial instruments throughout its businesses: interest-bearing loans and borrowings, cash and cash equivalents, short-dated liquid investments 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 Group Treasurer reports to the Finance Director and the activities of the corporate treasury function are subject to regular internal audit. Systems 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. 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 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 by the Group’s corporate treasury function 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 a pre-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 39 to 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. The following table demonstrates the impact on proﬁt before tax of a range of possible changes in the interest rates applicable to net ﬂoating rate borrowings, with all other variables held constant: Percentage change in cost of borrowings Impact on proﬁt before tax +/- 1% +/- 0.5% -/+ €8m -/+ €4m -/+ €32m -/+ €16m 2009 2008 CRH 91 21. Capital and Financial Risk Management continued Foreign currency risk Due to the nature of building materials, which in general exhibit a low value-to-weight ratio, CRH’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 and are shown in note 4. Given the Group’s presence in 35 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 25. 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, partially to hedge 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. The following table demonstrates the sensitivity of proﬁt before tax and equity to selected movements in the relevant €/US$ 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: Percentage change in relevant €/US$ exchange rate Impact on proﬁt before tax Impact on equity * * Includes the impact on ﬁnancial instruments which is as follows: +/- 5% +/-2.5% 2009 2008 -/+ €14m -/+ €7m -/+ €29m -/+ €15m 2009 -/+ €170m -/+ €87m 2008 -/+ €160m -/+ €82m 2009 +/- €105m +/- €54m 2008 +/- €139m +/- €71m Financial instruments include deposits, money market funds, bank loans, medium term notes and other ﬁxed term debt, interest rate swaps, commodity swaps and foreign exchange contracts. It excludes trade receivables and trade payables. Credit 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 either cash equivalents or liquid investments (see note 22). 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 counterparties. 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 - generally counterparties have ratings of A2/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 is the carrying value of the relevant ﬁnancial instrument. 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 circa 8.1% of gross trade receivables (2008: 6.3%). Customer credit risk is managed at appropriate Group locations subject to established policies, procedures and controls. Customer credit quality is assessed in line with strict credit rating criteria and credit limits 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 and non-interest-bearing. The trade receivables balances disclosed in note 18 comprise a large number of customers spread across the Group’s activities and geographies with balances classiﬁed as neither past due nor impaired representing 78% of the total receivables balance at the balance sheet date (2008: 84%); amounts receivable from related parties (notes 18 and 33) are immaterial. Factoring and credit guarantee arrangements are employed in certain of the Group’s operations where deemed relevant by operational management. Liquidity risk The principal liquidity risks faced by the Group stem from the maturation of debt obligations and derivative transactions. The Group’s corporate treasury function ensures that sufﬁcient resources are available to meet such liabilities as they fall due through a combination of liquid investments, 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 and liquid resources only with a diversity of highly-rated counterparties; (ii) limiting the 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; these facilities span a wide number of highly-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 outstanding interest-bearing loans and borrowings as at the balance sheet date is also presented in note 23. 92 CRH 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. At 31st December 2009 Financial liabilities - cash outﬂows Trade and other payables Finance leases Interest-bearing loans and borrowings Interest payments on ﬁnance leases Interest payments on interest-bearing loans and borrowings Interest rate swaps - net cash outﬂows Cross-currency swaps - gross cash outﬂows Other derivative ﬁnancial instruments Gross projected cash outﬂows Derivative ﬁnancial instruments - cash inﬂows Interest rate swaps - net cash inﬂows Cross-currency swaps - gross cash inﬂows Other derivative ﬁnancial instruments Gross projected cash inﬂows The equivalent disclosure for the prior year is as follows: At 31st December 2008 Financial liabilities - cash outﬂows Trade and other payables Finance leases Interest-bearing loans and borrowings Interest payments on ﬁnance leases Interest payments on interest-bearing loans and borrowings Cross-currency swaps - gross cash outﬂows Other derivative ﬁnancial instruments Gross projected cash outﬂows Derivative ﬁnancial instruments - cash inﬂows Interest rate swaps - net cash inﬂows Cross-currency swaps - gross cash inﬂows Other derivative ﬁnancial instruments Gross projected cash inﬂows 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 2,471 4 377 1 323 6 790 3 3,975 (114) (776) (1) (891) 2,919 6 1,016 1 377 1,394 14 5,727 (60) (1,342) (3) (1,405) 91 2 550 1 303 6 274 2 1,229 (111) (257) (1) (369) 72 4 1,303 1 323 42 4 1,749 (60) (34) - (94) 13 2 782 1 241 6 42 - 1,087 (72) (26) - (98) 14 2 783 1 268 42 2 1,112 (57) (34) (1) (92) 14 1 507 - 220 6 427 1 1,176 (57) (424) - (481) 14 1 1,043 - 195 41 1 1,295 (37) (33) - (70) 15 1 893 - 163 5 24 - 1,101 39 3 1,911 1 464 40 327 - 2,785 2,643 13 5,020 4 1,714 69 1,884 6 11,353 (37) (23) - (60) (132) (289) - (421) (523) (1,795) (2) (2,320) 15 1 571 - 169 428 - 1,184 (30) (438) - (468) 41 5 2,129 2 649 351 - 3,177 3,075 19 6,845 5 1,981 2,298 21 14,244 (108) (291) - (399) (352) (2,172) (4) (2,528) Commodity price risk The Group’s exposure to commodity price risk is minimal with the fair value of derivatives used to hedge future energy costs being €5 million unfavourable as at the balance sheet date (2008: €19 million unfavourable). CRH 93 22. Liquid Investments and Cash and Cash Equivalents Liquid investments and cash and cash equivalents balances are spread across a wide number of highly-rated ﬁnancial institutions with no material concentrations in credit or liquidity risk. Liquid investments Liquid investments comprise short-term deposits and current asset investments which are held as readily disposable stores of value and include investments in government gilts and commercial paper and deposits of less than one year in duration. The maturity of these investments falls outside the three months timeframe for classiﬁcation as cash and cash equivalents under IAS 7 Cash Flow Statements, and accordingly, the related balances have been separately reported in the Consolidated Balance Sheet and have been categorised as either “held-for-trading” or “loans and receivables” in accordance with IAS 39 Financial Instruments: Recognition and Measurement in the table below. The credit risk attaching to these items is documented in note 21. Held-for-trading (fair value through proﬁt or loss) Loans and receivables Total Cash and cash equivalents 2009 €m 62 4 66 2008 €m 127 1 128 In accordance with IAS 7, cash and cash equivalents comprise cash balances held for the purposes of meeting short-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. Where investments are categorised as cash equivalents, the related balances have a maturity of three months or less from the date of investment. Bank overdrafts are included within current interest-bearing loans and borrowings in the Consolidated Balance Sheet. Cash and cash equivalents are reported at fair value and are analysed as follows: Cash at bank and in hand Investments (short-term deposits) Included in Consolidated Balance Sheet and Consolidated Statement of Cash Flows 2009 €m 406 966 1,372 2008 €m 483 316 799 Cash at bank earns interest at ﬂoating rates based on daily deposit bank rates. Short-term 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. 94 CRH 23. Interest-bearing Loans and Borrowings Bank loans and overdrafts: - unsecured - secured * Other term loans: - unsecured - secured * Group share of joint ventures' interest-bearing loans and borrowings (non-current and current): - unsecured - secured * Interest-bearing loans and borrowings (non-current and current) Included in current liabilities in the Consolidated Balance Sheet: - loans repayable within one year - bank overdrafts Current interest-bearing loans and borrowings 2009 €m 2008 €m 169 35 4,881 16 198 25 5,324 (268) (113) (381) 2,250 28 4,754 22 215 29 7,298 (872) (149) (1,021) Non-current interest-bearing loans and borrowings 4,943 6,277 * Secured on speciﬁc items of property, plant and equipment; these ﬁgures include ﬁnance leases Repayment schedule Within one year Between one and two years Between two and three years Between three and four years Between four and ﬁve years After ﬁve years Categorisation by manner of repayment Loans fully repayable within ﬁve years: - not by instalments - by instalments Subtotal Loans fully repayable in more than ﬁve years: - not by instalments - by instalments ** Subtotal 381 570 857 547 924 2,045 5,324 3,135 124 3,259 2,037 28 2,065 1,021 1,309 811 1,148 631 2,378 7,298 4,747 145 4,892 2,364 42 2,406 Interest-bearing loans and borrowings (non-current and current) 5,324 7,298 ** €8 million (2008: €14 million) falls due for repayment after ﬁve years CRH 95 23. Interest-bearing Loans and Borrowings continued Borrowing facilities 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 available as at 31st December 2009 and 31st December 2008, in respect of which all conditions precedent had been met, mature as follows: Within one year Between one and two years Between two and three years Between three and four years Between four and ﬁve years After ﬁve years 2009 €m 203 391 782 164 3 26 1,569 2008 €m 589 519 160 196 53 49 1,566 Included in the ﬁgures above is an amount of €189 million in respect of the Group’s share of facilities available to joint ventures (2008: €304 million). Guarantees The Company has given letters of guarantee to secure obligations of subsidiary undertakings as follows: €5,098 million in respect of loans, bank advances, derivative obligations and future lease obligations (2008: €7,051 million), €6 million in respect of deferred and contingent acquisition consideration (2008: €7 million), €319 million in respect of letters of credit (2008: €419 million) and €43 million in respect of other obligations (2008: €43 million). Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of its wholly-owned subsidiary undertakings and the Oldcastle Finance Company and Oldcastle North America Funding Company general partnerships in the Republic of Ireland for the ﬁnancial year ended 31st December 2009 and, as a result, such subsidiary undertakings and the general partnerships have been exempted from the ﬁling provisions of Section 7, Companies (Amendment) Act, 1986 and Regulation 20 of the European Communities (Accounts Regulations), 1993 respectively. The Company has not guaranteed any debt or other obligations of joint ventures or associates. 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 for twelve-month periods ending quarterly on 31st March, 30th June, 30th September and 31st December. CRH 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. The ﬁnancial covenants are: (1) Minimum interest cover (excluding share of joint ventures) deﬁned as EBITDA/net interest cover at no lower than 4.5 times. As at 31st December 2009 the ratio was 6.1 times (2008: 7.4 times); (2) Minimum interest cover (excluding share of joint ventures) deﬁned as EBITDA plus rentals/net interest plus rentals at no lower than 3.0 times. As at 31st December 2009 the ratio was 3.8 times (2008: 4.8 times); (3) Maximum debt cover (excluding share of joint ventures) deﬁned as consolidated total net debt/EBITDA (taking into account proforma adjustments for acquisitions and disposals) at no higher than 3.5 times. As at 31st December 2009 the ratio was 2.2 times (2008: 2.4 times). 96 CRH 24. Derivative Financial Instruments The fair values of derivative ﬁnancial instruments are analysed by year of maturity and by accounting designation as follows: 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 31st December 2009 Assets Fair value hedges Net investment hedges Not designated as hedges (held-for-trading) Analysed as: Non-current assets Current assets Total Liabilities Fair value hedges Cash ﬂow hedges Net investment hedges Analysed as: Non-current liabilities Current liabilities Total Net asset arising on derivative ﬁnancial instruments The equivalent disclosure for the prior year is as follows: At 31st December 2008 Assets Fair value hedges Cash ﬂow hedges Net investment hedges Not designated as hedges (held-for-trading) Analysed as: Non-current assets Current assets Total Liabilities Fair value hedges Cash ﬂow hedges Net investment hedges Not designated as hedges (held-for-trading) Analysed as: Non-current liabilities Current liabilities Total Net asset arising on derivative ﬁnancial instruments 186 4 59 249 244 5 249 (30) (51) (5) (86) (78) (8) (86) 163 301 2 7 116 426 416 10 426 (40) (81) (23) (2) (146) (84) (62) (146) 280 - 4 1 5 - (3) (5) (8) - 2 7 1 10 (26) (13) (23) - (62) 18 - 1 19 - (2) - (2) - - - - - - (4) - - (4) 71 - - 71 - - - - 26 - - 1 27 - (3) - - (3) 36 - - 36 (30) (1) - (31) 100 - - - 100 - (1) - - (1) 27 - - 27 - - - - 57 - - - 57 (14) - - - (14) 34 - 57 91 - (45) - (45) 118 - - 114 232 - (60) - (2) (62) CRH 97 24. Derivative Financial Instruments continued Components of other comprehensive income: Cash ﬂow hedges: Gains/(losses) arising during the year: Currency forward contracts Commodity forward contracts Reclassiﬁcation adjustments for (gains)/losses included in: - the Consolidated Income Statement - property, plant and equipment 2009 €m 2008 €m - 1 16 (2) 15 2 (24) (6) - (28) 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. In accordance with IAS 39 Financial Instruments: Recognition and Measurement, fair value hedges and the related hedged items are marked-to-market at each reporting date with any movement in the fair values of the hedged item and the hedging instrument being reﬂected in the Consolidated Income Statement. 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. To the extent that the hedging instrument satisﬁes effectiveness testing, any movements in the fair values of the hedged item and the hedging instrument are reﬂected in equity. Ineffectiveness is reﬂected in the Consolidated Income Statement. Net investment hedges comprise cross-currency swaps and hedge changes in the value of net investments due to currency movements. The proﬁt/(loss) arising on fair value, cash ﬂow and net investment hedges reﬂected in the Consolidated Income Statement is shown below: Cash ﬂow hedges - ineffectiveness Fair value hedges Fair value of the hedged item Net investment hedges - ineffectiveness 2009 €m (6) (108) 105 - 2008 €m - 284 (287) 2 98 CRH 25. Analysis of Net Debt Components of and reconciliation of opening to closing net debt Net debt comprises cash and cash equivalents, liquid investments, derivative ﬁnancial instrument assets and liabilities and interest-bearing loans and borrowings. At 1st January Book value €m Cash ﬂow Acquisitions €m €m Mark-to- market €m Translation adjustment €m At 31st December Book value €m At 31st December Fair value (i) €m 31st December 2009 Cash and cash equivalents (note 22) Liquid investments (note 22) Interest-bearing loans and borrowings (note 23) Derivative ﬁnancial instruments (net) (note 24) Group net debt (including share of non-recourse debt in joint ventures) Group net debt excluding proportionately consolidated joint ventures 799 128 (7,298) 280 589 (65) 1,744 (16) (6,091) 2,252 (5,938) 2,215 The equivalent disclosure for the prior year is as follows: 31st December 2008 Cash and cash equivalents (note 22) Liquid investments (note 22) Interest-bearing loans and borrowings (note 23) Derivative ﬁnancial instruments (net) (note 24) Group net debt (including share of non-recourse debt in joint ventures) Group net debt excluding proportionately consolidated joint ventures 1,006 318 (6,498) 11 (262) (175) (358) 100 (5,163) (695) (4,999) (678) 4 - (3) - 1 1 68 - (55) - 13 (19) - - 135 (140) (5) (5) - - (287) 281 (6) (6) (20) 3 98 39 1,372 66 (5,324) 163 1,372 66 (5,432) 163 120 (3,723) (3,831) 118 (3,609) (3,717) (13) (15) (100) (112) 799 128 (7,298) 280 799 128 (6,324) 280 (240) (6,091) (5,117) (236) (5,938) (4,964) (i) The fair values of cash and cash equivalents and ﬂoating rate loans and borrowings are based on their carrying amounts, which constitute a reasonable approximation of fair value. The carrying value of liquid investments is the market value of these investments with these values quoted on liquid markets. The carrying value of derivatives is fair value based on discounted future cash ﬂows at current foreign exchange and interest rates. The fair value of ﬁxed rate debt is calculated based on actual traded prices for publicly traded debt or discounted future cash ﬂows reﬂecting market interest rate changes since issuance for other ﬁxed rate debt. Fair value hierarchy The table below analyses ﬁnancial instruments carried at fair value, by valuation method. The different levels have been deﬁned as follows: – Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities – Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) – Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) At 31st December 2009 Assets measured at fair value Fair value hedges - interest rate swaps Net investment hedges - cross currency swaps Not designated as hedges (held-for-trading) - interest rate swaps Held-for-trading (fair value through proﬁt or loss) Liabilities measured at fair value Fair value hedges - interest rate swaps Cash ﬂow hedges - cross currency swaps Liquid investments: Net investment hedges - cross currency swaps Level 1 €m Level 2 €m Total €m - - - 62 62 - - - - 186 4 59 - 249 (30) (51) (5) (86) 186 4 59 62 311 (30) (51) (5) (86) During the reporting period ending 31st December 2009, there were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements. CRH 99 25. 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 31st December 2009 is as follows: Cash and cash equivalents - ﬂoating rate Liquid investments - ﬂoating rate Interest-bearing loans and borrowings - ﬁxed rate Interest-bearing loans and borrowings - ﬂoating rate Net (debt)/cash by major currency excluding derivative ﬁnancial instruments Derivative ﬁnancial instruments (including mark-to-market) Net debt by major currency including derivative ﬁnancial instruments Non-debt assets and liabilities analysed as follows: Non-current assets Current assets Non-current liabilities Current liabilities Minority interest Capital and reserves attributable to the Company's equity holders The equivalent disclosure for the prior year is as follows: Cash and cash equivalents - ﬂoating rate Liquid investments - ﬂoating rate Interest-bearing loans and borrowings - ﬁxed rate Interest-bearing loans and borrowings - ﬂoating rate Net (debt)/cash by major currency excluding derivative ﬁnancial instruments Derivative ﬁnancial instruments (including mark-to-market) Net debt by major currency including derivative ﬁnancial instruments Non-debt assets and liabilities analysed as follows: Non-current assets Current assets Non-current liabilities Current liabilities Minority interest Capital and reserves attributable to the Company's equity holders euro €m 441 24 (775) (200) (510) (642) (1,152) 4,610 1,690 (706) (1,140) (25) 3,277 331 42 (34) (1,536) (1,197) (1,349) (2,546) 4,662 2,023 (629) (1,200) (27) 2,283 US Dollar €m Pound Sterling €m Swiss Franc €m Other (ii) €m Total €m 678 - (3,837) (117) (3,276) 1,065 (2,211) 6,142 1,856 (1,196) (1,009) (5) 3,577 174 43 (4,271) (413) (4,467) 1,543 (2,924) 6,512 2,337 (1,204) (1,365) (6) 3,350 39 9 (282) (27) (261) 227 (34) 508 212 (193) (184) - 309 22 43 (263) (406) (604) 542 (62) 470 234 (145) (181) - 316 88 - (1) (4) 83 (352) (269) 700 325 (108) (213) (8) 427 66 - (4) (247) (185) (300) (485) 790 395 (135) (196) (8) 361 126 33 (5) (76) 78 (135) (57) 1,372 66 (4,900) (424) (3,886) 163 (3,723) 2,097 456 (177) (237) (35) 2,047 14,057 4,539 (2,380) (2,783) (73) 9,637 206 - (3) (121) 82 (156) (74) 799 128 (4,575) (2,723) (6,371) 280 (6,091) 1,765 580 (166) (299) (29) 1,777 14,199 5,569 (2,279) (3,241) (70) 8,087 100 CRH 25. Analysis of Net Debt continued Interest proﬁle and analysis of gross debt and effective interest rates 31st December 2009 The ﬁxed rate interest-bearing loans and borrowings including the impact of derivative ﬁnancial instruments (interest rate and cross-currency swaps) as at 31st December 2009 are as follows: Interest-bearing loans and borrowings - ﬁxed rate as above (iii) Impact of derivative ﬁnancial instruments on ﬁxed rate debt Net ﬁxed rate interest-bearing loans and borrowings Weighted average ﬁxed interest rates Weighted average ﬁxed periods - years Gross debt by major currency - analysis of effective interest rates - interest rates excluding derivative ﬁnancial instruments - gross debt excluding derivative ﬁnancial instruments - interest rates including derivative ﬁnancial instruments - gross debt including derivative ﬁnancial instruments The equivalent disclosure for the prior year is as follows: 31st December 2008 euro €m (775) (568) (1,343) 6.4% 4.0 6.3% (975) 6.2% (1,617) US Dollar €m Pound Sterling €m Swiss Franc €m Other (ii) €m Total €m (3,837) 2,306 (1,531) 6.3% 7.6 6.6% (3,954) 4.6% (2,889) (282) 282 - (1) - (1) (5) - (5) - - 5.0% 1.7 4.6% 4.7 7.7% (309) 1.5% (82) 2.9% (5) 0.4% (357) 4.0% (81) 2.4% (216) (4,900) 2,020 (2,880) 6.3% 5.9 6.5% (5,324) 4.7% (5,161) The ﬁxed rate interest-bearing loans and borrowings including the impact of derivative ﬁnancial instruments (interest rate and cross-currency swaps) as at 31st December 2008 are as follows: Interest-bearing loans and borrowings - ﬁxed rate as above (iii) Impact of derivative ﬁnancial instruments on ﬁxed rate debt Net ﬁxed rate interest-bearing loans and borrowings Weighted average ﬁxed interest rates Weighted average ﬁxed periods - years Gross debt by major currency - analysis of effective interest rates - interest rates excluding derivative ﬁnancial instruments - gross debt excluding derivative ﬁnancial instruments - interest rates including derivative ﬁnancial instruments - gross debt including derivative ﬁnancial instruments (34) (1,124) (1,158) 5.5% 4.1 6.6% (1,570) 5.8% (2,919) (4,271) 2,553 (1,718) 6.3% 8.5 6.5% (4,684) 6.1% (3,141) (263) 263 - (4) - (4) (3) (22) (25) (4,575) 1,670 (2,905) - - 4.2% 1.5 6.6% 1.7 5.9% 6.7 5.6% (669) 3.7% (127) 2.9% (251) 2.0% (551) 6.2% (124) 5.8% (280) 6.3% (7,298) 5.6% (7,018) (ii) The principal currencies included in this category are the Canadian Dollar, the Polish Zloty, the Argentine Peso, the Ukranian Hryvnya, the Israeli Shekel, the Turkish Lira, the Chinese Renminbi and the Indian Rupee. (iii) Of the Group’s gross ﬁxed rate debt at 31st December 2009, €2,913 million (2008: €2,892 million) was hedged to ﬂoating rate at inception using interest rate swaps. In accordance with IAS 39 Financial Instruments: Recognition and Measurement, hedged ﬁxed rate debt is recorded at amortised cost adjusted for the change in value arising from changes in underlying market interest rates and the related hedging instruments (interest rate swaps) are stated at fair value. Adjustments to ﬁxed rate debt values and the changes in the fair value of the hedging instrument are reﬂected in the Consolidated Income Statement. The balance of gross ﬁxed rate debt of €1,987 million (2008: €1,683 million) are ﬁnancial liabilities measured at amortised cost in accordance with IAS 39. 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 (US$ LIBOR, Sterling LIBOR, Swiss Franc LIBOR and Euribor). Gains and losses arising on the re-translation of net worth are dealt with in the Consolidated Statement of Comprehensive Income. Transactional currency exposures arise in a number of the Group’s operations and these result in net currency gains and losses which are recognised in the Consolidated Income Statement and are immaterial (with materiality deﬁned in the context of the year-end 2009 ﬁnancial statements). CRH 101 26. Provisions for Liabilities Net present cost 31st December 2009 Insurance (i) Environment and remediation (ii) Rationalisation and redundancy (iii) Other (iv) Total Analysed as: Non-current liabilities Current liabilities Total The equivalent disclosure for the prior year is as follows: 31st December 2008 Insurance (i) Environment and remediation (ii) Rationalisation and redundancy (iii) Other (iv) Total Analysed as: Non-current liabilities Current liabilities Total (i) Insurance At 1st January €m Translation adjustment €m Arising on acquisition €m Provided during year €m Utilised during year €m Reversed unused €m Discount unwinding (note 8) €m At 31st December €m 214 67 19 89 389 253 136 389 209 64 13 103 389 248 141 389 (3) (1) - - (4) 7 3 - (2) 8 - - - 1 1 1 1 - 2 4 88 2 114 11 215 (108) (5) (109) (28) (250) - - - (6) (6) 66 9 23 22 120 (79) (11) (17) (27) (134) - (1) (1) (12) (14) 10 2 1 2 15 10 2 1 3 16 201 65 25 69 360 240 120 360 214 67 19 89 389 253 136 389 This provision relates to workers’ compensation (employers’ liability) and third-party liabilities or claims covered under the Group’s self-insurance schemes. Reﬂecting the operation of these self-insurance schemes, a substantial portion of the total provision relates to claims which are classiﬁed as incurred but not reported in respect of which the Group will bear an excess which will not be recoverable from insurers. In addition, due to the extended timeframe which is typically involved in such claims, a signiﬁcant component of the total provision is subject to actuarial valuation through the application of historical claims triangles. Where actuarial valuation is either inappropriate or impractical, other external assessments are made. The claims triangles applied in valuation indicate that these provisions have an average life of four years (2008: three years). (ii) Environment and remediation This provision comprises obligations governing site remediation and improvement costs to be incurred in compliance with either local or national environmental regulations together with constructive obligations stemming from established best practice. Whilst a signiﬁcant element of the total provision will reverse in the medium-term (two to ten years), the majority of the legal and constructive obligations applicable to long-lived assets (principally mineral-bearing land) will unwind over a 30-year timeframe. In discounting the related obligations, expected future cash outﬂows have been determined with due regard to extraction status and anticipated remaining life. (iii) Rationalisation and redundancy These provisions relate to irrevocable commitments under various rationalisation and redundancy programmes, none of which is individually material to the Group. The increased amount provided and utilised in 2009 reﬂects the additional cost reduction initiatives undertaken during the year. The Group expects that these provisions will be utilised within two years (2008: three years) of the balance sheet date. (iv) Other This includes provisions relating to guarantees and warranties of €20 million (2008: €22 million) throughout the Group at 31st December 2009. The Group expects that these provisions will be utilised within three years of the balance sheet date (2008: four years). All provisions are discounted at a rate of 5% (2008: 5%), derived primarily from the average effective interest rate for the Group’s borrowings. 102 CRH 27. Deferred Income Tax The deductible and taxable temporary differences at the balance sheet date in respect of which deferred tax has been recognised are analysed as follows: Deferred income tax assets (deductible temporary differences) Deﬁcits on Group deﬁned beneﬁt pension obligations (note 28) Revaluation of derivative ﬁnancial instruments to fair value Share-based payment expense Provisions for liabilities and working capital related items Other deductible temporary differences Total 2009 €m 2008 €m 103 21 9 157 47 337 94 13 4 206 16 333 Deferred income tax assets have been recognised in respect of all deductible temporary differences. Deferred income tax liabilities (taxable temporary differences) Taxable temporary differences principally attributable to accelerated tax depreciation and fair value adjustments arising on acquisition (i) Revaluation of derivative ﬁnancial instruments to fair value Rolled-over capital gains Total 1,498 1 20 1,519 1,441 1 19 1,461 (i) Fair value adjustments arising on acquisition principally relate to property, plant and equipment. Movement in net deferred income tax liability At 1st January Translation adjustment Net charge for the year (note 10) Arising on acquisition (note 32) Movement in deferred tax asset on Group deﬁned beneﬁt pension obligations Movement in deferred tax asset on share-based payment expense Movement in deferred tax liability on cash ﬂow hedges Reclassiﬁcation At 31st December 28. Retirement Beneﬁt Obligations 1,128 (26) 98 (2) (20) (2) 2 4 1,182 976 17 89 81 (67) 15 (4) 21 1,128 The Group operates either deﬁned beneﬁt or deﬁned contribution pension schemes in all of its principal operating areas. Scheme assets are held in separate trustee administered funds. At the year-end, €46 million (2008: €43 million) was included in other payables in respect of deﬁned contribution pension liabilities and €1 million (2008: €1 million) was included in other receivables in respect of deﬁned contribution pension prepayments. The Group operates deﬁned beneﬁt pension schemes in the Republic of Ireland, Britain and Northern Ireland, the Netherlands, Belgium, Germany, Portugal, Switzerland and the United States; for the purposes of the disclosures which follow, the schemes in the Republic of Ireland, the Netherlands, Belgium, Germany and Portugal (49% joint venture) have been aggregated into a “eurozone” category on the basis of common currency and ﬁnancial assumptions. In line with the principle of proportionate consolidation, the assets, liabilities, income and expenses attaching to deﬁned beneﬁt pension schemes in joint ventures are reﬂected in the ﬁgures below on the basis of the Group’s share of these entities. 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 Netherlands, Portugal and the United States and four schemes in Germany. In addition to the aforementioned deﬁned beneﬁt pension schemes, 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 in Portugal 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 are set out below. In all cases, the projected unit credit method has been employed in determining the present value of the obligations arising, the related current service cost and, where applicable, past service cost. The cumulative actuarial gains and losses attributable to the Group’s deﬁned beneﬁt pension scheme obligations at 1st January 2004 (the date of transition to IFRS) were recognised in full as at that date and adjusted against retained income. Actuarial gains and losses and the associated movement in the net deferred tax asset are recognised via the Consolidated Statement of Comprehensive Income. CRH 103 28. Retirement Beneﬁt Obligations continued Actuarial valuations - funding requirements 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 Ireland and Britain, 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 Portugal and Germany. In the United States, valuations are performed using a variety of actuarial cost methodologies - current unit, projected unit and aggregate cost. The actuarial valuations range from April 2006 to December 2009. The assumptions which have the most signiﬁcant effect on the results of the actuarial valuations are those relating to the rate of return on investments and the rates of increase in remuneration and pensions. In the course of preparing the funding valuations, it was assumed that the rate of return on investments would, on average, exceed annual remuneration increases by 2% and pension increases by 3% per annum. In general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to the members of the various schemes. Financial assumptions The ﬁnancial assumptions employed in the valuation of the deﬁned beneﬁt liabilities arising on pension schemes, post-retirement healthcare obligations and long-term service commitments applying the projected unit credit methodology are as follows: Scheme liabilities The major long-term assumptions used by the Group’s actuaries in the computation of scheme liabilities as at 31st December 2009 and 31st December 2008 are as follows: Rate of increase in: - salaries - pensions in payment Inﬂation Discount rate Medical cost trend rate 2009 % 4.00 2.00 2.00 6.00 5.25 Eurozone 2008 % Britain and Northern Ireland 2009 % 2008 % 3.80 1.80 1.80 5.80 5.25 4.50 3.50-3.70 3.50 5.75 n/a 3.50 2.75-3.25 2.75 6.25 n/a Switzerland United States 2009 % 2.25 0.50 1.50 3.25 n/a 2008 % 2.25 0.50 1.50 3.50 n/a 2009 % 2008 % 3.50 - 2.00 5.75 9.50 3.50 - 2.00 6.25 10.00 The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 are in accordance with the underlying funding valuations and represented 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: Current retirees - male - female Future retirees - male - female Republic of Ireland 2009 2008 Britain and Northern Ireland 2009 2008 Switzerland 2009 2008 20.7 23.8 21.8 24.8 19.8 22.8 20.8 23.8 22.7 25.5 24.5 27.2 21.9 24.6 22.4 25.1 18.5 22.0 18.5 22.0 18.4 21.9 18.4 21.9 The above data allow for future improvements in life expectancy. Scheme assets The long-term rates of return expected at 31st December 2009 and 31st December 2008, determined in conjunction with the Group’s actuaries and analysed by class of investment, are as follows: Equities Bonds Property Other Eurozone 2009 % 8.00 4.50 7.00 2.50 2008 % 9.00 4.25 7.00 2.50 Britain and Northern Ireland 2009 % 2008 % 8.00 5.00 7.00 2.50 9.00 4.75 7.00 2.50 Switzerland United States 2009 % 6.75 2.75 4.75 2.50 2008 % 7.50 3.25 4.50 2.50 2009 % 8.00 5.50 7.00 2.50 2008 % 9.00 6.00 7.00 2.50 The methodology applied in relation to the expected return on equities is driven by prevailing risk-free rates in the four jurisdictions listed and the application of an equity risk premium (which varies by country) to those rates. The differences between the expected return on bonds and the yields used to discount the liabilities in each of the four jurisdictions listed are driven by the fact that the majority of the Group’s schemes hold an amalgam of government and corporate bonds. The property and “other” (largely cash holdings) components of the asset portfolio are not material. In all cases, the reasonableness of the assumed rates of return is assessed by reference to actual and target asset allocations in the long-term and the Group’s overall investment strategy as articulated to the trustees of the various deﬁned beneﬁt pension schemes in operation. 104 CRH 28. Retirement Beneﬁt Obligations continued (a) Impact on Consolidated Income Statement The total expense charged to the Consolidated Income Statement in respect of deﬁned contribution and deﬁned beneﬁt pension schemes, post-retirement healthcare obligations and long-term service commitments is as follows: Total deﬁned contribution pension expense Deﬁned beneﬁt Pension schemes (funded and unfunded) Long-term service commitments (unfunded) Total deﬁned beneﬁt expense Total expense in Consolidated Income Statement Analysis of deﬁned beneﬁt expense 2009 €m 2008 €m 139 141 39 1 40 35 - 35 179 176 The total deﬁned beneﬁt expense (comprising funded and unfunded deﬁned beneﬁt pension schemes and unfunded post-retirement healthcare obligations and long- term service commitments) is analysed as follows: Eurozone 2009 €m 2008 €m Britain and Northern Ireland 2008 €m 2009 €m Switzerland 2008 €m 2009 €m United States 2009 2008 €m €m Total Group 2009 €m 2008 €m Charged in arriving at Group operating proﬁt Current service cost Past service cost: beneﬁt enhancements Curtailment gain (i) Subtotal Included in ﬁnance revenue and ﬁnance costs respectively Expected return on scheme assets Interest cost on scheme liabilities Subtotal Net charge to Consolidated Income Statement 13 11 - 24 (35) 42 7 31 18 (2) - 16 (52) 45 (7) 9 8 - (1) 7 (23) 24 1 8 11 1 (2) 10 (30) 27 (3) 7 17 - - 17 (20) 17 (3) 14 16 2 - 18 (21) 16 (5) 13 6 1 (23) (16) (9) 12 3 (13) 6 - - 6 (10) 10 - 6 44 12 (24) 32 (87) 95 8 40 51 1 (2) 50 (113) 98 (15) 35 Actual return on pension scheme assets 70 (200) 63 (82) 45 (48) 22 (34) 200 (364) (i) During 2009, the Group closed certain of its deﬁned beneﬁt pension schemes in the United States to future accrual, giving rise to a curtailment gain of €23 million and a reduction in liabilities of the same amount. In compensation for the closure to future accrual, provision has been made for additional deﬁned contribution top-up payments amounting to €11 million; this obligation is reﬂected in the 2009 deﬁned contribution expense of €139 million presented above. Based on the assumptions employed for the valuation of assets and liabilities at year-end 2009, and excluding the once-off past-service costs and curtailment gains recognised above of €12 million, the net charge in the 2010 Consolidated Income Statement is anticipated to exhibit a small increase from the 2009 ﬁgure of €52 million at constant exchange rates. No reimbursement rights have been recognised as assets in accordance with IAS 19 Employee Beneﬁts. CRH 105 28. Retirement Beneﬁt Obligations continued (b) Impact on Consolidated Balance Sheet The net pension liability (comprising funded and unfunded deﬁned beneﬁt pension schemes and unfunded post-retirement healthcare obligations and long-term service commitments) as at 31st December 2009 and 31st December 2008 is analysed as follows: Equities Bonds Property Other Bid value of assets Actuarial value of liabilities (present value) Recoverable deﬁcit in schemes Related deferred income tax asset Net pension liability Analysis of liabilities - funded and unfunded Funded Deﬁned beneﬁt pension schemes Unfunded Deﬁned beneﬁt pension schemes Total - deﬁned beneﬁt pension schemes Post-retirement healthcare obligations (unfunded) Long-term service commitments (unfunded) Actuarial value of liabilities (present value) Eurozone Britain and Northern Ireland 2009 €m 2008 €m 2009 €m 2008 €m Switzerland 2009 €m 2008 €m United States 2009 €m 2008 €m Total Group 2009 €m 2008 €m 318 209 35 22 584 (814) (230) 35 (195) 258 214 49 10 531 (759) (228) 35 (193) 215 144 14 11 384 (534) (150) 42 (108) 169 114 12 5 300 (372) (72) 20 (52) 133 230 85 56 504 (519) (15) 3 (12) 94 216 99 59 468 (500) (32) 7 (25) 78 51 - 4 133 (192) (59) 23 (36) 58 50 - 7 744 634 134 93 579 594 160 81 115 (197) 1,605 (2,059) 1,414 (1,828) (82) 32 (50) (454) 103 (351) (414) 94 (320) (770) (715) (534) (372) (514) (495) (180) (186) (1,998) (1,768) (29) (799) (7) (8) (814) (29) (744) (8) (7) (759) - (534) - - (534) - (372) - - (372) - (514) - (5) (519) - (495) - (5) (500) (5) (185) (7) - (192) (4) (190) (7) - (34) (33) (2,032) (14) (13) (1,801) (15) (12) (197) (2,059) (1,828) The assumption made in relation to discount rates is a material source of estimation uncertainty as deﬁned in IAS 1 Presentation of Financial Statements. The impact of a reduction of 25 basis points in the discount rates applied would be as follows with a corresponding increase in discount rates being inversely proportional: Revised discount rate Revised liabilities ﬁgure Split of asset values Equities Bonds Property Other Total 5.75 (842) 5.55 (789) 5.50 (562) 6.00 (392) 3.00 (540) 3.25 (519) 5.50 (198) 6.00 (204) n/a (2,142) n/a (1,904) % 54.4 35.8 6.0 3.8 100 % 48.6 40.3 9.2 1.9 100 % 56.0 37.5 3.6 2.9 100 % 56.3 38.0 4.0 1.7 100 % 26.4 45.6 16.9 11.1 100 % 20.1 46.2 21.1 12.6 100 % 58.6 38.4 - 3.0 100 % 50.4 43.5 - 6.1 100 % 46.4 39.5 8.3 5.8 100 % 41.0 42.0 11.3 5.7 100 The asset values above include €3 million in respect of investment in Ordinary Shares of the Company (CRH plc) as at 31st December 2009 (2008: €3 million). Analysis of amounts included in the Consolidated Statement of Comprehensive Income Actual return less expected return on scheme assets 35 (252) 40 (112) 25 (69) 13 (44) 113 (477) Experience (loss)/gain arising on scheme liabilities (present value) Assumptions (loss)/gain arising on scheme liabilities (present value) Asset limit adjustment Actuarial gain/(loss) recognised (12) (11) (5) (3) 7 1 (3) (2) (13) (15) (21) 59 (117) - 2 - (204) - (82) 61 - (54) (17) - 15 17 10 (41) (12) - (2) (3) - (49) (167) - (67) 134 10 (348) 106 CRH 28. Retirement Beneﬁt Obligations continued Eurozone 2009 €m 2008 €m Britain and Northern Ireland 2008 €m 2009 €m Switzerland 2008 €m 2009 €m United States 2009 2008 €m €m Total Group 2009 €m 2008 €m Actuarial gains and losses recognised in the Consolidated Statement of Comprehensive Income Actual return less expected return on scheme assets % of scheme assets 35 (252) 6.0% (47.5%) 40 (112) 10.4% (37.3%) 25 (69) 5.0% (14.7%) 13 (44) 9.8% (38.3%) 113 (477) 7.0% (33.7%) Experience (loss)/gain arising on scheme liabilities (present value) % of scheme liabilities (present value) (12) 1.5% (11) 1.4% (5) 0.9% (3) 7 0.8% (1.3%) 1 (0.2%) (3) 1.6% (2) 1.0% (13) 0.6% (15) 0.8% Actuarial gain/(loss) recognised % of scheme liabilities (present value) 2 (0.2%) (204) 15 26.9% 15.4% 14.5% (2.9%) (82) (54) (41) 8.2% (2) (49) 1.0% 24.9% (67) (348) 3.3% 19.0% The cumulative actuarial loss recognised in the Consolidated Statement of Comprehensive Income, following transition to IFRS on 1st January 2004, is as follows: Recognised in 2004 ﬁnancial year Recognised in 2005 ﬁnancial year Recognised in 2006 ﬁnancial year Recognised in 2007 ﬁnancial year Recognised in 2008 ﬁnancial year Recognised in 2009 ﬁnancial year Cumulative actuarial loss recognised €m (119) (86) 155 159 (348) (67) (306) CRH 107 28. Retirement Beneﬁt Obligations continued Reconciliation of scheme assets (bid value) At 1st January Movement in year Translation adjustment Arising on acquisition (note 32) Employer contributions paid Contributions paid by plan participants Beneﬁt payments Actual return on scheme assets At 31st December Reconciliation of actuarial value of liabilities At 1st January Movement in year Translation adjustment Arising on acquisition (note 32) Current service cost Contributions paid by plan participants Beneﬁt payments Past service cost: beneﬁt enhancements Interest cost on scheme liabilities Actuarial (loss)/gain arising on: - experience variations - changes in assumptions Curtailment gain At 31st December Eurozone 2009 €m 2008 €m Britain and Northern Ireland 2008 €m 2009 €m Switzerland 2009 €m 2008 €m United States 2009 2008 €m €m Total Group 2008 €m 2009 €m 531 767 300 478 468 458 115 143 1,414 1,846 - - 27 4 (48) 70 584 - - 17 5 (58) (200) 531 22 - 18 2 (21) 63 384 (97) - 20 4 (23) (82) 300 1 - 15 10 (35) 45 504 51 10 15 10 (28) (48) 468 (5) - 10 - (9) 22 133 6 - 7 - (7) (34) 115 18 - 70 16 (113) 200 1,605 (40) 10 59 19 (116) (364) 1,414 (759) (793) (372) (526) (500) (439) (197) (173) (1,828) (1,931) - - (13) (4) 48 (11) (42) (12) (21) - (814) - (6) (18) (5) 58 2 (45) (11) 59 - (759) (28) - (8) (2) 21 - (24) (5) (117) 1 (534) 114 - (11) (4) 23 (1) (27) (3) 61 2 (372) - - (17) (10) 35 - (17) 7 (17) - (519) (51) (12) (16) (10) 28 (2) (16) 7 - (6) - 9 (1) (12) (10) - (6) - 7 - (10) (21) - (44) (16) 113 (12) (95) 53 (18) (51) (19) 116 (1) (98) 1 17 - (500) (3) (12) 23 (192) (2) (3) - (197) (13) (167) 24 (2,059) (15) 134 2 (1,828) Anticipated employer contributions payable in the 2010 ﬁnancial year (expressed using average exchange rates for 2009) amount to €65 million in aggregate; the difference between the actual employer contributions paid in 2009 and the expectation of €55 million included in the 2008 Annual Report is largely attributable to a cash payment pertaining to the beneﬁt enhancement of €11 million in the eurozone and movements in exchange rates. Employer contributions are reﬂected in the reconciliation of scheme assets as paid. History of scheme assets, liabilities and actuarial gains and losses Bid value of assets Actuarial value of liabilities (present value) Asset limit adjustment Recoverable deﬁcit Actual return less expected return on scheme assets % of scheme assets Experience (loss)/gain arising on scheme liabilities (present value) % of scheme liabilities (present value) 2009 €m 2008 €m 2007 €m 2006 €m 2005 €m 1,605 (2,059) - (454) 1,414 (1,828) - (414) 1,846 (1,931) (10) (95) 1,739 (2,001) - (262) 1,771 (2,221) - (450) 113 (477) 7.0% (33.7%) (61) (3.3%) 45 177 2.6% 10.0% (13) 0.6% (15) 0.8% (25) 1.3% (6) 0.3% 42 (1.9%) Post-retirement healthcare beneﬁts - sensitivity analysis on key actuarial assumptions The impact of the sensitivity analysis on the key actuarial assumptions employed in the valuation of post-retirement healthcare beneﬁts as required under IAS 19 Employee Beneﬁts is not material to the Group (with materiality deﬁned in the context of the year-end 2009 ﬁnancial statements). 108 CRH 29. Capital Grants At 1st January Arising on acquisition (note 32) Received Released to Consolidated Income Statement At 31st December 30. Share Capital and Reserves Equity Share Capital Authorised At 1st January Increase in authorised share capital At 31st December Number of Shares at 1st January ('000s) Increase in number of Shares Number of Shares at 31st December ('000s) Allotted, called-up and fully paid At 1st January Rights Issue (iii) Share options and share participation schemes (iv) Shares issued in lieu of dividends (v) At 31st December The movement in the number of shares (expressed in '000s) during the ﬁnancial year was as follows: At 1st January Rights Issue (iii) Share options and share participation schemes (iv) Shares issued in lieu of dividends (v) At 31st December 2009 €m 2008 €m 14 - - 14 (2) 12 11 2 4 17 (3) 14 2009 2008 Ordinary Shares of €0.32 each (i) €m 235 85 320 Income Shares of €0.02 each (ii) €m 15 5 20 Ordinary Shares of €0.32 each (i) €m Income Shares of €0.02 each (ii) €m 235 - 235 15 - 15 735,000 265,000 1,000,000 735,000 265,000 1,000,000 735,000 735,000 - - 735,000 735,000 175 49 - 3 227 11 3 - - 14 175 - - - 175 11 - - - 11 548,502 152,088 - 9,895 710,485 548,502 152,088 - 9,895 710,485 547,208 - 401 893 548,502 547,208 - 401 893 548,502 (i) Ordinary Shares The Ordinary Shares represent 93.66% of the total issued share capital. (ii) Income Shares The Income Shares, which represent 5.85% of the total issued share capital, were created on 29th August 1988 for the express purpose of giving shareholders the choice of receiving dividends on either their Ordinary Shares or on their Income Shares (by notice of election to the Company). The Income Shares carried a different tax credit to the Ordinary Shares. The creation of the Income Shares was achieved by the allotment of fully paid Income Shares to each shareholder equal to his/her holding of Ordinary Shares but the shareholder is not entitled to an Income Share certiﬁcate, as a certiﬁcate for Ordinary Shares is deemed to include an equal number of Income Shares and a shareholder may only sell, transfer or transmit Income Shares with an equivalent number of Ordinary Shares. Income Shares carry no voting rights. Due to changes in Irish tax legislation since the creation of the Income Shares, dividends on the Company’s shares no longer carry a tax credit. As elections made by shareholders to receive dividends on their holding of Income Shares were no longer relevant, the Articles of Association were amended on 8th May 2002 to cancel such elections. (iii) Rights Issue 152,087,952 new Ordinary/Income Shares were issued in March 2009 at €8.40 per share under the terms of a Rights Issue on the basis of two new Ordinary/ Income Shares for every seven existing Ordinary/Income Shares (excluding Treasury Shares). The aggregate nominal value of the Shares issued was €52 million and the total consideration amounted to €1.24 billion net of associated expenses. CRH 109 30. Share Capital and Reserves continued (iv) Share schemes Share option schemes Details of share options granted under the Company’s share option schemes and savings-related share option schemes and the terms attaching thereto are provided in note 7 to the ﬁnancial statements. Under these schemes, options over a total of 3,680,876 Ordinary Shares were exercised during the ﬁnancial year (2008: 2,046,216). Of this total, 3,553,043 (2008: 1,944,501) were satisﬁed by the re-issue of Treasury Shares and 127,833 (2008: 82,335) by the purchase of Ordinary Shares on the market by the Employee Beneﬁt Trust. No new shares were issued in 2009 to satisfy share options exercised during the ﬁnancial year (2008: 19,380). Share participation schemes At 31st December 2009, 6,778,469 (2008: 6,466,707) Ordinary Shares had been appropriated to participation schemes. In the ﬁnancial year ended 31st December 2009, the appropriation of 311,762 shares was satisﬁed by the re-issue of Treasury Shares (2008: 55,849). 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 2 Share-based Payment and are hence not factored into the expense computation and the associated disclosures in note 7. During the ten-year period commencing on 3rd May 2000, the total number of Ordinary Shares which may be issued in respect of the share option schemes, the savings-related share option schemes, the share participation schemes and any subsequent share option schemes, may not exceed 15% in aggregate of the issued Ordinary share capital from time to time. (v) Shares issued in lieu of dividends In May 2009, 6,588,110 (2008: 893,242) Ordinary Shares were issued to the holders of Ordinary Shares who elected to receive additional Ordinary Shares at a price of €13.83 (2008: €24.15) per share, instead of part or all of the cash element of their 2008 and 2007 ﬁnal dividends. In November 2009, 3,307,480 (2008: nil) Ordinary Shares were issued to the holders of Ordinary Shares who elected to receive additional Ordinary Shares at a price of €17.20 per share, instead of part or all of the cash element of their 2009 interim dividend. The 2008 interim dividend was paid wholly in cash. Preference Share Capital Authorised At 1st January 2009 and 31st December 2009 Number of Shares at 1st January 2009 and 31st December 2009 ('000s) Allotted, called-up and fully paid At 1st January 2009 and 31st December 2009 Number of Shares at 1st January 2009 and 31st December 2009 ('000s) 5% Cumulative Preference Shares of €1.27 each 7% ‘A’ Cumulative Preference Shares of €1.27 each (vi) €m (vii) €m - 1 150 872 - 50 1 872 There was no movement in the number of cumulative preference shares in either the current or the prior year. (vi) 5% Cumulative Preference Shares 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 a winding-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 15th April and 15th October in each year. The 5% Cumulative Preference Shares represent 0.03% of the total issued share capital. (vii) 7% ‘A’ Cumulative Preference Shares 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 a winding-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 5th April and 5th October in each year. The 7% ‘A’ Cumulative Preference Shares represent 0.46% of the total issued share capital. 110 CRH 30. Share Capital and Reserves continued Treasury Shares/own shares At 1st January Performance Share Plan expense Shares acquired by CRH plc (Treasury Shares) Treasury/own shares re-issued Shares acquired by Employee Beneﬁt Trust (own shares) Reclassiﬁcation of Performance Share Plan expense At 31st December 2009 €m (378) - - 114 (2) (13) (279) 2008 €m (19) 7 (411) 48 (3) - (378) As at the balance sheet date, the total number of Treasury Shares held was 12,339,200 (2008: 16,204,005); the nominal value of these shares was €4 million (2008: €6 million). During the year ended 31st December 2009, 3,864,805 Shares were re-issued (2008: 2,000,350) to satisfy exercises and appropriations under the Group’s share option and share participation schemes (see (iv) above). These re-issued Treasury Shares were previously purchased at an average price of €25.35 (2008: €23.94). No Treasury Shares were purchased during the year ended 31st December 2009 (2008: 18,204,355). In accordance with the terms of the Performance Share Plan (see note 7), which was approved by shareholders at the 2006 Annual General Meeting, Ordinary Shares have been purchased by the Employee Beneﬁt Trust on behalf of CRH plc. The number of these shares held as at the balance sheet date was as follows: At 1st January Released to the participants of the Performance Share Plan At 31st December Ordinary shares 2009 2008 937,750 (474,997) 462,753 937,750 - 937,750 The nominal value of own shares, on which dividends have been waived by the Trustees of the Performance Share Plan, amounted to €0.2 million at 31st December 2009 (2008: €0.3 million). In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual proﬁt and loss account to the Annual General Meeting and from ﬁling it with the Registrar of Companies. Reconciliation of shares issued to proceeds shown in Consolidated Statement of Cash Flows Shares issued at nominal amount: - shares issued in respect of Rights Issue - share options and share participation schemes - shares issued in lieu of dividends Premium on shares issued Total value of shares issued Shares issued in lieu of dividends (note 11) Proceeds from issue of shares Expenses paid in respect of share issues Net proceeds from issue of shares - Consolidated Statement of Cash Flows Share Premium At 1st January Premium arising on shares issued Expenses paid in respect of shares issued At 31st December 2009 €m 2008 €m 52 - 3 1,370 1,425 (148) 1,277 (40) 1,237 2009 €m 2,448 1,370 (40) 3,778 - - - 28 28 (22) 6 - 6 2008 €m 2,420 28 - 2,448 CRH 111 31. Commitments under Operating and Finance Leases Operating leases Future minimum rentals payable under non-cancellable operating leases at 31st December are as follows: Within one year After one year but not more than ﬁve years More than ﬁve years 2009 €m 230 506 358 1,094 2008 €m 240 548 396 1,184 Finance leases Future minimum lease payments under ﬁnance leases together with the present value of the net minimum lease payments are as follows: Within one year After one year but not more than ﬁve years More than ﬁve years Total minimum lease payments Less: amounts allocated to future ﬁnance costs Present value of minimum lease payments 2009 2008 Minimum payments €m Present value of payments €m Minimum payments €m Present value of payments €m 5 8 4 17 (4) 13 4 6 3 13 8 10 5 23 (4) 19 6 8 5 19 32. Acquisition of Subsidiaries and Joint Ventures The principal acquisitions completed during the year ended 31st December 2009 by reportable segment, together with the completion dates, are detailed below; these transactions entailed the acquisition of a 100% stake where not indicated to the contrary: Europe Materials Poland: Increased stake in Grupa Silikaty to 73.2% (27th August); Portugal: Quimipedra quarry (23rd April). Europe Distribution Belgium: Creyns N.V. (8th January). Americas Materials Kansas: Holland Corporation (11th May); Kentucky: Cat Daddy (29th July); Missouri: Hilty Quarries (2nd November), selected assets of Lafarge (30th December); New Hampshire: Interstate 93 (26th March); New York: Cleason (30th July); Texas: Wheeler Companies (11th December); Utah: Backus Pit (10th July); Burdick Paving Corporation (24th December); West Virginia: certain assets of Appalachian Paving Products (5th March). Americas Distribution Utah: Warburton Acoustical Products (11th March). 112 CRH 32. Acquisition of Subsidiaries and Joint Ventures continued The identiﬁable net assets acquired excluding net debt assumed and including adjustments to provisional fair values were as follows: Assets Non-current assets Property, plant and equipment Intangible assets: - goodwill - excess of fair value of identiﬁable net assets over consideration paid - other intangible assets Investments in associates Other ﬁnancial assets Deferred income tax assets Total non-current assets Current assets Inventories Trade and other receivables Total current assets Equity Minority interest Total equity Liabilities Non-current liabilities Deferred income tax liabilities Retirement beneﬁt obligations Provisions for liabilities (stated at net present cost) Capital grants Total non-current liabilities Current liabilities Trade and other payables Current income tax liabilities Provisions for liabilities (stated at net present cost) Total current liabilities 2009 €m 2008 €m 110 64 - 2 - - 4 180 11 22 33 (4) (4) (2) - (1) - (3) (14) - - (14) 429 366 (6) 52 1 2 1 845 66 126 192 4 4 (82) (8) - (2) (92) (89) (12) (4) (105) Total consideration (enterprise value) 192 844 Consideration satisﬁed by Cash payments Professional fees incurred on business combinations Cash and cash equivalents acquired on acquisition Net cash outﬂow Net debt (other than cash and cash equivalents) assumed on acquisition: - non-current interest-bearing loans and borrowings and ﬁnance leases - current interest-bearing loans and borrowings and ﬁnance leases Deferred and contingent acquisition consideration (stated at net present cost) Associate becoming a subsidiary (note 15) Total consideration (enterprise value) 178 - (4) 174 2 1 8 7 192 837 8 (68) 777 9 46 12 - 844 None of the acquisitions completed during the ﬁnancial year was considered sufﬁciently material to warrant separate disclosure of the attributable fair values. No contingent liabilities were recognised on the acquisitions completed during the ﬁnancial year or the prior ﬁnancial year. The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and synergies with existing entities in the Group. CRH 113 32. Acquisition of Subsidiaries and Joint Ventures continued 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: Non-current assets (excluding goodwill) Current assets Non-current liabilities Current liabilities Minority interest Identiﬁable net assets acquired (excluding goodwill and net debt assumed) Goodwill arising on acquisition Total consideration (enterprise value) Book values €m Fair value adjustment €m Accounting policy alignments €m Adjustments to provisional fair values €m 87 33 (2) (15) - 103 91 194 28 1 (1) 1 (4) 25 (25) - - - - - - - - - 1 (1) - - - - (2) (2) Fair value €m 116 33 (3) (14) (4) 128 64 192 The initial assignment of fair values to identiﬁable net assets acquired has been performed on a provisional basis in respect of a number of the acquisitions disclosed above given the timing of closure of these deals; any amendments to these fair values made during the subsequent reporting window (within the twelve-month timeframe from the acquisition date imposed by IFRS 3) will be subject to subsequent disclosure. The following table analyses the 14 acquisitions (2008: 52 acquisitions) by reportable segment and provides details of the goodwill and consideration ﬁgures arising in each of those segments: Number Goodwill Consideration 2009 2008 2009 €m 2008 €m 2009 €m 2008 €m Reportable segments Europe Materials Europe Products Europe Distribution Americas Materials Americas Products Americas Distribution 2 - 1 10 - 1 14 8 9 7 19 8 1 52 2 - 4 60 - - 66 125 111 57 32 18 4 347 The post-acquisition impact of acquisitions completed during the year on Group proﬁt for the ﬁnancial year was as follows: Revenue Cost of sales Gross proﬁt Operating costs Group operating proﬁt Proﬁt on disposal of non-current assets Proﬁt before ﬁnance costs Finance costs (net) Proﬁt before tax Income tax expense Group proﬁt for the ﬁnancial year 20 - 9 164 - 1 194 2009 €m 43 (35) 8 (5) 3 - 3 (1) 2 (1) 1 293 202 177 101 52 8 833 2008 €m 530 (392) 138 (85) 53 - 53 (26) 27 (8) 19 The revenue and proﬁt of the Group for the ﬁnancial year determined in accordance with IFRS as though the acquisition date for all acquisitions effected during the year had been the beginning of that year would be as follows: Revenue Group proﬁt for the ﬁnancial year Pro-forma 2009 2009 acquisitions €m CRH Group excluding 2009 acquisitions €m Pro-forma consolidated Group €m Pro-forma 2008 €m 188 19 17,330 597 17,518 616 21,174 1,271 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 10 Events after the Balance Sheet Date. Development updates, giving details of acquisitions which do not require separate disclosure, are published in January and July each year. 114 CRH 33. Related Party Transactions The principal related party relationships requiring disclosure in the Consolidated Financial Statements of the Group under IAS 24 Related Party Disclosures pertain 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. 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 66 to 71. The Group’s principal subsidiaries, joint ventures and associates are disclosed on pages 124 to 129. Sales to and purchases from, together with outstanding payables to and receivables from, subsidiaries and joint ventures are eliminated in the preparation of the Consolidated Financial Statements (either in full or to the extent of the Group’s interest) in accordance with IAS 27 Consolidated and Separate Financial Statements and IAS 31 Interests in Joint Ventures. The amounts in respect of joint ventures are immaterial in the context of the year-end 2009 ﬁnancial statements. Loans extended by the Group to joint ventures and associates (see note 15) are included in ﬁnancial assets (whilst the Group’s share of the corresponding loans payable by joint ventures is included in interest-bearing loans and borrowings due to the application of proportionate consolidation in accounting for the Group’s interests in these entities). Sales to and purchases from associates during the ﬁnancial year ended 31st December 2009 amounted to €17 million (2008: €17 million) and €458 million (2008: €584 million) respectively. Amounts receivable from and payable to associates (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 other related parties (being joint ventures and associates) are conducted in the ordinary course of business and on terms equivalent to those that prevail in arm’s-length transactions. The outstanding balances included in receivables and payables as at the balance sheet date in respect of transactions with 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 (the respective amounts being disclosed in note 15) 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. As identiﬁed in the Report on Directors’ Remuneration on pages 51 to 59, the Directors, other than the non-executive Directors, serve as executive ofﬁcers of the Company. Full disclosure in relation to the 2009 and 2008 compensation entitlements of the Board of Directors is provided in the Report on Directors’ Remuneration with disclosure of the share-based payment expense relating to the Board of Directors provided in note 7 to the Consolidated Financial Statements. Other than these compensation entitlements, there were no other transactions involving key management personnel. 34. Board Approval The Board of Directors approved and authorised for issue the ﬁnancial statements on pages 62 to 115 in respect of the year ended 31st December 2009 on 1st March 2010. CRH 115 Notes 2 3 4 6 6 6 7 7 7 7 Company Balance Sheet as at 31st December 2009 Non-current assets Financial assets Current assets Debtors Cash at bank and in hand Creditors (amounts falling due within one year) Trade and other creditors Corporation tax liability Bank loans and overdrafts Total assets less liabilities Capital and reserves Called-up share capital Preference share capital Share premium Treasury Shares and own shares Revaluation reserve Other reserves Proﬁt and loss account Shareholders' funds K. McGowan, M. Lee, Directors 2009 €m 2008 €m 491 460 7,922 152 8,074 2,814 - 2 2,816 5,683 149 5,832 1,636 2 1 1,639 5,749 4,653 241 1 3,782 (279) 42 118 1,844 5,749 186 1 2,452 (378) 42 827 1,523 4,653 116 CRH Notes to the Company Balance Sheet 1. Accounting Policies Basis of accounting The ﬁnancial statements have been prepared under the historical cost convention in accordance with the Companies Acts, 1963 to 2009 and Generally Accepted Accounting Practice in the Republic of Ireland (“Irish GAAP”). The following paragraphs describe the principal accounting policies under Irish GAAP, which have been applied consistently. Operating income and expense Operating income and expense arises from the Company’s principal activities as a holding company for the Group and is accounted for on an accruals basis. Financial assets Fixed asset investments, including investments in subsidiaries, are stated at cost (and at valuation at 31st December 1980 for those investments in existence at that date) less any accumulated impairments and are reviewed for impairment if there are indications that the carrying value may not be recoverable. Foreign currencies The reporting currency of the Company is euro. Transactions in foreign currencies are translated at the rates of exchange ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into euro at the rates of exchange ruling at the balance sheet date, with a corresponding charge or credit to the proﬁt and loss account. Share issue expenses and share premium account Costs of share issues are written-off against the premium arising on issues of share capital. Share-based payments The Company has applied the requirements of FRS 20 Share-based Payment. The accounting policy applicable to share-based payments is consistent with that applied under IFRS and is accordingly addressed in detail on page 68 of the Consolidated Financial Statements. Cash ﬂow statement The Company has taken advantage of the exemption afforded by FRS 1 Cash Flow Statements not to provide a statement of cash ﬂows. Treasury Shares and own shares Treasury Shares Own equity instruments (i.e. Ordinary Shares) acquired by the Company are deducted from equity and presented on the face of the Company Balance Sheet. No gain or loss is recognised in proﬁt or loss on the purchase, sale, issue or cancellation of the Company’s Ordinary Shares. Own shares Ordinary Shares purchased by the Employee Beneﬁt Trust on behalf of the Company under the terms of the Performance Share Plan are recorded as a deduction from equity on the face of the Company Balance Sheet. Dividends Dividends on Ordinary Shares are recognised as a liability in the Company’s Financial Statements in the period in which they are declared by the Company. CRH 117 2. Financial Assets The Company’s investment in its subsidiaries is as follows: At 1st January 2009 at cost/valuation Capital contribution in respect of share-based payments Impairment At 31st December 2009 at cost/valuation The equivalent disclosure for the prior year is as follows: At 1st January 2008 at cost/valuation Additions Capital contribution in respect of share-based payments At 31st December 2008 at cost/valuation Shares (i) €m 377 - (3) 374 Shares (i) €m 251 126 - 377 2009 Other €m 83 34 - 117 2008 Other €m 60 - 23 83 Total €m 460 34 (3) 491 Total €m 311 126 23 460 (i) The Company’s investment in shares in its subsidiaries was revalued at 31st December 1980 to reﬂect the surplus on revaluation of certain property, plant and equipment (land and buildings) of subsidiaries. The original historical cost of the shares equated to approximately €9 million. The analysis of the closing balance between amounts carried at valuation and at cost is as follows: At valuation 31st December 1980 At cost post 31st December 1980 Total 3. Debtors Amounts owed by subsidiary undertakings 4. Trade and Other Creditors Amounts falling due within one year Amounts owed to subsidiary undertakings 2009 €m 47 327 374 2008 €m 47 330 377 2009 €m 2008 €m 7,922 5,683 2009 €m 2008 €m 2,814 1,636 5. Dividends Proposed (Memorandum Disclosure) Details in respect of dividends proposed of €307 million (2008: €258 million) are presented in the dividends note (note 11) on page 83 of the notes to the Consolidated Financial Statements. 6. Called-up Share Capital Details in respect of called-up share capital, Treasury Shares and own shares are presented in the share capital and reserves note (note 30) on pages 109 to 111 of the notes to the Consolidated Financial Statements. 118 CRH 7. Movement in Shareholders’ Funds At 1st January 2009 Currency translation effects Issue of share capital (net of expenses) Transfer to proﬁt and loss account Proﬁt after tax before dividends Treasury/own shares re-issued Shares acquired by Employee Beneﬁt Trust (own shares) Share option exercises Share-based payment expense Reclassiﬁcation of Performance Share Plan expense Dividends (including shares issued in lieu of dividends) At 31st December 2009 At 1st January 2008 Currency translation effects Issue of share capital (net of expenses) Proﬁt after tax before dividends Shares acquired by CRH plc (Treasury Shares) Treasury/own shares re-issued Shares acquired by Employee Beneﬁt Trust (own shares) Share option exercises Share-based payment expense Dividends (including shares issued in lieu of dividends) At 31st December 2008 2009 Issued share capital €m Share premium account €m Treasury Shares/ own shares €m Revaluation reserve €m Other reserves €m Proﬁt and loss account €m 187 - 55 - - - - - - - - 242 2,452 - 1,330 - - - - - - - - 3,782 42 - - - - - - - - - - 42 (378) - - - - 114 (2) - - (13) - (279) 2008 827 - - (750) - - - - 28 13 - 118 1,523 1 - 750 10 (114) - 60 - - (386) 1,844 Issued share capital €m Share premium account €m Treasury Shares/ own shares €m Revaluation reserve €m Other reserves €m Proﬁt and loss account €m 187 - - - - - - - - - 187 2,424 - 28 - - - - - - - 2,452 (19) - - - (411) 48 (3) - 7 - (378) 42 - - - - - - - - - 42 60 - - 750 - - - - 17 - 827 812 4 - 1,093 - (48) - 31 - (369) 1,523 In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual proﬁt and loss account to the Annual General Meeting and from ﬁling it with the Registrar of Companies. The loss retained for the ﬁnancial year dealt with in the Company Financial Statements amounted to €376 million (2008: proﬁt retained of €1,474 million). 8. Share-based Payments The total expense of €28 million (2008: €24 million) reﬂected in note 7 to the Consolidated Financial Statements attributable to employee share options and the Performance Share Plan has been included as a capital contribution in ﬁnancial assets (note 2) in addition to any payments to/from subsidiaries. 9. Section 17 Guarantees Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of its wholly-owned subsidiary undertakings and the Oldcastle Finance Company and Oldcastle North America Funding Company general partnerships in the Republic of Ireland for the ﬁnancial year ended 31st December 2009 and, as a result, such subsidiary undertakings and the general partnerships have been exempted from the ﬁling provisions of Section 7, Companies (Amendment) Act, 1986 and Regulation 20 of the European Communities (Accounts Regulations), 1993 respectively. The Company has not guaranteed any debt or other obligations of joint ventures or associates. Details in relation to other guarantees provided by the Company are provided in the interest-bearing loans and borrowings note (note 23) on pages 95 and 96 of the notes to the Consolidated Financial Statements. 10. Related Party Transactions The Company has taken advantage of the exemption in FRS 8 not to disclose transactions with wholly-owned subsidiaries. 11. Approval by Board The Board of Directors approved and authorised for issue the Company Financial Statements on pages 116 to 119 in respect of the year ended 31st December 2009 on 1st March 2010. CRH 119 Shareholder Information Dividend payments An interim dividend of 18.5c was paid in respect of Ordinary Shares on 30th October 2009. A ﬁnal dividend of 44.0c, if approved, will be paid in respect of Ordinary Shares on 10th May 2010. A scrip alternative will be offered to shareholders. 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, Capita 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 form may be obtained from Capita 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 Ireland for tax purposes are not entitled to an exemption. Shareholders who wish to have their dividend paid direct to a bank account, by electronic funds transfer, should contact Capita Registrars to obtain a mandate form. Tax vouchers will 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 Sterling and US Dollars to shareholders whose address, according to the Share Register, is in the UK and the United States respectively, unless they require otherwise. As the above arrangements can be inﬂexible for institutional shareholders, 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. Dividends in respect of 7% ‘A’ Cumulative Preference Shares are paid half-yearly on 5th April and 5th October. Dividends in respect of 5% Cumulative Preference Shares are paid half-yearly on 15th April and 15th October. 120 CRH CREST Website 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. Share price data Share price at 31st December Market capitalisation Share price movement during the year: - high - low 2009 € 19.01 13.3bn 20.70 12.55 2008 € 16.10* 9.5bn 24.50* 12.44* * Restated for the bonus element of the 2 for 7 Rights Issue in March 2009. Shareholdings as at 31st December 2009 Ownership of Ordinary Shares Geographic location * Number of shares held ‘000 % of total Ireland United Kingdom United States Europe/Other Retail Treasury 59,925 107,910 254,154 194,077 82,081 12,338 710,485 8 15 36 27 12 2 100 Registrars The Group’s website, www.crh.com, provides the full text of the Annual and Interim Reports, the Annual Report on Form 20-F, which is ﬁled annually with the United States Securities and Exchange Commission, trading statements, interim management statements and copies of presentations to analysts and investors. News releases are made available, in the News & Media section of the website, immediately after release to the Stock Exchanges. 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 to 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 Capita Registrars. Electronic proxy voting Shareholders may lodge a proxy form for the 2010 Annual General Meeting electronically. Shareholders who wish to submit proxies via the internet may do so by accessing CRH’s, or Capita Registrars’, website as described below. Shareholders must register for this service on-line before proxy forms can be lodged electronically. 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. * 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 1 - 1,000 1,001 - 10,000 10,001 - 100,000 100,001 - 1,000,000 Over 1,000,000 Number of shareholders % of total Number of shares held ‘000 17,261 10,166 1,360 262 82 29,131 59.25 34.90 4.67 0.90 0.28 100 6,217 29,539 35,077 82,449 557,203 710,485 % of total 0.87 4.16 4.94 11.60 78.43 100 Stock Exchange listings CRH has primary listings on the Irish and London Stock Exchanges. The Group’s American Depositary Shares (ADSs), each representing one Ordinary Share, are listed on the New York Stock Exchange (NYSE). The ADSs are evidenced by American Depositary Receipts. Financial calendar Announcement of ﬁnal results for 2009 Ex-dividend date Record date for dividend Latest date for receipt of scrip forms Interim Management Statement Annual General Meeting Dividend payment date and ﬁrst day of dealing in scrip dividend shares Trading Update Statement Announcement of interim results for 2010 Interim Management Statement 2nd March 2010 10th March 2010 12th March 2010 23rd April 2010 5th May 2010 5th May 2010 10th May 2010 7th July 2010 24th August 2010 9th November 2010 Enquiries concerning shareholdings should be addressed to: Capita Registrars, P.O. Box 7117, Dublin 2, Ireland. Telephone: +353 (0) 1 810 2400 Fax: +353 (0) 1 810 2422 Shareholders with access to the internet may check their accounts either by accessing CRH’s website and selecting “Registrars” under “Shareholder Services” in the Investor Relations section or by accessing Capita Registrars’ website, www.capitaregistrars.ie and selecting “Login to Shareholder Services” under “Online Services”. This facility allows shareholders to check their shareholdings and dividend payments, register e-mail addresses and download standard forms required to initiate changes in details held by Capita Registrars. Shareholders will need to register for a User ID before using some of the services. American Depositary Receipts (ADRs) 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 358516, Pittsburgh, PA 15252-8516, U.S.A. Telephone: Toll Free Number (United States residents): 1-888-269-2377 International: +1 201-680-6825 E-mail: shrrelations@bnymellon.com Website: http://www.bnymellon.com/shareowner Frequently Asked Questions (FAQ) The Group’s website contains answers to questions frequently asked by shareholders, including questions regarding shareholdings, dividend payments, electronic communications and shareholder rights. The FAQ can be accessed in the Investor Relations section of the website under “Shareholder Services”. CRH 121 Management Senior Group Staff Europe Materials Henry Morris Managing Director Ken McKnight Regional Director Ireland and Asia Declan Maguire Regional Director Europe South Alan Connolly Finance Director Eamon Geraghty Technical Director Philip Wheatley Development Director John Corbett Human Resources Director John McKeon Procurement Director John Madden Cement Operations Manager Ireland Jim Mintern Country Manager Ireland Seamus Lynch Managing Director Irish Cement Pat McCleery Managing Director Premier Periclase Larry Byrne Managing Director Clogrennane Lime Frank Byrne Managing Director Roadstone Wood Group Mark Lowry Managing Director Northstone Benelux Jan Boon Managing Director Cementbouw Poland Owen Rowley Country Manager Mossy O’Connor Cement Director Myles Lee Chief Executive Albert Manifold Chief Operating Ofﬁcer Glenn Culpepper Finance Director Neil Colgan Company Secretary Colm Bannon Group Technical Advisor Maeve Carton Head of Group Finance Jack Golden Group HR Director Rossa McCann Group Treasurer Éimear O’Flynn Head of Investor Relations Pat O’Shea Group Taxation Director 122 CRH Mariusz Bogacz Concrete Products Director Concrete Products Brian Walsh Aggs, Blacktop & Lime Director Poland & Slovakia Rudy Aertgeerts Managing Director Kees Verburg Finance Director Kees-Jan van ‘t Westeinde Managing Director Shutters & Barriers Gerben Stilma Managing Director Insulation & Rooﬂight Products Andrzej Ptak President . z Grupa O arów Michal Jankowski President ZPW Trzuskawica Ukraine Michael O’Sullivan Country Director Finland David Dillon Country Manager Kalervo Matikainen Managing Director Finnsementti Lauri Kivekäs Managing Director Rudus Switzerland Urs Sandmeier Country Manager Spain Sebastia Alegre Managing Director Beton Catalan Turkey & Portugal Frank Heisterkamp Country Manager China Peter Buckley Country Director India Oliver Mahon Country Director Tony Macken Country Manager Products & Distribution Máirtín Clarke Managing Director Edwin Bouwman Finance Director Michael Stirling Human Resources Director Peter Eigenhuis Human Resources Director Distribution Edwin van den Berg Managing Director Landscaping Products Alain Kirchmeyer Managing Director Civil Networks Claus Bering Managing Director Structural Products Clay Products Erik Bax Managing Director Peter Erkamp Finance Director Erik de Groot Human Resources Director Harry Bosshardt Managing Director Builders Merchants Central Europe Wayne Sheppard Managing Director Clay Products & Ibstock Brick Peter Stravers Managing Director Builders Merchants Benelux Geoff Bull Finance Director Jan van Ommen Managing Director Clay Mainland Europe Ruud van den Akker Managing Director Kooy Grzegorz Ploska Managing Director CRH Klinkier Richard Lee Managing Director Supreme Building Products Marc St. Nicolaas Managing Director Walter de Backer Finance Director Peter Liesker Human Resources Director Dirk Vael Managing Director Construction Accessories– Engineered Products Jean-Luc Bernard Managing Director Construction Accessories– Convenience Products Henk Dibbets Managing Director Fencing & Security Philippe Denécé Managing Director Builders Merchants France Emiel Hopmans Managing Director DIY Europe The Americas Mark S. Towe Chief Executive Ofﬁcer Michael O’Driscoll Chief Financial Ofﬁcer Don Eshleman Executive Vice President Gary Hickman Senior Vice President Tax & Risk Management Bill Miller Vice President & General Counsel Brian Reilly Vice President Finance North America Materials Doug Black Chief Executive Ofﬁcer John Keating President & Chief Operating Ofﬁcer, East Southeast Southwest Precast MMI John Parson President & Chief Operating Ofﬁcer, West Randy Lake President Performance Group Charles Brown Chief Financial Ofﬁcer Pascal Convers Senior Vice President Development Northeast Chris Madden President Northeast Division Christian Zimmermann President New England North Ciaran Brennan President New England South John Cooney, Jr. President New York Region George Thompson President Tilcon New Jersey Central John Powers President Central Division Doug Rauh President Shelly Dan Stover President Michigan Paving & Materials Mid-Atlantic Dan Cooperrider President Mid-Atlantic Division Mark Snyder President MidA Willie Crane President AMG – North Kevin Bragg President AMG – South Rick Mergens President Southeast Division Seán O’Sullivan President Mid-South Materials Gary Yelvington President Conrad Yelvington Distributors Robert Duke President Preferred Materials John Skidmore President APAC Florida Staker Parson Scott Parson President Staker Parson Division John Grunenwald Vice President Idaho Randy Anderson Vice President Staker Parson North Michael Kurz Vice President Staker Parson South Darrell Whitney Vice President Western Rock Products Northwest Jeff Schaffer President Northwest Division Rocky Mountain & Midwest Shane Evans President Rocky Mountain & Midwest Division Lane Bybee President North Region Craig Lamberty President South Region Jim Gauger President Midwest Region Kirk Randolph President Southwest Division Raymond Lane President Texas Region Chris Lodge President Region 1 & APAC Central Products & Distribution William J. Sandbrook Chief Executive Ofﬁcer Architectural Products Keith Haas Chief Executive Ofﬁcer Paul Valentine President Masonry & Hardscapes Mike Schaeffer Chief Financial Ofﬁcer Damian Burke Vice President Development Bertin Castonguay Director, Research & Development Georges Archambault President APG Canada Steve Matsick President Glen-Gery Wade Ficklin President APG West John O’Neill President APG Northeast Tim Ortman President APG South Mark Schack Chief Executive Ofﬁcer Celeste Mastin Chief Executive Ofﬁcer Bob Quinn Chief Administrative Ofﬁcer Bob Tenczar Chief Financial Ofﬁcer Eric Farinha Chief Financial Ofﬁcer George Heusel Vice President Development George Hand President Northeast Division Jan Olsen President Central / Southeast Division Ray Rhees President National Sales, Marketing & Engineering Group Mike Scott President Western Division Dave Steevens President Enclosures Division David Clark President Merchants Metals Edward Klavin President Meadow Burke Elizabeth Potts President Ivy Steel Distribution Michael Lynch Chairman Robert Feury, Jr. Chief Executive Ofﬁcer Ron Pilla President Interior Products Donald Toth President Exterior Products Tab Buckner Vice President Operational Excellence Frank Furia Vice President Finance Glass Ted Hathaway Chief Executive Ofﬁcer Dan Hamblen Chief Financial Ofﬁcer Daipayan Bhattacharya Vice President Development & Technology Jim Avanzini President Architectural Glass John B. Graham President Aluminum Glazing Systems David Maske President Bonsal American Mary Carol Witry President Engineered Products Eoin Lehane President Oldcastle Lawn & Garden Kevin Hawley Vice President Development South America Juan Carlos Girotti Managing Director CRH Sudamericana & Canteras Cerro Negro Alejandro Javier Bertrán Business Development Manager Benjamin Fernández Business Development Manager Bernardo Alamos Managing Director Vidrios Dell Orto & South American Glass Group Gustavo Arona Operations Manager Superglass Federico Ferro Managing Director Cormela Jaime Bustamante Managing Director Comercial Duomo CRH 123 Principal Subsidiary Undertakings as at 31st December 2009 Incorporated and operating in % held Products and services Incorporated and operating in % held Products and services Europe Materials Britain & Northern Ireland Northstone (NI) Limited (including Farrans, Ready Use Concrete, R.J. Maxwell & Son, Scott (Toomebridge) Limited) 100 Aggregates, readymixed concrete, mortar, coated macadam, rooftiles, building and civil engineering contracting Premier Cement Limited 100 Marketing and distribution of cement T.B.F. Thompson (Properties) Limited 100 Property development Formigons Girona S.A. 100 Readymixed concrete and precast concrete products Suberolita S.A. 100 Readymixed concrete and precast concrete products Tamuz S.A. 100 Aggregates Switzerland JURA-Holding Ukraine 100 Cement, aggregates and readymixed concrete China Harbin Sanling Cement Company Limited * Finland 100 Cement OJSC Podilsky Cement 98.89 Cement Europe Products & Distribution Austria Finnsementti Oy 100 Cement Quester Baustoffhandel GmbH 100 Builders merchants Rudus Oy Ireland 100 Aggregates and readymixed concrete Belgium Concrete Products Irish Cement Limited 100 Cement Douterloigne N.V. 100 Concrete ﬂoor elements, pavers and Premier Periclase Limited 100 High quality seawater magnesia Clogrennane Lime Limited 100 Burnt and hydrated lime Ergon N.V. Klaps N.V. blocks 100 Precast concrete structural elements 100 Concrete paving, sewerage and water treatment Roadstone Wood Limited 100 Aggregates, readymixed concrete, mortar, coated macadam, concrete blocks and pipes, asphalt, agricultural and chemical limestone and contract surfacing Netherlands Cementbouw B.V. 100 Cement transport and trading, readymixed concrete and aggregates Poland Marlux Klaps N.V. 100 Decorative concrete paving MBI Beton B.V. Oeterbeton N.V. 100 Architectural products 100 Precast concrete Olivier Betonfabriek N.V. 100 Architectural products Prefaco N.V. Remacle S.A. Schelfhout N.V. 100 Precast concrete structural elements 100 Precast concrete products 100 Precast concrete wall elements Bosta Beton Sp. z o.o. 90.3 Readymixed concrete Clay Products Cementownia Rejowiec S.A. 100 Cement Drogomex Sp. z o.o.* 99.94 Asphalt and contract surfacing J. De Saegher Steenhandel en Bouwspecialiteiten N.V. 100 Clay brick factors Faelbud S.A.* 100 Readymixed concrete, concrete Building Products . arów S.A. z Grupa O 100 Cement Grupa Prefabet S.A.* 100 Concrete products products and concrete paving Masfalt Sp. z o.o.* 100 Asphalt and contract surfacing Plakabeton N.V. 100 Construction accessories Portal S.A. Distribution 100 Glass roof structures O.K.S.M. Sp. z o.o. 99.92 Aggregates Van Neerbos België N.V. 100 DIY stores Polbruk S.A.* 100 Readymixed concrete and concrete paving ZPW Trzuskawica S.A. 99.98 Production of lime and lime products Britain & Northern Ireland Concrete Products Spain Beton Catalan S.A. 100 Readymixed concrete Cabi S.A. 99.99 Cementitious materials Cantera de Aridos Puig Broca S.A. Explotacion de Aridos Calizos S.A. 99.81 Aggregates 100 Aggregates Formigo i Bigues S.A. 99.81 Aggregates 124 CRH Forticrete Limited 100 Concrete masonry products and rooftiles Supreme Concrete Limited 100 Concrete fencing, lintels and ﬂoorbeams Clay Products Ibstock Brick Limited 100 Clay brick manufacturer Kevington Building Products Limited Manchester Brick and Precast Limited 100 Specialist brick fabricator 100 Brick-clad precast components Trinity Bricks Limited 100 Clay brick factors Incorporated and operating in % held Products and services Incorporated and operating in % held Products and services Building Products Airvent Systems (Services) Limited 100 Smoke ventilation systems and services Adronit GmbH 100 Security fencing and access control Building Products Ancon Limited 100 Construction accessories Broughton Controls Limited 100 Access control systems Cox Building Products Limited 100 Domelights, ventilation systems and EcoTherm GmbH 100 PUR/PIR insulation Geﬁnex Gesellschaft für Innovative Extrusionprodukte mbH 100 XPE insulation CRH Fencing Limited 100 Security fencing Hammerl GmbH & Co. KG 100 Construction accessories continuous rooﬂights Greschalux GmbH 100 Domelights and ventilation systems 100 PUR/PIR insulation Halfen GmbH 100 Metal construction accessories EcoTherm Insulation (UK) Limited FCA Wholesalers Limited * 100 Construction accessories Heras SKS GmbH 100 Security fencing Jet Brakel Aero GmbH 100 Rooﬂights, glass roof structures and Geoquip Limited 100 Perimeter intrusion detection systems ventilation systems Springvale EPS Limited 100 EPS insulation and packaging JET-Tageslicht & RWA GmbH 100 Domelights, ventilation systems and TangoRail Limited 100 Non-welded railing systems West Midland Fencing Limited 100 Security fencing Denmark Concrete Products continuous rooﬂights Magnetic Autocontrol GmbH 100 Vehicle and pedestrian access control systems Syncotec Inmobilien GmbH 100 Construction accessories Unidek Deutschland GmbH 100 EPS insulation Betongruppen RBR A/S 100 Paving manufacturer Distribution CRH Concrete A/S 100 Structural products Paulsen & Bräuninger GmbH 100 Sanitary ware, heating and plumbing Building Products ThermiSol Denmark A/S 100 EPS insulation Hungary Concrete Products Finland Building Products ThermiSol Oy 100 EPS insulation France Concrete Products Ferrobeton Zrt. 100 Precast concrete structural elements Ireland Concrete Products Concrete Stair Systems Limited 100 Precast concrete products Building Products Béton Moulé Industriel S.A. 99.95 Precast concrete products Aerobord Limited 100 EPS insulation and packaging Chapron Leroy S.A.S. 100 Utility products 100 Structural products Construction Accessories Limited * 100 Metal and plastic construction accessories Cinor S.A.S. Stradal S.A.S. Building Products 100 Landscape, utility and infrastructural concrete products Italy Concrete Products Ste. Heda S.A. 100 Security fencing Heras Clôture S.A.R.L. * 100 Temporary fencing Laubeuf S.A.S. 100 Glass roof structures Plakabeton France S.A. 100 Construction accessories Record S.P.A. 100 Concrete landscaping Building Products Plastybeton S.R.L. 100 Construction accessories Netherlands Concrete Products Distribution CRH Ile de France Distribution S.A.S. * Germany Concrete Products 100 Builders merchants Alvon Bouwsystemen B.V. 100 Precast concrete structural elements Calduran Kalkzandsteen B.V. 100 Sand-lime bricks and building elements Dycore B.V. 100 Concrete ﬂooring elements Jonker Beton B.V. 100 Concrete paving products EHL AG 100 Concrete paving and landscape walling Heembeton B.V. 100 Precast concrete structural elements products Struyk Verwo Groep B.V. 100 Concrete paving products Rhebau Rheinische Beton und Bauindustrie GmbH & Co. KG 100 Water treatment and sewerage products Clay Products CRH Clay Solutions GmbH 100 Clay brick, pavers and rooftiles CRH 125 Principal Subsidiary Undertakings continued Incorporated and operating in % held Products and services Incorporated and operating in % held Products and services Netherlands continued Clay Products Kleiwarenfabriek Buggenum B.V. Kleiwarenfabriek Façade Beek B.V. 100 Clay brick manufacturer 100 Clay brick manufacturer B.V. Kleiwarenfabriek Joosten 100 Clay brick manufacturer Kleiwarenfabriek Joosten Wessem B.V. 100 Clay brick manufacturer CRH Klinkier Sp. z o.o.* 100 Clay brick manufacturer Gozdnickie Zaklady Ceramiki Budowlanej Sp. z o.o.* Krotoszyñskie Przedsi biorstwo Ceramiki Budowlanej CERABUD S.A. Patoka Industries Limited Sp. z o.o.* Building Products 100 Clay brick manufacturer 96.37 Clay blocks, bricks and rooftiles 99.19 Clay brick manufacturer Kooy Bilthoven B.V. 100 Clay brick factors Termo Organika Sp. z o.o. 100 EPS insulation Steenfabriek Nuth B.V. 100 Clay brick manufacturer Building Products Arfman Hekwerk B.V. * 100 Producer and installer of fauna and railway fencing solutions Aluminium Verkoop Zuid B.V. 100 Roller shutter and awning systems BIK Bouwprodukten B.V. 100 Domelights and continuous rooﬂights Brakel Atmos B.V. 100 Glass roof structures, continuous rooﬂights and ventilation systems EcoTherm B.V. 100 PUR/PIR insulation Heras Nederland B.V. 100 Security fencing and perimeter protection Mavotrans B.V. 100 Construction accessories Unidek Group B.V. 100 EPS insulation Unipol Holland B.V. 100 EPS granulates Romania Concrete Products Elpreco SA 100 Architectural products Ergon Concrete International 100 Structural products Slovakia Concrete Products Premac spol. s.r.o. 100 Concrete paving and ﬂoor elements Ferrobeton Slovakia, s.r.o. 100 Precast concrete structural elements Spain Building Products Plakabeton S.L.U. 100 Accessories for construction and precast concrete 100 Domelights Distribution Vaculux B.V. Distribution CRH Bouwmaterialenhandel B.V. 100 Holding company CRH Rooﬁng Materials B.V. 100 Rooﬁng materials merchant N.V. B. Bouwstoffen B.V. 100 Builders merchants Stoel van Klaveren Bouwstoffen B.V. 100 Builders merchants Syntec B.V. 100 Ironmongery merchants Van Neerbos Bouwmarkten B.V. 100 DIY stores CRH Bouwmaten B.V. 100 Cash & Carry building materials Van Neerbos Bouwmaterialen B.V. 100 Builders merchants Norway Building Products Halfen-Frimeda AS 100 Construction accessories Poland Concrete Products Ergon Poland Sp. z o.o. 100 Structural products Faelbud Prefabrykaty Sp. z o.o.* 100 Readymixed concrete, concrete products and concrete paving Clay Products CERG Sp. z o.o. 67.55 Clay brick manufacturer Cerpol Kozlowice Sp. z o.o. 99.60 Clay brick manufacturer 126 CRH JELF Brico House S.L. 94.75 Builders merchants Sweden Building Products ThermiSol AB 100 EPS insulation TUVAN-stängsel AB 100 Security fencing Switzerland Concrete Products Element AG 100 Prefabricated structural concrete elements Building Products U.C. Aschwanden Holding AG * 100 Construction accessories Distribution BR Bauhandel AG (trading as BauBedarf, Richner, Sanmat and Sabez) CRH Gétaz Holding AG (trading as Gétaz Romang and Miauton) Regusci S.A. (trading as Regusci and Reco) 100 Builders merchants, sanitary ware and ceramic tiles 100 Builders merchants 100 Builders merchants Incorporated and operating in % held Products and services Incorporated and operating in % held Products and services Americas Materials United States Americas Products & Distribution Argentina Oldcastle Materials, Inc. 100 Holding company CRH Sudamericana S.A. 100 Holding company APAC Holdings, Inc. and Subsidiaries Callanan Industries, Inc. Conrad Yelvington Distributors, Inc. 100 Aggregates, asphalt and related construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities 100 Aggregates distribution Canteras Cerro Negro S.A. 99.98 Clay rooftiles, wall tiles and ﬂoor tiles Cormela S.A. 100 Clay blocks Superglass S.A. 100 Fabricated and tempered glass products Canada CPM Development Corporation 100 Aggregates, asphalt, readymixed Architectural Products Group concrete, prestressed concrete and related construction activities Dolomite Products Company, Inc. 100 Aggregates, asphalt and readymixed concrete Eugene Sand Construction, Inc. 100 Aggregates, asphalt, readymixed concrete and related construction activities Evans Construction Company Hills Materials Company 100 Aggregates, asphalt, readymixed concrete and related construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities Oldcastle Building Products Canada, Inc. (trading as Décor Precast, Groupe Permacon, Oldcastle Glass and Synertech Moulded Products) Glass Group Oldcastle Glass Engineered Products Canada, Inc. Xemax International, Inc. (trading as Antamex International) Hilty Quarries, Inc. 100 Aggregates, asphalt and related Chile 100 Masonry, paving and retaining walls, utility boxes and trenches and custom fabricated and tempered glass products 100 Architectural-rated operable windows and curtain wall 100 Architectural curtain wall construction activities Michigan Paving and Materials Company 100 Aggregates, asphalt and related construction activities Mountain Enterprises, Inc. 100 Aggregates, asphalt and related Vidrios Dell Orto, S.A. 99.9 Fabricated and tempered glass products Comercial Duomo Limitada 81 Wholesaler and retailer of specialised building products OMG Midwest, Inc. Oldcastle SW Group, Inc. Pennsy Supply, Inc. construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities Pike Industries, Inc. 100 Aggregates, asphalt and related United States CRH America, Inc. 100 Holding company Oldcastle, Inc. 100 Holding company Oldcastle Building Products, Inc. 100 Holding company Architectural Products Group Big River Industries, Inc. 100 Lightweight aggregates and ﬂy-ash Bonsal American, Inc. 100 Pre-mixed products and specialty stone products P.J. Keating Company 100 Aggregates, asphalt and related countertops construction activities Glen-Gery Corporation 100 Clay bricks construction activities Oldcastle Surfaces, Inc. 100 Custom fabrication and installation of Preferred Materials, Inc. 100 Aggregates and readymixed concrete Staker & Parson Companies 100 Aggregates, asphalt, readymixed concrete and related construction activities The Shelly Company 100 Aggregates, asphalt and related Tilcon Connecticut, Inc. construction activities 100 Aggregates, asphalt, readymixed concrete and related construction activities Tilcon New York, Inc. 100 Aggregates, asphalt and related construction activities West Virginia Paving, Inc. 100 Aggregates, asphalt and related construction activities Northﬁeld Block Company (trading as Bend-Northﬁeld) 100 Specialty masonry, hardscape and patio products Oldcastle Architectural, Inc. 100 Holding company Oldcastle APG Midwest, Inc. (trading as 4D Schusters and Miller Rhino Materials) Oldcastle APG Northeast, Inc. (trading as Anchor Concrete Products, Arthur Whitcomb, Betco Supreme, Domine Builders Supply, Foster- Southeastern, Trenwyth Industries) Oldcastle APG South, Inc. (trading as Adams Products, Georgia Masonry Supply) 100 Specialty masonry, hardscape and patio products 100 Specialty masonry, hardscape and patio products 100 Specialty masonry, hardscape and patio products CRH 127 Principal Subsidiary Undertakings continued Incorporated and operating in % held Products and services United States continued Oldcastle APG Texas, Inc. (trading as Custom-Crete, Custom Stone Supply, Jewell Concrete Products) Oldcastle APG West, Inc. (trading as Amcor Masonry Products, Central Pre-Mix Concrete Products, Sierra Building Products, Superlite Block) 100 Specialty masonry and stone products, hardscape and patio products 100 Specialty masonry, hardscape and patio products Oldcastle Lawn & Garden, Inc. 100 Patio products, bagged stone, mulch and stone Oldcastle Coastal, Inc. 100 Patio products Distribution Group Oldcastle Distribution, Inc. 100 Holding company Allied Building Products Corp. 100 Distribution of rooﬁng, siding and related products, wallboard, metal studs, acoustical tile and grid A.L.L. Rooﬁng & Building Materials Corp. 100 Distribution of rooﬁng and related products AMS Holdings, Inc. 100 Distribution of drywall, acoustical ceiling systems, metal studs and commercial door solutions Arzee Acquisition Corp. (trading as Arzee Supply) Mahalo Acquisition Corp. (trading as G. W. Killebrew) 100 Distribution of rooﬁng, siding and related products 100 Distribution of rooﬁng and related products Glass Group Antamex (US), Inc. 100 Architectural curtain walls Oldcastle Glass, Inc. 100 Custom fabricated architectural glass Oldcastle Glass Engineered Products, Inc. 100 Engineered aluminium glazing systems and integrated building envelope solutions Construction Accessories, Fencing and Welded Wire Reinforcement Merchants Metals Holding Company MMI Products, Inc. (trading as Merchants Metals, Meadow Burke and ADC Manufacturing) 100 Holding company 100 Fabrication and distribution of metal products including fencing, welded wire reinforcement and concrete accessories; distribution of plastic, lumber and other metal products Ivy Steel & Wire, Inc. 100 Welded wire reinforcement manufacturer Precast Group Oldcastle Precast, Inc. 100 Precast concrete products, concrete pipe, prestressed plank and structural elements 128 CRH Principal Joint Venture Undertakings as at 31st December 2009 Principal Associated Undertakings as at 31st December 2009 Incorporated and operating in % held Products and services Incorporated and operating in % held Products and services Europe Materials India My Home Industries Limited 50 Cement Ireland Kemek Limited * 50 Commercial explosives Portugal Secil-Companhia Geral de Cal e Cimento, S.A. * 48.99 Cement, aggregates, concrete products, mortar and readymixed concrete Europe Materials China Jilin Yatai Group Building Materials Investment Company Limited * 26 Cement Israel Mashav Initiating and Development Limited Spain 25 Cement Turkey Denizli Çimento Sanayii T.A. . 50 Cement and readymixed concrete Corporación Uniland S.A. * 26.3 Cement, aggregates, readymixed concrete and mortar Europe Products & Distribution Belgium Building Products Jackon Insulation N.V. Germany Building Products Jackon Insulation GmbH * 49 XPS insulation 49.20 XPS insulation Distribution Bauking AG * France Distribution Doras S.A. * Ireland Building Products Williaam Cox Ireland Limited Netherlands Distribution Bouwmaterialenhandel de Schelde B.V. Portugal Distribution Modelo Distribuição de Materials de Construção S.A. * Americas Materials 47.82 Builders merchants, DIY stores 57.85 Builders merchants 50 Glass construction, continuous rooﬂights and ventilation systems 50 DIY stores 50 Cash & Carry building materials American Cement Company, LLC * 50 Cement Bizzack Construction LLC * 50 Construction Boxley Aggregates of West Virginia, LLC * 50 Aggregates Cadillac Asphalt, LLC * 50 Asphalt Europe Products & Distribution France Distibution Samse S.A. * 21.23 Builders merchants and DIY stores Melin Trialis S.A.S. * 34.81 Builders merchants Americas Materials Buckeye Ready Mix, LLC * 45 Readymixed concrete * Audited by ﬁrms other than Ernst & Young Pursuant to Section 16 of the Companies Act, 1986, a full list of subsidiary, joint venture and associated undertakings will be annexed to the Company’s Annual Return to be ﬁled in the Companies Registration Ofﬁce in the Republic of Ireland. CRH 129 Group Financial Summary (Figures prepared in accordance with Irish GAAP) Turnover including share of joint ventures 2,520 3,354 4,234 5,211 6,734 8,870 10,444 10,794 11,080 12,820 1995 € m 1996 € m 1997 € m 1998 € m 1999 € m 2000 € m 2001 € m 2002 € m 2003 € m 2004 € m Group operating proﬁt Goodwill amortisation Proﬁt on disposal of ﬁxed assets Exceptional items Proﬁt on ordinary activities before interest Net interest payable Proﬁt on ordinary activities before taxation Taxation on proﬁt on ordinary activities Taxation on exceptional items Proﬁt on ordinary activies after taxation Employment of capital Fixed assets - Tangible assets - Intangible asset - goodwill - Financial assets Net working capital Other liabilities Total Financed as follows Equity shareholders' funds Preference share capital Minority shareholders' equity interest Capital grants Deferred tax Net debt Convertible capital bonds Purchase of tangible assets Acquisitions and investments Total (a) (b) (c) (d) Depreciation and goodwill amortisation Earnings per share after goodwill amortisation (cent) Earnings per share before goodwill amortisation (cent) Dividend per share (cent) Cash earnings per share (cent) Dividend cover (times) (e) (e) (e) (e),(f) (g) 224 - 1 - 225 (21) 204 (42) - 162 895 - 118 133 (13) 1,133 868 1 12 12 49 189 2 1,133 109 164 273 81 37.1 37.1 9.49 55.9 3.9 283 - 1 - 284 (28) 256 (58) - 198 1,236 - 127 255 (25) 1,593 1,056 1 13 11 70 442 - 1,593 150 532 682 104 43.9 43.9 10.64 67.1 4.1 349 - 9 - 358 (36) 322 (76) - 246 1,519 - 132 313 (61) 1,903 1,308 1 14 11 104 465 - 1,903 147 241 388 129 52.4 52.4 12.21 80.2 4.3 442 (1) 11 - 452 (43) 409 (100) - 309 2,288 138 53 512 (286) 2,705 1,553 1 285 20 116 730 - 2,705 232 604 836 166 65.0 65.3 14.08 100.3 4.6 676 (19) 7 64 728 (93) 635 (152) (26) 457 3,226 629 66 608 (430) 4,099 2,201 1 37 19 172 1,669 - 4,099 360 1,421 1,781 275 87.5 91.6 16.43 145.4 5.3 919 (44) 13 - 888 (191) 697 (194) - 503 4,551 955 104 915 (470) 6,055 3,074 1 36 17 307 2,620 - 6,055 430 1,605 2,035 395 102.6 111.6 18.73 184.0 5.5 1,020 (61) 17 - 976 (173) 803 (217) - 586 5,150 1,153 316 1,040 (479) 7,180 4,734 1 135 16 400 1,894 - 7,180 452 1,080 1,532 497 104.0 114.8 20.74 192.7 5.0 1,049 (70) 16 - 995 (139) 856 (227) - 629 5,004 1,154 275 1,078 (443) 7,068 4,747 1 111 14 485 1,710 - 7,068 367 992 1,359 526 107.5 119.5 22.90 198.2 4.7 1,046 (76) 13 - 983 (118) 865 (218) - 647 5,145 1,475 349 1,116 (429) 7,656 4,758 1 90 13 486 2,308 - 7,656 402 1,615 2,017 534 109.9 122.8 25.34 201.4 4.3 1,247 (101) 11 - 1,157 (140) 1,017 (247) - 770 5,320 1,443 702 1,244 (429) 8,280 5,217 1 82 11 528 2,441 - 8,280 520 922 1,442 596 129.8 147.1 29.76 231.2 4.4 Notes to Irish GAAP ﬁnancial summary data (a) Excluding bank advances and cash and liquid investments which are included under net debt (see note (c) below). (b) Including deferred and contingent acquisition consideration due after more than one year and provisions for liabilities and charges and excluding deferred tax. (c) Net debt represents the sum of loans (including ﬁnance leases) and overdrafts falling due within one year, bank loans (including ﬁnance leases) falling due after more than one year less cash and liquid investments. (d) Including supplemental interest. (e) Per share amounts for 1995 to 2004 have been restated for the bonus element of the Rights Issue in March 2009. (f) Cash earnings per share equals the sum of proﬁt for the year attributable to ordinary shareholders, depreciation and goodwill amortisation divided by the average number of Ordinary Shares outstanding for the year. (g) Excluding exceptional net gains in 1999. 130 CRH Group Financial Summary (Figures prepared in accordance with IFRS) Revenue Group operating proﬁt Proﬁt on disposal of non-current assets Proﬁt before ﬁnance costs Finance costs Finance revenue Group share of associates' proﬁt after tax Proﬁt before tax Income tax expense Restated 2004 € m 2005 € m 2006 € m 2007 € m 2008 € m 2009 € m 12,755 14,449 18,737 20,992 20,887 17,373 1,220 11 1,392 20 1,767 40 2,086 57 1,841 69 1,231 (264) 118 19 1,104 (232) 1,412 (297) 138 26 1,279 (273) 1,807 (407) 155 47 1,602 (378) 2,143 (473) 170 64 1,904 (466) 1,910 (503) 160 61 1,628 (366) 955 26 981 (419) 122 48 732 (134) Group proﬁt for the ﬁnancial year 872 1,006 1,224 1,438 1,262 598 Employment of capital Non-current and current assets Property, plant and equipment Intangible assets Investments in associates/other ﬁnancial assets Net working capital Other liabilities - current and non-current Total Capital and reserves excluding preference share capital Preference share capital Minority interest Capital grants Net deferred income tax liability Net debt 5,831 1,774 292 1,540 (1,035) 6,824 2,252 635 1,944 (1,243) 7,480 2,966 651 2,420 (1,099) 8,226 3,692 652 2,469 (869) 8,888 4,108 870 2,650 (1,126) 8,535 4,095 1,090 1,991 (1,084) (h) (i) 8,402 10,412 12,418 14,170 15,390 14,627 4,944 1 34 13 652 2,758 6,194 1 39 12 718 3,448 7,062 1 41 10 812 4,492 7,953 1 66 11 976 5,163 8,086 1 70 14 1,128 6,091 9,636 1 73 12 1,182 3,723 (j) Total 8,402 10,412 12,418 14,170 15,390 14,627 Purchase of property, plant and equipment Acquisitions and investments Total Depreciation of property, plant and equipment (including impairments) Amortisation of intangible assets (including impairments) Earnings per share after amortisation of intangible assets (cent) Earnings per share before amortisation of intangible assets (cent) Dividend per share (cent) Cash earnings per share (cent) Dividend cover (times) Notes to IFRS ﬁnancial summary data 551 1,019 1,570 516 4 147.5 148.1 29.76 236.1 5.0 652 1,298 1,950 556 9 168.3 170.0 35.17 263.7 4.8 832 2,311 3,143 664 25 202.2 206.5 46.89 317.5 4.3 1,028 2,227 3,255 739 35 236.9 242.7 61.31 365.1 3.9 1,039 1,072 2,111 781 43 210.2 217.4 62.22 348.9 3.4 532 458 990 794 54 88.3 96.3 62.50 214.7 1.4 (k) (k) (k) (k),(l) (m) (h) Represents the sum of inventories and trade and other receivables (included in current assets) less trade and other payables (included in current liabilities). (i) Represents the sum of current income tax liabilities, current and non-current provisions for liabilities, non-current trade and other payables and retirement beneﬁt obligations. (j) Represents the sum of current and non-current interest-bearing loans and borrowings and derivative ﬁnancial instrument liabilities less the sum of liquid investments, cash and cash equivalents and current and non-current derivative ﬁnancial instrument assets. (k) Per share amounts for restated 2004 to 2008 have been restated for the bonus element of the Rights Issue in March 2009. (l) Cash earnings per share represents proﬁt attributable to equity holders of the Company less preference dividends paid plus depreciation of property, plant and equipment and amortisation of intangible assets, including impairments, where applicable, divided by the average number of Ordinary Shares outstanding for the year. (m) Represents earnings per Ordinary Share divided by dividends per Ordinary Share. CRH 131 Index A Accounting policies Acquisition of subsidiaries and joint ventures (note 32) Acquisitions Committee American Depositary Receipts Americas Materials - 2009 Results Americas Materials - Operations Review Americas Products & Distribution - 2009 Results Americas Products & Distribution - Operations Review Amortisation - Intangible assets (note 14) - Segmental analysis (note 1) Annual General Meeting Associated undertakings, principal Associates’ proﬁt after tax, Group share of (note 9) Audit Committee Auditors, Report of Independent Auditors’ remuneration (note 4) B Balance sheet - Company - Consolidated Board approval of ﬁnancial statements (note 34) Board Committees Board of Directors C Capital and ﬁnancial risk management (note 21) Capital grants (note 29) Cash and cash equivalents (note 22) Cash ﬂow statement, Consolidated Cash ﬂow - summary Chairman’s Statement Changes in Equity: issued share capital, share premium account, Treasury Shares/own shares, foreign currency translation, retained income and minority interest Chief Executive’s Review Code of business conduct Communications Corporate governance Corporate social responsibility CREST CRH Overview D Debt, analysis of net (note 25) Deferred acquisition consideration payable (note 19) Deferred income tax - Expense (note 10) - Assets and liabilities (note 27) 132 CRH Depreciation 66 112 - Group operating proﬁt (note 4) - Property, plant and equipment (note 13) 41, 43 - Segmental analysis (note 1) 121 Derivative ﬁnancial instruments (note 24) 29 29 33 33 86 72 50 129 81 Development activity Directors’ emoluments and interests (note 5) Directors’ interests in share capital Directors’ interests - share options Directors’ remuneration, Report on Directors’ Report Directors’ responsibilities, Statement of Disposal of non-current assets (note 16) Diverse portfolio - strategy in action Dividend payments (shareholder information) 41, 43 Dividends (note 11) 61 76 116 63 115 Dow Jones Sustainability Indexes E Earnings per Ordinary Share (note 12) Emerging regions - strategy in action Employees, average numbers (note 6) Employment costs (note 6) End-use 41, 43 - Americas Distribution 40 - Americas Materials - Americas Products - Europe Distribution 91 109 - Europe Materials - Europe Products 94 65 38 12 64 15 45 - Group Environment and climate change Europe Materials - 2009 Results Europe Materials - Operations Review Europe Products & Distribution - 2009 Results Europe Products & Distribution - Operations Review Exchange rates F 10, 121 Finance Committee Finance costs and revenue (note 8) Finance leases (note 31) Finance Review Financial assets (note 15) Financial calendar Financial summary, Group (1995-2009) Frequently asked questions FTSE4Good 42 10 121 2 99 90 82 103 76 85 72 97 12 77 59 57 51 48 60 88 9 120 83 10 84 7 77 77 3 3 3 2 2 2 inside cover 10 21 21 25 25 67 41, 45 81 112 36 88 121 130 121 10 G Geographic leadership positions Group operations Group overview Provisions for liabilities (note 26) 2, 3 Proxy voting, electronic 19 2 R Guarantees (note 23 and note 9 to Company Balance Sheet ) 95, 119 Registrars H Health & safety I Income Statement, Consolidated Income tax expense (note 10) Intangible assets (note 14) Internal control (see Corporate Governance) Inventories (note 17) J Joint venture undertakings, principal Joint ventures, proportionate consolidation (note 2) K Key components of 2009 performance Key ﬁnancial ﬁgures 2009 Key ﬁnancial performance indicators L Related party transactions (note 33) Remuneration Committee 10 Retirement beneﬁt obligations (note 28) 62 82 86 47 89 129 75 36 1 37 S Segmental information (note 1) Senior Independent Director Share-based payments (note 7) Share capital and reserves (note 30) Share options - Directors - Employees Share price data Shareholder information Shareholdings as at 31st December 2009 Social (Corporate Social Responsibility) Stakeholder communication Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Statement of Directors’ responsibilities Stock Exchange listings Leases, commitments under operating and ﬁnance (note 31) 112 Strategic vision Liquid investments (note 22) Loans and borrowings, interest-bearing (note 23) M Management N Nomination Committee Notes on ﬁnancial statements O Operating costs (note 3) Operating leases (note 31) Operating proﬁt, Group (note 4) Operations Reviews: - Americas Materials - Americas Products & Distribution - Europe Materials - Europe Products & Distribution P Pensions, retirement beneﬁt obligations (note 28) Property, plant and equipment (note 13) Strategy in action Subsidiary undertakings, principal Substantial holdings Sustainable Asset Management (SAM) 94 95 122 T Total Shareholder Return 41, 45 Trade and other payables (note 19) 72 – 115 Trade and other receivables (note 18) V Volumes, annualised production - Americas Distribution - Americas Materials - Americas Products - Europe Distribution - Europe Materials - Europe Products W Website Working capital, movement during year (note 20) 76 112 76 29 33 21 25 103 85 102 121 121 115 41, 45 103 72 41, 43 78 109 57 79 121 120 121 10 46 62 64 60 121 1 4, 7, 9 124 45 10 1 90 89 3 3 3 2 2 2 121 90 CRH 133 Notes Notes The International Building Materials Group CRH plc Belgard Castle Clondalkin Dublin 22 Ireland Telephone: +353 1 404 1000 Fax: +353 1 404 1007 E-mail: mail@crh.com Website: www.crh.com Registered Ofﬁce 42 Fitzwilliam Square Dublin 2 Ireland Telephone: +353 1 634 4340 Fax: +353 1 676 5013 E-mail: crh42@crh.com Gotthard Base Tunnel is part of the Swiss Alp Transit project, also known as the New Railway Link through the Alps. With a planned length of 57 km it will, on completion, be the longest railway/road tunnel in the world. Planning for the project started in 1993 with mechanical excavation commencing in 2003. The project features two separate tunnels containing one track each. Final break-through is expected in Winter 2010 with an opening date planned for 2017. Jura Cement, a CRH company, under contract to ARGE AGN, has to date (2003-2009) delivered circa 215,000 tonnes of cement to this project.

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