CRH analysis: Manifold intent on leaving mark

For a man who told analysts on Thursday he's "just a guy passing through" as CRH chief executive, Albert Manifold is intent on heaving his mark.

The building materials giant, which was spending over €2 billion a year on deals just before the global financial crisis, kept a relatively low profile on that front during Myles Lee’s period at the helm between 2009 and 2014 as the company focused on protecting its balance sheet. Meanwhile, rivals found themselves caught at the wrong time with too much debt.

Lafarge and Holcim deal

But Manifold, 53, who joined CRH in 1998 and took over the reins in 2014, has shown he has the appetite for a deal that may have scared some of his predecessors, the company’s hitherto most acquisitive chief executive. Last year, the group gobbled up €6.5 billion of assets being disposed of by French and Swiss rival Lafarge and Holcim as they sought regulatory clearance for their own mega-merger.

The transaction, even though it was partly funded by a €1.6 billion share sale, pushed CRH’s debt right up to €6.6 billion by the end of 2015 - compared to €2.5 billion a year earlier.

However, CRH’s strong ability to turn earnings before tax, depreciation and amortisation (ebitda) into cash should see debt fall to €6 billion or below by the year end, pulling its net debt down to two times’ ebitda. This is delivering on a key pledge made by the company early last year to shareholders when it sought money from them for the LafargeHolcim deal.

Economic downturn

Of more interest to investors that stuck with the company through the economic downturn is that CRH said on Thursday it has increased its interim dividend by 1.6 per cent to 18.8 cents, marking the first increase in seven years. Before the financial crisis, the group was considered one of the safest bets on the Irish market for payout increases, with a 26-year track record of annual dividend hikes.

CRH’s transformational deal last year is set, according to Manifold’s own forecast, to help the group post at least 36 per cent ebitda growth for this year, to in excess of €3 billion. Analysts, on average, are already pencilling in a record figure of €3.1 billion.

While Manifold told analysts at a presentation in London on Thursday that the group has passed up on some large purchases this year, he suggested that it could comfortably spend between €1.5 billion and €2 billion next year without damaging its debt ratios.