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—Annual Report & Financial Statements 2019Kingspan Group plcIKONGlobal Innovation CentreKingscourt, Ireland—We believe we have to challenge building industry traditions through innovating advanced materials and digital technologies to achieve a net zero emissions future.IKON, our new Global Innovation Centre, empowers us to continue to thrive in a changing world, while asking the big questions that will lead us to a more sustainable, circular and healthy future.Our Planet Passionate sustainability vision is driving everything that we do. IKON embodies this, being a high-performance, low-carbon building envelope. Climate change is the single most important issue facing the world today and our most urgent priority. At Kingspan, we are committed to driving a more sustainable approach to our business in response to these issues. Energy conservation has always been at the core of our products, and how we run our business. Through Planet Passionate we will reduce carbon and energy in both our manufacturing processes and products, and continue our relentless pursuit of low-carbon buildings that deliver more performance and value, with clear targets to strive for by 2030.Gene M. MurtaghCEO, Kingspan Business & Strategic Report
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Business & Strategic ReportChairman’s Statement 10Business Model & Strategy 12Chief Executive’s Review 20Financial Review 30Risk & Risk Management 36Sustainability Report 42Directors' ReportThe Board 58Chairman’s Introduction 60Report of the Nomination & Governance Committee 62Report of the Remuneration Committee 70Report of the Audit Committee 82Report of the Directors 88Financial Statements 96Independent Auditor’s Report 98Financial Statements 102Notes to the Financial Statements 109Other InformationAlternative Performance Measures 148Shareholder Information 151 Principal Subsidiary Undertakings 153Group Five Year Summary 156—CONTENTSProject Case Studies:Madison Fire Station #14 USA 8-9Haus Gables USA 40-41Western Australia Museum Australia 56-57Studley Castle Hotel UK 68-69Aico UK 80-81Holiday Inn USA 94-95IKON is our new Global Innovation Centre, dedicated to advanced material science and the digitalisation of construction. It has been built to the highest standards of sustainable design and is a showcase for high-performance building envelope design using 18 Kingspan products and systems. The building itself is a living research project, providing a foundation for future value creating innovation.The value we createWithin our 2019 Annual Report we highlight a number of case studies which demonstrate the many ways in which Kingspan creates superior value for building owners and building occupants, utilising innovative products that can meaningfully contribute to a more sustainable future. Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@18 Kingspan products and systems have been utilised on IKON, from across each of our five businesses.IKON’s high-performance building envelope and optimised lighting contribute to an expected 50% outperformance versus the ASHRAE 90.1-2010 baseline.QuadCore™ panels enabled us to reduce insulation thickness by over 50% versus mineral wool, increasing useable space and ultimately the value of the asset.IKON uses sensors to measure light, noise, temperature, air quality and air pressure to enhance indoor comfort for occupants and as research for future innovation.Kingspan’s unitised systems and coordinated supply chain delivered a significantly faster build time when compared with a built-up system. IKON is a finalist for Project of the Year, Irish Construction Excellence (ICE) Awards 2020.The QuadCore™ panels used on IKON are made using renewable energy and contain over 15% recycled content.IKON is targeting LEED V.4 Gold Certification.Sustainable Development Goals (SDGs)At Kingspan we recognise that action, at scale, is urgently needed to avert a climate emergency. As a business leader we are committed to contributing toward the UN’s Sustainable Development Goals through our products, our processes, our partnerships and our people. @@@@@@Find out more in our Sustainability ReportReader note: Please cross reference this information panel with the case study pages throughout the report.CASE STUDY Our cover design is inspired by the facade design at our IKON Global Innovation Centre, Kingscourt, Ireland. The photos on this page are also from IKON.Product: Dri-Design Perforated with QuadCore™ Karrier Business & Strategic Report
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32—1145153736992223232283375422322222Kingspan Group plc — Annual Report & Financial Statements 2019With its geometric exterior resembling a crystal-like structure, the venue has already become a Yas Island landmark, significantly adding to the integrated leisure, lifestyle and entertainment experiences available to visitors.CLYMB Abu DhabiAbu Dhabi, UAE1bn We are committed to recycling 1 billion ocean recovered plastic bottles per annum from 2025.—Find out more in our Sustainability Report400 Our wind turbine at Holywell in Wales, will save over 800 tonnes of CO₂ emissions per year. This is roughly the equivalent to the combined annual emissions from 400 average petrol cars.35,000 Our manufacturing facility at Castleblayney will use nearly 100% energy generated by solar panels. We will save over 35,000 tonnes of CO₂.—OUR GLOBAL REACHAfrica Egypt Morocco Asia India Indonesia Singapore Thailand VietnamAustralasia 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 Portugal Romania Russia Serbia Slovakia Slovenia Spain Sweden Switzerland United Kingdom Middle East Qatar Turkey UAEAmericas Brazil Canada Chile Colombia Costa Rica Mexico Panama Peru USA Kingspan Locations Insulated Panels: KingZip® Linea Standing Seam Roof System Kingspan Karrier Panel SalesManufacturing Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 201954—Lower Mill EstateCotswolds, UKThe Lower Mill Estate, a development of sustainable holiday homes in the Cotswolds, is offering holiday homemakers the best in bespoke, energy efficient properties. The Kingspan TEK System has enabled a high level of design flexibility and exceptional out-of-the-box building fabric performance, as well as maximising construction efficiency and minimising site waste.—WE AREPLANETPASSIONATEOUR COMMITMENTS—The total projected energy savings* over the lifetime of the Kingspan insulation systems, sold worldwide in 2019, is equivalent to:OUR IMPACT—79mTaking seventy- nine million cars off the road annually18.1Up to 18.1 times the the annual electricity consumption of Greater London441mOver four hundred and forty-one million barrels of oil259The annual output of 259 gas-fired power stationsInsulation:Kingspan TEK Building SystemCredit: Habitat First Group *figures are based on savings of insulation systems in use for 60 years.202020252030ENERGY- Maintain our Net Zero Energy status- Increase our direct use of renewable energy to 60% by 2030- Increase our on-site generation of renewable energy to 20% by 2030- Install solar PV systems on all wholly owned facilities by 2030•---•---••••CARBON- Net zero carbon manufacturing by 2030- 50% reduction in product CO₂ intensity from our primary supply partners by 2030- 100% zero emission company funded cars by 2025 -----••••CIRCULARITY- 1 billion PET bottles upcycled into our manufacturing processes by 2025- All QuadCore™ insulation to utilise upcycled PET by 2025- Zero company waste to landfill by 2030---••-•••WATER- 5 active ocean clean-up projects by 2025- 100 million litres of rainwater harvested by 2030--•-•• Business & Strategic Report
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SUMMARY
FINANCIALS
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Revenue
€4.7bn
+7%
2018: €4.4bn
EBITDA1
€579.8m
+11%
2018: €521.2m
Trading Profit2
€497.1m
+12%
2018: €445.2m
Trading Margin
Profit After Tax
EPS
10.7%
+50bps
2018: 10.2%
€377.8m
+13%
2018: €335.8m
204.6c
+11%
2018: 184.0c
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1 Earnings before finance costs, income taxes, depreciation,
amortisation and the impact of IFRS 16
2 Operating profit before amortisation of intangibles
Germany
Zon Eichen
Kingspan Insulated Panels:
Kingspan1000 AWP Micro
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Kingspan Group plc — Annual Report & Financial Statements 2019—BUSINESS & STRATEGICREPORTUniQuad® Translucent WallsThe UniQuad® translucent daylighting system contributed to the station’s LEED Platinum rating and its 70% energy saving versus comparable facilities.2,630 square feet of natural daylighting and its associated health benefits.Optimal light levels help to reduce stress, improve concentration and promote positive emotional functioning to the fire fighters on duty. Unitised design enabled fast, efficient installation and superior quality control. Soft, ambient light illuminates the station at night, giving it a strong, visible presence in the community. UniQuad® aluminium contains up to 40% recycled content, with polycarbonate containing up to 10% recycled content and the product itself is continuously recyclable. LEED PlatinumWe wanted daylighting, but with a west orientation for the main facade of the building, we knew we’d have to work hard to control solar gain and glare. Instead of all glass, we looked for another material. How could we minimise solar gain and glare? The product really stood out for its qualities of daylighting and energy efficiency. The patterning, and the modularity of the system all worked out with our design. Mark Kruser, AIA, Project Manager, OPN ArchitectsMadison Fire Station #14Wisconsin, USA–Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@Click here to see more—98 Business & Strategic Report
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CHAIRMAN’S
STATEMENT
In 2019 Kingspan continued its
evolution as the global leader in high-
performance insulation and building
envelope solutions. It marked another
year of record financial performance
with total sales of €4.7bn and a
trading profit of over €497m.
Hungary
APZ Test Track, Zalaegerszeg
Insulated Panels:
Dri-Design Rainscreen Facade
IPN Karrier Panel
Board governance and composition
The Board is committed to high
standards of corporate governance
and has refined its approach to align
with the principles of the new UK
Corporate Governance Code (2018).
Further details of the best practice
governance policies and procedures
we have adopted are set out in the
Directors’ Report of this annual
report. The Board, through the Audit
Committee, carefully monitors and
manages risk across the business,
and throughout the year the Board
engaged in dialogue with our major
shareholders on the Company’s
strategic and financial performance
as detailed in the Financial Review
in this Annual Report, as well as on
our remuneration policy as set out
in the Remuneration Report. We
look forward to continuing this open
dialogue with our stakeholders in the
years ahead.
As part of the process of continually
refreshing the Board, we were pleased
to announce the appointment of
Anne Heraty as a non-executive
director to the Board last August.
Anne has more than two decades
of experience as an entrepreneur
and CEO of an international plc,
and we are delighted to welcome
her to our Board.
Earlier during 2019, Helen Kirkpatrick
retired as a non-executive director
having served for almost 12 years on
the Board and various committees.
On behalf of the Board, I would like
to thank Helen for her wise counsel
and contribution to Kingspan during
those years.
Looking ahead
Whilst 2019 presented challenges
which the business has successfully
navigated, I am confident that the
diverse and globalised business we
have built is well placed to address
whatever new challenges and
opportunities 2020 may present. Our
focus remains on continued growth
both organically and through a
disciplined acquisition strategy. This is
supported by investment in research
and development to ensure we have
a product suite that outperforms
the competition, and a sustainable
business model through our Planet
Passionate goals, which leads our
customers to choose Kingspan.
Eugene Murtagh
Chairman
21 February 2020
By focusing on our four key strategic
pillars: increased penetration of our
existing product suite; the continued
evolution of Kingspan’s geographic
footprint; differentiation from our
competitors driven by innovation;
and our new Planet Passionate
goals; Kingspan has delivered a ninth
straight year of trading profit growth.
Deeper penetration into our existing
markets remains a core focus, and
the successful integration of our
Synthesia and Balex acquisitions
throughout 2019 bolstered our
position in Europe, whilst the
acquisition of Bacacier during the
year also gives us a market leading
position in France.
At the same time we built on our
entry into new geographies, such as
Latin America and Southeast Asia,
which are converting from traditional
building methods to more advanced
building solutions. We continued our
organic expansion with the successful
commissioning of a new insulated
panel facility in the south of Brazil.
The first full year of our partnership
with Jindal Mectec has performed
well, whilst our office in Singapore
continues to grow and provides
a bridgehead to explore further
opportunities in Southeast Asia.
2019 was also a landmark year
for Kingspan’s commitment to
innovation, with the completion of
IKON, our new Global Innovation
Centre in Kingscourt. IKON has
been built to the highest standards
of sustainable design and is a
showcase for Kingspan products
and systems. Significant research
activities going on in this state-
of-the-art facility include the
development of a new fibre-free
A1 AlphaCore® insulation board,
the next generation of our market-
leading QuadCore™ insulated panels
and Kooltherm® insulation boards,
and a revolutionary new integrated
solar PV panel, all designed to help
our customers efficiently reduce
energy costs and the environmental
footprint of their businesses.
This year Kingspan also unveiled the
next phase in its programme to be a
leader in tackling climate change. As
part of our 10-year Planet Passionate
strategy, Kingspan has committed
to hitting 12 ambitious targets by
2030, including increasing on-site
generation of renewable energy to
20%, achieving a net zero carbon
impact from our manufacturing
processes, and committing to a
target of upcycling one billion PET
plastic bottles per annum from 2025.
Management and employees
During the year the Board visited
our Joris Ide site in Germany, and
the recently acquired Balex facility in
Poland. We were pleased to have the
opportunity to meet with local staff
and management, to see the great
work they are doing and to hear,
from them, their plans for the future.
On behalf of the Board, I want to
thank all Kingspan’s management
and employees across the globe for
their hard work and contribution to
Kingspan’s success in 2019, and we
look forward to visiting and meeting
with more of the local teams in 2020.
Dividend
The Board is recommending a final
dividend of 33.5 cent per share, which
if approved at the Annual General
Meeting, will give a total dividend for
the year of 46.5 cent, an increase
of 11% 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 7 May 2020 to shareholders
on the register at close of business
on 27 March 2020.
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 1312—ProductProduct is at the core of Kingspan’s mission to deliver better buildings for all. We are the market leader in innovating high-performance building envelopes and continue to push the boundaries of what is possible for efficiency in buildings. We extended our commitment to innovation in 2019 with the opening of our state-of-the-art innovation centre, IKON, at our home base in Ireland.Energy/Carbon Saving Kingspan's innovative insulation technologies significantly improve the energy performance of building envelopes. Our QuadCore™ and Kooltherm® solutions are up to twice as thermally efficient as traditional fibre based materials and unlike legacy insulation, our advanced insulation doesn't slump or sag and so retains its performance for its lifetime. Space/DimensionsHigh-performance insulation enables a thinner application of insulation for the same energy performance, thereby adding valuable internal space in construction or renovation. In an environment where space is becoming an increasingly scarce commodity, this drives real value for a building owner or occupier.Health & WellbeingOur range of insulation systems enable optimised air tightness, improving thermal comfort within a building, while thinner dimensions of insulation and our daylighting solutions bring more natural light into a building. Access floors help to circulate air for heating or cooling and can enable personal comfort controls to individual occupants. Our water harvesting solutions can help to prevent flooding and polluted run-off to local waterways. Speed/Ease of buildKingspan’s insulated panel is a single component system. The system can be quickly and easilyinstalled through a single-fix installation process. As well as reducing days of labour on-site, the rapid speed of installation reduces the risk of accidents, as less time is spent working at height. It also means that the building is weathertight sooner, allowing internal fit-out and external finishing to commence earlier, minimising delays and the need for multiple trades.AestheticsThe outer envelope forms your first impression of a building. The case studies we present throughout this report and online are testament to the impact of a high-end architectural facade finish. Kingspan’s facade and daylighting solutions integrate with our high-performance insulation systems to deliver a truly exceptional building envelope. Planet Passionate/SustainabilityAt Kingspan we understand the importance of the resources that we rely on to deliver our best-in-class products – the people that drive a culture of innovation and entrepreneurship, the communities that we embrace, and the natural resources that we employ. We have committed to Net Zero Energy operations from 2020, Net Zero Carbon operations from 2030 and a 50% reduction in product CO₂ intensity from our primary suppliers by 2030. Read more about our Planet Passionate commitments in the Sustainability Report. Awards/CertificationEnvironmental certification can help to attract tenants and purchasers and to protect and enhance future asset value. Kingspan’s products contribute to the achievement of credits in green building rating systems such as BREEAM, LEED and WELL across multiple categories including energy, materials, indoor air quality and innovation.Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 1312—Kingspan is the global leader in high-performance insulation and building envelopes. Our mission is to accelerate a net zero emissions future with the wellbeing of people and planet at its heart. We do this through enabling high-performance buildings that can save more energy, carbon and water. Through our relentless development of innovative and proprietary technology we have created a portfolio of products which create value across a number of key metrics. Critically, through the differentiated thermal performance of our innovative solutions, we help design teams, architects and ultimately our customers to play their part in tackling climate change. Today, the construction and operation of buildings together account for 36% of global energy use and 39% of energy-related CO₂ emissions when upstream power generation is included. Action, at scale, is urgently needed.Founded in Kingscourt, Co Cavan, Kingspan has expanded into a truly global business operating in over 70 countries and employing more than 15,000 people. We execute our strategy across four strategic pillars and five businesses.Our businesses:1.Insulated Panels Kingspan Insulated Panels is the world’s largest and leading manufacturer of high-performance insulated panel building envelopes. Powered by Kingspan’s proprietary and differentiated insulation core technologies, a Kingspan panelised envelope provides building owners with consistently superior build quality and lifetime thermal performance compared with built-up constructions using traditional insulation.2. Insulation Boards Kingspan is a world leader in Insulation Boards, pipework and ducting. Our advanced insulation technologies deliver superior thermal performance and air-tightness when compared with traditional insulation, resulting in thinner solutions that offer multiple advantages including more internal floorspace and daylighting.3. Light & Air Kingspan Light & Air is established as a global leader providing a full suite of daylighting solutions, as well as natural ventilation and smoke management solutions, which complement our existing building envelope technologies. —THE VALUE WE CREATEThermal comfort, indoor air quality and natural daylighting are widely recognised as the most important factors affecting occupant wellbeing in buildings. 4. Data & Flooring Kingspan is the world's largest supplier of raised access flooring. Raised access flooring is the most cost effective way of creating a flexible working environment by utilising the floor void to manage the distribution of M&E services and HVAC systems. Our systems have many benefits including optimising overall building height, achieving faster construction with greater design flexibility, enabling easier reconfiguration of a workspace, and improving indoor air quality. 5. Water & Energy Sustainable water management is rapidly becoming one of the greatest challenges of our time. We manufacture and support pioneering new technologies to preserve and protect water. Kingspan is also a market leading manufacturer of innovative energy management solutions.—BUSINESS MODEL & STRATEGY Business & Strategic Report
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1514—PENETRATIONIncreased penetration of Kingspan’s product suite. Underpinned by efficiency gains from high-performance building envelopes, regulatory changes and an increasing awareness of the long-term environmental impact of inefficient building design: →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. →QuadCore™ now represents 9% of Kingspan’s global insulated panel sales and Kooltherm® represents 39% of Kingspan’s insulation board sales. Kingspan’s best-in-class proprietary products continue to drive penetration as architects and design teams seek out advanced solutions for energy efficient building envelopes. →The rising tide of climate awareness and compulsion to take action is an underlying positive trend for structural penetration gains over the long-term.PLANET PASSIONATEIn 2019, we launched our new Planet Passionate programme across Kingspan and to the industry. This is a critical first step in the next phase of our journey to proactively address the key sustainability challenges that face our planet. Through our Net Zero Energy programme, we have already made great strides in powering our business on renewable energy, and with Planet Passionate we are setting ourselves even more challenging goals for the next 10 years. We are committing to hard targets in the areas of energy, carbon, circularity and water. →Energy: Increase our direct use of renewable energy to 60% of total energy use, increase on-site generation to 20% and deploy rooftop Solar PV on all wholly owned sites by 2030. →Carbon: Net zero carbon manufacturing, 100% zero emission company funded cars, and a 50% reduction in product carbon intensity from primary supply partners by 2030. →Circularity: Zero company waste to landfill by 2030 and upcycling 1 billion PET bottles into our manufacturing processes per annum from 2025. →Water: Harvest 100 million litres of rainwater by 2030 and support 5 ocean clean up projects by 2025.GLOBALThe continued evolution of Kingspan’s geographic footprint as we build market leading positions globally: →Kingspan has evolved into a truly global business. Ten years ago 52% of our end-market exposure was in the UK and Ireland, in 2019 it was less than 25. Over the past two years we have entered markets which are only beginning to embark on the conversion to high-performance building envelopes such as Brazil, Colombia and India. →In 2019 we opened a new facility in Cambui, Brazil, to support the ongoing development of Kingspan Isoeste and conversion of the Brazilian market. →Kingspan Light & Air opened a new facility in Saint-Priest in 2019. The 30,000m2 campus will be central to expanding our capabilities and presence in France and Southern Europe and exemplifies what can be achieved with Kingspan systems, achieving BREEAM “Very good” certification. →We acquired Bacacier, an integrated metal profiling and insulated panel distributor with an extensive network across France. We look forward to working with the Bacacier team to further develop the region.Business & Strategic Report Kingspan Group plc — Annual Report & Financial Statements 2019—BUSINESS MODEL & STRATEGYSTRATEGIC GOALS & PILLARS →To be the leader in high-performance insulation globally with proprietary and differentiating technologies. →To be the world’s leading provider of low energy building envelopes – Insulate and Generate. →To expand globally, bringing high-performance building envelope solutions to markets which are at an earlier stage in the evolution of sustainable and efficient building methods. →To deliver 20% Return on Investment. →To progress our Net Zero Energy goal by delivering on our ambitious 10-year Planet Passionate commitments which aim to make significant advances in the sustainability of both our business operations and our products. →To advance materials, building systems and digital technologies to address issues such as climate change, circularity and the protection of our natural world. Strategic PillarsStrategic GoalsLeft:Ireland Project Showrooms, DublinInsulated Panels: QuadCore™ Trapezoidal Roof and Wall Panels; Day-Lite Trapezoidal RooflightsINNOVATIONDifferentiation from competitors driven by superior innovation: →Kingspan’s IKON, our new Global Innovation Centre, opened its doors in 2019. Built to the highest standards of sustainable design, IKON is a showcase for high-performance building materials, incorporating 18 Kingspan products and systems. Containing state-of-the-art research equipment and prototyping capabilities, IKON is home to a team of people dedicated to research and development in advanced material science and will further our commitment to a more sustainable, circular and healthy future. →Development of a pioneering integrated insulated panel with solar technology, and the fibre-free, A-Class insulation material. →The digitalisation of Kingspan, transforming how we do business and how our specifiers and customers interact with us now and in the future. →Co-innovating with the industry. Kingspan sponsored the 2019 Rotman Design Challenge, tasking students with the topic of disruption in the construction industry and sought innovative solutions to the question of where disruption will come from in the industry and in what form. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 1716——BUSINESS MODEL & STRATEGY2019 IN A NUTSHELLHow we create value > Product innovation and differentiation> Excellent customer service> Energy efficient sustainable building envelope solutions> We operate our businesses to the highest standards> We acquire excellent businesses> We recycle capital to optimise returns> We maintain financial discipline> We balance our portfolio of businesses across product and geography> We drive sustainable practices in our operations through our Planet Passionate initiativesRevenue €4.7bnHow we operate159Global manufacturing facilities15,000+Employees > Management controls> Quality systems> Responsible supply chain partnershipsApplications> Retail> Distribution> Leisure> Accommodation> Food> Manufacturing> Data Management> InfrastructureTrading Profit2€497.1mEBITDA1 €579.8mTotal Shareholder Return 47.2%EPS 204.6cFree cash€337.1mROCE 17.3%Dividend 46.5cValue created 5% Data & Flooring7% Light & Air4% Water & Energy65% Insulated Panels85% Energy Efficiency & Conversion19% Insulation Boards15% OtherProductsDrivers18% Residential12% Office & Data19% UK70% Commercial & Industrial53% Europe7% Rest of World21% Americas80% New Build70% DirectGeographySectorEnd-MarketChannel20% Refurbishment30% Via Distribution1 Earnings before finance costs, income taxes, depreciation, amortisation and the impact of IFRS 162 Operating profit before amortisation of intangiblesIreland IMC Cinema, KilkennyInsulated Panels: Steel Framing System; QuadCore™ Karrier; Dri-Design Shadow, Shingle, Evolution Axis Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report Home to various research groups of the Energy Research Accelerator (ERA), the collaboration provides world class laboratory and office space for industry leading academics and post graduate students. It is the first truly embedded cross-disciplinary energy research hub in the UK and it required a building fit for accelerating research into sustainability. Constructingexcellence.org.uk The RAD Building Nottingham University, UK –Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@Kingspan TEK™ Cladding PanelKingspan’s TEK™ Cladding Panels supported construction of an airtight, high-performance building envelope, helping to reduce estimated energy demand to below 15 kWh/m2/yr. Changing the specification to a thinner build using Kingspan TEK™ Cladding Panels saved up to 250mm wall depth versus the original specification, maximising the useable floor space. The RAD Building prioritises user wellbeing by maintaining thermal comfort levels through carefully regulated internal environments. The offsite production and dry, panelised construction of the Kingspan TEK™ Panels supported a fast and predictable build, making the building weathertight at an early stage.The factory-engineered SIPs afforded considerable design freedom, allowing the architects to create a striking building with a unique and dynamic appearance.The facility at which Kingspan TEK™ Cladding Panels are produced, carries FSC®- C109304 and PEFC Chain of Custody certification. The RAD Building has been designed to achieve BREEAM ‘Excellent’ and was the 2019 winner of the East Midlands Constructing Excellence Sustainability Award. —1918Click here to see more Business & Strategic Report
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CHIEF
EXECUTIVE’S
REVIEW
2019 capped off a decade of great
progress for Kingspan with revenue
and trading profit ahead of prior year
by 7% and 12% respectively.
Dubai
Bluewaters Island
Insulation Boards:
Kooltherm® K10 Soffit Board
Financial Highlights:
Operational Highlights:
→ Revenue up 7% to €4.7bn,
(pre-currency, up 6%).
→ Trading profit up 12% to €497.1m,
(pre-currency, up 10%).
→ Free cashflow up 9% to €337.1m.
→ Group trading margin of 10.7%,
an increase of 50bps.
→ Basic EPS up 11% to 204.6 cent.
→ Final dividend per share of
33.5 cent. Total dividend for the
year up 10.7% to 46.5 cent.
→ Year-end net debt1 of €633.2m
(2018: €728.3m). Net debt to
EBITDA2 of 1.1x (2018: 1.4x).
→ ROCE of 17.3% (2018: 16.8%).
→ Insulated Panels sales growth
of 7%. Strong performance in
the Americas, Mainland Europe
performed well overall with the
notable exception of Germany.
Difficult UK market particularly in
the second half. Further headway
in key markets on QuadCore™,
now 9% of global sales.
→ Insulation Boards sales growth
of 2%. Continuing progress on
Kooltherm® and share gain from
traditional materials.
→ Strong underlying volume growth
of 4% and 8% in Insulated Panels
and Insulation Boards partially
offset by the pricing impact of
raw material deflation.
→ Light & Air sales growth
of 12% buoyed by a strong
performance in the US. Solid
activity in Mainland Europe.
Daylighting centre of excellence
under construction in Ireland.
→ Water & Energy sales growth of
3% with progress in the Nordics,
a difficult UK environment
and more subdued rainwater
harvesting activity in Australia.
→ Data & Flooring sales growth
of 13% reflecting strong
datacentre activity and
geographic expansion in Europe.
Business Review
2019 capped off a decade of great
progress for Kingspan with revenue
and trading profit ahead of prior year
by 7% and 12% respectively. Over
the past decade sales and trading
profit grew in excess of fourfold and
sevenfold respectively. Group sales
reached almost €4.7bn, and trading
profit €497m. Despite the significant
macro instability in a number of our
key markets the Group performed
well in the first half, but was weaker
towards year end. Predictably, the
UK was the most notable illustration
of this.
Underlying volume growth at the
larger Insulated Panels and Insulation
Boards divisions was 4% and 8%
respectively. Underlying revenue
was 1% ahead in Insulated Panels
and 1% lower in Insulation Boards
reflecting the impact of lower
pricing due to raw material
deflation over prior year.
During the year we invested a
total of €305m continuing on
our path of both organic and new
acquisition expansion worldwide.
New facilities were either completed
or commenced in Sweden, UAE,
USA, the Netherlands and Brazil.
Acquisition investment was €144m,
comprising most notably Bacacier
in France for €122m.
2019 marked the launch of our global
Planet Passionate initiative, building
upon the last decade of progress
on our Net Zero Energy agenda. We
have now embarked on our next
ambitious 10 year journey to radically
advance Kingspan across the four
key themes of Energy, Carbon,
Circularity and Water. This agenda
is central to our purpose and entails
the following targets and timelines:
1 Net Debt and EBITDA both pre-IFRS 16
2 Earnings before finance costs, income taxes, depreciation,
amortisation and the impact of IFRS 16
ENERGY
- Maintain our Net Zero Energy
status
- Increase our direct use of
renewable energy to 60% by 2030
- Increase our on-site generation of
renewable energy to 20% by 2030
- Install solar PV systems on all
wholly owned facilities by 2030
CARBON
- Net zero carbon manufacturing
by 2030
- 50% reduction in product CO₂
intensity from our primary
supply partners by 2030
- 100% zero emission company
funded cars by 2025
CIRCULARITY
- 1 billion PET bottles upcycled
into our manufacturing
processes per annum from 2025
- All QuadCore™ insulation to
utilise upcycled PET by 2025
- Zero company waste to
landfill by 2030
WATER
- 5 active ocean clean-up
projects by 2025
- 100 million litres of rainwater
harvested by 2030
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INSULATED PANELS
—
QuadCore™ penetration reached 9%
globally, with sales up 36% over prior
year. In Mainland Europe, the trading
picture was quite mixed overall
although most regions started the
year ahead of 2018. France and
Spain performed particularly well
throughout the year as the Kingspan
model has become more embedded
in these markets in recent years. In
the Benelux, revenue was marginally
ahead although the Netherlands
weakened in the last quarter owing
to environmental legislation that
affected progress on many building
sites. This headwind is expected to
ease somewhat in 2020. The German
market has been key for us in recent
years although it stagnated during
2019. We have taken steps to ensure
our competitiveness is enhanced,
including significant focus on
QuadCore™. Poland and the
broader Central European markets
were steady as was our activity in
the Nordics.
Significant progress was achieved
across all markets in the Americas
over the year. Penetration in the
USA and Canada has continued to
Australia
Perth Stadium Train Station
Insulated Panels:
Kingspan KingZip® Roof Panel System
grow as modern and more efficient
methods of construction become
increasingly adopted and Kingspan's
solutions become the basis of
specification in many applications
which historically would have used
more traditional materials. The roll-
out of QuadCore™ is also gaining
momentum and this will be further
enabled with the new production
line in Modesto, California, that
is nearing completion. In Latin
America, progress has also been
encouraging with a gradual gain in
position in Mexico and continuing
our momentum in Brazil where we
opened a new facility in Cambui
late last year. We have also broken
ground on a fifth plant in the region
which will be in southern Brazil. Other
regions in Latin America are now also
under developmental review.
At the outset of 2019 the UK backlog
and general activity was healthy,
showing no signs of the weakness
that ensued in the second half of
the year. As the political uncertainty
grew through the year more building
projects were postponed which,
when combined with accelerating
deflation in the latter part of the
year, resulted in a disappointing
outturn overall. QuadCore™,
however, continued to grow in share.
With the momentum in QuadCore™
continuing through early 2020,
together with a more stable political
backdrop, we should see activity
improve from the evident weakness
of the first quarter.
Activity for Insulated Panels in
Australia was solid over the year
while in New Zealand the business
advanced significantly over 2018.
Although relatively embryonic in
Southeast Asia, revenue has grown
year-on-year and we continue to
build a base level of demand in the
region which should necessitate local
manufacturing in the not too distant
future. Our Indian business delivered
its plan for the year, while the Middle
East remains a challenge for the
Panels business.
Volume growth in Ireland was
healthy for most of the year but
weakened towards year-end,
pointing towards a slow start
to 2020.
2
2
Turnover
Trading Profit
€3,031.9m
+7%(1)
€316.1m
+12%
2018: €2,823.1m
2018: €281.8m
2
Trading Margin
10.4%
+40bps
2018: 10.0%
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(1) Comprising underlying +1%, currency +1% and acquisitions +5%. Like-for-like volume +4%.
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INSULATION BOARDS
—
On the whole, the Insulation Boards
business performed well across
Continental Europe. 2018 was marred
by heavy raw material inflation
followed by rapid deflation through
2019. This led to a challenge in
maintaining price, and of course
margins. Despite this, volumes grew
substantially in the Benelux and
Southern Europe and improved in
Germany and the Nordics. A new
Kooltherm® plant will come on
stream later this year in Sweden
to support continued conversion
from legacy mineral fibre insulation.
Kooltherm® volumes grew by 15%
in the year.
In the UK, volumes were strong in
the early part of the period followed
by weakness in the latter half of the
year, largely owing to the uncertain
political backdrop which was very
pronounced at that point.
Progress continued in North America
where our presence to date has been
limited to a single XPS facility in the
North East. We expect to build and
commission a new PIR/QuadCore™
board facility during 2021/2022
which will be the first plant of our
phased roll-out in the US, and will
sit alongside a new Insulated Panel
facility currently under development
in Pennsylvania.
Our business in the Middle East
delivered another year of solid
growth largely in the Industrial
Insulation sphere. Strong recovery
was evident in the Australasia market
as Kooltherm® grew its presence
against local legacy mineral fibre and
other insulation materials. In Ireland,
the business had a solid outcome for
the year across both the Insulation
Board and structural residential
Timberframe business units.
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Netherlands
De Woldring Locatie
Insulation Boards:
Kingspan Unidek SIPS
2
2
2
Turnover
Trading Profit
Trading Margin
€876.9m
+2%(1)
2018: €864.1m
€117.1m
+11%
2018: €105.1m
13.4%
+120bps
2018: 12.2%
(1) Comprising underlying -1%, currency +1% and acquisitions +2%. Like-for-like volume +8%.
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2
Turnover
€327.7m
+12%(1)
2018: €291.8m
2
Trading Profit
€25.2m
+17%
2018: €21.5m
2
Trading Margin
7.7%
+30bps
2018: 7.4%
(1) Comprising underlying
+9%, currency +1% and
acquisitions +2%.
Left:
Singapore
Jewel Changi Airport
Light & Air:
Kingspan Lumera
ventilation windows
Right:
Ireland
Center Parcs Longford Forest
Subtropical Swimming Paradise
Water & Energy:
Klargester Pump stations
for surface water and
waste drainage
Klargester Fuel and Oil
separator for treating
surface water drainage
LIGHT & AIR
—
Revenue grew by 12% in 2019 and
trading profit by 17% aided by
improving synergies and efficiencies
as this relatively embryonic business
segment evolves. The story was
somewhat mixed however with
activity in Germany weakening
notably through the second half and
the Benelux performing similarly. In
contrast to this, France and Southern
Europe generally experienced
attractive growth supported by the
recently commissioned new facility
in Lyon from which we anticipate
continued momentum through
the current year.
North America delivered a stand-
out performance across both the
standard and architecturally bespoke
offerings. The UniQuad® wall-light,
produced near Chicago, has also
been launched across Europe where
we anticipate penetration growth in
the coming years.
Work has commenced on a
significant plant expansion in Ireland
to extrude polycarbonate daylighting
for both roof and wall applications
and we anticipate production to
commence mid-2021.
WATER & ENERGY
—
2019 was a year of stability for the
Water & Energy business segment
with profit in line with prior year. The
UK and Ireland were both broadly
flat on prior year, Mainland Europe
grew and in Australia sales weakened
as housing starts in New South
Wales came under pressure. This
pattern can be expected to continue
into the current year and longer
term we would expect to grow large
scale water storage applications in
more rural and afforested parts of
Australia. The focus of this wider unit
will increasingly revolve around water
applications with a plan to establish
a more global footprint beyond the
European and Australian presence
we currently have.
2
Turnover
€208.1m
+3%(1)
2018: €202.9m
-
Trading Profit
€14.2m
-
2018: €14.2m
™
Trading Margin
6.8%
-20bps
2018:7.0%
(1) Comprising underlying
-3% and acquisitions +6%
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DATA & FLOORING
—
2019 was a positive year for our
global Data & Flooring business
segment largely driven by an
increased product offering into
the data sector and our growing
geographic presence in Europe.
The UK was predictably weak
however as office construction
faltered particularly in the greater
London area. We anticipate this
trend to remain a drag through 2020,
compensated somewhat by growth
in Germany and the Benelux. Whilst
the data opportunity remains front
and central to the division’s future,
the projects can be large and lumpy
with respect to the timing, resulting
in an inconsistent pattern of revenue.
2020 is expected to be no different
in that regard.
2
Turnover
€214.5m
+13%(1)
2018: €190.6m
2
Trading Profit
€24.5m
+8%
2018: €22.6m
™
Trading Margin
11.4%
-50bps
2018: 11.9%
(1) Comprising underlying +4%,
currency +3% and acquisitions +6%
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Canada
Central Library, Calgary
Data & Flooring:
ConCore® 1250 and
1500 Two-piece porcelain
Credit: Klassen Photography
Innovation
During the year we completed and
opened our Global Innovation Centre,
IKON, which sits alongside our
headquarters in Kingscourt, Ireland.
The primary near-term focus is to
soft launch PowerPanel® 2.0, and the
fibre-free A1 AlphaCore™ before the
end of 2020. Both will offer Kingspan
a significantly broadened specification
opportunity and will no doubt be
followed by more advanced iterations
over the coming years. QuadCore™
2.0 and the next generation of
Kooltherm® are also at the early
stages of development as part of our
ongoing innovation agenda.
Looking Ahead
As flagged in our most recent
trading update underlying sales in
the early part of 2020 are behind
prior year. Despite the poor start we
have experienced some element of
recovery in order placement in recent
weeks and our backlog globally is in
reasonable shape. This could point
towards an improved second quarter.
under consideration. Furthermore,
the understandable ratcheting in
recent months of the climate debate
chimes fully with the advanced
energy efficiency solutions provided by
Kingspan and our Planet Passionate
agenda. This, combined with the
global footprint of our business and
the strength of the Group’s balance
sheet, positions Kingspan well for the
years ahead.
Gene M. Murtagh
Chief Executive Officer
Our acquisitions pipeline is healthy
with a number of projects currently
21 February 2020
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 3130—Overview of resultsGroup revenue increased by 7% to €4.7bn (2018: €4.4bn) and trading profit increased by 12% to €497.1m (2018: €445.2m) with an increase of 50 basis points in the Group’s trading profit margin to 10.7% (2018: 10.2%). Basic EPS for the year was 204.6 cent (2018: 184.0 cent), representing an increase of 11%.The Group’s underlying sales and trading profit growth by division are set out to the right:Sales UnderlyingCurrencyAcquisitionTotalInsulated Panels +1%+1%+5%+7%Insulation Boards -1%+1%+2%+2%Light & Air+9%+1%+2%+12%Water & Energy-3%-+6%+3%Data & Flooring +4%+3%+6%+13%Group +1%+1%+5%+7%The Group’s trading profit measure is earnings before interest, tax and amortisation of intangibles:Trading ProfitUnderlyingCurrencyAcquisitionTotalInsulated Panels +7%+1%+4%+12%Insulation Boards +6%+2%+3%+11%Light & Air+11%+2%+4%+17%Water & Energy -2%-+2%-Data & Flooring -+3%+5%+8%Group +6%+2%+4%+12%The key drivers of sales and trading profit performance in each division are set out in the Business Review.The Financial Review provides an overview of the Group’s financial performance for the year ended 31 December 2019 and of the Group’s financial position at that date. —FINANCIAL REVIEWUK The Box Museum, PlymouthInsulated Panels:QuadCore™ Karrier Hook-On Cassette Business & Strategic Report
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IFRS 16 Leases
A new accounting standard, IFRS
16 Leases, was adopted with effect
from 1 January 2019. The standard
requires leases which were previously
treated as operating leases to be
recognised as a lease liability with
the associated asset capitalised
and treated as a right of use asset.
On 1 January 2019, €127.9m of
leases were recognised as liabilities
on adoption of the standard and
€128.8m capitalised as right of use
assets. During 2019 depreciation on
the right of use assets was €30.0m
and the associated lease rental
charge decreased by €31.8m leading
to an increase in operating profit of
€1.8m. The interest charge on the
associated leases was €3.8m and the
aggregate impact of IFRS 16 on profit
before tax was a decrease of €2.0m.
Finance costs (net)
Finance costs for the year increased
by €2.7m to €20.8m (2018: €18.1m).
A net non-cash charge of €0.1m
(2018: 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 €16.7m (2018: €18.0m). This
decrease reflects lower average
gross and net debt levels in 2019. The
interest expense is driven extensively
by gross debt balances with low cash
yields in the current environment.
An amount of €3.8m (2018: €nil)
was recorded as interest on leases
capitalised in accordance with IFRS
16 which was adopted with effect
from 1 January 2019.
Taxation
The tax charge for the year was
€76.6m (2018: €69.1m) which
represents an effective tax rate
of 16.9% (2018: 17.1%). 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.
Dividends
The Board has proposed a final
dividend of 33.5 cent per ordinary
share payable on 7 May 2020 to
shareholders registered on the
record date of 27 March 2020. When
combined with the interim dividend
of 13.0 cent per share, the total
dividend for the year increased to
46.5 cent (2018: 42.0 cent),
an increase of 10.7%.
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 has a number of smaller
defined benefit pension liabilities in
Mainland Europe. The net pension
liability in respect of all defined
benefit schemes was €15.1m (2018:
€13.1m) as at 31 December 2019.
Intangible assets and goodwill
Intangible assets and goodwill
increased during the year by €98.0m
to €1,600.1m (2018: €1,502.1m).
Intangible assets and goodwill of
€95.2m were recorded in the year
relating to acquisitions completed
by the Group. An increase of €24.7m
arose due to year end exchange
rates used to translate intangible
assets and goodwill other than
those denominated in euro, offset
by annual amortisation of €21.9m
(2018: €22.2m).
Financial key performance
indicators
The Group has a set of financial key
performance indicators (KPIs) which
are presented in the table below.
These KPIs are used to measure
the financial and operational
performance of the Group and are
used to track ongoing progress
and also in achieving medium and
long term targets to maximise
shareholder return.
Key performance indicators
Basic EPS growth
Sales growth
Trading margin
Free cashflow (€m)
Return on capital employed
Net debt/EBITDA
2019
11%
7%
10.7%
337.1
17.3%
1.1x
2018
16%
19%
10.2%
308.4
16.8%
1.4x
(a) Basic EPS growth. The growth in
EPS is accounted for primarily by
a 12% increase in trading profit.
The minority interest amount
increased year on year due to
a strong performance at the
Group’s operations which have
minority stakeholders, leading to
a basic EPS increase of 11%.
(b) Sales growth of 7% (2018: 19%)
was driven by a 5% contribution
from acquisitions, a 1% increase
in underlying sales and a 1%
increase due to the effect of
currency translation. Whilst
underlying sales growth overall
was a modest 1%, volume growth
exceeded this in many markets
although was partially offset
by price deflation due to raw
material price reductions.
(c) Trading margin by division is
set out below:
2019
2018
Insulated Panels
10.4% 10.0%
Insulation Boards
13.4% 12.2%
Light & Air
7.7% 7.4%
Water & Energy
6.8% 7.0%
Data & Flooring
11.4% 11.9%
The Insulated Panels division
trading margin advanced 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, operating leverage as a
consequence of volume growth
and a positive lag effect on
raw material price reductions.
The increased trading margin
in Light & Air reflects improved
efficiencies overall and the
market mix of sales. The Water
& Energy trading margin was
broadly stable year on year.
The decrease in trading margin
in Data & Flooring reflects the
geographic market and product
mix of sales year on year.
(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
2019
2018
EBITDA1
Movement in
working capital2
Movement in
provisions
Net capital
expenditure
€m
€m
579.8
521.2
5.6
2.3
1.7
(5.8)
(154.3)
(131.3)
Net interest paid
(16.7)
(15.6)
Income taxes paid
(87.2)
(75.0)
Other including
non-cash items
8.2
12.6
Free cashflow
337.1
308.4
1 Earnings before finance costs, income
taxes, depreciation, amortisation and
the impact of IFRS 16
2 Excludes working capital on acquisition
but includes working capital
movements since that point
Working capital at year-end was
€582.8m (2018: €543.9m) and
represents 11.9% (2018: 11.5%)
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 movement year
on year reflects a 40 basis points
increase in underlying working
capital levels primarily due to
higher inventory levels in recently
acquired businesses.
(e) Return on capital employed,
calculated as operating profit
divided by total equity plus net
debt, was 17.3% in 2019 (2018:
16.8%) or 17.7% 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 enhanced returns on
capital during the year.
(f) Net debt to EBITDA measures
the ratio of net debt to earnings
and at 1.1x (2018: 1.4x) is
comfortably less than the
Group’s banking covenant of
3.5x in both 2019 and 2018. The
calculation is pre-IFRS 16 which
is consistent with the Group’s
banking covenant.
Acquisitions and capital
expenditure
During the period the Group made
the following acquisitions for a
total upfront cash consideration
of €142.2m.
On 6 November 2019, the purchase
of 85% of Group Bacacier SAS for
an initial cash amount of €122.0m.
The Group also made a number of
smaller acquisitions during the year
for a combined cash consideration
of €22.2m:
→ the purchase of 100% of the
share capital of WeGo Floortec
GmbH, a German manufacturer
of access floors;
→ the purchase of 100% of the
share capital of Epur SA, a French
water treatment business; and
→ the purchase of the assets of
SkyCo, a US Light & Air business.
The deferred consideration paid
during the period of €59.7m (2018:
€3.1m) represents €30m relating to
the Synthesia business which was
acquired in 2018 and €29.7m relating
to the Isoeste business which was
acquired in 2017.
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 €451m revolving credit facility,
which was undrawn at year end
and which matures in June 2022.
In June 2019 an additional 3
year bank facility of €300m was
arranged, which was undrawn
at year end. As at 31 December
2019, the Group also had private
placement loan note funding net
of related derivatives totalling
€814m. The weighted average
maturity of the notes is 4.5 years.
Subsequent to the year end the
Group arranged a bilateral ‘Green
Loan’ of €50m to fund the Group’s
Planet Passionate initiatives.
The Group had significant available
undrawn facilities and cash balances
which, in aggregate, were €942m
at 31 December 2019. This, together
with the Green Loan of €50m
provides appropriate headroom for
ongoing operational requirements
and development funding.
Net debt
Net debt decreased by €95.1m
during 2019 to €633.2m
(2018: €728.3m).
This is analysed in the table below:
Movement in net debt
Free cashflow
Acquisitions
Deferred consideration paid
Share issues
Repurchase of treasury shares
Dividends paid
Dividends paid to non-controlling interests
Cashflow movement
Exchange movements on translation
Deferred consideration
Movement in net debt
Net debt at start of year
Net debt at end of year
2019
€m
337.1
(142.2)
(59.7)
0.1
(0.6)
(77.6)
(0.4)
56.7
8.4
30.0
95.1
(728.3)
(633.2)
2018
€m
308.4
(469.2)
(3.1)
0.1
-
(68.3)
(0.1)
(232.2)
(2.2)
(30.0)
(264.4)
(463.9)
(728.3)
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Share price and market
capitalisation
The Company’s shares traded in
the range of €35.70 to €55.25
during the year. The share price
at 31 December 2019 was €54.45
(31 December 2018: €37.38) giving
a market capitalisation at that
date of €9.9bn (2018: €6.7bn).
Total shareholder return for
2019 was 47.2%.
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
21 February 2020
Key financial covenants
The majority of Group borrowings
are subject to primary financial
covenants calculated in accordance
with lenders’ facility agreements
which exclude the impact of IFRS 16:
- 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:
2019
2018
Covenant
Times Times
Net
debt/
EBITDA
EBITDA/
Net
interest
Maximum
3.5
Minimum
4.0
1.1
1.4
34.1
28.8
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 nine
capital market conferences and
conducted 351 institutional one-
on-one and group meetings.
USA
Case Western Reserve University
Data & Flooring:
ConCore 1000 & Composite Board
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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
contained in this Annual Report.
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. 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 set out in
the following table.
Kingspan's strategic pillars that
may be impacted by these risks
and uncertainties are:
Innovation;
Global;
Penetration;
Planet Passionate.
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, 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.
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.
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:
- Significant globalisation strategy with a presence
in over 70 markets;
- Launch of new innovative products and an approach of
continuous improvement 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 contained in this
Annual Report.
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 has served 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
and continues to refine its omnichannel customer centric
approach, enabling management to respond appropriately
to issues which may impact business performance.
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 consistently high
standards
are maintained in relation to the sourcing and handling
of raw materials.
- The construction of a dedicated Kingspan fire engineering
research centre, using Kingspan products, allows for more
expedient and in-depth testing to take place.
- Quality audits are undertaken at our manufacturing sites.
Over 70 of our facilities are ISO 9001 certified.
- Effective training is delivered to our staff.
- We proactively monitor the regulatory and legislative
environment.
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Risk and impact
Actions to mitigate
Risk and impact
Actions to mitigate
Business interruption (including IT continuity and climate change)
Employee development and retention
Kingspan’s performance is
dependent on the availability and
quality of its physical infrastructure,
its proprietary technology, its
raw material supply chain and its
information technology. The safe and
continued operation of such systems
and assets 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.
Embedded within Climate Change
risks are energy regulations, change
in customer preferences and global
supply.
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.
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
€716.3m expressed net of provision
for default in payment. This
represents a net risk of 15% of
sales. Of these net receivables,
approximately 67% were covered by
credit insurance or other forms of
collateral such as letter of credit
and bank guarantees.
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 95 plants in
the Insulated Panels division or 27 plants in the Insulation 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.
Climate related risks are managed through significant
investment in product development which help mitigate climate
change along with our ambitious commitments to reduce our
own environmental footprint.
Kingspan is focused on developing, enhancing and protecting
its IP portfolio. As a global leader in building envelope solutions,
Kingspan considers its IP security to be paramount. In addition
to trade secret policies and procedures, Kingspan has developed
appropriate IP strategies to protect and defend against
infringements.
In an effort to reduce Kingspan’s exposure to raw material supply
chain issues, Kingspan retains 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 appropriate
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.
Each business unit has rigorous, 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 supplemented 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.
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.
Kingspan 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 programmes.
Fraud and cybercrime
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.
Health and safety
The nature of Kingspan’s operations
can expose its contractors,
customers, suppliers and other
individuals to potential health and
safety risks.
Health and safety incidents can
lead to loss of life or severe injuries.
Laws and regulations
Kingspan is subject to a broad
range of existing and evolving
governance requirements,
environmental, health and safety
and other laws, regulations and
standards which affect the way
the Group operates. Non-
compliance can lead to potential
legal liabilities and curtail the
development of the Group.
A robust health and safety framework is in place throughout the
Group’s operations requiring all employees to complete formal
health and safety training on a regular basis.
The Group monitors the performance of its health and safety
framework, and takes immediate and decisive action where
non-adherence is identified.
The development of a strong safety culture is driven by
management and employees at every level and is a core part
of doing business with integrity.
Kingspan’s in-house legal team is responsible for monitoring
changes to laws and regulations that affect the business and is
supported by external advisors.
A comprehensive framework of policies are in place that set
out the way employees and suppliers are expected to conduct
themselves.
Training is provided through a variety of mediums in key areas of
legal and regulatory compliance, including a suite of mandatory
training for those that join Kingspan.
A robust whistleblowing process is in place that allows the
anonymous reporting through an independent hotline of any
suspected wrongdoing or unethical behaviour, including reporting
instances of non-compliance with laws and regulations. All
reported cases are investigated.
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report –Kooltherm® K20 Concrete Sandwich BoardUsing a combination of Cross-Laminated Timber (CLT) and Kooltherm®, Haus Gables achieved an R-Value of 20.5 with only 2 inches of insulation. Kooltherm® halved the insulation thickness required versus traditional materials. This was a key consideration for Haus Gables with a breadth of just 18ft, equivalent to a mobile home. The Kooltherm® used on Haus Gables was manufactured with a blowing agent that has zero Ozone Depletion Potential, Low Global Warming potential, HCFC and CFC free. Through the innovative use of CLT and Kooltherm®, Haus Gables was erected in just over two weeks, drastically reducing labour time on site and therefore labour costs. Haus Gables has been featured in multiple influential architecture and design magazines globally for its innovative use of materials and its striking design. The Kooltherm® used on Haus Gables was manufactured using renewable energy. Architectural League Prize for Young Architects + Designers, Jennifer Bonner, Winner.The whole thing looked like an architectural model being assembled in place. If you squint your eyes, watching the panels being installed at that scale, one could imagine, ‘This is the way we cut up materials—chipboard, foam core, and whatever else is on our desks—and make models’.Jennifer Bonner, Director MALL and Assistant Professor at Harvard University Graduate School of DesignHaus GablesAtlanta, USA—4140Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@Click here to see more Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 4342——SUSTAINABILITY REPORTKingspan’s MissionTo accelerate a net zero emissions future with the wellbeing of people and planet at its heart. We do this through enabling high-performance buildings that can save more energy, carbon and water. We recognise the vital importance of achieving this while: enhancing the safety and wellbeing of people in buildings; enabling the circular economy; and always delivering more performance and value. We believe the answers lie in challenging building industry traditions with innovation in advanced materials and digital technologies. What defines us is our relentless pursuit for better building performance whilst being Planet Passionate in everything we do.Our commitment to sustainability is instilled at every level of Kingspan 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 achievement of the United Nation's Sustainable Development Goals (SDGs). With the case studies in this report we demonstrate how we are making a difference through our solutions and through our operations.—PEOPLE PASSIONATEDespite our size, we retain our heritage and culture as a family business, with very high value placed on people, relationships and communities which are at the very heart of how we do business.—PLANET PASSIONATEThrough Planet Passionate we are playing our part to tackle climate change by increasing our use of renewable energy, reducing carbon in our business operations and value chain, increasing our recycling of rainwater and waste and by accelerating our participation in the circular economy.—PRODUCT PASSIONATEToday, the construction and operation of buildings together account for 36% of global energy use and 39% of energy-related CO₂ emissions when upstream power generation is included. The energy efficiency of buildings is therefore fundamental to combating climate change. @ Kingspan takes the welfare of our employees very seriously. We are deeply saddened to report that there was a workplace fatality in the business in 2019. We will do our utmost to learn from this tragedy and to continually improve processes and training to achieve our target of zero fatalities across our business in the future. @ In 2019, Kingspan has invested over €2m on projects to enhance health and safety processes and culture across our business. Our Lost Time Incident rate fell by almost 7% in 2019, or by more than 12% over the past 2 years.@ We continue to champion diversity across the business. The percentage of females in Kingspan increased again in 2019 to almost 19%. Additionally, the percentage of females on the executive management team grew to 27%.@ Over 90 additional high-potential candidates had the opportunity to broaden their business and leadership skills on development programmes in 2019.@ Kingspan supports local community projects at a global level. For 2019, we highlight a number of projects we supported which championed the development and protection of children. See more on pages 54 - 55. @ Energy: In 2019 we achieved 90% of our Net Zero Energy goal throughout our operations and are firmly on track to achieve 100% by 2020. We generated 5.3% of our energy on Kingspan sites and 22% of wholly owned sites have deployed rooftop Solar PV systems.@ Carbon: We achieved a 92% reduction in energy carbon intensity in 8 years and began to implement our zero-emissions car strategy. In November 2019 we held our annual supplier day forum with specific focus given to our new sustainability programme. Productive discussions and workshops were held throughout the day with a range of suppliers resulting in some collaborative projects that will support the delivery of our supply chain targets. @ Circularity: We upcycled 385 million PET bottles into our manufacturing processes and through our new Planet Passionate program we are aiming to achieve zero waste to landfill throughout our business by 2030.@ Water: We harvested 21.5 million litres of rainwater across our manufacturing operations and entered into a partnership with The Ecoalf Foundation, a venture which collects waste in the Mediterranean Sea for recycling or repurposing where possible. @ The largest influence Kingspan has on the SDGs is through our solutions in use. As demonstrated throughout this report our advanced building envelope solutions help building owners to reduce energy emissions. The total energy saved over the lifetime of the Kingspan insulation systems, sold worldwide in 2019, is an estimated 751 million MWh of energy or 172 million tonnes of CO₂e. @ Our solutions also help to enhance occupant health and wellbeing through improved thermal comfort, natural daylighting, ventilation, and increased space. Our advanced insulation is also free from health concerns associated with airborne fibres. @ Our Water & Energy business helps building owners to sustainably manage water as a resource and can help to protect local communities through reducing flood risk and the risk of polluted run-off to waterways. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 4544—Kingspan Group plc — Annual Report & Financial Statements 2019Kingspan is driven by a belief that advanced materials and methods of construction hold the answer to some of the great challenges that our planet and society face. From products that insulate better while creating more internal space, to those that harness more natural daylight, we are dedicated to pushing the boundaries of high-performance envelope design with a core focus on energy efficiency.Since the beginning, Kingspan has been committed to innovation so we can make building better. It’s something we demonstrate daily across our business. We believe we must challenge building industry traditions through innovating in advanced materials and digital technologies to achieve a net zero carbon emissions future. Kingspan’s products and systems therefore enable higher lifetime energy and carbon savings, and enhance and protect the value of assets.This culture of innovation is why Kingspan has created IKON, our Global Innovation Centre. The building itself is a showcase for high-performance envelope design using 18 Kingspan products and systems. Both a place of research and a living research project, IKON asks the big questions that will lead us to a more sustainable and healthy future while delivering enhanced value, convenience and efficiencies to our customers.Our aim is to continue to deliver breakthrough products such as QuadCore™ and Kooltherm® and to do this while progressing sustainability practices within our operations. In 2019, 90% of our operational energy use was matched by renewable energy, on target to be 100% by 2020. We also upcycled the equivalent of 385 million PET bottles bottles into our manufacturing processes. Learn more about our commitments to the environment in our Planet Passionate section of this Sustainability Report. In 2019 we launched a QuadCore™ Roof Board, advanced progress on the PV solar integrated PowerPanel® 2.0 and the fibre-free A1 classified AlphaCore®. QuadCore™ 2.0 and the next generation of Kooltherm® are also in development.Kingspan's insulation systems, sold in 2019, will save an estimated 751 million MWh of energy or 172 million tonnes of CO₂e over their lifetime. Over 62% of our products contribute directly towards delivering the UN SDGs.—PRODUCT PASSIONATE—PLANET PASSIONATE—PEOPLE PASSIONATEFire Testing and ResearchKingspan is committed to delivering high-performance, innovative building solutions that are underpinned by extensive fire testing, including large-scale system testing. We have carried out over 2,000 fire tests to national, international and insurance industry standards, across our full range of insulated panel, rainscreen facade and insulation board products and systems. As part of our ongoing commitment to fire safety and product development, we are investing €5m in a global state-of-the-art facility dedicated to fire engineering research. Offering a comprehensive resource of fire a comprehensive fire science resource, its mission to advance knowledge and understanding of how building materials, products and complete systems perform when subjected to fire. Based in North Wales, the centre will be open to visitors from April 2020 and will welcome research partnerships and collaboration from across industry and academia. In addition, our new IKON Global Innovation Centre is focused on the digitalisation of construction and is developing new technologies and tools to enable end-to-end digital traceability from test to site and beyond to the full life cycle of a building.Extensive Reaction to Fire and Fire Resistance Testing Reaction to fire relates to the combustibility and ignitability of building materials and can be used to determine how much energy they contribute to the growth of a fire.These tests can range from small scale product tests, sometimes involving just a few grams of product, to large scale system tests involving products incorporated into structures up to 9 metres high and enclosures up to 10 metres in length. Large scale system testing is the most reliable way of assessing the performance of products and systems irrespective of material classifications. Large scale reaction to fire system tests performed on our products and systems include BS 8414; AS 5113; LPS 1181 and 1208; FM 4470, 4471, 4880, 4881, 4882 and 4924; IS0 13784; LEPIR II; NFPA 285 and 286; and SP Fire 105.Fire resistance is the measure of how building elements can effectively withstand and contain fire whilst continuing to perform their given function. These tests are typically performed by testing with large scale furnaces with minimum dimensions of 3 metres by 3 metres. Test results can include integrity, insulation, heat radiation and load bearing capacity. Test methods employed to assess the fire resistance capabilities of our products and systems include EN 1364, EN 1365, EN 1366 and ASTM E119. Compliance with regulatory and insurance industry requirements.QuadCore™ Technology is an advanced 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. Panel systems incorporating QuadCore™ Technology achieve excellent performance in a range of fire tests for regulatory compliance, are approved to insurance industry standards and achieve high levels of fire resistance. 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. Kingspan has a comprehensive range of building facade systems incorporating QuadCore™ technology and Kooltherm® boards that have successfully passed large scale facade tests around the globe including, but not limited to, NFPA 285 (North America), LEPIR II (France), SP Fire 105 (Nordics), AS 5113 (Australia), ISO 13785-2 (Czech Republic), MSZ 14800-6 (Hungary) and met the requirements of BR135 when tested to BS 8414 (UK). Please refer to product literature and datasheets for details of configurations and requirements to meet specific performance levels.Performance in real fire situationsTesting and certification to regulatory and insurance industry requirements, with particular emphasis on large scale system testing, is the cornerstone of Kingspan’s strategy to demonstrate the fire safety of our products and systems. However, we believe that it’s important to know how our products and systems perform in real fire situations. Across the world, we have examples of independently researched real fire case studies which have proven the performance of insurer approved insulated panel systems and a Therma roof board system. Over the years we have built up a library of real fire case studies. Case studies include building occupancytypes such as retail, healthcare,education, food processing and storage, manufacturing, logistics and distribution, car showrooms and car parks.79mTaking seventy-nine million cars off the road annually18.1Up to 18.1 times the the annual electricity consumption of Greater London441mOver four hundred and forty-one million barrels of oil259The annual output of 259 gas-fired power stationsThe total projected energy savings* over the lifetime of the Kingspan insulation systems, sold worldwide in 2019, is equivalent to:*figures are based on savings of insulation systems in use for 60 years. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 4746—Important factors in choosing metal panels for this project were schedule, speed, durability, efficiency and the one-shot envelope. Having one product delivered on site and then installed and finished is a huge benefit to a project in terms of schedule and managing construction costs - particularly in terms of labour.Jason Gamache, Principal Architect, MCG Architecture—PRODUCT PASSIONATE—CASE STUDIES—SUSTAINABLE BUILDINGS Alaska Airlines Hangar USAKingspan Insulated Panels: Kingspan KS Micro-Rib Wall Panels Energy efficiency was a key challenge with this project because of the harsh Alaskan conditions and the large opening created by the hangar doors. Insulated panels enabled the architect to meet Anchorage’s code for continuous insulation, despite these challenges. The construction season is incredibly short in Alaska so speed of build was another key factor in the design stage. Insulated panels reduced the time on site and negated the need for temporary enclosure, which would have needed to be heated. Kingspan’s single product solution contributed to the sustainability goals of the project by significantly reducing the waste versus what would have been generated with a built-up system. —SUSTAINABLE BUILDINGS Two Southbank Place UKKingspan Data & Flooring:Kingspan RMG 600 SimplocThe rainwater and stormwater tanks installed at Marrickville library have a capacity of 57,000 litres. These will supply over 100,000 waste flushes annually and provide irrigation for the trees and green spaces. A very important role of rainwater harvesting is to reduce peak flows and total volume of stormwater. This can improve the water quality and waterway health by reducing polluted run-off to local waterways. The tanks have been installed in the children’s garden and will be used as an environmental education tool. Inner West Council (Marrickville Council) is part of The Strategy for a Water Sensitive Community which aims to move current urban water management in Marrickville to a more sustainable and flexible approach that promotes liveable, productive, resilient and sustainable communities. At Kingspan, we have set ourselves the ambitious goal to harvest 100 million litres of our own water needs by 2030. Southbank Place is a hive of activity, featuring world-class arts venues, globally recognised landmarks, and attractions ranging from ferry tours of the River Thames, to boutique shops and fine dining. To cater for the growing interest in the location, a £1.5 billion mixed-use site has been developed. Southbank Place comprises seven new buildings, including luxury apartments, retail units, restaurants and commercial spaces, all clustered around the iconic Shell Tower. Two Southbank Place provides 15 floors of premium office space and a winter garden.The build programme had to work around design challenges such as a London Underground line running beneath the building’s footprint and the creation of a new ticket hall. So, with a tight deadline to meet, the specified products and materials needed to be quick and straightforward to install. The construction team also made use of available Kingspan BIM objects to aid project planning and clash detection.Kingspan’s flooring solution helped to futureproof the building as a suitable environment for co-working. Our access floor’s chain of custody certification and environmental certification contributed to Two Southbank Place achieving BREEAM ‘Excellent’ certification. —SUSTAINABLE CITIESMarrickville Library AustraliaKingspan Water & Energy:Kingspan Made to Measure Rainwater Harvesting and Stormwater Tanks Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 4948—202020252030ENERGY- Maintain our Net Zero Energy status- Increase our direct use of renewable energy to 60% by 2030- Increase our on-site generation of renewable energy to 20% by 2030- Install solar PV systems on all wholly owned facilities by 2030•---•---••••CARBON- Net zero carbon manufacturing by 2030- 50% reduction in product CO₂ intensity from our primary supply partners by 2030- Zero emission company cars by 2025 -----••••CIRCULARITY- 1 billion PET bottles upcycled into our manufacturing processes by 2025- All QuadCore™ insulation to utilise upcycled PET by 2025- Zero company waste to landfill by 2030---••-•••WATER- 5 active ocean clean-up projects by 2025- 100 million litres of rainwater harvested by 2030--•-••PARTNERSHIPSThrough Planet Passionate we aim to make a significant reduction in our environmental footprint, enhance the environmental performance of our products and make a meaningful contribution towards the achievement of the UN Sustainable Development Goals.Our Planet Passionate 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 2030 targets. Our Global Head of Sustainability reports Planet Passionate developments directly to the CEO, Gene Murtagh. ENERGYNet Zero Energy*In 2019 we made significant progress towards our Net Zero Energy goal of matching 100% of our operational energy use with renewable energy – achieving 90% NZE up from 75% in 2018. This was achieved through the implementation of our three step strategy: Save More, Generate More and Buy More.Save More Improving the energy efficiency of our operations remains the highest priority across Kingspan. A wide range of projects were implemented on many sites during 2019 including the following; →Insulation to reduce heat loss; →LED lighting installations including daylight dimming and occupancy sensing; →Optimised daylighting solutions including roof and wall lights; →Heat recovery systems; →Compressed air system improvements; →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 2020 and beyond. In 2019 we implemented multiple energy efficiency projects across the Group which will deliver approximately 7710 t/C02e of carbon savings per annum. Generate More A key foundation of our “Generate More” strategy has been investing in on-site generation. In 2019 5.3% of our total energy use was generated from renewable sources on our own manufacturing sites, 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. Kingspan is at the forefront of driving the agenda toward a more sustainable future. We launched our Net Zero Energy agenda in 2011 and are on target to match 100% of our operational energy use with renewable energy in 2020. Building upon the last decade of progress, we have now embarked on our next ambitious 10-year journey to radically advance Kingspan across the four key themes of Energy, Carbon, Circularity and Water.—PRODUCT PASSIONATE—PLANET PASSIONATE—PEOPLE PASSIONATEClimate change is the single most important issue facing the world today and our most urgent priority. At Kingspan, we are committed to driving a more sustainable approach to our business in response to these issues. Through Planet Passionate we will reduce carbon and energy in both our manufacturing processes and products and continue our relentless pursuit of low-carbon buildings that deliver more performance and value, with clear targets to strive for by 2030.Gene M Murtagh, CEO* Net Zero Energy: We aim to achieve net zero energy by the end of 2020. We have defined net zero energy as meaning: the non-renewable energy use associated with our manufacturing sites will be minimised through a combination of energy efficiency measures, on-site renewable energy generation and the purchase of certified renewable energy from the grid. Our remaining non-renewable energy use will be offset by the purchase renewable energy certificates. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 5150—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. Further to our Net Zero Energy target, through Planet Passionate we aim to increase our direct use of renewable energy to 60% of total energy use, increase on-site generated energy to a minimum of 20% and deploy rooftop solar PV systems on all wholly owned Kingspan sites by 2030. CARBONOur progress towards our Net Zero Energy goal to date has enable use to reduce our energy related carbon intensity per €‘000 turnover by 92% in just 8 years. Kingspan continues to respond to the CDP Climate Change questionnaire. Out of the thousands of companies which responded, Kingspan was recognised among the top 2% that earned a spot on the prestigious CDP Climate A list. Through Planet Passionate we aim to achieve Net Zero Carbon manufacturing and a 50% reduction in product CO₂ intensity from primary supply partners by 2030. We are also targeting 100% zero emission company funded cars by 2025. In November 2019 we held our annual Supplier Forum with specific focus given to our new sustainability programme. Productive discussions and workshops were held throughout the day with a range of suppliers resulting in some collaborative projects that will support the delivery of our supply chain targets. We will continue to build our supplier relationships and engagement strategy moving forward.CIRCULARITYWasteIn 2019 Kingspan recycled 65% of its waste, down from 68% in 2018. 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 through our new Planet Passionate program, implement our zero waste to landfill throughout the Group by 2030. We aim to share learnings from our more mature facilities, for example: our UK Data & Flooring Technology achieved zero waste to landfill in 2019.PARTNERSHIPS →World Green Building Council: Kingspan has signed on to be the primary sponsor of this programme for the next two years. We have also signed up to the Net Zero Carbon Buildings Commitment, aiming for our entire building portfolio to achieve net zero operational carbon by 2030. →Science-Based Target Initiative: Kingspan has committed to and verified its science-based targets. →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. →EP100: Kingspan is a member of the EP100. EP100 brings together a growing group of energy-smart companies committed to improving their energy productivity and doing more with less. →CE100: Kingspan is a member of the CE100 network and the Built Environment working group which aims to accelerate the circular economy across the global construction sector. →ECOALF Foundation: 3-year partnership with the ECOALF Foundation aiming to support their Upcycling the Oceans projects. →Born Free: 3-year partnership to support the conservation and education work to help protect the lion population in Meru, Kenya.Through Planet Passionate we aim to increase our direct use of renewable energy to 60% of total energy use.Kingspan has committed to send zero waste to landfill by 2030.PET upcyclingKingspan upcycled 385 million PET bottles into its manufacturing processes in 2019 and committed to a target of upcycling one billion PET plastic bottles per annum by 2025. In addition, Kingspan entered into a three-year partnership with the ECOALF Foundation to support and expand their project which removes 150 tonnes of plastic waste from the Mediterranean Sea each year, about 10% of which is PET. Ocean PET recovered from the ECOALF project is added to the upcycled PET bottles and used to make Kingspan’s insulation. Through Planet Passionate, Kingspan now plans to support four further ocean clean-up projects by 2025.WATERAlthough water is a small proportion of inputs into our operations, we aim to manage this precious resource in the most responsible manner possible. In general, water is mainly used for 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. Through Planet Passionate we aim to increase our harvested rainwater use to 100 million litres by 2030 (2019: 21.5 million litres).Our Data & Flooring Technology manufacturing site in Red Lion US is one of the largest consumers od water in the Group and in 2019 the conservation of water amounted to 8.9 million litres (which is 63.8 % of total usage) through water recycling.20190.8420180.8220170.7920160.8820150.9920141.1120131.1420121.29 20190.1420180.1420170.1320160.1420150.1420140.1620130.1820120.1920190.00420180.00920170.01220160.01420150.03420140.04020130.04920120.05320195762018459201732820162432015126201488201360201227201934.0201836.2201734.5201632.2201524.1201417.3201314.520126.62019237.92018214.42017176.22016164.42015102.3201480.3201358.0201227.4ENERGY: OUR JOURNEY TO DATENet Zero EnergyEnergy Costs Light and heat costs as a % of turnoverEnergy IntensitykWh per € turnoverEnergy Carbon IntensityCO₂ tonnes per €'000 of turnoverRenewable Energy UsageRenewable energy used (GWh)On-site Energy Generation Renewable energy generated on-site (GWh)Renewable Electricity UsageRenewable electricity used (GWh)2017201869%75%90%2019 Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 5352—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. —PRODUCT PASSIONATE—PLANET PASSIONATE—PEOPLE PASSIONATEInternational participants on the 2019 programme represented 14 diverse locations, including Brazil, USA and Europe, with female participants representing 24% (up from 11% in the first cohort). A new Enterprise Leadership Programme is being launched in 2020 along the lines of the previous global development programme in 2017 – 2018. To-date, over 60% of our executives who attended this programme have been promoted to the next level or have taken on increased responsibilities. We are also launching a coaching skills programme in 2020 for managers and business leaders, initially in Ireland and the UK, with a view to a wider global roll-out. This is part of a long-term strategy to build an internal cadre of coaches who are skilled in developing not only their own teams but can also contribute to the development of global talent. 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 on-going 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 our employees. We are deeply saddened to report that during the year, an accident at one of our Belgian facilities tragically resulted in a workplace fatality. Together with the local authorities and independent specialists retained by the company, we are fully examining the circumstances of this incident. We will use the learnings from this tragedy to continually improve processes and training to achieve our target of zero fatalities across all of our businesses in the future. In 2019 we invested over €4m on improving processes and H&S culture. Over 60 of our manufacturing facilities are certified to ISO 18001 or equivalent standard. Over the past three years, all of our sites have been audited by internal H&S teams. Sites which are certified to ISO 18001 standards are externally audited annually. 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. Diversity is widely promoted within Kingspan, over one third of recruits on our graduate programme are female, and 24% of the participants on our PEAK programme are female, both well above the Kingspan average (19%).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 graduates in 2019 up over 26% on prior year. One third of the participants were female, significantly above the company average. The highlight of the programme was the Graduate Projects Showcase which was hosted for the first time in IKON, our new Global Innovation Centre, where five teams presented strategic projects to senior executives from across Kingspan. Kingspan became a corporate partner of UNITECH from January 2020. This is an international body that represents the most prestigious engineering schools in the top nine universities in Ireland, the UK and Europe. This will give Kingspan an extensive platform to attract talent from all engineering disciplines who can go on to build their careers in our global business.RetainAt 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 company to drive real change through innovation and through engagement with our Planet Passionate initiatives.Our employees are already reaching out to play a role in our Planet Passionate initiatives – such as car-pooling, organising local beach clean-ups and increasing recycling in our offices. We are building a network of Planet Passionate Champions to help scale local action at our sites across the globe. The network will convene once a quarter to share ideas and to progress initiatives identified across the business which will contribute to achieving our Planet Passionate goals. Develop PEAK was launched in 2018 and is targeted at developing high-potential managers for future senior leadership roles. The core objective of the programme is to deepen Kingspan’s leadership bench-strength to match the increasing scale and global nature of the business. Since its launch in April 2018, 56 managers have participated in this six-month programme which has strengthened cross divisional relationships as well as furthering integration of executive talent from recent acquisitions. Another aim is to increase leadership diversity by deepening and widening the pool of future senior leaders. Health and Safety Investments in 2019 include: - Roof replacements in two of our facilities to improve working conditions and reduce slippage risk from leaks.- Employment of external consultants to update and improve training and to upgrade processes and procedures, where necessary.- Improvements in mechanisms for assisting employees when lifting panels, such as cranes with vacuum lifters and lift tables.- General safety upgrades to machines where opportunities for improvement have been identified.- General and emergency lighting upgrades.Hazard Identification Processes include (but are not limited to): - All near misses are assessed and processes are updated. - Employees are encouraged to make suggestions for process improvements.- Safety walks by responsible persons.- Periodic workplace inspections.- Risk assessment on new machines at installation.Injury Frequency Rate1.4 p/100k hours20191.5 p/100k hours20181.6 p/100k hours2017Gender balance19% 81% 201918% 82% 201817% 83%2017FemaleMaleFatalities201912018020170Right:IKON, Kingscourt, Ireland. 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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report 5554—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 2019 we are proud to have supported a wide range of initiatives, including: runs against cancer, stimulating the local environment through beekeeping, community tidy-towns initiatives, festive family box donations and multiple sponsorship and fundraising events.World Water DayIn 2019 Kingspan went blue for World Water Day. Our Water & Energy division launched a campaign to raise awareness about water as a resource, and to raise funds for the "Just a drop" foundation.The children are our futureChildren led a climate revolution in 2019, urging those in power to take action. Nearly 8 million people reportedly took part in protests across the globe in March and September. In this year’s report we want to highlight a number of projects in which Kingspan supported the development and protection of children across the globe in 2019: →In Ireland we have supported Junior Achievement Ireland (JAI) for over 16 years. JAI encourages young people to stay in education and helps them to develop the skills they need to succeed in a changing world. Kingspan volunteers have presented to students on the value of STEM subjects and we have been inspiring students through tours of our newly opened Global Innovation Centre, IKON. →In Poland, Kingspan supported a local children’s home in Sienno which provides shelter to 40 children between the ages of 4 and 16. Our employees donated toys and sports equipment for Children’s Day and donated funds to support the summer camp. →For the past 5 years, Kingspan has supported Gena Heraty’s project in Haiti which provides shelter and care for over 70 orphans, 30 of which have special needs. Gena was named the Irish Red Cross Humanitarian of the Year in 2019. Supply chain engagement 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. In November 2019 we held our annual Supplier Forum with specific focus given to our new sustainability programme. Productive discussions and workshops were held throughout the day with a range of suppliers resulting in some collaborative projects that will support the delivery of our goal for a 50% reduction in product CO₂ intensity from our primary supply partners by 2030.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 goals 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 actually experience. Kingspan is currently in its first phase of a Group wide customer experience programme. We have had over 10,000 responses and have very ambitious targets for this programme in the short to medium term. We look forward to updating you as we go through the process. →Continue to innovate.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. OUR COMMUNITIES 1234Our 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 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. Photo captions:1 Children participating in JAI's 'Futurewize' programme2 First Day at School, NPH, Haiti 3 Kingspan Water & Energy employees enjoying World Water Day4 Children from the Sienno Children's Home on summer camp Kingspan Water & Energy launch World Water Day campaign. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Business & Strategic Report –—DIRECTORS'REPORTKingspan Insulated Panels BENCHMARK Hook-on CassettesThe Karrier panels provided over double the thermal values specified for the project, directly impacting the HVAC systems’ output, operating costs and maintenance requirements.With such a large cantilever over the existing heritage building, weight was a crucial consideration and a key reason in switching from pre-cast concrete to a light-weight panel solution.Air leakage rates achieved on the project are excellent, critical for protecting the museum’s important artefacts and very difficult to achieve using traditional methods of construction. The pre-modularisation of the panels and the roof liner panel enabled a fast enclosure of the building envelope and an earlier start on internal works versus traditional methods of construction.The panel’s metallic finishes echo the vast landscapes of Western Australia and reflect the State’s mineral heritage and the origins of the WA Museum.Local material sourcing was a key focus for this project. Given Kingspan’s global manufacturing capacity, it contributed to the achievement of 80% of materials being locally sourced. The new Museum for Western Australia is among six national finalists for the 2020 Australian Construction Achievement Award. Kingspan’s BENCHMARK Hook-On Cassette’s were chosen for the project due to their efficiency in speed of construction, airtightness, thermal performance, and aesthetic potential, all encompassed by a through wall 25 year performance warranty as an added benefit.Alex Dennis, National Business Development Manager Kingspan Insulated Panels, AustraliaWestern Australia MuseumPerth, Australia—5756Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@ Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 5958—ChairmanEugene Murtagh(Age 77)IrelandEugene Murtagh is the non-executive Chairman of the Group.Key skills & experience: Eugene founded the Kingspan business in 1965 and, as CEO until 2005, he led its growth and development to become an international market leader. As Chairman, he sets the tone at the top, developing and embedding values. He has an unrivalled understanding of the Group, its business and its ethos, and demonstrates outstanding leadership and governance skills.Chief Executive OfficerGene M. Murtagh(Age 48)IrelandGene Murtagh is the Group Chief Executive Officer. He was appointed to the Board in November 1999.Key skills & experience: Gene joined the Group in 1993 and was appointed CEO in 2005. He was previously the Chief Operating Officer from 2003 to 2005, and prior to that he was managing director of the Group’s Insulated Panel business and of the Water & Energy business. He leads the development of the Group’s strategy and has a deep knowledge of all of the Group’s businesses and the wider construction materials industry.Executive directorsGeoff Doherty(Age 48)IrelandGeoff 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 Geoff 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(Age 58)United States of AmericaRussell Shiels is President of Kingspan’s Insulated Panels business in the Americas as well as Kingspan’s global Data & Flooring business. He joined the Board in December 1996.Key skills & experience: Russell has experience in many of the Group’s key businesses, and was previously Managing Director of the Group’s Building Components and Data & Flooring businesses in the UK. He brings to the Board his particular knowledge of the building envelope market in the Americas, as well as his understanding of the office and datacentre market globally.Peter Wilson(Age 63)United KingdomPeter Wilson is Managing Director of the Group’s global Insulation Boards business. He was appointed to the Board in February 2003.Key skills & experience: Peter has been with the Group since 1981, and has led the Insulation Boards division since 2001. He has unrivalled knowledge and experience of the global insulation industry, gained over almost 40 years’ in the business.Gilbert McCarthy(Age 48)IrelandGilbert 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: Gilbert 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.Non-executive directorsLinda Hickey(Age 58)IrelandIndependentLinda Hickey was appointed to the Board in June 2013, and is appointed as the Senior Independent Director.Key skills & experience: Linda is a registered stockbroker and was formerly the Head of Corporate Broking at Goodbody Capital Markets where she worked closely with multi-national corporates and the investor community. Previous experience includes working at NCB Stockbrokers and Merrill Lynch. Her considerable knowledge and experience of capital markets and corporate governance provide important insights to the Board.Qualifications: B.B.S.External appointments: Chair of the board of the Irish Blood Transfusion Service, and non-executive director of Cairn Homes plc.Michael Cawley(Age 65)IrelandIndependent Michael Cawley was appointed to the Board in May 2014.Key skills & experience: Michael is a chartered accountant, and was formerly Chief Operating Officer & Deputy Chief Executive of Ryanair. His extensive international financial and business experience as well as his role on other audit committees are an asset to the Board and to the Audit Committee.Qualifications: B. Comm., F.C.A.External appointments: Chairman of Hostelworld Group plc, and non-executive director of Flutter Entertainment plc and Ryanair Holdings plc.John Cronin(Age 60)IrelandIndependentJohn Cronin was appointed to the Board in May 2014.Key skills & experience: John 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 a past President of the British Irish Chamber of Commerce. His valuable legal, corporate governance and capital markets experience brings a unique perspective to the Board.Qualifications: B.A. (Mod) Legal Science, Solicitor in Ireland and England & Wales.External appointments: Non-executive director of The Dublin Theatre Festival. Bruce McLennan(Age 55)AustraliaIndependent Bruce McLennan was appointed to the Board in June 2015.Key skills & experience: Bruce 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 Financial Services 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.Qualifications: B.Bus, M. Comm.External appointments: Member of the Australian Government Takeovers Panel.Dr Jost Massenberg(Age 63)GermanyIndependentJost Massenberg was appointed to the Board in February 2018.Key skills & experience: Jost was 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. His more than 30 years’ industry experience in European steel and major manufacturing businesses are of enormous benefit to the Board. Qualifications: PhD Business Admin.External appointments: Chairman of VTG Aktiengesellschaft, and a non-executive director in a number of large private companies.Anne Heraty(Age 59)IrelandIndependentAnne Heraty was appointed to the Board in August 2019.Key skills & experience: Anne is the founder and Chief Executive Officer of Cpl Resources plc. She has over 20 years’ experience running an international recruitment and outsourcing business and is currently on the Board of IBEC, having previously held a number of other non-executive directorships, and brings this broad business and entrepreneurial experience to the Board. Qualifications: B.A. in Mathematics & Economics.External appointments: Chief Executive Officer of Cpl Resources plc.Company SecretaryLorcan Dowd(Age 51)IrelandLorcan Dowd was appointed Head of Legal and Group Company Secretary in July 2005.Key skills & experience: Lorcan 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.The Board provides entrepreneurial leadership and sets the governance framework for the Group.—THE BOARDBoard Committees: Audit Nomination & Governance Remuneration Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 6160—The Financial Reporting Council’s (‘FRC’) 2018 U.K. Corporate Governance Code (the ‘New Code’) came into effect for Kingspan from 1 January 2019. In publishing the Code, the FRC has aimed to emphasise the importance of good corporate governance to long-term sustainable success. Throughout 2019 the Board took a number of steps to refine its approach to reflect the altered focus of the New Code, relating to: →Board Leadership and Company Purpose →Division of Responsibilities →Composition, Succession and Evaluation →Audit, Risk and Internal Control →RemunerationThe New Code aims to return to a principle based approach to governance, as opposed to risking an overly prescriptive regime. A cornerstone of safeguarding our long-term ambitions has been a commitment to high standards of corporate governance, as well as a Board with a depth of experience and expertise. In making and implementing actions, the Board aims to maintain a balance between short-term pressures for change and the long-term impacts of decisions. As a Board, we hope you find our reporting to be meaningful in detailing how we have applied the revised principles under the New Code. In areas where we have deviated from any provisions of the New Code, we aim to provide clarity as to how we continue to meet the Principles of the Code and demonstrate why our approach represents less governance risk based on our strategy, business and outlook.During the past year, the Board was pleased to engage with major shareholders on a number of occasions. In addition to the many investor and executive management meetings held throughout the year, the Chair of the Remuneration Committee has engaged with a host of our major shareholders to discuss the outcome of the 2019 AGM, as well as changes to our remuneration policy in light of updates to the UK Code. Further details of these discussions are detailed in the Report of the Remuneration Committee contained in this Annual Report. On behalf of the Board, I would like to thank those shareholders who provided their views on governance and strategy during the past year.Eugene Murtagh ChairmanAt Kingspan, the Board sets this strategy and oversees the values and behaviours that shape our high-performance culture. A sound understanding of how performance is generated over time has been key in steering strategies toward the level of sustainable value creation we have delivered. I fundamentally believe we have an effective and entrepreneurial Board in place which has unlocked significant value for our stakeholders and wider society. —CHAIRMAN’S INTRODUCTIONUSA Seattle Opera CentreInsulated Panels:Kingspan Karrier Panel Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 6362—This statement outlines how Kingspan has applied the principles and complied with the provisions set out in the UK Corporate Governance Code (July 2018) (‘the Code’). —REPORT OF THE NOMINATION & GOVERNANCE COMMITTEEThe full text of the Code and of the Irish Corporate Governance Annex can be obtained from the following websites respectively:www.frc.org.ukwww.euronext.com Statement of complianceThe directors confirm that the Company has throughout the accounting period ended 31 December 2019 complied with the provisions of the UK Corporate Governance Code (July 2018) in the manner hereinafter detailed. Stakeholder viewsThe Board is cognisant of the principle underpinning Provision 5 of the New Code, which asks Boards to have regard for engagement mechanisms with stakeholders. The Board is fully aware of its responsibilities in this regard and other sections in this Annual Report set out clearly the long-lasting partnerships we have developed with customers, suppliers and communities. We are also aware of the importance of engagement with the workforce to the development of strategy as well as uncovering of risk and promoting new opportunities. The Board is pleased to confirm that Linda Hickey has been appointed as the director responsible for workforce engagement to facilitate the channelling of employee views to Board discussions. This process of engagement will also allow the Board to consistently assess and monitor the evolution of the company’s corporate culture, while promoting the ability of the workforce to raise concerns. Audit CommitteeMichael Cawley (Chair)Appointed 2014IndependentAnne HeratyAppointed 2019IndependentBruce McLennanAppointed 2020IndependentNomination & Governance Committee Eugene Murtagh (Chair)Appointed 1998Gene M. MurtaghAppointed 2007John CroninAppointed 2014IndependentBruce McLennanAppointed 2017IndependentJost MassenbergAppointed 2019IndependentRemuneration CommitteeLinda Hickey (Chair)Appointed 2015IndependentMichael CawleyAppointed 2014IndependentBruce McLennanAppointed 2017IndependentBoard committeesThe Board has established the following committees: Audit, Nomination & Governance, 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. The Members of each committee as at the date hereof, and the date of their first appointment to the committee, are set out below. The details of each committee’s activities during the year are detailed in their respective reports as set out in this Annual Report.Attendance at Board and Committeee meetingsduring the year ended 31 December 2019BoardAuditNominationsRemunerationABA BABABEugene Murtagh7711Gene M. Murtagh7711Geoff Doherty77Russell Shiels77Peter Wilson77Gilbert McCarthy77Helen Kirkpatrick111111Linda Hickey771144Michael Cawley775544John Cronin775511Bruce McLennan771144Jost Massenberg77Anne Heraty3333Column A - indicates the number of meetings held during the period the director was a member of the Board and/or CommitteeColumn B - indicates the number of meetings attended during the period the director was a member of the Board and/or CommitteeUSA Broadwater OfficeInsulated Panels:Kingspan Dri-Design Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 6564—Board composition and responsibilitiesThere is a clear division of responsibilities within the Group between the Board and executive management, with the Board retaining control of strategic and other major decisions. The Chairman leads the Board and is responsible for its overall effectiveness in directing the Company. One of the key roles for the Chairman in doing so is promoting a culture of objectivity, openness and debate. In addition, the Chairman facilitates constructive board relations and the effective contribution of all non-executive directors, and ensures that directors receive accurate, timely and clear information. The balance of skills, background and diversity of the Board contributes to the effective leadership of the business and the development of strategy. The Board’s composition is central to ensuring all directors contribute to discussions. As a means to foster challenge and director engagement, led by the senior independent director, the non-executive directors meet without the Chairman present at least annually. Likewise, the Chairman holds meetings with the non-executive directors without the executives present. In each of these settings, there is a collegiate atmosphere that also lends itself to a level of scrutiny, discussion and challenge. All directors have access to the advice and services of the Company Secretary. The Company has procedures whereby directors (including non-executive directors) receive formal induction and familiarisation with Kingspan’s business operations and systems on appointment, including trips to manufacturing sites with in-depth explanations of the processes involved at the site. Shareholders’ meetings and rightsThe Company operates under the Irish 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’).The Company must hold an AGM each year in addition to any other shareholder meeting in that year. The main features of the Group’s internal control and risk management systems that relate specifically to the Group’s financial reporting processes are: →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; →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. 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. LeadershipThe Nomination and Governance Committee (the 'committee'), leads the process for appointments while ensuring plans are in place for orderly succession to both the Board and senior management positions. A fundamental aspect of overseeing appointments to senior management remains the development of a diverse pipeline. In terms of non-executive directors, the committee remains guided by the principle that all appointments will be made on merit, but having regard, where possible to diversity of gender, age and nationality. The non-executive directors on the Board currently have the following mix of skills and experience as set out in the table below:Effectiveness and independenceThe committee has reviewed the size and performance of the Board during the year and this process occurs 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, more than half of the Board, excluding the Chairman, comprised independent non-executive directors. Linda Hickey is the senior independent director on the Board. The senior independent director provides a sounding board for the Chairman and serves as an intermediary for the other directors and shareholders when necessary. The directors consider that there is strong independent representation on the Board. The Board has had due regard to various matters which might affect, or appear to affect, the independence of certain of the directors. The Board considers that each of the non-executive directors (excluding the Chairman of the Board) are independent. In determining the independence of John Cronin, both at the time of his appointment and subsequently as part of annual reviews of the Board’s composition, the committee had particular regard for his position as a partner of McCann FitzGerald, one of the Company’s legal advisors. The committee concluded that Mr Cronin was fully independent, taking into account the following material factors: →He has no role in the selection or retention of legal advisors to the Company;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 in the Shareholder Information section of this Annual Report. Internal control and risk management systemsThe Board confirms that there is an ongoing process for identifying, evaluating and managing any significant risks faced by the Group. 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.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 detailed in the Report of the Audit Committee contained in this Annual Report. NameNationalityInternationalFinancialGovernanceLeadershipIndustryLegalEugene MurtaghIrish••••••••••Linda HickeyIrish••••••••Michael CawleyIrish••••••••••John CroninIrish••••••••••Bruce McLennanAustralian••••••Jost MassenbergGerman••••••••••Anne HeratyIrish••••••••••Belgium Gova MeubelenInsulated Panels:Kingspan Dri-Design, QuadCore™ Karrier Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 6766—The Board concluded that neither 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.Conflict of InterestsAcknowledging the importance of independent representation to the effective functioning of the Board, as well as the scrutiny and, when necessary, the challenging of management, as part of the evolution of our governance framework, the Committee developed and approved a conflicts of interest policy which will guide all decisions of the Board when actual or potential conflicts of interest arise. The policy stipulates that directors are required to avoid situations where they have, or could have, a direct or indirect interest that conflicts, or may conflict, with the Company’s interests. Directors are required to give notice of any potential situational and/or transactional conflicts, which are considered at the following Board meeting and, if appropriate, situational conflicts are authorised. Directors are not allowed to participate in such considerations or to vote regarding their own conflicts. External commitmentsNon-executive directors, including the Chairman, may serve on other boards provided they continue to demonstrate the requisite commitment to discharge their duties effectively. The Committee reviews the extent of the directors’ other interests on an ongoing basis throughout the year. The Committee is satisfied that each of the directors commits sufficient time to their duties in relation to the Company. The Chairman and each of the directors have also confirmed they have sufficient time to fulfil their obligations to the Company. In assessing the time commitments of Board members, the Committee had particular regard for the external commitments of Michael Cawley, who is also a non-executive director of Ryanair Holdings plc, and Flutter Entertainment plc, as well as Chairman of Hostelworld Group plc. The Committee recognises the views expressed by shareholders in this area, as the demands of being a director have grown considerably in the past decade. The committee reviewed Mr Cawley’s attendance and contribution as a non-executive director, as well as his other mandates. It was noted that since his appointment as a non-executive director, Mr Cawley has attended 100% of the Audit Committee meetings and has only missed one out of a total of 82 Board and committee meetings. The committee has engaged with Mr Cawley and noted his assurances that he will continue to devote sufficient time to the Board. The committee will continue to keep under review the external commitments of all Directors. 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. An externally facilitated review of the Board’s performance was carried out during 2018 by Better Boards. We will conduct another external evaluation within three years in line with best practice.Board changesDuring the past year, we continued to deliberately refresh the Board. As a Board, we are fully aware of the benefits of balancing longer serving and newly appointed Directors, which is central to the generation of new business strategies. In May 2019, having served for almost 12 years, Helen Kirkpatrick stepped down from the Board. Ms Kirkpatrick’s input was hugely valuable to the Board, as well as to all the key committees she sat on. Later in the year, Anne Heraty was appointed as a non-executive Director. With over two decades experience as the CEO of a public company, Ms Heraty deepens the diversity of background and expertise to our Board significantly. In considering the appointment of a new non-executive to the Board, the committee considered whether or not to engage a firm of consultants to assist in the process, but decided that in order to ensure best fit with the Company, it would use its internal knowledge and existing pool of candidates, before selecting and recommending Ms Heraty’s appointment to the Board.Succession PlanningOne of the primary remits of the committee is to ensure that robust succession plans are in place for the directors and senior management, taking into consideration planned and unplanned departures, as well as the strategic evolution of the business. Aligning succession planning to our strategy is a cornerstone of strong committee and Board governance, and will continue to be a focus of the committee in the coming period. One specific update to the New Code is that, generally, chairs should not remain in place for over nine years, although there is an exception to this rule to facilitate succession planning, and the committee, much like the New Code, recognises that governance is not always best served by rigid guidance, particularly for a position as important as that of the Chairman. As the founder of the business in 1965, Eugene Murtagh has led its growth and development as both Chairman and CEO until his retirement as CEO in 2005. As Chairman, Mr Murtagh has been instrumental in setting the tone at the top, developing and embedding values as well as encouraging performance and ensuring that management have the necessary support and controls in place to deliver on its strategy. Mr Murtagh has now indicated to the Board that it is his intention to retire as Chairman and non-executive director within the next 18 months. The committee believes that this is an appropriate timeline which balances the need for stability and continuity whilst ensuring an orderly transition takes place between him and his successor during what will be a significant change in the leadership of the Board. In line with best practice, Mr Murtagh will not Chair the committee when his successor is being selected. →All work undertaken by McCann FitzGerald for the Company is managed by other employees within the firm, and there are formal arrangements in place, both at McCann FitzGerald and Kingspan, to ensure there are no conflicts of interests; →Mr Cronin is an experienced and accomplished corporate lawyer who adds important legal and regulatory experience to the Board; →Since his appointment to the Board, Mr. Cronin has not had any involvement in advising the Company on any legal matters; →The total fees paid to McCann FitzGerald during the year were €125,947 (2018: €114,533) and account for substantially 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. In addition to these considerations, given the potential for a perceived conflict of interests, at the time of Mr Cronin’s appointment, we engaged with ISS to discuss the steps we had taken to avoid any conflicts developing during his tenure in order to alleviate any potential shareholder concerns. Both parties were satisfied at the time that the relationship was not likely to impact Mr Cronin’s independence as a director, and the Company agreed to disclose annually the fees paid to McCann FitzGerald as a related party transaction. In assessing the independence of Linda Hickey, the Board had due regard to her previous position as a senior executive at Goodbody Stockbrokers, one of the Company’s corporate brokers. Ms Hickey retired from her role at Goodbody Stockbrokers in 2019. Moreover, the annual level of fees and expenses paid to Goodbody Stockbrokers were normally in the region of €50,000 for corporate broking services during her tenure there. In assessing Ms. Hickey's independence annually, the Committee also took into account her invaluable experience in working for two of the largest Irish stockbroking firms. In Ireland, she has unrivalled experience in capital markets and particularly Irish public companies, which is hugely valuable to the Company and our shareholders.83%Male17%FemaleGender33%Over 9 years25%Between 6 and 9 years17% Less than 3 years25% Between 3 and 6 yearsTenureIndependence68%Ireland8% Australia8% Germany8% USA8% UK50%Independent 50 Non- Independent ResidencyNetherlands Grote Boel Insulated Panels:Kingspan Dri-Design Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report –We recommended Kingspan for the Studley Castle Hotel as our client wanted to ensure a thermally efficient build to minimise costs and maximise benefits. Given our experience working with its products, we were confident we could deliver this. In addition, we could also accomplish excellent indoor air quality as there are no fibres emitted from the insulation.Samuel Hitch, Managing Director, Chase Insulations Ltd.Studley Castle Hotel Studley, United KingdomKooltherm® Pipe InsulationStudley Castle’s refurbishment was designed to exceed current energy performance requirements. Kooltherm® Pipe Insulation enabled a reduction in the insulation thickness by 25-30%, a significant benefit in a space constrained application. Over 15,000 linear metres of pipework supply the hotel’s 200 guest rooms. With low VOC emissions, Kooltherm® Pipe Insulation helped to achieve excellent indoor air quality. Thinner insulation helped to increase clearances, making the installation easier and more efficient. Kooltherm® Pipe Insulation holds a highest possible BRE Green Guide rating of A+ and is manufactured to a BS EN ISO 14001, qualifying for the Responsible Sourcing credit. Kooltherm® Pipe Insulation qualifies for the highest possible BRE Green Guide rating of A/A+ and is manufactured to a BS EN 14001 Environmental Management System. —6968Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@Click here to see more Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 7170—Corporate governance developments As an Irish listed company, Kingspan reports against the provisions of the UK Corporate Governance Code (July 2018). This latest iteration of the Code has broadened the role of the committee, as well as introducing additional practices concerning director pay, all of which have been carefully considered by the committee during the year and extensively discussed with shareholders. As noted in last year’s Remuneration Report, the EU Shareholders’ Rights Directive, which includes a focus on 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 advance of that transposition taking place, Kingspan proposed an advisory vote on its remuneration policy at its 2019 Annual General Meeting, and we were pleased that this was supported by more than three quarters of shareholders. Shareholder consultationAt the 2019 AGM, 23% of shareholders opposed the resolution relating to our remuneration policy. When engaging with shareholders around the AGM, we developed a clear understanding of the concerns of those who voted against the remuneration policy, as well as those who supported the resolution while noting minor concerns. During engagement with shareholders, the most common areas of discussion related to pension contribution levels; post-cessation shareholding guidelines; and the adoption of post-vesting holding for PSP Awards. In the period since the 2019 AGM, we wrote to shareholders representing more than half of our issued share capital and again engaged with a number of our major shareholders. While it is not always possible to reach a consensus of views, particularly when discussing remuneration, we believe we have addressed the common themes emerging from the programme of shareholder engagement. Consequently, the committee has implemented the following changes to our incentive framework: →The inclusion of a two-year post-vesting holding period under the PSP; →A reduction in pension contributions for all future executive directors, which will be aligned with the rate applicable to the workforce in the relevant local market; and →The introduction of a post-cessation shareholding guideline for all new executive directors, with the current shareholding guidelines applying for two years after an executive’s departure.Following confirmation of the proposed changes, we again engaged with shareholders to detail the background to the changes and to foster mutual understanding of the steps we have taken to meet the evolution of market best-practice in the UK & Ireland. On behalf of the committee, I want to thank all those shareholders who took the time to engage with us. We are pleased that shareholders were supportive of the changes we have made. The input of our shareholders is key to our aim of consistently improving transparency and we have used certain aspects of the feedback to enhance our disclosure. Prior to my appointment as Chair, I had served on the committee for four years and have developed a fundamental understanding of the company’s incentive framework, its link to the Group’s strategy, and the strong alignment between Kingspan’s performance and our executive directors’ remuneration. Our remuneration philosophyCentral to our approach to remuneration are the principles of simplicity, pay for performance and transparency. Variable remuneration is only paid for strong performance and maximum payouts will only be realised for truly exceptional performance. A significant portion of remuneration is delivered through equity, ensuring strong levels of alignment between the interests of management and shareholders. In contrast to many of our peers in the UK & Ireland, our incentive framework is based on straight-forward metrics. The EPS measure we employ under both the annual bonus and Performance Share Plan (PSP) is identical to that which we report in the income statement and is not subject to any adjustments. This approach cascades through the organisation and promotes transparency and simplicity for participants and our shareholders. Our relentless focus on simplicity and a high-performance culture has been instrumental in driving the growth of the business and significant value creation for stakeholders. Business performance and pay outcomes2019 was another year of strong performance for the Group across a number of measures. In the face of some mixed markets and a relatively weaker second half, Group revenue increased 7% to €4.7bn, and Trading Profit was up 12% to €497.1m, reflecting both volume growth and a healthy focus on margin management. Earnings Per Share (‘EPS’) rose 11% to 204.6 cent and Total Shareholder Return (‘TSR’) for the year was 47.2%, which are two of the key performance measures used to determine the executives’ performance-related pay. This has resulted in varying levels of bonus being achieved, with 71% of the Group EPS targets achieved, and between 82% - 100% of the divisional profit targets having been met. The strength of the Group’s performance has also been reflected in the achievement of top quartile TSR performance among the peer group for the ninth cycle in a row which, together with strong long-term EPS growth, resulted in the 2017 PSP Awards vesting at 100% of maximum. Further details on outcomes under our incentive plans are set out later in this report.Linda HickeyChair of the Remuneration Committee—REPORT OF THE REMUNERATION COMMITTEEFixed pay v Variable pay38%Fixed62%VariableOn behalf of the Remuneration Committee (the “committee”) and the Board, I am pleased to present my first Report on Directors’ Remuneration, having been appointed as Chair of the committee in May 2019.Variable payShort Term v Long Term49%Short Term51%Long TermUSA San Francisco Consolidated Administration CampusInsulated Panels:Kingspan BENCHMARK Designwall 2000 Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 7372—PensionsOver the past 12 months, the issue of pensions, and specifically any disparity between contribution levels for executives and the wider workforce, has become an area of focus for a number of investors. We have reflected on the range of viewpoints expressed to the committee on this, resulting in the amendment to our policy to limit all pensions for future executives to those available to the workforce in the relevant local market. While there are a number of investors that expect pensions to be similarly reduced for incumbent directors, there was also a clear recognition in our discussions with shareholders that addressing this issue for new hires is more achievable than seeking to change the contracts for incumbent executive directors. By reducing pensions for all future executives to those levels available to the general workforce, the committee has taken steps to align the current remuneration policy with the revised provisions of the UK Code.To provide greater clarity, and in response to the feedback received from shareholders, we set out in more detail below how the pension contributions for the incumbent executive directors are calculated. As outlined in our Remuneration Policy, the Group operates a defined contribution pension scheme for executive directors, and 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. →For both the CEO and CFO, contributions are determined by reference to their salary, being c. 18% and 24% respectively. In relation to the Divisional MD’s, Gilbert McCarthy’s contributions are at 20% of base salary, whereas in the case of both Peter Wilson and Russell Shiels, there are specific legacy contractual arrangements in place. →Peter Wilson, who has been employed with Kingspan for almost 40 years, receives a base pension contribution of 21%. In 2010 the committee negotiated a revised contract with him which included an increase in his pension contribution by £75,000 per annum until retirement, and in 2016, as part of its strategic planning, the Company agreed to extend his retirement age by five years to 65. →Similarly, the contract of Russell Shiels, who joined the Group in 1996, was renegotiated in 2013, and his pension contributions were increased by $100,000 per annum until retirement. In 2018, as part of its strategic planning, the Company agreed with Mr Shiels to extend his retirement age by five years to 65. In line with good practice, the Committee will keep under review pension contributions for the current executives, noting however that these are legacy contractual arrangements that were put in place many years ago. The committee has taken appropriate measures to ensure contributions for future executives are fully aligned with those of the relevant local workforce. We consider the steps we have taken have ensured our alignment with evolving best-practice without causing disruption at a critical juncture in the Group’s strategic development.2019 Remuneration at a glanceThis section provides a snapshot of remuneration received by executive directors during 2019. SalaryAs flagged in last year’s Annual Report, the CEO received a base salary increase of 5% in 2019. Peter Wilson, managing director of the Group’s global Insulation Board received an increase of 10% in 2019, with other executives receiving an increase of 3% in line with those awarded to the general workforce. Further details of the directors' salaries and total remuneration are set out in the Remuneration Table on page 74.Annual bonusThe maximum annual bonus potential of 150% of basic salary for the CEO and CFO was based on achievement of Group EPS performance targets. For Divisional MDs, bonuses were based on a combination of stretching profit targets for their respective divisions, plus an element of Group EPS targets. The final outturns of the annual performance bonuses are detailed in full below: The CEO and CFO achieved 71% of maximum target, which is the equivalent of 106% of salary for each executive. Payouts for the divisional MDs ranged from 95% to 106% of salary, with Russell Shiels and Peter Wilson each having exceeded 100% of their divisional profit target and Gilbert McCarthy having achieved 82% of his target.Performance Share PlanThe Performance Share Plan (‘PSP’) awards vesting in May 2020, relate to awards granted in 2017. These awards were subject to EPS growth and relative TSR performance targets measured over the period from the start of 2017 to the end of 2019. Target and actual outturns are set out in the table below. 100% of awards granted will vest in May 2020. Summary of Remuneration PolicySet out below is a summary of the remuneration policy approved by shareholders at the 2019 AGM (as updated following shareholder consultation). The policy is guided by the following overarching principles: →Simplicity →Transparency →High-performanceHow it OperatesMaximum OpportunityBase salaryBase salaries are reviewed annually by the Remuneration Committee in the last quarter of each year. 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.No prescribed maximumPensionsThe 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 current maximum for incumbent executives. For all future appointments, pensions will be capped at the rate applicable to the workforce in the relevant local market.BenefitsExecutive 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 maximumAnnual bonusExecutive 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.150% of base salaryPart deferred PSPExecutive 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. The awards are subject to a two-year post-vesting holding period.200% of salary25% threshold vestingWeightingTargetsPerformancePayout (% of max.)EPS50%CPI + 5%-10% compound p.a.CPI + 12.2%100%TSR 50%Median-Upper Quartile87th percentile100%MeasureTargetsPerformance achieved% Salary payoutCEO & CFOEPS95% - 120% of prior year111%71%Divisional MDsDivisional profit targets10% divisional profit growth107% to 127% of prior year95% to 106%EPS95% - 120% of prior year111% Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 7574—In addition to the framework outlined, the following are key structural aspects of the remuneration policy.Executive director shareholding guidelines The committee recognises that share ownership is important in aligning the interests of management with those of shareholders. Shareholding guidelines are in place whereby all executive directors are required to acquire a holding of shares in the Company equal to 200% of salary. The executive directors in practice hold significantly in excess of this requirement, and details of these shareholdings are provided in the Report of the Directors contained in this Annual Report. With effect from 2020, newly appointed executive directors will also be subject to a post-employment shareholding policy equal to 200% of salary. The committee concluded that it was not necessary to implement post-employment guidelines for the current executive directors, having regard to their long-standing high levels of shareholdings and their existing contractual arrangements.ClawbackThe 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. 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.The remuneration policy approved at the 2019 AGM is set out in full in the 2018 Annual Report and on our website at the following address: www.kingspan.com.Performance related bonusIn 2019 all executive directors were eligible for a maximum performance related bonus opportunity of up to 150% of base salary. The CEO and CFO’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 20% Group EPS growth over prior year. The committee considers this to be a truly stretching target.For each of the Divisional MDs, up to 40% of their total bonus opportunity was based on achieving stretching divisional profit targets, with maximum bonus being payable on the achievement of 10% divisional profit growth. A further 60% of the Divisional MDs’ total bonus opportunity was payable on the achievement of the same Group EPS targets as for the CEO and CFO, ensuring a healthy balance between incentivising divisional and Group growth.While the Group delivered another year of record results, with trading profit up 12% and EPS up 11%, no participant received maximum payouts. The top-end Group EPS target was not achieved, and the varying divisional performances resulted in different levels of bonus payouts being earned. This underpins the committee’s philosophy that truly stretching performance is needed for executives to receive maximum payouts. A proportion of the payouts have been deferred into shares for 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 2019.We do not disclose the specific targets for the Divisional MDs, and performance against them, as these are commercially sensitive figures. While the committee is fully aware of the expectation that all bonus targets are disclosed in the year of payment, the specific targets for the Divisional MDs would provide information that would not otherwise be available to competitors. Max. opportunity as % salaryPerformance measures and % weightingThreshold targetTarget for maximum Performance achievedBonus outcome as % salaryChief Executive150%EPS174.8c220.8c204.6c106%Chief Financial Officer150%EPS174.8c220.8c204.6c106%Russell Shiels150%Divisional profit (40%)10% profit growth27% profit growth106%EPS (60%)174.8c220.8c204.6cPeter Wilson150%Divisional profit (40%)10% profit growth13% profit growth106%EPS (60%)174.8c220.8c204.6cGilbert McCarthy150%Divisional profit(40%)10% profit growth7% profit growth95%EPS (60%)174.8c220.8c204.6cDirectors’ Remuneration for year ended 31 December 2019 Executive DirectorsGene MurtaghGeoff DohertyRussell Shiels(1)Peter Wilson(2)Gilbert McCarthyTotalEUR'000EUR'000EUR'000EUR'000EUR'000EUR'000201920182019201820192018201920182019201820192018Fixed Pay - Salary and Fees870828562546522481477425520505 2,951 2,785 - Pension Contributions(3)158150137133174163186174104101 759 721 - Benefits(4)36343433555520193733 182 174 Performance Pay(5) - Cash element8708285625465224814772114954932,926 2,559 - Deferred share awards521583410431922981-96146 531 Total executive pay 1,986 1,998 1,329 1,362 1,304 1,272 1,189 910 1,156 1,2286,964 6,770 Charge to Consolidated Income Statement for share options and awards(6) 3,241 2,807 Non Executive Directors(7)Eugene Murtagh191191Helen Kirkpatrick(8)3585Linda Hickey8275Michael Cawley8585John Cronin7575Bruce McLennan7575Jost Massenberg7564Anne Heraty(9)31-Total non-executive pay649650Total Directors’ remuneration 10,854 10,227 (1) Russell Shiels’ remuneration is denominated in USD, and has been converted to Euro at the following average rates USD: 1.120 (2018: 1.181). (2) Peter Wilson’s remuneration was denominated in GBP in 2018, and has been converted to Euro at the following average rate GBP: 0.885.(3) 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.(4) 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.(5) 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 75 of the Remuneration Report. (6) 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.(7) 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.(8) Helen Kirkpatrick retired as a non-executive director on 03/05/2019.(9) Anne Heraty was appointed as a non-executive director on 01/08/2019. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 7776—In addition, the committee reviewed the vesting outcomes to ensure they reflected overall group performance, individual contribution as well as shareholder and the wider workforce experience throughout the performance period. In light of the strong performance, including three-year revenue growth of 50%, three-year trading profit growth of 46% and absolute TSR growth of 111% over the performance period, the committee concluded that the PSP vesting conditions had been satisfied in full and were an accurate reflection of the Group’s performance.Non-executive directorsThe non-executive directors each receive fees which are approved by the Board as a whole. 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). Performance Share PlanThe committee reviewed the extent to which the vesting targets in respect of the PSP Awards granted in 2017 had been met by reference to EPS and TSR targets over the three-year performance period to 31 December 2019. In 2017, the committee granted PSP Awards that were 50% based on EPS growth targets and 50% based on TSR targets:WeightingMeasureThresholdMaximumPerformance% Vesting50%EPSCPI + 5%CPI + 10%CPI + 12.2%100%50%TSRMedianUpper quartile87th percentile100%Performance Share PlanDirectorAt 31 Dec 2018Granted during yearVested during yearExercised or lapsed during yearAt 31 Dec 2019Option price €Earliest exercise dateLatest expiry dateGene M. MurtaghUnvested 129,498 38,642 (40,882)(4,908)¹ 122,350 0.1305/05/2025/02/26Vested 97,490 40,882 (55,121)² 83,251 0.1324/02/1823/02/23 226,988 38,642 - (60,029) 205,601 0.13Geoff DohertyUnvested 75,363 21,396 (24,090)(2,892)¹ 69,777 0.1305/05/2025/02/26Vested - 24,090 (24,089)³ 1 0.1323/02/1923/02/23 75,363 21,396 - (26,981) 69,778 0.13Russell ShielsUnvested 68,698 19,797 (22,524)(2,705)¹ 63,266 0.1305/05/2025 /02/26Vested - 22,524 (22,524)⁴ - 0.13-- 68,698 19,797 - (25,229) 63,266 0.13Peter WilsonUnvested 64,626 19,797 (20,912)(2,511)¹ 61,000 0.1305/05/2025/02/26Vested - 20,912 (20,912)⁵ - 0.13-- 64,626 19,797 - (23,423) 61,000 0.13Gilbert McCarthyUnvested 68,697 19,797 (21,819)(2,620)¹ 64,055 0.1305/05/2025/02/26Vested 95,854 21,819 (45,000)⁶ 72,673 0.1325/02/1723/02/23 164,551 19,797 - (47,620) 136,728 0.13Company SecretaryLorcan DowdUnvested 13,332 4,378 (3,958) 13,752 0.1305/05/2025/02/26Vested 21,780 3,958 (10,300)⁷ 15,438 0.1325/02/1723 /02/23 35,112 4,378 - (10,300) 29,190 0.131 Lapsed on 23/02/2019, because TSR performance targets were not fully met.2 Exercised on 03/05/2019. Market value on day of exercise €46.04.3 Exercised on 08/05/2019. Market value on day of exercise €45.80.4 Exercised on 04/06/2019. Market value on day of exercise €47.00.5 Exercised on 17/06/2019. Market value on day of exercise €46.54.6 Exercised on 11/12/2019. Market value on day of exercise €50.50.7 Exercised on 12/12/2019. Market value on day of exercise €51.05.Deferred Share AwardsDirectorAt 31 Dec 2018Granted during year Vested & transferred during yearAt 31 Dec 2019Earliest vesting/ transfer dateGene M. MurtaghUnvested 11,899 4,009 (11,899) 4,009 31/03/21Geoff DohertyUnvested 8,765 2,644 (8,765) 2,644 31/03/21Russell ShielsUnvested 8,349 2,424 (8,349) 2,424 31/03/21Peter WilsonUnvested 6,839 2,090 (6,839) 2,090 31/03/21Gilbert McCarthyUnvested 7,939 2,445 (7,939) 2,445 31/03/21The peer group against which TSR performance was measured was as follows:Armstrong World Industries Inc.Owens CorningBoral Ltd.Rockwool Intl. A/SCRH plcSIG plcGeberit AGSikaGrafton Group plcTravis Perkins plcLafarge HolcimUSG CorporationNCI Building Systems Inc.Wienerberger AGFinland Aanekosken Fire StationInsulated Panels: Kingspan Evolution featuring PIR Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 7978—Committee GovernanceThe Remuneration Committee comprises three independent non-executive directors, Linda Hickey (Chair), Michael Cawley and Bruce McLennan. The Company Secretary acts as the secretary to the committee. The Chief Executive does not normally attend meetings but provides input where relevant, to the committee Chair prior to the meeting. No individual is present at a meeting when the terms of his own remuneration are discussed. The terms of reference are available on the Company’s website: www.kingspan.com External advisorsThe 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. Korn Ferry did not provide any other services to Kingspan Group during the year. Accordingly, the committee is satisfied that the advice obtained was objective and independent.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. Implementation of Remuneration Policy for 2020The core principles of our remuneration philosophy as outlined earlier, frame our approach to 2020, namely simplicity, reward for high-performance, and transparency.Base salary and pensionAs detailed in our 2018 Annual Report, the committee carried out a review of each of the divisional directors’ roles. While recognising stakeholder concerns about any increases in pay, it was clear from the review that Peter Wilson’s role as Managing Director of the global Insulation business had increased over several years in terms of size and complexity, but at the same time his salary was misaligned to levels in the rest of the business.While this discrepancy was reduced somewhat in 2019, Mr Wilson will receive a salary increase of 7.5% in 2020. Following this increase, the committee is satisfied that it has largely addressed the findings of the review and is comfortable that Mr Wilson’s salary is now set at an appropriate level. Salaries for the other executive directors for 2020 have been increased by 2% in line with increases in the rest of the workforce. As outlined previously, the committee has made a significant change to the company’s policy on pensions, with the pension contributions of new executive directors limited to the levels applicable to the wider workforce in the market in which they work. While there are no changes to previously agreed contractual entitlements for incumbent executive directors, the Committee is aware of rapidly evolving expectations in this area and will continue to keep this aspect of executive remuneration under review. Annual BonusThe maximum bonus opportunity for all the executive directors is 150% of salary (unchanged from 2019) 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 2020, the committee has determined that the performance measures will remain unchanged from 2019. For the CEO and CFO, bonuses will continue to be based on Group EPS growth targets. For 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 remains of the view 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 and promotes simplicity and transparency. EPS targets will be disclosed with performance against them in the 2020 Remuneration Report. The committee is also keenly monitoring the Net Promoter Score (NPS) programme launched by Kingspan across the Group in 2019. NPS measures the customer experience across a range of aspects in the business, and as such it closely aligns our strategy with the experience of one of our most important stakeholders, our customers. The committee is reviewing the implementation of the NPS programme and is considering bringing it in as an additional performance measure in the annual bonus plan in the period ahead.Performance MeasuresWeightingPercentage vesting at thresholdThreshold vesting targetMaximum vesting target*EPS50%25%6%12%TSR50%25%MedianUpper quartile* Straight line vesting between threshold and maximum vesting Total Shareholder Returns Kingspan ISEQ FTSE 2501,2001,00080060020040020092010201120122013201420152016201720182019Remuneration Committee activitiesFEBJUNOCTDECSalary and feesEngage independent consultants••Review of overall remuneration policy••••Review executives’ salary, role and responsibilities for 2020••Review non-executives’ fees for 2020••Approve Executive’s pension arrangements••Performance payAssess Group and individual performance against targets for 2018••Confirm percentage of performance bonus achieved for 2018••Confirm vesting of 2017 Deferred Share Awards••Agree Group and individual performance targets for 2020••••PSP AwardsAssess performance of 2016/2018 PSP Awards against targets••Determine percentage of 2016/2018 PSP Awards which vest••Review performance measures for PSP Awards for 2019••Agree targets and level for grants of PSPs Awards for 2019••GovernanceReview and approve Remuneration Report for Annual Report 2018••Update on governance and remuneration trends generally••••••Consult with shareholders and consider feedback on new Remuneration Policy••••••••Consider shareholder votes and feedback from AGM 2019••Review of consultants’ performance and independence••Performance share awardsFor 2020, the CEO will receive an award over shares with a market value of 175% of base salary. The other executive directors will receive awards over shares with a market value of approximately 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. Following a review of the performance framework, the committee has selected the same performance measures as employed for the 2019 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 2019 awards. Annually, the committee conducts a rigorous test to ensure targets remain stretching yet realistic and are appropriately aligned with our risk appetite as well as internal and external forecasts. 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.The clarity and simplicity of the performance measures are a cornerstone of our approach to remuneration and have served the Company and our shareholders well since the introduction of the PSP.Non-executive director feesThere is no change to the non-executive director fees for 2020.Performance graph The graph below shows the Company’s TSR performance against the performance of the ISEQ and FTSE 250 indices over the 10 year period to 31 December 2019. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report Kingspan Topdek KS1000TD Roof PanelKingspan KS1000 Microrib Architectural Wall PanelsKingspan KS1000 OptimoKingspan panels enabled the considerable gain needed in thermal performance to offset the large glass content in the building envelope. Utilising insulated panels enabled a thinner insulation versus traditional materials thereby increasing useable space.Employee health and wellbeing was a key consideration for the project. The building was designed to provide a comfortable, yet stimulating, environment to work in.Insulated panels helped to reduce labour time and number of trades and the option to specify a complete range of roof, gutter and wall panels simplified the project coordination.Longspan wall panels reduce vertical joints, maximising the aesthetic properties of the panels. The vast array of colours and finishes enabled the architect to achieve their brief.The QuadCore™ used on the Aico building was made using renewable energy and contains 20-25% recycled steel.It is intended that the Aico building will be entered for multiple awards, with both design and sustainability as key considerations.–Credit: ©Richard StonehouseWe worked with Kingspan on the Aico building because of the great technical knowledge and back up from Kingspan employees at site and office level, and the ability to specify products that meet the brief in terms of aesthetics and technical standards. We also valued the opportunity to specify a suite of products from the same source that will seamlessly integrate with each other.Barry Prince MCIAT, Director DGA ArchitectsAico HeadquartersOswestry, UK—8180Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@ Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 8382—This report details how the Audit Committee has met its responsibilities under its Terms of Reference, the Irish Companies Act 2014 and under the UK Corporate Governance Code (July 2018) 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 2019 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 Irish Companies Act 2014 to present a Directors' Compliance Statement, 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 company 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 the Risk & Risk Management section of this Annual ReportThe 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 CawleyChairman, Audit CommitteeRole and Responsibilities 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 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 the external auditors, internal audit, and 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; and5. Whistleblowing procedures.Committee membershipAs at 31 December 2019, the Audit Committee comprised of three independent non-executive directors who are Michael Cawley (Chairman), Anne Heraty and John Cronin.Anne Heraty joined the committee on 1 August 2019. Linda Hickey and John Cronin retired from the committee in May 2019 and February 2020 respectively, and Bruce McLennan was also appointed to the committee in February 2020. The biographies of each can be found in the Board section of this annual report.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. MeetingsThe committee met four times during the year ended 31 December 2019 and attendance at the meetings is noted below. Activities of the Audit Committee in each meeting is noted below.Committee Member AttendedEligibleAppointment DateMichael Cawley (Chairman)552014Anne Heraty332019Linda Hickey (retired)112013John Cronin (retired)552015Bruce McLennon--2020As chairman of the Audit Committee I am pleased to present the report of the committee for the year ended 31 December 2019.—REPORT OF THE AUDIT COMMITTEEAudit Committee activitiesFEBJUNAUGOCTNOVFinancial reportingReview 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 of any related party matters and intended disclosures••Review Annual Report, and confirm if fair, balanced and understandable••External auditorsPlan 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••••Assessment and selection of external auditor for 2020••••Internal audit and risk management controlsReview 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••GovernanceAccounting standards update••Corporate governance update••Evaluation of external and internal audit function••Directors’ Compliance Statement policy and procedures••IT governance and risk management••General Data Protection Regulation legislation••••UK International Convention Centre WalesInsulated Panels:QuadCore™ Karrier Panel; Dri-Design Flat Cassettes, Evolution Axis Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 8584—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 EvaluationAs outlined in the Report of the Nomination and Governance Committee contained in this Annual Report, 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 ending 31 December 2019.Financial ReportingThe 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 2019, the committee reviewed: →the Group’s Trading Updates issued in May and November 2019; →the Group’ s Interim Report for the six months to 30 June 2019; and →the Preliminary Announcement and Annual Report to 31 December 2019.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 at that meeting 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, and treasury and tax matters.The primary areas of judgement considered by the committee in relation to the Group’s 2019 financial statements, and how they were addressed by the committee are set out overleaf. 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. Primary areas of judgementCommittee activityConsideration of impairment of goodwillThe 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 9 to the financial statements. KPMG also provided the committee with their evaluation of the impairment review process. Kingspan completed 4 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. Adequacy of warranty provisionsThe committee reviewed the judgements applied by management in assessing both specific and risk based warranty provisions at 31 December 2019. 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 2018 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 receivables provisionThe committee reviewed the judgements applied by management in determining the bad debts provision at 31 December 2019. 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. A retrospective review of bad debt provisions at 31 December 2018 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 provisionThe committee reviewed the valuation and provisioning for inventory at 31 December 2019. 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 2018 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. This assessment was conducted in line with the provisions of IFRIC 23. 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 acquisitionsTotal acquisition consideration in 2019 amounted to €144m. 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. UKScience and Technology Facilities CouncilLight & Air: Kingspan Day-Lite Klick Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 8786—External auditorThe 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 planFollowing the completion of the 2018 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 2019 year-end audit and half-year review, the committee approved the external auditors’ 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 auditors 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 ReformThe regulatory framework for the Group’s statutory audit is governed by EU legislation under 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 the predefined criteria set as part of the selection process. As a result of this process, the Company's auditors, KPMG Chartered Accountants, will continue in office and will retire following the conclusion of the audit for the 2019 financial year, with the Board then appointing EY as Group external auditor with effect from financial year commencing 1 January 2020.On behalf of the committee, I would like to thank each of the firms who participated in the tender process, along with KPMG who provided the highest level of audit and assurance services during their tenure.Internal auditThe 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.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 is working effectively, improves risk management throughout the Group and that the internal audit team is sufficiently resourced in addition to having the adequate level of experience and expertise. Risk Management and Internal controlsThe 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 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 Risk & Risk Management section of this Annual Report. 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 Report of the Nomination and Governance Committee contained in this Annual Report.Whistleblowing proceduresThe 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.Audit ServicesNon-Audit ServicesAudit V Non Audit Services Remuneration2017€2.0m2018€2.6m€0.9m2019€2.6m€0.9m€0.7mten 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 from the period commencing 1 January 2017. With regards audit firm rotation, EY has been selected as the external auditor for the financial year commencing 1 January 2020. The selection process is outlined in more detail below.Independence and objectivityThe 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. The lead audit partner is rotated every five years. 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 servicesIn 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. An analysis of fees paid to the external auditor, including the non-audit fees, is set out in Note 5 and below.Audit tender & rotation of auditorsA competitive audit tender process was launched in 2019. The committee was responsible for the design and operation of the tender process. The objectives were for the process to be efficient, fair and transparent and to submit two firms to the Board for appointment, with a reasoned preference for a single firm. Following the issuance of a Request for Proposal, a number of measures took place including visits to key manufacturing sites, numerous meetings with senior management and assurance that each of the firms would be suitably independent should they be appointed. The principal assessment criteria included: →Audit quality; →Experience; and →Cultural fitSubsequent to an evaluation of proposals and interactions, it was decided to take two firms to make final presentations to the committee and Group Chief Financial Officer. Following these final presentations, the committee recommended to the Board that EY be appointed to succeed KPMG as the Group’s external auditor. The committee believes that the strength and experience of the EY team best met Norway Kingspan Water & Energy: Klargester BioDisc Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 8988—Revenue (€bn)Principal ActivitiesKingspan 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 panelsStructural framingArchitectural facadesRigid insulation boardsBuilding services insulationEngineered timber systemsNatural daylightingVentilation and smoke management solutionsRaised access floorsDatacentre storage solutionsEnergy storage solutionsRainwater and wastewater solutionsRenewable energy systemsKingspan comprises five key business divisions which are Insulated Panels, Insulation Boards, Light & Air, Water & Energy and Data & Flooring. These divisions offer a suite of complementary building envelope solutions for both the new build and refurbishment markets.Results and DividendsGroup turnover for the year ended 31 December 2019 was €4.7bn (2018: €4.4bn), trading profit was €497.1m (2018: €445.2m), and earnings per share were 204.6 cent (2018: 184.0 cent). The Consolidated Income Statement is set out later in this Annual Report and a detailed review of the Group’s performance from a financial and operational perspective is contained within the Business & Strategic Report. Trading Profit (€m)EPS (cent)The directors of Kingspan Group plc (“Kingspan”) have pleasure in presenting their report with the audited financial statements for the year ended 31 December 2019.—REPORT OF THE DIRECTORS€4.4€445.2184.0€4.7€497.1204.6201920192019201820182018An interim dividend of 13.0 cent per share was paid to shareholders on 4 October 2019 (2018: 12.0 cent). The directors are recommending a final dividend of 33.5 cent per share for the year ended 31 December 2019 (2018: 30.0 cent), giving a total dividend for the year of 46.5 cent (2018: 42.0 cent). The final dividend if approved at the Annual General Meeting will be paid on 7 May 2020 to shareholders on the register at close of business on 27 March 2020.Business ReviewThe Business & Strategic Report contained in this Annual Report, including the Chief Executive’s Review and the Financial Review, sets out management’s review of the Group’s business during 2019. The key points include: →Revenue up 7% to €4.7bn. →Trading profit up 12% to €497.1m. →Free cashflow up 9% to €337.1m. →Group trading margin of 10.7%. →Basic EPS up 11% to 204.6 cent. →Year-end net debt1 of €633.2m (2018: €728.3m). Net debt to EBITDA2 of 1.1x (2018: 1.4x). →ROCE of 17.3% (2018: 16.8%). →Insulated Panels sales growth of 7%. Strong performance in the Americas, Mainland Europe performed well overall with the notable exception of Germany. Difficult UK market particularly in the second half. Further headway in key markets on QuadCore™. →Insulation Boards sales growth of 2%. Continuing progress on Kooltherm® and share gain from traditional materials. →Strong underlying volume growth of 4% and 8% in Insulated Panels and Insulation Boards partially offset by the pricing impact of raw material deflation. →Light & Air sales growth of 12% buoyed by a strong performance in the US. Solid activity in Mainland Europe. Daylighting centre of excellence under construction in Ireland. →Water & Energy sales growth of 3% with progress in the Nordics, a difficult UK environment and more subdued rainwater harvesting activity in Australia. →Data & Flooring sales growth of 13% reflecting strong datacentre activity and geographic expansion in Europe.+7%+12%+11%The Business and Strategic Report contained in this Annual Report 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 efficiency gains from high-performance building envelopes, regulatory changes and an increasing awareness of the long-term environmental impact of inefficient building design.GLOBAL The continued evolution of Kingspan’s geographic footprint as we build market leading positions globally.PLANET PASSIONATE In 2019, we launched our new Planet Passionate Programme across our entire group and to the industry. This is a critical first step in the next phase of our journey to proactively address the key sustainability challenges that face our planet. Through our Net Zero Energy Programme, we have already made great strides in powering our business on renewable energy, and with Planet Passionate we are setting ourselves even more challenging goals for the next 10 years. We are committing to hard targets in the areas of energy, carbon, circularity and water.1 Net Debt and EBITDA both pre-IFRS 16 2 Earnings before finance costs, income taxes, depreciation, amortisation and the impact of IFRS 16. France Champagne Palmer & CoInsulated Panels: Kingspan BENCHMARK Evolution Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 9190—Throughout 2019, 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.Principal Risks and UncertaintiesThe principal risks and uncertainties facing the Group, and the actions taken by Kingspan to mitigate them are detailed in the Risk & Risk Management Report contained in this Annual Report. The principal risks are: →Volatility in the macro environment; →Failure to innovate; →Product failure; →Business interruption (including IT continuity and climate change); →Credit risks and credit control; →Employee development and retention; →Fraud and cybercrime; →Acquisition and integration of new businesses; →Health and safety; →Laws and regulations.Key Performance IndicatorsThe directors are pleased to report on the very positive performance during 2019 against its key performance indicators. A detailed commentary incorporating key performance indicators is contained within the Financial Review and the Sustainability Report in this Annual Report. A number of the key performance indicators have been included in more detail on page 148 ‘Alternative Performance Measures’. The key performance indicators for Kingspan upon which particular emphasis is placed are listed below. InnovationSince the beginning, Kingspan has been committed to innovation so we can make building better. It’s something we demonstrate daily across our business. We believe we have to challenge building industry traditions through innovation in advanced materials and digital technologies in order to achieve a net zero emissions future. Kingspan’s products and systems therefore ensure longer lifetime energy and carbon savings.In the year ended 31 December 2019, the Group’s research and development expenditure amounted to €31.9m (2018: €30.5m) in addition to over €10 million of capital expenditure on IKON and our new fire research facility. Research and development expenditure is generally written off in the year in which it is incurred. During the year, we opened IKON, our new Global Innovation Centre in Kingscourt, further demonstrating our commitment to innovation. Kingspan’s continuing investment in research and development involves over 40 key projects. In 2019 we launched QuadCore™ Roof Board and continued to progress development on the following key projects: →PV solar-integrated PowerPanel® 2.0; →Fibre-free A1 classified AlphaCore® insulation; →QuadCore™ 2.0; →Kooltherm® 200 series; →Unitised facade solutions; →Digitalisation of the construction industry; and →Prismatic daylighting.Corporate GovernanceThe 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 (July 2018) is included in the Report of the Nomination and Governance Committee contained in this Annual Report. The Corporate Governance Statement is treated as forming part of this Annual Report. Code Of ConductKingspan 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.SustainabilityOur mission is to accelerate a net zero emissions future with the wellbeing of people and planet at its heart. We do this through enabling high-performance buildings that can save more energy, carbon and water. Aligned with our mission, we aim to make significant advances in the sustainability of both our business operations and our products. In 2011 we set ourselves an almost impossible challenge: by 2020, on an aggregated basis, we committed to matching 100% of our operational energy with renewable energy. Through this programme we have reduced our energy carbon intensity 6-fold, introduced solar PV to 22% of our wholly owned sites, and instigated significant on-site generation projects. As we reach the successful conclusion of our 10 year Net Zero Energy Programme in 2020, we are launching a new 10 year Planet Passionate Programme, setting ourselves challenging targets in the areas of energy, carbon, circularity and water. Learn more at www.kingspan.com under ‘Our Commitments’ and in the Sustainability Report contained in this Annual Report. Accounting RecordsThe directors are responsible for ensuring that accounting records, as outlined in Sections 281 to 285 of the Irish 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 2006Structure of the Company’s share capital At 31 December 2019, the Company had an authorised share capital comprised of 250,000,000 (2018: 250,000,000) ordinary shares of €0.13 each and the Company’s total issued share capital comprised 182,785,222 (2018: 182,171,120) Ordinary Shares, of which the Company held 1,907,826 (2018: 1,969,143) Ordinary Shares in treasury.KPIs FinancialBasic EPS growth204.6 cent (up 11%)See page 32Sales growth€4.7bn (up 7%)See page 32Trading margin10.7% (up 50 bps)See page 32Free cash flow€337.1m (up €28.7m)See page 33Return on capital employed17.3% (up 50 bps)See page 33Net debt/EBITDA1.1x (2018: 1.4x)See page 33KPIs Non-FinancialNet Zero Energy90% (up 15%)See page 49Health & Safety1.4 per 100k hours (down 7%)See page 52Gender balance19% female (up 1%)See page 52Waste recycling65% (down 3%)See page 51Shareholding analysis as at 31 December 2019:Shareholding rangeNumber of accounts% of totalNumber of shares held% of total1 - 10002,81657.281,182,8180.651,001 - 10,000 1,39828.444,557,6572.4910,001 - 100,00050110.1916,543,8329.05100,001 - 1,000,0001693.4449,453,08927.06Over 1,000,000320.65111,047,82660.754,916100182,785,222100Details of persons with a significant holding of securities in the Company are disclosed below:Notification DateShareholderShares held%23/01/20Eugene Murtagh 27,018,000 14.93%24/09/19Blackrock, Inc.12,090,7236.69%11/07/19Allianz Global Investors GmbH8,966,2844.96%16/11/18Bailie Gifford & Co.9,010,7405.00%07/08/19Ameriprise Financial Inc7,228,3554.00%16/01/20FMR LLC7,244,4934.00%Further information required by Regulation 21 of the above Regulations as at 31 December 2019 is set out in the Shareholder Information section of this Annual Report.Directors and SecretaryThe directors and secretary of the Company at the date of this report are as shown in this Annual Report on pages 58 and 59. Ms Helen Kirkpatrick retired as a non-executive director following conclusion of the AGM on 3 May 2019, and Ms Anne Heraty was appointed as a non-executive director with effect from 1 August 2019.Directors’ & Secretary’s Interests In SharesThe 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: 31-Dec-1931-Dec-18Eugene Murtagh27,018,00028,018,000Gene Murtagh1,079,2071,129,207Geoff Doherty251,495238,326Russell Shiels200,000300,000Peter Wilson389,376389,376Gilbert McCarthy255,576247,637Linda Hickey5,0005,000Michael Cawley30,60030,600John Cronin8,0008,000Bruce McLennan10,00010,000Jost Massenberg--Anne Heraty*--Lorcan Dowd2,9192,60329,250,17330,378,749* Appointed as a Director on 1 August 2019. Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report 9392—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 contained in this Annual Report. As at 21 February 2020, there have been no changes in the directors’ and secretary’s interests in shares since 31 December 2019.Conflicts Of InterestNone 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 InstrumentsIn 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 DonationsNeither 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 CompaniesThe Group operates from 159 manufacturing sites, and has operations in over 70 countries worldwide.The Company’s principal subsidiary undertakings at 31 December 2019, country of incorporation and nature of business are listed in the Principle Subsidiary Undertakings section of this Annual Report. The Company does not have any branches outside of Ireland. OutlookThe Board fully endorses the outlook “Looking Ahead” expressed in the Chief Executive’s Review in this Annual Report. Significant Events Since Year-endThere have been no significant events since the year-end. Going ConcernThe 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 the Group's 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 StatementIn accordance with Provision 31 of the 2018 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 2023.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 2023; →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 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 2019. 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 contained in this Annual Report, 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 StatementEach of the directors whose names and functions are set out in the Board section of this Annual Report confirm their responsibility for 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 Irish 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 Irish 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 27 of the 2018 UK Corporate Governance Code: →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 StatementThe 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 Irish 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; and3. 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 InformationEach 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. AuditorDuring 2019, the Board carried out an audit tender process, details of which are more particularly set out in the Report of the Audit Committee contained in this Annual Report. As a result of this process, the Company’s auditors, KPMG Chartered Accountants, will, in accordance with Section 383(2) of the Companies Act 2014, continue in office and will retire following the conclusion of the audit for the 2019 financial year, with the Board then appointing EY as Group external auditor with effect for the financial year ending 31 December 2020.On Behalf Of The BoardGene M. Murtagh, Chief Executive OfficerGeoff Doherty, Chief Financial Officer21 February 2020 Business & Strategic Report
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Kingspan Group plc — Annual Report & Financial Statements 2019Directors' Report —9594Using QuadCore™ allowed us to use a two-inch panel and go beyond code, without adding any additional insulation. We’ve used insulated panels before and we were confident that this would be fastest and most economical way to rebuild the hotel. Joseph Sorci, Principal Architect and President, Florida Architects Holiday InnPanama City, USABENCHMARK Designwall 2000 and Designwall 4000 featuring QuadCore™ technology.The Holiday Inn Panama City goes beyond code using a 2 inch QuadCore™ Panel. QuadCore(tm) reduced insulation thickness by approximately 50% versus traditional materials, adding over 3,000 sq ft of indoor space.QuadCore™ Panels are GREENGUARD Gold certified, and earn Material Health Silver certification. The Holiday Inn was the first major hotel to reopen in the area after the devastation of Hurricane Michael, having been completely rebuilt in just nine months. The BENCHMARK Designwall panels are finished in Granitstone, a Kingspan speciality finish that has the look of stucco masonry. Kingspan BENCHMARK insulated panels contain up to 90% recycled steel content. IHG Hotels and Resorts have an internal “Green Engage” system for driving sustainability. –Product@Energy/ Carbon Saving@Space/ Dimensions@Health & Wellbeing@Speed/ Ease of build@Aesthetics@Planet Passionate/ Sustainability@Awards/ Certifications@@@@@@@Click here to see more Business & Strategic Report
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—
FINANCIAL
STATEMENTS
Independent Auditor’s Report 98
Notes to the Financial Statements
Consolidated Income Statement 102
Consolidated Statement
of Comprehensive Income 102
Consolidated Statement of Financial Position 103
Consolidated Statement of Changes in Equity 104
Consolidated Statement of Cash Flows 106
Company Statement of Financial Position 107
Company Statement of Changes in Equity 108
Company Statement of Cash Flows 108
Statement of Accounting Policies 109
1
2 Segment Reporting 117
3 Employees 119
4 Finance Expense And Finance Income 120
5 Profit For The Year Before Income Tax 120
6 Directors’ Remuneration 121
Income Tax Expense 121
7
8 Earnings Per Share 122
9 Goodwill 123
10 Other Intangible Assets 124
11 Property, Plant and Equipment 125
Investments in Subsidiaries 126
12
13
Inventories 126
14 Trade and Other Receivables 126
15 Trade and Other Payables 127
16 Leases 127
17
Interest Bearing Loans
and Borrowings 128
18 Deferred Consideration 129
19 Financial Risk Management
and Financial Instruments 130
20 Provisions for Liabilities 139
21 Deferred Tax Assets and Liabilities 139
22 Business Combinations 140
23 Share Capital 142
24 Share Premium 142
25 Treasury Shares 142
26 Retained Earnings 143
27 Dividends 143
28 Non-Controlling Interest 143
29 Reconciliation of Net Cash Flow
to Movement in Net Debt 143
30 Guarantees and Other Financial Commitments 144
31 Pension Obligations 144
32 Related Party Transactions 147
33 Post Balance Sheet Events 147
34 Approval of Financial Statements 147
Other Information
Alternative Performance Measures 148
Shareholder Information 151
Principal Subsidiary Undertakings 153
5 Year Summary 156
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AustraliaMullum Mullum StadiumInsulated Panels: Rainscreen facade in Shingle and Evolution
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC
OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
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
We have audited the Group and
Company financial statements of
Kingspan Group plc (“the Company”)
for the year ended 31 December 2019,
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:
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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 2019
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 9
financial years ended 31 December 2019.
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.
2 Key audit matters: our
assessment of risks of
material misstatement
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.
We continue to perform procedures over
acquisition accounting. However, given
the number of significant acquisitions
has reduced we have not assessed this
as one of the most significant risks in our
current year audit and, therefore, it is not
separately identified in our report this year.
In arriving at our audit opinion above, the
key audit matters, in decreasing order of
audit significance, were as follows:
Group audit matters
Warranty provisions €109.7 million
(2018: €104.3 million)
Refer to page 85 (Report of the Audit
Committee), page 114 (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 is not
materially misstated.
Goodwill €1,506.9 million
(2018: €1,391.0 million)
Refer to page 85 (Report of the Audit
Committee), page 111 (accounting policy)
and Note 9 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.
The coverage we obtained was as follows:
Profit before tax
Revenue
Total assets
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.
Materiality for the Company financial
statements as a whole was set at €13.2m
(2018: €13.0m), determined with reference
to a benchmark of Company’s total assets
of which it represents 1% (2018: 1%).
Company audit matter
Investment in subsidiaries €1,201.4
million (2018: €1,191.0 million)
Refer to page 111 (accounting policy) and
Note 12 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
€22.3 million (2018: €19.5 million).
This has been calculated using a
benchmark of Group profit before
taxation (of which it represents 5%
(2018: 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.
We report to the Audit Committee all
corrected and uncorrected misstatements
we identified through our audit in excess
of €500,000 (2018: €500,000), 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 274 components, we
determined that there were:
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51 components ‘full scope
components’ where audits of the
financial information of those
components were performed;
15 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
208 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.
Full scope
components
%
78
70
82
Specific scope
components
%
12
16
13
Other
components
%
10
14
5
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Business & Strategic Report
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC
OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC
OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
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 €7,350,000. 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
21 full scope components and 6 specific
scope components. In respect of the other
30 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:
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participated in planning calls to
ensure that the audit instructions
were understood;
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 (Euronext Dublin and the
London Stock Exchange) set out on
page 92 is materially inconsistent with
our audit knowledge.
We have nothing to report in
these respects.
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 92 to 93): 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 90): if the directors’
statement does not properly disclose
a departure from provisions of the UK
Corporate Governance Code specified
by the Listing Rules of Euronext Dublin
and the London Stock Exchange 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 pages 62 to
67, that:
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, Business and Strategic
Report and the Other Information 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 directors’ report specified
for our review:
> we have not identified material
misstatements in the directors’ report
or other accompanying information;
>
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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:
>
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the directors’ statement of risk and
risk management on pages 36 to
39, concerning the disclosures of
principal risks, describing these risks
and explaining how they are being
managed and mitigated;
the directors’ confirmation within the
report of the Audit Committee on
page 82 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
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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 Euronext Dublin
and the London Stock Exchange require us
to review:
>
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the directors’ statement, set out on
page 92, in relation to going concern
and longer-term viability;
the part of the Corporate Governance
Statement on page 90 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 page 92 to 93, 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.
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
21 February 2020
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
Note
2019
€m
2018
€m
Note
2019
€m
2018
€m
REVENUE
Cost of sales
GROSS PROFIT
Operating costs, excluding intangible amortisation
TRADING PROFIT
Intangible amortisation
OPERATING PROFIT
Finance expense
Finance income
PROFIT FOR THE YEAR BEFORE INCOME TAX
Income tax expense
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
2
2
4
4
5
7
28
8
8
4,659.1
(3,304.3)
4,372.5
(3,158.0)
1,354.8
(857.7)
1,214.5
(769.3)
497.1
(21.9)
475.2
(23.7)
2.9
454.4
(76.6)
377.8
369.4
8.4
377.8
445.2
(22.2)
423.0
(19.5)
1.4
404.9
(69.1)
335.8
330.9
4.9
335.8
204.6c
184.0c
202.9c
182.3c
Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
21 February 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019
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 (losses)/gains on defined benefit pension schemes
Income taxes relating to actuarial (losses)/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
2019
€m
2018
€m
377.8
335.8
61.0
(0.2)
(0.2)
-
60.6
438.4
430.2
8.2
438.4
4.0
0.3
0.9
(0.2)
5.0
340.8
337.1
3.7
340.8
31
21
28
ASSETS
NON-CURRENT ASSETS
Goodwill
Other intangible assets
Financial asset
Property, plant and equipment
Right of use assets
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
Lease liabilities
Derivative financial instruments
Deferred consideration (including contingent consideration)
Interest bearing loans and borrowings
Current income tax liabilities
NON-CURRENT LIABILITIES
Retirement benefit obligations
Provisions for liabilities
Interest bearing loans and borrowings
Lease liabilities
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
9
10
11
16
19
31
21
13
14
19
15
20
16
19
18
17
31
20
17
16
21
18
23
24
25
28
1,506.9
93.2
8.2
965.2
121.6
27.3
9.2
14.1
2,745.7
557.6
794.2
-
190.9
1,542.7
4,288.4
768.9
58.0
25.6
0.1
-
3.1
72.9
928.6
24.3
51.7
848.3
96.7
31.9
186.5
1,239.4
2,168.0
2,120.4
23.8
95.6
0.7
(11.8)
(259.6)
2,221.6
2,070.3
50.1
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
TOTAL EQUITY
2,120.4
1,788.9
Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
21 February 2020
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
OPERATING ACTIVITIES
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
Movement of deferred consideration
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Other:
Change in provisions
Pension contributions
Cash generated from operations
Income tax paid
Interest paid
Net cash flow from operating activities
INVESTING ACTIVITIES
Additions to property, plant and equipment
Proceeds from disposals of property, plant and equipment
Purchase of subsidiary undertakings
Purchase of financial asset
Payment of deferred contingent consideration in respect of acquisitions
Interest received
Net cash flow from investing activities
FINANCING ACTIVITIES
Drawdown of loans
Repayment of loans and borrowings
Payment of lease liability
Proceeds from share issues
Repurchase of shares
Dividends paid to non-controlling interest
Dividends paid
Net cash flow from financing activities
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Effect of movement in exchange rates on cash held
Cash and cash equivalents at the beginning of the year
Note
2019
€m
2018
€m
377.8
335.8
7
5
10
11
4
4
5
31
22
18
29
29
16
25
28
27
29
76.6
114.5
21.9
0.2
13.1
(2.9)
23.7
(3.3)
(0.6)
5.8
57.3
(57.5)
1.7
(1.2)
627.1
(87.2)
(19.5)
520.4
(161.0)
6.7
(142.2)
-
(59.7)
2.8
(353.4)
7.8
(181.6)
(31.8)
0.1
(0.6)
(0.4)
(77.6)
(284.1)
(117.1)
13.5
294.5
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)
530.3
(75.0)
(17.0)
438.3
(144.2)
12.9
(461.0)
(8.2)
(3.1)
1.4
(602.2)
445.0
(92.7)
-
0.1
-
(0.1)
(68.3)
284.0
120.1
(2.2)
176.6
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
190.9
294.5
ASSETS
NON-CURRENT ASSETS
Investments in subsidiaries
CURRENT ASSETS
Amounts owed by group undertakings
Cash and cash equivalents
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Amounts owed to group undertakings
Payables
TOTAL LIABILITIES
NET ASSETS
EQUITY
Equity attributable to owners of Kingspan Group plc
Share capital
Share premium
Capital redemption reserve
Treasury shares
Retained earnings
TOTAL EQUITY
Note
2019
€m
2018
€m
12
14
15
15
23
24
25
26
1,201.4
1,191.0
128.7
0.1
112.7
0.1
1,330.2
1,303.8
61.3
0.2
61.5
-
0.2
0.2
1,268.7
1,303.6
23.8
95.6
0.7
(11.8)
1,160.4
23.7
95.6
0.7
(12.7)
1,196.3
1,268.7
1,303.6
F
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—
A
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Gene M. Murtagh
Chief Executive Officer
Geoff Doherty
Chief Financial Officer
21 February 2020
R
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
Share
Capital
Share
Premium
€m
€m
Capital
Redemption
Reserves
€m
Treasury
Shares
Retained
Earnings
Shareholders’
Equity
€m
€m
€m
Balance at 1 January 2019
23.7
95.6
0.7
(12.7)
1,196.3
1,303.6
Shares issued
Repurchase of shares
Employee share based compensation
Dividends paid
Transactions with owners
Profit for the year
0.1
-
-
-
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(0.6)
1.5
-
0.9
-
-
-
13.1
(77.6)
(64.5)
28.6
0.1
(0.6)
14.6
(77.6)
(63.5)
28.6
Balance at 31 December 2019
23.8
95.6
0.7
(11.8)
1,160.4
1,268.7
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018
Share
Capital
Share
Premium
€m
€m
Capital
Redemption
Reserves
€m
Treasury
Shares
Retained
Earnings
Shareholders’
Equity
€m
€m
€m
Balance at 1 January 2018
23.6
95.6
0.7
(14.0)
1,242.6
1,348.5
Shares issued
Repurchase of shares
Employee share based compensation
Dividends paid
Transactions with owners
Profit for the year
0.1
-
-
-
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.3
-
1.3
-
-
-
12.3
(68.3)
(56.0)
9.7
0.1
-
13.6
(68.3)
(54.6)
9.7
Balance at 31 December 2018
23.7
95.6
0.7
(12.7)
1,196.3
1,303.6
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
OPERATING ACTIVITIES
Profit for the year after tax
Net cash flow from operating activities
FINANCING ACTIVITIES
Change in receivables
Change in payables
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
2019
€m
28.6
28.6
(13.3)
61.3
(0.6)
1.5
0.1
(77.6)
(28.6)
0.1
-
0.1
2018
€m
9.7
9.7
57.2
-
-
1.3
0.1
(68.3)
(9.7)
0.1
-
0.1
1 STATEMENT OF ACCOUNTING POLICIES
General information
Kingspan Group plc is a public limited
company registered and domiciled in
Ireland. Its registered number is 70576 and
the address of its registered office is 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 153 to 155.
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 and presentation 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 148 to 150.
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 2019
IFRS 16 Leases
IFRS 16 is effective for accounting periods
beginning on or after 1 January 2019,
and the Group adopted IFRS 16 with
effect from 1 January 2019. 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 standard primarily affects the
accounting for the Group’s operating
leases. The application of IFRS 16 results in
the recognition of additional assets and
liabilities in the Consolidated Statement of
Financial Position and in the Consolidated
Income Statement it replaces 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 incremental borrowing rate is the rate
of interest that the lessee would expect to
incur on funds borrowed over a similar term
and security to obtain a comparable value
to the right of use asset in the relevant
economic environment. The Group’s
weighted average incremental borrowing
rate pertaining to these leases is 3%.
Definition of a lease
Previously, the Group determined
at contract inception whether an
arrangement was or contained a lease
under IFRIC 4 Determining Whether
an Arrangement contains a Lease. The
Group now assesses whether a contract
is or contains a lease based on the new
definition of a lease. Under IFRS 16, a
contract is, or contains a lease if the
contract conveys a right to control the use
of an identified asset for a period of time
in exchange for consideration.
On transition to IFRS 16, the Group
elected to apply the practical expedient
to grandfather the assessment of which
transactions are leases. It applied IFRS
16 only to contracts that were previously
identified as leases. Contracts that were
not identified as leases under IAS 17 and
IFRIC 4 were not reassessed. Therefore,
the definition of a lease under IFRS 16 has
been applied only to contracts entered
into or changed on or after 1 January 2019.
Transition
The Group adopted the new
standard by applying the modified
retrospective approach.
At transition, for leases classified as
operating leases under IAS 17, lease
liabilities were measured at the present
value of the remaining lease payments,
discounted at the applicable incremental
borrowing rate as at 1 January 2019. All
right of use assets were measured at the
amount of the lease liability on adoption,
adjusted by the amount of any prepaid or
accrued interest payments.
Previously under IAS 17 operating lease
rentals were charged to the Income
Statement on a straight-line basis over
the term of the lease.
The Group availed of the recognition
exemption for short-term and low-value
leases and used hindsight when determining
the lease term if the contract contains
options to extend or terminate the lease.
The Group also elected not to separate non-
lease components from lease components
and instead capitalise both the lease cost
and associated non-lease cost.
The Group has also availed of the practical
expedient which allows for a single discount
rate to be applied to a portfolio of leases
with reasonably similar characteristics.
The Group had a small number of finance
leases under IAS 17. For these leases, the
carrying amount of the asset and liability
at 1 January 2019 were recognised at the
equivalent carrying amount under IAS 17
immediately before that date.
On 1 January 2019 €127.9m of leases were
recognised as liabilities on adoption of the
standard and €128.8m capitalised as right
of use assets. During 2019, depreciation
on the right of use assets was €30.0m
and associated lease rentals decreased by
€31.8m leading to an increase in operating
profit of €1.8m. The interest charge on
the associated leases was €3.8m and the
aggregate impact of IFRS 16 on profit
before tax was a decrease of €2.0m. The
adoption of IFRS 16 reduced the 2019
EPS by 1 cent. While IFRS 16 had no net
impact on cash and cash equivalents at
the end of 2019, it had an impact on the
cashflow statement in respect of profit,
depreciation and finance expense by
amounts outlined above, offset by the
payment of lease liabilities of €31.8m.
Further details outlining the impact on the
financial statements on transition to IFRS
16 is outlined in note 16.
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Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Measurement
The Group recognises right of use assets
representing its right to use the underlying
assets and lease liabilities representing
its obligation to make lease payments
at the lease commencement date. The
right of use assets are initially measured
at cost, and subsequently measured at
cost less accumulated depreciation and
impairment losses.
Lease liabilities are measured at the
present value of the future lease
payments, discounted at the Group’s
incremental borrowing rate. Subsequent
to the initial measurement, the lease
liabilities are increased by the interest cost
and reduced by lease payments made.
The right of use assets and lease liabilities
are remeasured when there are changes
in the assessment of whether an
extension option is reasonably certain to
be exercised or a termination option is
reasonably certain not to be exercised or
where there is a change in future lease
payments as a result of a change in an
index or rate.
The Group has applied judgement to
determine the lease term of contracts
that include termination and extension
options. If the Group is reasonably certain
to exercise such options, the relevant
amount of right of use assets and lease
liabilities are recognised. The Group has
also applied judgement in determining the
incremental borrowing rate, the basis of
which is set out above.
IFRIC 23 Uncertainty over income
tax treatment
IFRIC 23 is effective for accounting periods
beginning on or after 1 January 2019, and
the Group adopted IFRIC 23 with effect
from 1 January 2019. IFRIC 23 sets out how
to determine taxable profits and losses, tax
bases, unused tax losses, unused tax credits
and tax rates when there is uncertainty
over income tax treatments under IAS 12
Income Taxes. Where the Group considers it
is probable that an uncertain tax treatment
will not be accepted by a tax authority it
is measured using either the most likely
amount method or the expected value
method, as appropriate. The adoption
and application of IFRIC 23 did not have a
material impact on the Group.
The new standards, amendments to standards and interpretations are as follows:
IFRS 16: Leases (13 January 2016)
IFRIC 23: Uncertainty over income tax treatment (7 June 2017)
Effective Date – periods
beginning on or after
1 January 2019
1 January 2019
The following amended standards and interpretations do not have a significant impact on the Group’s consolidated financial statements:
Effective Date – periods
beginning on or after
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2020
1 January 2020
Insulation Boards, Water & Energy,
Data & Flooring and Light & Air.
Revenue recognition
The Group uses the five-step model as
prescribed under IFRS 15 on the Group’s
revenue transactions. This includes
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.
Typically, individual performance
obligations are specifically called out in
the contract which allows for accurate
recognition of revenue as and when
performances are fulfilled.
Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards
Amendments to IAS 19: Plan amendment, curtailment or settlement
Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures
Amendments to IFRS 9: Prepayment Features with Negative Compensation
Amendments to References to Conceptual Framework in IFRS Standards.
Definition of Material (Amendments to IAS 1 and IAS 8)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
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
corporate assets, finance income and
expenses and tax assets and liabilities.
The Group has determined that it has five
operating segments: Insulated Panels,
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
and order backlogs
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.
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. Invoicing occurs at the
point of final delivery of the product or
performance obligation, at which point
a right is established for unconditional
consideration as control passes to the
customer. Typically, payment terms are 30
days from the end of the month in which
the invoice is raised.
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.
Business Combinations
Business combinations are accounted for
using the acquisition method as at the
date of acquisition.
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. Any
subsequent remeasurements required due
to changes in fair value of the put liability
estimation are recognised in the Put
Option 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:
>
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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.
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Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
Foreign currency
Transactions and balances
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 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,
which is recognised in the Statement of
Comprehensive Income.
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.
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
2019
2018
2019
2018
0.877
1.120
1.485
1.610
25.669
4.297
325.31
4.415
0.885
1.181
1.530
1.580
25.648
4.260
318.78
4.307
0.852
1.121
1.461
1.600
25.414
4.260
330.52
4.512
0.898
1.144
1.557
1.620
25.711
4.299
321.02
4.435
Foreign operations
> Work in progress and finished goods
Deferred tax
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:
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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 in the Statement of
Comprehensive Income and accumulated
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.
are carried at cost consisting of 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 from
prior years. Liabilities for uncertain tax
treatments are recognised in accordance
with IFRIC 23 and are measured using
either the most likely amount method or
the expected value method - whichever
better predicts the resolution of
the uncertainty.
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.
1 STATEMENT OF ACCOUNTING POLICIES (continued)
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.
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 initially recognised as deferred
income 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.
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
2% to 2.5% on cost
5% to 20% on cost
10% to 20% on cost
12.5% to 33% on cost
Motor vehicles
10% to 25% on cost
Freehold land is 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.
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 (Note 16)
Upon adoption of IFRS 16 the accounting
policy for the year ended 31 December
2019 is as follows:
The Group recognises right of use assets
representing its right to use the underlying
assets and lease liabilities representing
its obligation to make lease payments
at the lease commencement date. The
right of use assets are initially measured
at cost, and subsequently measured at
cost less accumulated depreciation and
impairment losses.
Depreciation is provided on a straight line
basis over the period of the lease, or useful
life if shorter.
Lease liabilities are measured at the
present value of the future lease
payments, discounted at the applicable
incremental borrowing rate. Subsequent
to the initial measurement, the lease
liabilities are increased by the interest cost
and reduced by lease payments made.
The right of use assets and lease
liabilities are remeasured when there are
changes in the assessment of whether
an extension option is reasonably
certain to be exercised or a termination
option is reasonably certain not to be
exercised or where there is a change in
future lease payments as a result of a
change in an index or rate. The Group
applies judgement when determining
the lease term where renewal and
termination options are contained in the
lease contract.
Prior to 1 January 2019 the policy was
as follows:
Leases are classified as finance leases
wherever substantially all of the risk 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.
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.
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Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
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 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:
i.
Fair value hedge: Hedges the exposure
to movements in fair value of
recognised assets or liabilities that are
attributable to hedged risks.
ii. 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.
iii. 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 Assets
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 Group applies the simplified approach
for expected credit losses (ECL) under
IFRS 9 Financial Instruments, which
requires expected lifetime losses to
be recognised from initial recognition
of receivables. Trade receivables are
considered for impairment on a case by
case basis, when they are past due or
when objective evidence is received that
a specific counterparty may default.
Trade receivables are written-off when
there is no reasonable expectation of
recovery. In the event recoveries are made,
these are recognised in the Consolidated
Income Statement.
Financial Liabilities
Financial liabilities held for trading are
measured at fair value through the profit
and loss, and all other financial liabilities
are measured at amortised cost unless
the fair value option is applied.
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,
fair value 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, 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 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
108 to 116, 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 following:
Impairment (Note 9)
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 9. This is
an area of estimation and judgement.
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.
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
1 STATEMENT OF ACCOUNTING POLICIES (continued)
2 SEGMENT REPORTING
Recoverability of trade receivables
(Note 14)
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 13)
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.
Leases (Note 16)
Income taxes (Note 7)
The Group has applied judgement to
determine the lease term of contracts
that include termination and extension
options. If the Group is reasonably certain
to exercise such options, the relevant
amount of right of use assets and lease
liabilities are recognised. The Group has
also applied judgement in determining the
incremental borrowing rates.
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. This is an area
of estimation and judgement.
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 uncertain tax
treatments where the group considers it
probable that uncertain tax treatments
will not be accepted by tax authorities
and the estimate is measured using either
the most likely amount method or the
expected value method as appropriate,
prescribed by IFRIC 23. 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.
This is an area of estimation.
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.
Operating segments
The Group has the following five operating segments:
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring
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
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Total
€m
Total revenue – 2019
Total revenue – 2018
Disaggregation of revenue 2019
Point of Time
Over Time & Contract
Disaggregation of revenue 2018
Point of Time
Over Time & Contract
3,031.9
2,823.1
3,025.2
6.7
3,031.9
2,816.8
6.3
2,823.1
876.9
864.1
834.4
42.5
876.9
831.8
32.3
864.1
327.7
291.8
202.3
125.4
327.7
190.4
101.4
291.8
208.1
202.9
207.4
0.7
208.1
201.6
1.3
202.9
214.5
190.6
4,659.1
4,372.5
186.1
28.4
214.5
166.2
24.4
190.6
4,455.4
203.7
4,659.1
4,206.8
165.7
4,372.5
The disaggregation of revenue by geography is set out in more detail on page 118.
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. Typically, individual performance obligations are specifically called out in the
contract which allow for accurate recognition of revenue as and when performances are fulfilled. Given the nature of the Group’s
product set, customer returns are not a significant feature of our business model. 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.
Segment result (profit before net finance expense)
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Trading profit – 2019
Intangible amortisation
316.1
(13.1)
117.1
(4.9)
Operating profit – 2019
303.0
112.2
Trading profit – 2018
Intangible amortisation
Operating profit - 2018
Net finance expense
Profit for the year before tax
Income tax expense
Net profit for the year
281.8
(12.2)
105.1
(4.4)
269.6
100.7
25.2
(2.9)
22.3
21.5
(4.4)
17.1
14.2
(0.9)
13.3
14.2
(1.2)
13.0
24.5
(0.1)
24.4
22.6
-
22.6
Total
2019
€m
497.1
(21.9)
475.2
(20.8)
454.4
(76.6)
377.8
Total
2018
€m
445.2
(22.2)
423.0
(18.1)
404.9
(69.1)
335.8
F
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
2 SEGMENT REPORTING (continued)
Segment assets
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Total
2019
€m
Total
2018
€m
Assets – 2019
Assets – 2018
2,495.9
2,231.7
832.2
782.2
348.0
331.2
191.8
180.3
188.2
166.3
4,056.1
Derivative financial instruments
Cash and cash equivalents
Deferred tax asset
27.3
190.9
14.1
3,691.7
27.6
294.5
15.6
Total assets as reported in the Consolidated Statement of Financial Position
4,288.4
4,029.4
Segment liabilities
Liabilities – 2019
Liabilities – 2018
Insulated
Panels
€m
Insulation
Boards
€m
(831.4)
(755.0)
(194.4)
(179.2)
Light
& Air
€m
(80.2)
(73.2)
Interest bearing loans and borrowings (current and non-current)
Derivative financial instruments (current and non-current)
Income tax liabilities (current and deferred)
Water &
Energy
€m
Data &
Flooring
€m
Total
2019
€m
Total
2018
€m
(64.2)
(58.2)
(41.5)
(35.1)
(1,211.7)
(851.4)
(0.1)
(104.8)
(1,100.7)
(1,020.2)
-
(119.6)
Total liabilities as reported in the Consolidated Statement of Financial Position
(2,168.0)
(2,240.5)
Other segment information
Insulated
Panels
€m
Insulation
Boards
€m
Light
& Air
€m
Water &
Energy
€m
Data &
Flooring
€m
Capital investment – 2019 *
Capital investment – 2018 *
Depreciation included in segment result – 2019
Depreciation included in segment result – 2018
Non-cash items included in segment result – 2019
Non-cash items included in segment result – 2018
135.7
160.8
(70.9)
(49.8)
(7.6)
(7.4)
36.8
87.9
(24.2)
(15.9)
(2.7)
(2.5)
11.8
22.7
(8.3)
(4.8)
(0.7)
(0.5)
4.5
7.1
(6.1)
(2.4)
(0.8)
(0.8)
4.0
2.8
(5.0)
(3.1)
(1.3)
(1.1)
Total
€m
192.8
281.3
(114.5)
(76.0)
(13.1)
(12.3)
* Capital investment also 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
€m
€m
Income Statement Items
Revenue – 2019
Revenue – 2018
Statement of Financial Position Items
Non-current assets – 2019 *
Non-current assets – 2018 *
Other segmental information
Capital investment – 2019
Capital investment – 2018
176.0
156.0
64.0
52.7
15.2
6.0
891.8
938.2
411.4
375.2
18.2
23.9
2,286.7
2,092.3
1,415.8
1,227.0
106.3
204.8
990.9
887.6
605.4
524.5
49.1
27.8
313.7
298.4
207.7
188.8
4.0
18.8
* Total non-current assets excluding derivative financial instruments and deferred tax assets.
Total
€m
4,659.1
4,372.5
2,704.3
2,368.2
192.8
281.3
2 SEGMENT REPORTING (continued)
The Group has a presence 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.
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 31)
Share based payments and awards
Actuarial losses/(gains) recognised in other comprehensive income
2019
Number
2018
Number
9,046
2,895
2,588
8,235
2,623
2,611
14,529
13,469
2019
€m
651.2
78.0
20.1
13.1
762.4
0.2
762.6
2018
€m
579.5
68.9
15.5
12.3
676.2
(0.9)
675.3
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
2019
2018
2,149,827
539,988
(76,361)
(10,781)
(649,562)
1,953,111
2,498,209
552,325
(65,266)
(6,636)
(828,805)
2,149,827
399,257
478,945
The Group recognised a PSP expense of €12.9m (2018: €11.7m) 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
€44.99 (2018: €38.96). The weighted average contractual life of share options outstanding at 31 December 2019 is 2.6 years (2018:
3.5 years). The weighted average exercise price during the period was €0.13 (2018: €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:
F
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Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
3 EMPLOYEES (continued)
5 PROFIT FOR THE YEAR BEFORE INCOME TAX (continued)
2019 Awards
2018 Awards
Analysis of total auditor’s remuneration for audit services
Share price at grant date
Exercise price per share
Expected volatility
Expected dividend yield
Risk-free rate
Expected life
€38.80
€0.13
30%
1.3%
(0.07%)
3 years
€35.55
€0.13
26%
1.2%
0.08%
3 years
Audit of Group (KPMG Ireland)
Audit of other subsidiaries (other KPMG offices)
The resulting weighted average fair value of options granted in the year was €29.67 (2018: €26.21).
Analysis of amounts paid to the auditor in respect of non-audit services
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 were 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.
Deferred Bonus Plan
As set out in the Report of the Remuneration Committee, the Deferred Bonus Plan (DBP) is intended to reward incremental
performance over and above the growth targeted by the annual performance related bonus. Any DBP bonus earned for such
incremental performance is 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, 15,718 (2018: Nil) were granted under the DBP and 49,924 (2018: 50,607) awards were exercised. 15,718 awards
remain outstanding at 31 December 2019. A charge of €0.2m was recognised in the Income Statement for 2019 (2018: €0.6m).
4 FINANCE EXPENSE AND FINANCE INCOME
Finance expense
Lease interest
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
Other interest
Finance income
Interest earned
Net finance cost
No costs were reclassified from other comprehensive income to profit during the year (2018: €nil).
5 PROFIT FOR THE YEAR BEFORE INCOME TAX
The profit before tax for the year is stated after charging /(crediting):
Distribution expenses
Product development costs (total, including payroll)
Depreciation
Amortisation of intangible assets
Foreign exchange net gains
Profit on sale of property, plant and equipment
2019
€m
3.8
0.1
2.4
17.2
2.6
(2.5)
0.1
23.7
(2.9)
20.8
2019
€m
224.6
31.9
114.5
21.9
0.7
(3.3)
2018
€m
-
0.3
2.7
16.7
(3.1)
2.5
0.4
19.5
(1.4)
18.1
2018
€m
202.1
30.5
76.0
22.2
(1.7)
(4.9)
2019
€m
0.8
1.8
2.6
2019
€m
0.1
0.8
0.9
2019
€m
0.6
6.3
0.8
7.7
3.2
10.9
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
Tax compliance and advisory services (KPMG Ireland)
Tax compliance and advisory services (other KPMG offices)
6 DIRECTORS’ REMUNERATION
Fees
Other emoluments
Pension costs
Performance Share Plan expense
A detailed analysis of directors’ remuneration is contained in the Report of the Remuneration Committee. Aggregate gains of €8.0m
(2018: €7.8m) were realised with respect to share options exercised by directors during the financial year.
7
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
2019
€m
2018
€m
83.2
(0.2)
83.0
(6.6)
0.2
(6.4)
76.6
72.2
(5.4)
66.8
1.5
0.8
2.3
69.1
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Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
7
INCOME TAX EXPENSE (continued)
9 GOODWILL
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
2019
€m
2018
€m
454.4
404.9
56.8
9.0
15.3
(1.5)
(3.0)
76.6
50.6
5.1
16.3
(0.8)
(2.1)
69.1
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 €29.7m (2018: €31.4m) consisting mainly of
tax losses forward. €1.3m 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 €10.9m (2018: €8.9m)
have not been recognised for withholding tax that would be payable on unremitted earnings of €219.6m (2018: €177.2m) in
certain subsidiaries.
8 EARNINGS PER SHARE
The calculations of earnings per share are based on the following:
Profit attributable to ordinary shareholders
2019
€m
2018
€m
369.4
330.9
Number of
shares (‘000)
2019
Number of
shares (‘000)
2018
Weighted average number of ordinary shares for the calculation of basic earnings per share
Dilutive effect of share options
Weighted average number of ordinary shares for the calculation of diluted earnings per share
180,586
1,489
182,075
179,840
1,696
181,536
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
2019
€ cent
204.6
202.9
215.0
213.2
2018
€ cent
184.0
182.3
193.5
191.7
Adjusted basic earnings reflects the profit attributable to ordinary shareholders after eliminating the impact of the Group’s
intangible amortisation charge, net of tax.
Adjusted diluted earnings reflects the profit attributable to ordinary shareholders after eliminating the impact of the Group’s
intangible amortisation charge, net of tax and the dilutive effect of share options. Dilution is attributable to the weighted average
number of share options outstanding at the end of the reporting period.
The number of options which are anti-dilutive and have therefore not been included in the above calculations is nil (2018: nil).
At 1 January
Additions relating to acquisitions (Note 22)
Net exchange movement
Carrying amount 31 December
At 31 December
Cost
Accumulated impairment losses
Carrying amount
2019
€m
1,391.0
92.5
23.4
2018
€m
1,095.7
296.8
(1.5)
1,506.9
1,391.0
1,574.6
(67.7)
1,458.7
(67.7)
1,506.9
1,391.0
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.
A total of 11 (2018: 11) 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.
Cash generating units
Insulated Panels
Insulation Boards
Light & Air
Water & Energy
Data & Flooring
Total
2019
6
1
1
1
2
11
2018
6
1
1
1
2
2019
918.3
235.7
178.0
83.8
91.1
Goodwill (€m)
2018
827.2
232.5
174.2
78.7
78.4
11
1,506.9
1,391.0
Significant goodwill amounts
Management has assessed that, in line with IAS 36 Impairment of Assets, there are 5 CGUs that are individually significant (greater
than 10% of total goodwill) that require additional disclosure and are as follows:
Panels
North America
Panels
Western Europe
Panels
Joris Ide
Insulation Boards
Light
& Air
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
Goodwill (€m)
Discount rate (%)
181.1
8.2
173.4
10.0
225.5
6.7
146.0
8.1
415.6
6.7
410.8
8.1
235.7
6.7
232.5
8.1
178.0
6.5
174.2
8.0
Excess*
722.0
335.7
1,976.4
1,655.1
576.2
489.5
1,812.1
854.0
279.1
132.8
* Excess of value-in-use over carrying amount (€m)
The goodwill allocated to these 5 CGUs accounts for 82% of the total carrying amount of €1,506.9m. The remaining goodwill balance
of €271.0m (2018: €400.1m) is allocated across the other 6 CGUs (2018: 7 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.
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Other Information
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Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
9 GOODWILL (continued)
11 PROPERTY, PLANT AND EQUIPMENT
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 6.5% to 10.2% (2018: 8.0% to 12.5%). 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.
Sensitivity analysis
Sensitivity analysis was performed by adjusting cash flows, the discount rate and the average operating margin of each division by
over 25% 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.
10 OTHER INTANGIBLE ASSETS
Cost
At 1 January 2019
Acquisitions (Note 22)
Net exchange difference
At 31 December 2019
Accumulated amortisation
At 1 January 2019
Charge for the year
Net exchange difference
At 31 December 2019
Net Book Value as at 31 December 2019
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
Customer
Relationships
€m
Patents &
Brands
€m
Other
Intangibles
€m
48.7
1.4
0.2
50.3
23.4
6.1
0.1
29.6
20.7
127.8
0.1
2.1
130.0
54.0
11.7
1.1
66.8
63.2
33.9
1.2
0.5
35.6
21.9
4.1
0.3
26.3
9.3
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
Total
€m
210.4
2.7
2.8
215.9
99.3
21.9
1.5
122.7
93.2
Total
€m
166.9
43.3
0.2
210.4
76.6
22.2
0.5
99.3
111.1
Other intangibles relate primarily to technological know how and order backlogs.
Land and
buildings
€m
Plant
machinery
and other
equipment
€m
Motor
vehicles
Total
€m
€m
As at 31 December 2019
Cost
Accumulated depreciation and impairment charges
634.1
(200.9)
1,386.2
(871.7)
42.8
(25.3)
2,063.1
(1,097.9)
Net carrying amount
433.2
514.5
17.5
965.2
At 1 January 2019, 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
401.0
12.4
29.9
(1.1)
(0.1)
(14.4)
(0.1)
5.6
436.2
13.1
125.2
(1.9)
(0.1)
(64.8)
(0.1)
6.9
13.3
-
9.5
(0.4)
0.2
(5.3)
-
0.2
850.5
25.5
164.6
(3.4)
-
(84.5)
(0.2)
12.7
At 31 December 2019, net carrying amount
433.2
514.5
17.5
965.2
Land and
buildings
€m
Plant
machinery
and other
equipment
€m
Motor
vehicles
Total
€m
€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)
Net carrying amount
401.0
436.2
13.3
850.5
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
Included within the cost of land and buildings and plant, machinery and other equipment are assets in the course of construction to
the value of €2.3m and €66.2m respectively (2018: €21.6m and €66.7m). These assets have not yet been depreciated.
The Group has no material investment properties and hence no property assets are held at fair value.
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Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
12 INVESTMENTS IN SUBSIDIARIES
15 TRADE AND OTHER PAYABLES
Company
At 1 January
Share options and awards
At 31 December
2019
€m
2018
€m
1,191.0
10.4
1,180.7
10.3
1,201.4
1,191.0
Current
Trade payables
Accruals
Deferred income
Income tax & social welfare
Value added tax
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. The carrying value of investments is reviewed at each
reporting date and there were no indicators of impairment.
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
13 INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
Inventory impairment allowance
At 31 December
2019
€m
433.2
20.3
169.6
(65.5)
2018
€m
415.1
19.6
149.2
(59.0)
557.6
524.9
A total of €2.7bn (2018: €2.6bn) of inventories was included in the Income Statement as an expense. This includes a net income
statement charge of €4.4m (2018: €2.6m) 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.
14 TRADE AND OTHER RECEIVABLES
Amounts falling due within one year:
Trade receivables, gross
Expected credit loss allowance
Trade receivables, net
Other receivables
Prepayments
2019
€m
770.3
(54.0)
716.3
45.1
32.8
794.2
2018
€m
791.5
(56.4)
735.1
32.1
31.4
798.6
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 €54.0m in 2019 (2018: €56.4m). This is presented in more detail
in Note 19.
Company
Amounts falling due within one year:
Amounts owed by group undertakings
The amounts due from group undertakings are unsecured, interest free and are repayable on demand.
2019
€m
2018
€m
128.7
128.7
112.7
112.7
Company
Current
Amounts owed to group undertakings
Payables
The amounts due to group undertakings are unsecured, interest free and are repayable on demand.
16 LEASES
A new accounting standard, IFRS 16 Leases, was adopted with effect from 1 January 2019. The standard requires leases which were
previously treated as operating leases to be recognised as a lease liability with the associated asset capitalised and treated as a right
of use asset. On 1 January 2019 €127.9m of leases were recognised as liabilities on adoption of the standard and €128.8m capitalised
as right of use assets. During 2019 depreciation on the right of use assets was €30.0m and associated lease rental charge decreased
by €31.8m leading to an increase in operating profit of €1.8m. The interest charge on the associated leases was €3.8m and the
aggregate impact of IFRS 16 on profit before tax was a decrease of €2.0m.
Right of use asset
At 1 January 2019
Additions
Arising on acquisitions
Remeasurement
Terminations
Depreciation charge for the year
Effect of movement in exchange rates
At 31 December 2019
Land and
buildings
€m
102.1
4.8
6.0
2.6
(1.6)
(17.4)
2.0
98.5
Plant,
machinery
and other
equipment
€m
12.7
1.1
0.2
-
(0.1)
(4.8)
0.1
9.2
Motor
vehicles
€m
14.0
8.2
0.1
-
(0.8)
(7.8)
0.2
Total
2019
€m
128.8
14.1
6.3
2.6
(2.5)
(30.0)
2.3
13.9
121.6
2019
€m
404.9
316.3
6.4
29.6
11.7
768.9
2019
€m
61.3
0.2
61.5
2018
€m
397.5
341.1
7.0
19.9
14.3
779.8
2018
€m
-
0.2
0.2
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Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
16 LEASES (continued)
Lease liability
At 1 January 2019
Additions
Arising on acquisitions
Remeasurement
Terminations
Payments
Interest
Effect of movement in exchange rates
At 31 December 2019
Split as follows:
Current liability
Non-current liability
At 31 December 2019
Reconciliation of IAS 17 operating lease commitments and IFRS 16 lease liability
Operating lease commitment at 31 December 2018 as disclosed in the Group’s Annual Report
Impact of discounting
Recognition exemption for short term and low value assets
Adjustments as a result of alignment of extension and termination options with accounting policies
Lease liabilities recognised at 1 January 2019
The €0.9m difference between the opening right of use asset and lease liability relates to lease prepayments.
17 INTEREST BEARING LOANS AND BORROWINGS
Current financial liabilities
Bank loans
Lease obligations per banking covenants
Non-current financial liabilities
Private placements
Bank loans (unsecured)
Lease obligations per banking covenants
2019
€m
127.9
14.0
6.2
2.5
(2.5)
(31.8)
3.8
2.2
122.3
25.6
96.7
122.3
2019
€m
151.5
(19.9)
(1.0)
(2.7)
127.9
2018
€m
52.8
0.4
53.2
2018
€m
835.9
127.3
3.8
967.0
2019
€m
2.8
0.3
3.1
2019
€m
840.9
5.1
2.3
848.3
17 INTEREST BEARING LOANS AND BORROWINGS (continued)
Analysis of Net Debt
Cash and cash equivalents
Derivative financial instruments
Current borrowings
Non-current borrowings
Deferred consideration
Total Net Debt
2019
€m
190.9
27.3
(3.1)
(848.3)
-
2018
€m
294.5
27.4
(53.2)
(967.0)
(30.0)
(633.2)
(728.3)
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 4.5 years.
The Group also has two revolving credit facilities. The €300m facility matures in June 2022 and the €451m facility also matures in
June 2022. No amount was drawn on either of the facilities as at 31 December 2019. The Group had no committed bilateral bank
facilities at year end, however, a green loan of €50m had been agreed but was undrawn.
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 €nil (2018: €0.2m) and foreign currency derivative liabilities of €0.1m (2018: €nil) which are
used for transactional hedging are not included in the definition of net debt. Lease liabilities recognised due to the implementation of
IFRS 16 and deferred contingent consideration have also been excluded from the calculation of net debt.
18 DEFERRED CONSIDERATION
At 1 January
Deferred consideration arising on acquisitions (note 22)
Deferred contingent consideration arising on acquisitions (note 22)
Movement in deferred contingent consideration arising from fair value adjustment
Put liability arising on current year acquisitions (note 22)
Movement in put liability arising from fair value adjustment
Amounts paid
Effect of movement in exchange rates
At 31 December
Split as follows:
Current liabilities
Non-current liabilities
Analysed as follows:
Deferred consideration
Deferred contingent consideration
Put liability
2019
€m
196.1
-
2.0
(0.5)
26.7
22.7
(59.7)
(0.8)
2018
€m
117.5
30.0
1.4
1.1
24.5
35.4
(3.1)
(10.7)
186.5
196.1
-
186.5
186.5
-
11.3
175.2
186.5
59.5
136.6
196.1
30.0
38.9
127.2
196.1
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Business & Strategic Report
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Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
18 DEFERRED CONSIDERATION (continued)
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.
During the year the Group paid €30m of deferred consideration relating to the Synthesia business which was acquired in 2018 (2018:
€nil). In addition, the Group paid €29.7m of deferred contingent consideration relating to the Isoeste business which was acquired in
2017 (2018: €nil).
During the prior year the Group paid €3.1m of deferred contingent consideration relating to the PAL business which was acquired
in 2014.
The deferred contingent consideration arising on current year acquisitions relates to Group Bacacier SAS.
The put liability arising on current year acquisitions is recognised with respect to the potential amounts payable to the 15%
shareholders of Group Bacacier SAS.
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 €nil to €11.3m could arise with respect to potential deferred contingent consideration obligations and €nil to
€182.1m with respect to potential put option obligations.
The put option in the shareholders’ agreement with non-controlling shareholders of Isoeste is exercisable from 2023. The
undiscounted expected cash outflow is estimated to be €118.6m (2018: €96m).
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 €9.1m (2018: €12.2m).
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 €26.8m (2018: €25.8m).
There are two put options in the shareholders’ agreement with non-controlling shareholders of Group Bacacier SAS. The first option
relating to 10% of shares is exercisable from 2021 and the related undiscounted expected cash flow is estimated to be €17.1m. The
second option for the remaining 5% of shares is exercisable from 2022 and the related undiscounted expected cash outflow is
estimated to be €10.5m.
For the purposes of the fair value assessments all of the put option liabilities are valued using the option price formula in the
shareholders’ agreement and the most recent financial projections. These are classified as unobservable inputs.
In the case of Isoeste, PanelMET, Kingspan Jindal and Group Bacacier SAS call options rest over the remaining shareholding held by
non-controlling interests, which are exercisable by the Group in a very limited range of circumstances. No value has been attributed
to these call options.
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 usage 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 and 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 €840.9m. The notes have a weighted
average maturity of 4.5 years.
The primary bank debt facility is a €451m revolving credit facility, which was undrawn at year end and which matures in June 2022. In
June 2019 an additional 3 year bank facility of €300m was arranged, which was undrawn at year end. Subsequent to the year end the
Group arranged a bilateral ‘Green Loan’ of €50m to fund the Group’s Planet Passionate initiatives.
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 2019.
The Group also has in place a number of uncommitted bilateral working capital facilities to serve its working capital requirements.
These facilities total €43m (2018: €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.
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
The following are the carrying amounts and contractual maturities of financial liabilities (including estimated interest payments):
Non derivative financial instruments
Bank loans
Private placement loan notes
Lease obligations per banking covenants
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
Carrying
amount
2019
€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
7.9
840.9
2.6
122.3
762.5
-
186.5
7.9
919.0
2.6
148.0
762.5
-
193.4
2.8
20.4
0.3
30.2
762.5
-
-
2.5
237.3
0.1
24.6
-
-
28.4
2.5
329.7
-
43.3
-
-
155.9
0.1
331.6
2.2
49.9
-
-
9.1
(0.7)
-
-
0.8
-
0.4
-
0.4
(26.6)
-
-
-
0.1
-
-
-
93.4
127.1
-
-
7.2
7.0
-
(0.2)
6.0
-
-
7.2
7.0
-
93.6
121.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Carrying
amount
2018
€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
Lease obligations per banking covenants
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
180.1
835.9
4.2
-
772.8
30.0
166.1
(0.3)
-
Cross currency interest rate swaps used for hedging:
Carrying value
- outflow
- inflow
(27.1)
-
-
Foreign exchange forwards used for hedging:
Carrying value assets
Carrying value liabilities
- outflow
- inflow
(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
-
-
-
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0.6
533.4
2.1
-
-
-
12.2
-
-
-
-
-
-
-
-
-
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.
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Other Information
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Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
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 USD,
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 2020, it is estimated that the Group is long GBP£61m (2018:
long GBP£110m) and short US$25m (2018: short US$35m). At 31 December 2019 these amounts were unhedged.
Translation risk
This exists due to the fact that the Group has operations whose functional currency is not the 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 2019, the impact of changing currency rates versus Euro compared to the average 2018
rates was positive €61.0m (2018: positive €4.0m). The key drivers of the change year on year are the movements in GBP and USD. 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 USD in respect of transaction risk in the reporting entities functional currency would
impact reported after tax profit by €4.9m (2018: €14.5m) and equity by €4.9m (2018: €14.3m).
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 2019.
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.
Before the impact of hedging transactions
As at 31 December 2019
Weighted average
effective interest rate
Bank loans
Loan notes
2.0%
2.4%
EUR
USD
Other
After the impact of hedging transactions
As at 31 December 2019
Weighted average
effective interest rate
Bank loans
Loan notes
2.0%
2.1%
EUR
GBP
USD
Other
Total
€m
7.9
840.9
848.8
Total
€m
666.3
178.3
4.2
848.8
Total
€m
7.9
840.9
848.8
Total
€m
691.3
105.1
48.2
4.2
848.8
At fixed
interest rate
€m
At floating
interest rate
€m
Under 5
years
€m
Over
5 years
€m
7.9
840.9
848.8
-
-
-
7.8
522.4
0.1
318.5
530.2
318.6
At fixed
interest rate
€m
At floating
interest rate
€m
666.3
178.3
4.2
848.8
-
-
-
-
At fixed
interest rate
€m
At floating
interest rate
€m
Under 5
years
€m
Over
5 years
€m
7.9
699.4
707.3
-
141.5
7.8
522.4
0.1
318.5
141.5
530.2
318.6
At fixed
interest rate
€m
At floating
interest rate
€m
691.3
-
11.8
4.2
707.3
-
105.1
36.4
-
141.5
The weighted average maturity of debt is 4.5 years as at 31 December 2019 (2018: 5.0 years).
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Financial Statements
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Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (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
Weighted average
effective interest rate
Bank loans
Loan notes
0.9%
2.4%
Total
€m
180.1
837.3
At fixed
interest rate
€m
At floating
interest rate
€m
Under 5
years
€m
Over
5 years
€m
At 31 December, the exposure to credit risk for trade receivables by geographic region was as follows:
180.1
837.3
1,017.4
1,017.4
-
-
-
179.5
325.8
0.6
511.5
505.3
512.1
Rest of Europe
ROI & UK
Americas
Others
Total
€m
At fixed interest
rate
€m
At floating
interest rate
€m
At 31 December, the exposure to credit risk for trade receivables by customer type was as follows:
838.8
174.8
3.8
1,017.4
-
-
-
Insulated Panels customers
Insulation Boards customers
Other
2019
€m
322.9
236.9
149.8
60.7
770.3
2019
€m
493.6
151.8
124.9
770.3
2018
€m
340.8
244.8
152.7
53.2
791.5
2018
€m
496.4
153.2
141.9
791.5
EUR
USD
Other
After the impact of hedging transactions
As at 31 December 2018
Weighted average
effective interest rate
Bank loans
Loan notes
0.9%
2.1%
838.8
174.8
3.8
1,017.4
Total
€m
180.1
835.9
1,016.0
At fixed
interest rate
€m
At floating
interest rate
€m
Under 5
years
€m
Over
5 years
€m
180.1
698.7
878.8
-
137.2
179.5
324.4
0.6
511.5
137.2
503.9
512.1
EUR
GBP
USD
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
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 (2018: €1.4m) and equity by €1.4m (2018: €1.4m).
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:
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.
The following table provides the information about the exposure to credit risk and ECL’s for trade receivables as at 31 December 2019.
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%
6%
16%
69%
512.4
146.4
41.0
12.2
58.3
770.3
Loss
allowance
€m
5.7
3.4
2.6
1.9
40.4
54.0
The following table provides the information about the exposure to credit risk and ECL’s for trade receivables as at 31 December 2018.
Cash & cash equivalents
Trade receivables
Derivative financial assets
Financial asset
2019
€m
190.9
770.3
27.3
8.2
2018
€m
294.5
791.5
27.6
8.2
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
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.
Loss rates are based on actual credit loss experience over an appropriate diverse sample of trading periods. Trade receivables are
written off when there is no reasonable expectation of recovery.
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
F
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
Movements in the allowance for impairment in respect of trade receivables
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
The carrying amounts of financial liabilities presented in the Statement of Financial Position relate to the following measurement
categories as defined in IFRS 9:
Balance at 1 January
Arising on acquisition
Written off during the year
Net remeasurement of loss allowance
Effect of movement in exchange rates
At 31 December
2019
€m
56.4
1.1
(7.3)
2.9
0.9
54.0
2018
€m
51.1
10.8
(9.5)
4.3
(0.3)
56.4
There are no material trade receivables written off during 2019 (2018: €nil) which are still subject to enforcement activity.
The decrease in the expected credit loss allowance during 2019 reflects the reduction in the gross carrying amount of trade receivables.
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 9 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:
2019
Current:
Trade receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Non Current:
Derivative financial instruments
Financial asset
2018
Current:
Trade receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Non Current:
Derivative financial instruments
Financial asset
Financial
asset
Loans and
receivables
€m
€m
Derivatives
designated
as hedging
instruments
€m
-
-
-
-
-
-
8.2
8.2
716.3
45.1
190.9
-
952.3
-
-
-
-
-
-
-
-
27.3
-
27.3
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
Total
€m
716.3
45.1
190.9
-
952.3
27.3
8.2
35.5
Total
€m
735.1
32.1
294.5
0.2
1,061.9
27.4
8.2
35.6
It is considered that the carrying amounts of the above financial assets approximate their fair values.
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
-
-
-
-
-
-
-
-
36.3
-
-
36.3
-
-
-
-
-
-
-
35.2
-
-
35.2
-
-
-
-
-
-
-
-
-
-
186.5
186.5
-
-
-
-
30.0
29.5
59.5
-
-
136.6
136.6
3.1
25.6
404.9
316.3
-
-
-
749.9
812.0
96.7
-
908.7
53.2
-
397.5
341.1
-
-
791.8
931.8
-
-
931.8
-
-
-
-
0.1
-
-
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
€m
3.1
25.6
404.9
316.3
0.1
-
-
750.0
848.3
96.7
186.5
1,131.5
53.2
-
397.5
341.1
30.0
29.5
851.3
967.0
-
136.6
1,103.6
2019
Current:
Borrowings
Leases liabilities
Trade payables
Accruals
Derivative financial instruments
Deferred consideration
Deferred contingent consideration
Non current:
Borrowings
Lease liabilities
Deferred contingent consideration
2018
Current:
Borrowings
Lease liabilities
Trade payables
Accruals
Deferred consideration
Deferred contingent consideration
Non current:
Borrowings
Lease liabilities
Deferred contingent consideration
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.
As at 31 December 2019
Level 1
€m
Level 2
€m
Level 3
€m
As at 31 December 2018
Level 1
€m
Level 2
€m
Level 3
€m
Financial Assets
Interest rate swaps
Foreign exchange contracts for hedging
Financial Liabilities
Deferred contingent consideration
Deferred consideration
Put option
Foreign exchange contracts for hedging
-
-
-
-
-
-
27.3
-
-
-
-
0.1
-
-
-
-
27.4
0.2
-
-
11.3
-
175.2
-
-
30.0
-
-
-
-
-
-
38.9
-
127.2
-
F
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued)
20 PROVISIONS FOR LIABILITIES
The principal movements in Level 3 liabilities in 2019 are set out in the table below:
Deferred contingent consideration
Put option liabilities
Balance
01 Jan
2019
€m
38.9
127.2
166.1
Settlement
Fair value
movement
Arising on
acquisition
Translation
adjustment
€m
€m
(29.7)
-
(29.7)
(0.5)
22.7
22.2
€m
2.0
26.7
28.7
€m
0.6
(1.4)
(0.8)
The principal movements in Level 3 liabilities in 2018 are set out in the table below:
Deferred contingent consideration
Put option liabilities
Balance
1 Jan
2018
€m
43.0
74.5
117.5
Settlement
Fair value
movement
Arising on
acquisition
Translation
adjustment
€m
(3.1)
-
(3.1)
€m
1.1
35.4
36.5
€m
1.4
24.5
25.9
€m
(3.5)
(7.2)
(10.7)
Balance
31 Dec
2019
€m
11.3
175.2
186.5
Balance
31 Dec
2018
€m
38.9
127.2
166.1
During the year ended 31 December 2019, the put liabilities were reassessed based on the most recently available financial
information. 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.
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.
As at 31 December 2019
As at 31 December 2018
Carrying
amount
€m
Fair
Value
€m
Carrying
amount
€m
Fair
Value
€m
Level
Private placement loan notes
840.9
902.3
2
835.9
889.0
Level
2
Capital Management Policies and Procedures
The Group employs a combination of debt and equity to fund its operations. As at 31 December the total capital employed in the
Group was as follows:
Net Debt
Equity
Total Capital Employed
2019
€m
633.2
2,120.4
2018
€m
728.3
1,788.9
2,753.6
2,517.2
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 20% 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.
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
2019
€m
104.3
1.8
54.4
(29.5)
(23.3)
2.0
109.7
58.0
51.7
109.7
2018
€m
101.0
9.4
38.2
(27.4)
(16.7)
(0.2)
104.3
47.5
56.8
104.3
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.
21 DEFERRED TAX ASSETS AND LIABILITIES
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
2019
€m
14.1
(31.9)
(17.8)
2018
€m
15.6
(40.8)
(25.2)
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 2019 is as follows:
Balance
1 Jan
2019
Recognised
in profit
or loss
Recognised
in equity
€m
€m
€m
Recognised
in other
comprehensive
income
€m
Translation
adjustment
Arising on
acquisitions
Balance
31 Dec
2019
€m
€m
€m
Property, plant and
equipment
Intangibles
Other temporary differences
Pension obligations
Unused tax losses
(45.8)
(29.4)
40.8
0.8
8.4
(25.2)
5.0
3.0
(0.2)
0.3
(1.7)
6.4
-
-
1.7
-
-
1.7
-
-
-
-
-
-
(0.6)
(0.2)
0.1
(0.1)
0.3
(0.5)
-
(0.2)
0.1
(0.1)
-
(0.2)
(41.4)
(26.8)
42.5
0.9
7.0
(17.8)
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Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
21 DEFERRED TAX ASSETS AND LIABILITIES (continued)
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
€m
(40.6)
(24.9)
35.8
0.9
6.6
(22.2)
€m
(4.2)
6.1
(5.9)
-
1.8
(2.2)
€m
-
-
0.9
-
-
0.9
Recognised
in other
comprehensive
income
€m
-
-
-
(0.2)
-
(0.2)
Translation
adjustment
Arising on
acquisitions
Balance
31 Dec
2018
€m
-
(0.1)
0.5
0.1
-
0.5
€m
€m
(1.0)
(10.5)
9.5
-
-
(2.0)
(45.8)
(29.4)
40.8
0.8
8.4
(25.2)
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 November 2019, the Group acquired 85% of the share capital of Group Bacacier SAS a French integrated profiling and insulated
panel distributor. The total consideration, including debt acquired amounted to €122.0m, representing the maximum amount of
identifiable consideration, comprising of €120.0m paid in cash on completion and €2.0m in deferred contingent consideration.
Put options are also in place over the remaining 15% of the business, the details of which are set out in note 18.
The Group also made a number of smaller acquisitions during the year for a combined cash consideration of €22.2m:
>
>
>
the purchase of 100% of the share capital of WeGo Floortec GmbH, a German manufacturer of access floors;
the purchase of 100% of the share capital of Epur SA, a French water treatment business; and
the purchase of the assets of SkyCo, a US Light & Air 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 (including Right of Use assets)
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current liabilities
Trade and other payables
Provisions for liabilities
Non-current liabilities
Trade and other payables
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
Bacacier
€m
Other*
€m
1.9
25.2
-
29.2
33.7
(36.6)
(0.3)
(3.6)
-
49.5
(3.7)
76.2
122.0
120.0
2.0
122.0
0.8
6.6
-
2.1
5.8
(6.3)
(1.5)
(1.4)
(0.2)
5.9
-
16.3
22.2
22.2
-
22.2
Total
€m
2.7
31.8
-
31.3
39.5
(42.9)
(1.8)
(5.0)
(0.2)
55.4
(3.7)
92.5
144.2
142.2
2.0
144.2
*Included in Other are certain immaterial remeasurements of prior year accounting estimates.
22 BUSINESS COMBINATIONS (continued)
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 2019, the businesses acquired during the current year contributed revenue of €38.7m
and trading profit of €2.0m 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 €4,834.9m and
€509.5m respectively.
The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to €40.6m. The fair
value of these receivables is €39.5m, all of which is recoverable, and is inclusive of an aggregate impairment provision of €1.1m.
There is €2.7m of goodwill (2018: €nil) which is expected to be deductible for tax purposes.
The Group incurred acquisition related costs of €2.4m (2018: €3.3m) relating to external legal fees and due diligence costs. These
costs have been included in operating costs in the Consolidated Income Statement.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of Group
Bacacier SAS due to the relative size of the acquisition and the timing of the transaction. Any amendments to these fair values within
the twelve-month timeframe from the date of acquisition will be disclosable in the 2020 Annual Report, as stipulated by IFRS 3.
Prior year acquisitions
In the prior year, the Group acquired 100% of the share capital of Synthesia Group (“Synthesia”), 100% of the share capital of Balex
Metal sp. z.o.o. (“Balex”), 100% of the share capital of Vestfold Plastindustri AS and Vestfold Plastindustri Eiendom AS, 51% of the
share capital of Jindal Mectec Private Limited, the assets of H2Enviro, an Australian water tanks business and two smaller bolt-on
European businesses.
The fair values as recognised at 31 December 2018 of the acquired assets and liabilities at acquisition are set out below:
Synthesia
€m
Balex
€m
Other
€m
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
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
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
Total
€m
43.3
93.7
6.8
83.9
92.7
3.9
8.6
2.8
4.8
4.2
(28.5)
(2.9)
(111.5)
(9.4)
-
0.9
(6.2)
4.9
52.7
51.4
50.0
1.4
51.4
-
(8.8)
190.7
4.9
296.8
492.4
461.0
31.4
492.4
In the post-acquisition period to 31 December 2018, the acquired businesses 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.
The Group incurred acquisition related costs of €3.3m (2018: €3.6m) relating to external legal fees and due diligence costs. These
costs have been included in operating costs in the Income Statement.
F
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
23 SHARE CAPITAL
26 RETAINED EARNINGS
2019
€m
2018
€m
32.5
32.5
23.7
0.1
23.8
2019
€m
95.6
95.6
23.6
0.1
23.7
2018
€m
95.6
95.6
Authorised
250,000,000 Ordinary shares of €0.13 each
(2018: 250,000,000 Ordinary shares of €0.13 each)
Issued and fully paid
Ordinary shares of €0.13 each
Opening balance – 182,171,120 (2018: 181,342,315) shares
Shares allotted – 614,102 (2018: 828,805) shares
Closing balance – 182,785,222 (2018: 182,171,120) shares
There were no adjustments to the authorised share capital during the year (2018: nil).
Details of share options exercised are set out in Note 3 to the financial statements.
24 SHARE PREMIUM
At 1 January
At 31 December
25 TREASURY SHARES
Consideration paid
At 1 January
Repurchase of shares
Shares issued
At 31 December
Nominal value
2019
No. of
shares
Consideration
paid
€
1,969,143
15,718
(77,035)
6.40
40.50
(18.63)
Total
€m
12.7
0.6
(1.5)
2018
No. of
shares
Consideration
paid
€
2,019,750
-
(50,607)
6.89
-
25.10
Total
€m
14.0
-
(1.3)
1,907,826
6.21
11.8
1,969,143
6.40
12.7
2019
2018
No. of
shares
Nominal
value
€
Total
€
No. of
shares
Nominal
value
€
Total
€
At 1 January
Repurchase of shares
Shares issued
1,969,143
15,718
(77,035)
0.13 255,988
2,043
0.13
(10,015)
0.13
2,019,750
-
(50,607)
0.13
-
0.13
262,567
-
(6,579)
At 31 December
1,907,826
0.13 248,016
1,969,143
0.13
255,988
During the year, the Company issued 77,035 treasury shares in satisfaction of obligations falling under share schemes.
The Company holds 1.0% (2018: 1.1%) of the issued ordinary share capital as treasury shares.
In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual
Income Statement to the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s profit for the
financial year was €28.6m (2018: €9.7m).
27 DIVIDENDS
Equity dividends on ordinary shares:
2019 Interim dividend 13.0 cent (2018: 12.0 cent) per share
2018 Final dividend 30.0 cent (2017: 26.0 cent) per share
Proposed for approval at AGM
Final dividend of 33.5 cent (2018: 30.0 cent) per share
2019
€m
23.6
54.0
77.6
60.6
2018
€m
21.7
46.6
68.3
54.1
This proposed dividend for 2019 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 2019 in accordance with IAS 10 Events after the
Reporting Period. The proposed final dividend for the year ended 31 December 2019 will be payable on 7 May 2020 to shareholders on
the Register of Members at close of business on 27 March 2020.
28 NON-CONTROLLING INTEREST
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
2019
€m
38.6
8.4
3.7
(0.4)
(0.2)
50.1
2018
€m
39.9
4.9
(4.9)
(0.1)
(1.2)
38.6
During the current year, the Group acquired 85% of the ordinary share capital of Group Bacacier SAS, a French Insulated Panels
business. As part of the acquisition, the Group recognised the 15% non-controlling interest of €3.7m.
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 and borrowings
Decrease /(increase) in deferred consideration
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
Lease liabilities of €122.3m are excluded from net debt.
2019
€m
(117.1)
(7.8)
181.6
30.0
86.7
(5.0)
13.5
(0.1)
95.1
2018
€m
120.1
(445.0)
92.7
(30.0)
(262.2)
(5.5)
(1.9)
5.2
(264.4)
(728.3)
(463.9)
(633.2)
(728.3)
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Business & Strategic Report
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Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
29 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (continued)
31 PENSION OBLIGATIONS (continued)
Balance
31 Dec
2019
€m
10.5
840.9
(27.3)
-
824.1
Balance
31 Dec
2018
€m
184.3
835.9
(27.4)
30.0
A reconciliation of liabilities arising from financing activities is set out below.
Balance
1 Jan
2019
€m
184.3
835.9
(27.4)
30.0
Bank loans and borrowings
Loan notes
Derivatives
Deferred Consideration
Repayments
Deferred
Consideration
Drawdowns /
Receipts
Non cash
movements
€m
€m
(181.6)
-
-
-
-
-
-
(30.0)
(30.0)
€m
7.8
-
-
-
7.8
€m
-
5.0
0.1
-
5.1
1,022.8
(181.6)
A reconciliation of liabilities arising from financing activities in 2018 is set out below.
Bank loans and borrowings
Loan notes
Derivatives
Deferred Consideration
Balance
1 Jan
2018
€m
7.3
655.4
(22.2)
-
640.5
Repayments
Deferred
Consideration
Drawdowns /
Receipts
Non cash
movements
€m
(92.7)
-
-
-
(92.7)
€m
-
-
-
30.0
30.0
€m
270.0
175.0
-
-
445.0
€m
(0.3)
5.5
(5.2)
-
-
1,022.8
30 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 and undrawn banking facilities of €751m.
(ii) Future capital expenditure
Capital expenditure in subsidiary entities, approved by the directors but not provided in the financial statements, is as follows:
Contracted for
Not contracted for
2019
€m
24.7
48.2
72.9
2018
€m
49.7
20.9
70.6
31 PENSION OBLIGATIONS
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 €20.1m (2018: €15.5m) represents employer contributions payable to these schemes in
accordance with the rules of each plan. An amount of €3.1m (2018: €4.3m) was included at year end in accruals in respect of defined
contribution pension accruals.
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 €nil (2018: €0.1m) and the expected contributions for 2020
are €nil.
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. €0.9m of pension entitlements have been paid to retired former employees during
the year (2018: €0.8m).
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 2019.
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
Movements in net liability recognised in the Statement of Financial Position
Net liability in schemes at 1 January
Acquired
Employer contributions
Recognised in income statement
Recognised in statement of comprehensive income
Foreign exchange movement
Net liability in schemes at 31 December
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 4)
2019
2018
21.6
23.3
22.9
24.8
21.9
23.8
23.3
25.4
0% - 2.75%
0% -1.9%
1.9%
0% - 2.75%
0% - 2.1%
2% - 2.2%
0.7% - 2.0% 1.2% - 2.8%
1.5% - 2.65% 1.5% - 3.2%
2019
€m
(13.1)
(2.7)
1.2
(0.7)
(0.2)
0.4
(15.1)
2019
€m
(0.4)
(0.3)
-
(0.7)
(2.0)
2.0
-
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
-
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Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Independent Auditor’s Report
Financial Statements
Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (continued)
31 PENSION OBLIGATIONS (continued)
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
32 RELATED PARTY TRANSACTIONS
2019
€m
71.1
-
2.0
0.1
(2.1)
(0.2)
6.1
4.0
-
81.0
2018
€m
76.9
-
1.8
0.1
(1.7)
(0.2)
(4.2)
(0.8)
(0.8)
71.1
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 dividends of €20.0m from subsidiaries (2018: €nil), and there was a net decrease in the intercompany
balance of €45.3m (2018: €55.2m decrease).
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 6.
Mr Eugene Murtagh received dividends of €11.9m during the year from the Group (2018: €10.9m). Dividends of €0.98m were paid
to other key management personnel (2018: €0.92m).
(iii) The Group purchased legal services in the sum of €125,947 (2018: €114,533) from McCann FitzGerald Solicitors, a firm in which
Mr John Cronin is a partner.
33 POST BALANCE SHEET EVENTS
There have been no material events subsequent to 31 December 2019 which would require adjustment to or disclosure in this report.
34 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the directors on 21 February 2020.
31 PENSION OBLIGATIONS (continued)
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 (loss)/gain arising from changes in financial assumptions
(Loss)/gain recognised in other comprehensive income
The cumulative actuarial loss recognised in other comprehensive income to date is €18.5m (2018: €18.3m).
In 2019, the actual return on plan assets was a gain of €8.1m (2018: loss of €2.4m).
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)
The net pension liability is analysed as follows:
Equities
Bonds (Corporates)
Cash
Property
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)
Changes in present value of defined benefit obligations
At 1 January
Acquired through business combination
Current service cost
Interest cost
Benefits paid
Settlement
Actuarial losses/(gains)
Effect of movement in exchange rates
Transfer
At 31 December
2019
€m
6.1
0.1
1.6
(8.0)
(0.2)
2018
€m
(4.2)
-
0.4
4.7
0.9
2019
2018
41.2%
0.4%
0.4%
58.0%
100%
53.0%
0.3%
0.2%
46.5%
100%
2019
€m
33.4
0.3
0.4
7.1
39.8
81.0
(96.1)
(15.1)
9.2
(24.3)
(15.1)
(0.9)
2019
€m
84.2
2.7
0.4
2.0
(3.2)
0.1
6.3
3.6
-
96.1
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
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Sustainability Report
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Directors' Report
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Other Information
Other Information
Alternative Performance Measures
Shareholder Information
Principal Subsidiary Undertakings
Group Five Year Summary
—
OTHER
INFORMATION
ALTERNATIVE PERFORMANCE MEASURES
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.
Financial Statements Reference
Trading Profit
Total Group Revenue
Trading margin
Note 2
Note 2
2019
€m
2018
€m
497.1
445.2
2019
€m
497.1
4,659.1
10.7%
2018
€m
445.2
4,372.5
10.2%
Net interest
The Group defines net interest as the net total of finance expense and finance income as presented in the Income Statement. The
impact of IFRS 16 is excluded from the calculation which is consistent with the terms and conditions of the covenants as set out in
the Group’s external borrowing arrangements.
Financial Statements Reference
Finance Expense
Finance Income
Less lease interest (IFRS 16)
Net Interest
Note 4
Note 4
Note 4
2019
€m
23.7
(2.9)
(3.8)
17.0
2018
€m
19.5
(1.4)
-
18.1
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.
The Group defines adjusted diluted earnings per share as basic earnings per share adjusted for the impact, net of tax, of intangible
amortisation and the dilutive effect of share options.
Dilution is attributable to the weighted average number of share options outstanding at the end of the reporting period.
Financial Statements Reference
Profit attributable to ordinary shareholders
Intangible amortisation
Intangible amortisation tax impact
Note 8
Note 2
Note 21
Weighted average number of shares (‘000)
Note 8
Adjusted earnings per share
Weighted average number of shares for dilutive
calculation (‘000)
Note 8
Adjusted diluted earnings per share
2019
€m
369.4
21.9
(3.0)
388.3
2018
€m
330.9
22.2
(5.1)
348.0
180,586
179,840
215.0 cent
193.5 cent
182,075
181,536
213.2 cent
191.7 cent
Free cash flow
Free cash flow is the cash generated from operations after net capital expenditure, interest paid, income taxes paid and lease
payments and reflects the amount of internally generated capital available for re-investment in the business or for distribution
to shareholders.
Financial Statements Reference
2019
€m
2018
€m
Net cash flow from operating activities
Consolidated Statement of Cash Flows
520.4
438.3
Additions to property, plant, equipment and
intangibles
Consolidated Statement of Cash Flows
(161.0)
(144.2)
Proceeds from disposals of property, plant and
equipment
Interest received
Lease payments
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Free cash flow
6.7
2.8
(31.8)
12.9
1.4
-
337.1
308.4
Return on capital employed (ROCE)
ROCE is the 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
2019
€m
2,120.4
633.2
2,753.6
2018
€m
1,788.9
728.3
2,517.2
Operating profit before interest and tax
Consolidated Income Statement
475.2
423.0
Return on capital employed
17.3%
16.8%
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Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Alternative Performance Measures
Shareholder Information
Principal Subsidiary Undertakings
Group Five Year Summary
Net debt
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. Lease liabilities recognised due to the implementation of IFRS 16 and deferred contingent
consideration have also been excluded from the calculation of net debt. Consistent with the 2018 APMs, this definition is in
accordance with the terms and conditions of the covenants as set out in the Group’s external borrowing arrangements.
Net Debt
Note 17
Financial Statements Reference
2019
€m
2018
€m
633.2
728.3
EBITDA
The Group defines EBITDA as earnings before finance costs, income taxes, depreciation, amortisation and the impact of IFRS 16.
Trading profit
Depreciation
Lease liability payments
EBITDA
Financial Statements Reference
Condensed Consolidated Income Statement
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
2019
€m
497.1
114.5
(31.8)
579.8
2018
€m
445.2
76.0
-
521.2
Net debt: EBITDA
Net debt as a ratio to 12 month EBITDA. EBITDA is solely adjusted for the impact of IFRS 16 Leases which is in accordance with the
terms and conditions of the covenants as set out in the Group’s external borrowing arrangements.
Net Debt
EBITDA
Net Debt: EBITDA times
Financial Statements Reference
Note 17
2019
€m
633.2
579.8
1.09
2018
€m
728.3
521.2
1.40
Working capital
Working capital represents the net total of inventories, trade and other receivables and trade and other payables, net of
transactional foreign currency derivative excluded from net debt.
Financial Statements Reference
Trade and other receivables
Inventories
Trade and other payables
Foreign currency derivatives excluded from
net debt
Note 14
Note 13
Note 15
Note 19
Working capital
2019
€m
794.2
557.6
(768.9)
2018
€m
798.6
524.9
(779.8)
(0.1)
0.2
582.8
543.9
Working capital ratio
Measures working capital as a percentage of October to December turnover annualised. The annulations on turnover reflects the
current profile of the Group rather than a partial reflection of any acquisitions completed during the period.
Financial Statements Reference
Working capital
October - December turnover annualised
Working Capital ratio
2019
€m
582.8
4,877.0
2018
€m
543.9
4,711.6
11.9%
11.5%
—
SHAREHOLDER
INFORMATION
The Annual General Meeting
The Annual General Meeting of
the Company will be held at the
InterContinental Hotel, Ballsbridge,
Dublin 4 on Friday 1 May 2020 at
10.00 a.m.
Notice of the 2020 AGM will be
made available to view online at
www.kingspan.com/agm2020
You may submit your votes electronically
by accessing Computershare’s website:
http://www.eproxyappointment.com/
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 29
April 2020 (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.
Share Registrar
Administrative enquiries about the holding of Kingspan Group plc shares should be
directed to:
The Company Registrar:
Computershare Investor Services (Ireland) Limited,
3100 Lake Drive,
Citywest Business Campus,
Dublin 24,
D24 AK82.
21 February 2020
1 May 2020
7 May 2020
26 March 2020
27 March 2020
21 August 2020
16 November 2020
HSBC Bank plc
BNP Paribas
Danske Bank AS
Ulster Bank Ireland DAC
Allen & Overy LLP,
One Bishops Square,
London,
E1 6AD,
England.
Bank of America Merrill Lynch,
2 King Edward St,
Farringdon,
London,
EC1A 1HQ,
England.
Financial Calendar
Preliminary results announced:
Annual General Meeting:
Payment date for 2019 final dividend:
Ex dividend date:
Record date:
Half-yearly financial report:
Trading update:
Bankers
Bank of America Merrill Lynch
ING Bank NV
Commerzbank AG
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
KPMG,
Chartered Accountants & Statutory Auditor,
1 Stokes Place,
St Stephen’s Green,
Dublin 2,
Ireland.
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Business & Strategic Report
Business & Strategic Report
Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Alternative Performance Measures
Shareholder Information
Principal Subsidiary Undertakings
Group Five Year Summary
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 2019 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 the
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 1 May 2020.
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 3
May 2019. 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 1 May 2020
unless renewed and resolutions to that
effect are being proposed at the Annual
General Meeting to be held on 1 May 2020.
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 3 May
2019, 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 1 May 2020, 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 Standard Share Option Scheme
and Performance Share Plan each contain
change of control provisions which allow
for the acceleration of the exercise of share
options/awards in the event of a change of
control of the Company.
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.
—
PRINCIPAL
SUBSIDIARY
UNDERTAKINGS
List of principal subsidiary and joint venture companies and the percentage shareholding held by Kingspan
Group plc, either directly or indirectly, pursuant to Section 314 of the Companies Act 2014:
% Shareholding Nature of Business
% Shareholding Nature of Business
IRELAND
Aerobord Limited
100 Manufacturing
Kingscourt Trustee
Company Limited
100
Trustee Company
UNITED KINGDOM
Ecotherm Insulation
(UK) Limited
100
Sales & Marketing
Euroclad Group Limited
100 Manufacturing
Kingspan Century Limited
100 Manufacturing
Fuel Tank Shop Limited
100
Sales & Marketing
50
Sales & Marketing
Joris Ide Limited
Kingspan ESB Designated
Activity Company
Kingspan Holdings
(Irl) Limited
Kingspan Holdings (North
America) Limited
Kingspan Holdings
(Overseas) Limited
100 Management &
Procurement
100 Holding Company
100 Holding Company
Kingspan Holdings Limited
100 Holding Company
Kingspan Insulation Limited
100 Manufacturing
Kingspan International
Finance Unlimited
Company
Kingspan Light &
Air Limited
Kingspan Limited
Kingspan RE Limited
Kingspan Securities
2016 Designated
Activity Company
Kingspan Securities
2017 Designated
Activity Company
100
Finance Company
100
Sales & Marketing
100 Manufacturing
100
100
Property Company
Finance Company
100
Finance Company
Kingspan Securities Limited
Kingspan Securities
No. 2 Limited
Kingspan Tate Limited
KSP Property Limited
100
100
100
100
Finance Company
Finance Company
Sales & Marketing
Property Company
Kingspan Access
Floors Limited
100 Manufacturing
100 Manufacturing
Kingspan Group Limited
100 Holding Company
Kingspan Industrial
Insulation Limited
100 Manufacturing
Kingspan Insulation Limited
100 Manufacturing
Kingspan Light &
Air Limited
Kingspan Limited
Kingspan Services
(UK) Limited
Kingspan Timber
Solutions Limited
Kingspan Trustee
Company Limited
Kingspan Water &
Energy Limited
100
Sales & Marketing
100 Manufacturing
100 Management &
Procurement
100 Manufacturing
100
Trustee Company
100 Manufacturing
KSP Europe Limited
Tanks Direct Limited
100
100
Finance Company
Sales & Marketing
AUSTRALIA
Kingspan Insulated
Panels Pty Limited
Kingspan Insulation
Pty Limited
Kingspan Water &
Energy Pty Limited
Tate Asia-Pacific
Pty Limited
100 Manufacturing
100 Manufacturing
85 Manufacturing
100
Sales & Marketing
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Sustainability Report
Sustainability Report
Directors' Report
Directors' Report
Financial Statements
Financial Statements
Other Information
Other Information
Alternative Performance Measures
Shareholder Information
Principal Subsidiary Undertakings
Group Five Year Summary
% Shareholding Nature of Business
% Shareholding Nature of Business
% Shareholding Nature of Business
% Shareholding Nature of Business
AUSTRIA
FINLAND
Kingspan GmbH
100
Sales & Marketing
Kingspan Insulation Oy
100 Manufacturing
Kingspan Oy
100
Sales & Marketing
BELGIUM
Argina Technics NV
100 Manufacturing
FRANCE
Brakel Aero NV
isomasters NV
Joris Ide NV
Kingspan Access
Floors Europe NV
Kingspan Door
Components SA
100 Manufacturing
62.5 Manufacturing
100 Manufacturing
100 Manufacturing
Comptoir du Batiment
et de L'Industrie SAS
100 Manufacturing
ECODIS SAS
100 Manufacturing
Groupe Bacacier SAS
85 Manufacturing
Isocab France SAS
100 Manufacturing
100 Manufacturing
Joris Ide Auvergne SAS
100 Manufacturing
Joris Ide Sud Ouest SAS
100 Manufacturing
Kingspan Insulation NV
100 Manufacturing
100
Sales & Marketing
100 Manufacturing
Kingspan S.a.r.l.
Profinord S.a.r.l.
Societe Bretonne
de Profilage SAS
100
Sales & Marketing
100 Manufacturing
100 Manufacturing
51 Manufacturing
GERMANY
Kingspan NV
Epur SA
BRAZIL
Kingspan-Isoeste
Construtivos
Isotérmicos S/A.
CANADA
Kingspan Insulated
Panels Limited
100 Manufacturing
Vicwest Inc.
100 Manufacturing
CHILE
Synthesia Technology S.p.A.
100
Sales & Marketing
Essmann Gebäudetechnik
GmbH
Joris Ide Deutschland
GmbH
Kingspan Access
Floors GmbH
Kingspan GmbH
Kingspan Insulation
Gmbh & Co. KG
Kingspan Services
Deutschland GmbH
100 Manufacturing
100 Manufacturing
100 Manufacturing
100
Property Company
100 Manufacturing
100
Sales & Marketing
COLOMBIA
PanelMET S.A.S.
CROATIA
51 Manufacturing
Kingspan Holding GmbH
100 Holding
STG Beikirch GmbH
100 Manufacturing
HUNGARY
Kingspan D.O.O.
100
Sales & Marketing
Kingspan Kereskedelmi Kft.
100 Manufacturing
CZECH REPUBLIC
Balex Metal S.R.O.
100
Sales & Marketing
Kingspan A.S.
100 Manufacturing
DENMARK
Kingspan A/S
Kingspan Insulation ApS
ESTONIA
100
100
Sales & Marketing
Sales & Marketing
Kingspan Insulation OÜ
100
Sales & Marketing
INDIA
Kingspan Jindal
Private Limited
LATVIA
Balex Metal SIA
Kingspan SIA
LITHUANIA
Balex Metal UAB
Kingspan UAB
51 Manufacturing
100 Manufacturing
100
Sales & Marketing
100
100
Sales & Marketing
Sales & Marketing
100 Manufacturing
Huurre Iberica S.A.
100 Manufacturing
Kingspan Insulation S.A.
100 Manufacturing
SPAIN
MEXICO
Kingspan Insulated
Panels S.A. DE C.V.
NETHERLANDS
Hoesch Bouwsystemen B.V.
100
Sales & Marketing
Kingspan (MEATI) B.V.
85 Holding Company
Kingspan B.V.
Kingspan Holding
Netherlands B.V.
100
Sales & Marketing
100 Holding Company
Kingspan Insulation B.V.
100 Manufacturing
Kingspan Light + Air NL B.V.
100 Manufacturing
Kingspan Light + Air
Production NL B.V.
100 Manufacturing
Kingspan Unidek B.V.
100 Manufacturing
Kingspan Shaped
Solutions SL
Kingspan Suelo
Technicos S.L.
Synthesia Technology
Europe SLU
100 Manufacturing
50
Sales & Marketing
100 Manufacturing
Teczone Española S.A.
100 Manufacturing
SWEDEN
Kingspan AB
Kingspan Insulation AB
100
100
Sales & Marketing
Sales & Marketing
NEW ZEALAND
Kingspan Limited
NORWAY
Kingspan AS
100 Manufacturing
TURKEY
Kingspan Yapi
Elemanlari A.S.
UKRAINE
85 Manufacturing
100
Sales & Marketing
Balex Metal LLC
100
Sales & Marketing
Vestfold Plastindustri AS
100 Manufacturing
PANAMA
Huurre Panama S.A.
50 Manufacturing
Synthesia Technology S.A.
100 Manufacturing
PERU
Synthesia Technology S.A.C.
100
Sales & Marketing
POLAND
Balex Metal Sp. Z o.o.
100 Manufacturing
Essmann Polska Sp. Z o.o.
100
Sales & Marketing
Kingspan Environmental
Sp. Z o.o.
100 Manufacturing
Kingspan Sp. Z o.o.
100 Manufacturing
ROMANIA
Joris Ide S.R.L.
Kingspan S.R.L.
RUSSIA
Kingspan LLC
SERBIA
100 Manufacturing
100
Sales & Marketing
100 Manufacturing
Kingspan D.O.O.
100
Sales & Marketing
UNITED ARAB EMIRATES
Kingspan Insulated Panels
Manufacturing LLC
85 Manufacturing
Kingspan Insulation LLC
90 Manufacturing
UNITED STATES
ASM Modular Systems Inc.
100 Manufacturing
CPI Daylighting Inc.
100 Manufacturing
Dri-Design Inc.
94.67 Manufacturing
Kingspan Insulated
Panels Inc.
100 Manufacturing
Kingspan Insulation LLC
100 Manufacturing
Kingspan Light & Air LLC
100 Manufacturing
Morin Corporation
100 Manufacturing
Pre-insulated Metal
Technologies Inc.
100 Manufacturing
Tate Access Floors Inc.
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.
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Financial Statements
Financial Statements
Other Information
Other Information
Alternative Performance Measures
Shareholder Information
Principal Subsidiary Undertakings
Group Five Year Summary
20192018201720162015Results (amounts in €m)Revenue4,659.14,372.53,668.13,108.52,774.3Trading profit497.1445.2377.5340.9255.9Profit before tax454.4404.9346.5314.0232.0Operating cashflow627.1530.3362.5377.1382.5Equity (amounts in €m)Gross assets4,288.44,029.43,235.63,004.62,549.1Working capital582.8543.9477.8382.7301.8Total shareholder equity2,120.41,788.91,568.01,471.51,293.8Net debt633.2728.3463.9427.9328.0RatiosNet debt as % of total shareholders’ equity29.9%40.7%29.6%29.1%25.4%Current assets / current liabilities1.661.591.651.561.43Net debt / EBITDA1.091.401.051.061.04Per Ordinary Share (amounts in €cent)Earnings204.6184.0159.0143.8106.7Operating cashflows347.3294.9202.1212.3217.1Net assets1,174.2994.7876.7828.4734.2Dividends46.542.037.033.525.0Average number of employees14,52913,46911,13310,3968,595—5 YEAR SUMMARY106.7143.8159.0184.0204.6201520162017201820192,774.33,108.53,668.14,372.54,659.12015201620172018201925.033.537.042.046.520152016201720182019255.9340.9377.5445.2497.120152016201720182019Revenue (€m)Trading Profit(€m)EPS (cent)DPS (cent)156 Business & Strategic Report
Sustainability Report
Directors' Report
Financial Statements
Other Information
Dublin RoadKingscourtCo CavanIrelandA82 XY31Tel: +353 42 969 8000Email: admin@kingspan.comwww.kingspan.comDesign: www.reddog.ie