Cantillon: Warm glow coming from Kingspan

Kingspan was one of the first in its sector to begin drawing in its horns when recession loomed in the closing years of the last decade and it now appears to be reaping the rewards.

The Cavan-based insulation specialist is currently bedding down three acquisitions in western Europe, Finland and Canada. Yesterday it presented a set of interim results showing that operating profits rose by more than 60 per cent to €108 million, beating previous records.

Despite a €450 million total spend on two acquisitions, Joris Ide in Europe and Vicwest in Canada, in the first half, its net interest bill barely budged, going from just under €7 million to just over it.

At 1.4- to 1.5-times, its debt-to-earnings ratio is well below a self-imposed limit of two times, giving it the scope for more deals particularly as that ratio could improve if earnings strengthen ahead of expectations as the year rolls on. Its chief executive Gene Murtagh says as it stands it should have a few hundred million euro available should it want to do another acquisition.

The full impact of its new purchases, combined with a recovery in its main European and American markets, point to a better second half even though its outlook erred slightly on the side of caution.

Events in China overshadowed the good news and the optimistic pointers for the rest of the year. However, analysts generally gave the results the thumbs-up, with number crunchers in Goodbody and Davy both signalling they are likely to upgrade the stock and ranking it as a "buy".

Exane BNP Paribas stuck with a neutral rating – effectively a “hold” – on the basis that Kingspan trades at around 14 times earnings, compared with 12 for the rest of its sector. However, the institution also said yesterday’s results could justify an upgrade in earnings forecasts.