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Operator: Hello, and welcome, everyone, to the Kingspan Half Year Results 2025. My name is Becky, and I'll be your operator today. [Operator Instructions] I will now hand over to your host, Gene Murtagh, Group CEO, to begin. Please go ahead.
Gene M. Murtagh: Thank you, Becky, and good morning, everybody, and welcome to our H1 results call. Lots to get through today. So we'll take you first of all to Slide #3, please, titled H1 '25 in Summary. So just on that, our revenue came in 8% ahead of prior year, EUR 4.5 billion; trading profit, up 5%; EPS of EUR 1.72 is up 4% on a pure basis. And as always, on our greenhouse gas emissions, a tremendous progress, down 63% in real terms versus 2020. In terms of just picking out some of the kind of key points of the first half, I think it's important to point out that it has been and continues to be a pretty unforgiving environment. And I think in the context of that, our catch-up in the second quarter really reflected quite a resilient performance versus what was a very slow start to the year. Our reported margin is down slightly to 9.8%. But in fact, that masked what is an underlying increase in the margin by 20 bps. The dilution relates in the large part to Nordic Waterproofing, which is a heavily second half business. That was pretty predictable, and we would expect it to deliver much more strongly, obviously, in the second half. But we have to bear that in mind for next year as well. It's a big business, and it's highly seasonal. So that's really the issue around the margin reduction. We've introduced 2 new segments to replace what was 5. This really is to reflect increasingly how the business is being run and the closeness of what were those older segments in terms of how that's going to function going forward. In summary there, the Insulated Building Envelopes business revenue increased by 8%, which was largely around acquisitions, including Nordic. And the Advanced Building Systems business grew strongly, largely around the continued progress in the data segment. So revenue there grew by 12%, and that was largely organic. We've announced this morning as well as share buyback of up to EUR 650 million over the next 18 or 24 months. That doesn't interfere, in any way, to be clear, with the development agenda that we've been pursuing forever, basically. And our pipeline on that front continues to be as full and healthy as it's ever been. In terms of investments made in the first half, EUR 400 million was the total in both acquisitions and organic CapEx. And on the acquisitions side, the chunkier part of that really was the continued purchase of Steico shares and the earnout and also just finishing off on the acquisition of Nordic Waterproofing. And then ongoing bolt-ons, some of which we've even announced since the period closed. So that's it in a nutshell, and now I'll hand you over to Geoff.
Geoff P. Doherty: Thank you, Gene. I'm moving to Slide 13, financial highlights. So group revenues, a little over EUR 4.5 billion in the first half, up 8% at a headline level or, at constant exchange rates, up 9%. Trading profits of a little under EUR 443 million, up 5% or up 6% at constant exchange rates. Earnings per share progressed by 4%. The interim dividend is in line with the first half of last year. I'll come to the constituents of cash flow shortly, with a modest free cash outflow in the first half of the year. The group's trading margin on a reported basis is down 30 basis points. But actually, the like-for-like trading margin, as Gene outlined, is up by 20 basis points, with the reported margin solely being down due to the initial consolidation of Nordic Waterproofing in the first half of 2025. Our net debt at the end of June stood at a little over EUR 1.9 billion, and I'll come to the debt movements in a second. And our net debt to EBITDA, 1.74x, so comfortably in investment-grade territory. Moving to Slide 14, just to bridge sales and profits in the first half. Currency was a modest headwind in the first half. That will be a steeper headwind which is baked into our guidance, but it's a steeper headwind into the second half given the exchange rate movements since the beginning of the year. Acquisitions contributed EUR 358 million of revenues half year-on-half year. And you'll note from the right-hand side of the page, net, they delivered a little under EUR 17 million of profits in the first half. So initially dilutive. Clearly, over time, they'll progress. And it also reflects a strong element of seasonality, particularly in the Nordic Waterproofing business, which is the significant component of the acquisition sales. So underlying sales, modestly ahead in the first half. And from a profit perspective, you'll see the currency was a headwind of about EUR 3.5 million. We would estimate that will be closer to EUR 20 million on a full year basis for FX in 2025 versus '24, and that's factored into the approximate EUR 950 million that we've guided. The underlying profitability, up slightly year-on-year, contributed about EUR 8 million additionally to profitability. From a geography perspective, that's set out on Page 15, no significant change in the geographic profile of the group, first half '25 versus first half '24. You will note that Central and Northern Europe was up by 15%, and that largely reflects the consolidation of Nordic Waterproofing. And I'd also draw your attention to the difference between the absolute change and the constant currency change in the Americas. So at a headline level, we were ahead by 13%, but on a reported basis, ahead by 9%, and that's reflective of exchange rate movements in the period. Turning to free cash flow on Page 16. I would say a free cash outflow in total for the first half. It's worth highlighting that cash generation of Kingspan is typically very second half weighted. Our working capital position is higher in June than it is in December. Our working capital outflow was EUR 288 million in the first half of this year. The working capital-to-sales ratio, up 13.1%, was 120 basis points higher than the June position of 2024. We fully expect that to unwind in the second half. So there will be a reduction of -- or an inflow of EUR 150 million on the working capital line in the second half associated with that. It's just a point in time. Our net CapEx organically was EUR 152 million in the first half. And our CapEx guidance for the full year is EUR 320 million. And tax was an outflow of EUR 69 million in the first half, which was EUR 40 million lower than in the first half of last year. Reconciling net debt on Page 17. The combination of acquisitions and deferred consideration was EUR 246 million. That, as Gene outlined, was the -- taking the full ownership stake of Nordic Waterproofing, buying an additional 10% of Steico as well as completing the earnouts in respect to Steico dividends, EUR 52 million. And net debt ending the period of EUR 1.915 billion. Ignoring development, our plan is that we would have a net debt figure predevelopment and prebuyback of EUR 1.5 billion by year- end. So we expect to generate significant cash into the second half of the year. The strength of our balance sheet is highlighted on Page 18. Net debt to EBITDA, 1.74x. We have an EUR 800 million green revolving credit facility with a syndicate of global banks. That's fully undrawn and committed to May 2028, with outstanding private placement loan notes of EUR 1.477 billion and our debut public bond of EUR 750 million. The weighted average maturity of all of our outstanding debt is a little over 4.5 years. And our total available liquidity between cash balances on hand and committed undrawn lines is about EUR 1.4 billion. So that gives us plenty of development headroom. The long-term value creation of Kingspan is set out on Page 19, which plots the growth in revenues, profitability and earnings from 2014 through to the end of last year. It is worth emphasizing that the guidance that we've issued for the first time this year, this is the first time we've actually prescriptively given guidance for 2025. If we deliver that, it will be another record year for the business, notwithstanding difficult end markets that we're currently dealing with and continue to grow profitability through. So with that, I hand back to Gene.
Gene M. Murtagh: Excellent, Geoff. Thank you. We're moving now to Slide 22, which is titled Outlook. So essentially, things have firmed up, as we highlighted earlier, from a very slow start. It's far from exciting, we'd have to add. It's -- as we said, it's still a relatively tough trading environment. But we expect the Insulated Building Envelopes business to continue to benefit from structural growth as methods of construction move towards more energy-efficient systems. That's been clearly evident over many years, and it's continuing. The Advanced Building Systems is probably going to accelerate in terms of its growth and opportunity, in particular, capitalizing on the tech sector as it seeks out really the best-of-breed solutions for hyperscalers worldwide. We're tone -- we're very well connected into that whole segment, as you know, and in fact, right across the product offering. And I think very importantly, the backlog across the major businesses is ahead of the same point last year, which naturally does point towards a stronger second half. And the second half will be stronger than prior year as well. The exchange rate environment is very difficult to judge. It's up and down by the week. So far, that's worked against us. Let's see how that pans out for the remainder of the year. But our best assessment of the outcome for this year as a whole is an operating -- or a trading profit of in or around EUR 950 million, which, if we get there, is about a 5% improvement over 2024. And so that's it in summary, essentially. And now we're open to whatever questions you may have. Becky?
Operator: [Operator Instructions] Our first question comes from Shane Carberry from Goodbody.
Shane Carberry: The first question, just if you could expand a little bit on what you mentioned a moment ago, Gene, just in terms of the Advanced Building Solutions opportunity. And could you just talk about how kind of the product set has been evolving there and how we should think about the product set evolving into the future? And then the second is just, I guess, we haven't caught up since you kind of made the decision to enter into the kind of shingles market in the U.S. Could you give us a little bit more color around kind of the rationale for that, how we should think about the competitive dynamics in that market as well? Would be really helpful.
Gene M. Murtagh: Sure, Shane. So just on the Advanced Building Systems, the -- obviously, it's a very wide product portfolio, which is increasingly becoming exposed or exposing itself to the tech sector, which is obviously accelerating at a hell of a pace. And as that accelerates, essentially, the demand for energy conservation or management of heat becomes intensified, largely around AI, which creates basically multiples rather than percentages higher of the heat. And as a result of that, the solutions have to obviously be able to deal with that. We've gone -- we're increasingly involved in air management within data centers. So we went from floors into stick-built HACs into modular HACs, now significantly into air movement around data centers. We're going to increase our exposure there pretty radically over the coming years. And then in terms of liquid cooling around this, you've got liquid cooling of the HACs, and you've got liquid cooling direct to the racks themselves, which we're at the very early stages of entering. And all of that really presents a very, very significant opportunity for the group. And essentially, that's the direction of travel on that whole side of things. On the shingles market, it's basically part of our whole roofing approach to North America. We've -- I think we've been pretty clear about what we're doing on the commercial side, which, by the way, is advancing very well, the plant in Oklahoma and in Maryland. And we're becoming increasingly encouraged by interaction from the market and the appetite for Kingspan into the business there. And then shingles, as you know, is really around the residential opportunity. It's a highly consolidated, dense market, and we see an opportunity to basically enter by building. And then clearly down the line, that may lead to some activity beyond the build itself. But it's a very resilient market. It's probably 80-plus percent for the refurb. So it's got clear traction. And therefore, we're going to have a go at entering it.
Operator: Our next question comes from Cedar Ekblom from Morgan Stanley.
Cedar Ekblom: Can you talk a little bit about the largest business within the group, which is the panels offering? Maybe you can give us a little bit of detail on how you've seen your pricing, order intake developed in that product segment, maybe a bit of color across the regions, Europe versus U.S. And then if we look at the key raw material inputs for that product category, we're not really seeing much inflation. I know that there's been some ambition to increase steel prices in Europe, but those don't seem to have stuck in the last couple of weeks. Can you give us a little bit of visibility on how we should think about the pricing and volume trends for that product category into the second half and then also how we should think about margins?
Gene M. Murtagh: Yes. So just, like broadly on the intake side, we're up 5% or 6%. That's on a like-for-like worldwide. So all of that actually, given the fact that absolute construction is clearly negative in most markets, is pretty encouraging. And our order bank, as I said, is up encouragingly for the second half of the year as well. Now it's obviously a different story and a radically different story by markets and by country. So probably we're seeing the U.S. has had strong activity, strong order bank, but it's not as urgent in terms of delivery requirements as we'd like to see it. Latin America is powering ahead, and much of Europe is reasonably encouraging, actually, probably outside of the U.K. From a pricing perspective, I think stable is pretty much as we find it. You're right, there have been attempts to push steel ahead in Europe that are definitely faltering. So we don't expect steel going up in the near term. We've obviously got the whole chemical side of things as well, which varies a lot by geography, too. But from a pricing perspective, there is and is going to be more cost and, as a result, price inflation in North America. And that's happening for obvious reasons. And as always, we expect to be able to push that through and hold our margins pretty much around where they are now.
Operator: Our next question comes from Allison Sun from Bank of America.
Allison Sun: I have 2 questions. So first, this EUR 950 million guidance for the full year '25, how should we think about the margin implied by this one? And number two is on the share buyback. I wonder if there's any, I don't know, like pace you guys are expecting. Should we think it's a steady share buyback or maybe there's some acceleration? Yes.
Geoff P. Doherty: Thank you, Allison. Firstly, on margin, what the approximately EUR 950 million trading profit implies is a group trading margin north of 10%, in the region of 10.2%, 10.3%. Very hard to be specific beyond that. We expect Insulated Building Envelopes to nudge a little over 10%, and Advanced Building Systems ought to be at or around 11%, just given the growth in that business that you'll have seen in the first half, which will continue into the second half. So we might reach the 10.5% that we had at a group level for 2024, but we'll be north of 10%.
Gene M. Murtagh: And on the buyback, it's very difficult to predict. We judge that as we go along. It may be steady, it may be lumpy depending on what's -- how the stock is trading and what lumps are out there. It's -- just to be clear about this, it doesn't interfere whatsoever with the development agenda that we've had for a long time and we will continue to have, obviously, outside of anything very significant. And our thinking around it all is essentially, we're buying and continue to buy assets in or around the rating that the group is at. And obviously, we know Kingspan better than we know anything else. And we're the best asset in the sector worldwide, and that's essentially our interest in doing it. So before anybody goes there, have we run out of ideas? Absolutely far from it. We've tons of ideas beyond this.
Operator: Our next question comes from Elodie Rall from JPMorgan.
Elodie Yvonne Daniele Rall: A follow-up on the buyback, first of all. I was wondering what drove the rationale for the decision. I mean you seem confident about the growth pipeline. But is this really as -- do you see as much growth as you saw in the past? Maybe you can elaborate a little bit on what you see in the pipeline going forward versus what you've done. And you've said that net debt to EBITDA is expected at 1.5x by the end of this year predevelopment, prebuyback. So where would you be comfortable to bring that leverage ratio to adding acquisition and buyback? So that's my first question. And second, just on housekeeping. Could you give us the scope for the full year that you expect, the scope impact? And maybe, well, I'll stop here.
Geoff P. Doherty: Thanks, Elodie. Well, firstly, on buyback. The -- deliberately, it is over an 18- to 24-month period. We have, as Gene has outlined, a very healthy and full development pipeline. So I'd highlight that we invested EUR 400 million in development in the first half of this year alone between earnouts and organic CapEx and acquisitions. So that pipeline remains healthy. From a balance sheet perspective, predevelopment and prebuyback, we expect our net debt to be about EUR 1.5 billion at year-end, which actually is leverage of somewhere between 1.2 and 1.3x. So that gives us significant balance sheet headroom to be able to develop the business and indeed progress the buyback extensively. We're strongly committed to our investment-grade credit rating. We're highly cash generative. We have a pretty low dividend payout ratio as well. So the lion's share of our cash flow is going to be invested in continuing to develop the business. So I think all of that is highly relevant in the context of how we progress both as we go forward. From a scope perspective, we expect the M&A scope to deliver somewhere between EUR 35 million and EUR 40 million of profitability in 2025.
Operator: Our next question comes from the Flor O'Donoghue from Davy.
Florence O'Donoghue: My 2 questions are as follows. First one is, I might just ask on the data side, on capacity, is there a risk of being capacity constrained? Just your latest update on capacity expansion projects, et cetera. And then the second one is, I might just ask on U.S. roofing, just the initial feedback you've been getting from distribution partners or potential partners and maybe how you feel about the product and how you're going to differentiate the offering at this time next year once you're fully up and running with the new plants.
Gene M. Murtagh: Okay, Flor. On the data capacity, we -- like, I suppose, a great problem we're having is that we were constrained, if you want to call it that way, by the speed at which we can actually build capacity. So that's really a superb problem. It's worldwide, but I'd say it's largely around North America in terms of just the intensity of the constraint. So we've -- the plant that we opened in the Northeast last year is literally full to the rafters 24/7 already. We started production in Arkansas, which is running on a full single shift now, and actually demand is there to fill that completely 24/7 as fast as we possibly can. And we're now scoping out another location in the U.S. And that clearly -- like beyond that, we've acquired the RXL business in California which, product-wise, brings us into a new segment as well as giving additional capacity. And the same is happening in terms of expansion across Europe and Asia, where we expect to start production very shortly in Vietnam. That's to complement everything we're doing in Australia. So it's really very exciting. And as I say, we can -- as fast as we can build, we can sell. That's not an issue at all. From the U.S. roofing perspective, first of all, the feedback is -- gets more encouraging by the week. We're having engagement clearly with specifiers, with roofing and main contractors and, obviously, with the distribution base, which in itself is actually going through a period of disruption. And I think that will become more and more disruptive as time goes on. So that whole environment kind of works for us. And as I said, the feedback has been extremely encouraging. In terms of differentiation, we have kind of product and offering differentiation. Our focus is going to be on TPO and polyiso board as well as some other insulation types and then, after that, PVC membrane. We're staying away entirely from EPDM, which is a declining part of us. And obviously, bitumen isn't of interest to us in the U.S. We're going to be introducing a QuadCore-based board as well beyond the PIR. That would be fundamentally differentiated from thermal fire circularity from all the existing products that exist in the market. That's probably 18 months away before we get at that, but very clearly on our agenda, and we would expect it to become a very sizable portion of the business the same way that it has the insulated panel offering. And more widely than that, Flor, there's the opportunity to -- like America likes warranty systems. So roof packages is typically how things are approached. It's sold as a full warranty system. And we see the same on the insulated panel and basically on wall and façade applications. So we will very quickly be moving towards a combined offering of roof and wall and essentially offering the building owner a complete warranty on the envelope. And that in itself will be wholly differentiated from anybody else in the market and, frankly, the biggest opportunity we see in the U.S.
Operator: Our next question comes from Alexander Craeymeersch from Kepler.
Alexander Craeymeersch: So the first one would be that you mentioned some -- Western Europe as being short-term attractive, but yet you don't really see a significant growth in the first half of the year, year-on-year. What gives you the confidence to make that statement? Is that like the order book? Is this just a general perception? And then the second question would be on the cautiousness of North America, where you say basically on the short term, it's optimistic but not flagged as such. So I'm wondering why there is that cautiousness embedded in that outlook. Is that only related to the FX headwinds? Or do you also see a change in order book?
Gene M. Murtagh: So in terms of the Western European markets, Alexander, it's very mixed. Like we've -- like Germany and France, we'd be quite encouraged by an improvement, as we've highlighted in Central Europe. The U.K. is, not surprisingly, in an increasingly negative place, I would say. And then in Iberia where we've got a very strong and growing position, that's actually going very much in the right direction. So it's kind of a -- it's very mixed, but on the whole, we wouldn't feel too bad about Europe in general. That's what I was getting into the nitty-gritty of all the different product areas. And in the U.S., like the issue in the U.S. is you've got tech-related segments which is utterly detached from the realities of normal regular markets. So it's just firing ahead, I would say, at a totally unbridled pace. And then you've got the regular business, which is very shaky in general, never mind in Kingspan. And that's -- I think that's clear from all the indicators and reports that you would see. And essentially, that just comes down to the level of uncertainty that there is in the market. And that's all we're seeing basically.
Operator: Our next question comes from Pujarini Ghosh from Bernstein.
Pujarini Ghosh: Can you hear me?
Gene M. Murtagh: We can.
Pujarini Ghosh: So going back to the U.S. roofing market, I mean, you've just -- I mean you're expanding greenfield, and you'll have some components of the entire roofing system as they call it. So what are your plans of kind of trying to get all of the elements that are required for the system selling? Do you plan to, over time, kind of build up all of these elements on a greenfield basis as you're doing now? Or potentially down the road, do you think there could be opportunities of acquisitions as well, I mean, which is obviously something that you've done very well in the past in other parts of the business?
Gene M. Murtagh: So in terms of the offering, it's kind of like we highlighted before. It's around membrane, insulation, vapor barriers and the accessories that go along with all of that. And it's focused on TPO and PVC membrane as the outer layer. So we're brownfielding these in Maryland and Oklahoma and likely in Georgia next. And in terms of the opportunity for acquisitions, yes, those exist. Some of them reasonably large scale, but plenty of bolt-on opportunity around the edges to enhance the overall offering that we will be bringing to market. So I think it's going to be a combination of. And as you rightly point out, we've been successful in bolting on acquisitions into the business, and we expect to do the very same in this sector in the U.S.
Operator: [Operator Instructions] Our next question comes from Yassine Touahri from On Field Investment Research.
Yassine Touahri: First, on your roofing expansion in the U.S., I understand that you're starting one plant in early 2026. You've got a target of $0.5 billion. Do you have any view of how much you can generate of this $0.5 billion in 2026? Is a couple of hundred million dollars realistic? And the situation, I also understand that you're talking about QuadCore. Is QuadCore something that will be attached to a membrane? Or are you really targeting the world market and to try to replace traditional insulation with fiberglass in the U.S. with boards? Maybe a follow-up question on the end markets. So I understand that the data center market is doing extremely well. Is there any way you can quantify your exposure of the group? And then if you can give a bit more color on the other market like warehousing, I understand in -- was under pressure and maybe stabilizing, distribution, logistics. It would be great to get a bit of a feel about where could we see a recovery after the uncertainties on trade abates.
Gene M. Murtagh: So on the -- yes, so about $0.5 billion, but by the way, that's just -- that's the first 2 facilities. That doesn't include the shingles plant. That's -- we're making very good progress on scoping that out actually right now, like literally right down to site selection. So -- but on the industrial roofing side, yes, we will get going early '26. In fact, we'll be making products late '25. But that has to go through commissioning and testing and all the rest. Like $200 million is absolutely achievable in year 1. And the QuadCore offering, as you highlight, that's really coming -- that's going to be a 2027. We're going to produce polyiso boards straight away. In fact, we'll be producing it before membrane. And then the QuadCore offering comes thereafter, and it's very specifically around an upgraded conversion from polyiso insulation in the flat roof. So we're not targeting QuadCore in an insulation board against fiberglass and walls. That's not what it's about. It's about upgrading the flat roof offering. And then...
Geoff P. Doherty: On your question around the data center category, clearly, it's a very strong category globally, but it's still -- at a group level, it's still a single-digit percentage of our group sales.
Gene M. Murtagh: But growing very, very rapidly.
Yassine Touahri: And the other end markets, do you see -- I think a lot of investors are trying to understand when -- what could be the trigger for people that are holding on their decision to invest in, I don't know, warehousing, cold storage. What could we -- what should we watch? And what could be the trigger of the recovery? And what would be the timing?
Gene M. Murtagh: Like stability. It's geopolitical stability. Some certainty around what's happening in Ukraine, in particular, around how that's affecting Europe, they are the things that will trigger decision-making and activity. And frankly, outside of that, I wouldn't expect anything to change.
Geoff P. Doherty: We can only influence what we can influence. We'll continue to develop and grow the business as we've outlined. I suppose the other point just worth highlighting before we wrap is on PowerPanel. It's pleasing for us to note that we've 30 million meg of project specified.
Gene M. Murtagh: 30 meg.
Geoff P. Doherty: Sorry, 30 meg.
Gene M. Murtagh: 30 million meg, we're a little bit away from that. That's the plan.
Geoff P. Doherty: 30 meg specified. So very early and encouraging progress on that front, and that's just in 2 markets.
Operator: [Operator Instructions] We currently have no further questions, so I'll hand back to the management team for closing remarks.
Gene M. Murtagh: That's excellent, Becky. Thank you all for joining, and we'll be speaking, no doubt, to you all individually over the coming days and weeks. Take care.
Geoff P. Doherty: Thanks, everybody.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.