Interim Results
Kingspan Group PLC
09 September 2003
Kingspan Group plc
Kingspan Group plc announces half year results to 30th June 2003:
Summary
•Turnover up 5.5% to €380.3 million (H1 2002 : €360.5 million). Underlying
growth, excluding the negative effects of translation, was 14.6%.
•Profit before tax €28.3 million (H1 2002 : €28.7 million). Underlying
growth of earnings before goodwill, excluding the negative effect of
translation, was 6.2%.
•Basic earnings per share before goodwill ('adjusted EPS') up 1.9% to 15.8
cent.
•Interim dividend up 24% to 2.6 cent per share.
•Net debt as a percentage of shareholders' funds of 59% at 30th June 2003
(50% at 31st December 2002).
•Interest cover was 10.2 times (8.8 times for the calendar year 2002).
•Two acquisitions in the period: CFMex, Spanish installer of raised access
floors at a cost of €1 million, and certain assets of Tarmont, a Polish
insulated panel manufacturer, at a cost of €7 million.
•Capital expenditure was €18 million in the period, with investment of €10
million in additional manufacturing capacity.
Interim Statement
Results
The Directors of Kingspan Group plc are pleased to announce the results for the
Group for the six months ended 30th June 2003. Profits before tax were €28.3
million, a drop of € 0.4 million on the corresponding period last year on
turnover of €380.3 million, up 5.5%. Due to the weakness in Sterling and the US
dollar in relation to the Euro, there was a negative impact on the translation
of profits before tax and goodwill of €1.7 million and of €33 million on the
translation of turnover compared to the corresponding period last year.
Excluding the impact of translation there was growth in earnings before goodwill
of 6.2% and growth in turnover of 14.6%. Goodwill of €4.0 million has been
amortised against profits in the period compared to €4.4 million in the
corresponding period last year. This reduction in goodwill also arose from the
translation effect.
Basic earnings per share before goodwill amortisation of 15.8 cent were up 1.9%
compared to the same period last year. It is proposed that an interim dividend
of 2.6 cent per share will be paid on 10th October 2003 to shareholders on the
register at close of business on 19th September 2003. This represents an
increase of 24% on the 2002 interim dividend. The interim dividend is covered
6.1 times by earnings before goodwill amortisation.
Market conditions
Expressed in local currency, there was very healthy growth for Kingspan in all
its main geographic markets. This growth was achieved in construction markets
that continued to decline during the period. In these tough market conditions
all Kingspan products, with the exception of access floors, showed their
resilience, delivering growth and significantly outperforming the markets in
which they compete :
Sales by geographical market before translation
Ireland + 11.4%
Britain and Northern Ireland + 14.7%
Mainland Europe + 24.7%
United States of America + 14.2%
Sales by product group before translation
Insulated panels + 23%
Raised access flooring - USA + 5%
Raised access flooring - Europe - 22%
Insulation boards + 45%
Environmental containers + 18%
As mentioned earlier, a feature of the period was the weakness of Sterling and
the US dollar relative to Kingspan's reporting currency, the Euro. While this
had little effect on the trading results, where currency exposure is mainly
internally hedged, there was a negative impact on the translation of the results
of subsidiaries operating in these areas.
Insulated Panels
Sales of insulated panels outperformed the markets in all geographic areas in
which we operate. Sales were up 15.2% in monetary terms on the corresponding
period last year and by 13.5% in volume. If the negative effects of translation
are excluded, revenues were up by 23%. The overall cladding market in Britain,
mainly in commercial and industrial building, is estimated to be down by a
minimum of 5% in 2003 compared to last year. Despite this, Kingspan achieved
sales growth of 26 % in this market as insulated panels continue to increase
penetration against traditional built up systems. This increasing penetration
continues to be driven by the application of building regulations governing
insulation and air leakage and by the success of new products in the Kingspan
range. To meet continuing sales demand both in the UK and mainland Europe, a new
insulated panel line will be installed and commissioned by mid 2004 and new
warehouse facilities have been added at the Group's panel factory in Holywell,
North Wales.
The Central European markets remain a strong focus for the Group where it sees
an opportunity to become the dominant brand. The Group acquired certain assets
of Tarmont, a panel manufacturing business in Poland, in April this year. This
facility, in which the plant is practically new, is based at Lipsko, south of
Warsaw, and combined with sales from the Group's Czech factory, gives the Group
a very strong position in the Polish insulated panel market. Upgrading the
latest Polish facility to accommodate the Kingspan configuration of insulated
panels is underway. This will facilitate interchanging production and products
in the region between the Polish and Czech plants.
The acquisition of the Polish facility and the installation of a new panel line
to service the UK and Western European markets are the first two of five panel
lines that the Group expects to add over the next five years.
Raised Access Flooring
Access floors, which are aimed at the high rise office market, represented 17%
of Group sales in the period. The products are manufactured in Hull, England and
at Red Lion, Pennsylvania in the US and are sold in a global marketplace but
with a focus on the US, the UK and mainland Europe.
In the UK, all the Group lead indicators suggest that construction of new
offices will decline further through 2003 and 2004. Steps have been taken
through reductions in fixed and variable costs to contain the downside risks and
position the business for any market upturn. In mainland Europe the Group has
continued to build up its network of customers and installers. In Spain,
following the acquisition of a 50% interest in CFMex, a national installer,
Kingspan supplies 30% of that market which remains an exception in that it
continues to be buoyant and looks like it can continue to grow through 2003 and
2004.
In the US market, where Kingspan is also the market leader, sales in the period
were up 5% to $23.7 million and indications are that the market may have
bottomed out. This remains an attractive market opportunity for Kingspan,
where, even in this significant downturn, 150 million square feet of new office
space is expected to be constructed in 2003. Very significant costs have been
taken out of the business which is now trading at breakeven.
Insulation Boards
Sales of insulation boards represented 19% of Group turnover in the period and
at €74 million sales were up 35% in the period compared to the corresponding
period last year. When the effects of translation are eliminated, the increase
in turnover was 45% and sales outperformed the markets in all geographic areas.
As planned a new line has been installed in the UK and another is planned for
2004/05. More capacity is also being added at the Group's plant in The
Netherlands.
Environmental Containers
Sales of environmental containers represented 16% of Group turnover in the
period and were up 8.3% in the period, rising from €56.8 million in the
equivalent period last year to €61.5 million this year. When the effects of
translation are eliminated, the increase in turnover in local currencies was
18%. The Group has a comprehensive range of products in the marketplace which
addresses the more stringent environmental regulation and legislation introduced
in Britain. These relate to commercial buildings where all oil storage must be
converted to bunded tanks by the end of 2005.
Operating Margins
The gross margin in the period was 29.3%, down 1.0% from the 30.3% for the full
year 2002. The operating margin before goodwill amortisation was 9.4% compared
to 11.1% for the full year 2002. These declines are a factor of the reduced
profitability in access floors in the UK and increased transport costs,
particularly in insulated panels and insulation boards.
Balance Sheet and Cash Flow Review
Net debt at 30th June was €142.5 million, up from €117.3 million at the end
December 2002. This is after paying the special dividend of €19.8 million
declared in the 2002 accounts, capital expenditure of €18 million and
acquisitions of €8 million. Capital expenditure for the year is expected to be
approximately €35 million. Working capital increased by €19.5 million in the six
month period. Half of this reflects the higher activity level, and half relates
to a real increase in working capital equating to four days sales. Interest was
covered 10.2 times by profits in the period compared to 8.8 times for the
calendar year 2002. Balance sheet gearing, being the relationship of net debt to
shareholders' funds, was 59% at the end of June compared to 50 % at 31st
December 2002. The current level of borrowings, anticipated capital expenditure
and available bank facilities are consistent with the Group's cash generation,
dividend policy and growth strategies.
6 months 30th June 2003 Year 31st December 2002
€million €million
Inflows
Profit before taxation 28.3 63.7
Depreciation 10.9 21.2
Amortisation 4.2 9.4
Disposals 1.3 0.7
Share issues 0.0 1.1
44.7 96.1
Outflows
Acquisitions 7.9 7.7
Capital expenditure 18.2 30.0
Dividends paid 26.0 8.5
Taxation paid 5.9 10.7
Purchase own shares 0.0 8.0
Working Capital 19.5 1.7
Others 0.3 0.2
(77.8) (66.8)
Net cash inflow/outflow (33.1) 29.3
Translation effect 7.9 23.1
Net debt at start of (117.3) (169.7)
period
Net debt at end of period (142.5) (117.3)
Board Changes
We have taken steps to broaden the composition of your board with the recent
appointments of three new non-executive directors - Mr Tom Mulcahy, Mr Brian
Joyce and Mr Tony McArdle.
I have decided that it is appropriate that the roles of Chairman and Chief
Executive Officer be separated. This will be done in 2004 when an independent
non-executive Chairman will be appointed.
The board also announces the promotion of Mr. Gene Murtagh Jr. to the position
of Chief Operating Officer.
Outlook
Market conditions in all regions remain difficult. This is most evident in
Kingspan's access floors and building components sectors, which are more
dependent on macro economic conditions, and where sales and margins remain under
some pressure. On the positive side the Group continues to benefit from further
tightening of building and environmental regulations. New products are beginning
to take hold and have the ability for improved momentum going forward. In the
medium term the Group will benefit from the Government sponsored Private Finance
Initiative in the UK and continues to develop and present its products with this
in mind. The Group's growth strategies are not acquisition dependent and can be
achieved through organic development across its product categories.
In the absence of any further deterioration in the economies in which the Group
operates, Kingspan looks forward to a satisfactory outcome for the year.
Group CEO, Mr. Eugene Murtagh is chairing a results conference call at 2.30 pm
BST. To join the call, dial 1 890 924 780 or (+44 020 8747 6810. There will be a
presentation followed by a question and answer session. To listen to a recording
of the call, please dial (+44) (0)1296 618700, the access code is 401159 and the
password is Kingspan. This recording will be available to listen to until 9th
October.
Further information, contact:
Eugene Murtagh
Chairman & Chief Executive
Dermot Mulvihill
Group Finance Director
Tel.: +353 42 9698000
GROUP PROFIT AND LOSS
ACCOUNT
Continuing
operations Acquisitions
6 months 6 months 6 months 6 months Year
ended ended ended ended ended
30.6.03 30.6.03 30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000 €'000 €'000
Turnover 371,338 8,948 380,286 360,523 739,610
Cost of sales (261,937) (7,044) (268,981) (248,605) (515,236)
Gross profit 109,401 1,904 111,305 111,918 224,374
Distribution costs (23,016) (523) (23,539) (19,183) (41,361)
Administrative expenses (51,214) (785) (51,999) (54,358) (101,014)
Goodwill amortisation (3,963) (22) (3,985) (4,380) (8,887)
Group operating profit 31,208 574 31,782 33,997 73,112
Interest payable and (3,992) (6,047) (10,972)
similar charges
Interest receivable and 491 723 1,605
other income
Profit on ordinary 28,281 28,673 63,745
activities before taxation
Tax on profit on ordinary (6,102) (7,072) (13,276)
activities
Profit on ordinary 22,179 21,601 50,469
activities after taxation
Minority interest (86) 52 13
Profit attributable to 22,093 21,653 50,482
ordinary shareholders
Ordinary dividends (4,288) (3,543) (29,494)
Profit retained for the 17,805 18,110 20,988
period
€ cent € cent € cent
Basic earnings per share 13.4 12.9 30.2
Diluted earnings per share 13.4 12.8 35.5
Basic earnings per share 15.8 15.5 30.0
(before goodwill)
Dividend per share 2.60 2.10 17.90
GROUP BALANCE SHEET 30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
FIXED ASSETS
Tangible assets 169,701 164,111 165,962
Intangible assets 131,084 148,536 142,645
Financial assets 49 36 36
300,834 312,683 308,643
CURRENT ASSETS
Stocks 63,816 61,642 62,172
Trade and other debtors 199,456 173,175 168,600
Cash and term deposits 33,358 78,670 71,782
296,630 313,487 302,554
CREDITORS
(Amounts falling due within
one year)
Trade and other creditors 157,478 148,291 140,215
Bank and other borrowings 15,586 17,325 28,375
Deferred consideration 215 375 311
Dividends 4,288 3,543 26,034
177,567 169,534 194,935
NET CURRENT ASSETS 119,063 143,953 107,619
TOTAL ASSETS LESS CURRENT LIABILITIES 419,897 456,636 416,262
CREDITORS
(Amounts falling due after
more than one year)
Bank and other borrowings 155,819 195,675 156,138
Deferred consideration 4,212 4,939 4,264
160,031 200,614 160,402
PROVISIONS FOR LIABILITIES AND CHARGES 16,728 11,534 17,156
CAPITAL GRANTS 1,048 1,236 1,145
242,090 243,252 237,559
CAPITAL AND RESERVES
Called-up share capital 21,649 22,144 21,631
Share premium account 18,214 18,212 18,214
Revaluation reserve 891 891 891
Profit and loss account 218,258 205,581 200,453
Other reserves (18,852) (5,216) (5,285)
Shareholders' funds 240,160 241,612 235,904
MINORITY INTERESTS 1,930 1,640 1,655
242,090 243,252 237,559
GROUP CASH FLOW STATEMENT 6 months 6 months Year
ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Net cash inflow from 26,743 52,630 102,979
operating activities
Returns on investments and (3,161) (5,506) (10,969)
servicing of finance
Taxation (5,888) (4,561) (10,713)
Capital expenditure and (16,893) (14,319) (29,356)
financial investment
Acquisitions and disposals (7,560) (4,991) (8,007)
Equity dividends paid (26,034) (4,997) (8,456)
Cash (outflow)/inflow before use of liquid resources and (32,793) 18,256 35,478
financing
Management of liquid 20,708 (1,884) (5,505)
resources
Financing (1,775) (16,371) (38,776)
(Decrease)/Increase in cash (13,860) 1 (8,803)
in the period
RECONCILIATION OF NET CASH
FLOW TO MOVEMENT IN NET DEBT 6 months 6 months Year
ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Increase in cash in the (13,860) 1 (8,803)
period
(Decrease) / increase in (20,708) 1,884 5,505
liquid resources
Cash flow from movement in debt, lease finance and 2,333 17,453 32,920
deferred consideration
Change in net debt (32,235) 19,338 29,622
resulting from cash flows
Change in net debt (872) 177 (362)
resulting from acquisitions
(33,107) 19,515 29,260
Translation adjustment 7,939 10,528 23,121
Movement in net debt in the (25,168) 30,043 52,381
period
Net debt at start of period (117,306) (169,687) (169,687)
Net debt at end of period (142,474) (139,644) (117,306)
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months 6 months Year
ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit for financial period attributable to 22,093 21,653 50,482
Group shareholders
Exchange adjustments (13,567) (8,571) (9,153)
Total gains and losses recognised since 8,526 13,082 41,329
last annual report
SUPPLEMENTARY INFORMATION
1 BASIS OF PREPARATION
The 2003 interim results and summarised balance sheet are presented in Euro.
Results and cash flows of foreign subsidiary undertakings 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 interim financial information has been prepared in accordance with
applicable accounting and financial reporting standards and the accounting
policies used are consistent with those set out on pages 52 to 54 of the
Annual Report for the year ended 31st December 2002.
The interim results for the half year to 30th June 2003 and 30th June 2002 are
unaudited. The comparative figures for the year ended 31st December 2002
represent an abbreviated version of the Group's full accounts for that year
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 who have
not elected to receive the results electronically. 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
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit attributable to 22,093 21,653 50,482
ordinary shareholders
Number of Number of Number of
shares shares shares
('000) ('000) ('000)
Weighted average number of ordinary shares
for the
calculation of basic 164,844 167,839 167,121
earnings per share
Dilutive effect of share 386 1,673 1,304
options
Weighted average number of ordinary shares
for the
calculation of diluted 165,230 169,512 168,425
earnings per share
€ cent € cent € cent
Basic earnings per share 13.4 12.9 30.2
Diluted earnings per share 13.4 12.8 30.0
3 DIVIDEND
An interim dividend at the rate of 2.60c per ordinary share (2002: 2.10c) is
payable on 10 October 2003 to shareholders on the register at the close of
business on 19 September 2003.
4 TURNOVER 6 months 6 months Year
ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
The analysis by class of €'000 €'000 €'000
activity is as follows:
Insulated panels 133,742 116,123 240,240
Raised access flooring 63,903 84,309 160,716
Insulation products 73,888 54,663 123,170
Environmental containers 61,521 56,792 118,610
Building components 47,232 48,636 96,874
380,286 360,523 739,610
The analysis by
geographical area is as
follows:
Republic of Ireland 51,334 46,493 94,179
Britain and Northern 246,925 236,580 475,542
Ireland
Mainland Europe 52,567 43,693 97,678
United States of America 21,157 22,781 49,006
Other 8,303 10,976 23,205
380,286 360,523 739,610
5 RECONCILIATION OF MOVEMENTS 6 months 6 months Year
IN SHAREHOLDERS' FUNDS ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit for the financial period attributable 22,093 21,653 50,482
to Group shareholders
Dividends (4,288) (3,543) (29,494)
17,805 18,110 20,988
Exchange adjustment (13,567) (8,571) (9,153)
Purchase of treasury shares - - (8,006)
New share capital 18 1,089 1,091
subscribed
Net addition to 4,256 10,628 4,920
shareholders' funds
Opening shareholders' funds 235,904 230,984 230,984
Closing shareholders' funds 240,160 241,612 235,904
6 RECONCILIATION OF OPERATING PROFIT TO 6 months 6 months Year
NET CASH FLOW FROM OPERATING ACTIVITIES ended ended ended
30.6.03 30.6.02 31.12.02
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Operating profit 31,782 33,997 73,112
Depreciation charge 10,863 10,265 21,227
Amortisation of intangible 4,225 4,621 9,370
assets
(Profit)/loss on sale of (581) - 1,137
tangible assets
Government grants amortised (60) (59) (152)
(Increase) in stocks (3,211) (1,254) (3,183)
(Increase) in debtors (34,884) (4,074) (6,802)
Increase in creditors 18,609 9,134 8,270
Net cash flow from 26,743 52,630 102,979
operating activities
7 INTANGIBLE ASSETS 6 months 6 months Year
ended ended ended
30.6.03 30.6.02 31.12.02
Goodwill
At start of period 139,714 158,513 158,513
On acquisitions 2,818 3,140 7,730
Translation adjustment (10,134) (11,911) (17,642)
Amortised in period (3,985) (4,380) (8,887)
At end of period 128,413 145,362 139,714
Patents
At start of period 2,931 3,440 3,440
On acquisitions - - -
Translation adjustment (20) (24) (26)
Amortised in period (240) (242) (483)
At end of period 2,671 3,174 2,931
Total intangible assets
At start of period 142,645 161,953 161,953
On acquisitions 2,818 3,140 7,730
Translation adjustment (10,154) (11,935) (17,668)
Amortised in period (4,225) (4,622) (9,370)
At end of period 131,084 148,536 142,645
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