Building solutions group Kingspan beats targets despite Brexit concerns

Building solutions group Kingspan is eyeing 15% higher annual revenues this year — which would see it comfortably breach the €3bn mark — on the back of a record first half and a better-than-expected performance by its UK operations in the immediate aftermath of June’s Brexit vote.

However, the company’s share movement of late suggests there remains some concern over what long-term effect Brexit may have on the stock.

Kingspan’s shares rose by nearly 6%, to €24.10 yesterday on the back of the strong results, but are still down from the €25.10 mark they were at the turn of the year and are still below their similar pre-Brexit vote level.

That said they’ve recovered from their post-referendum low of €18.09.

Chief executive Gene Murtagh yesterday suggested it remains far too early to make a judgement call on the Brexit vote.

“People are saying we’re post-Brexit, but Brexit hasn’t happened yet. The reality is that the process is yet to play out and until it does, most investors are seeing things as business as usual. I’m not saying it’s not negative but we’re a long way away from knowing [the full Brexit effect].”

The insulation and environmental-focused building materials group yesterday reported a 19% year-on-year rise in first-half revenues to almost €1.47bn, with trading profit up 50% at €167.3m and earnings per share ahead by 52% at 70.6c.

While it had noted some easing in UK business in the run-up to the Brexit vote, a 7% increase in orders was seen after it; which management called “encouraging”.

While mainland Europe is now Kingspan’s largest market, the UK still accounts for nearly 30% of group revenues. There, the company is nearly 70% tilted towards the commercial building market.

Mr Murtagh said management is forecasting full-year revenue of between €3.1bn and €3.2bn and trading profit of around €320m, which would be up by 25% on last year.

Acquisitions contributed 15% to first-half sales growth and 7% to profit growth; helped hugely by the company’s two big 2015 buys — North American firm Vicwest Building Products and Belgium’s insulation specialist Joris Ide.

As alluded to at its AGM in May, Kingspan has kept up its buying habits this year — spending around €200m so far on improving its environmental business in Australia and significantly complementing its core insulation units in the UK — via the purchase of Euroclad and Eurobond — and agreeing to buy German ‘daylighting’ business Essmann.

The company still has a healthy pipeline of acquisition opportunities – ranging from small to “very large” targets – and has firepower of around €500m available without stretching its balance sheet.

Profits were up by 59%, to €112m, in the core insulated panels division in the first half, with a 41% rise – to €39m – evident in the insulation boards business.

Though no longer a core market, Kingspan’s Irish division kept its recovery going and management expects that trend to continue for the full year.

Ireland represents 4% of group revenue and Mr. Murtagh said it would be pleasing if it could keep a 4%-5% contribution rate.

Kingspan has a long-term eye on expanding in the Americas and saw annualised sales growth, there, of 15% in the first half.