CRH starts second €350m phase of share buyback programme

CRH, the largest company on Ireland's Iseq index, has started the second phase of its share buyback programme, authorising its broker UBS to repurchase up to €350 million of its stock by the middle of November.

The company announced on April 25th that it would repurchase up to €1 billion of its stock over a 12-month period to take advantage of the fact that the shares are trading at a discount to what the board believes to be their real value.

Analysts at Cantor Fitzgerald highlighted in a note to clients on Wednesday that the stock is trading at about a 25 per cent discount to the €36.50, 12-monht price that they have set for it.

CRH, led by chief executive Albert Manifold, had already bought back €350 million of shares by the time it reported first-half results last week, which saw its earnings before interest, tax, depreciation and amortisation (ebitda) rise by 1 per cent to €1.13 billion.

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"In our view, the group's financial muscle sets it apart in the sector at present," said Davy analyst Robert Gardiner. "Not only is CRH buying back shares, it is also fully funding capex (capital expenditure), paying a generous dividend and will be a net acquirer of businesses in 2018."

The analyst sees the group, which has the biggest building materials business in the US and is benefitting from a recovering European economy, spending €1.2 billion on capex this year, €600 million on dividends and will have net cash out of mergers and acquisitions (M&A) out of €1 billion on 2018.

“The longer-term cash picture is even more positive, with CRH aiming to have €7 billion of excess financial capacity by 2021. These funds will be aimed at value-driven M&A or further cash returns to shareholders,” he said.

Mr Manifold said last week that he expects “another year of progress for the group” for the full year, as momentum in Europe and north America continues, despite continuing currency headwinds and challenging conditions in the Philippines.