Kingspan shares surge after first-half profits fell less than expected

Cavan-based insulation group won’t pay an interim dividend and expects economy to remain weak

Kingspan chief executive Gene Murtagh  expects the general economic environment to be tougher than it was before the Covid-19 crisis. Photograph: Cyril Byrne / THE IRISH TIMES

Kingspan chief executive Gene Murtagh expects the general economic environment to be tougher than it was before the Covid-19 crisis. Photograph: Cyril Byrne / THE IRISH TIMES

 

Kingspan shares surged on Friday after the Irish insulation specialist reported that first-half profits fell 13 per cent to €200 million.

The Co Cavan-based company said revenues slipped 8 per cent to €2.07 billion in the six months ended June 30th, from €2.24 billion during the same period last year.

Its trading profit fell 13 per cent to €200 million in the first half, from €230.4 million in the opening six months of 2019.

The results beat stockbrokers’ predictions that Kingspan’s first-half profits would fall between €135 million and €175 million.

Investors reacted by plunging for Kingspan’s shares, which soared 8.9 per cent to close at €70.50 on Friday in Dublin.

Worst performer

Chief executive Gene Murtagh noted that Kingspan’s business in the Republic fell 90 per cent during the spring lockdown, making it the group’s worst performer during that period.

“I believe we did not get the commensurate health dividend from that,” he said of the Government’s initial approach to curbing coronavirus and its impact on the economy.

He argued that in future, lockdown should be more selective and “sector specific”.

Mr Murtagh said the company believed it was prudent not to pay an interim dividend, and would review its shareholder returns policy in light of the weak economy.

“We expect that the economic environment will remain weak, with confidence for businesses to make investment decisions curtailed,” he said.

“On a more positive note, policy makers are more focussed on ensuring buildings are more energy efficient, which is a supportive long-term trend.”

Kingspan has more than €1 billion in cash and undrawn credit. Strong cashflow aided the the company in cutting net debt by €195.3 million during the first half of the year to €437.9 million.

Free cashflow more than trebled to €260 million in the first half, from €80 million during the same period in 2019.

So far in 2020 it has agreed or completed deals to buy three companies that have a combined turnover of €400 million.

The group has just agreed to buy Slovenian roof and facade manufacturer, Trimo. In April, it bought the light and air business of Colt. Early in the second half it agreed to buy Romanian insulated panel manufacturer, Terasteel.

Resilient

News of the Trimo deal emerged this week. The Slovenian company has sales of around €100 million a year. It is understood Kingspan paid less than that sum for the business.

Mr Murtagh said the markets for Trimo’s products were mainly across Europe, but global in some cases. “We’ve been trying to acquire it for well in excess of 10 years,” he said.

He added that on average, it took Kingspan eight years to finally buy the businesses it targets.

Kingspan will remain on the acquisitions trail, despite ongoing uncertainty, but Mr Murtagh said travel restrictions slowed the speed at which deals get done.

He described Kingspan’s first-half performance as resilient in the face of unparalleled challenges.

“Performance has varied substantially from region to region depending on the severity and length of Government restrictions, and been helped by our rapid introduction of cost containment measures,” he added.

Kingspan expects the general economic environment to be tougher than it was before the Covid-19 crisis.