Final Results

KINGSPAN GROUP PLC

PRELIMINARY RESULTS

Year Ended 31 December 2013

KINGSPAN GROUP PLC

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013

Kingspan, the global leader in high performance insulation and building envelope solutions, reports its preliminary results for the year ended 31 December 2013.

Highlights:

Financial Highlights:

· Sales up 10% to €1.79bn.

· Trading profit up 14% to €122.8m.

· Group trading margin of 6.9%, an increase of 30bps. Underlying trading margin before the impact of acquisitions increased by 40bps.

· Basic EPS up 18% to 51.7 cent.

· Final dividend per share of 8.5 cent. Total dividend for the year up 14% to 14.0 cent (2012: 12.25 cent).

· A decrease in net debt to €107.6m (2012: €165.5m). Net debt to EBITDA of 0.66x (2012: 1.12x).

· Increase in ROCE by 160bps to 12.3% (2012:10.7%).

Operational Highlights:

· Insulated Panels sales up 23% and trading profit up 23%, with significant contributions from the ThyssenKrupp Construction and Rigidal Industries LLC acquisitions. Underlying sales pre-currency and acquisitions were up 2%.

· Solid performance in Insulation Boards where sales were down 3% (flat pre-currency), albeit improving in the UK in the second half with markets stabilising in Continental Europe.

· Improving UK office activity and resilient data centre related construction led to a positive year for Access Floors with sales in line with previous year (+5% pre-currency).

· Trading in Environmental proved tough with sales down 12% (H2 -5%) in a year of tight markets and internal consolidation.

Summary Financials:

Gene Murtagh, Chief Executive of Kingspan commented:

"Kingspan saw an improved momentum during 2013, despite various demanding market conditions, which has helped to deliver a strong operational performance including increased profitability, a higher return on capital and an improved dividend.

With some tentative signs of improved economic stability and sentiment, Kingspan remains focused on its core strategy of delivering innovation, prudent management and a widening global footprint that leaves the company well positioned to take advantage of any recovery that may take place in individual markets."

For further information contact:

Business Review

During 2013 global sales at Kingspan grew by 10% to €1.79bn and trading profit by 14% to €122.8m. This delivered an earnings per share increase of 18% to 51.7 cent.

The trading year was characterised by an unusually slow start in construction activity in Northern Europe with momentum building thereafter.

Economic stability and sentiment improved in parallel through 2013 and in particular in the UK where 34% of our revenue was derived in the past year. This was a key factor in Kingspan's second half performance. In the Benelux, the economy struggled early in the year with activity gradually clawing its way back towards the end of the year and with momentum notably better than 12 months earlier. Germany performed solidly, albeit at similar levels of construction to 2012. The Middle East was positive for Kingspan, and Australia, despite some concerns of weakening demand from the resources rich region of Western Australia, advanced as our products continued on a path of improved penetration. North America, to some degree, countered this general trend beginning 2013 quite strongly then waning somewhat following the political uncertainty created over the Federal budget during the third quarter. Undoubtedly that political impasse affected construction decisions and, having since subsided, should give way to a more positive 2014.

In all, the general consensus from within our own business, combined with more positive internal and external leading indicators, points toward gradually improving construction momentum into 2014.

Insulated Panels

(1) Comprising acquisition impact +24%, volume +7%, price/mix -5% and currency impact -3%

UK

Insulated Panels sales revenue in the UK grew by a modest 1% at constant currency, having been behind in the early part of the year owing to the difficult winter. The project pipeline, even at that earlier point, had shown considerable improvement over the prior year and ultimately led to a strong second half sales performance. During the second half of the year sentiment picked up markedly as reflected in quotation levels and an enquiry bank that improved on the same time a year earlier. The spread of activity was also well balanced, across a wide variety of end applications covering food, industrial, distribution, low rise office and commercial. Whilst the more established roof and wall product remained under considerable pricing pressure, the differentiation that has been built into the product suite over time played a material role in specification and margin protection. The phased release of Kingspan's Quadcore® technology from mid to late 2014 and the improving momentum of Benchmark® in architectural applications, Kingspan Energy and Powerpanel® should together play a key part in evolving our business further.

Mainland Europe

Sales revenue grew by 46% across this wide set of geographic markets, or by 1% pre-acquisition. Activity, and Kingspan's business, grew steadily in Germany as the year progressed cemented by the integration of the Continental European assets acquired from ThyssenKrupp Construction in late 2012. The manufacturing and sales presence of ThyssenKrupp Construction was largely concentrated around Germany, France, Hungary and the Benelux. The process of integrating these businesses progressed well during 2013 and, as we expected with its significant footprint, plenty remains to be done.

Activity in Poland performed well as did Hungary, despite its economic difficulties, as inward investment created some large scale opportunities for Kingspan in the region. Our business in Turkey and the Middle East had a very strong year with the associated momentum also carrying into early 2014.

North America

Sales revenue increased by 7% (+11% pre-currency) due to penetration growth and an element of improved construction macro activity. The US performed ahead of this level with Canada lagging somewhat, the latter showing considerable improvement as the year drew to a close. Insulated Panels, as a method of construction, has been growing consistently over the past five years, even during the times of economic weakness experienced in recent years. At approximately 10%, market penetration of the insulated panel remains relatively low and is set to continue growing. This trend is expected to continue driven by improving awareness of, and demand for, energy efficient building fabrics which is likely to vary materially from state to state. As a general theme, acceptance has been growing across the Americas that modern envelope technology significantly conserves energy and delivers sizeable financial and ecological benefits.

Australasia

Given the project led nature of the Australian market, sales revenue growth can ebb and flow, which was the case during 2013 when sales decreased by 6% (+4% pre-currency), following the breakthrough growth of 27% experienced a year earlier. Underlying conversion to Insulated Panels, as is the case in the US, continued through 2013 and order intake was ahead of prior year by 35%, boding well for early 2014. South East Asia, as an adjacent market, is still embryonic for Kingspan, but the prospects are positive for the medium term.

Ireland

Off a lowered base, sales revenue in Ireland grew by 24% reflecting the continued, albeit gradual, recovery of the local market. In absolute terms, we expect volume progression to be relatively subdued given the overhang in constructed space that still exists in some segments and regions.

Insulation Boards

(1) Comprising growth from price/mix +3%, volume -3% and currency impact -3%

UK

In the UK, sales revenue improved through the year resulting in a like-for-like sales decrease of 1%. Residential newbuild, as with office construction, has been more positive than in recent years and this pattern is likely to remain for early 2014. Non-residential low-rise construction was broadly flat over the prior year, although activity in recent months has shown signs of improvement. Refurbishment in the UK, however, was somewhat disappointing having been a key driver for our business over recent years. External wall insulation, part of Kingspan's internationally growing Kooltherm® range, suffered as the Cert and CESP programs ceased. The Group can expect an increase in RMI demand over time from Government-sponsored energy efficiency initiatives.

Continental Europe

Kingspan's position in this region has strengthened significantly in recent years and, reflecting the troubles of certain economies in the Eurozone, sales revenue of rigid board fell by 8% in 2013 (H2 -5%). Demand in the Netherlands was generally weak for much of the year. However, the combination of growing penetration of Kooltherm® and improved sentiment in quarter four delivered growth. The case was similar in Belgium. Germany, a key longer term platform, had a relatively weak year as refurbishment activity was lower for rigid board products. The fundamentals of this market remain very attractive particularly given the extremely low level of penetration of high performance insulation. Our new facility, close to Dresden, will be commissioned by mid 2014 and will be focused on this regional market as well as neighbouring CEE countries.

Australasia

Sales revenue in Australasia improved markedly during 2013 and ended the year 11% ahead (flat post currency). Despite weaker residential newbuild in Australia, penetration growth of our high performance insulation continued to rise and delivered the positive outcome. Additionally, our relatively recent presence in South East Asia benefitted from a number of sizeable wins over the year.

Ireland

Ireland has shown clear signs of improvement during 2013 and sales revenue grew by a modest 2%. This should be viewed in the context of the absolute market size by volume which understandably trails the levels experienced five or more years ago. The market appears to be on a path towards a more measured and sustainable level of activity. Refurbishment activity, as a proportion of sales, continued to feature prominently.

Environmental

2013 was a year of restructuring for the Environmental business, particularly in the UK, with divisional fixed costs reducing by €4.1m over 2012. This is now complete and although sales dropped by 12% year-on-year profit generated grew modestly at both an EBITDA level of €5.4m (2012: €5.3m) and trading profit of €1.5m (2012: €1.2m). Clearly, the reduced cost base played a key part in achieving this. Sequentially, by quarter, the sales trend over prior year improved having been down 27% in quarter one, was down 2% in quarter four. The focus for the current year will be on stabilising sales driven primarily by the opportunity in the UK newbuild markets. Renewables product sales remain a significant challenge for the division where solarthermal sales in particular continue to fall in both the UK and Germany.

Access Floors

(1) Comprising volume +1%, price/mix +4% and currency impact -5%

Sales revenue in Access Floors across all geographies grew by 5% in 2013 at constant exchange rates. Activity in North America was driven by the datacentre market which continued to develop robustly. This was further enhanced by our recent product introductions geared towards energy efficient underfloor air management. These solutions optimise airflow to the servers that require cooling and, in addition to newbuild, are being provided as an upgrade product for energy reduction in existing datacenters. The financial benefits in North America of these systems are extremely compelling.

Conversely, office construction remains critically low in that region. However, the medium term pipeline is showing early signs of gradual improvement in late 2014 and into 2015.

In the UK, the office construction cycle has already improved through late 2013. This trend is almost certain to continue in 2014 and our Hull based facility is operationally geared for the growth anticipated over the coming year or two.

Our Strategy

For some time now, we have been pursuing a three pillar strategy:

- Conversion from traditional insulation and building techniques to high performance solutions.

- Innovating within our space to consistently maintain a competitive edge.

- Broadening our geographies, with primary focus on mainland Europe, the Americas, Gulf & Middle East and Australasia.

The delivery of these objectives, within the scope of a conservatively managed balance sheet which has served the Group well, will remain the focus of our execution for the foreseeable future.

Financial Review

Overview of results

Group sales increased by 10% to €1.79bn (2012: €1.63bn) and trading profit increased by 14% to €122.8m (2012: €107.7m) reflecting an improvement of 30 basis points in the Group's trading profit margin to 6.9% (2012: 6.6%). The trading profit margin grew by 40 basis points to 7.3% excluding the impact of acquisitions. Basic EPS for the year was 51.7 cent, representing an increase of 18% (2012: 43.8 cent).

The Group's underlying sales and trading profit growth by division are set out below:

The Group's trading profit measure is earnings before interest, tax and amortisation of intangibles:

Finance costs

Finance costs for the year decreased by €1.2m to €13.5m (2012: €14.7m). Finance costs include a non-cash charge of €0.3m (2012: nil) in respect of the Group's legacy defined benefit pension schemes. A net non-cash credit of €0.7m was recorded in respect of swaps on the Group's USD private placement notes (2012: credit of €0.4m). The Group's net interest expense on borrowings (bank and loan notes) and net of interest receivable was €14.0m compared to €15.1m in 2012. This decrease reflects lower average net debt levels in 2013 compared to 2012. The interest expense is driven extensively by gross debt balances with cash yields negligible in the current low interest rate environment. Average gross debt during the year was €298m (2012: €307m) with average cash balances amounting to €158m (2012: €123m). The average is calculated by reference to the month end position.

Non trading items

The Group recorded a non trading charge of €3.5m (2012: credit of €0.1m) in the year. The charge is a composite item comprising an impairment charge of €6.0m in respect of certain fixed assets within the Environmental division and a credit of €2.5m reflecting the reversal of an impairment charge taken previously on a fixed asset within the Insulated Panels division. The credit in the prior year is a composite item which is set out in further detail in the Group's 2012 annual report.

Taxation

The tax charge for the year was €12.8m (2012: €15.3m) which represents an effective tax rate of 13.8% (2012: 18.6%) on earnings before intangible amortisation and non-trading items.

Dividends

The Board has proposed a final dividend of 8.5 cent per ordinary share payable on 15 May 2014 to shareholders registered on the record date of 25 April 2014. When combined with the interim dividend of 5.5 cent per share, the total dividend for the year increases to 14.0 cent (2012: 12.25 cent), an increase of 14.3%.

Retirement benefits

The Group has two legacy defined benefit schemes which are closed to new members and to future accrual. In addition, the Group assumed a defined benefit pension liability in respect of current and former employees of ThyssenKrupp Construction acquired during 2012. The net pension liability in respect of these schemes and obligations was €7.7m as at 31 December 2013 (31 December 2012: liability of €12.3m).

Key performance indicators

The Group has a set of key performance indicators which are set out in the table below:

EPS growth. The growth in EPS is accounted for by the 14% increase in trading profit generating a 19.4% increase in profit after tax.

Sales growth of 10% (2012: 5%) was driven by a 12% contribution from acquisitions, a 1% increase in underlying sales offset by a 3% decrease due to the negative impact of currency translation.

Trading margin by division is set out below:

The Insulated Panels division trading margin reflects an increase in overall margin due to a positive business mix oriented towards higher specification industrial and architectural applications which offset the initially dilutive impact of acquisitions made towards the end of 2012. The trading margin improvement in the Insulation Boards division reflects some recovery in overall margin and business mix in Mainland Europe. The increase in the Environmental trading margin was due to the impact of restructuring initiatives undertaken on the divisional cost base. The increase in trading margin in Access Floors reflects the year on year sales mix between domestic and international markets as well as the office/data centre mix.

Free cashflow is an important indicator and it reflects the amount of internally generated capital available for re-investment in the business or for distribution to shareholders.

*Earnings before finance costs, income taxes, depreciation and amortisation

Working capital at year end was €209.1m (2012: €200.0m) and represents 11.7% of annual turnover (2012: 12.3%). This metric is monitored throughout the year and is subject to a certain amount of seasonal variability associated with trading patterns and the timing of significant purchases for steel and chemicals.

Return on capital employed, calculated as operating profit, adjusted for non-trading items, divided by total equity plus net debt, was 12.3% in 2013 (2012: 10.7%).

Net debt to EBITDA measures the ratio of debt to earnings and at 0.66x is comfortably less than the Group's banking covenant of 3.5x in both 2013 and 2012.

Financing

The Group funds itself through a combination of equity and debt. Debt is funded through a combination of syndicated bank facilities and private placement loan notes. The primary bank debt facility is a €300m revolving credit facility, with a syndicate of international banks, entered into in April 2012 and maturing in April 2017. The facility was undrawn at year end. The Group has two US Private Placement loan notes in issue and the total Private Placement debt outstanding is $400m. $158m of this matures in 2015, $42m matures in 2017 with the balance of $200m maturing in 2021. The weighted average maturity of debt facilities at year end was 3.9 years (December 2012: 4.9 years).

The Group has significant available undrawn facilities which provide appropriate headroom for potential development opportunities.

Net debt

Net debt decreased by €57.9m during 2013 to €107.6m (2012: €165.5m). This is analysed in the table below:

Key financial covenants

The majority of Group borrowings are subject to primary financial covenants calculated in accordance with lenders' facility agreements:

- A maximum net debt to EBITDA ratio of 3.5 times; and

- A minimum net debt to net interest coverage of 4 times

The performance against these covenants in the current and comparative year is set out below:

Financial risk management

The Group operates a centralised treasury function governed by a treasury policy approved by the Group Board. Adherence to the policy is monitored by the CFO and the Internal Audit function. The Group does not engage in speculative trading of derivatives or related financial instruments.

Looking Ahead

There has been much commentary of late regarding global economic recovery and there is evidence to suggest that such a recovery may be underway in certain regions of the world. As a global business, Kingspan is well placed to take advantage of this in time. It is also the case that market recovery is somewhat patchy, and we are conscious of false dawns which have occurred previously. That said, it would appear that key markets for Kingspan, such as the UK, have seen a notable change in sentiment over the past six months. Consequently, Group sales in the early part of 2014 are encouraging albeit against a weak comparative period.

We remain focused on delivering our innovation and product development agenda, extending and consolidating our global footprint and improving returns on capital. Kingspan is well placed for the year ahead.

On behalf of the Board

Kingspan Group plc

Group Condensed Income Statement

for the year ended 31 December 2013

 Gene M. Murtagh Geoff Doherty 24 February 2014

 Chief Executive Chief Financial Officer  

Kingspan Group plc

Group Condensed Statement of Comprehensive Income

for the year ended 31 December 2013

Kingspan Group plc

Group Condensed Statement of Financial Position

as at 31 December 2013

Gene M. Murtagh Geoff Doherty 24 February 2014

Chief Executive Chief Financial Officer

Kingspan Group plc

Group Condensed Statement of Cash Flows

for the year ended 31 December 2013

Notes to the Preliminary Statement for the year ended 31 December 2013

1 General Information

The financial information presented in this report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as set out in the Group's annual financial statements in respect of the year ended 31 December 2012 except as noted below. The financial information does not include all the information and disclosures required in the annual financial statements. The Annual Report will be distributed to shareholders and made available on the Company's website www.kingspan.com in due course. It will also be filed with the Company's annual return in the Companies Registration Office. The auditors have reported on the financial statements for the year ended 31 December 2013 and their report was unqualified and did not contain any matters to which attention was drawn by way of emphasis. The financial information for the year ended 31 December 2012 represents an abbreviated version of the Group's statutory financial statements on which an unqualified audit report was issued and which have been filed with the Companies Registration Office.

Basis of Preparation and Accounting Policies

The financial information contained in this Preliminary Statement has been prepared in accordance with the accounting policies set out in the last annual financial statements.

IFRS does not define certain Income Statement headings. For clarity, the following are the definitions as applied by the Group:

- 'Trading profit' refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses from non trading items.

- 'Non trading items' refers to material gains or losses on the disposal or acquisition of businesses and material related acquisition and integration costs, and material impairments to the carrying value of intangible assets or property, plant and equipment. It is determined by management that each of these items relate to events or circumstances that are non-recurring in nature.

- 'Operating profit' is profit before income taxes and net finance costs.

The Group makes this distinction to give a better understanding of the financial performance of the business.

The layout of the Condensed Income Statement has been changed during the year to align the report more closely with the key reporting metrics used by the Chief Operating Decision Maker, which the Group has defined as the Board of Directors. These key metrics are revenue and trading profit.

The following are the new standards that were effective for the Group's financial year ending 31 December 2013. They had no significant impact on the results or financial position as set out in this Preliminary Statement.

· IFRS13 Fair Value Measurement

· Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

· IAS 19 Employee Benefits (amended 2011)

· Disclosures: Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7)

· Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

· Annual Improvements to IFRS 2009-2011 Cycle

There are a number of forthcoming requirements of IFRSs as adopted by the EU which are not yet effective and have therefore not been adopted in these financial statements. These new standards and interpretations, which are effective from the beginning of the periods outlined below include:

· January 2014 - Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27), Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32), IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 Separate Financial Statements (2012), IAS 28 Investments in Associates and Joint Ventures (2012).

· Unknown date - IFRS 9 Financial Instruments

The Group does not plan to adopt these standards early and the extent of their impact has not yet been determined.

2 Segment Reporting

In identifying the Group's operating segments, management based its decision on the product supplied by each segment and the fact that each segment is managed and reported separately to the Chief Operating Decision Maker, which the Group has defined as the Board of Directors. These operating segments are monitored and strategic decisions are made on the basis of segment operating results.

Operating segments

The Group has the following four reportable segments:

Analysis by class of business

Inter-segment transfers are carried out at arm's length prices and using an appropriate transfer pricing methodology. As inter-segment revenue is not material, it is not subject to separate disclosure in the above analysis.

* Capital investment includes fair value of property, plant and equipment acquired in business combinations

The Group has a presence in over 70 countries worldwide. The revenues from external customers and non-current assets (as defined in IFRS 8) attributable to the country of domicile and all foreign countries or regions of operation are as set out above and specific regions are highlighted separately on the basis of materiality.

There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8. The individual entities within the Group each have a large number of customers spread across various activities, end-uses and geographies.

3 Non Trading Items

The impairment of plant and machinery relates to certain assets within the Environmental segment. Due to difficult trading conditions in specific activities, the carrying value of the associated plant and machinery has been written down to nil. In addition, an accrual has been recorded for the potential repayment of associated grant aid.

The reversal of previous impairment, which was originally made in 2008, arises following receipt of compensation from a landowner following the aborted development of a new Insulated Panels plant in Canada.

Negative goodwill represents the excess of the fair value of the acquired net assets in the Thyssenkrupp Construction Group (TKCG) over the consideration paid to acquire the business. The excess has been recorded as a credit to the Income Statement in line with IFRS3 (2008) 'Business Combinations'. The fair values were reassessed in 2013, resulting in a further credit of €48,626.

Acquisition related costs relate to the legal and other due diligence costs incurred in acquiring TKCG. In addition, the Group incurred costs in integrating the acquisition into the Group's operations and structures.

The impairment of goodwill and intangibles in 2012 arose as a result of the annual goodwill impairment review required under IAS36. It relates to the Group's timberframe and renewable activities which are respectively part of the Insulation Boards and Environmental cash generating units.

The tax effect of the above items was €1.4m (2012: credit of €1.5m). The income tax expense for the year in the Consolidated Income Statement includes the impact of this effect.

4 Finance Expense and Finance Income