TIDMKGP
RNS Number : 7557Y
Kingspan Group PLC
24 August 2018
KINGSPAN GROUP PLC
HALF-YEARLY FINANCIAL REPORT
for the period ended 30 June 2018
KINGSPAN GROUP PLC
RESULTS FOR THE HALF YEAR 30 JUNE 2018
Kingspan, the global leader in high performance insulation and
building envelope solutions, issues its half-yearly financial
report for the six-month period ended 30 June 2018.
Financial Highlights:
-- Revenue up 15% to EUR2.0bn, (pre-currency, up 19%).
-- Trading profit* up 10% to EUR195.3m, (pre-currency, up 13%).
-- Group trading margin** of 9.7%, a decrease of 50bps versus the same period in 2017.
-- Acquisitions contributed 15% to sales growth and 12% to trading profit growth in the period.
-- Net debt of EUR739.4m (H1 2017: EUR440.3m). Net debt to EBITDA of 1.59x (H1 2017: 1.06x).
-- Basic EPS up 8% to 80.7 cent (H1 2017: 74.4 cent).
-- Interim dividend per share up 9% to 12.0 cent (H1 2017: 11.0 cent).
-- ROCE of 15.6% (H1 2017: 17.3%), 16.6% when the annualised
impact of acquisitions is taken into account.
Operational Highlights:
-- Insulated Panels sales growth of 14% with a notable
improvement in most key markets in the second quarter after a
sluggish start. UK solid overall and improved since the turn of the
year. Quadcore(TM) revenue increased by 76%, now 6% of global
insulated panel sales and 18% of UK and Ireland.
-- Insulation Board sales growth of 15% reflecting, in the main,
inflation recovery on pricing. Kooltherm(R) revenue increased by
12%, now comprising 35% of rigid board sales (37% excluding
acquisitions).
-- Light & Air sales of EUR128.6m, were up 57% (up 11%
pre-currency and acquisitions). Good performance in Continental
Europe offsetting softer activity in the US. Second half is
seasonally more significant.
-- Water & Energy (formerly Environmental) broadly in line
with prior year after a slow start. Acquisition in the Nordic
region completed during the period.
-- Access Floors sales 7% behind H1 2017 reflecting a subdued US
market and some slowdown in the UK.
-- Significant position established in Southern European
insulated panels and boards markets through the acquisition of
Synthesia Group.
-- Entry into India, an embryonic insulation market, with the establishment of Kingspan Jindal.
Summary Financials[1]:
H1 '18 H1 '17 Change
---------------------- -------- -------- --------
Revenue EURm 2,009.9 1,749.3 +15%
EBITDA EURm 231.6 209.2 +11%
Trading Profit*
EURm 195.3 177.8 +10%
Trading Margin** 9.7% 10.2% -50bps
EPS (cent per share) 80.7 74.4 +8%
---------------------- -------- -------- --------
*Operating profit before amortisation of intangibles
** Operating profit before amortisation of intangibles divided
by total revenue
Gene Murtagh, Chief Executive of Kingspan commented:
"We delivered a record performance in the first half of the
year, with revenue over EUR2bn for the first time. Performance was
helped by improved momentum in the second quarter after a sluggish
start to the year due to prolonged winter weather conditions. This
momentum has continued into the second half in a number of key
markets, and underpins our encouraging outlook for the rest of the
year. Kingspan's geographical footprint continues to expand, with
development activity in Latin America, Southern Europe and India
opening up exciting growth opportunities."
For further information contact:
Murray Consultants Tel: +353 (0) 1 4980 300
Douglas Keatinge
Business Review
The first half of 2018 was a record for Kingspan with revenue in
the period surpassing EUR2bn for the first time. Trading profit was
ahead by 10% to EUR195.3m and trading margin was 9.7%, partly
reflecting the initial dilutive effect of recent acquisitions and
an element of lag in the recovery of raw material increases.
Following a slow start to the year hampered by a prolonged
winter, momentum improved notably in the second quarter in which
revenue was ahead by 21% (+7% on an underlying basis). The
improvement was particularly evident in North America and Germany
whilst LATAM continued its recent strong performance. The UK was
particularly robust given the ongoing uncertainty surrounding
withdrawal from the EU. Across the Group, order intake levels
improved in many regions, without the extreme raw material supply
constraints that impacted progress all through last year and
inadvertently benefited competing solutions.
By business, Insulated Panels revenue was ahead by 14% and
Insulation Boards was up by 15%, the latter reflecting inflation
and a positive mix towards Kooltherm(R) , albeit on softer volumes.
Light & Air continued its advance with sales ahead by 57%,
whilst Water & Energy sales were broadly in line with prior
year with Access Floors modestly behind.
During the period we invested EUR335m, EUR265m of which was on
acquisitions (including deferred consideration) with an additional
EUR70m on internal capital projects across the business.
Furthermore, since the period end we completed the acquisition of
Balex in Poland and established Kingspan Jindal in India for a
combined outlay of EUR220m.
Innovation
Differentiation has been at the heart of Kingspan for many years
now and across many levels of product performance. Chief among
these has been our relentless focus on the thermal and fire
properties of our materials. We are in the process of developing a
global Innovation Hub which will continue to drive materials
science and high performance at the epicentre of our product
development agenda.
Our ground-breaking solutions include Kooltherm(R) ,
Quadcore(TM) and Optim-R(R) and these will be further complemented
by the planned introduction of a next generation core in 2020. This
will be a fibre-free, high insulating core with an 'A' fire
classification. Thermally, our solutions can be up to 80% thinner
than traditional insulation, and have achieved fire performances
equal to, and at times exceeding, the values attributed to some so
called 'non-combustible' solutions. Our values are achieved without
the end user compromising on the many other aspects where
traditional fibrous materials have inherent weaknesses.
Net Zero
In 2011 we set about achieving 100% net zero energy across the
Group by 2020. Progress has been significant, reaching 69% by the
end of 2017, and we are confident of meeting approximately 75% by
the end of 2018.
In addition, with the acquisition of Synthesia, Kingspan now
uses over 250 million recycled plastic bottles annually. We aim to
dramatically increase that number over the next five years, and to
include a large element of 'ocean-harvested' PET bottles. We will
then recycle these inputs into world leading building fabric.
Insulated Panels
H1 '18 H1 '17 Change
---------------- -------- -------- ---------
Revenue EURm 1,268.6 1,111.7 +14% (1)
Trading Profit
EURm 122.6 116.9 +5%
Trading Margin 9.7% 10.5% -80bps
---------------- -------- -------- ---------
(1) Comprising underlying +4%, currency impact -4% and acquisitions +14%
Mainland Europe
Similar to many of our markets in the first quarter, Continental
Europe had a slow start in most regions. Activity improved markedly
through the second quarter, particularly in France and Germany. The
Netherlands also recorded growth as did the Nordic region.
Southern Europe is a new frontier for Kingspan with the
acquisition of Synthesia and revenue in this region has experienced
good growth in the period since acquisition.
UK
In the UK, our business has been solid overall bearing in mind
the prevailing uncertainty generally although project postponements
have been a feature of the trading environment over the last year
or so. Notably however, Insulated Panels revenue in the second
quarter was comfortably ahead of the same period in 2017 bolstered
by a growing appetite for building infrastructure to support the
expanding online retail environment. The wider market continues to
be understandably tough and we would anticipate no change in this
respect until clarity emerges from the ongoing negotiations with
the EU.
Americas
Again, after a lacklustre start to 2018, momentum in North
America increased significantly through quarter two which leaves
this region's orderbook at record levels as we head into the second
half. Penetration rates in North America still lag Europe by a
stretch and we are optimistic about the scope for the shift towards
energy efficient building envelopes to continue across this
region.
Trading in LATAM has been most encouraging as our businesses in
both Brazil and Colombia have advanced materially compared with the
same period in the prior year. Conversion towards insulated panel
systems, particularly in Brazil, leaves significant scope for
further long term penetration growth.
APAC & Middle East
Activity in Australia and New Zealand has also improved in the
second quarter, across a broad spectrum of end-applications. Recent
success in large-scale fire tests is expected to create further
opportunity for growth as this market, which like others, seeks
tested and approved systems supported by a performance warranty. In
the Middle East we have also experienced growth in activity, which
over the coming two years will be further boosted by the recent
success in winning an advanced roofing project for Kuwait Airport.
Our fledgling business in India commenced in July and we are very
encouraged by the potential this can deliver over the longer
term.
Ireland
This market has continued the pattern of growth seen in recent
years and we anticipate continued gradual growth in support of an
economy that has recovered strongly from the depths of
2009/2010.
Insulation Boards
H1'18 H1 '17 Change
--------------------- ------ ------- ---------
Revenue EURm 428.9 373.7 +15% (1)
Trading Profit EURm 53.1 40.0 +33%
Trading Margin 12.4% 10.7% +170bps
--------------------- ------ ------- ---------
(1) Comprising underlying +7%, currency impact -3% and acquisitions +11%
UK
First half revenue in the UK is significantly up on prior year
owing to the strong performance of Kooltherm(R) combined with the
inflationary benefit our PIR range experienced. The latter has been
the result of the pass-through of raw material increases in 2017.
We expect these year on year increases to progressively unwind
during the current year, and this pattern has recently led to
volume slippage as we have prioritised margin over volume. General
activity in the market has been solid although concerns exist as to
the sustainability of this trend in the context of lingering wider
uncertainty.
Mainland Europe
Our business in this region has had a mixed first half with
weakness in the Benelux PIR market, strong progress in the Nordics,
and a very solid performance in the residential roofing elements
unit in the Netherlands.
The dynamic in Benelux relates solely to competitor reaction to
falling raw material prices combined with high customer inventory
levels early in the year. More positively, progress in the Nordics
has been compelling as we build demand ahead of our new Swedish
Kooltherm(R) facility, which we plan to open late 2019. Our recent
entry into Southern Europe has also been encouraging as we embark
on a conversion strategy across the region.
APAC & Middle East
Activity across the Middle East has progressed well so far this
year. Our ducting Insulation Boards business in the UAE has
continued to grow and will undergo a transition from PIR to
Kooltherm(R) over the next year as we position our offering to meet
their impending and more stringent building codes. The building
insulation category has also grown well in the period as we
gradually broaden the product offering available in the region.
Trading in Australasia has been solid.
Ireland
Sales revenue in Ireland is well up on the same period last
year, and volume intake for the period has also been encouragingly
ahead. This growth is being experienced across all segments of the
building sector. Housing supply remains a challenge for the
industry as it continues to rebuild itself and our Engineered
Timber-Frame business is performing strongly as the build speed and
thermal benefits of this system come to the fore.
Light & Air
H1'18 H1 '17 Change
--------------------- ------ ------- ---------
Revenue EURm 128.6 81.7 +57% (1)
Trading Profit EURm 5.1 3.0 +70%
Trading Margin 4.0% 3.7% +30bps
--------------------- ------ ------- ---------
(1) Comprising underlying +11%, currency impact -3% and acquisitions +49%
Our relatively embryonic Light & Air division has continued
to build on the progress made during 2017. Global sales revenue for
the first half was EUR128.6m, up 57% on prior year as we extend our
international footprint and broaden our range of solutions.
Worldwide, we expect revenue for this full year to be in the region
of EUR300m with a trading margin of approximately 8% in line with
plan.
Regionally Western Europe, and in particular Germany, has
performed strongly to date this year. The UK has been stable and
Southern Europe intake has been strong in recent months and will be
supported by a significant investment in a new facility in Lyon,
France. North America order intake in Engineered Solutions has been
strong although Unit Skylights activity has been more subdued. In
this region, the focus will be on achieving greater operational
efficiency and streamlining of systems as we consolidate the
various acquired businesses.
Water & Energy
H1'18 H1 '17 Change
--------------------- ------ ------- --------
Revenue EURm 96.6 88.9 +9% (1)
Trading Profit EURm 5.5 6.7 -18%
Trading Margin 5.7% 7.5% -180bps
--------------------- ------ ------- --------
(1) Comprising underlying +1%, currency impact -4% and acquisitions +12%
Activity in the Water & Energy division gained momentum
through the second quarter with that period up 4% on a
like-for-like basis. Margins were somewhat weaker owing in the main
to pricing pressure in the hot water segment in the UK and the
initially dilutive impact of the online trading business developed
since the end of last year.
In contrast, the wider Water offering that encompasses rainwater
harvesting and treatment solutions delivered growth, most
prominently in Australia and the Nordics. This is a category for
which we anticipate greater global demand over time as droughts,
constrained water availability and associated charges for water
become a bigger feature worldwide.
During the period we acquired Vestfold Plastindustri (VPI), a
water treatment business in Norway as part of our wider Group
strategy to expand our business in these markets.
Access Floors
H1'18 H1 '17 Change
--------------------- ------ ------- --------
Revenue EURm 87.2 93.3 -7% (1)
Trading Profit EURm 9.0 11.2 -20%
Trading Margin 10.3% 12.0% -170bps
--------------------- ------ ------- --------
(1) Comprising underlying -5%, currency impact -6% and acquisitions +4%
Global revenue in the period was behind the same time a year
earlier reflecting a subdued US market, some weakening in the UK,
and increases experienced in Mainland Europe and Australia. Sales
into class A office construction in North America were down
somewhat and compensated for by increases in revenue generated from
new product sets including a concrete floor range, an expanded
suite of surface finishes and data centre solutions.
The UK was slightly down in the first half although we expect
this to stabilise through the second half of the year. Mainland
Europe activity continues to progress as we develop the business
from our Belgian manufacturing facility acquired in the second half
of 2017.
Financial Review
Overview of results
Group revenue increased by 15% to EUR2,009.9m (H1 2017:
EUR1,749.3m) and trading profit increased by 10% to EUR195.3m (H1
2017: EUR177.8m). This represents a 19% increase in sales and a 13%
increase in trading profit on a constant currency basis. The
Group's trading margin decreased by 50bps to 9.7% (H1 2017: 10.2%)
reflecting the divisional mix of earnings, an element of lag in
recovery of input inflation as well as the initially dilutive
effect of recent acquisitions. The amortisation charge in respect
of intangibles was EUR9.0m compared to EUR7.5m in the first half of
2017 with the increase reflecting, primarily, the year on year
effect of intangible assets acquired as part of business
acquisition activity during 2017. Group operating profit after
amortisation and non-trading items grew 9% to EUR186.3m. Profit
after tax was EUR146.7m compared to EUR133.1m in the first half of
2017, driven in the main by the growth in trading profit. Basic EPS
for the period was 80.7 cent, representing an increase of 8% on the
first half of 2017 (H1 2017: 74.4 cent).
The Group's underlying sales and trading profit performance by
division is set out below:
Sales Underlying Currency Acquisition Total
------------------- ----------- --------- ------------ ------
Insulated Panels +4% -4% +14% +14%
Insulation Boards +7% -3% +11% +15%
Light & Air +11% -3% +49% +57%
Water & Energy +1% -4% +12% +9%
Access Floors -5% -6% +4% -7%
Group +4% -4% +15% +15%
----------- --------- ------------ ------
The Group's trading profit measure is earnings before
non-trading items, interest, tax and amortisation of
intangibles:
Trading Profit Underlying Currency Acquisition Total
------------------- ----------- --------- ------------ ------
Insulated Panels -3% -3% +11% +5%
Insulation Boards +26% -4% +11% +33%
Light & Air -38% +3% +105% +70%
Water & Energy -28% -5% +15% -18%
Access Floors -14% -6% - -20%
Group +1% -3% +12% +10%
----------- --------- ------------ ------
Finance costs (net)
Finance costs for the period were modestly higher than the same
period last year at EUR8.7m (H1 2017: EUR7.6m). Finance costs
include a non-cash charge of EUR0.1m (H1 2017: EUR0.1m) relating to
the Group's legacy defined benefit pension schemes. A net non-cash
credit of EUR0.6m was recorded in respect of swaps on the Group's
USD private placement notes (H1 2017: credit of EUR0.5m). The
Group's net interest expense on borrowings (bank and loan notes)
was EUR8.9m compared to EUR7.9m in the first half of 2017. The
increased interest charge reflects the higher level of debt year on
year due to development activity.
Taxation
The tax charge for the first half of the year was EUR30.9m (H1
2017: EUR30.2m) which represents an effective tax rate of 17.4% on
profit before tax (H1 2017: 18.5%). The decrease in the effective
rate reflects the global mix of earnings year on year and rate
reductions in certain territories.
Free cashflow
H1 '18 H1 '17
EURm EURm
-------------------------------- ------- -------
EBITDA* 231.6 209.2
Movement in working capital ** (92.0) (84.9)
Net capital expenditure (68.1) (46.0)
Pension contributions (0.5) (0.6)
Net finance costs paid (7.1) (9.8)
Income taxes paid (30.8) (32.0)
Other including non-cash items 5.3 3.5
------- -------
Free cashflow 38.4 39.4
------- -------
*Earnings before finance costs, income taxes, depreciation,
amortisation and non-trading items
**Excludes working capital on acquisition but includes working
capital movements since that point
Working capital at 30 June 2018 was EUR617.9m (31 December 2017:
EUR477.8m), an increase of EUR140.1m in the period. This increase
is driven by the working capital on acquisitions in the period and
the typical seasonal build in the first half of the year. The
average working capital to sales % was 13.8% compared with 11.5% in
H1 2017. The annualised sales in the last three months has been
used to calculate this metric reflecting the seasonal profile of
the Group. The increase year on year reflects higher inventory
levels and this is expected to decrease in the second half of the
year.
Net Debt
Net debt increased by EUR275.5m during the first half of the
year to EUR739.4m (31 December 2017: EUR463.9m) and this is
analysed in the table below:
Movement in net debt H1 '18 H1 '17
EURm EURm
----------------------------------- -------- --------
Free cashflow 38.4 39.4
Acquisitions and disposals (235.0) (8.6)
Share issues 0.1 0.1
Dividends paid (46.7) (42.0)
-------- --------
Cashflow movement (243.2) (11.1)
Deferred Consideration (30.0) -
Exchange movements on translation (2.3) (1.3)
-------- --------
Increase in net debt (275.5) (12.4)
Net debt at start of period (463.9) (427.9)
-------- --------
Net debt at end of period (739.4) (440.3)
-------- --------
Retirement benefits
The primary method of pension provision for current employees is
by way of defined contribution arrangements. The Group has two
legacy defined benefit schemes in the UK which are closed to new
members and to future accrual. In addition, the Group assumed a
number of defined benefit pension liabilities in Mainland Europe
through acquisitions completed in recent years. The net pension
liability in respect of these schemes and obligations was EUR13.9m
at 30 June 2018 (30 June 2017: EUR15.0m).
Acquisitions
During the period the Group made the following acquisitions for
a total consideration of EUR265m.
-- In March 2018, the purchase of 100% of the Synthesia Group
for an initial cash amount of EUR212.6m plus a deferred amount of
EUR30m payable in April 2019.
-- In May 2018, the purchase of 100% of Vestfold Plastindustri
AS, a Norwegian water treatment business for a total cash
consideration of EUR12.3m.
-- An investment of EUR8.2m in Invicara PTE Limited, a Building
Information Modelling solution provider with global reach.
-- Further capital outlay of EUR1.9m was made with respect to
Water & Energy acquiring a small bolt-on Australian water
business together with some residual payments arising on the
finalisation of completion accounts for prior year
acquisitions.
Capital Structure and Group Financing
The Group funds itself through a combination of equity and debt.
Debt is funded through a combination of syndicated bank facilities
and private placement loan notes. The principal syndicated facility
is a revolving credit facility of EUR500m with a committed term to
June 2022. This facility was undrawn at period end.
In addition, as part of the Group's longer-term capital
structure, the Group has total private placement loan notes of
EUR833m which have a weighted average maturity of 6 years. This
includes a previously announced private placement amount of EUR175m
which was drawn on 31 January 2018.
The weighted average maturity of all debt facilities is 5.8
years.
As well as ongoing free cashflow generation, the Group has
significant available undrawn facilities and cash which provide
appropriate headroom for operational requirements and development
funding. Total available headroom was EUR671m at 30 June 2018.
Related Party Transactions
There were no changes in related party transactions from the
2017 Annual Report that could have a material impact on the
financial position or performance of the Group in the first half of
the year.
Principal Risks & Uncertainties
Details of the principal risks and uncertainties facing the
Group can be found in the 2017 Annual Report. These risks, namely
volatility in the macro environment, failure to innovate, product
failure, business interruption (including IT continuity), credit
risks and credit control, employee development and retention, fraud
and cybercrime and acquisition and integration of new businesses,
remain the most likely to affect the Group in the second half of
the current year. The Group actively manages these and all other
risks through its control and risk management processes.
Dividend
The Board has proposed an interim dividend of 12.0 cent per
ordinary share, an increase of 9% on the 2017 interim dividend of
11.0 cent per share. The interim dividend will be paid on 5 October
2018 to shareholders on the register on the record date of 7
September 2018.
Looking Ahead
The improving momentum through the second quarter has continued
in a number of key markets since half-year end. Whilst it is
conceivable that activity in the UK could ease in the run up to the
crunch point of EU negotiations we anticipate the relative strength
of Western Europe and the Americas should compensate for that. The
combination of solid order books as we entered the second half, a
normalising raw material environment and recent acquisitions
integrating well should deliver a strong second half.
Longer term, the Group's relentless focus on innovation,
unrivalled routes to market and ever increasing geography, leaves
Kingspan well positioned to advance further in the years ahead.
RESPONSIBILITY STATEMENT
Directors' Responsibility Statement in respect of the
half-yearly financial report for the six-month period ended 30 June
2018
Each of the directors of Kingspan Group plc confirm our
responsibility for preparing the half-year financial report in
accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007, the Transparency Rules of the Central Bank of
Ireland and with IAS 34 Interim Financial Reporting, as adopted by
the EU, and to the best of our knowledge and belief:
a) the condensed interim financial statements comprising the
Condensed Consolidated Income Statement, the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated
Statement of Financial Position, the Condensed Consolidated
Statement of Changes in Equity, the Condensed Consolidated
Statement of Cash Flows and related notes have been prepared in
accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007, the Transparency Rules of the Central Bank of
Ireland and with IAS 34 Interim Financial Reporting as adopted by
the EU.
b) The interim management report includes a fair review of the
information required by:
i) Regulation 8(2) of the Transparency (Directive 2004/109/EC)
Regulations 2007, being an indication of important events that have
occurred during the first six months of the financial year and
their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
ii) Regulation 8(3) of the Transparency (Directive 2004/109/EC)
Regulations 2007, being related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or performance
of the entity during that period; and any changes in the related
party transactions described in the last annual report that could
do so.
The directors of Kingspan Group plc, and their functions, are as
listed in the 2017 Annual Report.
On behalf of the Board
Gene Murtagh Geoff Doherty
Chief Executive Officer Chief Financial Officer
------------------------
24 August 2018 24 August 2018
------------------------
Independent Review Report to Kingspan Group plc
Introduction
We have been engaged by Kingspan Group plc ('the Company') to
review the condensed set of consolidated financial statements in
the half-yearly financial report for the six months ended 30 June
2018 which comprises the Condensed Consolidated Income Statement,
the Condensed Consolidated Statement of Comprehensive Income, the
Condensed Consolidated Statement of Financial Position, the
Condensed Consolidated Statement of Changes in Equity, the
Condensed Consolidated Statement of Cash Flows and the related
explanatory notes. The financial reporting framework that has been
applied in their preparation is International Financial Reporting
Standards as adopted by the EU ("IFRSs"). Our review was conducted
having regard to the Financial Reporting Council's ("FRC's")
International Standard on Review Engagements ("ISRE") (UK and
Ireland) 2410, 'Review of Interim Financial Information Performed
by the Independent Auditor of the Entity'.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of consolidated
financial statements in the half-yearly report for the six months
ended 30 June 2018 is not prepared, in all material respects, in
accordance with IAS 34 'Interim Financial Reporting' as adopted by
the EU, the Transparency (Directive 2004/109/EC) (Amendment)
Regulations 2007 ("Transparency Directive"), and the Transparency
Rules of the Central Bank of Ireland.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Transparency Directive and the Transparency Rules of the
Central Bank of Ireland. The annual financial statements of the
company are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for ensuring that the condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 'Interim Financial Reporting' as
adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of consolidated financial statements in the
half-yearly financial report based on our review.
Scope of review
We conducted our review having regard to the Financial Reporting
Council's International Standard on Review Engagements (UK and
Ireland) 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. A review of interim
financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (Ireland) and consequently
does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
We read the other information contained in the half-yearly
financial report to identify material inconsistencies with the
information in the condensed set of consolidated financial
statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the review. If
we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company and its directors in
accordance with the terms of our engagement to assist the company
in meeting the requirements of the Transparency Directive and the
Transparency Rules of the Central Bank of Ireland. Our review has
been undertaken so that we might state to the Company those matters
we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
KPMG 24 August 2018
Chartered Accountants
1 Stokes Place
St. Stephen's Green
Dublin 2
Kingspan Group plc
Condensed consolidated income statement (unaudited)
for the 6 month period ended 30 June 2018
6 months 6 months
ended ended
30 June 2018 30 June
2017
Note EURm EURm
Revenue 4 2,009.9 1,749.3
Cost of Sales (1,448.2) (1,243.5)
------------- ----------
Gross Profit 561.7 505.8
Operating Costs * (366.4) (328.0)
------------- ----------
Trading Profit 4 195.3 177.8
Intangible amortisation (9.0) (7.5)
Non-trading items 6 - 0.6
------------- ----------
Operating Profit 186.3 170.9
Finance expense 7 (9.3) (7.8)
Finance income 7 0.6 0.2
------------- ----------
Profit for the period before income
tax 177.6 163.3
Income tax expense 8 (30.9) (30.2)
------------- ----------
Net Profit for the period 146.7 133.1
------------- ----------
Attributable to owners of Kingspan
Group plc 144.8 132.8
Attributable to non-controlling
interests 1.9 0.3
------------- ----------
146.7 133.1
------------- ----------
Earnings per share for the period
Basic 12 80.7c 74.4c
Diluted 12 80.0c 73.6c
* Operating costs exclude intangible amortisation and
non-trading items
Kingspan Group plc
Condensed consolidated statement of comprehensive income
(unaudited)
for the 6 month period ended 30 June 2018
6 months 6 months
ended ended
30 June 30 June
2018 2017
EURm EURm
Net profit for financial period 146.7 133.1
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss
Exchange differences on translating foreign
operations 6.9 (54.5)
Net changes in fair value of cash flow
hedges 2.4 (0.4)
Income taxes relating to changes in fair (0.3) -
value of cash flow hedges
Total comprehensive income for the period 155.7 78.2
--------- ---------
Attributable to owners of Kingspan Group
plc 155.1 78.8
Attributable to non-controlling interests 0.6 (0.6)
--------- ---------
155.7 78.2
--------- ---------
Kingspan Group plc
Condensed consolidated statement of financial position
as at 30 June 2018
At 30 June At 30 June At 31 December
2018 (unaudited) 2017 2017
(unaudited) (audited)
Note EURm EURm EURm
Assets
Non-current assets
Goodwill 13 1,255.0 971.1 1,095.7
Other intangible assets 82.9 91.5 90.3
Financial asset 8.2 - -
Property, plant and equipment 14 779.7 674.0 703.3
Derivative financial instruments 10 23.3 31.2 22.2
Retirement benefit assets 7.5 6.4 7.9
Deferred tax assets 16.9 12.0 16.5
----------------- ------------- ---------------
2,173.5 1,786.2 1,935.9
Current assets
Inventories 543.3 444.1 447.1
Trade and other receivables 873.8 687.4 675.9
Derivative financial instruments 10 1.1 0.7 0.1
Cash and cash equivalents 10 171.0 205.6 176.6
----------------- ------------- ---------------
1,589.2 1,337.8 1,299.7
----------------- ------------- ---------------
Total assets 3,762.7 3,124.0 3,235.6
----------------- ------------- ---------------
Liabilities
Current liabilities
Trade and other payables 800.3 686.7 645.2
Provisions for liabilities 45.0 40.7 52.3
Derivative financial instruments 10 - 0.1 0.1
Deferred consideration (including
contingent consideration) 36.7 6.2 6.4
Interest bearing loans and
borrowings 10 8.1 1.7 1.2
Current income tax liabilities 86.6 79.0 80.9
----------------- ------------- ---------------
976.7 814.4 786.1
Non-current liabilities
Retirement benefit obligations 21.4 21.4 21.5
Provisions for liabilities 57.7 54.4 48.7
Interest bearing loans and
borrowings 10 895.6 675.4 661.5
Deferred tax liabilities 35.2 37.5 38.7
Deferred contingent consideration 100.7 13.3 111.1
----------------- ------------- ---------------
1,110.6 802.0 881.5
----------------- ------------- ---------------
Total liabilities 2,087.3 1,616.4 1,667.6
----------------- ------------- ---------------
Net Assets 1,675.4 1,507.6 1,568.0
----------------- ------------- ---------------
Equity
Share capital 23.7 23.5 23.6
Share premium 95.6 95.6 95.6
Capital redemption reserve 0.7 0.7 0.7
Treasury shares (12.7) (13.9) (14.0)
Other reserves (213.5) (121.9) (220.5)
Retained earnings 1,748.5 1,505.9 1,642.7
----------------- ------------- ---------------
Equity attributable to owners
of Kingspan Group plc 1,642.3 1,489.9 1,528.1
Non-controlling interests 33.1 17.7 39.9
----------------- ------------- ---------------
Total Equity 1,675.4 1,507.6 1,568.0
----------------- ------------- ---------------
Kingspan Group plc
Condensed consolidated statement of changes in equity (unaudited)
for the 6 month period ended 30 June 2018
Total
Cash Share Put attributable
Capital flow based option to owners Non-
Share Share redemption Treasury Translation hedging payment Revaluation liability Retained of the controlling Total
capital premium reserve shares reserve reserve reserve reserve reserve earnings parent interests equity
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
Balance at 1 January
2018 23.6 95.6 0.7 (14.0) (177.2) 0.2 35.2 0.7 (79.4) 1,642.7 1,528.1 39.9 1,568.0
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Transactions with owners
recognised
directly in equity
Employee share based
compensation - - - - - - 6.1 - - - 6.1 - 6.1
Exercise or lapsing
of
share options 0.1 - - 1.3 - - (9.0) - - 7.7 0.1 - 0.1
Dividends - - - - - - - - - (46.7) (46.7) - (46.7)
Transactions with
non-controlling
interests:
Dividends paid to
non-controlling
interests - - - - - - - - - - - (0.1) (0.1)
Fair value movement - - - - - - - - (0.4) - (0.4) (7.3) (7.7)
Transactions with
owners 0.1 - - 1.3 - - (2.9) - (0.4) (39.0) (40.9) (7.4) (48.3)
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Total comprehensive
income
for the period
Profit for the period - - - - - - - - - 144.8 144.8 1.9 146.7
Other comprehensive
income
Items that may be reclassified subsequently to profit or loss
Cash flow hedging in
equity
- current year - - - - - 2.4 - - - - 2.4 - 2.4
- tax impact - - - - - (0.3) - - - - (0.3) - (0.3)
Exchange differences
on
translating foreign
operations - - - - 8.2 - - - - - 8.2 (1.3) 6.9
Total comprehensive
income
for the period - - - - 8.2 2.1 - - - 144.8 155.1 0.6 155.7
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Balance at 30 June
2018 23.7 95.6 0.7 (12.7) (169.0) 2.3 32.3 0.7 (79.8) 1,748.5 1,642.3 33.1 1,675.4
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Kingspan Group plc
Condensed consolidated statement of changes in equity (unaudited)
for the 6 month period ended 30 June 2017
Total
Cash Share Put attributable
Capital flow based option to owners Non-
Share Share redemption Treasury Translation hedging payment Revaluation liability Retained of the controlling Total
capital premium reserve shares reserve reserve reserve reserve reserve earnings parent interests equity
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
Balance at 1
January
2017 23.4 95.6 0.7 (12.5) (95.2) 2.3 33.3 0.7 - 1,406.6 1,454.9 16.6 1,471.5
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Transactions with owners
recognised
directly in equity
Employee share
based
compensation 0.1 - - - - - 6.9 - - - 7.0 - 7.0
Exercise or
lapsing of
share options - - - - - - (8.5) - - 8.5 - - -
Repurchase of
shares - - - (1.4) - - - - - - (1.4) - (1.4)
Dividends - - - - - - - - (42.0) (42.0) - (42.0)
Transactions with
non-controlling
interests:
Non-controlling
interest
arising on
acquisition - - - - - - - - - - - 1.7 1.7
Put option
liability arising
on acquisition - - - - - - - - (7.4) - (7.4) - (7.4)
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Transactions with
owners 0.1 - - (1.4) - - (1.6) - (7.4) (33.5) (43.8) 1.7 (42.1)
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Total
comprehensive
income
for the period
Profit for the
period - - - - - - - - - 132.8 132.8 0.3 133.1
Other
comprehensive
income
Items that may be reclassified subsequently to profit or loss
Cash flow
hedging
in equity
- current year - - - - - (0.4) - - - - (0.4) - (0.4)
Exchange
differences on
translating
foreign
operations - - - - (53.6) - - - - - (53.6) (0.9) (54.5)
Total
comprehensive
income
for the period - - - - (53.6) (0.4) - - - 132.8 78.8 (0.6) 78.2
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Balance at 30
June 2017 23.5 95.6 0.7 (13.9) (148.8) 1.9 31.7 0.7 (7.4) 1,505.9 1,489.9 17.7 1,507.6
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- ---------- ------------- ------------ ----------
Kingspan Group plc
Condensed consolidated statement of changes in equity (audited)
for the financial year ended 31 December 2017
Total
Cash Share Put attributable
Capital flow based option to owners Non-
Share Share redemption Treasury Translation hedging payment Revaluation liability Retained of the controlling Total
capital premium reserve shares reserve reserve reserve reserve reserve earnings parent interest equity
EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm EURm
Balance at 1
January 2017 23.4 95.6 0.7 (12.5) (95.2) 2.3 33.3 0.7 - 1,406.6 1,454.9 16.6 1,471.5
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- --------- ------------- ------------ ---------
Transactions with owners recognised directly in equity
Employee share
based
compensation 0.2 - - - - - 10.7 - - - 10.9 - 10.9
Tax on employee
share based
compensation - - - - - - 0.8 - - 3.1 3.9 - 3.9
Exercise or
lapsing of
share options - - - - - - (9.6) - - 9.6 - - -
Repurchase of
shares - - - (1.5) - - - - - - (1.5) - (1.5)
Dividends - - - - - - - - - (61.7) (61.7) - (61.7)
Transactions
with
non-controlling
interests:
Arising on
acquisition - - - - - - - - (79.1) - (79.1) 24.9 (54.2)
Fair value
movement - - - - - - - - (0.3) - (0.3) - (0.3)
Dividends paid - - - - - - - - - - - - -
to
non-controlling
interest
Transactions
with owners 0.2 - - (1.5) - - 1.9 - (79.4) (49.0) (127.8) 24.9 (102.9)
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- --------- ------------- ------------ ---------
Total
comprehensive
income
for the year
Profit for the
year - - - - - - - - - 284.3 284.3 1.6 285.9
Other
comprehensive
income:
Items that may be reclassified subsequently to profit or loss
Cash flow
hedging in
equity
- current year - - - - - (2.1) - - - - (2.1) - (2.1)
- tax impact - - - - - - - - - - - - -
Exchange
differences on
translating
foreign
operations - - - - (82.0) - - - - - (82.0) (3.2) (85.2)
Items that will not be reclassified subsequently to profit or loss
Actuarial losses
of defined
benefit pension
scheme - - - - - - - - - 1.0 1.0 - 1.0
Income taxes
relating to
actuarial
losses on
defined
benefit pension
scheme - - - - - - - - - (0.2) (0.2) - (0.2)
Total
comprehensive
income
for the year - - - - (82.0) (2.1) - - - 285.1 201.0 (1.6) 199.4
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- --------- ------------- ------------ ---------
Balance at 31
December
2017 23.6 95.6 0.7 (14.0) (177.2) 0.2 35.2 0.7 (79.4) 1,642.7 1,528.1 39.9 1,568.0
-------- -------- ----------- --------- ------------ -------- -------- ------------ ---------- --------- ------------- ------------ ---------
Kingspan Group plc
Condensed consolidated statement of cash flows (unaudited)
for the 6 month period ended 30 June 2018
6 months 6 months
ended ended
30 June 2018 30 June
2017
EURm
EURm
Operating activities
Net profit for the period 146.7 133.1
Add back non-operating expenses:
Income tax 30.9 30.2
Depreciation of property, plant
and equipment 36.3 31.4
Amortisation of intangible assets 9.0 7.5
Non-trading items - (0.6)
Employee equity-settled share options 6.1 6.9
Finance income (0.6) (0.2)
Finance expense 9.3 7.8
Profit on sale of property, plant
and equipment (0.8) (2.0)
Changes in working capital:
Increase in inventories (45.6) (87.0)
Increase in trade and other receivables (124.8) (95.1)
Increase in trade, other payables
and provisions 78.4 97.2
Other:
Pension contributions (0.5) (0.6)
-------- ---------
Cash generated from operations 144.4 128.6
Taxes paid (30.8) (32.0)
Financing fees paid - (1.8)
Interest paid (7.7) (8.2)
-------- ---------
Net cash flow from operating activities 105.9 86.6
-------- ---------
Investing activities
Additions to property, plant and
equipment (70.1) (44.6)
Additions to intangible assets - (4.8)
Proceeds from disposals of property,
plant and equipment 2.0 3.4
Proceeds from disposal of trade
and assets - 5.7
Purchase of subsidiary undertakings
(including net debt/cash acquired) (226.8) (14.3)
Purchase of financial fixed asset (8.2) -
Interest received 0.6 0.2
-------- ---------
Net cash flow from investing activities (302.5) (54.4)
-------- ---------
Financing activities
Drawdown of interest bearing loans
and borrowings 237.9 30.9
Repayment of interest bearing loans
and borrowings - (39.7)
Settlement of derivative financial
instrument - 8.0
Increase in finance lease liability 0.1 1.5
Proceeds from share issues 0.1 0.1
Repurchase of treasury shares - (1.4)
Dividends to non-controlling interests (0.1) -
Dividends paid (46.7) (42.0)
-------- ---------
Net cash flow from financing activities 191.3 (42.6)
-------- ---------
Decrease in cash and cash equivalents (5.3) (10.4)
Translation adjustment (0.3) (6.0)
Cash and cash equivalents at the
beginning of the period 176.6 222.0
-------- ---------
Cash and cash equivalents at the
end of the period 171.0 205.6
-------- ---------
Kingspan Group plc
Notes
forming part of the financial statements
1 Reporting entity
Kingspan Group plc ("the Company") is a public limited company
registered and domiciled in Ireland.
The Company and its subsidiaries (together referred to as "the
Group") are primarily involved in the manufacture of high
performance insulation and building envelope solutions.
The financial information presented in the half-yearly report
does not represent full statutory accounts. Full statutory accounts
for the year ended 31 December 2017 prepared in accordance with
IFRS, as adopted by the EU, upon which the auditors have given an
unqualified audit report, are available on the Group's website
(www.kingspan.com).
2 Basis of preparation
This half-yearly financial report is unaudited but has been
reviewed by the Company's auditor.
(a) Statement of compliance
These condensed consolidated interim financial statements ("the
Interim Financial Statements") have been prepared in accordance
with IAS 34 Interim Financial Reporting and do not include all of
the information required for full annual financial statements.
The Interim Financial Statements were approved by the Board of
Directors on 24 August 2018.
(b) Significant accounting policies
The accounting policies applied by the Group in the Interim
Financial Statements are the same as those applied by the Group in
its consolidated financial statements as at and for the year ended
31 December 2017 with the exception of changes in accounting policy
in respect of IFRS 9, Financial Instruments and IFRS 15, Revenue
from Contracts with Customers which are described below.
The following standards are effective from 1 January 2018 but do
not have a material impact on the results of the financial position
of the Group.
New and amended standards and interpretations effective during
2018
Financial instruments
IFRS 9, Financial Instruments, replaces IAS 39, Financial
Instruments: Recognition and Measurement. IFRS 9 addresses the
classification, measurement and derecognition of financial assets
and liabilities, introduces new rules for hedge accounting and a
new impairment model for financial assets. The Group has adopted
IFRS 9 from 1 January 2018.
IFRS 9 largely retains the requirements of IAS 39 for the
classification and measurement of financial liabilities but
eliminates the previous IAS 39 categories for financial assets. The
vast majority of the Group's financial assets are trade receivables
and cash and as a result the classification and measurement changes
do not have a material impact on the Group's consolidated financial
statements.
For trade receivables, the Group applies the IFRS 9 simplified
approach to measure expected credit losses which uses a lifetime
expected loss allowance. Given historic loss rates, normal
receivable ageing and the significant portion of trade receivables
that are within agreed terms, the change in impairment methodology
as a result of implementing IFRS 9 did not have a material impact
on the Group's financial results.
The impact of adopting IFRS 9 on the consolidated financial
statements was not material for the Group and there was no
adjustment to retained earnings on application at 1 January
2018.
Revenue recognition
IFRS 15, Revenue from Contracts with Customers, replaces IAS 18,
Revenue and IAS 11, Construction Contracts and related
interpretations. IFRS 15 establishes a five-step model for
reporting the nature, amount, timing and uncertainty of revenue and
cash flows arising from contracts with customers. IFRS 15 specifies
how and when revenue should be recognised as well as requiring
enhanced disclosures. The Group has adopted IFRS 15 from 1 January
2018, using the modified retrospective approach and has not
restated comparatives for 2017.
The Group used the five-step model to develop an impact
assessment framework to assess the impact of IFRS 15 on the Group's
revenue transactions. The results of our IFRS 15 assessment
framework and contract reviews indicated that the impact of
applying IFRS 15 on the consolidated financial statements was not
material for the Group and there was no adjustment to retained
earnings or material impact on the timing of revenue recognition on
application of the new rules at 1 January 2018.
Revenue is recognised when control of goods is transferred to
the customer, which for the vast majority of the Group is at a
point in time when delivery has taken place in accordance with the
terms of sale.
New and amended standards and interpretations issued but not yet
effective or early adopted
IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both the
lessee and the lessor. For lessees, IFRS 16 eliminates the
classification of leases as either operating leases or finance
leases and introduces a single lessee accounting model whereby all
leases are accounted for as finance leases, with some exemptions
for short-term and low-value leases. It also includes an election
which permits a lessee not to separate non-lease components (e.g.
maintenance) from lease components and instead capitalise both the
lease cost and associated non-lease cost. The lessee will recognise
a right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make
lease payments. IFRS 16 is effective for annual periods beginning
on or after 1 January 2019, and the Group will apply IFRS 16 from
its effective date.
The standard will primarily affect the accounting for the
Group's operating leases. The application of IFRS 16 will result in
the recognition of additional assets and liabilities in the
consolidated statement of financial position and in the
consolidated income statement it will replace the straight-line
operating lease expense with a depreciation charge for the
right-of-use asset and an interest expense on the lease
liabilities.
The Group has completed an initial assessment of the potential
impact of IFRS 16 on its consolidated financial statements. The
Group will adopt the new standard by applying the modified
retrospective approach and will avail of the recognition exemption
for short-term and low-value leases. The Group's non-cancellable
operating lease commitments on an undiscounted basis at 31 December
2017 are detailed in Note 31 to the consolidated financial
statements of the Group's 2017 Annual Report and provides an
indication of the scale of leases held by the Group.
Based on this initial impact assessment, the standard is not
expected to have any material impact on either the statement of
financial position or income statement.
(c) Estimates
The preparation of Interim Financial Statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expense. Actual results
may differ from these estimates.
In preparing the Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
as at and for the year ended 31 December 2017.
The Interim Financial Statements are available on the Group's
website (www.kingspan.com).
(d) Going concern
The directors have reviewed forecasts and projected cash flows
for a period of not less than 12 months from the date of these
Interim Financial Statements, and considered its net debt position,
available committed banking facilities and other relevant
information including the economic conditions currently affecting
the building environment generally. On the basis of this review,
the directors have concluded that there are no material
uncertainties that would cast significant doubt over the Group's
ability to continue as a going concern. For this reason, the
directors consider it appropriate to adopt the going concern basis
in preparing the financial statements.
3 Reporting currency
The Interim Financial Statements are presented in Euro which is
the functional currency of the Company and presentation currency of
the Group.
Results and cash flows of foreign subsidiary undertakings have
been translated into Euro at the average exchange rates for the
period, as these approximate the exchange rates at the dates of the
transactions. The related assets and liabilities have been
translated at the closing rates of exchange applicable at the end
of the reporting period.
The following significant exchange rates were applied during the
period:
Average rate Closing rate
H1 2018 H1 2017 FY 2017 H1 2018 H1 2017 FY 2017
Euro =
Pound Sterling 0.880 0.860 0.876 0.883 0.879 0.887
US Dollar 1.210 1.083 1.129 1.156 1.140 1.197
Canadian Dollar 1.546 1.446 1.465 1.541 1.484 1.501
Australian Dollar 1.569 1.436 1.473 1.576 1.487 1.533
Czech Koruna 25.501 26.783 26.329 26.029 26.294 25.574
Polish Zloty 4.221 4.268 4.256 4.365 4.245 4.171
Hungarian Forint 314.060 309.50 309.26 328.590 309.95 310.20
Brazilian Real 4.143 3.446 3.609 4.463 3.778 3.967
4 Operating segments
The Group has the following five reportable segments:
Insulated Panels Manufacture of insulated panels, structural framing
and metal facades.
Insulation Boards Manufacture of rigid insulation boards, building
services insulation and engineered timber systems.
Light & Air Manufacture of daylighting, smoke management and
ventilation systems.
Water & Energy Manufacture of energy storage, water management
solutions and related service activity.
Access Floors Manufacture of raised access floors and data centre
solutions.
Analysis by class of business
Segment revenue and disaggregation of revenue*
Insulated Insulation Light Water Access
Panels Boards & Air & Energy Floors Total
EURm EURm EURm EURm EURm EURm
Total revenue -
H1 2018 1,268.6 428.9 128.6 96.6 87.2 2,009.9
Total revenue -
H1 2017 1,111.7 373.7 81.7 88.9 93.3 1,749.3
Insulated Insulation Light Water Access
Panels Boards & Air & Energy Floors Total
EURm EURm EURm EURm EURm EURm
Trading profit -
H1 2018 122.6 53.1 5.1 5.5 9.0 195.3
Intangible amortisation (4.9) (1.0) (2.4) (0.7) - (9.0)
Non-trading items - - - - - -
---------- ----------- ------- ---------- -------- --------
Operating result
- H1 2018 117.7 52.1 2.7 4.8 9.0 186.3
---------- ----------- ------- ---------- --------
Net finance expense (8.7)
--------
Profit for the period before income tax 177.6
Income tax expense (30.9)
--------
Profit for the period - H1 2018 146.7
--------
*The Group has considered the disaggregation of revenue
disclosures required under IFRS 15 and has determined that using
the existing operating segments is appropriate.
Insulated Insulation Light Water Access
Panels Boards & Air & Energy Floors Total
EURm EURm EURm EURm EURm EURm
Trading
profit - H1
2017 116.9 40.0 3.0 6.7 11.2 177.8
Intangible
amortisation (4.6) (1.1) (1.1) (0.7) - (7.5)
Non-trading
items (2.3) 2.9 - - - 0.6
-------------- ----------- ------- ---------- -------- ----------------------
Operating
result - H1
2017 110.0 41.8 1.9 6.0 11.2 170.9
-------------- ----------- ------- ---------- --------
Net finance
expense (7.6)
----------------------
Profit for the period before income tax 163.3
Income tax
expense (30.2)
----------------------
Profit for the period - H1
2017 133.1
----------------------
Segment assets and liabilities
Total Total
Insulated Insulation Light Water Access 30 June 30 June
Panels Boards & Air & Energy Floors 2018 2017
EURm EURm EURm EURm EURm EURm EURm
Assets - H1
2018 2,067.0 817.0 309.6 192.4 164.4 3,550.4
Assets - H1
2017 1,765.4 629.8 153.6 168.7 157.0 2,874.5
Derivative
financial
instruments 24.4 31.9
Cash and cash
equivalents 171.0 205.6
Deferred tax
asset 16.9 12.0
---------- ----------
Total assets 3,762.7 3,124.0
---------- ----------
Liabilities -
H1 2018 (696.7) (203.2) (67.4) (60.5) (34.0) (1,061.8)
Liabilities -
H1 2017 (529.9) (160.8) (46.5) (51.9) (33.6) (822.7)
Interest bearing loans and borrowings (current and non-current) (903.7) (677.1)
Derivative financial instruments (current and non-current) - (0.1)
Income tax liabilities (current and deferred) (121.8) (116.5)
---------- ------------
Total
liabilities (2,087.3) (1,616.4)
---------- ------------
Other segment information
Insulated Insulation Light Water Access
Panels Boards & Air & Energy Floors Total
EURm EURm EURm EURm EURm EURm
Capital Investment
- H1 2018 ** 52.9 42.4 14.0 5.3 1.5 116.1
Capital Investment
- H1 2017 ** 40.8 16.0 1.8 1.7 2.2 62.5
Depreciation included
in segment
result - H1 2018 (23.4) (7.9) (2.3) (1.3) (1.4) (36.3)
Depreciation included
in segment
result - H1 2017 (20.2) (7.1) (1.4) (1.5) (1.2) (31.4)
Non cash items included
in segment result
- H1 2018 (3.5) (1.3) (0.2) (0.5) (0.6) (6.1)
Non cash items included
in segment result
-H1 2017 (4.2) (1.5) (0.1) (0.5) (0.6) (6.9)
Analysis of segmental data by geography
Republic United Rest
of Ireland Kingdom of Americas Others Total
EURm EURm Europe EURm EURm EURm
EURm
Income Statement Items
Revenue - H1 2018 76.9 455.3 946.7 392.1 138.9 2,009.9
Revenue - H1 2017 66.2 455.4 759.1 336.4 132.2 1,749.3
Statement of Financial Position Items
Non-current assets -
H1 2018 * 51.4 375.7 1,028.3 520.1 157.8 2,133.3
Non-current assets -
H1 2017 * 52.2 371.1 731.5 423.0 165.2 1,743.0
Capital Investment -
H1 2018 ** 1.7 12.9 84.2 15.3 2.0 116.1
Capital Investment -
H1 2017 ** 6.1 8.3 25.8 15.9 6.4 62.5
* Total non-current assets excluding derivative financial instruments
and deferred tax assets.
** Capital investment includes the fair value of property, plant,
equipment and intangible assets acquired through additions
in the period and also as part of business combinations.
In presenting information on the basis of geographic segments,
segment revenue is based on the geographic location of customers.
Segment assets are based on the geographic location of the
assets.
5 Seasonality of operations
Activity in the global construction industry is characterised by
cyclicality and is dependent to a significant extent on the
seasonal impact of weather in some of the Group's operating
locations. Activity is second half weighted and could be more
pronounced in the future due to the activity profile of recent
acquisitions.
6 Non-trading items
6 months 6 months
ended ended
30 June 30 June
2018 2017
EURm EURm
Profit on disposal of trade and
assets - 2.9
Impairment of goodwill - (2.3)
- 0.6
----------- ---------
During the period, no items of a non-trading nature arose.
In the period to 30 June 2017 the Group disposed of the trade
and assets of Kingspan Gefinex GmbH, which was part of the
Insulation Boards division, for EUR5.7m and realised a non-trading
profit of EUR2.9m, and impaired goodwill relating to a US energy
business, which is part of the Insulated Panels division.
7 Finance expense and finance income
6 months 6 months
ended ended
30 June 30 June
2018 2017
EURm EURm
Finance expense
Bank loans 1.4 0.9
Private placement loan notes 8.1 7.2
Finance leases 0.1 0.1
Deferred contingent consideration
fair value movement 0.2 -
Defined benefit pension scheme,
net 0.1 0.1
Fair value movement on derivative
financial instruments (1.4) 8.0
Fair value movement on private placement
debt 0.8 (8.5)
--------- ---------
9.3 7.8
Finance income
Interest earned (0.6) (0.2)
Net finance cost 8.7 7.6
--------- ---------
No borrowing costs were capitalised during the period (H1 2017:
Nil).
8 Taxation
Taxation provided for on profits is EUR30.9m which represents
17.4% of the profit before tax for the period (H1 2017: 18.5%). The
full year effective tax rate in 2017 was 17.5%. The taxation charge
for the six month period is accrued using the estimated applicable
rate for the year as a whole.
9 Analysis of net debt
At At
30 June 30 June
2018 2017
EURm EURm
Cash and cash equivalents 171.0 205.6
Derivative financial instruments 23.3 31.2
Current borrowings (8.1) (1.7)
Non-current borrowings (895.6) (675.4)
Deferred consideration (30.0) -
Total net debt (739.4) (440.3)
---------- ----------
Net debt, which is a non-IFRS measure, is stated net of interest
rate and currency hedges (asset of EUR23.3m) which relate to hedges
of debt. Foreign currency derivatives (asset of EUR1.1m), which are
used for transactional hedging, are not included in the definition
of net debt.
10 Financial instruments
The following table outlines the components of net debt by
category:
Loans and
receivables Liabilities Derivatives
and other in a fair designated Total
financial value as hedging net debt
assets/(liabilities) hedge instruments by category
at amortised relationship EURm EURm
cost EURm
EURm
Assets:
Interest rate swaps - - 23.3 23.3
Cash at bank and in
hand 171.0 - - 171.0
---------------------- --------------- -------------- --------------
Total assets 171.0 - 23.3 194.3
---------------------- --------------- -------------- --------------
Liabilities:
Private placement notes (698.3) (135.0) - (833.3)
Deferred consideration (30.0) - - (30.0)
Other loans (70.4) - - (70.4)
---------------------- --------------- -------------- --------------
Total liabilities (798.7) (135.0) - (933.7)
---------------------- --------------- -------------- --------------
At 30 June 2018 (627.7) (135.0) 23.3 (739.4)
---------------------- --------------- -------------- --------------
Loans and
receivables Liabilities Derivatives
and other in a fair designated Total
financial value as hedging net debt
assets/(liabilities) hedge instruments by category
at amortised relationship EURm EURm
cost EURm
EURm
Assets:
Interest rate swaps - - 31.2 31.2
Cash at bank and in
hand 205.6 - - 205.6
---------------------- --------------- -------------- --------------
Total assets 205.6 - 31.2 236.8
---------------------- --------------- -------------- --------------
Liabilities:
Private placement notes (523.8) (142.6) - (666.4)
Other loans (10.7) - - (10.7)
---------------------- --------------- -------------- --------------
Total liabilities (534.5) (142.6) - (677.1)
---------------------- --------------- -------------- --------------
At 30 June 2017 (328.9) (142.6) 31.2 (440.3)
---------------------- --------------- -------------- --------------
The Group's private placement loan notes of EUR833.3m have a
weighted average maturity of 6 years.
Fair value of financial instruments carried at fair value
Financial instruments recognised at fair value are analysed
between those based on quoted prices in active markets for
identical assets or liabilities (Level 1), those involving inputs
other than quoted prices that are observable for the assets or
liabilities, either directly or indirectly (Level 2), and those
involving inputs for the assets or liabilities that are not based
on observable market data (Level 3).
The following table sets out the fair value of all financial
instruments whose carrying value is at fair value:
Level 1 Level 2 Level 3
30 June 30 June 30 June
2018 2018 2018
EURm EURm EURm
Financial assets
Interest rate swaps - 23.3 -
Foreign exchange contracts for - 1.1 -
hedging
Financial liabilities
Deferred contingent consideration - - (107.4)
Deferred consideration - - (30.0)
Foreign exchange contracts for - - -
hedging
---------- --------- ----------
At 30 June 2018 - 24.4 (137.4)
---------- --------- ----------
Level 1 Level 2 Level 3
30 June 30 June 30 June
2017 2017 2017
EURm EURm EURm
Financial assets
Interest rate swaps - 31.2 -
Foreign exchange contracts for
hedging - 0.7 -
Financial liabilities
Deferred contingent consideration - - (19.5)
Deferred consideration - - -
Foreign exchange contracts for
hedging - (0.1) -
---------- --------- ---------
At 30 June 2017 - 31.8 (19.5)
---------- --------- ---------
All derivatives entered into by the Group are included in Level
2 and consist of foreign currency forward contracts, interest rate
swaps and cross currency interest rate swaps.
Where derivatives are traded either on exchanges or liquid
over-the-counter markets, the Group uses the closing price at the
reporting date. Normally, the derivatives entered into by the Group
are not traded in active markets. The fair values of these
contracts are estimated using a valuation technique that maximises
the use of observable market inputs, e.g. market exchange and
interest rates.
Deferred contingent consideration is included in Level 3.
Deferred consideration arose with respect to the Synthesia
acquisition as set out in note 15. The deferred contingent
consideration is consistent with 31 December 2017 and is set out in
notes 18 and 22 of the 2017 Annual Report. The contingent element
is measured on a series of trading performance targets and is
adjusted by the application of a range of outcomes and associated
probabilities.
During the period ended 30 June 2018, there were no significant
changes in the business or economic circumstances that affect the
fair value of financial assets and liabilities, no
reclassifications and no transfers between levels of the fair value
hierarchy used in measuring the fair value of the financial
instruments.
Fair value of financial instruments at amortised cost
Except as detailed below, it is considered that the carrying
amounts of financial assets and financial liabilities recognised at
amortised cost in the Interim Financial Statements approximate
their fair values.
Private placement notes Carrying amount Fair value
EURm EURm
At 30 June 2018 833.3 883.9
At 30 June 2017 666.4 705.6
The fair value of the private placement notes, which are Level 2
financial instruments, is derived by using observable market data,
principally the relevant interest rates.
11 Dividends
A final dividend on ordinary shares of 26.0 cent per share in
respect of the year ended 31 December 2017 (2016: 23.5 cent) was
paid on 27 April 2018.
The directors are proposing an interim dividend of 12.0 cent
(2017: 11.0 cent) per share in respect of 2018, which will be paid
on 5 October 2018 to shareholders on the register on the record
date of 7 September 2018.
12 Earnings per share
6 months 6 months
ended ended
30 June 30 June
2018 2017
EURm EURm
The calculations of earnings per
share are based on the following:
Profit attributable to owners
of the Company 144.8 132.8
--------------- -----------
Number of Number
shares ('000) of
6 months shares
ended ('000)
30 June 6 months
2018 ended
30 June
2017
Weighted average number of ordinary
shares for
the calculation of basic earnings
per share 179,562 178,570
Dilutive effect of share options 1,558 1,754
--------------- -----------
Weighted average number of ordinary
shares
for the calculation of diluted
earnings per share 181,120 180,324
--------------- -----------
EUR cent EUR cent
Basic earnings per share 80.7 74.4
Diluted earnings per share 80.0 73.6
Adjusted basic earnings per share
(pre amortisation and non-trading
items; net of tax) 84.7 77.5
At 30 June 2018, there were no anti-dilutive options (30 June
2017: Nil).
13 Goodwill
At At At
30 June 30 June 2017 31 Dec
2018 2017
EURm
EURm EURm
At beginning of period 1,095.7 990.1 990.1
Acquired through business
combinations (note 15) 159.8 11.7 156.1
Impairment charge - (2.3) (2.3)
Effect of movement in exchange
rates (0.5) (28.4) (48.2)
--------- -------------- -----------
At end of period 1,255.0 971.1 1,095.7
--------- -------------- -----------
At end of period
Cost 1,322.7 1,039.0 1,163.4
Accumulated impairment losses (67.7) (67.9) (67.7)
Net carrying amount 1,255.0 971.1 1,095.7
--------- -------------- -----------
14 Property, plant and equipment
At At At
30 June 30 June 2017 31 Dec
2018 EURm 2017
EURm EURm
Cost or valuation 1,705.0 1,523.5 1,592.3
Accumulated depreciation
and impairment charges (925.3) (849.5) (889.0)
---------- --------------- -------------
Net carrying amount 779.7 674.0 703.3
---------- --------------- -------------
Opening net carrying amount 703.3 665.5 665.5
Acquired through business
combinations 42.0 7.9 39.8
Additions 72.2 45.3 84.5
Disposals (1.2) (1.9) (2.6)
Depreciation charge (36.3) (31.4) (64.2)
Impairment charge - - (0.8)
Effect of movement in exchange
rates (0.3) (11.4) (18.9)
Closing net carrying amount 779.7 674.0 703.3
---------- --------------- -------------
The disposals generated a profit in the period of EUR0.8m (H1
2017: EUR2.0m).
15 Business combinations
During the period, the Group made three acquisitions for a
combined total consideration of EUR256.8m:
-- In March 2018, the purchase of 100% of the share capital of
the Synthesia Group comprising of Synthesia Espanola S.A.,
Poliuretanos S.A, Huurre Iberica S.A. and their respective
subsidiaries;
-- In April 2018, the purchase of the assets of H2Enviro an
Australian water tanks business; and
-- In May 2018, the purchase of 100% of Vestfold Plastindustri
AS and Vestfold Plastindustri Eiendom AS; a Norwegian water
treatment business.
The provisional fair values of the acquired assets and
liabilities in respect of these acquisitions at their respective
acquisition dates, along with fair value adjustments to certain
2017 acquisitions (including Isoeste), are set out below:
Synthesia Isoeste Other* Total
EUR'm EUR'm EUR'm EUR'm
Non-current assets
Intangible assets - - 1.9 1.9
Property, plant and equipment 41.6 1.7 (1.3) 42.0
Deferred tax assets 0.6 - 1.7 2.3
Current assets
Inventories 49.8 (3.1) 4.9 51.6
Trade and other receivables 72.6 (2.2) 3.0 73.4
Current liabilities
Trade and other payables (59.9) (11.3) (6.2) (77.4)
Provisions for liabilities (3.5) (1.4) (0.6) (5.5)
Non-current liabilities
Deferred tax liabilities - 1.4 - 1.4
------------ -------- ------- -------
Total identifiable assets 101.2 (14.9) 3.4 89.7
Non-controlling interest - 7.3 - 7.3
Goodwill 141.4 7.6 10.8 159.8
------------ -------- ------- -------
Total consideration 242.6 - 14.2 256.8
------------ -------- ------- -------
Satisfied by:
Cash (net of cash/debt acquired) 212.6 - 14.2 226.8
Deferred consideration 30.0 - - 30.0
Total consideration 242.6 - 14.2 256.8
------------ -------- ------- -------
*Other includes the remaining acquisitions completed during the
period together with certain immaterial remeasurements of prior
year accounting estimates.
The goodwill is attributable principally to the profit
generating potential of the businesses, together with a strong
workforce, new geographies and synergies expected to be achieved
from integrating the businesses into Kingspan's existing
structure.
In the post-acquisition period to 30 June 2018, the businesses
acquired in the current period contributed total revenue of
EUR123.9m and trading profit of EUR9.9m to the Group's results.
In addition to the foregoing, an investment of EUR8.2m was made
in Invicara PTE Limited during the reporting period. This is
classified as a financial asset.
16 Capital and reserves
Issues of ordinary shares
676,592 ordinary shares (H1 2017: 949,558) were issued as a
result of the exercise of vested options arising from the Group's
share option schemes (see the 2017 Annual Report for full details
of the Group's share option schemes). Options were exercised at an
average price of EUR0.13 per option.
17 Significant events and transactions
There were no individually significant events or transactions in
the period which contributed to material changes in the Statement
of Financial Position; the most significant movement was the
changes in Inventories, Trade and other receivables and Trade and
other payables reflective of the acquisitions completed during the
period.
18 Related party transactions
There were no changes in related party transactions from the
2017 Annual Report that could have a material effect on the
financial position or performance of the Group in the first half of
the year.
19 Subsequent events
On 4 July 2018 the Group completed the acquisition of Balex
Metal sp. z.o.o., a Polish based manufacturer of insulated panels
and insulation board.
On 9 July 2018 the Group completed the acquisition of 51% of
Jindal Mectec Private Limited, an Indian manufacturer of insulated
panels.
The combined consideration for these acquisitions was
EUR220m.
There have been no further material events subsequent to 30 June
2018 which would require disclosure in this report.
[1] The Group uses a number of measures that are non-IFRS
measures, to monitor the performance of its operations. An
explanation of these Alternative Performance Measures is set out on
pages 129-130 of the Group's 2017 Annual Report.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFLTTRIVFIT
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