2016 Annual Report
and Form 20-F
Contents
Our Global Business
Our Balanced Portfolio
Chairman’s Introduction
Strategy Review
Chief Executive’s Review
Strategy
Business Model
Measuring Performance
Sustainability
Risk Governance
Business Performance
Business Overview
Finance Director’s Review
Segmental Reviews
Governance
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
Financial Statements
Independent Auditor’s Reports
Consolidated Financial Statements
Accounting Policies
Notes on Consolidated Financial Statements
Additional Information
Supplementary 20-F Disclosures
Shareholder Information
Other Information
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4
5
8
10
12
14
16
18
22
23
28
59
62
72
96
110
120
125
136
210
236
248
Cross Reference to Form 20-F Requirements 257
Index
258
This document constitutes the Annual Report and Financial
Statements in accordance with Irish and UK requirements and
the Annual Report on Form 20-F in accordance with the US
Securities Exchange Act of 1934, for CRH plc for the year ended
31 December 2016. A cross reference to Form 20-F requirements
is included on page 257.
The Directors’ Statements (comprising the Statement of Directors’
Responsibilities, the Viability Statement and the Directors’
Compliance Statement on pages 98 to 100), the Independent
Auditor’s Report (on pages 110 to 117) and the Parent Company
financial statements of CRH plc (on pages 204 to 209) do not
form part of CRH’s Annual Report on Form 20-F as filed with the
Securities and Exchange Commission.
Forward-Looking Statements
This document contains forward-looking statements, which by
their nature involve risk and uncertainty. Please see Disclaimer/
Forward-Looking Statements on page 97 for more information
about these statements and certain factors that may cause them
to prove inaccurate.
Our business
CRH manufactures and distributes a diverse range of superior building materials
and products for the modern built environment. From foundations, to frame and
roofing, to fitting out the interior space and improving the exterior environment,
to on-site works and infrastructural projects including roads and bridges, our
materials and products are used extensively in construction projects of all sizes,
all across the world.
Heavyside Materials
Heavyside Materials
• Aggregates
• Cement
• Asphalt
• Readymixed Concrete
• Precast Concrete
• Architectural Concrete
Lightside Products
Lightside Products
• Glass and Glazing Systems
• Construction Accessories
• Shutters and Awnings
• Perimeter Protection
• Network Access Products
Building Materials
Building Materials
Distribution
Distribution
• General Builders Merchants
• Sanitary, Heating and
Plumbing Outlets
• DIY Stores
CRH Annual Report and Form 20-F I 2016 CRH at a glance
CRH plc is a leading global diversified building
materials group, employing 87,000 people at
close to 3,800 operating locations in 31 countries
worldwide.
CRH is the second largest building materials company globally and the
largest in North America. The Group has leadership positions in Europe
as well as established strategic positions in the emerging economic
regions of Asia and South America.
CRH is committed to improving the built environment through the delivery
of superior materials and products for the construction and maintenance
of infrastructure, residential and non-residential projects.
A Fortune 500 company, CRH is listed in London and Dublin and is a
constituent member of the FTSE100 index, the EURO STOXX 50 index
and the ISEQ 20. CRH’s American Depositary Shares (ADSs) are listed on
the New York Stock Exchange (NYSE). CRH’s market capitalisation at
31 December 2016 was approximately €27 billion.
Our Vision
Our Vision
To be the
leading building
materials business
in the world
2016
Performance
highlights
Sales
€27.1billion
+15%
EBITDA
(as defined)*
€3.1billion
+41%
Operating Profit
€2.0 billion
+59%
Profit After Tax
€1.3 billion
+74%
Earnings Per Share
150.2 cent
+69%
Dividend Per Share
65.0
cent
+4%
Visit our Investor Relations Centre
http://www.crh.com/investors
View Annual Report and Form 20-F Online
http://www.crh.com/reports/2016-annual-report-20-f.pdf
* EBITDA is defined as earnings before interest, taxes, depreciation,
amortisation, asset impairment charges, profit on disposals and
the Group’s share of equity accounted investments’ profit after tax.
Details of how non-GAAP measures are calculated are set out on
pages 213 to 215.
1
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CRH Annual Report and Form 20-F I 2016 Our Global Business
CRH’s global footprint spans 31 countries and close to 3,800 operating locations, serving
customers across the entire building materials spectrum, on five continents, worldwide.
Alaska
Hungary
CRH in the Americas
• #1 Building Materials Company in North America
• Organised in three segments:
- Heavyside Materials
- Heavyside & Lightside Products
- Building Materials Distribution
53%
Global Sales
Sales
Growth
€14.2 billion +8%
• Operations in all 50 states, nine Canadian provinces
2015: €13.1 billion
and Southeast Brazil
• c. 42,800 employees
• c. 1,750 operating locations
CRH Timeline
1970
1970
1973
1973
1978
1978
1995
1995
2007
2007
Founded in
Ireland in 1970
First acquisition
in mainland Europe
First acquisition in
the United States
2
CRH Annual Report and Form 20-F I 2016 45%
Global Sales
CRH in Europe
• #1 in Heavyside Materials
• Organised in three segments:
- Heavyside Materials & Products
- Lightside Products
- Building Materials Distribution
• Operations in 23 countries
• c. 42,600 employees
• c. 2,000 operating locations
Sales
Growth
€12.4 billion +20%
2015: €10.4 billion
Alaska
Hungary
1970
1970
1973
1973
1978
1978
1995
1995
2007
2007
2015
2015
2%
Global Sales
CRH in Asia
• #2 Cement producer in the Philippines
• Regional leadership positions in China and India
• Lightside operations in Malaysia and Australia
report to Europe Lightside Division
• c. 1,400 employees
• Ten operating locations
Sales
€0.5 billion
2015: €0.15 billion
Growth
+236%
First acquisitions in Central and
Eastern Europe, Canada and
South America
First acquisition
in Asia
First acquisitions in the Philippines,
Brazil and Serbia. Major expansion
in Canada and Eastern Europe
3
CRH Annual Report and Form 20-F I 2016 Our Balanced Portfolio
Building a balanced portfolio is a core constituent of our strategy and a key determinant of
value creation for CRH.
By Geography
By Division
66%
Americas
30%
Europe
4%
Asia
64%
Heavyside Materials
24%
Lightside Products
12%
Distribution
Americas
Europe
Asia
Heavyside Materials
Lightside Products
Distribution
Percentages based on 2016 Operating Profit
Percentages based on 2016 Operating Profit
By End-use
New Build vs RMI
40%
Residential
35%
Non-Residential
25%
Infrastructure
55%
New Build
45%
RMI
Residential
Non-Residential
Infrastructure
New Build
Repair, Maintenance &
Improvement (RMI)
Percentages based on 2016 Group Sales
Percentages based on 2016 Group Sales
4
4
CRH Annual Report and Form 20-F I 2016 Chairman’s Introduction
y
r
e
t
r
a
H
y
k
c
N
i
Chairman
Dear Shareholder,
Following a year of significant acquisition spend
in 2015, I am pleased to report that the assets
we acquired from LafargeHolcim (LH Assets),
and the C.R. Laurence (CRL) business,
are now fully integrated with our heritage
businesses, and performing as expected. I am
equally pleased to report that we exceeded the
commitments we made when we announced
the acquisitions. Our debt metrics at the
end of 2016 were below normalised levels,
representing a continued strong focus during
the year on cash generation and prudent
financial management.
2016 has been a strong year in terms of
performance over the global operations,
with sales, earnings, margins and returns all
ahead of 2015, reflecting our relentless focus
on value creation through operational and
commercial performance.
Considering the Group’s excellent performance
in 2016 and a generally positive outlook, the
Board is recommending a final dividend of
46.2c per share, which, if approved at the
Annual General Meeting in 2017 will result in
an increase in the full-year dividend of 4% to
65.0c per share.
Looking forward to 2017, it is clear that the
vote in the United Kingdom (UK) to leave the
European Union has created uncertainty, both
for our businesses in the UK and in relation
to the European economy generally. While
there has been limited impact on trading in
the UK to date, this is something which the
Board will continue to monitor closely.
2016 saw a number of changes to the
composition of the Board. In December,
Mark Towe retired from the Board as an
executive Director. Mark joined CRH in 1997
and was appointed a Director in 2008. His
40+ years’ experience in the sector have
been invaluable to CRH and we are delighted
that he is remaining as Chairman of CRH’s
Americas operations. I have no doubt that we
will continue to benefit from Mark’s industry
knowledge and experience for a number of
years to come.
We also announced in December, the
appointment to the Board of Gillian Platt
as a non-executive Director with effect
from January 2017. Gillian has significant
experience in human resources, corporate
affairs and strategy.
I would like to take the opportunity to thank
my non-executive colleagues on the Board
for their expertise, energy and guidance.
In particular, I would like to thank Bill Egan,
Utz-Hellmuth Felcht and Rebecca McDonald,
who stepped down from the Board during
the year, for their service. Full details of Board
changes in the past year are set out on
page 99.
I would like also to record my appreciation
for the CRH management team led by
Albert Manifold. Their achievements over the
past year have been significant and leave the
Group well placed for further progress in 2017.
Nicky Hartery
Chairman
28 February 2017
5
CRH Annual Report and Form 20-F I 2016
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e
v
e
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S
6
6
CRH Annual Report and Form 20-F I 2016
Strategy Review
Chief Executive’s Review
Strategy
Business Model
Measuring Performance
Sustainability
Risk Governance
8
10
12
14
16
18
Over 100,000 rebar couplers, manufactured by CRH company Ancon, have been used in the concrete support towers,
end piers and road deck of one of the longest cable-stayed bridges in the world. The Queensferry Crossing, near Edinburgh,
Scotland, will open in May 2017.
7
CRH Annual Report and Form 20-F I 2016
Chief Executive’s Review†
d
o
l
f
i
n
a
M
t
r
e
b
A
l
Chief Executive
At CRH, our vision is to become the leading
building materials business in the world. With
operations in 31 countries, and leadership
positions in the major markets of Europe,
North America and Asia, we are well on our
way to achieving that vision. Our materials
and products can be found throughout the
built environment, from critical infrastructure
and iconic commercial real estate buildings, to
family homes in suburban neighbourhoods.
For me, as Chief Executive, that vision is
however, not simply about achieving size and
scale, but about ensuring that CRH builds
businesses that are the best at what they do,
that create value and that deliver growth for
our shareholders.
This is not a new concept for us, in fact it is
something that has been part of the DNA of
CRH for almost half a century. We have always
been rigorous in our assessment of where
value can be created and relentless in our
pursuit of that value once we have identified it.
This focus on value creation and growth
through building better businesses was
central to the strong performance delivered
by the Group in 2016. As a significantly
enlarged business following value-adding
record acquisition activity in 2015, CRH
delivered good profit growth with a substantial
contribution from newly acquired businesses
and a further improved performance in our
heritage businesses.
Profit after tax increased 74% to €1.3 billion,
representing further significant profit growth
for CRH. Earnings per share (EPS) for the year
increased 69% to 150.2c and the Board has
proposed to increase the dividend to 65.0c per
share, an increase of 4% compared with last
year’s level of 62.5c per share.
Operationally, improved margins and returns
were underpinned by our relentless focus
on performance improvement and benefited
also from our ability to increasingly leverage
our vertically integrated business model for
heavyside materials, particularly in Europe
where we are now the largest heavyside player.
By integrating newly acquired assets quickly,
realising the identified synergies and positioning
the new businesses to make an immediate
contribution to the Group’s performance, we
also exceeded our commitment to return our
debt metrics to normalised levels, reaching a
net debt/EBITDA (as defined)*▲ ratio of 1.7x
at year-end.
In North America, where CRH is the largest
building materials company and the leading
supplier of product for road construction and
repair/maintenance, construction activity
benefited from favourable weather conditions
during the early part of the year, stable
federal funding, increased state spending
and improved non-residential activity. Positive
momentum was also supported by low interest
rates and increasing employment.
In Europe, the Group experienced continued
recovery in key markets, albeit with pricing
still a challenge for some of our businesses in
certain markets. In Asia, which now reports
as a stand-alone Division, our newly acquired
business in the Philippines benefited from good
economic growth.
As a result, overall Group sales for the year
increased 15% to €27.1 billion reflecting both
the inclusion of full-year results from the two
major acquisitions in 2015 and ongoing growth
in organic sales from underlying operations.
A universally strong performance across the
Group saw EBITDA (as defined)* increase
strongly to €3.1 billion.
The Group focuses on continuously improving
the operational and commercial performance
of its businesses in order to achieve strong
returns on capital invested. In 2016, this focus
along with reinvestment in our businesses
through capital expenditure of €853 million,
enabled us to deliver a Return on Net Assets
(RONA)■ of 9.7% ahead of 7.6% in 2015.
Synergies of €89 million were realised through
the timely integration and prudent financial
management of the LH Assets and CRL
businesses, demonstrating the Group’s
effectiveness at integrating businesses of
this scale.
Our uncompromising approach to safety
remains a strategic priority for the Group and
we continued our efforts to ensure safe and
responsible operations during 2016.
† See cautionary statement regarding forward-looking statements on page 97.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
▲ Net debt/EBITDA (as defined)* is a non-GAAP measure as defined on page 215. The GAAP figures that are most directly comparable to the components of net debt/EBITDA (as defined)* include:
interest-bearing loans and borrowings (2016: €7,790 million) and profit after tax (2016: €1,270 million). Details of how non-GAAP measures are calculated are set out on pages 213 to 215.
8
CRH Annual Report and Form 20-F I 2016
Reflecting in more detail on the performance
of each of our Divisions, overall sales for the
Americas were ahead by 8% while operating
profit increased by 38% reflecting very strong
profit delivery. With higher sales and good cost
control, profits and margins improved in all
three Americas Divisions.
All of our Americas Divisions experienced
positive underlying demand momentum,
albeit with the pace of growth moderating
somewhat following a particularly strong
first-half which was helped by favourable
early season weather conditions.
Americas Materials delivered good profit
growth across all regions in the United States
(US). This was primarily driven by continuing
volume improvement, reduced energy costs
and the benefits of ongoing operational and
commercial performance initiatives.
Our Americas Products Division saw strong
market conditions continue across all major
end-use market segments including new
build and RMI, supported by low interest
rates and increasing employment. Our
Architectural Products, Precast and Oldcastle
BuildingEnvelope® businesses, including our
newly integrated professional glazing business
CRL, all delivered positive volume and pricing
gains during the year.
Positive demand from commercial and
multi-family residential construction resulted
in good growth throughout the year for our
Americas Distribution business despite some
weather-related pull-forward in the first-half.
In Europe, total sales increased 20%, reflecting
a strong contribution from the heavyside
businesses acquired in 2015. Organic sales
were also ahead as recovery continued in
certain key markets. Operating profit doubled
to €608 million.
Our Europe Heavyside Division experienced
encouraging volume improvements in a
number of key European markets. The overall
pricing environment however, continued to
prove challenging.
Europe Lightside saw improvements in
most end-use markets which together with
favourable weather patterns in the
first-half, product innovation and cost control,
contributed to increased profit delivery.
Strong cost control and performance
improvement initiatives helped drive margin
improvement in our Europe Distribution
Division against a mixed market backdrop.
Results for our Asia Division primarily relate
to our operations in the Philippines, where
cement market demand continued to grow.
The Group’s equity accounted investment in
India experienced pricing challenges due to
increased competition and new capacities,
while in China, both volumes and pricing
continued to prove challenging.
In 2016, the Group continued to strengthen
in strategically important markets through a
number of bolt-on acquisitions. Development
spend during the year was funded through
proceeds from divestments, which along
with the Group’s strong cash generation
performance, positions us very favourably
to take advantage of the right opportunities
for value creation through acquisition, as
opportunities arise.
The portfolio management process is now
an embedded feature of our business. We
continue to actively manage our portfolio,
focusing on allocating capital to the areas best
positioned to benefit from growth through the
current cycle.
Our divestment programme has to date
recorded total proceeds of €1.7 billion and
we have been successful in recycling this
capital into areas that offer long-term growth
potential and value creation at attractive
multiples. We anticipate further transactions as
part of this programme, albeit at a lower level
as our portfolio becomes more optimised for
current and future market conditions.
This strong performance has helped ensure the
Group is well positioned for future growth and
further value creation as we commence the
2017 season.
Outlook
In 2017, we see continued positive momentum
in the US construction sector. We expect
that residential construction, which has still
not returned to long-term average levels, will
advance, while non-residential activity will also
improve. For US infrastructure, we anticipate
that the funding stability provided by the FAST
Act (which authorises moderate year-on-year
increases in federal funding for highways),
together with expected increases in state
spending on transportation improvements,
will result in a positive trend for volumes,
particularly in the second half of the year.
Overall we expect our Americas business to
advance further in 2017.
In Europe, we anticipate that most countries
will continue to experience the modest impact
of early-stage economic recovery. While
the UK’s vote to leave the European Union,
together with the forthcoming elections in a
number of countries, has created a level of
uncertainty for the medium-term, we expect
progress to continue in 2017.
In Asia, we expect further improvement in
economic and construction activity in the
Philippines in 2017.
We expect the generally positive economic
backdrop to continue this year. With our
balanced portfolio, CRH is well positioned to
capitalise on this improved market environment
and we see continued growth for the Group
in 2017.
Albert Manifold
Chief Executive
28 February 2017
■ RONA is a non-GAAP measure as defined on page 215. The GAAP figures that are most directly comparable to the components of RONA include: operating profit (2016: €2,027 million), total
assets and total liabilities respectively (2016: €31,594 million and €17,151 million respectively). Details of how non-GAAP measures are calculated are set out on pages 213 to 215.
9
CRH Annual Report and Form 20-F I 2016 Strategy
Becoming the global leader in building materials
Our vision is to be the leading building materials business in the world and in doing so, to create
value and deliver superior returns for all our stakeholders.
CRH has a clear vision for its business,
based on a guiding principle of continuous
improvement, for the purpose of creating value
and maximising returns for stakeholders.
In many of our businesses, the relationships
we have with our customers span decades
and are rooted in trust that has been built over
generations.
Our businesses excel through a constant
focus on understanding the unique needs
of customers in local and regional markets
around the world and consistently delivering
for those customers over time.
The Group’s business strategy has been
successfully developed and refined for
almost half a century, as we have grown our
operations and expanded into new markets
across the globe.
We have implemented our strategy by
continuously strengthening existing positions
and developing new platforms for growth.
While the Group continues to grow in scale,
our focus on delivering for our customers
remains a key factor in enabling CRH to realise
its vision of becoming the leading building
materials business in the world.
Strategy in action
Continuous
Improvement
Disciplined and
Focused Growth
Vision
Leading Building
Materials Business
in the World
Leadership
Development
Expanding our balanced portfolio of diversified products and geographies
Extracting the
Benefits of Scale
10
CRH Annual Report and Form 20-F I 2016 Conducting our business responsibly and sustainablyMaximising performance and returns in our business Delivery of the Group’s strategy is centred on:
• Maximising performance and returns in
our business
•
•
Expanding our balanced portfolio of
diversified products and geographies
Conducting our business responsibly
and sustainably
In this way, we aim to balance risk and return
in order to deliver strong levels of growth
for the long-term. The link between risk
governance and value creation is outlined
on pages 18 and 19.
We are guided by a number of
strategic imperatives:
•
•
Continuous Improvement
Make our businesses better through
operational, commercial and financial
excellence
Disciplined and Focused Growth
Maintain financial discipline, use our
strong balance sheet, cash generation
capability and focused allocation of
capital to achieve optimum growth
•
•
Leadership Development
Attract, develop and empower the next
generation of performance-orientated,
innovative and entrepreneurial leaders
Extracting the Benefits of our Scale
Leverage Group capabilities and scale to
build leadership positions in local markets
In 2016 we continued our focus on continuously improving operational and commercial performance across the Group, which together with investment
of €0.9 billion in capital expenditure, helped deliver a further improvement in RONA to 9.7% ahead of 7.6% in 2015.
One example of this approach in action was the investment in a polishing and grinding machine at our Structural Concrete business in Denmark. This
highly efficient and fully automated machine allowed us to expand our capacity and range of products in the area of high quality facades by significantly
reducing the production time involved.
In 2016 we continued to integrate the major acquisitions of 2015 and to extract the targeted synergies which to date total €89 million. Bolt-on
acquisitions made during the year were funded by our disposal programme which generated total proceeds of €283 million.
We continued to maintain financial discipline through careful working capital management and capital expenditure controls. This helped us
exceed our target of restoring debt metrics to normalised levels (c. 1.7x net debt/EBITDA (as defined)*) by year-end. Net debt levels at year-end
were €5.3 billion, compared with €6.6 billion at year-end 2015.
In 2016 we continued to make progress in the area of talent injection across the Group. In addition, high performers participated in
a range of leadership and talent development programmes. These programmes support our ambition to continue to develop our
leadership bench strength with a pipeline of performance-orientated, entrepreneurial leaders ready to make the step-up to senior
management roles in the years ahead.
New initiatives were introduced to encourage mobility across our operating locations worldwide. Mobility has been identified as an
important factor in providing valuable international and operational experience to the next generation of leaders.
Our global position enables us to extract benefits of scale in areas such as operations, procurement, finance and
Health & Safety.
In 2016 significant benefits were achieved from the integration of the c. €8 billion of assets acquired in 2015. This
included increasing our internal sourcing of primary materials such as cement and aggregates for our downstream
businesses in readymixed concrete and concrete products.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
11
CRH Annual Report and Form 20-F I 2016 Business Model
How we create value and growth
CRH delivers its strategy through a dynamic business model which is focused on value creation and
growth. This has allowed CRH to deliver an industry-leading compound annual Total Shareholder
Return (TSR) of 16.3% since 1970. €100 invested in CRH shares in 1970, with dividends reinvested,
would now be worth €104,000.
CRH Business Model
CRH operates businesses engaged
in the production and supply of a
broad range of building materials
in local markets around the world.
Every day our employees deliver
solutions for customers in the
residential, non-residential and
infrastructure market segments,
in 31 countries worldwide.
How we
Operate
How we
Create Value
We aim to achieve the optimum
return on our available
resources including:
• Financial capital
• Mineral reserves
• Operations
• Products
• Our employees
• Business systems
•
Intellectual property
• We seek to improve our
businesses and operate them
to the highest standard
• We acquire excellent new
businesses
• We recycle capital to areas
that provide the best return
• We balance our portfolio of
businesses across geography,
product, sector and end-use
• We maintain financial
discipline
• We use ERM to mitigate risks
Business Model
in Action
Balanced Portfolio
Making Businesses Better
Our balanced portfolio helps promote
optimum exposure to the breadth of
product and sectoral end-use demand.
In 2016 the Group’s sector exposure,
based on sales, was 40% residential,
35% non-residential and 25%
infrastructure. End-use, based on sales,
was balanced at 55% New Build and
45% RMI.
Our ongoing focus on continuous
improvement helps build better
businesses that deliver stronger
returns on capital invested. In 2016
we delivered RONA of 9.7%.
12
CRH Annual Report and Form 20-F I 2016 CRH’s business model is focused on
identifying and acquiring strong businesses
that complement our existing portfolio of
building materials businesses and add value
for our stakeholders.
We seek to ensure the Group is protected
from the impact of low demand at the bottom
of any one economic cycle by balancing our
portfolio across geography, product, sector
and end-use.
In addition, we maintain a constant focus
on continuously making our core businesses
better so that they realise their full potential
and help create further value.
We constantly monitor how capital is deployed
across the Group and seek to identify where
capital can be recycled into areas offering
better returns and/or superior growth.
Our approach is underpinned by a constant
focus on maintaining strong financial discipline
and safeguarding the financial strength of the
Group. This enables us to take advantage of
opportunity as it arises and for efficient funding
of value-adding investments.
The Value
Created
Benefits
to CRH
Benefits to
Stakeholders
Value we created for stakeholders
in 2016 included:
• €3.1bn EBITDA (as defined)*
• €1.3bn Profit After Tax
• 150.2c EPS
• 9.7% RONA
• Employment for 87,000
• €471m in taxes
• 1 million tonnes CO2 prevented
•
•
Availability of capital to
fund further acquisitions
Investment in existing
businesses to drive
improved returns
• Reduced cost of funding
on capital markets
• Returns to shareholders
through dividends and share
value appreciation
•
Building materials solutions for
our customers
• Resilient business partner for
suppliers
• Employment and job creation
• A sustainable partner to local
communities
• Contribution to government
revenues through taxes paid
Proven Acquisition Model
Dynamic Capital Management
Financial Strength
We excel at identifying, acquiring
and integrating businesses that are
positioned to succeed as part of
the CRH Group. During 2016 we
successfully integrated the record
c. €8 billion of assets acquired
during 2015.
We aim to ensure that capital is continuously
recycled from low growth areas into core
parts of our business that offer the potential
for stronger growth and returns. In 2016
the Group recorded total disposal proceeds
of €283 million and spent €213 million
on bolt-on acquisition and investment
transactions.
Our strong financial position reduces the
cost of capital. The Group successfully
completed one eurobond issue in 2016.
We raised €600 million in October through
the issue of a 12-year bond with a coupon
of 1.375%, our longest tenor in the
Eurobond market and a historical low rate
for the Group. CRH is rated BBB+ by S&P,
Baa2 by Moody’s and BBB by Fitch.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
13
CRH Annual Report and Form 20-F I 2016 Measuring Performance
CRH believes that measurement fosters positive behaviour and performance improvement.
As part of the Group’s strategic focus on continuous business improvement, CRH uses a
number of financial and non-financial Key Performance Indicators (KPIs) to measure progress
across our organisation.
Non-financial KPIs
2016 Performance
2017 Focus
% Zero-Accident
Locations
A measure of safety performance
in our operations.
Health & 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.
Zero-Accident Locations (%)
2016
90%
2015
92%
2014
93%
Further enhancement of our strong
safety culture with the ultimate aim of
achieving zero-accident status at every
location.
Continued high level of zero-accident locations.
Links to other disclosures: CRH Sustainability Report will be published mid-year 2017.
Greenhouse Gas
Emissions
Scope 1 and 2 CO2 Emissions (kg/€ Revenue)
1.0
2016
A measure of addressing the
challenges of climate change.
Energy efficiency and carbon
reduction are twin imperatives
of CRH’s environmental
management strategy.
CO2 Emissions (million tonnes)
Scope 1
25
20
10
Scope 2
2
2
1
2016
2015
2014
2015
0.9
0.9
2014
0.6
Absolute CO2 emissions and CO2 emissions/€ Revenue
increased due to the inclusion of a full year of data for LH
Assets in 2016. For the portfolio of cement plants covered by
CRH’s CO2 commitment (Scope 1), there was a continued
reduction to 0.6 tonnes net CO2 per tonne of cementitious
product and 2016 emissions were 22% below the baseline
year. CRH’s CO2 commitment resulted in the prevention of
absolute emissions of 1 million tonnes of CO2 in 2016 alone.
Ongoing programmes focus on reducing
CO2 emissions, with a targeted reduction
commitment in cement.
Lower carbon products and
Group-wide energy and resource
efficiency programmes.
Note 1: CO2 emissions subject to final
verification under the European Union
Emissions Trading Scheme (EU ETS).
Note 2: Group CO2 emissions data
includes both Scope 1 and Scope 2
emissions, as defined by the World
Resources Institute Greenhouse Gas
Protocol.
Links to other disclosures: CRH Sustainability Report will be published mid-year 2017.
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.
Diversity (% Female)
2016
18%
2015
18%
2014
18%
In 2016, 18% of all employees were female. Within this, 11% of
operational staff and 41% of clerical and administrative staff were
female, while at senior management level, 8% were female. As at
28 February 2017, 33% of the Directors of CRH plc were female.
The building materials industry
traditionally attracts a higher than
average proportion of male employees.
Continue to welcome diversity in all
its forms and to encourage all CRH
employees to develop their careers.
14
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
Links to other disclosures: Corporate Governance Report pages 62 to 71; CRH Sustainability Report will be published mid-year 2017.
CRH Annual Report and Form 20-F I 2016 Financial KPIs
2016 Performance
2017 Focus
Total Shareholder
Return (TSR)
A measure of shareholder
returns delivery through the
cycle.
Total Shareholder Return (%)
2016
26.0%
2015
37.8%
2014
12.3%
Delivering superior return on
invested capital and maintaining
strong cash flows to support the
continued development of the
Group and dividend payment.
CRH delivered TSR of 26.0% in 2016 and in euro terms
has delivered a compound annual TSR of 16.3%, since
the formation of the Group in 1970.
Links to other disclosures: Directors’ Remuneration Report pages 72 to 95.
Return on Net
Assets (RONA)
A measure of pre-tax returns
through excellence in
operational performance.
Return on Net Assets (%)
2016
9.7%
2015
7.6%
2014
7.4%
Improved RONA through effective
margin management, continued
enhancement of operating
efficiencies and tight working
capital management.
RONA at 9.7% in 2016 is a reflection of improved profitability.
Segmental Reviews pages 28 to 55; Directors’ Remuneration Report pages 72 to 95 and Non-GAAP Performance
Measures pages 213 to 215.
EBITDA (as defined)*
Net Interest Cover ●
A measure of financial liquidity
and capital resources which
underpins investment grade
credit ratings and the ability to
access finance.
EBITDA (as defined)* Net Interest Cover (times)
2016
9.9x
2015
7.5x
2014
6.7x
EBITDA (as defined)* Net Interest Cover at 9.9x
was higher in 2016 despite increased interest
arising on acquisition debt.
Maintain financial discipline to
ensure that Net Interest Cover
remains strong and should
usually be no lower than 6x.
We remain committed to
protecting our investment grade
credit ratings.
CRH’s long-term credit ratings:
Standard & Poor’s:
Moody’s:
Fitch:
BBB+
Baa2
BBB
Operating Cash
Flow (OCF)
A measure of cash flows
generated to fund organic
and acquisitive growth
and dividend returns to
shareholders.
Links to other disclosures: Finance Director’s Review pages 23 to 27; note 23 Interest-bearing Loans and Borrowings
page 169 and Non-GAAP Performance Measures pages 213 to 215.
Operating Cash Flow (€ billion)
2016
2.3
2015
2.2
2014
1.2
To continue to generate strong
operating cash flows in 2017.
Note 1: Operating cash flow
represents net cash inflow
from operating activities in the
Consolidated Statement of Cash
Flows page 124.
Prudent management of working capital and other cash
flows increased OCF to €2.3 billion in 2016.
Links to other disclosures: Finance Director’s Review pages 23 to 27.
● EBITDA (as defined)* net interest cover is a non-GAAP measure as defined on page 215. The GAAP figures that are most directly comparable to the components of EBITDA (as
defined)* net interest cover include: profit after tax (2016: €1,270 million), finance costs (2016: €325 million) and finance income (2016: €8 million). Details of how non-GAAP measures
are calculated are set out on pages 213 to 215.
15
CRH Annual Report and Form 20-F I 2016 Sustainability
Achieving long-term success through sustainability
We believe that our strong sustainability performance is
fundamental to achieving our vision of being the leading building
materials business in the world. This is reflected in our business
strategy, which is underpinned by the principle of conducting our
business sustainably and responsibly.
Our View
With our extensive global presence and
industry leadership positions, we are very
aware of our role in the many communities
in which we operate. Our business activities
provide materials that are needed to fulfil the
basic human need of shelter, together with the
infrastructure that is needed for our societies
to thrive.
We believe that meeting these needs in a
manner that respects sustainability principles
will create long-term value for all our
stakeholders including; investors, customers,
partners, employees, suppliers, neighbours
and local communities.
Our Approach
We take a risk-based, collaborative,
strategic approach to responding to global
trends including demographic change,
urbanisation, climate change, resource
scarcity and technological developments.
Group performance and effectiveness is
reviewed regularly by the Board of Directors.
We collaborate with stakeholders to ensure
our medium-term objectives and long-term
ambitions are achieved.
As well as being beneficial for our business,
these ambitions have an outward focus and
will contribute towards developments such as
the World Business Council for Sustainable
Development’s Low Carbon Technology
Partnership Initiative, to which we are a
signatory, in addition to the United Nations’
(UN) Sustainable Development Goals.
We are committed to reporting on the
breadth of our sustainability performance in
a comprehensive and transparent manner
and to publishing performance indicators and
ambitions in key identified sustainability areas.
Our annual Sustainability Report is published
mid-year following external independent
verification and is available at www.crh.com.
We are ranked among sector leaders
by leading Socially Responsible Investment
(SRI) rating agencies. We are a constituent
member of indices including the FTSE4Good
Index, the STOXX® Global ESG Leaders
Indices and the Vigeo World 120 Index.
In addition, many individual operating
companies have achieved accolades for
excellence in sustainability achievements.
Republic Cement, in the Philippines, supports local
communities through a range of initiatives such as its outreach
to local school children during National Nutrition Month.
CRH Canada conducts ‘tailgate’ safety talks at customer
workshops across Ontario, covering topics such as dump
point safety and concrete discharge.
Rudus, Finland, received a special award for biodiversity in the European Aggregates Association (UEPG) 2016 awards for its LUMO programme, which promotes and conserves the diversity of
nature, including this endangered plant, Anthyllis vulneraria.
16
CRH Annual Report and Form 20-F I 2016 Health & Safety
Health & Safety has long been a strategic priority
for CRH. Our global network of safety officers
oversees the implementation of policy and best
practice across all our operations. We adopt an
unwavering approach to safety at every level
of the organisation, from frontline employees
through to operational management and senior
executives. We continue to invest in initiatives
targeted at promoting and maintaining a strong
culture of safety and over the past five years
€148 million has been invested in this area.
Safety performance continued to be strong
in 2016 and 90% of active locations were
accident free.
Environment & Climate Change
Excellence in environmental management,
together with a proactive approach to
addressing the challenges and opportunities
of climate change, is fundamental to our
“making businesses better” approach. We
have a continued focus on the development of
sustainable products such as our low carbon
cements and transformative construction
applications for our many products. For
example, approximately 40% of our US
asphalt volume in 2016 was lower carbon
warm-mix asphalt, and recycled asphalt
pavement and shingles provided a fifth of
raw materials requirements in this business.
People & Community
We believe that continued sustainable business
success is built on maintaining excellent
relationships with all stakeholders. We offer
rewarding career and personal development
experiences to our employees worldwide,
recognising that people are critical to sustaining
competitive advantage and long-term success.
In 2016, we continued to place an emphasis on
training and skills learning, as well as developing
and recruiting talented leaders to guide our
evolving and growing Group.
We are committed to fostering respect in the
workplace and to developing an inclusive
workforce based on merit and ability. In 2016,
18% of our employees were female. The
building materials industry traditionally attracts
more male than female employees and our
diversity programmes are aimed at increasing
social diversity, not only of employees, but
of the pool of talent available to take up
opportunities in CRH.
The accident frequency rate (number of
accidents per million manhours) has continued
to decline and has reduced by an average of
14% per annum over the last decade. However,
we are saddened to report that there were three
employee fatalities and three contractor fatalities
at our operations during 2016. We deeply regret
the loss of these lives and extend our sincere
sympathies to the families of these individuals.
We continue to implement our Fatality
Elimination Plan, which remains a cornerstone
of our safety strategy and which proved effective
in eliminating employee fatalities in both 2014
and 2015.
By incorporating alternative raw materials into
our products we reduced our reliance on virgin
raw materials by 27 million tonnes in 2016.
We work with stakeholders including
customers and the wider building materials
industry in this area, and also in the promotion
of energy and resource efficiency, emissions
reductions and biodiversity enhancements.
We are on-track to achieve our commitment
to reduce specific net CO2 emissions by 25%
on 1990 levels by 2020; 2016 emissions were
22% below 1990 levels.
In 2016 our Group companies hosted over
1,000 stakeholder events in keeping with
our policy to engage in an open, honest and
proactive way. We assist local community
initiatives and support programmes in priority
areas including education, environmental
protection and job creation, recognising the
value these can bring to all.
We endorse human and labour rights
and support the principles set out in the
articles of the UN’s Universal Declaration of
Human Rights and the International Labour
Organisation’s Core Labour Principles. As
well as our comprehensive Code of Business
Conduct, we have additionally implemented an
Ethical Procurement Code and Supplier Code
of Conduct, with the aim of extending our
positive influence along the value chain.
2016
Sustainability
highlights
90%
locations
accident free
27
million tonnes
of alternative
raw materials
c. 40%
US asphalt is lower carbon
warm-mix asphalt
over 1,000
stakeholder
engagement events
17
17
CRH Annual Report and Form 20-F I 2016 Risk Governance
Creating value through risk management
The aim of Enterprise Risk Management is to deliver increased shareholder value for CRH.
Effective governance, which is considered fundamental in CRH, is critical to success, supporting
management in executing strategy, managing costs, responding to risks, attracting investment,
achieving regulatory compliance and in promoting effective decision making.
Managing risk is of vital importance and the
Group’s Enterprise Risk Management (ERM)
Framework is the basis for assessing and
managing risks associated with business
and strategic corporate decisions. ERM in
CRH is a forward-looking, strategy-centric
approach to managing the risks inherent in
decision making. It recognises the linkage
between business objectives and strategies
and their associated risks and opportunities,
and integrates strategic decision making and
risk taking in order to preserve and/or enhance
value and reputation.
With our balanced portfolio, the decentralised
and geographically dispersed structure of the
Group provides some natural mitigation for
some of the significant risks and uncertainties
faced, such as industry cyclicality, political
and economic uncertainty and damage to
corporate reputation.
ERM Framework
The ERM Framework (the ‘Framework’)
addresses risks across the various strands of
CRH’s strategy, driving performance, executing
organic and acquisitive growth, protecting
information assets, monitoring compliance
with all laws and regulations (including an
unwavering commitment to health & safety),
sustainability, leadership development and
talent management and finance.
In formalising CRH’s approach to risk
management through ERM, a key requirement
has been to ensure that the Framework
continues to deliver value for management
by providing visibility on strategic priorities
and the linkages to the associated risks and
opportunities. The key risks identified are
reported periodically to the Audit Committee
and the Board, with the risks being subject
to common, standardised and repeatable
processes of assessment, evaluation,
management and monitoring.
In line with international best practice, CRH
follows a “three lines of defence” model for
risk management and internal control.
First Line of Defence
Operating company/business leaders are
responsible for ensuring that a risk control
environment is established as part of their
day-to-day operations. Proactive risk
engagement and management is critical
to quick identification and response.
Second Line of Defence
CRH has various Group oversight
functions such as Group Sustainability,
Group Regulatory, Compliance & Ethics,
Group IT Governance, Group Finance and
Group Risk. These functions are responsible
for setting policies and ensuring that they are
implemented throughout the Group.
Our Risk Management Framework – Three Lines of Defence
CRH plc Board
3rd Line of
Defence
Audit Committee
Provide
independent
assurance
Internal Audit
Provide
independent
assurance
2nd Line of
Defence
Group Risk
Group
Finance
Group Risk
Governance
Functions
Regulatory,
Compliance
& Ethics
IT
Governance
Sustainability
Executive Management
CRH Divisions / Product Groups
1st Line of
Defence
Operating companies/businesses
18
CRH Annual Report and Form 20-F I 2016 Third Line of Defence
Our Risk Assessment Process
Group Internal Audit provides independent
assurance. It reports on the effectiveness
of the risk management and internal control
frameworks to management and the
Audit Committee on a regular basis.
Roles and Responsibilities
The Board is ultimately responsible for risk
management within CRH. The Board has
delegated responsibility for the monitoring
of the effectiveness of the Group’s risk
management and internal control systems
to the Audit Committee. Such systems are
designed to manage, rather than eliminate, the
risk of failure to achieve business objectives.
The Audit Committee in turn monitors the
activities of various functions including
Group Regulatory, Compliance & Ethics,
Group IT Governance, Group Finance and
Group Risk. Group Internal Audit is charged
with independently assessing and reporting on
the risk management initiatives implemented
by these functions.
The Board and Audit Committee receive, on a
regular basis, reports from management on the
key strategic, operational, compliance, financial
and other risks to the business and the steps
being taken to manage/mitigate such risks.
They also consider whether the significant
risks faced by the Group are being identified,
evaluated and appropriately managed. The
Audit Committee reviews the list of principal
risks and uncertainties disclosed on
pages 102 to 107.
CRH’s risk management process operates to
ensure a comprehensive evaluation of risks is
performed and is the subject of continuous
improvement. The risk management cycle
operates as follows:
Identify
Report
Operations
Assess
Monitor
Manage
Identify and Assess
Management identifies risks as part of their
day-to-day activities and is required to conduct
a robust assessment of these risks. The
following factors are taken into consideration:
•
•
•
•
•
•
Risk appetite and risk tolerance
The likelihood of the risk materialising
The impact and velocity in the event that
the risk materialises
The mitigation strategies implemented
in order to manage the risks
The monitoring processes in place
to determine and respond to the
effectiveness of mitigation strategies
Management is required to assess all risks
which could have an impact on the current
or future operation of their business and
to document these risks in a standardised
The nature and extent of risks facing
the Group, including emerging risks
Report
template. Risks are assessed in terms of their
financial and operational impact should they
occur and their likelihood of occurrence, using
a defined risk scoring methodology.
Risk velocity, the speed at which a risk impacts
the business, is an important constituent of this
evaluation.
Manage and Monitor
In line with our ongoing focus on continuous
process improvement, risks are assessed
by management on an inherent/gross basis
(prior to mitigation strategies) and a
residual/net basis (post mitigation strategies).
Where the gross risk score determines the risk
to be material, appropriate mitigation strategies
are implemented to bring the residual risk to a
level which is within risk appetite and tolerance
levels approved by the Board.
The Risk Appetite and Tolerance Framework
is a critical component of CRH’s risk
governance system through defining the key
risk parameters within which strategic decision
making takes place. The Board approves the
Risk Appetite and Tolerance Framework on
an annual basis in line with best corporate
governance practice.
The Group-level Risk Register, which is
compiled by the Group Risk function, identifies
those risks which may impede the realisation
of core strategic objectives. The risks listed
on pages 102 to 107 constitute this register,
which forms the basis of Board and Audit
Committee communications and discussions.
Viability Statement
Our Viability Statement, prepared in
accordance with the UK Corporate
Governance Code 2014, is set out on
page 98 of the Directors’ Report.
19
CRH Annual Report and Form 20-F I 2016 e
c
n
a
m
o
r
f
r
e
P
s
s
e
n
s
u
B
i
20
20
CRH Annual Report and Form 20-F I 2016
Business Performance
Business Overview
Finance Director’s Review
Segmental Reviews
22
23
28
432 Park Avenue, New York City, is the tallest residential building in the world. CRH company HALFEN developed the
stainless steel window washing track for the project. There is just under 5,500 lineal metres of track on the building.
HALFEN channels were also used to anchor windows throughout the building.
21
21
CRH Annual Report and Form 20-F I 2016 Business Overview
The percentage of Group revenue and operating profit for each of the reporting segments for
2016, 2015 and 2014 is as follows (i):
Revenue
2016
2015
2014
Europe
Heavyside
27%
Europe
Lightside
Europe
Distribution
3%
15%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
22%
4%
18%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
21%
5%
21%
Americas
Materials
28%
Americas
Materials
30%
Americas
Materials
27%
Americas
Products
Americas
Distribution
Asia
16%
9%
2%
Americas
Products
Americas
Distribution
Asia
16%
9%
1%
Americas
Products
17%
Americas
Distribution
9%
Operating Profit
Europe
Heavyside
Europe
Lightside
Europe
Distribution
2016
20%
4%
6%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
2015 (ii)
11%
6%
7%
Americas
Materials
40%
Americas
Materials
49%
Americas
Products
Americas
Distribution
Asia
20%
6%
4%
Americas
Products
19%
Americas
Distribution
Asia
9%
(1%)
Europe
Heavyside
Europe
Lightside
Europe
Distribution
2014
16%
8%
12%
Americas
Materials
39%
Americas
Products
Americas
Distribution
16%
9%
(i)
(ii)
As set out in note 1 to the Consolidated Financial Statements (page 136), the Group has seven reporting segments, including the newly formed Asia Division. For 2014, the Group had six
reporting segments. Comparative amounts have been restated where necessary to reflect the new format for segmentation.
The operating profit as reported by CRH in 2015 is stated after €197 million of one-off charges related to the acquisition of LH Assets.
22
CRH Annual Report and Form 20-F I 2016 Finance Director’s Review 2016†
y
h
p
r
u
M
n
a
n
e
S
Finance Director
The overall trading backdrop in 2016 was
positive with good momentum in both the
Americas and Europe, albeit at different paces,
supported by a good performance from the
newly established Asia Division. In addition, our
businesses benefited from favourable weather
patterns in the Americas at the start of the
year. With a relentless focus on performance
in all our businesses, coupled with our
vertically integrated business model for
heavyside materials, good operational leverage
underpinned improved margins and returns.
Following the two major acquisitions of the
LH Assets and CRL in the second half of 2015,
the Group focused in 2016 on completing
their integration, extracting synergies and on
prudent financial management to return debt
metrics to nomalised levels. With this focus,
€89 million of synergies were realised while
operating cash flow for the year amounted to
€2.3 billion (2015: €2.2 billion) and year-end
net debt finished at €5.3 billion bringing net
debt/EBITDA (as defined)* to 1.7 times.
Key Components of 2016
Performance
Overall sales of €27.1 billion for the period
were 15% ahead of 2015 reflecting the
inclusion of full-year results from the two
major acquisitions, while organic sales★
from underlying operations were up 3%,
reflecting positive momentum in the Group’s
major markets.
An increase of 8% in the America’s sales
reflected the inclusion of the Canadian element
of the LH Assets and CRL. Notwithstanding
this, organic sales from underlying operations
increased 2% benefiting from favourable
early weather with more normalised demand
patterns experienced in the second half.
Americas Materials benefited from stable
federal funding underpinned by increased state
spending and improved non-residential activity.
At Americas Products, continued positive
momentum in construction markets was
supported by low interest rates and increasing
employment, while Americas Distribution also
benefited from the good underlying demand.
With higher sales and good cost control,
profits and margins improved in all three
Americas segments.
In Europe total sales were up 20% compared
with 2015 and organic sales were 4% ahead
on the back of continued recovery in some
key markets. In addition to the full-year
contributions from the LH Assets in the UK
and mainland Europe, Europe Heavyside
faced a mixed backdrop, benefiting from a
broad-based recovery in the Netherlands,
Ireland, Finland and Ukraine with more
subdued activity in Switzerland and Poland.
Europe Lightside experienced strong demand
in key markets while Europe Distribution
benefited from improving demand in the
Netherlands with a more challenging backdrop
in Switzerland.
The Asia Division reflects results from the
Philippines operations acquired as part of
the LH Assets in the second half of 2015
together with CRH Asia’s divisional costs.
Separately, the Group’s investments in India
and China are equity accounted. In the
Philippines, construction demand is supported
by good economic growth, strong domestic
consumption and low inflation. In India, a
favourable economic backdrop continues to
drive construction demand but pricing remains
challenging while reduced construction activity
in China had a negative impact on volumes
and prices.
EBITDA (as defined)* for the year amounted
to €3.1 billion, a 41% increase on 2015 and
reported profit after tax was €1.3 billion
(2015: €0.7 billion).
The euro strengthened versus most major
currencies during 2016, particularly the Pound
Sterling which weakened from an average
0.7258 in 2015 to 0.8195 in 2016. The effect
of this was only partially offset by a small
change in the average euro/US Dollar rate,
which, despite strengthening towards the end
of 2016, averaged 1.1069 for the year and was
broadly similar to the prior year (2015: 1.1095).
Overall currency movements resulted in an
unfavourable net foreign currency translation
impact on our results as shown on the table
on page 24. The average and year-end
2016 exchange rates of the major currencies
impacting on the Group are set out on
page 135.
The two major acquisitions (the LH Assets
and CRL) account for the vast majority of the
acquisition impact included in the table on
page 24.
† See cautionary statement regarding forward-looking statements on page 97.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
★ Details of how non-GAAP measures are calculated are set out on pages 213 to 215.
23
CRH Annual Report and Form 20-F I 2016
Finance Director’s Review 2016 - continued
Key Components of 2016 Performance
€ million
2015
Exchange effects
2015 at 2016 rates
Incremental impact in 2016 of:
- 2015/2016 acquisitions
- 2015/2016 divestments
- LH Assets integration costs (ii)
- Swiss fine
- Early bond redemption
- Organic
2016
% Total change
% Organic change
Sales
revenue
EBITDA
(as defined)*
Operating
profit
Profit on
disposals
Finance
costs (net)
Assoc. and
JV PAT (i)
Pre-tax
profit
23,635
(333)
23,302
3,624
(506)
-
-
-
684
2,219
(29)
2,190
546
(29)
152
32
-
239
1,277
(11)
1,266
337
(13)
152
32
-
253
27,104
3,130
2,027
15%
3%
41%
11%
59%
20%
101
(7)
94
-
(51)
-
-
-
12
55
(389)
3
(386)
(33)
3
-
-
38
(5)
44
1
45
2
(14)
-
-
-
9
1,033
(14)
1,019
306
(75)
152
32
38
269
(383)
42
1,741
69%
26%
(i) CRH’s share of after-tax profits of joint ventures and associated undertakings.
(ii) LH Assets integration costs of €45 million were incurred in 2016 (2015: €197 million).
Liquidity and Capital Resources
– 2016 compared with 2015
The comments that follow refer to the major
components of the Group’s cash flows for
2016 and 2015 as shown in the Consolidated
Statement of Cash Flows on page 124.
As noted already, following the significant
acquisition spend in 2015, prudent financial
management to return debt metrics to
normalised levels was a key objective for 2016.
The Group focused on working capital in
particular, and operating cash flow increased
to €2.3 billion (2015: €2.2 billion). Year-end
working capital of €2.1 billion represented just
7.8% of sales (2015: 8.9%). This performance
delivered a net positive movement (inflow) for
the year of €56 million (2015: €585 million).
CRH believes that its current working capital is
sufficient for the Group’s present requirements.
Strong control of spending on property,
plant and equipment concentrating on markets
and businesses with increased demand
backdrop and efficiency requirements resulted
in lower cash outflows of €853 million
(2015: €882 million), with spend in 2016
representing 85% of depreciation
(2015: 105%).
During the year the Group spent €213 million
on 24 bolt-on transactions (2015: €7.4 billion)
which was financed by divestment and
disposal proceeds of €283 million (net of
cash disposed and deferred proceeds)
(2015: €889 million).
Cash dividend payments of €360 million
(2015: €383 million) reflect the Group’s
continued focus on returns to shareholders.
Net proceeds of €52 million from share issues
in 2016 is significantly less than 2015 proceeds
of €1.6 billion due to the 74 million shares
placed in February of that year.
Year-end interest-bearing loans and borrowings
decreased by €1.4 billion to €7.8 billion
(2015: €9.2 billion). The strengthening of the
US Dollar versus the euro at 31 December
2016 (versus 31 December 2015) had a
negative impact on net debt, but this was
offset by the positive translation impact of a
weakening Pound Sterling, such that the net
translation impact was broadly neutral.
Reflecting all these movements, net debt of
€5.3 billion at 31 December 2016 was
€1.3 billion lower than year-end 2015. The
Group is in a good financial position. It is well
funded and net interest cover (EBITDA (as
defined)*/net debt related interest costs) is
9.9x. As set out in note 23 to the Consolidated
Financial Statements the Group is significantly
in excess of the minimum requirements of its
covenant agreements.
24
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 The Group successfully completed one
eurobond issue in 2016, raising €600 million in
October through the issue of a 12-year bond
with a coupon of 1.375%, our longest tenor
in the Eurobond market and a historical low
rate for the Group. Proceeds from the bond
were partly used to repay the remaining bank
term loan financing put in place to fund the
purchase of the LH Assets.
The bond issue reflects CRH’s commitment
to prudent management of our debt and the
timing of the related maturities and also to
maintaining an investment grade credit rating.
The Group ended 2016 with total liquidity of
€5.5 billion comprising almost €2.5 billion of
cash and cash equivalents on hand and
€3.0 billion of undrawn committed facilities,
€2.7 billion of which do not mature until 2021.
At year-end the cash balances were enough to
meet all maturing debt obligations for the next
4.3 years and the weighted average maturity
of the remaining term debt was 10.1 years.
Contractual obligations and Off-Balance Sheet
arrangements are disclosed on page 216 of
this Annual Report and Form 20-F.
Segmental Reviews
The sections on pages 28 to 55 outline the
scale of CRH’s business in 2016, and provide
a more detailed review of performance in
each of CRH’s reporting segments. As set
out in note 1 to the Consolidated Financial
Statements (page 136), following the
integration of the LH Assets, the Group has
seven reporting segments, including Asia.
Comparative amounts have been restated
where necessary to reflect the new format
for segmentation.
Development Review
2016
During 2016, the Group completed 21 bolt-on
acquisitions and three investment transactions for
a total spend of €213 million (including deferred
and contingent consideration in respect of prior
year acquisitions).
In Europe, eight acquisitions and two investments
with a total spend of c. €43 million were
completed. Our Heavyside business acquired
11 readymixed concrete plants in the UK, three
quarries in Ireland, an aggregates terminal in
Belgium and entered into a sand & gravel joint
venture in France, adding reserves of 11 million
tonnes. Further investments were also made to
buy out a minority position in Spain and add to
an existing joint venture in Ireland. Our Lightside
Division completed two acquisitions in the
UK: a supplier of composite products, which is
highly complementary to our Network Access
Products business, and a strategic bolt-on to our
UK shutters business. The Distribution Division
acquired a small builders merchant in Austria.
In the Americas, c. €170 million was spent on
13 acquisitions and one investment. Our Materials
Division completed eight bolt-on acquisitions
and one investment in 2016. The principal
acquisition was of a significant aggregates and
asphalt operation in Utah. Seven further bolt-on
acquisitions in New Mexico, New Jersey, Michigan,
Ohio, Washington and Canada were completed.
In total 93 million tonnes of permitted reserves
were added during the year. The Products Division
completed five acquisitions, the largest of which
was of a Canadian exterior surfaces company
which is a strong addition to the core hardscape
business of our Architectural Products Group
(APG). Three precast bolt-on operations were
acquired in Colorado, Louisiana and California.
Finally, a glass hardware company was added in
Perth, Australia, which will significantly enhance
our CRL operations in Western Australia.
On the divestment front, the Group completed
13 transactions and realised total business and
asset disposal proceeds of €283 million.
Business divestments during the year generated
net proceeds of €123 million. In Europe, our
Distribution Division disposed of a roofing
products company in the Netherlands while
the Heavyside business divested a precast
concrete operation in Poland, a small aggregates
business in Switzerland and a roof tile operation
in Romania. Two small joint venture holdings
in France and Germany were also divested.
The Americas Materials Division disposed of
select aggregates and asphalt operations in
Missouri, a small waterproofing business in
Michigan and a readymixed concrete operation
in Iowa/Minnesota. Certain aggregates assets in
Oregon/Montana were also disposed in a cash
neutral swap. Finally, our Americas Products
Division disposed of a pavement products
operation in North Carolina, certain precast
operations in Canada and the assets of a burial
vaults business. In addition to these business
divestments, the Group realised proceeds
of €160 million from the disposal of surplus
property, plant and equipment.
25
CRH Annual Report and Form 20-F I 2016 Finance Director’s Review 2015
2015 was a year of growth for CRH, with
continued positive momentum in the Americas
and more mixed market conditions in Europe.
The Group also benefited from more normal
weather patterns in the Americas at the start
of 2015 compared with 2014 and favourable
conditions through to the end of 2015 in all
markets. The post-acquisition contribution from
the LH Assets was ahead of expectations. The
Group continued to focus on cash generation
with operating cash flow for 2015 amounting
to €2.2 billion (2014: €1.2 billion) and year-end
2015 net debt finished at €6.6 billion. This was
achieved with significant acquisition spend
of almost €8 billion being partly offset by
the strong cash inflows from operations, net
proceeds from disposals of €889 million and a
net €1.6 billion from shares issues, relating to
the 74 million shares placed in February 2015.
Key Components of 2015
Performance
Reported sales of €23.6 billion for 2015
were 25% ahead of 2014. On a like-for-like
basis, excluding the impact of acquisitions,
divestments and the benefit of positive
currency impacts, 2015 sales were 3% higher
than 2014. An increase of 6% in the Americas
reflected the continued positive momentum in
construction markets, while 2015 like-for-like
sales in Europe were broadly in line with 2014.
Group profits and margins increased with
good operating leverage also delivered. Overall
EBITDA (as defined)* in the Americas was 52%
ahead of 2014, with our European operations
delivering EBITDA (as defined)* growth of 10%.
Group profit after tax for 2015, including
the contribution from the newly formed Asia
Division, amounted to €0.7 billion, a 25%
increase on 2014.
During 2015, most major currencies
strengthened in value compared with the
euro, the US Dollar strengthened 20% from
an average of 1.33 versus the euro in 2014 to
an average of 1.11 in 2015, while the Swiss
Franc strengthened from an average of 1.21
in 2014 to 1.07 in 2015. These movements,
partly offset by the weakening of certain other
currencies, particularly the Ukrainian Hryvnia,
resulted in a favourable foreign currency
Key Components of 2015 Performance
translation impact on our results; this is the
principal factor behind the exchange effects
shown in the table below. The average and
year-end 2015 exchange rates of the major
currencies impacting on the Group are set
out on page 135.
We continued to advance the significant
cost reduction initiatives which were
progressively implemented since 2007
and which by year-end 2015 had generated
cumulative annualised savings of over
€2.5 billion. Total restructuring costs
associated with these initiatives (which
generated gross savings of €110 million
in 2015) amounted to €29 million in 2015
(2014: €51 million).
€ million
2014
Exchange effects
2014 at 2015 rates
Incremental impact in 2015 of:
- 2014/2015 acquisitions
- 2014/2015 divestments
- LH Assets integration costs
- Swiss fine
- Early bond redemption
- Organic
2015
% Total change
% Organic change
Sales
revenue
EBITDA
(as defined)*
Operating
profit
Profit on
disposals
Finance
costs (net)
Assoc. and
JV PAT (i)
Pre-tax
profit
18,912
2,198
21,110
2,738
(855)
-
-
-
642
1,641
218
1,859
412
(100)
(197)
(32)
-
277
917
137
1,054
225
(69)
(197)
(32)
-
296
23,635
2,219
1,277
25%
3%
35%
15%
39%
28%
77
6
83
-
20
-
-
-
(2)
101
(288)
(27)
(315)
(50)
6
-
-
(38)
8
(389)
55
4
59
1
(10)
-
-
-
(6)
44
761
120
881
176
(53)
(197)
(32)
(38)
296
1,033
36%
34%
(i) CRH’s share of after-tax profits of joint ventures and associated undertakings.
26
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Liquidity and Capital Resources
– 2015 compared with 2014
The comments that follow refer to the major
components of the Group’s cash flows in
2015 and 2014 as shown in the Consolidated
Statement of Cash Flows on page 124.
Throughout 2015 the Group remained
focused on cash management, targeting
in particular working capital, and operating
cash flow increased to €2.2 billion
(2014: €1.2 billion). Year-end 2015 working
capital of €2.1 billion represented just 8.9%
of sales, an improvement compared with
year-end 2014 (10.6%). This performance
delivered a net positive movement (inflow)
for 2015 of €585 million (2014: €35 million).
Controlled spending on property, plant
and equipment, focusing on markets and
businesses with increased demand backdrop
and efficiency requirements, particularly the
Americas, resulted in increased cash outflows
of €882 million (2014: €435 million), with spend
in 2015 representing 105% of depreciation
(2014: 69%). Capital expenditure in the
acquired LH Assets businesses amounted
to €155 million in the post-acquisition period
(95% of depreciation), while the currency
translation impact due to the weakening euro
was €85 million.
During 2015 the Group spent €7.4 billion
(excluding net debt arising on acquisition)
on 20 bolt-on transactions together with
acquisition of the LH Assets and CRL
(2014: €181 million) which was partly offset
by divestment and disposal proceeds of
€889 million (net of cash disposed and
deferred proceeds) (2014: €345 million).
Cash dividend payments of €383 million
(2014: €357 million) and net proceeds
of €1.6 billion (2014: nil) from share issues
(relating to the 74 million shares placed
in February 2015) reflected the Group’s
focus on balanced financing and returns
to shareholders.
Development Review
2015 and 2014
2015
In 2015, the Group completed 20 bolt-on
acquisition and investment transactions. These
deals, together with the acquisition of the LH
Assets, the CRL acquisition and net deferred
consideration payments, brought development
spend for 2015 to approximately €8 billion
(including debt arising in acquired companies).
In Europe, four bolt-on acquisitions and one
investment with a total cost of €20 million were
completed. Our Lightside business completed
one acquisition in Australia and a small further
investment in the Netherlands, accelerating
the introduction of the Cubis network access
chamber range to Australia’s growing market.
Our Heavyside operations set up a new
joint venture with its existing readymixed
concrete operations in St. Petersburg, Russia
in addition to acquiring a concrete paviour
production plant in Poland. Our Distribution
business acquired the plumbing operations of
a steel and tool merchant in the Bern area of
Switzerland.
Ten bolt-on acquisitions and two investments
were completed by our Americas Materials
Division in 2015 adding over 253 million
tonnes of aggregates reserves. Our
Americas Products Division completed three
transactions in 2015 adding annualised sales
of US$55 million.
A total of 30 divestments, together with asset
disposals generated proceeds of €1 billion in
2015; the largest of which was the sale of the
clay and concrete products operations in the
UK and the Group’s clay business in the US for
€0.43 billion.
Our Europe Heavyside business completed
13 further divestments in 2015, the largest of
which was the disposal of CRH’s 25% equity
stake in its Israeli operation. Other disposals
comprised a number of non-core readymixed
concrete and concrete products businesses.
One small disposal was completed by the
Europe Lightside Division, while the Distribution
Division disposed of its 45% stake in Doras, a
builders merchant in France.
In the Americas, our Materials Division
disposed of five non-core operations.
Our Products Division sold six operations across
the US, including the disposal of Merchants
Metals, a national distributor of fencing systems
and perimeter control products. The Products
Division also divested of all of its businesses in
Argentina and Chile.
2014
Total acquisition and investment activity for
2014 amounted to €188 million (including
debt arising in acquired companies) on a total
of 21 bolt-on transactions. Our Heavyside
operations in Europe acquired selected
readymixed concrete and aggregates assets of
Cemex Ireland (including 12 million tonnes of
high quality reserves) and a precast concrete
business in Denmark. Our Europe Distribution
business completed six acquisitions in the
Benelux, France and Germany which added a
total of nine branches to our network.
Eight bolt-on acquisitions were completed
by our Americas Materials Division in 2014
across the US adding over 230 million
tonnes of aggregates reserves. Our Americas
Products Division completed five transactions
in the Precast, Architectural Products and
Construction Accessories businesses.
A total of 16 divestments, together with asset
disposals, generated proceeds of €345 million
in 2014.
In Europe, the disposal of CRH’s 50% equity
stake in Denizli Çimento, the Group’s only
involvement in the Turkish construction market,
was the largest single divestment completed in
2014, realising proceeds of €170 million. The
Heavyside Division also disposed of a number
of readymixed concrete and concrete products
businesses, while all three European Divisions
realised proceeds from the disposal of surplus
assets. As most of the divested entities had
been equity accounted by CRH, the impact of
these divestments on 2014 Group sales was
not material.
In the Americas, our Materials Division
disposed of several non-core operations
across the US. The Products Division sold
five operations in the Precast, Architectural
Products and BuildingEnvelope® businesses.
27
CRH Annual Report and Form 20-F I 2016 s
w
e
v
e
R
i
l
a
t
n
e
m
g
e
S
28
28
CRH Annual Report and Form 20-F I 2016
Segmental Reviews
Europe Heavyside
Europe Lightside
Europe Distribution
Americas Materials
Americas Products
Americas Distribution
Asia
30
34
38
42
46
50
54
A worker atop the 37-storey Fairmont Hotel in downtown Austin, Texas. Oldcastle Materials supplied 42,500m3 of
concrete for the construction of the luxury hotel.
29
29
CRH Annual Report and Form 20-F I 2016 Europe Heavyside
The Europe Heavyside Division comprises aggregates, asphalt,
cement and concrete operations. With market leading positions
and a wide geographic reach, our goal is to be the leading
vertically integrated heavyside business in Europe.
What we do:
Europe Heavyside’s vertically integrated
business is founded in resource-backed cement
and aggregates assets, which support the
manufacture and supply of aggregates, asphalt,
cement, readymixed and precast concrete and
landscaping products. Our portfolio is managed
through a focus on value creation, with a
strong pipeline of opportunities across regions,
including emerging markets in Eastern Europe
that offer long-term growth potential. With a
balanced approach to demand exposure and
product penetration and through maximising the
benefits of scale and best practice, our business
is well differentiated in the marketplace.
How we create value:
We place great emphasis on performance
improvement initiatives across the business
and seek to create value through optimisation
of the asset base, maximising Group synergies
and leveraging commercial and operational
excellence. The scale of our operations
provides economies in purchasing and logistics
management. Our commitment to sustainability
is evidenced by extensive use of alternative fuels
and the manufacture of low carbon cements.
Enhanced alignment and collaboration leads to
value creation throughout our extensive network
of well-invested facilities.
Our development strategy is focused on
identifying and integrating bolt-on acquisitions
for synergies, reserves and further vertical
integration, in addition to opportunities in
contiguous regions to extend and strengthen
regional positions.
How we are structured:
With effect from the beginning of 2016,
the Division is organised into six primarily
geographical regions to leverage market
synergies and economies of scale, with a
small number of central support functions.
The regions are 1) Tarmac (UK); 2) UK Cement
& Lime, Ireland and Spain; 3) France, Benelux
and Denmark; 4) Switzerland and Germany;
5) North East: Finland, Estonia, Poland, Ukraine;
6) South East: Hungary, Romania, Serbia and
Slovakia. Europe Heavyside employs over
27,000 people at close to 1,250 locations.
€ million
% of Group
Sales
Operating Profit
EBITDA (as defined)*
Net Assets**
7,396
397
814
6,035
27%
20%
26%
29%
Geography***
5%
South East
15%
North East
10%
Switzerland
and Germany
25%
France,
Benelux and
Denmark
30%
Tarmac (UK)
15%
UK Cement &
Lime, Ireland
and Spain
Sector Exposure***
Residential
Non-Residential
Infrastructure
35%
30%
35%
End-use***
New
70%
RMI
30%
Aggregates
Cement
Lime
Aggregates are naturally occurring mineral
deposits such as granite, limestone and
sandstone. Our Europe Heavyside businesses
extract these deposits and process them
for sale. They are supplied as a range of
aggregates products principally for use in general
construction and civil engineering projects and
are also used in a variety of additional CRH
product lines including asphalt and readymixed
concrete. Recycled concrete also increasingly
features as an aggregate. For additional
information on the location and adequacy of all
of the Group’s mineral reserves, see the Mineral
Reserves section on pages 218 and 219.
Cement is a primary building material used in
the construction industry. It is used principally
as an agent to bind other materials together.
Most commonly it is mixed with sand, stone or
other aggregates and water to form concrete.
Europe Heavyside has cement operations in
15 countries across Europe. Cement
customers are mainly concrete producers,
including CRH concrete operations and
builders merchants supplying construction
contractors and others. While cement may
be imported from other countries, competition
comes mainly from other large cement
producers located within each country.
Europe Heavyside’s Lime businesses
produce and supply a wide range of
specialist products for the agricultural,
environmental, industrial and
construction sectors.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Geography, sector exposure and end-use balance are based on sales.
30
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
Cement
Belgium, Finland, France, Germany, Hungary, Ireland,
Netherlands, Poland, Romania, Serbia, Slovakia, Spain,
Switzerland, Ukraine, United Kingdom
Lime
Ireland, Poland,
United Kingdom
Aggregates
Estonia, Finland, France,
Ireland, Netherlands, Poland,
Romania, Serbia, Slovakia, Spain,
Switzerland, Ukraine, United Kingdom
Asphalt
Ireland, Poland, Switzerland,
United Kingdom
Readymixed Concrete and Concrete Products
Belgium, Denmark, Estonia, Finland, France, Germany, Hungary, Ireland, Netherlands,
Poland, Romania, Slovakia, Spain, Switzerland, Ukraine, United Kingdom
Annualised Sales Volumes†: Cement: 26.0m tonnes; Aggregates: 114.0m tonnes (118.5m tonnes††); Asphalt: 10.4m tonnes; Readymixed Concrete: 16.1m m3; Lime: 1.5m tonnes;
Concrete Products and Architectural Concrete: 13.1m tonnes
Readymixed Concrete
Readymixed concrete is a highly versatile
building material comprised of aggregates
bound together with cement and water.
Europe Heavyside’s businesses sell annual
volumes of over 16 million cubic metres,
manufactured mainly at locations with
aggregates on site, and delivered
to construction sites in fluid form.
Concrete Products
In addition to readymixed concrete, CRH
manufactures other concrete products
for two principal end-uses: pavers, tiles
and blocks for architectural use, and floor
and wall elements, beams and vaults for
structural use.
Principal raw materials include cement,
crushed stone and sand and gravel,
all of which are readily available locally.
Readymixed concrete and concrete products
(manufactured mainly at locations with
aggregates on site and including block,
masonry, pipe, rooftiles and paving) are sold
to both the public and private construction
sectors. Competition comes mainly from other
readymixed concrete and concrete products
producers, as well as from a variety of smaller
manufacturers in local economies.
Asphalt
Asphalt is the primary building material used
in road surfacing and other infrastructure
including airport runways. It consists of
aggregates bound together with bitumen, a
by-product of the oil industry. Europe
Heavyside’s businesses in the UK (under
the Tarmac brand), Ireland, Poland and
Switzerland are involved in the production
and supply of asphalt. Customers are typically
government and local authorities involved in
the construction and maintenance of national
road networks.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including equity accounted investments.
31
CRH Annual Report and Form 20-F I 2016 Operations Review - Europe Heavyside
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
3,929
380
151
9.7%
3.8%
2015 was characterised by mixed trends
across our major European markets with
challenging market conditions in our businesses
in Switzerland, France, Germany and Finland
offsetting increased activity in Ireland, Poland,
Denmark and the Netherlands. As a result,
like-for-like sales for the year were slightly behind
2014, with like-for-like EBITDA (as defined)*
broadly in line with 2014 due to ongoing cost
savings initiatives and improved capacity
utilisation. While reported margins for 2015 were
behind 2014, margins for Heavyside excluding
LH costs, were ahead of 2014.
Post-acquisition trading results for the European
LH Assets acquired in July 2015 were ahead of
expectation. Strong performances were reported
in the UK, Romania, Serbia, Hungary and
Slovakia driving solid sales and operating profit
performance. More challenging market conditions
were experienced in France and Germany.
In addition to the divestment of the UK’s clay and
products operations, Heavyside completed 13
divestments in 2015. The commentary below
excludes the impact of these divestments.
Western Europe
The strong Swiss Franc created challenging
market conditions in Switzerland. Combined with
the slight slowdown in residential construction
and decline in infrastructure spend, this resulted
in pricing pressure in all markets. Sales volumes
in both our cement and downstream businesses
declined, and operating profit was below 2014.
In Belgium, our cement and readymixed concrete
businesses continued to face competitive trading
conditions while curtailed public spending and
lower exports to France affected our landscaping
business in particular. Our structural concrete
business saw some improvement in sales,
however operating profit was flat. Construction
activity in the Netherlands improved, mainly due
to strong growth in the residential market. This
was reflected in sales and operating profit growth
in our structural concrete business. While sales
of other products were adversely impacted by
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
Organic
+89
+9
+7
+1,654
+234
+108
-386
-62
-45
-
-108
-108
-30
+7
+22
% change
+34%
+21%
-11%
2015
5,256
460
135
8.8%
2.6%
LH integration costs of €121 million and reclassification of head office costs of €13 million
the competitive trading environment, ongoing
cost reduction programmes resulted in improved
operating profit.
In Ireland, construction growth was supported
by improvements across all sectors, primarily
non-residential, albeit from a low base. While
cement volumes grew by 17%, pricing was under
pressure in competitive markets. With the benefit
of higher volumes and the positive impact of cost
savings initiatives in previous years, operating
profit was ahead of 2014.
With the benefit of a continued strong
non-residential market and growth in new
residential construction in Denmark, both volumes
and prices in our structural concrete business
improved. Sales and operating profit were ahead
of 2014.
Overall, the macro-economic situation in Spain
stabilised but there were some regional variations.
In the regions in which we operate, both cement
and readymixed concrete volumes were under
pressure with difficult trading conditions, resulting
in sales below 2014. However, operating results
showed improvement due to ongoing cost
reductions.
Volumes in our concrete products businesses
in Germany and France were under pressure
as lower government spending contributed to
subdued construction markets. While sales
declined, the effect on operating profit was
moderate due to vigorous implementation of cost
reduction programmes. Our French cement and
readymixed concrete operations, acquired in July
2015 as part of the LH Assets transaction, faced
difficult conditions as continued market slowdown
resulted in an 8% decline in cement market
volumes for the year. The challenging market
conditions also negatively impacted prices. A
focus on cost reduction initiatives across all
product lines limited the operating profit impact.
Cement volumes for our German operation,
acquired as part of the same transaction in
July 2015, were also under pressure reflecting
a combination of regional market declines and
project delays with a resultant impact on cement
prices which were slightly lower than expected
in 2015.
Construction activity in the UK showed strong
growth trends in 2015 with the pace moderating
slightly in the second half of the year. This positive
backdrop was reflected in sales volumes and
price growth in all our major business lines. Lower
input costs also contributed to a strong operating
profit performance.
Eastern Europe
In Poland, cement volumes improved, with
growing momentum in the second half of
2015; however prices remained under pressure
with overcapacity in the market. Both sales
and operating profit were ahead of 2014
with the benefit of cost savings, disposal of
non-performing assets and increased readymixed
concrete activity. Construction activity in Finland
was somewhat down in 2015, and our cement
operations reported a 6% decline in volumes,
with pricing also under pressure. Readymixed
concrete volumes were also lower than 2014 while
aggregates and the concrete products businesses
benefited from a number of large projects. With
the benefit of cost and efficiency initiatives, overall
operating profit was ahead of 2014.
In Ukraine our cement volumes were 2% ahead
of 2014, with volume growth of 8% in the second
half of 2015 compensating for a slower start to
2015. Local inflation negatively impacted input
costs and operating profit was lower than 2014
impacted by the weakening of the local currency.
Construction activity in Romania increased in 2015
driven by residential and non-residential market
growth. This positive growth drove strong sales
and operating profit performance in the period
following the acquisition of the LH Assets.
EBITDA (as defined)* margins in Serbia were
strong; however, pricing was challenging due to
overcapacity and import pressure. Our operations
in Hungary and Slovakia traded favourably,
supported by a modest recovery in construction
activity in this region.
32
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
5,256
460
135
8.8%
2.6%
Trends remained mixed across our major
European markets in 2016 with more challenging
conditions in our businesses in Switzerland and
Poland contrasted by evident market recovery
in Ireland, Ukraine, Finland and the Netherlands.
Sales and operating profit were well ahead of
2015, reflecting stable results in our heritage
businesses and a full year’s trading and synergy
benefits of 2015 acquisitions. Organic profit in
the heritage businesses was assisted by volume
improvements and by ongoing cost saving and
efficiency measures which largely offset the
impact of a challenging pricing environment in
some of our key markets.
The segment was organised into six primarily
geographical regions at the beginning of 2016,
and the commentary below reflects this new
organisation.
Tarmac (UK)
With a full year of trading included in the results,
volumes in our aggregates and readymixed
concrete business lines in the UK grew in 2016
against a stable construction backdrop. Price
increases were achieved in all products except
asphalt where the impact of lower prices was
compensated by lower input (bitumen) costs.
Despite recent uncertainty surrounding the UK
construction market in light of the decision of the
electorate in June to exit the European Union,
2016 was a year of progress for Tarmac.
UK Cement & Lime,
Ireland and Spain
Despite an overall backdrop of modest growth
in the cement market, the UK Cement & Lime
operations delivered strong volumes and prices
in all product categories. Together with the Irish
and Spanish cement businesses, the focus on
network optimisation resulted in the achievement
of synergies in 2016.
In Ireland, while cement volumes grew strongly
(18%), domestic pricing in particular remained
under pressure due to overcapacity in the market.
With the benefit of improved cement pricing on
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
‐228
‐21
‐8
+2,129
+299
+183
‐111
‐11
‐7
‐
+89
+89
Organic
+350
‐2
+5
% change
+41%
+77%
+194%
2016
7,396
814
397
11.0%
5.4%
LH integration costs of €32 million were incurred in 2016 (2015: €121 million)
exports to the UK, stronger overall volumes and
improved domestic concrete and aggregates
prices, operating profit was ahead of 2015.
In Spain, the macro-economic situation remained
weak but stable, with some regional recovery.
Prices remained under pressure, and despite
some improvement in cement and readymixed
concrete volumes, operating profit was lower than
last year.
France, Benelux
and Denmark
Our French cement operations delivered growth
in volumes, primarily due to the inclusion of a full
year of ownership of the LH Assets, as well as the
positive impact of synergies with CRH heritage
businesses and a modest recovery in the cement
market, although prices remained under pressure
due to strong competition and overcapacity.
Continued challenging pricing also impacted our
precast business in France, although a focus on
cost reduction initiatives across the business more
than offset the underlying operating profit impact.
In the Netherlands, strong recovery of the
residential market and an increase in centrally
funded infrastructure projects delivered higher
volumes in our readymixed and structural concrete
operations. Readymixed concrete prices remained
under continued pressure. There was some
improvement in volumes and prices in Belgium.
In Denmark, with the benefit of a strong
non-residential market and a year of growth in
new residential construction, both volumes and
prices in our structural business improved. Sales
and operating profit were well ahead of 2015.
Switzerland and Germany
Stable economic and construction output
combined with an early start to the season in
Switzerland led to growth in readymixed concrete
volumes. However, cement prices declined
against a backdrop of continued pricing pressure
arising from imports, and sales and operating
profit were below 2015.
Strong cement volumes in our German
operations reflected a full year of ownership of
the LH Assets and growth in construction output,
boosted mainly by new build multi-family housing.
However, pricing remained under pressure in both
our cement and concrete landscaping products
businesses.
North East
In Poland, weaker than expected activity
adversely affected pricing in our cement,
readymixed concrete and paving products.
Both sales and operating profit were behind
prior year due to the significant decline in
cement volumes year-on-year.
In Finland construction activity recovered strongly
in 2016, and all our product categories reported
growth in volumes; pricing remained under
pressure due to overcapacity in readymixed
concrete and increased cement imports. With the
benefit of continued cost and efficiency initiatives,
overall operating profit was ahead of 2015.
Despite the ongoing political conflict, construction
activity in Ukraine increased year-on-year and our
operations delivered strong trading, and operating
profit was ahead of 2015. Cement volumes were
up 11%, with prices also increasing during the
year. Inflation stabilised somewhat, positively
impacting costs and operating profit.
South East
After a promising start, 2016 was a mixed year
in Romania, and mid-year construction activity
slowed as a result of lower government spending
and unfavourable weather conditions.
Continued strong growth in volumes and prices
was delivered by our cement operations in Serbia
due to ongoing large motorway projects in the
south of the country. Similar to 2015, overcapacity
and import pressure remained a threat in the
region.
Although both Hungary and Slovakia experienced
a drop in infrastructure spend, growth was solid
in the residential market, with improved cement
volumes and prices.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
33
CRH Annual Report and Form 20-F I 2016 100%
Philippines
40%
Interior
60%
Exterior
14%
Canada
1%
Brazil
85%
United States
20%
Precast
35%
Building
Envelope®
45%
Architectural
Products
Europe Lightside
The Europe Lightside Division manufactures and supplies
high-value, innovative products and solutions for customers
in global construction markets.
What we do:
How we create value:
Our strategy is to build and grow scalable
businesses, balanced across a range of
products, geographies and end-use sectors.
We operate a portfolio of platforms which
focus on increasing the penetration of our
range of value-added products, and create
competitive advantage through strong
customer relationships, brand leadership
and service.
Customer intimacy, product and process
innovation and the relative ease with which our
products can be transported long distances,
are all key features of this Division’s business.
Our development strategy is to deepen
our positions in existing business platforms
in developed Europe, to broaden our
differentiated product portfolio through
selected new growth platforms that are
exposed to attractive global megatrends,
and to expand our presence in developing
regions as construction markets in those
regions become more sophisticated.
This strategy complements CRH’s aim to
provide innovative solutions that meet
the longer-term opportunities presented
by economic development, changing
demographics and sustainability.
We realise commercial, operational and
procurement synergies across the wider
CRH network to benefit from scale and best
practice, and we leverage a range of flagship
brands at a regional, European and global
level. There is a continuous focus on product
innovation and development and we work with
specialist end-users, such as architects and
engineers, to develop design-solutions that
are approved and certified for individual
target markets.
We draw upon an established record of
enabling mature and high-growth businesses
to expand their offerings and develop their
markets. Lightside has consistently achieved
attractive returns; this reflects active, balanced
management of our product range and our
geographic and business cycle exposures.
How we are structured:
The Division is organised into three business
areas: Construction Accessories, Shutters
& Awnings and Perimeter Protection &
Network Access Products. Employees total
approximately 4,600 at over
100 locations.
20%
DIY
Sales
Operating Profit
20%
SHAP
EBITDA (as defined)*
Net Assets**
€ million
% of Group
941
81
104
486
3%
4%
60%
General
Builders
Merchants
3%
2%
Products***
20%
Shutters &
Awnings
50%
Construction
Accessories
30%
Perimeter Protection
& Network Access
Products
Sector Exposure***
Residential
Non-Residential
Infrastructure
35%
45%
20%
End-use***
New
70%
RMI
30%
Construction Accessories
CRH’s Construction Accessories business is
a leading global manufacturer and supplier of
high-value innovative products and engineered
solutions for challenging construction projects.
Construction Accessories products have
been specified and used in many high-profile
projects including skyscrapers, stadiums and
infrastructure developments.
Construction Accessories products include a
broad range of engineered anchoring, fixing
and connection solutions as well as lifting
systems, formwork accessories and general
accessories for construction applications.
From our manufacturing footprint located
mostly in Northern Europe, we export products
across the world, targeting large-scale projects
through project specification.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Products, sector exposure and end-use balance are based on sales.
34
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
Construction Accessories
Australia, Austria, Belgium, China, France, Germany, Ireland, Italy, Malaysia,
Netherlands, Norway, Poland, Spain, Sweden, Switzerland, United Kingdom
Shutters & Awnings
Germany, Netherlands, United Kingdom
Perimeter Protection &
Network Access Products
Australia, France, Germany,
Ireland, Netherlands, Sweden,
United Kingdom
Perimeter Protection &
Network Access Products
Our Perimeter Protection business designs,
manufactures and installs fully integrated outdoor
security and detection solutions. This includes
permanent fencing, mobile fencing for building site
security and event management and perimeter
intrusion detection systems (PIDs).
The Network Access Products operation designs
and manufactures technical systems for the
access and protection of buried and above
ground infrastructure, including composite access
chambers and covers, walk-in kiosks and meter
boxes. Due to the lightweight composite design,
these products offer a time-saving alternative to
traditional methods of construction.
Shutters & Awnings
The Shutters & Awnings business designs,
manufactures and supplies roller shutters,
awnings, terrace roofs and related products
for sun protection and outdoor living. Our
companies offer energy-efficient products
and solutions which contribute to a secure,
sustainable and comfortable environment.
Shutters & Awnings is well positioned to
take advantage of a number of trends in the
European building industry such as higher
RMI spending, energy-efficiency, heightened
security concerns, outdoor living and the
emergence of “smart” homes.
35
CRH Annual Report and Form 20-F I 2016 Operations Review - Europe Lightside
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
913
94
71
10.3%
7.8%
Analysis of change
Exchange
Acquisitions
Organic
+33
+4
+4
+12
-
-
+3
+2
-
% change
+5%
+6%
+6%
2015
961
100
75
10.4%
7.8%
The business saw further growth in 2015 with
total sales 5% ahead of 2014, reflecting a good
performance in key markets and the benefit of
favourable weather conditions in the second half
of 2015. The UK market experienced growth,
particularly in residential construction. Market
circumstances in France and the Netherlands
were challenging, while overall activity in Germany,
Belgium and Switzerland was relatively stable.
Export markets outside of Europe were robust.
With the benefit of new product innovation and
process improvements, operating profit was
ahead of 2014.
Construction Accessories
Construction Accessories supplies a broad range
of connecting, fixing and anchor systems to the
construction industry. Like-for-like sales grew
by 2% in 2015, with an increase in operating
profit. Engineered Accessories benefited from
new product innovation and favourable market
conditions in the UK. Our businesses in Germany
and the UK continued to deliver growth in
operating profit in 2015. Our Swiss business
recorded stable sales and profits in spite of
the negative exchange rate impact on market
demand. Results for the Building Site Accessories
division were mixed, with a satisfactory
performance in the UK, Belgium, the Netherlands
and Spain offset by more difficult trading in
Germany and France. The German Building Site
Accessories business was divested at the end of
2015. Our Southeast Asia business was affected
by more difficult trading conditions and exchange
rate effects but recorded an improvement in
operating profit.
Shutters & Awnings
Shutters & Awnings is focused on the attractive
RMI and residential end-use segments. Overall,
like-for-like sales increased by 4% and the
business achieved higher operating profit in 2015.
Our German Awnings businesses benefited
from the introduction of new products and
favourable weather conditions, and recorded
significant growth in both sales and profits. The
German Shutters business recorded stable
sales and substantially higher profits in 2015
as a result of previous restructuring measures.
The UK business also showed improved sales
and margins. Our business in the Netherlands
recorded a stable and satisfactory performance in
a relatively flat RMI market.
Perimeter Protection &
Network Access Products
Our Permanent Fencing business experienced
difficult trading conditions, especially in the
non-residential markets in the Netherlands and
Germany and some export markets in 2015.
Profits were also affected by restructuring
measures in Germany. Against a backdrop of
mixed markets, Mobile Fencing recorded strong
growth in sales and profits through various
commercial and operational excellence measures.
The innovation focused Network Access
Products business had another good year despite
some challenges in France, increasing sales and
operating profits due to strong UK demand and
a positive contribution from a newly acquired
business in Australia.
36
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
Exchange
Acquisitions
Divestments
Organic
2016
% change
Analysis of change
961
100
75
10.4%
7.8%
‐28
‐4
-4
+30
+2
+2
‐50
‐3
-1
+28
+9
+9
‐2%
+4%
+8%
941
104
81
11.1%
8.6%
Although reported sales declined 2% driven
by exchange and divestments, 2016 was
a year of good underlying sales growth for
Europe Lightside due to strong performances
in key markets combined with some favourable
weather patterns in the first-half of the year.
Our UK-based businesses continued to
benefit from strong activity levels, with a robust
residential construction sector in particular. In the
Netherlands and France, recovery in construction
activity was evident. Swiss market circumstances
were challenging, while Germany and Belgium
were ahead. Operating profit increased through
a combination of growing demand, continuous
product innovation, delivery on cost optimisation
initiatives and margin expansion activities.
Construction Accessories
Like-for-like sales in the Construction Accessories
platform grew by 5%, mainly resulting from
a combination of continued innovation in key
product lines and strong demand in some of our
main markets, such as the UK and Germany.
While competitive pressure in Switzerland
intensified, activity levels in our other European
markets and Australia picked up, resulting in
strong organic growth across the platform.
Our Southeast Asia business recorded a
solid performance despite challenging trading
conditions. Overall operating profit progressed
well, reflecting a combination of organic sales
growth and the positive impact arising from
internal efficiency improvement initiatives
undertaken during the year.
Shutters & Awnings
The Shutters & Awnings business recorded flat
like-for-like sales in 2016. The German Awnings
business saw an increase in sales through a
combination of benign weather patterns and
the introduction of a number of new products
to the market. The German Shutters business
delivered a solid performance in relatively flat
markets, increasing profitability as a result of the
impact of continued performance optimisation
measures. The UK business reported a stable
organic performance, which was further aided by
a complementary acquisition. Despite a decline in
like-for-like sales, the Netherlands showed solid
profit performance as margins increased in a
competitive environment.
Perimeter Protection &
Network Access Products
The permanent Perimeter Protection business
saw a decline in sales, but still showed
improvement in performance and continued
progress following the restructuring of both
its German and UK businesses. Our mobile
fencing operation benefited from good demand
particularly in its export business with a resultant
increase in sales and profitability. Network Access
Products, with operations in the UK, Ireland and
Australia and a broad export base, recorded an
increase in both organic sales and operating profit
through positive demand trends in the UK market
in particular. Results were also supported by a
positive contribution from its newly acquired
UK-based business.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
37
CRH Annual Report and Form 20-F I 2016
Europe Distribution
Through its Europe Distribution Division, CRH distributes
building materials to professional builders, specialist heating
and plumbing contractors, and DIY customers through a
network of trusted local and regional brands.
Sales
Operating Profit
EBITDA (as defined)*
€ million
% of Group
4,066
15%
130
206
What we do:
Europe Distribution is active in the trading of a
range of building materials, catering to different
local markets and varied customer groups.
Our development strategy is to increase the
network density of our existing businesses
in our core European markets, while also
investing in new platforms in other attractive
segments of building materials distribution.
Substantial opportunities remain to expand our
existing network in core European markets and
to establish new platforms aimed at increasing
our exposure to growing RMI market demand.
How we create value:
We operate a portfolio of local brands that
focus on building deep customer relationships
through quality of service, reliability and
focused propositions aimed at selected
market segments. We innovate around the
changing needs of our customers through the
introduction of additional product categories,
new formats and technology in our offerings.
Net Assets**
1,518
Activities***
Expertise across our business segments
is leveraged to optimise the supply
chain, with just-in-time logistics, a
category-management-based approach
to procurement and focused IT systems.
How we are structured:
The Division is active in three business areas:
General Builders Merchants (GBM),
Sanitary, Heating and Plumbing (SHAP),
and DIY (Do-It-Yourself). CRH holds a
21.13% equity interest in Samse S.A.,
a publicly-quoted distributor of building
materials to the merchanting sector in the
Rhône-Alpes region.
Europe Distribution employs approximately
11,000 people at over 650 locations.
20%
DIY
20%
SHAP
Sector Exposure***
20%
Residential
Shutters &
Awnings
75%
End-use***
New
30%
Perimeter Protection
35%
& Network Access
Products
RMI
65%
Non-Residential Infrastructure
20% 5%
50%
Construction
Accessories
6%
7%
7%
60%
General
Builders
Merchants
100%
Philippines
40%
Interior
60%
Exterior
14%
Canada
1%
Brazil
85%
United States
20%
Precast
35%
Building
Envelope®
45%
Architectural
Products
General Builders
Merchants (GBM)
GBM distributes heavy building materials and a
wide range of other products to a professional
customer base, mainly small and medium
sized builders from 345 (505†) locations.
Europe Distribution has strong regional
positions in GBM, based on a comprehensive
branch coverage, wide product offering and
high stock availability.
Sanitary, Heating & Plumbing
(SHAP)
SHAP businesses specialise in servicing the
needs of plumbers and heating, gas, water, and
ventilation technicians at 132 locations. The
businesses are organised around public-facing
showrooms to facilitate product choice, central
warehousing and a wide network of locations
for installers to collect or co-ordinate delivery.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Activities, sector exposure and end-use balance are based on sales.
† Including equity accounted investments.
38
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
General Builders Merchants
Austria, Belgium, France, Germany,
Netherlands, Switzerland
DIY
Belgium, Germany,
Netherlands
SHAP
Belgium, Germany,
Switzerland
DIY (Do-It-Yourself)
Addressing the residential RMI segment, our DIY
business sells decorative and home improvement
products direct to the consumer from 197 (243†)
easily-accessible retail locations. The DIY platform
in Europe operates under four different brands:
GAMMA (the Netherlands and Belgium), Karwei
(the Netherlands), Hagebau (Germany)
and Maxmat joint venture (Portugal).
† Including equity accounted investments.
39
CRH Annual Report and Form 20-F I 2016 Operations Review - Europe Distribution
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
3,999
190
112
4.8%
2.8%
Analysis of change
Exchange
Acquisitions
Swiss Fine
Organic
+153
+8
+5
+27
+1
-
-
-32
-32
-21
+4
+9
% change
+4%
-10%
-16%
2015
4,158
171
94
4.1%
2.3%
DIY (Do-It-Yourself)
Our DIY business operates in the Netherlands,
Germany and Belgium. Overall sales were slightly
ahead of 2014 due to improving sales in our
Dutch business with profit progress coming from
higher volumes and margins. In this business,
which is more exposed to RMI compared to
our builders merchants business, sales showed
moderate progress with improving consumer
confidence a key factor behind the growth in the
Dutch market. Strong leverage on these sales
from procurement excellence initiatives helped
to deliver good operating profit growth in 2015.
Germany saw broadly flat sales with very little
growth seen in the market. Overall operating profit
for DIY was ahead of 2014.
Sanitary, Heating and Plumbing
(SHAP)
Sales for our SHAP business were ahead of
2014. Despite very challenging markets in
Switzerland, sales ended only slightly behind
2014 with profitability ahead due to margin
improvement initiatives, purchasing benefits
from a stronger Swiss Franc, and cost savings
measures. Sales in Belgium showed good
progress as we consolidated market share leaving
operating profit ahead of 2014. In Germany, the
benefit of moderate sales growth was offset
by lower margins and profit was broadly in line
with 2014. Overall operating profit for our SHAP
activities was ahead of 2014 due to higher sales
and commercial excellence initiatives.
The market backdrop for Distribution in 2015
was mixed, with improving sentiment in the
Netherlands partly offset by weaker markets in
France and Switzerland, leaving full-year organic
sales flat on 2014. Swiss sales in particular were
negatively impacted by a softening residential
market and exchange rate movements.
Encouraging sales in our Dutch businesses were
driven by a recovery in new residential markets
together with commercial excellence initiatives
to drive market share growth, particularly in
our general merchants business. Excluding the
impact of the provision for the Swiss Competition
Commission fine of €32 million, overall
profitability was ahead of 2014 with performance
improvement and cost savings measures
offsetting challenging markets.
General Builders Merchants
Like-for-like results for our wholly-owned General
Builders Merchants business were slightly behind
2014 with pricing pressure in competitive markets
a feature in 2015. Sales ended slightly behind
2014 partly due to strong prior year comparatives
which benefited from very mild weather in Q1
2014. Our Swiss business experienced a difficult
market environment in 2015 due to a softening of
residential activity and the negative market impact
of the Swiss National Bank decision in early 2015
to unpeg the Swiss Franc from the euro. Margin
improvement initiatives together with cost savings
measures helped protect profits to leave results
only slightly behind 2014. Sales growth in our
Dutch businesses were driven by a recovering
new residential market in addition to commercial
excellence initiatives to capture market share
growth. Strong leverage on these higher sales
coming from margin improvement measures (e.g.
procurement initiatives, private label growth) and
cost savings delivered operating profit progress
in 2015. Without the recurrence of the very mild
weather which benefited the first-half of 2014,
sales and operating profit in Germany were
slightly behind 2014.
40
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016
Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
4,158
171
94
4.1%
2.3%
Europe Distribution was impacted in 2016
by mixed market circumstances in its main
geographies, resulting in slightly reduced sales.
However, performance improvement initiatives,
strong cost control across the Division and the
non-recurrence in 2016 of a one-off provision
of €32 million in 2015 for a Swiss Competition
Commission fine led to an increase in overall
profitability. The Netherlands continued to show
positive momentum in the new build residential
market, while Belgium improved and Germany
remained generally stable compared to 2015.
The Swiss business faced a challenging market
backdrop, with competitive pressures and the
impact of new laws on second homes.
General Builders Merchants
Overall, like-for-like sales for our General Builders
Merchants business declined in 2016 but
operating profit remained stable. Challenging
market circumstances in the Swiss business,
where margin improvements and strong cost
control could not fully compensate for lower
sales levels, resulted in a decline in profitability.
Trading in the Netherlands was strong as a result
of increasing overall demand and delivery on
performance improvement projects. Sales at our
German business were stable in line with market
circumstances. Despite a recovering trend in the
new residential market, performance in the French
business was impacted by unfavourable weather
patterns (including flooding) in the Paris area and
a competitive market which resulted in a decline
in sales and profitability compared to 2015. In
Austria, improvements in pricing and product mix,
as well as the closure of some branches led to
improved results.
Analysis of change
Exchange
Divestments
Swiss Fine
Organic
‐24
‐1
‐1
‐53
‐2
‐1
‐
+32
+32
‐15
+6
+6
% change
‐2%
+20%
+38%
2016
4,066
206
130
5.1%
3.2%
DIY (Do-It-Yourself)
Our DIY business operates in the Netherlands,
Germany and Belgium. Strong competitive
pressures resulted in lower sales, but overall
operating profit improved. In the Netherlands, DIY
is more exposed to the late-cycle RMI market,
therefore it did not benefit from an improving
new residential market to the same extent as the
builders merchants business. Although consumer
confidence has improved, competition has also
increased, in part due to new entrants. Despite
lower sales levels, operating profit increased
due to a range of performance improvement
measures. The Belgian business suffered from
reduced consumer confidence in 2016, leading to
lower sales and operating profit. The German DIY
business experienced flat sales and profitability,
which was in line with market developments.
Sanitary, Heating and Plumbing
(SHAP)
Sales for our SHAP business were flat compared
to 2015, with good progress in Belgium and
Germany offset by the challenging market
backdrop in Switzerland. Significant cost
reductions were realised in Switzerland, which
partially compensated for the lower sales.
Operating profit in the German and Belgian
businesses improved, benefiting from higher sales
levels in addition to operational improvements and
procurement initiatives.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
41
CRH Annual Report and Form 20-F I 2016
Americas Materials
CRH Americas Materials is North America’s leading vertically
integrated supplier of aggregates, asphalt, cement, readymixed
concrete and paving and construction services.
20%
DIY
40%
Interior
20%
Precast
60%
Exterior
35%
Building
Envelope®
45%
Architectural
Products
Sales
Operating Profit
EBITDA (as defined)*
Net Assets**
€ million
% of Group
7,598
818
1,204
7,245
28%
40%
100%
39%
Philippines
35%
Geography***
14%
Canada
1%
Brazil
85%
United States
Sector Exposure***
Residential Non-Residential
Infrastructure
15%
30%
55%
End-use***
New
40%
RMI
60%
60%
General
Builders
Merchants
20%
SHAP
20%
Shutters &
Awnings
How we create value:
Americas Materials has a network of operations
in almost 1,200 locations across 43 US states
and eight Canadian provinces. We build strong
regional leadership positions underpinned by
well-located, long-term reserves. Our national
network and deep local market knowledge
50%
drive local performance while leveraging talent,
Construction
synergies for procurement, cost management
Accessories
and operational excellence. As a vertically
integrated organisation, approximately 30% of
the aggregates we produce are sold internally,
promoting company-wide financial growth and
efficiency. Our more than 22,600 employees
share a commitment to our core values of
safety, quality and integrity.
30%
Perimeter Protection
& Network Access
Products
How we are structured:
Americas Materials is vertically integrated in
aggregates, asphalt, cement, readymixed
concrete, paving and construction services. The
business is organised geographically into six
divisions (North, South, Central, West, Canada
and Brazil). Americas Materials is strongly
resource-backed, with over 13 billion tonnes of
aggregates reserves, of which approximately
80% are owned.
What we do:
Americas Materials is the number one producer
of asphalt, the second largest producer of
aggregates and the third largest producer of
readymixed concrete in North America. We are
the number two cement producer in Canada,
and we are a major supplier to the Rio de
Janeiro and Belo Horizonte markets in Brazil.
A significant portion of our work is awarded by
public bid for federal, provincial, state and local
government authority road and infrastructural
projects. We also have a broad commercial
customer base, supplying aggregates, cement,
readymixed concrete and asphalt for industrial,
office, shopping mall and private residential
development and refurbishment.
In a largely unconsolidated sector where the
top ten aggregates, asphalt and readymixed
concrete participants account for less than one
third of overall production, CRH’s strategy is
to position the business to participate as the
industry consolidates further. Americas Materials
is broadly self-sufficient in aggregates and its
principal purchased raw materials are liquid
asphalt and cement used in the manufacture of
asphalt and readymixed concrete respectively.
These raw materials are available from a number
of suppliers.
Aggregates
Aggregates such as sand, gravel and crushed
stone are essential ingredients in construction
materials. They can be found in everything from
the asphalt pavements used to make roads,
concrete for bridges, golf course sand traps
and building foundations. Americas Materials
is the number two producer of aggregates in
North America, with sales of 156 million tonnes.
With operations and reserves throughout North
America, we compete in local markets, to best
serve our customers.
Asphalt
Asphalt is used in building roads, highways,
runways and parking lots. Americas Materials
is the number one asphalt producer in North
America, selling 44 million tonnes. We ensure
value for our customers through quality
control and rigorous product testing. We
are committed to sustainability, with heavy
investment in recycled materials and warm-mix
asphalt technologies that consume less fuel
and release fewer emissions.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Geography, sector exposure and end-use balance are based on sales.
42
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
Aggregates
Canada, United States
Asphalt
Canada, United States
Readymixed Concrete
Canada, United States
Paving and Construction Services
Canada, United States
Cement
Brazil, Canada, United States
Annualised Sales Volumes†: Cement: 5.3m tonnes (5.8m tonnes††); Aggregates: 156.0m tonnes (157.2m tonnes††); Asphalt: 44.5m tonnes (45.9m tonnes††);
Readymixed Concrete: 8.8m m3 (9.1m m3††)
Readymixed Concrete
Readymixed concrete is composed of
aggregates, cement and water. It is strong,
customisable, versatile and durable, making
it the world’s most popular building material.
Americas Materials sells approximately
nine million cubic metres of readymixed
concrete annually. Our readymixed concrete
is designed to customer specifications and
is delivered in a timely manner from our
extensive network of locations.
Paving and
Construction Services
Americas Materials is the leading supplier
of product for road construction and
repair/maintenance demand in North
America. Annually, our crews complete
approximately €3.6 billion in paving and
construction projects.
Cement
Americas Materials is the number two supplier
of cement in Canada, across eight provinces
and five US states. We sell three million
tonnes of cementitious products in Canada
and a further two million tonnes in Brazil.
Because cement requires an energy-intensive
manufacturing process, we have established
company-wide initiatives to reduce our
carbon footprint and incorporate reusable,
recyclable material.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including equity accounted investments.
43
CRH Annual Report and Form 20-F I 2016 Operations Review - Americas Materials
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
5,070
609
355
12.0%
7.0%
2015 was a year of good growth across all
regions for Americas Materials, with the
benefit of reduced energy costs, the addition
of assets in Canada and Brazil as part of the
larger LH Assets transaction, along with
improved weather patterns in most markets.
Trading conditions improved with increased
demand in key market areas, led by improved
residential and non-residential segments and
stable infrastructure. While total sales grew 38%
and operating profit improved by 75%, on an
organic basis sales grew 6% and EBITDA (as
defined)* increased 23% compared to 2014.
In the US positive trends in pricing continued
for aggregates and readymixed concrete, with
asphalt pricing declines more than offset by
lower input costs in 2015. The five months
post-acquisition results for the Canadian
operations were in line with expectations with
more challenging market conditions experienced
in Brazil.
Along with the addition of the Canadian and
Brazilian LH Assets in July 2015, ten acquisitions
and two investments were also completed in
2015 at a total cost of €86 million, adding over
253 million tonnes of aggregates reserves,
6 operating quarries, 18 asphalt plants and
1 aggregates terminal, with annual production of
2.3 million tonnes of aggregates and 1.3 million
tonnes of asphalt. Business and asset disposals
during the year generated proceeds of
€109 million.
In the US the price of bitumen, a key component
of asphalt mix, decreased by 18% in 2015
following a 3% increase in 2014. Prices for diesel
and gasoline, important inputs to our aggregates,
readymixed concrete and paving operations,
decreased by 28% and 29% respectively. The
price of energy used at our asphalt plants,
consisting of fuel oil, recycled oil, electricity and
natural gas, decreased by 25%. Recycled asphalt
and shingles accounted for approximately 22%
of total asphalt requirements in 2015, lessening
demand on virgin bitumen.
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
Organic
+1,003
+125
+71
+698
+114
+77
-95
-7
-3
-
-57
-57
+342
+171
+177
% change
+38%
+57%
+75%
2015
7,018
955
620
13.6%
8.8%
Like-for-like aggregates volumes rose 4% from
2014 while overall volumes rose 11% mainly
due to the inclusion of Canadian sales. Average
prices increased by 5% on a like-for-like basis in
the US compared with 2014. These price and
volume increases, together with efficient cost
control, resulted in improved margin for our
aggregates business.
Asphalt volumes increased 6% on a like-for-like
basis and 9% overall compared to 2014. Despite
price declines of 4% on a like-for-like basis,
volume increases together with efficient cost
control contributed to an overall asphalt margin
expansion.
Like-for-like readymixed concrete volumes
increased 2% while volumes were up 21% overall
compared with 2014. Average prices increased
5% on a like-for-like basis, contributing to margin
expansion in the US for this business.
With flat federal funding and pockets of increased
state infrastructure spending, like-for-like sales
for paving and construction services increased
6%. Bidding continued to be under pressure in
a competitive environment. However, efficient
cost controls enabled overall margin in the US to
improve slightly in 2015.
United States
In 2014 and 2015, Americas Materials’ operations
in the US were organised in two regions, East and
West, each with four divisions.
East: The East region comprised operations in
24 states, the most important of which were
Ohio, New York, Florida, Michigan, New Jersey,
Pennsylvania and Connecticut. With the benefit
of lower bitumen costs, operating profit in the
Northeast division increased strongly compared
with 2014. The Central division benefited from
increased transportation spending in Ohio,
along with favourable bitumen costs. Operating
profit was also ahead in the Mid-Atlantic division
despite closure of coal mines and a slowdown in
natural gas exploration in the region. The strong
residential and non-residential markets in the
Southeast division contributed to higher asphalt
and readymixed concrete volumes and better
prices resulting in significant margin growth in
2015. Overall volumes for the East region were
7% ahead of 2014 for aggregates, 11% ahead for
asphalt and 1% behind for readymixed concrete.
West: The West region had operations in 20
states, the most important of which were Utah,
Texas, Washington, Kansas, Arkansas and
Colorado. With strong operating and overhead
cost management across the product lines, all
divisions reported significant margin increases
in 2015. With resilient market growth in Texas
in both the public and private sectors, the
Southwest division delivered higher margins, while
the Northwest division benefited from increased
commercial demand. Volumes in the Great Plains
division were impacted by state spending cuts
which were offset by strengthening residential
and commercial sectors. Overall West volumes
were flat for aggregates and decreased 2% from
2014 for both asphalt and readymixed concrete
respectively.
Canada
Regional variations in key operational geographies
produced mixed results for our businesses in
Canada which are located primarily in Quebec
and Ontario. Continued government investment
in large-scale public infrastructure projects and
stable demand for residential housing delivered
positive results across all segments in the core
Ontario market. Cement exports increased with
favourable pricing as the US recovery took hold.
In contrast, excess capacity and a reduction in
available bid work created pressure on volume
and price in the Quebec/Atlantic markets.
Brazil
The Brazilian construction market suffered in
2015 as the country struggled with significant
economic, financial and political problems.
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’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
7,018
955
620
13.6%
8.8%
With continuing volume improvement, operational
efficiencies and reduced energy costs, Americas
Materials had another year of good profit growth
in 2016 and delivered a strong organic operating
profit. Residential and non-residential demand
continued to improve, while publicly funded
infrastructure activity remained stable resulting
in an overall improvement in trading conditions
in the US. Organic sales were down 1% but
like-for-like operating profit increased 21%, with
positive real price improvements experienced
across all products. 2016 also represented
the first full year of results from the LH Assets
acquired during 2015, which saw mixed regional
results from Canada alongside more challenging
market conditions in Brazil.
Total volumes, including acquisition effects,
increased 9% for aggregates, 3% for asphalt
and 22% for readymixed concrete. This volume
growth, together with a 3% average price
increase in aggregates, a 4% average price
increase in readymixed concrete in the US
and efficient cost control resulted in margin
improvements in the year. Despite price declines
of 8% in asphalt, strong leverage on increased
volumes and the beneficial impact of lower
energy prices contributed to margin expansion.
Construction sales increased 6%, driven by the
Canadian business as bidding continued to be
competitive in the US despite limited increased
infrastructure spending across some states.
Good cost control enabled margin expansion.
Demand in our North American cement markets
increased as declines in Western Canada were
more than offset by increases in Quebec and the
US market. Average prices were steady despite
strong external downward pricing pressures in the
Canadian regions.
While the main focus during 2016 was on
successfully integrating our Canadian and
Brazilian acquired assets, eight bolt-on
acquisitions and one investment were also
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
Organic
‐4
‐
‐
+715
+72
+23
‐78
‐7
‐3
‐
+50
+50
‐53
+134
+128
% change
+8%
+26%
+32%
2016
7,598
1,204
818
15.8%
10.8%
LH integration costs of €7 million were incurred in 2016 (2015: €57 million)
increased volumes contributing to margin growth.
The Central division has operations in nine states,
with the key states being Texas, Kansas and
Arkansas. With resilient market growth in Texas
in both the public and private sectors, the Central
division delivered a heritage sales increase of
8% along with strong margin improvement.
Like-for-like volumes in the division were ahead
of 2015, with Texas in particular showing strong
growth. The West division has operations in ten
states, the most important of which are Utah,
Idaho, Washington and Colorado. With strong
operating and overhead cost management across
each product line, the division reported heritage
sales 2% ahead of 2015 along with margin and
operating profit increases.
Canada
Sales and operating profit were ahead of 2015
with the impact of a full year of ownership of
the LH Assets in 2016 augmented by a series
of major projects including the Highway 407
extension in Ontario and the Turcot Highway
Interchange in Montreal as well as strong
backlogs. There were mixed results across
different product lines and regions, with
improvements in our core markets of Ontario
and Quebec partially offset by margin pressures
and weaker demand in our Western Canada
businesses.
Brazil
The construction market weakened in 2016
as a result of deteriorating macroeconomic
and political conditions, with overall cement
consumption down 12% in the Southeast region
and selling prices under continued pressure in a
very competitive environment.
completed in 2016 at a total cost of €112 million.
The principal acquisition was of a significant
aggregates and asphalt operation in Utah which
added three asphalt plants, one readymixed
concrete plant and lease rights to 16 aggregates
sites. In total 93 million tonnes of permitted
reserves were added during the year. Business
and asset disposals in 2016 generated proceeds
of €107 million, continuing the optimisation of our
strategic footprint.
United States
Like-for-like aggregates volumes rose 4%
from 2015 while average prices increased
by 3%. Asphalt volumes increased 1% on a
like-for-like basis while input cost decreases
more than offset like-for-like price declines of 8%
compared to 2015. US readymixed concrete
volumes increased 4% compared with 2015
and average prices increased 4%. Like-for-like
sales in our paving and construction services
business decreased 3%, but this was offset by
overall margin expansion of 140 basis points in
2016. Performance was positively impacted by
the lower energy cost environment experienced
throughout the year.
Operations in the US were reorganised at the
beginning of 2016 into four divisions; North,
South, Central and West. The North division
comprises operations in 13 states, the most
important of which are Ohio, New York, New
Jersey and Michigan. Overall the division’s sales
were down from 2015; however, with the benefit
of operating efficiencies, strong cost controls and
lower energy costs, operating profit in the North
division improved significantly during 2016. The
South division comprises operations in 11 states,
with key operations in Florida, North Carolina
and West Virginia. Heritage sales in the South
division were 1% ahead during 2016, despite
record flooding in West Virginia and Kentucky,
and the impact of hurricane Matthew. Operating
profit was also well ahead in the division with
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
45
CRH Annual Report and Form 20-F I 2016 20%
DIY
Americas Products
CRH Americas Products is one of North America’s leading
suppliers of construction products. We supply, manufacture
60%
General
and deliver the products needed to build our modern
Builders
20%
Merchants
communities.
SHAP
100%
Philippines
Sales
40%
Operating Profit
Interior
EBITDA (as defined)*
€ million
% of Group
4,280
16%
411
543
20%
Shutters &
Awnings
What we do:
Americas Products is a leading supplier to
residential, commercial and infrastructure
construction projects operating in 38 US states
and five Canadian provinces. With almost
50%
Construction
16,300 employees at nearly 350 locations, our
Accessories
breadth of product range and footprint provide
national service to customers with the personal
touch of a local supplier.
30%
Perimeter Protection
& Network Access
Products
How we create value:
Americas Products’ strategy is to build a
portfolio of networked and scalable businesses
with leading market positions across a
balanced range of products and end-use
markets. We consistently invest in commercial
and operational excellence processes,
innovation and technology to ensure
continuous improvement. Our commitment to
building better businesses is demonstrated in
our approach at national and regional levels to
facilitate best practice sharing. We leverage our
unique scale, breadth and capabilities to build
competitive advantage in key segments and
channels. We maintain a pipeline of
value-added products and design solutions
1%
Brazil
through our research and development centres.
14%
Canada
Focusing strategic accounts and influencers
in the construction supply chain on CRH’s
product portfolio, the Oldcastle Building
Solutions group provides an additional avenue
85%
United States
for growth as it is well positioned to create
value for stakeholders across all phases of
construction.
How we are structured:
Americas Products is organised into
three strategic business product groups,
Architectural Products, Precast and
BuildingEnvelope® which maintain distinct
organisations for their business-specific
strategies, with the centre supporting finance,
business development and strategy, strategic
account development and procurement. Each
group has smaller national or regional positions
in product lines that support and complement
its core businesses.
Net Assets**
3,277
Products***
20%
Precast
20%
60%
Exterior
17%
16%
35%
Building
Envelope®
45%
Architectural
Products
Sector Exposure***
Residential
Non-Residential
Infrastructure
40%
55%
5%
End-use***
New
60%
RMI
40%
Dry cement mixes, marketed under brands
such as Sakrete® and Amerimix®, are also an
important product offering of our business.
Lawn & garden products, mainly bagged and
bulk mulch, soil and speciality stone products,
are marketed to major DIY and homecenter
chains across the US.
Architectural Products
The Architectural Products Group (APG)
is North America’s leading supplier of concrete
masonry, hardscape and related products
for residential, commercial and do-it-yourself
(DIY) construction markets. APG has 172
operating locations in 35 states and five
Canadian provinces.
Competition for APG arises primarily from other
locally owned products companies. Principal
raw material supplies are readily available.
APG’s concrete masonry products are used
for veneers, walls and foundations. Hardscape
products comprise pavers, retaining wall and
patio products.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Products, sector exposure and end-use balance are based on sales.
46
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
Architectural Concrete and Related Accessories
Canada, United States
Precast Concrete, Pipe and Structural Products
Canada, United States
Glass Fabrication
Canada, United States
Construction Accessories
United States
Glazing Systems
Canada, United States
Custom Glazing Hardware and
Installation Products
Australia, Canada, Denmark, Germany,
United Kingdom, United States
Annualised Sales Volumes†: Concrete masonry, patio products & pavers: 8.0m tonnes; Pre-packaged concrete mixes: 4.0m tonnes; Pre-packaged lawn & garden products: 6.2m tonnes;
Precast concrete products: 1.6m tonnes; Building envelope products: 7.5m m2, 67,000 SKUs
Precast
Our Precast group is one of North America’s leading
manufacturers of precast concrete and related products
with 81 locations in 27 states and the province of
Quebec, and approximately 3,900 employees.
Precast manufactures a range of concrete and
polymer-based products such as underground vaults,
plastic enclosures, concrete flooring and modular
precast structures which are supplied to the water,
electrical, telephone and railroad markets as well as
hotels, apartments, dormitories and prisons.
The Precast group also includes the construction
accessories business, which supplies specialised products
used in concrete construction activities. In many instances,
precast products are an alternative to poured-in-place
concrete, which is a significant competing product.
BuildingEnvelope®
Our Oldcastle BuildingEnvelope® (OBE) business
custom manufactures architectural glass and
engineered aluminium glazing systems for multi-storey
commercial, institutional and residential construction.
With nearly 6,600 people and 82 locations in
23 states and four Canadian provinces and further
operating locations across Europe and Australia,
OBE is the largest supplier of high performance glazing
products and services in North America.
We are one of the leading integrated suppliers
of products specified to close the building envelope,
including: custom-engineered curtain wall and window
wall, architectural windows, storefront systems, doors,
skylights and architectural glass. Our CRL business
designs, engineers, manufactures and distributes
glazing hardware and installation products.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
47
CRH Annual Report and Form 20-F I 2016 Operations Review - Americas Products
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
3,225
263
145
8.2%
4.5%
Analysis of change
Exchange
Acquisitions
Divestments
Organic
+569
+50
+32
+196
+29
+15
-374
-31
-21
+246
+80
+78
% change
+20%
+49%
+72%
2015
3,862
391
249
10.1%
6.4%
Trading results improved in 2015 due to a
pick-up in US macroeconomic fundamentals,
including stronger labour markets and consumer
confidence, which strengthened private new
residential construction and RMI. The
non-residential construction sector also
performed strongly in 2015, with the Southern
and Western markets particularly strong. Input
cost inflation was more than offset by the effects
of improved operational efficiencies, procurement
initiatives, favourable product mix and targeted
price increases. Combined with the added
benefits of cost reduction initiatives, Americas
Products achieved a 72% increase in operating
profit and margins improved.
In 2015, we acquired CRL, a highly
complementary platform for our OBE group
together with three bolt-on acquisitions at a
total cost of €1.2 billion. CRL is the leading
North American manufacturer and supplier of
custom door hardware and glazing installation
products. OBE and CRL generated synergies
through integrated supply chains, increased
sales to a larger customer base and more
efficient fixed costs. The acquisition of Anchor
Block and Anchor Wall Systems expanded the
product capabilities of APG’s core masonry and
hardscape business and enhanced its market
position in the upper Midwest region. In addition
to the disposal of the Glen-Gery clay business,
nine further divestments together with asset
disposals in 2015 generated net proceeds of
€155 million.
Architectural Products
Precast
In 2015, with improved demand for both
private construction and public infrastructure,
the Precast business registered solid sales
gains as growth initiatives continued to deliver.
Operating profit increases were achieved in
most markets across all concrete product lines.
Our enclosures solutions business realised
significantly increased sales and profits, and our
construction accessories business also grew
and improved. Overall, like-for-like sales rose
and operating profit was significantly ahead and
backlogs remained strong.
The APG business benefited from improved
economic fundamentals, which gave rise to
increased RMI spend, stronger residential
construction, in particular increased growth in
single-family home construction, and recovering
non-residential demand. Sales volumes were
robust across the US but more muted in
Canada, where macroeconomic growth was
less favourable. The strengthening market,
together with product innovation and commercial
initiatives, drove gains across nearly all product
channels resulting in an increase in like-for-like
sales compared with 2014. Input costs increased
moderately in 2015 but were offset by the
impacts of cost reduction measures and selected
price improvements. Overall, APG recorded
strong improvements in operating profit and
margin in 2015.
BuildingEnvelope®
In 2015, non-residential building activity
experienced improved market demand. Sales
growth for OBE was also driven by initiatives
to gain market share and differentiate the
business through innovative products and
technology. Organic sales increased and with
improved pricing and a more favourable product
mix, OBE achieved robust growth in margins
and operating profit.
48
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
3,862
391
249
10.1%
6.4%
Our Products business in the Americas is mainly
located in the US and Canada. 2016 saw good
progress especially in the first-half, helped by
an ongoing pick-up in US macroeconomic
fundamentals, including stronger labour markets
and good consumer sentiment, which have
strengthened private new residential construction
and RMI. There was good growth in the South,
East Coast and West Coast markets due to an
improving non-residential construction sector.
Input cost inflation was more than offset by
the effects of improved operational efficiencies,
procurement initiatives, favourable product mix
and targeted price increases. Benefiting from
strong acquisition trading results and synergies
from the CRL acquisition, as well as good organic
growth across the Division, Americas Products
achieved a 65% increase in operating profit and
margins improved.
The acquisition of Techniseal, a manufacturer of
packaged products for hardscapes installation,
added a product capability complementary to
APG’s core hardscape business. In addition, four
other small bolt-on acquisitions were completed
and APG divested its non-core Gemseal
business, a manufacturer and supplier of
pavement maintenance products, along with two
other smaller divestments.
Architectural Products
With the benefit of favourable weather early in
2016, APG showed increased activity in the
RMI sector, with continuing improvement from
residential and commercial construction. Sales
volumes were strong across the US but were
Analysis of change
Exchange
Acquisitions
Divestments
Organic
‐48
‐3
+2
+390
+80
+58
‐214
‐6
‐1
+290
+81
+103
% change
+11%
+39%
+65%
2016
4,280
543
411
12.7%
9.6%
Precast
In 2016, strong sales growth was achieved as
specific commercial initiatives continued to
deliver, along with improved demand for both
private construction and public infrastructure.
Operating profit increases were achieved in most
markets across all concrete product lines with
a particularly strong performance in the West.
Overall, like-for-like sales increased, operating
profit advanced significantly and backlogs
remained strong.
more steady in Canada. The favourable selling
environment, together with product innovation
and commercial initiatives, drove gains across all
major product categories and channels resulting
in an increase in like-for-like sales compared with
2015. APG focused on both product portfolio
management and cost reduction efforts to
maximise returns. Overall, APG recorded a strong
improvement in operating profit for the year.
BuildingEnvelope®
In 2016, non-residential building activity
experienced increases in both institutional and
commercial markets, though contract square
footage decreased slightly. Sales growth was
driven by favourable glass pricing and product
mix, and enhanced production capabilities in
architectural glass. These, coupled with actions
to differentiate the business through innovative
products and technology, enabled OBE to
achieve substantial growth in margins and
operating profit.
Integration of the CRL and OBE businesses
has been very successful and both CRL and
OBE have continued to benefit from significant
synergies through an increased common
customer base and fixed cost efficiencies. With a
full year of ownership, CRL had strong sales and
profit growth and has shown an improvement in
margins in 2016.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
49
CRH Annual Report and Form 20-F I 2016
Americas Distribution
Via its Americas Distribution Division, CRH is a leading United
States distributor of roofing, siding, drywall, ceiling systems and
related accessories to speciality contractors in residential and
commercial construction.
20%
DIY
What we do:
Americas Distribution, trading as Allied Building
Products (Allied) is focused on being the
supplier of choice to speciality contractors
of Exterior Products (roofing and siding),
60%
General
and Interior Products (ceilings and walls), as
Builders
well as Solar Roofing panels primarily for the
Merchants
residential market. Allied’s business is cyclical
in nature and sensitive to changes in general
economic conditions, specifically to housing
and construction-based markets.
20%
SHAP
technologies, disciplined and focused cash
and asset management, and well established
procurement and commercial systems to
support supply chain optimisation and enable
us to provide superior customer service.
100%
Allied established the private label Tri-Built
Philippines
Materials Group to help differentiate from
competitors in the marketplace, establish
product brand identity and expand margins.
This initiative has expanded to include
more than 30 residential and commercial
accessory products.
14%
Canada
30%
Perimeter Protection
& Network Access
Products
How we create value:
Allied has executed a growth strategy
based on focused acquisitions, selective
greenfields and investments in private label
products. Through CRH’s commitment to
continuously making businesses better, we
employ state-of-the-art customer facing IT
20%
Shutters &
Awnings
50%
Construction
Accessories
1%
Brazil
How we are structured:
Allied is structured as two divisions: Exterior
Products and Interior Products. We operate
in 31 states and employ approximately 3,900
people at 200 locations.
85%
United States
€ million
% of Group
Sales
2,315
Operating Profit
EBITDA (as defined)*
Net Assets**
119
150
760
Activities***
9%
6%
5%
4%
40%
Interior
60%
Exterior
Sector Exposure***
Residential
50%
20%
Precast
New
50%
Non-Residential
50%
35%
Building
Envelope
End-use***
RMI
45%
Architectural
Products
50%
Exterior Products
Allied is a leading Exterior Products distributor
in the US with 141 branches across 27
states. We distribute both commercial and
residential roofing, siding and related products.
Additionally, we have two locations dedicated
to the distribution of Solar Roofing panels.
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. Commercial roofing products
include single-ply membranes and various
asphalt-based roll roofing products along
with complementary products, such as
sealants, vapour barriers and roof cements
and coatings.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Activities, sector exposure and end-use balance are based on sales.
50
CRH Annual Report and Form 20-F I 2016 Products and Services Locations
Exterior Products
United States
Interior Products
United States
Interior Products
Allied is a leading Interior Products
distributor with 57 branches in 18 states.
We distribute gypsum wallboard, metal
studs and acoustical tile and grid.
Demand for Interior Products is primarily
driven by the new residential, multi-family
and commercial construction markets. Interior
Products’ customers consist of interior partition
and commercial ceiling contractors. Sales
tend slightly toward commercial construction
and are almost exclusively focused on
new construction for both residential and
commercial-based projects.
51
CRH Annual Report and Form 20-F I 2016 Operations Review - Americas Distribution
Prior Year 2015
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2014
1,776
105
83
5.9%
4.7%
Analysis of change
Exchange
+351
+22
+18
Organic
+102
+13
+10
2015
2,229
140
111
6.3%
5.0%
% change
+26%
+33%
+34%
While no acquisitions were completed within
the Americas Distribution group in 2015, we
continued to build on our organic greenfield and
service centre strategy by opening three 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 2015 to increase brand
awareness of Tri-Built, our proprietary private label
brand, as both sales and product offerings grew.
Exterior Products
Growth in 2015 came mainly from the commercial
roofing sector which benefited from strong
demand, particularly in California and the East
Coast metro markets. With pricing discipline
maintained in highly competitive markets, the
Exterior Products division maintained margins and
reported strong sales and operating profit growth
over 2014.
Interior Products
Performance in this business was strong in most
markets in 2015 with increased demand of
core products contributing to higher sales and
improved operating profit.
Allied experienced solid performance across its
activities in 2015, reporting another year of good
profit delivery on increased sales. Our Exterior
Products and Interior Products divisions, as well
as our growing Solar business, continued to
advance and benefit from organic sales and profit
growth compared to 2014.
Performance in our Exterior Products business
was led by strong demand in our West Coast
markets (California and Oregon), focused growth
in Texas and steady volumes in the Northeast
(New York/New Jersey/New England). The
Mountain (Colorado) market experienced
modest setbacks coming off seasonal storm
activity in 2014.
The Interior Products business continued to
experience volume growth throughout 2015.
The strongest gains were experienced in our
Western markets, Hawaii and California, driven by
multi-family construction. Modest declines were
experienced in our Mountain (Colorado) and
Mid-Atlantic (Carolinas) markets.
In 2015, Allied management remained focused
on gross margins in a highly competitive
environment, maintaining price discipline while
controlling variable costs through continuous
improvement and efficiency; the team also
achieved significant improvements in our working
capital through better procurement and demand
planning technologies in conjunction with our
maturing regional service area (district) approach.
Additionally, the simplification of our business
processes, the evolution of our organisational
structure and regional service area strategy
helped drive operating leverage and allowed for
greater economies of scale as our business and
the overall market grew.
52
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016
Current Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
2,229
140
111
6.3%
5.0%
Analysis of change
Exchange
Organic
+5
‐
‐
+81
+10
+8
2016
2,315
150
119
6.5%
5.1%
% change
+4%
+7%
+7%
2016 was another year of solid profit delivery on
increased sales for Allied. Our Exterior Products
and Interior Products divisions each advanced
and recorded sales and profit growth.
Strong demand in the Florida, Chicago and
Atlantic markets, focused growth in our Iowa,
Ohio and Michigan markets and storm driven
demand in Texas were the drivers of performance
in our Exterior Products division. Against a strong
performance in 2015, sales in our Northeast
markets were marginally behind prior year.
The Interior Products division continued to
experience volume growth throughout the year.
The strongest gains were in Western markets,
particularly California and Hawaii where increased
demand continued to be driven by robust
multi-family construction, offsetting softer
Carolinas markets.
In 2016, Allied management remained highly
focused on gross margins in a very competitive
environment through improved procurement
initiatives, both internal and leveraging the
resources of the CRH network. We continued to
maintain margin discipline and optimised working
capital while growing organically. Technology
investments made in 2016 included a customer
relationship management tool, a transportation
management tracking system and a highly
functional mobile application for our customers,
all of which serve to differentiate Allied in
the marketplace. Our regional service area
model continues to mature, and our drive
towards simplifying our business processes
through continuous improvement all add to the
potential for greater economies of scale as our
business expands.
Although no acquisitions were completed in
2016, the opening of five new locations continued
to strengthen our greenfield and service centre
strategy. This continued focus allows us to
improve in the area of customer service, cost
control and more efficiently leveraging existing
assets. Sales and product offerings of our
Tri-Built private label brand continued to grow in
2016. This, combined with our investments in
technology and the ongoing effort and expansion
of our service centre network, continue to
differentiate Allied in the marketplace.
Exterior Products
Commercial roofing continued to experience
modest industry-wide growth while growth in
the residential sector was largely due to the high
level of hail storm activity experienced in specific
markets in the US, particularly in Texas. While
most of our residential roofing markets grew
in line with the market, concentrated efforts
resulted in an improved residential product mix.
The Exterior Products division reported solid
sales and improved operating profits in 2016.
Interior Products
Performance in this business was strong in most
markets with increased demand of core products
contributing to higher sales and operating profit.
The strong growth of multi-family construction
and a shift towards more urbanisation led to
particularly strong results in the Southeast and
West Coast markets. Focused investments
in new locations and operational excellence
initiatives helped to achieve solid sales growth
and higher operating margins.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
53
CRH Annual Report and Form 20-F I 2016
Asia
CRH’s operations in Asia include strong market positions in
cement markets in the Philippines, Northeast China and Southern
India. These positions represent growth platforms which provide
us with exposure to industrialisation, urbanisation and population
related construction demand in Asia’s developing economies.
What we do:
CRH has established strategic footholds
in regional cement markets in China and
India over the past nine years. In 2015,
the Group significantly expanded its Asian
operations when it entered the cement market
in the Philippines following its acquisition of
Republic Cement, the number two producer
in the market.
CRH Asia is focused on maximising
performance and returns in our businesses,
expanding our balanced portfolio of diverse
products and geographies and conducting our
businesses responsibly and sustainably. We
are investing in, and developing our leadership
positions across the region.
How we create value:
CRH Asia creates value by identifying and
establishing select positions with strong
20%
DIY
long-term prospects in regional markets.
Using our proven acquisition model, we are
concentrating on building on the existing
platform and on making businesses better;
as has been demonstrated in India and China
where capacity has increased more than
threefold through both organic growth and
the successful integration of new bolt-on
acquisitions.
60%
General
Builders
Merchants
20%
SHAP
CRH Asia achieves benefits of scale and other
synergies in areas such as health & safety,
operational efficiency, commercial excellence,
energy-efficiency and procurement.
20%
Shutters &
Awnings
30%
Perimeter Protection
& Network Access
Products
How we are structured:
Country level operations across ten locations
50%
in the Philippines as well as functions in
Construction
China and India report to CRH’s regional
Accessories
headquarters in Singapore. The Division
employs approximately 1,400 people, with
a further 8,250 in our equity accounted entities.
€ million
% of Group
Sales
Operating Profit
EBITDA (as defined)*
508
71
109
Net Assets**
1,333
Geography***
2%
4%
3%
7%
100%
Philippines
40%
Interior
60%
Exterior
Sector Exposure***
Residential
70%
14%
Non-Residential
Canada
1%
20%
Brazil
Infrastructure
10%
20%
Precast
End-use***
New
90%
RMI
10%
85%
United States
Annualised Sales Volumes†:
Cement: 5.9m tonnes (13.3m tonnes††);
Aggregates: 0.5m tonnes (0.5m tonnes††);
Readymixed Concrete: 0.0m m3 (0.4m m3††)
35%
Building
Envelope
45%
Architectural
Products
Aggregates
Cement
In the Philippines, CRH operations include
the production and supply of aggregates for
use in building materials including paving,
asphalt, base and sub-base course for roads,
foundations and footing.
Republic Cement, the second largest cement
producer in the Philippines has six strategically
located cement production facilities across the
country which contribute to a capacity of
7.5 million tonnes.
CRH’s operations in China consist of a 26%
stake in Yatai Building Materials which is a
market leader in cement in Northeast China
with a cement capacity of 32 million tonnes
operating across the three provinces of
Heilongjiang, Jilin and Liaoning.
My Home Industries Limited (MHIL), is
our 50% joint venture cement producer in
Southern India. It has a leading position in
the states of Andhra Pradesh and Telangana
with cement capacity of 8.4 million tonnes
across three locations. The business is
currently constructing a new grinding station
in the southern state of Tamil Nadu which will
improve its geographical reach.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
** Net Assets at 31 December 2016 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
*** Geography, sector exposure and end-use balance are based on sales.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including equity accounted investments.
54
CRH Annual Report and Form 20-F I 2016 Operations Review - Asia
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit/(loss)
EBITDA (as defined)*/sales
Operating profit/sales
2015
151
2
-7
1.3%
-4.6%
The Asia Division was formed following the
acquisition of the Philippines operations as
part of the LH Assets transaction in 2015.
The table above includes the results from
these operations together with CRH Asia’s
divisional costs.
In addition to our subsidiary businesses in
the Philippines, the Group also has a share of
profit after tax from our stakes in Yatai Building
Materials in China and MHIL in India which are
reported within the Group’s equity accounted
investments as part of profit before tax.
Analysis of change
Exchange
Acquisitions
LH Costs
Organic
2016
% change
‐6
-
-
+360
+93
+71
-
+13
+13
+3
+1
-6
+236%
n/m
n/m
508
109
71
21.5%
14.0%
LH integration costs of €6 million were incurred in 2016 (2015: €19 million)
n/m not meaningful percentage movements
Philippines - 2015
Construction activity in the Philippines showed
favourable growth trends during 2015. This
positive growth was reflected in stronger
volumes and prices contributing to a robust
operating performance for the four-month
post-acquisition period in 2015.
Philippines - 2016
The construction market remains strong in
the Philippines, with growth in cement demand
in 2016 largely due to increased construction
activities in the private sector and government
infrastructure spending. Despite competitive
markets, operating profit was ahead due to
higher selling prices and lower variable costs
which benefited from a decrease in the price
of imported clinker and lower prices of fuel
and power.
Equity Accounted Entities
2015
2016
China
Market conditions in 2015 were very challenging
as the Chinese economy moved towards
a more sustainable level of growth. This
impacted negatively on the construction
industry. Performance at Yatai Building Materials
was affected by lower volumes and selling
prices, partially offset by lower energy costs.
China
Yatai Building Materials continued to be
affected by lower volumes and selling
prices. Cement prices were down 3% due
to lower levels of construction activities and
overcapacity in the market.
India
In 2015, MHIL sales grew by 5% compared to
2014 helped by better pricing and the benefit
of clinker exports to Sri Lanka and Bangladesh.
The lower cost of raw materials and fuels and the
focus on commercial and operational excellence
also resulted in higher trading profits in 2015.
India
Sales at MHIL decreased by 8% due to lower
cement prices, increased competition and
new capacities in the region. This coupled with
lower clinker exports was only partly offset
by improved cement volumes, and operating
profit was lower in 2016.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
55
CRH Annual Report and Form 20-F I 2016
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CRH Annual Report and Form 20-F I 2016 Governance
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
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A Safety Officer at the Hoghiz Cement Plant in Romania, where 40% of all employees and 45% of operational
managers are women.
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CRH Annual Report and Form 20-F I 2016 58
CRH Canada’s vertical integration strategy in action in the Greater Montréal Area, where Demix Construction
and Demix Agrégats were contractor and aggregates supplier respectively for the construction of the Highway
25 Bridge.
CRH Annual Report and Form 20-F I 2016 Board of Directors
Chairman
Appointed to the Board:
June 2004
Nationality: Irish
Age: 65
Committee membership:
Acquisitions Committee;
Finance Committee;
Nomination & Corporate
Governance Committee
Chief Executive
Appointed to the Board:
January 2009
Nationality: Irish
Age: 54
Committee membership:
Acquisitions Committee
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 US.
Qualifications: C.Eng, FIEI, MBA.
External appointments: Non-listed: 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.
Listed: Non-executive Director 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 (now
Europe Heavyside), 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.
External appointments: Non-listed: Not applicable. Listed: Not applicable.
Finance Director
Appointed to the Board:
January 2016
Nationality: Irish
Age: 48
Committee membership:
Acquisitions Committee;
Finance Committee
Skills and experience: Senan has over 25 years’ experience in international
business across financial services, banking and renewable energy. He joined
CRH from Bank of Ireland Group plc where he was the Chief Operating Officer
and a member of the Group’s Executive Committee. He previously held positions
as Chief Operating Officer and Finance Director at Ulster Bank, Chief Financial
Officer at Airtricity and numerous senior financial roles in GE, both in Ireland and
the US.
Qualifications: BComm, FCA.
External appointments: Non-listed: Not applicable. Listed: Not applicable.
Group
Transformation
Director
Appointed to the Board:
May 2010
Skills and experience: Since joining CRH in 1988, Maeve held a number of
roles in the Group Finance area prior to being appointed Finance Director in May
2010. She became Group Transformation Director in January 2016. Maeve 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.
Nationality: Irish
Qualifications: MA, FCA.
Age: 58
Committee membership:
Acquisitions Committee;
Finance Committee
External appointments: Non-listed: Agency Member of the National Treasury
Management Agency (NTMA), a state body that provides asset and liability
management services to the Irish Government. Listed: Samse S.A.
59
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CRH Annual Report and Form 20-F I 2016
Non-executive
Director
Appointed to the Board:
October 2011
Nationality: Swiss
Age: 64
Committee membership:
Audit Committee
(Financial Expert);
Finance Committee
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: Non-listed: Member of the Advisory Board of China
Renaissance Capital Investment Inc., a private equity investment company in Hong
Kong, China. Listed: Chairman of the Board of Directors of Conzetta AG, a broadly
diversified Swiss company and a member of the Board of Bucher Industries AG, a
mechanical and vehicle engineering company based in Switzerland.
Non-executive
Director
Appointed to the Board:
January 2015
Nationality: Irish
Age: 63
Committee membership:
Acquisitions Committee;
Nomination & Corporate
Governance Committee;
Remuneration Committee
Non-executive
Director*
Appointed to the Board:
July 2013
Nationality: United States
Age: 66
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
Non-executive
Director
Appointed to the Board:
February 2012
Nationality: Irish
Age: 55
Committee membership:
Audit Committee;
Remuneration Committee
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 portfolio of businesses, 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. 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. He retired from SHV in mid-2014.
Qualifications: BComm, MBS.
External appointments: Non-listed: Member of the Board of Liquigas S.p.A., an
LPG distribution company. Listed: Not applicable.
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: Non-listed: Director of Neuraltus Pharmaceuticals, Inc.
and eAsic Corporation. Listed: Not applicable.
* 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-listed: Chairman of the Bank of Ireland Pension
Fund Trustees Board; Director of Ergonomics Solutions International and the
Institute of Directors. Listed: Non-executive Director of Greencore Group plc and
Jazz Pharmaceuticals plc.
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CRH Annual Report and Form 20-F I 2016
Non-executive
Director
Appointed to the Board:
January 2017
Nationality: Canadian
Age: 62
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
Skills and experience: During the course of her executive career, Gillian has held a number
of senior leadership positions in a variety of industries, geographies and roles including
human resources, corporate affairs and strategy. Most recently she was Executive
Vice President and Chief Human Resources Officer at Finning International, Inc. (the
world’s largest Caterpillar dealer) with global responsibility for human resources, talent
development and communications. She previously held senior executive roles at Aviva,
the multinational insurance company, as Executive Vice President Human Resources and
Executive Vice President Strategy and Corporate Development.
Qualifications: Bachelor of Arts from the University of Western Ontario and a Masters
of Education from the University of Toronto.
External appointments: Non-listed: Not applicable. Listed: Non-executive Director of
Interfor Corporation, a Canadian listed company, which is one of the world’s largest
providers of lumber.
Non-executive
Director
Appointed to the Board:
March 2015
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’s Equity Capital Markets Group and Vice
Chairman of the Investment Banking Division.
Nationality: British
Age: 55
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
Qualifications: Masters in Philosophy, Politics and Economics and a Masters in
Political Science.
External appointments: Non-listed: Non-executive Director of UK Financial
Investments Limited, which manages the UK government’s investments in financial
institutions, and the British Standards Institution. Lucinda is also a trustee of Sue
Ryder. Listed: Non-executive Director of Ashtead Group plc, Diverse Income Trust plc
and ICG Enterprise Trust plc.
Non-executive
Director
Appointed to the Board:
February 2014
Nationality: Dutch
Age: 61
Committee membership:
Acquisitions Committee;
Audit Committee
Skills and experience: Henk has a background in distribution, wholesale and
logistics. Until 2010, he was Chief Executive Officer at Pon Holdings B.V., a large,
privately held international company which is focused 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 food-retail group Detailresult Groep.
Qualifications: Masters degree in Dutch Law; PMD Harvard Business School.
External appointments: Non-listed: Member of the Supervisory Board of
Stork Technical Services, Member of the Supervisory Board of the retail group
Blokker Holding B.V., Chairman of Koole Terminals B.V. Henk also holds several
non-profit board memberships. Listed: Not applicable.
Non-executive
Director
Appointed to the Board:
March 2016
Nationality: United States
Age: 65
Committee membership:
Audit Committee
(Financial Expert);
Finance Committee
Skills and experience: Bill was until September 2016 the Vice Chairman of EMC
Corporation, a global leader in enabling businesses and service providers to transform
their operations and deliver IT as a service. In previous roles he was responsible for
EMC’s global sales and distribution organisation (2006-2012) and served as Chief
Financial Officer leading the company’s worldwide finance operation (1996-2006).
Prior to joining EMC he was a partner in the audit and financial advisory services
practice of Coopers & Lybrand LLP.
Qualifications: MBA degree from Babson College, a Masters of Science in Taxation
from Bentley College and a Bachelors degree from Holy Cross.
External appointments: Non-listed: Director of the College of the Holy Cross. Listed:
Member of the Board of Directors of Popular, Inc. a diversified financial services
company, and Inovalon Holdings, Inc., a healthcare technology company.
61
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CRH Annual Report and Form 20-F I 2016
Corporate Governance Report
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Chairman
Chairman’s Introduction
This Corporate Governance report sets out
CRH’s governance structures and highlights the
main areas of focus for the Board during 2016.
Details of CRH’s general governance practices,
which are largely unchanged from prior years,
are available in the governance appendix on
CRH’s website, www.crh.com (the ‘Governance
Appendix’)*.
Auditor Tendering/Rotation
The Audit Committee has considered the issue
of auditor tendering/rotation in the context of
new European Union requirements mandating
auditor rotation in advance of the 2021 audit.
Details regarding the Audit Committee’s
recommendations in this regard are set out
in the Audit Committee Chairman’s report on
pages 64 to 65.
CRH implemented the 2014 UK Corporate
Governance Code (the ‘Code’) and complied
with its provisions in 2016. A copy of the Code
can be obtained from the Financial Reporting
Council’s website, www.frc.org.uk.
Board focus during 2016 and
priorities for 2017
In the 2015 Annual Report, I highlighted
acquisition integration, risk management, IT and
cyber security, talent management, succession
planning and strategy as areas of particular
focus for 2016. The Board has devoted a
significant amount of time to reviewing and
considering each of these areas in conjunction
with management during the course of the
year and is pleased with the progress to date.
With the successful completion in 2016 of the
integration of the major acquisitions from 2015,
this item is no longer of particular focus for the
Board; however the other five areas will continue
to be priorities for the Board in 2017.
The potential for an adverse impact on the
building materials sector resulting from the
UK vote to leave the European Union is a
topic which we will be monitoring given CRH’s
extensive operations in the UK and the potential
for a negative economic effect in Mainland
Europe.
During 2016, we extended our normal Board
visit itinerary by holding meetings in Europe,
the US and Asia, visiting the operations of
Tarmac (UK), CRL (US) and Republic Cement
(the Philippines). We also visited the Group’s
Asia headquarters in Singapore. This has
required significant time commitment from my
non-executive colleagues for which I would like
to record my appreciation.
Board Renewal and
Succession Planning
Details of Board changes during 2016 and to
date in 2017, and the Board renewal process
generally, are set out in the Nomination &
Corporate Governance Committee section of
this report on page 67.
Given the relatively extensive Board renewal
process in recent years, I am very focused
on ensuring that our induction programme
is extensive and responsive to the needs of
individual Directors. Based on feedback from
non-executive Directors, and in conjunction
with the Company Secretary, we have an
ongoing process for refining and improving the
programme.
As part of the Group’s general succession
planning process, the Nomination & Corporate
Governance Committee has started the process
of considering the requirements of CRH for
my successor as Chairman. The Committee,
led by the Senior Independent Director for this
purpose, is continuing with this process during
the course of 2017.
Remuneration
At the 2016 Annual General Meeting (AGM)
shareholders approved a new remuneration
policy. The Board believes the new policy gives
the Remuneration Committee appropriate tools
to incentivise management in a way which is
balanced, rewards performance against our
key strategic objectives and is designed for the
long-term benefit of shareholders. However,
the Board noted that a number of shareholders
did not support the new arrangements. The
introduction to the Directors’ Remuneration
Report by the Chairman of the Remuneration
Committee outlines the actions taken by the
Remuneration Committee to understand the
concerns raised by shareholders.
* The Governance Appendix is published in conjunction with the Directors’ Report in compliance with Section 1373 of the Companies Act 2014. For the purposes of Section 1373 (2) of the
62
Companies Act 2014, the Governance Appendix and the risk management disclosures on pages 18, 19 and 102 to 107 form part of, and are incorporated by reference into, this Corporate
Governance Report.
CRH Annual Report and Form 20-F I 2016
Conclusion
In an increasingly complex environment, solid
governance foundations are vital to good
long-term decision-making and to maximising
value for shareholders while being a valued
contributor to society. I believe that our
governance structures enable us to meet
these aims.
Nicky Hartery
Chairman
28 February 2017
Independence of
non-executive
Directors/Re-election
The Board has determined that each
non-executive Director is independent. In
addition, I have evaluated the performance
of each Director and I recommend that
shareholders vote in favour of the
reappointment of each Director at the
2017 AGM.
Reporting
Prior to the 2016 financial year, CRH prepared
annual reports in two formats; one satisfying
the requirements of Irish company law, various
European Union regulations and directives and
Stock Exchange listing requirements*, and
a second report containing mostly the same
information but in a format that complied with
the requirements of the United States Securities
and Exchange Commission (SEC). In order
to make the reporting process as efficient as
possible, CRH has issued this combined Annual
Report and Form 20-F in respect of its 2016
financial year.
Culture
My colleagues on the Board and I acknowledge
and fully embrace our primary role in setting and
maintaining CRH’s culture. This culture is based
on our core philosophies of transparency and
fairness, and on our belief that “there is never a
good business reason to do the wrong thing”.
Diversity of thought, respect, constructive
challenge and having no topics which are out of
bounds are integral to the way we operate as a
Board. These philosophies and characteristics
are the basis of the tone that the Board sets for
management and employees generally. I believe
that they are also strongly reinforced by the
Board’s governance structures which have as
a focus: communicating our business model,
strategy and the resulting outputs in a clear
and unambiguous way; actively monitoring and
managing our key risks; making decisions in the
long-term interests of shareholders; aligning the
interests of management with investors; taking
the views of wider stakeholders into account;
and fostering a “Speak-Up” culture across
the Group.
* The primary (premium) listing of CRH plc is on the London Stock Exchange (LSE), with the listing on the Irish Stock Exchange (ISE) characterised as secondary. 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 ISE. For further information, shareholders should
consult their own financial adviser. Further details on the Group’s listing arrangements, including its premium listing on the LSE, are set out on page 70.
63
CRH Annual Report and Form 20-F I 2016
Corporate Governance Report - continued
Audit Committee Report
i
h
c
s
t
r
ä
B
.
J
t
s
n
r
E
Chairman of Audit Committee
Audit Committee Financial Expert
(as determined by the Board)
Chairman’s Overview
On behalf of the Audit Committee, I am pleased
to introduce the Audit Committee Report for the
year ended 31 December 2016. The purpose
of this report is to provide shareholders with
an insight into the workings of, and principal
matters considered by, the Committee in the
past 12 months. General details in relation to
roles and responsibilities of the Committee, its
operation and the policies applied by it can be
found in the Governance Appendix.
Table 2 on page 65 outlines the key areas
that the Committee focused on in 2016.
Audit Committee Membership
The 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
60 and 61. Together the members of the
Committee bring a broad range of relevant
experience and expertise from a wide variety of
industries which is vital in supporting effective
governance.
External Auditors
Tender/Rotation of Audit
The Committee has recommended to the
Board that, subject to the then prevailing
circumstances and any intervening
developments of Group-wide significance,
a tender process for the external audit be
conducted in 2018. Further details in relation
to the factors taken into account in making this
recommendation are set out in table 2 on
page 65.
Following completion of his five-year term at the
conclusion of the 2015 year-end audit, Breffni
Maguire ceased to be our lead external audit
engagement partner and was replaced by Pat
O’Neill. On behalf of the Committee, I would like
to thank Breffni for his contribution during his
tenure.
Effectiveness
The Committee, on behalf of the Board, is
responsible for the relationship with Ernst &
Young (EY) and for monitoring the effectiveness
and quality of the external audit process. The
Committee’s primary means of assessing the
effectiveness of the external audit process is
by monitoring performance against the agreed
audit plan. Each year the Committee considers
the experience and knowledge of the EY audit
team and the results of post audit interviews
with management and the Audit Committee
Chairman. These annual procedures are
supplemented by periodic formal reviews of
the performance of EY, 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 results indicated a high level of
satisfaction with EY and the services provided
by them to CRH. Further details in relation to
the external auditors, including information on
how auditor objectivity and independence are
maintained, are included in Section 2 of the
Governance Appendix.
Non-audit Fees
In 2016, the external auditors provided a
number of audit-related services, including
Sarbanes-Oxley Section 404 attestation**, and
non-audit services, including due diligence
services associated with proposed acquisitions
and disposals. EY were also engaged during
2016 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 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 EY for
non-audit work in 2016, which amounted
to €1.4 million and represented 7% of the
total fees for the year, 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 141 (see also table 1 on page 65).
Further details in relation to the Group’s policy
regarding non-audit fees are set out in Section 2
of the Governance Appendix.
Internal Audit Effectiveness
In December 2015, the Committee received
and approved the Internal Audit plan for 2016,
which focused significantly on the integration
of the LH Assets and CRL. During the year, the
Committee received regular updates from the
64
* The Board has determined that all of the non-executive Directors on the Audit Committee are independent according to the requirements of Rule 10A.3 of the rules of the SEC.
** A copy of Section 404 of the Sarbanes-Oxley Act 2002 can be obtained from the SEC’s website, www.sec.gov.
CRH Annual Report and Form 20-F I 2016
Head of Internal Audit outlining the principal
findings from the work of Internal Audit and
management’s responses thereto.
Audit Committee Effectiveness
and Priorities for 2017
Building on the Committee’s previous reviews of
its operation and effectiveness, the Committee
again reviewed its operation during 2016. This
involved an assessment of the Committee’s
primary role and responsibilities, the time
allocated for considering key issues, the format
and content of the information provided to
the Committee and the priorities for 2017 and
Key Areas of Focus in 2016
Issue
Description
onwards. The resulting recommendations will be
implemented over the course of 2017.
Percentage of audit
and non-audit fees
The key areas of focus for the Committee in
2017 will continue to be on internal control,
external audit planning, IT governance
and cyber security and Enterprise Risk
Management. In addition, the Committee will
consider, in conjunction with management, the
potential use of shared service centres across
the Group’s finance functions.
Ernst Bärtschi
Chairman of Audit Committee
28 February 2017
Table 1
7%
2016
93%
2015
73%
27%
2014
89%
11%
Audit Services
Non-audit Services
Table 2
Financial Reporting
and External Audit
We reviewed the 2015 Annual Report, the 2015 Annual Report on Form 20-F, together with the annual, half-year and trading statements
for recommendation to the Board.
In July, we met with EY to agree the 2016 external audit plan. Table 3 on page 66 outlines the key areas identified as being potentially
significant and how we addressed these during the year.
Impairment Testing
Through discussion with both management and EY, we reviewed management’s impairment testing methodology and processes. We
found the methodology to be robust and the results of the testing process appropriate. Details of the impairment recorded during the
year, which amounted to a total of €23 million, are set out in note 14 to the Consolidated Financial Statements on page 155.
Integration of
Acquisitions
Enterprise Risk
Management
IT Governance and
Cyber Security
External Auditors
The Group acquired a number of significant assets and businesses in 2015. Accordingly, a particular focus for the Committee during
2016 was ensuring, together with management, the successful implementation of CRH’s internal control structures to the newly
acquired entities.
The Committee continued to monitor progress in respect of the formalisation of the Group’s Enterprise Risk Management framework
and the methodology and process underlying the Viability Statement included on page 98 of the Directors’ Report (further details in
relation to CRH’s risk governance are outlined on pages 18 and 19).
We also considered an assessment of the Group’s 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.
We continued to monitor progress in refining the Group’s IT governance and information security programme and cyber security
capabilities.
EY have been the Group’s external auditors since 1988. Following an assessment of EY’s continued independence, objectivity and
performance, and having received confirmation of their willingness to continue in office, the Committee has recommended to the Board
their continuance in office for the 2017 financial year. As in prior years, their continuance in office will be subject to a non-binding
advisory vote at the 2017 AGM.
The Committee considered the possibility of putting the external audit engagement out to tender in 2016. However, given the continued
management focus during the year on the operational and financial integration of the significant acquisitions completed in 2015, the
appointment of a new Group Finance Director and the Committee’s continued satisfaction with the performance of EY (details of the
Committee’s processes in reviewing the effectiveness of the external audit are set out on page 64), it was concluded that it would not be
in the best interests of the Group to carry out a tender process in 2016.
Given the deadlines imposed by European Union rules for the rotation of external auditors (which for CRH will require new external
auditors to be in place for the 2021 year-end audit), the Committee also discussed the timing for any future tender of the external audit
engagement. Having considered the Group-wide resource commitment required in 2017 to deliver a number of key financial and
performance-related initiatives (including planning for a number of significant accounting standard changes), it is the Committee’s current
intention, subject to the then prevailing circumstances and any intervening developments of Group-wide significance, to carry out a
tender process in 2018. However, this will continue to be monitored during 2017, with the Committee’s overriding aim being that any
tender is carried out at a time that is in the best interests of the Group and its shareholders.
65
CRH Annual Report and Form 20-F I 2016 Corporate Governance Report - continued
Audit Committee Report - continued
Areas identified for focus during the 2016 External Audit Planning Process
Table 3
Area of Focus
Audit Committee Action
Impairment of Goodwill
Impairment of Property,
Plant and Equipment,
and Financial Assets
Contract Revenue
Recognition
Accounting for
Acquisition of
LH Assets
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 number of the business units identified for divestment as part of the previously announced Group-wide portfolio review but which
have not yet been divested were reintegrated back into the Group’s standard impairment testing processes during 2016. Similar to
prior years, a separate assessment was carried out in 2016 in respect of the remaining business units identified for divestment as part
of the previously announced Group-wide portfolio review. The valuation of each business unit (based on the estimated fair value less
costs of disposal) was reassessed in 2016 on a standalone CGU basis and compared with its carrying value. The Audit Committee
reviewed and considered the methodology used by management in the reassessment process and was satisfied that it was
appropriate.
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.
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 EY, the Audit Committee was satisfied that contract revenue recognition was not a material issue for the
Group in 2016 as the majority of contracts were completed within the financial year.
Given the significant scale of the acquisition of the LH Assets in 2015, both in terms of monetary value and geographical spread,
the Audit Committee considered with management and EY the judgements and estimates used by management in:
•
•
•
the finalisation of the provisional accounting adjustments to opening balance sheet assets and liabilities;
the fair value accounting for property, plant and equipment; and
the recognition of provisions related to the acquisition
In each case the Audit Committee was satisfied that these were appropriate.
66
CRH Annual Report and Form 20-F I 2016
Nomination & Corporate Governance Committee Report
Chairman’s Overview
Board Effectiveness
y
r
e
t
r
a
H
y
k
c
N
i
Chairman of Nomination &
Corporate Governance Committee
An internal evaluation of the Board’s
effectiveness was carried out during the year.
In addition, the recommendations made by
ICSA Board Evaluation following their external
evaluation in 2015 were reviewed and actions
were agreed and implemented.
Corporate Governance
In 2016, revised guidance was issued by the
Pre-emption Group (an independent body
representing listed companies, investors
and intermediaries) in relation to the annual
authorities requested from shareholders
regarding pre-emption rights. Having taken this
guidance into consideration, the Committee
recommended to the Board that two separate
authorities be sought from shareholders at the
2017 Annual General Meeting: one resolution
authorising the Directors to issue up to 5%
of the issued Ordinary Share capital of the
Company for cash, with a second resolution
authorising the Directors to issue up to an
additional 5% of the issued share capital,
provided any issuance relates to a specific
acquisition or capital expenditure proposal.
The Board has approved the inclusion of the
revised authorities on the agenda of the 2017
AGM (further details of which are set out in the
Directors’ Report on page 99).
Nicky Hartery
Chairman of Nomination & Corporate
Governance Committee
28 February 2017
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 to
identify candidates for the role of non-executive
Director. The Committee is also responsible
for making recommendations to the Board
in relation to executive appointments and
succession planning generally.
During 2016, and to date in 2017, the
Committee identified and recommended to
the Board that the following individuals be
appointed:
•
•
Bill Teuber (non-executive Director),
appointed to the Board with effect
from 3 March 2016; and
Gillian Platt (non-executive Director),
appointed to the Board with effect
from 1 January 2017
The search criteria for the appointments
included candidates with expertise in finance,
technology, talent and change management
and with experience in the regions in which
CRH operates and emerging markets. External
agents, which have no other connection with
the Group, were used to identify candidates in
each case (Boardworks and KornFerry).
Succession Planning
As mentioned in my introduction to the
Corporate Governance Report, the Committee
is continuing the process of considering the
requirements of CRH for my successor as
Chairman.
Committee Composition
Following Gillian Platt’s appointment to the
Board, the Committee recommended to the
Board that she be appointed to the Nomination
& Corporate Governance Committee and to the
Remuneration Committee.
67
CRH Annual Report and Form 20-F I 2016
Corporate Governance Report - continued
Nomination & Corporate
Governance Committee
Membership
The Nomination & Corporate Governance
Committee consists of five non-executive
Directors, considered by the Board to be
independent. The biographical details of each
member are set out on pages 59 to 61. The
Chief Executive normally attends meetings of
the Committee.
Board of Directors
Membership Structure
of the Board
We consider the current size and composition
of the Board to be within a range which is
appropriate. The spread of nationalities of the
Directors reflects the geographical reach of
the Group and we consider that the Board as
a whole has the appropriate blend of skills,
knowledge and experience, from a wide
range of industries, regions and backgrounds,
necessary to lead the Group. Section 1 of the
Governance Appendix on the CRH website
(www.crh.com) contains further details on the
Board’s structures and the Board’s policies with
regard to the appointment and retirement of
Directors.
Role and 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 4.
The Group’s strategy, which is regularly
reviewed by the Board, and business model are
summarised on pages 10 to 13.
The Board has delegated some of its
responsibilities to Committees of the Board.
While responsibility for monitoring the
effectiveness of the Group’s risk management
and internal control systems has been
delegated to the Audit Committee*, the Board
retains ultimate responsibility for determining
the Group’s risk appetite and 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.
Committees
The Board has established five permanent
Committees to assist in the execution of
its responsibilities. The current permanent
Committees are:
•
•
•
•
•
Acquisitions
Audit
Finance
Nomination & Corporate Governance
Remuneration
The Group has a Directors’ and Officers’ liability
insurance policy in place.
In addition, ad-hoc Committees are formed from
time to time to deal with specific matters.
Chairman
Nicky Hartery was appointed Chairman of
the Group in 2012. On his appointment as
Chairman, he met the independence criteria set
out in the Code. Although he holds a number of
other directorships, including a Canadian listed
company (see details on page 59), the Board
has satisfied itself that these do not impact on
his role as Chairman.
Policy on Diversity
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.
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
Chairmen of the Committees attend the AGM
and are available to answer questions from
shareholders.
Each of the Committees reviewed their
respective Terms of Reference in December
2016 and minor changes were approved to
the Terms of Reference of the Finance and
Remuneration Committees.
The Terms of Reference of each Committee are
available on the CRH website, www.crh.com.
Matters reserved
to the Board
Table 4
• Appointment of Directors
• Strategic plans for the Group
• Annual budget
• Major acquisitions and disposals
• Significant capital expenditure
• Approval of full-year results and
the Annual Report and Form 20-F
• Approval of the interim results
* In accordance with Section 167(7) of the Companies Act 2014.
68
** The Terms of Reference of these Committees comply fully with the Code; CRH considers that they are generally responsive to the relevant NYSE rules, but may not address all aspects of these
rules.
CRH Annual Report and Form 20-F I 2016 Membership of the CRH Board (as at 28 February 2017)
Table 5
Independence (determined by CRH Board annually)
Independent
75%
Non-Independent
25%
Tenure of non-executive Directors (excluding Chairman)
0-3 years
50%
Geographical Spread (by residency)
3-6 years
50%
Ireland
50%
North America
Mainland Europe
UK
25%
17%
8%
Gender Diversity
Male
67%
Female
33%
Attendance at meetings during the year ended 31 December 2016
Table 6
Name
Board
Acquisitions
Audit
Finance
Nomination &
Corporate Governance
Remuneration
Total Attended
Total Attended
Total Attended
Total
Attended
Total
Attended
Total
Attended
E.J. Bärtschi
M. Carton
W.P. Egan (i)
U-H. Felcht (i)
N. Hartery
P.J. Kennedy
R. McDonald (ii)
D.A. McGovern, Jr.
H.A. McSharry
A. Manifold
S. Murphy (iii)
L.J. Riches
H. Th. Rottinghuis
W.J. Teuber, Jr. (iv)
M.S. Towe (v)
7
7
1
1
7
7
4
7
7
7
7
7
7
6
7
7
7
1
1
7
7
4
7
7
7
7
7
7
6
6
-
7
-
1
7
2
4
-
-
7
6
-
7
-
-
-
7
-
1
7
2
4
-
-
7
6
-
7
-
-
8
-
-
-
-
2
-
-
8
-
-
-
8
6
-
8
-
-
-
-
2
-
-
8
-
-
-
7
6
-
7
7
-
1
7
-
3
-
1
-
6
-
-
6
-
7
7
-
1
7
-
3
-
1
-
6
-
-
6
-
-
-
1
-
6
5
-
6
-
-
-
6
-
-
-
-
-
1
-
6
5
-
6
-
-
-
6
-
-
-
-
-
4
-
4
5
-
9
5
-
-
9
-
-
-
(i) Retired April 2016
(ii) Retired September 2016
(iii) Appointed January 2016
(iv) Appointed March 2016
(v) Retired from the Board at end December 2016
All Directors attended the 2016 AGM.
-
-
4
-
4
5
-
9
5
-
-
9
-
-
-
69
CRH Annual Report and Form 20-F I 2016
Corporate Governance Report - continued
Substantial Holdings
The Company is not owned or controlled
directly or indirectly by any government or
by any corporation or by any other natural
or legal person severally or jointly. The major
shareholders do not have any special voting
rights. Details of the substantial holdings as at
31 December 2016 are provided in table 7.
Stock Exchange Listings
CRH, which is incorporated in Ireland and
subject to Irish company law, has a premium
listing on the London Stock Exchange (LSE),
a secondary listing on the Irish Stock Exchange
(ISE) and its American Depositary Shares are
listed on the New York Stock Exchange (NYSE).
Regulatory, Compliance
& Ethics
The Group Regulatory, Compliance & Ethics
(Group RCE) programme has continued to
develop in scope and reach. An external
benchmarking review was completed during
2016 which included an assessment of
the compliance programmes in place and
their integration into the CRH businesses.
This assessment included a number of site
visits, as well as an online survey amongst a
random selection of some 5,000 international
employees. The resulting Report, which was
issued in early 2016, confirmed that CRH
has generally set the right tone in the area
of compliance and that the Group has good
policies and training in place to support
compliance requirements. The Report also
provided useful advice and insight to assist CRH
Substantial Holdings
in developing further organisational effectiveness
in the regulatory, compliance and ethics area.
Awareness and Training
CRH’s compliance priorities for 2016 in
the areas of training, review activities and
awareness were communicated to all operating
businesses in the Group and were supported
by the introduction of various initiatives which
include the following:
•
•
•
•
•
full integration of CRH’s recent and largest
acquisitions into the CRH compliance
programmes;
leveraging from the Group’s risk
management processes, a roll-out of a
bottom up compliance risk assessment;
enhanced annual Compliance
Certification process;
verification of Hotline contact
functionality and refined Hotline
procedures put in place; and
review and development of current
training programmes
The focus on training to the CRH Code of
Business Conduct (COBC) continues for all
relevant employees. During 2016, 23,500
employees participated in COBC training and a
further 8,000 completed advanced instruction
on competition/antitrust law and anti-bribery,
anti-corruption and anti-fraud training. In line
with its commitment to maintain its high ethical
business standards, CRH continues to enhance
its compliance training offerings and, during
the last quarter of 2016, has fully reviewed and
updated its online COBC training as well as
developing online competition/antitrust,
anti-bribery, anti-corruption and anti-fraud
training which will be rolled out in 2017.
Policies and Guidance
In 2016, the Anti-Fraud Policy was revised
and updated. The new Anti-Fraud &
Anti-Theft Policy was distributed via the CRH
management network in the last quarter of
2016. In addition, codes, policies and guidance
have been reviewed in the following areas:
competition/antitrust compliance; “Speak Up”
policy; gifts and hospitality; and donations.
The review of these policies was completed by
year-end and recommendations were made for
some additional guidance content in each area.
The CRH COBC has scored an ‘A’ rating
by New York Stock Exchange Governance
Services and incorporates some welcome
features, including learning aids, an ethical
decision-making guide and a clear focus on the
core values of the Group: honesty, integrity and
respect for the law. The COBC is available in
23 languages, is provided to all relevant
employees and is available on the CRH
website, www.crh.com.
Hotline
A robust communications plan is in place to
complement the training programmes. A 24/7
multi-lingual confidential “Hotline” facility called
“Speak Up” is also available to employees to
report issues that concern them, for example
issues concerning business ethics. The “Hotline”
is maintained by an independent operator. All
Table 7
As at 31 December 2016, the Company had received notification of the following interests in its Ordinary Share capital, which were equal to, or in excess of, 3%.
Between 31 December 2016 and 28 February 2017, the Company has been advised that BlackRock, Inc.’s holding is 74,847,872 (8.98%) and that Baillie Gifford
& Co. has reduced its holdings below 3%.
Name
31 December 2016
31 December 2015
31 December 2014
Holding/
Voting Rights
% at
year end
Holding/
Voting Rights
% at
year end
Holding/
Voting Rights
% at
year end
Baillie Gifford Overseas Limited and Baillie Gifford & Co.
BlackRock, Inc. (i)
Harbor International Fund
UBS AG
33,171,299
74,809,499
21,853,816
26,380,604
3.98
8.98
2.62
3.16
41,193,797
74,030,167
21,853,816
26,380,604
5.00
8.99
2.65
3.20
-
40,681,647
21,999,275
26,380,604
-
5.49
2.96
3.56
(i) BlackRock, Inc. has advised that its interests in CRH shares arise by reason of discretionary investment management arrangements entered into by it or its
subsidiaries.
70
CRH Annual Report and Form 20-F I 2016
issues raised, whether through the “Hotline” or
otherwise, are fully reviewed and appropriately
investigated, with the applicable action taken
based on the investigation’s findings. Group
RCE continues to monitor that all concerns
raised are subject to appropriate investigation
and that outcomes and recommendations are
acted upon. The collective goal is to ensure that
the message is clearly understood that at CRH
“there is never a good business reason to do
the wrong thing”.
Communications with
Shareholders
Communications with shareholders are
given high priority and the Group devotes
considerable time and resources each year to
shareholder engagement. We recognise the
importance of effective dialogue as an integral
element of good corporate governance. The
Investor Relations team, together with the Chief
Executive, Finance Director and other senior
executives, regularly meet with institutional
shareholders (each year covering over 60% of
the shareholder base). Detailed reports on the
issues covered in those meetings and the views
of shareholders are circulated to the Board after
each group of meetings. Table 9 provides a brief
outline of the nature of the activities undertaken
by our Investor Relations team.
In addition to the above, major acquisitions are
notified to the Stock Exchanges in accordance
with the requirements of the Listing Rules and
development updates, giving details of other
acquisitions completed and major capital
expenditure projects, are issued periodically.
During 2016, the Chairman, Senior Independent
Director and Company Secretary again
participated in a number of conference calls
with some of the Group’s major shareholders in
advance of the 2016 AGM. The meetings were
organised to provide those shareholders with
an opportunity to discuss the resolutions on the
2016 AGM agenda and corporate governance
matters generally.
We also respond throughout the year to
correspondence from shareholders on a wide
range of issues.
US Listing - Additional Information
Table 8
Additional details in relation to CRH’s general corporate governance practices are set out in the
Governance Appendix, which has been filed as an exhibit to the Annual Report on Form 20-F as filed
with the SEC. For the purposes of the Annual Report on Form 20-F, the Governance Appendix, and in
particular the following sections thereof, are incorporated by reference herein:
Section 1 - Frequently Asked Questions
• Page 3: For what period are non-executive Directors appointed?
• Page 3: What are the requirements for the retirement and re-election of Directors?
Section 2 - Operation of the Board’s Committees
• Page 6: Audit Committee: Role and Responsibilities
• Page 6: Audit Committee: Meetings
• Page 8: Audit Committee: Non-audit Fees
In addition, details of the executive Directors’ service contracts and the policy for loss of office are set
out in the 2016 Directors’ Remuneration Policy, a copy of which has been filed as an exhibit to the
Annual Report on Form 20-F as filed with the SEC and is incorporated by reference herein.
Investor Relations Activities
Table 9
•
•
•
•
Formal Announcements: including the release of the annual and interim results and the issuance of
trading 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.
The following are available on the CRH website (www.crh.com)
Table 10
Corporate Governance
Investors
• Governance Appendix
• Directors’ Remuneration Policy (2016 - 2019)
• Terms of Reference of the Acquisitions, Audit,
Finance, Nomination & Corporate Governance
and Remuneration Committees
• Annual and Interim Reports, the Annual Report
and Form 20-F (separate documents up to
2015) and the annual Sustainability Report
• News releases
• Webcast recordings of results briefings
• Memorandum and Articles of Association of
•
the Company
General Meeting dates, notices, shareholder
circulars, presentations and poll results
• Pre-approval policy for non-audit services
• Answers to Frequently Asked Questions,
provided by the auditors
•
Compliance & Ethics statement, Code of
Business Conduct and Hotline contact
numbers
including questions regarding dividends and
shareholder rights in respect of general
meetings
71
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report
.
r
J
,
n
r
e
v
o
G
c
M
.
l
A
d
a
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o
D
Chairman of Remuneration Committee
Chairman’s Overview
As Chairman of the Remuneration Committee
I am pleased to present the Directors’
Remuneration Report for the year ended
31 December 2016. CRH has transformed
over recent years, increasing in complexity and
scale and is now positioned at 24 in the FTSE
index, some 18 places higher than when CRH
joined the index in December 2011. During
that time, the Group’s market capitalisation
has grown from €10 billion to €27.4 billion.
This transformation, led by our exceptional
management team, caused us to examine
our remuneration structure last year. Our new
Remuneration Policy (the ‘Policy’) was approved
by shareholders at the 2016 AGM.
This Remuneration Report sets out the rationale
for the implementation of the Policy in 2016, the
Committee’s response to shareholder feedback
regarding the Policy and the way in which the
Committee will implement the Policy in 2017.
As an Irish incorporated company, CRH is not
subject to the UK’s remuneration reporting
requirements. However, our preferred approach
is to adopt best practice corporate governance
for a FTSE50 company. Therefore, as in
previous years, this report is split into three
sections: this Chairman’s Statement, a summary
of the main features of the Policy approved by
shareholders in 2016 (pages 75 to 80) and the
Annual Report on Remuneration (pages 81
to 95). The full Policy is detailed in the Group’s
2015 Annual Report (pages 95 to 106).
Alignment of Business
Performance with
Remuneration for 2016
2016 has been another very positive year for
CRH, with a 15% growth in sales, and EBITDA
(as defined)* well ahead of 2015 (+41%). Group
profit for the 2016 financial year increased by
74% compared with 2015. The share
price has increased by 23% over the
year, the total dividend proposed is 65.0c,
an increase of 4% compared to 2015, and
three-year TSR to end 2016 was 95%,
compared with 15% for the FTSE100.
The Group performance is reflected in the
executive Directors’ remuneration. With strong
trading and cash flow performance for the year,
the financial targets for the annual bonus plan
(EPS, RONA and cash flow) were achieved
in full, resulting in a maximum payout level for
each metric. Payout levels for the personal
and strategic targets are summarised in tables
20 and 21 on page 86. Overall, bonuses of
between 96.67% and 98.33% of maximum
were achieved.
The Committee has approved the full vesting
of the Performance Share Plan (the ‘PSP’)
awards made in 2014, with the strong share
price relative to the relevant peer group (see
table 24 on page 88) resulting in top quartile
three-year TSR performance (75% of the award)
and the cash delivery by management over the
three years to end 2016 (25% of the award)
exceeding the target for maximum payout.
This brings the average vesting level since the
original plan was adopted by shareholders in
2006 to approximately 46% (previously 39%).
Further details of 2016 remuneration are set out
in the Annual Report on Remuneration.
2016 Remuneration Policy and
Shareholder Engagement
At the 2016 AGM, shareholders approved
the new Policy. The Committee believes this
Policy is an appropriate incentive framework for
management to deliver on the Group’s strategy
and to gain maximum value from the significant
acquisitions completed in 2015. During 2016,
management has made significant progress
on the areas that the Committee focused on
in framing the new Policy, by the creation of
shareholder value through improved margins
and returns, the successful integration of
the 2015 acquisitions and, in particular, by
the restoration of debt metrics through the
generation of a net cash inflow of €2.3 billion
from operating activities.
The Committee noted that a number of
shareholders did not support the new
arrangements. A summary of the vote is set
out in table 36 on page 94.
As I mentioned in last year’s Remuneration
Report, in early 2016 I met with CRH’s major
shareholders (representing approximately
50% of the issued share capital) to discuss
the revised policy proposals. Shareholders
expressed a wide range of distinct views on
the draft remuneration proposals, which the
Committee considered carefully in determining
the final proposed policy. After the publication
of the 2016 AGM agenda, the Company also
engaged with a number of shareholders who
had not been involved in the initial consultation
process, which provided the Committee with
additional shareholder perspectives on pay.
72
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016
Following the 2016 AGM, the Committee
analysed the voting outcome in detail and
reviewed the key reasons for which some
shareholders felt they could not support the
Policy. These reasons fell broadly into two
categories: (i) the mix of performance metrics in
the PSP, or (ii) the total remuneration potential
for full achievement of targets.
I appreciate the time given by shareholders
to engage with me on this topic both before,
and, in some cases, after the 2016 AGM. The
Committee has considered all of the various
issues and I set out below our continued
commitment to addressing the key concerns
raised. In particular:
Performance Metrics
• Given CRH’s continued focus on our
•
debt metrics and maximising long-term
shareholder value from the LH Assets and
CRL acquisitions, the Committee believes
that the current mix of performance
measures in the PSP (50% TSR and 50%
cash flow) remains appropriate for awards
made in 2017, as it reflects this combined
focus on shareholder value and cash
generation;
The Committee notes the preference of
certain shareholders for the introduction of
RONA as a metric for the PSP. Following
this feedback, we introduced an additional
underpin for the TSR element of PSP
awards in 2016, whereby at the end of the
performance period the Committee will
carefully consider the RONA performance
of the business, including in particular
that of the LH Assets. The PSP outcome
may be adjusted downwards if RONA
performance has not met the expectations
of the Board. This RONA underpin will also
be applied for PSP awards made in 2017.
In the meantime, the annual bonus plan
will continue to have RONA as a significant
component, and the Committee will
continue to keep under close review the
appropriateness of setting specific targets
relating to a returns metric for the PSP in
the next couple of years; and
•
In relation to the cash flow element, the
Committee will monitor and, if required,
make appropriate adjustments to
reflect unusual items such as significant
underspend or a delay in budgeted
capital expenditure, both ordinary and
extraordinary
Total Remuneration Potential
•
•
•
During development of the Policy, the
Committee considered carefully the
incentive opportunities for achievement of
on-target and stretch performance, and
believes they are appropriate for a FTSE50
company and vital for the achievement
of the Board’s strategic goals and the
retention of key employees;
Prior to finalising the Policy submitted to
the 2016 AGM, the Committee reduced
the total potential for full achievement of
targets to reflect feedback received from
shareholders during the consultation
process; and
The Committee has a robust and
considered approach to target setting, and
is satisfied that the targets which apply to
2017 incentives include significant stretch,
and appropriately reflect the quantum
of remuneration potential. Maximum
payout is delivered only for exceptional
performance in both relative and absolute
terms. The performance targets are
summarised on page 84
Remuneration in 2017
The Committee is not proposing any changes
to the Policy at this time, as it considers that the
current remuneration structure and incentive
opportunities remain appropriate for the
business.
The Committee will implement the Policy in
2017 as set out in table 12 on page 74.
For 2017, Albert Manifold and Maeve Carton
will receive salary increases of 3% and 2.5%
to €1,442,000 and €705,713, respectively.
This is in line with the average increases for
the workforce as a whole, which range from
2.4% to 3% in CRH’s core geographies. Senan
Murphy will receive an increase of 12.9%, taking
his salary to €705,713.
In line with best practice, Senan Murphy
was initially appointed as Finance Director in
January 2016 on a significantly below-market
salary, with the expectation that his salary
would increase over time as he develops in
the role. Towards the end of the year, the
Committee reviewed Senan’s performance and
contribution to the very strong year in 2016.
The Committee also carefully considered his
salary and overall package compared to FTSE
companies of a similar size and complexity.
2016
Performance
highlights
Sales
€27.1billion
+15%
EBITDA (as defined)*
€3.1billion
+41%
Operating Cash Flow
€2.3 billion
+4%
Earnings Per Share
150.2 cent
+69%
Return on Net Assets
9.7%
Net Debt/EBITDA
(as defined)*
1.7x
times
Dividend Per Share**
65.0 +4%
cent
Share Price Performance
23%
* EBITDA is defined as earnings before interest, taxes,
depreciation, amortisation, asset impairment charges, profit
on disposals and the Group’s share of equity accounted
investments’ profit after tax.
** An interim dividend was paid on 4 November 2016; the
final divided will, subject to shareholder approval at the
2017 Annual General Meeting, be paid on 5 May 2017.
73
73
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report - continued
Taking into account his excellent growth in
the role and his exceptional contribution to
business performance since his appointment,
the Committee concluded that his salary should
be increased to €705,713. His revised salary
remains below market for FTSE companies of a
similar size.
Board Changes
Mark Towe retired from the Board on 31
December 2016. He remains Chairman of CRH
Americas and a Group employee. Details of the
treatment of his outstanding share awards are
set out on page 84.
Conclusion
The Committee believes that the remuneration
paid to the executive Directors in 2016 is
appropriate and is strongly correlated with
the performance of the Company and value
delivered for shareholders. The Committee also
believes that the Policy is vital to the continued
delivery of CRH’s strategy and maximisation of
shareholder value by the leadership team in the
coming years. We hope to receive your support
for the Directors’ Remuneration Report at the
2017 AGM.
Donald A. McGovern, Jr.
Chairman of Remuneration Committee
28 February 2017
Executive Directors’ Remuneration Summary
2016 Remuneration Snapshot
(full details of 2016 remuneration in table 17 on page 83)
Table 11
Director
Fixed
Salary
Performance Related Variable Remuneration
Annual Bonus (i)
(% of max)
Value of PSP awarded in 2014 (ii)
(% of max)
Albert Manifold
€1,400,000
Maeve Carton
Senan Murphy
€688,500
€625,000
Mark Towe
US$1,448,400
98.33%
96.67%
96.67%
98.33%
(i)
In accordance with 2016 Remuneration Policy.
100%
100%
Not applicable (iii)
100%
(ii) The awards, for which performance is measured over the three-year period to end 2016, will vest at
100% in 2019 following the completion of a two-year holding period. Further details in relation to the
estimated value of the awards, split between the value created for performance and the value
created through share price growth, are included in table 17 on page 83. The market value per share
on the date of award (in March 2014) was €20.49.
(iii) Appointed to the Board in January 2016.
2017 Remuneration Snapshot
Table 12
Director
Salary
Albert Manifold
Maeve Carton
Senan Murphy
€1,442,000
+3.0%
€705,713
+2.5%
€705,713
+12.9%
(i) Subject to a RONA underpin.
Max. Annual
Bonus
(% of salary)
Bonus metrics for
2017 Award
2017 PSP
Award
(% of salary)
Metrics for 2017
PSP Award
225%
150%
150%
• EPS
• RONA
• Operating cash
flow
• Personal/
Strategic
365%
200%
200%
• TSR (50%) (i)
• Cash flow (50%)
TSR Performance (2008 - 2016)
Table 13
250
200
150
100
50
0
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
5
1
0
2
6
1
0
2
CRH
FTSE (i)
Eurofirst 300
(i)
For the purposes of comparability, the FTSE100 Index is converted to euro using the closing
exchange rate at each year-end.
74
CRH Annual Report and Form 20-F I 2016
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 31 countries, in geographic regions which are
often at different stages in the economic cycle.
Annually, the Chairman of the Remuneration
Committee reviews with the Audit Committee
the Group’s remuneration structures from a risk
perspective.
CRH’s Approach to
Remuneration
The purpose of the Policy is to:
• attract and retain Directors of the
highest calibre;
Table 14
• properly reward and motivate executive
Directors to perform in the long-term interests
of the shareholders;
• provide an appropriate blend of fixed and
variable remuneration and short and
long-term incentives for executive Directors;
•
•
foster entrepreneurship in 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
Structure of Directors’
Remuneration Report
This report sets out details of:
•
•
•
•
•
the 2016 Directors’ Remuneration Policy,
which was approved by shareholders at
the 2016 AGM;
the key areas of focus for the
Remuneration Committee during 2016;
the remuneration paid to Directors in
respect of 2016;
how the Policy will operate for 2017; and
other areas of disclosure
The Directors’ Remuneration Report, excluding
the Summary of Directors’ Remuneration Policy
on pages 75 to 80, will be put to shareholders
for the purposes of an advisory vote at the AGM
to be held on 27 April 2017.
The Remuneration Committee
The Remuneration Committee consists of
five non-executive Directors considered by
the Board to be independent. They bring the
range of experience of large organisations
and public companies, including experience
in the area of senior executive remuneration,
to enable the Committee to fulfil its role. Their
biographical details are set out on pages 60
to 61. Details of the non-executive Directors
who were members of the Committee during
2016, together with their record of attendance
at Committee meetings, is set out in table 6
on page 69. 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 salaries and other
terms of the 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
Summary of Directors’
Remuneration Policy
CRH’s Remuneration Policy is available on
the Group’s website, www.crh.com, and was
included in full in the 2015 Annual Report. As the
Company is not seeking shareholder approval for
any revision to the Policy in 2017, the full text has
not been reproduced in this report. The following
paragraphs and tables 15 and 16 on pages 76
to 80 provide a summary of the key elements of
the Policy.
As an Irish incorporated company, CRH is not
required to comply with section 439A of the
UK Companies Act 2006 which requires UK
companies to submit their remuneration policy to
a binding shareholder vote.
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 was 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.
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.
75
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
The purpose, operation, opportunity and
performance measures for the five components
of executive Directors’ remuneration are
summarised in table 15 below. Further details
and explanatory notes are included in the
full Policy, a copy of which is available on the
CRH website, www.crh.com. The components
of remuneration comprise three fixed elements:
basic salary, pension and benefits, and two
variable elements: annual bonus and PSP.
Details regarding the implementation of the
Policy in 2016 can be found on pages 81 to 95
of the Annual Report on Remuneration.
Policy for Executive Directors
Table 15
Element
Purpose and
link to strategy
Fixed
Base Salary
Fixed
Pension
• Competitive salaries help to attract and retain staff
with the experience and knowledge required to
enable the Group to compete in its markets
• Pension arrangements provide competitive and appropriate retirement plans
• Given the long-term nature of the business, pension is an important part of the
remuneration package to support creation of value and succession planning
Operation
• Base salaries are set by the Committee taking into
•
account:
–
–
–
the size and scope of the executive Director’s
role and responsibilities;
the individual’s skills, experience and
performance;
salary levels at FTSE listed companies of
a similar size and complexity to CRH and
other international construction and building
materials companies; and
–
pay and conditions elsewhere in the Group
• Base salary is normally reviewed annually with
changes generally effective on 1 January, although
the Committee may make an out-of-cycle increase if
it considers it to be appropriate
Ireland-based executive Directors can participate in a defined contribution
scheme, or in certain circumstances can opt for a taxable, non-pensionable,
supplementary cash alternative in lieu of pension contributions. Ireland-based
executive Directors who joined the Group prior to 31 December 2011
participate in a contributory defined benefit scheme which closed to new
entrants on that date
• US-based executive Directors can participate in a defined contribution
scheme and in an unfunded Supplemental Executive Retirement Plan (SERP)
• For new appointments to the Board the Committee may determine that
alternative pension provisions will operate (for example a cash contribution).
When determining pension arrangements for new appointments the Committee
will give regard to existing entitlements, the cost of the arrangements, market
practice and the pension arrangements received elsewhere in the Group
Maximum
opportunity
• Base salaries are set at a level which the
• The entitlement of individuals participating in defined contribution schemes
Committee considers to be appropriate taking into
consideration the factors outlined in the Operation
row above
reflects the accumulated individual and matching company contributions paid
into the schemes. At present no Ireland-based executive Directors are members
of a defined contribution scheme
• 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
Performance
measure
n/a
76
For the two Ireland-based executive Directors who joined the Group prior to
31 December 2011, the defined benefit pension is provided through an Irish
Revenue approved retirement benefit scheme (the ‘Scheme’). Accrued benefits
for service to 31 December 2011 are based on pensionable salary and years
of service as at that date (annual accrual of 1/60ths), with this tranche being
revalued annually at the Consumer Price Index subject to a 5% ceiling. For
service subsequent to that date a career-average revalued earnings system was
introduced with each year of service being subject to annual revaluation on the
same basis as outlined above. Ireland-based executive Directors have elected
to cease accruing pensions benefits and to receive a supplementary taxable
non-pensionable cash allowance in lieu of pension benefits foregone as a result
of the pension cap (see page 82 for more details). These allowances are similar
in value to the reduction in the Company’s liability represented by the pension
benefit foregone. Whilst there is no absolute maximum to the quantum of these
payments they are calculated based on actuarial advice as the equivalent of
the reduction in the liability the Company would otherwise have had under the
Scheme in respect of each individual’s benefits and spread over the term to
retirement as annual compensation allowances
• US-based executive Directors can participate in a defined contribution
retirement plan in respect of basic salary; and in addition can participate in a
SERP also in respect of basic salary, to which contributions are made at an
agreed rate (20%), offset by contributions made to the other retirement plan
n/a
CRH Annual Report and Form 20-F I 2016 Policy for Executive Directors - continued
Element
Purpose and
link to strategy
Fixed
Benefits
• To provide a market-competitive level of benefits for executive Directors
Operation
• The Committee’s policy is to set benefit provision at an appropriate market-competitive level taking into account market practice, the level of
benefits provided for other employees in the Group, the individual’s home jurisdiction and the jurisdiction in which the individual is based
• Employment-related benefits include the use of company cars (or a car allowance), medical insurance for the Director and his/her family and
life assurance
•
In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or disablement so that the Chief
Executive could not work for a period of more than six months, in lieu of the early ill-health retirement provisions in the pension scheme
which would otherwise operate in such cases, he shall be entitled to receive a disability salary of €1,000,000 per annum. Such payment
would cease when the Chief Executive reaches age 60, returns to work or if the service agreement is terminated
• US-based executive Directors can also receive benefits in relation to club membership and short-term disability insurance
• Benefits may also be provided in relation to legal fees incurred in respect of agreeing service contracts, or similar agreements (for which the
Company may settle any tax incurred by the executive Director) and a gift on retirement
• The Committee may remove benefits that executive Directors receive or introduce other benefits if it is considered appropriate to do so.
The Company may also pay the tax due on benefits if it considers that it is appropriate to do so
• Executive Directors are eligible to participate in the Company’s all-employee share schemes on the same terms as other employees.
Executive Directors may also receive other benefits which are available to employees generally
• Relocation policy: where executive Directors are required to relocate to take up their role, the Remuneration Committee may determine
that they should receive appropriate relocation and ongoing expatriate benefits. The level of such benefits would be determined based on
individual circumstances taking into account typical market practice
Maximum
opportunity
• The level of benefit provided will depend on the cost of providing individual items and the individual’s circumstances, and therefore the
Committee has not set a maximum level of benefits
Performance
measure
n/a
77
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Policy for Executive Directors - continued
Table 15 - continued
Element
Purpose and
link to strategy
Performance-related Incentive
Annual Bonus
• The Annual Performance-related Incentive Plan is designed to reward the creation of shareholder value through operational excellence and
organic and acquisitive growth. The Plan incentivises executive Directors to deliver Group and individual goals that support long-term value
creation
• The deferred element of the Plan links the value of executive Directors’ reward with the long-term performance of the CRH share price and
aligns the interests of executive Directors with shareholders’ interests
•
‘Malus’ and clawback provisions enable the Company to mitigate risk
Operation
• The Annual Performance-related Incentive Plan rewards executive Directors for meeting Company performance goals over a financial year
of the Company. Targets are set annually by the Committee
• The annual bonus is paid in a mix of cash and shares (structured as a deferred share award)
• For 2017:
–
–
75% of the bonus will be paid in cash; and
25% will be paid in shares (deferred element)
•
In future years, the Committee may determine that a different balance between cash and shares is appropriate and adjust the relevant
payments accordingly
• When assessing performance and determining bonus payouts the Committee also considers the underlying financial performance of the
business to ensure it is consistent with the overall award level
• The deferred element of the bonus will be structured as a conditional share award or nil-cost option and will normally vest after three years
from grant (or a different period determined by the Committee). Deferred share awards may be settled in cash
• Dividend equivalents may be paid on deferred share awards in respect of dividends paid during the vesting period. These payments may be
made in cash or shares and may assume the reinvestment of dividends on a cumulative basis
• For deferred awards, ‘malus’ provisions apply. Cash bonus payments are subject to clawback of the net amount paid for a period of three
years from payment
Maximum
opportunity
• Maximum annual opportunity of 225% of base salary
• For 2017, the intended maximum award levels are:
–
–
225% of base salary for Chief Executive; and
150% of base salary for other executive Directors. The Committee may increase the percentage in the future up to a maximum
of 225%
Performance
measure
• The Annual Performance-related Incentive Plan is based on achieving clearly defined and stretching annual targets and strategic goals set
by the Committee each year based on key business priorities
• The performance metrics used are a mix of financial targets including return goals and personal/strategic objectives generally. Currently
80% of the bonus is based on financial performance measures. The Committee may vary the weightings of measures but no less than 50%
shall be based on financial performance measures
• A portion of the bonus metrics for any Director may be linked to his/her specific area of responsibility
• Up to 50% of the maximum bonus will be paid for achieving target levels of performance
78
CRH Annual Report and Form 20-F I 2016 Policy for Executive Directors - continued
Element
Purpose and
link to strategy
Performance-related Incentive
Performance Share Plan
• The purpose of the PSP is to align the interest of key management across different regions and nationalities with those of shareholders
through an interest in CRH shares and by incentivising the achievement of long-term performance goals
•
‘Malus’ provisions enables the Company to mitigate risk
Operation
• Awards (in the form of conditional share awards or nil-cost options) normally vest based on performance over a period of not less than three
years. Awards may also be settled in cash
• Awards are normally subject to an additional holding period ending on the fifth anniversary of the grant date (or another date determined by
the Committee)
• Dividend equivalents may be paid on PSP awards that vest in respect of dividends paid during the vesting period until the end of the
holding period. These payments may be made in cash or shares and may assume reinvestment on a cumulative basis
•
‘Malus’ provisions (as set out in the rules of the 2014 Performance Share Plan) will apply to awards
Maximum
opportunity
• Maximum annual opportunity of up to 365% of salary
• For 2017 the intended award levels are:
–
–
365% of base salary for Chief Executive; and
200% of base salary for other executive Directors. The Committee may increase the percentage in the future up to a maximum
of 365%
Performance
measure
• Awards to be granted in 2017 will vest based on a relative TSR test compared to a tailored group of key peers (25%) and an index
comparator (25%), and cumulative cash flow performance (50%) (see page 84 for details in relation to the 2017 awards)
• For threshold levels of performance, 25% of the award vests
• Where applicable, when determining vesting under the PSP the Committee reviews whether the TSR performance has been impacted
by unusual events and whether it reflects the underlying performance of the business. In addition, the Committee considers financial
performance (including RONA) in the period to ensure that TSR performance is consistent with the objectives of the performance criteria
and was not distorted by extraneous factors
• The Committee may in future years change performance measures including introducing additional performance measures for awards
made under this Policy, for example, returns-based measures
• The Committee may amend the performance conditions if an event occurs that causes it to consider that an amended performance
condition would be more appropriate and would not be materially less difficult to satisfy
79
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Policy for Non-Executive Directors
Table 16
Approach to setting fees
Basis of fees
Other items
• The remuneration of non-executive Directors
• Fees are paid in cash
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
• 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
• 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 reviewed at appropriate intervals
•
In accordance with the Articles of Association,
shareholders set the maximum aggregate
amount of the fees payable to non-executive
Directors. The current limit of €875,000 was set
by shareholders at the AGM held in 2016
80
CRH Annual Report and Form 20-F I 2016 Annual Report
on Remuneration
Remuneration received by executive
Directors in respect of 2016
Details of individual remuneration for executive
Directors for the year ended 31 December
2016, including explanatory notes, are given
in table 17 on page 83. Details of Directors’
remuneration charged against profit in the year
are given in table 19 on page 85.
2016 Annual Bonus Plan
CRH’s Annual Bonus Plan for 2016 was based
on a combination of financial targets and
personal/strategic goals. The relative weighting
of the components of the plan, together with
indicative performance for each measure is
given in table 20 on page 86. With strong overall
performance by the Group in 2016, there was
a full payout under each of the financial targets
(EPS, RONA and cash flow), which applied
to each executive Director. Specific financial
targets for the 2016 Annual Bonus Plan have
not been disclosed in this report as they are
considered by the Board to be commercially
sensitive. However, it is intended that
Group-related financial targets for 2016 will be
disclosed in the 2017 Directors’ Remuneration
Report, subject to the information no longer
being commercially sensitive at that time.
Details of each executive Director’s
personal/strategic objectives and their
achievement against these objectives are
set out in table 21 on page 86, with total
bonus payments of 221.25% of salary for
Albert Manifold, 145% of salary for Maeve
Carton, 145% of salary for Senan Murphy and
147.5% of salary for Mark Towe representing
a percentage against the maximum payable
of 98.33%, 96.67%, 96.67% and 98.33%
respectively.
In accordance with the Policy, 25% of the
bonus amount will be deferred into shares for
a period of three years. Deferred Share awards
are not subject to any additional performance
conditions during the deferral period and are
adjusted for dividend equivalents based on
dividends paid by CRH during the deferral
period. Annual bonus awards are subject to
recovery provisions for three years from the date
of payment (cash awards) or grant (deferred
awards).
2015 Annual Bonus – Retrospective
Disclosure of Targets
Similar to 2016, CRH’s Annual Bonus Plan for
2015 was based on a combination of financial
targets and personal/strategic goals. Due to
commercial sensitivity, specific targets were not
disclosed in the 2015 Directors’ Remuneration
Report. The Remuneration Committee
considers that Group-related targets for 2015
have ceased to be commercially sensitive and,
accordingly, these are set out in table 22 on
page 87.
Long-term Incentives
Performance Share Plan (the ‘PSP’)
2014 awards
In 2014, the executive Directors were granted
conditional awards under the 2014 PSP. The
awards were based on TSR (75% of the award)
and Cumulative Cash Flow (25% of award), and
performance was measured over the three-year
period 1 January 2014 to 31 December 2016.
In February 2017, the Remuneration Committee
determined that 100% of the award had met the
relevant performance criteria as performance in
relation to both the TSR and cumulative cash
flow metrics exceeded the relevant threshold
targets for vesting. The Committee considers
that the vesting outcome is reflective of the
Company’s underlying performance over the
performance period. In accordance with the
Policy, the 2014 awards to executive Directors
will vest in 2019 on completion of an additional
two-year holding period. Vested awards will
be adjusted for dividend equivalents based on
dividends paid in the period from grant to the
date of vesting in 2019. Table 23 on page 88
sets out the relevant targets. Table 25 on page
88 sets out details of the awards.
Further commentary on performance against
the TSR and cash flow metrics is set out in the
Chairman’s Introduction on page 72.
2016 awards
During 2016, following approval of the Policy,
awards under the PSP were made to the
executive Directors, details of which are
summarised in table 28 on page 89. 50% of
each award made in 2016 is subject to a TSR
measure, with 25% being measured against
a tailored sector peer group (see table 27 on
page 89) and 25% against the FTSE All-World
Construction & Materials Index (as at the start
of the relevant performance period). Given the
importance of returns-based measures to a
number of our shareholders, the TSR measure
will be subject to a RONA underpin. At the
end of the three-year performance period, the
Remuneration Committee will consider the
RONA performance of the business and the
outcome for the TSR element may be adjusted
(downwards only) if RONA performance has
not met the expectations of the Board and
the Remuneration Committee. The other 50%
of each award made in 2016 is subject to a
cumulative cash flow metric. The definition of
cash flow is the net increase/decrease in cash
and cash equivalents adjusted to exclude:
•
•
•
•
•
•
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. The Remuneration
Committee will also consider whether any
adjustments are required to cash flows,
for example, resulting from any significant
acquisitions completed during the performance
period or a significant underspend or delay in
budgeted capital expenditure, both ordinary and
extraordinary.
Performance for the awards made in 2016 will
be assessed over the three-year period to
31 December 2018. Details of the performance
targets are set out in table 26 on page 89.
Awards, to the extent that they vest, will be
adjusted for dividend equivalents based on
dividends paid in the period from grant to the
date of vesting in 2021. ‘Malus’ provisions apply
to the awards.
81
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Shareholding guidelines for executive
Directors
Pursuant to the Policy, executive Directors are
required to build up (and maintain), the following
minimum holding in CRH shares:
Chief Executive:
2.5x basic salary
Other executive Directors: 1.0x basic salary
Unless the executive Director has a significant
change in role, which results in a step change
in salary, the shareholding guideline is ordinarily
required to be achieved within five years of
appointment.
Following his appointment in 2016, the
Remuneration Committee determined that
Senan Murphy will have until 31 December
2020 to meet the shareholding guideline.
Similarly, following the increase in the
shareholding guideline requirement for the
Chief Executive (increased from 1.0 times basic
salary to 2.5 times basic salary) in 2016, the
Remuneration Committee has determined that
the Chief Executive will also have until
31 December 2020 to meet the revised
guideline.
The current shareholdings of executive Directors
as a multiple of basic salary are shown in table
32 on page 92.
Other employee share plans
Executive Directors are eligible to participate
in the 2010 Savings-related Option Scheme
(Republic of Ireland) (the ‘2010 SAYE Scheme’)
and in the Group’s Irish Revenue approved
Share Participation Scheme (the ‘Participation
Scheme’).
The 2010 SAYE Scheme is an Irish Revenue
approved plan open to all Irish employees.
Participants may save up to €500 a month from
their net salaries for a fixed term of three or
five years and at the end of the savings period
they have the option to buy CRH shares at a
discount of up to 15% of the market price on
the date of invitation of each savings contract.
Details of the outstanding awards of executive
Directors under the 2010 SAYE Scheme are set
out in table 29 on pages 90 and 91.
The Participation Scheme is an Irish Revenue
approved plan and is open to all employees
in Ireland. Grants can be made to participants
up to a maximum of €12,700 annually in CRH
shares. Albert Manifold and Maeve Carton
participated in the Participation Scheme
in 2016.
Retirement benefit expense
Albert Manifold and Maeve Carton are
participants in a contributory defined benefit
plan which is based on an accrual rate of 1/60th
of salary* for each year of pensionable service
and is designed to provide two-thirds of career
average salary at retirement for full service. If
either leaves 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
established a cap on pension provisions by
introducing a penalty tax charge on pension
assets in excess of the higher of €5 million
(in the Finance Act 2011, this threshold was
reduced to €2.3 million and reduced further
to €2 million by the Finance (No. 2) Act 2013)
or the value of individual accrued pension
entitlements as at 7 December 2005.
As a result of these legislative changes,
the Remuneration Committee decided that
executive Directors should have the option
of continuing to accrue pension benefits
as previously, or of choosing an alternative
arrangement - by accepting pension benefits
limited by the cap - with a similar overall cost
to the Group. Albert Manifold and Maeve
Carton have opted for an arrangement whereby
their pensions are capped in line with the
provisions of the Finance Act 2006 and receive
a supplementary taxable non-pensionable cash
supplement in lieu of pension benefits forgone.
There was, therefore, no additional accrual in
2016. The cash pension supplements for 2016
are detailed in table 17. These supplements
are similar in value to the reduction in the
Company’s liability represented by the pension
benefits foregone. They are calculated based
on actuarial advice as the equivalent of the
reduction in the Company’s liability to each
individual and spread over the term to retirement
as annual compensation allowances.
The contributory defined benefit plan in which
Albert Manifold and Maeve Carton participate
closed to new entrants at the end of 2011.
Senan Murphy receives a supplementary
taxable non-pensionable cash supplement
equivalent to 25% of his annual base salary in
lieu of a pension contribution.
Mark Towe participates in a defined contribution
retirement plan in respect of basic salary; and in
addition he participates in an unfunded defined
contribution Supplemental Executive Retirement
Plan (SERP) also in respect of basic salary, to
which contributions are made at an agreed rate
(20%), offset by contributions made to the other
retirement plan.
Details regarding pension entitlements for the
executive Directors are set out in tables 30 and
31 on page 92.
82
* Salary is defined as basic annual salary and excludes any fluctuating emoluments.
CRH Annual Report and Form 20-F I 2016 Individual Executive Remuneration for the year ended 31 December 2016 (Audited)
Table 17
Albert Manifold
Maeve Carton
Senan Murphy
Mark Towe
2016
€000
2015
€000
2014
€000
2016
€000
2015
€000
2016
€000
2015
€000
2014
€000
2016
€000
2015
€000
2014
€000
Fixed Pay
Basic Salary (i)
Benefits (ii)
Retirement Benefit Expense (iii)
Total Fixed Pay
Performance-related Pay
Annual Bonus (iv):
Cash Element
Deferred Shares
Total Annual Bonus
Long-term Incentives (v):
Performance Share Plan
1,400
1,290
1,200
22
671
22
607
39
559
2,093
1,919
1,798
2,323
1,451
1,350
774
484
450
3,097
1,935
1,800
2014
€000
625
16
260
901
703
234
937
-
-
69
69
689
10
252
951
748
250
998
1,320
675
-
675
10
282
967
734
245
979
630
323
145
1,995
1,098
625
22
156
803
679
227
906
-
-
-
-
- value delivered through performance
- value delivered through share price growth
Vested Share Options
3,171
1,622
-
907
466
209
Total Long-term Incentives
4,793
1,582
-
-
586
586
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,309
1,280
1,036
74
262
72
256
59
207
1,645
1,608
1,302
1,447
1,416
1,166
483
472
389
1,930
1,888
1,555
2,155
1,134
1,102
-
588
266
3,257
1,988
-
-
129
129
5,187
3,876
1,684
6,832
5,484
2,986
Total Performance-related Pay
7,890
3,517
2,386
2,993
2,077
1,006
906
Total Single Figure
9,983
5,436
4,184
3,944
3,044
1,907
1,709
(fixed and performance-related)
(i) Basic Salary: Further details and background in relation to the changes in salaries effective for 2016 are set out on page 72 of the 2015 Directors’
Remuneration Report.
(ii) Benefits: For executive Directors these relate principally to the use of company cars, medical insurance and life assurance and, where relevant, the value of
the non-taxable discount on the grant of options under the Group’s 2010 SAYE Scheme.
(iii) Retirement Benefit Expense: As noted on page 82, Albert Manifold and Maeve Carton each receive 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. Senan Murphy receives a supplementary taxable non-pensionable cash
supplement equivalent to 25% of his annual base salary in lieu of a pension contribution.
(iv) Annual Bonus Plan: Under the executive Directors’ Annual Bonus Plan for 2016, a bonus was payable for meeting clearly defined and stretch targets and
strategic goals. The structure of the 2016 Plan, together with details of the performance against targets and payouts in respect of 2015 and 2016, are set
out on pages 86 and 87. For 2016, 2015 and 2014 bonuses, 25% of executive Directors’ bonuses were paid in Deferred Shares, vesting after three years,
with no additional performance conditions.
(v) Long-term Incentives: In February 2017, the Remuneration Committee determined that 100% of the performance conditions which applied to the PSP
awards made in 2014 have been met. The awards are subject to a two-year holding period and will vest in 2019. For the purposes of this table, the value of
these awards, which were subject to a three-year performance period ending in 2016, has been estimated using a share price of €30.97, being the
three-month average share price to 31 December 2016. Amounts in the long-term incentive column for 2015 reflect the value of long-term incentive awards
with a performance period ending in 2015. These amounts reflect the value of the PSP and share option awards granted in 2013, which the Remuneration
Committee determined in February 2016 had met the applicable performance targets and have been updated to reflect the market value of the shares on the
date of vesting, which for Irish-based executives was €24.50 and for the US-based executive was €24.59, less, in the case of the options, the total exercise
cost. In the 2015 Directors’ Remuneration Report, the value of the awards was estimated based on the three-month average share price to 31 December
2015 (see page 77 of the 2015 Directors’ Remuneration Report). Amounts in the long-term incentive column for 2014 reflect the value of the awards granted
in 2006, 2007, 2008 and 2009, which the Remuneration Committee determined in May 2015 had met the applicable EPS performance targets and had
vested. For the purposes of this table, the value of these awards has been calculated based on the difference between the total exercise cost and the market
value on the date of vesting (€25.11).
83
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Board Changes
Mark Towe retired from the Board on
31 December 2016. He remains Chairman of
CRH Americas and a Group employee. He
received a bonus in respect of performance
to the end of 2016 as outlined above. Details
of his outstanding share awards are set out
in table 29 on pages 90 and 91. On the basis
that Mark Towe will continue his employment
with the Group, the Remuneration Committee
has determined that the arrangements outlined
in table 18 should apply in relation to his
outstanding awards.
Bill Egan and Utz-Hellmuth Felcht retired as
non-executive Directors at the conclusion
of the AGM in April 2016, and Rebecca
McDonald retired as a non-executive Director in
September 2016. Each non-executive Director
received their outstanding non-executive
Director fees for the period to their respective
dates of retirement.
Non-executive Directors
The remuneration of non-executive Directors
and the Chairman is determined by the Board of
Directors as a whole. The fees were increased in
2016. Details of the remuneration paid to
non-executive Directors in 2016 is set out in
table 33 on page 93. There is no proposed
change in fees for non-executive Directors
for 2017.
Implementation of
Remuneration Policy
for 2017
Basic salary and benefits
Details of executive Directors’ salaries for
2017 compared with 2016 are set out in the
Committee Chairman’s introduction on pages
73 and 74.
Executive Directors will receive benefits in
line with the Policy in 2017. The level of
benefits provided will depend on the cost of
providing individual items and the individual
circumstances.
2017 Annual Bonus Plan
The Remuneration Committee has determined
that the 2017 Annual Bonus Plan will be
operated broadly in line with the 2016
Annual Bonus Plan. 80% of the bonus will be
based on financial targets and the remaining
20% on individual objectives aligned to key
84
Outstanding Share Awards - Mark Towe
Table 18
Deferred
Share
Awards
• Outstanding awards (i.e. awards in relation to 2013, 2014, 2015 and 2016 bonuses)
will vest on their normal vesting dates, with dividends accruing over the vesting periods
in the normal way
•
In the event that Mark Towe ceases to be employed by the Group, the vesting for any
outstanding awards will be determined by the Remuneration Committee in accordance
with the Policy
• Outstanding awards (i.e. awards made in 2014, 2015 and 2016) will be released on
their normal release dates subject to performance (to be measured at the normal time)
and continued employment on the release date. Awards will be subject to the normal
two-year holding period
•
In the event that Mark Towe ceases to be employed by the Group, the vesting and
achievement of performance conditions for any outstanding awards will be determined
by the Remuneration Committee in accordance with the Policy
• 2013 award, which has vested, must be exercised within 12 months of Mark Towe
ceasing to be employed by the Group, or the expiry date of the award if earlier
2014
Performance
Share Plan
2010 Share
Option
Scheme
has reviewed in detail the capital expenditure
projects planned during the three-year period,
and will make appropriate adjustments in
the event that there are significant variances
from the plan. The Committee will also
consider whether adjustments are required
to cash flows, for example, resulting from any
significant acquisitions during the period. Given
the completion of CRH’s major divestment
programme in 2016, the Committee has
excluded proceeds from divestments from the
cash flow calculation. Otherwise, the definition
of cash flow is as set out on page 81.
Retirement Benefit Expense
No changes in pension arrangements are
proposed in 2017.
strategic areas for each executive Director.
The Committee intends to disclose the targets
for the 2017 Annual Bonus Plan in the 2018
Directors’ Remuneration Report.
2017 PSP Awards
For the 2017 PSP awards, performance will
be assessed over the three-year period to 31
December 2019.
As was the case in 2016, 50% of the 2017
awards will be subject to TSR performance, with
25% being measured against a tailored sector
peer group (see table 27 on page 89) and 25%
against the FTSE All-World Construction &
Materials Index. Vesting between the threshold
and maximum levels will be calculated on a
straight-line basis. The TSR measure will also be
subject to a RONA underpin.
For the cash flow measure, vesting is calculated
on a straight-line basis between 25% and 80%
for cash flow of between €2.8 billion and €3.25
billion and between 80% and 100% for an
outturn between €3.25 billion and €3.7 billion.
This stretch cash flow target reflects significantly
higher net inflows from operating activities over
the three-year period ending 31 December
2019. It also reflects increased outflows on
capital expenditure for the period as higher
spending on development, replacement and
safety projects is planned in order to ensure
the Group is well positioned to take advantage
of improving markets and changing trends,
and to deliver improved returns in the years
ahead. In setting the target, the Committee
CRH Annual Report and Form 20-F I 2016 Details of remuneration charged against profit in 2016
Directors’ Remuneration (i) (Audited)
Executive Directors
Basic Salary
Performance-related Incentive Plan
- cash element
- deferred shares element
Retirement Benefits Expense
Benefits
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 (ii)
Total Directors’ remuneration
2016
€000
2015
€000
Table 19
2014
€000
4,023
3,245
2,861
5,197
1,734
1,341
128
12,423
4
722
980
7
1,709
9.24
124
14,256
3,601
1,201
1,145
104
9,296
3
672
794
6
1,472
9.75
95
10,863
3,219
1,073
1,026
114
8,293
3
627
749
15
1,391
9.30
23
9,707
(i) See analysis of 2016 remuneration by individual in tables 17 and 33 on pages 83 and 93 respectively.
(ii) Consulting and other fees paid to a number of former Directors.
For the purposes of Section 305 of the Companies Act 2014, the aggregate gains by Directors on the exercise of share options during 2016
was €994,651 (2015: €1,011,685).
85
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report - continued
Remuneration Tables
Annual Bonus Plan - 2016
2016 Annual Bonus - Achievement (Financial Targets) (i)
Table 20
Measure
CRH EPS
CRH Cash Flow (iii)
CRH RONA
Performance achieved relative to targets (ii)
Weighting as a %
of Maximum
Threshold
Target
Maximum
Performance
Achieved
Payout %
of Maximum
25%
30%
25%
150.2c
2,444
9.7%
100%
100%
100%
(i)
Due to commercial sensitivity, 2016 targets will be disclosed in full in the 2017 Directors’ Remuneration Report.
(ii) 0% of each element is earned at threshold, 50% at target and 100% at maximum, with a straight-line payout schedule between these points.
(iii) For this purpose, operating cash flow has been defined as reported internally. The figure differs from the net cash inflow from operating companies of €2,340
million reported in the Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows on the purchase of property,
plant and equipment (PP&E), net of proceeds from the disposal of PP&E, and before deducting interest and tax payments.
2016 Annual Bonus - Achievement - Personal/Strategic Targets
Table 21
Directors
Achievements
Albert Manifold
Maeve Carton
Senan Murphy
Mark Towe
Continued oversight over and delivery on the successful integration of the LH Assets and CRL acquisitions; implementation of new
country and regional organisations; the continued development of a newly formed Group Leadership Team (GLT) structure; leadership
of the Group talent management process with a focus on effective management succession for senior roles across the Group;
continued assessment of strategic alternatives for the Group.
Successful induction and handover of finance function to new Finance Director; updating the Group’s Investor Relations strategy in
conjunction with the Chief Executive and Finance Director; successful roll out of SOX documentation and testing for the LH Assets
and CRL; working with the Chief Executive and other GLT members in relation to delivery in respect of key Group transformation
objectives.
Effective management of the programme to restore CRH’s debt metrics to normalised levels and of the Group’s debt funding
programme; leadership of a new Group performance programme for the key performance indicators used to operate our businesses;
managing the evolution of the finance organisation structure to ensure alignment with business priorities and succession planning
across the function; effective leadership for the risk and control environment across the Group including SOX compliance.
Leadership of the process to transition to a new organisation in the Americas; continued input into the development of the Group’s
talent management process; mentoring and coaching the CRH Senior Management Team; working with the Chief Executive in relation
to the ongoing process to leverage the collective scale of the Group.
86
CRH Annual Report and Form 20-F I 2016 Annual Bonus Plan - 2015
2015 Annual Bonus - Achievement - Group Targets (i)
Table 22
Performance needed for payout at
Measure
CRH EPS
CRH Cash Flow
- Operating Cash Flow (ii)
- Divestments
CRH RONA (iii)
Threshold
69.2c
€865m
€200m
6.6%
Target
75.2c
€940m
€225m
7.2%
Maximum
Performance Achieved
Payout % of Maximum
79.0c
89.1c
100.0%
€1,016m
€1,722m
€250m
7.8%
€889m
8.8%
100.0%
100.0%
100.0%
(i)
Due to commercial sensitivity, 2015 bonus targets were not disclosed in the 2015 Directors’ Remuneration Report.
(ii) For this purpose, operating cash flow achieved in 2015 has been defined as reported internally, and excludes the operating cash flows attributable to the
post acquisition period of the LH Assets. The figure also differs from the net cash inflow from operating companies of €2,247 million reported in the 2015
Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows on the purchase of PP&E, net of proceeds from the
disposal of PP&E, and before deducting interest and tax payments.
(iii) 2015 RONA is calculated excluding the transaction/one-off costs of €197 million related to the acquisition of the LH Assets.
87
CRH Annual Report and Form 20-F I 2016 Directors’ Remuneration Report - continued
Remuneration Tables - continued
Long-Term Incentives - Awards in 2014 and 2015
Performance Share Plan Metrics
Table 23
TSR vs. tailored peer group
(75% of award) (i)
TSR vs. tailored peer group
(75% of award) (i)
100%
100%
100%
Cumulative cash flow
(25% of award) (ii)
Cumulative cash flow
(25% of award) (ii)
100%
2014 and 2015 Awards
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
25%
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
25%
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
25%
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
25%
2015 Award
Cumulative cash flow
(25% of award)(ii)
2015 Award
Cumulative cash flow
(25% of award)(ii)
100%
25%
100%
25%
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
0%
0%
0%
0%
0%
0%
Median
Median
Upper quartile
Upper quartile
€2.9bn
€2.9bn
€3.5bn
€3.5bn
€2.9bn
€2.9bn
€3.5bn
€3.5bn
(i) The methodology for calculating TSR assumes all dividends are reinvested on the ex-dividend date at the closing share price on that day; the open and close
price is based on the three-month average closing price on the last day before the start of the performance period and the final day of the performance
period respectively.
(ii) See page 84 for further information on how cash flow is calculated for 2016 and 2017 awards.
Peer Group for TSR Performance Metric for PSP Awards in 2014 and 2015
Table 24
Heidelberg Cement
Martin Marietta Materials
Vulcan Materials
Boral
Buzzi Unicem
Cemex
Grafton Group
Italcementi
Kingspan Group
Lafarge
Holcim
Saint Gobain
Titan Cement
Travis Perkins
Wienerberger
Wolseley
Table 25
2014 PSP Award - Vesting Details
Executive Director
Interests Held
Vesting Outcome (%
of max)
Interests
Due to Vest
Date of Vesting
Assumed
Share Price (i)
Estimated Value
Albert Manifold
Maeve Carton
Mark Towe
154,784
64,448
105,176
100%
100%
100%
154,784
64,448
105,176
2019
2019
2019
€30.97
€30.97
€30.97
€4,793,660
€1,995,954
€3,257,300
(i) For the purposes of this table, the value of these awards, which were subject to a three-year performance period ending in 2016, has been estimated using
a share price of €30.97, being the three-month average share price to 31 December 2016.
88
CRH Annual Report and Form 20-F I 2016
Long-Term Incentives - Awards in 2016 and 2017
Performance Share Plan Metrics Table 26
2016 and 2017 Awards
TSR vs. tailored peer group
TSR vs. tailored peer group
(25% of award) (i)
(25% of award) (i)
TSR(i) vs. tailored peer group
TSR vs. tailored peer group
(25% of award)
100%
(25% of award) (i)
100%
Median
Median
Upper quartile
Upper quartile
Upper quartile
Upper quartile
TSR vs. FTSE All-World Cons & Materials
TSR vs. FTSE All-World Cons & Materials
TSR vs. FTSE All-World Cons & Materials
TSR vs. FTSE All-World Cons & Materials
(25% of award) (i)
(25% of award)
(25% of award) (i)
(25% of award) (i)
100%
100%
100%
100%
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
100%
100%
25%
25%
0%
0%
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
25%
25%
0%
0%
Median
Median
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
25%
25%
0%
0%
25%
25%
0%
0%
Index
Index
Cumulative cash flow 2016-2018
Cumulative cash flow 2016-2018
(50% of award) (ii)
(50% of award) (ii)
2016 Award
Cumulative cash flow (ii) 2016-2018
Cumulative cash flow 2016-2018
(50% of award)
100%
(50% of award) (ii)
100%
80%
80%
25%
25%
0%
0%
€2.8 bn
€2.8bn
€2.8bn
€2.8bn
€3.25bn
€3.25bn
€3.25bn
€3.25bn
€3.7bn
€3.7bn
€3.7bn
€3.7bn
2017 Award
Cumulative cash flow 2017-2019
Cumulative cash flow 2017-2019
(50% of award) (ii)
(50% of award) (ii)
Cumulative cash flow 2017-2019
Cumulative cash flow 2017-2019
(50% of award) (ii)
100%
(50% of award) (ii)
100%
80%
80%
25%
25%
0%
0%
€2.8bn
€xbn
€xbn
€xbn
€3.25bn
€xbn
€3.7bn
€xbn
€xbn
€xbn
€xbn
€xbn
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
100%
100%
80%
80%
25%
25%
0%
0%
100%
100%
80%
80%
25%
25%
0%
0%
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
l
f
f
l
)
t
n
e
)
t
m
n
e
e
m
e
e
o
e
%
o
%
g
n
i
g
t
s
n
e
i
t
V
s
e
V
(
(
Index
Index
Index +5% p.a.
Index +5% p.a.
Index +5% p.a.
Index +5% p.a.
(i) and (ii) see footnotes to table 23.
Peer Group for TSR Performance Metric for PSP Awards in 2016 and 2017
Table 27
ACS
Boral
Braas Monier
Cemex
Buzzi Unicem
Heidelberg Cement
LafargeHolcim
Skanska
Vinci
Rockwool
Saint Gobain
Titan Cement
Wienerberger
Vicat
2016 PSP Award Details
Table 28
Executive Director
Date of Grant
Number of Shares
Market Price on which
Award was Based
Face Value at Date
of Award
Face Value at Date of Award
(% of salary)
Albert Manifold
Maeve Carton
Senan Murphy
Mark Towe
6 May 2016
6 May 2016
6 May 2016
6 May 2016
208,104
56,078
50,906
107,110
€24.555
€24.555
€24.555
€24.555
€5,109,994
€1,376,995
€1,249,997
€2,630,086
365%
200%
200%
200%
89
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report - continued
Remuneration Tables - continued
Summary of Outstanding Share Incentive Awards (Audited)
Table 29
Year of
Award
Performance Period
Vesting
Date
Market Value
on Award
Exercise
Price
Balance at 31
December 2015
Granted
in 2016
Vested
in 2016
Exercised
in 2016
Lapsed
in 2016
Balance at 31
December 2016
Dividends Awarded
Market Value on Date
& Vested
of Exercise/Vesting
Albert Manifold
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2010 Savings-Related Share Option Scheme
Maeve Carton
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2010 Savings-Related Share Option Scheme
Senan Murphy
2015
2016
2013
2014
2015
2016
2006
2007
2013
2012
2015
2016
2013
2014
2015
2016
2006
2007
2013
2014
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
n/a
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
n/a
2018
2019
2016
2019
2020
2021
2015
2015
2016
2017
2018
2019
2016
2019
2020
2021
2015
2015
2016
2019
€18.05
€25.60
€16.19
€20.49
€24.42
€24.56
n/a
n/a
n/a
n/a
€18.05
€25.60
€16.19
€20.49
€24.42
€24.56
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
€26.15
€29.49
€16.19
€13.64
n/a
n/a
n/a
n/a
n/a
n/a
€26.15
€29.49
€16.19
€17.67
24,928
-
72,000
142,900
132,064
-
22,180
33,270
67,500
2,236
12,983
-
50,000
59,500
55,283
-
16,635
19,962
47,000
1,726
2014 Performance Share Plan (iii)
2016
01/01/2016 - 31/12/2018
2021
€24.56
n/a
-
Mark Towe
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2014
2015
2016
2013
2014
2015
2016
2006
2007
2008
2013
01/01/2013 - 31/12/2013
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
2017
2018
2019
2016
2019
2020
2021
2015
2015
2015
2016
US$28.94
US$22.54
US$28.01
€16.19
€20.49
€24.42
€24.56
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
€26.15
€29.86
€21.52
€16.19
2,561
22,908
-
90,000
97,100
107,110
-
33,270
36,043
36,043
85,000
The market price of the Company’s shares at 31 December 2016 was €32.96 and the range during 2016 was €21.00 to €32.99. There were no movements in
the above interests in the period from 31 December 2016 to 28 February 2017.
(i) The Remuneration Committee has determined that dividend equivalents should accrue on deferred share awards under the Annual Bonus Plan. Such
dividend equivalents will be released to participants on the date of vesting of the Deferred Shares.
(ii) The last award under the 2006 Performance Share Plan vested in March 2016. There were no outstanding awards under this plan at 31 December 2016.
(iii) The Remuneration Committee has determined that dividend equivalents should accrue on awards under the 2014 Performance Share Plan. Subject to
satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares on vesting.
90
18,900
208,104
9,560
56,078
50,906
18,697
107,110
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,044
15,956
33,270
25,110
22,180
42,390
38,920
11,080
19,962
17,484
16,635
29,516
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70,056
19,944
33,270
36,043
36,043
53,380
31,620
24,928
18,900
142,900
132,064
208,104
2,236
12,983
9,560
59,500
55,283
56,078
1,726
50,906
2,561
22,908
18,697
97,100
107,110
107,110
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
€24.50
€31.42
€24.87
€24.50
€31.42
€31.42
€24.59
€32.05
€30.49
CRH Annual Report and Form 20-F I 2016
Summary of Outstanding Share Incentive Awards (Audited)
Table 29
Year of
Award
Performance Period
Date
on Award
Price
December 2015
Vesting
Market Value
Exercise
Balance at 31
Granted
in 2016
Vested
in 2016
Exercised
in 2016
Lapsed
in 2016
Balance at 31
December 2016
Dividends Awarded
& Vested
Market Value on Date
of Exercise/Vesting
Albert Manifold
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2010 Savings-Related Share Option Scheme
Maeve Carton
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2010 Savings-Related Share Option Scheme
Senan Murphy
Mark Towe
Annual Bonus Plan (Deferred Share Awards) (i)
2006 Performance Share Plan (ii)
2014 Performance Share Plan (iii)
2000 Share Option Scheme (iv)
2010 Share Option Scheme (v)
2015
2016
2013
2014
2015
2016
2006
2007
2013
2012
2015
2016
2013
2014
2015
2016
2006
2007
2013
2014
2014
2015
2016
2013
2014
2015
2016
2006
2007
2008
2013
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
n/a
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
n/a
01/01/2013 - 31/12/2013
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2013 - 31/12/2015
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2012 - 31/12/2014
01/01/2013 - 31/12/2015
2018
2019
2016
2019
2020
2021
2015
2015
2016
2017
2018
2019
2016
2019
2020
2021
2015
2015
2016
2019
2017
2018
2019
2016
2019
2020
2021
2015
2015
2015
2016
€18.05
€25.60
€16.19
€20.49
€24.42
€24.56
n/a
n/a
n/a
n/a
€18.05
€25.60
€16.19
€20.49
€24.42
€24.56
n/a
n/a
n/a
n/a
US$28.94
US$22.54
US$28.01
€16.19
€20.49
€24.42
€24.56
€26.15
€29.49
€16.19
€13.64
€26.15
€29.49
€16.19
€17.67
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
€26.15
€29.86
€21.52
€16.19
-
-
-
-
-
-
-
24,928
72,000
142,900
132,064
22,180
33,270
67,500
2,236
12,983
50,000
59,500
55,283
16,635
19,962
47,000
1,726
2,561
22,908
90,000
97,100
107,110
33,270
36,043
36,043
85,000
2014 Performance Share Plan (iii)
2016
01/01/2016 - 31/12/2018
2021
€24.56
n/a
-
18,900
-
-
-
208,104
-
-
-
-
-
9,560
-
-
-
56,078
-
-
-
-
50,906
-
-
18,697
-
-
-
107,110
-
-
-
-
-
-
56,044
-
-
-
-
-
-
-
-
-
38,920
-
-
-
-
-
-
-
-
-
-
-
70,056
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,270
25,110
-
-
-
-
-
-
-
-
19,962
17,484
-
-
-
-
-
-
-
-
-
-
36,043
36,043
-
-
15,956
-
-
-
22,180
-
42,390
-
-
-
11,080
-
-
-
16,635
-
29,516
-
-
-
-
-
19,944
-
-
-
33,270
-
-
24,928
18,900
-
142,900
132,064
208,104
-
-
-
2,236
12,983
9,560
-
59,500
55,283
56,078
-
-
-
1,726
50,906
2,561
22,908
18,697
-
97,100
107,110
107,110
-
-
-
-
53,380
31,620
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
€24.50
-
-
-
-
€31.42
€24.87
-
-
-
€24.50
-
-
-
-
€31.42
€31.42
-
-
-
-
-
€24.59
-
-
-
-
€32.05
€30.49
-
(iv) Options granted under the 2000 Share Option Scheme vested once EPS growth exceeded the growth on the Irish Consumer Price Index by 5%
compounded over a period of at least three years subsequent to the granting of options.
(v) Options granted under the 2010 Share Option Scheme vested once compound EPS growth exceeded 10% over the three-year period from the date of
granting of the options.
91
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report - continued
Remuneration Tables - continued
Retirement Benefits
Pension Entitlements - Defined Benefit (Audited)
Table 30
Executive Directors
Albert Manifold
Maeve Carton
Increase in accrued personal pension
during 2016 (i)
€000
Transfer value of increase in dependants
pension (i)
€000
Total accrued
personal pension at year-end (ii)
€000
-
-
132
26
273
266
(i)
As noted on page 82, the pensions of Albert Manifold and Maeve Carton have been capped in line with the provisions of the Irish Finance Acts. However,
dependants’ pensions continue to accrue resulting in Greenbury transfer values which have been calculated on the basis of actuarial advice. These
amounts do not represent sums paid out or due in 2016 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 31
The accumulated liability related to the unfunded Supplemental Executive Retirement Plans for Mark Towe are as follows:
Executive Director
Mark Towe
As at 31 December 2015
€000
2016 contribution
€000
2016 Notional Interest
€000
Translation Adjustment
€000
As at 31 December 2016
€000
3,153
241
127 (iii) 122
3,643
(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.
Shareholdings of Directors and Company Secretary
Table 32
Name
Executive Directors
A. Manifold
M. Carton
S. Murphy
Non-executive Directors
N. Hartery
E.J. Bärtschi
P.J. Kennedy
D.A. McGovern, Jr. (iii)
H.A. McSharry
L.J. Riches
H.Th. Rottinghuis
W.J. Teuber, Jr. (iii) (iv)
Company Secretary
Neil Colgan
Total
Beneficially Owned (i)
(% of Salary)
31 December 2015
31 December 2016
Shareholding Requirement
Beneficially Owned
43,372
84,818
1,000
(ii)
16,591
25,200
2,000
5,255
3,965
2,000
15,426
-
9,511
209,138
76,597
124,289
1,021
250% (v)
100%
100% (v)
175%
580%
5%
16,987
25,200
2,000
5,375
4,043
2,000
15,645
1,000
9,993
284,150
(i)
Excludes awards of Deferred Shares, details of which are disclosed on pages 90 and 91. The Directors and Company Secretary do not have any special
voting rights.
(ii) Holding at date of appointment.
(iii) Holdings are held in the form of American Depositary Receipts (ADRs).
(iv) Appointed with effect from 3 March 2016. Bill did not have a holding of CRH Shares on his appointment.
(v) To be achieved by 2020 (see page 82 for more details).
Gillian Platt joined the Board with effect from 1 January 2017. The Articles of Association require Directors to hold a minimum of 1,000 shares within two months
of their appointment. As Ms. Platt did not hold CRH shares prior to her appointment she acquired the shares on 31 January 2017. Other than Ms. Platt’s
acquisition of shares, there were no transactions in the above Directors’ and Secretary’s interests between 31 December 2016 and 28 February 2017.
92
CRH Annual Report and Form 20-F I 2016 Non-executive Directors
Individual remuneration for the year ended 31 December 2016 (Audited)
Table 33
Non-executive Directors
E.J. Bärtschi
W.P. Egan (iv)
U-H. Felcht (iv)
N. Hartery
J.W. Kennedy (v)
P.J. Kennedy (vi)
R. McDonald (vii)
D.A. McGovern, Jr.
H.A. McSharry
L.J. Riches (viii)
D.N. O’Connor (v)
H.Th. Rottinghuis
W.J. Teuber, Jr. (ix)
Basic salary
and fees
(i)
€000
Benefits
(ii)
€000
Other
remuneration
(iii)
€000
2016
2015
2016
2015
2016
2015
2016
Total
€000
2015
2014
78
26
26
78
-
78
59
78
78
78
-
78
65
68
68
68
68
24
68
23
68
68
57
24
68
-
722
672
-
-
-
7
-
-
-
-
-
-
-
-
-
7
-
-
-
6
-
-
-
-
-
-
-
-
-
6
81
19
14
71
52
37
512
382
-
42
43
96
42
42
-
42
47
13
37
17
85
22
31
10
37
-
159
45
40
597
-
120
102
174
120
120
-
120
112
139
120
105
456
37
105
40
153
90
88
34
105
-
139
120
105
460
105
-
-
120
90
-
124
86
-
980
794
1,709
1,472
1,349
(i) Fee levels for non-executive Directors were increased in 2016 (see page 72 of the 2015 Directors’ Remuneration Report for more details).
(ii) Benefits: In the case of Nicky Hartery the amount reflects the reimbursement of travel expenses from his residence to his Chairman’s office in Dublin, which
have been grossed up for Irish tax purposes.
(iii) Other Remuneration: Includes remuneration for Chairman, Board Committee work and fees to reflect the time commitment to travel to CRH sites across
the globe.
(iv) Bill Egan and Utz-Hellmuth Felcht retired as Directors on 28 April 2016.
(v) John Kennedy and Dan O’Connor retired as Directors on 7 May 2015.
(vi) Pat Kennedy became a Director on 1 January 2015.
(vii) Rebecca McDonald became a Director on 1 September 2015 and retired as a Director on 28 September 2016.
(viii) Lucinda Riches became a Director on 1 March 2015.
(ix) Bill Teuber became a Director on 3 March 2016.
Non-executive Director Fee Structure
Table 34
Role
Group Chairman (including non-executive Director salary and fees for committee work)
Basic non-executive Director fee
Committee fee
Additional fees
Senior Independent Director/Remuneration Committee Chairman (i)
Audit Committee Chairman
Fee for Europe-based non-executive Directors
Fee for US-based non-executive Directors
(i) If the roles of Senior Independent Director and Remuneration Committee Chair are not combined, fees of €25,000 and €15,000 apply respectively.
2017
€575,000
€78,000
€27,000
€39,000
€39,000
€15,000
€30,000
93
CRH Annual Report and Form 20-F I 2016
Directors’ Remuneration Report - continued
Other Disclosures
Ms. Carton was appointed a non-executive
Director of Samse S.A. in 2016. She does
not receive any fees in respect of her role with
Samse S.A.
Total Shareholder Return
The value at 31 December 2016 of €100
invested in CRH in 2008, compared with the
value of €100 invested in the Eurofirst 300 Index
and the FTSE100 Index (which CRH joined in
December 2011) is shown in table 13 on
page 74.
TSR performance has been compared
against the FTSE100 and the Eurofirst 300
as these are broad general market indices of
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 16.3%.
Fees paid to former Directors
The 2013 Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment Regulations) Regulations in
the UK, require disclosure of payments to
former Directors in certain circumstances. No
payments have been made to individual former
Directors in those circumstances which exceed
the de minimis threshold of €20,000 per annum
set by the Remuneration Committee.
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.
During 2014, Maeve Carton was appointed as
an agency member of the National Treasury
Management Agency, an Irish state body
that provides asset and liability management
services to the Irish government. During 2016,
Ms. Carton received fees of €30,000 in relation
to this appointment.
Remuneration paid
to Chief Executive
2009 – 2016
Table 35 shows the total remuneration paid
to the Chief Executive in the period 2009 to
2016 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 in
January 2014.
Excluding the impact of vested share-based
awards, the percentage change in the Chief
Executive’s salary, benefits and bonus between
2015 and 2016 was as follows:
+8.5%
Salary
Benefits no change
Bonus
+60%
The combined percentage change was +39%*.
There was a 11.5% increase in the total average
employment costs in respect of employees in
the Group as a whole between 2015 and 2016.
Remuneration Paid to Chief Executive - 2009 to 2016 inclusive
Table 35
2009
2010
2011
2012
2013
2014
2015
2016
Single figure Remuneration (€m) (i)
€2.6m
€2.6m
€2.9m
€2.5m
€4.2m
€4.2m
€5.4m
€9.9m
Annual Bonus (% of max)
22%
21%
39%
28%
30%
100%
100%
98%
Long-term incentive award vesting (% of max)
50%
46%
17%
0%
PSP: 49%
PSP: 0%
PSP: 78%
LTIP: 34%
Options: 75%
Options: 37%
100%
(i) Single figure remuneration comprises the total fixed pay, performance-related pay and the value of long-term incentives vesting in each year.
2016 AGM – Remuneration Related Votes
Table 36
Year of
AGM
%
in Favour
%
Against
No. of
votes withheld
Total No. of Votes Cast
(incl. votes withheld)
% of issued share
capital voted
Directors’ Remuneration Report (“Say on Pay”)
2016
91.35
8.65
4,214,665
559,004,377
Directors’ Remuneration Policy
2016
59.15
40.85
13,830,863
559,015,684
67.83
67.83
94
* The maximum bonus level for the Chief Executive was increased in line with the Policy approved by shareholders at the 2016 AGM.
CRH Annual Report and Form 20-F I 2016 Relative Importance of Spend on Pay
+11.5%
Table 37
2016
2015
+41%
+4%
Dividends
Remuneration received
by all employees
EBITDA
(as defined)*
€m
6,000
5,000
4,000
3,000
2,000
1,000
0
Relative Importance of
Spend on Pay
Table 37 sets out the amount paid by the Group
in remuneration to employees compared to
dividend distributions made to shareholders
in 2015 and 2016. We have also shown the
change in EBITDA (as defined)* performance
year-on-year to provide an indication of the
change in profit performance.
Advisers to the Remuneration
Committee
Kepler, a brand of Mercer, are the Committee’s
independent remuneration consultants. The
Committee has satisfied itself that the advice
provided by Kepler is robust and independent
and that the Kepler engagement partner and
team that provide remuneration advice to the
Committee do not have connections with
CRH plc that may impair their independence.
Kepler are signatories to the Voluntary Code of
Conduct in relation to executive remuneration
consulting in the UK. During 2016, Kepler
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
attendance at Committee meetings,
when required
In 2016, Kepler’s parent, Mercer, provided
pensions advice and related services to the
Company. In 2016, the total fees paid to Kepler
were Stg£88,068.
2016 Annual General Meeting
The voting outcome in respect of the
remuneration related votes at the 2016 AGM is
set out in table 36 on page 94. Further details in
relation to the voting outcome are set out in the
Committee Chairman’s introduction on pages
72 and 73.
On behalf of the Board
Donald A. McGovern, Jr.
Chairman of Remuneration Committee and
Senior Independent Director
28 February 2017
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
95
CRH Annual Report and Form 20-F I 2016
Directors’ Report
The Directors submit their report and the
audited Consolidated Financial Statements for
the year ended 31 December 2016.
Principal Activity, Results
for the Year and Review of
Business
CRH is a leading diversified building materials
group which manufactures and distributes a
diverse range of products servicing the breadth
of construction needs, from the fundamentals of
heavy materials and elements to construct the
frame, through value-added exterior products
that complete the building envelope, to
distribution channels which service construction
fit-out and renewal. The Group has over
1,300 subsidiary, joint venture and associate
undertakings; the principal ones as at 31
December 2016 are listed on pages 250 to 255.
The Group’s strategy, business model and
development activity are summarised on pages
10 to 13 and 23 to 27 and are deemed to be
incorporated in this part of the Directors’ Report.
As set out in the Consolidated Income
Statement on page 120, the Group reported
a profit before tax for the year of €1.74 billion.
Comprehensive reviews of the financial and
operating performance of the Group during
2016 are set out in the Business Performance
section on pages 20 to 55; key financial
performance indicators are also set out in this
section and on pages 14 and 15.
The treasury policy and objectives of the
Group are set out in detail in note 21 to the
Consolidated Financial Statements.
Dividend
CRH’s capital allocation policy reflects the
Group’s strategy of generating industry leading
returns through value-accretive investments
while delivering long-term dividend growth for
shareholders. For the period 1984 to 2009 the
Group maintained a progressive dividend policy
delivering dividend growth in each of these years.
The Group maintained the dividend at 62.5c per
share for each of the subsequent six years.
An interim 2016 dividend of 18.8c (2015: 18.5c)
per share was paid in November 2016. The
Board is recommending a final dividend of
46.2c per share (2015: 44.0c). This would give a
total dividend of 65.0c for the year, an increase
of 4% over last year (2015: 62.5c). The earnings
per share for the year were 150.2c representing
a cover of 2.3 times the proposed dividend for
the year.
It is proposed to pay the final dividend on 5 May
2017 to shareholders registered at the close
of business on 10 March 2017. Subject to the
approval of Resolution 7 at the 2016 AGM,
shareholders are being offered a scrip dividend
alternative.
While the Board continues to believe that a
progressive dividend policy is appropriate for the
Group, our target is to build dividend cover to
three times, and accordingly any dividend
increases in coming years will lag increases in
earnings per share.
2017 Outlook
The 2017 outlook set out in the Chief
Executive’s Review on page 9 is deemed to be
incorporated in this part of the Directors’ Report.
Sustainability
Sustainability and Corporate Social
Responsibility (CSR) concepts are embedded
in all CRH operations and activities. Embracing
all aspects of these concepts is considered
fundamental to achieving the CRH vision to be
the leading building materials business in the
world. Excellence in the areas of health & safety,
environment & climate change, governance,
and people & community is a daily priority. The
Group’s policies and implementation systems
are summarised in the Strategy Review section
on pages 16 and 17, and are described in
detail in the independently verified annual
Sustainability Report, which is published
mid-year in respect of the previous calendar
year, and is available on the Group’s website,
www.crh.com. CRH is recognised by several
leading Socially Responsible Investment (SRI)
agencies as being among the leaders in its
sector in these important areas.
Greenhouse Gas Emissions
Disclosures relating to the Group’s greenhouse
gas emissions are contained in the Measuring
Performance section on page 14.
Location of Information required pursuant to Listing Rule 9.8.4C
Table 38
Listing Rule
LR 9.8.4. (2)
Information to be included (i):
In the Trading Update published on 27 April 2016, CRH stated that total Group EBITDA (as defined)* for the first half of 2016
was expected to be close to €1 billion. The actual performance was €1.12 billion.
LR 9.8.4. (12) and (13)
Waivers of Dividends Disclosure
The Trustees of the Employee Benefit Trust have elected to waive dividends in respect of certain holdings of CRH shares.
See page 187 to the Consolidated Financial Statements.
(i) 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).
96
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F I 2016 Regulatory Information†
Companies Act 2014
2006 Takeover Regulations
Table 39
For the purpose of Section 1373, the Corporate Governance Report on pages 62 to 71, together with the Governance
Appendix located on the CRH website (www.crh.com), which contains the information required by Section 1373(2) of the
Companies Act 2014 and the risk management disclosures on pages 18, 19 and 102 to 107 are deemed to be incorporated
in the Directors’ Report and form part of the corporate governance statement required by section 1373 of the Companies
Act. Details of the Company’s employee share schemes and capital structure can be found in notes 7 and 29 to the
Consolidated Financial Statements on pages 144 to 147 and 185 to 187 respectively.
For the purpose of Regulation 21 of Statutory Instrument 255/2006 European Communities (Takeover Bids (Directive
2004/25/EC)) Regulations 2006, the rules relating to the appointment and replacement of Directors are summarised in the
Governance Appendix. The Chief Executive and the Finance Director have entered into service contracts, the principal
terms of which are summarised in the 2016 Directors’ Remuneration Policy which is available on the CRH website
(www.crh.com) and are deemed to be incorporated in this part of the Directors’ Report. The Company’s Memorandum
and Articles of Association, which are available on the CRH website, are also deemed to be incorporated in this part of
the Directors’ Report. The Group has certain banking facilities and bond issues outstanding which may require repayment
in the event that a change in control occurs with respect to the Company. In addition, the Company’s Share Option
Schemes and Performance Share Plan contain change of control provisions which can allow for the acceleration of the
exercisability of share options and the vesting of share awards in the event that a change of control occurs with respect to
the Company.
2007 Transparency Regulations For the purpose of Statutory Instrument 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007, the
Sustainability Report as published on the CRH website is deemed to be incorporated in this part of the Directors’ Report*,
together with the following sections of this Annual Report and Form 20-F: the Chairman’s Introduction on page 5, the
Strategy Review section on pages 6 to 19, the Principal Risks and Uncertainties section on pages 102 to 107, the Business
Performance Review section on pages 20 to 55, the details of earnings per Ordinary Share in note 12 to the Consolidated
Financial Statements, the details of derivative financial instruments in note 24, the details of the reissue of Treasury Shares in
note 29 and the details of employees in note 5.
Disclaimer/Forward-Looking
Statements
In order to utilise the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, CRH plc
(the ‘Company’), and its subsidiaries (collectively, ‘CRH’ or the ‘Group’) is providing the following cautionary statement.
This document contains certain forward-looking statements with respect to the financial condition, results of operations,
business, viability and future performance of CRH and certain of the plans and objectives of CRH including the statements
under: the “Chairman’s Introduction” with regard to the business outlook; “Strategy Review – Chief Executive’s Review
– Outlook”; the “Strategy Review” about our vision to be the leading building materials business in the world; in “Measuring
Performance” with regard to our 2017 focus; in the “Business Performance – Finance Director’s Review” with respect to our
belief that the Group has sufficient resources to meet its debt obligations and capital and other expenditure requirements in
2017; in “Business Performance” with respect to our expectations regarding economic activity and fiscal developments in
our operating regions; our expectations for the residential, non-residential and infrastructure markets; and our potential
future growth in Asia; and the statements relating to our strategies for individual segments and business lines in the section
entitled “Segmental Reviews”.
These forward-looking statements may generally, but not always, be identified by the use of words such as “will”,
“anticipates”, “should”, “expects”, “is expected to”, “estimates”, “believes”, “intends” or similar expressions.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future and reflect the Company’s current expectations and assumptions as
to such future events and circumstances that may not prove accurate. A number of material factors could cause actual
results and developments to differ materially from those expressed or implied by these forward-looking statements, certain
of which are beyond our control and which include, among other things: economic and financial conditions generally in
various countries and regions where we operate; the pace of recovery in the overall construction and building materials
sector; demand for infrastructure, residential and non-residential construction in our geographic markets; increased
competition and its impact on prices; increases in energy and/or raw materials costs; adverse changes to laws and
regulations; approval or allocation of funding for infrastructure programmes; adverse political developments in various
countries and regions; failure to complete or successfully integrate acquisitions; and the specific factors identified in the
discussions accompanying such forward-looking statements and in the Principal Risks and Uncertainties included on
pages 102 to 107 of the Directors’ Report and in the Risk Factors included on pages 220 to 229 of this Annual Report and
Form 20-F.
You should not place undue reliance on any forward-looking statements. These forward-looking statements are made as
of the date of this Directors’ Report. The Company expressly disclaims any obligation to update these forward-looking
statements other than as required by law.
The forward-looking statements in this Annual Report and Form 20-F do not constitute reports or statements published in
compliance with any of Regulations 4 to 8 and 26 of the Transparency (Directive 2004/109/EC) Regulations 2007.
† This table contains information which is required to be provided for regulatory purposes.
* For the purposes of the Company’s Annual Report on Form 20-F as filed with the SEC, the Sustainability Report, and any reference thereto, is explicitly excluded from this
Directors’ Report.
97
CRH Annual Report and Form 20-F I 2016 Directors’ Report - continued
Principal Risks and
Uncertainties
Pursuant to Section 327(1)(b) of the
Companies Act 2014, Regulation 5(4)(c)
(ii) of the Transparency (Directive 2004/109/
EC) Regulations 2007, the principal risks and
uncertainties that could affect the Group’s
business are set out on pages 102 to 107
and are deemed to be incorporated in this
part of the Directors’ Report. These risks and
uncertainties reflect the international scope of
the Group’s operations and its decentralised
structure. If any of these risks occur, the
Group’s business, financial condition, results of
operations, liquidity and/or prospects could be
materially adversely affected.
Viability Statement
In accordance with Provision C.2.2. of the 2014
UK Corporate Governance Code, the Board
has carried out a robust assessment of the
principal risks facing the Group, including those
which would threaten its business model, future
performance, solvency or liquidity. The nature
of and the strategies, practices and controls
to mitigate those risks are addressed in the
Principal Risks and Uncertainties section on
pages 102 to 107.
Using the Group Strategic Plan (the ‘Plan’),
which is prepared annually on a bottom up
basis and is approved by the Board, the
prospects of the Group have been assessed
over a three-year period from 1 January 2017
to 31 December 2019 inclusive. The projections
in the Plan consider the Group’s cash flows,
committed funding and liquidity positions,
forecast future funding requirements, banking
covenants and other key financial ratios,
including those relevant to maintaining the
Group’s investment grade credit ratings.
Appropriate stress testing of certain
key performance, solvency and liquidity
assumptions underlying the Plan has been
conducted taking account of the principal
risks and uncertainties faced and possible
severe but plausible combinations of those
risks and uncertainties. Whilst each of the
principal risks and uncertainties set out in this
Directors’ Report could have an impact, the
sensitivity analysis focused on the economic
environment (captioned Industry Cyclicality in
the Principal Risks and Uncertainties disclosure)
and regulatory compliance (captioned Laws and
Regulations) and presumed the availability and
effectiveness of various mitigating actions which
could realistically be implemented to avoid
or reduce the impact or occurrence of those
risks and uncertainties. In evaluating the likely
effectiveness of such actions, the conclusions of
the Board’s regular monitoring and review of risk
management and internal control systems were
taken into account.
As a result of this assessment, the Board
has a reasonable expectation that the Group
will be able to continue in operation and
meet its liabilities as they fall due over the
aforementioned three-year period.
Going Concern
The Group’s business activities, together with
the factors likely to affect its future development,
performance and position, are set out in the
Strategy Review section and in this report on
pages 6 to 19 and 102 to 107 respectively. The
financial position of the Group, its cash flows,
liquidity position and borrowing facilities are
described in the Business Performance section
on pages 20 to 55. In addition, notes 20 to
24 to the Consolidated Financial Statements
include the Group’s objectives, policies and
processes for managing its capital; its financial
risk management objectives; details of its
financial instruments and hedging activities; and
its exposures to credit, currency and liquidity
risks.
The Group has considerable financial resources
and a large number of customers and
suppliers across different geographic areas
and industries. In addition, the local nature
of building materials means that the Group’s
products are not usually shipped cross-border.
Having assessed the relevant business risks,
the Directors believe that the Group is well
placed to manage these risks successfully, and
they have a reasonable expectation that CRH
plc, and the Group as a whole, has adequate
resources to continue in operational existence
for the foreseeable future. For this reason, the
Directors continue to adopt the going concern
basis in preparing the Consolidated Financial
Statements.
Risk Management and Internal
Control*
The Directors confirm that, in addition to the
monitoring carried out by the Audit Committee
under its Terms of Reference, they have
reviewed the effectiveness of the Group’s risk
management and internal control systems up
to and including the date of approval of the
financial statements. This review had regard
to all material controls, including financial,
operational and compliance controls that could
affect the Group’s business.
Directors’ Compliance
Statement
It is the policy of the Company to comply
with its relevant obligations (as defined in the
Companies Act 2014). The Directors have
drawn up a compliance policy statement (as
defined in section 225(3)(a) of the Companies
Act 2014) and arrangements and structures
are in place that are, in the Directors’ opinion,
designed to secure material compliance with the
Company’s relevant obligations. The Directors
confirm that these arrangements and structures
were reviewed during the financial year. As
required by Section 225(2) of the Companies
Act 2014, the Directors acknowledge that they
are responsible for the Company’s compliance
with the relevant obligations. In discharging their
responsibilities under Section 225, the Directors
relied on the advice both of persons employed
by the Company and of persons retained by
the Company under contract, who they believe
have the requisite knowledge and experience
to advise the Company on compliance with its
relevant obligations.
Directors’ Remuneration
Report
Resolution 3 to be proposed at the 2017 AGM
deals with the 2017 Directors’ Remuneration
Report (excluding the summary of the
Remuneration Policy), as set out on pages 72
to 95, which the Board has again decided to
present to shareholders for the purposes of a
non-binding advisory vote. This is in line with
international best practice.
98
* For more information in relation to the Group’s risk management and internal control systems, please see the Risk Management and Internal Control section in the Supplementary
20-F Disclosures section on page 230.
CRH Annual Report and Form 20-F I 2016
Changes to the Board
of Directors
•
Senan Murphy was appointed to the
Board on 4 January 2016;
•
•
•
•
•
•
Bill Teuber, Jr. was appointed to the
Board on 3 March 2016;
Bill Egan retired from the Board on
28 April 2016;
Utz-Hellmuth Felcht retired from the
Board on 28 April 2016;
Rebecca McDonald retired from the
Board on 28 September 2016;
Mark Towe retired from the Board on
31 December 2016; and
Gillian Platt was appointed to the Board
on 1 January 2017
Under the Company’s Articles of Association,
co-opted Directors are required to submit
themselves to shareholders for election at
the AGM following their appointment and all
Directors are required to submit themselves
for re-election at intervals of not more than
three years. However, in accordance with the
provisions contained in the UK Corporate
Governance Code, the Board has decided
that all Directors eligible for re-election should
retire at each AGM and offer themselves for
re-election.
Auditors
As required under Section 381(1)(b) of the
Companies Act 2014, the AGM agenda
includes a resolution authorising the Directors
to fix the remuneration of the auditors.
Section 383 of the Companies Act 2014
provides for the automatic reappointment of
the auditor of an Irish company at a company’s
annual general meeting, unless the auditor has
given notice in writing of his unwillingness to be
reappointed or a resolution has been passed
at that meeting appointing someone else or
providing expressly that the incumbent auditor
shall not be reappointed. The auditors, 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 have a say
on the continuance in office of Ernst & Young
and a non-binding resolution has been included
on the agenda for the 2017 AGM for this
purpose.
Authority to Allot Shares
The Directors require the authority of the
shareholders to allot any unissued Ordinary
Share capital of the Company. Accordingly,
an ordinary resolution will be proposed at the
2017 AGM (Resolution 7) to renew the annual
authority for that purpose. The authority will be
for an amount which represents just under 50%
of the issued Ordinary Share capital as at 28
February 2017. Any allotment exceeding 33%
of the issued Ordinary Share capital will only be
made pursuant to a fully pre-emptive issue and
no issue of shares will be made which could
effectively alter control of the Company without
prior approval of the Company in General
Meeting.
The Directors have no present intention of
making any issue of shares, other than in
connection with the Group’s share incentive
plans and scrip dividend scheme. If approved,
this authority will expire on the earlier of the date
of the AGM in 2018 or 26 July 2018.
Disapplication of
Pre-emption Rights
Resolutions 8 and 9 are special resolutions
which, if approved by shareholders, will renew
the annual authorities of the Directors to
disapply statutory pre-emption rights in relation
to allotments of Ordinary Shares for cash in
certain circumstances.
Resolution 8 will, if approved, authorise
the Directors to allot Ordinary Shares on a
non-pre-emptive basis and for cash (otherwise
than in connection with a rights issue or similar
pre-emptive issue) up to a maximum nominal
value of €14,157,000. This amount represents
approximately 5% of the issued Ordinary Share
capital as at 28 February 2017, being the
latest practicable date prior to publication of
this document. Resolution 8 will also allow the
Directors to disapply pre-emption rights in order
to accommodate any regulatory restrictions in
certain jurisdictions.
Resolution 9 will, if approved, afford the Directors
with an additional power to allot Ordinary Shares
on a non-pre-emptive basis and for cash up
to a further 5% of the issued share capital as
at 28 February 2017. The power conferred by
Resolution 9 can be used only in connection with
an acquisition or a specified capital investment
which is announced contemporaneously with
the issue, or which has taken place in the
preceding six-month period and is disclosed in
the announcement of the issue.
The 5% limits in Resolutions 8 and 9 include
any Treasury Shares reissued by the Company
during the same period.
The Directors confirm that in respect of
Resolutions 8 and 9, they intend to follow the
Statement of Principles updated by the
Pre-Emption Group in that allotments of shares
for cash and the reissue of Treasury Shares
on a non-pre-emptive basis, other than for
an open offer or rights issues to ordinary
shareholders and employees’ share schemes
or in connection with an acquisition or specified
capital investment, will not exceed 7.5% of the
issued Ordinary Share capital within a rolling
three-year period without prior consultation with
shareholders.
Transactions in
Own Shares
During 2016, 711,839 (2015: 2,980,193)
Treasury Shares were reissued under the
Group’s employees’ share schemes. As at
28 February 2017, 83,423 shares were held
as Treasury Shares, equivalent to 0.01% of the
Ordinary Shares in issue (excluding Treasury
Shares).
A special resolution will be proposed at
the 2017 AGM (Resolution 10) to renew
the authority of the Company, or any of its
subsidiaries, to purchase up to 10% of the
Company’s Ordinary/Income Shares in issue
at the date of the AGM.
If approved, the minimum price which may be
paid for shares purchased by the Company
shall not be less than the nominal value of the
shares and the maximum price will be 105% of
the higher of the last independent trade in the
Company’s shares (or current independent bid,
if higher) and the average market price of such
shares over the preceding five days. A special
resolution (Resolution 11) will also be proposed
for the purpose of renewing the authority to set
the maximum and minimum prices at which
Treasury Shares (effectively shares purchased
and not cancelled) may be reissued off-market
by the Company. If granted, both of these
authorities will expire on the earlier of the date of
the AGM in 2018 or 26 July 2018.
99
CRH Annual Report and Form 20-F I 2016 Directors’ Report - continued
As at 28 February 2017, options to subscribe
for a total of 4,370,523 Ordinary/Income Shares
are outstanding, representing 0.5% of the
issued Ordinary/Income share capital (excluding
Treasury Shares). If the authority to purchase
Ordinary/lncome Shares was used in full, the
options would represent 0.6% 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
2017 AGM to renew the Directors’ authority to
make scrip dividend offers (Resolution 12). This
authority will apply to dividends declared or to
be paid commencing on 27 April 2017. Unless
renewed at the AGM in 2018, this authority shall
expire at the close of business on 26 July 2018.
Annual General Meeting
The Notice of Meeting for the 2017 AGM is
available on the CRH website (www.crh.com)
and will be posted to shareholders on 29 March
2017.
Statement of Directors’
Responsibilities
The Directors as at the date of this report,
whose names are listed on pages 59 to 61, are
responsible for preparing the Annual Report
and Form 20-F and Consolidated 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 (the ‘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 2016 Annual
Report and Form 20-F 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 204 to 209), in respect of which the
applicable accounting standards are those
which are generally accepted in Ireland.
The Directors have elected to prepare the
Company Financial Statements in accordance
with 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), including FRS
101 Reduced Disclosure Framework, the
Financial Reporting Standard applicable in the
UK and Ireland.
The Directors are responsible for keeping
adequate accounting records 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
100
Financial Reporting Standards as adopted
by the European Union and comply with the
provisions of the Companies Act 2014 and
Article 4 of the lAS 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 Group’s administrative
head offices located at Stonemason’s Way,
Rathfarnham, Dublin 16.
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 confirms that they
consider that the Annual Report and Form 20-F
and Consolidated Financial Statements, taken
as a whole, is fair, balanced and understandable
and provides the information necessary for
shareholders to assess the Company’s position,
performance, business model and strategy.
For the purposes of Section 330 of the
Companies Act 2014, each of the Directors also
confirms that:
•
•
so far as they are aware, there is no
relevant audit information of which
the Company’s statutory auditors are
unaware; and
they have taken all the steps that they
ought to have taken as Directors in order
to make themselves aware of any relevant
audit information and to establish that the
Company’s statutory auditors are aware
of that information
On behalf of the Board,
N. Hartery, A. Manifold
Directors
28 February 2017
CRH Annual Report and Form 20-F I 2016 Truck Loader at Gypsum Products, Inc. a division of Allied Building Products, delivering 5/8" (13 cm) drywall to a
commercial project in Denver, Colorado.
101101
CRH Annual Report and Form 20-F I 2016 Principal Risks and Uncertainties
Under Section 327(1)(b) of the Companies Act 2014 and Regulation 5(4)(c)(ii) of the Transparency
(Directive 2004/109/EC) Regulations 2007, the Group is required to give a description of the
principal risks and uncertainties which it faces. These risks and uncertainties reflect the international
scope of the Group’s operations and the Group’s decentralised structure. The risks set out below
are supplemented by a broader discussion of risk factors set out on pages 220 to 229.
Principal Strategic Risks and Uncertainties
Industry cyclicality
Risk
Description:
The level of construction activity in local and national markets is
inherently cyclical being influenced by a wide variety of factors
including global and national economic circumstances, 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.
Impact:
Failure of the Group to respond on a timely basis and/or
adequately to unfavourable events beyond its control may
adversely affect financial performance.
How we Manage the Risk
• CRH’s market and product diversification strategy, in addition to its spread of activity across
multiple end-use sectors, means that recession would need to be general across the US
and/or Europe to have a significant impact at Group level. CRH’s geographic footprint
is spread across 31 countries and multiple end-use sectors. CRH is the largest building
materials company in North America and is a regional leader in Europe with strategic
positions in Asia.
• Through an ingrained philosophy of business improvement, the Group is strongly committed
to ongoing cost control, strong cash generation and disciplined financial management. This
commitment, and the strength of its reporting and internal control systems, assist the Group
in responding quickly and hence mitigating the volatility associated with cyclicality.
• The Group prioritises dynamic capital allocation and reallocation aimed at ensuring profitable
growth across the Group’s network of businesses.
How we Manage the Risk
• The annual budgeting process is undertaken in two phases with prevailing economic and
market forecasts factored into performance targets.
• Commentaries and economic indicators are provided to senior management and the
Board on a monthly basis together with trading results and forecasts to facilitate tracking of
political and economic events which may create uncertainties as to financial performance.
• Where political tensions are heightened, or materialise, mitigation strategies are in place to
protect CRH’s people and assets.
Political and economic uncertainty
Risk
Description:
As an international business, the Group operates in many
countries with differing, and in some cases, potentially
fast-changing economic, social and political conditions. These
conditions, which may be heightened by the uncertainty resulting
from the outcome of the referendum in the UK to exit the
European Union, could include political unrest, currency
disintegration, strikes, civil disturbance and may be triggered or
worsened by other forms of instability including natural disasters,
epidemics, widespread transmission of diseases and terrorist
attacks. These factors are of particular relevance in
developing/emerging markets.
Impact:
Changes in these conditions, or in the governmental or regulatory
requirements in any of the countries in which the Group operates,
may adversely affect the Group’s business, results of operations,
financial condition or prospects thus leading to possible
impairment of financial performance and/or restrictions on future
growth opportunities.
102
CRH Annual Report and Form 20-F I 2016 Commodity products and substitution
Risk
Description:
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.
Impact:
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
Risk
Description:
Growth through acquisition and active management of the Group’s
business portfolio are key elements of the Group’s strategy with the
Group’s balanced portfolio growing year on year through bolt-on activity
occasionally supplemented by larger and/or step-change transactions.
In addition, the Group may be liable for the past acts, omissions or
liabilities of companies or businesses it has acquired.
Impact:
The Group may not be able to continue to grow as contemplated in its
business plans if it is unable to identify attractive targets (including potential
new platforms for growth), 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. If the Group is held liable for the past
acts, omissions or liabilities of companies or businesses it has acquired,
those liabilities may either be unforeseen or greater than anticipated at the
time of the relevant acquisition.
Joint ventures and associates
Risk
Description:
The Group does not have a controlling interest in certain of the businesses
(i.e. joint ventures and associates) in which it has invested and may invest.
The absence of a controlling interest gives rise to increased governance
complexity and a need for proactive relationship management, which may
restrict the Group’s ability to generate adequate returns and to develop
and grow these businesses.
Impact:
These limitations could impair the Group’s ability to manage joint ventures
and associates effectively and/or realise the strategic goals for these
businesses. In addition, improper management or ineffective policies,
procedures or controls for non-controlled entities could adversely affect
the business, results of operations or financial condition of the relevant
investment.
How we Manage the Risk
• CRH endeavours to counter the competitive positioning difficulties posed by
low barriers to entry across many of its markets, products and services through
focusing on customer service and other means of differentiation.
•
Innovation and research and development are aimed at ensuring that the Group is
constantly aligning its products and services to the demands of customers. These
activities are supported by the Group Sustainability function.
• Further details are outlined in the Group Sustainability Report, issued annually and
approved by the Board.
How we Manage the Risk
• CRH has traditionally grown through acquisition and as such has developed
significant expertise in identifying and evaluating appropriate targets and
conducting due diligence and subsequent integration.
• Many of the Group’s core markets remain fragmented or relatively unconsolidated
and will continue to offer growth opportunities via the proven acquisition model in
the decades ahead.
• The Group’s detailed due diligence programme is supported by external
specialists where required.
• Further discussion is provided in the Business Performance section,
Chairman’s Introduction and Chief Executive’s Review.
How we Manage the Risk
• Board-approved governance protocols are in place which require
acquisition/investment contracts to contain appropriate provisions as regards
future Board participation and ongoing management and interaction, amongst
other items.
•
In joint venture arrangements, CRH has traditionally appointed CRH personnel,
by way of the legal agreement entered into, to facilitate integration, assist in best
practice transfer and drive performance and growth.
103
CRH Annual Report and Form 20-F I 2016 Principal Strategic Risks and Uncertainties - continued
Human resources
Risk
Description:
Existing processes to recruit, develop and retain talented individuals
and promote their mobility may be inadequate thus giving rise to
employee/management attrition, difficulties in succession planning and
inadequate “bench strength”, potentially impeding the continued realisation
of the core 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.
How we Manage the Risk
• Succession planning and talent management initiatives are implemented in an
organised and concerted way in respect of all senior management positions
across the Group. These exercises are promoted and co-ordinated by Group
Human Resources & Talent Management with support from senior operational and
HR executives across the Group.
• Through appropriate structures, the Group and its operating entities seek to
maintain positive employee and trade/labour union relations which are key to
successful operations.
Impact:
In the longer term, failure to manage talent and plan for leadership and
succession could impede the realisation of core strategic objectives around
performance and growth.
Corporate affairs and communications
Risk
Description:
How we Manage the Risk
• The strategic, operational and financial performance of the Group and its
As a publicly-listed company, the Group undertakes regular
communications 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.
Impact:
Failure to deliver on performance indications and non-financial
commitments communicated to the Group’s variety of stakeholders could
result in a reduction in share price, reduced earnings and reputational
damage.
constituent entities is reported to the Board on a monthly basis with all results
announcements and other externally-issued documentation being discussed by
the Board/Audit Committee prior to release.
• Communications with stakeholders are given high priority and the Group devotes
considerable time and resources each year to stakeholder engagement. The
Group has an active and well-recognised investor relations programme fostering
openness and transparency in communications with shareholders. CRH
recognises the importance of effective dialogue as an integral element of good
corporate governance.
Principal Operational Risks and Uncertainties
Sustainability and Corporate Social Responsibility
Risk
Description:
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 & safety management and social
performance).
Impact:
Non-adherence to such laws, regulations, standards and best practices
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.
104
How we Manage the Risk
• CRH’s strategy and business model are built around sustainable, responsible and
ethical performance. Sustainability and Corporate Social Responsibility (CSR)
concepts are embedded in all CRH operations and activities. Excellence in the
areas of Health & Safety, Environment & Climate Change, Governance and People
& Community is a daily priority of line management.
• The Group has implemented detailed policies and procedures promoting Health &
Safety, Environmental Practices and Energy Efficiency.
• Further details are outlined in the Group Sustainability Report, issued annually and
approved by the Board.
CRH Annual Report and Form 20-F I 2016 Principal Operational Risks and Uncertainties - continued
Information Technology and Security/Cyber
Risk
Description:
How we Manage the Risk
• Ongoing strategic and tactical efforts to address the evolving nature of cyber
The Group is dependent on the employment of advanced information
systems and is exposed to risks of failure in the operation of these systems.
Further, the Group is exposed to security threats to its digital infrastructure
through cyber-crime. Such attacks are by their nature technologically
sophisticated and may be difficult to detect and defend in a timely fashion.
threats and the challenges posed, including the revision of internal practices and
controls.
• Enhancement of existing information and cyber security practices towards
best practices for organisational assets, which include people, processes and
technology.
Impact:
Should a threat materialise, it 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, regulatory penalties and incur significant financial costs
in remediation.
• Ongoing investment and development of risk management and governance
associated with cyber security and information technology.
Principal Compliance Risks and Uncertainties
Laws and regulations
Risk
Description:
The Group is subject to many local and international laws and regulations,
including those relating to competition law, corruption and fraud, across
many jurisdictions of operation and is therefore exposed to changes in
those laws and regulations and to the outcome of any investigations
conducted by governmental, international or other regulatory authorities.
Impact:
Potential breaches of local and international laws and regulations in
the areas of competition law, corruption and fraud, among others,
could result in the imposition of significant fines and/or sanctions for
non-compliance, and may inflict reputational damage.
How we Manage the Risk
• CRH’s Code of Business Conduct, which is in effect mandatorily across the
Group, stipulates best practice in relation to regulatory and compliance matters
amongst other issues. The Code is available on www.crh.com.
• Proactive on-the-ground engagement throughout the Group through an extensive
training programme, a dedicated whistleblowing hotline (the results of which are
reported to the Audit Committee) and detailed policies and procedures to support
the Code of Business Conduct.
• Significant internal controls and compliance policies have been implemented in
order to promote strong and ongoing compliance with all laws and regulations,
including the UK Bribery Act, 2010 and the US Foreign Corrupt Practices Act,
1977.
105
CRH Annual Report and Form 20-F I 2016 Principal Financial and Reporting Risks and Uncertainties
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity)
Risk
Description:
The Group uses financial instruments throughout its businesses giving rise
to interest rate and leverage, foreign currency, counterparty, credit rating
and liquidity risks. A significant portion of the cash generated by the
Group from operational activity is currently dedicated to the payment of
principal and interest on indebtedness. In addition, the Group has entered
into certain financing agreements containing restrictive covenants
requiring it to maintain a certain minimum interest coverage ratio and a
certain minimum net worth.
Impact:
A downgrade of the Group’s credit ratings may give rise to increases in
funding costs in respect of future debt and may impair the Group’s ability to
raise funds on acceptable terms. In addition, insolvency of the financial
institutions with which the Group conducts business (or a downgrade in
their credit ratings) may lead to losses in derivative assets and cash and
cash equivalents balances or render it more difficult for the Group either to
utilise existing debt capacity or otherwise obtain financing for operations.
Defined benefit pension schemes and related obligations
Risk
Description:
The Group operates a number of defined benefit pension schemes and
schemes with related obligations (for example, termination indemnities
and jubilee/long-term service benefits, which are accounted for as defined
benefit) in certain of its operating jurisdictions. The assets and liabilities of
defined benefit pension schemes may exhibit significant period-on-period
volatility attributable primarily to asset values, changes in bond yields/
discount rates and anticipated longevity.
Impact:
In addition to the contributions required for the ongoing service of
participating employees, significant cash contributions may be required to
remediate deficits applicable to past service. Further, fluctuations in the
accounting surplus/deficit may adversely impact the Group’s credit metrics
thus harming its ability to raise funds.
Taxation litigation
Risk
Description:
The Group is exposed to uncertainties stemming from governmental
actions in respect of taxes paid and payable in all jurisdictions of
operation.
Impact:
Changes in the tax regimes and related government policies and
regulations in the countries in which the Group operates could adversely
affect its results and its effective tax rate.
The final determination of tax audits or tax disputes may be different from
what is reflected in the Group’s historical income tax provisions and
accruals. If future audits find that additional taxes are due, the Group may
be subject to incremental tax liabilities, possibly including interest and
penalties, which could have a material adverse effect on cash flows,
financial condition and results of operations.
106
How we Manage the Risk
• Fixed and floating rate debt and interest rate swaps are used to manage
borrowing costs, while currency swaps and forward foreign currency contracts
are used to manage currency exposures and to achieve the desired profile of
borrowings.
• The Group seeks to ensure that sufficient resources are available to meet the
Group’s liabilities as they fall due through a combination of cash and cash
equivalents, cash flows and undrawn committed bank facilities. Systems are in
place to monitor and control the Group’s liquidity risks, which are reported to
the Board on a monthly basis. Cash flow forecasting is provided to executive
management on a daily basis.
• The Group’s established policy is to spread its net worth across the currencies
of its various operations with the objective of limiting its exposure to individual
currencies.
• All of the Group’s financial counterparties are leading financial institutions of
international scope with a minimum S&P credit rating of A-.
• Please see note 21 to the Consolidated Financial Statements on page 165 for
further detail.
How we Manage the Risk
• Where feasible, defined benefit pension schemes have been closed to future
accrual. Where closure to future accrual was not feasible for legal and other
reasons, the relevant final salary schemes were transitioned to a career-average
methodology for future service with severance of the final salary link and the
introduction of defined contribution for new entrants.
• De-risking frameworks (for example, Liability-Driven Investment techniques)
have been instituted to mitigate deficit volatility and enable better matching of
investment returns with the cash outflows related to benefit obligations.
• Defined benefit pension scheme exposures and the mitigation strategies are
reviewed by the Audit Committee on a periodic basis.
How we Manage the Risk
• The Group Tax Guidelines and Group Transfer Pricing Guidelines provide a
governance framework for the Group to operate within from a tax perspective.
• Group Tax is managed by in-house specialists with significant experience. The
in-house expertise is supplemented with the assistance of external advisors where
required.
• Group Tax, and the responsible individuals at operating company level, monitor
potential changes in tax legislation and policy in all jurisdictions of operation.
• The Group Tax Director reports directly to the Group Finance Director and
provides regular tax updates to the Finance Director and the Finance Committee.
This ensures tax risk is actively managed and monitored.
CRH Annual Report and Form 20-F I 2016 Adequacy of insurance arrangements and related counterparty exposures
Risk
Description:
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 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.
Impact:
In the event of failure of one or more of the Group’s counterparties, the
Group could be impacted by losses where recovery from such
counterparties is not possible. In addition, losses may materialise in
respect of uninsured events or may exceed insured amounts.
Foreign currency translation
Risk
Description:
The principal foreign exchange risks to which the Consolidated Financial
Statements are exposed pertain to adverse movements in reported
results when translated into euro (which is the Group’s reporting currency)
together with declines in the euro value of net investments which are
denominated in a wide basket of currencies other than the euro.
Impact:
Adverse changes in the exchange rates used to translate foreign
currencies into euro have impacted and will continue to impact retained
earnings. The annual impact is reported in the Consolidated Statement of
Comprehensive Income.
Goodwill impairment
Risk
Description:
Significant under-performance in any of the Group’s major
cash-generating units or the divestment of businesses in the future
may give rise to a material write-down of goodwill.
Impact:
A write-down of goodwill could have a substantial impact on the Group’s
income and equity.
How we Manage the Risk
•
Insurance protection is maintained with leading, highly-rated international
insurers with appropriate risk retention by wholly-owned insurance companies
(captive insurers) and by insured entities in the context of deductibles/excesses
borne.
• Strong adherence to Group policies on property management, quality control,
Information Security, health & safety and Sustainability assist in avoiding potential
loss events. Insurance captives play a critical role in CRH’s insurable risk
management strategies.
• Constant monitoring of the risk environment to determine whether all key risks are
covered by insurance, where practicable and sensible.
How we Manage the Risk
• The Group’s activities are conducted primarily in the local currency of operation
resulting in low levels of foreign currency transactional risk.
• The Group’s established policy is to spread its net worth across the currencies
of the various operations with the objective of limiting its exposure to individual
currencies and thus promoting consistency with the geographical balance of its
operation.
• The Group manages its multi-currency borrowings through hedging a portion of its
foreign currency assets.
• Sensitivity analysis is conducted in order to understand the impact of significant
variances in currency fluctuations.
How we Manage the Risk
• Economic indicators of goodwill impairment are monitored closely through the
monthly reporting process and regular senior management dialogue in order
to ensure that potential impairment issues are flagged on a timely basis and
corrective action taken, where feasible.
• Detailed impairment testing in respect of each of the cash-generating units across
the Group is undertaken prior to year-end for the purposes of the Consolidated
Financial Statements.
• The goodwill impairment assessment is subject to regular review by the Audit
Committee.
• For further information on how we manage the risk posed by Goodwill Impairment,
please refer to note 14 to the Consolidated Financial Statements
on pages 153 to 156.
107
CRH Annual Report and Form 20-F I 2016 s
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CRH Annual Report and Form 20-F 2016
Consolidated Financial Statements
Independent Auditor’s Reports
110
Consolidated Income Statement
120
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Accounting Policies
Notes on Consolidated
Financial Statements
121
122
123
124
125
136
C.R. Laurence, a division of Oldcastle BuildingEnvelope®, manufactured and supplied 500 linear feet of patented
dry-glaze TAPER-LOC¨ Glass Railing Systems, lining interior stairways of five new buildings at Capital One’s
campus, West Plano. It is among the largest corporate office complexes in the state of Texas.
109
109
CRH Annual Report and Form 20-F 2016 Independent Auditor’s Irish Report
to the members of CRH plc
Our opinion on the financial statements
In our opinion:
•
•
•
•
CRH plc’s Group financial statements and Company financial statements (the ‘financial statements’) give a true and fair view of the assets, liabilities and
financial position of the Group’s and of the Company’s affairs as at 31 December 2016 and of the Group’s Profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with Generally Accepted Accounting Practice in Ireland, including FRS 101
Reduced Disclosure Framework; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2014, and, as regards the Group financial
statements, Article 4 of the IAS Regulation
What we have audited
CRH plc’s financial statements comprise:
Group
Company
Consolidated Income Statement for the year ended 31 December 2016
Balance Sheet as at 31 December 2016
Consolidated Statement of Comprehensive Income for the year then ended
Statement of Changes in Equity for the year then ended
Consolidated Balance Sheet as at 31 December 2016
Related notes 1 to 13 to the Company Financial Statements
Consolidated Statement of Changes in Equity for the year then ended
Consolidated Statement of Cash Flows for the year then ended
Accounting Policies
Related notes 1 to 33 to the Consolidated Financial Statements
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), including FRS 101 Reduced Disclosure Framework.
Overview of our audit approach
Risks of material misstatement
•
•
•
•
Assessment of the carrying value of goodwill
Assessment of the carrying value of property, plant and equipment and financial assets
Revenue recognition for construction contracts
Finalisation of provisional accounting for the LafargeHolcim acquisition (the ‘LH Assets’)
Audit Scope
• We performed an audit of the complete financial information of 20 components and performed audit
procedures on specific balances for a further 47 components
Materiality
•
•
•
The components where we performed either full or specific audit procedures accounted for 93% of Profit
before tax, 87% of Revenue and 93% of Total Assets
‘Components’ represent business units across the Group considered for audit scoping purposes
Overall Group materiality was assessed to be €87 million which represents approximately 5% of Profit
before tax
110
Independent Auditor’s Irish Report on pages 110 to 117 does not form part of CRH’s Annual Report on Form 20-F as filed with the SEC.
CRH Annual Report and Form 20-F 2016 Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the allocation of resources in the
audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the procedures below which were designed in the context of
the financial statements as a whole and, consequently, we do not express any opinion on these individual areas.
Key observations communicated to
the Audit Committee
We completed our planned audit procedures with
no exceptions noted.
Consistent with the previous year, two CGUs had
allocated goodwill balances of between 10% and
25% of total goodwill which the Group considered
significant and therefore warranted separate
disclosure. An impairment charge of €23 million
was recorded in respect of the total goodwill of one
CGU. One additional CGU was determined to be
sensitive in respect of the excess of value-in-use
over its carrying value, compared to 4 in the
previous year.
Risk
Our response to the risk
Assessment of the carrying value of goodwill
The impairment review of goodwill, with a carrying
value of €7.4 billion, 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, all of which may be
subject to management override.
There has been no change in this risk from the
prior year.
Refer to the Audit Committee Report (page 64);
Accounting policies (page 125); and note 14 of the
Consolidated Financial Statements (page 153).
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 challenged the determination of the Group’s
25 cash-generating units (CGUs) including the
integration of prior year acquisitions for which
goodwill was unallocated at 31 December 2015,
and flexed our audit approach relative to our risk
assessment and the level of excess of value-in-use
over carrying amount in each CGU. For all CGUs
selected for detailed testing, we corroborated key
assumptions in the models and benchmarked
growth assumptions 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 excess of
value-in-use over the goodwill carrying amount 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 disclosures appropriately
communicate the underlying sensitivities.
The above procedures were performed
predominantly by the Group audit team.
111
CRH Annual Report and Form 20-F 2016 Independent Auditor’s Irish Report - continued
Risk
Our response to the risk
Assessment of the carrying value of
property, plant and equipment (PP&E)
and financial assets
In respect of the discount rate, we performed
similar procedures to those noted above for
goodwill.
Key observations communicated to
the Audit Committee
Our planned audit procedures were completed
without exception.
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.
We performed the above procedures in 37
components representing 94% of total PP&E and
financial asset carrying values.
We performed a range of audit procedures which
included obtaining a sample of contracts, reviewing
for change orders, retrospectively reviewing
estimated profit and costs to complete and
enquiring of key personnel regarding adjustments
for job costing and potential contract losses.
As a result of our audit procedures, we believe that
revenue has been appropriately recognised in
relation to construction contracts and that the
judgements made by management in recognising
revenue, margin and provisioning on loss-making
contracts are reasonable.
We performed the above procedures in 8
components representing 97% of construction
contract revenue recognised during the year.
The impairment review of PP&E and financial
assets, with a carrying value of €12.7 billion and
€1.3 billion respectively, is considered to be a
risk area due to the size of the balances as well
as the judgemental nature of key assumptions,
which may be subject to management override,
similar to that noted in the assessment of the
carrying value of goodwill above.
There has been no change in this risk from the
prior year.
Refer to the Audit Committee Report (page 64);
Accounting policies (page 125); and note 13
and note 15 of the Consolidated Financial
Statements (pages 152 and 157).
Revenue recognition for construction contracts
There are significant accounting judgements
including determining the stage of completion,
the timing of revenue recognition and the
calculation under the percentage-of-completion
method, made by management in applying the
Group’s revenue recognition policies to long-term
contracts entered into by the Group. The nature of
these judgements results in them being susceptible
to management override.
The majority of the Group’s construction contracts
have a maturity within one year. There is significant
seasonality to when services are rendered under
these construction contracts, with the majority of
the work historically performed in the summer
months and, consequently, most are completed
prior to the year-end.
Total revenue for construction contracts was
€5.1 billion which represents 19% of the Group’s
revenue in 2016.
There has been no change in this risk from the
prior year.
Refer to the Audit Committee Report (page 64);
Accounting policies (page 125); and note 1 of the
Consolidated Financial Statements (page 136).
112
CRH Annual Report and Form 20-F 2016 Key observations communicated to
the Audit Committee
Measurement period adjustments to the
preliminary opening balance sheet and
preliminary purchase price allocation as defined
under IFRS 3 were deemed to be reasonable.
Risk
Our response to the risk
Finalisation of provisional accounting for the
LH Assets
The acquisition of the LH Assets was a material
acquisition completed in the second half of
2015 and spanned 11 countries. The fair value
of the identifiable net assets acquired was
€4.7 billion and the transaction resulted in the
recognition of €2.3 billion of goodwill. Due to
both the timing of when the acquisition was
completed and the size and scale of the
acquisition, the allocation of the purchase
price and the determination of the fair values
of identifiable assets acquired and liabilities
assumed were only provisional as of 31
December 2015.
Under IFRS 3 Business Combinations,
CRH is permitted to revise its preliminary
purchase price allocation during the 12 month
measurement period following the date of
the acquisition.
Because of the significant scale of this
acquisition, we identified a risk over the
finalisation of the provisional accounting
adjustments to the purchase price allocation
and the opening balance sheet assets and
liabilities relating to the LH Assets. The
accounting treatment of certain assets and
liabilities recognised under IFRS 3 may involve
significant estimates and judgements to be
made by management.
The emphasis related to the risk concerning the
purchase price allocation for the LH Assets has
been revised in 2016 to focus on where we
deem the risk to reside in relation to this
significant transaction which took place in 2015.
Refer to the Audit Committee Report (page 64);
Accounting policies (page 125); and note 30
of the Consolidated Financial Statements
(page 188).
We audited the final opening balance sheets for
each location acquired and purchase price
allocation for material adjustments at both
Group and component levels. We provided an
independent challenge to key judgements,
assumptions and calculations made by
management. We obtained an understanding of
the adjustments identified by management and
management’s specialists and we assessed the
reasonableness of the adjustments by way of
reference to IFRS 3. We performed an
evaluation of any experts engaged by
management and utilised our own specialists
where necessary.
In respect of the fair value adjustments to
PP&E, we performed an evaluation of valuation
methodologies, assessed the appropriateness
of the underlying data used, and tested
significant assumptions in conjunction with our
valuations specialists. We performed
corroborative procedures including examining
relevant external third party benchmarks and
performing sensitivity analyses on key
assumptions, being the useful lives, direct costs
inputs and economics of relevant countries. We
also held discussions with the experts
employed by management to assist in this area
and evaluated the findings and conclusions in
their valuation report. These procedures were
predominantly performed by the Group audit
team and our valuations specialists, although
we also leveraged the knowledge and expertise
of our component teams.
We also determined whether adjustments to
the preliminary opening balance sheet and
preliminary purchase price allocation fell within
the measurement period as defined under
IFRS 3 and were correctly recognised/not
recognised in goodwill.
In the prior year, our auditor’s report included risks of material misstatement in relation to accounting for acquisitions and disposals and in relation to the C.R.
Laurence (CRL) acquisition, and the identification and valuation of acquired intangible assets. In the current year, we have removed these two risks of material
misstatement as there were no material acquisitions and disposals in 2016 and, in relation to the CRL acquisition, this was a specific 2015 event. In addition, we
have revised the wording of the prior year risk of material misstatement “in relation to the acquisition of the LH Assets, fair value accounting for property, plant and
equipment and provisions” to “finalisation of provisional accounting for the LH Assets” to ensure that all adjustments made during the measurement period under
IFRS 3 have been appropriately accounted for.
113
CRH Annual Report and Form 20-F 2016 Independent Auditor’s Irish Report - continued
The scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for each
entity within the Group. Taken together, this enables
us to form an opinion on the Consolidated Financial
Statements.
In determining those components in the Group to
which we perform audit procedures, we utilised
size and risk criteria in accordance with
International Standards on Auditing (UK and
Ireland).
In assessing the risk of material misstatement to
the Group financial statements, and to ensure we
had adequate quantitative coverage of significant
accounts in the financial statements, we selected
67 components covering entities across Europe
and the Americas, as well as the Philippines, which
represent the principal business units within the
Group.
Of the 67 components selected, we performed an
audit of the complete financial information of 20
components (‘full scope components’) which were
selected based on their size or risk characteristics.
For the remaining 47 components (‘specific scope
components’), we performed audit procedures on
specific accounts within that component that we
considered had the potential for the greatest
impact on the significant accounts in the financial
statements either because of the size of these
accounts or their risk profile.
The reporting components where we performed
audit procedures accounted for 93% (2015: 98%)
of the Group’s Profit before tax, 87% (2015: 90%)
of the Group’s Revenue and 93% (2015: 87%) of
the Group’s Total Assets.
For the current year, the full scope components
contributed 78% (2015: 93%) of the Group’s Profit
before tax, 80% (2015: 81%) of the Group’s
Revenue and 78% (2015: 78%) of the Group’s Total
Assets. The specific scope components
contributed 15% (2015: 5%) of the Group’s Profit
before tax, 7% (2015: 9%) of the Group’s Revenue
and 15% (2015: 9%) of the Group’s Total Assets.
The audit scope of these components may not
have included testing of all significant accounts of
the component but will have contributed to the
coverage of significant risks tested for the Group.
Of the remaining components, which together
represent 7% of the Group’s Profit before tax, none
is individually greater than 5% of the Group’s Profit
before tax. For these components, we performed
other procedures, including analytical review,
testing of consolidation journals and intercompany
eliminations and foreign currency translation
recalculations to respond to any potential risks of
material misstatement to the Consolidated Financial
Statements.
The charts below illustrate the coverage obtained from the work performed by our audit teams.
Profit before tax
Revenue
Total Assets
7%
Other procedures
7%
Other procedures
15%
Specific scope
components
15%
Specific scope
components
78%
Full scope
components
78%
Full scope
components
13%
Other procedures
13%
Other procedures
7%
Other procedures
7%
Other procedures
7%
Other procedures
13%
Other procedures
7%
Other procedures
7%
Specific scope
components
7%
Specific scope
components
80%
Full scope
components
80%
Full scope
components
15%
Specific scope
components
15%
Specific scope
components
15%
Specific scope
components
78%
Full scope
components
78%
Full scope
components
78%
Full scope
components
7%
Specific scope
components
80%
Full scope
components
15%
Specific scope
components
78%
Full scope
components
114
CRH Annual Report and Form 20-F 2016 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.
Respective responsibilities
of Directors and auditor
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
those statements give a true and fair view and
otherwise comply with the Companies Act 2014.
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.
Involvement with component teams
In establishing our overall approach to the Group
audit, we determined the type of work that needed
to be undertaken at each of the components by us,
as the Group audit team, or by component auditors
from other EY global network firms operating under
our instruction.
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, visiting 10 component teams during 2016
and visiting 42 component teams in the past
5 years. The visits conducted during the year
involved discussing with the component team the
audit approach and any issues arising from their
work, meeting with local management, attending
planning and closing meetings and reviewing key
audit working papers on risk areas. The Group
audit team interacted regularly with all component
teams where appropriate during various stages of
the audit, reviewed key working papers and were
responsible for the scope and direction of the audit
process. This, together with the additional
procedures performed at Group level, gave us
appropriate evidence for our opinion on the
Consolidated Financial Statements.
Our application of materiality
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of
identified misstatements on the audit and in
forming our audit opinion.
Materiality
We determined materiality for the Group to
be €87 million (2015: €50 million), which is
approximately 5% (2015: 5%) of Group Profit
before tax. Profit before tax is a key performance
indicator for the Group and is also a key metric
used by the Group in the assessment of the
performance of management. We therefore
considered Profit before tax to be the most
appropriate performance metric on which to base
our materiality calculation as we consider it to be
the most relevant performance measure to the
stakeholders of the Group.
During the course of our audit, we reassessed initial
materiality and the only change in final materiality
was to reflect the actual reported performance of
the Group in the year.
Performance materiality
On the basis of our risk assessments, together with
our assessment of the Group’s overall control
environment, our judgement was that performance
materiality should be set at 50% (2015: 50%) of
our planning materiality, namely €43.5 million
(2015: €25 million). We have set performance
materiality at this percentage due to our past
experience of the risk of misstatements, both
corrected and uncorrected.
Audit work at component locations for the purpose
of obtaining audit coverage over significant financial
statement accounts is undertaken based on a
percentage of total performance materiality. The
performance materiality set for each component is
based on the relative scale and risk of the
component to the Group as a whole and our
assessment of the risk of misstatement at that
component. In the current year, the range of
performance materiality allocated to components
was €7.5 million to €22.7 million (2015: €4.1 million
to €13 million).
Reporting threshold
We agreed with the Audit Committee that we
would report to them all uncorrected audit
differences in excess of €4.35 million
(2015: €2.1 million), which is set at approximately
5% of planning materiality, as well as differences
below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements
against both the quantitative measures of
materiality discussed above and in light of other
relevant qualitative considerations in forming
our opinion.
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’s
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
115
CRH Annual Report and Form 20-F 2016 Independent Auditor’s Irish Report - continued
Opinion on other matters prescribed by the Companies Act 2014
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit
•
•
•
In our opinion the information given in the Directors’ Report is consistent with the financial statements and the description in the Corporate Governance
Statement of the main features of the internal control and risk management systems in relation to the process for preparing the Consolidated Financial
Statements is consistent with the Consolidated Financial Statements
In our opinion the accounting records of the Company were sufficient to permit the Company financial statements to be readily and properly audited
The Company Balance Sheet is in agreement with the accounting records
Matters on which we are required to report by exception
ISAs (UK and
Ireland) reporting
We are required to report to you if, in our opinion, financial and non-financial information in the
Annual Report is:
We have no exceptions
to report.
• 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
otherwise misleading
In particular, we are required to report whether we have identified any inconsistencies between our
knowledge acquired in the course of performing the audit and the Directors’ statement that they
consider 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 entity’s
performance, business model and strategy; and whether the Annual Report appropriately
addresses those matters that we communicated to the Audit Committee that we consider should
have been disclosed.
We are required to report to you if, in our opinion:
In respect of Sections 305 to 312 of the Companies Act 2014 we are required to report to you if,
in our opinion, the disclosures of Directors’ remuneration and transactions specified by law are
not made.
We are required to review:
•
•
•
the Directors’ statement in relation to going concern, set out on page 98, and longer term
viability, set out on page 98;
the part of the Corporate Governance Statement relating to the Company’s compliance
with the 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
Companies Act
2014 reporting
Listing Rules review
requirements
We have no exceptions
to report.
We have no exceptions
to report.
116
CRH Annual Report and Form 20-F 2016 Statement on the Directors’ Assessment of the Principal Risks that would
threaten the Solvency or Liquidity of the Entity
ISAs (UK and
Ireland) reporting
We are required to give a statement as to whether we have anything material to add or to draw
attention to in relation to:
We have nothing material to
add or to draw attention to.
•
•
•
•
the Directors’ confirmation in the Annual Report that they have carried out a robust
assessment of the principal risks facing the entity, including those that would threaten its
business model, future performance, solvency or liquidity;
the disclosures in the Annual Report that describe those risks and explain how they are
being managed or mitigated;
the Directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and their
identification of any material uncertainties to the entity’s ability to continue to do so over a
period of at least twelve months from the date of approval of the financial statements; and
the Directors’ explanation in the Annual Report as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider that
period to be appropriate, and their statement as to whether they have a reasonable
expectation that the entity will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions
Pat O’Neill
for and on behalf of Ernst & Young
Chartered Accountants and Statutory Audit Firm
Dublin
28 February 2017
117
CRH Annual Report and Form 20-F 2016 Independent Auditor’s US Reports
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of CRH public limited company (CRH plc):
We have audited the accompanying Consolidated Balance Sheets of CRH plc as of 31 December 2016 and 2015, and the related Consolidated Income
Statements and Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for each of the three years in the period ended
31 December 2016. These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the Consolidated Financial Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall Consolidated Financial Statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the consolidated financial position of CRH plc at
31 December 2016 and 2015, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended
31 December 2016, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CRH plc’s internal control over
financial reporting as of 31 December 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organisations of the Treadway Commission (2013 Framework) and our report dated 28 February 2017 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG
Dublin, Ireland
28 February 2017
118
Note that the report set out above is included for the purposes of CRH plc’s 2016 Annual Report on Form 20-F only.
CRH Annual Report and Form 20-F 2016 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
To the Board of Directors and Shareholders of CRH public limited company (CRH plc):
We have audited CRH plc’s internal control over financial reporting as of 31 December 2016, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organisations of the Treadway Commission (2013 Framework) (the ‘COSO criteria’). CRH plc’s management is responsible
for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of Consolidated Financial Statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of Consolidated Financial Statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the Consolidated Financial Statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the internal controls of business combinations during the year ended 31 December 2016,
which are included in the 2016 Consolidated Financial Statements of CRH plc and constituted 0.5% and 1.0% of total and net assets, respectively, as of 31
December 2016 and 0.4% and 0.1% of revenues and group profit, respectively, for the year then ended. Our audit of internal control over financial reporting of CRH
plc also did not include an evaluation of the internal control over financial reporting of business combinations completed during the year ended 31 December 2016.
In our opinion, CRH plc maintained, in all material respects, effective internal control over financial reporting as of 31 December 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2016 Consolidated Financial
Statements of CRH plc and our report dated 28 February 2017 expressed an unqualified opinion thereon.
/s/ ERNST & YOUNG
Dublin, Ireland
28 February 2017
Note that the report set out above is included for the purposes of CRH plc’s 2016 Annual Report on Form 20-F only.
119
CRH Annual Report and Form 20-F 2016 Consolidated Income Statement
for the financial year ended 31 December 2016
Notes
1
2
2
Revenue
Cost of sales
Gross profit
Operating costs
1,3,5,6
Group operating profit
1,4
Profit on disposals
Profit before finance costs
Finance costs
Finance income
Other financial expense
Share of equity accounted investments’ profit
Profit before tax
8
8
8
9
1
10
Income tax expense
Group profit for the financial year
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Group profit for the financial year
12
12
Basic earnings per Ordinary Share
Diluted earnings per Ordinary Share
All of the results relate to continuing operations.
2016
€m
2015
€m
2014
€m
27,104
(18,267)
8,837
(6,810)
2,027
55
2,082
(325)
8
(66)
42
1,741
(471)
1,270
1,243
27
1,270
150.2c
149.1c
23,635
(16,394)
7,241
(5,964)
1,277
101
1,378
(303)
8
(94)
44
1,033
(304)
729
724
5
729
89.1c
88.7c
18,912
(13,427)
5,485
(4,568)
917
77
994
(254)
8
(42)
55
761
(177)
584
582
2
584
78.9c
78.8c
120
CRH Annual Report and Form 20-F 2016 Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2016
Notes
Group profit for the financial year
1,270
729
584
2016
€m
2015
€m
2014
€m
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
24
Gains/(losses) relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
27
10
Remeasurement of retirement benefit obligations
Tax on items recognised directly within other comprehensive income
(82)
14
(68)
(61)
3
(58)
661
(2)
659
203
(30)
173
599
(6)
593
(414)
69
(345)
Total other comprehensive income for the financial year
(126)
832
248
Total comprehensive income for the financial year
1,144
1,561
832
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
1,128
1,538
16
23
1,144
1,561
830
2
832
121
CRH Annual Report and Form 20-F 2016 Consolidated Balance Sheet
as at 31 December 2016
Notes
13
14
15
15
17
24
26
16
17
24
22
29
29
29
29
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Other financial assets
Other receivables
Derivative financial instruments
Deferred income tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Capital and reserves attributable to the Company’s equity holders
Equity share capital
Preference share capital
Share premium account
Treasury Shares and own shares
Other reserves
Foreign currency translation reserve
Retained income
Capital and reserves attributable to the Company’s equity holders
31
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Deferred income tax liabilities
Other payables
Retirement benefit obligations
Provisions for liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Current income tax liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Provisions for liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
N. Hartery, A. Manifold, Directors
23
24
26
18
27
25
18
23
24
25
122
2016
€m
2015
€m
12,690
7,761
1,299
26
212
53
159
13,062
7,820
1,317
28
149
85
149
22,200
22,610
2,939
3,979
4
23
2,449
9,394
31,594
284
1
6,237
(14)
286
629
6,472
13,895
548
14,443
7,515
-
2,008
461
591
678
2,873
3,977
5
24
2,518
9,397
32,007
281
1
6,021
(28)
240
700
5,800
13,015
529
13,544
8,465
5
2,023
410
588
603
11,253
12,094
4,815
4,761
394
275
32
382
5,898
17,151
31,594
401
756
19
432
6,369
18,463
32,007
CRH Annual Report and Form 20-F 2016
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2016
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 2016
Group profit for the financial year
Other comprehensive income
Total comprehensive income
29
7
29
29
10
11
30
29
7
29
29
10
11
30
29
7
29
11
Issue of share capital (net of expenses)
Share-based payment expense
Treasury/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
Tax relating to share-based payment expense
Dividends (including shares issued in lieu of dividends)
Non-controlling interests arising on acquisition of subsidiaries
Transactions involving non-controlling interests
At 31 December 2016
For the financial year ended 31 December 2015
At 1 January 2015
Group profit for the financial year
Other comprehensive income
Total comprehensive income
Issue of share capital (net of expenses)
Share-based payment expense
Treasury/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
Tax relating to share-based payment expense
Share option exercises
Dividends (including shares issued in lieu of dividends)
Non-controlling interests arising on acquisition of subsidiaries
At 31 December 2015
For the financial year ended 31 December 2014
At 1 January 2014
Group profit for the financial year
Other comprehensive income
Total comprehensive income
Issue of share capital (net of expenses)
Share-based payment expense
Treasury/own shares reissued
Share option exercises
Dividends (including shares issued in lieu of dividends)
Transactions involving non-controlling interests
At 31 December 2014
282
-
-
-
3
-
-
-
-
-
-
-
285
254
-
-
-
28
-
-
-
-
-
-
-
282
252
-
-
-
2
-
-
-
-
-
254
6,021
-
-
-
216
-
-
-
-
-
-
-
6,237
4,324
-
-
-
1,697
-
-
-
-
-
-
-
6,021
4,219
-
-
-
105
-
-
-
-
-
4,324
(28)
-
-
-
-
-
18
(4)
-
-
-
-
(14)
(76)
-
-
-
-
-
51
(3)
-
-
-
-
(28)
(118)
-
-
-
-
-
42
-
-
-
(76)
240
-
-
-
-
46
-
-
-
-
-
-
286
213
-
-
-
-
27
-
-
-
-
-
-
240
197
-
-
-
-
16
-
-
-
-
213
700
-
(71)
(71)
-
-
-
-
-
-
-
-
629
57
-
643
643
-
-
-
-
-
-
-
-
700
(542)
-
599
599
-
-
-
-
-
-
57
5,800
1,243
(44)
1,199
-
-
(18)
-
12
(519)
-
(2)
6,472
5,405
724
171
895
-
-
(51)
-
5
57
(511)
-
5,800
5,654
582
(351)
231
-
-
(42)
22
(460)
-
5,405
529
27
(11)
16
-
-
-
-
-
(8)
9
2
548
21
5
18
23
-
-
-
-
-
-
(4)
489
529
24
2
-
2
-
-
-
-
(4)
(1)
21
13,544
1,270
(126)
1,144
219
46
-
(4)
12
(527)
9
-
14,443
10,198
729
832
1,561
1,725
27
-
(3)
5
57
(515)
489
13,544
9,686
584
248
832
107
16
-
22
(464)
(1)
10,198
123
CRH Annual Report and Form 20-F 2016 Consolidated Statement of Cash Flows
for the financial year ended 31 December 2016
Notes
8
9
4
2
2
2
7
Cash flows from operating activities
Profit before tax
Finance costs (net)
Share of equity accounted investments’ profit
Profit on disposals
Group operating profit
Depreciation charge
Amortisation of intangible assets
Impairment charge
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
4
15
13
30
15
19
Cash flows from investing activities
Proceeds from disposals (net of cash disposed and deferred proceeds)
Interest received
Dividends received from equity accounted investments
Purchase of property, plant and equipment
Acquisition of subsidiaries (net of cash acquired)
Other investments and advances
Deferred and contingent acquisition consideration paid
Net cash outflow from investing activities
Cash flows from financing activities
29
Proceeds from issue of shares (net)
Proceeds from exercise of share options
Acquisition of non-controlling interests
20
20
8
29
20
11
11
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
Premium paid on early debt redemption
Treasury/own shares purchased
Repayment of interest-bearing loans, borrowings and finance leases
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash (outflow)/inflow from financing activities
2016
€m
1,741
383
(42)
(55)
2,027
1,009
71
23
46
(65)
56
3,167
(346)
(481)
2,340
283
8
40
(853)
(149)
(7)
(57)
(735)
52
-
-
600
(5)
-
(4)
(2,015)
(352)
(8)
(1,732)
2015
€m
1,033
389
(44)
(101)
1,277
843
55
44
27
(47)
585
2,784
(302)
(235)
2,247
889
8
53
(882)
(7,296)
(19)
(59)
(7,306)
1,593
57
-
5,633
47
(38)
(3)
(2,744)
(379)
(4)
4,162
(Decrease)/increase in cash and cash equivalents
(127)
(897)
2014
€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
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
(Decrease)/increase in cash and cash equivalents
22
Cash and cash equivalents at 31 December
2,518
58
(127)
2,449
3,295
120
(897)
2,518
2,540
130
625
3,295
124
CRH Annual Report and Form 20-F 2016
Accounting Policies
(including key accounting estimates and assumptions)
This document constitutes both the Annual Report
and Financial Statements in accordance with Irish
and UK requirements, and the Annual Report on
Form 20-F in accordance with the US Securities
Exchange Act of 1934. In previous years the Group
issued these Annual Reports as two separate
documents.
Basis of preparation
The Consolidated Financial Statements of CRH plc
have been prepared in accordance with
International Financial Reporting Standards (IFRS)
as adopted by the European Union, which
comprise standards and interpretations approved
by the International Accounting Standards Board
(IASB). IFRS as adopted by the European Union
differ in certain respects from IFRS as issued by the
IASB. However, the Consolidated Financial
Statements for the financial years presented would
be no different had IFRS as issued by the IASB
been applied. The Consolidated Financial
Statements are also prepared in compliance with
the Companies Act 2014 and Article 4 of the
European Union 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.
In accordance with Section 304 of the Companies
Act, 2014, the Company is availing of the
exemption from presenting its individual profit and
loss account to the AGM and from filing it with the
Registrar of Companies.
Adoption of IFRS and
International Financial
Reporting Interpretations
Committee (IFRIC)
interpretations
The Group has applied those new standards and
interpretations that apply from 1 January 2016,
including the Annual Improvements 2011-2014
Cycle and amendments to IAS 1 Presentation of
Financial Statements. These amendments
principally related to clarifications and presentation;
and their application did not result in material
changes to the Group’s Consolidated Financial
Statements.
IFRS and IFRIC interpretations
being adopted in subsequent
years
The Group has formed a number of project teams
to evaluate and implement the following standards
in the coming years:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments addresses the
classification, measurement and derecognition of
financial assets and financial liabilities, introduces
new rules for hedge accounting and a new
impairment model for financial assets. IFRS 9 is
effective from 1 January 2018.
The new hedge accounting rules will align the
accounting for hedging instruments more closely
with the Group’s risk management practices. As a
general rule, more hedge relationships may be
eligible for hedge accounting, as the standard
introduces a more principles-based approach. The
Group has performed an initial assessment on the
impact of IFRS 9, and it would appear that the
Group’s current hedge relationships would qualify
as continuing hedges upon the adoption of IFRS 9.
Accordingly, the Group does not expect a
significant impact on the accounting for its hedging
relationships.
The new impairment model requires the recognition
of impairment provisions based on expected credit
losses (ECL) rather than only incurred credit losses
as is the case under IAS 39 Financial Instruments:
Recognition and Measurement. It applies to
financial assets classified at amortised cost,
contract assets under IFRS 15 Revenue from
Contracts with Customers, lease receivables, loan
commitments and certain financial guarantee
contracts. While the Group has not yet completed
a detailed assessment of how its impairment
provisions would be affected by the new model, it
may result in an earlier recognition of credit losses.
The new standard also introduces expanded
disclosure requirements and changes in
presentation. These are expected to change the
nature and extent of the Group’s disclosures about
its financial instruments particularly in the first year
of adoption of the new standard.
IFRS 15 Revenue from Contracts with
Customers
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 2018.
IFRS 15 introduces a number of new concepts
and requirements and also provides guidance
and clarification on existing practice. CRH expects
to adopt IFRS 15 by applying the modified
retrospective application approach as permitted by
the standard (i.e. CRH will adopt the standard from
the date of initial application and will not be required
to restate comparatives. Instead the cumulative
effect of initially applying IFRS 15 will be presented
as an adjustment to the opening balance of
retained earnings).
During 2016, the Group performed a preliminary
assessment of IFRS 15, which is subject to
changes arising from a more detailed ongoing
analysis. The Group’s revenue is €27 billion and
therefore the transition to IFRS 15 is a significant
project that has been ongoing throughout 2016
and will continue through 2017. For the purpose of
assessing IFRS 15, revenue has been evaluated
based on type of contract:
Revenue derived from sources other than
construction contracts
In our non-construction contract-related business,
revenue is recognised at a point in time when
delivery of the goods or services has been
performed. A number of our businesses offer
guarantees and warranties. These tend to be
standard warranty periods and are not typically
extended warranties which apply a number of years
after the point of sale. If consideration is received in
advance it is deferred until the point at which
revenue can be appropriately recognised. CRH
utilises rebates and discounts as standard
throughout its business model.
125
CRH Annual Report and Form 20-F 2016
Accounting Policies - continued
Revenue derived from construction contracts
(iv) Loss-making contracts
Loss-making contracts will now be accounted for
under IAS 37 rather than under IAS 11. CRH does
not expect this to have a significant impact on our
business.
(v) Disclosure requirements
IFRS 15 disclosure requirements are more detailed
than under current IFRS and will significantly
increase the volume of disclosures required in the
Group’s Consolidated Financial Statements.
IFRS 16 Leases
IFRS 16 Leases was issued in January 2016 and
replaces IAS 17 Leases, IFRIC 4 Determining
Whether an Arrangement Contains a Lease,
SIC-15 - Operating Leases - Incentives and SIC-27
- Evaluating the Substance of Transactions
Involving the Legal Form of a Lease. The new
standard is applicable from 1 January 2019.
IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of
leases and requires lessees to account for the
majority of leases under a single on-balance sheet
model, similar to the accounting for finance leases
under IAS 17. The standard includes two
recognition exemptions for lessees – leases of
‘low-value’ assets (e.g. personal computers) and
short-term leases (i.e. leases with a term of 12
months or less). At the commencement date of a
lease, a lessee will recognise a liability to make
lease payments (i.e. the lease liability) and an asset
representing the right to use the underlying asset
during the lease term (i.e. the right-of-use asset).
Lessees will be required to separately recognise the
interest expense on the lease liability and the
depreciation expense on the right-of-use asset.
The adoption of the new standard will have a
material impact on the Group’s Consolidated
Income Statement and Consolidated Balance
Sheet, as follows:
Income Statement
Operating expenses will decrease, as the Group
currently recognises operating lease expenses in
either cost of sales, selling and distribution or
administration expenses (depending on the nature
of the lease). The Group’s lease expense for 2016
was €616 million and is disclosed in note 3 to the
Consolidated Financial Statements.
Depreciation and finance costs as currently
reported in the Group’s Income Statement will
increase, as under the new standard the
right-of-use asset will be capitalised and
depreciated over the term of the lease with an
associated finance cost applied annually to the
lease liability.
Balance Sheet
At transition date the Group will calculate the lease
commitments outstanding at that date and apply
the appropriate discount rate to calculate the
present value of the lease commitment. CRH
expects to adopt IFRS 16 by applying the modified
retrospective application as permitted by the
standard. In addition, CRH will perform an
impairment assessment at date of adoption and
any resulting impairment will impact retained
earnings rather than the Consolidated Income
Statement in the year of transition.
The Group’s commitment outstanding on all leases
as at 31 December 2016 is €2,171 million (2015:
€2,116 million) (see note 28 to the Consolidated
Financial Statements).
Under IFRS 16 lessees will also be required to
remeasure the lease liability upon the occurrence of
certain events (e.g. a change in lease term or a
change in future lease payments resulting from a
change in an index or rate used to determine those
payments). The lessee will generally recognise the
amount of the remeasurement of the lease liability
as an adjustment to the right-of-use asset.
The Group has been assessing the impact of the
new standard since it was issued in January 2016.
The approximate financial impact of the standard is
as yet unknown, as a number of factors impact the
calculation of the liability, such as discount rate, the
expected term of leases including renewal options
and exemptions for short-term leases and
low-value items.
CRH has entered into operating leases for a range
of assets principally relating to property across the
US and Europe. These property leases have
varying terms, escalation clauses and renewal
rights including periodic rent reviews linked with a
consumer price index and/or other indices. The
Group also leases plant and machinery, vehicles
and equipment under operating leases. Note 3 to
these Consolidated Financial Statements outlines
the Group’s expense for 2016 and note 28 outlines
the Group’s operating lease commitment at
31 December 2016.
The Group’s commitment as at 31 December 2016
provides an indication of the scale of leases held
and how significant leases currently are to CRH’s
business. However, for the reasons outlined above,
this amount should not be used as a proxy for the
impact of IFRS 16 on the Consolidated Balance
Sheet. The Group will continue to assess its
portfolio of leases to calculate the impending
impact of transition to the new standard during
2017.
A number of entities throughout the Group engage
in construction contract activity; principally in our
Heavyside businesses in the US, Canada, UK and
Ireland. Revenue in respect of construction
contracts is recognised over time under both the
current and new standard. The majority of
contracts are less than 12 months in duration and
principally relate to government granted contracts
under fixed price arrangements. Retentions are a
standard feature of this business model.
Our initial assessment of the potential impact of the
new standard has identified the following focus
areas:
(i) Variable consideration
As outlined above, some contracts with customers
offer trade discounts or volume rebates. Currently,
the Group recognises revenue from the sale of
goods measured at the fair value of the
consideration received or receivable, net of trade
discounts and volume rebates. If revenue cannot
be reliably measured, the Group defers revenue
recognition until the uncertainty is resolved. Such
provisions give rise to variable consideration under
IFRS 15, and will be required to be estimated at
contract inception. We are currently assessing the
impact on the timing of revenue recognition, though
given the short term nature of the sales cycle in
CRH, we do not currently anticipate a significant
change.
(ii) Warranty obligations
The Group provides warranties for general repairs
and does not typically provide extended warranties
or maintenance services in its contracts with
customers. As such, the Group expects that
such warranties will primarily be assurance-type
warranties which will continue to be accounted
for under IAS 37 Provisions, Contingent Liabilities
and Contingent Assets, consistent with its
current practice.
(iii) Bundling and unbundling of contracts to
determine performance obligations
Under IFRS 15 there will now be a focus on
performance obligations or ‘promises’ within a
contract. IFRS 15 requires revenue to be
recognised based on transfer of control. CRH is
currently assessing the level of integration and
distinct promises offered within contracts to
determine whether they represent a single or
multiple performance obligations, and the resulting
impact on current revenue recognition. Multiple
performance obligations could impact the timing of
revenue recognition over the life of the contract.
However, as outlined above most of the Group’s
construction contracts are less than 12 months
in duration.
126
CRH Annual Report and Form 20-F 2016 In addition to the impacts above, there will also be
significant increased disclosures when the Group
adopts IFRS 16.
There are no other IFRS or IFRIC interpretations
that are effective subsequent to the CRH 2016
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 considers 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, 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.
127
CRH Annual Report and Form 20-F 2016 Accounting Policies - continued
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
(including discount rates, rates of increase in future
compensation levels, mortality rates and healthcare
cost trends), from which the amounts recognised in
the Consolidated Financial Statements are
determined, are updated annually based on current
economic conditions and for any relevant changes
to the terms and conditions of the pension and
post-retirement plans. These assumptions can be
affected by (i) 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. Contingent liabilities arising on business
combinations are recognised as provisions if the
contingent liability can be reliably measured at its
acquisition date fair value. 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 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.
128
CRH Annual Report and Form 20-F 2016 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.
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 €12,690 million at 31 December
2016 represents a significant portion (40%) 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.
129
CRH Annual Report and Form 20-F 2016 Accounting Policies - continued
Subsidiaries
Subsidiaries are all entities over which the Group
has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has
the ability to affect those returns through its power
over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the
Group. They are deconsolidated from the date that
control ceases. A change in the ownership interest
of a subsidiary without a change in control is
accounted for as an equity transaction.
When the Group holds less than the majority of
voting rights, other facts and circumstances
including contractual arrangements that give the
Group power over the investee may result in the
Group controlling the investee. The Group
reassesses whether it controls an investee if, and
when, facts and circumstances indicate that there
are changes to the elements evidencing control.
Non-controlling interests represent the portion of
the equity of a subsidiary not attributable either
directly or indirectly to the Parent Company and are
presented separately in the Consolidated Income
Statement and within equity in the Consolidated
Balance Sheet, distinguished from Parent
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 or
measured works to date methods. The completion
percentage is generally measured based on the
proportion of contract costs incurred at the balance
sheet date relative to the total estimated costs of
the contract. When the outcome of a construction
contract cannot be estimated reliably, contract
revenue is recognised only to the extent of contract
costs incurred where it is probable that these costs
will be recoverable.
When it is probable that total contract costs will
exceed total contract revenue, the expected loss is
recognised immediately as an expense. Revenue
and/or costs in respect of variations or contracts
claims and incentive payments, to the extent that
they arise, are recognised when it is probable that
the amount, which can be measured reliably, will be
recovered from/paid to the customer.
If circumstances arise that may change the original
estimates of revenues, costs or extent of progress
towards completion, estimates are revised. These
revisions may result in increases or decreases in
revenue or costs and are reflected in income in the
period in which the circumstances that give rise to
the revision became known by management.
Segment reporting – Note 1
Operating segments are reported in a manner
consistent with the internal organisational and
management structure and the internal reporting
information provided to the Chief Operating
Decision 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
130
CRH Annual Report and Form 20-F 2016 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
12 months from the date of classification as held
for sale.
Property, plant and equipment and intangible
assets are not depreciated or amortised once
classified as held for sale. The Group ceases to use
the equity method of accounting from the date on
which an interest in a joint venture or associate
becomes held for sale. Non-current assets
classified as held for sale and liabilities directly
associated with those assets are presented
separately as current items in the Consolidated
Balance Sheet.
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 72. The
Group has no exposure in respect of cash-settled
share-based payment transactions and share-
based payment transactions with cash alternatives.
Awards under the Performance
Share Plans
50% of the awards granted in 2016 under the
2014 Performance Share Plan are subject to a
TSR (and hence market-based) vesting condition;
with 25% being measured against a tailored sector
peer group and 25% against the FTSE All-World
Construction & Materials index. The awards made
in 2014 and 2015 are subject to a TSR on 75% of
the grant. Accordingly, the fair value assigned to
the related equity instruments at the grant date is
derived using a Monte Carlo simulation technique
to model the combination of market-based and
non-market-based performance conditions in the
Plans; and is adjusted to reflect the anticipated
likelihood as at the grant date of achieving the
vesting condition. Awards are treated as vesting
irrespective of whether or not the market condition
is satisfied, provided that all other performance
and/or service conditions are satisfied.
The remaining awards granted under the
2014 Performance Share Plan are subject to a
cumulative cash flow target (non-market-based)
vesting condition. The fair value of the awards is
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.
Savings-related Share
Option Schemes
The fair value assigned to options under the
Savings-related Share Option Schemes are
derived in accordance with the trinomial valuation
methodology on the basis that the services to be
rendered by employees as consideration for the
granting of share options will be received over
the vesting period, which is assessed as at the
grant date. The 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 an employee in receipt of share
options leaves service prior to completion of the
expected vesting period and those options forfeit in
consequence.
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.
Awards under the 2013
Restricted Share Plan
The fair value of shares granted under the 2013
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.
Deferred tax
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.
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
131
CRH Annual Report and Form 20-F 2016 Accounting Policies - continued
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.
Intangible assets (other than
goodwill) arising on business
combinations – Note 14
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.
An intangible asset is capitalised separately from
goodwill as part of a business combination at cost
(fair value at date of acquisition).
Subsequent to initial recognition, intangible assets
are carried at cost less any accumulated
amortisation and any accumulated impairment
losses. The carrying values of definite-lived
intangible assets (the Group does not currently
have any indefinite-lived intangible assets other
than goodwill) are reviewed for indicators of
impairment at each reporting date and are subject
to impairment testing when events or changes in
circumstances indicate that the carrying values may
not be recoverable.
Intangible assets are amortised on 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 28
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 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.
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
132
CRH Annual Report and Form 20-F 2016
the required additional rights at fair value; being the
market rate. Any rights purchased are recognised
at cost within inventories, and subsequently
measured at the lower of cost and net realisable
value. 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.
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.
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).
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
Where the conditions for hedge accounting are
satisfied and the hedging instrument concerned
is classified as a fair value hedge, any gain or
loss stemming from the remeasurement of the
hedging instrument to fair value is reported in
the Consolidated Income Statement. In addition,
any gain or loss on the hedged item which is
attributable to the hedged risk is adjusted against
the carrying amount of the hedged item and
reflected in the Consolidated Income Statement.
Where the adjustment is to the carrying amount
of a 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.
133
CRH Annual Report and Form 20-F 2016 Accounting Policies - continued
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.
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.
Net investment hedges
Where foreign currency borrowings provide a
hedge against a net investment in a foreign
operation, and the hedge is deemed to be effective,
foreign exchange differences are taken directly to a
foreign currency translation reserve. The ineffective
portion of any gain or loss on the hedging
instrument is recognised immediately in the
Consolidated Income Statement. Cumulative gains
and losses remain in equity until disposal of the net
investment in the foreign operation at which point
the related differences are transferred to the
Consolidated Income Statement as part of the
overall gain or loss on sale.
Fair value hierarchy – Note 24
For financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3
based on the degree to which inputs to the fair
value measurements are observable and the
significance of the inputs to the fair value
measurement in its entirety, which are described
as follows:
Level 1
Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2
Valuation techniques for which the lowest level of
inputs which have a significant effect on the
recorded fair value are observable, either directly or
indirectly; and
Level 3
Valuation techniques for which the lowest level of
inputs that have a significant effect on the recorded
fair value are not based on observable market data.
Share capital and dividends –
Notes 11 and 29
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.
134
CRH Annual Report and Form 20-F 2016 The principal exchange rates used for the translation of results, cash flows and balance sheets into euro were as follows:
euro 1 =
Argentine Peso
Brazilian Real
Canadian Dollar
Chinese Renminbi
Hungarian Forint
Indian Rupee
Philippine Peso
Polish Zloty
Pound Sterling
Romanian Leu
Serbian Dinar
Swiss Franc
Turkish Lira
Ukrainian Hryvnia
US Dollar
2016
Average
2015
2014
2016
2015
Year-end
16.3483
10.2803
10.7785
16.7246
14.0824
3.8561
1.4659
7.3522
3.7004
1.4186
6.9733
311.4379
309.9956
74.3717
52.5555
4.3632
0.8195
4.4904
71.1956
50.5217
4.1841
0.7258
4.4454
123.1356
120.7168
1.0902
3.3433
28.2812
1.1069
1.0679
3.0255
24.3693
1.1095
-
1.4664
8.1883
-
81.0576
-
4.1839
0.8062
-
-
1.2147
2.9068
15.8908
1.3290
3.4305
1.4188
7.3202
4.3117
1.5116
7.0608
309.8300
315.9800
71.5935
52.2680
4.4103
0.8562
4.5390
72.0215
50.9990
4.2639
0.7340
4.5240
123.4600
121.5612
1.0739
3.7072
28.6043
1.0541
1.0835
3.1765
26.1434
1.0887
135
CRH Annual Report and Form 20-F 2016 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.
During 2016, the Group completed its integration of
the businesses acquired from LH Assets in Q3
2015. In light of this, CRH has revisited its
operating segment disclosures to ensure that they
continue to reflect the Group’s organisational
structure and the nature of the financial information
reported to and assessed by the Group Chief
Executive and Finance Director, who are together
determined to fulfil the role of Chief Operating
Decision Maker (as defined in IFRS 8 Operating
Segments). As a result, a new operating segment
for Asia has been identified and activities reported
from date of acquisition in Q3 2015 in the LH
Assets operating segment have been reallocated
within the Europe Heavyside, Americas Materials
and new Asia segments.
Comparative segment amounts for 2015 have
been restated where necessary to reflect the new
format for segmentation. The Group now reports
across the following seven operating segments:
Europe Heavyside, Europe Lightside, Europe
Distribution, Americas Materials, Americas
Products, Americas Distribution and Asia.
The principal factors employed in the identification
of the seven segments reflected in this note
include:
•
•
•
•
the Group’s organisational structure in 2016
(during 2016 each divisional President
fulfilled the role of “segment manager” as
outlined in IFRS 8, with the President of
Americas Products and Distribution and
the President of Europe Lightside and
Distribution acting as “segment manager”
for each of the Americas Products and
Americas Distribution segments and the
Europe Lightside and Europe Distribution
segments respectively);
the nature of the reporting lines to the
Chief Operating Decision Maker
(as defined in IFRS 8);
the structure of internal reporting
documentation such as management
accounts and budgets; and
the degree of homogeneity of products,
services and geographical areas within
each of the segments from which revenue
is derived
The Chief Operating Decision Maker monitors the
operating results of segments separately in order to
allocate resources between segments and to
assess performance. Segment performance is
predominantly evaluated based on operating profit.
As performance is also evaluated using operating
profit before depreciation, amortisation and
impairment (EBITDA (as defined)*), supplemental
information based on EBITDA (as defined)* is 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.
Europe Heavyside businesses are predominantly
engaged in the manufacture and supply of cement,
aggregates, readymixed and precast concrete,
concrete landscaping and asphalt products.
The segment comprises businesses operating in
17 countries across Western, Central and Eastern
Europe.
Europe Lightside businesses are predominantly
engaged in the production and supply of
construction accessories, shutters & awnings,
fencing and composite access chambers across
16 countries primarily in Western Europe.
Europe Distribution businesses are predominantly
engaged in supplying General Merchants,
Sanitary, Heating and Plumbing (SHAP) and
Do-It-Yourself (DIY) businesses catering to the
general public and small and medium-sized
builders in the Netherlands, Belgium, France,
Germany, Switzerland and Austria, selling a range
of bricks, cement, sanitary, heating, plumbing and
other building products.
Americas Materials businesses are predominantly
engaged in the production and sale of aggregates,
asphalt and readymixed concrete products and
provide asphalt paving services in the US and
Canada. This segment also includes the Group’s
cement operations in Brazil.
Americas Products businesses are predominantly
engaged in the production and sale in the US and
Canada of concrete masonry and hardscapes,
packaged lawn and garden products, packaged
cement mixes, fencing, utility, drainage and
structural precast products, construction
accessories and glass and aluminium glazing
systems.
Americas Distribution businesses are predominantly
engaged in the US in supplying Exterior Products
such as roofing and siding and Interior Products
such as gypsum wallboard, metal studs and
acoustical ceiling systems.
Asia businesses are predominantly engaged in the
manufacturing and supply of cement and
aggregates in the Philippines.
136
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F 2016 A. Operating segments disclosures - Consolidated Income Statement data
Year ended 31 December
Group EBITDA (as defined)*
Revenue
2015
€m
2014
€m
5,256
3,929
961
913
2016
€m
7,396
941
4,066
4,158
3,999
2016
€m
814
104
206
12,403
10,375
8,841
1,124
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
7,598
4,280
2,315
7,018
5,070
1,204
3,862
3,225
2,229
1,776
543
150
Americas
14,193
13,109
10,071
1,897
1,486
Depreciation,
amortisation and
impairment
Group
operating profit
2016
€m
417
23
76
516
386
132
31
549
2015
€m
325
25
77
427
335
142
29
506
2014
2016
€m
229
23
78
330
254
118
22
394
€m
397
81
130
608
818
411
119
1,348
2015
€m
135
75
94
304
620
249
111
980
2014
€m
151
71
112
334
355
145
83
583
2015
€m
460
100
171
731
955
391
140
2014
€m
380
94
190
664
609
263
105
977
Asia
508
151
-
109
2
-
38
9
-
71
(7)
-
Total Group
27,104
23,635
18,912
3,130
2,219
1,641
1,103
942
724
2,027
1,277
917
Profit on disposals (i)
Finance costs less income
Other financial expense
Share of equity accounted investments’ profit (ii)
Profit before tax
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Asia
Total Group
55
(317)
(66)
42
101
(295)
(94)
44
1,741
1,033
77
(246)
(42)
55
761
(ii) Share of equity accounted
investments’ profit/(loss)
(note 9)
12
-
13
25
34
-
-
34
15
-
15
30
23
-
-
23
28
-
13
41
7
-
-
7
7
(i) Profit/(loss) on
disposals
(note 4)
24
101
1
13
38
(19)
34
2
17
(23)
8
86
24
(11)
2
15
38
1
6
45
11
20
1
32
-
-
-
(17)
(9)
55
101
77
42
44
55
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
137
CRH Annual Report and Form 20-F 2016
1. Segment Information - continued
B. Operating segments disclosures - Consolidated Balance Sheet data
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Asia
Total Group
As at 31 December
Total assets
2016
€m
8,736
731
2,160
2015
€m
9,224
767
2,238
Total liabilities
2016
2015
€m
2,701
245
642
€m
2,773
261
647
11,627
12,229
3,588
3,681
8,970
4,275
1,152
8,780
4,146
1,095
1,725
1,582
998
392
952
364
14,397
14,021
3,115
2,898
1,557
1,631
224
215
27,581
27,881
6,927
6,794
Reconciliation to total assets as reported in the Consolidated Balance Sheet:
Investments accounted for using the equity method
1,299
1,317
Other financial assets
Derivative financial instruments (current and non-current)
Income tax assets (current and deferred)
Cash and cash equivalents
Total assets as reported in the Consolidated Balance Sheet
26
76
163
2,449
31,594
28
109
154
2,518
32,007
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)
Total liabilities as reported in the Consolidated Balance Sheet
7,790
32
2,402
17,151
9,221
24
2,424
18,463
138
CRH Annual Report and Form 20-F 2016 C. Operating segments disclosures - other items
Additions to non-current assets
Property, plant and
equipment (note 13)
2016
€m
275
12
26
313
328
142
23
493
47
2015
€m
261
15
46
322
335
153
41
529
2014
€m
113
14
36
163
173
81
18
272
31
-
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Asia
Total Group
853
882
435
D. Entity-wide disclosures
Section 1: Information about products and services
Year ended 31 December
Financial assets
(note 15)
2016
€m
2015
€m
2014
€m
2
-
-
2
5
-
-
5
-
7
8
-
1
9
10
-
-
10
-
19
-
-
-
-
3
-
-
3
-
3
Total Group
2015
€m
269
15
47
331
345
153
41
539
2014
€m
113
14
36
163
176
81
18
275
31
-
2016
€m
277
12
26
315
333
142
23
498
47
860
901
438
The Group’s revenue from external customers in respect of its principal products and services is analysed in the disclosures above. Segment revenue
includes €5,102 million (2015: €4,523 million; 2014: €3,351 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 are 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 32. In addition, due to the nature of building
materials, which have 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 31 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 set out below; 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
Benelux (mainly the Netherlands)
United Kingdom
United States
Other
Total Group
Year ended 31 December
Revenue by destination
As at 31 December
Non-current assets*
2016
€m
403
2,576
3,091
12,730
8,304
27,104
2015
€m
349
2,478
1,694
12,048
7,066
2014
€m
306
2,350
802
9,650
5,804
2016
€m
475
1,201
2,487
9,241
8,346
2015
€m
609
1,209
2,940
8,911
8,530
23,635
18,912
21,750
22,199
There are no material dependencies on or concentrations of 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.
* Non-current assets comprise property, plant and equipment, intangible assets and investments accounted for using the equity method.
139
CRH Annual Report and Form 20-F 2016 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
2016
€m
2015
€m
2014
€m
9,008
2,725
8,629
2,446
7,527
1,985
940
803
817
(55)
789
630
697
29
655
452
532
34
4,029
3,174
2,242
18,267
16,394
13,427
4,409
2,401
6,810
3,878
2,086
5,964
3,143
1,425
4,568
Depreciation and depletion (note 13)
Amortisation of intangible assets (note 14)
Impairment of property, plant and equipment (note 13)
Impairment of intangible assets (note 14)
Impairment of financial assets (note 15)
Total
Cost of sales
2015
€m
667
-
30
-
-
2016
€m
817
-
-
-
-
2014
€m
485
-
47
-
-
Operating costs
2016
€m
192
71
-
23
-
2015
€m
176
55
11
1
2
2014
€m
146
44
2
-
-
2016
€m
1,009
71
-
23
-
Total
2015
€m
843
55
41
1
2
2014
€m
631
44
49
-
-
817
697
532
286
245
192
1,103
942
724
140
CRH Annual Report and Form 20-F 2016 3. Operating Profit Disclosures
Operating lease rentals
- hire of plant and machinery
- land and buildings
- other operating leases
Total
Auditor’s remuneration
2016
2015
2014
€m
€m
€m
266
292
58
616
204
263
50
517
149
216
48
413
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)
2015
2016
2014
EY
(network firms)
Total
2016
2015
2014
2016
2015
2014
Audit fees (i)
Other audit-related assurance fees (ii)
Tax advisory services
Total
€m
€m
€m
3
-
-
3
3
1
-
4
2
-
-
2
€m
16
-
1
17
€m
16
4
2
22
€m
12
1
1
14
€m
19
-
1
20
€m
19
5
2
26
€m
14
1
1
16
(i)
Audit of the Group accounts includes audit of internal controls over financial reporting and parent and subsidiary statutory audit
fees, but excludes €2 million (2015: €2 million; 2014: €2 million) paid to auditors other than EY.
(ii) Other assurance services includes attestation and due diligence services that are closely related to the performance of the audit.
(iii) There were no other fees for services provided by the Group’s independent auditor (2015: €nil million; 2014: €nil million).
141
CRH Annual Report and Form 20-F 2016 4. Business and Non-Current Asset Disposals
Assets/(liabilities) disposed of at net carrying amount:
- non-current assets (notes 13,14,15)
- cash and cash equivalents
- working capital and provisions (note 19)
- interest-bearing loans and borrowings
- deferred tax (note 26)
- retirement benefit obligations (note 27)
Net assets disposed
Reclassification of currency translation effects on disposal
Total
Proceeds from disposals (net of disposal costs)
Profit on step acquisition (note 30)
Profit on disposals
Net cash inflow arising on disposal
Proceeds from disposals
Less: cash and cash equivalents disposed
Less: deferred proceeds arising on disposal (note 19)
Business disposals
Disposal of other
non-current assets
2016
2015 (i)
2014 (ii)
€m
€m
€m
2016
€m
2015
€m
2014
€m
2016
€m
147
3
24
-
(1)
-
173
(44)
129
133
-
4
570
90
246
(20)
(22)
(84)
780
39
819
875
6
62
117
-
11
-
-
-
128
57
185
224
-
39
109
103
83
256
-
-
-
-
-
109
-
109
160
-
51
-
-
-
-
-
103
-
103
142
-
39
-
-
-
-
-
83
-
83
121
-
38
3
24
-
(1)
-
282
(44)
238
293
-
55
Total
2015
€m
673
90
246
(20)
(22)
(84)
883
39
922
1,017
6
101
2014
€m
200
-
11
-
-
-
211
57
268
345
-
77
133
875
224
160
142
121
293
1,017
345
(3)
(7)
(90)
(38)
-
-
-
-
-
-
-
-
(3)
(7)
(90)
(38)
-
-
Total
123
747
224
160
142
121
283
889
345
(i)
Disposals in 2015 related principally to the divestment of the Group’s clay and concrete businesses in the UK (Europe Heavyside) and its clay business in the
US (Americas Products) on 26 February 2015.
(ii) The principal divestment in 2014 was the disposal of our 50% equity stake in our Turkish joint venture, Denizli Çimento (Europe Heavyside).
Assets and liabilities that met the IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations criteria at 31 December 2016 have not been separately
disclosed as held for sale as they were not considered material in the context of the Group. The businesses divested in 2016 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.
In February 2017, the Group reached agreement to dispose of one cement plant and one grinding station in Germany for an enterprise value purchase price of
€349 million; these assets formed part of the LH Assets acquisition in 2015 and are included in our Europe Heavyside segment in 2016. The transaction is subject
to approval by the German Competition Authority (Bundeskartellamt).
142
CRH Annual Report and Form 20-F 2016 5. Employment
The average number of employees is as follows:
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Asia
Total Group
Year ended 31 December
2016
27,039
4,596
10,971
42,606
22,650
16,259
3,889
42,798
2015
20,704
4,787
11,392
36,883
20,125
16,712
3,920
40,757
2014
19,096
5,003
11,607
35,706
18,457
17,707
3,836
40,000
1,374
466
-
86,778
78,106
75,706
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
* Other employment costs relate principally to redundancy, severance and healthcare costs.
2016
€m
4,139
472
560
46
315
2015
€m
2014
€m
3,690
2,987
419
537
27
288
368
448
16
215
5,532
4,961
4,034
2,725
2,795
12
5,532
2,446
2,498
17
4,961
1,985
2,035
14
4,034
6. Directors’ Emoluments and Interests
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.
143
CRH Annual Report and Form 20-F 2016 7. Share-based Payment Expense
Performance Share Plans and Restricted Share Plan expense
Share option expense
Total share-based payment expense
2016
2015
2014
€m
40
6
46
€m
26
1
27
€m
15
1
16
Share-based payment expense relates primarily to awards granted under the 2014 Performance Share Plan and the Group’s share option schemes. The expense,
which also includes charges in relation to the 2013 Restricted Share Plan and the 2006 Performance Share Plan, is reflected in operating costs in the Consolidated
Income Statement.
In May 2014, shareholders approved the adoption of the 2014 Performance Share Plan, which replaced the 2006 Performance Share Plan (approved by
shareholders in May 2006), and the 2010 Share Option Scheme (approved by shareholders in May 2010) (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.
2014 Performance Share Plan
The structure of the 2014 Performance Share Plan is set out in the Directors’ Remuneration Report on page 81. An expense of €38 million was recognised in 2016
(2015: €20 million; 2014: €5 million).
Details of awards granted under the 2014 Performance Share Plan
Granted in 2016
Granted in 2015
Granted in 2014
Share price at
date of award
Period to earliest
release date
Number of shares
Initial
award*
Net outstanding at
31 December 2016
€24.87
€24.84
€20.49
3 years
3 years
3 years
3,879,901
2,989,371
2,283,960
3,810,301
2,866,840
2,143,810
* Numbers represent the initial awards. The Remuneration Committee has determined that dividend equivalents will accrue on awards under the 2014
Performance Share Plan. Subject to satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of
additional shares on vesting.
50% of each award made in 2016 is subject to a TSR measure, with 25% being measured against a tailored sector peer group and 25% against the FTSE All-World
Construction & Materials index. The other 50% of each award made in 2016 is subject to a cumulative cash flow metric. The awards made in 2014 and 2015 are
subject to TSR (75% of each award) and cumulative cash flow (25% of each award) metrics. Further details are set out on page 81 in the Directors’ Remuneration
Report.
The fair values assigned to the portion of awards which are subject to TSR performance against peers and the index were €11.94 and €10.52 respectively
(2015: €13.99 subject to TSR performance against peers only; 2014: €10.88 subject to TSR performance against peers only). The fair value of these awards was
calculated using a TSR pricing model taking account of peer group TSR, volatilities and correlations together with the following assumptions:
Risk-free interest rate (%)
Expected volatility (%)
2016
(0.53)
21.7
2015
0.25
21.4
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 one or
three-year service period) was €24.87 (2015: €24.84; 2014: €20.49). The fair value was calculated using the closing CRH share price at the date the award was
granted.
144
CRH Annual Report and Form 20-F 2016 2006 Performance Share Plan and 2013 Restricted Share Plan
Due to the immateriality of the 2006 Performance Share Plan and the 2013 Restricted Share Plan expense; and the level of awards outstanding in these plans at
31 December 2016 and comparative periods, detailed financial disclosures have not been provided in relation to these share-based payment arrangements.
Share Option Schemes
As noted above, the 2010 Share Option Scheme was replaced in 2014 by the 2014 Performance Share Plan, and accordingly no options have been granted
since 2013.
Details of movement and options outstanding under Share Option Schemes (excluding Savings-related Share Option Schemes)
Outstanding at beginning of year
Exercised (i)
Lapsed
Outstanding at end of year (ii)
Exercisable at end of year
Weighted average
exercise price
€21.14
€22.04
€20.27
€21.51
€21.51
Number of
options
2016
8,620,690
(2,102,332)
(3,520,863)
2,997,495
2,997,495
Weighted average
exercise price
€19.58
€19.35
€16.64
€21.14
€24.18
Number of
options
2015
15,481,191
(2,544,141)
(4,316,360)
8,620,690
5,335,290
Weighted average
exercise price
€18.75
€16.58
€16.77
€19.58
€18.79
Number of
options
2014
21,798,887
(919,205)
(5,398,491)
15,481,191
1,248,698
(i) The weighted average share price at the date of exercise of these options was €29.70 (2015: €25.51; 2014: €20.47).
(ii) All options granted have a life of ten years.
Weighted average remaining contractual life for the share options outstanding
at 31 December (years)
2016
2.46
2015
3.86
2014
4.89
euro-denominated options outstanding at end of year (number)
2,991,831
8,604,776
15,389,922
Range of exercise prices (€)
16.19-29.86
16.19-29.86
15.19-29.86
Pound Sterling-denominated options outstanding at end of year (number)
5,664
15,914
91,269
Range of exercise prices (Stg£)
15.30-17.19
13.64-18.02
12.80-20.23
145
CRH Annual Report and Form 20-F 2016 7. Share-based Payment Expense - continued
2010 Savings-related Share Option Schemes
The Group operates Savings-related Share Option Schemes. Participants may save up to €500/Stg£500 per month from their net salaries for a fixed term of three
or five years and at the end of the savings period they have the option to buy CRH shares at a discount of up to 15% of the market price on the date of invitation of
each savings contract.
Details of options granted under the Savings-related Share Option Schemes
Weighted average
exercise price
Number of
options
2016
Weighted average
exercise price
Number of
options
2015
Weighted average
exercise price
Outstanding at beginning of year
€16.96/Stg£14.27
593,177
€14.84/Stg£12.80
894,548
€12.92/Stg£11.64
Exercised (i)
Lapsed
Granted (ii)
Outstanding at end of year
Exercisable at end of year
€13.66/Stg£11.95
(121,242)
€13.42/Stg£12.07
€17.55/Stg£15.68
(81,628)
€13.52/Stg£13.63
€20.83/Stg£16.16
€18.63/Stg£15.92
€13.45/Stg£12.22
1,011,867
1,402,174
23,897
€21.12/Stg£15.54
€16.96/Stg£14.27
€13.72/n/a
(331,925)
(187,892)
218,446
593,177
15,165
€11.62/Stg£11.28
€16.52/Stg£12.32
€17.67/Stg£14.94
€14.84/Stg£12.80
€11.67/n/a
Number of
options
2014
1,082,799
(388,201)
(97,546)
297,496
894,548
21,575
(i) The weighted average share price at the date of exercise of these options was €27.90 (2015: €25.77; 2014: €18.80).
(ii) Pursuant to the 2010 Savings-related Share Option Schemes operated by the Group, employees were granted options over 1,011,867 of CRH plc’s Ordinary
Shares in March 2016 (2015: 218,446 share options in March 2015; 2014: 297,496 share options in March 2014). This figure comprises options over 692,334
(2015: 152,312; 2014: 187,278) shares and 319,533 (2015: 66,134; 2014: 110,218) shares which are normally exercisable within a period of six months after
the third or the fifth anniversary of the contract, whichever is applicable, and are not subject to specified EPS growth targets being achieved. The exercise price
at which the options are granted under the scheme represents a discount of 15% to the market price on the date of invitation of each savings contract.
Weighted average remaining contractual life for the share options
outstanding at 31 December (years)
2016
2.41
2015
1.96
2014
1.74
euro-denominated options outstanding at end of year (number)
320,362
321,059
327,664
Range of exercise prices (€)
12.82-21.12
12.82-21.12
11.18-17.67
Pound Sterling-denominated options outstanding at end of year (number)
1,081,812
272,118
566,884
Range of exercise prices (Stg£)
11.55-16.16
11.19-15.54
11.19-14.94
The weighted fair values assigned to options issued under the Savings-related Share Option Schemes, which were computed in accordance with the trinomial
valuation methodology, were as follows:
3-year
€5.01
€4.59
€3.74
5-year
€5.57
€6.08
€5.25
Granted in 2016
Granted in 2015
Granted in 2014
146
CRH Annual Report and Form 20-F 2016 The fair value of these options were determined using the following assumptions:
Weighted average exercise price (€)
Risk-free interest rate (%)
Expected dividend payments over the expected life (€)
Expected volatility (%)
Expected life in years
2016
2015
2014
3-year
20.83
(0.48)
1.95
21.8
3
5-year
20.83
(0.33)
3.32
22.9
5
3-year
21.12
(0.22)
1.91
21.6
3
5-year
21.12
(0.09)
3.25
27.8
5
3-year
17.67
0.19
1.91
22.7
3
5-year
17.67
0.59
3.25
30.3
5
The expected volatility was determined using a historical sample of 37 month-end CRH share prices in respect of the three-year savings-related share options and
61 month-end share prices in respect of the five-year savings-related share options. The expected lives of the options are based on historical data and are therefore
not necessarily indicative of exercise patterns that may materialise.
Other than the assumptions listed above, no other features of options grants were factored into the determination of fair value.
The terms of the options issued under the savings-related share option schemes do not contain any market conditions within the meaning of IFRS 2 Share-based
Payment.
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 loss/(gain) 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
Premium paid on early debt redemption
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
Total net finance costs
2016
€m
337
(10)
14
(3)
(20)
7
325
(4)
(4)
(8)
317
-
30
24
12
66
2015
€m
334
(32)
12
4
(22)
7
303
(4)
(4)
(8)
2014
€m
308
(42)
(15)
-
8
(5)
254
(3)
(5)
(8)
295
246
38
19
20
17
94
-
16
12
14
42
288
(i)
The Group uses interest rate swaps to convert fixed rate debt to floating rate. Fixed rate debt, which has been converted to floating rate
through the use of interest rate swaps, is stated in the Consolidated Balance Sheet at adjusted value to reflect movements in underlying
fixed rates. The movement on this adjustment, together with the offsetting movement in the fair value of the related interest rate swaps, is
included in finance costs in each reporting period.
147
383
389
CRH Annual Report and Form 20-F 2016 9. Share of Equity Accounted Investments’ Profit
The Group’s share of joint ventures’ and associates’ profit 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
Operating profit
Finance costs (net)
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
Joint Ventures
2016
€m
2015
€m
2014
€m
Associates
2015
€m
2016
€m
2014
€m
2016
€m
Total
2015
€m
2014
€m
480
85
(26)
59
(4)
55
(4)
51
496
488
79
(27)
52
(6)
46
(5)
41
62
(27)
35
(6)
29
(3)
26
769
52
(40)
12
(15)
(3)
(6)
(9)
961
953
1,249
1,457
1,441
84
(55)
29
(17)
12
(9)
3
106
(45)
61
(21)
40
(11)
29
137
(66)
71
(19)
52
(10)
42
163
(82)
81
(23)
58
(14)
44
168
(72)
96
(27)
69
(14)
55
An analysis of the profit after tax by operating segment is presented in note 1. The aggregated balance sheet data (analysed between current and non-current
assets and liabilities) in respect of the Group’s investment in joint ventures and associates is presented in note 15.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges and profit on disposals.
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 (income)/expense
Income tax reported in the Consolidated Income Statement
2016
€m
5
481
486
8
(11)
1
(13)
(15)
471
2015
€m
-
339
339
7
(8)
1
(35)
(35)
2014
€m
-
141
141
7
-
6
23
36
304
177
148
CRH Annual Report and Form 20-F 2016 10. Income Tax Expense - continued
Recognised outside the Consolidated Income Statement
(a) Within the Consolidated Statement of Comprehensive Income:
Deferred tax - retirement benefit obligations
(b) Within the Consolidated Statement of Changes in Equity:
Deferred tax - share-based payment expense
Income tax recognised outside the Consolidated Income Statement
Reconciliation of applicable tax rate to effective tax rate
2016
€m
2015
€m
2014
€m
3
3
12
12
15
(30)
(30)
5
5
(25)
69
69
-
-
69
Profit before tax (€m)
Tax charge expressed as a percentage of profit before tax (effective tax rate):
- current tax expense only
- total income tax expense (current and deferred)
1,741
1,033
761
27.9%
27.1%
32.8%
29.4%
18.5%
23.2%
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)
Total effective tax rate
Other disclosures
% of profit before tax
12.5
15.9
(1.3)
27.1
12.5
13.8
3.1
29.4
12.5
9.6
1.1
23.2
Effective tax rate
The 2016 effective tax rate is 27.1%. The 2015 Consolidated Income Statement included one-off charges related to the LH Assets transaction of €197 million which
were substantially non-deductible for income tax purposes. The 2015 effective tax rate excluding the impact of these costs was 25.8%.
Changes in tax rates
The total tax charge in future periods will be affected by any changes to the tax rates in force in the countries in which the Group operates.
Excess of capital allowances over depreciation
The current tax charge will also be impacted by changes in the excess of tax depreciation (capital allowances) over accounting depreciation. Based on current
capital investment plans, the Group expects to continue to be in a position to claim capital allowances in excess of depreciation in future years.
Investments in subsidiaries
Given management’s intention not to unwind temporary differences in respect of its investment in subsidiaries or tax exemptions and credits being available in the
majority of jurisdictions in which the Group operates, the aggregate amount of deferred tax liabilities on temporary differences which have not been recognised
would be immaterial.
Proposed dividends
There are no income tax consequences for the Company in respect of dividends proposed prior to issuance of the Consolidated Financial Statements and for which
a liability has not been recognised.
149
CRH Annual Report and Form 20-F 2016 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 (2015: €3,175; 2014: €3,175)
7% ‘A’ Cumulative Preference Shares €77,521 (2015: €77,521; 2014: €77,521)
Equity
Final - paid 44.00c per Ordinary Share (2015: 44.00c; 2014: 44.00c)
Interim - paid 18.80c per Ordinary Share (2015: 18.50c; 2014: 18.50c)
Total
Reconciliation to Consolidated Statement of Cash Flows
Dividends to shareholders
Less: issue of scrip shares in lieu of cash dividends (note 29)
Dividends paid to equity holders of the Company
Dividends paid by subsidiaries to non-controlling interests
Total dividends paid
Dividends proposed (memorandum disclosure)
Equity
2016
€m
2015
€m
2014
€m
-
-
363
156
519
519
(167)
352
8
360
-
-
359
152
511
511
(132)
379
4
383
-
-
323
137
460
460
(107)
353
4
357
Final 2016 - proposed 46.20c per Ordinary Share (2015: 44.00c; 2014: 44.00c)
385
362
359
150
CRH Annual Report and Form 20-F 2016
12. Earnings per Ordinary Share
The computation of basic and diluted earnings per Ordinary Share is set out below:
Numerator computations
Group profit for the financial year
Profit attributable to non-controlling interests
Profit attributable to equity holders of the Company
Preference dividends
Profit attributable to ordinary equity holders of the Company -
numerator for basic/diluted earnings per Ordinary Share
Denominator computations
2016
€m
1,270
(27)
1,243
-
2015
€m
729
(5)
724
-
2014
€m
584
(2)
582
-
1,243
724
582
Weighted average number of Ordinary Shares (millions) outstanding for the year (i)
Effect of dilutive potential Ordinary Shares (employee share options) (millions) (i) and (ii)
Denominator for diluted earnings per Ordinary Share
827.8
6.1
833.9
812.3
3.6
815.9
737.6
0.7
738.3
Basic earnings per Ordinary Share
150.2c
89.1c
78.9c
Diluted earnings per Ordinary Share
149.1c
88.7c
78.8c
(i)
The weighted average number of Ordinary Shares included in the computation of basic and diluted earnings per Ordinary Share has been
adjusted to exclude shares held by the Employee Benefit Trust and Ordinary Shares repurchased and held by the Company (CRH plc) as
Treasury Shares given that these shares do not rank for dividend. The number of Ordinary Shares so held at the balance sheet date is
detailed in note 29.
(ii) Contingently issuable Ordinary Shares (totalling 3,095,404 at 31 December 2016, 8,630,786 at 31 December 2015 and 19,062,236 at
31 December 2014) 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.
151
CRH Annual Report and Form 20-F 2016 13. Property, Plant and Equipment
At 31 December 2016
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
At 1 January 2016, net carrying amount
Translation adjustment
Reclassifications
Transfer from trade and other receivables (note 19)
Additions at cost
Arising on acquisition (note 30)
Disposals at net carrying amount
Depreciation charge for year
At 31 December 2016, net carrying amount
The equivalent disclosure for the prior year is as follows:
At 31 December 2015
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
At 1 January 2015, net carrying amount
Translation adjustment
Reclassifications
Additions at cost
Arising on acquisition (note 30)
Reclassified from held for sale
Disposals at net carrying amount
Depreciation charge for year
Impairment charge for year (ii)
Land and
buildings (i)
€m
Plant and
machinery
€m
Assets in
course of
construction
€m
8,438
(2,281)
6,157
13,182
(7,147)
6,035
6,396
6,087
9
41
8
82
(17)
(129)
(233)
6,157
(62)
340
-
451
51
(56)
(776)
6,035
8,471
(2,075)
6,396
12,583
(6,496)
6,087
4,176
3,026
292
145
96
1,999
173
(283)
(175)
(27)
115
46
514
3,138
88
(161)
(665)
(14)
498
-
498
579
(4)
(381)
-
320
(15)
(1)
-
498
582
(3)
579
220
6
(191)
272
276
1
(2)
(3)
-
Total
€m
22,118
(9,428)
12,690
13,062
(57)
-
8
853
19
(186)
(1,009)
12,690
21,636
(8,574)
13,062
7,422
413
-
882
5,413
262
(446)
(843)
(41)
At 31 December 2015, net carrying amount
6,396
6,087
579
13,062
At 1 January 2015
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
6,068
(1,892)
4,176
8,940
(5,914)
3,026
220
-
220
15,228
(7,806)
7,422
(i)
The carrying value of mineral-bearing land included in the land and buildings category above amounted to €2,708 million at the balance sheet date
(2015: €2,855 million).
(ii) The impairment charge of €41 million in 2015, principally relates to the write-down of property, plant and equipment in Europe Heavyside and
Americas Products of €24 million and €15 million respectively.
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
2016
€m
309
467
2015
€m
311
118
152
CRH Annual Report and Form 20-F 2016 14. Intangible Assets
At 31 December 2016
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
At 1 January 2016, net carrying amount
Translation adjustment
Arising on acquisition (note 30)
Disposals
Amortisation charge for year
Impairment charge for year
At 31 December 2016, net carrying amount
The equivalent disclosure for the prior year is as follows:
At 31 December 2015
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
At 1 January 2015, net carrying amount
Translation adjustment
Arising on acquisition (note 30)
Reclassifications
Reclassified from held for sale
Disposals
Amortisation charge for year
Impairment charge for year
At 31 December 2015, net carrying amount
At 1 January 2015
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
7,701
(305)
7,396
7,406
(2)
71
(56)
-
(23)
7,396
7,699
(293)
7,406
4,018
247
3,187
-
16
(61)
-
(1)
7,406
4,362
(344)
4,018
142
(53)
89
91
2
3
-
(7)
-
89
137
(46)
91
12
3
84
(2)
-
-
(6)
-
91
52
(40)
12
659
(430)
229
264
6
11
(1)
(51)
-
229
639
(375)
264
126
11
167
1
1
-
(42)
-
264
448
(322)
126
87
(40)
47
59
1
-
-
(13)
-
47
85
(26)
59
17
2
47
1
-
(1)
(7)
-
59
37
(20)
17
(i) The customer-related intangible assets relate predominantly to non-contractual customer relationships.
Total
€m
8,589
(828)
7,761
7,820
7
85
(57)
(71)
(23)
7,761
8,560
(740)
7,820
4,173
263
3,485
-
17
(62)
(55)
(1)
7,820
4,899
(726)
4,173
153
CRH Annual Report and Form 20-F 2016 14. Intangible Assets - continued
Annual goodwill testing
The net book value of goodwill capitalised under previous GAAP (Irish GAAP) as at the transition date to IFRS (1 January 2004) has been treated as deemed cost.
Goodwill arising on acquisition since that date is capitalised at cost.
Cash-generating units
Goodwill acquired through business combination activity has been allocated to cash-generating units (CGUs) that are expected to benefit from synergies in that
combination. The CGUs 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 25 (2015: 21) CGUs have been identified and these are
analysed between the seven business segments below. The increase in the number of CGUs in 2016 relates to the integration of the LH Assets and CRL business
acquired in 2015, a reorganisation within the Americas Materials segment and the reintegration of the majority of the remaining portfolio review entities into the
standard goodwill impairment testing process. All businesses within the various CGUs 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.
Europe Heavyside (i)
Europe Lightside (i)
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
Asia
Unallocated Goodwill
LH Assets
CRL
Total Group
Cash-generating units
2016
2015
14
1
1
16
6
1
1
8
1
-
-
8
1
1
10
8
2
1
11
-
-
-
Goodwill (€m)
2016
1,708
336
665
2,709
2,077
1,671
411
4,159
528
-
-
2015
648
347
662
1,657
1,484
758
398
2,640
-
2,252
857
25
21
7,396
7,406
(i)
As the Group moves into a phase of continuous portfolio evaluation any residual businesses remaining from the original 2013 portfolio review have been reintegrated
into the standard impairment testing process for 2016, with only those expected to be divested in the immediate term assessed separately from a valuation
perspective. Included in the goodwill numbers of Europe Heavyside and Europe Lightside at 31 December 2016 are amounts of €nil million (2015: €52 million
and €8 million respectively) relating to such businesses identified for divestment.
154
CRH Annual Report and Form 20-F 2016 Impairment testing methodology and results
Goodwill is subject to impairment testing on an annual basis. The recoverable amount of each of the 25 CGUs is determined based on a value-in-use computation,
using Level 3 inputs in accordance with the fair value hierarchy (as described in the Fair Value Hierarchy section of the accounting policies on page 134). The cash
flow forecasts are primarily based on a five-year strategic plan document formally approved by the Board of Directors and specifically exclude the impact of future
development activity. These cash flows are projected forward for an additional five years to determine the basis for an annuity-based terminal value, calculated on
the same basis as the Group’s acquisition modelling methodology. As in prior years, the terminal value is based on a 20-year annuity, with the exception of certain
long-lived cement assets, where an assumption of a 30-year annuity has been used. 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 7.1% to 12.0% (2015: 7.0% 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 2016 annual goodwill impairment testing process has resulted in an impairment of €23 million being recorded in respect of one CGU in the Europe Heavyside
segment (2015: €nil million). The CGU, which has formed part of our sensitivity disclosures for the last number of years, has experienced a difficult trading
environment in 2016, resulting in a slower recovery now being forecast for the CGU than previously identified. These updated assumptions underlying the
value-in-use model projections result in a present value (using a real pre-tax discount rate of 8.0%) of €142 million and a related goodwill impairment being
recorded of €23 million. Given the immateriality of the impairment recorded in the context of the Group’s results, no further disclosures relating to the sensitivity of
the value-in-use computations for the CGU are considered to be warranted.
Key sources of estimation uncertainty
The cash flows have been arrived at taking account of the Group’s strong financial position, its established history of earnings and cash flow generation and the
nature of the building materials industry, where product obsolescence is very low. However, expected future cash flows are inherently uncertain and are therefore
liable to material change over time. The key assumptions employed in arriving at the estimates of future cash flows factored into impairment testing are subjective
and include projected EBITDA (as defined)* margins, net cash flows, discount rates used and the duration of the discounted cash flow model.
Significant under-performance in any of CRH’s major CGUs may give rise to a material write-down of goodwill which would have a substantial impact on the Group’s
income and equity, however given the excess headroom on the models the likelihood of this happening is not considered a realistic possibility.
Significant goodwill amounts
The goodwill allocated to the UK (Europe Heavyside segment) and the Oldcastle Building Products (Americas Products segment) CGUs account for between 10%
and 25% of the total carrying amount shown on page 154. 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:
Goodwill allocated to the cash-generating unit at balance sheet date
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
United
Kingdom
2016
€748m
7.8%
13.7%
€3,549m
€1,338m
Oldcastle
Building Products
2016
2015
€1,670m
11.7%
14.4%
€4,695m
€1,388m
€756m
11.7%
12.0%
€2,726m
€566m
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.
The UK 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 believes 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 the sensitivity of
the value-in-use computations for the UK or Oldcastle Building Products CGUs are considered to be warranted.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
155
CRH Annual Report and Form 20-F 2016 14. Intangible Assets - continued
Sensitivity analysis
Sensitivity analysis has been performed and results in additional disclosures in respect of one CGU (in the Europe Heavyside segment) of the total 25 CGUs. The
key assumptions, methodology used and values applied to each of the key assumptions for this CGU are in line with those outlined above (a 30-year annuity period
has been used). This CGU had goodwill of €186 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 CGU 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
One cash-generating unit
0.7 percentage points
8.4%
7.2%
0.7 percentage points
The average EBITDA (as defined)* margin for the CGU over the initial five-year period was 13.9%. The value-in-use (being the present value of the future net cash
flows) was €371 million and the carrying amount was €344 million, resulting in an excess of value-in-use over carrying amount of €27 million.
156
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
CRH Annual Report and Form 20-F 2016 15. Financial Assets
At 1 January 2016
Translation adjustment
Investments and advances
Reduction in joint venture loans
Disposals and repayments
Share of profit after tax
Dividends received
At 31 December 2016
The equivalent disclosure for the prior year is as follows:
At 1 January 2015
Translation adjustment
Investments and advances
Joint ventures becoming subsidiaries (note 30)
Reclassified from held for sale
Disposals and repayments
Return of share capital
Arising on acquisition (note 30)
Impairment charge for year
Share of profit after tax
Dividends received
At 31 December 2015
Investments accounted for
using the equity method
(i.e. joint ventures and associates)
Share of net
assets
€m
1,161
(14)
1
-
2
42
(40)
1,152
1,193
103
7
(25)
34
(159)
(6)
23
-
44
(53)
Loans
€m
156
3
6
(5)
(13)
-
-
147
136
14
11
-
-
(6)
-
1
-
-
-
Total
€m
1,317
(11)
7
(5)
(11)
42
(40)
1,299
1,329
117
18
(25)
34
(165)
(6)
24
-
44
(53)
Other (i)
€m
28
-
-
-
(2)
-
-
26
23
1
1
-
-
-
-
5
(2)
-
-
1,161
156
1,317
28
(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
2016
€m
727
171
(285)
(102)
511
2015
€m
696
173
(194)
(187)
488
2016
€m
845
413
(182)
(435)
641
2015
€m
880
444
(140)
(511)
673
2016
€m
1,572
584
(467)
(537)
1,152
2015
€m
1,576
617
(334)
(698)
1,161
A listing of the principal equity accounted investments is contained on page 255.
The Group holds a 21.13% stake (2015: 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
2016 (Level 1 input in the fair value hierarchy), was €107 million (2015: €82 million).
157
CRH Annual Report and Form 20-F 2016 16. Inventories
Raw materials
Work-in-progress (i)
Finished goods
Total inventories at the lower of cost and net realisable value
2016
€m
821
94
2,024
2,939
2015
€m
836
106
1,931
2,873
(i)
Work-in-progress includes €2 million (2015: €9 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 €17 million (2015: €12 million; 2014: €29 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
2016
€m
2,773
792
3,565
(152)
3,413
9
557
3,979
2015
€m
2,752
720
3,472
(161)
3,311
11
655
3,977
212
149
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 €149 million and
€167 million respectively (2015: €155 million and €145 million respectively).
158
CRH Annual Report and Form 20-F 2016 17. Trade and Other Receivables - continued
Valuation and qualifying accounts (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
Reclassified from/(as) held for sale
Disposed of during year
Written off during year
Arising on acquisition (note 30)
Recovered during year
At 31 December
2016
€m
161
(1)
43
-
(1)
(43)
2
(9)
152
2015
€m
106
5
40
2
(4)
(36)
55
(7)
161
2014
€m
118
4
28
(2)
-
(36)
-
(6)
106
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
2016
€m
2,414
774
120
105
152
3,565
2015
€m
2,385
608
211
107
161
3,472
Trade receivables and amounts receivable in respect of construction contracts are in general receivable within 90 days of the balance sheet date.
159
CRH Annual Report and Form 20-F 2016 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
2016
€m
2,531
296
61
1,875
52
4,815
221
240
461
2015
€m
2,521
240
46
1,911
43
4,761
168
242
410
(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) The fair value of total contingent consideration is €136 million (2015: €111 million), (Level 3 input in the
fair value hierarchy) and deferred consideration is €165 million (2015: €177 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 €144 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
2016
€m
288
9
22
15
(57)
24
301
2015
€m
207
21
97
2
(59)
20
288
160
CRH Annual Report and Form 20-F 2016
19. Movement in Working Capital and Provisions
for Liabilities
Trade and other
receivables
€m
Trade and other
payables
€m
Provisions
for liabilities
€m
(5,171)
(1,035)
At 1 January 2016
Translation adjustment
Arising on acquisition (note 30)
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 30)
- paid during year
Deferred proceeds arising on disposals during year
Interest accruals and discount unwinding
Transfer to property, plant and equipment
Increase/(decrease) in working capital and provisions for liabilities
At 31 December 2016
The equivalent disclosure for the prior years is as follows:
At 1 January 2015
Translation adjustment
Arising on acquisition (note 30)
Reclassified from held for sale
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 30)
- paid during year
Deferred proceeds arising on disposals during year
Interest accruals and discount unwinding
Decrease in working capital and provisions for liabilities
At 31 December 2015
At 1 January 2014
Translation adjustment
Arising on acquisition (note 30)
Reclassified as held for sale
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 2014
Inventories
€m
2,873
20
9
(18)
-
-
-
-
-
55
2,939
2,260
130
621
102
(211)
-
-
-
-
(29)
2,873
2,254
128
23
(102)
(9)
-
-
-
(34)
2,260
4,126
(12)
28
(15)
-
-
7
-
(8)
65
4,191
2,729
147
1,533
79
(178)
-
-
38
-
(222)
4,126
2,609
165
20
(79)
(4)
-
-
-
18
2,729
Total
€m
793
60
41
(24)
(22)
57
7
(54)
(8)
(56)
794
1,442
121
24
76
(246)
(97)
59
38
(39)
(585)
793
26
18
1
-
-
-
(30)
-
(40)
(1,060)
(396)
(5)
(581)
(7)
6
-
-
-
(19)
(33)
(1,035)
(380)
1,440
(27)
(1)
7
-
-
-
(16)
21
93
25
(76)
(11)
(3)
26
(17)
(35)
26
(14)
8
(22)
57
-
(24)
-
(136)
(5,276)
(3,151)
(151)
(1,549)
(98)
137
(97)
59
-
(20)
(301)
(5,171)
(3,043)
(173)
(17)
98
2
(3)
26
(1)
(40)
(3,151)
(396)
1,442
161
CRH Annual Report and Form 20-F 2016
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 2016
As at 31 December 2015
Fair value (i)
€m
Book value
€m
Fair value (i)
€m
Book value
€m
2,449
(8,236)
44
(5,743)
2,449
(7,790)
44
(5,297)
2,518
(9,526)
85
(6,923)
2,518
(9,221)
85
(6,618)
(i) All interest-bearing loans and borrowings are Level 2 fair value measurements.
Reconciliation of opening to closing net debt
At 1 January
Debt in acquired companies
Debt in disposed companies
2016
€m
2015
€m
2014
€m
(6,618)
(2,492)
(2,973)
(3)
-
(175)
20
Increase in interest-bearing loans, borrowings and finance leases
(600)
(5,633)
Net cash flow arising from derivative financial instruments
Repayment of interest-bearing loans, borrowings and finance leases
(Decrease)/increase in cash and cash equivalents
Mark-to-market adjustment
Translation adjustment
At 31 December
5
2,015
(127)
21
10
(5,297)
(47)
2,744
(897)
(1)
(137)
(6,618)
The following table shows the effective interest rates on period-end fixed, gross and net debt:
(7)
-
(901)
11
934
625
(3)
(178)
(2,492)
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
As at 31 December 2016
As at 31 December 2015
Weighted
average
fixed period
Years
Interest
rate
3.5%
8.7
4.1%
€m
(7,417)
1,640
(5,777)
(270)
(103)
(1,596)
(7,746)
2,449
(5,297)
Weighted
average
fixed period
Years
Interest
rate
4.0%
9.4
3.3%
€m
(7,431)
2,270
(5,161)
(1,668)
(122)
(2,185)
(9,136)
2,518
(6,618)
(i)
Of the Group’s nominal fixed rate debt at 31 December 2016, €1,640 million (2015: €2,270 million) is hedged to floating rate using interest rate swaps.
(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.
162
CRH Annual Report and Form 20-F 2016 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 2016 and
31 December 2015 is as follows:
Cash and cash equivalents (note 22)
Interest-bearing loans and borrowings (note 23)
Derivative financial instruments (net) (note 24)
Net debt by major currency including derivative
financial instruments
Non-debt assets and liabilities analysed as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Non-controlling interests
Capital and reserves attributable to the
Company’s equity holders
The equivalent disclosure for the prior year is as follows:
Cash and cash equivalents (note 22)
Interest-bearing loans and borrowings (note 23)
Derivative financial instruments (net) (note 24)
Net debt by major currency including derivative
financial instruments
Non-debt assets and liabilities analysed as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Non-controlling interests
Capital and reserves attributable to the
Company’s equity holders
euro
€m
690
US
Dollar
€m
1,284
(3,840)
(2,957)
2,397
(1,246)
Pound
Sterling
€m
Canadian
Dollar
€m
Philippine
Peso
€m
Polish
Zloty
€m
72
(464)
(208)
145
(1)
(612)
16
(197)
-
(753)
(2,919)
(600)
(468)
(181)
2,485
1,541
1,459
4,476
1,809
9,311
3,064
(641)
(1,885)
(1,610)
(2,059)
(46)
(16)
749
(276)
(892)
-
3,235
5,496
1,466
1,062
791
(4,533)
(3,503)
2,449
(918)
(1,022)
(3,630)
99
(540)
(413)
(854)
471
(247)
(320)
-
977
131
(29)
(536)
(434)
97
(238)
(125)
(472)
540
10
(226)
-
(216)
4,487
1,855
9,111
2,934
(643)
(1,837)
2,845
818
(254)
(1,547)
(1,956)
(1,091)
(39)
(12)
-
3,091
4,610
1,464
1,403
1,459
393
(228)
(272)
-
862
121
(193)
(150)
(467)
554
Swiss
Franc
€m
89
(306)
(209)
Other (i)
€m
132
Total
€m
2,449
(24)
(7,790)
2
44
(426)
110
(5,297)
797
325
(350)
(199)
(12)
1,790
22,147
258
6,922
(97)
(3,738)
(268)
(5,591)
(1)
(548)
135
1,792
13,895
182
(304)
(232)
(354)
821
331
(377)
(200)
(13)
208
123
(22)
(215)
2,518
(9,221)
85
(114)
(6,618)
2,034
22,525
245
(84)
6,855
(3,624)
(257)
(5,594)
-
(529)
1,824
13,015
21
(1)
(80)
(60)
288
149
(4)
(118)
(1)
254
120
(64)
(50)
6
365
158
(8)
(121)
2
402
(i)
The principal currencies included in this category are the Chinese Renminbi, the Romanian Leu, the Indian Rupee, the Ukrainian Hryvnia and the Serbian Dinar.
163
CRH Annual Report and Form 20-F 2016 20. Analysis of Net Debt - continued
Liquidity and capital resources
The following table provides certain information related to our cash generation and changes in our cash and cash equivalents position:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash (outflow)/inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year, excluding overdrafts (note 22)
Effect of exchange rate changes
Cash and cash equivalents at end of year, excluding overdrafts (note 22)
Bank overdrafts
Borrowings
Derivative financial instruments
Net debt at end of year
2016
€m
2,340
(735)
(1,732)
(127)
2,518
58
2,449
(78)
(7,712)
44
(5,297)
2015
€m
2,247
(7,306)
4,162
(897)
3,295
120
2,518
(117)
(9,104)
85
(6,618)
2014
€m
1,237
(232)
(380)
625
2,540
130
3,295
(70)
(5,796)
79
(2,492)
The Group’s financing strategy includes maintenance of adequate financial resources and liquidity. During 2016 the Group’s total net cash inflow from operating
activities of €2.3 billion funded investing activities of €0.7 billion and a reduction of €1.7 billion in net financing.
The Group believes that its financial resources (operating cash together with cash and cash equivalents of €2.4 billion and undrawn committed loan facilities of
€3.0 billion) will be sufficient to cover the Group’s cash requirements.
At 31 December 2016, euro and US Dollar denominated cash and cash equivalents represented 28% (2015: 42%) and 52% (2015: 31%) of total cash and cash
equivalents respectively.
Significant borrowings
The main sources of Group debt funding are public bond markets in Europe and North America. The following bonds were outstanding as at 31 December 2016:
US Dollar bonds
euro bonds
euro bonds
US Dollar bonds
euro bonds
Swiss Franc bonds
euro bonds
euro bonds
US Dollar bonds
euro bonds
Pound Sterling bonds
US Dollar bonds
US Dollar bonds
Annual
coupons
Outstanding
millions
Final
maturity
8.125%
5.000%
2.750%
5.750%
1.750%
1.375%
3.125%
1.875%
3.875%
1.375%
4.125%
6.400%
5.125%
$650
€500
€750
$400
€600
CHF330
€750
€600
$1,250
€600
£400
$213 (i)
$500
2018
2019
2020
2021
2021
2022
2023
2024
2025
2028
2029
2033
2045
(i) Originally issued as a US$300 million bond in September 2003. Subsequently in August 2009 and December 2010, US$87.445 million
of the issued notes were acquired by CRH plc as part of liability management exercises undertaken.
164
CRH Annual Report and Form 20-F 2016
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 2016.
The Board periodically reviews the capital structure of the Group, including the cost of capital and the risks associated with each class of capital. The Group
manages and, if necessary, adjusts its capital structure taking account of underlying economic conditions; any material adjustments to the Group’s capital structure
in terms of the relative proportions of debt and equity are approved by the Board. In order to maintain or adjust the capital structure, the Group may issue new
shares, dispose of assets, amend investment plans, alter dividend policy or return capital to shareholders.
The Group is committed to optimising the use of its balance sheet within the confines of the overall objective to maintain an investment grade credit rating. Dividend
cover for the year ended 31 December 2016 amounted to 2.31 times (2015: 1.43 times).
The capital structure of the Group, which comprises net debt and capital and reserves attributable to the Company’s equity holders, may be summarised as follows:
Capital and reserves attributable to the Company’s equity holders
Net debt
Capital and net debt
2016
€m
13,895
5,297
19,192
2015
€m
13,015
6,618
19,633
Financial risk management objectives and policies
The Group uses financial instruments throughout its businesses: interest-bearing loans and borrowings, cash and cash equivalents and finance leases are used to
finance the Group’s operations; trade receivables and trade payables arise directly from operations; and derivatives, principally interest rate and currency swaps and
forward foreign exchange contracts, are used to manage interest rate risks and currency exposures and to achieve the desired profile of borrowings. The Group
does not trade in financial instruments nor does it enter into any leveraged derivative transactions.
The Group’s corporate treasury function provides services to the business units, co-ordinates access to domestic and international financial markets, and monitors
and manages the financial risks relating to the operations of the Group. The Group Treasurer reports to the General Manager of Finance and the activities of the
corporate treasury function are subject to regular internal audit. Systems and processes are in place to monitor and control the Group’s liquidity risks. The Group’s
net debt position forms part of the monthly documentation presented to the Board.
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.
165
CRH Annual Report and Form 20-F 2016 21. Capital and Financial Risk Management - continued
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 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 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 before tax
Impact on total equity
Foreign currency risk
+/- 1%
+/- 0.5%
+/- €6m
-/+ €14m
+/- €21m
+/- €3m
-/+ €7m
+/- €10m
-/+ €1m
-/+ €7m
-/+ €5m
-/+ €0.5m
-/+ €4m
-/+ €2m
2016
2015
2014
2016
2015
2014
Due to the nature of building materials, which in general have a low value-to-weight ratio, the Group’s activities are conducted primarily in the local currency of the
country of operation resulting in low levels of foreign currency transaction risk; variances arising in this regard are reflected in operating costs or cost of sales in the
Consolidated Income Statement in the period in which they arise.
Given the Group’s presence in 31 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 before tax and equity to selected movements in the relevant euro/US Dollar exchange rate (with all other
variables held constant); the US Dollar has been selected as the appropriate currency for this analysis given the materiality of the Group’s activities in the US. The
impact on profit before tax is based on changing the euro/US Dollar exchange rate used in calculating profit before tax for the period. The impact on total equity and
financial instruments is calculated by changing the euro/US Dollar exchange rate used in measuring the closing balance sheet.
Percentage change in relevant euro/US Dollar exchange rate
Impact on profit before tax
Impact on total equity*
* Includes the impact on financial instruments which is as follows:
+/- 5%
-/+ €60m
-/+ €33m
-/+ €26m
-/+ €275m
-/+ €230m
-/+ €263m
+/- €146m
+/- €181m
+/- €53m
2016
2015
2014
2016
2015
2014
2016
2015
2014
+/- 2.5%
-/+ €30m
-/+ €17m
-/+ €13m
-/+ €137m
-/+ €115m
-/+ €135m
+/- €73m
+/- €90m
+/- €27m
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.
166
CRH Annual Report and Form 20-F 2016
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 - counterparties have ratings of A3/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 4.3% of gross trade
receivables (2015: 4.6%). Customer credit risk is managed at appropriate Group locations according to established policies, procedures and controls. Customer credit
quality is assessed in line with strict credit rating criteria and credit limits are established where appropriate. Outstanding customer balances are regularly monitored and a
review for indicators of impairment (evidence of financial difficulty of the customer, payment default, breach of contract etc.) is carried out at each reporting date.
Significant balances are reviewed individually while smaller balances are grouped and assessed collectively. Receivables balances are in general unsecured 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 68% of the total trade receivables balance at the balance sheet date (2015: 69%); amounts
receivable from related parties (notes 17 and 32) 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 diverse group 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.
Commodity price risk
The fair value of derivatives used to hedge future energy costs was €2 million unfavourable as at the balance sheet date (2015: €17 million unfavourable).
167
CRH Annual Report and Form 20-F 2016 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 2016
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 (i)
Cross-currency swaps - gross cash outflows
Gross projected cash outflows
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows (ii)
Cross-currency swaps - gross cash inflows
Gross projected cash inflows
The equivalent disclosure for the prior year is as follows:
At 31 December 2015
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 (i)
Cross-currency swaps - gross cash outflows
Gross projected cash outflows
Derivative financial instruments - cash inflows
Interest rate swaps - net cash inflows (ii)
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
4,815
2
280
1
279
2,904
8,281
311
2
620
1
278
-
1,212
(30)
(2,894)
(2,924)
(30)
-
(30)
46
2
501
1
228
-
778
(17)
-
(17)
72
2
751
1
198
-
14
1
980
-
166
-
41
5
5,299
14
4,589
7,721
2
1,154
-
6
2,303
2,904
1,024
1,161
5,791
18,247
(16)
-
(16)
(16)
-
(16)
(45)
(154)
-
(2,894)
(45)
(3,048)
4,761
2
760
315
2,716
8,554
231
2
800
277
146
80
2
1,361
270
-
1,456
1,713
(53)
(2,707)
(2,760)
(35)
(162)
(197)
(35)
-
(35)
37
2
500
196
-
735
(21)
-
(21)
48
2
750
190
-
65
5
5,222
15
4,971
9,142
1,271
2,519
-
2,862
990
6,312
19,760
(21)
-
(21)
(87)
(252)
-
(2,869)
(87)
(3,121)
(i)
At 31 December 2016 and 31 December 2015, a portion of the Group’s long-term debt carried variable interest rates. The Group uses the interest rates in effect
on 31 December to calculate the interest payments on the long-term debt for the periods indicated.
(ii) The Group uses interest rate swaps to help manage its interest cost. Under these contracts the Group has agreed to exchange at predetermined intervals, the
difference between fixed and variable interest amounts calculated by reference to a pre-agreed notional principal. The Group uses the interest rates in effect on
31 December to calculate the net interest receipts or payments on these contracts.
168
CRH Annual Report and Form 20-F 2016 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 and Consolidated Statement of Cash Flows at fair value and are analysed as follows:
Cash at bank and in hand
Investments (short-term deposits)
Total
2016
€m
1,141
1,308
2,449
2015
€m
938
1,580
2,518
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.
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
2016
€m
78
200
14
7,497
1
7,790
2015
€m
117
1,564
15
7,508
17
9,221
Interest-bearing loans and borrowings include loans of €3 million (2015: €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
As at 31 December 2016
As at 31 December 2015
Loans and
borrowings
€m
Undrawn
committed
facilities
€m
Loans and
borrowings
€m
Undrawn
committed
facilities
€m
275
629
500
748
978
4,660
7,790
197
-
-
91
2,746
-
3,034
756
794
1,382
501
747
5,041
9,221
31
220
-
-
2,837
-
3,088
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
The Group manages its borrowing ability by entering into committed borrowing agreements. Revolving committed bank facilities are generally available to the Group
for periods of up to five years from the date of inception. The undrawn committed facilities figures shown in the table above represent the facilities available to be
drawn by the Group at 31 December 2016.
169
CRH Annual Report and Form 20-F 2016 23. Interest-bearing Loans and Borrowings - continued
Guarantees
The Company has given letters of guarantee to secure obligations of subsidiary undertakings as follows: €7.6 billion in respect of loans, bank advances, derivative
obligations and future lease obligations (2015: €8.9 billion), €0.3 billion in respect of letters of credit (2015: €0.3 billion) and €nil million in respect of other obligations
(2015: €10 million).
Pursuant to the provisions of Section 357(1)(b) of the Companies Act 2014, the Company has guaranteed all amounts shown as liabilities in the statutory financial
statements of its wholly-owned subsidiary undertakings in the Republic of Ireland for the financial year ended 31 December 2016 and as a result, such subsidiary
undertakings have been exempted from the filing provisions of Sections 347 and 348 of the Companies Act 2014 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 (2015: 4.5 times; 2014: 4.5
times). As at 31 December 2016 the ratio was 10.1 times (2015: 8.5 times; 2014: 7.0 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
€6.2 billion (2015: €5.6 billion) (such minimum being adjusted for foreign exchange translation impacts). As at 31 December 2016 net worth (as defined in
the relevant agreement) was €16.4 billion (2015: €15.6 billion).
170
CRH Annual Report and Form 20-F 2016 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
€m
Cash flow
hedges
€m
Net
investment
hedges
€m
Not
designated
as hedges
€m
Total
€m
At 31 December 2016
Derivative assets
Within one year - current assets
Between one and two years
Between two and three years
After five years
Non-current assets
Total derivative assets
Derivative liabilities
Within one year - current liabilities
Total derivative liabilities
Net asset/(liability) arising on derivative financial instruments
The equivalent disclosure for the prior year is as follows:
At 31 December 2015
Derivative assets
Within one year - current assets
Between one and two years
Between two and three years
Between three and four years
After five years
Non-current assets
Total derivative assets
Derivative liabilities
Within one year - current liabilities
Between one and two years - non-current liabilities
Total derivative liabilities
-
13
-
33
46
46
-
-
46
4
21
22
-
34
77
81
-
-
-
2
1
-
-
1
3
(1)
(1)
2
-
-
-
-
-
-
-
(7)
(4)
(11)
Net asset/(liability) arising on derivative financial instruments
81
(11)
21
-
-
-
-
21
(31)
(31)
(10)
15
-
-
-
-
-
-
-
6
-
6
6
-
-
6
5
-
-
8
-
8
23
14
6
33
53
76
(32)
(32)
44
24
21
22
8
34
85
15
13
109
(7)
-
(7)
8
(5)
(1)
(6)
7
(19)
(5)
(24)
85
171
CRH Annual Report and Form 20-F 2016 24. Derivative Financial Instruments - continued
At 31 December 2016 and 2015, the Group had no master netting or similar arrangements, collateral posting requirements, or 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 (loss)/profit 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
Gains/(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
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
2016
€m
(11)
13
2015
€m
(16)
13
2014
€m
15
(16)
14
(2)
(6)
2016
Level 2
€m
2015
Level 2
€m
46
21
6
3
76
(1)
(31)
-
(32)
81
15
13
-
109
(11)
(7)
(6)
(24)
At 31 December 2016 and 2015 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 134.
172
CRH Annual Report and Form 20-F 2016 25. Provisions for Liabilities
At 1
January
Translation
adjustment
Arising on
acquisition
(note 30)
Provided
during
year
Utilised
during
year
Reclassified
from held
for sale
Disposed
during
year
Reversed
unused
Discount
unwinding
At 31
December
€m
€m
€m
€m
€m
€m
€m
31 December 2016
Insurance (i)
Environment and
remediation (ii)
Rationalisation and
redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
€m
5
(21)
-
(10)
(26)
€m
244
450
26
315
1,035
603
432
1,035
The equivalent disclosure for the prior year is as follows:
-
(16)
1
(3)
(18)
105
38
23
77
243
(76)
(17)
(25)
(29)
(147)
18
(5)
1
(9)
5
8
348
2
223
581
61
20
23
62
166
(49)
(10)
(23)
(21)
(103)
31 December 2015
Insurance (i)
Environment and
remediation (ii)
Rationalisation and
redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
208
96
24
68
396
257
139
396
Notes (i) to (iv) are set out overleaf.
-
-
-
-
-
-
4
-
3
7
-
(1)
-
-
(1)
-
(5)
-
(1)
(6)
(11)
(9)
(2)
(34)
(56)
(12)
(4)
(2)
(12)
(30)
19
6
-
5
30
10
6
1
2
19
€m
286
430
23
321
1,060
678
382
1,060
244
450
26
315
1,035
603
432
1,035
173
CRH Annual Report and Form 20-F 2016 25. Provisions for Liabilities - continued
(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 US), public and products liability (general liability in the US), 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
(2015: six years).
(ii) This provision comprises obligations governing site remediation, restoration and environmental works 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), those 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 2016, €23 million (2015: €23 million; 2014: €30 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 (2015: one to two years).
(iv) Other provisions primarily relate to legal claims (only one of which is individually material to the Group, see below for further details), onerous contracts,
guarantees and warranties and employee related provisions. The Group expects these provisions will be utilised within two to five years of the balance sheet
date (2015: two to five years); however due to the nature of the legal provisions there is a level of uncertainty in the timing of settlement as the Group generally
cannot determine the extent and duration of the legal process.
Swiss Competition Commission investigation
In 2015, the Swiss Competition Commission imposed fines on the Association of Swiss Wholesalers of the Sanitary Industry and on major Swiss wholesalers
including certain Swiss CRH subsidiaries; the fine attributable to these subsidiaries was CHF34 million. While the Group remains of the view that the fine is
unjustified and it has appealed to the Swiss Federal Appeals Court, a provision of €32 million (2015: €32 million) is recorded in the Group’s Consolidated
Balance Sheet.
174
CRH Annual Report and Form 20-F 2016 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
2016
€m
2,008
(159)
1,849
119
12
150
38
350
83
752
2015
€m
2,023
(149)
1,874
126
13
158
15
326
46
684
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 €1.4 billion (2015: €1.4 billion).
The vast majority either do not expire based on current tax legislation or they expire post 2021 (2015: 2020).
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
(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 income for the year (note 10)
Arising on acquisition (note 30)
Reclassified from held for sale
Disposal (note 4)
Movement in deferred tax asset on Group retirement benefit obligations
Movement in deferred tax asset on share-based payment expense
At 31 December
2,569
18
14
2,601
2,521
18
19
2,558
1,874
1,134
41
(15)
(35)
-
(1)
(3)
(12)
1,849
126
(35)
627
19
(22)
30
(5)
1,874
175
CRH Annual Report and Form 20-F 2016 27. Retirement Benefit Obligations
The Group operates either defined benefit or defined contribution pension schemes in all of its principal operating areas. The disclosures included below relate to
all pension schemes in the Group.
The Group operates defined benefit pension schemes in Belgium, Brazil, Canada, France, Germany, the Netherlands, the Philippines, the Republic of Ireland,
Romania, Serbia, Slovakia, Switzerland, the UK and the US. The majority of the defined benefit pension schemes operated by the Group are funded, totalling
a net liability of €444 million (2015: €449 million). Unfunded schemes (primarily related to jubilee, post-retirement health care obligations and long-term service
commitments) are restricted to a number of schemes in Canada, Germany, the Netherlands, the Philippines, Switzerland and the US, totalling a net liability of
€147 million (2015: €139 million).
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 operates 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 most members depends on length of service and either their average salary over their period of employment
or their salary in the final years leading up to retirement. The Group’s pension schemes in Switzerland are contribution-based schemes with guarantees to provide
further contributions in the event that certain targets are not met largely in relation to investment return and the annuity conversion factor on retirement.
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 IAS 19 Employee Benefits, 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 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: A significant amount of the Group’s pension obligations are linked to inflation; higher inflation will lead to higher liabilities (although in most cases, caps
on the level of inflationary increases are in place to protect the 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.
Aggregation
For the purposes of the disclosures which follow for 2016 and 2015; the schemes in Belgium, France, Germany, the Netherlands, the Republic of Ireland and
Slovakia have been aggregated into a “Eurozone” category on the basis of common currency and financial assumptions; schemes in Brazil, the Philippines,
Romania, Serbia and the UK have been aggregated into an “Other” category. For 2014, Eurozone principally relates to the Republic of Ireland and Other relates to
the UK.
176
CRH Annual Report and Form 20-F 2016 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 2016, 31 December 2015 and
31 December 2014 are as follows:
Eurozone
2015
%
2016
%
3.41
1.50
1.50
1.86
n/a
3.64
1.75
1.75
2.61
n/a
2014
%
3.75
1.75
1.75
2.00
n/a
Switzerland
United States
and Canada
2016
%
2015
%
2014
%
2016
%
2015
%
2014
%
1.25
1.75
2.25
3.28
3.29
3.50
-
0.75
0.65
n/a
-
0.75
0.85
n/a
-
1.25
1.15
n/a
-
2.00
4.01
5.98
-
2.00
4.22
6.21
-
2.00
3.80
16.70
Rate of increase in:
- salaries
- pensions in payment
Inflation
Discount rate
Medical cost trend rate
The mortality assumptions employed in determining the present value of scheme liabilities under IAS 19 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. For the Group’s most material
schemes, the future life expectations factored into the relevant valuations, based on retirement at 65 years of age for current and future retirees, are as follows:
Republic of Ireland
2015
2014
2016
Switzerland
2015
2016
United States
and Canada
2014
2016
2015
2014
Current retirees
- male
- female
Future retirees
- male
- female
22.5
24.3
22.8
24.9
22.8
24.9
22.3
24.3
21.5
24.0
21.3
23.8
20.5
23.0
21.2
23.4
22.0
24.0
25.4
26.9
25.8
26.9
25.8
26.8
24.6
26.6
23.6
26.0
23.5
25.9
22.3
24.7
23.0
25.1
24.0
26.0
The above data allows for future improvements in life expectancy.
177
CRH Annual Report and Form 20-F 2016 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
2016
€m
240
75
315
2015
€m
211
77
288
2014
€m
152
63
215
At 31 December 2016, €89 million (2015: €79 million) was included in other payables in respect of defined contribution pension liabilities.
Analysis of defined benefit expense
Charged in arriving at group profit before finance costs:
Current service cost
Administration expenses
Past service costs
Subtotal
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
Reconciliation of scheme assets (bid value)
At 1 January
Movement in year
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
Administration expenses
Translation adjustment
At 31 December
Eurozone
2016
€m
Switzerland
2016
United States
and Canada
2016
€m
€m
Other
2016
€m
16
-
(2)
14
(27)
31
4
18
34
2
-
36
(7)
8
1
37
5
1
-
6
(17)
22
5
11
6
1
-
7
(7)
9
2
9
Total Group
2016
€m
61
4
(2)
63
(58)
70
12
75
1,016
774
416
193
2,399
27
46
73
3
(49)
-
-
1,116
7
20
18
10
(29)
(2)
6
804
17
5
22
1
(28)
(1)
21
453
7
10
20
-
(24)
(1)
(22)
183
58
81
133
14
(130)
(4)
5
2,556
178
CRH Annual Report and Form 20-F 2016 Reconciliation of actuarial value of liabilities
At 1 January
Movement in year
Current service cost
Past service costs
Interest cost on scheme liabilities
Arising on acquisition (note 30)
Remeasurement adjustments
- experience variations
- actuarial (loss)/gain from changes in financial
assumptions
- actuarial (loss)/gain from changes in demographic
assumptions
Contributions paid by plan participants
Benefit and settlement payments
Translation adjustment
At 31 December
Recoverable deficit in schemes
Related deferred income tax asset
Net pension liability
Eurozone
Switzerland
2016
€m
2016
€m
United States
and Canada
2016
€m
Other
2016
€m
Total Group
2016
€m
(1,232)
(989)
(530)
(236)
(2,987)
(16)
2
(31)
(1)
9
(115)
-
(3)
49
-
(1,338)
(222)
34
(188)
(34)
-
(8)
-
14
13
(3)
(10)
29
(7)
(995)
(191)
37
(154)
(5)
-
(22)
-
-
(15)
16
(1)
28
(25)
(554)
(101)
36
(65)
(6)
-
(9)
-
(3)
(59)
1
-
24
28
(61)
2
(70)
(1)
20
(176)
14
(14)
130
(4)
(260)
(3,147)
(77)
12
(65)
(591)
119
(472)
179
CRH Annual Report and Form 20-F 2016 27. Retirement Benefit Obligations - continued
The equivalent disclosure for the prior year is as follows:
Analysis of defined benefit expense
Charged in arriving at group profit before finance costs:
Current service cost
Administration expenses
Past service costs
Gain on settlements
Subtotal
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
Reconciliation of scheme assets (bid value)
At 1 January
Movement in year
Interest income on scheme assets
Arising on acquisition (note 30)
Reclassified from held for sale
Disposals
Remeasurement adjustments
- return of scheme assets excluding interest income
Employer contributions paid
Contributions paid by plan participants
Benefit and settlement payments
Administration expenses
Translation adjustment
At 31 December
Eurozone
2015
Switzerland
2015
United States
and Canada
2015
€m
19
1
(1)
-
19
(19)
27
8
27
€m
34
1
-
-
35
(9)
11
2
37
€m
2
-
-
-
2
(12)
16
4
6
Other
2015
€m
8
-
-
(4)
4
(10)
13
3
7
Total Group
2015
€m
63
2
(1)
(4)
60
(50)
67
17
77
935
745
211
155
2,046
19
10
-
-
19
74
3
(43)
(1)
-
9
-
-
(39)
(6)
19
11
(47)
(1)
83
1,016
774
12
216
-
-
(20)
6
-
(21)
-
12
416
10
28
633
(705)
12
14
-
(11)
-
57
50
254
633
(744)
5
113
14
(122)
(2)
152
193
2,399
180
CRH Annual Report and Form 20-F 2016 Reconciliation of actuarial value of liabilities
At 1 January
Movement in year
Current service cost
Past service costs
Gain on settlements
Interest cost on scheme liabilities
Arising on acquisition (note 30)
Reclassified from held for sale
Disposals
Remeasurement adjustments
- experience variations
- actuarial gain/(loss) from changes in financial assumptions
- actuarial gain from changes in demographic assumptions
Contributions paid by plan participants
Benefit and settlement payments
Translation adjustment
At 31 December
Recoverable deficit in schemes
Related deferred income tax asset
Net pension liability
The equivalent disclosure for 2014 is as follows:
Analysis of defined benefit expense
Charged in arriving at Group profit before finance costs:
Current service cost
Administration expenses
Past service costs
Subtotal
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
Eurozone
Switzerland
United States
and Canada
2015
€m
(1,332)
(19)
1
-
(27)
(67)
-
-
28
144
-
(3)
43
-
(1,232)
(216)
34
(182)
2015
€m
(900)
(34)
-
-
(11)
-
-
47
15
(43)
-
(11)
47
(99)
(989)
(215)
42
(173)
2015
€m
(309)
(2)
-
-
(16)
(235)
-
-
-
26
5
-
21
(20)
(530)
(114)
43
(71)
Other
2015
€m
Total Group
2015
€m
(216)
(2,757)
(8)
-
4
(13)
(39)
(714)
781
10
(6)
19
-
11
(65)
(63)
1
4
(67)
(341)
(714)
828
53
121
24
(14)
122
(184)
(236)
(2,987)
(43)
7
(36)
(588)
126
(462)
Eurozone
2014
Switzerland
2014
United States
2014
€m
11
1
(5)
7
(29)
37
8
15
€m
24
-
-
24
(16)
17
1
25
€m
2
-
-
2
(9)
11
2
4
Other
2014
€m
14
2
-
16
(31)
34
3
19
Total Group
2014
€m
51
3
(5)
49
(85)
99
14
63
181
CRH Annual Report and Form 20-F 2016 27. Retirement Benefit Obligations - continued
Sensitivity analysis
The impact of a movement (as indicated below) in the principal actuarial assumptions would be as follows:
Scheme liabilities at 31 December 2016
Revised liabilities
Discount rate
Inflation rate
Decrease by 0.25%
Increase by 0.25%
Life expectancy
Increase by 1 year
Eurozone
2016
€m
(1,338)
Switzerland
2016
€m
(995)
(1,400)
(1,397)
(1,383)
(1,044)
(999)
(1,029)
United States
and Canada
2016
€m
(554)
(572)
(556)
(568)
Other
2016
€m
(260)
Total Group
2016
€m
(3,147)
(273)
(266)
(267)
(3,289)
(3,218)
(3,247)
The above sensitivity analysis are derived through changing the individual assumption while holding all other assumptions constant.
215
16
308
378
56
32
88
1
1
7
5
2
7
1,116
277
-
268
65
46
-
-
-
-
-
115
15
18
804
206
4
83
23
-
1
41
-
94
-
-
1
-
75
9
28
38
10
4
19
-
-
-
-
-
-
773
29
687
504
112
37
148
1
95
7
120
18
25
453
183
2,556
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
Unquoted investments
Equity instruments
Debt instruments:
- Non-Government debt instruments
- Government debt instruments
Property
Cash and cash equivalents
Assets held by insurance company
Total assets
182
CRH Annual Report and Form 20-F 2016 The equivalent disclosure for the prior year is as follows:
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
Unquoted investments
Equity instruments
Debt instruments:
- Non-Government debt instruments
Property
Cash and cash equivalents
Assets held by insurance company
Total assets
Eurozone
2015
€m
Switzerland
2015
€m
United States
and Canada
2015
€m
Other
2015
€m
Total Group
2015
€m
290
9
297
294
45
31
15
10
1
3
18
3
1,016
282
-
262
70
35
-
-
-
-
98
11
16
774
108
-
139
38
-
115
15
-
-
-
1
-
90
1
29
31
12
7
18
5
-
-
-
-
770
10
727
433
92
153
48
15
1
101
30
19
416
193
2,399
183
CRH Annual Report and Form 20-F 2016 27. Retirement Benefit Obligations - continued
Actuarial valuations - funding requirements and future cash flows
In accordance with statutory requirements in the Republic of Ireland and the UK (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 the Republic of Ireland and the UK, either the attained age or projected unit
credit methods are used in the valuations. In the Netherlands and Switzerland, the actuarial valuations reflect the current unit method, while the valuations are
performed in accordance with the projected unit credit methodology in Germany. In the US, valuations are performed using a variety of actuarial cost methodologies
- current unit, projected unit and aggregate cost. In Canada, the projected unit credit method is used in valuations. The dates of the actuarial valuations range from
December 2013 to December 2016.
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 (Republic of Ireland) and Other (UK) 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
2015
2014
€m
18
17
17
-
-
-
€m
18
17
17
17
-
-
2016
€m
18
17
-
-
-
-
35
52
69
Other
2015
€m
2016
€m
2
2
2
2
2
10
20
2
2
2
2
2
11
21
2014
€m
8
8
7
7
7
48
85
Total
2015
2016
€m
20
19
2
2
2
10
55
€m
20
19
19
2
2
11
73
2014
€m
26
25
24
24
7
48
154
Employer contributions payable in the 2017 financial year including minimum funding payments (expressed using year-end exchange rates for 2016) are estimated
at €111 million.
Switzerland
2015
18.0
2016
18.6
2014
16.0
United States
and Canada
2015
2016
2014
13.1
14.0
12.0
84%
85%
85%
-
-
-
16%
15%
15%
41%
17%
42%
45%
17%
38%
35%
30%
35%
Average duration and scheme composition
Average duration of defined benefit obligation (years)
Allocation of defined benefit obligation by participant:
Active plan participants
Deferred plan participants
Retirees
Eurozone
2015
14.7
2016
17.1
63%
12%
25%
64%
12%
24%
2014
16.0
37%
21%
42%
184
CRH Annual Report and Form 20-F 2016 28. Commitments under Operating and Finance Leases
Operating leases
The Group has entered into operating leases for a range of assets principally relating to property across the US and Europe. Lease commitments are provided for
up to the earliest break clause in the lease. These property leases have varying terms, escalation clauses and renewal rights including periodic rent reviews linked
with a consumer price index and/or other indices. The Group also leases plant and machinery, vehicles and equipment under operating lease. The terms and
conditions of these operating leases do not impose any significant financial restriction on the Group.
Within one year
After one year but not more than five years
More than five years
2016
2015
2014
€m
402
978
791
€m
370
915
831
€m
310
663
417
2,171
2,116
1,390
Finance leases
Future minimum lease payments under finance leases are not material for the Group.
29. Share Capital and Reserves
Equity share capital
Authorised
At 1 January (€m)
Increase in authorised share capital
At 31 December (€m)
Number of Shares at 1 January (millions)
Increase in number of Shares (millions)
Number of Shares at 31 December (millions)
Allotted, called-up and fully paid
At 1 January (€m)
Issue of scrip shares in lieu of cash dividends (iii)
Share options and share participation schemes
Issue of share capital - equity placing
At 31 December (€m)
2016
2015
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)
400
-
400
1,250
-
1,250
266
2
1
-
269
25
-
25
1,250
-
1,250
15
-
-
-
15
824
7
2
-
833
320
80
400
1,000
250
1,250
239
2
-
25
266
745
5
-
74
824
20
5
25
1,000
250
1,250
14
-
-
1
15
745
5
-
74
824
The movement in the number of shares (expressed in millions) during the financial year was as follows:
At 1 January
Issue of scrip shares in lieu of cash dividends (iii)
Share options and share participation schemes
Issue of share capital - equity placing
At 31 December
824
7
2
-
833
(i)
The Ordinary Shares represent 93.73% of the total issued share capital.
(ii) The Income Shares, which represent 5.86% 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.
185
CRH Annual Report and Form 20-F 2016 29. Share Capital and Reserves - continued
(iii) Issue of scrip shares in lieu of cash dividends:
May 2016 - Final 2015 dividend (2015: Final 2014 dividend;
2014: Final 2013 dividend)
October 2016 - Interim 2016 dividend (2015: Interim 2015 dividend;
2014: Interim 2014 dividend)
Total
Share schemes
Number of shares
Price per share
2016
2015
2014
2016
2015
2014
5,301,827 5,056,633 4,081,636
€24.69
€24.60
€20.99
1,243,042
288,769 1,212,700
€29.41
€26.16
€17.81
6,544,869 5,345,402 5,294,336
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 pages 90 to 91 of the Directors’ Remuneration Report. Under these schemes, options over a total of 2,223,574 Ordinary Shares were exercised during the
financial year (2015: 2,876,066; 2014: 1,307,406).
Options exercised during the year (satisfied by the issue of new shares)
Number of shares
2016
2,209,638
2015
-
2014
-
Options exercised during the year (satisfied by the reissue of Treasury Shares)
13,936 2,876,066 1,307,406
Total
2,223,574 2,876,066 1,307,406
Share participation schemes
As at 31 December 2016, 7,729,412 (2015: 7,613,252) Ordinary Shares had been appropriated to participation schemes. In the financial year ended 31 December
2016, the appropriation of 116,160 shares was satisfied by the issue of new shares (by the reissue of Treasury Shares in 2015: 104,127). 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.
Preference share capital
Authorised
At 1 January 2016 and 31 December 2016
Allotted, called-up and fully paid
At 1 January 2016 and 31 December 2016
5% Cumulative
Preference Shares
of €1.27 each
7% ‘A’ Cumulative
Preference Shares
of €1.27 each
Number of shares
‘000s
Number of shares
‘000s
€m
150
50
-
-
872
872
€m
1
1
There was no movement in the number of cumulative preference shares in either the current or the prior year.
The holders of the 5% Cumulative Preference Shares are entitled to a fixed cumulative preference dividend at a rate of 5% per annum and priority in 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 0.02% of the total issued share capital.
The holders of the 7% ‘A’ Cumulative Preference Shares are entitled to a fixed cumulative preference dividend at a rate of 7% per annum, and subject to the rights
of the holders of the 5% Cumulative Preference Shares, priority in 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 0.39% of the total issued share capital.
186
CRH Annual Report and Form 20-F 2016
Treasury Shares/own shares
2016
2015
At 1 January
Treasury Shares/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
At 31 December
€m
(28)
18
(4)
(14)
€m
(76)
51
(3)
(28)
As at the balance sheet date, the total number of Treasury Shares held was 83,423 (2015: 795,262); the nominal value of these shares was €nil million
(2015: €0.3 million). During the year ended 31 December 2016, 13,936 (2015: 2,980,193) shares were reissued to satisfy exercises under the Group’s share
option schemes and 697,903 (2015: nil) shares were reissued to the CRH Employee Benefit Trust in connection with the release of awards under the 2006
Performance Share Plan. These reissued Treasury Shares were previously purchased at an average price of €17.23 (2015: €17.12). No Treasury Shares were
purchased during 2016 or 2015.
As at the balance sheet date, the CRH Employee Benefit Trust held 284,980 (2015: 489,654) Ordinary Shares on behalf of CRH plc in respect of awards made
under the 2014 Deferred Share Bonus Plan and the 2013 Restricted Share Plan. The nominal value of these own shares, on which dividends have been waived
by the Trustees, amounted to €0.1 million at 31 December 2016 (2015: €0.2 million).
Reconciliation of shares issued to net proceeds
Shares issued at nominal amount:
- scrip shares issued in lieu of cash dividends
- share options and share participation schemes
- share capital issued - equity placing
Premium on shares issued
Total value of shares issued
Issue of scrip shares in lieu of cash dividends (note 11)
Proceeds from issue of shares
Expenses paid in respect of shares issued
Net proceeds from issue of shares
Share premium
At 1 January
Premium arising on shares issued
Expenses paid in respect of shares issued
At 31 December
2014
€m
2
-
-
105
107
(107)
-
-
-
2016
€m
2
1
-
216
219
(167)
52
-
52
2016
€m
6,021
216
-
6,237
2015
€m
2
-
26
1,722
1,750
(132)
1,618
(25)
1,593
2015
€m
4,324
1,722
(25)
6,021
187
CRH Annual Report and Form 20-F 2016
30. Business Combinations
The acquisitions completed during the year ended 31 December 2016 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:
Belgium: Ghent Marine Aggregates Terminal (31 December);
Ireland: Carrigtwohill Quarry (11 March); Fountain Cross and Copestown Quarries (11 November);
Spain: increased stake in Morteros Bizkor to 100% ownership (12 July); and
UK: certain assets of Hope Construction Materials and Breedon Aggregates (1 August).
Europe Lightside:
UK: Alluguard Limited (3 May); MCL Group Industries Limited (3 May).
Europe Distribution:
Austria: Jung & Sohn (15 July).
Americas Materials:
Canada: certain assets of TecMix Ready Mix Inc. (6 July); certain assets of Inter County Concrete Product Inc. (15 December);
Michigan: Winchester/Dykstra Property (22 August);
New Jersey: Meer Property (26 February);
New Mexico: assets of Consolidated Constructors (9 December);
Ohio: Lower Property (22 December);
Utah: selected assets of Nielson Construction (1 February); and
Washington: certain assets of Knife River Corporation (30 December).
Americas Products:
Australia: Neil Bennett Pty, Ltd. (1 February);
California: certain assets of Cell Blocks, Inc. (1 December);
Canada: Techniseal Products, Inc. (20 May);
Colorado: selected assets of Colorado Precast Concrete, Inc. (7 March); and
Louisiana: ModX (51%, 12 May).
188
CRH Annual Report and Form 20-F 2016 The identifiable net assets acquired, including adjustments to provisional fair values, were as follows:
2016
€m
2015
€m
2014
€m
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Equity accounted investments
Other financial assets
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
Retirement benefit obligations
Interest-bearing loans and borrowings and finance leases
Current income tax liabilities
Deferred income tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill arising on acquisition (ii)
Joint ventures becoming subsidiaries
Non-controlling interests*
Total consideration
Consideration satisfied by:
Cash payments
Deferred consideration (stated at net present cost)
Contingent consideration
Profit on step acquisition
Total consideration
NET CASH OUTFLOW ARISING ON ACQUISITION
Cash consideration
Less: cash and cash equivalents acquired
Total outflow in the Consolidated Statement of Cash Flows
91
16
-
-
107
23
20
1
44
(17)
(1)
-
(7)
-
(2)
(27)
124
31
-
-
155
19
14
-
-
33
9
28
4
41
5,413
298
24
5
5,740
621
1,533
494
2,648
(14)
(1,549)
(581)
(87)
(175)
(149)
(627)
(3,168)
5,220
3,187
(25)
(489)
7,893
18
(1)
(3)
4
35
39
113
71
-
(9)
175
153
21
1
-
175
153
(4)
149
* Non-controlling interests are measured at the proportionate share of net assets in 2016 and fair value in 2015.
7,790
152
97
-
6
1
2
-
7,893
155
7,790
(494)
7,296
152
(1)
151
189
CRH Annual Report and Form 20-F 2016 30. Business Combinations - continued
The acquisition balance sheet presented on the previous page reflects the identifiable net assets acquired in respect of acquisitions completed during 2016,
together with adjustments to provisional fair values in respect of acquisitions completed during 2015. Details of the measurement period adjustments in respect of
acquisitions completed during 2015 are set out in the table below:
Non-current assets
Liabilities
Identifiable net assets acquired
Goodwill arising on acquisition (ii)
Non-controlling interests
Total consideration
LH Assets
2016
€m
(95)
58
(37)
44
(7)
-
CRL
2016
€m
-
7
7
1
-
8
Other
acquisitions
2016
€m
5
(5)
-
-
-
-
Total
2016
€m
(90)
60
(30)
45
(7)
8
In accordance with the terms of the acquisition agreements, CRH and LafargeHolcim continue to engage in a process to finalise the post-completion consideration
for the acquisition of the LH Assets which completed in Q3 2015. No financial adjustment has been made in this respect in our 2016 Consolidated Financial
Statements. The position is under continuous review and financial adjustments will be reflected when there is sufficient evidence to do so.
None of the acquisitions completed during the financial period was 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 €30 million (2015: €1,588 million;
2014: €22 million). The fair value of these receivables is €28 million (all of which is expected to be recoverable) (2015: €1,533 million; 2014: €20 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. €15 million
of the goodwill recognised in respect of acquisitions completed in 2016 is expected to be deductible for tax purposes (2015: €254 million; 2014: €18 million).
Acquisition-related costs, excluding post-acquisition integration costs, amounting to €2 million (2015: €152 million; 2014: €2 million) have been included in operating
costs in the Consolidated Income Statement (note 2).
190
CRH Annual Report and Form 20-F 2016
The following table analyses the 21 acquisitions completed in 2016 (2015: 19 acquisitions; 2014: 21 acquisitions) by reportable segment and provides details of the
goodwill and consideration figures arising in each of those segments:
Reportable segments
2016
2015
2014
2016
2015
2014
2016
2015
2014
Number of
acquisitions
Goodwill
Consideration
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
Unallocated Goodwill (note 14)
LH Assets
CRL
Total Group
Adjustments to provisional fair values of prior year acquisitions
Total
5
2
1
8
8
5
13
-
-
21
1
2
1
4
10
3
13
1
1
2
-
6
8
8
5
13
-
-
19
21
€m
2
7
-
9
10
7
17
-
-
26
45
71
€m
-
6
-
6
32
9
41
2,307
833
3,187
-
3,187
€m
2
-
9
11
5
17
22
-
-
33
(2)
31
€m
15
22
-
37
97
33
€m
5
12
1
18
80
65
€m
7
-
20
27
71
59
130
145
130
-
-
6,561
1,169
-
-
167
7,893
157
8
-
(2)
175
7,893
155
191
CRH Annual Report and Form 20-F 2016 30. Business Combinations - continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit for the financial year was as follows:
Revenue
Profit/(loss) before tax for the financial year
2016
€m
101
1
2015
€m
2,679
(7)
2014
€m
122
7
The revenue and profit of the Group for the financial year determined in accordance with IFRS as though the acquisitions effected during the year had been at the
beginning of the year would have been as follows:
2016 acquisitions
€m
CRH Group
excluding 2016
acquisitions
€m
CRH Group
including 2016
acquisitions
€m
Revenue
(Loss)/profit before tax for the financial year
168
(2)
27,003
1,740
27,171
1,738
There have been no acquisitions completed subsequent to the balance sheet date which would be individually material to the Group, thereby requiring disclosure
under either IFRS 3 or IAS 10 Events after the Balance Sheet Date. Development updates, giving details of acquisitions which do not require separate disclosure on
the grounds of materiality, are published periodically.
192
CRH Annual Report and Form 20-F 2016 31. Non-controlling Interests
The total non-controlling interest at 31 December 2016 is €548 million (2015: €529 million) of which €472 million (2015: €467 million) relates to Republic Cement &
Building Materials (RCBM), Inc. and Luzon Continental Land Corporation (LCLC). The non-controlling interests in respect of the Group’s other subsidiaries are not
considered to be material.
Name
Principal activity
Country of incorporation
Economic ownership interest
held by non-controlling interest
Republic Cement & Building Materials, Inc. and
Luzon Continental Land Corporation
Manufacture, development and sale
of cement and building materials
Philippines
45%
The following is summarised financial information for RCBM and LCLC prepared in accordance with IFRS 12 Disclosure of Interests in Other Entities. This
information is before intragroup eliminations with other Group companies.
Summarised financial information
Profit/(loss) for the year/period since acquisition
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Cash flows from operating activities
Dividends paid to non-controlling interests during the year/period since acquisition
2016
€m
47
118
1,460
(124)
(690)
764
91
(1)
2015
€m
(5)
141
1,459
(150)
(675)
775
(2)
(1)
CRH holds 40% of the equity share capital in RCBM and LCLC and has an economic interest of 55% of the combined Philippines business. Non-controlling interest
relates to another party who holds 60% of the equity share capital in RCBM and LCLC and has an economic interest of 45% of the combined Philippines business.
CRH has obtained control (as defined under IFRS 10 Consolidated Financial Statements) by virtue of contractual arrangements which give CRH power to direct the
relevant non-nationalised activities of the business, in compliance with Philippine law.
193
CRH Annual Report and Form 20-F 2016 32. 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; the identification and compensation of key
management personnel; and lease arrangements.
Subsidiaries, joint ventures and associates
The Consolidated Financial Statements include the financial statements of the Company (CRH plc, the ultimate parent) and its subsidiaries, joint ventures and
associates as documented in the accounting policies on pages 125 to 135. The Group’s principal subsidiaries, joint ventures and associates are disclosed on pages
250 to 255.
Sales to and purchases from joint ventures are immaterial in 2016, 2015 and 2014. 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 2016 amounted to €56 million (2015: €48 million;
2014: €33 million) and €401 million (2015: €422 million; 2014: €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 arms-length transactions. The outstanding balances included in
receivables and payables as at the balance sheet date in respect of transactions with joint ventures and associates are unsecured and settlement arises in cash. No
guarantees have been either requested or provided in relation to related party receivables and payables. Loans to joint ventures and associates (as disclosed in note
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:
2016
2015
Short-term benefits
Post-employment benefits
Share-based payments - calculated in accordance
with the principles disclosed in note 7
Total
€m
13
1
3
17
€m
10
1
2
13
2014
€m
9
1
2
12
Other than these compensation entitlements, there were no other transactions involving key management personnel.
Lease arrangements
CRH has a number of lease arrangements in place with related parties across the Group, which have been negotiated on an arms-length basis at market rates. We
do not consider these arrangements to be material either individually or collectively in the context of the 2016, 2015 and 2014 Consolidated Financial Statements.
33. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 120 to 203 in respect of the year ended 31 December 2016 on
28 February 2017.
194
CRH Annual Report and Form 20-F 2016 34. Supplemental Guarantor Information
The following consolidating information presents Condensed Consolidated Balance Sheets as at 31 December 2016 and 2015 and Condensed Consolidated
Income Statements and Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flow for the years
ended 31 December 2016, 2015 and 2014 of the Company and CRH America, Inc. as required by Article 3-10(c) of Regulation S-X. This information is prepared in
accordance with IFRS with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated. CRH
America, Inc. is 100% owned by the Company. The Guarantees of the Guarantor are full and unconditional.
CRH America, Inc. (the ‘Issuer’) has the following notes which are fully and unconditionally guaranteed by CRH plc (the ‘Guarantor’):
US$650 million 8.125% Notes due 2018 – listed on the NYSE
US$400 million 5.750% Notes due 2021 – listed on the NYSE
US$1,250 million 3.875% Notes due 2025 – listed on the ISE
US$300 million 6.40% Notes due 2033 – listed on the ISE (i)
US$500 million 5.125% Notes due 2045 – listed on the ISE
(i)
Originally issued as a US$300 million bond in September 2003. Subsequently in August 2009 and December 2010, US$87.445 million of the issued notes were
acquired by CRH plc as part of liability management exercises undertaken.
195
CRH Annual Report and Form 20-F 2016 34. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2016
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Subsidiaries
Investments accounted for using the equity method
Advances to subsidiaries and parent undertakings
Other financial assets
Other receivables
Derivative financial instruments
Deferred income tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Advances to subsidiaries and parent undertakings
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents
Total current assets
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
7,654
-
-
-
-
-
-
7,654
-
-
6,546
-
-
401
6,947
-
-
375
-
4,508
-
-
13
-
4,896
-
6
-
-
-
-
6
12,690
7,761
1,682
1,299
-
26
212
40
159
23,869
2,939
3,973
704
4
23
2,048
9,691
-
-
(9,711)
-
(4,508)
-
-
-
-
(14,219)
-
-
(7,250)
-
-
-
(7,250)
12,690
7,761
-
1,299
-
26
212
53
159
22,200
2,939
3,979
-
4
23
2,449
9,394
Total assets
14,601
4,902
33,560
(21,469)
31,594
EQUITY
Capital and reserves attributable to the Company’s equity holders
Non-controlling interests
Total equity
13,895
-
13,895
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Deferred income tax liabilities
Other payables
Advances from subsidiary and parent undertakings
Retirement benefit obligations
Provisions for liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Advances from subsidiary and parent undertakings
Current income tax liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Provisions for liabilities
Total current liabilities
Total liabilities
-
-
-
-
-
-
-
-
704
-
2
-
-
706
706
Total equity and liabilities
14,601
1,922
-
1,922
2,934
-
-
-
-
-
2,934
46
-
-
-
-
-
46
2,980
4,902
7,789
548
8,337
4,581
2,008
461
4,508
591
678
12,827
4,769
6,546
394
273
32
382
12,396
25,223
(9,711)
-
(9,711)
-
-
-
(4,508)
-
-
(4,508)
-
(7,250)
-
-
-
-
(7,250)
(11,758)
13,895
548
14,443
7,515
2,008
461
-
591
678
11,253
4,815
-
394
275
32
382
5,898
17,151
33,560
(21,469)
31,594
196
CRH Annual Report and Form 20-F 2016 Supplemental Condensed Consolidated Balance Sheet as at 31 December 2015
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Subsidiaries
Investments accounted for using the equity method
Advances to subsidiaries and parent undertakings
Other financial assets
Other receivables
Derivative financial instruments
Deferred income tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Advances to subsidiaries and parent undertakings
Current income tax recoverable
Derivative financial instruments
Cash and cash equivalents
Total current assets
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
5,925
-
-
-
-
-
-
5,925
-
-
7,784
-
-
408
8,192
-
-
280
-
5,019
-
-
29
-
5,328
-
13
-
-
9
-
22
13,062
7,820
1,682
1,317
-
28
149
56
149
24,263
2,873
3,964
1,091
5
15
2,110
10,058
-
-
(7,887)
-
(5,019)
-
-
-
-
(12,906)
-
-
(8,875)
-
-
-
(8,875)
13,062
7,820
-
1,317
-
28
149
85
149
22,610
2,873
3,977
-
5
24
2,518
9,397
Total assets
14,117
5,350
34,321
(21,781)
32,007
EQUITY
Capital and reserves attributable to the Company’s equity holders
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Deferred income tax liabilities
Other payables
Advances from subsidiary and parent undertakings
Retirement benefit obligations
Provisions for liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Advances from subsidiary and parent undertakings
Current income tax liabilities
Interest-bearing loans and borrowings
Derivative financial instruments
Provisions for liabilities
Total current liabilities
Total liabilities
13,015
-
13,015
-
-
-
-
-
-
-
-
-
1,091
-
11
-
-
1,102
1,102
1,810
-
1,810
2,867
-
-
-
-
-
-
2,867
53
-
-
620
-
-
673
3,540
6,077
529
6,606
5,598
5
2,023
410
5,019
588
603
14,246
4,708
7,784
401
125
19
432
13,469
27,715
(7,887)
-
(7,887)
-
-
-
-
(5,019)
-
-
(5,019)
-
(8,875)
-
-
-
-
(8,875)
(13,894)
13,015
529
13,544
8,465
5
2,023
410
-
588
603
12,094
4,761
-
401
756
19
432
6,369
18,463
Total equity and liabilities
14,117
5,350
34,321
(21,781)
32,007
197
CRH Annual Report and Form 20-F 2016 34. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Revenue
Cost of sales
Gross profit
Operating income/(costs)
Group operating profit
Profit on disposals
Profit before finance costs
Finance costs
Finance income
Other financial expense
Share of subsidiaries’ profit before tax
Share of equity accounted investments’ profit
Profit before tax
Income tax expense
Group profit for the financial year
Profit attributable to:
Equity holders of the Company
Non-controlling interests
Group profit for the financial year
Year ended 31 December 2016
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
-
20
20
-
20
-
2
-
1,650
42
1,714
(471)
1,243
1,243
-
1,243
-
-
-
-
-
-
-
(266)
275
-
95
-
104
(41)
63
63
-
63
27,104
(18,267)
8,837
(6,830)
2,007
55
2,062
(334)
6
(66)
-
42
1,710
(430)
1,280
1,253
27
1,280
-
-
-
-
-
-
-
275
(275)
-
(1,745)
(42)
(1,787)
471
(1,316)
(1,316)
-
(1,316)
27,104
(18,267)
8,837
(6,810)
2,027
55
2,082
(325)
8
(66)
-
42
1,741
(471)
1,270
1,243
27
1,270
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit for the financial year
1,243
63
1,280
(1,316)
1,270
Other Comprehensive Income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
Gains relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
Remeasurement of retirement benefit obligations
Tax on items recognised directly within other comprehensive income
(71)
14
(57)
(61)
3
(58)
49
-
49
-
-
-
(131)
14
(117)
(61)
3
(58)
71
(14)
57
61
(3)
58
(82)
14
(68)
(61)
3
(58)
Total other comprehensive income for the financial year
(115)
49
(175)
115
(126)
Total comprehensive income for the financial year
1,128
112
1,105
(1,201)
1,144
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
1,128
-
1,128
112
-
112
1,089
16
1,105
(1,201)
-
(1,201)
1,128
16
1,144
198
CRH Annual Report and Form 20-F 2016 Supplemental Condensed Consolidated Income Statement
Revenue
Cost of sales
Gross profit
Operating income/(costs)
Group operating profit/(loss)
(Loss)/profit on disposals
Profit/(loss) before finance costs
Finance costs
Finance income
Other financial expense
Share of subsidiaries’ (loss)/profit before tax
Share of equity accounted investments’ profit
Profit/(loss) before tax
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
Guarantor
€m
-
-
-
1,473
1,473
(7)
1,466
-
1
-
(483)
44
1,028
(304)
724
724
-
724
Year ended 31 December 2015
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
Issuer
€m
-
-
-
-
-
-
-
(321)
333
-
62
-
74
(29)
45
45
-
45
23,635
(16,394)
7,241
(7,437)
(196)
108
(88)
(315)
7
(94)
-
44
(446)
(275)
(721)
(726)
5
(721)
-
-
-
-
-
-
-
333
(333)
-
421
(44)
377
304
681
681
-
681
CRH and
subsidiaries
€m
23,635
(16,394)
7,241
(5,964)
1,277
101
1,378
(303)
8
(94)
-
44
1,033
(304)
729
724
5
729
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit/(loss) for the financial year
724
45
(721)
681
729
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
Losses relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
Remeasurement of retirement benefit obligations
Tax on items recognised directly within other comprehensive income
643
(2)
641
203
(30)
173
159
-
159
-
-
-
Total other comprehensive income for the financial year
814
159
Total comprehensive income for the financial year
1,538
204
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
1,538
-
1,538
204
-
204
502
(2)
500
203
(30)
173
673
(48)
(71)
23
(48)
(643)
2
(641)
(203)
30
(173)
661
(2)
659
203
(30)
173
(814)
832
(133)
1,561
(133)
-
(133)
1,538
23
1,561
199
CRH Annual Report and Form 20-F 2016 34. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Income Statement
Revenue
Cost of sales
Gross profit
Operating income/(costs)
Group operating profit/(loss)
Profit on disposals
Profit/(loss) before finance costs
Finance costs
Finance income
Other financial expense
Share of subsidiaries’ (loss)/profit before tax
Share of equity accounted investments’ profit
Profit/(loss) before tax
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
Guarantor
€m
-
-
-
1,208
1,208
-
1,208
-
-
-
(504)
55
759
(177)
582
582
-
582
Year ended 31 December 2014
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
Issuer
€m
-
-
-
-
-
-
-
(211)
219
-
35
-
43
(17)
26
26
-
26
18,912
(13,427)
5,485
(5,776)
(291)
77
(214)
(262)
8
(42)
-
55
(455)
(160)
(615)
(617)
2
(615)
-
-
-
-
-
-
-
219
(219)
-
469
(55)
414
177
591
591
-
591
CRH and
subsidiaries
€m
18,912
(13,427)
5,485
(4,568)
917
77
994
(254)
8
(42)
-
55
761
(177)
584
582
2
584
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit/(loss) for the financial year
582
26
(615)
591
584
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
Losses relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
Remeasurement of retirement benefit obligations
Tax on items recognised directly within other comprehensive income
599
(6)
593
(414)
69
(345)
167
-
167
-
-
-
Total other comprehensive income for the financial year
248
167
Total comprehensive income for the financial year
830
193
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
830
-
830
193
-
193
432
(6)
426
(414)
69
(345)
81
(534)
(536)
2
(534)
(599)
6
(593)
414
(69)
345
599
(6)
593
(414)
69
(345)
(248)
248
343
832
343
-
343
830
2
832
200
CRH Annual Report and Form 20-F 2016 Supplemental Condensed Consolidated Statement of Cash Flow
Cash flows from operating activities
Profit before tax
Finance costs (net)
Share of subsidiaries’ profit before tax
Share of equity accounted investments’ profit
Profit on disposals
Group operating profit
Depreciation charge
Amortisation of intangible assets
Impairment charge
Share-based payment (income)/expense
Other (primarily pension payments)
Net movement on working capital and provisions
Cash generated from operations
Interest paid (including finance leases)
Corporation tax paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Proceeds from disposals (net of cash disposed and deferred proceeds)
Interest received
Dividends received from equity accounted investments
Purchase of property, plant and equipment
Advances from subsidiary and parent undertakings
Acquisition of subsidiaries (net of cash acquired)
Other investments and advances
Deferred and contingent acquisition consideration paid
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares (net)
Advances to subsidiary and parent undertakings
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
Treasury/own shares purchased
Repayment of interest-bearing loans, borrowings and finance leases
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash outflow from financing activities
Decrease in cash and cash equivalents
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
Decrease in cash and cash equivalents
Cash and cash equivalents at 31 December
Year ended 31 December 2016
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
Issuer
€m
104
(9)
(95)
-
-
-
-
-
-
-
-
(1)
(1)
(266)
(41)
(308)
-
275
-
-
-
-
-
25
-
287
644
-
-
-
-
-
-
289
919
Guarantor
€m
1,714
(2)
(1,650)
(42)
-
20
-
-
-
(3)
-
-
17
-
-
17
-
2
-
-
52
-
-
-
(4)
(9)
(352)
-
(313)
(7)
408
-
(7)
401
1,710
394
-
(42)
(55)
2,007
1,009
71
23
49
(65)
57
3,151
(355)
(440)
2,356
283
6
40
(853)
-
(149)
(7)
(57)
(737)
-
(931)
600
(30)
-
CRH and
subsidiaries
€m
1,741
383
-
(42)
(55)
2,027
1,009
71
23
46
(65)
56
3,167
(346)
(481)
2,340
283
8
40
(853)
-
(149)
(7)
(57)
(735)
52
-
600
(5)
(4)
(2,015)
(352)
(8)
(1,787)
-
1,745
42
-
-
-
-
-
-
-
-
-
275
-
275
-
(275)
-
-
(931)
-
-
-
(1,206)
-
931
-
-
-
-
-
-
(636)
(1,370)
-
-
-
(8)
(611)
(1,739)
931
(1,732)
-
-
-
-
-
(120)
2,110
58
(120)
2,048
-
-
-
-
-
(127)
2,518
58
(127)
2,449
201
CRH Annual Report and Form 20-F 2016 34. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Statement of Cash Flow
Cash flows from operating activities
Profit/(loss) before tax
Finance costs (net)
Share of subsidiaries’ loss/(profit) before tax
Share of equity accounted investments’ profit
Loss/(profit) on disposals
Group operating profit/(loss)
Depreciation charge
Amortisation of intangible assets
Impairment charge
Share-based payment (income)/expense
Other (primarily pension payments)
Amounts due from subsidary undertakings
Net movement on working capital and provisions
Cash generated from operations
Interest paid (including finance leases)
Corporation tax paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Proceeds from disposals (net of cash disposed and deferred proceeds)
Interest received
Dividends received from equity accounted investments
Purchase of property, plant and equipment
Advances from subsidiary and parent undertakings
Acquisition of subsidiaries (net of cash acquired)
Other investments and advances
Deferred and contingent acquisition consideration paid
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares (net)
Proceeds from exercise of share options
Advances to subsidiary and parent undertakings
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
Premium paid on early debt redemption
Treasury/own shares purchased
Repayment of interest-bearing loans, borrowings and finance leases
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash (outflow)/inflow from financing activities
(Decrease)/increase in cash and cash equivalents
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 31 December
202
Year ended 31 December 2015
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
Issuer
€m
Guarantor
€m
1,028
(1)
483
(44)
7
1,473
-
-
-
(2)
-
(1,460)
-
11
-
-
11
-
1
-
-
74
(12)
(62)
-
-
-
-
-
-
-
-
-
(9)
(9)
(283)
(29)
(321)
-
333
-
-
(699)
(632)
-
-
-
-
-
-
(698)
(299)
-
57
-
9
-
-
(3)
-
(379)
-
(316)
(1,003)
1,411
-
(1,003)
408
-
-
-
1,584
15
(38)
-
(968)
-
-
593
(27)
25
2
(27)
-
(446)
402
-
(44)
(108)
(196)
843
55
44
29
(47)
1,460
594
2,782
(352)
(206)
2,224
889
7
53
(882)
-
(7,296)
(19)
(59)
(7,307)
1,593
-
1,331
4,040
32
-
-
(1,776)
-
(4)
377
-
(421)
44
-
-
-
-
-
-
-
-
-
-
333
-
333
-
(333)
-
-
1,331
-
-
-
-
-
(1,331)
-
-
-
-
-
-
-
CRH and
subsidiaries
€m
1,033
389
-
(44)
(101)
1,277
843
55
44
27
(47)
-
585
2,784
(302)
(235)
2,247
889
8
53
(882)
-
(7,296)
(19)
(59)
1,593
57
-
5,633
47
(38)
(3)
(2,744)
(379)
(4)
4,162
(897)
3,295
120
(897)
2,518
998
(7,306)
5,216
(1,331)
133
1,859
118
133
2,110
-
-
-
-
-
CRH Annual Report and Form 20-F 2016 Supplemental Condensed Consolidated Statement of Cash Flow
Cash flows from operating activities
Profit/(loss) before tax
Finance costs (net)
Share of subsidiaries’ loss/(profit) before tax
Share of equity accounted investments’ profit
Profit on disposals
Group operating profit/(loss)
Depreciation charge
Amortisation of intangible assets
Impairment charge
Share-based payment expense
Other (primarily pension payments)
Net movement on working capital and provisions
Cash generated from operations
Interest paid (including finance leases)
Corporation tax paid
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Proceeds from disposals
Interest received
Dividends received from equity accounted investments
Purchase of property, plant and equipment
Advances from subsidiary and parent undertakings
Acquisition of subsidiaries (net of cash acquired)
Other investments and advances
Deferred and contingent acquisition consideration paid
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from exercise of share options
Acquisition of non-controlling interests
Advances to subsidiary and parent undertakings
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
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash outflow from financing activities
Guarantor
€m
759
-
504
(55)
-
1,208
-
-
-
-
-
-
1,208
-
-
1,208
-
-
-
-
414
-
-
-
43
(8)
(35)
-
-
-
-
-
-
-
-
(7)
(7)
(211)
(17)
(235)
-
219
-
-
17
-
-
-
414
236
22
-
-
-
-
(55)
(353)
-
(386)
-
-
-
-
16
(175)
-
-
(159)
Increase/(decrease) in cash and cash equivalents
1,236
(158)
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 31 December
175
-
1,236
1,411
174
9
(158)
25
Year ended 31 December 2014
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
Issuer
€m
(455)
296
-
(55)
(77)
(291)
631
44
49
16
(66)
42
425
(270)
(110)
45
345
8
30
(435)
-
(151)
(3)
(26)
(232)
-
(1)
(431)
901
(27)
(704)
-
(4)
(266)
(453)
2,191
121
(453)
1,859
414
-
(469)
55
-
-
-
-
-
-
-
-
-
219
-
219
-
(219)
-
-
(431)
-
-
-
(650)
-
-
431
-
-
-
-
-
431
-
-
-
-
-
CRH and
subsidiaries
€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
203
CRH Annual Report and Form 20-F 2016 Company Balance Sheet
as at 31 December 2016
Notes
Fixed assets
3
Financial assets
Current assets
4
Debtors
Cash at bank and in hand
Total current assets
Creditors (amounts falling due within one year)
5
Trade and other creditors
Bank loans and overdrafts
Total current liabilities
Net current assets
Net assets
8
8
8
9
Capital and reserves
Called-up share capital
Preference share capital
Share premium account
Treasury Shares and own shares
Revaluation reserve
Other reserves
9
Profit and loss account
Total equity
N. Hartery, A. Manifold, Directors
2016
€m
2015
€m
2,818
2,205
6,546
401
6,947
704
2
706
7,784
408
8,192
1,091
11
1,102
6,241
7,090
9,059
9,295
284
1
6,241
(14)
42
276
2,229
9,059
281
1
6,025
(28)
42
230
2,744
9,295
204
CRH Annual Report and Form 20-F 2016 Company Statement of Changes in Equity
for the financial year ended 31 December 2016
Issued
share
capital
€m
Share
premium
account
€m
Treasury
Shares/
own
shares
€m
Revaluation
reserve
€m
Other
reserves
€m
Profit
and loss
account
€m
282
6,025
(28)
42
230
2,744
At 1 January 2016
Profit for the financial year
Total comprehensive income
Issue of share capital (net of expenses)
Share-based payment expense
Treasury/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
Dividends (including shares issued in lieu of dividends)
-
-
3
-
-
-
-
-
-
216
-
-
-
-
At 31 December 2016
285
6,241
At 1 January 2015
Profit for the financial year
Total comprehensive income
254
4,328
-
-
-
-
Issue of share capital (net of expenses)
28
1,697
Share-based payment expense
Treasury/own shares reissued
Shares acquired by Employee Benefit Trust (own shares)
Share option exercises
Dividends (including shares issued in lieu of dividends)
-
-
-
-
-
-
-
-
-
-
At 31 December 2015
282
6,025
-
-
-
-
18
(4)
-
(14)
(76)
-
-
-
-
51
(3)
-
-
(28)
Total
equity
€m
9,295
22
22
219
46
-
(4)
(519)
9,059
6,533
1,467
1,467
1,725
27
-
(3)
57
-
-
-
-
-
-
-
-
-
-
46
-
-
-
42
276
42
203
-
-
-
-
-
-
-
-
-
-
-
27
-
-
-
-
22
22
-
-
(18)
-
(519)
2,229
1,782
1,467
1,467
-
-
(51)
-
57
(511)
(511)
42
230
2,744
9,295
205
CRH Annual Report and Form 20-F 2016 Notes to the Company Balance Sheet
1. Basis of Preparation
The financial statements have been prepared on a going concern basis under the historical cost convention in accordance with the Companies Act 2014 and
Generally Accepted Accounting Practice in the Republic of Ireland (Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101)). Note 2 describes
the principal accounting policies under FRS 101, which have been applied consistently.
For the financial year ended 31 December 2016, the Company transitioned from FRS 102 to FRS 101. In the transition to FRS 101, the Company has applied
IFRS 1 First-time Adoption of International Financial Reporting Standards, whilst ensuring that its assets and liabilities are measured in compliance with FRS 101.
The Company’s date of transition was 1 January 2015. There were no adjustments to the total equity of the Company as at 1 January 2015 or 31 December 2015
and profit for the financial year ending 31 December 2015 between FRS 102 as previously reported and FRS 101.
The Company has availed of an exemption to measure its investments in subsidiaries at the carrying amount at the date of transition as determined under FRS 102.
In these financial statements the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:
•
•
•
•
•
•
•
Statement of Cash Flows;
Disclosures in respect of transactions with wholly-owned subsidiaries;
An opening Statement of Financial Position at the date of transition;
Certain requirements of IAS 1 Presentation of Financial Statements;
Disclosures required by IFRS 7 Financial Instrument Disclosures;
Disclosures required by IFRS 13 Fair Value Measurement; and
The effects of new but not yet effective IFRSs
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
2016
€m
47
2,516
2,563
2015
€m
47
1,946
1,993
Deemed cost in respect of the investment in these subsidiaries amounted to €400 million at the date of transition to FRS 101.
206
CRH Annual Report and Form 20-F 2016
Cash and cash equivalents
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 creditors falling due within one year in the
Company Balance Sheet.
2. Accounting Policies
Key accounting policies which
involve estimates, assumptions
and judgements
Share issue expenses and share
premium account
Costs of share issues are written off against the
premium arising on issues of share capital.
Preparation of the financial statements requires
management to make significant judgements and
estimates. The items in the financial statements
where these judgements and estimates have been
made include:
Financial assets
Investments in subsidiaries, are stated at cost less
any accumulated impairment and are reviewed
for impairment if there are indications that the
carrying value may not be recoverable. Impairment
assessment is considered as part of the Group’s
overall impairment assessment.
Loans receivable and payable
Intercompany loans receivable and payable
are initially recognised at fair value. These are
subsequently measured at amortised cost, less any
provision for impairment.
Other significant
accounting policies
Operating income and expense
Operating income and expense arises from
the Company’s principal activities as a holding
and financing company for the Group and are
accounted for on an accruals basis.
Foreign currencies
The functional and presentation 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-based payments
The Company has applied the requirements of
Section 8 of FRS 101.
The accounting policy applicable to share-based
payments is addressed in detail on page 131 of
the Consolidated Financial Statements.
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.
Dividend income
Dividend income is recognised when the right to
receive payment is established.
207
CRH Annual Report and Form 20-F 2016 Notes to the Company Balance Sheet - continued
3. Financial Assets
The Company’s investment in its subsidiaries is as follows:
At 1 January 2016 at cost
Capital contribution in respect of share-based payments
Additions
At 31 December 2016 at cost
The equivalent disclosure for the prior year is as follows:
At 1 January 2015 at cost
Capital contribution in respect of share-based payments
Additions
Disposals
At 31 December 2015 at cost
Shares
€m
1,993
-
570
2,563
400
-
1,593
-
1,993
Other
€m
212
43
-
255
195
24
-
(7)
212
Total
€m
2,205
43
570
2,818
595
24
1,593
(7)
2,205
The additions in the year relate to the Company’s investment in its subsidiary CRH Finance DAC (2015: CRH Finance Jersey Limited).
The Company’s principal subsidiaries, joint ventures and associates are disclosed on pages 250 to 255.
Pursuant to Section 348(4) of the Companies Act 2014, a full list of subsidiaries, joint ventures and associated undertakings will be annexed to the Company’s
annual return to be filed in the Companies Registration Office in Ireland.
4. Debtors
Amounts owed by subsidiary undertakings
Amounts owed by subsidiary undertakings are repayable on demand.
5. Creditors
Amounts falling due within one year
Amounts owed to subsidiary undertakings
Amounts owed to subsidiary undertakings are repayable on demand.
2016
€m
6,546
2015
€m
7,784
2016
€m
704
2015
€m
1,091
6. Auditor’s Remuneration (Memorandum Disclosure)
In accordance with Section 322 of the Companies Act 2014, the fees paid in 2016 to the statutory auditor for work engaged by the Parent Company comprised
audit fees of €20,000 (2015: €20,000) and other assurance services of €nil (2015: €nil).
208
CRH Annual Report and Form 20-F 2016 7. Dividends Proposed (Memorandum Disclosure)
Details in respect of dividends proposed of €385 million (2015: €362 million) and dividends paid during the year are presented in the dividends note (note 11) on
page 150 of the notes to the Consolidated Financial Statements.
8. Called-up Share Capital
Details in respect of called-up share capital, preference share capital, Treasury Shares and own shares are presented in the share capital and reserves note (note 29)
on pages 185 to 187 of the notes to the Consolidated Financial Statements.
9. Reserves
Revaluation reserve
The Company’s revaluation reserve arose on the revaluation of certain investments prior to the transition to FRS 101.
In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual profit and loss account to the
AGM and from filing it with the Registrar of Companies. The profit for the financial year dealt with in the Company Financial Statements amounted to €22 million
(2015: €1,467 million).
10. Share-based Payments
The total expense of €46 million (2015: €27 million) reflected in note 7 to the Consolidated Financial Statements attributable to employee share options and the
performance share awards has been included as a capital contribution in financial assets (note 3) in addition to any payments to/from subsidiaries.
11. Section 357 Guarantees
Pursuant to the provisions of Section 357(1)(b) of the Companies Act 2014, the Company has guaranteed all amounts shown as liabilities in the statutory financial
statements of its wholly-owned subsidiary undertakings in the Republic of Ireland for the financial year ended 31 December 2016 and as a result, such subsidiary
undertakings have been exempted from the filing provisions of Sections 347 and 348 of the Companies Act 2014 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 170 of the notes
to the Consolidated Financial Statements.
12. Directors’ Emoluments
Directors’ emoluments and interests are presented in the Directors’ Remuneration Report on pages 72 to 95 of this Annual Report and Form 20-F.
13. Board Approval
The Board of Directors approved and authorised for issue the Company Financial Statements on pages 204 to 209 in respect of the year ended 31 December 2016
on 28 February 2017.
209
CRH Annual Report and Form 20-F 2016 s
e
r
u
s
o
c
s
D
i
l
F
-
0
2
y
r
a
t
n
e
m
e
p
p
u
S
l
210
210
CRH Annual Report and Form 20-F I 2016
Supplementary 20-F Disclosures
Selected Financial Data
212
Non-GAAP Performance Measures
213
Contractual Obligations
Property, Plants and Equipment
Mineral Reserves
Risk Factors
Corporate Governance Practices
- NYSE
The Environment and
Government Regulations
Exchange Rates
Other Disclosures
216
217
218
220
230
232
233
234
Bouwmaterialen Nederland (BMN) is a general builders merchant with close to 80 branches across the Netherlands.
BMN distributes a range of construction products to mainly small and medium sized builders.
211
211
CRH Annual Report and Form 20-F I 2016 Selected Financial Data
The Consolidated Financial Statements of CRH
plc have been prepared in accordance with IFRS
as adopted by the International Accounting
Standards Board.
Selected financial data is presented below for the
five years ended on 31 December 2016. For the
three years ended 31 December 2016, the
selected financial data is qualified in its entirety by
reference to, and should be read in conjunction
with, the audited Consolidated Financial
Statements, the related Notes and the Business
Performance section included elsewhere in this
Annual Report and Form 20-F.
Year ended 31 December (amounts in millions, except per share data and ratios)
Consolidated Income Statement Data
Revenue
Group operating profit
Profit/(loss) attributable to equity holders of the Company
Basic earnings/(loss) per Ordinary Share
Diluted earnings/(loss) per Ordinary Share
Dividends paid during calendar year per Ordinary Share
Average number of Ordinary Shares outstanding (iii)
Ratio of earnings to fixed charges (times) (iv)
All data relates to continuing operations
Consolidated Balance Sheet Data
Total assets
Net assets (vi)
Ordinary shareholders’ equity
Equity share capital
Number of Ordinary Shares (iii)
Number of Treasury Shares and own shares (iii)
Number of Ordinary Shares net of Treasury Shares and own shares (iii)
2016
€m
2015
€m
2014
€m
2013 (i)
2012 (ii)
€m
€m
27,104
23,635
18,912
18,031
18,084
2,027
1,243
150.2c
149.1c
62.8c
827.8
4.0
31,594
14,443
13,894
284
832.8
0.4
832.4
1,277
724
89.1c
88.7c
62.5c
812.3
2.9
32,007
13,544
13,014
281
823.9
1.3
822.6
917
582
78.9c
78.8c
62.5c
737.6
2.6
22,017
10,198
10,176
253
744.5
3.8
740.7
100
(296)
(40.6c)
(40.6c)
62.5c
729.2
0.7 (v)
20,429
9,686
9,661
251
739.2
6.0
733.2
805
538
74.6c
74.5c
62.5c
721.9
2.6
20,900
10,589
10,552
249
733.8
7.4
726.4
(i)
Group operating profit includes asset impairment charges of €650 million in 2013, with an additional €105 million impairment charge included in loss
attributable to equity holders of the Company in respect of equity accounted investments.
(ii) On 1 January 2013, the Group adopted IFRS 11 Joint Arrangements and IAS 19 Employee Benefits. As a result, the prior year comparatives were restated
as required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
(iii) All share numbers are shown in millions of shares.
(iv) For the purposes of calculating the ratio of earnings to fixed charges, in accordance with Item 503 of Regulation S-K, earnings have been calculated by
adding: profit/(loss) before tax adjusted to exclude the Group’s share of equity accounted investments’ result after tax, fixed charges and dividends
received from equity accounted investments; and the fixed charges were calculated by adding interest expensed and capitalised, amortised premiums,
discounts and capitalised expenses related to indebtedness, an estimate of the interest within rental expense and preference security dividend
requirements of consolidated subsidiaries.
(v) The amount of the deficiency in 2013 was US$183 million.
(vi) Net assets is calculated as the sum of total assets less total liabilities.
212
CRH Annual Report and Form 20-F I 2016 Non-GAAP Performance Measures
CRH uses a number of non-GAAP performance
measures to monitor financial performance. These
measures are referred to throughout the
discussion of our reported financial position and
operating performance and are measures which
are regularly reviewed by CRH management.
These performance measures may not be
uniformly defined by all companies and
accordingly they may not be directly comparable
with similarly titled measures and disclosures by
other companies. Certain information presented is
derived from amounts calculated in accordance
with IFRS but is not itself an expressly permitted
GAAP measure. The non-GAAP performance
measures as summarised below should not be
viewed in isolation or as an alternative to the
equivalent GAAP measure.
Reconciliation of EBITDA (as defined)* and Operating Profit (by segment) to Group Profit
Group EBITDA (as defined)*
Year ended 31 December
Depreciation, amortisation
and impairment
Group operating profit (i)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution
Americas
€m
814
104
206
1,124
1,204
543
150
€m
460
100
171
731
955
391
140
1,897
1,486
€m
380
94
190
664
609
263
105
977
Asia
109
2
-
€m
417
23
76
516
386
132
31
549
38
€m
325
25
77
427
335
142
29
506
9
€m
229
23
78
330
254
118
22
394
-
€m
397
81
130
608
818
411
119
1,348
€m
135
75
94
304
620
249
111
980
€m
151
71
112
334
355
145
83
583
71
(7)
-
Total Group
3,130
2,219
1,641
1,103
942
724
2,027
1,277
917
Profit on disposals
Finance costs less income
Other financial expense
Share of equity accounted investments’ profit
Profit before tax
Income tax expense
Group profit for the financial year
55
(317)
(66)
42
1,741
(471)
1,270
101
(295)
(94)
44
1,033
(304)
729
(i) Throughout this document, Group operating profit is reported as shown in the Consolidated Income Statement and excludes profit on disposals.
Calculation of EBITDA (as defined)* Net Interest Cover
77
(246)
(42)
55
761
(177)
584
2014
€m
254
(8)
246
2016
€m
325
(8)
317
2015
€m
303
(8)
295
3,130
2,219
1,641
Times
9.9
7.5
6.7
Interest
Finance costs (i)
Finance income (i)
Net interest
EBITDA (as defined)*
EBITDA (as defined)* net interest cover (EBITDA (as defined)* divided by net interest)
(i) These items appear on the Consolidated Income Statement on page 120.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
213
CRH Annual Report and Form 20-F I 2016 Non-GAAP Performance Measures - continued
Return on Net Assets
Group operating profit
Current year
Segment assets (i)
Segment liabilities (i)
Group segment net assets
Prior year
Segment assets (i)
Segment liabilities (i)
Group segment net assets
Average net assets
RONA
2016
€m
2,027
27,581
(6,927)
20,654
27,881
(6,794)
21,087
20,871
9.7%
2015
€m
1,277
27,881
(6,794)
21,087
16,584
(4,258)
12,326
16,707
7.6%
2014
€m
917
16,584
(4,258)
12,326
16,313
(3,833)
12,480
12,403
7.4%
Reconciliation of Segment Assets and Liabilities to Group Assets and Liabilities
Assets
Segment assets (i)
2016
€m
2015
€m
2014
€m
2013
€m
27,581
27,881
16,584
16,313
Reconciliation to total assets as reported in the Consolidated Balance Sheet:
Investments accounted for using the equity method
1,299
1,317
1,329
1,340
Other financial assets
Derivative financial instruments (current and non-current)
Income tax assets (current and deferred)
Cash and cash equivalents
Assets held for sale
26
76
163
2,449
-
28
109
154
2,518
-
Total assets as reported in the Consolidated Balance Sheet
31,594
32,007
23
102
186
3,262
531
22,017
23
80
133
2,540
-
20,429
Liabilities
Segment liabilities (i)
6,927
6,794
4,258
3,833
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
7,790
32
2,402
-
17,151
9,221
24
2,424
-
18,463
5,866
23
1,459
213
11,819
5,540
53
1,317
-
10,743
(i) Segment assets and liabilities as disclosed in note 1 to the Consolidated Financial Statements.
214
CRH Annual Report and Form 20-F I 2016
Calculation of Net Debt/EBITDA (as defined)*
Net Debt
Cash and cash equivalents (i)
Interest-bearing loans and borrowings (i)
Derivative financial instruments (net) (i)
Group net debt
EBITDA (as defined)*
2016
€m
2,449
(7,790)
44
(5,297)
3,130
Net debt divided by EBITDA (as defined)*
1.7
(i) These items appear in note 20 to the Consolidated Financial Statements.
2015
€m
2,518
(9,221)
85
(6,618)
2,219
Times
3.0
2014
€m
3,295
(5,866)
79
(2,492)
1,641
1.5
EBITDA (as defined). EBITDA is defined as
earnings before interest, taxes, depreciation,
amortisation, asset impairment charges, profit on
disposals and the Group’s share of equity
accounted investments’ profit after tax and is
quoted by management in conjunction with other
GAAP and non-GAAP financial measures, to aid
investors in their analysis of the performance of
the Group and to assist investors in the
comparison of the Group’s performance with that
of other companies. EBITDA (as defined) and
operating profit by segment are monitored by
management in order to allocate resources
between segments and to assess performance.
Given that net finance costs and income tax are
managed on a centralised basis, these items are
not allocated between operating segments for the
purpose of the information presented to the Chief
Operating Decision Maker.
Net Debt. Net debt is used by management as it
gives a more complete picture of the Group’s
current debt situation than total interest-bearing
loans and borrowings. Net debt is provided to
enable investors to see the economic effect of
gross debt, related hedges and cash and cash
equivalents in total. Net debt is a non-GAAP
measure and comprises current and non-current
interest-bearing loans and borrowings, cash and
cash equivalents and current and non-current
derivative financial instruments. Net debt/EBITDA
(as defined)* is monitored by management and is
useful to investors in assessing the Company’s
level of indebtedness relative to its profitability and
cash-generating capabilities. It is the ratio of net
debt to EBITDA (as defined)* and is calculated
above.
CRH’s debt and financing arrangements. It is the
ratio of EBITDA (as defined)* to net interest and is
calculated on page 213. The definitions and
calculations used as a metric in lender covenant
agreements include certain specified adjustments
to the amounts included in the Consolidated
Financial Statements. The ratios as calculated on
the basis of the definitions in those covenants are
disclosed in note 23 to the Consolidated Financial
Statements.
RONA. Return on Net Assets is a key internal
pre-tax measure of operating performance
throughout the CRH Group and can be used by
management and investors to measure the relative
use of assets between CRH’s business segments
and to compare to other businesses. The metric
measures management’s ability to generate profits
from the net assets required to support that
business, focusing on both profit maximisation
and the maintenance of an efficient asset base; it
encourages effective fixed asset maintenance
programmes, good decisions regarding
expenditure on property, plant and equipment and
the timely disposal of surplus assets, and also
supports the effective management of the Group’s
working capital base. RONA is calculated by
expressing Group operating profit as a percentage
of average net assets; net assets comprise total
assets by segment less total liabilities by segment
as shown on page 214 and detailed in note 1 to
the Consolidated Financial Statements, and
exclude equity accounted investments and other
financial assets, net debt (as previously defined)
and tax assets and liabilities. The average net
assets for the year is the simple average of the
opening and closing balance sheet figures.
EBITDA (as defined)* Net Interest Cover. EBITDA
(as defined)* net interest cover is used by
management as a measure which matches the
earnings and cash generated by the business to
the underlying funding costs. EBITDA (as defined)*
net interest cover is presented to provide investors
with a greater understanding of the impact of
Organic Revenue, Organic Operating Profit
and Organic EBITDA (as defined)*. CRH pursues
a strategy of growth through acquisitions and
investments, with €213 million spent on
acquisitions and investments in 2016
(2015: €7.4 billion). Acquisitions completed in
2015 and 2016 contributed incremental sales
revenue of €3,624 million, operating profit of
€337 million and EBITDA (as defined)* of
€546 million in 2016. Proceeds from divestments
and non-current asset disposals amounted to
€283 million (net of cash disposed and deferred
proceeds) (2015: €889 million). The sales impact
of divested activities in 2016 was a negative
€506 million and the disposal impact at an
operating profit and EBITDA (as defined)* level
was a negative €13 million and €29 million
respectively.
The euro strengthened versus most major
currencies during 2016, particularly the Pound
Sterling which weakened from an average
0.7258 in 2015 to 0.8195 in 2016. The effect of
this was only partially offset by a small change in
the average euro/US Dollar rate, which, despite
strengthening towards the end of 2016, averaged
1.1069 for the year and was broadly similar to the
prior year (2015: 1.1095). Overall currency
movements resulted in an unfavourable net foreign
currency translation impact on our results as
shown in the table on page 24.
Because of the impact of acquisitions,
divestments, exchange translation and other
non-recurring items on reported results each year,
the Group uses organic revenue, organic
operating profit and organic EBITDA (as defined)*
as additional performance indicators to assess
performance of pre-existing (also referred to as
underlying, heritage, like-for-like or ongoing)
operations each year.
Organic revenue, organic operating profit and
organic EBITDA (as defined)* is arrived at by
excluding the incremental revenue, operating profit
and EBITDA (as defined)* contributions from
current and prior year acquisitions and
divestments, the impact of exchange translation
and the impact of any non-recurring items. In the
Business Performance section on pages 20 to 55,
changes in organic revenue, organic operating
profit and organic EBITDA (as defined)* are
presented as additional measures of revenue,
operating profit and EBITDA (as defined)* to
provide a greater understanding of the
performance of the Group. A reconciliation of the
changes in organic revenue, organic operating
profit and organic EBITDA (as defined)* to the
changes in total revenue, operating profit and
EBITDA (as defined)* for the Group and by
segment, is presented with the discussion of each
segment’s performance in tables contained in the
segment discussion commencing on page 30.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
215
CRH Annual Report and Form 20-F I 2016 Contractual Obligations
An analysis of the maturity profile of debt, finance and operating leases, purchase obligations, deferred and contingent acquisition consideration and pension
scheme contribution commitments at 31 December 2016 is as follows:
Contractual Obligations
Payments due by period
Interest-bearing loans and borrowings (i)
Finance leases
Estimated interest payments on contractually-committed debt
and finance leases (ii)
Deferred and contingent acquisition consideration
Operating leases
Purchase obligations (iii)
Retirement benefit obligation commitments (iv)
Total
Total
€m
7,721
14
2,309
301
2,171
1,230
55
Less than
1 year
€m
280
2
280
61
402
540
20
1-3 years
€m
1,121
3-5 years
€m
1,731
4
508
198
605
166
21
3
365
32
373
112
4
More than
5 years
€m
4,589
5
1,156
10
791
412
10
13,801
1,585
2,623
2,620
6,973
(i)
Of the €7.7 billion total gross debt, €0.3 billion is drawn on revolving facilities which may be repaid and redrawn up to the date of maturity. The interest
payments are estimated assuming these loans are repaid on facility maturity dates.
(ii) These interest payments have been estimated on the basis of the following assumptions: (a) no change in variable interest rates; (b) no change in exchange
rates; (c) that all debt is repaid as if it falls due from future cash generation; and (d) none is refinanced by future debt issuance.
(iii) Purchase obligations include contracted for capital expenditure. A summary of the Group’s future purchase commitments as at 31 December 2016
for capital expenditure are set out in note 13 to the Consolidated Financial Statements. These expenditures for replacement and new projects are in the
ordinary course of business and will be financed from internal resources.
(iv) These retirement benefit commitments comprise the contracted payments related to our pension schemes in the UK and Ireland. See further details in note
27 to the Consolidated Financial Statements.
Quantitative and Qualitative
Information about Market Risk
CRH addresses the sensitivity of the Group’s
interest rate swaps and debt obligations to
changes in interest rates in a sensitivity analysis
technique that measures the estimated impacts
on the income statement and on equity of either
an increase or decrease in market interest rates
or a strengthening or weakening in the US Dollar
against all other currencies, from the rates
applicable at 31 December 2016, for each class
of financial instrument with all other variables
remaining constant. The technique used measures
the estimated impact on profit before tax and on
total equity arising on net year-end floating rate
debt and on year-end equity, based on either an
increase/decrease of 1% and 0.5% in
floating interest rates or a 5% and 2.5%
strengthening/weakening in the US Dollar/euro
exchange rate. The US Dollar/euro rate has been
selected for this sensitivity analysis given the
materiality of the Group’s activities in the US. This
analysis, set out in note 21 to the Consolidated
Financial Statements, is for illustrative purposes
only as in practice interest and foreign exchange
rates rarely change in isolation.
Quantitative and qualitative information and
sensitivity analysis of market risk is contained
in notes 20 to 24 to the Consolidated Financial
Statements.
Off-Balance Sheet
Arrangements
CRH does not have any off-balance sheet
arrangements that have, or are reasonably likely to
have a current or future effect on CRH’s financial
condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material
to investors.
216
CRH Annual Report and Form 20-F I 2016 Property, Plants and Equipment
At 17 February 2017, CRH had a total of 2,895
building materials production locations and 874
Merchanting and DIY locations. 1,771 locations
are leased, with the remaining 1,998 locations
held on a freehold basis.
The significant subsidiary locations are the cement
facilities in the Philippines, Poland, Ukraine, the
UK, Canada, Romania, Slovakia, Ireland,
Germany, France and Brazil. The clinker (the key
intermediate product in the manufacture of
cement) capacity for these locations is set out
in the table below. Further details on locations
and products manufactured are provided in the
Business Performance section on pages 20 to 55.
None of CRH’s individual properties is of material
significance to the Group.
CRH believes that all the facilities are in good
condition, adequate for their purpose and suitably
utilised according to the individual nature and
requirements of the relevant operations. CRH has
a continuing programme of improvements and
replacements to properties when considered
appropriate to meet the needs of the individual
operations. Further information in relation to the
Group’s accounting policy and process governing
any impairment of property, plant and equipment
is given on page 127 and in note 13 to the
Consolidated Financial Statements on page 152.
Significant Locations – Clinker Capacity
Subsidiary
Country
Number of plants
Republic Cement
Grupa Ożarów
Podilsky Cement PJSC
Tarmac
CRH Canada
CRH Romania
CRH Slovakia
Irish Cement
Opterra
Eqiom
CRH Brazil
Philippines
Poland
Ukraine
United Kingdom
Canada
Romania
Slovakia
Ireland
Germany
France
Brazil
5
1
1
3
2
2
2
2
2
3
3
Clinker Capacity
(tonnes per hour)
613
342
313
306
306
305
290
288
268
243
200
Sources and Availability of
Raw Materials
CRH generally owns or leases the real estate on
which its main raw materials, namely aggregates,
are found. CRH is a significant purchaser of
certain important materials or resources such as
cement, liquid bitumen, steel, gas, fuel and other
energy supplies, the cost of which can fluctuate
significantly and consequently have an adverse
impact on CRH’s business. CRH is not generally
dependent on any one source for the supply of
these materials or resources, other than in certain
jurisdictions with regard to the supply of gas and
electricity. Competitive markets generally exist in
the jurisdictions in which CRH operates for the
supply of cement, bitumen, steel and fuel.
Mine Safety Disclosures
The information concerning mine safety violations
and other regulatory matters required by Section
1503(a) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act is included in Exhibit
99.1 to CRH’s Annual Report on Form 20-F, as
filed with the SEC.
217
CRH Annual Report and Form 20-F I 2016 Mineral Reserves
Activities with Reserves Backing (i)
Property acreage
(hectares) (ii)
% of mineral
reserves by rock type
Physical location
No. of
quarries
/pits Owned
Leased
Proven &
probable
reserves (iii)
Years to
depletion (iv)
Hard
rock
Sand &
gravel Other
2016
Annualised
extraction (v)
Europe Heavyside
Cement
Aggregates
Lime
Subtotals
Americas Materials
Cement
Aggregates
Subtotals
Asia
Cement
Aggregates
Subtotals
Group totals
France
Germany
Ireland
Poland
Romania
Serbia
Slovakia
Spain
Switzerland
Ukraine
United Kingdom
Finland
France
Ireland
Poland
Romania
Spain
United Kingdom
Other
Ireland, Poland,
United Kingdom
Brazil
Canada
United States
Canada
United States
Philippines
Philippines
3
3
2
2
5
2
5
1
3
2
7
128
51
123
4
21
11
212
42
119
315
248
293
220
53
331
34
93
230
1,131
525
558
5,220
273
20
119
-
-
-
-
881
41
48
-
-
-
149
380
987
70
-
340
64
11,833
234
10,511
686
4
313
2
243
161
212
181
184
108
303
86
26
126
228
203
259
1,087
179
118
109
1,398
185
204
631
22,162
14,159
5,600
3
2
4
25
723
757
12
2
14
1,072
691
527
3,035
42,304
47,629
2,247
-
2,247
-
-
19
94
167
296
30
473
19,826
19,939
12,804
13,770
17
17
34
246
25
271
1,402
72,038
34,132
19,641
96
61
92
46
50
176
144
285
17
41
58
17
30
85
47
47
58
34
20
95
84
99
69
28
91
38
69
100%
100%
100%
93%
80%
100%
92%
100%
91%
100%
100%
65%
70%
86%
96%
98%
99%
89%
74%
-
-
-
6%
-
-
-
-
-
-
-
35%
30%
14%
4%
2%
1%
11%
26%
100%
-
-
-
-
1%
20%
-
8%
-
9%
-
-
-
-
-
-
-
-
-
-
-
90%
9%
1%
100%
100%
100%
82%
72%
73%
100%
100%
100%
76%
-
-
-
18%
28%
27%
-
-
-
24%
-
-
-
-
-
-
-
-
-
-
2.5
2.6
2.6
3.7
4.1
0.7
2.2
0.3
1.4
3.3
4.0
13.0
8.9
14.8
3.0
2.6
1.6
41.7
9.2
2.1
1.9
3.2
0.5
17.9
144.4
6.7
0.5
(i) The disclosures made in this category refer to those facilities which are engaged in on-site processing of reserves in the various forms.
(ii) 1 hectare equals approximately 2.47 acres.
(iii) Where reserves are leased, the data presented above is restricted to include only that material which can be produced over the life of the contractual
commitment inherent in the lease; the totals shown pertain only to amounts which are proven and probable. All of the proven and probable reserves are
permitted and are quoted in millions of tonnes.
(iv) Years to depletion is based on the average of the most recent three years annualised production.
(v) Annualised extraction is quoted in millions of tonnes.
218
CRH Annual Report and Form 20-F I 2016 The Group’s reserves for the production of primary
building materials (which encompass cement,
lime, aggregates (stone, sand and gravel), asphalt,
readymixed concrete and concrete products)
fall into a variety of categories spanning a
wide number of rock types and geological
classifications – see the table on the previous
page setting out the activities with reserves
backing.
Reserve estimates are generally prepared by
third-party experts (i.e. geologists or engineers)
prior to acquisition; this procedure is a critical
component in the Group’s due diligence process
in connection with any acquisition. Subsequent to
acquisition, estimates are typically updated by
company engineers and/or geologists and are
reviewed annually by corporate and/or divisional
staff. However, where deemed appropriate by
management, in the context of large or
strategically important deposits, the services of
third-party consultant geologists and/or engineers
may be employed to validate reserves quantities
outside of the aforementioned due diligence
framework on an ongoing basis.
The Group has not employed third-parties to
review reserves over the three-year period ending
31 December 2016 other than in business
combination activities and specific instances
where such review was warranted.
Reserve estimates are subject to annual review by
each of the relevant operating entities across the
Group. The estimation process distinguishes
between owned and leased reserves segregated
into permitted and unpermitted as appropriate
and includes only those permitted reserves which
are proven and probable. The term “permitted”
reserves refers to those tonnages which can
currently be mined without any environmental or
legal constraints. Permitted owned reserve
estimates are based on estimated recoverable
tonnes whilst permitted leased reserve estimates
are based on estimated total recoverable tonnes
which may be extracted over the term of the lease
contract.
Proven and probable reserve estimates are based
on recoverable tonnes only and are thus stated
net of estimated production losses and other
matters factored into the computation (e.g.
required slopes/benches). In order for reserves to
qualify for inclusion in the “proven and probable”
category, the following conditions must be
satisfied:
•
•
the reserves must be homogeneous
deposits based on drill data and/or local
geology; and
the deposits must be located on owned land
or on land subject to long-term lease
None of CRH’s mineral-bearing properties is
individually material to the Group.
219
CRH Annual Report and Form 20-F I 2016 Risk Factors
This section describes the principal risks and
uncertainties that could affect the Group’s
business. If any of these risks occur, the Group’s
business, financial condition, results of operations
and prospects could be materially adversely
affected.
The risks and uncertainties listed below
should be considered in connection with
any forward-looking statements in this Annual
Report and Form 20-F and the cautionary
statements contained in Corporate
Governance - Disclaimer/Forward-Looking
Statements on page 97.
The Risk Factors have been grouped to focus on
key strategic, operational, compliance and key
financial and reporting risks.
Key Strategic Risk Factors
Industry cyclicality
Risk Factor
Description:
The level of construction activity in local and national markets is
inherently cyclical being influenced by a wide variety of factors including
global and national economic circumstances, 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.
Impact:
Failure of the Group to respond on a timely basis and/or adequately to
unfavourable events beyond its control may adversely affect financial
performance.
Discussion
The Group’s operating and financial performance is influenced by general
economic conditions and the state of the residential, industrial and commercial
and infrastructure construction markets in the countries in which it operates,
particularly in Europe and North America.
In general, economic uncertainty exacerbates negative trends in construction
activity leading to postponement in orders. Construction markets are inherently
cyclical and are affected by many factors that are beyond the Group’s control,
including:
•
•
the price of fuel and principal energy-related raw materials such as bitumen
and steel (which accounted for approximately 7% of annual Group sales
revenues in 2016);
the performance of the national economies in the 31 countries in which the
Group operates;
• monetary policies in the countries in which the Group operates — for
example, an increase in interest rates typically reduces the volume of
mortgage borrowings thus impacting residential construction activity;
•
•
the allocation of government funding for public infrastructure programmes,
such as the development of highways in the US under the Fixing Americas
Surface Transportation Act (FAST Act); and
the level of demand for construction materials and services, with sustained
adverse weather conditions leading to potential disruptions or curtailments in
outdoor construction activity
While economic conditions have improved in the US, a prolongation of, or further
deterioration in economic performance in Europe may result in further general
reductions in construction activity in that area. Against this backdrop, the
adequacy and timeliness of the actions taken by the Group’s management team
are of critical importance in maintaining financial performance at appropriate
levels.
Each of the above factors could have a material adverse effect on the Group’s
operating results and the market price of CRH plc’s Ordinary Shares.
220
CRH Annual Report and Form 20-F I 2016 Political and economic uncertainty
Risk Factor
Description:
As an international business, the Group operates in many countries with
differing, and in some cases, potentially fast-changing economic, social
and political conditions. These conditions, which may be heightened by
the uncertainty resulting from the outcome of the referendum in the UK
to exit the European Union, could include political unrest, currency
disintegration, strikes, civil disturbance and may be triggered or
worsened by other forms of instability including natural disasters,
epidemics, widespread transmission of diseases and terrorist attacks.
These factors are of particular relevance in developing/emerging
markets.
Impact:
Changes in these conditions, or in the governmental or regulatory
requirements in any of the countries in which the Group operates, may
adversely affect the Group’s business, results of operations, financial
condition or prospects thus leading to possible impairment of financial
performance and/or restrictions on future growth opportunities.
Discussion
Whilst economic trends are on average improving across many of CRH’s
markets, the UK’s decision to exit the European Union, together with pending
elections in 2017 in the Netherlands, France and Germany, have collectively
contributed to heightened uncertainty, with possible upside and downside
economic consequences. While various actions have been taken by central
banks and other political and economic institutions to stabilise the economic
situation, the success of these actions cannot be guaranteed.
The Group currently operates mainly in Western Europe and North America as
well as, to a lesser degree, in developing countries/emerging markets in Eastern
Europe, the Philippines, Brazil, China and India. The economies of these
countries are at varying stages of socioeconomic and macroeconomic
development which could give rise to a number of risks, uncertainties and
challenges and could include the following:
•
•
•
•
•
•
•
•
changes in political, social or economic conditions;
trade protection measures and import or export licensing requirements;
potentially negative consequences from changes in tax laws;
labour practices and differing labour regulations;
procurement which contravenes ethical considerations;
unexpected changes in regulatory requirements;
state-imposed restrictions on repatriation of funds; and
the outbreak of armed conflict
Commodity products and substitution
Risk Factor
Description:
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.
Impact:
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.
Discussion
The competitive environment in which the Group operates can be significantly
impacted by general economic conditions in combination with local factors
including the number of competitors, the degree of utilisation of production
capacity and the specifics of product demand. Across the multitude of largely
local markets in which the Group conducts business, downward pricing pressure
is experienced from time to time, and the Group may not always be in a position
to recover increased operating expenses (caused by factors such as increased
fuel and raw material prices) through higher sale prices.
A number of the products sold by the Group (both those manufactured internally
and those distributed) compete with other building products that do not feature
in the existing product range. Any significant shift in demand preference from the
Group’s existing products to substitute products, which the Group does not
produce or distribute, could adversely impact market share and results of
operations.
221
CRH Annual Report and Form 20-F I 2016 Discussion
The Group’s acquisition strategy focuses on value-enhancing mid-sized
acquisitions supplemented from time to time by larger strategic acquisitions into
new markets or new building products.
The realisation of the Group’s acquisition strategy is dependent on the ability to
identify and acquire suitable assets at appropriate prices thus satisfying the
stringent cash flow and return on investment criteria underpinning such activities.
The Group may not be able to identify such companies, and, even if identified,
may not be able to acquire them because of a variety of factors including the
outcome of due diligence processes, the ability to raise funds (as required) on
acceptable terms, the need for competition authority approval in certain
instances and competition for transactions from peers and other entities
exploring acquisition opportunities in the building materials sector. In addition,
situations may arise where the Group may be liable for the past acts or
omissions or liabilities of companies acquired; for example, the potential
environmental liabilities addressed under the “Sustainability and Corporate Social
Responsibility” Risk Factor on page 224.
The Group’s ability to realise the expected benefits from acquisition activity
depends, in large part, on its ability to integrate newly acquired businesses in a
timely and effective manner. Even if the Group is able to acquire suitable
companies, it still may not be able to incorporate them successfully into the
relevant legacy businesses and, accordingly, may be deprived of the expected
benefits thus leading to potential dissipation and diversion of management
resources and constraints on financial performance.
Discussion
Due to the absence of full control of joint ventures and associates, important
decisions such as the approval of business plans and the timing and amount of
cash distributions and capital expenditures, for example, may require the
consent of partners or may be approved without the Group’s consent.
These limitations could impair the Group’s ability to manage joint ventures and
associates effectively and/or realise the strategic goals for these businesses. In
addition, improper management or ineffective policies, procedures or controls for
non-controlled entities could adversely affect the business, results of operations or
financial condition of the relevant investment and of the Group.
Key Strategic Risk Factors - continued
Acquisition activity
Risk Factor
Description:
Growth through acquisition and active management of the Group’s
business portfolio are key elements of the Group’s strategy with the
Group’s balanced portfolio growing year on year through bolt-on activity
occasionally supplemented by larger and/or step-change transactions.
In addition, the Group may be liable for the past acts, omissions or
liabilities of companies or businesses it has acquired.
Impact:
The Group may not be able to continue to grow as contemplated in its
business plans if it is unable to identify attractive targets (including
potential new platforms for growth), 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. If the Group is
held liable for the past acts, omissions or liabilities of companies or
businesses it has acquired, those liabilities may either be unforeseen or
greater than anticipated at the time of the relevant acquisition.
Joint ventures and associates
Risk Factor
Description:
The Group does not have a controlling interest in certain of the
businesses (i.e. joint ventures and associates) in which it has invested
and may invest. The absence of a controlling interest gives rise to
increased governance complexity and a need for proactive relationship
management, which may restrict the Group’s ability to generate
adequate returns and to develop and grow these businesses.
Impact:
These limitations could impair the Group’s ability to manage joint
ventures and associates effectively and/or realise the strategic goals for
these businesses. In addition, improper management or ineffective
policies, procedures or controls for non-controlled entities could
adversely affect the business, results of operations or financial condition
of the relevant investment.
222
CRH Annual Report and Form 20-F I 2016 Human resources
Risk Factor
Description:
Existing processes to recruit, develop and retain talented individuals and
promote their mobility may be inadequate thus giving rise to employee/
management attrition, difficulties in succession planning and inadequate
“bench strength”, potentially impeding the continued realisation of the
core 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.
Impact:
In the longer term, failure to manage talent and plan for leadership and
succession could impede the realisation of core strategic objectives
around performance and growth.
Discussion
The identification and subsequent assessment, management, development and
deployment of talented individuals is of major importance in continuing to deliver
on the Group’s core strategy of performance and growth and in ensuring that
succession planning objectives for key executive roles throughout its international
operations are satisfied. Programmes designed to focus on performance
management skills and leadership development may not achieve their desired
objectives.
The maintenance of positive employee and trade/labour union relations is key
to the successful operation of the Group. Some of the Group’s employees
are represented by trade/labour unions under various collective agreements.
For unionised employees, the Group may not be able to renegotiate satisfactorily
the relevant collective agreements upon expiration and may face tougher
negotiations and higher wage demands than would be the case for
non-unionised employees. In addition, existing labour agreements may not
prevent a strike or work stoppage with any such activity creating reputational risk
and potentially having a material adverse effect on the results of operations and
financial condition of the Group.
Corporate affairs and communications
Risk Factor
Description:
As a publicly-listed company, the Group undertakes regular
communications 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.
Impact:
Failure to deliver on performance indications and non-financial
commitments communicated to the Group’s variety of stakeholders
could result in a reduction in share price, reduced earnings and
reputational damage.
Discussion
The Group places great emphasis on timely and relevant corporate
communications with overall responsibility for these matters being vested in
senior management at the Group Head Office (largely the Chief Executive, the
Finance Director, the Group Transformation Director, the Head of Investor
Relations and the Group Director, Corporate Affairs) supported by engagement
with highly experienced external advisors, where appropriate. The strategic,
operational and financial performance of the Group and of its constituent entities
is reported to the Board on a monthly basis with all results announcements and
other externally-issued documentation being discussed by the Board/Audit
Committee prior to release.
223
CRH Annual Report and Form 20-F I 2016 Key Operational Risk Factors
Sustainability and Corporate Social Responsibility
Risk Factor
Description:
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 & safety management and
social performance).
Impact:
Non-adherence to such laws, regulations, standards and best practices
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.
Discussion
The Group is subject to a broad and increasingly stringent range of existing and
evolving laws, regulations, standards and best practices with respect to
governance, the environment, health & safety and social performance in each of
the jurisdictions in which it operates giving rise to significant compliance costs,
potential legal liability exposure and potential limitations on the development of its
operations. These laws, regulations, standards and best practices relate to,
amongst other things, climate change, noise, emissions to air, water and soil, the
use and handling of hazardous materials and waste disposal practices. Given the
above, the risk of increased environmental and other compliance costs and
unplanned capital expenditure is inherent in conducting business in the building
materials sector and the impact of future developments in these respects on the
Group’s activities, products, operations, profitability and cash flow cannot be
estimated; there can therefore be no assurance that material liabilities and costs
will not be incurred in the future or that material limitations on the development of
its operations will not arise.
Environmental and health & safety and other laws, regulations, standards and
best practices may expose the Group to the risk of substantial costs and
liabilities, including liabilities associated with assets that have been sold or
acquired and activities that have been discontinued. In addition, many of the
Group’s manufacturing sites have a history of industrial use and, while strict
environmental operating standards are applied and extensive environmental due
diligence is undertaken in acquisition activity, some soil and groundwater
contamination has occurred in the past at a limited number of sites. Although the
associated remediation costs incurred to date have not been material, they may
become more significant in the future. The Group may face increased
remediation liabilities and legal proceedings concerning environmental and health
& safety matters in the future.
The Group cannot predict environmental and health & safety matters with
certainty, and budgeted amounts and established reserves may not be adequate
for all purposes. In addition, the development or discovery of new facts, events,
circumstances or conditions, including future decisions to close plants, which
may trigger remediation liabilities, and other developments such as changes in
laws or increasingly strict enforcement by governmental authorities, could result
in increased costs and liabilities or prevent or restrict some of the operations of
the Group, which in turn could have a material adverse effect on the reputation,
business, results of operations and overall financial condition of the Group.
224
CRH Annual Report and Form 20-F I 2016 Information Technology and Security/Cyber
Risk Factor
Description:
The Group is dependent on the employment of advanced information
systems and is exposed to risks of failure in the operation of these
systems. Further, the Group is exposed to security threats to its digital
infrastructure through cyber-crime. Such attacks are by their nature
technologically sophisticated and may be difficult to detect and defend
in a timely fashion.
Impact:
Should a threat materialise, it 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, regulatory penalties and incur significant financial
costs in remediation.
Discussion
Security and cyber threats are becoming increasingly sophisticated and are
continually evolving. Such attacks may result in interference with production
software, corruption or theft of sensitive data, manipulation of financial data
accessible through digital infrastructure, or reputational losses as a result of
misrepresentation via social media and other websites. There can be no
assurance that future attacks will not be successful due to their increasing
sophistication and the difficulties in detecting and defending against them in a
timely fashion.
Key Compliance Risk Factors
Laws and regulations
Risk Factor
Description:
The Group is subject to many local and international laws and
regulations, including those relating to competition law, corruption and
fraud, across many jurisdictions of operation and is therefore exposed
to changes in those laws and regulations and to the outcome of any
investigations conducted by governmental, international or other
regulatory authorities.
Impact:
Potential breaches of local and international laws and regulations in the
areas of competition law, corruption and fraud, among others, could
result in the imposition of significant fines and/or sanctions for
non-compliance, and may inflict reputational damage.
Discussion
The Group is subject to various statutes, regulations and laws applicable to
businesses generally in the countries and markets in which it operates. These
include statutes, regulations and laws affecting land usage, zoning, labour and
employment practices, competition, financial reporting, taxation, anti-bribery,
anti-corruption, governance and other matters. The Group mandates that its
employees comply with its Code of Business Conduct which stipulates best
practices in relation to regulatory matters. The Group cannot guarantee that its
employees will at all times successfully comply with all demands of regulatory
agencies in a manner which will not materially adversely affect its business,
results of operations, financial condition or prospects.
There can be no assurance that the Group’s policies and procedures will afford
adequate protection against fraudulent and/or corrupt activity and any such
activity could have a material adverse effect on the Group’s business, results of
operations, financial condition or prospects.
225
CRH Annual Report and Form 20-F I 2016 Key Financial and Reporting Risk Factors
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity)
Risk Factor
Description:
The Group uses financial instruments throughout its businesses giving
rise to interest rate and leverage, foreign currency, counterparty, credit
rating and liquidity risks. A significant portion of the cash generated by
the Group from operational activity is currently dedicated to the payment
of principal and interest on indebtedness. In addition, the Group has
entered into certain financing agreements containing restrictive
covenants requiring it to maintain a certain minimum interest coverage
ratio and a certain minimum net worth.
Impact:
A downgrade of the Group’s credit ratings may give rise to increases in
funding costs in respect of future debt and may impair the Group’s
ability to raise funds on acceptable terms. In addition, insolvency of the
financial institutions with which the Group conducts business (or a
downgrade in their credit ratings) may lead to losses in derivative assets
and cash and cash equivalents balances or render it more difficult for
the Group either to utilise existing debt capacity or otherwise obtain
financing for operations.
Discussion
Interest rate and leverage risks: The Group’s exposures to changes in interest rates
result from investing and borrowing activities undertaken to manage liquidity and
capital requirements and stem predominantly from long-term debt obligations.
Borrowing costs are managed through employing a mix of fixed and floating
rate debt and interest rate swaps, where appropriate. As at 31 December 2016,
the Group had outstanding net indebtedness of approximately €5.3 billion
(2015: €6.6 billion). Following its acquisition activity in 2015, the Group has significant
outstanding indebtedness, which may impair its operating and financial flexibility over
the longer term and could adversely affect its business, results of operations and
financial position. This high level of indebtedness could give rise to the Group
dedicating a substantial portion of its cash flow to debt service thereby reducing the
funds available in the longer term for working capital, capital expenditure,
acquisitions, distributions to shareholders and other general corporate purposes and
limiting its ability to borrow additional funds and to respond to competitive pressures.
In addition, the Group’s level of indebtedness may give rise to a general increase in
interest rates borne and there can be no assurance that the Group will not be
adversely impacted by increases in borrowing costs in the future.
For the year ended 31 December 2016, PBITDA/net interest (all as defined in the
relevant agreements as discussed in note 23 to the Consolidated Financial
Statements), which is the Group’s principal financial covenant, was 10.1 times (2015:
8.5 times). The prescribed minimum PBITDA/net interest cover ratio under such
agreements is 4.5 times and the prescribed minimum net worth is €6.2 billion.
Foreign currency risks: If the euro, which is the Group’s reporting currency, weakens
relative to the basket of foreign currencies in which net debt is denominated
(principally the US Dollar, Pound Sterling, Canadian Dollar, Swiss Franc and
Philippine Peso), the net debt balance would increase; the converse would apply if
the euro was to strengthen. The Group may not succeed in managing these foreign
currency risks.
Counterparty risks: Insolvency of the financial institutions with which the Group
conducts business, or a downgrade in their credit ratings, may lead to losses in
derivative assets and cash and cash equivalents balances or render it more difficult
either to utilise existing debt capacity or otherwise obtain financing for operations.
The maximum exposure arising in the event of default on the part of the counterparty
(including insolvency) is the carrying amount of the relevant financial instrument.
The Group holds significant cash balances on deposit with a variety of highly-rated
financial institutions (typically invested on a short-term basis) which, together
with cash and cash equivalents at 31 December 2016, totalled €2.4 billion
(2015: €2.5 billion). In addition to the above, the Group enters into derivative
transactions with a variety of highly-rated financial institutions giving rise to derivative
assets and derivative liabilities; the relevant balances as at 31 December 2016 were
€76 million and €32 million respectively (2015: €109 million and €24 million
respectively). The counterparty risks inherent in these exposures may give rise to
losses in the event that the relevant financial institutions suffer a ratings downgrade
or become insolvent. In addition, certain of the Group’s activities (e.g. highway paving
in the US) give rise to significant amounts receivable from counterparties at year-end
2016, this balance was €0.8 billion (2015: €0.7 billion). In the current business
environment, there is increased exposure to counterparty default, particularly as
regards bad debts.
226
CRH Annual Report and Form 20-F I 2016 Financial instruments - continued (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity)
Risk Factor
Discussion
Defined benefit pension schemes and related obligations
Risk Factor
Description:
The Group operates a number of defined benefit pension schemes and
schemes with related obligations (for example, termination indemnities
and jubilee/long-term service benefits, which are accounted for as
defined benefit) in certain of its operating jurisdictions. The assets and
liabilities of defined benefit pension schemes may exhibit significant
period-on-period volatility attributable primarily to asset values, changes
in bond yields/discount rates and anticipated longevity.
Impact:
In addition to the contributions required for the ongoing service of
participating employees, significant cash contributions may be required
to remediate deficits applicable to past service. Further, fluctuations in
the accounting surplus/deficit may adversely impact the Group’s credit
metrics thus harming its ability to raise funds.
Credit rating risks: A downgrade of the Group’s credit ratings may give rise to
increases in funding costs in respect of future debt and may, among other
concerns, impair its ability to access debt markets or otherwise raise funds or enter
into letters of credit, for example, on acceptable terms. Such a downgrade may
result from factors specific to the Group, including increased indebtedness
stemming from acquisition activity, or from other factors such as general economic
or sector-specific weakness or sovereign credit rating ceilings.
Liquidity risks: The principal liquidity risks stem from the maturation of debt
obligations and derivative transactions. The Group aims to achieve flexibility in
funding sources through a variety of means including (i) maintaining cash and cash
equivalents with a number of highly-rated counterparties; (ii) limiting the maturity of
such balances; (iii) meeting the bulk of debt requirements through committed bank
lines or other term financing; and (iv) having surplus committed lines of credit.
However, market or economic conditions may make it difficult at times to realise
this objective.
For additional information on the above risks see note 21 to the Consolidated
Financial Statements.
Discussion
The assumptions used in the recognition of pension assets, liabilities, income
and expenses (including discount rates, rate of increase in future compensation
levels, mortality rates and healthcare cost trend rates) are updated based on
market and economic conditions at the respective balance sheet date and
for any relevant changes to the terms and conditions of the pension and
post-retirement plans. These assumptions can be affected by (i) for the discount
rate, changes in the rates of return on high-quality fixed income investments;
(ii) for future compensation levels, future labour market conditions and
anticipated inflation; (iii) for mortality rates, changes in the relevant actuarial
funding valuations or changes in best practice; and (iv) for healthcare cost trend
rates, the rate of medical cost inflation in the relevant regions. The weighted
average actuarial assumptions used and sensitivity analysis in relation to the
significant assumptions employed in the determination of pension and other
post-retirement liabilities are disclosed in note 27 to the Consolidated Financial
Statements. A prolonged period of financial market instability or other adverse
changes in the assumptions mentioned above would have an adverse impact on
the valuations of pension scheme assets.
In addition, a number of the defined benefit pension schemes in operation
throughout the Group have reported material funding deficits thus necessitating
remediation either in accordance with legislative requirements or as agreed with
the relevant regulators. These obligations are reflected in the contracted
payments disclosure on page 216. The extent of such contributions may be
exacerbated over time as a result of a prolonged period of instability in worldwide
financial markets or other adverse changes in the assumptions mentioned above.
227
CRH Annual Report and Form 20-F I 2016 Key Financial and Reporting Risk Factors - continued
Taxation litigation
Risk Factor
Description:
The Group is exposed to uncertainties stemming from governmental
actions in respect of taxes paid and payable in all jurisdictions of
operation.
Impact:
Changes in the tax regimes and related government policies and
regulations in the countries in which the Group operates could adversely
affect its results and its effective tax rate.
The final determination of tax audits or tax disputes may be different
from what is reflected in the Group’s historical income tax provisions
and accruals. If future audits find that additional taxes are due, the
Group may be subject to incremental tax liabilities, possibly including
interest and penalties, which could have a material adverse effect on
cash flows, financial condition and results of operations.
Discussion
As a multinational corporation, the Group is subject to various taxes in all
jurisdictions of operation. Due to economic and political conditions, tax rates in
these jurisdictions may be subject to significant change. The Group’s future
effective income tax rate could be affected by changes in the mix of earnings in
countries with differing statutory tax rates, changes in the valuation of deferred
tax assets or changes in tax laws or their interpretation.
In addition, recent developments, including the European Commission’s
investigations on illegal state aid as well as the Organisation for Economic
Co-operation and Development project on Base Erosion and Profit Shifting may
result in changes to long-standing tax principles, which could adversely affect the
Group’s effective tax rate or result in higher cash tax liabilities. If the Group’s
effective income tax rate was to increase, its cash flows, financial condition and
results of operations could be adversely affected.
Adequacy of insurance arrangements and related counterparty exposures
Risk Factor
Description:
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 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.
Impact:
In the event of failure of one or more of the Group’s counterparties, the
Group could be impacted by losses where recovery from such
counterparties is not possible. In addition, losses may materialise in
respect of uninsured events or may exceed insured amounts.
Discussion
Insurance protection is maintained with leading, highly-rated international
insurers with appropriate risk retention by wholly-owned insurance
companies (captive insurers) and by insured entities in the context of the
deductibles/excesses borne. The coverage includes property damage and
business interruption, public and products liability/general liability, employers’
liability/workers’ compensation, environmental impairment liability, automobile
liability and directors’ and officers’ liability. Adequate coverage at reasonable
rates is not always commercially available to cover all potential risks and no
assurance can be given that the insurance arrangements in place would be
sufficient to cover all losses or liabilities to which the Group might be exposed.
The occurrence of a significant adverse event not covered, or only partially
covered, by insurance could have a material adverse impact on the business,
results of operations, financial condition or prospects of the Group.
As at 31 December 2016, the total insurance provision, which is subject to
periodic actuarial valuation and is discounted, amounted to €286 million
(2015: €244 million); a substantial proportion of this figure pertained to
claims which are classified as “incurred but not reported”.
228
CRH Annual Report and Form 20-F I 2016 Foreign currency translation
Risk Factor
Description:
The principal foreign exchange risks to which the Consolidated Financial
Statements are exposed pertain to adverse movements in reported
results when translated into euro (which is the Group’s reporting
currency) together with declines in the euro value of net investments
which are denominated in a wide basket of currencies other than
the euro.
Impact:
Adverse changes in the exchange rates used to translate foreign
currencies into euro have impacted and will continue to impact retained
earnings. The annual impact is reported in the Consolidated Statement
of Comprehensive Income.
Goodwill impairment
Risk Factor
Description:
Significant under-performance in any of the Group’s major
cash-generating units or the divestment of businesses in
the future may give rise to a material write-down of goodwill.
Impact:
A write-down of goodwill could have a substantial impact
on the Group’s income and equity.
Discussion
A significant proportion of the Group’s revenues, expenses, assets and liabilities
are denominated in currencies other than the euro, principally US Dollar, Pound
Sterling, Canadian Dollar, Swiss Franc, Philippine Peso and Polish Zloty. From
year to year, adverse changes in the exchange rates used to translate these and
other foreign currencies into euro have impacted and will continue to impact
consolidated results and net worth. For additional information on the impact of
foreign exchange movements on the Consolidated Financial Statements for the
Group for the year ended 31 December 2016, see the Business Performance
section commencing on page 20 and note 21 to the Consolidated Financial
Statements.
Discussion
An acquisition generates goodwill to the extent that the price paid exceeds the
fair value of the net assets acquired. Under IFRS, goodwill and indefinite-lived
intangible assets are not amortised but are subject to annual impairment testing.
Other intangible assets deemed separable from goodwill arising on acquisitions
are amortised. A detailed discussion of the impairment testing process, the key
assumptions used, the results of that testing and the related sensitivity analysis
is contained in note 14 to the Consolidated Financial Statements on pages 153
to 156.
Whilst a goodwill impairment charge does not impact cash flow, a full write-down
at 31 December 2016 would have resulted in a charge to income and a
reduction in equity of €7.4 billion (2015: €7.4 billion).
Inspections by the Public Company Accounting Oversight Board (PCAOB)
Risk Factor
Description:
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.
Impact:
Investors who rely on the audit report prepared by the Group’s auditors
are deprived of the benefits of PCAOB inspections to assess audit work
and quality control procedures.
Discussion
As a public company, our auditors are required by US law to undergo regular
PCAOB inspections to assess their compliance with US law and professional
standards in connection with their audits of financial statements filed with the
SEC. Under Irish law, the PCAOB is currently unable to inspect and evaluate the
audit work and quality control procedures of auditors in Ireland. Accordingly
investors who rely on our auditors’ audit reports are deprived of the benefits of
PCAOB inspections of auditors.
229
CRH Annual Report and Form 20-F I 2016 Corporate Governance Practices - NYSE
Compliance Statement
Non-US companies such as CRH are exempt
from most of the corporate governance rules of
the NYSE. In common with companies listed on
the ISE and the LSE, CRH’s corporate governance
practices reflect, inter alia, compliance with
(a) domestic company law; (b) the Listing Rules of
the UK Listing Authority and the ISE; and (c) the
2014 UK Corporate Governance Code, which is
appended to the listing rules of the LSE and ISE.
The Board of CRH has adopted a robust set of
governance principles, which reflect the Code and
its principles-based approach to corporate
governance. Accordingly, the way in which CRH
makes determinations of Directors’ independence
differs from the NYSE rules. The Board has
determined that, in its judgement, all of the
non-executive Directors are independent. In doing
so, however, the Board did not explicitly take into
consideration the independence requirements
outlined in the NYSE’s listing standards.
Shareholder Approval of Equity
Compensation Plans
The NYSE rules require that shareholders
must be given the opportunity to vote on all
equity-compensation plans and material revisions
to those plans. CRH complies with Irish
requirements, which are similar to the NYSE rules.
The Board, however, does not explicitly take into
consideration the NYSE’s detailed definition on
what are considered “material revisions”.
Risk Management and
Internal Control
The Board has delegated responsibility for
monitoring the effectiveness of the Group’s risk
management and internal control systems to the
Audit Committee*. Such systems are designed to
manage rather than eliminate the risk of failure to
achieve business objectives and, in the case of
internal control systems, can provide only
reasonable and not absolute assurance against
material misstatement or loss.
The Consolidated Financial Statements are
prepared subject to oversight and control of the
Finance Director, who seeks to ensure that data is
captured from Group locations and all required
information for disclosure in the Consolidated
Financial Statements is provided. An appropriate
control framework has been put in place around
the recording of appropriate eliminating journals
and other adjustments. The Consolidated
Financial Statements are reviewed by the CRH
Financial Reporting and Disclosure Group prior to
being reviewed by the Audit Committee and
approved by the Board of Directors.
Group management has responsibility for major
strategic development and financing decisions.
Responsibility for operational issues is devolved,
subject to limits of authority, to product group and
operating company management. Management at
all levels is responsible for internal control over the
business functions that have been delegated. This
embedding of the system of internal control
throughout the Group’s operations is designed to
enable the organisation to respond quickly to
evolving business risks, and to ensure that
significant internal control issues, should they
arise, are reported promptly to appropriate levels
of management.
Management’s Report on
Internal Control over Financial
Reporting
In accordance with the requirements of Rule
13a-15 of the US Securities Exchange Act, the
following report is provided by management in
respect of the Company’s internal control over
financial reporting. As defined by the SEC, internal
control over financial reporting is a process
designed by, or under the supervision of, the
Company’s principal executive and principal
financial officers, or persons performing similar
functions, and effected by the Company’s Board
of Directors, management and other personnel, to
provide reasonable assurance regarding the
reliability of financial reporting and the preparation
of the Consolidated Financial Statements for
external purposes in accordance with generally
accepted accounting principles and includes
those policies and procedures that:
•
•
•
pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect
the transactions and dispositions of the
assets of the Company;
provide reasonable assurance that
transactions are recorded as necessary
to permit preparation of the Consolidated
Financial Statements in accordance with
generally accepted accounting principles,
and that receipts and expenditures
of the Company are being made only
in accordance with authorisations of
management and Directors of the
Company; and
provide reasonable assurance regarding
prevention or timely detection of
unauthorised acquisition, use or disposition
of the Company’s assets that could have a
material effect on the Consolidated Financial
Statements
Our management is responsible for establishing
and maintaining adequate internal control over
financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the US Securities Exchange
Act. Our internal control system was designed to
provide reasonable assurance regarding the
reliability of financial reporting and the preparation
of our Company’s published Consolidated
Financial Statements for external purposes under
generally accepted accounting principles.
In connection with the preparation of the
Company’s annual Consolidated Financial
Statements, management has undertaken an
assessment of the effectiveness of the Company’s
internal control over financial reporting as of
31 December 2016, based on criteria established
in Internal Control - Integrated Framework (2013),
issued by the Committee of Sponsoring
Organisations of the Treadway Commission.
230
* In accordance with Section 167(7) of the Companies Act 2014.
CRH Annual Report and Form 20-F I 2016 As permitted by the SEC, the Company has
elected to exclude an assessment of the internal
controls of acquisitions made during the year
2016. These acquisitions, which are listed in note
30 to the Consolidated Financial Statements,
constituted 0.5% of total assets and 1.0% of net
assets, as of 31 December 2016 and 0.4% and
0.1% of revenue and Group profit for the financial
year, respectively, for the year then ended.
Management’s assessment included an
evaluation of the design of the Company’s internal
control over financial reporting and testing of the
operational effectiveness of those controls.
Based on this assessment, management has
concluded and hereby reports that as of
31 December 2016, the Company’s internal
control over financial reporting is effective.
Our auditors, Ernst & Young, a registered
public accounting firm, who have audited the
Consolidated Financial Statements for the year
ended 31 December 2016, have audited the
effectiveness of the Company’s internal controls
over financial reporting. Their report, on which
an unqualified opinion is expressed thereon, is
included on page 119.
Changes in Internal Control
over Financial Reporting
During 2016, there has been no change in our
internal control over financial reporting identified in
connection with the evaluation required by Rules
13a-15 that occurred during the period covered
by this Annual Report and Form 20-F that has
materially affected, or is reasonably likely to
materially affect, our internal control over
financial reporting.
The 2015 acquisitions of LH Assets and CRL
were successfully integrated into the CRH internal
control system in 2016.
Evaluation of Disclosure
Controls and Procedures
Management has evaluated the effectiveness of
the design and operation of the disclosure
controls and procedures as defined in Exchange
Act Rules 13a-15(e) as of 31 December 2016.
Based on that evaluation, the Chief Executive and
the Finance Director have concluded that these
disclosure controls and procedures were effective
as of such date at the level of providing
reasonable assurance.
In designing and evaluating our disclosure controls
and procedures, management, including the Chief
Executive and the Finance Director, recognised
that any controls and procedures, no matter how
well designed and operated, can provide only
reasonable assurance of achieving the desired
control objectives, and management necessarily
was required to apply its judgement in evaluating
the cost-benefit relationship of possible controls
and procedures. Because of the inherent
limitations in all control systems, no evaluation of
controls can provide absolute assurance that all
control issues and instances of fraud, if any, within
the Company have been detected.
Code of Business Conduct
The COBC is applicable to all Group employees
including the Chief Executive and senior financial
officers. The Code promotes honest and ethical
conduct; full, fair, accurate, timely and
understandable disclosures and compliance with
applicable governmental laws, rules and
regulations and complies with the applicable code
of ethics regulations of the SEC arising from the
Sarbanes-Oxley Act.
231
CRH Annual Report and Form 20-F I 2016 The Environment and Government Regulations
The most important government regulations
relevant to CRH as a building materials company
are environmental laws and regulations relevant to
extractive and production processes. In the
European Union, operations are subject to
national environmental laws and regulations, most
of which now emanate from European Union
Directives and Regulations. In the US, operations
are subject to federal, state and local
environmental laws and regulations. In other
jurisdictions, national environmental and local laws
apply.
Environmental Compliance
Policy
In order to comply with environmental regulations,
CRH has developed the following Group
environmental policy, approved by the Board
and applied across all Group companies,
which is to:
•
•
•
•
•
•
comply, as a minimum, with all applicable
environmental legislation and continuously
improve our environmental stewardship,
aiming all the time to meet or exceed
industry best practice;
ensure that our employees and contractors
respect their environmental responsibilities;
address proactively the challenges and
opportunities of climate change;
optimise our use of energy and all resources;
promote environmentally driven product
innovation and new business opportunities;
and
develop positive relationships and strive to
be good neighbours in every community in
which we operate
Achieving the Group’s environmental policy
objectives at all locations is a management
imperative; this line responsibility continues
right up to Board level. Daily responsibility for
ensuring that the Group’s environmental policy
is effectively implemented lies with individual
location managers, assisted by a network of
Environmental Liaison Officers (ELOs).
At each year-end, the ELOs assist the Group
Corporate Social Responsibility & Sustainability
team in carrying out a detailed assessment of
Group environmental performance, which is
reviewed by the Board.
Addressing Climate Change
CRH believes that a proactive approach to
addressing the challenges and opportunities of
climate change is fundamental to its “making
businesses better” approach. CRH has evaluated
the risks and opportunities arising from climate
change and has put in place a management
strategy focusing on energy efficiencies and
carbon reduction. There is an emphasis
on producing lower carbon products in
climate-friendly processes across all activities,
from the more carbon intensive businesses to
those with more limited potential climate impacts.
CRH is a core member of the Cement
Sustainability Initiative (CSI) of the World Business
Council for Sustainable Development (WBCSD).
The CSI is a voluntary initiative by the world’s
major cement producers, promoting greater
sustainability in the cement industry.
Having achieved its initial CO2 reduction
commitment three years ahead of target in 2012,
CRH has pledged a 25% reduction in specific net
CO2 cement plant emissions by 2020, compared
to 1990 levels. The Group is progressing
successfully towards achieving this commitment,
which is supported by a strategic investment
programme and covers a defined portfolio of
Group cement plants.
Through its membership of the CSI of the WBCSD
and regional industry associations including the
European Cement Association (CEMBUREAU)
and the European Lime Association (EuLA) in
Europe and the National Asphalt Pavement
Association (NAPA) and the Portland Cement
Association (PCA) in the US, CRH is actively
involved in global and regional discussions on the
climate change agenda. Relevant facilities in
Europe operate within the European Union
Emission Trading Scheme for Greenhouse Gas
emissions through actively implementing carbon
reduction strategies. CRH has endorsed the
WBCSD Low Carbon Technology Partnership
Initiative (LCTPi), a statement of ambition, which
seeks a reduction in global cement CO2 emissions
in the range of 20-25% by 2030.
CRH has implemented capital expenditure
programmes in its cement operations to reduce
carbon emissions in the context of national and
international commitments to reduce greenhouse
gas emissions. The European Union has binding
targets to reduce greenhouse gases, on 1990
levels, by 20% by 2020 and by 40% by 2030. In
addition, the European Commission has
suggested an objective to reduce emissions by
80% by 2050 compared to 1990. Achieving such
reductions would represent a significant extra
constraint on cement operations in Europe. US
federal, state and local laws are developing
proactively to address carbon emissions and CRH
notes that in 2015, the US pledged to cut its
emissions to 26-28% below 2005 levels by 2025.
The Group will incur costs in monitoring and
reporting emissions. Ultimately a “cap and trade”
scheme may be implemented; depending on the
scope of the legislation, this could significantly
impact certain operations in the US. As of 17
February 2017, the Group is not aware of any
schemes that would materially affect its US
operations.
Possible Environmental
Liabilities
At 17 February 2017 there were no material
pending legal proceedings relating to site
remediation which are anticipated to have a
material adverse effect on the financial position or
results of operations or liquidity of the Group, nor
have internal reviews revealed any situations of
likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital
expenditures and the allocation by state entities of
available funds to different projects, as well as
interest rate and tax policies, directly affect the
overall levels of construction activity. The terms
and general availability of government permits
required to conduct Group business also has an
impact on the scope of Group operations. As a
result such governmental decisions and policies
can have a significant impact on the operating
results of the Group.
232
CRH Annual Report and Form 20-F I 2016 These rates may vary slightly from the rates used
for translating foreign currencies into euro in the
preparation of the Consolidated Financial
Statements (see page 135).
For a discussion on the effects of exchange rate
fluctuations on the financial condition and results
of the operations of the Group, see the Business
Performance section beginning on page 20.
Exchange Rates
In this Annual Report and Form 20-F, references
to “US$”, “US Dollars” or “US cents” are to the
United States currency, references to “euro”, “euro
cent”,“cent”, “c” or “€” are to the euro currency
and “Stg£” or “Pound Sterling” are to the currency
of the United Kingdom of Great Britain and
Northern Ireland (UK). Other currencies referred to
in this Annual Report and Form 20-F include
Polish Zloty (PLN), Swiss Franc (CHF), Canadian
Dollar (CAD), Chinese Renminbi (RMB), Indian
Rupee (INR), Ukrainian Hryvnia (UAH), Philippine
Peso (PHP), Romanian Leu (RON) and Serbian
Dinar (RSD).
For the convenience of the reader, this Annual
Report and Form 20-F contains translations of
certain euro amounts into US Dollars at specified
rates. These translations should not be construed
as representations that the euro amounts actually
represent such US Dollar amounts or could be
converted into US Dollars at the rate indicated.
The table below sets forth, for the periods and
dates indicated, the average, high, low and
end-of-period exchange rates in US Dollars per
€1 (to the nearest cent) using the Federal Reserve
Bank of New York Noon Buying Rate (the ‘FRB
Noon Buying Rate’).
euro/US Dollar exchange rate
Years ended 31 December
Period End Average Rate (i)
2012
2013
2014
2015
2016
2017 (through 17 February 2017)
Months ended
September 2016
October 2016
November 2016
December 2016
January 2017
February 2017 (through 17 February 2017)
1.32
1.38
1.21
1.09
1.06
1.06
1.12
1.10
1.06
1.06
1.08
1.06
1.29
1.33
1.32
1.10
1.10
1.07
1.12
1.10
1.08
1.05
1.06
1.07
High
1.35
1.38
1.39
1.20
1.15
1.08
1.13
1.12
1.11
1.08
1.08
1.08
Low
1.21
1.28
1.21
1.05
1.04
1.04
1.12
1.09
1.06
1.04
1.04
1.06
(i) The average of the euro/US Dollar exchange rate on the last day of each month during the period or
in the case of monthly averages, the average of all days in the month, in each case using the FRB
Noon Buying Rate.
The FRB Noon Buying Rate on 31 December 2016 was €1 = US$1.0552 and on 17 February 2017 was
€1 = US$1.0614.
233
CRH Annual Report and Form 20-F I 2016 Material Contracts
On 10 July 2015, CRH entered into an amended
and restated agreement among Holcim Ltd.,
Lafarge S.A., CRH International, CRH Fünfte
Vermögensverwaltungs GmbH and CRH plc for
the sale and purchase of a global portfolio of
assets of Lafarge S.A. and Holcim Ltd (the ‘Global
SPA’), and on 3 August 2015 CRH entered into an
amended and restated put and call options
agreement among Lafarge Holdings (Philippines)
Inc., Calumboyan Holdings Inc., Round Royal Inc.,
Southwestern Cement Ventures Inc., CRH
International and CRH plc with respect to certain
assets located in the Philippines (the ‘Philippines
Agreement’ and, together with the Global SPA,
the ‘LH Agreements’). CRH completed the
majority of the acquisition on July 31, 2015
(except for the acquisition of the Philippines
assets, which was completed on September 15,
2015).
Under the LH Agreements, the total consideration
payable by CRH was an enterprise value of
€6.5 billion, subject to certain agreed upon
adjustments (including with respect to working
capital, debt and agreed debt-like items at
closing). The LH Agreements contained
customary warranties, including compliance with
law, antitrust, environmental matters, litigation, tax
and material contracts. As part of the transaction,
the CRH Group is also indemnified against any
pre-closing tax liabilities subject to certain
exclusions and limitations. In addition, where
CRH disposes of any business (in whole or in part)
within the LH Assets Group within 18 months of
closing of the agreement, it has agreed to share
any profit on disposal equally with the relevant
seller(s).
CRH is a leading global diversified building
materials group employing approximately 87,000
people at close to 3,800 operating locations in 31
countries worldwide. For over four decades, the
Group has developed and implemented a proven
model of business improvement. By building
better businesses across our international
operations, we are the second largest building
materials company globally and the largest in
North America. The Group has leadership
positions in Europe as well as established
strategic positions in the emerging economic
regions of Asia and South America.
In the detailed description of the Group’s business
on pages 30 to 55, estimates of the Group’s
various aggregates and stone reserves have been
provided by engineers employed by the individual
operating companies. Details of product end-use
by sector for each reporting segment are based
on management estimates.
A listing of the principal subsidiary undertakings
and equity accounted investments is contained on
pages 250 to 255.
Statements Regarding
Competitive Position and
Construction Activity
Statements made in the Business Performance
section and elsewhere in this document referring
to the Group’s competitive position are based on
the Group’s belief, and in some cases rely on a
range of sources, including investment analysts’
reports, independent market studies and the
Group’s internal assessment of market share
based on publicly available information about the
financial results and performance of market
participants.
Unless otherwise specified, references to
construction activity or other market activity relate
to the relevant market as a whole and are based
on publicly available information from a range of
sources, including independent market studies,
construction industry data and economic
forecasts for individual jurisdictions.
Other Disclosures
History, Development and
Organisational Structure of
the Company
CRH public limited company is the Parent
Company of a diversified international group of
companies which manufactures and distributes
a diverse range of products servicing the breadth
of construction needs, from the fundamentals of
heavy materials and elements to construct the
frame, through value-added exterior products that
complete the building envelope, to distribution
channels which service construction fit-out and
renewal.
The Group resulted from the merger in 1970
of two leading Irish public companies, Cement
Limited (established in 1936) and Roadstone,
Limited (incorporated in 1949). Cement Limited
manufactured and supplied cement while
Roadstone, Limited was primarily involved in
the manufacture and supply of aggregates,
readymixed concrete, mortar, coated macadam,
asphalt and contract surfacing to the Irish
construction industry.
The Company is incorporated and domiciled
in the Republic of Ireland. CRH is a public
limited company operating under the Companies
Act of Ireland 2014. The Group’s worldwide
headquarters are located in Dublin, Ireland.
Our principal executive offices are located
at Belgard Castle, Clondalkin, Dublin 22
(telephone: +353 1 404 1000). The Company’s
registered office is located at 42 Fitzwilliam
Square, Dublin 2, Ireland and our US agent
is Oldcastle, Inc., 900 Ashwood Parkway,
Suite 600, Atlanta, Georgia 30338.
The Company is the holding company of the
Group, with direct and indirect share and loan
interests in subsidiaries, joint ventures and
associates. From Group headquarters, a small
team of executives exercise strategic control over
our decentralised operations.
As a result of planned geographic diversification
since the mid-1970s, the Group has expanded
by acquisition and organic growth into an
international manufacturer and supplier of building
materials.
234
CRH Annual Report and Form 20-F I 2016 Legal Proceedings
Research and Development
Seasonality
Group companies are parties to various legal
proceedings, including some in which claims
for damages have been asserted against the
companies. Having taken appropriate advice,
we believe that the aggregate outcome of such
proceedings will not have a material effect on the
Group’s financial condition, results of operations
or liquidity.
In 2015, the Swiss Competition Commission
imposed fines on the Association of Swiss
Wholesalers of the Sanitary Industry and on
major Swiss wholesalers including certain
Swiss CRH subsidiaries; the fine attributable
to these subsidiaries was CHF34 million. While
the Group remains of the view that the fine
is unjustified and it has appealed to the Swiss
Federal Appeals Court, a provision of €32 million
(2015: €32 million) is recorded in the Group’s
Consolidated Balance Sheet.
Research and development is not a significant
focus of the Group. CRH’s policy is to expense all
research and development costs as they occur.
Employees
The average number of employees for the past
three financial years is disclosed in note 5 to the
Consolidated Financial Statements on page 143.
No significant industrial disputes have occurred at
any of CRH’s factories or plants during the past
five years. The Group believes that relations with
its employees and labour unions are satisfactory.
Activity in the construction industry is
characterised by cyclicality and is dependent to
a considerable extent on the seasonal impact of
weather in the Group’s operating locations, with
activity in some markets reduced significantly in
winter due to inclement weather. First-half sales
accounted for 47% of full-year 2016 (2015: 40%),
while EBITDA (as defined)* for the first six months
of 2016 represented 36% of the full-year outturn
(2015: 25%).
Significant Changes
No significant changes have occurred since the
balance sheet date.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
235
CRH Annual Report and Form 20-F I 2016 n
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i
t
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o
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n
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e
d
o
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h
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236
236
CRH Annual Report and Form 20-F I 2016
Shareholder Information
Stock Exchange Listings
Ownership of Ordinary Shares
Dividends
Share Plans
American Depositary Shares
Taxation
Memorandum and Articles
of Association
General Information
238
239
240
241
242
243
245
247
Republic Cement’s integrated cement plant located in the town of Teresa, in the province of Rizal, on the outskirts
of Metropolitan Manila, is now ready to serve its growing market with the recent increase in its production capacity
following investment in another finish mill.
237
237
CRH Annual Report and Form 20-F I 2016 Stock Exchange Listings
CRH has a premium listing on the LSE and a
secondary listing on the ISE.
ADSs, each representing one Ordinary Share, are
listed on the NYSE. The ADSs are evidenced by
ADRs issued by The Bank of New York Mellon
(the ‘Depositary’) as Depositary under an
Amended and Restated Deposit Agreement dated
28 November 2006. The ticker symbol for the
ADSs on the NYSE is CRH.
The following table sets forth, for the periods
indicated, the reported high and low closing sales
prices for the Ordinary Shares in euro on the ISE
and in Pound Sterling on the LSE from 2012
through 17 February 2017. The table also sets
forth, for the same periods, the high and low
closing sale prices for the ADSs on the NYSE.
Pound Sterling per Ordinary Share euro per Ordinary Share US Dollars per ADS
Low
High
High
High
Low
Low
Calendar Year
2012
2013
2014
2015
2016
2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Recent Months
September 2016
October 2016
November 2016
December 2016
January 2017
February 2017 (through 17 February 2017)
Additional share price data
Share price at 31 December
Market capitalisation
£14.09
£16.17
£17.88
£19.80
£28.30
£18.52
£19.27
£19.69
£19.80
£19.86
£21.85
£26.07
£28.30
£26.07
£27.23
£28.12
£28.30
£28.95
£28.49
£10.52
£12.15
£12.66
£14.71
£16.37
£14.71
£17.45
£17.00
£17.11
£16.37
£19.40
£20.96
£25.51
£24.49
£25.81
£25.51
£25.75
£27.54
£27.16
€16.79
€19.30
€21.82
€28.09
€32.96
€25.62
€27.10
€28.09
€27.94
€26.37
€27.47
€30.90
€32.96
€30.90
€30.61
€32.50
€32.96
€34.03
€33.05
€12.99
€14.68
€15.86
€18.73
€21.00
€18.73
€24.01
€22.97
€23.09
€21.00
€23.32
€24.52
€28.65
€29.01
€29.11
€28.65
€30.65
€32.05
€31.78
$22.20
$26.26
$29.72
$30.95
$35.18
$28.47
$30.17
$30.95
$29.75
$28.47
$31.49
$34.04
$35.18
$34.04
$33.72
$35.18
$34.62
$36.59
$35.57
$16.35
$19.56
$20.47
$22.51
$23.72
$22.51
$26.18
$25.76
$26.34
$23.72
$26.54
$27.64
$31.60
$32.14
$32.30
$31.60
$32.54
$33.66
$34.07
LSE
£28.30
£23.6bn
2016
ISE
€32.96
€27.4bn
NYSE
$34.38
$28.6bn
LSE
£19.71
£16.2bn
2015
ISE
€26.70
€22.0bn
NYSE
$28.82
$23.7bn
For further information on CRH shares see note 29 to the Consolidated Financial Statements.
238
CRH Annual Report and Form 20-F I 2016
Ownership of Ordinary Shares
Shareholdings as at 31 December 2016
Geographic location (i)
United Kingdom
North America
Europe/Other
Retail
Ireland
Treasury (ii)
Number of shares
held ‘000s
% of total
271,839
249,205
155,877
131,103
24,675
83
832,782
32.64
29.93
18.72
15.74
2.96
0.01
100
(i)
This represents a best estimate of the number of shares controlled by fund managers resident in the
geographic regions indicated. Private shareholders are classified as retail above.
(ii) As detailed in note 29 to the Consolidated Financial Statements.
Holdings
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
Over 1,000,000
Number of
shareholders
% of
total
14,390
60.28
7,691
32.22
1,267
393
131
23,872
5.31
1.64
0.55
100
Number
of shares
held ‘000s
4,605
22,722
38,089
% of
total
0.55
2.73
4.57
124,743
14.98
642,623
77.17
832,782
100
The Company is not owned or controlled directly
or indirectly by any government or by any
corporation or by any other natural or legal person
severally or jointly. The major shareholders do not
have any special voting rights.
As at 28 February 2017, the Company had
received notification of certain interests in its
Ordinary Share capital that were equal to, or in
excess of, 3%. These interests are presented in
Corporate Governance – Substantial Holdings
on page 70.
Purchases of Equity Securities
by the Issuer and Affiliated
Persons
Other than the 81,457 and 86,464 shares
purchased on the open market by the Employee
Benefit Trust in March and August 2016
respectively (2015: 95,843 in December), there
were no purchases of equity securities by the
issuer and/or affiliated persons during the course
of 2016. Shares purchased by the Employee
Benefit Trust were purchased at a price of €24.38
(£18.88) and €29.80 (£25.46) respectively per
share (2015: €26.74 (£19.79)).
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.
239
CRH Annual Report and Form 20-F I 2016 Alternatively shareholders can complete a paper
dividend mandate form and submit it to the
Registrars. A copy of the form can be obtained by
logging onto the Registrar’s share portal and
following the instructions as set out under
Registrars on page 247. Tax vouchers will
continue to be sent to the shareholder’s registered
address under this arrangement.
Dividends are generally paid in euro. However, in
order to avoid costs to shareholders, dividends
are paid in Pound Sterling and US Dollars to
shareholders whose shares are not held in the
CREST system (see page 239) and whose
address, according to the Share Register, is in the
UK and the US respectively, unless they require
otherwise.
Dividends in respect of 7% ‘A’ Cumulative
Preference Shares are paid half-yearly on
5 April and 5 October.
Dividends in respect of 5% Cumulative Preference
Shares are paid half-yearly on 15 April and 15
October.
Shareholders have the option of taking their
dividend in the form of shares under the
Company’s Scrip Dividend Scheme.
The proposed final dividend has been translated
using the FRB Noon Buying Rate on 17 February
2017.
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 their bank account, by electronic
funds transfer, can do so by logging on to
www.capitashareportal.com, selecting CRH and
registering for the share portal (the ‘Share Portal’).
Shareholders should note that they will need to
have their Investor Code (found on their share
certificate), and follow the instructions online to
register.
euro cent per Ordinary Share
Translated into US cents per ADS
Interim
18.50
18.50
18.50
18.50
18.80
Final
44.00
44.00
44.00
44.00
46.20 (i)
Total
62.50
62.50
62.50
62.50
65.00
Interim
24.09
25.52
23.45
19.88
20.91
Final
57.18
60.54
49.46
50.25
49.04 (i)
Total
81.27
86.06
72.91
70.13
69.95
Dividends
The Company has paid dividends on its Ordinary
Shares in respect of each fiscal year since the
formation of the Group in 1970. Dividends are
paid to shareholders on the Register of Members
on the record date for the dividend. Record dates
are set by the LSE and the ISE. An interim
dividend is normally declared by the Board of
Directors in August of each year and is generally
paid in October. A final dividend is normally
recommended by the Board of Directors following
the end of the fiscal year to which it relates and,
if approved by the shareholders at an AGM, is
generally paid in May of that year.
The payment of future cash dividends will be
dependent upon future earnings, the financial
condition of the Group and other factors.
The below table sets forth the amounts of interim,
final and total dividends in euro cent per Ordinary
Share declared in respect of each fiscal year
indicated. Each amount represents the actual
dividend payable. Solely for the convenience of
the reader, these dividends have been translated
into US cents per ADS using the FRB Noon
Buying Rate on the date of payment. An interim
dividend of 18.8c was paid in respect of Ordinary
Shares on 4 November 2016. The final dividend, if
approved at the forthcoming AGM of shareholders
to be held on 27 April 2017, will be paid on 5 May
2017 to shareholders on the Register of Members
as at the close of business on 10 March 2017 and
will bring the full-year dividend for 2016 to 65.0c.
Years ended 31 December
2012
2013
2014
2015
2016
(i) Proposed
240
CRH Annual Report and Form 20-F I 2016 Share Plans
The Group operates share option schemes,
performance share plans, share participation
schemes and savings-related share option
schemes (the ‘Schemes’) for eligible employees in
all regions where the regulations permit the
operation of such schemes. A brief description of
the Schemes is outlined below. Shares issued
(whether by way of the allotment of new shares or
the reissue of Treasury Shares) in connection with
the Schemes rank pari passu in all respects with
the Ordinary and Income shares of the Company.
2000 Share Option Schemes
At the AGM held on 3 May 2000, shareholders
approved the adoption of Share Option Schemes
(the ‘2000 Share Option Schemes’) to replace
schemes which were approved in May 1990. The
2000 Share Option Schemes were replaced by
new schemes in May 2010 (see below).
Subject to the achievement of the EPS
performance criteria, options may be exercised
not later than ten years from the date of grant of
the option, and not earlier than the expiration of
three years from the date of grant. Benefits under
the schemes are not pensionable.
2010 Savings-related Share
Option Schemes
At the AGM held on 5 May 2010, shareholders
approved the adoption of savings-related share
option schemes (the ‘2010 Savings-related
Share Option Schemes’) to replace the 2000
Savings-related Share Option Schemes.
All employees of a participating subsidiary in the
Republic of Ireland or the UK, who have satisfied a
required qualifying period, are invited to participate
in this scheme.
Details of the performance criteria applicable to
options granted under the 2000 Share Option
Schemes are contained in the Directors’
Remuneration Report in table 29 on pages
90 to 91.
Eligible employees who wish to participate in
the scheme enter into a savings contract with a
nominated savings institution, for a three or a
five-year period, to save a maximum of €500 or
Stg£500, as appropriate, per month.
At the commencement of each contract period
employees are granted an option to acquire
Ordinary Shares in the Company at an option
price which is equal to the amount proposed to
be saved plus the bonus payable by the
nominated savings institution at the end of the
savings period. The price payable for each
Ordinary Share under an option will be not less
than the higher of par or 75% (or in the case of
the UK scheme 80%) of the market value of a
share on the day the invitation to apply for the
option is issued.
On completion of the savings contract, employees
may use the amount saved, together with the
bonus earned, to exercise the option.
At 17 February 2017, 563,998 Ordinary Shares
have been issued* pursuant to the 2010
Savings-related Share Option Schemes to date.
Options may be exercised not later than ten years
from the date of grant of the option, and not
earlier than the expiration of three years from the
date of grant. Benefits under the schemes are not
pensionable.
2010 Share Option Schemes
At the AGM held on 5 May 2010, shareholders
approved the adoption of new share option
schemes to replace the schemes which were
approved in May 2000 (see above). Following the
approval by shareholders of the 2014
Performance Share Plan (see below), no further
awards will be granted under the 2010 Share
Option Schemes. Consequently, the last award
under the 2010 Share Option Schemes was made
in 2013.
The 2010 Share Option Schemes are based on
one tier of options with a single vesting test. The
performance criteria for the 2010 Share Option
Schemes are EPS-based. Vesting only occurs
once an initial performance target has been
reached and, thereafter, is dependent on
performance. In considering the level of vesting
based on EPS performance, the Remuneration
Committee also considers the overall results of the
Group. Please see table 29 on pages 90 to 91 for
more details.
Share Participation Schemes
At the AGM on 13 May 1987, shareholders
approved the establishment of Share Participation
Schemes for the Company, its subsidiaries and
companies under its control. Directors and
employees of the companies who have at least
one year’s service may elect to participate in these
Share Participation Schemes.
At 17 February 2017, 7,729,412 Ordinary Shares
have been issued* pursuant to the Share
Participation Schemes.
2014 Performance Share Plan
The 2014 Performance Share Plan was approved
by shareholders at the AGM on 7 May 2014. It
replaces the 2010 Share Option Schemes and the
2006 Performance Share Plan. See the 2016
Directors’ Remuneration Report on page 81 for
more details.
Restricted Share Plan
In 2013, the Board approved the adoption of the
2013 Restricted Share Plan. Under the rules of the
2013 Restricted Share Plan, certain senior
executives (excluding executive Board Directors)
can receive conditional awards of shares. As
(i) executive Directors are excluded from awards
and (ii) no shares are allotted or reissued to satisfy
the awards, the listing rules of the LSE and ISE do
not require shareholder approval for the 2013
Restricted Share Plan.
During 2016, the Employee Benefit Trust
purchased 86,464 shares on behalf of CRH plc
in respect of awards under the 2013 Restricted
Share Plan.
* Whether by way of the allotment of new shares or the reissue of Treasury Shares.
241
CRH Annual Report and Form 20-F I 2016 American Depositary Shares
Fees and charges payable by a
holder of ADSs.
The Depositary collects fees for delivery and
surrender of ADSs directly from investors or from
intermediaries acting for them depositing shares or
surrendering ADSs for the purpose of withdrawal.
The Depositary collects fees for making
distributions to investors by deducting those
fees from the amounts distributed or by selling a
portion of distributable property to pay the fees.
The Depositary may generally refuse to provide
fee-attracting services until its fees for those
services are paid.
Persons depositing or withdrawing shares must pay:
For:
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
(A fee equivalent to the fee that would be payable if securities distributed
had been shares and the shares had been deposited for issuance of ADSs)
Applicable Registration or Transfer fees
Applicable Expenses of the Depositary
•
•
•
•
•
•
Issuance of ADSs, including issuances resulting from a
distribution of shares or rights or other property
Cancellation of ADSs for the purpose of withdrawal, including if
the deposit agreement terminates
Distribution of deposited securities by the Depositary to ADS
registered holders
Transfer and registration of shares on our share register to or from
the name of the Depositary or its agent when the holder deposits
or withdraws shares
Cable, telex and facsimile transmissions
Converting foreign currency to US Dollars
Applicable Taxes and other governmental charges the Depositary or
the custodian have to pay on any ADS or share underlying an ADS,
for example, stock transfer taxes, stamp duty or withholding taxes
•
As necessary
Fees and direct and indirect
payments made by the
Depositary to the Company
Category of expense reimbursed to the Company
Amount reimbursed for the year ended
31 December 2016
New York Stock Exchange listing fees
Investor relations expenses
Total
$59,500
$42,147
$101,647
The table below sets forth the types of expenses that the Depositary has paid to third parties and the
amounts reimbursed for the year ended 31 December 2016:
Category of expense waived or paid
directly to third parties
Amount reimbursed for the year ended
31 December 2016
Printing, distribution and administration costs paid
directly to third parties in connection with United States
shareholder communications and Annual General Meeting
related expenses in connection with the American
Depositary Share programme*
Total
$459
$459
* During 2016, $459 was paid by the Depositary to third parties, relating to services provided in 2016.
The Depositary has agreed to reimburse certain
Company expenses related to the Company’s
ADS programme and incurred by the Company
in connection with the ADS programme. For the
year ended 31 December 2016 the Depositary
reimbursed to the Company, or paid amounts
on its behalf to third parties, a total sum of
$102,106. This table sets forth the category of
expense that the Depositary has agreed to
reimburse to the Company and the amounts
reimbursed for the year ended
31 December 2016.
The Depositary has also agreed to waive fees for
standard costs associated with the administration
of the ADS programme and has paid certain
expenses directly to third parties on behalf of the
Company.
Under certain circumstances, including removal
of the Depositary or termination of the ADS
programme by the Company before November
2021, the Company is required to repay the
Depositary, up to a maximum of $250,000, the
amounts waived, reimbursed and/or expenses
paid by the Depositary to or on behalf of the
Company.
242
CRH Annual Report and Form 20-F I 2016 Taxation
The following summary outlines the material
aspects of US federal income and Republic of
Ireland tax law regarding the ownership and
disposition of Ordinary Shares or ADSs. Because
it is a summary, holders of Ordinary Shares or
ADSs are advised to consult their tax advisors
with respect to the tax consequences of their
ownership or disposition. This summary does not
take into account the specific circumstances of
any particular holders (such as tax-exempt
entities, certain insurance companies,
broker-dealers, traders in securities that elect to
mark-to-market, investors liable for alternative
minimum tax, investors that actually or
constructively own 10% or more of the stock of
the Company (by vote or value), investors that
hold Ordinary Shares or ADSs as part of a
straddle or a hedging or conversion transaction,
investors that hold Ordinary Shares or ADSs as
part of a wash sale for tax purposes or investors
whose functional currency is not the US Dollar),
some of which may be subject to special rules. In
addition, if a partnership holds the Ordinary
Shares or ADSs, the US federal income tax
treatment of a partner will generally depend on the
status of the partner and the tax treatment of the
partnership and may not be described fully below.
Holders of Ordinary Shares or ADSs are advised
to consult their tax advisors with respect to US
federal, state and local, Republic of Ireland and
other tax consequences of owning and disposing
of Ordinary Shares and ADSs in their particular
circumstances, and in particular whether they are
eligible for the benefits of the Income Tax Treaty
(as defined below) in respect of their investment in
the Ordinary Shares or ADSs.
The statements regarding US and Irish laws set
forth below are based, in part, on representations
of the Depositary and assume that each obligation
in the Deposit Agreement and any related
agreement will be performed in accordance with
their terms.
This section is based on the Internal Revenue
Code of 1986, as amended, its legislative history,
existing and proposed US Treasury regulations,
published rulings and court decisions, and the
laws of the Republic of Ireland all as currently in
effect, as well as the Convention between the
Government of the United States of America and
the Government of Ireland for the Avoidance of
Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and
Capital Gains (the ‘Income Tax Treaty’). These
laws are subject to change, possibly on a
retroactive basis.
In general, holders of ADSs will be treated as the
owners of Ordinary Shares represented thereby
for the purposes of the Income Tax Treaty and for
US federal income tax purposes. Exchanges of
Ordinary Shares for ADSs, and ADSs for Ordinary
Shares, generally will not be subject to US federal
income or Irish tax.
As used herein, the term “US holder” means a
beneficial owner of an Ordinary Share or ADS who
(i) is a US citizen or resident, a US corporation, an
estate whose income is subject to US federal
income tax regardless of its source, or a trust if a
US court can exercise primary supervision over
the trust’s administration and one or more US
persons are authorised to control all substantial
decisions of the trust, and (ii) is not a resident of,
or ordinarily resident in, the Republic of Ireland for
purposes of Irish taxes.
Taxation of Dividends Paid to
United States Holders
Under general Irish tax law, US holders are not
liable for Irish tax on dividends received from the
Company. On the payment of dividends, the
Company is obliged to withhold DWT. The
statutory rate at present is 20% of the dividend
payable. Dividends paid by the Company to a US
tax resident individual will be exempt from DWT,
provided the following conditions are met:
1. the individual (who must be the beneficial
owner) is resident for tax purposes in the US
(or any country with which Ireland has a
double tax treaty) and neither resident nor
ordinarily resident in Ireland; and
2. the individual signs a declaration to the
Company, which states that he/she is a US
tax resident individual at the time of making
the declaration and that he/she will notify the
Company in writing when he/she no longer
meets the condition in (1) above; or
3. the individual provides the Company with a
certificate of tax residency from the US tax
authorities
Dividends paid by the Company to a US tax
resident company (which must be the beneficial
owner) will be exempt from DWT, provided the
following conditions are met:
1. the recipient company is resident for tax
purposes in the US (or any country with which
Ireland has a double tax treaty) and not under
the control, either directly or indirectly, of Irish
resident persons; and
2. the recipient company is not tax resident in
Ireland; and
3. the recipient company provides a declaration
to the Company, which states that it is entitled
to an exemption from DWT, on the basis that it
meets the condition in (1) above at the time of
making the declaration, and that it will notify
the Company when it no longer meets the
condition in (1) above
For US federal income tax purposes, and subject
to the passive foreign investment company (PFIC)
rules discussed on page 244, US holders will
include in gross income the gross amount of any
dividend paid by the Company out of its current or
accumulated earnings and profits (as determined
for US federal income tax purposes) as ordinary
income when the dividend is actually or
constructively received by the US holder, in the
case of Ordinary Shares, or by the Depositary, in
the case of ADSs. Any Irish tax withheld from this
dividend payment must be included in this gross
amount even though the amount withheld is not in
fact received. Dividends paid to non-corporate US
holders that constitute qualified dividend income
will be taxed at the preferential rates applicable to
long-term capital gains provided certain holding
period requirements are met. Dividends the
Company pays with respect to Ordinary Shares or
ADSs generally will be qualified dividend income.
Dividends paid by CRH will not be eligible for the
dividends received deduction generally allowed to
US corporations in respect of dividends received
from other US corporations.
The amount of the dividend distribution includable
in income of a US holder will be the US Dollar
value of the euro payments made, determined at
the spot euro/US Dollar rate on the date such
dividend distribution is includable in the income of
the US holder, regardless of whether the payment
is in fact converted to US Dollars. Generally any
gain or loss resulting from currency exchange
fluctuations during the period from the date the
dividend payment is includable in income to the
date such payment is converted into US Dollars
will be treated as ordinary income or loss and will
not be eligible for the special tax rate applicable to
qualified dividend income. Such gain or loss will
generally be income or loss from sources within
the US for foreign tax credit limitation purposes.
243
CRH Annual Report and Form 20-F I 2016 applied to any tax attributable to such gain or
excess distribution for the prior years. With certain
exceptions, Ordinary Shares or ADSs will be
treated as stock in a PFIC if the company was a
PFIC at any time during the investor’s holding
period in the Ordinary Shares or ADSs. In addition,
dividends that you receive from the Company will
not constitute qualified dividend income to you if
the Company is deemed to be a PFIC either in the
taxable year of the distribution or the preceding
taxable year, but instead will be taxable at rates
applicable to ordinary income.
Stamp Duty
Section 90 Stamp Duties Consolidation Act 1999
exempts from Irish stamp duty transfers of ADSs
where the ADSs are dealt in and quoted on a
recognised stock exchange in the US and the
underlying deposited securities are dealt in and
quoted on a recognised stock exchange. The Irish
tax authorities regard NASDAQ and the NYSE as
recognised stock exchanges. Irish stamp duty will
be charged at the rate of 1% of the amount or
value of the consideration on any conveyance or
transfer on sale of Ordinary Shares (exemption
generally available in the case of single transfers
with a value of less than €1,000).
Taxation - continued
Distributions in excess of current and accumulated
earnings and profits, as determined for US federal
income tax purposes, will be treated as a
non-taxable return of capital to the extent of the
US holder’s basis in the Ordinary Shares or ADSs
and thereafter as capital gain. However, the
Company does not calculate earnings and profits
in accordance with US federal income tax
principles. Accordingly, US holders should expect
to generally treat distributions the Company
makes as dividends.
For foreign tax credit limitation purposes,
dividends the Company pays with respect to
Ordinary Shares or ADSs will be income from
sources outside the US, and will, depending on
your circumstances, be either “passive” or
“general” income for purposes of computing the
foreign tax credit allowable to a US holder.
Any Irish tax withheld from distributions will not be
eligible for a foreign tax credit to the extent an
exemption from the tax withheld is available to the
US holder.
Capital Gains Tax
A US holder will not be liable for Irish tax on gains
realised on the sale or other disposition of
Ordinary Shares or ADSs unless the Ordinary
Shares or ADSs are held in connection with a
trade or business carried on by such holder in the
Republic of Ireland through a branch or agency. A
US holder will be liable for US federal income tax
on such gains in the same manner as gains from a
sale or other disposition of any other shares in a
company.
Subject to the PFIC rules below, US holders who
sell or otherwise dispose of Ordinary Shares or
ADSs will recognise a capital gain or loss for US
federal income tax purposes equal to the
difference between the US Dollar value of the
amount realised on the sale or disposition and the
tax basis, determined in US Dollars, in the
Ordinary Shares or ADSs.
Capital gains of a non-corporate US holder are
generally taxed at a preferential rate where the
holder has a holding period greater than one year,
and the capital gain or loss will generally be US
source for foreign tax credit limitation purposes.
Capital Acquisitions Tax
(Estate/Gift Tax)
Although non-residents may hold Ordinary Shares,
the shares are deemed to be situated in the
Republic of Ireland, because the Company is
required to maintain its Share Register in the
Republic of Ireland for Irish Capital Gains Tax
purposes.
Accordingly, holders of Ordinary Shares may be
subject to Irish gift or inheritance tax,
notwithstanding that the parties involved are
domiciled and resident outside the Republic of
Ireland. Certain exemptions apply to gifts and
inheritances depending on the relationship
between the donor and donee.
Under the Ireland-US Estate Tax Treaty with
respect to taxes on the estates of deceased
persons, credit against US federal estate tax is
available in respect of any Irish inheritance tax
payable in respect of transfers of Ordinary Shares.
Additional United States
Federal Income Tax
Considerations
The Company believes that Ordinary Shares and
ADSs should not be treated as stock of a PFIC for
US federal income tax purposes, but this
conclusion is a factual determination that is made
annually and thus may be subject to change. If the
Company is treated as a PFIC and you are a US
holder that did not make a mark-to-market
election, you will be subject to special rules with
respect to any gain you realise on the sale or other
disposition of your Ordinary Shares or ADSs and
any excess distribution that the Company makes
to you. Generally, any such gain or excess
distribution will be allocated ratably over your
holding period for the Ordinary Shares or ADSs,
the amount allocated to the taxable year in which
you realised the gain or received the excess
distribution, or to prior years before the first year in
which we were a PFIC with respect to you, will be
taxed as ordinary income, the amount allocated to
each prior year will be generally taxed as ordinary
income at the highest tax rate in effect for each
other such year, and an interest charge will be
244
CRH Annual Report and Form 20-F I 2016 Memorandum and Articles of Association
The Company’s Memorandum of Association sets
out the objects and powers of the Company. The
Articles of Association detail the rights attaching to
each share class; the method by which the
Company’s shares can be purchased or reissued;
the provisions which apply to the holding of and
voting at general meetings; and the rules relating
to the Directors, including their appointment,
retirement, re-election, duties and powers.
A copy of the current Memorandum and Articles
of Association can be obtained from the Group’s
website, www.crh.com.
The following summarises certain provisions of
CRH’s Memorandum and Articles of Association
and applicable Irish law.
Objects and Purposes
CRH is incorporated under the name CRH public
limited company and is registered in Ireland with
registered number 12965. Clause 4 of CRH’s
Memorandum of Association provides that its
objects include the business of an investment
holding company. Clause 4 also sets out other
objects including the business of quarry masters
and proprietors and lessees and workers of
quarries, sand and gravel pits, mines and the like
generally; the business of road-makers and
contractors, building contractors, builders
merchants and providers and dealers in road
making and building materials, timber merchants;
and the carrying on of any other business
calculated to benefit CRH. The memorandum
grants CRH a range of corporate capabilities to
effect these objects.
Directors
The Directors manage the business and affairs of
CRH.
Directors who are in any way, whether directly or
indirectly, interested in contracts or other
arrangements with CRH must declare the nature
of their interest at a meeting of the Directors, and,
subject to certain exemptions, may not vote in
respect of any contract or arrangement or other
proposal whatsoever in which they have any
material interest other than by virtue of their
interest in shares or debentures in the Company.
However, in the absence of some other material
interest not indicated below, a Director is entitled
to vote and to be counted in a quorum for the
purpose of any vote relating to a resolution
concerning the following matters:
any special or extra services to the Company or
go or reside abroad in connection with the
conduct of any of the affairs of the Company.
The qualification of a Director is the holding alone
and not jointly with any other person of 1,000
Ordinary Shares in the capital of the Company.
Voting Rights
The Articles provide that, at shareholders’
meetings, holders of Ordinary Shares, either in
person or by proxy, are entitled on a show of
hands to one vote and on a poll to one vote per
share. No member is entitled to vote at any
general meeting unless all calls or other sums
immediately payable in respect of their shares in
the Company have been paid.
Laws, Decrees or other
Regulations
There are no restrictions under the Memorandum
and Articles of Association of the Company or
under Irish law that limit the right of non-Irish
residents or foreign owners freely to hold their
Ordinary Shares or to vote their Ordinary Shares.
Liquidation Rights/Return
of Capital
In the event of the Company being wound up, the
liquidator may, with the sanction of a
shareholders’ special resolution, divide among the
holders of the Ordinary Shares the whole or any
part of the net assets of the Company (after the
return of capital and payment of accrued
dividends on the preference shares) in cash or in
kind, and may set such values as he deems fair
upon any property to be so divided and determine
how such division will be carried out. The
liquidator may, with a like sanction, vest such
assets in trust as he thinks fit, but no shareholders
will be compelled to accept any shares or other
assets upon which there is any liability.
•
•
•
•
•
the giving of security or indemnity with
respect to money lent or obligations taken
by the Director at the request or for the
benefit of the Company;
the giving of security or indemnity to a third
party with respect to a debt or obligation
of the Company which the Director
has assumed responsibility for under
a guarantee, indemnity or the giving of
security;
any proposal under which the Director is
interested concerning the underwriting
of Company shares, debentures or other
securities;
any other proposal concerning any other
company in which the Director is interested,
directly or indirectly (whether as an officer,
shareholder or otherwise) provided that the
Director is not the holder of 1% or more
of the voting interest in the shares of such
company; and
proposals concerning the modification of
certain retirement benefits under which the
Director may benefit and which have been
approved or are subject to approval by the
Irish Revenue Commissioners
The Directors may exercise all the powers of the
Company to borrow money, except that such
general power is restricted to the aggregate
amount of principal borrowed less cash
balances of the Company and its subsidiaries
not exceeding an amount twice the aggregate
of (a) the share capital of the Company; and
(b) the amount standing to the credit of retained
income, foreign currency translation reserve and
other reserves, capital grants, deferred taxation
and non-controlling interest; less any repayable
government grants; less (c) the aggregate amount
of Treasury Shares and own shares held by the
Company.
The Company in general meeting from time to
time determines the fees payable to the Directors.
The Board may grant special remuneration to any
of its number who being called upon, shall render
245
CRH Annual Report and Form 20-F I 2016 Memorandum and Articles of Association - continued
Variation in Class Rights
Meetings
Preference Shares
Details of the 5% and 7% ‘A’ Cumulative
Preference Shares are disclosed in note 29 to the
Consolidated Financial Statements.
Use of Electronic
Communication
Whenever the Company, a Director, the Secretary,
a member or any officer or person is required or
permitted by the Articles of Association to give
information in writing, such information may be
given by electronic means or in electronic form,
whether as electronic communication or
otherwise, provided that the electronic means or
electronic form has been approved by the
Directors.
Subject to the provisions of the Companies Act
2014, the rights attached to any class of shares
may be varied with the consent in writing of the
holders of not less than three fourths in nominal
value of the issued shares of that class, or with
the sanction of a special resolution passed at a
separate general meeting of the holders of those
shares.
Issue of Shares
Subject to the provisions of the Companies Act
2014 and the Articles of Association, the issue of
shares is at the discretion of the Directors.
Dividends
Shareholders may by ordinary resolution declare
final dividends and the Directors may declare
interim dividends but no final dividend may be
declared in excess of the amount recommended
by the Directors and no dividend may be paid
otherwise than out of income available for that
purpose in accordance with the Companies Act
2014. There is provision to offer scrip dividends in
lieu of cash. The preference shares rank for fixed
rate dividends in priority to the Ordinary and
Income Shares for the time being of the Company.
Any dividend which has remained unclaimed for
12 years from the date of its declaration shall, if
the Directors so decide, be forfeited and cease to
remain owing by the Company.
Shareholder meetings may be convened by
majority vote of the Directors or requisitioned by
shareholders holding not less than 5% of the
voting rights of the Company. A quorum for a
general meeting of the Company is constituted by
five or more shareholders present in person and
entitled to vote. The passing of resolutions at a
meeting of the Company, other than special
resolutions, requires a simple majority. A special
resolution, in respect of which not less than 21
clear days’ notice in writing must be given,
requires the affirmative vote of at least 75% of the
votes cast.
Disclosure of Shareholders’
Interests
A shareholder may lose the right to vote by not
complying with any statutory notice or notice
pursuant to Article 14 of the Articles of Association
given by the Company requiring an indication in
writing of: (a) the capacity in which the shares are
held or any interest therein; (b) the persons who
have an interest in the shares and the nature of
their interest; or (c) whether any of the voting
rights carried by such shares are the subject of
any agreement or arrangement under which
another person is entitled to control the
shareholder’s exercise of these rights.
246
CRH Annual Report and Form 20-F I 2016 General Information
Electronic Communications
Electronic Proxy Voting
American Depositary Receipts
Shareholders may lodge a proxy form for the 2017
AGM electronically by accessing the Registrars’
website as described below.
The ADR programme is administered by the Bank
of New York Mellon and enquiries regarding ADRs
should be addressed to:
CREST members wishing to appoint a proxy
via CREST should refer to the CREST Manual
and the notes to the Notice of the AGM.
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
Shareholders with access to the internet
may check their accounts by logging onto
www.capitashareportal.com, selecting CRH plc
and registering for the share portal. Shareholders
should note that they will need to have their
Investor Code (found on their share certificate)
and follow the instructions online to register. 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.
Following the introduction of the 2007
Transparency Regulations, and in order to adopt a
more environmentally friendly and cost effective
approach, the Company provides the Annual
Report and Form 20-F to shareholders
electronically via the CRH website, www.crh.com,
and only sends a printed copy to those
shareholders who specifically request a copy.
Shareholders who choose to do so can receive
other shareholder communications, for example,
notices of general meetings and shareholder
circulars, electronically. However, shareholders will
continue to receive printed proxy forms, dividend
documentation and, if the Company deems it
appropriate, other documentation by post.
Shareholders can alter the method by which they
receive communications by contacting the
Registrars.
CRH Website
Information on or accessible through our website,
www.crh.com, other than the item identified as
the Annual Report and Form 20-F, does not form
part of and is not incorporated into the Company’s
Annual Report on Form 20-F as filed with the SEC
(the ‘Form 20-F’). References in this document to
other documents on the CRH website, such as
the CRH Sustainability Report, are included only
as an aid to their location and are not incorporated
by reference into the Form 20-F. The Group’s
website provides the full text of the Form 20-F,
which is filed annually with the SEC, interim
reports, trading updates, copies of presentations
to analysts and investors and circulars to
shareholders. News releases are made available,
in the News & Events section of the website,
immediately after release to the Stock Exchanges.
Financial Calendar
Announcement of final results for 2016
Ex-dividend date
Record date for dividend
Latest date for receipt of scrip forms
Annual General Meeting
1 March 2017
9 March 2017
10 March 2017
19 April 2017
27 April 2017
5 May 2017
Dividend payment date and first day of dealing in scrip dividend shares
Further updates to the calendar can be found on www.crh.com
BNY Mellon Shareowner Services,
P.O. Box 30170, College Station,
TX 77842-3170, U.S.A.
Telephone: Toll Free Number
US residents: 1-888-269-2377
International: +1 201-680-6825
E-mail: shrrelations@cpushareownerservices.com
Website:www.mybnymdr.com
Frequently Asked Questions
(FAQs)
The Group’s website contains answers to
questions frequently asked by shareholders,
including questions regarding shareholdings,
dividend payments, electronic communications
and shareholder rights. The FAQs can be
accessed in the Investors section of the website
under “Equity Investors”.
Exchange Controls
Certain aspects of CRH’s international monetary
operations outside the European Union were, prior
to 31 December 1992, subject to regulation by
the Central Bank of Ireland. These controls have
now ceased. There are currently no Irish foreign
exchange controls, or other statute or regulations
that restrict the export or import of capital, that
affect the remittance of dividends, other than
dividend withholding tax on the Ordinary Shares,
or that affect the conduct of the Company’s
operations.
Principal Accountant Fees
and Services
Details of auditors’ fees are set out in note 3 to the
Consolidated Financial Statements. For details on
the audit and non-audit services pre-approval
policy see Corporate Governance – External
Auditors on page 64.
Documents on Display
It is possible to read and copy documents referred
to in this Form 20-F, that have been filed with the
SEC at the SEC’s public reference room located at
100 F Street, NE, Washington, DC 20549. Please
call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms and
their copy charges. The SEC filings are also
available to the public from commercial document
retrieval services and, for most recent CRH
periodic filings only, at the Internet World Wide
Web site maintained by the SEC at www.sec.gov.
247
CRH Annual Report and Form 20-F I 2016 n
o
i
t
a
m
o
r
f
n
I
r
e
h
O
t
248
248
CRH Annual Report and Form 20-F I 2016
Other Information
Principal Subsidiary Undertakings
250
Principal Equity Accounted Investments 255
Exhibits
Cross Reference to Form 20-F
Requirements
Index
Signatures
256
257
258
260
Paulsen Group, part of CRH’s Europe Distribution Division, is a specialist distributor of sanitary, heating and plumbing
products in northern Germany. Paulsen operates a network of 55 locations which includes nine state-of-the-art
showrooms, such as this one, in the city of Kiel, Germany.
249
249
CRH Annual Report and Form 20-F I 2016 Principal Subsidiary Undertakings
as at 31 December 2016
Europe Heavyside
Incorporated
and operating in
Belgium
Douterloigne N.V.
Ergon N.V.
Marlux N.V.
Oeterbeton N.V.
Prefaco N.V.
Remacle S.A.
Schelfhout N.V.
Stradus Infra N.V.
Stradus Aqua N.V.
VVM N.V.
Northstone (NI) Limited (including Farrans
Construction Limited, Materials and Cubis divisions)
Britain &
Northern Ireland
Premier Cement Limited
Tarmac Aggregates Limited
Tarmac Building Products Limited
Tarmac Cement and Lime Limited
Denmark
Finland
Tarmac Trading Limited
Betongruppen RBR A/S
CRH Concrete A/S
Finnsementti Oy
Rudus Oy
Eqiom
L’industrielle du Béton S.A.*
France &
La Réunion
Marlux
Stradal
Germany
Hungary
Teralta Ciment Reunion*
Teralta Granulat Beton Reunion*
EHL AG
Opterra GmbH
CRH Magyarország Kft.
Ferrobeton Beton-és Vasbetonelem gyártó Zrt.
Irish Cement Limited
Clogrennane Lime Limited
Ireland
Roadstone Limited
Calduran Kalkzandsteen B.V.
Cementbouw B.V.
Netherlands
CRH Structural Concrete B.V.
Dycore B.V.
Struyk Verwo Groep B.V.
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
99.99
100
100
100
82.90
93.33
100
100
100
100
100
100
100
100
100
100
100
100
Concrete floor elements, pavers and blocks
Precast concrete and structural elements
Concrete paving and landscaping products
Precast concrete
Precast concrete structural elements
Precast concrete products
Precast concrete wall elements
Concrete paving and landscaping products
Concrete paving, sewerage and water treatment
Cement transport and trading, readymixed concrete, clinker grinding
Aggregates, readymixed concrete, mortar, coated macadam,
rooftiles, building and civil engineering contracting
Marketing and distribution of cement
Aggregates, asphalt, readymixed concrete and contracting
Aggregates, asphalt, cement, readymixed concrete and contracting
Building products
Cement and lime
Concrete paving manufacturer
Structural concrete products
Cement
Aggregates, readymixed concrete and concrete products
Aggregates, asphalt, cement and readymixed concrete
Structural concrete products
Concrete paving manufacturer
Utility and infrastructural concrete products
Cement
Aggregates, readymixed concrete
Concrete paving and landscape walling products
Cement
Cement and readymixed concrete
Precast concrete structural elements
Cement
Burnt and hydrated lime
Aggregates, readymixed concrete, mortar, coated macadam, concrete
blocks and pipes, asphalt, agricultural and chemical limestone and
contract surfacing
Cement transport and trading, readymixed concrete and aggregates
Sand-lime bricks and building elements
Precast concrete structural elements
Concrete flooring elements
Concrete paving products
250
CRH Annual Report and Form 20-F I 2016 Europe Heavyside
Incorporated
and operating in
Bosta Beton Sp. z o.o.
CRH Klinkier Sp. z o.o.
Drogomex Sp. z o.o.*
Grupa Ożarów S.A.
Grupa Silkaty Sp. z o.o.
Masfalt Sp. z o.o.*
Polbruk S.A.
Trzuskawica S.A.
CRH Agregate Betoane S.A.
CRH Ciment (Romania) S.A.
Elpreco S.A.
Ferrobeton Romania SRL
Poland
Romania
Serbia
CRH (Srbija) d.o.o.
Slovakia
Spain
CRH (Slovensko) a.s.
Premac, spol. s.r.o.
Beton Catalan S.A.
Cementos Lemona S.A.
Switzerland
JURA-Holding AG
Ukraine
LLC Cement*
PJSC Mykolaivcement
Podilsky Cement PJSC
Europe Lightside
Australia
Ancon Building Products Pty Ltd
Belgium
Plakabeton N.V.
Ancon Limited
Britain &
Northern Ireland
Anchor Bay Construction Products Limited*
CRH Fencing & Security Group (UK) Limited
Security Windows Shutters Limited
France
Plaka Group France S.A.S.
Alulux GmbH*
ERHARDT Markisenbau GmbH*
Germany
Halfen GmbH
Heras Deutschland GmbH
Tenbrink Rolladensysteme GmbH
Ireland
Cubis Industries Limited
Netherlands
B.V. Aluminium Verkoop Zuid
Heras B.V.
Sweden
Heras Stängsel AB
Switzerland
F.J. Aschwanden AG*
United States
Halfen USA Inc.
% held
Products and services
90.30
100
99.94
100
100
100
100
100
98.59
98.62
100
100
100
99.70
100
100
98.75
100
100
99.27
99.60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Readymixed concrete
Clay brick manufacturer
Asphalt and contract surfacing
Cement
Sand-lime bricks
Asphalt and contract surfacing
Readymixed concrete and concrete paving
Production of lime and lime products
Readymixed concrete
Cement
Architectural concrete products
Structural concrete products
Cement
Cement and readymixed concrete
Concrete paving and floor elements
Readymixed concrete
Cement
Cement, aggregates and readymixed concrete
Cement and clinker grinding
Cement
Cement
Construction accessories
Construction accessories
Construction accessories
Construction accessories
Security fencing
Physical security, industrial and garage doors, roofing systems
Construction accessories
Roller shutter and awning systems
Roller shutter and awning systems
Construction accessories
Security fencing and access control
Roller shutter and awning systems
Supplier of access chambers and ducting products
Roller shutter and awning systems
Security fencing and perimeter protection
Security fencing
Construction accessories
Construction accessories
251
CRH Annual Report and Form 20-F I 2016 Principal Subsidiary Undertakings - continued
as at 31 December 2016
Europe Distribution
Incorporated
and operating in
Austria
Quester Baustoffhandel GmbH
Creyns N.V.
Halschoor BVBA
Lambrechts N.V.
Sax Sanitair N.V.
Belgium
Schrauwen Sanitair en Verwarming N.V.
Van Den Broek BVBA
Van Neerbos België N.V.
CRH Ile-de-France Distribution*
France
CRH Normandie Distribution
Germany
CRH TP Distribution
Andreas Paulsen GmbH
BauKing AG
CRH Bouwmaten B.V.
Netherlands
BMN |Bouwmaterialen B.V.
Van Neerbos Bouwmarkten B.V.
BR Bauhandel AG (trading as BauBedarf and Richner)
Switzerland
Gétaz Romang Services SA (trading as Gétaz Romang and Miauton)
Regusci Reco S.A. (trading as Regusci and Reco)
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Builders merchants
Builders merchants
Builders merchants
Builders merchants
Sanitary ware, heating and plumbing
Sanitary ware, heating and plumbing
Builders merchants
DIY stores
Builders merchants
Builders merchants
Builders merchants
Sanitary ware, heating and plumbing
Builders merchants, DIY stores
Cash & Carry building materials
Builders merchants
DIY stores
Builders merchants, sanitary ware and ceramic tiles
Builders merchants
Builders merchants
252
CRH Annual Report and Form 20-F I 2016 Americas Materials
Incorporated
and operating in
Canada
CRH Canada Group Inc.
APAC Holdings, Inc. and Subsidiaries
Callanan Industries, Inc.
CPM Development Corporation
Dolomite Products Company, Inc.
Eugene Sand Construction, Inc.
Evans Construction Company
Michigan Paving and Materials Company
Mountain Enterprises, Inc.
Oldcastle Materials, Inc.
Oldcastle SW Group, Inc.
United States
OMG Midwest, Inc.
Pennsy Supply, Inc.
Pike Industries, Inc.
P.J. Keating Company
Preferred Materials Inc.
Staker & Parson Companies
The Shelly Company
Tilcon Connecticut, Inc.
Tilcon New York, Inc.
Trap Rock Industries, LLC*
West Virginia Paving, Inc.
CRH Brasil Participações S.A.
Brazil
CRH Cantagalo Indústria de Cimentos S.A.
CRH Sudeste Indústria de Cimentos S.A
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
Aggregates, asphalt, cement and readymixed concrete
and provider of construction services
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete, prestressed
concrete and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt and related construction activities
Aggregates, asphalt and related construction activities
Holding company
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt and related construction activities
Aggregates, asphalt, readymixed concrete, aggregates
distribution and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt and related construction activities
Aggregates, asphalt and related construction activities
Aggregates, asphalt and related construction activities
Holding company
Cement
Cement
253
CRH Annual Report and Form 20-F I 2016 Principal Subsidiary Undertakings - continued
as at 31 December 2016
Americas Products
Incorporated
and operating in
Oldcastle BuildingEnvelope™ Canada, Inc.
Canada
Oldcastle Building Products Canada, Inc. (trading as Techniseal,
Expocrete Concrete Products, Groupe Permacon, Oldcastle
Enclosure Solutions and Transpavé)
Americas Products & Distribution, Inc.
CRH America, Inc.
C.R. Laurence Co., Inc.
Meadow Burke, LLC
Oldcastle, Inc.
United States
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, Anchor
Block and Oldcastle Coastal)
Oldcastle APG West, Inc. (trading principally as Amcor Masonry
Products, Central Pre-Mix Concrete Products, Jewell Concrete,
Miller Rhino Materials, Sierra Building Products and Superlite
Block)
Oldcastle Architectural, Inc.
Oldcastle BuildingEnvelope™, Inc.
Oldcastle Building Products, Inc.
Oldcastle Lawn & Garden, Inc.
Oldcastle Precast, Inc.
Americas Distribution
United States
Asia
Philippines (i)
Allied Building Products Corp.
Oldcastle Distribution, Inc.
Republic Cement & Building Materials, Inc.
Luzon Continental Land Corporation
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
40
40
Custom fabricated and tempered
glass products and curtain wall
Specialty masonry, hardscape and patio
products, utility boxes and trench systems
Holding company
Holding company
Fabrication and distribution of custom
hardware products for the glass industry
Concrete accessories
Holding company
Specialty masonry, hardscape and patio products
Specialty masonry, hardscape and patio products
Specialty masonry and stone products,
hardscape and patio products
Holding company
Custom fabricated architectural glass
Holding company
Patio products, bagged stone, mulch and stone
Precast concrete products, concrete pipe,
prestressed plank and structural elements
Distribution of roofing, siding and related products,
wallboard, metal studs, acoustical tile and grid
Holding company
Cement
Cement and Building Materials
(i) 55% economic interest in the combined Philippines business (see note 31 to the Consolidated Financial Statements).
254
CRH Annual Report and Form 20-F I 2016 Principal Equity Accounted Investments
as at 31 December 2016
Europe Heavyside
Incorporated
and operating in
Ireland
Kemek Limited*
Europe Distribution
Samse S.A.*
France
Netherlands
Bouwmaterialenhandel de Schelde B.V.
Intergamma B.V.
Portugal
Modelo Distribuição de Materials de Construção S.A.*
Asia
China
India
Jilin Yatai Group Building Materials Investment Company Limited*
My Home Industries Limited
Americas Materials
United States
American Asphalt of West Virginia, LLC*
American Cement Company, LLC*
Buckeye Ready Mix, LLC*
Cadillac Asphalt, LLC*
HMA Concrete, LLC*
Piedmont Asphalt, LLC*
Southside Materials, LLC*
* Audited by firms other than EY
% held
50
21.13
50
47.83
50
26
50
50
50
45
50
50
50
50
Products and services
Commercial explosives
Builders merchants and DIY stores
DIY stores
DIY franchisor
DIY stores
Cement
Cement
Asphalt and related construction activities
Cement
Readymixed concrete
Asphalt
Readymixed concrete
Asphalt
Aggregates
Pursuant to Sections 314-316 of the Companies Act, 2014, a full list of subsidiaries, joint ventures and associated undertakings will be annexed to the
Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
255
CRH Annual Report and Form 20-F I 2016 Exhibits
The following documents are filed in the SEC’s EDGAR system, as part of this Annual Report on Form 20-F, and can be viewed on the SEC’s website.
1.
2.1
4.1
4.2
7.
8.
12.
13.
Memorandum and Articles of Association.*
Amended and Restated Deposit Agreement dated 28 November 2006, between CRH plc and The Bank of New York Mellon.**
Share and asset purchase agreement among Holcim Limited, Lafarge S.A., CRH International, CRH Fünfte Vermögensverwaltungs GmbH and
CRH plc.* †
Put and call options agreement among Lafarge Holdings (Philippines), Inc., Calumboyan Holdings, Inc., Round Royal, Inc., Southwestern Cement
Ventures, Inc., CRH International and CRH plc.* †
Computation of Ratios of Earnings to Fixed Charges.
Listing of principal subsidiary undertakings and equity accounted investments (included on pages 250 to 255 of this Annual Report and Form 20-F).
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Public Company Accounting Reform and Investor
Protection Act of 2002.
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor
Protection Act of 2002.***
15.1
Consent of Independent Registered Public Accounting Firm.
15.2
Governance Appendix.
15.3
2016 Directors’ Remuneration Policy.
99.1
Disclosure of Mine Safety and Health Administration (“MSHA”) Safety Data.
* Incorporated by reference to Annual Report on Form 20-F for the year ended 31 December 2015 that was filed by the Company on 16 March 2016.
** Incorporated by reference to Annual Report on Form 20-F for the year ended 31 December 2006 that was filed by the Company on 3 May 2007.
*** Furnished but not filed.
† Certain terms omitted pursuant to a request for confidential treatment.
The total amount of long-term debt of the Registrant and its subsidiaries authorised under any one instrument does not exceed 10% of the total assets of
CRH plc and its subsidiaries on a consolidated basis.
The Company agrees to furnish copies of any such instrument to the SEC upon request.
256
CRH Annual Report and Form 20-F I 2016 n/a
212
n/a
n/a
220
235
9, 23
216
216
97
59
72
62
235
Cross Reference to Form 20-F Requirements
This table has been provided as a cross reference from the information included in this Annual Report and Form 20-F to the requirements of this 20-F.
PART I
Item 1.
Item 2.
Item 3.
Identity of Directors, Senior Management and
Advisors
Offer Statistics and Expected Timetable
Key Information
A - Selected Financial Data
B - Capitalisation and Indebtedness
C - Reasons for the Offer and Use of Proceeds
D - Risk Factors
Item 4.
Information on the Company
Page
n/a
Item 10.
Additional Information
A - Share Capital
B - Memorandum and Articles of Association
C - Material Contracts
D - Exchange Controls
E - Taxation
F
- Dividends and Paying Agents
G - Statements by Experts
H - Documents on Display
I
- Subsidiary Information
A - History and Development of the Company 2, 3, 25, 27, 234
B - Business Overview
C - Organisational Structure
D - Property, Plants and Equipment
Item 4A.
Unresolved Staff Comments
Item 5.
Operating and Financial Review and Prospects
22, 28
234
217
None
Item 11.
Item 12.
Quantitative and Qualitative Disclosures about
Market Risk
Description of Securities Other than Equity
Securities
A - Debt Securities
A - Operating Results 8, 20, 213
B - Liquidity and Capital Resources 24, 25, 27, 216
B - Warrants and Rights
C - Other Securities
D - American Depositary Shares
PART II
Item 13.
Defaults, Dividend Arrearages and Delinquencies
Item 14.
Item 15.
Material Modifications to the Rights of Security
Holders and Use of Proceeds
Controls and Procedures
Item 16A.
Audit Committee Financial Expert
Item 16B. Code of Ethics
None
None
230
64
70, 231
Item 16C. Principal Accountant Fees and Services 64, 71, 247
92, 239
Item 16E.
Item 16D.
Item 16F.
Exemptions from the Listing Standards for Audit
Committees
Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosures
PART III
Item 17.
Item 18.
Item 19.
Financial Statements
Financial Statements
Exhibits
C - Research and Development, Patent and
Licences, etc.
D - Trend Information
E - Off-Balance Sheet Arrangements
F
- Tabular Disclosure of Contractual Obligations
G - Safe Harbor
Item 6.
Directors, Senior Management and Employees
A - Directors and Senior Management
B - Compensation
C - Board Practices
D - Employees
E - Share Ownership
Item 7.
Major Shareholders and Related Party Transactions
A - Major Shareholders
B - Related Party Transactions
C - Interests of Experts and Counsel
70, 239
194
n/a
Item 8.
Financial Information
A - Consolidated Statements and Other
118-203
Financial Information
- Legal Proceedings
- Dividends
B - Significant Changes
Item 9.
The Offer and Listing
A - Offer and Listing Details
B - Plan of Distribution
C - Markets
D - Selling Shareholders
E - Dilution
F
- Expenses of the Issue
235
240
235
238
n/a
238
n/a
n/a
n/a
Page
n/a
245
234
247
243
n/a
n/a
247
250
216
n/a
n/a
n/a
242
n/a
239
None
230
217
n/a
118-203
256
257
CRH Annual Report and Form 20-F I 2016
Auditor’s Remuneration (note 3)
64, 141, 208
CREST
Index
A
Accounting Policies
Acquisitions Committee
American Depositary Shares
Americas Distribution
Americas Materials
Americas Products
Annual General Meeting
Asia
Audit Committee
Auditors (Directors’ Report)
125
68
242
50
42
46
100
54
64
99
Auditor’s Report, Independent (Irish) 110
Auditor’s Report, Independent (US) 118
B
Balance Sheet
- Company
- Consolidated
Balanced Portfolio
Board Approval of Financial
Statements (note 33)
Board Committees
Board Effectiveness
Board of Directors
Board Responsibilities
Business and Non-Current Asset
Disposals (note 4)
204
122
4
194
68
67
59
68
142
Business Combinations (note 30)
131, 188
Cash Flow Statement, Consolidated
124
Chairman’s Introduction
Chief Executive’s Review
Communications with Shareholders
Company Secretary
Compliance and Ethics
Contractual Obligations
5
8
71
71
70
216
Corporate Governance Practices - NYSE 230
Corporate Governance Report
Cost Analysis (note 2)
D
Debt, Analysis of Net (note 20)
Deferred Income Tax
- expense (note 10)
- assets and liabilities (note 26)
Depreciation
- cost analysis (note 2)
140
- property, plant and equipment
129, 152
(note 13)
- 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
Dividend Payments (Shareholder
Information)
12
22
20
165
Dividend per Share
Dividends (note 11)
133, 169
15
E
Earnings per Ordinary Share (note 12) 151
Employees, Average Number (note 5) 143
Employment Costs (note 5)
End-use Exposure
Equity Accounted Investments’ Profit,
Share of (note 9)
Europe Distribution
Europe Heavyside
Europe Lightside
Exchange Rates
Exhibits
F
Finance Committee
Finance Costs and Finance Income
(note 8)
Finance Director’s Review
143
4
148
38
30
34
135
256
68
147
23
Financial Assets (note 15)
130, 157
Financial Calendar
Financial Statements, Consolidated
247
120
Foreign Currency Translations
107, 229
Frequently Asked Questions
247
G
Gender Diversity
Gobal Business
Going Concern
Governance
Greenhouse Gas Emissions
Guarantees (note 23; note 11 to
Company Balance Sheet )
H
Health & Safety
14, 69
2
98
56
14
170, 209
17
62
140
239
162
129, 148
129, 175
137
133, 171
143, 209
92
72
96
100
90
96, 240
1
134, 150
Business Model
Business Overview
Business Performance
C
Capital and Financial Risk
Management (note 21)
Cash and Cash Equivalents
(note 22)
Cash Flow, Operating
258
CRH Annual Report and Form 20-F I 2016
I
Income Statement, Consolidated
Income Tax Expense (note 10)
Intangible Assets (note 14)
Inventories (note 16)
Investor Relations Activities
K
Key Components of 2016
Performance
KPIs, Financial
KPIs, Non-Financial
120
148
132, 153
132, 158
71
23
15
14
L
Leases, Commitments Under 126, 132, 185
Operating and Finance (note 28)
Listing Rule 9.8.4C
Loans and Borrowings, Interest-
Bearing (note 23)
96
133, 169
M
Measuring Performance
Memorandum and Articles of
Association
N
Nomination and Corporate
Governance Committee
Non-controlling Interests (note 31)
Non-GAAP Performance Measures
14
71, 245
67
193
213
Notes on Consolidated Financial
Statements
Notes to the Company Balance Sheet 206
136
P
Pensions, Retirement Benefit
Obligations (note 27)
Principal Equity Accounted
Investments
Principal Risks and Uncertainties
Principal Subsidiary Undertakings
Profit on Disposals (note 4)
Property, Plant and Equipment
(note 13)
Property, Plants and Equipment
Provisions for Liabilities (note 25)
Proxy Voting, Electronic
R
Registrars
Regulatory Information
Related Party Transactions (note 32)
Remuneration Committee
Reserves
Retirement Benefit Obligations
(note 27)
Return on Net Assets (RONA)
Risk Governance
Risk Management and Internal
Control
Risk Factors
S
Sector Exposure and End-Use
- Americas Distribution
- Americas Materials
- Americas Products
- Asia
- Europe Distribution
- Europe Heavyside
- Europe Lightside
255
102
250
142
129, 152
217
128, 173
247
247
97
194
75
218
127, 176
15
18
98, 230
220
50
42
46
54
38
30
34
O
Operating Costs (note 2)
Operating Leases (note 28)
Operating Profit Disclosures (note 3)
Segment Information (note 1)
130, 136
Selected Financial Data
Senior Independent Director
Share-based Payments (note 7)
Share Capital and Reserves
(note 29)
140
132, 185
141
212
60
131, 144
134, 185
127, 176
Share Options
- Directors
- Employees (note 7)
Share Price Data
90
144
238
Shareholder Communication
71
Shareholdings as at 31 December 2016 70, 239
123
Statement of Changes in Equity,
Consolidated
Statement of Changes in Equity,
Company
Statement of Comprehensive
Income, Consolidated
Statement of Directors’
Responsibilities
Stock Exchange Listings
70, 238
100
205
121
Strategy
Substantial Holdings
Supplemental Guarantor Information
(note 34)
Sustainability
10
70
195
16
T
Total Shareholder Return (TSR)
Trade and Other Payables (note 18)
Trade and Other Receivables
(note 17)
12, 15
160
133, 158
V
Volumes, Annualised Production
- Americas Materials
- Americas Products
- Europe Heavyside
- Asia
W
Website
Working Capital and Provisions for
Liabilities, Movement in (note 19)
43
47
31
54
71, 247
161
259
CRH Annual Report and Form 20-F I 2016
Signatures
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorised the undersigned to sign this Annual Report on its behalf.
CRH public limited company
(Registrant)
By:
/s/ S. Murphy
Senan Murphy
Finance Director
Dated: 10 March 2017
260
CRH Annual Report and Form 20-F I 2016
CRH plc
Belgard Castle
Clondalkin
Dublin 22
D22 AV61
Ireland
Telephone: +353 1 404 1000
E-mail: mail@crh.com
Website: www.crh.com
Registered Office
42 Fitzwilliam Square
Dublin 2
D02 R279
Ireland
Telephone: +353 1 634 4340
Fax: +353 1 676 5013
E-mail: crh42@crh.com
CRH® is a registered trade mark
of CRH plc.
Cover image: Car park at Bispebjerg Hospital,
Copenhagen, Denmark, built from prefabricated
concrete supplied by CRH business, Betonelement.
Using 22,000m3 of slabs and panels, in addition
to 900 tonnes of beams, columns and stairs, the
Betonelement solution enabled project completion
three months ahead of schedule.