3rd Mar 2008 07:01
Kingspan Group PLC03 March 2008 KINGSPAN GROUP PLC RESULTS FOR THE YEAR ENDED 31st DECEMBER 2007. Kingspan ("Kingspan"), the leading manufacturer of an integrated range of energyconserving building solutions, announces preliminary results for the year ended31 December 2007. Financial highlights: 2007 2006 % Change Turnover €1,863.2mn €1,461.2mn 27.5% Operating profit €236.7mn €194.0mn 22.0% Net profit before tax €224.2mn €185.2mn 21.0% Basic earnings per share 110.5 •cent 89.8 •cent 23.0% Dividend per share for the year 25.0 •cent 19.0 •cent 31.5% Dividend cover 4.4 times 4.7 times Interest cover 22.8 times 26.7 times(EBITDA/Net Interest)Gearing ratio 33.4% 34.3%(net debt as % shareholders funds) Operational highlights: • Increased penetration of Insulated Panels and rigid Insulated Boards in the UK• Further significant progression in CEE with turnover up 33%.• Total acquisition and capital expenditure of €194.6mn: o Commissioned new phenolic insulation line in Ireland and new Insulated Panel facility in Turkey; o Commencement of building projects for additional lines/greenfield plants in the UK, Czech Republic, Poland, the Netherlands and Canada.• Solid, early stage progress in the newer markets of Australia, New Zealand & Canada.• Encouraging growth in Offsite residential in the UK with significant like for like growth in order book.• Outstanding performance of Access Floors, both UK and North America. Gene Murtagh, Chief Executive of Kingspan commented: "Kingspan delivered another record year of profitable growth in 2007. Ourstrategy of focusing on higher growth, energy sensitive segments of the buildingindustry with a diverse product range will continue to be beneficial in dealingwith a backdrop of challenging market conditions and the ongoing battle againstclimate change. As a Group, we have little control over global market conditions, but areclearly taking all reasonable measures to respond to the immediate challengesfacing the business. That aside, we believe our ability to penetrate furtherinto existing markets and our continually expanding geographic reach, coupledwith the growing global demand for energy conserving building systems, willprovide excellent growth opportunities for Kingspan in the longer term." For further information contact: Murray Consultants Tel: +353 (0) 1 4980 300James Dunny Buchanan Communications Tel: +(44) 207 466 5000Tim Thompson / Jeremy Garcia Chief Executive's Review 2007 was another year of strong organic development throughout the Group,resulting in a period of record earnings with operating profit growing 22% to€236.7mn. The Group's model of focusing on higher growth, energy sensitive segments of thebuilding industry proved resilient in a year of mixed overall performance. Thecore energy conservation qualities of many of the Group's products againdemonstrated Kingspan's ability to relentlessly convert specifiers and end-usersfrom traditional and less effective materials towards more modern solutions. The enormity of climate change, and its accelerating implications, continues togain much greater exposure than at any stage in the past. With that comes thevery evident shift in demand for all solutions that will contribute to an easingof these pressures over the medium to long term. Buildings, be theyresidential, commercial or manufacturing account for in excess of 40% of carbonemissions globally. Recognising this, Kingspan has, and continues to innovateand deliver solutions today that will dramatically reduce the need for energytomorrow, and provide compelling economic payback. Becoming the first in theworld to develop the Zero Carbon home, which in itself meets the 2016 standardsas outlined in the Code for Sustainable Homes, is the latest example of thisinnovation. This code envisages much higher insulation standards, rainwaterrecovery, use of renewables such as solar hot water and power generation, allproducts currently in the Kingspan suite. Insulated Panels & Boards Insulated Panels Representing 40% of Group sales, Insulated Panels continued its pattern ofstrong organic sales growth, delivering revenue of €763.6mn in 2007, an increaseof 33% over prior year. Growth was achieved in all markets. In Ireland, volumes grew in the year by 9% in a non-residential market thatcontinued to display strength despite weakness in other segments ofconstruction. In particular, retail and distribution drove much of the progressin the year. However, the buoyancy of the first half was not evident in thesecond half. Low rise non-residential activity in the UK continued to be asrobust as in recent years, and the market grew by an estimated 5% in 2007.Penetration growth continued, which together with a strong market contributed toa volume increase of 15%. The Group's R&D resources delivered a number of newproducts to the market, particularly in the area of architectural facades. Asyet sales levels are low as the concepts move through the process of launch,specification and receipt of order, but progress has been encouraging forproduct specifications in these newer, future segments, including the Group'sEnergiPanel. It will be 2009 before these specifications materialise intoorders. Central & Eastern Europe, together with Turkey, once again showed exceptionalgrowth in the Panel business. Strong markets, favourable mix, and expansionsinto a small number of new markets all combined to deliver 48% growth both inrevenue and volume in the region. This business is currently in the process ofexpanding its product offering of architectural, roofing and Firesafe(R)solutions throughout the region which will form the foundation for longer termsustainable growth. Significant additional capacity is being added to the Czechfacility in 2008, in addition to that in Turkey successfully commissioned during2007. The Turkish and Middle Eastern markets remain very competitive however,and it is a medium to longer term process to bring these business opportunitiesinto satisfactory levels of profitability. Canada and Australia, both delivered solid progress in 2007. In Australia, thefocus remained largely on expanding our presence in the cold and food storesectors, and towards the end of the period, production of roofing systemscommenced. This, together with an architectural wall offering which beganproduction in early 2008, significantly broadens the longer term opportunity forKingspan in that region. In Canada, the front end of the business has beenrebranded Kingspan, and the manufacturing side will become fully integrated aswe establish a new, multi-product panel facility south of Toronto during 2008.To date, both the Canadian and Australian markets have been slow to embracepolicies to deal with the challenges of climate change. During 2007, there wasevidence that this is beginning to turn, as was also the case in the US wherethe Group intends to become more established over the medium term. Insulation Boards Representing 15% of Group sales, Insulation sales at €284.2mn grew by 17% overprior year, in all markets. In Ireland, and against a challenging backdrop, sales in Insulation Boards grewby 7.7%. The drivers for this robust performance were strong commercial construction,improving standards of insulation, steady one-off residential construction, andan increasing need for high performance insulation in Northern Ireland. Inaddition to this, Kingspan's phenolic insulation sales are outgrowing themarket, which are being further supported by a newly commissioned productionline in Ireland during the year. In Britain sales increased by 20%, continuing the pattern of growth displayed inrecent years. The Group's high performance rigid insulation business isoptimally positioned to benefit from the rapid improvement in thermal buildingstandards. Accordingly, the market attainable by Kingspan's products continuesto expand, as does our product range, and our capacity. Early 2008 will see thecommissioning of a new Northern UK PIR insulation facility designed to supportthe longer term growth and service demands of Kingspan's client network throughthe UK, whilst significantly enhancing the Group's ability to retain its clearnumber one market position in the face of growing demand and an increasinglycompetitive environment. On Mainland Europe, both Western and Central regions performed well in 2007.Benelux sales grew significantly, particularly in phenolic, as did sales in ourinsulation business' more recent markets in CEE. The Group places growingemphasis on its ability to expand this product offering throughout MainlandEurope, and has committed to substantial greenfield expansion in both theNetherlands and Poland where production is expected in early 2009. Offsite & Structural Representing 18% of Group sales, this Division generated sales of €326.8mn for2007, growth of 33% over prior year, driven entirely by strong progress in theUK market. Offsite construction has become much more prevalent in the UK in recent years,which is clearly evidenced by year on year growth of 66% in that market during2007. The Group's emphasis has been placed predominately on highly insulatedtimberframe applications, which showed growth in penetration in the England/Wales markets from 13% to 15% of residential construction. Also the Group'ssecondary steel products performed satisfactorily in both the UK and Ireland. More significant for the longer term is the adoption in the UK of the Code forSustainable Homes which has mapped out a mandatory roadmap to zero carbon forall new dwelling construction by 2016. Whilst perceived by many as an ambitioustimeline, Kingspan made a practical contribution to this debate by developingand building the world's first net zero carbon house, the Lighthouse, during2007. The Lighthouse now represents the future standard, versions of which willbe increasingly reflected in the products offered by the Group. Similarly inIreland regulations are trending in this direction, the first step of which willbe a 40% energy efficiency improvement in late 2008, followed in 2010 by a 60%improvement on today's levels, plus mandatory use of renewable energy. TheGroup's products have been developed and tailored for these advancing standards. In the shorter term however, Ireland's residential construction market isexperiencing a dramatic downturn, likely to last at least until late 2009.To-date this has had a significant effect on this business' sales and profits,to the extent that the unit traded at breakeven in 2007. Appropriate measureshave been taken, including satellite plant closures, to minimise the effect onthe business in the short term. Environmental & Renewables Representing almost 16% of Group sales, this Division grew sales by 17% to€291.5mn in the year, owing largely to a continued strong performance in HotWater Systems, and the addition of a number of bolt-ons, including Thermomax,now Kingspan's own manufactured solar thermal solution. The Group's Hot Water Systems business in the UK continued its growth trend,through market share and penetration gains. Increasingly, pressurised systemsare replacing traditional gravity fed systems and Kingspan has positioned itselfideally to benefit from this trend. In the short term, however, the slowdown inresidential construction in the UK and Ireland means we will not see the fullbenefit of the transition in the coming year. It is further envisaged thatrenewable sources of energy for hot water will become much more evident in themedium term in the UK & Ireland, and indeed across Europe. The Thermomaxproduct range now puts the Group at the forefront of this emerging opportunityand renewables will favour storage over direct heating, pointing towardssustainable growth in hot water storage. Augmenting our position in this sectorwill be central to this business' development. The Effluent Treatment productsagain delivered a steady performance, but Fuel Storage suffered greater warrantyrelated costs than in previous years. Whilst Fuel Storage products remain arobust contributor to the sales line, warranty issues alone hampered thebusiness' outcome and compressed the Division's margin by approximately 5% in2007. During 2008, legal proceedings will commence against the raw materialmanufacturer to recover past and future costs. On Mainland Europe, profits grew once again as the small sales subsidiariesaround the continent delivered another year of local growth. The Group willcontinue to focus on this region in 2008, through both organic and acquisitionled opportunities. Access Floors Representing almost 11% of Group sales, turnover in this Division grew by 32% to€197.1mn in 2007. In North America, the business delivered an excellent performance, with recordprofits, despite sales trailing the sector's last peak. Good product mix, leancost and gradual growth in penetration all contributed to the strongperformance. This was further supported by the small but advantageous bolt-onof Tate ASP in Canada, which is now fully integrated and partially supplied bythe Group's US operations. Order intake activity was well ahead of prior year. In many ways, performance of the UK based business mirrored that of NorthAmerica. Strong topline growth, exceptionally low cost base and recordoperating margins. Vacancy rates in London, in particular, remained extremelylow at year end. Notwithstanding a slight weakening in vacancy rates in theearly part of 2008, we expect the order bank to deliver a strong first half tothe current year. Strategy The Group's strategic focus is to pursue a broadening geographic footprint ofsustainable building solutions, with market leading positions in regions whereenergy conservation and creative aesthetics are the priority. In support ofthis goal, significant internal resources and emphasis has been placed onnurturing a continuous flow of new and leading edge products and solutions toour markets, produced in the most highly efficient manufacturing environmentpossible. Outlook The backdrop of recent global economic and financial turmoil has made itselfincreasingly evident in most construction markets in the developed world.Limited access to debt markets for investors and developers along with dwindlingconsumer confidence is resulting in contraction of building activity generally.While it is still early in the year, if present market conditions persist it islikely to result in the Group's earnings performance being appreciably behindthe 2007 outcome. The Group is taking all reasonable measures to respond to the immediatechallenges it faces. Kingspan's strategy, however, leaves it well positioned tocapitalise on future improvements in global construction markets. The climatechange agenda is here to stay resulting in both voluntary and mandatory measuresto alleviate its impact on our surroundings. Longer term, the Group remainsabsolutely confident and ambitious about its ability to grow, and is fullycommitted to its strategy of increasing penetration in existing markets andfurther geographic expansion in response to growing global demand for energyconserving building systems. Financial Review Results Turnover for the year ended 31st December 2007 was €1,863.2mn, an increase of27.5% on 2006. Acquisitions completed during the course of the year generated€43.6mn additional turnover. Profit before tax was €224.2mn, 21% up on the €185.2mn achieved in 2006.Earnings attributable to ordinary shareholders were €187.3mn (2006:€151mn).Cash generation remained strong with earnings before interest, tax, depreciationand amortisation (EBITDA) of €284.2mn, which represented a 20.4% increase on the€236mn out-turn in 2006. The amortisation charge for the year amounted to€4.6mn (2006:€2.7mn). Turnover and Margins Group turnover increased by 27.5% or €402mn compared to 2006. The tables belowsummarise the Profit and Loss account and detail the Group's Turnover by Classof Activity and Geographical Area and the year on year growth achieved. Summary Profit and Loss Account: 2007 2006 •'mn •'mn Sales Revenue 1,863.2 1,461.2Gross Profit 562.8 456.6Gross Profit % 30.2% 31.2%Operating Costs 322.3 259.9 240.5 196.7Add profit on sale of Land/ 3.9 -BuildingsLess Goodwill Impairment (3.1) -Less Amortisation of Intangibles (4.6) (2.7)Operating Result 236.7 194.0 Analysis by Class of Activity Year ended Year ended % Change •'mn increase 31.12.07 •'mn 31.12.06 2007-2006 •'mn Insulated Panels 763.6 574.1 +33% +189.5 Insulation Boards 284.2 242.4 +17.2% +41.8Insulated Panels & Boards 1,047.8 816.5 +28.3% +231.4Raised Access Flooring 197.1 149.5 +31.8% +47.6Environmental &.Renewables 291.5 249.0 +17.1% +42.5Offsite & Structural 326.8 246.2 +32.7% +80.6 1,863.2 1,461.2 +27.5% +402 Year ended Year ended % Change •'mn increase 31.12.07 31.12.06 2007-2006 •'mn •'mn Republic of Ireland 270.4 261.5 +3.4% +8.9Britain and Northern Ireland 1,036.7 822.1 +26.1% +214.6Mainland Europe 375.5 272.1 +38% +103.4Americas 144.5 78.9 +83% +65.6Other 36.1 26.6 +35.7% +9.5 1,863.2 1,461.2 +27.5% +402 The gross profit margin was 30.2%, down from 31.2% last year. The operatingcosts at €322.3mn represent 17.3% of sales revenue, compared to 17.8% in theprevious year. Within the product groups, the operating margin in insulated panels andinsulation boards, which together represent 56% of group sales revenue,increased to 16.2% (2006:15.8%). The margin in off-site and structural productsfell to 7.0% (2006:11.7%), the result of the significant fall-off in sales inIreland in the second half of the year. This business has now been downsizedto the current market environment. The margin in environmental and renewableproducts at 4.8% is down from 8.6% in 2006. This division is in the process ofrationalizing production sites, the benefit of which will only come through in2008/9, and continues to be negatively affected by warranty costs. Accessfloor products delivered an operating margin of 17.3% (2006:11.8%) and benefitedin the year from a good mix of products, a favourable procurement environmentand from the timing of the final completion of certain projects. The ongoing amortisation of intangibles was €4.6mn in the year (2006:€2.7 mn).There was a profit of €3.9mn on the disposal of a property, resulting from therelocation of a business to a more modern and efficient building, and there wasan impairment of goodwill charge of €3.1mn relating to the discontinuance of aparticular product line. The operating margin, being profits before interest and tax, as a percent ofturnover, and after accounting for the items above, was 12.7% (2006:13.3%) Taxation The effective tax rate in the year at 16.4% compares with 18.1% last year. Earnings Per Share Basic earnings per share at 110.5 cent shows an increase of 23% over theprevious year. This figure has grown at an annual compound rate of 20% over theten year period 1997 to 2007. The average number of shares in issue during 2007was 169.6mn and the number of shares in issue at 31st December 2007 was 170.4mn. Dividends Subject to shareholder approval at the 2008 Annual General Meeting, it isproposed that the dividend for 2007 will be 25 cent per share. This consists ofan interim dividend of 8.0 cent per share paid on 5th October 2007, and a finaldividend of 17 cent per share proposed to be paid on 30th May 2008 toshareholders on the register on 14th March 2008. This represents a 31.5%increase on the previous year. The dividend for the year is covered 4.4 times byearnings which compares to 4.7 times in 2006, which is line with previouslygiven management guidance of a progressive dividend policy so as to bringdividend cover to a level closer to industry norms. Funds Flow The table below summarises the Group's funds flow for 2007 and 2006: 2007 2006 •'mn •'mn Operating profit 236.7 194.0Depreciation 39.8 39.3Amortisation 7.7 2.7Working capital increase (66.8) (48.5)Pension contributions (3.4) (4.6)Interest (12.3) (8.4)Taxation paid (27.0) (25.5)Others 17.6 17.7 Free cash 192.3 166.7 Acquisitions (49.8) (107.3)Net capital expenditure (140.3) (57.7)Dividends paid (35.5) (25.1) (225.6) (190.1) Cash flow movement (33.3) (23.4)Debt translation (4.1) (0.7) (Increase) in net debt (37.4) (24.1) Net debt at start of year (187.6) (163.5)Net debt at end of year (225.0) (187.6) The free cash flow for the year, representing operating cash flow less interestand taxation paid, amounted to €192.3mn, which was up 15% on last year. This wasused to fund investment of €194.6mn in acquisitions and capital expenditure, anddividends of €35.5mn to shareholders Operational working capital at the year end was €285.4mn (2006:€229.7mn) andrepresented 15.3% of turnover (2006:15.7%). Overall net debt, including amounts outstanding in respect of acquisitions, atthe end of year was up slightly on the previous year at €225mn (2006:€187.6mn),which represents gearing of 33.4%. Return on Capital Employed The return on capital employed, being profit before interest and taxation as apercentage of shareholders' funds plus net debt at the year end, was maintainedat 26.4%. Treasury At 31st December 2007 the Group had total facilities of €533mn comprising ofsyndicated bank facilities of €275mn, €151.5mn loan notes and €106.5mn ofoverdraft and other facilities. The syndicated facilities include a €50mn termloan with repayments of €25mn per annum to 16th December 2009, and a €225mnrevolving credit facility which will also mature at that date. The Group'sprivate placement of $200mn (€151.5mn) loan note matures in March 2015 ($158mn)and March 2017 ($42mn). The drawn down bank facilities and loan notes at 31st December 2007 were€248.4mn, comprising €171.3mn EUR debt, €77.1mn of STG debt. The loan notes, which represent 60% of the drawn down facilities, are fixed outto maturity in Euro at 4.15%. The remainder of the drawn down facilities aresubject to floating rates. Currently the Group does not enter into any external hedges to limit theexposure on translating non-Euro earnings. Foreign exchange transaction exposures are internally hedged as far as possibleand to the extent that they are not, such material residual exposures are hedgedon a rolling 12 month basis. Based on current cashflow projections for theexisting businesses to 31st December 2008, it is estimated that the Group hasthe need to sell the equivalent of €55mn in Sterling for Euro and sell theequivalent of US$24m in Sterling for US Dollar. As at 31st December 2007,hedges were in place covering over 50% of the Sterling to Euro exposure at aweighted average rate of 0.6990, and covering over 60% of the Sterling to US$exposure at a weighted average rate of 2.01. Pension Deficit The Group has three legacy defined benefit pension schemes in the U.K. Theseschemes have been closed and the liability relates only to past service. As at31st December 2007 there were assets in the schemes of €61.4mn and actuarialassessed pension liabilities of €67.9mn, giving a net deficit of €6.5mn. Thecorresponding liability at 31st December 2006 was €20.9mn. The main drivers in this movement were: Assets •'mn Liabilities •'mn Net •'mn Opening deficit 61.3 (82.2) (20.9)Translation (5.6) 7.5 1.9Contributions paid 3.4 - 3.4Benefits paid (1.7) 1.7 0Actuarial gains/(losses) 0.3 8.9 9.2Net return on asset 3.7 - 3.7Interest cost - (3.8) (3.8)Closing deficit 61.4 (67.9) (6.5) Summary Overall the Group is in a strong financial position going into 2008. Thebalance sheet is conservatively geared with interest cover significantly aboveboth banking covenants and company targets. This will enable the Group tocomfortably fund its anticipated growth, through both organic means and bolt onacquisitions. GROUP INCOME STATEMENTfor the year ended 31 December 2007 Continuing Operations Acquisitions Total Total 2007 2007 2007 2006 • '000 • '000 • '000 • '000 Revenue 1,819,654 43,585 1,863,239 1,461,170Costs of sales (1,266,178) (34,282) (1,300,460) (1,004,613) Gross profit 553,476 9,303 562,779 456,557 Operating costs (317,105) (9,010) (326,115) (262,512) Operating result 236,371 293 236,664 194,045 Finance costs (14,297) (11,620)Finance income 1,837 2,775 Result for the year before 224,204 185,200taxIncome tax expense (36,877) (33,520) Net result for the year 187,327 151,680 Profit attributable to:Shareholders of Kingspan 187,295 151,032Group plcMinority Interest 32 648 Net Result for the year 187,327 151,680 Earnings per share for theyearBasic 110.5 89.8Diluted 108.5 87.8 GROUP BALANCE SHEETas at 31 December 2007 2007 2006 • '000 • '000AssetsNon-current assetsGoodwill 303,966 287,580Other intangible assets 14,164 17,117Property, plant and 398,688 294,875equipmentFinancial assets 209 227Deferred tax assets 2,401 2,694 719,428 602,493 Current assetsInventories 152,140 130,868Trade and other receivables 386,744 357,966Cash and cash equivalents 66,626 69,060 605,510 557,894 Total assets 1,324,938 1,160,387 LiabilitiesCurrent liabilitiesTrade and other liabilities 253,454 259,112Provisions for liabilities 54,670 42,554and chargesDeferred consideration 3,351 5,659Interest bearing loans and 46,102 34,631borrowingsCurrent tax liabilities 32,861 26,130 390,438 368,086Non-current liabilitiesPension and other employee 6,509 20,958obligationsInterest bearing loans and 234,392 205,979borrowingsDeferred tax liabilities 12,933 8,212Deferred consideration 7,750 10,355 261,584 245,504 Total liabilities 652,022 613,590 NET ASSETS 672,916 546,797 EquityEquity attributable to shareholders of Kingspan GroupplcCalled-up share capital 22,146 22,161Additional paid-in share 31,917 26,341capitalOther reserves (67,568) (25,601)Revaluation reserve 713 713Capital redemption reserve 723 513Retained earnings 681,755 519,390 669,686 543,517 Minority interest 3,230 3,280 TOTAL EQUITY 672,916 546,797 STATEMENT OF RECOGNISED INCOME AND EXPENSEas at 31 December 2007 2007 2006 • '000 • '000 Profit for financial year attributable to Group 187,295 151,032shareholders Currency translation (43,670) (4,657)Cash flow hedging in equity 1,702 (337)Actuarial losses in defined benefit 9,203 (685)pension schemeIncome taxes relating to items charged or credited to (3,110) 206equity Total recognised income and expense for 151,420 145,559the year GROUP CASH FLOW STATEMENTfor the year ended 31 December 2007 2007 2006 • '000 • '000Operating activitiesResult for the year before 224,204 185,200taxAdjustments 62,350 54,393Change in inventories (21,759) (18,446)Change in trade and other (37,829) (68,313)receivablesChange in trade and other 3,519 48,669payablesPension contributions (3,447) (4,561) Cash generated from 227,038 196,942operationsTaxes paid (26,985) (25,498) Net cash flow from operating 200,053 171,444activities Investing activitiesAdditions to property, plant and (144,880) (59,420)equipmentProceeds from disposals of property, plant and 7,310 1,747equipmentProceeds from financial - 528assetsPurchase of subsidiary (48,647) (70,815)undertakingsNet cash acquired with 2,284 (7,073)acquisitionsPayment of deferred consideration in respect of (2,163) (16,102)acquisitionsDividends paid to minorities (24) (14)Interest received 1,846 2,654 Net cash flow from investing activities (184,274) (148,495) Financing activitiesProceeds from bank loans and loan notes - -Repayment of bank loans 35,487 (35,998)Discharge of finance lease (246) (2,406)liabilityProceeds from share issues 4,644 3,288Interest paid (14,188) (11,087)Dividends paid (35,546) (25,103) Net cash flow from financing (9,849) (71,306)activities Cash and cash equivalents at the beginning of the 61,864 110,231year Net increase in cash and cash equivalents 5,930 (48,357)Translation adjustment (4,856) (10) Cash and cash equivalents at end of the 62,938 61,864year Cash and cash equivalents as at 1st January 2007 weremade up of: Cash and cash equivalents 69,060 120,165 Overdrafts (7,196) (9,934) 61,864 110,231 Cash and cash equivalents as at 31st December 2007 were made up of: Cash and cash equivalents 66,626 69,060 Overdrafts (3,688) (7,196) 62,938 61,864 The following non-cash adjustments have been made to the pre-tax result for the year to arriveat operating cash flow: 2007 2006 •'000 •'000 Depreciation, amortisation and impairment charges of fixed and 47,572 41,957intangible assetsEmployee equity-settled 5,650 3,492share optionsFinance income (1,837) (2,775)Finance cost 14,297 11,620Loss on sale of tangible (3,332) 99assets Total 62,350 54,393 Reconciliation of net cash flow to movement in net debt 2007 2006 •'000 •'000 (Decrease)/increase in cash and bank 5,930 (48,357)overdraftsDecrease/(increase) in debt, lease finance and (33,078) 54,506deferred consideration Change in net debt resulting from cash (27,148) 6,149flows Loans and lease finance acquired with (5,469) (15,365)subsidiariesDeferred consideration arising on acquisitions in the 2,035 (14,086)periodNew finance leases (2,704) (67)Translation movement (4,119) (679) Net movement (37,405) (24,048) Net debt at start of the (187,564) (163,516)year Net debt at end of the year (224,969) (187,564) SUPPLEMENTARY INFORMATION 1 Reporting currency The currency used in this Preliminary Announcement is Euro. Results and cashflows of foreign subsidiary undertakings have been translated into Euro at theaverage exchange rates, and the related balance sheets have been translated atthe rates of exchange ruling at the balance sheet date. Exchange rates of material entites usedwere as follows: Average rate Closing RateEuro = 2007 2006 2007 2006 Pound Sterling 0.685 0.682 0.738 0.670US Dollar 1.371 1.256 1.471 1.313Canadian Dollar 1.469 1.425 1.438 1.525Australian Dollar 1.636 1.668 1.669 1.670Czech Koruna 27.782 28.367 26.335 27.590Polish Zloty 3.792 3.906 3.625 3.840 2 Segment reporting Segment information is presented in respect of the Group's business andgeographical segments. The primary format, business segments, is based on theGroup's management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and liabilities. Business segmentsThe Group comprises operates in the following four business segments: Insulated Panels & Boards Manufacture of insulated panels and rigid insulation products.Offsite & Structural Manufacture of offsite solutions, timber frame buildings and structural products.Environmental & Renewables Manufacture of environmental and pollution control products.Access Floors Manufacture of raised access floors. Geographical segments In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customer. Segment assets are based on the geographical location of the assets. Analysis by class of business Insulated Offsite & Environmental Access TOTAL PanelsSegment Revenue & Boards Structural & Renewables Floors •m •m •m •m •m Total Revenue - 2007 1,047.8 326.8 291.5 197.1 1,863.2Total Revenue - 2006 816.5 246.2 249.0 149.5 1,461.2 Intersegment revenue is not material and is thus not subject to separate disclosure in the above analysis. Intersegment transfers are priced using an appropriate transfer pricing methodology. Segment Result (profit before finance costs) Insulated Offsite & Environmental Access TOTAL TOTAL Panels & Boards Structural & Renewables Floors 2007 2006 •m •m •m •m •m •m Operating result pre 169.6 23.0 13.9 34.0 240.5goodwill/impairmentSale of property 3.9 3.9Intangible Amortisation (1.2) (2.4) (0.9) (0.1) (4.6)Goodwill Impairment (3.1) (3.1)Operating result - 2007 172.3 20.6 9.9 33.9 236.7 Operating result - 2006 128.0 27.5 20.9 17.6 194.0 Finance costs (net) (12.5) (8.8)Result for the year before 224.2 185.2taxIncome tax expense (36.9) (33.5) Net result for the year 187.3 151.7 Segment Assets and Liabilities Insulated Offsite & Environmental Access TOTAL TOTAL Panels & Boards Structural & Renewables Floors 2007 2006 •m •m •m •m •m •m Assets - 2007 659.9 204.3 249.4 142.3 1,255.9Assets - 2006 534.8 216.0 201.2 136.6 1,088.6 Liabilities - 2007 (171.4) (52.2) (57.4) (33.6) (314.6)Liabilities - 2006 (163.8) (77.5) (50.5) (30.9) (322.7) Total assets less total 941.3 765.9liabilities Cash and cash equivalents 66.6 69.1Deferred tax asset 2.4 2.7Interest bearing loans and borrowings (current and (280.5) (240.6)non-current)Deferred consideration (current and (11.1) (16.0)non-current)Income tax liabilities (current and (45.8) (34.3)deferred) Total Equity as reported in Group Balance 672.9 546.8Sheet Other Segment Information Insulated Offsite & Environmental Access TOTAL Panels & Boards Structural & Renewables Floors •m •m •m •m •m Capital investment pre goodwill 126.6 16.7 52.3 4.5 200.1impairmentGoodwill impairment 0.0 0.0 (3.1) 0.0 (3.1)Capital Investment - 2007 126.6 16.7 49.2 4.5 197.0Capital Investment - 2006 77.8 56.4 21.8 8.8 164.8 Depreciation included in segment result - (21.6) (7.8) (6.8) (3.7) (39.9)2007Depreciation included in segment result - (19.7) (6.8) (6.5) (6.3) (39.3)2006 Amortisation & impairment included in (1.2) (2.4) (4.0) (0.1) (7.7)segment result - 2007Amortisation included in segment result - (0.9) (1.3) (0.4) (0.1) (2.7)2006 Non cash Items included in segment result 3.8 (0.1) (0.4) 0.0 3.3- 2007Non cash Items included in segment result (0.1) 0.0 0.0 0.0 (0.1)- 2006 Analysis of Segmental Data by Geography Republic of United Rest of Americas Others TOTAL Ireland Kingdom Europe •m •m •m •m •m •m Income Statement ItemsRevenue - 2007 270.4 1,036.7 375.5 144.5 36.1 1,863.2Revenue - 2006 261.5 822.1 272.1 78.9 26.6 1,461.2 Balance Sheet ItemsAssets - 2007 189.1 730.6 208.3 111.8 16.1 1,255.9Assets - 2006 162.6 653.2 171.1 87.2 14.5 1,088.6 Other segmental informationCapital investment pre 27.9 117.9 32.6 20.3 1.4 200.1goodwill impairmentGoodwill impairment (3.1) (3.1)Capital Investment - 2007 27.9 114.8 32.6 20.3 1.4 197.0Capital Investment - 2006 21.6 87.5 21.1 21.5 13.1 164.8 3 Dividends Dividends on Ordinary Shares are recognised in the Group's financial statementson a cash paid basis under IFRS rather than on an accruals basis which was theaccounting treatment previously adopted under Irish GAAP. The Final Dividend on Ordinary Shares for 2006 (€22.0 million) was approved byshareholders in May 2007 and, in accordance with IFRS, was recognised as acharge to Reserves in the year ended 31 December 2007. The Interim Dividend onOrdinary Shares for 2007 (€13.5 million) was recognised as a charge to Reservesin the year ended 31 December 2007. The Final Dividend on Ordinary Shares for 2007 (€29 million) is being proposedat the Group's AGM and, in accordance with IFRS, will be recognised as a chargeto Reserves in the year ended 31 December 2008. DIVIDENDS 2007 2006 •'000 •'000Ordinary dividends Paid: 2006 Final dividend 13.00c per share (2005: 8.95c per share) on 169,827,909 22,000 15,007 shares 2007 Interim dividend 8.00c per share (2006: 6.00c per share) on 168,893,070 13,546 10,096 shares 35,546 25,103 4 Earnings per share 2007 2006 •'000 •'000The calculations of earnings per share are based onthe following: Profit attributable to ordinary 187,295 151,032shareholders Number of Number of shares shares ('000) ('000) 2007 2006 Weighted average number of ordinary shares for the calculation of 169,567 168,149basic earnings per share Dilutive effect of share 3,118 3,936options Weighted average number of ordinary shares for the calculation of 172,685 172,085diluted earnings per share 2007 2006 • cent • cent Basic earnings per share 110.5 89.8 Diluted earnings per share 108.5 87.8 5 Basis of preparation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Commission,which comprise standards and interpretations approved by InternationalAccounting Standards Board (IASB) and International Accounting Standards andStanding Interpretations Committee interpretations approved by the predecessorInternational Accounting Standards Committee that have been subsequentlyauthorised by IASB and remain in effect. These financial statements, which are presented in euro, have been preparedunder the historical cost convention, as modified by the revaluation of land andbuildings and the measurement of fair value share options and derivativeinstruments. The carrying value of recognised assets and liabilities that arehedged are adjusted to record changes in the fair values attributable to therisks that are being hedged. The accounting policies set out below have been applied consistently by all theGroups' subsidiaries. The financial period-ends of the Group's subsidiaries arecoterminous. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. In addition it requires management toexercise judgement in the process of applying the Company's accounting policies.The areas involving a high degree of judgement or complexity, or areas whereassumptions and estimates are significant to the consolidated financialstatements, relate primarily to the accounting for defined benefit pensionschemes, share-based payments, receivable provisions, guarantees & warranties,tangible assets, intangible assets, goodwill impairment, and acquisitiondeferred consideration. 6 Distribution of Preliminary Announcement These results are available on the group's website at www.kingspan.com. Aprinted copy is available to view at the Company's registered office or from theCompany's Registrars: Computershare Services (Ireland) Limited, Heron House,Corrig Road, Sandyford Industrial Estate, Dublin 18. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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