Tarmac owner CRH shares rise after it releasings solid post-merger results

Oliver Gill
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CRH took on the Tarmac brand as part of the purchase of Lafarge (Source: Getty)

Shares in Tarmac owner CRH were up more than 2.5 per cent this morning after the company released half-year results that included returns that were bolstered from its expanded operations.

The 100 per cent increase in earnings looked dramatic but included returns from Lafarge and Holcim, businesses that were acquired last year. This led to comparatively subdued commentary from the chief exec Albert Manifold.

The figures

Earnings before interest, taxation, interest and depreciation (ebitda) for the first six months of this year leapt to €1.1bn (£940m), up from €555m. Profit before tax hit €407m, up from €63m a year earlier.

This meant earnings per share were 33.8 cents, compared with 5.7 cents in 2015. However, the interim dividend was only slightly increased – from 18.5 cents to 18.8 cents per share.

Group net debt increased from €1.2bn to €7.1bn.

Operational cash flow moved back into positive territory from an outflow of €19m in 2015 to inflow of €331m.

Read more: CRH feeling the strain ahead of meeting to vote on acquisition

Why it's interesting

All of these numbers are skewed by the fact they include operations from Lafarge and Holcim, which the Dublin-based company bought for a combined fee of €6.5bn last August.

The large increase in the group's debt pile also relates to this transaction and investors will be pleased to note that CRH paid back nearly €1bn of debt capital during the period.

Although such a large increase in debt could be a cause for concern, it should be noted that the company said it is operating well within its banking covenants – earnings cover over interest was 9.1x and net worth was €15.1m. These need to be at a minimum of 4.5x and €6.3bn respectively.

Read more: Doubts of Holcim merger hit Irish firm’s share price

Whereas previously America products was the largest earnings generator, this has now been overtaken by the Europe heavyside division. The former Larfarge and Holcim businesses make a significant contribution here and revenues increased from €1.8bn to €3.6bn.

(Source: CRH half-year presentation)

Read more: Irish aggregates firm nets Holcim Lafarge assets

CRH's primary listing is on the FTSE but it has a secondary listing on the Irish Stock Exchange. After falling out of the DJ Euro Stoxx 50 two years ago – replaced by Nokia – analysts have estimated it is about 40th on the list in terms of European market capitalisation and could be in line for a return to the index next week.

Such a return would mean that Ireland would once again have representation on the premier European listing.

CRH plc CRH plc | mobile image

What CRH said

Chief executive Albert Manifold said:

We have had a very satisfactory first half, with good performance from our heritage businesses and contributions from 2015 acquisitions delivering significant profit growth for CRH.

As always, we have maintained a strong focus on cash management, and with de-leveraging ahead of plan, I am pleased to report that we expect year-end debt metrics to be at, or below, normalised levels.

With continued positive momentum in the Americas and the modest impact of early-stage economic recovery in Europe, and assuming normal weather conditions for the remainder of the season, we expect further progress in the second half with full year reported ebitda in excess of €3bn.