Kingspan to continue debt reduction

KINGSPAN plans to continue reducing debts in the second half of this year after wiping off €69 million in debts while making profits of €24.9m in the first six months of the year.

Kingspan shares roared ahead by 15% yesterday morning – the most in three months – after the company announced a better than expected 35% drop in first-half revenue and said demand for most of its products had stabilised, sending its shares soaring ahead in morning trading.

The shares closed the day up 14% at €6.15.

The company said it suffered a market contraction not seen in the lifetime of the business for the six-month period to June 30.

Kingspan chief executive, Gene Murtagh, acknowledged that the company “knocked lumps” out of its debts. Net debt was reduced to €230.8m in the period, down from €299.6m at the December year end, and the firm said it plans to reduce it further between now and December, albeit at a slower rate.

In a statement accompanying the results, Kingspan said: “Longer term, and despite the depth of the current recession, Kingspan is steadfast in its ambition to play a leading global role in what will inevitably evolve into a low-energy buildings environment. Combined organic expansion and select acquisitions will cement this strategy ongoing.”

Mr Murtagh said that there were a number of companies they would like to get their hands on.

“They won’t be too distressed. We are looking at setting ourselves up to look at decent businesses at a sensible price,” he told the Irish Examiner.

Kingspan, the number one producer of insulation in Britain, Ireland, Canada and Australasia, reported operating profits of €30.3m for the six months to the end of June, down 66% on the same period last year.

This was ahead of Bloxham Stockbrokers expectations for operating profit of €27m and represented an operating margin of 5.5% (H1 2008: 10.6%).

“The central theme coming from the interim results is that the second half is expected to show a more stable performance with further significant declines not expected across the majority of the group’s businesses. Total revenue declined by 35% year on year, with Ireland and UK the worse affected, with declines of 61% and 44% respectively. As expected, no interim dividend is to be paid,” Bloxham said.

The biggest decline in first-half sales was in Ireland and Britain, which are mired in recession and a construction slump that have led companies to postpone or cancel orders. Sales in Britain, Kingspan’s biggest market, fell 44% in the first half, while sales in Ireland plunged 61%.

The company has cut costs by €60m over the last 18 months, a process Mr Murtagh said is “to a large extent done”.

The Kingspan boss said the group would not pay a dividend in 2009 and was unlikely to do so in 2010.

Kingspan paid shareholders eight cents a share for the same period last year, but decided against paying a full-year dividend in March to focus on cost and cash management.

“Certainly not (in H1) and to be quite honest ... it’ll be unlikely in 2010,” said Mr Murtagh.