Kingspan sees UK orders drop as Brexit jitters set in

Kingspan's chief executive, Gene Murtagh, said on Friday that orders for its insulation panels have fallen by a "high-single-digit" per cent in the UK since the start of this year as concerns over Brexit take their toll on construction.

"Nervousness is increasing in the UK," Mr Murtagh said in a phone interview with The Irish Times as the Cavan-based group reported that sales surged 19 per cent last year to a record €4.4 billion, driven by acquisitions and marginally beating analysts' estimates.

While the warehousing sector is going through a boom at the moment as businesses prepare for the UK’s exit from the European Union, residential construction is going through a downturn, and the commencement of office building is set to fall by “in excess of 10 per cent” this year, Mr Murtagh said earlier in the day on a call with analysts.

The chief executive said there was little point in Kingspan putting firm plans in place for Brexit, which is set to take effect at the end of March, as divorce talks between the UK and EU continue.

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"We've considered every possible permutation," Mr Murtagh told The Irish Times by phone. "It's a pure gamble."

Exposure

Still, the company has managed to lower its proportionate UK sales exposure to 21 per cent of total turnover from 25 per cent over the past two years, helped by acquisitions in other markets.

During 2018, Kingspan spent €470 million on eight deals, including: Synthesia, the leading insulated panel and board businesses in Iberia; a strong player in the insulated panel business in central and eastern Europe called Balex Metal; and a partnership with the market leader in the insulated panel market in India, Jindal Mectec.

The group’s sales last year were fuelled by acquisitions, as underlying growth touched 5 per cent and currency fluctuations wiped 3 percentage points off the top line. Trading profit jumped 18 per cent to €445.2 million.

Mr Murtagh said Kingspan was “prepared to invest” as much as €600 million on further purchases this year and that its pipeline of potential deals is “quite healthy”.

Full-year dividend

Kingspan has proposed a 13.5 per cent increase to its full-year dividend, to 42 cent per share.

Net debt rose to €728.3 million at the end of December from €463.9 million a year earlier, though its debt level dipped marginally to 1.4 times earnings before interest, tax, depreciation and amortisation (ebitda) as a result of the company’s earnings growth.

The company expects that its bill for chemicals used to make insulation panels and boards will fall by about €100 million, having been elevated over the last 18 months due to global shortages of methylene diphenyl diisocyante (MDI), a key chemical used to make rigid insulation panels.