UPDATE 1-Streamlined building supplies group CRH sees 2014 growth

Tue Feb 25, 2014 8:26am EST

* Says has made positive start to this year

* Will sell 45 businesses, reviews further operations

* Takes 755 mln euro impairment charge ahead of disposals

* Shares up 4.4 pct after CEO promises better returns

By Padraic Halpin

DUBLIN, Feb 25 (Reuters) - Irish building supplies group CRH expects the restructured business to boost margins and return to profit growth this year after posting full-year earnings ahead of guidance on Tuesday.

Shares in CRH climbed by more than 4 percent after new Chief Executive Albert Maniford spelt out his vision for a leaner group and said that 2013 should represent a trough in the company's profits.

After announcing a review of its portfolio in November, CRH said on Tuesday that it would sell 45 businesses representing 10 percent of net assets and would continue to keep tabs on other operations accounting for 20 percent of assets.

"We did an awful lot more right than wrong but at least we started to understand where we went wrong," Manifold said in a presentation to investors in London. "We put our hand up and said, yes, we made a mistake. We will never again go down the road of buying market trends."

CRH has generated 2 billion euros from disposals since 2007, having spent about 24 billion euros on bolt-on acquisitions over the past 12 years. That spree averaged almost a deal a week, Manifold said.

He added that 70 percent of the business pinpointed for sale on Tuesday were acquired between 2000 and 2006 when there was very strong constuction growth, built on easy credit.

"We have always managed our businesses well, now we're going to manage our portfolio very well," Manifold said. "We are going to see a narrower portfolio but deeper investment. Our objective is to bring returns and margins back to peak in the coming cycle."

Manifold, a 15-year CRH veteran who took charge last month after the retirement of Myles Lee, said his gut feeling was that most of the businesses still under review would be kept and that the group does not need to engage in a fire sale.

The Dublin-based company took a non-cash impairment charge of 755 million euros ($1 billion) ahead of the sale of the mostly European operations identified for disposal. Those businesses accounted for 3 percent of earnings before interest, tax, depreciation and amortisation (EBITDA) last year.

It said it does not expect further impairment charges if it decides to exit any of the other businesses under review.

The company's London-listed shares were up 4.4 percent by 1246 GMT.

"It's a pretty radical shake-up. The focus is back to the old-sytle CRH, of getting back to peak margins of 12 to 13 percent - and that makes pleasant music to investors' ears," one trader said.

Full-year EBITDA fell 6 percent to 1.48 billion euros but was ahead of guidance offered in November.

Encouraged by improved trading so far this year, Manifold said that he expects a return to profit growth in 2014.

An unusually long period of bad weather resulted in a sharp fall in 2013 first-half earnings, but revenue rose by 2 percent in the second half thanks to a strengthening construction market in the United States and signs of increased economic stability in Europe.

CRH's more positive outlook matches that of France's Saint-Gobain, Europe's biggest supplier of building materials, which last week said that cost savings, innovation and a recovery in the United States would help operating profit to rebound this year.