TIDMKGP
RNS Number : 8012Q
Kingspan Group PLC
22 February 2019
KINGSPAN GROUP PLC
PRELIMINARY RESULTS
Year Ended 31 December 2018
KINGSPAN GROUP PLC
RESULTS FOR THE YEARED 31 DECEMBER 2018
Kingspan, the global leader in high performance insulation and
building envelope solutions, reports its preliminary results for
the year ended 31 December 2018.
Financial Highlights:
-- Revenue up 19% to EUR4.4bn, (pre-currency, up 22%).
-- Trading profit up 18% to EUR445.2m, (pre-currency, up 20%).
-- Free cashflow up 55% to EUR308.4m.
-- Group trading margin of 10.2%, a decrease of 10bps.
-- Basic EPS up 16% to 184.0 cent.
-- Final dividend per share of 30.0 cent. Total dividend for the year up 13.5% to 42.0 cent.
-- Year-end net debt of EUR728.3m (2017: EUR463.9m). Net debt to EBITDA of 1.4x (2017: 1.05x).
-- ROCE of 16.8% (2017: 17.8%).
Operational Highlights:
-- Insulated Panels sales growth of 21%. Strong activity in the
Americas, a positive performance in Continental Europe and a solid
UK outturn against a difficult backdrop. Good contribution from
acquisitions in Europe and Latin America.
-- Insulation Boards sales growth of 12% reflecting a positive
outturn in the Iberian acquisition, ongoing advancement of
Kooltherm(R) and solid underlying markets overall. New capacity
planned for the Nordic region and the Middle East reflecting
ongoing conversion from traditional materials.
-- Light & Air sales approaching EUR300m with improved
margins in Europe offsetting softer US margin, strong order intake
overall in the US and a planned new facility in France to service
Europe and the Middle East.
-- Water & Energy (formerly Environmental) sales growth of
13% with a new frontier established in the Nordic region.
-- Data & Flooring Technology (formerly Access Floors) sales
growth of 3% with strong sales of datacentre solutions offsetting
more sluggish office activity.
Summary Financials:
2018 2017 change
------------------ -------- -------- -------
Revenue EURm 4,372.5 3,668.1 +19%
EBITDA EURm 521.2 441.7 +18%
Trading Profit*
EURm 445.2 377.5 +18%
Trading Margin** 10.2% 10.3% -10bps
Profit after tax
EURm 335.8 285.9 +17%
EPS (cent) 184.0 159.0 +16%
------------------ -------- -------- -------
*Operating profit before amortisation of intangibles and non
trading items
** Trading profit divided by total revenue
Gene M. Murtagh, Chief Executive of Kingspan commented:
"2018 was a year of strong growth for Kingspan, with the company
delivering revenues of over EUR4bn for the first time. Performance
has been robust in most of our major markets, and momentum has
improved through the year. With the order book going into the new
financial year ahead of the prior year period, we are confident in
our near-term outlook. Notwithstanding this we remain mindful of
challenges to growth, particularly the continuing uncertainty in
the UK. However, the geographical diversification of the business,
helped by our acquisitions last year to expand our footprint in
Latin America, Southern Europe and India, means we are well placed
to continue to deliver long-term returns to shareholders."
For further information contact:
Murray Consultants Tel: +353 (0) 1 4980 300
Douglas Keatinge
Business Review
During 2018 Kingspan generated record revenues of almost
EUR4.4bn, and EBITDA exceeded EUR500m for the first time. Trading
profit reached EUR445m, ahead by 18% over prior year, and EPS was
up by 16% at 184.0 cent per share. In all, it was a positive
outcome and delivered in the face of unprecedented turbulence in
our raw material supply chain. Total investment was EUR604m in the
period, EUR472.3m of which was on acquisition and EUR131.3m on net
internal capital expenditure. Year-end net debt/EBITDA was
1.4x.
Momentum in activity generally improved for us as the year
evolved, and with the notable exception of the politically
hamstrung UK, most of our major markets ended the year strongly
with order banks well positioned for the start of 2019. The
majority of Western Europe performed robustly, North America
advanced well, as did Latin America. Conversely, the UK eased back
considerably towards year-end although it is relatively stable for
Kingspan despite the backdrop.
Strategy
Our strategic agenda is focused on the four pillars of
Innovation, Globalisation, Penetration and Planet Passionate. 2018
once again delivered advancements in all four areas:
- Product Innovation and range expansion is key to Kingspan. The
rollout of QuadCore(TM) has been core to this agenda in recent
years and in 2018 8% of global Insulated Panel sales contained this
proprietary technology. 2019 will see its launch as a roof
Insulation Board thereby creating a clear differentiator in this
application. Development of Kooltherm(R) 200 continues and the
fibre-free 'A Core' project is progressing on plan and we expect to
launch our solution during 2020. IKON(TM) , our global innovation
hub is well under construction at our home base of Kingscourt in
Ireland and is scheduled to open around mid-year. It will focus on
delivering the full spectrum of insulation and building envelope
solutions that are ThermalSafe, FireSafe, SmokeSafe, WeatherSafe
and FibreSafe.
- Globalisation of Kingspan remains at the heart of our ongoing
evolution. In late 2017 we further expanded our manufacturing
footprint by investing in partnerships in Brazil and Colombia.
These acquisitions firmly place Kingspan in a market leading
position across Latin America, a new frontier for Kingspan, with a
strong platform for further growth in the region.
Early in 2018 we acquired a presence in Southern Europe through
the Synthesia Group, consisting of three operating businesses;
Synthesia International, Poliuretanos and Huurre. Through its
Huurre and Poliuretanos businesses, the Synthesia Group gives
Kingspan a leading position in both Insulated Panels and Insulation
Boards on the Iberian Peninsula and strengthens our emerging
Insulated Panels presence in Latin America. It also provides an
excellent technology platform for blended chemical systems similar
to those used throughout the wider Kingspan Group.
We also advanced our position in Central Europe with the
acquisition in July 2018 of Balex Metal, a Polish manufacturer of
Insulated Panels and Insulation Boards. Balex has a strong market
presence locally and in surrounding export markets. It complements
our existing presence in the region and brings with it two well
invested manufacturing facilities.
In July we invested in the Kingspan Jindal business in India
opening the door to a longer term conversion opportunity in the
region.
- Penetration growth and conversion from traditional insulation
and building methods has been a core driver of our success to date.
As energy consumption, energy conservation, and energy sources
become increasingly important challenges for the world, demand
should rise for product technologies which address this urgent
agenda. Buildings consume approximately 40% of global energy and
Kingspan's solutions are designed to dramatically curtail the
environmental damage from building emissions.
- We are Planet Passionate at Kingspan. We are committed to
achieving 100% Net Zero Energy by 2020, and stand alone within our
industry in having this goal. Our product technology provides
designers, developers and owners the means with which to equally
embrace a lower energy future. Circularity is becoming crucial, and
our products are reusable, recyclable and increasingly comprise
recycled PET with a commitment to more than doubling this source
within the coming five years. We are developing initiatives to
harvest recycled raw materials from both land and ocean.
Insulated Panels
FY '18 FY '17 Change
EURm EURm
---------------- -------- -------- ---------
Turnover 2,823.1 2,328.5 +21% (1)
Trading Profit 281.8 233.3 +21%
Trading Margin 10.0% 10.0% -
---------------- -------- -------- ---------
(1) Comprising underlying +6%, currency -3% and acquisitions +18%
Mainland Europe
The Continental European region performed well overall for our
Insulated Panels businesses. France in particular had an excellent
year, as did the Netherlands. Germany and Belgium delivered solid
outcomes and market penetration in the Nordics advanced further as
the region increasingly adopts advanced methods. Activity in
Central Europe was mixed and the focus on reviving margins in this
market resulted in a strong operating outcome, further bolstered by
the addition of Balex to the portfolio. Early in the year we
entered the Iberian market with the acquisition of Synthesia which
in both the home and export markets delivered an excellent first
year's performance, and ahead of plan.
Americas
Volume, margin and profitability all improved considerably in
North America during 2018 as penetration for Insulated Panels
continued to grow, and as the steep cost inflation experienced
earlier in the year was passed through to market. The temperature
controlled environments segment performed well and the adoption of
our insulated architectural facades range continued to outpace
traditional construction methods across a wide variety of building
applications. 2018 was also our first full year of operation in
Latin America through the Kingspan Isoeste partnership in Brazil
and PanelMET in Colombia. Both businesses made significant progress
over the prior year and have begun to deliver broader technical and
operational synergies. Across the Americas in total, the business
exited the year with an order bank well ahead of prior year.
UK
Sales volumes were strong towards the end of the year bringing
the full year on year output broadly in line with 2017. This was
achieved despite growing uncertainty and a construction market
backdrop that weakened towards year-end. Whilst the project
pipeline is in reasonable shape, the growing deficit in confidence
has resulted in ongoing postponements. We expect this situation to
prevail until the political and economic landscape is more certain,
and will focus our efforts on accelerating QuadCore(TM) and
Kingspan Facades growth to help compensate for an anticipated
general contraction in building activity.
Asia Pacific & Middle East
Having experienced a challenging 2017, the business in
Australasia regained momentum in 2018 with both the order bank and
specification pipeline well improved by year-end. This bodes
positively for the first half of 2019. Meanwhile in Turkey and the
Middle East, growth also resumed and a healthy project pipeline
should provide a solid foundation from which to advance long term
in the region. During the year we also entered India through the
Kingspan Jindal partnership which provides us with two
manufacturing facilities in this relatively embryonic and exciting
new frontier.
Ireland
Not surprisingly, construction activity in Ireland has expanded
once again and at a more digestible pace than in the past. The
non-residential segment which this business unit serves experienced
a significant uplift in 2018 and we would anticipate this trend
continuing into 2019.
Insulation Boards
FY '18 FY '17 Change
EURm EURm
---------------- ------- ------- ---------
Turnover 864.1 769.4 +12% (1)
Trading Profit 105.1 91.2 +15%
Trading Margin 12.2% 11.9% +30bps
---------------- ------- ------- ---------
(1) Comprising underlying +2%, currency -2% and acquisitions
+12%.
UK
The business had a strong start to 2018 which was largely fueled
by continuing penetration growth of Kooltherm(R) coupled with the
selling price inflationary impact of rising raw material costs.
Since then, and as indicated at half year, these prices have
reversed somewhat leading to corresponding deflation in the price
of our PIR based products. This general trend, also experienced in
other markets, has resulted in PIR regaining share from traditional
materials. More broadly in the UK however, the political backdrop
has meant that demand for building products has eased in recent
months and is likely to weaken further if this uncertainty
persists.
Mainland Europe
Having had a weak start to the year, the demand for advanced
insulation in Mainland Europe improved significantly in the second
half of the year. The scarcity of some raw materials had hampered
growth earlier in the year. Activity in the Netherlands was
particularly strong and our presence in the Nordics, which is
dominated by traditional fibrous materials, continued to advance in
anticipation of our upcoming Kooltherm(R) facility which we expect
to commission in the fourth quarter of this year. Our first year
with the Synthesia Insulation business in Spain, has been very
satisfactory at a time of gradual recovery in the Iberian market.
This business has been further bolstered by growth in exports as it
delivers its technologies across a broad international base of end
markets.
Americas
Again, following a slow start to 2018, our business in North
America improved as the year progressed. The investment made in
2017 in a new XPS line in Winchester Virginia is now fully
operational and as its capacity becomes increasingly utilised our
focus will shift to assessing further locations to establish a
future manufacturing presence. The specification pipeline for
Kooltherm(R) has grown substantially, albeit from a small base.
Whilst this is currently supported by supply from Europe it is our
intention in the medium term to manufacture this technology locally
in the USA.
Asia Pacific & Middle East
This region has again delivered strong growth for the division
in 2018. The business is now providing solutions to a broader set
of applications and is supported by both the new PIR line installed
earlier in the year, and a new phenolic board plant. The latter
will be aimed at servicing the increasing demand for advanced
insulation in HVAC applications in the UAE and beyond.
Ireland
The revenue growth experienced during the first half continued
through the remainder of the year, largely driven by Kooltherm(R)
and strong PIR pricing, although the latter eased somewhat towards
year-end. Raw material deflation has led to some price erosion of
PIR which we anticipate will stabilise in the near-term.
Light & Air
FY '18 FY '17 Change
EURm EURm
---------------- ------- ------- ---------
Turnover 291.8 204.7 +43% (1)
Trading Profit 21.5 14.8 +45%
Trading Margin 7.4% 7.2% +20bps
---------------- ------- ------- ---------
(1) Comprising underlying +7%, currency -1% and acquisitions
+37%.
Continental Europe, particularly Germany, performed well and has
continued to do so into the early part of 2019. The Benelux was a
little more subdued as the project pipeline was lower than in
recent years, although this picture has improved into early 2019.
Southern Europe grew marginally and the relocation of this business
into a state-of-the-art manufacturing facility in Lyon, France will
provide capacity for growth, and play a key role in supporting the
substantial daylighting requirement across the Middle East.
In North America the specification bank for the high-end
UniQuad(R) wall-lighting system has grown considerably during the
year. Order intake outpaced dispatches during the year and this
augurs well for 2019. In contrast to this, more generic
roof-lighting systems have become increasingly competitive
resulting in an element of margin pressure. This pattern is
expected to improve during the current year and over time the
integrated sales effort with our Insulated Panels business is
expected to deliver meaningful sales leverage.
Water & Energy (formerly Environmental)
FY '18 FY '17 Change
EURm EURm
---------------- ------- ------- ---------
Turnover 202.9 179.8 +13% (1)
Trading Profit 14.2 16.2 -12%
Trading Margin 7.0% 9.0% -200bps
---------------- ------- ------- ---------
(1) Comprising underlying +3%, currency impact -3% and acquisitions +13%
Underlying sales revenue was relatively stable during 2018.
Margins were affected by costs incurred on the exit from micro wind
and solar thermal activities and also by acquisition expenses
related to the Norwegian investment. The UK weakened across most
product segments in the second half, Ireland performed well, as did
much of Mainland Europe. Integration of the VPI acquisition in the
Nordics is progressing and provides a new growth frontier in the
waste water management category which we expect will feature
prominently in the division's future. In Australia, the rainwater
harvesting business has performed very strongly in recent years,
particularly in the residential segment in New South Wales. With
this sector easing back, we expect demand for rainwater systems in
that region to moderate but aim to compensate for this with a wider
product offering and growth initiatives in other states.
Data & Flooring Technology (formerly Access Floors)
FY '18 FY '17 Change
EURm EURm
---------------- ------- ------- --------
Turnover 190.6 185.7 +3% (1)
Trading Profit 22.6 22.0 +3%
Trading Margin 11.9% 11.8% +10bps
---------------- ------- ------- --------
(1) Comprising underlying +2%, currency -3% and acquisitions +4%
The re-naming of this division is a reflection of the evolution
of the division's product offering since it started life in
Kingspan as Access Floors in isolation. The portfolio now includes
a wide range of sub-structure technology and air management
solutions for datacentres, as well as a much wider offering on
floor finishes.
In the first half of the year, the performance of the business
in the UK was in contrast to the general trend in office
construction performing robustly through the second half. Whilst
the requirement for access floors is expected to contract
marginally through 2019, growth is anticipated in data solutions
activity, a sector which has been a key growth area for the
division in recent years. This is also likely to be the case in
North America and Australia where we expect to deliver tangible
progress in the year ahead. In addition, during 2018 our presence
grew in Continental Europe through the business acquired in Belgium
in late 2017.
Acquisitions
During the year we completed eight acquisitions with a
consideration of almost EUR470m. These included the leading
insulated panel and board businesses in Iberia, a strong player in
the insulated panel business in Central and Eastern Europe and a
partnership with the market leader in the insulated panel market in
India.
Financial Review
The Financial Review provides an overview of the Group's
financial performance for the year ended 31 December 2018 and of
the Group's financial position at that date.
Overview of results
Group revenue increased by 19% to EUR4.4bn (2017: EUR3.7bn) and
trading profit increased by 18% to EUR445.2m (2017: EUR377.5m) with
a modest decrease of 10 basis points in the Group's trading profit
margin to 10.2% (2017: 10.3%). Basic EPS for the year was 184.0
cent (2017: 159.0 cent), representing an increase of 16%.
The Group's underlying sales and trading profit growth by
division are set out below:
Sales Underlying Currency Acquisition Total
---------------------------- ----------- --------- ------------ ------
Insulated Panels +6% -3% +18% +21%
Insulation Boards +2% -2% +12% +12%
Light & Air +7% -1% +37% +43%
Water & Energy +3% -3% +13% +13%
Data & Flooring Technology +2% -3% +4% +3%
----------- --------- ------------ ------
Group +5% -3% +17% +19%
----------- --------- ------------ ------
The Group's trading profit measure is earnings before interest,
tax, amortisation of intangibles and non trading items:
Trading Profit Underlying Currency Acquisition Total
---------------------------- ----------- --------- ------------ ------
Insulated Panels +11% -3% +13% +21%
Insulation Boards +4% -2% +13% +15%
Light & Air -7% - +52% +45%
Water & Energy -14% -3% +5% -12%
Data & Flooring Technology +5% -3% +1% +3%
----------- --------- ------------ ------
Group +7% -2% +13% +18%
----------- --------- ------------ ------
The key drivers of sales and trading profit performance in each
division are set out in the Business Review.
Finance costs (net)
Finance costs for the year increased by EUR2.2m to EUR18.1m
(2017: EUR15.9m). A net non-cash credit of EUR0.6m (2017: credit of
EUR0.6m) was recorded in respect of swaps on the Group's USD
private placement notes. The Group's net interest expense on
borrowings (bank and loan notes) was EUR18.0m (2017: EUR16.1m).
This increase reflects higher average gross and net debt levels in
2018, due to acquisition spend. The interest expense is driven
extensively by gross debt balances with cash yields, although
improving, still low in the current environment.
Taxation
The tax charge for the year was EUR69.1m (2017: EUR60.6m) which
represents an effective tax rate of 17.1% (2017: 17.5%). The
decrease in the effective rate reflects, primarily, the change in
the geographical mix of earnings year on year and reductions in
certain territorial tax rates.
Divisional reporting
The Group renamed two pre-existing divisions during the year to
more appropriately reflect the business activity in each case. The
divisions are now named Water & Energy (formerly Environmental)
and Data & Flooring Technology (formerly Access Floors).
Dividends
The Board has proposed a final dividend of 30.0 cent per
ordinary share payable on 10 May 2019 to shareholders registered on
the record date of 29 March 2019. When combined with the interim
dividend of 12.0 cent per share, the total dividend for the year
increased to 42.0 cent (2017: 37.0 cent), an increase of 13.5%.
Retirement benefits
The primary method of pension provision for current employees is
by way of defined contribution arrangements. The Group has two
legacy defined benefit schemes in the UK which are closed to new
members and to future accrual. In addition, the Group assumed a
number of smaller defined benefit pension liabilities in Mainland
Europe through acquisitions completed in recent years. The net
pension liability in respect of all defined benefit schemes was
EUR13.1m (2017: EUR13.6m) as at 31 December 2018.
Intangible assets and goodwill
Intangible assets and goodwill increased during the year by
EUR316.1m to EUR1,502.1m (2017: EUR1,186.0m). Intangible assets and
goodwill of EUR340.1m were recorded in the year relating to
acquisitions and additions completed by the Group, offset by annual
amortisation of EUR22.2m (2017: EUR15.7m) and a small decrease due
to year end exchange rates used to translate intangible assets and
goodwill other than those denominated in euro.
Key performance indicators - financial
The Group has a set of financial key performance indicators
(KPIs) which are set out in the table below. These KPIs are used to
measure the financial and operational performance of the Group and
are used to track progress continually and also in achieving medium
and long term targets.
Key performance indicators 2018 2017
---------------------------- ------ ------
Basic EPS growth 16% 11%
Sales growth 19% 18%
Trading margin 10.2% 10.3%
Free cashflow (EURm) 308.4 198.5
Return on capital employed 16.8% 17.8%
Net debt/EBITDA 1.4x 1.05x
---------------------------- ------ ------
(a) Basic EPS growth. The growth in EPS is accounted for
primarily by an 18% increase in trading profit, partially offset by
an increase in intangible amortisation generating a 17% increase in
profit after tax. The minority interest amount increased year on
year leading to a basic EPS increase of 16%.
(b) Sales growth of 19% (2017: 18%) was driven by a 17%
contribution from acquisitions, a 5% increase in underlying sales
and a 3% decrease due to the effect of currency translation. A key
contributor to underlying sales growth in the year was price growth
necessitated by raw material inflation recovery in the first half
of the year. Furthermore, sales volumes were positive in most key
end markets.
(c) Trading margin by division is set out below:
2018 2017
---------------------------- ------ ------
Insulated Panels 10.0% 10.0%
Insulation Boards 12.2% 11.9%
Light & Air 7.4% 7.2%
Water & Energy 7.0% 9.0%
Data & Flooring Technology 11.9% 11.8%
---------------------------- ------ ------
The Insulated Panels division trading margin was stable year on
year reflecting ongoing progress in sales of QuadCore(TM) and the
market mix of sales. The trading margin improvement in the
Insulation Boards division reflects a positive Kooltherm(R) mix and
some relief on raw material prices towards the end of the year. The
decrease in the Water & Energy trading margin reflects, in the
main, the impact of costs associated with the exit from small scale
wind and solar thermal activity. The increased trading margin in
Light & Air reflects an improved margin performance overall in
Europe which offset more subdued margins in certain products in the
US. The modest increase in trading margin in Data & Flooring
Technology reflects the geographic market and product mix of sales
year on year.
(d) Free cashflow is an important indicator and it reflects the
amount of internally generated capital available for re-investment
in the business or for distribution to shareholders.
Free cashflow 2018 2017
EURm EURm
----------------------------- -------- -------
EBITDA* 521.2 441.7
Non-cash items 13.4 9.4
Movement in working capital 2.3 (85.3)
Pension contributions (0.8) (0.9)
Movement in provisions (5.8) (2.4)
Net capital expenditure (131.3) (85.6)
Net interest paid (15.6) (16.8)
Income taxes paid (75.0) (61.6)
-------- -------
Free cashflow 308.4 198.5
-------- -------
*Earnings before finance costs, income taxes, depreciation,
amortisation and non trading items
Working capital at year end was EUR543.9m (2017: EUR477.8m) and
represents 11.5% (2017: 12.4%) of annualised turnover based on
fourth quarter sales. This metric is closely managed and monitored
throughout the year and is subject to a certain amount of seasonal
variability associated with trading patterns and the timing of
significant purchases of steel and chemicals. The decrease year on
year reflects a 90 basis points reduction in underlying working
capital levels due mainly to lower inventory days on hand.
(e) Return on capital employed, calculated as operating profit
divided by total equity plus net debt, was 16.8% in 2018 (2017:
17.8%) or 17.1% including the annualised impact of acquisitions.
The creation of shareholder value through the delivery of long term
returns well in excess of the Group's cost of capital is a core
principle of Kingspan's financial strategy. The increase in
profitability together with the deployment of further capital has
maintained returns on capital during the year.
(f) Net debt to EBITDA measures the ratio of net debt to
earnings and at 1.4x (2017: 1.05x) is comfortably less than the
Group's banking covenant of 3.5x in both 2018 and 2017.
Acquisitions and capital expenditure
During the period the Group made the following acquisitions for
a total upfront cash consideration of EUR469.2m with an additional
deferred amount of EUR30m payable in April 2019.
-- On 7 March 2018, the purchase of 100% of the Synthesia Group
for an initial cash amount of EUR213.4m plus a deferred amount of
EUR30m payable in April 2019.
-- On 8 May 2018, the purchase of 100% of Vestfold Plastindustri
AS, a Norwegian water treatment business for a total cash
consideration of EUR12.3m.
-- On 4 July 2018, the purchase of 100% of Balex Metal
Sp.z.o.o., a Polish based manufacturer of insulated panels and
insulation boards for a cash amount of EUR197.6m.
-- On 9 July 2018, the purchase of 51% of Jindal Mectec Private
Limited, an Indian manufacturer of insulated panels for a cash
amount of EUR22.8m
-- An investment of EUR8.2m in Invicara PTE Limited, a Building
Information Modelling solution provider with global reach.
-- Further capital outlay of EUR14.9m was made with respect to
business within Light & Air and Water & Energy together
with some residual payments arising on the finalisation of
completion accounts for prior year acquisitions.
Capital structure and Group financing
The Group funds itself through a combination of equity and debt.
Debt is funded through syndicated and bilateral bank facilities and
private placement loan notes. The primary bank debt facility is a
EUR500m revolving credit facility, EUR120m of which was drawn at
year end and which matures in June 2022. As at 31 December 2018,
the Group also had bilateral bank facilities of EUR50m, which were
fully drawn. Private placement loan note funding net of related
derivatives totals EUR808m. The weighted average maturity of the
notes is 5.6 years, including a private placement of EUR175m
completed on 8 December 2017 which was drawn on 31 January
2018.
The Group had significant available undrawn facilities and cash
balances which, in aggregate, were c.EUR675m at 31 December 2018
and provide appropriate headroom for ongoing operational
requirements and development funding.
Net debt
Net debt increased by EUR264.4m during 2018 to EUR728.3m (2017:
EUR463.9m). This is analysed in the table below:
Movement in net debt 2018 2017
EURm EURm
----------------------------------- -------- --------
Free cashflow 308.4 198.5
Acquisitions (472.3) (168.2)
Share issues 0.1 0.2
Repurchase of shares - (1.5)
Dividends paid (68.3) (61.7)
Dividends paid to non-controlling (0.1) -
interests
-------- --------
Cashflow movement (232.2) (32.7)
Exchange movements on translation (2.2) (3.3)
Deferred consideration (30.0) -
-------- --------
Increase in net debt (264.4) (36.0)
Net debt at start of year (463.9) (427.9)
-------- --------
Net debt at end of year (728.3) (463.9)
-------- --------
Key financial covenants
The majority of Group borrowings are subject to primary
financial covenants calculated in accordance with lenders' facility
agreements:
- A maximum net debt to EBITDA ratio of 3.5 times; and
- A minimum EBITDA to net interest coverage of 4 times.
The performance against these covenants in the current and
comparative year is set out below:
2018 2017
Covenant Times Times
--------------------- ------------- ------ ------
Net debt/EBITDA Maximum 3.5 1.4 1.05
EBITDA/Net interest Minimum 4.0 28.8 27.8
--------------------- ------------- ------ ------
Investor relations
Kingspan is committed to interacting with the international
financial community to ensure a full understanding of the Group's
strategic plans and its performance against these plans. During the
year, the executive management and investor team presented at three
capital market conferences, hosted a capital markets day at our
Holywell facility in Wales and conducted 311 institutional
one-on-one and group meetings.
Share price and market capitalisation
The Company's shares traded in the range of EUR32.60 to EUR43.60
during the year. The share price at 31 December 2018 was EUR37.38
(31 December 2017: EUR36.41) giving a market capitalisation at that
date of EUR6.7bn (2017: EUR6.5bn). Total shareholder return for
2018 was 3.8%.
Impact of Brexit
At the time of writing the exact form of the UK's exit from the
European Union is not clear. Given our manufacturing base in both
the UK and the Eurozone Kingspan is well positioned to deal with
the outcome in whatever form it takes, albeit in a context of the
wider macro economic conditions.
Financial risk management
The Group operates a centralised treasury function governed by a
treasury policy approved by the Group Board. This policy primarily
covers foreign exchange risk, credit risk, liquidity risk and
interest rate risk. The principal objective of the policy is to
minimise financial risk at reasonable cost. Adherence to the policy
is monitored by the CFO and the Internal Audit function. The Group
does not engage in speculative trading of derivatives or related
financial instruments.
Looking Ahead
2019 has started well for the Group with like-for-like sales
revenue and volume ahead of the same period last year. Order intake
and the order bank in many of our key markets are ahead of prior
year, although some exceptions exist. As the competitive dynamics
of the various raw materials in insulation have changed in recent
months Kingspan's proprietary non-fibrous cores have grown share
and, in general, penetration of advanced insulation has improved
following the supply turbulence earlier in 2018 which had upset
this momentum.
Whilst these indicators bode well for our near-term future, we
remain acutely mindful of the increasingly negative economic
rhetoric, not alone in the UK, that could well impact the appetite
for investment in construction later in the year. Setting aside
this macro concern, and any unavoidable effect it may have on
Kingspan, we remain resolutely focused on the delivery of our
long-term strategy.
On behalf of the Board
Gene M. Murtagh Geoff Doherty
Chief Executive Officer Chief Financial Officer
22 February 2019 22 February 2019
Kingspan Group plc
Group Condensed Income Statement
for the year ended 31 December 2018
2018 2017
EURm EURm
Note
REVENUE 2 4,372.5 3,668.1
Cost of sales (3,158.0) (2,615.4)
---------- ----------
GROSS PROFIT 1,214.5 1,052.7
Operating costs, excluding intangible
amortisation (769.3) (675.2)
---------- ----------
TRADING PROFIT 2 445.2 377.5
Intangible amortisation (22.2) (15.7)
Non trading items 3 - 0.6
OPERATING PROFIT 423.0 362.4
Finance expense 4 (19.5) (16.4)
Finance income 4 1.4 0.5
---------- ----------
PROFIT FOR THE YEAR BEFORE INCOME
TAX 404.9 346.5
Income tax expense (69.1) (60.6)
---------- ----------
NET PROFIT FOR THE YEAR FROM CONTINUING
OPERATIONS 335.8 285.9
---------- ----------
Attributable to owners of Kingspan
Group plc 330.9 284.3
Attributable to non-controlling
interests 4.9 1.6
---------- ----------
335.8 285.9
---------- ----------
EARNINGS PER SHARE FOR THE YEAR
Basic 9 184.0c 159.0c
Diluted 9 182.3c 157.3c
Gene M. Murtagh Geoff Doherty 22 February
2019
Chief Executive Officer Chief Financial Officer
Kingspan Group plc
Group Condensed Statement of Comprehensive Income
for the year ended 31 December 2018
2018 2017
EURm EURm
Profit for the year 335.8 285.9
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating
foreign operations 4.0 (85.2)
Effective portion of changes in
fair value of cash flow hedges 0.3 (2.1)
Items that will not be reclassified subsequently to profit or
loss
Actuarial gains on defined benefit
pension schemes 0.9 1.0
Income taxes relating to actuarial
gains on defined benefit pension
schemes (0.2) (0.2)
---------- ---------
Total other comprehensive income 5.0 (86.5)
---------- ---------
Total comprehensive income for
the year 340.8 199.4
---------- ---------
Attributable to owners of Kingspan
Group plc 337.1 201.0
Attributable to non-controlling
interests 3.7 (1.6)
---------- ---------
340.8 199.4
---------- ---------
Kingspan Group plc
Group Condensed Statement of Financial Position
As at 31 December 2018
2018 2017
EURm EURm
ASSETS
NON-CURRENT ASSETS
Goodwill 1,391.0 1,095.7
Other intangible assets 111.1 90.3
Financial asset 8.2 -
Property, plant and equipment 850.5 703.3
Derivative financial instruments 27.4 22.2
Retirement benefit assets 7.4 7.9
Deferred tax assets 15.6 16.5
---------- ----------
2,411.2 1,935.9
---------- ----------
CURRENT ASSETS
Inventories 524.9 447.1
Trade and other receivables 798.6 675.9
Derivative financial instruments 0.2 0.1
Cash and cash equivalents 294.5 176.6
---------- ----------
1,618.2 1,299.7
TOTAL ASSETS 4,029.4 3,235.6
---------- ----------
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 779.8 645.2
Provisions for liabilities 47.5 52.3
Derivative financial instruments - 0.1
Deferred consideration 59.5 6.4
Interest bearing loans and
borrowings 53.2 1.2
Current income tax liabilities 78.8 80.9
---------- ----------
1,018.8 786.1
---------- ----------
NON-CURRENT LIABILITIES
Retirement benefit obligations 20.5 21.5
Provisions for liabilities 56.8 48.7
Interest bearing loans and
borrowings 967.0 661.5
Deferred tax liabilities 40.8 38.7
Deferred contingent consideration 136.6 111.1
1,221.7 881.5
---------- ----------
TOTAL LIABILITIES 2,240.5 1,667.6
---------- ----------
NET ASSETS 1,788.9 1,568.0
---------- ----------
EQUITY
Share capital 23.7 23.6
Share premium 95.6 95.6
Capital redemption reserve 0.7 0.7
Treasury shares (12.7) (14.0)
Other reserves (273.2) (220.5)
Retained earnings 1,916.2 1,642.7
---------- ----------
EQUITY ATTRIBUTABLE TO OWNERS
OF KINGSPAN GROUP PLC 1,750.3 1,528.1
NON-CONTROLLING INTEREST 38.6 39.9
---------- ----------
TOTAL EQUITY 1,788.9 1,568.0
---------- ----------
Gene M. Murtagh Geoff Doherty 22 February 2019
Chief Executive Officer Chief Financial Officer
Kingspan Group plc
Group Condensed Statement of Changes in Equity
for the year ended 31 December 2018
Capital Cash Share Total
Share Share Redemption Treasury Translation Flow Based Put Attributable Non- Total
Capital Premium Reserve Shares Reserve Hedging Payment Revaluation Option Retained to Owners Controlling Equity
Reserve Reserve Reserve Liability Earnings of the Interest
Reserve Parent
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
Balance at 1
January 2018 23.6 95.6 0.7 (14.0) (177.2) 0.2 35.2 0.7 (79.4) 1,642.7 1,528.1 39.9 1,568.0
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Transactions with owners recognised directly in equity
Employee share
based
compensation 0.1 - - - - - 12.3 - - - 12.4 - 12.4
Tax on employee
share
based
compensation - - - - - - (2.0) - - 2.9 0.9 - 0.9
Exercise or
lapsing of
share options - - - 1.3 - - (8.6) - - 7.3 - - -
Dividends - - - - - - - - - (68.3) (68.3) (0.1) (68.4)
Transactions
with
non-controlling
interests:
Arising on
acquisition - - - - - - - - (24.5) - (24.5) (4.9) (29.4)
Fair value
movement - - - - - - - - (35.4) - (35.4) - (35.4)
Transactions
with owners 0.1 - - 1.3 - - 1.7 - (59.9) (58.1) (114.9) (5.0) (119.9)
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Total
comprehensive
income
for the year
Profit for the
year - - - - - - - - - 330.9 330.9 4.9 335.8
Other
comprehensive
income:
Items that may be reclassified subsequently to profit or loss
Cash flow
hedging in
equity
- current year - - - - - 0.3 - - - - 0.3 - 0.3
- tax impact - - - - - - - - - - - - -
Exchange
differences on
translating
foreign
operations - - - - 5.2 - - - - - 5.2 (1.2) 4.0
Items that will not be reclassified subsequently to profit or loss
Actuarial gains
of defined
benefit pension
scheme - - - - - - - - - 0.9 0.9 - 0.9
Income taxes
relating
to actuarial
gains on
defined benefit
pension
scheme - - - - - - - - - (0.2) (0.2) - (0.2)
Total
comprehensive
income
for the year - - - - 5.2 0.3 - - - 331.6 337.1 3.7 340.8
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Balance at 31
December
2018 23.7 95.6 0.7 (12.7) (172.0) 0.5 36.9 0.7 (139.3) 1,916.2 1,750.3 38.6 1,788.9
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Kingspan Group plc
Group Condensed Statement of Changes in Equity
for the year ended 31 December 2017
Capital Cash Share Total
Share Share Redemption Treasury Translation Flow Based Put Attributable Non- Total
Capital Premium Reserve Shares Reserve Hedging Payment Revaluation Option Retained to Owners Controlling Equity
Reserve Reserve Reserve Liability Earnings of the Interest
Reserve Parent
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
Balance at 1
January 2017 23.4 95.6 0.7 (12.5) (95.2) 2.3 33.3 0.7 - 1,406.6 1,454.9 16.6 1,471.5
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Transactions with owners recognised directly in equity
Employee share
based
compensation 0.2 - - - - - 10.7 - - - 10.9 - 10.9
Tax on employee
share
based
compensation - - - - - - 0.8 - - 3.1 3.9 - 3.9
Exercise or
lapsing of
share options - - - - - - (9.6) - - 9.6 - - -
Repurchase of
shares - - - (1.5) - - - - - - (1.5) - (1.5)
Dividends - - - - - - - - - (61.7) (61.7) - (61.7)
Transactions
with
non-controlling
interests:
Arising on
acquisition - - - - - - - - (79.1) - (79.1) 24.9 (54.2)
Fair value
movement - - - - - - - - (0.3) - (0.3) - (0.3)
Dividends paid - - - - - - - - - - - - -
to
non-controlling
interest
Transactions
with owners 0.2 - - (1.5) - - 1.9 - (79.4) (49.0) (127.8) 24.9 (102.9)
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Total
comprehensive
income
for the year
Profit for the
year - - - - - - - - - 284.3 284.3 1.6 285.9
Other
comprehensive
income:
Items that may be reclassified subsequently to profit or loss
Cash flow
hedging in
equity
- current year - - - - - (2.1) - - - - (2.1) - (2.1)
- tax impact - - - - - - - - - - - - -
Exchange
differences on
translating
foreign
operations - - - - (82.0) - - - - - (82.0) (3.2) (85.2)
Items that will not be reclassified subsequently to profit or loss
Actuarial gains
of defined
benefit pension
scheme - - - - - - - - - 1.0 1.0 - 1.0
Income taxes
relating
to actuarial
gains on
defined benefit
pension
scheme - - - - - - - - - (0.2) (0.2) - (0.2)
Total
comprehensive
income
for the year - - - - (82.0) (2.1) - - - 285.1 201.0 (1.6) 199.4
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Balance at 31
December
2017 23.6 95.6 0.7 (14.0) (177.2) 0.2 35.2 0.7 (79.4) 1,642.7 1,528.1 39.9 1,568.0
--------- --------- ------------ ---------- ------------- --------- --------- ------------- ----------- ---------- -------------- ------------- ----------
Kingspan Group plc
Group Condensed Statement of Cash Flows
for the year ended 31 December 2018
2018 2017
Note EURm EURm
OPERATING ACTIVITIES
Cash generated from operations 7 530.3 362.5
Income tax paid (75.0) (61.6)
Interest paid (17.0) (17.3)
-------- ---------
Net cash flow from operating activities 438.3 283.6
-------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (144.2) (85.0)
Additions to intangible assets - (4.8)
Proceeds from disposals of property,
plant and equipment 12.9 4.2
Proceeds from disposals of trade and
assets - 5.7
Purchase of subsidiary undertakings 10 (461.0) (173.9)
Purchase of financial fixed asset (8.2) -
Payment of deferred contingent consideration (3.1) -
in respect of acquisitions
Interest received 1.4 0.5
-------- ---------
Net cash flow from investing activities (602.2) (253.3)
-------- ---------
FINANCING ACTIVITIES
Drawdown of loans 6 445.0 30.4
Repayment of loans 6 (92.8) (41.8)
Settlement of derivative financial instrument - 8.0
Increase in lease finance 6 0.1 0.8
Proceeds from share issues 0.1 0.2
Repurchase of shares - (1.5)
Dividends paid to non-controlling interests (0.1) -
Dividends paid 8 (68.3) (61.7)
-------- ---------
Net cash flow from financing activities 284.0 (65.6)
-------- ---------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 6 120.1 (35.3)
Effect of movements in exchange rates
on cash held (2.2) (10.1)
Cash and cash equivalents at the beginning
of the year 176.6 222.0
-------- ---------
CASH AND CASH EQUIVALENTS AT THE
OF THE YEAR 294.5 176.6
-------- ---------
Notes to the Preliminary Results
for the year ended 31 December 2018
1 GENERAL INFORMATION
The financial information presented in this report has been
prepared using accounting policies consistent with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and as set out in the Group's annual financial statements in
respect of the year ended 31 December 2017 except as noted below.
The financial information does not include all the information and
disclosures required in the annual financial statements. The Annual
Report will be distributed to shareholders and made available on
the Company's website www.kingspan.com in due course. It will also
be filed with the Company's annual return in the Companies
Registration Office. The auditors have reported on the financial
statements for the year ended 31 December 2018 and their report was
unqualified and did not contain any matters to which attention was
drawn by way of emphasis. The financial information for the year
ended 31 December 2017 represents an abbreviated version of the
Group's statutory financial statements on which an unqualified
audit report was issued and which have been filed with the
Companies Registration Office.
Basis of preparation and accounting policies
The financial information contained in this Preliminary
Statement has been prepared in accordance with the accounting
policies set out in the last annual financial statements with the
exception of changes in accounting policy in respect of IFRS 9,
Financial Instruments and IFRS 15, Revenue from Contracts with
Customers which are described below.
IFRS does not define certain Income Statement headings. For
clarity, the following are the definitions as applied by the
Group:
- Trading profit refers to the operating profit generated by the
businesses before intangible asset amortisation and non trading
items.
- Trading margin refers to the trading profit, as calculated above, as a percentage of revenue.
- Operating profit is profit before income taxes and net finance costs.
The following standards are effective from 1 January 2018.
New and amended standards and interpretations effective during
2018
Financial instruments
IFRS 9, Financial Instruments, replaces IAS 39, Financial
Instruments: Recognition and Measurement. IFRS 9 addresses the
classification, measurement and derecognition of financial assets
and liabilities, introduces new rules for hedge accounting and a
new impairment model for financial assets. The Group has adopted
IFRS 9 from 1 January 2018.
IFRS 9 largely retains the requirements of IAS 39 for the
classification and measurement of financial liabilities but
eliminates the previous IAS 39 categories for financial assets. The
vast majority of the Group's financial assets are trade receivables
and cash and as a result the classification and measurement changes
do not have a material impact on the Group's consolidated financial
statements.
For trade receivables, the Group applies the IFRS 9 simplified
approach to measure expected credit losses which uses a lifetime
expected loss allowance. Given historic loss rates, normal
receivable ageing and the significant portion of trade receivables
that are within agreed terms, the change in impairment methodology
as a result of implementing IFRS 9 did not have a material impact
on the Group's financial results.
The hedge accounting requirements in IFRS 9 are optional. Under
the transition requirements of the new standard, the Group may
choose to apply, as its accounting policy IAS 39. The Group have
decided not to adopt the hedge accounting requirements under IFRS 9
and will continue to apply IAS 39. This decision has no impact on
the current effective hedging relationships.
The cumulative effect method has been adopted upon transitioning
to IFRS 9. The impact of adopting IFRS 9 on our consolidated
financial statements was not material for the Group and there was
no adjustment to retained earnings on application at 1 January
2018.
Revenue recognition
IFRS 15, Revenue from Contracts with Customers, replaces IAS 18,
Revenue and IAS 11, Construction Contracts and related
interpretations. IFRS 15 establishes a five-step model for
reporting the nature, amount, timing and uncertainty of revenue and
cash flows arising from contracts with customers. IFRS 15 specifies
how and when revenue should be recognised as well as requiring
enhanced disclosures. The Group has adopted IFRS 15 from 1 January
2018, using the modified retrospective approach and has not
restated comparatives for 2017.
The Group used the five-step model to develop an impact
assessment framework to assess the impact of IFRS 15 on the Group's
revenue transactions. The results of our IFRS 15 assessment
framework and contract reviews indicated that the impact of
applying IFRS 15 on our consolidated financial statements was not
material for the Group and there was no adjustment to retained
earnings or material impact on the timing of revenue recognition on
application of the new rules at 1 January 2018.
Revenue is recognised when control of goods is transferred to
the customer, which for the vast majority of the Group is at a
point in time when delivery has taken place in accordance with the
terms of sale.
New and amended standards and interpretations issued but not yet
effective or early adopted
IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both the
lessee and the lessor. For lessees, IFRS 16 eliminates the
classification of leases as either operating leases or finance
leases and introduces a single lessee accounting model whereby all
leases are accounted for as finance leases, with some exemptions
for short-term and low-value leases. It also includes an election
which permits a lessee not to separate non-lease components (e.g.
maintenance) from lease components and instead capitalise both the
lease cost and associated non-lease cost. The lessee will recognise
a right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make
lease payments. All right-of-use assets will be measured at the
amount of the lease liability on adoption. IFRS 16 is effective for
annual periods beginning on or after 1 January 2019, and the Group
will apply IFRS 16 from its effective date.
The standard will primarily affect the accounting for the
Group's operating leases. The application of IFRS 16 will result in
the recognition of additional assets and liabilities in the
consolidated statement of financial position and in the
consolidated income statement it will replace the straight-line
operating lease expense with a depreciation charge for the
right-of-use asset and an interest expense on the lease
liabilities.
The Group has completed an initial assessment of the potential
impact of IFRS 16 on its consolidated financial statements. The
Group will adopt the new standard by applying the modified
retrospective approach and will avail of the recognition exemption
for short-term and low-value leases. The Group's non-cancellable
operating lease commitments on an undiscounted basis at 31 December
2018 are detailed in Note 31 to the consolidated financial
statements of the Group's 2018 Annual Report and provides an
indication of the scale of leases held by the Group.
Based on this initial impact assessment, and the current group
profile, the standard is expected to increase debt by EUR140m and
reduce profit before tax by EUR1.4m.
The new standards, amendments to standards and interpretations
are as follows:
Effective Date
- periods beginning
on or after
IFRS 15: Revenue from contracts with customers 1 January 2018
(Note - including amendments to IFRS 15: Effective
date of IFRS 15 (11 September 2015) and clarifications
to IFRS 15 (12 April 2016))
IFRS 9 Financial Instruments (24 July 2014) 1 January 2018
Amendments to IFRS 2: Classification and measurement 1 January 2018
of share based payment transactions (20 June
2016)
Annual Improvements to IFRS 2014 -2016 Cycle: 1 January 2018
(Amendments to IFRS 1 First-time Adoption of
IFRSs and IAS 28 Investments in Associates and
Joint Ventures) (issued on 8 December 2016)
IFRIC Interpretation 22: Foreign Currency Transactions 1 January 2018
and Advance Consideration
Amendments to IAS 40: Transfers of Investment 1 January 2018
Property (December 2016)
IFRS 16: Leases (13 January 2016) 1 January 2019
IFRIC 23: Uncertainty over income tax treatment 1 January 2019
(7 June 2017)
Annual Improvements to IFRS 2015 -2017 Cycle 1 January 2019*
(12 December 2017)
Amendments to IAS 19: Plan amendment, Curtailment 1 January 2019*
or Settlement (8 February 2018)
Amendments to references to the Conceptual Framework 1 January 2020*
in IFRS Standards (29 March 2018)
*not EU endorsed
2 SEGMENT REPORTING
In identifying the Group's operating segments, management based
its decision on the product supplied by each segment and the fact
that each segment is managed and reported separately to the Chief
Operating Decision Maker. These operating segments are monitored
and strategic decisions are made on the basis of segment operating
results.
Operating segments
The Group has the following five operating segments:
Insulated Panels Manufacture of insulated panels, structural
framing and metal facades.
Insulation Boards Manufacture of rigid insulation boards, building
services insulation and engineered timber
systems.
Light & Air Manufacture of daylighting, smoke management
and ventilation systems.
Water & Energy (formerly Manufacture of energy and water solutions
Environmental) and all related service activities.
Data & Flooring Technology Manufacture of datacentre storage solutions
(formerly Access and raised access floors.
Floors)
Analysis by class of business
Segment revenue and disaggregation of revenue
Insulated Insulation Light & Water & Data
Panels Boards Air Energy & Flooring Total
EURm EURm EURm EURm EURm EURm
Total revenue
- 2018 2,823.1 864.1 291.8 202.9 190.6 4,372.5
Total revenue
- 2017 2,328.5 769.4 204.7 179.8 185.7 3,668.1
Disaggregation of revenue 2018
Point of Time 2,816.8 831.8 190.4 201.6 166.2 4,206.8
Over Time 6.3 32.3 101.4 1.3 24.4 165.7
----------- ------------ -------- -------- ------------ --------
2,823.1 864.1 291.8 202.9 190.6 4,372.5
The disaggregation of revenue by geography is set out in more
detail below.
The segments specified above capture the major product lines
relevant to the Group.
The combination of the disaggregation of revenue by product
group, geography and the timing of revenue recognition capture the
key categories of disclosure with respect to revenue. No further
disclosures are required with respect to disaggregation of revenue
other than what has been presented above.
Inter-segment transfers are carried out at arm's length prices
and using an appropriate transfer pricing methodology. As
inter-segment revenue is not material, it is not subject to
separate disclosure in the above analysis. For the purposes of the
segmental analysis, corporate overheads have been allocated to each
division based on their respective revenue for the year.
The Group has initially applied IFRS 15 at 1 January 2018. Under
the transition methods chosen, comparative information is not
restated.
Segment result (profit before net finance expense)
Insulated Insulation Light Water Data Total Total
Panels Boards & Air & Energy & Flooring 2018 2017
EURm EURm EURm EURm EURm EURm EURm
Trading profit
- 2018 281.8 105.1 21.5 14.2 22.6 445.2
Intangible amortisation (12.2) (4.4) (4.4) (1.2) - (22.2)
Operating profit
- 2018 269.6 100.7 17.1 13.0 22.6 423.0
---------- ----------- ------- ---------- ------------
Trading profit
- 2017 233.3 91.2 14.8 16.2 22.0 377.5
Intangible amortisation (9.4) (2.1) (2.6) (1.6) - (15.7)
Non-trading items (2.3) 2.9 - - - 0.6
Operating profit
- 2017 221.6 92.0 12.2 14.6 22.0 362.4
---------- ----------- ------- ---------- ------------
Net finance expense (18.1) (15.9)
-------- --------
Profit for the
year before tax 404.9 346.5
Income tax expense (69.1) (60.6)
Net profit for
the year 335.8 285.9
-------- --------
Segment assets
Insulated Insulation Light Water Data Total Total
Panels Boards & Air & Energy & Flooring 2018 2017
EURm EURm EURm EURm EURm EURm EURm
Assets - 2018 2,231.7 782.2 331.2 180.3 166.3 3,691.7
Assets - 2017 1,792.1 620.4 287.6 164.1 156.0 3,020.2
Derivative financial instruments 27.6 22.3
Cash and cash equivalents 294.5 176.6
Deferred tax assets 15.6 16.5
---------- ----------
Total assets as reported in the Consolidated Statement
of Financial Position 4,029.4 3,235.6
---------- ----------
Segment liabilities
Insulated Insulation Light Water Data Total Total
Panels Boards & Air & Energy & Flooring 2018 2017
EURm EURm EURm EURm EURm EURm EURm
Liabilities -
2018 (755.0) (179.2) (73.2) (58.2) (35.1) (1,100.7)
Liabilities -
2017 (590.4) (148.0) (67.0) (49.3) (30.5) (885.2)
Interest bearing loans and borrowings (current and
non-current) (1,020.2) (662.7)
Derivative financial instruments (current and non-current) - (0.1)
Income tax liabilities (current and deferred) (119.6) (119.6)
---------- ----------
Total liabilities as reported in the Consolidated
Statement of Financial Position (2,240.5) (1,667.6)
---------- ----------
Other segment information
Insulated Insulation Light Water Data
Panels Boards & Air & Energy & Flooring Total
EURm EURm EURm EURm EURm EURm
Capital investment -
2018 * 160.8 87.9 22.7 7.1 2.8 281.3
Capital investment -
2017 * 82.5 25.1 22.9 5.4 6.1 142.0
Depreciation included
in segment result - 2018 (49.8) (15.9) (4.8) (2.4) (3.1) (76.0)
Depreciation included
in segment result - 2017 (40.7) (14.6) (3.7) (2.8) (2.4) (64.2)
Non-cash items included
in segment result - 2018 (7.4) (2.5) (0.5) (0.8) (1.1) (12.3)
Non-cash items included
in segment result - 2017 (6.4) (2.3) (0.2) (0.8) (1.0) (10.7)
* Capital investment includes fair value of property, plant and
equipment and intangible assets acquired in business
combinations.
Analysis of segmental data by geography
Republic United Rest of
of Ireland Kingdom Europe Americas Others Total
EURm EURm EURm EURm EURm EURm
Income Statement
Items
Revenue - 2018 156.0 938.2 2,092.3 887.6 298.4 4,372.5
Revenue - 2017 138.1 909.2 1,628.5 738.1 254.2 3,668.1
Statement of Financial Position Items
Non-current assets
- 2018 * 52.7 375.2 1,227.0 524.5 188.8 2,368.2
Non-current assets
- 2017 * 51.8 369.9 809.8 507.7 158.0 1,897.2
Other segmental
information
Capital investment
- 2018 6.0 23.9 204.8 27.8 18.8 281.3
Capital investment
- 2017 8.0 16.9 57.9 49.7 9.5 142.0
* Total non-current assets excluding derivative financial
instruments and deferred tax assets.
The Group has activities in over 90 countries worldwide. The
revenues from external customers and non-current assets (as defined
in IFRS 8) attributable to the country of domicile and all foreign
countries or regions of operation are as set out above and specific
regions are highlighted separately on the basis of materiality.
There are no material dependencies or concentrations on
individual customers which would warrant disclosure under IFRS 8.
The individual entities within the Group each have a large number
of customers spread across various activities, end-users and
geographies.
3 NON-TRADING ITEMS
2018 2017
EURm EURm
Profit on disposal of trade and
assets - 2.9
Impairment of goodwill - (2.3)
- 0.6
-------- ------
During the period, no items of a non-trading nature arose.
In the prior period, the Group disposed of the trade and assets
of Kingspan Gefinex GmbH, which was part of the Insulation Boards
division, for EUR5.7m and realised a non-trading profit of EUR2.9m,
and impaired goodwill relating to a US energy business, which was
part of the Insulated Panels division.
4 FINANCE EXPENSE AND FINANCE INCOME
2018 2017
EURm EURm
Finance expense
Finance lease 0.4 0.2
Deferred contingent consideration
fair value movement 0.3 0.1
Bank loans 2.7 2.4
Private placement loan notes 16.7 14.2
Fair value movement on derivative
financial instrument (3.1) 15.6
Fair value movement on private placement
debt 2.5 (16.2)
Net defined benefit pension scheme - 0.1
19.5 16.4
Finance income
Interest earned (1.4) (0.5)
Net finance cost 18.1 15.9
------ -------
No costs were reclassified from other comprehensive income to
profit during the year (2017: EURnil).
5 ANALYSIS OF NET DEBT
2018 2017
EURm EURm
Cash and cash equivalents 294.5 176.6
Derivative financial instruments
- net 27.4 22.2
Current borrowings (53.2) (1.2)
Non-current borrowings (967.0) (661.5)
Deferred consideration (30.0) -
Total Net Debt (728.3) (463.9)
---------- ----------
The Group's core funding is provided by five private placement
loan notes; one USD private placement totalling $200m matures in
August 2021, and four EUR private placements totalling EUR662.5m
which will mature in tranches between March 2021 and January 2028.
The notes have a weighted average maturity of 5.6 years.
In addition, the Group has a EUR500m revolving credit facility,
EUR120m of which was drawn at year end and which matures in June
2022. As at 31 December 2018, the Group's committed bilateral bank
facilities were EUR50m, all of which was drawn.
Net debt, which is an Alternative Performance Measure, is stated
net of interest rate and currency hedges which relate to hedges of
debt. Foreign currency derivative assets of EUR0.2m (2017: EUR0.1m)
and EURnil foreign currency derivative liabilities (2017: EUR0.1m)
which are used for transactional hedging are not included in the
definition of net debt.
6 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
2018 2017
EURm EURm
Movement in cash and bank overdrafts 120.1 (35.3)
Drawdown of loans (445.0) (30.4)
Repayment of loans 92.8 41.8
(Increase)/decrease in deferred (30.0) -
consideration
Settlement of derivative financial
instrument - (8.0)
(Increase)/decrease in lease finance (0.1) (0.8)
---------- ----------
Change in net debt resulting from
cash flows (262.2) (32.7)
Translation movement - relating
to US dollar loan (5.5) 25.9
Translation movement - other (1.9) (10.9)
Derivative financial instruments
movement 5.2 (18.3)
---------- ----------
Net movement (264.4) (36.0)
Net debt at start of the year (463.9) (427.9)
Net debt at end of the year (728.3) (463.9)
---------- ----------
Further analysis on net debt at the start and end of the year is
provided in note 5.
7 CASH GENERATED FROM OPERATIONS
2018 2017
EURm EURm
Profit for the year 335.8 285.9
Add back non-operating expenses:
- Income tax expense 69.1 60.6
- Depreciation of property, plant and equipment 76.0 64.2
- Amortisation of intangible assets 22.2 15.7
- Impairment of non-current assets 5.2 3.1
- Employee equity-settled share options 12.3 10.7
- Finance income (1.4) (0.5)
- Finance expense 19.5 16.4
- Profit on sale of property, plant and equipment (4.9) (2.1)
- Profit on disposal of subsidiary - (2.9)
- Fair value movement of deferred consideration 0.8 -
Changes in working capital:
- Inventories 4.7 (64.8)
- Trade and other receivables (33.0) (47.7)
- Trade and other payables 30.6 27.2
Other
- Change in provisions (5.8) (2.4)
- Pension contributions (0.8) (0.9)
-------- --------
Cash generated from operations 530.3 362.5
-------- --------
8 DIVIDS
Equity dividends on ordinary shares: 2018 2017
EURm EURm
2018 Interim dividend 12.0 cent (2017:
11.0 cent) per share 21.7 19.7
2017 Final dividend 26.0 cent (2016:
23.5 cent) per share 46.6 42.0
68.3 61.7
------- -------
Proposed for approval at AGM
Final dividend of 30.0 cent (2017:
26.0 cent) per share 54.1 46.6
------- -------
This proposed dividend for 2018 is subject to approval by the
shareholders at the Annual General Meeting and has not been
included as a liability in the Consolidated Statement of Financial
Position of the Group as at 31 December 2018 in accordance with IAS
10 Events after the Reporting Period. The proposed final dividend
for the year ended 31 December 2018 will be payable on 10 May 2019
to shareholders on the Register of Members at close of business on
29 March 2019.
9 EARNINGS PER SHARE
2018 2017
EURm EURm
The calculations of earnings per
share are based on the following:
Profit attributable to ordinary
shareholders 330.9 284.3
--------------- ---------------
Number of Number of
shares ('000) shares ('000)
2018 2017
Weighted average number of ordinary
shares for
the calculation of basic earnings
per share 179,840 178,854
Dilutive effect of share options 1,696 1,856
--------------- ---------------
Weighted average number of ordinary
shares
for the calculation of diluted earnings
per share 181,536 180,710
--------------- ---------------
2018 2017
EUR cent EUR cent
Basic earnings per share 184.0 159.0
Diluted earnings per share 182.3 157.3
Adjusted basic earnings per share 193.5 165.8
Adjusted diluted earnings per share 191.7 164.1
Adjusted basic earnings reflects the profit attributable to
ordinary shareholders after eliminating the impact, net of tax, of
non trading items and the Group's intangible amortisation
charge.
The number of options which are anti-dilutive and have therefore
not been included in the above calculations is nil (2017: nil).
10 BUSINESS COMBINATIONS
A key strategy of the Group is to create and sustain market
leading positions through acquisitions in markets it currently
operates in, together with extending the Group's footprint in new
geographic markets. In line with this strategy, the principal
acquisitions completed during the year were as follows:
In March 2018, the Group acquired 100% of the share capital of
the Synthesia Group comprising of Synthesia Espanola S.A.,
Poliuretanos S.A, Huurre Iberica S.A. and their respective
subsidiaries ("Synthesia"). The total consideration, including debt
acquired and related costs amounted to EUR243.4m, representing the
maximum amount of identifiable consideration, comprising of
EUR213.4m paid in cash on completion and EUR30.0m in deferred
consideration.
In July 2018, the Group acquired 100% of the share capital of
Balex Metal Sp. z.o.o. ("Balex"), a Polish based manufacturer of
insulated panels and insulation boards. The total consideration,
including debt acquired and related costs amounted to EUR197.6m
which was discharged in full at acquisition.
The Group also made a number of smaller acquisitions during the
year for a combined cash consideration of EUR50m:
-- the purchase of 51% of the share capital of Jindal Mectec
Private Limited, an Indian manufacturer of insulated panels;
-- the purchase of the assets of H2Enviro, an Australian water tanks business;
-- the purchase of 100% of Vestfold Plastindustri AS, and
Vestfold Plastindustri Eiendom AS, a Norwegian water treatment
business;
-- the purchase of STF Holding GmbH & Co KG, a German based
daylighting and smoke extraction business; and
-- the purchase of Tanks Direct Limited, a UK based Water & Energy business.
The table below reflects the fair value of the identifiable net
assets acquired in respect of the acquisitions completed during the
year. Any amendments to fair values will be made within the twelve
month period from the date of acquisition, as permitted by IFRS 3,
Business Combinations:
Synthesia Balex Other* Total
EURm EURm EURm EURm
Non-current assets
Intangible assets 31.5 7.9 3.9 43.3
Property, plant and
equipment 42.8 42.3 8.6 93.7
Deferred tax asset 3.3 0.7 2.8 6.8
Current assets
Inventories 49.1 30.0 4.8 83.9
Trade and other receivables 70.4 18.1 4.2 92.7
Current liabilities
Trade and other payables (59.6) (23.4) (28.5) (111.5)
Provisions for liabilities (5.6) (0.9) (2.9) (9.4)
Non-current liabilities
Deferred tax liabilities (7.9) (1.8) 0.9 (8.8)
------------------ -------------- --------------- --------------
124.0 72.9 (6.2) 190.7
Total identifiable assets
Non-controlling interest
arising on acquisition - - 4.9 4.9
Goodwill 119.4 124.7 52.7 296.8
------------------ -------------- --------------- --------------
Total consideration 243.4 197.6 51.4 492.4
------------------ -------------- --------------- --------------
Satisfied by:
Cash (net of cash acquired) 213.4 197.6 50.0 461.0
Deferred consideration 30.0 - 1.4 31.4
------------------ -------------- --------------- --------------
243.4 197.6 51.4 492.4
------------------ -------------- --------------- --------------
*Included in Other are certain immaterial remeasurements of
prior year accounting estimates.
The acquired goodwill is attributable principally to the profit
generating potential of the businesses, together with cross-selling
opportunities and other synergies expected to be achieved from
integrating the acquired businesses into the Group's existing
business.
In the post-acquisition period to 31 December 2018, the
businesses acquired during the current year contributed revenue of
EUR416.3m and trading profit of EUR35.0m to the Group's
results.
11 POST BALANCE SHEET EVENTS
There have been no material events subsequent to 31 December
2018 which would require disclosure in this report.
12 EXCHANGE RATES
The financial information included in this report is expressed
in Euro which is the presentation currency of the Group and the
functional currency of the Company. Results and cash flows of
foreign subsidiary undertakings have been translated into Euro at
actual exchange rates or average, where this is a reasonable
approximation, and the related Statements of Financial Position
have been translated at the rates of exchange ruling at the balance
sheet date.
Exchange rates of material currencies used were as follows:
Average rate Closing rate
Euro = 2018 2017 2018 2017
Pound Sterling 0.885 0.876 0.898 0.887
US Dollar 1.181 1.129 1.144 1.197
Canadian Dollar 1.530 1.465 1.557 1.501
Australian Dollar 1.580 1.473 1.620 1.533
Czech Koruna 25.648 26.329 25.711 25.574
Polish Zloty 4.260 4.256 4.299 4.171
Hungarian Forint 318.78 309.26 321.02 310.20
Brazilian Real 4.307 3.609 4.435 3.967
13 CAUTIONARY STATEMENT
This report contains certain forward-looking statements
including, without limitation, the Group's financial position,
business strategy, plans and objectives of management for future
operations. Such forward-looking information involves risks and
uncertainties, assumptions and other factors that could cause the
actual results, performance or achievements of the Group to differ
materially from those in the forward-looking statements. The
forward-looking statements in this report reflect views held only
as of the date hereof. Neither Kingspan nor any other person gives
any representation, assurance or guarantee that the occurrence of
the events expressed or implied in any forward-looking statement in
this report will actually occur. Kingspan undertakes no duty to and
will not necessarily update any such statements in light of new
information or future events, except to the extent required by any
applicable law or regulation.
14 BOARD APPROVAL
This announcement was approved by the Board on 22 February
2019.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UAVBRKAAUUAR
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February 22, 2019 02:00 ET (07:00 GMT)
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