Murtagh takes bumpy ride east with Kingspan

 

When Kingspan expanded into the Czech Republic five years ago, the Kingscourt, Co Cavan-based company little realised exactly where it had bought.

The company had made its first move into eastern Europe with the acquisition of Sunip, a manufacturer of composite panels. What nobody told Kingspan chairman and chief executive Eugene Murtagh was that Hradec Karlove, the town in which Sunip is based, literally translates into English as "Kingscourt".

"We were driving down one day and a bus passed us and written on the back of the bus was the Kingscourt Express.

"We thought it was a joke but it seems the bus parks in the square in Prague and brings visitors down and as they can't pronounce the name they call it Kingscourt. Hopefully, it's a good omen."

It has been a long road from Kingspan's establishment in one Kingscourt to its expansion into another one very far away.

The company, which was founded by Eugene and his brother, Brendan Murtagh, began life in the back yard of the family pub in Co Cavan, "doing anything you could in engineering, with very little equipment, to make a few pounds".

The arrival in Ireland of multinationals like Asahi provided an opportunity for the company in the 1970s to become involved in electrical and mechanical installation work and it moved on from there to an involvement in structural steel.

"We started looking at claddings too and almost immediately attempted to make them into a composite panel rather than what was the old form of single skins or built up systems."

"That was the start of what developed into a building products group," Mr Murtagh says.

The demise of asbestos as a buildings material in the 1970s made it an opportune time for a young company interested in coming up with new products. Innovation, along with close attention to building regulations, has remained a hallmark of the firm.

Kingspan now has a number of divisions, including its insulation panel business, its environmental container business and its raised access flooring division - a drag on the company in recent times.

Its key panel business, which started out doing around 100,000 metres of product, now does many millions.

"It has gone from being a very, very niche business to a more mainstream one which has lots of growth potential still," Mr Murtagh says.

Kingspan's move into the Czech Republic five years ago has been followed by further expansion into Poland. The group is currently developing a greenfield site outside Budapest.

"The last few years have been quite difficult in Germany and the Benelux countries, very depressed. So we took the opportunity to more or less leap over these difficult markets and we went for the Czech Republic," Mr Murtagh says.

Kingspan is planning further expansion in eastern Europe where it is hoping to either acquire or develop a greenfield site in Poland as well as adding another facility in the next couple of years.

Meanwhile, the group's environmental containers division produces oil tanks, water tanks, septic tanks and other environmental products, including 3,000 wheelie bins a day.

It is heading for 20 per cent of the business in terms of turnover and the company remains keen to continue its rollout in Europe.

By contrast, Kingspan's raised access flooring business has been a black spot in its performance in recent years. The acquisition of the Tate flooring business in the US in 2000 saw the company end up in arbitration, which it subsequently won, over contracts that failed to materialise.

Mr Murtagh believes, however, that the bad times may be behind the division.

"We feel the American access floor business will have a very good future. We think it has bottomed and is on the way up," he says, noting Kingspan is the only major player in access floors in the US where penetration is very low.

Despite its steady expansion since its arrival on the stock market in 1989, Kingspan's progress has been overshadowed by a series of non-trading glitches. These include an arrangement where directors had their salaries topped up by dividends from a patent income company, unorthodox share dealings by members of Brendan Murtagh's family and a secret €5.3 million payment relating to a failed export credit insurance project in Canada.

As a company which has at times appeared to chafe under the restrictions imposed on publicly-quoted companies, many wondered if Mr Murtagh, who retains 24 per cent of Kingspan, would consider an MBO when the shares dipped to a low of €1.35 two years ago.

"Wouldn't I be very wrong to say I didn't ?" Mr Murtagh says.

But company management decided to stick with its stock market listing on the basis that it best suited "the ambitions we here as a team have for the group".

In recent years, the company has made moves to address its corporate governance shortcomings with the appointment of high-profile non-executive directors. The one outstanding issue, but one the company is committed to addressing, is Mr Murtagh's dual role as chairman and chief executive.

But whether he decides to assume the chairmanship or remain on as chief executive, Mr Murtagh is likely to remain a feature at Kingspan for some years yet.

Asked when he intends to retire, 62-year-old Mr Murtagh says: "Whenever I'm hunted. There's a little bit left in me yet."