The directors have pleasure in presenting their report with the audited financial statements for the year ended 31 December 2009.
Principal activities
Kingspan Group is a leading manufacturer of an integrated range of energy conserving building solutions. Kingspan Group plc is a holding company for the Group’s subsidiaries and other entities. The Group's principal activities comprise the manufacture of insulated panels, rigid insulation boards, architectural facades, raised access floors, engineered timber systems, solar thermal hot water systems and fuel & water storage solutions.
Results and dividends
Group turnover was €1,125.5mn (2008: €1,672.7mn), operating profit was €62.7mn (2008: €157.1mn before non-trading items of €75.1mn), and earnings per share were 28.7cent (2008: 26.7cent).
No dividend was paid during the year, and the directors are not recommending payment of a final dividend for the year ended 31 December 2009 (2008: 8.0 cent). Resumption of dividend payments will be considered by the Board in 2010 in light of debt reduction achieved in 2009, ongoing cash flow and operating performance reaching expectations.
Some key financial performance indicators are set out in the Financial Review, and the financial statements for the year ended 31 December 2009 are set out in detail in this Annual Report. Other non-financial performance indicators relating to waste management and employee health and safety are set out in the Corporate Social Responsibility Statement in this Annual Report.
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Business review
The Chief Executive’s Review and the Financial Review set out management’s review of the Group’s business during 2009. The key points include:
- A solid performance in 2009 from the overall Group, despite hostile economic conditions.
- Excellent progress was made in debt reduction, with net debt at year-end of €164.3mn, down from €299.6mn. Operating working capital was €99mn lower than a year earlier.
- Insulation Boards total sales volumes were down 23%, but with growing sales and penetration in Western Europe.
- Insulated Panel sales volumes in the UK, Ireland and Western Europe were down 33%, with particular weakness in the speculative development segment.
- Insulated Panel sales volumes in North America were down 23%. Architectural façade products remained strong and the former Metecno business performed robustly in the circumstances.
- Central & Eastern Europe panel volumes were also weaker, down 25%. A substantial reorganisation of this unit was implemented, which will be completed in H1 2010.
- Access Floors sales volumes were down 31% globally, however, margins improved from 14% to 17.5%.
- Across the Group, fixed cost reductions in the year of €50mn brought the total since peak to €66mn. This process is now largely complete.
- Total investment in the year was €48.1mn. The main projects were the completion of a new Kooltherm® phenolic insulation facility in the Netherlands, and the completion of a new solar thermal collector plant in Northern Ireland. The Group also entered the Australian thermal insulation market with the acquisition of AIR-CELL Innovations in December, complementing Kingspan’s already growing Insulated Panel business in that region.
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Research & development
The Group continues to place considerable emphasis on research and development of existing and new products and on the improvement of the production process. Kingspan will continue to invest in research & development through 2010, with particular emphasis on renewable energy and high performing insulation products. Further details of research & development are contained in the Chief Executive’s Review.
Corporate governance
The directors are committed to achieving the highest standards of corporate governance and a detailed statement describing how the principles of good governance set out in the Combined Code on Corporate Governance have been applied by the Company is included in this Annual Report.
Corporate social responsibility
Kingspan recognises the importance of conducting its business in a socially responsible manner. Its Corporate Social Responsibility Statement is available on the Group’s website www.kingspan.com in the section “Our Responsibilities”, with some further details included in this Annual Report.
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Share capital
The Company’s total authorised share capital comprises 220,000,000 ordinary shares of €0.13 each. At the 31 December 2009 the Company’s total issued share capital comprised 171,503,951 ordinary shares of €0.13 each, of which the Company held 5,237,017 treasury shares.
All ordinary shares rank pari passu, and the rights attaching to the ordinary shares (including as to voting and transfer) are as set out in the Company’s articles of association (“the Articles”). There are no unusual restrictions on voting rights except in circumstances where a Specified Event (as defined in the Articles) shall have occurred and the directors have served a restriction notice on the shareholder. The directors may decline to register any transfer of a partly-paid share to a person of whom they do not approve. The directors may also decline to register any transfer of a share on which the Company has a lien. Subject to the Articles, any member may transfer all or any of his uncertificated shares in the manner provided for in the CREST Regulations. The directors may refuse to register a transfer of uncertificated shares only in such circumstances as may be permitted or required by the CREST Regulations.
The directors are currently authorised to issue number of shares equal to the authorised but as yet unissued share capital of the Company under an authority that was conferred on them at the Annual General Meeting held on 14 May 2009.
The directors are also authorised to disapply the strict statutory pre-emption provisions relating to the issue of new equity for cash, provided that the disapplication is limited to the allotment of equity securities in connection with any rights issue or any open offer to shareholders, or the allotment of shares not exceeding in aggregate 5% of the nominal value of the Company's issued share capital. Both these authorities expire on 13 May 2010 unless renewed and resolutions to that effect are being proposed at the Annual General Meeting to be held on 13 May 2010.
At the Annual General Meeting held on 14 May 2009, shareholders passed a resolution giving the Company, or any of its subsidiaries, the authority to purchase up to 10% of its own shares, subject to the restrictions set out in that resolution. At the Annual General Meeting to be held on 13 May 2010, shareholders are being asked to renew this authority. The directors do not have any current intention to exercise the power to purchase the Company's own shares.
The Company’s Standard Share Option Scheme, Long Term Incentive Plan and Performance Share Plan, each contain change of control provisions which allow for the acceleration of the exercise of share options/awards in the event of a change of control of the Company.
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Directors and secretary
The directors and secretary of the Company at the date of this report are as shown in this Annual Report. Danny Kitchen was appointed as a non-executive director on the 1 March 2009. Brian Joyce and Eoin McCarthy both retired as non-executive directors, on the 30 January 2009 and the 14 May 2009 respectively, and Louis Eperjesi resigned as an executive director on the 31 July 2009.
The Directors have been notified of the following substantial shareholdings in the Company:
DIRECTORS’ & SECRETARY’S INTERESTS IN SHARES
|
31 December 2009 |
31 December 2008 |
| Eugene Murtagh |
35,120,000 |
35,120,000 |
| Gene M. Murtagh |
1,128,103 |
1,128,103 |
| Brendan Murtagh |
4,626,629 |
5,126,629 |
| Dermot Mulvihill |
812,961 |
812,961 |
| Russell Shiels |
353,307 |
353,307 |
| Peter Wilson |
217,656 |
217,656 |
| Noel Crowe |
10,000 |
10,000 |
| Tony McArdle |
30,000 |
20,000 |
| Helen Kirkpatrick |
17,511 |
9,234 |
| Brian Hill |
11,000 |
11,000 |
| David Byrne |
3,000 |
3,000 |
| Danny Kitchen |
3,000 |
- |
| Lorcan Dowd |
2,672 |
2,672 |
|
42,335,839 |
42,824,562 |
As at the 12 March 2010 the Company had been notified of the following substantial holdings in its issued share capital, in accordance with the Disclosure and Transparency Rules (DTR5):
Notification
Date |
Institution |
Shares held |
% |
| 11.03.10 |
Governance for Owners LLP |
9,695,989 |
5.80 |
| 06.10.09 |
Generation Investment Management LLP |
19,975,011 |
12.03 |
| 28.07.09 |
Investec Asset Management Limited |
6,865,931 |
4.01 |
| 06.05.09 |
Invesco Limited |
11,558,276 |
6.96 |
Directors’ & secretary’s interests in shares
The beneficial interests of the directors and secretary and their spouses and minor children in the shares of the Company at the end of the financial year are as shown in the table above.
Details of the directors’ and secretary’s share options are set out in the report of the Remuneration Committee. Since the 31 December 2009 Brendan Murtagh disposed of 4,493,750 shares, and Peter Wilson exercised 14,482 options, apart from which there have been no other changes in the directors’ and secretary’s interests.
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Accounting records
The directors are responsible for ensuring that proper books and accounting records, as outlined in Section 202 of the Companies Act 1990, are kept by the Group. The directors have appointed suitable accounting personnel, including a professionally qualified Finance Director, in order to ensure that those requirements are complied with. The books and accounting records of the Group are maintained at the principal executive offices located at Dublin Road, Kingscourt, Co. Cavan.
Conflicts of interest
Save as set out in this Annual Report, none of the directors has any direct or indirect interest in any contract or arrangement subsisting at the date hereof which is significant in relation to the business of the Company or any of its subsidiaries nor in the share capital of the Company or any of its subsidiaries.
Political donations
Neither the Company nor any of its subsidiaries have made any political donations in the year which would be required to be disclosed under the Electoral Act 1997.
Subsidiary companies
The Group operates from 42 manufacturing sites, and bases in 32 countries worldwide.
The Company’s principal subsidiary undertakings at 31 December 2009, country of incorporation and nature of business are listed in Note 42 of the financial statements.
Outlook
The Board fully endorses the outlook ("Looking Ahead") expressed by the Chief Executive in his Review.
Significant events since year end
There have been no significant events since the year end.
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Principal risks and uncertainties
The principal risks and uncertainties facing the Group’s business are set out in the Business Risk Analysis, as well as being addressed in the Chief Executive’s Review and the Financial Review. In particular the principal risks include:
- Competitive pressure affecting margin and profitability;
- Deterioration in market conditions resulting in weakening of demand;
- Product failure in the event of a breach in the quality controls in the manufacturing process.
Going concern
The directors have reviewed budgets and projected cash flows for a period of not less than 12 months from the date of this Annual Report, and considered other relevant information including the economic conditions currently affecting the building environment generally. On the basis of this review, the directors have concluded that there are no material uncertainties that may cast significant doubt about the Company’s and the Group’s ability to continue as a going concern. For this reason, the directors consider it appropriate to adopt the going concern basis in preparing the financial statements.
Auditors
In accordance with Section 160(2) of the Companies Act, 1963 the auditors, Grant Thornton, Registered Auditors, will continue in office.
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Annual General Meeting
The Annual General Meeting of the Company will be held at The Herbert Park Hotel, Ballsbridge, Dublin 4 on Thursday 13 May 2010 at 11.00 a.m. The Notice of the Meeting is available on the Company’s website www.kingspan.com, and Proxy Forms are being sent to all shareholders by post.
Shareholders registered in the register of members of the Company as at 6.00 pm on Tuesday 11 May 2010 shall be entitled to attend and vote at the Annual General Meeting in respect of the number of shares registered in their names at the time. A shareholder may ask any questions relating to the business being dealt with at the Annual General Meeting. A member entitled to attend, speak and vote at the above meeting is entitled to appoint a proxy to attend, speak and vote on his/her behalf. The ordinary resolutions require a simple majority of votes cast by shareholders voting in person or by proxy to be passed. The special resolutions require a majority of not less than 75% of votes cast by those who vote either in person or by proxy to be passed. A shareholder or a group of shareholders holding 3% of the issued share capital have a right to table a draft resolution to put an item on the agenda of the meeting subject to any contrary provisions in company law.
Re-election of directors
Noel Crowe, Tony McArdle and Helen Kirkpatrick each retire by rotation, and offer themselves for re-election at the Annual General Meeting.
Eugene Murtagh and Danny Kitchen, non-executive directors who have each served on the Board for a period greater than nine years, also offer themselves for re-election.
The Chairman, having regard to the performance and contribution of all of the above directors during the year, is of the view that each of the above directors continues to be effective and committed to the role, and recommends their re-election.
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Special Business at the Annual General Meeting
Shareholders are being asked to renew, until the Annual General Meeting in 2011, the authority to allot any unissued share capital of the Company. No issue of shares will be made which could effectively alter control of the Company without prior approval of the shareholders in general meeting. At present the directors do not intend to issue any shares other than in connection with the Group’s previously approved share option schemes.
Shareholders are being asked to renew, until the Annual General Meeting in 2011, the power of the directors to disapply the statutory pre-emption provisions applying to ordinary shares in the event of a rights issue or in any other issue for cash up to an aggregate of 5% of the nominal value of the Company’s issued ordinary share capital. Shareholders are also being asked to approve, until the Annual General Meeting in 2011, the authority for the Company, or any of its subsidiaries, to purchase up to 10% of the Company’s own shares and to reissue such shares purchased by it and not cancelled. The directors would only exercise the power to purchase the Company’s own shares at price levels which they considered to be in the best interests of the shareholders generally, after taking account of the Company’s overall financial position.
The minimum price which may be paid for a purchase of the Company’s own shares shall be the nominal value of the ordinary shares, and the maximum price which may be paid shall be 105% of the then average market price of the ordinary shares. Shareholders are being asked to approve that, where the Company’s shares have been repurchased, (such shares being known as Treasury Shares), these shares may be sold off-market at a maximum price of 120% of the Appropriate Price (as defined in the resolution), and a minimum price of 95% of the Appropriate Price.
Shareholders are being asked to renew, until the Annual General Meeting in 2011, the power of the directors to call a general meeting (other than the Annual General Meeting or a meeting to consider a special resolution requiring a 75% majority vote) on 14 days’ notice. The directors consider that it is in the interests of the Company to retain this flexibility should circumstances arise which would require it.
Finally, the last item of special business concerns a number of proposed amendments to the articles of association of the Company, to reflect more comprehensively than has been done to date certain provisions of the Companies Acts (as amended by the Shareholder Rights (Directive 2007/36/EC) Regulations 2009) relating to proxies, general meetings and electronic communications. The proposed amendments are necessary for the management and good order of electronic communications between the Company and shareholders. Full details of the proposed amendments to the Company’s articles of association are set out in the Notice of the Annual General Meeting.
SHAREHOLDER ANALYSIS AS AT 31 DECEMBER 2009
Shareholding
range |
Number
of accounts |
% of
total |
Number of
shares held |
%
of total |
| 1 - 1,000 |
3,635 |
57.7 |
1,816,71 |
1.05 |
| 1,001 - 10,000 |
2,271 |
36.05 |
6,780,196 |
3.98 |
| 10,001 - 100,000 |
278 |
4.43 |
7,676,642 |
4.47 |
| 100,001 - 1,000,000 |
83 |
1.32 |
22,481,695 |
13.10 |
| Over 1,000,000 |
32 |
0.5 |
132,749,147 |
77.40 |
|
6,299 |
100.00 |
171,503,951 |
100.00 |
On behalf of the Board
Eugene Murtagh, Chairman
Gene M Murtagh, Chief Executive