Kingspan amasses €750m war chest to fund acquisitions

Kingspan has a €750 million war chest to fund the acquisition of rivals, according to Gene Murtagh, the Irish insulation maker's chief executive.

The group reported on Friday that trading profit grew 11.6 per cent to a record €497.1 million last year from €445.2 million in 2018.

Kingspan could have up to €992 million – through a combination of cash and debt – to fund expansion, including acquisitions, its figures show.

Mr Murtagh said that this would leave it with about €750 million to buy other businesses in its industry.

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He confirmed that the Kingscourt, Co Cavan-based group was eyeing several targets, but did not name the companies involved.

Mr Murtagh also stressed that Kingspan would approach transactions conservatively. “We had a healthy pipe this time last year, but we only managed to do one sizeable acquisition,” he pointed out.

That deal was 85 per cent of French insulation panel distributor, Group Bacacier, for which Kingspan paid €122 million in the autumn. Smaller acquisitions brought total spending to €142 million.

“Believe it or not, the average gestation period for any of our acquisitions is eight years,” Mr Murtagh said, adding that Kingspan was always very familiar with any company that it bought.

Last year’s fall in deal-making, from €470 million in 2018, contributed to a €95.1 million reduction in Kingspan’s net debt to €633.2 million.

New factories

Meanwhile, the group intends spending €150 million on expanding existing factories and building new ones at its operations around the world.

"That's in Australia, Russia, through to Europe, the US and down to Brazil, " Mr Murtagh said.

Kingspan has operations in Europe, the Americas, Asia and Australia. It makes and sells insulation, flooring products and other building materials.

The group has already warned that uncertainty in many markets led to a slow start to the year.

Speaking after it published its results, Mr Murtagh said the coronavirus outbreak, which has claimed more than 2,100 lives since late last year, could be a “big negative” in 2020 if it continued.

The epidemic has not hit Kingspan's business, but its chief executive noted that it had the potential to do so if it continued, as the resulting slow down in China could affect the US and Europe, slowing demand for the Irish group's products.

However, he also said that sales were beginning to recover and that Kingspan expected them to be 2 per cent or 3 per cent ahead of 2018 in the second quarter of this year.

Uncertainty

The group also believes that the situation in the UK, where uncertainty over Brexit hindered investment over the last four years, is stabilising.

Mr Murtagh explained that there is now a greater degree of certainty there, as the UK has left the bloc and is now in trade talks with the EU, while it is likely to have the same government for the next five years.

“Whether you are for or against these things, at least there’s stability and I think that stability will lead to investment,” he said.

Kingspan reported that revenues grew 7 per cent in 2019 to €4.7 billion.

Earnings per share increased 11 per cent to 204.6 cent. The group plans to pay shareholders a final dividend of 33.5 cent a share, bringing the final payout for the year to 46.5 cent, 10.7 per cent more than its 2018 dividend.

In the Republic builders of offices, factories and data centres drove demand for Kingspan’s products.

Mr Murtagh argued that, whoever formed the next government, home building would pick up here this year, sparking increased demand from that industry.