Interim Results

KINGSPAN GROUP PLC 2 September 1999 Kingspan Group plc announces half year results to 30th June 1999: FINANCIAL HIGHLIGHTS - Turnover up 39% to Euro 242 million - Profit before tax up 21% to Euro 27.7 million - Profit after tax up 20% to Euro 21.1 million - Basic earnings per share up 20% to 12.5 cents - Basic earnings per share before goodwill ('adjusted EPS') up 27% to 13.3 cents - Interim dividend up 48% to 0.93 cents - Net debt as a percentage of shareholders' equity of 76% at 30th June 1999 (40% at 31st December 1998). ***************************************************** INTERIM STATEMENT Results The Directors of Kingspan Group are pleased to announce that profit before tax for the six months to 30th June 1999 amounted to Euro 27.7 million compared to Euro 22.9 million for the corresponding period of 1998, representing an increase of 21% (26% before goodwill amortisation). Basic earnings per share of 12.5 cents is up 20% compared to the same period last year while adjusted EPS is up 27%. In line with Financial Reporting Standard 10, goodwill arising on acquisitions in the period of Euro 44.1 million has been capitalised; Euro 1.2 million of the goodwill has been amortised against profits in the period. Net debt, after the Hewetson acquisition, amounted to Euro 84.7 million at 30th June 1999, representing net gearing of 76%. This compares to Euro 35.4 million at 31st December 1998 and net gearing of 40%. Interest cover remains comfortable at 10.4 times. It is proposed that an interim dividend of 0.93 cents will be paid to shareholders on the register at close of business on 22nd October 1999. This represents an increase of 48% on the 1998 interim dividend and is in accordance with our stated intention of bringing dividend yield and cover closer to the average for the industry over the next three years. Review of operations The results for the period include full contributions from acquisitions made in 1998 and two acquisitions in January 1999. Hewetson plc has been assimilated well into the Group and in every respect is performing ahead of expectations at the time of acquisition. Opportunities have been identified to increase both the product range and geographic spread of Hewetson and we expect this will lead to continuing growth in these areas. On 31st August 1999, the Group disposed of its 50.1% shareholding in CMS Pozament Limited, a non-core activity of Hewetson, for a consideration of Stg£1m. The Group also successfully added to its range of Environmental Bulk Containers (EBC's), aimed at the building materials market, through the acquisition of Entec whose principal activity is the manufacture of small waste treatment plants. Sales in value terms, excluding acquisitions in 1999, increased by 13% over the corresponding period last year. This increase in sales value masks a much more significant increase in sales volume. In particular, in the Group's composite panel business, sales volume increased by 17% while sales value increased by 12%. This volume growth continues to outstrip the growth experienced by the relevant construction sector in all the Group's market places. As this rate of growth in volumes looks set to continue, it is likely that the Group will invest in further capacity by mid 2000. Gross margins increased to 31.2% (1998: 31.1%) despite reduced selling prices. Group operating profits are up 26% on the corresponding period in 1998 and margins are 12.7% (1998: 14.0%). This reduction, which was anticipated, reflects some dilutive effect from the acquisition of Hewetson, increased distribution costs as a per cent of sales values and significant market and product development investment. Outlook The Group has carefully built up an integrated portfolio of building components for industrial, commercial, office and domestic buildings and has also built up a significant market position in these products in Ireland, the UK and in specific regions across mainland Europe. Going forward there continues to be significant opportunities for Kingspan through its proven strategies of market conversion, geographic spread, continual product development and focused acquisitions. The economic environment continues to be favourable and order levels remain strong in all our markets. This gives us confidence that a satisfactory outcome for the Group will be achieved for the year. For further information, contact: Eugene Murtagh Tel.: +353 42 9698000 Chairman & Chief Executive Dermot Mulvihill Tel.: +353 42 9698000 Group Finance Director ***************************************************** GROUP PROFIT AND LOSS ACCOUNT Continuing operations Acquisitions Total 6 months 6 months 6 months 6 months Year ended ended ended ended ended 30.6.99 30.6.99 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Euro'000 Euro'000 Turnover 196,304 45,219 241,523 174,228 368,794 Cost of sales (134,796) (31,326) (166,122) (120,063) (254,292) ------- ------ ------- ------- ------- Gross profit 61,508 13,893 75,401 54,165 114,502 Distribution costs (11,565) (1,851) (13,416) (8,663) (19,601) Administrative expenses(23,339) (6,849) (30,188) (21,084) (43,174) Goodwill amortisation (1,185) 0 (1,185) (42) (490) ------- ------ ------- ------- ------- Group operating profit 25,419 5,193 30,612 24,376 51,237 ======= ====== Interest payable and similar charges (3,710) (1,748) (3,991) Interest receivable and other income 755 262 710 ------- ------- ------- Profit on ordinary activities before taxation 27,657 22,890 47,956 Tax on profit on ordinary activities (6,526) (5,294) (11,167) ------- ------- ------- Profit on ordinary activities after taxation 21,131 17,596 36,789 Minority interest (104) (203) (305) ------- ------- ------- Profit attributable to ordinary shareholders 21,027 17,393 36,484 Ordinary dividends (1,555) (1,062) (2,873) ------- ------- ------- Profit retained for the period 19,472 16,331 33,611 ======= ======= ======= Euro cents Euro cents Euro cents Basic earnings per share 12.5 10.4 21.9 Diluted earnings per share 12.3 10.2 21.4 Basic earnings per share (before goodwill) 13.3 10.5 22.1 Dividend per share 0.93 0.63 1.71 ***************************************************** GROUP BALANCE SHEET 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 FIXED ASSETS Tangible assets 95,592 77,323 77,199 Intangible assets 58,720 7,926 13,267 Financial assets 41 55 9,174 ------- ------- ------- 154,353 85,304 99,640 ------- ------- ------- CURRENT ASSETS Stocks 48,015 33,433 33,219 Trade and other debtors 132,534 87,975 87,895 Cash and term deposits 34,651 14,088 71,854 ------- ------- ------- 215,200 135,496 192,968 ------- ------- ------- CREDITORS (Amounts falling due within one year) Trade and other creditors 125,623 81,257 82,765 Bank and other borrowings 47,284 25,286 35,718 Deferred consideration 818 1,282 980 Dividends 1,555 1,059 1,808 ------- ------- ------- 175,280 108,884 121,271 ------- ------- ------- NET CURRENT ASSETS 39,920 26,612 71,697 ------- ------- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 194,273 111,916 171,337 ------- ------- ------- CREDITORS (Amounts falling due after more than one year) Bank and other borrowings 69,690 20,732 69,171 Deferred consideration 1,524 0 1,417 ------- ------- ------- 71,214 20,732 70,588 ------- ------- ------- PROVISIONS FOR LIABILITIES AND CHARGES Deferred taxation 2,112 2,016 1,789 ------- ------- ------- GOVERNMENT GRANTS 1,790 1,839 1,807 ------- ------- ------- 119,157 87,329 97,153 ======= ======= ======= CAPITAL AND RESERVES Called-up share capital 21,292 21,171 21,271 Share premium account 15,747 15,690 15,747 Revaluation reserve 891 891 891 Profit and loss account 73,431 36,679 53,958 Other reserves 144 3,455 (2,579) ------- ------- ------- Shareholders' funds 111,505 77,886 89,288 ------- ------- ------- MINORITY INTERESTS Including non-equity interests 7,652 9,443 7,865 ------- ------- ------- 119,157 87,329 97,153 ======= ======= ======= ***************************************************** GROUP CASH FLOW STATEMENT 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Net cash inflow from operating activities 22,004 13,081 43,597 Returns on investments and servicing of finance (3,407) (915) (2,418) Taxation (5,945) (2,057) (8,091) Capital expenditure and financial investment (8,051) (11,302) (27,883) Acquisitions and disposals (43,231) (903) (7,973) Equity dividends paid (1,808) (1,482) (2,545) ------ ------ ------ Cash outflow before use of liquid resources and financing (40,438) (3,578) (5,313) Management of liquid resources (537) 0 (7,573) Financing (4,017) (5,573) 53,605 ------ ------ ------ (Decrease)/increase in cash in the period (44,992) (9,151) 40,719 ====== ====== ====== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 (Decrease)/increase in cash in the period (44,992) (9,151) 40,719 Increase in liquid resources 537 0 7,573 Cash flow from decrease/(increase) in debt and lease finance 2,927 5,702 (53,314) ------ ----- ------ Change in net debt resulting from cash flows (41,528) (3,449) (5,022) Change in net debt resulting from acquisitions and translation (7,706) (7,631) (8,277) ------ ------ ------ Movement in net debt in the period (49,234) (11,080) (13,299) Net debt at start of period (35,432) (22,133) (22,133) ------ ------ ------ Net debt at end of period (84,666) (33,213) (35,432) ====== ====== ====== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months 6 months Year ended ended ended 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Profit for financial period attributable to Group shareholders 21,027 17,393 36,484 Exchange adjustments 2,723 1,901 (4,134) ------ ------ ------ Total gains and losses recognised since last annual report 23,750 19,294 32,350 ====== ====== ====== SUPPLEMENTARY INFORMATION 1 BASIS OF PREPARATION The 1999 interim results and summarised balance sheet are presented in Euro. Results and cash flows of subsidiary undertakings outside the Euro Zone have been translated into Euro at the average exchange rates for the period, and the related balance sheets have been translated at the rates of exchange ruling at the balance sheet date. The 1998 comparative figures have been translated from Irish Pounds into Euro using the fixed conversion rate of Euro 1 = IR£0.787564. The interim financial information has been prepared in accordance with applicable accounting and financial reporting standards and, except for the change to presentation of the financial information in Euro, the accounting policies used are consistent with those set out on pages 40 to 42 of the Annual Report for the year ended 31st December 1998. The interim results for the half year to 30th June 1999 and 30th June 1998 are unaudited. The comparative figures for the year ended 31st December 1998 represent an abbreviated version of the Group's full accounts for that year (converted to Euro) which have been filed with the Registrar of Companies and on which the auditors, Grant Thornton, have issued an unqualified audit report. These interim results are available on the Group's website (www.kingspan.com). A printed copy will be sent by post to all registered shareholders. Copies may also be obtained from the Company's Registrars: Computershare Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18. 2 EARNINGS PER SHARE 6 months 6 months Year ended ended ended 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Profit attributable to ordinary shareholders 21,027 17,393 36,484 ======= ======= ======= Number of Number of Number of shares ('000) shares ('000) shares ('000) Weighted average number of ordinary shares for the calculation of basic earnings per share 167,592 166,682 166,968 ======= ======= ======= Dilutive effect of share options 2,693 3,100 3,330 ======= ======= ======= Weighted average number of ordinary shares for the calculation of diluted earnings per share 170,285 169,782 170,298 ======= ======= ======= Euro cents Euro cents Euro cents Basic earnings per share 12.5 10.4 21.9 ======= ======= ======= Diluted earnings per share 12.3 10.2 21.4 ======= ======= ======= 3 DIVIDEND An interim dividend at the rate of 0.93 cents per ordinary share (1998: 0.63 cents) is payable on 1 November 1999 to shareholders on the register at the close of business on 22 October 1999. 4 TURNOVER 6 months 6 months Year ended ended ended 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 The analysis by class of activity is as follows: Building components 176,997 120,285 255,111 Insulation products 36,499 35,406 68,744 Environmental Bulk Containers 28,027 18,537 44,939 ------- ------- ------- 241,523 174,228 368,794 ======= ======= ======= The analysis by geographical area is as follows: Republic of Ireland 37,531 29,158 65,056 Britain and Northern Ireland 164,095 114,954 231,253 Mainland Europe 31,654 23,813 59,372 Other 8,243 6,303 13,113 ------- ------- ------- 241,523 174,228 368,794 ======= ======= ======= 5 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 6 months 6 months Year ended ended ended 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Profit for the financial period attributable to Group shareholders 21,027 17,393 36,484 Dividends (1,555) (1,062) (2,873) ------- ------- ------- 19,472 16,331 33,611 Other recognised gains and losses for the period 2,723 1,901 (4,134) New share capital subscribed 22 42 199 ------- ------- ------- Net addition to shareholders' funds 22,217 18,274 29,676 Opening shareholders' funds 89,288 59,612 59,612 ------- ------- ------- Closing shareholders' funds 111,505 77,886 89,288 ======= ======= ======= 6 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES 6 months 6 months Year ended ended ended 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Operating profit 30,612 24,376 51,237 Depreciation charges 6,033 4,358 10,105 Amortisation of intangible assets 1,435 281 965 (Profit)/loss on sale of tangible assets (11) (39) (170) Government grants amortised (173) (117) (232) (Increase)/decrease in stocks (5,096) (6,482) (7,406) (Increase)/decrease in debtors (23,812) (15,887) (19,758) Increase/(decrease)in creditors 13,016 6,591 8,856 ------- ------- ------- Net cash flow from operating activities 22,004 13,081 43,597 ======= ======= ======= 7 INTANGIBLE ASSETS 30.6.99 30.6.98 31.12.98 (Unaudited) (Unaudited) (Audited) Euro'000 Euro'000 Euro'000 Goodwill At start of period 8,925 0 0 Goodwill on acquisition 44,130 3,379 9,776 Translation adjustment 2,757 0 (361) Amortised in period (1,185) (42) (490) ------- ------- ------- At end of period 54,627 3,337 8,925 ======= ======= ======= Patents At start of period 4,342 4,689 4,689 On acquisition 0 126 125 Translation adjustment 1 13 3 Amortised in period (250) (239) (475) ------- ------- ------- At end of period 4,093 4,589 4,342 ======= ======= ======= Total intangible assets At start of period 13,267 4,689 4,689 Goodwill on acquisition 44,130 3,505 9,901 Translation adjustment 2,758 13 (358) Amortised in period (1,435) (281) (965) ------- ------- ------- At end of period 58,720 7,926 13,267 ======= ======= ======= 8 YEAR 2000 COMPLIANCE Many computer systems which express dates using only the last two digits of the year may malfunction due to the date change to the Year 2000. The risk to the business relates not only to the Group's computer systems but also to some degree on those of our customers and suppliers. The Group has conducted a review of both its production and business systems at all locations and has established a formal Year 2000 project to modify or replace all the affected systems. Many of the non-compliant systems identified were due to be replaced or upgraded for operational and functional reasons unconnected with the Year 2000 issue. The direct cost of addressing the Year 2000 issue was not material to the Group. Work on all business critical systems is at a substantially complete stage and is in line with the Group's implementation plan. ***************************************************** Independent Review Report to Kingspan Group plc Introduction We have been instructed by the company to review the financial information set out on pages 4-9 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Irish Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of group and local management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30th June 1999. Grant Thornton Chartered Accountants Ashford House Tara Street Dublin 2

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