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Annual Report 2014
The International
Building Materials
Group
CRH provides building materials
across the spectrum of the
construction industry – from building
foundations to frame and roofing,
to fitting out the interior space and
improving the exterior environment,
on-site works and infrastructural
projects, our materials and products
are used extensively.
Contents
Page 2
Chairman’s Introduction
Strategy Review
Chief Executive’s Introduction
Strategic Report
Business Model
Measuring Performance
Sustainability and Governance
Business Performance Review
Finance Director’s Introduction
Operational Snapshot
Europe
The Americas
Asia
Governance
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
Financial Statements
Independent Auditor’s Report
Consolidated Financial Statements
Accounting Policies
Notes on Consolidated Financial Statements
Other Information
Shareholder Information
Management
Principal Subsidiary Undertakings
Principal Equity Accounted Investments
Group Financial Summary
Index
4
7
10
14
17
22
26
28
38
48
51
54
72
96
101
104
108
115
158
160
162
166
167
168
We are committed to improving the
built environment and we understand
the wider impact our businesses can
make in supporting human activity
through the delivery of superior
building materials and products
for use in buildings, roads, public
spaces, infrastructure and other
construction areas.
For over four decades, CRH
has developed and implemented
a proven model of business
improvement. By building better
businesses across our international
operations, we have grown to be a
leader in the global building materials
industry.
The value created from our strategic
approach translates into superior
growth which has enabled our
shareholders to enjoy a euro
compound annual Total Shareholder
Return (TSR) of 15.7% since our
formation in 1970.
Our geographic footprint is wide.
We operate in 34 countries and
are the largest building materials
company in North America, a
regional leader in Europe, and
have strategic positions in Asia.
A Fortune 500 ranked company,
CRH is a constituent member of the
FTSE 100 index and the ISEQ 20.
Our shares are listed on the London
and Dublin stock exchanges, and on
the New York stock exchange in the
form of American Depositary Shares.
CRH
1
34
countries
3,300
locations
76,000
people
15 billion
tonnes of
aggregates
reserves
300 million
tonnes of
manufactured
product
115,000
Distribution
SKUs
Chairman’s Introduction
Dear Shareholder,
In the Chief Executive’s introduction to last year’s Annual
Report, Albert Manifold set out the areas of focus for
management in 2014. He highlighted dynamic portfolio
management together with maintaining CRH’s traditional
tight cost control, capital discipline and focus on returns
as being key to driving growth and to rebuilding margins
in the coming years.
A significant amount of progress has been made in the past
12 months, which is reflected in the results and performance
for 2014. In particular, we are pleased with progress in the
multi-year divestment programme and the related reshaping of
the Group’s portfolio.
The Group’s financial strength was further enhanced during
the year by two bond issuances, co-ordinated by Maeve
Carton, our Finance Director, and her team, in the amounts of
€600 million and CHF330 million. The record low coupons
achieved by the Group for these bonds reflect our track record
in debt markets and the value that results from our investment
grade credit ratings.
In respect of 2014, the Board is recommending a final
dividend of 44c per share. If approved at the 2015 Annual
General Meeting, this will maintain the full-year dividend at
62.5c per share.
During the last year, my non-executive colleagues and I
have spent a considerable amount of time working with the
executive Directors and the wider management team on
reviewing and refining the Group’s strategy in the context of
the evolution of key markets and products over time and in
setting the priorities for the Group. On 1 February 2015 we
announced that CRH had entered into a binding commitment
to acquire certain assets from Lafarge S.A. (“Lafarge”) and
Holcim Limited (“Holcim”) for a total enterprise value of
€6.5 billion, subject to (i) CRH shareholder approval at
an Extraordinary General Meeting to be held on 19 March
2015; (ii) the successful completion of the proposed merger
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CRH
of Lafarge and Holcim; and (iii) the completion of certain
local reorganisations by Lafarge and Holcim in advance of
the acquisition. The Board believes that this acquisition,
which arises from regulatory requirements for industry
deconsolidation in connection with the merger of Lafarge
and Holcim, represents a compelling strategic opportunity
for the Group, and that our financial, capital and operational
discipline has positioned the Group to take advantage of this
unique opportunity at this time. The placing of approximately
74 million shares in CRH plc, which completed on 5 February
2015, raised €1.6 billion as part of the financing of this
acquisition.
In 2015, in addition to the integration plan for the Lafarge /
Holcim assets, on the approval of shareholders, the Board
will continue to focus on talent management, cyber security,
and working towards the achievement of sustainability, safety
and environmental priorities. In relation to safety, 2015 will
see the introduction of a new Chairman’s award for safety
excellence in the Group.
During 2014, the Board redoubled its ongoing focus on the
area of compliance and ethics to ensure that CRH’s processes
are robust and in line with best practice across the Group.
In the current training cycle, over 32,000 employees have
participated in Code of Business Conduct training and a
further 11,000 have undertaken advanced instruction on the
prevention of breaches of competition law, anti-bribery and
corruption laws. We remain vigilant in our business practices
in this area and are responsive to all regulatory agencies.
Notwithstanding this work, as we announced in May 2014 the
Swiss Competition Commission has an open investigation in
respect of practices in the sanitary building products sector
in Switzerland and its Secretariat has recommended that the
industry, of which certain CRH group companies are members,
be fined. Engagement with the Swiss Competition Commission
is ongoing and CRH is responding vigorously to the allegations
made by the Secretariat. In doing so, we maintain our initial
assessment that the case is ill-founded and that the proposed
fine in respect of the Group is unjustified.
Two new non-executive Directors joined the Board in recent
months. Pat Kennedy was appointed in January 2015 while
Lucinda Riches has been appointed with effect from 1
March 2015. Their biographies, along with those of the rest
of the Board are set out on pages 51 to 53. Further details
on the on-going process of Board renewal are set out in the
Nomination & Corporate Governance Committee Report on
pages 66 and 67.
All Directors will retire at the Annual General Meeting on
Thursday, 7 May 2015, with those eligible offering themselves
for re-election. I strongly recommend that shareholders vote in
favour of each of the individuals putting themselves forward
for re-election.
As part of the Board’s planned renewal process, John Kennedy
and Dan O’Connor will step down from the Board at the
conclusion of the 2015 Annual General Meeting on 7 May 2015.
On behalf of the Board, I would like to thank John and Dan for
their commitment and great service to CRH over many years.
Finally, I would like to take the opportunity to thank Albert and
his team for their significant achievements over the past year.
Nicky Hartery, Chairman
February 2015
CRH
3
Strategy Review
Chief Executive’s Introduction
When I joined CRH in 1998, I quickly learned that a
philosophy of business improvement is ingrained in the
history of the Group. At CRH, we seek to build better
businesses each and every day. As the construction industry
emerges from a tumultuous few years, our approach has never
been more relevant and there is nowhere I would rather be at
this moment in time than in this Group, in this industry, at
this point in the business cycle.
2014 was a year of good progress for CRH. We were able to use
the underlying strength of our business to capitalise on the
recovering markets and deliver a return to profit and margin
growth.
This progress was made possible by the hard decisions and
hard work undertaken by the Board, management and staff
of CRH over the course of the previous seven years since the
onset of the global financial crisis. As a result of this, the
Group ended 2014 in a position of real strength across our key
metrics – strategic, operational and financial.
It is particularly pleasing to report that improvements
in performance were achieved last year across all of our
Divisions, leading to a double-digit percentage increase in
EBITDA.
The year began well in Europe, aided by favourable early-
season weather conditions compared with the prolonged
winter of the previous year. Conversely, first-half trading in
the Americas was impacted by very severe weather conditions
for a second consecutive year. However, strengthening
economic recovery in the United States drove construction
activity as the year progressed and enabled our Americas
businesses to perform strongly in the second half, when we
began to see an easing of trends in Europe.
Like-for-like sales were ahead by 5% in the first half of the
year and rose by 3% in the second, resulting in a full-year
increase of 4%. The US Dollar/euro average exchange rate of
1.3290 (2013: 1.3281) was relatively unchanged from prior
year. Overall sales of €18.9 billion were achieved, an increase
of 5%. EBITDA for the year was €1.641 billion, up 11%.
Throughout recent times, the Group has maintained its
commitment to ongoing cost control, strong cash generation
efficiency and disciplined financial management. Further
progress was achieved in these areas in 2014 including an
additional €118 million of targeted cost savings delivered by
year-end.
The reorganisation of our European businesses was largely
completed during the year and we now have an integrated
heavyside materials and products organisation that is
providing synergies across our operating plant network in
European markets.
Development spend in 2014 was €0.19 billion on
21 transactions, a lower spend than in previous years.
During 2014 we completed a detailed review of our portfolio
and commenced a multi-year divestment programme, of
businesses which no longer meet our returns and growth
criteria, or for which we believe CRH is no longer the best
long-term owner. We remain focussed on optimising our
portfolio to meet our financial objectives and prioritising the
allocation and reallocation of capital as we reset for growth
and restore margins and returns to peak levels.
Portfolio Management is now embedded in our business
model as a core competency and a key enabler of value
creation within the Group. The discipline of this process
encourages optimal capital efficiency and provides new
opportunities for investment and acquisition, the drivers of
value creation in our business.
On 1 February 2015, the Group announced that it had
entered into a binding commitment to acquire certain
assets from Lafarge and Holcim for an enterprise value of
€6.5 billion. As noted by the Chairman in his review on
pages 2 and 3 the transaction is subject to CRH obtaining
shareholder approval and certain other conditions. Assuming
these conditions are satisfied, we expect the acquisition to
complete in mid-2015.
The acquisition involves a portfolio of quality assets with
broad geographical and product spread. The businesses
4
CRH
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represented by these assets have market leading positions
and cover a range of segments in the building materials
sector in both developed and emerging markets. On
completion, the acquisition will strengthen our presence in
important markets across North America, Western, Central
and Eastern Europe in addition to providing new platforms
for growth in the Philippines and Brazil.
Acquiring these businesses represents a compelling
opportunity for the Group to employ our proven strategy
in a transformative way. Our approach to value creation is
straightforward – we deploy capital efficiently, to support
vertically integrated businesses, which we then improve
with our unrelenting commitment to operational excellence.
Through this systematic process, we create significant and
sustainable shareholder value. We have followed this model
successfully for decades and, we believe that this acquisition
will deliver enhanced opportunities to roll out our vertical
integration and bolt-on acquisition models.
Throughout the period of recession and downturn in
construction activity that followed the global financial
crisis, the Group maintained strict financial discipline. This
discipline has served us well and has positioned us strongly
to avail of the opportunity to acquire these businesses at an
attractive valuation and at the right point of the business
cycle. Upon completion, CRH will become the third largest
building materials company in the world.
Outlook for 2015
In the United States, the pace of GDP growth is expected to
pick up in 2015 and we believe that the fundamentals are
in place for continued positive momentum in the economy.
Demand in the residential construction market continues to
expand, albeit at a more moderate rate, while recovery in the
non-residential market is starting to gather pace. While the
infrastructure market remains broadly stable, there is upside
potential due to the growing economy and increased state
spending.
In Europe, the general market environment continues to
normalise across our main markets. The outlook for 2015 is
somewhat mixed, particularly in the first half for which the
2014 comparatives reflect the benefit of very benign weather
conditions. In our generally stable markets in Western Europe
we expect to see some improvement in overall demand in
2015, particularly in residential activity. While the outlook in
Ukraine remains very uncertain, we anticipate that demand
will increase in Eastern Europe, driven primarily by an
expected pick up in the roads programme in Poland towards
the second half of the year.
With the improvements expected in market conditions across
our main geographies, together with easing commodity prices,
the benefits of cost efficiencies and a favourable foreign
exchange translation effect, we expect 2015 to be a further
year of progress.
Albert Manifold, Chief Executive
February 2015
Sales
€18.9 billion
EBITDA
€1.641 billion
Operating Profit
€917 million
Profit before Tax
€761 million
Earnings per share
78.9 cent
Dividend per share
62.5 cent
CRH
5
Through 2012-2014, due to its expertise in concrete
mixing and pouring technology, Bosta Beton was
selected to supply circa 34,000 m3 of readymixed
concrete, of which 14,000 m3 was in the form of
architectural concrete products, to the Bialystock City
Stadium in Poland.
6
CRH
CRH Strategic Report
What We Do
CRH is a global leader in the manufacture and supply
of a diverse range of superior building materials and
products for the modern built environment.
Our impact is far-reaching. Each day, millions of people
around the world come into contact with our materials
and products. From the roads we drive on, to the
pavements we walk down, the buildings we work in, the
schools our children attend, the restaurants and theatres
we are entertained in, and to fitting out the homes we
live in, CRH supplies the materials and products that
build our world.
Our route to global leadership has seen us expand
our presence across the three major segments of the
construction industry; residential, non-residential and
infrastructure – and in ever widening geographies.
Today, we operate in 34 countries. We are the largest
building materials company in North America, a regional
leader in Europe, and we have a number of strategic
footholds in Asia.
Strategic Goals
CRH’s strategy is to deploy our proven value creation
business model, which enables us to expand our
balanced portfolio of diversified products and
geographies, for the building industry in a sustainable
way.
The Group’s strategic goals are to achieve our vision to
become the global leader in the industry, to conduct
our business in a responsible manner, and to maximise
returns for shareholders over the long term.
To achieve these outcomes, we utilise a strong balance
sheet, and cash generation capability to build leadership
positions in regional markets, leveraging the scale
of the Group to fund expansion by acquisition, and
allocating resources appropriately to deliver growth. At
the same time, we maintain financial discipline and a
focus on returns, as we work to make all our businesses
better through operational, commercial and financial
performance.
A guiding philosophy of CRH is to pursue these
objectives as one company. For 45 years, we have
grown in scale through the accumulation of hundreds
of businesses. We integrate these businesses into the
wider Group and through this process we deliver
enhanced returns. With a presence across a broad range
of construction products and materials, we provide
a national service with the personal touch of a local
supplier.
CRH
7
CRH Footprint
The Group has good balance across its operations in North
America and Western Europe. Our heavyside building
materials operations give us exposure to new-build and
also to infrastructure repair, maintenance and improvement
(RMI) construction. Elsewhere, our lightside and distribution
businesses are mainly exposed to residential and non-
residential markets, where we also have positions of scale,
global brands and potential for growth.
Our strategic priority in these mature markets is to develop
our businesses further through a dynamic allocation and
reallocation of capital, investment in greenfield projects and
in acquisitions which meet our criteria of achieving vertical
integration, and which add to reserves and expand our
regional and product positions.
Elsewhere, in developing regions, such as Asia, our
entry platforms tend to be in cement. Industrialisation,
urbanisation and population growth are key drivers in these
markets and CRH targets businesses that have the potential
to develop further downstream into integrated building
materials businesses as construction markets become more
sophisticated.
8
CRH
Portfolio Review
In 2014, in light of a vastly changed environment following
the global financial crisis and recession of the previous seven
years, CRH undertook a comprehensive review of its entire
portfolio of businesses to determine which of those businesses
offered the most attractive returns and potential for growth in
the emerging new cycle. Following this review, a multi-year
divestment programme has been initiated for up to
€1.5 billion - €2 billion of assets. Portfolio Management
is now an intrinsic part of the Group’s strategy and value
creation model, which is outlined in the next section.
CRH’s vision is
to be the leading
building materials
business in the
world
Struyk Verwo Infra (SVI) contributed to the iconic Rotterdam
Central Station and municipal area in the Netherlands
by providing the polished paving flower bed blocks that
surround the station and guide traffic. SVI was contracted
to provide 1,050 m2 of product covering a green area of
approximately 3,000 m2.
CRH
9
At the core of the
CRH mission is a
commitment to create
value and deliver
best-in-class returns
for all stakeholders,
consistently and
sustainably
The CRH Business Model
CRH’s business model has played an instrumental role in the
consistent delivery by the Group of industry leading return on
invested capital through the cycle. In the period 1970 – 2014,
CRH has, in euro terms, delivered a formidable compound
annual Total Shareholder Return (TSR) of 15.7%.
At the heart of this enduring performance is our long standing
and relentless commitment to our value creation model, which
is delivered by an international team of dedicated people.
The five elements of the model are:
• A Balanced Portfolio
• A Unique Acquisition Model
• A Focus on Building Better Businesses
• Dynamic Portfolio Management
•
Financial Strength
10 CRH
Balanced Portfolio
Acquisition Model
Building a balanced portfolio is a core constituent of our
philosophy and a key determinant of value creation for CRH.
The Group is a broad-based building materials business that
is diversified with many products, geographies and sector
end-uses. We are a multi-product company and the breadth
and depth of our product range differentiates our positioning
relative to peers in the industry.
Maintaining a balanced portfolio enables the Group to
take advantage of differing demand cycles across our
businesses. Diversification also opens up a greater number
of opportunities for acquisitions, while having vertically
integrated businesses creates potential for synergies and
operational leverage.
Each year, the Group’s balanced portfolio grows, primarily
by way of acquisition. For over four decades, CRH has
successfully employed its unique acquisition model with
a focus on adding small to mid-sized companies that
complement and add value to our existing portfolio. On
occasion, larger and/or step-change acquisitions are made
when the value proposition and strategic rationale are
compelling.
Many of our core end markets in mature economies remain
fragmented or relatively unconsolidated and will continue to
offer growth opportunities via our proven acquisition model
in the decades ahead.
Our acquisition model for creating new value and growth
platforms also offers considerable long-term potential in
developing economies, in particular those in Asia, where the
Group is currently building select leading regional positions.
Royal Roofing Materials BV renovated 7,000 m2 of roofing at
the monumental industrial building named Innovation Dock in
Rotterdam, the Netherlands. The hall is situated on the terrain of
a former shipyard which was recently rebuilt into a campus for
education and innovation.
CRH 11
Building Better Businesses
Building Better Businesses is a core CRH competency. With
over 3,300 operating locations in 34 countries worldwide, the
potential for value creation is significant.
Through the extraction of inherent value in newly acquired
businesses, and a focus on delivering organic performance
improvement in existing businesses, our commitment to
Building Better Businesses is a key component of the CRH
value creation model.
Every day we strive to make improvements. Attention to
detail by our 76,000 strong team, together with the multiplier
effect of businesses involving millions of tonnes of aggregates,
asphalt and cement, and millions of units of construction
accessories and distribution stock keeping units, has a
material and cumulative impact over time.
By leveraging the scale of the Group, benefits accrue in the
areas of procurement, merchandising, selling prices, category
management, distribution and IT. Through the sharing of
knowledge, ongoing people development, optimisation of our
networks, operational leverage and utilisation of the Group’s
financial strength, we can deliver greater value from these
businesses.
CRH’s operations benefit from an active philosophy of
continuous improvement. The Group provides guidance,
support, functional expertise and control in the areas
of performance measurement, financial reporting, cash
management, strategic planning, business development, talent
management, governance and compliance, risk management,
sustainability, health & safety and environment.
Portfolio Management
Through the past number of very difficult years for the global
construction industry, CRH has worked hard to position
itself to maximise the opportunities presented by the coming
growth cycle.
An objective of the ongoing Portfolio Management process is
to create a narrower and deeper suite of businesses that are
positioned either by virtue of size, product mix, location or
12 CRH
operational expertise to benefit most from improvements in
demand activity and pricing in their respective markets.
The impact of Portfolio Management on value creation is
twofold: capital will be continuously released from low
growth areas and reallocated to core businesses for growth,
while balance sheet capacity will be enhanced to boost
acquisition capabilities.
Financial Strength
Maintaining a position of financial strength is a cornerstone
of the CRH business model and the Group adopts a rigorous
commitment to financial discipline, strong cash generation
and retaining balance sheet capacity.
Financial strength enables the Group to create value in two
key ways: to provide the resources to fund value enhancing
investments and long-term growth; and to reduce the cost of
capital which ultimately translates into higher margins and
profitability.
The combination of two key financial measures – robust cash
generation and solid interest cover – support the ratings CRH
enjoys from the rating agencies S&P (BBB+) and Moody’s
(Baa2). These strong investment grade ratings enable the
Group to gain access to multiple sources of funding.
In recent times, our financial discipline has enabled the Group
to secure lower and more diversified long-term interest rates
on our debt, which will reduce the Group’s average interest
rate from above 5% in 2012 to circa 3% from 2018 onwards.
Financial strength is a fundamental tenet of the business
and has given CRH the capacity to increase or maintain the
dividend payment to shareholders in each of the last 31 years.
The Shelly Company’s Smith Concrete supplied and delivered
14,715 m3 of concrete and over 45,000 tonnes of aggregates to the
Zanesville, Ohio, Genesis Healthcare 2014 expansion project. Smith
Concrete’s 4-H-themed readymix truck promotes the largest youth
development organisation in the United States.
CRH 13
Measuring Performance
CRH believes that measurement fosters positive behaviour and performance. In
keeping with our focus on Building Better Businesses, we continue to refine and
develop appropriate financial and non-financial measures to communicate leading
practice benchmarks across our organisation.
Financial KPIs
Why Important
2014 Performance
Total Shareholder Return
A measure of shareholder returns
delivery through the cycle
TSR is a full measure of monetary value created
and delivered to owners.
Return on Net Assets (RONA)
A measure of returns through excellence
in operational performance
RONA is a key internal pre-tax measure of
operating performance.
Operating Cash Flow (OCF)
A measure of cash flows generated to fund
organic and acquisitive growth
OCF is the primary funding source for dividend
payments and investment spend.
EBITDA Interest Cover
A measure of financial liquidity and
capital resources
EBITDA interest cover is evidence of ability to
service interest payments and debt maturities.
It underpins the investment grade credit ratings
and the Group’s ability to access finance.
Total Shareholder Return (%)
2014
2013
2012
0%
10%
20%
30%
Return on Net Assets (%)
2014
2013
2012
3%
5%
7%
9%
Operating Cash Flow (€ Bn)
2014
2013
2012
0.4
0.6
0.8
1.0
EBITDA Interest Cover (x)
2014
2013
2012
4.0
5.0
6.0
7.0
Non-financial KPIs
Why Important
2014 Performance
% Zero-Accident Locations
A measure of safety in the workplace
Safety is a priority for CRH and we constantly
strive to improve our performance. A strong
safety culture is a key element of our business
strategy.
Greenhouse Gas Emissions
A measure of addressing the challenges
of climate change
Energy efficiency and carbon reduction are
twin imperatives of CRH’s environmental
management strategy.
Gender Diversity
A measure of an inclusive workplace
Recruitment, selection and promotion decisions
are merit-based and in line with the principles of
equal opportunity and non-discrimination.
14 CRH
% Zero-Accident Locations
2014
2013
2012
80%
85%
90%
95%
CO2 Emissions (kg/€ Revenue)
2014
2013
2012
0.4
0.5
0.6
0.7
Diversity (%Female)
2014
2013
2012
5
10
15
20
Key Performance Indicators (KPIs) are used to measure the Group’s performance
against its strategy. These are quantifiable measurements, which the Group has
worked to for many years and which demonstrate how CRH strategy is being
successfully implemented.
2015 Focus
Links to other disclosures
CRH delivered TSR of 12.3% in 2014
and in euro terms has delivered a
compound annual TSR of 15.7% since
the formation of the Group in 1970.
Delivering superior return on invested capital
and maintaining strong cash flows to support
the continued development of the Group and
dividend payment.
Directors’ Remuneration Report
pages 72 to 95
RONA improvement to 7.4% in 2014
is a reflection of improved profit
margins in all six business Divisions.
Improved RONA through effective margin
management, continued enhancement of
operating efficiencies and tight working capital
management.
Business Performance Review
pages 22 to 49
Directors’ Remuneration Report
pages 72 to 95
Prudent working capital and tight
capital expenditure increased OCF
to over €902 million in 2014.
To continue to generate strong operating cash
flows in 2015.
Summarised cash flow
page 24
Cover at 6.7x was higher in 2014 due
to strong organic EBITDA delivery.
CRH’s credit ratings: BBB+/Baa2 from
S&P/Moody’s rating agencies.
Maintain financial discipline to ensure that
EBITDA cover remains strong and should
usually be no lower than 6x.
Finance Director’s Introduction
pages 22 to 24
Note 23 Interest-bearing Loans and Borrowings
page 138
2015 Focus
Links to other disclosures
Encouragingly we achieved 93%
zero-accident locations in 2014
(2013: 92%).
Further enhancement of a strong safety culture
with the ultimate aim of achieving zero-accident
status at every location.
CRH Sustainability Report
published mid-year 2015
While absolute CO2 emissions
increased with increased activity, our
cement plant measure remained stable
at 0.62 tonne net CO2 per tonne of
cementitious product.
CO2 Emissions (million tonnes)
Scope 1
Scope 2
2014
2013
10.3
9.8
1.4
1.3
In 2014, 18% of all employees were
female. Within that 11% of operational
staff and 41% of clerical and
administrative staff were female.
At Board level, 17% of our Directors
were female and 5% of our senior
managers were female.
Ongoing programmes focus on reducing CO2
emissions. Working towards 25% net reduction
in specific net CO2 cement plant emissions by
2020.
Lower carbon products and Group-wide energy
and resource efficiency programmes.
CRH Sustainability Report
published mid-year 2015
Note1: CO2 emissions subject to final verification
under the EU Emissions Trading Scheme (EU
ETS).
Note 2: Group CO2 emissions data includes both
Scope 1 and Scope 2 emissions, as defined by
the WRI Greenhouse Gas Protocol.
The building materials industry traditionally
attracts a higher than average proportion of
male employees.
Continue to encourage all CRH employees to
develop their careers.
Corporate Governance Report pages 54 to 71
Senior Management Listing
pages 160 and 161
CRH Sustainability Report
published mid-year 2015
CRH 15
16 CRH
Sustainability and Governance
CRH’s strategy and business model is built around
the principles of sustainable, responsible and ethical
performance.
The Group’s organisational culture is rooted in a daily
commitment to core values of honesty, integrity and
respect in all business dealings.
CRH believes that combining these principles and
values with best international practice, promotes good
governance and provides a platform for the business to
deliver superior returns over a sustained period of time,
while also being sensitive and responsive to stakeholders
and the environment in which the Group operates.
CRH has therefore placed sustainability and corporate
social responsibility at the heart of its business model,
strategy and activities worldwide.
Health & Safety
CRH employs approximately 76,000 people globally and
keeping people safe is a strategic priority at all levels of
the organisation.
Throughout the organisation, from senior executives to
operational management and all employees, safety in the
workplace remains a primary focus. The Group’s network
of safety officers oversee the implementation of safety
policy and best practices across all operations.
Over the last five years, CRH has invested
€135 million in a range of initiatives worldwide
targeted at promoting and maintaining a strong culture
of safety. The effectiveness of these efforts is
demonstrated by the continued reduction in accidents.
A significant 93% of active locations were accident free
in 2014, which is an improvement on the prior year, and
the accident frequency rate has reduced by an average of
15% per annum over the last decade. However, despite
the continued focus on safety, CRH deeply regrets the
loss of two contractors’ lives at Group operations during
2014. CRH continues to implement its Group-wide
Fatality Elimination Plan and the elimination of fatalities
is a fundamental objective of the Group.
The Gliniany Quarry, owned by Grupa Ožarów SA in Poland,
excavated its 100 millionth tonne of limestone for clinker
production in December 2014. This photo, taken after
severe rain in the area, displays the coexistence of the
operating quarry and the surrounding nature.
CRH 17
Environment & Climate Change
With a global base, CRH recognises the part it can play in
improving the sustainability of the built environment. CRH
is committed to the highest standards of environmental
management and to addressing proactively the challenges and
opportunities of climate change.
The Group implements programmes across its worldwide
operations to promote energy and resource efficiency, achieve
targeted air emission reductions, enhance biodiversity, restore
worked-out quarries and, in addition, realise environmentally
driven product and process innovation and new business
opportunities.
In 2012, three years ahead of the target date, CRH achieved
its commitment to reduce specific net carbon dioxide (CO2)
emissions from cement plants by 15% on 1990 levels. CRH
is now on track to achieving its 2020 commitment to a 25%
reduction in specific net CO2 cement plant emissions on
1990 levels.
Further progress was made in 2014. CRH continued to
increase sales of lower carbon products such as warm-mix
asphalt, which now accounts for approximately 40% of CRH’s
US asphalt sales. In Europe CRH provides low carbon cement
for sustainable construction and approximately one third of
CRH’s cement plant fuel requirements are met by alternative
fuels, generating cost benefits in addition to carbon savings.
As well as being recyclable themselves, many CRH products
incorporate significant quantities of recycled and other
alternative materials. In 2014, the Group used 19 million
tonnes of externally sourced alternative materials to replace
raw materials, including recycled asphalt pavement and
shingles which together provide a fifth of asphalt requirements
in US operations.
18 CRH
People & Community
CRH believes that continued sustainable business success
is built on maintaining excellent relationships with all
stakeholders.
The Group is committed to fostering respect in the workplace
and to developing an inclusive workforce based on merit
and ability. Good people are at the heart of all successful
organisations. It is a guiding Group philosophy to develop and
nurture all employees, to provide training and skills learning,
offering strong career paths and upskilling opportunities.
The Group endorses human and labour rights and supports
the principles set out in the articles of the United Nations’
Universal Declaration of Human Rights and the International
Labour Organisation’s Core Labour Principles. CRH operates
a comprehensive Code of Business Conduct and has
additionally implemented an Ethical Procurement Code and
Supplier Code of Conduct.
The building materials industry traditionally attracts
more male than female employees. In 2014, 18% of CRH’s
employees were female. At Board level, CRH has two female
directors including the Finance Director, increasing to three
from 1 March 2015. Following the Annual General Meeting
25% of the CRH Board will be female.
CRH also recognises a wider responsibility beyond core
business activities in the communities in which Group
companies operate. It is Group policy to actively support and
engage with our neighbours. In 2014, Group companies hosted
over 600 stakeholder engagement events.
CRH assists local neighbourhood and community initiatives,
in addition to supporting programmes in education,
environmental protection and job creation. For example,
during 2014, CRH’s US subsidiary, Oldcastle, continued in
its national partnership with Habitat for Humanity and also
continues to support the Wildlife Habitat Council.
Oldcastle hosted its first Earth Day event on the Oldcastle Nature Trail
at the Marcus Autism Center, in Atlanta, Georgia. Oldcastle employees
participated in creating a butterfly garden, removing invasive plants,
and planting native trees and bushes to enhance the trail.
CRH 19
Delivering Best-in-Class Governance
CRH is committed to adopting and maintaining best-in-class
governance, which is a hallmark of successful organisations
and businesses. At CRH, our values based approach to
building and running a global business places an emphasis
on respect for the law and an unrelenting commitment to
compliance with the highest standards of business ethics.
CRH adopts an open and transparent environment in the
workplace and we have developed an internal principle of
conduct for all employees that there is ‘never a good reason to
do the wrong thing’. Within this environment, we also foster
a ‘speak up’ culture to empower and encourage participation
among employees.
CRH’s Compliance & Ethics teams implement a Code
of Business Conduct programme and work to ensure its
success. The Code of Business Conduct sets out policies and
guidelines, training, and monitoring and review mechanisms.
In the current training cycle a further 32,000 employees
participated in Code of Business Conduct training. A further
11,000 also undertook advanced instruction on changing
regulatory environments, anti-bribery rules, competition law
and other relevant areas such as corruption and fraud.
Further information is provided in the Corporate Governance
section of this report on pages 54 to 71.
20 CRH
Managing Risk
Performance Reporting
Managing risk is an area of vital importance to CRH and the
Group has adopted a formal Enterprise Risk Management
(ERM) framework as a basis for assessing and mitigating
risks associated with our range of businesses and corporate
decisions.
The Group adopts the best international practice of
incorporating the ‘three lines of defence’ structure into
our corporate risk management: (i) local management,
(ii) divisional and corporate oversight, and (iii) the internal
audit function.
The principal risks and uncertainties faced by the Group are
outlined on pages 96 to 98 of the Directors’ Report and are
reported to the Audit Committee on a bi-annual basis.
CRH has formal structures in place to identify, evaluate and
manage potential risks and opportunities in sustainability
areas. Group performance in this regard, together with the
effectiveness of actions, is reviewed regularly by the Board
of Directors. CRH is committed to reporting on the breadth
of its sustainability performance in a comprehensive and
transparent manner and to publishing performance indicators
and ambitions in key identified sustainability areas. The
Group’s annual Sustainability Report is published mid-year
following external independent verification and is available
at www.crh.com.
Oldcastle Precast provided Storm Capture® as a solution for the
underground stormwater detention system at the new administration
building site at Quantico National Cemetery, in Virginia – a military
cemetery for veterans of the United States Armed Forces.
CRH 21
EBITDA
€1,641 million
Capital Expenditure
€435 million
Operating Cash Flow
€902 million
Net Debt
€2.5 billion
Net Debt/EBITDA
1.5 times
EBITDA/Net Interest
6.7 times
Business Performance Review
Finance Director’s Introduction
2014 was a year of growth for CRH, with improved
performance in the first half driven by favourable weather
in Europe, and the second half benefiting from improved
momentum in the United States. The Group continued to
focus on cash generation finishing the year in a strong and
flexible financial position. Net debt at year-end 2014 reduced
by €0.5 billion compared to 2013. This was achieved with
strong cash inflows from operations, and proceeds of €0.35
billion from disposals, partly offset by spend of €0.62 billion
on acquisitions, investments and capital expenditure, and
dividend payments of €0.46 billion.
Key Components of 2014 Performance
Overall sales for 2014 were 5% ahead of 2013, while organic
sales from underlying operations were up 4%, reflecting
strong favourable weather-impacted demand in Europe in the
first half and increasing activity in the United States.
In Europe, after the encouraging start to the year which saw
like-for-like sales increase by 6% helped by favourable early-
season weather, trading in the second half was impacted by
moderating trends across all three segments. Overall like-
for-like sales for the year increased by 2%. EBITDA margin
increased due to increased capacity utilisation, efficiency
measures and cost saving actions.
Against an improving market backdrop as the year progressed,
like-for-like sales in the Americas were up 8% in the second
half, compared with a first-half increase of 4%. In our
Materials business, like-for-like sales improved throughout the
year and finished 7% ahead. Our Products and Distribution
businesses which were impacted by unfavourable weather
patterns in the early part of the year, benefited from improving
demand in the second half particularly from new residential
construction, and like-for-like sales were 5% ahead of 2013.
With higher sales and good cost control, EBITDA margins
improved in all three Americas segments.
During 2014, the US Dollar remained relatively stable at
approximately 1.33 against the euro, however the weakening
of currencies like the Ukrainian Hryvnia and Argentine
Peso, partly offset by the strengthening of Sterling, were the
principal factors behind the exchange effects shown in the
d
n
a
l
r
e
z
t
i
w
S
,
g
g
e
d
W
l
i
,
t
n
a
P
l
t
n
e
m
e
C
a
r
u
J
22 CRH
table below. The average and year-end 2014 exchange rates of
the major currencies impacting on the Group are set out on
page 114.
We continued to advance the significant cost-reduction
initiatives which have been progressively implemented
since 2007 and which by year-end had generated cumulative
annualised savings of over €2.5 billion. Total restructuring
costs associated with these initiatives (which generated
savings of €118 million in 2014) amounted to €51 million
in 2014 (2013: €71 million) and were once again heavily
focussed on our European Divisions.
Cash Management and Financial Performance
Throughout 2014 the Group continued to keep a focus on
cash management, targeting in particular working capital and
capital expenditure. Year-end working capital of €2 billion
represented just 10.6% of sales, an improvement compared
with year-end 2013 (11.2%). This performance delivered net
inflows for the year of €69 million (2013: €118 million). CRH
believes that its current working capital is sufficient for the
Group’s present requirements. Strong control of spending
Key Components of 2014 Performance
on property, plant and equipment resulted in lower cash
outflows of €435 million (2013: €497 million), with spend
in 2014 representing 69% of depreciation (2013: 74%). As
a result, operating cash flow increased to €902 million
(2013: €736 million).
Other major movements in net debt during the year comprised
acquisition spend of €188 million on 21 transactions which
was more than offset by divestment and disposal proceeds of
€345 million.
Dividend payments of €460 million (before scrip) and proceeds
of €129 million from share issues (including scrip and net of
own shares purchased) were very similar to last year.
At year-end the stronger US Dollar (1.2141 versus the euro
compared with 1.3791 at year-end 2013) was the main factor
in the negative translation and mark-to-market impact of
€181 million on net debt. Net debt of €2.5 billion at
31 December 2014 was €481 million lower than year-end 2013.
The Group is in a strong financial position. It is well
funded and interest cover (EBITDA/net interest) of 6.7x is
Revenue
EBITDA
Operating
profit
Profit on
disposal
Finance
costs (net)
Equity
accounted
investments*
Pre-tax
profit/(loss)
€ million
2013
Exchange effects
2013 at 2014 exchange rates
Incremental impact in 2014 of:
- 2014 and 2013 acquisitions
- 2014 and 2013 divestments
- Restructuring costs
- Pension/CO2 gains
- Impairment charges
Ongoing operations
2014
18,031
(62)
17,969
237
(25)
-
-
-
731
18,912
1,475
(11)
1,464
16
-
20
(23)
-
164
1,641
100
(4)
96
4
1
20
(23)
601
218
917
26
-
26
-
43
-
-
-
8
77
(297)
(1)
(298)
-
-
-
-
-
10
(288)
(44)
5
(39)
(2)
(1)
-
-
105
(8)
55
* CRH’s share of after-tax profits of joint ventures and associated undertakings
(215)
-
(215)
2
43
20
(23)
706
228
761
CRH 23
Finance Director’s Introduction | continued
significantly higher than the minimum requirements in the
Group covenant agreements – further details are set out in
note 23 to the financial statements.
We successfully completed two bond issues during 2014: in July
€600 million of 7-year euro bonds were issued with a coupon
of 1.75% and in September we completed our first Swiss Franc
issuance for a further CHF330 million of 8-year bonds with a
coupon of 1.375%. These were the lowest ever coupons obtained
by the Group and reflect CRH’s commitment to managing debt
and maintaining an investment grade credit rating.
The Group remains in a very strong financial position with
total liquidity at end 2014 of €5.9 billion comprising
€3.3 billion of cash and cash equivalents on hand and
€2.6 billion of committed undrawn facilities which do not
mature until 2019. These cash balances were enough to meet
all maturing debt obligations for the next five years and the
weighted average maturity of the remaining term debt was
eight years.
CRH’s euro share price increased by 9% in 2014 to €19.90 at
year-end; combined with the maintained dividend of 62.5c,
shareholder euro returns were 12% in 2014 and contributed
towards net debt as a percentage of market capitalisation
decreasing to 17% (2013: 22%).
Post Balance Sheet Events
On 1 February 2015, CRH announced that it had made a
binding commitment to acquire certain businesses and assets
of Lafarge S.A. (“Lafarge”) and Holcim Limited (“Holcim”)
for a total enterprise value of €6.5 billion. The proposed
acquisition is subject to: (i) CRH shareholder approval at
an Extraordinary General Meeting to be held on 19 March
2015; (ii) the successful completion of the proposed merger
of Lafarge and Holcim and (iii) the completion of certain
local reorganisations by Lafarge and Holcim in advance of
the acquisition. The Board believes that this acquisition,
which arises from the decision by Lafarge and Holcim to
divest certain of their businesses and assets in order to obtain
regulatory clearances necessary to complete their merger,
represents a compelling strategic opportunity for CRH. The
acquisition will be funded through a combination of €2 billion
from existing cash resources, the proceeds of €1.6 billion
from the placing, which completed on 5 February 2015, of
74,039,915 ordinary shares in CRH plc (which rank pari passu
in all respects with the existing ordinary shares including the
right to receive all future dividends declared or paid after the
date of the placing) and by new debt facilities in the amount of
€2.9 billion. See note 33 on page 153 for further details.
24 CRH
Business Performance Reviews
The section that follows outlines the scale of CRH’s business
in 2014, and provides a more detailed review of performance
in each of CRH’s six reporting segments.
Summarised Cash Flow
Inflows
Profit/(loss) before tax
Depreciation, amortisation and impairment
Working capital inflow (i)
Outflows
Tax payments
Capital expenditure
Other (ii)
Operating cash flow
Pension payments
Acquisitions and investments (iii)
Proceeds from disposals (iv)
Share issues (v)
Dividends (before scrip dividends)
Translation and mark-to-market adjustment
Decrease/(increase) in net debt
2014
€m
761
724
69
1,554
(127)
(435)
(90)
(652)
902
(66)
(188)
345
129
(460)
(181)
481
2013
€m
(215)
1,375
118
1,278
(110)
(497)
65
(542)
736
(96)
(720)
283
101
(455)
87
(64)
(i) Working capital inflow includes the difference between net finance
costs (included in profit before tax) and interest paid and received.
(ii)
Other outflows comprise, primarily non-cash items included in profit
before tax, comprising primarily profits on disposals/divestments of
€77 million (2013: €26 million), share-based payments expense of
€16 million (2013: €15 million) and share of profit of equity accounted
investments of €55 million (2013: €44 million loss), together with
dividends received from equity accounted investments of €30 million
(2013: €33 million).
(iii) Acquisitions and investments spend comprises consideration for
acquisition of subsidiaries (including debt acquired and asset
exchanges), deferred and contingent consideration paid, other
investments, advances and acquisition of non-controlling interests.
(iv) Proceeds from disposals includes asset exchanges (see note 4 to
Financial Statements).
(v) Proceeds from share issues include scrip dividends of €107 million
(2013: €88 million) and in 2013 were net of own shares purchased of
€6 million.
The museum and cultural centre La Fondation
Louis Vuitton, designed by architect Frank Gehry,
opened in Paris in October 2014. Zoontjens
produced 1,530 m2 of unique, natural stone
rooftop terrace tiles designed to ensure they could
withstand substantial weights of 20 kN per slab.
CRH 25
Operational Snapshot (sector exposure and end-use based on 2014 EBITDA)
Europe Heavyside
Europe Lightside
Europe Distribution
€ million
% of Group
€ million
% of Group
€ million
% of Group
3,929
380
2,396
21%
23%
20%
Sales
EBITDA
Net Assets*
Geography
Sales
EBITDA
Net Assets*
Products
913
94
546
5%
6%
4%
Sales
EBITDA
Net Assets*
Activities
3,999
190
1,577
21%
12%
13%
West
55%
East
45%
Fencing
& Cubis
20%
Construction
Accessories
55%
Shutters &
Awnings
25%
SHAP
25%
DIY
30%
Builders
Merchants
45%
Sector Exposure
Sector Exposure
Sector Exposure
Residential
Non-residential
Infrastructure
40%
35%
25%
Residential
Non-residential
Infrastructure
35%
50%
15%
Residential
Non-residential
Infrastructure
End-use
End-use
End-use
New
RMI
75%
25%
New
RMI
70%
30%
New
RMI
80%
20%
0%
35%
65%
Annualised Production Volumes
Cement – 10.3m tonnes (19.8m tonnes**)
Aggregates – 41.9m tonnes (42.5m tonnes**)
Asphalt – 2.1m tonnes
Readymixed Concrete – 7.1m m3 (7.5m m3**)
Lime – 1.1m tonnes
Concrete Products – 6.5m tonnes
Architectural Concrete – 7.4m tonnes
Clay – 2.0m tonnes
Annualised Production Volumes
Fencing & Security – 3.5 lineal metres
Outlets
Builders Merchants – 343 (517**)
DIY – 184 (228**)
SHAP – 132
* Net assets at 31 December 2014 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
** Including equity accounted investments.
26 CRH
Americas Materials
Americas Products
Americas Distribution
Sales
EBITDA
Net Assets*
Geography
West
35%
€ million
% of Group
€ million
% of Group
€ million
% of Group
5,070
609
5,276
27%
37%
43%
Sales
EBITDA
Net Assets*
Products
3,225
263
1,863
17%
16%
15%
Sales
EBITDA
Net Assets*
Activities
1,776
105
668
9%
6%
5%
APG
55%
Interior
40%
Exterior
60%
East
65%
Precast
20%
Building
Envelope®
20%
South America 5%
Sector Exposure
Sector Exposure
Sector Exposure
Residential
Non-residential
Infrastructure
15%
25%
60%
Residential
Non-residential
Infrastructure
45%
45%
10%
Residential
Non-residential
Infrastructure
End-use
End-use
End-use
New
RMI
35%
65%
New
RMI
70%
30%
New
RMI
Annualised Production Volumes
Aggregates – 135.8m tonnes (137.3m tonnes**)
Asphalt – 39.4m tonnes (40.5m tonnes**)
Readymixed Concrete – 6.2m m3 (6.3m m3**)
Annualised Production Volumes
Outlets
Exterior products – 146
Interior products – 52
Concrete masonry, patio products and
pavers – 9.9m tonnes
Pre-packaged concrete mixes – 2.8m tonnes
Clay bricks, pavers and tiles – 0.9m tonnes
Pre-packaged lawn & garden products – 4.3m tonnes
Precast concrete products – 1.2m tonnes
Pipe and pre-stressed concrete – 0.4m tonnes
Building envelope products – 9.4m square metres
Fencing products – 12.1m lineal metres
50%
50%
0%
45%
55%
CRH 27
CRH in Europe
Norway
Sweden
Finland
Estonia
Latvia
St. Petersburg
Region
of Russia
Ireland
Denmark
Netherlands
Britain
Belgium
Poland
Germany
Ukraine
Czech Republic
Slovakia
Austria
Hungary
Romania
France
Switz.
Italy
Portugal
Spain
28 CRH
Israel
St. Petersburg
Region
of Russia
Ukraine
CRH is a regional leader in the
manufacture and supply of building
materials to construction markets in
Europe and strives to maintain No 1
and No 2 market positions in different
product segments across a range of
European countries.
The European operations are comprised
of three divisions: Heavyside, Lightside
and Distribution. The Heavyside
operations produce cement, asphalt,
aggregates, readymixed concrete, precast
concrete and concrete landscaping.
Our Lightside operations manufacture
construction accessories, shutters &
awnings, fencing and composite access
chambers. In Distribution we are a
leading player in builders merchanting,
DIY and sanitary, heating and plumbing.
Operating across Western and Eastern
Europe, close to 36,000 people are
employed at over 1,500 locations.
Top: CRH operates six cement distribution
terminals across the UK. Pictured here,
a bulk tanker loaded with cement from
CRH in Ireland leaves the Premier Cement
Terminal at Liverpool, England for delivery
to customers.
Centre: Heras, a Europe Lightside fencing
business, recently developed the innovative
iGate range. This is a lightweight and
environmentally friendly aluminium gate
design, with a large choice of colours and
frame fillings for the architect including
LED illumination. Pictured is a Heras iGate
at a hotel in Dordrecht, the Netherlands.
Right: Regusci Reco is located in the Italian
speaking part of Switzerland, a major tourist
area. Their distribution product range
comprises all the materials needed to build
tourist accommodation including building
materials, bathrooms, kitchens, tools and
doors.
CRH 29
Europe Heavyside
Business Description
In 2014, the Group reorganised its
European business by integrating its
former Materials Division with the
concrete and clay businesses of the
former Products Division into one
Heavyside organisation. The purpose
of this reorganisation is to enable CRH
to maximise the benefits and synergies
of our operating plant network in both
Western and Eastern European markets.
Europe Heavyside’s strategy is to build
leading regional positions in businesses
that are vertically integrated and which
have the potential to grow further in the
large European construction markets.
We deliver our strategy through a focus
on a balanced exposure to demand,
product penetration and on maximising
the benefits of scale and best practice.
Our business is differentiated and
achieves competitive advantage through
a commitment to constant product,
process and end-use improvement.
Europe Heavyside is organised into
two regional divisions: Western
Europe, which comprises our cement,
aggregates, asphalt, concrete and clay
operations primarily in Switzerland,
Germany, UK, Benelux, France,
Denmark, Ireland and Spain, and
Eastern Europe which includes our
cement, aggregates, asphalt and
concrete businesses in Poland, Ukraine
and Finland. The business model
of vertical integration is founded in
resource-backed cement and aggregates
assets, which support the manufacture
and supply of cement, aggregates,
readymixed and precast concrete,
concrete landscaping and asphalt
products. Consequently, a key focus for
the Heavyside Division is the ongoing
process of extending and adding to
reserves. We operate a network of
well-invested facilities and place great
emphasis on excellence initiatives
across the business. CRH’s approach to
Building Better Businesses ensures a
30 CRH
focus on achieving greater production
efficiencies and realising operational,
logistical and procurement synergies
across our network. A commitment to a
sustainable future results in greater use
of alternative fuels and the manufacture
of low carbon cements.
Our development focus is centred
on bolt-on acquisitions for synergies,
reserves and further vertical integration,
in addition to opportunities in
contiguous regions to extend and
strengthen regional positions; this
includes developing markets in Eastern
Europe that offer long-term growth
potential, with entry via cement and
aggregates assets and the potential
to roll out operational excellence
programmes and a vertical integration
approach over time. In the context of
the detailed review of the portfolio
undertaken by the Group during 2014,
CRH announced in December 2014 that
it had reached agreement to dispose of
its clay and concrete businesses in the
UK. The transaction is expected to close
in the first quarter of 2015.
Europe Heavyside employs
approximately 19,100 people at close to
800 locations in 21 countries.
Market leadership positions
Cement
Top 10 Europe
No.1
Finland, Ireland, Ukraine,
Basque Region Spain
No.2
No.3
Switzerland
Poland
Aggregates
No.1
Finland, Ireland
Readymixed concrete
No.1
No.2
No.2
Finland, Ireland
Switzerland
Poland
Agricultural & chemical lime
No.1
No.2
Ireland
Poland
Concrete products
No.1
Structural concrete &
flooring: Benelux
No.1
No.2
No.1
Structural concrete: Denmark
Utility precast: France
Precast structural elements:
Hungary, Switzerland
No.1
Concrete fencing and
lintels: UK
Architectural concrete
No.1
No.1
Blocks & rooftiles: Ireland
Landscaping products:
Finland, Poland, Benelux,
France and Slovakia
No.1
Paving/landscape walling:
Germany
No.1
No.2
Architectural masonry: UK
Paving products: Denmark
Operations Review
Results
€ million
%
Change
2014
2013
Total
Change
Organic Acquisitions Divestments
Restructuring/
Impairment
Pension/
CO2 gains Exchange
Analysis of change
Sales revenue
4%
3,929
3,786
EBITDA*
Operating profit*
EBITDA/sales
17%
138%
380
151
326
-395
9.7%
8.6%
Operating profit/sales
3.8% -10.4%
* EBITDA and operating profit exclude profit on disposals
No pension restructuring gains were recorded (2013: €12 million)
Gains from CO2 trading amounted to €9 million (2013: €8 million)
143
54
546
105
47
73
51
2
-2
-4
1
1
-
22
489
-
-11
-11
-9
-7
-4
Restructuring costs amounted to €15 million (2013: €37 million)
Impairment charges of €35 million were incurred (2013: €502 million)
The commentary below excludes
the impact of impairment charges on
operating profit.
Excellent weather conditions, especially
in the first quarter, provided a platform
for a like-for-like sales increase of
7% in the first six months. With sales
marginally behind 2013 in the second
half, overall like-for-like sales for the
year increased by 3%. The EBITDA
margin improved significantly due to
increased capacity utilisation, efficiency
measures, cost savings and relatively
stable input costs.
Western Europe (55% of EBITDA)
Sales increased by 4% in 2014 with
double-digit growth in Ireland and
the UK partly offset by declines in the
Benelux and France. EBITDA increased
significantly, mainly driven by excellent
results in the UK.
With the residential construction
market remaining strong in Switzerland,
our cement volumes were 8% ahead
of 2013, although we continued to
experience price pressure. Prices
in the downstream businesses were
stable while volumes declined slightly.
Overall operating profit declined. In
the UK the residential market remained
very strong both for our clay and
concrete businesses, and sales and
operating profit increased during the
year. There was a mixed outcome in
the Benelux. While overall demand in
the Netherlands was weak, resulting in
lower volumes for readymixed concrete
and landscaping products, cement
volumes remained in line with the
prior year and in Belgium were better
than in 2013. Both markets experienced
significant price pressure and operating
profit was lower than prior year. In
Ireland an increase in residential
activity in Dublin resulted in higher
volumes, however prices remained
competitive due to overcapacity in the
market. Overall operating profit was in
line with 2013.
Construction output in France
continued to decline and precast
concrete volumes fell sharply
resulting in lower operating profit.
In Germany, volumes were higher
in our concrete landscaping activity
and prices remained under pressure;
underlying operating profit was in
line with 2013. Residential activity
in Denmark improved, and although
pricing remained difficult due to the
overcapacity in the market; operating
profit increased. In Spain, the decline
in national cement volumes moderated,
while volumes for our cement business
in the Basque region were slightly ahead
of 2013; overall operating profit was
ahead of the 2013 outcome.
Eastern Europe (45% of EBITDA)
Our operations benefited from
favourable weather at the start of the
year, with like-for-like sales up 9%
in the first half. However, sales fell
by 6% in the second half, resulting
in a marginal increase in like-for-like
sales for the year overall. The slight
improvement was achieved against a
backdrop of political turmoil in Ukraine
offset by improved demand in Poland. A
relatively stable input cost environment,
together with ongoing efficiency
measures, resulted in an overall stable
EBITDA margin.
Construction output in Poland increased
by 5% in 2014, reflecting an early
start to the season due to very mild
weather in the first quarter, stronger
economic growth and a pick-up in the
previously sluggish residential sector.
CRH 31
Europe Heavyside | continued
National cement volumes for the year
increased by 6%. Our readymixed
concrete and landscaping volumes also
increased. While prices for many of
our products remained under pressure,
operating profit in Poland increased
due to strong volumes and the benefit
of previously implemented cost-
reduction programmes. Despite the
uncertain political backdrop in Ukraine
and a 13% reduction in national
construction output, our like-for-like
cement volumes were only down 1%
on 2013 reflecting the concentration of
our plants in western Ukraine and the
ongoing commitment and dedication
of our Ukrainian-based team. Due
to better pricing, continued focus
on cost efficiencies and the full-year
benefit of the acquisition of Mykolaiv,
operating profit in local currency was
ahead of 2013. Construction output in
Finland remained relatively weak in
2014 mainly as a result of a continuing
decline in housing starts and a 2%
drop in our cement volumes. Volumes
and prices in readymixed concrete and
aggregates were also under pressure and
operating profit was below 2013. Sales
and operating profit were ahead in 2014
in our concrete products operations in
Romania, Hungary and Slovakia as a
result of improved activity.
Outlook
Western Europe: In the Netherlands
we expect to see further improvements
in the residential sector, which should
have a positive impact in 2015, while
the non-residential and infrastructure
sectors are expected to improve
marginally. In Switzerland construction
activity is expected to decline slightly
but remain on a relatively high level
with some improvement from larger
infrastructure (tunnel) projects, which
are expected to commence in 2015.
The outlook for construction output in
Belgium is flat. Ireland should continue
to grow with overall construction
activity mainly driven by the residential
segment. France is expected to decline
32 CRH
further especially in the infrastructure
sector. The outlook for Germany and
Denmark is positive, but showing
only modest growth. Spain remains
challenging and we expect that 2014
was the bottom of the cycle, with
moderate improvements anticipated
in 2015.
Eastern Europe: The growth in activity
in Poland during 2014 is expected
to continue to be led by a pick-up in
road programme activity in the second
half of 2015. The outlook for Ukraine
is uncertain; we expect construction
activity to decline, and the local
currency is expected to remain very
weak. The outlook remains challenging
for Finland, although with the benefits
of cost efficiencies we expect to improve
margins. Further growth is expected in
Romania, Hungary and Slovakia.
Reserves
Physical
location
Proven &
Period to
probable depletion
million tonnes
years
Cement
Ireland
Poland
Switzerland
Ukraine
Spain
Aggregates
Finland
Ireland
Poland
Spain
Other
Lime
217
185
26
164
86
190
897
182
98
173
Ireland/Poland
46
133
49
17
62
602
15
85
20
43
22
46
Alulux is part of the
Shutters & Awnings
business in Europe
Lightside. It is a leading
German producer of roller
shutters and external
venetian blinds, which are
used to improve energy
efficiency, comfort and
security in residential
building construction and
renovation.
Europe Lightside
Business Description
Europe Lightside produces and supplies
high-value, award-winning products,
expert solutions and other technologies
for often challenging construction
projects. The Division is organised
into four business areas: Construction
Accessories, Shutters & Awnings,
Fencing and Cubis (composite access
chambers). We buy, build and grow
business units with market leading
positions and strong growth prospects,
selling through a range of flagship
brands at a regional and European level.
The Lightside Division grows both
organically and by acquisition to create
leading positions within our chosen
markets. We maximise synergies across
the business in the areas of performance
improvement, procurement, talent
management and product development.
We have a relentless focus on
innovation. Lightside customers
are specialist end-users, including
architects and engineers. Using our pan-
European presence and scale, we work
closely with them to develop design
solutions that are approved and certified
for individual target markets.
We draw upon an outstanding record
of enabling mature and high-growth
businesses alike to expand their
offerings, and develop their markets.
Lightside has achieved consistently
attractive returns. The resilience of
these returns reflects active, balanced
management of our product range and
our geographic and business cycle
exposures.
Our development strategy is to deepen
our positions in existing markets and
technologies in developed European
markets, to broaden our product range
in selected growth categories, and to
expand our presence in developing
regions outside Europe as construction
markets in those areas become more
sophisticated.
This strategy complements CRH’s aim to
provide innovative solutions that meet
the longer-term opportunities presented
by economic development, changing
demographics and sustainability.
Employees total approximately 5,000
people at circa 100 operating locations
in 17 countries.
Market leadership positions
Construction Accessories
No.1 Europe
No.1 Malaysia
No.2 Singapore
Shutters & Awnings
No.1 Netherlands
No.3 Germany
Fencing
No.1 Europe
CRH 33
Europe Lightside | continued
Operations Review
Results
€ million
Sales revenue
EBITDA*
Operating profit*
EBITDA/sales
Operating profit/sales
%
Change
7%
32%
154%
2014
2013
913
856
94
71
10.3%
7.8%
71
28
8.3%
3.3%
Analysis of change
Total
Change
Organic
Acquisitions
Restructuring/
Impairment
Pensions
Exchange
57
23
43
53
22
31
-
-
-
-
1
14
-
-1
-1
4
1
-1
* EBITDA and operating profit exclude profit on disposals
No pension restructuring gains were recorded (2013: €1 million)
Restructuring costs amounted to €5 million (2013: €6 million)
No impairment charges were recorded (2013: €13 million)
sales and operating profits. Despite
challenging market conditions, results
for Mobile Fencing were only slightly
lower year-on-year, as a result of various
operational excellence measures. Cubis,
our composite access chamber business,
had another good year in which sales
and operating profits increased due to
strong UK demand and the introduction
of a range of new products.
Outlook
While we are positive about the UK and
Switzerland in 2015, we expect France
to remain challenging, and are cautious
about the outlook for Germany and the
Netherlands. Given Europe Lightside’s
robust business mix, we anticipate
further organic growth in 2015, achieved
through new products, maximising
export opportunities and a continued
RMI focus. This growth, combined with
commercial and operational excellence
programmes, is expected to deliver
further improvement in our operating
profit in the year ahead.
The commentary below excludes
the impact of impairment charges on
operating profit.
2014 saw good progress for Europe
Lightside, with our portfolio of
businesses benefiting from mild weather
early in the year. Like-for-like sales
were 6% ahead of 2013, helped by
good export levels to markets outside
of Europe. Market demand in the
Netherlands and France remained weak,
while activity in Germany, Belgium and
Switzerland was more resilient. The UK
experienced robust growth, particularly
in residential construction. With the
benefit of new product innovation,
market share gains and cost reduction
initiatives, the Division achieved
substantial growth in both EBITDA and
operating profit margins.
Construction Accessories
(55% of EBITDA)
This division supplies a broad range of
connecting, fixing and anchor systems to
the construction industry. Like-for-like
sales grew by almost 6% in 2014, with a
significant increase in operating profit.
Engineered Accessories benefited from
new product innovation and previous
restructuring initiatives. Our businesses
in Germany and the UK delivered
strong growth in operating profits, while
Switzerland also performed well. The
more commodity-focussed Building
Site Accessories businesses had a
mixed year, with better performances
in the UK, Belgium and Spain offset by
rationalisation costs and more difficult
trading conditions in Germany and
France.
Shutters & Awnings (25% of EBITDA)
Our operations in this division serve
the attractive RMI and residential
end-use markets, supplying sun
protection, energy-saving, and outdoor
living technologies. The Netherlands
business benefited from the introduction
of innovative new products with
strong margins. The UK business also
delivered improved sales and margins.
In Germany, strong demand for our
awnings products was offset by a
weaker performance in the shutters
business due to lower exports to France
and restructuring measures. Overall,
like-for-like sales and operating profits
increased.
Fencing & Cubis (20% of EBITDA)
Our Permanent Fencing business again
experienced difficult markets, especially
in the Netherlands, although a number
of initiatives contributed to improved
34 CRH
Europe Distribution
Business Description
Europe Distribution’s strategy is to
grow its network presence in the
largely unconsolidated core European
markets while also investing in other
attractive segments of building materials
distribution. Operational excellence is
delivered through optimising the supply
chain and providing superior customer
service.
We have leading General Builders
Merchant positions in the Netherlands,
Switzerland, northern Germany, Austria
and France which service the growing
repair, maintenance and improvement
construction sector. Our businesses
cater to the needs of small and medium-
sized builders, selling a range of bricks,
cement, roofing and other building
products.
Our specialist Sanitary, Heating and
Plumbing (SHAP) business services the
needs of plumbers, heating specialists
and installers in Belgium, Germany
and Switzerland. In addition, Europe
Distribution operates under four
DIY brands: GAMMA (Netherlands
and Belgium), Karwei (Netherlands),
Hagebau (Germany) and Maxmat
(Portugal) selling to DIY enthusiasts and
home improvers.
Significant opportunities remain to
expand our existing network and to gain
exposure to rising RMI demand and new
growth platforms.
Europe Distribution employs over
11,600 people at more than 600
locations.
Market leadership positions
Builders Merchants
No.1
No.1
No.1
No.1
No.1
No.2
DIY
No.1
No.3
No.5
No.2
Austria
Netherlands
Switzerland
Northern Germany
France: Burgundy,
Franche-Comté, and
Rhône-Alps
Ile-de-France and
Normandy
Netherlands*
Belgium*
Germany**
Portugal (50%)
* Member of Gamma franchise
** Member of Hagebau franchise
SHAP
No.2
No.2
No.3
Switzerland
Belgium
Northern Germany
CRH 35
Europe Distribution | continued
Operations Review
Results
€ million
Sales revenue
EBITDA*
Operating profit*
EBITDA/sales
Operating profit/sales
%
Change
2014
2013
Total
Change
Organic
Acquisitions
Restructuring/
Impairment
Pensions
Exchange
Analysis of change
2%
2%
6%
3,999
3,936
190
112
4.8%
2.8%
186
106
4.7%
2.7%
63
4
6
7
15
14
41
-
-1
-
-
4
-
-11
-11
15
-
-
* EBITDA and operating profit exclude profit on disposals
No pension restructuring gains were recorded (2013: €11 million)
Restructuring costs amounted to €4 million (2013: €4 million)
No impairment charges were recorded (2013: €4 million)
With the benefit of mild weather in
the early months of 2014, first-half
like-for-like sales increased by 4%.
Although the Netherlands saw some
recovery in consumer confidence as the
year progressed, financing conditions
remained tight; our other key markets,
particularly Switzerland, France and
Germany, experienced more subdued
demand and intense competition. While
sales in the third quarter declined by
4% on a like-for-like basis, by December
activity had flattened to a level similar
to last year, resulting in a full-year like-
for-like sales outturn that was broadly
similar to 2013. With the benefit of
procurement and other commercial
excellence initiatives, and in spite of the
absence in 2014 of the once-off pension
gain of €11 million reported in 2013,
overall operating profit and margin was
ahead of last year.
Six builders merchants acquisitions
were completed in 2014 at a total cost of
€27 million. In the Benelux, we acquired
seven branches mainly to expand
our footprint in our growing builders
merchants platform in Belgium. We
also acquired two branches in northern
France, strengthening our network in
Normandy.
Professional Builders Merchants
(45% of EBITDA)
Overall operating profit for our wholly-
owned professional builders merchants
business, which operates 343 branches
in six countries, was ahead of 2013.
Mild first-quarter weather together
with the incremental contribution from
acquisitions offset weaker demand as
the year progressed, resulting in full-
year sales in line with the previous year.
Operating profit advanced mainly due to
procurement initiatives in the Benelux
and France and ERP optimisation in
Austria. Sales in the Benelux ended
slightly ahead of 2013 due mainly to
our recent Belgian acquisitions with
operating profit well ahead as a result of
procurement and cost savings initiatives.
In Switzerland, sales finished slightly
behind 2013, with the main driver
for lower sales being a softening of
local residential markets in particular;
operating profit was impacted by lower
volumes and pricing pressure partly
coming from the strong Swiss Franc.
Our builders merchants activities in
Germany made a strong start to the year
in mild weather; this moderated as the
year progressed leaving full-year sales
and operating profit slightly ahead of
prior year. Sales in France were slightly
ahead of 2013 due to acquisition
contributions, while operating profit
improved following a continued focus
on pricing, purchasing and cost control.
Sales levels in Austria were slightly
behind 2013, although operating profit
was ahead due to measures taken to
leverage the recently implemented ERP
system.
Sanitary, Heating and Plumbing
(“SHAP”) (25% of EBITDA)
Sales in our SHAP business, which
operates 132 branches, were ahead of
2013 due to an organic improvement in
our Belgian businesses which continue
to perform strongly. Sales in our German
business moderated in the second half,
finishing broadly in line with prior
year. Due to the challenging market
conditions in Switzerland, results were
lower compared with 2013. Underlying
operating profit for our SHAP activities
in 2014 was broadly in line with 2013
as organic improvement in Belgium was
offset by weaker Swiss results.
DIY (30% of EBITDA)
Our wholly-owned DIY business
operates 184 stores in the Netherlands,
Germany and Belgium. Similar to our
other businesses, DIY made a strong start
36 CRH
to 2014 with garden sales in particular
benefiting from mild weather conditions.
Despite improving consumer confidence
and mild weather, competition remained
intense in the Dutch market with high
levels of price discounting featuring
prominently during the year. Overall
sales ended broadly in line with 2013 in
both the Netherlands and Belgium. Sales
in our DIY business in Germany were
higher than the previous year in part
due to recent greenfield investments.
Overall operating profit for the DIY
business was ahead of the prior year
with weaker pricing in the Netherlands
more than offset by cost savings
initiatives, lower restructuring costs and
a good performance in our German DIY
business.
Outlook
While the Dutch economy continues
to show progress, as seen in improving
consumer confidence indicators,
underlying financing conditions remain
somewhat constrained and therefore we
expect measured progress in 2015. The
German market outlook remains broadly
positive despite some moderation in
economic growth. Markets in Austria
are expected to be flat in 2015. In
Switzerland, consistent with recent
Euroconstruct indicators, residential
markets in particular are expected to
be subdued, so we remain cautious for
2015. Construction activity in France is
also expected to be constrained in the
near term. Overall 2015 is likely to be
another challenging year, but we expect
improved operating profit due mainly
to further initiatives in commercial and
operational excellence programmes and
our continued focus on cost-reduction
measures.
A customer service employee at the newly
opened 4,000 m2 GAMMA hardware store
in Alkmaar, the Netherlands, uses his DIY
knowledge to assist a customer.
CRH 37
ALASKA
BRITISH
COLUMBIA
ALBERTA
SASKATCHEWAN
MANITOBA
ONTARIO
QUEBEC
WASHINGTON
MONTANA
NORTH DAKOTA
OREGON
IDAHO
WYOMING
SOUTH DAKOTA
A
T
O
S
E
N
N
M
I
SIN
N
O
C
WIS
N
A
HIG
MIC
NEBRASKA
IOWA
NEVADA
UTAH
COLORADO
C
A
L
I
F
O
R
I
S
O
N
L
L
I
KANSAS
MISSOURI
I
A
N
A
D
N
I
I
OHIO
Y
K
C
U
T
N
E
K
A
V
L
Y
S
N
N
E
P
W .VIR GINIA
VIRGINIA
OKLAHOMA
ARKANSAS
TENNESSEE
N.CAROLINA
NEW
YORK
N I A
1
2
3
5
4
6
7
8
MAINE
1. VERMONT
2. NEW HAMPSHIRE
3. MASSACHUSETTS
4. RHODE ISLAND
5. CONNECTICUT
6. NEW JERSEY
7. DELAWARE
8. MARYLAND
ARIZONA
NEW MEXICO
TEXAS
L
O
U
I
S
I
A
N
A
PI
SIP
SIS
MIS
A
M
A
B
A
L
A
G
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O
R
G
I
A
S. CAROLINA
F
L
O
R
I
D
A
N
I
A
MEXICO
(BAJA CALIFORNIA)
HAWAII
CHILE
ARGENTINA
38 CRH
CRH in the Americas
CRH is the largest building materials
company in North America. We
operate across all 50 US states and in
six Canadian provinces. In addition,
we have operations in Baja California,
Argentina and Chile.
Our Americas operations comprise
Materials, Products and Distribution
Divisions. In Materials, we are the
largest producer of asphalt and third
largest producer of aggregates and
readymixed concrete in the United
States. Our Products operations,
with their national footprint and
broad product range, are the leading
supplier of concrete products and
architectural glazing systems in
North America. In Distribution, we
are a leading supplier of product
to the specialist Exterior roofing/
siding contractor and also the Interior
ceilings/walls demand segments.
Close to 40,000 people are employed
by CRH in the Americas at close to
1,800 locations.
Top: Employees safely excavate bulk
sand at the Thompson-Arthur’s Candor
Sand Plant in North Carolina. In 2014,
the plant produced over 430,000 tonnes
of product and employees celebrated 26
years of operating without a recordable,
preventable, or lost time incident.
Centre: Oldcastle BuildingEnvelope®
manufactured and supplied high-
performance low-iron laminated
architectural glass and engineered
entrance and storefront aluminum
glazing systems for the award winning
143,000 ft2 university building at the
Rutgers University Business School in
Piscataway, New Jersey.
Right: The Montebello branch is
the largest branch in the AMS
network. Servicing Los Angeles and
the southwestern suburbs, it is the
established market leader for the
fabrication of doors, frames and
hardware for commercial buildings
in southern California.
CRH 39
Market leadership positions
Reserves
Aggregates
No.3 National Producer
Asphalt
No.1 National Producer
Readymixed concrete
No.3 National Producer
Physical
location
Proven &
Period to
probable depletion
million tonnes
years
Aggregates
East
West
9,181
4,042
125
76
Equity Accounted
Entities
Aggregates
Cement
135
9
117
31
Americas Materials
Business Description
Americas Materials’ strategy is to build
strong regional leadership positions
underpinned by well-located, long-term
reserves. We are the largest producer of
asphalt and the third largest producer
of both aggregates and readymixed
concrete in the United States. We
operate nationally in 44 states with
over 13 billion tonnes of permitted
aggregates reserves of which circa 80%
are owned. The business is vertically
integrated from primary resource
quarries into aggregates, asphalt and
readymixed concrete products. With
60% exposure to infrastructure, the
business is further integrated into
asphalt paving services through which
it is the leading supplier of product
to highway repair and maintenance
demand in the United States.
Our national network of operations and
deep local market knowledge drive local
performance and national synergies in
procurement, cost management and
operational excellence. In a largely
unconsolidated sector where the top
ten industry participants account for
just 30% of aggregates production,
25% of asphalt production and 25% of
readymixed concrete production, CRH’s
strategy is to position the business to
participate as the industry consolidates
further.
Americas Materials employs
approximately 18,400 people at close to
1,200 operating locations.
The Shelly Company paved State Route
31 south of Kenton, Ohio, with asphalt
using a “Flow Boy” trailer that holds 23
tonnes of product, which is 3 tonnes
more than a typical truck load, improving
efficiency. The “Flow Boy” trailers
allow the asphalt to flow into the paver
eliminating the need to raise the trailer
bed and thereby reducing risk.
40 CRH
Operations Review
Results
€ million
Sales revenue
EBITDA*
Operating profit*
EBITDA/sales
Analysis of change
%
Change
2014
2013
Total
Change
Organic
Acquisitions
Divestments
Restructuring/
Impairment
Exchange
7%
9%
57%
5,070
4,721
609
355
557
226
12.0%
11.8%
349
52
129
317
42
61
37
7
5
-2
-
-
-
3
63
-3
-
-
Operating profit/sales
7.0%
4.8%
* EBITDA and operating profit exclude profit on disposals
Restructuring costs amounted to €9 million (2013: €12 million)
No impairment charges were recorded (2013: €60 million)
The commentary below excludes
the impact of impairment charges on
operating profit.
After the early months of 2014 which
were impacted by harsh winter weather,
trading conditions improved as the year
progressed, led by improved residential
and non-residential segments and stable
infrastructure. Americas Materials
delivered another year of growth, with
like-for-like sales revenues growing
7% and overall EBITDA increasing 9%
compared to 2013. Positive trends in
pricing continued for the third year in
a row for aggregates and readymixed
concrete, with asphalt pricing also
improving in 2014.
Americas Materials completed eight
acquisition transactions in 2014 at
a total cost of €91 million, adding
over 230 million tonnes of aggregates
reserves, 2 operating quarries, 6 asphalt
plants and 2 aggregates terminals, with
annual production of 4.3 million tonnes
of aggregates and 0.2 million tonnes
of asphalt. In addition divestments
during the year generated proceeds of
€12 million.
Energy and related costs: The price of
bitumen, a key component of asphalt
mix, increased by 3% in 2014 following
a 4% decrease in 2013. Prices for diesel
and gasoline, important inputs to
aggregates, readymixed concrete and
paving operations, decreased by 2% and
3% respectively. The price of energy
used at our asphalt plants, consisting
of fuel oil, recycled oil, electricity and
natural gas, remained flat. Recycled
asphalt and shingles accounted for
approximately 22% of total asphalt
requirements in 2014, lessening demand
on virgin bitumen.
Aggregates: Like-for-like volumes
increased 6% from 2013 while total
volumes including acquisitions
increased 10%. Average prices increased
by 2% on a like-for-like basis and 1%
overall compared with 2013. These
price and volume increases, together
with efficient cost control, resulted in
improved margin for our aggregates
business.
Asphalt: Volumes increased 5% on
a like-for-like basis and 6% overall
compared to 2013. Volume increases
together with pricing increases of 1%
contributed to an overall asphalt margin
expansion.
Readymixed Concrete: Like-for-like
volumes increased 6% while total
volumes including acquisitions were up
7% compared with 2013. Average prices
increased 4% on both a like-for-like and
an overall basis, contributing to margin
expansion for this business.
CRH 41
price gains building on strong operating
and overhead cost management
across the product lines. Recovery in
construction margins provided very
positive year-on-year improvements
from this line of business. Overall West
volumes increased 15%, 4% and 9%
ahead of 2013 for aggregates, asphalt
and readymixed concrete respectively.
Outlook
We expect that US GDP growth in
2015 will be similar to 2014 and that
housing will continue to recover. We
also expect non-residential construction
to show modest gains. Federal funding
for infrastructure is expected to be flat
in 2015. A more robust federal highway
bill is being explored by Congress and
has the support of the President, but if
passed the impact would most likely be
evident in 2016 and beyond. State fiscal
conditions are improving with certain
states passing infrastructure funding
measures.
We expect 2015 volumes for aggregates
and asphalt to show single-digit growth
and readymixed concrete volumes to
be up slightly more due to improving
residential markets. Targeted price
increases in all product lines,
combined with cost controls and
stable/improving energy markets are
expected to lead to another year of
margin expansion in 2015.
Americas Materials | continued
Paving and Construction Services:
With flat federal funding and pockets of
increased state infrastructure spending,
like-for-like sales increased 2% and
overall sales including acquisitions
increased 3%. Bidding continued to
be under pressure in a competitive
environment. However, efficient cost
controls enabled overall margin to
improve by 0.5% in 2014.
Regional Performance
East (65% of EBITDA)
The East region comprises operations
in 23 states, the most important of
which are Ohio, New York, Florida,
Michigan, New Jersey, Pennsylvania
and West Virginia. After a harsh winter,
the Northeast division was able to
take advantage of favourable weather
and improving economic conditions
during the remainder of the year with
operating profit growing strongly
compared with 2013. Operating profit
was more stable in the Mid-Atlantic
and Central divisions where very wet
conditions hampered activity in the
peak production months. The strong
residential and non-residential markets
in Florida contributed to higher
volumes, better prices and margin
growth in the Southeast division.
Overall operating profit for the East
region was higher than in 2013, with
overall volumes 7%, 6% and 5% ahead
of prior year for aggregates, asphalt and
readymixed concrete respectively.
West (35% of EBITDA)
The West region has operations in 21
states, the most important of which are
Utah, Texas, Washington, Iowa, Kansas
and Colorado. All three divisions,
Central West, Northwest, and Mountain
West reported higher operating profit.
Early season earnings improvements
throughout the West continued into the
autumn and early winter, with modest
42 CRH
Americas Products
Business Description
Americas Products’ strategy is to
build a portfolio of businesses which
have leading market positions across
a balanced range of products and
end-use segments. Our activities
are organised into three product
groups under the Oldcastle brand:
Architectural Products (concrete
masonry and hardscapes, clay brick,
packaged lawn and garden products,
packaged cement mixes, fencing);
Precast (utility, drainage and structural
precast, construction accessories);
and BuildingEnvelope® (architectural
glass and aluminium glazing systems).
The Group’s commitment to Building
Better Businesses ensures a coordinated
approach at national and regional
levels to achieve economies of scale
and to facilitate the sharing of best
practices which drive operational and
commercial improvement. Innovation is
a hallmark of the business, and through
Oldcastle’s North American research
and development centres, a pipeline
of value-added products and design
solutions is maintained.
In the context of the detailed review
of the portfolio undertaken by the
Group during 2014, CRH announced
in December 2014 that it had reached
agreement to dispose of its Glen-Gery
clay business in the United States. The
transaction is expected to close in the
first quarter of 2015.
A national business operating in 39 US
states, six Canadian provinces, Mexico
and South America. CRH has the
breadth of product range and national
footprint that combines providing a
national service to customers with
the personal touch of a local supplier.
Focussing on strategic accounts and
influencers in the construction supply
chain, the Oldcastle Building Solutions
group provides an additional avenue
for growth as it is uniquely positioned
in the industry to create value for
stakeholders across all phases of
construction.
The number of employees in this
division totals approximately 17,700 at
nearly 400 locations.
Market leadership positions
Concrete masonry, patio products
and pavers
No.1 Paving & patio: North America
No.1 Masonry: North America
Packaged cement mixes
No. 2 United States
Tiles
No.1 Rooftiles: Argentina
No. 2 Floor and wall tiles: Argentina
Packaged lawn & garden products
No. 2 United States
Precast concrete products
No.1 Precast concrete utility
products: North America
Building envelope solutions
No.1 North America
Concrete accessories
No. 2 United States
Fencing products
No. 2 Fencing supplier:
United States
Oldcastle Architectural supplied four
different Trenwyth® masonry products
to complete the interior and exterior
renovation of the Lenoir-Rhyne University
Chapel in Hickory, North Carolina, a
gathering place at the center of the
123-year-old campus for its student
and faculty population.
CRH 43
Americas Products | continued
Operations Review
Results
€ million
Sales revenue
EBITDA*
%
Change
2014
2013
Total
Change
Organic
Acquisitions
Divestments
Restructuring/
Impairment
Exchange
Analysis of change
Operating profit*
113%
EBITDA/sales
Operating profit/sales
5%
7%
3,225
3,068
157
17
77
263
145
8.2%
4.5%
246
68
8.0%
2.2%
169
24
24
75
6
2
-19
-1
-
-
-7
50
-68
-5
1
* EBITDA and operating profit exclude profit on disposals
Restructuring costs amounted to €18 million (2013: €11 million)
Impairment charges of €14 million were incurred (2013: €71 million)
The commentary below excludes
the impact of impairment charges on
operating profit.
our footprint into the growing Texas
market; while five divestments in 2014
generated net proceeds of €50 million.
Our Products business in the Americas
is located primarily in the United States
but also in Canada, Mexico and South
America. Construction activity in the
eastern and northern parts of North
America was hampered by unseasonably
wintry weather into May. Good weather
in the second half of the year and an
ongoing pick-up in US macroeconomic
fundamentals, particularly stronger
labour markets and consumer
confidence, led to improved trading
results in the remainder of the year.
Overall like-for-like sales increased by
6%. With improving market conditions,
input cost pressures accelerated but
were more than offset by the effects of
improved operational efficiencies and
targeted price increases. Combined
with the benefits of organic growth, cost
reduction initiatives and contributions
from acquisitions, Americas Products
achieved a 7% increase in EBITDA and
improved margins.
Five bolt-on acquisitions were
completed in 2014 at a total spend of
€60 million. The acquisition by our
Architectural Products Group (“APG”)
of Hope Agri Products, a supplier of
packaged mulches and soils, extended
Architectural Products
(55% of EBITDA)
APG is a leading supplier of masonry
and hardscape products, packaged
lawn and garden products, clay brick
and fencing solutions. In addition to
contractor-based new construction, the
DIY and professional RMI segments
are significant end-users. The business
benefited from improving private
residential and non-residential
construction and increasing RMI spend.
In general, activity was more robust in
the West and South, while trading in
the Midwest, Northeast, and Eastern
Canada started slowly during the first
four months due to unseasonably
bad weather. The strengthening
housing market, together with product
innovation and commercial initiatives,
drove gains across nearly all business
segments resulting in a 7% increase
in like-for-like sales compared with
2013. While our markets remain
competitive, the combination of cost
reduction measures and selected
price improvements broadly offset the
impact of higher input costs. Overall,
APG recorded strong improvements in
operating profit and margin for the year.
Precast (20% of EBITDA)
The Precast group manufactures a
broad range of value-added concrete
and polymer-based products primarily
for utility infrastructure applications.
In addition, the business is a leading
manufacturer of accessories to the
concrete construction industry. While
public infrastructure spend remained
subdued, the business saw an otherwise
improved market environment in 2014
and registered solid sales gains as
growth initiatives continued to deliver.
Operating profit increases were achieved
in most precast markets although
selected areas were slow to recover from
the weather-impacted start to the year.
Our utility enclosures and construction
accessories businesses also continued
to grow and improve. Overall, like-for-
like sales rose by 5%, operating profit
was marginally ahead and backlogs
continued to improve.
BuildingEnvelope® (20% of EBITDA)
The BuildingEnvelope® group is
North America’s leading supplier of
architectural glass and aluminium
glazing systems that close the building
envelope. New non-residential building
activity, a key market segment for this
business, experienced improved market
conditions and healthy increases in
demand in 2014. Sales growth was
44 CRH
also driven by ongoing initiatives to
gain market share and differentiate the
business through innovative product
and technology offerings. Organic sales
rose 2%, slightly less than the overall
market, as our Engineered Glazing
Systems (“EGS”) division concentrated
on completing existing major project
work. The Architectural Glass and
Storefront division continued to benefit
from an improved pricing environment,
resilient non-residential RMI activity
and a generally more favourable product
mix. With a tight focus on cost control,
product quality and improved processes,
the business delivered operating profit
and margin improvements.
South America (5% of EBITDA)
Our South American operations were
negatively impacted by challenging
economic conditions and operating
profit was lower than in 2013. Slow
economic growth and high inflation led
to lower volumes and higher operating
costs in the Argentine clay products
businesses. Our Chilean business also
recorded reduced profits due to soft
demand in a very competitive market.
Outlook
Based on the improving macroeconomic
backdrop, which will benefit both
residential and non-residential
construction demand, we expect further
organic sales growth in 2015. Combined
with the impact of 2014 acquisitions and
divestments, and the benefits of internal
growth and cost initiatives, we expect
to record improved operating profit and
margin in 2015.
Oldcastle Architectural is a leading designer
and manufacturer of high-quality, branded
concrete outdoor living products. The local
Western Canadian business, Expocrete,
manufactured this Belgard® segmental
retaining wall and paver system for a private
residence in Vancouver, British Columbia.
CRH 45
Americas Distribution
Business Description
Operations Review
Americas Distribution, trading as
Allied Building Products (“Allied”),
experienced improved performance
across its activities in 2014, leading to
strong overall reported results. Both
business divisions benefited from sales
growth providing increased operating
profit compared to 2013. Performance
in our Exterior Products business was
led by strong demand in our Midwest
(Chicago) and Mountain (Colorado)
markets aided by early storm activity.
The Northeast and West Coast markets
experienced modest setbacks due to
the completion of Hurricane Sandy
rebuilding efforts in New York/New
Jersey and exceptionally dry and
drought-like weather patterns
experienced in California.
The Interior Products business
continued to show growth as both
volumes and pricing improved
throughout the year. The strongest
gains were experienced in our Atlantic
markets, in part due to the full-year
effect of our prior year acquisitions, and
also the Southwest and West markets
which were driven by multi-family
construction.
In 2014, Allied management maintained
its focus on improving employee safety,
controlling variable costs, streamlining
administrative procedures and
eliminating redundant processes. The
simplification of our business processes,
along with the ongoing evolution of
our organisational structure and go-to-
market strategies, is aimed at improving
Market leadership positions
Exterior Products
No.3 United States
Interior Products
No.3 United States
Americas Distribution strategy is
focussed on being the leading supplier
to contractors of Exterior Products such
as roofing and siding. We also apply this
successful distribution model to Interior
Products such as ceilings and walls.
Demand in the Exterior Products
business is largely influenced by
residential and commercial replacement
activity with the key products having an
average lifespan of 25 to 30 years.
Demand for Interior Products is driven
by the new residential, multi-family and
commercial construction markets.
Through CRH’s commitment to
continuous business improvement,
we employ state-of-the-art IT systems,
disciplined and focussed cash and asset
management, and well-established
procurement and commercial
systems which support supply chain
optimisation and enable us to provide
superior customer service.
Americas Distribution operates in 31
states, and growth opportunities include
investment in new and existing markets,
in complementary private label and
energy-saving product offerings, and
in other attractive building materials
distribution segments that service
professional dealer networks.
The division employs approximately
3,800 people at close to 200 locations.
46 CRH
Results
€ million
%
Change
2014
2013
Total
Change
Organic
Acquisitions
Restructuring
Exchange
Analysis of change
Sales revenue
7%
1,776
1,664
112
EBITDA*
Operating profit*
EBITDA/sales
Operating profit/sales
18%
24%
105
83
5.9%
4.7%
89
67
5.3%
4.0%
16
16
80
14
15
33
1
-
-
1
1
-1
-
-
* EBITDA and operating profit exclude profit on disposals
No restructuring costs were recorded (2013: €1 million)
business integration and enhancing
operating leverage, allowing for greater
economies of scale as our business, and
the overall market, grows.
While no acquisitions were completed
within the Americas Distribution group
in 2014, we have continued to build on
our organic greenfield and service centre
strategy by opening six bolt-on locations
within some of our key existing markets.
Our service centre model enables us to
improve customer service, consolidate
fixed costs and more efficiently leverage
branch assets. Progress continued to
be made in 2014 to increase brand
awareness of Tri-Built, our proprietary
private label brand, as both sales and
product offerings grew. The addition
of our new service centre locations
combined with the continued growth of
our Tri-Built private label brand and our
commitment to developing our people
continued to differentiate Allied in the
marketplace.
This photograph, featuring Tri-Built
Building Wrap, appeared in a 2014 New
York Times article covering the restoration
of homes on the Jersey Shore following
Superstorm Sandy. Tri-Built Materials is
part of the Allied Building Products private
label offering.
Exterior Products (60% of EBITDA)
The Exterior Products business is
largely comprised of both commercial
and residential roofing, siding and
related products, and is the third largest
distributor in the United States. Exterior
Products demand is greatly influenced
by residential and commercial
replacement activity (75% of sales
volume is RMI-related). Commercial
roofing experienced modest industry-
wide growth while residential roofing
shipments saw a slight decline leading
to an overall flat market from 2013.
As a result, product mix shifted more
towards lower-margin commercial
products. Additionally, with no volume
growth, markets across the industry
remained very competitive leading
to pricing pressure in all regions. In
spite of flat market conditions and the
pressures mentioned above, the Exterior
Products division reported modest sales
growth and operating profit just slightly
behind prior year.
Interior Products (40% of EBITDA)
The Interior Products business, which
is the third largest specialty distributor
in the United States, sells gypsum
wallboard, acoustical ceiling systems
and related products to specialised
contractors. The primary market is new
construction including residential,
multi-family and commercial, with
limited exposure to the repair and
remodel market. Performance in this
business was strong in all markets with
increased volumes and prices of core
products contributing to higher sales
and improved operating margins. In
addition, a more favourable mix toward
higher-margin core products combined
with efficiency initiatives implemented
in recent years, helped to drive
improved sales and operating profit
for 2014.
Outlook
The overall outlook for 2015 is
encouraging as commercial and
residential construction is expected to
grow. While headwinds are expected
to continue in our Exterior Products
business, as pricing pressures remain
and only modest growth is expected,
our Interior Products business continues
to experience favourable markets,
with another year of sales and profit
growth expected. Overall, the expected
benefits of the six service centre
additions in 2014 combined with our
continued focus on efficiency and cost
control should provide a year of further
improvement in operating performance
in 2015.
CRH 47
CRH in Asia
CRH has a number of strategic footholds in Asia,
following the establishment of entry platforms in
China and India over the last seven years. Our strategy
is to build select leading regional positions to enable
us to benefit from industrialisation, urbanisation and
population growth in these developing economies over
the coming decades.
The Group has a 26% stake in associate Yatai Building
Materials, which is a market leader in building materials
in Northeast China. In India, we have a 50% joint
venture with My Home Industries Limited which is a
leading player in the southern state of Andra Pradesh.
In October 2013, we opened a regional headquarters in
Singapore. The Group’s equity accounted operations in
China and India employ circa 12,000 people.
SOUTHERN
INDIA
MALAYSIA
SINGAPORE
48 CRH
NORTH EAST
CHINA
AUSTRALIA
China and India | Equity Accounted Investments
China
Market conditions in China remained
challenging during 2014 as government
policies to rebalance the economy
towards a more sustainable growth
model impacted on industrial and
real estate activity. This resulted
in a slowdown which created an
unfavourable short-term environment
for the construction sector. Profitability
at our 26% associate, Yatai Building
Materials, which is a market leader in
Northeast China with a capacity of
32 million tonnes of cement, was affected
by lower volumes and selling prices;
partially offset by improved operational
efficiencies and reduced costs.
India
CRH has a cement capacity of 8 million
tonnes across three locations in southern
India, where it operates through a 50%
joint venture; My Home Industries
Limited (“MHIL”). The regional market
has a cement consumption of 75 million
tonnes and MHIL is the market leader in
the southern states of Andhra Pradesh
and Telangana.
In 2014, MHIL posted a 25% increase
in volumes following the acquisition
of Sree Jayajothi Cements Limited in
late 2013 and has also made significant
gains in adjoining states. Prices were
under pressure in the first half due to
poor demand, but improved later in the
year. Volume growth and acquisition
synergies resulted in higher trading
profit in 2014.
Outlook
In China trading conditions looking
forward are expected to recover as the
country’s underlying urbanisation trends
drive investment in infrastructure and
property. Business performance will be
further helped by stricter government
measures to reduce overcapacity
combined with internal commercial and
operational excellence initiatives.
Demand for cement in India is expected
to show strong growth of over 8% with
the government providing a boost to
public infrastructure spending and
various housing projects in both urban
and rural areas.
Market leadership positions
Cement
No.1 Andhra Pradesh and
Telangana, India (50%)
No.1 North East China (26%)
Reserves
Physical
location
Period to
Proven &
probable depletion
million tonnes
years
India (50%)
102
23
Pictured outside the My Home Industries
(MHIL) office, in Hyderabad, India, is the
Hyderabad Metro Rail, a rapid transit
system currently under construction.
To date, MHIL has supplied over 19,000
tonnes of cement to the project which is
expected to be completed by July 2017.
CRH 49
Polbruk provided 2,000 m2 of durable,
washed concrete pavers for the pathways
surrounding the Musical Theatre
development in Gdynia, Poland. This
product is suitable for high levels of
pedestrian traffic, while the rough textured
finish contrasts with the building style to
create a modern city look.
50 CRH
Board of Directors
Nicky Hartery
Chairman
Appointed to the Board: June 2004
Nationality: Irish
Age: 63
Committee membership: Acquisitions
Committee; Finance Committee;
Nomination & Corporate Governance
Committee; Remuneration Committee
Albert Manifold
Chief Executive
Appointed to the Board: January 2009
Nationality: Irish
Age: 52
Committee membership: Acquisitions
Committee
Maeve Carton
Finance Director
Appointed to the Board: May 2010
Nationality: Irish
Age: 56
Committee membership: Acquisitions
Committee; Finance Committee
Mark S. Towe
Chief Executive Officer Oldcastle, Inc.
Appointed to the Board: July 2008
Nationality: United States
Age: 65
Committee membership: Not
applicable
Skills and experience: Nicky was Vice President of Manufacturing and
Business Operations for Dell Inc.’s Europe, Middle East and Africa (EMEA)
operations from 2000 to 2008. Prior to joining Dell, he was Executive Vice
President at Eastman Kodak and previously held the position of President
and Chief Executive Officer at Verbatim Corporation, based in the United
States. Qualifications: C.Eng, FIEI, MBA.
External appointments: Chief Executive of Prodigium, a consulting
company which provides business advisory services; non-executive director
of Musgrave Group plc, a privately-owned international food retailer,
Eircom Limited, a telecommunications services provider in Ireland, and of
Finning International, Inc., the world’s largest Caterpillar equipment dealer.
Skills and experience: Albert was appointed a CRH Board Director in
January 2009. He joined CRH in 1998. Prior to joining CRH, he was Chief
Operating Officer with a private equity group. While at CRH, he has held
a variety of senior positions, including Finance Director of the Europe
Materials Division, Group Development Director and Managing Director
of Europe Materials. He became Chief Operating Officer in January 2009
and was appointed Group Chief Executive with effect from 1 January 2014.
Qualifications: FCPA, MBA, MBS.
Skills and experience: Since joining CRH in 1988, Maeve has held a number
of roles in the Group Finance area and was appointed Group Controller
in 2001, Head of Group Finance in January 2009 and to the position of
Finance Director in May 2010. She has broad-ranging experience of CRH’s
reporting, control, budgetary and capital expenditure processes and has
been extensively involved in CRH’s evaluation of acquisitions. Prior to
joining CRH, she worked for a number of years as a chartered accountant in
an international accountancy practice. Qualifications: MA, FCA.
External appointments: Board member of the National Treasury
Management Agency (NTMA), a state body that provides asset and liability
management services to the Irish Government.
Skills and experience: Mark joined CRH in 1997 and was appointed a
CRH Board Director with effect from July 2008. 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. (the holding company for CRH’s
operations in the Americas) in July 2008. With over 40 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.
CRH 51
Board of Directors | continued
Ernst J. Bärtschi
Non-executive Director
Appointed to the Board: October 2011
Nationality: Swiss
Age: 62
Committee membership: Audit
Committee (Financial expert);
Finance Committee
William P. Egan
Non-executive Director
Appointed to the Board: January 2007
Nationality: United States
Age: 69
Committee membership: Nomination
& Corporate Governance Committee;
Remuneration Committee
Utz-Hellmuth Felcht
Non-executive Director
Appointed to the Board: July 2007
Nationality: German
Age: 67
Committee membership: Acquisitions
Committee; Finance Committee
John W. Kennedy
Non-executive Director
Appointed to the Board: June 2009
Nationality: Irish
Age: 64
Committee membership: Acquisitions
Committee; Finance Committee
Patrick J. Kennedy
Non-executive Director
Appointed to the Board: January 2015
Nationality: Irish
Age: 61
Committee membership: Acquisitions
Committee; Audit Committee
52 CRH
Skills and experience: Ernst was Chief Executive of Sika AG, a
manufacturer of speciality chemicals for construction and general industry,
until 31 December 2011. Prior to joining Sika, he worked for the Schindler
Group and was Chief Finance Officer between 1997 and 2001. Over the
course of his career he has gained extensive experience in India, China and
the Far East generally. Qualifications: LIC.OEC.HSG.
External appointments: Chairman of the Board of Directors of Conzetta
AG, a broadly diversified Swiss company, member of the board of Bucher
Industries AG, a mechanical and vehicle engineering company based in
Switzerland; member of the advisory board of China Renaissance Capital
Investment Inc., a private equity investment company in Hong Kong, China.
Skills and experience: Bill is founder and General Partner of Alta
Communications and Marion Equity Partners LLC, Massachusetts-based
venture capital firms. He is past Chairman of Cephalon Inc., and past
President and Chairman of the National Venture Capital Association. He
was until May 2014, director of the Irish venture capital company Delta
Partners Limited. Qualifications: BA, MBA.
External appointments: He serves on the boards of several communications,
cable and information technology companies.
Skills and experience: Utz-Hellmuth was, until May 2011, Chairman of the
Supervisory Board of Süd-Chemie Aktiengesellschaft. He was also Chief
Executive of Degussa AG, Germany’s third largest chemical company, until
May 2006, and a partner in the private equity group One Equity Partners
Europe GmbH until July 2014.
External appointments: Chairman of the Supervisory board of German rail
company Deutsche Bahn AG and director of Jungbunzlauer Holding AG.
Skills and experience: John is past Chairman of Wellstream Holdings plc.
In a 40 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 past director of the UK Atomic Energy
Authority and Integra Group. Qualifications: M.Sc, BE, C.Eng, FIEE.
External appointments: Non-executive Chairman of Lamprell plc; director
of Maxwell Drummond International Limited and BiFold Group Limited.
Skills and experience: Pat was Chairman of the Executive Board of Directors
of SHV Holdings (SHV), a large family-owned Dutch multinational company
with a diverse range of operational and investment activities, including the
production and distribution of energy, the provision of industrial services,
heavy lifting and transport solutions, cash and carry wholesale and the
provision of private equity. He retired from SHV mid-2014. During a 32
year career with SHV, he held various leadership roles across SHV’s diverse
portfolio of businesses, while living in various parts of the world, and
was a member of the Executive Board of SHV from 2001, before becoming
Executive Chairman in 2006. Qualifications: MBS, BComm.
Donald A. McGovern, Jr.
Non-executive Director*
Appointed to the Board: July 2013
Nationality: United States
Age: 63
Committee membership: Nomination
& Corporate Governance Committee;
Remuneration Committee
Heather Ann McSharry
Non-executive Director
Appointed to the Board: February 2012
Nationality: Irish
Age: 53
Committee membership: Audit
Committee; Finance Committee
Dan O’Connor
Non-executive Director
Appointed to the Board: June 2006
Nationality: Irish
Age: 55
Committee membership: Nomination
& Corporate Governance Committee;
Remuneration Committee
Henk Rottinghuis
Non-executive Director
Appointed to the Board: February 2014
Nationality: Dutch
Age: 58
Committee membership: Acquisitions
Committee; Audit Committee
Lucinda Riches
Non-executive Director
Appointed to the Board: March 2015
Nationality: British
Age: 53
Committee membership: Nomination
& Corporate Governance Committee;
Remuneration Committee
Skills and experience: Don retired from PricewaterhouseCoopers (PwC)
in June 2013, following a 39 year career with the firm. During that time
he was Vice Chairman, Global Assurance at PwC, a position he had held
since July 2008 and directed the US firm’s services for a number of large
public company clients. He also held various leadership roles in PwC and
was, from July 2001 to June 2008, a member of, and past lead director for,
the Board of Partners and Principals of the US firm as well as a member of
PwC’s Global Board. Qualifications: CPA, MBA.
External appointments: Director of Neuraltus Pharmaceuticals, Inc.
* Don McGovern is Senior Independent Director
Skills and experience: Heather Ann is a former Managing Director Ireland
of Reckitt Benckiser and Boots Healthcare and was previously a non-
executive director of Bank of Ireland plc and IDA Ireland.
Qualifications: BComm, MBS.
External appointments: Non-executive director of Greencore Group plc and
Jazz Pharmaceuticals plc; Chairman of the Bank of Ireland Pension Fund
Trustees Board; director of Ergonomics Solutions International and the
Institute of Directors.
Skills and experience: Dan is a former President and Chief Executive Officer
of GE Consumer Finance - Europe and a former Senior Vice-President of GE.
He was Executive Chairman of Allied Irish Banks, p.l.c. until October 2010.
Qualifications: BComm, FCA.
External appointments: Director of Glanbia plc, an Irish food company and
International Personal Finance plc, a consumer lending business.
Skills and experience: Henk has a background in distribution, wholesale
and logistics. He was until 2010, Chief Executive Officer at Pon Holdings
B.V., a large, privately held international company which is focussed on the
supply and distribution of passenger cars and trucks, and equipment for the
construction and marine sectors. He was also a member of the Supervisory
Board of the Royal Bank of Scotland N.V. and the retail group Detailresult
Groep. Qualifications: Masters degree in Dutch Law.
External appointments: Chairman of the Supervisory Board of Stork
Technical Services and member of the Supervisory Board of the retail group
Blokker Holding B.V.
Skills and experience: Lucinda spent the majority of her career in investment
banking, including 21 years in UBS Investment Bank and its predecessor
firms where she worked until 2007. She held senior management positions
in the UK and the US, including Global Head and Chairman of UBS Capital
Markets Group and Vice Chairman of the Investment Banking Division.
Qualifications: Masters in Philosophy, Politics and Economics and a Masters in
Political Science.
External appointments: Non-executive director of UK Financial Investments
Limited, which manages the UK government’s investments in financial
institutions. She is also a non-executive director of Diverse Income Trust plc,
Graphite Enterprise Trust plc, the British Standards Institution and a non-
executive member of the Partnership Board of King & Wood Mallesons LLP.
She is also a trustee of Sue Ryder.
CRH 53
Nicky Hartery
Chairman
Governance
Contents
Page
Corporate Governance Report
54 Chairman’s Introduction
56 Stock Exchange Listings and
Corporate Governance Codes
56 Board of Directors
56
56
56
57
57
57
58
58
58
58
58
58
59
59
60
60
61
66
68
68
68
69
69
69
70
70
70
Responsibilities
Roles of Chairman and Chief Executive
Membership
Succession and diversity
Independence
Chairman
Senior Independent Director
Company Secretary
Terms of appointment of non-executive
Directors
Induction, training and development
Performance appraisal and Board
evaluation
Directors’ retirement and re-election
Board meetings
Board agendas
“Fair, Balanced and Understandable”
process
Securities dealing policies and codes
Audit Committee
Nomination & Corporate Governance
Committee
Remuneration Committee
Acquisitions Committee
Attendance at Board/Committee meetings
Finance Committee
Risk Management and Internal Control
Compliance & Ethics
Sustainability and Corporate Social
Responsibility
Substantial Holdings
Communications with Shareholders
71 General Meetings
71 Memorandum and Articles of Association
71 Going Concern
71
72
73
75
90
96
Documents and presentations available
on CRH website
Directors’ Remuneration Report
Statement from Committee Chairman
Annual Statement on Remuneration
Directors’ Remuneration Policy Summary
Directors’ Report
CRH plc has a secondary listing on the Irish Stock
Exchange. For this reason, CRH plc is not subject to the
same ongoing listing requirements as would apply to an
Irish company with a primary listing on the Irish Stock
Exchange. For further information, shareholders should
consult their own financial adviser. Further details on the
Group’s listing arrangements, including its premium listing
on the London Stock Exchange, are set out on page 56.
54 CRH
Corporate Governance Report
Chairman’s Introduction
The following report outlines our
approach to corporate governance and
how we implement the 2012
UK Corporate Governance Code (the
2012 Code).
The reports from the Chairmen of
Audit, Nomination & Corporate
Governance and Remuneration
Committees on pages 61, 66 and 73
respectively highlight the key areas of
focus for, and the background to the
principal decisions taken by, those
Committees.
In relation to 2014, we complied in full
with the provisions of the 2012 Code.
We also have procedures in place for
compliance with our obligations under
the applicable rules and regulations
issued by the United States Securities
and Exchange Commission.
Board Renewal and Re-election
We have recently appointed two new
non-executive Directors to the Board. Pat
Kennedy, former Chief Executive of SHV
Holdings, a large family owned Dutch
multi-national company with a range of
operational and investment activities,
was appointed in January 2015. Lucinda
Riches, who spent the majority of her
career in investment banking, including
21 years in UBS Investment Bank and
its predecessor firms where she worked
in senior management positions in the
UK and the US, will join the Board
with effect from 1 March 2015. Their
biographies, along with those of the
other Board members are set out on
pages 51 to 53. The Group’s approach
to Board renewal and succession
planning is set out on page 57 and in the
Nomination & Corporate Governance
Committee section.
Report, taken as a whole, is “Fair,
Balanced and Understandable”. The
Board has put in place a robust process
to ensure this concept is taken into
account throughout the drafting and
review stages. This process is outlined
on page 60.
Conclusion
As a Board, we are committed to a
process of continued improvement
in our collective effectiveness. In this
regard, I look forward to the feedback
from our upcoming external evaluation
process.
Nicky Hartery
Chairman
February 2015
Last year, I reported that the Board
had set itself the goal of increasing the
number of female Directors to circa
25% of the Board by the end of 2015.
In this regard, I am pleased to report
that, following the 2015 Annual General
Meeting, to be held in early May, one
quarter of the Board will be female.
In relation to each of the Directors
putting themselves forward for re-
election at the 2015 Annual General
Meeting, I have conducted a formal
evaluation of the performance of each
Director, which included training
needs where appropriate. I can confirm
that each of the Directors continues to
perform effectively and to demonstrate
strong commitment to the role.
As referred to in my introduction to the
Annual Report on page 3, John Kennedy
and Dan O’Connor, after many years’
service to CRH, will retire from the
Board following the conclusion of the
2015 Annual General Meeting.
Board Effectiveness and Training
During the course of 2015, an
external consultant will be engaged to
facilitate the external evaluation of the
effectiveness of the Board. The external
evaluation will supplement our existing
internal evaluation processes, details
of which are set out on page 58. The
last externally facilitated evaluation
was carried out in 2012. Also this year,
together with Don McGovern who took
over as Senior Independent Director in
January 2015, I will be reviewing the
training arrangements we have in place
for Directors with a view to partnering
with an external firm to provide a range
of programmes which Directors can avail
of on an ongoing basis.
Talent Management / Succession Planning
Throughout its history, CRH’s approach
to recruiting, developing and retaining
talented executives has resulted in
a long standing tradition of making
internal appointments for critical senior
roles and is an important component
in the achievement of the Group’s
strategic priorities. Nevertheless, the
Board recognises that CRH’s evolving
organisation structure and the expansion
of the Group’s geographic footprint over
time will bring additional challenges. In
this regard, we will be working with the
Chief Executive and the Group Human
Resources and Talent Development
Director to take a fresh look at our
processes in 2015 and the coming
years to ensure we have a pipeline of
executives at all levels to match our
needs.
Shareholder Engagement and Reporting
This year the Senior Independent
Director and I will again hold meetings
with large shareholders prior to the
Annual General Meeting to discuss
any areas of concern in relation to
the agenda for that meeting or other
topical governance-related matters.
We appreciate the level of interest and
engagement in this process, which
provides us with an insight into
the views of shareholders on CRH’s
governance structures and in relation
to recent or upcoming developments in
this area. I am always available to meet
with shareholders outside of this process
should the need arise.
As was the case last year, in accordance
with the 2012 Code, the Directors’
Report contains confirmation that the
Directors believe that the 2014 Annual
CRH 55
Corporate Governance Report | continued
Stock Exchange Listings and Corporate
Governance Codes
CRH, which is incorporated in Ireland and
subject to Irish company law, has a premium
listing on the London Stock Exchange, a
secondary listing on the Irish Stock Exchange
and its American Depositary Shares are listed
on the New York Stock Exchange.
This Report describes CRH’s governance
principles and practice and the Group’s risk
management and internal control systems.
The Report also sets out how CRH applies the
main and supporting principles of the 2012
UK Corporate Governance Code (the 2012
Code).
A copy of the 2012 Code can be obtained from
the Financial Reporting Council’s website,
www.frc.org.uk.
Board of Directors
What are the responsibilities
of the Board?
The Board is responsible for the leadership,
oversight, control, development and
long-term success of the Group. It is also
responsible for instilling the appropriate
culture, values and behaviour throughout
the organisation.
There is a formal schedule of matters reserved
to the Board for consideration and decision.
This includes the matters set out in table 1.
of the Group’s risk management and internal
control systems has been delegated to the
Audit Committee*, the Board retains ultimate
responsibility for determining the Group’s
“risk tolerance” and annually considers
a report in relation to the monitoring,
controlling and reporting of identified risks
and uncertainties. In addition, the Board
receives regular reports from the Chairman
of the Audit Committee in relation to the
work of that Committee in the area of risk
management.
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.
How do the roles of the Chairman
and Chief Executive differ?
It has been CRH’s practice since the
formation of the Group in the 1970s that the
roles of Chairman and Chief Executive are
not combined.
The Board has delegated responsibility for the
management of the Group, through the Chief
Executive, to executive management. There
is a clear division of responsibilities between
the roles of the Chairman and the Chief
Executive, which is set out in writing and has
been approved by the Board. A summary of
the respective roles is set out in table 2.
Table 1
What is the membership structure
of the Board?
size of the Board is sufficiently large to enable
its Committees to operate without undue
reliance on individual non-executive
Directors, while being dynamic and
responsive to the needs of the Group. The
spread of nationalities of the Directors reflects
the geographical reach of the Group and we
consider that the Board as a whole has the
appropriate blend of skills, knowledge and
experience, from a wide range of industries,
regions and backgrounds, necessary to lead
the Group.
None of the executive Directors is a non-
executive director of another listed company.
The current membership structure of the
Board is set out in table 3.
Chairman is responsible for
Table 2
The efficient and effective working of
the Board
Ensuring that Board agendas cover the
key strategic issues confronting the Group,
that the Board reviews and approves
management’s plans for the Group and that
the Directors receive accurate, timely, clear
and relevant information
Making certain that the Board applies
sufficient challenge to management
proposals and examines and reviews
management performance in meeting
agreed objectives and targets
Overseeing the search for new Board
members
Matters Reserved
to the Board
Appointment of Directors
Strategic plans for the Group
Annual budget
Major acquisitions and disposals
Significant capital expenditure
Approval of the Annual Report
Approval of the Interim Results
Issuance of guarantees
The Group’s strategy, which is regularly
reviewed by the Board, and its business
model are summarised in the Strategic Report
on pages 7 to 15.
The Board has delegated some of its
responsibilities to Committees of the Board.
The work of each Committee is set out
on pages 61 to 69 of this Report. While
responsibility for monitoring the effectiveness
It is CRH’s practice that a majority of the
Board comprises non-executive Directors.
Chief Executive is responsible for
At present, there are three executive and
ten** non-executive Directors. Biographical
details are set out on pages 51 to 53. Non-
executive Directors are expected to challenge
management proposals constructively and to
examine and review management
performance in meeting agreed objectives and
targets. In addition, they are expected to draw
on their experience and knowledge in respect
of any challenges facing the Group and in
relation to the development of proposals on
strategy.
We consider the current size and composition
of the Board to be within a range which is
appropriate. We also believe that the current
Full day-to-day operational and
profit performance of the Group and
accountability to the Board for all authority
delegated to executive management
Executing strategy agreed with the Board
and reporting regularly on the progress and
performance of the Group
Co-ordinating and overseeing the profitable
growth of the Group’s diverse portfolio of
international businesses
Maximising the contribution of senior
management to business planning,
operational control and profit performance
*
In accordance with Regulation 91(6)(b) of the European Communities (Statutory Audits) (Directive 2006/43) Regulations 2010.
** Will increase to 11 with effect from 1 March 2015 and reduce to 9 following the conclusion of the 2015 Annual General Meeting.
56 CRH
Corporate Governance Report | continued
Membership of the CRH Board
Table 3
Independence
(determined by CRH Board annually)
Tenure of non-executive Directors
(excluding Chairman)
23%
77%
Independent
Non-independent
34%
33%
33%
0-3 years
3-6 years
6-9 years
Gender Diversity
Geographical Spread (by residency)
15%*
85%
Female
Male
*25% following 2015 Annual General Meeting
8%
23%
38%
31%
Ireland
Mainland Europe
UK
US
How does the Board plan for
succession and what is its policy on
diversity?
The Board plans for its own succession with
the assistance of the Nomination &
Corporate Governance Committee.
For non-executive appointments,
independent consultants are normally
engaged to search for suitable candidates.
The process to identify, evaluate and appoint
a non-executive Director with the suitable
experience, skills and time commitment
takes into account both the needs of CRH
and the tenure and skills of existing Board
members. As a result, Board renewal and the
appointment of non-executive Directors is a
continuous process. The process put in place
in respect of appointments made since the
2013 Annual Report was published is set out
in the Chairman’s introduction to the
Nomination & Corporate Governance
Committee’s Report on page 66.
External consultants are engaged for
executive Director recruitment if, and when,
required. In the case of the Chief Executive
role, the Board appoints a succession
committee of long standing non-executive
Directors, when required. The incumbent
Chief Executive generally acts as advisor to
that committee.
We are committed to ensuring that the Board
is sufficiently diverse and appropriately
balanced. In its work in the area of Board
renewal, the Nomination & Corporate
Governance Committee looks at the
following four criteria when considering
non-executive Director candidates:
– international business experience,
particularly in the regions in which the
Group operates or into which it intends to
expand;
– skills, knowledge and expertise in areas
relevant to the operation of the Board;
– diversity, including nationality and gender;
and
– the need for an appropriately sized Board.
During the ongoing process of Board
renewal, each, or a combination, of these
factors can take priority.
In 2014, the Board set itself the goal of
increasing the number of female Board
members to circa 25% by the end of 2015.
Following the 2015 Annual General Meeting,
this objective will have been achieved.
What criteria are used to determine
the independence of non-executive
Directors?
The Board considers the principles relating
to independence contained in the 2012 Code,
together with the guidance provided by a
number of shareholder voting agencies, and
takes into account a Director’s character,
objectivity and integrity.
The independence of non-executive Board
members is considered annually. The Board
is assisted in this by the annual review
carried out by the Senior Independent
Director which addresses the independence
of the individual members of the Board, and
by the work of the Nomination & Corporate
Governance Committee, which annually
reviews each Board member’s directorships,
and considers any relevant business
relationships between Board members. We
have concluded that all of the non-executive
Directors bring independent judgement to
bear on issues of strategy, performance,
resources, key appointments and standards,
and have determined that each of the
non-executive Directors is independent.
When was the Chairman appointed
and does he have
non-CRH commitments?
While the Chairman holds other
directorships (see details on page 51), the
Board considers that these do not interfere
with the discharge of his duties to CRH.
Nicky Hartery was appointed Chairman of the
Group in 2012. On his appointment as
Chairman, he met the independence criteria
set out in the 2012 Code. During 2014, Nicky
CRH 57
Corporate Governance Report | continued
joined the Board of a Canadian listed
company. The Board has satisfied itself that
this would not impact on his role as CRH
Chairman.
In February 2015, the Board considered the
outcome of the annual review, carried out by
the Senior Independent Director, of the
performance of the Chairman, whose initial
term of office is due to expire at the
conclusion of the Annual General Meeting in
May 2015. The Board, chaired by the Senior
Independent Director for this purpose,
resolved that Mr. Hartery’s term in office be
extended for a further three years.
Who is the Senior Independent
Director?
The Senior Independent Director is available
to shareholders who have concerns that
cannot be addressed through the Chairman,
Chief Executive or Finance Director.
Don McGovern was appointed as Senior
Independent Director in January 2015.
Who is the Company Secretary?
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.
Neil Colgan was appointed Company
Secretary in June 2009. The appointment and
removal of the Company Secretary is a matter
for the Board.
For what period are non-executive
Directors appointed?
Non-executive Directors are typically
expected to serve two three-year terms,
although they may be invited by the Board
to serve for further periods.
How are the induction, training
and development needs of
Directors catered for?
The Chairman agrees a tailored and
comprehensive induction programme with
each new Director.
New Directors are provided with extensive
briefing materials on the Group and its
operations, the procedures relating to the
Board and its Committees and their duties
and responsibilities as Directors under
legislation and regulations that apply to the
Company.
A typical induction programme, which
generally takes place over the first year of a
Director’s appointment, would cover the
topics set out in table 4.
Sessions are held periodically with the
Chairman at which progress is reviewed and
feedback is sought.
For newly-appointed members of the Audit
Committee, additional training arrangements
include the topics set out in table 5.
Members of the Audit Committee
receive periodic updates on accounting
developments.
Directors can also avail of opportunities to
hear the views of, and meet with, the Group’s
shareholders. Directors regularly receive
copies of research and analysis conducted on
CRH and the building materials sector. The
Board receives regular updates from the
external auditors in relation to regulatory and
accounting developments. Updates in relation
to other relevant matters, for example,
changes in company law, are provided from
time to time.
What processes are in place for
appraising the performance of
Directors and for evaluating the
effectiveness of the Board and its
Committees?
The standard terms of the letter of
appointment for non-executive Directors,
which states that they are generally expected
to serve two terms of three years, are available
for inspection at the Company’s registered
office and at the Annual General Meeting. A
non-executive Director’s term of office is
subject to his/her annual re-election by
shareholders and the letter of appointment
does not provide for any compensation for
loss of office.
An annual review of individual Directors’
performance is conducted by the Chairman
and each Director is provided with feedback
gathered from other members of the Board.
The performance of individual Directors 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
58 CRH
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.
As part of that review process the Chairman
discusses with each individual their training
and development needs and, where
appropriate, agrees suitable arrangements to
be put in place to address those needs.
The Senior Independent Director conducts an
annual review of Board Effectiveness and the
balance of skills, experience, independence
and knowledge of the Company on the Board,
the operation and performance of the
Chairman, the Board and its Committees and
the effectiveness of Board communications.
This is achieved through discussion in one-to-
one sessions with each Director, aided by the
completion by each Director of a
questionnaire in advance. The meetings,
which cover specific topics and allow for
free-ranging discussion, provide a forum for
an open and frank discourse. The Senior
Independent Director circulates a written
report to the Board, which summarises the
outcome of the review and sets out any
recommendations from Board members in
relation to areas where improvements can be
made. Consideration of the Senior
Independent Director’s report is a formal
agenda item at a scheduled Board meeting.
When was the last external Board
evaluation completed and
what was the outcome?
The 2012 evaluation was facilitated by
ICSA Board Evaluation, which has
an extensive record in facilitating
evaluations in large listed companies
both in Ireland and the UK.
An externally facilitated Board evaluation
was carried out by an independent third
party, ICSA Board Evaluation in 2012, the
outcome of which was very positive. The
recommendations were reported in the 2012
Corporate Governance Report, a copy of
which is available on the CRH website. The
next external evaluation will be conducted
during 2015.
What are the requirements
regarding the retirement and
re-election of Directors?
All Directors retire at each Annual General
Meeting and, unless they are stepping down
from the Board, submit themselves to
shareholders for re-election.
Corporate Governance Report | continued
Induction Programme
Board Members
Topic
Group strategy and finance:
– Group strategy, the current challenges facing the Group and
the trading backdrop
– Financial reporting, trading results, acquisition models,
funding sources/debt maturity, group treasury and credit
rating metrics
Divisional strategy and structure:
– Divisional strategy and organisational structure
– Development priorities
– IT strategy
Senior management team:
– Succession planning
– Leadership development programmes
– Remuneration trends
Directors’ legal duties and responsibilities:
– Legal duties and responsibilities
– Management of inside information
– Dealings in CRH securities
– Listing rule requirements
Compliance & ethics, health & safety, risk management,
investor relations and remuneration:
– Compliance & ethics policies and the structures in place to
ensure ongoing compliance
– Health & safety programme, including the fatality elimination
programme, and the Group’s Corporate Social Responsibility
policies
– Investor Relations programme and the views of the Group’s
major investors
– Enterprise Risk Management, insurance arrangements and
captive insurance programme
Audit Committee
Topic
External Audit
– Audit planning
– Auditors’ responsibilities
Internal Audit
– Strategy and workplan
– IT audit
Table 4
Sessions with
Chief Executive, Finance
Director, senior finance and
treasury management
Re-appointment of Directors retiring at
Annual General Meetings is not automatic.
Directors who are seeking re-election are
subject to a satisfactory performance
appraisal. All Directors are subject to the
Memorandum and Articles of Association of
the Company (a summary of provisions in the
Memorandum and Articles of Association
relating to the Directors is set out on page 71).
How often does the Board meet?
Chief Executive, Heads of
Divisions and senior
operational management
Chief Executive and Group
Human Resources and
Talent Development Director
Finance Director, Company
Secretary and the Group’s
legal advisers
Finance Director, executives
responsible for the relevant
area, the Group’s
stockbrokers and the
Remuneration Committee’s
remuneration advisors
Table 5
Sessions with
Finance Director, senior
finance management,
Head of Internal Audit and
external auditors
Details of the number of Board and
Committee meetings during 2014, and of
Directors’ attendance at those meetings, is
set out in table 11 on page 68.
There were eight full meetings of the Board
during 2014.
Each year, additional meetings, to consider
specific matters, are held if and when
required. Prior to their appointment, potential
non-executive Directors are made aware of
the calendar of meetings and are asked to
confirm that they are able to allocate sufficient
time to meet the expectations of their role.
The agreement of the Chairman is required
before a Director accepts additional
commitments that might impact adversely on
the time he or she is able to devote to CRH.
The Board typically makes two visits each
year to Board operations; one in Europe and
one in North America. Each visit lasts
between three and five days and incorporates
a scheduled Board meeting. In 2014, these
visits were to Amsterdam in the Netherlands
and Los Angeles in the United States.
How are Board
agendas determined?
The Chairman sets the agenda for each
meeting in consultation with the Chief
Executive and Company Secretary.
In setting the agendas, the Chairman ensures
that sufficient time is allocated to strategy
setting and review, performance monitoring,
portfolio management, including acquisitions
and divestments, succession planning and
talent management. Board agendas typically
cover items set out in table 6 on page 60.
The non-executive Directors regularly meet
before or after each Board meeting without
executives being present.
The papers for meetings are generally
circulated electronically in the week prior to
the meeting.
CRH 59
Corporate Governance Report | continued
Typical Board Agenda Items
Table 6
Recurring items on each agenda:
– Minutes
– Board matters (including Board
Committee updates)
– Trading results
– Acquisitions/Disposals/Capital
Expenditure Projects
Periodic agenda items during the year:
– Group strategy and Divisional strategy
updates
– Group budget
– Full-year/interim financial results and
reports
– Investor interaction and feedback
– Performance review of acquisitions
against the original Board proposal
following three years of Group ownership
– Funding proposals
– Human resources and succession
planning
– Risk management and internal controls
– Compliance & Ethics
– Health & Safety review, with a particular
focus on the Group’s fatality elimination
programme
– Environmental review
provide guidance regarding developments. In
the case of the Annual Report, to facilitate
each Director’s individual review, the draft
document is circulated to Board members
circa two weeks prior to the finalisation of the
report.
Are the Directors subject to
securities dealing policies
or codes?
Directors are required to obtain clearance
from the Chairman and Chief Executive
before dealing in CRH securities.
Details of the CRH shares held by Directors
are set out on page 85. CRH has a policy on
dealings in securities that applies to all
Directors and senior management. 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
UK Listing Authority subject to amendments
in relation to Irish company law and taxation
references.
What are the Committees of
the Board?
How does the Board ensure its
reports are “Fair, Balanced and
Understandable”?
The Board has established five permanent
Committees to assist in the execution of its
responsibilities.
The Board collectively determines whether
or not it is appropriate to include in the
Annual Report a statement that the Board
considers the document, taken as a whole,
to be “Fair, Balanced and Understandable”.
The Group’s Financial Reporting and
Disclosure Group (“FRADG”) reviews draft
disclosures such as the annual and interim
reports, and meets with the Finance Director
to discuss proposed disclosures, in the
context of whether draft reports fulfil the
criteria of being fair, balanced and
understandable. The conclusions of the
FRADG are reported to the Board. To ensure
the Group’s disclosures are in line with
evolving best practice in this area, the
FRADG, which is made up of executives with
responsibilities across a range of functions,
regularly receives feedback from external
experts who review published documents and
60 CRH
The current permanent Committees of the
Board are the Acquisitions Committee, the
Audit Committee, the Finance Committee, the
Nomination & Corporate Governance
Committee and the Remuneration Committee.
In addition, 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
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
and each member’s length of service is set out
in the relevant sections in the remainder of
this report. Attendance at meetings held in
2014 is set out in table 11 on page 68.
Chairmen of the Committees attend the
Annual General Meeting and are available to
answer questions from shareholders.
Ernst Bärtschi
Chairman of Audit Committee
Audit Committee Financial Expert
The Audit Committee currently consists of four
non-executive Directors considered by the Board
to be independent. The biographical details of
each member are set out on pages 51 to 53.
Together the members of the Committee bring a
broad range of experience and expertise from a
wide range of industries which is vital in supporting
effective governance.
The primary responsibilities of the Committee
are to:
– monitor the financial reporting process, the
integrity of the financial statements, including
the Annual and Interim Reports, preliminary
results announcements, interim management
statements and any other formal announcement
relating to the financial performance of the
Company, and to review significant financial
reporting issues and judgements exercised in
the preparation thereof;
– monitor the audit of the financial statements;
– keep under review the effectiveness of the
Company’s internal financial controls and the
internal control and risk management systems
and review and approve statements to be
included in the Annual Report regarding internal
control and risk management;
– review the Company’s arrangements for its
employees to raise concerns, in confidence,
about possible wrongdoing in financial reporting
or other matters and review the Company’s
procedures and systems for detecting fraud and
preventing bribery;
– keep under review the adequacy of the Group’s
compliance and ethics function;
– monitor and review the effectiveness of the
internal audit function;
– review the effectiveness of the audit process and
the independence and objectivity of the external
auditors;
– develop and monitor the policy on non-audit
services to be provided by the external auditors;
– approve the remuneration and terms of
engagement of the external auditors;
– make recommendations to the Board in relation
to the appointment or removal of the external
auditor;
– report to the Board on how it has discharged its
responsibilities.
The responsibilities of the Audit Committee are set
out in full in its Terms of Reference, which are
available on the CRH website, www.crh.com.
Audit Committee
Chairman’s overview
On behalf of the Audit Committee,
I am pleased to introduce the Audit
Committee Report for the year ended
31 December 2014. The non-executive
Directors who were members of the
Committee during 2014, together with
their record of attendance at Committee
meetings, are identified in table 11
on page 68. A summary of recent and
upcoming changes to the membership
of the Audit Committee is set out in
the Chairman’s overview section of the
Nomination & Corporate Governance
Committee Report on page 67.
Financial Reporting and External Audit
In July 2014, the Committee met
with Ernst & Young to agree the 2014
external audit plan. Table 7 on page 63
outlines the key areas identified as being
potentially significant and how they
were addressed by the Committee.
Impairment Testing / Accounting
for Divestments
The Committee reviewed management’s
goodwill impairment testing
methodology and process, through
discussion with both management
and Ernst & Young, and found the
methodology to be robust and the results
of the testing process appropriate.
The Committee also reviewed the
re-assessment of the carrying value
of the business units identified for
divestment in 2013 (in respect of which
an impairment charge of €683 million
was recorded in the 2013 Consolidated
Financial Statements). No goodwill
impairments or reversal of previous
impairments were recorded during the
year (see note 14 on pages 128 to 130 for
more details). However, a number of the
business units identified for divestment
met the ‘held for sale’ criteria contained
within IFRS 5 Non-current Assets Held
for Sale and Discontinued Operations at
31 December 2014 and have been
CRH 61
Corporate Governance Report | continued
Committee has again recommended to
Board that the continuance in office of
Ernst & Young should be subject to a
non-binding advisory vote at the 2015
Annual General Meeting.
Further details in relation to the external
auditors, including information on how
auditor objectivity and independence are
maintained and how the effectiveness
of the external audit is assessed, are
included on pages 64 and 65.
Audit Committee Effectiveness and
Priorities for 2015
During 2014 the Committee, together
with the Finance Director and Company
Secretary, carried out a review of
the operation of the Committee.
This involved an assessment of
the Committee’s primary role and
responsibilities, training arrangements
for Committee members, the time
allocated for consideration of key
issues, the format and content of the
information provided to the Committee
and the priorities for 2015 and onwards.
A number of helpful recommendations
resulted from the process which
I believe will further improve the
efficiency and effectiveness of the
Committee.
The key areas of focus for the Committee
in 2015 will be on internal control,
external audit planning, IT governance,
cyber security and risk management.
Ernst Bärtschi
Audit Committee Chairman
February 2015
re-classified as such in the Consolidated
Financial Statements (see note 4 on
page 120 for more details).
Enterprise Risk Management
During 2014 the Committee received and
considered an update from management
on progress in respect of the ongoing
development of the Group’s enterprise
risk management framework, which
included detailed reports identifying
the key risks at Divisional and Group
level and the related mitigation steps.
The Committee also considered an
annual report on the assessment of
risk management and internal control
systems. This had regard to all material
controls, including financial, operational
and compliance controls that could
affect the Group’s business. Further
details in relation to the Group’s risk
management and internal control
systems are set out on page 69.
External Auditors
Ernst & Young have been the Group’s
auditors since 1988. In last year’s
report, I informed shareholders that
the Committee had deferred making a
decision on the timeframe for putting
the external audit out to tender until
the finalisation of EU legislation on
the reform of the audit sector. This
EU legislation, which includes a
requirement for mandatory auditor
rotation and will necessitate, in the
case of CRH, an audit tender by the
end of 2020, was enacted in June
2014. However, taking into account
the differing requirements of the EU
legislation and the 2012 Code (the
current provision in the 2012 Code
which would require a tender process
in 2015 remains in place), and the
organisational change in Europe
(see page 30), the Committee has
determined that it is not in the best
interests of the Group to carry-out a
tender at this time. The Committee
will continue to review this position
on an ongoing basis. In the interim, the
62 CRH
Corporate Governance Report | continued
Audit Committee Members
The biographies of the members of the
Audit Committee are set out on pages 51
to 53.
The tenure of each Committee member
is as follows:
E.J. Bärtschi
H.A. McSharry
H. Th. Rottinghuis
3 years
3 years
0.75 years
Mr. P.J. Kennedy joined the Committee
with effect from 25 February 2015.
Mr. E.J. Bärtschi has been designated by
the Board as the Committee’s Financial
Expert.
The Committee reviewed its Terms
of Reference in December 2014 and
determined that no changes were
required. The Terms of Reference, which
were last updated in December 2013, are
available on the CRH website.
Committee meetings
The Committee met ten times during
2014, with meetings held to coincide
with key dates in the financial reporting
and audit cycle. The Finance Director
and the Head of Internal Audit generally
attend Committee meetings. The external
auditors, Ernst & Young, attend the
majority of meetings and have direct
access to the Chairman of the Committee.
The Group Chairman, Chief Executive
and other senior finance personnel attend
meetings (or for particular agenda items)
at the invitation of the Committee. During
2014, the Committee met with the Head
of Internal Audit, and separately with
the external auditors, in the absence
of management. A typical calendar of
meetings, which includes a general
outline of the main agenda items, is set
out in table 8 on page 64.
In February each year, the Chairman
of the Committee formally reports to
the Board on how the Committee has
discharged its responsibilities in respect
of the prior financial year.
Internal Audit
The Head of Internal Audit attends the
majority of the meetings of the Audit
Committee. The Committee agrees the
Internal Audit strategy, its charter and the
annual workplan, which is developed on
a risk-based approach.
Areas identified for focus during the 2014 Audit Planning Process
Table 7
Area of Focus
Audit Committee Action
Impairment of
goodwill
For the purposes of its annual impairment testing process, the Group
assesses the recoverable amount of each of CRH’s cash-generating
units (CGUs – see details in note 14 to the Consolidated Financial
Statements) based on a value-in-use computation. The annual goodwill
impairment testing was conducted by management and papers
outlining the methodology and assumptions used in, and the results of,
that assessment were presented to the Audit Committee. Following its
deliberations, the Audit Committee was satisfied that the methodology
used by management (which was consistent with prior years) and the
results of the assessment, together with the disclosures in note 14,
were appropriate.
A separate assessment was carried out in 2014 in respect of the
business units identified in 2013 for divestment as part of the
Group-wide portfolio review initiated in November of that year. A total
impairment charge of €683 million (of which €315 million related to
goodwill) was recorded in the 2013 Consolidated Financial Statements.
The valuation of each business unit (based on the estimated fair value
less costs of disposal) at year-end 2013 was reassessed in 2014 on a
standalone CGU basis. The revised valuations were then compared
with the carrying value of each business. The Audit Committee
reviewed and considered the methodology used by management in the
reassessment process and was satisfied that it was appropriate.
Impairment of
property, plant
and equipment
and financial
assets
In addition to the goodwill impairment testing process discussed
above, the Group also annually assesses the need for impairment of
other non-current assets (property, plant and equipment and financial
assets) as and when indicators of impairment exist. The Audit
Committee considered the methodology used by management in that
process and was satisfied that it was appropriate.
Divestments
– appropriate
application of
IFRS 5 Non-current
Assets Held for
Sale and
Discontinued
Operations
In 2013, the Group announced that it had identified a number of
business units for divestment globally. None of these businesses met
the ‘held for sale’ criteria at 31 December 2013. However, the status of
the businesses identified for divestment evolved during 2014 and those
businesses which met the ‘held for sale’ criteria at 31 December 2014
have been reclassified as such in the Consolidated Financial
Statements (see note 4 to the Consolidated Financial Statements for
more details). Following detailed discussions with management and
Ernst & Young, the Audit Committee was satisfied that the treatment in
2014 was appropriate.
Contract revenue
recognition
IAS 11 Construction Contracts requires revenue and expenses to be
recognised on uncompleted contracts, with the underlying principle
that, once the outcome of a long-term construction contract can be
reliably estimated, revenue and expenses associated with that contract
should be recognised by reference to the stage of completion of the
contract activity at the balance sheet date. If it is anticipated that the
contract will be loss-making, the expected loss must be recognised
immediately. Following discussions with management and Ernst &
Young, the Audit Committee was satisfied that contract revenue
recognition was not a material issue for the Group in 2014 as the
majority of contracts were completed within the financial year.
CRH 63
Corporate Governance Report | continued
Typical Audit Committee Calendar
Meeting
Activity
Table 8
Attendees by invitation
(in addition to the Finance
Director and the Head of
Internal Audit)
February
– Consideration of the financial statements (including
the report from the external auditors on Integrated
Audit Results and Communications)
Chief Executive and
executives responsible
for the relevant areas
– Approval of external audit fee
– Annual review of external auditor independence
– Annual assessment of risk management and internal
control systems
– Approval of Internal Audit workplan
– Review of reports on the operation of the CRH Code
of Business Conduct, the Competition/Anti-trust
Compliance Code and the arrangements in place to
enable employees to raise concerns, in confidence, in
relation to possible wrongdoing in financial reporting
or other matters
– Enterprise Risk Management Review
March
– Review of Annual Report on Form 20-F
Senior finance personnel
May
– Review of interim management statement*
June
– Meeting with Finance Director, Europe
– Cyber Security Update
July
– Preliminary consideration of interim results
– Approval of the external audit plan
– Updates on accounting & auditing developments
– Update on Internal Audit work/activities
– Annual review of Committee effectiveness
– Enterprise Risk Management Review
August
– Review of interim results announcement
September
– Meeting with the Chief Financial Officer for the
Americas
– Preliminary review of goodwill impairment and
sensitivity analysis
– Cyber Security Update
October
– Enterprise Risk Management Review
– Preliminary review of interim management statement
– Pensions Update
November
– Review of interim management statement*
Group Chairman and
Chief Executive
Senior Europe finance
personnel
Chief Executive and
executives responsible
for the relevant areas
Group Chairman and
Chief Executive
Senior Americas
finance personnel
Executives responsible
for the relevant areas
Group Chairman and
Chief Executive
December
– Review of outcome of goodwill impairment and
Senior finance personnel
sensitivity analysis
– Update on Internal Audit work/activities
– Enterprise Risk Management Review
– Approval of non-audit fees provided by external
auditors
– Review of the Committee’s performance and Terms of
Reference
* A Committee of the Group Chairman, Audit Committee Chairman, Chief Executive and Finance Director
are authorised from time to time to review and approve the release of interim management statements.
64 CRH
The Head of Internal Audit reports to
the Audit Committee on the findings
of internal audit reviews and related
follow-ups and the outcome of control
testing in connection with Section 404
of the Sarbanes-Oxley Act 2002.
In recent years, there has been a
significant increase in the resources
allocated to IT Audit. The Committee
meets regularly with the senior IT Audit
Manager to discuss IT Audit strategy,
the key areas of focus and agrees the
annual IT Audit workplan.
Assessments of the Internal Audit
function have been carried out
periodically by management and
validated by an independent third
party assessor. An external assessment,
which principally involved a series
of interviews with key stakeholders
throughout the organisation, including
the members of the Audit Committee,
was commenced in December 2014.
The results of that assessment will be
presented to the Audit Committee for
consideration in the first half of 2015.
Risk management and internal controls
The Board has delegated responsibility
for monitoring the effectiveness of the
Group’s risk management and internal
control systems to the Audit Committee.
Further details in relation to the
Committee’s work in this area are set out
in the section on Risk Management and
Internal Controls on page 69.
External Auditors
There are no contractual obligations
which act to restrict the Committee’s
choice of external auditor. The
Committee periodically considers the
risk of withdrawal by Ernst & Young
from the market and the potential
impact on the Group, were that
eventuality to materialise.
The Audit Committee has put in
place safeguards to ensure that the
independence of the audit is not
compromised. Such safeguards include:
– seeking confirmation from the
external auditors that they 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
Corporate Governance Report | continued
Percentage of Audit and Non-audit Fees
(see note 3 to the Consolidated Financial Statements)
Table 9
2014
2013
2012
89%
85%
81%
11%
15%
19%
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Audit services
Non-audit related services
prohibiting the employment of former
staff of the external auditors, who
were part of the CRH audit team, in
senior management positions with the
Group 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 external 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;
– 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 external audit engagement
partner is replaced every five years and
other senior audit staff are rotated every
seven years.
The Group has a policy governing
the conduct of non-audit work by the
auditors. The policy, which was updated
in 2012, is available on the CRH website.
Under the policy, the external auditors
are prohibited from performing services
where they:
– may be required to audit their own
work;
– participate in activities that
would normally be undertaken by
management;
– are remunerated through a ‘success
fee’ structure; and
– act in an advocacy role for the Group.
Other than the above, the Group does
not impose an automatic ban on the
external auditors undertaking non-
audit work. The external auditors are
permitted to provide non-audit services
that are not, or are not perceived to be,
in conflict with auditor independence
or prohibited by Rule 2-01 of SEC
Regulation S-X, provided they have
the skill and competence to carry out
the work and are considered by the
Committee to be the most appropriate
party 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 pre-approval policy
specifies the services that are prohibited
and the services which have general pre-
approval. The Committee has delegated
to the Finance Director responsibility for
confirming whether a service, which has
general pre-approval, can be provided
by Ernst & Young. In addition, Internal
Audit reviews the pre-approval process
to ensure that it is robust in addressing
the requirements of the Public Company
Accounting Oversight Board and
does not impinge on Ernst & Young’s
independence. The Finance Director
reports regularly to the Committee on
services which have been approved.
In 2014, the external auditors provided
a number of audit-related services,
including Sarbanes-Oxley Section 404
attestation, and non-audit services,
including due diligence services
associated with proposed acquisitions
and disposals. Ernst & Young were
also engaged during 2014 in a number
of jurisdictions in which the Group
operates to provide help with local tax
compliance, advice on taxation laws
and other related matters; assignments
which typically involve relatively small
fees. The Audit Committee is satisfied
that the external auditors’ knowledge
of the Group was an important factor in
choosing them to provide these services.
The Committee is also satisfied that the
fees paid to Ernst & Young for non-audit
work, which amounted to 11% of the
total fee in 2014, did not compromise
their independence or integrity. Details
of the amounts paid to the external
auditors during the year for audit and
other services are set out in note 3 to the
Consolidated Financial Statements on
page 119.
The Audit Committee’s primary means
of assessing the effectiveness of the
external audit process is by monitoring
performance against the agreed audit
plan. In addition, each year the
Committee considers (i) the experience
and knowledge of the Ernst & Young
audit team; (ii) the results of post-audit
interviews with management and the
Audit Committee Chairman; (iii) the
transparency reports issued under EU
regulations by Ernst & Young Ireland;
and (iv) where applicable, relevant
reports by regulatory bodies on the
performance of Ernst & Young. These
annual procedures are supplemented
by periodic formal reviews of the
performance of Ernst & Young, the most
recent of which took place in late 2014.
The 2014 review captured the views of
relevant stakeholders across the Group
and members of the Committee. The
preliminary results indicated a high
level of satisfaction with Ernst & Young
and the services provided by them
to CRH. The Audit Committee will
consider a full report on the findings
and recommendations arising from the
review in the first half of 2015.
CRH 65
The Nomination & Corporate Governance
Committee consists of four non-executive
Directors.
The primary responsibilities of the
Committee are:
– regularly reviewing the size,
structure and composition (including
skills, knowledge, experience and
diversity) of the Board and making
recommendations to the Board
regarding any changes;
– giving consideration to succession
planning for Directors and senior
executives;
– identifying and recommending
candidates to fill Board vacancies;
– in respect of the appointment of a
chairman, preparing a job specification
including the time commitment
expected;
– keeping under review the leadership
needs of the organisation;
– approving the terms of reference for
external board evaluations;
– keeping under review corporate
governance developments with the
aim of ensuring that CRH’s governance
policies and practices continue to be in
line with best practice;
– ensuring that the principles and
provisions set out in the 2012 Code
(and any other governance code that
applies to the Company) are observed;
– reviewing the disclosures and
statements made in the Corporate
Governance Report to shareholders.
The responsibilities of the Nomination &
Corporate Governance Committee are
set out in full in its Terms of Reference,
which are available on the CRH
website, www.crh.com.
66 CRH
Nicky Hartery
Chairman of Nomination
& Corporate Governance
Committee
Nomination & Corporate
Governance Committee
Chairman’s overview
Board Renewal
The Nomination & Corporate Governance
Committee regularly reviews the Board’s
skill mix, experience and tenure in
order that the renewal process is orderly
and planned. A skills matrix has been
developed to aid this process and is used
by the Committee. During 2014, and to
date in 2015, the Committee identified
and recommended to the Board that the
following individuals be appointed as
non-executive Directors:
– Pat Kennedy, appointed with effect
from 1 January 2015; and
– Lucinda Riches, appointed with effect
from 1 March 2015.
The search criteria for these appointments
included candidates with a Chief
Executive or senior management
background who had general industry,
emerging markets and, in the context of
recent and impending Board retirements,
finance, investment banking or private
equity experience.
Biographies for Pat Kennedy and Lucinda
Riches are included on pages 52 and 53.
The Committee worked with Korn/Ferry
in relation to the appointment of Lucinda.
Korn/Ferry has no other connection with
the Company. We did not use the services
of a recruitment agency in relation to
the appointment of Pat; he had been
identified as a candidate for a non-
executive Director a number of years ago.
At that time he was Executive Chairman
of SHV Holdings, a large family owned
multi-national based in the Netherlands.
We remained in contact with him and
when he retired from his executive role
at SHV he met with all of the current
members of the Nomination & Corporate
Governance Committee and a number of
other Board members. He brings to CRH
wide experience in a range of industries,
emerging markets and the provision of
private equity. Lucinda has significant
experience in equity and capital markets
both in London and New York. While she
worked for the majority of her career up
to 2007 in UBS, the Company’s broker,
the Committee is satisfied that no issues
of independence arise.
Nomination & Corporate
Governance Committee
Chairman’s overview
Meeting. Don also succeeds Dan as
Senior Independent Director. A summary
of recent and upcoming changes to the
Board’s Committees are set out in
table 10.
Voting at General Meetings
The Committee reviewed the voting
outcome at the 2014 Annual General
Meeting and concluded that there was
no issue or pattern in voting which was
unexplained or warranted discussion
with individual shareholders.
Nicky Hartery
Nomination & Corporate Governance
Committee Chairman
February 2015
Ernst Bärtschi was appointed to the
Board in 2011 and Heather Ann
McSharry was appointed in 2012. They
completed their first three year terms as
non-executive Directors in November
2014 and February 2015 respectively.
Following a performance review, on
the recommendation of the Committee,
the Board has asked Ernst and Heather
Ann to each continue on the Board for a
further three year term.
Following the appointment of Lucinda
Riches, female Directors will represent
25% of the Board after the conclusion of
the 2015 Annual General Meeting. The
Nomination & Corporate Governance
Committee will continue to retain gender
diversity as a key factor to consider in all
Board appointments for the foreseeable
future.
Board Committees / Senior Independent
Director
On the recommendation of the
Nomination & Corporate Governance
Committee, the Board has appointed
Don McGovern as Chairman of the
Remuneration Committee, with effect
from March 2015. Don succeeds Dan
O’Connor, who will remain on the
Committee until his retirement at the
conclusion of the 2015 Annual General
Summary of Board Committee Changes
Table 10
Acquisitions
Audit
Finance
Nomination Remuneration
Ernst Bärtschi
John Kennedy
Pat Kennedy
Albert Manifold
Don McGovern
Heather Ann McSharry
Dan O’Connor
Henk Rottinghuis
Lucinda Riches*
-
M
-
-
-
-
M (Ch)
-
-
M
M
-
-
-
-
-
-
-
-
-
-
M
-
-
-
-
(Ch)
-
M (prev. Ch)
-
= Appointed to committee;
= ceased to be a committee member; (Ch) = committee Chairman;
- = not applicable or no change; M = continuing member
* Committee appointment will take effect from 1 March 2015
CRH 67
Corporate Governance Report | continued
Nomination & Corporate Governance
Committee Members
The biographies of the members of the
Nomination & Corporate Governance
Committee are set out on pages 51 to 53.
The tenure of each Committee member is as
follows:
W. P. Egan
N. Hartery
D. McGovern
D. O’Connor
7.5 years
10.5 years
0.25 years
2.5 years
Ms. L. Riches will join the Nomination &
Corporate Governance Committee with effect
from her appointment to the Board on 1 March
2015.
The factors taken into account by the
Nomination & Corporate Governance
Committee in considering the composition of
the Board are set out in the policy for Board
renewal which is detailed on page 57.
The Committee reviewed its Terms of Reference
in December 2014 and determined that no
changes were required. The Terms of Reference,
which were last updated in December 2013, are
available on the CRH website.
Remuneration Committee
The Directors’ Remuneration Report on
pages 72 to 95 contains an overview of
the responsibilities and activities of the
Remuneration Committee during 2014.
Under its Terms of Reference, the Remuneration
Committee must be made up of at least three
members, all of whom must be independent
non-executive Directors. Members of the
Committee can serve for up to a maximum of
three terms of three years. The Group Chairman
may be a member of the Committee provided
he was independent on appointment as
Chairman and the Board continues to consider
him to be independent. Only members of the
Committee have the right to attend Committee
meetings. However, other individuals such
as the Chairman, if not a member of the
Committee, the Chief Executive, the Group
Human Resources and Talent Development
Director and external advisers may be invited
to attend for all or part of any meeting as and
when appropriate. The Chief Executive is fully
consulted about remuneration proposals.
Remuneration Committee Members
The biographies of the members of the
Remuneration Committee are set out on pages
51 to 53.
The tenure of each Committee member is as
follows:
W. P. Egan
N. Hartery
D. McGovern
D. O’Connor
7.5 years
10.5 years
0.25 years
2.5 years
Ms. L. Riches will join the Remuneration
Committee with effect from her appointment to
the Board on 1 March 2015.
The Committee reviewed its Terms of Reference
in December 2014 and determined that no
changes were required. The Terms of Reference,
which were last updated in December 2013, are
available on the CRH website.
Acquisitions Committee
Acquisitions Committee Members
The biographies of the members of the
Acquisitions Committee are set out on pages 51
to 53.
The tenure of each Committee member is
as follows:
N. Hartery
M. Carton
U-H. Felcht
J.W. Kennedy
A. Manifold
2.5 years
4.5 years
3.0 years
0.5 years
6.0 years
Mr. P. Kennedy and Mr. H. Rottinghuis were
appointed to the Committee on 25 February
2015.
The attendance at Acquisitions Committee
meetings is set out in table 11.
Role and Responsibilities
The Acquisitions Committee has been delegated
authority by the Board to approve acquisitions
and disposals and large capital expenditure
projects up to agreed limits.
Attendance at Board and Board Committee meetings during the year ended 31 December 2014
Table 11
Board
Acquisitions
Audit
Finance
Nomination
Remuneration
No. of Meetings
No. of Meetings
No. of Meetings
No. of Meetings
No. of Meetings
No. of Meetings
Total
Attended
Total
Attended
Total
Attended
Total
Attended
Total
Attended
Total
Attended
E.J. Bärtschi
M. Carton
W.P. Egan
U-H. Felcht
N. Hartery
J.M. de Jong*
J.W. Kennedy
D.A. McGovern, Jr.
H.A. McSharry
A. Manifold
D.N. O’Connor
H. Th. Rottinghuis**
M.S. Towe
8
8
8
8
8
2
8
8
8
8
8
8
8
8
8
7
7
8
2
8
8
8
8
8
8
8
8
8
8
1
2
8
8
8
8
1
2
8
10
10
10
10
5
5
10
10
5
4
* Retired May 2014
** Appointed to Board February 2014
Note: See summary of Board Committee changes in table 10 on page 67.
68 CRH
7
7
7
2
7
7
7
7
2
7
7
7
5
7
7
7
5
7
8
8
7
8
8
8
7
8
Corporate Governance Report | continued
Finance Committee
Finance Committee Members
The biographies of the members of the Finance
Committee are set out on pages 51 to 53.
The tenure of each Committee member is
as follows:
N. Hartery
M. Carton
U-H. Felcht
J.W. Kennedy
2.5 years
4.5 years
7.5 years
0.5 years
Mr. E. J. Bärtschi and Ms. H. A. McSharry were
appointed to the Committee on 25 February
2015.
The attendance at Finance Committee meetings
is set out in table 11.
Role and Responsibilities
The Finance Committee is responsible for:
– advising the Board on the financial
requirements of the Group and on
appropriate funding arrangements;
– considering and making recommendations
to the Board in relation to the issue and buy-
back of shares and debt instruments and on
the Group’s financing arrangements;
– considering and making recommendations
to the Board in relation to dividend levels on
the Ordinary Shares;
– keeping the Board advised of the financial
implications of Board decisions in relation to
acquisitions;
– assisting management, at their request, in
considering any financial or taxation aspect
of the Group’s affairs; and
– reviewing the Group’s insurance
arrangements.
Risk Management and Internal Control
The Board has delegated responsibility for the
monitoring of the effectiveness of the Group’s
risk management and internal control systems
to the Audit Committee*. Such systems are
designed to manage rather than eliminate the
risk of failure to achieve business objectives
and, in the case of internal control systems,
can provide only reasonable and not absolute
assurance against material misstatement
or loss.
The Consolidated Financial Statements are
prepared subject to oversight and control of
the Finance Director, ensuring correct data
is captured from Group locations and all
required information for disclosure in the
Consolidated Financial Statements is provided.
An appropriate control framework has been put
in place around the recording of appropriate
eliminating journals and other adjustments.
The Consolidated Financial Statements are
reviewed by the CRH Financial Reporting and
Disclosure Group prior to being reviewed by
the Audit Committee and approved by the
Board of Directors.
The Directors confirm that the Group’s
ongoing process for identifying, evaluating and
managing its principal risks and uncertainties
(as outlined in the Directors’ Report on pages
96 to 98) is in accordance with the updated
Turnbull guidance (Internal Control: Revised
Guidance for Directors on the Combined Code)
published in October 2005. The process has
been in place throughout the accounting period
and up to the date of approval of the Annual
Report and financial statements.
Group management has responsibility for
major strategic development and financing
decisions. Responsibility for operational issues
is devolved, subject to limits of authority,
to product group and operating company
management. Management at all levels is
responsible for internal control over the
business functions that have been delegated.
This embedding of the system of internal
control throughout the Group’s operations
ensures that the organisation is capable of
responding quickly to evolving business risks,
and that significant internal control issues,
should they arise, are reported promptly to
appropriate levels of management.
During the year, the Board and Audit
Committee received, on a regular basis, reports
from management on the key risks to the
business and the steps being taken to manage
such risks. They also considered whether
the significant risks faced by the Group were
being identified, evaluated and appropriately
managed, having regard to the balance of
risk, cost and opportunity. In addition, the
Audit Committee met with internal auditors
on a regular basis and satisfied itself as to
the adequacy of the Group’s internal control
system; met with the Chairman of the
Remuneration Committee to ensure that the
Group’s remuneration policies and structures
were appropriate and in line with the Group’s
risk tolerance; and reviewed the principal risks
and uncertainties outlined in the Directors’
Report. The Audit Committee also met with,
and received reports from, the external auditors.
The Chairman of the Audit Committee reported
regularly to the Board on all significant issues
considered by the Committee and the minutes
of its meetings were circulated to all Directors.
The Directors confirm that, in addition to the
monitoring carried out by the Audit Committee
under its Terms of Reference, they have
reviewed the effectiveness of the Group’s risk
management and internal control systems
up to and including the date of approval of
the financial statements. This had regard to
all material controls, including financial,
operational and compliance controls that could
affect the Group’s business.
Compliance & Ethics
The Group Compliance & Ethics (C&E)
programme continues to develop in scope and
reach. The structure of the C&E organisation
was realigned in 2014 to serve the new CRH
Europe organisation. A CRH Europe Head
of C&E was appointed from the existing
Compliance pool. Business Unit Compliance
Coordinators (BUCCs) were also appointed
for Heavyside East, Heavyside West, Lightside
and Distribution and a European Compliance
Officer was appointed to assist the European
Head of C&E.
CRH’s Code of Business Conduct (COBC) and
related policies were updated and approved by
the Board and the C&E team’s primary focus
since then has been to ensure all relevant
employees receive appropriate training. In the
current training cycle over 32,000 employees
have participated in COBC training and a
further 11,000 have also undertaken advanced
instruction on competition law and anti-
bribery, corruption and fraud.
In addition, our development teams and
procurement teams have received appropriate
instruction on both our C&E Mergers,
Acquisitions and Joint Venture Due Diligence
Programme and our Ethical Procurement Code.
Our Supplier Code of Conduct was developed
to communicate our minimum Corporate Social
Responsibility requirements to existing and
new suppliers to the Group and to outline how
we ensure compliance with these requirements.
Similar procedures have been developed for
any engagements with business partners.
Further guidelines developed during the year
include a Competition Law Toolbox – which
gathers into one place various CRH guidelines,
policies and notes to help the businesses
comply with Competition Law requirements.
The following existing policies are under
review;
• The Competition/Antitrust Compliance Code
• The Donations Policy
• The Anti-Fraud Policy
The COBC has scored an “A” rating by New
York Stock Exchange Governance Services
and incorporates some welcome new features,
including learning aids, an ethical-decision
making guide and a clear focus on the core
values of the Group: Integrity, Honesty and
Respect for the law. It was translated and
distributed during 2014 and related training
is being migrated to an on-line module. A
robust communication plan is in place to
* In accordance with Regulation 91(6)(b) of the European Communities (Statutory Audits) (Directive 2006/43) Regulations 2010.
CRH 69
Corporate Governance Report | continued
Substantial Holdings
Table 12
As at 31 December 2014, the Company had received notification of the following interests in its Ordinary share capital:
Name
31 December 2014
31 December 2013
31 December 2012
Holding/Voting
Rights
% at year
end
Holding/Voting
Rights
% at year
end
Holding/Voting
Rights
% at year
end
BlackRock, Inc.*
40,681,647
5.49%
43,857,751
5.98%
28,961,677
3.98%
The Capital Group Companies, Inc.
-
-
-
-
35,763,581
4.92%
Harbor International Fund
Legal & General Group Plc
Norges Bank (The Central Bank of Norway)
21,999,275
2.96%
21,999,275
3.00%
21,999,275
3.02%
-
-
-
-
-
-
-
-
22,496,003
3.09%
21,543,277
2.96%
Templeton Global Advisors Limited
21,503,171
2.90%
21,503,171
2.93%
21,503,171
2.96%
UBS AG
26,380,604
3.56%
26,380,604
3.59%
26,380,604
3.63%
* 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.
complement the training programme. A
multi-lingual “hotline” facility – “Speak Up”
is also available to employees as a secure
channel to report ethical issues that concern
them or suspected violations of our Codes.
All hotline reports received are fully reviewed
and investigated by appropriately qualified
personnel.
The C&E programme has been integrated
into our standard Internal Audit procedures
and forms part of an annual management
certification process. Its effectiveness is also
regularly reviewed by the C&E function
with appropriate oversight from senior
management and the Audit Committee. The
collective goal is to ensure the message is
clearly understood that at CRH “there is never
a good business reason to do the wrong thing”.
Sustainability and Corporate Social
Responsibility
Sustainability and Corporate Social
Responsibility (CSR) concepts are embedded
in all CRH operations and activities.
Excellence in the areas of health & safety,
environment & climate change, governance
and people & community is a daily priority of
line management. The Group’s policies and
implementation systems are summarised on
pages 17 to 21 and are described in detail in
the annual Sustainability Report, which is
typically published mid-year in respect of the
previous calendar year, and is available on
the Group’s website. During 2014, CRH was
again recognised by several leading socially
responsible investment (SRI) agencies as
being among the leaders in its sector in these
important areas.
70 CRH
Substantial Holdings
The Company is not owned or controlled
directly or indirectly by any government or
by any corporation or by any other natural or
legal person severally or jointly. The major
shareholders do not have any special voting
rights. Details of the substantial holdings
as at 31 December 2014 are provided in
table 12. Between 31 December 2014 and 25
February 2015, the Company has been advised
that Harbor International Fund decreased
its holding to 21,853,816 (2.9502%) and
BlackRock, Inc. has increased its holding to
67,412,664 (8.27%).
Communications with Shareholders
Communications with shareholders are
given high priority and the Group devotes
considerable time and resources each year to
shareholder engagement. We recognise the
importance of effective dialogue as an integral
element of good corporate governance.
The Investor Relations team, together with
the Chief Executive, Finance Director and
other senior executives, meet regularly
with institutional shareholders (each year
covering over 50% of shareholder base).
Detailed reports on the issues covered in those
meetings and the views of shareholders are
circulated to the Board after each group of
meetings. Table 13 provides a brief outline of
the nature of the activities undertaken by our
Investor Relations team.
During 2014, the Chairman, Senior
Independent Director and Company Secretary
participated in a number of conference calls
with some of the Group’s major shareholders
in advance of the 2014 Annual General
Meeting. The meetings were organised
to provide those shareholders with an
opportunity to discuss the resolutions
Investor Relations Activities
Table 13
Formal Announcements, including the release of the annual and interim results and the
issuance of interim management statements. These announcements are typically accompanied
by presentations and webcasts or conference calls.
Investor Roadshows, typically held following the release of formal announcements, provide
an opportunity for the management team to meet existing and/or potential investors in a
concentrated set of meetings.
Industry Conferences: Attendance at key sector and investor conferences affords members of
the senior management team the opportunity to engage with key investors and analysts.
Investor Briefings: In addition to regular contact with investors and analysts during the year, the
Company periodically holds capital market days, which include presentations on various aspects
of CRH’s operations and strategy and provide an opportunity for investors and analysts to meet
with CRH’s wider management team.
Media Briefings: Each year, the Company provides media briefings on numerous issues.
Corporate Governance Report | continued
on the 2014 Annual General Meeting agenda
and corporate governance matters generally.
In addition to the above, major acquisitions are
notified to the Stock Exchanges in accordance
with the requirements of the Listing Rules and
development updates, giving details of other
acquisitions completed and major capital
expenditure projects, are issued periodically
(typically in January and July each year).
In addition, we respond throughout the year to
correspondence from shareholders on a wide
range of issues.
The Chief Executive made a presentation
to shareholders at the 2014 Annual General
Meeting on CRH’s businesses.
General Meetings
The Company’s Annual General Meeting
(AGM), which is held in Ireland, affords
individual shareholders the opportunity to
question the Chairman and the Board. All
Directors attended the 2014 AGM. The Notice
of the AGM, which specifies the time, date,
place and the business to be transacted, is sent
to shareholders at least 20 working days before
the meeting. At the meeting, resolutions are
voted on by way of a poll using an electronic
voting system. The votes of shareholders
present at the meeting are added to the proxy
votes received in advance and the total number
of votes for, against and withheld for each
resolution are announced. This information
is made available on the Company’s website
following the meeting.
All other general meetings are called
Extraordinary General Meetings (EGMs).
An EGM called for the passing of a special
resolution requires at least 21 clear days’
notice.
A quorum for a general meeting of the
Company is constituted by five or more
shareholders present in person and entitled to
vote. The passing of resolutions at a meeting of
the Company, other than special resolutions,
requires a simple majority. To be passed, a
special resolution requires a majority of at least
75% of the votes cast.
Shareholders have the right to attend, speak,
ask questions and vote at general meetings.
In accordance with Irish company law, the
Company specifies record dates for general
meetings, by which date shareholders must
be registered in the Register of Members of
the Company to be entitled to attend. Record
dates are specified in the notes to the notice of
a general meeting. Shareholders may exercise
their right to vote by appointing, by electronic
means or in writing, a proxy/proxies to vote
some or all of their shares. The requirements
for the receipt of valid proxy forms are set
out in the notes to the notice convening the
meeting and in the notes on the proxy form.
A shareholder, or a group of shareholders,
holding at least 5% of the issued share capital
of the Company, has the right to requisition
a general meeting. A shareholder, or a group
of shareholders, holding at least 3% of the
issued share capital of the Company, has the
right to put an item on the agenda of an AGM
or to table a draft resolution for inclusion in
the agenda of a general meeting, subject to any
contrary provision in Irish company law.
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 and the provisions
which apply to the holding of and voting at
general meetings. Details of transactions in the
Company’s own shares are included on pages
99 and 100 of the Directors’ Report.
The Articles of Association also set out the
rules relating to Directors, including their
appointment, retirement, re-election, duties
and powers. The Articles provide that no
person other than a Director retiring at the
meeting shall, unless recommended by the
Directors, be eligible for election to the office
of Director at any General Meeting unless
not less than seven nor more than 21 days
before the day appointed for the meeting there
shall have been left at the registered office
notice in writing, signed by a member duly
qualified to attend and vote at the meeting for
which such notice is given, of his intention
to propose such person for election and also
notice in writing signed by that person of his
willingness to be elected. The Articles also
require that the qualification of a Director shall
be the holding alone and not jointly with any
other person of 1,000 Ordinary Shares in the
capital of the Company. A Director may act
before acquiring his/her qualification but must
acquire the shares within two months of his/
her appointment or election.
Going Concern
The Company’s business activities, together
with the factors likely to affect its future
development, performance and position are set
out in the Strategy Review section and in the
Directors’ Report on pages 8 to 15 and pages 96
to 98. The financial position of the Company,
its cash flows, liquidity position and borrowing
facilities are described in the Business
Performance Review on pages 22 to 49. In
addition, notes 20 to 24 to the Consolidated
Financial Statements include the Company’s
objectives, policies and processes for managing
its capital; its financial risk management
objectives; details of its financial instruments
and hedging activities; and its exposures to
credit, currency and liquidity risks.
The Company has considerable financial
resources and a large number of customers
and suppliers across different geographic areas
and industries. In addition, the local nature
of building materials means that the Group’s
products are not usually shipped cross-border.
Having assessed the relevant business risks,
the Directors believe that the Company is well
placed to manage these risks successfully,
and they have a reasonable expectation that
the Company, and the Group as a whole, have
adequate resources to continue in operational
existence for the foreseeable future. For this
reason, they continue to adopt the going
concern basis in preparing the Consolidated
Financial Statements.
The following are available on the CRH website, www.crh.com:
Table 14
Corporate Governance section:
– Terms of Reference of Acquisitions Committee (amended December 2010)
– Terms of Reference of Audit Committee (amended December 2013)
– Terms of Reference of Finance Committee (amended February 2004)
– Terms of Reference of Nomination & Corporate Governance Committee (amended
December 2013)
– Terms of Reference of Remuneration Committee (amended December 2013)
– The Memorandum and Articles of Association of the Company
– Pre-approval policy for non-audit services provided by the auditors
– Compliance & Ethics statement, Code of Business Conduct and Hotline contact numbers
– The 2014 Remuneration Policy
Investors section:
– Annual and Interim Reports, the Annual Report on Form 20-F, the Sustainability Report, Interim
Management Statements and copies of presentations to analysts and investors
– News releases
– Webcast recordings of key investor briefings
– General Meeting dates, notices, shareholder circulars, presentations and poll results
– Answers to Frequently Asked Questions, including questions regarding dividends and
shareholder rights in respect of general meetings
CRH 71
Directors’ Remuneration Report
Salary Level Increases 2009 - 2015
Table 15
10%
8%
6%
4%
2%
0%
Albert Manifold see note (i)
Maeve Carton see note (ii)
Mark Towe
2010/09
2011/10
2012/11
2013/12
2014/13
2015/14
(i) Salary increased from €825,000 to €1,200,000 when appointed as Chief Executive with effect from 1 January 2014.
(ii) Appointed to the Board in May 2010; 2014 and 2015 salary increased following review of market levels, breadth of responsibilities
and performance in 2013.
See page 62 of the 2013 Annual Report for further information.
Annual Bonus Levels as a Percentage of Salary 2009 - 2014
Table 16
150%
130%
110%
90%
70%
50%
30%
10%
Albert Manifold
Maeve Carton*
Mark Towe
2009
2010
2011
2012
2013
2014
Bonus Payouts in period 2009 to 2014 ranged from: 25% - 150%
* Appointed in May 2010
Historic Vesting of 2006 Performance Share Plan Awards
Table 17
2006 award; vested/lapsed in 2009
2007 award; vested/lapsed in 2010
2008 award; vested/lapsed in 2011
2009 award; vested/lapsed in 2012
2010 award; vested/lapsed in 2013
2011 award; vested/lapsed in 2014
2012 award; vested/lapsed in 2015
Average vested/lapsed
0%
20%
40%
60%
80%
100%
Vested
Lapsed
AGM Votes on Report on Directors’ Remuneration
Table 18
Voting Results 2010-2014
Remuneration
Report
2010
2011
2012
2013
2014
Policy 2014 - 2017
2014
0%
20%
40%
60%
80%
100%
For
Against
Contents
Page
72 Summary of role of Committee
73 Recent remuneration snapshot
73 Committee Chairman Introduction
75 Annual Statement on Remuneration*
90 Remuneration Policy Summary**
* Tables 19, 34, 35, 36, 37, 38, 39, 40,
42, 43 and 50 have been audited
** The full policy, which was approved by
shareholders at the 2014 AGM and
which will remain in force until May
2017, unless previously amended by
shareholders is available on the CRH
website, www.crh.com
The Remuneration Committee consists of four
non-executive Directors considered by the
Board to be independent. They bring a range of
experience of large organisations and public
companies, including experience in the area of
senior executive remuneration, to enable the
Committee to fulfil its role. Their biographical
details are set out on pages 51 to 53.
The main focus of the Committee is to:
– determine and agree with the Board the
Group’s policy on executive remuneration;
– seek shareholder approval for the policy at
least every three years;
– ensure that CRH’s remuneration structures
are fair and responsible; and
– consider and approve remuneration
packages for the executive Directors and
the Chairman.
In addition, the Committee:
– recommends and monitors the level
and structure of remuneration for senior
management; and
– oversees the preparation of this Directors’
Remuneration Report.
In considering remuneration levels for executive
Directors particularly, the Committee takes into
account remuneration trends across the CRH
Group, which has a diverse range of operations
in 34 countries, in geographic regions which are
often at different stages in the economic cycle.
Additional details in relation to the Committee,
its role and responsibilities and how it operates
are included in the Remuneration Committee
section of the Corporate Governance report on
page 68.
The Chief Executive attends meetings except
when his own remuneration is being discussed.
72 CRH
Introduction
Dan O’Connor
Chairman of
Remuneration Committee
Recent Remuneration Snapshot:
• Updated Remuneration Policy
approved at 2014 AGM
• New performance share plan
adopted at 2014 AGM
• Incentive payout levels linked to
stretching performance criteria
• Strong support from shareholders
for policy and implementation
On behalf of the Remuneration
Committee, I am pleased to introduce
the Directors’ Remuneration Report for
the year ended 31 December 2014. The
Remuneration Report (excluding the
Remuneration Policy summary on
pages 90 to 95), will be included on the
agenda of the 2015 Annual General
Meeting for shareholder consideration.
The purpose of CRH’s Remuneration
Policy, which was approved by
shareholders at the 2014 Annual General
Meeting, is to provide an appropriate
framework to support the creation of
value for shareholders over the longer
term, the attraction and retention of key
executives and succession planning,
without paying more than is necessary.
The full Remuneration Policy is
available on the CRH website,
www.crh.com.
2014 Performance
2014 was a year of growth and progress
in terms of our aim of restoring margins
and returns to peak levels in the
coming years.
In addition, there was significant
achievement regarding the Group’s
multi-year divestment programme of
€1.5 billion to €2.0 billion, with
proceeds from completed disposals of
€0.35 billion since the programme was
announced in August 2014.
Overall, CRH’s strong balance sheet and
cash generation capability leave the
Company well positioned to take
advantage of value-creating acquisition
opportunities.
In the context of the Group’s
performance in 2014, and performance
against individual and strategic goals,
the Remuneration Committee has
determined that the annual bonus levels
for 2014 should be set at the maximum
level of 150% for each of the executive
Directors.
In accordance with CRH’s Remuneration
Policy, approved by shareholders at the
2014 Annual General Meeting, 25% of
the 2014 bonus will be deferred into
shares for a period of three years.
The basis for each bonus award is set out
in detail on page 76. In line with
Sales
EBITDA
EPS
+ 5%
+11%
+33%*
Return on Net Assets
+150bps
Operating Cash Flow
Net Debt
+23%
-16%
evolving best practice, we have
increased the level of disclosure in
relation to payout levels to provide
shareholders with a greater level of
insight into the approach for
determining bonus payments. We have
also disclosed the targets for the bonus
payments in respect of 2013 as these are
no longer considered to be commercially
sensitive. Similarly, the Remuneration
Committee intends that the targets for
the 2014 bonus plan will be disclosed in
the 2015 Directors’ Remuneration
Report.
The 2014 Remuneration Policy also
made provision for the Remuneration
Committee to introduce clawback
provisions, in addition to the malus**
provisions already in place for the
annual bonus plan and the long-term
performance share plan. The Committee
has decided, in accordance with the
provisions of the 2014 UK Corporate
Governance Code, to introduce clawback
provisions for the cash element of the
annual bonus plan for 2015 and
onwards.
The long-term awards made under the
2006 Performance Share Plan and the
2010 Share Option Scheme made in
2012 (each with a three year
performance period 2012 - 2014) did not
meet the relevant performance criteria
required to vest and, consequently, those
awards lapse in full. Further details are
set out on pages 78 and 79.
Executive Director Salaries
As reported in the 2013 Directors’
Remuneration Report, following
consideration of the scope of the
Finance Director’s responsibilities and
her performance since being appointed
in 2010, the Committee decided that
Maeve Carton’s salary should be
increased, subject to continued
individual and business performance,
to €675,000 in two steps. Her salary
* Based on adjusted 2013 EPS (excluding impairments and the related tax impact).
** Malus is a mechanism whereby the Remuneration Committee may decide not to release deferred share or performance share plan awards if an unusual event such as a
material financial misstatement occurred, significant losses were incurred or the Company suffered significant reputational damage.
CRH 73
Directors’ Remuneration Report | continued
during the course of 2015 to ensure it
remains appropriate for the needs of the
business.
Conclusion
Shareholders play a crucial role in the
design of appropriate, balanced and fair
remuneration structures and, as I will
retire from the Board of CRH following
the 2015 Annual General Meeting, I
would like to thank all those who have
engaged with CRH during my tenure as
Remuneration Committee Chairman, for
their constructive approach to dialogue
with the Company. I have no doubt that
my successor, Don McGovern, will
benefit from your continued strong support
for CRH.
Dan O’Connor
Remuneration Committee Chairman
February 2015
increased to €625,000 (+9.7%) in 2014.
The Remuneration Committee has
determined that it is appropriate to make
the second increase (to €675,000) in
respect of 2015 (+8%).
The Committee has also reviewed the
salary levels for Albert Manifold and
Mark Towe and determined that
increases of 7.5% to €1,290,000 and 3%
to US$1,420,000 respectively are
appropriate. The increase for Albert
Manifold reflects the speed with which
he has developed in the Chief Executive
role, demonstrated by the progress in the
delivery of strategy and the improvement
in returns and margins referred to above.
The Remuneration Committee also noted
that the salary of Albert Manifold
remains below the level of €1,450,000
awarded to the Chief Executive of CRH
in 2008. The increase for Mark Towe is
in line with increases across the general
employee population in the United
States.
2015 Awards under the 2014
Performance Share Plan
Awards under the 2014 Performance
Share Plan in 2015 will be made at the
same level as in 2014 and will continue
to be based on TSR and adjusted cash
flow. The adjusted cash flow targets have
not yet been set by the Remuneration
Committee and will be set when the
outcome of the proposed acquisition of
assets from Lafarge S.A. and Holcim
Limited is known. As in previous years,
the targets will be demanding and
aligned to value creation for
shareholders, with significant stretch
ensuring that only exceptional
performance will result in maximum
payout.
Remuneration Policy
As referred to in the Chairman’s
introduction to the Annual Report
on page 2, CRH has entered into a
binding commitment to acquire certain
assets from Lafarge S.A. and Holcim
Limited for a total enterprise value
of €6.5 billion. In the context of this
proposed acquisition, the Committee
will review the remuneration policy
74 CRH
Directors’ Remuneration Report | continued
Annual Statement on Remuneration
The following section sets out details of:
– the remuneration paid to Directors in
respect of 2014;
– how CRH’s remuneration policy will
operate for 2015; and
– other areas of disclosure.
The Directors’ Remuneration Report,
excluding the Remuneration Policy
summary on pages 90 to 95, will be put
to shareholders for the purposes of an
advisory vote at the Annual General
Meeting to be held on 7 May 2015.
The Company is not seeking shareholder
approval for a revised Remuneration
Policy this year and, therefore, we have
not included the full policy in this
report. We have, however, included the
executive Director and non-executive
Director policy tables, as well as details
of the Chief Executive’s service contract
as information for shareholders.
Executive Directors
Remuneration received by executive
Directors in respect of 2014
Details of individual remuneration for
executive Directors for the year ended 31
December 2014, including explanatory
notes, are given in table 19. Details of
Directors’ remuneration charged against
profit in the year are given in table 50 on
page 89 in the Other Disclosures section.
Individual remuneration for the year ended 31 December 2014 (Audited)
Table 19
Basic Salary
and Fees
(a)
€ 000
Benefits
(b)
€ 000
Annual Bonus Plan
Long-
Retirement
Cash
Element
(c)
€ 000
Deferred
Shares
(c)
€ 000
Term
Incentives
(d)
€ 000
Benefits
Expense
(e)
€ 000
Total
Total
€ 000 € 000
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Executive Directors
Maeve Carton
625
570
Albert Manifold
1,200
825
Mark Towe
1,036 1,016
16
39
59
13
31
59
703
203
1,350
294
1,166
915
234
450
389
2,861 2,411
114
103
3,219 1,412
1,073
-
-
54
54
-
-
-
439
648
718
260
187
1,838 1,412
559
290
3,598 2,088
207
203
2,857 2,965
- 1,805
1,026
680
8,293 6,465
(a) Basic Salary and Fees: The background to the increase in Maeve Carton’s salary in 2014 is set out on pages 73 and 74. When he assumed the
role of Chief Executive in January 2014, Albert Manifold’s salary was set at broadly the same level as the outgoing Chief Executive. Mark Towe’s
salary increased in US$ terms by 2% in line with general trends in CRH operations in the United States.
(b) Benefits: For executive Directors these relate principally to the use of company cars, medical insurance and life assurance and, where relevant,
the value of the discount on the grant of options under the Group’s 2010 Savings-related Share Option Scheme (see table 39 on page 83) for
more details) and the reimbursement of legal fees in relation to the putting in place of service contracts (see page 93 for more details).
(c) Annual Bonus Plan: Under the executive Directors’ Annual Bonus Plan for 2014, a bonus is payable for meeting clearly defined and stretch
targets and strategic goals. The structure of the 2014 plan, together with details of the performance against targets and payouts in respect of
2014, is set out on pages 76 to 78.
(d) Long-Term Incentives: In February 2015, the Remuneration Committee determined that the award made in 2012 under the 2006 Performance
Share Plan would lapse as, over the three-year period 2012-2014, CRH’s TSR performance was below the median of both the peer group and
the Eurofirst 300 Index. The share options granted in 2012 under the 2010 Share Option Scheme will also lapse in full as the option failed to
meet the necessary EPS performance targets. As a result, no long-term incentive award with a performance period ending in 2014 has vested or
will vest. Amounts in the Long-Term Incentive column for 2013 reflect the value of vested long-term incentive awards with a three-year
performance period ending in 2013. These amounts have been updated to reflect the market value of the shares on the date of vesting, which
for Irish based executives was €21.28 and for the US based executive was €21.505. In the 2013 Directors’ Remuneration Report the value of the
award was estimated based on the three month average share price to 31 December 2013 (see page 66 of the 2013 Directors’ Remuneration
Report for more details). The structure of the 2006 Performance Share Plan is set out in tables 31 and 32 on page 80. The performance criteria
for the 2010 Share Option Scheme are set out in table 33 on page 80.
(e) 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 7 December
2005. This cap was further reduced by the Irish Finance Act 2011 to €2.3 million and, by the Finance (No. 2) Act 2013, to €2 million. As a result
of these legislative changes, the Remuneration Committee 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. Maeve Carton and Albert Manifold chose to opt for the alternative
arrangement which involved capping their pensions in line with the provisions of the Finance Acts 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 2014 the
compensation allowances amount to €259,950 (2013: €187,141) for Maeve Carton and €559,150 (2013: €290,190) for Albert Manifold.
CRH 75
Directors’ Remuneration Report | continued
2015 Salaries - Executive Directors
Table 20
Director
Albert Manifold
(Chief Executive)
Maeve Carton
(Finance Director)
2014
2015
% Change
€1,200,000
€1,290.000
+7.5%
€625,000
€675,000
+8%
Mark Towe
(Chief Executive, Oldcastle, Inc.)
US$1,377,000
US$1,420,000
+3%
Basic Salary and Benefits
Details of executive Directors’ salaries
for 2015 compared with 2014 are set out
in table 20.
The background to the increases in
respect of 2015 are set out in the
Remuneration Committee Chairman’s
introduction on pages 73 and 74.
Salary level increases for executive
Directors since 2009 are shown in table
15 on page 72.
Details in relation to employment-
related benefits are set out in note (b) in
table 19.
Annual Bonus Plan
A summary of the structure of CRH’s
Annual Bonus Plan is set out in table 21.
2014 Annual Bonus Outcomes
CRH’s Annual Bonus Plan for 2014 was
based on a combination of financial
targets and personal/strategic goals. The
specific weightings for each executive
Director are shown in table 22. In terms
of the relative weighting of the
components of the plan, the Committee
has increased the focus on returns on net
assets, with a corresponding reduction
in the percentage of the plan based on
earnings per share to ensure that there is
sufficient focus on delivering sustainable
growth. Indicative performance for each
measure is given in tables 23 and 24.
Specific targets for the 2014 Annual
Bonus Plan have not been disclosed in
this report as they are considered by the
Board to be commercially sensitive.
However, it is intended that Group-
related targets for 2014 will be disclosed
in the 2015 Directors’ Remuneration
Report.
Overall, strong performance against the
2014 Annual Bonus Plan metrics
resulted in bonus payments of 150% of
salary for Albert Manifold, Maeve Carton
and Mark Towe. In accordance with the
Group’s remuneration policy, 25% of the
bonus amount will be deferred into
shares for a period of three years.
Deferred Shares are not subject to any
additional performance conditions
during the deferral period.
Similar to 2014, CRH’s Annual Bonus
Plan for 2013 was based on a
combination of financial targets and
personal/strategic goals. Due to
commercial sensitivity, specific targets
were not disclosed in the 2013 Directors’
Remuneration Report. The Remuneration
Committee considers that Group-related
targets for 2013 have ceased to be
commercially sensitive and, accordingly,
these are set out in table 25. Indicative
performance against Oldcastle targets for
2013 is shown in table 26; the actual
targets have not been disclosed as it is
considered that the information remains
commercially sensitive. Please see table
11 in the 2013 Directors’ Remuneration
Report for performance in 2013 against
personal/strategic measures.
The 2015 Annual Bonus Plan will be
operated broadly in line with the 2014
Annual Bonus Plan. However, in line
with the requirements of the 2014 UK
Corporate Governance Code, the
Remuneration Committee has decided
that, in addition to the malus provisions
already in place, clawback provisions for
the cash element of the Annual Bonus
Plan will apply for 2015 onwards (see
page 80 for more details).
Share Scheme Awards
A summary of share scheme awards
made to executive Directors in 2014 is
set out in table 28. Details of outstanding
performance share awards and share
options held by executive Directors are
shown in tables 37, 38 and 39.
In addition to the awards set out in table
28, Maeve Carton was granted an option
under the Group’s 2010 Savings-related
Share Option Scheme. Further details in
relation to that award are set out in
table 39.
Structure of CRH’s Annual Bonus Plan
Table 21
Long-Term Incentives
Operation:
– 80% of awards based on financial measures, such as profits, cash
flow and returns
– 20% of awards based on personal and strategic goals
Performance:
– 50% of maximum bonus awarded for delivering target performance
– Maximum award size of 150% of salary for all executive Directors
Deferral:
– 25% of all bonus awards deferred into shares for three years
Malus/Clawback:
76 CRH
– Malus provisions for deferred share awards to provide the ability
to scale back awards prior to vesting in the event of material
misstatement, serious reputational damage or the Company
suffering serious losses
– In line with the requirements of the 2014 UK Corporate Governance
Code, clawback provisions will apply to the cash element of the
Annual Bonus Plan for 2015 awards onwards, for the same events
as apply in respect of malus, for a period of three years
2014 Performance Share Plan
A summary of the structure of CRH’s
2014 Performance Share Plan is set out
in table 27.
In 2014, shareholders approved the
introduction of the 2014 Performance
Share Plan (the “2014 PSP”). Following
approval by shareholders, awards were
made to the executive Directors, details
of which are summarised in table 38. It
is anticipated that awards in 2015 under
the 2014 PSP will be on broadly the
same basis as those made in 2014.
Directors’ Remuneration Report | continued
2014 Annual Bonus - Measures and Weightings
Table 22
Albert Manifold
% of salary
Maeve Carton
% of salary
Mark Towe
% of salary
Measure
CRH EPS
CRH Cash Flow
(i) Operating Cash Flow
(ii) Divestments
CRH Return on Net Assets
Oldcastle* Group PBIT**
Oldcastle Cash Flow
(i) Operating Cash Flow
(ii) Divestments
Personal/Strategic
Total
Target
18.75%
11.25%
11.25%
18.75%
-
-
-
Maximum
37.5%
22.5%
22.5%
37.5%
-
-
-
Target
18.75%
11.25%
11.25%
18.75%
-
-
-
Maximum
37.5%
Target
15.0%
Maximum
30.0%
22.5%
22.5%
37.5%
-
-
-
-
-
7.5%
15.0%
15.0%
7.5%
15.0%
75.0%
-
-
15.0%
30.0%
30.0%
15.0%
30.0%
150.0%
15.00%
75.0%
30.0%
150.0%
15.00%
75.0%
30.0%
150.0%
* Oldcastle is the holding company for the Group's operations in the Americas
** PBIT is defined as earnings before interest and taxes
2014 Annual Bonus - Achievement against targets*
Table 23
Measure
CRH EPS
CRH Cash Flow
(i) Operating Cash Flow****
(ii) Divestments
CRH RONA
Oldcastle Group PBIT
Oldcastle Cash Flow
(i) Operating Cash Flow
(ii) Divestments
Performance achieved relative to targets
Threshold**
Target
Maximum
Performance
achieved***
78.9c
Payout
% of max
100%
€1,477m
€345m
7.4%
N/D
N/D
N/D
100%
100%
100%
100%
100%
100%
* Specific targets have not been disclosed as these are deemed commercially sensitive at this time. Target will be disclosed retrospectively when no longer sensitive.
** 0% of each element is earned at threshold.
*** Oldcastle cash flow targets have not been disclosed as it would result in the disclosure of information which is not generally available and is commercially sensitive.
**** For this purpose, operating cash flow has been defined as reported internally.
2014 Annual Bonus - Achievement against Personal/Strategic targets
Director
Strong delivery in relation to:
Albert Manifold
Maeve Carton
Effective leadership of the Group's portfolio review; continued progress in relation to organisational change in
particular in Europe; supporting and mentoring the senior executive team; effective and clear managemnt of
investor communications and building up the Group's general communication capability.
Continued build up of finance organisation and expansion of finance roles to support performance
management; achievements in relation to succession to ensure a strong pipeline of finance executives;
completion of two bond issues in 2014 (including a debut Swiss bond issuance) at the lowest coupons
achieved by the Group; continued build up of Group IT security and project management roles.
Mark Towe
Continued input in to the Group’s talent management process and supporting newly appointed Group Human
Resources and Talent Development Director; working closely with the Chief Executive to refine succession
planning in the Americas; leading the portfolio review process in the Americas.
Table 24
Payout % of
Maximum
100%
100%
100%
CRH 77
Directors’ Remuneration Report | continued
2013 Annual Bonus - Achievement against Group targets (Albert Manifold, Maeve Carton and Mark Towe)
Table 25
Measure
CRH EPS
Operating Cash Flow**
CRH RONA
Performance needed for payout at
Threshold
74c
€1,075m
6.0%
Target
80c
€1,240m
6.5%
Maximum
84c
€1,340m
7.0%
Performance
Achieved
Payout
% of max
59.5c*
€1,204m
5.9%
0.0%
52.0%
0.0%
* Adjusted EPS, excluding the impact of non cash impairment recorded in 2013.
** For this purpose, operating cash flow has been defined as reported internally.
2013 Annual Bonus - Achievement against Oldcastle targets (Mark Towe)
Table 26
Measure
Threshold**
Target
Maximum
Performance achieved relative to targets
Oldcastle Group PBIT*
Oldcastle Cash Flow
Oldcastle RONA
* PBIT is defined as earnings before interest and taxes.
** 0% of each element is earned at threshold.
Payout
% of max
93.3%
92.6%
93.3%
75% of each award made in 2014 is
subject to a Total Shareholder Return
(TSR) performance measure, with
performance being measured against
sector peers (see table 31 on page 80).
The vesting schedule is shown in table
29. The Committee believes that, for a
cyclical business such as CRH, TSR is
the most appropriate performance
measure at present and is a key measure
of the value generated for shareholders.
The TSR performance measure will be
subject to a financial underpin. This
means that when determining vesting
under the 2014 PSP, the Committee will
review whether the TSR performance
has been impacted by unusual events
and whether it is, therefore, an
appropriate reflection of underlying
performance. In addition, the Committee
will consider EPS performance in the
period to ensure that TSR performance
was consistent with the objectives of the
performance criteria and had not been
distorted by extraneous factors.
The remaining 25% of each award is
subject to a cumulative cash flow metric.
This Group financial measure supports
dividend delivery, development activity
and, in the context of the Group’s
€1.5 - €2.0 billion multi-year divestment
programme, provides an emphasis on
asset/business disposals. The cash flow
78 CRH
target is based on a cumulative adjusted
cash flow figure over three financial
years. The definition of cash flow is
adjusted to exclude:
– dividends to shareholders;
– acquisition/investment expenditure;
– share issues (scrip dividend, share
options, other);
– financing cash flows (new loans/
repayments);
– back funding pension payments; and
– foreign exchange translation.
The Remuneration Committee considers
that it is appropriate to make these
adjustments in order to remove items
that do not reflect the quality of
management’s operational performance,
or are largely outside of management
control. This is to ensure that
management remains incentivised to
make decisions which are in the best
long-term interests of the business and
shareholders.
The cumulative adjusted cash flow target
for the award made in 2014 under the
2014 PSP are set out in table 30 on page 80.
The adjusted cash flow target for awards
in 2015 under the 2014 PSP have not yet
been set by the Remuneration
Committee. The target will be set once
the outcome of the proposed acquisition
of assets from Lafarge S.A. and Holcim
Limited is known. The targets will be
demanding with significant stretch
ensuring that only exceptional
performance will result in a maximum
payout.
Vested awards will be required to be
held for a further two years post-vesting.
2006 Performance Share Plan
The 2006 Performance Share Plan (the
“2006 PSP”), which was approved by
shareholders in May 2006, is tied to TSR
over a three year performance period.
It has been replaced by the 2014 PSP
(see page 76), which was approved by
shareholders at the 2014 Annual General
Meeting. Consequently, the last award
under the 2006 PSP was made in 2013.
Half of each award is assessed against
TSR for a group of global building
materials companies (see table 31 on
page 80) and the other half against TSR
for the constituents of the Eurofirst 300
Index.
The performance criteria for the 2006
PSP are set out in table 32 on page 80.
Participants 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 the
shares vest.
Directors’ Remuneration Report | continued
Structure of the 2014 Performance Share Plan
Table 27
Operation:
over a three year period
– Conditional share award which vests, subject to performance,
Performance:
Malus/Clawback:
– Awards subject to a two year holding period post vesting
– 75% of awards based on relative TSR performance compared to key
peers (see table 31 on page 80)
– 25% of awards based on cumulative cash flow performance
(see table 30 on page 80)
– Maximum award size of 250% of salary for Chief Executive and
200% of salary for other executive Directors
– Malus provisions provide the Remuneration Committee with the
ability to scale back awards up to five years from grant in the event
of material misstatement, serious reputational damage or the
Company suffering serious losses
The rules of the 2006 PSP provide that
no award, or portion of an award, which
has satisfied the TSR performance
criteria should be released unless the
Remuneration Committee has confirmed
the validity of the TSR performance and
reviewed EPS performance to assess its
consistency with the objectives of the
assessment.
In respect of the award made in 2012
(with a performance period 2012-2014),
in February 2015, the Remuneration
Committee determined that the award
would lapse as, over the three-year
period 2012 -2014, CRH’s TSR
performance was below the median of
both the peer group and the Eurofirst
Index. The Company’s TSR performance
was reviewed by the Remuneration
Committee’s remuneration consultants.
During 2014, the Remuneration
Committee determined that 49% of the
award made under the 2006 PSP in 2011
(with a performance period 2011-2013)
had vested. Details of the value of that
award are set out in table 19 on page 75.
Further details are provided in the 2013
Directors’ Remuneration Report.
Details of outstanding awards to
Directors under the 2006 PSP are
provided in table 37 on page 82.
Outstanding awards are subject to the
performance conditions outlined above.
2010 Share Option Scheme
At the 2010 Annual General Meeting,
shareholders approved the introduction
of the Earnings Per Share (EPS) based
share option scheme (the “2010
Scheme”). Following the approval by
shareholders for the introduction of the
2014 PSP, no further awards will be
made under the 2010 Scheme.
Consequently, the last award under the
2010 Scheme was made in 2013.
Options were granted at the market price
of the Company’s shares at the time of
grant. The vesting period for options is
three years, with vesting only occurring
once an initial EPS performance target
has been reached. Awards under the
2010 Scheme were limited to 150% of
salary.
The performance criteria for the 2010
Scheme were agreed with the Irish
Association of Investment Managers (the
“IAIM”) and are set out in table 33 on
page 80. The performance targets were
designed to provide for proportionately
more vesting for higher levels of EPS
growth.
Vesting levels are subject to any
reduction which the Remuneration
Committee deems appropriate in the
context of the overall results of the
Group.
The grant of options under the 2010
Scheme made in 2010 and 2011 did not
meet the EPS performance criteria set
out above and, accordingly, the options
lapsed on the third anniversary of the
date of grant. Similarly, the grant of
options made in 2012, having failed to
meet the appropriate EPS criteria, will
lapse in full in April 2015.
Summary of Scheme Interests Granted in 2014
Table 28
Director
Scheme
Basis of
award
(% of salary)
Number of
shares
Face value*
Exercise
price
Percentage vesting
at threshold
performance
(% of maximum)
Performance
period
end date
Expected
date of
release
Albert Manifold
Maeve Carton
Mark Towe
2014 PSP
(conditional
shares)
2014 PSP
(conditional
shares)
2013 Annual
Bonus**
(deferred
shares)
2014 PSP
(conditional
shares)
250%
142,900
€2,928,021
n/a
25%
31-Dec-16
Feb-2019
200%
59,500
€1,219,155
n/a
25%
31-Dec-16
Feb-2019
5%
2,561
€54,000
n/a
n/a
n/a
Mar-2017
200%
97,100
€1,989,579
n/a
25%
31-Dec-16
Feb-2019
* Face value has been calculated using the share price at the date of grant for 2014 PSP awards (€20.49).
** See table 9 on page 67 of the 2013 Annual Report for the structure of the 2013 Annual Bonus Plan.
CRH 79
Directors’ Remuneration Report | continued
Details of outstanding awards to
Directors under the 2010 Scheme are
provided in tables 39 and 40 on page 83.
The Remuneration Committee has
discretionary powers regarding the
implementation of the rules of the 2010
Scheme. These powers have not been
exercised since the adoption of the 2010
Scheme.
2000 Share Option Scheme
At the Annual General Meeting held in
2000, shareholders approved the
introduction of a share option scheme
(the “2000 Scheme”). This scheme was
superseded by the 2010 Scheme referred
to on page 79. No awards have been
made under the 2000 Scheme since
2009. Details of outstanding awards and
the performance criteria for the 2000
Scheme are set out in tables 39 and 40
on page 83.
Other employee share plans
Maeve Carton and Albert Manifold also
participate in the 2010 Savings-related
Option Scheme (Republic of Ireland)
(the “2010 SAYE”) and in the Group’s
Irish Revenue approved Share
Participation Scheme (the “Participation
Scheme”).
The 2010 SAYE is an Irish Revenue
approved plan open to all Irish
employees. Participants may save up to
€500 a month from their net salaries for
a fixed term of three or five years and at
the end of the savings period they have
the option to buy CRH shares at a
discount of up to 15% of the market
price on the date of invitation of each
savings contract. Details of the
outstanding awards of Maeve Carton and
Albert Manifold under the 2010 SAYE
are set out in tables 39 and 40 on
page 83.
The Participation Scheme is open to all
employees in Ireland, and grants can be
made to participants up to a maximum
of €12,700 annually in CRH shares.
Malus and Clawback
From 2015 all incentive awards to
executive Directors are subject to
recovery provisions. Annual bonus
awards will be subject to recovery
provisions for three years from the date
of payment (cash awards) or grant
(deferred awards). Performance Share
80 CRH
2014 Performance Share Plan (2014 PSP) Metrics
3-year TSR* performance compared to peer group
(75% of award)
Vesting Level
Table 29
Equal to or greater than 75th percentile
100%
Between 50th and 75th percentile
Straight line between 25% and 100%
Equal to 50th percentile
Below 50th percentile
25%
0%
* The methodology for calculating TSR assumes all dividends are reinvested on the ex-dividend date at the
closing share price on that day; the open and close price is based on the three month average closing price
on the last day before the start of the performance period and the final day of the performance period
respectively.
Cumulative Cash Flow 2014 - 2016 (25% of award)
Vesting Level
Table 30
Equal to or greater than €3.5bn
100%
Between €2.9bn - €3.5bn
Straight line between 25% - 100%
Equal to €2.9bn
Below €2.9bn
25%
0%
Peer Group for TSR Performance Metric for awards under the 2014 PSP
and 2006 PSP
Table 31
Boral
Italcementi
Titan Cement
Additional company included
in the 2006 PSP Peer Group:
Buzzi Unicem
Kingspan Group
Travis Perkins
Home Depot
Cemex
Lafarge
Vulcan Materials
Grafton Group
Martin Marietta
Materials
Weinerberger
Heidelberg Cement
Saint Gobain
Wolseley
Holcim
2006 Performance Share Plan (2006 PSP) Metrics
Table 32
3-year TSR* performance compared to
peer group/Eurofirst 300 Index
Vesting Level
Equal to or greater than 75th percentile
100%
Between 50th and 75th percentile
Straight line between 30% and 100%
Equal to 50th percentile
Below 50th percentile
30%
0%
* The methodology for calculating TSR assumes all dividends are reinvested on the ex-dividend date at the
closing share price on that day; the open and close price is based on the closing price on the last day
before the start of the performance period and the final day of the performance period respectively.
Share Option Scheme Metrics
Table 33
Compound EPS* Growth Performance over three years
Awarded in 2010 & 2011
Awarded in 2012 & 2013
Vesting Level
Equal to or greater than 27.5% p.a.
Equal to or greater than 20% p.a. 100%
Between 17.5% and 27.5% p.a.
Between 13% and 20% p.a.
Straight line between 40% and 100%
Between 12.5% and 17.5% p.a.
Between 10% and 13% p.a.
Straight line between 20% and 40%
Equal to 12.5% p.a.
Equal to 10% p.a.
Less than 12.5% p.a.
Less than 10% p.a.
20%
0%
* The EPS figure used for the purposes of the 2010 Scheme is the basic consolidated earnings per share of the
Company for the accounting period concerned as shown in the Annual Report issued by the Company for that
accounting period.
Directors’ Remuneration Report | continued
Plan awards will be subject to malus for
the three years prior to performance
assessment and the two further years of
the holding period.
Malus or clawback provisions may be
triggered in the event of:
– material misstatement;
– serious reputational damage; or
– the Company suffering serious losses.
Retirement Benefit Expense
Maeve Carton and Albert Manifold are
participants in a contributory defined
benefit plan which is based on an
accrual rate of 1/60th of salary* for each
year of pensionable service and is
designed to provide two-thirds of career
average salary at retirement for full
service. If either Maeve Carton or Albert
Manifold leave service prior to Normal
Retirement Age (60) they will become
entitled to a deferred pension, payable
from Normal Retirement Age, based on
the pension they have accrued to their
date of leaving.
The Finance Act 2006 effectively
established a cap on pension provisions
by introducing a penalty tax charge on
pension assets in excess of the higher of
€5 million (in the Finance Act 2011, this
threshold was reduced to €2.3 million
and reduced further to €2 million by the
Finance Act (No. 2) Act 2013) or the
value of individual accrued pension
entitlements as at 7 December 2005. As a
result of these legislative changes, the
Remuneration Committee decided that
executive Directors should have the
option of continuing to accrue pension
benefits as previously, or of choosing an
alternative arrangement - by accepting
pension benefits limited by the cap -
with a similar overall cost to the Group.
Maeve Carton and Albert Manifold have
opted for an arrangement whereby their
pensions are capped in line with the
provisions of the Finance Acts and
receive a supplementary taxable
non-pensionable cash supplement in
lieu of pension benefits forgone. There
was, therefore, no additional accrual in
2014.
The cash pension supplements for 2014
are detailed in table 19 on page 75.
These supplements are similar in value
to the reduction in the Company’s
Pension Entitlements - Defined Benefit (Audited)
Table 34
Increase in
accrued
personal pension
during 2014
(i)
€ 000
Transfer value
of increase in
dependents’
pension
(i)
€ 000
Total accrued
personal
pension at
year-end
(ii)
€ 000
-
-
208
29
273
266
Executive Directors
Albert Manifold
Maeve Carton
(i) As noted on page 75, the pensions of Albert Manifold and Maeve Carton have been capped in line
with the provisions of the Irish Finance Acts. However, dependants’ pensions continue to accrue
resulting in Greenbury transfer values which have been calculated on the basis of actuarial advice.
These amounts do not represent sums paid out or due, but are the amounts that the pension
scheme would transfer to another pension scheme in relation to benefits accrued in 2014 in the
event of these Directors leaving service.
(ii) The accrued pensions shown are those which would be payable annually from normal
retirement date.
Pension Entitlements - Defined Contribution (Audited)
Table 35
The accumulated liablilities related to the unfunded Supplemental Executive Retirement Plans for Mark Towe
are as follows:
As at
31 December
2013
€ 000
2014
contribution
€ 000
2014
Notional
interest
(iii)
€ 000
Translation
adjustment
€ 000
As at
31 December
2014
€ 000
Executive Director
Mark Towe
1,923
194
97
288
2,502
(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.
Details regarding pension entitlements
for the executive Directors are set out in
tables 34 and 35.
There is no change to the pension
arrangements for 2015.
liability represented by the pension
benefits foregone. They are calculated
based on actuarial advice as the
equivalent of the reduction in the
Company’s liability to each individual
and spread over the term to retirement
as annual compensation allowances.
The contributory defined benefit plan in
which Albert Manifold and Maeve
Carton participate is closed to new
entrants.
Mark Towe participates in a defined
contribution retirement plan in respect
of basic salary; and in addition he
participates in an unfunded defined
contribution Supplemental Executive
Retirement Plan (SERP) also in respect
of basic salary, to which contributions
are made at an agreed rate (20%), offset
by contributions made to the other
retirement plan.
* Salary is defined as basic annual salary and excludes any fluctuating emoluments.
CRH 81
Directors’ Remuneration Report | continued
Directors’ Interests in Shares and Share Scheme Awards
Deferred Share Awards under the Annual Bonus Plan (i) (Audited)
Table 36
31 December
2013
Awards in
2014
(ii)
Alloted under
the scrip dividend
scheme in
2014
Released in
2014
31 December
2014
Release
Date
Mark Towe
-
2,561
65
-
2,626
Feb 2017
(i) Under the Annual Bonus Plan in operation in respect of the financial year ended 31 December 2013, up to one-third of the earned bonus was receivable in CRH
shares, deferred for a period of three years, with forfeiture in the event of departure from the Group in certain circumstances during that period.
(ii) The shares awarded during 2014 related to the deferred portion of 2013 bonus and were included in total remuneration reported for 2013. These shares were
purchased by the Trustees of the CRH plc Employee Benefit Trust on 26 February 2014 at €20.375 per Ordinary Share.
Directors’ awards under the 2006 Performance Share Plan (i) (Audited)
31 December
2013
Granted in
2014
Released in
2014 (ii)
Lapsed in
2014 (ii)
31 December
2014
Performance
Period
Table 37
Release
Date
Market
Price in euro
on award
Maeve Carton
Albert Manifold
Mark Towe
42,000
50,000
50,000
142,000
62,000
70,000
72,000
204,000
68,000
90,000
90,000
248,000
-
-
-
-
-
-
-
-
-
-
-
-
20,626
21,374
-
01/01/11 - 31/12/13
-
-
-
-
50,000
01/01/12 - 31/12/14
50,000
01/01/13 - 31/12/15
February 2016
20,626
21,374
100,000
30,448
31,552
-
01/01/11 - 31/12/13
-
-
-
-
70,000
01/01/12 - 31/12/14
72,000
01/01/13 - 31/12/15
February 2016
30,448
31,552
142,000
33,394
34,606
-
01/01/11 - 31/12/13
-
-
33,394
-
90,000
01/01/12 - 31/12/14
-
34,606
90,000
180,000
01/01/13 - 31/12/15
February 2016
15.19
16.19
15.19
16.19
15.19
16.19
(i) 2006 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 February 2016 will be allocated to the extent that the relative TSR performance
conditions are achieved. The structure of the 2006 Performance Share Plan is set out on page 78.
In 2014, the Remuneration Committee determined that 49.11% of the 2011 award vested and that portion of the award was released to participants. The balance
of the 2011 award lapsed. The market value per share for tax purposes on the date of release was €21.28 for Directors resident in Ireland and €21.505 for
Directors resident outside Ireland.
(ii)
Directors’ Awards under the 2014 Performance Share Plan (i) (Audited)
31 December
2013
Granted in
2014
Dividend
Equivalents
2014 (ii)
Released in
2014
Lapsed in
2014
31 December
2014
Performance
Period
Release
Date
Maeve Carton
Albert Manifold
Mark Towe
-
-
-
59,500
142,900
97,100
618
1,484
1,008
-
-
-
-
-
-
60,118
01/01/14 - 31/12/16 February 2019
144,384
01/01/14 - 31/12/16 February 2019
98,108
01/01/14 - 31/12/16 February 2019
20.49
(i) 2014 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 February 2019 will be allocated to the extent that the relevant performance conditions
are achieved. The structure of the 2014 Performance Share Plan is set out in table 27 on page 79.
(ii) The Remuneration Committee has determined that dividend equivalents should accrue on awards under the 2014 Performance Share Plan. Subject to the
satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares at vesting.
82 CRH
Table 38
Market
Price
in euro
on award
20.49
20.49
Directors’ Remuneration Report | continued
Directors’ Share Options (Audited)
Table 39
Details of movements on outstanding options and those exercised during the year are set out in the table below
Maeve Carton
Albert Manifold
Mark Towe
31 December
2013
Granted in
2014
Lapsed
in 2014
Exercised
in 2014
31 December
2014
55,831
13,308
139,500
-
-
-
-
1,726
166,445
16,635
200,000
2,236
155,425
49,905
245,000
1,044,285
-
-
-
-
-
-
-
1,726
-
13,308
42,500
-
-
16,635
62,500
-
-
49,905
70,000
254,848
-
-
-
-
-
-
-
-
22,344
-
-
22,344
55,831
-
(a)
(b)
97,000
(c)
1,726
(d)
166,445
(a)
-
(b)
137,500
(c)
2,236
(d)
133,081
-
175,000
768,819
(a)
(b)
(c)
Option by price (Audited)
Options exercised during 2014
Weighted
average
option price at
31 December
2014
€
Weighted
average
exercise
price
€
Weighted
average
market
price at date
of exercise
€
25.75
-
15.67
17.67
21.97
-
15.68
13.64
24.38
-
15.68
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15.09
-
-
21.53
-
-
Table 40
€
15.0674
15.0854
15.0854
18.7463
18.8545
26.1493
29.4855
29.8643
21.5235
16.58
16.38
15.19
16.19
13.64
17.67
31 December
2013
Granted
in 2014
Lapsed
in 2014
Exercised
in 2014
31 December
2014
Earliest
exercise date
Expiry date
29,943
22,344
49,905
16,635
27,725
72,085
53,232
36,043
99,637
50,000
175,000
210,000
199,500
2,236
-
1,044,285
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29,943
-
49,905
-
-
-
-
-
-
-
175,000
-
-
-
-
22,344
-
-
-
-
-
-
-
-
-
-
-
-
1,726
1,726
-
254,848
-
22,344
-
-
-
16,635
27,725
72,085
53,232
36,043
99,637
50,000
-
210,000
199,500
2,236
1,726
768,819
(b)
(a)
(b)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(c)
(c)
(c)
(d)
(d)
February 2015
February 2015
August 2017
August 2019
April 2015
April 2015
April 2016
April 2017
April 2017
April 2018
April 2019
April 2022
April 2023
January 2018
January 2020
The market price of the Company's shares at 31 December 2014 was €19.90 and the range during 2014 was €15.86 to €21.82.
(a) 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.
(b) 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.
(c) Granted under the 2010 share option scheme. Vesting will only occur once an initial performance target has been reached and, thereafter, will be dependent
on performance. The performance criteria are set out in table 33 on page 80.
(d) Granted under the 2010 savings-related share option scheme.
CRH 83
Directors’ Remuneration Report | continued
Shareholding guidelines for
executive Directors
The Remuneration Committee adopted a
policy in 2013 whereby executive
Directors are required to build up (and
maintain), within five years of
appointment a minimum holding in
CRH shares which is equivalent to one
times basic salary. For existing executive
Directors this level must be achieved by
31 December 2015, unless the executive
Director has a significant change in role
which results in a step change in salary
in which case the one times salary level
must be achieved within five years of the
change. The current shareholding levels
as a multiple of basic salary are shown
in table 41.
Following his appointment as Chief
Executive on 1 January 2014, the
Remuneration Committee determined
that Albert Manifold will be required to
meet the shareholding guideline by 31
December 2017.
As part of the remuneration review
carried out in 2013, the Remuneration
Committee considered whether the
shareholding level should be increased,
particularly in relation to the Chief
Executive role. The Remuneration
Committee concluded that, as the
guidelines were only recently
introduced, it was not appropriate to
increase the requirement at this time.
However, the Committee will look to
increase shareholding guidelines in the
future as the Chief Executive builds on
his existing holding.
Executive Director Shareholdings*
Table 41
120,000
100,000
80,000
60,000
40,000
20,000
0
3.0x
times salary
2.4x
times salary
0.8x
times salary
Albert Manifold
Maeve Carton
Mark Towe
* The shareholdings are calculated based on the closing share price on 24 February 2015 (€24.92) and do not include
Deferred Shares to be awarded under the 2014 Annual Bonus Plan (which will be released in 2018). If the Deferred
Shares were included in the above table (on a post-tax basis) the executive Directors’ shareholdings would be
approximately 0.9, 3.2 and 2.6 times salary respectively.
84 CRH
Directors’ Remuneration Report | continued
Shareholdings of Directors and Company Secretary as at 31 December 2014
Directors’ Interests in Share Capital at 31 December 2014 (Audited)
Table 42
The interests of the Directors and Secretary in the shares of the Company, which are beneficial unless otherwise indicated, are shown below.
The Directors and Secretary have no beneficial interests in any of the Group’s subsidiary, joint venture or associated undertakings.
Ordinary Shares
Directors
E.J. Bärtschi
M. Carton
W.P. Egan
- Non-beneficial
U-H. Felcht
N. Hartery
J.W. Kennedy
D.A. McGovern, Jr.
H.A. McSharry
A. Manifold
D.N. O’Connor
H. Th. Rottinghuis
M. Towe
Secretary
N. Colgan
31 December
2014
31 December
2013
25,200
82,036
16,112
12,000
1,285
12,265
1,083
5,131
3,886
39,998
17,344
15,124
7,200
60,100
16,112
12,000
1,285
1,430
1,049
4,000
3,789
38,981
16,915
- **
100,276*
77,117
15,549
347,289
10,836
250,814
There were no transactions in the above Directors’ and Secretary’s interests between 31 December 2014 and 25 February 2015.
Of the above holdings, the following are held in the form of American Depository Receipts:
W.P. Egan
- Non-beneficial
D.A. McGovern, Jr.
31 December
2014
31 December
2013
15,000
12,000
5,131
15,000
12,000
4,000
Patrick J. Kennedy became a Director on 1 January 2015. He did not have a holding of CRH shares on appointment and there were no transactions
between 1 January and 25 February 2015.
On 18 February 2015, Lucinda Riches was appointed a Director with effect from 1 March 2015. She does not have a holding of CRH shares.
* Excludes awards of Deferred Shares, details of which are disclosed in table 36 on page 82.
** Holding at date of appointment.
CRH 85
Directors’ Remuneration Report | continued
Non-executive Directors
Remuneration paid to non-executive
Directors in 2014 is set out in table 43.
The remuneration of non-executive
Directors is determined by the Board
of Directors as a whole. In determining
the remuneration, the Board receives
recommendations from a committee
of the Chairman and the executive
Directors. The Remuneration Committee
determines the remuneration of the
Chairman.
Fees for the non-executive Directors
were reviewed during 2014. It was
concluded that CRH’s fees are
competitively positioned at present and
should remain unchanged in 2015.
Fees for 2015 are set out in table 44.
Individual Remuneration for the year ended 31 December 2014 (Audited)
Table 43
Basic
Salary and Fees
(a)
€ 000
Benefits
(b)
€ 000
Other
Remuneration
(c)
€ 000
Total
€ 000
2014
2013
2014
2013
2014
2013
2014
2013
Non-executive Directors
E.J. Bärtschi
W.P. Egan
U-H. Felcht
N. Hartery
J.M. de Jong (d)
J.W. Kennedy
D.A. McGovern Jr. (e)
H.A. McSharry
D.N. O'Connor
H.Th. Rottinghuis (f)
68
68
68
68
24
68
68
68
68
59
68
68
68
68
68
68
34
68
68
-
-
-
-
10
5
-
-
-
-
-
-
-
-
23
-
-
-
-
-
-
71
52
37
382
13
37
52
22
56
27
48
52
37
382
60
37
26
22
56
-
139
120
105
460
42
105
120
90
124
86
116
120
105
473
128
105
60
90
124
-
627
578
15
23
749
720
1,391
1,321
(a) Fee levels for non-executive Directors were unchanged in 2014.
(b) Benefits: In the case of Nicky Hartery the amount reflects the reimbursement of travel expenses from his residence to his Chairman’s office in Dublin, which
have been grossed up for Irish tax purposes. In the case of Jan Maarten de Jong, it also includes the value of a gift given to him on his retirement.
(c) Other Remuneration: Includes remuneration for Chairman, Board Committee work and allowances for non-executive Directors based outside of Ireland.
(d) Jan Maarten de Jong retired as a Director on 7 May 2014.
(e) Don McGovern became a Director on 1 July 2013.
(f) Henk Rottinghuis became a Director on 18 February 2014.
Non-executive Director Fee Structure
Role
Group Chairman (including non-executive Director salary and fees for committee work)
Non-executive Director (basic salary and fees for committee work)
Additional fees:
Senior Independent Director/Remuneration Committee Chairman*
Audit Committee Chairman
Fee for Europe-based non-executive Directors
Fee for US-based non-executive Directors
Table 44
Amount
€450,000
€90,000
€34,000
€34,000
€15,000
€30,000
* If the roles of Senior Independent Director and Remuneration Committee Chair are not combined, fees of €25,000 and €15,000 apply respectively.
86 CRH
Directors’ Remuneration Report | continued
TSR performance since 2004 (i)
Table 45
TSR performance since 2008 (i)
Table 46
200
150
100
50
0
CRH
FTSE 100
Eurofirst 300
250
200
150
100
50
0
CRH
FTSE 100
Eurofirst 300
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
(i) For the purposes of comparability, the FTSE 100 Index has been converted to euro using the closing exchange rate at each year-end.
Other Disclosures
Fees paid to former Directors
No payments have been made to
individual former directors in excess
of the de minimis threshold of €20,000
per annum agreed by the Remuneration
Committee.
Executives’ external appointments
The executive Directors may accept
external appointments with the prior
approval of the Board provided that
such appointments do not prejudice
the individual’s ability to fulfil their
duties at the Group. Whether any related
fees are retained by the individual or
remitted to the Group is considered on a
case-by-case basis.
Maeve Carton was appointed as a
non-executive member of the National
Treasury Management Agency, an
Irish state body that provides asset and
liability management services to the
Irish government in December 2014.
Total Shareholder Return
The value at 31 December 2014 of €100
invested in 2004 and 2008 respectively,
compared with the value of €100
invested in the Eurofirst 300 Index and
the FTSE 100 Index (which CRH joined
in December 2011) is shown in the
graphs above.
TSR performance has been compared
against the FTSE 100 and the Eurofirst
300 as these are broad general market
indices on which CRH is a constituent.
The Committee, therefore, considers that
they offer a reasonable comparison for
performance.
Compound TSR growth since the
formation of the Group in 1970
(assuming the reinvestment of
dividends) is 15.7%.
Remuneration paid to Chief Executive
2009 - 2014
Table 47 shows the total remuneration
paid to the Chief Executive in the period
2009 to 2014 inclusive and shows
bonuses and vested long-term incentive
awards as a percentage of the maximum
bonus and award that could have been
received in each year. Albert Manifold
succeeded Myles Lee as Chief Executive
effective from 1 January 2014.
The percentage increase in the Chief
Executive’s salary in the period 2009 to
2014 is set out in table 15 on page 72.
The percentage change in the Chief
Executive’s salary, benefits and bonus
between 2013 and 2014 was as follows:
Salary +1.7%
Benefits +69.6%
Bonus +327.6%
The combined percentage change was
+87.1%.
There was a 1.5% increase in the total
average employment costs in respect
of employees in the Group as a whole
between 2013 and 2014.
Chief Executive 2009 - 2014 inclusive
Table 47
(€m)
€4.5
€4.0
€3.5
€3.0
€2.5
€2.0
€1.5
€1.0
€0.5
€0.0
Myles Lee
(2009-2013)
€2.6m
€2.6m
50%**
22%*
46%
21%
€2.9m
17%
39%
Albert
Manifold
€3.6m
100%
€4.2m
PSP:
49%
LTIP:
34%
€2.5m
27.8%
30%
2009
2010
2011
2012
2013
2014
Other
Retirement Benefits
Long-Term Incentives
Bonus
Benefits
Salary
* Value of bonus award each year as a percentage of the maximum opportunity.
** Value of vested incentive awards as a percentage of the maximum opportunity; in respect of 2013 the
long-term incentive award value is made up of vestings under the 2006 Performance Share Plan (49.1%
of maximum) and the 2009 CEO LTIP (33.7% of maximum). There was no long-term incentive vesting in
relation to awards with a performance period ending in 2012 or 2014.
CRH 87
Directors’ Remuneration Report | continued
Relative importance of spend on pay
Table 48 sets out the amount paid by the
Group in remuneration to employees
compared to dividend distributions
made to shareholders in 2013 and 2014.
The average number of employees is
set out in note 5 to the Consolidated
Financial Statements on page 121. We
have also shown the change in EBITDA
performance year on year to provide
an indication of the change in profit
performance.
The Remuneration Committee and
Advisors
The non-executive Directors who
were members of the Remuneration
Committee during 2014, together with
their record of attendance at Committee
meetings, are identified on page 68. Don
McGovern joined the Committee with
effect from 1 January 2015.
Risk policies and systems
During 2014, the Chairman of the
Remuneration Committee reviewed
with the Audit Committee the Group’s
remuneration structures from a risk
perspective.
Remuneration consultants
Deloitte LLP was appointed as the
Committee’s remuneration consultants
in 2013 following a tender process. The
Committee has satisfied itself that the
advice provided by Deloitte is robust
and independent and that the Deloitte
LLP engagement partner and team that
provide remuneration advice to the
Committee do not have connections
with CRH plc that may impair their
independence. Deloitte are signatories
to the Voluntary Code of Conduct in
relation to executive remuneration
consulting in the UK.
During 2014, Deloitte provided the
following remuneration services:
– research and advice regarding
remuneration trends, best practice and
remuneration levels for executive and
non-executive directors in companies
of similar size and complexity;
– guidance and advice in relation to
remuneration developments;
– analysis of TSR workings under the
2006 Performance Share Plan;
– advice in relation to remuneration
matters generally; and
88 CRH
Relative Importance of Spend on Pay
Table 48
€4,500
€4,000
€3,500
€3,000
€2,500
€2,000
€1,500
€1,000
€500
€0
€4,034
€3,955
€460
€455
Dividends €m
Remuneration received by
all employees €m
2013
2014
€1,641
€1,475
EBITDA €m
Note: the increase in employment costs for all employees reflects an increase in employee numbers due
to acquisitions and increased activity in the United States.
2014 AGM – Remuneration Related Votes
Table 49
% in Favour % Against
No. of votes
withheld
Total No. of
votes cast
(incl. votes
withheld)
% of issued
share capital
Directors’ Remuneration
Report (“Say on Pay”)
98.1%
1.9%
13,587,697 511,227,387
69.6%
Remuneration Policy Report
95.2%
4.8%
3,648,186
511,208,343
69.6%
meeting the Remuneration Committee
determined that there were no concerns
with the Group’s remuneration
structures that required investigation.
Following the 2014 Annual General
Meeting we also met with a major
shareholder to discuss the metrics used
for CRH’s long-term incentive structures
and we received correspondence from
another shareholder regarding their
perspectives in relation to the disclosure
of annual targets (which we believe our
disclosures on pages 77 and 78 address).
– attendance at Committee meetings,
when required.
Deloitte also provide other consultancy
services to the Company in relation
to support for Internal Audit, when
required and in respect of talent
management and human resources,
taxation and sustainability.
In respect of work carried out by
Deloitte on behalf of the Remuneration
Committee in 2014, fees in the amount
of €49,000 were incurred.
2014 Annual General Meeting votes on
remuneration matters
The voting outcome in respect of the
remuneration related votes at the 2014
Annual General Meeting is set out in
table 49.
Shareholder Engagement
The Chairman and the Remuneration
Committee Chairman met with a number
of the Group’s major shareholders in
advance of the 2014 Annual General
Meeting. No issues of concern in relation
to remuneration arose. As the voting
was overwhelmingly in favour of the
“Say on Pay” resolution, following the
Directors’ Remuneration Report | continued
Details of remuneration charged against profit in 2014
Directors’ Remuneration* (Audited)
Executive Directors
Basic salary
Performance-related incentive plan
- cash element
- deferred shares element
Retirement benefits expense
Benefits
Provision for Chief Executive long-term incentive plan**
Total executive Directors’ remuneration
Average number of executive Directors
Non-executive Directors
Fees
Other remuneration
Benefits
Total non-executive Directors’ remuneration
Average number of non-executive Directors
Payments to former Directors***
Total Directors’ remuneration
2014
€ 000
Table 50
2013
€ 000
2,861
3,591
3,219
1,073
1,026
114
8,293
-
8,293
3.00
627
749
15
1,391
9.30
23
9,707
1,833
54
1,660
126
7,264
(1,062)
6,202
4.00
578
720
23
1,321
8.50
23
7,546
* See analysis of 2014 remuneration by individual in tables 19 and 43 on pages 75 and 86.
** As set out on page 69 of the 2013 Directors ‘Remuneration Report, former Chief Executive Myles Lee had 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, amounting to a potential €2,312,000. The actual earnings under this plan amounted to €778,127, payment of which was made in 2014. Annual
provisions of 40% of basic salary were made in respect of this plan for the years 2009 through 2012 amounting in total to €1,840,000. The difference between the
total provided for and the sum paid, which amounts to €1,061,873, is reflected as a reduction in the amount of total Directors’ remuneration for 2014.
*** Consulting and other fees paid to a number of former directors.
CRH 89
The Committee’s policy in this area
is that service contracts will be put in
place for newly appointed executive
Directors and in cases where there is
a significant step change in Directors’
responsibilities. It is currently
anticipated that these terms will be
similar to those agreed with the Chief
Executive.
Under Irish company law, CRH is not
required to make service contracts
available for inspection as the notice
period is less than 12 months. Service
contracts will only be available with the
executive Director’s consent due to data
protection reasons.
On behalf of the Board
Dan O’Connor
Remuneration Committee Chairman
Directors’ Remuneration Report | continued
Remuneration Policy Summary
• properly reward and motivate
The following summarises the key
elements of CRH’s Remuneration Policy
(the “Policy”), which was approved
by shareholders at the 2014 Annual
General Meeting. A copy of the Policy is
available on the Group’s website,
www.crh.com.
As an Irish incorporated company, CRH
is not required to comply with section
439A of the UK Companies Act 2006
which requires UK companies to submit
their remuneration policy to a binding
shareholder vote. However, maintaining
high levels of corporate governance is
important to CRH and, therefore, the
Company intends to operate within the
Policy unless it is not practical to do so
in exceptional circumstances. However,
as an Irish incorporated company, CRH
cannot rely on the statutory provisions
applicable to UK companies under
the 2013 UK Regulations which, in
certain circumstances, can resolve any
inconsistency between a remuneration
policy and any contractual or other right
of a Director. In the event there were to
be such an inconsistency the Company
may be obliged to honour any such right,
notwithstanding it may be inconsistent
with the Policy.
The Remuneration Committee’s aim is
to make sure that CRH’s pay structures
are fair, responsible and competitive,
in order that CRH can attract and retain
staff of the calibre necessary for it to
compete in all of its markets.
The Group’s remuneration structures
are designed to drive performance and
link rewards to responsibility and the
individual contribution of executives.
It is policy to grant participation in
the Group’s performance-related plans
to key management to encourage
identification with shareholders’
interests and to create a community of
interest among different regions and
nationalities.
The policy on Directors’ remuneration,
which is derived from the overall Group
policy, is designed to:
• help 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;
90 CRH
executive Directors to perform in the
long-term interest of the shareholders;
• provide an appropriate blend of fixed
and variable remuneration and short
and long-term incentives for executive
Directors;
• complement CRH’s strategy of
fostering entrepreneurship in its
regional companies by rewarding the
creation of shareholder value through
organic and acquisitive growth;
• reflect the spread of the Group’s
operations so that remuneration
packages in each geographical area are
appropriate and competitive for that
area; and
• reflect the risk policies of the Group.
In setting remuneration levels, the
Remuneration Committee takes into
consideration the remuneration practices
of other international companies of
similar size and scope and trends in
executive remuneration generally,
in each of the regions in which the
Company operates. The Remuneration
Committee also takes into account the
EU Commission’s recommendations on
remuneration in listed companies.
Executive Director service contracts
and policy on payment for loss of office
When determining leaving arrangements
for an executive Director, the Committee
takes into account any contractual
agreements (including any incentive
arrangements) and the performance and
conduct of the individual.
Service contracts
The Chief Executive has entered into
a service contract with the Company.
Table 52 sets out the key remuneration
terms of this contract.
The Finance Director (Maeve Carton)
and Chief Executive, Oldcastle, Inc.
(Mark Towe) do not currently have
service contracts. They do not have a
notice period in excess of 12 months
or an entitlement to any benefits
on termination of employment.
The Committee will determine the
amount, if any, paid on termination
taking into account the circumstances
around departure and the prevailing
employment law.
Directors’ Remuneration Report | continued
Remuneration Policy for non-executive Directors
Approach to Setting Fees
Basis of Fees
Other Items
Table 51
• The remuneration of non-executive
Directors is determined by a Board
committee of the Chairman and the
executive Directors.
• The Remuneration Committee determines
the remuneration of the Chairman within
the framework or broad policy agreed with
the Board.
• Remuneration is set at a level which will
attract individuals with the necessary
experience and ability to make a substantial
contribution to the Company’s affairs and
reflect the time and travel demands of
Board duties.
• Fees are set taking into account typical
practice at other companies of a similar
size and complexity to CRH.
• Fees are reviewed at appropriate intervals.
• The non-executive Directors do not
participate in any of the Company’s
performance-related incentive plans or
share schemes.
• Non-executive Directors do not receive
pensions.
• The Group Chairman is reimbursed for
expenses incurred in travelling from his
residence to his CRH office. The
Company settles any tax incurred on this
on his behalf.
• Non-executive Directors do not currently
receive any benefits. However, benefits
may be provided in the future if, in the
view of the Board (for non-executive
Directors or for the Chairman), this was
considered appropriate. The Company
may settle any tax due on benefits.
• Fees are paid in cash.
• Non-executive Director fees policy is to
pay:
- A basic fee for membership of the
Board;
- An additional fee for chairing a
Committee;
- An additional fee for the role of Senior
Independent Director (SID) (if the SID is
not the Chairman of the Remuneration
Committee);
- An additional fee to reflect committee
work (combined fee for all committee
roles); and
- An additional fee based on the location
of the Director to reflect time spent
travelling to Board meetings.
• Other fees may also be paid to reflect
other board roles or responsibilities.
• In accordance with the Articles of
Association, shareholders set the
maximum aggregate amount of the fees
payable to non-executive Directors. The
current limit of €750,000 was set by
shareholders at the Annual General
Meeting held in 2005.
Chief Executive Service Contract
Table 52
Notice period
• 12 months’ notice by the Company or the executive.
Expiry date
• Indefinite duration.
• Terms of contract will automatically terminate on the executive’s 62nd birthday.
Termination
payments
• On lawful termination of employment, the Committee may, at its absolute discretion, make a termination payment in
lieu of 12 months’ notice based on base salary, benefits and pension contribution due during that period.
• Where the Company terminates the contract lawfully without notice then no payment in lieu of notice shall be due.
• If, in the event of a change of control, there is a diminution in the role and responsibilities of the Chief Executive he may
terminate the contract; on such termination a payment equal to one year’s remuneration (being salary, pension, other
benefits and vested incentive awards) will be made to the executive.
Disability
• In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or
disablement so that the Chief Executive could not work for a period of more than six months, in lieu of the early
ill-health retirement provisions in the pension scheme which would otherwise operate in such cases, he shall be
entitled to receive a disability salary of €1,000,000 per annum. Such payment would cease when the Chief Executive
reaches age 60, returns to work or if the service agreement is terminated.
Other information
• The Company retains the ability to suspend the executive from employment on full salary and to require the executive
to observe a period of “garden leave” of up to 12 months on full salary, contractual benefits and pension contribution.
CRH 91
Directors’ Remuneration Report | continued
Policy table
Further details regarding the operation of the Policy can be found on pages 75 to 89 of the Annual Statement on Remuneration.
Table 53
Fixed
Element
Base salary
Purpose and
link to strategy
• Competitive salaries help to attract and retain staff with the
experience and knowledge required to enable the Group to
compete in its markets.
Pension
Benefits
• Pension arrangements provide competitive and appropriate
• To provide a market-competitive level of benefits for executive Directors.
retirement plans.
• Given the long-term nature of the business, pension is an
important part of the remuneration package to support
creation of value and succession planning.
Operation
• Base salaries are set by the Committee taking into account:
• Irish-based executive Directors participate in a contributory
• The Committee’s policy is to set benefit provision at an appropriate market competitive level taking into account market practice, the level of
– the size and scope of the executive Director’s role and
defined benefit scheme.
responsibilities;
– the individual’s skills, experience and performance;
– salary levels at FTSE listed companies of a similar size and
complexity to CRH and other international construction
and building materials companies; and
– pay and conditions elsewhere in the Group.
• Base salary is normally reviewed annually with changes
generally effective on 1 January, although the Committee
may make an out-of-cycle increase if it considers it to be
appropriate.
• The US-based executive Director participates in a defined
contribution scheme and in an unfunded Supplemental
Executive Retirement Plan (SERP).
assurance.
• The defined benefit scheme which the Di rectors participate
Executive could not work for a period of more than six months, in lieu of the early ill-health retirement provisions in the pension scheme
in is closed to new entrants.
which would otherwise operate in such cases, he shall be entitled to receive a disability salary of €1,000,000 per annum. Such payment
• For new appointments to the Board, the Committee may
determine that alternative pension provisions will operate
(for example a defined contribution scheme or cash
contribution). When determining pension arrangements for
new appointments, the Committee will give regard to existing
entitlements, the cost of the arrangements, market practice
and the pension arrangements received elsewhere in the
Group.
Maximum
opportunity
• Base salaries are set at a level which the Committee
• The defined benefit pension is provided through an Irish
• The level of benefit provided will depend on the cost of providing individual items and the individual’s circumstances, and therefore the
considers to be appropriate taking into consideration the
factors outlined in the “operation” section.
• While there is no maximum base salary, normally increases
will be in line with the typical level of increase awarded to
other employees in the Group but may be higher in certain
circumstances. These circumstances may include:
– Where a new executive Director has been appointed at
a lower salary, higher increases may be awarded over an
initial period as the executive Director gains in experience
and the salary is moved to what the Committee considers
is an appropriate positioning;
– Where there has been a significant increase in the scope
or responsibility of an executive Director’s role or where
an individual has been internally promoted, higher salary
increases may be awarded; and
– Where a larger increase is considered necessary to reflect
significant changes in market practice.
Revenue approved retirement benefit scheme up until the
pension cap established in the Finance Act 2006 (see details
on page 81). Accrued benefits for service to 31 December
2011 are based on pensionable salary and years of service
as at that date (annual accrual of 1/60th), with this tranche
being revalued annually at the Consumer Price Index subject
to a 5% ceiling. For service subsequent to that date, a
career-average revalued earnings system was introduced
with each year of service being subject to annual revaluation
on the same basis as outlined above. Irish based executive
Directors receive a supplementary taxable non-pensionable
cash allowance in lieu of pension benefits foregone as a
result of the pension cap. These allowances are similar in
value to the reduction in the Company’s liability represented
by the pension benefit foregone. Whilst there is no absolute
maximum to the quantum of these payments they are
calculated based on actuarial advice as the equivalent of the
reduction in the Company’s liability to each individual and
spread over the term to retirement as annual compensation
allowances.
• The US-based executive Director participates in a defined
contribution retirement plan in respect of basic salary; and in
addition he participates in an unfunded defined contribution
SERP also in respect of basic salary, to which contributions
are made at an agreed rate (20%), offset by contributions
made to the other retirement plan.
Performance
measures
n/a
92 CRH
n/a
n/a
benefits provided for other employees in the Group, the individual’s home jurisdiction and the jurisdiction in which the individual is based.
• Employment-related benefits include the use of company cars (or a car allowance), medical insurance for the Director and his/her family/life
• In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or disablement so that the Chief
would cease when the Chief Executive reaches age 60, returns to work or if the service agreement is terminated.
• The Chief Executive, Oldcastle Inc. also receives benefits in relation to club membership and short term disability insurance.
• Benefits may also be provided in respect of legal fees incurred in respect of agreeing service contracts, or similar agreements (for which the
Company may settle any tax incurred by the executive Director) and a gift on retirement.
• The Committee may remove benefits that executive Directors receive or introduce other benefits if it is considered appropriate to do so.
The Company may also pay the tax due on benefits if it considers that it is appropriate to do so.
• All-employee share schemes – executive Directors are eligible to participate in the Company’s all-employee share schemes on the same
terms as other employees.
• Relocation policy – where executive Directors are required to relocate to take up their role, the Committee may determine that they
should receive appropriate relocation and ongoing expatriate benefits. The level of such benefits would be determined based on individual
circumstances taking into account typical market practice.
Committee has not set a maximum level of benefits.
Policy table
Further details regarding the operation of the Policy can be found on pages 75 to 89 of the Annual Statement on Remuneration.
Table 53
Fixed
Element
Base salary
Pension
Benefits
Purpose and
• Competitive salaries help to attract and retain staff with the
• Pension arrangements provide competitive and appropriate
• To provide a market-competitive level of benefits for executive Directors.
Directors’ Remuneration Report | continued
• The Committee’s policy is to set benefit provision at an appropriate market competitive level taking into account market practice, the level of
benefits provided for other employees in the Group, the individual’s home jurisdiction and the jurisdiction in which the individual is based.
• Employment-related benefits include the use of company cars (or a car allowance), medical insurance for the Director and his/her family/life
assurance.
• In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or disablement so that the Chief
Executive could not work for a period of more than six months, in lieu of the early ill-health retirement provisions in the pension scheme
which would otherwise operate in such cases, he shall be entitled to receive a disability salary of €1,000,000 per annum. Such payment
would cease when the Chief Executive reaches age 60, returns to work or if the service agreement is terminated.
• The Chief Executive, Oldcastle Inc. also receives benefits in relation to club membership and short term disability insurance.
• Benefits may also be provided in respect of legal fees incurred in respect of agreeing service contracts, or similar agreements (for which the
Company may settle any tax incurred by the executive Director) and a gift on retirement.
• The Committee may remove benefits that executive Directors receive or introduce other benefits if it is considered appropriate to do so.
The Company may also pay the tax due on benefits if it considers that it is appropriate to do so.
• All-employee share schemes – executive Directors are eligible to participate in the Company’s all-employee share schemes on the same
terms as other employees.
• Relocation policy – where executive Directors are required to relocate to take up their role, the Committee may determine that they
should receive appropriate relocation and ongoing expatriate benefits. The level of such benefits would be determined based on individual
circumstances taking into account typical market practice.
Maximum
opportunity
• Base salaries are set at a level which the Committee
• The defined benefit pension is provided through an Irish
• The level of benefit provided will depend on the cost of providing individual items and the individual’s circumstances, and therefore the
considers to be appropriate taking into consideration the
Revenue approved retirement benefit scheme up until the
Committee has not set a maximum level of benefits.
factors outlined in the “operation” section.
pension cap established in the Finance Act 2006 (see details
link to strategy
experience and knowledge required to enable the Group to
retirement plans.
compete in its markets.
• Given the long-term nature of the business, pension is an
important part of the remuneration package to support
creation of value and succession planning.
Operation
• Base salaries are set by the Committee taking into account:
• Irish-based executive Directors participate in a contributory
– the size and scope of the executive Director’s role and
defined benefit scheme.
responsibilities;
– the individual’s skills, experience and performance;
– salary levels at FTSE listed companies of a similar size and
complexity to CRH and other international construction
and building materials companies; and
– pay and conditions elsewhere in the Group.
• Base salary is normally reviewed annually with changes
generally effective on 1 January, although the Committee
may make an out-of-cycle increase if it considers it to be
appropriate.
• The US-based executive Director participates in a defined
contribution scheme and in an unfunded Supplemental
Executive Retirement Plan (SERP).
• The defined benefit scheme which the Di rectors participate
in is closed to new entrants.
• For new appointments to the Board, the Committee may
determine that alternative pension provisions will operate
(for example a defined contribution scheme or cash
contribution). When determining pension arrangements for
new appointments, the Committee will give regard to existing
entitlements, the cost of the arrangements, market practice
and the pension arrangements received elsewhere in the
Group.
• While there is no maximum base salary, normally increases
will be in line with the typical level of increase awarded to
other employees in the Group but may be higher in certain
circumstances. These circumstances may include:
– Where a new executive Director has been appointed at
a lower salary, higher increases may be awarded over an
initial period as the executive Director gains in experience
and the salary is moved to what the Committee considers
is an appropriate positioning;
– Where there has been a significant increase in the scope
or responsibility of an executive Director’s role or where
an individual has been internally promoted, higher salary
increases may be awarded; and
– Where a larger increase is considered necessary to reflect
significant changes in market practice.
on page 81). Accrued benefits for service to 31 December
2011 are based on pensionable salary and years of service
as at that date (annual accrual of 1/60th), with this tranche
being revalued annually at the Consumer Price Index subject
to a 5% ceiling. For service subsequent to that date, a
career-average revalued earnings system was introduced
with each year of service being subject to annual revaluation
on the same basis as outlined above. Irish based executive
Directors receive a supplementary taxable non-pensionable
cash allowance in lieu of pension benefits foregone as a
result of the pension cap. These allowances are similar in
value to the reduction in the Company’s liability represented
by the pension benefit foregone. Whilst there is no absolute
maximum to the quantum of these payments they are
calculated based on actuarial advice as the equivalent of the
reduction in the Company’s liability to each individual and
spread over the term to retirement as annual compensation
allowances.
• The US-based executive Director participates in a defined
contribution retirement plan in respect of basic salary; and in
addition he participates in an unfunded defined contribution
SERP also in respect of basic salary, to which contributions
are made at an agreed rate (20%), offset by contributions
made to the other retirement plan.
Performance
n/a
measures
n/a
n/a
CRH 93
2014 Performance Share Plan (PSP)
interest in CRH shares and by incentivising the achievement of long-term performance goals.
Table 53
Committee).
• Dividend equivalents may be paid on PSP awards that vest in respect of dividends paid during the vesting period until the end of the holding
period. These payments may be made in cash or shares and may assume reinvestment on a cumulative basis.
• For 2014 awards onwards, malus provisions (as set out in the rules of the PSP) will apply to awards.
Directors’ Remuneration Report | continued
Policy table continued
Performance-related pay
Element
Annual Bonus Plan
Purpose and
link to strategy
• The Annual Performance-related Incentive Plan is designed to reward the creation of shareholder value through operational
• The role of the PSP is to align the interest of key management across different regions and nationalities with those of shareholders through an
excellence and organic and acquisitive growth. The Plan incentivises executive Directors to deliver Group and individual goals
that support long-term value creation.
• A Deferred Annual Performance-related Incentive Plan element links the value of executive Directors’ reward with the long-term
performance of the CRH share price and aligns the interests of executive Directors with shareholders’ interests.
• The ‘malus’ provision enables the Company to mitigate risk.
Operation
• The Annual Performance-related Incentive Plan rewards executive Directors for meeting Company performance goals over a
• Awards (in the form of conditional share awards or nil cost options) normally vest based on performance over a period of not less than three years.
financial year of the Company. Targets are set annually by the Committee.
Awards may also be settled in cash.
• The annual bonus is paid in a mix of cash and shares (structured as a deferred share award).
• Awards are normally subject to an additional holding period ending on the fifth anniversary of the grant date (or another date determined by the
• For 2014:
– 75% of the bonus will be paid in cash; and
– 25% will be paid in shares.
• In future years, the Committee may determine that a different balance between cash and shares is appropriate and adjust the
relevant payments accordingly.
• When assessing performance and determining bonus payouts the Committee also considers the underlying financial
performance of the business to ensure it is consistent with the overall award level.
• The deferred element of the bonus will be structured as a conditional share award or nil cost option and will normally vest after
three years from grant (or a different period determined by the Committee). Deferred share awards may be settled in cash.
• Dividend equivalents may be paid on deferred share awards in respect of dividends paid during the vesting period. These
payments may be made in cash or shares and may assume the reinvestment of dividends on a cumulative basis.
• For deferred awards granted from 2014, malus provisions apply. Cash bonus payments may be subject to clawback of the net
amount paid for a period of three years from payment.
Maximum
opportunity
• Maximum annual opportunity of 150% of base salary.
• The normal maximum award is 250% of salary per annum. In exceptional circumstances, the Committee may grant awards of up to 350% of
base salary.
• For 2014 the intended award levels are:
– Chief Executive – 250% of base salary
– Other executive Directors – 200% of base salary
Performance
measures
• The Annual Performance-related Incentive Plan is based on achieving clearly defined and stretching annual targets and
• Awards to be granted in 2014 will vest based on a relative TSR return compared to key peers and cumulative cash flow performance.
strategic goals set by the Committee each year based on key business priorities.
• The performance metrics used are a mix of financial targets including return goals and personal/strategic objectives generally
including safety. Currently 80% of the bonus is based on financial performance measures. The Committee may vary the
weightings of measures but no less than 50% shall be based on financial performance measures.
• For threshold levels of performance 25% of the award vests with straight-line vesting to maximum.
• When determining vesting under the PSP the Committee reviews whether the TSR performance has been impacted by unusual events and
whether it, therefore, reflects the underlying performance of the business. In addition, the Committee will consider financial performance (including
EPS) in the period to ensure that TSR performance is consistent with the objectives of the performance criteria and was not distorted by
• A portion of the bonus metrics for any Director may be linked to his/her specific area of responsibility.
extraneous factors.
• Up to 50% of the maximum bonus will be paid for achieving target levels of performance.
• The Committee may amend the performance conditions if an event occurs that causes it to consider that an amended performance condition
would be more appropriate and would not be materially less difficult to satisfy.
94 CRH
Directors’ Remuneration Report | continued
2014 Performance Share Plan (PSP)
Table 53
Purpose and
• The Annual Performance-related Incentive Plan is designed to reward the creation of shareholder value through operational
• The role of the PSP is to align the interest of key management across different regions and nationalities with those of shareholders through an
link to strategy
excellence and organic and acquisitive growth. The Plan incentivises executive Directors to deliver Group and individual goals
interest in CRH shares and by incentivising the achievement of long-term performance goals.
Operation
• The Annual Performance-related Incentive Plan rewards executive Directors for meeting Company performance goals over a
• Awards (in the form of conditional share awards or nil cost options) normally vest based on performance over a period of not less than three years.
financial year of the Company. Targets are set annually by the Committee.
Awards may also be settled in cash.
• The annual bonus is paid in a mix of cash and shares (structured as a deferred share award).
• Awards are normally subject to an additional holding period ending on the fifth anniversary of the grant date (or another date determined by the
Committee).
• Dividend equivalents may be paid on PSP awards that vest in respect of dividends paid during the vesting period until the end of the holding
period. These payments may be made in cash or shares and may assume reinvestment on a cumulative basis.
• For 2014 awards onwards, malus provisions (as set out in the rules of the PSP) will apply to awards.
Policy table continued
Performance-related pay
Element
Annual Bonus Plan
that support long-term value creation.
• A Deferred Annual Performance-related Incentive Plan element links the value of executive Directors’ reward with the long-term
performance of the CRH share price and aligns the interests of executive Directors with shareholders’ interests.
• The ‘malus’ provision enables the Company to mitigate risk.
• For 2014:
– 75% of the bonus will be paid in cash; and
– 25% will be paid in shares.
relevant payments accordingly.
• In future years, the Committee may determine that a different balance between cash and shares is appropriate and adjust the
• When assessing performance and determining bonus payouts the Committee also considers the underlying financial
performance of the business to ensure it is consistent with the overall award level.
• The deferred element of the bonus will be structured as a conditional share award or nil cost option and will normally vest after
three years from grant (or a different period determined by the Committee). Deferred share awards may be settled in cash.
• Dividend equivalents may be paid on deferred share awards in respect of dividends paid during the vesting period. These
payments may be made in cash or shares and may assume the reinvestment of dividends on a cumulative basis.
• For deferred awards granted from 2014, malus provisions apply. Cash bonus payments may be subject to clawback of the net
amount paid for a period of three years from payment.
Maximum
opportunity
• Maximum annual opportunity of 150% of base salary.
• The normal maximum award is 250% of salary per annum. In exceptional circumstances, the Committee may grant awards of up to 350% of
base salary.
• For 2014 the intended award levels are:
– Chief Executive – 250% of base salary
– Other executive Directors – 200% of base salary
Performance
• The Annual Performance-related Incentive Plan is based on achieving clearly defined and stretching annual targets and
• Awards to be granted in 2014 will vest based on a relative TSR return compared to key peers and cumulative cash flow performance.
measures
strategic goals set by the Committee each year based on key business priorities.
• The performance metrics used are a mix of financial targets including return goals and personal/strategic objectives generally
including safety. Currently 80% of the bonus is based on financial performance measures. The Committee may vary the
weightings of measures but no less than 50% shall be based on financial performance measures.
• A portion of the bonus metrics for any Director may be linked to his/her specific area of responsibility.
• For threshold levels of performance 25% of the award vests with straight-line vesting to maximum.
• When determining vesting under the PSP the Committee reviews whether the TSR performance has been impacted by unusual events and
whether it, therefore, reflects the underlying performance of the business. In addition, the Committee will consider financial performance (including
EPS) in the period to ensure that TSR performance is consistent with the objectives of the performance criteria and was not distorted by
extraneous factors.
• Up to 50% of the maximum bonus will be paid for achieving target levels of performance.
• The Committee may amend the performance conditions if an event occurs that causes it to consider that an amended performance condition
would be more appropriate and would not be materially less difficult to satisfy.
CRH 95
Directors’ Report
The Directors submit their report and the
audited Consolidated Financial Statements for
the year ended 31 December 2014.
Principal Activity, Results for the Year and
Review of Business
CRH is a diversified international building
materials group which manufactures and
distributes a diverse range of products
servicing the breadth of construction needs,
from the fundamentals of heavy materials and
elements to construct the frame, through
value-added exterior products that complete
the building envelope, to distribution channels
which service construction fit-out and renewal.
The Group has over 1,000 subsidiary, joint
venture and associate undertakings; the
principal ones as at 31 December 2014 are
listed on pages 162 to 166.
The Group’s strategy, business model and
development activity are summarised in the
Strategy Review section on pages 7 to 15 and
are deemed to be incorporated in this part of
the Directors’ Report.
As set out in the Consolidated Income
Statement on page 104, the Group reported a
profit before tax for the year of €761 million.
Comprehensive reviews of the financial and
operating performance of the Group during
2014 are set out in the Business Performance
Review on pages 22 to 49; key financial
performance indicators are also set out in this
section. The treasury policy and objectives of
the Group are set out in detail in note 21 to the
Consolidated Financial Statements.
Dividend
An interim dividend of 18.5c (2013: 18.5c) per
share was paid in October 2014. The Board is
recommending a final dividend of 44c per
share. This gives a total dividend of 62.5c
for the year, maintained at last year’s level
(2013: 62.5c). The earnings per share for the
year were 78.9c representing a cover of
1.26 times the proposed dividend for 2014.
It is proposed to pay the final dividend on
12 May 2015 to shareholders registered at the
close of business on 6 March 2015. Subject to
the approval of resolutions 2 and 12 at the
2015 Annual General Meeting, shareholders
are being offered a scrip dividend alternative.
2015 Outlook
In the United States, the pace of GDP growth
is expected to pick-up in 2015 and we believe
that the fundamentals are in place for
continued positive momentum in the
economy. Demand in the residential
construction market continues to expand,
96 CRH
albeit at a more moderate rate, while recovery
in the non-residential market is starting to
gather pace. While the infrastructure market
remains broadly stable, there is upside
potential due to the growing economy and
increased state spending.
In Europe, the general market environment
continues to normalise across our main
markets. The outlook for 2015 is somewhat
mixed, particularly in the first half for which
the 2014 comparatives reflect the benefit of
very benign weather conditions. In our
generally stable markets in Western Europe we
expect to see some improvement in overall
demand in 2015, particularly in residential
activity. While the outlook in Ukraine remains
very uncertain, we anticipate that demand
will increase in Eastern Europe, driven
primarily by an expected pick-up in the roads
programme in Poland towards the second half
of the year.
With the improvements expected in market
conditions across our main geographies,
together with easing commodity prices, the
benefits of cost efficiencies and a favourable
foreign exchange translation effect, we expect
2015 to be a further year of progress.
Sustainability
As set out in the Strategy Review section on
pages 7 to 15, the Group is fully committed to
operating ethically and responsibly in all
aspects of its business relating to employees,
customers, neighbours and other stakeholders.
Details of CRH’s policies and performance
relating to the Environment and Climate
Change, Health & Safety and Social &
Community matters are set out in the
separately published and independently
verified annual Sustainability Reports which
are available on the Group’s website at
www. crh.com. The 2014 report will be
available by mid-2015.
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 risks and
uncertainties reflect the international scope of
the Group’s operations and the Group’s
decentralised structure.
Strategic Risks and Uncertainties
Industry cyclicality: The level of construction
activity in local and national markets is
inherently cyclical being influenced by a wide
variety of factors including global and national
economic circumstances, ongoing austerity
programmes in the developed world,
governments’ ability to fund infrastructure
projects, consumer sentiment and weather
conditions. Financial performance may also be
negatively impacted by unfavourable swings in
fuel and other commodity/raw material prices.
Failure of the Group to respond on a timely
basis and/or adequately to unfavourable events
beyond its control will adversely affect
financial performance.
Political and economic uncertainty: As an
international business, the Group operates in
many countries with differing, and in some
cases potentially fast-changing economic,
social and political conditions. These
conditions could include political unrest,
strikes, war and other forms of instability
including natural disasters, epidemics,
widespread transmission of diseases and
terrorist attacks. With particular reference to
developing markets, changes in these
conditions, or in the governmental or
regulatory requirements in any of the countries
in which the Group operates, may adversely
affect the Group’s business, results of
operations, financial condition or prospects
thus leading to possible impairment of
financial performance and/or restrictions on
future growth opportunities.
Commodity products and substitution: The
Group faces strong volume and price
competition across its product lines. In
addition, existing products may be replaced by
substitute products which the Group does not
produce or distribute. Against this backdrop, if
the Group fails to generate competitive
advantage through differentiation and
innovation across the value chain (for example,
through superior product quality, engendering
customer loyalty or excellence in logistics),
market share, and thus financial performance,
may decline.
Acquisition activity: Growth through
acquisition is a key element of the Group’s
strategy. The Group may not be able to
continue to grow as contemplated in its
business plan if it is unable to identify
attractive targets (including potential new
platforms for growth), execute full and proper
due diligence, raise funds on acceptable terms,
complete such acquisition transactions,
integrate the operations of the acquired
businesses and realise anticipated levels of
profitability and cash flows. The Group may be
liable for the past acts, omissions or liabilities
of companies or businesses acquired, which
may either be unforeseen or greater than
anticipated at the time of the relevant
acquisition. On 1 February 2015, CRH
Regulatory Information
This table contains information which is required to be provided for regulatory purposes.
2009 Corporate Governance Regulations:
For the purpose of Statutory Instrument 450/2009 European Communities (Directive 2006/46/
EC) Regulations 2009, as amended by Statutory Instrument 83/2010 European Communities
(Directive 2006/46/EC) (Amendment) Regulations 2010, the Corporate Governance report on
pages 54 to 71 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 28 to
the Financial Statements on pages 121 to 123 and 147 and 148 respectively.
2006 Takeover Regulations:
For the purpose of Regulation 21 of Statutory Instrument 255/2006 European Communities
(Takeover Bids (Directive 2004/25/EC)) Regulations 2006, the rules relating to the appointment
and replacement of Directors are summarised in the section on Board of Directors in this Report
on page 98 and in the following sections of the Corporate Governance Report: Membership of
the Board on page 56, Directors’ retirement and re-election on page 58 and Memorandum and
Articles of Association on page 71. The Chief Executive has entered into a service contract, the
principal terms of which are summarised on page 91 of the Directors’ Remuneration Report and
are deemed to be incorporated in this part of the Directors’ Report. The Company’s
Memorandum and Articles of Association, which are available on the CRH website, are also
deemed to be incorporated in this part of the Directors’ Report. The Group has certain banking
facilities and bond issues outstanding which may require repayment in the event that a change
in control occurs with respect to the Company. In addition, the Company’s share option
schemes and Performance Share Plan contain change of control provisions which can allow for
the acceleration of the exercisability of share options and the vesting of share awards in the
event that a change of control occurs with respect to the Company.
2007 Transparency Regulations:
For the purpose of Statutory Instrument 277/2007 Transparency (Directive 2004/109/EC)
Regulations 2007, the Sustainability Report as published on the CRH website is deemed to be
incorporated in this part of the Directors’ Report, together with the following sections of this
annual report: the Chairman’s Introduction on pages 2 and 3, the Strategy Review section on
pages 7 to 15, the Business Performance Review on pages 22 to 49, the details of earnings per
Ordinary Share in note 12 to the Consolidated Financial Statements, details of derivative
financial instruments in note 24, the details of the re-issue of Treasury Shares in note 28 and
details of employees in note 5.
announced that it had made a binding
irrevocable offer to acquire certain assets being
disposed of by Lafarge S.A. and Holcim
Limited in advance of their intended merger for
an enterprise value of €6.5 billion. As noted by
the Chairman in his review on pages 2 and 3
the transaction is subject to CRH obtaining
shareholder approval and certain other
conditions. There can be no guarantee that these
conditions precedent will be met, these approvals
granted or that the proposed acquisition will be
completed as proposed or at all.
Joint ventures and associates: The Group does
not have a controlling interest in certain of the
businesses (i.e. joint ventures and associates) in
which it has invested and may invest. The
absence of a controlling interest gives rise to
increased governance complexity and a need
for proactive relationship management, which
may restrict the Group’s ability to generate
adequate returns and to develop and grow
these businesses.
Human resources: Existing processes to recruit,
develop and retain talented individuals and
promote their mobility may be inadequate thus
giving rise to employee/management attrition
and difficulties in succession planning and
potentially impeding the continued realisation
of the core strategy of performance and growth.
In addition, the Group is exposed to various
risks associated with collective representation
of employees in certain jurisdictions. These
risks could include strikes and increased wage
demands with possible reputational
consequences.
Corporate communications: As a publicly
listed company, the Group undertakes regular
communication with its stakeholders. Given
that these communications may contain
forward looking statements, which by their
nature involve uncertainty, actual results and
developments may differ from those
communicated due to a variety of external and
internal factors giving rise to reputational risk.
Cyber and information technology: As a result
of the proliferation of information technology
in the world today, the Group is dependent on
the employment of advanced information
systems and is exposed to risks of failure in the
operation of these systems. Furthermore, the
Group is exposed to security threats to its
digital infrastructure through cyber crime
which might lead to interference with
production processes, manipulation of
financial data, the theft of private data or
misrepresentation of information via digital
media. In addition to potential irretrievability
or corruption of critical data, the Group could
suffer reputational losses and incur significant
financial costs in remediation. Such attacks are
by their nature technologically sophisticated
and may be difficult to detect and defend in a
timely fashion.
Sustainability: The Group is subject to stringent
and evolving laws, regulations, standards and
best practices in the area of sustainability
(comprising corporate governance,
environmental management and climate
change (specifically capping of emissions),
health and safety management and social
performance) which may give rise to increased
ongoing remediation and/or other compliance
costs and may adversely affect the Group’s
business, results of operations, financial
condition and/or prospects.
Laws and regulations: The Group is subject to
many local and international laws and
regulations, including those relating to
competition law, corruption and fraud, across
many jurisdictions of operation and is exposed
to changes in those laws and regulations and to
the outcome of any investigations conducted by
governmental, international and other
regulatory authorities, which may result in the
imposition of fines and/or sanctions for
non-compliance, and may potentially inflict
reputational damage.
Financial and Reporting Risks and
Uncertainties
Financial instruments (interest rate and
leverage, foreign currency, counterparty, credit
ratings and liquidity): The Group uses financial
instruments throughout its businesses giving
CRH 97
Directors’ Report | continued
rise to interest rate and leverage, foreign
currency, counterparty, credit rating and
liquidity risks. A significant portion of the cash
generated by the Group from operational
activity is currently dedicated to the payment
of principal and interest on indebtedness. In
addition, the Group has entered into certain
financing agreements containing restrictive
covenants requiring it to maintain a certain
minimum interest coverage ratio and a certain
minimum net worth. A downgrade of the
Group’s credit ratings may give rise to increases
in funding costs in respect of future debt and
may impair the Group’s ability to raise funds
on acceptable terms. In addition, against the
backdrop of heightened uncertainties in the
eurozone, insolvency of the financial
institutions with which the Group conducts
business (or a downgrade in their credit
ratings) may lead to losses in derivative assets
and cash and cash equivalents balances or
render it more difficult either to utilise existing
debt capacity or otherwise obtain financing for
operations.
Defined benefit pension schemes and related
obligations: The Group operates a number of
defined benefit pension schemes and related
obligations (for example, termination
indemnities and jubilee/long-term service
benefits, which are accounted for as defined
benefit) in certain of its operating jurisdictions.
The assets and liabilities of defined benefit
pension schemes may exhibit significant
period-on-period volatility attributable
primarily to asset values, changes in bond
yields/discount rates and anticipated longevity.
In addition to the contributions required for the
ongoing service of participating employees,
significant cash contributions may be required
to remediate deficits applicable to past service.
In addition, fluctuations in the accounting
surplus/deficit may adversely impact credit
metrics thus harming the Group’s ability to
raise funds.
Adequacy of insurance arrangements and
related counterparty exposures: The building
materials sector is subject to a wide range of
operating risks and hazards, not all of which
can be covered, adequately or at all, by
insurance; these risks and hazards would
include climatic conditions such as floods and
hurricanes/cyclones, seismic activity, technical
failures, interruptions to power supplies,
industrial accidents and disputes,
environmental hazards, fire and crime. In its
worldwide insurance programme, the Group
provides coverage for its operations at a level
believed to be commensurate with the
associated risks. In the event of failure of one or
98 CRH
more of its insurance counterparties, the Group
could be impacted by losses where recovery
from such counterparties is not possible.
Foreign currency translation: The Group’s
activities are conducted primarily in the local
currency of the country of operation resulting
in low levels of foreign currency transactional
risk. The principal foreign exchange risks to
which the Consolidated Financial Statements
are exposed pertain to adverse movements in
reported results when translated into euro
(which is the Group’s reporting currency)
together with declines in the euro value of net
investments which are denominated in a wide
basket of currencies other than the euro.
Goodwill impairment: Significant under-
performance in any of the Group’s major
cash-generating units or the divestment of
businesses in the future may give rise to a
material write-down of goodwill, which would
have a substantial impact on the Group’s
income and equity.
Inspections by Public Company Accounting
Oversight Board (“PCAOB”): Our auditors, like
other independent registered public accounting
firms operating in Ireland and a number of
other European countries, are not currently
permitted to be subject to inspection by the
PCAOB, and as such, investors are deprived of
the benefits of PCAOB inspections.
The principal financial and reporting risks and
uncertainties are subject to further disclosure
in the notes to the Consolidated Financial
Statements and the accompanying accounting
policies.
As demonstrated by CRH’s proven record of
superior performance, the Group’s management
team has substantial and long experience in
dealing with the impact of these risks. The
mechanisms through which the principal risks
and uncertainties are managed are addressed in
the Risk Management and Internal Control
section of the Corporate Governance Report.
Greenhouse Gas Emissions
Disclosures relating to the Group’s greenhouse
gas emissions are contained in the Measuring
Performance section on page 14.
Proposed Acquisition of Certain Assets Being
Disposed of by Lafarge S.A. and Holcim
Limited
The Directors’ have convened an Extraordinary
General Meeting (“EGM”) to be held on 19
March 2015 for the purposes of approving the
acquisition of certain assets being disposed of
by Lafarge S.A. and Holcim Limited in advance
of their intended merger. A circular to
shareholders in relation to this proposal
including the notice of the EGM was published
by the Company on 20 February 2015.
Shareholders should refer to this circular for
further details.
Directors’ Remuneration Report
Resolution 3 to be proposed at the 2015 Annual
General Meeting deals with the 2014 Directors’
Remuneration Report (excluding the summary
of the Remuneration Policy), as set out on
pages 72 to 89, which the Board has again
decided to present to shareholders for the
purposes of a non-binding advisory vote. This
is in line with international best practice.
Board of Directors
Mr. H. Th. Rottinghuis was appointed to the
Board on 18 February 2014.
Mr. J.M. de Jong retired from the Board on
7 May 2014.
Mr. P.J. Kennedy was appointed to the Board
with effect from 1 January 2015.
Ms. L. Riches has been appointed to the Board
with effect from 1 March 2015.
Mr. J.W. Kennedy and Mr. D.N. O’Connor will
retire from the Board at the conclusion of the
Annual General Meeting to be held on 7 May
2015.
Under the Company’s Articles of Association,
co-opted Directors are required to submit
themselves to shareholders for election at the
Annual General Meeting following their
appointment and all the Directors are required
to submit themselves for re-election at intervals
of not more than three years. However, in
accordance with the provisions contained in
the UK Corporate Governance Code, the Board
has decided that all Directors eligible for
re-election should retire at each Annual
General Meeting and offer themselves for
re-election.
Auditors
Section 160(2) of the Companies Act, 1963
provides that the auditor of an Irish company
shall be automatically re-appointed at a
company’s annual general meeting unless the
auditor has given notice in writing of his
unwillingness to be re-appointed or a
resolution has been passed at that meeting
appointing someone else or providing
expressly that the incumbent auditor shall not
be re-appointed. The Auditors, Ernst & Young,
Chartered Accountants, are willing to continue
in office. Notwithstanding the provisions of
Irish company law, the Board has decided to
provide shareholders with an opportunity to
Location of information required pursuant to Listing Rule 9.8.4C
Listing Rule
Information to be included*: Publication of unaudited financial information**
LR 9.8.4 (2)
Disclosure
The circular to shareholders published on 20 February 2015 contained the
following statement:-
“On 11 November 2014, CRH issued an Interim Management Statement, which
contained the following statement (extracted without material adjustment) on
CRH’s current trading:
“Assuming normal weather patterns for the remainder of the year and a US dollar/
euro exchange rate of 1.331 (2013: 1.3281), we expect EBITDA for the fourth
quarter to be broadly similar to the strong performance in the final quarter of 2013.
Against this backdrop, we reiterate our expectation for second-half EBITDA to be
somewhat ahead of last year (H2 2013: €1.08 billion), resulting in expected full
year EBITDA growth of c.10% in 2014 (2013: €1.475 billion).”
1 Average exchange rate based on year-to-date US$/euro rate of 1.3455 and a
projected rate of 1.2493 to year-end.
“Since that date, the CRH Group’s trading performance continues to be in line with
the Board’s expectations and we expect EBITDA for the full year ended
31 December 2014 to be not less than €1.625 billion with full year revenues of
€18.9 billion. We expect year-end net debt to be approximately €2.5 billion (2013:
€3.0 billion), with a net debt/EBITDA ratio of approximately 1.5 times…”
The actual EBITDA outturn for the full year ended 31 December 2014 was €1.641
billion. See page 116 to the Consolidated Financial Statements for more details.
Listing Rule
Information to be included*: Waivers of dividends
LR 9.8.4 (12)
and (13)
Disclosure
The Trustees of the Employee Benefit Trust, have elected to waive dividends in
respect of certain holdings of CRH shares. See pages 121 to 123 to the
Consolidated Financial Statements.
* No information is required to be disclosed in respect of Listing Rules 9.8.4 (1), (3), (4), (5), (6), (7), (8), (9),
(10), (11) and (14).
** Required by Listing Rule 9.2.18.
have a say on the continuance in office of Ernst
& Young and a non-binding resolution has been
included on the agenda for the 2015 Annual
General Meeting for this purpose.
As required under Irish law, the Annual
General Meeting agenda also includes a
resolution authorising the Directors to fix the
remuneration of the Auditors.
Increase in Authorised Share Capital
On 5 February 2015, CRH allotted 74,039,915
new Ordinary Shares and 74,039,915 new
Income Shares, representing approximately
9.99% of CRH’s issued Ordinary/Income share
capital in connection with a share placing
announced on 2 February 2015. As the placing
reduced the number of unissued Ordinary/
Income Shares, a resolution to increase the
aggregate of the authorised Ordinary/Income
share capital from €340,000,000 to
€425,000,000 will be proposed at the Annual
General Meeting. The increase in the
authorised Ordinary/Income share capital is
necessary to ensure there is sufficient share
capital available to the Company to operate the
approved Employee Share Schemes, the Scrip
Dividend Scheme and to maintain the
authorised but unissued share capital at a
prudent level.
The proposed increase in the authorised
Ordinary/Income share capital is 25% and
unissued Ordinary/Income Shares will
represent 34.5% of the authorised Ordinary/
Income share capital.
Authority to Allot Shares
The Directors require the authority of the
shareholders to allot any unissued share capital
of the Company. Accordingly, an ordinary
resolution will be proposed at the 2015 Annual
General Meeting to grant authority for that
purpose. The total number of shares which the
Directors may issue under this authority will be
limited to a number which is equivalent to
33% of the issued share capital of the Company
as at 25 February 2015.
No issue of shares will be made which could
effectively alter control of the Company
without prior approval of the Company in
General Meeting. The Directors have no present
intention of making any issue of shares. This
authority will expire on the earlier of the date
of the Annual General Meeting in 2016 or
6 August 2016.
Disapplication of Pre-emption Rights
A special resolution will be proposed at the
2015 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 total
number of shares which the Directors may
issue under this authority will be limited to a
number which is equivalent to 5% of the
issued share capital of the Company as at
25 February 2015. This authority will expire on
the earlier of the date of the Annual General
Meeting in 2016 or 6 August 2016.
The Directors intend to follow the Pre-Emption
Group’s Statement of Principles in that
allotments of shares for cash and the re-issue of
Treasury Shares on a non pre-emptive basis,
other than for rights issues to ordinary
shareholders and employees’ share schemes,
will not exceed 7.5% of the issued Ordinary/
Income share capital within a rolling three year
period without prior consultation with its
shareholders.
Transactions in Own Shares
During 2014, 2,175,649 (2013: 1,423,602)
Treasury Shares were re-issued under the
Group’s Share Schemes. As at 25 February
2015, 3,735,479 shares were held as Treasury
Shares, equivalent to 0.45% of the Ordinary
Shares in issue (excluding Treasury Shares).
A special resolution will be proposed at the
2015 Annual General Meeting to renew the
authority of the Company, or any of its
subsidiaries, to purchase up to 10% of the
CRH 99
Directors’ Report | continued
Company’s Ordinary/Income Shares in issue at
the date of the Annual General Meeting. If
approved, the minimum price which may be
paid for shares purchased by the Company
shall not be less than the nominal value of the
shares and the maximum price will be 105% of
the higher of the last independent trade in the
Company’s shares (or current independent bid,
if higher) and the average market price of such
shares over the preceding five days. A special
resolution will also be proposed for the
purpose of renewing the authority to set the
maximum and minimum prices at which
Treasury Shares (effectively shares purchased
and not cancelled) may be re-issued off-market
by the Company. If granted, both of these
authorities will expire on the earlier of the date
of the Annual General Meeting in 2016 or
6 August 2016.
As at 25 February 2015, options to subscribe for
a total of 16,335,763 Ordinary/Income Shares
are outstanding, representing 2.0% of the
issued Ordinary/lncome share capital
(excluding Treasury Shares). If the authority to
purchase Ordinary/Income Shares was used in
full, the options would represent 2.22% of the
remaining shares in issue.
The Directors do not have any current intention
of exercising the power to purchase the
Company’s own shares and will only do so if
they consider it to be in the best interests of the
Company and its shareholders.
Authority to Offer Scrip Dividends
An ordinary resolution will be proposed at the
2015 Annual General Meeting to renew the
Directors’ authority to make scrip dividend
offers. This authority will apply to dividends
declared or to be paid commencing on 7 May
2015. Unless renewed at the Annual General
Meeting in 2016, this authority shall expire at
the close of business on 6 August 2016.
Notice Period for Extraordinary General
Meetings
Resolution 11 to be proposed at the Annual
General Meeting is a special resolution, which
seeks shareholders’ approval to permit 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.
In addition, the Directors are cognisant of the
UK Corporate Governance Code requirement for
general meetings to be convened at 14 business
days’ notice.
100 CRH
Amendments to Memorandum and Articles of
Association and Annual General Meeting
A circular to shareholders, which will contain
the Notice of Meeting and proposed changes to
the Company’s Memorandum and Articles of
Association to be considered at the 2015 Annual
General Meeting, will be posted to shareholders
on 30 March 2015.
Statement of Directors’ Responsibilities
The Directors as at the date of this report, whose
names are listed on pages 51 to 53, are
responsible for preparing the Annual Report and
Financial Statements in accordance with
applicable laws and regulations.
Irish Company law requires the Directors to
prepare financial statements for each financial
year which give a true and fair view of the
assets, liabilities, financial position of the Parent
Company and of the Group and of the profit or
loss of the Group taken as a whole for that
period (Consolidated Financial Statements).
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 Directors are required by the
Transparency (Directive 2004/109/EC)
Regulations 2007 and the Transparency Rules
of the Central Bank of Ireland to include a
management report containing a fair review of
the development and performance of the
business and the position of the Parent
Company and of the Group taken as a whole
and a description of the principal risks and
uncertainties facing the Group.
The Directors confirm that to the best of their
knowledge they have complied with the above
requirements in preparing the 2014 Annual
Report and Consolidated Financial
Statements. 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 154 to 157, 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 2013.
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
2013 and Article 4 of the IAS Regulation.
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.
The Directors 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.
Each of the Directors as at the date of this
report, whose names are listed on pages 51 to
53, confirms that they consider that the
Annual Report and Financial Statements,
taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Company’s performance, business model and
strategy.
On behalf of the Board,
N. Hartery, A. Manifold
Directors
25 February 2015
Independent Auditor’s Report
to the members of CRH plc
What we have audited
We have audited the financial statements of CRH plc for the year ended
31 December 2014 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 Accounting Policies, the
related notes 1 to 34 (Group) and the related notes 1 to 13 (Company). The
financial reporting framework that has been applied in the preparation of
the Group Financial Statements is Irish law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in the preparation of
the Company Financial Statements is Irish law and accounting standards
issued by the Financial Reporting Council and promulgated by the Institute
of Chartered Accountants in Ireland (Generally Accepted Accounting
Practice in Ireland).
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 auditor’s 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.
Opinion on financial statements
In our opinion:
• the Group financial statements give a true and fair view, in accordance
with IFRSs as adopted by the European Union, of the state of the Group’s
affairs as at 31 December 2014 and of its profit for the year then ended;
• the Company Balance Sheet gives a true and fair view in accordance with
Generally Accepted Accounting Practice in Ireland of the state of the
Company’s affairs as at 31 December 2014; and
• the financial statements have been properly prepared in accordance with
the requirements of the Companies Acts 1963 to 2013 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors’ Responsibilities set
out on page 100 the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with Irish law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the Group and the Company’s circumstances
and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the Directors;
and the overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the Annual Report
to identify material inconsistencies with the audited financial statements
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by us
in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications
for our Report.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and performing
our audit and in evaluating the effect of misstatements on our audit and on
the financial statements.
When establishing our overall audit strategy, we determined a magnitude
of uncorrected misstatements that we judged would be material for the
financial statements as a whole. We determined materiality for the Group
to be €36 million, which is approximately 5% of pre-tax profit. In 2013,
we determined materiality for the Group to be €25 million which was
approximately 5% of adjusted pre-tax profit. We used adjusted pre-tax
profit in 2013 which excluded the impairment of goodwill and the non-
recurring impairment of property, plant and equipment and financial
assets arising from a portfolio review as they do not reflect the underlying
trading performance of the Group thereby avoiding inappropriate
variations in our materiality as a result of significant non-recurring items.
Our materiality calculation provided a basis for determining the nature,
timing and extent of risk assessment procedures, identifying and assessing
the risk of material misstatement and determining the nature, timing and
extent of further audit procedures.
On the basis of our risk assessments, together with our assessment of the
Group’s overall control environment, our judgement was that overall
performance materiality (i.e. our tolerance for misstatement in an individual
account or balance) for the Group should be 50% of planning materiality,
namely €18 million (2013: €12.5 million). Our objective in adopting this
approach was to ensure that total uncorrected and undetected audit
differences in all accounts did not exceed our planning materiality level.
We agreed with the Audit Committee that we would report to them all audit
differences in excess of €1.8 million (2013: €1.25 million), as well as
differences below that threshold that in our view warranted reporting on
qualitative grounds.
We evaluated any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations.
An overview of the scope of our audit
The overall scope of our audit has been assessed in line with the principles as
described above in ‘scope of the audit of the financial statements’. In
determining those components in the Group at which we perform audit
procedures, we utilised size and risk criteria in accordance with International
Standards on Auditing (UK and Ireland). Following this assessment we
selected 80 (2013: 77) components which represent the principal business
units within the Group’s six business segments. 26 (2013: 33) of these
components were subject to a full audit, whilst another 54 (2013: 44) were
subject to a partial audit where the extent of the audit work was based on our
assessment of the risks of material misstatement and the materiality of the
Group’s business operations at those locations and focuses on specific
accounts. For the remaining components, we performed other procedures to
identify if there were any remaining significant risks of material misstatement
in the Group financial statements in respect of those components.
Audit work at each component is undertaken based on a percentage of our
total performance materiality. The performance materiality set for each
CRH 101
Independent Auditor’s Report | continued
component is based on the relative size of the component and our view of
the risk of misstatement at that component. In the current year the range of
performance materiality allocated to components was €3.6 million to
€11 million (2013: €2.5 million and €8.5 million).
We issued detailed instructions to each component auditor in scope for the
Group audit, with specific audit requirements and requests across key areas.
The Group audit team continued to perform a programme of site visits at key
locations across the Group which included a review of key working papers
supporting conclusions on significant risk areas. In addition to site visits, the
Group audit team participated in divisional planning and closing meetings
and the component auditors’ discussion of the risks of fraud and error.
Our assessment of risks of material misstatement
and added a new risk concerning the accounting and disclosure
requirements arising from the application of the held for sale requirements
contained within IFRS 5 – Non-current Assets Held for Sale and
Discontinued Operations, as the businesses identified for disposal in the
portfolio review advance towards disposal.
We consider that the following areas present the greatest risk of material
misstatement in the financial statements and consequently have had the
greatest impact on our audit strategy, the allocation of resources and the
efforts of the engagement team, including the more senior members of
the team.
Based on our walkthrough and control testing performed, we believe the
controls over the areas identified below are designed and operate effectively.
In 2013 we identified a risk arising from the ‘accounting and disclosure
implications of the portfolio review’, whereby management had identified a
number of business units for disposal. For 2014, we have removed this risk
The Audit Committee’s report on those matters which they considered to
be significant issues in relation to the financial statements is set out on
page 61.
Principal risk area and rationale
Assessment of the carrying value of goodwill
Audit response
The impairment review of goodwill, with a carrying value of
€4.0bn, is considered to be a risk area due to the size of the
balance as well as the fact that it involves significant
judgement by management. Judgemental aspects include
assumptions of future profitability, revenue growth, margins
and forecast cash flows, and the selection of appropriate
discount rates.
Assessment of the carrying value of property, plant and
equipment and financial assets
The impairment review of property, plant and equipment and
financial assets, with a carrying value of €7.7bn and €1.4bn
respectively, is considered to be a risk area due to the size of
the balances as well as their judgemental nature, similar to
that noted in the assessment of the carrying value of
goodwill above.
Accounting and disclosure requirements arising from the
application of the held for sale requirements contained
within IFRS 5
In 2013 management made a decision to divest of a number
of business units across its operations. None of these
businesses met the ‘held for sale’ criteria at 31 December
2013. The status of the businesses identified for disposal has
evolved during the year with some having been disposed,
others meeting the held for sale criteria and the remainder
continuing to be assessed for impairment.
102 CRH
Our specialist valuations team performed an independent assessment against external market data of
key inputs used by management in calculating appropriate discount rates, principally risk free rates,
country risk premium and inflation rates.
We reviewed and challenged the determination of the Group’s 20 Cash Generating Units (‘CGUs’) and
flexed our audit approach depending on our risk assessment and the level of headroom in each CGU.
For all CGUs selected for detailed testing, we critically assessed all key assumptions in the models by
challenging management’s detailed calculations and benchmarking growth forecasts to external
economic forecasts and construction activity measures.
We challenged management’s sensitivity analyses and performed our own sensitivity calculations to
assess the level of headroom in place based on reasonably expected movements in such assumptions.
We considered the adequacy of management’s disclosures in respect of impairment testing and
whether the sensitivity disclosures appropriately communicate the underlying sensitivities.
Audit response
In respect of the discount rate, we performed similar procedures to those noted above for goodwill.
The Group operates a variety of business models and as a result the identification of CGUs for testing is
based on these business models and management’s assessment of impairment indicators.
Similar audit procedures to those noted under goodwill above are performed in respect of the key
assumptions underpinning the impairment models.
Audit response
Throughout the year and in the subsequent period up to the date of approval of the financial
statements, we have regular contact with management who inform us on the status of the various
entities subject to disposal. We also review Board minutes where proposals in respect of businesses
moving to disposal are presented.
We challenged management’s assessment by applying professional scepticism to the judgements made
by management in concluding whether all relevant criteria had been met in order to classify businesses
as held for sale in accordance with IFRS 5. We also tested whether depreciation of non-current assets
and the accounting for the share of results of equity method investees ceased at the date of IFRS 5
classification and that foreign exchange recycling was calculated where relevant. We considered the
adequacy of the disclosures in the financial statements in respect of held for sale assets (note 4).
Principal risk area and rationale | continued
Revenue recognition for construction contracts
Audit response
There are significant accounting judgements which include determining the
stage of completion, the timing of revenue recognition and the calculation
under the percentage-of-completion method, in applying the Group’s revenue
recognition policies to long-term contracts entered into by the Group. The
majority of the Group’s construction contracts have a maturity within one
year and most are completed prior to the year-end, reflecting seasonality.
Total revenue for construction contracts was €3.4bn which represents 17.7%
of the Group’s revenue in 2014.
There is significant seasonality to when services are rendered under these
construction contracts, with the majority of the work performed in the
summer months.
We performed substantial audit procedures which included a review of a sample of
contracts, a review for change orders, a retrospective review of estimated profit and
costs to complete and enquired of key personnel regarding adjustments for job
costing and potential job losses. We performed testing procedures over routine sales
transactions.
Accounting for acquisitions and disposals
Audit response
During 2014, the Group completed 21 acquisitions at a cost of €0.2bn and
realised total disposal proceeds of €0.2bn across 16 disposals.
On 1 February 2015, the Group entered into a binding commitment to acquire
certain assets from Lafarge and Holcim for an enterprise value of €6.5bn.
Acquisitions and disposals continue to be a significant focus area for the
Group and an area where we allocate significant resources in directing the
efforts of the engagement team.
Our specialist valuations team challenge purchase price allocation adjustments,
deferred consideration and the identification and valuation of acquired intangible
assets as all elements involve significant judgement by management.
In considering the accounting for disposals we consider various areas including
identification of consideration, net assets, disposal costs and foreign exchange
reserve recycling.
We also considered the adequacy of the related disclosures (note 4 and note 30).
Matters on which we are required to report by the Companies Acts 1963
to 2013
• We have obtained all the information and explanations which 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 and the description in the Corporate
Governance Report of the main features of the internal control and risk
management systems in relation to the process for preparing the Group
Financial Statements is consistent with the Group Financial Statements.
• The net assets of the Company, as stated in the Company Balance Sheet
are more than half of the amount of its called-up share capital and, in our
opinion, on that basis there did not exist at 31 December 2014 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.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if, in our
opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially inconsistent with,
our knowledge of the Group acquired in the course of performing our
audit; or
• is otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
Directors’ Statement that they consider the Annual Report is fair, balanced
and understandable and whether the Annual Report appropriately discloses
those matters that we communicated to the Audit Committee which we
consider should have been disclosed.
Under the Companies Acts 1963 to 2013 we are required to report to you if,
in our opinion, the disclosures of Directors’ remuneration and transactions
specified by law are not made.
Under the Listing Rules we are required to review:
• the Directors’ Statement, set out on page 100, in relation to going concern;
• the part of the Corporate Governance Report relating to the Company’s
compliance with the nine provisions of the UK Corporate Governance
Code specified for our review; and
• certain elements of the report to shareholders by the Board on Directors’
remuneration.
Breffni Maguire
for and on behalf of Ernst & Young
Dublin
25 February 2015
CRH 103
Consolidated Income Statement
for the financial year ended 31 December 2014
Notes
1 Revenue
2 Cost of sales
Gross profit
2 Operating costs
1,3,5,6 Group operating profit
1,4 Profit on disposals
Profit before finance costs
8 Finance costs
8 Finance income
8 Other financial expense
9 Share of equity accounted investments' profit/(loss)
1 Profit/(loss) before tax
10 Income tax expense
Group profit/(loss) for the financial year
Profit/(loss) attributable to:
Equity holders of the Company
Non-controlling interests
Group profit/(loss) for the financial year
12 Basic earnings/(loss) per Ordinary Share
12 Diluted earnings/(loss) per Ordinary Share
All of the results relate to continuing operations.
Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2014
2014
€m
2013
€m
18,912
(13,427)
5,485
(4,568)
18,031
(13,153)
4,878
(4,778)
917
77
994
(254)
8
(42)
55
761
(177)
584
582
2
584
100
26
126
(262)
13
(48)
(44)
(215)
(80)
(295)
(296)
1
(295)
78.9c
78.8c
(40.6c)
(40.6c)
2014
€m
2013
€m
Notes
Group profit/(loss) for the financial year
584
(295)
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
24 Losses relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
27 Remeasurement of retirement benefit obligations
10 Tax on items recognised directly within other comprehensive income
Total other comprehensive income for the financial year
Total comprehensive income for the financial year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
N. Hartery, A. Manifold, Directors
104 CRH
599
(6)
593
(414)
69
(345)
248
832
830
2
832
(373)
(2)
(375)
162
(43)
119
(256)
(551)
(552)
1
(551)
Consolidated Balance Sheet
as at 31 December 2014
Notes
ASSETS
Non-current assets
13 Property, plant and equipment
14 Intangible assets
15 Investments accounted for using the equity method
15 Other financial assets
17 Other receivables
24 Derivative financial instruments
26 Deferred income tax assets
Total non-current assets
Current assets
16 Inventories
17 Trade and other receivables
Current income tax recoverable
24 Derivative financial instruments
22 Cash and cash equivalents
4 Assets held for sale
Total current assets
2014
€m
2013
€m
7,422
4,173
1,329
23
85
87
171
13,290
2,260
2,644
15
15
3,262
531
8,727
7,539
3,911
1,340
23
93
63
107
13,076
2,254
2,516
26
17
2,540
-
7,353
Total assets
22,017
20,429
EQUITY
Capital and reserves attributable to the Company's equity holders
28 Equity share capital
28 Preference share capital
28 Share premium account
28 Treasury Shares and own shares
Other reserves
Foreign currency translation reserve
Retained income
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
23 Interest-bearing loans and borrowings
24 Derivative financial instruments
26 Deferred income tax liabilities
18 Other payables
27 Retirement benefit obligations
25 Provisions for liabilities
Total non-current liabilities
Current liabilities
18 Trade and other payables
Current income tax liabilities
23 Interest-bearing loans and borrowings
24 Derivative financial instruments
25 Provisions for liabilities
4 Liabilities associated with assets classified as held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
N. Hartery, A. Manifold, Directors
253
1
4,324
(76)
213
57
5,405
10,177
21
10,198
5,419
3
1,305
257
711
257
7,952
2,894
154
447
20
139
213
3,867
251
1
4,219
(118)
197
(542)
5,654
9,662
24
9,686
4,579
34
1,166
289
410
231
6,709
2,754
151
961
19
149
-
4,034
11,819
10,743
22,017
20,429
CRH 105
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2014
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
Non-
controlling
interests
€m
Total
equity
€m
Notes
At 1 January 2014
252
4,219
(118)
197
(542)
5,654
24
9,686
Group profit for the financial year
Other comprehensive income
Total comprehensive income
28 Issue of share capital (net of expenses)
7 Share-based payment expense
- share option schemes
- Performance Share Plans/Restricted Share Plan
28 Treasury/own shares reissued
Share option exercises
11 Dividends (including shares issued in lieu of dividends)
Acquisition of non-controlling interests
-
-
-
2
-
-
-
-
-
-
-
-
-
105
-
-
-
-
-
-
-
-
-
-
-
-
42
-
-
-
-
-
-
-
1
15
-
-
-
-
-
599
599
-
-
-
-
-
-
-
582
(351)
231
-
-
-
(42)
22
(460)
-
2
-
2
-
-
-
-
-
(4)
(1)
584
248
832
107
1
15
-
22
(464)
(1)
At 31 December 2014
254
4,324
(76)
213
57
5,405
21
10,198
for the financial year ended 31 December 2013
At 1 January 2013
250
4,133
(146)
182
(169)
6,303
36
10,589
Group loss for the financial year
Other comprehensive income
Total comprehensive income
28 Issue of share capital (net of expenses)
7 Share-based payment expense
- share option schemes
- Performance Share Plans/Restricted Share Plan
28 Treasury/own shares reissued
28 Shares acquired by Employee Benefit Trust (own shares)
Share option exercises
11 Dividends (including shares issued in lieu of dividends)
30 Non-controlling interests arising on acquisition of subsidiaries
Acquisition of non-controlling interests
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
86
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34
(6)
-
-
-
-
-
-
-
-
1
14
-
-
-
-
-
-
-
(373)
(373)
-
-
-
-
-
-
-
-
-
(296)
117
(179)
-
-
-
(34)
-
19
(455)
-
-
At 31 December 2013
252
4,219
(118)
197
(542)
5,654
1
-
1
-
-
-
-
-
-
(1)
1
(13)
24
(295)
(256)
(551)
88
1
14
-
(6)
19
(456)
1
(13)
9,686
N. Hartery, A. Manifold, Directors
106 CRH
Consolidated Statement of Cash Flows
for the financial year ended 31 December 2014
Notes
Cash flows from operating activities
Profit/(loss) before tax
8 Finance costs (net)
9 Share of equity accounted investments' result
4 Profit on disposals
Group operating profit
2 Depreciation charge
2 Amortisation of intangible assets
2 Impairment charge
7 Share-based payment expense
Other (primarily pension payments)
19 Net movement on working capital and provisions
Cash generated from operations
Interest paid (including finance leases)
Corporation tax paid
Net cash inflow from operating activities
Cash flows from investing activities
4 Proceeds from disposals
Interest received
Dividends received from equity accounted investments
13 Purchase of property, plant and equipment
30 Acquisition of subsidiaries (net of cash acquired)
15 Other investments and advances
19 Deferred and contingent acquisition consideration paid
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from exercise of share options
Acquisition of non-controlling interests
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
28 Treasury/own shares purchased
Repayment of interest-bearing loans, borrowings and finance leases
11 Dividends paid to equity holders of the Company
11 Dividends paid to non-controlling interests
Net cash (outflow)/inflow from financing activities
Increase in cash and cash equivalents
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
Increase in cash and cash equivalents
22 Cash and cash equivalents at 31 December
Reconciliation of opening to closing net debt
Net debt at 1 January
30 Debt in acquired companies
4 Debt in disposed companies
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
Repayment of interest-bearing loans, borrowings and finance leases
Increase in cash and cash equivalents
Mark-to-market adjustment
Translation adjustment
20 Net debt at 31 December
N. Hartery, A. Manifold, Directors
2014
€m
2013
€m
761
288
(55)
(77)
917
631
44
49
16
(66)
35
1,626
(262)
(127)
1,237
345
8
30
(435)
(151)
(3)
(26)
(232)
22
(1)
901
(11)
-
(934)
(353)
(4)
(380)
625
2,540
130
625
3,295
(2,973)
(7)
-
(901)
11
934
625
(3)
(178)
(2,492)
(215)
297
44
(26)
100
671
54
650
15
(96)
77
1,471
(269)
(110)
1,092
122
13
33
(497)
(336)
(78)
(105)
(848)
19
(13)
1,491
64
(6)
(586)
(367)
(1)
601
845
1,747
(52)
845
2,540
(2,909)
(44)
17
(1,491)
(64)
586
845
10
77
(2,973)
CRH 107
Accounting Policies
(including key accounting estimates and assumptions)
Basis of Preparation
The Consolidated Financial Statements of CRH plc have been prepared
in accordance with International Financial Reporting Standards (IFRSs)
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. The Consolidated Financial
Statements are also prepared in compliance with the Companies Acts
1963 to 2013 and Article 4 of the EU IAS Regulation.
CRH plc, the Parent Company, is a publicly traded limited company
incorporated and domiciled in the Republic of Ireland.
The Consolidated Financial Statements, which are presented in euro
millions, have been prepared under the historical cost convention as
modified by the measurement at fair value of share-based payments,
retirement benefit obligations and certain financial assets and liabilities
including derivative financial instruments.
The accounting policies set out below have been applied consistently by
all the Group’s subsidiaries, joint ventures and associates to all periods
presented in these Consolidated Financial Statements.
Certain prior year disclosures have been amended to conform to current
year presentation. An amount of €161 million has been reclassified from
cost of sales to operating expenses in 2013 to align with current year
presentation.
In accordance with Section 148(8) of the Companies Act, 1963 and Section
71 (A) 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.
Adoption of IFRS and International Financial Reporting Interpretations
Committee (IFRIC) interpretations
(i) The following standards and amendments have been adopted during
the financial year
• Offsetting Financial Assets and Financial Liabilities (Amendments
to IAS 32 Financial Instruments: Presentation)
• Recoverable Amount Disclosures for Non-Financial Assets
(Amendments to IAS 36 Impairment of Assets)
• Novation of Derivatives and Continuation of Hedge Accounting
(Amendments to IAS 39 Financial Instruments: Recognition and
Measurement)
• IFRIC 21 Levies
The application of the above standards and interpretations did not result
in material changes to the results or financial position of the Group.
(ii) IFRS and IFRIC interpretations being adopted in subsequent years
IFRS 15 Revenue from Contracts with Customers will replace IAS 18
Revenue, IAS 11 Construction Contracts and related interpretations.
The new standard is applicable from 1 January 2017 and is subject to
EU endorsement. IFRS 15 provides a new five step model to be applied
to revenue arising from contracts with customers. The principles in
IFRS 15 provide a more structured approach to measuring and recognising
revenue and may impact the timing and amount of revenue recognised
from contracts with customers. The Group is currently assessing the
impact of IFRS 15.
IFRS 9 Financial Instruments reflects the final phase of the IASB’s
work on the replacement of IAS 39 Financial Instruments: Recognition
and Measurement and applies to the classification and measurement of
financial assets and liabilities as defined in IAS 39, impairment, and the
application of hedge accounting. IFRS 9 is effective from 1 January 2018
108 CRH
and is awaiting EU endorsement. The Group is currently assessing the
impact of IFRS 9.
There are no other IFRS or IFRIC interpretations that are effective
subsequent to the CRH 2014 financial year-end that would have a material
impact on the results or financial position of the Group.
Key Accounting Policies which involve Estimates, Assumptions and
Judgements
The preparation of the Consolidated Financial Statements in accordance
with IFRS requires management to make certain estimates, assumptions
and judgements that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Management
believes that the estimates, assumptions and judgements upon which it
relies are reasonable based on the information available to it at the time
that those estimates, assumptions and judgements are made. In some
cases, the accounting treatment of a particular transaction is specifically
dictated by IFRS and does not require management’s judgement in its
application.
Management consider that their use of estimates, assumptions and
judgements in the application of the Group’s accounting policies are inter-
related and therefore discuss them together below. The critical accounting
policies which involve significant estimates, assumptions or judgements,
the actual outcome of which could have a material impact on the Group’s
results and financial position outlined below, are as follows:
Impairment of long-lived assets and goodwill – Notes 13 and 14
Impairment of property, plant and equipment and goodwill
The carrying values of items of property, plant and equipment are reviewed
for indicators of impairment at each reporting date and are subject to
impairment testing when events or changes in circumstances indicate
that the carrying values may not be recoverable. Goodwill is subject to
impairment testing on an annual basis and at any time during the year if
an indicator of impairment is considered to exist. A decision to dispose of
a business unit represents one such indicator and in these circumstances
the recoverable amount is assessed on a fair value less costs of disposal
basis. In the year in which a business combination is effected and where
some or all of the goodwill allocated to a 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.
Property, plant and equipment assets are reviewed for potential
impairment by applying a series of external and internal indicators
specific to the assets under consideration; these indicators encompass
macroeconomic issues including the inherent cyclicality of the building
materials sector, actual obsolescence or physical damage, a deterioration
in forecast performance in the internal reporting cycle and restructuring
and rationalisation programmes.
Where the carrying value exceeds the estimated recoverable amount
(being the greater of fair value less costs of disposal and value-in-use),
an impairment loss is recognised by writing down the assets 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. Impairment losses arising in respect of goodwill are not
reversed once recognised.
Goodwill relating to associates and joint ventures is included in
the carrying amount of the investment and is neither amortised nor
individually tested for impairment. Where indicators of impairment of an
investment arise in accordance with the requirements of IAS 39 Financial
Instruments: Recognition and Measurement, the carrying amount is tested
for impairment by comparing its recoverable amount with its carrying
amount.
The impairment testing process requires management to make significant
judgements and estimates regarding the future cash flows expected to
be generated by the use of and, if applicable, the eventual disposal of,
long-lived assets and goodwill as well as other factors to determine the
fair value of the assets. Management periodically evaluates and updates
the estimates based on the conditions which influence these variables.
A detailed discussion of the impairment methodology applied and key
assumptions used by the Group in the context of long-lived assets and
goodwill is provided in note 14 to the Consolidated Financial Statements.
The assumptions and conditions for determining impairments of long-
lived assets and goodwill reflect management’s best assumptions and
estimates, but these items involve inherent uncertainties described above,
many of which are not under management’s control. As a result, the
accounting for such items could result in different estimates or amounts
if management used different assumptions or if different conditions occur
in future accounting periods.
Retirement benefit obligations – Note 27
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.
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 in the Consolidated Balance Sheet. The deferred tax impact
of pension scheme surpluses and deficits is disclosed separately within
deferred tax assets or liabilities as appropriate. Remeasurements,
comprising of actuarial gains and losses and the return on plan assets
(excluding net interest), are recognised immediately in the Consolidated
Balance Sheet with a corresponding debit or credit to retained earnings
through other comprehensive income in the period in which they occur.
Remeasurements are not reclassified to profit or loss in subsequent
periods.
The defined benefit pension asset or liability in the Consolidated Balance
Sheet comprises the total for each plan of the present value of the defined
benefit obligation less the fair value of plan assets out of which the
obligations are to be settled directly. Plan assets are assets that are held by
a long-term employee benefit fund or qualifying insurance policies. Fair
value is based on market price information and, in the case of published
securities, 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.
Assumptions
The assumptions underlying the actuarial valuations from which
the amounts recognised in the Consolidated Financial Statements
are determined (including discount rates, rates of increase in future
compensation levels, mortality rates and healthcare cost trend rates) are
updated annually based on current economic conditions and for any
relevant changes to the terms and conditions of the pension and post-
retirement plans. These assumptions can be affected by (i) for the discount
rate, changes in the rates of return on high-quality corporate bonds; (ii)
for future compensation levels, future labour market conditions and (iii)
for healthcare cost trend rates, the rate of medical cost inflation in the
relevant regions. The weighted average actuarial assumptions used and
sensitivity analysis in relation to the significant assumptions employed
in the determination of pension and other post-retirement liabilities are
contained in note 27 to the Consolidated Financial Statements.
While management believes that the assumptions used are appropriate,
differences in actual experience or changes in assumptions may affect
the obligations and expenses recognised in future accounting periods.
The assets and liabilities of defined benefit pension schemes may exhibit
significant period-on-period volatility attributable primarily to changes
in bond yields and longevity. In addition to future service contributions,
significant cash contributions may be required to remediate past service
deficits.
Provisions for liabilities – Note 25
A provision is recognised when the Group has a present obligation (either
legal or constructive) as a result of a past event, it is probable that a
transfer of economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation. Where the
Group anticipates that a provision will be reimbursed, the reimbursement
is recognised as a separate asset only when it is virtually certain that
the reimbursement will arise. The expense relating to any provision is
presented in the Consolidated Income Statement net of any reimbursement.
Provisions are measured at the present value of the expenditures expected
to be required to settle the obligation. The increase in the provision due
to passage of time is recognised as an interest expense. 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.
Rationalisation and redundancy provisions
Provisions for rationalisation and redundancy are established when
a detailed restructuring plan has been drawn up, resolved upon by the
responsible decision-making level of management and communicated
to the employees who are affected by the plan. These provisions are
recognised at the present value of future disbursements and cover only
expenses that arise directly from restructuring measures and are necessary
for restructuring; these provisions exclude costs related to future business
operations. Restructuring measures may include the sale or termination of
business units, site closures and relocation of business activities, changes
in management structure or a fundamental reorganisation of departments
or business units.
Environmental and remediation provisions
The measurement of environmental and remediation provisions is
based on an evaluation of currently available facts with respect to each
individual site and considers factors such as existing technology, currently
enacted laws and regulations and prior experience in remediation of
sites. Inherent uncertainties exist in such evaluations primarily due to
unknown conditions, changing governmental regulations and legal
standards regarding liability, the protracted length of the clean-up
periods and evolving technologies. The environmental and remediation
liabilities provided for in the Consolidated Financial Statements reflect
the information available to management at the time of determination of
the liability and are adjusted periodically as remediation efforts progress
or as additional technical or legal information becomes available. Due
CRH 109
Accounting Policies | continued
to the inherent uncertainties described above, many of which are not
under management’s control, the accounting for such items could result
in different amounts if management used different assumptions or if
different conditions occur in future accounting periods.
Legal contingencies
The status of each significant claim and legal proceeding in which the
Group is involved is reviewed by management on a periodic basis and the
Group’s potential financial exposure is assessed. If the potential loss from
any claim or legal proceeding is considered probable, and the amount can
be estimated, a liability is recognised for the estimated loss. Because of the
uncertainties inherent in such matters, the related provisions are based on
the best information available at the time; the issues taken into account by
management and factored into the assessment of legal contingencies
include, as applicable, the status of settlement negotiations, interpretations
of contractual obligations, prior experience with similar contingencies/
claims, the availability of insurance to protect against the downside
exposure and advice obtained from legal counsel and other third parties.
As additional information becomes available on pending claims, the
potential liability is reassessed and revisions are made to the amounts
accrued where appropriate. Such revisions in the estimates of the potential
liabilities could have a material impact on the results of operations and
financial position of the Group.
Taxation – current and deferred – Notes 10 and 26
Current tax represents the expected tax payable (or recoverable) on the
taxable profit for the year using tax rates enacted for the period. Any
interest or penalties arising are included within current tax. Where
items are accounted for outside of profit or loss, the related income tax is
recognised either in other comprehensive income or directly in equity as
appropriate.
Deferred tax is recognised using the liability method on temporary
differences arising at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts in the Consolidated Financial
Statements. However, deferred tax liabilities are not recognised if they
arise from the initial recognition of goodwill; in addition, deferred income
tax is not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit
or loss. For the most part, no provision has been made for temporary
differences applicable to investments in subsidiaries and joint ventures
as the Group is in a position to control the timing of reversal of the
temporary differences and it is probable that the temporary differences
will not reverse in the foreseeable future. However, a temporary difference
has been recognised to the extent that specific assets have been identified
for sale or where there is a specific intention to unwind the temporary
difference in the foreseeable future. Due to the absence of control in the
context of associates (significant influence only), deferred tax liabilities
are recognised where appropriate in respect of CRH’s investments in these
entities on the basis that the exercise of significant influence would not
necessarily prevent earnings being remitted by other shareholders in the
undertaking.
Deferred tax is determined using tax rates (and laws) that have been
enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled. Deferred tax assets and
liabilities are not subject to discounting. Deferred tax assets are recognised
in respect of all deductible temporary differences, carry-forward of unused
tax credits and unused tax losses to the extent that it is probable that
taxable profits will be available against which the temporary differences
can be utilised. The carrying amounts of deferred tax assets are subject to
review at each balance sheet date and are reduced to the extent that future
taxable profits are considered to be inadequate to allow all or part of any
deferred tax asset to be utilised.
110 CRH
The Group’s income tax charge is based on reported profit and expected
statutory tax rates, which reflect various allowances and reliefs and
tax planning opportunities available to the Group in the multiple tax
jurisdictions in which it operates. The determination of the Group’s
provision for income tax requires certain judgements and estimates in
relation to matters where the ultimate tax outcome may not be certain.
The recognition or non-recognition of deferred tax assets as appropriate
also requires judgement as it involves an assessment of the future
recoverability of those assets. In addition, the Group is subject to tax audits
which can involve complex issues that could require extended periods for
resolution. Although management believes that the estimates included
in the Consolidated Financial Statements and its tax return positions
are reasonable, no assurance can be given that the final outcome of these
matters will not be different than that which is reflected in the Group’s
historical income tax provisions and accruals. Any such differences could
have a material impact on the income tax provision and profit for the
period in which such a determination is made.
Property, plant and equipment – Note 13
The Group’s accounting policy for property, plant and equipment is
considered critical because the carrying value of €7,422 million at
31 December 2014 represents a significant portion (34%) of total assets
at that date. Property, plant and equipment are stated at cost less any
accumulated depreciation and any accumulated impairments except
for certain items that had been revalued to fair value prior to the date of
transition to IFRS (1 January 2004).
Repair and maintenance expenditure is included in an asset’s carrying
amount or recognised as a separate asset, as appropriate, only when it
is probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably. All
other repair and maintenance expenditure is charged to the Consolidated
Income Statement during the financial period in which it is incurred.
Borrowing costs incurred in the construction of major assets which take
a substantial period of time to complete are capitalised in the financial
period in which they are incurred.
In the application of the Group’s accounting policy, judgement is exercised
by management in the determination of residual values and useful lives.
Depreciation and depletion is calculated to write off the book value of
each item of property, plant and equipment over its useful economic life
on a straight-line basis at the following rates:
Land and buildings: The book value of mineral-bearing land, less an
estimate of its residual value, is depleted over the period of the mineral
extraction in the proportion which production for the year bears to the
latest estimates of proven and probable mineral reserves. Land other
than mineral-bearing land is not depreciated. In general, buildings are
depreciated at 2.5% per annum (“p.a.”).
Plant and machinery: These are depreciated at rates ranging from
3.3% p.a. to 20% p.a. depending on the type of asset. Plant and machinery
includes transport which is, on average, depreciated at 20% p.a.
Depreciation methods, useful lives and residual values are reviewed
at each financial year-end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in
the asset are accounted for by changing the depreciation period or method
as appropriate on a prospective basis. For the Group’s accounting policy
on impairment of property, plant and equipment please see impairment of
long-lived assets and goodwill.
Other Significant Accounting Policies
Basis of consolidation
The Consolidated Financial Statements include the financial statements
of the Parent Company and all subsidiaries, joint ventures and associates,
drawn up to 31 December each year. The financial year-ends of the Group’s
subsidiaries, joint ventures and associates are co-terminous.
Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases. A change in
the ownership interest of a subsidiary without a change in control is
accounted for as an equity transaction.
Non-controlling interests represent the portion of the equity of a subsidiary
not attributable either directly or indirectly to the Parent Company and are
presented separately in the Consolidated Income Statement and within
equity in the Consolidated Balance Sheet, distinguished from Parent
Company shareholders’ equity. Acquisitions of non-controlling interests
are accounted for as transactions with equity holders in their capacity as
equity holders and therefore no goodwill is recognised as a result of such
transactions. On an acquisition by acquisition basis, the Group recognises
any non-controlling interest in the acquiree either at fair value or at the
non-controlling interest’s proportionate share of the acquiree’s net assets.
Investments in associates and joint ventures – Notes 9 and 15
An associate is an entity over which the Group has significant influence.
Significant influence is the power to participate in the financial and
operating policy decisions of an entity, but is not control or joint control
over those policies.
A joint venture is a type of joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
joint venture. Joint control is the contractually agreed sharing of control
of the arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
The Group’s investments in its associates and joint ventures are accounted
for using the equity method from the date significant influence/joint
control is deemed to arise until the date on which significant influence/
joint control ceases to exist or when the interest becomes classified as an
asset held for sale.
The Consolidated Income Statement reflects the Group’s share of profit
after tax of the related associates and joint ventures. Investments in
associates and joint ventures are carried in the Consolidated Balance
Sheet at cost, adjusted in respect of post-acquisition changes in the
Group’s share of net assets, less any impairment in value. Loans advanced
to equity accounted investments that have the characteristics of equity
financing are also included in the investment held on the Consolidated
Balance Sheet. If necessary, impairment losses on the carrying amount of
an investment are reported within the Group’s share of equity accounted
investments’ results in the Consolidated Income Statement. If the Group’s
share of losses exceeds the carrying amount of an associate or joint
venture, the carrying amount is reduced to nil and recognition of further
losses is discontinued except to the extent that the Group has incurred
obligations in respect of the associate or joint venture.
Transactions eliminated on consolidation
Intra-group 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 and is
net of trade discounts and value added tax/sales tax. Other than in the
case of construction contracts, revenue is recognised to the extent that
revenue and related costs incurred or to be incurred are subject to reliable
measurement, that it is probable that economic benefits will flow to the
Group and that the significant risks and rewards of ownership have passed
to the buyer, usually on delivery of the goods.
Construction contracts
The Group engages primarily in the performance of fixed price contracts, as
opposed to cost plus contracts. Contract costs are recognised as incurred.
When the outcome of a contract can be estimated reliably the Group
recognises revenue in accordance with the percentage-of-completion
method. The completion percentage is generally measured based on the
proportion of contract costs incurred at the balance sheet date relative to the
total estimated costs of the contract. When the outcome of a construction
contract cannot be estimated reliably, contract revenue is recognised only
to the extent of contract costs incurred where it is probable that these costs
will be recoverable.
When it is probable that total contract costs will exceed total contract
revenue, the expected loss is recognised immediately as an expense.
Revenue and/or costs in respect of variations or contracts claims and
incentive payments, to the extent that they arise, are recognised when
it is probable that the amount, which can be measured reliably, will be
recovered from/paid to the customer.
If circumstances arise that may change the original estimates of revenues,
costs or extent of progress towards completion, estimates are revised.
These revisions may result in increases or decreases in revenue or costs
and are reflected in income in the period in which the circumstances that
give rise to the revision became known by management.
Segment reporting – Note 1
Operating segments are reported in a manner consistent with the internal
organisational and management structure and the internal reporting
information provided to the Chief Operating Decision-Maker who is
responsible for allocating resources and assessing performance of the
operating segments.
Assets and liabilities held for sale – Note 4
Non-current assets and disposal groups classified as held for sale are
measured at the lower of carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held for sale if
their carrying amounts will be recovered through a sale transaction rather
than through continuing use. This condition is regarded as met only when
the sale is highly probable and the asset or disposal group is available
for immediate sale in its present condition subject only to terms that
are usual and customary for sales of such assets. Management must be
committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year from the date of classification as held
for sale.
Property, plant and equipment and intangible assets are not depreciated
or amortised once classified as held for sale. The Group ceases to use the
equity method of accounting from the date on which an interest in a joint
venture or associate becomes held for sale. Non-current assets classified
as held for sale and liabilities directly associated with those assets are
presented separately as current items in the Consolidated Balance Sheet.
Share-based payments – Note 7
The Group operates a number of equity-settled share-based payment
plans. Its policy in relation to the granting of share options and awards
under these plans, together with the nature of the underlying market and
non-market performance and other vesting conditions, are addressed
in the Directors’ Remuneration Report on page 75. The Group has no
exposure in respect of cash-settled share-based payment transactions and
share-based payment transactions with cash alternatives.
Share options
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.
CRH 111
Accounting Policies | continued
The share options granted by the Company are at market value at date of
grant and are not subject to market-based vesting conditions within the
meaning of IFRS 2 Share-based Payment.
The cost is recognised, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are
fulfilled. The cumulative expense recognised at each reporting date until
the vesting date reflects the extent to which the vesting period has expired
and the Group’s best estimate of the number of equity instruments that
will ultimately vest. The Consolidated Income Statement expense/credit
for a period represents the movement in cumulative expense recognised
at the beginning and end of that period. The cumulative charge to the
Consolidated Income Statement is reversed only where the performance
condition is not met or where an employee in receipt of share options
leaves service prior to completion of the expected vesting period and
those options forfeit in consequence.
No expense is recognised for awards that do not ultimately vest, except
for share-based payments where vesting is conditional upon a non-vesting
condition which is treated as vesting irrespective of whether or not it is
satisfied, provided that all other performance and/or service conditions
are satisfied.
Where an award is cancelled, it is treated as if it is vested on the date
of cancellation, and any expense not yet recognised for the award is
recognised immediately. This includes any award where non-vesting
conditions within the control of either the Company or the employee are
not met. All cancellations of awards are treated equally.
The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium when the
options are exercised.
The dilutive effect of outstanding options is reflected as additional share
dilution in the determination of diluted earnings per share.
To the extent that the Group receives a tax deduction relating to the services
paid in shares, deferred tax in respect of share options is provided on the
basis of the difference between the market price of the underlying equity
as at the date of the financial statements and the exercise price of the
option; where the amount of any tax deduction (or estimated future tax
deduction) exceeds the amount of the related cumulative remuneration
expense, the current or deferred tax associated with the excess is
recognised directly in equity.
Awards under the Performance Share Plans
All awards granted under the 2006 Performance Share Plan and 75% of
the awards granted under the 2014 Performance Share Plan are subject
to a total shareholder return-based (and hence market-based) vesting
condition. Accordingly, the fair value assigned to the related equity
instruments at the grant date is adjusted so as to reflect the anticipated
likelihood as at the grant date of achieving the market-based vesting
condition. Awards are treated as vesting irrespective of whether or not the
market condition is satisfied, provided that all other performance and/or
service conditions are satisfied.
The remaining 25% of awards granted under the 2014 Performance Share
Plan are subject to a cumulative cash flow target (non-market based)
vesting condition. The fair value of the awards is calculated as the market
price of the shares at the date of grant. No expense is recognised for awards
that do not ultimately vest. At the balance sheet date the estimate of the
level of vesting is reviewed and any adjustment necessary is recognised in
the Consolidated Income Statement.
Awards under the Restricted Share Plan
The fair value of shares granted under the Restricted Share Plan is
calculated as the market price of the shares at the date of grant reduced by
the present value of dividends expected to be paid over the vesting period.
Business combinations – Note 30
The Group applies the acquisition method in accounting for business
combinations. The cost of an acquisition is measured as the aggregate of
the consideration transferred (excluding amounts relating to the settlement
of pre-existing relationships), the amount of any non-controlling interest
in the acquiree and, in a business combination achieved in stages, the
acquisition-date fair value of the acquirer’s previously-held equity interest
in the acquiree. Transaction costs that the Group incurs in connection
with a business combination are expensed as incurred.
To the extent that settlement of all or any part of consideration for a
business combination is deferred, the fair value of the deferred component
is determined through discounting the amounts payable to their present
value at the date of exchange. The discount component is unwound as
an interest charge in the Consolidated Income Statement over the life of
the obligation. Any contingent consideration is recognised at fair value at
the acquisition date and included in the cost of the acquisition. The fair
value of contingent consideration at acquisition date is arrived at through
discounting the expected payment (based on scenario modelling) to
present value. In general, in order for contingent consideration to become
payable, pre-defined profit and/or profit/net asset ratios must be exceeded.
Subsequent changes to the fair value of the contingent consideration will
be recognised in profit or loss unless the contingent consideration is
classified as equity, in which case it is not remeasured and settlement is
accounted for within equity.
The assets and liabilities arising on business combination activity are
measured at their acquisition-date fair values. Contingent liabilities
assumed in business combination activity are recognised as of the
acquisition date, where such contingent liabilities are present obligations
arising from past events and their fair value can be measured reliably. In
the case of a business combination achieved in stages, the acquisition-date
fair value of the acquirer’s previously-held equity interest in the acquiree
is remeasured to fair value as at the acquisition date through profit or loss.
When the initial accounting for a business combination is determined
provisionally, any adjustments to the provisional values allocated to the
consideration, identifiable assets or liabilities (and contingent liabilities,
if relevant) are made within the measurement period, a period of no more
than one year from the acquisition date.
Goodwill – Note 14
Goodwill arising on a business combination is initially measured at cost,
being the excess of the cost of an acquisition over the net identifiable
assets and liabilities assumed at the date of acquisition and relates to
the future economic benefits arising from assets which are not capable of
being individually identified and separately recognised. Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses. If the cost of the acquisition is lower than the fair value of the net
assets of the subsidiary acquired, the identification and measurement of
the related assets and liabilities and contingent liabilities are revisited and
the cost is reassessed with any remaining balance recognised immediately
in the Consolidated Income Statement.
The carrying amount of goodwill in respect of associates and joint ventures
is included in investments accounted for using the equity method (i.e.
within financial assets) in the Consolidated Balance Sheet.
Where a subsidiary is disposed of or terminated through closure, the
carrying value of any goodwill of that subsidiary is included in the
determination of the net profit or loss on disposal/termination.
Intangible assets (other than goodwill) arising on business combinations
– Note 14
An intangible asset is capitalised separately from goodwill as part of a
business combination at cost (fair value at date of acquisition).
Information on the models used by the Group to estimate the fair value of
awards granted is included in note 7.
Subsequent to initial recognition, intangible assets are carried at cost less
any accumulated amortisation and any accumulated impairment losses.
112 CRH
The carrying values of definite-lived intangible assets (the Group does not
currently have any indefinite-lived intangible assets other than goodwill)
are reviewed for indicators of impairment at each reporting date and are
subject to impairment testing when events or changes in circumstances
indicate that the carrying values may not be recoverable.
Intangible assets are amortised on a straight-line basis. In general, definite-
lived intangible assets are amortised over periods ranging from one to ten
years, depending on the nature of the intangible asset.
Amortisation periods, useful lives, expected patterns of consumption
and residual values are reviewed at each financial year-end. Changes in
the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for by changing
the amortisation period or method as appropriate on a prospective basis.
Leases – Notes 3 and 29
Leases where the lessor retains substantially all the risks and rewards of
ownership are classified as operating leases. Operating lease rentals are
charged to the Consolidated Income Statement on a straight-line basis
over the lease term.
Other financial assets – Note 15
All investments are initially recognised at the fair value of consideration
given plus any directly attributable transaction costs. Where equity
investments are actively traded in organised financial markets, fair value
is determined by reference to Stock Exchange quoted market bid prices
at the close of business on the balance sheet date. Unquoted equity
investments are recorded at historical cost given that it is impracticable to
determine fair value in accordance with IAS 39 and are included within
financial assets in the Consolidated Balance Sheet.
Inventories and construction contracts – Note 16
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. Estimates of net realisable value are based on
the most reliable evidence available at the time the estimates are made,
taking into consideration fluctuations of price or cost directly relating to
events occurring after the end of the period, the likelihood of short-term
changes in buyer preferences, product obsolescence or perishability (all
of which are generally low given the nature of the Group’s products) and
the purpose for which the inventory is held. Materials and other supplies
held for use in the production of inventories are not written down below
cost if the finished goods, in which they will be incorporated, are expected
to be sold at or above cost.
Amounts recoverable on construction contracts, which are included in
receivables, are stated at the net invoiced value of the work done less
amounts received as progress payments on account. Cumulative costs
incurred, net of amounts transferred to cost of sales, after deducting
foreseeable losses, provisions for contingencies and payments on account
not matched with revenue, are included as construction contract balances
in inventories. Cost includes all expenditure directly related to specific
projects and an allocation of fixed and variable overheads incurred in the
Group’s contract activities based on normal operating capacity.
Trade and other receivables – Note 17
Trade receivables are carried at original invoice amount less an allowance
for potentially uncollectible debts. Provision is made when there is
objective evidence that the Group will not be in a position to collect the
associated debts. Bad debts are written-off to the Consolidated Income
Statement on identification.
Cash and cash equivalents – Note 22
Cash and cash equivalents comprise cash balances held for the purpose 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. 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 for
the purposes of the Consolidated Statement of Cash Flows.
Interest-bearing loans and borrowings – Note 23
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 floating rates (using interest rate swaps), are
measured at amortised cost adjusted for changes in value attributable
to the hedged risks arising from changes in underlying market interest
rates. The computation of amortised cost includes any issue costs and any
discount or premium materialising on settlement.
Gains and losses are recognised in the Consolidated Income Statement
through amortisation on the basis of the period of the loans and borrowings.
Borrowing costs arising on financial instruments are recognised as an
expense in the period in which they are incurred (unless capitalised as
part of the cost of property, plant and equipment).
Derivative financial instruments and hedging practices – Note 24
In order to manage interest rate, foreign currency and commodity risks and
to realise the desired currency profile of borrowings, the Group employs
derivative financial instruments (principally interest rate swaps, currency
swaps and forward foreign exchange contracts). Derivative financial
instruments are recognised initially at fair value on the date on which a
derivative contract is entered into and are subsequently remeasured at fair
value. The carrying value of derivatives is fair value based on discounted
future cash flows and adjusted for counterparty risk. Future floating rate
cash flows are estimated based on future interest rates (from observable
yield curves at the end of the reporting period). Fixed and floating rate
cash flows are discounted at future interest rates and translated at period-
end foreign exchange rates.
At the inception of a derivative transaction, the Group documents the
relationship between the hedged item and the hedging instrument
together with its risk management objective and the strategy underlying
the proposed transaction. The Group also documents its assessment,
both at the inception of the hedging relationship and subsequently on an
ongoing basis, of the effectiveness of the hedging instrument in offsetting
movements in the fair values or cash flows of the hedged items. Where
derivatives do not fulfil the criteria for hedge accounting, changes in fair
values are reported in the Consolidated Income Statement.
Fair value and cash flow hedges
The Group uses fair value hedges and cash flow hedges in its treasury
activities. For the purposes of hedge accounting, hedges are classified either
as fair value hedges (which entail hedging the exposure to movements in
the fair value of a recognised asset or liability or an unrecognised firm
commitment that could affect profit or loss) or cash flow hedges (which
hedge exposure to fluctuations in future cash flows derived from a
particular risk associated with a recognised asset or liability, or a highly
probable forecast transaction that could affect profit or loss).
Where the conditions for hedge accounting are satisfied and the hedging
instrument concerned is classified as a fair value hedge, any gain or loss
CRH 113
Accounting Policies | continued
stemming from the remeasurement of the hedging instrument to fair value
is reported in the Consolidated Income Statement. In addition, any gain
or loss on the hedged item which is attributable to the hedged risk is
adjusted against the carrying amount of the hedged item and reflected
in the Consolidated Income Statement. Where the adjustment is to the
carrying amount of a 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, net of the income tax effect, with the
ineffective portion being reported in the Consolidated Income Statement.
The associated gains or losses that had previously been recognised as
other comprehensive income are transferred to the Consolidated Income
Statement contemporaneously with the materialisation of the hedged
transaction. Any gain or loss arising in respect of changes in the time value
of the derivative financial instrument is excluded from the measurement
of hedge effectiveness and is recognised immediately in the Consolidated
Income Statement.
Hedge accounting is discontinued when the hedging instrument expires
or is sold, terminated or exercised, or no longer qualifies for hedge
accounting. At that point in time, any cumulative gain or loss on the
hedging instrument recognised as other comprehensive income remains
there until the forecast transaction occurs. If a hedged transaction is no
longer anticipated to occur, the net cumulative gain or loss previously
recognised as other comprehensive income is transferred to the
Consolidated Income Statement in the period.
Net investment hedges
Where foreign currency borrowings provide a hedge against a net
investment in a foreign operation, and the hedge is deemed to be
effective, foreign exchange differences are taken directly to a foreign
currency translation reserve. The ineffective portion of any gain or loss
on the hedging instrument is recognised immediately in the Consolidated
Income Statement. Cumulative gains and losses remain in equity until
disposal of the net investment in the foreign operation at which point the
related differences are transferred to the Consolidated Income Statement
as part of the overall gain or loss on sale.
Fair value hierarchy – Note 24
For financial reporting purposes, fair value measurements are categorised
into Level 1, 2 or 3 based on the degree to which inputs to the fair value
measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities;
Dividends
Dividends on Ordinary Shares are recognised as a liability in the
Consolidated Financial Statements in the period in which they are
declared by the Parent Company.
Emission rights
Emission rights are accounted for such that a liability is recognised only
in circumstances where emission rights have been exceeded from the
perspective of the Group as a whole and the differential between actual
and permitted emissions will have to be remedied through the purchase
of the required additional rights at fair value. Assets and liabilities arising
in respect of under and over-utilisation of emission credits respectively
are accordingly netted against one another in the preparation of the
Consolidated Financial Statements. To the extent that excess emission
rights are disposed of during a financial period, the profit or loss
materialising thereon is recognised immediately within cost of sales in
the Consolidated Income Statement.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities
are measured using the currency of the primary economic environment in
which the entity operates (“the functional currency”). The Consolidated
Financial Statements are presented in euro, which is the presentation
currency of the Group and the functional currency of the Parent Company.
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date. All currency translation differences are taken to the
Consolidated Income Statement with the exception of all monetary items
that provide an effective hedge for a net investment in a foreign operation.
These are recognised in other comprehensive income until the disposal of
the net investment, at which time they are recognised in the Consolidated
Income Statement.
Results and cash flows of subsidiaries, joint ventures and associates
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 and net assets of
non-euro subsidiaries, joint ventures and associates are recognised in a
separate translation reserve within equity, net of differences on related
currency borrowings. All other translation differences are taken to the
Consolidated Income Statement. Goodwill and fair value adjustments
arising on acquisition of a foreign operation are regarded as assets and
liabilities of the foreign operation and are translated accordingly.
The principal exchange rates used for the translation of results, cash flows
and balance sheets into euro were as follows:
Level 2: valuation techniques for which the lowest level of inputs which
have a significant effect on the recorded fair value are observable, either
directly or indirectly; and
euro 1 =
Level 3: valuation techniques for which the lowest level of inputs that
have a significant effect on the recorded fair value are not based on
observable market data.
US Dollar
Pound Sterling
Polish Zloty
Average
Year-end
2014
2013
2014
2013
1.3290
1.3281
1.2141
1.3791
0.8062
0.8493
0.7789
0.8337
4.1839
4.1975
4.2732
4.1543
Share capital and dividends – Notes 11 and 28
Ukrainian Hryvnia
15.8908 10.8339
19.1814 11.3583
Treasury Shares and own shares
Ordinary Shares acquired by the Parent Company or purchased by the
Employee Benefit Trust on behalf of the Parent Company under the terms
of the Performance Share Plans and the Restricted Share Plan are deducted
from equity and presented on the face of the Consolidated Balance Sheet.
No gain or loss is recognised in profit or loss on the purchase, sale, issue
or cancellation of the Parent Company’s Ordinary Shares.
Swiss Franc
Canadian Dollar
Argentine Peso
Turkish Lira
Indian Rupee
1.2147
1.2311
1.2024
1.2276
1.4664
1.3684
1.4063
1.4671
10.7785
7.2892
10.2645
8.9910
2.9068
2.5335
2.8320
2.9605
81.0576 77.9300
76.7190 85.3660
Chinese Renminbi
8.1883
8.1646
7.5358
8.3491
114 CRH
Notes on Consolidated 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. In conjunction with the ongoing portfolio review, the
Group reorganised its European business in 2014. Following this, the Group is now organised into six
segments: Europe Heavyside, Europe Lightside, Europe Distribution, Americas Materials, Americas
Products and Americas Distribution. Comparative segment information has been restated. No operating
segments have been aggregated to form these segments.
Europe Heavyside businesses are predominantly engaged in the manufacturing and supply of cement,
aggregates, readymixed and precast concrete, concrete landscaping and asphalt products.
Europe Lightside businesses are predominately engaged in the production and supply of construction
accessories, shutters & awnings, fencing and composite access chambers.
Europe Distribution businesses are predominantly engaged in supplying Do-It-Yourself (DIY), General
Merchants and Sanitary, Heating and Plumbing (SHAP) businesses catering to the general public and
small and medium-sized builders, selling a range of bricks, cement, sanitary, heating, plumbing and
other building products.
Americas Materials businesses are predominantly engaged in the production and sale of aggregates,
asphalt and readymixed concrete products and provide asphalt paving services.
Americas Products businesses are predominantly engaged in the production and sale of concrete
masonry and hardscapes, clay brick, packaged lawn and garden products, packaged cement mixes,
fencing, utility, drainage and structural precast products, glass and aluminium glazing systems and
construction accessories.
Americas Distribution businesses are predominantly engaged in supplying Exterior Products such as
roofing and siding and Interior Products such as gypsum wallboard, metal studs and acoustical ceiling
systems.
The principal factors employed in the identification of the six segments reflected in this note include the
Group’s organisational structure in 2014, the nature of the reporting lines to the Chief Operating
Decision-Maker (as defined in IFRS 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 (as defined)*), supplemental information based on
EBITDA (as defined)* is also provided below. Given that net finance costs and income tax are managed
on a centralised basis, these items are not allocated between operating segments for the purposes of
the information presented to the Chief Operating Decision-Maker and are accordingly omitted from the
detailed segmental analysis below. There are no asymmetrical allocations to reporting segments which
would require disclosure.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges,
profit on disposals and the Group’s share of equity accounted investments’ result after tax.
CRH 115
1. Segment Information | continued
A. Operating segments disclosures - Consolidated Income Statement data
Continuing operations - year ended 31 December
Group operating profit
before depreciation and
amortisation (EBITDA
(as defined)*)
Depreciation,
amortisation and
impairment (i)
2014
€m
380
94
190
664
609
263
105
977
1,641
2013
€m
326
71
186
583
557
246
89
892
1,475
2014
€m
229
23
78
330
254
118
22
394
724
2013
€m
721
43
80
844
331
178
22
531
1,375
Revenue
2014
€m
2013
€m
3,929
913
3,999
8,841
5,070
3,225
1,776
10,071
18,912
3,786
856
3,936
8,578
4,721
3,068
1,664
9,453
18,031
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Profit on disposals (ii)
Finance costs less income
Other financial expense
Share of equity accounted investments' profit/(loss) (iii)
Profit/(loss) before tax
(i) See notes 13 and 14 for details of the impairment charge.
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Group operating
profit (EBIT)
2014
€m
2013
€m
151
71
112
334
355
145
83
583
917
77
(246)
(42)
55
761
(395)
28
106
(261)
226
68
67
361
100
26
(249)
(48)
(44)
(215)
(ii) Profit/(loss) on
disposals (note 4)
(iii) Share of equity
accounted
investments’ profit/
(loss) (note 9)
38
1
6
45
11
20
1
32
77
6
6
(2)
10
19
(3)
-
16
26
35
-
13
48
7
-
-
7
55
(60)
-
9
(51)
7
-
-
7
(44)
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted
investments’ result after tax.
116 CRH
1. Segment Information | continued
B. Operating segments disclosures - Consolidated Balance Sheet data
Continuing operations - as at 31 December
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
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)
Cash and cash equivalents
Assets held for sale
Total assets as reported in the Consolidated Balance Sheet
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)
Liabilities associated with assets classified as held for sale
Total liabilities as reported in the Consolidated Balance Sheet
C. Operating segments disclosures - other items
Additions to non-current assets
Total assets
2014
€m
3,864
761
2,221
6,846
6,245
2,542
951
9,738
16,584
1,329
23
102
186
3,262
531
22,017
2013
€m
4,605
768
2,217
7,590
5,510
2,360
853
8,723
16,313
1,340
23
80
133
2,540
-
20,429
Total liabilities
2014
€m
2013
€m
1,468
215
644
2,327
969
679
283
1,931
4,258
1,428
180
542
2,150
772
656
255
1,683
3,833
5,866
23
1,459
213
11,819
5,540
53
1,317
-
10,743
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Continuing operations - year ended 31 December
Property, plant and
equipment (note 13)
2014
€m
113
14
36
163
173
81
18
272
435
2013
€m
132
13
49
194
199
83
21
303
497
Financial assets
(note 15)
2014
€m
2013
€m
-
-
-
-
3
-
-
3
3
70
-
1
71
7
-
-
7
78
Total Group
2014
€m
113
14
36
163
176
81
18
275
438
2013
€m
202
13
50
265
206
83
21
310
575
CRH 117
1. Segment Information | continued
D. Entity-wide disclosures
Section 1: Information about products and services
The Group’s revenue from external customers in respect of its principal products and services is analysed in the disclosures above. Segment revenue
includes €3,351 million (2013: €3,268 million) in respect of revenue applicable to construction contracts. The bulk of our construction activities are performed
by our Americas Materials reportable segment, are for the most part short-term in nature and are generally completed within the same financial reporting
period.
Revenue derived through the supply of services and intersegment revenue 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 31. 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.
Section 2: Information about geographical areas and customers
CRH has a presence in 34 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; individual foreign countries which exceed 10% of total external Group revenue have
been highlighted separately on the basis of materiality.
Country of domicile - Republic of Ireland
United States of America
Benelux (mainly the Netherlands)
Other
Total Group
Year ended 31 December
Revenue by destination
2013
€m
2014
€m
306
9,650
2,350
6,606
18,912
278
8,991
2,324
6,438
18,031
As at 31 December
Non-current assets
2013
2014
€m
€m
477
6,948
1,231
4,268
12,924
475
6,241
1,280
4,794
12,790
There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8. The individual entities within
the Group have a large number of customers spread across various activities, end-uses and geographies.
2. Cost Analysis
Cost of sales analysis
Raw materials and goods for resale
Employment costs (note 5)
Energy conversion costs
Repairs and maintenance
Depreciation, amortisation and impairment (i)
Change in inventory (note 19)
Other production expenses (primarily sub-contractor costs and equipment rental)
Total
Operating costs analysis
Selling and distribution costs
Administrative expenses
Total
(i) Depreciation, amortisation and impairment analysis
Depreciation and depletion (note 13)
Impairment of property, plant and equipment (note 13)
Impairment of intangible assets (note 14)
Amortisation of intangible assets (note 14)
Total
118 CRH
2014
€m
2013
€m
7,527
1,985
655
452
532
34
2,242
13,427
7,240
1,974
644
421
792
37
2,045
13,153
3,143
1,425
4,568
3,054
1,724
4,778
Cost of sales
Operating costs
Total
2014
€m
485
47
-
-
532
2013
€m
521
271
-
-
792
2014
€m
146
2
-
44
192
2013
€m
150
4
375
54
583
2014
€m
631
49
-
44
724
2013
€m
671
275
375
54
1,375
2. Cost Analysis | continued
Segmental analysis of 2013 impairment charges
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Annual
impairment
process
€m
Portfolio
review
€m
Included in
operating profit
€m
58
-
4
62
-
10
-
10
72
444
13
-
457
60
61
-
121
578
502
13
4
519
60
71
-
131
650
Portfolio
review
included in
share of equity
accounted
entities
€m
101
-
4
105
-
-
-
-
105
Narrative disclosures regarding the 2013 impairments are included in section (b) of note 14.
3. Operating Profit Disclosures
Operating lease rentals
- hire of plant and machinery
- land and buildings
- other operating leases
Total
Total
€m
603
13
8
624
60
71
-
131
755
2014
€m
2013
€m
149
216
48
413
108
220
47
375
Auditor’s remuneration
In accordance with statutory requirements in Ireland, fees for professional services provided by the Group’s independent auditor in respect of each of the
following categories were:
EY Ireland (statutory auditor)
EY (network firms)
Total
Audit of the
Group accounts (i)
2013
2014
€m
€m
2
12
14
2
12
14
Other assurance
services (ii)
Tax advisory
services
2014
€m
2013
€m
2014
€m
2013
€m
-
1
1
-
2
2
-
1
1
-
1
1
Total
2014
€m
2
14
16
2013
€m
2
15
17
(i) Audit of the Group accounts includes Sarbanes-Oxley attestation and parent and subsidiary statutory audit fees, but excludes €2 million
(2013: €1 million) paid to auditors other than EY.
(ii) Other assurance services includes attestation and due diligence services that are closely related to the performance of the audit.
CRH 119
4. Business and Non-current Asset Disposals
(a) Profit on disposal
Assets/(liabilities) disposed of at net carrying amount:
- non-current assets (notes 13,14,15)
- working capital and provisions (note 19)
- asset held for sale (ii) (note 15)
- interest-bearing loans and borrowings
Net assets disposed
Reclassification of currency translation effects on disposal
Total
Proceeds from disposals (net of disposal costs)
Asset exchange (ii) (note 30)
Profit/(loss) on disposals
Business
disposals
Disposal of other
non-current assets
Total
2014 (i)
€m
2013
€m
2014
€m
2013
€m
2014
€m
2013
€m
117
11
-
-
128
57
185
224
-
39
43
6
139
(17)
171
3
174
26
144
(4)
83
-
-
-
83
-
83
121
-
38
66
-
-
-
66
-
66
96
-
30
200
11
-
-
211
57
268
345
-
77
109
6
139
(17)
237
3
240
122
144
26
(i) This relates principally to the disposal of our 50% equity stake in our Turkish joint venture, Denizli Çimento (which was part of the Europe Heavyside segment).
(ii) On 25 February 2013, the Group transferred its 26% stake in Corporacion Uniland to Cementos Portland Valderrivas in exchange for a 99% stake in
Cementos Lemona, an integrated cement, readymixed concrete and aggregates business.
(b) Assets held for sale
In November 2013, a Group-wide portfolio review was initiated which identified a number of business units which did not meet our future returns objectives
and which were in line for divestment. This review was completed during 2014; a multi-year divestment programme commenced during the year, with
proceeds of €0.35 billion realised on business and non-current asset disposals in 2014.
On 15 December 2014, the Group announced that it had reached agreement to dispose of its clay and concrete businesses in the United Kingdom (Europe
Heavyside) and its clay business in the United States (Americas Products) for an Enterprise Value (EV) of Stg £414 million (€522 million). As part of the
transaction, the purchaser will assume certain debt and pension liabilities and accordingly, the net cash consideration payable to CRH is expected to be
approximately Stg £295 million. The transaction is expected to close in the first quarter of 2015. The assets associated with this transaction, together with
a number of smaller business units, met the “held for sale” criteria set out in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations as at
31 December 2014 and the relevant assets and liabilities have accordingly been reclassified as assets or liabilities held for sale as appropriate as set out in
the table below.
The businesses either divested in 2014 or held for sale at year-end 2014 are not considered to be either separate major lines of business or geographical
areas of operation and therefore do not constitute discontinued operations as defined in IFRS 5.
Assets
Property, plant and equipment (note 13)
Intangible assets (note 14)
Financial assets (note 15)
Deferred income tax assets (note 26)
Inventories (note 19)
Trade and other receivables (note 19)
Cash and cash equivalents (note 22)
Assets held for sale
Liabilities
Trade and other payables (note 19)
Current income tax liabilities
Provisions for liabilities (note 19)
Deferred income tax liabilities (note 26)
Retirement benefit obligations (note 27)
Liabilities associated with assets classified as held for sale
Net assets held for sale
31 December
2014
€m
262
17
34
4
102
79
33
531
98
4
7
23
81
213
318
Total losses recognised in other comprehensive income and accumulated in equity relating to assets held for sale amounted to €164 million at 31 December 2014.
120 CRH
5. Employment
The average number of employees is as follows:
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Employment costs charged in the Consolidated Income Statement are analysed as follows:
Wages and salaries
Social welfare costs
Other employment-related costs
Share-based payment expense (note 7)
Total retirement benefits expense (note 27)
Total
Total charge analysed between:
Cost of sales
Operating costs
Finance costs (net) - applicable to retirement benefit obligations (note 8)
Total
6. Directors’ Emoluments and Interests
Year ended 31 December
2014
2013
19,096
5,003
11,607
35,706
18,457
17,707
3,836
40,000
75,706
2014
€m
2,987
368
448
16
215
4,034
1,985
2,035
14
4,034
19,996
4,849
11,263
36,108
18,216
17,276
3,709
39,201
75,309
2013
€m
2,915
360
464
15
201
3,955
1,974
1,959
22
3,955
Directors’ emoluments (which are included in administrative expenses in note 2) and interests are presented in the Directors’ Remuneration Report on pages
72 to 95 of this Annual Report.
7. Share-based Payment Expense
Share option expense (i)
Performance Share Plans and Restricted Share Plan expense (ii)
Total
2014
€m
1
15
16
2013
€m
1
14
15
(i) Relates to options granted under the 2000 share option scheme, the 2010 share option scheme and the savings-related share option schemes.
(ii) Relates to awards granted under the 2006 and 2014 Performance Share Plans and the 2013 Restricted Share Plan.
The share-based payment expense is reflected in operating costs in the Consolidated Income Statement.
In May 2014, shareholders approved the adoption of a new Performance Share Plan (the “2014 Performance Share Plan”), which replaced the 2006
Performance Share Plan (approved by shareholders in May 2006), the 2010 Share Option Scheme (approved by shareholders in May 2010) and the 2013
Restricted Share Plan (together, the “Existing Plans”). Following the introduction of the 2014 Performance Share Plan, no further awards will be made under
the Existing Plans. Consequently, the last awards under the Existing Plans were made in 2013. The general terms and conditions applicable to the various
plans are set out in the Directors’ Remuneration Report on pages 72 to 95.
The Group also operates savings-related share option schemes. Due to the immateriality of the savings-related schemes’ expense and the level of savings-
related share options outstanding, detailed financial disclosures have not been provided in relation to these schemes.
CRH 121
7. Share-based Payment Expense | continued
Share option schemes
Details of options granted under the share option schemes (excluding savings-related share option schemes)
Outstanding at beginning of year
Granted
Exercised (a)
Lapsed
Outstanding at end of year (b)
Exercisable at end of year
Weighted average
exercise price
Number of
options
2014
Weighted average
exercise price
Number of
options
2013
€18.75 21,798,887
-
(919,205)
(5,398,491)
-
€16.58
€16.77
€19.58 15,481,191
1,248,698
€18.79
€18.84
€16.19
€13.21
€18.53
23,295,955
3,853,400
(1,245,029)
(4,105,439)
€18.75
€17.94
21,798,887
2,114,772
(a) The weighted average share price at the date of exercise of these options was €20.47 (2013: €17.28).
(b) The level of vesting of options outstanding at the end of the year will be determined by reference to certain performance targets (outlined on page 80 of
this Annual Report). If the performance criteria have been met, these options, or portion thereof as appropriate, may be exercised after the expiration of
three years from their date of grant. All options granted have a life of ten years.
Weighted average remaining contractual life for the share options outstanding at 31 December (years)
Euro-denominated options outstanding at the end of the year (number)
Range of exercise prices (€)
Sterling-denominated options outstanding at the end of the year (number)
Range of exercise prices (Stg£)
2014
4.89
2013
5.54
15,389,922
15.19-29.86
21,683,559
15.07-29.86
91,269
12.80-20.23
115,328
10.04-20.23
The CRH share price at 31 December 2014 was €19.90 (2013: €18.30). The following analysis shows the number of outstanding share options with
exercise prices lower/higher than the year-end share price:
Number of options with exercise prices lower than year-end price:
Exercisable
Not exercisable
Number of options with exercise prices higher than year-end price:
Exercisable
Not exercisable
Total options outstanding
1,248,698
8,789,200
10,037,898
506,581
13,788,399
14,294,980
-
5,443,293
5,443,293
1,608,191
5,895,716
7,503,907
15,481,191
21,798,887
The Group measures the fair value of options granted using the trinomial model (a lattice option-pricing model in accordance with IFRS 2 Share-based
Payment). Due to the immateriality of the share option expense in both the current and the prior year, detailed fair value disclosures have not been included.
2014 Performance Share Plan
The general terms and conditions of the 2014 Performance Share Plan were set out in a circular issued to shareholders prior to the Annual General Meeting
held in 2014, a copy of which is available on www.crh.com. The structure of the 2014 Performance Share Plan is set out in the Directors’ Remuneration
Report on page 72. An expense of €5 million was recognised in 2014.
Details of awards granted under the 2014 Performance Share Plan
Share price
at date
of award
Period to
earliest
release
date
Number of Shares
Initial
award
Net
outstanding
Granted in 2014
€20.49
3 years
2,283,960
2,270,340
75% of vesting is subject to Total Shareholder Return (TSR) performance against sector peers, while the remaining 25% of vesting is subject to a cumulative
cash flow target. A small number of awards are subject only to a three year service period (i.e. no performance conditions).
122 CRH
7. Share-based Payment Expense | continued
The fair value assigned to the portion of awards which are subject to TSR performance was €10.88. The fair value of these awards was calculated using a TSR
pricing model taking account of peer group TSR, volatilities and correlations together with the following assumptions:
Risk-free interest rate (%)
Expected volatility (%)
2014
0.13
21.9
The expected volatility was determined using a historical sample of 37 month-end CRH share prices.
The fair value of (i) the portion of awards subject to cash flow performance and (ii) the awards with no performance conditions (which are subject to a three
year service period) was €20.49. The fair value was calculated using the closing CRH share price at the date the award was granted. Awards vest only if all
performance and service conditions are met. No expense is recognised for awards that do not ultimately vest. At the balance sheet date the estimate of the
level of vesting is reviewed and any necessary adjustment to the share-based payment expense is recognised in the Consolidated Income Statement.
2006 Performance Share Plan
The expense of €8 million (2013: €13 million) reported in the Consolidated Income Statement has been arrived at through applying a Monte Carlo simulation
technique to model the combination of market-based and non-market-based performance conditions in the Plan.
Details of awards granted under the 2006 Performance Share Plan
Granted in 2011
Granted in 2012
Granted in 2013
Share price
at date
of award
Period to
earliest
release
date
Number of Shares
Initial
award
Net
outstanding
Fair
value
€16.52
3 years
1,684,250
-
€9.72
€15.63
3 years
2,079,000
1,849,000
€7.77
€16.69
3 years
1,195,500
1,040,500
€8.54
In February 2014, 742,604 of the shares awarded under the Performance Share Plan in 2011 vested and accordingly were released to the participants of the
scheme. The remaining awards granted in 2011 lapsed.
The fair value of the shares awarded was determined using a Monte Carlo simulation technique taking account of peer group TSR, volatilities and correlations,
together with the following assumptions:
Risk-free interest rate (%)
Expected volatility (%)
2013 Restricted Share Plan
2013
0.10
31.3
Due to the immateriality of the Restricted Share Plan expense and the level of awards outstanding in this plan at 31 December 2014 and 31 December 2013,
detailed financial disclosures have not been provided in relation to this share-based payment arrangement.
CRH 123
8. Finance Costs and Finance Income
Finance costs
Interest payable on borrowings
Net 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)
Net (gain)/loss on interest rate swaps not designated as hedges
Net finance cost on gross debt including related derivatives
Finance income
Interest receivable on loans to joint ventures and associates
Interest receivable on cash and cash equivalents and other
Finance income
Finance costs less income
Other financial expense
Unwinding of discount element of provisions for liabilities (note 25)
Unwinding of discount applicable to deferred and contingent acquisition consideration (note 18)
Pension-related finance cost (net) (note 27)
Total
2014
€m
2013
€m
308
(42)
(15)
-
8
(5)
254
(3)
(5)
(8)
323
(55)
68
1
(79)
4
262
(3)
(10)
(13)
246
249
16
12
14
42
15
11
22
48
(i) The Group uses interest rate swaps to convert fixed rate debt to floating rate. Fixed rate debt, which has been converted to floating rate through the
use of interest rate swaps, is stated in the Consolidated Balance Sheet at adjusted value to reflect movements in underlying fixed rates. The movement
on this adjustment, together with the offsetting movement in the fair value of the related interest rate swaps, is included in finance costs in each reporting
period.
9. Share of Equity Accounted Investments’ Profit/(Loss)
The Group’s share of joint ventures’ and associates’ result after tax is equity accounted and is presented as a single-line item in the Consolidated Income
Statement; it is analysed as follows between the principal Consolidated Income Statement captions:
Group share of:
Revenue
EBITDA (as defined)*
Depreciation and amortisation
Impairment (i)
Operating profit/(loss)
Finance costs (net)
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
Joint Ventures
2013
2014
€m
€m
Associates
2014
€m
2013
€m
Total
2014
€m
2013
€m
488
469
953
961
1,441
1,430
62
(27)
-
35
(6)
29
(3)
26
60
(27)
(54)
(21)
(2)
(23)
(5)
(28)
106
(45)
-
61
(21)
40
(11)
29
109
(39)
(51)
19
(22)
(3)
(13)
(16)
168
(72)
-
96
(27)
69
(14)
55
169
(66)
(105)
(2)
(24)
(26)
(18)
(44)
An analysis of the result 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 joint ventures and associates is presented in note 15.
(i) See section (b) of note 14 for details of the 2013 impairment charge.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges and profit on disposals.
124 CRH
10. Income Tax Expense
Recognised within the Consolidated Income Statement
(a) Current tax
Republic of Ireland
Overseas
Total current tax expense
(b) Deferred tax
Origination and reversal of temporary differences:
Retirement benefit obligations
Share-based payment expense
Derivative financial instruments
Other items
Total deferred tax expense
Income tax expense reported in the Consolidated Income Statement
Recognised within equity
(a) Within the Consolidated Statement of Comprehensive Income:
Deferred tax - retirement benefit obligations
Income tax recognised directly within equity
Reconciliation of applicable tax rate to effective tax rate
2014
€m
-
141
141
7
-
6
23
36
177
69
69
2013
€m
(1)
77
76
16
(1)
4
(15)
4
80
(43)
(43)
Profit/(loss) before tax (€m)
Tax charge expressed as a percentage of profit/(loss) before tax (effective tax rate):
- current tax expense only
- total income tax expense (current and deferred)
761
(215)
18.5%
23.2%
(35.3%)
(37.2%)
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
Higher tax rates on overseas earnings
Other items (primarily comprising items not chargeable to tax/expenses not deductible for tax):
- arising from 2013 impairment
- other items
Total effective tax rate
% of profit/(loss)
before tax
12.5
9.6
-
1.1
23.2
12.5
17.8
(70.2)
2.7
(37.2)
Other disclosures
Changes in tax rates
The total tax charge in future periods will be affected by any changes to the tax rates in force in the countries in which the Group operates.
Excess of capital allowances over depreciation
The current tax charge will also be impacted by changes in the excess of tax depreciation (capital allowances) over accounting depreciation. Based on
current capital investment plans, the Group expects to continue to be in a position to claim capital allowances in excess of depreciation in future years.
Investments in subsidiaries
Given that participation exemptions and tax credits would be available in the context of the Group’s investments in subsidiaries in the majority of the
jurisdictions in which the Group operates, the aggregate amount of temporary differences in respect of which deferred tax liabilities have not been recognised
would be immaterial.
Proposed dividends
There are no income tax consequences for the Company in respect of dividends proposed prior to issuance of the Consolidated Financial Statements and
for which a liability has not been recognised.
CRH 125
11. Dividends
The dividends paid and proposed in respect of each class of share capital are as follows:
Dividends to shareholders
Preference
5% Cumulative Preference Shares €3,175 (2013: €3,175)
7% 'A' Cumulative Preference Shares €77,521 (2013: €77,521)
Equity
Final - paid 44.00c per Ordinary Share (2013: 44.00c)
Interim - paid 18.50c per Ordinary Share (2013: 18.50c)
Total
Dividends proposed (memorandum disclosure)
Equity
Final 2014 - proposed 44.00c per Ordinary Share (2013: 44.00c)
Reconciliation to Consolidated Statement of Cash Flows
Dividends to shareholders
Less: issue of scrip shares in lieu of cash dividends (note 28)
Dividends paid to equity holders of the Company
Dividends paid by subsidiaries to non-controlling interests
Total dividends paid
12. Earnings per Ordinary Share
The computation of basic and diluted earnings per Ordinary Share is set out below:
Numerator computations
Group profit/(loss) for the financial year
Profit attributable to non-controlling interests
Profit/(loss) attributable to equity holders of the Company
Preference dividends
Profit/(loss) attributable to ordinary equity holders of the Company - numerator for basic/diluted earnings per Ordinary Share
Depreciation charge
Amortisation of intangible assets
Impairment of property, plant and equipment and intangible assets
Impairment of financial assets
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 (iii)
Denominator for diluted earnings per Ordinary Share
Basic earnings/(loss) per Ordinary Share
Diluted earnings/(loss) per Ordinary Share
"Cash" earnings per Ordinary Share (i)
2014
€m
2013
€m
-
-
323
137
460
-
-
320
135
455
359
323
460
(107)
353
4
357
455
(88)
367
1
368
2014
€m
2013
€m
584
(2)
582
-
582
631
44
49
-
1,306
737.6
0.7
738.3
78.9c
78.8c
177.1c
(295)
(1)
(296)
-
(296)
671
54
650
105
1,184
729.2
-
729.2
(40.6c)
(40.6c)
162.4c
(i) This measure 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 Ordinary Share on a diluted earnings basis amounted to 176.9c. This is not a recognised measure under generally accepted
accounting principles.
(ii) The weighted average number of Ordinary Shares included in the computation of basic and diluted earnings per Ordinary Share has been adjusted to
exclude shares held by the Employee Benefit Trust and Ordinary Shares repurchased and held by the Company (CRH plc) as Treasury Shares given that
these shares do not rank for dividend. The number of Ordinary Shares so held at the balance sheet date is detailed in note 28.
(iii) Contingently issuable Ordinary Shares (totalling 19,062,236 at 31 December 2014 and 24,282,615 at 31 December 2013) 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 or they are antidilutive for the periods presented.
Subsequent to year end the Group completed a share placing. Further details are set out in note 33.
126 CRH
13. Property, Plant and Equipment
At 31 December 2014
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
At 1 January 2014, net carrying amount
Translation adjustment
Reclassifications
Additions at cost
Arising on acquisition (note 30)
Disposals at net carrying amount
Reclassified as held for sale
Depreciation charge for year
Impairment charge for year (ii)
At 31 December 2014, net carrying amount
The equivalent disclosure for the prior year is as follows:
At 31 December 2013
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
At 1 January 2013, net carrying amount
Translation adjustment
Reclassifications
Additions at cost
Arising on acquisition (note 30)
Disposals at net carrying amount
Depreciation charge for year
Impairment charge for year (iii)
At 31 December 2013, net carrying amount
At 1 January 2013
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
Land and
buildings (i)
€m
Plant and
machinery
€m
Assets in
course of
construction
€m
6,068
(1,892)
4,176
4,096
329
66
45
20
(68)
(173)
(132)
(7)
4,176
5,912
(1,816)
4,096
4,313
(129)
7
46
132
(30)
(132)
(111)
4,096
5,838
(1,525)
4,313
8,940
(5,914)
3,026
3,214
64
34
264
71
(27)
(88)
(499)
(7)
3,026
8,847
(5,633)
3,214
3,371
(114)
144
350
210
(44)
(539)
(164)
3,214
8,694
(5,323)
3,371
220
-
220
229
1
(100)
126
-
-
(1)
-
(35)
220
229
-
229
287
(8)
(151)
101
-
-
-
-
229
287
-
287
Total
€m
15,228
(7,806)
7,422
7,539
394
-
435
91
(95)
(262)
(631)
(49)
7,422
14,988
(7,449)
7,539
7,971
(251)
-
497
342
(74)
(671)
(275)
7,539
14,819
(6,848)
7,971
(i) The carrying value of mineral-bearing land included in the land and buildings category above amounted to €1,997 million at the balance sheet date (2013:
€1,824 million).
(ii) The impairment charge of €49 million in 2014, of which €47 million has been charged against cost of sales (see note 2), relates to the write down of
property, plant and equipment in Europe Heavyside (€35 million) and Americas Products (€14 million).
(iii) The property, plant and equipment impairment charge of €275 million in 2013, of which €271 million was charged against cost of sales (see note 2), arose
primarily from a Group-wide portfolio review initiated in November 2013; further details of this, and of the related impairment of intangible assets in 2013,
are set out in section (b) of note 14.
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
2014
€m
211
70
2013
€m
155
91
CRH 127
14. Intangible Assets
At 31 December 2014
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
At 1 January 2014, net carrying amount
Translation adjustment
Arising on acquisition (note 30)
Disposals
Reclassified as held for sale
Amortisation charge for year
At 31 December 2014, net carrying amount
The equivalent disclosure for the prior year is as follows:
At 31 December 2013
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
At 1 January 2013, net carrying amount
Translation adjustment
Arising on acquisition (note 30)
Disposals
Amortisation charge for year
Impairment charge for year
At 31 December 2013, net carrying amount
At 1 January 2013
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
Other intangible assets
Goodwill
€m
Marketing-
related
€m
Customer-
related (i)
€m
Contract-
based
€m
4,362
(344)
4,018
3,734
279
31
(10)
(16)
-
4,018
4,158
(424)
3,734
4,067
(117)
169
(12)
-
(373)
3,734
4,122
(55)
4,067
52
(40)
12
12
3
2
(1)
-
(4)
12
48
(36)
12
17
(1)
1
-
(5)
-
12
51
(34)
17
448
(322)
126
151
6
10
(2)
(1)
(38)
126
420
(269)
151
177
(2)
20
-
(42)
(2)
151
413
(236)
177
37
(20)
17
14
1
4
-
-
(2)
17
31
(17)
14
6
(1)
18
(2)
(7)
-
14
17
(11)
6
Total
€m
4,899
(726)
4,173
3,911
289
47
(13)
(17)
(44)
4,173
4,657
(746)
3,911
4,267
(121)
208
(14)
(54)
(375)
3,911
4,603
(336)
4,267
(i) The customer-related intangible assets relate predominantly to non-contractual customer relationships.
(a) Annual goodwill testing
The net book value of goodwill capitalised under previous GAAP (Irish GAAP) as at the transition date to IFRS (1 January 2004) has been treated as deemed cost.
Goodwill arising on acquisition since that date is capitalised at cost.
Cash-generating units
Goodwill acquired through business combination activity has been allocated to cash-generating units (CGUs) that are expected to benefit from synergies in that
combination. The cash-generating 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 20 (2013: 19) cash-generating
units have been identified and these are analysed between the six business segments in the Group below. The increase in the number of CGUs in 2014 relates
to organisational changes in our Europe segments. As a result, a number of entities have been added to the Benelux CGU in Europe Heavyside, two new CGUs
have been added (Germany - Europe Heavyside and Europe Lightside) and the Europe Products CGU has been removed. All businesses within the various cash-
generating units exhibit similar and/or consistent profit margin and asset intensity characteristics. Assets, liabilities, deferred tax and goodwill have been assigned
to the CGUs on a reasonable and consistent basis.
Significant under-performance in any of CRH’s major cash-generating units may give rise to a material write-down of goodwill which would have a substantial
impact on the Group’s income and equity.
Cash-generating units
Goodwill (€m)
Europe Heavyside*
Europe Lightside*
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
2014
2013
8
1
1
10
7
2
1
10
20
7
1
1
9
7
2
1
10
19
2014
650
346
649
1,645
1,313
703
357
2,373
4,018
2013
697
313
641
1,651
1,151
618
314
2,083
3,734
* Included in the goodwill numbers of Europe Heavyside and Europe Lightside at 31 December 2014 are amounts of €54 million and €9 million respectively (2013: €53 million
and €9 million respectively) relating to businesses identified for divestment as part of the portfolio review, which have been tested separately (see section (b) below).
128 CRH
14. Intangible Assets | continued
Impairment testing methodology and results
Goodwill is subject to impairment testing on an annual basis. The recoverable amount of each of the 20 CGUs is determined based on a value-in-use
computation, using Level 3 inputs in accordance with the fair value hierarchy. The cash flow forecasts are primarily based on a five-year strategic plan document
formally approved by senior management and the Board of Directors and specifically exclude the impact of future development activity. These cash flows are
projected forward for an additional five years to determine the basis for an annuity-based terminal value, calculated on the same basis as the Group’s acquisition
modelling methodology. As in prior years, the terminal value is based on a 20-year annuity. 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 CGU. The real pre-tax discount rates used range from 7.5% to 12.2% (2013: 7.8% to 11.7%); these rates are in line with the Group’s
estimated weighted average cost of capital, arrived at using the Capital Asset Pricing Model.
The 2014 annual goodwill impairment testing process has resulted in no intangible asset impairments. The 2013 annual impairment testing process resulted in
an impairment of €58 million being recorded in respect of our Benelux CGU in Europe Heavyside due to a difficult trading environment in 2013 and a slower
recovery than previously anticipated. The assumptions underlying the 2013 value-in-use model projections resulted in a present value (using a real pre-tax
discount rate of 9.4%) of €241 million and a related goodwill impairment being recorded of €58 million.
Key sources of estimation uncertainty
The cash flows have been arrived at taking account of the Group’s strong financial position, its established history of earnings and cash flow generation and
the nature of the building materials industry, where product obsolescence is very low. However, expected future cash flows are inherently uncertain and are
therefore liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing
are subjective and include projected EBITDA (as defined)* margins, net cash flows, discount rates used and the duration of the discounted cash flow model.
Significant goodwill amounts
The goodwill allocated to the Europe Distribution and the Oldcastle Building Products (Americas Products segment) CGUs accounts for between 10% and 20%
of the total carrying amount of €4,018 million. The goodwill allocated to each of the remaining CGUs is less than 10% of the total carrying value in all other
cases. The additional disclosures required for the two CGUs with significant goodwill are as follows:
Europe Distribution
Oldcastle
Building Products
2014
2013
2014
2013
Goodwill allocated to the cash-generating unit at balance sheet date
€649m
€641m
€699m
€615m
Discount rate applied to the cash flow projections (real pre-tax)
Average EBITDA (as defined)* margin over the initial 5-year period
Value-in-use (present value of future cash flows)
Excess of value-in-use over carrying amount
9.4%
5.9%
9.4%
6.4%
11.9%
11.0%
11.7%
10.6%
€2,015m
€2,201m
€2,588m
€2,380m
€336m
€431m
€509m
€579m
The key assumptions and methodology used in respect of these two CGUs are consistent with those described above. The values applied to each of the
key estimates and assumptions are specific to the individual CGUs and were derived from a combination of internal and external factors based on historical
experience and took into account the cash flows specifically associated with these businesses. The cash flows and 20-year annuity-based terminal value
were projected in line with the methodology disclosed above.
Europe Distribution and Oldcastle Building Products are not included in the CGUs referred to in the “Sensitivity analysis” section below. Given the magnitude
of the excess of value-in-use over carrying amount, and our belief that the key assumptions are reasonable, management believe that it is not reasonably
possible that there would be a change in the key assumptions such that the carrying amount would exceed the value-in-use. Consequently no further
disclosures relating to sensitivity of the value-in-use computations for the Europe Distribution or Oldcastle Building Products CGUs are considered to be
warranted.
Sensitivity analysis
Sensitivity analysis has been performed and results in additional disclosures in respect of 2 of the 20 CGUs. The key assumptions, methodology used and
values applied to each of the key assumptions for the two cash-generating units are in line with those outlined above. The two CGUs had goodwill of €178
million at the date of testing. The table below identifies the amounts by which each of the following assumptions may either decline or increase to arrive at a
zero excess of the present value of future cash flows over the book value of net assets in the two CGUs selected for sensitivity analysis disclosures:
Reduction in EBITDA (as defined)* margin
Reduction in profit before tax
Reduction in net cash flow
Increase in pre-tax discount rate
2 CGUs
1.3 to 2.0 percentage points
8.6% to 15.9%
7.9% to 13.6%
0.7 to 1.4 percentage points
The average EBITDA (as defined)* margin for the aggregate of these two CGUs over the initial 5-year period was 9.2%. The value-in-use (being the present
value of the future net cash flows) was €619 million and the carrying amount was €542 million, resulting in an excess of value-in-use over carrying amount of
€77 million.
While the Ukraine CGU is not considered to require additional sensitivity-related disclosures based on analysis performed, the country’s ongoing political
situation remains uncertain. CRH’s activities in Ukraine are mainly located in the west of the country and are therefore not directly affected by the continuing
conflict; however, the economic outlook for the country as a whole remains unclear. The net asset value of the Ukrainian CGU amounts to €267 million at year-
end 2014.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted
investments’ result after tax.
CRH 129
14. Intangible Assets | continued
(b) Portfolio review update
In November 2013, a Group-wide portfolio review was initiated to identify and focus on those businesses within our portfolio which offer the most attractive
future returns, and to prioritise capital allocation to ensure profitable growth across our network of businesses. This review was completed during the year
and a multi-year divestment programme has commenced with proceeds of €0.35 billion realised on business and non-current asset disposals in 2014 (see
note 4).
The decision to divest of these business units resulted in the need to assess them for impairment, either individually or combined where they form a new
group for disposal purposes. Excluding business units divested during 2014, the remainder were assessed for impairment or reversal of previous impairments
and also assessed from the perspective of the held for sale criteria set out in IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (see
note 4).
A valuation was prepared based on the estimated fair value less costs of disposal (FVLCD) for each business unit. The valuations were then compared to
the carrying value of each business and where that valuation fell below the carrying value an impairment charge was taken.
No goodwill impairments or reversal of previous impairments were recorded during the year.
In 2013, the total impairments (including financial asset impairments) arising from the portfolio review amounted to €683 million, of which €261 million related
to property, plant and equipment (see note 13) and €317 million related to intangible assets. The largest impairments in 2013 arose in two business units
within Europe Heavyside. Both businesses serve the residential new-build sector in mature markets. Financial asset impairments of €105 million were
recorded in 2013 relating to two Europe Heavyside equity accounted investments. The additional disclosures required are as follows:
Amount of impairment loss recognised in 2013
Description of valuation technique
Level of fair value hierarchy
Recoverable amount (FVLCD)
Discount rate applicable to cash flow projections (real pre-tax)
Average EBITDA (as defined)* margin over initial 5-year period
Business 1
Business 2
Financial Assets
2013
€99m
2013
€75m
2013
€105m
Income-based
Income-based
Income-based
Level 3
€182m
8.9%
13.5%
Level 3
€34m
9.2%
13.7%
Level 3
€172m
9.2% - 9.8%
20.1% - 22.5%
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of
equity accounted investments’ result after tax.
130 CRH
15. Financial Assets
At 1 January 2014
Translation adjustment
Investments and advances
Disposals and repayments
Reclassified as held for sale
Retained profit
At 31 December 2014
The equivalent disclosure for the prior year is as follows:
At 1 January 2013
Translation adjustment
Investments and advances
Disposals and repayments
Arising on acquisition (note 30)
Retained loss
At 31 December 2013
Investments accounted for
using the equity method
(i.e. joint ventures and associates)
Share of net
assets
€m
Loans
€m
1,211
73
-
(82)
(34)
25
1,193
1,291
(72)
64
-
2
(74)
1,211
129
14
3
(10)
-
-
136
131
(5)
10
(7)
-
-
129
Total
€m
1,340
87
3
(92)
(34)
25
1,329
1,422
(77)
74
(7)
2
(74)
1,340
Asset held
for sale
€m
Other (i)
€m
-
-
-
-
-
-
-
143
(1)
-
(139)
-
(3)
-
23
-
-
-
-
-
23
34
(1)
4
(14)
-
-
23
(i) Other financial assets primarily comprise trade investments carried at historical cost.
Summarised financial information for the Group’s investment in joint ventures and associates which are accounted for using the equity method is as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Joint Ventures
Associates
Total
2014
€m
548
121
(161)
(73)
435
2013
€m
600
176
(174)
(106)
496
2014
€m
955
538
(209)
(526)
758
2013
€m
862
557
(230)
(474)
715
2014
€m
1,503
659
(370)
(599)
1,193
2013
€m
1,462
733
(404)
(580)
1,211
A listing of the principal equity accounted investments is contained on page 166.
The Group holds a 21.13% stake (2013: 21.13%) in Samse S.A., a publicly-listed distributor in France which is accounted for as an associate investment
above. The fair value of this investment at the balance sheet date, calculated based on the number of shares held multiplied by the closing share price at
31 December 2014 (Level 1 input in the fair value hierarchy), was €75 million (2013: €58 million).
CRH 131
16. Inventories
Raw materials
Work-in-progress (i)
Finished goods
Total inventories at the lower of cost and net realisable value
2014
€m
612
80
1,568
2,260
2013
€m
606
86
1,562
2,254
(i) Work-in-progress includes €8 million (2013: €2 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.
An analysis of the Group’s cost of sales expense is provided in note 2 to the financial statements.
Write-downs of inventories recognised as an expense within cost of sales amounted to €29 million (2013: €19 million).
17. Trade and Other Receivables
Current
Trade receivables
Amounts receivable in respect of construction contracts (i)
Total trade receivables, gross
Provision for impairment
Total trade receivables, net
Amounts receivable from equity accounted investments
Prepayments and other receivables
Total
Non-current
Other receivables
2014
€m
1,810
476
2,286
(106)
2,180
6
458
2,644
2013
€m
1,725
422
2,147
(118)
2,029
4
483
2,516
85
93
The carrying amounts of current and non-current trade and other receivables approximate their fair value largely due to the short-term maturities and nature of
these instruments.
(i)
Includes unbilled revenue and retentions held by customers in respect of construction contracts at the balance sheet date amounting to €119 million
and €82 million respectively (2013: €121 million and €63 million respectively).
Provision for impairment
The movements in the provision for impairment of receivables during the financial year were as follows:
At 1 January
Translation adjustment
Provided during year
Written-off during year
Recovered during year
Reclassified as held for sale
At 31 December
118
4
28
(36)
(6)
(2)
106
123
(2)
36
(33)
(6)
-
118
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 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
1,638
1,554
373
117
45
113
2,286
290
126
53
124
2,147
Trade receivables and amounts receivable in respect of construction contracts are in general receivable within 90 days of the balance sheet date.
132 CRH
18. Trade and Other Payables
Current
Trade payables
Construction contract-related payables (i)
Deferred and contingent acquisition consideration (ii)
Accruals and other payables
Amounts payable to equity accounted investments
Total
Non-current
Other payables
Deferred and contingent acquisition consideration (ii)
Total
2014
€m
1,506
129
59
1,148
52
2,894
109
148
257
2013
€m
1,495
103
24
1,093
39
2,754
105
184
289
(i) Construction contract-related payables include billings in excess of revenue, together with advances received from customers in respect of work to be
performed under construction contracts and foreseeable losses thereon.
Other than deferred and contingent consideration, the carrying amounts of trade and other payables approximate their fair value largely due to the short-term
maturities and nature of these instruments.
(ii) Deferred and contingent acquisition consideration
The fair value of total contingent consideration is €122 million (2013: €120 million), (Level 3 input in the fair value hierarchy) and deferred consideration
is €85 million (2013: €88 million). On an undiscounted basis, the corresponding basis for which the Group may be liable for contingent consideration
ranges from €nil million to a maximum of €145 million. The movement in deferred and contingent consideration during the financial year was as follows:
At 1 January
Translation adjustment
Arising on acquisitions and investments during year (note 30)
Changes in estimate
Paid during year
Discount unwinding
At 31 December
19. Movement in Working Capital and Provisions for Liabilities
208
16
3
(6)
(26)
12
207
297
(9)
17
(3)
(105)
11
208
At 1 January 2014
Translation adjustment
Arising on acquisition (note 30)
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 30)
- paid during year
Reclassified as held for sale
Interest accruals and discount unwinding
(Decrease)/increase in working capital and provisions for liabilities
At 31 December 2014
The equivalent disclosure for the prior year is as follows:
At 1 January 2013
Translation adjustment
Arising on acquisition (note 30)
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 30)
- paid during year
Interest accruals and discount unwinding
(Decrease)/increase in working capital and provisions for liabilities
At 31 December 2013
Trade
and other
receivables
€m
Trade
and other
payables
€m
Provisions
for
liabilities
€m
Inventories
€m
2,254
128
23
(9)
-
-
(102)
-
(34)
2,260
2,333
(74)
41
(9)
-
-
-
(37)
2,254
2,609
165
20
(4)
-
-
(79)
-
18
2,729
2,603
(80)
53
(4)
-
-
-
37
2,609
(3,043)
(173)
(17)
2
(3)
26
98
(1)
(40)
(3,151)
(3,052)
91
(80)
7
(17)
105
(14)
(83)
(3,043)
(380)
(27)
(1)
-
-
-
7
(16)
21
(396)
(366)
9
(14)
-
-
-
(15)
6
(380)
Total
€m
1,440
93
25
(11)
(3)
26
(76)
(17)
(35)
1,442
1,518
(54)
-
(6)
(17)
105
(29)
(77)
1,440
CRH 133
20. Analysis of Net Debt
Components of net debt
Net debt is a non-GAAP measure which we provide to investors as we believe they find it useful. Net debt comprises cash and cash equivalents, derivative financial
instrument assets and liabilities and interest-bearing loans and borrowings and enables investors to see the economic effects of these in total (see note 21 for details
of the capital and risk management policies employed by the Group). Net debt is commonly used in computations such as net debt as a % of total equity and net
debt as a % of market capitalisation.
Cash and cash equivalents (note 22)
Interest-bearing loans and borrowings (note 23)
Derivative financial instruments (net) (note 24)
Group net debt
As at 31 December 2014
As at 31 December 2013
Fair value (i)
Book value
Fair value (i)
Book value
€m
3,295
(6,302)
79
(2,928)
€m
3,295
(5,866)
79
(2,492)
€m
2,540
(5,799)
27
(3,232)
€m
2,540
(5,540)
27
(2,973)
(i) All interest-bearing loans and borrowings are Level 2 fair value measurements.
The following table shows the effective interest rates on period-end fixed, gross and net debt:
As at 31 December 2014
As at 31 December 2013
Interest-bearing loans and borrowings nominal - fixed rate (i)
Derivative financial instruments - fixed rate
Net fixed rate debt including derivatives
Interest-bearing loans and borrowings nominal - floating rate (ii)
Adjustment of debt from nominal to book value (i)
Derivative financial instruments - currency floating rate
Gross debt including derivative financial instruments
Cash and cash equivalents - floating rate
Group net debt
Cash at bank and in hand reclassified as held for sale (note 22)
Group net debt excluding cash reclassified as held for sale
€m
(5,657)
1,227
(4,430)
(63)
(146)
(1,148)
(5,787)
3,295
(2,492)
(33)
(2,525)
Interest
rate
Weighted average
fixed period
Years
4.5%
5.2
4.1%
Interest
rate
Weighted average
fixed period
Years
5.5%
5.1
4.6%
€m
(5,362)
1,518
(3,844)
(54)
(124)
(1,491)
(5,513)
2,540
(2,973)
-
(2,973)
(i) Of the Group’s nominal fixed rate debt at 31 December 2014, €1,616 million (2013: €1,882 million) was hedged to floating rate at inception using interest rate swaps. The
balance of nominal fixed rate debt of €4,041 million (2013: €3,480 million) pertains to financial liabilities measured at amortised cost in accordance with IAS 39 Financial
Instruments: Recognition and Measurement.
(ii) Floating rate debt comprises bank borrowings and finance leases bearing interest at rates set in advance for periods ranging from overnight to less than one year largely
by reference to inter-bank interest rates.
Currency profile
The currency profile of the Group’s net debt and net worth (capital and reserves attributable to the Company’s equity holders) as at 31 December 2014 and 2013
is as follows:
euro
€m
US
Dollar
€m
Pound
Sterling
€m
Swiss
Franc Other (iii)
€m
€m
Total
€m
Group net debt* by major currency
(871)
(1,117)
(68)
(250)
(219)
(2,525)
Non-debt assets (including cash reclassified as held for sale) and liabilities
analysed as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Non-controlling interests
3,061
1,611
(616)
(1,117)
(5)
7,003
2,558
(1,481)
(1,436)
(4)
Capital and reserves attributable to the Company's equity holders
2,063
5,523
The equivalent disclosure for the prior year is as follows:
346
489
(92)
(368)
-
307
778
326
(270)
(191)
(12)
381
2,015
13,203
466
(71)
(288)
-
5,450
(2,530)
(3,400)
(21)
1,903
10,177
Group net debt by major currency
(1,304)
(1,476)
(57)
11
(147)
(2,973)
Non-debt assets and liabilities analysed as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Non-controlling interests
3,378
1,568
(522)
(1,126)
(8)
6,293
2,138
(1,221)
(1,221)
(3)
Capital and reserves attributable to the Company's equity holders
1,986
4,510
433
234
(107)
(208)
-
295
796
330
(169)
(198)
(12)
758
2,113
13,013
526
(77)
(301)
(1)
4,796
(2,096)
(3,054)
(24)
2,113
9,662
(iii) The principal currencies included in this category are the Chinese Renminbi, the Polish Zloty, the Indian Rupee, the Ukrainian Hryvnia, the Canadian Dollar,
the Israeli Shekel, the Turkish Lira and the Argentine Peso.
* Excluding €33 million cash reclassified as held for sale which is analysed by major currency in current assets above.
134 CRH
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. No changes were made in the objectives, policies or processes for
managing capital during 2014.
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 year ended 31 December
2014 amounted to 1.26 times (2013 before impairment charges and the related tax credit: 0.95 times).
The capital structure of the Group, which comprises net debt and capital and reserves attributable to the Company’s equity holders, may be summarised as
follows:
2014
€m
2013
€m
Capital and reserves attributable to the Company's equity holders
Net debt
Capital and net debt
Financial risk management objectives and policies
10,177
2,492
12,669
9,662
2,973
12,635
The Group uses financial instruments throughout its businesses: interest-bearing loans and borrowings, cash and cash equivalents and finance leases are used
to finance the Group’s operations; trade receivables and trade payables arise directly from operations; and derivatives, principally interest rate and currency
swaps and forward foreign exchange contracts, are used to manage interest rate risks and currency exposures and to achieve the desired profile of borrowings.
The Group does not trade in financial instruments nor does it enter into any leveraged derivative transactions.
The Group’s corporate treasury function provides services to the business units, co-ordinates access to domestic and international financial markets, and
monitors and manages the financial risks relating to the operations of the Group. The Head of Group Financial Operations reports to the General Manager of
Finance 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 arising
from financial instruments is of minimal relevance given that exposure is confined to a small number of contracts entered into for the purpose of hedging future
movements in energy costs. The Board reviews and agrees policies for the prudent management of each of these risks as documented below.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates stems predominantly from its long-term debt obligations. Interest cost is managed using a mix
of fixed and floating rate debt. With the objective of managing this mix in a cost-efficient manner, the Group enters into interest rate swaps, under which the
Group contracts to exchange, at predetermined intervals, the difference between fixed and variable interest amounts calculated by reference to 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 Financial Instruments: Recognition and Measurement 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/(loss) before tax and total equity of a range of possible changes in the interest rates applicable
to net floating rate borrowings, with all other variables held constant. These impacts are calculated based on the closing balance sheet for the relevant period
and assume all floating interest rates and interest curves change by the same amount. For profit/(loss) before tax, the impact shown is the impact on closing
balance sheet floating rate net debt for a full year while for total equity the impact shown is the impact on the value of financial instruments.
Percentage change in cost of borrowings
Impact on profit/(loss) before tax
Impact on total equity
+/- 1%
+/- 0.5%
+/- €21m
+/- €10m
+/- €10m
+/- €5m
-/+ €5m
-/+ €8m
-/+ €2m
-/+ €4m
2014
2013
2014
2013
CRH 135
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.
Given the Group’s presence in 34 countries worldwide, the principal foreign exchange risk arises from fluctuations in the euro value of the Group’s net
investment in a wide basket of currencies other than the euro; such changes are reported separately within the Consolidated Statement of Comprehensive
Income. A currency profile of the Group’s net debt and net worth is presented in note 20. The Group’s established policy is to spread its net worth across the
currencies of its various operations with the objective of limiting its exposure to individual currencies and thus promoting consistency with the geographical
balance of its operations. In order to achieve this objective, the Group manages its borrowings, where practicable and cost effective, to hedge a portion of its
foreign currency assets. Hedging is done using currency borrowings in the same currency as the assets being hedged or through the use of other hedging
methods such as currency swaps.
The following table demonstrates the sensitivity of profit/(loss) before tax and equity to selected movements in the relevant US$/€ exchange rate (with all other
variables held constant); the US Dollar has been selected as the appropriate currency for this analysis given the materiality of the Group’s activities in the United
States. The impact on profit/(loss) before tax is based on changing the US$/€ exchange rate used in calculating profit/(loss) before tax for the period. The impact
on total equity and financial instruments is calculated by changing the US$/€ exchange rate used in measuring the closing balance sheet.
Percentage change in relevant US$/€ exchange rate
Impact on profit/(loss) before tax
Impact on total equity*
* Includes the impact on financial instruments which is as follows:
+/- 5% +/- 2.5%
2014
2013
-/+ €26m -/+ €13m
-/+ €7m
-/+ €14m
2014 -/+ €263m -/+ €135m
2013 -/+ €215m -/+ €110m
2014
2013
+/- €53m +/- €27m
+/- €70m +/- €36m
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. They exclude trade receivables and trade payables.
Credit/counterparty risk
In addition to cash at bank and in hand, the Group holds significant cash balances which are invested on a short-term basis and are classified as cash
equivalents (see note 22). These deposits and other financial instruments (principally certain derivatives and loans and receivables included within financial
assets) give rise to credit risk on amounts due from counterparty financial institutions (stemming from their insolvency or a downgrade in their credit ratings).
Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty primarily depending on its credit rating and by regular
review of these ratings. Acceptable credit ratings are high investment-grade ratings - 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 (including insolvency) is the carrying
value of the relevant financial instrument.
In its worldwide insurance programme, the Group carries appropriate levels of insurance for typical business risks (including product liability) with various
leading insurance companies. However, in the event of the failure of one or more of its insurance counterparties, the Group could be impacted by losses where
recovery from such counterparties is not possible.
Credit risk arising in the context of the Group’s operations is not significant with the total bad debt provision at the balance sheet date amounting to 4.6% of
gross trade receivables (2013: 5.5%). Customer credit risk is managed at appropriate Group locations according to established policies, procedures and
controls. Customer credit quality is assessed in line with strict credit rating criteria and credit limits 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 17 comprise a large number of
customers spread across the Group’s activities and geographies with balances classified as neither past due nor impaired representing 72% of the total trade
receivables balance at the balance sheet date (2013: 72%); amounts receivable from related parties (notes 17 and 31) are immaterial. Factoring and credit
guarantee arrangements are employed in certain of the Group’s operations where deemed to be of benefit by operational management.
Liquidity risk
The principal liquidity risks faced by the Group stem from the maturation of debt obligations and derivative transactions. A downgrade of CRH’s credit ratings
may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. The Group’s
corporate treasury function ensures that sufficient resources are available to meet such liabilities as they fall due through a combination of cash and cash
equivalents, cash flows and undrawn committed bank facilities. Flexibility in funding sources is achieved through a variety of means including (i) maintaining
cash and cash equivalents only with a 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.
136 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 31 December 2014
Financial liabilities - cash outflows
Trade and other payables
Finance leases
Other interest-bearing loans and borrowings
Interest payments on other interest-bearing loans and borrowings
Cross-currency swaps - gross cash outflows
Gross projected cash outflows
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows
Cross-currency swaps - gross cash inflows
Gross projected cash inflows
The equivalent disclosure for the prior year is as follows:
At 31 December 2013
Financial liabilities - cash outflows
Trade and other payables
Finance leases
Other interest-bearing loans and borrowings
Interest payments on finance leases
Interest payments on other interest-bearing loans and borrowings
Cross-currency swaps - gross cash outflows
Gross projected cash outflows
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows
Cross-currency swaps - gross cash inflows
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
2,894
2
452
253
1,729
5,330
(34)
(1,738)
(1,772)
2,754
3
955
1
263
2,196
6,172
(40)
(2,183)
(2,223)
178
2
1,371
207
-
1,758
(28)
-
(28)
140
2
353
1
214
327
1,037
(30)
(308)
(338)
25
2
1
157
-
185
(19)
-
(19)
20
1
1,203
-
178
-
1,402
(20)
-
(20)
16
1
536
137
-
690
(14)
-
(14)
22
6
-
-
134
-
162
(12)
-
(12)
11
2
500
90
-
603
(6)
-
(6)
22
1
472
-
116
-
611
(13)
-
(13)
56
4
2,882
305
-
3,247
3,180
13
5,742
1,149
1,729
11,813
(18)
-
(18)
(119)
(1,738)
(1,857)
128
2
2,445
-
318
-
2,893
3,086
15
5,428
2
1,223
2,523
12,277
(22)
-
(22)
(137)
(2,491)
(2,628)
In its worldwide insurance programme, the Group carries appropriate levels of insurance for typical business risks (including product liability) with various
leading insurance companies. However, in the event of the failure of one or more of its insurance counterparties, the Group could be impacted by losses where
Commodity price risk
The fair value of derivatives used to hedge future energy costs was €19 million unfavourable as at the balance sheet date (2013: €4 million unfavourable).
22. Cash and Cash Equivalents
Cash and cash equivalents balances are spread across a wide number of highly-rated financial institutions. The credit risk attaching to these items is
documented in note 21.
Cash and cash equivalents are included in the Consolidated Balance Sheet at fair value and are analysed as follows:
Cash at bank and in hand
Investments (short-term deposits)
Total
2014
€m
689
2,573
3,262
2013
€m
582
1,958
2,540
Cash at bank earns interest at floating rates based on daily deposit bank rates. Short-term deposits, which include bank and money market deposits, are
made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates.
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-
Cash and cash equivalents at fair value include the following for the purposes of the Consolidated Statement of Cash Flows:
Cash at bank and in hand
Investments (short-term deposits)
Cash at bank and in hand reclassified as held for sale
Total
689
582
2,573
1,958
33
-
3,295
2,540
CRH 137
Credit/counterparty risk
In addition to cash at bank and in hand, the Group holds significant cash balances which are invested on a short-term basis and are classified as cash
equivalents (see note 22). These deposits and other financial instruments (principally certain derivatives and loans and receivables included within financial
assets) give rise to credit risk on amounts due from counterparty financial institutions (stemming from their insolvency or a downgrade in their credit ratings).
Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty primarily depending on its credit rating and by regular
review of these ratings. Acceptable credit ratings are high investment-grade ratings - 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 (including insolvency) is the carrying
value of the relevant financial instrument.
recovery from such counterparties is not possible.
Credit risk arising in the context of the Group’s operations is not significant with the total bad debt provision at the balance sheet date amounting to 4.6% of
gross trade receivables (2013: 5.5%). Customer credit risk is managed at appropriate Group locations according to established policies, procedures and
controls. Customer credit quality is assessed in line with strict credit rating criteria and credit limits 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 17 comprise a large number of
customers spread across the Group’s activities and geographies with balances classified as neither past due nor impaired representing 72% of the total trade
receivables balance at the balance sheet date (2013: 72%); amounts receivable from related parties (notes 17 and 31) are immaterial. Factoring and credit
guarantee arrangements are employed in certain of the Group’s operations where deemed to be of benefit by operational management.
Liquidity risk
The principal liquidity risks faced by the Group stem from the maturation of debt obligations and derivative transactions. A downgrade of CRH’s credit ratings
may give rise to increases in funding costs in respect of future debt and may impair the Group’s ability to raise funds on acceptable terms. The Group’s
corporate treasury function ensures that sufficient resources are available to meet such liabilities as they fall due through a combination of cash and cash
equivalents, cash flows and undrawn committed bank facilities. Flexibility in funding sources is achieved through a variety of means including (i) maintaining
cash and cash equivalents only with a 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.
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.
23. Interest-bearing Loans and Borrowings
Loans and borrowings outstanding
Bank overdrafts
Bank loans
Finance leases
Bonds and private placements
Other
Interest-bearing loans and borrowings*
2014
€m
70
16
13
5,750
17
5,866
2013
€m
40
28
15
5,439
18
5,540
* Including loans of €1 million (2013: €1 million) secured on specific items of property, plant and equipment; these figures do not include finance leases.
Maturity profile of loans and borrowings and undrawn committed facilities
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
Total
As at 31 December 2014
As at 31 December 2013
Loans and
borrowings
Undrawn
committed
facilities**
Loans and
borrowings
Undrawn
committed
facilities**
€m
447
1,395
-
562
505
2,957
5,866
€m
22
-
-
-
2,641
-
2,663
€m
961
349
1,240
4
506
2,480
5,540
€m
-
40
1,625
85
200
-
1,950
** 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 figures shown above are the undrawn committed facilities available to be drawn by the Group at 31 December 2014.
Guarantees
The Company has given letters of guarantee to secure obligations of subsidiary undertakings as follows: €5.8 billion in respect of loans, bank advances,
derivative obligations and future lease obligations (2013: €5.5 billion), €288 million in respect of letters of credit (2013: €270 million) and €5 million in respect of
other obligations (2013: €nil 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 31 December 2014 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.
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 half-yearly on 30 June and 31 December. The Group was in full compliance with its financial covenants throughout each of the periods
presented. The Group is not aware of any stated events of default as defined in the Agreements.
The financial covenants are:
(1) Minimum interest cover defined as PBITDA/net interest (all as defined in the relevant agreement) cover at no lower than 4.5 times. As at 31 December
2014 the ratio was 7.0 times (2013: 6.3 times);
(2) Minimum net worth defined as total equity plus deferred tax liabilities and capital grants less repayable capital grants being in aggregate no lower than
€5.0 billion (2013: €5.1 billion) (such minimum being adjusted for foreign exchange translation impacts). As at 31 December 2014 net worth (as defined
in the relevant agreement) was €11.5 billion (2013: €10.9 billion).
138 CRH
24. Derivative Financial Instruments
The fair values of derivative financial instruments are analysed by year of maturity and by accounting designation as follows:
Fair
value
hedges
Cash flow
hedges
Net
investment
hedges
Not
designated
as hedges
€m
€m
€m
€m
At 31 December 2014
Derivative assets
Within one year - current assets
Between one and two years
Between three and four years
Between four and five years
After five years
Non-current assets
Total derivative assets
Derivative liabilities
Within one year - current liabilities
Between one and two years
Between two and three years
Between three and four years
Non-current liabilities
Total derivative liabilities
Net asset arising on derivative financial instruments
The equivalent disclosure for the prior year is as follows:
At 31 December 2013
Derivative assets
Within one year - current assets
Between two and three years
Between four and five years
After five years
Non-current assets
Total derivative assets
Derivative liabilities
Within one year - current liabilities
Between one and two years
Between two and three years
Between three and four years
After five years
Non-current liabilities
Total derivative liabilities
Net asset arising on derivative financial instruments
-
22
26
-
30
78
78
-
-
-
-
-
-
78
9
30
28
-
58
67
-
-
-
-
(11)
(11)
(11)
56
2
-
-
-
-
-
2
(7)
(1)
(1)
(1)
(3)
(10)
(8)
-
-
-
-
-
-
(2)
(21)
(1)
(1)
-
(23)
(25)
(25)
13
-
-
-
-
-
13
(4)
-
-
-
-
(4)
9
8
-
-
-
-
8
(17)
-
-
-
-
-
(17)
(9)
-
-
-
9
-
9
9
(9)
-
-
-
-
(9)
-
-
-
-
5
5
5
-
-
-
-
-
-
-
5
Total
€m
15
22
26
9
30
87
102
(20)
(1)
(1)
(1)
(3)
(23)
79
17
30
28
5
63
80
(19)
(21)
(1)
(1)
(11)
(34)
(53)
27
CRH 139
24. Derivative Financial Instruments | continued
At 31 December 2014 and 2013, the Group had no master netting or similar arrangements, collateral posting requirements, and
enforceable right of set-off agreements with any of its derivative counterparts.
Fair value hedges consist of interest rate swaps and currency swaps. These instruments hedge risks arising from changes in asset/
liability fair values due to interest rate and foreign exchange rate movements.
Cash flow hedges consist of forward foreign exchange and commodity contracts and interest rate and currency swaps. These
instruments hedge risks arising to future cash flows from movements in foreign exchange rates, commodity prices and interest rates.
Cash flow hedges are expected to affect profit and loss over the period to maturity.
Net investment hedges comprise cross-currency swaps and hedge changes in the value of net investments due to currency movements.
The profit/(loss) arising on fair value, cash flow, net investment hedges and related hedged items reflected in the Consolidated Income
Statement is shown below:
Fair value of hedge instruments
Fair value of the hedged items
Components of other comprehensive income - cash flow hedges
Losses arising during the year:
- commodity forward contracts
Fair value hierarchy
Assets measured at fair value
Fair value hedges - cross currency and interest rate swaps
Net investment hedges - cross currency swaps
Not designated as hedges (held-for-trading) - interest rate swaps
Cash flow hedges - cross currency, interest rate swaps and commodity forwards
Total
Liabilities measured at fair value
Fair value hedges - cross currency and interest rate swaps
Cash flow hedges - cross currency, interest rate swaps and commodity forwards
Net investment hedges - cross currency swaps
Not designated as hedges (held-for-trading) - interest rate swaps
Total
2014
€m
15
(16)
2013
€m
(68)
71
(6)
(2)
2014
Level 2
€m
2013
Level 2
€m
78
13
9
2
102
-
(10)
(4)
(9)
(23)
67
8
5
-
80
(11)
(25)
(17)
-
(53)
At 31 December 2014 and 2013 there were no derivatives valued using Level 1 or Level 3 fair value techniques. Valuation methods for
Levels 1, 2 and 3 are described in the “fair value hierarchy” section of the accounting policies on page 114.
140 CRH
25. Provisions for Liabilities
Net present cost
At 1
January
€m
Translation
adjustment
€m
Arising on
acquisition
(note 30)
€m
Provided
during
year
€m
Utilised
during
year
€m
Reclassified
as held
for sale
€m
Reversed
unused
€m
Discount
unwinding
€m
At 31
December
€m
31 December 2014
Insurance (i)
Environment and remediation (ii)
Rationalisation and redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
181
87
43
69
380
231
149
380
The equivalent disclosure for the prior year is as follows:
31 December 2013
Insurance (i)
Environment and remediation (ii)
Rationalisation and redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
191
82
26
67
366
256
110
366
20
5
1
1
27
(7)
(1)
-
(1)
(9)
-
-
-
1
1
-
5
5
4
52
12
30
14
(50)
(4)
(48)
(8)
108
(110)
42
6
55
14
(50)
(4)
(38)
(11)
14
117
(103)
-
(4)
-
(3)
(7)
-
-
-
-
-
(3)
(4)
(3)
(9)
8
4
1
3
208
96
24
68
(19)
16
396
257
139
396
181
87
43
69
(4)
(4)
(6)
(6)
9
3
1
2
(20)
15
380
231
149
380
(i) This provision relates to actual and potential obligations arising under the self-insurance components of the Group’s insurance arrangements which
comprise employers’ liability (workers’ compensation in the United States), public and products liability (general liability in the United States), automobile
liability, property damage, business interruption and various other insurances; a substantial proportion of the total provision pertains to claims which are
classified as “incurred but not reported”. Due to the extended timeframe associated with many of the insurances, a significant proportion of the total
provision is subject to periodic actuarial valuation. The projected cash flows underlying the discounting process are established through the application
of actuarial triangulations, which are extrapolated from historical claims experience. The triangulations applied in the discounting process indicate that
the Group’s insurance provisions have an average life of six years (2013: six years).
(ii) 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) These provisions relate to irrevocable commitments under various rationalisation and redundancy programmes, none of which is individually material to
the Group. In 2014, €30 million (2013: €55 million) was provided in respect of rationalisation and redundancy activities as a consequence of undertaking
various cost reduction initiatives across all operations. These initiatives included removing excess capacity from manufacturing and distribution networks
and scaling operations to match market supply and demand; implementation of these initiatives resulted in a reduction in staffing levels in all business
segments over recent years. The Group expects that these provisions will be utilised within one to two years of the balance sheet date (2013: one to two
years).
(iv) This includes provisions relating to guarantees and warranties of €13 million (2013: €14 million) throughout the Group at 31 December 2014. The Group
expects that these provisions will be utilised within two years of the balance sheet date (2013: two years).
Discount rate sensitivity analysis
All non-current provisions are discounted at a rate of 5% (2013: 5%), consistent with the average effective interest rate for the Group’s borrowings. There is
€nil million impact (2013: €nil million) on profit before tax of a 1% change in the discount rate applicable to provisions, with all other variables held constant.
CRH 141
26. Deferred Income Tax
The deductible and taxable temporary differences in respect of which deferred tax has been recognised are as follows:
Reported in balance sheet after offset
Deferred tax liabilities
Deferred tax assets
Net deferred income tax liability
Deferred income tax assets (deductible temporary differences)
Deficits on Group retirement benefit obligations (note 27)
Revaluation of derivative financial instruments to fair value
Tax loss carryforwards
Share-based payment expense
Provisions for liabilities and working capital-related items
Other deductible temporary differences
Total
2014
€m
2013
€m
1,305
(171)
1,134
1,166
(107)
1,059
140
14
97
2
187
37
477
74
15
98
2
144
38
371
Deferred income tax assets have been recognised in respect of all deductible temporary differences, with the exception of some tax loss carryforwards. The
amount of tax losses where recovery is not probable and is therefore not recognised in the Consolidated Balance Sheet is €937 million (2013: €712 million).
The vast majority will expire post 2019 (2013: 2018).
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
1,575
18
18
1,611
1,400
13
17
1,430
(i) Fair value adjustments arising on acquisition principally relate to property, plant and equipment.
Movement in net deferred income tax liability
At 1 January
Translation adjustment
Net expense for the year (note 10)
Arising on acquisition (note 30)
Reclassified as held for sale
Movement in deferred tax asset on Group retirement benefit obligations
At 31 December
1,059
125
1,041
(37)
36
2
(19)
(69)
1,134
4
8
-
43
1,059
142 CRH
26. Deferred Income Tax
27. Retirement Benefit Obligations
The deductible and taxable temporary differences in respect of which deferred tax has been recognised are as follows:
Reported in balance sheet after offset
Deferred tax liabilities
Deferred tax assets
Net deferred income tax liability
Deferred income tax assets (deductible temporary differences)
Deficits on Group retirement benefit obligations (note 27)
Revaluation of derivative financial instruments to fair value
Tax loss carryforwards
Share-based payment expense
Provisions for liabilities and working capital-related items
Other deductible temporary differences
Total
The vast majority will expire post 2019 (2013: 2018).
Deferred income tax liabilities (taxable temporary differences)
Revaluation of derivative financial instruments to fair value
Rolled-over capital gains
Total
Movement in net deferred income tax liability
At 1 January
Translation adjustment
Net expense for the year (note 10)
Arising on acquisition (note 30)
Reclassified as held for sale
At 31 December
Movement in deferred tax asset on Group retirement benefit obligations
Deferred income tax assets have been recognised in respect of all deductible temporary differences, with the exception of some tax loss carryforwards. The
amount of tax losses where recovery is not probable and is therefore not recognised in the Consolidated Balance Sheet is €937 million (2013: €712 million).
Taxable temporary differences principally attributable to accelerated tax depreciation and fair value adjustments arising on acquisition (i)
1,575
1,400
(i) Fair value adjustments arising on acquisition principally relate to property, plant and equipment.
2014
€m
2013
€m
1,305
(171)
1,134
1,166
(107)
1,059
140
14
97
2
187
37
477
74
15
98
2
144
38
371
18
18
13
17
1,611
1,430
1,059
125
1,041
(37)
36
2
(19)
(69)
1,134
4
8
-
43
1,059
The Group operates either defined benefit or defined contribution pension schemes in all of its principal operating areas. The disclosures included below relate
to all pension schemes in the Group, including any schemes reclassified as held for sale.
The Group operates defined benefit pension schemes in the Republic of Ireland, Britain and Northern Ireland, the Netherlands, Belgium, Germany, Switzerland
and the United States; for the purposes of the disclosures which follow, the schemes in the Republic of Ireland, the Netherlands, Belgium and Germany have
been aggregated into a “Eurozone” category on the basis of common currency and financial assumptions. The majority of the defined benefit pension schemes
operated by the Group are funded as disclosed in the analysis of the defined benefit obligation presented below with unfunded schemes restricted to one scheme
in each of the Netherlands and the United States and three schemes in Germany.
All funded defined benefit schemes are administered by separate funds that are legally separate from the Group under the jurisdiction of Trustees. Each of the
Group’s schemes operate under broadly similar regulatory frameworks. The Trustees of the various pension funds in existence across the Group are required by law
and by their Articles of Association to act in the best interests of the scheme participants and are responsible for the definition of investment strategy and for scheme
administration. The level of benefits available to members depends on length of service and either their average salary over their period of employment or their salary
in the final years leading up to retirement. The Group’s pension schemes in Switzerland are contribution-based schemes with guarantees to provide further
contributions in the event that certain targets are not met largely in relation to investment return and the annuity conversion factor on retirement.
Provision has been made in the financial statements for post-retirement healthcare obligations in respect of certain current and former employees principally in
the United States and for long-term service commitments in respect of certain employees in the Eurozone and Switzerland. These obligations are unfunded in
nature and the required disclosures form part of this note.
Defined benefit pension schemes - principal risks
Through its defined benefit pension schemes and post-retirement healthcare plans, the Group is exposed to a number of risks, the most significant of which
are detailed below:
Asset volatility: Under IFRS, the assets of the Group’s defined benefit pension schemes are reported at fair value (using bid prices, where relevant). The
majority of the schemes’ assets comprise of equities, bonds and property all of which may fluctuate significantly in value from period to period. Given that
liabilities are discounted to present value based on bond yields and that bond prices are inversely related to yields, an increase in the liability discount rate
(which would reduce liabilities) would reduce bond values though not necessarily by an equal magnitude.
Given the maturity of certain of the Group’s funded defined benefit pension schemes, de-risking frameworks have been introduced to mitigate deficit volatility
and enable better matching of investment returns with the cash outflows related to benefit obligations. These frameworks entail the usage of asset-liability
matching techniques whereby triggers are set for the conversion of equity holdings into bonds of similar average duration to the relevant liabilities.
Discount rates: The discount rates employed in determining the present value of the schemes’ liabilities are determined by reference to market yields at the
balance sheet date on high-quality corporate bonds of a currency and term consistent with the currency and term of the associated post-employment benefit
obligations. Changes in discount rates impact the quantum of liabilities as discussed above.
Inflation risk: Some of the Group’s pension obligations have an inflation linkage; higher inflation will lead to higher liabilities (although in most cases, caps on
the level of inflationary increases are in place to protect the scheme against extreme inflation).
Longevity risk: In the majority of cases, the Group’s defined benefit pension schemes provide benefits for life with spousal and dependent child reversionary
provisions; increases in life expectancy will therefore give rise to higher liabilities.
Financial assumptions - scheme liabilities
The major long-term assumptions used by the Group’s actuaries in the computation of scheme liabilities as at 31 December 2014 and 31 December 2013 are
as follows:
Rate of increase in:
- salaries
- pensions in payment
Inflation
Discount rate
Medical cost trend rate
Eurozone
2014
%
2013
%
Britain and
Northern Ireland
2013
2014
%
%
Switzerland
2014
%
2013
%
United States
2014
%
2013
%
3.75
1.75
1.75
2.00
n/a
4.00
4.00
4.30
2.25
2.00
3.00-3.20 3.00-3.50
2.00
3.70
n/a
3.00
3.50
n/a
3.30
4.60
n/a
-
1.25
1.15
n/a
2.25
0.25
1.25
2.35
n/a
3.50
3.50
-
2.00
3.80
16.70
-
2.00
4.70
7.40
The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 Employee Benefits are in accordance with the underlying
funding valuations and represent actuarial best practice in the relevant jurisdictions taking account of mortality experience and industry circumstances. With
regard to the most material of the Group’s schemes, the future life expectations factored into the relevant valuations, based on retirement at 65 years of age for
current and future retirees, are as follows:
Current retirees
- male
- female
Future retirees
- male
- female
The above data allow for future improvements in life expectancy.
Republic of
Ireland
2014
2013
Britain and
Northern Ireland
2013
2014
Switzerland
2014
2013
22.8
24.9
25.8
26.8
22.7
24.9
23.2
25.8
23.2
25.7
21.3
23.8
21.3
23.8
25.7
26.7
25.6
28.2
25.5
28.2
23.5
25.9
23.5
25.9
CRH 143
27. Retirement Benefit Obligations | continued
Impact on Consolidated Income Statement
The total retirement benefit expense in the Consolidated Income Statement is as follows:
Total defined contribution expense
Total defined benefit expense
Total expense in Consolidated Income Statement
2014
€m
2013
€m
152
63
215
149
52
201
At 31 December 2014, €44 million (2013: €34 million) was included in other payables in respect of defined contribution pension liabilities.
Analysis of defined benefit expense
Eurozone
2014
€m
2013
€m
Britain and
Northern Ireland
2013
€m
2014
€m
Switzerland
2014
€m
2013
€m
United States
2014
€m
2013
€m
Total Group
2014
€m
2013
€m
Charged in arriving at Group profit before finance costs:
Current service cost
Administration expenses
Past service costs
Included in finance income and finance costs respectively:
Interest income on scheme assets
Interest cost on scheme liabilities
Net interest expense
Net charge to Consolidated Income Statement
11
11
1
(5)
7
(29)
37
8
15
1
(6)
6
(27)
39
12
18
14
2
-
16
(31)
34
3
19
13
1
(3)
11
(26)
30
4
15
24
-
-
24
(16)
17
1
25
27
1
(15)
13
(12)
14
2
15
2
-
-
2
(9)
11
2
4
-
-
-
-
(6)
10
4
4
51
3
(5)
49
(85)
99
14
63
51
3
(24)
30
(71)
93
22
52
Past service costs also include curtailment and settlement gains. During 2014, there were no significant curtailment or settlement gains (2013: curtailment
gain of €15 million). The prior year curtailment gain arose due to the implementation of changes to the terms of a number of the Group’s defined benefit
pension schemes in Switzerland.
No reimbursement rights have been recognised as assets in accordance with IAS 19.
Reconciliation of scheme assets (bid value)
At 1 January
Movement in year
Administration expenses
Interest income on scheme assets
Remeasurement adjustments
- return on scheme assets excluding interest income
Employer contributions paid
Contributions paid by plan participants
Benefit and settlement payments
Reclassified as held for sale
Translation adjustment
At 31 December
790
710
662
597
683
661
179
174
2,314
2,142
(1)
29
87
72
3
(45)
-
-
(1)
27
30
70
3
(49)
-
-
935
790
(2)
31
54
19
-
(25)
(633)
49
155
(1)
26
44
28
-
(21)
-
-
16
34
17
10
(30)
-
(1)
12
25
17
10
(31)
-
(11)
662
15
745
(10)
683
-
9
4
7
-
(14)
-
26
211
-
6
9
9
-
(11)
-
(8)
(3)
85
179
115
13
(114)
(633)
90
(3)
71
108
124
13
(112)
-
(29)
179
2,046
2,314
144 CRH
27. Retirement Benefit Obligations | continued
Reconciliation of actuarial value of liabilities
At 1 January
Movement in year
Current service cost
Past service costs
Interest cost on scheme liabilities
Remeasurement adjustments
- experience variations
- actuarial (loss)/gain from changes in financial assumptions
- actuarial loss from changes in demographic assumptions
Contributions paid by plan participants
Benefit and settlement payments
Reclassified as held for sale
Translation adjustment
At 31 December
Recoverable deficit in schemes
Related deferred income tax asset
Net pension liability
Eurozone
2014
€m
2013
€m
Britain and
Northern Ireland
2013
€m
2014
€m
Switzerland
2014
€m
2013
€m
United States
2013
2014
€m
€m
Total Group
2014
€m
2013
€m
(1,045)
(1,054)
(723)
(705)
(727)
(765)
(229)
(271)
(2,724)
(2,795)
(11)
5
(37)
20
(306)
-
(3)
45
-
-
(11)
6
(39)
23
(16)
-
(3)
49
-
-
(1,332)
(1,045)
(397)
59
(338)
(255)
39
(216)
(14)
-
(34)
1
(129)
-
-
25
714
(56)
(216)
(61)
12
(49)
(13)
3
(30)
2
(13)
(2)
-
21
-
14
(723)
(61)
6
(55)
(24)
-
(17)
7
(142)
-
(10)
30
-
(17)
(900)
(155)
30
(125)
(27)
15
(14)
17
64
(51)
(10)
31
-
13
(727)
(44)
9
(35)
(2)
-
(11)
-
(27)
(17)
-
14
-
(37)
(309)
(98)
39
(59)
-
-
(10)
-
30
-
-
11
-
11
(51)
5
(99)
28
(604)
(17)
(13)
114
714
(110)
(51)
24
(93)
42
65
(53)
(13)
112
-
38
(229)
(2,757)
(2,724)
(50)
20
(30)
(711)
140
(571)
(410)
74
(336)
During the year, there were no settlement payments (2013: €11 million) made in respect of the Group’s schemes.
Split of scheme liabilities - funded and unfunded
Funded defined benefit pension schemes
Unfunded defined benefit pension schemes
(1,274)
(52)
(999)
(40)
(930)
(723)
(894)
(722)
(297)
(219)
(3,395)
(2,663)
-
-
-
-
(8)
(7)
(60)
(47)
Total - defined benefit pension schemes
(1,326)
(1,039)
(930)
(723)
(894)
(722)
(305)
(226)
(3,455)
(2,710)
Post-retirement healthcare obligations (unfunded)
Long-term service commitments (unfunded)
Actuarial value of liabilities (present value)
Reclassified as held for sale
Actuarial value of liabilities (present value) excluding
schemes reclassified as held for sale
-
(6)
-
(6)
(1,332)
(1,045)
-
-
-
-
(930)
714
-
-
-
(6)
-
(5)
(4)
-
(3)
-
(4)
(12)
(3)
(11)
(723)
(900)
(727)
(309)
(229)
(3,471)
(2,724)
-
-
-
-
-
714
-
(1,332)
(1,045)
(216)
(723)
(900)
(727)
(309)
(229)
(2,757)
(2,724)
Sensitivity analysis
The impact of a movement (as indicated below) in the principal actuarial assumptions would be as follows:
Britain and
Northern
Eurozone
2014
€m
Ireland Switzerland
2014
€m
2014
€m
United
States
2014
€m
Total
Group
2014
€m
Scheme liabilities at 31 December 2014
(1,332)
(930)
(900)
(309)
(3,471)
Revised liabilities
Discount rate
Inflation rate
Decrease by 0.25%
Increase by 0.25%
Life expectancy
Increase by 1 year
(1,398)
(1,394)
(1,376)
(979)
(965)
(963)
(941)
(900)
(921)
(320)
(309)
(319)
(3,638)
(3,568)
(3,579)
The above sensitivity analysis is derived through changing the individual assumption while holding all other assumptions constant.
CRH 145
27. Retirement Benefit Obligations | continued
Split of scheme assets
Investments quoted in active markets
Equity instruments:
- Developed markets
- Emerging markets
Debt instruments:
- Non Government debt instruments
- Government debt instruments
Property
Cash and cash equivalents
Investment funds
Assets held by insurance company
Unquoted investments
Equity instruments:
- Developed markets
- Emerging markets
Debt instruments:
- Non Government debt instruments
Property
Cash and cash equivalents
Investment funds
Assets held by insurance company
Total assets
Reclassified as held for sale
Total excluding schemes reclassified as held for sale
Eurozone
2014
€m
2013
€m
Britain and
Northern Ireland
2013
€m
2014
€m
Switzerland
2014
€m
2013
€m
United States
2013
2014
€m
€m
Total Group
2014
€m
2013
€m
281
10
279
265
37
16
24
-
-
-
-
3
17
-
3
935
-
935
262
12
29
390
29
47
12
-
-
-
-
2
4
-
3
790
-
790
329
55
166
165
41
2
17
-
-
6
-
-
7
-
-
788
(633)
155
340
53
139
69
43
1
9
-
-
-
-
-
2
6
-
662
-
662
260
-
226
65
31
-
-
-
1
-
2
97
44
-
19
745
-
745
229
-
210
58
68
2
-
5
-
-
-
68
31
-
12
683
-
683
69
-
59
67
-
16
-
-
-
-
-
-
-
-
-
211
-
211
92
-
26
51
-
4
6
-
-
-
-
-
-
-
-
179
-
179
939
65
730
562
109
34
41
-
923
65
404
568
140
54
27
5
1
6
-
-
2
100
68
-
22
2,679
(633)
2,046
-
70
37
6
15
2,314
-
2,314
Actuarial valuations - funding requirements and future cash flows
In accordance with statutory requirements in Ireland and Britain (minimum funding requirements), additional annual contributions and lump-sum payments are required
to certain of the schemes in place in those jurisdictions. The funding requirements in relation to the Group’s defined benefit schemes are assessed in accordance with
the advice of independent and qualified actuaries and valuations are prepared in this regard either annually, where local requirements mandate that this be done, or at
triennial intervals at a maximum in all other cases. In 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 Germany. In the United States, valuations are performed using a variety of actuarial cost methodologies - current unit, projected unit and aggregate cost.
The dates of the actuarial valuations range from April 2011 to January 2014.
In general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to the members of the various schemes on request.
The maturity profile of the Group’s contracted payments (on a discounted basis) to certain schemes in the Eurozone (Ireland) and Britain and Northern Ireland is as follows:
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
Eurozone
2014
€m
2013
€m
Britain and
Northern Ireland
2013
€m
2014
€m
18
17
17
17
-
-
69
18
17
16
16
15
-
82
8
8
7
7
7
48
85
7
7
7
6
6
47
80
Total
2014
€m
26
25
24
24
7
48
154
2013
€m
25
24
23
22
21
47
162
Total contracted payments disclosed above include commitments of €65 million in relation to schemes reclassified as held for sale. Employer contributions
payable in the 2015 financial year including minimum funding payments (expressed using year-end exchange rates for 2014) are estimated at €191 million of
which €96 million relates to schemes reclassified as held for sale.
Average duration and scheme composition
Eurozone
2014
2013
Britain and
Northern Ireland
2013
2014
Switzerland
2013
2014
United
States
2014
2013
Average duration of defined benefit obligation (years)
16.0
15.9
17.5
18.1
16.0
16.0
12.0
13.3
Allocation of defined benefit obligation by participant:
Active plan participants
Deferred plan participants
Retirees
146 CRH
37%
21%
42%
39%
20%
41%
27%
34%
39%
27%
34%
39%
85%
86%
-
-
15%
14%
35%
30%
35%
36%
30%
34%
28. Share Capital and Reserves
Equity Share Capital
2014
2013
Ordinary
Shares of
€0.32 each (i)
Income
Shares of
€0.02 each (ii)
Ordinary
Shares of
€0.32 each (i)
Income
Shares of
€0.02 each (ii)
Authorised
At 1 January 2014 and 31 December 2014 (€m)
320
20
320
20
Number of Shares at 1 January 2014 and 31 December 2014 ('000s)
1,000,000
1,000,000
1,000,000
1,000,000
Allotted, called-up and fully paid
At 1 January (€m)
Issue of scrip shares in lieu of cash dividends (iii)
At 31 December (€m)
237
2
239
14
-
14
235
2
237
14
-
14
The movement in the number of shares (expressed in ‘000s) during the financial year was as follows:
At 1 January
Issue of scrip shares in lieu of cash dividends (iii)
At 31 December
739,231
5,294
744,525
739,231
5,294
744,525
733,821
5,410
739,231
733,821
5,410
739,231
(i) The Ordinary Shares represent 93.68% of the total issued share capital.
(ii) The Income Shares, which represent 5.85% of the total issued share capital, were created on 29 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 8 May 2002 to cancel such elections.
Share schemes
The aggregate number of shares which may be committed for issue in respect of any share option scheme, savings-related share option scheme, share
participation scheme, performance share plan or any subsequent option scheme or share plan, may not exceed 10% of the issued ordinary share capital from
time to time.
Share option schemes
Details of share options granted under the Company’s share option schemes and the terms attaching thereto are provided in note 7 to the financial statements
and on page 76 of the Directors’ Remuneration Report.
Options exercised during the year (satisfied by the reissue of Treasury Shares)
Number of Shares
2014
2013
1,307,406
1,310,187
Share participation schemes
As at 31 December 2014, 7,509,125 (2013: 7,386,047) Ordinary Shares had been appropriated to participation schemes. In the financial year ended 31 December
2014, the appropriation of 123,078 shares was satisfied by the reissue of Treasury Shares (2013: 113,415). 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.
Performance Share Plan
During the year, 742,604 Ordinary Shares were acquired by the Employee Benefit Trust by way of the reissue of Treasury Shares by CRH plc to satisfy the release
of shares in respect of the 2011 award under the 2006 Performance Share Plan.
Restricted Share Plan
During 2013, the Employee Benefit Trust purchased 391,250 shares on behalf of CRH plc in respect of awards under the 2013 Restricted Share Plan. There were
no such purchases in 2014.
The nominal value of own shares, on which dividends have been waived by the Trustees of the 2013 Restricted Share Plan, amounted to €0.1 million at
31 December 2014 (2013: €0.1 million).
(iii) Issue of scrip shares in lieu of cash dividends:
May 2014 - Final 2013 dividend (2013: Final 2012 dividend)
October 2014 - Interim 2014 dividend (2013: Interim 2013 dividend)
Total
Number of Shares
Price per Share
2014
2013
4,081,636
2,011,165
1,212,700
3,398,992
5,294,336
5,410,157
2014
€20.99
€17.81
2013
€17.01
€15.79
CRH 147
28. Share Capital and Reserves | continued
Preference Share Capital
Authorised
At 1 January 2014 and 31 December 2014
Allotted, called-up and fully paid
At 1 January 2014 and 31 December 2014
5% Cumulative
Preference Shares of
€1.27 each (iv)
7% ‘A’ Cumulative
Preference Shares of
€1.27 each (v)
Number of
Shares ‘000s
150
50
€m
-
-
Number of
Shares ‘000s
872
872
€m
1
1
There was no movement in the number of cumulative preference shares in either the current or the prior year.
(iv) 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 15 April and 15 October in
each year. The 5% Cumulative Preference Shares represent 0.03% of the total issued share capital.
(v) 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 5 April and 5 October in each year. The 7% ‘A’ Cumulative Preference Shares represent 0.44% of the total issued share capital.
Treasury Shares/own shares
At 1 January
Treasury Shares/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
At 31 December
2014
€m
(118)
42
-
(76)
2013
€m
(146)
34
(6)
(118)
As at the balance sheet date, the total number of Treasury Shares held was 3,775,455 (2013: 5,951,104); the nominal value of these shares was €1 million
(2013: €2 million). During the year ended 31 December 2014, 1,430,484 (2013: 1,423,602) shares were reissued to satisfy exercises and appropriations under the
Group’s share option and share participation schemes and 2,561 (2013: nil) shares were reissued to satisfy deferred share awards. In addition, 742,604 (2013: nil)
shares were reissued to the CRH plc Employee Benefit Trust in connection with the release of the award under the 2006 Performance Share Plan. These reissued
Treasury Shares were previously purchased at an average price of €19.40 (2013: €24.08). No Treasury Shares were purchased during 2014 or 2013.
Reconciliation of shares issued to net proceeds
Shares issued at nominal amount:
- scrip shares issued in lieu of cash dividends
Premium on shares issued
Total value of shares issued
Issue of scrip shares in lieu of cash dividends (note 11)
Net proceeds from issue of shares
Share Premium
At 1 January
Premium arising on shares issued
At 31 December
29. Commitments under Operating and Finance Leases
Operating leases
Future minimum rentals payable under non-cancellable operating leases at 31 December are as follows:
Within one year
After one year but not more than five years
More than five years
2
105
107
(107)
-
2
86
88
(88)
-
4,219
105
4,324
4,133
86
4,219
2014
€m
310
663
417
1,390
2013
€m
301
596
357
1,254
Total operating lease commitments disclosed above include commitments of €54 million in relation to businesses classified as held for sale.
Finance leases
Future minimum lease payments under finance leases are not material for the Group.
148 CRH
30. Business Combinations
The principal acquisitions completed during the year ended 31 December 2014 by reportable segment, together with the completion dates, are detailed
below; these transactions entailed the acquisition of an effective 100% stake except where indicated to the contrary:
Europe Heavyside: Denmark: selected assets of a precast concrete business (11 August); Ireland: selected assets of Cemex Ireland (31 August).
Europe Distribution: Belgium: Heumatop (24 March), Costermans (2 July) and Van Den Broeck (17 July); France: assets of two Toute Faire Materiaux
branches (1 April); the Netherlands: Hoogeveen branch of Kroon Bouwcenter (9 April).
Americas Materials: Iowa: Shipley Contracting asphalt plant and paving assets (6 June); Kentucky: selected assets of MAC Construction & Excavating
(5 November); Maine: Marriner quarry (10 April) and selected assets of Lane Construction (26 September); Texas: selected assets of Capitol Aggregates (6 May);
Virginia: Kendrick reserves (6 August); Washington: asphalt assets of Eucon Corporation in Spokane (15 December); West Virginia: assets of Yellowstar
Materials (7 January).
Americas Products: California: assets of Kristar Enterprises (6 January); North and South Carolina: concrete pipe assets of MC Precast (19 May); Iowa:
Thermomass (10 September); Texas: assets of Hope Agri Products (20 February, also Arkansas, Louisiana and Oklahoma) and assets of Ashley Concrete
(19 May).
The identifiable net assets acquired, including adjustments to provisional fair values, were as follows:
2014
€m
2013
€m
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Equity accounted investments
Total non-current assets
Current assets
Inventories
Trade and other receivables (i)
Cash and cash equivalents
Total current assets
Liabilities
Trade and other payables
Provisions for liabilities (stated at net present cost)
Interest-bearing loans and borrowings and finance leases
Deferred income tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition (ii)
Excess of fair value of identifiable net assets over consideration paid (ii)
Non-controlling interests*
Total consideration
Consideration satisfied by:
Cash payments
Asset exchange (note 4)
Deferred consideration (stated at net present cost)
Contingent consideration (iii)
Total consideration
* Measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets.
Net cash outflow arising on acquisition
Cash consideration
Less: cash and cash equivalents acquired
Total
91
16
-
107
23
20
1
44
(17)
(1)
(7)
(2)
(27)
124
31
-
-
155
152
-
1
2
155
152
(1)
151
342
39
2
383
41
53
11
105
(80)
(14)
(44)
(8)
(146)
342
169
(2)
(1)
508
347
144
4
13
508
347
(11)
336
CRH 149
30. Business Combinations | continued
None of the acquisitions completed during the financial year were considered sufficiently material to warrant separate disclosure of the attributable fair
values. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of certain acquisitions;
any amendments to these fair values made during the subsequent reporting window (within the measurement period imposed by IFRS 3 Business
Combinations) will be subject to subsequent disclosure.
(i) The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to €22 million (2013: €57 million). The fair value
of these receivables is €20 million (all of which is expected to be recoverable) (2013: €53 million) and is inclusive of an aggregate allowance for impairment of
€2 million (2013: €4 million).
(ii) The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and other synergies
with existing entities in the Group which do not qualify for separate recognition as intangible assets. Due to the asset-intensive nature of operations in the
Europe Heavyside and Americas Materials business segments, no significant intangible assets are recognised on business combinations in these segments.
€18 million of the goodwill recognised in respect of acquisitions completed in 2014 is expected to be deductible for tax purposes (2013: €49 million). No
excess of fair value of identifiable net assets over consideration arose during the year (2013: €2 million).
(iii) The fair value of contingent consideration recognised is €2 million (including adjustments to prior year acquisitions of €1 million). On an undiscounted basis,
the corresponding future payments on current year acquisitions for which the Group may be liable range from €nil million to a maximum of €1 million.
Acquisition-related costs amounting to €2 million (2013: €2 million) have been included in operating costs in the Consolidated Income Statement (note 2).
No contingent liabilities were recognised on the acquisitions completed during the financial year or the prior financial year.
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
Current assets
Liabilities
Identifiable net assets acquired
Goodwill arising on acquisition (see (ii) above)
Total consideration
Book
values
€m
Fair value
adjustments
€m
Accounting
policy
alignments
€m
Adjustments
to provisional
fair values
€m
95
45
(22)
118
38
156
11
(3)
(2)
6
(5)
1
-
-
-
-
-
-
1
2
(3)
-
(2)
(2)
Fair
value
€m
107
44
(27)
124
31
155
The following table analyses the 21 acquisitions (2013: 25 acquisitions) by reportable segment and provides details of the goodwill and consideration figures
arising in each of those segments:
Reportable segments
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Total Group
Adjustments to provisional fair values of prior year acquisitions
Total
Number of
acquisitions
2014
2013
2
-
6
8
8
5
-
13
21
6
-
3
9
9
4
3
16
25
Goodwill
Consideration
2014
€m
2013
€m
2014
€m
2013
€m
2
-
9
11
5
17
-
22
33
(2)
31
80
-
10
90
19
48
8
75
165
4
169
7
-
20
27
71
59
-
130
157
(2)
155
265
-
15
280
76
124
22
222
502
6
508
150 CRH
30. Business Combinations | continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit/(loss) for the financial year was as follows:
Revenue
Cost of sales
Gross profit
Operating costs
Group operating profit
Profit on disposals
Profit before finance costs
Finance costs (net)
Profit before tax
Income tax expense
Group profit for the financial year
2014
€m
122
(89)
33
(26)
7
-
7
-
7
(2)
5
2013
€m
306
(232)
74
(63)
11
-
11
(3)
8
(2)
6
The revenue and profit/(loss) of the Group for the financial year determined in accordance with IFRS as though the acquisitions effected during the year had
been at the beginning of the year would have been as follows:
Revenue
Group profit/(loss) for the financial year
Pro-forma 2014
2014
acquisitions
€m
CRH Group excluding
2014 acquisitions
€m
Pro-forma
consolidated
Group
€m
Pro-forma
2013
€m
182
7
18,790
18,972
579
586
18,159
(300)
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. Details of events after the balance sheet date are set out in note 33.
Development updates, giving details of acquisitions which do not require separate disclosure on the grounds of materiality, are typically published in January
and July each year.
CRH 151
31. 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 108 to 114. The Group’s principal subsidiaries, joint ventures and associates are disclosed on
pages 162 to 166.
Sales to and purchases from joint ventures are immaterial in 2014 and 2013. Loans extended by the Group
to joint ventures and associates (see note 15) are included in financial assets. Sales to and purchases from
associates during the financial year ended 31 December 2014 amounted to €33 million (2013: €24 million)
and €411 million (2013: €411 million) respectively. Amounts receivable from and payable to equity accounted
investments (arising from the aforementioned sales and purchases transactions) as at the balance sheet date
are included as separate line items in notes 17 and 18 to the Consolidated Financial Statements.
Terms and conditions of transactions with subsidiaries, joint ventures and associates
In general, the transfer pricing policy implemented by the Group across its subsidiaries is market-based.
Sales to and purchases from joint ventures and associates are conducted in the ordinary course of business
and on terms equivalent to those that prevail in arm’s-length transactions. The outstanding balances included
in receivables and payables as at the balance sheet date in respect of transactions with joint ventures and
associates are unsecured and settlement arises in cash. No guarantees have been either requested or
provided in relation to related party receivables and payables. Loans to joint ventures and associates (as
disclosed in note 15) are extended on normal commercial terms in the ordinary course of business with
interest accruing and, in general, paid to the Group at predetermined intervals.
Key management personnel
For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those
persons having authority and responsibility for planning, directing and controlling the activities of the
Company) comprises the Board of Directors which manages the business and affairs of the Company.
Key management remuneration amounted to:
Short-term benefits
Post-employment benefits
Share-based payments - calculated in accordance with the principles
disclosed in note 7
Total
2014
€m
9
1
2
12
2013
€m
7
2
2
11
Other than these compensation entitlements, there were no other transactions involving key management
personnel.
32. Contingent Liabilities
On 30 May 2014 CRH announced that the secretariat of the Competition Commission in Switzerland had
invited CRH’s Swiss subsidiaries BR Bauhandel AG, Gétaz-Miauton SA and Regusci Reco SA, to comment on
a proposal to impose sanctions on the Association of Swiss Wholesalers of the Sanitary Industry and all other
major Swiss wholesalers, including CRH’s subsidiaries, regarding the pending investigation into the sanitary
(bathroom fixtures and fittings) industry in Switzerland. The secretariat alleges competition law infringements
and proposes a total fine of approximately CHF 283 million on all parties, of which approximately CHF 119
million (€99 million) is attributable to CRH’s Swiss subsidiaries, based on Swiss turnover.
CRH believes that the position of the secretariat is fundamentally ill-founded and views the proposed fine as
unjustified. The Group has made submissions to this effect to the Competition Commission. Any decision of
the Competition Commission on this matter is not expected before April 2015. Any decision finding an
infringement can be appealed to the Federal Administrative Tribunal, and ultimately to the Federal Supreme
Court. No provision has been made in respect of this proposed fine in the 2014 Consolidated Financial
Statements.
152 CRH
33. Events after the Balance Sheet Date
On 1 February 2015, CRH announced that it had made a binding irrevocable offer to acquire certain of the
businesses and assets of Lafarge S.A. (‘Lafarge’) and Holcim Limited (‘Holcim’ and together with Lafarge the
‘Sellers’) comprising a global portfolio of assets in the building materials industry (which are complementary to
CRH’s footprint) for an enterprise value of €6.5 billion (based on exchange rates at 30 January 2015). The
consideration will be paid in a combination of euro, Sterling and Canadian Dollars.
The proposed acquisition constitutes a Class 1 transaction under the UKLA Listing Rules and therefore requires
the approval of a simple majority of CRH’s shareholders. An Extraordinary General Meeting (‘EGM’) will be held
on 19 March 2015 to seek shareholder approval of the acquisition. If the acquisition is not approved by CRH’s
shareholders at the EGM, a termination fee of approximately €158 million in total will be payable by CRH to the
Sellers. A termination fee of approximately €158 million will be payable by the Sellers to CRH in either of the
following circumstances: 1) if the Sellers do not accept CRH’s offer; or 2) if the proposed merger of Lafarge and
Holcim (the ‘Merger’) does not proceed to successful completion.
The acquisition is also conditional upon: 1) the successful completion of the Merger; and 2) the completion of
certain local reorganisations that need to take place before completion of the acquisition. In addition, CRH has
committed to the Sellers that it will take all steps and do all things necessary to obtain regulatory approvals
required in relation to the acquisition. The long stop date for completion of the acquisition is the earlier of:
1) three months following completion of the Merger; or 2) 31 December 2015, but in any case no earlier than
31 August 2015.
In connection with the proposed acquisition, CRH completed a placing of 74,039,915 new ordinary shares
raising gross proceeds of approximately €1.6 billion, and representing approximately 9.99% of CRH’s issued
ordinary share capital before the placing. Closing of the placing and admission of the placing shares to the
official lists and to trading on the main markets of the London Stock Exchange and Irish Stock Exchange took
place on 5 February 2015.
On 1 February 2015, CRH agreed a €6.5 billion senior unsecured bridge loan facility which has subsequently
been reduced by €1.6 billion to reflect the proceeds of the placing and by a further €2.0 billion to reflect other
cash balances which are intended to fund the acquisition. The remaining €2.9 billion of the loan facilities are
available to be used to complete the debt-funded portion of the proposed acquisition. Subject to certain carve-
outs, the facilities contain provisions requiring mandatory prepayment from disposal proceeds and the
proceeds of capital market transactions. Other terms and conditions are otherwise substantially similar to
CRH’s existing €2.5 billion revolving credit facility dated 11 June 2014.
34. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 104 to 153 in
respect of the year ended 31 December 2014 on 25 February 2015.
CRH 153
Company Balance Sheet
as at 31 December 2014
Notes
Fixed assets
2 Financial assets
Current assets
3 Debtors
Cash at bank and in hand
Total current assets
Creditors (amounts falling due within one year)
4 Trade and other creditors
Bank loans and overdrafts
Total current liabilities
Net current assets
Net assets
Capital and reserves
7 Called-up share capital
7 Preference share capital
8 Share premium account
8 Treasury Shares and own shares
8 Revaluation reserve
8 Other reserves
8 Profit and loss account
Shareholders' funds
N. Hartery, A. Manifold, Directors
2014
€m
2013
€m
595
581
5,532
1,411
6,943
1,003
2
1,005
6,394
175
6,569
1,453
57
1,510
5,938
5,059
6,533
5,640
253
1
4,328
(76)
42
203
1,782
6,533
251
1
4,223
(118)
42
187
1,054
5,640
154 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 2013 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 are accounted for on an accruals basis.
Financial assets
Fixed asset investments, including investments in subsidiaries, are stated at cost (and at valuation at
31 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 pages 111 and 112 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 155
2. Financial Assets
The Company’s investment in its subsidiaries is as follows:
At 1 January 2014 at cost/valuation
Capital contribution in respect of share-based payments
At 31 December 2014 at cost/valuation
The equivalent disclosure for the prior year is as follows:
At 1 January 2013 at cost/valuation
Capital contribution in respect of share-based payments
Additions
At 31 December 2013 at cost/valuation
Shares (i)
€m
Other
€m
400
-
400
371
-
29
400
181
14
195
167
14
-
181
Total
€m
581
14
595
538
14
29
581
(i) The Company’s investment in shares in its subsidiaries was revalued at 31 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 31 December 1980
At cost post 31 December 1980
Total
2014
€m
47
353
400
2013
€m
47
353
400
Pursuant to Section 16 of the Companies (Amendment) Act, 1986, a full list of subsidiaries, joint ventures and associated undertakings will be annexed to the
Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
3. Debtors
Amounts owed by subsidiary undertakings
4. Trade and Other Creditors
Amounts falling due within one year
Amounts owed to subsidiary undertakings
2014
€m
2013
€m
5,532
6,394
2014
€m
2013
€m
1,003
1,453
5. Auditor’s Remuneration (Memorandum Disclosure)
In accordance with Section 161D of the Companies Act, 1963, the fees paid in 2014 to the statutory auditor for work engaged by the Parent Company
comprised audit fees of €20,000 (2013: €20,000) and other assurance services of €118,000 (2013: €60,000).
6. Dividends Proposed (Memorandum Disclosure)
Details in respect of dividends proposed of €359 million (2013: €323 million) are presented in the dividends note (note 11) on page 126 of the notes to the
Consolidated Financial Statements.
7. 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 28) on pages 147 and
148 of the notes to the Consolidated Financial Statements.
156 CRH
8. Movement in Shareholders’ Funds
At 1 January 2014
Issue of share capital (net of expenses)
Profit after tax before dividends
Treasury/own shares reissued
Share option exercises
Share-based payment expense
Dividends (including shares issued in lieu of dividends)
Issued
share
capital
€m
252
2
-
-
-
-
-
At 31 December 2014
254
4,328
The equivalent disclosure for the prior year is as follows:
At 1 January 2013
Issue of share capital (net of expenses)
Profit after tax before dividends
Treasury/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
Share option exercises
Share-based payment expense
Dividends (including shares issued in lieu of dividends)
250
2
-
-
-
-
-
-
4,137
86
-
-
-
-
-
-
Share
premium
account
€m
Treasury
Shares/
own shares
€m
Revaluation
reserve
€m
Other
reserves
€m
Profit
and loss
account
€m
4,223
105
-
-
-
-
-
(118)
42
187
1,054
-
-
42
-
-
-
(76)
-
-
-
-
-
-
42
-
-
-
-
16
-
203
-
1,208
(42)
22
-
(460)
1,782
Total
equity
€m
5,640
107
1,208
-
22
16
(460)
6,533
(146)
42
172
1,521
5,976
-
-
34
(6)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15
-
187
-
3
(34)
-
19
-
88
3
-
(6)
19
15
(455)
1,054
(455)
5,640
At 31 December 2013
252
4,223
(118)
42
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 in the Republic
of Ireland. The profit for the financial year dealt with in the Company Financial Statements amounted to €1,208 million (2013: €3 million).
9. Share-based Payments
The total expense of €16 million (2013: €15 million) reflected in note 7 to the Consolidated Financial Statements attributable to employee share options and the
Performance Share Plans has been included as a capital contribution in financial assets (note 2) in addition to any payments to/from subsidiaries.
10. 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 31 December 2014 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.
Details in relation to other guarantees provided by the Company are provided in the interest-bearing loans and borrowings note (note 23) on page 138 of the
notes to the Consolidated Financial Statements.
11. Related Party Transactions
The Company has taken advantage of the exemption in FRS 8 Related Party Disclosures not to disclose transactions with wholly-owned subsidiaries.
12. Events after the Balance Sheet Date
Details of events after the balance sheet date are provided in note 33 on page 153 of the notes to the Consolidated Financial Statements.
13. Board Approval
The Board of Directors approved and authorised for issue the Company Financial Statements on pages 154 to 157 in respect of the year ended 31 December
2014 on 25 February 2015.
CRH 157
Shareholder Information
Dividend payments
An interim dividend of 18.5c was paid in respect of Ordinary Shares on 24
October 2014.
A final dividend of 44c, if approved at the 2015 Annual General Meeting, will
be paid in respect of Ordinary Shares on 12 May 2015 to shareholders on the
Register of Members as at the close of business on 6 March 2015.
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 Asset Services (the “Registrars”). DWT applies to dividends
paid by way of cash or by way of shares under a scrip dividend scheme and
is deducted at the standard rate of Income Tax (currently 20%). Non-resident
shareholders and certain Irish companies, trusts, pension schemes,
investment undertakings and charities may be entitled to claim exemption
from DWT. Copies of the exemption form may be obtained from the Registrars.
Shareholders should note that DWT will be deducted from dividends in cases
where a properly completed form has not been received by the record date
for a dividend. Individuals who are resident in the Republic of Ireland for tax
purposes are not entitled to an exemption.
Shareholders who wish to have their dividend paid direct to a bank account,
by electronic funds transfer, should complete the required dividend mandate
form and submit it to the Registrars. A copy of the required form can be
obtained from the shareholder services section of the CRH website,
www.crh.com, under “Equity Investors”. Alternatively, shareholders can
contact the Registrars to obtain a mandate form (see contact details below).
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 shares are not held in the CREST system (see below) and whose
address, according to the Share Register, is in the UK and the United States
respectively, unless they require otherwise.
Dividends in respect of 7% ‘A’ Cumulative Preference Shares are paid half-
yearly on 5 April and 5 October.
Dividends in respect of 5% Cumulative Preference Shares are paid half-yearly
on 15 April and 15 October. Shareholders have the option of taking their
dividend in the form of shares under the Company’s Scrip Dividend Scheme.
CREST
Transfer of the Company’s shares takes place through the CREST system.
Shareholders have the choice of holding their shares in electronic form or in
the form of share certificates.
Where shares are held in CREST, dividends are automatically paid in euro
unless a currency election is made. CREST members should use the facility
in CREST to make currency elections. Such elections must be made in
respect of entire holdings as partial elections are not permissible.
Stock Exchange listings
CRH has a premium listing on the London Stock Exchange (LSE) and a
secondary listing on the Irish Stock Exchange (ISE). 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.
158 CRH
Shareholder Information | continued
Share price data
Electronic communications
2014
2013
ISE
LSE
ISE
LSE
Share price at 31 December
€19.90
£15.44
€18.30
£15.23
Market capitalisation
€14.7bn
£11.4bn
€13.4bn
£11.2bn
Share price movement
during year:
- high
- low
€21.82
€15.86
£17.88
£12.66
€19.30
€14.68
£16.17
£12.15
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,
it appropriate, other
the Company deems
documentation by post. Shareholders can alter the method by which they
receive communications by contacting the Registrars.
if
Shareholdings as at 31 December 2014
Ownership of Ordinary Shares
Geographic location*
Number of
Shares held
‘000s
North America
United Kingdom
Europe/Other
Retail
Ireland
Treasury
309,829
185,851
125,413
87,458
32,198
3,776
744,525
41.61
24.96
16.85
11.75
4.32
0.51
100
* This represents a best estimate of the number of shares controlled by fund managers
resident in the geographic regions indicated. Private shareholders are classified as
retail above.
Electronic proxy voting
% of
total
Shareholders may lodge a proxy form for the 2015 Annual General Meeting
electronically by accessing the Registrars’ website as described below.
CREST members wishing to appoint a proxy via CREST should refer to the
CREST Manual and the notes to the Notice of the Annual General Meeting.
Registrars
Enquiries concerning shareholdings should be addressed to the Registrars:
Capita Asset Services
P.O. Box 7117
Dublin 2
Ireland
Telephone: +353 (0) 1 553 0050
Fax: +353 (0) 1 224 0700
Website: www.capitaassetservices.com
Holdings
Number of
Shareholders
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
Over 1,000,000
Financial calendar
14,973
8,375
1,152
310
93
24,903
% of
total
Number of
Shares held
‘000s
60.13
33.63
4.63
1.24
0.37
100
4,989
24,431
31,838
109,383
573,884
744,525
% of
total
0.67
3.28
4.28
14.69
77.08
100
Shareholders with access to the internet may check their accounts by
accessing the Registrars’ website and selecting “Shareholder Portal (Ireland)”.
This facility allows shareholders to check their shareholdings and dividend
payments, register e-mail addresses, appoint proxies electronically and
download standard forms required to initiate changes in details held by the
Registrars. Shareholders will need to register for a User ID before using some
of the services.
American Depositary Receipts (ADRs)
The ADR programme is administered by the Bank of New York Mellon and
enquiries regarding ADRs should be addressed to:
Announcement of final results for 2014
26 February 2015
Ex-dividend date
Record date for dividend
Extraordinary General Meeting
Latest date for receipt of scrip forms
Interim Management Statement
Annual General Meeting
5 March 2015
6 March 2015
19 March 2015
24 April 2015
6 May 2015
7 May 2015
Dividend payment date and first day of dealing in
scrip dividend shares
Announcement of interim results for 2015
Interim Management Statement
12 May 2015
27 August 2015
19 November 2015
Website
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, interim management
statements and copies of presentations to analysts and investors. News
releases are made available, in the “Media” section of the website, immediately
after release to the Stock Exchanges.
BNY Mellon Shareowner Services
P.O. Box 30170
College Station
TX 77842-3170
U.S.A.
Telephone: Toll Free Number (United States residents): 1-888-269-2377
International: +1 201-680-6825
E-mail: shrrelations@cpushareownerservices.com
Website: www.mybnymdr.com
Frequently Asked Questions (FAQ)
The Group’s website contains answers to questions frequently asked by
shareholders,
regarding shareholdings, dividends
payments, electronic communications and shareholder rights. The FAQ can
be accessed in the Investors section of the website under “Equity Investors”.
including questions
CRH 159
Management
Executive Directors/
Company Secretary
Senior Group Staff
Anthony Fitzgerald
Group Treasurer
Albert Manifold
Chief Executive
Maeve Carton
Finance Director
Compliance, Sustainability &
Risk
Europe
Jack Golden
Organisation Development
Director
Ken McKnight
Managing Director
Heavyside/Lightside
Mark Towe
Chief Executive Officer
Oldcastle, Inc.
Declan Condren
Group Strategic Financial
Risk Manager
Marc St. Nicolaas
Managing Director
Distribution
Neil Colgan
Company Secretary
Human Resources & Talent
Development
Edwin Bouwman
Chief Financial Officer
Dan Brennan
Group HR & Talent
Development Director
Nicola McCracken
HR Director, Talent
Management & Reward
Strategy, Innovation &
Development
Noel O’Mahony
Group Performance &
Strategy Director
Philip Wheatley
Group Strategy &
Development Director
Corporate Affairs & Investor
Relations
Mark Cahalane
Group Director, Corporate
Affairs
Frank Heisterkamp
Head of Investor Relations
Éimear O’Flynn
Corporate Communications
Finance, Tax, Treasury
Alan Connolly
General Manager - Finance
Heavyside
John Corbett
HR & Talent Development
Director
Pat McCleery
Performance Improvement
Director
John McKeon
Procurement Director
Heavyside West
Oliver Mahon
Managing Director
Owen Rowley
Chief Operating Officer
Edwin van den Berg
Managing Director
Benelux
Séamus Lynch
Managing Director
Ireland & Spain
Claus Bering
Managing Director
Denmark
Urs Sandmeier
Managing Director
Switzerland & Germany
Mark Lowry
Managing Director
Poland
Jim Mintern
Managing Director (a.i.)
Finland
Barry Leonard
Managing Director
Ukraine
Jim Mintern
Managing Director
Russia & Israel
Mariusz Bogacz
Financial Director
Lightside
David Dillon
Managing Director
Kees-Jan van ‘t Westeinde
Managing Director
Shutters & Awnings
Jean-Luc Bernard
Managing Director
Construction Accessories
Dennis Gouka
Managing Director
Heras
Hans Welting
Managing Director
Mobile Fencing
Michael Wightman
Managing Director
Cubis
Arijan Bakker
Financial Director
Distribution
Emiel Hopmans
Managing Director
DIY Benelux
Dan Creedon
Finance & Performance
Director
Francois Demoulin
Managing Director
France
Gijs Graafmans
HR & Talent Development
Director
Rossa McCann
Head of Group Financial
Operations
Johanna O’Driscoll
Head of Group Financial
Evaluation & Advisory
Services
Grainne McKenna
Head of Group Reporting &
Analysis
Sanna Luthala
Financial Director
Richard Piekar
Procurement Director
Heavyside East
Distribution North
Jim Mintern
Managing Director
Taco van Vroonhoven
Chief Operating Officer
Declan Maguire
Chief Operating Officer
Jan Boon
Managing Director
Builders Merchants,
Netherlands
160 CRH
Taco van Vroonhoven
Managing Director (a.i.)
Builders Merchants,
Belgium
Christoph Lehrmann
Managing Director
Builders Merchants,
Germany
Tom Beyers
Managing Director
SHAP & Netherlands
Roofing
Hans Wouda
Financial Director
Distribution South
Khaled Bachir
Chief Operating Officer
Ulrich Paulmann
Managing Director
Builders Merchants,
Austria
Nicolas Weinmann
Managing Director
Builders Merchants,
Switzerland
Khaled Bachir
Managing Director
Builders Merchants,
France
Laurent Sauvage
Financial Director
Asia
Ken McKnight
President
Peter Buckley
Country Director
China
Ee Ming Wong
Country Manager
China
Paul Headd
Country Director
India
Atul Khosla
Managing Director
India
The Americas
Mark Towe
Chief Executive Officer
BuildingEnvelope®
Eric Farinha
Chief Financial Officer
Doug Radabaugh
Chief Financial Officer, East
Southeast
Michael O’Driscoll
Chief Financial Officer
Ted Hathaway
Chief Executive Officer
Gary Hickman
Senior Vice President Tax &
Risk Management
Brian Reilly
Chief Administrative Officer
Michael Lynch
Executive Vice President
Development
Rick Mergens
Executive Vice President
Group Performance
Bill Miller
Vice President & General
Counsel
Mark Schack
Executive Vice President
Talent Management
Products
Keith Haas
Chief Executive Officer
Paul Valentine
Chief Financial Officer
Dan Krehnbrink
Senior Vice President
Development & Strategy
John Kemp
President
Building Solutions
Architectural Products
Tim Ortman
President
Mike Schaeffer
Chief Financial Officer
Eoin Lehane
President
National Group
Peter Kiley
Executive Vice President
Strategic Sales
Precast
Dave Steevens
President
Bob Quinn
Chief Administrative Officer
Jim Avanzini
Chief Operating Officer
Architectural Glass &
Storefronts
Mary Carol Witry
Chief Operating Officer
Engineered Glazing
Systems
Distribution
Robert Feury, Jr.
Chief Executive Officer
Frank Furia
Chief Financial Officer
John McLaughlin
President
Exterior Products
Ron Pilla
President
Interior Products
South America
Juan Carlos Girotti
Managing Director
CRH Sudamericana &
Canteras Cerro Negro
Bernardo Alamos
Managing Director
Vidrios Dell Orto & South
American Glass Group
Federico Ferro
Managing Director
Cormela
North America
Materials
Randy Lake
Chief Executive Officer
Charlie Brown
Chief Financial Officer
Kirk Randolph
Senior Vice President
Development
John Keating
President & Chief Operating
Officer, East
John Parson
President & Chief Operating
Officer, West
Jeff Schaffer
Executive Vice President,
West
Chris Madden
Executive Vice President,
Fleet Operations
Northeast
Dan Stover
President
Northeast Division
Christian Zimmermann
President
New England North
John Cooney, Jr.
President
New York Region
Sean O’Sullivan
President
Tilcon New Jersey
Central
John Powers
President
Central Division
Ty Nofziger
President
Shelly
Rob Duke
President
Southeast Division
David Church
President
Mid-South Region
Northwest
Jim Gauger
President
Northwest Division
Craig Mayfield
President
East Region
Ricardo Linares
President
West Region
Mountain West
Scott Parson
President
Mountain West Division
Randy Anderson
President
Staker Parson
North/Rocky Mountain
Michael Kurz
President
Staker Parson South
Rich Umbel
President
Southwest Region
Gregg Campbell
President
Michigan Paving & Materials
Bob Rowberry
President
Jack B. Parson
Mid-Atlantic
Great Plains
Dan Cooperrider
President
Mid-Atlantic Division
Mark Snyder
President
Mid-Atlantic Region
Willie Crane
President
AMG – North
Kevin Bragg
President
AMG – South
Craig Lamberty
President
Great Plains Division
Earl Losier
President
KS/MO & OK/AR Regions
Raymond Lane
President
TN/MS Regions
Craig Lamberty
President
Midwest Region
Southwest
Nathan Creech
President
Southwest Division
CRH 161
Principal Subsidiary Undertakings as at 31 December 2014
Incorporated and operating in
% held Products and services
Europe Heavyside
Belgium
VVM N.V.
Douterloigne N.V.
Ergon N.V.
Stradus Aqua N.V.
Oeterbeton N.V.
Prefaco N.V.
Remacle S.A.
Schelfhout N.V.
Stradus Infra N.V.
Marlux N.V.
Britain &
Northern
Ireland
Anderton Concrete Products Limited
Northstone (NI) Limited
(including Farrans, Ready Use Concrete, R.J.
Maxwell & Son, Scott (Toomebridge) Limited)
Premier Cement Limited
Forticrete Limited
Ibstock Brick Limited
Supreme Concrete Limited
Denmark
Betongruppen RBR A/S
CRH Concrete A/S
Finland
Finnsementti Oy
Rudus Oy
100 Cement transport and trading, readymixed concrete, clinker grinding
100 Concrete floor elements, pavers and blocks
100 Precast concrete and structural elements
100 Concrete paving, sewerage and water treatment
100 Precast concrete
100 Precast concrete structural elements
100 Precast concrete products
100 Precast concrete wall elements
100 Concrete paving and landscaping products
100 Concrete paving and landscaping products
100 Precast and pre-stressed concrete products
100 Aggregates, readymixed concrete, mortar, coated macadam, rooftiles,
building and civil engineering contracting
100 Marketing and distribution of cement
100 Concrete masonry products and rooftiles
100 Clay brick manufacturer
100 Concrete fencing, lintels and floorbeams
100 Concrete paving manufacturer
100 Structural concrete products
100 Cement
100 Aggregates, readymixed concrete and concrete products
France
Béton Moulé Industriel S.A.
99.98 Precast concrete products
L'industrielle du Béton S.A.*
Marlux
Stradal
Germany
CRH Clay Solutions GmbH*
EHL AG
Hungary
Ireland
Ferrobeton Beton-és Vasbetonelem gyártó Zrt.
Irish Cement Limited
Clogrennane Lime Limited
Roadstone Wood Limited
Netherlands
Cementbouw B.V.
Calduran Kalkzandsteen B.V.
CRH Kleiwaren Beheer B.V.
CRH Structural Concrete B.V.
Dycore B.V.
Struyk Verwo Groep B.V.
Poland
Bosta Beton Sp. z o.o.
CRH Klinkier Sp. z o.o.
Drogomex Sp. z o.o.*
Ergon Poland Sp. z o.o.
.
arów S.A.
z
Grupa O
Grupa Prefabet S.A.*
Masfalt Sp. z o.o.*
O.K.S.M. S.A.
Polbruk S.A.
100 Structural concrete products
100 Concrete paving manufacturer
100 Utility and infrastructural concrete products
100 Clay brick, pavers and rooftiles
100 Concrete paving and landscape walling products
100 Precast concrete structural elements
100 Cement
100 Burnt and hydrated lime
100 Aggregates, readymixed concrete, mortar, coated macadam, concrete blocks
and pipes, asphalt, agricultural and chemical limestone and contract surfacing
100 Cement transport and trading, readymixed concrete and aggregates
100 Sand-lime bricks and building elements
100 Clay brick manufacturer
100 Precast concrete structural elements
100 Concrete flooring elements
100 Concrete paving products
90.30 Readymixed concrete
100 Clay brick manufacturer
99.94 Asphalt and contract surfacing
100 Structural concrete products
100 Cement
100 Concrete products
100 Asphalt and contract surfacing
100 Aggregates
100 Readymixed concrete and concrete paving
Trzuskawica S.A.
99.95 Production of lime and lime products
Romania
Ferrobeton Romania SRL
Elpreco S.A.
Premac, spol. s.r.o.
Beton Catalan S.A.
Cementos Lemona S.A.
Slovakia
Spain
162 CRH
100 Structural concrete products
100 Architectural concrete products
100 Concrete paving and floor elements
100 Readymixed concrete
98.75 Cement
Incorporated and operating in
% held Products and services
Europe Heavyside | continued
Switzerland
JURA-Holding AG
Element AG Schweiz
Ukraine
LLC Cement*
PJSC Mykolaivcement
Podilsky Cement PJSC
Europe Lightside
Belgium
Britain &
Northern
Ireland
Plakabeton N.V.
Anchor Bay Construction Products*
Ancon Limited
CRH Fencing & Security Group (UK) Limited
Cubis
Security Windows Shutters Limited
France
Heras Clôture S.A.R.L.
Plaka Group France S.A.S.
Germany
Alulux GmbH*
ERHARDT Markisenbau GmbH*
Halfen GmbH
Hammerl GmbH
Heras-Adronit GmbH
Reuss-Seifert GmbH
Plaka Ireland Limited*
Halfen S.R.L., Società Unipersonale*
Ireland
Italy
Netherlands
Aluminium Verkoop Zuid B.V.
Heras B.V.
Mavotrans B.V.
Halfen AS*
Plakabeton S.L.U.
Heras Stängsel AB*
Norway
Spain
Sweden
Switzerland
F.J. Aschwanden AG*
Europe Distribution
Austria
Belgium
Quester Baustoffhandel GmbH
Lambrechts N.V.
Sax Sanitair N.V.
Schrauwen Sanitair en Verwarming N.V.
Van Neerbos België N.V.
France
CRH Ile de France Distribution*
CRH TP Distribution
CRH Normandie Distribution
Germany
BauKing AG
Andreas Paulsen GmbH
Netherlands
CRH Bouwmaten B.V.
CRH Bouwmaterialenhandel B.V.
NVB Ubbens Bouwstoffen B.V.
Royal Roofing Materials B.V.
Stoel van Klaveren Bouwstoffen B.V.
Van Neerbos Bouwmaterialen B.V.
Van Neerbos Bouwmarkten B.V.
100 Cement, aggregates and readymixed concrete
100 Prefabricated structural concrete elements
51 Cement and clinker grinding
99.27 Cement
99.60 Cement
100 Construction accessories
100 Construction accessories
100 Construction accessories
100 Security fencing
100 Supplier of access chambers and ducting products
100 Physical security, industrial and garage doors, roofing systems
100 Temporary fencing
100 Construction accessories
100 Roller shutter and awning systems
100 Roller shutter and awning systems
100 Construction accessories
100 Construction accessories
100 Security fencing and access control
100 Construction accessories
100 Construction accessories
100 Construction accessories
100 Roller shutter and awning systems
100 Security fencing and perimeter protection
100 Construction accessories
100 Construction accessories
100 Construction accessories
100 Security fencing
100 Construction accessories
100 Builders merchants
100 Builders merchants
75 Sanitary ware, heating and plumbing
100 Sanitary ware, heating and plumbing
100 DIY stores
100 Builders merchants
100 Builders merchants
100 Builders merchants
100 Builders merchants, DIY stores
100 Sanitary ware, heating and plumbing
100 Cash & Carry building materials
100 Builders merchants
100 Builders merchants
100 Roofing materials merchant
100 Builders merchants
100 Builders merchants
100 DIY stores
100 Builders merchants
Switzerland
Wij©k's B.V.
BR Bauhandel AG (trading as BauBedarf and Richner) 100 Builders merchants, sanitary ware and ceramic tiles
Gétaz Romang Holding SA (trading as Gétaz
Romang and Miauton)
100 Builders merchants
Regusci Reco S.A. (trading as Regusci and Reco)
100 Builders merchants
CRH 163
Principal Subsidiary Undertakings | continued
Incorporated and operating in
% held Products and services
Americas Materials
United States
Oldcastle Materials, Inc.
APAC Holdings, Inc. and Subsidiaries
Callanan Industries, Inc.
CPM Development Corporation
Dolomite Products Company, Inc.
Eugene Sand Construction, Inc.
Evans Construction Company
Hills Materials Company
Michigan Paving and Materials Company
Mountain Enterprises, Inc.
OMG Midwest, Inc.
Preferred Materials Inc.
Oldcastle SW Group, Inc.
Pennsy Supply, Inc.
Pike Industries, Inc.
P.J. Keating Company
Staker & Parson Companies
The Shelly Company
Tilcon Connecticut, Inc.
Tilcon New York, Inc.
Trap Rock Industries, LLC*
West Virginia Paving, Inc.
100 Holding company
100 Aggregates, asphalt, readymixed concrete and related construction activities
100 Aggregates, asphalt, readymixed concrete and related construction activities
100 Aggregates, asphalt, readymixed concrete, prestressed concrete and related
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
100 Aggregates, asphalt, readymixed concrete and related construction activities
100 Aggregates, asphalt and related construction activities
100 Aggregates, asphalt and related construction activities
100 Aggregates, asphalt, readymixed concrete and related construction activities
100 Aggregates, asphalt, readymixed concrete, aggregates distribution and
related 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
100 Aggregates, asphalt and related 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
100 Aggregates, asphalt and related construction activities
60 Aggregates, asphalt and related construction activities
100 Aggregates, asphalt and related construction activities
164 CRH
Incorporated and operating in
% held Products and services
Americas Products & Distribution
Argentina
CRH Sudamericana S.A.
100 Holding company
Canteras Cerro Negro S.A.
99.98 Clay rooftiles, wall tiles and floor tiles
Cormela S.A.
Superglass S.A.
Building Products
Canada
Oldcastle BuildingEnvelope® Canada, Inc.
Oldcastle Building Products Canada, Inc.
(trading as Décor Precast, Expocrete Concrete
Products, Groupe Permacon, Oldcastle
Enclosure Solutions and Transpavé)
100 Clay blocks
100 Fabricated and tempered glass products
100 Custom fabricated and tempered glass products and curtain wall
100 Masonry, paving and retaining walls, utility boxes and trenches
Chile
Vidrios Dell Orto, S.A.
Comercial Duomo Limitada
99.90 Fabricated and tempered glass products
99.99 Wholesaler and retailer of specialised building products
United States
Americas Products & Distribution, Inc.
CRH America, Inc.
Oldcastle, Inc.
Building Products
Oldcastle Architectural, Inc.
Oldcastle Building Products, Inc.
Big River Industries, Inc.
Bonsal American, Inc.
Glen-Gery Corporation
Merchants Metals, Inc.
Meadow Burke, LLC
Oldcastle APG Northeast, Inc. (trading principally
as Anchor Concrete Products and Trenwyth
Industries)
Oldcastle APG South, Inc. (trading principally
as Adams Products, Georgia Masonry Supply,
Northfield Block Company and Oldcastle
Coastal)
Oldcastle APG West, Inc. (trading principally
as Amcor Masonry Products, Central Pre-Mix
Concrete Products, Texas Masonry Products,
Miller Rhino Materials, Sierra Building Products
and Superlite Block)
Oldcastle BuildingEnvelope®, Inc.
Oldcastle Lawn & Garden, Inc.
Oldcastle Precast, Inc.
Oldcastle Surfaces, Inc.
Distribution
Oldcastle Distribution, Inc.
Allied Building Products Corp.
100 Holding company
100 Holding company
100 Holding company
100 Holding company
100 Holding company
100 Lightweight aggregates
100 Premixed cement and asphalt products
100 Clay bricks
100 Fabrication and distribution of fencing products
100 Concrete accessories
100 Specialty masonry, hardscape and patio products
100 Specialty masonry, hardscape and patio products
100 Specialty masonry and stone products, hardscape and patio products
100 Custom fabricated architectural glass
100 Patio products, bagged stone, mulch and stone
100 Precast concrete products, concrete pipe, prestressed plank and structural
elements
100 Custom fabrication and installation of countertops
100 Holding company
100 Distribution of roofing, siding and related products, wallboard, metal studs,
acoustical tile and grid
CRH 165
Principal Equity Accounted Investments as at 31 December 2014
Incorporated and operating in
% held Products and services
Europe Heavyside
China
India
Ireland
Israel
Jilin Yatai Group Building Materials Investment
Company Limited*
26 Cement
My Home Industries Limited
Kemek Limited*
Mashav Initiating and Development Limited
50 Cement
50 Commercial explosives
25 Cement
Europe Distribution
France
Doras S.A.
Samse S.A.*
56.95 Builders merchants
21.13 Builders merchants and DIY stores
Netherlands
Bouwmaterialenhandel de Schelde B.V.
Intergamma B.V.
Portugal
Modelo Distribuição de Materials de Construção S.A.*
50 DIY stores
48.57 DIY franchisor
50 DIY stores
Americas Materials
United States
American Cement Company, LLC*
Boxley Aggregates of West Virginia, LLC*
Southside Materials, LLC*
Cadillac Asphalt, LLC*
Piedmont Asphalt, LLC*
American Asphalt of West Virginia, LLC*
HMA Concrete, LLC*
Buckeye Ready Mix, LLC*
* Audited by firms other than Ernst & Young
50 Cement
50 Aggregates
50 Aggregates
50 Asphalt
50 Asphalt
50 Asphalt and related construction activities
50 Readymixed concrete
45 Readymixed concrete
Pursuant to Section 16 of the Companies Act, 1986, a full list of subsidiaries, joint ventures and associated undertakings will be annexed to the
Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
166 CRH
Group Financial Summary
(Figures prepared in accordance with IFRS)
Revenue
EBITDA (as defined)*
Group operating profit
Profit on disposals
Profit before finance costs
Net finance costs (funding/cash)
Other financial expense
Share of equity accounted investments' profit/(loss)
Profit/(loss) before tax
Income tax expense
Restated Restated Restated Restated Restated Restated Restated Restated
2012
€m
2010
€m
2011
€m
2007
€m
2006
€m
2008
€m
2009
€m
2005
€m
2013
€m
2014
€m
13,831 17,836 19,916 19,715 16,278 16,112 17,374 18,084 18,031 18,912
1,845
1,311
19
1,330
(135)
(10)
75
1,260
(254)
2,326
1,724
36
1,760
(221)
(15)
60
1,584
(360)
2,704
1,973
57
2,030
(282)
(7)
138
1,879
(441)
2,478
1,704
68
1,772
(324)
(6)
160
1,602
(340)
1,654
861
25
1,487
630
54
1,543
811
53
886
(263)
(27)
117
713
(115)
598
684
(211)
(29)
69
513
(74)
439
864
(223)
(28)
87
700
(103)
597
1,563
805
230
1,035
(256)
(49)
(84)
646
(106)
540
1,475
100
26
1,641
917
77
126
(249)
(48)
(44)
(215)
(80)
(295)
994
(246)
(42)
55
761
(177)
584
Group profit/(loss) for the financial year
1,006
1,224
1,438
1,262
Employment of capital
Non-current and current assets
Property, plant and equipment
Intangible assets
Equity accounted investments/other financial assets
Net working capital
Other liabilities - current and non-current
Assets and liabilities held for sale
6,275
2,005
1,126
1,864
(1,226)
6,954
2,713
1,169
2,314
(1,070)
7,503
3,424
1,448
2,326
(836)
7,904
3,772
1,969
2,468
(1,078)
7,570
3,754
2,204
1,838
(1,051)
7,939
3,960
2,265
1,799
(1,056)
8,008
4,148
2,107
2,004
(1,323)
7,971
4,267
1,456
2,078
(1,376)
7,539
3,911
1,363
2,016
(1,111)
7,422
4,173
1,352
2,010
(1,418)
-
-
-
-
-
-
-
143
-
285
(a)
(b)
(c)
(d)
Total
10,044 12,080 13,865 15,035 14,315 14,907 14,944 14,539 13,718 13,824
Capital and reserves excluding preference share capital
Preference share capital
Non-controlling interests
Net deferred income tax liability
Net debt
(e)
6,194
1
25
647
3,177
7,062
1
31
742
4,244
7,953
1
37
875
4,999
8,086
1
38
972
5,938
9,636 10,327 10,508 10,552
1
36
1,041
2,909
1
50
1,149
3,380
1
41
1,059
3,335
1
41
1,028
3,609
9,661 10,176
1
21
1,134
2,492
1
24
1,059
2,973
Total
10,044 12,080 13,865 15,035 14,315 14,907 14,944 14,539 13,718 13,824
Purchase of property, plant and equipment
614
777
956
955
Acquisitions and investments
1,298
2,311
2,227
1,072
Total
Depreciation of property, plant and equipment
Amortisation of intangible assets
Impairment of property, plant and equipment and
intangible assets
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
1,912
3,088
3,183
2,027
525
9
577
25
696
35
717
43
487
458
945
709
43
418
567
507
610
544
548
497
576
985
1,117
1,092
1,073
711
44
673
38
686
44
671
54
435
188
623
631
44
-
-
-
14
41
102
21
28
650
49
(f)
168.3
202.2
236.9
210.2
88.3
61.3
82.6
74.6
(40.6)
78.9
(f)
(f)
(f), (g)
(h)
170.0
35.17
268.9
4.8
206.5
46.89
332.0
4.3
242.7
61.31
372.3
3.9
217.4
62.22
357.4
3.4
96.3
62.50
222.9
1.4
79.9
62.50
203.2
1.0
88.6
62.50
201.4
1.3
80.6
62.50
199.8
1.2
(33.2)
62.50
162.4
n/a
84.9
62.50
177.1
1.3
The Group financial summary for 2005 to 2012 has been restated for the impact of IFRS 11 Joint Arrangements. The 2012 results also reflect the change in accounting as
required by IAS 19 Employee Benefits.
(a) Represents the sum of equity accounted investments’ and other financial assets.
(b) Represents the sum of inventories and trade and other receivables (included in current assets) less trade and other payables (included in current liabilities).
(c) Represents the sum of current income tax liabilities, current and non-current provisions for liabilities, non-current other payables and retirement benefit obligations less
the sum of current income tax recoverable and non-current other receivables.
(d) Represents the sum of assets and liabilities reclassified as held for sale, excluding cash and cash equivalents reclassified which is included under net debt (see note (e) below).
(e) 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 (including cash reclassified as held for sale) and current and non-current derivative financial instrument assets.
(f) Per share amounts for restated 2005 to 2008 have been restated for the bonus element of the Rights Issue in March 2009.
(g) Cash earnings per share represents profit attributable to equity holders of the Company less preference dividends paid plus depreciation of property, plant and
equipment, amortisation of intangible assets and, where applicable, asset impairments divided by the average number of Ordinary Shares outstanding for the year.
(h) Represents earnings per Ordinary Share divided by dividends per Ordinary Share.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted
investments’ result after tax.
CRH 167
Index
A
D
Accounting policies
Acquisitions Committee
108
Debt, Analysis of net (note 20)
134
Foreign currency translations
68
Deferred income tax
Frequently asked questions
American Depositary Receipts
159
- Expense (note 10)
110, 125
Annual General Meeting
Audit Committee
Auditors (Directors’ Report)
71
61
98
- Assets and liabilities (note 26)
110, 142
G
Depreciation
Gender diversity
- Cost analysis (note 2)
118
Going concern
Auditor’s remuneration (note 3)
64, 119
- Property, plant and equipment
Governance
Auditor’s Report, Independent
101
(note 13)
B
Balance sheet
- Company
- Consolidated
Board agendas
Board approval of financial
statements (note 34)
Board Committees
Board evaluation
Board Meetings
Board of Directors
Board responsibilities
Business and non-current asset
disposals (note 4)
154
105
60
153
60
58
59, 68
51, 56, 98
56
120
Business combinations (note 30)
112, 149
Business model
Business performance review
C
Capital and financial risk
management (note 21)
10
22
135
Cash and cash equivalents (note 22)
113,137
Cash flow, operating
14, 24
Cash flow statement, Consolidated
Cash flow, summarised
Chairman’s Introduction
Changes in Equity, Consolidated
Statement of
Chief Executive’s Introduction
Communications with shareholders
Company Secretary
Compliance and ethics
Comprehensive Income,
Consolidated Statement of
Consolidated Financial Statements
Contingent liabilities (note 32)
Corporate governance report
Cost analysis (note 2)
CREST
CRH in Asia
CRH in Europe
CRH in the Americas
168 CRH
107
24
2
106
4
70
58
69
104
104
152
54
118
158
48
28
39
- Segment analysis (note 1)
Derivative financial instruments
(note 24)
Directors’ emoluments and interests
(note 6)
Directors’ interests in share capital
Directors’ remuneration report
Directors’ Report
Directors’ responsibilities, Statement of
Directors’ share options
Distribution
Dividend payments
(shareholder information)
Dividend per Share
Dividends (note 11)
E
Earnings per Ordinary Share
(note 12)
Employees, average number (note 5)
Employment costs (note 5)
End-use
- Americas Distribution
- Americas Materials
- Americas Products
- Europe Distribution
- Europe Heavyside
- Europe Lightside
Equity accounted investments’
profit/(loss), share of (note 9)
Events after the balance sheet date
(note 33)
Exchange rates
F
Finance Committee
Finance costs and finance income
(note 8)
Finance Director’s Introduction
110, 127
116
113, 139
121
85
72
96
100
76, 83
35, 46
96, 158
5
114, 126
126
121
121
27
27
27
26
26
26
124
153
114
69
124
22
Financial assets (note 15)
113, 131
Financial calendar
Financial statements, Consolidated
Financial summary,
Group (2005-2014)
159
104
167
Greenhouse gas emissions
Guarantees (note 23; note 10 to
Company Balance Sheet )
H
Health and safety
Heavyside
I
Income Statement, Consolidated
Income tax expense (note 10)
Independent auditors’ report
Intangible assets (note 14)
Inventories (note 16)
Investor relations activities
K
Key components of 2014
performance
Key financial figures 2014
KPIs, financial
KPIs, non-financial
L
Leases, commitments under
operating and finance (note 29)
Lightside
Listing rule 9.8.4C
Loans and borrowings, interest-
bearing (note 23)
M
Management
Materials
Measuring performance
Memorandum and Articles
of Association
N
Nomination and Corporate
Governance Committee
114
159
14, 57
71
54
14, 98
138, 157
17
30
104
110, 125
101
112, 128
113, 132
70
23
5
14
14
113, 148
33
99
113, 138
160
40
14
71
66
Notes on Consolidated Financial
Statements
115-153
O
Operating costs (note 2)
Operating leases (note 29)
118
113, 148
Shareholdings as at
31 December 2014
Operating profit disclosures (note 3)
119
Snapshot 2014
Statement of Changes in Equity,
Consolidated
Statement of Comprehensive
Income, Consolidated
Statement of Directors’
responsibilities
Stock Exchange listings
Strategic report
Strategy review
Subsidiary undertakings, principal
Substantial holdings
Sustainability and governance
159
26
106
104
100
56, 158
7
4
162
70
17
Operational Reviews and 2014 results
- Americas Distribution
- Americas Materials
- Americas Products
- Europe Distribution
- Europe Heavyside
- Europe Lightside
P
Pensions, retirement benefit
obligations (note 27)
Principal equity accounted
investments
Principal subsidiary undertakings
Products
Profit on disposals (note 4)
Property, plant and equipment
(note 13)
Provisions for liabilities (note 25)
Proxy voting, electronic
R
Registrars
Regulatory information
Related party transactions (note 31)
Remuneration Committee
Reserves (million tonnes)
Retirement benefit obligations
(note 27)
Return on net assets
Risk management and internal
control
Risks and uncertainties
S
Sector exposure and end-use
Segment information (note 1)
Senior Independent Director
46
40
43
35
30
33
143
166
162
43
120
127
141
159
159
97
152
68, 72
32, 40, 49
109, 143
14
69
96
26
111, 115
58
Share-based payments (note 7)
111, 121
Share capital and reserves (note 28)
114, 147
Share options
- Directors
- Employees (note 7)
Share price data
Shareholder communication
Shareholder information
83
121
159
70
158
T
Total Shareholder Return (TSR)
Trade and other payables (note 18)
Trade and other receivables
(note 17)
14, 87
133
113, 132
V
Volumes, annualised production
- Americas Materials
- Americas Products
- Europe Heavyside
- Europe Lightside
W
Website
Working capital and provision for
liabilities, movement during year
(note 19)
27
27
26
26
71, 159
109, 133
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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
CRH® is a registered
trade mark of CRH plc.
Front cover: The Rehberger bridge, also known
as the “Slinky Springs to Fame” bridge-sculpture,
spans the Rhine-Herne canal in Oberhausen,
Germany. It consists of 496 spiral rings, each
with a five metre diameter, suspended ten metres
above the canal for a total length of 406 metres.
HALFEN, a CRH Europe Lightside business,
designed and engineered a solution consisting of
serrated steel channels to connect the guardrail
to the top of the concrete slab, and the spiral
underneath the slab, as part of the same
element. This clever design allowed the project to
be constructed efficiently, safely and on time.