Building materials group Kingspan today reported pre-tax profits of €68m in 2008, a tumble of almost 70% from the €224m in 2007.
Revenue fell by only 10% to €1,673m and adjusted earnings per share fell by 31% to 76 cent. The firm said a 68% lower dividend of eight cent for the year will be paid.
Kingspan reported a 13% fall in sales of its insulated panels and insulation boards in the UK and Ireland, athough there was growth in the rest of Europe. Kingspan also said its US insulated panels business had performed well.
A breakdown showed that insulated panel sales fell 5% to €724m, with Irish sales falling 28%.
Gene Murtagh, Chief Executive of Kingspan commented: "In 2008, we saw a global economic downturn and a dislocation in financial markets not seen in many years. Kingspan responded quickly and decisively to these changing conditions with a cost reduction programme and a focus on operational efficiencies that provides the group with an appropriate cost base to meet the anticipated economic headwinds. 2009 will present greater challenges than the year gone by and the prime focus is cost and cash management throughout the organisation.
While the timing of a recovery remains uncertain, moves towards acceptance of the need for enhanced energy efficiency in buildings continue apace. Kingspan has differentiated itself through a strategy of providing an integrated range of energy conserving building solutions to meet these needs. The Group has the benefits of a strong balance sheet and cash flow, and the correct product mix to leave it well positioned in the longer term."
Results detail
Goodbody analyst Robert Eason commented: "Kingspan has reported a 34% (-28% constant currency) decline in EBIT (pre-exceptionals) for the 12 months to the end of Dec-08 to €157m. This is in line with management guidance given in November for a decline of “approximately 33%”. However, it was slightly ahead of our forecasts of €154m, with a stronger than expected outturn from Insulation Boards & Panels being partly offset by a much weaker than expected outturn for Environmental & Renewables. Adjusted EPS of 75c was 8% ahead of our forecasts, reflecting lower than expected interest and tax charges (note in the latter there is a one-off charge of €9.1m relating to the withdrawal of industrial buildings’ allowances in the UK).
However, the exceptional charge of €75m was larger than expected and it consisted of the following: (i) €31.5m from business restructuring; and, (ii) €43.6m of goodwill impairment, the bulk of which was related to the Offsite division. Year end net debt of €300m was in line with our forecasts and there were no significant variances in the composition of the cashflows. As expected management is increasing its focus on cashflow and as a result it is recommending no final dividend and is curtailing acquisition/capex plans. Furthermore, management has indicated that on the back of actions taken already, there is €50m of cost savings (€35m of overhead savings and €15m of direct labour costs) to come through in 2009, which will bring the savings since the peak to €76m.
As expected sales trends have deteriorated across all the businesses in the second half and order intake has weakened. Given these trends it is no surprise that management is cautious on the outlook and say that “2009 will present greater challenges than the year gone by”. We believe our recently revised forecasts reflect such an environment (FY09 EPS of 27c, down circa 60% yoy versus -20% in H108 and -43% in H208) and, therefore, we do no expect to be making any significant changes to forecasts."
