THE INVESTMENT COLUMN: CRH shows how well it pays to be single- minded

CRH learned its lesson in the early 1980s when exposure to the collapsing Irish economy left the building materials company high and dry. Since then a single-minded focus on costs, geographical diversity and cash generation has yielded an impressive record of steadily rising earnings and dividends through thick and very thin.

Figures for the year to December showed a second successive year of buoyant growth. Pre-tax profits jumped 38 per cent to Irpounds 160m, earnings per share were 35 per cent better at Ir35.6p and the twelfth consecutive rise in dividend: a 12 per cent improvement to Ir9.1p.

In the face of difficult markets in the UK and a progressive slowdown in the US and Europe that was an impressive performance - and confirmation that even in difficult markets quality companies such as RMC, Wolseley and CRH can make a good living.

One of the most impressive features of CRH's growth over the years has been the way the company has managed to expand largely out of internally generated cash flow. Despite spending Irpounds 215m on acquisitions and capital investment, borrowings ended the year only Irpounds 18.5m higher at Irpounds 150.6m to give an unchanged gearing figure of 21 per cent. The company promises continued high levels of investment for the foreseeable future but analysts think the ratio of borrowings to net assets will remain broadly unchanged this year as well.

For investors that is a reassuring strength in the face of what promises to be a difficult year. While assuring shareholders yesterday that profits would enjoy another good year of progress in 1996, CRH warned that it would be unrealistic to expect recent growth rates to be repeated.

That translates into forecasts of Irpounds 185m this year and Irpounds 205.5m next time for earnings of 41p and 45.6p respectively. At yesterday's price of 549p, down 9p, the shares trade on a prospective price/earnings ratio of 13 falling to 12. They deserve a premium to the sector and, despite their strong run since 1992, still have some way to run.