12c dividend boosts Kingspan shares as profits plunge 13% to €63.7m

KINGSPAN shares rose by 7.74% yesterday on the back of the promise of a special 12c dividend as pre-tax profits plunged by 13% to €63.7 million.

Pre-tax profits were down 13% to €63.7m, operating profits down 17% to €73.1m, turnover down 11% to €739.6m and earnings per share were down 8% to 30.2c.

However, Kingspan’s numbers were well received by analysts, who recognised the strong performance by the company in difficult trading conditions in the building industry.

Kingspan’s chairman and chief executive Eugene Murtagh said that while he sees existing business remaining broadly flat, he expects new products to add around €25m to sales this year.

And Mr Murtagh says he is comfortable in his dual role as chairman and chief executive.

“It works in our business. It’s not a dictatorial role, we work as a team and things are done by agreement,” he said.

Looking to the future, Mr Murtagh said: “As is well documented, the current macro environment which is characterised by uncertainty is unlikely to show any improvements over 2002.

However, the group has a product mix not entirely dependent on the macro environment and also has geographic opportunities which support sales going forward.

“This combination, together with tight cost management, should continue to insulate the group against the worst effects of the global downturn.

Kingspan remains committed to our goals of high return on capital employed, strong cashflow generation and organic growth.”

The company has performed well on the debt reduction front, with net debt at year end at €117m, a reduction of €52m from €169m at December 31, 2001.

This was done against a backdrop of a €30m spend on capital expenditure.

“This was achieved after capital investment during the year of 30m,” explained Mr Murtagh.

“Debt has been significantly reduced over the past two years so that balance sheet gearing at year end was 50%.”

Rating the shares a hold, Dolmen Stockbrokers analyst Ronan Wallace said: “The economic backdrop is difficult for Kingspan at the present time.

“While Kingspan may remain currently attractive with good potential dividend flows, the company operational performance may in the medium term hold back any significant share price appreciation.”

Meanwhile, Goodbody Stockbrokers analyst Robert Eason rates the shares a buy.