Interim Results
Kingspan Group PLC
07 September 2004
Kingspan Group plc
Kingspan Group plc announces half year results to 30th June 2004
Summary
•Turnover up 15.5% to €439.4 million (H1 2003 : €380.3 million).
•Profit before tax up 32.5% to €37.5 million (H1 2003 : €28.3 million).
•Basic earnings per share before goodwill ('adjusted EPS') up 28% to 20.2
cent.
•Interim dividend up 31% to 3.4 cent per share.
•Net debt as a percentage of shareholders' funds of 40% at 30th June 2004
(49% at 31st December 2003).
•Interest cover was 15.4 times before goodwill amortisation (13.2 times for
the calendar year 2003).
•Capital investment was €28.4 million in the period, mostly related to
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 2004. Profit before tax was €37.5
million, an increase 32.5% on the corresponding period last year, on turnover of
€439.4 million, up 15.5%. Goodwill of €3.9 million has been amortised against
profits in the period compared to €4.0 million in the corresponding period last
year.
Basic earnings per share before goodwill amortisation of 20.2 cent were up 28%
compared to the same period last year. It is proposed that an interim dividend
of 3.4 cent per share will be paid on 15th October 2004 to shareholders on the
register at close of business on 17th September 2004. This represents an
increase of 31% on the 2003 interim dividend. The interim dividend is covered
5.9 times by earnings before goodwill amortisation.
Market conditions
Kingspan businesses aim to remain market leaders in their main product
categories, based on their reputation for design, quality, technical expertise
and an ability to re-invent themselves to accommodate the requirements of an
ever-changing construction environment.
Kingspan products meet the specialist needs of architects, specifiers,
developers and the PFI sector. Kingspan aims to provide a range of products that
meet or exceed current regulations and where practicable, anticipate future
changes to the regulations. It provides integrated solutions across a broad
range of product categories that combine to increase efficiency by reducing
on-site construction time, cost and problems.
This continued focus on solutions in the area of thermal efficiency, fire
ratings, speed of erection and structural and aesthetic quality resulted in very
healthy growth for Kingspan in all its main geographic markets and across the
full product range, except for access flooring in Europe.
Sales by geographical market (Half 1 2004 versus Half 1 2003):
Ireland + 18.5%
Britain and Northern Ireland + 11.2%
Mainland Europe + 30.2%
United States of America + 33.6%
Sales by product group (Half 1 2004 versus Half 1 2003):
Insulated panels + 23.2%
Raised access flooring - USA + 36.2%
Raised access flooring - Europe - 26.8%
Insulation products + 26.8%
Environmental containers + 13.6%
Building components + 6.4%
Foreign exchange rates did not have a material impact on the translation of
Group sales with the exception of raised access flooring in the USA where growth
in local currency was 51%.
Insulated panels
Sales of insulated panels represented 37.5% of Group turnover in the period and,
at €164.8 million, sales were up 23.2% in the period compared to the
corresponding period last year.
Kingspan continues to press ahead with its strategy of increasing the
penetration of insulated panels in the cladding market in the UK. To help
achieve this goal, the Group will have the benefit of even more stringent
building regulations in 2006. This growth will be further assisted by the
increased penetration of Kingspan products in market segments that are
relatively new to Kingspan. We have ensured that manufacturing capacity has kept
pace with demand and will have invested €14 million in the period 2003/2004.
The Group is very satisfied with the progress being made in Central Europe which
has gone from strength to strength from our initial investment there 6 years
ago. Sales in this region now represent 18.6% of the Group's panel sales.
Kingspan's brand recognition is improving and spreading through many of the new
countries that have joined the EU this year and it is becoming evident to the
Group that market shares can be achieved in these markets comparable to those
achieved in other markets. To this end, Kingspan is further enhancing its
presence in the region by establishing a new facility in Hungary. This involves
an investment of €12 million and the new line will be commissioned in April
2005.
Raised access flooring
Sales of raised access flooring represented 13.8% of Group turnover in the
period and, at €60.7 million, sales were down 5% in the period compared to the
corresponding period last year.
In Europe the market for raised access flooring which had shown sharp declines
in the past two and a half years is showing some signs of stabilisation,
particularly in the UK and Ireland. While new build can be expected to be slower
to recover, the fit-out sector is looking more buoyant. As a result of the very
competitive environment brought about by the steep decline in demand, two
manufacturers exited the industry in the UK. Similar strains were evident in
mainland Europe which is likely to result in significant rationalisation in that
market.
The market for raised access flooring in the USA was much more encouraging and
sales increased by 51% from $23.7 million in the first half of 2003 to $35.9
million in the current period. There are signs that the marketing drive to
promote the use of raised access flooring, in combination with under-floor air,
is bringing positive results. One third of all projects being tracked have
specified raised access flooring to handle their air distribution requirements
as well as for cable management. Raw material inputs, specifically steel, in
this market were subject to much more dramatic price increases than elsewhere in
the Group. Because these increases came in rapid succession, it was difficult to
avoid a time lag in passing them on into the marketplace. This resulted in
margins being impacted negatively in the period. Nevertheless the market
demonstrated its ability to absorb the price increases, albeit with a time lag,
as is evidenced by the increased volumes achieved.
Insulation products
Sales of insulation products represented 21.3% of Group turnover in the period
and, at €93.7 million,sales were up 26.8% in the period compared to the
corresponding period last year.
Kingspan is recognised for its exclusive range of high performance boards for
the construction sector. Following the completion of the current extensive
investment programme in manufacturing technologies, Kingspan is well placed to
satisfy current demand. The next round of Building Regulations takes effect in
2006, and capacity planning for this is already in progress. The more stringent
the regulations, the more efficient and cost effective Kingspan products become
relative to competing products.
Additionally, Kingspan manufactures a range of products targeted at HVAC process
and industrial sectors specifically for pipe work and duct work. These solutions
have been used successfully in applications where fibrous insulants are
considered unsuitable, particularly in:
Hospitals, hostels, schools, public buildings;
Food, beverage, brewing, pharmaceuticals;
Petrochemical and cryogenic industries.
Structural and Off-Site
Sales of structural and Off-Site products represented 11.4% of Group turnover
in the period and, at €50.2 million, sales were up 6.4% in the period compared
to the corresponding period last year.
The structural products element of this business services a very mature market
and it is for this reason that Kingspan set about adding the Off-Site dimension
which is the fastest growing sector of the UK construction industry. The Group
is investing to develop the business away from just being a supplier of
components to a fragmented market, to being a key player in the Off-Site sector,
working with all of the PFI participants in the areas of Education, Healthcare
and Single Living Accommodation.
The concept of alliances is increasingly fundamental to Kingspan's view as to
how efficiency and quality in construction can be improved and made available to
the client. Kingspan's unique Off-Site concept embraces this principle to a
degree that gives real meaning to partnering the supply chain. The concept goes
the whole way in developing long term alliances that include those involved in
the process of delivering the product from identification of the clients'
requirements to the fulfilment of those needs.
Environmental containers
Sales of environmental containers represented 15.9% of Group turnover in the
period and were up 13.6% in the period, rising from €61.5 million in the same
period last year to €69.9 million this year.
Kingspan provides a wide range of high specification storage solutions designed
to meet and exceed regulations which are being driven forward throughout Europe
by environmental demands. The expected impact of these will be that bunding and
telemetry will become a mandatory part of oil storage products. Kingspan's
experience and innovation has led to the creation of market leading brands which
in no small way has helped to drive the demand for these products. In this
product area Kingspan continues to develop new environmentally friendly
solutions that have found favour not only in its traditional markets of Western
and Central European countries, but also in the Nordic region. Many of these new
products are being produced in Poland which has a very efficient production
facility. It is likely that capacity will be increased in 2005 to meet the
anticipated demand for its products.
In the area of pollution control, this business has well established products
that lead the market in the UK and Ireland in packaged sewage treatment plants.
The applications range from single house to leisure and certain types of
commercial applications. This product range, like the high specification storage
solutions, enjoyed strong growth in the period, helped by environmental
legislation in the various markets.
Operating Margins
The operating margin before goodwill amortisation was 10.1% compared to 9.4% in
the same period last year and 10.1% for the full year 2003.
The gross margin in the period was 29.2%, and was in line with the first half of
last year but down 0.4% compared with 2003 as a whole.
The two main raw material inputs to Group products, steel and chemicals, have
been subject to increases in the period and are likely to undergo further
increases in the second half. As this is an industry wide issue it is not
expected to have any negative impact on Kingspan's relative competitiveness.
Taking into account some degree of time lag, and subsequent impact on gross
margin, these increases will be passed into the marketplace. However it is
unlikely that these price increases will be passed on with a profit margin.
Balance Sheet and Cash Flow Review
Net debt at 30th June 2004 was €116.2 million, compared to €120.8 million at
31st December 2003. This is after capital investment of €28.4 million in the
period. Capital investment for the year is expected to be approximately
€60 million. Continued focus on good working capital management and strong
operational cash flow resulted in a strong balance sheet at the period end.
Interest was covered 15.4 times by profits before goodwill amortisation in the
period compared to 13.2 times for the calendar year2003. Balance sheet gearing,
being the relationship of net debt to shareholders' funds, was 40% at
30th June 2004 compared to 49 % at 31st December 2003.
Board Changes
There are plans to strengthen the Board with the appointment of an additional
two non-Executive directors. The Board would expect to be in a position to make
these announcements in the near future.
Outlook
The macro environment in which Kingspan operates has improved during the course
of the current reporting period. This should continue to assist the Group
achieve good volume growth going forward. Additionally, there is ever increasing
pressure on architects and specifiers to reduce CO2 emissions, which can be best
achieved by designing energy efficient buildings. This will impact favourably on
sales of Kingspan's insulated panels and products in the UK and Irish markets.
Central Europe should continue to perform well for insulated panels, supported
by continued investment in manufacturing capacity and marketing expenditure to
further enhance the well established Kingspan brand.
While the market for raised access flooring in Europe remains dull, we are
encouraged by the continued progress in the USA. The environmental containers
business continues to grow geographically and will benefit from stringent
environmental legislation.
Going forward, the completion of the capital and product development expenditure
in the structural and Off-Site business is expected to enhance the Group's
prospects in this sector.
Even though the Group is operating in an environment where there is upward
pressure on raw material prices, markets are reasonably buoyant and with the
current momentum the Group expects to see a satisfactory outcome for the year as
a whole.
Further information, contact:
Donnchadh O'Neill
Murray Consultants
35 Upper Mount Street
Dublin, 2
Ireland
Tel: + 353 (0) 1 4980300
GROUP PROFIT AND LOSS ACCOUNT
6 months 6 months Year
ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Turnover 439,387 380,286 783,894
Cost of sales (311,284) (268,981) (551,542)
--------- --------- --------
Gross profit 128,103 111,305 232,352
Distribution costs (28,034) (23,539) (48,990)
Administrative expenses (55,748) (51,999) (103,972)
--------- --------- --------
Operating Profit before
Goodwill Amortisation 44,321 35,767 79,390
Goodwill amortisation (3,899) (3,985) (7,933)
--------- --------- --------
Group operating profit 40,422 31,782 71,457
Interest payable and similar charges (3,322) (3,992) (6,802)
Interest receivable and other income 438 491 786
--------- --------- --------
Profit on ordinary activities before 37,538 28,281 65,441
taxation
Tax on profit on ordinary activities (8,041) (6,102) (13,959)
--------- --------- --------
Profit on ordinary activities after 29,497 22,179 51,482
taxation
Minority interest 19 (86) (74)
--------- --------- --------
Profit attributable to ordinary 29,516 22,093 51,408
shareholders
Ordinary dividends (5,630) (4,288) (11,896)
--------- --------- --------
Profit retained for the period 23,886 17,805 39,512
========= ========= ========
€ cent € cent € cent
Basic earnings per share 17.8 13.4 31.2
Diluted earnings per share 17.5 13.4 30.9
Basic earnings per share (before 20.2 15.8 36.0
goodwill)
Diluted earnings per share (before 19.8 15.8 35.7
goodwill)
Dividend per share 3.4 2.6 7.2
Interest cover (net before goodwill) 15.37 10.22 13.20
Dividend cover (before goodwill) 5.9 6.1 5.0
GROUP BALANCE SHEET 30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
FIXED ASSETS
Tangible assets 198,695 169,701 176,140
Intangible assets 124,205 131,084 122,487
Financial assets 38 49 49
--------- --------- --------
322,938 300,834 298,676
--------- --------- --------
CURRENT ASSETS
Stocks 72,030 63,816 61,708
Trade and other debtors 230,061 199,456 175,957
Cash and term deposits 56,365 33,358 55,746
--------- --------- --------
358,456 296,630 293,411
--------- --------- --------
CREDITORS
(Amounts falling due within one year)
Trade and other creditors 188,861 157,478 139,613
Bank and other borrowings 22,820 15,586 46,298
Deferred consideration 85 215 85
Dividends 5,630 4,288 7,608
--------- --------- --------
217,396 177,567 193,604
--------- --------- --------
NET CURRENT ASSETS 141,060 119,063 99,807
--------- --------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES 463,998 419,897 398,483
--------- --------- --------
CREDITORS
(Amounts falling due after more than
one year)
Bank and other borrowings 145,805 155,819 126,116
Deferred consideration 3,825 4,212 4,067
--------- --------- --------
149,630 160,031 130,183
--------- --------- --------
PROVISIONS FOR LIABILITIES AND CHARGES 23,305 16,728 17,605
--------- --------- --------
CAPITAL GRANTS 987 1,048 999
--------- --------- --------
290,076 242,090 249,696
========= ========= ========
CAPITAL AND RESERVES
Called-up share capital 21,734 21,649 21,711
Share premium account 19,179 18,214 18,761
Revaluation reserve 891 891 891
Profit and loss account 263,851 218,258 239,965
Other reserves (16,824) (18,852) (32,896)
--------- --------- --------
Shareholders' funds 288,831 240,160 248,432
--------- --------- --------
MINORITY INTERESTS 1,245 1,930 1,264
--------- --------- --------
--------- --------- --------
290,076 242,090 249,696
========= ========= ========
GROUP CASH FLOW STATEMENT 6 months 6 months Year
ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Net cash inflow from operating 49,377 26,743 75,698
activities
Returns on investments and servicing (3,288) (3,161) (6,503)
of finance
Taxation (4,663) (5,888) (8,909)
Capital expenditure and financial (26,360) (16,893) (36,316)
investment
Acquisitions and disposals (1,245) (7,560) (7,484)
Equity dividends paid (7,608) (26,034) (30,322)
--------- --------- --------
Cash inflow/(outflow) before use of liquid 6,213 (32,793) (13,836)
resources and financing
Management of liquid resources (1,225) 20,708 3,400
Financing (7,642) (1,775) 1,103
--------- --------- --------
(Decrease) in cash in the period (2,654) (13,860) (9,333)
========= ========= ========
RECONCILIATION OF NET CASH FLOW TO 6 months 6 months Year
MOVEMENT IN NET DEBT ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
(Decrease) in cash in the period (2,654) (13,860) (9,333)
Increase/(decrease) in liquid 1,225 (20,708) (3,400)
resources
Cash flow from movement in debt, lease finance and deferred 8,583 2,333 (441)
consideration --------- --------- --------
Change in net debt resulting from cash 7,154 (32,235) (13,174)
flows
Change in net debt resulting from - (872) (892)
acquisitions --------- --------- --------
7,154 (33,107) (14,066)
Translation adjustment (2,504) 7,939 10,552
--------- --------- --------
Movement in net debt in the period 4,650 (25,168) (3,514)
Net debt at start of period (120,820) (117,306) (117,306)
--------- --------- --------
Net debt at end of period (116,170) (142,474) (120,820)
========= ========= ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months 6 months Year
ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit for financial period attributable to Group 29,516 22,093 51,408
shareholders
Exchange adjustments 16,072 (13,567) (27,611)
--------- --------- --------
Total gains and losses recognised since last 45,588 8,526 23,797
annual report ========= ========= ========
SUPPLEMENTARY INFORMATION
1 BASIS OF PREPARATION
The 2004 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 42 to 43 of the Annual Report for the
year ended 31st December 2003.
The interim results for the half year to 30th June 2004 and 30th June 2003 are
unaudited. The comparative figures for the year ended 31st December 2003 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. Copies
ay 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
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit attributable to ordinary 29,516 22,093 51,408
shareholders --------- --------- --------
Number of Number of Number of
shares shares shares
('000) ('000) ('000)
Weighted average number of ordinary shares for the
calculation of basic earnings per share 165,444 164,844 164,984
Dilutive effect of share options 3,318 386 1,425
--------- --------- --------
Weighted average number of ordinary shares for the
calculation of diluted earnings per share 168,762 165,230 166,409
--------- --------- --------
€ cent € cent € cent
Basic earnings per share 17.8 13.4 31.2
--------- --------- --------
Diluted earnings per share 17.5 13.4 30.9
--------- --------- --------
3 DIVIDEND
An interim dividend at the rate of 3.4c per ordinary share (2003: 2.6c) is
payable on 15th October 2004 to shareholders on the register at the close of
business on 17th September 2004
4 TURNOVER 6 months 6 months Year
ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
The analysis by class of activity is as follows: €'000 €'000 €'000
Insulated panels 164,820 133,742 292,530
Raised access floors 60,736 63,903 115,681
Insulation products 93,723 73,888 155,768
Environmental containers 69,867 61,521 128,413
Building components 50,241 47,232 91,502
--------- --------- --------
439,387 380,286 783,894
========= ========= ========
The analysis by geographical area is
as follows:
Republic of Ireland 60,836 51,334 105,799
Britain and Northern Ireland 274,684 246,925 494,743
Mainland Europe 68,421 52,567 126,410
United States of America 28,268 21,157 36,825
Other 7,178 8,303 20,117
--------- --------- --------
439,387 380,286 783,894
========= ========= ========
5 RECONCILIATION OF MOVEMENTS IN 6 months 6 months Year
SHAREHOLDERS' FUNDS ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Profit for the financial period attributable to 29,516 22,093 51,408
Group shareholders
Dividends (5,630) (4,288) (11,896)
--------- --------- --------
23,886 17,805 39,512
Exchange adjustment 16,072 (13,567) (27,611)
New share capital subscribed 441 18 627
--------- --------- --------
Net addition to shareholders' funds 40,399 4,256 12,528
Opening shareholders' funds 248,432 235,904 235,904
--------- --------- --------
Closing shareholders' funds 288,831 240,160 248,432
========= ========= ========
6 RECONCILIATION OF OPERATING PROFIT TO 6 months 6 months Year
NET CASH FLOW FROM OPERATING ACTIVITIES ended ended ended
30.6.04 30.6.03 31.12.03
(Unaudited) (Unaudited) (Audited)
€'000 €'000 €'000
Operating profit 40,422 31,782 71,457
Depreciation charge 11,710 10,863 21,511
Amortisation of intangible assets 4,135 4,225 8,407
Profit on sale of tangible assets (49) (581) (426)
Profit on sale of investments (3) - -
Government grants amortised (54) (60) (102)
(Increase) in stocks (6,877) (3,211) (4,685)
(Increase) in debtors (45,363) (34,884) (17,749)
Increase/(Decrease) in creditors 45,456 18,609 (2,715)
--------- --------- --------
Net cash flow from operating 49,377 26,743 75,698
activities ========= ========= ========
7 INTANGIBLE ASSETS 6 months 6 months Year
ended ended ended
30.6.04 30.6.03 31.12.03
Goodwill
At start of period 120,058 139,714 139,714
On acquisitions 901 2,818 4,375
Translation adjustment 4,933 (10,134) (16,098)
Amortised in period (3,899) (3,985) (7,933)
--------- --------- --------
At end of period 121,993 128,413 120,058
========= ========= ========
Patents
At start of period 2,429 2,931 2,931
Translation adjustment 19 (20) (28)
Amortised in period (236) (240) (474)
--------- --------- --------
At end of period 2,212 2,671 2,429
========= ========= ========
Total intangible assets
At start of period 122,487 142,645 142,645
On acquisitions 901 2,818 4,375
Translation adjustment 4,952 (10,154) (16,126)
Amortised in period (4,135) (4,225) (8,407)
--------- --------- --------
At end of period 124,205 131,084 122,487
========= ========= ========
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Friday, 5th July 2024
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