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KINGSPAN GROUP PLC

HALF-YEARLY FINANCIAL REPORT

for the period ended 30 June 2015

KINGSPAN GROUP PLC

RESULTS FOR THE HALF YEAR 30 JUNE 2015

Kingspan the global leader in high performance insulation and building envelope solutions issues its half-yearly financial report for the six month period ended 30 June 2015.

Financial Highlights:

· Revenue up 39% to €1.24bn, (pre-currency, up 29%).

· Trading profit up 61% to €111.7m, (pre-currency up 44%).

· Acquisitions contributed 26% to sales growth and 31% to trading profit growth in the period.

· Group trading margin of 9.0%, an increase of 120bps versus the same period in 2014.

· Net debt of €449.3m (H1 2014: €113.4m). Net debt to EBITDA of 1.9x (H1 2014: 0.7x), with pro-forma net debt to EBITDA being 1.6x.

· Basic EPS up 59% to 46.5 cent (H1 2014: 29.2 cent).

· Interim dividend per share up 28% to 8.0 cent (H1 2014: 6.25 cent).

· 11.3% ROCE (H1 2014: 12.4%) with annualised ROCE of 14.4% post the full year contribution of recent acquisitions.

Business Highlights:

· Strong delivery overall with encouraging organic growth complemented by significant development activity.

· Insulated Panel revenue growth of 43% to €753m, reflecting solid organic growth in key markets, combined with the acquired sales of Joris Ide and Vicwest.

· Insulation Boards revenue growth of 44% to €319m, largely driven by the Pactiv and PAL acquisitions late in 2014, as well as robust sales growth in the UK and Western Europe.

· Environmental sales were slightly ahead and profitability has recovered significantly.

· Access Floors delivered a solid performance in North America, countered by slightly weaker EU sales. Sales overall were ahead by 22%.

· Organic capacity expansion and plant upgrades planned in Belgium, France, the Nordics, UAE, Mexico, US, Australia and Russia. These facilities, across both Insulated Panels and Insulation Boards will come on stream progressively between now and 2020.

Summary Financials:

*Operating profit before amortisation of intangibles

Gene Murtagh, Chief Executive of Kingspan commented:

"Kingspan has had an exceptionally strong start to the year, underpinned by solid organic growth. Good progress has also been made with the integration of the Joris Ide and Vicwest businesses acquired during the period, both of which contribute significantly to the global evolution of Kingspan. With reduced levels of economic uncertainty in Continental Europe, and improving levels of building activity in the UK and US, we are optimistic about the outlook for the full year."

For further information contact:

Business Review

The first half of 2015 has been a record period for Kingspan which resulted in revenue growth of 39% to €1,235.3m and trading profit growth of 61% to €111.7m. Pre-acquisitions, these growth rates were 13% and 30% respectively, benefitting also from significant year-on-year currency and raw material gains. Trading margin was 9.0%, ahead of prior year by 120bps reflecting the strong leverage in core markets and complemented partly by the timing of recent acquisitions which did not include their typically lower winter trading period.

Revenue in Mainland Europe, our largest market, grew by 46% and represented 37% of total Group turnover in the period. The Joris Ide acquisition, completed in March 2015 for a consideration of €320m, contributed €138m to revenue in the period. More generally, our sales performance in Germany has continued to improve, as it has in the Benelux, whilst France has been stable at an organic level. Central Europe has been mixed although broadly flat in aggregate. Underlying revenue in the Gulf region was steady, and order intake improved notably which should translate into sales over the latter half of the year. North America has been performing well, and Australasia has hit a more challenging patch on revenues as we prioritise margin over volume.

During the first half of the year, we completed two substantial deals for a total outlay of €459m. Joris Ide, the larger of the two, is a Belgium based manufacturer of Insulated Panels and related products with further facilities in France, Germany, Romania and Russia. The Joris Ide brand and business model are distinct and are complementary to Kingspan. We intend growing this business and brand independently from our existing presence in Continental Europe and, in time, further afield. Vicwest, a Canadian based manufacturer of Insulated Panels and metal profiles was acquired in May. In addition to its Canadian facilities, it also has two Insulated Panel plants in the US, addressing a tier of the market previously not serviced by the Kingspan brand. As with Joris Ide, it is our intention to grow this business along the lines it has been developed to-date, while simultaneously consolidating the Canadian manufacturing footprint. Both businesses are integrating smoothly and are already seeing some of the Kingspan operational and material cost benefits.

Since the period end we have completed the acquisition of SPU Oy, a Finnish based rigid insulation boards business. Revenues are in the order of €25m and it represents our first manufacturing step into the Nordics insulation sector. The business is currently undergoing a complete brand migration to "Kingspan Insulation".

Insulated Panels

(1) Comprising volume +3%, price/mix -1%, currency impact +9% and acquisitions +32%

UK

Activity in the UK has continued to improve through the early part of 2015, and our project pipeline indicates that this is the likely trend for the foreseeable future. Despite continental competition having a currency advantage at present, Kingspan's volume has grown solidly owing largely to the specification nature of our business, and the unparalleled product suite offered in this market. In addition to that, Kingspan Energy, our roof and photovoltaic combination, has continued to gain traction within and beyond the UK with an active presence now in North America.

Mainland Europe and the Middle East

Our end markets remain mixed across Continental Europe. We have continued to grow our position in Germany, despite a relatively poor start to the year in the general market. Our Insulated Panel sales in the Benelux continue to recover, aided somewhat by the macro improvements in The Netherlands, while France has performed solidly across all of our brands. Central Europe remains broadly flat and volume in the Nordics market has grown well. Turkey is showing some recent signs of improvement and the project pipeline is increasingly encouraging, albeit from a low base. The Gulf region has been relatively slow on deliveries in the first half, although a growing orderbook is likely to pave the way to revenue improvement in the second half and early 2016, which will be supported by an investment in a new insulated panel line at our Dubai factory.

In its first few months under our ownership, the Joris Ide business has performed as expected. To support the further evolution of this distinct brand, we plan to install new insulated panel capacity in Belgium, France and Russia, phased over the coming two years.

Americas

Growing conversion from traditional systems, and our position at the forefront of this dynamic, has delivered another period of double-digit sales growth across North America. Canada, having had a relatively weak start to the year, has picked up notably in the second quarter. The outlook for the second half is encouraging, and we are finalising plans to enter the Mexican market, through a greenfield expansion over 2016/2017.

Australasia

This region has delivered strong sales on the back of a strong orderbook at the end of 2014. Order intake has been more challenging as we prioritise margins over volume. This is likely to lead to sluggish second half sales with a current emphasis on rebuilding a strong specification led pipeline for 2016.

Ireland

Volumes in Ireland are ahead of prior year as the market slowly recovers.

Insulation Boards

(1) Comprising volume +2%, price/mix +3%, currency impact +11% and acquisitions +28%

UK

Insulation Board sales volume grew ca. 5% in the first half, owing mainly to continued growth in penetration of Kooltherm®, and the general construction recovery across the UK. The operating result has also been complemented by significant purchase price improvements, and the strength of sterling. As with Insulated Panels, these raw material benefits will unwind over time. Specifications for Optim-R®, our leading edge vacuum insulation, have been steadily increasing albeit still at relatively embryonic levels.

Mainland Europe and the Middle East

Our position in Continental Europe continues to develop into a meaningful presence across much of the region. Revenue has grown consistently in Belgium and France, and after a few years of stagnation in the Netherlands growth has resumed there also. Germany, particularly in the agri-sector, has hit a tough patch, however our volumes of Kooltherm® have continued growing in the residential segment. The Nordics, another key area of focus for Kingspan, has received a boost following the acquisition in July of SPU Oy, now rebranded to Kingspan Insulation. This represents our first manufacturing presence in the region, and will serve as a platform for expanding our PIR, Kooltherm® and Optim-R® technologies.

Our Insulation Board business in the Middle East has performed strongly in the first half and the developing specification bank has been very encouraging.

Americas

Almost one year into the acquisition of Pactiv Insulation, now rebranded as Kingspan, the business has developed well in its core XPS product category, which is manufactured at the Winchester facility in Virginia. This plant is effectively now at full capacity and our focus is on refining an investment plan that will see capacity rise by the annual revenue equivalent of $40m. We expect to commission the new line by mid 2017. In the meantime, we are developing a specification presence around growing our Kooltherm® product range across North America. This should become an increasingly attractive proposition as the market becomes ever-more receptive to low-energy building solutions.

Ireland

Sales revenue in Ireland has grown significantly in the first half, driven by Kooltherm® as well as a gradually improving construction backdrop. This trend can be expected to continue for the foreseeable future.

Environmental

This recent period at the Environmental Division has proved one of the more encouraging in recent years. Following a relatively prolonged spell of either stagnant or declining sales, activity has now stabilised. With the additional leverage benefits of a shrunken overhead base, profitability has grown markedly in the period.

Growing this business more internationally is now key, with particular emphasis on environmental fuel storage solutions, water and treatment applications.

Access Floors

(1) Comprising volume -6%, price/mix +10% and currency impact +18%

This division has experienced mixed performances by geography during the first half of 2015. In North America revenue grew significantly, driven largely by the expanded datacentre product suite that has been developed under the Tate brand as well as a comparison against a tough start to 2014. This product category will provide significant longer-term scope for this division, at a time when the traditional office floor market still remains somewhat subdued. This segment too should, in time, see the resumption of growth in high rise office across North America.

Despite a very strong orderbook in the UK, deliveries in the early part of the year declined marginally from prior year. This trend is not expected to continue with sales into London, in particular, expected to show significant growth towards year-end and into early 2016.

Financial Review

Overview of results

Group revenue increased by 39% to €1,235.3m (H1 2014: €889.3m) and trading profit increased by 61% to €111.7m (H1 2014: €69.2m). This represented a 29% increase in sales and a 44% increase in trading profit on a constant currency basis. The Group's trading margin increased by 120bps to 9.0% (H1 2014: 7.8%). The amortisation charge in respect of intangibles was €3.7m compared to €2.2m in the first half of 2014 with the increase reflecting, primarily, intangible assets acquired in respect of Joris Ide in March 2015 and Pactiv Insulation in October 2014. Group operating profit after amortisation grew 61% to €108.0m. Profit after tax was €82.4m compared to €49.9m in the first half of 2014 driven, in the main, by the growth in trading profit. Basic EPS for the period was 46.5 cent, representing an increase of 59% on the first half of 2014 (H1 2014: 29.2 cent).

The Group's underlying sales and trading profit performance by division is set out below:

The Group's trading profit measure is earnings before interest, tax and amortisation of intangibles:

Finance costs (net)

Finance costs for the period were modestly higher than the same period last year at €7.6m (H1 2014: €7.0m). Finance costs include a non-cash charge of €0.1m (H1 2014: €0.1m) in respect of the Group's legacy defined benefit pension schemes. A net non-cash charge of €0.4m was recorded in respect of swaps on the Group's USD private placement notes (H1 2014: Nil). The Group's net interest expense on borrowings (bank and loan notes) was €7.1m compared to €6.9m in the first half of 2014. The flat interest charge, despite the higher level of debt, reflects favourable financing initiatives carried out in 2014 and the repayment of a higher coupon private placement loan note on maturity in March 2015.

Taxation

The tax charge for the first half of the year was €18.0m (H1 2014: €10.1m) which represents an effective tax rate of 18% on profit before tax and amortization (H1 2014: 16.2%). The increase in the effective rate reflects the global mix of earnings year on year.

Retirement benefits

The Group has two legacy defined benefit schemes which are closed to new members and to future accrual. In addition, the Group assumed a defined benefit obligation in respect of certain current and former employees of ThyssenKrupp Construction acquired during 2012. The net pension liability in respect of all the Group's defined benefit obligations was €9.9m as at 30 June 2015 (30 June 2014: €6.4m).

Acquisitions

The Group completed two significant acquisitions during the period. In March 2015, the Group completed the acquisition of Joris Ide. Joris Ide is a pan European manufacturer and supplier of insulated panels, profiles and related accessories, with leading market positions in France and the Benelux. It has five insulated panel manufacturing facilities in Belgium, Germany, Romania and Russia, and eleven regional manufacturing sites across Europe. The consideration was €320m, satisfied on completion partly in cash and by the assumption of net debt, with the balance of the consideration satisfied by the issue of three million shares in Kingspan Group plc. The completion balance sheet has been the subject of a fair value exercise and this is set out in note 15 in the accounts.

In May 2015, the Group completed the acquisition of the Building Products ("BP") division of Vicwest Inc. ("Vicwest"). It comprises three Insulated Panel manufacturing plants, one of which is to be disposed of under an arrangement with the Canadian anti-trust authorities, in addition to a number of profiling facilities across Canada and the US. The total consideration was €139m, including the assumption of net debt. Given the proximity of completion of the acquisition to the period end the fair value exercise has not yet been completed.

Free cashflow 

*Earnings before finance costs, income taxes, depreciation and amortization

**Excludes working capital on acquisition but includes working capital movements since that point

Working capital at 30 June 2015 was €332m, an increase of €68.7m in the period. This increase is driven by the working capital on acquisitions in the period, partly offset by a reduction in working capital in the underlying businesses.

The average working capital to sales % was 14.2% (11.5% when adjusted to reflect the annualized sales of the current period acquisitions) in H1 2015 compared to 12.7% in H1 2014 and was helped in 2015 by an untypical working capital mix some of which will unwind in the second half.

Net Debt

Net debt increased by €323.8m during the first half to €449.3m (31 December 2014: €125.5m) due to acquisitions completed in the period. This is analysed in the table below:

Capital Structure and Group Financing

The Group funds itself through a combination of equity and debt. Debt is funded through a combination of syndicated bank facilities and private placement loan notes. The primary bank debt facility is a €300m revolving credit facility, with a syndicate of international banks, with a term to March 2019.

In December 2014, the Group agreed a €127.5m private placement loan note with equal maturities of 6, 8 and 10 years. These notes were drawn in March 2015 to fund the repayment of maturing loan notes of $158m.

Also in December 2014, the Group agreed bi-lateral facilities of €190m with three banks with a two year maturity, of which €150m was drawn at period-end.

The Group has two US Private Placement loan notes in issue and the total US Private Placement debt outstanding at period-end was $242m. $42m matures in March 2017 with the balance of $200m maturing in August 2021.

The Group has significant available undrawn facilities which provide appropriate headroom for ongoing operational requirements and development funding.

Related Party Transactions

There were no changes in related party transactions from the 2014 Annual Report that could have a material effect on the financial position or performance of the Group in the first half of the year.

Principal Risks & Uncertainties

Details of the principal risks and uncertainties facing the Group can be found in the 2014 Annual Report. These risks, namely volatility in the macro environment, failure to innovate, product failure, business interruption (including IT continuity), credit risks and credit control, remain the most likely to affect the Group in the second half of the current year. The Group actively manages these and all other risks through its control and risk management processes.

Dividend

The Board has proposed an interim dividend of 8.0 cent per ordinary share, an increase of 28% on the 2014 interim dividend of 6.25 cent per share. The interim dividend will be paid on 25 September 2015 to shareholders on the register on the record date of 4 September 2015.

Outlook

Building activity in the UK and US in particular has been gradually improving over the past year, and it is likely this trend will broadly continue for the time being, although we have seen some easing of activity in the UK in recent months. European markets, in general, have underperformed relatively with trading nonetheless stable in most continental markets. With the backdrop of broader Eurozone uncertainty now dwindling, any improvement in consumer confidence should give way to a form of gradual and sustained market recovery, ultimately reflected on building sites and in our volumes. In contrast to this our input environment has been at a cyclical low in recent months. Given past experience we anticipate this situation to harden over time. Similiary, the impact of Euro denominated exchange rates is significantly better than the average rates over the last ten years.

These factors, combined with our well established energy driven conversion model, should see Kingspan grow steadily over time and into the future.

RESPONSIBILITY STATEMENT

Directors' Responsibility Statement in respect of the half-yearly financial report for the six month period ended 30 June 2015

Each of the directors of Kingspan Group plc confirm our responsibility for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the Republic of Ireland's Financial Regulator and with IAS 34 "Interim Financial Reporting" as adopted by the EU. We confirm that to the best of our knowledge:

a) The condensed consolidated half-yearly financial statements comprising the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and related notes have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the Republic of Ireland's Financial Regulator and with IAS 34 "Interim Financial Reporting" as adopted by the EU.

b) The interim management report includes a fair review of the information required by:

i) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations 2007, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations 2007, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

The directors of Kingspan Group plc, and their functions, are as listed in the 2014 Annual Report, with the exception of the following changes during the period:

· Kieran Murphy retired as a non-executive director on 7 May 2015;

· Bruce McLennan was appointed as a non-executive director on 26 June 2015.

On behalf of the Board

Independent Review Report to Kingspan Group PLC

Introduction

We have been engaged by the company to review the condensed consolidated financial statements for the six months ended 30 June 2015 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Transparency (Directive 2004/109/EC) Regulations 2007 as amended ("the TD Regulations") and the Transparency Rules of the Central Bank of Ireland. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the TD Regulations and the Transparency Rules of the Central Bank of Ireland.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for ensuring that the condensed consolidated financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated financial statements based on our review.

Scope of review

We conducted our review in accordance with the Financial Reporting Council's International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated financial statements for the six months ended 30 June 2015 are not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU, the TD Regulations and the Transparency Rules of the Central Bank of Ireland.

Roger Gillespie 24 August 2015

for and on behalf of KPMG

Chartered Accountants, Statutory Audit Firm

1 Stokes Place

St. Stephen's Green

Dublin 2

Ireland

Kingspan Group plc

Condensed consolidated income statement (unaudited)

for the 6 month period ended 30 June 2015

Kingspan Group plc

Condensed consolidated statement of comprehensive income (unaudited)

for the 6 month period ended 30 June 2015

Kingspan Group plc

Condensed consolidated statement of financial position

as at 30 June 2015

1 The transfer of shares relates to the 3m treasury shares issued as part of the Joris Ide acquisition. See note 15.