Swedish activist investor Cevian Capital increased its stake in CRH last week to take advantage of a stock slump amid the Covid-19 crisis, while also giving its backing for the building materials group's efforts to "unlock value".
Cevian first revealed in February last year that it had built up a stake in CRH of below the 3 per cent level that must be disclosed to the stock market under transparency rules. Its managing partner, Christer Gardell, said at the time that he was "convinced that CRH's assets could become significantly more valuable".
Mr Gardell followed up last June by telling news agency Reuters that CRH had “become too complex, both structurally and operationally, which hampers performance and traps value”. He added that “continued far-reaching structural and operational improvements are needed for the group’s assets to reach full potential”.
Stock exchange filing
Cevian told CRH on Monday that it had increased its holding to 3.14 per cent, triggering a stock exchange filing.
"As a long-term investor we are pleased to be able to increase our ownership and commitment to CRH at a share price that is well below our view of the value of the group's assets," Gustav Lundgren, a partner with Cevian Capital, said in a response to a query from The Irish Times. "We remain convinced of CRH's potential and support the company's efforts to unlock value and enhance long-term competitiveness."
Shares in CRH have lost about half their value since global markets began to tank in the final week of February as investors fretted increasingly about the economic consequences of the spread of Covid-19.
CRH’s full-year results statement on February 28th shows how the group has worked hard at simplifying itself over the past 12 months, raising €2.1 billion from asset sales, including its European distribution unit and 50 per cent stake in an Indian cement business that was acquired just before the financial crash in 2008.
It spent €700 million on bolt-on acquisitions during the period, a tame amount by CRH standards.
Ruthless show
Group chief executive Albert Manifold had already been running a ruthless show, selling off underperforming or unwanted assets over the previous five years, raising €5 billion. The proceeds have been used to part-finance €13 billion of acquisitions of more attractive businesses – at cheaper valuations, relative to earnings – over the same period.
The group has also spent €1.8 billion repurchasing its own stock in less than two years and is currently weighing further buybacks.
Although CRH expanded its earnings before interest, tax, depreciation and amortisation (ebitda) margin by 2.3 percentage points to 14.8 per cent last year, fuelled by deals, the underlying margin expanded by only half a point. That leaves some work to be done to meet its target of delivering a three-percentage-point boost to underlying margins by 2021.
