2017 Annual Report
and Form 20-F
Contents
1.
2.
3.
4.
5.
6.
Our business
CRH manufactures and distributes a diverse range of superior building materials and products for the built
environment. From foundations, to frame and roofing, to fitting out the interior space and improving the exterior
aesthetic, 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
Lightside Products
• Aggregates
• Cement
• Lime
• Asphalt
• Readymixed Concrete
• Precast Concrete
• Architectural Products
• Glass and Glazing Systems
• Construction Accessories
• Shutters and Awnings
• Perimeter Protection
• Network Access Products
Building Materials
Distribution
• General Builders Merchants
• Sanitary, Heating and
Plumbing Outlets
• DIY Stores
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 2017. A cross reference to
Form 20-F requirements is included on page 253.
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 200 to 205) do not form part of CRH’s
Annual Report on Form 20-F as filed with the Securities and
Exchange Commission (SEC).
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.
CRH is now the number one building materials company in Florida following its acquisition of Suwannee American Cement together with certain other materials assets, in 2017. This dry batch plant
at Prestige Concrete Products, Port Manatee (south of Tampa), is one of 18 readymixed concrete plants acquired as part of the deal. Florida is one of the fastest growing states in the United States.
OverviewOur Global Business in 2017 2Our Balanced Portfolio 4Chairman’s Introduction 5 Strategy ReviewChief Executive’s Review 8Strategy 10Business Model 12Measuring Performance 14Sustainability 16Risk Governance 20Business PerformanceBusiness Overview 24Finance Director’s Review 25Segmental Reviews 30GovernanceBoard of Directors 59Corporate Governance Report 62Directors’ Remuneration Report 72Directors’ Report 96Financial StatementsIndependent Auditor’s Reports 110Consolidated Financial Statements 120Accounting Policies 125Notes on Consolidated Financial Statements 135Additional InformationSupplementary 20-F Disclosures 206Shareholder Information 232Other Information 244Cross Reference to Form 20-F Requirements 253Index 254 CRH at a glance
CRH plc is a leading global diversified building materials
group, employing 85,000 people at over 3,600 operating
locations in 32 countries worldwide.
CRH is the second largest building materials company
worldwide and the largest in North America. The Group
has leadership positions in Europe, where it is the largest
heavyside materials business, as well as established
strategic positions in the emerging economic regions of
Asia and South America.
CRH is committed to improving the built environment
through the delivery of superior materials and products for
the construction and maintenance of infrastructure, housing
and commercial projects.
A Fortune 500 company, CRH is a constituent member of
the FTSE 100 index, the EURO STOXX 50 index, the ISEQ
20 and the Dow Jones Sustainability Index (DJSI) Europe.
CRH’s American Depositary Shares (ADSs) are listed on the
New York Stock Exchange (NYSE).
CRH’s market capitalisation at 31 December 2017 was
approximately €25 billion.
Our Vision
To be the leading building
materials business in the world
2017 Performance highlights
Continuing and
Discontinued Operations▲
Continuing Operations
€27.6 billion
Sales +2%
€25.2 billion
Sales +2%
€1.9 billion
Profit After Tax‡ +51%
2017
2016
€27.6bn
€27.1bn
2017
2016
€25.2bn
€24.8bn
2017
2016
€1.9bn
€1.3bn
€3.3 billion
EBITDA (as defined)* +6%
€3.1 billion
EBITDA (as defined)* +6%
226.8 cent
Earnings Per Share‡ +51%
2017
2016
€3.3bn
€3.1bn
2017
2016
€3.1bn
€3.0bn
2017
2016
226.8c
150.2c
€2.2 billion
Operating Profit +10%
€2.1 billion
Operating Profit +10%
68.0 cent
Dividend Per Share +5%
2017
2016
€2.2bn
€2.0bn
2017
2016
€2.1bn
€1.9bn
2017
2016
68.0c
65.0c
During 2017 the Americas Distribution segment was classified as discontinued operations under IFRS 5 Non-Current Assets Held for Sale and Discontinued
Operations (refer to note 2 to the Consolidated Financial Statements for further information). Accordingly, all references to income statement data are on a
continuing operations basis throughout the Overview, Strategy Review and Business Performance sections (pages 2 to 53), unless otherwise stated.
*
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 210 to 213.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
Visit our Investor Relations Centre
www.crh.com/investors
View Annual Report and Form 20-F Online
www.crh.com/reports/2017-annual-report-20-f.pdf
1
CRH Annual Report and Form 20-F I 2017
Our Global Business in 2017
CRH’s global footprint spans 32 countries and over 3,600
operating locations, serving customers across the entire
building materials spectrum, on five continents, worldwide.
Americas
★
• #1 Building Materials Company
in North America
• Organised in two segments:
- Heavyside Materials
- Heavyside & Lightside Products
• Operations in 46 states, seven Canadian
provinces and Southeast Brazil
• c. 41,200 employees
• c. 1,650 operating locations
Europe
• #1 in Heavyside Materials
• Organised in three segments:
- Heavyside Materials & Products
- Lightside Products
- Building Materials Distribution
• Operations in 24 countries
• c. 42,700 employees
• c. 1,950 operating locations
Sales
€12.3
bn
2016: €11.9 billion
Growth
+4%
49%
Global Sales
Sales
€12.5 bn
2016: €12.4 billion
Growth
+1%
49%
Global Sales
2
★ Our discontinued operations Americas Distribution employed approximately 3,900 people, across over 200 locations in 31 US states in 2017.
CRH Annual Report and Form 20-F I 2017 CRH Timeline
Founded in
Ireland in 1970
1970
1973
First acquisition
in mainland Europe
First acquisition in
the United States
1978
1995
First acquisitions in
Central and Eastern
Europe, Canada and
South America
First acquisition
in Asia
2007
2015
First acquisitions in
the Philippines, Brazil
and Serbia. Major
expansion in the UK,
Canada and
Eastern Europe
3
Asia
• #2 Cement producer in the Philippines
• Regional leadership positions in
China and India
• Lightside operations in Malaysia
and Australia, which report to
Europe Lightside Division
• c. 1,400 employees
• 12 operating locations
Sales
€0.4
bn
2016: €0.5 billion
Decline
-14%
2%
Global Sales
CRH Annual Report and Form 20-F I 2017 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
Americas
Europe
Asia
Heavyside
Materials
Lightside
Products
Distribution
62%
Americas
37%
Europe
1%
Asia
64%
Heavyside
Materials
26%
Lightside
Products
10%
Distribution
Percentages based on 2017 Operating Profit
Percentages based on 2017 Operating Profit
By End-use
New Build vs RMI
Residential
Non-Residential
Infrastructure
New Build
Repair, Maintenance
& Improvement (RMI)
40%
Residential
30%
Non-Residential
30%
Infrastructure
50%
New Build
50%
RMI
Percentages based on 2017 Group Sales
Percentages based on 2017 Group Sales
4
CRH Annual Report and Form 20-F I 2017 “
Financial discipline
continued to be
a key focus for
the Board
Nicky Hartery, Chairman ”
Chairman’s Introduction
Dear Shareholder,
I am pleased to report that 2017 was a year of
further growth for CRH, with improvements in
sales and profits in our Americas and Europe
Divisions.
2017 has also been another significant year
of development for CRH, with a total of 34
acquisition and investment transactions. In
line with the Group’s strategy of continually
pursuing value creation opportunities through
the efficient allocation and reallocation
of capital, in August we announced the
divestment of our Americas Distribution
business (Allied Building Products). The sale,
to a highly respected industry player, for
US$2.6 billion, was concluded in January
2018.
Subsequently, in late 2017, we acquired
Suwannee American Cement together with
certain other materials assets in Florida and
announced an agreement to purchase Ash
Grove Cement, a leading cement producer in
the United States (US), which is due to close
during 2018. Combined with the acquisition of
Fels, a leading European lime producer, these
transactions position the Group to pursue
further growth opportunities in key markets.
As you would expect, financial discipline
continued to be a key focus for the Board, with
year-end net debt/EBITDA (as defined)*♦ cover
remaining strong at 1.8x (2016: 1.7x). Further
details on the performance of the Group, its
strategy and business model are set out on
pages 6 to 53.
Based on the performance in 2017, the Board
is recommending a final dividend of 48.8c
per share, which, if approved at the 2018
Annual General Meeting (AGM), will result in an
increase in the full year dividend of 5% to
68.0c per share.
I look forward to the opportunity to update
you further on the Group’s performance at
the AGM, which will be held on Thursday,
26 April 2018. Notice of the AGM will be
posted to shareholders on 28 March 2018
and is available on the CRH website. Details
in relation to the business of the meeting are
set out in the Directors’ Report on pages 96
to 100.
The Governance section of the Report on
pages 59 to 71 provides biographical details
for each Director and details of the priorities
and focus of the Board. In addition, this section
contains important updates in relation to
board renewal and diversity, the tendering of
CRH’s external audit, the implementation of
CRH’s remuneration policy and shareholder
engagement.
In August, Maeve Carton retired from the
Board and CRH. Maeve joined CRH in 1988,
joined the Board in 2010 and held a number
of senior executive roles, including Finance
Director and Group Transformation Director.
Throughout her exemplary career with the
Group, she contributed to the development
and progress of CRH, and we wish her well
in her retirement.
In December 2017, Ernst Bärtschi resigned
from the Board. Ernst joined the Board in
October 2011. Over his two terms of three
years as a non-executive Director and, in
particular, as Chairman of the Audit Committee
since September 2013, Ernst committed
significant time and effort to CRH. I would like
to thank him for his exemplary service and I
wish him every success in the future.
I am delighted that Richie Boucher will join the
Board with effect from 1 March 2018. I believe
that he will be an excellent addition and I look
forward to working with him.
I would like to express my appreciation to my
non-executive colleagues on the Board for their
input and time commitment in 2017.
Finally, on behalf of the Board, I would like
to thank the CRH management team, led by
Albert Manifold, for the progress and significant
achievements made over the past year.
Nicky Hartery
Chairman
28 February 2018
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges,
profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
*
♦ Net debt/EBITDA (as defined)* from continuing and discontinued operations is a non-GAAP measure
as defined on page 212. The GAAP figures that are most directly comparable to the components of
net debt/EBITDA (as defined)* include: interest-bearing loans and borrowings (2017: €7,976 million; 2016:
€7,790 million) and profit after tax (2017: €1,919 million; 2016: €1,270 million). Details of how non-GAAP
measures are calculated are set out on pages 210 to 213.
5
CRH Annual Report and Form 20-F I 20175
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v
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R
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66
CRH Annual Report and Form 20-F I 2017
Strategy Review
Chief Executive’s Review
Strategy
Business Model
Measuring Performance
Sustainability
Risk Governance
8
10
12
14
16
20
Precast concrete vaults, used in solar energy production facilities, are designed and produced by Oldcastle Precast, part of CRH Americas
Products Division, in Chandler, Arizona. The vaults are used to speed up the installation of large scale utility solar power generating plants.
Renewable energy production is a leading end-use market for Oldcastle Precast’s Southwest region, with specialised products also being
shipped across the US.
77
CRH Annual Report and Form 20-F I 2017
Chief Executive’s Review†
At CRH, one of the key factors in our success,
is a proven track record in taking the right
step forward at the right time. For almost 50
years, the Group has carefully taken each of
the steps that have built CRH into the global
leader it is today. With a portfolio balanced
across geography, sector and end-use, our
businesses serve the needs of customers
right across the building materials spectrum.
In doing so, we create new opportunities
for growth, while preserving existing
shareholder value.
In 2017, we continued to focus on identifying,
acquiring and integrating businesses that
enhance and add value to our existing
portfolio. We also pursued opportunities to
reallocate capital from low growth to high
growth areas. This included our decision to
crystallise the value we had built up in our
Americas Distribution business, where we saw
limited prospects for further growth. Instead,
through our acquisition of Suwannee American
Cement together with certain other materials
assets in Florida, and our agreement to
purchase Ash Grove Cement, we are investing
in cement and aggregates businesses in the
South of the US and west of the Mississippi,
where there is a broader base, high population
growth, and thus, high demand.
We also maintained our emphasis on
continuous improvement across our
existing businesses through operational and
commercial excellence initiatives. With this
dual approach to developing our business, we
continued to make progress towards our goal
of making CRH the leading building materials
business in the world and a leading global
industrial company.
Performance Highlights
The Group delivered a strong performance
again in 2017 with revenues increasing 2% to
€25.2 billion, driven primarily by the continuing
strength of the economy in the US, along with
ongoing recovery in our key European markets.
Good profit growth continued, with the Group
generating record EBITDA (as defined)* of
€3.3 billion, from continuing and discontinued
operations, a 6% increase on the previous
year (2016: €3.1 billion), despite significant
currency and weather headwinds. Profit
after tax‡ increased 51% to €1.9 billion
(2016: €1.3 billion).
Our continued focus on performance initiatives,
along with improvements in pricing in certain
key markets, resulted in strong operational
leverage, which saw a further increase in
margins and returns. Return on Net Assets
(RONA)■ for the year improved from 9.7% in
2016 to 10.6%.
Despite significant acquisition activity,
net debt/EBITDA (as defined)* remained
strong at 1.8x (2016: 1.7x).
Earnings per share (EPS)‡ for the year
advanced 51% to 226.8c (2016: 150.2c)
and the Board has proposed to increase the
dividend to 68.0c per share, an increase of
5% compared with last year’s level of 65.0c
per share.
Operational Highlights
Overall trading conditions across all Divisions
remained broadly positive. In the Americas,
where total sales increased 4% to €12.3 billion,
a strong US economy with good momentum
in the residential and non-residential market
segments, underpinned increased revenues.
In our Americas Materials Division, revenues
increased 5% to €8.0 billion. Infrastructure
activity remained stable in our markets, while
our Americas Products Division benefited from
stable market fundamentals in southern and
western US states.
Despite the impact of significant weather
headwinds, the trading environment in the
US remained positive overall, with volume
growth achieved.
In Europe, where overall sales increased
1% to €12.5 billion, our Heavyside Materials
Division benefited from increased demand in
certain key markets as the European economy
continued to recover at a modest pace.
Challenges remained in Switzerland, while in
the United Kingdom (UK), despite uncertainty
around the impact of Brexit, the performance
of our materials business, Tarmac, remained
resilient.
Our European Lightside Division, which is
favourably exposed to export activity, benefited
from growth in key markets. In our European
Distribution Division, sales were broadly stable
overall and slightly ahead in certain
key markets.
In Asia, we continue to take a long-term
view in relation to the Philippines, where the
challenging pricing environment persisted
throughout 2017, despite robust underlying
market fundamentals. Our equity accounted
investments in China and India both benefited
from improvements in pricing during the year.
Overall, a very satisfactory year and while our
materials businesses currently account for
almost two-thirds of Group operating profit,
the strategic importance of our products
businesses continues to increase as market
demand for building materials evolves and
construction methods and technologies
change.
Sustainability and Safety
Sustainability and Corporate Social
Responsibility (CSR) are essential components
of our business and our ongoing commitment
to global sustainable development resulted in
the Group’s inclusion in the 2017 Dow Jones
Sustainability Index (DJSI) Europe. The index
represents the gold standard for corporate
sustainability and CRH’s inclusion comes as a
result of a lengthy evaluation based on strict
economic, environmental, social and long-term
shareholder related criteria.
We also maintained our uncompromising focus
on making our work environments safe for
our people. This approach has yielded very
positive outcomes in recent years. Despite
our progress however, in 2017 a number of
fatalities at our operations underlined the need
for us to do even more to ensure that all of our
people return home safe to their families at the
end of each working day.
Development
Having paused major acquisition activity
during 2016, to focus our efforts on effectively
integrating the businesses acquired during
the previous 12 months, CRH again returned
† 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.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
■ RONA from continuing and discontinued operations is a non-GAAP measure as defined on page 211. The GAAP figures that are most directly comparable to the components of RONA include:
8
Group operating profit (2017: €2,095 million; 2016: €1,908 million), total assets and total liabilities respectively (2017: €31,633 million and €16,656 million respectively; 2016: €31,594 million and
€17,151 million respectively). Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
CRH Annual Report and Form 20-F I 2017
In Europe, we expect that economic recovery
will gather momentum in most countries
in 2018. Against a backdrop of increasing
demand, particularly in the residential
sector, our focus is building upon pricing
improvements and efficiency gains achieved in
2017 and as a result, we expect our European
business to advance further in 2018.
In Asia, with expectations for continued
economic growth in the Philippines, we
anticipate some stabilisation of the cement
market in 2018, however results from our
business will remain challenged.
With a balanced portfolio of businesses, CRH
is well positioned to capitalise on ongoing
economic growth and our focus remains on
consolidating and building upon the gains
made in 2017. Against this backdrop, we
believe 2018 will be a year of further progress
for the Group.
Albert Manifold
Chief Executive
28 February 2018
to significant acquisition activity during 2017,
completing 34 deals. Total acquisition spend
for the period was €1.9 billion, while proceeds
from disposals amounted to €222 million.
In Europe, the acquisition of Fels, a leading
German lime and aggregates business,
is an excellent addition to our portfolio of
heavyside businesses and gives us a platform
for further growth in the highly attractive
European lime market. Lime is a resilient,
high-margin business with a customer base
extending beyond construction to applications
in agriculture and industry. Fels had been an
acquisition target for CRH for many years, and
our patience and persistence ensured that we
acquired it at the right time and at the right
multiple.
In the Americas we made a decision to
divest our Americas Distribution business,
Allied Building Products. The sale of Allied,
which closed in January 2018, generated
US$2.6 billion and provided the Group with
the opportunity to exit the business at a
high multiple and recycle the proceeds into
opportunities that offer better long-term
prospects for value creation and growth.
We reached an agreement with the Board
of Ash Grove Cement to acquire a significant
portfolio of cement and other materials assets.
This deal is due to close in 2018 and will
give CRH a leading market position in the
North American cement market for the
first time.
Like many of the businesses we have acquired
in the US over the years, Ash Grove is a family
run business with similar values to CRH. Our
Americas Materials business is currently the
biggest customer of Ash Grove and CRH’s
relationship with the company extends back
as far as the 1970s.
Ash Grove is the number two cement producer
west of the Mississippi. Its eight cement plants,
extensive readymixed concrete, aggregates
and associated logistics operations are
excellent assets, providing important exposure
to high-growth urban environments in states
such as Texas.
In Florida, another strategically important
state due to its strong population growth,
CRH became the largest supplier of building
materials following our acquisition of Suwannee
American Cement together with certain other
materials assets.
Our focus now is on integrating these
businesses. We will, however, continue to
identify value-adding bolt-on acquisitions that
we can quickly integrate into our business and
that offer good potential for synergies, vertical
integration and downstream opportunities.
This value-creating acquisition activity, along
with CRH’s strong operational performance
during 2017, ensures the Group is well
positioned for further growth in 2018.
Outlook
In the US, GDP growth in 2018 is expected to
be similar to 2017, supported by steady gains
in overall job creation, improving consumer
confidence and a slight easing of credit
terms. We anticipate continued growth in US
housing construction and that non-residential
construction will also improve. While the
infrastructure market remains broadly stable,
there is upside potential due to the growing
economy and increased state spending
on transportation improvements. With a
continuing favourable pricing environment, a
sustained emphasis on operating efficiency
and benefits from our recent development
activity, we expect progress to continue in
2018 in our Americas business.
“
We will continue to identify
value-adding bolt-on acquisitions
that we can quickly integrate into our
business and that offer good potential
for synergies, vertical integration
and downstream opportunities
“
Albert Manifold, Chief Executive
CRH Annual Report and Form 20-F I 20179 Strategy
Becoming the global leader in building materials
Our vision is to become the leading building materials business in the world and in doing
so, to maximise long-term value and deliver superior returns for all our stakeholders.
At CRH our operations benefit from a relentless
focus on continuous improvement, which
enables us to build better businesses and
generate enhanced returns for shareholders.
By maximising the value we extract from
our core businesses we ensure the Group is
positioned to take advantage of opportunities
that arise to strategically develop new
platforms for investment and growth.
In pursuing our growth agenda, we maintain
a constant focus on financial discipline and
strong cash generation. At the heart of this
approach is ensuring that above all we protect
the customer loyalty and trust we have built up
over decades of operation. To do so, we work
hard to better understand the unique needs
of customers in the local markets in which we
operate. This allows us to deliver in a better
way for our customers and provide them with
a locally tailored service underpinned by a level
of quality and excellence consistent with a
global company of our scale.
As we have grown in scale and diversified into
new product areas and geographic markets,
we have evolved and optimised our approach
accordingly. The scale of our operations allows
us to pursue economies across a range of
operational areas. In addition, a pivotal feature of
our approach to development is the identification
and integration of bolt-on acquisitions which
strengthen existing market positions and provide
opportunities for vertical integration.
To continue to successfully execute our
strategy in pursuit of our vision of becoming
the global leader in building materials, we
maintain an ongoing focus on identifying,
recruiting, developing and retaining individuals
with the potential to become the next
generation of leaders for our businesses.
Delivery of the Group’s strategy is centred on:
• Optimising performance and returns in
our business
• Enhancing our balanced portfolio of
diversified products and geographies
• Conducting our business in a responsible
and sustainable manner
We are guided by a number of strategic imperatives:
Continuous Improvement
Drive continuous improvement and value realisation through operational, commercial and financial excellence
Disciplined and Focused Growth
Maintain a constant focus on financial discipline and strong cash generation, which in turn supports our ability to
fund new value-creating acquisitions and returns for shareholders
Extracting the Benefits of our Scale
Leverage Group capabilities and scale to build leadership positions in local markets
Leadership Development
Attract, develop and empower the next generation of performance-orientated, innovative and entrepreneurial
leaders
10
CRH Annual Report and Form 20-F I 2017 Strategy in action
Continuous
Improvement
At CRH continuous improvement is part of our
cultural fabric. In 2017 we continued to focus on
value realisation through operational and commercial
excellence programmes across the Group.
Initiatives like the investment in Liquefied Petroleum
Gas (LPG) conversions at our Tarmac asphalt
plants in the UK have generated cost savings from
reduced energy spend, enhanced burner efficiencies
and improved service and maintenance costs.
The conversions have also helped to deliver on our
commitment to improve our environmental footprint
given the lower emissions of LPG compared to
liquid fuels.
Initiatives such as these together with an overall
investment of over €1.0 billion in capital expenditure
during the year, helped deliver a further
improvement in RONA to 10.6% ahead of
9.7% in 2016.
Disciplined and
Focused Growth
In 2017 we continued to take a disciplined approach
to creating value through the efficient allocation and
reallocation of capital.
Acquisition activity was financed through a
combination of cash, existing debt facilities and the
proceeds of disposals.
The addition of both Fels; a leading German lime
and aggregates business, and Suwannee American
Cement together with certain other materials assets
in Florida; will further enhance our global portfolio
and provide opportunities to create additional value
for our shareholders.
The divestment of our Americas Distribution
business will allow us to recycle capital into further
value-creating opportunities.
Vision
Global Leader in
Building Materials
Expanding our balanced portfolio of diversified products and geographies
Extracting the
Benefits of Scale
The scale of the Group enables the sharing of
experience, knowledge and ideas in areas such
as operations, finance, Health & Safety and
procurement.
In 2017, cost savings were targeted through global
procurement initiatives, which increasingly involve
CRH centralising certain expenditures at Group level.
An example of this is the sourcing of mobile plant
and equipment, which involved coordinating the
purchase of 212 loading shovels through our global
E-Sourcing platform. By providing transparency to
suppliers and approaching the market as a single
purchasing entity, we were able to deliver 4.3%
of savings on the purchases. This approach also
succeeded in delivering additional benefits through
improved warranties, assurances and efficiencies.
By leveraging the collective knowledge and scale of
our businesses we develop our people, encourage
collaboration and innovation and professionalise our
procurement practices.
Leadership
Development
At CRH we understand that people are the driving
force behind our business. Our people are key to
developing and maintaining the knowledge and
know-how that allows us to be more effective than our
competitors. In 2017 we continued to make progress
in our efforts to identify, attract and retain senior
top talent across the Group.
As part of this, we increased the number of leadership
development programmes undertaken. These were
attended by a range of high performers from a variety
of different parts of our business, ensuring that there is
a diverse, capable and expanding leadership pool of
talent across all levels within the organisation.
New initiatives introduced through the establishment
of a Global Talent Management function also support
the early identification of the next generation of
leaders. This includes mobility initiatives which enable
key talent to develop critical experiences.
These initiatives support our ambition to continue
to strengthen the CRH leadership bench with
performance driven, entrepreneurial leaders.
11
CRH Annual Report and Form 20-F I 2017 Conducting our business responsibly and sustainablyMaximising performance and returns in our business 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. Since 1970 CRH has delivered an industry-leading compound Total Shareholder Return
(TSR) of 15.8%. €100 invested in CRH shares in 1970, with dividends reinvested, would now be
worth €97,000.
CRH Business Model
CRH operates businesses across the
spectrum of the construction industry
in local markets around the world.
Every day we deliver solutions
to customers in the residential,
non-residential and infrastructure
market segments, in 32 countries
worldwide.
How we
Operate
We aim to optimise our return on the
resources we need, including:
• Financial capital
• Mineral reserves
• Products
• Our employees
• Business systems
•
Intellectual property
Business Model
in Action
Balanced Portfolio
We aim to maintain a balanced portfolio
by ensuring that our businesses are
diversified across a range of products,
geographies, and end-uses, thereby
mitigating the impact of cyclical changes
in demand in any one market.
In 2017 the Group’s sector exposure,
based on sales, was 40% residential,
30% non-residential and 30%
infrastructure. End-use, based on sales,
was balanced at 50% New Build and
50% RMI.
How we
Create Value
• We promote continuous
improvement and excellence
• We acquire new businesses with
potential to drive growth and returns
• We recycle capital to high-potential
areas to maximise returns
• We balance our portfolio of
businesses across products,
geography and end-use
• We maintain strong financial discipline
• We use ERM to mitigate risks
Making
Businesses Better
We continue to focus on Making
Businesses Better to ensure we deliver
growth and create value in a smarter,
more thoughtful and consistent
manner, and ultimately deliver stronger
returns on capital invested.
Our commitment to excellence,
continuous improvement, hard work,
and value creation lies at the heart of
CRH’s success.
Our relentless focus on operational and
commercial performance in all of our
businesses helped deliver RONA of
10.6% in 2017 (2016: 9.7%).
12
CRH Annual Report and Form 20-F I 2017 CRH’s business model is centered on making
its core businesses better through continuous
improvement so that they realise their full
potential and create further value.
This is in addition to a continuous focus on the
identification of new geographical platforms in
our core businesses along with complementary
product opportunities which support our
efforts to maintain a balanced portfolio and to
establish additional platforms from which to
deliver performance and growth.
By balancing our portfolio across geography,
product, sector and end-use, we seek to
ensure the Group is protected from the impact
of low demand at the bottom of any one
economic cycle.
The recycling of capital into areas offering
better returns and/or superior growth is deeply
embedded into our business model. In this
way, we constantly monitor how capital is
deployed to create maximum long-term value.
Our focus on maintaining strong financial
discipline and cash generation allows us to
further invest in our businesses and to take
advantage of opportunities for value-adding
investments as they arise.
The Value
Created
Value we created for stakeholders in
2017 included:
• €3.1 billion EBITDA (as defined)* ▲
• €1.9 billion Profit After Tax‡
• 226.8c EPS‡
• 10.6% RONA▲
• Employment for 85,000 people
• €474 million in taxes paid
• 1.8 million tonnes CO2 prevented
Proven
Acquisition Model
At CRH our business model focuses
on continuously strengthening our core
businesses and then identifying and
acquiring high-potential businesses that
complement and drive value.
In 2017, the addition of the leading
German lime producer Fels, provided
CRH with a new platform for growth
in Europe and attractive value creation
opportunities, while the acquisition of
Suwannee American Cement together
with certain other materials assets
in Florida, is expected to generate
significant synergies, vertical integration
and downstream opportunities.
Benefits
to CRH
• Strong financial position to support
further acquisition activity
•
Investment in core businesses to
drive continuous improvement and
maximise returns
• Reduced cost of capital
Dynamic Capital
Management
As part of our strategic pursuit of focused
growth, we take a disciplined approach
to capital allocation and reallocation to
ensure that capital is recycled at attractive
multiples which create value.
In 2017 we reached agreement to divest
our Americas Distribution business. Our
decision to divest was supported by the
absence of value accretive acquisition
opportunities and lack of visibility as
regards a route to market leadership.
In total, the Group recorded disposal
proceeds for 2017 of €222 million and
spent €1.9 billion on acquisitions and
investment transactions.
Benefits to
Stakeholders
• 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
Financial Strength
Our financial strength allows us to benefit
from a lower cost of capital. The Group
successfully completed a dual tranche
US$ bond in 2017. We raised a total of
US$1 billion in May through the issue of
a 10-year US$600 million bond with a
coupon of 3.4% and a 30-year
US$400 million bond with a coupon
of 4.4%. The Group also successfully
amended and extended its principal
Revolving Credit Facility in 2017. The
facility size, which was increased to
€3.5 billion (from €2.5 billion), included
a number of new Group banks and the
maturity date was extended to 2022 (from
2020). CRH is rated BBB+ by S&P, Baa1
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.
2016 comparatives for EBITDA (as defined)* and RONA were €3.0 billion and 9.7% respectively.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
13
CRH Annual Report and Form 20-F I 2017
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
2017 Performance
2018 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.
Greenhouse Gas
Emissions
A measure of addressing the
challenges of climate change.
Energy efficiency and carbon
reduction are twin imperatives
of CRH’s environmental
management strategy.
CO2 Emissions (million tonnes)
Scope 2
Scope 1
2
26
2
25
2
20
2017
2016
2015
Gender Diversity
A measure of an inclusive
workplace.
Recruitment, selection and
promotion decisions are
merit-based and in line with
the principles of
equal opportunity and
non-discrimination.
14
Zero-Accident Locations (%)
94%
92%
90%
Further enhancement of our
strong safety culture with
the ultimate aim of achieving
zero-accident status at every
location.
2017
2016
2015
Continued achievement of a high level of zero-accident locations, with a particular focus on
transport and machine safety, contractor safety and behavioural safety in 2017.
Links to other disclosures: CRH Sustainability Report 2017 will be published in 2018.
Scope 1 and 2 CO2 Emissions (kg/€ Revenue)
1.1
1.1
1.0
2017
2016
2015
Absolute CO2 emissions increased with increased activity, while CO2 emissions/€ Revenue
was similar to the previous year. For the portfolio of cement plants covered by CRH’s CO2
commitment (Scope 1), there was a continued reduction to 0.59 tonnes net CO2 per tonne
of cementitious product and 2017 emissions were 22% below the baseline year. CRH’s CO2
commitment resulted in the prevention of absolute emissions of 1.8 million tonnes of CO2 in
2017 alone.
Links to other disclosures: CRH Sustainability Report 2017 will be published in 2018.
Diversity (% Female)
18%
18%
17%
2017
2016
2015
The building materials industry traditionally attracts a higher than average proportion of
male employees. In 2017, 17% of all employees were female, 11% of operational staff
were female, while 41% of clerical and administrative staff were female. As at 28
February 2018, 30% of the Directors of CRH plc were female.
Links to other disclosures: Corporate Governance Report pages 62 to 71; CRH
Sustainability Report 2017 will be published in 2018.
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.
We continue to champion
diversity and inclusion at CRH.
The Group is in the process of
appointing diversity officers and
a number of initiatives focused
on improving diversity are
planned for 2018.
CRH Annual Report and Form 20-F I 2017 Financial KPIs
2017 Performance
2018 Focus
3-Year Annualised Total Shareholder Return (%)
24.9%
24.3%
17.2%
Delivering superior return on
invested capital and maintaining
strong cash flows to support
the continued development
of the Group and dividend
payment.
2017
2016
2015
CRH delivered a 3-year annualised TSR of 17.2% in 2017 and in euro terms has
delivered a compound annual TSR of 15.8%, since the formation of the Group in 1970.
Links to other disclosures: Directors’ Remuneration Report pages 72 to 95.
Return on Net Assets (%)
10.6%
9.7%
7.6%
Improved RONA through
effective margin management,
continued enhancement of
operating efficiencies and tight
working capital management.
Total Shareholder
Return (TSR)
A measure of shareholder
returns delivery through the
cycle.
TSR represents the total
accumulated value delivered
to shareholders (via gross
dividends reinvested and share
appreciation).
Return on Net
Assets (RONA)
A measure of pre-tax returns
through excellence in
operational performance.
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.
2017
2016
2015
RONA at 10.6% in 2017 is a reflection of improved profitability.
Segmental Reviews pages 30 to 53; Directors’ Remuneration Report pages
72 to 95 and Non-GAAP Performance Measures pages 210 to 213.
EBITDA (as defined)* Net Interest Cover (times)
10.9x
9.4x
7.0x
2017
2016
2015
EBITDA (as defined)* Net Interest Cover at 10.9x improved in 2017 due to
lower interest charges.
Links to other disclosures: Finance Director’s Review pages 25 to 29; Non-GAAP
Performance Measures pages 210 to 213.
Operating Cash
Flow (OCF)
A measure of cash flows
generated to fund organic and
acquisitive growth and dividend
returns to shareholders.
Operating Cash Flow (€ billion)
2.3
2.2
2.2
2017
2016
2015
Management continues to focus on strong cash generation with OCF at €2.2 billion for 2017.
Links to other disclosures: Finance Director’s Review pages 25 to 29.
*
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.
● EBITDA (as defined)* net interest cover is a non-GAAP measure as defined on page 212. The GAAP figures that are most directly comparable to the components of EBITDA (as defined)*
net interest cover include: profit after tax: €1,919 million (2016: €1,270 million), finance costs: €301 million (2016: €325 million) and finance income: €12 million (2016: €8 million).
Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
15
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+
Baa1
BBB
To continue to generate strong
operating cash flows in 2018.
Note 1: Operating cash flow
represents net cash inflow from
operating activities in the
Consolidated Statement of Cash
Flows page 124.
CRH Annual Report and Form 20-F I 2017
Sustainability
Achieving long-term success through sustainability
We believe that a strong sustainability performance is fundamental to achieving our vision
of becoming the leading building materials business in the world. As part of our strategy to
maximise long-term value and deliver superior returns, we embed sustainability principles
in all areas of our business. As we deliver on our strategy, we have a unique opportunity to
contribute to some of the key sustainable development challenges facing society.
Our approach
We take a risk-based, collaborative, strategic
approach to responding to global trends in the
areas of demographic change, urbanisation,
climate change, resource scarcity and
technological developments. Risks related to
sustainability, including climate-related risks,
are fully embedded in our Enterprise Risk
Management (ERM) Framework, described on
page 20, and details of sustainability risks are
given on page 104.
Sustainability principles are embedded in all
areas of our business strategy. At Group level,
we set policies in key sustainability areas and
the delivery of these is the responsibility of
management.
We have strong governance structures in
place. Policy implementation, effectiveness
and performance against our medium-term
objectives as well as long-term ambitions is
monitored and reviewed regularly by the Board
of Directors. Acquired businesses are rapidly
integrated into our processes.
Our annual Sustainability Report, which is
prepared in line with the Global Reporting
Initiative Standards, is published following
external independent assurance and is
available at www.crh.com.
We are committed to reporting on the
breadth of our sustainability performance in a
comprehensive and transparent manner and to
publishing performance indicators, ambitions
and outcomes in key sustainability areas.
Our view
With our extensive global presence and
industry leadership positions, we are very
aware of our role in the many communities in
which we operate. Our materials and products
are found throughout the built environment
– from critical infrastructure and iconic
commercial real estate buildings to family
homes in suburban neighbourhoods.
Our business activities provide materials that
are needed to fulfil the basic human need of
shelter, together with the infrastructure that is
needed for our societies to thrive. We believe
that meeting these needs in a manner that
respects sustainability principles will create
long-term value for all our stakeholders
including; investors, customers, employees,
partners, suppliers, neighbours and local
communities.
CRH Americas Products businesses Oldcastle Architectural, Oldcastle BuildingEnvelope® and Oldcastle Precast all provided products to the Mercedes-Benz Stadium in Atlanta,
Georgia. The stadium is the first professional stadium in North America to achieve Leadership in Energy and Environmental Design (LEED®) platinum certification.
16
CRH Annual Report and Form 20-F I 2017 member of indices including the FTSE4Good
Index, the STOXX® Global ESG Leaders
Indices and the Dow Jones Sustainability
Indices. In addition, many operating companies
have achieved accolades for excellence in
sustainability achievements.
Our sustainable value
creation model
As we work towards our vision of becoming
the leading building materials business in the
world, we are careful to ensure that this is not
simply about achieving size and scale. It is
about building resilient businesses that are the
best at what they do, that create sustainable
value for all stakeholders and that deliver
growth for our shareholders.
Our aim is to create sustainable value by
providing industry-leading products and
solutions to satisfy the construction needs
of our customers around the world. By
considering the full life cycle of our products
and innovating to drive more sustainable
outcomes in the built environment, we can
have a positive impact on wider society and
the environment while delivering profitable
growth.
As well as being beneficial for our business,
these ambitions also have an outward focus. In
collaboration with our stakeholders, our actions
also contribute to the delivery of key initiatives.
These include the World Business Council
for Sustainable Development’s Low Carbon
Technology Partnership Initiative, to which we
are a signatory, and the United Nations’ (UN)
Sustainable Development Goals.
CRH is ranked among sector leaders by
leading Environmental, Social and Governance
(ESG) rating agencies. We are a constituent
Our sustainable products in the built environment
4
2
1
5
8
7
6
3
11
10
9
1
2
3
4
5
Balcony connector products that
reduce thermal bridging, delivering
energy saving
Concrete Masonry Units with
recycled content
Concrete with low embodied energy
and carbon savings supported by life
cycle analysis and locally sourced
Skylights with energy saving from
solar heat gain
Glass with energy saving from solar
heat gain
6
Precast concrete flooring and walling
elements delivering energy savings
7
8
9
High performance glass and glazing
products that incorporate innovative
thermal break technologies for
superior thermal performance and
solar heat gain control while providing
essential daylight and ventilation for
the building
Vaulted ceilings with improved
thermal comfort, daylight and
ventilation, containing recycled
content and lower embodied energy
Lower carbon warm-mix asphalt
with high recycled content and
sustainable run-off design
10 Permeable paving connected to
sustainable urban drainage systems
11 Shutters and awning products,
reducing solar heat gain
17
CRH Annual Report and Form 20-F I 2017 Sustainability - continued
Progressing our key priority areas
Safe working practices and personal fall protection
reduce safety risks from working at heights for Gulf Coast
workers at this Port of Beaumont project in Texas, US.
The Oldcastle Precast StormCapture system, installed at
a community development in California, US, captures and
treats stormwater, reducing flooding and water quality risks.
The Kaltes Tal lime production plant, Germany, part of
the Fels acquisition in 2017, is being integrated into the
CRH Group.
Embedding a culture
of safety
Creating solutions for
our customers
Safety has long been a strategic priority for
CRH. There are multiple safety risks and
hazards associated with our industry, therefore,
our focus on safety is unrelenting. Our global
network of safety officers works closely with
our businesses in implementing policy and best
practice across all of our operations.
In 2017, 94% of active locations were accident
free. The accident frequency rate (number of
accidents per million manhours) continued
to decline and has reduced by an average
of 12% per annum over the last decade. We
are however deeply saddened to report that
there were three employee fatalities and seven
contractor fatalities at our operations during
2017. Of these fatalities, three were road
traffic accidents. We deeply regret this loss
of life and extend our sincere sympathies to
the families of each individual. All fatalities are
independently investigated and we continue to
implement our Fatality Elimination Plan, which
remains a cornerstone of our safety strategy
and which proved effective in eliminating
employee fatalities in both 2014 and 2015.
We also continue to invest in initiatives targeted
at promoting and maintaining a strong culture
of safety and in the past five years over
€160 million has been invested in this area.
Every day, in 32 countries worldwide, our
employees deliver solutions for customers
in the residential, non-residential and
infrastructure market segments. We work with
our customers to create products that deliver
specific sustainability and performance goals,
solve problems through innovative design,
products and processes, and create added
value for their businesses.
We maintain a strong focus on the
development of climate-friendly building
materials such as lower carbon cements,
warm-mix asphalt and recycled aggregates.
Not only does this help to reduce CO2
emissions, it also minimises construction
waste. Approximately 75% of our US asphalt
volume in 2017 was lower carbon warm-mix
asphalt, as defined by the National Asphalt
Pavement Association, and recycled asphalt
pavement and shingles provided a fifth of
raw materials requirements in this business.
In addition, products such as concrete and
building envelope products can also contribute
to a more energy-efficient, resilient and
sustainable built environment.
Collaborating
and engaging for
sustainability
Business is about people, and at CRH
we believe success is built on developing
transparent and trusting relationships with
all stakeholders. We take an inclusive,
collaborative and responsive approach to
developing stakeholder relationships, taking
care to maintain transparency throughout.
Our businesses are rooted in local communities
and it is our aim to create real and lasting
value for our stakeholders. Whether serving
our customers, participating in community
initiatives or partnering with each other, we
know that in today’s increasingly complex
world, we can achieve much more when we
collaborate with others.
In 2017 our Group companies hosted 1,100
stakeholder events in keeping with our policy
to engage in an open, honest and proactive
way. The outcomes from these stakeholder
engagement processes inform our continuous
improvement activities.
18
CRH Annual Report and Form 20-F I 2017 An employee at Tarmac, UK, which has an active
programme to increase the proportion of women in its
organisation.
Northstone works with external stakeholders to protect
wildlife, including this peacock butterfly (Aglais io),
photographed at Croaghan Quarry, Northern Ireland.
Colleagues from across CRH came together at our
annual Regulatory, Compliance and Ethics Conference
with a focus on ‘OneCRH Stronger Together’.
Developing and
empowering
our people
With operations in 32 countries, CRH is not
only multinational but also multicultural. Our
aim is to attract and develop a workforce
that is as diverse as our customers and our
communities, recognising that people are
critical to sustaining competitive advantage and
long-term success. We believe that employing
people from a broad range of ethnicities,
backgrounds, experiences and perspectives
creates an inclusive workforce, which provides
us with competitive advantage.
The building materials industry traditionally
attracts more male than female employees. In
2017, 17% of employees overall were female,
while of operational staff, 11% were female and
of clerical and administrative staff, 41% were
female. Within senior management, 9% were
female. As at 28 February 2018, 30% of the
Directors of CRH plc were female.
In 2017, we continued with our focused
diversity programmes, which are aimed
at increasing social diversity, not only of
employees, but also of the pool of talent
available to take up opportunities in CRH.
Going beyond this, we endeavour to ensure
equal access to rewarding career and personal
development experiences for employees
worldwide.
In 2017, we continued to place an emphasis
on training and skills learning, as well as
developing and recruiting talented leaders to
guide our evolving and growing Group.
Protecting the
environment
While potential impacts and risks vary across
our businesses, excellence in environmental
management, together with a proactive
approach to addressing the challenges and
opportunities of climate change, is fundamental
to our continuous improvement approach.
We work with stakeholders including
customers and the wider building materials
industry in promoting energy and resource
efficiency, emissions reductions and
biodiversity enhancements. For example, by
incorporating alternative raw materials into our
products we reduced our reliance on virgin raw
materials by 30 million tonnes in 2017.
Climate change is a key societal challenge and
we have governance structures that provide
oversight, assessment and management of
climate-related risks and opportunities. Our
climate strategy, which is integrated with
our business strategy, focuses on providing
building solutions that reduce emissions and
promote climate resilience, recognising the
long-term durability, resilience and carbon
benefits of concrete construction during the
lifetime of buildings. We also focus on reducing
our own emissions and hence the carbon
footprint of our products.
We are on-track to achieve our commitment
to reduce specific net CO2 emissions by 25%
on 1990 levels by 2020; 2017 emissions were
22% below 1990 levels. Key performance
indicators in this area are included on page 14.
Building a resilient and
sustainable business
We view integrity and good governance as
fundamental to long-term business success
and we are committed to meeting the highest
standards of business conduct and corporate
governance.
We implement our comprehensive Code
of Business Conduct (CoBC), which is
underpinned by our policies including
Anti-Fraud & Anti-Theft, Anti-Bribery and
our Competition Code. In addition, we have
implemented an Ethical Procurement Code
and Supplier Code of Conduct, with the aim
of extending our positive influence along the
value chain.
We endorse human and labour rights
and support the principles set out in the
articles of the UN’s Universal Declaration of
Human Rights and the International Labour
Organisation’s Core Labour Principles. We
continue to improve our processes and policies
in line with evolving best practices and ensure
our coverage incorporates all stakeholder
groups, paying special attention to vulnerable
groups such as children, women, minorities
and migrant groups.
We foster an open culture of ethical behaviour
driven from the top of the business,
communicating to employees what is expected
of them and equipping them with the tools
they need to ensure compliance. We embrace
a ‘speak-up’ culture where employees are
encouraged to inform us immediately of any
actual or suspected unethical behaviour or a
possible breach of conduct.
19
CRH Annual Report and Form 20-F I 2017 Risk Governance
Creating value through risk management
The goal of Enterprise Risk Management is to deliver increased shareholder value for CRH.
Effective governance, which is considered fundamental in CRH, is critical to success, supporting
management in executing strategy, managing costs, responding to risks, capturing opportunities,
achieving regulatory compliance and in promoting effective decision making.
Effectively managing risk is of vital importance
in CRH and the Group’s Enterprise Risk
Management (ERM) Framework is the basis
for identifying, assessing and managing
risks associated with business and strategic
corporate decisions. ERM in CRH is a
forward-looking, strategy-centric approach to
managing the risks inherent in decision making.
It recognises the linkage between business
objectives and strategies and their associated
risks and opportunities, and integrates
strategic decision making and risk taking in
order to preserve and/or enhance value and
reputation.
With our balanced portfolio, the decentralised
and geographically dispersed structure of the
Group provides some natural mitigation for
some of the significant risks and uncertainties
faced, such as industry cyclicality, political
and economic uncertainty and damage to
corporate reputation.
ERM Framework
The ERM Framework (the ‘Framework’)
addresses risks across the various strands of
CRH’s strategy, driving performance, executing
organic and acquisitive growth, protecting
information assets, monitoring compliance
with all laws and regulations (including an
unwavering commitment to Health & Safety),
sustainability, leadership development and
talent management and finance.
CRH Risk Management Framework
Our Three Lines of Defence
1
2
3
20
Operating Companies/
Businesses
Risk Owners
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.
CRH Divisions/Product Groups
Executive Management
Group Oversight
Functions
Review and Challenge
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.
Executive Management
Provides
Provides
independent
independent
assurance
assurance
Provides
independent
assurance
Group
Internal Audit
Independent Assurance
Third Line of Defence
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.
CRH Board/Audit
Committee
CRH Annual Report and Form 20-F I 2017 In formalising CRH’s approach to risk
management through ERM, a key requirement
has been to ensure that the Framework
continues to deliver value for management
by providing visibility on strategic priorities
and the linkages to the associated risks and
opportunities. The key risks identified are
reported periodically to the Audit Committee
and the Board, with the risks being subject
to common, standardised and repeatable
processes of assessment, evaluation,
management and monitoring.
In line with international best practice, CRH
follows a “three lines of defence” model for
risk management and internal control which is
highlighted on page 20.
Roles and Responsibilities
The Board is ultimately responsible for risk
management within CRH. The Board has
delegated responsibility for the monitoring
of the effectiveness of the Group’s risk
management and internal control systems
to the Audit Committee. Such systems are
designed to manage, rather than eliminate, the
risk of failure to achieve business objectives.
The Audit Committee in turn monitors the
activities of various functions including;
Group Regulatory, Compliance & Ethics,
Group IT Governance, Group Finance and
Group Risk. Group Internal Audit is charged
with independently assessing and reporting on
the risk management initiatives implemented
by these functions.
The Board and Audit Committee receive, on a
regular basis, reports from management on the
key strategic, operational, compliance, financial
and other risks to the business and the steps
being taken to manage/mitigate such risks.
They also consider whether the significant
risks faced by the Group are being identified,
evaluated and appropriately managed. The
Audit Committee reviews the list of principal
risks and uncertainties disclosed on
pages 102 to 107.
Our Risk Assessment Process
CRH’s risk management process operates to
ensure a comprehensive evaluation of risks is
performed and is the subject of continuous
improvement. CRH operates both a top-down
and bottom-up risk assessment to ensure that
risks presented to the Audit Committee and
Board are representative of the risks faced by
our business in strategy execution. 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:
• The nature and extent of risks facing
the Group, including emerging risks
• 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 the business and to
document these risks in a standardised
template. Risks are assessed in terms of their
financial and operational impact should they
occur and their likelihood of occurrence, using
a defined risk scoring methodology.
Risk velocity, the speed at which a risk impacts
the business, is an important constituent of this
evaluation.
Manage and Monitor
In line with our ongoing focus on continuous
process improvement, risks are assessed
by management on an inherent/gross basis
(prior to mitigation strategies) and a
residual/net basis (post mitigation strategies).
Where the gross risk score determines the risk
to be material, appropriate mitigation strategies
are implemented to bring the residual risk to a
level which is within risk appetite and tolerance
levels approved by the Board.
The Risk Appetite and Tolerance Framework
is a critical component of CRH’s risk
governance system through defining the key
risk parameters within which strategic decision
making takes place. The Board approves the
Risk Appetite and Tolerance Framework on
an annual basis in line with best corporate
governance practice.
Report
The Group level Risk Register, which is
compiled by the Group Risk function, highlights
those risks which may impede the realisation
of core strategic objectives. The risks are
fed up from our businesses through the
bottom-up assessment which forms the
basis of our Register. Additional strategic
and Group-related risks are added to ensure
the risks highlighted on pages 102 to 107 of
this report are reflective of the barriers to the
realisation of our business strategy. These risks
form the basis of Board and Audit Committee
communications and discussions.
Viability Statement
Our Viability Statement, which does not form
part of the Annual Report and Form 20-F,
as filed with the SEC, has been prepared
in accordance with the UK Corporate
Governance Code 2016 and is set out on page
98 of the Directors’ Report.
21
CRH Annual Report and Form 20-F I 2017 e
c
n
a
m
o
r
f
r
e
P
s
s
e
n
s
u
B
i
22
CRH Annual Report and Form 20-F I 2017
Business Performance
Business Overview
Finance Director’s Review
Segmental Reviews
24
25
30
CRH Americas Products company Oldcastle BuildingEnvelope®, supplied 21,000 square metres of glass to the McKinney & Olive Class A+ office
building in Dallas, Texas. Designed by world-renowned architect Cesar Pelli, this one-of-a-kind, 41,000 square metre, 20-storey structure is the
tallest building in Uptown Dallas and features a distinctive geometric design including a sheer glass facade.
23
CRH Annual Report and Form 20-F I 2017
Business Overview
The percentage of Group revenue and operating profit for each of the reporting segments for
2017, 2016 and 2015 is as follows:
Revenue
2017
2016(i),(ii)
2015(i),(ii)
27%
6%
16%
32%
17%
2%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
Americas
Materials
Americas
Products
Asia
28%
6%
16%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
22%
7%
19%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
31%
Americas
Materials
33%
Americas
Materials
17%
2%
Americas
Products
Asia
18%
1%
Americas
Products
Asia
Operating Profit
22%
5%
10%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
41%
Americas
Materials
2017
2016(i),(ii)
20%
5%
7%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
2015(i),(ii)
10%
8%
8%
Europe
Heavyside
Europe
Lightside
Europe
Distribution
43%
Americas
Materials
53%
Americas
Materials
21%
1%
Americas
Products
Asia
21%
Americas
Products
4%
Asia
22%
Americas
Products
(1%)
Asia
(i) During 2017 the Americas Distribution segment was classified as discontinued operations. Comparative amounts for 2016 and 2015 have been restated.
(ii) During 2017, our dedicated European landscaping businesses previously included within our Europe Heavyside segment were reorganised to form a new platform, Architectural
Products, within our Europe Lightside segment. Comparative segment amounts for 2016 and 2015 have been restated where necessary to reflect the new format for segmentation.
24
CRH Annual Report and Form 20-F I 2017 reduction in the Group’s net deferred tax
liabilities‡‡ due to changes in tax legislation
related to the enactment of the “Tax Cuts and
Jobs Act” in the US during 2017.
“ 2017 was a year
of growth for CRH,
with increases in
underlying demand
in the Americas and
continued positive
momentum in Europe
“
Senan Murphy, Finance Director
Finance Director’s Review 2017†
2017 was a year of growth for CRH with
increases in underlying demand in the
Americas, and continued positive momentum
in Europe, while very competitive market
conditions remained in Asia. With a constant
focus on performance in all our businesses,
coupled with our vertically integrated
business model for heavyside materials, good
operational leverage underpinned improved
margins and returns in our American and
European Divisions. The Group also maintained
a focus on cash generation and appropriate
deployment of capital as operating cash
flow for the year amounted to €2.2 billion
(2016: €2.3 billion) and year-end net debt
increased by €0.5 billion to €5.8 billion
(2016: €5.3 billion) despite acquisition spend
net of disposal proceeds increasing to
€1.7 billion (2016: net inflow €0.1 billion).
Key Components of 2017
Performance
The overall sales movement in the year was a
combination of the performance of each of the
individual segments as noted below.
Despite hurricane activity and record levels
of rainfall during the year, our Americas
operations benefited from the continuation
of stable market fundamentals in the US and
good underlying demand. An organic sales▲
increase of 3% in our Americas Materials
Division was supported by continued growth
in the residential and non-residential sectors,
while infrastructure remained relatively stable in
our markets. In Americas Products, sales were
broadly in line with prior year as good growth
along the West Coast and parts of the South
and Southeast were partly offset by more
modest trading in Canada and parts of the
Northern US.
In Europe, total sales were up 1% compared
with 2016 and organic sales were 2% ahead
due to continued recovery in key markets.
Europe Heavyside’s outturn was positive, with
a broad-based recovery in Ireland, France,
Poland and Finland more than offsetting more
subdued activity in Switzerland and the UK.
Europe Lightside experienced a year of further
progress as good performances in a number
of our main markets resulted in sales finishing
3% ahead of 2016. The backdrop at Europe
Distribution was stable as a strong contribution
from the Netherlands together with solid
demand in Belgium and Germany was partly
offset by continued challenges in Switzerland.
In Asia, economic growth and market
fundamentals remained robust in the
Philippines, with both residential and
non-residential demand stable, though
infrastructure investment was slower
than expected and pricing remained very
competitive. In India, a favourable economic
backdrop continued to drive demand, while
reduced construction activity in China had a
negative impact on volumes but this was more
than offset by stronger pricing.
Americas Distribution, which has been
classified as discontinued operations for
reporting purposes, benefited from good
underlying demand, particularly for
Exterior Products.
EBITDA (as defined)* from continuing
and discontinued operations for the year
amounted to €3.3 billion, a 6% increase on
2016 (2016: €3.1 billion) and reported profit
after tax‡ was €1.9 billion (2016: €1.3 billion).
The euro strengthened against most major
currencies during 2017, particularly towards
the end of the year resulting in the average
euro/Pound Sterling rate weakening from
0.8195 in 2016 to 0.8767 in 2017 and the
US Dollar weakening from an average 1.1069
in 2016 to 1.1297 in 2017. Overall currency
movements resulted in an unfavourable net
foreign currency translation impact on our
results as shown on the table on page 26.
The average and year-end 2017 exchange
rates of the major currencies impacting on
the Group are set out on page 134.
The underlying results for the year were
augmented by two one-off items; a past
service credit of €81 million due to changes in
a Swiss pension scheme and a €447 million
† 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 210 to 213.
▲
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
‡‡ Net deferred tax liabilities reduction of €447 million is stated on a continuing (€440 million) and discontinued
(€7 million) basis.
CRH Annual Report and Form 20-F I 201725
Finance Director’s Review 2017 - continued
Key Components of 2017 Performance
€ million
2016
Exchange effects
2016 at 2017 rates
Incremental impact in 2017 of:
- 2016/2017 acquisitions
- 2016/2017 divestments
- LH Assets integration costs (ii)
- Swiss pension past service credit (iii)
- Early bond redemption
- Organic
2017
% 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
24,789
(479)
24,310
596
(204)
-
-
-
518
2,980
(74)
2,906
60
(21)
45
81
-
75
25,220
3,146
2%
2%
6%
3%
1,908
(53)
1,855
14
(14)
45
81
-
114
2,095
10%
6%
53
(1)
52
-
(3)
-
-
-
7
56
(383)
6
(377)
(8)
1
15
-
(18)
38
(349)
42
1
43
-
-
-
-
-
22
65
1,620
(47)
1,573
6
(16)
60
81
(18)
181
1,867
15%
12%
(i) CRH’s share of after-tax profits of joint ventures and associated undertakings.
(ii) LH Assets integration costs of €45 million were incurred in 2016. In addition, following the related debt restructuring, finance costs reduced by €15 million
in 2017.
(iii) 2017 includes a one-off past service credit of €81 million due to changes in the Group’s pension scheme in Switzerland.
Liquidity and Capital Resources
- 2017 compared with 2016
The comments that follow refer to the major
components of the Group’s cash flows for
2017 and 2016 as shown in the Consolidated
Statement of Cash Flows on page 124.
Throughout 2017 the Group remained
focused on cash management. Operating
cash flow decreased marginally to €2.2 billion
(2016: €2.3 billion) with net working
capital outflow for the year of €209 million
(2016: €56 million inflow) reflecting trends in
overall sales, seasonal weather patterns and
the impact of acquisitions in the final quarter
of the year. Working capital of €1.8 billion
at year end (2016: €2.1 billion) represented
just 7.2% of sales (2016: 8.5%), continuing
the downward movement in this metric for
the Group since 2011. CRH believes that its
current working capital is sufficient for the
Group’s present requirements.
Focused spending on property, plant and
equipment in markets and businesses
with increased demand backdrop and
efficiency requirements, particularly in the
Americas, resulted in higher cash outflows of
€1.0 billion (2016: €853 million), with spend
in 2017 representing 104% of depreciation
(2016: 85%).
During the year the Group spent €1.9 billion on
34 transactions (2016: €213 million) which was
partly financed by divestment and disposal
proceeds of €222 million (net of cash disposed
and deferred proceeds) (2016: €283 million).
Cash dividend payments of €477 million
(2016: €360 million) reflect the Group’s
continued focus on returns to shareholders.
Net proceeds of €42 million from share
issues in 2017 were similar to last year
(2016: €52 million).
Year-end interest-bearing loans and
borrowings increased by €0.2 billion to
€8.0 billion (2016: €7.8 billion). At year end,
the stronger euro against both the US Dollar
and Pound Sterling had a positive translation
impact on net debt.
Reflecting all these movements, net debt
of €5.8 billion at 31 December 2017 was
€0.5 billion higher than year-end 2016
(€5.3 billion). The Group is in a good financial
position. It is well funded and net interest
cover (EBITDA (as defined)*/net debt related
interest costs) is 10.9x (2016: 9.4x). As set
out in note 24 to the Consolidated Financial
Statements the Group is significantly in excess
of the minimum requirements of its covenant
agreements.
In May 2017, the Group successfully issued a
total of US$1.0 billion dollar bonds comprised
of a US$0.6 billion 10-year bond at a coupon
rate of 3.4% and a US$0.4 billion 30-year bond
at a coupon rate of 4.4%. Concurrently, an
any-and-all tender offer was made for the
US$0.65 billion bond due in 2018, with the final
result being that US$0.36 billion were validly
tendered and accepted for purchase, which
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 2017 Development Review
2017
In 2017, the Group spent a total of
€1.9 billion (including deferred and contingent
consideration in respect of prior year
acquisitions) (2016: €0.2 billion) on 34
(2016: 24) acquisition/investment transactions.
On the divestment front, the Group realised
business and asset disposal proceeds of €0.2
billion (2016: €0.3 billion).
In the Americas, c. €1.3 billion was spent
on 21 acquisitions and one investment. Our
Materials Division completed the largest 2017
acquisition at the end of November with the
acquisition of Suwannee American Cement
together with certain other materials assets in
Florida. The total assets acquired consist of a
1 million tonne cement plant in North Central
Florida, 18 readymixed concrete plants, an
aggregates quarry, two block plants and nine
gunite facilities. The Materials Division also
completed 12 further bolt-on acquisitions,
including two in Canada, adding c. 2.5 billion
tonnes of additional aggregates reserves. The
Products Division completed eight acquisitions
and one investment in 2017 at a cost of
c. €0.2 billion.
In Europe, c. €0.6 billion was spent on ten
acquisitions and two investments. This is split
between eight acquisitions and one investment
in Europe Heavyside and two acquisitions and
one investment in Europe Distribution.
The largest acquisition in Europe in 2017
was that of the Fels lime business which was
acquired at the end of October 2017. Fels has
significant high-quality limestone reserves and
11 production locations; nine in Germany and
one in both the Czech Republic and Russia.
The majority of production capacity is situated
in the Harz region of East Germany, providing a
strong platform for future growth.
Business divestments during 2017, all
in Europe, generated net proceeds of
c. €85 million. The remaining clay products
businesses in Europe (Belgium, Germany,
Netherlands and Poland) were divested
and our Heavyside Division also sold its civil
prefabricated concrete businesses in the
Benelux, along with seven other small
non-core businesses. In addition to these
business divestments, the Group realised
proceeds of c. €137 million from the disposal
of surplus property, plant and equipment.
As previously announced, CRH completed the
sale of its Americas Distribution business on
2 January 2018 for proceeds of US$2.6 billion.
In addition, we reached an agreement with
the Board of Ash Grove Cement to acquire a
portfolio of cement and other materials assets.
The deal is due to close in 2018 and will give
CRH a market leadership position in the North
American cement market for the first time.
gave rise to a one-off charge of €18 million.
The early redemption of these Notes results
in overall net interest savings for the Group in
2017 and 2018.
The bond issues reflect CRH’s commitment
to prudent management of our debt and the
timing of the related maturities and also to
maintaining an investment grade credit rating.
The Group ended 2017 with total liquidity of
€5.7 billion comprising €2.1 billion of cash
and cash equivalents on hand and almost
€3.6 billion of undrawn committed facilities
(which are available until 2022). At year end
the cash balances were enough to meet
all maturing debt obligations for the next
3.6 years and the weighted average maturity
of the remaining term debt was 10.5 years.
CRH also has a US$1.5 billion US commercial
paper programme and a €1.5 billion Euro
commercial paper programme. The purpose
of these programmes is to provide short-term
liquidity at attractive terms. There was no
commercial paper outstanding under either of
these programmes at 31 December 2017.
Contractual obligations and Off-Balance Sheet
arrangements are disclosed on page 214 of
this Annual Report and Form 20-F.
Segmental Reviews
The sections on pages 30 to 53 outline
the scale of CRH’s continuing operations
in 2017, and provide a more detailed
review of performance in each of CRH’s
reporting segments. As set out in note 1
to the Consolidated Financial Statements
(page 135), following the agreement to sell
the Americas Distribution business, the Group
has six reporting segments. A review of the
discontinued operations, Americas Distribution,
is also included on pages 54 and 55 for
information.
27
CRH Annual Report and Form 20-F I 2017 Finance Director’s Review 2016
The overall trading backdrop in 2016 was
positive with good momentum in both the
Americas and Europe, albeit at different
paces, supported by a good performance
from the newly established Asia Division.
In addition, our businesses benefited from
favourable weather patterns in the Americas
at the start of 2016. With a relentless focus
on performance in all our businesses, coupled
with our vertically integrated business model for
heavyside materials, good operational leverage
underpinned improved margins and returns.
Following the two major acquisitions of the
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 2016 net debt
finished at €5.3 billion (2015: €6.6 billion).
Key Components of 2016
Performance
Overall sales of €24.8 billion for 2016 were 16%
ahead of 2015 reflecting the inclusion of full-year
2016 results from the two major acquisitions,
while organic sales from operations were
up 3%, reflecting positive momentum in the
Group’s major markets.
of the LH Assets and CRL. Organic sales from
operations increased 2% in 2016 benefiting
from favourable early weather with more
normalised demand patterns experienced in
the second half of 2016. Americas Materials
benefited from stable federal funding
underpinned by increased state spending and
improved non-residential activity. At Americas
Products, continued positive momentum in
construction markets was supported by low
interest rates and increasing employment. With
higher sales and good cost control, profits and
margins improved in our Americas segments.
Our former reporting segment Americas
Distribution (now disclosed as discontinued
operations) also benefited from the good
underlying demand.
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 2016
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.
An increase of 9% in the Americas’ sales
reflected the inclusion of the Canadian element
The Asia Division reflects results from the
Philippines operations acquired as part of the
Key Components of 2016 Performance
LH Assets in the second half of 2015 together
with CRH Asia’s divisional costs. Separately,
the Group’s investments in India and China
are equity accounted. In the Philippines,
construction demand was supported by
good economic growth, strong domestic
consumption and low inflation. In India, a
favourable economic backdrop continued to
drive construction demand but pricing remained
challenging while reduced construction activity
in China had a negative impact on volumes and
prices.
EBITDA (as defined)* for 2016 amounted
to €3.0 billion, a 43% increase on 2015
(€2.1 billion) and reported profit after tax‡ was
€1.3 billion (2015: €0.7 billion).
In 2016, the euro strengthened versus most
major currencies, particularly the Pound
Sterling which weakened from an average
0.7258 in 2015 to 0.8195 in 2016. The effect
of this was only partially offset by a small
change in the average euro/US Dollar rate,
which, despite strengthening towards the end
of 2016, averaged 1.1069 for 2016 and was
broadly similar to 2015 (1.1095). Overall
currency movements resulted in an unfavourable
net foreign currency translation impact on
our results as shown in the table below. The
average and year-end 2016 exchange rates of
the major currencies impacting on the Group
are set out on page 134.
€ 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
21,406
(338)
21,068
3,624
(506)
-
-
-
603
24,789
16%
3%
2,079
(29)
2,050
546
(29)
152
32
-
229
2,980
43%
11%
1,166
(11)
1,155
337
(13)
152
32
-
245
1,908
64%
21%
99
(7)
92
-
(51)
-
-
-
12
53
(389)
3
(386)
(33)
3
-
-
38
(5)
(383)
44
1
45
2
(14)
-
-
-
9
42
920
(14)
906
306
(75)
152
32
38
261
1,620
76%
29%
(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).
*
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.
‡ Profit after tax and earnings per share are as reported in the Consolidated Income Statement on page 120.
28
CRH Annual Report and Form 20-F I 2017
The two major 2015 acquisitions (the LH Assets
and CRL) account for the vast majority of the
acquisition impact included in the table on
page 28.
Liquidity and Capital Resources
– 2016 compared with 2015
The comments that follow refer to the major
components of the Group’s cash flows for
2016 and 2015 as shown in the Consolidated
Statement of Cash Flows on page 124.
Following the significant acquisition spend
in 2015, prudent financial management to
return debt metrics to normalised levels
was a key objective for 2016. The Group
focused on working capital in particular, and
operating cash flow increased to €2.3 billion
(2015: €2.2 billion). Year-end 2016 working
capital of €2.1 billion delivered a net positive
movement (inflow) for the year of €56 million
(2015: €585 million).
Strong control of spending on property,
plant and equipment concentrating on
markets and businesses with increased
demand backdrop and efficiency requirements
resulted in lower cash outflows of €853 million
(2015: €882 million).
During 2016 the Group spent €213 million
on 24 bolt-on transactions (2015: €7.4 billion)
which was financed by divestment and
disposal proceeds of €283 million (net of
cash disposed and deferred proceeds)
(2015: €889 million).
Cash dividend payments of €360 million
(2015: €383 million) reflect the Group’s
continued focus on returns to shareholders.
Net proceeds of €52 million from share
issues in 2016 was significantly less than 2015
proceeds of €1.6 billion due to the 74 million
shares placed in February of that year in
connection with the acquisition of LH Assets.
Year-end 2016 interest-bearing loans and
borrowings decreased by €1.4 billion to
€7.8 billion (2015: €9.2 billion). The
strengthening of the US Dollar versus the
euro at 31 December 2016 (versus 31
December 2015) had a negative impact on
net debt, but this was offset by the positive
translation impact of a weakening Pound
Sterling, such that the net translation impact
was broadly neutral.
Development Review
2016
In 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. 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 were completed. In total 93 million
tonnes of permitted reserves were added during
the year. The Products Division completed
five acquisitions, the largest of which was of
a Canadian exterior surfaces company which
was a strong addition to the core hardscape
business of our Architectural Products Group
(APG). Three precast bolt-on operations
were also acquired. Finally, a glass hardware
company was added in Perth, Australia.
On the divestment front, the Group completed
13 transactions and realised total business
and asset disposal proceeds of €283 million
in 2016. Business divestments during 2016
generated net proceeds of €123 million. In
Europe, our Distribution Division disposed of a
roofing products company in the Netherlands
while the Heavyside business divested of
operations in Poland, Switzerland and Romania.
Two small joint venture holdings in France and
Germany were also divested. The Americas
Materials Division disposed of select aggregates
and asphalt operations in Missouri, a small
waterproofing business in Michigan and a
readymixed concrete operation in Iowa and
Minnesota. Certain aggregates assets in Oregon
and Montana were also disposed in a cash
neutral swap. Finally, our Americas Products
Division disposed of a pavement products
operation, certain precast operations in Canada
and the assets of a burial vaults business.
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
two acquisitions; one in Australia and a concrete
paviour production plant in Poland, as well as a
small further investment in the Netherlands. Our
Heavyside operations set up a new joint venture
with its existing readymixed concrete operations
in St. Petersburg, Russia. Our Distribution
business acquired the plumbing operations of
a steel and tool merchant in 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.
A total of 30 divestments, together with asset
disposals generated proceeds of €1 billion in
2015; the largest of which was the sale of clay
and certain concrete products operations in the
UK and the Group’s clay business in the US for
€0.43 billion. Our Europe Heavyside business
completed 13 further divestments in 2015, the
largest of which was the disposal of CRH’s
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.
29
CRH Annual Report and Form 20-F I 2017 s
w
e
v
e
R
i
l
a
t
n
e
m
g
e
S
30
CRH Annual Report and Form 20-F I 2017
Segmental Reviews
Europe Heavyside
Europe Lightside
Europe Distribution
Americas Materials
Americas Products
Asia
Americas Distribution (Discontinued Operations)
32
36
40
44
48
52
54
Echelon Masonry, an Oldcastle Architectural company and part of CRH Americas Products Division, supplied the Mesa Community College
Performing Arts Center with an inner and outer shell of sound-reflective materials. A variety of masonry was chosen both for structure and finish,
with the exterior shell required to be resilient to Arizona’s extreme climate.
31
CRH Annual Report and Form 20-F I 2017
Europe Heavyside
With market leading positions and a wide geographic reach, CRH
is the number one Heavyside Materials business in Europe. Our
Europe Heavyside Division comprises aggregates, cement, lime,
concrete products operations and asphalt.
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,
lime, cement and readymixed concrete. Our
materials are used extensively in a wide range
of construction projects from major public
infrastructure, to commercial buildings and
residential structures. Customers typically range
from national, regional and local governments,
to building contractors and other construction
product and service providers. In addition to
an ability to leverage the benefits of scale and
best practice, our businesses are differentiated
in their markets by a proven track record
in understanding the unique needs of local
customers and successfully delivering for those
customers.
How we create value:
Our portfolio of businesses is managed through
a focus on value creation. We place great
emphasis on performance improvement initiatives
across our businesses and seek to create
value through optimisation of the asset base,
maximising Group synergies and leveraging
commercial and operational excellence.
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. With a strong pipeline of
opportunities across regions, 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:
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 approximately 24,400 people
at close to 1,150 locations.
Sales
Operating Profit
EBITDA (as defined)*
€ million
6,902
478
839
Net Assets**
6,291
% of Group
27%
22%
27%
30%
Geography***
5%
South East
10%
North East
10%
Switzerland
and Germany
25%
France, Benelux
and Denmark
35%
Tarmac (UK)
15%
UK Cement & Lime,
Ireland and Spain
Sector Exposure***
Residential
35%
Non-
Residential
30%
Infrastructure
35%
End-use***
New
70%
RMI
30%
Aggregates
Aggregates are naturally occurring mineral deposits
such as granite, limestone and sandstone. Our
Europe Heavyside businesses extract these
deposits and process them for sale. They are
supplied as a range of aggregates products
principally for use in general construction and civil
engineering projects and are also used in a variety
of additional CRH product lines including asphalt
and readymixed concrete. Recycled concrete also
increasingly features as an aggregate. For additional
information on the location and adequacy of all
of the Group’s mineral reserves, see the Mineral
Reserves section on pages 216 and 217.
Cement
Cement is a primary building material used in
the construction industry. It is used principally as
an agent to bind other materials together. Most
commonly it is mixed with sand, stone or other
aggregates and water to form concrete. The Europe
Heavyside Division has cement operations in 15
countries across Europe. Cement customers are
mainly concrete producers, including CRH concrete
operations and builders merchants supplying
construction contractors and others. While cement
may be imported from other countries, competition
comes mainly from other large cement producers
located within each country.
Lime
Europe Heavyside’s lime businesses produce
and supply a wide range of specialist products
for the agricultural, environmental, industrial and
construction sectors. CRH Lime has operations in
the UK, Ireland and Poland, with further operations
added during 2017 in Germany, Czech Republic
and Russia through the Fels acquisition. CRH is
now the second largest producer of lime in the
European market.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
**
Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Geography, sector exposure and end-use balance are based on sales.
32
CRH Annual Report and Form 20-F I 2017
Readymixed Concrete and Concrete Products
Belgium, Denmark, Estonia, Finland, France, Germany,
Hungary, Ireland, Netherlands, Poland, Romania, Slovakia,
Spain, Switzerland, Ukraine, United Kingdom
Products and Services Locations
Cement
Belgium, Finland, France, Germany,
Hungary, Ireland, Netherlands, Poland,
Romania, Serbia, Slovakia, Spain,
Switzerland, Ukraine, United Kingdom
Aggregates
Czech Republic, Estonia, Finland,
France, Germany, Ireland, Netherlands,
Poland, Romania, Serbia, Slovakia,
Spain, Switzerland, Ukraine,
United Kingdom
Asphalt
Ireland, Poland, Switzerland,
United Kingdom
Lime
Czech Republic, Germany, Ireland,
Poland, Russia, United Kingdom
Annualised Sales Volumes†: Cement: 27.1m tonnes; Aggregates: 118.7m tonnes (121.4m tonnes††); Asphalt: 10.7m tonnes; Readymixed Concrete: 16.5m m3; Lime: 4.1m tonnes;
Concrete Products: 5.8m 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, primarily
floor and wall elements, beams and vaults for
structural use. Principal raw materials include
cement, crushed stone and sand and gravel, all
of which are readily available locally. Readymixed
concrete and concrete products are sold to
both the public and private construction sectors.
Competition comes mainly from other readymixed
concrete and concrete products producers, as well
as from a variety of smaller manufacturers in local
economies.
Asphalt
Asphalt is the primary building material used in road
surfacing and other infrastructure including airport
runways. It consists of aggregates bound together
with bitumen, a by-product of the oil industry.
Europe Heavyside’s businesses in the UK (under
the Tarmac brand), Ireland, Poland and Switzerland
are involved in the production and supply of
asphalt. Customers are typically government and
local authorities involved in the construction and
maintenance of national road networks.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including the Group’s share of equity accounted investments.
33
CRH Annual Report and Form 20-F I 2017
Operations Review - Europe Heavyside
Prior Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
4,813
424
120
8.8%
2.5%
During 2017, our dedicated European
landscaping businesses previously included
within our Europe Heavyside segment were
reorganised to form a new platform, Architectural
Products, within our Europe Lightside segment.
Comparative segment amounts for 2016 and
2015 have been restated where necessary to
reflect the new format for segmentation.
Trends were mixed across our major European
markets in 2016 with more challenging conditions
in our businesses in Switzerland and Poland
contrasted by evident market recovery in Ireland,
Ukraine, Finland and the Netherlands.
Sales and operating profit were well ahead of
2015, reflecting stable results in our heritage
businesses and a full year’s trading and synergy
benefits of 2015 acquisitions. Organic profit in
the heritage businesses was assisted by volume
improvements and by ongoing cost saving and
efficiency measures which largely offset the impact
of a challenging pricing environment in some of
our key markets.
Tarmac (UK)
With a full year of trading included in the results,
volumes in our aggregates and readymixed
concrete business lines in the UK grew in
2016 against a stable construction backdrop.
Price increases were achieved in all products
except asphalt where the impact of lower prices
was compensated by lower input (bitumen)
costs. Despite uncertainty surrounding the UK
construction market in light of the decision of the
electorate in June to exit the European Union,
2016 was a year of progress for Tarmac.
UK Cement & Lime,
Ireland and Spain
Despite an overall backdrop of modest growth
in the cement market, the UK cement and lime
operations delivered strong volumes and prices
in all product categories. Together with the Irish
and Spanish cement businesses, the focus on
network optimisation resulted in the achievement
of synergies in 2016.
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
-224
-21
-3
+2,129
+299
+183
-111
-11
-7
-
+89
+89
Organic
+338
+1
+4
% change
44%
84%
222%
2016
6,945
781
386
11.2%
5.6%
LH integration costs of €32 million were incurred in 2016 (2015: €121 million)
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
In Ireland, while cement volumes grew strongly
(18%), domestic pricing in particular remained
under pressure due to overcapacity in the market.
against a backdrop of continued pricing pressure
arising from imports, and sales and operating
profit were below 2015.
With the benefit of improved cement pricing on
exports to the UK, stronger overall volumes and
improved domestic concrete and aggregates
prices, operating profit was ahead of 2015.
In Spain, the macroeconomic situation remained
weak but stable, with some regional recovery.
Prices remained under pressure, and despite
some improvement in cement and readymixed
concrete volumes, operating profit was lower than
2015.
France, Benelux and Denmark
Our French cement operations delivered growth
in volumes, primarily due to the inclusion of a full
year of ownership of the LH Assets, as well as the
positive impact of synergies with CRH heritage
businesses and a modest recovery in the cement
market, although prices remained under pressure
due to strong competition and overcapacity.
Continued challenging pricing also impacted our
precast business in France, although a focus on
cost reduction initiatives across the business more
than offset the underlying operating profit impact.
In the Netherlands, strong recovery of the
residential market and an increase in centrally
funded infrastructure projects delivered higher
volumes in our readymixed and structural concrete
operations. Readymixed concrete prices remained
under continued pressure. There was some
improvement in volumes and prices in Belgium.
In Denmark, with the benefit of a strong
non-residential market and a year of growth in
new residential construction, both volumes and
prices in our structural business improved. Sales
and operating profit were well ahead of 2015.
Switzerland and Germany
Stable economic and construction output
combined with an early start to the season in
Switzerland led to growth in readymixed concrete
volumes. However, cement prices declined
Strong cement volumes in our German operations
reflected a full year of ownership of the LH Assets
and growth in construction output, boosted mainly
by new build multi-family housing. However,
pricing remained under pressure in our cement
business.
North East
In Poland, weaker than expected activity adversely
affected pricing in our cement and readymixed
concrete products. Both sales and operating profit
were behind 2015 due to the significant decline in
cement volumes year-on-year.
In Finland, construction activity recovered strongly
in 2016, and all our product categories reported
growth in volumes; pricing remained under
pressure due to overcapacity in readymixed
concrete and increased cement imports. With the
benefit of continued cost and efficiency initiatives,
overall operating profit was ahead of 2015.
Despite the ongoing political conflict, construction
activity in Ukraine increased year-on-year and our
operations delivered strong trading, and operating
profit was ahead of 2015. Cement volumes were
up 11%, with prices also increasing in 2016.
Inflation stabilised somewhat, positively impacting
costs and operating profit.
South East
After a promising start, 2016 was a mixed year
in Romania, and mid-year construction activity
slowed as a result of lower government spending
and unfavourable weather conditions.
Strong growth in volumes and prices was
delivered by our cement operations in Serbia due
to ongoing large motorway projects in the south
of the country. Similar to 2015, overcapacity and
import pressure remained a threat in the region.
Although both Hungary and Slovakia experienced
a drop in infrastructure spend, growth was solid
in the residential market, with improved cement
volumes and prices.
34
*
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 2017
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
Analysis of change
2016
Exchange
Acquisitions
Divestments
‐203
‐26
-16
+95
+3
-3
‐110
‐17
‐14
6,945
781
386
11.2%
5.6%
LH Costs/
Pension Credit
-
+52
+52
Organic
2017
% change
+175
+46
+73
6,902
839
478
12.2%
6.9%
‐1%
7%
24%
Swiss pension plan past service credit of €20 million in 2017
LH integration costs of €32 million were incurred in 2016
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
The commentary below excludes the impact
of a past service credit due to pension plan
amendments in Switzerland.
Overall the 2017 outturn for Heavyside was
positive with market recovery in Ireland, France,
Poland and Finland in particular compensating for
more subdued trading conditions in Switzerland
and the UK. Although total sales declined,
modest year-on-year organic growth resulted in
improved operating profit, due to strong operating
leverage arising from volume growth in some
key countries, signs of progress on pricing and
a continued focus on performance improvement
initiatives and synergies.
Tarmac (UK)
Despite ongoing political and economic
uncertainty in the UK, organic sales in our Tarmac
business were ahead of 2016, with growth in
building products and contracting sales and
modest improvements in pricing for aggregates,
asphalt and readymixed concrete compensating
for a slight decline in overall volumes. Operating
profit was slightly behind the prior year, with
increased bitumen costs in the asphalt division
not fully compensated by increased sales and the
impact of performance improvement initiatives.
UK Cement & Lime,
Ireland and Spain
The UK cement and lime operations maintained
stable pricing against a backdrop of modest
economic growth, while improvements in
production processes and synergies, achieved
through network optimisation, further contributed
to operating profit growth.
In Ireland, both sales and operating profit were
ahead of 2016 mainly due to market recovery,
particularly in the residential and commercial
sectors, and the resulting growth in cement,
aggregates and readymixed concrete volumes;
positive trends on pricing across key products
also contributed to sales and operating profit.
The performance in Spain advanced on prior year,
with an improving macroeconomic situation.
France, Benelux and Denmark
Both sales and operating profits in France
benefited from increased volumes in all major
products, particularly cement and readymixed
concrete, driven by growth in the residential
sector, although pricing remained challenging.
Organic sales in the Benelux grew in 2017 with
a strong contribution from some larger projects
in the Belgian structural business and continued
growth in the Dutch residential sector; operating
profit declined, impacted by a one-off cost in the
structural business.
The 2017 outturn in Denmark was positive, with
sales and operating profit significantly ahead of
prior year supported by residential construction in
major cities, some large non-residential projects
and overall modest economic growth.
Switzerland and Germany
Both sales and organic operating profit were
behind prior year in Switzerland due to difficult
market conditions, with overall domestic cement
consumption also impacted by poor weather
early in the year. With continued pricing pressure
arising from imports, cement prices declined.
Lower cement volumes were experienced in our
German operations due to reduced demand in
key rural markets, a competitive landscape and
individual project delays; results were behind
2016. Our new lime acquisition, Fels, performed
in line with expectations.
North East
Improvement in the residential sector and an
overall positive economic backdrop resulted in
cement volumes in Finland finishing ahead of
2016 and, despite competition from importers
negatively affecting cement pricing, operating
profit increased.
Overall economic growth was experienced in
Poland, driven by private consumption and
supported by EU-financed public spending.
In addition, execution of previously delayed
infrastructure projects resulted in growth in
cement volumes and both sales and operating
profit were well ahead of 2016.
Both sales and operating profit in Ukraine
increased in 2017, with pricing improvement
mitigating the impact of inflation and
compensating for a decline in cement volumes,
which were affected by an increased level of
imports.
South East
Our operations in Hungary and Slovakia benefited
from solid economic and construction growth
in 2017. Improved sales and operating profits
were driven by higher cement and readymixed
concrete volumes, some positive signs on pricing
and an emphasis on performance improvement.
Although the mix of products and projects in
Serbia negatively affected cement pricing, overall
sales and operating profit were ahead of 2016,
supported by both ongoing infrastructure projects
and some residential growth.
Organic sales in Romania were slightly ahead of
2016, with poor weather in the early part of the
year and slower than anticipated commencement
of major infrastructure projects compensated by
stronger volumes in the last quarter. Operating
profits were ahead of 2016, positively impacted
by continued price improvement and by
performance improvement 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.
35
CRH Annual Report and Form 20-F I 2017
5%
South East
[10%]
North East
10%
Switzerland
and Germany
35%
Tarmac (UK)
15%
UK Cement &
Lime, Ireland
and Spain
15%
France, Benelux
and Denmark
Europe Lightside
CRH’s Europe Lightside Division is comprised of businesses
engaged in the manufacture and supply of high quality,
value-added, innovative products and solutions for customers
in construction markets globally.
What we do:
We operate a portfolio of value-added
product platforms across four business areas;
Construction Accessories, Shutters & Awnings,
Network Access Products & Perimeter
Protection and Architectural Products. Customer
understanding, product and process innovation
and the relative ease with which certain of our
products can be transported long distances, are
all key features of this Division’s business.
Our strategy is to build and grow scalable
businesses, balanced across a range of
products, geographies and end-use sectors,
through increasing the penetration of our
range of value-added products and creating
competitive advantage through strong customer
relationships, brand leadership and service.
Our development strategy is to deepen our
positions in existing business platforms, to
broaden our differentiated product portfolio
through selected new growth platforms that are
exposed to attractive global megatrends, and to
expand our presence in developing regions as
construction markets in those regions become
more sophisticated. This strategy complements
CRH’s aim to provide innovative solutions that
meet the longer-term opportunities presented by
economic development, changing demographics
and sustainability.
How we create value:
We realise commercial, operational and
procurement synergies across the wider CRH
network to benefit from scale and best practice.
We also leverage a range of flagship brands
at a regional, European and global level. There
is a continuous focus on product innovation
and development and we work with specialist
end-users, such as architects and engineers, to
develop design-solutions that are approved and
certified for individual target markets.
We draw upon an established record of
enabling mature and high-growth businesses
to expand their offerings and develop their
markets. Lightside has consistently achieved
attractive returns; this reflects active, balanced
management of our product range and our
geographic and business cycle exposures.
How we are structured:
CRH Europe Lightside is organised into four
business areas: Construction Accessories,
Shutters & Awnings, Network Access Products &
Perimeter Protection and Architectural Products.
The Division employs approximately 7,300
people at close to 180 locations.
Sales
Operating Profit
EBITDA (as defined)*
Net Assets**
€ million
1,440
% of Group
6%
102
143
798
5%
4%
4%
Products***
30%
Architectural
Products
35%
Construction
Accessories
20%
Network Access
Products & Perimeter
Protection
15%
Shutters &
Awnings
Sector Exposure***
Residential
40%
Non-
Residential
40%
Infrastructure
20%
End-use***
New
65%
RMI
35%
Construction Accessories
CRH’s Construction Accessories business is a
leading global manufacturer and supplier of
high-value innovative products and engineered
solutions for challenging construction projects.
Construction Accessories products include a
broad range of engineered anchoring, fixing and
connection solutions as well as lifting systems,
formwork accessories and general accessories
for construction applications.
From our manufacturing footprint located mostly
in Northern Europe, we export products across
the world, targeting large-scale projects through
project specification.
Construction Accessories products have been
specified and used in many high-profile projects
globally including skyscrapers, stadiums and
infrastructure developments.
Network Access Products
& Perimeter Protection
The Network Access Products operation designs
and manufactures technical systems for the
access and protection of buried and above
ground infrastructure, including composite access
chambers and covers, and meter boxes. Due to the
lightweight composite design, these products offer
a time-saving alternative to traditional methods of
construction.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
**
Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Products, sector exposure and end-use balance are based on sales.
36
CRH Annual Report and Form 20-F I 2017
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
Network Access Products
& Perimeter Protection
Australia, France, Germany, Ireland,
Netherlands, Sweden, United Kingdom
Architectural Products
Belgium, France, Germany,
Netherlands, Poland, Slovakia
Our Perimeter Protection business designs,
manufactures, installs and services fully integrated
outdoor security and detection solutions. This
includes permanent and temporary fencing,
entrance control and perimeter intrusion detection
systems (PIDs).
Architectural Products
CRH’s landscaping businesses in Europe (formerly
reported as part of Europe Heavyside) are now
structured as a new Architectural Products platform
within Europe Lightside.
The Architectural Products business is a leading
producer of exterior hardscape products across
six European countries. It produces pavers, kerbs,
retaining walls and slabs for both private and
public use. Products are sold to General Builders
Merchants and Do-It-Yourself (DIY) outlets as well
as to municipalities and large contractors.
Shutters & Awnings
The Shutters & Awnings business designs,
manufactures and supplies roller shutters,
awnings, terrace roofs and related products for
sun protection and outdoor living. Our companies
offer energy-efficient products and solutions which
contribute to a secure, sustainable and comfortable
environment. Shutters & Awnings is well positioned
to take advantage of a number of trends in the
European building industry such as higher RMI
spending, energy-efficiency, heightened security
concerns, outdoor living and the emergence of
“smart” homes.
37
CRH Annual Report and Form 20-F I 2017 Operations Review - Europe Lightside
Prior Year 2016
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2015
1,404
136
90
9.7%
6.4%
Analysis of change
Exchange
Acquisitions
Divestments
Organic
-32
-4
-9
+30
+2
+2
-50
-3
-1
+40
+6
+10
% change
-1%
1%
2%
2016
1,392
137
92
9.8%
6.6%
Architectural Products
Architectural Products sales progressed on 2015,
however overall operating profit was behind. At
our German business, sales were ahead of 2015
but operating profit was behind mainly as a result
of product mix. Our Polish business experienced
lower sales than 2015 whilst in Belgium and the
Netherlands sales were ahead of 2015 reflecting
improving economic conditions.
Shutters & Awnings
The Shutters & Awnings business recorded flat
like-for-like sales in 2016. The German Awnings
business saw an increase in sales through a
combination of benign weather patterns and
the introduction of a number of new products
to the market. The German Shutters business
delivered a solid performance in relatively flat
markets, increasing profitability as a result of the
impact of continued performance optimisation
measures. The UK business reported a stable
organic performance, which was further aided by
a complementary acquisition. Despite a decline in
like-for-like sales, the Netherlands showed solid
profit performance as margins increased in a
competitive environment.
Network Access Products
& Perimeter Protection
Network Access Products recorded an increase
in both organic sales and operating profit 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.
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.
During 2017, our dedicated European
landscaping businesses previously included
within our Europe Heavyside segment were
reorganised to form a new platform, Architectural
Products, within our Europe Lightside segment.
Comparative segment amounts for 2016 and
2015 have been restated where necessary to
reflect the new format for segmentation.
Although reported sales declined 1% driven by
exchange and divestments, 2016 was a year
of good underlying sales growth for Europe
Lightside due to strong performances in key
markets combined with some favourable
weather patterns in the first-half of 2016. Our
UK-based businesses continued to benefit
from strong activity levels, with a robust
residential construction sector in particular. In the
Netherlands and France, recovery in construction
activity was evident. Swiss market circumstances
were challenging, while Germany and Belgium
were ahead. Operating profit increased through
a combination of growing demand, continuous
product innovation, delivery on cost optimisation
initiatives and margin expansion activities.
Construction Accessories
Like-for-like sales in the Construction Accessories
platform grew by 5%, mainly resulting from
a combination of continued innovation in key
product lines and strong demand in some of our
main markets, such as the UK and Germany.
While competitive pressure in Switzerland
intensified, activity levels in our other European
markets and Australia picked up, resulting in
strong organic growth across the platform.
Our Southeast Asia business recorded a
solid performance despite challenging trading
conditions. Overall operating profit progressed
well, reflecting a combination of organic sales
growth and the positive impact arising from
internal efficiency improvement initiatives
undertaken in 2016.
38
*
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 2017
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2016
1,392
137
92
9.8%
6.6%
Europe Lightside experienced a year of further
growth as good performances in a number of
key markets resulted in total sales for the Division
finishing 3% ahead of 2016. Strong activity
levels in the UK market underpinned demand,
particularly for our Construction Accessories
and Network Access Products businesses.
Economic recovery continued in the Netherlands
and Poland resulting in good growth, while
activity in other key markets, including Belgium
and Germany, was stable. Against this
overall favourable market backdrop, a focus
on continued cost optimisation and margin
enhancement resulted in an 11% operating profit
increase for the Division.
Construction Accessories
The year was one of progress for the
Construction Accessories platform with strong
organic sales due to robust activity levels across
core markets and further product innovation.
Operating profit also expanded, despite
restructuring charges taken as part of the
platform’s optimisation of its production network.
Our UK-based engineered accessories business
experienced strong demand for its products,
supported by good activity levels and both sales
and operating profit were ahead of prior year.
In Germany, the business also advanced, as
positive trading conditions resulted in increased
demand. For our Swiss business, reasonable
activity levels saw sales finish ahead of prior year.
Activities in the Netherlands and France benefited
from ongoing economic recovery while sales in
our Belgian business advanced in competitive
markets. Our export markets proved challenging
as project delays impacted performance, though
our Australian business saw organic growth due
to good demand for its products.
Analysis of change
Exchange
Acquisitions
Organic
‐15
‐2
‐2
+7
+1
+1
+56
+7
+11
% change
3%
4%
11%
2017
1,440
143
102
9.9%
7.1%
Architectural Products
Despite a good demand backdrop across the
platform’s main markets and sales progression,
operating profit finished behind last year as a
result of a lower margin product profile in some
markets. In the Benelux, trading advanced in an
overall positive economic environment. For our
German business, trading was broadly in line with
last year while results were positively impacted by
improved pricing and operational performance.
In Poland, our operations experienced strong
demand, albeit for some lower margin products,
and with good volume growth sales finished
ahead of the prior year.
Shutters & Awnings
The Shutters & Awnings business recorded
a 3% increase in sales compared with the
prior year. The Netherlands, supported by
underlying market activity and benefiting from
operational improvements, reported a good
trading performance. Our German businesses
experienced challenges arising from tighter labour
markets and increasing input costs; however,
sales across the businesses advanced. The UK
business reported a solid trading performance
despite currency pressure. Operating profit for
the platform remained in line with 2016.
Network Access Products
& Perimeter Protection
The Network Access Products business, with
operations in the UK, Ireland and Australia and
a growing export base, had another year of
growth in both sales and operating profit. Positive
underlying infrastructure demand continued,
particularly in its UK-based business; in addition,
ongoing focus on optimising costs and product
profile resulted in positive margin development for
the business.
The permanent fencing business overall had
a positive year as it reported both sales and
operating profit ahead of prior year. Continued
cost focus at our UK businesses resulted in
improved sales and profitability and margins
advanced in the Netherlands, despite competitive
markets. The mobile fencing business, after a
strong prior year, experienced another year of
growth benefiting from improved building activity
in its core markets.
*
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.
39
CRH Annual Report and Form 20-F I 2017
Europe Distribution
CRH’s Europe Distribution Division, sells and distributes building
materials to professional builders, specialist heating and plumbing
contractors, and DIY customers through a network of trusted
local and regional brands across a number of mature markets in
Western Europe.
20%
Network Access
Products & Perimeter
Protection
15%
Shutters &
Awnings
What we do:
Europe Distribution is involved in the sale and
supply of a wide range of building materials,
catering to different local markets and varied
customer groups.
5%
South East
30%
Architectural
Products
Our development strategy is focused on
10%
increasing the network density of our existing
North East
businesses in our core markets, while also
35%
investing in new platforms and formats in
10%
Construction
Switzerland
other attractive segments of building materials
Accessories
and Germany
distribution.
Substantial opportunities remain to improve
our existing network in our core markets and to
establish new propositions 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 our 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 supporting our interaction
with customers.
35%
Tarmac (UK)
Collective expertise from across our various
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.
15%
UK Cement &
Lime, Ireland
and Spain
How we are structured:
15%
France, Benelux
The Division is active in three business areas:
and Denmark
General Builders Merchants (GBM), Sanitary,
Heating and Plumbing (SHAP), and DIY
(Do-It-Yourself). The Division also 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.
Sales
€ million
4,145
% of Group
16%
Operating Profit
EBITDA (as defined)*
207
269
Net Assets**
1,615
10%
9%
8%
Activities***
20%
DIY
20%
SHAP
60%
General
Builders
Merchants
Sector Exposure***
Residential
75%
Non-
Residential Infrastructure
20%
5%
End-use***
New
35%
RMI
65%
13%
Canada
1%
Brazil
86%
United States
General Builders
Merchants (GBM)
GBM distributes heavy building materials and
a wide range of other products to professional
customers, mainly small and medium sized
builders from 352 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 134 locations. The businesses are
organised around public-facing showrooms to
facilitate product choice, central warehousing and
a wide network of pick-up 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 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Activities, sector exposure and end-use balance are based on sales.
40
CRH Annual Report and Form 20-F I 2017
Products and Services Locations
General Builders Merchants
Austria, Belgium, France, Germany,
Netherlands, Switzerland
DIY
Belgium, Germany,
Netherlands, Portugal (JV)
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 198
easily-accessible retail locations. The DIY platform
in Europe operates under four different brands:
GAMMA (the Netherlands and Belgium), Karwei
(the Netherlands), Hagebaumarkt (Germany)
and our Maxmat joint venture (Portugal).
41
CRH Annual Report and Form 20-F I 2017 Operations Review - Europe Distribution
Prior 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%
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)
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.
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.
42
*
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 2017
Exchange
‐20
‐1
‐1
Analysis of change
Acquisitions Pension Credit
-
+61
+61
+28
-
-
Organic
+71
+3
+17
% change
2%
31%
59%
2017
4,145
269
207
6.5%
5.0%
Swiss pension plan past service credit of €61 million in 2017
DIY (Do-It-Yourself)
Our DIY business operates in the Netherlands,
Belgium and Germany. Despite improving
consumer confidence in these countries,
competitive pressures and an increasing trend
towards online sales contributed to declining
store sales. Operating profit in our Netherlands
business improved due to a continued focus
on overhead costs and personnel productivity
initiatives. Despite the opening of a new store
in the Brussels area, sales and operating profit
remained stable in a competitive environment.
Our German DIY business performed in line
with 2016, although trading was impacted by
some unfavourable weather conditions at the
beginning of the year.
Sanitary, Heating and Plumbing
(SHAP)
Continued sales growth from additional
pick-up locations and further investments in
showrooms led to market share improvement
in our German and Belgian SHAP businesses.
Operating profit decreased due to declining
results in Switzerland, which were partly offset
by operational improvement, procurement
initiatives and growth in Belgium and Germany.
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2016
4,066
206
130
5.1%
3.2%
The commentary below excludes the impact
of a past service credit due to pension plan
amendments in Switzerland.
Europe Distribution experienced stable
sales and profit development but with mixed
performances across our businesses. Overall
sales were slightly ahead with a strong
contribution from our General Builders
Merchants business in the Netherlands which
benefited from an increase in residential
building volumes. In addition, our SHAP
businesses in Germany and Belgium continued
to gain market share in consolidating markets.
These positive developments were partly offset
by difficult market conditions in Switzerland.
General Builders Merchants
Our General Builders Merchants business
showed 3% sales growth in 2017, with stable
operating profit excluding depreciation.
Continued increasing demand in the
Netherlands combined with delivery on
performance improvement projects resulted
in further growth of the Dutch operating profit.
Our German business showed sales growth
against a flat RMI market backdrop, with profit
impacted by acquisition-related costs. Market
conditions in Switzerland remained challenging
due to sluggish residential demand, and cost
savings initiatives could not fully offset the
impact of lower sales and increased pressure
on trade margins. Our French business
benefited from an improving residential sector
and the performance in our Austrian business
improved due to continued focus on our cost
base.
*
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.
43
CRH Annual Report and Form 20-F I 2017
20%
Network Access
Products & Perimeter
Protection
30%
Architectural
Products
15%
Shutters &
Awnings
35%
Construction
Accessories
5%
South East
10%
North East
10%
Switzerland
and Germany
15%
France, Benelux
and Denmark
Americas Materials
CRH’s Americas Materials Division is the leading vertically
integrated supplier of aggregates, cement, asphalt, readymixed
concrete and paving and construction services in North America.
What we do:
CRH’s Americas Materials Division is the number
one producer of aggregates and asphalt and the
second largest producer of readymixed concrete
in North America.
35%
Tarmac (UK)
CRH Americas Materials is a leading producer of
cement in Canada. During 2017, it expanded its
cement operations with the acquisition of assets
in Florida. In Brazil, CRH is a major supplier of
cement to the Rio de Janeiro and Belo Horizonte
markets.
20%
SHAP
A significant portion of our business is awarded
15%
UK Cement &
by public tender for federal, provincial, state
Lime, Ireland
and local government authority road and
and Spain
infrastructural projects. CRH Americas Materials
also has a broad commercial customer base,
supplying aggregates, cement, asphalt and
readymixed concrete for industrial, office,
shopping mall and private residential development
and refurbishment. The Division is strongly
resource-backed and broadly self-sufficient in
aggregates with over 15 billion tonnes
of reserves, of which approximately 80%
are owned.
Our principal purchased raw materials are liquid
asphalt and cement used in the manufacture of
asphalt and readymixed concrete respectively.
How we create value:
In a largely unconsolidated sector where the
top ten aggregates, asphalt and readymixed
concrete participants account for less than one
third of overall production, our businesses build
strong regional leadership positions in local
markets underpinned by well-located, long-term
reserves. Our deep market knowledge drives
performance in local markets, while our extensive
network allows us to leverage talent, synergies for
60%
procurement, cost management and operational
General
Builders
excellence.
Merchants
20%
DIY
Americas Materials is vertically integrated in
aggregates, asphalt, cement, readymixed
concrete and paving and construction services.
Approximately 30% of the aggregates we
produce are sold internally, helping to drive
company-wide growth and efficiency.
How we are structured:
CRH Americas Materials is organised
geographically into six divisions (North,
South, Central, West, Canada and Brazil).
The Division has a network of operations at
close to 1,300 locations across 44 US states
and six Canadian provinces, employing
approximately 24,100 people.
Sales
Operating Profit
EBITDA (as defined)*
Net Assets**
€ million
7,970
858
1,270
7,552
% of Group
32%
41%
40%
37%
Geography***
13%
Canada
1%
Brazil
86%
United States
Sector Exposure***
Residential
15%
Non-
Residential
30%
Infrastructure
55%
End-use***
New
40%
RMI
60%
Aggregates
Aggregates, including sand, gravel and crushed
stone, are essential ingredients in a wide range
of construction materials. They can be found in
everything from the asphalt pavements used to
make roads, to the concrete used in bridges and
foundations, to the sand traps in golf courses.
With sales of 170 million annualised tonnes,
Americas Materials is the number one producer
of aggregates in North America.
Cement
Cement is a primary building material and used
as a binding agent in the production of a range of
products for the construction industry. Americas
Materials, a leading producer of cement in Canada
sold 3 million tonnes of cementitious product in
2017 and a further 2 million tonnes in Brazil. We
also acquired a 1 million tonne cement plant in
Florida to expand our cement operations in the US.
Because cement requires an energy-intensive
manufacturing process, we have established a
range of initiatives to reduce our carbon footprint
and incorporate reusable, recyclable material.
Asphalt
Asphalt is used in building roads, highways,
runways and parking lots. Americas Materials is
the number one asphalt producer in North America,
selling 47 million annualised 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 innovative 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 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Geography, sector exposure and end-use balance are based on sales.
44
CRH Annual Report and Form 20-F I 2017
Products and Services Locations
Aggregates
Canada, United States
Readymixed Concrete
Canada, United States
Cement
Brazil, Canada, United States
Asphalt
Canada, United States
Paving and Construction Services
Canada, United States
Annualised Sales Volumes†: Cement: 6.3m tonnes (6.8m tonnes††); Aggregates: 169.7m tonnes (170.6m tonnes††); Asphalt: 47.0m tonnes (48.5m tonnes††);
Readymixed Concrete: 10.4m m3 (10.7m m3††)
Readymixed Concrete
Readymixed concrete is comprised 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 10 million annualised cubic metres
of readymixed concrete. Our readymixed concrete
is produced 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
€3.8 billion in paving and construction projects.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including the Group’s share of equity accounted investments.
45
CRH Annual Report and Form 20-F I 2017 Operations Review - Americas Materials
Prior 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 continued volume improvement, operational
efficiencies and reduced energy costs, Americas
Materials had another year of good profit growth
in 2016 and delivered a strong organic operating
profit. 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 in 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 2016. 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 in 2016 was on successfully
integrating our Canadian and Brazilian acquired
assets, eight bolt-on acquisitions and one
investment were also completed in 2016 at a total
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)
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
of 2015, with Texas in particular showing strong
growth. With strong operating and overhead
cost management across each product line, the
West division reported heritage sales 2% ahead
of 2015 along with margin and operating profit
increases.
Canada
Sales and operating profit were ahead of 2015
with the impact of a full year of ownership of
the LH Assets in 2016 augmented by a series
of major projects including the Highway 407
extension in Ontario and the Turcot Highway
Interchange in Montreal as well as strong
backlogs. There were mixed results across
different product lines and regions, with
improvements in our core markets of Ontario
and Quebec partially offset by margin pressures
and weaker demand in our Western Canada
businesses.
Brazil
The construction market weakened in 2016
as a result of deteriorating macroeconomic
and political conditions, with overall cement
consumption down 12% in the Southeast region
and selling prices under continued pressure in a
very competitive environment.
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 in 2016. 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 2016.
Operations in the US were reorganised at the
beginning of 2016 into four divisions; North,
South, Central and West. The North division’s
sales were down from 2015; however, with the
benefit of operating efficiencies, strong cost
controls and lower energy costs, operating profit
in the division improved significantly in 2016.
Heritage sales in the South division were 1%
ahead in 2016, despite record flooding in West
Virginia and Kentucky, and the impact of hurricane
Matthew. Operating profit was also well ahead in
the division with increased volumes contributing
to margin growth. With resilient market growth in
Texas in both the public and private sectors, the
Central division delivered a heritage sales increase
of 8% along with strong margin improvement.
Like-for-like volumes in the division were ahead
46
*
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 2017
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2016
7,598
1,204
818
15.8%
10.8%
2017 was a year of progress in Americas
Materials, supported by continued economic
growth across residential and non-residential
sectors, while infrastructure remained stable in our
markets. Despite record levels of rainfall during
the year and hurricane activity experienced in
Florida and Texas, both sales and operating profit
increased 5%, as selling price increases were
achieved across all products in North America.
Aggregates had a strong finish to 2017 and
together with the positive impact of acquisitions
during the year, total volumes were 7% ahead,
while like-for-like volumes were flat. Average price
increases of 6% on a like-for-like basis combined
with efficient cost control resulted in margin
expansion.
Margin improvement was also experienced in our
readymixed concrete operations as like-for-like
volumes increased 4% while overall volumes
were 3% ahead, impacted by 2016 divestments
in our Central division. Both like-for-like and total
average prices increased by 3%.
Although like-for-like asphalt volumes increased
2% and 6% on an overall basis, asphalt margins
were under pressure with like-for-like average
price increases unable to offset higher input costs.
With pockets of increased state infrastructure
spending, like-for-like sales for paving and
construction services increased 1% with overall
sales 7% ahead. Construction margin improved
slightly in 2017, despite the ongoing competitive
bidding environment.
Our cement business in North America saw
total volumes 3% ahead and marginal price
increases, supported by stronger demand in the
US. Against the backdrop of a favourable US
price environment, Americas Materials continued
to optimise its terminal network and market
penetration by repositioning more volumes to
the US from Canada, where competitive market
conditions remain, especially in Quebec.
Analysis of change
Exchange Acquisitions
Divestments
LH Costs
Organic
‐123
‐24
‐19
+379
+46
+12
‐80
‐5
‐2
-
+7
+7
+196
+42
+42
% change
5%
5%
5%
2017
7,970
1,270
858
15.9%
10.8%
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
Americas Materials continued to strengthen its
position in existing and complementary markets
throughout North America in 2017 and completed
13 acquisitions for a combined total of €1.1 billion.
The principal acquisition, which was completed
at the end of November 2017 and therefore had
a limited contribution to current year trading,
was Suwannee American Cement together
with certain other materials assets; consisting
of a 1 million tonne cement plant in Florida, 18
readymixed concrete plants, an aggregates
quarry, two block plants and nine gunite facilities.
United States
Trading benefited from solid demand in the US
and, despite some unfavourable weather, total
volumes and prices increased across all products.
Like-for-like sales saw a resulting 4% increase
in 2017. Operating profit also increased though
margin expansion in aggregates and readymixed
concrete was partly offset by a decline in asphalt
margins due to higher bitumen prices, a key
component of asphalt mix.
Our US operations are divided into four main
divisions: North, South, Central and West.
The North division comprises operations in 13
states, with key operations in Ohio, New York,
New Jersey and Michigan. With significant
precipitation as well as softer markets in
Michigan and Connecticut, volumes were down
across all products, although increased pricing
and improved construction sales resulted in a
like-for-like sales increase. Operating profit was
further impacted by increased input costs, and
margin declined. The South division comprises
operations in 12 states with key operations in
Florida, North Carolina and West Virginia.
Like-for-like South division sales and operating
profit were ahead 7% and 14% respectively,
despite the impact of hurricane Irma which
caused downtime at several locations in Florida
and Georgia. Improvements were mainly driven
by increased construction activity and margin, as
well as price increases across all products.
The Central division has operations in nine states,
with the key states being Texas, Arkansas and
Minnesota. Like-for-like Central division sales were
down 3% mainly due to unfavourable weather
during the summer which continued into autumn,
along with the impact of hurricane Harvey;
however, with strong cost control and the benefit
of operating efficiencies, overall operating profit
improved over prior year. The West division has
operations in ten states, the most important of
which are Utah, Idaho, Washington and Colorado.
Overall demand was strong across the division,
with improved volumes across all product lines
resulting in like-for-like sales up 11% compared
with the prior year. Operating profit was also
well ahead in the division, with aggregates and
readymixed concrete price increases taking hold
and driving increased margin.
Canada
The overall Canadian economy expanded in
2017, led by robust gains in the core markets of
Ontario, Quebec and Alberta. The pace of growth
was largely fuelled by improvements in oil prices
and continued spending by Canadian consumers.
Despite the positive environment and increases
of volumes across all products, like-for-like sales
were muted by regional variations in pricing
and the performance within the construction
business, which was impacted by adverse
weather conditions and the non-recurrence of key
projects.
Brazil
Weakness in the construction market continued
during 2017 due to the unfavourable economic
and political situation; however, more recently,
lower interest rates and a reduction in inflation
have started to have a positive impact.
While cement consumption was down 5%
in the Southeast region, CRH saw volume
improvements through a focus on key customer
segments; however, selling prices continued to fall
below 2016 levels.
*
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.
47
CRH Annual Report and Form 20-F I 2017
Americas Products
CRH’s Americas Products Division is one of North America’s
leading suppliers of construction products. Its businesses
manufacture, supply and deliver the products needed to shape and
enhance the built environment for modern communities.
20%
Network Access
Products & Perimeter
Protection
30%
Architectural
Products
15%
Shutters &
Awnings
35%
Construction
Accessories
5%
South East
[10%]
North East
10%
Switzerland
and Germany
35%
Tarmac (UK)
15%
UK Cement &
Lime, Ireland
and Spain
15%
France, Benelux
and Denmark
20%
DIY
20%
SHAP
What we do:
CRH Americas Products is a leading supplier
of value-added building products, primarily to
residential, and non-residential construction
projects across the US and Canada. Our broad
product range and extensive geographic footprint
allow us to serve large national customers as well
as providing smaller customers with the personal
touch of a local supplier. Our architectural,
precast concrete and building envelope products
businesses serve the needs of local customers
mainly in the residential and non-residential
building sectors.
60%
General
Builders
Merchants
How we create value:
As part of our ongoing focus on value creation
we consistently invest in talent development,
commercial and operational excellence
processes, innovation and technology to ensure
continuous improvement in everything we do.
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 innovative and value-added products
and design-solutions through our research and
development centres.
1%
Brazil
13%
Canada
Americas Products’ development 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. Focusing strategic accounts and
influencers in the construction supply chain on
CRH’s broader product and capability portfolio,
our Building Solutions group provides an
86%
additional avenue for market share growth.
United States
How we are structured:
Americas Products is organised into three
strategic product groups, Architectural Products,
Precast and BuildingEnvelope® which maintain
distinct organisations for their business-specific
strategies, with the centre supporting finance,
talent management, 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. The
Division employs approximately 17,100 people at
nearly 350 locations.
Sales
€ million
4,327
% of Group
17%
Operating Profit
EBITDA (as defined)*
435
573
Net Assets**
3,122
21%
18%
15%
Products***
20%
Precast
35%
Building
Envelope®
45%
Architectural
Products
Sector Exposure***
Residential
45%
Non-
Residential
50%
Infrastructure
5%
End-use***
New
50%
RMI
50%
Architectural Products
The Architectural Products Group (APG) is North
America’s leading supplier of concrete masonry,
hardscape and related products for residential,
commercial and DIY (Do-It-Yourself) construction
markets. APG has 182 operating locations in 36
states and five Canadian provinces.
Competition for APG arises primarily from other
locally owned building 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.
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. Composite decking
products, marketed under the ChoiceDekTM and
MoistureShieldTM brands, are another key outdoor
living offering in our portfolio.
Precast
Our Precast group is one of North America’s
leading manufacturers of precast concrete and
related products with 77 locations across North
America predominantly in 26 US states. The group
employs approximately 4,100 employees.
Precast manufactures a range of concrete and
polymer-based products such as underground
vaults, drainage pipe and structures, utility
enclosures and modular precast structures which
are supplied to the water, electrical, telephone
and railroad markets and to select non-residential
building applications.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
**
Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Products, sector exposure and end-use balance are based on sales.
48
CRH Annual Report and Form 20-F I 2017
Products and Services Locations
Glass Fabrication and
Glazing Systems
Canada, United States
Construction Accessories
United States
Architectural Concrete and
Related Products
Canada, United States
Precast Concrete, Pipe
and Related Products
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;
Annualised Sales Volumes†: Concrete masonry, patio products & pavers: 8.2m tonnes; Pre-packaged concrete mixes: 4.2m tonnes; Pre-packaged lawn & garden products:
Precast concrete products: 1.6m tonnes; Building envelope products: 7.5m m2, 67,000 SKUs
6.5m tonnes; Precast concrete products: 1.8m tonnes; Building envelope products: 7.2m m2, 67,000 SKUs
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
is a leading integrated supplier of products
specified to close the building envelope, including
architectural glass, storefront systems, custom
engineered curtain wall and window wall,
architectural windows, doors and skylights. OBE
is also the largest supplier of architectural railings,
glazing hardware and high performance glass
installation products in North America.
Our products are specified across all market
segments from single-storey storefronts to
intermediate multi-storey commercial structures
to high-rise, monumental buildings. OBE employs
approximately 6,700 people and serves every major
North American metropolitan and regional market
through its 82 operating locations along with
further operating locations across Europe (4) and
Australia (3).
† 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.
49
CRH Annual Report and Form 20-F I 2017 Operations Review - Americas Products
Prior 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%
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%
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 continued improvement from
residential and commercial construction.
Sales volumes were strong across the US but
were 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 2016.
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 showed an improvement
in margins in 2016.
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.
50
*
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 2017
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2016
4,280
543
411
12.7%
9.6%
Continued improvement in macroeconomic
conditions positively impacted construction;
however, activity was limited by historically
high levels of precipitation in 2017,
supply-side factors such as the shortage of
skilled construction labour and competitive
markets. Americas Products saw good growth
along the West Coast and parts of the South
and Southeast due to improving residential and
non-residential construction, partly offset by
more modest trading in Canada and parts of
the Northern US. Contributions from improved
operational efficiencies, improved product
and project mix, procurement initiatives and
targeted price increases more than offset the
impact of input cost inflation. Benefiting from
the contribution of acquisitions and continued
synergies from the CRL acquisition, Americas
Products achieved a 6% increase in operating
profit and margins improved.
Americas Products completed eight
acquisitions and one joint venture investment
for total consideration of €0.2 billion. The
acquisition of Advanced Environmental
Recycling Technologies, Inc. (AERT), a
manufacturer of composite decking, added
an outdoor living product complementary
to APG’s Belgard hardscapes and retaining
wall products. Also, the acquisition of Block
USA extended APG’s masonry footprint into
Alabama, Mississippi and the Gulf Coast.
Analysis of change
Exchange
Acquisitions
Divestments
Organic
‐79
‐10
‐8
+87
+10
+4
‐14
+1
+2
+53
+29
+26
% change
1%
6%
6%
2017
4,327
573
435
13.2%
10.1%
Precast
Sales growth was achieved in 2017 but was
limited by unfavourable weather and relatively
slower demand growth for both private
construction and public infrastructure in certain
markets. Precast recorded increased operating
profits, due to better operational performance
at construction project businesses, partly offset
by margin impacts from increased input costs.
In addition, backlogs remained strong in 2017.
Architectural Products
With the benefit of acquisitions, APG saw
increased activity, especially in the residential
RMI sector. Growth was at a more measured
pace than last year, with volumes affected by
unfavourable weather and installation labour
shortages. Activity was good across most of
the US but more moderate in Canada. Solid
demand from major products and distribution
channels, together with product innovation and
commercial initiatives, drove a modest increase
in like-for-like sales compared with 2016. APG
continued to focus on operating cost reduction
efforts to maximise returns. Overall, APG saw
good operating profit growth for the year.
BuildingEnvelope®
In 2017, non-residential building activity saw
continued advancement but at a slower pace
than prior years. OBE experienced relatively
flat sales revenue in 2017 because of more
challenging market conditions, more selective
bidding on larger projects and tighter skilled
labour markets. However, OBE recorded
improved operating profits because of better
sales mix, improved operational performance
and continued synergies from the integration of
the CRL and OBE businesses.
*
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.
51
CRH Annual Report and Form 20-F I 2017
Asia
CRH’s Asia Division is comprised of cement operations in the
Philippines, Northeast China and Southern India. These positions
represent strategic growth platforms which provide us with
exposure to industrialisation, urbanisation and population related
construction demand in the region’s developing economies.
What we do:
CRH is the second largest producer of cement
in the Philippines. The Group also has strategic
footholds in regional cement markets in China
and India. The Group is committed to investing
in, and developing its leadership positions in
the region.
CRH’s Asia Division is focused on maximising
performance and returns in its businesses,
expanding its balanced portfolio of diverse
products and geographies and conducting its
businesses responsibly and sustainably.
How we create value:
CRH Asia creates value by identifying and
establishing select positions with strong
long-term prospects in regional markets.
Using CRH’s proven acquisition model, we are
focused on building on our existing platforms
and on making our businesses better. Since
20%
DIY
our initial entry into the Chinese and Indian
markets, we have increased capacity more
than threefold through both organic growth
and the successful integration of new bolt-on
acquisitions. Our joint venture in India recently
60%
commissioned its new grinding unit at Tuticorin
General
Builders
in the southern state of Tamil Nadu, which
Merchants
gives us access to new markets.
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.
xx%
Architectural
Products
xx%
Shutters &
Awnings
xx%
Construction
Accessories
How we are structured:
In the Philippines our operations span 12
different operating locations. Our country
level head-offices in China and India report to
CRH’s regional headquarters in Singapore. The
Division employs approximately 1,400 people,
with a further 7,500 in our equity accounted
investments.
xx%
Network Access
Products & Perimeter
Protection
Sales
€ million
436
% of Group
2%
Operating Profit
EBITDA (as defined)*
15
52
Net Assets**
1,230
1%
2%
6%
Geography***
100%
Philippines
xx%
Interior
xx%
Exterior
Sector Exposure***
Residential
50%
13%
Non-
Canada
Residential
20%
End-use***
New
90%
Annualised Sales Volumes†:
Cement: 6.1m tonnes (13.5m tonnes††);
Aggregates: 0.7m tonnes (0.7m tonnes††);
Readymixed Concrete: 0.0m m3 (0.2m m3††)
Infrastructure
1%
Brazil
30%
xx%
Precast
RMI
10%
86%
United States
xx%
Building
Envelope®
xx%
Architectural
Products
Aggregates
In the Philippines, CRH’s operations include
the production and supply of aggregates
used in concrete for housing, buildings and
infrastructure.
Cement
Republic Cement, the second largest
cement producer in the Philippines has six
strategically located cement production
facilities across the country which contribute
to a total capacity of 7.5 million tonnes.
CRH’s operations in China consist of a 26%
stake in Yatai Building Materials, a market
leader in cement in Northeast China, with
a cement capacity of 32 million tonnes
and operations in 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 a total capacity of 9.6 million tonnes
across four locations.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
**
Net Assets at 31 December 2017 comprise segment assets less segment liabilities as disclosed in note 1 to the Consolidated Financial Statements.
***
Geography, sector exposure and end-use balance are based on sales.
† Throughout this document annualised volumes have been used which reflect the full-year impact of acquisitions made during the year and may vary from actual volumes sold.
†† Including the Group’s share of equity accounted investments.
52
CRH Annual Report and Form 20-F I 2017
Operations Review - Asia
Current Year 2017
Results
€ million
Sales revenue
EBITDA (as defined)*
Operating profit
EBITDA (as defined)*/sales
Operating profit/sales
2016
508
109
71
21.5%
14.0%
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.
Prior Year 2016
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%
Analysis of change
Exchange
LH Costs
Organic
-39
-11
-7
-
+6
+6
‐33
‐52
‐55
% change
‐14%
‐52%
‐79%
2017
436
52
15
11.9%
3.4%
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
Philippines
While economic growth and market
fundamentals remain robust, with both
residential and non-residential demand stable,
major infrastructure projects progressed at
a slower pace in 2017. Despite this, the
long-term outlook for the construction industry
in the Philippines remains strong.
Although volumes increased in 2017, driven by a
strong performance in the Visayas and Mindanao
(VisMin) housing sector, overall sales were behind,
as prices were impacted by additional capacities
in the market and aggressive competitor pricing.
The impact of lower selling prices combined with
increased fuel and power costs resulted in lower
operating profit than 2016.
Equity Accounted
Investments
China
Despite volumes being under pressure in Northeast
China, prices significantly recovered in the market,
with both cement and clinker prices in Yatai
Building Materials well ahead of 2016. The higher
prices more than offset increased coal prices and
resulted in improved performance in 2017.
India
Despite recording higher cement volumes and
marginally higher prices, MHIL ended 2017 with
operating profit behind prior year due to increased
fuel prices, as well as lower sales of power to third
parties.
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
The LH integration costs refers to the businesses acquired from LafargeHolcim in 2015
Philippines
The construction market remained strong in
the Philippines in 2016, with growth in cement
demand 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
Investments
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
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.
53
CRH Annual Report and Form 20-F I 2017
Americas Distribution (Discontinued Operations)
Americas Distribution was a leading distributor of roofing, siding,
drywall, ceiling systems and related accessories to speciality
contractors in residential and commercial construction in the
United States.
xx%
DIY
In August 2017, the Group entered into a
sales agreement to divest of its 100% holding
in Allied Building Products, the trading name
of our Americas Distribution Division. The
transaction closed on 2 January 2018. In
xx%
accordance with IFRS 5, the Division is
General
reported as discontinued operations for 2017
Builders
Merchants
(see note 2 to the Consolidated Financial
Statements). The business description and
trading performance that follows is provided
for information purposes only.
xx%
SHAP
xx%
Shutters &
Awnings
Americas Distribution, was a leading supplier
to speciality contractors of Exterior Products
(roofing and siding), and Interior Products
(ceilings and walls), as well as Solar Roofing
panels, primarily for the residential market.
xx%
Architectural
Products
xx%
Construction
Accessories
xx%
Network Access
Products & Perimeter
Protection
The business, which was characterised by a
strong commitment to both customers and
manufacturers, was cyclical in nature and
sensitive to changes in general economic
conditions, specifically to fluctuations in
housing and construction-based markets.
Americas Distribution deployed state-of-the-art
customer-facing IT technologies, disciplined
and focused cash and asset management
systems, and well established procurement
and commercial systems to support supply
chain optimisation and enabled it to provide
xx%
superior customer service.
Philippines
The Division established the private label
Tri-Built Materials Brand to help differentiate
from competitors in the marketplace, establish
a unique brand identity and expand margins.
This initiative grew to include more than
30 residential and commercial accessory
products.
xx%
Canada
xx%
Brazil
Americas Distribution was structured as
two divisions: Exterior Products and Interior
Products and operated in 31 states across
over 200 locations, employing approximately
3,900 people.
xx%
United States
Sales
2017
2016
€ million
2,343 2,315 2,229
2015
Operating Profit
143
119
111
EBITDA (as defined)*
164
150
140
Activities**
35%
Interior
65%
Exterior
Sector Exposure**
xx%
Building
Envelope®
Non-Residential
Residential
xx%
Precast
50%
New
50%
End-use**
50%
xx%
Architectural
RMI
Products
50%
Exterior Products
Exterior Products distributed both
commercial and residential roofing, siding
and related products. Additionally, two
locations were dedicated to the distribution
of Solar Roofing panels. Demand in the
Exterior Products business was largely
influenced by residential and commercial
replacement activity with key products
having an average lifespan of 25 to 30 years.
Commercial roofing products included
single-ply membranes and various
asphalt-based roll roofing products along
with complementary products, such as
sealants, vapour barriers and roof cements
and coatings.
Interior Products
Interior Products distributed gypsum
wallboard, metal studs and acoustical tile
and grid. Demand for Interior Products
was primarily driven by the new residential,
multi-family and commercial construction
markets. Interior Products’ customers
consisted of interior partition and commercial
ceiling contractors. Sales trended slightly
toward commercial construction and were
predominantly focused on new construction
for both residential and commercial-based
projects.
54
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.
Activities, sector exposure and end-use balance are based on 2017 sales.
*
**
CRH Annual Report and Form 20-F I 2017
Operations Review - Americas Distribution (Discontinued Operations)
Current Year 2017
Solid revenue and strong operating profit
growth was achieved in 2017, predominantly
in the Exterior Products division. Sales in the
Interior Products business, while remaining
healthy, finished the year behind prior year
levels.
Demand for Exterior Products, specifically
residential roofing, was very strong in the
hail-affected markets of Minnesota, Colorado,
Maryland, Virginia and Chicago. Continued
economic improvement and focused growth in
the Northeast markets (New York, New Jersey,
Pennsylvania), Michigan and Florida were
additional performance drivers for the Exterior
Products division. Following a very robust
2016 multi-family demand in the Hawaiian
Interior Products market, 2017 sales volumes
Prior Year 2016
2016 was a year of solid profit delivery on
increased sales and both the Exterior Products
and Interior Products divisions advanced and
recorded sales and profit growth.
Strong demand in the Florida, Chicago and
Atlantic markets, focused growth in Iowa,
Ohio and Michigan markets and storm
driven demand in Texas were the drivers of
performance in the Exterior Products division.
Against a strong performance in 2015, sales
in Northeast markets were marginally behind
2015.
The Interior Products division continued to
experience volume growth throughout 2016.
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, management remained highly focused
on gross margins in a very competitive
environment through improved procurement
initiatives. Margin discipline and optimised
working capital were maintained while growing
organically. Technology investments made
returned to a more normalised level. This was
partly offset by gains in the California and
Colorado Interior Products markets. Recent
facility investments in the Solar business fuelled
growth in that segment also.
In 2017, management remained highly focused
on cost control and maintaining gross margin
through improved procurement initiatives and
the persistent monitoring of non-essential
expenses. Business process improvements
and the regional service area model continued
to mature, enabling further economies of scale.
Five new greenfield locations were opened in
2017 and the Tri-Built private label business
continued to be developed.
Exterior Products
Most of the residential roofing products
continued to grow in 2017, both in line with
the market and due to concentrated efforts
to improve the residential product mix. The
storm-affected areas experienced significant
roofing growth and overall the Exterior
Products division reported solid sales and
improved operating profits in 2017.
Interior Products
Sales in this division were tempered in most
markets compared with prior year, with the
largest slowdown in the Hawaiian market
coming off a very robust 2016. A focused
approach to cost control and gross margin
improvement enabled operating profits to
remain in line with prior year.
in 2016 included a customer relationship
management tool, a transportation
management tracking system and a highly
functional mobile application for customers,
all of which served to differentiate in the
marketplace. The regional service area model
continued to mature, and the drive towards
simplifying business processes through
continuous improvement all added to the
potential for greater economies of scale as the
business expanded.
Although no acquisitions were completed
in 2016, the opening of five new locations
continued to strengthen the greenfield and
service centre strategy. This continued focus
allowed improvement in the area of customer
service, cost control and more efficiently
leveraging existing assets. Sales and product
offerings of the Tri-Built private label brand
continued to grow in 2016. This, combined
with investments in technology and the
ongoing effort and expansion of the service
centre network, continued to differentiate the
business 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 Exterior Products
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.
55
CRH Annual Report and Form 20-F I 2017 e
c
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a
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56
56
CRH Annual Report and Form 20-F I 2017 Governance
Board of Directors
Corporate Governance Report
Directors’ Remuneration Report
Directors’ Report
59
62
72
96
Every year Tarmac, part of CRH’s Europe Heavyside Division, moves approximately nine million tonnes of material by rail freight. In 2017 Tarmac
opened a new rail depot at Garston, Liverpool, as part of its strategy to increase the movement of material by rail. The new depot will take around
10,000 trucks off British roads every year.
5757
CRH Annual Report and Form 20-F I 2017
58
The interior of CRH's new Amsterdam office, which opened in 2017.
CRH Annual Report and Form 20-F I 2017 Board of Directors
Nicky Hartery
Non-executive Chairman
Appointed to the Board:
June 2004
Nationality:
Irish
Age:
66
Committee membership:
Acquisitions Committee;
Finance Committee;
Nomination & Corporate
Governance Committee
Albert Manifold
Chief Executive
Appointed to the Board:
January 2009
Nationality:
Irish
Age:
55
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: Listed: Non-executive Director of Finning
International, Inc., the world’s largest Caterpillar equipment dealer.
Non-listed: Chief Executive of Prodigium, a consulting company
which provides business advisory services; non-executive Chairman
of Musgrave Group plc, a privately-owned international food retailer.
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.
Committee membership:
Acquisitions Committee
External appointments: Listed: Not applicable.
Non-listed: Not applicable.
Senan Murphy
Finance Director
Appointed to the Board:
January 2016
Nationality:
Irish
Age:
49
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: Listed: Not applicable.
Non-listed: Not applicable.
59
CRH Annual Report and Form 20-F I 2017 Patrick J. Kennedy
Non-executive Director
Appointed to the Board:
January 2015
Nationality:
Irish
Age:
64
Committee membership:
Acquisitions Committee;
Nomination & Corporate
Governance 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: Listed: Not applicable. Non-listed: Member of the
Supervisory Board of SHV Holdings N.V.
Donald A. McGovern, Jr.*
Non-executive Director
Appointed to the Board:
July 2013
Nationality:
United States
Age:
67
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.
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
External appointments: Listed: Director of Cars.com, Inc.
Non-listed: Director of Neuraltus Pharmaceuticals, Inc. and
eAsic Corporation.
* Senior Independent Director
Heather Ann McSharry
Non-executive Director
Appointed to the Board:
February 2012
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.
Nationality:
Irish
Age:
56
Committee membership:
Audit Committee;
Remuneration Committee
Gillian L. Platt
Non-executive Director
Appointed to the Board:
January 2017
Nationality:
Canadian
Age:
64
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
60
Qualifications: BComm, MBS.
External appointments: Listed: Non-executive Director of Greencore Group
plc and Jazz Pharmaceuticals plc. Non-listed: Director of Ergonomics
Solutions International and the Institute of Directors.
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 equipment 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: Listed: Non-executive Director of Interfor Corporation,
a Canadian listed company, which is one of the world’s largest providers
of lumber. Non-listed: Not applicable.
CRH Annual Report and Form 20-F I 2017 Lucinda J. Riches
Non-executive Director
Appointed to the Board:
March 2015
Nationality:
British
Age:
56
Committee membership:
Nomination & Corporate
Governance Committee;
Remuneration Committee
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.
Qualifications: Masters in Philosophy, Politics and Economics and a Masters
in Political Science.
External appointments: Listed: Non-executive Director of Ashtead Group
plc, Diverse Income Trust plc and ICG Enterprise Trust plc.
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 and DIT Income Services Limited.
Henk Th. Rottinghuis
Non-executive Director
Appointed to the Board:
February 2014
Nationality:
Dutch
Age:
62
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: Listed: Not applicable. Non-listed: 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.
William J. Teuber, Jr.
Non-executive Director
Appointed to the Board:
March 2016
Nationality:
United States
Age:
66
Committee membership:
Audit Committee
(Financial Expert);
Finance Committee
Richard Boucher
Non-executive Director
Appointed to the Board:
With effect from 1 March 2018
Nationality:
Irish
Age:
59
Committee membership:
Not Applicable
Skills and experience: Until September 2016, Bill was the Vice Chairman of EMC
Corporation. In previous roles he was responsible for EMC's global sales and
distribution organisation (2006-2012) and served as Chief Financial Officer
(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: Listed: Member of the Board of Directors of Popular,
Inc. a diversified financial services company, and Inovalon Holdings, Inc., a
healthcare technology company. Non-listed: Director of Accedian Networks,
a technology company and BGP Bravo Holdings, a technology
services company.
Skills and experience: Richie has extensive experience in all aspects of financial
services and was Chief Executive of Bank of Ireland Group plc between February
2009 and October 2017. He also held a number of key senior management
roles within Bank of Ireland, Royal Bank of Scotland and Ulster Bank. Richie is a
consultant for Fairfax Financial Group and acts as its nominee on the boards of
investee companies. He is a past President of the Institute of Banking in Ireland
and of the Irish Banking Federation.
Qualifications: Bachelor of Arts (Economics) from Trinity College, Dublin;
Fellow of the Institute of Banking in Ireland.
External appointments: Listed: Director of Atlas Mara Limited, a company
with investments in banks in Africa, and Eurobank Ergasias SA, a bank
based in Athens, Greece which has operations in Greece and several
other European countries. Non-listed: Not applicable.
61
CRH Annual Report and Form 20-F I 2017 Corporate Governance Report
Chairman's Overview
The Corporate Governance report contains
details of CRH’s governance structures and
highlights the main areas of focus for the
Board during 2017. 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”)*.
CRH implemented the 2016 UK Corporate
Governance Code (the '2016 Code') and
complied with its provisions in 2017. A copy
of the 2016 Code can be obtained from the
Financial Reporting Council’s website,
www.frc.org.uk.
Shareholder Engagement
During the course of 2017, we again saw an
increased level of dialogue with institutional
shareholders in relation to corporate
governance and board effectiveness.
As part of our governance engagement
process, in the first half of 2017 I met with
shareholders together with Don McGovern,
Senior Independent Director, and Neil Colgan,
Company Secretary. I also had further
meetings later in the year with shareholders
who expressed an interest in continuing our
dialogue. The broad areas of discussion
during these meetings were the resolutions
to be considered at the 2017 AGM, auditor
independence, succession planning for
the Board and the policy for non-executive
Director appointments, the Board’s role
in the area of talent management, CRH’s
focus on diversity, both in terms of Board
appointments and across the Group generally,
the timing of the Board’s input in relation to
acquisition projects, risk management and the
Group’s remuneration policy. We also noted
an increased focus on environmental and
social issues and I was pleased to facilitate a
meeting between our sustainability team and
a shareholder who wished to gain an in-depth
understanding of our processes and policies.
During the course of 2018, the Audit
Committee will be conducting a tender process
for the appointment of a new external auditor
to replace Ernst & Young (EY), who must rotate
off the CRH audit by 2021 in accordance with
European Union rules. Further details on this
process are included in the Audit Committee
section of this report (on page 64). The
governance meetings scheduled for 2018 will
provide a forum for discussion of this process
with those shareholders who have a particular
interest in this issue.
The Directors' Remuneration Report (on
page 72) provides further detail in relation
to shareholders' perspectives on CRH's
remuneration structures.
Board Focus Areas
and Priorities
During the course of 2017, the Board
continued to focus on risk management, IT and
cyber security, talent management, succession
planning and strategy. In relation to talent
management, in particular, the Board receives
regular updates from the Chief Executive and
a committee of a small group of non-executive
Directors works closely with him in relation
to key senior executive appointments. The
Board also continues to monitor developments
in relation to negotiations regarding the UK
ceasing to be a member of the European
Union.
Safety continues to be a key area of focus
for the Board. In addition to regular updates
throughout the year, during Board visits to
our operations in France and Canada in 2017
we had an opportunity to obtain a detailed
understanding of various projects, safety
initiatives and investment priorities in this
critical area. We also had an in-depth review
of safety across the Group with the senior
management team during the year, with a
particular focus on safety strategy and fatality
elimination.
Diversity and Board Renewal
Diversity at Board level has been a focus for
the Nomination & Corporate Governance
Committee and the Board for a number of
years and is a key factor when considering
Board renewal. The diversity policy for Board
appointments is set out on page 68, together
with a summary of the number of female
Directors on the Board since 2014. Building
diversity below Board level has been slower.
To some degree this is related to the nature of
CRH's industry. Nevertheless, diversity is one
of the main areas of focus for the executive
leadership team. The Group is in the process
of appointing diversity officers. In addition,
in 2018 there will be a number of initiatives
focused on improving diversity.
“
Diversity at Board level
has been a focus for the
Nomination & Corporate
Governance Committee
and the Board for a
number of years and
is a key factor when
considering Board
renewal
“
Nicky Hartery
62
CRH Annual Report and Form 20-F I 2017 Details on Board changes during 2017 and to
date in 2018, and the Board renewal process
generally, are set out in the Nomination &
Corporate Governance section of this report.
This section also contains an update on the
process to identify my successor as Chairman.
Independence and
Re-election of Directors
The Nomination & Corporate Governance
Committee has reviewed the interests of
each Director and the Board has determined
that each non-executive Director remains
independent. In addition, I have evaluated
the performance of each Director and I
recommend that shareholders vote in favour of
the re-appointment of each Director at the
2018 AGM.
Conclusion
In an ever changing world, it is vital to have
a clear insight into the perspectives of our
shareholders regarding corporate governance
matters. I very much appreciate the time
many of you have given to discuss CRH's
governance structures and procedures with
us over the course of the last year. Our usual
process of engagement will continue
in 2018.
Nicky Hartery
Chairman
February 2018
*
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 Companies Act 2014, the
Governance Appendix and the risk management disclosures pages 20, 21
and 102 to 107 form part of, and are incorporated by reference into, this
Corporate Governance Report.
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 financial
adviser. Further details on the Group’s listing arrangements, including its
premium listing on the LSE, are set out on page 70.
Oldcastle BuildingEnvelope®, part of CRH’s Americas Products Division, provided
custom-engineered signature unitised curtain wall and skylights to the Inter-disciplinary
Research Building at Howard University in Washington, D.C. The 7,600 square metre
mixed-use academic building, which was designed as an energy-efficient Leadership in
Energy and Environmental Design (LEED®) facility, incorporates cutting-edge technology
and the latest educational, environmental and research standards.
63
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
Corporate Governance Report - continued
Audit Committee Report
Chairman’s Overview
The Board has appointed me as Chairman of
the Audit Committee to replace Ernst Bärtschi,
who recently resigned from the Board. I would
like to thank Ernst for his significant contribution
to the work of the Committee during his tenure.
On behalf of the Committee, I am pleased to
introduce the Audit Committee Report for the
year ended 31 December 2017. The purpose
of this report is to provide shareholders with
an insight into the workings of, and principal
matters considered by, the Committee in 2017.
General details in relation to the roles and
responsibilities of the Committee, its operation
and the policies applied by it can be found in the
Governance Appendix.
Table 1 on page 65 outlines the key areas that
the Committee focused on in 2017.
Audit Committee Membership
The Committee currently consists of three
non-executive Directors considered by the
Board to be independent*. The biographical
details of each member are set out on pages
60 and 61. Together, the members of the
Committee bring a broad range of relevant
experience and expertise from a variety of
industries which is vital in supporting effective
governance.
External Auditors
Tender/Rotation of Audit
As outlined in last year’s Audit Committee
Report, the Committee has recommended to
the Board that a tender process for the external
audit be conducted during 2018. During 2017,
the Committee considered the proposed format
of the tender process and an assessment was
carried out to identify suitable candidates to
participate in the process. A detailed Request
for Proposal will be issued in 2018.
Effectiveness
The Committee, on behalf of the Board, is
responsible for the relationship with EY and
for monitoring the effectiveness and quality of
the external audit process. The Committee’s
primary means of assessing the effectiveness
of the external audit process is by monitoring
performance against the 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. All of the above initiatives
have 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 order to ensure auditor independence and
objectivity, the Committee has a policy on the
provision of audit and non-audit services by the
external auditor. Following the adoption of the
European Union Audit Reform Regulation in
June 2016, the Committee approved a number
of amendments to the policy in 2017 to ensure
compliance with the new requirements.
In 2017, the external auditors provided a
number of audit-related services, including
Sarbanes-Oxley Section 404 attestation**, and
non-audit services, including due diligence
services associated with proposed acquisitions
and disposals. EY were also engaged during
2017 in a number of jurisdictions in which the
Group operates to provide help with local tax
compliance, advice on taxation laws and 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 2017, which
amounted to €2 million and represented 11% 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 4 to the Consolidated Financial Statements
on page 141 (see also table 2 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 2016, the Committee received
and approved the Internal Audit plan for 2017.
During the year, the Committee received regular
updates from the Head of Internal Audit outlining
the principal findings from the work of Internal
Audit and management's responses thereto.
The Committee also considered and approved
the proposed Internal Audit strategy for the next
five years, which included detailed consideration
of the focus, structure and resources required
by the Internal Audit function.
Audit Committee Effectiveness
and Priorities for 2018
During 2017, the Committee and the Board
reviewed the operation, performance and
effectiveness of the Committee and I am
pleased to confirm that the Committee
continues to operate effectively. As outlined
in the Nomination & Corporate Governance
Committee section, an external evaluation of the
effectiveness of the Board and its Committees,
will be carried out in 2018.
64
William J. Teuber, Jr.
Chairman of Audit Committee
Audit Committee Financial Expert (as determined by the Board)
according to the requirements of Rule 10A.3 of the rules of the SEC.
*
The Board has determined that all of the non-executive Directors on the Audit Committee are independent
**
A copy of Section 404 of the Sarbanes-Oxley Act 2002 can be obtained from the SEC’s website, www.sec.gov.
64
I would like to thank my fellow Committee
members for their commitment and input to the
work of the Committee during 2017.
audit planning, IT governance and cyber
security and enterprise risk management.
While the external audit tender process
will obviously be an important issue for the
Committee in 2018, the Committee will also
continue to focus on internal control, external
William J. Teuber, Jr.
Chairman of Audit Committee
February 2018
Key Areas of Focus in 2017
Issue
Description
Table 1
Financial Reporting
and External Audit
We reviewed the 2017 Annual Report and 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 2017 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. There were no impairments in 2017.
New Accounting
Standards
In conjunction with management, the Committee considered the proposed timeframes for the Group to implement new
accounting standards in relation to Revenue from Contracts with Customers (IFRS 15), Financial Instruments (IFRS 9) and
Leases (IFRS 16). Please see pages 125 and 126 for further information on the implementation of these new standards.
Enterprise Risk
Management
The Committee continued to monitor and review 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 20 and 21).
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.
IT Governance and
Cyber Security
We continued to monitor progress in refining the Group’s IT governance and information security programme and cyber
security capabilities.
External Auditors
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 2018 financial year. As in prior years, their continuance in office will be subject to a
non-binding advisory vote at the 2018 AGM. Pat O'Neill has been the Group's lead audit engagement partner with effect from the
financial year beginning 1 January 2016.
As outlined above, the Committee will conduct an external audit tender during 2018.
Percentage of audit and non-audit fees
2017
2016
2015
11% 89%
7%
93%
27% 73%
Table 2
Audit Services
Non-audit
Services
65
CRH Annual Report and Form 20-F I 2017 Corporate Governance Report - continued
Audit Committee Report - continued
Areas identified for focus during the 2017 External Audit Planning Process
Table 3
Area of Focus
Audit Committee Action
Impairment of Goodwill
For the purposes of its annual impairment testing process, the Group assesses the recoverable amount of each of CRH’s
cash-generating units (CGUs – see details in note 15 to the Consolidated Financial Statements) based on a value-in-use
computation or fair value less costs to sell. 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 (including
the growth rates) and the results of the assessment, together with the disclosures in note 15, were appropriate.
Impairment of Property,
Plant and Equipment,
and Financial Assets
In addition to the goodwill impairment testing process discussed above, the Group also undertook its annual assessment of 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.
Contract Revenue
Recognition
IAS 11 Construction Contracts requires revenue and expenses to be recognised on uncompleted contracts, with the underlying
principle that, once the outcome of a long-term construction contract can be reliably estimated, revenue and expenses
associated with that contract should be recognised by reference to the stage of completion of the contract activity at the
balance sheet date. If it is anticipated that the contract will be loss-making, the expected loss must be recognised immediately.
Following discussions with management and EY, the Audit Committee was satisfied that contract revenue recognition was not a
material issue for the Group in 2017 as the majority of contracts were completed within the financial year.
Accounting for Acquisitions
and Divestments -
appropriate application of
IFRS 5 Non-current Assets
Held for Sale and
Discontinued Operations
During 2017, the Group completed 34 acquisitions and investments at a total cost of €1.9 billion. Following discussion with
management and EY, the Committee was satisfied that the accounting treatment applied to acquisitions during 2017 was
appropriate. During 2017, the Group also announced its decision to divest its Americas Distribution business for US$2.6 billion.
As at 31 December 2017, Americas Distribution met the Held for Sale and Discontinued Operations criteria and has been
classified as such in the Consolidated Financial Statements (see note 2 for more details). Following discussion with management
and EY, the Committee was satisfied that the treatment applied to Americas Distribution was correct.
66
CRH Annual Report and Form 20-F I 2017
Nomination & Corporate Governance Committee Report
Chairman’s Overview
During 2017, the Nomination & Corporate
Governance Committee has focused on
the renewal and refreshment of the Board,
particularly in the context of Chairman
succession, and the role and composition
of the Board’s Committees.
Board Renewal/Chairman Succession
As part of the Board renewal process, the
Committee uses a skills matrix to map the
current skills of the Board. This facilitates
the identification of skills gaps, areas of
expertise and knowledge which may be lost
to the Board due to retirements. This also
provides a framework when establishing
priorities for appointments and developing role
specifications.
As a result of recent Board changes in 2017 and
to date in 2018, the number of female directors
will reduce from 33% to 27%. This is intended
to be short term in nature. CRH’s policy on
diversity in respect of Board appointments and
the percentage of female Directors on the Board
since 2014 is set out on pages 68 and 69.
During the year the Committee noted the Parker
Review initiative to improve ethnic diversity on
Boards and will consider this as the renewal
policy evolves.
In August 2017, Maeve Carton retired from the
Board and as an executive. In December 2017,
Ernst Bärtschi also left the Board.
The Committee recommended to the Board
that Pat Kennedy and Lucinda Riches who had
both completed their initial three year term as
non-executive Directors each be appointed for
a second three year term. The Committee has
also recommended that Heather Ann McSharry
be appointed for a third term of three years.
In 2017, the Committee engaged Irish and
international recruitment agencies to identify
candidates for the role of non-executive Director.
As a result of that process, Richard Boucher
will be appointed to the Board with effect
from 1 March 2018. We also identified some
candidates who were not available to join the
Board at the present time but who will remain
part of our longer term pipeline of prospective
candidates. Amongst the factors reflected in the
terms of reference agreed with the agencies for
the recruitment process were the blend of skills
required by the Board, both now and in the
next few years, the need to ensure appropriate
levels of gender diversity on the Board and the
desire of the Board to have a strong pool of
candidates for key non-executive positions.
Last year I reported that the Committee
had commenced a process to consider the
requirements for the appointment of my
successor as Chairman. Led by the Senior
Independent Director, Don McGovern,
the Committee put in place a detailed job
specification for the role. A thorough and robust
process to identify my successor is ongoing.
In order to aid the transition in due course, the
Board has asked me to extend my term as
Chairman, which was due to expire in April this
year. I have acceded to this request to act as a
bridge until my successor has been identified
and a timeline for induction and appointment
has been agreed.
External agents (Korn Ferry and Leaders Mores)
were used to identify candidates during the
course of 2017 and to date in 2018. Korn Ferry
provide other services to the Group in the area
of human resources.
Safety, Environmental & Social
Responsibility Committee
In CRH, safety and sustainability issues are
important to our employees, the management
team and the Board. To reflect this, and to
ensure that the Board gives an appropriate level
of focus to monitoring and supporting various
initiatives, the Board has decided to put in place
a dedicated Safety, Environmental & Social
Responsibility Committee during 2018.
Committee Composition
Following Ernst Bärtschi’s resignation from the
Board, the Committee recommended that Bill
Teuber be appointed as Chairman of the Audit
Committee. Bill has been a member of the Audit
Committee since 2016 and has previously been
designated as the Audit Committee's financial
expert.
During the course of 2018, the Committee
will consider the composition of the Board's
Committees, including the new Safety,
Environmental & Social Responsibility
Committee.
Time Commitment
With effect from 1 January 2018, I have
taken over the role of non-executive
Chairman of Musgraves, a non-listed
food retailing company which I have
been a director of for a number of years.
I am satisfied that the incremental
responsibilities resulting from this new position
will not impact on my time commitment to CRH.
Prior to accepting the role, I discussed the
nature of, and the time requirement associated
with, the position with the Nomination &
Corporate Governance Committee.
Board Effectiveness
In accordance with the Board’s procedures, the
Senior Independent Director has interviewed
all Directors to evaluate the effectiveness of the
operation of the Board and its Committees.
Action points and recommendations arising
from the resulting report will be addressed
during the course of 2018. In addition, each of
the Committees reviewed its own performance
during the course of the year. An externally
facilitated Board evaluation in relation to the
effectiveness of the Board and its Committees
will be carried out later this year.
Nicky Hartery
Chairman of Nomination & Corporate
Governance Committee
February 2018
67
CRH Annual Report and Form 20-F I 2017 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.
To date, the Board has not set any policy
regarding age. The ages of the Directors
range from 49 to 67, which the Nomination &
Corporate Governance Committee believes is
appropriate at the current time.
Individual Directors may seek independent
professional advice, at the expense of the
Company, in the furtherance of their duties as
a Director.
The Group has a Directors’ and Officers’
liability insurance policy in place.
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 2016 Code. Although he holds a
number of other directorships, the Board has
satisfied itself that these do not impact on his
role as Chairman. Changes in Mr. Hartery's
time commitments in the past 12 months
are outlined in the Nomination & Corporation
Governance Committee section on page 67.
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 (including
education or professional background)
in areas relevant to the operation of the
Board;
•
diversity, including nationality and
gender; and
•
the need for an appropriately sized Board
During the ongoing process of Board renewal,
each, or a combination, of these factors can
take priority.
In 2014, the Board set itself a goal of
increasing the number of female Directors to
25%. The progress made since is shown in
table 6.
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
In addition, a Safety, Environmental & Social
Responsibility Committee will be set up during
the course of 2018. Ad-hoc Committees are
formed from time to time to deal with specific
matters.
Each of the 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 has reviewed their
respective Terms of Reference.
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
*
**
68
In accordance with Section 167(7) of the Companies Act 2014.
The Terms of Reference of these Committees comply fully with the 2016 Code; CRH considers that the Terms of Reference are generally responsive to the relevant NYSE rules, but may not address
all aspects of these rules.
CRH Annual Report and Form 20-F I 2017
Membership of the CRH Board (as at 28 February 2018)
Independence (determined
by CRH Board annually)
Tenure of non-executive
Directors (excluding Chairman)
Geographical Spread
(by residency)
Table 5
Gender Diversity
20%
Non-
Independent
80%
Independent
71% 29%
3-6 years
0-3 years
50%
Ireland
30%
North
America
10%
Mainland
Europe
10%
UK
30%
Female
70%
Male
% Female Directors at 31 December
2013
15%
2014
23%
2015
29%
2016
33%
Attendance at meetings during the year ended 31 December 2017
Table 6
2017
30%
Table 7
Name
Board
Acquisitions
Audit
Finance
Nomination &
Corporate Governance
Remuneration
Total Attended
Total Attended
Total Attended
Total
Attended
Total
Attended
Total
Attended
-
4
5
5
-
-
5
5
-
-
5
-
-
4
5
5
-
-
5
5
-
-
5
-
7
-
-
-
-
7
-
-
-
-
7
7
7
-
-
-
-
7
-
-
-
-
7
7
5
3
5
-
-
-
-
5
-
-
-
5
5
3
5
-
-
-
-
5
-
-
-
5
-
-
5
5
5
-
-
-
4
5
-
-
-
-
5
5
5
-
-
-
4
5
-
-
-
-
-
9
9
9
-
-
6
9
-
-
-
-
-
9
9
9
-
-
6
9
-
-
E.J. Bärtschi (i)
M. Carton (ii)
N. Hartery
P.J. Kennedy
D.A. McGovern, Jr.
H.A. McSharry
A. Manifold
S. Murphy
G.L. Platt (iii)
L.J. Riches
H. Th. Rottinghuis
W.J. Teuber, Jr.
6
4
6
6
6
6
6
6
6
6
6
6
6
4
6
6
6
6
6
6
6
6
6
6
(i) Resigned December 2017
(ii) Retired August 2017
(iii) Appointed January 2017
All Directors attended the 2017 AGM.
69
CRH Annual Report and Form 20-F I 2017
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 2017 are provided in table
8. The Company has not been advised of any
changes in holdings since 31 December 2017.
Compliance Training (ACT - including
Anti-bribery, Anti-Fraud, Anti-theft and
Competition/Antitrust) e-Learning modules
were reviewed, redesigned and distributed in
23 languages during the year.
In addition, new GDPR and Data Privacy
e-Learning modules were developed for
general awareness amongst the CRH
businesses and also for specific business
functions.
Stock Exchange Listings
CRH, which is incorporated in Ireland and
subject to Irish company law, has a premium
listing on the London Stock Exchange (LSE),
a secondary listing on the Irish Stock Exchange
(ISE) and its American Depositary Shares
are listed on the New York Stock Exchange
(NYSE).
Regulatory, Compliance
& Ethics
CRH’s Regulatory, Compliance & Ethics (RCE)
programmes support the Group in operating
sustainably and consistently to its core values
of integrity, honesty and respect for the law.
RCE provides support on a range of matters
including compliance risk assessments, export
controls and sanctions processes, monitoring
of hotline calls, competition/antitrust law as
well as preparation for the implementation of
the European Union General Data Protection
Regulations (GDPR).
Awareness and Training
In line with our commitment to maintain high
ethical business standards, the Code of
Business Conduct (CoBC) and Advanced
Substantial Holdings
During 2017, RCE has worked with HR, IT,
legal and business teams to develop policies,
guidance and implementation plans as part of
preparations to address the impact of GDPR.
A robust communication plan is in place to
complement the training programmes and
promote awareness among employees.
Hotline
A 24/7 multi-lingual confidential “Hotline” facility
called “Speak Up” is available to employees to
report issues that concern them, for example
issues concerning business ethics or conduct.
The “Hotline” is maintained by an independent
operator.
All reports received via the Hotline (or
through other channels) are investigated
with appropriate actions taken based on
investigation findings. The collective goal is to
ensure that the message is clearly understood
that at CRH “there is never a good business
reason to do the wrong thing”.
Communications with
Shareholders
Communications with shareholders are
given high priority and the Group devotes
considerable time and resources each year to
shareholder engagement. We recognise the
importance of effective dialogue as an integral
element of good corporate governance. The
Investor Relations team, together with the Chief
Executive, Finance Director and other senior
executives, regularly meet with institutional
shareholders (each year covering over 60%
of the shareholder base). Detailed reports on
the issues covered in those meetings and the
views of shareholders are circulated to the
Board after each group of meetings. Table 10
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 2017, the Chairman, Senior
Independent Director and Company Secretary
again participated in a number of meetings
with some of the Group’s major shareholders,
details of which are set out in the Chairman's
letter on page 62.
We also respond throughout the year to
correspondence from shareholders on a wide
range of issues.
Table 8
As at 31 December 2017, the Company had received notification of the following interests in its Ordinary Share capital, which were equal to, or in excess of, 3%:
Name
31 December 2017
31 December 2016
31 December 2015
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.
Holding below 3%
BlackRock, Inc. (i)
Standard Life Aberdeen plc.
UBS AG
75,119,286
25,643,747
26,380,604
8.95
3.05
3.14
33,171,299
74,809,499
3.98
8.98
41,193,797
74,030,167
5.00
8.99
Holding below 3%
Holding below 3%
26,380,604
3.16
26,380,604
3.20
(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 2017
US Listing - Additional Information
Table 9
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 10
•
•
•
•
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 11
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 2017
Directors’ Remuneration Report
Chairman’s Overview
Introduction
As Chairman of the Remuneration Committee,
I am pleased to present the Directors’
Remuneration Report for the year ended 31
December 2017. As in previous years, the main
report is split into three sections:
•
this Chairman’s Statement (pages 72 and
73);
• a summary of the main features of the
Directors’ Remuneration Policy (the ”Policy”)
approved by shareholders at the 2016 AGM
(pages 76 to 83). The full Policy is detailed
in the Group’s 2015 Annual Report (pages
95 to 106); and
•
the Annual Report on Remuneration
(pages 84 to 95)
We have also included a remuneration summary
on page 73, which provides an overview of the
key remuneration outcomes for 2017, as well
as the proposed remuneration arrangements
for 2018.
2017 Performance
2017 was a year of continued profit growth
for CRH. With a focus on performance
improvement and operational delivery, margins
72
and returns were ahead of 2016 in our
Americas and Europe Divisions. Supported
by strong operational cash generation we
continued to deliver value through efficient
capital management.
2017 Performance Highlights
Earnings Per Share:
Operating Cash Flow:
Return on Net Assets:
Total Shareholder Return*:
226.8 cent
€2.2 billion
10.6%
17.2 %
* Annualised three-year Total Shareholder Return
to 31 December 2017
Incentive Outcomes for 2017
The Group’s performance in 2017, as well
as individual performance during the year,
has translated into annual bonus payouts
of between 90% and 96% of the maximum
opportunity.
The Committee also determined that 78.7%
of the awards made in 2015 under the 2014
Performance Share Plan (PSP) had met the
relevant performance criteria as performance
in relation to TSR (75% of the award) and
cumulative cash flow (25% of the award)
metrics exceeded the relevant threshold targets
for vesting. The Committee considers that the
vesting outcome is reflective of the Group’s
underlying performance over the applicable
performance period (1 January 2015 to 31
December 2017). In accordance with the Policy,
the 2015 awards for the executive Directors
will vest in 2020 on completion of an additional
two-year hold period (see page 84 for more
details).
Further details in relation to the remuneration
received by the executive Directors are set
out in the Annual Report on Remuneration on
pages 75 to 95.
Shareholder Engagement
The Committee is committed to engaging
with shareholders to understand their views
on remuneration. Prior to the AGM in 2017
we received feedback from investors holding
approximately one third of the shares in issue
on a range of topics including the Policy and
its implementation. We continued to engage
with shareholders in 2017; we subsequently
contacted investors holding 70% of the
shares in issue and received valuable
feedback not only on the Committee’s
specific proposals for 2018 but on our approach
to remuneration generally. I appreciate the
time taken by shareholders to engage with the
Committee on remuneration matters.
The outcome of the vote on the Annual Report
on Remuneration at the 2017 AGM is shown in
table 15. We will consider the full range of views
from shareholders when we begin the process
of reviewing the Remuneration Policy, which is
scheduled to be voted on by shareholders at
the 2019 AGM.
Remuneration in 2018
In 2017, the Committee carried out a review of
Senan Murphy’s Finance Director remuneration
package. The drivers for the review were as
follows:
• Senan was appointed as Finance Director
in January 2016 on a significantly
below-market salary, with the expectation
that his salary would increase over time;
• Since his appointment Senan has
performed exceptionally well and grown
significantly in his role, and is a key member
of the Group’s executive leadership team;
and
• 2017 was a year of change for the
executive team at CRH, with Mark Towe
(Chairman, CRH Americas) and Maeve
Carton (Group Transformation Director)
retiring from the Board on 31 December
2016 and 31 August 2017 respectively.
Following these changes, Senan’s remit
expanded to include certain areas that
previously fell within Maeve’s responsibility
in her Group Transformation Director
role. However, he retained responsibility
for his existing functions (which includes
performance management, a function
that did not previously report to his
predecessors)
The review highlighted that Senan’s current
overall remuneration package was significantly
below market when compared to similar roles
in FTSE 50 companies (excluding financial
services) and sector peer companies, driven
primarily by a lower quartile salary compared
with market.
The Committee, therefore, believed an
adjustment was necessary and consulted with
shareholders on a proposal to increase his
base salary to broadly bring him into line with
the market. While the majority of shareholders
who responded to the consultation were in
CRH Annual Report and Form 20-F I 2017 favour of the proposal put forward, a number
of shareholders queried whether the level of
salary increase proposed was appropriate
in a single year, particularly following the
percentage increase he received in 2017. In
addition, we received feedback suggesting that
any adjustments should increase shareholder
alignment.
Taking all of the feedback into account, the
Committee decided to increase Senan’s salary
by 9.8%, which is materially less than initially
proposed. In addition, the Committee has
taken steps to increase shareholder alignment
by increasing Senan’s PSP award level in
2018 by 25% of salary, while at the same time
increasing his shareholding requirement from
one times salary to two times salary to be
achieved within five years. The revised proposal
results in a position whereby Senan’s total
expected remuneration remains significantly
below market. Overall, the Committee believes
that the changes are fair, balanced and to the
extent possible are reflective of the full range
of feedback received from the consultation
process.
For 2018, Albert Manifold will receive an
increase in salary of 3%, which is broadly
consistent with the average increases for
executives in CRH’s core geographies and
the increase for the wider workforce. The
other elements of his remuneration will remain
unchanged.
As outlined above, Senan Murphy’s salary will
increase by 9.8%, taking his salary to €775,000.
In addition, his PSP award for 2018 will increase
to 225% of salary (previously 200% of salary).
2018 Annual Bonus Plan
The metrics for the 2018 annual bonus are
unchanged from last year, and are set out in
table 13.
2018 Performance Share Plan
Awards
The metrics and targets for awards to be made
under the PSP in 2018 are set out in table 29
on page 87.
The Committee is aware that a number of
shareholders would like to see a returns based
metric introduced when possible. At present,
the Committee believes that the focus on TSR
and Cashflow remains appropriate in terms of
the Group’s current strategic priorities. Return
on Net Assets (RONA) remains a core element
of the Annual Bonus Plan and will continue to
be an underpin for the TSR element of PSP
awards made in 2018, whereby at the end of
the performance period the Committee will
carefully consider the RONA performance of the
business. The PSP outcome may be adjusted
downwards if RONA performance has not met
the expectations of the Board.
The Committee will continue to evaluate the mix
of metrics for the PSP and, in particular, will take
this issue into consideration when considering
the updated Remuneration Policy to be put to
shareholders for consideration in 2019.
Board changes
Maeve Carton retired from the Board and
from CRH on 31 August 2017. All elements of
Maeve’s remuneration have been treated in line
with the Remuneration Policy and relevant plan
rules. Details are outlined in table 16 on page
74. Maeve has also entered into an agreement
to provide consultancy services to the Group
for a maximum of 40 days per year at a rate of
€2,500 per day. As a result, the Group will retain
access to Maeve’s significant knowledge of the
industry and she may continue to represent
CRH in key strategic relationships.
Conclusion
The Committee believes that the remuneration
paid to the executive Directors in respect of
2017 is appropriate and is well aligned with
the performance of the Company and the
value delivered for shareholders. We hope to
receive your support for the Annual Report on
Remuneration at the 2018 AGM. In addition,
I look forward to engaging further with
shareholders as we undertake a review of our
Policy later this year.
Donald A. McGovern, Jr.
Chairman of Remuneration Committee
28 February 2018
Executive Directors’ Remuneration Summary
2017 Remuneration Snapshot
(full details of 2017 remuneration are set out in table 17 on page 75)
Table 12
Director
Fixed
Salary
Performance Related Variable Remuneration
Annual Bonus
(% of max)
Value of PSP awarded
in 2015 (ii) (% of max)
Albert Manifold
€1,442,000
Maeve Carton (i)
Senan Murphy
€470,475
€705,713
96%
90%
96%
78.7%
78.7%
Not applicable (iii)
(i)
Retired from the Board and from CRH on 31 August 2017. The salary in the table above is pro-rated
for service to her retirement. The equivalent salary for 12 months would be €705,713. Details of her
remuneration arrangements on retirement are set out in table 16 on page 74.
(ii) The awards, for which performance was measured over the three-year period to end 2017, will vest
at 78.7% in 2020 following the completion of a two-year holding period. Further details in relation to
the estimated value of the awards, split between the value created for performance and the value
created through share price growth, are included in table 17 on page 75. The market value per share
on the date of award (March 2015) was €24.42.
(iii) Appointed to the Board in January 2016.
2018 Remuneration Snapshot
Table 13
Director
Salary
Albert Manifold
€1,485,260
+3%
Senan Murphy
€775,000
+9.8%
(i) Subject to a RONA underpin.
Max. Annual
Bonus
(% of salary)
Metrics for
2018 Award
2018 PSP
Award
(% of salary)
Metrics for
2018 PSP
Award
225%
150%
• EPS (25%)
• RONA (25%)
• Operating cash
flow (30%)
• Personal/
Strategic (20%)
365%
225%
• TSR (50%) (i)
• Cash flow (50%)
73
CRH Annual Report and Form 20-F I 2017
Directors’ Remuneration Report - continued
TSR Performance (2008 - 2017)
Table 14
300
250
200
150
100
50
0
8
0
0
2
9
0
0
2
CRH
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
7
1
0
2
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.
2017 AGM – Remuneration Related Votes (i)
Table 15
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”)
2017
82.31
17.69
8,260,492
522,037,881
62.45
(i) The outcome of the remuneration related votes at the 2016 AGM is set out on page 94 of the 2016 Annual Report and Form 20-F.
Maeve Carton – Remuneration Arrangements on Retirement
Table 16
Salary
Bonus
Pension
Maeve received her normal salary up to the date of her retirement.
Maeve received a pro-rated bonus in respect of performance from 1 January 2017 to her date of retirement. The bonus was
paid entirely in cash.
As outlined in table 17 on page 75, Maeve received her normal supplementary taxable non-pensionable cash allowance,
pro-rated for service from 1 January 2017 to her date of retirement.
2014 Performance Share
Plan
Unvested Awards: Maeve's oustanding unvested awards (i.e. the awards made in 2015, 2016 and 2017) will be released on their
normal release dates subject to performance (to be measured at the normal time) and will be subject to the normal two-year
holding period.
Vested Awards: Maeve's vested awards (i.e. the award made in 2014) will be released at the normal release date following the
completion of the two-year holding period.
Deferred Share Awards
Maeve's outstanding awards (i.e. the awards in relation to her 2015, 2016 and 2017 bonuses), adjusted for dividends accruing
from the date of award, were released to her in November 2017.
2010 Savings-related
Share Option Scheme
Maeve's outstanding award (i.e. the award granted in 2014) will remain in force and will vest at the normal vesting date in 2019.
74
CRH Annual Report and Form 20-F I 2017
Individual Executive Remuneration for the year ended 31 December 2017 (Audited)
Table 17
Albert Manifold
Maeve Carton(i)
Senan Murphy(ii)
Mark Towe(iii)
Fixed Pay
Basic Salary (iv)
Benefits (v)
Retirement Benefit Expense (vi)
Total Fixed Pay
Performance Related Pay
Annual Bonus (vii):
Cash Element
Deferred Shares
Total Annual Bonus
Long-term Incentives (viii):
Performance Share Plan
2017
€000
2016
€000
2015
€000
2017
€000
2016
€000
1,442
1,400
1,290
35
677
22
671
22
607
2,154
2,093
1,919
2,338
2,323
1,451
779
774
484
3,117
3,097
1,935
470
18
135
623
634
-
634
689
10
252
951
748
250
998
- value delivered through performance
2,720
3,171
- value delivered through share price growth
668
1,622
Vested Share Options
-
-
907
466
209
1,138
1,320
280
675
-
-
2015
€000
675
10
282
967
734
245
979
630
323
145
Total Long-term Incentives
3,388
4,793
1,582
1,418
1,995
1,098
2017
€000
706
25
176
907
2016
€000
625
22
156
803
762
254
1,016
679
227
906
-
-
-
-
-
-
-
-
Total Performance Related Pay
6,505
7,890
3,517
2,052
2,993
2,077
1,016
906
Total Single Figure
8,659
9,983
5,436
2,675
3,944
3,044
1,923
1,709
(fixed and performance-related)
2015
€000
2017
€000
2016
€000
2015
€000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,309
1,280
74
262
72
256
1,645
1,608
1,447
1,416
483
472
1,930
1,888
2,155
1,134
1,102
-
588
266
3,257
1,988
5,187
3,876
6,832
5,484
Maeve Carton retired as a Director and from CRH on 31 August 2017.
(i)
(ii) Senan Murphy was appointed as a Director with effect from 1 January 2016.
(iii) Mark Towe retired as a Director on 31 December 2016.
(iv) Basic Salary: Further details and background in relation to the changes in salaries effective for 2017 are set out on page 73 of the 2016 Directors’
Remuneration Report.
(v) Benefits: For executive Directors these relate principally to the use of company cars, medical insurance and life assurance and, where relevant, the value of
the non-taxable discount on the grant of options under the Group’s 2010 SAYE Scheme and any retirement gifts.
(vi) Retirement Benefit Expense: As noted on page 92, 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. Following her retirement on 31 August 2017, the amount due to Maeve Carton
has been pro-rated for service in the period from 1 January 2017 to 31 August 2017. Senan Murphy receives a supplementary taxable non-pensionable
cash supplement equivalent to 25% of his annual base salary in lieu of a pension contribution.
(vii) Annual Bonus Plan: Under the executive Directors’ Annual Bonus Plan for 2017, a bonus was payable for meeting clearly defined and stretch targets and
strategic goals. The structure of the 2017 Annual Bonus Plan, together with details of the performance against targets and payouts in respect of 2016 and
2017, are set out on page 85. For 2017, 2016 and 2015 bonuses, 25% of executive Directors’ bonuses were paid in Deferred Shares, vesting after three
years, with no additional performance conditions. In the case of Maeve Carton, following her retirement in 2017 the Remuneration Committee determined
that the Deferred Shares in respect of the bonuses granted in 2015 and 2016 should be released to her and that her 2017 bonus, pro-rated for service to
her retirement in August 2017, should be paid in cash.
(viii) Long-term Incentives: In February 2018, the Remuneration Committee determined that 78.7% of the performance conditions which applied to the PSP awards
made in 2015 have been met. The awards are subject to a two-year holding period and will vest in 2020. For the purposes of this table, the value of these awards
(including accrued dividend equivalents), which were subject to a three-year performance period ending in 2017, has been estimated using a share price of €30.42,
being the three-month average share price to 31 December 2017. Amounts in the long-term incentive column for 2016 reflect the value of long-term incentive
awards with a performance period ending in 2016 (i.e. the PSP awards granted in 2014), which the Remuneration Committee determined in February 2017 had
met the applicable performance targets. The awards are scheduled to vest in 2019 following the completion of a two-year holding period. For the purposes of this
table, the value of these awards (including accrued dividend equivalents) has been estimated using a share price of €30.97, being the three-month average share
price to 31 December 2016. Amounts in the long-term incentive column for 2015 reflect the value of PSP and share option awards granted in 2013, which the
Remuneration Committee determined in 2015 had met the applicable performance targets. For the purposes of this table, the awards have been valued based on
the market value of the shares on the respective date of vesting, which was €24.50 in the case of the 2013 PSP award and €25.11 in the case of the 2013 options,
less, in the case of the 2013 options, the total exercise cost.
75
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Structure of Directors’
Remuneration Report
This report, including the Committee
Chairman's introduction on pages 72 and 73,
sets out details of:
•
•
•
the Directors’ Remuneration Policy, which
was approved by shareholders at the 2016
AGM;
the key areas of focus for the Remuneration
Committee during 2017;
the remuneration paid to Directors in
respect of 2017;
• how the Policy will operate for 2018; and
• other areas of disclosure
The Directors’ Remuneration Report, excluding
the Summary of Directors’ Remuneration
Policy on pages 76 to 83, will be put to
shareholders for the purposes of an advisory
vote at the AGM to be held on 26 April 2018.
The 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 and 61.
A schedule of attendance at Committee
meetings is set out in table 7 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 the executive
Directors and senior management; and
• oversees the preparation of this Directors’
Remuneration Report
In considering remuneration levels for executive
Directors particularly, the Committee takes
into account remuneration trends across
the CRH Group, which has a diverse range
of operations in 32 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.
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 2018,
the full text has not been reproduced in this
report. The following paragraphs and tables 18
to 22 on pages 78 to 83 provide a summary of
the key elements of the Policy.
As an Irish incorporated company, CRH is not
required to comply with section 439A of the
UK Companies Act 2006 which requires UK
companies to submit their remuneration policy
to a binding shareholder vote.
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. 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 European Union Commission’s
recommendations on remuneration in listed
companies.
CRH's Approach to Remuneration
The purpose of the Policy is to:
Attract and retain Directors of the highest calibre
Properly reward and motivate executive Directors to
perform in the long-term interests of the shareholders
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
Provide an appropriate blend of fixed and variable remuneration
and short and long-term incentives for executive Directors
Reflect the risk policies of the Group
76
CRH Annual Report and Form 20-F I 2017 Concrete samples being tested for water resistance in the Concrete Lab at Podilsky Cement
in the Ukraine. Podilsky has been part of CRH’s Europe Heavyside Division since 1999 and is
one of the largest and most modern dry process cement producers in Europe.
77
CRH Annual Report and Form 20-F I 2017 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 18 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 2017 can be found on pages 84 to 93
of the Annual Report on Remuneration.
Policy for Executive Directors
Table 18
Element
Fixed Base Salary
Fixed Pension
Purpose and
link to strategy
• Competitive salaries help to attract and retain staff
with the experience and knowledge required to
enable the Group to compete in its markets
• Pension arrangements provide competitive and appropriate retirement plans
• Given the long-term nature of the business, pension is an important part of the
remuneration package to support creation of value and succession planning
Operation
• Base salaries are set by the Committee taking into
•
account:
–
–
–
the size and scope of the executive Director’s
role and responsibilities;
the individual’s skills, experience and
performance;
salary levels at FTSE listed companies of a
similar size and complexity to CRH and other
international construction and building materials
companies; and
– pay and conditions elsewhere in the Group
• Base salary is normally reviewed annually with
changes generally effective on 1 January, although
the Committee may make an out-of-cycle increase
if it considers it to be appropriate
Ireland-based executive Directors can participate in a defined contribution
scheme, or in certain circumstances can opt for a taxable, non-pensionable,
supplementary cash alternative in lieu of pension contributions. Ireland-based
executive Directors who joined the Group prior to 31 December 2011
participate in a contributory defined benefit scheme which closed to new
entrants on that date
• US-based executive Directors can participate in a defined contribution
scheme and in an unfunded Supplemental Executive Retirement Plan (SERP)
• For new appointments to the Board the Committee may determine that
alternative pension provisions will operate (for example a cash contribution).
When determining pension arrangements for new appointments the
Committee will give regard to existing entitlements, the cost of the
arrangements, market practice and the pension arrangements received
elsewhere in the Group
Maximum
opportunity
• Base salaries are set at a level which the
Committee considers to be appropriate taking into
consideration the factors outlined in the Operation
row above
• The entitlement of individuals participating in defined contribution schemes
reflects the accumulated individual and matching company contributions
paid into the schemes. At present no Ireland-based executive Directors are
members of a defined contribution scheme
• 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
• For the two Ireland-based executive Directors on the Board during 2017 who
joined the Group prior to 31 December 2011, the defined benefit pension is
provided through an Irish-revenue approved retirement benefit scheme (the
'Scheme'). Accrued benefits for service to 31 December 2011 are based
on pensionable salary and years of service as at that date (annual accrual
of 1/60ths), with this tranche being revalued annually at the Consumer
Price Index subject to a 5% ceiling. For service subsequent to that date a
career-average revalued earnings system was introduced with each year of
service being subject to annual revaluation on the same basis as outlined
above. Ireland-based executive Directors have elected to cease accruing
pensions benefits and to receive a supplementary taxable non-pensionable
cash allowance in lieu of pension benefits foregone as a result of the pension
cap (see page 92 for more details). These allowances are similar in value to
the reduction in the Company’s liability represented by the pension benefit
foregone. Whilst there is no absolute maximum to the quantum of these
payments they are calculated based on actuarial advice as the equivalent of
the reduction in the liability the Company would otherwise have had under the
Scheme in respect of each individual’s benefits and spread over the term to
retirement as annual compensation allowances
• US-based executive Directors can participate in a defined contribution
retirement plan in respect of basic salary; and in addition can participate in a
SERP also in respect of basic salary, to which contributions are made at an
agreed rate (20%), offset by contributions made to the other retirement plan
Performance
measure
Not applicable
Not applicable
78
CRH Annual Report and Form 20-F I 2017 Policy for Executive Directors - continued
Element
Fixed Benefits
Purpose and
link to strategy
• To provide a market-competitive level of benefits for executive Directors
Operation
• The Committee’s policy is to set benefit provision at an appropriate market-competitive level taking into account market practice, the
level of benefits provided for other employees in the Group, the individual’s home jurisdiction and the jurisdiction in which the individual is
based
• Employment-related benefits include the use of company cars (or a car allowance), medical insurance for the Director and his/her family
and life assurance
•
In the event that the Chief Executive falls ill or is injured in such a way as which would constitute ill-health or disablement so that the
Chief Executive could not work for a period of more than six months, in lieu of the early ill-health retirement provisions in the pension
scheme which would otherwise operate in such cases, he shall be entitled to receive a disability salary of €1,000,000 per annum. Such
payment would cease when the Chief Executive reaches age 60, returns to work or if the service agreement is terminated
• US-based executive Directors can also receive benefits in relation to club membership and short-term disability insurance
• Benefits may also be provided in relation to legal fees incurred in respect of agreeing service contracts, or similar agreements (for which
the Company may settle any tax incurred by the executive Director) and a gift on retirement
• The Committee may remove benefits that executive Directors receive or introduce other benefits if it is considered appropriate to do so.
The Company may also pay the tax due on benefits if it considers that it is appropriate to do so
• Executive Directors are eligible to participate in the Company’s all-employee share schemes on the same terms as other employees.
Executive Directors may also receive other benefits which are available to employees generally
• Relocation policy: where executive Directors are required to relocate to take up their role, the Remuneration Committee may determine
that they should receive appropriate relocation and ongoing expatriate benefits. The level of such benefits would be determined based
on individual circumstances taking into account typical market practice
• 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
Maximum
opportunity
Performance
measure
Not applicable
79
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Policy for Executive Directors - continued
Table 18 - 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 2018:
– 75% of the bonus will be paid in cash; and
– 25% will be paid in shares (deferred element)
•
In future years, the Committee may determine that a different balance between cash and shares is appropriate and adjust the relevant
payments accordingly
• When assessing performance and determining bonus payouts the Committee also considers the underlying financial performance of the
business to ensure it is consistent with the overall award level
• The deferred element of the bonus will be structured as a conditional share award or nil-cost option and will normally vest after three
years from grant (or a different period determined by the Committee). Deferred share awards may be settled in cash
• Dividend equivalents may be paid on deferred share awards in respect of dividends paid during the vesting period. These payments may
be made in cash or shares and may assume the reinvestment of dividends on a cumulative basis
• For deferred awards, ‘malus’ provisions apply. Cash bonus payments are subject to clawback of the net amount paid for a period of
three years from payment
Maximum
opportunity
• Maximum annual opportunity of 225% of base salary
• For 2018, the intended maximum award levels are:
– 225% of base salary for Chief Executive; and
– 150% of base salary for Finance Director. The Committee may increase the percentage in the future up to a maximum
of 225%
Performance
measure
• The Annual Performance-related Incentive Plan is based on achieving clearly defined and stretching annual targets and strategic goals
set by the Committee each year based on key business priorities
• The performance metrics used are a mix of financial targets including return goals and personal/strategic objectives generally. Currently
80% of the bonus is based on financial performance measures. The Committee may vary the weightings of measures but no less than
50% shall be based on financial performance measures
• A portion of the bonus metrics for any Director may be linked to his/her specific area of responsibility
• Up to 50% of the maximum bonus will be paid for achieving target levels of performance
80
CRH Annual Report and Form 20-F I 2017 Policy for Executive Directors - continued
Element
Purpose and
link to strategy
Performance-related Incentive
Performance Share Plan (PSP)
• The purpose of the PSP is to align the interest of key management across different regions and nationalities with those of shareholders
through an interest in CRH shares and by incentivising the achievement of long-term performance goals
•
‘Malus’ provisions enables the Company to mitigate risk
Operation
• Awards (in the form of conditional share awards or nil-cost options) normally vest based on performance over a period of not less than
three years. Awards may also be settled in cash
• Awards are normally subject to an additional holding period ending on the fifth anniversary of the grant date (or another date determined
by the Committee)
• Dividend equivalents may be paid on PSP awards that vest in respect of dividends paid during the vesting period until the end of the
holding period. These payments may be made in cash or shares and may assume reinvestment on a cumulative basis
•
‘Malus’ provisions (as set out in the rules of the 2014 Performance Share Plan) will apply to awards
Maximum
opportunity
• Maximum annual opportunity of up to 365% of salary
• For 2018 the intended award levels are:
– 365% of base salary for Chief Executive; and
– 225% of base salary for Finance Director. The Committee may increase the percentage in the future up to a maximum
of 365%
Performance
measure
• Awards to be granted in 2018 will vest based on a relative TSR test compared to a tailored group of key peers (25%) and an index
comparator (25%), and cumulative cash flow performance (50%) (see page 93 for details in relation to the 2018 awards)
• For threshold levels of performance, 25% of the award vests
• Where applicable, when determining vesting under the PSP the Committee reviews whether the TSR performance has been impacted
by unusual events and whether it reflects the underlying performance of the business. In addition, the Committee considers financial
performance (including RONA) in the period to ensure that TSR performance is consistent with the objectives of the performance criteria
and was not distorted by extraneous factors
• The Committee may in future years change performance measures including introducing additional performance measures for awards
made under this Policy, for example, returns-based measures
• The Committee may amend the performance conditions if an event occurs that causes it to consider that an amended performance
condition would be more appropriate and would not be materially less difficult to satisfy
81
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Summary of Directors’ Remuneration Policy - continued
Remuneration outcomes in
different performance scenarios
Remuneration at CRH consists of fixed pay
(salary, pension and benefits), short-term variable
pay and long-term variable pay. A significant
portion of executive Directors’ remuneration is
linked to the delivery of key business goals over
the short and long-term and the creation of
shareholder value.
Table 21 shows hypothetical values of the
remuneration package for executive Directors
under three assumed performance scenarios.
No share price growth or the payment of
dividend equivalents has been assumed in these
scenarios. Potential benefits under all-employee
share schemes have not been included.
Hypothetical remuneration values
Chief Executive (Albert Manifold)
Finance Director (Senan Murphy)
(i) Based on 2017 expenses.
Remuneration outcomes in different performance scenarios
Table 19
Performance scenario
Payout level
Minimum
• Fixed pay (see table 20 for each executive Director)
• No bonus payout
• No vesting under the Performance Share Plan
On-target performance
• 50% annual bonus payout (112.5% of salary for the Chief
Executive and 75% for the Finance Director)
• 25% vesting under the Performance Share Plan (91.25% of salary
for the Chief Executive and 56.25% for the Finance Director)
Maximum performance
• 100% annual bonus payout (225% of salary for the Chief
Executive and 150% of salary for the Finance Director)
• 100% Performance Share Plan vesting (365% of salary for the
Chief Executive and 225% for the Finance Director)
Salary
With effect from
1 January 2018
€1,485,260
€775,000
Benefits
Level paid
in 2017(i)
€35,000
€25,000
Table 20
Estimated
Pension(ii)
Total
Fixed Pay
€743,000
€2,263,260
€193,750
€993,750
(ii) See page 92 for details in relation to retirement benefit arrangements.
Performance-related remuneration outcomes
Chief Executive
€11,026k
€5,289k
26%
31%
43%
€2,263k
100%
49%
30%
21%
Finance Director
Table 21
€3,900k
€2,011k
22%
29%
49%
€994k
100%
45%
30%
25%
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Fixed Pay
Annual Bonus Long-term Incentives
82
CRH Annual Report and Form 20-F I 2017
Policy for Non-Executive Directors
Table 22
Approach to setting fees
Basis of fees
Other items
• The remuneration of non-executive Directors
is determined by a Board committee of the
Chairman and the executive Directors
• The Remuneration Committee determines
the remuneration of the Chairman within
the framework or broad policy agreed with
the Board
• Remuneration is set at a level which will
attract individuals with the necessary
experience and ability to make a substantial
contribution to the Company’s affairs and
reflect the time and travel demands of
Board duties
• Fees are set taking into account typical
practice at other companies of a similar size
and complexity to CRH
• Fees are reviewed at appropriate intervals
• Fees are paid in cash
• Non-executive Director fees policy is to pay:
– a basic fee for membership of the Board;
– an additional fee for chairing a Committee;
– an additional fee for the role of Senior
Independent Director (SID) (if the SID is
not the Chairman of the Remuneration
Committee);
– an additional fee to reflect committee work
(combined fee for all committee roles); and
– an additional fee based on the location of
the Director to reflect time spent travelling to
Board meetings
• Other fees may also be paid to reflect other
Board roles or responsibilities
•
In accordance with the Articles of Association,
shareholders set the maximum aggregate
amount of the fees payable to non-executive
Directors. The current limit of €875,000 was set
by shareholders at the AGM held in 2016
• The non-executive Directors do not participate
in any of the Company’s performance-related
incentive plans or share schemes
• Non-executive Directors do not receive pensions
• The Group Chairman is reimbursed for expenses
incurred in travelling from his residence to
his CRH office. The Company settles any tax
incurred on this on his behalf
• Non-executive Directors do not currently receive
any benefits. However, benefits may be provided
in the future if, in the view of the Board (for
non-executive Directors or for the Chairman), this
was considered appropriate. The Company may
settle any tax due on benefits
83
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Following her retirement in 2017, the
Remuneration Committee has determined that
the 2017 bonus for Maeve Carton will be paid
entirely in cash.
2016 Annual Bonus – Retrospective
Disclosure of Targets
Similar to 2017, CRH’s Annual Bonus Plan for
2016 was based on a combination of financial
targets and personal/strategic goals. Due to
commercial sensitivity, specific targets were not
disclosed in the 2016 Directors’ Remuneration
Report. The Remuneration Committee
considers that Group-related targets for 2016
have ceased to be commercially sensitive and,
accordingly, these are set out in table 25 on
page 85.
Long-term Incentives
Performance Share Plan (the ‘PSP’)
2015 awards
In 2015, 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 the
award), and performance was measured over
the three-year period 1 January 2015 to
31 December 2017. Based on performance,
53.7% out of 75% will vest in respect of the
TSR element, and 25% out of 25% will vest in
respect of the Cumulative Cash Flow element
(resulting in an overall vesting level for the 2015
awards of 78.7%). The Committee considers
that the vesting outcome is reflective of the
Company’s underlying performance over the
performance period. In accordance with the
Policy, the 2015 awards to executive Directors
will vest in 2020 on completion of an additional
two-year holding period. Vested awards will
be adjusted for dividend equivalents based on
dividends in the period from grant to the date
of vesting in 2020. Table 26 on page 86 sets
out the relevant targets. Table 28 on page 86
sets out details of the awards.
2017 awards
During 2017 awards under the PSP were
made to the executive Directors, details of
which are summarised in table 31 on page 87.
50% of each award made in 2017 is subject
to a TSR measure, with 25% being measured
against a tailored sector peer group (see table
30 on page 87) and 25% against the FTSE
All-World Construction & Materials Index
(as at the start of the relevant performance
period). Given the importance of returns-
based measures to a number of our
shareholders, the TSR measure will be
subject to a RONA underpin. At the end
of the three-year performance period, the
Remuneration Committee will consider the
RONA performance of the business and the
outcome for the TSR element may be adjusted
(downwards only) if RONA performance has
not met the expectations of the Board and
the Remuneration Committee. The other 50%
of each award made in 2017 is subject to a
cumulative cash flow metric. The definition of
cash flow is the net increase/decrease in cash
and cash equivalents adjusted to exclude:
• dividends to shareholders;
• acquisition/investment expenditure;
• proceeds from divestments;
• 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 2017 will
be assessed over the three-year period to
31 December 2019. Details of the performance
targets are set out in table 29 on page 87.
Awards, to the extent that they vest, will be
adjusted for dividend equivalents based on
dividends in the period from grant to the date
of vesting in 2022. ‘Malus’ provisions apply to
the awards.
Annual Report
on Remuneration
Remuneration received by executive
Directors in respect of 2017
Details of individual remuneration for executive
Directors for the year ended 31 December
2017, including explanatory notes, are given
in table 17 on page 75. Details of Directors’
remuneration charged against profit in the year
are given in table 40 on page 95.
2017 Annual Bonus Plan
CRH’s Annual Bonus Plan for 2017 was
based on a combination of financial targets
and personal/strategic goals. The relative
weighting of the components of the plan,
together with indicative performance for each
measure is given in table 23 on page 85. The
performance by the Group in 2017 translated
to annual bonus payouts of between 90% and
96% of maximum. Specific financial targets for
the 2017 Annual Bonus Plan have not been
disclosed in this report as they are considered
by the Board to be commercially sensitive.
However, it is intended that Group-related
financial targets for 2017 will be disclosed in
the 2018 Directors’ Remuneration Report,
subject to the information no longer being
commercially sensitive at that time.
Details of each executive Director’s
personal/strategic objectives and their
achievement against these objectives are
set out in table 24 on page 85, with total
bonus payments of 216% of salary for Albert
Manifold, 135% of salary for Maeve Carton
(pro-rated for service from 1 January to her
retirement on 31 August 2017) and 144%
of salary for Senan Murphy representing a
percentage against the maximum payable of
96%, 90% and 96% respectively.
In accordance with the Policy, 25% of the
bonus amounts for Albert Manifold and Senan
Murphy will be deferred into shares for a
period of three years. Deferred Share awards
are not subject to any additional performance
conditions during the deferral period and are
adjusted for dividend equivalents based on
dividends paid by CRH during the deferral
period. Annual bonus awards are subject
to recovery provisions for three years from
the date of payment (cash awards) or grant
(deferred awards).
84
CRH Annual Report and Form 20-F I 2017 Annual Bonus Plan - 2017
2017 Annual Bonus - Achievement - Financial Targets (i)
Measure
CRH EPS
CRH Cash Flow (iii)
CRH RONA
Personal/Strategic
Total
Performance achieved relative to targets (ii)
Weighting
Threshold
Target
Maximum
25%
30%
25%
20%
100%
Table 23
Performance
Achieved
Percentage of
Maximum Awarded
166.2c (iv)
€2,234m
10.3% (iv)
25%
30%
24%
See table 24
11%-17%
90%-96%
(i)
Due to commercial sensitivity, 2017 targets will be disclosed in the 2018 Directors' Remuneration Report.
(ii) 0% of each element is earned at threshold, 50% at target and 100% at maximum, with a straight-line payout schedule between these points.
(iii) For the purpose of the annual bonus, operating cash flow has been defined as reported internally. The figure differs from the net cash inflow from operating
activities of €2,189 million reported in the Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows on the
purchase of property, plant and equipment (PP&E), net of proceeds for the disposal of PP&E, and before deducting interest and tax payments.
(iv) Reported EPS and RONA have been adjusted by the Remuneration Committee to exclude one-off benefits.
2017 Annual Bonus - Achievement - Personal/Strategic Targets
Directors
Weighting
Achievements
Table 24
Percentage of
Maximum Awarded
Albert Manifold
20%
Maeve Carton
20%
Senan Murphy
20%
Good progress in relation to the continued development of the Group Leadership team; effective leadership
for the Group's talent management process with a particular focus on management succession for senior
leadership roles; ongoing co-ordination of the assessment of strategic alternatives for the Group; ensuring
alignment of CRH's organisation structure with evolving strategy.
Continued development of the Group's regulatory, ethics and compliance functions; responsibility for the roll
out of CRH's IT security strategy and ensuring a cross-Group approach to cyber and information security;
supporting Internal Audit in relation to the development of an updated strategy; the development of a
medium-term strategy for Investor Relations, including the establishment of new offices.
Supporting the development and application of strategic initiatives for key lines of business; providing an
increased focus on talent management across the finance function for new and existing roles and continued
development of succession planning processes; sponsorship of a Group project initiative in relation to the
use of CRH branding by operating entities; continued maintenance of a strong risk and control environment;
effective management of relations with investors, banks, rating agencies and other key stakeholders.
17%
11%
17%
Annual Bonus Plan - 2016
2016 Annual Bonus - Achievement - Financial Targets (i)
Table 25
Performance needed for payout at
Measure
CRH EPS
CRH Cash Flow (ii)
CRH RONA
Weighting
Threshold
Target
Maximum
Performance
Achieved
Percentage of
Maximum Awarded
25%
30%
25%
76.7c
83.4c
87.6c
150.2c
€1,782m
€1,937m
€2,034m
€2,444m
6.2%
6.7%
7.2%
9.7%
25%
30%
25%
(i)
Due to commercial sensitivity, 2016 bonus targets were not disclosed in the 2016 Directors' Remuneration Report.
(ii) For the purpose of the annual bonus, operating cash flow has been defined as reported internally. The figure differs from the net cash inflow from operating
activities of €2,340 million reported in the 2016 Consolidated Statement of Cash Flows, primarily because it is calculated after deducting cash outflows
on the purchase of property, plant and equipment (PP&E), net of proceeds for the disposal of PP&E, and before deducting interest and tax payments.
85
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Long-Term Incentives - Awards 2015
Performance Share Plan Metrics
Table 26
TSR vs. tailored peer group
(75% of award) (i)
2015 Awards
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
100%
71.6%
25%
0%
Vesting Level
TSR element
vested at
71.6%(iii)
Median
Upper quartile
)
t
n
e
m
e
e
l
f
o
%
(
g
n
i
t
s
e
V
Cumulative cash flow
(25% of award) (ii)
100%
Vesting Level
Cumulative cash
flow element
vested at 100%(iii)
25%
0%
€2.9bn
€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, 2017 and 2018 awards.
(iii) For the purposes of the 2015 Award, TSR performance was in the 66th percentile against the tailored peer group (see table 27 below) and the cumulative
cash flow for the three years to end 31 December 2017 was €4.8 billion.
Peer Group for TSR Performance Metric for PSP Awards in 2015
Table 27
Boral
Buzzi Unicem
Cemex
Grafton Group
Heidelberg Cement
Martin Marietta Materials
Vulcan Materials
Italcementi
Kingspan Group
Lafarge
Holcim
Saint Gobain
Titan Cement
Travis Perkins
Wienerberger
Ferguson (formerly Wolseley)
2015 PSP Award - Vesting Details
Table 28
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
141,531
59,246
78.7%
78.7%
111,385
March 2020
46,627
March 2020
€30.42
€30.42
€3,388,329
€1,418,381
(i)
As the share price on the date of vesting is not yet known, for the purposes of this table, the value of these awards, which were subject to a three-year
performance period ending in 2017, has been estimated using a share price of €30.42, being the three-month average share price to 31 December 2017.
86
CRH Annual Report and Form 20-F I 2017
Long-Term Incentives - Awards in 2016, 2017 and 2018
Performance Share Plan Metrics Table 29
2016, 2017 and 2018 Awards
TSR vs. tailored peer group
(25% of award) (i)
100%
)
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
25%
0%
Median
Upper quartile
TSR vs. FTSE All-World Cons & Materials
(25% of award) (i)
100%
25%
0%
Index
Index +5% p.a.
2016 and 2017 Awards
Cumulative cash flow
(50% of award) (ii)
€2.8bn
€3.25bn
€3.7bn
2018 Award
Cumulative cash flow
(50% of award) (ii) (iii)
€3.3bn
€3.8bn
€4.3bn
)
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
100%
80%
25%
0%
100%
80%
25%
0%
(i) and (ii) see footnotes to table 26.
(iii) the cumulative cash flow target for the 2018 award includes the impact of the Ash Grove acquisition, the conclusion of which is subject to
regulatory approval.
Peer Group for TSR Performance Metric for PSP Awards in 2016, 2017 and 2018
Table 30
ACS
Boral
Braas Monier
Cemex
Buzzi Unicem
Heidelberg Cement
LafargeHolcim
Skanska
Vinci
Rockwool
Saint Gobain
Titan Cement
Wienerberger
Vicat
2017 PSP Award Details
Table 31
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
6 March 2017
Maeve Carton
6 March 2017
Senan Murphy
6 March 2017
163,254
43,779
43,779
€32.24
€32.24
€32.24
€5,263,309
€1,411,435
€1,411,435
365%
200%
200%
87
CRH Annual Report and Form 20-F I 2017
Directors’ Remuneration Report - continued
Summary of Outstanding Share Incentive Awards (Audited)
Table 32
Year of
Award
Performance Period
Release
Date
Market Value at
Date of Award
Exercise
Price
Balance at 31
December 2016
Granted
in 2017
Vested
in 2017
Exercised
in 2017
Lapsed
in 2017
Balance at 31
December 2017
Dividends Awarded
Market Value on Date
& Vested
of Exercise/Vesting
Albert Manifold
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
2010 Savings-Related Share Option Scheme
Maeve Carton
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
2010 Savings-Related Share Option Scheme
Senan Murphy
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
2015
2016
2017
2014
2015
2016
2017
2012
2017
2015
2016
2017
2014
2015
2016
2017
2014
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2016 - 31/12/2016
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
n/a
n/a
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2016 - 31/12/2016
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
n/a
2017
2016
2017
01/01/2016 - 31/12/2016
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
2018
2019
2020
2019
2020
2021
2022
2017
2022
2018
2019
2020
2019
2020
2021
2022
2019
2020
2021
2022
€18.05
€25.60
€30.97
€20.49
€24.42
€24.56
€32.24
n/a
n/a
€18.05
€25.60
€30.97
€20.49
€24.42
€24.56
€32.24
n/a
n/a
n/a
n/a
n/a
n/a
n/a
€13.64
€27.86
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
€17.67
€30.97
€24.56
€32.24
n/a
n/a
n/a
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
-
The market price of the Company’s shares at 31 December 2017 was €29.96 and the range during 2017 was €28.48 to €34.53.
(i)
Dividend equivalents accrue on Deferred Share Bonus Awards under the Remuneration Policy. Such dividend equivalents will be released to participants
on the date of release of the Deferred Shares. As outlined on page 74, following her retirement on 31 August 2017, all deferred share awards granted to
Maeve Carton were released to her on 3 November 2017.
(ii) Dividend equivalents accrue on awards made under the 2014 Performance Share Plan under the Remuneration Policy. Subject to satisfaction of the
applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares on vesting.
-
-
-
-
-
-
-
-
-
-
-
-
-
25,007
163,254
1,085
8,060
43,779
7,316
43,779
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,983
9,560
8,060
2,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,928
18,900
25,007
142,900
132,064
208,104
163,254
1,085
-
-
-
-
59,500
55,283
56,078
43,779
1,726
7,316
50,906
43,779
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
928
433
165
€30.80
€31.45
€31.45
€31.45
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88
CRH Annual Report and Form 20-F I 2017 Summary of Outstanding Share Incentive Awards (Audited)
Albert Manifold
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
2010 Savings-Related Share Option Scheme
Maeve Carton
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
Senan Murphy
Annual Bonus Plan (Deferred Share Awards) (i)
2014 Performance Share Plan (ii)
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2016 - 31/12/2016
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
n/a
n/a
01/01/2014 - 31/12/2014
01/01/2015 - 31/12/2015
01/01/2016 - 31/12/2016
01/01/2014 - 31/12/2016
01/01/2015 - 31/12/2017
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
2015
2016
2017
2014
2015
2016
2017
2012
2017
2015
2016
2017
2014
2015
2016
2017
2014
2017
2016
2017
01/01/2016 - 31/12/2016
01/01/2016 - 31/12/2018
01/01/2017 - 31/12/2019
2018
2019
2020
2019
2020
2021
2022
2017
2022
2018
2019
2020
2019
2020
2021
2022
2019
2020
2021
2022
€18.05
€25.60
€30.97
€20.49
€24.42
€24.56
€32.24
n/a
n/a
€18.05
€25.60
€30.97
€20.49
€24.42
€24.56
€32.24
€30.97
€24.56
€32.24
€13.64
€27.86
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
Table 32
24,928
18,900
142,900
132,064
208,104
2,236
12,983
9,560
59,500
55,283
56,078
-
-
-
-
-
-
-
50,906
2010 Savings-Related Share Option Scheme
n/a
n/a
€17.67
1,726
Year of
Award
Performance Period
Date
Date of Award
Price
December 2016
Release
Market Value at
Exercise
Balance at 31
Granted
in 2017
Vested
in 2017
Exercised
in 2017
Lapsed
in 2017
Balance at 31
December 2017
Dividends Awarded
& Vested
Market Value on Date
of Exercise/Vesting
-
-
25,007
-
-
-
163,254
-
1,085
-
-
8,060
-
-
-
43,779
-
7,316
-
43,779
-
-
-
-
-
-
-
-
-
12,983
9,560
8,060
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,928
18,900
25,007
142,900
132,064
208,104
163,254
-
1,085
-
-
-
59,500
55,283
56,078
43,779
1,726
7,316
50,906
43,779
-
-
-
-
-
-
-
-
-
928
433
165
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
€30.80
-
€31.45
€31.45
€31.45
-
-
-
-
-
-
-
-
89
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Shareholdings of Directors and Company Secretary Table 33
Name
Executive Directors
A. Manifold
S. Murphy
Non-executive Directors
N. Hartery
P.J. Kennedy
D.A. McGovern, Jr. (ii)
H.A. McSharry
G.L. Platt (iii)
L.J. Riches
H.Th. Rottinghuis
W.J. Teuber, Jr. (ii)
Company Secretary
N. Colgan
Total
Beneficially Owned (i)
31 December 2016
31 December 2017
76,597
1,021
16,987
2,000
5,375
4,043
-
2,000
15,645
1,000
9,993
134,661
20,170
1,039
17,309
2,000
5,481
4,111
1,019
5,000
1,000
1,000
10,416
68,545
(i)
Excludes awards of Deferred Shares, details of which are disclosed on pages 88
and 89. The Directors and Company Secretary do not have any special voting
rights.
(ii) Holdings in the form of American Depositary Receipts (ADRs).
(iii) Appointed with effect from 1 January 2017. Gillian Platt did not have a holding of
CRH shares on her appointment.
There were no transactions in the above Directors' and Secretary's interests
between 31 December 2017 and 28 February 2018.
Ancon, part of CRH’s Europe Lightside Division, supplied punching
shear reinforcement, threaded rebar couplers and reinforcement
continuity systems to the 69-storey, 218 metre high, Lighthouse Tower
in Melbourne, Australia, which opened in 2017.
90
CRH Annual Report and Form 20-F I 2017 Executive Director Shareholdings as a % of 2018 base salary (i)
Guideline
(% of Salary)
To be
achieved by
Holdings as of 28 February 2018
A. Manifold
250%
December 2020
67%
265%
70%
S. Murphy
200%
December 2022
0
0
4%
50,000
2,500
100,000
No. of shares
30%
5,000
No. of shares
150,000
200,000
7,500
10,000
Table 34
Total Interests
(% of Salary)
402%
34%
Estimated after tax value of Deferred Share Awards made in 2016, 2017 and 2018 (as applicable)
Estimated after tax value of PSP awards subject to a two-year hold period only
Beneficially Owned Shares (includes the Deferred Share Awards made in 2015 which the Remuneration Committee has determined will vest on 5 March 2018)
(i) For the purposes of this table, the interests have been valued using the three-month average share price to 31 December 2017 (€30.42).
Non-executive Directors
Individual remuneration for the year ended 31 December 2017 (Audited)
Table 35
Basic salary and fees (i)
€000
Benefits (ii)
€000
Other remuneration (iii)
€000
Total
€000
2017
2016
2017
2016
2017
2016
2017
2016
2015
Non-executive Directors
E.J. Bärtschi (iv)
W.P. Egan (v)
U-H. Felcht (v)
N. Hartery
P.J. Kennedy
R. McDonald (vi)
D.A. McGovern, Jr.
H.A. McSharry
G.L. Platt (vii)
L.J. Riches (viii)
H.Th. Rottinghuis
W.J. Teuber, Jr. (ix)
78
-
-
78
78
-
78
78
78
78
78
78
78
26
26
78
78
59
78
78
-
78
78
65
702
722
-
-
-
1
-
-
-
-
-
-
-
-
1
-
-
-
7
-
-
-
-
-
-
-
-
7
81
-
-
81
19
14
512
512
42
-
96
42
53
42
42
57
42
43
96
42
-
42
42
47
159
-
-
591
120
-
174
120
131
120
120
135
159
45
40
597
120
102
174
120
-
120
120
112
139
120
105
456
105
40
153
90
-
88
105
-
967
980
1,670
1,709
1,401
(i) Further information in relation to the non-executive Director fee structure is set out in table 37 on page 93.
(ii) Benefits: In the case of Nicky Hartery the amount reflects the reimbursement of travel expenses from his residence to his Chairman's office in Dublin, which
have been grossed up for Irish tax purposes.
(iii) Other Remuneration: Includes remuneration for Chairman, Board Committee work and allowances for non-executive Directors based outside of Ireland.
(iv) Ernst Bärtschi resigned as a Director on 20 December 2017.
(v) Bill Egan and Utz Felcht retired as Directors on 28 April 2016.
(vi) Rebecca McDonald retired as a Director on 28 September 2016.
(vii) Gillian Platt became a Director on 1 January 2017.
(viii) Lucinda Riches became a Director on 1 March 2015.
(ix) Bill Teuber became a Director on 3 March 2016.
91
CRH Annual Report and Form 20-F I 2017
Directors’ Remuneration Report - continued
Other employee share plans
Executive Directors are eligible to participate
in the 2010 Savings-related Option Scheme
(Republic of Ireland) (the ‘2010 SAYE Scheme’)
and in the Group’s Irish Revenue approved
Share Participation Scheme (the ‘Participation
Scheme’).
The 2010 SAYE Scheme is an Irish Revenue
approved plan open to all Irish employees.
Participants may save up to €500 a month
from their net salaries for a fixed term of three
or five years and at the end of the savings
period they have the option to buy CRH shares
at a discount of up to 15% of the market
price on the date of invitation of each savings
contract. Details of the outstanding awards
of executive Directors under the 2010 SAYE
Scheme are set out in table 32 on pages 88
and 89.
The Participation Scheme is an Irish Revenue
approved plan and is open to all employees
in Ireland. Grants can be made to participants
up to a maximum of €12,700 annually in CRH
shares. Albert Manifold and Maeve Carton
participated in the Participation Scheme
in 2017.
Retirement benefit expense
Albert Manifold and Maeve Carton are
participants in a contributory defined benefit
plan which is based on an accrual rate of
1/60th of salary* for each year of pensionable
service and is designed to provide two-thirds
of career average salary at retirement for full
service. Following her retirement in 2017,
Maeve Carton will receive a deferred pension,
payable from her Normal Retirement Age (60),
based on the pension she accrued to her date
of retirement. Albert Manifold will become
entitled to a deferred pension, payable from
Normal Retirement Age, if he leaves service
prior to Normal Retirement Age. The Finance
Act 2006 established a cap on pension
provisions by introducing a penalty tax charge
on pension assets in excess of the higher
of €5 million (in the Finance Act 2011, this
threshold was reduced to €2.3 million and
reduced further to €2 million by the Finance
(No. 2) Act 2013) or the value of individual
accrued pension entitlements as
at 7 December 2005.
As a result of these legislative changes,
the Remuneration Committee decided that
executive Directors should have the option
of continuing to accrue pension benefits
as previously, or of choosing an alternative
arrangement - by accepting pension benefits
limited by the cap - with a similar overall cost
to the Group. Albert Manifold and Maeve
Carton have opted for an arrangement whereby
their pensions are capped in line with the
provisions of the Finance Act 2006 and receive
a supplementary taxable non-pensionable cash
supplement in lieu of pension benefits foregone.
There was, therefore, no additional accrual in
2017. The cash pension supplements for 2017
are detailed in table 17 on page 75. In the case
of Maeve Carton, the cash pension supplement
for 2017 has been pro-rated for service in
the period between 1 January 2017 and the
date of her retirement in August 2017. These
supplements are similar in value to the reduction
in the Company’s liability represented by the
pension benefits foregone. They are calculated
based on actuarial advice as the equivalent of
the reduction in the Company’s liability to each
individual and spread over the term to retirement
as annual compensation allowances.
The contributory defined benefit plan in which
Albert Manifold and Maeve Carton participate
closed to new entrants at the end of 2011.
Senan Murphy receives a taxable
non-pensionable cash supplement equivalent
to 25% of his annual base salary in lieu of a
pension contribution.
Details regarding pension entitlements for the
executive Directors are set out in table 36.
Shareholding guidelines for executive
Directors
Pursuant to the Policy, executive Directors are
required to build up (and maintain) a minimum
holding in CRH shares.
The shareholding guideline for the Chief
Executive is 2.5 times basic salary. The
Remuneration Committee has determined that
the Chief Executive will have until 31 December
2020 to meet the guideline.
As outlined in the Chairman's introduction
on pages 72 and 73, the shareholding
guideline for the Finance Director has been
increased from 1 times basic salary to 2
times basic salary. Following the increase, the
Remuneration Committee has determined
that the Finance Director will have until 31
December 2022 to meet the guideline.
The current shareholdings of executive
Directors as a multiple of basic salary are
shown in table 34 on page 91. The table
includes, for illustrative purposes, shares
beneficially owned by the executive Directors
as at 28 February 2018 (which includes, in the
case of the Chief Executive, the 2015 Deferred
Share awards which the Remuneration
Committee has determined will vest on 5
March 2018), the estimated after tax vesting
of the 2014 and 2015 PSP awards, which will
be released in 2019 and 2020 respectively,
and the estimated after tax vesting of Deferred
Share awards granted in respect of 2015,
2016 and 2017, as appropriate.
Pension Entitlements - Defined Benefit (Audited)
Table 36
Executive Directors
Albert Manifold
Maeve Carton
Increase in accrued personal pension
during 2017 (i)
€000
Transfer value of increase in dependants
pension (i)
€000
Total accrued
personal pension at year-end (ii)
€000
-
-
104
18
273
266
(i)
As noted above, the pensions of Albert Manifold and Maeve Carton have been capped in line with the provisions of the Irish Finance Acts. However,
dependants’ pensions continue to accrue resulting in Greenbury transfer values which have been calculated on the basis of actuarial advice. These
amounts do not represent sums paid out or due in 2017 in the event of these Directors leaving service.
(ii) The accrued pensions shown are those which would be payable annually from normal retirement date.
92
*
Salary is defined as basic annual salary and excludes any fluctuating emoluments.
CRH Annual Report and Form 20-F I 2017 Non-executive Director Fee Structure
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
Table 37
2017
€575,000
€78,000
€27,000
€39,000
€39,000
€15,000
€30,000
(i) If the roles of Senior Independent Director and Remuneration Committee Chair are not combined, fees of €25,000 and €15,000 apply respectively.
€3.3 billion and €3.8 billion and between
80% and 100% for an outturn between
€3.8 billion and €4.3 billion. The Remuneration
Committee has reviewed the cash flow target
in detail and is satisfied that the target for
maximum payout represents a significant
stretch. The target includes the impact of
the Ash Grove acquisition, the conclusion of
which is subject to regulatory approval. The
Committee will consider whether adjustments
are required to cash flows, for example,
resulting from any significant acquisitions
during the period.
Retirement Benefit Expense
No changes in pension arrangements are
proposed in 2018.
Non-executive Directors
The remuneration of non-executive Directors
is determined by the Board of Directors as
a whole. The fees were increased in 2016.
Details of the remuneration paid to
non-executive Directors in 2017 are set out
in table 35 on page 91. There is no proposed
change in fees for non-executive Directors
for 2018. See table 37 for the current fee
structure.
Implementation of
Remuneration Policy
for 2018
Basic salary and benefits
Details of executive Directors’ salaries for
2018 compared with 2017 are set out in the
Committee Chairman’s introduction on pages
72 and 73.
Executive Directors will receive benefits in
line with the Policy in 2018. The level of
benefits provided will depend on the cost of
providing individual items and the individual
circumstances.
2018 Annual Bonus Plan
The Remuneration Committee has determined
that the 2018 Annual Bonus Plan will be
operated broadly in line with the 2017 Annual
Bonus Plan. 80% of the bonus will be based
on financial targets and the remaining 20% on
individual objectives aligned to key strategic
areas for each executive Director (the metrics,
weightings and opportunity under the 2018
Annual Bonus Plan are summarised in table
13 on page 73). The Committee intends to
disclose the targets for the 2018 Annual
Bonus Plan in the 2019 Directors’
Remuneration Report.
2018 PSP Awards
For the 2018 PSP awards, performance will
be assessed over the three-year period to
31 December 2020. The metrics, weightings
and opportunity for the 2018 PSP awards are
summarised in table 13 on page 73.
As was the case in 2017, 50% of the 2018
awards will be subject to TSR performance,
with 25% being measured against a tailored
sector peer group (see table 30 on page
87) and 25% against the FTSE All-World
Construction & Materials Index. Vesting
between the threshold and maximum levels
will be calculated on a straight-line basis. The
TSR measure will also be subject to a RONA
underpin.
For the cash flow measure, vesting is
calculated on a straight-line basis between
25% and 80% for cash flow of between
93
CRH Annual Report and Form 20-F I 2017 Directors’ Remuneration Report - continued
Other Disclosures
Relative Importance of Spend on Pay
Table 38
2017
2016
+1%
+6%
€m
6,000
5,000
4,000
3,000
2,000
1,000
0
Fees paid to former Directors
The 2013 Large and Medium-sized Companies
and Groups (Accounts and Reports)
(Amendment Regulations) Regulations in
the UK, require disclosure of payments to
former Directors in certain circumstances. No
payments have been made to individual former
Directors in those circumstances which exceed
the de minimis threshold of €20,000 per
annum set by the Remuneration Committee.
As reported in the 2016 Directors’
Remuneration Report, following his retirement
from the Board on 31 December 2016, the
Remuneration Committee determined that
Mark Towe's outstanding Deferred Share and
PSP awards should be released to him at the
applicable normal release dates. Accordingly,
during 2017 2,772 shares were released to him
in respect of his 2014 Deferred Share Award.
Executives’ external
appointments
The executive Directors may accept external
appointments with the prior approval of the
Board provided that such appointments do
not 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.
Total Shareholder Return
The value at 31 December 2017 of €100
invested in CRH in 2008, compared with the
value of €100 invested in the Eurofirst 300
Index and the FTSE100 Index (which CRH
joined in December 2011) is shown in table 14
on page 74.
TSR performance has been compared
against the FTSE100 and the Eurofirst 300
as these are broad general market indices of
+5%
Dividends
Remuneration received
by all employees
EBITDA
(as defined)*
which CRH is a constituent. The Committee,
therefore, considers that they offer a
reasonable comparison for performance.
Compound TSR growth since the formation of
the Group in 1970 (assuming the reinvestment
of dividends) is 15.8%.
Remuneration paid to Chief
Executive 2009 – 2017
Table 39 shows the total remuneration paid to
the Chief Executive in the period 2009 to 2017
inclusive and shows bonuses and vested
long-term incentive awards as a percentage
of the maximum bonus and award that could
have been received in respect of each year.
Albert Manifold succeeded Myles Lee as Chief
Executive in January 2014.
Excluding the impact of vested share-based
awards and the non-taxable benefit
associated with participation in the Group's
savings-related share option scheme, the
percentage change in the Chief Executive’s
salary, benefits and bonus between 2016 and
2017 was as follows:
+3%
Salary
Benefits +36%
Bonus
+1%
The combined percentage change was 2%.
There was a 1% increase in the total average
employment costs in respect of employees in
the Group as a whole between 2016 and 2017.
Relative Importance of
Spend on Pay
Table 38 sets out the amount paid by
the Group in remuneration to employees
compared to dividend distributions made to
shareholders in 2016 and 2017. We have also
shown the change in EBITDA (as defined)*
performance year-on-year to provide an
indication of the change in profit performance.
Remuneration Paid to Chief Executive - 2009 to 2017 inclusive
Table 39
2009
2010
2011
2012
2013
2014
2015
2016
2017
Single figure Remuneration (€m) (i)
€2.6m
€2.6m
€2.9m
€2.5m
€4.2m
€4.2m
€5.4m
€9.9m
€8.7m
Annual Bonus (% of max)
22%
21%
39%
28%
30%
100%
100%
98%
96%
Long-term incentive award vesting
(% of max)
50%
46%
17%
0%
PSP: 49%
PSP: 0%
PSP: 78%
LTIP: 34%
Options: 75%
Options: 37%
100%
79%
(i) Single figure remuneration comprises the total fixed pay, annual bonus and the value of long-term incentives vesting in respect of each year.
94
*
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 2017
Advisers to the Remuneration
Committee
Mercer Kepler, a brand of Mercer, are the
Committee’s independent remuneration
consultants. The Committee has satisfied itself
that the advice provided by Mercer Kepler is
robust and independent and that the Mercer
Kepler engagement partner and team that
provide remuneration advice to the Committee
do not have connections with CRH plc that
may impair their independence.
Mercer Kepler are signatories to the Voluntary
Code of Conduct in relation to executive
remuneration consulting in the UK. During
2017, Mercer 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;
• advice in relation to remuneration
matters generally; and
• attendance at Committee meetings,
when required
In 2017, Mercer Kepler’s parent, the MMC
Group, provided pensions advice and related
services to the Company. In 2017, the total
fees paid to Mercer Kepler were Stg£62,000.
2017 Annual General Meeting
The voting outcome in respect of the
remuneration-related votes at the 2017 AGM is
set out in table 15 on page 74. 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
28 February 2018
3,601
1,201
1,145
104
9,296
3.00
672
794
6
Details of remuneration charged against profit in 2017
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
2017
€000
2016
€000
Table 40
2015
€000
2,618
4,023
3,245
3,734
1,033
988
78
8,451
5,197
1,734
1,341
128
12,423
Average number of executive Directors
2.67
4.00
Non-executive Directors
Fees
Other remuneration
Benefits
702
967
1
722
980
7
Total non-executive Directors’ remuneration
1,670
1,709
1,472
Average number of non-executive Directors
Payments to former Directors (ii)
Total Directors’ remuneration
9.00
9
9.24
124
9.75
95
10,130
14,256
10,863
(i)
See analysis of 2017 remuneration by individual in tables 17 and 35 on pages 75 and 91 respectively.
(ii) Consulting and other fees paid to a number of former Directors.
For the purposes of Section 305 of the Companies Act 2014, the aggregate gains by Directors on the
exercise of share options during 2017 was €38,370 (2016: €994,651).
95
CRH Annual Report and Form 20-F I 2017
Directors’ Report
The Directors submit their report and the
audited Consolidated Financial Statements for
the year ended 31 December 2017.
The treasury policy and objectives of the
Group are set out in detail in note 22 to the
Consolidated Financial Statements
approval of resolutions 7 and 12 at the 2018
Annual General Meeting, shareholders are being
offered a scrip dividend alternative.
Principal Activity, Results
for the Year and Review of
Business
CRH is a leading global diversified building
materials group which manufactures and
distributes a diverse range of products
servicing the breadth of construction needs,
from the fundamentals of heavy materials
and elements to construct the frame, through
value-added exterior products that complete
the building envelope, to distribution channels
which service construction fit-out and renewal.
The Group has approximately 1,300 subsidiary,
joint venture and associate undertakings; the
principal ones as at 31 December 2017 are
listed on pages 246 to 251.
The Group’s strategy, business model and
development activity are summarised on pages
10 to 13 and 25 to 29 and are deemed to
be incorporated in this part of the Directors’
Report.
As set out in the Consolidated Income
Statement on page 120, the Group reported
a profit before tax for the year of €1.87 billion.
Comprehensive reviews of the financial and
operating performance of the Group during
2017 are set out in the Business Performance
section on pages 22 to 55; key financial
performance indicators are also set out in this
section and on pages 14 and 15.
Dividend
CRH’s capital allocation policy reflects the
Group’s strategy of generating industry leading
returns through value-accretive allocation of
capital while delivering long-term dividend growth
for shareholders. For the period 1984 to 2009 the
Group maintained a progressive dividend policy
delivering dividend growth in each of these years.
The Group maintained the dividend at 62.5c per
share for each of the subsequent six years while
in 2016 the full-year dividend was increased 4%
to 65c.
Further to the dividend increase in 2016, an
interim dividend of 19.2c (2016: 18.8c) per
share was paid in November 2017. The Board
is recommending a final dividend of 48.8c per
share. This would give a total dividend of 68.0c
for the year, an increase of 5% over last year
(2016: 65.0c). The earnings per share for the year
were 226.8c representing a cover of 3.3 times
the proposed dividend for the year. Excluding the
one-off impact of changes in corporate tax rates
in the US and the past service credit from the
Swiss pension plan amendment, adjusted basic
earnings per share for the year would have been
166.2c▲, representing a cover of 2.4 times the
proposed dividend for 2017.
It is proposed to pay the final dividend on 4 May
2018 to shareholders registered at the close
of business on 9 March 2018. Subject to the
While the Board continues to believe that a
progressive dividend policy is appropriate for the
Group, our target is to build dividend cover to
three times before one-off items, and accordingly
any dividend increases in coming years will
continue to lag increases in earnings per share.
2018 Outlook
The 2018 outlook set out in the Chief Executive’s
Review on page 9 is deemed to be incorporated
in this part of the Directors’ Report.
Principal Risks and
Uncertainties
Pursuant to Section 327(1)(b) of the
Companies Act 2014, Regulation 5(4)(c)
(ii) of the Transparency (Directive 2004/109/
EC) Regulations 2007, the principal risks and
uncertainties that could affect the Group’s
business are set out on pages 102 to 107
and are deemed to be incorporated in this
part of the Directors’ Report. These risks and
uncertainties reflect the international scope of
the Group’s operations and its decentralised
structure. If any of these risks occur, the
Group’s business, financial condition, results of
operations, liquidity and/or prospects could be
materially adversely affected.
Location of Information required pursuant to Listing Rule 9.8.4C
Table 41
Listing Rule
Information to be included (i):
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 184 to the Consolidated Financial Statements.
(i) No information is required to be disclosed in respect of Listing Rules 9.8.4 (1), (2), (4), (5), (6), (7), (8), (9), (10), (11) and (14).
Adjusted basic earnings per share from continuing and discontinued operations is a non-GAAP measure as defined on page 213. The GAAP numerator that is most directly comparable is profit
▲
attributable to ordinary equity holders of the Company, €1,895 million. Details of how non-GAAP measures are calculated are set out on pages 210 to 213.
96
CRH Annual Report and Form 20-F I 2017 Regulatory Information†
Table 42
Companies Act 2014
2006 Takeover
Regulations
2007 Transparency
Regulations
Non-Financial
Reporting
For the purpose of Section 1373, the Corporate Governance Report on pages 62 to 71, together with the Governance Appendix
located on the CRH website (www.crh.com), which contains the information required by Section 1373(2) of the Companies Act 2014
and the risk management disclosures on pages 20, 21 and 102 to 107, are deemed to be incorporated in the Directors’ Report and
form part of the corporate governance statement required by section 1373 of the Companies Act. Details of the Company’s employee
share schemes and capital structure can be found in notes 8 and 30 to the Consolidated Financial Statements on pages 144 to 146
and 182 to 184 respectively.
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.
For the purpose of Statutory Instrument 277/2007 Transparency (Directive 2004/109/EC) Regulations 2007, the Sustainability Report
as published on the CRH website (www.crh.com) is deemed to be incorporated in this part of the Directors’ Report*, together with the
following sections of this Annual Report and Form 20-F: the Chairman’s Introduction on page 5, the Strategy Review section on
pages 6 to 21, the Principal Risks and Uncertainties section on pages 102 to 107, the Business Performance section on pages 22 to
55, the details of earnings per Ordinary Share in note 13 to the Consolidated Financial Statements, the details of derivative financial
instruments in note 25, the details of the reissue of Treasury Shares in note 30 and the details of employees in note 6.
For the purpose of Statutory Instrument 360/2017 European Union (Disclosure of Non-Financial and Diversity Information by certain
large undertakings and groups) Regulations 2017, the Sustainability Report* as published on the CRH website (www.crh.com) is
deemed to be incorporated in this part of the Directors’ Report, together with the following sections of this Annual Report and Form
20-F: the Business Model section on pages 12 and 13, the Sustainability section, including greenhouse gas emissions, on pages 16
to 19, the Risk Governance section on pages 20 and 21, the Principal Risks and Uncertainties section on pages 102 to 107, the
Measuring Performance section on pages 14 and 15 and the Business Performance section on pages 22 to 55.
Disclaimer/Forward-
Looking Statements
In order to utilise the “Safe Harbor” provisions of the United States Private Securities Litigation Reform Act of 1995, CRH plc (the
‘Company’), and its subsidiaries (collectively, ‘CRH’ or the ‘Group’) is providing the following cautionary statement.
This document contains certain forward-looking statements with respect to the financial condition, results of operations, business,
viability and future performance of CRH and certain of the plans and objectives of CRH including the statements under: “Strategy
Review – Chief Executive’s Review – Outlook”; the “Strategy Review” about our vision to be the leading building materials business in
the world; in “Measuring Performance” with regard to our 2018 focus; in the “Business Performance – Finance Director’s Review”
with respect to our belief that the Group has sufficient resources to meet its debt obligations and capital and other expenditure
requirements in 2018; in “Business Performance” with respect to our expectations regarding economic activity and fiscal
developments in our operating regions; our expectations for the residential, non-residential and infrastructure markets; and our
potential future growth in Asia; and the statements relating to our strategies for individual segments and business lines in the section
entitled “Segmental Reviews”.
These forward-looking statements may generally, but not always, be identified by the use of words such as “will”, “anticipates”,
“should”, “expects”, “is expected to”, “estimates”, “believes”, “intends” or similar expressions.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances
that may or may not occur in the future and reflect the Company’s current expectations and assumptions as to such future events
and circumstances that may not prove accurate. A number of material factors could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking statements, certain of which are beyond our control and which
include, among other things: economic and financial conditions generally in various countries and regions where we operate; the pace
of recovery in the overall construction and building materials sector; demand for infrastructure, residential and non-residential
construction in our geographic markets; increased competition and its impact on prices; increases in energy and/or raw materials
costs; adverse changes to laws and regulations; approval or allocation of funding for infrastructure programmes; adverse political
developments in various countries and regions; failure to complete or successfully integrate acquisitions; and the specific factors
identified in the discussions accompanying such forward-looking statements and in the Principal Risks and Uncertainties included on
pages 102 to 107 of the Directors’ Report and in the Risk Factors included on pages 218 to 227 of this Annual Report and
Form 20-F.
You should not place undue reliance on any forward-looking statements. These forward-looking statements are made as
of the date of this Directors’ Report. The Company expressly disclaims any obligation to update these forward-looking statements
other than as required by law.
The forward-looking statements in this Annual Report and Form 20-F do not constitute reports or statements published in compliance
with any of Regulations 4 to 8 and 26 of the Transparency (Directive 2004/109/EC) Regulations 2007.
† This table contains information which is required to be provided for regulatory purposes.
*
For the purposes of the Company’s Annual Report on Form 20-F as filed with the SEC, the Sustainability Report, and any reference thereto, is explicitly excluded from this
Directors’ Report.
97
CRH Annual Report and Form 20-F I 2017 Directors’ Report - continued
Viability Statement
In accordance with Provision C.2.2. of the
2016 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
2018 to 31 December 2020 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 and Political and
Economic Uncertainty 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 10 to 21 and 102 to
107 respectively. The financial position of
the Group, its cash flows, liquidity position
and borrowing facilities are described in the
Business Performance section on pages
22 to 55. In addition, notes 21 to 25 to the
Consolidated Financial Statements include the
Group’s objectives, policies and processes
for managing its capital; its financial risk
management objectives; details of its financial
instruments and hedging activities; and its
exposures to credit, currency, cash flow and
liquidity risks.
The Group has considerable financial
resources and a large number of customers
and suppliers across different geographic areas
and industries. In addition, the local nature
of building materials means that the Group’s
products are not usually shipped cross-border.
Having assessed the relevant business risks,
the Directors believe that the Group is well
placed to manage these risks successfully,
and they have a reasonable expectation that
CRH plc, and the Group as a whole, has
adequate resources to continue in operational
existence for the foreseeable future with no
material uncertainties. For this reason, the
Directors continue to adopt the going concern
basis in preparing the Consolidated Financial
Statements.
Risk Management and Internal
Control*
The Directors confirm that, in addition to the
monitoring carried out by the Audit Committee
under its Terms of Reference, they have
reviewed the effectiveness of the Group’s risk
management and internal control systems up
to and including the date of approval of the
financial statements. This review had regard
to all material controls, including financial,
operational and compliance controls that could
affect the Group’s business.
Directors’ 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 2018 AGM
deals with the 2017 Directors’ Remuneration
Report (excluding the 2016 Remuneration
Policy Section), as set out on pages 72 to
95, which the Board has again decided to
present to shareholders for the purposes of a
non-binding advisory vote. This is in line with
international best practice.
Changes to the Board
of Directors
• Gillian Platt was appointed to the Board on
1 January 2017
•
Maeve Carton retired from the Board on
31 August 2017
• Ernst Bärtschi resigned from the Board on
20 December 2017
• Richard Boucher was appointed to the
Board with effect from 1 March 2018
* For more information in relation to the Group’s risk management and internal control systems, please see the Risk Management and Internal Control section in the Supplementary
20-F Disclosures section on pages 228 and 229.
98
CRH Annual Report and Form 20-F I 2017 Under the Company’s Articles of Association,
co-opted Directors are required to submit
themselves to shareholders for election at
the AGM following their appointment and all
Directors are required to submit themselves
for re-election at intervals of not more than
three years. However, in accordance with the
provisions contained in the UK Corporate
Governance Code, the Board has decided
that all Directors eligible for re-election should
retire at each AGM and offer themselves for
re-election.
Auditors
As required under Section 381(1)(b) of the
Companies Act 2014, the AGM agenda
includes a resolution authorising the Directors
to fix the remuneration of the auditors.
Section 383 of the Companies Act 2014
provides for the automatic reappointment of
the auditor of an Irish company at a company’s
annual general meeting, unless the auditor has
given notice in writing of his unwillingness to be
reappointed or a resolution has been passed
at that meeting appointing someone else or
providing expressly that the incumbent auditor
shall not be reappointed. The auditors, EY,
Chartered Accountants, are willing to continue
in office.
Notwithstanding the provisions of Irish
company law, the Board has decided to
provide shareholders with an opportunity to
have a say on the continuance in office of
EY and a non-binding resolution has been
included on the agenda for the 2018 AGM for
this purpose.
Authority to Allot Shares
The Directors require the authority of the
shareholders to allot any unissued Ordinary
Share capital of the Company. Accordingly,
an ordinary resolution will be proposed at
the 2018 AGM (Resolution 7) to renew the
annual authority for that purpose. The authority
will be for an amount which represents just
under 50% of the issued Ordinary Share
capital as at 28 February 2018. Any allotment
exceeding 33% of the issued Ordinary Share
capital will only be made pursuant to a fully
pre-emptive issue and no issue of shares will
be made which could effectively alter control
of the Company without prior approval of the
Company in General Meeting.
The Directors have no present intention of
making any issue of shares, other than in
connection with the Group’s share incentive
plans and scrip dividend scheme. If approved,
this authority will expire on the earlier of the
date of the AGM in 2019 or 25 July 2019.
Disapplication of
Pre-emption Rights
Resolutions 8 and 9 are special resolutions
which, if approved by shareholders, will renew
the annual authorities of the Directors to
disapply statutory pre-emption rights in relation
to allotments of Ordinary Shares for cash in
certain circumstances.
Resolution 8 will, if approved, authorise
the Directors to allot Ordinary Shares on a
non-pre-emptive basis and for cash (otherwise
than in connection with a rights issue or similar
pre-emptive issue) up to a maximum nominal
value of €14,262,000. This amount represents
approximately 5% of the issued Ordinary
Share capital as at 28 February 2018, being
the latest practicable date prior to publication
of this document. Resolution 8 will also allow
the Directors to disapply pre-emption rights
in order to accommodate any regulatory
restrictions in certain jurisdictions.
Resolution 9 will, if approved, afford the
Directors with an additional power to allot
Ordinary Shares on a non-pre-emptive basis
and for cash up to a further 5% of the issued
share capital as at 28 February 2018. The
power conferred by Resolution 9 can be
used only in connection with an acquisition
or a specified capital investment which is
announced contemporaneously with the issue,
or which has taken place in the preceding
six-month period and is disclosed in the
announcement of the issue.
The 5% limits in Resolutions 8 and 9 include
any Treasury Shares reissued by the Company
during the same period.
The Directors confirm that in respect of
Resolutions 8 and 9, they intend to follow the
Statement of Principles updated by the
Pre-Emption Group in that allotments of
shares for cash and the reissue of Treasury
Shares on a non-pre-emptive basis (other
than for an open offer or rights issue to
Ordinary Shareholders, the operation of CRH's
employee share schemes or in connection with
an acquisition or specified capital investment)
will not exceed 7.5% of the issued Ordinary
Share capital within a rolling three-year period
without prior consultation with shareholders.
Transactions in
Own Shares
During 2017, 29,575 (2016: 711,839) Treasury
Shares were reissued under the Group’s
employees’ share schemes. As at 28 February
2018, 53,848 shares were held as Treasury
Shares, equivalent to 0.006% of the Ordinary
Shares in issue (excluding Treasury Shares).
A special resolution will be proposed at
the 2018 AGM (Resolution 10) to renew
the authority of the Company, or any of its
subsidiaries, to purchase up to 10% of the
Company’s Ordinary/Income Shares in issue
at the date of the AGM.
If approved, the minimum price which may be
paid for shares purchased by the Company
shall not be less than the nominal value of the
shares and the maximum price will be 105% of
the higher of the last independent trade in the
Company’s shares (or current independent bid,
if higher) and the average market price of such
shares over the preceding five days. A special
resolution (Resolution 11) will also be proposed
for the purpose of renewing the authority to set
the maximum and minimum prices at which
Treasury Shares (effectively shares purchased
and not cancelled) may be reissued off-market
by the Company. If granted, both of these
authorities will expire on the earlier of the date
of the AGM in 2019 or 25 July 2019.
As at 28 February 2018, options to subscribe
for a total of 2,973,948 Ordinary/Income
Shares are outstanding, representing 0.36%
of the issued Ordinary/Income share capital
(excluding Treasury Shares). If the authority to
purchase Ordinary/lncome Shares was used in
full, the options would represent 0.40% of the
remaining shares in issue.
The Directors do not have any current intention
of exercising the power to purchase the
Company’s own shares and will only do so if
they consider it to be in the best interests of
the Company and its shareholders.
99
CRH Annual Report and Form 20-F I 2017 Directors’ Report - continued
Authority to Offer Scrip
Dividends
An ordinary resolution will be proposed at the
2018 AGM to renew the Directors’ authority to
make scrip dividend offers (Resolution 12). This
authority will apply to dividends declared or to
be paid commencing on 26 April 2018. Unless
renewed at the AGM in 2019, this authority
shall expire at the close of business on 25 July
2019.
Amendments to Articles of
Association
A special resolution will also be proposed
at the 2018 AGM, which, if approved, will
provide the Directors with important flexibility
regarding the mechanism for setting the price
for scrip dividend offers. Under the existing
provisions of Article 137(b)(ii) the scrip price
must be set by reference to the average price
of an Ordinary Share on each of the first three
business days on which the Ordinary Shares
are quoted “ex” the relevant dividend. There
can be circumstances where setting the price
using this methodology may not be appropriate
or in the best interests of shareholders. In such
situations the only option currently open to the
Board is to exercise its discretion to withdraw
the scrip offer. The amendment will also
provide the Board with flexibility in relation to
the way in which the scrip dividend alternative
plan is operated.
Annual General Meeting
The Notice of Meeting for the 2018 AGM is
available on the CRH website (www.crh.com)
and will be posted to shareholders on
28 March 2018.
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
100
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 2017 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 200 to 205), 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 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 2018
CRH Annual Report and Form 20-F I 2017 Farrans, a Building and Civil Engineering division of Northstone, which is part of CRH’s Europe Heavyside Division, delivered Harburnhead Windfarm in Scotland ahead of schedule
in 2017. The 52MW, 22 turbine ‘Balance of Plant’ contract included civil engineering and electrical infrastructure components, as well as major forestry works. Farrans has been
involved in the construction of windfarms that produce more than 800MW of renewable energy across the United Kingdom.
101101
CRH Annual Report and Form 20-F I 2017 Principal Risks and Uncertainties
Under Section 327(1)(b) of the Companies Act 2014 and Regulation 5(4)(c)(ii) of the Transparency
(Directive 2004/109/EC) Regulations 2007, the Group is required to give a description of the principal
risks and uncertainties which it faces. These risks and uncertainties reflect the international scope of
the Group’s operations and the Group’s decentralised structure. The risks and uncertainties presented
below, which are supplemented by a broader discussion of Risk Factors set out on pages 218 to 227,
are reviewed on an annual basis and represent the principal risks and uncertainties faced by the Group
at the time of compilation of the 2017 Annual Report and Form 20-F. During the course of 2018, new
risks and uncertainties may materialise attributable to changes in markets, regulatory environments and
other factors and existing risks and uncertainties may become less relevant.
Principal Strategic Risks and Uncertainties
Industry cyclicality
Risk
How we Manage the Risk
Description:
The level of construction activity in local and national markets is inherently
cyclical being influenced by a wide variety of factors including global and national
economic circumstances, governments’ ability to fund infrastructure projects,
consumer sentiment and weather conditions. Financial performance may also
be negatively impacted by unfavourable swings in fuel and other commodity/raw
material prices.
• CRH’s market and product diversification strategy, in addition to its spread of
activity across multiple end-use sectors, means that recession would need
to be general across the US and/or Europe to have a significant impact at
Group level. CRH’s geographic footprint is spread across 32 countries and
multiple end-use sectors. CRH is the largest building materials company in
North America and is a regional leader in Europe with strategic positions in
Asia
Impact:
Failure of the Group to respond on a timely basis and/or adequately to
unfavourable events may adversely affect financial performance.
• Through an ingrained philosophy of business improvement, the Group is
strongly committed to ongoing cost control, strong cash generation and
disciplined financial management. This commitment, and the strength of
its reporting and internal control systems, assist the Group in responding
quickly and hence mitigating the volatility associated with cyclicality
• The Group prioritises dynamic capital allocation and reallocation aimed at
ensuring profitable growth across the Group’s network of businesses
Political and economic uncertainty
Risk
How we Manage the Risk
• 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
Description:
As an international business, the Group operates in many countries with
differing, and in some cases, potentially fast-changing economic, social and
political conditions. These conditions, which may be heightened by the
uncertainties resulting from the commencement of proceedings for the UK to
exit the European Union, in addition to continued instability in Brazil, Philippines
and Ukraine could include political unrest, currency disintegration, strikes,
restrictions on repatriation of earnings, changes in law and policies, activism,
and civil disturbance and may be triggered or worsened by other forms of
instability including natural disasters, epidemics, widespread transmission of
diseases and terrorist attacks. These factors are of particular relevance in
developing/emerging markets.
Impact:
Changes in these conditions, or in the governmental or regulatory requirements
in any of the countries in which the Group operates, may adversely affect the
Group’s business, results of operations, financial condition or prospects thus
leading to possible impairment of financial performance and/or restrictions on
future growth opportunities.
102
CRH Annual Report and Form 20-F I 2017 Commodity products and substitution
Risk
How we Manage the Risk
Description:
The Group faces strong volume and price competition across its product lines,
stemming from the fact that many of the Group’s products are commodities. In
addition, existing products may be replaced by substitute products which the
Group does not produce or distribute, or new construction techniques may be
devised.
Impact:
Against this backdrop, if the Group fails to generate competitive advantage
through differentiation and innovation, market share, and thus financial
performance, may decline.
• CRH endeavours to counter the competitive positioning difficulties posed
by low barriers to entry across many of its markets, products and services
through focusing on customer service and other means of differentiation
•
Innovation and research and development are aimed at ensuring that the
Group is constantly aligning its products and services to the demands of
customers. These activities are business led and are guided by the Group
Sustainability function
• Further details are outlined in the Group Sustainability Report, issued
annually and approved by the Board
Reserves availability and planning
Risk
Description:
Certain of the Group’s businesses require long-term reserves backing
necessitating detailed utilisation planning. Appropriate reserves are an
increasingly scarce commodity and licences and/or permits are required to
enable operation. There are numerous uncertainties inherent in reserves
estimation and in projecting future rates of production.
Impact:
Failure by the Group to plan adequately for depletion may result in sub-optimal
or uneconomic utilisation giving rise to unplanned capital expenditure or
acquisition activity, lower financial performance and the need to obtain new
licences and/or permits to operate. Operating entities may fail to obtain or renew
or may experience material delays in securing the requisite government
approvals, licences and permits for the conduct of business.
How we Manage the Risk
• Planning for reserves enlargement and security of the requisite permits and
licences is an ongoing process and a key focus for our heavyside businesses
• All operating companies are required to have an effective permit
management system in place to ensure compliance with permit conditions
as well as ensuring timely renewal of permits
• Group functions work continuously with operating entities to ensure efficient
and economic utilisation of mineral reserves
Business portfolio management: acquisition and divestment activity
Risk
How we Manage the Risk
Description:
Growth through acquisition and active management of the Group’s business
portfolio are key elements of the Group’s strategy with the Group’s balanced
portfolio growing year on year through bolt-on activity occasionally
supplemented by larger and/or step-change transactions.
In addition, the Group may be liable or remain liable for the past acts, omissions
or liabilities of companies or businesses it has acquired or divested.
Impact:
The Group may not be able to continue to grow as contemplated in its business
plans if it is unable to identify attractive targets (including potential new platforms
for growth), divest non-core or underperforming entities, execute full and proper
due diligence, raise funds on acceptable terms, complete such acquisition
transactions, integrate the operations of the acquired businesses, retain key staff
and realise anticipated levels of profitability and cash flows. If the Group is held
liable for the past acts, omissions or liabilities of companies or businesses it has
acquired, or remains liable in cases of divestment, those liabilities may either be
unforeseen or greater than anticipated at the time of the relevant acquisition or
divestment.
• CRH has traditionally grown through acquisition and as such has developed
significant expertise in identifying and evaluating appropriate targets and
conducting due diligence and subsequent integration
• Many of the Group’s core markets remain fragmented or relatively
unconsolidated and will continue to offer growth opportunities via the proven
acquisition model in the decades ahead
• The Group’s detailed due diligence and integration programmes are
supported by external specialists where internal expertise is insufficient
• Further discussion is provided in the Business Performance section,
Chairman’s Introduction and Chief Executive’s Review
103
CRH Annual Report and Form 20-F I 2017 Principal Strategic Risks and Uncertainties - continued
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 its strategic goals for these businesses. In
addition, improper management or ineffective policies, procedures or controls for
non-controlled entities could adversely affect the business, results of operations or
financial condition of the relevant investment.
Human resources and talent management
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
Risk
How we Manage the Risk
Description:
Existing processes to recruit, develop and retain talented individuals and promote
their mobility within a decentralised organisation may be inadequate thus giving rise
to employee/management attrition, difficulties in succession planning and inadequate
“bench strength”, potentially impeding the continued realisation of the core strategic
objectives of value creation and growth. In addition, the Group is exposed to various
risks associated with collective representation of employees in certain jurisdictions;
these risks could include strikes and increased wage demands.
• 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.
Principal Operational Risks and Uncertainties
Sustainability, corporate social responsibility and climate change
Risk
How we Manage the Risk
Description:
The Group is subject to stringent and evolving laws, regulations, standards and best
practices from a sustainability perspective. The Group’s use of the term "sustainability"
comprises Health & Safety management (i.e. embedding a culture of safety and
ensuring safe working environments), conducting business with integrity, protecting the
environment, preparing for and managing the impact of climate change on business
activities, managing stakeholders, attaining strong social performance credentials and,
lastly, using the foregoing to generate innovation and other business opportunities to
create value. Against this backdrop, the nature of the Group's activities pose or
create certain inherent risks, responsibility for which is vested with operating entity
management, Group and Divisional management and the Board of Directors.
Impact:
Non-adherence to the many laws, regulations, standards and best practices in
the sustainability arena may give rise to increased ongoing remediation and/or
other compliance costs and may adversely affect the Group's business, results of
operations, financial condition and/or prospects. Failure to leverage innovation and
other sustainability initiatives may shorten product life cycles or give rise to early
product obsolescence thus impairing financial performance and/or future value
creation. In addition, the failure to embed sustainability principles across the Group's
businesses and in the Group's strategy may lead to adverse investor sentiment or
reduced investor interest in CRH plc's Ordinary Shares.
104
• CRH’s strategy and business model are built around sustainable,
responsible and ethical performance. Sustainability and Corporate
Social Responsibility (“CSR”) concepts are embedded in all CRH
operations and activities. Excellence in the areas of Health & Safety,
Environment & Climate Change, Governance and People & Community
is a daily priority of line management with regular reporting to Group
management and to the Board of Directors
• The Group has implemented detailed policies and procedures
promoting Health & Safety, Environmental Practices and Energy
Efficiency
• Sustainability performance is subject to rigorous external evaluation
on an annual basis. The Group's achievements have been recognised
through its inclusion in a variety of leading global sustainability indices
and are communicated to investors as part of the Group's investor
relations efforts
• Further details are outlined in the Group Sustainability Report, issued
annually and approved by the Board
CRH Annual Report and Form 20-F I 2017 Principal Operational Risks and Uncertainties - continued
Operational continuity
Risk
Description:
The Group’s operating entities are subject to a wide range of operating risks and
hazards including climatic conditions such as floods and hurricanes/cyclones,
seismic activity, technical failures, interruptions to power supplies, industrial
accidents and disputes, environmental hazards, fire and crime.
Impact:
The occurrence of a significant adverse event could lead to prolonged disruption
of business activities and, as a result, could have a material impact on the
business, results of operations, financial condition or prospects of the Group.
How we Manage the Risk
•
In general, the geographical spread and, in many instances, the
concentration of the Group's activities in specific market areas facilitates
continuity management if an adverse event was to materialise
• Strong adherence to Group policies on property management, quality
control, Information Security, Health & Safety and Sustainability assist in
avoiding potential loss events. Captive insurance entities, which are
wholly-owned subsidiaries, play a critical role in CRH’s insurable risk
management strategies
• Constant monitoring of the risk environment to determine whether all key
risks are covered by insurance, where practicable and sensible
•
Insurance protection is provided at a level believed to be commensurate with
the associated risks, and is maintained with leading, highly-rated international
insurers with appropriate risk retention by insurance captives and by insured
entities in the context of deductibles/excesses borne
Information technology and security/cyber
Risk
How we Manage the Risk
Description:
The Group is dependent on the employment of advanced information systems
(digital infrastructure, applications and networks) to support its business
activities, and is exposed to risks of failure in the operation of these systems.
Further, the Group is exposed to security threats to its digital infrastructure
through cyber-crime. Such attacks are by their nature technologically
sophisticated and may be difficult to detect and defend in a timely fashion.
Impact:
Should a security breach or other incident materialise, it could lead to
interference with production processes, manipulation of financial data, the theft
of private data or intellectual property, misappropriation of funds, or
misrepresentation of information via digital media. In addition to potential
irretrievability or corruption of critical data, the Group could suffer reputational
losses, regulatory penalties and incur significant financial costs in remediation.
• Ongoing strategic and tactical efforts to address the evolving nature of cyber
threats and the challenges posed, including the revision of internal practices
and controls
• Enhancement of existing information and cyber security practices towards
best practices for organisational assets, which include people, processes
and technology
• Ongoing investment and development of risk management and governance
associated with cyber security and information technology
105
CRH Annual Report and Form 20-F I 2017 Principal Compliance Risks and Uncertainties
Laws and regulations
Risk
How we Manage the Risk
Description:
The Group is subject to many local and international laws and regulations,
including those relating to competition law, corruption and fraud, across many
jurisdictions of operation and is therefore exposed to changes in those laws
and regulations and to the outcome of any investigations conducted by
governmental, international or other regulatory authorities.
Impact:
Potential breaches of local and international laws and regulations in the areas
of competition law, corruption and fraud, among others, could result in the
imposition of significant fines and/or sanctions for non-compliance, including
the withdrawal of operating licences, and may inflict reputational damage.
• CRH’s Code of Business Conduct, which is in effect mandatorily across
the Group, stipulates best practice in relation to regulatory and compliance
matters amongst other issues. The Code is available on www.crh.com
• Proactive on-the-ground engagement throughout the Group, through an
extensive training programme, a dedicated whistleblowing hotline (the
results of which are reported to the Audit Committee) and detailed policies
and procedures to support the Code of Business Conduct
• Significant internal controls and compliance policies have been
implemented in order to promote strong and ongoing compliance with
all laws and regulations, including the UK Bribery Act, 2010 and the US
Foreign Corrupt Practices Act, 1977
Principal Financial and Reporting Risks and Uncertainties
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity)
Risk
How we Manage the Risk
Description:
The Group uses financial instruments throughout its businesses giving rise to
interest rate and leverage, foreign currency, counterparty, credit rating and
liquidity risks. A significant portion of the cash generated by the Group from
operational activity is currently dedicated to the payment of principal and
interest on indebtedness. In addition, the Group has entered into certain
financing agreements containing restrictive covenants requiring it to maintain
a certain minimum interest coverage ratio and a certain minimum net worth.
Impact:
A downgrade of the Group’s credit ratings may give rise to increases in funding
costs in respect of future debt and may impair the Group’s ability to raise funds
on acceptable terms. In addition, insolvency of the financial institutions with
which the Group conducts business (or a downgrade in their credit ratings) may
lead to losses in derivative assets and cash and cash equivalents balances or
render it more difficult for the Group either to utilise existing debt capacity or
otherwise obtain financing for operations.
• Fixed and floating rate debt and interest rate swaps are used to manage
borrowing costs, while currency swaps and forward foreign currency
contracts are used to manage currency exposures and to achieve the
desired profile of borrowings
• The Group seeks to ensure that sufficient resources are available to meet
the Group’s liabilities as they fall due through a combination of cash and
cash equivalents, cash flows and undrawn committed bank facilities.
Systems are in place to monitor and control the Group’s liquidity risks,
which are reported to the Board on a monthly basis. Cash flow forecasting
is provided to executive management on a daily basis
• The Group’s established policy is to spread its net worth across the
currencies of its various operations with the objective of limiting its
exposure to individual currencies
• All of the Group’s financial counterparties are leading financial institutions of
international scope with a minimum S&P credit rating of A-
• Please see note 22 to the Consolidated Financial Statements for further
detail
Defined benefit pension schemes and related obligations
Risk
How we Manage the Risk
Description:
The Group operates a number of defined benefit pension schemes and
schemes with related obligations (for example, termination indemnities and
jubilee/long-term service benefits, which are accounted for as defined benefit)
in certain of its operating jurisdictions. The assets and liabilities of defined
benefit pension schemes may exhibit significant period-on-period volatility
attributable primarily to asset values, changes in bond yields/discount rates
and anticipated longevity.
Impact:
In addition to the contributions required for the ongoing service of participating
employees, significant cash contributions may be required to remediate deficits
applicable to past service. Further, fluctuations in the accounting surplus/deficit
may adversely impact the Group's credit metrics thus harming its ability to raise
funds.
• Where feasible, defined benefit pension schemes have been closed to
future accrual. Where closure to future accrual was not feasible for legal
and other reasons, the relevant final salary schemes were transitioned to a
career-average methodology for future service with severance of the final
salary link and the introduction of defined contribution for new entrants
• De-risking frameworks (for example, Liability-Driven Investment techniques)
have been instituted to mitigate deficit volatility and enable better matching
of investment returns with the cash outflows related to benefit obligations
• Deficit reparation initiatives are in place for all of the defined benefit pension
schemes in the Republic of Ireland. The funding proposals governing
the quantum and regularity of contributions have been agreed with the
Pensions Board. In most cases, on the assumption that funding levels
remain on track, the reparation periods cease in 2018
• Defined benefit pension scheme exposures and the mitigation strategies in
place are reviewed by the Audit Committee on a periodic basis
106
CRH Annual Report and Form 20-F I 2017 Principal Financial and Reporting Risks and Uncertainties - continued
Taxation charge and balance sheet provisioning
Risk
How we Manage the Risk
Description:
The Group is exposed to uncertainties stemming from governmental actions in
respect of taxes paid and payable in all jurisdictions of operation. In addition,
various assumptions are made in the computation of the overall tax charge
and in balance sheet provisions which may not be borne out in practice.
Impact:
Changes in the tax regimes and related government policies and regulations in
the countries in which the Group operates could adversely affect its results and
its effective tax rate. The final determination of tax audits or tax disputes may
be different from that which is reflected in the Group's historical income tax
provisions and accruals. If future audits find that additional taxes are due, the
Group may be subject to incremental tax liabilities, possibly including interest
and penalties, which could have a material adverse effect on cash flows,
financial condition and results of operations.
• The Group Tax Guidelines and Group Transfer Pricing Guidelines provide a
tax governance framework operable throughout the Group
• Group Tax is managed by in-house specialists with significant experience.
The in-house expertise is supplemented by the assistance of external
advisors where required
• Group Tax, and the responsible individuals at operating company level,
monitor potential changes in tax legislation and policy in all jurisdictions of
operation
• The Group Tax Director reports directly to the Group Finance Director
and provides regular tax updates to the Finance Director and the Finance
Committee. This ensures that the related risks are actively managed and
monitored
Foreign currency translation
Risk
How we Manage the Risk
Description:
The principal foreign exchange risks to which the Consolidated Financial
Statements are exposed pertain to adverse movements in reported results
when translated into euro (which is the Group’s reporting currency) together
with declines in the euro value of net investments which are denominated in
a wide basket of currencies other than the euro.
Impact:
Adverse changes in the exchange rates used to translate foreign currencies into
euro have impacted and will continue to impact retained earnings. The annual
impact is reported in the Consolidated Statement of Comprehensive Income.
• The Group’s activities are conducted primarily in the local currency of
operation resulting in low levels of foreign currency transactional risk
• The Group’s established policy is to spread its net worth across the
currencies of the various operations with the objective of limiting its
exposure to individual currencies and thus promoting consistency with the
geographical balance of its operation
• The Group manages its multi-currency borrowings through hedging a
portion of its foreign currency assets
• Sensitivity analysis is conducted in order to understand the impact of
significant variances in currency fluctuations
Goodwill impairment
Risk
How we Manage the Risk
Description:
Significant under-performance in any of the Group’s major cash generating
units or the divestment of businesses in the future may give rise to a material
write-down of goodwill.
• 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
Impact:
A write-down of goodwill could have a substantial impact on the Group’s
income and equity.
• Detailed impairment testing in respect of each of the cash-generating units
across the Group is undertaken prior to year-end for the purposes of the
Consolidated Financial Statements
• The goodwill impairment assessment is subject to regular review by the
Audit Committee
• For further information on how we manage the risk posed by Goodwill
impairment, please refer to note 15 to the Consolidated Financial
Statements on pages 153 to 156
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CRH Annual Report and Form 20-F I 2017 s
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CRH Annual Report and Form 20-F I 2017
Consolidated Financial Statements
Independent Auditor’s Reports
Consolidated Income Statement
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
110
120
121
122
123
124
125
135
CRH Americas Materials company, Jack B. Parson Companies supplied 16,000 cubic metres of specialised readymixed concrete during the
construction of the award-winning ‘111 Main’ office building in Salt Lake City, Utah. The 24-storey, sustainable, high-performance building was
designed to operate 15% below the State’s energy code.
109
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CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Independent Auditor’s Irish Report
to the members of CRH plc
Opinion
We have audited the financial statements of CRH plc (‘the Company’) and its subsidiaries (together ‘the Group’) for the year ended 31 December 2017, which
comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated
Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company Balance Sheet, the Company Statement of Changes in Equity, the
Accounting Policies including the summary of Significant Accounting Policies set out on pages 125 to 134 and notes to the financial statements. The financial
reporting framework that has been applied in their preparation is Irish law and International Financial Reporting Standards (‘IFRS’) as adopted by the European
Union and, as regards the Company financial statements, Accounting Standards including FRS 101 Reduced Disclosure Framework (Irish Generally Accepted
Accounting Practice).
In our opinion:
•
•
•
•
the Group financial statements and the Company financial statements give a true and fair view of the assets, liabilities and financial position of the Group
and the Company as at 31 December 2017 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with Irish Generally Accepted Accounting Practice; and
the Group financial statements and the Company financial statements have been properly prepared in accordance with the requirements of the Companies
Act 2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (‘ISAs (Ireland)’) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group
and Company in accordance with ethical requirements that are relevant to our audit of financial statements in Ireland, including the Ethical Standard as applied
to public interest entities issued by the Irish Auditing and Accounting Supervisory Authority (‘IAASA’), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Overview of our audit approach
Key audit matters
•
•
•
•
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
Accounting for acquisitions
Audit scope
• We performed an audit of the complete financial information of 19 components and performed audit
procedures on specific balances for a further 51 components
•
The components where we performed either full or specific audit procedures accounted for 93% of Profit
before tax, 85% of Revenue and 93% of Total Assets
• We have also performed full scope audit procedures for the component which comprised discontinued
operations
•
•
•
•
‘Components’ represent business units across the Group considered for audit scoping purposes
Overall Group materiality was assessed to be €100 million which represents approximately 5% of Profit
before tax from continuing and discontinued operations
In the prior year, our auditor’s report included a risk of material misstatement in relation to the finalisation of
the provisional accounting for the LafargeHolcim (LH) assets. In the current year, we have removed this risk of
material misstatement as it is no longer applicable as the provisional accounting was finalised in 2016
In the current year, our auditor’s report includes accounting for acquisitions as a key audit matter. In 2017,
the total aggregate consideration for acquisitions amounted to €2.1 billion compared to €0.2 billion in the
prior year
Materiality
What has changed?
110
CRH Annual Report and Form 20-F | 2017
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period
and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest
effect on: our overall audit strategy, the allocation of resources in the audit and directing of the efforts of the engagement team. These matters were addressed
in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
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. One additional CGU was
determined to be sensitive in respect of the
excess of value-in-use over its carrying value.
Risk
Our response to the risk
Assessment of the carrying value of goodwill
The impairment review of goodwill, with a
carrying value of €6.9 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 15 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) 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 possible changes 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.
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CRH Annual Report and Form 20-F | 2017
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 impairment review of PP&E and financial
assets, with a carrying value of €13.1 billion and
€1.2 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 14 and
note 16 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
€5.2 billion which represents 21% of the Group’s
revenue in 2017.
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 135).
Accounting for acquisitions
During 2017, the Group completed
31 acquisitions at a cost of €2.1 billion.
Acquisitions continue to be a significant focus
area for the Group and an area where we allocate
significant resources in directing the efforts of the
engagement team.
Refer to the Audit Committee Report (page 64);
Accounting policies (page 125); and note 31 of
the Consolidated Financial Statements
(page 185).
112
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
33 components representing 92% 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.
We performed the above procedures in
eight components representing 96% of
construction contract revenue recognised during
the year.
Our observations included an outline of the range
of audit procedures performed, the key
judgements made by management in recognising
revenue, margin and provisioning on loss-making
contracts and the results of our testing.
Our specialist valuations team challenged
purchase price allocation adjustments, deferred
consideration and the identification and valuation
of acquired intangible assets as all such elements
involve significant judgement by management.
We also considered the adequacy of the related
disclosures (note 31). The above procedures are
performed both locally and by the Group audit
team, and covered 84% of acquisition spend.
Our procedures in respect of current year
acquisitions were focused on four acquisitions
which together comprised 84% of total
acquisition spend.
Substantial audit resources were allocated to
these procedures, including evaluation of the
work done by experts utilised by management
and involvement of our own specialists, in
particular with respect to the purchase price
allocations for the businesses acquired; and the
audit of the opening balance sheets by
component teams.
CRH Annual Report and Form 20-F | 2017
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
The magnitude of an omission or misstatement
that, individually or in the aggregate, could
reasonably be expected to influence the
economic decisions of the users of the financial
statements. Materiality provides a basis for
determining the nature and extent of our audit
procedures.
We determined materiality for the Group to be
€100 million (2016: €87 million), which is
approximately 5% (2016: 5%) of Group Profit
before tax from continuing and discontinued
operations or 5.36% of Group Profit before tax
from continuing operations. 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 management’s performance. 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.
We determined materiality for the Company to
be €87 million (2016: €91 million), which is
approximately 1% (2016: 1%) of total equity.
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
Performance materiality is the application of
materiality at the individual account or balance
level. It is set at an amount to reduce to an
appropriately low level the probability that the
aggregate of uncorrected and undetected
misstatements exceeds 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%
(2016: 50%) of our planning materiality, namely
€50 million (2016: €43.5 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
€10.0 million to €32.5 million (2016: €7.5 million
to €22.7 million).
Reporting threshold
An amount below which identified
misstatements are considered as being clearly
trivial.
We agreed with the Audit Committee that we
would report to them all uncorrected audit
differences in excess of €5 million (2016: €4.35
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.
An overview of the scope of
our audit report
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
ISAs (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
70 (2016: 66) components covering entities across
Europe and the Americas, as well as the
Philippines, which represent the principal business
units within the Group.
Of the 70 components selected, we performed
an audit of the complete financial information of
19 (2016: 19) components (‘full scope
components’) which were selected based on
their size or risk characteristics. For the
remaining 51 (2016: 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% (2016:
93%) of the Group’s Profit before tax, 85%
(2016: 86%) of the Group’s Revenue and 93%
(2016: 93%) of the Group’s Total Assets.
For the current year, the full scope components
contributed 81% (2016: 77%) of the Group’s
Profit before tax, 77% (2016: 78%) of the
Group’s Revenue and 76% (2016: 78%) of the
Group’s Total Assets. The specific scope
components contributed 12% (2016: 16%) of
the Group’s Profit before tax, 8% (2016: 8%) of
the Group’s Revenue and 17% (2016: 15%) 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% (2016: 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.
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CRH Annual Report and Form 20-F | 2017
Independent Auditor’s Irish Report - continued
The charts below illustrate the coverage obtained from the work performed by our audit teams based on continuing operations.
Profit before tax
Revenue
7%
Other procedures
15%
Other procedures
Total Assets
7%
Other procedures
12%
Specific scope
components
81%
Full scope
components
8%
Specific scope
components
77%
Full scope
components
17%
Specific scope
components
76%
Full scope
components
In 2017 and 2016 we have also performed full scope audit procedures for the component which comprised discontinued operations.
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.
For the full scope and specific scope
components, where the work was performed by
component auditors, we determined the
appropriate level of involvement to enable us to
determine that sufficient audit evidence had
been obtained as a basis for our opinion on the
Group as a whole.
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 nine
component teams during 2017 and visiting 44
component teams in the past five 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.
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Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (Ireland) require us to report to you whether
we have anything material to add or draw attention to:
•
•
•
•
•
the disclosures in the Annual Report set out on pages 102 to 107 that describe the principal risks and explain how they are being managed or mitigated;
the Directors’ confirmation set out on page 98 in the Annual Report that they have carried out a robust assessment of the principal risks facing the Group
and the Company, including those that would threaten its business model, future performance, solvency or liquidity;
the Directors’ statement set out on page 98 in the financial statements about whether the Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements and the Directors’ identification of any material uncertainties to the Group’s and the Company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 6.8.3(3) is materially inconsistent
with our knowledge obtained in the audit; or
the Directors’ explanation set out on page 98 in the Annual Report as to how they have assessed the prospects of the Group and the Company, 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 Group and the Company 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
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other than the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as
uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
•
•
•
Fair, balanced and understandable (set out on page 100) – the statement given by the Directors 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 Group’s and the
Company’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
Audit committee reporting (set out on page 64) – the section describing the work of the Audit Committee does not appropriately address matters
communicated by us to the audit committee is materially inconsistent with our knowledge obtained in the audit; or
Directors’ statement of compliance with the UK Corporate Governance Code (set out on page 62) – the parts of the Directors’ statement required under the
Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in
accordance with Listing Rule 6.8.6 do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code
115
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Independent Auditor’s Irish Report - continued
Opinions on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
•
•
in our opinion, the information given in the Directors’ Report is consistent with the financial statements; and
in our opinion, the Directors’ Report has been prepared in accordance with 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 accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the Company
Balance Sheet is in agreement with the accounting records.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the Group and the Company and its environment obtained in the course of the audit, we have not identified
material misstatements in the Directors’ Report.
The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of Directors’ remuneration and transactions required by sections 305 to
312 of the Act are not made. We have nothing to report in this regard.
Respective responsibilities
Respective responsibilities of Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 100, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and the Company’s ability to continue as going concerns, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or the
Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain
sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate
responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and
detection of fraud rests with both those charged with governance of the entity and management.
116
CRH Annual Report and Form 20-F | 2017
Our approach was as follows:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group across the various jurisdictions globally in which the
Group operates. We determined that the most significant are those that relate to the form and content of external financial and corporate governance
reporting including company law, tax legislation, employment law and regulatory compliance
• We understood how the Group is complying with those frameworks by making enquiries of management, internal audit, those responsible for legal and
compliance procedures and the Company Secretary. We corroborated our enquiries through our review of the Group’s Compliance Policy, board minutes,
papers provided to the Audit Committee and correspondence received from regulatory bodies
• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur, by meeting with
management, including within various parts of the business, to understand where they considered there was susceptibility to fraud. We also considered
performance targets and the potential for management to influence earnings or the perceptions of analysts. Where this risk was considered to be higher, we
performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and were designed to provide
reasonable assurance that the financial statements were free from fraud or error
•
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures included a
review of board minutes to identify any non-compliance with laws and regulations, a review of the reporting to the Audit Committee on compliance with
regulations, enquiries of internal and external legal counsel and management
A further description of our responsibilities for the audit of the financial statements is located on the IAASA’s website at:
http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf. This description forms part of
our auditor’s report.
Other matters which we are required to address
We were appointed by the Board of Directors following the AGM held on 27 April 2017 to audit the financial statements for the year ended 31 December 2017.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 30 years.
Except for the inadvertent continuation of an immaterial and previously permissible service which was subsequently terminated as required under the Ethical
Standard for Auditors (Ireland) April 2017, prohibited non-audit services referred to in article 5(1) of the Regulation were not provided to the Group and we
remained independent of the Group in conducting our audit.
Our audit opinion is consistent with the additional report to the Audit Committee.
The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s members, as a body, in accordance with section 391 of the Companies Act 2014. Our audit work has been
undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body,
for our audit work, for this report, or for the opinions we have formed.
Pat O’Neill
for and on behalf of
Ernst & Young
Chartered Accountants and Statutory Audit Firm
Dublin
28 February 2018
117
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Independent Auditor’s US Reports
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CRH public limited company (CRH plc):
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of CRH plc (the Company) as of 31 December 2017 and 2016, the related Consolidated
Income Statements and Consolidated Statements of Comprehensive Income, Changes in Equity and Cash Flows for each of the three years in the period ended
31 December 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the consolidated financial position of the Company at 31 December 2017 and 2016, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended 31 December 2017, in conformity with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of 31 December 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organisations of the Treadway Commission (2013 Framework) and our report dated 28 February 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to
assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
ERNST & YOUNG
We have served as the Company’s auditor since 1988.
Dublin, Ireland
28 February 2018
118
CRH Annual Report and Form 20-F | 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CRH public limited company (CRH plc):
Opinion on Internal Control over Financial Reporting
We have audited CRH plc’s internal control over financial reporting as of 31 December 2017, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission (2013 Framework) (the ‘COSO criteria’). In our opinion, CRH plc
(the Company) maintained, in all material respects, effective internal control over financial reporting as of 31 December 2017, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the
effectiveness of internal control over financial reporting did not include the internal controls of business combinations during the year ended 31 December 2017,
which are included in the 2017 Consolidated Financial Statements of the Company and constituted 6.4% and 10.6% of total and net assets, respectively, as of
31 December 2017 and 1.9% and (0.1)% of revenues (from continuing and discontinued operations) and group profit, respectively, for the year then ended. Our
audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of business
combinations completed during the year ended 31 December 2017.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Consolidated Balance
Sheets of CRH plc as of 31 December 2017 and 2016, the related Consolidated Income Statements and Consolidated Statements of Comprehensive Income,
Changes in Equity and Cash Flows for each of the three years in the period ended 31 December 2017, and the related notes (collectively referred to as the
“financial statements”) of the Company and our report dated 28 February 2018 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of 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 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 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.
ERNST & YOUNG
Dublin, Ireland
28 February 2018
119
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Consolidated Income Statement
for the financial year ended 31 December 2017
Notes
1
3
3
Revenue
Cost of sales
Gross profit
Operating costs
1,4,6,7
Group operating profit
1,5
Profit on disposals
Profit before finance costs
Finance costs
Finance income
Other financial expense
Share of equity accounted investments’ profit
Profit before tax from continuing operations
Income tax expense
Group profit for the financial year from continuing operations
Profit after tax for the financial year from discontinued operations
Group profit for the financial year
Profit attributable to:
Equity holders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
From continuing operations
Group profit for the financial year
Basic earnings per Ordinary Share
Diluted earnings per Ordinary Share
Basic earnings per Ordinary Share from continuing operations
Diluted earnings per Ordinary Share from continuing operations
2017
€m
Restated(i)
2016
€m
Restated(i)
2015
€m
25,220
(16,903)
8,317
(6,222)
2,095
56
2,151
(301)
12
(60)
65
1,867
(55)
1,812
107
1,919
1,788
107
24
1,919
226.8c
225.4c
214.0c
212.7c
24,789
(16,566)
8,223
(6,315)
1,908
53
1,961
(325)
8
(66)
42
1,620
(431)
1,189
81
1,270
1,162
81
27
1,270
150.2c
149.1c
140.4c
139.4c
21,406
(14,743)
6,663
(5,497)
1,166
99
1,265
(303)
8
(94)
44
920
(276)
644
85
729
639
85
5
729
89.1c
88.7c
78.7c
78.3c
(i) Restated to show the results of our Americas Distribution segment in discontinued operations. See note 2 for
further details.
9
9
9
10
1
11
2
13
13
13
13
120
CRH Annual Report and Form 20-F | 2017
Consolidated Statement of Comprehensive Income
for the financial year ended 31 December 2017
Notes
Group profit for the financial year
1,919
1,270
729
2017
€m
2016
€m
2015
€m
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
25
Gains/(losses) relating to cash flow hedges
Items that will not be reclassified to profit or loss in subsequent years:
28
11
Remeasurement of retirement benefit obligations
Tax on items recognised directly within other comprehensive income
(1,076)
8
(1,068)
114
(33)
81
(82)
14
(68)
(61)
3
(58)
661
(2)
659
203
(30)
173
Total other comprehensive income for the financial year
(987)
(126)
832
Total comprehensive income for the financial year
932
1,144
1,561
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
969
(37)
932
1,128
1,538
16
23
1,144
1,561
121
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Consolidated Balance Sheet
as at 31 December 2017
Notes
14
15
16
16
18
25
27
17
18
25
23
2
30
30
30
30
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
Assets held for sale
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
32
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
Liabilities associated with assets classified as held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
N. Hartery, A. Manifold, Directors
24
25
27
19
28
26
19
24
25
26
2
122
2017
€m
2016
€m
13,094
7,214
1,248
25
156
30
95
21,862
2,715
3,630
165
34
2,115
1,112
9,771
12,690
7,761
1,299
26
212
53
159
22,200
2,939
3,979
4
23
2,449
-
9,394
31,633
31,594
286
1
6,417
(15)
285
(386)
7,903
14,491
486
14,977
7,660
3
1,666
226
377
693
10,625
4,534
458
316
11
371
341
6,031
16,656
31,633
284
1
6,237
(14)
286
629
6,472
13,895
548
14,443
7,515
-
2,008
461
591
678
11,253
4,815
394
275
32
382
-
5,898
17,151
31,594
CRH Annual Report and Form 20-F | 2017
Consolidated Statement of Changes in Equity
for the financial year ended 31 December 2017
Attributable to the equity holders of the Company
Notes
At 1 January 2017
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)
Shares distributed under the Performance Share Plan Awards
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
Issued
share
capital
€m
Share
premium
account
€m
Treasury
Shares/
own shares
€m
Other
reserves
€m
285
-
-
-
6,237
-
-
-
1
-
-
-
1
-
-
-
-
118
-
-
-
62
-
-
-
-
(14)
-
-
-
-
-
2
(3)
-
-
-
-
-
At 31 December 2017
287
6,417
(15)
For the financial year ended 31 December 2016
At 1 January 2016
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
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
282
-
-
-
3
-
-
-
-
-
-
-
285
254
-
-
-
28
-
-
-
-
-
-
-
282
6,021
-
-
-
216
-
-
-
-
-
-
-
6,237
4,324
-
-
-
1,697
-
-
-
-
-
-
-
6,021
(28)
-
-
-
-
-
18
(4)
-
-
-
-
(14)
(76)
-
-
-
-
-
51
(3)
-
-
-
-
(28)
30
30
30
30
11
12
31
30
30
30
11
12
31
11
12
31
286
-
-
-
-
62
-
-
(63)
-
-
-
-
285
240
-
-
-
-
46
-
-
-
-
-
-
286
213
-
-
-
-
27
-
-
-
-
-
-
240
Foreign
currency
translation
reserve
€m
629
-
(1,015)
(1,015)
-
-
-
-
-
-
-
-
-
Retained
income
€m
Non-
controlling
interests
€m
Total
equity
€m
6,472
1,895
89
1,984
-
-
(2)
-
-
(5)
(546)
-
-
548 14,443
1,919
(987)
932
24
(61)
(37)
-
-
-
-
-
-
(8)
20
(37)
119
62
-
(3)
-
(5)
(554)
20
(37)
(386)
7,903
486 14,977
700
-
(71)
(71)
-
-
-
-
-
-
-
-
629
57
-
643
643
-
-
-
-
-
-
-
-
700
5,800
1,243
(44)
1,199
-
-
(18)
-
12
(519)
-
(2)
6,472
5,405
724
171
895
-
-
(51)
-
5
57
(511)
-
5,800
529 13,544
1,270
(126)
1,144
27
(11)
16
-
-
-
-
-
(8)
9
2
219
46
-
(4)
12
(527)
9
-
548 14,443
21 10,198
729
832
1,561
5
18
23
1,725
-
27
-
-
-
(3)
-
5
-
57
-
(515)
(4)
489
489
529 13,544
123
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Consolidated Statement of Cash Flows
for the financial year ended 31 December 2017
Notes
2
9
10
14
15
15
20
5
16
14
31
16
20
30
21
21
9
30
21
12
12
Cash flows from operating activities
Profit before tax from continuing operations
Profit before tax from discontinued operations
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)
Net movement on working capital and provisions
Cash generated from operations
Interest paid (including finance leases)
Corporation tax paid
Net cash inflow from operating activities
Cash flows from investing activities
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
Proceeds from issue of shares (net)
Proceeds from exercise of share options
Transactions involving non-controlling interests
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 inflow/(outflow) from financing activities
2017
€m
1,867
146
2,013
349
(65)
(59)
2,238
1,006
66
-
65
(186)
(209)
2,980
(317)
(474)
2,189
222
11
31
(1,044)
(1,841)
(11)
(53)
(2,685)
42
-
(37)
1,010
169
(18)
(3)
(343)
(469)
(8)
343
2016
€m
1,620
121
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
920
113
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 in cash and cash equivalents
(153)
(127)
(897)
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at 1 January
Translation adjustment
Decrease in cash and cash equivalents
23
Cash and cash equivalents at 31 December
2,449
(161)
(153)
2,135
2,518
58
(127)
2,449
3,295
120
(897)
2,518
124
Accounting Policies
(including key accounting estimates and assumptions)
This document constitutes both the Annual
Report and the Financial Statements in
accordance with the Irish and UK requirements,
and the Annual Report on Form 20-F in
accordance with the US Securities
Exchange Act of 1934.
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 EU IAS Regulation.
CRH plc, the Parent Company, is a publicly
traded limited company incorporated and
domiciled in the Republic of Ireland.
The Consolidated Financial Statements, which
are presented in euro millions, have been
prepared under the historical cost convention as
modified by the measurement at fair value of
share-based payments, retirement benefit
obligations and certain financial assets and
liabilities including derivative financial
instruments.
The accounting policies set out below have
been applied consistently by all of 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 Annual General
Meeting 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
2017, including the Annual Improvements
2014-2016 Cycle and amendments to IAS 7
Statement of Cash Flows and to IAS 12 Income
Taxes. 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:
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.
The Group will adopt IFRS 9 on 1 January 2018
in accordance with the transition provisions of
the standard.
The new impairment model requires the
recognition of impairment provisions based on
expected credit losses (ECL) rather than only
incurred credit losses as is the case under
IAS 39 Financial Instruments: Recognition and
Measurement. Overall, the Group expects no
material impact on the Consolidated Financial
Statements. This assessment is based on
internally available information and may be
subject to change arising from further
reasonable and supportable information being
made available to the Group in 2018 when the
Group adopts the new standard.
The new hedge accounting rules will align the
accounting for hedging instruments more
closely with the Group’s risk management
practices. As a general rule, more hedge
relationships may be eligible for hedge
accounting, as the standard introduces a more
principles-based approach.
The new standard also introduces expanded
disclosure requirements and changes in
presentation. These are expected to change the
nature and extent of the Group’s disclosures
about its financial instruments particularly in the
first year of adoption of the new standard.
CRH Annual Report and Form 20-F | 2017
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 will adopt IFRS 15 by
applying the modified retrospective application.
Throughout 2017, the Group performed a
detailed analysis of the impact of IFRS 15;
including a review of our contracts and sales
arrangements. At this point, we have concluded
that there is no material impact arising from
transition to IFRS 15. Opening retained earnings
for 2018 will not be adjusted as a result.
Revenue derived from sources other than
construction contracts will continue to be
recognised at a point in time.
Revenue earned in our construction contract
businesses will continue to be recognised over
time; principally using an input method.
The Group’s transition project had the following
focus areas:
(i) Variable consideration
Some contracts with customers offer trade
discounts or volume rebates. Our construction
contracts can include certain bonuses and other
variable consideration clauses. Based on the
detailed procedures performed during 2017, a
material impact on the recognition of such
variable consideration under IFRS 15 has not
been identified.
(ii) Warranty obligations
Warranties currently offered by the Group will
continue to be accounted for under IAS 37
Provisions, Contingent Liabilities and Contingent
Assets.
(iii) Bundling and unbundling of contracts to
determine performance obligations
The vast majority of our contracts contain just
one performance obligation. Within our
construction contract businesses, some
contracts have been identified as offering two
promises to a customer; however the adoption
of IFRS 15 will not have a material impact on the
recognition of revenue on these contracts.
125
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Accounting Policies - continued
(iv) Loss-making contracts
Loss-making contracts will now be accounted
for under IAS 37 rather than under IAS 11. This
will not have an impact on revenue recognition
at transition.
(v) Principal versus agent considerations
We examined whether any revenue might be
deemed to be more appropriately recorded on
an agency or net basis, rather than on a gross
basis, under IFRS 15 and determined that no
material impact on the Group’s revenue arose.
(vi) Disclosure requirements
IFRS 15 disclosure requirements are more
detailed than under current IFRS. The Group is
in the process of finalising the disclosures
required to be reported in 2018.
IFRS 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). It also
includes an election which permits a lessee not
to separate non-lease components (e.g.
maintenance) from lease components and
instead capitalise both the lease cost and
associated non-lease cost.
At the commencement date of a lease, a lessee
will recognise a liability to make lease payments
(i.e. the lease liability) and an asset representing
the right to use the underlying asset during the
lease term (i.e. the right-of-use asset). Lessees
will be required to separately recognise the
interest expense on the lease liability and the
depreciation expense on the right-of-use asset.
Under IFRS 16 lessees will also be required to
remeasure the lease liability upon the
occurrence of certain events (e.g. a change in
lease term or a change in future lease payments
resulting from a change in an index or rate used
to determine those payments). The lessee will
generally recognise the amount of the
126
remeasurement of the lease liability as an
adjustment to the right-of-use asset.
CRH has entered into operating leases for a
range of assets, principally relating to property
across the US and Europe. These property
leases have varying terms, escalation clauses
and renewal rights including periodic rent
reviews linked with a consumer price index
and/or other indices. The Group also leases
plant and machinery, vehicles and equipment
under operating leases.
The adoption of the new standard will have a
material impact on the Group’s Consolidated
Financial Statements, as follows:
Income Statement
Operating expenses will decrease, as the Group
currently recognises operating lease expenses in
either cost of sales, selling and distribution or
administration expenses (depending on the
nature of the lease). The Group’s lease expense
(continuing operations) for 2017 was
€606 million and is disclosed in note 4 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 determine the
lease payments outstanding at that date and
apply the appropriate discount rate to calculate
the present value of the lease payments. CRH is
currently considering adopting the new standard
by applying the modified retrospective
approach. In addition, CRH will perform an
impairment assessment at date of adoption and
any resulting impairment will impact retained
earnings rather than the Consolidated Income
Statement in the year of transition.
The Group’s commitment outstanding on all
leases (including those relating to discontinued
operations) as at 31 December 2017 is
€2,191 million (2016: €2,171 million) (see note
29 to the Consolidated Financial Statements).
The Group has been assessing the impact of
the new standard since it was issued in January
2016. The exact financial impact of the standard
is as yet unknown, as a number of factors
impact the calculation of the liability, such as
discount rate and the expected term of leases
including renewal options.
The Group’s commitment as at 31 December
2017 provides an indication of the scale of
leases held and how significant leases currently
are to CRH’s business. The Group will continue
to assess its portfolio of leases to calculate the
impending impact of transition to the new
standard during 2018.
In addition to the impacts above, there will also
be significantly increased disclosures when the
Group adopts IFRS 16.
IFRIC 23 Uncertainty over Income
Tax Treatments
IFRIC 23 was issued in June 2017; with an
effective date of 1 January 2019. It clarifies the
accounting for uncertainties in income taxes.
The Group is currently evaluating the impact of
this interpretation on future periods.
IAS 19 Employee Benefits
In February 2018, the IASB issued a narrow
scope amendment to IAS 19 Employee
Benefits. The amendment will be applied
prospectively for plan amendments, curtailments
or settlements occurring on or after 1 January
2019. These amendments are not expected to
have an impact on the Group on the effective
date, but will impact how the Group determines
current service cost and net interest in the event
of any plan amendments, curtailments or
settlements which arise thereafter.
IFRS 17 Insurance Contracts
In May 2017, the IASB issued IFRS 17
Insurance Contracts. IFRS 17 is effective for
reporting periods beginning on or after
1 January 2021, with presentation of
comparative figures required. This standard is
not expected to have an impact on the Group.
There are no other IFRS or IFRIC interpretations
that are effective subsequent to the CRH 2017
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
CRH Annual Report and Form 20-F | 2017
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.
Estimates, and underlying assumptions, are
reviewed on an ongoing basis. Changes in
accounting estimates may be necessary if there
are changes in the circumstances or
experiences on which the estimate was based
or as a result of new information.
The critical accounting policies which involve
significant estimates, assumptions or judgements,
the actual outcome of which could have a material
impact on the Group’s results and financial
position outlined below, are as follows:
Impairment of long-lived assets
and goodwill – Notes 14 and 15
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.
Retirement benefit obligations –
Note 28
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 15 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.
Costs arising in respect of the Group’s defined
contribution pension schemes are charged to
the Consolidated Income Statement in the
period in which they are incurred. The Group
has no legal or constructive obligation to pay
further contributions in the event that the fund
does not hold sufficient assets to meet its
benefit commitments.
The liabilities and costs associated with the
Group’s defined benefit pension schemes (both
funded and unfunded) are assessed either on
the basis of the attained age, the projected unit
credit, the current unit credit or the aggregate
cost methods by professionally qualified
actuaries and are arrived at using actuarial
assumptions based on market expectations at
the balance sheet date. The discount rates
employed in determining the present value of
the schemes’ liabilities are determined by
reference to market yields at the balance sheet
date on high-quality corporate bonds of a
currency and term consistent with the currency
and term of the 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 actuarial gains and losses and the
return on plan assets (excluding net interest), are
recognised immediately in the Consolidated
Balance Sheet with a corresponding debit or
credit to retained earnings through other
comprehensive income in the period in which
they occur. Remeasurements are not reclassified
to profit or loss in subsequent periods.
The defined benefit pension asset or liability in
the Consolidated Balance Sheet comprises the
total for each plan of the present value of the
defined benefit obligation less the fair value of
plan assets out of which the obligations are to
be settled directly. Plan assets are assets that
are held by a long-term employee benefit fund
or qualifying insurance policies. Fair value is
based on market price information and, in the
case of published securities; it is the published
bid price. The value of any defined benefit asset
is limited to the present value of any economic
benefits available in the form of refunds from the
plan and reductions in the future contributions
to the plan.
127
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Accounting Policies - continued
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) for the discount rate, changes
in the rates of return on high-quality corporate
bonds; (ii) for future compensation levels, future
labour market conditions and (iii) for healthcare
cost trend rates, the rate of medical cost
inflation in the relevant regions. The weighted
average actuarial assumptions used and
sensitivity analysis in relation to the significant
assumptions employed in the determination of
pension and other post-retirement liabilities are
contained in note 28 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. A sensitivity
analysis of the change in these assumptions is
provided in note 28.
Provisions for liabilities –
Note 26
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.
128
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. Refer to note 26 for the
expected timing of outflows by provisions
category.
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 in future
accounting periods.
Taxation – current and deferred
– Notes 11 and 27
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 to conclude, the resolution of
which is often not within the control of the
Group. Although management believes that the
estimates included in the Consolidated Financial
Statements and its tax return positions are
reasonable, there is no certainty 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.
Whilst it is possible, the Group does not
currently anticipate that any such differences
could have a material impact on the income tax
provision and profit for the period in which such
a determination is made nor does it expect any
significant impact on its financial position in the
near term. This is based on the Group’s
knowledge and experience, as well as the profile
of the individual components which have been
reflected in the current tax liability, the status of
the tax audits, enquiries and negotiations in
progress at each year-end, previous claims and
any factors specific to the relevant tax
environments.
Other Significant
Accounting Policies
Basis of consolidation
The Consolidated Financial Statements include
the financial statements of the Parent Company
and all subsidiaries, joint ventures and
associates, drawn up to 31 December each
year. The financial year-ends of the Group’s
subsidiaries, joint ventures and associates are
co-terminous.
Subsidiaries
Subsidiaries are all entities over which the Group
has control. The Group controls an entity when
the Group is exposed to, or has rights to,
variable returns from its involvement with the
entity and has the ability to affect those returns
through its power over the entity. Subsidiaries
are fully consolidated from the date on which
control is transferred to the Group. They are
deconsolidated from the date that control
ceases. A change in the ownership interest of a
subsidiary without a change in control is
accounted for as an equity transaction.
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.
CRH Annual Report and Form 20-F | 2017
Investments in associates and joint
ventures – Notes 10 and 16
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.
Property, plant and equipment
– Note 14
The carrying value of property, plant and
equipment of €13,094 million at 31 December
2017 represents 41% of total assets at that
date. Property, plant and equipment are stated
at cost less any accumulated depreciation and
any accumulated impairments except for certain
items that had been revalued to fair value prior
to the date of transition to IFRS (1 January
2004).
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CRH Annual Report and Form 20-F | 2017
Accounting Policies - continued
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.
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
130
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 2
Non-current assets and disposal groups
classified as held for sale are measured at the
lower of carrying amount and fair value less
costs to sell.
Non-current assets and disposal groups are
classified as held for sale if their carrying amounts
will be recovered through a sale transaction rather
than through continuing use. This condition is
regarded as met only when the sale is highly
probable and the asset or disposal group is
available for immediate sale in its present condition
subject only to terms that are usual and customary
for sales of such assets. Management must be
committed to the sale, which should be expected
to qualify for recognition as a completed sale
within 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.
Discontinued operations –
Note 2
Discontinued operations are reported when a
component of the Group has been disposed of,
or when a sale is highly probable; and its
operations and cash flows can be clearly
distinguished, operationally and for financial
reporting purposes, from the rest of the Group
and is classified as held for sale or has been
disposed of. The Group classifies a non-current
asset or disposal group as held for disposal if its
carrying value will be recovered through a sales
transaction or distribution to shareholders rather
than continuing use.
In the Consolidated Income Statement,
discontinued operations are excluded from the
results of continuing operations and are
presented as a single amount as profit or loss
after tax from discontinued operations.
Corresponding notes to the Consolidated
Income Statement exclude amounts for
discontinued operations, unless stated
otherwise.
Prior year information
The presentation of certain prior year information
has been reclassified to conform to the current
year presentation. The presentation of financial
information pertaining to discontinued
operations has been restated retrospectively
(including the Consolidated Income Statement
and corresponding prior year income statement
notes).
Share-based payments –
Note 8
Savings-related Share
Option Scheme
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 material
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 2017 and 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 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.
Awards which vest under the 2014 Performance
Share Plan are allotted to an Employee Benefit
Trust. An increase in nominal Share Capital and
Share Premium are recognised accordingly on
allotment.
The fair values assigned to options under the
Savings-related Share Option Scheme are
derived in accordance with the trinomial
valuation methodology on the basis that the
services to be rendered by employees as
consideration for the granting of share options
will be received over the vesting period, which is
assessed as at the grant date.
The 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.
Business combinations –
Note 31
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.
CRH Annual Report and Form 20-F | 2017
Transaction costs that the Group incurs in
connection with a business combination are
expensed as incurred.
To the extent that settlement of all or any part of
consideration for a business combination is
deferred, the fair value of the deferred
component is determined through discounting
the amounts payable to their present value at
the date of exchange. The discount component
is unwound as an interest charge in the
Consolidated Income Statement over the life of
the obligation. Any contingent consideration is
recognised at fair value at the acquisition date
and included in the cost of the acquisition. The
fair value of contingent consideration at
acquisition date is arrived at through discounting
the expected payment (based on scenario
modelling) to present value. In general, in order
for contingent consideration to become payable,
pre-defined profit and/or profit/net asset ratios
must be exceeded. Subsequent changes to the
fair value of the contingent consideration will be
recognised in profit or loss unless the contingent
consideration is classified as equity, in which
case it is not remeasured and settlement is
accounted for within equity.
The assets and liabilities arising on business
combination activity are measured at their
acquisition-date fair values. Contingent liabilities
assumed in business combination activity are
recognised as of the acquisition date, where
such contingent liabilities are present obligations
arising from past events and their fair value can
be measured reliably. In the case of a business
combination achieved in stages, the
acquisition-date fair value of the acquirer’s
previously-held equity interest in the acquiree is
remeasured to fair value as at the acquisition
date through profit or loss. When the initial
accounting for a business combination is
determined provisionally, any adjustments to the
provisional values allocated to the consideration,
identifiable assets or liabilities (and contingent
liabilities, if relevant) are made within the
measurement period, a period of no more than
one year from the acquisition date.
Goodwill – Note 15
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
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CRH Annual Report and Form 20-F | 2017
Accounting Policies - continued
identification and measurement of the related
assets and liabilities and contingent liabilities are
revisited and the cost is reassessed with any
remaining balance recognised immediately in
the Consolidated Income Statement.
The carrying amount of goodwill in respect of
associates and joint ventures is included in
investments accounted for using the equity
method (i.e. within financial assets) in the
Consolidated Balance Sheet.
Where a subsidiary is disposed of or terminated
through closure, the carrying value of any
goodwill of that subsidiary is included in the
determination of the net profit or loss on
disposal/termination.
Intangible assets (other than
goodwill) arising on business
combinations – Note 15
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 4 and 29
Leases where the lessor retains substantially all
the risks and rewards of ownership are
classified as operating leases. Operating lease
rentals are charged to the Consolidated Income
Statement on a straight-line basis over the lease
term.
132
Inventories and construction
contracts – Note 17
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.
Cash and cash equivalents –
Note 23
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 24
All loans and borrowings are initially recorded at
the fair value of the consideration received net of
directly attributable transaction costs.
Subsequent to initial recognition, current and
non-current interest-bearing loans and
borrowings are, in general, measured at
amortised cost employing the effective interest
methodology. Fixed rate term loans, which have
been hedged to floating rates (using interest rate
swaps), are measured at amortised cost
adjusted for changes in value attributable to the
hedged risks arising from changes in underlying
market interest rates. The computation of
amortised cost includes any issue costs and any
discount or premium materialising on
settlement.
Gains and losses are recognised in the
Consolidated Income Statement through
amortisation on the basis of the period of the
loans and borrowings.
Borrowing costs arising on financial instruments
are recognised as an expense in the period in
which they are incurred (unless capitalised as
part of the cost of property, plant and
equipment).
Derivative financial instruments
and hedging practices –
Note 25
In order to manage interest rate, foreign
currency and commodity risks and to realise the
desired currency profile of borrowings, the
Group employs derivative financial instruments
(principally interest rate swaps, currency swaps
and forward foreign exchange contracts).
Derivative financial instruments are recognised
initially at fair value on the date on which a
derivative contract is entered into and are
subsequently remeasured at fair value. The
carrying value of derivatives is fair value based
on discounted future cash flows and adjusted
for counterparty risk. Future floating rate cash
flows are estimated based on future interest
rates (from observable yield curves at the end of
the reporting period). Fixed and floating rate
cash flows are discounted at future interest
rates and translated at period-end foreign
exchange rates.
At the inception of a derivative transaction, the
Group documents the relationship between the
hedged item and the hedging instrument
together with its risk management objective and
the strategy underlying the proposed
transaction. The Group also documents its
assessment, both at the inception of the
hedging relationship and subsequently on an
ongoing basis, of the effectiveness of the
hedging instrument in offsetting movements in
the fair values or cash flows of the hedged
items. Where derivatives do not fulfil the criteria
for hedge accounting, changes in fair values are
reported in the Consolidated Income Statement.
Fair value and cash flow hedges
The Group uses fair value hedges and cash flow
hedges in its treasury activities. For the
purposes of hedge accounting, hedges are
classified either as fair value hedges (which
entail hedging the exposure to movements in
the fair value of a recognised asset or liability or
an unrecognised firm commitment that could
affect profit or loss) or cash flow hedges (which
hedge exposure to fluctuations in future cash
flows derived from a particular risk associated
with a recognised asset or liability, or a highly
probable forecast transaction that could affect
profit or loss).
Where the conditions for hedge accounting are
satisfied and the hedging instrument concerned
is classified as a fair value hedge, any gain or
loss stemming from the remeasurement of the
hedging instrument to fair value is reported in
the Consolidated Income Statement.
In addition, any gain or loss on the hedged item
which is attributable to the hedged risk is
adjusted against the carrying amount of the
hedged item and reflected in the Consolidated
Income Statement. Where the adjustment is to
the carrying amount of a hedged
interest-bearing financial instrument, the
adjustment is amortised to the Consolidated
Income Statement with the objective of
achieving full amortisation by maturity.
Where a derivative financial instrument is
designated as a hedge of the variability in cash
flows of a recognised asset or liability or a highly
probable forecast transaction that could affect
profit or loss, the effective part of any gain or
loss on the derivative financial instrument is
recognised as other comprehensive income, net
of the income tax effect, with the ineffective
portion being reported in the Consolidated
Income Statement. The associated gains or
losses that had previously been recognised as
other comprehensive income are transferred to
the Consolidated Income Statement
contemporaneously with the materialisation of
the hedged transaction. Any gain or loss arising
in respect of changes in the time value of the
derivative financial instrument is excluded from
the measurement of hedge effectiveness and is
recognised immediately in the Consolidated
Income Statement.
Hedge accounting is discontinued when the
hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies
for hedge accounting. At that point in time, any
cumulative gain or loss on the hedging
instrument recognised as other comprehensive
income remains there until the forecast
transaction occurs. If a hedged transaction is no
longer anticipated to occur, the net cumulative
gain or loss previously recognised as other
comprehensive income is transferred to the
Consolidated Income Statement in the period.
Net investment hedges
Where foreign currency borrowings provide a
hedge against a net investment in a foreign
operation, and the hedge is deemed to be
effective, foreign exchange differences are taken
directly to a foreign currency translation reserve.
The ineffective portion of any gain or loss on the
hedging instrument is recognised immediately in
the Consolidated Income Statement. Cumulative
gains and losses remain in equity until disposal
of the net investment in the foreign operation at
which point the related differences are
transferred to the Consolidated Income
Statement as part of the overall gain or loss on
sale.
Share capital and dividends –
Notes 12 and 30
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
CRH Annual Report and Form 20-F | 2017
recognised in profit or loss on the purchase,
sale, issue or cancellation of the Parent
Company’s Ordinary Shares.
Dividends
Dividends on Ordinary Shares are recognised as
a liability in the Consolidated Financial
Statements in the period in which they are
declared by the Parent Company.
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.
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CRH Annual Report and Form 20-F | 2017
Accounting Policies - continued
The principal exchange rates used for the translation of results, cash flows and balance sheets into euro were as follows:
euro 1 =
Brazilian Real
Canadian Dollar
Chinese Renminbi
2017
3.6054
1.4647
7.6290
Average
2016
3.8561
1.4659
7.3522
2015
3.7004
1.4186
6.9733
Hungarian Forint
309.1933
311.4379
309.9956
73.5324
56.9734
4.2570
0.8767
4.5688
74.3717
52.5555
4.3632
0.8195
4.4904
71.1956
50.5217
4.1841
0.7258
4.4454
Year-end
2017
3.9729
1.5039
7.8044
310.3300
76.6055
59.7950
4.1770
0.8872
4.6585
2016
3.4305
1.4188
7.3202
309.8300
71.5935
52.2680
4.4103
0.8562
4.5390
121.3232
123.1356
120.7168
118.3086
123.4600
1.1117
30.0341
1.1297
1.0902
28.2812
1.1069
1.0679
24.3693
1.1095
1.1702
33.6769
1.1993
1.0739
28.6043
1.0541
Indian Rupee
Philippine Peso
Polish Zloty
Pound Sterling
Romanian Leu
Serbian Dinar
Swiss Franc
Ukrainian Hryvnia
US Dollar
134
CRH Annual Report and Form 20-F | 2017
Notes on Consolidated Financial Statements
1. Segment Information
CRH is a leading global diversified 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 2017, our dedicated European
landscaping businesses, previously included
within our Europe Heavyside segment, were
reorganised to form a new platform,
Architectural Products, within our Europe
Lightside segment. Comparative segment
amounts for 2016 and 2015 have been restated
where necessary to reflect the new format for
segmentation.
The Group reports across the following six
operating segments: Europe Heavyside, Europe
Lightside, Europe Distribution, Americas
Materials, Americas Products and Asia reflecting
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).
The principal factors employed in the
identification of the six segments reflected in this
note include:
•
•
•
•
the Group’s organisational structure in
2017 (during 2017 each divisional
President fulfilled the role of “segment
manager” as outlined in IFRS 8, with the
President of Europe Lightside and
Distribution acting as “segment manager”
for each of the Europe Lightside and
Europe Distribution segments respectively);
the nature of the reporting lines to the Chief
Operating Decision Maker (as defined in
IFRS 8);
the structure of internal reporting
documentation such as management
accounts and budgets; and
the degree of homogeneity of products,
services and geographical areas within
each of the segments from which revenue
is derived
The Chief Operating Decision Maker monitors
the operating results of segments separately in
order to allocate resources between segments
and to assess performance. Segment
performance is predominantly evaluated based
on operating profit. As performance is also
evaluated using operating profit before
depreciation, amortisation and impairment
(EBITDA (as defined)*), supplemental information
based on EBITDA (as defined)* is provided
overleaf. Given that net finance costs and
income tax are managed on a centralised basis,
these items are not allocated between operating
segments 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, lime, aggregates, readymixed and
precast concrete and asphalt products. The
segment comprises businesses operating in 19
countries across Western, Central and Eastern
Europe.
Europe Lightside businesses are predominantly
engaged in the production and supply of
construction accessories, architectural
products, shutters & awnings, perimeter
protection & network access products across
17 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, cement 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.
Asia businesses are predominantly engaged in
the manufacture and supply of cement and
aggregates in the Philippines.
The Americas Distribution business has been
classified as discontinued operations in the
current year; its performance in this year and
comparative years is therefore part of
discontinued operations. See note 2 for further
details.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
135
135
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
1. Segment Information - continued
A. Operating segments disclosures - Consolidated Income Statement data
Year ended 31 December
Revenue
Group EBITDA (as defined)*
Depreciation,
amortisation and
impairment
Group
operating profit
2017
€m
2016
€m
2015
€m
2017
€m
2016
€m
2015
€m
2017
€m
2016
€m
2015
€m
2017
€m
2016
€m
2015
€m
6,902
1,440
4,145
6,945
1,392
4,066
4,813
1,404
4,158
839
143
269
781
137
206
12,487
12,403
10,375
1,251
1,124
7,970
4,327
7,598
4,280
7,018
3,862
12,297
11,878
10,880
1,270
573
1,843
1,204
543
1,747
424
136
171
731
955
391
1,346
361
41
62
464
412
138
550
395
45
76
516
386
132
518
304
46
77
427
335
142
477
478
102
207
787
858
435
386
92
130
608
818
411
1,293
1,229
120
90
94
304
620
249
869
Continuing operations
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
Asia
436
508
151
52
109
2
37
38
9
15
71
(7)
Total Group from continuing operations
25,220
24,789
21,406
3,146
2,980
2,079
1,051
1,072
913
2,095
1,908
1,166
Discontinued operations
Americas Distribution
Total Group
2,343
2,315
2,229
164
150
140
21
31
27,563
27,104
23,635
3,310
3,130
2,219
1,072
1,103
29
942
143
119
111
2,238
2,027
1,277
Group operating profit from continuing operations
Profit on disposals (i)
Finance costs less income
Other financial expense
Share of equity accounted investments’ profit (ii)
Profit before tax from continuing operations
2,095
56
(289)
(60)
65
1,867
1,908
53
(317)
(66)
42
1,620
1,166
99
(295)
(94)
44
920
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
Asia
Total Group
(i) Profit/(loss) on
disposals
(note 5)
24
1
13
19
-
4
100
(22)
8
(ii) Share of equity accounted
investments’ profit/(loss)
(note 10)
12
-
13
9
-
15
15
-
15
23
29
4
33
-
38
86
(19)
34
15
24
(11)
13
24
32
-
32
25
34
-
34
-
-
9
(17)
56
53
99
65
42
30
23
-
23
(9)
44
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.
B. Operating segments disclosures - Consolidated Balance Sheet data
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas Distribution (i)
Americas
Asia
Total Group
Reconciliation to total assets as reported in the Consolidated Balance Sheet:
Investments accounted for using the equity method
Other financial assets
Derivative financial instruments (current and non-current)
Income tax assets (current and deferred)
Cash and cash equivalents
Assets held for sale
Total assets as reported in the Consolidated Balance Sheet
Reconciliation to total liabilities as reported in the Consolidated Balance Sheet:
Interest-bearing loans and borrowings (current and non-current)
Derivative financial instruments (current and non-current)
Income tax liabilities (current and deferred)
Liabilities associated with assets classified as held for sale
Total liabilities as reported in the Consolidated Balance Sheet
CRH Annual Report and Form 20-F | 2017
As at 31 December
Total assets
Total liabilities
2017
€m
8,932
1,100
2,178
12,210
9,180
4,017
-
13,197
2016
€m
8,383
1,084
2,160
11,627
8,970
4,275
1,152
14,397
2017
€m
2,641
302
563
3,506
1,628
895
-
2,523
2016
€m
2,633
313
642
3,588
1,725
998
392
3,115
1,402
1,557
172
224
26,809
27,581
6,201
6,927
1,248
25
64
260
2,115
1,112
31,633
1,299
26
76
163
2,449
-
31,594
7,976
14
2,124
341
16,656
7,790
32
2,402
-
17,151
(i) During 2017, the Americas Distribution segment was classified as held for sale under IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations
(refer to note 2 for further information). Accordingly its total assets and total liabilities have not been presented for 2017.
137
137
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
1. Segment Information - continued
C. Operating segments disclosures - other items
Additions to non-current assets
Year ended 31 December
Property, plant and
equipment (note 14)
2016
€m
2017
€m
2015
€m
Financial assets
(note 16)
2016
€m
2017
€m
2015
€m
Continuing operations
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
349
36
33
418
375
167
542
260
27
26
313
328
142
470
238
38
46
322
335
153
488
Asia
55
47
31
Total Group from continuing operations
1,015
830
841
Discontinued operations
Americas Distribution
Total Group
D. Entity-wide disclosures
Section 1: Information about products and services
29
1,044
23
853
41
882
-
-
-
-
5
6
11
-
11
-
11
2
-
-
2
5
-
5
-
7
-
7
8
-
1
9
10
-
10
-
19
-
19
Total Group
2016
€m
2017
€m
2015
€m
349
36
33
418
380
173
553
262
27
26
315
333
142
475
246
38
47
331
345
153
498
55
47
31
1,026
837
860
29
1,055
23
860
41
901
The Group’s revenue from external customers in respect of its principal products and services is analysed in the disclosures above. Segment revenue
includes €5,236 million (2016: €5,102 million; 2015: €4,523 million) in respect of revenue applicable to construction contracts. The bulk of our
construction activities are performed by our Americas Materials reportable segment, are for the most part short-term in nature and are generally
completed within the same financial reporting period.
Revenue derived through the supply of services and intersegment revenue 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 33. 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 32 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.
Year ended 31 December
As at 31 December
Revenue by destination
2016
€m
2017
€m
2015
€m
Country of domicile - Republic of Ireland
Benelux (mainly the Netherlands)
United Kingdom
United States
Other
Total Group from continuing operations
United States - Americas Distribution
Total Group
435
2,589
3,023
10,844
8,329
25,220
2,343
27,563
403
2,576
3,091
10,415
8,304
24,789
2,315
27,104
349
2,478
1,694
9,819
7,066
21,406
2,229
23,635
Non-current assets*
2016
€m
2017
€m
493
1,162
2,395
8,749
8,757
21,556
476
22,032
475
1,201
2,487
8,710
8,346
21,219
531
21,750
There are no material dependencies 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.
138 * Non-current assets comprise property, plant and equipment, intangible assets and investments accounted for using the equity method.
CRH Annual Report and Form 20-F | 2017
2. Assets Held for Sale and Discontinued Operations
In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply Inc. to dispose of its 100% holding in Allied Building Products, the
trading name of our Americas Distribution segment, for a consideration of US$2.6 billion. The transaction closed on 2 January 2018. The assets associated with
this transaction met the ‘held for sale’ criteria set out in IFRS 5 and the relevant assets and liabilities have accordingly been reclassified as assets and liabilities
held for sale as appropriate as set out in the table below. The proceeds of the sale exceeded the carrying amount of the related net assets and, accordingly, no
impairment loss was recognised on the reclassification of Americas Distribution as held for sale.
The businesses divested in 2017 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 by IFRS 5.
A. Discontinued operations
The results of the discontinued operations included in the Group profit for the financial year are set out below:
Revenue
EBITDA (as defined)*
Depreciation
Amortisation
Operating profit
Profit on disposals
Profit before tax
Attributable income tax expense (i)
Profit after tax
Basic earnings per Ordinary Share from discontinued operations
Diluted earnings per Ordinary Share from discontinued operations
Cash flows from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Net cash inflows
2017
€m
2,343
164
(16)
(5)
143
3
146
(39)
107
12.8c
12.7c
111
(27)
1
85
2016
€m
2,315
150
(22)
(9)
119
2
121
(40)
81
9.8c
9.7c
123
(22)
(1)
100
2015
€m
2,229
140
(18)
(11)
111
2
113
(28)
85
10.4c
10.4c
173
(39)
-
134
(i)
The 2017 attributable income tax expense includes a non-cash deferred tax credit of €7 million related to the enactment of the
“Tax Cuts and Jobs Act” in the US during the year.
B. Assets held for sale
Assets
Property, plant and equipment (note 14)
Intangible assets (note 15)
Deferred income tax assets (note 27)
Inventories (note 20)
Trade and other receivables (note 20)
Cash and cash equivalents (note 23)
Assets held for sale
Liabilities
Trade and other payables (note 20)
Interest-bearing loans and borrowings (note 24)
Deferred income tax liabilities (note 27)
Liabilities associated with assets classified as held for sale
Net assets held for sale
2017
€m
104
372
16
266
334
20
1,112
306
5
30
341
771
Total gains recognised in other comprehensive income and accumulated in equity relating to assets held for sale amounted to €32 million at 31 December 2017.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
139
139
CRH Annual Report and Form 20-F I 2017 2017
€m
2016
€m
2015
€m
7,428
2,869
1,004
811
830
(142)
4,103
16,903
7,307
2,725
940
803
817
(33)
4,007
6,978
2,446
789
630
697
37
3,166
16,566 14,743
4,236
1,986
6,222
4,100
2,215
6,315
3,593
1,904
5,497
Operating costs
2016
€m
2017
€m
2015
€m
160
61
-
-
-
221
170
62
-
23
-
255
158
44
11
1
2
216
Total
2016
€m
987
62
-
23
-
1,072
2017
€m
990
61
-
-
-
1,051
2015
€m
825
44
41
1
2
913
CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
3. Cost Analysis
Continuing Operations
Cost of sales analysis
Raw materials and goods for resale
Employment costs (note 6)
Energy conversion costs
Repairs and maintenance
Depreciation, amortisation and impairment (i)
Change in inventory
Other production expenses (primarily sub-contractor costs and equipment rental)
Total
Operating costs analysis
Selling and distribution costs
Administrative expenses
Total
(i) Depreciation, amortisation and impairment analysis
Depreciation and depletion (note 14)
Amortisation of intangible assets (note 15)
Impairment of property, plant and equipment
Impairment of intangible assets (note 15)
Impairment of financial assets
Total
Cost of sales
2016
€m
2017
€m
2015
€m
830
-
-
-
-
830
817
-
-
-
-
817
667
-
30
-
-
697
140
CRH Annual Report and Form 20-F | 2017
4. Operating Profit Disclosures
Continuing Operations
2017
€m
2016
€m
2015
€m
292
258
56
606
262
250
57
569
200
221
50
471
Operating lease rentals
- hire of plant and machinery
- land and buildings
- other operating leases
Total
Auditor’s remuneration
In accordance with statutory requirements in Ireland, fees for professional services provided by the Group’s independent auditor in
respect of each of the following categories were:
EY Ireland
(statutory auditor)
2016
€m
2017
€m
2015
€m
Audit fees (i)
Other audit-related assurance fees (ii)
Tax advisory services
Total
4
-
-
4
3
-
-
3
3
1
-
4
EY
(network firms)
2017
€m
2016
€m
2015
€m
2017
€m
16
1
1
18
16
-
1
17
16
4
2
22
20
1
1
22
Total
2016
€m
19
-
1
20
2015
€m
19
5
2
26
(i)
Audit of the Group accounts includes audit of internal controls over financial reporting and parent and subsidiary statutory audit
fees, but excludes €2 million (2016: €2 million; 2015: €2 million) paid to auditors other than EY.
(ii) Other assurance services includes attestation and due diligence services that are closely related to the performance of the audit.
(iii) There were no other fees for services provided by the Group’s independent auditor (2016: €nil million; 2015: €nil million).
141
141
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
5. Business and Non-Current Asset Disposals
Continuing Operations
Business disposals
2016
€m
2017
€m
2015 (i)
€m
Disposal of other
non-current assets
2016
€m
2015
€m
2017
€m
Assets/(liabilities) disposed of at net carrying amount:
- non-current assets (notes 14,15,16)
- cash and cash equivalents
- working capital and provisions (note 20)
- interest-bearing loans and borrowings
- deferred tax (note 27)
- retirement benefit obligations
Net assets disposed
Reclassification of currency translation effects on disposal
Total
Proceeds from disposals (net of disposal costs)
Profit on step acquisition (note 31)
Profit on disposals
Net cash inflow arising on disposal
Proceeds from disposals from continuing operations
Proceeds from disposals from discontinued operations
Less: cash and cash equivalents disposed
Less: deferred proceeds arising on disposal (note 20)
Total
47
11
29
-
2
-
89
9
98
99
-
1
99
-
(11)
(3)
85
147
3
24
-
(1)
-
173
(44)
129
133
-
4
133
-
(3)
(7)
123
570
90
246
(20)
(22)
(84)
780
39
819
875
6
62
875
-
(90)
(38)
747
79
109
103
-
-
-
-
-
79
-
79
134
-
55
-
-
-
-
-
109
-
109
158
-
49
-
-
-
-
-
103
-
103
140
-
37
134
158
140
3
-
-
2
-
-
2
-
-
137
160
142
2017
€m
Total
2016
€m
2015
€m
126
11
29
-
2
-
168
9
177
233
-
56
233
3
(11)
(3)
222
256
3
24
-
(1)
-
282
(44)
238
291
-
53
673
90
246
(20)
(22)
(84)
883
39
922
1,015
6
99
291
1,015
2
(3)
(7)
283
2
(90)
(38)
889
(i) Disposals in 2015 related principally to the divestment of the Group’s clay and certain concrete businesses in the UK (Europe Heavyside) and its clay
business in the US (Americas Products) on 26 February 2015.
142
6. Employment
Continuing Operations
The average number of employees is as follows:
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
Asia
Total Group
Year ended 31 December
2017
24,401
7,272
11,036
42,709
24,077
17,146
41,223
2016
24,551
7,084
10,971
42,606
22,650
16,259
38,909
2015
18,131
7,360
11,392
36,883
20,125
16,712
36,837
1,431
1,374
466
85,363
82,889
74,186
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 8)
Total retirement benefits expense (note 28)
Total
Total charge analysed between:
Cost of sales
Operating costs
Finance costs (net) - applicable to retirement benefit obligations (note 9)
Total
* Other employment costs relate principally to redundancy, severance and healthcare costs.
2017
€m
3,997
465
546
60
236
5,304
2,869
2,424
11
5,304
2016
€m
3,915
454
531
44
307
5,251
2,725
2,514
12
5,251
2015
€m
3,474
401
505
26
281
4,687
2,446
2,224
17
4,687
Employment costs including discontinued operations were €5,588 million (2016: €5,532 million; 2015: €4,961 million). The
average number of employees including discontinued operations were 89,213 (2016: 86,778; 2015: 78,106).
7. Directors’ Emoluments and Interests
Directors’ emoluments (which are included in administrative expenses in note 3) and interests are presented in the Directors’
Remuneration Report on pages 72 to 95.
CRH Annual Report and Form 20-F | 2017
143
143
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
8. Share-based Payment Expense
Continuing Operations
Performance Share Plans and Restricted Share Plan expense
Share option expense
Total share-based payment expense
2017
€m
57
3
60
2016
€m
38
6
44
2015
€m
25
1
26
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, is reflected in operating costs in the Consolidated Income Statement.
2014 Performance Share Plan
The structure of the 2014 Performance Share Plan is set out in the Directors’ Remuneration Report on page 84.
An expense of €56 million was recognised in 2017 (2016: €37 million; 2015: €19 million).
Details of awards granted under the 2014 Performance Share Plan
Granted in 2017
Granted in 2016
Granted in 2015
Number of shares
Share price at
date of award
Period to earliest
release date
Initial
award*
Net outstanding at
31 December 2017
€33.21
€24.87
€24.84
3 years
3 years
3 years
3,342,900
3,879,901
2,989,371
3,156,995
3,437,098
2,644,593
* Numbers represent the initial awards including those granted to employees of Allied Building Products. The Remuneration Committee has determined
that dividend equivalents will accrue on awards under the 2014 Performance Share Plan. Subject to satisfaction of the applicable performance criteria,
such dividend equivalents will be released to participants in the form of additional shares on vesting.
50% of each award made in 2017 and 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 2017 and 2016 is
subject to a cumulative cash flow metric. The awards made in 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 84 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 €17.43
and €14.99 respectively (2016: €11.94 and €10.52 respectively; 2015: €13.99 subject to TSR performance against peers only).
The fair value of these awards was calculated using a TSR pricing model taking account of peer group TSR, volatilities and
correlations together with the following assumptions:
Risk-free interest rate (%)
Expected volatility (%)
2017
(0.40)
30.1
2016
(0.53)
21.7
2015
0.25
21.4
The expected volatility was determined using a historical sample of daily 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 €33.21 (2016: €24.87; 2015: €24.84).
The fair value was calculated using the closing CRH share price at the date the award was granted.
144
CRH Annual Report and Form 20-F | 2017
Share Option Schemes
The 2010 Share Option Scheme was replaced in 2014 by the 2014 Performance Share Plan, and accordingly no options have been granted since 2013.
Details of movement and options outstanding under Share Option Schemes (excluding Savings-related Share Option Schemes)
Outstanding at beginning of year
Exercised (i)
Lapsed
Outstanding at end of year (ii)
Exercisable at end of year
Weighted average
exercise price
€21.51
€24.85
€24.14
€17.96
€17.96
Number of
options
2017
2,997,495
(1,462,863)
(92,853)
1,441,779
1,441,779
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
(i)
The weighted average share price at the date of exercise of these options was €32.24 (2016: €29.70; 2015: €25.51).
(ii) All options granted have a life of ten years.
Weighted average remaining contractual life for the share options outstanding
at 31 December (years)
2017
2.53
2016
2.46
2015
3.86
euro-denominated options outstanding at end of year (number)
Range of exercise prices (€)
1,436,115
16.19-21.52
2,991,831
16.19-29.86
8,604,776
16.19-29.86
Pound Sterling-denominated options outstanding at end of year (number)
Range of exercise prices (Stg£)
5,664
15.30-17.19
5,664
15.30-17.19
15,914
13.64-18.02
2010 Savings-related Share Option Schemes
The Group operates Savings-related Share Option Schemes. Participants may save up to €500/Stg£500 per month from their net salaries for a fixed term of
three or five years and at the end of the savings period they have the option to buy CRH shares at a discount of up to 15% of the market price on the date of
invitation of each savings contract.
Details of options granted under the Savings-related Share Option Schemes
Weighted average
exercise price
Number of
options
2017
Weighted average
exercise price
Number of
options
2016
Weighted average
exercise price
Outstanding at beginning of year
€18.63/Stg£15.92
1,402,174
€16.96/Stg£14.27
593,177
€14.84/Stg£12.80
Exercised (i)
Lapsed
Granted (ii)
€15.73/Stg£14.27
€21.42/Stg£18.22
(126,472)
(123,455)
€13.66/Stg£11.95
(121,242)
€13.42/Stg£12.07
€17.55/Stg£15.68
(81,628)
€13.52/Stg£13.63
€27.86/Stg£24.51
404,052
€20.83/Stg£16.16
1,011,867
€21.12/Stg£15.54
Outstanding at end of year
€21.50/Stg£18.05
1,556,299
€18.63/Stg£15.92
1,402,174
€16.96/Stg£14.27
Exercisable at end of year
€15.89/n/a
15,890
€13.45/Stg£12.22
23,897
€13.72/n/a
Number of
options
2015
894,548
(331,925)
(187,892)
218,446
593,177
15,165
(i)
The weighted average share price at the date of exercise of these options was €31.14 (2016: €27.90; 2015: €25.77).
(ii) Pursuant to the 2010 Savings-related Share Option Schemes operated by the Group, employees were granted options over 404,052 of CRH plc’s Ordinary
Shares in March 2017 (2016: 1,011,867 share options in March 2016; 2015: 218,446 share options in March 2015). This figure comprises options over
304,492 (2016: 692,334; 2015: 152,312) shares and 99,560 (2016: 319,533; 2015: 66,134) shares which are normally exercisable within a period of six
months after the third or the fifth anniversary of the contract, whichever is applicable, and are not subject to specified EPS growth targets being achieved.
The exercise price at which the options are granted under the scheme represents a discount of 15% to the market price on the date of invitation of each
savings contract.
145
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CRH Annual Report and Form 20-F | 2017
8. Share-based Payment Expense - continued
Continuing Operations
Weighted average remaining contractual life for the share options outstanding
at 31 December (years)
2017
1.90
2016
2.41
2015
1.96
euro-denominated options outstanding at end of year (number)
Range of exercise prices (€)
304,963
13.64-27.86
320,362
12.82-21.12
321,059
12.82-21.12
Pound Sterling-denominated options outstanding at end of year (number)
Range of exercise prices (Stg£)
1,251,336
12.22-24.51
1,081,812
11.55-16.16
272,118
11.19-15.54
The weighted fair values assigned to options issued under the Savings-related Share Option Schemes, which were computed in
accordance with the trinomial valuation methodology, were as follows:
Granted in 2017
Granted in 2016
Granted in 2015
3-year
5-year
€5.97
€5.01
€4.59
€6.49
€5.57
€6.08
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
2017
2016
2015
3-year
5-year
3-year
5-year
3-year
5-year
27.86
(0.72)
2.07
20.9
3
27.86
(0.45)
3.55
20.6
5
20.83
(0.48)
1.95
21.8
3
20.83
(0.33)
3.32
22.9
5
21.12
(0.22)
1.91
21.6
3
21.12
(0.09)
3.25
27.8
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.
146
9. Finance Costs and Finance Income
Continuing Operations
CRH Annual Report and Form 20-F | 2017
Finance costs
Interest payable on borrowings
Net loss/(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 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 26)
Unwinding of discount applicable to deferred and contingent acquisition
consideration (note 19)
Pension-related finance cost (net) (note 28)
Total
2017
€m
2016
€m
2015
€m
300
2
16
-
(23)
6
301
(5)
(7)
(12)
289
18
24
7
11
60
337
(10)
14
(3)
(20)
7
325
(4)
(4)
(8)
317
-
30
24
12
66
334
(32)
12
4
(22)
7
303
(4)
(4)
(8)
295
38
19
20
17
94
Total net finance costs
349
383
389
(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
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CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
10. 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
2017
€m
2015
€m
2017
€m
Associates
2016
€m
582
77
(28)
49
(1)
48
(5)
43
480
85
(26)
59
(4)
55
(4)
51
496
79
(27)
52
(6)
46
(5)
41
816
77
(39)
38
(10)
28
(6)
22
769
52
(40)
12
(15)
(3)
(6)
(9)
2015
€m
961
84
(55)
29
(17)
12
(9)
3
2017
€m
Total
2016
€m
2015
€m
1,398
1,249
1,457
154
(67)
87
(11)
76
(11)
65
137
(66)
71
(19)
52
(10)
42
163
(82)
81
(23)
58
(14)
44
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 16.
* EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges and profit on disposals.
11. Income Tax Expense
Continuing Operations
Recognised within the Consolidated Income Statement
(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 (including deferred tax credit associated with the “Tax Cuts and
Jobs Act” and other timing differences)
Total deferred tax income
2017
€m
9
312
321
16
(4)
2
(280)
(266)
2016
€m
5
443
448
8
(11)
1
(15)
(17)
2015
€m
-
320
320
7
(8)
1
(44)
(44)
Income tax reported in the Consolidated Income Statement
55
431
276
148
CRH Annual Report and Form 20-F | 2017
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:
Current tax
Current tax - share option exercises
Deferred tax
Deferred tax - share-based payment expense
Income tax recognised outside the Consolidated Income Statement
Reconciliation of applicable tax rate to effective tax rate
Profit before tax (€m)
Tax charge expressed as a percentage of profit before tax (effective tax rate):
- current tax expense only
- total income tax expense (current and deferred)
2017
€m
(33)
2
(7)
(5)
(38)
2016
€m
3
-
12
12
15
2015
€m
(30)
-
5
5
(25)
1,867
1,620
920
17.2%
2.9%
27.7%
26.6%
34.8%
30.0%
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of the Group:
Irish corporation tax rate
Higher tax rates on overseas earnings
Deferred tax credit relating to the enactment of the “Tax Cuts and Jobs Act”
Other items (primarily comprising items not chargeable to tax/expenses not deductible for tax)
Total effective tax rate
% of profit before tax
12.5
15.9
(23.6)
(1.9)
2.9
12.5
15.1
-
(1.0)
26.6
12.5
12.3
-
5.2
30.0
Other disclosures
Effective tax rate
The 2017 effective tax rate is 2.9%. The 2017 reported tax charge includes a non-cash deferred tax credit of €440 million related to the
enactment of the “Tax Cuts and Jobs Act” in the US during the year. The 2017 effective tax rate excluding the impact of this exceptional
deferred tax credit is 26.5%.
The tax charge associated with discontinued operations during 2017 is recognised separately in “Profit after tax for the financial year from
discontinued operations”. See note 2 for further details.
The 2015 Consolidated Income Statement 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.
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CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
12. 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 (2016: €3,175; 2015: €3,175)
7% ‘A’ Cumulative Preference Shares €77,521 (2016: €77,521; 2015: €77,521)
Equity
Final - paid 46.20c per Ordinary Share (2016: 44.00c; 2015: 44.00c)
Interim - paid 19.20c per Ordinary Share (2016: 18.80c; 2015: 18.50c)
Total
Reconciliation to Consolidated Statement of Cash Flows
Dividends to shareholders
Less: issue of scrip shares in lieu of cash dividends (note 30)
Dividends paid to equity holders of the Company
Dividends paid by subsidiaries to non-controlling interests
Total dividends paid
Dividends proposed (memorandum disclosure)
Equity
2017
€m
2016
€m
2015
€m
-
-
386
160
546
546
(77)
469
8
477
-
-
363
156
519
519
(167)
352
8
360
-
-
359
152
511
511
(132)
379
4
383
Final 2017 - proposed 48.80c per Ordinary Share (2016: 46.20c; 2015: 44.00c)
409
385
362
150
CRH Annual Report and Form 20-F | 2017
13. 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
Profit after tax for the financial year from discontinued operations
Profit attributable to ordinary equity holders of the Company -
numerator for basic/diluted earnings per Ordinary Share from continuing operations
Denominator computations
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
Basic earnings per Ordinary Share
Diluted earnings per Ordinary Share
Basic earnings per Ordinary Share from continuing operations
Diluted earnings per Ordinary Share from continuing operations
2017
€m
1,919
(24)
1,895
-
1,895
107
1,788
835.6
5.2
840.8
226.8c
225.4c
214.0c
212.7c
2016
€m
1,270
(27)
1,243
-
1,243
81
1,162
827.8
6.1
833.9
150.2c
149.1c
140.4c
139.4c
2015
€m
729
(5)
724
-
724
85
639
812.3
3.6
815.9
89.1c
88.7c
78.7c
78.3c
(i)
The weighted average number of Ordinary Shares included in the computation of basic and diluted earnings per Ordinary Share has been
adjusted to exclude shares held by the Employee Benefit Trust and Ordinary Shares repurchased and held by the Company (CRH plc) as
Treasury Shares given that these shares do not rank for dividend. The number of Ordinary Shares so held at the balance sheet date is detailed in
note 30.
(ii) Contingently issuable Ordinary Shares (totalling 5,710,247 at 31 December 2017, 3,095,404 at 31 December 2016 and 8,630,786 at
31 December 2015) 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
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CRH Annual Report and Form 20-F | 2017
14. Property, Plant and Equipment
At 31 December 2017
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
At 1 January 2017, net carrying amount
Translation adjustment
Reclassifications
Additions at cost
Arising on acquisition (note 31)
Reclassified as held for sale
Disposals at net carrying amount
Depreciation charge for year (ii)
At 31 December 2017, net carrying amount
The equivalent disclosure for the prior year is as follows:
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 20)
Additions at cost
Arising on acquisition (note 31)
Disposals at net carrying amount
Depreciation charge for year (ii)
At 31 December 2016, net carrying amount
At 1 January 2016
Cost/deemed cost
Accumulated depreciation (and impairment charges)
Net carrying amount
Land and
buildings (i)
€m
Plant and
machinery
€m
Assets in
course of
construction
€m
8,472
(2,248)
6,224
6,157
(483)
60
87
703
(22)
(53)
(225)
6,224
8,438
(2,281)
6,157
6,396
9
41
8
82
(17)
(129)
(233)
6,157
8,471
(2,075)
6,396
13,157
(6,838)
6,319
6,035
(460)
348
481
812
(79)
(37)
(781)
6,319
13,182
(7,147)
6,035
6,087
(62)
340
-
451
51
(56)
(776)
6,035
12,583
(6,496)
6,087
551
-
551
498
(33)
(408)
476
21
(3)
-
-
551
498
-
498
579
(4)
(381)
-
320
(15)
(1)
-
498
582
(3)
579
Total
€m
22,180
(9,086)
13,094
12,690
(976)
-
1,044
1,536
(104)
(90)
(1,006)
13,094
22,118
(9,428)
12,690
13,062
(57)
-
8
853
19
(186)
(1,009)
12,690
21,636
(8,574)
13,062
(i)
The carrying value of mineral-bearing land included in the land and buildings category above amounted to €2,831 million at the balance sheet
date (2016: €2,708 million).
(ii)
The depreciation charge for the year includes €16 million (2016: €22 million; 2015: €18 million) relating to discontinued operations.
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
2017
€m
346
491
2016
€m
309
467
152
15. Intangible Assets
At 31 December 2017
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
At 1 January 2017, net carrying amount
Translation Adjustment
Arising on acquisition (note 31)
Reclassified as held for sale
Disposals
Amortisation charge for year (ii)
At 31 December 2017, net carrying amount
The equivalent disclosure for the prior year is as follows:
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 31)
Disposals
Amortisation charge for year (ii)
Impairment charge for year
At 31 December 2016, net carrying amount
At 1 January 2016
Cost/deemed cost
Accumulated amortisation (and impairment charges)
Net carrying amount
CRH Annual Report and Form 20-F | 2017
Other intangible assets
Goodwill
€m
Marketing-
related
€m
Customer-
related (i)
€m
Contract-
based
€m
7,198
(293)
6,905
7,396
(593)
487
(363)
(22)
-
6,905
7,701
(305)
7,396
7,406
(2)
71
(56)
-
(23)
7,396
7,699
(293)
7,406
129
(54)
75
89
(10)
4
-
-
(8)
75
142
(53)
89
91
2
3
-
(7)
-
89
137
(46)
91
535
(331)
204
229
(22)
51
(8)
(1)
(45)
204
659
(430)
229
264
6
11
(1)
(51)
-
229
639
(375)
264
80
(50)
30
47
(4)
1
(1)
-
(13)
30
87
(40)
47
59
1
-
-
(13)
-
47
85
(26)
59
Total
€m
7,942
(728)
7,214
7,761
(629)
543
(372)
(23)
(66)
7,214
8,589
(828)
7,761
7,820
7
85
(57)
(71)
(23)
7,761
8,560
(740)
7,820
(i)
(ii)
The customer-related intangible assets relate predominantly to non-contractual customer relationships.
The amortisation charge for the year includes €5 million (2016: €9 million; 2015: €11 million) relating to discontinued operations, which primarily relates to
customer-related intangible assets.
153
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CRH Annual Report and Form 20-F | 2017
15. Intangible Assets - continued
Annual goodwill testing
The net book value of goodwill capitalised under previous GAAP (Irish GAAP) as at the transition date to IFRS (1 January 2004) has been treated as deemed
cost. Goodwill arising on acquisition since that date is capitalised at cost.
Cash-generating units
Goodwill acquired through business combination activity has been allocated to cash-generating units (CGUs) that are expected to benefit from synergies in that
combination. The 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 (2016: 25) CGUs have been identified and
these are analysed between the six business segments and Americas Distribution below. 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*
Europe Lightside
Europe Distribution
Europe
Americas Materials*
Americas Products
Americas Distribution
Americas
Asia
Total Group
Cash-generating units
2016
2017
14
1
1
16
6
1
1
8
1
14
1
1
16
6
1
1
8
1
Goodwill (€m)
2017
1,770
365
671
2,806
2,082
1,555
-
3,637
2016
1,679
365
665
2,709
2,077
1,671
411
4,159
462
528
25
25
6,905
7,396
*WithinthegoodwillfiguresincludedabovefortheEuropeHeavysideandAmericasMaterials
segmentsis€339millionofgoodwillunallocatedtoaCGUduetothecompletionoftwoacquisitionsin
quarterfour2017.
154
CRH Annual Report and Form 20-F | 2017
Impairment testing methodology and results
Goodwill is subject to impairment testing on an
annual basis. The recoverable amount of 24
CGUs is determined based on a value-in-use
computation, using Level 3 inputs in accordance
with the fair value hierarchy. The held for sale
assets (Americas Distribution CGU) were
considered separately on a fair value less costs
to sell basis, given that a market price has been
agreed.
The cash flow forecasts are primarily based on a
five-year strategic plan document formally
approved by 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. Projected
cash flows beyond the initial evaluation period
have been extrapolated using real growth rates
ranging from 0.5% to 2.0% in Europe, 1.3%
to 1.4% in the Americas and 3.5% in Asia.
Such real growth rates do not exceed the long-
term average growth rates for the countries in
which each CGU operates. 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 7.0% to
10.3% (2016: 7.1% to 12.0%); these rates are in
line with the Group’s estimated weighted
average cost of capital, arrived at using the
Capital Asset Pricing Model.
The 2017 annual goodwill impairment testing
process has resulted in no intangible asset
impairments. The 2016 annual goodwill
impairment testing process resulted in an
impairment of €23 million being recorded in
respect of one CGU in the Europe Heavyside
segment.
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 153. The
goodwill allocated to each of the remaining
CGUs is less than 10% of the total carrying
value in all other cases. The additional
disclosures required for the two CGUs with
significant goodwill are as follows:
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
Oldcastle
Building Products
2017
2016
2017
2016
€725m
7.6%
13.9%
€748m
7.8%
13.7%
€3,221m €3,549m
€1,334m €1,338m
€1,555m €1,670m
11.7%
10.3%
15.1%
14.4%
€5,628m €4,695m
€2,152m €1,388m
The key assumptions and methodology used in
respect of these two CGUs are consistent with
those described above. The values applied to
each of the key estimates and assumptions are
specific to the individual CGUs and were derived
from a combination of internal and external
factors based on historical experience and took
into account the cash flows specifically
associated with these businesses. The cash
flows and 20-year annuity-based terminal value
were projected in line with the methodology
disclosed above.
The UK and Oldcastle Building Products CGUs
are not included in the CGUs referred to in the
Sensitivity analysis section overleaf. 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 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
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CRH Annual Report and Form 20-F | 2017
15. Intangible Assets - continued
Sensitivity analysis
Sensitivity analysis has been performed and results in additional disclosures in respect of 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 on page 155 (a 30-year annuity
period has been used). This CGU had goodwill of €169 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
2.9 percentage points
22.2%
18.2%
1.7 percentage points
The average EBITDA (as defined)* margin for the CGU over the initial five-year period was 24.0%. The value-in-use (being the present value of the future net cash
flows) was €289 million and the carrying amount was €236 million, resulting in an excess of value-in-use over carrying amount of €53 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 | 2017
16. Financial Assets
At 1 January 2017
Translation adjustment
Investments and advances
Disposals and repayments
Share of profit after tax
Dividends received
At 31 December 2017
The equivalent disclosure for the prior year is as follows:
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
Investments accounted for
using the equity method
(i.e. joint ventures and associates)
Share of net
assets
€m
Loans
€m
1,152
(67)
5
(1)
65
(31)
1,123
1,161
(14)
1
-
2
42
(40)
1,152
147
(16)
6
(12)
-
-
125
156
3
6
(5)
(13)
-
-
147
Total
€m
1,299
(83)
11
(13)
65
(31)
1,248
1,317
(11)
7
(5)
(11)
42
(40)
1,299
Other (i)
€m
26
(1)
-
-
-
-
25
28
-
-
-
(2)
-
-
26
(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
2017
€m
752
209
(348)
(115)
498
2016
€m
727
171
(285)
(102)
511
2017
€m
754
492
(73)
(548)
625
2016
€m
845
413
(182)
(435)
641
2017
€m
1,506
701
(421)
(663)
1,123
2016
€m
1,572
584
(467)
(537)
1,152
A listing of the principal equity accounted investments is contained on page 251.
The Group holds a 21.13% stake (2016: 21.13%) in Samse S.A., a publicly-listed distributor in France which is accounted for as an associate investment above.
The fair value of this investment at the balance sheet date, calculated based on the number of shares held multiplied by the closing share price at 31 December
2017 (Level 1 input in the fair value hierarchy), was €125 million (2016: €107 million).
157
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CRH Annual Report and Form 20-F | 2017
17.
Inventories
Raw materials
Work-in-progress (i)
Finished goods
Total inventories at the lower of cost and net realisable value
2017
€m
885
92
1,738
2,715
2016
€m
821
94
2,024
2,939
(i) Work-in-progress includes €2 million (2016: €2 million) in respect of the cumulative costs incurred, net of amounts
transferred to cost of sales under percentage-of-completion accounting, for construction contracts in progress at
the balance sheet date.
An analysis of the Group’s cost of sales expense is provided in note 3 to the financial statements.
Write-downs of inventories recognised as an expense within cost of sales amounted to €31 million (2016: €17 million;
2015: €12 million).
18. 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
2017
€m
2,456
773
3,229
(131)
3,098
8
524
3,630
2016
€m
2,773
792
3,565
(152)
3,413
9
557
3,979
Non-current
Other receivables
156
212
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 €176 million and €154 million respectively (2016: €149 million and €167 million
respectively).
158
CRH Annual Report and Form 20-F | 2017
Valuation and qualifying accounts (provision for impairment)
The movements in the provision for impairment of receivables during the financial year were as follows:
At 1 January
Translation adjustment
Provided during year
Reclassified (as)/from held for sale
Disposed of during year
Written off during year
Arising on acquisition (note 31)
Recovered during year
At 31 December
2017
€m
152
(7)
32
(6)
-
(36)
3
(7)
131
2016
€m
161
(1)
43
-
(1)
(43)
2
(9)
152
2015
€m
106
5
40
2
(4)
(36)
55
(7)
161
Information in relation to the Group’s credit risk management is provided in note 22 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
2017
€m
2,070
832
129
67
131
3,229
2016
€m
2,414
774
120
105
152
3,565
Trade receivables and amounts receivable in respect of construction contracts are in general receivable within 90 days of the balance sheet date.
159
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CRH Annual Report and Form 20-F | 2017
19. 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
2017
€m
2,304
217
167
1,802
44
4,534
128
98
226
2016
€m
2,531
296
61
1,875
52
4,815
221
240
461
(i) Construction contract-related payables include billings in excess of revenue, together with advances
received from customers in respect of work to be performed under construction contracts and
foreseeable losses thereon.
Other than deferred and contingent consideration, the carrying amounts of trade and other payables
approximate their fair value largely due to the short-term maturities and nature of these instruments.
(ii)
The fair value of total contingent consideration is €118 million (2016: €136 million), (Level 3 input in the
fair value hierarchy) and deferred consideration is €147 million (2016: €165 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 €118 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 31)
Changes in estimate
Paid during year
Discount unwinding
Reclassified as held for sale
At 31 December
2017
€m
301
(36)
45
3
(53)
7
(2)
265
2016
€m
288
9
22
15
(57)
24
-
301
160
CRH Annual Report and Form 20-F | 2017
20. Movement in Working Capital and Provisions
for Liabilities
Inventories
€m
Trade and other
receivables
€m
Trade and other
payables
€m
Provisions
for liabilities
€m
At 1 January 2017
Translation adjustment
Arising on acquisition (note 31)
Reclassified as held for sale
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 31)
- paid during year
Deferred proceeds arising on disposals during year
Interest accruals and discount unwinding
Reclassification
Increase/(decrease) in working capital and provisions for liabilities
At 31 December 2017
The equivalent disclosure for the prior years is as follows:
At 1 January 2016
Translation adjustment
Arising on acquisition (note 31)
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 31)
- 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
At 1 January 2015
Translation adjustment
Arising on acquisition (note 31)
Reclassified from held for sale
Disposals
Deferred and contingent acquisition consideration:
- arising on acquisitions during year (note 31)
- 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
2,939
(218)
114
(266)
(34)
-
-
-
-
(3)
183
2,715
2,873
20
9
(18)
-
-
-
-
-
55
2,939
2,260
130
621
102
(211)
-
-
-
-
(29)
2,873
4,191
(286)
129
(334)
(16)
-
-
3
1
(14)
112
3,786
4,126
(12)
28
(15)
-
-
7
-
(8)
65
4,191
2,729
147
1,533
79
(178)
-
-
38
-
(222)
4,126
(5,276)
(1,060)
348
(149)
306
20
(45)
53
-
-
65
(82)
72
(49)
-
1
-
-
-
(24)
-
(4)
(4,760)
(1,064)
(5,171)
(1,035)
26
(14)
8
(22)
57
-
(24)
-
(136)
(5,276)
(3,151)
(151)
(1,549)
(98)
137
(97)
59
-
(20)
(301)
26
18
1
-
-
-
(30)
-
(40)
(1,060)
(396)
(5)
(581)
(7)
6
-
-
-
(19)
(33)
(5,171)
(1,035)
Total
€m
794
(84)
45
(294)
(29)
(45)
53
3
(23)
48
209
677
793
60
41
(24)
(22)
57
7
(54)
(8)
(56)
794
1,442
121
24
76
(246)
(97)
59
38
(39)
(585)
793
161
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CRH Annual Report and Form 20-F | 2017
21. 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 22 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 23)
Interest-bearing loans and borrowings (note 24)
Derivative financial instruments (net) (note 25)
Group net debt
As at 31 December 2017
As at 31 December 2016
Fair value (i)
€m
Book value
€m
Fair value (i)
€m
Book value
€m
2,135
(8,421)
50
(6,236)
2,135
(7,981)
50
(5,796)
2,449
(8,236)
44
(5,743)
2,449
(7,790)
44
(5,297)
(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 (note 31)
Debt in disposed companies
Increase in interest-bearing loans, borrowings and finance leases
Net cash flow arising from derivative financial instruments
Repayment of interest-bearing loans, borrowings and finance leases
Decrease in cash and cash equivalents
Mark-to-market adjustment
Translation adjustment
At 31 December
2017
€m
2016
€m
2015
€m
(5,297)
(6,618)
(2,492)
(12)
-
(3)
-
(175)
20
(1,010)
(600)
(5,633)
(169)
343
(153)
9
493
5
2,015
(127)
21
10
(5,796)
(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:
Interest-bearing loans and borrowings nominal - fixed rate (i)
Derivative financial instruments - fixed rate
Net fixed rate debt including derivatives
Interest-bearing loans and borrowings nominal - floating rate (ii)
Adjustment of debt from nominal to book value (i)
Derivative financial instruments - currency floating rate
Gross debt including derivative financial instruments
Cash and cash equivalents - floating rate
Group net debt
Cash at bank and in hand reclassified as held for sale (note 23)
Bank overdrafts reclassified as held for sale (note 24)
Group net debt excluding net debt reclassified as held for sale
As at 31 December 2017
As at 31 December 2016
Weighted
average
fixed period
Years
Interest
rate
3.3%
9.2
4.2%
€m
(7,844)
1,505
(6,339)
(70)
(67)
(1,455)
(7,931)
2,135
(5,796)
(20)
5
(5,811)
€m
(7,417)
1,640
(5,777)
(270)
(103)
(1,596)
(7,746)
2,449
(5,297)
-
-
(5,297)
Weighted
average
fixed period
Years
Interest
rate
3.5%
8.7
4.1%
(i) Of the Group’s nominal fixed rate debt at 31 December 2017, €1,505 million (2016: €1,640 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 | 2017
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 2017 and
31 December 2016 is as follows:
Cash and cash equivalents (note 23)*
Interest-bearing loans and borrowings (note 24)*
Derivative financial instruments (net) (note 25)
Net debt* by major currency including derivative
financial instruments
Non-debt assets and liabilities (including cash and bank
overdrafts reclassified as held for sale) 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 23)
Interest-bearing loans and borrowings (note 24)
Derivative financial instruments (net) (note 25)
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
US
Dollar
€m
Pound
Sterling
€m
Canadian
Dollar
€m
Philippine
Peso
€m
Polish
Zloty
€m
Swiss
Franc
€m
euro
€m
Other (i)
€m
Total
€m
743
714
(3,827)
(3,097)
2,078
(908)
215
(465)
(157)
140
(2)
(480)
43
(293)
99
-
(17)
(171)
61
(281)
(247)
100
(11)
(48)
2,115
(7,976)
50
(1,006)
(3,291)
(407)
(342)
(267)
(72)
(467)
41
(5,811)
5,030
1,935
8,815
3,718
(713)
(1,311)
(1,745)
(2,093)
(49)
(14)
2,400
1,466
1,292
692
(295)
(806)
-
454
(206)
(322)
-
110
(153)
(137)
(391)
310
138
(5)
(130)
-
715
302
(181)
(186)
(11)
1,804
21,832
273
(98)
7,622
(2,962)
(285)
(5,704)
(21)
(486)
3,452
5,824
1,584
1,050
454
241
172
1,714
14,491
690
1,284
(3,840)
(2,957)
2,397
(1,246)
72
(464)
(208)
145
(1)
(612)
16
(197)
21
(1)
-
(80)
89
(306)
(209)
132
(24)
2
2,449
(7,790)
44
(753)
(2,919)
(600)
(468)
(181)
(60)
(426)
110
(5,297)
4,476
1,809
9,311
3,064
(641)
(1,885)
(1,610)
(2,059)
(46)
(16)
749
(276)
(892)
-
2,485
1,541
1,459
471
(247)
(320)
-
977
288
149
(4)
(118)
(1)
797
325
(350)
(199)
(12)
1,790
22,147
258
(97)
6,922
(3,738)
(268)
(5,591)
(1)
(548)
97
(238)
(125)
(472)
540
254
135
1,792
13,895
Capital and reserves attributable to the
Company’s equity holders
3,235
5,496
1,466
(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.
*Excluding€20millioncashand€5millionbankoverdraftsreclassifiedasheldforsalewhichareanalysedbymajorcurrencyincurrentassetsandliabilitiesabove.
163
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CRH Annual Report and Form 20-F | 2017
21. Analysis of Net Debt - continued
Liquidity and capital resources
The following table provides certain information related to our cash generation and changes in our cash and cash equivalents position:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year, excluding overdrafts (note 23)
Effect of exchange rate changes
Cash and cash equivalents at end of year, excluding overdrafts (note 23)
Bank overdrafts
Borrowings
Derivative financial instruments
Total liabilities from financing activities
Net debt at end of year
Cash at bank and in hand reclassified as held for sale (note 23)
Bank overdrafts reclassified as held for sale (note 24)
Group net debt excluding net debt reclassified as held for sale
2017
€m
2,189
(2,685)
343
(153)
2,449
(161)
2,135
(71)
(7,910)
50
(7,931)
(5,796)
(20)
5
(5,811)
2016
€m
2,340
(735)
(1,732)
(127)
2,518
58
2,449
(78)
(7,712)
44
(7,746)
(5,297)
-
-
(5,297)
2015
€m
2,247
(7,306)
4,162
(897)
3,295
120
2,518
(117)
(9,104)
85
(9,136)
(6,618)
-
-
(6,618)
Part of the Group’s financing strategy objectives include maintenance of adequate financial resources and liquidity. During 2017 the Group’s
total net cash inflow from operating activities of €2.2 billion plus net cash inflow from financing activities of €0.3 billion funded investing
activities of €2.7 billion.
The Group believes that its financial resources (operating cash together with cash and cash equivalents of €2.1 billion and undrawn committed
loan facilities of €3.6 billion) will be sufficient to cover the Group’s cash requirements.
At 31 December 2017, euro and US Dollar denominated cash and cash equivalents represented 35% (2016: 28%) and 34% (2016: 52%) of
total cash and cash equivalents respectively.
Significant borrowings
The main sources of Group debt funding are public bond markets in Europe and North America. The following bonds were outstanding as at
31 December 2017:
US Dollar bonds (i)
euro bonds
euro bonds
US Dollar bonds
euro bonds
Swiss Franc bonds
euro bonds
euro bonds
US Dollar bonds
US Dollar bonds
euro bonds
Pound Sterling bonds
US Dollar bonds (ii)
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%
3.400%
1.375%
4.125%
6.400%
5.125%
4.400%
US$288
€500
€750
US$400
€600
CHF330
€750
€600
US$1,250
US$600
€600
£400
US$213
US$500
US$400
2018
2019
2020
2021
2021
2022
2023
2024
2025
2027
2028
2029
2033
2045
2047
(i) Originally issued as a US$650 million bond in July 2008. In May 2017, US$362.13 million of the issued notes were redeemed by the issuer
as part of liability management exercise.
(ii) Originally issued as a US$300 million bond in September 2003. In August 2009 and December 2010, US$87.445 million of the issued
notes were acquired by CRH plc as part of liability management exercises undertaken.
164
CRH Annual Report and Form 20-F | 2017
22. Capital and Financial Risk Management
Capital management
Overall summary
The primary objectives of CRH’s capital
management strategy are to ensure that the
Group maintains a strong credit rating to
support its business and to create shareholder
value by managing the debt and equity balance
and the cost of capital. No changes were made
in the objectives, policies or processes for
managing capital during 2017.
The Board periodically reviews the capital
structure of the Group, including the cost of
capital and the risks associated with each class
of capital. The Group manages and, if
necessary, adjusts its capital structure taking
account of underlying economic conditions; any
material adjustments to the Group’s capital
structure in terms of the relative proportions of
debt and equity are approved by the Board. In
order to maintain or adjust the capital structure,
the Group may issue new shares, dispose of
assets, amend investment plans, alter dividend
policy or return capital to shareholders.
The Group is committed to optimising the use of
its balance sheet within the confines of the
overall objective to maintain an investment
grade credit rating. Dividend cover for the year
ended 31 December 2017 amounted to 3.34
times (2016: 2.31 times).
The capital structure of the Group, which
comprises net debt and capital and reserves
attributable to the Company’s equity holders, may
be summarised as follows:
Capital and reserves
attributable to the
Company’s equity holders
Net debt
2017
€m
2016
€m
14,491
13,895
5,796
5,297
Capital and net debt
20,287
19,192
Financial risk management objectives and
policies
The Group uses financial instruments
throughout its businesses: interest-bearing
loans and borrowings, cash and cash
equivalents and finance leases are used to
finance the Group’s operations; trade
receivables and trade payables arise directly
from operations; and derivatives, principally
interest rate and currency swaps and forward
foreign exchange contracts, are used to
manage interest rate risks and currency
exposures and to achieve the desired profile of
borrowings. The Group does not trade in
financial instruments nor does it enter into any
leveraged derivative transactions.
The Group’s corporate treasury function
provides services to the business units,
co-ordinates access to domestic and
international financial markets, and monitors
and manages the financial risks relating to the
operations of the Group. The 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.
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 25.
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 (i)
Impact on profit
before tax
+/- 1% +/- 0.5%
+/- €6m +/- €3m
2017
+/- €6m +/- €3m
2016
2015 -/+ €15m -/+ €7m
Impact on total equity 2017 -/+ €0.4m -/+ €0.2m
-/+ €1m -/+ €0.5m
2016
-/+ €7m -/+ €4m
2015
(i) Sensitivity analysis for cost of borrowing has
been presented for continuing operations
only.
Foreign currency risk
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 32 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 21. The Group’s established
policy is to spread its net worth across the
currencies of its various operations with the
objective of limiting its exposure to individual
currencies and thus promoting consistency with
the geographical balance of its operations. In
order to achieve this objective, the Group
manages its borrowings, where practicable and
cost effective, to hedge a portion of its foreign
currency assets. Hedging is done using currency
borrowings in the same currency as the assets
being hedged or through the use of other hedging
methods such as currency swaps.
165
165
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
22. Capital and Financial Risk Management - continued
(ii) limiting the annual maturity of such balances;
(iii) borrowing the bulk of the Group’s debt
requirements under committed bank lines or
other term financing; and (iv) having surplus
committed lines of credit.
The undrawn committed facilities available to
the Group as at the balance sheet date are
quantified in note 24; 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 24.
The Group has an €8 billion Euro Medium-Term
Note (EMTN) Programme in place, which along
with a €1.5 billion Euro Commercial Paper
Programme and a US$1.5 billion US Dollar
Commercial Paper Programme means we have
framework programmes in the money and
capital markets in place that allow the Group to
issue in the relevant markets within a short
period of time.
Commodity price risk
The fair value of derivatives used to hedge
future energy costs was €11 million favourable
as at the balance sheet date (2016: €2 million
unfavourable).
The following table demonstrates the sensitivity
of profit before tax and equity to selected
movements in the relevant euro/US Dollar
exchange rate (with all other variables held
constant); the US Dollar has been selected as
the appropriate currency for this analysis given
the materiality of the Group’s activities in the
US. The impact on profit before tax is based on
changing the euro/US Dollar exchange rate
used in calculating profit before tax for the
period. The impact on total equity and financial
instruments is calculated by changing the
euro/US Dollar exchange rate used in
measuring the closing balance sheet.
Percentage change in
relevant €/US$
exchange rate (i)
Impact on profit
before tax
Impact on total equity*
* Includes the impact on
financial instruments
which is as follows:
+/- 5% +/- 2.5%
2017 -/+ €53m -/+ €27m
2016 -/+ €54m -/+ €27m
2015 -/+ €27m -/+ €14m
2017 -/+ €291m -/+ €146m
2016 -/+ €275m -/+ €137m
2015 -/+ €230m -/+ €115m
2017 +/- €165m +/- €82m
2016 +/- €146m +/- €73m
2015 +/- €181m +/- €91m
(i) Sensitivity analysis for exchange rates has
been presented for continuing operations
only.
Financial instruments include deposits, money
market funds, bank loans, medium-term notes
and other fixed term debt, interest rate swaps,
commodity swaps and foreign exchange
contracts. They exclude trade receivables and
trade payables.
Credit/counterparty risk
In addition to cash at bank and in hand, the
Group holds significant cash balances which
are invested on a short-term basis and are
classified as cash equivalents (see note 23).
These deposits and other financial instruments
(principally certain derivatives and loans and
receivables included within financial assets) give
rise to credit risk on amounts due from
counterparty financial institutions (stemming
from their insolvency or a downgrade in their
credit ratings). Credit risk is managed by limiting
the aggregate amount and duration of exposure
to any one counterparty primarily depending on
its credit rating and by regular review of these
ratings. Acceptable credit ratings are high
investment-grade ratings - in general
- counterparties have ratings of A3/A- or higher
from Moody’s/Standard & Poor’s ratings
agencies.
166
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 4.1% of gross trade receivables
(2016: 4.3%). Customer credit risk is managed
at appropriate Group locations according to
established policies, procedures and controls.
Customer credit quality is assessed in line with
strict credit rating criteria and credit limits are
established where appropriate. Outstanding
customer balances are regularly monitored and a
review for indicators of impairment (evidence of
financial difficulty of the customer, payment
default, breach of contract etc.) is carried out at
each reporting date. Significant balances are
reviewed individually while smaller balances are
grouped and assessed collectively. Receivables
balances are in general unsecured and
non-interest-bearing. The trade receivables
balances disclosed in note 18 comprise a large
number of customers spread across the Group’s
activities and geographies with balances
classified as “neither past due nor impaired”
representing 64% of the total trade receivables
balance at the balance sheet date (2016: 68%);
amounts receivable from related parties (notes
18 and 33) are immaterial. Factoring and credit
guarantee arrangements are employed in certain
of the Group’s operations where deemed 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;
CRH Annual Report and Form 20-F | 2017
The tables below show the projected contractual undiscounted total cash outflows (principal and interest) arising from the Group’s trade and other payables,
gross debt and derivative financial instruments. The tables also include the gross cash inflows projected to arise from derivative financial instruments. These
projections are based on the interest and foreign exchange rates applying at the end of the relevant financial year.
Within
1 year
€m
Between
1 and 2
years
€m
Between
2 and 3
years
€m
Between
3 and 4
years
€m
Between
4 and 5
years
€m
After
5 years
€m
Total
€m
At 31 December 2017
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 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
4,534
3
320
1
283
2,391
7,532
(26)
(2,399)
(2,425)
4,815
2
280
1
279
2,904
8,281
(30)
(2,894)
(2,924)
126
2
501
-
260
-
889
(14)
-
(14)
311
2
620
1
278
-
1,212
(30)
-
(30)
38
2
751
-
231
-
20
1
934
-
200
-
1,022
1,155
(13)
-
(13)
72
2
751
1
198
-
(13)
-
(13)
46
2
501
1
228
-
778
(17)
-
(17)
16
1
36
3
4,770
12
362
5,082
7,950
-
184
-
563
(13)
-
(13)
2
1,381
-
3
2,539
2,391
6,504
17,665
(16)
(95)
-
(2,399)
(16)
(2,494)
14
1
41
5
5,299
14
980
4,589
7,721
-
2
166
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)
(i) At 31 December 2017 and 31 December 2016, a portion of the Group’s long-term debt carried variable interest rates. The Group uses the interest rates in
effect on 31 December to calculate the interest payments on the long-term debt for the periods indicated.
(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.
167
167
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
23. Cash and Cash Equivalents
Cash and cash equivalents balances are spread across a wide number of highly-rated financial institutions. The credit risk attaching to these items is
documented in note 22.
Cash and cash equivalents are included in the Consolidated Balance Sheet at fair value and are analysed as follows:
Cash at bank and in hand
Investments (short-term deposits)
Total
2017
€m
737
1,378
2,115
2016
€m
1,141
1,308
2,449
Cash at bank earns interest at floating rates based on daily deposit bank rates. Short-term deposits, which include bank and money market deposits, are made
for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective
short-term deposit rates.
Cash and cash equivalents at fair value include the following for the purposes of the Consolidated Statement of Cash Flows:
Cash at bank and in hand
Investments (short-term deposits)
Cash at bank and in hand reclassified as held for sale
Total
2017
€m
737
1,378
20
2,135
2016
€m
1,141
1,308
-
2,449
24. Interest-bearing Loans and Borrowings
Loans and borrowings outstanding
Bank overdrafts
Bank loans
Finance leases
Bonds
Other
Interest-bearing loans and borrowings
Bank overdrafts reclassified as held for sale
Total
2017
€m
66
295
12
7,602
1
7,976
5
7,981
2016
€m
78
200
14
7,497
1
7,790
-
7,790
Interest-bearing loans and borrowings include loans of €2 million (2016: €3 million) secured on specific items of property, plant and equipment; these figures do
not include finance leases.
168
Maturity profile of loans and borrowings and undrawn committed facilities
As at 31 December 2017
As at 31 December 2016
Loans and
borrowings
€m
Undrawn
committed
facilities
€m
Loans and
borrowings
€m
Undrawn
committed
facilities
€m
316
498
746
930
359
5,127
7,976
5
7,981
-
-
-
-
3,554
-
3,554
-
3,554
275
629
500
748
978
4,660
7,790
-
7,790
197
-
-
91
2,746
-
3,034
-
3,034
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
Amounts due within one year
reclassified as held for sale
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 2017.
Guarantees
The Company has given letters of guarantee to
secure obligations of subsidiary undertakings as
follows: €7.7 billion in respect of loans and
borrowings, bank advances, derivative
obligations and future lease obligations (2016:
€7.6 billion) and €0.2 billion in respect of letters
of credit (2016: €0.3 billion).
Any Irish registered wholly-owned subsidiary of
the Company may avail of the exemption from
filing its statutory financial statements for the
year ended 31 December 2017 as permitted by
Section 357 of the Companies Act 2014 and if
an Irish registered wholly-owned subsidiary of
the Company elects to avail of this exemption,
there will be in force an irrevocable guarantee
from the Company in respect of all
commitments entered into by such
wholly-owned subsidiary, including amounts
shown as liabilities (within the meaning of
Section 357(1)(b) of the Companies Act 2014) in
such wholly-owned subsidiary’s statutory
financial statements for the year ended
31 December 2017.
Lender covenants
The Group’s major bank facilities 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.
CRH Annual Report and Form 20-F | 2017
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 (2016: 4.5 times; 2015: 4.5 times).
As at 31 December 2017 the ratio was 11.6
times (2016: 10.1 times; 2015: 8.5 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
(2016: €6.2 billion) (such minimum being
adjusted for foreign exchange translation
impacts). As at 31 December 2017 net
worth (as defined in the relevant agreement)
was €16.6 billion (2016: €16.4 billion).
169
169
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
25. Derivative Financial
Instruments
The fair values of derivative financial instruments are analysed by year of maturity and by accounting designation as follows:
Fair value
hedges
€m
Cash flow
hedges
€m
Net
investment
hedges
€m
Not
designated
as hedges
€m
Total
€m
At 31 December 2017
Derivative assets
Within one year - current assets
Between one and two years
After five years
Non-current assets
Total derivative assets
Derivative liabilities
Within one year - current liabilities
After five years
Non-current liabilities
Total derivative liabilities
Net asset arising on derivative financial instruments
The equivalent disclosure for the prior year is as follows:
At 31 December 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
170
2
-
26
26
28
-
(3)
(3)
(3)
25
-
13
-
33
46
46
-
-
46
11
1
-
1
12
(1)
-
-
(1)
11
2
1
-
-
1
3
(1)
(1)
2
19
-
-
-
19
(10)
-
-
(10)
9
21
-
-
-
-
21
(31)
(31)
(10)
2
3
-
3
5
-
-
-
-
5
-
-
6
-
6
6
-
-
6
34
4
26
30
64
(11)
(3)
(3)
(14)
50
23
14
6
33
53
76
(32)
(32)
44
CRH Annual Report and Form 20-F | 2017
At 31 December 2017 and 2016, 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
- currency forward contracts
Total
Fair value hierarchy
Assets measured at fair value
Fair value hedges - cross-currency and interest rate swaps
Net investment hedges - cross-currency swaps
Cash flow hedges - cross-currency, interest rate swaps and commodity forwards
Not designated as hedges (held for trading) - interest rate swaps
Total
Liabilities measured at fair value
Fair value hedges - cross-currency and interest rate swaps
Net investment hedges - cross-currency swaps
Cash flow hedges - cross-currency, interest rate swaps and commodity forwards
Total
2017
€m
(16)
18
9
(1)
8
2016
€m
(11)
13
14
-
14
2015
€m
(16)
13
(2)
-
(2)
2017
Level 2
€m
2016
Level 2
€m
28
19
12
5
64
(3)
(10)
(1)
(14)
46
21
3
6
76
-
(31)
(1)
(32)
At 31 December 2017 and 2016 there were no derivatives valued using Level 1 or Level 3 fair value techniques.
171
171
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
26. Provisions for Liabilities
At 1
January
€m
Translation
adjustment
€m
Arising on
acquisition
(note 31)
€m
Provided
during
year
€m
Utilised
during
year
€m
Disposed
during
year
€m
Reversed
unused
€m
Discount
unwinding
€m
At 31
December
€m
31 December 2017
Insurance (i)
Environment and remediation (ii)
Rationalisation and redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
286
430
23
321
1,060
678
382
1,060
The equivalent disclosure for the prior year is as follows:
31 December 2016
Insurance (i)
Environment and remediation (ii)
Rationalisation and redundancy (iii)
Other (iv)
Total
Analysed as:
Non-current liabilities
Current liabilities
Total
Notes (i) to (iv) are set out overleaf.
244
450
26
315
1,035
603
432
1,035
(28)
(25)
-
(19)
(72)
5
(21)
-
(10)
(26)
3
43
-
3
49
-
(16)
1
(3)
(18)
101
27
32
106
266
(61)
(29)
(27)
(37)
(154)
105
38
23
77
(76)
(17)
(25)
(29)
243
(147)
-
-
-
(1)
(1)
-
(1)
-
-
(1)
(19)
(14)
(3)
(72)
(108)
(11)
(9)
(2)
(34)
(56)
10
9
-
5
24
19
6
-
5
30
292
441
25
306
1,064
693
371
1,064
286
430
23
321
1,060
678
382
1,060
172
CRH Annual Report and Form 20-F | 2017
(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 5.5
years (2016: 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 2017, €32 million (2016: €23 million; 2015: €23 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 primarily be utilised within one to two years of the balance sheet date
(2016: one to two years).
(iv) Other provisions primarily relate to legal claims, onerous contracts, guarantees and warranties and employee related provisions. The Group expects the
majority of these provisions will be utilised within two to five years of the balance sheet date (2016: 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.
173
173
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
27. 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 28)
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
2017
€m
1,666
(95)
1,571
72
7
132
29
157
145
542
2016
€m
2,008
(159)
1,849
119
12
150
38
350
83
752
Deferred income tax assets have been recognised in respect of all deductible temporary differences, with the exception of some tax loss carryforwards.
The amount of tax losses where recovery is not probable and is therefore not recognised in the Consolidated Balance Sheet is €1.5 billion (2016: €1.4 billion).
The vast majority either do not expire based on current tax legislation or they expire post 2022 (2016: 2021).
Deferred income tax liabilities (taxable temporary differences)
Taxable temporary differences principally attributable to accelerated tax depreciation and
fair value adjustments arising on acquisition (i)
Revaluation of derivative financial instruments to fair value
Rolled-over capital gains
Total
Movement in net deferred income tax liability
At 1 January
Translation adjustment
Net income for the year (note 11) (ii)
Arising on acquisition (note 31)
Reclassified as held for sale
Disposal (note 5)
Movement in deferred tax asset on Group retirement benefit obligations
Movement in deferred tax asset on share-based payment expense
At 31 December
2,089
11
13
2,113
1,849
(173)
(265)
132
(14)
2
33
7
1,571
2,569
18
14
2,601
1,874
41
(15)
(35)
-
(1)
(3)
(12)
1,849
(i) Fair value adjustments arising on acquisition principally relate to property, plant and equipment.
(ii) The net income for the year includes an expense of €1 million (2016: €2 million) relating to discontinued operations.
174
28. Retirement Benefit Obligations
The Group operates either defined benefit or
defined contribution pension schemes in all of
its principal operating areas. The disclosures
included below relate to all pension schemes in
the Group.
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.
The Group operates defined benefit pension
schemes in Belgium, Brazil, Canada, France,
Germany, Italy, the Netherlands, the Philippines,
the Republic of Ireland, Romania, Serbia,
Slovakia, Switzerland, the UK and the US. The
Group has a mixture of funded and unfunded
defined benefit pension schemes. The net
liability of the funded schemes is €175 million
(2016: €444 million). Unfunded obligations
(including jubilee, post-retirement healthcare
obligations and long-term service commitments)
comprise of a number of schemes in Brazil,
Canada, France, Germany, Italy, the
Netherlands, the Philippines, Romania, Serbia,
Slovakia, Switzerland and the US, totalling a net
liability of €202 million (2016: €147 million).
Funded defined benefit schemes in the Republic
of Ireland, Switzerland and the UK are
administered by separate funds that are legally
distinct from the Group under the jurisdiction of
Trustees. The Trustees of these pension funds
are required by law and by their Articles of
Association to act in the best interests of the
scheme participants and are responsible for the
definition of investment strategy and for scheme
administration. Other schemes are also
administered in line with the local regulatory
environment. The level of benefits available to
most members depends on length of service
and either their average salary over their period
of employment or their salary in the final years
leading up to retirement. The Group’s pension
Defined benefit pension schemes -
principal risks
Through its defined benefit pension and jubilee
schemes, long-term service commitments and
post-retirement healthcare plans, the Group is
exposed to a number of risks, the most
significant of which are detailed below:
Asset volatility: Under IAS 19, the assets of the
Group’s defined benefit pension schemes are
reported at fair value (using bid prices, where
relevant). The majority of the schemes’ assets
comprise 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.
CRH Annual Report and Form 20-F | 2017
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 schemes
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 2017, 2016 and 2015; the schemes in
Belgium, France, Germany, Italy, the
Netherlands, the Republic of Ireland and
Slovakia have been aggregated into a
“Eurozone” category on the basis of common
currency and financial assumptions; schemes in
Brazil, the Philippines, Romania, Serbia and the
UK have been aggregated into an “Other”
category.
175
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CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
28. Retirement Benefit Obligations - continued
Financial assumptions - scheme liabilities
The major long-term assumptions used by the Group’s actuaries in the computation of scheme liabilities as at 31 December 2017,
31 December 2016 and 31 December 2015 are as follows:
Eurozone
2016
%
2017
%
3.59
1.70
1.75
2.05
n/a
3.41
1.50
1.50
1.86
n/a
2015
%
3.64
1.75
1.75
2.61
n/a
Switzerland
2016
%
2017
%
1.25
-
0.75
0.70
n/a
1.25
-
0.75
0.65
n/a
2015
%
1.75
-
0.75
0.85
n/a
United States
and Canada
2016
%
2017
%
3.27
-
2.00
3.52
6.33
3.28
-
2.00
4.01
5.98
2015
%
3.29
-
2.00
4.22
6.21
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 represent actuarial best
practice in the relevant jurisdictions, taking account of mortality experience and industry circumstances. For schemes in the Republic
of Ireland and the UK, the mortality assumptions used are in accordance with the underlying funding valuations. For the Group’s most
material schemes, the future life expectations factored into the relevant valuations, based on retirement at 65 years of age for current
and future retirees, are as follows:
2015
21.2
23.4
23.0
25.1
Republic of Ireland
2016
2017
2015
Switzerland
2016
2017
2015
2017
United States
and Canada
2016
Current retirees
- male
- female
Future retirees
- male
- female
22.7
24.4
25.5
27.0
22.5
24.3
25.4
26.9
22.8
24.9
25.8
26.9
22.4
24.4
24.6
26.6
22.3
24.3
24.6
26.6
21.5
24.0
23.6
26.0
20.6
23.1
22.3
24.7
20.5
23.0
22.3
24.7
The above data allows for future improvements in life expectancy.
176
CRH Annual Report and Form 20-F | 2017
Impact on Consolidated Income Statement
The total retirement benefit expense from continuing operations in the Consolidated Income Statement is as follows:
Total defined contribution expense
Total defined benefit (credit)/expense
Total expense in Consolidated Income Statement
2017
€m
237
(1)
236
2016
€m
232
75
307
2015
€m
204
77
281
At 31 December 2017, €78 million (2016: €89 million) was included in other payables relating to 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 credit (net)
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 (credit)/expense to Consolidated Income Statement
The composition of the net (credit)/expense to the Consolidated Income Statement is as follows:
Eurozone
Switzerland
United States and Canada
Other
Total
62
4
(78)
-
(12)
(49)
60
11
(1)
25
(49)
14
9
(1)
61
4
(2)
-
63
(58)
70
12
75
18
37
11
9
75
63
2
(1)
(4)
60
(50)
67
17
77
27
37
6
7
77
Past service credit in 2017 includes a gain of €81 million due to plan amendments in Switzerland. The principal amendment related to
the reduction of the annuity conversion factor on retirement from 6.4% to 5.0% of accumulated savings.
177
177
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
28. Retirement Benefit Obligations - continued
Reconciliation of scheme assets (bid value)
At 1 January
Movement in year
Interest income on scheme assets
Arising on acquisition (note 31)
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
The composition of scheme assets is as follows:
Eurozone
Switzerland
United States and Canada
Other
Total
Reconciliation of actuarial value of liabilities
At 1 January
Movement in year
Current service cost
Past service credit (net)
Interest cost on scheme liabilities
Arising on acquisition (note 31)
Remeasurement adjustments
- experience variations
- actuarial 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
The composition of the actuarial value of liabilities is as follows:
Eurozone
Switzerland
United States and Canada
Other
Total
Recoverable deficit in schemes
Related deferred income tax asset
Net pension liability
The composition of the net pension liability is as follows:
Eurozone
Switzerland
United States and Canada
Other
Total
178
2017
€m
2,556
49
5
112
123
14
(114)
(4)
(119)
2,622
1,184
781
448
209
2,622
2016
€m
2,399
58
-
81
133
14
(130)
(4)
5
2,556
1,116
804
453
183
2,556
(3,147)
(2,987)
(62)
78
(60)
(57)
11
(29)
20
(14)
114
147
(61)
2
(70)
(1)
20
(176)
14
(14)
130
(4)
(2,999)
(3,147)
(1,384)
(1,338)
(819)
(540)
(256)
(995)
(554)
(260)
(2,999)
(3,147)
(377)
72
(305)
(168)
(30)
(68)
(39)
(305)
(591)
119
(472)
(188)
(154)
(65)
(65)
(472)
CRH Annual Report and Form 20-F | 2017
Sensitivity analysis
The impact of a movement (as indicated below) in the principal actuarial assumptions would be as follows:
Eurozone
2017
€m
Switzerland
2017
€m
United States
and Canada
2017
€m
Other
2017
€m
Total Group
2017
€m
Scheme liabilities at 31 December 2017
(1,384)
(819)
(540)
(256)
(2,999)
Revised liabilities
Discount rate
Inflation rate
Life expectancy
Increase by 0.25%
Decrease by 0.25%
Increase by 0.25%
Decrease by 0.25%
Increase by 1 year
Decrease by 1 year
(1,325)
(1,448)
(1,441)
(1,330)
(1,430)
(1,338)
(785)
(856)
(822)
(816)
(846)
(791)
(524)
(556)
(542)
(538)
(555)
(527)
(244)
(269)
(262)
(250)
(263)
(249)
(2,878)
(3,129)
(3,067)
(2,934)
(3,094)
(2,905)
The above sensitivity analysis are derived through changing the individual assumption while holding all other assumptions constant.
Split of scheme assets
Investments quoted in active markets
Equity instruments (i)
Debt instruments (ii)
Property
Cash and cash equivalents
Investment funds
Unquoted investments
Equity instruments
Debt instruments (iii)
Property
Cash and cash equivalents
Assets held by insurance company
Total assets
2017
€m
828
1,413
120
26
95
2
8
92
13
25
2016
€m
802
1,191
112
37
148
1
102
120
18
25
2,622
2,556
(i)
Equity instruments primarily relate to developed markets.
(ii) Quoted debt instruments are made up of €831 million (2016: €687 million) and €582 million
(2016: €504 million) of non-government and government instruments respectively.
(iii) Unquoted debt instruments primarily relate to government debt instruments (2016: primarily
non-government debt instruments).
179
179
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
28. Retirement Benefit Obligations - continued
Actuarial valuations - funding requirements and future cash flows
In accordance with statutory requirements in the Republic of Ireland and minimum funding requirements in the UK, additional annual contributions and lump-sum
payments are required to certain of the schemes in place in those jurisdictions. The funding requirements in relation to the Group’s defined benefit schemes are
assessed in accordance with the advice of independent and qualified actuaries and valuations are prepared in this regard either annually, where local
requirements mandate that this be done, or at triennial intervals at a maximum in all other cases. In the Republic of Ireland and 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 funding
valuations range from April 2015 to July 2017.
In general, funding valuations are not available for public inspection; however, the results of valuations are advised to the members of the various schemes on
request.
The Group’s contracted payments (on a discounted basis) to certain schemes is €18 million (2016: €35 million; 2015: €52 million) in the Republic of Ireland and
€16 million (2016: €20 million; 2015: €21 million) in the UK. The maturity profile of the Group’s contracted payments (on a discounted basis) 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
Total
2016
€m
2015
€m
20
19
2
2
2
10
55
20
19
19
2
2
11
73
2017
€m
19
2
2
2
1
8
34
Employer contributions payable in the 2018 financial year including minimum funding payments (expressed using year-end exchange rates for 2017) are
estimated at €112 million.
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
2016
17.1
2017
17.8
2015
14.7
Switzerland
United States
and Canada
2017
17.2
2016
18.6
2015
18.0
2017
12.2
2016
13.1
2015
14.0
72%
9%
19%
63%
12%
25%
64%
12%
24%
84%
84%
85%
-
-
-
16%
16%
15%
40%
16%
44%
41%
17%
42%
45%
17%
38%
180
CRH Annual Report and Form 20-F | 2017
29. Commitments under Operating and Finance Leases
Operating leases
The Group has entered into operating leases for a range of assets principally relating to property across the US and Europe. Lease commitments are provided
for up to the earliest break clause in the lease. These property leases have varying terms, escalation clauses and renewal rights including periodic rent reviews
linked with a consumer price index and/or other indices. The Group also leases plant and machinery, vehicles and equipment under operating leases. The terms
and conditions of these operating leases do not impose any significant financial restriction on the Group.
Within one year
After one year but not more than five years
More than five years
2017
€m
419
962
810
2,191
2016
€m
402
978
791
2,171
2015
€m
370
915
831
2,116
The commitments above include €252 million of operating lease commitments (2016: €237 million; 2015: €172 million) relating to discontinued operations.
Finance leases
Future minimum lease payments under finance leases are not material for the Group.
181
181
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
30. Share Capital and Reserves
Equity share capital
2017
2016
Authorised
At 1 January and 31 December (€m)
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
25
400
25
Number of Shares at 1 January and 31 December (millions)
1,250
1,250
1,250
1,250
Allotted, called-up and fully paid
At 1 January (€m)
Performance Share Plan Awards
Issue of scrip shares in lieu of cash dividends (iii)
Share options and share participation schemes
At 31 December (€m)
269
1
1
-
271
The movement in the number of shares (expressed in millions) during the financial year was as follows:
At 1 January
Performance Share Plan Awards
Issue of scrip shares in lieu of cash dividends (iii)
Share options and share participation schemes
At 31 December
833
2
3
1
839
15
-
-
-
15
833
2
3
1
839
266
-
2
1
269
824
-
7
2
833
15
-
-
-
15
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.
(iii) Issue of scrip shares in lieu of cash dividends:
May 2017 - Final 2016 dividend (2016: Final 2015 dividend;
2015: Final 2014 dividend)
October 2017 - Interim 2017 dividend (2016: Interim 2016 dividend;
2015: Interim 2015 dividend)
433,046
5,301,827
5,056,633
€33.08
€24.69
€24.60
2,130,496
1,243,042
288,769
€29.24
€29.41
€26.16
Total
2,563,542
6,544,869
5,345,402
Number of shares
Price per share
2017
2016
2015
2017
2016
2015
182
CRH Annual Report and Form 20-F | 2017
Share schemes
The aggregate number of shares which may be committed for issue in respect of any share option scheme, savings-related share option scheme, share
participation scheme, performance share plan or any subsequent option scheme or share plan, may not exceed 10% of the issued ordinary share capital from
time to time.
Share option schemes
Details of share options granted under the Company’s Share Option Schemes and the terms attaching thereto are provided in note 8 to the financial statements
and on pages 88 to 89 of the Directors’ Remuneration Report. Under these schemes, options over a total of 1,589,335 Ordinary Shares were exercised during
the financial year (2016: 2,223,574; 2015: 2,876,066).
Options exercised during the year (satisfied by the issue of new shares)
1,589,335
2,209,638
-
Options exercised during the year (satisfied by the reissue of Treasury Shares)
-
13,936
2,876,066
Total
1,589,335
2,223,574
2,876,066
Number of shares
2017
2016
2015
Share participation schemes
As at 31 December 2017, 7,862,416 (2016: 7,729,412) Ordinary Shares had been appropriated to participation schemes. In the financial year ended
31 December 2017, the appropriation of 133,004 shares was satisfied by the issue of new shares (2016: 116,160). The Ordinary Shares appropriated pursuant
to these schemes were issued at market value on the dates of appropriation. The shares issued pursuant to these schemes are excluded from the scope of
IFRS 2 Share-based Payment and are hence not factored into the expense computation and the associated disclosures in note 8.
Preference share capital
Authorised
At 1 January 2017 and 31 December 2017
Allotted, called-up and fully paid
At 1 January 2017 and 31 December 2017
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.
183
183
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
30. Share Capital and Reserves - continued
Treasury Shares/own shares
At 1 January
New Shares allotted to the Employee Benefit Trust (own shares)
Own Shares released by the Employee Benefit Trust under the 2014 Performance Share Plan
Shares acquired by the Employee Benefit Trust (own shares)
Treasury Shares/own shares reissued
At 31 December
2017
€m
(14)
(63)
63
(3)
2
(15)
2016
€m
(28)
-
-
(4)
18
(14)
As at the balance sheet date, the total number of Treasury Shares held was 53,848 (2016: 83,423); the nominal value of these shares was
€nil million (2016: €nil million). During the year ended 31 December 2017, no shares (2016: 13,936) were reissued to satisfy exercises under
the Group’s share option schemes and 29,575 (2016: 697,903) shares were reissued to the CRH Employee Benefit Trust in connection with
the release of awards under the 2014 Performance Share Plan (2016: 2006 Performance Share Plan). These reissued Treasury Shares were
previously purchased at an average price of €15.89 (2016: €17.23). No Treasury Shares were purchased during 2017 or 2016.
As at the balance sheet date, the CRH Employee Benefit Trust held 337,909 (2016: 284,980) Ordinary Shares on behalf of CRH plc in
respect of awards made under the 2014 Performance Share Plan, the 2014 Deferred Share Bonus Plan and the 2013 Restricted Share
Plan. The nominal value of these own shares, on which dividends have been waived by the Trustees, amounted to €0.1 million at
31 December 2017 (2016: €0.1 million).
Reconciliation of shares issued to net proceeds
Shares issued at nominal amount:
- Performance Share Plan Awards
- 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 12)
Shares allotted to the Employee Benefit Trust*
Expenses paid in respect of shares issued
Net proceeds from issue of shares
2017
€m
2016
€m
1
1
-
-
180
182
(77)
(63)
-
42
-
2
1
-
216
219
(167)
-
-
52
2015
€m
-
2
-
26
1,722
1,750
(132)
-
(25)
1,593
* During the year, shares were allotted to the Employee Benefit Trust to satisfy the vesting and release of awards under the 2014
Performance Share Plan to qualifying employees. An increase in nominal Share Capital and Share Premium of €63 million arose
on the allotment to the Employee Benefit Trust.
Share premium
At 1 January
Premium arising on shares issued
At 31 December
184
2017
€m
6,237
180
6,417
2016
€m
6,021
216
6,237
CRH Annual Report and Form 20-F | 2017
31. Business Combinations
The acquisitions completed during the year ended 31 December 2017 by reportable segment, together with the completion dates, are detailed below; these
transactions entailed the acquisition of an effective 100% stake except where indicated to the contrary:
Europe Heavyside:
Germany: Fels (31 October) and land adjacent to Saal Quarry (27 December);
Ireland: certain assets of Kilsaran RMC Ltd. (14 September); and
UK: J.B. Riney & Co. Ltd. (12 May), increased stake in Scotash Ltd. to 100% (19 July), assets of East Antrim Mini Mix (1 August), Fields Farm (15 December) and
increased stake in Newhaven Roadstone Ltd to 100% (29 December).
Europe Distribution:
Germany: AGP Bauzentrum GmbH (31 August) and Kruger and Scharnberg GmbH (30 October).
Americas Materials:
Canada: Carrières St-Jacques Inc. (22 February) and K.J. Beamish Construction Co. Ltd. (26 May);
Colorado: Connell Resources (24 February);
Connecticut: Costello Industries, Inc. (4 January);
Florida: Suwannee American Cement Co., Inc., Prestige Concrete Products, Inc. and A. Mining Group, LLC (30 November);
Idaho: certain assets of Hardcore Ready Mix (12 July);
Indiana: Mulzer Crushed Stone, Inc. (10 February);
Minnesota: Hardrives, Inc. (24 February) and Chard Tiling and Excavating and Rivers Edge (24 February);
New Jersey: Byram Quarry (4 December);
Oklahoma: United Materials (28 September);
Texas: assets of Henderson Asphalt (30 August); and
Washington: Columbia Asphalt (13 February).
Americas Products:
Alabama: Block USA (29 September);
Arkansas: Advanced Environmental Recycling Technologies, Inc. (1 May);
Illinois: certain assets of Elston Materials, LLC (13 September);
Oregon: Advantage Precast, Inc. (12 July), Hansen Architectural Systems, Inc. (8 August) and Spec Industries, Inc. (14 November);
Pennsylvania: Behney Corp (31 July); and
Texas: Duravault, Inc. (11 May).
185
185
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
31. Business Combinations - continued
The identifiable net assets acquired, including adjustments to provisional fair values, were as follows:
2017
€m
1,536
56
-
-
1,592
114
129
174
417
(149)
(49)
(52)
(12)
(22)
(132)
(416)
1,593
487
-
(20)
2,060
2,015
45
-
-
2,060
2,015
(174)
1,841
2016
€m
19
14
-
-
33
9
28
4
41
(14)
18
(1)
(3)
4
35
39
113
71
-
(9)
175
153
21
1
-
175
153
(4)
149
2015
€m
5,413
298
24
5
5,740
621
1,533
494
2,648
(1,549)
(581)
(87)
(175)
(149)
(627)
(3,168)
5,220
3,187
(25)
(489)
7,893
7,790
97
-
6
7,893
7,790
(494)
7,296
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
Note (i) and (ii) are set out overleaf.
* Non-controlling interests are measured at the proportionate share of net assets in 2017 and 2016 and fair value in 2015.
186
CRH Annual Report and Form 20-F | 2017
None of the acquisitions completed during the financial year was considered sufficiently material to warrant separate disclosure of the attributable fair values. The
initial assignment of fair values to identifiable net assets (most significantly, property, plant and equipment) acquired has been performed on a provisional basis in
respect of certain acquisitions; any amendments to these fair values made during the subsequent reporting window (within the measurement period imposed by
IFRS 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 €132 million (2016: €30 million;
2015: €1,588 million). The fair value of these receivables is €129 million (all of which is expected to be recoverable) (2016: €28 million; 2015: €1,533 million).
(ii) The principal factor contributing to the recognition of goodwill on acquisitions entered into by the Group is the realisation of cost savings and other synergies
with existing entities in the Group which do not qualify for separate recognition as intangible assets. Due to the asset-intensive nature of operations in the
Europe Heavyside and Americas Materials business segments, no significant identifiable intangible assets are recognised on business combinations in these
segments. €260 million of the goodwill recognised in respect of acquisitions completed in 2017 is expected to be deductible for tax purposes
(2016: €15 million; 2015: €254 million).
Acquisition-related costs, excluding post-acquisition integration costs, amounting to €11 million (2016: €2 million; 2015: €152 million) have been included in
operating costs in the Consolidated Income Statement (note 3).
The following table analyses the 31 acquisitions completed in 2017 (2016: 21 acquisitions; 2015: 19 acquisitions) by reportable segment and provides details of
the goodwill and consideration figures arising in each of those segments:
Reportable segments
2017
2016
2015
2017
2016
2015
2017
2016
2015
Number of
acquisitions
Goodwill
Consideration
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
Unallocated Goodwill
LH Assets
CRL
Total Group
Adjustments to provisional fair values of prior year acquisitions
Total
8
-
2
10
13
8
21
-
-
5
2
1
8
8
5
13
-
-
31
21
-
3
1
4
10
3
13
1
1
19
€m
155
-
17
172
239
76
315
-
-
487
-
487
€m
€m
2
7
-
9
10
7
17
-
-
26
45
71
-
6
-
6
32
9
41
2,307
833
3,187
-
3,187
€m
698
-
30
728
1,171
162
€m
€m
15
22
-
37
97
33
-
17
1
18
80
65
1,333
130
145
-
-
-
-
6,561
1,169
2,061
167
7,893
(1)
8
-
2,060
175
7,893
187
187
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
31. Business Combinations - continued
The post-acquisition impact of acquisitions completed during the year on the Group’s profit for the financial year was as follows:
Revenue
(Loss)/profit before tax for the financial year
2017
€m
532
(2)
2016
€m
101
1
2015
€m
2,679
(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:
Revenue
Profit before tax for the financial year
2017 acquisitions
€m
CRH Group
excluding 2017
acquisitions
€m
CRH Group
including 2017
acquisitions
€m
1,188
38
24,688
1,869
25,876
1,907
188
CRH Annual Report and Form 20-F | 2017
32. Non-controlling Interests
The total non-controlling interest at 31 December 2017 is €486 million (2016: €548 million) of which €391 million (2016: €472 million) relates to Republic
Cement & Building Materials (RCBM), Inc. and Republic Cement Land & Resources (RCLR), Inc. (formerly Luzon Continental Land Corporation (LCLC)).
The non-controlling interests in respect of the Group’s other subsidiaries are not considered to be material.
Name
Principal activity
Country of incorporation
Economic ownership interest
held by non-controlling interest
Republic Cement & Building Materials, Inc.
and Republic Cement Land & Resources, Inc.
Manufacture, development and sale
of cement and building materials
Philippines
45%
The following is summarised financial information for RCBM and RCLR 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 for the year
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
2017
€m
14
159
1,292
(140)
(663)
648
9
-
2016
€m
47
118
1,460
(124)
(690)
764
91
(1)
CRH holds 40% of the equity share capital in RCBM and RCLR and has an economic interest of 55% of the combined Philippines business. Non-controlling
interest relates to another party who holds 60% of the equity share capital in RCBM and RCLR and has an economic interest of 45% of the combined
Philippines business. CRH has obtained control (as defined under IFRS 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.
189
189
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
33. Related Party Transactions
The principal related party relationships requiring disclosure in the Consolidated Financial Statements of the Group under IAS 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 134. The Group’s principal subsidiaries, joint ventures and associates are disclosed on
pages 246 to 251.
Sales to and purchases from associates and joint ventures are as follows:
Sales
Purchases
Associates
Joint Ventures
2017
€m
51
400
2016
€m
56
401
2015
€m
48
422
2017
€m
111
55
2016
€m
88
54
2015
€m
64
56
Loans extended by the Group to joint ventures and associates (see note 16) are included in financial assets. Amounts receivable from and payable to equity
accounted investments (arising from the aforementioned sales and purchases transactions) as at the balance sheet date are included as separate line items in
notes 18 and 19 to the Consolidated Financial Statements.
Terms and conditions of transactions with subsidiaries, joint ventures and associates
In general, the transfer pricing policy implemented by the Group across its subsidiaries is market-based. Sales to and purchases from joint ventures and
associates are conducted in the ordinary course of business and on terms equivalent to those that prevail in arms-length transactions. The outstanding balances
included in receivables and payables as at the balance sheet date in respect of transactions with joint ventures and associates are unsecured and settlement
arises in cash. No guarantees have been either requested or provided in relation to related party receivables and payables. Loans to joint ventures and
associates (as disclosed in note 16) are extended on normal commercial terms in the ordinary course of business with interest accruing and, in general, paid to
the Group at predetermined intervals.
Key management personnel
For the purposes of the disclosure requirements of IAS 24, the term “key management personnel” (i.e. those persons having authority and responsibility for
planning, directing and controlling the activities of the Company) comprises the Board of Directors which manages the business and affairs of the Company.
Key management remuneration amounted to:
Short-term benefits
Post-employment benefits
Share-based payments - calculated in accordance
with the principles disclosed in note 8
Total
2017
€m
2016
€m
2015
€m
9
1
3
13
13
1
3
17
10
1
2
13
Other than these compensation entitlements, there were no other transactions involving key management personnel.
Lease arrangements
CRH has a number of lease arrangements in place with related parties across the Group, which have been negotiated on an arms-length basis at market rates.
We do not consider these arrangements to be material either individually or collectively in the context of the 2017, 2016 and 2015 Consolidated Financial
Statements.
34. Board Approval
The Board of Directors approved and authorised for issue the financial statements on pages 120 to 199 in respect of the year ended 31 December 2017 on
28 February 2018.
190
CRH Annual Report and Form 20-F | 2017
35. Supplemental Guarantor Information
The following consolidating information presents Condensed Consolidated Balance Sheets as at 31 December 2017 and 2016 and Condensed Consolidated
Income Statements and Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flow for the years
ended 31 December 2017, 2016 and 2015 of the Company and CRH America, Inc. as required by Article 3-10(c) of Regulation S-X. This information is prepared
in accordance with IFRS with the exception that the subsidiaries are accounted for as investments under the equity method rather than being consolidated. CRH
America, Inc. is 100% owned by the Company. The Guarantees of the Guarantor are full and unconditional.
CRH plc also fully and unconditionally guarantees securities issued by CRH America Finance, Inc., which is a 100% owned finance subsidiary of CRH plc.
CRH America, Inc. (the ‘Issuer’) has the following notes which are fully and unconditionally guaranteed by CRH plc (the ‘Guarantor’):
US$288 million 8.125% Notes due 2018 – listed on the NYSE (i)
US$400 million 5.750% Notes due 2021 – listed on the NYSE
US$1,250 million 3.875% Notes due 2025 – listed on the ISE
US$300 million 6.40% Notes due 2033 – listed on the ISE (ii)
US$500 million 5.125% Notes due 2045 – listed on the ISE
(i) Originally issued as a US$650 million bond in July 2008. Subsequently in May 2017, US$362.13 million of the issued notes were redeemed by the issuer as
part of a liability management exercise.
(ii) Originally issued as a US$300 million bond in September 2003. Subsequently in August 2009 and December 2010, US$87.445 million of the issued notes
were acquired by CRH plc as part of liability management exercises undertaken.
191
191
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2017
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
Assets held for sale
Total current assets
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
8,658
-
-
-
-
-
-
8,658
-
-
6,141
-
-
401
-
6,542
-
-
458
-
3,627
-
-
-
-
4,085
-
4
-
-
4
-
-
8
13,094
7,214
1,682
1,248
-
25
156
30
95
23,544
2,715
3,626
704
165
30
1,714
1,112
10,066
-
-
(10,798)
-
(3,627)
-
-
-
-
(14,425)
-
-
(6,845)
-
-
-
-
(6,845)
13,094
7,214
-
1,248
-
25
156
30
95
21,862
2,715
3,630
-
165
34
2,115
1,112
9,771
Total assets
15,200
4,093
33,610
(21,270)
31,633
EQUITY
Capital and reserves attributable to the Company’s equity holders
Non-controlling interests
Total equity
14,491
-
14,491
1,797
-
1,797
9,001
486
9,487
(10,798)
-
(10,798)
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
Liabilities associated with assets classified as held for sale
Total current liabilities
-
-
-
-
-
-
-
-
3
704
-
2
-
-
-
709
2,020
3
-
-
-
-
-
2,023
29
-
-
244
-
-
-
273
5,640
-
1,666
226
3,627
377
693
12,229
4,502
6,141
458
70
11
371
341
11,894
-
-
-
-
(3,627)
-
-
(3,627)
-
(6,845)
-
-
-
-
-
(6,845)
14,491
486
14,977
7,660
3
1,666
226
-
377
693
10,625
4,534
-
458
316
11
371
341
6,031
Total liabilities
709
2,296
24,123
(10,472)
16,656
Total equity and liabilities
15,200
4,093
33,610
(21,270)
31,633
192
CRH Annual Report and Form 20-F | 2017
Supplemental Condensed Consolidated Balance Sheet as at 31 December 2016
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
Total assets
EQUITY
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
14,601
4,902
33,560
(21,469)
31,594
Capital and reserves attributable to the Company’s equity holders
Non-controlling interests
Total equity
13,895
-
13,895
1,922
-
1,922
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
Total equity and liabilities
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
(9,711)
-
(9,711)
-
-
-
(4,508)
-
-
(4,508)
-
(7,250)
-
-
-
-
(7,250)
13,895
548
14,443
7,515
2,008
461
-
591
678
11,253
4,815
-
394
275
32
382
5,898
-
-
-
-
-
-
-
-
704
-
2
-
-
706
2,934
-
-
-
-
-
2,934
46
-
-
-
-
-
46
706
2,980
25,223
(11,758)
17,151
14,601
4,902
33,560
(21,469)
31,594
193
193
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
35. 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 from continuing operations
Income tax expense
Group profit for the financial year from continuing operations
Profit after tax for the financial year from discontinued operations
Group profit for the financial year
Profit attributable to:
Equity holders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
From continuing operations
Group profit for the financial year
Year ended 31 December 2017
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
-
22
22
-
22
-
2
-
1,754
65
1,843
(55)
1,788
107
1,895
1,788
107
-
1,895
-
-
-
-
-
-
-
(235)
242
-
83
-
90
(29)
61
-
61
61
-
-
61
25,220
(16,903)
8,317
(6,244)
2,073
56
2,129
(308)
10
(60)
-
65
1,836
(26)
1,810
107
1,917
1,786
107
24
1,917
-
-
-
-
-
-
-
242
(242)
-
(1,837)
(65)
(1,902)
55
(1,847)
(107)
(1,954)
(1,847)
(107)
-
(1,954)
25,220
(16,903)
8,317
(6,222)
2,095
56
2,151
(301)
12
(60)
-
65
1,867
(55)
1,812
107
1,919
1,788
107
24
1,919
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit for the financial year
1,895
61
1,917
(1,954)
1,919
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
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
(1,015)
8
(1,007)
114
(33)
81
(186)
-
(186)
-
-
-
Total other comprehensive income for the financial year
(926)
(186)
(890)
8
(882)
114
(33)
81
(801)
1,015
(8)
1,007
(114)
33
(81)
926
(1,076)
8
(1,068)
114
(33)
81
(987)
Total comprehensive income for the financial year
969
(125)
1,116
(1,028)
932
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
194
969
-
969
(125)
-
(125)
1,153
(37)
1,116
(1,028)
-
(1,028)
969
(37)
932
CRH Annual Report and Form 20-F | 2017
Year ended 31 December 2016
Restated(i)
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
-
20
20
-
20
-
2
-
1,529
42
1,593
(431)
1,162
81
1,243
1,162
81
-
1,243
-
-
-
-
-
-
-
(266)
275
-
95
-
104
(41)
63
-
63
63
-
-
63
24,789
(16,566)
8,223
(6,335)
1,888
53
1,941
(334)
6
(66)
-
42
1,589
(390)
1,199
81
1,280
1,172
81
27
1,280
-
-
-
-
-
-
-
275
(275)
-
(1,624)
(42)
(1,666)
431
(1,235)
(81)
(1,316)
(1,235)
(81)
-
(1,316)
24,789
(16,566)
8,223
(6,315)
1,908
53
1,961
(325)
8
(66)
-
42
1,620
(431)
1,189
81
1,270
1,162
81
27
1,270
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 from continuing operations
Income tax expense
Group profit for the financial year from continuing operations
Profit after tax for the financial year from discontinued operations
Group profit for the financial year
Profit attributable to:
Equity holders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
From continuing operations
Group profit for the financial year
(i) Restated to show the results of our Americas Distribution segment in discontinued operations.
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit for the financial year
1,243
63
1,280
(1,316)
1,270
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
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
Total other comprehensive income for the financial year
Total comprehensive income for the financial year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
(71)
14
(57)
(61)
3
(58)
(115)
1,128
1,128
-
1,128
49
-
49
-
-
-
49
112
112
-
112
(131)
14
(117)
(61)
3
(58)
(175)
1,105
1,089
16
1,105
71
(14)
57
61
(3)
58
115
(1,201)
(1,201)
-
(1,201)
(82)
14
(68)
(61)
3
(58)
(126)
1,144
1,128
16
1,144
195
195
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
35. Supplemental Guarantor Information - continued
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 from continuing operations
Income tax expense
Group profit/(loss) for the financial year from continuing operations
Profit after tax for the financial year from discontinued operations
Group profit/(loss) for the financial year
Profit/(loss) attributable to:
Equity holders of the Company
From continuing operations
From discontinued operations
Non-controlling interests
From continuing operations
Group profit/(loss) for the financial year
Year ended 31 December 2015
Restated(i)
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
-
-
-
1,473
1,473
(7)
1,466
-
1
-
(596)
44
915
(276)
639
85
724
639
85
-
724
-
-
-
-
-
-
-
(321)
333
-
62
-
74
(29)
45
-
45
45
-
-
45
21,406
(14,743)
6,663
(6,970)
(307)
106
(201)
(315)
7
(94)
-
44
(559)
(247)
(806)
85
(721)
(811)
85
5
(721)
-
-
-
-
-
-
-
333
(333)
-
534
(44)
490
276
766
(85)
681
766
(85)
-
681
21,406
(14,743)
6,663
(5,497)
1,166
99
1,265
(303)
8
(94)
-
44
920
(276)
644
85
729
639
85
5
729
(i) Restated to show the results of our Americas Distribution segment in discontinued operations.
Supplemental Condensed Consolidated Statement of Comprehensive Income
Group profit/(loss) for the financial year
724
45
(721)
681
729
Other comprehensive income
Items that may be reclassified to profit or loss in subsequent years:
Currency translation effects
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
Total other comprehensive income for the financial year
Total comprehensive income for the financial year
Attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income for the financial year
196
643
(2)
641
203
(30)
173
814
1,538
1,538
-
1,538
159
-
159
-
-
-
159
204
204
-
204
502
(2)
500
203
(30)
173
673
(48)
(71)
23
(48)
(643)
2
(641)
(203)
30
(173)
(814)
661
(2)
659
203
(30)
173
832
(133)
1,561
(133)
-
(133)
1,538
23
1,561
Supplemental Condensed Consolidated Statement of Cash Flow
Cash flows from operating activities
Profit before tax from continuing operations
Profit before tax from discontinued operations
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
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)
Transactions involving 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
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 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
CRH Annual Report and Form 20-F | 2017
Year ended 31 December 2017
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
1,843
146
1,989
(2)
90
-
90
(7)
(1,900)
(83)
(65)
-
22
-
-
(1)
-
-
21
-
-
21
-
2
-
-
-
-
-
-
-
-
-
(11)
(11)
(236)
(29)
(276)
-
242
-
-
407
356
-
-
-
-
-
-
1,836
146
1,982
358
-
(65)
(59)
2,216
1,006
66
66
(186)
(198)
2,970
(323)
(445)
2,202
222
9
31
(1,044)
-
(1,841)
(11)
(53)
(1,902)
(146)
(2,048)
-
1,983
65
-
-
-
-
-
-
-
-
242
-
242
-
(242)
-
-
(763)
-
-
-
1,867
146
2,013
349
-
(65)
(59)
2,238
1,006
66
65
(186)
(209)
2,980
(317)
(474)
2,189
222
11
31
(1,044)
-
(1,841)
(11)
(53)
409
598
(2,687)
(1,005)
(2,685)
42
-
-
-
-
-
(3)
-
(469)
-
(430)
-
401
-
-
401
-
-
-
6
11
(18)
-
(321)
-
-
(322)
-
-
-
-
-
-
(37)
(763)
1,004
158
-
-
(22)
-
(8)
332
(153)
2,048
(161)
(153)
1,734
-
-
763
-
-
-
-
-
-
-
763
-
-
-
-
-
42
(37)
-
1,010
169
(18)
(3)
(343)
(469)
(8)
343
(153)
2,449
(161)
(153)
2,135
197
197
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
35. Supplemental Guarantor Information - continued
Supplemental Condensed Consolidated Statement of Cash Flow
Year ended 31 December 2016
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate and
reclassify
€m
CRH and
subsidiaries
€m
Cash flows from operating activities
Profit before tax from continuing operations
Profit before tax from discontinued operations
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)/inflow 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
198
1,593
121
1,714
(2)
(1,650)
(42)
-
20
-
-
-
(3)
-
-
17
-
-
17
-
2
-
-
287
-
-
-
289
52
-
-
-
(4)
(9)
(352)
-
(313)
(7)
408
-
(7)
401
104
-
104
(9)
(95)
-
-
-
-
-
-
-
-
(1)
(1)
(266)
(41)
(308)
-
275
-
-
644
-
-
-
919
-
-
-
25
-
(636)
-
-
(611)
-
-
-
-
-
1,589
121
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)
-
(1,370)
-
(8)
(1,739)
(120)
2,110
58
(120)
2,048
(1,666)
(121)
(1,787)
-
1,745
42
-
-
-
-
-
-
-
-
-
275
-
275
-
(275)
-
-
(931)
-
-
-
(1,206)
-
931
-
-
-
-
-
-
931
-
-
-
-
-
1,620
121
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)
(127)
2,518
58
(127)
2,449
Supplemental Condensed Consolidated Statement of Cash Flow
Cash flows from operating activities
Profit/(loss) before tax from continuing operations
Profit before tax from discontinued operations
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
CRH Annual Report and Form 20-F | 2017
Year ended 31 December 2015
Guarantor
€m
Issuer
€m
Non-Guarantor
subsidiaries
€m
Eliminate
and
reclassify
€m
CRH and
subsidiaries
€m
915
113
1,028
(1)
483
(44)
7
1,473
-
-
-
(2)
-
(1,460)
-
11
-
-
11
-
1
-
-
(699)
-
-
-
(698)
-
57
-
9
-
-
(3)
-
(379)
-
(316)
74
-
74
(12)
(62)
-
-
-
-
-
-
-
-
-
(9)
(9)
(283)
(29)
(321)
-
333
-
-
(632)
-
-
-
(299)
-
-
-
1,584
15
(38)
-
(968)
-
-
593
(559)
113
(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)
5,216
490
(113)
377
-
(421)
44
-
-
-
-
-
-
-
-
-
-
333
-
333
-
(333)
-
-
1,331
-
-
-
998
-
-
(1,331)
-
-
-
-
-
-
-
(1,331)
-
-
-
-
-
920
113
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
(897)
3,295
120
(897)
2,518
199
199
(Decrease)/increase in cash and cash equivalents
(1,003)
(27)
133
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
1,411
-
(1,003)
408
25
2
(27)
-
1,859
118
133
2,110
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Company Balance Sheet
as at 31 December 2017
Notes
3
4
Fixed assets
Financial assets
Current assets
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
Capital and reserves
Called-up share capital
Preference share capital
Share premium account
Treasury Shares and own shares
Revaluation reserve
Other reserves
Profit and loss account(i)
Total equity
8
8
8
9
9
2017
€m
2016
€m
2,882
2,818
6,141
401
6,542
707
2
709
6,546
401
6,947
704
2
706
5,833
6,241
8,715
9,059
286
1
6,421
(15)
42
275
1,705
8,715
284
1
6,241
(14)
42
276
2,229
9,059
(i) In accordance with section 304 of the Companies Act 2014, the profit for the financial year of the
Company amounted to €24 million (2016: €22 million).
N. Hartery, A. Manifold, Directors
200
CRH Annual Report and Form 20-F | 2017
Company Statement of Changes in Equity
for the financial year ended 31 December 2017
Issued
share
capital
€m
Share
premium
account
€m
Treasury
Shares/
own shares
€m
Revaluation
reserve
€m
Other
reserves
€m
Profit
and loss
account
€m
Total
equity
€m
At 1 January 2017
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)
Shares distributed under the Performance Share Plan Awards
Dividends (including shares issued in lieu of dividends)
285
-
-
1
-
-
-
1
-
6,241
-
-
118
-
-
-
62
-
(14)
-
-
-
-
2
(3)
-
-
At 31 December 2017
287
6,421
(15)
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)
282
-
-
3
-
-
-
-
6,025
-
-
216
-
-
-
-
At 31 December 2016
285
6,241
(28)
-
-
-
-
18
(4)
-
(14)
42
-
-
-
-
-
-
-
-
42
42
-
-
-
-
-
-
-
276
-
-
-
62
-
-
(63)
-
275
230
-
-
-
46
-
-
-
2,229
24
24
9,059
24
24
-
-
(2)
-
-
(546)
119
62
-
(3)
-
(546)
1,705
8,715
2,744
22
22
-
-
(18)
-
(519)
9,295
22
22
219
46
-
(4)
(519)
42
276
2,229
9,059
201
201
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
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
GAAP in the Republic of Ireland (Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101)). Note 2 below describes the principal accounting
policies under FRS 101, which have been applied consistently.
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;
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
2017
€m
47
2,516
2,563
2016
€m
47
2,516
2,563
Deemed cost in respect of the investment in these subsidiaries amounted to €400 million at the date of transition to FRS 101.
202
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.
CRH Annual Report and Form 20-F | 2017
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.
203
203
CRH Annual Report and Form 20-F I 2017 CRH Annual Report and Form 20-F I 2017
CRH Annual Report and Form 20-F | 2017
Notes to the Company Balance Sheet - continued
3. Financial Assets
The Company’s investment in its subsidiaries is as follows:
At 1 January 2017 at cost
Capital contribution in respect of share-based payments
At 31 December 2017 at cost
The equivalent disclosure for the prior year is as follows:
At 1 January 2016 at cost
Capital contribution in respect of share-based payments
Additions
At 31 December 2016 at cost
Shares
€m
2,563
-
2,563
1,993
-
570
2,563
Other
€m
255
64
319
212
43
-
255
Total
€m
2,818
64
2,882
2,205
43
570
2,818
Additions in 2016 relate to the Company’s investment in its subsidiary CRH Finance DAC.
The Company’s principal subsidiaries, joint ventures and associates are disclosed on pages 246 to 251.
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
Accruals and other payables
2017
€m
6,141
2016
€m
6,546
2017
€m
704
3
707
2016
€m
704
-
704
Amounts owed to subsidiary undertakings are repayable on demand.
6. Auditor’s Remuneration (Memorandum Disclosure)
In accordance with Section 322 of the Companies Act 2014, the fees paid in 2017 to the statutory auditor for work engaged by the Parent Company comprised
audit fees of €20,000 (2016: €20,000) and other assurance services of €nil (2016: €nil).
204
CRH Annual Report and Form 20-F | 2017
7. Dividends Proposed
(Memorandum Disclosure)
Details in respect of dividends proposed of
€409 million (2016: €385 million) and dividends
paid during the year are presented in the
dividends note (note 12) 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 30) on pages 182 to
184 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
€24 million (2016: €22 million).
10. Share-based
Payments
The total expense of €65 million (2016: €46
million) reflected in 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
Any Irish registered wholly-owned subsidiary of
the Company may avail of the exemption from
filing its statutory financial statements for the
year ended 31 December 2017 as permitted by
Section 357 of the Companies Act 2014 and if
an Irish registered wholly-owned subsidiary of
the Company elects to avail of this exemption,
there will be in force an irrevocable guarantee
from the Company in respect of all
commitments entered into by such
wholly-owned subsidiary, including amounts
shown as liabilities (within the meaning of
Section 357 (1) (b) of the Companies Act 2014)
in such wholly-owned subsidiary’s statutory
financial statements for the year ended
31 December 2017.
Details in relation to other guarantees provided
by the Company are provided in the
interest-bearing loans and borrowings note
(note 24) on page 169 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 200 to 205 in respect of the year ended
31 December 2017 on 28 February 2018.
205
205
CRH Annual Report and Form 20-F I 2017 l
s
e
r
u
s
o
c
s
D
F
-
0
2
i
y
r
a
t
n
e
m
e
p
p
u
S
l
206
206
CRH Annual Report and Form 20-F I 2017
Supplementary 20-F Disclosures
Selected Financial Data
Exchange Rates
Non-GAAP Performance Measures
Contractual Obligations
Property, Plants and Equipment
Mineral Reserves
Risk Factors
Corporate Governance Practices - NYSE
The Environment and
Government Regulations
Other Disclosures
208
209
210
214
215
216
218
228
230
231
Readymixed concrete trucks assembled at a Yatai Building Materials depot in Changchun, China. CRH has a 26% stake in the company which is
a market leader in cement in Northeast China with a capacity of 32 million tonnes and operations in the three provinces.
207
207
CRH Annual Report and Form 20-F I 2017
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 2017. For the
three years ended 31 December 2017, the
selected financial data is qualified in its entirety by
reference to, and should be read in conjunction
with, the audited Consolidated Financial
Statements, the related Notes and the Business
Performance section included elsewhere in this
Annual Report and 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)
2017
€m
2016 (i)
2015 (i)
2014 (i)
2013 (i) (ii)
€m
€m
€m
€m
25,220
24,789
21,406
17,136
16,367
2,095
1,788
214.0c
212.7c
65.4c
835.6
4.5
31,633
14,977
14,490
286
839.0
0.4
838.6
1,908
1,162
140.4c
139.4c
62.8c
827.8
3.9
31,594
14,443
13,894
284
832.8
0.4
832.4
1,166
639
78.7c
78.3c
62.5c
812.3
2.8
32,007
13,544
13,014
281
823.9
1.3
822.6
834
520
70.4c
70.4c
62.5c
737.6
2.4
22,017
10,198
10,176
253
744.5
3.8
740.7
33
(344)
(47.2c)
(47.2c)
62.5c
729.2
0.6 (v)
20,429
9,686
9,661
251
739.2
6.0
733.2
(i)
Prior year comparative income statement data has been restated to show the results of our Americas Distribution segment in discontinued operations. See
note 2 to the Consolidated Financial Statements for further details.
(ii) Group operating profit includes asset impairment charges of €650 million in 2013, with an additional €105 million impairment charge included in loss
attributable to equity holders of the Company in respect of equity accounted investments.
(iii) All share numbers are shown in millions of shares.
(iv) For the purposes of calculating the ratio of earnings to fixed charges, in accordance with Item 503 of Regulation S-K, earnings have been calculated by
adding: profit/(loss) before tax from continuing operations adjusted to exclude the Group’s share of equity accounted investments’ result after tax, fixed
charges and dividends received from equity accounted investments; and the fixed charges were calculated by adding interest expensed and capitalised,
amortised premiums, discounts and capitalised expenses related to indebtedness, an estimate of the interest within rental expense and preference security
dividend requirements of consolidated subsidiaries.
(v) The amount of the deficiency in 2013 was US$183 million.
(vi) Net assets is calculated as the sum of total assets less total liabilities.
208
CRH Annual Report and Form 20-F I 2017 Exchange Rates
Exchange Rates
In this Annual Report and Form 20-F, references
to “US$”, “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’).
These rates may vary slightly from the rates used
for translating foreign currencies into euro in the
preparation of the Consolidated Financial
Statements (see page 134).
For a discussion on the effects of exchange rate
fluctuations on the financial condition and results
of the operations of the Group, see the Business
Performance section beginning on page 22.
Where referenced in the Supplementary 20-F
Disclosures and Shareholder Information sections,
information is provided at the latest practicable
date, 16 February 2018.
euro/US Dollar exchange rate
Years ended 31 December
Period End Average Rate (i)
2013
2014
2015
2016
2017
2018 (through 16 February 2018)
Months ended
September 2017
October 2017
November 2017
December 2017
January 2018
February 2018 (through 16 February 2018)
1.38
1.21
1.09
1.06
1.20
1.24
1.18
1.16
1.19
1.20
1.24
1.24
1.33
1.32
1.10
1.10
1.14
1.23
1.19
1.18
1.17
1.18
1.22
1.24
High
1.38
1.39
1.20
1.15
1.20
1.25
1.20
1.18
1.19
1.20
1.25
1.25
Low
1.28
1.21
1.05
1.04
1.04
1.19
1.17
1.16
1.16
1.17
1.19
1.22
(i) The average of the euro/US Dollar exchange rate on the last day of each month during the period or
in the case of monthly averages, the average of all days in the month, in each case using the FRB
Noon Buying Rate.
The FRB Noon Buying Rate on 31 December 2017 was €1 = US$1.2022 and on 16 February 2018 was
€1 = US$1.2442.
209
CRH Annual Report and Form 20-F I 2017 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 Revenue, EBITDA (as defined)* and Operating Profit by segment
Year ended 31 December
Revenue
Group EBITDA
(as defined)*
2017
€m
2016
€m
2015
€m
2017
€m
2016
€m
2015
€m
Depreciation,
amortisation and
impairment
2016
€m
2017
€m
2015
€m
Continuing operations
Europe Heavyside
Europe Lightside
Europe Distribution
Europe
Americas Materials
Americas Products
Americas
6,902
6,945
4,813
1,440
1,392
1,404
4,145
4,066
4,158
839
143
269
781
137
206
12,487 12,403 10,375
1,251
1,124
7,970
7,598
7,018
1,270
1,204
4,327
4,280
3,862
573
543
424
136
171
731
955
391
12,297 11,878 10,880
1,843
1,747
1,346
361
41
62
464
412
138
550
395
45
76
516
386
132
518
304
46
77
427
335
142
477
Group
operating profit (i)
2017
€m
2016
€m
2015
€m
478
102
207
787
858
435
386
92
130
608
818
411
1,293
1,229
120
90
94
304
620
249
869
Asia
436
508
151
52
109
2
37
38
9
15
71
(7)
Total Group from continuing operations
25,220 24,789 21,406
3,146
2,980
2,079
1,051
1,072
913
2,095
1,908
1,166
Discontinued operations
Americas Distribution
Total Group
2,343
2,315
2,229
164
150
140
21
31
27,563 27,104 23,635
3,310
3,130
2,219
1,072
1,103
29
942
143
119
111
2,238
2,027
1,277
Group operating profit from continuing operations
Profit on disposals
Finance costs less income
Other financial expense
Share of equity accounted investments’ profit
Profit before tax from continuing operations
Income tax expense
Group profit for the financial year from continuing operations
Profit after tax for the financial year from discontinued operations
Group profit for the financial year
2,095
1,908
1,166
56
53
99
(289)
(317)
(295)
(60)
65
(66)
42
1,867
1,620
(94)
44
920
(55)
(431)
(276)
1,812
1,189
107
81
1,919
1,270
644
85
729
(i)
Throughout this document, Group operating profit is reported as shown in the Consolidated Income Statement and excludes profit on disposals.
210 EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
*
CRH Annual Report and Form 20-F I 2017 Return on Net Assets
Group operating profit from continuing operations
Group operating profit from discontinued operations
Total Group operating profit (numerator for RONA computation)
Current year
Segment assets (i)
Segment liabilities (i)
Group segment net assets
Assets held for sale
Liabilities associated with assets classified as held for sale
Group net assets (including net assets held for sale)
Prior year
Segment assets (i)
Segment liabilities (i)
Group segment net assets
2017
€m
2,095
143
2,238
26,809
(6,201)
20,608
1,112
(341)
21,379
27,581
(6,927)
20,654
2016
€m
1,908
119
2,027
27,581
(6,927)
20,654
-
-
20,654
27,881
(6,794)
21,087
2015
€m
1,166
111
1,277
27,881
(6,794)
21,087
-
-
21,087
16,584
(4,258)
12,326
Average net assets including net assets held for sale (denominator for
RONA computation)
RONA
21,017
20,871
16,707
10.6%
9.7%
7.6%
Reconciliation of Segment Assets and Liabilities to Group Assets and Liabilities
Assets
Segment assets (i)
Reconciliation to total assets as reported in the Consolidated Balance Sheet:
Investments accounted for using the equity method
Other financial assets
Derivative financial instruments (current and non-current)
Income tax assets (current and deferred)
Cash and cash equivalents
Assets held for sale
Total assets as reported in the Consolidated Balance Sheet
Liabilities
Segment liabilities (i)
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
2017
€m
26,809
1,248
25
64
260
2,115
1,112
31,633
2016
€m
27,581
1,299
26
76
163
2,449
-
31,594
2015
€m
27,881
1,317
28
109
154
2,518
-
32,007
2014
€m
16,584
1,329
23
102
186
3,262
531
22,017
6,201
6,927
6,794
4,258
7,976
14
2,124
341
16,656
7,790
32
2,402
-
17,151
9,221
24
2,424
-
18,463
5,866
23
1,459
213
11,819
(i) Segment assets and liabilities as disclosed in note 1 to the Consolidated Financial Statements.
211
CRH Annual Report and Form 20-F I 2017 Non-GAAP Performance Measures - continued
Calculation of EBITDA (as defined)* Net Interest Cover
Interest
Finance costs (i)
Finance income (i)
Net interest
2017
€m
301
(12)
289
2016
€m
325
(8)
317
2015
€m
303
(8)
295
EBITDA (as defined)* from continuing operations
3,146
2,980
2,079
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.
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 excluding net debt reclassified as held for sale
Cash at bank and in hand reclassified as held for sale (i)
Interest-bearing loans and borrowings reclassified as held for sale (i)
Group net debt
EBITDA (as defined)* from continuing operations
EBITDA (as defined)* from discontinued operations
Total Group EBITDA (as defined)*
Net debt divided by EBITDA (as defined)*
(i) These items appear in notes 21 to 25 to the Consolidated Financial Statements.
Adjusted Basic Earnings per Ordinary Share
Numerator for basic and diluted earnings per Ordinary Share (i)
One-off Swiss pension past service credit (net of tax) (ii)
One-off deferred tax credit (including credit relating to discontinued operations)
Numerator for adjusted basic EPS excluding one-off gains per Ordinary Share from
continuing and discontinued operations
Average shares (i)
Adjusted basic earnings per Ordinary Share
Dividend declared for the year
Dividend cover (adjusted basic earnings per share/dividend declared per share)
(i) These items appear in note 13 to the Consolidated Financial Statements.
Times
9.4
10.9
7.0
2017
€m
2,115
(7,976)
50
(5,811)
20
(5)
2016
€m
2,449
(7,790)
44
(5,297)
-
-
2015
€m
2,518
(9,221)
85
(6,618)
-
-
(5,796)
(5,297)
(6,618)
3,146
164
3,310
2,980
150
3,130
2,079
140
2,219
Times
1.8
1.7
3.0
2017
€m
1,895
(59)
(447)
1,389
835.6
166.2c
68.0c
2.4x
(ii) The one-off Swiss pension past service credit was €81 million before a tax charge of €22 million.
212
*
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 2017 EBITDA (as defined). EBITDA is defined as
earnings before interest, taxes, depreciation,
amortisation, asset impairment charges, profit on
disposals and the Group’s share of equity
accounted investments’ profit after tax and is
quoted by management in conjunction with other
GAAP 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 on page 212.
EBITDA (as defined)* Net Interest Cover. EBITDA
(as defined)* net interest cover is used by
management as a measure which matches the
earnings and cash generated by the business to
the underlying funding costs. EBITDA (as defined)*
net interest cover is presented to provide investors
with a greater understanding of the impact of
CRH’s debt and financing arrangements. It is the
ratio of EBITDA (as defined)* to net interest and is
calculated on page 212. The definitions and
calculations used as a metric in lender covenant
agreements include certain specified adjustments
to the amounts included in the Consolidated
Financial Statements. The ratios as calculated on
the basis of the definitions in those covenants are
disclosed in note 24 to the Consolidated Financial
Statements.
RONA. Return on Net Assets is a key 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 total Group operating profit as a
percentage of average net assets. Net assets
comprise total assets by segment (including
assets held for sale) less total liabilities by segment
(including liabilities associated with assets
classified as held for sale) as shown on page 211
and detailed in note 1 to the Consolidated
Financial Statements, and exclude equity
accounted investments and other financial assets,
net debt (as previously defined) and tax assets &
liabilities. The average net assets for the year is
the simple average of the opening and closing
balance sheet figures.
Organic Revenue, Organic Operating Profit
and Organic EBITDA (as defined)*. CRH
pursues a strategy of growth through acquisitions
and investments, with €1,905 million spent
on acquisitions and investments in 2017
(2016: €213 million). Acquisitions completed in
2016 and 2017 contributed incremental sales
revenue of €596 million, operating profit of
€14 million and EBITDA (as defined)* of
€60 million in 2017. Proceeds from divestments
and non-current asset disposals amounted to
€222 million (net of cash disposed and deferred
proceeds) (2016: €283 million). The sales impact
of divested activities in 2017 was a negative
€204 million and the disposal impact at an
operating profit and EBITDA (as defined)* level
was a negative €14 million and €21 million
respectively.
The euro strengthened against most major
currencies during 2017, particularly towards the
end of the year resulting in the average euro/
Pound Sterling rate weakening from 0.8195 in
2016 to 0.8767 in 2017 and the US Dollar
weakening from an average 1.1069 in 2016 to
1.1297 in 2017. Overall currency movements
resulted in an unfavourable net foreign currency
translation impact on our results as shown on the
table on page 26.
Because of the impact of acquisitions,
divestments, exchange translation and 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 22 to 53,
changes in organic revenue, organic operating
profit and organic EBITDA (as defined)* are
presented as additional measures of revenue,
operating profit and EBITDA (as defined)* to
provide a greater understanding of the
performance of the Group. A reconciliation of the
changes in organic revenue, organic operating
profit and organic EBITDA (as defined)* to the
changes in total revenue, operating profit and
EBITDA (as defined)* for the Group and by
segment, is presented with the discussion of each
segment’s performance in tables contained in the
segment discussion commencing on page 32.
Adjusted Basic Earnings per Ordinary Share.
Adjusted basic earnings per Ordinary Share has
been used by management as it presents a more
accurate picture of the profit attributable to equity
holders of the Group, before certain one-off items
(net of related tax). Management believes adjusted
basic earnings per Ordinary Share provides useful
information for investors and allows more
meaningful period-to-period comparisons of our
operating results. This is a non-GAAP measure as
it removes the impact of the one-off past service
credit due to changes in the Group’s pension
scheme in Switzerland and the one-off benefit of a
reduction in the Group’s deferred tax liabilities due
to changes in US tax legislation. As these are
one-off items, relating to 2017, no comparative
information is required.
Revenue from continuing and discontinued
operations, EBITDA (as defined)* from continuing
and discontinued operations and Operating Profit
from continuing and discontinued operations. As
detailed in note 2 to the Consolidated Financial
Statements, our Americas Distribution segment
has been classified as discontinued operations in
accordance with IFRS 5. In certain instances
throughout the Annual Report and Form 20-F we
refer to revenue, EBITDA (as defined)* and
operating profit from continuing and discontinued
operations. Information presented on this basis is
useful to investors as (i) it provides a greater
understanding of the Group’s performance and (ii)
assists investors in the comparison of the Group’s
performance with that of other companies.
A reconciliation of each of these measures is
detailed in note 1 to the Consolidated Financial
Statements and on page 210.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
213
CRH Annual Report and Form 20-F I 2017 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 2017 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 (iii)
Purchase obligations (iv)
Retirement benefit obligation commitments (v)
Total
Total
€m
7,950
12
2,542
265
2,191
1,295
34
Less than
1 year
€m
320
3
284
167
419
611
19
1-3 years
€m
1,252
4
491
63
598
178
4
3-5 years
€m
More than
5 years
€m
1,296
2
384
24
364
117
3
5,082
3
1,383
11
810
389
8
7,686
14,289
1,823
2,590
2,190
(i)
Of the €8.0 billion total gross debt, €0.1 billion is drawn on revolving facilities which may be repaid and redrawn up to the date of maturity. The interest
payments are estimated assuming these loans are repaid on facility maturity dates.
(ii) These interest payments have been estimated on the basis of the following assumptions: (a) no change in variable interest rates; (b) no change in exchange
rates; (c) that all debt is repaid as if it falls due from future cash generation; and (d) none is refinanced by future debt issuance.
(iii) Includes €252 million relating to discontinued operations. See further details in note 29 to the Consolidated Financial Statements.
(iv) Purchase obligations include contracted for capital expenditure. A summary of the Group’s future purchase commitments as at 31 December 2017 for
capital expenditure are set out in note 14 to the Consolidated Financial Statements. These expenditures for replacement and new projects are in the
ordinary course of business and will be financed from internal resources.
(v) These retirement benefit commitments comprise the contracted payments related to our pension schemes in the UK and Ireland. See further details in note
28 to the Consolidated Financial Statements.
Quantitative and Qualitative
Information about Market Risk
CRH addresses the sensitivity of the Group’s
interest rate swaps and debt obligations to
changes in interest rates in a sensitivity analysis
technique that measures the estimated impacts
on the income statement and on equity of either
an increase or decrease in market interest rates
or a strengthening or weakening in the US Dollar
against all other currencies, from the rates
applicable at 31 December 2017, for each class
of financial instrument with all other variables
remaining constant. The technique used measures
the estimated impact on profit before tax and on
total equity arising on 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 22 to the Consolidated
Financial Statements, is for illustrative purposes
only as in practice interest and foreign exchange
rates rarely change in isolation.
Quantitative and qualitative information and
sensitivity analysis of market risk is contained
in notes 21 to 25 to the Consolidated Financial
Statements.
Off-Balance Sheet
Arrangements
CRH does not have 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.
214
CRH Annual Report and Form 20-F I 2017 Property, Plants and Equipment
CRH believes that all the facilities are in good
condition, adequate for their purpose and suitably
utilised according to the individual nature and
requirements of the relevant operations. CRH has
a continuing programme of improvements and
replacements to properties when considered
appropriate to meet the needs of the individual
operations. Further information in relation to the
Group’s accounting policy and process governing
any impairment of property, plant and equipment
is given on page 127 and in note 14 to the
Consolidated Financial Statements on page 152.
At 16 February 2018, CRH had a total of 2,960
building materials production locations and 684
Merchanting and DIY locations. 1,613 locations
are leased, with the remaining 2,031 locations
held on a freehold basis.
The significant subsidiary locations as at 31
December 2017 are the cement facilities in the
Philippines, Poland, Ukraine, the UK, Romania,
Canada, Slovakia, Ireland, Germany, France and
Brazil. The clinker (the key intermediate product in
the manufacture of cement) capacity for these
locations is set out in the table below. Further
details on locations and products manufactured
are provided in the Business Performance section
on pages 22 to 53. None of CRH’s individual
properties is of material significance to the Group.
Significant Locations – Clinker Capacity
Subsidiary
Country
Number of plants
Republic Cement
Grupa Ożarów
Podilsky Cement PJSC
Tarmac
CRH Romania
CRH Canada
CRH Slovakia
Irish Cement
Opterra
Eqiom
CRH Brazil
Philippines
Poland
Ukraine
United Kingdom
Romania
Canada
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
305
292
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 16
to CRH’s Annual Report on Form 20-F, as filed
with the SEC.
215
CRH Annual Report and Form 20-F I 2017 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
2017
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
Czech Republic,
Ireland, Poland,
United Kingdom
Germany
Brazil
Canada
United States
Canada
United States
Philippines
Philippines
3
3
2
2
6
2
5
1
3
2
6
111
52
124
3
20
11
168
41
4
9
512
314
260
293
220
54
341
34
93
240
500
520
638
5,182
243
86
119
11,964
333
-
-
-
-
898
41
48
-
6
-
154
335
953
70
10
344
64
3,014
572
150
341
10
-
578
22,437
6,519
3
2
5
41
769
820
14
1
15
1,072
717
1,175
-
-
19
5,999
45,920
431
20,222
54,883
20,672
2,247
-
2,247
17
17
34
91
158
208
174
242
108
301
85
23
125
273
146
254
1,114
150
53
107
1,350
184
121
298
5,565
166
293
85
709
14,931
16,184
222
25
247
1,413
79,567
27,225
21,996
34
59
82
44
60
155
138
232
17
43
69
13
30
78
44
22
59
32
20
32
43
83
94
53
41
103
34
50
90%
100%
100%
93%
83%
100%
92%
100%
100%
100%
97%
68%
70%
85%
92%
96%
99%
84%
74%
100%
100%
88%
100%
100%
100%
82%
73%
75%
100%
100%
100%
78%
-
-
-
6%
-
-
-
-
-
-
-
32%
30%
15%
8%
4%
1%
16%
26%
-
-
10%
-
-
1%
17%
-
8%
-
-
-
3%
-
-
-
-
-
-
-
-
-
-
10%
2%
-
-
-
18%
27%
25%
-
-
-
22%
-
-
-
-
-
-
-
-
-
-
2.8
2.9
2.7
4.1
4.0
0.8
2.3
0.4
1.4
2.4
4.1
10.0
9.0
15.3
2.7
1.7
2.0
42.0
9.0
3.7
7.0
1.9
3.1
1.6
18.1
149.9
6.6
0.6
(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.
216
CRH Annual Report and Form 20-F I 2017 The Group’s reserves for the production of primary
building materials (which encompass cement,
lime, aggregates (stone, sand and gravel), asphalt,
readymixed concrete and concrete products)
fall into a variety of categories spanning a
wide number of rock types and geological
classifications – see the table on the previous
page setting out the activities with reserves
backing.
Reserve estimates are generally prepared by
third-party experts (i.e. geologists or engineers)
prior to acquisition; this procedure is a critical
component in the Group’s due diligence process
in connection with any acquisition. Subsequent to
acquisition, estimates are typically updated by
company engineers and/or geologists and are
reviewed annually by corporate and/or divisional
staff. However, where deemed appropriate by
management, in the context of large or
strategically important deposits, the services of
third-party consultant geologists and/or engineers
may be employed to validate reserves quantities
outside of the aforementioned due diligence
framework on an ongoing basis.
The Group has not employed third-parties to
review reserves over the three-year period ending
31 December 2017 other than in business
combination activities and specific instances
where such review was warranted.
Reserve estimates are subject to annual review by
each of the relevant operating entities across the
Group. The estimation process distinguishes
between owned and leased reserves segregated
into permitted and unpermitted as appropriate
and includes only those permitted reserves which
are proven and probable. The term “permitted”
reserves refers to those tonnages which can
currently be mined without any environmental or
legal constraints. Permitted owned reserve
estimates are based on estimated recoverable
tonnes whilst permitted leased reserve estimates
are based on estimated total recoverable tonnes
which may be extracted over the term of the lease
contract.
Proven and probable reserve estimates are based
on recoverable tonnes only and are thus stated
net of estimated production losses and other
matters factored into the computation (e.g.
required slopes/benches). In order for reserves to
qualify for inclusion in the “proven and probable”
category, the following conditions must be
satisfied:
•
•
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 lease
None of CRH’s mineral-bearing properties is
individually material to the Group.
217
CRH Annual Report and Form 20-F I 2017 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
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, governments’ ability to fund
infrastructure projects, consumer sentiment and weather conditions.
Financial performance may also be negatively impacted by unfavourable
swings in fuel and other commodity/raw material prices.
Impact:
Failure of the Group to respond on a timely basis and/or adequately to
unfavourable events may adversely affect financial performance.
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.
In general, economic uncertainty exacerbates negative trends in construction
activity leading to postponement in orders. Construction markets are inherently
cyclical and are affected by many factors that are beyond the Group’s control,
including:
•
•
the price of fuel and principal energy-related raw materials such as bitumen and
steel (which accounted for approximately 8% of annual Group sales revenues in
2017);
the performance of the national economies in the countries in which the Group
operates, across Europe, Americas and Asia;
• monetary policies in the countries in which the Group operates — for example,
an increase in interest rates typically reduces the volume of mortgage
borrowings thus impacting residential construction activity;
•
•
the allocation of government funding for public infrastructure programmes, such
as the development of highways in the US under the Fixing Americas Surface
Transportation Act (FAST Act); and
the level of demand for construction materials and services, with sustained
adverse weather conditions leading to potential disruptions or curtailments in
outdoor construction activity
The adequacy and timeliness of the actions taken by the Group’s management
team are of critical importance in maintaining financial performance at appropriate
levels.
Each of the above factors could have a material adverse effect on the Group’s
operating results and the market price of CRH plc’s Ordinary Shares.
218
CRH Annual Report and Form 20-F I 2017 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 uncertainties resulting from the commencement of proceedings for the
UK to exit the European Union, in addition to continued instability in Brazil,
Philippines and Ukraine, could include political unrest, currency
disintegration, strikes, restrictions on repatriation of earnings, changes in
law and policies, activism, and civil disturbance and may be triggered or
worsened by other forms of instability including natural disasters,
epidemics, widespread transmission of diseases and terrorist attacks.
These factors are of particular relevance in developing/emerging markets.
Impact:
Changes in these conditions, or in the governmental or regulatory
requirements in any of the countries in which the Group operates, may
adversely affect the Group’s business, results of operations, financial
condition or prospects thus leading to possible impairment of financial
performance and/or restrictions on future growth opportunities.
Commodity products and substitution
Risk Factor
Description:
The Group faces strong volume and price competition across its product
lines, stemming from the fact that many of the Group’s products are
commodities. In addition, existing products may be replaced by substitute
products which the Group does not produce or distribute, or new
construction techniques may be devised.
Impact:
Against this backdrop, if the Group fails to generate competitive
advantage through differentiation and innovation, market share, and
thus financial performance, may decline.
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 the effects of unwinding
the sustained monetary stimulus in the US, the ECB’s plans to scale back
quantitative easing in the Eurozone and ongoing tensions in the Korean peninsula,
have collectively contributed to heightened uncertainty, with possible upside and
downside economic consequences.
The Group currently operates mainly in Western Europe and North America as well
as, to a lesser degree, in developing countries/emerging markets in Eastern
Europe, the Philippines, Brazil, China and India. The economies of these countries
are at varying stages of socioeconomic and macroeconomic development which
could give rise to a number of risks, uncertainties and challenges and could include
the following:
• changes in political, social or economic conditions;
•
trade protection measures and import or export licensing requirements;
• potentially negative consequences from changes in tax laws;
•
labour practices and differing labour regulations;
• procurement which contravenes ethical considerations;
• unexpected changes in regulatory requirements;
• state-imposed restrictions on repatriation of funds; and
•
the outbreak of armed conflict
The Group also has significant business interests in Ukraine, where the outlook
remains uncertain.
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. Many of the Group’s products are
commodities and competition in such circumstances is driven largely by price.
Across the multitude of largely local markets in which the Group conducts
business, downward pricing pressure is experienced from time to time, and the
Group may not always be in a position to recover increased operating expenses
(caused by factors such as increased fuel and raw material prices) through higher
sale prices.
The cement business, in particular, is capital intensive resulting in significant fixed
and semi-fixed costs. The Group’s profits are therefore sensitive to changes in
volume, which is driven by highly competitive markets, and impacted by ongoing
capital expenditure needs.
A number of the products sold by the Group (both those manufactured internally
and those distributed) compete with other building products that do not feature
in the existing product range. Any significant shift in demand preference from the
Group’s existing products to substitute products, which the Group does not
produce or distribute, could adversely impact market share and results of
operations.
219
CRH Annual Report and Form 20-F I 2017 Key Strategic Risk Factors - continued
Reserves availability and planning
Risk Factor
Description:
Certain of the Group’s businesses require long-term reserves backing
necessitating detailed utilisation planning. Appropriate reserves are an
increasingly scarce commodity and licences and/or permits are required
to enable operation. There are numerous uncertainties inherent in
reserves estimation and in projecting future rates of production.
Impact:
Failure by the Group to plan adequately for depletion may result in
sub-optimal or uneconomic utilisation giving rise to unplanned capital
expenditure or acquisition activity, lower financial performance and the
need to obtain new licences and/or permits to operate. Operating entities
may fail to obtain or renew or may experience material delays in securing
the requisite government approvals, licences and permits for the conduct
of business.
Discussion
Continuity of the cash flows derived from the production and sale of the related
heavyside materials and products is dependent on satisfactory reserves planning
and on the presence of appropriate long-term arrangements for replacement. There
can be no assurance that the required licences and permits will be forthcoming at
the appropriate juncture or that relevant operating entities will continue to satisfy the
many terms and conditions under which such licences and permits are granted.
The failure to plan adequately for current and future utilisation or to ensure ongoing
compliance with the requirements of issuing authorities could lead to withdrawal of
the related licence or permit and consequential disruption to operations.
Business portfolio management: acquisition and divestment activity
Risk Factor
Description:
Growth through acquisition and active management of the Group’s
business portfolio are key elements of the Group’s strategy with the
Group’s balanced portfolio growing year on year through bolt-on activity
occasionally supplemented by larger and/or step-change transactions.
In addition, the Group may be liable or remain liable for the past acts,
omissions or liabilities of companies or businesses it has acquired or
divested.
Impact:
The Group may not be able to continue to grow as contemplated in its
business plans if it is unable to identify attractive targets (including potential
new platforms for growth), divest non-core or underperforming entities,
execute full and proper due diligence, raise funds on acceptable terms,
complete such acquisition transactions, integrate the operations of the
acquired businesses, retain key staff and realise anticipated levels of
profitability and cash flows. If the Group is held liable for the past acts,
omissions or liabilities of companies or businesses it has acquired, or
remains liable in cases of divestment, those liabilities may either be
unforeseen or greater than anticipated at the time of the relevant acquisition
or divestment.
Discussion
The Group’s acquisition strategy focuses on value-enhancing mid-sized
acquisitions, largely in existing markets, supplemented from time to time by larger
strategic acquisitions into new markets or new building products. In addition, as
part of its ongoing commitment to active portfolio management, the Group may,
from time to time, divest businesses which are evaluated to be non-core or
underperforming.
The realisation of the Group’s acquisition strategy is dependent on the ability to
identify and acquire suitable assets at appropriate prices thus satisfying the
stringent cash flow and return on investment criteria underpinning such activities.
The Group may not be able to identify such companies, and, even if identified, may
not be able to acquire them because of a variety of factors including the outcome
of due diligence processes, the ability to raise funds (as required) on acceptable
terms, the need for competition authority approval in certain instances and
competition for transactions from peers and other entities exploring acquisition
opportunities in the building materials sector. In addition, situations may arise where
the Group may be liable for the past acts or omissions or liabilities of companies
acquired, or remains liable in cases of divestment; for example, the potential
environmental liabilities addressed under the “Sustainability, Corporate Social
Responsibility and Climate Change” Risk Factor on page 222.
The Group’s ability to realise the expected benefits from acquisition activity
depends, in large part, on its ability to integrate newly-acquired businesses in a
timely and effective manner. Even if the Group is able to acquire suitable
companies, it still may not achieve the growth synergies or other financial and
operating benefits it expected to achieve, and the Group may incur write-downs,
impairment charges or unforeseen liabilities that could negatively affect its operating
results or financial position or could otherwise harm the Group’s business. Further,
integrating an acquired business, product or technology could divert management
time and resources from other matters.
220
CRH Annual Report and Form 20-F I 2017 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 its strategic goals for these
businesses. In addition, improper management or ineffective policies,
procedures or controls for non-controlled entities could adversely affect
the business, results of operations or financial condition of the relevant
investment.
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. In addition, the lack
of controlling interest may give rise to the non-realisation of operating synergies and
lower cash flows than anticipated at the time of investment, thereby increasing the
likelihood of impairment of goodwill or other assets.
These limitations could impair the Group’s ability to manage joint ventures and
associates effectively and/or realise the strategic goals for these businesses. In
addition, improper management or ineffective policies, procedures or controls for
non-controlled entities could adversely affect the business, results of operations or
financial condition of the relevant investment and, by corollary, the Group.
Human resources and talent management
Risk Factor
Description:
Existing processes to recruit, develop and retain talented individuals and
promote their mobility within a decentralised organisation may be
inadequate thus giving rise to employee/management attrition, difficulties
in succession planning and inadequate “bench strength”, potentially
impeding the continued realisation of the core strategic objectives of value
creation and growth. In addition, the Group is exposed to various risks
associated with collective representation of employees in certain
jurisdictions; these risks could include strikes and increased wage
demands.
Impact:
In the longer term, failure to manage talent and plan for leadership and
succession could impede the realisation of core strategic objectives.
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 strategy and in ensuring that succession planning objectives for key
executive roles throughout its international operations are satisfied.
The maintenance of positive employee and trade/labour union relations is key to the
successful operation of the Group. Some of the Group’s employees are represented
by trade/labour unions under various collective agreements. For unionised
employees, the Group may not be able to renegotiate satisfactorily the relevant
collective agreements upon expiration and may face tougher negotiations and
higher wage demands than would be the case 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.
221
CRH Annual Report and Form 20-F I 2017 Key Operational Risk Factors
Sustainability, corporate social responsibility and climate change
Risk Factor
Description:
The Group is subject to stringent and evolving laws, regulations, standards
and best practices from a sustainability perspective. The Group’s use of
the term “sustainability” comprises Health & Safety management (i.e.
embedding a culture of safety and ensuring safe working environments),
conducting business with integrity, protecting the environment, preparing
for and managing the impact of climate change on business activities,
managing stakeholders, attaining strong social performance credentials
and, lastly, using the foregoing to generate innovation and other business
opportunities to create value. Against this backdrop, the nature of the
Group’s activities pose or create certain inherent risks, responsibility for
which is vested with operating entity management, Group and Divisional
management and the Board of Directors.
Impact:
Non-adherence to the many laws, regulations, standards and best
practices in the sustainability arena may give rise to increased ongoing
remediation and/or other compliance costs and may adversely affect the
Group’s business, results of operations, financial condition and/or
prospects. Failure to leverage innovation and other sustainability initiatives
may shorten product life cycles or give rise to early product obsolescence
thus impairing financial performance and/or future value creation. In
addition, the failure to embed sustainability principles across the Group’s
businesses and in the Group’s strategy may lead to adverse investor
sentiment or reduced investor interest in CRH plc’s Ordinary Shares.
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 flows cannot be estimated; there can therefore be no assurance
that material liabilities and costs will not be incurred in the future or that material
limitations on the development of its operations will not arise.
Environmental and Health & Safety and other laws, regulations, standards and best
practices may expose the Group to the risk of substantial costs and liabilities,
including liabilities associated with assets that have been sold or acquired and
activities that have been discontinued. In addition, many of the Group’s manufacturing
sites have a history of industrial use and, while strict environmental operating
standards are applied and extensive environmental due diligence is undertaken in
acquisition activity, some soil and groundwater contamination has occurred in the
past at a limited number of sites. Although the associated remediation costs incurred
to date have not been material, they may become more significant in the future. The
Group may face increased remediation liabilities and legal proceedings concerning
environmental and Health & Safety matters in the future.
The impact of climate change may over time affect the operations of the Group and
the markets in which the Group operates. This could include acute and chronic
changes in weather, technological development, policy and regulatory change, and
market and economic responses. Efforts to address climate change through laws
and regulations, for example by requiring reductions in emissions of greenhouse
gases (GHGs), can create economic risks and uncertainties for the Group’s
businesses. Such risks could include the cost of purchasing allowances or credits to
meet GHG emission caps, the cost of installing equipment to reduce emissions to
comply with GHG limits or required technological standards, decreased profits or
losses arising from decreased demand for the Group’s goods and higher production
costs resulting directly or indirectly from the imposition of legislative or regulatory
controls. To the extent that financial markets view the impact of climate change
emissions as a financial risk, this could have a material adverse effect on the cost of
and access to capital.
222
CRH Annual Report and Form 20-F I 2017 Operational continuity
Risk Factor
Description:
The Group’s operating entities are subject to a wide range of operating risks
and hazards including climatic conditions such as floods and hurricanes/
cyclones, seismic activity, technical failures, interruptions to power supplies,
industrial accidents and disputes, environmental hazards, fire
and crime.
Impact:
The occurrence of a significant adverse event could lead to prolonged
disruption of business activities and, as a result, could have a material
impact on the business, results of operations, financial condition or
prospects of the Group.
Discussion
Responsibility for business continuity management is vested in operating entity
management throughout the Group to ensure that the circumstances likely to give
rise to material operational disruption are addressed in a manner appropriate to the
relevant operating entity.
The insurance coverage provided for operating entities includes property damage and
business interruption, public and products liability/general liability, employers’ liability/
workers’ compensation, environmental impairment liability, automobile liability and
directors’ and officers’ liability. Adequate coverage at reasonable rates is not always
commercially available to cover all potential risks and no assurance can be given that
the insurance arrangements in place would be sufficient to cover all losses or liabilities
to which the Group might be exposed.
As at 31 December 2017, the total insurance provision, which is subject to periodic
actuarial valuation and is discounted, amounted to €292 million (2016: €286 million);
a substantial proportion of this figure pertained to claims which are classified as
“incurred but not reported”.
Information technology and security/cyber
Risk Factor
Description:
The Group is dependent on the employment of advanced information
systems (digital infrastructure, applications and networks) to support its
business activities, and is exposed to risks of failure in the operation of these
systems. Further, the Group is exposed to security threats to its digital
infrastructure through cyber-crime. Such attacks are by their nature
technologically sophisticated and may be difficult to detect and defend in
a timely fashion.
Impact:
Should a security breach or other incident materialise, it could lead to
interference with production processes, manipulation of financial data, the
theft of private data or intellectual property, misappropriation of funds, or
misrepresentation of information via digital media. In addition to potential
irretrievability or corruption of critical data, the Group could suffer
reputational losses, regulatory penalties and incur significant financial
costs in remediation.
Discussion
Security and cyber incidents are becoming increasingly sophisticated and are
continually evolving. Our systems for protecting against cyber security risks may not be
sufficient. As cyber incidents continue to evolve, we may be required to expend
additional resources to continue to modify or enhance our protection measures or to
investigate and remediate any vulnerability to cyber incidents. Such attacks may result
in interference with production software, corruption or theft of sensitive data,
manipulation of financial data accessible through digital infrastructure, or reputational
losses as a result of misrepresentation via social media and other websites. There can
be no assurance that future attacks will not be successful due to their increasing
sophistication and the difficulties in detecting and defending against them in a timely
fashion.
223
CRH Annual Report and Form 20-F I 2017 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,
including the withdrawal of operating licences, 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.
224
CRH Annual Report and Form 20-F I 2017 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 2017, the Group had
outstanding net indebtedness of approximately €5.8 billion (2016: €5.3 billion).
Following recent acquisition activity, the Group has significant outstanding
indebtedness, which may impair its operating and financial flexibility over the longer
term and could adversely affect its business, results of operations and financial
position. This high level of indebtedness could give rise to the Group dedicating a
substantial portion of its cash flow to debt service thereby reducing the funds
available in the longer term for working capital, capital expenditure, acquisitions,
distributions to shareholders and other general corporate purposes and limiting its
ability to borrow additional funds and to respond to competitive pressures. In
addition, the Group’s level of indebtedness may give rise to a general increase in
interest rates borne and there can be no assurance that the Group will not be
adversely impacted by increases in borrowing costs in the future.
The prescribed minimum PBITDA/net interest (all as defined in the relevant
agreements as discussed in note 24 to the Consolidated Financial Statements) cover
ratio, which is the Group’s principal financial covenant, is 4.5 times and the
prescribed minimum net worth, which is the Group’s other financial covenant, is
€6.2 billion. For the year ended 31 December 2017, PBITDA/net interest was 11.6
times on a total Group basis (2016:10.1 times) and the Group’s net worth on a total
Group basis was €16.6 billion (2016: €16.4 billion).
Foreign currency risks: If the euro, which is the Group’s reporting currency, weakens
relative to the basket of foreign currencies in which net debt is denominated
(principally the US Dollar, Canadian Dollar, Swiss Franc, Philippine Peso and Pound
Sterling), the net debt balance would increase; the converse would apply if the euro
was to strengthen. The Group may not succeed in managing these foreign currency
risks.
Counterparty risks: Insolvency of the financial institutions with which the Group
conducts business, or a downgrade in their credit ratings, may lead to losses in
derivative assets and cash and cash equivalents balances or render it more difficult
either to utilise existing debt capacity or otherwise obtain financing for operations.
The maximum exposure arising in the event of default on the part of the counterparty
(including insolvency) is the carrying amount of the relevant financial instrument.
The Group holds significant cash balances on deposit with a variety of highly-rated
financial institutions (typically invested on a short-term basis) which, together with
cash and cash equivalents at 31 December 2017, totalled €2.1 billion (2016: €2.4
billion). In addition to the above, the Group enters into derivative transactions with a
variety of highly-rated financial institutions giving rise to derivative assets and
derivative liabilities; the relevant balances as at 31 December 2017 were €64 million
and €14 million respectively (2016: €76 million and €32 million respectively). The
counterparty risks inherent in these exposures may give rise to losses in the event
that the relevant financial institutions suffer a ratings downgrade or become insolvent.
In addition, certain of the Group’s activities (e.g. highway paving in the US) give rise to
significant amounts receivable from counterparties at the balance sheet date; at
year-end 2017, this balance was €0.8 billion (2016: €0.8 billion). In the business
environment, there is increased exposure to counterparty default, particularly as
regards bad debts.
225
CRH Annual Report and Form 20-F I 2017 Key Financial and Reporting Risk Factors - continued
Financial instruments (interest rate and leverage, foreign currency, counterparty, credit ratings and liquidity) - continued
Risk Factor
Discussion
Credit rating risks: A downgrade of the Group’s credit ratings may give rise to
increases in funding costs in respect of future debt and may, among other concerns,
impair its ability to access debt markets or otherwise raise funds or enter into letters
of credit, for example, on acceptable terms. Such a downgrade may result from
factors specific to the Group, including increased indebtedness stemming from
acquisition activity, or from other factors such as general economic or sector-specific
weakness or sovereign credit rating ceilings.
Liquidity risks: The principal liquidity risks stem from the maturation of debt obligations
and derivative transactions. The Group aims to achieve flexibility in funding sources
through a variety of means including (i) maintaining cash and cash equivalents with a
number of highly-rated counterparties; (ii) limiting the maturity of such balances; (iii)
meeting the bulk of debt requirements through committed bank lines or other term
financing; and (iv) having surplus committed lines of credit. However, market or
economic conditions may make it difficult at times to realise this objective.
For additional information on the above risks see note 22 to the Consolidated
Financial Statements.
Defined benefit pension schemes and related obligations
Risk Factor
Discussion
Description:
The Group operates a number of defined benefit pension schemes and
schemes with related obligations (for example, termination indemnities
and jubilee/long-term service benefits, which are accounted for as defined
benefit) in certain of its operating jurisdictions. The assets and liabilities of
defined benefit pension schemes may exhibit 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.
The assumptions used in the recognition of pension assets, liabilities, income and
expenses (including discount rates, rate of increase in future compensation levels,
mortality rates and healthcare cost trend rates) are updated based on market and
economic conditions at the respective balance sheet date and for any relevant
changes to the terms and conditions of the pension and post-retirement plans. These
assumptions can be affected by (i) for the discount rate, changes in the rates of return
on high-quality fixed income investments; (ii) for future compensation levels, future
labour market conditions and anticipated inflation; (iii) for mortality rates, changes in
the relevant actuarial funding valuations or changes in best practice; and (iv) for
healthcare cost trend rates, the rate of medical cost inflation in the relevant regions.
The weighted average actuarial assumptions used and sensitivity analysis in relation
to the significant assumptions employed in the determination of pension and other
post-retirement liabilities are disclosed on pages 175 to 180. A prolonged period of
financial market instability or other adverse changes in the assumptions mentioned
above would have an adverse impact on the valuations of pension scheme assets.
In addition, a number of the defined benefit pension schemes in operation throughout
the Group have reported material funding deficits thus necessitating remediation
either in accordance with legislative requirements or as agreed with the relevant
regulators. These obligations are reflected in the contracted payments disclosure on
page 214. The extent of such contributions may be exacerbated over time as a result
of a prolonged period of instability in worldwide financial markets or other adverse
changes in the assumptions mentioned above.
226
CRH Annual Report and Form 20-F I 2017 Taxation charge and balance sheet provisioning
Risk Factor
Discussion
Description:
The Group is exposed to uncertainties stemming from governmental actions
in respect of taxes paid and payable in all jurisdictions of operation. In
addition, various assumptions are made in the computation of the overall
tax charge and in balance sheet provisions which may not be borne out in
practice.
Impact:
Changes in the tax regimes and related government policies and regulations
in the countries in which the Group operates could adversely affect its
results and its effective tax rate. The final determination of tax audits or tax
disputes may be different from that which is reflected in the Group’s
historical income tax provisions and accruals. If future audits find that
additional taxes are due, the Group may be subject to incremental tax
liabilities, possibly including interest and penalties, which could have a
material adverse effect on cash flows, financial condition and results of
operations.
The Group’s income tax charge is based on reported profit and expected statutory tax
rates, which reflect various allowances and reliefs and tax planning opportunities
available to the Group in the multiple tax jurisdictions in which it operates. The
determination of the Group’s provision for income tax requires certain judgements and
estimates in relation to matters where the ultimate tax outcome may not be certain. The
recognition of deferred tax assets also requires judgement as it involves an assessment
of the future recoverability of those assets. In addition, the Group is subject to tax audits
which can involve complex issues that could require extended periods to conclude, the
resolution of which is often not within its control. Although management believes that the
estimates included in the Consolidated Financial Statements and the Group’s tax return
positions are reasonable, there can be no assurance that the final outcome of these
matters will not differ from estimates reflected in the Group’s historical income tax
provisions and accruals.
As a multinational corporation, the Group is subject to various taxes in all jurisdictions of
operation. Due to economic and political conditions, tax rates in these jurisdictions may
be subject to significant change. For example, the recent US Tax Cuts and Jobs Act has
made significant changes to the US tax rules. The Group’s future effective income tax
rate could be affected (positively or negatively) by changes in the mix of earnings in
countries with differing statutory tax rates, changes in the valuation of deferred tax assets
or changes in tax laws or their interpretation.
In addition, recent developments, including the European Commission’s investigations
on illegal state aid as well as the Organisation for 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.
Foreign currency translation
Risk Factor
Discussion
Description:
The principal foreign exchange risks to which the Consolidated Financial
Statements are exposed pertain to adverse movements in reported results
when translated into euro (which is the Group’s reporting currency) together
with declines in the euro value of net investments which are denominated in
a wide basket of currencies other than the euro.
Impact:
Adverse changes in the exchange rates used to translate foreign currencies
into euro have impacted and will continue to impact retained earnings. The
annual impact is reported in the Consolidated Statement
of Comprehensive Income.
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.
Given the geographic diversity of the Group, a significant proportion of its revenues,
expenses, assets and liabilities are denominated in currencies other than the euro,
principally US Dollar, Canadian Dollar, Swiss Franc, Polish Zloty, Philippine Peso and
Pound Sterling. From year to year, adverse changes in the exchange rates used to
translate these and other foreign currencies into euro have impacted and will continue
to impact consolidated results and net worth. For additional information on the impact
of foreign exchange movements on the Consolidated Financial Statements for the
Group for the year ended 31 December 2017, see the Business Performance section
commencing on page 22 and note 22 to the Consolidated Financial Statements.
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 15 to the
Consolidated Financial Statements on pages 153 to 156.
While a goodwill impairment charge does not impact cash flow, a full write-down at 31
December 2017 would have resulted in a charge to income and a reduction in equity of
€6.9 billion (2016: €7.4 billion).
227
CRH Annual Report and Form 20-F I 2017 Corporate Governance Practices - NYSE
Compliance Statement
Non-US companies such as CRH are exempt
from most of the corporate governance rules of
the NYSE. In common with companies listed on
the ISE and the LSE, CRH’s corporate governance
practices reflect, inter alia, compliance with
(a) domestic company law; (b) the Listing Rules of
the UK Listing Authority and the ISE; and (c) the
2016 UK Corporate Governance Code, which is
appended to the listing rules of the LSE and ISE.
The Board of CRH has adopted a robust set of
governance principles, which reflect the Code and
its principles-based approach to corporate
governance. Accordingly, the way in which CRH
makes determinations of Directors’ independence
differs from the NYSE rules. The Board has
determined that, in its judgement, all of 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 2017, based on criteria established
in Internal Control - Integrated Framework (2013),
issued by the Committee of Sponsoring
Organisations of the Treadway Commission.
228
*
In accordance with Section 167(7) of the Companies Act 2014.
CRH Annual Report and Form 20-F I 2017 As permitted by the SEC, the Company has
elected to exclude an assessment of the internal
controls of acquisitions made during the year
2017. These acquisitions, which are listed in note
31 to the Consolidated Financial Statements,
constituted 6.4% of total assets and 10.6% of net
assets, as of 31 December 2017 and 1.9% and
(0.1%) of revenue (from continuing and
discontinued operations) and Group profit for the
financial year, respectively, for the year then
ended.
Management’s assessment included an evaluation
of the design of the Company’s internal control
over financial reporting and testing of the
operational effectiveness of those controls. Based
on this assessment, management has concluded
and hereby reports that as of 31 December 2017,
the Company’s internal control over financial
reporting is effective.
Our auditors, EY, a registered public accounting
firm, who have audited the Consolidated Financial
Statements for the year ended 31 December
2017, have audited the effectiveness of the
Company’s internal controls over financial
reporting. Their report, on which an unqualified
opinion is expressed thereon, is included on
page 119.
Changes in Internal Control
over Financial Reporting
During 2017, there has been no change in our
internal control over financial reporting identified in
connection with the evaluation required by 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.
Acquisitions excluded from the 2016 assessment
of internal control over financial reporting were all
successfully integrated into the CRH internal
control systems in 2017.
Evaluation of Disclosure
Controls and Procedures
Management has evaluated the effectiveness of
the design and operation of the disclosure
controls and procedures as defined in Exchange
Act Rules 13a-15(e) as of 31 December 2017.
Based on that evaluation, the Chief Executive and
the Finance Director have concluded that these
disclosure controls and procedures were effective
as of such date at the level of providing
reasonable assurance.
In designing and evaluating our disclosure controls
and procedures, management, including the Chief
Executive and the Finance Director, recognised
that any controls and procedures, no matter how
well designed and operated, can provide only
reasonable assurance of achieving the desired
control objectives, and management necessarily
was required to apply its judgement in evaluating
the cost-benefit relationship of possible controls
and procedures. Because of the inherent
limitations in all control systems, no evaluation of
controls can provide absolute assurance that all
control issues and instances of fraud, if any, within
the Company have been detected.
Code of Business Conduct
The CoBC, together with its supporting policies,
sets out the guiding business principles and core
values of the CRH Group. The Code complies
with the applicable code of ethics regulations of
the SEC arising from the Sarbanes-Oxley Act and
it also reinforces the fundamental CRH principle
that “there is never a good business reason to do
the wrong thing”. The CoBC is applicable to all
employees of the CRH Group including the Chief
Executive and senior financial officers. The Code
promotes honest and ethical conduct; full, fair,
accurate, timely and understandable disclosures;
and sets out the requirements for compliance with
applicable governmental laws, rules and
regulations.
229
CRH Annual Report and Form 20-F I 2017 The Environment and Government Regulations
The most important government regulations
relevant to CRH as a building materials company
are environmental laws and regulations relevant to
extractive and production processes. In the
European Union, operations are subject to
national environmental laws and regulations, most
of which now emanate from European Union
Directives and Regulations. In the US, operations
are subject to federal, state and local
environmental laws and regulations. In other
jurisdictions, national environmental and local laws
apply.
Environmental Compliance
Policy
In order to comply with environmental regulations,
CRH has developed the following Group
environmental policy, approved by the Board
and applied across all Group companies,
which is to:
•
•
•
comply, as a minimum, with all applicable
environmental legislation and continuously
improve our environmental stewardship,
aiming all the time to meet or exceed industry
best practice;
ensure that our employees and contractors
respect their environmental responsibilities;
address proactively the challenges and
opportunities of climate change;
•
optimise our use of energy and all resources;
• promote environmentally driven product
innovation and new business opportunities
and;
•
develop positive relationships and strive to be
good neighbours in every community in which
we operate
Achieving the Group’s environmental policy
objectives at all locations is a management
imperative; this line responsibility continues
right up to Board level. Daily responsibility for
ensuring that the Group’s environmental policy
is effectively implemented lies with individual
location managers, assisted by a network of
Environmental Liaison Officers (ELOs).
At 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 has evaluated the risks and opportunities
arising from climate change and has put in place a
management strategy. In striving to reduce its
emissions, CRH delivers carbon, energy and
financial efficiencies for its businesses and helps
to address climate change on a societal level.
There is a focus on reducing the carbon footprint
of products during manufacture and on increasing
their contribution to reducing emissions during
their lifetime. There are value creation
opportunities for the Group, including
opportunities for sales of products aimed at
climate adaptation, such as sustainable drainage
systems, flood defences, and more resilient
structures. CRH is a core member of the Cement
Sustainability Initiative (CSI) of the World Business
Council for Sustainable Development (WBCSD).
The CSI is a voluntary initiative by the world’s
major cement producers, promoting greater
sustainability in the cement industry.
Having achieved its initial CO2 reduction
commitment three years ahead of target in 2012,
CRH has pledged a 25% reduction in specific net
CO2 cement plant emissions by 2020, compared
with 1990 levels. The Group is progressing
successfully towards achieving this commitment,
which is supported by a strategic investment
programme and covers a defined portfolio of
Group cement plants.
Through its membership of the CSI of the WBCSD
and regional industry associations including the
European Cement Association (CEMBUREAU)
and the European Lime Association (EuLA) in
Europe and the National Asphalt Pavement
Association (NAPA) and the Portland Cement
Association (PCA) in the US, CRH is actively
involved in global and regional discussions on the
climate change agenda. Relevant facilities in
Europe operate within the European Union
Emission Trading Scheme for Greenhouse Gas
emissions through actively implementing carbon
reduction strategies. Relevant facilities in Canada
comply with relevant “cap and trade” schemes.
CRH has endorsed the WBCSD Low Carbon
Technology Partnership Initiative (LCTPi), a
statement of ambition, which seeks a reduction in
global cement CO2 emissions in the range of
20-25% by 2030.
CRH acknowledges the “Paris Climate
Agreement” to limit global temperature rise to 2oC
(with efforts towards 1.5oC), made at the 21st
Conference of the Parties (COP) to the United
Nations Framework Convention on Climate
Change (UNFCCC) in 2015. CRH has
implemented capital expenditure programmes in
its cement operations to reduce carbon emissions
in the context of international and national
commitments to reduce greenhouse gas
emissions. The European Union has binding
targets to reduce greenhouse gases, on 1990
levels, by 20% by 2020 and by 40% by 2030. In
addition, the European Commission has
suggested an objective to reduce emissions by
80% by 2050 compared to 1990. Achieving such
reductions would represent a significant extra
constraint on cement operations in Europe. US
federal, state and local laws continue to develop
to address carbon emissions. The Group may
incur costs in monitoring and reporting emissions.
Ultimately a “cap and trade” scheme may be
implemented in the US; depending on the scope
of the legislation, this could significantly impact
certain operations in the US. As of 16 February
2018, the Group is not aware of any schemes that
would materially affect its US operations, however,
we are continuously monitoring developments
in regulations.
Possible Environmental
Liabilities
At 16 February 2018, there were no material
pending legal proceedings relating to site
remediation which are anticipated to have a
material adverse effect on the financial position or
results of operations or liquidity of the Group, nor
have internal reviews revealed any situations of
likely material environmental liability to the Group.
Governmental Policies
The overall level of government capital
expenditures and the allocation by state entities of
available funds to different projects, as well as
interest rate and tax policies, directly affect the
overall levels of construction activity. The terms
and general availability of government permits
required to conduct Group business also has an
impact on the scope of Group operations. As a
result such governmental decisions and policies
can have a significant impact on the operating
results of the Group.
230
CRH Annual Report and Form 20-F I 2017 Employees
The average number of employees for the past
three financial years is disclosed in note 6 to the
Consolidated Financial Statements on page 143.
No significant industrial disputes have occurred at
any of CRH’s factories or plants during the past
five years. The Group believes that relations with
its employees and labour unions are satisfactory.
Seasonality
Activity in the construction industry is
characterised by cyclicality and is dependent to
a considerable extent on the seasonal impact of
weather in the Group’s operating locations, with
activity in some markets reduced significantly in
winter due to inclement weather. First-half sales
accounted for 47% of full-year 2017 (2016: 47%),
while EBITDA (as defined)* for the first six months
of 2017 represented 36% of the full-year out-turn
(2016: 36%).
Significant Changes
In August 2017, the Group entered into a sales
agreement with Beacon Roofing Supply Inc. to
dispose of its 100% holding in Allied Building
Products, the trading name of our Americas
Distribution segment, for a consideration of
US$2.6 billion. The transaction closed on 2
January 2018. See further details in note 2 to
the Consolidated Financial Statements.
In 2017, we reached an agreement with the Board
of Ash Grove Cement to acquire a significant
portfolio of cement and other materials assets.
This deal is due to close in 2018.
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.
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.
The Company is incorporated and domiciled
in the Republic of Ireland. CRH is a public
limited company operating under the Companies
Act of Ireland 2014. The Group’s worldwide
headquarters is located in Dublin, Ireland.
Our principal executive offices are located
at Belgard Castle, Clondalkin, Dublin 22
(telephone: +353 1 404 1000). The Company’s
registered office is located at 42 Fitzwilliam
Square, Dublin 2, Ireland and our US agent
is Oldcastle, Inc., 900 Ashwood Parkway,
Suite 600, Atlanta, Georgia 30338.
The Company is the holding company of the
Group, with direct and indirect share and loan
interests in subsidiaries, joint ventures and
associates. From Group headquarters, a small
team of executives exercises strategic control over
our decentralised operations.
CRH plc is a leading global diversified building
materials group employing 85,000 people at
over 3,600 operating locations in 32 countries
worldwide.
CRH is the second largest building materials
company worldwide and the largest in North
America. The Group has leadership positions in
Europe, where it is the largest heavyside materials
business, as well as established strategic
positions in the emerging economic regions of
Asia and South America.
In the detailed description of the Group’s business
on pages 22 to 53, estimates of the Group’s
various aggregates and stone reserves have been
provided by engineers employed by the individual
operating companies. Details of 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 246 to 251.
Statements Regarding
Competitive Position and
Construction Activity
Statements made in the Business Performance
section and elsewhere in this document referring
to the Group’s competitive position are based on
the Group’s belief, and in some cases rely on a
range of sources, including investment analysts’
reports, independent market studies and the
Group’s internal assessment of market share
based on publicly available information about the
financial results and performance of market
participants.
Unless otherwise specified, references to
construction activity or other market activity relate
to the relevant market as a whole and are based
on publicly available information from a range of
sources, including independent market studies,
construction industry data and economic
forecasts for individual jurisdictions.
Legal Proceedings
Group companies are parties to various legal
proceedings, including some in which claims
for damages have been asserted against the
companies. Having taken appropriate advice,
we believe that the aggregate outcome of such
proceedings will not have a material effect on the
Group’s financial condition, results of operations
or liquidity.
In 2015, the Swiss Competition Commission
imposed fines on the Association of Swiss
Wholesalers of the Sanitary Industry and on
major Swiss wholesalers including certain
Swiss CRH subsidiaries; the fine attributable
to these subsidiaries was CHF34 million. While
the Group remains of the view that the fine
is unjustified and it has appealed to the Swiss
Federal Appeals Court, a provision of €29 million
(2016: €32 million) is recorded in the Group’s
Consolidated Balance Sheet.
Research and Development
Research and development is not a significant
focus of the Group. CRH’s policy is to expense all
research and development costs as they occur.
*
EBITDA is defined as earnings before interest, taxes, depreciation, amortisation, asset impairment charges, profit on disposals and the Group’s share of equity accounted investments’ profit after tax.
231
CRH Annual Report and Form 20-F I 2017 n
o
i
t
a
m
o
r
f
n
I
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r
e
d
o
h
e
r
a
h
S
232
CRH Annual Report and Form 20-F I 2017
Shareholder Information
Stock Exchange Listings
Ownership of Ordinary Shares
Dividends
Share Plans
American Depositary Shares
Taxation
Memorandum and Articles
of Association
General Information
234
235
236
237
238
239
241
243
Schrauwen, part of the Sanitary, Heating, and Plumbing (SHAP) platform in CRH’s Europe Distribution Division, opened a new distribution
centre in Herentals, Belgium in 2017. The warehousing facility provides spaces for over 10,000 pallets, allowing Schrauwen to improve
product availability and scale-up customer fulfilment in Northern Belgium.
233233
CRH Annual Report and Form 20-F I 2017 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 2013
through 16 February 2018. The table also sets
forth, for the same periods, the high and low
closing sale prices for the ADSs on the NYSE.
Pound Sterling per Ordinary Share euro per Ordinary Share US Dollars per ADS
Low
High
High
High
Low
Low
Calendar Year
2013
2014
2015
2016
2017
2016
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2017
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Recent Months
September 2017
October 2017
November 2017
December 2017
January 2018
February 2018 (through 16 February 2018)
Additional share price data
Share price at 31 December
Market capitalisation
£16.17
£17.88
£19.80
£28.30
£29.20
£19.86
£21.85
£26.07
£28.30
£28.98
£29.20
£28.37
£28.61
£28.37
£28.61
£28.04
£26.63
£27.70
£25.75
£12.15
£12.66
£14.71
£16.37
£25.30
£16.37
£19.40
£20.96
£25.51
£26.67
£26.14
£26.25
£25.30
£26.40
£27.23
£25.66
£25.30
£26.12
£23.80
€19.30
€21.82
€28.09
€32.96
€34.53
€26.37
€27.47
€30.90
€32.96
€34.03
€34.53
€32.28
€32.47
€32.28
€32.47
€31.75
€30.06
€31.55
€29.44
€14.68
€15.86
€18.73
€21.00
€28.48
€21.00
€23.32
€24.52
€28.65
€31.44
€30.98
€28.48
€28.54
€29.09
€30.49
€28.95
€28.54
€29.73
€26.76
$26.26
$29.72
$30.95
$35.18
$37.86
$28.47
$31.49
$34.04
$35.18
$36.59
$37.76
$37.86
$37.58
$37.86
$37.58
$36.79
$36.09
$38.96
$36.88
$19.56
$20.47
$22.51
$23.72
$33.41
$23.72
$26.54
$27.64
$31.60
$33.41
$33.42
$34.02
$33.87
$34.78
$35.81
$34.63
$33.87
$36.09
$33.19
LSE
£26.57
£22.3bn
2017
ISE
€29.96
€25.1bn
NYSE
$36.09
$30.3bn
LSE
£28.30
£23.6bn
2016
ISE
€32.96
€27.4bn
NYSE
$34.38
$28.6bn
For further information on CRH shares see note 30 to the Consolidated Financial Statements.
234
CRH Annual Report and Form 20-F I 2017
Ownership of Ordinary Shares
Shareholdings as at 31 December 2017
Geographic location (i)
United Kingdom
North America
Europe/Other
Retail
Ireland
Treasury (ii)
Number of shares
held ‘000s
% of total
269,047
212,702
171,900
156,267
28,988
54
838,958
32.07
25.35
20.49
18.63
3.45
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 30 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
14,583
60.15
7,689
31.71
1,408
427
5.81
1.76
Number
of shares
held ‘000s
4,618
22,801
43,626
% of
total
0.55
2.72
5.20
140,608
16.76
139
0.57
627,305
74.77
24,246
100
838,958
100
The Company is not owned or controlled directly
or indirectly by any government or by any
corporation or by any other natural or legal person
severally or jointly. The major shareholders do not
have any special voting rights.
As at 28 February 2018, the Company had
received notification of certain interests in its
Ordinary Share capital that were equal to, or in
excess of, 3%. These interests are presented in
Corporate Governance – Substantial Holdings
on page 70.
Purchases of Equity Securities by the Issuer and Affiliated Persons
Month
March
July
November
November
2017
Number
purchased
90,971
179
1,673
3,960
Price
Month
March
August
€33.21
€33.33
€31.40
€31.51
2016
Number
purchased
81,457
86,464
Price
€24.38 (i)
€29.80 (i)
(i) Shares were purchased in Stg£ at a price of £18.88 and £25.46 respectively per share.
Other than the above, there were no purchases of equity securities by the issuer and/or affiliated
persons during the course of 2017.
CREST
Transfer of the Company’s shares takes place
through the CREST system. Shareholders have
the choice of holding their shares in electronic
form or in the form of share certificates.
Where shares are held in CREST, dividends are
automatically paid in euro unless a currency
election is made. CREST members should use
the facility in CREST to make currency elections.
Such elections must be made in respect of entire
holdings as partial elections are not permissible.
235
CRH Annual Report and Form 20-F I 2017 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 19.2c was paid in respect of Ordinary
Shares on 3 November 2017. The final dividend, if
approved at the forthcoming AGM of shareholders
to be held on 26 April 2018, will be paid on 4 May
2018 to shareholders on the Register of Members
as at the close of business on 9 March 2018 and
will bring the full-year dividend for 2017 to 68.0c.
The proposed final dividend has been translated
using the FRB Noon Buying Rate on 16 February
2018.
Dividend Withholding Tax (DWT) must be
deducted from dividends paid by an Irish resident
company, unless a shareholder is entitled to an
exemption and has submitted a properly
completed exemption form to the Company’s
Registrars, Link Asset Services (the ‘Registrars’).
DWT applies to dividends paid by way of cash or
by way of shares under a scrip dividend scheme
and is deducted at the standard rate of Income
Tax (currently 20%). Non-resident shareholders
and certain Irish companies, trusts, pension
schemes, investment undertakings and charities
may be entitled to claim exemption from DWT.
Copies of the exemption form may be obtained
from the Registrars. Shareholders should note that
DWT will be deducted from dividends in cases
where a properly completed form has not been
received by the record date for a dividend.
Individuals who are resident in the Republic of
Ireland for tax purposes are not entitled to an
exemption.
Shareholders who wish to have their dividend
paid direct to their bank account, by electronic
funds transfer, can do so by logging on to
www.signalshares.com (formerly www.
capitashareportal.com), selecting CRH and
registering for the share portal (the ‘Share Portal’).
Shareholders should note that they will need to
have their Investor Code (found on their share
certificate), and follow the instructions online to
register.
Alternatively shareholders can complete a paper
dividend mandate form and submit it to the
Registrars. A copy of the form can be obtained by
logging onto the Registrar’s share portal and
following the instructions as set out under
Registrars on page 243. Tax vouchers will
continue to be sent to the shareholder’s registered
address under this arrangement.
Dividends are generally paid in euro. However, in
order to avoid costs to shareholders, dividends
are paid in Pound Sterling and US Dollars to
shareholders whose shares are not held in the
CREST system (see page 235) and whose
address, according to the Share Register, is in the
UK and the US respectively, unless they require
otherwise.
Dividends in respect of 7% ‘A’ Cumulative
Preference Shares are paid half-yearly on
5 April and 5 October.
Dividends in respect of 5% Cumulative Preference
Shares are paid half-yearly on 15 April and 15
October.
Shareholders have the option of taking their
dividend in the form of shares under the
Company’s Scrip Dividend Scheme.
euro cent per Ordinary Share
Translated* into US cents per ADS
Interim
18.50
18.50
18.50
18.80
19.20
Final
44.00
44.00
44.00
46.20
48.80(i)
Total
62.50
62.50
62.50
65.00
68.00
Interim
25.52
23.45
19.88
20.91
22.30
Final
60.54
49.46
50.25
50.80
60.72(i)
Total
86.06
72.91
70.13
71.71
83.02
Years ended 31 December
2013
2014
2015
2016
2017
(i) Proposed
At the FRB Noon Buying Rate on the date of payment
*
236
CRH Annual Report and Form 20-F I 2017 Share Participation Schemes
At the AGM on 13 May 1987, shareholders
approved the establishment of Share Participation
Schemes for the Company, its subsidiaries and
companies under its control. Directors and
employees of the companies who have at least
one year’s service may elect to participate in these
Share Participation Schemes.
At 28 February 2018, 7,862,416 Ordinary Shares
have been issued* pursuant to the Share
Participation Schemes.
2014 Performance Share Plan
The 2014 Performance Share Plan was approved
by shareholders at the AGM on 7 May 2014. It
replaces the 2010 Share Option Schemes and the
2006 Performance Share Plan. See the 2017
Directors’ Remuneration Report on page 84 for
more details.
Restricted Share 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.
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.
Options granted under the 2000 Share Option
Schemes vested when EPS growth exceeded the
growth on the Irish Consumer Price Index by 5%
compounded over a period of at least three years
subsequent to the granting of options.
Eligible employees who wish to participate in
the scheme enter into a savings contract with a
nominated savings institution, for a three or a
five-year period, to save a maximum of €500 or
Stg£500, as appropriate, per month.
At the commencement of each contract period
employees are granted an option to acquire
Ordinary Shares in the Company at an option
price which is equal to the amount proposed to
be saved plus the bonus payable by the
nominated savings institution at the end of the
savings period. The price payable for each
Ordinary Share under an option will be not less
than the higher of par or 75% (or in the case of
the UK scheme 80%) of the market value of a
share on the day the invitation to apply for the
option is issued.
On completion of the savings contract, employees
may use the amount saved, together with the
bonus earned, to exercise the option.
At 28 February 2018, 679,312 Ordinary Shares
have been issued* pursuant to the 2010
Savings-related Share Option Schemes to date.
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.
Whether by way of the allotment of new shares or the reissue of Treasury Shares.
*
237
CRH Annual Report and Form 20-F I 2017 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)
•
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
(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)
registered holders
Applicable Registration or Transfer fees
Applicable Expenses of the Depositary
• 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 2017
New York Stock Exchange listing fees
Investor relations expenses
Total
US$65,000
US$41,460
US$106,460
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 2017:
Category of expense waived or paid
directly to third parties
Amount reimbursed for the year ended
31 December 2017
Printing, distribution and administration costs paid
directly to third parties in connection with United
States shareholder communications and Annual
General Meeting related expenses in connection
with the American Depositary Share programme
Total
238
US$2,989
US$2,989
The Depositary has agreed to reimburse certain
Company expenses related to the Company’s
ADS programme and incurred by the Company
in connection with the ADS programme. For the
year ended 31 December 2017 the Depositary
reimbursed to the Company, or paid amounts
on its behalf to third parties, a total sum of
US$109,449. 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
2017.
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 US$250,000, the
amounts waived, reimbursed and/or expenses
paid by the Depositary to or on behalf of the
Company.
CRH Annual Report and Form 20-F I 2017 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 below, US holders will include in
gross income the gross amount of any dividend
paid by the Company out of its current or
accumulated earnings and profits (as determined
for US federal income tax purposes) as ordinary
income when the dividend is actually or
constructively received by the US holder, in the
case of Ordinary Shares, or by the Depositary, in
the case of ADSs. Any Irish tax withheld from this
dividend payment must be included in this gross
amount even though the amount withheld is not in
fact received. Dividends paid 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.
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 generally be income
from sources outside the US, and will, depending
on your circumstances, generally be “passive”
income for purposes of computing the foreign tax
credit allowable to a US holder.
239
CRH Annual Report and Form 20-F I 2017 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
Subject to certain limitations, the Irish tax
withheld in accordance with the Income Tax
Treaty and paid over to the Republic of Ireland
will be creditable or deductible against your US
federal income tax liability. Special rules apply
in determining the foreign tax credit limitation
with respect to dividends that are subject to the
preferential tax rates. Any Irish tax withheld from
distributions will not be eligible for a foreign tax
credit to the extent an exemption from the tax
withheld is available to the US holder.
Capital Gains Tax
A US holder will not be liable for Irish tax on
gains realised on the sale or other disposition
of 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
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.
240
CRH Annual Report and Form 20-F I 2017 Memorandum and
Articles of Association
The Company’s Memorandum of Association sets out
the objects and powers of the Company. The Articles
of Association detail the rights attaching to each share
class; the method by which the Company’s shares can
be purchased or reissued; the provisions which apply
to the holding of and voting at general meetings; and
the rules relating to the Directors, including their
appointment, retirement, re-election, duties and
powers.
A copy of the current Memorandum and Articles of
Association can be obtained from the Group’s website,
www.crh.com.
The following summarises certain provisions of CRH’s
Memorandum and Articles of Association and
applicable Irish law.
Objects and Purposes
CRH is incorporated under the name CRH public
limited company and is registered in Ireland with
registered number 12965. Clause 4 of CRH’s
Memorandum of Association provides that its objects
include the business of an investment holding
company. Clause 4 also sets out other objects
including the business of quarry masters and
proprietors and lessees and workers of quarries, sand
and gravel pits, mines and the like generally; the
business of road-makers and contractors, building
contractors, builders merchants and providers and
dealers in road making and building materials, timber
merchants; and the carrying on of any other business
calculated to benefit CRH. The memorandum grants
CRH a range of corporate capabilities to effect these
objects.
Directors
The Directors manage the business and affairs
of CRH.
Directors who are in any way, whether directly or
indirectly, interested in contracts or other
arrangements with CRH must declare the nature of
their interest at a meeting of the Directors, and, subject
to certain exemptions, may not vote in respect of any
contract or arrangement or other proposal whatsoever
in which they have any material interest other than by
virtue of their interest in shares or debentures in the
Company. However, in the absence of some other
material interest not indicated below, a Director is
entitled to vote and to be counted in a quorum for the
purpose of any vote relating to a resolution concerning
the following matters:
•
•
the giving of security or indemnity with respect to
money lent or obligations taken by the Director at
the request or for the benefit of
the Company;
the giving of security or indemnity to a third
party with respect to a debt or obligation of
the Company which the Director has assumed
responsibility for under a guarantee, indemnity or
the giving of security;
A Production Analyst at work at the CRH Canada Mississauga Cement Plant. In operation
since 1956 and located approximately 30km west of Toronto, the plant has seen ongoing
investment in improvement initiatives, including employee safety. The plant was acquired
by CRH in 2015.
241
241
CRH Annual Report and Form 20-F I 2017 Memorandum and Articles of Association - continued
•
•
•
any proposal in 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
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.
242
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.
Variation in Class Rights
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.
Meetings
Shareholder meetings may be convened by
majority vote of the Directors or requisitioned by
shareholders holding not less than 5% of the
voting rights of the Company. A quorum for a
general meeting of the Company is constituted by
five or more shareholders present in person and
entitled to vote. The passing of resolutions at a
meeting of the Company, other than special
resolutions, requires a simple majority. A special
resolution, in respect of which not less than 21
clear days’ notice in writing must be given,
requires the affirmative vote of at least 75% of
the votes cast.
Disclosure of Shareholders’
Interests
A shareholder may lose the right to vote by not
complying with any statutory notice or notice
pursuant to Article 14 of the Articles of Association
given by the Company requiring an indication in
writing of: (a) the capacity in which the shares are
held or any interest therein; (b) the persons who
have an interest in the shares and the nature of
their interest; or (c) whether any of the voting
rights carried by such shares are the subject of
any agreement or arrangement under which
another person is entitled to control the
shareholder’s exercise of these rights.
Preference Shares
Details of the 5% and 7% ‘A’ Cumulative
Preference Shares are disclosed in note 30 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.
2018 Changes
At the AGM to be held on 26 April 2018, the
approval of shareholders will be sought for a
proposed change to the Memorandum and
Articles of Association, as follows:
Resolution 13 is a special resolution, which, if
approved, will provide the Directors with important
flexibility regarding the mechanism for setting the
price for scrip dividend offers. Under the existing
provisions of Article 137(b)(ii) the scrip price
must be set by reference to the average price
of an Ordinary Share on each of the first three
business days on which the Ordinary Shares are
quoted “ex” the relevant dividend. There can be
circumstances where setting the price using this
methodology may not be appropriate or in the
best interests of shareholders. In such situations
the only option currently open to the Board is to
not make or cancel a scrip offer. The amendment
will also provide the Board with flexibility in relation
to the way in which the scrip dividend alternative
plan is operated.
CRH Annual Report and Form 20-F I 2017 Electronic Proxy Voting
Shareholders may lodge a proxy form for the 2018
AGM electronically by accessing the Registrars’
website as described below.
American Depositary Receipts
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:
Link Asset Services
(formerly Capita Asset Services),
P.O. Box 7117,
Dublin 2, Ireland.
Telephone: +353 (0) 1 553 0050
Fax: +353 (0) 1 224 0700
Website: www.linkassetservices.com
Shareholders with access to the internet
may check their accounts by logging onto
www.signalshares.com (formerly 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.
General Information
Electronic Communications
Following the introduction of the 2007
Transparency Regulations, and in order to adopt a
more environmentally friendly and cost effective
approach, the Company provides the Annual
Report and 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 2017
Ex-dividend date
Record date for dividend
Latest date for receipt of scrip forms
Annual General Meeting
1 March 2018
8 March 2018
9 March 2018
18 April 2018
26 April 2018
4 May 2018
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 505000, Louisville,
KY 40233-5000, 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 4 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 web site maintained by
the SEC at www.sec.gov.
243
CRH Annual Report and Form 20-F I 2017 n
o
i
t
a
m
o
r
f
n
I
r
e
h
O
t
244
CRH Annual Report and Form 20-F I 2017Other Information
Other Information
Principal Subsidiary Undertakings
Principal Equity Accounted Investments
Exhibits
246
251
252
Cross Reference to Form 20-F Requirements
253
Index
Signatures
254
256
Surfacing work undertaken by Idaho Materials & Construction (IMC), part of CRH Americas Materials Division on a section of
Interstate-84 (I-84) between Nampa and Caldwell, Idaho. Recent harsh winters caused the original surface to deteriorate and IMC
completed a fast-track project that included milling out the existing surface, inlaying a base course and overlaying approximately
15km of highway.
245
245
CRH Annual Report and Form 20-F I 2017 Principal Subsidiary Undertakings
as at 31 December 2017
Europe Heavyside
Incorporated
and operating in
Belgium
Douterloigne N.V.
Ergon N.V.
Oeterbeton N.V.
Prefaco N.V.
Remacle S.A.
Schelfhout 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
Tarmac Trading Limited
Czech Republic
Vapenka Vitosov s.r.o
Denmark
Finland
France &
La Réunion
Betongruppen RBR A/S
CRH Concrete A/S
Finnsementti Oy
Rudus Oy
Eqiom
L’industrielle du Béton S.A.*
Stradal
Teralta Ciment Reunion*
Teralta Granulat Beton Reunion*
Fels Holding Company GmbH
Fels Netz GmbH
Germany
Fels Vertriebs und Service GmbH & Co. KG.
Fels-Werke GmbH
Opterra GmbH
CRH Magyarország Kft.
Ferrobeton Beton-és Vasbetonelem gyártó Zrt.
Clogrennane Lime Limited
Irish Cement Limited
Roadstone Limited
Hungary
Ireland
Netherlands
Calduran Kalkzandsteen B.V.
Cementbouw B.V.
CRH Structural Concrete B.V.
Dycore B.V.
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
99.99
100
100
82.90
93.33
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Concrete floor elements, pavers and blocks
Precast concrete and structural elements
Precast concrete
Precast concrete structural elements
Precast concrete products
Precast concrete wall elements
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
Production of lime and lime products
Concrete paving manufacturer
Structural concrete products
Cement
Aggregates, readymixed concrete and concrete products
Aggregates, asphalt, cement and readymixed concrete
Structural concrete products
Utility and infrastructural concrete products
Cement
Aggregates, readymixed concrete
Holding company
Logistics and owned railway infrastructure operator
Lime and limestone, development of new products
Production and sale of lime and limestone
Cement
Cement and readymixed concrete
Precast concrete structural elements
Burnt and hydrated lime
Cement
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
246
CRH Annual Report and Form 20-F I 2017 Europe Heavyside
Incorporated
and operating in
Bosta Beton Sp. z o.o.
Drogomex Sp. z o.o.*
Grupa Ożarów S.A.
Grupa Silikaty Sp. z o.o.
Masfalt Sp. z o.o.*
Trzuskawica S.A.
CRH Agregate Betoane S.A.
CRH Ciment (Romania) S.A.
Elpreco S.A.
Ferrobeton Romania SRL
LLC Fels Izvest
CRH (Srbija) d.o.o.
CRH (Slovensko) a.s.
Beton Catalan S.A.
Cementos Lemona S.A.
Poland
Romania
Russia
Serbia
Slovakia
Spain
Switzerland
JURA-Holding AG
Ukraine
LLC Cement*
PJSC Mykolaivcement
Podilsky Cement PJSC
Europe Lightside
Australia
Ancon Building Products Pty Ltd
Plakabeton N.V.
Belgium
Marlux N.V.
Stradus Infra N.V.
Ancon Limited
Britain &
Northern Ireland
Anchor Bay Construction Products Limited*
CRH Fencing & Security Group (UK) Limited
France
Germany
Security Windows Shutters Limited
Plaka Group France S.A.S.
Marlux
Alulux GmbH*
EHL AG
ERHARDT Markisenbau GmbH*
Halfen GmbH
Heras Deutschland GmbH
Tenbrink Rolladensysteme GmbH
% held
Products and services
90.30
99.94
100
99.19
100
100
98.59
98.62
100
100
100
100
99.70
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
Readymixed concrete
Asphalt and contract surfacing
Cement
Sand-lime bricks
Asphalt and contract surfacing
Production of lime and lime products
Readymixed concrete
Cement
Architectural concrete products
Structural concrete products
Production of lime and lime products
Cement and readymixed concrete
Cement
Readymixed concrete
Cement
Cement, aggregates and readymixed concrete
Cement and clinker grinding
Cement
Cement
Construction accessories
Construction accessories
Concrete paving and landscaping products
Concrete paving and landscaping products
Construction accessories
Construction accessories
Security fencing
Physical security, industrial and garage doors, roofing systems
Construction accessories
Concrete paving manufacturer
Roller shutter and awning systems
Concrete paving and landscape walling products
Roller shutter and awning systems
Construction accessories
Security fencing and access control
Roller shutter and awning systems
247
CRH Annual Report and Form 20-F I 2017 Principal Subsidiary Undertakings - continued
as at 31 December 2017
Europe Lightside - continued
Incorporated
and operating in
Ireland
Cubis Industries Limited
B.V. Aluminium Verkoop Zuid
Netherlands
Heras B.V.
Poland
Slovakia
Sweden
Struyk Verwo Groep B.V.
Polbruk S.A.
Premac, spol. s.r.o.
Heras Stängsel AB
Switzerland
F.J. Aschwanden AG*
United States
Halfen USA Inc.
Europe Distribution
Austria
Quester Baustoffhandel GmbH
Creyns N.V.
BMB Bouwmaterialen BVBA
Belgium
Lambrechts N.V.
Sax Sanitair N.V.
Schrauwen Sanitair en Verwarming N.V.
Van Den Broeck 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.
Switzerland
BR Bauhandel AG (trading as BauBedarf and Richner)
Regusci Reco S.A. (trading as Regusci and Reco)
% held
Products and services
100
100
100
100
100
100
100
100
100
100
99.36
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Supplier of access chambers and ducting products
Roller shutter and awning systems
Security fencing and perimeter protection
Concrete paving products
Concrete paving products
Concrete paving and floor elements
Security fencing
Construction accessories
Construction accessories
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
248
CRH Annual Report and Form 20-F I 2017 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.
Michigan Paving and Materials Company
Mountain Enterprises, Inc.
Mulzer Crushed Stone
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
Suwannee American Cement
Tilcon Connecticut Inc.
Tilcon New York Inc.
The Shelly Company
Trap Rock Industries, LLC*
West Virginia Paving, Inc.
CRH Brasil Participações S.A.
CRH Sudeste Indústria de Cimentos S.A
Brazil
% 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
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 and related construction activities
Aggregates, asphalt and related construction activities
Aggregates, asphalt, readymixed concrete, aggregates
distribution 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
Cement
Aggregates, asphalt, readymixed concrete
and related construction activities
Aggregates, asphalt 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
Cement
249
CRH Annual Report and Form 20-F I 2017 Principal Subsidiary Undertakings - continued
as at 31 December 2017
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)
Advanced Environmental Recycling Technologies, Inc.
Americas Products & Distribution, Inc.
CRH America, Inc.
CRH America Finance, 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 (i)
Allied Building Products Corp.
Oldcastle Distribution, Inc.
% held
Products and services
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Custom fabricated and tempered
glass products and curtain wall
Specialty masonry, hardscape and patio
products, utility boxes and trench systems
Composite building products
Holding company
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
(i)
In August 2017, the Group entered into a sales agreement with Beacon Roofing Supply, Inc. to dispose of its 100% holding in Allied Building Products
Corp. The transaction closed on 2 January 2018.
Asia
Philippines (ii)
Republic Cement & Building Materials, Inc.
Republic Cement Land & Resources Inc.
40
40
Cement
Cement and Building Materials
(ii) 55% economic interest in the combined Philippines business (see note 32 to the Consolidated Financial Statements).
250
CRH Annual Report and Form 20-F I 2017 Principal Equity Accounted Investments
as at 31 December 2017
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
% held
50
21.13
50
47.83
50
26
50
Products and services
Commercial explosives
Builders merchants and DIY stores
DIY stores
DIY franchisor
DIY stores
Cement
Cement
Americas Materials
Canada
Blackbird Infrastructure 407 General Partnership*
American Asphalt of West Virginia, LLC*
American Cement Company, LLC*
United States
Buckeye Ready Mix, LLC*
Cadillac Asphalt, LLC*
HMA Concrete, LLC*
Piedmont Asphalt, LLC*
Southside Materials, LLC*
50 Special-purpose entity on highway infrastructure construction
50
50
45
50
50
50
50
Asphalt and related construction activities
Cement
Readymixed concrete
Asphalt
Readymixed concrete
Asphalt
Aggregates
Audited by firms other than Ernst & Young
*
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.
251
CRH Annual Report and Form 20-F I 2017 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
2.2
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.**
Multicurrency Revolving Facility Agreement originally dated 11 June 2014 (as amended and restated by an Amendment and Restatement Agreement
dated 7 April 2017).†
Computation of Ratios of Earnings to Fixed Charges.
Listing of principal subsidiary undertakings and equity accounted investments (included on pages 246 to 251 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.***
16.
Disclosure of Mine Safety and Health Administration (“MSHA”) Safety Data.
101.
eXtensible Business Reporting Language (XBRL).
*
**
***
****
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.
Incorporated by reference to Annual Report on Form 20-F for the year ended 31 December 2016 that was filed by the Company on 10 March 2017.
Furnished but not filed.
† Certain terms omitted pursuant to a request for confidential treatment.
252
CRH Annual Report and Form 20-F I 2017
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
n/a
208
n/a
n/a
218
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, 27, 29, 231
B - Business Overview
C - Organisational Structure
D - Property, Plants and Equipment
Item 4A.
Unresolved Staff Comments
Item 5.
Operating and Financial Review and Prospects
24, 30
231
215
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, 22, 210
B - Liquidity and Capital Resources 26, 27, 29, 214
C - Research and Development, Patents and
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
228
64
70, 229
Item 16C. Principal Accountant Fees and Services 64, 71, 243
90, 235
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
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
Item 8.
Financial Information
A - Consolidated Statements and Other
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
231
9, 25
214
214
97
59
72
62
231
70, 235
190
n/a
120-199
231
236
231
234
n/a
234
n/a
n/a
n/a
Page
n/a
241
None
243
239
n/a
n/a
243
246
214
n/a
n/a
n/a
238
n/a
235
None
228
215
n/a
120-199
252
253
CRH Annual Report and Form 20-F I 2017
Index
A
Accounting Policies
Acquisitions Committee
American Depositary Shares
Americas Distribution
Americas Materials
Americas Products
125
68
238
54
44
48
Cash Flow Statement, Consolidated
124
Chairman’s Introduction
Chief Executive’s Review
Communications with Shareholders
Company Secretary
Compliance and Ethics
Annual General Meeting
100
Contractual Obligations
Asia
Audit Committee
Auditors (Directors’ Report)
52
64
99
Corporate Governance Report
Cost Analysis (note 3)
Corporate Governance Practices - NYSE 228
Auditor’s Remuneration (note 4)
64, 141, 204
CREST
Auditor’s Report, Independent (Irish) 110
Auditor’s Report, Independent (US) 118
Balanced Portfolio
4
- cost analysis (note 3)
140
190
- property, plant and equipment
129, 152
B
Balance Sheet
- Company
- Consolidated
Board Approval of Financial
Statements (note 34)
Board Committees
Board Effectiveness
Board of Directors
Board Responsibilities
Business and Non-Current Asset
Disposals (note 5)
D
Debt, Analysis of Net (note 21)
Deferred Income Tax
- expense (note 11)
200
122
- assets and liabilities (note 27)
Depreciation
68
67
59
68
142
(note 14)
- segment analysis (note 1)
Derivative Financial Instruments
(note 25)
Directors’ Emoluments and Interests
(note 7)
Directors’ Interests in Share Capital
Directors’ Remuneration Report
Business Combinations (note 31)
131, 185
Business Model
Business Overview
Business Performance
C
Capital and Financial Risk
Management (note 22)
Cash and Cash Equivalents
(note 23)
12
24
22
165
Directors’ Report
Directors’ Responsibilities,
Statement of
Directors’ Share Options
Discontinued Operations (note 2)
Dividend Payments
(Shareholder Information)
Dividend per Share
132, 168
Dividends (note 12)
Cash Flow, Operating
15
254
E
Earnings per Ordinary Share (note 13) 151
Employees, Average Number (note 6) 143
Employment Costs (note 6)
End-use Exposure
Equity Accounted Investments’
Profit, Share of (note 10)
Europe Distribution
Europe Heavyside
Europe Lightside
Exchange Rates
Exhibits
F
Finance Committee
Finance Costs and Finance Income
(note 9)
Finance Director’s Review
143
4
148
40
32
36
134
252
68
147
25
Financial Assets (note 16)
129, 157
Financial Calendar
Financial Statements, Consolidated
243
120
Foreign Currency Translations
107, 227
Frequently Asked Questions
243
G
Gender Diversity
Global Business
Going Concern
Governance
Greenhouse Gas Emissions
Guarantees (note 24; note 11 to
Company Balance Sheet)
H
Health & Safety
14, 68
2
98
56
14
169, 205
18
5
8
70
70
70
214
62
140
235
162
128, 148
128, 174
135
132, 170
143, 205
90
72
96
100
88
139
96, 236
1
133, 150
CRH Annual Report and Form 20-F I 2017
I
Income Statement, Consolidated
Income Tax Expense (note 11)
Intangible Assets (note 15)
Inventories (note 17)
Investor Relations Activities
K
Key Components of 2017
Performance
KPIs, Financial
KPIs, Non-Financial
120
148
131, 153
132, 158
71
26
15
14
L
Leases, Commitments Under 126, 132, 181
Operating and Finance (note 29)
Listing Rule 9.8.4C
Loans and Borrowings, Interest-
Bearing (note 24)
96
132, 168
M
Measuring Performance
Memorandum and Articles of
Association
N
Nomination and Corporate
Governance Committee
Non-controlling Interests (note 32)
Non-GAAP Performance Measures
Notes on Consolidated Financial
Statements
14
71, 241
67
189
210
135
Notes to the Company Balance Sheet 202
O
Operating Costs (note 3)
Operating Leases (note 29)
Operating Profit Disclosures (note 4)
140
132, 181
141
P
Pensions, Retirement Benefit
Obligations (note 28)
Principal Equity Accounted
Investments
Principal Risks and Uncertainties
Principal Subsidiary Undertakings
Profit on Disposals (note 5)
Property, Plant and Equipment
(note 14)
127, 175
Share Capital and Reserves
(note 30)
133, 182
251
Share Options
102
246
142
129, 152
- Directors
- Employees (note 8)
Share Price Data
Shareholder Communication
88
144
234
70
Shareholdings as at 31 December 2017 70, 235
Property, Plants and Equipment
215
Provisions for Liabilities (note 26)
128, 172
Proxy Voting, Electronic
R
Registrars
Regulatory Information
Related Party Transactions (note 33)
Remuneration Committee
Reserves
243
243
97
190
76
216
Retirement Benefit Obligations
(note 28)
127, 175
Return on Net Assets (RONA)
15, 211, 213
Statement of Changes in Equity,
Consolidated
Statement of Changes in Equity,
Company
Statement of Comprehensive
Income, Consolidated
Statement of Directors’
Responsibilities
123
201
121
100
Stock Exchange Listings
70, 234
Strategy
Substantial Holdings
Supplemental Guarantor Information
(note 35)
Sustainability
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
20
98, 228
218
T
Total Shareholder Return (TSR)
Trade and Other Payables (note 19)
Trade and Other Receivables (note 18)
V
Volumes, Annualised
- Americas Materials
- Americas Products
- Europe Heavyside
- Asia
W
Website
54
44
48
52
40
32
36
Segment Information (note 1)
130, 135
Selected Financial Data
Senior Independent Director
Working Capital and Provisions for
Liabilities, Movement in (note 20)
208
60
Share-based Payments (note 8)
131, 144
10
70
191
16
12, 15
160
158
45
49
33
52
71, 243
161
255
CRH Annual Report and Form 20-F I 2017
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: 9 March 2018
256
CRH Annual Report and Form 20-F I 2017
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CRH Annual Report and Form 20-F I 2017
CRH plc
Belgard Castle
Clondalkin
Dublin 22
D22 AV61
Ireland
Telephone: +353 1 404 1000
E-mail: mail@crh.com
Website: www.crh.com
Registered Office
42 Fitzwilliam Square
Dublin 2
D02 R279
Ireland
Telephone: +353 1 634 4340
Fax: +353 1 676 5013
E-mail: crh42@crh.com
CRH® is a registered trade mark
of CRH plc.
Cover image: Fels’ Elbingerode Quarry in
Saxony-Anhalt, Germany. CRH acquired Fels, a
leading German lime and aggregates business, with
nine production locations in Germany and one each
in the Czech Republic and in the Moscow region of
Russia, for €0.6 billion in 2017.