Tuesday 24 April 2018

Loss of key CRH executives puts the spotlight on Lee's stewardship

Thomas Molloy

CRH consistently wins awards for excellent investor relations which makes last week's profit warning so alarming. We just don't know what is going on at the ISEQ's largest Irish-based company and in the absence of information it is wise to stay away.

The concrete maker now has a lot of questions to answer. The biggest is also very simple: how could CRH say just a week ago that it would beat 2009 earnings and then announce last week that this is unlikely to be the case?

Unfortunately, the company, which is currently on a roadshow to calm large investors' fears, has so far failed to explain publicly what happened between July and August to change its outlook so radically other than the well-flagged slowdown in the US economy.

Shareholders

While the company's many small shareholders here in Ireland have received no apology or explanation, the poor performance of the share price since last week's 17pc tumble suggests that the company is not doing a good job of explaining what went wrong to institutional shareholders.

Moody's downgrade on Monday is yet another sign that the company is not explaining itself.

Without a credible story it is hard to see how the company can quickly bounce back, especially as CRH has such an unfortunate history both here in Ireland where eight of its directors were once found to have accounts in an illegal offshore bank and elsewhere in Europe where the company has run into problems with regulators over cartels.

Like Caeser's wife, CRH is one of those companies that must be above suspicion or it could once again become what the 'New York Times' once dubbed the company Ireland loves to hate.

The latest mishap at CRH adds to the growing list of questions about the stewardship of chief executive Myles Lee. Mr Lee is fast becoming the Brian Cowen of corporate Ireland; a chief financial officer who took over a company at a difficult moment but who has yet to show much leadership or vision.

Bolt-on policy

He has failed to continue his predecessors' successful policy of bolt-on acquisitions despite raising the money and a recession that has hurt many competitors.

This failure seems strange when common sense tells us that there must be many deals out there in times such as these.

Equally strange, but perhaps not unrelated, is the chief executive's inability to retain top executives.

While there is often some kind of shakeout after a new chief executive is appointed, the loss of Glen Culpepper, who replaced Mr Lee as chief financial officer, has never been adequately explained.

At the time the company told the markets Mr Culpepper left "for personal reasons" although he has since joined US-based Summit Materials, a sort of home for CRH dissidents set up by former CRH executive Tom Hill last year.

Other CRH executives to defect to Summit include Michael Brady, Tony Keenan, Anya Fonina and Damian Murphy. CRH has always prided itself on recruiting the brightest and the best to train in Belgard Castle in Clondalkin, but even CRH cannot keep losing talent like this.

Accountants

Sharescope always worries when an accountant takes the top job in any company; accountants have their uses, but they are often unable to see the big picture -- even accountants who also hold degrees in civil engineering like Mr Lee.

Former CRH chief executive Liam O'Mahony had a much more convincing pedigree for the head of an acquisitive building company; engineering, business administration and a first-class degree in law.

Regardless of his training, Mr Lee now needs to show quickly that he can take CRH by the scruff of the neck or stand aside for somebody with better luck, better forecasting skills and the ability to ink the sort of deals that made CRH one of Ireland's great success stories and rewarded shareholders so well during the past decade.

Irish Independent

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