CRH Annual Report 2007 PERFORMANCE AND GROWTH

Directors’ ReportThe Directors submit their Reportand Financial Statements for theyear ended 31st December 2007.Accounts and DividendsSales revenue at €20,992 millionwas 12% higher than in 2006. Profitbefore tax amounted to €1,904million, an increase of €302 million(19%) on the previous year. Afterproviding for tax, Group profit for thefinancial year amounted to €1,438million (2006: €1,224 million). Basicearnings per share amounted to262.7c compared with 224.3c in theprevious year, an increase of 17%.An interim dividend of 20.0c(2006: 13.5c) per share was paidin November 2007. It is proposedto pay a final dividend of 48.0cper share on 12th May 2008 toshareholders registered at closeof business on 18th March 2008.The total dividend of 68c compareswith a dividend of 52c for 2006, anincrease of 31%. Shareholders willhave the option of receiving newshares in lieu of cash dividends.Other net expense recogniseddirectly within equity in theyear amounted to €317 million(2006: €233 million).Some key financial performanceindicators are set out in the FinanceReview on pages 35 to 39. Thefinancial statements for the yearended 31st December 2007 are setout in detail on pages 58 to 115.Books and RecordsThe Directors are responsible forensuring that proper books andaccounting records, as outlined inSection 202 of the Companies Act,1990, are kept by the Company.The Directors have appointedappropriate accounting personnel,including a professionally qualifiedFinance Director, in order to ensurethat those requirements are met.The books and accountingrecords of the Company aremaintained at the principalexecutive offices located at BelgardCastle, Clondalkin, Dublin 22.Business ReviewFull year acquisition spend for 2007was a record €2.2 billion, comparedwith €2.1 billion (net) in 2006, and€1.3 billion and €1 billion for 2005and 2004 respectively. The natureand extent of these investmentswill make an important contributionto delivering further growth for theGroup in the years ahead. First halfexpenditure of €1 billion comprisedthe acquisition of Swiss buildersmerchant Gétaz Romang completedin May; the purchase of a 50% stakein Denizli Cement in Turkey and thebuyout of the remaining 50% ofPaver Systems in the United Statesannounced in April; the acquisitionof Harbin Sanling Cement in Chinaannounced in February plus 31other initiatives announced in theJuly Development Strategy Update.Second half spending of €1.2 billionincluded the August buyout of theremaining 55% of Cementbouwbv in the Netherlands; completionof four separate transactions bythe Americas Materials Divisionas announced in September; thepurchase of certain Cemex assetsin Florida and Arizona announcedin late November plus a strong flowof traditional CRH developmentopportunities outlined in theDevelopment Strategy Updatereleased in January 2008.CRH’s Materials Divisions in bothEurope and the Americas achievedsignificant profit advances in2007, with strong organic growthand significant contributions fromacquisitions. While the Products& Distribution Division in Europealso reported good organic andacquisition profit growth, the resultsof the Products & DistributionDivision in the Americas wereaffected by the sharp decline in newresidential construction in the UnitedStates. Comprehensive reviews ofthe development and financial andoperating performance of the Groupduring 2007 are set out in the ChiefExecutive’s Review on pages 15 to18, the separate Operations Reviewsfor each of the Divisions on pages19 to 34 and the Finance Reviewon pages 35 to 39 (including KeyFinancial Performance Indicators onpage 37). The treasury policy andobjectives of the Group are set out innote 23 to the financial statements.The Group is fully committedto operating ethically andresponsibly in all aspects of itsbusiness relating to employees,customers, neighbours and otherstakeholders. The Corporate SocialResponsibility (CSR) report availableon the Group’s website at www.crh.com sets out CRH’s policiesand performance relating to theEnvironment, Health & Safety andSocial & Community matters.Outlook 2008CRH’s geographic, sectoral andproduct balance continued todeliver in 2007 both in termsof overall trading performanceand development activity. Whiledevelopments over recentmonths have added to economicuncertainties, CRH is well positionedacross its operations to deal withthe evolving market circumstances.Following record levels of acquisitionactivity in 2006 and 2007, andwith an ongoing strong pipeline ofopportunities, we are continuing todevelop our Western European andNorth American businesses whilebuilding on our growing platforms inemerging markets. With a relentlessemphasis on operational efficiency,and targeted cost reductionmeasures, we remain focusedon our twin goals - performanceand growth - and on delivering asixteenth consecutive year of profitand earnings growth in 2008.Principal Risks and UncertaintiesUnder Irish Company law (Regulation37 of the European Communities(Companies: Group Accounts)Regulations 1992, as amended),the Group is required to give adescription of the principal risks anduncertainties which it faces. Theseprincipal risks are set out below.• CRH operates in cyclicalindustries which are affected byfactors beyond Group controlsuch as the level of constructionactivity, fuel and raw materialprices, which are in turn affectedby the performance of nationaleconomies, the implementationof economic policies bysovereign governments andpolitical developments.• The onset of a cycle of reducedeconomic growth in thecountries in which CRH hassignificant operations or theimplementation of unfavourablegovernmental policies couldadversely affect Group revenuesand operating margins.• CRH pursues a strategy of growththrough acquisitions. CRH maynot be able to continue to growas contemplated in its businessplan if it is unable to identifyattractive targets, completethe acquisition transactionsand integrate the operationsof the acquired businesses.• CRH faces strong competition inits various markets, and if CRHfails to compete successfully,market share will decline.• Existing products may bereplaced by substitute productswhich CRH does not produceand, as a result, CRH maylose market share in themarkets for these products.• Severe weather can reduceconstruction activity and lead toa decrease in demand for Groupproducts in areas affected byadverse weather conditions.• CRH is subject to stringent andevolving environmental and healthand safety laws, regulations andstandards which could resultin costs related to complianceand remediation efforts that mayadversely affect Group results ofoperations and financial condition.• CRH may be adversely affectedby governmental regulations.• Many of CRH’s subsidiariesoperate in currencies otherthan the euro, and adversechanges in foreign exchangerates relative to the euro couldadversely affect Group reportedearnings and cash flow.The Group has long experienceof coping with these risks whiledelivering superior performance andstrong Total Shareholder Return.Board of DirectorsMr. P.J. Molloy retired from theBoard on 9th May 2007. Mr.D.W. Doyle retired from theBoard on 30th June 2007.Mr. N. Hartery, Mr. T.W. Hill, Mr.K. McGowan and Ms. J.M.C.O’Connor retire from the Board46 CRH