6th Mar 2006 07:01
Kingspan Group PLC06 March 2006 KINGSPAN GROUP PLC RESULTS FOR THE YEAR ENDED 31st DECEMBER 2005 Results Highlights 2005 2004 % Change Turnover €1,243.4mn €958.1mn 30% Operating profit €145.1mn €103.3mn 40% Net profit before tax €135.0mn €96.4mn 40% Basic earnings per share 66.4 •cent 47.1 •cent 41% Dividend per share for the year 13.4 •cent 9.6 •cent 40% Dividend cover 4.9 times 4.9 times Interest cover 17.6 times 18.6 times Gearing ratio 39.2% 35.4%(net debt as % shareholders funds) Chairman's Statement Review of the Year Results I am pleased to report on another strong year's performance and growth inKingspan. Group turnover increased 30% to €1,243.4 million, operating profit rose by 40%to €145.1 million, and earnings per share rose to 66.4 cent. Just over half ofthis represents organic growth, whilst acquisitions during the year contributed€138.9 million to Group turnover, adding €16.1 million in operating profits. For the second year running Kingspan has delivered growth in operating profitsin excess of 30%. Indeed, over the past 10 years Kingspan has deliveredcompound annual growth in earnings per share of 30%. These results are built ona platform of strong management, innovative building solutions, and a commitmentto driving Modern Methods of Construction in the building industry. Milestones achieved during the year included the commissioning of the newmanufacturing plant in Hungary to meet demand for Insulated Panels in thegrowing Central and Eastern European markets, the acquisition of Century Homes,Ireland's largest timberframe manufacturer, and the acquisition of ASM in the USwhich has consolidated Kingspan's position for Raised Access Floor solutions inthe US. Other acquisitions complementing the Group's organic growth were ATC,the leading provider of panels to the UK food storage industry, and the additionof the RCM and Albion water storage and heating businesses to the EnvironmentalContainers range of products. In fact, during the year Kingspan grew to employover 4,600 people, and now operates in 28 countries worldwide. I wish to extend my thanks to all employees throughout the Group for theircontribution throughout the year, and also to our customers, trading partners,shareholders, and other stakeholders in the business for their continuedsupport. Dividends The Board is recommending payment of a final dividend of 8.95 cent per share, anincrease of 44% on the 2004 final dividend. This will give a total dividend forthe year of 13.4 cent, up 40% on the previous year. The increased dividend isin accordance with the Board's stated policy of progressively increasing thedividend so as to bring dividend cover to a level closer to industry norms, in amanner compatible with the Group's strategic growth plans. If approved at the Annual General Meeting, the final dividend (which will besubject to Irish withholding tax rules) will be paid on the 9th June 2006 toshareholders on the register at close of business on the 24th March 2006. Board Changes As previously announced, David Byrne S.C. was co-opted on to the Board as anon-executive director on the 1st January 2005, and was duly elected at theAnnual General Meeting on the 26th May 2005. Brian Hill was co-opted on to theBoard as a non-executive director on the 1st June 2005 and offers himself forelection at the forthcoming Annual General Meeting. Both appointments bringvaluable experience and independent view points to the Board. Jim Paul retired from the Board on the 31st December 2005 after 16 years withthe Group. During his career with Kingspan, Jim was Managing Director of theInsulation Board business and more recently the Off-Site & Structural division.On behalf of the Board, I wish to thank Jim for his significant contribution tothe Group over the years. Looking to the Future The excellent results for the year under review have been achieved while at thesame time investing substantial resources in Research & Development to ensurethe future prospects of the Group. There is now substantial emphasis on developing new building solutions that aresustainable, renewable and affordable. In their various market segments, all ofKingspan's products have major contributions to make in this regard. Energy Performance of Buildings Directive The European Union introduced a directive on the energy performance ofbuildings, which passed into EU law in 2003. The legislation when fullyimplemented in member states will impact on the energy efficiency of buildingsby reducing the CO2 emissions from these buildings by at least 20%. Memberstates can stipulate minimum efficiency standards for new buildings of all typesand for the refurbishment of existing large buildings. In addition, and for thefirst time, the precise measurement of a building's own energy consumption willbecome a reality. In the UK the directive will be implemented via revised Building Regulations anda certification scheme agreed with building stakeholders, with the intention ofsaving over one million tonnes of CO2 per annum by 2010. Kingspan's range ofproducts are well positioned to benefit from the general thrust of thisDirective. Sustainable Buildings From mid 2006 a more stringent regulatory environment will exist. This isdesigned to improve the sustainable development profile of buildings in the UK.The code for sustainable buildings will go beyond the current BuildingRegulations in terms of energy consumption, and will cover not just fuel andpower, but also the efficient use of water and the effective management ofwaste. The code will be mandatory for all new buildings. Kingspan's Off-Site &Structural solutions will significantly reduce waste on site as well asproviding energy efficient buildings, and Kingspan's range of products in theEnvironmental Containers division are specifically geared towards saving andrecycling water. Renewable Resource of Building Materials Increasingly, architects are considering not just the strength and durability ofbuilding materials, but also their impact on the environment, the community, andglobal resources. There is a realisation that building developments in futuremust meet the needs of the present, without compromising the ability of futuregenerations to meet theirs. Various developments within the Group, coupled withcomplementary acquisitions, will ensure that Kingspan's product range will havea major role to play in sustainable developments of the future. Outlook The fact that the "Energy Performance of Buildings Directive" was one of thefastest pieces of legislation to be introduced in the EU, indicates the urgencywith which regulators are now treating the environmental impact of the builtenvironment, and the pressure to transform is set to increase in the comingyears. Kingspan intends to influence this transformation, and is well placed totake advantage of all these developments as they come on stream. For some timenow Kingspan has directed its product focus, through continued research anddevelopment and strategic acquisitions, to benefit from the move to sustainable,renewable and affordable solutions for the construction sector. Eugene MurtaghChairman6th March 2006 Chief Executive's Review 2005 marked a year of exceptional performance across the Group, in which revenuegrew by 30% to almost €1.25 billion and operating profit grew by 40% to €145.1million. Despite the absence of any real buoyancy in the Group's primarymarkets, progress was achieved in all of the operating divisions, where therelentless focus on internally generated growth continued to bear fruit.Organic growth, which accounted for most of this year on year increase, added€146.4 million to the Group's revenue. Contributing to this in particular were:- • Continued volume growth; • Further new product penetration; and also • The impact of passed-on input price rises in many product and geographic areas. This organic growth was complemented by acquisitions, which added almost €138.9million to Group revenue in the year. In summary, the main features of 2005 were: • Record levels of sales and earnings, reaching almost €1.25 billion and €111.4 million respectively. • The addition of new businesses, at a cost of €141.7 million, which themselves are focused on growing sectors. • Continued penetration growth of Insulated Panels across a number of markets. • The successful commissioning of our Insulated Panel facility in Hungary, reinforcing our position as the clear leader in the Central and Eastern European markets. • Robust performance of our UK and Ireland Rigid Insulation businesses. • Satisfactory profits in Raised Access Floors, achieved in the face of weak Class A office construction in both the UK and US. Insulated Panels & Boards Insulated Panels Representing 38% of Group turnover in 2005, Insulated Panels continued todeliver good growth in its main markets, and revenues were up by a very healthy24%. In Ireland, where non-residential construction activity remained high,Panel volumes grew reasonably, and in the UK where the metal cladding market wasessentially flat versus 2004, Panels continued to convert from the cumbersomesite assembled systems, albeit at a lesser pace than in some recent years.Management succeeded in maximising returns by striking the right balance betweenvolumes and price when material inputs were unpredictable. In the second six months, Central and Eastern European construction marketsrecovered from a poor start to the year. The Panel business in this regionposted growth of 18% in the first half, which improved to 26% for the year as awhole, reflecting a very robust run up to year end, and the further expansioninto the region from the newly established manufacturing facility in Hungary. The integration of the Door Panel business in Belgium is complete and the newlyacquired ATC, which specialises in panels for the food storage sector, performedwell. Now operating as Kingspan Controlled Environments this business furtherconsolidated its position in the UK, as well as securing large scale projects inAustralia and New Zealand. These are growing markets for Firesafe(R) solutionsand the Group continues to review the possibility of investing moresubstantially in Australasia. Insulation Boards Representing 17% of Group turnover in 2005, Insulation grew by 9% over the prioryear. As previously indicated, this business was expected to deliver somewhatless growth in 2005 than in previous years, primarily due to the transitionaryphase between the insulation demand patterns established following the 2002 UKBuilding Regulations, and those anticipated following the April 2006 regulationsreview. Accordingly, although volume was broadly flat, revenue growth wasachieved as some of the substantial chemical cost increases were passed on tothe market. More importantly Kingspan grew sales of the higher value, higherperforming phenolic insulation products in which the Group has investedsignificantly over recent years. Coinciding with the pressure on the input side of this business, was anintensified level of competition due to a number of recent entrants to themarket. In the short to medium term further new entrants are also anticipated.Notwithstanding this, Kingspan's core focus on absolute lowest unit cost,superior efficiencies, and an unparalleled range of solutions for the design andconstruction community, all contributed to defending the Group's leadingposition during this transition period. The pattern for the early part of 2006is expected to be quite similar. This will be followed, later in the year, bythe resumption of significant investment in projects to capitalise on the strongvolume growth potential to be derived from continued conversion, which willarise from the increasing inter-changeability of insulants in the future. The Group entered an industrial insulation joint venture with the Belgian group,Recticel S.A. at the end of the year. Turnover of the venture is expected to bein the region of €35.0 million for 2006. Raised Access Floors Representing 10% of Group turnover in 2005, Access Floors continued to buildupon the return to profitability achieved in 2004, exiting 2005 with salesgrowth of 9% and operating profits of €9.8 million. This result was managedagainst a backdrop of a flat market in Class A office development, the type ofconstruction most likely to opt for the cable management and underfloor airattributes of the access floor itself. Cost base control, a favourable productmix, and some upward price movement were all features of the 2005 performance. In the UK, quotation levels for future projects grew by greater than 30% overthe prior year, coinciding with office vacancy rates in the City of Londondipping below 10% for the first time in a few years. Both are encouragingindicators of this business's prospects over 2006 and 2007. In the US, activity in this particular construction sector remains relativelyweak, compared with the peak of 2001. There are signs that activity in segmentsof the market such as data centres may enter a new phase of good growth. Thistime the growth would be demand led and not speculation led as in the previousboom period. Strengthened by the recent acquisition in the US of the 'ASM'access floor business and brand, the operation, which has returned toprofitability, is now well positioned for any market uplift. Environmental Containers Representing 18% of Group turnover in 2005, this division grew by a verysubstantial 54% in the past year through a combination of robust organic growthand a number of acquisitions. The main products of this division fall into the broad categories of fuelstorage, effluent treatment, and water storage and distribution, all of whichhave very important environmental attributes. Sales of fuel storage containers in absolute numbers declined during the year,however the growth in conversion to higher value double skinned tanks,incorporating level sensing telemetry, contributed to increased revenues in thiscategory. The effluent treatment products grew both in volume and value onceagain, largely driven by further conversion from septic tanks to the highervalue domestic treatment plant range. This dynamic continues to take place inboth the UK and Ireland. The hot water storage and distribution systems business was considerablystrengthened in 2005 through the acquisition of RCM and Albion in the UK. Theacquisition of these businesses has moved Kingspan into a leading position in agrowing market for unvented hot water systems. This sub-sector is growing atapproximately 12% per annum, driven by a shift away from traditional gravity fedsystems, towards more modern pressurised solutions. The acquisitions have beenwell integrated and are performing as expected. From its manufacturing base in Poland, the mainland European business unit grewonce again by more than 50% and has just recently completed an expansionprogramme there to support further growth during 2006. In general, Environmental Containers is a product group ideal for furthergeographic expansion, and accordingly the Group continues to review appropriateopportunities. Off-Site & Structural Representing 17% of Group turnover in 2005, this division grew in revenue by asignificant 75%, the result of Century's timber frame business joining theGroup, as well as further inflationary growth driven by the high steel costexperienced by our lightweight structural components during the year. The Off-Site opportunity for Kingspan lies in bringing together the overwhelmingadvantages of build speed and energy performance in both the residential andnon-residential markets, predominately in the UK and Ireland. Century hasalmost single handedly grown timber frame penetration in Ireland to 25% by 2005. Kingspan's share of that market provides a platform to drive similarconversion to timber frame in the UK, and evolve this product group into a morestrategic part of the Group's Modern Methods of Construction Solutions.Already, Kingspan's Off-Site & Structural division was part of a consortium thatwas selected as a successful bidder in the UK government's £60k affordablehousing initiative. However, the business will require significant upfrontinvestment in product and process development in order to achieve its fullpotential. On the metal side of this business, the first phase of investment at our UKmetal offsite plant is fully commissioned and operational. This is alreadygenerating encouraging levels of specifications. 2006 will represent the firstfull year since the launch of this product and we have reason to anticipate asatisfactory level of sales based on those specifications. This is an evolvingsector for us and the Group will be looking to make further investments in thisarea. Research & Development At Kingspan, we are acutely mindful of the contribution Research & Developmenthas made, and will make, to the success of the Group. Firstly it is crucial tomaintaining our edge in current products and markets, which require continuousprocess and product improvements throughout each business. Additionally it isthe source of new concepts, solutions and products that enable us to forge aposition in evolving areas relatively new to the market. Approximately 1% of the Group turnover is invested in this process annually.The current pipeline of initiatives numbers greater than sixty, and spansprojects ranging from formulation improvement, to fundamental chemistryadvancements, to developing new construction concepts. It is central to many ofKingspan's strategic objectives. Much of the development process occurs internally, and beyond this we continueto build complimentary working relationships with a number of external bodies,including universities and technical colleges. People 2005 was a tremendous year at Kingspan. This is largely due to the ideas,commitment and determination of the many people throughout the business. Iwould like to extend my gratitude to all for their contribution to date, and fortheir collective ambitions for the continued development of the organisation. Looking Ahead The Group has got off to a good start in 2006. The economies in which Kingspanoperates are quite stable in general, with some improvement anticipated incertain sectors later in the year. This backdrop, together with the robustnessof the business, and the imminent UK Building Regulations review, should enableKingspan to deliver further growth into the future. Gene MurtaghChief Executive Officer6th March 2006 Financial Review Results Turnover for the year ended 31st December 2005 was €1,243.4 million, an increaseof 30% compared to the previous year. Acquisitions in the year generated €138.9million additional turnover. Profit before tax was €135.0 million (2004: €96.4 million). Earningsattributable to ordinary shareholders were €111.4 million (2004: €78.1 million). Cash generation remained strong with earnings before interest, tax,depreciation and amortisation (EBITDA) of €177.6 million (2004: €128.4 million). Amortisation amounted to €1.9 million (2004: €0.7 million). Turnover and Margins Group turnover increased by 30% or €285.3 million compared to 2004. The Tables below detail the Group's turnover by class of activity andgeographical area and the year on year growth achieved. Analysis by Class of Activity Year ended Year ended % Change 31.12.05 31.12.04 2005-2004 •'million •'million Insulated Panels 472.4 380.2 +24% Insulation Boards 217.0 199.4 +9%Insulated Panels & Boards 689.4 579.6 +19%Raised Access Floors 130.0 119.2 +9%Environmental Containers 220.1 142.5 +54%Off-Site & Structural 203.9 116.8 +75% 1,243.4 958.1 +30% Analysis by Geographical Area Year ended Year ended % Change 31.12.05 31.12.04 2005-2004 •'million •'million Republic of Ireland 215.3 136.8 +57%Britain and Northern Ireland 753.3 592.4 +27%Mainland Europe 196.4 163.2 +20%United States of America 63.7 53.6 +19%Other 14.7 12.1 +21% 1,243.4 958.1 +30% In continuing operations the gross profit margin was 30.8%, up from 29.5% lastyear. Acquisitions, with an equivalent margin of 26.9%, had a small dilutativeeffect giving an overall margin of 30.3%. The operating margin, being earnings before interest and tax as a percent ofturnover, was 11.7% in the year, up from 10.8% last year. Acquisitions, whichhave lower distribution costs than continuing operations delivered an operatingmargin of 11.6%. Taxation The effective tax rate in the year at 17.5% compares with 19% last year. Earnings Per Share Basic earnings per share at 66.4 cent show an increase of 41% over the previousyear. This figure has grown at an annual compound rate of almost 30% over theten year period 1995 to 2005. Dividends Subject to shareholder approval at the 2006 Annual General Meeting, it isproposed that the dividend for 2005 will be 13.4 cent per share. This consistsof an interim dividend of 4.45 cent per share paid on 7th October 2005, and afinal dividend of 8.95 cent per share proposed to be paid on 9th June 2006 toshareholders on the register on 24th March 2006. This represents a 40% increaseon the previous year. The dividend for the year is covered 4.9 times byearnings, and 7.9 times profits before interest, taxation, depreciation andamortisation compared to 8.0 times in 2004. The dividend yield for the year was1.4% compared to 1.9% for 2004, based on the average share price in the relevantyears. The ordinary dividend has grown at an annual compound rate of 30% over theperiod 2001 through to 2005 compared to earnings growth of 15%, as the Groupcontinues with a progressive dividend policy so as to bring dividend cover to alevel closer to industry norms. Acquisitions in the year The Group completed a number of strategically important acquisitions during theyear with a total spend, net of cash acquired and including debt acquired, of€141.7 million. This investment falls into the following product categories: Product group Net Investment Assets acquired Goodwill & Intangibles •'million •'million •'million Off-Site & Structural 69.1 13.8 55.3Insulated Panels & Board 35.6 7.7 27.9Environmental Containers 31.9 6.0 25.9Raised Access Floors 5.1 0.8 4.3 141.7 28.3 113.4 The intangibles acquired, which amounted to €12.4 million, are being amortisedprincipally over 7 years and this amortisation of €1.5 million has been chargedagainst the profits from the acquisitions in the year. Under the IFRSaccounting rules the goodwill acquired of €101.0 million is not amortised butwill be subject to impairment reviews. These acquisitions delivered turnover, from date of acquisition to year end, of€138.9 million and operating profits, after intangible amortisation, of €16.1million. Funds Flow The table below summarises the Group's funds flow for 2005 and 2004: 2005 2004 •'million •'million Operating profit 145.1 103.3Depreciation 30.6 24.4Amortisation 1.9 0.7Working capital increase (9.4) (36.0)Pension Contributions (2.9) (2.9)Interest (7.5) (6.6)Taxation paid (28.2) (14.8)Others 13.8 14.2Free cash 143.4 82.3 Acquisitions (141.7) (26.6)Receipt of Tate settlement - 24.7Net capital expenditure (42.2) (53.5)Dividends paid (17.8) (13.2) (201.7) (68.6) Cash flow movement (58.3) 13.7Debt translation 2.9 (0.6)(Increase)/Decrease in net debt (55.4) 13.1 Net debt at start of year (108.1) (121.2)Net debt at end of year (163.5) (108.1) The acquisitions during the year were financed out of Group resources. Debtreduction before acquisitions, dividend payments and non-cash translation effectwas €101.1 million (2004: €53.5 million). The free cash flow for the year, representing operating cash flow less interestand taxation paid, amounted to €143.4 million, an increase of €61.1 million onlast year or 74%. This performance represents 85.5 cent per share (2004: 49.7cent). Over the two years 2004 and 2005, a total of €225.7 million in free cashwas generated and €264.0 million was invested in acquisitions and capitalexpenditure. Operational working capital at the year end was €175.1 million (2004: €154.2million) and represented 14.1% of turnover (2004: 16.1%), against a companytarget of 15%. Working capital expressed as days sales, which takes intoaccount the phasing of sales, has remained constant at 33 days compared withprior year end. 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 constant at25% compared to 2004. If goodwill previously written off of €80.7 million wasstill on the balance sheet, the corresponding figures would be 22% in 2005 and21% in 2004. Treasury At 31st December 2005, the Group had total facilities of €541.5 millioncomprising of syndicated bank facilities of €325.0 million, €151.5 million loannotes and €65.0 million of overdraft and other facilities. The syndicatedfacilities are comprised of a €100.0 million term loan with repayments of €25.0million per annum to 16th December 2009 and €225.0 million revolving creditwhich will also mature at that date. On 29th March 2005, the Group had a successful private placement of $200.0million (€151.5 million) loan notes with maturities of 10 and 12 years. Thesenotes were then swapped into fixed interest EUR giving the Group a broad rangeof debt providers with an appropriate mix of debt maturity at competitiveinterest rates. The drawn down bank facilities and loan notes at 31st December 2005 were €252.3million, comprising €197.3 million EUR debt and €55.0 million of STG debt. It is Group policy to enter into interest rate hedging to limit interest rateexposure on a proportion of the Group's medium to long term debt. Approximately67% of drawn down bank facilities were subject to interest rate swaps, at 3.89%on the EUR debt and at 4.97 % on the STG debt. €151.5 million of EUR swapsexpire on the maturity of the loan notes, a further €10.0 million of EUR swapsand €7.0 million of STG swaps expire on 31st December 2006. Currently the Group does not enter into any external hedges to limit theexposure on translating non-Euro earnings. Foreign exchange transaction exposure is internally hedged as far as possibleand to the extent that they are not, such residual exposures are hedged on arolling 12 month basis. Pension Deficit The Group has two legacy defined benefit pension schemes in the U.K. Theseschemes have been closed and the liability relates only to past service. As at31st December 2005 there were assets in the schemes of €52.5 million andactuarial assessed pension liabilities of €76.5 million, giving a net deficit of€24.0 million. The corresponding liability at 31st December 2004 was €22.7million. International Financial Reporting Standards (IFRS) The financial statements for 2005 and the comparatives for 2004 have beenprepared and are presented using IFRS while the annual financial statements for2004 and prior years were prepared in accordance with accounting practicegenerally accepted in Ireland (GAAP). The effect of this change on the 2004profits as previously reported was an increase in the net profit before tax of€8.4 million and an increase in the tax charge of €0.3 million. The effect onshareholders funds was an increase of €2.4 million. These changes aresummarised below: NET PROFIT BEFORE TAX RECONCILIATION 2004 2004 •'million •'million Irish GAAP 88.0 Defined benefit pension credit 2.3 Share based Payment (1.8) Goodwill amortisation 7.9 8.4IFRS 96.4 SHAREHOLDERS' FUND RECONCILIATION 2004 2004 •'million •'million Irish GAAP 302.2 Defined benefit pension deficit (22.7) Deferred Tax on pension 6.8 Share based Payment 0.4 Goodwill amortisation 7.9 Final dividend accrual 10.3 Others (taxation) (0.3) 2.4IFRS 304.6 Summary Overall the Group is in a strong financial position going into 2006 and is wellpositioned for continued growth. The balance sheet is conservatively geared andthis will enable the Group to comfortably fund its anticipated growth, throughboth organic means and bolt on acquisitions. Dermot MulvihillFinance Director6th March 2006 For further information contact: James DunnyMurray ConsultantsTel: +(353 1) 4980 300 Tim Thompson/Jeremy Garcia/Tom CarrollBuchanan CommunicationsTel: +(44) 207 466 5000 GROUP INCOME STATEMENTfor the year ended 31 December 2005 Continuing Operations Acquisitions Total Total 2005 2005 2005 2004 •'000 •'000 •'000 •'000 Revenue 1,104,555 138,855 1,243,410 958,083Cost of sales (764,848) (101,500) (866,348) (675,729)Gross profit 339,707 37,355 377,062 282,354 Distribution costs (67,162) (4,420) (71,582) (59,269)Administrative costs (143,619) (16,792) (160,411) (119,786)Operating result 128,926 16,143 145,069 103,299 Finance costs (11,607) (7,761)Finance income 1,535 873Result for the year before tax 134,997 96,411Income taxes (23,628) (18,330)Net result for the year 111,369 78,081 Attributable to minority interest 9 (4)Attributable to shareholders of Kingspan Group plc 111,378 78,077 Earnings per share for the year Basic (•'cent) 66.4 47.1 Diluted (•'cent) 64.8 46.3 GROUP BALANCE SHEETas at 31 December 2005 2005 2004 •'000 •'000AssetsNon-current assetsGoodwill 217,736 110,039Other intangible assets 12,265 2,180Property, plant and equipment 250,757 210,898Long term financial assets 755 38Deferred tax assets 2,366 1,639 483,879 324,794Current assetsInventories 97,323 89,225Trade and other receivables 268,124 220,787Cash and cash equivalents 120,165 87,791 485,612 397,803 Total assets 969,491 722,597 LiabilitiesCurrent liabilitiesTrade and other liabilities 193,368 157,164Provisions 30,252 18,483Deferred consideration 16,777 597Short term financial liabilities 38,864 108,725Current tax liabilities 16,366 19,355 295,627 304,324Non-current liabilitiesPension and other employee obligations 24,009 22,664Long term financial liabilities 226,799 79,435Deferred tax liabilities 5,173 3,947Deferred consideration 1,241 7,164 257,222 113,210 Total liabilities 552,849 417,534 NET ASSETS 416,642 305,063 EquityEquity attributable to shareholders of Kingspan Group plcShare capital 22,003 21,797Additional paid-in share capital 22,803 20,260Other reserves (23,650) (38,868)Revaluation reserve 713 713Capital redemption reserve 513 513Retained earnings 393,898 300,233 416,280 304,648 Minority interest 362 415 TOTAL EQUITY 416,642 305,063 GROUP STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2005 2005 2004 •'000 •'000 Balance at beginning of year 305,063 244,171 Cash flow hedging - in equity 18 102Actuarial losses on defined benefit pension scheme (2,959) (7,708)Currency translation 15,013 (1,921)Income taxes relating to items charged or credited to equity 891 2,314 Net income recognised directly in equity 12,963 (7,213)Net result for the year 111,378 78,077 Total recognised income and expense for the year 124,341 70,864 Shares issued during the year 2,749 1,585Employee share based compensation 2,256 1,764Dividends paid during the year (17,713) (13,238)Movement in Minority Interest (54) (83) Balance at end of year 416,642 305,063 STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 31 December 2005 2005 2004 •'000 •'000 Profit for financial year attributable to Group shareholders 111,378 78,077 Cash flow hedging 18 102Actuarial losses on defined benefit pension scheme (2,959) (7,708)Currency translation 15,013 (1,921)Income taxes relating to items charged or credited to equity 891 2,314 Total income and expense recognised since last annual report 124,341 70,864 GROUP CASH FLOW STATEMENTfor the year ended 31 December 2005 2005 2004 •'000 •'000Operating activitiesResult for the year before tax 134,997 96,411Adjustments 46,625 34,852Change in inventories 8,032 (21,838)Change in trade and other receivables (5,627) (39,779)Change in trade and other payables (4,392) 35,754Pension contributions (2,873) (2,885)Cash generated from operations 176,762 102,515Taxes paid (28,159) (14,826)Net cash flow from operating activities 148,603 87,689 Investing activitiesAdditions to property, plant and equipment (46,802) (55,679)Proceeds from disposals of property, plant and equipment 4,654 2,124Proceeds from financial assets 29 11Purchase of subsidiary and joint venture undertakings (142,970) (18,051)Net cash acquired with acquisitions 18,910 954Receipt of Tate Global Corporation settlement - 24,680Payment of deferred consideration in respect of acquisitions (1,441) (629)Dividends paid to minorities (44) (91)Interest received 1,606 875Net cash flow from investing activities (166,058) (45,806) Financing activitiesProceeds from bank loans and loan notes 151,458 187,338Repayment of bank loans (89,862) (178,342)Discharge of finance lease liability (413) (5)Proceeds from share issues 2,749 1,585Interest paid (9,138) (7,472)Dividends paid (17,713) (13,238)Net cash flow from financing activities 37,081 (10,134) Cash and cash equivalents at the beginning of the year 85,201 52,917 Net increase in cash and cash equivalents 19,626 31,749Translation adjustment 5,404 535 Cash and cash equivalents at the end of the year 110,231 85,201 Cash and cash equivalents at the beginning of the yearCash 87,791 55,746Overdrafts (2,590) (2,829) 85,201 52,917 Cash and cash equivalents at the end of the yearCash 120,165 87,791Overdrafts (9,934) (2,590) 110,231 85,201 The following non-cash adjustments have been made to the pre-tax result for the year to arrive at operating cash flow: Adjustments: 2005 2004 •'000 •'000 Depreciation, amortisation and impairment charges of fixed and intangible assets 32,515 25,039Employee equity-settled share options 2,256 1,764Finance income (1,535) (873)Finance cost 11,607 7,761Loss on sale of tangible assets 1,782 1,161Total 46,625 34,852 Reconciliation of net cash flow to movement in net debt 2005 2004 •'000 •'000 Increase in cash and bank overdrafts 19,626 31,749Increase in debt, lease finance and deferred consideration (59,742) (8,362) Change in net debt resulting from cash flows (40,116) 23,387 Loans and lease finance acquired with subsidiaries (6,314) (2,054)Deferred consideration arising on acquisitions in the period (11,383) (7,456)New finance leases (45) (82)Translation movement 2,472 (598) Net movement (55,386) 13,197 Net debt, beginning of the year (108,130) (121,327)Net debt, end of the year (163,516) (108,130) SUPPLEMENTARY INFORMATION 1 REPORTING CURRENCY The currency used in this Annual Report is Euro. Results and cash flows offoreign subsidiary undertakings have been translated into Euro at the averageexchange rates, and the related balance sheets have been translated at the ratesof exchange ruling at the balance sheet date. Exchange rates used were as follows: Average Closing rate RateEuro = 2005 2004 2005 2004 Pound Sterling 0.684 0.679 0.678 0.693US Dollar 1.245 1.244 1.185 1.335Czech Koruna 29.836 31.953 28.920 30.600Polish Zloty 4.029 4.534 3.830 4.100 2 SEGMENT REPORTING Segment information is presented in respect of the Group's business and geographical segments. The primary format, business segments,is based on the Group's management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise interest-bearing loans, borrowings and expenses, cash and cash equivalents, income tax assets, liabilities and expenses and deferredconsideration. Business segmentsThe Group operates in the following four business segments: Insulated Panels & Boards Manufacture of insulated panels and rigid insulation products.Off-site & Structural Manufacture of offsite solutions, timber frame buildings and structural products.Environmental Containers (EC) Manufacture of environmental and pollution control products.Access Floors Manufacture of raised access floors. Geographical segmentsIn presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.Segment assets are based on the geographical location of the assets. Analysis by class of business Segment Revenue Insulated Off-site & EC Access TOTAL Panels & Structural Floors Boards •'mn •'mn •'mn •'mn •'mn Total Revenue - 2005 689.4 203.9 220.1 130.0 1,243.4Total Revenue - 2004 579.6 116.8 142.5 119.2 958.1 Inter-segment revenue is not material and is thus not subject to separate disclosure in the above analysis. Segment Result (profit before finance costs) Insulated Off-site & EC Access TOTAL TOTAL 2004 Panels & Structural Floors 2005 Boards •'mn •'mn •'mn •'mn •'mn •'mn Operating result - 2005 94.2 22.7 18.4 9.8 145.1Operating result - 2004 72.2 13.9 14.2 3.0 103.3 Finance costs (net) (10.1) (6.9)Result for the year before tax 135.0 96.4Income taxes (23.6) (18.3) Net result for the year 111.4 78.1 Segment Assets and Liabilities Insulated Off-site & EC Access TOTAL TOTAL 2004 Panels & Structural Floors 2005 Boards •'mn •'mn •'mn •'mn •'mn •'mn Assets - 2005 413.3 134.6 161.2 137.9 847.0Assets - 2004 323.9 93.2 96.2 119.8 633.1 Liabilities - 2005 (131.2) (50.2) (40.2) (26.1) (247.7)Liabilities - 2004 (119.2) (34.8) (24.4) (19.9) (198.3) Total assets less total liabilities 599.3 434.8 Cash and cash equivalents 120.2 87.8Deferred tax asset 2.3 1.6Financial liabilities (current and non-current) (265.7) (188.2)Deferred consideration (current and non-current) (18.0) (7.7)Income tax liabilities (current and deferred) (21.5) (23.3) Total Equity as reported in Group Balance Sheet 416.6 305.0 Other Segment Information Insulated Off-site & EC Access TOTAL Panels & Structural Floors Boards •'mn •'mn •'mn •'mn •'mn Capital Investment - 2005 67.3 66.7 45.4 7.2 186.6Capital Investment - 2004 50.0 8.2 12.8 (21.1) 49.9 Depreciation included in segment result - 2005 (14.8) (5.0) (6.3) (4.5) (30.6) Depreciation included in segment result - 2004 (13.2) (3.1) (4.2) (3.9) (24.4) Amortisation included in segment result - 2005 (0.8) (0.8) (0.3) (0.0) (1.9) Amortisation included in segment result - 2004 (0.7) 0.0 0.0 0.0 (0.7) Non- Cash Items included in segment result - 2005 (1.9) (0.1) 0.2 (0.0) (1.8) Non- Cash Items included in segment result - 2004 (1.2) 0.0 0.0 0.0 (1.2) Analysis of Segmental Data by Geography Republic of United Mainland Americas Others TOTAL Ireland Kingdom Europe •'mn •'mn •'mn •'mn •'mn •'mnIncome Statement ItemsSegment Revenue - 2005 215.3 753.3 196.4 63.7 14.7 1,243.4Segment Revenue - 2004 136.8 592.4 163.2 53.6 12.1 958.1 Balance Sheet ItemsAssets - 2005 119.2 532.8 127.6 66.1 1.3 847.0Assets - 2004 105.4 367.2 106.6 53.3 0.6 633.1 Other segmental informationCapital Investment - 2005 22.8 36.1 124.2 0.8 2.7 186.6Capital Investment - 2004 5.9 10.5 17.0 0.0 16.5 49.9 3 DIVIDENDS Dividends on Ordinary Shares are recognised in the Group's financial statements on a cash paid basis under IFRS rather than On an accruals basis which was the accounting treatment previously adopted under Irish GAAP. The Final Dividend on Ordinary Shares for 2004 (€10.3 million) was approved byshareholders in May 2005 and, in accordance with IFRS, was recognised as acharge to Reserves in the year ended 31 December 2005. The Interim Dividend onOrdinary Shares For 2005 (€7.4 million) was recognised as a charge to Reservesin the year ended 31 December 2005. The Final Dividend on Ordinary Shares for 2005 (€15.0 million) is being proposed at the Group's AGM and, in accordance with IFRS, will be recognised as a charge to Reserves in the year ended 31 December 2006. DIVIDENDS 2005 2004 •'000 •'000Ordinary dividends Paid:2004 Final dividend 6.20c per share (2003: 4.60c per share) on 166,121,748 10,300 7,608shares 2005 Interim dividend 4.45c per share (2004: 3.40c per share) on 166,607,628 7,413 5,630shares 17,713 13,2384 EARNINGS PER SHARE 2005 2004 •'000 •'000The calculations of earnings per share are based on the following: Profit attributable to ordinary shareholders 111,378 78,077 No. of No. of shares shares ('000) ('000) 2005 2004 Weighted average number of ordinary shares for the calculation of basic earnings per share 167,625 165,621 Dilutive effect of share options 4,269 3,025 Weighted average number of ordinary shares for the calculation of diluted earnings per share 171,894 168,646 2005 2004 • cent • cent Basic earnings per share 66.4 47.1 Diluted earnings per share 64.8 46.3 5 BASIS OF PREPARATION The financial information set out in this document is an abridged version of theGroup's financial statements which have not yet been filed with the Registrar ofCompanies but upon which the auditors have given an unqualified audit report.The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards as adopted for use in the EuropeanUnion and their interpretations as issued by the International AccountingStandards Board (IASB) and the International Financial Reporting InterpretationsCommittee. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of land and buildings and the measurement of fair value share options and derivative instruments. The carrying value of recognised assets and liabilities that are hedged are adjusted to record changes in the fair values attributable to the risks that are being hedged. The Group's accounting policies will be included in the Annual Report to bepublished in April 2006. 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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