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Kingspan eyes up CRH's disposal plans for takeover target


Kingspans CEO Gene Murtagh

Kingspans CEO Gene Murtagh

Kingspans CEO Gene Murtagh

Kingspan is looking at acquisition targets including some that could be sold by CRH.

The Cavan-based insulation group hopes to complete a couple of deals in 2014, according to chief executive Gene Murtagh.

Speaking to the Irish Independent, Mr Murtagh said that Kingspan currently has a very low ratio of debt to EBITDA (earnings before interest, tax, depreciation and amortisation). The rate, at 0.66 times, is much lower than the two-times figure Kingspan management would remain comfortable with, said Mr Murtagh.

He said that meant the company had the leeway to spend about €350m on acquisitions and that the main targets are mainland Europe and the US.

Global aggregates giant CRH is due to unveil a major strategic review today alongside its full-year results. The company has indicated that will most likely result in the disposal of non-core businesses. Newly appointed CRH chief executive Albert Manifold said the businesses to be offloaded won't be formally identified until the summer, however.

In 2010, Kingspan agreed to pay €120m for the European insulation business of CRH.

Mr Murtagh said there was "potentially" other CRH assets Kingspan might be interested in.

"Like everyone else, we'll see what their intention is," he said.

Mr Murtagh was speaking as Kingspan reported a 14pc rise in trading profit to €122.8m during 2013.

Turnover climbed 10pc to €1.8bn and was 8pc higher on a like-for-like basis.

The company had its best second half since the second half in 2008.

Mr Murtagh pointed out that the key difference is that back in 2008 business was trending down, while now it's up.

At Kingspan's insulated panels unit, sales rose 23pc to €1.03bn, with the bulk of the increase driven by acquisitions. Profits at the division also rose 23pc, to €75.6m.

The insulated panels are used in commercial projects such as office blocks, retail units and industrial units.

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In the UK, which accounts for 34pc of group sales, Kingspan said sentiment in the segment "picked up markedly" in the second half.

But Mr Murtagh said that his sense is that activity in the US this year will be "flat to potentially weak". "We still expect to see growth in that market," he said, however.

In Germany, he said that business for Kingspan this year will probably be flat.

In Ireland, Kingspan also said there had been a "clear improvement" in its insulation boards business.

Those boards are primarily used in residential construction. However, that's off a low base. Ireland accounts for just 4pc of Kingspan's group sales.

Despite the solid group performance and results ahead of analyst expectations, Mr Murtagh said he remains conservative about the outlook for the group this year.

Analysts were upbeat on the results.

Davy Stockbrokers said that Kingspan offers a "potent mix of cyclical and structural growth and a financial position that affords considerable opportunity for inorganic expansion".

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