Kingspan : Interim Results 2020 (Presentation)

-

2020 INTERIM

RESULTS

21st August 2020

Disclaimer

Forward Looking Statements

This presentation contains certain forward-looking statements including, without limitation, the Group's financial position, business strategy, plans and objectives of management for future operations. Such forward-looking information involves risks and uncertainties, assumptions and other factors that could cause the actual results, performance or achievements of the Group to differ materially from those in the forward-looking statements. The forward-looking statements in this presentation reflect views held only as of the date hereof. Neither Kingspan nor any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this presentation will actually occur. Kingspan undertakes no duty to and will not necessarily update any such statements in light of new information or future events, except to the extent required by any applicable law or regulation.

Our Mission

To accelerate a net-zero

emissions built environment with the wellbeing of people

and planet at its heart.

Ultra Energy-Efficient

172 million tonnes of CO2 will be saved over the life of our insulation systems sold in 2019

Net-Zero Carbon

Over 90% reduction in energy carbon intensity per euro of revenue since 2012

Circular Materials

In 2019 alone we upcycled 385 million waste plastic bottles

Natural Daylight & Ventilation

The capacity to create 9 billion lumens of natural light annually through our daylighting systems

Conserved Water

Over 75 billion litres of rainwater has been harvested by our rainwater systems

3

The Envelope

Insulation Boards

Global Leader

18% Revenue

Flat Roof Membrane

Embryonic position presently - global scale opportunity

Light & Air

Global Leader

8% Revenue

Insulated Panels

Global Leader

64% Revenue

Data & Flooring

Global Leader

5% Revenue

	Water & Energy
	Global Leader
Industrial Insulation	5% Revenue
Embryonic position presently -	4
global scale opportunity

Megatrends That Drive Us

Politics and Regulation

Averting a climate emergency

Paris Agreement goal to limit the temperature1.5ºC increase above pre-industrial levels to

Market and Customers

Future proofing of asset values

7% increase in asset value of green buildings above the value of traditional buildings1

Growth of new industry

2x increase in share of online as a percentage of retail sales in the first half of 2020 over 20192

Sustainability and Resilience

Resource Scarcity

No.1consumer of global raw materials is the construction industry

Sustainability requirements

50% of the solid waste in the United States is produced by the construction industry

Energy and Climate Change

30% of global greenhouse gas emissions are attributable to buildings

Society and Workforce

Health/comfort needs of citizens

8-11% productivity improvements are not uncommon as a result of better air quality3

Talent and ageing workforce

50% of general contractors are concerned about finding experienced crafts workers for their workforce

Source: The Future of Construction, World Economic Forum

Note 1 - Source: Dodge Data & Analytics 2018

Note 2 - Source: JLL preliminary research

Note 3 - Source: World Green Building Council

5

IPCC 1.5ºC - AECOM Research1

The rate of retrofits needs to dramatically accelerate and extend

to deep energy

refurbishment:

4%/year

2030Retrofit

Envelope

First2

Embodied carbon in buildings also needs to be reduced through

low carbon materials and

building designs.

Refurbishment is inherently lower embodied carbon than new-build.

ECO22050

Energy in buildings

needs to reduce by

30% as a

first step to free grid capacity for other sectors to also move to clean electricity.

plus energy-efficiency and mixed low carbon heat sources is the

only modelled pathway

to hit IPCC goals for

energy reduction and decarbonisation of space heating and cooling.

Net-Zero

Carbon Built

Environment

1. New 2020 Global Research by AECOM: Envelope First Global Emissions Savings
2. Envelope First:
3. 1. Limit the use of unnecessary energy using envelope optimisation.
   2. Ensure that the remaining energy requirements are served efficiently.

iii. Meet energy demands using renewable sources.	6

Better Insulation is the Cornerstone of Envelope First

OPTIM-R®

0.007 W/m.K

KINGSPAN'S FULL SPECTRUM

Insulates Better

							Kooltherm® 100
					PIR	QuadCore™	0.018 W/m.K
					0.018 W/m.K	(0.018-0.023)2
					0.022 W/m.K
			EPS	XPS	(0.022-0.027)2
		Synthetic
		0.030 W/m.K	0.030 W/m.K
		Mineral
Hemp Wool	Sheep Wool	(0.030-0.038)2	(0.030-0.038)2
Fibre
0.038 W/m.K	0.035 W/m.K	0.034 W/m.K
(0.038-0.043)2	(0.035-0.045)2	(0.034-0.042)2

		Reference	13%	13%		55%	89%	89%	386%
11%	3%	material	better1	better1	better1	better1	better1	better1
worse4	worse4			1	Insulation performance (R-value) compared to stone mineral fibre of the same thickness.
		2	The thermal conductivity range is based on data from insulation manufacturers websites or Agrément certificates.
				3	Thermal conductivity (Lambda) W/m.K values quoted at 10ºC.		7
				4	% Change v mineral wool (based on R-value for same thickness).

Solutions Driven Innovation -

QuadCoreTM versus Synthetic Mineral Fibre1

Market and

Customers

25% lower panel system cost2

20% savings in installation costs

20-30% accessories
	savings in
6	more BREEAM credits
enabled than typical retail
	or distribution warehouse

Sustainability and

Resilience

297 fewer truck deliveries to site

1,300 tonnes lighter facade with savings in structure & foundation

15% contains up to 15% recycled content when upcycled PET is incorporated

	Society and	Politics and
	Workforce	Regulation
12%	savings in installation time	thermal performance
(faster build programme)	40year guarantee

60mins fire resistance (EI 60)3

VS

Estimates based on a 100,000m2 facility

1 Estimates based on a 150mm QuadCoreTM wall panel system versus a 300mm Synthetic Mineral Fibre wall panel system (to achieve equivalent U-value)

2 Estimate based on Continental European prices

3 QuadCoreTM AWP-S 150mm wall panel system tested to EN 1364-1

Synthetic

Mineral Fibre

8

Space Matters

London, Office Tower

	Description	Value
	Wall build-up	Kingspan Kooltherm® K15
		Rainscreen Board with
		Glass Mineral Fibre
	Lettable floor area	15,650 sq.m (168,455 sq.ft)
	Additional floor area	126,500 sq.m (1,361.63 sq.ft)
	Additional development cost	£142,172.00 or 0.22%
	Capitalised value of	£1,766,384.00
	additional space
1,142%
	Return on additional CapEx
Details of the London Office Tower Case Study with a Rainscreen Ventilated Hybrid Wall
Construction incorporating Kingspan Kooltherm® K15 Rainscreen Board with Glass Mineral Fibre
versus Build-up incorporating Synthetic Rock Mineral Fibre Slab & Glass Mineral Fibre.	9
Source: Cushman Wakefield Report

We are

Energy

• Our Net-Zero

energy status maintained

• Increase our direct use of renewable energy to 60% by 2030
• Increase our on-site generation of renewable energy to 20% by 2030
• Install Solar PV
  systems on all wholly owned facilities by 2030

Carbon

• Net-Zerocarbon

manufacturing by 2030

• 50% reduction in
  product CO2 intensity from our primary supply partners by 2030
• 100% zero emission
  company funded cars by 2025

Circularity

• 1 billion PET bottles
  upcycled into our manufacturing processes by 2025
• All QuadCoreTM insulation to
  utilise upcycled
  PET by 2025
• Zero company waste to landfill by 2030

Water

• 5 active ocean clean-up projects by 2025
• 100 million
  litres of rainwater harvested by 2030

10

Global Organic Expansion

UK

AlphaCore® Line 2021/2022

Industrial Insulation 2021

Kingscourt, Ireland

Light & Air Facility 2021

North East USA

New Panel Line 2021

PIR/QuadCoreTM Board Line 2022

Brazil

New Panel Line 2020

Finland

PIR/QuadCoreTM Board Line 2022

Sweden

Kooltherm® Facility 2021

Hungary

K-RocTM Panel Line 2020

France

PIR/QuadCoreTM Board Line 2022

PIR Panel Line 2022

Russia

PIR Panel Line 2021

Southeast Asia

QuadCoreTM Panel Line 2022

Brazil

New Panel Line 2022

Australia

K-RocTM Panel Line 2022

11

Progress So Far

Sales (€bn)

4.8

4.6

4.4

4.2

4.0

3.8

3.6

3.4

3.2

3.0

2.8

CAGR 17.2%

2.6

2.4

2.2

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

12

5 Year Financial Performance

Revenue (€m)

CAGR (13.8%)

2,774.3

3,108.5

3,668.1

4,372.5

4,659.1

15 16 17 18 19

500.0

400.0

300.0

200.0

100.0

0.0

Trading Profit (€m)

CAGR (18.1%)

255.9

340.9

377.5

445.2

497.1

15 16 17 18 19

13

2020 H1 In A Nutshell

64%

Insulated Panels

85%

Energy Efficiency & Conversion

56%

Europe

70%

Commercial & Industrial

80%

New Build

70%

Direct

18%	8% Light & Air
5% Data & Flooring
Insulation Boards	5% Water & Energy
	15%
	Other

20%	17%		7%
Americas	United Kingdom	ROW
18%		12%
Residential		Office
	& Data

20%

Refurbishment

30%

Via Distribution

Revenue

€2.1

Billion

Applications

• Retail
• Distribution
• Leisure
• Accommodation
• Food
• Manufacturing
• Data Management
• Infrastructure

Trading

Profit

€200.1

Million

14

2020 H1 In Summary

• Insulated Panels sales decrease of 8%. Good recovery in key markets particularly in Europe. UK slower to recover with Americas softer recently. Continued progress on QuadCoreTM adoption and Bacacier integrating well
• Insulation Boards sales decrease of 18%. Positive Kooltherm® performance. UK and Ireland experiencing more prolonged disruption than Mainland European and North American markets. Australasia relatively resilient
• Light & Air sales growth of 20%. Another milestone marked in the period with acquisition of Colt Group significantly adding to the scale and breadth of the category and service offering
• Water & Energy sales decrease of 10% with solid rainwater harvesting and wastewater activity
• Data & Flooring sales growth of 6% with strong data centre activity overall

Revenue

down 8% to

€2.1bn

Trading Profit down 13% to

€200m

Basic EPS

down 15% to

79.8c

15

Financial Highlights

	H1 2020	H1 2019	Change	CC Change*
Revenue (€m)	2,072.7	2,243.1	-8%	-7%
Trading Profit (€m)	200.1	230.4	-13%	-12%
Earnings per share (cent)	79.8	93.8	-15%
Interim Dividend (cent)	-	13.0	-100%
Free Cashflow (€m)	260.4	80.6	+223%
Net Debt (€m)	437.9	734.3	-296.4m
Trading Margin	9.7%	10.3%	-60bps
Net Debt/EBITDA	0.79x	1.31x	-
Effective Tax Rate	16.9%	17.1%	-20bps
ROCE	16.9%	17.1%	-20bps

* Constant currency change

16

Trading Profit & Margin

CAGR 4.6%

	Trading Margin	H1 20	FY 19	H1 19
	Insulated Panels	9.3%	10.4%	10.1%
	Insulation Board	13.2%	13.4%	13.4%
	Light & Air	4.4%	7.7%	4.3%
	Water & Energy	7.4%	6.8%	5.7%
	Data & Flooring	12.8%	11.4%	11.2%
	Group	9.7%	10.7%	10.3%

Broadwater Bay Business Park, Montana, USA

Dri-Design

€m

167.3

177.8

195.3

230.4

200.1

H1 16

H1 17

H1 18

H1 19

H1 20

17

Group Sales & Profit Bridge

Revenue (€m)

142.0

Trading Profit (€m)

250.0

9.4

(18.6)

(293.8)

(1.5)(38.2)

200.0

2,243.1

2,072.7

Revenue	Currency Acquisitions Underlying	Revenue
H1 2019		H1 2020

150.0
100.0	230.4	200.1
50.0

0.0

Trading Profit		Currency		Acquisitions		Underlying		Trading Profit
H1 2019								H1 2020

18

Strong Free Cash Flow

4.6	(10.4)	(14.9)
95.6		(58.7)

€m

244.2

260.4

EBITDA

Working Capital

Non Cash/Pension

Interest

Tax

Net Capex

Free Cash Flow

19

Net Debt Reconciliation

(260.4)

23.1

42.0

€m

633.2

437.9

Net Debt Dec 19

Free Cash Flow

Acquisitions

FX/Other

Net Debt Jun 20

20

Strong ROCE

Alaska Airlines Hangar

Insulated Panels

17.3%

17.8%

16.8%

17.3%

16.9%

2016

2017

2018

2019

H1 20

21

Sales by Geography

56%

53%

H1 20H1 19

7%	7%

	20%	20%
17%	20%

€m	H1 20	H1 19	YOY %	Constant Currency
Change	Change
Europe	1,156.5	1,193.3	-3%	-3%
Americas	426.6	451.5	-6%	-3%
UK	350.9	450.6	-22%	-22%
Rest of World	138.7	147.7	-6%	-5%
Group Sales	2,072.7	2,243.1	-8%	-7%

22

Strong Balance Sheet

Eyescan, Utrecht

Insulated Panels

• €300m revolving credit facility arranged in June 2019 - undrawn at 30 June 2020
• €451m revolving credit facility in place until June 2022 - undrawn at 30 June 2020
• €50m green loan to fund Planet Passionate initiatives signed in February 2020, fully drawn.
• Total available cash balances and committed undrawn facilities of €1,182m
• Weighted average maturity of debt is 3.8 years

23

Insulated Panels

• Global order intake down 7% in the first six months of 2020 having started the year ahead
• Backlog volume is 8% ahead pointing towards strong near- term deliveries assuming markets are open and receptive
• Intake picture varies by region and although still relatively strong in Germany, France, the Benelux and Brazil, other key markets such as the UK and North America have weakened
• Overall QuadCoreTM represented 12% of insulated panel sales revenue in the period (H1 19: 8%)
• In Europe markets have behaved differently with Germany largely unaffected, France well recovered after effective closure in April and the Benelux performing steadily
• Central & Eastern Europe was a little behind but very robust in Poland
• UK has been disappointing

	H1 20	H1 19
Sales (€m)	1,332.0	1,444.8
% of Group Sales	64%	64%

Analysis of YoY % Change
Underlying	Currency	Acquisitions	Total
-12%	-1%	+5%	-8%

Istanbul Airport Hangar, Turkey	24
Insulated Panels

Insulated Panels (cont.)

MIVB Haren, Belgium

Insulated Panels

• During the first half the US performed exceptionally well as the business traded largely uninterrupted, as was also the case in Brazil, supported by the new facility close to Sao Paulo
• Canada took more extreme measures and as a result trading was significantly behind the same period in 2019, and particularly in the second quarter
• Ireland performed weaker than any of our regions globally
• Australasia did ease back but still performed robustly all things considered and intake in this region has been strong

25

Insulation Boards

• Pattern of sales in Insulation Boards mapped a similar path to that of Insulated Panels
• Of note, strong performance in Western European markets, in particular the Netherlands, Germany and Denmark
• Construction activity severely impacted in the UK with revenue significantly down. This has improved in recent months although still trailing prior year
• Ireland revenue virtually halted for April and much of May and has since rebounded strongly
• North America delivered growth with all product categories making progress
• Australasia resumed growth, taking share from traditional materials
• Middle East heavily impacted by shutdowns but has since begun to recover

	H1 20	H1 19
Sales (€m)	367.9	450.5
% of Group Sales	18%	20%

Analysis of YoY % Change

	Underlying	Currency	Acquisitions	Total
	-18%	-	-	-18%
Windermere Jetty, UK
Insulation

Photo credit: Christian Richter

26

Light & Air

• Overall the business performed robustly through the turbulence of H1, albeit like-for-like revenue negatively impacted
• Before and since then the underlying operation grew encouragingly in France and Germany
• More challenging in the US compared to strong prior year performance
• Colt acquisition completed in April and despite obvious hurdles is integrating to plan
• H2 focus on regional integration of Colt
• Ongoing assessment of further opportunities in Europe and beyond

		H1 20	H1 19
	Sales (€m)	171.9	142.9
	% of Group Sales	8%	6%

Analysis of YoY % Change
Underlying	Currency	Acquisitions	Total
-9%	-	+29%	+20%

Wilmington Basketball Centre, US	27
Light & Air

Water & Energy

• Overall this business suffered at a revenue level in the UK and Ireland due to lockdown measures
• Cost containment in these regions was particularly effective in delivering a relatively strong trading profit with momentum expected to continue into H2
• Hot Water offering particularly weak in the UK, both newbuild and house renovations ground to a halt for a time
• Water treatment was steady, most prominently in the Nordics and Western Europe
• Rainwater Harvesting business in Australia delivered a strong outcome in the circumstances

	H1 20	H1 19
Sales (€m)	92.9	103.1
% of Group Sales	5%	5%

Analysis of YoY % Change
Underlying	Currency	Acquisitions	Total
-10%	-2%	+2%	-10%

The Glenmorangie Distillery, UK

Water & Energy / Insulated Panels

28

Data & Flooring

• Positive first half overall in key regions of the US, Western Europe and Australia
• UK was predictably weaker
• Growing 'Data' dimension a key driver of robust delivery in recent years
• Further growth achieved by the expanding product set aimed at the data warehousing opportunity
• In Germany, the WeGo acquisition has been seamlessly integrated and is performing ahead of plan

	H1 20	H1 19
Sales (€m)	108.0	101.8
% of Group Sales	5%	5%

Analysis of YoY % Change

Underlying	Currency	Acquisitions	Total
-9%	+1%	+14%	+6%

Northeast Louisville Public Library, Kentucky	29
Data & Flooring

Outlook

Cube Smart Storage, Florida, USA

Insulated Panels

• Accurate predictions are impossible at present, albeit certain that general confidence will have suffered and investment decisions will be curtailed through 2021
• Conversely data, technology, online logistics and next generation automotive manufacturers could be buoyed up as consumer behaviour evolves with Kingspan well positioned for this change
• Policy makers worldwide are becoming more purposeful about a move towards lower emissions, and more efficient buildings will be central to this
• Despite near-term stimulus across the globe we expect the general economic environment to be tougher than pre-crisis
• Kingspan remains well poised, agile and funded to play our part in whatever situation unfolds

30

Driving Penetration Growth

INSULATED PANELS

100%

UK

100%

Germany

20% North America

80%

60%

40%

20%

0%

2005

2019

2025p

INSULATION BOARDS

50%

UK

40%

30%

20%

10%

0%

2005

2019

2025p

80%

60%

40%

20%

0%

20%

15%

10%

5%

0%

15%

10%

5%

0%

2005

2019

2025p

Western Europe		14%
	12%
		10%
		8%
		6%
		4%
		2%
2005	2019	0%
2025p

2005

2019

2025p

The Nordics

2005

2019

2025p

Aim to Change Building Practices / Material Choices

31

www.kingspan.com

Dublin Road
Kingscourt
Co Cavan
Ireland	Tel: [phone]
A82 XY31	Email: [e-mail]