The construction sector was dramatically impacted in 2020 as a result of the global downturn and the effects from the COVID-19 pandemic, experiencing a slump of 5.1%. Yet, as we ushered in 2021, there appeared to be light at the end of the tunnel. The recovery of the European construction industry was more rapid than initially anticipated and according to the latest estimates, construction volume in the Euroconstruct area, which includes Ireland, is set to grow by 3.8% in 2021.
With economic activity across Europe rebounding, an Irish heavyweight in the building materials business is riding high. From a small family business to a large multinational, Kingspan Group has a long and diverse history which is deeply rooted in the communities in which its plants are developed. Known for its high-performance insulation and building envelopes, the Group challenges traditional building methods and builds sustainable buildings, helping its customers far and wide tackle climate change. As it embraces new technologies, business for the Kingspan Group is bound to flourish.
A brief history of Kingspan Group
In the early 1960s when the Irish billionaire businessman Eugene Murtagh was just a fitter, he established a small engineering and contracting business and began manufacturing agricultural trailers right behind his family’s bar in Kingscourt, Cavan. In the 1970s, the Kingscourt Construction Group was officially formed, while further expansion set in motion the importation of cold roll and pre-engineering building components that drove the company to incorporate what is known today as Kingspan Panels.
By 1980, the company branched out, embracing insulation and creating Shelter Insulations Ltd after it purchased the technology to manufacture thermal insulation boards for flat roof and wall lining. In fact, much of Kingspan’s growth has come by way of acquisitions and global expansion. From purchasing Coolag which further strengthened its insulation division to acquiring a panel manufacturing facility in the Czech Republic to focus on developing markets in Central Europe, Kingspan has been big on acquisitions. More recently, the company acquired the Polish-based manufacturer of insulated panels and boards Balex Metal, Brazilian insulated panel company Isoeste and Group Bacacier SAS, which has helped to further strengthen its position in France.
Cementing its reputation for offering quality products, Kingspan Insulation products were used in the construction of the London 2012 Olympic and Paralympic Village, together with the aquatics centre, the Copper Box Arena, the Media Centre, as well as the Olympic Stadium in Stratford.
Operating under five primary divisions, namely Insulated Panels, Insulation, Light & Air, Water & Energy, as well as Data & Flooring, its insulated panels segment manufactures panels, structural framing and metal facades, whereas the insulation boards segment produces rigid insulation boards, building services insulation, as well as engineered timber systems. On the other hand, the light and air segment is engaged in manufacturing daylighting, smoke management and ventilation systems, while the water and energy sector produces energy and water solutions. Lastly, the data and flooring segment manufactures data centre storage solutions and raised access floors.
With innovation at the very core of the Group, in 2019, Kingspan inaugurated a new global innovation centre dubbed IKON. Modelled with cutting-edge IoT devices, Virtual Reality (VR), Autodesk Forge, BIM Data and a range of other features, IKON serves as both a state-of-the-art place of research and a living research project in itself.
Today, Kingspan has transformed into a global leader in high-performance insulation and building envelope solutions, with 150 manufacturing facilities and over 15,000 employees, while it trades in over 70 countries. And in line with its strategy of globalisation, the Group is extending its geographic footprint, with its eyes now focused on emerging economies and growth sectors like urbanisation and renovation.
When did Kingspan Group go public?
The company floated on the unlisted securities market in Dublin in 1989, offering its shares at a price of 76 pence apiece and with a market cap of £20 million. Then, in 1995 it joined the official lists of the Dublin and London stock exchanges.
A great dividend payer, the total dividend offered has consistently gone up, which means that long-term shareholders have enjoyed a steady income stream. The final dividend per share for 2020 was that of 20.6 cents, up 58% from 2019’s dividend payment.
Is Kingspan Group a buy?
Following the 2017 Grenfell Tower fire in London, Kingspan claimed that it had no knowledge that its insulation boards were used in the building’s cladding system. The inquiry that ensued following the tragedy raise questions about the Group’s approach to safety and corporate culture. As a result, investors scrambled to sell shares worth hundreds of millions of pounds, while investment management firm Baillie Gifford, which was once Kingspan’s largest shareholder, sold an estimated £300 million worth of stock in a series of trades executed between February and March of 2021.
In February, Kingspan said that it was overhauling it insulation board business in the UK after the disaster, while it has repeatedly apologised for what it has said were shortcomings in employee conduct by its UK arm, which supplied the insulation board used on the tower block. Since then, the stock has recovered phenomenally, touching an all-time high of €85 on July 13, 2021. The company’s financial performance in 2020 was also robust, despite a reduction in activity marked in April and May, which was eventually offset thanks to a strong recovery towards the end of the year. Total revenue for 2020 amounted to €4.6 billion, while trading profit was up by 2% to €508.2 million. Meanwhile, its EPS (earnings per share) was also up 1% to 206.2 cents. Reflecting the role Kingspan’s products play when it comes to reducing carbon emissions over a building’s lifetime, the stellar performance is also driving demand by consumers.
What‘s more, the Group has had a strong first quarter both in terms of sales and order intake. According to Kingspan, Group sales amounted to €1.28 billion for the three-month period ending March 31, 24% ahead of the previous year, with mainland Europe being the strongest market in the first quarter. Germany, France and the Benelux were all notably positive, while the company saw an encouraging start to the year in Latin America. On the other hand, order intake in North America also boomed, whereas in the UK, business has been strong so far with buoyant sales and order intake activity.
And the momentum that was reported in April for the first quarter has continued into the second quarter. The company is expecting sales in the first half of 2021 to be in the region of €2.9 billion and trading profit of approximately €315 million. The trading update announced by Kingspan on June 22 has gotten investors excited. Brokers have greeted Kingspan’s trading update with a wave of forecast upgrades as the company’s buoyant sales point to a big rebound in European construction. Several investment banks that cover the Cavan-based building materials company raised their profit forecasts or price targets on the stock. For instance, Bank of America increased its price target from €85 to €90 expressing its support for Kingspan’s ability to navigate the current high-cost inflation and low raw materials availability environment.
What’s next for Kingspan Group?
The International Energy Agency (IEA) estimates that the buildings and construction sectors account for more than a third of global energy consumption and almost two-fifths of carbon emissions. As more countries target net zero emissions, Kingspan’s insulation products and building envelope solutions offer a way to reduce the energy usage of both existing and new buildings.
In fact, the Group is known for being dedicated to buildings that deliver more energy savings along with superior lifetime performance and value, while as a leader in sustainable business, it has pledged to take the lead in combating climate change through various collaborations with other stakeholders and several initiatives. Launched in 2019, its ambitious 10-year Planet Passionate sustainability programme will see the Group tackle important global issues like climate change, circularity and protection of our natural world.
In order to deliver on this promise, the company has been investing in its ongoing product development and innovation. As part of the company’s efforts to drive its green transformation, Kingspan acquired Logstor, Europe’s leading manufacturer of pre-insulated pipes for sustainable and energy-efficient distribution systems. The acquisition complements the company’s core building insulation business in a sector that is expected to see strong growth. Furthermore, in May of 2021, it partnered with EVBOX Group, a leading provider of intelligent electric vehicle (EV) charging solutions with the aim to establish a zero-emission company fleet by 2025.
As the recovery of the European construction industry appears to be more rapid than initially expected with much of the losses experienced during the pandemic set to be recovered this year, demand for products and services from insulator makers just like Kingspan is expected to boom and this certainly bodes well for the Group.
How to invest in Kingspan Group (KGP) stock with Moneybase Invest
Ready to buy a share in Kingspan Group (KGP)? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
To do so:
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- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. KGP has been added to your portfolio.
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