Wednesday 13 December 2017

Kingspan shares rise 10pc after surprise profit surge

Insulation business considers possible acquisitions this year

Peter Flanagan

Shares in Kingspan rose almost 10pc yesterday as the building materials company said it was resuming dividend payments after better than expected first-half results.

The company surprised the market yesterday when it announced an increase in its operating profit of 9pc to €33.1m in the six months to the end of Jun. The company had forecast a 10pc fall in profit last May. Sales were up slightly at €558.7m compared to €552.5m last year. Adjusted earnings per share climbed 11.3pc to 15.7c.

The growth was attributed to better-than-expected performance in the insulation business in the US, Europe and Australia, as the insulated panel business grew.

"Sales rose in excess of 50pc over prior year [in Australia] and the Benelux [Belgium, Netherlands, Luxembourg] performed robustly," the company said.

Net debt was reduced by €95.7m to €135.1m through "tight cash management" and may be reduced by another €20m or so this year. The company said it would resume paying a dividend, set at 4c per share. That dividend is the first for two years and comes six months ahead of schedule.

The building materials firm said it was also considering possible acquisitions before the end of the year.

Company chief executive Gene Murtagh said the company had looked at possible purchases earlier this year and was now "running the rule over a number of companies" with a view to making an acquisition.


Mr Murtagh said he was pleased with the group's results but warned they were still a long way from the peaks of 2006.

"While the results show a near 20pc swing between where we are now compared to last May when we issued our guidance, that swing equates to only about €5m so it was not really that big a change," he said.

"The insulation business has been especially strong in recent months. New house builds are down significantly across the board but people are pushing ahead with renovating their homes and we have been able to capitalise on that.

"Having said that, this is more a case of the declines stopping rather than really strong growth as far as we're concerned," he added.

"We are still a long way from where we were a few years ago."

Mr Murtagh said the number of houses built in Ireland last year was far too few for the population.

"Last year there were only 5,000 or 6,000 new houses built in Ireland. That is far too few for a population of four-and-a-half to five million so we expect that to increase to about 30,000 in the medium term," he said

The improvement in the first half is "likely to underpin a robust sales performance across the group in the second half". Orders so far continue to be stronger than 2009 but are slower than the first half.

The results were welcomed by analysts. Robert Eason of Goodbody Stockbrokers described them as "significantly ahead of forecasts".

"The key takeaway from the results is the strong momentum given that sales were down 6pc in January through April, but finished the period up 1pc," he said.

"Overall, the results demonstrate to us why Kingspan can outperform the wider construction sector and why, therefore, the stock continues to offer value in the medium term."

"At just over 500c, Kingspan is trading at its lowest level since it announced its 2009 results at the beginning of March," said Flor O'Donoghue of Davy stockbrokers.

"The stock rallied strongly at that point and we think that the interim results provide a similar platform for a rebound."

Kingspan share price closed up nearly 6pc on the Irish Stock Exchange at €5.37 yesterday evening.

Irish Independent

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