Kingspan shares surge but Grenfell shadow remains

The company had no role in the design of the cladding system used on Grenfell Tower but it still hasn’t fully shaken off the controversy

Kingspan has begun a corrective review of its UK insulation business over its role in the Grenfell Tower tragedy in 2017.

Shares in building insulation group Kingspan surged by more than 11% as it reported a strong start to the year and set out corrective measures for its UK business in response to issues raised at the inquiry into the Grenfell Tower tragedy.

Kingspan had no role in the design of the cladding system used on Grenfell Tower. A total of 72 people died in a devastating fire at the building, in west London, in 2017.

However, about 5% of the insulation used on the façade of the Grenfell building comprised Kingspan’s K15 product.

Kingspan said the product was used without its knowledge in a system that was unsafe and wasn’t compliant with the building’s regulations.

The group said it had full confidence in the safety of the K15 product, “when used in a compliant system”, having undertaken an extensive testing and review process.

Speaking as the Cavan-headquartered group published a “robust” set of 2020 annual results, chief executive Gene Murtagh said the issues raised by the inquiry related to “unacceptable conduct and historical process shortcomings” involving a small number of employees in Kingspan’s UK Insulation Boards business.

Kingspan said it was carrying out “a rigorous review” of its UK Insulation Boards business – with management changes, a compliance and governance review, a new code of conduct and new fire-testing protocols all featuring.

“Our aims are clear: to reassure that safety takes precedence over all other considerations and to ensure this can never happen again,” Mr Murtagh said.

Kingspan’s shares dropped from a near record high of €80.85 to €53.25 after it started giving evidence to the Grenfell inquiry in November 2020. Its shares are now back up to about €63, but the company still hasn’t fully shaken off the Grenfell controversy.

A strong recovery towards the end of the year saw Kingspan post a 2% increase, to €508.2m, in trading profit for 2020. However, revenues fell by 2% to just under €4.6bn. Its core insulated panels division saw a 4% drop in revenue.

The company said it has seen a strong start to 2021, helped by strong backlogs from the tail-end of 2020 and more trading days in the first six weeks of the year compared to 12 months ago. 

Nevertheless, group sales were up 20%, year-on-year, in the first six weeks of this year.

Kingspan has announced three further bolt-on acquisitions since the turn of the year. 

Mr Murtagh said there remains “plenty of activity” regarding further bolt-on purchases and said the overall acquisition pipeline is “more lively than I’ve ever seen it”.

He said Kingspan has “firepower” of €2bn in undrawn facilities and cash balances.

Kingspan reportedly pulled out of a €2bn race to buy international roofing materials business Firestone before Christmas. 

Mr Murtagh said Kingspan remains interested in acquiring businesses in the industrial and building membrane areas and could stretch its valuation limit if necessary, while still protecting its balance sheet.