Thursday 18 October 2018

Glen Ding ghost haunts CRH

AGREAT company. A global company. A generous company. And a whitewashed company.

This week a whitewashed Cement Roadstone meets its shareholders.

Not the best of timing for its annual lap of honour.

Last Thursday the great, global, generous CRH faced an awkward little reality: the ominous figure of the beak: Mr Justice Michael Moriarty.

The beak is worried about CRH. He is puzzled by a few deals it did in 1990 and back in the Seventies.

Questions are even being asked about how such a great company made so much money.

Did hidden hands make life a little easier for CRH than for others? Did it have help from on high, maybe even buy land at deflated prices - prices that demand a little explanation?

The whitewash is wearing off.

The airbrush is being introduced.

Last week I read the CRH annual report, the sanitised story of Ireland's most successful company.

I was interested in a few buried bones which CRH seems to want left interred.

Like, the Moriarty tribunal.

So I looked up the letter 'M' in the annual report's index. CRH would surely want to tell its army of overseas shareholders that it has been dragged into an inquiry about the finances of former taoiseach Charles Haughey? US investors in particular would not be as familiar with the tale as the Irish public.

Besides, CRH has just gained a full listing on the New York Stock Exchange, where it is making claims to good corporate citizenship. As a good corporate citizen it obviously favours transparency. So no doubt, at Wednesday's AGM in Jurys Hotel, Dublin, CRH will want all investors to know that it is centre stage at a tribunal of inquiry.

Not a sausage surfaces about Moriarty under the letter 'M'.

In CRH-speak 'M' is for Management. Not a hint of 'M' for Moriarty. Nor even a whisper of 'M' for Monopoly.

Not welcome words in the CRH lexicon. Airbrush them.

Instead, I tried 'G' for Glen Ding, the Wicklow wood where CRH bought a 147-acre site for ?1.25m from the State in 1990. The deal has aroused Moriarty's interest. Questions have arisen about why the sale never went to public tender. Was CRH given preferential treatment? Haughey was Taoiseach at the time, while his old pal and financial adviser, Des Traynor, held the chair at CRH.

The riddle of Glen Ding is the sale price. Sceptics suggest that the company bought the property for a song. They want to know why.

Nothing appears under 'G' for Glen Ding either.

In CRH-speak 'G' is for Growth, Group and Guarantees.

Still in Wicklow, but now down the road in Blessington, I wondered what CRH was telling overseas shareholders about its role in a national pollution scandal at the lovely lakeside.

Pollution at its Blessington lands has been super-controversial. For 10 years dumping took place. No one at CRH saw anything. A hundred thousand tonnes were dumped and embedded. Environmentalists were up in arms. CRH was summoned before parliamentary committees. Our newspapers were full of the story.

Does it merit a mention? No, shareholders are not troubled with such awkward information.

'B' for Blessington does not feature in the index. 'B' is for Balance Sheet.

But let us not wrong the company. Buried in the eulogy painting CRH as some sort of environmental whited sepulchre is a small paragraph: "In early 2006 we received permission from the Irish EPA to remediate the unauthorised waste dumped by third parties at our Blessington location near Dublin."

Three cheers for the heroes. CRH is fighting waste. The pollution was nothing to do with them, but as good corporate citizens they were mopping up other people's mess.

No mention of the background. No mention of the scale. No mention of the cost. No mention that the EPA had refused CRH's application to build a landfill on the site. No mention that they had been forced to remove the waste. No mention of the threat to the water in the Blessington Lakes. No mention of their sleepy staff's uncanny inability to spot over 100,000 tonnes being dumped on their lands over 10 years. It must be all that gravel dust in their eyes.

Neither Glen Ding nor the pollution at Blessington is a trivial matter. Both raise a serious question for shareholders: has CRH in the past enjoyed decades of political favours which gave it a stranglehold over the industry?

More important for shareholders is to ask if CRH's traditional political clout is now under attack? Will CRH's quasi-monopoly in Ireland soon end? It still controls over 60 per cent of Ireland's cement business.

Worse still, will the Competition Authority finally show an interest in CRH's record of hidden ownership and non-competitive practices? Lurking in the background is a potentially explosive court case from Seamus Maye's Framus Group.

There are signs that US investors have already rumbled these little problems.

CRH shares are inexplicably cheap by US standards. Despite a good run this year (up about 18 per cent) the company's US marketing campaign has failed to lift the shares. The US market refuses to rate them on a par with similar American companies, even though more shares are now held in the US (27 per cent) than in Ireland (21 per cent), Great Britain (17 per cent) or Europe (22 per cent). At best, US investors refuse to recognise it as a global play and stubbornly pop it into the European pigeon-hole.

Of course, they may have spotted that its ethos remains overwhelmingly Irish. And perhaps they are puzzled.

CRH likes to posture as an American outfit. It takes five times as much operating profit from the US as from Ireland. But the board is still stuffed with Ireland's golden circle. Despite its global reach, six out of seven non-executives are Irish residents. The other is Dutch. Where are the US directors? They are not yet part of the family.

The family includes the Bank of Ireland. BoI Asset Managers (8 per cent) is the company's biggest shareholder. It has three directors with umbilical attachments to BoI. Chairman Pat Molloy is a former BoI chief executive; senior independent director David Kennedy is a former BoI deputy-governor and CRH director Terry Neill is second-favourite to take over as the bank's governor from Richard Burrows.

And Kennedy is hugging his CRH board place like a man possessed. He has been a director since 1989. The board has decided (despite corporate governance rules) that his independence is not compromised by his 18-year stint. The board is backing his re-election on Wednesday. CRH directors are fiercely loyal to each other.

But CRH is loyal to arch-rival AIB too. Former CRH chief executive Jim Culliton ended up in the chair at AIB; when Don Godson retired from his post at the helm in AIB he held a place on the CRH board.

These lads cover all corners of official Ireland. They know their way around; they know their banks; and they keep the board Irish.

That way, they control the flow of information. And they pray that no overseas investor ever hears of 'M' for Moriarty , 'B' for Blessington or 'M' for Monopoly. Provided they only read the annual report or the website, they can swallow all the lovely whitewash.

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