Kingspan Grp Ord

Good morning and welcome to today's Kingspan half-year results 2026 conference call. My name is Seb and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw from the queue, please press star 2. In the interest of time and fairness, we ask that you limit yourself to two questions each. I will now hand the floor over to Jean Murtagh, CEO, to begin the call. Please go ahead.

Thank you and good morning everybody. Welcome to the Half Year Results 2026 here at Kingspan. We get straight into it on slide number three, which is titled H1 in Summary. Really quite a strong first half, bearing in mind that the first quarter was difficult worldwide and in our sector naturally. But for the first half, I think a very pleasing outcome with revenue just under 4.9 billion, which is 8% ahead of prior year. Our EBITDA was up 9% at 626, and our trading profits, our pure trading profit number, up 10% at 487 million, all of which is, I think, reasonably positive in the environment that we're in. Importantly, by business segments, the envelope business was up 4% at a revenue level and advances which is heavily focused on the data side was up 36% pre currency at a revenue level so both both extremely encouraging and we get into the order books in both businesses as we go through the presentation and we're holding back on our share buyback program and just to preserve dry powder for some opportunities that are out there right now and And the outlook for the second half of the year is even better again. We're upping our guidance to 1.125 billion trading profit for the year as a whole, which would imply second half trading profit growth of around 25%. So momentum is increasing and we expect that to obviously continue into 2027 as well.

So that's it in summary and I'll just hand you over to Jeff for some detail on this Thanks Gene and I'm speaking to the flash highlights on page 6 so going from the top group revenue up 8% half year and half year and I'll come to the conditions of that in a second EBITDA up 9% trading profit up 10% but I would highlight that this year's reported number 487.2 is net of 4.5 million of advances IPO exploration costs so actually stripping that out and adjusting for currency the underlying trading profit was up 13% half year and half year earnings per share up 5% as you recall the interest number in the first half of 25 was flattered by a one-off credit we would expect based on the guidance that we've given for the full year on trading profit of 1.125% that our earnings per share growth on a full year basis will be closer to mid-teens for the full year. Our interim dividend at 27.1 cents, up 3%. A strong free cash flow performance in the first half, 144 million, and I'll come to the components of that shortly. A decent trading margin performance of 10%, up 20 basis points. the margin performance continues to evolve positively we expect in the second half to be knocking on the door of 12% in the second half so our full year margin guidance for the year ought to be in the region of 11% on a full year basis from a debt and leverage perspective the balance sheet remains in good shape net debt to EBITDA standing at a little over 1.5 times Turning to page 7, just the bridges of revenue and profit, firstly to deal with revenue. Currency clipped 61 million or about 1.5% of sales half year and half year. Acquisitions contributed 125 million euro or about 3%. An underlying sales grew by 6% or $278 million, all combining to give us the $4.86 billion for the first half. From a profit perspective, currency shaved a little under 2% off the half-year number, $8.4 million. M&A contributed $14 million, which is net of that $4.5 that I referred to earlier. An underlying profit grew by $38.7 million. in the first half all combined to give the 487 for the first half turning to page 8 just on our sales by geography I think a couple of particular highlights on this would be that our America's business grew by a fifth in total half year over half year up 21% constant currency and our rest of world business grew by over a quarter half year on half year and the rest of the business The strongest component of free cash flow performance is EBITDA which was ahead in the half year. on working capital we typically build working capital in the first half our trading balance sheet is larger in June than it is at year end our working capital our working capital the sales ratio actually improved in the first half of 26 the working capital the sales ratio is 12.3% in June 26 compared to 13.1% in June 25 so a positive positive performance there CapEx a little over 156 million our capex guidance for the full year is 360 million and a similar number going into 2027 and the only other number I'd highlight on the page is our tax outflow 47 million slightly lower than the income statement charge that'll normalise with the income statement charge as we move through the year reconciling that to the overall net debt position on page 10 the only other item to note on that beyond free cash flow are a modest acquisition spend in the period of a little under 74 million and our dividend payments of 52.6 million on page 11 some highlights on our balance sheet balance sheet remains in strong shape net debt to EBITDA 1.56 times an undrawn component of 700 million of our green revolving credit facility which is committed to May 2028 with total outstanding private placement notes of 1.4 billion and public bonds of 750 million the weighted average maturity of all of our guest facilities is 3.7 years and with total available liquidity of 1.3 billion and what I would say is that the group remains strongly committed to its investment-grade rating, which means maintaining leverage sub-two times. And with that, I will hand back to Jane.

Great, Jeff. So we'll just take you to slide 25, which is Outlook, and then head on to the Q&A. So obviously, the general geopolitical environment remains... I guess unpredictable, but that's something we've got used to dealing with for some time now. But even considering that, we do expect the second half to deliver strong performance both in the building envelope business and in the advances business and pretty much across the world, obviously with some markets and some businesses doing better than others. But in total, we expect the business to Solidity breakthrough 10 billion in revenue for the year as a whole and as you said to reach a trading profit of in or around 1.125 billion way up in prior year and 18% if we achieve that number and and again importantly we expect that momentum to carry through into next year and kind of feels like about 1.3 billion of an organic or to be achievable at a trading profit level for 2027 and that's well backed by pipeline and customer engagement on projects and that's it really in a nutshell so we're happy now to take your questions Thank you

As a reminder, to ask a question, please press star 1 on your telephone keypad, and to withdraw your question, please press star 2. And please limit yourself to two questions each in the interest of time. Our first question is from Shane Carberry with Goodbody. Please go ahead.

Cheers. Thank you, and well done, Gene, Jeff, on a stellar set of results. First one for me is just in terms of the panel order intake growth, pretty exceptional stuff at that kind of 13%. you can get that really helpful slide back at the four years talking about you know consistent performance of about three percent versus the market it probably feels like this is going to be even bigger out performance and so could we dig a little bit deeper into exactly what you're seeing in terms of the kind of panel growth would be really helpful and then just on advances like obviously we've kind of come into the year thinking about an out turn for 26 at an EBITDA level of 300 million and and you talked about doubling that, obviously it feels like you're running significantly ahead of that for 2026. So how should we think about sort of the medium term target? Certainly feels like you're gonna hit that 600 million maybe sooner than we would have anticipated.

Okay Shane, thank you. Yeah, the order intake was pretty pleasing for the first half on insulated panels, 13% ahead by volume. Globally and you can take it the order book is kind of up at a similar level and that delivered a strong performance of the first half and we We expect that to continue Kind of with this sort of momentum into the into the second half as well. We're we're actually we've seen quite an encouraging performance in some parts of Europe and You know Iberia France Germany we would kind of pull out as you know, having been strong performers for us. They've been reasonably depressed for quite some time, so good momentum there, particularly in penetration growth and some new product introduction. North America has continued to be strong for us, and indeed so has Latin America, you know, where the business has expanded way beyond Brazil into many surrounding countries, and even recently into Argentina. like that expansion is going very encouragingly and we will see that whole market as really very early stage in terms of the adoption of this method of construction so we continue to focus on that and so yeah I have to say you know that that has been by and large kind of a global global trend that we've been driving and experiencing and then from the From the advances side, we had indicated an EBITDA in 2026 of around 300 million. Yes, that's going to be significantly up on that. It could be 400-ish. If you recall at the time when we pulled back from the IPO, the very reason we gave, which some people didn't seem to catch at the time, was that momentum was just increasing way beyond our expectation, even in the near term. So that's evidence in coming through now. And we'd be very confident that we break through that 600 million guide that we had given. I think it was for 2030. Way in advance of that. At an organic level, clearly. That's not including any acquisitions, which of course we would expect to do. So that's the general shape of those two questions.

Really helpful.

Thanks, Gene. Thank you. Next question is from Flora Donoghue from Davey. Please go ahead.

Thank you. Good morning, everyone. I have two questions as well. First I might ask is just in advance, just wondering about the order book in terms of how long that now stretches out and just in terms of the kind of evolution of the business in terms of the nature of the orders, the type. is there any kind of changes there or what are you seeing and then the second one just on the reference to the dry powder just interested to hear your thoughts on that in terms of what it might actually mean in terms of the balance sheet capacity etc and what we might need to keep an eye out for in the coming while so those two please yeah so on the advances on the advances side

But really for this has been like it's around the environment we're operating is growing significantly. Like there's no need for us to kind of focus on that. That's clear. And our market share growth is hurtling along at a product by product level. And then our share of wallet is expanding as we add different technologies to the offering. And that's something that we're going to continue to focus very heavily on. So like the shape of this business is entirely different than it was even three or four years ago where we've gone from floors to ceilings to modular hacks into air management and significantly now into liquid cooling in the data centers and that itself hasn't really kicked off yet and we would expect in the second half and particularly into 2027 and beyond that that will really gain momentum and this is all before we get into the next stage which is more the electrical side insofar as it's bolted onto the hack itself, which is precisely what we're doing. And that should pull the share of wallet up significantly again. So we're really just evolving the whole product offering, gaining share, and gaining share of wallet. The dry powder comment is, you can take it as Jeff said, like our focus is on ensuring that our investment grade is maintained. You know, we've heard speculation that we're going to be up to all sorts. You can take it we're not going to be up to all sorts. We will look at chunky deals, naturally, but nothing that kind of stretches us beyond 2x, and we want to be very clear about that. But that still leaves us with encouraging opportunity that we hope to, you know, continue to move on as you'd normally expect us to. Very good. Thank you, Gene. That was very clear.

Thank you. The next question is from Elodie Roll with JP Morgan. Please go ahead.

Hi, thanks for taking my question. So just following up on your M&A ambition, could you maybe elaborate a little bit about indeed where you'd go, what your financial firepower would be, that two times leverage that you've mentioned, is that a hard cap or would you be able to go a little bit above it? Would you use equity eventually for a deal? So if you can give us a bit more color about how big and what we could expect there, that would be helpful. And second, on margins, I mean, 11% margins for 2016 versus broadly 10% for the last few years and historically. So are we now in a different dynamic and should we expect more margin progression from here? Thank you very much.

Okay, so just on the first point, just to reiterate again, we have no intention of doing anything that involves equity anytime soon. We obviously would never dismiss that as possibility long term, but nothing remotely imminent on that front. If you think about us pushing it to 2x with an intention to rapidly deliver as we always have done, That implies we have headroom of approximately a billion at the present time. And that's about the height of it. And we have lots of opportunities that would fill that scope.

And just to pick up on your point about margin, Elodie, you'll have seen in the first half some progression on margin by 20 basis points at a group level. we expect the momentum and margin of the second half to pick up to close to at a group level close to 12% in the second half so we ought to be at around 11% for the full year and as we progress the business into next year and consistent with the 1.3 billion of trading profit that Jean referenced earlier we continue to see ongoing incremental improvement on that front as well as we move through the years.

Okay, thanks very much. The next question is from Julian Radlinger from UBS. Please go ahead.

Yeah, thanks very much, guys. So two questions from me, please. First of all, can you give us a sense for the organic growth you're expecting in the second half for Envelope? and maybe how that splits between price and cost, Rafi. I know you don't like to talk about that, but I think what was the conflict going on and the input cost inflation currently, I think a lot of investors would be interested to understand that a bit better. And then secondly, on commercial roofing, I didn't see too much in the release. Maybe I missed it. Can you remind us of the sales targets there, how the ramp there is going? I think that should be happening now, right? What are your expectations for sales and EBITDA contribution either into 2027 or in 2027? Thank you very much.

I'll just deal with the first bit there, if I can, Julian. The commercial roofing rollout in the US is going totally according to plan. We would expect revenue next year to be hopefully pushing up around $200 million with a positive contribution as well. We're already manufacturing and delivering product from our facility in Oklahoma, which is a fairly stunning plant and will be the location where our CMD is later in the year. We're commissioning in Cumberland and Maryland at the present time. And the hot on the heels of all that would be a facility for poly isoboard in Utah that we're working on right now. So that's kind of what's on our immediate horizon. As I say, developing well, commercial engagement is very positive with the customer base. And we'd be at least as confident as we ever were about how we will succeed in driving that business forward in the US. And of course, in Europe, the business is performing exceptionally well too. And we have a business, as you know, right now that's in excess of 800 million in Europe. And we're satisfied with the performance of that as well.

Yeah, and just to deal with the sales performance in envelopes, I mean, firstly, and it's worth highlighting that both divisions have contributed to the earnings upgrade that we've referenced this morning, both this year and our early guide on next year. But if you look at the trajectory of sales, and I'm just going to do it pre-currency to avoid that, in the first quarter, our building envelope sales were minus 2%. For the first half, they were up 4% pre-currency. That implies a pickup in momentum in the second quarter. We're not going to be drawn on the specifics of pricing and volumes, giving the category breadth that we have, the breadth of end markets that we're in, all of the factors around that. But suffice to say, we would expect the top-line growth in envelopes to be better than 4% in the second half of the year but more importantly than that the 1-1-2-5 profit guidance is where we remain centrally focused the margin recovery speaks for itself in terms of the margin performance in envelopes in the first half and indeed we expect the margin performance in envelopes to be north of 11% in the second half so you know, that will be borne out through a combination of volume and pricing in different markets and different products. Excellent. Thank you very much.

Thank you.

Thank you. Next question is from Alexander Kremash from Chevrolet. Please go ahead.

Hey, good morning. Yes, two questions on my side. So, first question would be on inflation. If you if you could say a word on what you expect for the second half in terms of chemical inflation and steel inflation in terms of the cost and if you also expect that some demand of your clients got put forward to Q2 considering they were anticipating some price increases in the third quarter so that would be one part and then the other one is on advances I mean clearly it's gaining steam here so A couple of months ago, you mentioned that you would postpone the IPO. I think it's, I mean, the market sort of read into that that this is cancelled. But the question that I really have is now whether we still need to take into account the potential IPO of this advances or whether this is completely behind us. But I would anticipate a positive read considering this drop momentum. Thanks.

Okay, so in terms of cost inflation in the second half, that's obviously a moving feast. You know, views on that kind of ebb and flow depending on the week and what's going on geopolitically. But broadly speaking, I'd say we would feel that broadly speaking, we feel that we have already taken on the cost inflation by and large that we would expect it through particularly the second quarter. There may be some humps and bumps as we go through H2. Chemicals and steel may move in different directions and for entirely different reasons. I think if anything, steel could push on a little. I wouldn't expect it to be huge, but possibly a little. And on our chemical input side, I think it's reasonable to expect it to remain broadly stable, although that'll jump around depending on the obvious stuff. So from a selling price perspective, I'd also say that we've done a good job in terms of cost recovery. That's evident in terms of the maintenance of margins in the businesses. And again, I would say that we'd expect that to be broadly stable in the second half. And in terms of what impact that's had in terms of H1 forward buying, that's all was Honestly, that's very difficult for even us to assess. The majority of Kingspan's business, as you know, is made to order. The only bit that is not is around insulation board, which can go into stock as standard items, and that's a relatively small part of the overall group. The bigger part by far, in terms of insulated panels, is all bespoke, and it's impossible to actually buy forward. And so we have an order bank like we said that's extremely healthy for the second half and that's for delivery through to the second half and And I think it's not it's not unreasonable to think that there's been some element of forward buying But it's not something we think has been has been a very significant feature of the business You can take it the on the advances side The the IPO discussion is over and It's very much a central part of Kingspan, as by the way it would have been even in the event of IPO. If you recall, we were going to retain 75% in any event. So there's one Kingspan. It's all together. It's all very tight, and we're blasting forward.

Thank you. Thank you. Thank you. The next question is from Ben Rather-Martin from Goldman Sachs. Please go ahead.

Hi, Jean and Jeff. Thanks for the questions this morning. I've had two, please. My first was around some of the 2027 comments that you made, Jean. I think you spoke to, you know, $1.3 billion in trading profit. I'd be interested, in terms of your optimism, which segments do you think you're mainly constructive on in terms of seeing greater visibility on 2027? Is it mainly the advances piece, or I guess are there parts of IPE that you're also constructive on into 2027. And then second would just be on the advances performance in the first half. I'd be interested if you could kind of break down the contribution between new facilities that you've got coming online and also existing facilities as well. Thank you.

Okay. I think you got about 400 questions in there. We'll try and break them down. In terms of the 2027 confidence, I think that, you know, it's very difficult for us to predict where total accuracy, like where we're going to go in terms of envelope insulation, et cetera, et cetera. But, you know, you can take it. It's not a particularly buoyant time for our end markets right now worldwide. We're making progress. We're seeing recovery in the EU despite that, as we talked about a little earlier. Our whole project engagement in North America where we've a significant, you know, longer term pipeline visibility is actually still encouraging. Naturally, an awful lot of that is tech oriented, but that's a positive thing. We have new product introductions, particularly around flat roofing and insulated panels. A product called OneDeck in one of our brands in the US that's getting Significant Fraction, which means goes well for the parents business, but also it's a very interesting dynamic in our emerging flat roof presence. That's extremely encouraging. As I said, LATAM at a volume level is doing extremely well. And even having said that, penetration of our products in LATAM is still at a very low level by comparison to any other part of the world. So, like all of that would give us confidence, if you like, heading into 2027. And on the advances side, there's naturally a very long lead time. I think it was asked earlier on, we would have an order bank of around one year. We would even have some order engagement beyond that. But Broadly speaking, you can take that we have an order bank of around one year there, which gives us strong visibility.

Thank you. Next question is from Ephraim Rabi from Citi. Please go ahead.

Thank you. So you mentioned the $600 million in advances could be achieved well before. Again, could you, from your perspective, give us a sense as to when that would be? On your base case, you gave us very helpfully $1.3 billion. organic kind of expectation for operating profit next year. So I guess advances, you know, in terms of how quickly the target could be that could also be from that similar market assumptions as well. And secondly, in terms of the CapEx, obviously you are accelerating growth significantly. Should we see, you know, significant step up in CapEx and related to that, does a Utah plant also continue come under the $1 billion investment that you've already done, just clarifying that point.

Yeah, so the Utah facility absolutely comes as part of that. So that $1 billion was organic and acquisition. It's well underway, and yes, the Utah plant is included in that. And from the $600 million EBITDA target, if you like, we put out there for advances,

it's difficult to be precise on that but it'll be that'll happen long before 2030 and probably just in terms of CapEx this year's full year CapEx guidance approximately 360 million and a similar CapEx investment in 2027 Thank you

Thank you. The next question is from Isaac Osseo from Onfield Investment Research. Please go ahead.

Hi. Thank you for taking my questions. So first on M&A, so is it fair to assume a key area of interest is residential roofing and your data center operations that would be adjacent to advances? And then when you look at your M&A pipeline, could you maybe explain a bit more about your decision framework when you approve or pass on opportunities? And do you have clear valuation limits in terms of, you know, EV to EBITDA or other multiples? Or do you have minimum thresholds in terms of returns? And finally, could you maybe, you know, accept a temporary dilution in returns on capital if the long-term strategic fit and EPS equation were compelling?

So in terms of M&A focus, it's right across the piece. Like we've got a large portfolio of product opportunity. We've got a very broad geography. Residential roofing wouldn't feature very highly, certainly not in the near term. And yes, you'd be right in thinking that fleshing out our advances portfolio building what we keep saying is our share of wallet opportunity is really important to us like we've got we've got we've got an audience with some of the really critical decision makers and hyper scares around the world and the more we can include in that conversation the better and that's that's a critical area of focus and then obviously right across the business we see opportunity in in in in panels and boards and installations of

all different types so yeah it's quite broad but residential roofing would not feature Heidi at the present time and just on returns and capital as a management team we are absolutely focused on returns and capital and rebuilding that over time and naturally the sharpest way to do that is through margin and performance and you'll see in these numbers that actually we're on with that as we think about allocating capital as we go forward the proportionality of M&A capital relative to our existing capital base is not going to materially alter the returns profile of the group anything we're contemplating we would have an aspiration to incrementally add to return on the capital over time Thank you

Thank you. The next question is from from Bernstein. Please go ahead.

Hi, and thanks for taking my question. So if we talk about going back to the margin discussion. So we are expecting around 12% margin in H2. Could you maybe talk about the different levers? which are driving this margin expansion? Is it coming from price cost or the product mix might be geared to higher margins now? And looking at the medium term, how sustainable do you think these margins would be? So that's my question for today.

Okay, well firstly, the 12% that I indicated earlier in the second half, that's the trading margin. And typically our trading margin is higher in the second half than in the first half, bearing in mind the trading cycle in a typical year. That would leave us at 11%. And as we indicated earlier, as we ramp up further through 2027 and beyond, we fully expect to be able to incrementally add to margin each year in a developmental way not a sea change in any one year but to continually incrementally add to margin whether that's through our new products whether it's through the growth that we have in various segments there's a whole strand of levers that we deploy to develop margin over time the market often gets fixated on on price and price recovery, that rarely makes the difference between a good or a bad year in Kingspan. If we've got inflation, we've recovered it and we've got any amount of examples over our history that demonstrate that. The margin expansion over time will be grounded in innovation, new product, developing our business, developing our end markets, developing new territories and all of that as a combination ought to be meaningful for margin over time.

Thank you. Next question is from Chase Coughlin with Kempen. Please go ahead.

Hi. Good morning, all, and thank you for taking my questions. I just have two. Perhaps I missed it, but starting with advances, could you provide the split between data and non-data in the first half of 26 and just on a sales level? And I think the initial sort of target for the medium term was to have that data portion grow to, above 50%. Is that does that seem conservative now? Where do you think that will sort of realistically end up in a few years? And my second question, just a quick one on the board's strategy in Europe, I believe you are repurposing some capacity there to more attractive products and end markets. Could you provide just a brief update on that strategy? Thanks.

Yeah, the exact the exact advances between data and data we haven't provided, but it's You can take it that the shift in that in that split towards data is increasing rapidly and In fact, we'd be very confident that that that's this will will exceed 50% in the not-too-distant future And that'll be our better be our strong our strong sense And then the second question for today or repurposing board capacity. Yes, indeed. So we're obviously increasing our poly ISO opportunity around roofing in North America. One of the plants that has been taken down in Europe will be put into the US. And one of the facilities will also be put into Brazil. as we start to just break into that opportunity in conversion from other traditional types of insulation in Brazil longer term. So they're the two likely repurposing projects that are underway at the moment. Okay, Gene, Jeff, thank you very much.

Thank you. Thank you. Our next question is from Alison Sun with Bank of America. Please go ahead.

Good morning. Congratulations on the very good result. I only have one question on the UK market. I think you mentioned that this market is more subdued in the revenue year-over-year, but the order intake was solid. Can you give us more color on which end market you see is a bit weaker, and what gives you confidence that you think the second half will be stronger? Thank you.

Yeah, I mean, I think it's always hard to call a particular friend in the UK. It was encouraging to see it pick up an intake. I think we're gearing up for a solid second half in the UK. I don't think we'd call out any one sector over the other. The residential sector, which is the smaller part of our business in the UK, remains pretty quiet, as it does in other markets as well. But there's no standout, I think, categories in the UK that we would call out. But we do expect it to be a little bit better in the second half than in the first half when it was particularly quiet in the early part of the year.

Thank you very much.

Thank you. We have no further questions on the line at this time, so I'll hand back to Jean for any closing remarks.

Thank you very much. We always look forward to engaging with most of you individually as we go to the next day and next week. And you're also all very welcome to our CMD, which takes place in Oklahoma later in the year. We'd encourage you to get out there. It always makes a big difference to see stuff rather than just hear about it. And we've lots to talk about there. This concludes today's call. Thanks everyone very much for joining and have a wonderful rest of your day.