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Kingspan Group plc
—
Annual Report
& Financial
Statements
2018
Innovation
Kingscourt, Ireland
—
IKON™ will be Kingspan’s global
innovation hub and is expected to
open its doors mid-2019. The hub
will be the centre of excellence
for collaborative innovation in
Kingspan, across divisions and
across geographic regions.
Our research and development will
concentrate on using advanced
materials to create solutions
across the themes of ThermalSafe,
FireSafe, SmokeSafe, WeatherSafe
and FibreSafe; developing ways
to increase recycled content and
create a more circular product set,
for example our ambitious target
to include more than 500 million
recycled PET bottles in our high-
performance insulation by 2023;
and the ongoing digitalisation
of the construction industry
using technologies such as data
information, BIM, augmented reality
and virtual reality.
Stakeholders will be invited to
come to IKON™ and feedback into
the innovations which are most
relevant to them, giving them the
opportunity to shape their ongoing
partnership with Kingspan.
N
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K
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Kingspan
Locations
Africa
Egypt
Morocco
Asia
India
Indonesia
Pakistan
Singapore
Thailand
Vietnam
Australasia
Australia
New Zealand
Europe
Austria
Azerbaijan
Belgium
Bosnia
Croatia
Czech Republic
Denmark
Estonia
Finland
France
Germany
Hungary
Ireland
Kazakhstan
Latvia
Lithuania
Netherlands
Northern Ireland
Norway
Poland
Romania
Russia
Serbia
Slovakia
Slovenia
Spain
Sweden
Switzerland
United Kingdom
Ukraine
Middle East
Iran
Qatar
Saudi Arabia
Turkey
UAE
Americas
Brazil
Canada
Chile
Colombia
Costa Rica
Mexico
Panama
USA
—
—
75%
75%
Net Zero Energy
Net Zero Energy
achieved
achieved
Chairman's
Statement
Page
6
—
Approaching
2,000 external
fire tests
Financial
Review
Page
26
Chief
Executive’s
Review
Page
16
2
2
2
2
—
Capital
investment
of over
€600 million
Sustainability
Report
Page
36
Financial
Statements
Page
88
2
2
2
2
2
2
2
2
4
4
3
3
5
5
8
8
4
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2
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15
15
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3
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3
10
10
11
11
8
8
9
9
2
2
—
14,000+
Employees
—
129
Manufacturing
sites
2
2
Sales
Manufacturing
2
2
2
2
3
3
4 — 47
Business & Strategic Report
Chairman’s Statement 6
Business Model & Strategy 8
Chief Executive’s Review 16
Financial Review 26
Risk & Risk Management 32
Sustainability Report 36
88 — 139
Financial Statements
Independent Auditor’s Report 92
Financial Statements 95
Notes to the Financial Statements 102
48 — 87
140 — 148
Directors' Report
Chairman’s Introduction 50
The Board 52
Report of the Directors 54
Corporate Governance Statement 62
Report of the Remuneration Committee 70
Report of the Audit Committee 82
Other Information
Alternative Performance Measures 140
Shareholder Information 142
Principal Subsidiary Undertakings 144
Group Five Year Summary 148
— 256 million plastic bottles recycled Summary Financials
—
2
Revenue
€4.4bn
+19%
2017: €3.7bn
2
2
™
2
EBITDA1
Trading Profit2
Trading Margin
Profit After Tax
€521.2m
+18%
€445.2m
+18%
2017: €441.7m
2017: €377.5m
10.2%
-10bps
2017: 10.3%
€335.8m
+17%
2017: €285.9m
2
EPS
184.0c
+16%
2017: 159.0c
3
3
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1 Earnings before interest, tax,
depreciation, amortisation of
intangibles and non trading items.
2 Operating profit before amortisation
of intangibles and non trading items.
US
Laurel Branch Library
Insulated Panels:
Benchmark Designwall 2000;
and Designwall R Series
Fire Rating: FM 4880
4
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Canada
Brian Glancy
Toronto, Canada
—
Brian has been with Kingspan
since 2006, he was a General
Manager as well as a Director of
R&D in the US. Alongside this,
Brian founded and operated an
innovation lab for the North
American business, before taking
up his current position as Head of
BIM Strategy in 2018.
The built environment impacts us
all; as a business we are embracing
digital as one potential nucleus for
transformation of the construction
industry. We are leveraging digital
technologies to overcome both
current and future challenges
and delivering strategic benefits
that answer the big questions to
ensure a sustainable future. For me
personally, this is a very exciting
and progressive field and at
Kingspan, it brings a fast-
paced, exciting and challenging
environment with a distinct
focus on the future.
The construction sector is
traditionally slow to adopt
new technologies but with the
dawn of digitalisation, stakeholder
expectations are changing.
Building Information Modelling (BIM)
will enable better collaboration
between everyone involved in a
project and will be a dynamic
platform for Kingspan to showcase
the performance attributes of
our products.
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7
Chairman’s Statement
—
2018 was a year of new milestones, new frontiers
and new developments for Kingspan. For the
first time ever Kingspan’s revenues surpassed the
€4 billion mark, with total sales of €4.4bn, and
trading profits reaching a record €445m.
Germany
Insulated Panels:
QuadCore™ AWP;
KS1000 RW
Fire Rating:
Euroclass B-s1, d0 to EN 13501-1
Our first full year in Brazil and
Colombia, followed by further
investment during the year in
Panama, delivered a very encouraging
performance for the LATAM region as
a whole. At the same time Kingspan
advanced its position in southern
Europe, through our acquisition
of the Synthesia Group. We also
extended the company’s footprint
into India through an Insulated
Panel manufacturing partnership
with Jindal Mectec. These are all
exciting new markets for Kingspan,
with considerable long-term growth
potential. Organic investment in
new frontiers also continued, with
Kingspan currently constructing its
first Kooltherm® manufacturing plant
in the Nordics, to be commissioned
later this year. Each of these
investments will create strong
platforms for growth in these
new regions.
At the same time Kingspan
has continued its investment in
research & development to bring
to the market new and proprietary
technologies to further differentiate
from our competitors. In 2018,
Kingspan started development of
our first fibre free 'A Core' insulation
which is planned for launch next year.
Additionally, during the year Kingspan
QuadCore™ insulated panel systems
achieved major milestones in fire
resistance performance, including
the achievement of up to 1 hour
fire insulation and up to 4 hours fire
integrity in our architectural wall
panel range.
In 2018, Kingspan also launched its
new digital strategy. This exciting
plan is focused on the digitalisation
of our business and of the broader
construction industry, using world
leading technologies to transform the
design, construction and performance
of intelligent buildings. Through
investment in technology we can
help drive cost-saving collaboration
between partners on construction
projects such as architects, engineers,
contractors, and owners.
Notwithstanding the rapid expansion
of our business, both organically
and through acquisition, Kingspan’s
commitment to reducing our carbon
emissions and attaining our goal of
becoming a Net Zero Energy business
by 2020, remains as strong as ever.
In 2018 renewable energy accounted
for 75% of our total energy usage.
Management and employees
During the year the Board had the
opportunity to visit several of our
manufacturing facilities, and we
were delighted to meet the local
staff and management teams,
and really appreciated seeing their
commitment and enthusiasm for
the Kingspan vision.
On behalf of the Board, I want to
thank all of Kingspan's management
and employees for their contribution
to our success in 2018.
Photo: Simon Wegener
Dividend
The Board is recommending a final
dividend of 30.0 cent per share,
which if approved at the Annual
General Meeting, will give a total
dividend for the year of 42.0 cent,
an increase of 13.5% on prior year.
This continues the Board’s policy
of growing the shareholder
dividend in line with the Company’s
continued progression.
If approved, the final dividend will be
paid (subject to Irish withholding tax
rules) on 10 May 2019 to shareholders
on the register at close of business
on 29 March 2019.
details of which are set out in the
Directors’ Report of this Annual
Report. We also engage in open
dialogue with our major shareholders
on the Company’s strategic and
financial performance, as detailed
in the Financial Review in this
Annual Report.
During the year, we were delighted
to announce the appointment of
Jost Massenberg as a non-executive
director to the Board. Jost brings
more than 30 years’ experience in
European steel and manufacturing
industries, and I welcome his
addition to the Board.
Board governance and
composition
The Board carefully monitors and
manages risk across the business,
and espouses best practice
governance policies and procedures,
Following the conclusion of this
year’s Annual General Meeting
in May, Helen Kirkpatrick will be
retiring as a non-executive director
on the expiration of her term of
office. Helen has served as chair of
the audit committee, chair of the
remuneration committee, and as
senior independent director, and
on behalf of the Board, I would like
to thank Helen for the valuable
contribution she has made to the
Company during those years.
Looking ahead
Whilst acknowledging the challenges
and uncertainties that lie ahead in
some of our more mature markets,
I am confident that Kingspan’s
continued strategy of building on
our existing leadership positions by
investing in new geographies and
new technologies, will continue to
deliver improved shareholder returns
into the future.
Eugene Murtagh
Chairman
22 February 2019
Kingspan Group plc — Annual Report & Financial Statements 2018Business & Strategic Report — Chairman’s Statement 8
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Business Model & Strategy
—
Kingspan is the global leader in high performance insulation and
building envelopes. Through our relentless development of innovative
and proprietary technology we have created a portfolio of products
which help our customers reduce energy costs, reduce construction
time, increase usable space, increase returns, enhance architectural
design and all with a superior service offering.
Critically, through the differentiated
thermal performance of our
innovative solutions, we help design
teams, architects and ultimately our
customers to make a difference in
tackling climate change. Building
emissions are one of the highest
contributors to greenhouse gas
emissions, therefore the sector has
a major role to play in addressing
climate change.
Founded in Kingscourt, Co Cavan
in Ireland in 1965, the Group has
expanded into a global business
operating in over 70 countries,
employing more than 14,000 people.
Kingspan manufactures a suite of
complementary building envelope
solutions for both the new build
and refurbishment markets.
The Group manages its business
through 5 operating divisions:
1. Insulated Panels
A global leader in the design,
development and manufacture of
products and solutions for advanced
building envelopes. Providing
thermally efficient and airtight
insulated panel building envelopes,
and world-class customer and
technical support in sustainable
building design and realisation. All of
our products and systems are backed
by extensive testing and guarantees,
and by 50 years of experience.
2. Insulation Boards
Manufacturing insulation boards,
pipe insulation and engineered
timber systems. A wide product
range suitable for a variety of
applications in the domestic,
non-domestic, new-build and
refurbishment sectors.
3. Light & Air
Initiated in 2016, Kingspan
Light & Air is now established
as a global leader providing a
full suite of daylighting and
energy efficient lighting, as well
as natural ventilation and smoke
management solutions, which
complement Kingspan’s existing
building envelope technologies.
4. Data & Flooring Technology
The world’s largest supplier of raised
access flooring, providing the most
cost effective way of creating flexible
space and convenient distribution
of building services in a range of
high-end architectural finishes. Our
wide range of custom manufactured
data centre airflow systems, including
structural ceilings, airflow panels
and containment, work together to
maximise datacentre performance.
5. Water & Energy
Providing trusted market-leading
solutions for rainwater harvesting
wastewater management, hot
water systems, environmental
fuel storage and smart monitoring
for all types of building projects.
Below:
France, Paris, La Défense Arena
Insulated Panels: JI Grégale 300
Fire Rating: Euroclass A1
Rest of World
Data & Flooring Technology
7%
Mainland Europe
48%
Geography
—
4%
Light & Air
7%
Insulation Boards
20%
Products
—
Water & Energy
5%
Insulated Panels
64%
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Ireland
4%
UK
21%
Americas
20%
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Business Model & Strategy
Strategic Pillars
—
Strategic Goals
—
—
—
To be the leader in high
performance insulation
globally with proprietary and
differentiating technologies.
To achieve greater geographic
balance, primarily focusing on the
Americas, Continental Europe and
appropriate developing markets.
—
—
To contribute to the effort in
tackling climate change by
continuously improving the
attributes of our high performance
insulation, which address the
impact of building emissions.
To be the world’s leading
provider of low energy
building envelopes –
Insulate and Generate.
To deliver 20% Return
on Investment.
—
I
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Differentiation from
competitors driven by
superior innovation:
→ Construction on “IKON™” is
well underway at Kingspan’s
Group headquarters in
Kingscourt, Ireland. IKON™
will be Kingspan's global
centre of excellence for
Research and Development
and we look forward to
updating you on the future
innovations it delivers.
→ The ongoing roll-out of
QuadCore™ during the year,
which is now available from
over half of our Insulated
Panel facilities worldwide.
→ The Kooltherm® 100 Series
was launched towards the
end of 2016, and work is
ongoing on developing a
Kooltherm® 200 Series.
→ The digitalisation of Kingspan,
designed to transform how
we do business and how our
specifiers and customers
interact with us over the
next three to five years.
I
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P
Increased penetration of
Kingspan’s product suite
underpinned by regulatory
changes and environmental
awareness:
→ Continued penetration
growth and conversion from
traditional insulation and
building methods has been
and will continue to be a core
driver of our success.
→ Ongoing revisions to key
EU legislation including
the Energy Performance of
Buildings Directive (EPBD)
continue to drive industry to
take action.
→ Through 2018 we continued
to drive the penetration
of Kingspan’s best in class
proprietary products,
QuadCore™ now represents
8% of Kingspan's Insulated
Panel global sales.
US
Entertainment and Sports Arena
Insulated Panels: Optimo
Fire Rating: FM 4880
I
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The continued evolution
of Kingspan’s geographic
footprint as we build market
leading positions globally:
→ In 2018 Kingspan closed a
number of acquisitions which
supplemented our geographic
spread. Synthesia Group
is our first manufacturing
presence in Southern Europe
and consists of Synthesia
International, Poliuretanos
and Huurre. In July we
finalised the acquisition of
Balex which supplemented
our presence in Central and
Eastern Europe.
→ Following the investment in
Isoeste in 2017, we announced
plans in 2018 to invest in
further capacity for the
Kingspan Isoeste business
in Brazil.
→ In 2018 we announced
a partnership with
Jindal Mectec in India.
This is Kingspan’s first
manufacturing footprint
in the Indian market, an
economy with over 1.3 billion
people and significant
development plans.
I
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To drive sustainable practices
through our organisations with
programmes such as Net Zero
Energy and PET recycling.
In 2018 we achieved 75%
Net Zero Energy, a significant
increase on the 69% achieved
last year and we remain on
target to achieve 100% by 2020.
→ Kingspan is proud to
continue to support CDP.
In 2018 we achieved an
A- Climate Change rating
which puts us among the
top 400 companies in the
world in terms of leading on
environmental practices.
→ A wide range of projects
designed to improve the
energy efficiency of our
operations were implemented
on many sites, including the
implementation of Energy
Management Standard
ISO 50001.
→ 5.9% of our total energy
use was generated from
renewable sources on our
own manufacturing sites.
Business & Strategic Report — Chairman’s StatementKingspan Group plc — Annual Report & Financial Statements 2018
12
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Business Model & Strategy
2018 In a Nutshell
—
Data & Flooring Technology
4%
Water & Energy
5%
Other
15%
Energy Efficiency & Conversion
85%
Light & Air
7%
Insulation
Boards
20%
Ireland
4%
UK
21%
Americas
20%
Products
—
Insulated
Panels
64%
Drivers
—
Rest of World
7%
Office & Data
12%
Commercial & Industrial
70%
Geography
—
Mainland
Europe
48%
Residential
18%
Sector
—
Refurbishment
20%
New Build
80%
Via Distribution
30%
Direct
70%
End Market
—
et
Channel
—
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Opposite:
France, Sports Hall Plélo
Insulated Panels: JI 92-400;
Fire Rating: Euroclass A1
Revenue
€4.4bn
Applications
> Retail
> Distribution
> Leisure
> Accommodation
> Food
> Manufacturing
> Data Management
> Infrastructure
How we operate
How we create value
129
Global manufacturing facilities
14,000+
Employees
> Management controls
> Quality systems
> Responsible supply
chain partnerships
> Product innovation
and differentiation
> Excellent customer service
> Energy efficient sustainable
building envelope solutions
> We operate our businesses to
the highest standards
> We acquire excellent
new businesses
> We recycle capital to
provide the best return
> We maintain financial discipline
> We balance our portfolio of
businesses across product
and geography
Value created
EBITDA
Free cash
€521.2m
€308.4m
Trading Profit
Trading profit
ROCE
€445.2m
16.8%
€445.2m
EPS
184.0c
Dividend
42.0c
Kingspan Group plc — Annual Report & Financial Statements 2018
14
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Bianca Wong
Melbourne, Australia
—
Bianca came to Kingspan
through our graduate programme
in 2013. In 2015, Bianca became a
Divisional Sustainability Manager,
having previously worked in
our Insulated Panel Business
in Australia.
The built environment has a real
impact on climate change. I work
with teams across our business to
continually drive our sustainability
vision forward. Together we focus
on developing innovative low carbon
building solutions, minimising our
own environmental footprint and
actively supporting our stakeholders.
Bianca works closely with design
teams and architects, helping them
to design buildings which not only
fulfil the vision of the client on a
technical and aesthetic basis but
are also at the cutting edge in
terms of sustainability and energy
performance. Through her work on
our Net Zero Energy team, Bianca
has collaborated across divisions
and geographies, driving our own
sustainability agenda and being
a key contributor to driving our
Net Zero Energy performance. Our
Melbourne, Australia, facility is
vying to achieve a prestigious 5-star
Green Star energy rating. The first
manufacturing facility of its kind to
achieve the rating in Australia.
15
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Australia
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Chief Executive’s Review
—
During 2018 Kingspan generated record revenues of
almost €4.4bn, and EBITDA exceeded €500m for the
first time. Trading profit reached €445m, ahead by
18% over prior year, and EPS was up by 16% at 184.0
cent per share. In all, it was a positive outcome and
delivered in the face of unprecedented turbulence
in our raw material supply chain. Total investment
was €604m in the period, €472.3m of which was
on acquisition and €131.3m on internal capital
expenditure. Year-end net debt/EBITDA was 1.4x.
Netherlands
Amstel Tower
Insulation Boards:
Unidek SIPS
Fire Rating:
Euroclass B
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Financial Highlights:
Operational Highlights:
→ Light & Air sales approaching
→ Revenue up 19% to €4.4bn,
(pre-currency, up 22%).
→ Trading profit up 18% to
€445.2m, (pre-currency,
up 20%).
→ Free cashflow up 55%
to €308.4m.
→ Group trading margin of 10.2%,
a decrease of 10bps.
→ Basic EPS up 16% to 184.0 cent.
→ Final dividend per share of 30.0
cent. Total dividend for the year
up 13.5% to 42.0 cent.
→ Year-end net debt of €728.3m
(2017: €463.9m). Net debt to
EBITDA of 1.4x (2017: 1.05x).
→ ROCE of 16.8% (2017: 17.8%).
→ Insulated Panels sales growth
of 21%. Strong activity in the
Americas, a positive performance
in Continental Europe and a solid
UK outturn against a difficult
backdrop. Good contribution
from acquisitions in Europe
and Latin America.
→ Insulation Board sales growth
of 12% reflecting a positive
outturn in the Iberian acquisition,
ongoing advancement of
Kooltherm® and solid underlying
markets overall. New capacity
planned for the Nordic region
and the Middle East reflecting
ongoing conversion from
traditional materials.
€300m with improved margins
in Europe offsetting softer US
margin, strong order intake
overall in the US and a planned
new facility in France to service
Europe and the Middle East.
→ Water & Energy (formerly
Environmental) sales growth
of 13% with a new frontier
established in the Nordic region.
→ Data & Flooring Technology
(formerly Access Floors) sales
growth of 3% with strong sales
of data centre solutions
offsetting more sluggish
office activity.
Business Review
Momentum in activity generally
improved for us as the year evolved,
and with the notable exception of
the politically hamstrung UK, most
of our major markets ended the
year strongly with order banks well
positioned for the start of 2019.
The majority of Western Europe
performed robustly, North America
advanced well, as did Latin America.
Conversely, the UK eased back
considerably towards year-end
although it is relatively stable for
Kingspan despite the backdrop.
Strategy
Our strategic agenda is focused
on the four pillars of Innovation,
Globalisation, Penetration and
Planet Passionate. 2018 once
again delivered advancements
in all four areas:
→ Product Innovation and range
expansion is key to Kingspan. The
rollout of QuadCore™ has been
core to this agenda in recent
years and in 2018 8% of global
Insulated Panel sales contained
this proprietary technology.
2019 will see its launch as a
roof Insulation Board thereby
creating a clear differentiator in
this application. Development of
Kooltherm® 200 continues and
the fibre-free ‘A Core’ project
is progressing on plan and we
expect to launch our solution
during 2020. IKON™, our global
innovation hub is well under
construction at our home base
of Kingscourt in Ireland and is
scheduled to open around mid-
year. It will focus on delivering
the full spectrum of insulation
and building envelope solutions
that are ThermalSafe, FireSafe,
SmokeSafe, WeatherSafe and
FibreSafe.
→ Globalisation of Kingspan
remains at the heart of our
ongoing evolution. In late
2017 we further expanded our
manufacturing footprint by
investing in partnerships in Brazil
and Colombia. These acquisitions
firmly place Kingspan in a
market leading position across
Latin America, a new frontier for
Kingspan, with a strong platform
for further growth in the region.
→ Early in 2018 we acquired a
presence in Southern Europe
through the Synthesia Group,
consisting of three operating
businesses; Synthesia
International, Poliuretanos and
Huurre. Through its Huurre and
Poliuretanos businesses, the
Synthesia Group gives Kingspan
a leading position in both
Insulated Panels and Insulation
Boards on the Iberian Peninsula
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and strengthens our emerging
Insulated Panels presence in Latin
America. It also provides an
excellent technology platform for
blended chemical systems similar
to those used throughout the
wider Kingspan Group.
We also advanced our position
in Central Europe with the
acquisition in July 2018 of Balex
Metal, a Polish manufacturer of
Insulated Panels and Insulation
Boards. Balex has a strong
market presence locally and in
surrounding export markets.
It complements our existing
presence in the region and
brings with it two well invested
manufacturing facilities.
→ In July we invested in the
→ We are Planet Passionate
Kingspan Jindal business in India
opening the door to a longer
term conversion opportunity
in the region.
→ Penetration growth and
conversion from traditional
insulation and building
methods have been core drivers
of our success to date. As
energy consumption, energy
conservation, and energy sources
become increasingly important
challenges for the world,
demand should rise for product
technologies which address this
urgent agenda. Buildings consume
approximately 40% of global
energy and Kingspan’s solutions
are designed to dramatically
curtail the environmental
damage from building emissions.
at Kingspan. We are committed
to achieving 100% Net Zero
Energy by 2020, and stand alone
within our industry in having this
goal. Our product technology
provides designers, developers
and owners the means with
which to equally embrace a
lower energy future. Circularity
is becoming crucial, and our
products are reusable, recyclable
and increasingly comprise
recycled PET with a commitment
to more than doubling this source
within the coming five years.
We are developing initiatives to
harvest recycled raw materials
from both land and ocean.
2
Turnover
€2,823.1m
+21%(1)
2017: €2,328.5m
2
Trading Profit
€281.8m
+21%
2017: €233.3m
—
Trading Margin
10.0%
2017: 10.0%
Ireland
Pilz
Insulated Panels:
Evolution Axis
Evolution Recess
Fire Rating:
EN 13501-1 is B – s1, d0.
(1) Comprising underlying +6%,
currency -3% and acquisitions +18%
Insulated Panels
—
Mainland Europe
The Continental European region
performed well overall for our
Insulated Panels businesses. France in
particular had an excellent year, as
did the Netherlands. Germany and
Belgium delivered solid outcomes
and market penetration in the
Nordics advanced further as the
region increasingly adopts advanced
methods. Activity in Central Europe
was mixed and the focus on reviving
margins in this market resulted in a
strong operating outcome, further
bolstered by the addition of Balex
to the portfolio. Early in the year we
entered the Iberian market with the
acquisition of Synthesia which in
both the home and export markets
delivered an excellent first year’s
performance, and ahead of plan.
Americas
Volume, margin and profitability
all improved considerably in North
America during 2018 as penetration
for Insulated Panels continued
to grow, and as the steep cost
inflation experienced earlier in
the year was passed through to
market. The temperature controlled
environments segment performed
well and the adoption of our
insulated architectural facades range
continued to outpace traditional
construction methods across a wide
variety of building applications.
2018 was also our first full year of
operation in Latin America through
the Kingspan Isoeste partnership in
Brazil and PanelMET in Colombia.
Both businesses made significant
progress over the prior year and have
begun to deliver broader technical
and operational synergies. Across the
Americas in total, the business exited
the year with an order bank well
ahead of prior year.
UK
Sales volumes were strong towards
the end of the year bringing the
full year-on-year output broadly
in line with 2017. This was achieved
despite growing uncertainty and
a construction market backdrop
that weakened towards year-end.
Whilst the project pipeline is in
reasonable shape, the growing
deficit in confidence has resulted in
ongoing postponements. We expect
this situation to prevail until the
political and economic landscape
is more certain, and will focus our
efforts on accelerating QuadCore™
and Kingspan Façades growth to
help compensate for an anticipated
general contraction in building
activity.
Asia Pacific & Middle East
Having experienced a challenging
2017, the business in Australasia
regained momentum in 2018
with both the order bank and
specification pipeline well improved
by year-end. This bodes positively
for the first half of 2019. Meanwhile
in Turkey and the Middle East,
growth also resumed and a healthy
project pipeline should provide a
solid foundation from which to
advance long-term in the region.
During the year we also entered
India through the Kingspan Jindal
partnership which provides us with
two manufacturing facilities in this
relatively embryonic and exciting
new frontier.
Ireland
Not surprisingly, construction activity
in Ireland has expanded once again
and at a more digestible pace than
in the past. The non-residential
segment which this business unit
serves experienced a significant uplift
in 2018 and we would anticipate this
trend continuing into 2019.
Business & Strategic Report — Chief Executive's ReviewKingspan Group plc — Annual Report & Financial Statements 2018
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2
Turnover
€864.1m
+12%(1)
2017: €769.4m
2
Trading Profit
€105.1m
+15%
2017: €91.2m
2
Trading Margin
12.2%
+30bps
2017: 11.9%
Insulation Boards
—
UK
The business had a strong start to
2018 which was largely fuelled by
continuing penetration growth of
Kooltherm® coupled with the selling
price inflationary impact of rising
raw material costs. Since then, and
as indicated at half year, these prices
have reversed somewhat, leading
to corresponding deflation in the
price of our PIR based products. This
general trend, also experienced in
other markets, has resulted in PIR
regaining share from traditional
materials. More broadly in the UK
however, the political backdrop has
meant that demand for building
products has eased in recent months
and is likely to weaken further if this
uncertainty persists.
Mainland Europe
Having had a weak start to the year,
the demand for advanced insulation
in Mainland Europe improved
significantly in the second half of
the year. The scarcity of some raw
materials had hampered growth
earlier in the year. Activity in the
Netherlands was particularly strong
and our presence in the Nordics,
which is dominated by traditional
fibrous materials, continued to
advance in anticipation of our
upcoming Kooltherm® facility which
we expect to commission in the
fourth quarter of this year. Our first
year with the Synthesia Insulation
business in Spain, has been very
satisfactory at a time of gradual
recovery in the Iberian market. This
business has been further bolstered
by growth in exports as it delivers
its technologies across a broad
international base of end markets.
Americas
Again, following a slow start to
2018, our business in North America
improved as the year progressed. The
investment made in 2017 in a new
XPS line in Winchester Virginia is now
fully operational and as its capacity
becomes increasingly utilised our
focus will shift to assessing further
locations to establish a future
manufacturing presence. The
specification pipeline for Kooltherm®
has grown substantially, albeit from
a small base. Whilst this is currently
supported by supply from Europe it is
our intention in the medium term to
manufacture this technology locally
in the USA.
Asia Pacific & Middle East
This region has again delivered
strong growth for the division in
2018. The business is now providing
solutions to a broader set of
applications and is supported by
both the new PIR line installed earlier
in the year, and a new phenolic
board plant. The latter will be aimed
at servicing the increasing demand
for advanced insulation in HVAC
applications in the UAE and beyond.
Ireland
The revenue growth experienced
during the first half continued
through the remainder of the year,
largely driven by Kooltherm® and
strong PIR pricing, although the
latter eased somewhat towards
year-end. Raw material deflation
has led to some price erosion of PIR
which we anticipate will stabilise in
the near-term.
(1) Comprising underlying +2%,
currency -2% and acquisitions +12%.
UK
University of Nottingham
Insulation Boards:
Kooltherm Pipe Insulation,
ThermaDuct Insulation
Fire Rating:
Kooltherm: Euroclass BL,s1,d0, FM Approved Class 4924
ThermaDuct: Class 1, BS 476–7: 1997
Business & Strategic Report — Chief Executive's ReviewKingspan Group plc — Annual Report & Financial Statements 2018 22
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Water & Energy
(formerly Environmental)
—
Underlying sales revenue was
relatively stable during 2018. Margins
were affected by costs incurred
on the exit from micro wind and
solar thermal activities and also
by acquisition expenses related to
the Norwegian investment. The
UK weakened across most product
segments in the second half, Ireland
performed well, as did much of
Mainland Europe. Integration of
the VPI acquisition in the Nordics
is progressing and provides a new
growth frontier in the waste water
management category which we
expect will feature prominently in
the division’s future. In Australia, the
rainwater harvesting business has
performed very strongly in recent
years, particularly in the residential
segment in New South Wales. With
this sector easing back, we expect
demand for rainwater systems in
that region to moderate but aim
to compensate for this with a
wider product offering and growth
initiatives in other states.
(1) Comprising underlying +3%,
currency impact -3% and
acquisitions +13%
Below: UK
Harry Potter Studios
Water & Energy:
Klargester fuel and soil separator
2
Turnover
€202.9m
+13%(1)
2017: €179.8m
™
Trading Profit
€14.2m
-12%
2017: €16.2m
™
Trading Margin
7.0%
-200bps
2017:9.0%
Light & Air
—
Continental Europe, particularly
Germany, performed well and has
continued to do so into the early
part of 2019. The Benelux was a
little more subdued as the project
pipeline was lower than in recent
years, although this picture has
improved into early 2019. Southern
Europe grew marginally and the
relocation of this business into a
state-of-the-art manufacturing
facility in Lyon, France will provide
capacity for growth, and play a key
role in supporting the substantial
daylighting requirement across the
Middle East.
In North America the specification
bank for the high-end UniQuad®
wall-lighting system has grown
considerably during the year. Order
intake outpaced dispatches during
the year and this augurs well for
2019. In contrast to this, more
generic roof-lighting systems have
become increasingly competitive
resulting in an element of margin
pressure. This pattern is expected
to improve during the current year
and overtime the integrated sales
effort with our insulated panels
business is expected to deliver
meaningful sales leverage.
(1) Comprising underlying +7%,
currency -1% and acquisitions +37%.
Above: Middle East
Ali Bin Ali
Light & Air: ECOFEU DV110; HPA Smoke Vent
Insulated Panels: KS100PRW, KS103SSF and KS110CTF
Fire Rating: Light & Air: Multiwall Polycarbonate 16mm sheet: B-S1,d0
Insulated Panels: All panels FM and QCDD approved
2
Turnover
€291.8m
+43%(1)
2017: €204.7m
2
Trading Profit
€21.5m
+45%
2017: €14.8m
2
Trading Margin
7.4%
+20bps
2017: 7.2%
Business & Strategic Report — Chief Executive's ReviewKingspan Group plc — Annual Report & Financial Statements 2018 24
Data & Flooring
Technology
(formerly Access Floors)
—
The re-naming of this business is a
reflection of the evolution of the division’s
product offering since it started life in
Kingspan as Access Floors in isolation. The
portfolio now includes a wide range of sub-
structure technology and air management
solutions for datacentres, as well as a much
wider offering on floor finishes.
In the first half of the year, the
performance of the business in the UK
was in contrast to the general trend in
office construction performing robustly
through the second half. Whilst the
requirement for access floors is expected to
contract marginally through 2019, growth
is anticipated in data solutions activity,
a sector which has been a key growth
area for the division in recent years. This is
also likely to be the case in North America
and Australia where we expect to deliver
tangible progress in the year ahead. In
addition, during 2018 our presence grew in
Continental Europe through the business
acquired in Belgium in late 2017.
2
Turnover
€190.6m
+3%(1)
2017: €185.7m
2
Trading Profit
€22.6m
+3%
2017: €22.0m
2
Trading Margin
11.9%
+10bps
2017:11.8%
(1) Comprising underlying +2%,
currency -3% and acquisitions +4%
Photo: Hufton + Crow
Photo: Hufton + Crow
UK
V&A Dundee
Insulation Boards:
Kingspan Thermataper TT46;
approved to LPS 1181: Part 1
FM 4470 & 4450;
Thermaroof: 4470 FM4470
Data & Flooring Technology:
RMG600 Attiro magnetic
engineered timber flooring finish
RMG600 - Fire rating: BS476-6 & BS476-7;
EN13501:1 Bfl-s1
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Acquisitions
During the year we completed eight
acquisitions with a consideration of
almost €470m. These included the
leading insulated panel and board
businesses in Iberia, a strong player
in the insulated panel business in
Central and Eastern Europe and a
partnership with the market leader in
the insulated panel market in India.
Looking Ahead
2019 has started well for the Group
with like-for-like sales revenue and
volume ahead of the same period
last year.
Order intake and the order bank
in many of our key markets are
ahead of prior year, although some
exceptions exist. As the competitive
dynamics of the various raw
materials in insulation have changed
in recent months Kingspan's
proprietary non-fibrous cores
have grown share and, in general,
penetration of advanced insulation
has improved following the supply
turbulence earlier in 2018 which had
temporarily upset this momentum.
Whilst these indicators bode well
for our near-term future, we remain
acutely mindful of the increasingly
negative economic rhetoric, not
alone in the UK, that could well
impact the appetite for investment
in construction later in the year.
Setting aside this macro concern,
and any unavoidable effect it may
have on Kingspan, we remain
resolutely focused on the delivery
of our long-term strategy.
Gene M Murtagh
Chief Executive Officer
22 February 2019
Kingspan Group plc — Annual Report & Financial Statements 2018
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Financial Review
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The Financial Review provides an overview of
the Group’s financial performance for the year
ended 31 December 2018 and of the Group’s
financial position at that date.
Overview of results
Group revenue increased by 19% to
€4.4bn (2017: €3.7bn) and trading
profit increased by 18% to €445.2m
(2017: €377.5m) with a modest
decrease of 10 basis points in the
Group’s trading profit margin to
10.2% (2017: 10.3%).
Basic EPS for the year was 184.0 cent
(2017: 159.0 cent), representing an
increase of 16%.
The Group’s underlying sales
and trading profit growth by
division are set out in the
following tables:
Sales
Underlying
Currency
Acquisition
Total
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring
Technology
Group
+6%
+2%
+7%
+3%
+2%
+5%
-3%
-2%
-1%
-3%
-3%
-3%
+18%
+12%
+37%
+13%
+4%
+17%
+21%
+12%
+43%
+13%
+3%
+19%
The Group’s trading profit measure is earnings before interest, tax,
amortisation of intangibles and non trading items:
Trading Profit
Underlying Currency
Acquisition
Total
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring
Technology
Group
+11%
+4%
-7%
-14%
+5%
+7%
-3%
-2%
-
-3%
-3%
-2%
+13%
+13%
+52%
+5%
+1%
+21%
+15%
+45%
-12%
+3%
+13%
+18%
The key drivers of sales and trading profit performance in each division
are set out in the Business Review.
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Finance costs (net)
Finance costs for the year increased
by €2.2m to €18.1m (2017: €15.9m).
A net non-cash credit of €0.6m
(2017: credit of €0.6m) was recorded
in respect of swaps on the Group’s
USD private placement notes. The
Group’s net interest expense on
borrowings (bank and loan notes)
was €18.0m (2017: €16.1m). This
increase reflects higher average
gross and net debt levels in 2018, due
to acquisition spend. The interest
expense is driven extensively by
gross debt balances with cash yields,
although improving, still low in the
current environment.
Taxation
The tax charge for the year was
€69.1m (2017: €60.6m) which
represents an effective tax rate of
17.1% (2017: 17.5%). The decrease in
the effective rate reflects, primarily,
the change in the geographical mix of
earnings year-on-year and reductions
in certain territorial tax rates.
Divisional reporting
The Group renamed two pre-existing
divisions during the year to more
appropriately reflect the business
activity in each case. The divisions
are now named Water & Energy
(formerly Environmental) and
Data & Flooring Technology
(formerly Access Floors).
Dividends
The Board has proposed a final
dividend of 30.0 cent per ordinary
share payable on 10 May 2019 to
shareholders registered on the
record date of 29 March 2019. When
combined with the interim dividend
of 12.0 cent per share, the total
dividend for the year increased
to 42.0 cent (2017: 37.0 cent),
an increase of 13.5%.
Retirement benefits
The primary method of pension
provision for current employees
is by way of defined contribution
arrangements. The Group has two
legacy defined benefit schemes
in the UK which are closed to new
members and to future accrual.
In addition, the Group assumed a
number of smaller defined benefit
pension liabilities in Mainland Europe
through acquisitions completed in
recent years. The net pension liability
in respect of all defined benefit
schemes was €13.1m (2017: €13.6m)
as at 31 December 2018.
Intangible assets and goodwill
Intangible assets and goodwill
increased during the year by
€316.1m to €1,502.1m (2017:
€1,186.0m). Intangible assets and
goodwill of €340.1m were recorded in
the year relating to acquisitions and
additions completed by the Group,
offset by annual amortisation of
€22.2m (2017: €15.7m) and a small
decrease due to year end exchange
rates used to translate intangible
assets and goodwill other than
those denominated in euro.
Key performance indicators -
financial
The Group has a set of financial key
performance indicators (KPIs) which
are set out in the following table.
These KPIs are used to measure
the financial and operational
performance of the Group and are
used to track progress continually
and also in achieving medium and
long term targets.
Australia
Police Citizens Youth Club
Insulated Panels:
KingZip Linea
Fire Rating: BS476 Part 3
Business & Strategic Report — Financial Review
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Key performance indicators
Basic EPS growth
Sales growth
Trading margin
Free cashflow (€m)
Return on capital employed
Net debt/EBITDA
2018
16%
19%
10.2%
308.4
16.8%
1.4x
2017
11%
18%
10.3%
198.5
17.8%
1.05x
(a) Basic EPS growth. The growth in
EPS is accounted for primarily by
an 18% increase in trading profit,
partially offset by an increase in
intangible amortisation generating
a 17% increase in profit after tax.
The minority interest amount
increased year-on-year leading to
a basic EPS increase of 16%.
in underlying sales and a 3%
decrease due to the effect
of currency translation. A key
contributor to underlying sales
growth in the year was price
growth necessitated by raw
material inflation recovery in the
first half of the year. Furthermore,
sales volumes were positive in
most key end markets.
(b) Sales growth of 19% (2017: 18%)
was driven by a 17% contribution
from acquisitions, a 5% increase
(c) Trading margin by division is
set out below:
Trading Margin
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring Technology
2018
10.0%
12.2%
7.4%
7.0%
11.9%
2017
10.0%
11.9%
7.2%
9.0%
11.8%
The Insulated Panels division
trading margin was stable
year-on-year reflecting ongoing
progress in sales of QuadCore™
and the market mix of sales. The
trading margin improvement
in the Insulation Boards division
reflects a positive Kooltherm® mix
and some relief on raw material
prices towards the end of the
year. The decrease in the Water
& Energy trading margin reflects,
in the main, the impact of costs
associated with the exit from
small scale wind and solar thermal
activity. The increased trading
margin in Light & Air reflects an
improved margin performance
overall in Europe which offset
more subdued margins in certain
products in the US. The modest
increase in trading margin in Data
& Flooring Technology reflects the
geographic market and product
mix of sales year-on-year.
UK
Dunfermline, Carnegie
Insulation Boards:
Rainscreen Board; K10 Soffit Board
Fire Rating: K15: Successfully tested to
BS8414-1 : 2002 & BS8414 : 2005
K10: FM 4880 Class 1
(d) 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.
Free cashflow
EBITDA*
Non-cash items
Movement in working
capital
2018
2017
€m €m
521.2 441.7
13.4
9.4
2.3 (85.3)
Pension contributions
(0.8)
(0.9)
Movement in provisions
(5.8)
(2.4)
(e) Return on capital employed,
calculated as operating profit
divided by total equity plus net
debt, was 16.8% in 2018 (2017:
17.8%), or 17.1% including the
annualised impact of acquisitions.
The creation of shareholder
value through the delivery of
long term returns well in excess
of the Group’s cost of capital is
a core principle of Kingspan’s
financial strategy. The increase
in profitability together with the
deployment of further capital has
maintained returns on capital
during the year.
Net capital expenditure
(131.3) (85.6)
(f) Net debt to EBITDA measures
Net interest paid
(15.6) (16.8)
Income taxes paid
(75.0) (61.6)
Free cashflow
308.4 198.5
* Earnings before finance costs, income
taxes, depreciation, amortisation and
non trading items
Working capital at year end was
€543.9m (2017: €477.8m) and
represents 11.5% (2017: 12.4%) of
annualised turnover based on fourth
quarter sales. This metric is closely
managed and monitored throughout
the year and is subject to a certain
amount of seasonal variability
associated with trading patterns and
the timing of significant purchases
of steel and chemicals. The decrease
year-on-year reflects a 90 basis
point reduction in underlying working
capital levels due mainly to lower
inventory days on hand.
the ratio of net debt to earnings
and at 1.4x (2017: 1.05x) is
comfortably less than the
Group’s banking covenant of
3.5x in both 2018 and 2017.
Acquisitions and capital
expenditure
During the period the Group
made the following acquisitions
for a total upfront cash
consideration of €469.2m with
an additional deferred amount of
€30m payable in April 2019:
→ On 7 March 2018, the purchase
of 100% of the Synthesia Group
for an initial cash amount of
€213.4m plus a deferred amount
of €30m payable in April 2019.
→ On 8 May 2018, the purchase of
100% of Vestfold Plastindustri AS,
a Norwegian water treatment
business for a total cash
consideration of €12.3m.
→ On 4 July 2018, the purchase of
100% of Balex Metal Sp. z.o.o.,
a Polish based manufacturer of
insulated panels and insulation
boards for a cash amount of
€197.6m.
→ On 9 July 2018, the purchase of
51% of Jindal Mectec Private
Limited, an Indian manufacturer
of insulated panels for a cash
amount of €22.8m.
→ An investment of €8.2m in
Invicara PTE Limited, a Building
Information Modelling solution
provider with global reach.
→ Further capital outlay of
€14.9m was made with respect
to business within Light & Air
and Water & Energy together
with some residual payments
arising on the finalisation of
completion accounts for prior
year acquisitions.
Capital structure and
Group financing
The Group funds itself through a
combination of equity and debt.
Debt is funded through syndicated
and bilateral bank facilities and
private placement loan notes. The
primary bank debt facility is a €500m
revolving credit facility, €120m of
which was drawn at year end and
which matures in June 2022. As at
31 December 2018, the Group also
had bilateral bank facilities of €50m,
which were fully drawn. Private
placement loan note funding net of
related derivatives totals €808m. The
weighted average maturity of the
notes is 5.6 years, including a private
placement of €175m completed on 8
December 2017 which was drawn on
31 January 2018.
The Group had significant available
undrawn facilities and cash balances
which, in aggregate, were c.€675m
at 31 December 2018 and provide
appropriate headroom for ongoing
operational requirements and
development funding.
Photo: Chris Humphreys Photography
Business & Strategic Report — Financial ReviewKingspan Group plc — Annual Report & Financial Statements 2018 France
Quatuor
Insulated Panels:
JI Facade - Profil TYPHON
Perfo diam 11, Profil OURAGAN
Perfo diam 11
Fire Rating: Euroclass A1
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Net debt
Net debt increased by €264.4m during 2018 to €728.3m (2017: €463.9m).
This is analysed in the table below:
Movement in net debt
Free cashflow
Acquisitions
Share issues
Repurchase of shares
Dividends paid
Dividends paid to non-controlling interests
Cashflow movement
Exchange movements on translation
Deferred consideration
Increase in net debt
Net debt at start of year
Net debt at end of year
2018
€m
308.4
(472.3)
0.1
-
(68.3)
(0.1)
(232.2)
(2.2)
(30.0)
(264.4)
(463.9)
(728.3)
2017
€m
198.5
(168.2)
0.2
(1.5)
(61.7)
-
(32.7)
(3.3)
-
(36.0)
(427.9)
(463.9)
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 EBITDA to net interest
coverage of 4 times.
The performance against these
covenants in the current and
comparative year is set out below:
2018
2017
Covenant Times Times
Net debt/
EBITDA
Maximum
3.5
EBITDA/
Net interest
Minimum
4.0
1.4
1.05
28.8
27.8
Investor relations
Kingspan is committed to
interacting with the international
financial community to ensure a full
understanding of the Group’s strategic
plans and its performance against
these plans. During the year, the
executive management and investor
team presented at three capital
market conferences, hosted a capital
markets day at our Holywell facility in
Wales and conducted 311 institutional
one-on-one and group meetings.
Share price and market
capitalisation
The Company’s shares traded in
the range of €32.60 to €43.60
during the year. The share price
at 31 December 2018 was €37.38
(31 December 2017: €36.41) giving
a market capitalisation at that
date of €6.7bn (2017: €6.5bn).
Total shareholder return for 2018
was 3.8%.
Impact of Brexit
At the time of writing the exact
form of the UK’s exit from the
European Union is not clear. Given
our manufacturing base in both the
UK and the Eurozone Kingspan is well
positioned to deal with the outcome
in whatever form it takes, albeit
in a context of the wider macro
economic conditions.
Financial risk management
The Group operates a centralised
treasury function governed by a
treasury policy approved by the
Group Board. This policy primarily
covers foreign exchange risk, credit
risk, liquidity risk and interest rate
risk. The principal objective of the
policy is to minimise financial risk
at reasonable cost. 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.
Geoff Doherty
Chief Financial Officer,
22 February 2019
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Risk & Risk Management
—
As a leading building supplies manufacturer in a highly
competitive international environment, Kingspan is
exposed to a variety of risks and uncertainties which are
monitored and controlled by the Group’s internal risk
management framework.
Overall responsibility for risk
management lies with the Board
who ensures that risk awareness is
set at an appropriate level.
To ensure that risk awareness is set
at an appropriate level, the Audit
Committee assists the Board by
taking delegated responsibility for the
risk identification and assessment, in
addition to reviewing the Group’s risk
management and internal control
systems and making recommendations
to the Board thereon.
The chairman of the Audit
Committee reports to the Board at
each Board meeting on its activities,
both in regard to audit matters and
risk management.
The activities of the Audit Committee
are set out in detail in the Report of
the Audit Committee on page 82.
The Board monitors the Group’s
risk management systems through
this consultation with the Audit
Committee but also through
the Group’s divisional monthly
management meetings, where at least
two executive directors are present.
The risks and trends are the focus of
each division’s monthly management
meeting, where their performance
is also assessed against budget,
forecast and prior year. In addition, key
performance indicators are used to
benchmark operational performance
for all manufacturing sites.
In addition to this ongoing
assessment of risk within the
divisions, the Audit Committee
oversees an annual risk assessment
for the Group whereby each divisional
management team is formally asked
to prepare a risk assessment for their
business. This assessment involves
evaluating group-wide risks, as put
forward by the Board, and also
presenting additional risks that are
specific to their business.
While it is acknowledged that the
Group faces a variety of risks, the
Board, through the processes set out
above, has identified the principal
risks and uncertainties that could
potentially impact upon the Group’s
short to medium term strategic goals
and these are as follows:
Risk and impact
Actions to mitigate
Volatility in the macro environment
Kingspan products are targeted at both the
residential and non-residential (including retail,
commercial, public sector and high rise offices)
construction sectors. As a result, demand is
dependent on activity levels which may vary by
geographic market and is subject to the usual
drivers of construction activity (i.e. general
economic conditions and volatility, Brexit,
political uncertainty in some regions,
interest rates, business / consumer confidence
levels, unemployment and population growth).
While construction markets are inherently cyclical,
changing building and environmental regulations
continue to act as an underlying positive structural
trend for demand for many of the Group’s products.
Failure to innovate
Failing to successfully manage and compete with
new product innovations, changing market trends
and consumer tastes could have an adverse effect
on Kingspan’s market share, the future growth
of the business and the margins achieved on the
existing product line.
The exposure to the cyclicality of any one construction market is partially mitigated by
the Group’s diversification, both geographically and by product.
As set out in the Business Model & Strategy, the Group has mitigated this risk through
diversification as follows:
› Sales outside of traditional markets, predominantly the UK and Ireland, have
increased from 40% in 2008 to 75% in 2018;
› Launch of new products and continual improvements to existing product lines; and
› Acquisitions made during the year extend the geographic reach of the Group.
The full details of these diversifications are set out in the Business Model & Strategy
report on pages 8 to 13.
Innovation is one of Kingspan’s four pillars to increasing shareholder value and therefore
plays a key role within the Group.
There is a continual review of each division’s product portfolios at both the executive
and local management level to ensure that they target current and future opportunities
for profitable growth.
This risk is further mitigated by continuing innovation and compelling marketing
programmes. The launch of IKON™ in 2019 will only serve to enhance the capabilities
of the Group to innovate. Kingspan also has a deep understanding of changing
consumer and industry dynamics in its key markets, enabling management to respond
appropriately to issues which may impact business performance.
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Risk and impact
Product failure
A key risk to Kingspan’s business is
the potential for functional failure of
our product which could lead to health,
safety and security issues for both our
people and our customers.
The Kingspan brand is well established
and is a key element of the Group’s overall
marketing and positioning strategy.
In the event of a product failure, the
Kingspan brand and/or reputation could
be damaged and if so, this could lead to
a loss of market share.
Actions to mitigate
Dedicated structures and processes are in place to manage and monitor product quality controls
throughout the business:
› The majority of new products go through a certification process which is undertaken by
a recognised and reputable authority (for example, in the UK it is the Building Research
Establishment, BRE) before it is brought to market.
› Our businesses employ quality control specialists and operate strict policies to ensure consistent
high standards are maintained in relation to the sourcing and handling of raw materials.
› Quality audits are undertaken at our manufacturing sites.
› Documented and tested product recall procedures are embedded in all our businesses
and are regularly reviewed.
› Effective training is delivered to our staff.
› We proactively monitor the regulatory and legislative environment.
Business interruption (including IT continuity)
Kingspan’s performance is dependent on
the availability and quality of its physical
infrastructure, its raw material supply
chain and its information technology.
The safe and continued operation of such
systems and infrastructure is threatened
by natural and man-made perils and
is affected by the level of investment
available to improve them.
The building industry as a whole is going
through some significant change with
respect to building regulations and codes.
The risks associated with misunderstanding
some of the potential changes and the
nature of our product set is one that is
more prevalent today.
Any significant or prolonged restriction to
its physical infrastructure, the necessary
raw materials or its IT systems and
infrastructure could have an adverse effect
on Kingspan’s business performance.
Kingspan insists on industry leading operational processes and procedures to ensure effective
management of each facility. The Group invests significantly in a rigorous programme of
preventative maintenance on all key manufacturing lines to mitigate the risk of production line
stoppages.
The impact of production line stoppages is also mitigated by having business continuity plans in
place to allow for the transfer of significant volume from any one of our 68 plants in the Insulated
Panels division or 26 plants in the Insulated Boards division to another in the event of a shutdown.
In addition, and as part of our consequential loss insurance, Kingspan is subject to regular reviews
of all manufacturing sites by external risk management experts, with these reviews being aimed at
enhancing Kingspan’s risk profile.
In an effort to reduce Kingspan’s exposure to raw material supply chain issues, Kingspan builds
strong relationships with a wide range of raw material suppliers to limit the reliance on any one
supplier or even a small number of suppliers.
Kingspan continues to inform all stakeholders of the characteristics of our product offerings, their
application and benefits to limit the risk of misunderstanding within the building industry.
Kingspan’s IT infrastructure is constantly reviewed and updated to meet the needs of the Group.
Procedures have been established for the protection of this infrastructure and all other IT related
assets. These include the development of IT specific business continuity plans, IT disaster recovery
plans and back-up delivery systems, to reduce business disruption in the event of a major
technology failure.
Credit risks and credit control
As part of the overall service package,
Kingspan provides credit to customers
and as a result there is an associated risk
that the customer may not be able to pay
outstanding balances.
At the year-end, the Group was carrying a
receivables book of €735.1m expressed net
of provision for default in payment. This
represents a net risk of 17% of sales. Of
these net receivables, approximately 62%
were covered by credit insurance or other
forms of collateral such as letter of credit
and bank guarantees.
Employee development & retention
The success of Kingspan is built upon
effective management teams committed
to achieving a superior performance in
each division. Failure to attract, retain or
develop these teams could have an impact
on business performance.
Fraud and cybercrime
Each business unit has established procedures and credit control functions around managing
its receivables and takes action when necessary.
Trade receivables are primarily managed through strong credit control functions backed up by credit
insurance to the extent that it is available. All major outstanding and overdue balances together
with significant potential exposures are reviewed regularly and concerns are discussed at monthly
meetings at which the Group’s executive directors are present.
Control systems are in place to ensure that credit authorisation requests are supported with
appropriate and sufficient documentation and are approved at appropriate levels in the
organisation.
Kingspan, and each of its divisions, is committed to ensuring that the necessary procedures are in
place to attract, develop and retain the skill levels needed to achieve the Group’s strategic goals.
These procedures include strong recruitment processes, succession planning, remuneration reviews,
including both long and short term incentive plans, and targeted career development plans.
Kingspan is potentially exposed to
fraudulent activity, with particular
focus on the Group’s online banking
systems, online payment procedures and
unauthorised access to internal systems.
The security and processes around the Group’s IT and banking systems are subject to review by
divisional management and internal audit. These systems are continually reviewed with updates and
improvements implemented as required. Robust IT and security policy documents and related alerts
are circulated by Group management to all divisions to ensure a consistent and effective approach
is taken across the Group.
Acquisition and integration of new businesses
Acquisitive growth is an important element
of Kingspan’s development strategy. A
failure to execute and properly integrate
significant acquisitions and capitalise on
the potential synergies they bring may
adversely affect the Group.
All potential acquisitions are rigorously assessed and evaluated, both internally and by external
advisors, to ensure any potential acquisition meets Kingspan’s strategic and financial criteria.
This process is underpinned by extensive integration procedures and the close monitoring of
performance post acquisition by both divisional and Group management.
Kingspan also has a strong track record of successfully integrating acquisitions and therefore
management have extensive knowledge in this area which it utilises for each acquisition.
Business & Strategic Report — Risk & Risk Management
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Mark Harris
Holywell, UK
—
Mark joined Kingspan through
the acquisition of Kooltherm®
Insulation in 1996. Since then Mark
has worked in a number of roles
in both our Insulated Panels and
Insulation Boards divisions and is
now Divisional Technical Director
for Insulated Panels.
Tested systems, at large-scale,
are critical for evaluating real
life performance. I’ve been with
Kingspan Group for 22 years and
am passionate about our unique
range of high performance insulation
systems and the benefits they offer
to our clients and end users. As a
divisional technical director in the
insulated panel business my focus is
on helping develop and deliver tested
and certified systems in critical
performance areas that include
fire safety, property protection,
sustainability and lifetime reliability.
Mark has extensive experience
in the industry and has been at the
forefront of the development of high
performance thermosetting polymer
based insulation systems and
solutions. Mark and his department
have been an integral part of the
wider Kingspan team in developing,
certifying and promoting the merits
of our innovative and best-in-
class insulated panel technology,
QuadCore™, and to driving its
rollout globally.
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Sustainability Report
Product Passionate
—
Kingspan’s vision
To be a global leader in sustainable business and establish
a leading position in providing ethical, renewable and
affordable best practice solutions for the construction sector.
We know that the built environment
has an important role to play in
combating climate change and we
pledge to take the lead in meeting
that challenge.
Our commitment to sustainability
is instilled at every level of the
Group and at every step in the
manufacturing process.
In developing our approach to
sustainability, we have built on
materiality assessments conducted
at a divisional level as well as
incorporating guidelines from
recognised associations such as the
Sustainable Accounting Standards
Board (SASB) and the Task Force on
Climate-related Financial Disclosures
(TCFD), of which Kingspan is a
signatory. Kingspan recognises that
it has a responsibility as a business
leader to contribute towards
the United Nation’s Sustainable
Development Goals (SDGs) and over
the next few pages we demonstrate
how we are making a difference.
Product Passionate
Planet Passionate
People Passionate
› Kingspan's primary SDG impact
is through our high performance
insulation materials and the
positive impact they have on the
energy consumption of buildings
and, therefore, climate change.
61% of our revenue in 2018 was
generated by the sale of products
which improve energy efficiency.
› At Kingspan, innovation is at
the core of who we are. We
invest annually in research and
development in order to drive
efficiency improvements and
increase circularity in our
high-performance products.
› Our product set, from insulation
technologies to rainwater
harvesting, offer solutions to
build more sustainable cities.
The thermal performance of our
insulation means it can be used
in thinner applications, helping
architects to create space as the
world becomes more urbanised.
› Kingspan Light & Air manufactures
products which allow natural light
and ventilation into a building,
thereby improving the ambient
conditions for its inhabitants.
› Kingspan Water & Energy sells
solutions for sourcing, storing
and protecting water.
› Net Zero Energy – Since 2011
Kingspan has been on a journey to
attain Net Zero Energy throughout
our operations. In 2018 we
achieved 75% NZE and we are on
track to achieve 100% by 2020.
› Plastic bottle recycling – In 2018,
through the acquisition of
The Synthesia Group, Kingspan
recycled 256 million PET plastic
bottles for use in our products.
We aim to reach 500 million
by 2023.
› We recently entered into a
partnership with The Ecoalf
Foundation, a venture which
collects waste in the Spanish
seas for recycling or repurposing
where possible.
›
In 2018 Kingspan recycled 69%
of its waste, down from 78% in
2017, as acquired businesses had a
dilutive impact. We aim to minimise
waste across our businesses and
will share best practice from our
more mature businesses: our
UK and Ireland panel facilities
achieved zero waste to landfill in
2018 and the target is to achieve
this across Panels Western Europe;
and our European Data & Flooring
Technology achieved 100% of
waste to recycling in 2018.
› Following on from a tremendous
experience, Kingspan employees
continue to volunteer for
The Junior Achievement
programme, helping to educate
and inspire young students.
› Kingspan takes the welfare of our
employees very seriously and we
are proud that 2018 was another
year with zero fatalities across
the Group. Our lost time injury
frequency rate fell by almost 6%
or over 9% excluding the impact
of acquired businesses.
› Kingspan recently became a
signatory for the Task Force
on Climate-related Financial
Disclosures. We are also
a gold member of RE100 and
we respond to The CDP in
relation to Climate Action.
At Kingspan, we are committed
to supporting partners which are
driving results against the SDGs.
—
Kingspan started life with a simple mission to always work to
make building better. Since that time, through our commitment
to ongoing product development and innovation, we have become
the global leader in high-performance insulation.
Innovation is one of the key
strategic pillars at Kingspan.
We invested over €30 million in
2018 in Research and Development.
Product breakthroughs include
QuadCore™, Kingspan’s next
generation of self-blended hybrid
insulation, delivering unrivalled
thermal efficiency, superior fire
protection, enhanced environmental
credentials and our longest
performance guarantee. In 2019,
Kingspan will open our innovation
hub in Kingscourt, Ireland – IKON™.
It will be the global centre of
excellence for innovation at
Kingspan, leading further product
enhancements in the area of
thermal performance and circularity.
Circularity and sustainability are
major and growing themes globally.
Kingspan has always been at the
forefront of enabling buildings to
consume less energy, and we strive
for ways to do this more sustainably.
Since 2011 we have been on a journey
to manufacture our products using
(in aggregate) 100% of energy from
renewable sources by 2020. In 2018
we reached 75% Net Zero Energy.
In addition to this, one of the key
chemicals in our high-performance
insulation is Polyol. Polyol can be
manufactured from recycled PET
plastic. In 2018, Kingspan used the
equivalent of 256 million recycled
plastic bottles in our products,
we aim to make that number 500
million recycled bottles by 2023.
Please see our “Planet Passionate”
section for more detail on these
initiatives.
Buildings are one of the largest
contributors to global greenhouse
gas emissions with an estimated
40% of emissions attributable to
buildings. Kingspan is proud to help
designers, architects and building
owners design and operate buildings
which consume less energy. Every
year, Kingspan insulation systems
significantly reduce energy usage,
carbon emissions and building
operational costs in over 90 countries
across the globe. In 2018, Kingspan
Insulated Panel and Insulation
Board products, in use in the built
environment, saved 192.7 million
MWh of energy, 38.15 million tonnes
of CO2 and €5 billion of costs.*
In 2018 the total
energy saved*
by our insulation
systems is
equivalent to:
110m
20m
66
4.7
Over one hundred and
ten million barrels of oil
Taking twenty million
cars off the road
The annual output of
sixty-six power stations
Up to 4.7 times the annual
electricity consumption
of Greater London
* These figures relate to sales of Insulated Panels and Insulation Boards between 1993 and 2018.
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Product Passionate Case Studies
Product Passionate Case Studies
Sustainable buildings
The Hub: The UK’s First Electricity
Cost Neutral Logistics Building
The logistics sector is undoubtedly a
very large energy user, but a sector
which acknowledges its impact on
the environment and is looking to
find its place in the greener future of
sustainable building. IM Properties, a
UK based investor developer, looked
at how it could create a world-class
sustainable logistics facility and
developed the UK's first electricity
cost neutral logistics building –
The Hub.
The Hub is the UK’s first building
which could eradicate electricity
bills by combining Kingspan’s high
performance insulated panel and
rooftop solar PV products with next
generation battery technology
to make the building energy self-
sufficient. In the process, the
development, which holds an A+
Energy Performance Certificate (EPC),
can potentially offset 115,956 tonnes
of CO2 annually. It is estimated that
the building will consume 90% of the
energy it generates.
The Hub will use roof-mounted,
solar photovoltaic panels to supply
electricity straight to the building
for immediate use. Any extra power
produced is then used to charge a
battery which supplies the building
with power whenever there is a dip
in electricity production from the
building's own solar panels, ensuring
that there is never any business
interruption. The battery can also
be solar charged or charged from
the grid when electricity is cheaper,
allowing the power to be used
during more expensive periods in a
process known as peak shaving. Any
extra electricity generated from the
building can also be exported back
to the UK’s electricity grid further
enhancing the building’s electricity
cost neutrality.
The innovative project combination
of battery and solar PV technology
could be a game-changer for large
energy users, like the logistics sector,
who understand the importance of
the green agenda, and look to do their
part to enhance global sustainability.
Sustainable cities
Ripley Town Centre achieves
Prestigious Green Star Rating
Located in the centre of Ripley
Queensland, the Ripley Town
Centre is on track to become the
sustainable urban hub for the
community.
The AUD$1.5 billion project has
earned the 5 Star Green Star Design
& As Built accreditation after
demonstrating initiatives to reduce
the impact of climate change,
promote sustainability within the
built environment and improve
quality of life.
Innovative design and planning led
to the installation of 1,800 individual
solar panels, rainwater harvesting
and stormwater systems and
integration of a public transport hub.
Australia, Coles Ripley
Modline Water Tanks
Kingspan is proud to have four
Modline Steel tanks installed.
Together, the tanks have the
potential to harvest 25,200 litres
of rainwater a year. The rainwater
will be reused for toilets and
landscape irrigation.
The Modline shape was selected for
maximum storage, efficient use of
space and to accommodate large
commercial fittings.
The made to measure nature of
Kingspan’s water tanks proved to be
advantageous for this project as the
client wanted a commercial tank
system that would take up most
of the available space, allowing for
maximum water storage capacity.
Sustainable buildings
Bloomberg’s European
Headquarters – The World’s Most
Sustainable Office Building
One of London’s most iconic
buildings, Bloomberg’s award-
winning London-based European
headquarters occupies 3.2 acres,
providing approximately 1.1 million
square feet of sustainable office
space to 4,000 of Bloomberg’s
employees. The completion of the
high specification building marks the
culmination of years of planning and
development for both Bloomberg,
its partners and Kingspan Data &
Flooring Technology.
Sustainability is at the heart of
every design choice which resulted
in Bloomberg's HQ being named
the world’s most sustainable office
building with a BREEAM rating of
98.5%. The building, a zero-landfill
operation, employs the most
sustainable of building materials.
Rainwater from the roof, basins
and showers, is captured, treated
and recycled to serve vacuum flush
toilets. When weather conditions are
temperate, the building’s distinctive
bronze blades can open and close,
allowing the building to operate
in a “breathable” state which is
complimented by smart CO2 control
air distribution according to the
approximate number of people
occupying the building.
Bloomberg’s desire was to create a
building which looks to the future,
reflects the company’s commitments
in practice to sustainability and
encourages active working for its
employees – the development’s
interiors do just that, with sit-to-
stand work stations for all employees
and a central ramp spanning six
floors that encourages movement
through the building on foot.
The installation of 37,000m2 of
Kingspan raised access flooring and
34,000m2 of Kingspan Attiro real
wood engineered floor covering
makes the Bloomberg HQ a
landmark project for Kingspan Data
& Flooring Technology and supports
Bloomberg’s vision to create an
environment that promotes wellbeing
and encourages collaboration and
active working.
UK, The Hub Birmingham
Insulated Panels: AWP, Curvewall, Trapezoidal Wall.
Roof: Trapezoidal Roof with Energy Rooftop Solar PV Fire Rating: (Panels) - LPCB 1181
Part 1 and achieve LPS Grade EXT-B and are FM approved to 4880 and 4471
UK, Bloomberg European Headquarters
37,000m2 of Kingspan raised access flooring and 34,000m2 of Kingspan Attiro real wood
engineered floor
Business & Strategic Report — Sustainability ReportKingspan Group plc — Annual Report & Financial Statements 2018 40
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Product Passionate
Fire testing and research
Kingspan takes the issue of fire
safety extremely seriously. We have
been researching and testing the
performance of our products for
decades to find suitable solutions for
even the most demanding projects.
We have conducted almost
2,000 external fire tests to national
and international standards for
compliance across global regulatory
regimes. Only those that can
achieve rigorous standards are
recommended for use in sensitive
applications.
Fire test certification
During our research, the importance
of system testing rather than
material testing has been proven
numerous times. Large-scale
system testing underpins the fire
safety credentials of Kingspan’s
high performance closed cell rigid
insulation products and systems,
including BS 8414; AS 5113; LPS 1181
and 1208; FM 4470, 4471, 4880, 4881,
4882 and 4924; EN 1364, 1365 & 1366:
IS0 13784; LEPIR II; NFPA 285 and 286;
and SP Fire 105.
Products & systems
QuadCore™ Technology is a high
performance closed-cell rigid
insulation solution offering a unique
combination of fire performance
certification when used as a core
in our insulated panel systems
including FM 4882 (the FM Global
insurance standard for smoke
sensitive occupancies), providing
enhanced ‘reaction to fire’ and
‘fire resistance’ performance. The
Kooltherm® range of insulation
boards and KoolDuct® pre-insulated
ductwork are manufactured with
a phenolic insulation core, which
has been proven through a rigorous
programme of testing to offer
superior fire and smoke performance
to other commonly used rigid
thermoset insulants. Some products
from the Therma range of PIR flat
and tapered roofing products have
achieved FM 4470 certification.
Tests
Kingspan Insurer Certified insulated
panels and premium performance
rigid thermoset phenolic insulation
boards and products can achieve high
levels of reaction to fire performance
in tests specified for regulatory
purposes, large scale tests developed
by the insurance industry and large
scale tests developed by other
organisations including ISO, British
Standards Institute (BSI), ASTM and
the National Fire Protection Agency
(NFPA). Kingspan has numerous
façade systems that have successfully
passed large scale façade tests
around the globe including NFPA 285,
LEPIR II, SP Fire 105, AS 5113 and BR135
to BS 8414. We therefore have systems
that are suitable for many high-rise
buildings. Going forward we believe
that large scale system testing is
the most appropriate fire
performance benchmark to
ensure safe building envelopes.
Case studies
Independently researched real
fire case studies have proven the
performance of Insurer Certified
insulated panel systems and
Therma roofing boards across the
world. We have been building up a
comprehensive library of real fire
case studies over the years. The fire
performance and test results for the
full Kingspan range are available in
the relevant Kingspan literature.
Fire performance/outputs
Fire Performance Certification of
products and systems incorporating
Kingspan’s high performance closed
cell rigid insulation cores:
→ Approval to large scale insurance
industry fire certification
standards including the Loss
Prevention Certification Board
(LPS) and FM Approvals (FM);
→ up to 60 minutes fire insulation
and integrity (EI60) according
to EN 1364 Parts 2 & 3 and
ASTM E119;
→ up to FR60 according to
UK Insurance Industry
Standard LPS 1208;
→ up to 240 minutes fire integrity
and heat radiation (E240 and
EW240) according to EN 1364
Part 2;
→ up to 90 minutes insulation,
integrity & load bearing capacity
(RE190) according to EN 1365
Part 2.
Kingspan Kooltherm® and KoolDuct®
products can achieve:
→ a Euroclass rating as good
as B-s1,d0;
→ Class 0 to UK building regulations
when tested to BS 476 Pt 6
& Part 7.
Kooltherm® can achieve:
→ a Flame Spread Index (FSI)
of 5 and a Smoke Developed
Index (SDI) of 0 when tested to
ASTM E 84;
→ Ignitability Index, Spread of
Flame Index and Heat Evolved
Index of 0, as well as a Smoke
Developed Index of 0-1 according
to AS 1530 Part 3;
→ Class 1 Fire Rating to Factory
Mutual Class Number 4880: 2005
(Kooltherm® K10 FM Soffit Board).
KoolDuct® is the only premium
performance pre-insulated ductwork
in the world to be UL Listed as a Class 1
Air Duct, to Standard for Safety UL 181.
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Planet Passionate
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Net Zero Energy
In 2011, Kingspan Group embarked on its own initiative,
committing to ensure that all of our facilities worldwide are
Net Zero Energy on an aggregate basis by the year 2020. With
over 14,000 employees and 129 manufacturing sites operating
across the world, the scale of the challenge is daunting.
The Group’s rapid growth also
adds complexity:
→ Increasing demand for
products leads to an increase in
manufacturing energy demand.
→ Growth through acquisitions
adds new facilities at different
levels of development and
energy efficiency.
→ Employees must be encouraged
to take responsibility for their own
environmental footprint
and to support the Net Zero
Energy strategy.
Our Journey To Date
Despite these obstacles, in 2016 the
Group over-achieved on its 50%
target by 7% while in 2018 the NZE
% currently stands at 75%. 2018 saw
a large contribution from acquisition
activity which had a significant
impact on the NZE %, adjusted for
acquisitions the NZE % would have
been 80%.
In 2018 Kingspan committed to the
Science Based Targets Initiative.
For Kingspan, this means a 10%
reduction in emissions by 2025, off the
base year of 2017. This isn’t the only
target set for 2025, Kingspan is also
committing to reduce its absolute
emissions from purchased goods and
services, business travel, transport
and distribution, and end-of-life
treatment of sold products by 10%.
“ At Kingspan, we are dedicated to
sustainable business practices,
from our products, to our processes
and our people, which is why we
are delighted to sign up to the Science
Based Targets Initiative. This provides
measurable targets for our business
to achieve and will ensure that we
continue to match our words with
actions that make a real difference.”
Gene M. Murtagh,
CEO of Kingspan.
Net Zero Energy
2018
Net Zero Energy
2017
75% 2 6%
69%
Energy Costs
Light and heat
costs as a %
of turnover
Energy
Intensity
kWh per €
turnover
Energy
Carbon
Intensity
CO2 tonnes
per €'000 of
turnover
2018
2017
2016
2015
2014
2013
2012
2018
2017
2016
2015
2014
2013
2012
2018
2017
2016
2015
2014
2013
2012
0.82
0.79
0.88
0.99
1.11
1.14
1.29
0.14
0.13
0.14
0.14
0.16
0.18
0.19
0.009
0.012
0.014
0.034
0.040
0.049
0.053
Renewable
Energy Usage
Renewable
energy used
(GWh)
On-site Energy
Generation
Renewable
energy
generated
on-site (GWh)
Renewable
Electricity
Usage
Renewable
electricity
used (GWh)
2018
2017
2016
2015
2014
2013
2012
2018
2017
2016
2015
2014
2013
2012
2018
2017
2016
2015
2014
2013
2012
459
328
243
126
88
60
27
36.2
34.5
32.2
24.1
17.3
14.5
6.6
214.4
176.2
164.4
102.3
80.3
58.0
27.4
2018 was a significant year for acquisitions which contributed over €400 million to revenue.
These acquisitions had an impact on energy metrics as we onboard them to our Net Zero Energy objective.
42
Planet Passionate
Planet Passionate
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→ Insulation to reduce heat loss;
→ Destratification fans to improve
heat distribution;
→ Low energy process equipment
installation;
→ Transitioned forklifts from LPG to
renewable energy;
→ Optimised the use of lower gauge
steel in access floor panels,
saving wielding energy;
→ Power factor correction systems.
A key part of the “Save More” strategy
has been employee awareness and
training. Implementation of Energy
Management Standard ISO 50001 in
several of our manufacturing sites
has also been effective in driving
energy efficiency improvements
and increased use of sub-metering
has facilitated accurate targeting
of energy saving opportunities. Our
efforts to make further improvements
will continue in 2019 and beyond
and we are already working on some
significant opportunities that have
the capability of delivering over
100,000kWh per annum savings.
Generate More
A key foundation of our “Generate
More” strategy has been investing in
on site generation. In 2018 5.9% of
our total energy use was generated
from renewable sources on our own
manufacturing sites, and we have
ambitious targets to grow this. The
technologies presently in use include:
→ Solar PV;
→ Solar thermal;
→ Biomass heat;
→ Biomass CHP (electricity);
→ Wind;
→ Anaerobic digestion.
A particular highlight of 2018 was the
erection of a 1.5MW wind turbine at
our Holywell facility. It stands at over
75 metres in height and has blades
which span 26 metres. The turbine
was switched on in December and
we anticipate that the machine will
generate over 1.5GWh of electricity
per annum.
75%
69%
57%
Our Net Zero Energy Committee
is a global team consisting of 17
dedicated and passionate people
representing all business units and all
geographies. This team collaborates
and shares best practice in order
to deliver our ambitious 2020 goal
through our three-step strategy
– Save More – Generate More – Buy
More. The Chair of the committee,
Mark Harris, reports Net Zero Energy
developments directly to the CEO,
Gene Murtagh.
Save More
Improving the energy efficiency of
our operations remains the highest
priority across the Group. A wide
range of projects were implemented
on many sites during 2018 including
the following;
→ LED lighting installations
including daylight dimming and
occupancy sensing;
→ Optimised daylighting solutions
including roof and wall lights;
→ Heat recovery systems;
→ Compressed air system
improvements;
Progress to Net Zero Energy
2018
2017
2016
2015
2014
2013
459
611
328
475
243
424
126
386
88
312
60
327
33%
28%
18%
Total Renewable Energy GWh
Total Energy Use GWh
NZE%
Our Data & Flooring Technology
manufacturing site in Red Lion US
is one of the largest consumers of
water in the Group and in 2018 the
conservation of water amounted to
1.1 million gallons (which is 71% of
total usage) through water recycling.
Accreditation
RE100 Kingspan is a gold member of
the RE100. RE100 is a collaborative,
global initiative of influential
businesses committed to 100%
renewable electricity, working to
increase demand for, and delivery
of renewable electricity. The private
sector accounts for around half of
the world’s electricity consumption.
Switching this demand to renewables
will accelerate the transformation
of the global energy market and
aid the transition to a low carbon
economy. RE100 is an initiative of
The Climate Group in partnership
with CDP, as part of the We Mean
Business coalition.
CDP climate list
Kingspan is proud to continue
to respond to CDP, formerly The
Carbon Disclosure Project. In
2018 we achieved an A- Climate
Change rating which puts us
among the top 400 companies in
the world in terms of leading on
environmental practices.
Carbon Trust Standard
Our operations in the UK have
been awarded the Carbon Trust
Standard in recognition of our
various initiatives to manage and
reduce carbon emissions. The
Carbon Trust Standard is designed
to provide a robust, objective
analysis of a company’s carbon
performance over a number of
years. Organisations must be able
to display both annual reductions in
energy usage over a period of three
years, and prove that they have the
necessary management procedures,
plans and targets to continue to
achieve further year-on-year carbon
reductions in the future.
David Palleja
CEO Synthesia Technology
Buy More
The purchase of renewable energy
from the grid is an important part
of our strategy. Our preferred option
is to purchase certified renewable
energy (both electricity and gas)
direct from our suppliers but where
this is not possible we have made
purchases of Guarantees of Origin
(GOs) in Europe, Renewable Energy
Certificates (RECs) in North America
and International Renewable Energy
Certificates (iRECs) in other regions
as necessary.
In 2018 Kingspan announced plans
to recycle the equivalent of 500
million plastic bottles per annum in
our products by 2023, growing from
256 million in 2018. We are delighted
to have recently partnered with The
Ecoalf Foundation, a venture which
collects waste in the Spanish seas
with the objective of recycling or
repurposing it where possible. We
look forward to announcing further
initiatives which will help us to reach
our goal over the coming months.
Recycling PET (Land & Ocean)
2023 Plan
2022 Plan
2021 Plan
2020 Plan
2019 Plan
2018 Actual
500
450
400
350
300
256
Number of bottles recycled (m)
Waste
Waste reduction brings benefits
through reducing environmental
impacts and operating costs.
Kingspan is fully committed to
reducing the amount of waste
sent to landfill and is continuously
looking at new and innovative ways
to reduce the generation of waste
and, where it is generated, to reuse
and recycle wherever possible. In
2018 Kingspan recycled 69% of its
waste, down from 78% in 2017. The
decrease is primarily as a result of
the impact of acquired businesses.
We aim to bring those businesses on
our waste reduction journey and to
share learnings from more mature
facilities; for example, our UK and
Ireland panel facilities are zero waste
to landfill, and we aim to achieve
that milestone across Panels Western
Europe; and our UK Data & Flooring
Technology achieved 100% recycled
waste in 2018.
Water
Although water is a small proportion
of inputs into our operations, we
aim to manage the resource in the
most responsible manner possible.
In general, water is mainly used
for general sanitation purposes
and Kingspan continues to aim
to maximise water conservation
through the use of rainwater
harvesting and other water saving
initiatives such as sensoring systems
and water flow regulators.
Business & Strategic Report — Sustainability ReportKingspan Group plc — Annual Report & Financial Statements 2018
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People Passionate
01
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What has been achieved at Kingspan would not be
possible without the people that work hard every day to
drive the company forward. A dynamic and motivated
workforce is key to delivering against the future growth
strategy of the business. For this reason, talent is at the
heart of future planning at Kingspan.
Kingspan’s leadership team holds an
annual Talent Forum in September to
review succession plans, metrics on
key positions hired throughout the
year and to forecast future talent
gaps as part of our human capital
risk assessment.
Attract
We have a number of initiatives at
Kingspan to attract top talent. One
of the key, group wide, initiatives is
the graduate programme which saw
applications in 2018 up over 150% on
prior year.
Retain
At Kingspan we use multiple tools to
drive talent retention. These include
traditional motivational tools such
as reviews and objective setting,
but there is also the opportunity to
join a network of people across the
Group to drive real change through
innovation and sustainability
initiatives. Over 4 months in 2018
we ran a Global Digital Challenge,
which incorporated 52 teams,
spanning 14 countries and yielded
such remarkable results that we
announced 8 winners. In 2011,
Kingspan initiated a target to be
Net Zero Energy by 2020, people
from all over the group have had
the opportunity to drive actions to
reduce energy consumption and to
generate on site renewable energy.
Develop
Kingspan has developed three
leadership development programmes
over the past 24 months and over
170 current and future leaders have
attended these programmes. The
first level is geared to our graduate
employees who join the “Yours to
Shape” development programme,
which takes place in 4 modules over
12 months. During this programme
each graduate is assigned a senior
executive as their mentor. The second
programme, our newest leadership
programme – PEAK (Programme for
Executive Acceleration in Kingspan),
is aimed at middle management.
This comprises of two residential
modules with on-going external
coaches assigned to participants
and regular webinars on key issues
e.g. digitalisation and innovation.
Thirdly, we partnered with
the International Institute for
Management Development in
Data & Flooring Technology
Insulated Panels
Rest of the World
Republic of Ireland
57%
8%
Employee
Numbers
by Division
Americas
19%
Employee
Numbers
by Geography
3%
Water & Energy
9%
Light & Air
12%
Insulation
Boards
19%
5%
UK
21%
Mainland
Europe
47%
Gender balance, % Female
02
2018
18% F
82% M
2017
17% F
83% M
Injury Frequency Rate
2018
2017
1.5 p/100k hours
1.6 p/100k hours
Zero fatalities in 2018 (2017: zero)
01
UK, Berenice Hitchens,
Water & Energy
02
UK, Will Dyer,
Water & Energy
45
Lausanne for a customised, global
leadership programme for our current
top talent who are operating at the
most senior level worldwide.
Protect
Kingspan takes the safety of our
employees incredibly seriously. All
accidents, as well as near misses, are
recorded and reviewed. Health and
Safety (H&S) is under ongoing review
at a facility and divisional level and a
Group H&S Committee sits at least
twice a year. It is an opportunity for
all divisions and geographies to share
best practice and discuss operational
experiences that will improve the
welfare of all of our employees.
Several initiatives have been rolled
out to encourage H&S in our facilities,
including safety culture surveys and
questionnaires, poster campaigns,
guest speakers who shared their
experiences of living with an injury and
e-learning training platforms.
Kingspan is proud to have gone
through another year with zero
fatalities in our business. Absolute lost
time accidents were up year-on-year
but primarily driven by the impact of
acquisitions, the frequency rate fell by
almost 6% or over 9% if you exclude
the impact of acquisitions.
Equal opportunities, employee
rights and diversity
Kingspan is committed to providing
equal opportunities from recruitment
and appointment, training and
development to appraisal and
promotion opportunities for a
wide range of people, free from
discrimination or harassment and in
which all decisions are based on work
criteria and individual performance.
We see diversity and inclusiveness as
an essential part of our productivity,
creativity and innovation.
It is important for us to celebrate
and highlight the successes of people
in Kingspan and we created online
stories to demonstrate the career
potential for diverse groups in our
business. We are encouraged to see
that over 30% of graduates on our
“Yours to Shape” programme in
2018 were female.
Business & Strategic Report — Sustainability Report
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Our Communities
Our Communities
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Kingspan grew out of a family business and those family values
continue to shape how we engage with our communities today.
Decades on, Kingspan remains deeply rooted in the community
of Kingscourt, Ireland, where the business was founded. Being
engaged in our local communities is a core element of the culture
of Kingspan. It is important that our businesses have the flexibility
to support initiatives which are relevant to the local workforce and
to the communities in which they operate. In 2018 we are proud to
have supported a wide range of initiatives, including: runs against
cancer, stimulating the local environment through beekeeping,
children’s craft competitions for local schools, festive family box
donations and multiple sponsorship and fundraising events.
Kingspan Water & Energy
gives the gift of water - Australia
Kingspan reached out to the Liverpool
Plains Shire to donate a 104,000
litre tank filled with drinking water.
The council chose to install the tank
at Currabubula, a town 18 km outside
of Tamworth with a community of
about 330 people. This community
of people were mainly relying on bore
water for drinking due to the drought
conditions in the area. The bore
water was not ideal for drinking as it
contained too much iron and calcium.
The tank was installed at
Currabubula War Memorial Hall -
an ideal location with great
accessibility from all angles and
is situated right across from
Currabubula Public School.
Our policies
Aims
→ Comply with all local laws in
the countries we operate in.
→ Ensure supply chain
accountability.
Modern slavery
Slavery and human trafficking are
abhorrent crimes and we all have
a responsibility to ensure that they
do not continue. At Kingspan we
pride ourselves on conducting our
business ethically and responsibly.
The Modern Slavery Act 2015 became
UK legislation and required all large
UK companies and businesses who
supply goods or services in the UK
to publish a slavery and human
trafficking statement each financial
year on their website. Kingspan is
fully committed to ensuring that
modern slavery is not taking place
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Kingspan – our future innovators
Kingspan was delighted to continue
to support Junior Achievement
Ireland (JAI) in 2018. Our volunteers
went back to the classroom to
encourage and to inspire young
students to continue in education
and to explore exciting new future
opportunities incorporating
possibilities opened up through the
study of STEM and related subjects.
Junior Achievement programmes
help to create a culture of enterprise
within the education system. They
also help young people prepare for
the world of work, giving them skills
in communication and preparing for
interviews. In 2018 JAI programmes
and workshops reached over
60,000 students, partnered with
over 540 schools and received the
support of over 3,000 volunteers.
Kingspan volunteers worked with
over 300 students in schools local
to our facilities.
02
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Ireland
Students on the Junior
Achievement Ireland programme.
03
02
Australia
Gift of Water. Councillor Doug Hawkins
(Deputy Mayor)and Rural Sales Account
Manager, Ron James with the council
members of Liverpool Plains Shire.
03
France
Light & Air. The Light and Air team
in Ecodis keep 120,000 bees, which
produce 45kg of honey annually.
in our business or any of our supply
chains. We adopted and published
our policy statement at the end
of 2016 and all our businesses are
responsible for ensuring supplier
compliance with the legislation.
Supply chain engagement
Kingspan engages with its supply
chain to minimise the environmental
impact of its raw materials, using
its purchasing power to bring
about lasting and positive change.
Kingspan has developed an ethical
and procurement strategy for
procuring materials and services in a
sustainable way, and we seek to build
and maintain long term relationships
with key suppliers and contractors to
ensure that they are aligned to the
same standards. Many of our suppliers
are accredited to ISO 9001, ISO 14001
and OHSAS 18001, which cover quality,
environmental and health and safety
management systems.
Customer experience programme
Everything that our customers
experience with Kingspan matters
to us. Whether it’s the performance
of our product solutions, the
responsiveness of our service teams
or the efficiency of our deliveries, we
strive to provide a positive experience
to all our customers. To help us
achieve our strategic goal we have
introduced four key commitment
areas into our businesses on which
we are focusing as part of our
customer excellence programme:
→ Deliver a memorable customer
experience.
→ Develop the employee experience,
so our teams never want to work
for anyone else.
→ Measure what our customers and
employees actually experience.
→ Continue to innovate.
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USA
Natalia Rizzatti
California, USA
—
Natalia joined Kingspan through
the acquisition of AWIP in 2016.
As an experienced CFO and
originally from Brazil, Natalia
was the ideal candidate to set
up the finance function for our
LATAM division. Natalia is also
the President of Kingspan’s
AWIP business.
At Kingspan, I have been
fortunate to be exposed to
diverse cultures throughout
the world. The Americas teams
are passionate about developing
new technologies that allow
Kingspan to convert traditional
systems to more energy efficient
building solutions. For example,
the insulated panel roof market
in the USA is still in its infancy
compared to that of Latin America
or Europe - our North America
team is committed to changing
this reality through competitive
and innovative products which
enable material improvements
to the construction timeline,
while also providing a long-term
sustainable roofing solution.
The Americas is a significant
conversion opportunity for Kingspan.
Insulated Panels account for less
than 15% of the relevant market
in North America and QuadCore™
offers a differentiated and best-in-
class solution for design teams.
Latin America is seeing rapid
changes in building codes and
is a compelling long-term market
for our product portfolio.
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Chairman’s Introduction
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On behalf of the Board, I am pleased
to present the Directors’ Report to the
shareholders of Kingspan Group plc. Kingspan
has implemented a strong governance framework
which supports the effective and prudent
management of the business, and helps drive
the long-term success of the Group.
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During the year the Board
committees have continued to work
effectively. The reports of the Audit
and Remuneration Committees are
set out in this Annual Report, and
provide details of each committee’s
membership and activities during
the year.
The Audit Committee has focused
in particular on the management
and control of risks throughout
the business having regard to the
growing global footprint of the
Group, as well as on the Group’s
financial reporting. At the same
time, the Remuneration Committee
has ensured that the executive
directors’ pay is properly aligned
with the Group’s performance,
and shareholders' interests in the
long-term success of the Group.
The Nominations Committee has
continued to assess the mix of
the skills and experience on the
Board and its committees, and
has strengthened the independent
representation on the Board.
The Board as a whole has reviewed
the Annual Report and Financial
Statements, and is pleased to
confirm that they consider the
report and financial statements,
taken as a whole, are fair, balanced
and understandable.
This report describes how Kingspan
has applied the principles of good
governance of the UK Corporate
Governance Code (April 2016),
and the Irish Corporate Governance
Annex, throughout 2018.
Eugene Murtagh
Chairman
USA
Squibb Building
Insulation Boards:
Optim-R; Kingspan Greenguard XPS
Fire Rating: XPS Class A;
Optim-R (Core): non-combustible as
tested to EN ISO 1716
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The Board
—
The Board provides entrepreneurial leadership
and sets the governance framework for the Group.
Chairman
Eugene Murtagh
(Age 76)
Ireland
Eugene Murtagh is the non-executive Chairman of the Group.
Key skills & experience: He founded the Kingspan business in 1965 and, as CEO until 2005, he led its growth
and development to become an international market leader. He has an unrivalled understanding of the Group,
its business and ethos, and brings to the Board his leadership and governance skills.
Committees: Nominations (21 years, chair).
Chief Executive Officer
Gene M. Murtagh
(Age 47)
Ireland
Gene Murtagh is the Group Chief Executive Officer. He was appointed to the Board in November 1999.
Key skills & experience: He was previously the Chief Operating Officer from 2003 to 2005. Prior to that he was
managing director of the Group’s Insulated Panels business and of the Water & Energy business. He joined the Group
in 1993, and has a deep knowledge of all of the Group’s businesses and the wider construction materials industry.
Committees: Nominations (11½ years).
Executives
Geoff Doherty
(Age 47)
Ireland
Russell Shiels
(Age 57)
United States of
America
Peter Wilson
(Age 62)
United Kingdom
Gilbert McCarthy
(Age 47)
Ireland
Non-Executives
Helen Kirkpatrick
M.B.E.
(Age 60)
United Kingdom
Independent
Geoff Doherty is the Group Chief Financial Officer. He joined the Group, and was appointed to the Board, in
January 2011.
Key skills & experience: Prior to joining Kingspan he was the Chief Financial Officer of Greencore Group plc and
Chief Executive of its property and agribusiness activities. He is a qualified chartered accountant, with extensive
experience of capital markets and financial management in an international manufacturing environment.
Russell Shiels is President of Kingspan’s Insulated Panels business in the Americas as well as Kingspan’s global
Data & Flooring Technology business. He joined the Board in December 1996.
Key skills & experience: He has experience in many of the Group’s key businesses, and was previously Managing
Director of the Group’s Building Components and Data & Flooring Technology businesses in the UK. He
brings to the Board his particular knowledge of the North American building envelope market, as well as his
understanding of the office and datacentre market globally.
Peter Wilson is Managing Director of the Group’s global Insulation Boards business. He was appointed to the
Board in February 2003.
Key skills & experience: He has been with the Group since 1981, and has led the Insulation Boards division since
2001. He brings to the Board over 35 years’ knowledge and experience of the global insulation industry.
Gilbert McCarthy is Managing Director of the Group’s Insulated Panels businesses in the UK, Ireland, Western
Europe, Middle East and Australasia. He was appointed to the Board in September 2011.
Key skills & experience: He joined the Group in 1998, and has held a number of senior management positions
including managing director of the Off-site division and general manager of the Insulation Boards business. He
brings to the Board his extensive knowledge of the building envelope industry, in particular in Western Europe
and Australasia.
Helen Kirkpatrick joined the board in June 2007.
Key skills & experience: Helen is a Fellow of Chartered Accountants Ireland and a member of the
Chartered Institute of Marketing. She was formerly a non-executive director of the International
Fund for Ireland, Enterprise Equity Venture Capital Group, NI-CO Ltd, Wireless Group plc, and a
number of other private and not for profit companies. She brings her considerable financial and
business acumen to the Board and its Committees.
Committees: Remuneration (10 years, chair), Nominations (10 years), Senior Independent
Director.
External appointments: Non-executive director of Dale Farm Co-operative Limited, a member
of the Audit Committee of Queen’s University Belfast, a non-executive director of QUBIS Limited,
a non-executive director of the Irish Football Association and the Chairman of Neueda Group.
Qualifications: B.A., F.C.A.
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Non-Executives continued
Linda Hickey
(Age 57)
Ireland
Independent
Linda Hickey was appointed to the Board in June 2013.
Key skills & experience: She is a registered stockbroker and the Head of Corporate Broking
at Goodbody Capital Markets, where she has worked since 2004. Previously she worked at
NCB Stockbrokers and Merrill Lynch. She brings to the Board her considerable knowledge and
experience in capital markets and corporate governance.
Michael Cawley
(Age 64)
Ireland
Independent
John Cronin
(Age 59)
Ireland
Independent
Bruce McLennan
(Age 54)
Australia
Independent
Committees: Audit (5½ years), Remuneration (3½ years).
External appointments: Chair of the board of the Irish Blood Transfusion Service.
Qualifications: B.B.S.
Michael Cawley was appointed to the Board in May 2014.
Key skills & experience: He is a chartered accountant, and was formerly Chief Operating Officer
& Deputy Chief Executive of Ryanair. Prior to joining Ryanair he had experience in a number of
different distribution and manufacturing industries, including as Finance Director of the Gowan
Group, one of Ireland’s largest private companies. He brings his extensive international financial
and business experience to the Board and to the Audit Committee.
Committees: Audit (4½ years, chair), Remuneration (4½ years).
External appointments: Chairman of Fáilte Ireland, Chairman of Hostelworld Group plc, and
non-executive director of Paddy Power Betfair plc, Ryanair Holdings plc and Gowan Group Ltd.
Qualifications: B. Comm., F.C.A.
John Cronin was appointed to the Board in May 2014.
Key skills & experience: He is a qualified solicitor, and partner and former chairman of McCann
FitzGerald. He has more than 30 years’ experience in corporate, banking, structured finance and
capital markets matters. He is a member of the International Bar Association, and is President
of the British Irish Chamber of Commerce. He brings valuable legal, corporate governance and
capital markets experience to the Board.
Committees: Audit (3½ years), Nominations (4½ years).
External appointments: None.
Qualifications: B.A. (Mod) Legal Science, Solicitor in Ireland, and England & Wales.
Bruce McLennan was appointed to the Board in June 2015.
Key skills & experience: He is Managing Director and Co-Head of Advisory at Gresham
Advisory Partners Limited. He is also a Member of the Australian Institute of Company Directors,
Australian Society of Certified Practising Accountants, and a Fellow of the Securities Institute of
Australia. He brings to the Board over 30 years’ experience in investment banking, and a broad
knowledge of international capital markets and strategic and corporate planning.
Committees: Nominations (1½ year), Remuneration (1½ year).
External appointments: Member of the Australian Government Takeovers Panel.
Qualifications: B.Bus, M. Comm.
Dr Jost
Massenberg
(Age 62)
Germany
Independent
Jost Massenberg was appointed to the Board in February 2018.
Key skills & experience: He is Chief Executive Officer of Benteler Distribution International
GmbH, and was formerly the Chief Sales Officer and a member of the executive board of
ThyssenKrupp Steel Europe AG. He brings to the Board his 30 years’ experience in European
steel and major manufacturing businesses.
Committees: None.
External appointments: Chairman of VTG Aktiengesellschaft, and a non-executive director
in a number of large private companies.
Qualifications: PhD Business Admin.
Company Secretary
Lorcan Dowd
(Age 50)
Ireland
Lorcan Dowd was appointed Group Company Secretary in July 2005.
Key skills & experience: He qualified as a solicitor in 1992. Before joining Kingspan he was
Director of Corporate Legal Services in PwC in Belfast, having previously worked as a solicitor
in private practice.
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Report of the Directors
—
The directors of Kingspan Group plc (“Kingspan”) have
pleasure in presenting their report with the audited financial
statements for the year ended 31 December 2018.
Principal Activities
Kingspan is the global leader in
high performance insulation and
building envelope solutions. Kingspan
Group plc is a holding company
for the Group’s subsidiaries and
other entities. The Group’s principal
activities comprise the manufacture
and distribution of the following
product suites as part of the
complete “Building Envelope”:
→ insulated panels;
→ structural framing;
→ architectural facades;
→ rigid insulation boards;
→ building services insulation;
→ engineered timber systems;
→ natural daylighting;
→ ventilation and smoke
management solutions;
→ raised access floors;
→ datacentre storage solutions;
→ energy storage solutions;
→ rainwater and wastewater
solutions.
Kingspan is comprised of five key
business divisions which are Insulated
Panels, Insulation Boards, Light & Air,
Water & Energy and Data & Flooring
Technology. These divisions offer a
suite of complementary building
envelope solutions for both the new
build and refurbishment markets.
Results and Dividends
Group turnover for the year ended
31 December 2018 was €4.4bn
(2017: €3.7bn), trading profit
was €445.2m (2017: €377.5m),
and earnings per share were
184.0 cent (2017: 159.0 cent).
The Consolidated Income Statement
is set out in page 95 and a detailed
review of the Group’s performance
from a financial and operational
perspective is contained within the
Business & Strategic Report on
pages 8 to 33.
An interim dividend of 12.0 cent per
share was paid to shareholders on 5
October 2018 (2017: 11.0 cent). The
directors are recommending a final
dividend of 30.0 cent per share for
the year ended 31 December 2018
(2017: 26.0 cent), giving a total
dividend for the year of 42.0 cent
(2017: 37.0 cent). The final dividend
if approved at the Annual General
Meeting will be paid on 10 May 2019
to shareholders on the register at
close of business on 29 March 2019.
€4.4
€3.7
€445.2
€377.5
184.0
159.0
2018
2017
2018
2017
2018
2017
Revenue
(€bn)
Trading Profit
(€m)
EPS
(cent)
55
USA
Palo Alto
Data & Flooring Technology:
ConCore 1000
Fire Rating: Non-combustible
Business Review
The Business & Strategic Report,
including the Chief Executive’s
Review and the Financial Review,
sets out management’s review of
the Group’s business during 2018 on
pages 8 to 33. The key points include:
→ Revenue up 19% to €4.4bn.
→ Trading profit up 18% to €445.2m.
→ Insulation Board sales growth
of 12% reflecting a positive
outturn in the Iberian acquisition,
ongoing advancement of
Kooltherm® and solid underlying
markets overall.
→ Light & Air sales approaching
€300m with improved margins
in Europe offsetting softer US
margin.
→ Free cashflow up 55%
→ Water & Energy (formerly
Environmental) sales growth
of 13% with a new frontier
established in the Nordic region.
→ Data & Flooring Technology
(formerly Access Floors) sales
growth of 3% with strong sales of
data centre solutions offsetting
more sluggish office activity.
to €308.4m.
→ Group trading margin of 10.2%.
→ Basic EPS up 16% to 184.0 cent.
→ Year-end net debt of €728.3m
(2017: €463.9m). Net debt to
EBITDA of 1.4x (2017: 1.05x).
→ ROCE of 16.8% (2017: 17.8%).
→ Insulated Panels sales growth
of 21%. Strong activity in the
Americas, a positive performance
in Continental Europe and a solid
UK outturn against a difficult
backdrop. Good contribution
from acquisitions in Europe
and Latin America.
The Business & Strategic Report
on pages 10 and 11 sets out the
“four pillars” of Kingspan’s strategy,
which are:
Innovation
Differentiation from competitors
driven by superior innovation.
Penetration
Increased penetration of Kingspan’s
product suite underpinned
by regulatory changes and
environmental awareness.
Globalisation
The continued evolution of
Kingspan’s geographic footprint as
we build market leading positions
globally.
Planet Passionate
A set of initiatives across our global
business targeting the adoption of
100% renewable power.
Throughout 2018, Kingspan made
significant progress in pursuit
of this strategy with the result
that Kingspan has continued to
deliver year-on-year growth. This
strategy will remain the focus of the
execution of Kingspan’s strategic
plan for the foreseeable future.
Directors' Report — Report of the Directors
56
57
Principal risks and uncertainties
The principal risks and uncertainties
facing the Group, and the actions
taken by Kingspan to mitigate them
are detailed on pages 32 to 33 of the
Risk & Risk Management Report.
The principal risks are:
→ Volatility in the macro
environment;
→ Failure to innovate;
→ Product failure;
→ Business interruption
(including IT continuity);
→ Credit risk and credit control;
→ Employee development &
retention;
→ Fraud and cybercrime;
→ Acquisition and integration
of new businesses.
Key performance indicators
The directors are pleased to report on
the very positive performance during
2018 against all of its key performance
indicators. A detailed commentary
incorporating key performance
indicators is contained within the
Financial Review on pages 26 to 30,
and in the Sustainability Report on
pages 36 to 47. A number of the key
performance indicators have been
included in more detail on page 140
‘Alternative Performance Measures’.
The key performance indicators for
Kingspan upon which particular
emphasis is placed upon are:
Innovation
Kingspan places considerable
emphasis on innovation and
development of existing and new
products and on the improvement
of the production process, focused
primarily on differentiation and
extending competitive advantage.
In the year ended 31 December
2018, the Group’s research and
development expenditure amounted
to €30.5m (2017: €27.1m). Research
and development expenditure is
generally written off in the year in
which it is incurred. During 2018
Kingspan’s continuing investment in
research and development involved
over 40 key projects. These key
projects included:
→ QuadCore™ insulation board;
→ Next generation Kooltherm®
200 range;
→ Fibre-free ‘A Core’ insulation;
→ Prismatic daylighting
development;
→ Translucent Polycarbonate
→ Cleanroom systems product
development;
→ Integrated solar PowerPanel;
→ New Access Floors datacentre
Products;
→ Recycling of PET for Insulation
material; and
→ Unitised Façade Solutions.
Corporate governance
The directors are committed to
achieving the highest standards of
corporate governance. A statement
describing how Kingspan has applied
the principles of good governance
set out in the UK Corporate
Governance Code (April 2016) and
the Irish Corporate Governance
Annex is included in the Governance
section of this Annual Report on
pages 62 to 67. The Corporate
Governance Statement is treated
as forming part of this Report.
Code of conduct
Kingspan is committed to acting
responsibly in its business and
maintaining high standards of ethics
and integrity in all of its dealings
with its stakeholders, be they
investors, customers, suppliers, its
people or the community it operates
in. Kingspan has a Code of Conduct
which sets the standard by which
all employees across the Group are
expected to conduct themselves.
The Code sets out the fundamental
principles which all directors, officers
and employees of Kingspan are
required to adhere to in meeting
those standards.
Sustainability
Our goal is to be a global leader in
sustainable business and establish
a leading position in providing
KPIs
Financial
KPIs
Non-
Financial
Basic EPS growth
184.0 cent (up 16%)
Sales growth
Trading margin
Free cash flow
€4.4bn (up 19%)
10.2% (down 10 bps)
See page 28
See page 28
See page 28
€308.4m (up €109.9m)
See page 29
Return on capital employed 16.8% (down 1%)
Net debt/EBITDA
1.4x (2017: 1.05x)
See page 29
See page 29
Net Zero Energy
Health & Safety
Gender Balance
Waste Recycling
75%
See pages 41-42
1.5 per 100k hours (down 6%) See page 45
18% female (up 1%)
68% (down 9%)
See page 45
See page 43
ethical, renewable and affordable
best practice solutions for the
construction sector. We know that
the built economy has an important
part to play in combatting climate
change, and we have pledged to
lead by example. Our commitment
to sustainability is instilled at every
level of the Group and at every step
in the manufacturing process. Our
goal is that by 2020 all of Kingspan’s
energy needs will be met by
renewable energy.
Kingspan recognises the importance
of conducting its business in a socially
responsible manner. At Kingspan
we are Product Passionate, Planet
Passionate and People Passionate.
The Sustainability Report on pages
36 to 47 of this Annual Report gives
details of some of the projects that
are on-going across the Group, with
further details available on the
Group’s website www.kingspan.com.
Accounting records
The directors are responsible for
ensuring that accounting records,
as outlined in Sections 281 to 285 of
the Companies Act 2014, are kept
by the Group. The directors have
provided appropriate systems and
resources, including the appointment
of suitably qualified accounting
personnel, to maintain adequate
accounting records throughout
the Group, in order to ensure that
the requirements of Sections 281
to 285 are complied with. The
accounting records of the Company
are maintained at the principal
executive offices located at Dublin
Road, Kingscourt, Co. Cavan,
A82 XY31, Ireland.
The European Communities
(Takeover Bids (Directive 2004/
25/Ec)) Regulations 2006
Structure of the Company’s
share capital
At 31 December 2018, the Company
had an authorised share capital
comprised of 250,000,000 (2017:
250,000,000) ordinary shares of €0.13
each and the Company’s total issued
share capital comprised 182,171,120
(2017: 181,342,315) Ordinary Shares,
of which the Company held 1,969,143
(2017: 2,019,750) Ordinary
Shares in treasury.
Shareholding analysis as at 31 December 2018:
Shareholding
range
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
Over 1,000,000
Number of
accounts
% of total
Number of
shares held
% of total
2,874
1,472
473
153
30
5,002
57.5
29.4
9.5
3.0
0.6
100
1,232,792
4,733,536
16,321,082
45,764,680
114,119,030
182,171,120
0.7
2.6
9.0
25.1
62.6
100
Details of persons with a significant holding of securities in the company are
disclosed below:
Notification Date
Shareholder
Eugene Murtagh
Blackrock, Inc.
Shares held
%
28,018,000
15.53%
15,233,848
8.44%
Allianz Global Investors GmbH
10,349,716
5.74%
Bailie Gifford & Co.
Ameriprise Financial Inc
FMR LLC
9,010,740
5.00%
8,979,739
4.98%
5,460,760
3.02%
07/02/2019
15/02/2019
12/04/2018
16/11/2018
02/10/2018
13/02/2019
Further information required
by Regulation 21 of the above
Regulations as at 31 December
2018 is set out in the Shareholder
Information section of this
Annual Report.
Directors and Secretary
The directors and secretary of the
Company at the date of this report
are as shown in this Annual Report
on pages 52 and 53. During the year
we were pleased to announce the
appointment of Dr Jost Massenberg
as a non-executive director with
effect from 22 February 2018.
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 follows:
Eugene Murtagh
Gene Murtagh
Geoff Doherty
Russell Shiels
Peter Wilson
Gilbert McCarthy
Helen Kirkpatrick
Linda Hickey
Michael Cawley
John Cronin
Bruce McLennon
Jost Massenberg
Lorcan Dowd
31-Dec-18
28,018,000
1,129,207
238,326
300,000
389,376
247,637
26,000
5,000
30,600
8,000
10,000
-
2,603
31-Dec-17
29,018,000
1,128,999
240,350
300,000
389,376
247,637
26,000
5,000
30,600
8,000
10,000
-
4,961
30,404,749
31,408,923
Directors' Report — Report of the DirectorsKingspan Group plc — Annual Report & Financial Statements 2018 58
Details of the directors’ and
secretary’s share options at the end
of the financial year are set out in
the report of the Remuneration
Committee. As at the 22 February
2019, there have been no changes in
the directors’ and secretary’s interests
in shares since 31 December 2018.
Conflicts of interest
None of the directors have 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.
Financial instruments
In the normal course of business,
the Group has exposure to a variety
of financial risks, including foreign
currency risk, interest rate risk,
liquidity risk, and credit risk. The
Company’s financial risk objectives
and policies are set out in Note 19
of the financial statements.
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 129
manufacturing sites, and has
operations in over 70 countries
worldwide.
The Company’s principal subsidiary
undertakings at 31 December 2018,
country of incorporation and nature
of business are listed on pages 144
to 147 of this Annual Report.
The Company does not have any
branches outside of Ireland.
Outlook
The Board fully endorses the outlook
(“Looking Ahead”) expressed in the
Chief Executive’s Review on page 25.
Significant events since year end
There have been no significant
events since the year end.
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 its net debt position
and capital commitments, available
committed banking facilities and
other relevant information including
the economic conditions currently
affecting the building environment
generally and the Group’s Strategic
Plan. On the basis of this review the
directors have concluded that there
are no material uncertainties that
would cast significant doubt over 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.
Viability statement
In accordance with provision C.2.2 of
the 2016 UK Corporate Governance
Code, the directors are required
to assess the prospects of the
Company, explain the period over
which we have done so and state
whether we have a reasonable
expectation that the Company will
be able to continue in operation and
meet liabilities as they fall due over
this period of assessment.
The directors have assessed the
prospects of the Group over the
three-year period to February 2022.
The directors concluded that three
years was an appropriate period
for the assessment, having had
regard to:
→ the Group’s rolling Strategic Plan
which extends to 2022;
→ the Group’s long-term funding
commitments some of which fall
to be repaid during the period;
→ the inherent short-cycle nature
of the construction market
including the Group’s order bank
and project pipeline; and
→ the potential impact of macro-
economic events and political
uncertainty in some regions such
as the UK and Middle East.
It is recognised that such future
assessments are subject to a level
of uncertainty that increases with
time, and therefore future outcomes
cannot be guaranteed or predicted
with certainty.
The Group Strategic Plan is approved
by the Board, building upon the
several divisional management plans
as well as the Group’s strategic
goals. It is based on a number of
cautious assumptions concerning
macro growth and stability in our
key markets, and continued access
to capital to support the Group’s
ongoing investments. The strategic
plan is subject to stress testing
which involves flexing a number of
the main assumptions underlying
the forecast in severe but reasonable
scenarios. Such assumptions are
rigorously tested by management
and the directors. It is reviewed
and updated annually and was
considered and approved by the
Board at its meeting in October 2018.
In making this assessment, the
directors have considered the
resilience of the Group, taking
account of its current position
and the principal risks facing the
business as outlined in the Risk &
Risk Management Report on pages
32 and 33, and the Group’s ability to
manage those risks. The risks have
been identified using a top-down
and bottom-up approach, and
their potential impact was assessed
having regard to the effectiveness
of controls in place to manage each
risk. In assessing the prospects of
the Group such potential impacts
have been considered as have the
mitigating factors in place.
Based on this assessment the
directors have a reasonable
expectation that the Group will be
able to continue in operation and
meet its liabilities as they fall due
over the three-year period of their
assessment.
Directors’ responsibility
statement
Each of the directors whose names
and functions are set out in the
Board section of this Annual Report
confirm their responsibility for
59
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preparing the Annual Report and the
consolidated and company financial
statements in accordance with
applicable Irish law and regulations.
Company law in Ireland requires
the directors to prepare financial
statements for each financial year.
Under that law the directors have to
prepare the consolidated financial
statements in accordance with
International Financial Reporting
Standards (IFRSs) as adopted by
the European Union (EU). The
directors have elected to prepare
the company financial statements
in accordance with IFRSs as adopted
by the EU and as applied by the
Companies Act 2014. The financial
statements are required by law
to give a true and fair view of the
assets, liabilities and financial
position of the Group and company
and of the profit or loss of the Group
for that period.
In preparing those financial
statements, the directors are
required to:
→ select suitable accounting
policies and then apply them
consistently;
→ make judgements and estimates
that are reasonable and prudent;
→ state whether applicable IFRSs
have been followed, subject to
any material departures disclosed
and explained in the financial
statements; and
→ prepare the financial statements
on the going concern basis unless
it is inappropriate to presume that
the Company, and the Group as a
whole, will continue in business.
The directors are responsible for
keeping accounting records which
disclose with reasonable accuracy at
any time the financial position of the
Group and the Company and which
enable them to ensure that the
financial statements comply with the
Companies Act 2014 and Article 4 of
the IAS Regulation.
They are responsible for safeguarding
the assets of the Group and hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The directors are responsible for the
maintenance and integrity of the
corporate and financial information
on the Company’s website.
Legislation in the Republic of
Ireland governing the preparation
and dissemination of financial
statements may differ from
legislation in other jurisdictions.
In accordance with Transparency
(Directive 2004/109/EC) Regulations
2007 and the Transparency Rules of
the Financial Regulator, the directors
confirm that to the best of their
knowledge:
→ the Group financial statements
and the Company financial
statements, prepared in
accordance with the applicable
set of accounting standards, give
a true and fair view of the assets,
liabilities, financial position and
profit or loss of the Group and
Company; and
→ the Report of the Directors
includes a fair review of the
development and performance
of the business and the position
of the Group and Company,
together with a description of the
principal risks and uncertainties
that they face.
They are also satisfied in compliance
with provision C.1.1 of the UK
Corporate Governance Code
(April 2016):
→ that the Annual Report and
financial statements, taken as
a whole, is fair, balanced and
understandable and provides
the information necessary
for shareholders to assess the
Group’s position, business model
and strategy.
Directors’ compliance statement
The directors acknowledge that
they are responsible for securing
the Company’s compliance with its
relevant obligations in accordance
with Section 225(2)(a) of the
Companies Act 2014 (the “Act”)
(described below as the “Relevant
Obligations”).
In accordance with Section 225 (2)
(b) of the Act, the directors confirm
that they have:
1. drawn up a Compliance Policy
Statement setting out the
Company’s policies (that are,
in the opinion of the directors,
appropriate to the Company)
in respect of the compliance by
the Company with its Relevant
Obligations;
2. put in place appropriate
arrangements or structures that,
in the opinion of the directors,
provide a reasonable assurance
of compliance in all material
respects with the Company’s
Relevant Obligations; and
3. during the financial year to
which this report relates,
conducted a review of the
arrangements or structures that
the directors have put in place
to ensure material compliance
with the Company’s Relevant
Obligations.
Audit information
Each of the directors have taken all
the steps that they should or ought
to have taken as a director in order
to make himself or herself aware
of any relevant audit information
and to establish that the Group’s
statutory auditors are aware of that
information. So far as the directors
are aware, there is no relevant
information of which the Group’s
statutory auditors are unaware.
Auditor
In accordance with Section 383(2)
of the Companies Act 2014 the
Company’s auditors, KPMG,
Chartered Accountants, will continue
in office. A resolution authorising
the directors to determine their
remuneration will be proposed at
the Annual General Meeting.
On behalf of the Board
Gene M. Murtagh,
Chief Executive Officer
Geoff Doherty,
Chief Financial Officer
22 February 2019
Kingspan Group plc — Annual Report & Financial Statements 2018
60
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Magnus Wallin
Jönköping, Sweden
—
Magnus joined Kingspan
in 2013 as a Business Director
for Scandinavia in our
Insulation Boards division.
Space really matters in modern
buildings. The Nordics has had
insulated houses for decades,
thick wooden walls filled with
traditional fibrous insulation.
20 years ago no one wanted to
pay for making them thinner.
Now we want to make them
even better, but not thicker.
This is why the market for high
performance insulation is
growing rapidly. Our job is to
create trust in converting
a traditional insulation market
into advanced materials.
It is thrilling to be part of
a development where no one
knew what our advanced insulation
was back in 2009 and yet
10 years later it has become
well known to builders,
fire engineers and architects.
The value proposition for
Kingspan’s high performance
insulation in the Nordics is
unquestionable. We can offer
solutions with high thermal
performance that don’t
compromise on space,
which is an increasingly rare
commodity as the world
moves toward urbanisation.
Kingspan’s new Kooltherm® facility
in Sweden will support Magnus
in his growth ambitions.
Sweden
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Corporate Governance Statement
—
Kingspan is committed to operating best practice standards
of good governance, accountability and transparency.
This tone is set by the Group Board of Directors and
communicated throughout the Group regardless of division
or geographical location.
This statement outlines how
Kingspan has applied the principles
and complied with the provisions set
out in the UK Corporate Governance
Code (April 2016) (‘the Code’) and
the Irish Corporate Governance
Annex (‘the Annex’).
The full text within the Code and
the Annex can be obtained from the
following websites respectively:
www.frc.org.uk
www.ise.ie
Statement of compliance
The directors confirm that the
Company has throughout the
accounting period ended 31
December 2018 complied with the
provisions of the UK Corporate
Governance Code (April 2016) and
the Irish Corporate Governance
Annex.
The Board
The Board of Kingspan Group plc
is responsible for the leadership,
strategic direction and the long term
success of the Group. It sets the
Group’s strategic aims, establishes
the Group’s values and standards,
and monitors compliance within a
framework of effective controls.
The Board is comprised of twelve
directors, five of whom are executive
directors and seven, inclusive of
the Chairman, are non-executive
directors. Further details on the
members of the Board, including
short biographies, can be found
in the section entitled “The
Board” on pages 52 and 53. Each
of the executive directors has a
combination of general business skills
and experience in the construction
materials market. The non-executive
directors represent a diverse business
background complementing the
executive directors’ skills.
All of the directors bring an objective
judgement to bear on issues of
strategy, resources and standards of
performance both on an individual
and collective basis. The directors
believe that the Board includes
an appropriate balance of skills,
experience, independence and
knowledge of the Group to enable
them to discharge their respective
duties and responsibilities effectively
and to address any challenges as
they arise.
→ On recommendation of the
Remuneration Committee
determining the remuneration for
executive directors, secretary and
non-executive directors; and
→ Approving the Group’s long
term debt facilities and capital
structure.
The Board met formally 6 times
during the year, as well as informally
on an ad-hoc basis as and when
required. Attendance at Board
and committee meetings is set
out in the table below. The Board
has delegated responsibility for
management of the Group to the
Chief Executive and his executive
management team.
The schedule of matters reserved
for Board discussion includes the
following:
→ Adopting the Group’s rolling
5 year strategic plan and the
annual budget;
→ Approving all major capital
expenditure, investments,
material contracts, acquisitions
and disposals of businesses and
other assets;
→ Reviewing management’s
corporate and financial
performance;
→ Overall review of the Group’s
internal controls;
→ Appointment of executive and
non-executive directors and
succession planning;
Australia
8%
Germany
8%
USA
8%
UK
17%
Ireland
59%
Geographic
Breakdown
by Residency
—
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Attendance at Board and Committee meetings during the year
ended 31 December 2018
Board
Audit
Nominations
Remuneration
Eugene Murtagh
Gene M. Murtagh
Geoff Doherty
Russell Shiels
Peter Wilson
Gilbert McCarthy
Helen Kirkpatrick
Linda Hickey
Michael Cawley
John Cronin
Bruce McLennan
Jost Massenberg
A
6
6
6
6
6
6
6
6
6
6
6
5
B
6
6
6
6
5
6
6
6
5
6
6
4
A
B
4
4
4
4
4
4
A
2
2
2
2
2
B
2
2
2
2
2
A
B
4
4
4
4
4
4
4
4
Column A - indicates the number of meetings held during the period the director was a
member of the Board and/or Committee.
Column B - indicates the number of meetings attended during the period the director
was a member of the Board and/or Committee.
Board balance and independence
The Board is comprised of twelve
directors and its current size and
structure is functioning efficiently.
The balance of executive and
non-executive directors facilitates
constructive and effective challenge
and debate. Whilst it is intended
to progressively refresh the
independent non-executive directors
on the Board having regard to their
mix of skills, experience and diversity,
it is not at present intended to
change the size of the Board. The
Nomination Committee has
reviewed the size and performance
of the Board during the year and this
process occurs once annually.
The Board continues to ensure
that each of the non-executive
directors, excluding the Chairman,
remain impartial and independent
in order to meet the challenges
of the role. Throughout the year,
half of the Board, excluding the
Chairman, comprised independent
non-executive directors. Helen
Kirkpatrick is nominated as the
senior independent director of the
Company to provide a sounding
board for the Chairman and to serve
as an intermediary for the other
directors when necessary.
The directors consider that there is a
strong independent representation
on the Board. The Board has had
Independent
50%
Female
18%
Over
9 years
42%
Less than
3 years
8%
Breakdown
of
Independence
—
Gender
Breakdown
of Board
—
Tenure
on the
Board
—
Non-Independent
50%
Male
82%
Between 6
and 9 years
17%
Between
3 and 6
years
33%
64
65
due regard to various matters which
might affect, or appear to affect, the
independence of some of the directors,
and the Board considers that Helen
Kirkpatrick, Linda Hickey, Michael
Cawley, John Cronin, Bruce McLennan
and Jost Massenberg are independent.
In determining the independence
of Helen Kirkpatrick, the Board had
due regard to her length of service
as a non-executive director on the
Board, which was extended beyond
nine years following consultation
with ISS and the IAIM at that time.
Having considered the circumstances,
the Board formed the view that she
has always expressed a strongly
independent voice at the Board and
its Committee meetings, including
the Remuneration Committee of
which she is chairman, and that she
has always exercised her judgement
as a non-executive director
and as the Senior Independent
Director independent of any other
relationships within the Board.
Her independence and her sound
judgement have also been recognised
in her other external appointments.
In determining the independence of
Linda Hickey, the Board had due regard
to her position as a senior executive
at Goodbody stockbrokers, one of the
Company’s corporate brokers. Having
regard to the fact that the level of
fees and expenses paid to Goodbody
stockbrokers in respect of their role as
the Company’s corporate brokers is less
than €50,000 per annum, the Board
concluded that there was no material
relationship, financial or otherwise,
which might either directly or indirectly
influence her judgement.
When considering John Cronin’s
independence, the Board had due
regard to his position as a partner
at McCann FitzGerald, one of the
Company’s legal advisers. Mr Cronin is
not engaged directly in the provision
of legal advice to the Company and
appropriate arrangements have
been put in place within McCann
FitzGerald to ensure that no conflict
of interest could arise. The total fees
paid to McCann FitzGerald during
the year (details of which are set out
in Note 33) account for less than
1% of McCann FitzGerald's annual
revenues. In these circumstances
the Board concluded that there was
no material relationship, financial or
otherwise, which might either directly
or indirectly influence his judgement.
The Board therefore concluded that
neither Ms Kirkpatrick’s, Ms Hickey’s
nor Mr Cronin’s independence was
affected and considers that between
them they bring valuable financial,
capital markets, governance and
legal risk experience to the Board.
The Chairman and Chief Executive
There is a clear division of responsibility
set out in writing between the non-
executive Chairman and the Chief
Executive. Further information on
the officers of the Company on the
division of responsibility set out below.
Appointments to the Board
All appointments to the Board are
made on the recommendation of the
Nominations Committee. In addition,
the Nominations Committee reviews
the various committees and makes
recommendations to the Board on the
appointment of the chairman and the
membership of each. This is a formal,
rigorous and transparent procedure.
The standard terms of appointment
of non-executive directors are
available, on request, from the
Company Secretary. Further details
of the activities of the Nominations
Committee during the year are set out
elsewhere in this section.
The Chairman’s primary responsibility
is to lead the Board. He is responsible
for setting the Board’s agenda
and for the efficient and effective
working of the Board. He ensures
that all members of the Board,
including in particular the
non-executive directors, have an
opportunity to contribute
effectively and openly. He is also
responsible for ensuring that
there is appropriate and timely
communication with shareholders.
n
a
Chair m
Senior In
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The Board has delegated executive
responsibility for running the
Group to the Chief Executive and
the executive management team.
The Chief Executive is responsible
for the strategic direction and the
overall performance of the Group,
and is accountable to the Board
for all authority so delegated.
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The Senior Independent
Director of the Company is
available to shareholders who
have concerns that cannot
be addressed through the
Chairman, Chief Executive or
Chief Financial Officer. She
also leads an annual meeting
with the non-executive
directors to appraise the
workings of the Board.
All directors have access to
the advice and services of
the Company Secretary who
is responsible for ensuring
that Board procedures are
followed. He is also responsible
for advising the Board,
through the Chairman, on all
governance matters.
n
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Information and professional
development
The Group Chairman is responsible
for ensuring that all directors are
supplied with appropriate and timely
information for Board and committee
meetings. Such information is always
provided to the Board in a timely
manner which gives the directors the
opportunity to probe and question
the executives when deemed relevant.
Kingspan ensures that the directors
obtain all professional advice required
in order to further their duties as a
director either through the directors
seeking professional advice at the
expense of the Company or through
independent professional advisors
being available for consultation with
the Board and attending Board and
Committee meetings where required.
All directors have access to the
advice and services of the Company
Secretary. The Group has arranged
appropriate insurance cover in respect
of legal action against its directors.
The Company has procedures whereby
directors (including non-executive
directors) receive formal induction
and familiarisation with Kingspan’s
business operations and systems on
appointment. They are brought to
the businesses manufacturing sites
as part of the induction procedure
with in-depth explanations of the
processes involved at the site. All
directors receive continuing training
relating to the discharge of their
duties as directors, including
legislative changes and developments
in accounting, governance and other
standards as appropriate. During
the year, the Board visited three of
the Group’s manufacturing facilities
and also had the opportunity to
meet with key executives within the
Group, which gave the Board valuable
insight into the manufacturing
processes, the local markets and the
management strategy.
Performance evaluation
Kingspan has in place formal
procedures for the evaluation of its
Board, Committees and individual
directors. The purpose of this formal
evaluation is to ensure that the
Board of Directors (on a collective
and individual basis) is performing
effectively and to ensure stakeholder
confidence in the Board.
The Chairman reviews annually the
performance of the Board of Directors,
the conduct of Board meetings and
committee meetings, and the general
corporate governance of the Group. In
addition the non-executive directors,
led by the senior independent director,
meet annually without the Chairman
present to conduct a review of the
Board and appraise the Chairman’s
performance.
As part of the performance
evaluation process the Chairman
meets at least once annually with
the non-executive directors without
the executive directors being
present to review the performance
of the Board, the conduct of
Board meetings and committee
meetings, and the general corporate
governance of the Group.
An externally facilitated review of the
Board’s performance was carried
out during the year by Better Boards.
The review format included both a
questionnaire completed by all Board
members, and a series of one to one
interviews conducted with selected
executive and non-executive directors.
The results of the review were very
positive, with the overall conclusion
that the Board operates effectively
and cohesively, and no major gaps or
concerns were identified. A number of
themes for further consideration were
proposed, and the Board will monitor
progress against an agreed step plan
during the current year.
Re-election of directors and
succession planning
All directors, in accordance with
the provisions of the UK Corporate
Governance Code, are subject
to annual re-election by the
shareholders at the Company’s
Annual General Meeting. Kingspan
is committed to refreshing and
strengthening the independent
representation on the Board on
an on-going basis.
Kingspan also has in place a People
and Leadership Development
Programme. This allows the Group
to ensure that the key senior talent
throughout the Group are gaining
the appropriate experience, skillsets
and development opportunities in
order to ensure that we have the
best people in the right roles and a
strong pipeline of executive talent
throughout the Group.
Board committees
The Board has established the
following committees: Audit,
Nominations and Remuneration
committees. All committees of
the Board have written terms
of reference setting out their
authorities and duties and these
terms are available on the Group’s
website www.kingspan.com.
Attendance at meetings held is set
out in the table on page 63.
The Members of each committee,
the date of their first appointment
to the committee and brief details of
these committees are set out below:
Audit Committee
Michael Cawley (Chair)
Appointed 2014, Independent
Linda Hickey
Appointed 2013, Independent
John Cronin
Appointed 2015, Independent
The Board has established an Audit
Committee to monitor the integrity of
the Company’s financial statements,
and the effectiveness of the Group’s
internal financial controls.
The members of the Audit
Committee bring considerable
financial, accounting and commercial
experience to the committee’s
work, and in particular the Board
considers that the chairman of the
Audit Committee, Michael Cawley
B.COMM., F.C.A., has appropriate
recent and relevant financial
experience. The Board is satisfied
that the combined qualifications and
experience of the members give the
committee collectively the financial
expertise necessary to discharge its
responsibilities. The report of the Audit
Committee is set out on pages 82 to
87, which describes how the Company
has applied the principles of Section
C of the UK Corporate Governance
Code (April 2016) and the Irish
Corporate Governance Annex.
Directors' Report — Corporate Governance StatementKingspan Group plc — Annual Report & Financial Statements 2018
66
Nominations Committee
Eugene Murtagh (Chair)
Appointed 1998
Gene Murtagh
Appointed 2007
Helen Kirkpatrick
Appointed 2009, Independent
John Cronin
Appointed 2014, Independent
Bruce McLennan
Appointed 2017, Independent
The Nominations Committee assists
the Board in ensuring that the
composition of the Board and its
committees is appropriate for the
needs of the Group. The committee
considers the Board’s membership,
identifies additional skills or
experience which might benefit the
Board’s performance, considers
whether there’s a need to strengthen
or refresh the non-executive director
representation on the Board, and
recommends appointments to or,
where necessary, removals from, the
Board. In considering appointments
to the Board, it is the policy of the
committee to have regard to diversity,
encompassing gender, nationality,
age and skillset, when setting the key
criteria for the appointment.
The Nominations Committee met
twice in 2018, to recommend the
appointment of Jost Massenberg
to the Board, to approve the
annual re-election of Directors at
the Company’s Annual General
Meeting, and to consider the report
from Better Boards following their
externally facilitated evaluation of
the Board and agree any actions
arising therefrom.
The committee considered
whether or not to engage a firm of
consultants to assist in the process
of recruiting a new non-executive
director, and agreed that in order to
ensure best fit with the Company,
it would use the knowledge and
contacts of the committee to
identify suitable candidates. Using
the Board’s knowledge and contacts
the committee identified a pool
of potential candidates and Jost
Massenberg was considered the most
suitable. Members of the committee
met with Jost Massenberg before
agreeing to recommend his
appointment to the Board.
Following the retirement of Helen
Kirkpatrick after last year's
Annual General Meeting, Jost
Massenberg will be appointed to the
Nomination Committee.
Remuneration Committee
Helen Kirkpatrick (Chair)
Appointed 2009, Independent
Michael Cawley
Appointed 2014, Independent
Linda Hickey
Appointed 2015, Independent
Bruce McLennan
Appointed 2017, Independent
The Remuneration Committee has
responsibility for setting remuneration
for all executive directors and for
the Chairman, including pension
contributions, share options and
any compensation payments. The
committee also monitors the level
and structure of remuneration for
senior management.
The Report of the Remuneration
Committee is set out in this Annual
Report on pages 70 to 81, which
describes how the Company has
applied the principles of Section D of
the UK Corporate Governance Code
(April 2016) and the Irish Corporate
Governance Annex.
Following the retirement of Helen
Kirkpatrick after last year's Annual
General Meeting, Linda Hickey
will take over as chair of the
Remuneration Committee
Communication with shareholders
Kingspan places great emphasis
on maintaining regular and
responsible dialogue with
shareholders. This is achieved
through meetings with institutional
investors, presentations to brokers
and analysts, and making relevant
information available on the Group’s
website www.kingspan.com in a
timely fashion. Twice a year, following
publication of the annual and half-
year results, the Chief Executive
Officer and the Chief Financial Officer
meet with institutional investors
during a formal results roadshow.
In addition, Kingspan is committed
to interacting with the international
financial community to ensure a
full understanding of the Group’s
strategic plans and its performance
against these plans. During the year,
the executive management and
investor team presented at three
capital market conferences, hosted a
capital markets day at our Holywell
facility in Wales and conducted 311
institutional one-on-one and group
meetings. Further information
regarding the Company’s Annual
General Meeting is set out in the
Shareholder Information Section in
this Annual Report.
All shareholders can sign up to
obtain all regulatory news and
alerts via the Kingspan website
www.kingspan.com, and depending
upon shareholder preference, a copy
of the Annual Report can be obtained
in hard copy or can be obtained from
the Group website.
The Company encourages
communication with all shareholders,
and welcomes their participation at
Annual General Meetings. Last year,
in advance of the Annual General
Meeting, the Company reached out
to the holders of over 75% of shares
to engage with them and seek their
feedback on the AGM resolutions
and governance matters in general.
All shareholders who attend the
Company’s Annual General Meeting
are given the opportunity to question
the Chairman and other members of
the Board, including the chairmen of
the committees, on any aspect of the
Group’s business.
Key Shareholder
Engagements 2018
February Full year Results 2017
March Annual Report 2017
April Trading Update
April Annual General Meeting 2018
August Interim results 2018
November Trading Update
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Shareholders’ meetings and rights
The Company operates under the
Companies Act 2014 (the ‘Act’).
This Act provides for two types of
shareholder meetings: the Annual
General Meeting (‘AGM’) with
all other meetings being called
Extraordinary General Meetings
(‘EGM’).
This process has been in place for
the year under review and up to the
date of approval of the financial
statements and it is regularly
reviewed by the Board in compliance
with ‘Guidance on Risk Management,
Internal Control and Related Financial
and Business Reporting’ issued by the
Financial Reporting Council.
→ Sales are submitted and
reviewed on a weekly basis
whilst full reporting packs are
submitted and reviewed on a
monthly basis; and
→ Internal audit function review
financial controls and report
results/findings on a quarterly
basis to the Audit Committee.
The Company must hold an AGM
each year in addition to any other
shareholder meeting in that year. The
ordinary business of an AGM is to
receive and consider the Company’s
Annual Report and statutory
financial statements, to review
the affairs of the Group, to elect
directors, to declare dividends, to
appoint or reappoint auditors and
to fix the remuneration of auditors
and directors.
The Chairman of the Board of
Directors shall preside as chairman
of every general meeting and in his
absence, one of the directors present
will act in the capacity of chairman.
The quorum for a general meeting
shall be not less than three members
present in person or by proxy and
entitled to vote. At any general
meeting, a resolution put to the vote
of the meeting shall be decided by
a show of hands unless a poll is duly
demanded. All ordinary shares rank
pari passu and carry equal voting
rights. Every member present in
person or by proxy shall upon a show
of hands have one vote, and every
member present in person or by
proxy shall upon a poll have one vote
for each share of which they are the
holder. In the case of an equality of
votes the Chairman shall, both on a
show of hands and at a poll, have a
casting vote.
Further details of shareholders rights
with regards the general meetings
are set out on page 142 within the
Shareholder Information section of
this Annual Report.
Internal control and risk
management systems
The Board confirms that there is
an ongoing process for identifying,
evaluating and managing any
significant risks faced by the Group.
The Board has delegated
responsibility to the Audit
Committee to monitor and review
the Group’s risk management
and internal control processes,
including the financial, operational
and compliance controls, through
detailed discussions with
management and the executive
directors, the review and approval
of the internal audit reports, which
focus on the areas of greatest risk
to the Group, and the external audit
reports, as part of both the year-
end audit and the half year review
process, all of which are designed
to highlight the key areas of control
weakness in the Group. Further
details of the work conducted by the
Audit Committee in this regard is
contained in the Report of the Audit
Committee set out on pages 82 to 87.
The main features of the
Group’s internal control and risk
management systems that relate
specifically to the Group’s financial
reporting processes are:
→ Annual budgets and strategic
plans are approved annually
by the Board and compared
to actual performance and
forecasts on a monthly basis;
→ Sufficiently sized finance
teams with appropriate level of
experience and qualifications
throughout the Group;
→ Formal Group Accounting
Manual in place which clearly
sets out the Group financial
policies in addition to the
formal controls;
→ Formal IT and Treasury policies
and controls in place;
→ Centralised Tax and Treasury
functions;
In addition, the main features of
the Group’s internal control and
risk management systems that
relate specifically to the Group’s
consolidation process are:
→ The review of reporting
packages for each entity as
part of the year-end audit
process;
→ The reconciliation of reporting
packages to monthly
management packs as part of
the audit process and as part
of management review;
→ The validation of consolidation
journals as part of the
management review process
and as an integral component
of the year-end audit process;
→ The review and analysis of
results by the Chief Financial
Officer and the Auditors with
the management of each
division;
→ Consideration by the Audit
Committee of the outcomes
from the annual risk
assessment of the business;
→ The review of internal and
external audit management
letters by the Chief Financial
Officer, Head of Internal Audit
and the Audit Committee; and
the follow up of any critical
management letter points to
ensure issues highlighted are
addressed.
Further information on the risks
faced by the Group and how they
are managed are set out in the Risks
& Risk Management section of this
Annual Report on pages 32 and 33.
Kingspan Group plc — Annual Report & Financial Statements 2018
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Ireland
Sean McGuinness
Kingscourt, Ireland
—
Sean is a qualified engineer who
joined Kingspan through our
graduate programme in 2016.
Sean has worked out of our R&D
facility in Hradec, Czech Republic
and is presently working, out of
Ireland, on multiple projects with
Kingspan Panels in the US.
New technologies are revolutionising
our industry. At Kingspan we not
only focus on making the most
thermally efficient insulation,
we’re exploring new technology
solutions to maximise the energy-
efficiency of buildings. Working as
part of R&D means that I get to
be part of a very diverse team that
enables me to be involved in each
stage of product and technology
development, from idea generation,
through to testing and certifications.
I get to work with teams across
the business to create proof of
concepts and test cases that can
ultimately deliver value for
our business and customers.
Kingspan’s ambition is to be
the leader in digital technologies for
the construction industry and Sean
dedicates a large portion of
his research time to digitalisation.
Along with investing in BIM
technology, we have sponsored a
number of internal and external
digital innovation challenges.
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→ The committee notes the
→ In line with new provisions in the
provisions of the UK Corporate
Governance Code relating to
pensions and will seek to address
these over time as part of its wider
remit of considering wider group
policies and practices. Pension
arrangements for the current
executive directors will continue
in their current form but the new
policy will provide a cap for new
appointments of 25% of salary.
→ Shareholding guidelines have
increased so that executive
directors have to hold at least
200% of salary in Kingspan
shares, to be achieved through
the retention of at least 50%
of all vested deferred share and
PSP awards. These levels are
substantially exceeded by the
current executive directors.
→ There is currently a strong
alignment with shareholders
through the substantial
holdings of Kingspan shares
by the executive directors. The
committee does not therefore
consider it necessary, at this
time, to include a formal 2 year
holding period post vesting
for PSP awards but will keep
this under review for new
appointments.
revised UK Corporate Governance
Code, the policy includes a
discretion for the committee to
adjust incentive pay and vesting
levels if the formulaic outcome of
incentive awards does not reflect
underlying corporate performance,
the investor experience or
employee reward outcome.
→ For “good leavers”, the deferral of
annual bonuses and performance
period for the PSP awards
(with the award being reduced
by an amount to reflect the
proportion of the vesting period
not actually served), will continue
post cessation of employment.
This provides post cessation of
employment, alignment to the
longer-term performance and
sustainability of the business.
In light of this, the committee
has not introduced additional
post cessation of employment
shareholding at this time but
again will keep this under review
as market practice evolves.
→ The policy now sets out our
internal policies on recruitment
and cessation, and on non-
executive director remuneration,
which are in line with market
practice.
Investor views and consultation
In arriving at this new policy and
providing this years’ Remuneration
Report the committee has taken
into account investor and published
proxy agency guidance. It has also
engaged with our largest investors
and proxy voting agencies regarding
the new directors’ remuneration
policy and welcomes the feedback
received from both.
Conclusion
The committee believes that
the policy, with its evolutionary
refinements rather than
revolutionary changes and its
application for 2019 strongly
supports the Group’s business
strategy. Further, the committee
believes that there has been and
continues to be a strong link
between reward and performance.
Finally, as I will be stepping down
as chairman of the Remuneration
Committee and retiring as a non-
executive director of Kingspan
following completion of my term
of appointment, I want to thank
my fellow committee members and
the Company Secretary, for their
diligent work over the years.
Helen Kirkpatrick
Chairman,
Remuneration Committee
France
Insulated Panels:
JI Breva 27 solid and
perforated profiles
Fire Rating:
Euroclass A1
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Report of the Remuneration Committee
—
On behalf of the Remuneration Committee,
I am pleased to present the Directors’ Remuneration
Report for the year ended 31 December 2018.
This report sets out Kingspan’s
updated remuneration policy, the
operation of the policy in 2018 and
its proposed operation in 2019. It
provides details of the activities
of the committee, and explains
the decisions the committee has
made over the last 12 months and
the alignment of remuneration
outcomes to performance for 2018.
The Remuneration Report will
be subject to an advisory vote at
our Annual General Meeting on
3 May 2019.
The EU Shareholders’ Rights Directive
which addresses matters such as
directors’ remuneration disclosures
and shareholder approval of the
directors’ remuneration policy, has
yet to be transposed into Irish law
and it is not yet clear how this will
be finally implemented in Ireland.
Nevertheless, in anticipation of the
Shareholders’ Rights Directive being
implemented in Ireland, and in line
with Kingspan’s commitment to
best corporate governance practices
and shareholder engagement, the
Remuneration Committee has
decided that shareholders should
be given an advisory vote on the
Kingspan directors’ remuneration
policy at its 2019 Annual General
Meeting. This will be the first time
that Kingspan has presented its full
remuneration policy to shareholders
for approval.
The Remuneration Committee has
also committed to providing an
increased level of transparency in
its remuneration reporting in recent
years, and has incorporated many of
the proposed disclosure requirements
into this report.
Our remuneration strategy
The primary objective of the
Remuneration Committee is to
create a remuneration structure
for executive directors which:
a. supports the delivery of the Group
strategy and creates value for
shareholders over the longer term;
b. rewards individuals by reference
to their divisional responsibilities
and overall corporate
performance in both the short
and longer term; and
c. is capable of attracting and
retaining key individuals
necessary for business success.
Performance in 2018
2018 was another good result for
Kingspan and the remuneration
outcomes for our executive directors
are aligned to this. Group EBITDA
exceeded €500m for the first time
ever, reflecting a strong performance
from all businesses, despite
challenges in our raw material supply
chain and uncertainty in the UK
market. As against this, integration
of our recently acquired businesses
in Central and Southern Europe and
Latin America progressed well as they
delivered a solid contribution to the
Group results. Trading profit was up
18% on prior year and earnings per
share (EPS) was up 16% over prior
year, whilst the total shareholder
return in the year was 3.8%. (the
share price at 31 December 2018 was
€37.38, 2017: €36.41).
The executive directors’ annual
performance bonuses are based on
stretching Group EPS targets and
the Divisional MD’s have additional
divisional profit targets. This excellent
performance resulted in varying
levels of annual bonus payouts being
earned by each of the executive
directors in respect of the year ended
31 December 2018. These ranged
between 69% and 119% of base
salary, and are detailed later
in this report.
Our 2016 long-term Performance
Share Plan (PSP) awards are based
on Total Shareholder Return (TSR)
relative to a group of sector peers
and EPS growth, both measured over
a three-year performance period
from 2016 to 2018. Once again
Kingspan achieved top quartile TSR
performance amongst its peer group
for the eight cycle in a row which
together with strong long-term EPS
growth resulted in the 2016 PSP
awards vesting at 89% of maximum.
Further details on the vesting of the
2016 PSP Awards are also set out
later in this report.
Directors’ remuneration policy
changes
The committee reviewed the
current policy and concluded that
fundamental changes were not
required. Accordingly, there is no
change to quantum or the weighting
in the policy between annual
bonus and long-term incentive. The
committee also carefully reviewed
the changes to the UK Corporate
Governance Code, best practice
and investor expectations, and has
agreed changes to the current policy
to reflect these, as set out in this
report. The committee wishes to
highlight the following key factors
that it took into account:
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Directors’ Remuneration Policy
In setting the executive directors’
remuneration package the
Remuneration Committee seeks to
ensure that:
→ the Group will attract, motivate
and retain individuals of the
highest calibre;
→ executives are rewarded in a
fair and balanced way for their
contribution to the Group’s
performance;
→ executives receive a level of
remuneration that is appropriate
to their scale of responsibility and
individual performance;
→ the overall approach to
remuneration has regard to the
sectors and geographies in which
we operate; and
→ risk is properly considered in
setting remuneration policy
and determining remuneration
packages.
through a mix of short and long term
performance based incentives and by
encouraging share ownership, whilst
taking into consideration the market
norms and practices of other quoted
Irish and international industry peer
companies of similar size and scope in
setting the base and fixed elements of
the package.
The committee believes that
this policy sets an appropriate
balance between fixed and variable
remuneration, and that the split
between short-term and long-term
performance based remuneration
(including the deferred share awards)
reflects the Group’s objective to drive
long-term shareholder value through
its strategic pillars of innovation,
penetration, globalisation, and planet
passionate. The following tables show
the mix between fixed and variable
performance related pay, and also
between short-term and long-term
remuneration.
Fixed
38%
Variable
62%
Fixed pay
v
Variable pay
—
Variable pay
Short Term
v
Long Term
—
The Remuneration Committee seeks
to align the interests of executive
directors with those of shareholders
The key elements of the executive
directors’ remuneration policy are
set out below:
Long term
48%
Short term
52%
Executive Directors' Fixed Remuneration
Provides a fair fixed element of pay commensurate for the role ensuring no over reliance on variable pay.
Base salary - attracts and retains skilled and experienced individuals.
How it operates
Base salaries are reviewed annually by the Remuneration Committee in the last quarter of
each year.
Factors taken into account by the committee include the Group’s overall performance, the
executive directors’ experience, role and personal performance, movements in pay generally
across the Group and competitive market practice taking into account companies of a
similar size and complexity to Kingspan. Where applicable, changes in salary are effective
from 1 January.
Increases will generally be in line with increases across the Group, but may be higher or lower
in certain circumstances to reflect performance, changes in remit, roles and responsibilities,
or to allow newly appointed executives to move progressively towards market norms.
Maximum opportunity
No prescribed maximum base salary
or maximum annual increase.
Executive Directors' Variable Remuneration
The Remuneration Committee seeks to ensure that overall remuneration reflects Group performance and individual contribution.
Accordingly, the committee seeks to align an appropriate portion of the executive directors’ remuneration with the achievement
of annual and longer term performance targets.
Performance related bonus - drives and rewards achievement of annual short-term performance targets, with deferred
share awards aligning management interests with shareholders and the longer term performance of the Group.
How it operates
Executive directors receive annual performance related bonus based on the attainment
of financial targets set prior to the start of each year by the committee.
Bonuses are paid on a sliding scale if the targets are met. Maximum bonus is only
achieved if ambitious incremental growth targets are achieved.
No more than 100% of salary may be delivered in cash through the bonus plan.
Any performance related bonus achieved in excess of the amount payable in cash
is satisfied by the grant of share awards, which are deferred for two years.
Maximum opportunity
The maximum annual performance
related bonus is up to 150% of base
salary.
Bonus payment is 0% at threshold
target.
Performance share plan - drives and rewards execution of the longer term business strategy, aligns the interests of executive directors
and senior managers with those of the Group’s shareholders and recognises and rewards value creation over the longer term.
How it operates
Executive directors are entitled to participate in the Group’s Performance Share Plan (PSP).
Under the terms of the PSP, performance shares are awarded to the executive directors
and the senior management team. The performance shares will vest after three years only
if the Company’s underlying performance has improved during the 3-year performance
period, and if certain performance criteria are achieved over the performance period.
For new appointments (who may not already have a substantial equity stake in the
Company) the committee will consider whether PSP awards should have a two-year post
vesting holding period (so there is a total of five years between the date of grant and any
possible sale of shares subject to sales to pay taxes) to provide investor and share price
alignment as well as a mechanism for new executive directors to build a shareholding in
the Company.
Selection of performance measures - Annual bonus and PSP
Maximum opportunity
200% of base salary.
Threshold vesting is at
25% of maximum.
Each year, prior to the start of the relevant performance period, the committee assesses which performance measures
(including if applicable non-financial measures), are most appropriate for both the annual bonus and the PSP awards, to reflect
the Company’s strategic initiatives. The Committee may change the performance measures, or the combination and weighting
of performance measures, for awards granted in future years based upon the strategic plans of the Company. The committee
sets what it considers are demanding targets for variable pay in the context of the Company’s trading environment and strategic
objectives and considering the Company’s internal financial planning and market forecasts.
Policy on external appointments
Subject to Board approval, executive directors may accept external non-executive positions and retain the fees payable for
such appointments.
The non-executive directors’ remuneration policy is set out below.
Non-Executive Directors
Non-executive directors’ fees - to reflect time commitment, experience and responsibilities and to attract and retain high calibre
NEDs by offering a market competitive fee level
Pension scheme and other allowances - attracts and retains skilled and experienced individuals.
How it operates
How it operates
Maximum opportunity
The Chairman of the Board receives a single fee for all his responsibilities.
The Group operates a defined contribution pension scheme for executive directors. Pension
contributions are calculated on base salary only. Contributions are determined on an
individual basis and take into account a number of factors including age, length of service,
and number of years to retirement.
The committee may alternatively pay a cash amount subject to all applicable employee
and employer payroll taxes and social security.
No prescribed maximum for current
incumbents.
For new appointments a maximum of
25% of salary unless exceptionally a
higher amount is appropriate to take
account of market practice in certain
countries where executives may be
recruited from.
Benefits - provides market competitive benefits for recruitment and retention purposes, as well as supporting the personal health
and well-being of the executive.
How it operates
Maximum opportunity
Executive directors’ benefits include but are not limited to life and health insurance, the use by
the executive directors of company cars (or a taxable car allowance), and relocation or similar
allowances on recruitment, each in line with typical market practice.
No prescribed maximum level,
as benefits depend on individual
director circumstances.
The non-executive directors each receive a basic board membership fee.
The Chairman of Board Committees and the Senior Independent Director receive
an additional fee to reflect the additional role and responsibilities (only one
additional fee is paid if a director has dual roles).
Supplemental fees may be paid for additional responsibilities and activities.
Non-executive directors are entitled to the reimbursement of reasonable business
expenses including any tax (grossed up) that may be payable on those expenses.
Letters of appointment and policy on recruitment and termination
Maximum opportunity
There is no prescribed maximum annual fee
or fee increase.
Account is taken of the general increase in fees
in the non-executive market, but a lower or
higher fee increase may be made to recognise,
for example, an increase in the scale, scope or
responsibility of the role and/or take account
of relevant market movements.
Each of the non-executive directors has a letter of appointment with the Company which recognises that their appointments can
be terminated on one month’s notice and are subject to annual re-election by the shareholders at the Company’s Annual General
Meeting. The non-executive directors do not have service contracts and do not participate in any bonus or long-term incentive
schemes. The non-executive directors do not receive any pension or other benefits, and there is no provision for compensation for
loss of office other than payment of accrued fees and expenses.
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 74
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The committee has adopted best practice governance policies in relation to the directors’ remuneration contracts,
as set out below.
Governance
Share ownership guidelines - aligns the interests of management and shareholders to shareholder value and longer-term performance
Executive directors are required to build up and retain 200% of salary, to be achieved through the retention of at least 50% of all
vested deferred share and PSP awards (subject to sales to meet taxes payable). Achievement of this guideline is measured through
beneficially owned shares and deferred bonus share awards only.
For good leavers annual bonus deferral will continue post cessation of employment and performance targets for annual bonus
and pro-rated PSP awards will be tested at the usual time providing longer term post cessation of employment alignment to the
longer-term performance and sustainability of the business. There are no additional post cessation of employment requirements for
beneficially owned shares.
Clawback & malus - including discretion to adjust formulaic calculation of incentive pay
The Remuneration Committee recognises that there could potentially be circumstances in which performance related pay (either
annual performance related bonuses and/or PSP Awards) is paid out and where certain circumstances later arise which bring
the committee to conclude that the payment should not have been made in full or in part. Whilst the Company has robust
management and financial controls in place to minimise any such risk, the committee has put in place formal clawback and malus
arrangements for the protection of the company and its investors. The clawback of performance related pay, and malus provisions
(where awards are reduced to nil before they have vested) would apply in certain circumstances including:
→ a material misstatement of the Company’s financial results;
→ a material breach of an executive’s contract of employment;
→ error in calculation;
→ failure of risk management;
→ corporate failure;
→ any wilful misconduct, recklessness, and/or fraud resulting in serious damage to the financial condition or business reputation
of the Company.
The committee may adjust the bonus and PSP that is payable if it considers the formulaic outcome is not representative of the
underlying performance of the Company, investor experience or employee reward outcome.
Approach to recruitment
The recruitment package for a new director would be set in accordance with the terms of the Company’s remuneration policy.
Annual bonus opportunity will reflect the period of service for the year. On an internal appointment, any variable pay element
awarded in respect of their prior role will normally be allowed to continue according to its terms.
The normal maximum annual Performance Share Plan award limit is 200% of salary in a financial year. The committee may exceed
this limit (up to the maximum of 400% of salary) in exceptional circumstances, for example, for the Company to be able to attract
and secure the right candidate if required.
On recruitment, the Company may compensate for incentive pay (or benefit arrangements) foregone from a previous employer.
Replacement share awards would be made under the Company’s existing share plans or as necessary and as permitted under the
Listing Rules. The new awards would take account of the structure of awards being forfeited (cash or shares), quantum foregone,
the extent to which performance conditions apply, the likelihood of meeting any existing performance conditions and the time left
to vesting.
Service contracts and termination
Each of the executive directors has a service contract with the Company which provides for 12 months’ notice of termination
by the Company (or, at the discretion of the Company, payment for all or part thereof) and 6 or 12 months by the director and
it is the Company’s policy that notice periods will not exceed 12 months. The service contracts do not include any provision for
compensation for loss of office, other than the notice period provisions set out above. There are no enhanced provisions on a
change of control and there are no specific severance arrangements.
The committee’s policy in relation to termination of service contracts is to deal with each case on its merits having regard to the
circumstances of the individual, the termination of employment, any legal advice received and what is in the best interests of the
Company and its shareholders.
Annual bonuses and PSP awards are dealt with in accordance with the rules of the relevant plans. At the discretion of the committee
(and normally where the individual has served a minimum of 6 months of the bonus year), a pro-rata bonus may become payable at
the normal payment date for the period of service subject to full year performance targets being met.
The default treatment for share based awards is that any unvested award will lapse on termination of employment. However, under
the rules of the Performance Share Plan, in certain prescribed circumstances (e.g. “good leaver”), awards are eligible to vest subject
to the performance conditions being met over the normal performance period (or a shorter period at the committee’s discretion)
and with the award being reduced by an amount to reflect the proportion of the vesting period not actually served.
In anticipation of the Shareholders’ Rights Directive being implemented in Ireland, and in line with Kingspan’s
commitment to best corporate governance practices and shareholder engagement, the Remuneration Committee
has decided that shareholders should be given an advisory vote on Kingspan directors’ remuneration policy at the
2019 Annual General Meeting.
Implementation of Remuneration
Policy For 2019
Base salary, benefits and pension:
The committee carried out a full
review of base salaries, with the
assistance of independent advice,
and determined the following
increases for 2019.
In 2016 the committee agreed to
progressively increase the Chief
Executive Officer’s salary over a
number of years to what it considers
is a market rate for the size,
responsibilities and complexities of
his role. These factors have increased
significantly over the years as the
business has expanded into new
markets, invested in organic growth
and become a significantly larger
and more international business.
As part of this phasing, the Chief
Executive Officer received salary
increases in 2017 of 10% (previously
disclosed) and in 2018 an increase
of 7.5%. For 2019 the committee has
awarded a 5% increase, being the
final phase of this salary adjustment.
The committee considers this to be
market rate for the current role of
the Chief Executive Officer.
The committee also carried out a
review of the divisional directors’
roles and noted that Peter Wilson’s
role as Managing Director of the
global Insulation Boards business had
significantly increased over several
years in terms of size and complexity,
whilst at the same time as a result of
exchange rate movements, Mr Wilson’s
salary had become misaligned to
levels in the rest of the business. To
correct this the committee decided
to increase Mr Wilson’s salary by 10%
in 2019 and will review this again
in 2020 and consider whether a
further increase is required to bring
it into alignment, subject to ongoing
divisional and Group performance.
Salaries for the other executive
directors will be increased by 3% in
line generally with increases in the
rest of the workforce.
Benefits and pension will be in line
with those received for 2018.
Annual performance bonus:
The maximum bonus opportunity for
all the executive directors is 150% of
salary (unchanged from 2018) with
up to 100% of salary earned through
the bonus plan delivered in cash and
up to 50% of salary being deferred
into shares in the Company for two
years. For 2019, the Remuneration
Committee has determined to use
the same performance measures as
in 2018:
→ CEO & CFO: Group EPS growth
targets over prior year.
→ Divisional MDs: 40% of their total
bonus opportunity is based on the
achievement of divisional profit
growth targets, and 60% of their
total bonus opportunity is based
on the achievement of Group EPS
growth targets over prior year.
The committee has carefully
considered alternative financial
measures for the annual bonus and
has concluded that EPS provides
the strongest alignment to the
business strategy as well as being a
critical key performance indicator.
Targets are set using unadjusted
audited EPS, as reported in our
annual accounts, which creates a
strong alignment with shareholders’
experience. Targets will be disclosed
with performance against them in
the 2019 Remuneration Report.
Performance share awards:
For 2019, the following PSP Awards
will be granted:
→ For the CEO: an award over shares
with a market value of 175% of
base salary;
→ For the other executive directors:
an award over shares with a
market value of approx. 150%
of base salary (subject to
adjustment to ensure internal
parity and to manage exchange
rate fluctuations between
the divisional directors). The
committee will keep this
approach under review and
ensure that it does not breach
the overall limits contained in
the PSP rules.
The Remuneration Committee has
selected the same performance
measures as for the 2018 PSP awards.
Half of the award will be based on
EPS growth targets and the other
half on relative TSR against the same
peer group as the 2018 awards.
The committee reviewed the EPS
targets for the 2019 and future PSP
awards. It determined EPS targets
should no longer include Irish CPI,
reflecting the international nature of
the business and a desire to simplify
the targets. For the 2019 PSP awards,
25% of the EPS part of the award
will vest for 6% compound growth
per annum rising to 100% vesting for
12% compound growth per annum.
Accordingly, the committee set the
following targets which, given the
market and business outlook from
which these targets will be measured,
it considers to be demanding in all
the circumstances:
Non executive director fees
There is no increase to the non-
executive director fees for 2019.
2019 PSP Awards
Percentage
of total award
Performance measure
Percentage vesting
on threshold target
Threshold
vesting target*
Maximum
vesting target*
50%
50%
EPS
TSR
12.5%
12.5%
6%
12%
Median ranking
Upper quartile (or higher)
*Straight line vesting between threshold and maximum vesting
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 76
77
Remuneration outcomes for 2018
Base salary: The salaries for 2018 for
each of the executive directors were
set by the Remuneration Committee
towards the end of 2017. The Chief
Executive’s salary was increased by
7.5% as detailed above. Increases for
the other executive directors were
generally in line with increases in the
business as a whole.
Overall, total salaries for the
executive Directors increased by
5% in 2018. Full details are set out
in the table below.
DIRECTORS’ REMUNERATION FOR YEAR ENDED 31 DECEMBER 2018
(Remuneration is reported in the currency received by the individual)
Executive Directors
Gene
Murtagh
Geoff
Doherty
Russell
Shiels
Peter
Wilson
Gilbert
McCarthy
Total(1)
EUR000
EUR000
USD000
GBP000
EUR000
EUR000
2018
2017
2018 2017 2018 2017 2018 2017 2018 2017
2018
2017
Fixed Pay
- Salary and Fees
- Pension Contributions (2)
- Benefits (3)
Performance Pay (4)
- Cash element
- Deferred share awards
828
150
34
770
140
31
546
530
568
133
33
128
193
32
65
541
189
64
376
154
17
358
505
480
2,785
2,667
150
13
101
33
96
34
721
174
703
167
828
158
599
-
546
104
413
568
168
186
326
494
149
2,567
1,683
-
108
-
72
-
96
-
531
-
Total executive pay
1,998 1,540 1,362 1,103 1,502
962
805
847 1,229
759
6,770
5,220
Charge to Consolidated Income Statement for share options and awards (5)
2,807
2,153
Non Executive Directors (6)
Eugene Murtagh
Helen Kirkpatrick
Linda Hickey
Michael Cawley
John Cronin
Bruce McLennan
Jost Massenberg (7)
Total non-executive pay
Total Directors’ remuneration
191
191
85
75
85
75
75
64
85
75
85
75
75
-
650
586
10,227
7,959
(1) The 'Total' figure shows Russell Shiels’ remuneration converted to Euro at the following average rate USD: 1.1812 (2017: 1.1294).
(1) The 'Total' figure shows Peter Wilson's remuneration converted to Euro at the following average rate GBP: 0.88477 (2017: 0.87642).
(2) The Group operates a defined contribution pension scheme for executive directors. Certain executives have elected to receive part
of their prospective pension entitlement as a non-pensionable cash allowance in lieu of the pension benefit foregone, subject to
all applicable employee and employer payroll taxes.
(3) Benefits principally relate to health insurance premiums and company cars /car allowances. In the case of Russell Shiels the cost of
life insurance and permanent health benefit is also included.
(4) Performance pay is earned for meeting clearly defined EPS growth and divisional profit targets. Details of the bonus plan and
targets are set out on page 77 of the Remuneration Report.
(5) The charge to the Consolidated Income Statement represents the current year cost of the unvested PSP Awards granted to the
Executive Directors. Details of the valuation methodology are set out in Note 3 to the Financial Statements.
(6) Non-executive directors receive a base fee of €75,000 per annum, plus an additional fee of between €7,500 and €10,000 for
chairmanship of Board committees. They do not receive any pension benefit, or any performance or share based remuneration.
(7) Jost Massenberg was appointed as a non-executive director on 22 February 2018.
Performance related bonus:
The targets for 2018 were set prior
to the start of the year, and
comprise a combination of
stretching Group EPS targets and
divisional profit growth targets. In
2018 all executive directors were
eligible for a maximum performance
related bonus opportunity of up to
150% of base salary.
The Chief Executive’s and the
Chief Financial Officer’s annual
performance related bonuses were
based on Group EPS growth targets
over prior year, with the maximum
annual performance related bonus
being payable on the achievement
of 25% Group EPS growth over prior
year. The Remuneration Committee
considers this to be a stretching
target, aligned with shareholder
interests.
For each of the Divisional MDs, up
to 40% of their annual performance
related bonus opportunity was
based on achieving stretching
divisional profit targets, with the
maximum bonus for the divisional
profit element being payable on
the achievement of 10% divisional
profit growth. A further 60% of the
Divisional MDs’ annual performance
related bonus opportunity was
payable on the achievement of the
same Group EPS targets as for the
Chief Executive and Chief Financial
Officer’s bonus.
Again, the committee considers
these to be appropriately stretching
targets, aligned with shareholder
interests.
The Remuneration Committee
reviewed the Group EPS growth and
divisional performance following
the year end, and considered the
extent to which the 2018 annual
performance bonus targets had been
achieved by each of the executive
directors. Whilst the Group delivered
excellent results for the year (trading
profit up 18% on prior year) and
strong EPS growth (up 16% on prior
year) the maximum Group EPS
target was not achieved, and the
varying divisional performances
resulted in different levels of bonus
payouts being earned by each of the
executive directors. In each case 19%
of maximum bonus opportunity was
satisfied by the grant of deferred
share awards, which are designed
to align the executives reward with
longer-term shareholder interests.
The holding period is two years.
The table below sets out the
performance against targets for
each of the executive directors
in respect of the year ended 31
December 2018. The Board believes
that disclosure of the Divisional
MD’s specific bonus targets and
performance against them would be
inappropriate as this is commercially
sensitive business information not
otherwise available to competitors.
Vesting of the 2016 Performance
Share Plan awards: The
Remuneration Committee reviewed
the extent to which the vesting
targets in respect of the PSP Awards
granted in 2016 had been met by
reference to EPS and TSR targets over
the three year performance period
to 31 December 2018. For 2016 the
Committee granted PSP Awards
that were 40% based on EPS growth
targets, 40% based on relative TSR
and 20% based on Exceptional TSR
targets as set out below.
The committee determined that
total EPS growth during the period
was over 72%, which significantly
exceeded the target for maximum
vesting of CPI plus 10% p.a.
The committee also noted that
Kingspan had achieved top quartile
performance in its peer group for the
eighth cycle in a row, ranking in the
87th percentile in respect of the
performance period. The committee
therefore concluded that the PSP
vesting conditions in respect of the
TSR element of the 2016 PSP Awards
had been satisfied in full and that
the Exceptional TSR targets were
partly achieved.
2018 ANNUAL PERFORMANCE RELATED BONUS
Maximum
opportunity
as % salary
Performance
measure
Threshold
target
Target for
maximum
vesting of
cash
element
Target for
maximum
vesting of
deferred share
element
Performance
achieved
Bonus
outcome as
% salary
Chief Executive
Chief Financial
Officer
Russell Shiels
Peter Wilson
Gilbert McCarthy
150%
150%
60%
90%
60%
90%
60%
90%
EPS
EPS
151.0c
151.0c
174.9c
174.9c
198.7c
198.7c
Divisional profit
10% profit growth
EPS
151.0c
174.9c
198.7c
Divisional profit
10% profit growth
EPS
151.0c
174.9c
198.7c
Divisional profit
10% profit growth
EPS
151.0c
174.9c
198.7c
184.0c
184.0c
118%
184.0c
97%
184.0c
109%
184.0c
119%
119%
60%
59%
10%
59%
58%
59%
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 78
79
The table below sets out the targets set at the time of the granting of the 2016 PSP Awards,
and the performance achieved in respect thereof.
2016 - 2018 PSP AWARDS - PERFORMANCE
Percentage
of total
award
40%
40%
20%
Performance
measure
Threshold
target
Maximum
target
Performance
achieved
% of PSP
Awards
vesting
EPS
TSR
CPI + 5%
CPI + 10%
CPI + 19.6%
40%
Median ranking 75th percentile
87th percentile 40%
Exceptional TSR 76th percentile
100th percentile 87th percentile 9%
The TSR peer group for the 2016
PSP awards comprised the following
companies:
The TSR peer group was reviewed
and amended for awards in 2017 and
thereafter and is set out below:
Armstrong World
Industries Inc
Boral Ltd
Armstrong World
Industries
Owens
Corning
Compagnie de
Saint Gobain
Geberit AG
CRH Plc
Boral Ltd
Rockwool Intl.
A/S
Grafton Group
Plc
CRH Plc
Geberit AG
SIG Plc
Sika
NCI Building
Systems Inc
Owens
Corning
Rockwool Intl. A/S SIG Plc
Travis Perkins Plc
Uponor Corp
Grafton Group Plc Travis Perkins
Lafarge Holcim
Plc
USG
Corporation
Wienerberger
AG
Uralita SA
USG
Corporation
NCI Building
Systems Inc
Wienerberger AG
Grant of 2018 Performance Share
Plan awards: In February 2018 the
Remuneration Committee granted
PSP Awards to the executive directors
with a three year performance
period from 2018 to 2020. The Chief
Executive received an award over
shares with a market value equal
to 175% of salary and the other
executive directors 150% of salary.
The EPS condition for half of the 2018
PSP Awards, as determined by the
committee, is the achievement of
annual EPS growth of between CPI
plus 5% p.a. and CPI plus 10% p.a.
The TSR condition for the other half
of the award is the same as that set
out above for the 2019 award.
Details of all extant share awards
granted to the executive directors
and secretary under the 2017 and
the legacy 2008 Performance
Share Plans are set out in the
following table.
Non-executive directors: The non-
executive directors each receive a
fee which is approved by the Board.
The Chairman’s fee is €191,000.
The basic non-executive director
fee is €75,000. An additional fee
of €7,500 is paid for chairing the
Remuneration Committee, and a fee
of €10,000 for chairmanship of the
Audit Committee and for the Senior
Independent Director, to reflect the
additional role and responsibilities
(only one additional fee is paid if
a director has dual roles). Non-
executive director fee levels are
reviewed annually, and there was no
change to the level of fees paid to
the non-executive directors in 2018.
PERFORMANCE SHARE PLAN
Director
Gene M. Murtagh
At
31 Dec
2017
Granted
during
year
Vested
during
year
Exercised
or lapsed
during year
At
31 Dec
2018
Option
price
€
Earliest
exercise
date
Latest
expiry
date
Geoff Doherty
Russell Shiels
Peter Wilson
Gilbert McCarthy
Unvested
133,793
40,588
(44,883)
(2,514)¹
126,984
Vested
141,480
-
44,883
(86,359)²
100,004
275,273
40,588
-
(88,873)
226,988
Unvested
80,129
22,941
(27,707)
-
75,363
Vested
-
-
27,707
(27,707)³
-
80,129
22,941
-
(27,707)
75,363
Unvested
74,268
19,242
(24,812)
-
68,698
Vested
-
-
24,812
(24,812)⁴
-
74,268
19,242
-
(24,812)
68,698
Unvested
71,275
18,163
(24,812)
-
64,626
Vested
-
-
24,812
(24,812)⁵
-
71,275
18,163
-
(24,812)
64,626
Unvested
72,291
21,218
(24,812)
-
68,697
Vested
117,626
-
24,812
(46,584)6
95,854
189,917
21,218
-
(46,584)
164,551
Company Secretary
Lorcan Dowd
Unvested
13,940
4,622
(5,230)
-
13,332
Vested
27,730
41,670
-
5,230
(11,180)⁷
21,780
4,622
-
(11,180)
35,112
23/02/2019
26/02/2025
25/02/2017
24/02/2022
23/02/2019
26/02/2025
-
-
23/02/2019
26/02/2025
-
-
23/02/2019
26/02/2025
-
-
23/02/2019
26/02/2025
26/02/2016
24/02/2022
23/02/2019
26/02/2025
26/02/2016
24/02/2022
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
1 Lapsed on 24/02/2018.
2 Exercised on 07/06/2018. Market value on day of exercise €40.00.
3 Exercised on 26/02/2018. Market value on day of exercise €35.70.
4 Exercised on 11/05/2018. Market value on day of exercise €40.00.
5 Exercised on 09/05/2018. Market value on day of exercise €39.42.
6 Exercised on 15/06/2018. Market value on day of exercise €41.00.
7 Exercised on 28/08/2018. Market value on day of exercise €42.08.
DEFERRED SHARE AWARDS
Director
At 31 Dec
2017
Granted
during year
Gene M. Murtagh
Unvested
25,220
Geoff Doherty
Unvested
19,044
Russell Shiels
Unvested
18,147
Peter Wilson
Unvested
15,762
Gilbert McCarthy Unvested
16,225
1 Market value on vesting date €34.40
-
-
-
-
-
Vested &
transferred
during year1
At 31 Dec
2018
Vesting/
transfer
date
(13,321)
11,899
31/03/2019
(10,279)
8,765
31/03/2019
(9,798)
8,349
31/03/2019
(8,923)
6,839
31/03/2019
(8,286)
7,939
31/03/2019
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 80
81
Governance
Composition: The Remuneration
Committee comprises four
independent non-executive directors,
Helen Kirkpatrick (chairman),
Michael Cawley, Linda Hickey and
Bruce McLennan. The Company
Secretary acts as the secretary to
the committee.
Responsibilities: The responsibilities
of the Remuneration Committee
are summarised in the Corporate
Governance Report, and its terms
of reference are available on
the Company’s website:
www.kingspan.com
Chief Financial Officer and any other
members of the management team
may be asked to attend meetings
where their input is helpful to the
matter being discussed by the
committee. No individual is present
at a meeting when the terms of his
own remuneration are discussed. The
committee’s independent advisers
may also be asked to attend.
Clawback & malus policy: The
committee has put in place robust
clawback and malus arrangements
for the protection of the Company
and its investors, as outlined in the
Remuneration Policy above.
Shareholding requirements:
The Remuneration Committee
recognises that share ownership is
important in aligning the interests
of management with those of
shareholders. Executive directors
are required to build up and retain,
a minimum holding in Kingspan
shares with equivalent market value
to 200% of base salary. The executive
directors in practice hold significantly
in excess of this requirement. The
current shareholdings of the executive
directors as a multiple of 2018
salary (based on share price as at
31 December 2018) are shown in
the table below.
Meetings: The Remuneration
Committee met four times during
the year. Each meeting was
attended by all the members of
the committee, and an overview
of the workings of the committee is
set out below. The Chief Executive
does not normally attend meetings
but provides input where relevant,
to the committee chair prior to
the meeting. The Chief Executive,
Remuneration Committee Activities
Salary and fees
Engage independent consultants
Review of overall remuneration policy
Shareholding requirements
31/12/18
Shares/ Deferred shares
Multiple of salary
Gene M. Murtagh
Geoff Doherty
Russell Shiels
Peter Wilson
Gilbert McCarthy
1,141,106
247,091
308,349
396,215
255,576
51.5x
16.9x
23.2x
35.4x
18.9x
Feb
Mar
Jun
Oct
Review executives’ salary, role and responsibilities for 2019
Review non-executives’ fees for 2019
Approve Executive’s pension arrangements
Performance pay
Assess Group and individual performance against targets for 2017
Confirm percentage of performance bonus achieved for 2017
Confirm vesting of 2016 Deferred Share Awards
Agree Group and individual performance targets for 2019
PSP Awards
Assess performance of 2015/2017 PSP Awards against targets
Determine percentage of 2015/2017 PSP Awards which vest
Review performance measures for PSP Awards for 2018
Agree targets and level for grants of PSP Awards for 2018
Governance
Review and approve Remuneration Report for Annual Report 2017
Update on governance and remuneration trends generally
Consider shareholder votes and feedback from AGM 2018
Formalise new Remuneration Policy for shareholder approval
Review of consultants’ performance and independence
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Former directors: There were no
pension payments, payments for loss
of office or other remuneration paid
to any former directors during the
relevant financial year.
External advisors:
The Remuneration Committee
obtained advice during the year
from independent remuneration
consultants Korn Ferry.
Korn Ferry is a member of the
Remuneration Consultants Group
and a signatory to its Code of
Conduct, and all advice is provided
in accordance with this code.
During 2018 Korn Ferry carried
out a leadership development
assessment for senior members
of the Kingspan Group, but did
not have any other connection
with the Group during the year.
In light of this the committee is
satisfied that the advice obtained
was objective and independent.
Reporting requirements and
engagement with shareholders:
In anticipation of the Shareholders’
Rights Directive being implemented
in Ireland, and in line with
Kingspan’s commitment to best
corporate governance practices
and shareholder engagement,
the Remuneration Committee
has committed to providing an
increased level of transparency in
its remuneration reporting in recent
years, and has incorporated many
of the proposed disclosure
requirements into this report.
The Committee also keeps up to date
with the specific voting guidelines
of its shareholders and proxy voting
agencies as well as being advised
about developments in best practice
and Corporate Governance.
Accordingly, the Board, on
the recommendation of the
committee, will put this report of
the Remuneration Committee to an
advisory vote at the forthcoming
Annual General Meeting of the
Company, and will put the directors’
remuneration policy to a separate
advisory vote.
The Committee received strong
support for the 2017 Remuneration
Report. The table below shows
the voting outcome at Kingspan’s
2018 Annual General Meeting
relating to the 2017 Directors’
Remuneration Report.
Advisory vote on
2017 Directors’
Remuneration Report
Total votes
For
%
Against
%
143,826,542
136,145,491
94.66
7,681,051
5.34
Performance graphs
This graph shows the Company’s TSR performance against the
performance of the ISEQ and the FTSE 250 Indices over the ten-year period
to 31 December 2018.
Total Shareholder Returns
Kingspan
ISEQ
FTSE 250
1400
1200
1000
800
600
400
200
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 82
8
1
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i
Report of the Audit Committee
—
As Chairman of the Audit Committee,
I am pleased to present the report of the committee
for the year ended 31 December 2018.
This report details how the
Audit Committee has met its
responsibilities under its Terms of
Reference, the Irish Companies
Act 2014 and under the 2014 UK
Corporate Governance Code in the
last twelve months.
The Audit Committee focused
particularly on the appropriateness of
the Group’s financial statements. The
committee has satisfied itself, and
has advised the Board accordingly,
that the 2018 Annual Report and
financial statements are fair,
balanced and understandable, and
provide the information necessary
for shareholders to assess the
Company’s performance, business
model and strategy. The significant
issues that the committee considered
in relation to the financial statements
and how these issues were addressed
are set out in this report.
The Audit Committee note the
requirements under section 225 of
the Companies Act 2014 and has
ensured that the directors are aware
of their responsibilities and comply
fully with this provision.
One of the Audit Committee’s
key responsibilities is to review the
Group’s risk management and
internal controls systems, including in
particular internal financial controls.
During the year, the committee
carried out a robust assessment of
the principal risks facing the Group
and monitored the risk management
and internal control system on an on-
going basis. Further details in regard
to these matters are also set out in
this report on pages 32 to 33.
The committee also reviewed the
effectiveness of both the external audit
process and the internal audit function
as part of the continuous improvement
of financial reporting and risk
management across the Group.
Michael Cawley
Chairman, Audit Committee
US
Spoke Building
Light & Air: Pentaglas
Fire Rating:
CC1 per ASTM D 635
83
Role and responsibilities
The Board has established an Audit
Committee to monitor the integrity
of the Group's financial statements
and the effectiveness of the Group’s
internal financial controls. The
committee’s role and responsibilities
are set out in the committee’s Terms
of Reference which are available from
the Company and are displayed on
the Group’s website www.kingspan.
com. The terms of reference are
reviewed annually and amended
where appropriate. During the
year the committee worked with
management, the external auditors,
internal audit, and other members
of the senior management team in
fulfilling these responsibilities.
The Audit Committee report deals
with the key areas in which the
Audit Committee plays an active
role and has responsibility. These
areas are as follows:
1. Financial reporting and related
primary areas of judgement;
2. The external audit process;
3. The Group’s internal audit
function;
4. Risk management and internal
controls; and
5. Whistleblowing procedures.
Committee membership
As at 31 December 2018, the Audit
Committee comprised of three
independent non-executive directors
who are Michael Cawley (Chairman),
Linda Hickey and John Cronin.
The biographies of each can be
found on pages 52 to 53.
The Board considers that the
committee as a whole has an
appropriate and experienced blend
of commercial, financial and industry
expertise to enable it to fulfil its
duties, and that the committee
chairman, Michael Cawley B.COMM.,
F.C.A., has appropriate recent and
relevant financial experience.
Meetings
The committee met four times during
the year ended 31 December 2018
and attendance at the meetings is
noted below. Activities of the Audit
Committee in each meeting is
noted below.
Committee Member
Attended
Eligible
Appointment Date
Michael Cawley (Chairman)
Linda Hickey
John Cronin
4
4
4
4
4
4
2014
2013
2015
Audit Committee activities
Financial reporting
Review and approve preliminary & half-year results
Consider key audit and accounting issues and judgements
Approve going concern and viability statements
Consider accounting policies and the impact of new accounting standards
Review management letter from auditors
Review any related party matters and intended disclosures
Review Annual Report and confirm if fair, balanced and understandable
External auditors
Plan for year-end audit & half year review
Approval of audit engagement letter and audit fees
Confirm auditor independence, materiality of fees, and non-audit services
Internal audit and risk management controls
Review of internal audit reports and monitor progress on open actions
Approve internal audit plan and resources, taking account of risk management
Review of financial, IT and general controls
Monitor Group whistleblowing procedures
Assessment of the principal risks and effectiveness of internal control systems
Governance
Accounting standards update
Corporate governance update
Evaluation of external and internal audit functions
Directors' Compliance Statement policy and procedures
IT governance and risk management
General Data Protection Regulation legislation
Feb
June Aug Nov
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Directors' Report — Report of the Remuneration Committee
84
85
Each committee meeting was
attended by the Group Chief
Financial Officer and the Head of
Internal Audit. The external auditors
also attended these meetings as
required. The Company Secretary
is the secretary of the Audit
Committee. Other directors can
attend the meetings as required.
The chairman of the Audit
Committee also met with both
the Head of Internal Audit and the
external audit lead partner outside
of committee meetings as required
throughout the year.
Committee evaluation
As outlined on page 65 within the
Corporate Governance Statement,
the performance of the Board also
includes a review of the committees.
Any recommendations raised in
relation to the Audit Committee
are acted upon in a formal and
structured manner. No issues were
identified for the year ended
31 December 2018.
Financial reporting
The committee is responsible for
monitoring the integrity of the
Group’s financial statements and
reviewing the financial reporting
judgements contained therein. The
financial statements are prepared by
a finance team with the appropriate
qualifications and expertise.
The committee confirmed to the
Board that the Annual Report,
taken as a whole, is fair, balanced
and understandable and provides
the information necessary for
shareholders to assess the Group's
position and performance,
business model and strategy.
In respect of the year to 31 December
2018, the committee reviewed:
→ the Group’s Interim Management
Statements issued in April and
November 2018;
→ the Group’ s Interim Report for
the six months to 30 June 2018;
and
→ the Preliminary Announcement
and Annual Report for the year
ended 31 December 2018.
Germany
Auto Viger Garage
Insulated Panels:
JI Wall 1000FC PIR
Fire Rating:
Euroclass B-s2, d0
Primary areas
of judgement
Consideration
of impairment
of goodwill
Committee activity
The committee considered the annual impairment assessment of goodwill prepared by
management for each Cash Generating Unit (“CGU”) using a discounted cash flow analysis based
on the strategic plans approved by the Board, including a sensitivity analysis on key assumptions.
The primary judgement areas were the achievability of the long term business plans and the key
macroeconomic and business specific assumptions. In considering the matter, the committee
discussed with management the judgements made and the sensitivities performed. Further detail
of the methodology is set out in Note 10 to the financial statements.
KPMG also provided the committee with their evaluation of the impairment review process.
Kingspan completed eight acquisitions during the financial year. The allocation of goodwill to CGUs
is not yet complete for all acquisitions but the methodology of the assessments of such items of
goodwill was presented to the committee and the results were deemed appropriate.
In carrying out these reviews, the
committee:
→ reviewed the appropriateness
of Group accounting policies
and monitored changes to and
compliance with accounting
standards on an on-going basis;
→ discussed with management
and the external auditors the
critical accounting policies and
judgements that had been
applied;
→ compared the results with
management accounts
and budgets, and reviewed
reconciliations between these and
the final results;
→ discussed a report from the
external auditors identifying
the significant accounting and
judgemental issues that arose in
the course of the audit;
→ considered the management
representation letter requested by
the auditors for any non-standard
issues and monitored action
taken by management as a result
of any recommendations;
→ discussed with management
future accounting developments
which are likely to affect the
financial statements;
→ reviewed the budgets and
strategic plans of the Group in
order to ensure that all forward
looking statements made within
the Annual Report reflect the
actual position of the Group; and
→ considered key areas in which
estimates and judgement had
been applied in preparation of the
financial statements including,
but not limited to, a review of fair
values on acquisition, the carrying
amount of goodwill, intangible
assets and property, plant
and equipment, litigation and
warranty provisions, recoverability
of trade receivables, valuation
of inventory, hedge accounting
treatments, treasury matters and
tax matters.
The primary areas of judgement
considered by the committee in
relation to the Group’s 2018 financial
statements, and how they were
addressed by the committee are
set out in the following table.
Each of these areas received
particular focus from the external
auditor, who provided detailed
analysis and assessment of the
matter in their report to the
committee.
In addition, the Internal Audit team
review the businesses covered in their
annual Internal Audit Plan, as agreed
by the committee, and report their
findings to the Audit Committee
throughout the year. These internal
audit reviews are focused on areas of
judgement such as warranty provisions,
trade receivables and inventory and
provide the committee information on
the adequacy and appropriateness of
provisions in these areas.
Adequacy
of warranty
provisions
The committee reviewed the judgements applied by management in assessing both specific and
risk based warranty provisions at 31 December 2018. The committee reviewed and discussed with
management the monthly reports presented to the Board which set out, for each of the Group’s
divisions, warranty provisions and warranty costs and analyse these costs as a percentage of
divisional sales. A retrospective review of warranty provisions at 31 December 2017 was also carried
out in order to note any indication of management bias within the provisions and none was noted.
The committee was satisfied that such judgements were appropriate and the risk had been
adequately addressed.
Recoverability
of trade
receivables
and adequacy
of provision
The committee reviewed the judgements applied by management in determining the bad debts
provision at 31 December 2018. The committee reviewed and discussed with management the monthly
board report which sets out aged analysis of gross debtor balances and associated bad debt provisions
and reviewed security (including credit insurance) that is in place. The committee also assessed the
impact of IFRS 9 when completing the evaluation of the adequacy of the bad debt provisions. A
retrospective review of bad debt provisions at 31 December 2017 was also carried out in order to note
any indication of management bias within the provisions and none was noted. The committee was
satisfied that such judgements were appropriate and the risk had been adequately addressed.
Valuation of
inventory and
adequacy
of inventory
provision
The committee reviewed the valuation and provisioning for inventory at 31 December 2018. The main
area of judgement was the level of provisioning required for slow moving and obsolete inventory.
The committee reviewed and discussed with management the monthly board report which sets
out, for each of the Group’s divisions, gross inventory balances and associated obsolescence
provision including an analysis by inventory, category and ageing. A retrospective review of inventory
provisions at 31 December 2017 was also carried out in order to note any indication of management
bias within the provisions and none was noted. The committee was satisfied that such judgements
were appropriate and the risk had been adequately addressed.
Taxation
Provisioning for potential current tax liabilities and the level of deferred tax asset recognition in
relation to accumulated tax losses are underpinned by a range of judgements. The committee
addresses these issues through a range of reporting from senior management and a process of
challenging the appropriateness of management’s views including the degree to which these are
supported by professional advice from external legal and other advisory firms.
The Group’s accounting manual sets out detailed policies that prescribe the methodology to
be used by management in calculating the above provisions. Each division formally confirms
compliance with these policies on an annual basis.
The committee was satisfied that such judgements were appropriate and the risk had been
adequately addressed.
Accounting
for
acquisitions
Total acquisition consideration in 2018 amounted to €472.3m. The committee discussed with
management and the external auditors the accounting treatment for newly acquired businesses,
and the related judgements made by management, and were satisfied that the treatment in the
Group’s financial statements was appropriate.
Directors' Report — Report of the Remuneration CommitteeKingspan Group plc — Annual Report & Financial Statements 2018 86
External auditor
The Audit Committee has
responsibility for overseeing the
Group’s relationship with the external
auditor including reviewing the
quality and effectiveness of their
performance, their external audit
plan and process, their independence
from the Group, their appointment
and their audit fee proposals.
Performance and audit plan
Following the completion of
the 2017 year-end audit, the
committee carried out a review of
the effectiveness of the external
auditor and the audit process. This
review involved discussions with
both group management and
internal audit and feedback provided
by divisional management. The
committee continues to monitor
the performance and objectivity of
the external auditors and takes this
into consideration when making
its recommendations to the Board
on the remuneration, the terms of
engagement and the re-appointment,
or otherwise, of the external auditors.
Prior to commencement of the 2018
year-end audit and half-year review,
the committee approved the external
auditor's work plan and resources and
agreed with the auditor’s various key
areas of focus, including accounting
for acquisitions, impairments,
warranty provisions, as well as a
particular focus on certain higher
risk jurisdictions.
During the year the committee met
with the external auditor's without
management being present. This
meeting provided the opportunity
for direct dialogue and feedback
between the committee and the
auditor, where they discussed
inter alia some of the key audit
management letter points.
EU Audit Reform
EU legislation providing a new
regulatory framework for statutory
audit was adopted in April 2014
comprising Directive 2014/56/EU
and Regulation EU No. 537/2014). EU
Audit reform legislation is applicable
in the Member States of the European
Union, including Ireland. Under this
legislation, Kingspan Group plc is
considered a Public Interest Entity
(“PIE”). Key developments falling
from the implementation of this
legislation are:
→ a requirement that the PIE
changes its statutory auditor
every ten years (following
rotation, the statutory audit
firm cannot be reappointed for
four years);
→ a requirement that certain
procedures are followed for the
selection of the new statutory
auditor; and
→ restrictions on the entitlement
of the statutory auditing firm
to provide certain non-audit
services.
Kingspan Group plc has fully
complied with such EU Audit Reform
throughout 2018. With regards audit
firm rotation, at the very latest,
KPMG will be in situ for the final time
for the year ending 31 December
2020 and thereafter a formal tender
process will commence.
Independence and objectivity
The committee is responsible for
ensuring that the external auditor is
objective and independent. KPMG
has been the Group’s auditor since
2011, following a formal tender
process in which a number of leading
global firms submitted written
tenders and presentations. This was
the last formal tender process carried
out by the Group. The lead audit
partner is rotated every five years. In
2018, Conall O’Halloran succeeded
David Meagher as lead audit partner.
The committee received confirmation
from the auditors that they are
independent of the Group under
the requirements of the Financial
Reporting Council’s Ethical Standards
for Auditors.
The auditors also confirmed that they
were not aware of any relationships
between the Group and the firm or
between the firm and any persons
in financial reporting oversight roles
in the Group that may affect its
independence.
Non-audit services
In order to further ensure
independence, the committee has a
policy on the provision of non-audit
services by the external auditors that
seeks to ensure that the services
provided by the external auditors are
not, or are not perceived to be, in
conflict with auditor independence.
By obtaining an account of all
relationships between the external
auditors and the Group, and by
reviewing the economic importance
of the Group to the external auditors
by monitoring the audit fees as
a percentage of total income
generated from the relationship with
the Group, the committee ensured
that the independence of the
external audit was not compromised.
Last year the committee reviewed
and updated its policy on the
engagement of external auditors
and the provision of non-audit
services in order to bring it into full
compliance with the EU audit reform
legislation. An analysis of fees paid
to the external auditor, including the
non-audit fees, is set out in Note 6
and below:
Internal audit
The committee reviewed and agreed
the annual internal audit plan, which
the committee believes is appropriate
to the scope and nature of the
Group. The internal audit plan is risk
based, with all divisions audited every
year, and all new businesses audited
within 12 months of acquisition.
Audit V Non Audit Services Remuneration
2018
2017
2016
Audit Services
Non-Audit Services
87
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an annual risk assessment of the
business to formally identify the key
risks facing the Group. Full details
of this risk assessment and the key
risks identified are set out in the Risks
& Risk Management section of this
Annual Report on pages 32 to 33.
These processes, which are used by
the Audit Committee to monitor the
effectiveness of the Group’s system
of risk management and internal
control, are in place throughout the
accounting period and remain in
place up to the date of approval of
this Annual Report.
The main features of the Group’s
internal control and risk management
systems that specifically relate to
the Group’s financial reporting and
accounts consolidation process are
set out in the Corporate Governance
Report on page 67.
Whistleblowing procedures
The Group has a Code of Conduct,
full details of which are available
on the Group’s website
www.kingspan.com.
Based on the standards set out
in this Code of Conduct, the
Group employs a comprehensive,
confidential and independent
whistleblowing phone service to allow
all employees to raise their concerns
about their working environment and
business practices. This service then
allows management and employees
to work together to address any
instances of fraud, abuse and other
misconduct in the workplace.
Any instances of fraud, abuse
or misconduct reported on the
whistleblowing phone service are
reported to the Head of Internal
Audit and the Company Secretary,
who then evaluate each incident
for onward communication to
the committee. This onwards
communication consists of the full
details of the incident, key control
failures, any financial loss and actions
for improvement.
During the year, the committee
reviewed the Group’s whistleblowing
process and were satisfied with the
design and operating effectiveness
of the process.
The committee reviewed reports
from the Head of Internal Audit at
its quarterly meetings. These reports
enable the committee to monitor the
progress of the internal audit plan,
to discuss key findings and the plan
to address them in addition to status
updates of previous key findings.
The committee is responsible for
reviewing the effectiveness of the
internal audit function and does
so based upon discussion with
Group management, the Group’s
external auditor and feedback
provided by divisional management.
The committee was satisfied
that the internal audit function is
working effectively, improves risk
management throughout the Group
and that the internal audit function
team is sufficiently resourced in
addition to having the adequate level
of experience and expertise.
Risk management and
Internal controls
The Audit Committee has been
delegated, from the Board, the
responsibility for monitoring the
effectiveness of the Group’s system of
risk management and internal control.
The Audit Committee monitors
the Group’s risk management
and internal control processes
through detailed discussions
with management and executive
directors, the review and approval
of the internal audit reports, which
focus on the areas of greatest risk
to the Group, and the external audit
reports, as part of both the year-
end audit and the half year review
process, all of which highlight the
key areas of control weakness in
the Group. All weaknesses identified
by either internal or external audit
are discussed by the committee
with Group management and an
implementation plan for the targeted
improvements to these systems is put
in place. The implementation plan is
being overseen by the Group Chief
Financial Officer and the committee
is satisfied that this plan is being
properly executed.
As part of its standing schedule of
business, the committee carried out
Kingspan Group plc — Annual Report & Financial Statements 2018
88
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David Palleja
Barcelona, Spain
—
David joined Kingspan as
the CEO of Synthesia Group,
which was acquired by
Kingspan in March 2018.
The construction industry has a
responsibility to create a better
and cleaner environment for
everyone. In Synthesia we are
proud to contribute to the use
of recycled and natural ingredients
that are the basis of products
across the Kingspan Group.
In 2018 we used 256 million PET
recycled bottles and this number
is to grow in the coming years.
These bottles are used to make
our energy-efficient insulation.
At Kingspan, we think green.
When Synthesia Group was acquired
by Kingspan in 2018, David and his
team had already led the initiative
which enabled 250 million PET
recycled bottles to be converted
for use in our product range. It is
an inspiring achievement and we
look forward to investing in further
initiatives to hit our ambitious
target of using the equivalent of
500 million PET recycled bottles in
our products by 2023.
Spain
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92 — 101
102 — 139
Independent Auditor’s Report 92
Notes to the Financial Statements
91
Consolidated Income Statement 95
Consolidated Statement of
Comprehensive Income 95
Consolidated Statement of
Financial Position 96
Consolidated Statement of
Changes in Equity 97
Consolidated Statement of Cash Flows 99
Company Statement of Financial Position 100
Company Statement of Changes in Equity 101
Company Statement of Cash Flows 101
Statement of Accounting Policies 102
1
2 Segment Reporting 110
3 Employees 112
4 Non Trading Items 113
5 Finance Expense and Finance Income 113
6 Profit for the Year Before Income Tax 113
7 Directors’ Remuneration 114
8
Income Tax Expense 114
9 Earnings Per Share 115
10 Goodwill 115
11 Other Intangible Assets 117
12 Property, Plant and Equipment 118
Investments in Subsidiaries 118
13
14
Inventories 119
15 Trade and Other Receivables 119
16 Trade and Other Payables 119
17
18 Deferred Consideration 120
19 Financial Risk Management and Financial Instruments 121
20 Provisions for Liabilities 129
21 Deferred Tax Assets and Liabilities 130
22 Business Combinations 130
23 Share Capital 132
24 Share Premium 133
25 Treasury Shares 133
26 Retained Earnings 133
27 Dividends 133
28 Non-Controlling Interest 134
29 Reconciliation of Net Cash Flow to Movement
Interest Bearing Loans and Borrowings 119
in Net Debt 134
30 Cash Generated from Operations 135
31 Guarantees and Other Financial Commitments 135
32 Pension Obligations 136
33 Related Party Transactions 139
34 Post Balance Sheet Events 139
35 Approval of Financial Statements 139
140 — 148
Other Information
Alternative Performance Measures (APMs) 140
Shareholder Information 142
Principal Subsidiary Undertakings 144
Group Five Year Summary 148
92
93
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC
OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
1
OPINION: OUR OPINION ON THE
FINANCIAL STATEMENTS
IS UNMODIFIED
2
KEY AUDIT MATTERS: OUR
ASSESSMENT OF RISKS OF
MATERIAL MISSTATEMENT
We have audited the Group and Company
financial statements of Kingspan Group plc
(“the Company”) for the year ended 31 December
2018 which comprise the Consolidated Income
Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated
Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated
Statement of Cash Flows, the Company
Statement of Financial Position, the Company
Statement of Changes in Equity, the Company
Statement of Cash Flows and the related notes,
including the accounting policies in note 1. The
financial reporting framework that has been
applied in their preparation is Irish Law and
International Financial Reporting Standards
(IFRS) as adopted by the European Union and,
as regards the Company financial statements, as
applied in accordance with the provisions of the
Companies Act 2014.
In our opinion:
>
>
>
>
the financial statements give a true and fair
view of the assets, liabilities and financial
position of the Group and Company as at 31
December 2018 and of the Group’s profit for
the year then ended;
the Group financial statements have been
properly prepared in accordance with IFRS as
adopted by the European Union;
the Company financial statements have
been properly prepared in accordance with
IFRS as adopted by the European Union, as
applied in accordance with the provisions of
the Companies Act 2014; and
the Group and Company financial
statements have been properly prepared in
accordance with the requirements of the
Companies Act 2014 and, as regards the
Group financial statements, Article 4 of the
IAS Regulation.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (Ireland)
(“ISAs (Ireland)”) and applicable law. Our
responsibilities under those standards are further
described in the Auditor’s Responsibilities section
of our report. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were appointed as auditor by the directors
on 17 June 2011. The period of total uninterrupted
engagement is the 8 financial years ended 31
December 2018.
We have fulfilled our ethical responsibilities under,
and we remained independent of the Group in
accordance with, ethical requirements applicable
in Ireland, including the Ethical Standard issued
by the Irish Auditing and Accounting Supervisory
Authority (“IAASA”) as applied to listed public
interest entities. No non-audit services prohibited
by that standard were provided.
Key audit matters are those matters that, in our
professional judgment, were of most significance
in the audit of the financial statements and
include the most significant assessed risks of
material misstatement (whether or not due to
fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and
directing the efforts of the engagement team.
These matters were addressed in the context of
our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key
audit matters, in decreasing order of audit
significance, and which were unchanged from
our report on the 31 December 2017 financial
statements, were as set out below:
Group audit matters
Acquisition accounting (total consideration of
€492.4 million (2017: €207.1 million))
Refer to page 85 (Report of the Audit
Committee), page 104 (accounting policy) and
Note 22 to the financial statements.
The key audit matter
The Group completed a number of acquisitions
during the year, as set out in Note 22. The
acquired businesses comprise a number of
components in multiple jurisdictions and
accounting for the completed transactions
involves estimating the fair value at acquisition
date of the assets and liabilities of each
component, including the identification and
valuation, where appropriate, of intangible assets.
Significant judgement is involved in relation to the
assumptions used in this valuation process. There
is a risk that these assumptions are inappropriate.
How the matter was addressed in our audit
Our audit procedures in this area included,
among others, an inspection of the legal
agreements underpinning each transaction.
We examined the information contained in due
diligence reports and business case submissions
proposing the acquisitions to the board and,
where commissioned by the Group, third party
valuations of intangible assets.
We considered the assumptions used in
determining contingent consideration and
the fair value of the Group’s option to acquire
minority shares in the acquired entities. We
assessed the accounting entries used to record
each acquisition, the acquisition date assets and
liabilities of each of the acquired entities, and,
where the fair value assessment exercise had
been completed by management, the fair value
adjustments made thereto.
We also challenged the Group’s critical
assumptions in relation to the identification
and valuation of intangible assets by assessing
whether all intangible assets had been
appropriately identified; by considering the
appropriateness of the methodology used to
value the intangible assets; by comparing the
key assumptions used to external data, where
available; and by assessing the arithmetic
accuracy of calculations underpinning the values.
We considered whether the resulting goodwill
balances appeared reasonable. We also assessed
whether the disclosures as set out in Note 10 were
in compliance with IFRS 3.
Based on evidence obtained, we found that
the key assumptions used when accounting for
acquisitions were appropriate.
Warranty provisions €104.3 million (2017:
€101.0 million)
Refer to page 85 (Report of the Audit
Committee), page 106 (accounting policy) and
Note 20 to the financial statements.
The key audit matter
The Group’s business involves the sale of
products under warranty, some of which use
new technology and applications. Accordingly,
the Group has recorded significant warranty
provisions which are inherently judgemental in
nature. These provisions are required in order for
the Group to record an appropriate estimate
of the ultimate costs of repairing and replacing
product that is ascertained to be faulty.
How the matter was addressed in our audit
Our audit procedures included, among others,
assessing management’s approach to identifying,
recording and monitoring potential claims;
consideration of the nature and basis of the
provision and the range of potential outcomes;
correspondence in relation to specific claims;
progress on individual significant claims; and
relevant settlement history of claims and
utilisation of related provisions. We considered
the rollout of new technology and products and
challenged the Group’s assumptions in relation
to potential failure rates, considering past failure
rates and related settlements where necessary.
We substantively tested material movements in
the provision and considered the accounting for
movements in the provision balances and the
related disclosures for compliance with IAS 37.
Based on evidence obtained, we found that
management’s process for identifying and
quantifying warranty provisions was appropriate
and that the resulting provision was reasonable.
Goodwill €1,391.0 million
(2017: €1,095.7 million)
Refer to page 85 (Report of the Audit
Committee), page 104 (accounting policy) and
Note 10 to the financial statements.
The key audit matter
There is a risk in respect of the recoverability of the
Group’s significant goodwill balance if future cash
flows are not sufficient to recover the carrying
value of the Group’s goodwill; this could occur if
demand is weak or due to the nature of the cost
base in certain markets. We focus on this area due
to the inherent uncertainty involved in forecasting
and discounting future cash flows, which rely on
the management’s assumptions and estimates of
future trading performance, which are the basis of
the assessment of recoverability.
How the matter was addressed in our audit
Our audit procedures in this area included, among
others, assessing the Group’s impairment models
for each CGU and evaluating the assumptions
used by the Group in the model, specifically
the cash flow projections, perpetuity rates
and discount rates. We compared the Group’s
assumptions, where possible, to externally derived
data and performed our own assessment in
relation to key model inputs, such as projected
economic growth, competition, cost inflation and
discount rates.
We examined the sensitivity analysis performed
by Group management and performed our
own sensitivity analysis in relation to the key
assumptions. We compared the sum of the
discounted cash flows to the Group’s market
capitalisation. We also assessed whether the
disclosures in relation to the key assumptions and
in respect of the sensitivity of the outcome of the
impairment assessment to changes in those key
assumptions were appropriate.
Based on evidence obtained, we found that the
key assumptions used by management were
appropriate, and supported management’s
conclusion that no impairment of goodwill was
required.
Company audit matter
Investment in subsidiaries €1,191.0 million
(2017: €1,180.7 million)
Refer to page 108 (accounting policy) and Note 13
to the financial statements.
The key audit matter
The investments in subsidiary undertakings are
carried in the Company’s financial statements
at cost less impairment. Impairments are
determined by reference to the subsidiary
undertakings’ fair value.
How the matter was addressed in our audit
In this area our audit procedures included, among
others, assessing the carrying value of subsidiaries
for any objective indicators of impairment.
Based on the results of our testing, we found
management’s assessment that no impairment is
required to be reasonable.
3
OUR APPLICATION OF MATERIALITY
AND AN OVERVIEW OF THE SCOPE
OF OUR AUDIT
Materiality for the Group financial statements
as a whole was set at €19.5 million (2017: €17.5
million).
This has been calculated using a benchmark
of Group profit before taxation (of which it
represents 5% (2017: 5%)), which we have
determined, in our professional judgement, to
be one of the principal benchmarks within the
financial statements relevant to members of the
Company in assessing financial performance.
Materiality for the Company financial statements
as a whole was set at €13.0m (2017: €13.4m),
determined with reference to a benchmark of
Company’s total assets of which it represents 1%
(2017: 1%).
We report to the Audit Committee all corrected
and uncorrected misstatements we identified
through our audit in excess of €500,000
(2017: €350,000), in addition to other audit
misstatements below that threshold that we
believe warranted reporting on qualitative
grounds.
The structure of the Group’s finance function
is such that certain transactions and balances
are accounted for by the central Group finance
team, with the remainder accounted for in the
Group’s reporting components. We performed
comprehensive audit procedures, including those
in relation to the significant risks set out above, on
those transactions and balances accounted for
at Group. The Group audit team carried out the
audit of the Company financial statements.
In respect of components, based on our
assessment of the financial significance of each of
the Group’s 299 components, we determined that
there were:
>
>
>
57 components ‘full scope components’
where audits of the financial information of
those components were performed;
16 components ‘specific scope components’
where audit procedures over specified
financial statement captions were
performed, due to the risk of potential
misstatement of the Group financial
statements caused by errors in those
captions; and
226 components where the audit procedures
comprised analytical review procedures to
ensure that our initial assessment that there
were no significant risks of misstatement
of the Group financial statements in those
components was appropriate.
The coverage we obtained was as follows:
Full
scope
components
%
Specific
scope
components
%
Other
components
%
86
Profit
before
tax
Revenue 73
Total
assets
80
9
16
11
5
11
9
The audits undertaken for Group reporting
purposes at the key reporting components were
all performed to component materiality levels.
These component materiality levels were set
individually for each component and ranged from
€10,000 to €7,600,000. Detailed audit instructions
were sent to the component auditors in all of
these identified locations. These instructions
covered the significant audit areas to be covered
by these audits (which included the relevant key
audit matters detailed above) and set out the
information required to be reported to the Group
audit team.
Senior members of the Group audit team were
directly responsible for the audit of 25 full scope
components and 7 specific scope components. In
respect of the other 32 full scope components and
9 specific scope components carried out by other
component auditors (all KPMG member firms),
senior members of the Group audit team:
>
>
>
>
participated in planning calls to ensure that
the audit instructions were understood;
for certain locations, including some of the
acquired entities, visited the component;
inspected the audit workpapers in respect of
significant audit risk areas; and
participated in closing conference calls,
during which the results of the audit were
discussed by local management, the local
audit team, Group management and the
Group audit team.
Based on the above procedures, the Group audit
team was satisfied with the coverage obtained
and the audit work performed in respect of each
component.
4
WE HAVE NOTHING TO REPORT ON
GOING CONCERN
We are required to report to you if:
>
>
we have anything material to add or draw
attention to in relation to the directors’
statement in note 1 to the financial
statements on the use of the going concern
basis of accounting with no material
uncertainties that may cast significant
doubt over the Group and Company’s use
of that basis for a period of at least twelve
months from the date of approval of the
financial statements; or
the related statement under the Listing
Rules set out on page 58 is materially
inconsistent with our audit knowledge.
We have nothing to report in these respects.
5
WE HAVE NOTHING TO REPORT ON
THE OTHER INFORMATION IN THE
ANNUAL REPORT
The directors are responsible for the other
information presented in the annual report
together with the financial statements. The other
information comprises the information included
in the directors’ report and Business and Strategic
Report. The financial statements and our
auditor’s report thereon do not form part of the
other information. Our opinion on the financial
statements does not cover the other information
and, accordingly, we do not express an audit
opinion or, except as explicitly stated below, any
form of assurance conclusion thereon.
Our responsibility is to read the other information
and, in doing so, consider whether, based on our
financial statements audit work, the information
therein is materially misstated or inconsistent with
the financial statements or our audit knowledge.
Based solely on that work we have not identified
material misstatements in the other information.
Based solely on our work on the other information
we report that, in those parts of the director’s
report specified for our review:
>
>
>
we have not identified material
misstatements in the directors’ report or
other accompanying information;
in our opinion, the information given in
the directors’ report is consistent with the
financial statements;
in our opinion, the directors’ report has been
prepared in accordance with the Companies
Act 2014.
Disclosures of principal risks and longer-term
viability
Based on the knowledge we acquired during our
financial statements audit, we have nothing
material to add or draw attention to in relation to:
>
the directors’ statement of risk and
risk management on pages 32 and 33,
concerning the disclosures of principal risks,
describing these risks and explaining how
they are being managed and mitigated;
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
94
95
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance
about whether the financial statements as a
whole are free from material misstatement,
whether due to fraud or error, and to issue
our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but
does not guarantee that an audit conducted
in accordance with ISAs (Ireland) will always
detect a material misstatement when it
exists. Misstatements can arise from fraud,
other irregularities or error and are considered
material if, individually or in aggregate, they
could reasonably be expected to influence the
economic decisions of users taken on the basis of
the financial statements. The risk of not detecting
a material misstatement resulting from fraud or
other irregularities is higher than for one resulting
from error, as they may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control and may involve any
area of law and regulation not just those directly
affecting the financial statements.
A fuller description of our responsibilities is
provided on IAASA’s website at https://www.
iaasa.ie/getmedia/b2389013-1cf6-458b-
9b8f-a98202dc9c3a/Description_of_auditors_
responsiblities_for_audit.pdf
9
THE PURPOSE OF OUR AUDIT WORK
AND TO WHOM WE OWE OUR
RESPONSIBILITIES
Our report is made solely to the Company’s
members, as a body, in accordance with section
391 of the Companies Act 2014. Our audit work
has been undertaken so that we might state to
the Company’s members those matters we are
required to state to them in an auditor’s report
and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the Company
and the Company’s members, as a body, for our
audit work, for our report, or for the opinions we
have formed.
Conall O’Halloran
for and on behalf of
KPMG
Chartered Accountants,
Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2
Ireland
22 February 2019
>
>
the directors’ confirmation within the report
of the Audit Committee on page 87 that
they have carried out a robust assessment of
the principal risks facing the Group, including
those that would threaten its business
model, future performance, solvency and
liquidity; and
the directors’ explanation in the directors’
report of how they have assessed the
prospects of the Group, over what period
they have done so and why they considered
that period to be appropriate, and their
statement as to whether they have a
reasonable expectation that the Group
will be able to continue in operation and
meet its liabilities as they fall due over the
period of their assessment, including any
related disclosures drawing attention to any
necessary qualifications or assumptions.
Other corporate governance disclosures
We are required to address the following items
and report to you in the following circumstances:
>
>
>
Fair, balanced and understandable (set out
on pages 58 to 59): if we have identified
material inconsistencies between the
knowledge we acquired during our financial
statements audit and the directors’
statement that they consider that the
annual report and financial statements
taken as a whole is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Group’s position and
performance, business model and strategy;
Report of the Audit Committee (set out on
pages 82 to 87): if the section of the annual
report describing the work of the Audit
Committee does not appropriately address
matters communicated by us to the Audit
Committee;
Statement of compliance with UK Corporate
Governance Code (set out on page 56): if
the directors’ statement does not properly
disclose a departure from provisions of the
UK Corporate Governance Code specified by
the Listing Rules for our review.
We have nothing to report in these respects.
In addition, as required by the Companies Act
2014, we report, in relation to information given
in the Corporate Governance Statement on page
67, that:
>
>
based on the work undertaken for our
audit, in our opinion, the description of the
main features of internal control and risk
management systems in relation to the
financial reporting process for preparing
the Group financial statements, and
information relating to voting rights and
other matters required by the European
Communities (Takeover Bids (Directive
2004/EC) Regulations 2006 and specified
for our consideration, are consistent with
the financial statements and have been
prepared in accordance with the Act; and
based on our knowledge and understanding
of the Company and its environment
obtained in the course of our audit, we have
not identified any material misstatements in
that information.
>
the Corporate Governance statement
contains the information required by the
European Union (Disclosure of Non-Financial
and Diversity Information by certain large
undertakings and groups) Regulations 2017.
We also report that, based on work undertaken
for our audit, all of the other information
required by the Act is contained in the Corporate
Governance Statement.
6
OUR OPINIONS ON OTHER MATTERS
PRESCRIBED THE COMPANIES ACT
2014 ARE UNMODIFIED
We have obtained all the information and
explanations which we consider necessary for the
purpose of our audit.
In our opinion, the accounting records of the
Company were sufficient to permit the financial
statements to be readily and properly audited and
the Company’s statement of financial position is
in agreement with the accounting records.
7
WE HAVE NOTHING TO REPORT ON
OTHER MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
The Companies Act 2014 requires us to report to
you if, in our opinion, the disclosures of directors’
remuneration and transactions required by
sections 305 to 312 of the Act are not made.
The Companies Act 2014 also requires us to report
to you if, in our opinion, the Company has not
provided the information required by section 5(2)
to (7) of the European Union (Disclosure of Non-
Financial and Diversity Information by certain
large undertakings and groups) Regulations 2017
for the year ended 31 December 2018 as required
by the European Union (Disclosure of Non-
Financial and Diversity Information by certain
large undertakings and groups) (amendment)
Regulations 2018.
The Listing Rules of the Irish Stock Exchange
require us to review:
>
>
>
the directors’ statement, set out on page 58,
in relation to going concern and longer-term
viability;
the part of the Corporate Governance
Statement on page 56 relating to the
Company’s compliance with the provisions
of the UK Corporate Governance Code
and the Irish Corporate Governance Annex
specified for our review; and
certain elements of disclosures in the report
to shareholders by the Board of Directors’
remuneration committee.
8
RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out
on pages 58 and 59, the directors are responsible
for: the preparation of the financial statements
including being satisfied that they give a true
and fair view; such internal control as they
determine is necessary to enable the preparation
of financial statements that are free from
material misstatement, whether due to fraud or
error; assessing the Group and Company’s ability
to continue as a going concern, disclosing, as
applicable, matters related to going concern;
and using the going concern basis of accounting
unless they either intend to liquidate the Group or
the Company or to cease operations, or have no
realistic alternative but to do so.
Consolidated Income Statement for the year ended 31 December 2018
REVENUE
Cost of sales
GROSS PROFIT
Operating costs, excluding intangible amortisation
TRADING PROFIT
Intangible amortisation
Non trading items
OPERATING PROFIT
Finance expense
Finance income
PROFIT FOR THE YEAR BEFORE INCOME TAX
Income tax expense
NET PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS
Attributable to owners of Kingspan Group plc
Attributable to non-controlling interests
EARNINGS PER SHARE FOR THE YEAR
Basic
Diluted
Note
2
2
4
5
5
6
8
28
9
9
2018
€m
4,372.5
(3,158.0)
1,214.5
(769.3)
2017
€m
3,668.1
(2,615.4)
1,052.7
(675.2)
445.2
(22.2)
-
423.0
(19.5)
1.4
404.9
(69.1)
335.8
330.9
4.9
335.8
377.5
(15.7)
0.6
362.4
(16.4)
0.5
346.5
(60.6)
285.9
284.3
1.6
285.9
184.0c
182.3c
159.0c
157.3c
Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
22 February 2019
Consolidated Statement of Comprehensive Income for the year ended 31 December 2018
Profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Effective portion of changes in fair value of cash flow hedges
Items that will not be reclassified subsequently to profit or loss
Actuarial gains on defined benefit pension schemes
Income taxes relating to actuarial gains on defined benefit pension schemes
Total other comprehensive income
Total comprehensive income for the year
Attributable to owners of Kingspan Group plc
Attributable to non-controlling interests
Note
2018
€m
2017
€m
335.8
285.9
4.0
0.3
0.9
(0.2)
5.0
340.8
337.1
3.7
340.8
(85.2)
(2.1)
1.0
(0.2)
(86.5)
199.4
201.0
(1.6)
199.4
32
21
28
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
96
97
Consolidated Statement of Financial Position as at 31 December 2018
Note
2018
€m
2017
€m
ASSETS
NON-CURRENT ASSETS
Goodwill
Other intangible assets
Financial asset
Property, plant and equipment
Derivative financial instruments
Retirement benefit assets
Deferred tax assets
CURRENT ASSETS
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Provisions for liabilities
Derivative financial instruments
Deferred consideration
Interest bearing loans and borrowings
Current income tax liabilities
NON-CURRENT LIABILITIES
Retirement benefit obligations
Provisions for liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Deferred contingent consideration
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Capital redemption reserve
Treasury shares
Other reserves
Retained earnings
EQUITY ATTRIBUTABLE TO OWNERS OF KINGSPAN GROUP PLC
NON-CONTROLLING INTEREST
10
11
12
19
32
21
14
15
19
16
20
19
18
17
32
20
17
21
18
23
24
25
28
1,391.0
111.1
8.2
850.5
27.4
7.4
15.6
2,411.2
524.9
798.6
0.2
294.5
1,618.2
4,029.4
779.8
47.5
-
59.5
53.2
78.8
1,018.8
20.5
56.8
967.0
40.8
136.6
1,221.7
2,240.5
1,788.9
23.7
95.6
0.7
(12.7)
(273.2)
1,916.2
1,750.3
38.6
1,095.7
90.3
-
703.3
22.2
7.9
16.5
1,935.9
447.1
675.9
0.1
176.6
1,299.7
3,235.6
645.2
52.3
0.1
6.4
1.2
80.9
786.1
21.5
48.7
661.5
38.7
111.1
881.5
1,667.6
1,568.0
23.6
95.6
0.7
(14.0)
(220.5)
1,642.7
1,528.1
39.9
TOTAL EQUITY
1,788.9
1,568.0
Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
22 February 2019
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98
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Consolidated Statement of Cash Flows for the year ended 31 December 2018
OPERATING ACTIVITIES
Cash generated from operations
Income tax paid
Interest paid
Net cash flow from operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment
Additions to intangible assets
Proceeds from disposals of property, plant and equipment
Proceeds from disposals of trade and assets
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Payment of deferred contingent consideration in respect of acquisitions
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FINANCING ACTIVITIES
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Repayment of loans
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Proceeds from share issues
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Dividends paid to non-controlling interest
Dividends paid
Net cash flow from financing activities
INCREASE /(DECREASE) IN CASH AND CASH EQUIVALENTS
Effect of movement in exchange rates on cash held
Cash and cash equivalents at the beginning of the year
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
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100
101
Company Statement of Financial Position as at 31 December 2018
Company Statement of Changes In Equity for the year ended 31 December 2018
ASSETS
NON-CURRENT ASSETS
Investments in subsidiaries
CURRENT ASSETS
Intercompany receivables
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Payables
TOTAL LIABILITIES
NET ASSETS
EQUITY
Note
2018
€m
2017
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1,180.7
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Shareholders’
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€m
€m
Balance at 1 January 2018
23.6
95.6
0.7
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1,242.6
1,348.5
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1,348.5
Balance at 31 December 2018
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23
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95.6
0.7
(14.0)
1,242.6
Shares issued
Repurchase of shares
Employee share based compensation
Dividends paid
TOTAL EQUITY
1,303.6
1,348.5
Transactions with owners
Profit for the year
0.2
-
-
-
0.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.5)
-
-
-
10.7
-
(61.7)
(1.5)
(51.0)
-
83.0
0.2
(1.5)
10.7
(61.7)
(52.3)
83.0
Balance at 1 January 2017
23.4
95.6
0.7
(12.5)
1,210.6
1,317.8
Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
22 February 2019
Balance at 31 December 2017
23.6
95.6
0.7
(14.0)
1,242.6
1,348.5
Company Statement of Cash Flows for the year ended 31 December 2018
OPERATING ACTIVITIES
Profit for the year before tax
Net cash flow from operating activities
FINANCING ACTIVITIES
Change in receivables
Repurchase of shares
Exercise or lapsing of share options
Proceeds from share issues
Dividends paid
Net cash flow from financing activities
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
Net increase in cash and cash equivalents
CASH AND CASH EQUIVALENTS AT END OF YEAR
2018
€m
9.7
9.7
57.2
-
1.3
0.1
(68.3)
(9.7)
0.1
-
0.1
2017
€m
83.0
83.0
(19.9)
(1.5)
-
0.2
(61.7)
(82.9)
-
0.1
0.1
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
102
103
Notes to the Financial Statements for the year ended 31 December 2018
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
1 STATEMENT OF ACCOUNTING POLICIES
1 STATEMENT OF ACCOUNTING POLICIES (continued)
General information
Kingspan Group plc is a public limited
company registered and domiciled in Ireland,
with its registered office at Dublin Road,
Kingscourt, Co Cavan.
The Group’s principal activities comprise
the manufacture of insulated panels, rigid
insulation boards, architectural facades,
data and flooring technology, daylighting
and ventilation systems and water and
energy solutions. The Group’s Principal
Subsidiary Undertakings are set out on
page 144.
Statement of compliance
The consolidated and Company financial
statements have been prepared in
accordance with International Financial
Reporting Standards (IFRSs) and their
interpretations issued by the International
Accounting Standards Board (IASB) as
adopted by the EU and those parts of
the Companies Acts 2014, applicable to
companies reporting under IFRS and Article
4 of the IAS Regulation.
The Company has availed of the exemption
in Section 304 of the Companies Act 2014
and has not presented the Company
Income Statement, which forms part of
the Company's financial statements, to its
members and the Registrar of Companies.
Basis of preparation
The financial statements have been
prepared on a going concern basis,
under the historical cost convention, as
modified by:
>
> measurement at fair value of share
based payments at initial date
of award;
certain derivative financial instruments
and deferred contingent consideration
recognised and measured at fair value;
and
recognition of the defined benefit
liability as plan assets less the present
value of the defined benefit obligation.
>
The accounting policies set out below
have been applied consistently to all years
presented in these financial statements,
unless otherwise stated.
These consolidated financial statements
have been prepared in Euro. The Euro is the
presentation currency of the Group and the
functional currency of the Company.
The Group uses a number of Alternative
Performance Measures (APMs) throughout
these financial statements to give assistance
to investors in evaluating the performance of
the underlying business and to give a better
understanding of how management review
and monitor the business on an ongoing
basis. These APMs have been defined and
explained in more detail on page 140.
Comparative information has been
represented where necessary, to present the
financial statements on a consistent basis.
Changes in Accounting Policies
and Disclosures
New and amended standards and
interpretations effective during 2018
Financial instruments
IFRS 9, Financial Instruments, replaces IAS
39, Financial Instruments: Recognition
and Measurement. IFRS 9 addresses
the classification, measurement and
derecognition of financial assets and
liabilities, introduces new rules for hedge
accounting and a new impairment model
for financial assets. The Group has adopted
IFRS 9 from 1 January 2018.
IFRS 9 largely retains the requirements of IAS
39 for the classification and measurement
of financial liabilities but eliminates the
previous IAS 39 categories for financial
assets. The vast majority of the Group’s
financial assets are trade receivables and
cash and as a result the classification and
measurement changes do not have a
material impact on the Group’s consolidated
financial statements.
For trade receivables, the Group applies
the IFRS 9 simplified approach to measure
expected credit losses which uses a
lifetime expected loss allowance. Given
historic loss rates, normal receivable
ageing and the significant portion of trade
receivables that are within agreed terms,
the change in impairment methodology
as a result of implementing IFRS 9 did not
have a material impact on the Group’s
financial results.
The hedge accounting requirements in
IFRS 9 are optional. Under the transition
requirements of the new standard,
the Group may choose to apply, as its
accounting policy, IAS 39. The Group
have decided not to adopt the hedge
accounting requirements under IFRS 9 and
will continue to apply IAS 39. This decision
has no impact on the current effective
hedging relationships.
The cumulative effect method has been
adopted upon transitioning to IFRS 9.
The impact of adopting IFRS 9 on our
consolidated financial statements was
not material for the Group and there was
no adjustment to retained earnings on
application at 1 January 2018.
Revenue recognition
IFRS 15, Revenue from Contracts with
Customers, replaces IAS 18, Revenue and
IAS 11, Construction Contracts and related
interpretations.
IFRS 15 establishes a five-step model for
reporting the nature, amount, timing and
uncertainty of revenue and cash flows
arising from contracts with customers. IFRS
15 specifies how and when revenue should
be recognised as well as requiring enhanced
disclosures. The Group has adopted IFRS
15 from 1 January 2018, using the modified
retrospective approach and has not restated
comparatives for 2017.
The Group used the five-step model to
develop an impact assessment framework
to assess the impact of IFRS 15 on the
Group’s revenue transactions. The results
of our IFRS 15 assessment framework and
contract reviews indicated that the impact
of applying IFRS 15 on our consolidated
financial statements was not material for
the Group and there was no adjustment to
retained earnings or material impact on the
timing of revenue recognition on application
of the new rules at 1 January 2018.
Revenue is recognised when control of goods
is transferred to the customer, which for
the vast majority of the Group is at a point
in time when delivery has taken place in
accordance with the terms of sale.
New and amended standards and
interpretations issued but not yet
effective or early adopted
IFRS 16 sets out the principles for the
recognition, measurement, presentation and
disclosure of leases for both the lessee and
the lessor. For lessees, IFRS 16 eliminates the
classification of leases as either operating
leases or finance leases and introduces a
single lessee accounting model whereby all
leases are accounted for as finance leases,
with some exemptions for short-term and
low-value leases. It also includes an election
which permits a lessee not to separate
non-lease components (e.g. maintenance)
from lease components and instead
capitalise both the lease cost and associated
non-lease cost. The lessee will recognise a
right-of-use asset representing its right to
use the underlying asset and a lease liability
representing its obligation to make lease
payments. All rights of use assets will be
measured at the amount of the lease liability
on adoption. IFRS 16 is effective for annual
periods beginning on or after 1 January 2019,
and the Group will apply IFRS 16 from its
effective date.
The standard will primarily affect the
accounting for the Group’s operating
leases. The application of IFRS 16 will result
in the recognition of additional assets and
liabilities in the consolidated statement of
financial position and in the consolidated
income statement it will replace the
straight-line operating lease expense with
a depreciation charge for the right-of-
use asset and an interest expense on the
lease liabilities.
The Group has completed an initial
assessment of the potential impact of IFRS
16 on its consolidated financial statements.
The Group will adopt the new standard
by applying the modified retrospective
approach and will avail of the recognition
exemption for short-term and low-value
leases. The Group’s non-cancellable
operating lease commitments on an
undiscounted basis at 31 December 2018
are detailed in Note 31 to the consolidated
financial statements of the Group’s 2018
annual report and provides an indication of
the scale of leases held by the Group.
Based on this initial impact assessment,
and the current group profile, the standard
is expected to increase debt by €140m and
reduce profit before tax by €1.4m.
The new standards, amendments to standards and interpretations are as follows:
Effective Date – periods
beginning on or after
IFRS 15: Revenue from contracts with customers (Note – including amendments to IFRS 15:
Effective date of IFRS 15 (11 September 2015) and clarifications to IFRS 15 (12 April 2016))
IFRS 9 Financial Instruments (24 July 2014)
Amendments to IFRS 2: Classification and measurement of share based payment transactions (20 June 2016)
Annual Improvements to IFRS 2014 -2016 Cycle: (Amendments to IFRS 1 First-time Adoption of IFRSs and IAS
28 Investments in Associates and Joint Ventures) (issued on 8 December 2016)
IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration
Amendments to IAS 40: Transfers of Investment Property (December 2016)
IFRS 16: Leases (13 January 2016)
IFRIC 23: Uncertainty over income tax treatment (7 June 2017)
Annual Improvements to IFRS 2015 -2017 Cycle (12 December 2017)
Amendments to IAS 19: Plan amendment, Curtailment or Settlement (8 February 2018)
Amendments to references to the Conceptual Framework in IFRS Standards (29 March 2018)
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2018
1 January 2019
1 January 2019
1 January 2019*
1 January 2019*
1 January 2020*
*not EU endorsed
The following amended standards and
interpretations are not expected to have
a significant impact on the Group’s
consolidated financial statements:
IFRS 9 Financial Instruments
Amendments to IFRS 2: Classification and
measurement of share based payment
transactions
Annual Improvements to IFRS 2014 -2016
Cycle: (Amendments to IFRS 1 First-time
Adoption of IFRSs and IAS 28 Investments in
Associates and Joint Ventures)
IFRIC Interpretation 22: Foreign Currency
Transactions and Advance Consideration
Amendments to IAS 40: Transfers of
Investment Property
IFRIC 23: Uncertainty over income tax
treatment
Annual Improvements to IFRS 2015 -2017
Cycle
Amendments to IAS 19: Plan amendment,
Curtailment or Settlement
Amendments to references to the
Conceptual Framework in IFRS Standards
Basis of consolidation
The Group consolidated financial statements
incorporate the financial statements of the
Company and its subsidiary undertakings.
Subsidiaries
Subsidiaries are entities controlled by the
Group. The Group controls an entity when it
is exposed to, or has the rights to, variable
returns from its involvement with the entity
and has the ability to affect those returns
through its power over the entity.
Subsidiaries are included in the Group
financial statements from the date on which
control over the entity is obtained and cease
to be consolidated from the date on which
control is transferred out of the Group.
Transactions eliminated on consolidation
Intragroup transactions and balances,
and any unrealised gains arising from such
transactions, are eliminated in preparing
the consolidated financial statements.
Unrealised losses are eliminated in the
same manner as unrealised gains, but only
to the extent that there is no evidence
of impairment.
Segment reporting
The Group’s accounting policy for
identifying segments is based on internal
management reporting information that
is routinely reviewed by the Board of
Directors, which is the Chief Operating
Decision Maker (CODM) for the Group.
The measurement policies used for the
segment reporting under IFRS 8 are the
same as those used in the consolidated
financial statements. Segment results
that are reported to the CODM include
items directly attributable to a segment
as well as those that can be allocated on
a reasonable basis. Unallocated items
comprise mainly of corporate assets,
finance income and expenses and tax
assets and liabilities.
The Group has determined that it has five
operating segments: Insulated Panels,
Insulation Boards, Water & Energy, Data &
Flooring Technology and Light & Air.
Revenue recognition
For the year ended 31 December 2018
the Group used the five-step model as
prescribed under IFRS 15 on the Group’s
revenue transactions. This included the
identification of the contract, identification
of the performance obligations under
same, determination of the transaction
price, allocation of the transaction price to
performance obligations and recognition
of revenue.
The point of recognition arises when the
Group satisfies a performance obligation
by transferring control of a promised good
or service to the customer, which could
occur over time or at a point in time.
Prior to 1 January 2018 the policy was as
follows:
Revenue represents the fair value of goods
supplied to external customers net of trade
discounts, rebates and value added tax/
sales tax.
Revenue is recognised when the significant
risks and rewards of ownership have
passed to the customer, it is probable
that economic benefits will flow to the
Group and the amount of revenue can be
measured reliably, which usually arises on
delivery of the goods.
Research and development
Expenditure on research and development
is recognised as an expense in the period in
which it is incurred. An asset is recognised
only when all the conditions set out in IAS
38 Intangible Assets are met.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
104
105
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Business combinations
Business combinations are accounted for
using the acquisition method as at the
date of acquisition.
Any subsequent remeasurements required
due to changes in fair value of the put
liability estimation are recognised in the Put
Option Reserve in equity.
In accordance with IFRS 3 Business
Combinations, the fair value of consideration
paid for a business combination is measured
as the aggregate of the fair values at the
date of exchange of assets given and
liabilities incurred or assumed in exchange for
control. The assets, liabilities and contingent
liabilities of the acquired entity are measured
at fair value as at the acquisition date.
When the initial accounting for a business
combination is determined, it is done so on
a provisional basis with any adjustments
to these provisional values made within
12 months of the acquisition date and are
effective as at the acquisition date.
To the extent that deferred consideration
is payable as part of the acquisition cost
and is payable after one year from the
acquisition date, the deferred consideration
is discounted at an appropriate interest rate
and, accordingly, carried at net present value
(amortised cost) in the Group Statement of
Financial Position. The discount component
is then unwound as an interest charge in the
Consolidated Income Statement over the life
of the obligation.
Where a business combination agreement
provides for an adjustment to the cost of
a business acquired contingent on future
events, other than put options held by non-
controlling interests, the Group accrues the
fair value of the additional consideration
payable as a liability at acquisition date. This
amount is reassessed at each subsequent
reporting date with any adjustments
recognised in the Income Statement.
If the business combination is achieved
in stages, the fair value of the acquirer’s
previously held equity interest in the acquiree
is re-measured at the acquisition date
through the Income Statement.
Transaction costs are expensed to the
Income Statement as incurred.
Put options held by non-controlling
interest shares
Any contingent consideration is measured
at fair value at the date of acquisition.
Where a put option is held by a non-
controlling interest (“NCI”) in a subsidiary
undertaking whereby that party can require
the Group to acquire the NCI’s shareholding
in the subsidiary at a future date but the
NCI retain present access to the results
of the subsidiary, the Group applies the
present access method of accounting to
this arrangement. The Group recognises
a contingent consideration liability at fair
value, being the Group’s estimate of the
amount required to settle that liability and a
corresponding reserve in equity.
Goodwill
Goodwill arises on business combinations
and represents the difference between the
fair value of the consideration and the fair
value of the Group’s share of the identifiable
net assets of a subsidiary at the date
of acquisition.
The Group measures goodwill at the
acquisition date as:
>
>
>
>
the fair value of the consideration
transferred; plus
the recognised amount of any non-
controlling interests in the acquiree; plus
if the business combination is achieved
in stages, the fair value of the pre-
existing equity interest in the acquiree;
less
the net recognised amount (generally
fair value) of the identifiable assets
acquired and liabilities assumed.
Following initial recognition, goodwill is
measured at cost less any accumulated
impairment losses.
As at the acquisition date, any goodwill
acquired is allocated to each of the cash-
generating units expected to benefit from
the combination’s synergies. The cash-
generating units represent the lowest level
within the Group which generate largely
independent cash inflows and these units
are not larger than the operating segments
(before aggregation) determined in
accordance with IFRS 8 Operating Segments.
Goodwill is tested for impairment at the
same level as the goodwill is monitored
by management for internal reporting
purposes, which is at the individual cash-
generating unit level.
Goodwill is subject to impairment testing
on an annual basis and at any time during
the year if an indicator of impairment is
considered to exist. The goodwill impairment
tests are undertaken at a consistent time
each year. Impairment is determined by
assessing the recoverable amount of the
cash-generating unit to which the goodwill
relates. Where the recoverable amount of the
cash-generating unit is less than the carrying
amount, an impairment loss is recognised in
the Income Statement. Impairment losses
arising in respect of goodwill are not reversed
following recognition.
On disposal of a subsidiary, the attributable
amount of goodwill, not previously written
off, is included in the calculation of the profit
or loss on disposal.
Intangible assets
(other than goodwill)
Intangible assets separately acquired
are capitalised at cost. Intangible assets
acquired as part of a business combination
are capitalised at fair value as at the date
of acquisition.
Following initial recognition, intangible
assets, which have finite useful lives, are
carried at cost or initial fair value less
accumulated amortisation and accumulated
impairment losses.
The amortisation of intangible assets is
calculated to write off the book value of
intangible assets over their useful lives on
a straight-line basis on the assumption of
zero residual value. Amortisation charged
on these assets is recognised in the
Income Statement.
The carrying amount of intangible assets
is reviewed for indicators of impairment
at each reporting date and is subject to
impairment testing when events or changes
of circumstances indicate that the carrying
values may not be recoverable.
The estimated useful lives are as follows:
Customer relationships
Trademarks & Brands
Patents
Technological know how
2 - 6 years
2 - 12 years
8 years
5 - 10 years
Amortisation methods, useful lives and
residual values are reviewed at each
reporting date and adjusted as necessary.
Foreign currency
Functional and presentation currency
The individual financial statements of
each Group company are measured and
presented in the currency of the primary
economic environment in which the
company operates, the functional currency.
The Group financial statements are
presented in Euro, which is the Company’s
functional currency.
Transactions and balances
Transactions in foreign currencies are
translated into the functional currency
at the exchange rates at the date of the
transaction. Monetary assets and liabilities
denominated in foreign currencies are
translated to the functional currency at the
exchange rates at the reporting date. All
currency translation differences on monetary
assets and liabilities are taken to the Income
Statement, except when deferred in equity as
qualifying net investment hedges.
Goodwill and fair value adjustments arising
on the acquisition of a foreign entity
are initially translated at the exchange
rate at the date of acquisition and then
subsequently these assets and liabilities are
treated as part of a foreign entity and are
translated at the closing rate.
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Exchange rates of material currencies used were as follows:
Euro =
Pound Sterling
US Dollar
Canadian Dollar
Australian Dollar
Czech Koruna
Polish Zloty
Hungarian Forint
Brazilian Real
Average rate
Closing rate
2018
2017
2018
2017
0.885
1.181
1.530
1.580
25.648
4.260
318.78
4.307
0.876
1.129
1.465
1.473
26.329
4.256
309.26
3.609
0.898
1.144
1.557
1.620
25.711
4.299
321.02
4.435
0.887
1.197
1.501
1.533
25.574
4.171
310.20
3.967
Foreign operations
The Income Statement, Statement
of Financial Position and Cash Flow
Statement of Group companies that have
a functional currency different from that
of the Company are translated as follows:
>
>
Assets and liabilities at each reporting
date are translated at the closing rate
at that reporting date.
Results and cash flows are translated
at actual exchange rates for the year,
or an average rate where this is a
reasonable approximation.
All resulting exchange differences are
recognised as a separate component of
equity, the Translation Reserve.
On disposal of a foreign operation, any
such cumulative retranslation differences,
previously recognised in equity, are
reclassified to the Income Statement as
part of gain or loss on disposal.
Inventories
Inventories are stated at the lower of cost
and net realisable value.
Cost is based on the first-in, first-out
principle and includes all expenditure
incurred in acquiring the inventories and
bringing them to their present location
and condition.
>
Raw materials are valued at
the purchase price including
transport, handling costs and net of
trade discounts.
> Work in progress and finished goods
are carried at cost consisting direct
materials, direct labour and directly
attributable production overheads
and other costs incurred in bringing
them to their existing location
and condition.
Net realisable value represents the
estimated selling price less costs to
completion and appropriate marketing,
selling and distribution costs.
A provision is made, where necessary, in
all inventory categories for obsolete, slow-
moving and defective items.
Income tax
Income tax in the Income Statement
represents the sum of current income
tax and deferred tax not recognised in
other comprehensive income or directly
in equity.
Current tax
Current tax represents the expected tax
payable or recoverable on the taxable
profit for the year using tax rates and laws
that have been enacted, or substantively
enacted, at the reporting date and taking
into account any adjustments arising
from prior years. Liabilities for uncertain
tax positions are recognised based on
the directors’ best probability weighted
estimate of the probable outflow of
economic resources that will be required
to settle the liability.
Deferred tax
Deferred tax is recognised on all
temporary differences at the reporting
date. Temporary differences are defined
as the difference between the tax bases
of assets and liabilities and their carrying
amounts in the consolidated financial
statements. Deferred tax assets and
liabilities are not subject to discounting
and are measured at the tax rates that
are expected to apply in the period in
which the asset is realised or the liability
is settled based on tax rates and tax laws
that have been enacted or substantively
enacted at the reporting date.
Deferred tax liabilities are recognised for
all taxable temporary differences (i.e.
differences that will result in taxable
amounts in future periods when the
carrying amount of the asset or liability is
recovered or settled).
Deferred tax assets are recognised in
respect of all deductible temporary
differences (i.e. differences that give
rise to amounts which are deductible
in determining taxable profits in future
periods when the carrying amount of the
asset or liability is recovered or settled),
carry-forward of unused tax credits
and unused tax losses to the extent
that it is probable that taxable profits
will be available against which to offset
these items.
The carrying amounts of deferred tax
assets are subject to review at each
reporting date and reduced to the extent
that future taxable profits are considered
to be inadequate to allow all or part of
any deferred tax asset to be utilised.
Changes in deferred tax assets or liabilities
are recognised as a component of tax
income or expense in profit or loss,
except where they relate to items that
are recognised in other comprehensive
income or directly in equity, in which case
the related deferred tax is also recognised
in other comprehensive income or equity,
respectively.
Grants
Grants are recognised at their fair value
when there is a reasonable assurance that
the grant will be received and all relevant
conditions have been complied with.
Capital grants received and receivable in
respect of property, plant and equipment
are treated as a reduction in the cost
of that asset and thereby amortised to
the Income Statement in line with the
underlying asset.
Revenue grants are recognised in
the Income Statement to offset the
related expenditure.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 106
107
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Property, Plant and Equipment
Property, plant and equipment is measured at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is provided on a straight line basis at the rates stated below, which are estimated to reduce each item of property, plant
and equipment to its residual value by the end of its useful life:
Freehold buildings
Plant and machinery
Fixtures and fittings
Computer equipment
Motor vehicles
Leased assets
Leasehold property improvements
Freehold land
2% on cost
5% to 20% on cost
10% to 20% on cost
12.5% to 33% on cost
10% to 25% on cost
Over the period of the lease, or useful life if shorter
Over the period of the lease, or useful life if shorter
Stated at cost and is not depreciated.
The estimated useful lives and residual
values of property, plant and equipment
are determined by management at
the time the assets are acquired and
subsequently, re-assessed at each
reporting date. These lives are based on
historical experience with similar assets
across the Group.
In accordance with IAS 36 Impairment of
Assets, the carrying values of property,
plant and equipment are reviewed at
each reporting date to determine whether
there is any indication of impairment.
An impairment loss is recognised
whenever the carrying value of an asset
or its cash generating unit exceeds its
recoverable amount.
Impairment losses are recognised in
the Income Statement. Following the
recognition of an impairment loss, the
depreciation charge applicable to the
asset or cash-generating unit is adjusted
to allocate the revised carrying amount,
net of any residual value, over the
remaining useful life.
Assets under construction are carried at
cost less any recognised impairment loss.
Depreciation of these assets commences
when the assets are ready for their
intended use.
Leases
Leases are classified as finance leases
whenever substantially all the risks and
rewards of ownership of the asset have
transferred to the lessee. All other leases
are classified as operating leases.
Assets held under finance leases are
capitalised at the inception of the lease
in the Statement of Financial Position at
the lower of its fair value and the present
value of the minimum lease payments,
and are depreciated over their useful lives
with any impairment being recognised in
the Income Statement.
The corresponding lease obligation,
net of finance charges, is included in
interest bearing loans and borrowings
in the Statement of Financial Position
and analysed as appropriate between
current and non-current amounts. The
interest element of the lease payments is
charged to the Income Statement over the
lease period so as to produce a constant
periodic rate of interest, on the remaining
balance of the liability, for each period.
Leases where the lessor retains
substantially all the risks and rewards
of ownership are classified as operating
leases. Operating lease rentals are
charged to the Income Statement on a
straight-line basis over the lease term.
Retirement benefit obligations
The Group operates defined contribution
and defined benefit pensions schemes.
Defined contribution pension schemes
The costs arising on the Group’s defined
contribution schemes are recognised in the
Income Statement in the period in which
the related service is provided. The Group
has no legal or constructive obligation to
pay further contributions in the event that
these plans do not hold sufficient assets to
provide retirement benefits.
Defined benefit pension schemes
The Group’s net obligation in respect
of defined benefit plans is calculated
separately for each plan by estimating the
amount of future benefit that employees
have earned in return for their service in
the current and prior periods, discounting
that amount and deducting the fair value
of any plan assets.
The calculation is performed annually by
a qualified actuary using the projected
unit credit method. When the calculation
results in a benefit to the Group, the
recognised asset is limited to the total of
any unrecognised past service costs and
the present value of economic benefits
available in the form of any future refunds
from the plan or reductions in future
contributions to the plan.
Remeasurements of the net defined
benefit liability or asset, which comprise
actuarial gains and losses, the return
on plan assets (excluding interest)
and the effect of the asset ceiling,
are recognised immediately in other
comprehensive income.
The Group determines the net interest
expense on the net defined benefit liability
or asset by applying the discount rate
used to measure the defined benefit
obligation at the beginning of the annual
period to the then net defined benefit
liability or asset, taking into account any
changes in the net defined benefit liability
or asset during the period as a result of
contributions and benefit payments.
Net interest expense and other expenses
related to defined benefit plans are
recognised in profit or loss.
When the benefits of a plan are changed
or when a plan is curtailed, the resulting
change in benefit that relates to past
service or the gain or loss on curtailment
is recognised immediately in profit or loss.
The Group recognises gains and losses on
the settlement of a defined benefit plan
when the settlement occurs.
Provisions
A provision is recognised in the Statement
of Financial Position when the Group has a
present constructive or legal obligation as
a result of a past event and it is probable
that an outflow of economic benefit will
be required to settle the obligation and
the amount of the obligation can be
estimated reliably.
A specific provision is created when a
claim has actually been made against
the Group or where there is a known
issue at a known customer’s site, both
relating to a product or service supplied
in the past. In addition, a risk-based
provision is created where future claims
are considered incurred but not reported.
The warranty provision is based on
historical warranty data and a weighting
of all possible outcomes against their
associated probabilities.
Specific provisions will generally be
aged as a current liability, reflecting the
assessment that a current liability exists
to replace or repair product sold on foot
of an accepted valid warranty issue. Only
where the liability is reasonably certain not
to be settled within the next 12 months,
will a specific provision be categorised
as a long-term obligation. Risk-based
provisions will generally be aged as a non-
current liability, reflecting the fact that
no warranty claim has yet been made by
the customer.
Provisions which are not expected to give
rise to a cash outflow within 12 months of
the reporting date are, where material,
determined by discounting the expected
future cash flows. The unwinding of the
discount is recognised as a finance cost.
Dividends
Final dividends on ordinary shares are
recognised as a liability in the financial
statements only after they have been
approved at the Annual General Meeting
of the Company. Interim dividends on
ordinary shares are recognised when they
are paid.
Cash and cash equivalents
Cash and cash equivalents principally
comprise of cash at bank and in hand
and short term deposits with an original
maturity of three months or less.
Derivative financial instruments
Derivative financial instruments,
principally interest rate and currency
swaps, are used to hedge the Group’s
foreign exchange and interest rate
risk exposures.
Derivative financial instruments are
recognised initially at fair value and
thereafter are subsequently remeasured
at their fair value. Fair value is the
amount for which an asset could be
exchanged, or a liability settled, between
knowledgeable willing parties in an arm’s
length transaction. The fair value of these
instruments is the estimated amount
that the Group would receive or pay to
terminate the swap at the reporting
date, taking into account current
interest and currency exchange rates
and the current creditworthiness of the
swap counterparties.
The Group designates all of its derivatives
in one or more of the following types
of relationships:
>
>
>
Fair value hedge: Hedges the
exposure to movements in fair value
of recognised assets or liabilities that
are attributable to hedged risks.
Cash flow hedge: Hedges the Group’s
exposures to fluctuations in future
cash flow derived from a particular
risk associated with recognised assets
or liabilities or forecast transactions.
Net investment hedge: Hedges the
exchange rate fluctuations of a net
investment in a foreign operation.
At inception of the transaction, the Group
documents the relationship between
the hedging instruments and hedged
items, including the risk management
objectives and strategy in undertaking
the hedge transactions. The Group also
documents its assessment, both at
inception and on an ongoing basis, as to
whether the derivatives that are used in
hedging transactions are highly effective
in offsetting changes in fair values or cash
flows of hedged items.
Fair value hedge
Any gain or loss resulting from the re-
measurement of the hedging instrument
to fair value is reported in the Income
Statement, together with any changes
in the fair value of the hedged asset
or liability that are attributable to the
hedged risk. The gains or losses of a
hedging instrument that are in hedge
relationships with borrowings are included
within finance income or finance expense
in the Income Statement. In the case
of the related hedged borrowings, any
gain or loss on the hedged item which is
attributable to the hedged risk is adjusted
against the carrying amount of the
hedged item and is also included within
finance income or finance expense in the
Income Statement.
If the hedge no longer meets the criteria
for hedge accounting, the adjustment to
the carrying amount of the hedged item is
amortised on an effective interest basis to
the Income Statement with the objective
of achieving full amortisation by maturity
of the hedged item.
Cash flow hedge
The effective part of any gain or loss on
the derivative financial instrument is
recognised in other comprehensive income
and presented in the Cash Flow Hedge
Reserve in equity with the ineffective
portion being recognised within finance
income or finance expense in the Income
Statement. If a hedge of a forecasted
transaction subsequently results in the
recognition of a financial asset or a
financial liability, the associated gains
and losses that were recognised directly
in other comprehensive income are
reclassified into profit or loss in the same
period or periods during which the asset
acquired or liability assumed affects
profit or loss. For cash flow hedges, other
than those covered by the preceding
statements, the associated cumulative
gain or loss is removed from other
comprehensive income and recognised
in the Income Statement in the same
period or periods during which the hedged
forecast transaction affects profit or
loss. The ineffective part of any gain or
loss is recognised immediately in the
Income Statement.
Hedge accounting is discontinued when
a hedging instrument expires or is sold,
terminated or exercised, or no longer
qualifies for hedge accounting. The
cumulative gain or loss at that point
remains in other comprehensive income
and is recognised when the transaction
occurs. If a hedged transaction is no
longer expected to occur, the net
cumulative gain or loss recognised in other
comprehensive income is transferred to
the Income Statement in the period.
Net investment hedge
Any gain or loss on the hedging
instrument relating to the effective
portion of the hedge is recognised in other
comprehensive income and presented in
the Translation Reserve in equity. The gain
or loss relating to the ineffective portion is
recognised immediately in either finance
income or finance expense in the Income
Statement. Cumulative gains or losses
remain in equity until disposal of the net
investment in the foreign operation at
which point the related differences are
reclassified to the Income Statement as
part of the overall gain or loss on sale.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
108
109
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Financial assets
Upon adoption of IFRS 9 on 1 January 2018
the accounting policy for financial assets
is as follows:
On initial recognition, a financial asset is
classified as measured at amortised cost
or fair value with any movement being
reflected through other comprehensive
income or the income statement.
On initial recognition of an equity
investment that is not held for trading,
the Group may irrevocably elect to present
subsequent changes in the investment’s
fair value in other comprehensive income.
This election is made on an investment-
by-investment basis.
The accounting policy in force for the year
ended 31 December 2017 was as follows:
Financial assets other than derivatives are
divided into the following categories:
>
>
loans and receivables
investments held at fair value through
profit and loss
Trade and other receivables are initially
recorded at fair value and, at subsequent
reporting dates, at amortised cost.
Generally, the Group recognises all
financial assets using settlement day
accounting. An assessment of whether a
financial asset is impaired is made at least
at each reporting date.
A provision for impairment of trade
receivables is recognised when there is
objective evidence that the Group will
not be able to collect all amounts due
according to the original terms of the
receivable. The amount of the provision
is the difference between the asset’s
carrying amount and the present value of
estimated future cash flows. Movements
in provisions are recognised in the Income
Statement. Bad debts are written off
against the provision when no further
prospect of collection exists.
A reference table is included in note
19 which outlines the treatment of
the relevant instruments under both
standards.
Financial labilities
Upon adoption of IFRS 9 the accounting
policy for the year ended 31 December
2018 is as follows:
IFRS 9 doesn't change the main
accounting principles for financial
liabilities set out under IAS 39. Two
measurement categories continue to exist,
fair value through the income statement
and amortised cost. Financial liabilities
held for trading are measured at fair value
through the income statement, and all
other financial liabilities are measured at
amortised cost unless the fair value option
is applied.
The accounting policy in force for the year
ended 31 December 2017 was as follows:
Financial liabilities are classified as either
financial liabilities at fair value through
profit or loss or other financial liabilities.
Financial liabilities at fair value through
profit or loss are initially measured at
fair value and subsequently stated at
fair value, with any resultant gain or
loss recognised in profit or loss. The net
gain or loss recognised in profit or loss
incorporates any interest paid on the
financial liability.
Other financial liabilities (including trade
payables) are initially measured at fair
value, net of transaction costs, and are
subsequently measured at amortised cost
using the effective interest method. When
determining the fair value of financial
liabilities, the expected future cash flows
are discounted using an appropriate
interest rate.
A financial liability is derecognised only
when the obligation is extinguished, that
is, when the obligation is discharged,
cancelled or expired.
A reference table is included in note
19 which outlines the treatment of
the relevant instruments under both
standards.
Finance income
Finance income comprises interest income
on funds invested and any gains on
hedging instruments that are recognised
in the Income Statement. Interest income
is recognised as it accrues using the
effective interest rate method.
Finance expense
Finance expense comprises interest
payable on borrowings calculated using
the effective interest rate method, gains
and losses on hedging instruments that
are recognised in the Income Statement,
the net finance cost of the Group’s defined
benefit pension scheme, finance lease
interest and the discount component
of the deferred consideration which is
unwound as an interest charge in the
Income Statement over the life of the
obligation.
Borrowing costs
Borrowing costs directly attributable to
qualifying assets, as defined in IAS 23
Borrowing costs, are capitalised during
the period of time that is necessary to
complete and prepare the asset for its
intended use. Other borrowing costs are
expensed to the Income Statement in the
period in which they are incurred.
Share Based Payment Transactions
The Group grants equity settled share
based payments to employees through
the Performance Share Plan and the
Deferred Bonus Plan.
The fair value of these equity settled
transactions is determined at grant
date and is recognised as an employee
expense in the Income Statement, with
the corresponding increase in equity,
on a straight line basis over the vesting
period. The fair value at the grant date
is determined using a combination of
the Monte Carlo simulation technique
and a Black Scholes model, excluding the
impact of any non-market conditions.
Non-market vesting conditions are
included in the assumptions about the
number of options that are expected to
vest. At each reporting date, the Group
revises its estimates of the number of
options that are likely to vest as a result of
non-market conditions. Any adjustment
from this revision is recognised in the
Income Statement with a corresponding
adjustment to equity.
Where the share based payments give
rise to the issue of new share capital, the
proceeds received by the Company are
credited to share capital (nominal value)
and share premium (where applicable)
when the share entitlements are exercised.
Where the share based payments give
rise to the re-issue of shares from treasury
shares, the proceeds of issue are credited
to share premium.
The Group does not operate any cash-
settled share based payment schemes or
share based payment transactions with
cash alternatives as defined in IFRS 2.
Treasury shares
Where the Company purchases its own
equity share capital, the consideration
paid is deducted from total shareholders’
equity and classified as treasury shares
until such shares are cancelled or reissued.
Where such shares are subsequently sold
or reissued, any consideration received is
included in the share premium account.
No gains or losses are recognised on the
purchase, sale, cancellation or issue of
treasury shares.
Non-controlling interest
Non-controlling interests represent the
portion of the equity of a subsidiary not
attributable either directly or indirectly to
the parent company and are presented
separately in the Income Statement and
within equity in the Statement of Financial
Position, distinguished from shareholders’
equity attributable to owners of the
parent company.
Accounting estimates
and judgements
In the process of applying the Group’s
accounting policies, as set out on pages
102 to 109, management are required
to make estimates and judgements
that could materially affect the Group’s
reported results or net asset position.
Notwithstanding that the areas below
represent estimation and judgement
at the end of the reporting period, the
directors are satisfied that none of these
areas have a significant risk of resulting
in a material adjustment to the carrying
amounts of assets and liabilities within the
next financial year.
The areas where key estimates and
judgements were made by management
and are material to the Group’s reported
results or net asset position, are as follows:
Impairment (Note 10)
The Group is required to review assets for
objective evidence of impairment.
It does this on the basis of a review of the
budget and rolling 5 year forecasts (4 year
strategic plan, as approved by the Board,
plus year 5 forecasted by management),
which by their nature are based on a series
of assumptions and estimates.
The Group has performed impairment
tests on those cash generating units which
contain goodwill, and on any assets where
there are indicators of impairment. The
key assumptions associated with these
reviews are detailed in Note 10.
Guarantees & warranties (Note 20)
Certain products carry formal guarantees
of satisfactory functional and aesthetic
performance of varying periods following
their purchase. Local management
evaluate the constructive or legal
obligation arising from customer feedback
and assess the requirement to provide for
any probable outflow of economic benefit
arising from a settlement. This is an area
of estimation and judgement.
Recoverability of trade receivables
(Note 15)
The Group provides credit to customers
and as a result there is an associated risk
that the customer may not be able to pay
outstanding balances. Trade receivables
are considered for impairment on a case
by case basis, when they are past due
at the reporting date or when objective
evidence is received that a specific
counterparty may default.
Under IFRS 9 the Group uses an allowance
matrix to measure Expected Credit Loss
(ECL) of trade receivables from customers.
Loss rates are calculated using a roll rate
method based on the probability of a
receivable progressing through successive
chains of non-payment to write-off. The
rates are calculated at a business unit
level which reflects the risks associated
with geographic region, age mix of
customer relationship and type of product
purchased.
This is an area of estimation.
Valuation of inventory (Note 14)
Inventories are measured at the lower of
cost and net realisable value. The Group’s
policy is to hold inventories at original
cost and create an inventory provision
where evidence exists that indicates
net realisable value is below cost for a
particular item of inventory. Damaged,
slow-moving or obsolete inventory are
typical examples of such evidence. This is
an area of estimation.
Business combinations (Note 22)
Business combinations are accounted
for using the acquisition method which
requires that the assets and liabilities
assumed are recorded at their respective
fair values at the date of acquisition. The
application of this method requires certain
estimates and assumptions relating, in
particular, to the determination of the fair
values of the acquired assets and liabilities
assumed at the date of acquisition.
For intangible assets acquired, the Group
bases valuations on expected future cash
flows. This method employs a discounted
cash flow analysis using the present value
of the estimated cash flows expected to
be generated from these intangible assets
using appropriate discount rates and
revenue forecasts. The period of expected
cash flows is based on the expected useful
life of the intangible asset acquired.
Measurement of deferred contingent
consideration and put option liabilities
related to business combinations require
assumptions to be made regarding
profit forecasts and discount rates used
to arrive at the net present value of the
potential obligations. The Group has
considered all available information
in arriving at the estimate of liabilities
associated with deferred contingent
consideration obligations.
Income taxes (Note 8)
The Group is subject to income tax
in numerous jurisdictions. Significant
judgement is required in determining the
worldwide provision for income taxes.
There are many transactions for which the
ultimate tax determination is uncertain.
The Group recognises liabilities based on
estimates of whether additional taxes
will be due. Once it has been concluded
that a liability needs to be recognised,
the liability is measured based on the
tax laws that have been enacted or
substantially enacted at the end of the
reporting period. The amount shown for
current taxation includes an estimate
for tax uncertainties and is based on
the Directors’ best probability weighted
estimate of the probable outflow of
economic resources that will be required
to settle the liability. Where the final tax
outcome of these matters is different
from the amounts that were initially
estimated, such differences will impact
the income tax and deferred tax provisions
in the period in which such determination
is made.
Deferred tax assets are recognised to
the extent that it is probable that future
taxable profit will be available against
which the unused tax losses and unused
tax credits can be utilised. The Group
estimates the most probable amount of
future taxable profits, using assumptions
consistent with those employed in
impairment calculations, and taking into
consideration applicable tax legislation in
the relevant jurisdiction. These calculations
also require the use of estimates.
Deferred contingent consideration
(Note 18)
Measurement of put option liabilities
require assumptions to be made regarding
profit forecasts and discount rates used
to arrive at the net present value of the
potential obligations. The Group has
considered all available information
in arriving at the estimate of liabilities
associated with put option obligations.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 110
111
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
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. These operating segments are
monitored and strategic decisions are made on the basis of segment operating results.
2 SEGMENT REPORTING (continued)
Segment assets
Operating segments
The Group has the following five operating segments:
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
(formerly Environmental)
Data & Flooring Technology
(formerly Access Floors)
Manufacture of insulated panels, structural framing and metal facades.
Manufacture of rigid insulation boards, building services insulation and engineered timber systems.
Manufacture of daylighting, smoke management and ventilation systems.
Manufacture of energy and water solutions and all related service activities.
Manufacture of data centre storage solutions and raised access floors.
Analysis by class of business
Segment revenue and disaggregation of revenue
Total revenue – 2018
Total revenue – 2017
Disaggregation of revenue 2018
Point of Time
Over Time
Insulated
Panels
€m
Insulation
Boards
€m
2,823.1
2,328.5
2,816.8
6.3
2,823.1
864.1
769.4
831.8
32.3
864.1
Light
& Air
€m
291.8
204.7
190.4
101.4
291.8
Water &
Energy
€m
Data &
Flooring
€m
202.9
179.8
201.6
1.3
202.9
190.6
185.7
166.2
24.4
190.6
Total
€m
4,372.5
3,668.1
4,206.8
165.7
4,372.5
The disaggregation of revenue by geography is set out in more detail on page 111.
The segments specified above capture the major product lines relevant to the Group.
The combination of the disaggregation of revenue by product group, geography and the timing of revenue recognition capture the
key categories of disclosure with respect to revenue. No further disclosures are required with respect to disaggregation of revenue
other than what has been presented in this note.
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. For the purposes of the segmental
analysis, corporate overheads have been allocated to each division based on their respective revenue for the year.
The Group has initially applied IFRS 15 at 1 January 2018. Under the transition methods chosen, comparative information is not
restated.
Segment result (profit before net finance expense)
Trading profit – 2018
Intangible amortisation
Operating profit – 2018
Trading profit – 2017
Intangible amortisation
Non trading items
Operating profit - 2017
Net finance expense
Profit for the year before tax
Income tax expense
Net profit for the year
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Total
2018
€m
Total
2017
€m
281.8
(12.2)
269.6
233.3
(9.4)
(2.3)
221.6
105.1
(4.4)
21.5
(4.4)
14.2
(1.2)
22.6
-
445.2
(22.2)
100.7
17.1
13.0
22.6
423.0
91.2
(2.1)
2.9
14.8
(2.6)
-
16.2
(1.6)
-
22.0
-
-
92.0
12.2
14.6
22.0
377.5
(15.7)
0.6
362.4
(15.9)
346.5
(60.6)
285.9
(18.1)
404.9
(69.1)
335.8
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Total
2018
€m
Total
2017
€m
Assets – 2018
Assets – 2017
2,231.7
1,792.1
782.2
620.4
331.2
287.6
180.3
164.1
166.3
156.0
Derivative financial instruments
Cash and cash equivalents
Deferred tax asset
Total assets as reported in the Consolidated Statement of Financial Position
Segment liabilities
3,691.7
27.6
294.5
15.6
4,029.4
3,020.2
22.3
176.6
16.5
3,235.6
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Total
2018
€m
Total
2017
€m
Liabilities – 2018
Liabilities – 2017
(755.0)
(590.4)
(179.2)
(148.0)
(73.2)
(67.0)
(58.2)
(49.3)
(35.1)
(30.5)
(1,100.7)
(885.2)
Interest bearing loans and borrowings (current and non-current)
Derivative financial instruments (current and non-current)
Income tax liabilities (current and deferred)
Total liabilities as reported in the Consolidated Statement of Financial Position
(1,020.2)
-
(119.6)
(662.7)
(0.1)
(119.6)
(2,240.5) (1,667.6)
Other segment information
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Capital investment – 2018 *
Capital investment – 2017 *
Depreciation included in segment result – 2018
Depreciation included in segment result – 2017
Non-cash items included in segment result – 2018
Non-cash items included in segment result – 2017
160.8
82.5
(49.8)
(40.7)
(7.4)
(6.4)
87.9
25.1
(15.9)
(14.6)
(2.5)
(2.3)
22.7
22.9
(4.8)
(3.7)
(0.5)
(0.2)
7.1
5.4
(2.4)
(2.8)
(0.8)
(0.8)
2.8
6.1
(3.1)
(2.4)
(1.1)
(1.0)
Total
€m
281.3
142.0
(76.0)
(64.2)
(12.3)
(10.7)
* Capital investment includes fair value of property, plant and equipment and intangible assets acquired in business combinations.
Analysis of segmental data by geography
Republic of
Ireland
€m
United
Kingdom
€m
Rest of
Europe
€m
Americas
Others
Total
€m
€m
€m
Income Statement Items
Revenue – 2018
Revenue – 2017
Statement of Financial Position Items
Non-current assets – 2018 *
Non-current assets – 2017 *
Other segmental information
Capital investment – 2018
Capital investment – 2017
156.0
138.1
52.7
51.8
6.0
8.0
938.2
909.2
375.2
369.9
23.9
16.9
2,092.3
1,628.5
887.6
738.1
298.4
254.2
4,372.5
3,668.1
1,227.0
809.8
524.5
507.7
188.8
158.0
2,368.2
1,897.2
204.8
57.9
27.8
49.7
18.8
9.5
281.3
142.0
* Total non-current assets excluding derivative financial instruments and deferred tax assets.
The Group has activities in over 90 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.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
112
113
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
3 EMPLOYEES
a) Employee numbers
The average number of persons employed by the Group in the financial year was:
Production
Sales and distribution
Management and administration
b) Employee costs, including executive directors
Wages and salaries
Social welfare costs
Pension costs - defined contribution (Note 32)
Share based payments and awards
Actuarial (gains)/losses recognised in other comprehensive income
2018
Number
2017
Number
8,235
2,623
2,611
13,469
6,871
2,542
1,720
11,133
2018
€m
579.5
68.9
15.5
12.3
676.2
(0.9)
675.3
2017
€m
488.5
59.2
11.8
10.7
570.2
(1.0)
569.2
c) Employee share based compensation
The Group currently operates a number of equity settled share based payment schemes; two Performance Share Plans (PSP)
and a Deferred Bonus Plan, which was introduced in 2015. The details of these schemes are provided in the Report of the
Remuneration Committee.
Performance Share Plan (PSP)
Outstanding at 1 January
Granted
Forfeited
Lapsed
Exercised
Outstanding at 31 December
Of which, exercisable
Number of PSP Options
2018
2017
2,498,209
552,325
(65,266)
(6,636)
(828,805)
2,149,827
3,295,993
579,990
(84,007)
(2,986)
(1,290,781)
2,498,209
478,945
616,327
The Group recognised a PSP expense of €11.7m (2017: €9.3m) in the Income Statement during the year. All PSP options are exercisable
at €0.13 per share. For PSP options that were exercised during the year the average share price at the date of exercise was €38.96
(2017: €31.23). The weighted average contractual life of share options outstanding at 31 December 2018 is 3.5 years (2017: 4.4 years).
The weighted average exercise price during the period was €0.13 (2017: €0.13).
The fair values of options granted under the PSP scheme during the current and prior year were determined using the Black Scholes
Model or the Monte Carlo Pricing Model as appropriate. The key assumptions used in the model were as follows:
3 EMPLOYEES (continued)
As set out in the Report of the Remuneration Committee, the number of options that will ultimately vest is contingent on market
conditions such as Total Shareholder Return and non market conditions such as the Earnings Per Share of the Group. Market
conditions were taken into account in determining the above fair value, and non market conditions are considered when estimating
the number of shares that will eventually vest. Expected volatility was determined by calculating the historical volatility of the Group
and peer company share prices over the previous 3 years. The Report of the Remuneration Committee sets out the current companies
within the peer group.
As set out in the Report of the Remuneration Committee on page 73, a portion of the annual performance bonus may be satisfied
by the payment of deferred share awards. These shares are held for the benefit of the individual participants for two years without
any additional performance conditions. These shares vest after two years but are forfeited if the participant leaves the Group within
that period.
During the year, no deferred awards (2017: 49,924) were granted and 50,607 (2017: Nil) awards vested. 49,924 awards remain
outstanding at 31 December 2018. A charge of €0.6m was recognised in the Income Statement for 2018 (2017: €1.4m).
4 NON TRADING ITEMS
Profit on disposal of trade and assets
Impairment of goodwill
2018
€m
-
-
-
2017
€m
2.9
(2.3)
0.6
During the period, no items of a non-trading nature arose.
In the prior period the Group disposed of the trade and assets of Kingspan Gefinex GmbH, which was part of the Insulation Boards
division, for €5.7m and realised a non-trading profit of €2.9m, and impaired goodwill relating to a US energy business, which was part
of the Insulation Panels division.
5 FINANCE EXPENSE AND FINANCE INCOME
Finance expense
Finance lease
Deferred contingent consideration fair value movement
Bank loans
Private placement loan notes
Fair value movement on derivative financial instrument
Fair value movement on private placement debt
Net defined benefit pension scheme (Note 32)
Finance income
Interest earned
Net finance cost
No costs were reclassified from other comprehensive income to profit during the year (2017: €nil).
6 PROFIT FOR THE YEAR BEFORE INCOME TAX
2018
€m
0.4
0.3
2.7
16.7
(3.1)
2.5
-
19.5
(1.4)
18.1
2018
€m
202.1
30.8
30.5
76.0
22.2
(1.7)
(4.9)
2017
€m
0.2
0.1
2.4
14.2
15.6
(16.2)
0.1
16.4
(0.5)
15.9
2017
€m
174.3
22.1
27.1
64.2
15.7
(1.8)
(2.1)
Share price at grant date
Exercise price per share
Expected volatility
Expected dividend yield
Risk-free rate
Expected life
The resulting weighted average fair value of options granted in the year was €26.21 (2017: €23.45).
2018 Awards
2017 Awards
€35.55
€0.13
26%
1.2%
0.08%
3 years
€32.99
€0.13
22%
1.4%
-0.01%
3 years
The profit for the year is stated after charging / (crediting):
Distribution expenses
Operating lease payments
Product development costs (total, including payroll)
Depreciation
Amortisation of intangible assets
Foreign exchange net gains
Profit on sale of property, plant and equipment
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 114
115
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
6 PROFIT FOR THE YEAR BEFORE INCOME TAX (continued)
Analysis of total auditor’s remuneration for audit services
Audit of Group (KPMG Ireland)
Audit of other subsidiaries (other KPMG offices)
Analysis of amounts paid to the auditor in respect of non-audit services
Tax compliance and advisory services (KPMG Ireland)
Tax compliance and advisory services (other KPMG offices)
7 DIRECTORS’ REMUNERATION
Fees
Other emoluments
Pension costs
Performance Share Plan expense
2018
€m
0.8
1.8
2.6
2018
€m
0.3
0.6
0.9
2018
€m
0.7
6.0
0.7
7.4
2.8
10.2
2017
€m
0.8
1.2
2.0
2017
€m
0.1
0.6
0.7
2017
€m
0.6
4.5
0.7
5.8
2.2
8.0
A detailed analysis of directors’ remuneration is contained in the Report of the Remuneration Committee. Aggregate gains of €8.3m
(2017: €17.7m) were realised with respect to share options exercised by directors during the financial year.
8
INCOME TAX EXPENSE
Tax recognised in the Consolidated Income Statement
Current taxation:
Current tax expense
Adjustment in respect of prior years
Deferred taxation:
Origination and reversal of temporary differences
Effect of rate change
Income tax expense
2018
€m
2017
€m
72.2
(5.4)
66.8
1.5
0.8
2.3
69.1
68.9
(3.9)
65.0
(2.7)
(1.7)
(4.4)
60.6
The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of
the Group:
Profit for the year
Applicable notional tax charge (12.5%)
Expenses not deductible for tax purposes
Net effect of differing tax rates
Utilisation of unprovided deferred tax assets
Other items
Total income tax expense
2018
€m
2017
€m
404.9
346.5
50.6
5.1
16.3
(0.8)
(2.1)
69.1
43.3
7.6
8.7
(1.1)
2.1
60.6
8
INCOME TAX EXPENSE (continued)
The total tax charge in future periods will be affected by any changes to the corporation tax rates in force in the countries in which
the Group operates. No significant change is expected to the standard rate of corporation tax in the Republic of Ireland which is
currently 12.5%.
The methodology used to determine the recognition and measurement of uncertain tax positions is set out in Note 1 ‘Statement of
Accounting Policies’.
The total value of deductible temporary differences which have not been recognised is €31.4m (2017: €12.7m) consisting mainly of tax
losses forward. €1.2m (2017: €1.1m) of the losses expire within 10 years while all other losses may be carried forward indefinitely.
No provision has been made for tax in respect of temporary differences arising from unremitted earnings of foreign operations as
there is no commitment to remit such earnings and no current plans to do so. Deferred tax liabilities of €8.9m (2017: €7.9m) have not
been recognised for withholding tax that would be payable on unremitted earnings of €177.2m (2017: €158.2m) in certain subsidiaries.
An initial assessment of IFRIC 23 has been undertaken and it is not expected to have a material impact.
9 EARNINGS PER SHARE
The calculations of earnings per share are based on the following:
Profit attributable to ordinary shareholders
2018
€m
2017
€m
330.9
284.3
Number of
shares (‘000)
2018
Number of
shares (‘000)
2017
Weighted average number of ordinary shares for the calculation of basic earnings per share
179,840
178,854
Dilutive effect of share options
Weighted average number of ordinary shares for the calculation of diluted earnings per share
1,696
181,536
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
2018
€ cent
184.0
182.3
193.5
191.7
1,856
180,710
2017
€ cent
159.0
157.3
165.8
164.1
Adjusted basic earnings reflects the profit attributable to ordinary shareholders after eliminating the impact, net of tax, of
non-trading items and the Group’s intangible amortisation charge.
The number of options which are anti-dilutive and have therefore not been included in the above calculations is nil (2017: nil).
10 GOODWILL
At 1 January
Additions relating to acquisitions (Note 22)
Impaired during the year (Note 4)
Net exchange difference
Carrying amount 31 December
At 31 December
Cost
Accumulated impairment losses
Net carrying amount
2018
€m
1,095.7
296.8
-
(1.5)
2017
€m
990.1
156.1
(2.3)
(48.2)
1,391.0
1,095.7
1,458.7
(67.7)
1,163.4
(67.7)
1,391.0
1,095.7
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 116
117
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
10 GOODWILL (continued)
10 GOODWILL (continued)
Cash generating units
Goodwill acquired through business combinations is allocated, at acquisition, to CGUs that are expected to benefit from
synergies in that combination. The CGUs are the lowest level within the Group at which the associated goodwill is monitored for
internal management reporting purposes and are not larger than the operating segments determined in accordance with IFRS 8
Operating Segments.
Sensitivity analysis
Sensitivity analysis was performed by adjusting cash flows, the discount rate and the average operating margin of each division by
over 24% and by reducing the long-term growth rate to zero. Each test resulted in a positive recoverable amount for each CGU under
each approach. Management believes, therefore, that any reasonable change in any of the key assumptions would not cause the
carrying value of goodwill to exceed the recoverable amount, thereby giving rise to an impairment.
An assessment was conducted during the year and two new CGUs were identified; namely Panels LATAM and Synthesia Technology.
Both of these CGUs arose on the back of recent acquisitions completed by the Group.
11 OTHER INTANGIBLE ASSETS
A total of 11 (2017: 9) CGUs have been identified and these are analysed between the five business segments in the Group as set out
below. Assets and liabilities have been assigned to the CGUs on a reasonable and consistent basis.
Cost
At 1 January 2018
Acquisitions (Note 22)
Net exchange difference
At 31 December 2018
Accumulated amortisation
At 1 January 2018
Charge for the year
Net exchange difference
At 31 December 2018
Net Book Value as at 31 December 2018
Cost
At 1 January 2017
Acquisitions (Note 22)
Additions
Net exchange difference
At 31 December 2017
Accumulated amortisation
At 1 January 2017
Charge for the year
Net exchange difference
At 31 December 2017
Net Book Value as at 31 December 2017
Customer
Relationships
€m
Patents &
Brands
€m
Other
Intangibles
€m
27.7
21.2
(0.2)
48.7
17.9
5.4
0.1
23.4
25.3
109.2
18.8
(0.2)
127.8
43.4
10.5
0.1
54.0
73.8
30.0
3.3
0.6
33.9
15.3
6.3
0.3
21.9
12.0
Customer
Relationships
€m
Patents &
Brands
€m
Other
Intangibles
€m
25.4
3.4
-
(1.1)
27.7
13.9
4.5
(0.5)
17.9
9.8
107.1
6.3
-
(4.2)
109.2
36.5
8.3
(1.4)
43.4
65.8
23.6
3.2
4.8
(1.6)
30.0
13.8
2.9
(1.4)
15.3
14.7
Total
€m
166.9
43.3
0.2
210.4
76.6
22.2
0.5
99.3
111.1
Total
€m
156.1
12.9
4.8
(6.9)
166.9
64.2
15.7
(3.3)
76.6
90.3
Other intangibles relate primarily to technological know how and order backlogs.
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring Technology
Total
Cash-generating units
Goodwill (€m)
2018
2017
2018
2017
6
1
1
1
2
11
4
1
1
1
2
9
827.2
232.5
174.2
78.7
78.4
1,391.0
614.7
175.6
159.7
68.7
77.0
1,095.7
Significant goodwill amounts
Management has assessed that, in line with IAS 36 Impairment of Assets, there are 4 CGUs that are individually significant (greater
than 10% of total goodwill) that require additional disclosure and are as follows:
Panels
North America
Panels
Joris Ide
Insulation
Boards
Light
& Air
2018
2017
2018
2017
2018
2017
2018
2017
Goodwill (€m)
Discount rate (%)
173.4
10.0
226.9
9.4
410.8
8.1
284.5
7.8
232.5
8.1
175.6
7.8
174.2
8.0
159.7
7.8
Excess of value-in-use over carrying amount (€m)
335.7
380.6
489.5
502.2
854.0
1,468.0
132.8
138.6
The goodwill allocated to these 4 CGUs accounts for 71% of the total carrying amount of €1,391.0m. The remaining goodwill balance
of €400.1m (2017: €249.0m) is allocated across the other 7 CGUs (2017: 5 CGUs), none of which are individually significant.
None of the individually significant CGUs are included in the “Sensitivity analysis” section as it is not considered reasonably possible
that there would be a change in the key assumptions such that the carrying amount would exceed value-in-use. Consequently, no
further disclosures have been provided for these CGUs.
Impairment testing
Goodwill acquired through business combinations has been allocated to the above CGUs for the purpose of impairment testing.
Impairment of goodwill occurs when the carrying value of the CGU is greater than the present value of the cash that it is expected
to generate (i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if
there is an indication that a CGU may be impaired.
The recoverable amount of each CGU is determined from value-in-use calculations. The forecasts used in these calculations are based
on a 4 year financial plan approved by the Board of Directors, plus year 5 as forecasted by management, and specifically excludes
any future acquisition activity. They include assumptions regarding future organic growth with cash flows after year 5 assuming to
continue in perpetuity at a general growth rate of 2% (Panels LATAM 4%), reflecting the relevant CGU inflation, but no other growth.
The use of cash flows in perpetuity is considered appropriate in light of the Group’s established history of earnings growth and cash
flow generation, its strong financial position and the nature of the industry in which the Group operates.
The value in use calculation represents the present value of the future cash flows, including the terminal value, discounted at a rate
appropriate to each CGU. The real pre-tax discount rates used range from 8.0% to 12.5% (2017: 7.8% to 9.4%). These rates are based
on the Group’s estimated weighted average cost of capital, adjusted for risk, and are consistent with external sources of information.
The cash flows and the key assumptions used in the value in use calculations are determined based on the historical performance
of the Group, its strong current financial position as well as management’s knowledge and expectation of future trends in the
industry. Expected future cash flows are, however, inherently uncertain and are therefore liable to material change over time. The key
assumptions used in the value in use calculations are subjective and include projected EBITDA margins, net cash flows, discount rates
used and the duration of the discounted cash flow model.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
118
119
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
12 PROPERTY, PLANT AND EQUIPMENT
14 INVENTORIES
Land and
buildings
€m
Plant and
machinery
€m
Motor
vehicles
€m
Total
€m
As at 31 December 2018
Cost
Accumulated depreciation and impairment charges
583.7
(182.7)
1,245.4
(809.2)
36.3
(23.0)
1,865.4
(1,014.9)
Raw materials and consumables
Work in progress
Finished goods
Inventory impairment allowance
Net carrying amount
401.0
436.2
13.3
850.5
At 31 December
2018
€m
415.1
19.6
149.2
(59.0)
524.9
2017
€m
363.1
17.7
115.8
(49.5)
447.1
At 1 January 2018, net carrying amount
Acquisitions through business combinations (Note 22)
Additions
Disposals
Reclassification
Depreciation charge for year
Impairment charge for year
Effect of movement in exchange rates
337.5
47.8
34.9
(4.6)
(0.7)
(12.7)
(0.1)
(1.1)
355.3
44.9
102.8
(2.8)
-
(58.5)
(5.1)
(0.4)
10.5
1.0
6.6
(0.6)
0.7
(4.8)
-
(0.1)
703.3
93.7
144.3
(8.0)
-
(76.0)
(5.2)
(1.6)
At 31 December 2018, net carrying amount
401.0
436.2
13.3
850.5
Land and
buildings
€m
Plant and
machinery
€m
Motor
vehicles
€m
Total
€m
As at 31 December 2017
Cost
Accumulated depreciation and impairment charges
513.0
(175.5)
1,050.8
(695.5)
28.5
(18.0)
1,592.3
(889.0)
Net carrying amount
337.5
355.3
10.5
703.3
At 1 January 2017, net carrying amount
Acquisitions through business combinations (Note 22)
Additions
Disposals
Reclassification
Depreciation charge for year
Impairment charge for year
Effect of movement in exchange rates
324.2
22.2
9.3
(1.1)
1.5
(11.7)
(0.5)
(6.4)
333.0
17.1
70.4
(1.3)
(2.2)
(48.2)
(0.3)
(13.2)
8.3
0.5
4.8
(0.2)
0.7
(4.3)
-
0.7
665.5
39.8
84.5
(2.6)
-
(64.2)
(0.8)
(18.9)
At 31 December 2017, net carrying amount
337.5
355.3
10.5
703.3
The carrying amounts and depreciation of assets held under finance leases included above is as follows:
Net Book Value
Depreciation
€2.8m
€2.3m
(2017: €4.1m)
(2017: €2.8m)
Included within the cost of land and buildings and plant and machinery are assets in the course of construction to the value of
€21.6m and €66.7m respectively (2017: €4.1m and €42.1m). These assets have not yet been depreciated.
The Group has no material investment properties and hence no property assets are held at fair value.
13 INVESTMENTS IN SUBSIDIARIES
Company
At 1 January
Share options and awards
At 31 December
2018
€m
2017
€m
1,180.7
1,173.3
10.3
7.4
1,191.0
1,180.7
The share options and awards addition reflects the cost of share based payments attributable to employees of subsidiary
undertakings, which are treated as capital contributions by the Company.
A total of €2.6bn (2017: €2.3bn) of inventories was included in the Income Statement as an expense. This includes a net income
statement charge of €2.6m (2017: €7.1m) arising on the inventory impairment allowance. Inventory impairment allowance levels
are continuously reviewed by management and revised where appropriate, taking account of the latest available information on the
recoverability of carrying amounts.
No inventories have been pledged as security for liabilities entered into by the Group.
15 TRADE AND OTHER RECEIVABLES
Amounts falling due within one year:
Trade receivables, gross
Impairment allowance
Trade receivables, net
Other receivables
Prepayments
2018
€m
791.5
(56.4)
735.1
32.1
31.4
798.6
2017
€m
676.9
(51.1)
625.8
25.1
25.0
675.9
The maximum exposure to credit risk for trade and other receivables at the reporting date is their carrying amount.
The Group uses an allowance matrix to measure Expected Credit Loss (ECL) of trade receivables from customers. The simplified
approach has been adopted and this gives rise to an ECL of €56.4m in 2018. This is discussed in more detail in Note 19.
In 2017 the Group's trade and other receivables were reviewed for indicators of impairment. Certain trade receivables were determined
to be impaired, predominantly on the basis that the balances are overdue and at risk, and a total impairment allowance of €51.1m
was recorded. Further details are set out in Note 19.
16 TRADE AND OTHER PAYABLES
Trade payables
Accruals
Deferred income
Irish income tax & social welfare
Other income tax & social welfare
Value added tax
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
17 INTEREST BEARING LOANS AND BORROWINGS
Current financial liabilities
Bank loans and overdrafts (unsecured)
Finance lease obligations (Note 31)
2018
€m
397.5
341.1
7.0
1.3
18.6
14.3
779.8
2018
€m
52.8
0.4
53.2
2017
€m
326.5
271.1
12.3
0.6
18.6
16.1
645.2
2017
€m
0.6
0.6
1.2
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
120
121
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
17 INTEREST BEARING LOANS AND BORROWINGS (continued)
18 DEFERRED CONTINGENT CONSIDERATION (continued)
Non-current financial liabilities
Private placements
Bank loans (unsecured)
Finance lease obligations (Note 31)
Analysis of Net Debt
Cash and cash equivalents
Derivative financial instruments
Current borrowings
Non-current borrowings
Deferred consideration
Total Net Debt
2018
€m
835.9
127.3
3.8
967.0
2018
€m
294.5
27.4
(53.2)
(967.0)
(30.0)
2017
€m
655.4
2.4
3.7
661.5
2017
€m
176.6
22.2
(1.2)
(661.5)
-
(728.3)
(463.9)
The Group’s core funding is provided by five private placement loan notes; one USD private placement totalling $200m matures in
August 2021, and four EUR private placements totalling €662.5m which will mature in tranches between March 2021 and January
2028. The notes have a weighted average maturity of 5.6 years.
In addition, the Group has a €500m revolving credit facility, €120m of which was drawn at year end and which matures in June 2022.
As at 31 December 2018, the Group’s committed bilateral bank facilities were €50m, all of which was drawn.
More details of the Group’s loans and borrowings are set out in Note 19.
Net debt, which is an Alternative Performance Measure, is stated net of interest rate and currency hedges which relate to hedges of
debt. Foreign currency derivative assets of €0.2m (2017: €0.1m) and €nil foreign currency derivative liabilities (2017: €0.1m) which are
used for transactional hedging are not included in the definition of net debt.
18 DEFERRED CONSIDERATION
For each acquisition for which deferred contingent consideration has been provided, an annual review takes place to evaluate if the
payment conditions are likely to be met.
Opening balance
Effect of movement in exchange rates
Deferred consideration arising on acquisitions (Note 22)
Deferred contingent consideration arising on acquisitions (Note 22)
Movement in deferred contingent consideration arising from fair value movement
Put liability arising on current year acquisitions
Movement in put liability arising from fair value movement
Amounts paid
Closing balance
Split as follows:
Current liabilities
Non-current liabilities
Analysed as follows:
Deferred consideration
Deferred contingent consideration
Put liability
2018
€m
117.5
(10.7)
30.0
1.4
1.1
24.5
35.4
(3.1)
196.1
59.5
136.6
196.1
30.0
38.9
127.2
196.1
2017
€m
12.9
(8.1)
-
33.2
-
79.1
0.4
-
117.5
6.4
111.1
117.5
-
43.0
74.5
117.5
During the year the Group paid €3.1m of deferred contingent consideration relating to the PAL business which was acquired in 2014
(2017: €nil).
The deferred consideration arising on current year acquisitions relates to Synthesia.
The put liability arising on current year acquisitions is recognised with respect to the potential amounts payable to 49% shareholders
of Kingspan Jindal.
The amount of the deferred contingent consideration and put liability that have been recognised are arrived at by the application of
a range of outcomes and associated probabilities in order to determine the carrying amounts.
Liabilities in the range of €30m to €69.1m could arise with respect to potential deferred contingent consideration obligations and €nil
to €134.0m with respect to potential put option obligations.
The put option in the shareholders’ agreement with non-controlling shareholders of Kingspan Isoeste is exercisable from 2023. The
undiscounted expected cash outflow is estimated to be €96m (2017: €77.1m). For the purposes of the fair value assessment this put
option liability is valued using the option price formula in the shareholder’s agreement and the most recent financial projections.
These are classified as unobservable inputs.
The put option in the shareholders’ agreement with non-controlling shareholders of PanelMET is exercisable from 2022. The
undiscounted expected cash outflow is estimated to be €12.2m (2017: €7.1m). For the purposes of the fair value assessment this put
option liability is valued using the option price formula in the shareholder’s agreement and the most recent financial projections.
These are classified as unobservable inputs.
The put option in the shareholders’ agreement with non-controlling shareholders of Kingspan Jindal is exercisable from 2022. The
undiscounted expected cash outflow is estimated to be €25.8m. For the purposes of the fair value assessment this put option liability
is valued using the option price formula in the shareholder’s agreement and the most recent financial projections. These are classified
as unobservable inputs.
In the case of Kingspan Isoeste, PanelMET and Kingspan Jindal call options rest over the remaining 49% shareholding held by non-
controlling interests, which are exercisable by the Group in a very limited range of circumstances.
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
Financial Risk Management
In the normal course of business, the Group has exposure to a variety of financial risks, including foreign currency risk, interest
rate risk, liquidity risk and credit risk. The Group’s focus is to understand these risks and to put in place policies that minimise the
economic impact of an adverse event on the Group’s performance. Meetings are held on a regular basis to review the result of the risk
assessment, approve recommended risk management strategies and monitor the effectiveness of such policies.
The Group’s risk management strategies include the use of derivatives (other than for speculative transactions), principally forward
exchange contracts, interest rate swaps, and cross currency interest rate swaps.
Liquidity risk
In addition to the high level of free cash flow, the Group operates a prudent approach to liquidity management using a mixture of
long-term debt together with short-term debt, cash and cash equivalents, to enable it to meet its liabilities when due.
The Group’s core funding is provided by a number of private placement loan notes totalling €835.9m. The notes have a weighted
average maturity of 5.6 years.
In addition, the Group has a €500m revolving credit facility, €120m of which was drawn at year end and which expires in June 2022. As
at 31 December 2018, the Group’s committed bilateral bank facilities were €50m, all of which was drawn.
Both the private placements and the revolving credit facility have an interest cover test (Net Interest: EBITDA must exceed 4 times)
and a net debt test (Net Debt: EBITDA must be less than 3.5 times). These covenant tests have been met for the covenant test period
to 31 December 2018.
The Group also has in place a number of uncommitted bilateral working capital facilities to serve its working capital requirements.
These facilities total €44m (2017: €44m) and are supported by a Group guarantee. Core funding arrangements arise from a wide and
varied number of institutions and, as such, there is no significant concentration of liquidity risk.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 122
123
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
The following are the carrying amounts and contractual maturities of financial liabilities (including estimated interest payments):
2018
Carrying
amount
Contractual
cash flow
Within 1
year
€m
€m
€m
Between
1 and 2
years
€m
Between
2 and 5
years
€m
Greater
than 5
years
€m
Non derivative financial instruments
Bank loans
Private placement loan notes
Finance lease liabilities
Trade and other payables
Deferred consideration
Deferred contingent consideration
Derivative financial liabilities / (assets)
Interest rate swaps used for hedging:
Carrying values
Net inflows
Cross currency interest rate swaps used for hedging:
Carrying value
- outflow
- inflow
Foreign exchange forwards used for hedging:
Carrying value assets
Carrying value liabilities
- outflow
- inflow
2017
180.1
835.9
4.2
772.8
30.0
166.1
(0.3)
-
(27.1)
-
-
(0.2)
-
-
-
180.1
930.5
4.2
772.8
30.0
173.1
-
0.4
-
104.1
136.0
-
-
4.7
4.8
52.8
20.0
0.4
772.8
30.0
29.6
-
0.1
-
3.1
6.2
-
-
4.7
4.8
3.3
20.0
1.7
-
-
-
-
0.1
-
3.4
6.2
-
-
-
-
123.4
357.1
-
-
-
131.3
-
0.2
-
97.6
123.6
-
-
-
-
0.6
533.4
2.1
-
-
12.2
-
-
-
-
-
-
-
-
-
Carrying
amount
2017
€m
Contractual
cash flow
Within 1
year
€m
€m
Between
1 and 2
years
€m
Between
2 and 5
years
€m
Greater
than 5
years
€m
Non derivative financial instruments
Bank loans
Private placement loan notes
Finance lease liabilities
Trade and other payables
Deferred contingent consideration
Derivative financial liabilities / (assets)
Interest rate swaps used for hedging:
Carrying values
Net inflows
Cross currency interest rate swaps used for hedging:
Carrying value
- outflow
- inflow
Foreign exchange forwards used for hedging:
Carrying value assets
Carrying value liabilities
- outflow
- inflow
3.0
655.4
4.3
632.9
117.5
(0.9)
-
(21.3)
-
-
(0.1)
0.1
-
-
3.0
748.5
4.3
632.9
124.3
-
0.3
-
106.7
134.5
-
-
9.9
9.9
0.6
17.2
0.6
632.9
6.4
-
0.1
-
2.8
5.9
-
-
9.9
9.9
0.9
17.2
1.8
-
-
-
0.1
-
3.1
5.8
-
-
-
-
1.5
360.3
0.4
-
5.3
-
0.1
-
100.8
122.8
-
-
-
-
-
353.8
1.5
-
112.6
-
-
-
-
-
-
-
-
-
For provisions, the carrying amount represents the Group’s best estimate of the expected future outflows. As it does not represent a
contractual liability at the year end, no amount has been included as a contractual cash flow.
Deferred contingent consideration, which includes any put option liabilities, is valued using the relevant agreed multiple of the
expected future EBITDA in each acquired business which is appropriately discounted using a risk-adjusted discount rate. The estimated
fair value of contingent consideration would decrease if EBITDA was lower or if the risk adjusted discount rate was higher. The range of
outcomes are set out in Note 18.
The actual future cash flows could be different from the amounts included in the tables above, if the associated obligations were to become
repayable on demand as a result of non-compliance with covenants or other contractual terms. No such non-compliance is envisaged.
Market Risks
Foreign exchange risk
There are two types of foreign currency risk to which the Group is exposed, namely transaction risk and translation risk. The objective
of the Group’s foreign currency risk management strategy is to manage and control market risk exposures within acceptable
parameters. As set out below the Group uses derivatives to manage foreign exchange risk. Transactions involving derivatives are
carried out in accordance with the Treasury policy. The Group seeks to apply hedge accounting, where practicable, to manage
volatility in profit or loss.
Transaction risk
Apart from transaction risk on debt, this arises where operating units have input costs or sales in currencies other than their
functional currencies. These exposures are internally hedged as far as possible. Group policy is to hedge up to a maximum of 75% of a
forecast exposure. Material exposures are hedged on a rolling 12 months basis. The Group’s principal exposure relates to GBP and US$,
with less significant exposures to certain central European currencies.
In addition, where operating entities carry monetary assets and liabilities at year end denominated other than in their functional
currency, their translation at the year-end rates of exchange into their functional currency will give rise to foreign currency gains and
losses. The Group seeks to manage these gains and losses to net to nil.
Based on current cash flow projections for the businesses to 31 December 2019, it is estimated that the Group is long GBP110m and
short US$35m. At 31 December 2018 these amounts were unhedged.
Translation risk
This exists due to the fact that the Group has operations whose functional currency is not Euro, the Group's presentational currency.
Changes in the exchange rate between the reporting currencies of these operations and the Euro, have an impact on the Group's
consolidated reported result. For 2018, the impact of changing currency rates versus Euro compared to 2017 rates was positive €4.0m
(2017: negative €85.2m). In common with many other international groups, the Group does not currently seek to externally hedge its
translation exposure.
Sensitivity analysis for primary currency risk
A 10% volatility of the EUR against GBP and US$ in respect of transaction risk in the reporting entities functional currency would
impact reported after tax profit by €14.5m (2017: €14.3m) and equity by €14.3m (2017: €14.0m).
US Dollar Loan Notes
2011 Private Placement
In 2011, the Group issued a private placement of US$200m fixed interest 10 year bullet repayment loan notes maturing in August 2021.
In order to align the Group’s debt profile with its risk management strategy, the Group entered into a number of hedging transactions
in order to mitigate the associated foreign exchange and interest rate exposures. The Group entered into US dollar fixed / GBP floating
cross currency interest rate swaps for US$118.6m of the private placement. The benchmark interest rate and credit spread have been
separately identified and designated for hedge accounting purposes. The Group also entered into US dollar interest rate swaps for
US$40m of the private placement. The fixed rate and maturity date on the swaps match the fixed rate on the private placement for
all instruments. The instruments were designated as hedging instruments at inception and continued to qualify as effective hedges
under IAS 39 at 31 December 2018.
Interest rate risk
The Group has an exposure to movements in interest rates on its debt portfolio, and on its cash and cash equivalent balances and
derivatives. The Group policy is to ensure that at least 40% of its debt is fixed rate.
In respect of interest bearing loans and borrowings, the following table indicates the effective average interest rates at the year-end
and the periods over which they mature. Interest on interest bearing loans and borrowings classified as floating rate is repriced at
intervals of less than one year. The table further analyses interest bearing loans and borrowings by currency and fixed/floating mix
and has been prepared both before and after the impact of derivatives.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 124
125
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
Before the impact of hedging transactions
As at 31 December 2018
Bank loans
Loan notes
Weighted average
effective interest
rate
0.9%
2.4%
Total
€m
180.1
837.3
1,017.4
At fixed
interest rate
At floating
interest rate
€m
€m
180.1
837.3
1,017.4
-
-
-
Under
5 years
€m
179.5
325.8
505.3
Over
5 years
€m
0.6
511.5
512.1
EUR
US$
Other
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
838.8
174.8
3.8
1,017.4
838.8
174.8
3.8
1,017.4
-
-
-
-
After the impact of hedging transactions
As at 31 December 2018
Bank loans
Loan notes
Weighted average
effective interest
rate
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
0.9%
2.1%
180.1
835.9
1,016.0
180.1
698.7
878.8
-
137.2
137.2
Under
5 years
€m
179.5
324.4
503.9
Over
5 years
€m
0.6
511.5
512.1
EUR
GBP
US$
Other
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
863.3
102.0
46.9
3.8
1,016.0
863.3
-
11.7
3.8
878.8
-
102.0
35.2
-
137.2
The weighted average maturity of debt is 5.0 years as at 31 December 2018 (2017: 6.0 years).
Before the impact of hedging transactions
As at 31 December 2017
Bank loans
Loan notes
Weighted average
effective interest
rate
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
2.91%
2.63%
3.0
655.4
658.4
3.0
655.4
658.4
-
-
-
Under
5 years
€m
3.0
210.4
213.4
Over
5 years
€m
-
445.0
445.0
EUR
US$
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
487.5
170.9
658.4
487.5
170.9
658.4
-
-
-
After the impact of hedging transactions
As at 31 December 2017
Weighted average
effective interest
rate
Total
€m
At fixed
interest rate
€m
At floating
interest rate
€m
Bank loans
Loan notes
2.91%
2.13%
EUR
GBP
US$
3.0
655.4
658.4
Total
€m
510.9
99.1
48.4
658.4
3.0
522.1
525.1
-
133.3
133.3
At fixed
interest rate
At floating
interest rate
€m
510.9
-
14.2
525.1
€m
-
99.1
34.2
133.3
Under
5 years
€m
3.0
210.4
213.4
Over
5 years
€m
-
445.0
445.0
An increase or decrease of 100 basis points in each of the applicable rates and interest rate curves would impact reported after-tax
profit by €1.4m (2017: €1.3m) and equity by €1.4m (2017: €1.3m).
Credit risk
Credit risk encompasses the risk of financial loss to the Group of counterparty default in relation to any of its financial assets. The
Group’s maximum exposure to credit risk is represented by the carrying value of each financial asset:
Cash & cash equivalents
Trade receivables
Derivative financial assets
2018
€m
294.5
791.5
27.6
2017
€m
176.6
676.9
22.3
Trade receivables arise from a wide and varied customer base spread across various activities, end users and geographies, and as such
there is no significant concentration of credit risk. The Group’s credit risk management policy in relation to trade receivables involves
periodically assessing the financial reliability of customers, taking into account their financial position, past experience and other
factors. The utilisation of credit limits is regularly monitored and a significant element of credit risk is covered by credit insurance or
other forms of collateral such as letters of credit or bank guarantees.
At 31 December, the exposure to credit risk for trade receivables by geographic region was as follows:
Rest of Europe
ROI & UK
Americas
Others
At 31 December, the exposure to credit risk for trade receivables by customer type was as follows:
Insulated Panels customers
Insulation Boards customers
Other
2018
€m
340.8
244.8
152.7
53.2
791.5
2018
€m
496.4
153.2
141.9
791.5
2017
€m
259.5
240.0
126.7
50.7
676.9
2017
€m
417.6
137.4
121.9
676.9
The Group uses an allowance matrix to measure Expected Credit Loss (ECL) of trade receivables from customers. The ECL simplified
approach has been adopted.
Loss rates are calculated using a roll rate method based on the probability of a receivable progressing through successive chains of
non-payment to write-off. The rates are calculated at a business unit level which reflects the risks associated with geographic region,
age, mix of customer relationship and type of product purchased. The identifiable loss pertaining to cash positions is immaterial.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 126
127
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
The following table provides the information about the exposure to credit risk and ECL’s for trade receivables as at 31 December 2018.
Movements in the allowance for impairment in respect of trade receivables
Current (not past due)
1-30 days past due
31-60 days past due
61-90 days past due
More than 90 days past due
Weighted
average loss
rate
%
Gross
carrying
amount
€m
1%
2%
7%
15%
80%
538.7
148.2
39.0
13.0
52.6
791.5
Loss
allowance
€m
6.1
3.3
2.8
2.0
42.2
56.4
Loss rates are based on actual credit loss experience over an appropriate diverse sample of trading periods.
The table below sets out the measurement category of the various classes of financial instruments and their carrying value under
both standards.
Measurement Category
Carrying Amount
IAS 39
IFRS 9
IAS 39
IFRS 9
Non-Current Financial Assets
Financial Assets – Equity Investments*
Derivatives
Current Financial Assets
Trade and other receivables
Cash and cash equivalents
Derivatives
Non-Current Liabilities
Borrowings
Current Financial Liabilities
Borrowings
Trade and other payables
Derivatives
*no item of this nature in the 2017 accounts
Comparative information under IAS 39
-
Fair Value through
Income Statement
Fair Value through Other
Comprehensive Income
Fair Value through
Income Statement
Amortised cost
Amortised cost
Fair Value through
Income Statement
Amortised cost
Amortised cost
Fair Value through
Income Statement
-
27.2
675.9
176.6
0.1
-
22.2
675.9
176.6
0.1
Financial liabilities
Financial liabilities
661.5
661.5
Financial liabilities
Financial liabilities
Financial liabilities
Financial liabilities
Fair Value through
Income Statement
Fair Value through
Income Statement
1.2
645.2
0.1
1.2
645.2
0.1
The aged analysis of gross trade receivables, analysed between amounts that were neither past due nor impaired and amounts past
due but not impaired as at 31 December 2017, is as follows:
Neither past due nor impaired
-Invoice date less than 90 days
-Invoice date greater than 90 days
Past due but not impaired
- 0 to 60 days overdue
- 60+ days overdue
Past due and impaired (fully or partially)
2017
€m
432.6
22.1
153.5
30.1
38.6
676.9
The carrying amount of receivables at 31 December 2017 whose terms were being renegotiated, that would otherwise be past due or
impaired, is €nil.
The movement in the allowance for impairment in respect of trade receivables during the year was as follows. Comparative amounts
for 2017 represent the allowance account for impairment losses under IAS 39.
Balance at 1 January under IAS 39
Adjustment on initial application of IFRS 9
Balance at 1 January 2018 under IFRS 9
Arising on acquisition
Written off during the year
Net remeasurement of loss allowance
Effect of movement in exchange rates
At 31 December
2018
€m
51.1
-
51.1
10.8
(9.5)
4.3
(0.3)
56.4
2017
€m
46.1
3.9
(4.8)
7.6
(1.7)
51.1
There are no material trade receivables written off during 2018 which are still subject to enforcement activity.
The following significant changes in the gross carrying amount of trade receivables contributed to the change in the impairment
allowance during 2018:
>
>
the organic growth of the Group; and
the combined impact of the Synthesia and Balex acquisitions during the year.
Cash & cash equivalents
On the Group’s cash and cash equivalents and derivatives, counterparty risk is managed by dealing with banks that have a minimum
credit rating and by spreading business across a portfolio of ten relationship banks.
Financial instruments by category
The carrying amount of financial assets presented in the Statement of Financial Position relate to the following measurement
categories as defined in IAS 39:
2018
Current:
Trade receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Non Current:
Derivative financial instruments
Financial Asset
2017
Current:
Trade receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Non Current:
Derivative financial instruments
Financial
asset
Loans and
receivables
€m
€m
Derivatives
designated
as hedging
instruments
€m
-
-
-
-
-
-
8.2
8.2
735.1
32.1
294.5
-
1,061.7
-
-
-
-
-
-
0.2
0.2
27.4
-
27.4
Derivatives
designated
as hedging
instruments
€m
Loans and
receivables
€m
625.8
25.1
176.6
-
827.5
-
-
-
-
-
0.1
0.1
22.2
22.2
Total
€m
735.1
32.1
294.5
0.2
1,061.9
27.4
8.2
35.6
Total
€m
625.8
25.1
176.6
0.1
827.6
22.2
22.2
It is considered that the carrying amounts of the above financial assets approximate their fair values.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 128
129
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
The carrying amounts of financial liabilities presented in the Statement of Financial Position relate to the following measurement
categories as defined in IAS 39:
Except as detailed below, it is considered that the carrying amounts of financial assets and financial liabilities recognised at
amortised cost approximate their fair values.
2018
Current:
Borrowings
Trade payables
Accruals
Deferred consideration
Deferred contingent consideration
Non current:
Borrowings
Deferred contingent consideration
2017
Current:
Borrowings
Trade payables
Accruals
Deferred contingent consideration
Derivative financial instruments
Non current:
Borrowings
Deferred consideration
Financial
liabilities in
fair value
hedge
€m
Financial
liabilities
measured at
fair value
€m
Financial
liabilities
measured at
amortised cost
€m
Derivatives
designated
as hedging
instruments
€m
-
-
-
-
-
-
35.2
-
35.2
-
-
-
-
-
-
34.2
-
34.2
-
-
-
30.0
29.5
59.5
-
136.6
136.6
-
-
-
6.4
-
6.4
-
111.1
111.1
53.2
397.5
341.1
-
-
791.8
931.8
-
931.8
1.2
326.5
271.1
-
-
598.8
627.3
-
627.3
-
-
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
-
-
-
Total
€m
53.2
397.5
341.1
30.0
29.5
851.3
967.0
136.6
1,103.6
1.2
326.5
271.1
6.4
0.1
605.3
661.5
111.1
772.6
Fair value hierarchy
Financial assets and liabilities recognised at fair value are analysed between those based on quoted prices in active markets for
identical assets or liabilities (Level 1), those involving inputs other than quoted prices that are observable for the assets or liabilities,
either directly or indirectly (Level 2), and those involving inputs for the assets or liabilities that are not based on observable market
data (Level 3) as set out in note 18.
Normally, the derivatives entered into by the Group are not traded in active markets. The fair values of these contracts are estimated
using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates (Level 2).
All derivatives entered into by the Group are included in Level 2 and consist of foreign currency forward contracts, interest rate swaps
and cross currency interest rate swaps.
Financial Assets
Interest rate swaps
Foreign exchange contracts for hedging
Financial Liabilities
Deferred contingent consideration
Deferred consideration
Put option
Foreign exchange contracts for hedging
As at 31 December 2018
As at 31 December 2017
Level 1
€m
Level 2
€m
Level 3
€m
Level 1
€m
Level 2
€m
Level 3
€m
-
-
27.4
0.2
-
-
-
30.0
-
-
-
-
-
-
38.9
-
127.2
-
-
-
-
-
-
-
22.2
0.1
-
-
-
0.1
-
-
43.0
-
74.5
-
During the year ended 31 December 2018, there were no significant changes in the business or economic circumstances that affect
the fair value of financial assets and liabilities, no reclassifications and no transfers between levels of the fair value hierarchy used in
measuring the fair value of the financial instruments.
The unobservable input relevant to matters categorised as Level 3 is the underlying profitability of each business unit. A 5% movement in
cashflows and a 1% adjustment in the discount rate would each have an immaterial impact on the carrying value of Level 3 items.
As at 31 December 2018
As at 31 December 2017
Carrying
amount
€m
Fair
Value
€m
Level
Carrying
amount
€m
Fair
Value
€m
Level
Private placement loan notes
Bank loans
835.9
180.1
889.0
180.1
2
2
655.4
3.0
693.7
3.0
2
2
Capital Management Policies and Procedures
The Group employs a combination of debt and equity to fund its operations. As at 31 December 2018 the total capital employed in the
Group was as follows:
Net Debt
Equity
Total Capital Employed
2018
€m
728.3
1,788.9
2017
€m
463.9
1,568.0
2,517.2
2,031.9
The Board’s objective when managing capital is to maintain a strong capital base so as to maintain the confidence of investors,
creditors and the market. The Board monitors the return on capital (defined as total shareholders’ equity plus net debt), and targets
a return in excess of 15% together with a dividend level that is compatible with industry norms, but which also reflects any exceptional
market conditions.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and
the advantages and security afforded by a sound capital position. The Group actively manages foreign currency and interest rate
exposure, as well as actively managing the net asset position, in order to create bottom line value. This necessitates the development
of a methodology to optimise the allocation of financial resources on the one hand and the return on capital on the other.
The Board closely monitors externally imposed capital restrictions which are present due to covenants within the Group’s core
banking facilities.
There were no changes to the Group’s approach to capital management during the year.
20 PROVISIONS FOR LIABILITIES
Guarantees and warranties
At 1 January
Arising on acquisitions (Note 22)
Provided during year
Claims paid
Provisions released
Effect of movement in exchange rates
At 31 December
Current liability
Non-current liability
2018
€m
101.0
9.4
38.2
(27.4)
(16.7)
(0.2)
104.3
47.5
56.8
104.3
2017
€m
100.9
5.2
41.8
(27.1)
(17.1)
(2.7)
101.0
52.3
48.7
101.0
The Group manufactures a wide range of insulation and related products for use primarily in the construction sector. Some products
carry formal guarantees of satisfactory performance of varying periods following their purchase by customers and a provision is
carried in respect of the expected costs of settling warranty and guarantee claims which arise. Both the number of claims and
the cost of settling the claim are sensitive to change but not to such an extent as would cause a material change in the provision.
Provisions are reviewed by management on a regular basis, and adjusted to reflect the current best estimate of the economic
outflow. If it is no longer probable that an outflow of economic benefits will be required, the related provision is reversed.
For the non-current element of the provision, the Group anticipates that these will be utilised within three years of the reporting date.
Discounting of the non-current element has not been applied because the discount would be immaterial.
The Group is not engaged in any material litigation.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
130
131
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
21 DEFERRED TAX ASSETS AND LIABILITIES
22 BUSINESS COMBINATIONS (continued)
Deferred tax assets and liabilities arising from temporary differences and unused tax losses after offset are as follows:
Deferred tax assets
Deferred tax liabilities
Net Position
2018
€m
15.6
(40.8)
(25.2)
2017
€m
16.5
(38.7)
(22.2)
Deferred tax arises from differences in the carrying value of items such as property, plant and equipment, intangibles, pension
obligations, and other temporary differences in the financial statements and the tax base established by the tax authorities.
The movement in the net deferred tax position for 2018 is as follows:
Balance
1 Jan
2018
Recognised in
profit
or loss
Recognised in
equity
Recognised
in other
comprehensive
income
Translation
adjustment
Arising on
acquisitions
Balance
31 Dec
2018
€m
€m
€m
€m
€m
€m
€m
Property, plant
and equipment
Intangibles
Other temporary
differences
Pension obligations
Unused tax losses
(40.6)
(24.9)
35.8
0.9
6.6
(22.2)
(4.2)
6.1
(5.9)
-
1.8
(2.2)
-
-
0.9
-
-
0.9
-
-
-
(0.2)
-
(0.2)
-
(0.1)
0.5
0.1
-
0.5
(1.0)
(10.5)
9.5
-
-
(2.0)
(45.8)
(29.4)
40.8
0.8
8.4
(25.2)
The movement in the net deferred tax position for 2017 is as follows:
Balance
1 Jan
2017
Recognised in
profit
or loss
Recognised in
equity
Recognised
in other
comprehensive
income
Translation
adjustment
Arising on
acquisitions
Balance
31 Dec
2017
€m
(46.3)
(26.8)
39.2
(0.1)
8.2
(25.8)
€m
5.3
3.1
(3.9)
1.0
(1.1)
4.4
€m
-
-
3.9
-
-
3.9
€m
-
-
-
(0.2)
-
(0.2)
€m
1.2
1.6
(2.1)
0.2
(0.5)
0.4
€m
€m
(0.8)
(2.8)
(1.3)
-
-
(4.9)
(40.6)
(24.9)
35.8
0.9
6.6
(22.2)
Property, plant and
equipment
Intangibles
Other temporary
differences
Pension obligations
Unused tax losses
22 BUSINESS COMBINATIONS
A key strategy of the Group is to create and sustain market leading positions through acquisitions in markets it currently operates
in, together with extending the Group’s footprint in new geographic markets. In line with this strategy, the principal acquisitions
completed during the year were as follows:
In March 2018, the Group acquired 100% of the share capital of the Synthesia Group comprising of Synthesia Espanola S.A.,
Poliuretanos S.A, Huurre Iberica S.A. and their respective subsidiaries (“Synthesia”). The total consideration, including debt acquired
and related costs amounted to €243.4m, representing the maximum amount of identifiable consideration, comprising of €213.4m
paid in cash on completion and €30.0m in deferred consideration.
In July 2018, the Group acquired 100% of the share capital of Balex Metal sp. z.o.o. (“Balex”), a Polish based manufacturer of insulated
panels and insulation boards. The total consideration, including debt acquired and related costs amounted to €197.6m which was
discharged in full at acquisition.
The Group also made a number of smaller acquisitions during the year for a combined cash consideration of €50.0m:
>
>
>
>
>
the purchase of 51% of the share capital of Jindal Mectec Private Limited, an Indian manufacturer of insulated panels;
the purchase of the assets of H2Enviro, an Australian water tanks business;
the purchase of 100% of Vestfold Plastindustri AS and Vestfold Plastindustri Eiendom AS, a Norwegian water treatment business;
the purchase of STF Holding GmbH & Co KG, a German based daylighting and smoke extraction business; and
the purchase of Tanks Direct Limited, a UK based Water & Energy business.
The table below reflects the fair value of the identifiable net assets acquired in respect of the acquisitions completed during the year.
Any amendments to fair values will be made within the twelve month period from the date of acquisition, as permitted by IFRS 3,
Business Combinations.
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Provisions for liabilities
Non-current liabilities
Deferred tax liabilities
Total identifiable assets
Non-controlling interest arising on acquisition
(Note 28)
Goodwill
Total consideration
Satisfied by:
Cash (net of cash acquired)
Deferred contingent consideration
Synthesia
€m
31.5
42.8
3.3
49.1
70.4
(59.6)
(5.6)
(7.9)
124.0
-
119.4
243.4
213.4
30.0
243.4
Balex
€m
7.9
42.3
0.7
30.0
18.1
(23.4)
(0.9)
(1.8)
72.9
-
124.7
197.6
197.6
-
197.6
Other*
€m
3.9
8.6
2.8
4.8
4.2
(28.5)
(2.9)
0.9
(6.2)
4.9
52.7
51.4
50.0
1.4
51.4
Total
€m
43.3
93.7
6.8
83.9
92.7
(111.5)
(9.4)
(8.8)
190.7
4.9
296.8
492.4
461.0
31.4
492.4
*Included in Other are certain immaterial remeasurements of prior year accounting estimates.
The acquired goodwill is attributable principally to the profit generating potential of the businesses, together with cross-selling
opportunities and other synergies expected to be achieved from integrating the acquired businesses into the Group’s existing
business.
In the post-acquisition period to 31 December 2018, the businesses acquired during the current year contributed revenue of €416.3m
and trading profit of €35.0m to the Group’s results.
The full year revenue and trading profit had the acquisitions taken place at the start of the year, would have been €4,522.7m and
€449.5m respectively.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to €103.0m. The fair
value of these receivables is €92.7m, all of which is recoverable, and is inclusive of an aggregate impairment provision of €10.8m.
There is no goodwill (2017: €25.5m) which is expected to be deductible for tax purposes.
The Group incurred acquisition related costs of €3.3m (2017: €3.6m) relating to external legal fees, due diligence costs and stamp
duty. These costs have been included in operating costs in the Consolidated Income Statement.
The deferred consideration reflects the remaining obligation associated with the Group’s 100% interest in Synthesia. A put option is
also in place over the remaining 49% of Jindal Mectec Private Limited, the details of which are set out in Note 18.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of
Synthesia Technology, being the chemical element of Synthesia, and Balex due to the relative size of the acquisitions and the number
of markets they operate in. Any amendments to these fair values within the twelve-month timeframe from the date of acquisition will
be disclosable in the 2019 Annual Report, as stipulated by IFRS 3.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 132
133
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
22 BUSINESS COMBINATIONS (continued)
24 SHARE PREMIUM
Prior year acquisitions
In the prior year, the Group acquired 51% of the share capital of Isoeste Construtivos Isotermicos S.A. (“Isoeste”), 100% of the share
capital of Brakel Investments BV, 100% of the share capital of CPI Daylighting Inc., 100% of the share capital of Rhino Water Tanks &
Liners Pty., 51% of the share capital of PanelMET S.A.S, the assets of the Jansen Building Products Access Floors business in Belgium
and two smaller bolt-on European businesses.
The fair values as recognised at 31 December 2017 of the acquired assets and liabilities at acquisition are set out below:
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Provisions for liabilities
Non-current liabilities
Retirement benefit obligation
Deferred tax liabilities
Total identifiable assets
Non-controlling interest arising on acquisition (Note 28)
Goodwill
Total consideration
Satisfied by:
Cash (net of cash acquired)
Deferred contingent consideration
Isoeste
€m
Brakel
€m
Other
€m
5.3
12.9
-
23.4
29.0
(22.4)
-
-
(1.8)
46.4
(24.6)
53.2
75.0
41.8
33.2
75.0
-
10.5
-
3.9
14.2
(14.7)
(1.5)
(0.3)
(1.7)
10.4
-
62.9
73.3
73.3
-
73.3
7.6
16.4
3.9
5.1
8.2
(12.8)
(3.7)
(0.3)
(5.3)
19.1
(0.3)
40.0
58.8
58.8
-
58.8
Total
€m
12.9
39.8
3.9
32.4
51.4
(49.9)
(5.2)
(0.6)
(8.8)
75.9
(24.9)
156.1
207.1
173.9
33.2
207.1
In the post-acquisition period to 31 December 2017, the acquired businesses contributed revenue of €80.9m and a trading profit of
€9.5m to the Group’s results.
The full year revenue and trading profit had the acquisitions taken place at the start of the year, would have been €3,853.8m and
€397.3m.
The Group incurred acquisition related costs of €3.6m (2016: €3.1m) relating to external legal fees and due diligence costs. These costs
have been included in operating costs in the Income Statement.
23 SHARE CAPITAL
Authorised
250,000,000 Ordinary shares of €0.13 each
(2017: 250,000,000 Ordinary shares of €0.13 each)
Issued and fully paid
Ordinary shares of €0.13 each
Opening balance – 181,342,315 (2017: 180,051,534) shares
Share options exercised – 828,805 (2017: 1,290,781) shares
Closing balance – 182,171,120 (2017: 181,342,315) shares
There were no adjustments to the authorised share capital during the year (2017: 30,000,000 shares).
Details of share options exercised are set out in Note 3 to the financial statements.
2018
€m
2017
€m
32.5
32.5
23.6
0.1
23.7
23.4
0.2
23.6
At 1 January
Premium on share options exercised under employee share based compensation schemes
At 31 December
25 TREASURY SHARES
Consideration paid
2018
€m
95.6
-
95.6
2018
2017
No. of shares Consideration
paid
Total
No. of shares Consideration
paid
At 1 January
Repurchase of shares
Shares issued
At 31 December
Nominal value
2,019,750
-
(50,607)
1,969,143
No. of shares
At 1 January
Repurchase of shares
Shares issued
At 31 December
2,019,750
-
(50,607)
1,969,143
€
6.89
-
25.10
6.40
2018
Nominal
value
€
0.13
-
0.13
0.13
€m
14.0
-
(1.3)
12.7
1,969,826
49,924
-
2,019,750
Total
No. of shares
€
262,567
(6,579)
255,988
1,969,826
49,924
-
2,019,750
€
6.32
29.23
-
6.89
2017
Nominal
value
€
0.13
0.13
-
0.13
2017
€m
95.6
-
95.6
Total
€m
12.5
1.5
-
14.0
Total
€
256,077
6,490
-
262,567
During the year, the Company issued 50,607 treasury shares in satisfaction of obligations falling under the Deferred Bonus Plan.
The Company holds 1.1% (2017: 1.1%) of the issued ordinary share capital as treasury shares.
26 RETAINED EARNINGS
In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual
Income Statement at the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s profit for the
financial year was €9.7m (2017: €83.0m).
27 DIVIDENDS
Equity dividends on ordinary shares:
2018 Interim dividend 12.0 cent (2017: 11.0 cent) per share
2017 Final dividend 26.0 cent (2016: 23.5 cent) per share
Proposed for approval at AGM
Final dividend of 30.0 cent (2017: 26.0 cent) per share
2018
€m
21.7
46.6
68.3
54.1
2017
€m
19.7
42.0
61.7
46.6
This proposed dividend for 2018 is subject to approval by the shareholders at the Annual General Meeting and has not been included
as a liability in the Statement of Financial Position of the Group as at 31 December 2018 in accordance with IAS 10 Events after the
Reporting Period. The proposed final dividend for the year ended 31 December 2018 will be payable on 10 May 2019 to shareholders on
the Register of Members at close of business on 29 March 2019.
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 134
135
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
28 NON-CONTROLLING INTEREST
30 CASH GENERATED FROM OPERATIONS
At 1 January
Profit for the year attributable to non-controlling interest
Arising on acquisition (Note 22)
Dividends paid to minorities
Share of foreign operations’ translation movement
At 31 December
2018
€m
39.9
4.9
(4.9)
(0.1)
(1.2)
38.6
2017
€m
16.6
1.6
24.9
-
(3.2)
39.9
During the year, the Group acquired 51% of the ordinary share capital of Jindal Mectec Private Limited, an Indian Insulated Panels
business. As part of the acquisition, the Group recognised the 49% non-controlling interest of €2.4m. In addition, there was a €7.3m
movement attributable to Kingspan Isoeste.
Further details are provided in Note 22.
29 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Movement in cash and bank overdrafts
Drawdown of loans
Repayment of loans
(Increase) in deferred consideration
Settlement of derivative financial instrument
(Increase) in lease finance
Change in net debt resulting from cash flows
Translation movement - relating to US dollar loan
Translation movement – other
Derivative financial instruments movement
Net movement
Net debt at start of the year
Net debt at end of the year
2018
€m
120.1
(445.0)
92.8
(30.0)
-
(0.1)
(262.2)
(5.5)
(1.9)
5.2
(264.4)
2017
€m
(35.3)
(30.4)
41.8
-
(8.0)
(0.8)
(32.7)
25.9
(10.9)
(18.3)
(36.0)
(463.9)
(427.9)
(728.3)
(463.9)
A reconciliation of liabilities arising from financing activities is set out below:
Balance
1 Jan 2018
€m
Repayments
Deferred
Consideration
€m
€m
Drawdowns /
Receipts
€m
Non cash
movements
€m
Balance
31 Dec 2018
€m
Bank loans
Loan notes
Finance leases
Derivatives
Deferred Consideration
3.0
655.4
4.3
(22.2)
-
640.5
(92.8)
-
-
-
-
(92.8)
-
-
-
-
30.0
30.0
270.0
175.0
0.1
-
-
445.1
(0.1)
5.5
(0.2)
(5.2)
-
-
180.1
835.9
4.2
(27.4)
30.0
1,022.8
A reconciliation of liabilities arising from financing activities in 2017 is set out below:
Profit for the year
Add back non-operating expenses:
-Income tax expense
-Depreciation of property, plant and equipment
-Amortisation of intangible assets
-Impairment of non-current assets
-Employee equity-settled share options
-Finance income
-Finance expense
-Profit on sale of property, plant and equipment
-Profit on disposal of subsidiary
-Fair value movement of deferred consideration
Changes in working capital:
-Inventories
-Trade and other receivables
-Trade and other payables
Other
-Change in provisions
-Pension contributions
2018
€m
2017
€m
335.8
285.9
69.1
76.0
22.2
5.2
12.3
(1.4)
19.5
(4.9)
-
0.8
4.7
(33.0)
30.6
(5.8)
(0.8)
60.6
64.2
15.7
3.1
10.7
(0.5)
16.4
(2.1)
(2.9)
-
(64.8)
(47.7)
27.2
(2.4)
(0.9)
Cash generated from operations
530.3
362.5
31 GUARANTEES AND OTHER FINANCIAL COMMITMENTS
(i) Guarantees and contingencies
The Group’s principal debt facilities are secured by means of cross guarantees provided by Kingspan Group plc. These include drawn
private placement notes of US$200m and €662.5m, drawn banking facilities of €170m and undrawn banking facilities of €380m.
(ii) Leases
Finance lease liabilities are payable as follows:
Future minimum
lease payment
2018
€m
0.4
4.3
4.7
2017
€m
0.6
4.4
5.0
Interest
2018
€m
-
0.5
0.5
2017
€m
-
0.7
0.7
Present value of minimum
lease payments
2018
€m
0.4
3.8
4.2
2017
€m
0.6
3.7
4.3
Less than one year
Between 1 - 5 years
Total obligations under non-cancellable operating leases are due as follows:
Minimum
payments
2018
€m
Minimum
payments
2017
€m
28.4
67.8
55.3
151.5
19.2
48.3
39.8
107.3
Bank loans
Loan notes
Finance leases
Derivatives
Balance
1 Jan 2017
€m
3.8
691.1
3.5
(48.5)
649.9
Repayments
€m
(2.0)
(39.8)
-
-
(41.8)
Drawdowns /
Receipts
€m
Non cash
movements
€m
Balance
31 Dec 2017
€m
0.4
30.0
0.8
8.0
39.2
0.8
(25.9)
-
18.3
(6.8)
3.0
655.4
4.3
(22.2)
640.5
Less than one year
Between 1 - 5 years
More than 5 years
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 136
137
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
31 GUARANTEES AND OTHER FINANCIAL COMMITMENTS (continued)
32 PENSION OBLIGATIONS (continued)
(iii) Future capital expenditure
Movements in net liability recognised in the Statement of Financial Position
Capital expenditure in subsidiary entities, approved by the directors but not provided in the financial statements, is as follows:
Contracted for
Not contracted for
32 PENSION OBLIGATIONS
2018
€m
49.7
20.9
70.6
2017
€m
45.2
20.4
65.6
Net liability in schemes at 1 January
Acquired (Note 22)
Employer contributions
Recognised in income statement
Recognised in statement of comprehensive income
Foreign exchange movement
Net liability in schemes at 31 December
The Group operates defined contribution schemes in each of its main operating locations. The Group also has a number of defined
benefit schemes in the UK and mainland Europe.
Defined contribution schemes
The total cost charged to profit or loss of €15.5m (2017: €11.8m) represents employer contributions payable to these schemes in
accordance with the rules of each plan. An amount of €4.3m (2017: €5.0m) was included at year end in accruals in respect of defined
contribution pension accruals.
Contributions for key management personnel to defined contribution schemes are set out in Note 7.
Defined benefit schemes / obligations
The Group has two legacy defined benefit schemes in the UK, both of which are closed to new members and to future accrual.
The total pension contributions to these schemes for the year amounted to €0.1m (2017: €0.2m) and the expected contributions
for 2019 are €0.1m.
The Group also has pension obligations in mainland Europe which are accounted for as defined benefit obligations. These
obligations have been accounted for in line with the Group’s existing pension obligations whereby companies are not required to
fund independent schemes for post employment benefit obligations. Instead, commencing from the date the employee becomes
eligible to receive the income stream, this obligation is satisfied from available cash resources of the relevant employing company.
A provision has been made for the unfunded liability. Pension entitlements of €0.8m have been paid to retired former employees
during the year (2017: €0.7m).
The pension costs relating to all of the above defined benefit obligations are assessed in accordance with the advice of qualified
actuaries. In the case of the two UK legacy schemes, the most recent actuarial valuations were performed as of 31 December 2018. In
general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to members of the
various schemes.
The extent of the Group’s obligation under these schemes is sensitive to judgemental actuarial assumptions, of which the principal
ones are set out below. It is not considered that any reasonable sensitivity analysis on these assumptions would materially alter the
scheme obligations.
Life expectancies
Life expectancy for someone aged 65 - Males
Life expectancy for someone aged 65 - Females
Life expectancy at age 65 for someone aged 45 - Males
Life expectancy at age 65 for someone aged 45 - Females
Rate of increase in salaries
Rate of increase of pensions in payment
Rate of increase for deferred pensioners
Discount rate
Inflation rate
2018
2017
21.9
23.8
23.3
25.4
22.1
23.9
23.5
25.4
0% - 2.75%
0% - 2.1%
2% - 2.2%
1.2% - 2.8%
1.5% - 3.2%
0% - 2.75%
0% - 2.1%
2% - 2.2%
1.3% - 2.6%
1% - 3.2%
Defined benefit pension income/expense recognised in the Income Statement
Current service cost
Settlements of scheme obligations
Transfer
Total, included in operating costs
Movement on scheme obligations
Interest on scheme assets
Net interest expense, included in finance expense (Note 5)
Analysis of amount included in other comprehensive income
Actual return less interest on scheme assets
Experience gain arising on scheme liabilities
Actuarial gain arising from changes in demographic assumptions
Actuarial gain /(loss) arising from changes in financial assumptions
Gain/(loss)recognised in other comprehensive income
The cumulative actuarial loss recognised in other comprehensive income to date is €18.3m (2017: €19.2m).
In 2018, the actual return on plan assets was a loss of €2.4m (2017: €4.1m).
Asset Classes and Expected Rate of Return
The assets in the scheme at each year end were as follows:
Asset Classes as % of Total Scheme Assets
Equities
Bonds (Corporates)
Cash
Liability Driven Investment (LDI)
2018
€m
(13.6)
-
0.8
(1.1)
0.9
(0.1)
(13.1)
2018
€m
(1.3)
(0.1)
0.3
(1.1)
(1.8)
1.8
-
2018
€m
(4.2)
-
0.4
4.7
0.9
2017
€m
(14.1)
(0.6)
0.9
(0.6)
1.0
(0.2)
(13.6)
2017
€m
(0.4)
(0.1)
-
(0.5)
(2.0)
1.9
(0.1)
2017
€m
2.2
0.3
1.0
(2.5)
1.0
2018
2017
53.0%
0.3%
0.2%
46.5%
100%
46.0%
0.3%
0.2%
53.5%
100%
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018 138
139
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
Notes to the Financial Statements for the year ended 31 December 2018 (continued)
33 RELATED PARTY TRANSACTIONS
The principal related party relationships requiring disclosure under IAS 24 Related Party Disclosures relate to (i) transactions between
group companies, (ii) compensation of key management personnel and (iii) goods and services purchased from directors.
(i)
Transactions between subsidiaries and associates are carried out on an arm’s length basis.
The Company received no dividends from subsidiaries (2017: €67.0m), and there was a net decrease in the intercompany
balance of €55.2m (2017: €23.2m increase).
Transactions with the Group’s non-wholly owned subsidiaries primarily comprise trading sales and capital funding, carried out on
an arm’s length basis. These transactions are not considered to be material.
(ii)
For the purposes of the disclosure requirements of IAS 24 Related Party Disclosures, the term “key management personnel” (i.e.
those persons having the authority and responsibility for planning, directing and controlling the activities of the Company),
comprise the board of directors who manage the business and affairs of the Company. As identified in the Report of the
Remuneration Committee, the directors, other than the non-executive directors, serve as executive officers of the Group.
Key management personnel compensation is set out in Note 7.
Mr Eugene Murtagh received dividends of €10.9m during the year from the Group (2017: €10.0m). Dividends of €0.92m were
paid to other key management personnel (2017: €0.82m).
(iii)
The Group purchased legal services in the sum of €114,533 (2017: €135,916) from McCann FitzGerald Solicitors, a firm in which
Mr John Cronin is a partner.
34 POST BALANCE SHEET EVENTS
There have been no material events subsequent to 31 December 2018 which would require adjustment to or disclosure in this report.
35 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the directors on 22 February 2019.
32 PENSION OBLIGATIONS (continued)
The net pension liability is analysed as follows:
Equities
Bonds (Corporates)
Cash
Liability Driven Investment (LDI)
Fair market value of plan assets
Present value of obligation
Deficit
Analysed between:
Funded schemes’ surplus
Unfunded obligations
Related deferred tax (asset)/liability
Changes in present value of defined benefit obligations
At 1 January
Acquired through business combination
Current service cost
Interest cost
Benefits paid
Settlement
Actuarial (gains)/losses
Effect of movement in exchange rates
Transfer
At 31 December
Changes in present value of scheme assets during year
At 1 January
Acquired through business combination
Interest on scheme assets
Employer contributions
Benefits paid
Settlement
Actual return less interest
Effect of movement in exchange rates
Transfer
At 31 December
2018
€m
37.5
0.2
0.2
33.2
71.1
(84.2)
(13.1)
7.4
(20.5)
(13.1)
(0.8)
2018
€m
90.5
-
1.3
1.8
(2.4)
(0.1)
(5.1)
(0.7)
(1.1)
84.2
2018
€m
76.9
-
1.8
0.1
(1.7)
(0.2)
(4.2)
(0.8)
(0.8)
71.1
2017
€m
34.9
0.2
0.2
41.6
76.9
(90.5)
(13.6)
7.9
(21.5)
(13.6)
(0.9)
2017
€m
91.2
1.2
0.4
2.0
(2.9)
(0.2)
1.2
(2.4)
-
90.5
2017
€m
77.1
0.6
1.9
0.3
(2.3)
(0.3)
2.2
(2.6)
-
76.9
Financial StatementsKingspan Group plc — Annual Report & Financial Statements 2018
140
Other Information
—
Alternative Performance Measures (APMs)
The Group uses a number of metrics, which are non-IFRS measures, to monitor the performance of its operations.
The Group believes that these metrics assist investors in evaluating the performance of the underlying business. Given that these
metrics are regularly used by management, they also give the investor an insight into how Group management review and monitor
the business on an ongoing basis.
The principal APMs used by the Group are defined as follows:
TRADING PROFIT
This comprises the operating profit as reported in the Income Statement before intangible asset amortisation and non trading items.
This equates to the Earnings Before Interest, Tax and Amortisation (“EBITA”) of the Group. Trading profit is used by management as it
excludes items which may hinder year on year comparisons.
Financial Statements Reference
Trading profit
Note 2
TRADING MARGIN
Measures the trading profit as a percentage of revenue
Trading Profit
Total Group Revenue
Trading margin
NET INTEREST
Financial Statements Reference
Note 2
Note 2
2018
€m
445.2
2017
€m
337.5
2018
€m
445.2
4,372.5
10.2%
2017
€m
377.5
3,668.1
10.3%
The Group defines net interest as the net total of finance expense and finance income as presented in the Income Statement
Finance Expense
Finance Income
Net Interest
NON TRADING ITEMS
Financial Statements Reference
Note 5
Note 5
2018
€m
19.5
(1.4)
18.1
2017
€m
16.4
(0.5)
15.9
The Group defines non trading items as significant one off items which are not part of the regular trading performance of the
Group. These may include significant restructuring costs, profit or loss on disposal of investments, significant impairment of assets.
Judgement is used by the Group in assessing the particular items, by their scale and nature, should be classified as non trading items.
ADJUSTED EARNINGS PER SHARE
The Group defines adjusted earnings per share as basic earnings per share adjusted for the impact, net of tax, of intangible amortisation.
Financial Statements Reference
Profit attributable to ordinary shareholders
Intangible amortisation
Intangible amortisation tax impact
Non-trading items
Note 9
Note 2
Note 4
2018
€m
330.9
22.2
(5.1)
-
348.0
2017
€m
284.3
15.7
(3.1)
(0.4)
296.5
Weighted average number of shares ('000)
Note 9
179,840
178,854
Adjusted earnings per share
Weighted average number of shares for
dilutive calculation ('000)
Adjusted diluted earnings per share
Note 9
193.5 cent
165.8 cent
181,536
191.7 cent
180,710
164.1 cent
141
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FREE CASH FLOW
Free cash flow is the cash generated from operations after net capital expenditure, interest paid and income taxes paid and reflects
the amount of internally generated capital available for re-investment in the business or for distribution to shareholders. Free cash
flow is seen as an important indicator of the strength and quality of the business and the availability of funds for deployment of a
return to shareholders.
Net cash flow from operating activities
Consolidated Statement of Cash Flows
Financial Statements Reference
2018
€m
438.3
2017
€m
283.6
Additions to property, plant,
equipment and intangibles
Proceeds from disposals of property,
plant and equipment
Interest received
Free cash flow
RETURN ON CAPITAL EMPLOYED (ROCE)
Consolidated Statement of Cash Flows
(144.2)
(89.8)
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
12.9
1.4
308.4
4.2
0.5
198.5
ROCE is the adjusted operating profit before interest and tax expressed as a percentage of the net assets employed. The net assets
employed reflect the net assets, excluding net debt, at the end of each reporting period.
Net Assets
Net Debt
Financial Statements Reference
Consolidated Statement of Financial Position
Note 17
Operating profit before interest and tax
Consolidated Income Statement
Return on capital employed
NET DEBT
2018
€m
1,788.9
728.3
2,517.2
423.0
16.8%
2017
€m
1,568.0
463.9
2,031.9
362.4
17.8%
Net debt represents the net total of current and non-current borrowings, current and non-current derivative financial instruments,
(excluding foreign currency derivatives which are used for transactional hedging), and cash and cash equivalents as presented in the
Statement of Financial Position.
Net Debt
Note 17
WORKING CAPITAL
Financial Statements Reference
2018
€m
728.3
2017
€m
463.9
Working capital represents the net total of inventories, trade and other receivables and trade and other payables, net of transactional
foreign currency derivation excluded from net debt.
Financial Statements Reference
Note 15
Trade and other receivables
Note 14
Inventories
Trade and other payables
Note 16
Foreign currency derivatives excluded from net debt Note 19
Working capital
WORKING CAPITAL RATIO
2018
€m
798.6
524.9
(779.8)
0.2
2017
€m
675.9
447.1
(645.2)
-
543.9
477.8
Measures working capital as a percentage of October to December turnover annualised. The annualisation of October to December
turnover reflects the current profile of the Group rather than a partial reflection of any acquisitions completed during the financial year.
Working capital
October – December turnover annualised
Working Capital ratio
Financial Statements Reference
2018
€m
543.9
4,711.6
2017
€m
477.8
3,840.7
11.5%
12.4%
Kingspan Group plc — Annual Report & Financial Statements 2018
142
Shareholder Information
—
The Annual General Meeting
The Annual General Meeting of the Company will be held at
The Herbert Park Hotel, Ballsbridge, Dublin 4 on Friday 3 May
2019 at 10.00 a.m.
Notice of the 2019 AGM will be made available to view online
at www.kingspan.com/agm2019
You may submit your votes electronically by accessing
Computershare’s website:
Share Registrar
Administrative enquiries about the holding of Kingspan
Group plc shares should be directed to:
The Company Registrar:
Computershare Investor Services (Ireland) Limited,
Heron House,
Corrig Road,
Sandyford Industrial Estate,
Dublin 18.
www.eproxyappointment.com
Financial Calendar
You will be asked for your Shareholder Reference Number
(SRN), Control Number, and PIN, all of which will have been
sent to shareholders in advance of the meeting. To be valid,
your proxy vote must be received by Computershare no later
than 10.00 am on Wednesday 1 May 2019 (48 hours before
the meeting).
Amalgamation of shareholding accounts
Shareholders who receive duplicate sets of Company mailings
due to multiple accounts in their name should write to the
Company’s Registrar to have their accounts amalgamated.
Warning to shareholders
Many companies have become aware that their shareholders
have received unsolicited phone calls or correspondence
concerning investment matters. These are typically from
overseas based “brokers” who target shareholders offering
to sell them what often turn out to be worthless or high-risk
shares in US or UK investments. They can be very persistent
and extremely persuasive. Shareholders are therefore advised
to be very wary of any unsolicited advice, offers to buy shares
at a discount or offers of free company reports.
Please note that it is very unlikely that either the Company
or the Company’s Registrar, Computershare, would make
unsolicited telephone calls to shareholders and that any such
calls would relate only to official documentation already
circulated to shareholders and never in respect of investment
“advice”.
If you are in any doubt about the veracity of an unsolicited
phone call, please call either the Company Secretary or the
Registrar.
Company information
Kingspan Group plc was incorporated on 14 August 1979. It
is an Irish domiciled company and the registered office is
Kingspan Group plc, Dublin Road, Kingscourt, Co. Cavan, A82
XY31, Ireland. The registered company number of Kingspan
Group plc is 70576.
Preliminary results announced:
22 February 2019
Annual General Meeting:
3 May 2019
Payment date for 2018 final dividend: 10 May 2019
Ex dividend date:
Record date:
28 March 2019
29 March 2019
Half-yearly financial report:
23 August 2019
Trading update:
18 November 2019
Bankers
Bank of America Merrill Lynch
HSBC Bank plc
ING Bank NV
Commerzbank
JP Morgan Chase Bank
Ulster Bank Ireland Limited
BNP Paribas
Danske Bank AS
KBC Bank NV
Bank of Ireland
Solicitors
McCann FitzGerald,
Riverside One,
Sir John Rogerson’s Quay,
Dublin 2,
Ireland.
Stockbrokers
Goodbody,
Ballsbridge Park,
Ballsbridge,
Dublin 4,
Ireland.
Auditor
Allen & Overy LLP,
One Bishops Square,
London,
E1 6AD,
England.
JP Morgan Cazenove,
25 Bank Street,
Canary Wharf,
London,
E14 5JP,
England.
KPMG,
Chartered Accountants & Statutory Auditor,
1 Stokes Place,
St Stephen’s Green,
Dublin 2,
Ireland.
143
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Information Required by the European Communities
(Takeover Bids (Directive 2004/25/Ec))
Regulations 2006
The information required by Regulation 21 of the above Regulations
as at 31 December 2018 is set out below.
Rights and obligations attaching to the Ordinary Shares
The Company has no securities in issue conferring special rights
with regards control of the Company.
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 (“Articles”). The Articles
of Association also contain the rules relating to the appointment
and removal of directors, rules relating to amending the Articles of
Association, the powers of the Company’s directors and in relation
to issuing or buying back by the Company of its shares. A copy
of the Articles may be found on www.kingspan.com or may be
obtained on request to the Company Secretary.
Holders of Ordinary Shares are entitled to receive duly declared
dividends in cash or, when offered, additional Ordinary Shares. In
the event of any surplus arising on the occasion of the liquidation
of the Company, shareholders would be entitled to a share in that
surplus pro rata to their holdings of Ordinary Shares.
Holders of Ordinary Shares are entitled to receive notice of and to
attend, speak and vote in person or by proxy, at general meetings
having, on a show of hands, one vote, and, on a poll, one vote
for each Ordinary Share held. Procedures and deadlines for
entitlement to exercise, and exercise of, voting rights are specified
in the notice convening the general meeting in question. There
are no restrictions on voting rights except in the circumstances
where a “Specified Event” (as defined in the Articles) shall have
occurred and the Directors have served a Restriction Notice on the
shareholder. Upon the service of such Restriction Notice, no holder
of the shares specified in the notice shall, for so long as such notice
shall remain in force, be entitled to attend or vote at any general
meeting, either personally or by proxy.
Holding and transfer of ordinary shares
The Ordinary Shares may be held in either certificated or
uncertificated form (through CREST).
Save as set out below, there is no requirement to obtain the
approval of the Company, or of other shareholders, for a transfer
of Ordinary Shares. The Directors may decline to register (a)
any transfer of a partly-paid share to a person of whom they
do not approve, (b) any transfer of a share to more than four
joint holders, (c) any transfer of a share on which the Company
has a lien, and (d) any transfer of a certificated share unless
accompanied by the share certificate and such other evidence of
title as may reasonably be required. The registration of transfers of
shares may be suspended at such times and for such periods (not
exceeding 30 days in each year) as the Directors may determine.
Transfer instruments for certificated shares are executed by or on
behalf of the transferor and, in cases where the share is not fully
paid, by or on behalf of the transferee. Transfers of uncertificated
shares may be effected by means of a relevant system in the
manner provided for in the Companies Act, 1990 (Uncertificated
Securities) Regulations, 1996 (the “CREST Regulations”) and the
rules of the relevant system. 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.
Rules concerning the appointment and replacement of the
directors and amendment of the Company’s Articles
Unless otherwise determined by ordinary resolution of the
Company, the number of Directors shall not be less than two or
more than 15.
Subject to that limit, the shareholders in general meeting may
appoint any person to be a director either to fill a vacancy or as
an additional director. The directors also have the power to co-opt
additional persons as directors, but any director so co-opted is
under the Articles required to be submitted to shareholders for
re-election at the first annual general meeting following his or her
co-option.
The Articles require that at each annual general meeting of the
Company one-third of the directors retire by rotation. However,
in accordance with the recommendations of the UK Corporate
Governance Code, the directors have resolved they will all retire
and submit themselves for re-election by the shareholders at the
Annual General Meeting to be held on 3 May 2019.
The Company’s Articles may be amended by special resolution
(75% majority of votes cast) passed at general meeting.
Powers of directors including powers in relation to issuing or buying
back by the Company of its shares
Under its Articles, the business of the Company shall be managed
by the directors, who exercise all powers of the Company as are
not, by the Companies Acts or the Articles, required to be exercised
by the Company in general meeting.
The directors are currently authorised to issue a number of shares
equal to the authorised but as yet unissued share capital of the
Company on such terms as they may consider to be in the best
interests of the Company, under an authority that was conferred
on them at the Annual General Meeting held on 20 April 2018. The
directors are also currently authorised on the issue of new equity
for cash to disapply the strict statutory pre-emption provisions
that would otherwise apply, provided that the disapplication
is limited to the allotment of equity securities in connection
with (i) any rights issue or any open offer to shareholders, or (ii)
the allotment of shares not exceeding in aggregate 5% of the
nominal value of the Company’s issued share capital, or (iii) for
the purpose of financing (or refinancing) an acquisition or other
capital investment of a kind contemplated by the UK Pre-emption
Group not exceeding in aggregate 5% of the nominal value of the
Company’s issued share capital. Both these authorities expire on 3
May 2019 unless renewed and resolutions to that effect are being
proposed at the Annual General Meeting to be held on 3 May 2019.
The Company may, subject to the Companies Acts and the
Articles, purchase any of its shares and may either cancel or
hold in treasury any shares so purchased, and may re-issue any
such treasury shares on such terms and conditions as may be
determined by the directors. The Company shall not make market
purchases of its own shares unless such purchases have been
authorised by a special resolution passed by the members of the
Company at a general meeting. At the Annual General Meeting
held on 20 April 2018, shareholders passed a resolution giving the
Company, or any of its subsidiaries, the authority to purchase up
to 10% of the Company’s issued Ordinary Shares. At the Annual
General Meeting to be held on 3 May 2019, shareholders are being
asked to renew this authority.
Miscellaneous
There are no agreements between shareholders that are known
to the Company which may result in restrictions on the transfer of
securities or voting rights.
Certain of the Group’s banking facilities include provisions that,
in the event of a change of control of the Company, could oblige
early prepayment of the facilities. Certain of the Company’s joint
venture arrangements also contain provisions that would allow the
counterparty to terminate the agreement in the event of a change
of control of the Company.
The Company’s Performance Share Plan contains 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.
There are no agreements between the Company and its Directors
or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy
or otherwise) that occurs because of a takeover bid.
Kingspan Group plc — Annual Report & Financial Statements 2018
144
Principal Subsidiary Undertakings
—
Full list of principal subsidiary and joint venture companies and the percentage shareholding held by Kingspan Group plc,
either directly or indirectly pursuant to Section 316 of the Companies Act 2014:
% Shareholding
Nature of Business
% Shareholding
Nature of Business
% Shareholding
Nature of Business
% Shareholding
Nature of Business
Ireland
Aerobord Limited
Kingscourt Trustee
Company Limited
Kingspan Century Limited
Kingspan ESB Designated
Activity Company
Kingspan Holdings (Irl)
Limited
Kingspan Holdings
(North America) Limited
Kingspan Holdings
(Overseas) Limited
Kingspan Holdings Limited
Kingspan Insulation Limited
Kingspan International
Finance Unlimited
Company
Kingspan Light &
Air Limited
Kingspan Limited
Kingspan RE Limited
Kingspan Research &
Developments Limited
Kingspan Securities 2016
Designated Activity
Company
Kingspan Securities 2017
Designated Activity
Company
Kingspan Securities Limited
Kingspan Securities No. 2
Limited
Kingspan Tate Limited
Kingspan Water & Energy
Limited
KSP Property Limited
United Kingdom
Building Innovation Limited
Ecotherm Insulation (UK)
Limited
Euroclad Group Limited
Fuel Tank Shop Limited
Joris Ide Limited
Kingspan Access Floors Limited
Kingspan Energy Limited
Kingspan Group Limited
100 Manufacturing
100
Trustee Company
100 Manufacturing
50
Sales & Marketing
100 Management &
Procurement
Holding Company
100
100
Holding Company
Holding Company
100
100 Manufacturing
100
Finance Company
United Kingdom (continued)
Kingspan Insulation Limited
Kingspan Light & Air Limited
Kingspan Light & Air
(UK & Ireland) Limited
Kingspan Limited
Kingspan Services (UK) Limited
Kingspan Timber Solutions
Limited
Kingspan Trustee Company
Limited
Kingspan Water &
Energy Limited
Poultry House Products Limited
Springvale Insulation Limited
Tanks Direct Limited
100
Sales & Marketing
Australia
100 Manufacturing
100
100
Property Company
Product
Development
Finance Company
100
100
Finance Company
100
100
Finance Company
Finance Company
Sales & Marketing
100
100 Manufacturing
100
Property Company
100
100
100
100
100
100
100
100
Sales & Marketing
Sales & Marketing
Manufacturing
Sales & Marketing
Manufacturing
Manufacturing
Sales & Marketing
Holding Company
Kingspan Insulation Pty
Limited
Kingspan Water &
Energy Pty Limited
Tate Asic-Pacific Pty
Limited
Austria
Hoesch Bausysteme GmbH
Kingspan GmbH
Azerbaijan
Izopoli Mahdut Mesuliyeti
Cemiyeti
Belgium
Argina Technics NV
Brakel Aero NV
Isomasters NV
Joris Ide NV
Kingspan Access Floors
Europe NV
Kingspan Door
Components SA
Kingspan Insulation NV
Kingspan NV
Kingspan Unidek NV
100
100
100
100
100
100
Manufacturing
Sales & Marketing
Sales & Marketing
Manufacturing
Management &
Procurement
Manufacturing
100
Trustee Company
100
Manufacturing
100
100
100
Manufacturing
Manufacturing
Sales & Marketing
100
Manufacturing
85
Manufacturing
100
Sales & Marketing
100
100
Sales & Marketing
Sales & Marketing
85
Sales & Marketing
100
100
63
100
100
100
100
100
100
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Sales & Marketing
Sales & Marketing
Bosnia and Herzegovina
Kingspan D.O.O.
100
Sales & Marketing
Bulgaria
Kingspan EOOD
Brazil
Kingspan-Isoeste
Construtivos Isotérmicos
S/A.
Canada
Kingspan Insulated Panels
Limited
Tate ASP Access Floors Inc.
Vicwest Inc.
Chile
Synthesia Chile S.P.A.
Colombia
Kingspan Comercial SAS
PanelMET SAS
Synthesia Colombia S.A.
Costa Rica
Acusterm Costa Rica
S.R.L.
Croatia
Hoesch Gradjevinski
Elementi D.O.O.
Kingspan D.O.O.
Czech Republic
Balex Metal S.R.O.
Hoesch Stavebni Systemy
S.R.O
Kingspan A.S.
SEP Essmann S.R.O.
Denmark
Kingspan A/S
Kingspan Insulation ApS
Egypt
Izopoli Egypt LLC
Estonia
Kingspan Insulation OÜ
Kingspan OÜ
100
Sales & Marketing
51
Manufacturing
100
100
100
Manufacturing
Sales & Marketing
Manufacturing
100
Sales & Marketing
51
51
100
Sales & Marketing
Manufacturing
Sales & Marketing
100
Sales & Marketing
100
100
100
100
100
100
100
100
Sales & Marketing
Sales & Marketing
Sales & Marketing
Sales & Marketing
Manufacturing
Sales & Marketing
Sales & Marketing
Sales & Marketing
85
Sales & Marketing
100
100
Sales & Marketing
Sales & Marketing
Finland
Kingspan Insulation Oy
Kingspan Oy
Paroc Panel System Oy Ab
France
Comptoir du Batiment et
de L'Industrie SAS
ECODIS SAS
Isocab France SAS
Joris Ide Auvergne SAS
Joris Ide Sud Ouest SAS
Kingspan S.a.r.l.
Profinord S.a.r.l.
Societe Bretonne de
Profilage SAS
Teczone France SAS
Germany
E.M.B. Roda Montage u.
Service GmbH
Essmann Gebäudetechnik
GmbH
Hoesch Bausysteme GmbH
Joris Ide Deutschland
GmbH
Kingspan Environmental
GmbH
Kingspan Investments
GmbH
Kingspan GmbH
Kingspan Insulation Gmbh
& Co. KG
Schütze GmbH
STF Sicheheitstechnik
GmbH
Hong Kong
Chemprogress HK Limited
Tate Access Floors (Hong
Kong) Limited
Hungary
Essmann Hungaria Kft.
Kingspan Kereskedelmi Kft.
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Sales & Marketing
Manufacturing
Manufacturing
Sales & Marketing
Sales & Marketing
Manufacturing
Manufacturing
Manufacturing
Sales & Marketing
Property
Property Company
Manufacturing
Manufacturing
Manufacturing
100
100
Sales & Marketing
Sales & Marketing
100
100
Sales & Marketing
Manufacturing
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% Shareholding
Nature of Business
% Shareholding
Nature of Business
% Shareholding
Nature of Business
85
Sales & Marketing
100
Manufacturing
51
Manufacturing
Norway
Bokn Plast AS
Kingspan AS
Kingspan Insulation AS
Kingspan Miljo AS
Vestfold Plastindustri AS
Vestfold Plastindustri
Eiendom AS
100
100
100
100
100
100
Manufacturing
Sales & Marketing
Sales & Marketing
Sales & Marketing
Manufacturing
Property Company
85
Sales & Marketing
VPI-PS AS
100
Manufacturing
100
Manufacturing
85
Sales & Marketing
Panama
Acusterm Panama S.A.
Huurre Panama S.A.
Synthesia Technology S.A.
100
50
100
Manufacturing
Manufacturing
Manufacturing
India
Kingspan India Private
Limited
Kingspan Insulation Private
Limited
Kingspan Jindal Private
Limited
Iran
Izopoli Pars Private Joint
Stock Company
Kingspan Insulation Pars
Kenya
Kingspan Roof and Facade
Limited
Latvia
Kingspan SIA
Balex Metal SIA
Lithuania
Balex Metal UAB
Kingspan UAB
Luxembourg
Naps Holdings
(Luxembourg) S.á.r.l.
Mexico
Innovación en Aislamiento
Especializado S.A. DE C.V.
Kingspan Insulated Panels
S.A. DE C.V.
Synthequimica Mexicana
S.R.L. DE C.V.
Morocco
100
100
100
100
Sales & Marketing
Manufacturing
Sales & Marketing
Sales & Marketing
100
Finance Company
100
100
100
Management &
Procurement
Manufacturing
Sales & Marketing
SM Polyurethanes S.á.r.l.
100
Sales & Marketing
Netherlands
Hoesch Bouwsystemen
B.V.
Kingspan B.V.
Kingspan Holding
Netherlands B.V.
Kingspan Insulation B.V.
Kingspan (MEATI) B.V.
Kingspan Unidek B.V.
Brakel Aluminium B.V.
Brakel Atmos B.V.
New Zealand
Kingspan Insulation NZ
Limited
Kingspan Limited
100
100
100
100
85
100
100
100
100
100
Sales & Marketing
Sales & Marketing
Holding Company
Manufacturing
Holding Company
Manufacturing
Manufacturing
Manufacturing
Sales & Marketing
Manufacturing
Poland
100
Balex Metal Sp. z o.o.
Essmann Polska Sp. z o.o.
100
Kingspan Environmental Sp. z o.o. 100
100
Kingspan Insulation Sp. z o.o.
100
Kingspan Sp. z o.o.
Manufacturing
Sales & Marketing
Manufacturing
Sales & Marketing
Manufacturing
Qatar
Kingspan Insulation WLL
100
Sales & Marketing
Romania
Kingspan S.R.L.
Joris Ide S.R.L.
Russia
Joris Ide LLC
Serbia
Kingspan D.O.O.
Singapore
Hoesch Bausysteme Pte
Limited
Kingspan Pte Limited
Slovakia
Balex Metal A.S.
Kingspan S.R.O.
BPS & D&V S.R.O.
Slovenia
Kingspan D.O.O.
South Africa
Kingspan Insulated Panels
(Pty) Ltd
100
100
Sales & Marketing
Manufacturing
100
Manufacturing
100
Sales & Marketing
100
100
70
100
100
Sales & Marketing
Sales & Marketing
Manufacturing
Sales & Marketing
Manufacturing
100
Sales & Marketing
85
Sales & Marketing
Spain
100 Manufacturing
Huurre Iberica S.A.
100 Holding Company
Industrial Cassa S.A.
Kingspan Insulation S.A.
100 Manufacturing
Kingspan Manufacturas Pals S.A. 100 Manufacturing
Kingspan Plastisol S.L.
Kingspan Prax S.A.
Kingspan Protexfoam S.L.
Kingspan Suelo Technicos S.L.
Pontaut S.L.
Synthecoat S.L.
Synthesia Development S.L.
Synthesia Española S.A.
Synthesia Internacional S.L.U.
Tecno Export Ingenieros S.L.
Teczone Española S.A.
100 Manufacturing
100 Manufacturing
100 Manufacturing
100 Sales & Marketing
100 Sales & Marketing
100 Manufacturing
100 Product Development
100 Holding Company
100 Manufacturing
100 Sales & Marketing
100 Sales & Marketing
Sweden
Kingspan AB
Kingspan Insulation AB
Switzerland
Kingspan GmbH
100
100
Sales & Marketing
Sales & Marketing
100
Sales & Marketing
Turkey
Izopoli Impeks Prefabrik Panel
Sanayi ve Ticaret Ltd. Sti.
Kingspan Yapi Elemanlari A.S.
85
Sales & Marketing
85 Manufacturing
Ukraine
Balex Metal LLC
Kingspan Lviv LLC
United Arab Emirates
Kingspan Insulated Panels
Manufacturing LLC
Kingspan Insulation LLC
Kingspan International FZE
United States
American Solar Alternative
Power LLC
ASM Modular Systems Inc.
CPI Daylighting Inc.
Daylighting Contracts Inc.
Dri-Design Inc.
Kingspan Energy Inc.
Kingspan Insulated Panels Inc.
Kingspan Insulation LLC
Kingspan Light & Air LLC
Morin Corporation
Pre-insulated Metal
Technologies Inc.
Tate Access Floors Inc.
100
100
Sales & Marketing
Sales & Marketing
85
Manufacturing
95
100
Sales & Marketing
Sales & Marketing
100
Sales & Marketing
100 Manufacturing
100 Manufacturing
100
Sales & Marketing
Sales & Marketing
Sales & Marketing
95
100
100 Manufacturing
100 Manufacturing
100 Manufacturing
100 Manufacturing
100 Manufacturing
100 Manufacturing
Pursuant to Section 316 of the Companies Act 2014, a full list
of subsidiaries will be annexed to the Company's Annual Return
to be filed in the Companies Registration Office in Ireland.
147
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Kingspan Group plc — Annual Report & Financial Statements 2018
Group Five Year Summary
—
Results (amounts in €m)
Revenue
Trading profit
Net profit before tax
Operating cashflow
Equity (amounts in €m)
Gross assets
Working capital
Total shareholder equity
Net debt
Ratios
Net debt as % of total shareholders’ equity
Current assets / current liabilities
Net debt / EBITDA
Per Ordinary Share (amounts in €cent)
Earnings
Operating cashflows
Net assets
Dividends
4,372.5
445.2
404.9
530.3
4,029.4
543.9
1,788.9
728.3
40.7%
1.59
1.40
184.0
294.9
994.7
42.0
3,668.1
377.5
346.5
362.5
3,235.6
477.8
1,568.0
463.9
29.6%
1.65
1.05
159.0
202.1
876.7
37.0
3,108.5
340.9
314.0
377.1
3,004.6
382.7
1,471.5
427.9
29.1%
1.56
1.06
143.8
212.3
828.4
33.5
Average number of employees
13,469
11,133
10,396
148
8
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2018
2017
2016
2015
2014
5
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2
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3
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4
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8
6
6
,
3
5
.
8
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1
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3
3
.
4
7
7
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2
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8
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5
4
4
5
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7
7
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5
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2,774.3
255.9
232.0
382.5
2,549.1
301.8
1,293.8
328.0
25.4%
1.43
1.04
106.7
217.1
734.2
25.0
8,595
1,891.2
148.5
127.5
171.3
1,836.5
263.3
1,009.1
125.5
12.4%
1.47
0.66
62.6
100.1
589.7
16.3
6,627
8
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1
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6
1
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4
1
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2
8
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2
7
1
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6
1
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1
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2
Revenue
(€bn)
Trading Profit
(€m)
0
.
4
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9
5
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6
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7
1
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6
1
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5
1
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4
1
0
2
8
1
0
2
7
1
0
2
6
1
0
2
5
1
0
2
4
1
0
2
EPS
(cent)
DPS
(cent)
This publication is printed on paper and board which is produced from pulp sourced from
sustainably managed forests. We support environmentally appropriate, socially beneficial
and economically viable forestry management.
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1
8
Dublin Road
Kingscourt
Co Cavan
Ireland
A82 XY31
Tel: +353 42 969 8000
Email: admin@kingspan.com
www.kingspan.com
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