Kingspan delivers another record set of results

Kingspan’s (KGP) top-line came in north of €4bn (£3.4bn) for the first time, benefiting from the passing on of raw material price increases, and management pumped up the dividend by almost a third. But the company, which manufactures insulation products and other building materials, put in a mixed margin performance and warned on the immediate outlook for the sector.

Revenue growth was robust across all divisions in the half as customers stumped up higher prices. Insulated panels, the company’s chunkiest top-line contributor, was up by 39 per cent to €2.7bn. Insulation put in the best growth performance once acquisitions are factored in, up 69 per cent to €842mn, while revenue in the light and air (up 37 per cent), water and energy (up 16 per cent), and data and flooring divisions (up 30 per cent) also boomed.

But despite these record results, management highlighted that “the building economy is likely to contract in many parts of the world” in the short term and that “we have seen softer order intake patterns in recent months”. And the trading margin was down by 80 basis points to 10.5 per cent – only light and air saw its margin rise, and the insulation margin plunged by 350 basis points because of a "lag in recovery" of raw material price increases. 

Goldman Sachs analysts said that Kingspan is “a key beneficiary of several regulatory tailwinds short to medium term” such as Germany’s €56bn energy renovation subsidies plan and the EU’s solar rooftop initiative. The shares trade on 15 times the investment bank’s forward earnings forecast for financial year 2023, which is significantly under the five-year average of 25 times according to FactSet. And the net debt to cash profits ratio remains well below banking covenant requirements, despite moving up to 1.25 times from 0.83 times last year. Hold.

Last IC View: Hold, 9,245¢, 18 Feb 2022