Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Kingspan Group plc
— IKON Global Innovation Centre Kingscourt, Ireland
Annual Report & —
We believe we have to challenge building Financial Statements 2019 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. Murtagh CEO, Kingspan Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
The value we create Product 18 Kingspan products and IKON is our new Global Innovation Centre, systems have been utilised on Within our 2019 Annual Report @ IKON, from across each of our dedicated to advanced material science we highlight a number of case five businesses. studies which demonstrate and the digitalisation of construction. the many ways in which Energy/ IKON’s high-performance building It has been built to the highest standards Kingspan creates superior Carbon envelope and optimised lighting value for building owners and Saving @ contribute to an expected 50% of sustainable design and is a showcase building occupants, utilising outperformance versus the innovative products that can ASHRAE 90.1-2010 baseline. for high-performance building envelope meaningfully contribute to Space/ QuadCore™ panels enabled us to design using 18 Kingspan products and a more sustainable future. Dimensions reduce insulation thickness by @ over 50% versus mineral wool, systems. The building itself is a living increasing useable space and ultimately the value of the asset. research project, providing a foundation Reader note: Health & IKON uses sensors to measure light, Please cross reference Wellbeing noise, temperature, air quality and for future value creating innovation. this information panel @ air pressure to enhance indoor with the case study pages comfort for occupants and as throughout the report. research for future innovation. Speed/ Kingspan’s unitised systems Ease of build and coordinated supply chain Our cover design is inspired by the @ delivered a significantly faster facade design at our IKON Global CASE build time when compared Innovation Centre, Kingscourt, with a built-up system. STUDY Ireland. The photos on this page Aesthetics IKON is a finalist for Project are also from IKON. of the Year, Irish Construction @ Excellence (ICE) Awards 2020. Product: Dri-Design Perforated with QuadCore™ Karrier
Planet The QuadCore™ panels used Passionate/ on IKON are made using Sustainability @ renewable energy and contain over 15% recycled content.
Awards/ IKON is targeting LEED Certifications V.4 Gold Certification. @ — CONTENTS Sustainable Development Goals (SDGs) Business & Strategic Report @ At Kingspan we recognise Chairman’s Statement 10 that action, at scale, Business Model & Strategy 12 is urgently needed to Chief Executive’s Review 20 avert a climate emergency. Financial Review 30 As a business leader we are @ Risk & Risk Management 36 committed to contributing Sustainability Report 42 toward the UN’s Sustainable Development Goals through Directors' Report our products, our processes, The Board 58 @ our partnerships and Chairman’s Introduction 60 our people. Report of the Nomination & Governance Committee 62 Report of the Remuneration Committee 70 Report of the Audit Committee 82 @ Report of the Directors 88
Project Case Studies: Financial Statements 96 Madison Fire Station #14 USA 8-9 Independent Auditor’s Report 98 @ Haus Gables USA 40-41 Financial Statements 102 Notes to the Financial Statements 109 Western Australia Museum Australia 56-57 Studley Castle Hotel UK 68-69 Other Information Aico UK 80-81 Alternative Performance Measures 148 Find out more in our @ Holiday Inn USA 94-95 Shareholder Information 151 Sustainability Report Principal Subsidiary Undertakings 153 Group Five Year Summary 156 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
— CLYMB Abu Dhabi OUR GLOBAL REACH Abu Dhabi, UAE Kingspan Locations
Africa Europe Latvia Middle East Egypt Austria Lithuania Qatar Morocco Azerbaijan Netherlands Turkey With its geometric exterior Belgium Northern Ireland UAE resembling a crystal-like structure, Asia Bosnia Norway India Croatia Poland Americas the venue has already become a Yas Indonesia Czech Republic Portugal Brazil Island landmark, significantly adding Singapore Denmark Romania Canada Thailand Estonia Russia Chile to the integrated leisure, lifestyle Vietnam Finland Serbia Colombia and entertainment experiences France Slovakia Costa Rica Australasia Germany Slovenia Mexico available to visitors. Australia Hungary Spain Panama New Zealand Ireland Sweden Peru
Kazakhstan Switzerland USA GroupKingspan plc — &Annual Report Financial Statements 2019 United Kingdom Sales Manufacturing
4 2 2 3 3 2 6 2 15 7 4 3 3 5 11 3 9 5 37 2 3 2 8 2 9 2
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2 1bn 35,000 400 2 We are committed to recycling Our manufacturing facility at Our wind turbine at Holywell in Wales, 1 billion ocean recovered plastic Castleblayney will use nearly will save over 800 tonnes of CO₂ bottles per annum from 2025. 100% energy generated by emissions per year. This is roughly the solar panels. We will save equivalent to the combined annual Insulated Panels:
over 35,000 tonnes of CO₂. emissions from 400 average petrol cars. KingZip® Linea Standing Seam Roof System — Kingspan Karrier Panel — Find out more in our 32 Sustainability Report Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
— Lower Mill Estate WE ARE Cotswolds, UK PLANET The Lower Mill Estate, a development of PASSIONATE 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. Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019
Insulation: Kingspan TEK Building System
OUR IMPACT OUR COMMITMENTS — — The total projected energy savings* over the lifetime of the Kingspan insulation systems, sold worldwide in 2019, is equivalent to: 2020 2025 2030
ENERGY - Maintain our Net Zero Energy status • • • - Increase our direct use of renewable energy to 60% by 2030 - - • 441m 259 - Increase our on-site generation of renewable energy to 20% by 2030 - - • - Install solar PV systems on all wholly owned facilities by 2030 - - • Over four hundred The annual output and forty-one million of 259 gas-fired barrels of oil power stations 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 - • • 18.1 79m - All QuadCore™ insulation to utilise upcycled PET by 2025 - • • Up to 18.1 times the Taking seventy- - Zero company waste to landfill by 2030 - - • the annual electricity nine million cars consumption of off the road - 5 active ocean clean-up projects by 2025 - • • Greater London annually WATER - 100 million litres of rainwater harvested by 2030 - - • —
*figures are based on savings of insulation systems in use for 60 years. Credit: Habitat First Group 54 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
— SUMMARY FINANCIALS 2 2 2 2 2 2
Revenue EBITDA1 Trading Profit2 Trading Margin Profit After Tax EPS €4.7bn €579.8m €497.1m 10.7% €377.8m 204.6c +7% +11% +12% +50bps +13% +11% GroupKingspan plc — &Annual Report Financial Statements 2019 2018: €4.4bn 2018: €521.2m 2018: €445.2m 2018: 10.2% 2018: €335.8m 2018: 184.0c
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Zon Eichen — 1 Earnings before finance costs, income taxes, depreciation, amortisation and the impact of IFRS 16 Kingspan Insulated Panels: 2 Operating profit before amortisation of intangibles Kingspan1000 AWP Micro 76 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
Product UniQuad® Translucent Walls — @ Madison Fire Station #14 BUSINESS &
Energy/ The UniQuad® translucent daylighting Wisconsin, USA Carbon system contributed to the station’s LEED STRATEGIC Saving @ Platinum rating and its 70% energy saving versus comparable facilities. REPORT
Space/ 2,630 square feet of natural Dimensions daylighting and its associated We wanted daylighting, but with a west @ health benefits. orientation for the main facade of the
Health & Optimal light levels help to reduce building, we knew we’d have to work hard Wellbeing stress, improve concentration and @ promote positive emotional functioning to control solar gain and glare. Instead of to the fire fighters on duty. all glass, we looked for another material.
Speed/ Unitised design enabled fast, efficient How could we minimise solar gain and glare? Ease of build installation and superior quality control. @ The product really stood out for its qualities of daylighting and energy efficiency. The GroupKingspan plc — &Annual Report Financial Statements 2019
Aesthetics Soft, ambient light illuminates the patterning, and the modularity of the station at night, giving it a strong, @ visible presence in the community. system all worked out with our design. Mark Kruser, AIA, Project Manager, OPN Architects
Planet UniQuad® aluminium contains up Passionate/ to 40% recycled content, with Click here to see more Sustainability @ polycarbonate containing up to 10% recycled content and the product itself is continuously recyclable.
Awards/ LEED Platinum Certifications @
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Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
— Board governance and composition Business & Strategic Report The Board is committed to high standards of corporate governance CHAIRMAN’S and has refined its approach to align with the principles of the new UK Corporate Governance Code (2018). STATEMENT 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 In 2019 Kingspan continued its By focusing on our four key strategic solar PV panel, all designed to help engaged in dialogue with our major evolution as the global leader in high- pillars: increased penetration of our our customers efficiently reduce shareholders on the Company’s performance insulation and building existing product suite; the continued energy costs and the environmental strategic and financial performance evolution of Kingspan’s geographic footprint of their businesses. as detailed in the Financial Review envelope solutions. It marked another footprint; differentiation from our in this Annual Report, as well as on year of record financial performance competitors driven by innovation; This year Kingspan also unveiled the our remuneration policy as set out and our new Planet Passionate next phase in its programme to be a in the Remuneration Report. We with total sales of €4.7bn and a goals; Kingspan has delivered a ninth leader in tackling climate change. As look forward to continuing this open trading profit of over €497m. straight year of trading profit growth. part of our 10-year Planet Passionate dialogue with our stakeholders in the GroupKingspan plc — &Annual Report Financial Statements 2019 strategy, Kingspan has committed years ahead. Deeper penetration into our existing to hitting 12 ambitious targets by markets remains a core focus, and 2030, including increasing on-site As part of the process of continually the successful integration of our generation of renewable energy to refreshing the Board, we were pleased Synthesia and Balex acquisitions 20%, achieving a net zero carbon to announce the appointment of throughout 2019 bolstered our impact from our manufacturing Anne Heraty as a non-executive Hungary director to the Board last August. APZ Test Track, Zalaegerszeg position in Europe, whilst the processes, and committing to a acquisition of Bacacier during the target of upcycling one billion PET Anne has more than two decades Insulated Panels: year also gives us a market leading plastic bottles per annum from 2025. of experience as an entrepreneur Dri-Design Rainscreen Facade position in France. and CEO of an international plc, IPN Karrier Panel Management and employees and we are delighted to welcome At the same time we built on our During the year the Board visited her to our Board. entry into new geographies, such as our Joris Ide site in Germany, and Latin America and Southeast Asia, the recently acquired Balex facility in Earlier during 2019, Helen Kirkpatrick which are converting from traditional Poland. We were pleased to have the retired as a non-executive director building methods to more advanced opportunity to meet with local staff having served for almost 12 years on building solutions. We continued our and management, to see the great the Board and various committees. organic expansion with the successful work they are doing and to hear, On behalf of the Board, I would like commissioning of a new insulated from them, their plans for the future. to thank Helen for her wise counsel panel facility in the south of Brazil. and contribution to Kingspan during The first full year of our partnership On behalf of the Board, I want to those years. with Jindal Mectec has performed thank all Kingspan’s management well, whilst our office in Singapore and employees across the globe for Looking ahead continues to grow and provides their hard work and contribution to Whilst 2019 presented challenges a bridgehead to explore further Kingspan’s success in 2019, and we which the business has successfully opportunities in Southeast Asia. look forward to visiting and meeting navigated, I am confident that the with more of the local teams in 2020. diverse and globalised business we 2019 was also a landmark year have built is well placed to address for Kingspan’s commitment to Dividend whatever new challenges and innovation, with the completion of The Board is recommending a final opportunities 2020 may present. Our IKON, our new Global Innovation dividend of 33.5 cent per share, which focus remains on continued growth Centre in Kingscourt. IKON has if approved at the Annual General both organically and through a been built to the highest standards Meeting, will give a total dividend for disciplined acquisition strategy. This is of sustainable design and is a the year of 46.5 cent, an increase supported by investment in research showcase for Kingspan products of 11% on prior year. This continues and development to ensure we have and systems. Significant research the Board’s policy of growing the a product suite that outperforms activities going on in this state- shareholder dividend in line with the the competition, and a sustainable of-the-art facility include the Company’s continued progression. business model through our Planet 10 development of a new fibre-free Passionate goals, which leads our A1 AlphaCore® insulation board, If approved, the final dividend will be customers to choose Kingspan. — the next generation of our market- paid (subject to Irish withholding tax leading QuadCore™ insulated panels rules) on 7 May 2020 to shareholders Eugene Murtagh Chairman and Kooltherm® insulation boards, on the register at close of business 11 and a revolutionary new integrated on 27 March 2020. 21 February 2020 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report — — Business & Strategic Report BUSINESS MODEL THE VALUE & STRATEGY WE CREATE
Kingspan is the global leader in Our businesses: Thermal comfort, indoor air quality high-performance insulation and and natural daylighting are widely Product building envelopes. Our mission is 1.Insulated Panels recognised as the most important Product is at the core of Kingspan’s mission to deliver better buildings for all. We are the to accelerate a net zero emissions Kingspan Insulated Panels is factors affecting occupant wellbeing market leader in innovating high-performance building envelopes and continue to future with the wellbeing of the world’s largest and leading in buildings. push the boundaries of what is possible for efficiency in buildings. We extended our people and planet at its heart. manufacturer of high-performance commitment to innovation in 2019 with the opening of our state-of-the-art innovation We do this through enabling insulated panel building envelopes. 4. Data & Flooring centre, IKON, at our home base in Ireland. high-performance buildings Powered by Kingspan’s proprietary Kingspan is the world's largest and differentiated insulation core that can save more energy, supplier of raised access flooring. Energy/Carbon Saving technologies, a Kingspan panelised carbon and water. Raised access flooring is the most cost Kingspan's innovative insulation technologies significantly improve the energy performance envelope provides building owners effective way of creating a flexible of building envelopes. Our QuadCore™ and Kooltherm® solutions are up to twice as thermally with consistently superior build quality Through our relentless working environment by utilising the efficient as traditional fibre based materials and unlike legacy insulation, our advanced and lifetime thermal performance development of innovative and floor void to manage the distribution insulation doesn't slump or sag and so retains its performance for its lifetime. Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 proprietary technology we have compared with built-up constructions of M&E services and HVAC systems. GroupKingspan plc — &Annual Report Financial Statements 2019 created a portfolio of products using traditional insulation. Our systems have many benefits which create value across a including optimising overall building Space/Dimensions number of key metrics. Critically, 2. Insulation Boards height, achieving faster construction High-performance insulation enables a thinner application of insulation for the same energy through the differentiated thermal Kingspan is a world leader in with greater design flexibility, enabling performance, thereby adding valuable internal space in construction or renovation. In an performance of our innovative Insulation Boards, pipework and easier reconfiguration of a workspace, environment where space is becoming an increasingly scarce commodity, this drives real value solutions, we help design teams, ducting. Our advanced insulation and improving indoor air quality. for a building owner or occupier. architects and ultimately our technologies deliver superior thermal customers to play their part in performance and air-tightness when 5. Water & Energy Health & Wellbeing tackling climate change. Today, compared with traditional insulation, Sustainable water management Our range of insulation systems enable optimised air tightness, improving thermal comfort the construction and operation resulting in thinner solutions that offer is rapidly becoming one of the within a building, while thinner dimensions of insulation and our daylighting solutions bring of buildings together account multiple advantages including more greatest challenges of our time. more natural light into a building. Access floors help to circulate air for heating or cooling for 36% of global energy use internal floorspace and daylighting. We manufacture and support and can enable personal comfort controls to individual occupants. Our water harvesting and 39% of energy-related CO₂ pioneering new technologies solutions can help to prevent flooding and polluted run-off to local waterways. emissions when upstream 3. Light & Air to preserve and protect water. power generation is included. Kingspan Light & Air is established Kingspan is also a market leading Speed/Ease of build as a global leader providing a full manufacturer of innovative Kingspan’s insulated panel is a single component system. The system can be quickly and easily Action, at scale, is urgently suite of daylighting solutions, as energy management solutions. installed through a single-fix installation process. As well as reducing days of labour on-site, needed. well as natural ventilation and the rapid speed of installation reduces the risk of accidents, as less time is spent working at smoke management solutions, height. It also means that the building is weathertight sooner, allowing internal fit-out and Founded in Kingscourt, Co Cavan, which complement our existing external finishing to commence earlier, minimising delays and the need for multiple trades. Kingspan has expanded into a truly building envelope technologies. global business operating in over Aesthetics 70 countries and employing more The outer envelope forms your first impression of a building. The case studies we present than 15,000 people. We execute our throughout this report and online are testament to the impact of a high-end architectural strategy across four strategic pillars facade finish. Kingspan’s facade and daylighting solutions integrate with our and five businesses. high-performance insulation systems to deliver a truly exceptional building envelope.
Planet Passionate/Sustainability At 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/Certification Environmental 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. — — 1312 1312 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
— Business & Strategic Report INNOVATION GLOBAL BUSINESS MODEL Differentiation from competitors driven The continued evolution of Kingspan’s by superior innovation: geographic footprint as we build market leading positions globally: & STRATEGY → Kingspan’s IKON, our new Global Innovation Centre, opened its doors in 2019. Built to the →Kingspan has evolved into a truly global STRATEGIC highest standards of sustainable design, IKON business. Ten years ago 52% of our end-market is a showcase for high-performance building exposure was in the UK and Ireland, in 2019 materials, incorporating 18 Kingspan products it was less than 25. Over the past two years GOALS & PILLARS and systems. Containing state-of-the-art we have entered markets which are only research equipment and prototyping capabilities, beginning to embark on the conversion to high- IKON is home to a team of people dedicated to performance building envelopes such as Brazil, research and development in advanced material Colombia and India. science and will further our commitment to a → In 2019 we opened a new facility in Cambui, more sustainable, circular and healthy future. Brazil, to support the ongoing development → To be the leader in high-performance →Development of a pioneering integrated of Kingspan Isoeste and conversion of the insulation globally with proprietary and insulated panel with solar technology, Brazilian market. differentiating technologies. and the fibre-free, A-Class insulation material. →Kingspan Light & Air opened a new facility → The digitalisation of Kingspan, transforming in Saint-Priest in 2019. The 30,000m2 campus → To be the world’s leading provider of low how we do business and how our specifiers will be central to expanding our capabilities energy building envelopes – Insulate and GroupKingspan plc — &Annual Report Financial Statements 2019 and customers interact with us now and in and presence in France and Southern Europe Generate. the future. and exemplifies what can be achieved with →Co-innovating with the industry. Kingspan Kingspan systems, achieving BREEAM → To expand globally, bringing high- sponsored the 2019 Rotman Design Challenge, “Very good” certification. performance building envelope solutions tasking students with the topic of disruption in to markets which are at an earlier stage in → We acquired Bacacier, an integrated metal the construction industry and sought innovative the evolution of sustainable and efficient profiling and insulated panel distributor with an solutions to the question of where disruption will building methods. extensive network across France. We look forward come from in the industry and in what form. to working with the Bacacier team to further develop the region. → 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 PENETRATION PLANET PASSIONATE the sustainability of both our business Increased penetration of Kingspan’s product In 2019, we launched our new Planet Passionate operations and our products. suite. Underpinned by efficiency gains from programme across Kingspan and to the high-performance building envelopes, industry. This is a critical first step in the next → To advance materials, building systems and regulatory changes and an increasing phase of our journey to proactively address digital technologies to address issues such awareness of the long-term environmental the key sustainability challenges that face as climate change, circularity and the impact of inefficient building design: our planet. Through our Net Zero Energy protection of our natural world. programme, we have already made great → Continued penetration growth and conversion strides in powering our business on renewable from traditional insulation and building methods energy, and with Planet Passionate we are
Strategic Pillars Strategic has been, and will continue to be, setting ourselves even more challenging goals a core driver of our success. for the next 10 years. We are committing to → Ongoing revisions to key EU legislation including hard targets in the areas of energy, carbon, the Energy Performance of Buildings Directive circularity and water. (EPBD) continue to drive industry to take action. → Energy: Increase our direct use of renewable → QuadCore™ now represents 9% of Kingspan’s energy to 60% of total energy use, increase global insulated panel sales and Kooltherm® on-site generation to 20% and deploy rooftop represents 39% of Kingspan’s insulation board Solar PV on all wholly owned sites by 2030. sales. Kingspan’s best-in-class proprietary products continue to drive penetration as → Carbon: Net zero carbon manufacturing, architects and design teams seek out advanced 100% zero emission company funded cars, and solutions for energy efficient building envelopes. a 50% reduction in product carbon intensity from primary supply partners by 2030. Left: → The rising tide of climate awareness and Ireland compulsion to take action is an underlying → Circularity: Zero company waste to landfill Project Showrooms, by 2030 and upcycling 1 billion PET bottles into our Strategic Goals Strategic positive trend for structural penetration gains Dublin over the long-term. manufacturing processes per annum from 2025. — Insulated Panels: → Water: Harvest 100 million litres of rainwater QuadCore™ Trapezoidal by 2030 and support 5 ocean clean up Roof and Wall Panels; Day-Lite Trapezoidal projects by 2025. 1514 Rooflights Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
— Business & Strategic Report BUSINESS MODEL & STRATEGY 2019 IN A Ireland IMC Cinema, Kilkenny NUTSHELL Insulated Panels: Steel Framing System; QuadCore™ Karrier; Dri-Design Shadow, Shingle, Evolution Axis
Products Drivers How we create value 5% 4% 15% Revenue How we operate Other Data & Flooring Water & Energy > Product innovation and differentiation
7% €4.7bn 159 GroupKingspan plc — &Annual Report Financial Statements 2019 > Excellent customer service Light & Air Global manufacturing facilities > Energy efficient sustainable building envelope solutions Applications > We operate our businesses to the highest standards > Retail 15,000+ 85% > Distribution Employees > We acquire excellent businesses 19% 65% Energy Efficiency Insulation Boards Insulated Panels & Conversion > Leisure > We recycle capital to > Management controls optimise returns > Accommodation > Quality systems > We maintain financial discipline Geography Sector > Food > Responsible supply > We balance our portfolio of > Manufacturing chain partnerships businesses across product 7% 53% 18% 70% > Data Management and geography Rest of World Europe Residential Commercial > Infrastructure & Industrial > We drive sustainable practices in our operations through our Planet Passionate initiatives 19% UK 2 12% Trading Profit Value created Office & Data EBITDA1 Free cash 21% €497.1m Americas €579.8m €337.1m
Total Shareholder Return ROCE End-Market Channel 20% 30% 47.2% 17.3% Refurbishment Via Distribution
EPS Dividend 204.6c 46.5c — 1 Earnings before finance costs, income taxes, depreciation, 80% 70% amortisation and the impact of IFRS 16 New Build Direct 2 Operating profit before amortisation of intangibles 1716 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report Product Kingspan TEK™ Cladding Panel @ The RAD Building
Energy/ Kingspan’s TEK™ Cladding Panels Nottingham University, UK Carbon supported construction of an airtight, Saving @ high-performance building envelope, helping to reduce estimated energy demand to below 15 kWh/m2/ yr.
Space/ Changing the specification to a thinner Dimensions build using Kingspan TEK™ Cladding Home to various research groups of the @ Panels saved up to 250mm wall depth versus the original specification, Energy Research Accelerator (ERA), maximising the useable floor space.
Health & The RAD Building prioritises user the collaboration provides world class Wellbeing wellbeing by maintaining thermal @ comfort levels through carefully laboratory and office space for industry regulated internal environments. leading academics and post graduate
Speed/ The offsite production and dry, panelised students. It is the first truly embedded Ease of build construction of the Kingspan TEK™ Panels @ supported a fast and predictable build, cross-disciplinary energy research hub in
making the building weathertight at an GroupKingspan plc — &Annual Report Financial Statements 2019 early stage. the UK and it required a building fit for
Aesthetics The factory-engineered SIPs afforded accelerating research into sustainability. considerable design freedom, Constructingexcellence.org.uk @ allowing the architects to create a striking building with a unique and dynamic appearance.
Planet The facility at which Kingspan Passionate/ TEK™ Cladding Panels are produced, Click here to see more Sustainability @ carries FSC®- C109304 and PEFC Chain of Custody certification.
Awards/ The RAD Building has been designed Certifications to achieve BREEAM ‘Excellent’ @ and was the 2019 winner of the East Midlands Constructing Excellence Sustainability Award.
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Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
— Business & Strategic Report Financial Highlights: Operational Highlights: → Revenue up 7% to €4.7bn, → Insulated Panels sales growth → Light & Air sales growth CHIEF (pre-currency, up 6%). of 7%. Strong performance in of 12% buoyed by a strong → Trading profit up 12% to €497.1m, the Americas, Mainland Europe performance in the US. Solid EXECUTIVE’S (pre-currency, up 10%). performed well overall with the activity in Mainland Europe. notable exception of Germany. Daylighting centre of excellence → Free cashflow up 9% to €337.1m. Difficult UK market particularly in under construction in Ireland. REVIEW → Group trading margin of 10.7%, the second half. Further headway → Water & Energy sales growth of an increase of 50bps. in key markets on QuadCore™, 3% with progress in the Nordics, → Basic EPS up 11% to 204.6 cent. now 9% of global sales. a difficult UK environment → Final dividend per share of → Insulation Boards sales growth and more subdued rainwater 33.5 cent. Total dividend for the of 2%. Continuing progress on harvesting activity in Australia. 2019 capped off a decade of great year up 10.7% to 46.5 cent. Kooltherm® and share gain from → Data & Flooring sales growth progress for Kingspan with revenue → Year-end net debt1 of €633.2m traditional materials. of 13% reflecting strong (2018: €728.3m). Net debt to → Strong underlying volume growth datacentre activity and and trading profit ahead of prior year EBITDA2 of 1.1x (2018: 1.4x). of 4% and 8% in Insulated Panels geographic expansion in Europe. by 7% and 12% respectively. → ROCE of 17.3% (2018: 16.8%). and Insulation Boards partially offset by the pricing impact of raw material deflation. Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019
Business Review During the year we invested a 2019 capped off a decade of great total of €305m continuing on ENERGY progress for Kingspan with revenue our path of both organic and new and trading profit ahead of prior year acquisition expansion worldwide. - Maintain our Net Zero Energy by 7% and 12% respectively. Over New facilities were either completed status the past decade sales and trading or commenced in Sweden, UAE, - Increase our direct use of profit grew in excess of fourfold and USA, the Netherlands and Brazil. renewable energy to 60% by 2030 sevenfold respectively. Group sales Acquisition investment was €144m, - Increase our on-site generation of reached almost €4.7bn, and trading comprising most notably Bacacier renewable energy to 20% by 2030 profit €497m. Despite the significant in France for €122m. Dubai macro instability in a number of our - Install solar PV systems on all Bluewaters Island key markets the Group performed 2019 marked the launch of our global wholly owned facilities by 2030 Insulation Boards: well in the first half, but was weaker Planet Passionate initiative, building Kooltherm® K10 Soffit Board towards year end. Predictably, the upon the last decade of progress CARBON UK was the most notable illustration on our Net Zero Energy agenda. We of this. have now embarked on our next - Net zero carbon manufacturing ambitious 10 year journey to radically by 2030 Underlying volume growth at the advance Kingspan across the four - 50% reduction in product CO₂ larger Insulated Panels and Insulation key themes of Energy, Carbon, intensity from our primary Boards divisions was 4% and 8% Circularity and Water. This agenda supply partners by 2030 respectively. Underlying revenue is central to our purpose and entails - 100% zero emission company was 1% ahead in Insulated Panels the following targets and timelines: funded cars by 2025 and 1% lower in Insulation Boards reflecting the impact of lower pricing due to raw material CIRCULARITY deflation over prior year. - 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
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- 5 active ocean clean-up
projects by 2025 — - 100 million litres of rainwater 1 Net Debt and EBITDA both pre-IFRS 16 harvested by 2030 2 Earnings before finance costs, income taxes, depreciation, 21 amortisation and the impact of IFRS 16 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report INSULATED PANELS — QuadCore™ penetration reached 9% grow as modern and more efficient deflation in the latter part of the globally, with sales up 36% over prior methods of construction become year, resulted in a disappointing 2 2 2 year. In Mainland Europe, the trading increasingly adopted and Kingspan's outturn overall. QuadCore™, picture was quite mixed overall solutions become the basis of however, continued to grow in share. Turnover Trading Profit Trading Margin although most regions started the specification in many applications With the momentum in QuadCore™ year ahead of 2018. France and which historically would have used continuing through early 2020, Spain performed particularly well more traditional materials. The roll- together with a more stable political €3,031.9m €316.1m 10.4% throughout the year as the Kingspan out of QuadCore™ is also gaining backdrop, we should see activity model has become more embedded momentum and this will be further improve from the evident weakness (1) in these markets in recent years. In enabled with the new production of the first quarter. +7% +12% +40bps the Benelux, revenue was marginally line in Modesto, California, that ahead although the Netherlands is nearing completion. In Latin Activity for Insulated Panels in 2018: €2,823.1m 2018: €281.8m 2018: 10.0% weakened in the last quarter owing America, progress has also been Australia was solid over the year to environmental legislation that encouraging with a gradual gain in while in New Zealand the business affected progress on many building position in Mexico and continuing advanced significantly over 2018. sites. This headwind is expected to our momentum in Brazil where we Although relatively embryonic in ease somewhat in 2020. The German opened a new facility in Cambui Southeast Asia, revenue has grown
market has been key for us in recent late last year. We have also broken year-on-year and we continue to GroupKingspan plc — &Annual Report Financial Statements 2019 years although it stagnated during ground on a fifth plant in the region build a base level of demand in the 2019. We have taken steps to ensure which will be in southern Brazil. Other region which should necessitate local our competitiveness is enhanced, regions in Latin America are now also manufacturing in the not too distant including significant focus on under developmental review. future. Our Indian business delivered QuadCore™. Poland and the its plan for the year, while the Middle broader Central European markets At the outset of 2019 the UK backlog East remains a challenge for the were steady as was our activity in and general activity was healthy, Panels business. the Nordics. showing no signs of the weakness that ensued in the second half of Volume growth in Ireland was Significant progress was achieved the year. As the political uncertainty healthy for most of the year but across all markets in the Americas grew through the year more building weakened towards year-end, over the year. Penetration in the projects were postponed which, pointing towards a slow start USA and Canada has continued to when combined with accelerating to 2020.
Australia Perth Stadium Train Station
Insulated Panels: Kingspan KingZip® Roof Panel System 22 —
(1) Comprising underlying +1%, currency +1% and acquisitions +5%. Like-for-like volume +4%. 23 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
INSULATION BOARDS Business & Strategic Report —
On the whole, the Insulation Boards Progress continued in North America business performed well across where our presence to date has been Continental Europe. 2018 was marred limited to a single XPS facility in the by heavy raw material inflation North East. We expect to build and followed by rapid deflation through commission a new PIR/QuadCore™ 2019. This led to a challenge in board facility during 2021/2022 maintaining price, and of course which will be the first plant of our margins. Despite this, volumes grew phased roll-out in the US, and will substantially in the Benelux and sit alongside a new Insulated Panel Southern Europe and improved in facility currently under development Germany and the Nordics. A new in Pennsylvania. Kooltherm® plant will come on stream later this year in Sweden Our business in the Middle East to support continued conversion delivered another year of solid from legacy mineral fibre insulation. growth largely in the Industrial Kooltherm® volumes grew by 15% Insulation sphere. Strong recovery in the year. was evident in the Australasia market as Kooltherm® grew its presence In the UK, volumes were strong in against local legacy mineral fibre and GroupKingspan plc — &Annual Report Financial Statements 2019 the early part of the period followed other insulation materials. In Ireland, by weakness in the latter half of the the business had a solid outcome for year, largely owing to the uncertain the year across both the Insulation political backdrop which was very Board and structural residential pronounced at that point. Timberframe business units.
Netherlands De Woldring Locatie
Insulation Boards: Kingspan Unidek SIPS
2 2 2
Turnover Trading Profit Trading Margin €876.9m €117.1m 13.4% +2%(1) +11% +120bps 24 2018: €864.1m 2018: €105.1m 2018: 12.2% —
(1) Comprising underlying -1%, currency +1% and acquisitions +2%. Like-for-like volume +8%. 25 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
2 LIGHT & AIR Business & Strategic Report Turnover —
Revenue grew by 12% in 2019 and North America delivered a stand- €327.7m trading profit by 17% aided by out performance across both the improving synergies and efficiencies standard and architecturally bespoke (1) as this relatively embryonic business offerings. The UniQuad® wall-light, +12% segment evolves. The story was produced near Chicago, has also somewhat mixed however with been launched across Europe where 2018: €291.8m activity in Germany weakening we anticipate penetration growth in notably through the second half and the coming years. 2 the Benelux performing similarly. In contrast to this, France and Southern Work has commenced on a Trading Profit Europe generally experienced significant plant expansion in Ireland attractive growth supported by the to extrude polycarbonate daylighting recently commissioned new facility for both roof and wall applications in Lyon from which we anticipate and we anticipate production to €25.2m continued momentum through commence mid-2021. +17% the current year. 2018: €21.5m GroupKingspan plc — &Annual Report Financial Statements 2019 2 2 WATER & ENERGY Trading Margin Turnover — 7.7% 2019 was a year of stability for the term we would expect to grow large Water & Energy business segment scale water storage applications in €208.1m with profit in line with prior year. The more rural and afforested parts of +30bps UK and Ireland were both broadly Australia. The focus of this wider unit (1) flat on prior year, Mainland Europe will increasingly revolve around water +3% 2018: 7.4% grew and in Australia sales weakened applications with a plan to establish 2018: €202.9m as housing starts in New South a more global footprint beyond the (1) Comprising underlying Wales came under pressure. This European and Australian presence +9%, currency +1% and pattern can be expected to continue we currently have. - acquisitions +2%. into the current year and longer Trading Profit €14.2m - 2018: €14.2m
Left: Singapore ™ Jewel Changi Airport Light & Air: Kingspan Lumera Trading Margin ventilation windows 6.8% Right: Ireland Center Parcs Longford Forest -20bps Subtropical Swimming Paradise 2018:7.0% Water & Energy: Klargester Pump stations
for surface water and (1) Comprising underlying — waste drainage -3% and acquisitions +6% Klargester Fuel and Oil 2726 separator for treating surface water drainage Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report DATA & FLOORING 2 — Turnover 2019 was a positive year for our global Data & Flooring business €214.5m segment largely driven by an increased product offering into (1) the data sector and our growing +13% geographic presence in Europe. 2018: €190.6m The UK was predictably weak however as office construction 2 faltered particularly in the greater London area. We anticipate this Trading Profit trend to remain a drag through 2020, compensated somewhat by growth in Germany and the Benelux. Whilst the data opportunity remains front €24.5m and central to the division’s future, the projects can be large and lumpy with respect to the timing, resulting +8% GroupKingspan plc — &Annual Report Financial Statements 2019 in an inconsistent pattern of revenue. 2018: €22.6m 2020 is expected to be no different in that regard. ™ Trading Margin 11.4% -50bps 2018: 11.9%
(1) Comprising underlying +4%, currency +3% and acquisitions +6% Canada Central Library, Calgary
Data & Flooring: ConCore® 1250 and 1500 Two-piece porcelain
Credit: Klassen Photography
Innovation stages of development as part of our under consideration. Furthermore, During the year we completed and ongoing innovation agenda. the understandable ratcheting in opened our Global Innovation Centre, recent months of the climate debate IKON, which sits alongside our Looking Ahead chimes fully with the advanced headquarters in Kingscourt, Ireland. As flagged in our most recent energy efficiency solutions provided by trading update underlying sales in Kingspan and our Planet Passionate The primary near-term focus is to the early part of 2020 are behind agenda. This, combined with the soft launch PowerPanel® 2.0, and the prior year. Despite the poor start we global footprint of our business and fibre-free A1 AlphaCore™ before the have experienced some element of the strength of the Group’s balance end of 2020. Both will offer Kingspan recovery in order placement in recent sheet, positions Kingspan well for the 28 a significantly broadened specification weeks and our backlog globally is in years ahead. opportunity and will no doubt be reasonable shape. This could point — followed by more advanced iterations towards an improved second quarter. Gene M. Murtagh over the coming years. QuadCore™ Chief Executive Officer 2.0 and the next generation of Our acquisitions pipeline is healthy 29 Kooltherm® are also at the early with a number of projects currently 21 February 2020 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
— Business & Strategic Report FINANCIAL 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. Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019
Overview of results Group revenue increased by 7% to Sales Underlying Currency Acquisition Total €4.7bn (2018: €4.4bn) and trading Insulated Panels +1% +1% +5% +7% profit increased by 12% to €497.1m (2018: €445.2m) with an increase of Insulation Boards -1% +1% +2% +2% 50 basis points in the Group’s trading Light & Air +9% +1% +2% +12% profit margin to 10.7% (2018: 10.2%). Basic EPS for the year was 204.6 cent Water & Energy -3% - +6% +3% UK (2018: 184.0 cent), representing an Data & Flooring +4% +3% +6% +13% The Box Museum, Plymouth increase of 11%. Group +1% +1% +5% +7% Insulated Panels: QuadCore™ Karrier Hook-On Cassette The Group’s underlying sales and trading profit growth by division The Group’s trading profit measure is earnings before interest, tax and are set out to the right: amortisation of intangibles:
Trading Profit Underlying Currency Acquisition Total
Insulated 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% 30 Group +6% +2% +4% +12%
The key drivers of sales and trading profit performance in each division — are set out in the Business Review. 31 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report IFRS 16 Leases Dividends (a) Basic EPS growth. The growth in (d) Free cashflow is an important (f) Net debt to EBITDA measures Capital structure and A new accounting standard, IFRS The Board has proposed a final EPS is accounted for primarily by indicator and it reflects the the ratio of net debt to earnings Group financing 16 Leases, was adopted with effect dividend of 33.5 cent per ordinary a 12% increase in trading profit. amount of internally generated and at 1.1x (2018: 1.4x) is The Group funds itself through a from 1 January 2019. The standard share payable on 7 May 2020 to The minority interest amount capital available for re- comfortably less than the combination of equity and debt. requires leases which were previously shareholders registered on the increased year on year due to investment in the business or Group’s banking covenant of Debt is funded through syndicated treated as operating leases to be record date of 27 March 2020. When a strong performance at the for distribution to shareholders. 3.5x in both 2019 and 2018. The and bilateral bank facilities and recognised as a lease liability with combined with the interim dividend Group’s operations which have calculation is pre-IFRS 16 which private placement loan notes. the associated asset capitalised of 13.0 cent per share, the total minority stakeholders, leading to is consistent with the Group’s The primary bank debt facility is and treated as a right of use asset. dividend for the year increased to a basic EPS increase of 11%. Free cashflow 2019 2018 banking covenant. a €451m revolving credit facility, On 1 January 2019, €127.9m of 46.5 cent (2018: 42.0 cent), €m €m which was undrawn at year end leases were recognised as liabilities an increase of 10.7%. (b) Sales growth of 7% (2018: 19%) Acquisitions and capital and which matures in June 2022. 1 on adoption of the standard and was driven by a 5% contribution EBITDA 579.8 521.2 expenditure In June 2019 an additional 3 €128.8m capitalised as right of use Retirement benefits from acquisitions, a 1% increase Movement in 5.6 2.3 During the period the Group made year bank facility of €300m was assets. During 2019 depreciation on The primary method of pension in underlying sales and a 1% working capital2 the following acquisitions for a arranged, which was undrawn total upfront cash consideration the right of use assets was €30.0m provision for current employees increase due to the effect of Movement in 1.7 (5.8) at year end. As at 31 December and the associated lease rental is by way of defined contribution currency translation. Whilst provisions of €142.2m. 2019, the Group also had private charge decreased by €31.8m leading arrangements. The Group has two underlying sales growth overall placement loan note funding net Net capital (154.3) (131.3) On 6 November 2019, the purchase to an increase in operating profit of legacy defined benefit schemes in the was a modest 1%, volume growth of related derivatives totalling expenditure of 85% of Group Bacacier SAS for €1.8m. The interest charge on the UK which are closed to new members exceeded this in many markets €814m. The weighted average an initial cash amount of €122.0m. associated leases was €3.8m and the and to future accrual. In addition, although was partially offset Net interest paid (16.7) (15.6) maturity of the notes is 4.5 years. aggregate impact of IFRS 16 on profit the Group has a number of smaller by price deflation due to raw Income taxes paid (87.2) (75.0) Subsequent to the year end the The Group also made a number of before tax was a decrease of €2.0m. defined benefit pension liabilities in material price reductions. Group arranged a bilateral ‘Green Other including 8.2 12.6 smaller acquisitions during the year Mainland Europe. The net pension Loan’ of €50m to fund the Group’s GroupKingspan plc — &Annual Report Financial Statements 2019 non-cash items for a combined cash consideration Finance costs (net) liability in respect of all defined (c) Trading margin by division is Planet Passionate initiatives. Free cashflow 337.1 308.4 of €22.2m: Finance costs for the year increased benefit schemes was €15.1m (2018: set out below: by €2.7m to €20.8m (2018: €18.1m). €13.1m) as at 31 December 2019. The Group had significant available 1 Earnings before finance costs, income → the purchase of 100% of the A net non-cash charge of €0.1m 2019 2018 taxes, depreciation, amortisation and share capital of WeGo Floortec undrawn facilities and cash balances (2018: credit of €0.6m) was recorded Intangible assets and goodwill the impact of IFRS 16 GmbH, a German manufacturer which, in aggregate, were €942m in respect of swaps on the Group’s Intangible assets and goodwill Insulated Panels 10.4% 10.0% 2 Excludes working capital on acquisition of access floors; at 31 December 2019. This, together USD private placement notes. The increased during the year by €98.0m but includes working capital Insulation Boards 13.4% 12.2% with the Green Loan of €50m Group’s net interest expense on to €1,600.1m (2018: €1,502.1m). movements since that point → the purchase of 100% of the provides appropriate headroom for borrowings (bank and loan notes) Intangible assets and goodwill of Light & Air 7.7% 7.4% share capital of Epur SA, a French ongoing operational requirements was €16.7m (2018: €18.0m). This €95.2m were recorded in the year Water & Energy 6.8% 7.0% Working capital at year-end was water treatment business; and and development funding. decrease reflects lower average relating to acquisitions completed Data & Flooring 11.4% 11.9% €582.8m (2018: €543.9m) and → the purchase of the assets of gross and net debt levels in 2019. The by the Group. An increase of €24.7m represents 11.9% (2018: 11.5%) Net debt SkyCo, a US Light & Air business. interest expense is driven extensively arose due to year end exchange of annualised turnover based on Net debt decreased by €95.1m by gross debt balances with low cash rates used to translate intangible The Insulated Panels division during 2019 to €633.2m fourth quarter sales. This metric is The deferred consideration paid yields in the current environment. assets and goodwill other than trading margin advanced year closely managed and monitored (2018: €728.3m). An amount of €3.8m (2018: €nil) those denominated in euro, offset on year reflecting ongoing during the period of €59.7m (2018: throughout the year and is subject €3.1m) represents €30m relating to was recorded as interest on leases by annual amortisation of €21.9m progress in sales of QuadCore™ to a certain amount of seasonal This is analysed in the table below: capitalised in accordance with IFRS (2018: €22.2m). and the market mix of sales. The the Synthesia business which was variability associated with trading acquired in 2018 and €29.7m relating 16 which was adopted with effect trading margin improvement in patterns and the timing of from 1 January 2019. Financial key performance the Insulation Boards division to the Isoeste business which was significant purchases of steel and acquired in 2017. indicators reflects a positive Kooltherm® chemicals. The movement year Taxation The Group has a set of financial key mix, operating leverage as a on year reflects a 40 basis points The tax charge for the year was performance indicators (KPIs) which consequence of volume growth increase in underlying working Movement in net debt 2019 2018 €76.6m (2018: €69.1m) which are presented in the table below. and a positive lag effect on capital levels primarily due to represents an effective tax rate These KPIs are used to measure raw material price reductions. higher inventory levels in recently €m €m of 16.9% (2018: 17.1%). The decrease the financial and operational The increased trading margin acquired businesses. in the effective rate reflects, performance of the Group and are in Light & Air reflects improved Free cashflow 337.1 308.4 primarily, the change in the used to track ongoing progress efficiencies overall and the (e) Return on capital employed, Acquisitions (142.2) (469.2) geographical mix of earnings year and also in achieving medium and market mix of sales. The Water calculated as operating profit Deferred consideration paid (59.7) (3.1) on year and reductions in certain long term targets to maximise & Energy trading margin was divided by total equity plus net territorial tax rates. shareholder return. broadly stable year on year. debt, was 17.3% in 2019 (2018: Share issues 0.1 0.1 The decrease in trading margin 16.8%) or 17.7% including Repurchase of treasury shares (0.6) - in Data & Flooring reflects the the annualised impact of geographic market and product Dividends paid (77.6) (68.3) Key performance indicators 2019 2018 acquisitions. The creation of mix of sales year on year. shareholder value through the Dividends paid to non-controlling interests (0.4) (0.1) Basic EPS growth 11% 16% delivery of long term returns well Cashflow movement 56.7 (232.2) in excess of the Group’s cost
Sales growth 7% 19% Exchange movements on translation 8.4 (2.2) 32 of capital is a core principle of Trading margin 10.7% 10.2% Kingspan’s financial strategy. The Deferred consideration 30.0 (30.0) Free cashflow (€m) 337.1 308.4 increase in profitability together Movement in net debt 95.1 (264.4) — with the deployment of further Return on capital employed 17.3% 16.8% Net debt at start of year (728.3) (463.9) capital has enhanced returns on Net debt/EBITDA 1.1x 1.4x capital during the year. Net debt at end of year (633.2) (728.3) 33 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management
Key financial covenants Share price and market Business & Strategic Report The majority of Group borrowings capitalisation are subject to primary financial The Company’s shares traded in covenants calculated in accordance the range of €35.70 to €55.25 with lenders’ facility agreements during the year. The share price which exclude the impact of IFRS 16: at 31 December 2019 was €54.45 (31 December 2018: €37.38) giving - A maximum net debt to a market capitalisation at that EBITDA ratio of 3.5 times; and date of €9.9bn (2018: €6.7bn). - A minimum EBITDA to net Total shareholder return for interest coverage of 4 times. 2019 was 47.2%.
The performance against these Financial risk management covenants in the current and The Group operates a centralised comparative year is set out below: treasury function governed by a treasury policy approved by the Group Board. This policy primarily 2019 2018 covers foreign exchange risk, credit Covenant Times Times risk, liquidity risk and interest rate risk. The principal objective of the Net Maximum 1.1 1.4 policy is to minimise financial risk debt/ 3.5 at reasonable cost. Adherence to EBITDA the policy is monitored by the CFO GroupKingspan plc — &Annual Report Financial Statements 2019 EBITDA/ Minimum 34.1 28.8 and the Internal Audit function. Net 4.0 The Group does not engage in interest speculative trading of derivatives or related financial instruments. Investor relations Kingspan is committed to Geoff Doherty interacting with the international Chief Financial Officer financial community to ensure a 21 February 2020 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 3534 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report — Risk and impact Actions to mitigate
RISK & RISK Volatility in the macro environment MANAGEMENT Kingspan products are targeted at both The exposure to the cyclicality of any one construction the residential and non-residential market is partially mitigated by the Group’s diversification, (including retail, commercial, public both geographically and by product. sector and high-rise offices) construction sectors. As a result, demand is dependent As set out in the Business Model & Strategy, the Group has on activity levels which may vary by mitigated this risk through diversification as follows: geographic market and is subject to the usual drivers of construction activity, - Significant globalisation strategy with a presence (i.e. general economic conditions and in over 70 markets; volatility, Brexit, political uncertainty - Launch of new innovative products and an approach of As a leading building supplies manufacturer in some regions, interest rates, continuous improvement to existing product lines; and in a highly competitive international business /consumer confidence levels, - Acquisitions made during the year extend the geographic unemployment, population growth). reach of the Group. environment, Kingspan is exposed to a While construction markets are The full details of these diversifications are set out in variety of risks and uncertainties which are inherently cyclical, changing building the Business Model & Strategy report contained in this and environmental regulations continue Annual Report. monitored and controlled by the Group’s to act as an underlying positive structural internal risk management framework. trend for demand for many of the
Group’s products. GroupKingspan plc — &Annual Report Financial Statements 2019
Overall responsibility for risk present. The risks and trends are Kingspan's strategic pillars that Failure to innovate management lies with the Board the focus of each division’s monthly may be impacted by these risks who ensures that risk awareness management meeting, where their and uncertainties are: Failing to successfully manage and Innovation is one of Kingspan’s four pillars to increasing is set at an appropriate level. To performance is also assessed against compete with new product innovations, shareholder value and therefore plays a key role within changing market trends and consumer the Group. ensure that risk awareness is set budget, forecast and prior year. Key Innovation; tastes could have an adverse effect on at an appropriate level, the Audit performance indicators are used to Kingspan’s market share, the future There is a continual review of each division’s product Global; Committee assists the Board by benchmark operational performance growth of the business and the margins portfolios at both the executive and local management level taking delegated responsibility for all manufacturing sites. Penetration; achieved on the existing product line. to ensure that they target current and future opportunities for the risk identification and for profitable growth. assessment, in addition to reviewing In addition to this ongoing Planet Passionate. This risk is further mitigated by continuing innovation and the Group’s risk management assessment of risk within the compelling marketing programmes. The launch of IKON in and internal control systems and divisions, the Audit Committee 2019 has served to enhance the capabilities of the Group making recommendations to the oversees an annual risk assessment to innovate. Kingspan also has a deep understanding of Board thereon. for the Group whereby each changing consumer and industry dynamics in its key markets divisional management team is and continues to refine its omnichannel customer centric The chairman of the Audit formally asked to prepare a risk approach, enabling management to respond appropriately Committee reports to the Board assessment for their business. This to issues which may impact business performance. at each Board meeting on its assessment involves evaluating activities, both in regard to audit group-wide risks, as put forward Product failure matters and risk management. by the Board, and also presenting The activities of the Audit additional risks that are specific A key risk to Kingspan’s business is the Dedicated structures and processes are in place to manage potential for functional failure of our and monitor product quality controls throughout the Committee are set out in detail in to their business. product which could lead to health, safety business: the Report of the Audit Committee and security issues for both our people contained in this Annual Report. While it is acknowledged that the and our customers. - The majority of new products go through a certification Group faces a variety of risks, the process which is undertaken by a recognised and The Board monitors the Group’s Board, through the processes set out The Kingspan brand is well established reputable authority (for example, in the UK it is the and is a key element of the Group’s overall risk management systems through above, has identified the principal Building Research Establishment, BRE) before it is brought marketing and positioning strategy. risks and uncertainties that could to market. this consultation with the Audit In the event of a product failure, the Committee but also through potentially impact upon the Group’s - Our businesses employ quality control specialists and Kingspan brand and/or reputation could operate strict policies to ensure consistently high the Group’s divisional monthly short to medium term strategic be damaged and if so, this could lead to a standards management meetings, where at goals and these are as set out in loss of market share. are maintained in relation to the sourcing and handling least two executive directors are the following table. 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. 36 - We proactively monitor the regulatory and legislative environment. — 37 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report 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 Kingspan insists on industry leading operational processes and The success of Kingspan is built Kingspan is committed to ensuring that the necessary procedures dependent on the availability and procedures to ensure effective management of each facility. upon effective management teams are in place to attract, develop and retain the skill levels needed quality of its physical infrastructure, The Group invests significantly in a rigorous programme of committed to achieving a superior to achieve the Group’s strategic goals. These procedures include its proprietary technology, its preventative maintenance on all key manufacturing lines to performance in each division. strong recruitment processes, succession planning, remuneration raw material supply chain and its mitigate the risk of production line stoppages. Failure to attract, retain or develop reviews, including both long and short term incentive plans, and information technology. The safe and these teams could have an impact targeted career development programmes. continued operation of such systems The impact of production line stoppages is also mitigated on business performance. and assets is threatened by natural by having business continuity plans in place to allow for the and man-made perils and is affected transfer of significant volume from any one of our 95 plants in Fraud and cybercrime by the level of investment available the Insulated Panels division or 27 plants in the Insulation Boards to improve them. division to another in the event of a shutdown. Kingspan is potentially exposed to The security and processes around the Group’s IT and banking The building industry as a whole fraudulent activity, with particular In addition, and as part of our consequential loss insurance, systems are subject to review by divisional management and is going through some significant focus on the Group’s online banking Kingspan is subject to regular reviews of all manufacturing sites internal audit. These systems are continually reviewed with change with respect to building systems, online payment procedures updates and improvements implemented as required. Robust IT regulations and codes. The risks by external risk management experts, with these reviews being and unauthorised access to internal aimed at enhancing Kingspan’s risk profile. and security policy documents and related alerts are circulated associated with misunderstanding systems. by Group management to all divisions to ensure a consistent and some of the potential changes and Climate related risks are managed through significant effective approach is taken across the Group. the nature of our product set is one investment in product development which help mitigate climate that is more prevalent today. GroupKingspan plc — &Annual Report Financial Statements 2019 change along with our ambitious commitments to reduce our Acquisition and integration of new businesses Embedded within Climate Change own environmental footprint. risks are energy regulations, change Acquisitive growth is an important All potential acquisitions are rigorously assessed and evaluated, in customer preferences and global Kingspan is focused on developing, enhancing and protecting element of Kingspan’s development both internally and by external advisors, to ensure any potential supply. its IP portfolio. As a global leader in building envelope solutions, strategy. A failure to execute and acquisition meets Kingspan’s strategic and financial criteria. Kingspan considers its IP security to be paramount. In addition properly integrate significant Any significant or prolonged acquisitions and capitalise on the This process is underpinned by extensive integration procedures restriction to its physical to trade secret policies and procedures, Kingspan has developed appropriate IP strategies to protect and defend against potential synergies they bring may and the close monitoring of performance post acquisition by both infrastructure, the necessary raw adversely affect the Group. divisional and Group management. materials or its IT systems and infringements. infrastructure could have an adverse In an effort to reduce Kingspan’s exposure to raw material supply Kingspan also has a strong track record of successfully integrating effect on Kingspan’s business acquisitions and therefore management have extensive knowledge performance. chain issues, Kingspan retains strong relationships with a wide range of raw material suppliers to limit the reliance on any one in this area which it utilises for each acquisition. supplier or even a small number of suppliers. Health and safety Kingspan continues to inform all stakeholders of the characteristics of our product offerings, their appropriate The nature of Kingspan’s operations A robust health and safety framework is in place throughout the application and benefits to limit the risk of misunderstanding can expose its contractors, Group’s operations requiring all employees to complete formal within the building industry. customers, suppliers and other health and safety training on a regular basis. individuals to potential health and Kingspan’s IT infrastructure is constantly reviewed and updated safety risks. The Group monitors the performance of its health and safety framework, and takes immediate and decisive action where to meet the needs of the Group. Procedures have been Health and safety incidents can non-adherence is identified. established for the protection of this infrastructure and all other IT lead to loss of life or severe injuries. related assets. These include the development of IT specific business continuity plans, IT disaster recovery plans and back-up delivery The development of a strong safety culture is driven by systems, to reduce business disruption in the event of a major management and employees at every level and is a core part technology failure. of doing business with integrity.
Credit risks and credit control Laws and regulations
As part of the overall service Each business unit has rigorous, established procedures and Kingspan is subject to a broad Kingspan’s in-house legal team is responsible for monitoring range of existing and evolving package, Kingspan provides credit credit control functions around managing its receivables and changes to laws and regulations that affect the business and is governance requirements, to customers and as a result there takes action when necessary. supported by external advisors. is an associated risk that the environmental, health and safety A comprehensive framework of policies are in place that set customer may not be able to pay Trade receivables are primarily managed through strong credit and other laws, regulations and outstanding balances. control functions supplemented by credit insurance to the extent standards which affect the way out the way employees and suppliers are expected to conduct the Group operates. Non- that it is available. All major outstanding and overdue balances themselves. At the year-end, the Group was compliance can lead to potential together with significant potential exposures are reviewed carrying a receivables book of legal liabilities and curtail the Training is provided through a variety of mediums in key areas of €716.3m expressed net of provision regularly and concerns are discussed at monthly meetings at development of the Group. legal and regulatory compliance, including a suite of mandatory for default in payment. This which the Group’s executive directors are present. training for those that join Kingspan.
represents a net risk of 15% of 38 Control systems are in place to ensure that credit authorisation sales. Of these net receivables, A robust whistleblowing process is in place that allows the requests are supported with appropriate and sufficient approximately 67% were covered by anonymous reporting through an independent hotline of any documentation and are approved at appropriate levels in the
credit insurance or other forms of suspected wrongdoing or unethical behaviour, including reporting — collateral such as letter of credit organisation. instances of non-compliance with laws and regulations. All and bank guarantees. reported cases are investigated. 39 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Chairman's Statement Business Model & Strategy Chief Executive’s Review Financial Review Risk & Risk Management Business & Strategic Report Product Kooltherm® K20 Concrete Sandwich Board @
Energy/ Using a combination of Cross-Laminated Carbon Timber (CLT) and Kooltherm®, Haus Saving @ Gables achieved an R-Value of 20.5 with only 2 inches of insulation.
Space/ Kooltherm® halved the insulation Dimensions thickness required versus traditional @ materials. This was a key consideration for Haus Gables with a breadth of just 18ft, equivalent to a mobile home.
Health & The Kooltherm® used on Haus Gables Wellbeing was manufactured with a blowing @ agent that has zero Ozone Depletion Potential, Low Global Warming potential, HCFC and CFC free.
Speed/ Through the innovative use of CLT Ease of build and Kooltherm®, Haus Gables was @ erected in just over two weeks,
drastically reducing labour time on GroupKingspan plc — &Annual Report Financial Statements 2019 site and therefore labour costs.
Aesthetics Haus Gables has been featured in multiple influential architecture and @ design magazines globally for its innovative use of materials and its striking design.
Planet The Kooltherm® used on Haus Passionate/ Gables was manufactured using Sustainability @ renewable energy.
Awards/ Architectural League Prize for Certifications Young Architects + Designers, @ Jennifer Bonner, Winner. Haus Gables Atlanta, USA
@ –
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 Design 40
Click here to see more —
@ 41 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
— — Business & Strategic Report PRODUCT @ The largest influence Kingspan has on the SDGs is through our solutions in use. As demonstrated throughout this report our SUSTAINABILITY PASSIONATE advanced building envelope solutions help building owners to reduce energy emissions. The total energy saved over the lifetime REPORT Today, the construction and of the Kingspan insulation systems, sold worldwide in 2019, is an operation of buildings together estimated 751 million MWh of energy or 172 million tonnes of CO₂e. account for 36% of global @ Our solutions also help to enhance occupant health and wellbeing energy use and 39% of energy- through improved thermal comfort, natural daylighting, ventilation, and increased space. Our advanced insulation is also related CO₂ emissions when free from health concerns associated with airborne fibres. upstream power generation is @ Our Water & Energy business helps building owners to sustainably included. The energy efficiency manage water as a resource and can help to protect local of buildings is therefore communities through reducing flood risk and the risk of polluted Kingspan’s Mission fundamental to combating run-off to waterways. To accelerate a net zero emissions future with the climate change. wellbeing of people and planet at its heart. We do this through enabling high-performance buildings — that can save more energy, carbon and water. PLANET @ Energy: In 2019 we achieved 90% of our Net Zero Energy goal GroupKingspan plc — &Annual Report Financial Statements 2019 throughout our operations and are firmly on track to achieve We recognise the vital importance sustainability we have built on PASSIONATE 100% by 2020. We generated 5.3% of our energy on Kingspan of achieving this while: enhancing materiality assessments conducted sites and 22% of wholly owned sites have deployed rooftop Solar the safety and wellbeing of people at a divisional level as well as Through Planet Passionate we PV systems. in buildings; enabling the circular incorporating guidelines from are playing our part to tackle @ Carbon: We achieved a 92% reduction in energy carbon economy; and always delivering more recognised associations such as climate change by increasing intensity in 8 years and began to implement our zero-emissions performance and value. We believe the Sustainable Accounting our use of renewable energy, car strategy. In November 2019 we held our annual supplier the answers lie in challenging building Standards Board (SASB) and the reducing carbon in our business day forum with specific focus given to our new sustainability industry traditions with innovation Task Force on Climate-related programme. Productive discussions and workshops were held in advanced materials and digital Financial Disclosures (TCFD), of operations and value chain, throughout the day with a range of suppliers resulting in some technologies. What defines us is our which Kingspan is a signatory. increasing our recycling of collaborative projects that will support the delivery of our supply relentless pursuit for better building Kingspan recognises that it has a rainwater and waste and by chain targets. performance whilst being Planet responsibility as a business leader to @ Circularity: We upcycled 385 million PET bottles into our Passionate in everything we do. contribute towards the achievement accelerating our participation manufacturing processes and through our new Planet Passionate of the United Nation's Sustainable in the circular economy. program we are aiming to achieve zero waste to landfill Our commitment to sustainability Development Goals (SDGs). With throughout our business by 2030. is instilled at every level of the case studies in this report we Kingspan and at every step in demonstrate how we are making @ Water: We harvested 21.5 million litres of rainwater across our the manufacturing process. a difference through our solutions manufacturing operations and entered into a partnership with In developing our approach to and through our operations. The Ecoalf Foundation, a venture which collects waste in the Mediterranean Sea for recycling or repurposing where possible. — PEOPLE @ Kingspan takes the welfare of our employees very seriously. We are deeply saddened to report that there was a workplace PASSIONATE fatality in the business in 2019. We will do our utmost to learn from this tragedy and to continually improve processes and Despite our size, we retain training to achieve our target of zero fatalities across our our heritage and culture as business in the future. a family business, with very @ In 2019, Kingspan has invested over €2m on projects to enhance high value placed on people, health and safety processes and culture across our business. relationships and communities Our Lost Time Incident rate fell by almost 7% in 2019, or by more than 12% over the past 2 years. which are at the very heart @ We continue to champion diversity across the business. The of how we do business. 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 42 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. 43 See more on pages 54 - 55. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Fire Testing and Research Fire resistance is the measure of how Kingspan has a comprehensive Business & Strategic Report — Kingspan is committed to delivering building elements can effectively range of building facade systems PRODUCT PASSIONATE high-performance, innovative withstand and contain fire whilst incorporating QuadCore™ technology building solutions that are continuing to perform their and Kooltherm® boards that have — underpinned by extensive fire testing, given function. successfully passed large scale facade including large-scale system testing. tests around the globe including, PLANET PASSIONATE We have carried out over 2,000 fire These tests are typically performed but not limited to, NFPA 285 (North tests to national, international and by testing with large scale furnaces America), LEPIR II (France), SP Fire — insurance industry standards, across with minimum dimensions of 3 metres 105 (Nordics), AS 5113 (Australia), our full range of insulated panel, by 3 metres. Test results can include ISO 13785-2 (Czech Republic), MSZ PEOPLE PASSIONATE rainscreen facade and insulation integrity, insulation, heat radiation 14800-6 (Hungary) and met the board products and systems. As part and load bearing capacity. Test requirements of BR135 when tested of our ongoing commitment to fire methods employed to assess the fire to BS 8414 (UK). safety and product development, resistance capabilities of our products Kingspan is driven by a belief that advanced materials and methods we are investing €5m in a global and systems include EN 1364, EN Please refer to product literature of construction hold the answer to some of the great challenges state-of-the-art facility dedicated 1365, EN 1366 and ASTM E119. and datasheets for details of to fire engineering research. Offering configurations and requirements to that our planet and society face. From products that insulate better a comprehensive resource of fire a Compliance with regulatory and meet specific performance levels. while creating more internal space, to those that harness more comprehensive fire science resource, insurance industry requirements. its mission to advance knowledge QuadCore™ Technology is an Performance in real fire situations natural daylight, we are dedicated to pushing the boundaries of high- and understanding of how building advanced high-performance Testing and certification to regulatory performance envelope design with a core focus on energy efficiency. materials, products and complete closed-cell rigid insulation solution and insurance industry requirements,
systems perform when subjected offering a unique combination of with particular emphasis on GroupKingspan plc — &Annual Report Financial Statements 2019 to fire. Based in North Wales, the fire performance certification large scale system testing, is the Since the beginning, Kingspan has The building itself is a showcase for 385 million PET bottles bottles into centre will be open to visitors from when used as a core in our insulated cornerstone of Kingspan’s strategy been committed to innovation so high-performance envelope design our manufacturing processes. Learn April 2020 and will welcome research panel systems. to demonstrate the fire safety of we can make building better. It’s using 18 Kingspan products and more about our commitments to the partnerships and collaboration from our products and systems. However, something we demonstrate daily systems. Both a place of research environment in our Planet Passionate across industry and academia. Panel systems incorporating we believe that it’s important to across our business. We believe we and a living research project, IKON section of this Sustainability Report. QuadCore™ Technology achieve know how our products and systems must challenge building industry asks the big questions that will lead In addition, our new IKON Global excellent performance in a range of perform in real fire situations. traditions through innovating in us to a more sustainable and healthy In 2019 we launched a QuadCore™ Innovation Centre is focused on fire tests for regulatory compliance, advanced materials and digital future while delivering enhanced Roof Board, advanced progress on the digitalisation of construction are approved to insurance industry Across the world, we have examples technologies to achieve a net zero value, convenience and efficiencies the PV solar integrated PowerPanel® and is developing new technologies standards and achieve high levels of independently researched real fire carbon emissions future. Kingspan’s to our customers. 2.0 and the fibre-free A1 classified and tools to enable end-to-end of fire resistance. case studies which have proven the products and systems therefore AlphaCore®. QuadCore™ 2.0 and the digital traceability from test to site performance of insurer approved enable higher lifetime energy and Our aim is to continue to deliver next generation of Kooltherm® are and beyond to the full life cycle of The Kooltherm® range of Insulation insulated panel systems and a Therma carbon savings, and enhance and breakthrough products such as also in development. a building. Boards and KoolDuct® pre-insulated roof board system. Over the years we protect the value of assets. QuadCore™ and Kooltherm® and to ductwork are manufactured have built up a library of real fire case do this while progressing sustainability Kingspan's insulation systems, sold in Extensive Reaction to Fire and with a phenolic insulation core, which studies. Case studies include building This culture of innovation is why practices within our operations. 2019, will save an estimated 751 million Fire Resistance Testing has been proven through a rigorous occupancytypes such as retail, Kingspan has created IKON, In 2019, 90% of our operational energy MWh of energy or 172 million tonnes Reaction to fire relates to the programme of testing to offer healthcare,education, food processing our Global Innovation Centre. use was matched by renewable of CO₂e over their lifetime. Over 62% combustibility and ignitability of superior fire and smoke performance and storage, manufacturing, logistics energy, on target to be 100% by 2020. of our products contribute directly building materials and can be used to other commonly used rigid and distribution, car showrooms We also upcycled the equivalent of towards delivering the UN SDGs. to determine how much energy they thermoset insulants. and car parks. contribute to the growth of a fire.
These tests can range from small The total projected energy savings* over the lifetime of the Kingspan insulation systems, scale product tests, sometimes sold worldwide in 2019, is equivalent to: 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 441m 259 length. Large scale system testing is Over four hundred The annual output the most reliable way of assessing and forty-one million of 259 gas-fired the performance of products and barrels of oil power stations 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; 18.1 79m FM 4470, 4471, 4880, 4881, 4882 and 4924; IS0 13784; LEPIR II; NFPA 285
Up to 18.1 times the Taking seventy-nine and 286; and SP Fire 105. — the annual electricity million cars off the
consumption of road annually 4544 Greater London
*figures are based on savings of insulation systems in use for 60 years. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
— Business & Strategic Report — PRODUCT PASSIONATE SUSTAINABLE CITIES — CASE STUDIES Marrickville Library Australia
Kingspan Water & Energy: Kingspan Made to Measure — Rainwater Harvesting and SUSTAINABLE Stormwater Tanks
BUILDINGS The rainwater and stormwater tanks The tanks have been installed in the installed at Marrickville library have children’s garden and will be used as Alaska Airlines Hangar a capacity of 57,000 litres. These will an environmental education tool. USA supply over 100,000 waste flushes annually and provide irrigation for Inner West Council (Marrickville Kingspan Insulated Panels: the trees and green spaces. Council) is part of The Strategy Kingspan KS Micro-Rib Wall Panels for a Water Sensitive Community A very important role of rainwater which aims to move current urban
harvesting is to reduce peak flows water management in Marrickville GroupKingspan plc — &Annual Report Financial Statements 2019 Energy efficiency was a key the design stage. Insulated panels and total volume of stormwater. to a more sustainable and flexible challenge with this project because reduced the time on site and This can improve the water quality approach that promotes liveable, of the harsh Alaskan conditions negated the need for temporary and waterway health by reducing productive, resilient and sustainable and the large opening created by enclosure, which would have polluted run-off to local waterways. communities. At Kingspan, we have the hangar doors. Insulated panels needed to be heated. set ourselves the ambitious goal to enabled the architect to meet harvest 100 million litres of our own Anchorage’s code for continuous Kingspan’s single product solution water needs by 2030. insulation, despite these challenges. contributed to the sustainability goals of the project by significantly The construction season is reducing the waste versus what incredibly short in Alaska so speed would have been generated with of build was another key factor in a built-up system.
Important factors in choosing metal panels for this project were schedule, speed, durability, — efficiency and the one-shot envelope. Having one SUSTAINABLE product delivered on site and then installed and finished is a huge benefit to a project in terms BUILDINGS of schedule and managing construction costs - Two Southbank Place particularly in terms of labour. Jason Gamache, Principal Architect, MCG Architecture UK Kingspan Data & Flooring: Kingspan RMG 600 Simploc
Southbank Place is a hive of activity, Shell Tower. Two Southbank Place construction team also made use of featuring world-class arts venues, provides 15 floors of premium office available Kingspan BIM objects to aid globally recognised landmarks, and space and a winter garden. project planning and clash detection. attractions ranging from ferry tours of the River Thames, to boutique The build programme had to work Kingspan’s flooring solution helped to shops and fine dining. To cater for around design challenges such as a futureproof the building as a suitable the growing interest in the location, London Underground line running environment for co-working. 46 a £1.5 billion mixed-use site has beneath the building’s footprint been developed. Southbank Place and the creation of a new ticket Our access floor’s chain of custody — comprises seven new buildings, hall. So, with a tight deadline to certification and environmental including luxury apartments, retail meet, the specified products and certification contributed to Two units, restaurants and commercial materials needed to be quick and Southbank Place achieving BREEAM 47 spaces, all clustered around the iconic straightforward to install. The ‘Excellent’ certification. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information Business & Strategic Report —
PRODUCT PASSIONATE 2020 2025 2030 — ENERGY - Maintain our Net Zero Energy status • • • - Increase our direct use of renewable energy to 60% by 2030 - - • PLANET PASSIONATE - 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 - - • PEOPLE PASSIONATE - 50% reduction in product CO₂ intensity from our primary - - • supply partners by 2030 - Zero emission company cars by 2025 - • • Kingspan is at the forefront of driving the agenda CIRCULARITY - 1 billion PET bottles upcycled into our manufacturing processes by 2025 - • • - All QuadCore™ insulation to utilise upcycled PET by 2025 - • • toward a more sustainable future. We launched our - Zero company waste to landfill by 2030 - - • Net Zero Energy agenda in 2011 and are on target WATER - 5 active ocean clean-up projects by 2025 - • • to match 100% of our operational energy use with - 100 million litres of rainwater harvested by 2030 - - • renewable energy in 2020. Building upon the last PARTNERSHIPS decade of progress, we have now embarked on our next ambitious 10-year journey to radically GroupKingspan plc — &Annual Report Financial Statements 2019 advance Kingspan across the four key themes of Energy, Carbon, Circularity and Water.
Through Planet Passionate we aim Our Planet Passionate committee is a A key part of the “Save More” to make a significant reduction global team consisting of 17 dedicated ENERGY strategy has been employee in our environmental footprint, and passionate people representing Net Zero Energy* awareness and training. enhance the environmental all business units and all geographies. In 2019 we made significant progress Implementation of Energy performance of our products and This team collaborates and shares towards our Net Zero Energy goal of Management Standard ISO 50001 make a meaningful contribution best practice in order to deliver our matching 100% of our operational in several of our manufacturing sites towards the achievement of the ambitious 2030 targets. Our Global energy use with renewable energy – has also been effective in driving UN Sustainable Development Goals. Head of Sustainability reports Planet achieving 90% NZE up from 75% in energy efficiency improvements Passionate developments directly to 2018. This was achieved through the and increased use of sub-metering the CEO, Gene Murtagh. implementation of our three step has facilitated accurate targeting strategy: Save More, Generate More of energy saving opportunities. and Buy More. Our efforts to make further improvements will continue in 2020 Save More and beyond. In 2019 we implemented Improving the energy efficiency of multiple energy efficiency projects our operations remains the highest across the Group which will deliver priority across Kingspan. A wide approximately 7710 t/C02e of range of projects were implemented carbon savings per annum. on many sites during 2019 including the following; Generate More Climate change is the single most A key foundation of our “Generate → Insulation to reduce heat loss; More” strategy has been investing in important issue facing the world → LED lighting installations on-site generation. In 2019 5.3% of today and our most urgent priority. including daylight dimming our total energy use was generated and occupancy sensing; At Kingspan, we are committed to from renewable sources on our → Optimised daylighting solutions own manufacturing sites, we have driving a more sustainable approach including roof and wall lights; ambitious targets to grow this. The to our business in response to these → Heat recovery systems; technologies presently in use include: issues. Through Planet Passionate we * Net Zero Energy: We aim to → Compressed air system will reduce carbon and energy in both achieve net zero energy by the improvements; → Solar PV; end of 2020. We have defined net → Destratification fans to improve → Solar thermal; our manufacturing processes and zero energy as meaning: the non- heat distribution; → Biomass heat; products and continue our relentless renewable energy use associated → Low energy process equipment → Biomass CHP (electricity); with our manufacturing sites will be 48 pursuit of low-carbon buildings that minimised through a combination of installation; → Wind; deliver more performance and value, energy efficiency measures, on-site → Transitioned forklifts from → Anaerobic digestion. renewable energy generation and LPG to renewable energy; — with clear targets to strive for by 2030. the purchase of certified renewable → Optimised the use of lower gauge energy from the grid. Our remaining steel in access floor panels, non-renewable energy use will be 49 Gene M Murtagh, CEO offset by the purchase renewable saving wielding energy; energy certificates. → Power factor correction systems. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
PET upcycling Business & Strategic Report ENERGY: OUR JOURNEY TO DATE CIRCULARITY Kingspan upcycled 385 million PARTNERSHIPS Waste PET bottles into its manufacturing → World Green Building Council: Net Zero Energy 69% 75% 90% In 2019 Kingspan recycled 65% of its processes in 2019 and committed to Kingspan has signed on to be a target of upcycling one billion PET 2017 2018 2019 waste, down from 68% in 2018. The the primary sponsor of this decrease is primarily as a result of plastic bottles per annum by 2025. programme for the next two the impact of acquired businesses. In addition, Kingspan entered into years. We have also signed up to We aim to bring those businesses a three-year partnership with the the Net Zero Carbon Buildings ECOALF Foundation to support and Energy Costs Energy Intensity Energy Carbon Intensity on our waste reduction journey and Commitment, aiming for our Light and heat costs as a % of turnover kWh per € turnover CO₂ tonnes per €'000 of turnover through our new Planet Passionate expand their project which removes entire building portfolio to program, implement our zero waste 150 tonnes of plastic waste from achieve net zero operational the Mediterranean Sea each year, 2019 0.84 2019 0.14 2019 0.004 to landfill throughout the Group carbon by 2030. about 10% of which is PET. Ocean 2018 0.82 2018 0.14 2018 0.009 by 2030. We aim to share learnings PET recovered from the ECOALF 2017 0.79 2017 0.13 2017 0.012 from our more mature facilities, → Science-Based Target 2016 0.88 2016 0.14 2016 0.014 for example: our UK Data & Flooring project is added to the upcycled Initiative: Kingspan has 2015 0.99 2015 0.14 2015 0.034 Technology achieved zero waste to PET bottles and used to make committed to and verified its 2014 1.11 2014 0.16 2014 0.040 landfill in 2019. Kingspan’s insulation. Through Planet science-based targets. 2013 1.14 2013 0.18 2013 0.049 Passionate, Kingspan now plans to 2012 1.29 2012 0.19 2012 0.053 support four further ocean clean-up → RE100: Kingspan is a gold projects by 2025. member of the RE100. RE100 Renewable Energy Usage On-site Energy Generation Renewable Electricity Usage is a collaborative, global Renewable energy used (GWh) Renewable energy generated Renewable electricity used (GWh) initiative of influential businesses
WATER GroupKingspan plc — &Annual Report Financial Statements 2019 on-site (GWh) committed to 100% renewable Although water is a small proportion 2019 576 2019 34.0 2019 237.9 electricity, working to increase of inputs into our operations, we aim 2018 459 2018 36.2 2018 214.4 demand for, and delivery of 2017 328 2017 34.5 2017 176.2 to manage this precious resource in renewable electricity. 2016 243 2016 32.2 2016 164.4 the most responsible manner possible. 2015 126 2015 24.1 2015 102.3 In general, water is mainly used for → EP100: Kingspan is a member 2014 88 2014 17.3 2014 80.3 sanitation purposes and Kingspan of the EP100. EP100 brings 2013 60 2013 14.5 2013 58.0 continues to aim to maximise water together a growing group 2012 27 2012 6.6 2012 27.4 conservation through the use of of energy-smart companies rainwater harvesting and other water committed to improving their saving initiatives such as sensoring energy productivity and doing systems and water flow regulators. more with less. Through Planet Passionate we aim Buy More Kingspan continues to respond to increase our harvested rainwater → CE100: Kingspan is a member The purchase of renewable energy to the CDP Climate Change use to 100 million litres by 2030 of the CE100 network and the from the grid is an important part questionnaire. Out of the thousands (2019: 21.5 million litres). Built Environment working group of our strategy. Our preferred option of companies which responded, which aims to accelerate the is to purchase certified renewable Kingspan was recognised among the Our Data & Flooring Technology circular economy across the energy (both electricity and gas) top 2% that earned a spot on the manufacturing site in Red Lion US global construction sector. direct from our suppliers but where prestigious CDP Climate A list. is one of the largest consumers od this is not possible, we have made water in the Group and in 2019 the → ECOALF Foundation: 3-year purchases of Guarantees of Origin Through Planet Passionate we conservation of water amounted to partnership with the ECOALF (GOs) in Europe, Renewable Energy aim to achieve Net Zero Carbon 8.9 million litres (which is 63.8 % of Foundation aiming to support Certificates (RECs) in North America manufacturing and a 50% reduction total usage) through water recycling. their Upcycling the Oceans and International Renewable in product CO₂ intensity from projects. Energy Certificates (iRECs) in primary supply partners by 2030. other regions as necessary. We are also targeting 100% zero → Born Free: 3-year partnership emission company funded cars by to support the conservation Further to our Net Zero Energy 2025. In November 2019 we held our Through Planet Kingspan and education work to help target, through Planet Passionate annual Supplier Forum with specific protect the lion population in we aim to increase our direct use Passionate we has committed focus given to our new sustainability Meru, Kenya. of renewable energy to 60% of programme. Productive discussions aim to increase to send zero total energy use, increase on-site and workshops were held throughout generated energy to a minimum the day with a range of suppliers our direct use of waste to landfill of 20% and deploy rooftop solar resulting in some collaborative renewable energy by 2030. PV systems on all wholly owned projects that will support the delivery Kingspan sites by 2030. of our supply chain targets. We to 60% of total will continue to build our supplier
relationships and engagement energy use. 50 CARBON strategy moving forward. Our progress towards our Net Zero Energy goal to date has enable use — to reduce our energy related carbon
intensity per €‘000 turnover by 51 92% in just 8 years. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
International participants on the one of our Belgian facilities tragically Business & Strategic Report — 2019 programme represented 14 resulted in a workplace fatality. Hazard Identification Processes PRODUCT PASSIONATE diverse locations, including Brazil, Together with the local authorities include (but are not limited to): USA and Europe, with female and independent specialists retained - All near misses are assessed participants representing 24% (up by the company, we are fully — and processes are updated. from 11% in the first cohort). examining the circumstances of PLANET PASSIONATE this incident. We will use the learnings - Employees are encouraged to A new Enterprise Leadership from this tragedy to continually make suggestions for process — Programme is being launched in improve processes and training to improvements. 2020 along the lines of the previous achieve our target of zero fatalities PEOPLE PASSIONATE global development programme in across all of our businesses in - Safety walks by responsible 2017 – 2018. To-date, over 60% of the future. persons. our executives who attended this programme have been promoted In 2019 we invested over €4m on - Periodic workplace inspections. What has been achieved at Kingspan would to the next level or have taken on improving processes and H&S culture. - Risk assessment on new increased responsibilities. Over 60 of our manufacturing not be possible without the people that work machines at installation. facilities are certified to ISO 18001 hard every day to drive the company forward. We are also launching a coaching or equivalent standard. Over the A dynamic and motivated workforce is key to skills programme in 2020 for past three years, all of our sites delivering against the future growth strategy managers and business leaders, have been audited by internal H&S initially in Ireland and the UK, with a teams. Sites which are certified to Health and Safety Investments of the business. For this reason, talent is at the view to a wider global roll-out. This is ISO 18001 standards are externally in 2019 include: heart of future planning at Kingspan. part of a long-term strategy to build audited annually. GroupKingspan plc — &Annual Report Financial Statements 2019 an internal cadre of coaches who are - Roof replacements in two of skilled in developing not only their Equal opportunities, employee our facilities to improve working Kingspan’s leadership team holds an setting, but there is also the Gender balance own teams but can also contribute rights and diversity conditions and reduce slippage annual Talent Forum in September to opportunity to join a network of to the development of global talent. Kingspan is committed to providing risk from leaks. 19% 81% equal opportunities from recruitment review succession plans, metrics on people across the company to drive - Employment of external 2019 Protect and appointment, training and key positions hired throughout the real change through innovation consultants to update and Kingspan takes the safety of our development to appraisal and year and to forecast future talent and through engagement with our 18% 82% improve training and to upgrade gaps as part of our human capital Planet Passionate initiatives. 2018 employees incredibly seriously. All promotion opportunities for a processes and procedures, where risk assessment. accidents, as well as near misses, are wide range of people, free from necessary. Our employees are already reaching 17% 83% recorded and reviewed. Health and discrimination or harassment and in 2017 - Improvements in mechanisms Attract out to play a role in our Planet Safety (H&S) is under on-going review which all decisions are based on work for assisting employees when We have a number of initiatives at Passionate initiatives – such as Female Male at a facility and divisional level and a criteria and individual performance. Group H&S Committee sits at least We see diversity and inclusiveness as lifting panels, such as cranes with Kingspan to attract top talent. One car-pooling, organising local beach vacuum lifters and lift tables. of the key, group wide, initiatives clean-ups and increasing recycling twice a year. It is an opportunity for an essential part of our productivity, is the graduate programme which in our offices. We are building Injury Frequency Rate all divisions and geographies to share creativity and innovation. Diversity - General safety upgrades to saw graduates in 2019 up over a network of Planet Passionate best practice and discuss operational is widely promoted within Kingspan, machines where opportunities 26% on prior year. One third of the Champions to help scale local 1.4 p/100k hours experiences that will improve the over one third of recruits on our for improvement have been participants were female, significantly action at our sites across the globe. 2019 welfare of all our employees. graduate programme are female, and identified. 24% of the participants on our PEAK above the company average. The 1.5 p/100k hours We are deeply saddened to report programme are female, both well - General and emergency lighting highlight of the programme was the The network will convene once 2018 upgrades. that during the year, an accident at above the Kingspan average (19%). Graduate Projects Showcase which a quarter to share ideas and to 1.6 p/100k hours was hosted for the first time in IKON, progress initiatives identified across 2017 our new Global Innovation Centre, the business which will contribute to where five teams presented strategic achieving our Planet Passionate goals. projects to senior executives from Fatalities across Kingspan. Develop PEAK was launched in 2018 and 2019 1 Kingspan became a corporate is targeted at developing high- 2018 0 partner of UNITECH from January potential managers for future senior 2020. This is an international body leadership roles. The core objective 2017 0 that represents the most prestigious of the programme is to deepen engineering schools in the top nine Kingspan’s leadership bench- universities in Ireland, the UK and strength to match the increasing Europe. This will give Kingspan an scale and global nature of the extensive platform to attract talent business. Since its launch in April from all engineering disciplines who 2018, 56 managers have participated can go on to build their careers in in this six-month programme which our global business. has strengthened cross divisional 52 relationships as well as furthering Retain integration of executive talent from — At Kingspan we use multiple tools recent acquisitions. Another aim is to drive talent retention. These to increase leadership diversity by 53 include traditional motivational tools deepening and widening the pool Right: such as reviews and objective of future senior leaders. IKON, Kingscourt, Ireland. Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Our policies Supply chain engagement → Deliver a memorable customer Business & Strategic Report OUR COMMUNITIES Kingspan has developed an ethical experience. Aims and procurement strategy for → Develop the employee → Comply with all local laws in procuring materials and services experience, so our teams never the countries we operate in. Kingspan grew out of a family business and in a sustainable way, and we seek want to work for anyone else. → Ensure supply chain to build and maintain long term those family values continue to shape how we → Measure what our customers accountability. relationships with key suppliers and actually experience. Kingspan is engage with our communities today. Decades contractors to ensure that they are currently in its first phase of a Modern slavery aligned to the same standards. Many on, Kingspan remains deeply rooted in the Group wide customer experience Slavery and human trafficking of our suppliers are accredited to ISO programme. We have had over community of Kingscourt, Ireland, where the are abhorrent crimes and we all 9001, ISO 14001 and OHSAS 18001, 10,000 responses and have have a responsibility to ensure which cover quality, environmental business was founded. Being engaged in our very ambitious targets for this that they do not continue. At and health and safety management programme in the short to local communities is a core element of the Kingspan we pride ourselves on systems. In November 2019 we held medium term. We look forward culture of Kingspan. conducting our business ethically our annual Supplier Forum with to updating you as we go and responsibly. The Modern Slavery specific focus given to our new through the process. Act 2015 became UK legislation and sustainability programme. Productive It is important that our businesses The children are our future → In Poland, Kingspan supported required all large UK companies discussions and workshops were → Continue to innovate. have the flexibility to support Children led a climate revolution a local children’s home in Sienno and businesses who supply goods held throughout the day with a initiatives which are relevant to in 2019, urging those in power to which provides shelter to 40 or services in the UK to publish range of suppliers resulting in some the local workforce and to the take action. Nearly 8 million people children between the ages of 4 a slavery and human trafficking collaborative projects that will communities in which they operate. reportedly took part in protests and 16. Our employees donated statement each financial year support the delivery of our goal for In 2019 we are proud to have across the globe in March and toys and sports equipment for on their website. Kingspan is a 50% reduction in product CO₂ GroupKingspan plc — &Annual Report Financial Statements 2019 supported a wide range of initiatives, September. In this year’s report Children’s Day and donated funds fully committed to ensuring that intensity from our primary supply including: runs against cancer, we want to highlight a number to support the summer camp. modern slavery is not taking place partners by 2030. stimulating the local environment of projects in which Kingspan → For the past 5 years, Kingspan has in our business or any of our supply through beekeeping, community supported the development and supported Gena Heraty’s project chains. We adopted and published Customer experience programme tidy-towns initiatives, festive protection of children across the in Haiti which provides shelter and our policy statement at the end Everything that our customers family box donations and multiple globe in 2019: care for over 70 orphans, 30 of of 2016 and all our businesses are experience with Kingspan matters sponsorship and fundraising events. which have special needs. Gena responsible for ensuring supplier to us. Whether it’s the performance → In Ireland we have supported was named the Irish Red Cross compliance with the legislation. of our product solutions, the World Water Day Junior Achievement Ireland (JAI) Humanitarian of the Year in 2019. responsiveness of our service teams In 2019 Kingspan went blue for World for over 16 years. JAI encourages or the efficiency of our deliveries, we Water Day. Our Water & Energy young people to stay in education strive to provide a positive experience division launched a campaign to and helps them to develop the Photo captions: to all our customers. raise awareness about water as a skills they need to succeed in 1 Children participating in a changing world. Kingspan JAI's 'Futurewize' programme resource, and to raise funds for the To help us achieve our strategic volunteers have presented to Kingspan Water "Just a drop" foundation. 2 First Day at School, NPH, Haiti goals we have introduced four students on the value of STEM 3 Kingspan Water & Energy employees key commitment areas into our & Energy launch subjects and we have been enjoying World Water Day businesses on which we are focusing inspiring students through tours World Water Day as part of our customer excellence of our newly opened Global 4 Children from the Sienno Children's Home on summer camp programme: Innovation Centre, IKON. campaign.
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The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors Business & Strategic Report Product Kingspan Insulated Panels — BENCHMARK Hook-on Cassettes @ DIRECTORS'
Energy/ The Karrier panels provided over double Western Australia Museum Carbon the thermal values specified for the REPORT Saving @ project, directly impacting the HVAC systems’ output, operating costs and Perth, Australia maintenance requirements.
Space/ With such a large cantilever over the Dimensions existing heritage building, weight was a @ crucial consideration and a key reason in switching from pre-cast concrete to a light-weight panel solution. Kingspan’s BENCHMARK Hook-On Health & Air leakage rates achieved on the Cassette’s were chosen for the project Wellbeing project are excellent, critical for @ protecting the museum’s important due to their efficiency in speed of artefacts and very difficult to achieve using traditional methods of construction. construction, airtightness, thermal Speed/ The pre-modularisation of the panels performance, and aesthetic potential, Ease of build and the roof liner panel enabled a fast @ enclosure of the building envelope and all encompassed by a through wall an earlier start on internal works versus GroupKingspan plc — &Annual Report Financial Statements 2019 traditional methods of construction. 25 year performance warranty as Aesthetics The panel’s metallic finishes echo the vast landscapes of Western Australia an added benefit. @ and reflect the State’s mineral heritage Alex Dennis, National Business Development Manager and the origins of the WA Museum. Kingspan Insulated Panels, Australia
Planet Local material sourcing was a key focus Passionate/ for this project. Given Kingspan’s global Sustainability @ manufacturing capacity, it contributed to the achievement of 80% of materials being locally sourced.
Awards/ The new Museum for Western Australia Certifications is among six national finalists for @ the 2020 Australian Construction Achievement Award.
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@ 57 BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors Directors' Report — Non-executive directors
Linda Hickey Linda Hickey was appointed to the Board in June 2013, and is appointed as the Senior Independent THE (Age 58) Director. Ireland Key skills & experience: Linda is a registered stockbroker and was formerly the Head of Corporate BOARD Independent 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.
The Board provides entrepreneurial Michael Cawley Michael Cawley was appointed to the Board in May 2014. leadership and sets the governance (Age 65) Key skills & experience: Michael is a chartered accountant, and was formerly Chief Operating Officer Ireland & Deputy Chief Executive of Ryanair. His extensive international financial and business experience as framework for the Group. Independent 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. Chairman Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 John Cronin John Cronin was appointed to the Board in May 2014. Eugene Murtagh Eugene Murtagh is the non-executive Chairman of the Group. (Age 60) Key skills & experience: John is a qualified solicitor, and partner and former chairman of McCann (Age 77) Key skills & experience: Eugene founded the Kingspan business in 1965 and, as CEO until 2005, he Ireland FitzGerald. He has more than 30 years’ experience in corporate, banking, structured finance Ireland led its growth and development to become an international market leader. As Chairman, he sets Independent and capital markets matters. He is a member of the International Bar Association, and is a past the tone at the top, developing and embedding values. He has an unrivalled understanding of the President of the British Irish Chamber of Commerce. His valuable legal, corporate governance and Group, its business and its ethos, and demonstrates outstanding leadership and governance skills. capital markets experience brings a unique perspective to the Board. Chief Executive Officer Qualifications: B.A. (Mod) Legal Science, Solicitor in Ireland and England & Wales. External appointments: Non-executive director of The Dublin Theatre Festival. Gene M. Murtagh Gene Murtagh is the Group Chief Executive Officer. He was appointed to the Board in November (Age 48) 1999. Bruce Bruce McLennan was appointed to the Board in June 2015. Ireland Key skills & experience: Gene joined the Group in 1993 and was appointed CEO in 2005. He was McLennan Key skills & experience: Bruce is Managing Director and Co-Head of Advisory at Gresham Advisory previously the Chief Operating Officer from 2003 to 2005, and prior to that he was managing (Age 55) Partners Limited. He is also a Member of the Australian Institute of Company Directors, Australian director of the Group’s Insulated Panel business and of the Water & Energy business. He leads the Australia Society of Certified Practising Accountants, and a Fellow of the Financial Services Institute of development of the Group’s strategy and has a deep knowledge of all of the Group’s businesses Independent Australia. He brings to the Board over 30 years’ experience in investment banking, and a broad and the wider construction materials industry. knowledge of international capital markets and strategic and corporate planning. Executive directors Qualifications: B.Bus, M. Comm. External appointments: Member of the Australian Government Takeovers Panel. Geoff Doherty Geoff Doherty is the Group Chief Financial Officer. He joined the Group, and was appointed to the (Age 48) Board, in January 2011. Dr Jost Jost Massenberg was appointed to the Board in February 2018. Ireland Key skills & experience: Prior to joining Kingspan Geoff was the Chief Financial Officer of Massenberg Key skills & experience: Jost was Chief Executive Officer of Benteler Distribution International Greencore Group plc and Chief Executive of its property and agribusiness activities. He is a qualified (Age 63) GmbH, and was formerly the Chief Sales Officer and a member of the executive board of chartered accountant, with extensive experience of capital markets and financial management in Germany ThyssenKrupp Steel Europe AG. His more than 30 years’ industry experience in European steel and an international manufacturing environment. Independent major manufacturing businesses are of enormous benefit to the Board. Russell Shiels Russell Shiels is President of Kingspan’s Insulated Panels business in the Americas as well as Qualifications: PhD Business Admin. (Age 58) Kingspan’s global Data & Flooring business. He joined the Board in December 1996. External appointments: Chairman of VTG Aktiengesellschaft, and a non-executive director in a United States Key skills & experience: Russell has experience in many of the Group’s key businesses, and was number of large private companies. of America 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 Anne Heraty Anne Heraty was appointed to the Board in August 2019. Americas, as well as his understanding of the office and datacentre market globally. (Age 59) Key skills & experience: Anne is the founder and Chief Executive Officer of Cpl Resources plc. Ireland Peter Wilson She has over 20 years’ experience running an international recruitment and outsourcing business Peter Wilson is Managing Director of the Group’s global Insulation Boards business. He was Independent (Age 63) appointed to the Board in February 2003. 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. United Kingdom 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 Qualifications: B.A. in Mathematics & Economics. industry, gained over almost 40 years’ in the business. External appointments: Chief Executive Officer of Cpl Resources plc.
Gilbert McCarthy Gilbert McCarthy is Managing Director of the Group’s Insulated Panels businesses in the UK, Ireland, 58 (Age 48) Western Europe, Middle East and Australasia. He was appointed to the Board in September 2011. Company Secretary Ireland Key skills & experience: Gilbert joined the Group in 1998, and has held a number of senior Lorcan Dowd Lorcan Dowd was appointed Head of Legal and Group Company Secretary in July 2005. management positions including managing director of the Off-site division and general manager (Age 51) — of the Insulation Boards business. He brings to the Board his extensive knowledge of the building Key skills & experience: Lorcan qualified as a solicitor in 1992. Before joining Kingspan he was Director Ireland of Corporate Legal Services in PwC in Belfast, having previously worked as a solicitor in private practice.
envelope industry, in particular in Western Europe and Australasia. 59
Board Committees: Audit Nomination & Governance Remuneration BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
— Directors' Report USA Seattle Opera Centre
CHAIRMAN’S Insulated Panels: INTRODUCTION Kingspan Karrier Panel
At 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 GroupKingspan plc — &Annual Report Financial Statements 2019 The Financial Reporting Council’s As a Board, we hope you find our significant value for our stakeholders and wider society. (‘FRC’) 2018 U.K. Corporate reporting to be meaningful in Governance Code (the ‘New Code’) detailing how we have applied the came into effect for Kingspan from revised principles under the New 1 January 2019. In publishing the Code. In areas where we have Code, the FRC has aimed to deviated from any provisions of emphasise the importance of good the New Code, we aim to provide corporate governance to long-term clarity as to how we continue to sustainable success. meet the Principles of the Code and demonstrate why our approach Throughout 2019 the Board took represents less governance risk a number of steps to refine its based on our strategy, business approach to reflect the altered and outlook. focus of the New Code, relating to: During the past year, the Board → Board Leadership and was pleased to engage with major Company Purpose shareholders on a number of → Division of Responsibilities occasions. In addition to the many investor and executive management → Composition, Succession meetings held throughout the year, and Evaluation the Chair of the Remuneration → Audit, Risk and Internal Control Committee has engaged with a host → Remuneration of our major shareholders to discuss the outcome of the 2019 AGM, as The New Code aims to return to well as changes to our remuneration a principle based approach to policy in light of updates to the governance, as opposed to risking UK Code. Further details of these an overly prescriptive regime. A discussions are detailed in the Report cornerstone of safeguarding our of the Remuneration Committee long-term ambitions has been a contained in this Annual Report. commitment to high standards of corporate governance, as well as a On behalf of the Board, I would like Board with a depth of experience to thank those shareholders who and expertise. In making and provided their views on governance implementing actions, the Board and strategy during the past year. aims to maintain a balance between short-term pressures for change and Eugene Murtagh
the long-term impacts of decisions. Chairman 60 — 61 BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
— Directors' Report USA REPORT OF THE Broadwater Office Insulated Panels: NOMINATION & Kingspan Dri-Design GOVERNANCE COMMITTEE
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’). Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019
Board committees The full text of the Code and The Members of each committee The Board has established the of the Irish Corporate Governance as at the date hereof, and the date following committees: Audit, Annex can be obtained from of their first appointment to the Nomination & Governance, and the following websites respectively: committee, are set out below. The Remuneration committees. All www.frc.org.uk details of each committee’s activities committees of the Board have www.euronext.com during the year are detailed in their written terms of reference setting out respective reports as set out in this their authorities and duties and these Statement of compliance Annual Report. terms are available on the Group’s The directors confirm that the website www.kingspan.com. Company has throughout the accounting period ended 31 December 2019 complied with the provisions of the UK Corporate Governance Code (July 2018) in Audit Committee Attendance at Board and Committeee meetings the manner hereinafter detailed. during the year ended 31 December 2019 Michael Cawley (Chair) Appointed 2014 Independent Board Audit Nominations Remuneration Stakeholder views Anne Heraty Appointed 2019 Independent The Board is cognisant of the principle AB A B AB AB Bruce McLennan Appointed 2020 Independent underpinning Provision 5 of the New Eugene Murtagh 7 7 1 1 Code, which asks Boards to have regard for engagement mechanisms Gene M. Murtagh 7 7 1 1 Nomination & Governance Committee with stakeholders. The Board is fully Geoff Doherty 7 7 aware of its responsibilities in this Eugene Murtagh (Chair) Appointed 1998 regard and other sections in this Russell Shiels 7 7 Annual Report set out clearly the Gene M. Murtagh Appointed 2007 long-lasting partnerships we have John Cronin Appointed 2014 Independent Peter Wilson 7 7 developed with customers, suppliers Bruce McLennan Appointed 2017 Independent and communities. We are also aware Gilbert McCarthy 7 7 of the importance of engagement Jost Massenberg Appointed 2019 Independent Helen Kirkpatrick 1 1 1 1 1 1 with the workforce to the development of strategy as well as uncovering of Linda Hickey 7 7 1 1 4 4 risk and promoting new opportunities. Remuneration Committee Michael Cawley 7 7 5 5 4 4 The Board is pleased to confirm that Linda Hickey (Chair) Appointed 2015 Independent Linda Hickey has been appointed John Cronin 7 7 5 5 1 1 as the director responsible for Michael Cawley Appointed 2014 Independent workforce engagement to facilitate Bruce McLennan Appointed 2017 Independent Bruce McLennan 7 7 1 1 4 4 the channelling of employee views to Board discussions. This process of Jost Massenberg 7 7 engagement will also allow the Board Anne Heraty 3 3 3 3 — to consistently assess and monitor the evolution of the company’s corporate
Column A - indicates the number of meetings held during the period the director was a member of the Board and/or Committee 6362 culture, while promoting the ability of Column B - indicates the number of meetings attended during the period the director was a member of the Board and/or Committee the workforce to raise concerns. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
Board composition and The main features of the → The validation of consolidation Effectiveness and independence Directors' Report responsibilities Belgium Group’s internal control and risk journals as part of the The committee has reviewed There is a clear division of Gova Meubelen management systems that relate management review process and the size and performance of the responsibilities within the Group specifically to the Group’s financial as an integral component of Board during the year and this Insulated Panels: between the Board and executive Kingspan Dri-Design, reporting processes are: the year-end audit process; process occurs annually. The Board management, with the Board QuadCore™ Karrier → The review and analysis of continues to ensure that each of the retaining control of strategic and → Budgets and Strategic Plans results by the Chief Financial non-executive directors, excluding other major decisions. The Chairman are approved annually by the Officer and the auditors with the the Chairman, remain impartial and leads the Board and is responsible for Board and compared to actual management of each division; independent in order to meet the its overall effectiveness in directing performance and forecasts on a challenges of the role. → Consideration by the Audit the Company. One of the key roles for monthly basis; Committee of the outcomes the Chairman in doing so is promoting Throughout the year, more than → Sufficiently sized finance from the annual risk assessment a culture of objectivity, openness and half of the Board, excluding the teams with appropriate level of of the business; debate. In addition, the Chairman experience and qualifications Chairman, comprised independent → The review of internal and external facilitates constructive board relations throughout the Group; non-executive directors. Linda Hickey and the effective contribution of all audit management letters by is the senior independent director on → Formal Group Accounting Manual non-executive directors, and ensures the Chief Financial Officer, Head the Board. The senior independent in place which clearly sets out that directors receive accurate, timely of Internal Audit and the Audit director provides a sounding board the Group financial policies in and clear information. Committee; and the follow up of for the Chairman and serves as an addition to the formal controls; any critical management letter intermediary for the other directors The balance of skills, background and → Formal IT and Treasury policies points to ensure issues highlighted and shareholders when necessary. diversity of the Board contributes and controls in place; are addressed. The directors consider that there is
to the effective leadership of the → Centralised Tax and Treasury strong independent representation GroupKingspan plc — &Annual Report Financial Statements 2019 business and the development of functions; Further information on the risks on the Board. faced by the Group and how they strategy. The Board’s composition → Sales are submitted and reviewed are managed are set out in the Risks is central to ensuring all directors on a weekly basis whilst full The Board has had due regard & Risk Management section of this contribute to discussions. reporting packs are submitted to various matters which might Annual Report. and reviewed on a monthly basis; affect, or appear to affect, the As a means to foster challenge and The ordinary business of an AGM Internal control and risk and independence of certain of the director engagement, led by the is to receive and consider the management systems Leadership directors. The Board considers that → Internal audit function review senior independent director, the non- Company’s Annual Report and The Board confirms that there is The Nomination and Governance each of the non-executive directors financial controls and report executive directors meet without the statutory financial statements, to an ongoing process for identifying, Committee (the 'committee'), (excluding the Chairman of the results/findings on a quarterly Chairman present at least annually. review the affairs of the Group, to evaluating and managing any leads the process for appointments Board) are independent. basis to the Audit Committee. Likewise, the Chairman holds elect directors, to declare dividends, significant risks faced by the Group. while ensuring plans are in place meetings with the non-executive to appoint or reappoint auditors and This process has been in place for for orderly succession to both the In determining the independence In addition, the main features of directors without the executives to fix the remuneration of auditors the year under review and up to the Board and senior management of John Cronin, both at the time of the Group’s internal control and present. In each of these settings, and directors. date of approval of the financial positions. A fundamental aspect his appointment and subsequently risk management systems that there is a collegiate atmosphere that statements and it is regularly of overseeing appointments to as part of annual reviews of the relate specifically to the Group’s also lends itself to a level of scrutiny, The Chairman of the Board of reviewed by the Board in compliance senior management remains the Board’s composition, the committee consolidation process are: discussion and challenge. Directors shall preside as chairman with ‘Guidance on Risk Management, development of a diverse pipeline. had particular regard for his of every general meeting and in his Internal Control and Related Financial In terms of non-executive directors, position as a partner of McCann → The review of reporting packages All directors have access to absence, one of the directors present and Business Reporting’ issued by the the committee remains guided by FitzGerald, one of the Company’s for each entity as part of the the advice and services of the will act in the capacity of chairman. Financial Reporting Council. the principle that all appointments legal advisors. The committee year-end audit process; Company Secretary. The Company The quorum for a general meeting will be made on merit, but having concluded that Mr Cronin was fully has procedures whereby directors shall be not less than three members The Board has delegated → The reconciliation of reporting regard, where possible to diversity independent, taking into account (including non-executive directors) present in person or by proxy and responsibility to the Audit packages to monthly of gender, age and nationality. the following material factors: receive formal induction and entitled to vote. At any general Committee to monitor and review management packs as part of familiarisation with Kingspan’s meeting, a resolution put to the vote the Group’s risk management the audit process and as part of The non-executive directors on the → He has no role in the selection business operations and systems of the meeting shall be decided by and internal control processes, management review; Board currently have the following or retention of legal advisors on appointment, including trips to a show of hands unless a poll is duly including the financial, operational mix of skills and experience as set to the Company; manufacturing sites with in-depth demanded. All ordinary shares rank and compliance controls, out in the table below: explanations of the processes pari passu and carry equal voting through detailed discussions with involved at the site. rights. Every member present in management and the executive person or by proxy shall upon a show directors, the review and approval Name Nationality International Financial Governance Leadership Industry Legal Shareholders’ meetings and rights of hands have one vote, and every of the internal audit reports, which The Company operates under the member present in person or by focus on the areas of greatest risk Eugene Murtagh Irish • • • • • Irish Companies Act 2014 (the proxy shall upon a poll have one vote to the Group, and the external audit ‘Act’). This Act provides for two for each share of which they are the reports, as part of both the year- Linda Hickey Irish • • • • types of shareholder meetings: the holder. In the case of an equality of end audit and the half year review Michael Cawley Irish • • • • • Annual General Meeting (‘AGM’) votes the Chairman shall, both on a process, all of which are designed with all other meetings being called show of hands and at a poll, have a to highlight the key areas of control John Cronin Irish • • • • • Extraordinary General Meetings casting vote. weakness in the Group. Further Bruce McLennan Australian • • • (‘EGM’). details of the work conducted by
Further details of shareholders rights the Audit Committee in this regard Jost Massenberg German • • • • • — is detailed in the Report of the The Company must hold an AGM with regards the General Meetings are Anne Heraty Irish • • • • • each year in addition to any other set out in the Shareholder Information Audit Committee contained in 6564 shareholder meeting in that year. section of this Annual Report. this Annual Report. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
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→ All work undertaken by McCann In these circumstances the Board In assessing the independence of The Board concluded that neither a director have grown considerably new non-executive to the Board, the Directors' Report FitzGerald for the Company is concluded that there was no material Linda Hickey, the Board had due Ms Hickey’s nor Mr Cronin’s in the past decade. The committee committee considered whether or managed by other employees relationship, financial or otherwise, regard to her previous position as independence was affected and reviewed Mr Cawley’s attendance not to engage a firm of consultants within the firm, and there are which might either directly or a senior executive at Goodbody considers that between them they and contribution as a non-executive to assist in the process, but decided formal arrangements in place, indirectly influence his judgement. Stockbrokers, one of the Company’s bring valuable financial, capital director, as well as his other that in order to ensure best fit both at McCann FitzGerald and corporate brokers. Ms Hickey markets, governance and legal risk mandates. It was noted that since with the Company, it would use Kingspan, to ensure there are no In addition to these considerations, retired from her role at Goodbody experience to the Board. his appointment as a non-executive its internal knowledge and existing conflicts of interests; given the potential for a perceived Stockbrokers in 2019. Moreover, the director, Mr Cawley has attended pool of candidates, before selecting → Mr Cronin is an experienced and conflict of interests, at the time annual level of fees and expenses Conflict of Interests 100% of the Audit Committee and recommending Ms Heraty’s accomplished corporate lawyer of Mr Cronin’s appointment, we paid to Goodbody Stockbrokers were Acknowledging the importance meetings and has only missed appointment to the Board. who adds important legal and engaged with ISS to discuss the steps normally in the region of €50,000 of independent representation to one out of a total of 82 Board and regulatory experience to the we had taken to avoid any conflicts for corporate broking services during the effective functioning of the committee meetings. The committee Succession Planning Board; developing during his tenure in order her tenure there. In assessing Ms. Board, as well as the scrutiny and, has engaged with Mr Cawley and One of the primary remits of the to alleviate any potential shareholder Hickey's independence annually, when necessary, the challenging noted his assurances that he will committee is to ensure that robust → Since his appointment to the concerns. Both parties were satisfied the Committee also took into of management, as part of the continue to devote sufficient time succession plans are in place for the Board, Mr. Cronin has not had at the time that the relationship account her invaluable experience evolution of our governance to the Board. The committee will directors and senior management, any involvement in advising the was not likely to impact Mr Cronin’s in working for two of the largest framework, the Committee continue to keep under review taking into consideration planned Company on any legal matters; independence as a director, and the Irish stockbroking firms. In Ireland, developed and approved a conflicts the external commitments of and unplanned departures, as → The total fees paid to McCann Company agreed to disclose annually she has unrivalled experience in of interest policy which will guide all all Directors. well as the strategic evolution of FitzGerald during the year were the fees paid to McCann FitzGerald capital markets and particularly Irish decisions of the Board when actual the business. Aligning succession €125,947 (2018: €114,533) and as a related party transaction. public companies, which is hugely or potential conflicts of interest arise. Performance evaluation planning to our strategy is a account for substantially less valuable to the Company and our Kingspan has in place formal cornerstone of strong committee
than 1% of McCann FitzGerald’s shareholders. The policy stipulates that directors procedures for the evaluation and Board governance, and will GroupKingspan plc — &Annual Report Financial Statements 2019 annual revenues. are required to avoid situations of its Board, committees and continue to be a focus of where they have, or could have, individual directors. The purpose of the committee in the coming period. a direct or indirect interest that this formal evaluation is to ensure One specific update to the New conflicts, or may conflict, with the that the Board of Directors (on Code is that, generally, chairs Residency Independence Company’s interests. Directors a collective and individual basis) should not remain in place for over are required to give notice of is performing effectively and to nine years, although there is an any potential situational and/ ensure stakeholder confidence in exception to this rule to facilitate or transactional conflicts, which the Board. The Chairman reviews succession planning, and the 68% 8% 50% are considered at the following annually the performance of the committee, much like the New Code, Ireland Australia Independent Board meeting and, if appropriate, Board of Directors, the conduct of recognises that governance is not situational conflicts are authorised. Board meetings and committee always best served by rigid guidance, 8% Directors are not allowed to meetings, and the general corporate particularly for a position as Germany participate in such considerations or governance of the Group. important as that of the Chairman. to vote regarding their own conflicts. An externally facilitated review of As the founder of the business in 8% External commitments the Board’s performance was carried 1965, Eugene Murtagh has led USA Non-executive directors, including out during 2018 by Better Boards. its growth and development as the Chairman, may serve on other We will conduct another external both Chairman and CEO until 50 boards provided they continue evaluation within three years in line his retirement as CEO in 2005. As 8% to demonstrate the requisite with best practice. Chairman, Mr Murtagh has been UK Non- Independent commitment to discharge their instrumental in setting the tone at duties effectively. The Committee Board changes the top, developing and embedding reviews the extent of the directors’ During the past year, we continued values as well as encouraging Gender Tenure other interests on an ongoing basis to deliberately refresh the Board. As performance and ensuring that throughout the year. The Committee a Board, we are fully aware of the management have the necessary is satisfied that each of the directors benefits of balancing longer serving support and controls in place to commits sufficient time to their and newly appointed Directors, deliver on its strategy. Mr Murtagh 83% 17% 33% 17% duties in relation to the Company. which is central to the generation of has now indicated to the Board Male Female Over 9 years Less than The Chairman and each of the new business strategies. that it is his intention to retire 3 years directors have also confirmed they as Chairman and non-executive have sufficient time to fulfil their In May 2019, having served for director within the next 18 months. obligations to the Company. almost 12 years, Helen Kirkpatrick The committee believes that this stepped down from the Board. is an appropriate timeline which In assessing the time commitments Ms Kirkpatrick’s input was hugely balances the need for stability and 25% of Board members, the Committee valuable to the Board, as well as continuity whilst ensuring an orderly Between 3 had particular regard for the to all the key committees she sat transition takes place between and 6 years external commitments of Michael on. Later in the year, Anne Heraty him and his successor during what
Cawley, who is also a non-executive was appointed as a non-executive will be a significant change in the 66 director of Ryanair Holdings plc, and Director. With over two decades leadership of the Board. In line Flutter Entertainment plc, as well experience as the CEO of a public with best practice, Mr Murtagh will
25% — Netherlands as Chairman of Hostelworld Group company, Ms Heraty deepens not Chair the committee when his Grote Boel Between 6 and 9 years plc. The Committee recognises the the diversity of background and successor is being selected.
Insulated Panels: views expressed by shareholders in expertise to our Board significantly. 67 Kingspan Dri-Design this area, as the demands of being In considering the appointment of a BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors Directors' Report Product Kooltherm® Pipe Insulation @
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Click here to see more — @ 69 BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
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— Corporate governance Shareholder consultation → The inclusion of a two-year post- Directors' Report developments At the 2019 AGM, 23% of vesting holding period under the As an Irish listed company, Kingspan shareholders opposed the resolution PSP; REPORT OF THE reports against the provisions of relating to our remuneration policy. → A reduction in pension the UK Corporate Governance Code When engaging with shareholders contributions for all future REMUNERATION (July 2018). This latest iteration around the AGM, we developed a executive directors, which will be of the Code has broadened the clear understanding of the concerns aligned with the rate applicable role of the committee, as well as of those who voted against the to the workforce in the relevant COMMITTEE introducing additional practices remuneration policy, as well as local market; and concerning director pay, all of which those who supported the resolution → The introduction of a post- have been carefully considered by while noting minor concerns. During cessation shareholding guideline the committee during the year engagement with shareholders, the for all new executive directors, and extensively discussed with most common areas of discussion with the current shareholding shareholders. related to pension contribution guidelines applying for two years On behalf of the Remuneration levels; post-cessation shareholding after an executive’s departure. Committee (the “committee”) and As noted in last year’s Remuneration guidelines; and the adoption of post- Report, the EU Shareholders’ Rights vesting holding for PSP Awards. In Following confirmation of the the Board, I am pleased to present my Directive, which includes a focus on the period since the 2019 AGM, we proposed changes, we again directors’ remuneration disclosures wrote to shareholders representing first Report on Directors’ Remuneration, engaged with shareholders to detail and shareholder approval of the more than half of our issued share the background to the changes and having been appointed as Chair of the directors’ remuneration policy, capital and again engaged with a to foster mutual understanding of has yet to be transposed into Irish number of our major shareholders. committee in May 2019. the steps we have taken to meet the law and it is not yet clear how GroupKingspan plc — &Annual Report Financial Statements 2019 evolution of market best-practice in this will be finally implemented in While it is not always possible the UK & Ireland. On behalf of the Prior to my appointment as Chair, Business performance and Ireland. Nevertheless, in advance to reach a consensus of views, Fixed pay v Variable pay committee, I want to thank all those I had served on the committee for pay outcomes of that transposition taking place, particularly when discussing shareholders who took the time to four years and have developed a 2019 was another year of strong Kingspan proposed an advisory remuneration, we believe we have engage with us. We are pleased fundamental understanding of the performance for the Group across vote on its remuneration policy at addressed the common themes 38% that shareholders were supportive company’s incentive framework, a number of measures. In the face its 2019 Annual General Meeting, emerging from the programme Fixed of the changes we have made. The its link to the Group’s strategy, of some mixed markets and a and we were pleased that this was of shareholder engagement. input of our shareholders is key to and the strong alignment between relatively weaker second half, supported by more than three our aim of consistently improving Kingspan’s performance and our Group revenue increased 7% to quarters of shareholders. Consequently, the committee has transparency and we have used executive directors’ remuneration. €4.7bn, and Trading Profit was implemented the following changes certain aspects of the feedback up 12% to €497.1m, reflecting to our incentive framework: to enhance our disclosure. Our remuneration philosophy both volume growth and a healthy Central to our approach to focus on margin management. remuneration are the principles of simplicity, pay for performance and Earnings Per Share (‘EPS’) rose USA San Francisco Consolidated transparency. Variable remuneration 11% to 204.6 cent and Total Administration Campus is only paid for strong performance Shareholder Return (‘TSR’) for 62% and maximum payouts will only the year was 47.2%, which are two Variable Insulated Panels: be realised for truly exceptional of the key performance measures Kingspan BENCHMARK Designwall 2000 performance. A significant portion used to determine the executives’ of remuneration is delivered through performance-related pay. This equity, ensuring strong levels of has resulted in varying levels of alignment between the interests bonus being achieved, with 71% of of management and shareholders. the Group EPS targets achieved, and Variable pay In contrast to many of our peers between 82% - 100% of the divisional Short Term v Long Term in the UK & Ireland, our incentive profit targets having been met. framework is based on straight- forward metrics. The EPS measure The strength of the Group’s we employ under both the annual performance has also been reflected 49% bonus and Performance Share Plan in the achievement of top quartile Short Term (PSP) is identical to that which we TSR performance among the peer report in the income statement and group for the ninth cycle in a row is not subject to any adjustments. which, together with strong long- This approach cascades through term EPS growth, resulted in the the organisation and promotes 2017 PSP Awards vesting at 100% transparency and simplicity for of maximum. Further details on participants and our shareholders. outcomes under our incentive plans
Our relentless focus on simplicity are set out later in this report. 70 and a high-performance culture has been instrumental in driving the Linda Hickey 51% growth of the business and significant Chair of the Remuneration Long Term — value creation for stakeholders. Committee 71 BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
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Pensions → For both the CEO and CFO, 2019 Remuneration at a glance Performance Share Plan set out in the table below. 100% of The policy is guided by the following Directors' Report Over the past 12 months, the issue contributions are determined by This section provides a snapshot of The Performance Share Plan (‘PSP’) awards granted will vest in May 2020. overarching principles: of pensions, and specifically any reference to their salary, being remuneration received by executive awards vesting in May 2020, relate disparity between contribution c. 18% and 24% respectively. In directors during 2019. to awards granted in 2017. Summary of Remuneration Policy → Simplicity levels for executives and the wider relation to the Divisional MD’s, Set out below is a summary of → Transparency Salary workforce, has become an area of Gilbert McCarthy’s contributions These awards were subject to EPS the remuneration policy approved → High-performance focus for a number of investors. are at 20% of base salary, As flagged in last year’s Annual growth and relative TSR performance by shareholders at the 2019 AGM We have reflected on the range whereas in the case of both Peter Report, the CEO received a base targets measured over the period (as updated following shareholder of viewpoints expressed to the Wilson and Russell Shiels, there salary increase of 5% in 2019. Peter from the start of 2017 to the end of consultation). committee on this, resulting in the are specific legacy contractual Wilson, managing director of the 2019. Target and actual outturns are amendment to our policy to limit arrangements in place. Group’s global Insulation Board received an increase of 10% in 2019, all pensions for future executives → Peter Wilson, who has been with other executives receiving an to those available to the workforce employed with Kingspan for increase of 3% in line with those Payout in the relevant local market. While almost 40 years, receives a base Weighting Targets Performance awarded to the general workforce. (% of max.) there are a number of investors pension contribution of 21%. In Further details of the directors' that expect pensions to be similarly 2010 the committee negotiated EPS 50% CPI + 5%-10% compound p.a. CPI + 12.2% 100% salaries and total remuneration are reduced for incumbent directors, a revised contract with him set out in the Remuneration Table TSR 50% Median-Upper Quartile 87th percentile 100% there was also a clear recognition which included an increase in his on page 74. in our discussions with shareholders pension contribution by £75,000 that addressing this issue for new per annum until retirement, and Annual bonus hires is more achievable than in 2016, as part of its strategic The maximum annual bonus seeking to change the contracts planning, the Company agreed
potential of 150% of basic salary GroupKingspan plc — &Annual Report Financial Statements 2019 for incumbent executive directors. to extend his retirement age by How it Operates Maximum Opportunity for the CEO and CFO was based By reducing pensions for all future five years to 65. on achievement of Group EPS executives to those levels available Base salary Base salaries are reviewed annually by the Remuneration No prescribed → Similarly, the contract of Russell performance targets. For Divisional to the general workforce, the Committee in the last quarter of each year. Increases maximum Shiels, who joined the Group in MDs, bonuses were based on a committee has taken steps to will generally be in line with increases across the Group, 1996, was renegotiated in 2013, combination of stretching profit align the current remuneration but may be higher or lower in certain circumstances and his pension contributions targets for their respective divisions, policy with the revised provisions to reflect performance, changes in remit, roles and were increased by $100,000 per plus an element of Group EPS of the UK Code. responsibilities, or to allow newly appointed executives to annum until retirement. In 2018, targets. The final outturns of the as part of its strategic planning, move progressively towards market norms. To provide greater clarity, and in annual performance bonuses are the Company agreed with Mr response to the feedback received detailed in full below: Pensions The Group operates a defined contribution pension No current maximum for Shiels to extend his retirement from shareholders, we set out in scheme for executive directors. Pension contributions incumbent executives. For all future age by five years to 65. more detail below how the pension The CEO and CFO achieved 71% are calculated on base salary only. Contributions are appointments, pensions will be contributions for the incumbent of maximum target, which is the determined on an individual basis and take into account capped at the rate applicable to the In line with good practice, the executive directors are calculated. equivalent of 106% of salary for each a number of factors including age, length of service, workforce in the relevant local market. Committee will keep under review As outlined in our Remuneration executive. Payouts for the divisional and number of years to retirement. The committee may pension contributions for the Policy, the Group operates a MDs ranged from 95% to 106% of alternatively pay a cash amount subject to all applicable current executives, noting however defined contribution pension salary, with Russell Shiels and Peter employee and employer payroll taxes and social security. that these are legacy contractual scheme for executive directors, Wilson each having exceeded 100% arrangements that were put in Benefits Executive directors’ benefits include but are not limited No prescribed maximum and contributions are determined of their divisional profit target and place many years ago. The to life and health insurance, the use by the executive on an individual basis and take Gilbert McCarthy having achieved committee has taken appropriate directors of company cars (or a taxable car allowance), into account a number of factors 82% of his target. measures to ensure contributions and relocation or similar allowances on recruitment, including age, length of service, for future executives are fully each in line with typical market practice. and number of years to retirement. aligned with those of the relevant local workforce. We consider the Annual Executive directors receive annual performance related 150% of base salary steps we have taken have ensured bonus bonus based on the attainment of financial targets our alignment with evolving best- set prior to the start of each year by the committee. Part deferred practice without causing disruption Bonuses are paid on a sliding scale if the targets are at a critical juncture in the Group’s met. Maximum bonus is only achieved if ambitious strategic development. 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 % Salary Measure Targets Performance achieved grant of share awards, which are deferred for two years. payout PSP Executive directors are entitled to participate in the 200% of salary CEO & CFO EPS 95% - 120% of prior year 111% 71% Group’s Performance Share Plan (PSP). Under the terms of the PSP, performance shares are awarded to the 25% threshold vesting Divisional Divisional profit targets 10% divisional profit growth 107% to 127% of prior year
executive directors and the senior management team. 72 MDs 95% to 106% EPS 95% - 120% of prior year 111% 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- 73 vesting holding period. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
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In addition to the framework outlined, are in place whereby all executive executive directors will also be subject Clawback The committee may adjust the maximum bonus being payable on Directors' Report the following are key structural directors are required to acquire a to a post-employment shareholding The committee recognises that there bonus and PSP that is payable if it the achievement of 10% divisional aspects of the remuneration policy. holding of shares in the Company policy equal to 200% of salary. The could potentially be circumstances considers the formulaic outcome is profit growth. A further 60% of equal to 200% of salary. The executive committee concluded that it was in which performance related pay not representative of the underlying the Divisional MDs’ total bonus Executive director directors in practice hold significantly not necessary to implement post- (either annual performance related performance of the Company, opportunity was payable on the shareholding guidelines in excess of this requirement, and employment guidelines for the current bonuses and/or PSP Awards) investor experience or employee achievement of the same Group The committee recognises that share details of these shareholdings are executive directors, having regard is paid out and where certain reward outcome. EPS targets as for the CEO and ownership is important in aligning the provided in the Report of the Directors to their long-standing high levels circumstances later arise which CFO, ensuring a healthy balance interests of management with those of contained in this Annual Report. With of shareholdings and their existing bring the committee to conclude The remuneration policy approved between incentivising divisional shareholders. Shareholding guidelines effect from 2020, newly appointed contractual arrangements. that the payment should not have at the 2019 AGM is set out in full in and Group growth. been made in full or in part. The the 2018 Annual Report and on our clawback of performance related website at the following address: While the Group delivered another pay, and malus provisions (where www.kingspan.com. year of record results, with trading Directors’ Remuneration for year ended 31 December 2019 awards are reduced to nil before they profit up 12% and EPS up 11%, no Executive Directors Gene Geoff Russell Peter Gilbert Total have vested) would apply in certain Performance related bonus participant received maximum Murtagh Doherty Shiels(1) Wilson(2) McCarthy circumstances including: In 2019 all executive directors were payouts. The top-end Group EPS EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 eligible for a maximum performance target was not achieved, and the → a material misstatement of the related bonus opportunity of up to varying divisional performances 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Company’s financial results; 150% of base salary. The CEO and resulted in different levels of bonus CFO’s annual performance related payouts being earned. This underpins Fixed Pay → a material breach of an executive’s contract of bonuses were based on Group EPS the committee’s philosophy that - Salary and Fees 870 828 562 546 522 481 477 425 520 505 2,951 2,785 employment; growth targets over prior year, with truly stretching performance is
the maximum annual performance needed for executives to receive GroupKingspan plc — &Annual Report Financial Statements 2019 - Pension Contributions(3) 158 150 137 133 174 163 186 174 104 101 759 721 → error in calculation; related bonus being payable on maximum payouts. A proportion of - Benefits(4) 36 34 34 33 55 55 20 19 37 33 182 174 → failure of risk management; the achievement of 20% Group the payouts have been deferred into → corporate failure; EPS growth over prior year. The shares for two years. → any wilful misconduct, committee considers this to be a Performance Pay(5) recklessness, and/or fraud truly stretching target. The table below sets out the resulting in serious damage performance against targets for - Cash element 870 828 562 546 522 481 477 211 495 493 2,926 2,559 to the financial condition For each of the Divisional MDs, up to each of the executive directors - Deferred share awards 52 158 34 104 31 92 29 81 - 96 146 531 or business reputation of 40% of their total bonus opportunity in respect of the year ended the Company. was based on achieving stretching 31 December 2019. divisional profit targets, with Total executive pay 1,986 1,998 1,329 1,362 1,304 1,272 1,189 910 1,156 1,228 6,964 6,770
Charge to Consolidated Income Statement for share options and awards(6) 3,241 2,807 Max. Performance Threshold Target for Performance Bonus Non Executive Directors(7) opportunity measures and target maximum achieved outcome Eugene Murtagh 191 191 as % salary % weighting as % salary Helen Kirkpatrick(8) 35 85 Chief Executive 150% EPS 174.8c 220.8c 204.6c 106%
Linda Hickey 82 75 Chief Financial Officer 150% EPS 174.8c 220.8c 204.6c 106%
Michael Cawley 85 85 Russell Shiels Divisional 27% profit 10% profit growth John Cronin 75 75 150% profit (40%) growth 106% Bruce McLennan 75 75 EPS (60%) 174.8c 220.8c 204.6c Peter Wilson Divisional 13% profit Jost Massenberg 75 64 10% profit growth profit (40%) growth Anne Heraty(9) 31 - 150% 106% EPS (60%) 174.8c 220.8c 204.6c Total non-executive pay 649 650 Gilbert McCarthy Divisional 7% profit 10% profit growth Total Directors’ remuneration 10,854 10,227 150% profit(40%) growth 95%
(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). EPS (60%) 174.8c 220.8c 204.6c (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 We do not disclose the specific targets for the Divisional MDs, and employee and employer payroll taxes. performance against them, as these are commercially sensitive (4) Benefits principally relate to health insurance premiums and company cars/car allowances. In the case of Russell Shiels the cost of life figures. While the committee is fully aware of the expectation that insurance and permanent health benefit is also included. all bonus targets are disclosed in the year of payment, the specific 74 (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. targets for the Divisional MDs would provide information that would (6) The charge to the Consolidated Income Statement represents the current year cost of the unvested PSP Awards granted to the Executive not otherwise be available to competitors. 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. 75 (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. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
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Performance Share Plan The peer group against which Directors' Report The committee reviewed the extent to which the vesting targets in respect TSR performance was measured Deferred Share Awards of the PSP Awards granted in 2017 had been met by reference to EPS and TSR was as follows: Director At Granted Vested & At Earliest targets over the three-year performance period to 31 December 2019. In 2017, 31 Dec during transferred 31 Dec vesting/ the committee granted PSP Awards that were 50% based on EPS growth Armstrong Owens Corning 2018 year during year 2019 transfer date targets and 50% based on TSR targets: World Gene M. Murtagh Unvested 11,899 4,009 (11,899) 4,009 31/03/21 Industries Inc. Weighting Measure Threshold Maximum Performance % Boral Ltd. Rockwool Intl. A/S Vesting Geoff Doherty Unvested 8,765 2,644 (8,765) 2,644 31/03/21 CRH plc SIG plc 50% EPS CPI + 5% CPI + 10% CPI + 12.2% 100% Geberit AG Sika Russell Shiels Unvested 8,349 2,424 (8,349) 2,424 31/03/21 50% TSR Median Upper 87th 100% quartile percentile Grafton Travis Group plc Perkins plc Peter Wilson Unvested 6,839 2,090 (6,839) 2,090 31/03/21
Lafarge USG Corporation Holcim Gilbert McCarthy Unvested 7,939 2,445 (7,939) 2,445 31/03/21
NCI Building Wienerberger AG Systems Inc.
In addition, the committee 111% over the performance period, Chairman’s fee is €191,000. The Performance Share Plan reviewed the vesting outcomes to the committee concluded that basic non-executive director fee GroupKingspan plc — &Annual Report Financial Statements 2019 Director At Granted Vested Exercised At Option Earliest Latest ensure they reflected overall group the PSP vesting conditions had is €75,000. An additional fee of 31 Dec during during or lapsed 31 Dec price exercise expiry performance, individual contribution been satisfied in full and were an €7,500 is paid for chairing the 2018 year year during 2019 € date date as well as shareholder and the wider accurate reflection of the Group’s Remuneration Committee, and a fee year workforce experience throughout performance. of €10,000 for chairmanship of the the performance period. In light of Audit Committee and for the Senior Gene M. Murtagh the strong performance, including Non-executive directors Independent Director, to reflect the Unvested 129,498 38,642 (40,882) (4,908)¹ 122,350 0.13 05/05/20 25/02/26 three-year revenue growth of 50%, The non-executive directors each additional role and responsibilities Vested 97,490 40,882 (55,121)² 83,251 0.13 24/02/18 23/02/23 three-year trading profit growth of receive fees which are approved (only one additional fee is paid if a 46% and absolute TSR growth of by the Board as a whole. The director has dual roles). 226,988 38,642 - (60,029) 205,601 0.13 Geoff Doherty Unvested 75,363 21,396 (24,090) (2,892)¹ 69,777 0.13 05/05/20 25/02/26 Finland Aanekosken Fire Station Vested - 24,090 (24,089)³ 1 0.13 23/02/19 23/02/23 75,363 21,396 - (26,981) 69,778 0.13 Insulated Panels: Kingspan Evolution Russell Shiels featuring PIR Unvested 68,698 19,797 (22,524) (2,705)¹ 63,266 0.13 05/05/20 25 /02/26 Vested - 22,524 (22,524)⁴ - 0.13 - - 68,698 19,797 - (25,229) 63,266 0.13 Peter Wilson Unvested 64,626 19,797 (20,912) (2,511)¹ 61,000 0.13 05/05/20 25/02/26 Vested - 20,912 (20,912)⁵ - 0.13 - - 64,626 19,797 - (23,423) 61,000 0.13 Gilbert McCarthy Unvested 68,697 19,797 (21,819) (2,620)¹ 64,055 0.13 05/05/20 25/02/26 Vested 95,854 21,819 (45,000)⁶ 72,673 0.13 25/02/17 23/02/23 164,551 19,797 - (47,620) 136,728 0.13 Company Secretary Lorcan Dowd Unvested 13,332 4,378 (3,958) 13,752 0.13 05/05/20 25/02/26 Vested 21,780 3,958 (10,300)⁷ 15,438 0.13 25/02/17 23 /02/23 35,112 4,378 - (10,300) 29,190 0.13 76 1 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. 77 7 Exercised on 12/12/2019. Market value on day of exercise €51.05. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
Committee Governance meeting was attended by all the other executive directors for 2020 achievement of divisional profit Performance share awards Annually, the committee conducts Directors' Report The Remuneration Committee members of the committee, and have been increased by 2% in line with growth targets, and 60% of their For 2020, the CEO will receive an a rigorous test to ensure targets comprises three independent an overview of the workings of the increases in the rest of the workforce. total bonus opportunity is based award over shares with a market remain stretching yet realistic and non-executive directors, Linda committee is set out below. on the achievement of Group EPS value of 175% of base salary. The are appropriately aligned with our Hickey (Chair), Michael Cawley and As outlined previously, the committee growth targets over prior year. other executive directors will receive risk appetite as well as internal and Bruce McLennan. The Company Implementation of has made a significant change to awards over shares with a market external forecasts. The committee Secretary acts as the secretary to Remuneration Policy for 2020 the company’s policy on pensions, The committee has carefully value of approximately 150% of set the following targets which, the committee. The Chief Executive The core principles of our with the pension contributions of new considered alternative financial base salary (subject to adjustment given the market and business does not normally attend meetings remuneration philosophy as outlined executive directors limited to the levels measures for the annual bonus to ensure internal parity and to outlook from which these targets but provides input where relevant, earlier, frame our approach to 2020, applicable to the wider workforce in and remains of the view that EPS manage exchange rate fluctuations will be measured, it considers to to the committee Chair prior to the namely simplicity, reward for high- the market in which they work. While provides the strongest alignment to between the divisional directors). be demanding. meeting. No individual is present performance, and transparency. there are no changes to previously the business strategy as well as being The committee will keep this at a meeting when the terms of his agreed contractual entitlements a critical key performance indicator. approach under review and ensure The clarity and simplicity of the own remuneration are discussed. The Base salary and pension for incumbent executive directors, Targets are set using unadjusted that it does not breach the overall performance measures are a terms of reference are available on As detailed in our 2018 Annual Report, the Committee is aware of rapidly audited EPS, as reported in our limits contained in the PSP rules. cornerstone of our approach to the Company’s website: the committee carried out a review evolving expectations in this area and annual accounts, which creates a remuneration and have served the www.kingspan.com of each of the divisional directors’ will continue to keep this aspect of strong alignment with shareholders’ Following a review of the Company and our shareholders well roles. While recognising stakeholder executive remuneration under review. experience and promotes simplicity performance framework, the since the introduction of the PSP. External advisors concerns about any increases in pay, and transparency. EPS targets will be committee has selected the same The Remuneration Committee it was clear from the review that Peter Annual Bonus disclosed with performance against performance measures as employed Non-executive director fees obtained advice during the year Wilson’s role as Managing Director The maximum bonus opportunity for them in the 2020 Remuneration for the 2019 PSP Awards. Half of the There is no change to the non- from independent remuneration of the global Insulation business had all the executive directors is 150% of Report. The committee is also award will be based on EPS growth executive director fees for 2020.
consultants Korn Ferry. Korn Ferry increased over several years in terms salary (unchanged from 2019) with keenly monitoring the Net Promoter targets and the other half on relative GroupKingspan plc — &Annual Report Financial Statements 2019 is a member of the Remuneration of size and complexity, but at the up to 100% of salary earned through Score (NPS) programme launched TSR against the same peer group as Performance graph Consultants Group and a signatory to same time his salary was misaligned the bonus plan delivered in cash and by Kingspan across the Group in the 2019 awards. The graph below shows the its Code of Conduct, and all advice is to levels in the rest of the business. up to 50% of salary being deferred 2019. NPS measures the customer Company’s TSR performance against provided in accordance with this code. While this discrepancy was reduced into shares in the Company for two experience across a range of the performance of the ISEQ and Korn Ferry did not provide any other somewhat in 2019, Mr Wilson will years. For 2020, the committee has aspects in the business, and as FTSE 250 indices over the 10 year services to Kingspan Group during the receive a salary increase of 7.5% in determined that the performance such it closely aligns our strategy period to 31 December 2019. year. Accordingly, the committee is 2020. Following this increase, the measures will remain unchanged with the experience of one of our satisfied that the advice obtained was committee is satisfied that it has from 2019. For the CEO and CFO, most important stakeholders, objective and independent. largely addressed the findings of bonuses will continue to be based our customers. The committee is Performance Weighting Percentage Threshold Maximum the review and is comfortable that on Group EPS growth targets. For reviewing the implementation of the Measures vesting at vesting vesting The Remuneration Committee met Mr Wilson’s salary is now set at an Divisional MDs, 40% of their total NPS programme and is considering threshold target target* four times during the year. Each appropriate level. Salaries for the bonus opportunity is based on the bringing it in as an additional EPS 50% 25% 6% 12% performance measure in the annual bonus plan in the period ahead. TSR 50% 25% Median Upper quartile Remuneration Committee activities FEB JUN OCT DEC * Straight line vesting between threshold and maximum vesting Salary and fees Engage independent consultants • Review of overall remuneration policy • • Review executives’ salary, role and responsibilities for 2020 • Total Shareholder Returns Review non-executives’ fees for 2020 •
Approve Executive’s pension arrangements • 1,200 Kingspan Performance pay ISEQ Assess Group and individual performance against targets for 2018 • FTSE 250 1,000 Confirm percentage of performance bonus achieved for 2018 • Confirm vesting of 2017 Deferred Share Awards • 800 Agree Group and individual performance targets for 2020 • • PSP Awards Assess performance of 2016/2018 PSP Awards against targets • 600 Determine percentage of 2016/2018 PSP Awards which vest •
Review performance measures for PSP Awards for 2019 • 400 Agree targets and level for grants of PSPs Awards for 2019 • Governance 200 78 Review 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 • 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 79 Review of consultants’ performance and independence • BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors Directors' Report Product Kingspan Topdek KS1000TD Roof Panel @ Kingspan KS1000 Microrib Architectural Wall Panels Kingspan KS1000 Optimo Aico Headquarters Energy/ Kingspan panels enabled the Oswestry, UK Carbon considerable gain needed in thermal Saving @ performance to offset the large glass content in the building envelope.
Space/ Utilising insulated panels enabled Dimensions a thinner insulation versus @ traditional materials thereby We worked with Kingspan on the Aico increasing useable space. building because of the great technical Health & Employee health and wellbeing was knowledge and back up from Kingspan Wellbeing a key consideration for the project. @ The building was designed to provide employees at site and office level, and a comfortable, yet stimulating, environment to work in. the ability to specify products that Speed/ Insulated panels helped to reduce meet the brief in terms of aesthetics Ease of build labour time and number of trades @ and the option to specify a complete and technical standards. We also valued range of roof, gutter and wall panels GroupKingspan plc — &Annual Report Financial Statements 2019 simplified the project coordination. the opportunity to specify a suite of Aesthetics Longspan wall panels reduce vertical products from the same source that will joints, maximising the aesthetic @ properties of the panels. The vast seamlessly integrate with each other. array of colours and finishes enabled the architect to achieve their brief. Barry Prince MCIAT, Director DGA Architects
Planet The QuadCore™ used on the Passionate/ Aico building was made using Sustainability @ renewable energy and contains 20-25% recycled steel.
Awards/ It is intended that the Aico building Certifications will be entered for multiple awards, @ with both design and sustainability as key considerations.
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Credit: ©Richard Stonehouse BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
— Role and Responsibilities 1. Financial reporting and related The biographies of each can be Directors' Report The Board has established an Audit primary areas of judgement; found in the Board section of this Committee to monitor the integrity of 2. The external audit process; annual report. REPORT OF the Company’s financial statements 3. The Group’s internal audit and the effectiveness of the Group’s function; The Board considers that the THE AUDIT internal financial controls. The 4. Risk management and committee as a whole has an committee’s role and responsibilities internal controls; and appropriate and experienced blend are set out in the committee’s Terms 5. Whistleblowing procedures. of commercial, financial and industry COMMITTEE of Reference which are available from expertise to enable it to fulfil its the Company and are displayed on Committee membership duties, and that the committee the Group’s website (www.kingspan. As at 31 December 2019, the Audit chairman, Michael Cawley B.COMM., com). The Terms of Reference are Committee comprised of three F.C.A., has appropriate recent and reviewed annually and amended independent non-executive directors relevant financial experience. where appropriate. During the year who are Michael Cawley (Chairman), As chairman of the Audit Committee the committee worked with the Anne Heraty and John Cronin. Meetings I am pleased to present the report external auditors, internal audit, and The committee met four times members of the senior management Anne Heraty joined the committee during the year ended 31 December of the committee for the year ended team in fulfilling these responsibilities. on 1 August 2019. Linda Hickey 2019 and attendance at the 31 December 2019. and John Cronin retired from the meetings is noted below. Activities The Audit Committee report deals committee in May 2019 and February of the Audit Committee in each This report details how the committee considered in relation assessment of the principal risks with the key areas in which the 2020 respectively, and Bruce meeting is noted below. Audit Committee has met its to the financial statements and facing the company and monitored Audit Committee plays an active McLennan was also appointed to
responsibilities under its Terms of how these issues were addressed the risk management and internal role and has responsibility. These the committee in February 2020. GroupKingspan plc — &Annual Report Financial Statements 2019 Reference, the Irish Companies Act are set out in this report. control system on an on-going basis. areas are as follows: 2014 and under the UK Corporate Further details in regard to these Governance Code (July 2018) in the The Audit Committee note the matters are also set out in the Risk last twelve months. requirements under section 225 of & Risk Management section of this Committee Member Attended Eligible Appointment Date the Irish Companies Act 2014 to Annual Report Michael Cawley (Chairman) 5 5 2014 The Audit Committee focused present a Directors' Compliance Anne Heraty 3 3 2019 particularly on the appropriateness Statement, and has ensured that The committee also reviewed the of the Group’s financial statements. the directors are aware of their effectiveness of both the external Linda Hickey (retired) 1 1 2013 The committee has satisfied responsibilities and comply fully with audit process and the internal audit John Cronin (retired) 5 5 2015 itself, and has advised the Board this provision. function as part of the continuous Bruce McLennon - - 2020 accordingly, that the 2019 Annual improvement of financial reporting Report and financial statements are One of the Audit Committee’s and risk management across fair, balanced and understandable, key responsibilities is to review the the Group. Audit Committee activities FEB JUN AUG OCT NOV and provide the information Group’s risk management and Financial reporting necessary for shareholders to assess internal controls systems, including Michael Cawley Review and approve preliminary & half-year results • • the Company’s performance, in particular internal financial Chairman, Audit Committee Consider key audit and accounting issues and judgements • • business model and strategy. controls. During the year, the The significant issues that the committee carried out a robust Approve going concern and viability statements • Consider accounting policies and the impact of new accounting standards • • Review management letter from auditors • UK Review of any related party matters and intended disclosures • International Convention Centre Wales Review Annual Report, and confirm if fair, balanced and understandable • Insulated Panels: External auditors QuadCore™ Karrier Panel; Plan for year-end audit & half-year review • • Dri-Design Flat Cassettes, Evolution Axis 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 controls Review of internal audit reports and monitor progress on open actions • • • • Approve internal audit plan and resources, taking account of risk management • • • • Review of financial, IT and general controls • • • • Monitor Group whistleblowing procedures • • • • Assessment of the principal risks and effectiveness of internal control systems • Governance
Accounting standards update • 82 Corporate governance update • Evaluation of external and internal audit function • — Directors’ Compliance Statement policy and procedures •
IT governance and risk management • 83 General Data Protection Regulation legislation • • BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
Each committee meeting was Directors' Report Primary areas of Committee activity attended by the Group Chief judgement Financial Officer and the Head of Internal Audit. The external auditors also attended these meetings as Consideration The committee considered the annual impairment assessment of goodwill prepared required. The Company Secretary of impairment by management for each Cash Generating Unit (“CGU”) using a discounted cash flow is the secretary of the Audit of goodwill analysis based on the strategic plans approved by the Board, including a sensitivity analysis Committee. Other directors can on key assumptions. The primary judgement areas were the achievability of the long attend the meetings as required. term business plans and the key macroeconomic and business specific assumptions. In considering the matter, the committee discussed with management the judgements made The chairman of the Audit and the sensitivities performed. Further detail of the methodology is set out in Note 9 to Committee also met with both the financial statements. the Head of Internal Audit and the external audit lead partner outside KPMG also provided the committee with their evaluation of the impairment review process. of committee meetings as required throughout the year. 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 Committee Evaluation items of goodwill was presented to the committee and the results were deemed appropriate. UK As outlined in the Report of the Science and Technology Facilities Council Adequacy of The committee reviewed the judgements applied by management in assessing both specific Nomination and Governance warranty provisions and risk based warranty provisions at 31 December 2019. The committee reviewed and Committee contained in this Annual Light & Air: discussed with management the monthly reports presented to the Board which set out, Report, the performance of the Kingspan Day-Lite Klick for each of the Group’s divisions, warranty provisions and warranty costs and analyse these Board also includes a review of the GroupKingspan plc — &Annual Report Financial Statements 2019 costs as a percentage of divisional sales. A retrospective review of warranty provisions at committees. Any recommendations 31 December 2018 was also carried out in order to note any indication of management raised in relation to the Audit In carrying out these reviews, → considered key areas in which bias within the provisions and none was noted. The committee was satisfied that such Committee are acted upon in a the committee: estimates and judgement had judgements were appropriate and the risk had been adequately addressed. formal and structured manner. No been applied in preparation issues were identified for the year → reviewed the appropriateness of the financial statements Recoverability The committee reviewed the judgements applied by management in determining the ending 31 December 2019. of Group accounting policies including, but not limited of trade receivables bad debts provision at 31 December 2019. The committee reviewed and discussed with and monitored changes to and to, a review of fair values and adequacy management the monthly board report which sets out aged analysis of gross debtor Financial Reporting compliance with accounting on acquisition, the carrying of receivables balances and associated bad debt provisions and reviewed security (including credit The committee is responsible for standards on an on-going basis; amount of goodwill, intangible provision insurance) that is in place. A retrospective review of bad debt provisions at 31 December 2018 monitoring the integrity of the → discussed with management assets and property, plant was also carried out in order to note any indication of management bias within the provisions Group’s financial statements and and the external auditors the and equipment, litigation and and none was noted. The committee was satisfied that such judgements were appropriate reviewing the financial reporting critical accounting policies warranty provisions, recoverability and the risk had been adequately addressed. judgements contained therein. and judgements that had of trade receivables, valuation The financial statements are Valuation of The committee reviewed the valuation and provisioning for inventory at 31 December 2019. been applied; of inventory, hedge accounting prepared by a finance team with treatments, and treasury and inventory and The main area of judgement was the level of provisioning required for slow moving and → compared the results with the appropriate qualifications tax matters. adequacy of obsolete inventory. The committee reviewed and discussed with management the monthly and expertise. management accounts inventory board report which sets out, for each of the Group’s divisions, gross inventory balances and and budgets, and reviewed The primary areas of judgement provision associated obsolescence provision including an analysis by inventory, category and ageing. reconciliations between these The Committee confirmed to considered by the committee in A retrospective review of inventory provisions at 31 December 2018 was also carried out in and the final results; the Board that the Annual Report, relation to the Group’s 2019 financial order to note any indication of management bias within the provisions and none was noted. taken as a whole, is fair, balanced → discussed a report from the statements, and how they were The committee was satisfied that such judgements were appropriate and the risk had been and understandable and provides external auditors at that meeting addressed by the committee are set adequately addressed. the information necessary for identifying the significant out overleaf. shareholders to assess the Group’s accounting and judgemental 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 position and performance, business issues that arose in the course of Each of these areas received committee addresses these issues through a range of reporting from senior management model and strategy. the audit; particular focus from the external and a process of challenging the appropriateness of management’s views including the → considered the management auditor, who provided detailed degree to which these are supported by professional advice from external legal and other In respect of the year to 31 December representation letter requested analysis and assessment of the advisory firms. This assessment was conducted in line with the provisions of IFRIC 23. 2019, the committee reviewed: by the auditors for any non- matter in their report to the standard issues and monitored committee. The Group’s accounting manual sets out detailed policies that prescribe the methodology to → the Group’s Trading Updates action taken by management as be used by management in calculating the above provisions. Each division formally confirms issued in May and November a result of any recommendations; In addition, the Internal Audit team 2019; compliance with these policies on an annual basis. → discussed with management review the businesses covered in their → the Group’ s Interim Report annual Internal Audit Plan, as agreed future accounting developments The committee was satisfied that such judgements were appropriate and the risk had been for the six months to 30 June by the committee, and report their which are likely to affect the adequately addressed. 2019; and financial statements; findings to the Audit Committee throughout the year. These internal → the Preliminary Announcement → reviewed the budgets and Accounting Total acquisition consideration in 2019 amounted to €144m. The committee discussed audit reviews are focused on areas and Annual Report to strategic plans of the Group in for acquisitions with management and the external auditors the accounting treatment for newly acquired of judgement such as warranty 31 December 2019. order to ensure that all forward businesses, and the related judgements made by management, and were satisfied that the provisions, trade receivables and treatment in the Group’s financial statements was appropriate. looking statements made within — inventory and provide the committee the Annual Report reflect the information on the adequacy and
actual position of the Group; and 8584 appropriateness of provisions in these areas. BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
External auditor ten years (following rotation, the conflict with auditor independence. & Risk Management section of this Directors' Report The Audit Committee has statutory audit firm cannot be By obtaining an account of all Norway Annual Report.
responsibility for overseeing the reappointed for four years); relationships between the external Kingspan Water & Energy: Group’s relationship with the external → a requirement that certain auditors and the Group, and by Klargester BioDisc These processes, which are used by auditor including reviewing the procedures are followed for reviewing the economic importance the Audit Committee to monitor the quality and effectiveness of their the selection of the new of the Group to the external auditors effectiveness of the Group’s system performance, their external audit statutory auditor; and by monitoring the audit fees as a of risk management and internal plan and process, their independence percentage of total income generated control, are in place throughout the → restrictions on the entitlement from the Group, their appointment from the relationship with the Group, accounting period and remain in of the statutory auditing firm to and their audit fee proposals. the committee ensured that the place up to the date of approval of provide certain non-audit services. independence of the external audit this Annual Report. Performance and audit plan Kingspan Group plc has fully complied was not compromised. An analysis Following the completion of with such EU Audit Reform from the of fees paid to the external auditor, The main features of the Group’s the 2018 year-end audit, the period commencing 1 January 2017. including the non-audit fees, is set internal control and risk management committee carried out a review of With regards audit firm rotation, EY out in Note 5 and below. systems that specifically relate to the effectiveness of the external has been selected as the external the Group’s financial reporting and auditor and the audit process. This auditor for the financial year Audit tender & rotation of auditors accounts consolidation process are set review involved discussions with commencing 1 January 2020. The A competitive audit tender out in the Report of the Nomination both group management and selection process is outlined in more process was launched in 2019. The and Governance Committee internal audit and feedback provided detail below. committee was responsible for the the predefined criteria set as part internal audit is working effectively, contained in this Annual Report. by divisional management. The design and operation of the tender of the selection process. improves risk management committee continues to monitor Independence and objectivity process. The objectives were for throughout the Group and that the Whistleblowing procedures the performance and objectivity of The committee is responsible for the process to be efficient, fair and As a result of this process, the internal audit team is sufficiently The Group has a Code of Conduct, GroupKingspan plc — &Annual Report Financial Statements 2019 the external auditors and takes this ensuring that the external auditor is transparent and to submit two firms Company's auditors, KPMG resourced in addition to having full details of which are available into consideration when making objective and independent. KPMG has to the Board for appointment, with a Chartered Accountants, will continue the adequate level of experience on the Group’s website its recommendations to the Board been the Group’s auditor since 2011, reasoned preference for a single firm. in office and will retire following the and expertise. (www.kingspan.com). on the remuneration, the terms of following a formal tender process in conclusion of the audit for the 2019 engagement and the re-appointment, which a number of leading global Following the issuance of a Request financial year, with the Board then Risk Management and Based on the standards set out or otherwise, of the external auditors. firms submitted written tenders and for Proposal, a number of measures appointing EY as Group external Internal controls in this Code of Conduct, the presentations. The lead audit partner took place including visits to key auditor with effect from financial The Audit Committee has been Group employs a comprehensive, Prior to commencement of the is rotated every five years. manufacturing sites, numerous year commencing 1 January 2020. delegated, from the Board, the confidential and independent 2019 year-end audit and half-year meetings with senior management responsibility for monitoring the whistleblowing phone service to review, the committee approved The committee received and assurance that each of the firms On behalf of the committee, I would effectiveness of the Group’s system of allow all employees to raise their the external auditors’ work plan confirmation from the auditors would be suitably independent should like to thank each of the firms who risk management and internal control. concerns about their working and resources and agreed with the that they are independent of the they be appointed. The principal participated in the tender process, environment and business auditor’s various key areas of focus, Group under the requirements of the assessment criteria included: along with KPMG who provided the The Audit Committee monitors practices. This service then allows including accounting for acquisitions, Financial Reporting Council’s Ethical highest level of audit and assurance the Group’s risk management management and employees to → Audit quality; impairments, warranty provisions, as Standards for auditors. The auditors services during their tenure. and internal control processes work together to address any well as a particular focus on certain also confirmed that they were not → Experience; and through detailed discussions instances of fraud, abuse and other higher risk jurisdictions. aware of any relationships between → Cultural fit Internal audit with management and executive misconduct in the workplace. the Group and the firm or between The committee reviewed and agreed directors, the review and approval During the year, the committee met the firm and any persons in financial Subsequent to an evaluation of the annual internal audit plan, of the internal audit reports, which Any instances of fraud, abuse with the external auditors without reporting oversight roles in the Group proposals and interactions, it was which the committee believes is focus on the areas of greatest risk or misconduct reported on the management being present. This that may affect its independence. decided to take two firms to make appropriate to the scope and nature to the Group, and the external audit whistleblowing phone service are meeting provided the opportunity final presentations to the committee of the Group. The internal audit reports, as part of both the year- reported to the Head of Internal for direct dialogue and feedback Non-audit services and Group Chief Financial Officer. plan is risk based, with all divisions end audit and the half year review Audit and the Company Secretary, between the committee and the In order to further ensure Following these final presentations, audited every year, and all new process, all of which highlight the who then evaluate each incident auditor, where they discussed independence, the committee has a the committee recommended to businesses audited within 12 months key areas of control weakness in for onward communication to inter alia some of the key audit policy on the provision of non-audit the Board that EY be appointed of acquisition. the Group. All weaknesses identified the committee. This onwards management letter points. services by the external auditors that to succeed KPMG as the Group’s by either internal or external audit communication consists of the full seeks to ensure that the services external auditor. The committee The committee reviewed reports are discussed by the committee details of the incident, key control EU Audit Reform provided by the external auditors are believes that the strength and from the Head of Internal Audit at with Group management and an failures, any financial loss and The regulatory framework for the not, or are not perceived to be, in experience of the EY team best met its quarterly meetings. These reports implementation plan for the targeted actions for improvement. Group’s statutory audit is governed enable the committee to monitor the improvements to these systems is put by EU legislation under Directive progress of the internal audit plan, in place. The implementation plan is During the year, the committee 2014/56/EU and Regulation EU No. to discuss key findings and the plan being overseen by the Group Chief reviewed the Group’s whistleblowing 537/2014. EU Audit reform legislation Audit V Non Audit Services Remuneration to address them in addition to status Financial Officer and the committee process and were satisfied with the is applicable in the Member States of updates of previous key findings. is satisfied that this plan is being design and operating effectiveness the European Union, including Ireland. 2019 €2.6m €0.9m properly executed. of the process. Under this legislation, Kingspan Group The committee is responsible for
plc is considered a Public Interest reviewing the effectiveness of the As part of its standing schedule of 86 Entity (“PIE”). Key developments 2018 €2.6m €0.9m internal audit function and does so business, the committee carried out falling from the implementation of based upon discussion with Group an annual risk assessment of the this legislation are: 2017 €2.0m €0.7m management, the Group’s external business to formally identify the key — auditor and feedback provided risks facing the Group. Full details
→ a requirement that the PIE by divisional management. The of this risk assessment and the key 87 changes its statutory auditor every Audit Services Non-Audit Services committee was satisfied that the risks identified are set out in the Risk BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
An interim dividend of 13.0 cent per → Insulated Panels sales growth Directors' Report — The Business and Strategic Report share was paid to shareholders on 4 of 7%. Strong performance in contained in this Annual Report October 2019 (2018: 12.0 cent). The the Americas, Mainland Europe sets out the “four pillars” of REPORT directors are recommending a final performed well overall with the Kingspan’s strategy, which are: dividend of 33.5 cent per share for notable exception of Germany. OF THE the year ended 31 December 2019 Difficult UK market particularly in INNOVATION (2018: 30.0 cent), giving a total the second half. Further headway Differentiation from competitors dividend for the year of 46.5 cent in key markets on QuadCore™. driven by superior innovation. DIRECTORS (2018: 42.0 cent). The final dividend → Insulation Boards sales growth PENETRATION if approved at the Annual General of 2%. Continuing progress on Increased penetration of Kingspan’s Meeting will be paid on 7 May 2020 Kooltherm® and share gain product suite underpinned to shareholders on the register at from traditional materials. by efficiency gains from high- close of business on 27 March 2020. → Strong underlying volume performance building envelopes, growth of 4% and 8% in regulatory changes and an The directors of Kingspan Group Business Review Insulated Panels and Insulation increasing awareness of the long- The Business & Strategic Report plc (“Kingspan”) have pleasure in Boards partially offset by the term environmental impact of contained in this Annual Report, pricing impact of raw material inefficient building design. presenting their report with the including the Chief Executive’s deflation. audited financial statements for Review and the Financial Review, GLOBAL sets out management’s review of → Light & Air sales growth of The continued evolution of the year ended 31 December 2019. the Group’s business during 2019. 12% buoyed by a strong Kingspan’s geographic footprint The key points include: performance in the US. as we build market leading
Solid activity in Mainland GroupKingspan plc — &Annual Report Financial Statements 2019 Principal Activities positions globally. Insulated panels Kingspan comprises five key Europe. Daylighting centre of Kingspan is the global leader in high- → Revenue up 7% to €4.7bn. business divisions which are excellence under construction PLANET PASSIONATE performance insulation and building Structural framing → Trading profit up 12% to €497.1m. Insulated Panels, Insulation Boards, in Ireland. In 2019, we launched our new envelope solutions. Kingspan Architectural facades Light & Air, Water & Energy and → Free cashflow up 9% to €337.1m. Planet Passionate Programme → Water & Energy sales growth Group plc is a holding company Data & Flooring. These divisions offer across our entire group and to the Rigid insulation boards → Group trading margin of 10.7%. of 3% with progress in for the Group’s subsidiaries and a suite of complementary building industry. This is a critical first step Building services insulation → Basic EPS up 11% to 204.6 cent. the Nordics, a difficult UK other entities. The Group’s principal envelope solutions for both the new in the next phase of our journey environment and more activities comprise the manufacture Engineered timber systems build and refurbishment markets. → Year-end net debt1 of €633.2m to proactively address the key subdued rainwater harvesting and distribution of the following (2018: €728.3m). Net debt to sustainability challenges that face Natural daylighting activity in Australia. product suites as part of the Results and Dividends EBITDA2 of 1.1x (2018: 1.4x). our planet. Through our Net Zero Ventilation and smoke complete “Building Envelope”: Group turnover for the year ended → ROCE of 17.3% (2018: 16.8%). → Data & Flooring sales growth Energy Programme, we have already management solutions 31 December 2019 was €4.7bn (2018: of 13% reflecting strong made great strides in powering Raised access floors €4.4bn), trading profit was €497.1m datacentre activity and our business on renewable energy, (2018: €445.2m), and earnings per geographic expansion in Europe. Datacentre storage solutions and with Planet Passionate we share were 204.6 cent (2018: 184.0 are setting ourselves even more Energy storage solutions cent). The Consolidated Income challenging goals for the next 10 Rainwater and wastewater solutions Statement is set out later in this years. We are committing to hard Annual Report and a detailed review 1 Net Debt and EBITDA both pre-IFRS 16 Renewable energy systems 2 Earnings before finance costs, income targets in the areas of energy, of the Group’s performance from a taxes, depreciation, amortisation and carbon, circularity and water. financial and operational perspective the impact of IFRS 16. is contained within the Business & Strategic Report. +7% +12% +11% €4.7 €4.4 €497.1 €445.2 204.6 184.0 88
France
Champagne Palmer & Co —
2019 2018 2019 2018 2019 2018 Insulated Panels: 89 Kingspan BENCHMARK Evolution Revenue (€bn) Trading Profit (€m) EPS (cent) BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
Throughout 2019, Kingspan made The key performance indicators for → Digitalisation of the In 2011 we set ourselves an almost Shareholding analysis as at 31 December 2019: Directors' Report significant progress in pursuit Kingspan upon which particular construction industry; and impossible challenge: by 2020, on an of this strategy with the result emphasis is placed are listed below. → Prismatic daylighting. aggregated basis, we committed to Shareholding Number of % of Number of % of that Kingspan has continued to matching 100% of our operational range accounts total shares held total deliver year on year growth. This Innovation energy with renewable energy. Corporate Governance 1 - 1000 2,816 57.28 1,182,818 0.65 strategy will remain the focus of the Since the beginning, Kingspan has The directors are committed to Through this programme we 1,001 - 10,000 1,398 28.44 4,557,657 2.49 execution of Kingspan’s strategic been committed to innovation so achieving the highest standards of have reduced our energy carbon plan for the foreseeable future. we can make building better. It’s corporate governance. A statement intensity 6-fold, introduced solar PV 10,001 - 100,000 501 10.19 16,543,832 9.05 something we demonstrate daily to 22% of our wholly owned sites, describing how Kingspan has 100,001 - 1,000,000 169 3.44 49,453,089 27.06 Principal Risks and Uncertainties across our business. We believe we applied the principles of good and instigated significant on-site Over 1,000,000 32 0.65 111,047,826 60.75 The principal risks and uncertainties have to challenge building industry governance set out in the UK generation projects. As we reach facing the Group, and the actions traditions through innovation in Corporate Governance Code (July the successful conclusion of our 10 4,916 100 182,785,222 100 taken by Kingspan to mitigate advanced materials and digital 2018) is included in the Report of year Net Zero Energy Programme them are detailed in the Risk & Risk technologies in order to achieve a the Nomination and Governance in 2020, we are launching a new 10 Details of persons with a significant holding of securities in the Company Management Report contained in this net zero emissions future. Kingspan’s Committee contained in this Annual year Planet Passionate Programme, are disclosed below: Annual Report. The principal risks are: products and systems therefore Report. The Corporate Governance setting ourselves challenging targets ensure longer lifetime energy and Statement is treated as forming part in the areas of energy, carbon, → Volatility in the macro carbon savings. of this Annual Report. circularity and water. Learn more Notification Date Shareholder Shares held % environment; at www.kingspan.com under → Failure to innovate; In the year ended 31 December Code Of Conduct ‘Our Commitments’ and in the 23/01/20 Eugene Murtagh 27,018,000 14.93% 2019, the Group’s research and Sustainability Report contained in → Product failure; Kingspan is committed to acting 24/09/19 Blackrock, Inc. 12,090,723 6.69% development expenditure amounted responsibly in its business and this Annual Report.
→ Business interruption 11/07/19 Allianz Global Investors GmbH 8,966,284 4.96% GroupKingspan plc — &Annual Report Financial Statements 2019 to €31.9m (2018: €30.5m) in maintaining high standards of ethics (including IT continuity and addition to over €10 million of and integrity in all of its dealings Accounting Records 16/11/18 Bailie Gifford & Co. 9,010,740 5.00% climate change); capital expenditure on IKON and our with its stakeholders, be they The directors are responsible for 07/08/19 Ameriprise Financial Inc 7,228,355 4.00% → Credit risks and credit control; new fire research facility. Research investors, customers, suppliers, its ensuring that accounting records, as 16/01/20 FMR LLC 7,244,493 4.00% → Employee development and development expenditure is people or the community it operates outlined in Sections 281 to 285 of the and retention; generally written off in the year in. Kingspan has a Code of Conduct Irish Companies Act 2014, are kept in which it is incurred. During by the Group. The directors have Further information required following conclusion of the AGM → Fraud and cybercrime; which sets the standard by which the year, we opened IKON, our all employees across the Group are provided appropriate systems and by Regulation 21 of the above on 3 May 2019, and Ms Anne → Acquisition and integration new Global Innovation Centre in expected to conduct themselves. resources, including the appointment Regulations as at 31 December Heraty was appointed as a of new businesses; Kingscourt, further demonstrating The Code sets out the fundamental of suitably qualified accounting 2019 is set out in the Shareholder non-executive director with → Health and safety; our commitment to innovation. principles which all directors, officers personnel, to maintain adequate Information section of this effect from 1 August 2019. → Laws and regulations. Kingspan’s continuing investment in and employees of Kingspan are accounting records throughout Annual Report. research and development involves required to adhere to in meeting the Group, in order to ensure that Directors’ & Secretary’s Interests Key Performance Indicators over 40 key projects. In 2019 we those standards. the requirements of Sections 281 Directors and Secretary In Shares The directors are pleased to report launched QuadCore™ Roof Board and to 285 are complied with. The The directors and secretary of the The beneficial interests of the on the very positive performance continued to progress development Sustainability accounting records of the Company Company at the date of this report directors and secretary and their during 2019 against its key on the following key projects: Our mission is to accelerate a net zero are maintained at the principal are as shown in this Annual Report on spouses and minor children in the performance indicators. A detailed emissions future with the wellbeing executive offices located at Dublin pages 58 and 59. Ms Helen Kirkpatrick shares of the Company at the end commentary incorporating key → PV solar-integrated of people and planet at its heart. Road, Kingscourt, Co. Cavan, retired as a non-executive director of the financial year are as follows: performance indicators is contained PowerPanel® 2.0; We do this through enabling high- A82 XY31, Ireland. within the Financial Review and → Fibre-free A1 classified performance buildings that can The European Communities the Sustainability Report in this AlphaCore® insulation; save more energy, carbon and water. 31-Dec-19 31-Dec-18 (Takeover Bids (Directive 2004/25/ Annual Report. A number of the key → QuadCore™ 2.0; Aligned with our mission, we aim to performance indicators have been make significant advances in the EC)) Regulations 2006 Eugene Murtagh 27,018,000 28,018,000 → Kooltherm® 200 series; included in more detail on page 148 sustainability of both our business Gene Murtagh 1,079,207 1,129,207 ‘Alternative Performance Measures’. → Unitised facade solutions; operations and our products. Structure of the Company’s share capital Geoff Doherty 251,495 238,326 At 31 December 2019, the Company Russell Shiels 200,000 300,000 had an authorised share capital comprised of 250,000,000 Peter Wilson 389,376 389,376 Basic EPS growth 204.6 cent (up 11%) See page 32 (2018: 250,000,000) ordinary Gilbert McCarthy 255,576 247,637 KPIs Sales growth €4.7bn (up 7%) See page 32 shares of €0.13 each and the Company’s total issued share Linda Hickey 5,000 5,000 Financial Trading margin 10.7% (up 50 bps) See page 32 capital comprised 182,785,222 Michael Cawley 30,600 30,600 Free cash flow €337.1m (up €28.7m) See page 33 (2018: 182,171,120) Ordinary John Cronin 8,000 8,000 Return on capital employed 17.3% (up 50 bps) See page 33 Shares, of which the Company held 1,907,826 (2018: 1,969,143) Bruce McLennan 10,000 10,000 Net debt/EBITDA 1.1x (2018: 1.4x) See page 33 Ordinary Shares in treasury. Jost Massenberg - -
Net Zero Energy 90% (up 15%) See page 49 Anne Heraty* - - KPIs Lorcan Dowd 2,919 2,603
Health & Safety 1.4 per 100k hours See page 52 — Non-Financial (down 7%) 29,250,173 30,378,749
Gender balance 19% female (up 1%) See page 52 9190 * Appointed as a Director on 1 August 2019. Waste recycling 65% (down 3%) See page 51 BusinessBusiness & Strategic & Strategic Report ReportSustainability Sustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements Other Other Information Information
The Board Chairman’s Introduction Report of the Nomination & Governance Committee Report of the Remuneration Committee Report of the Audit Committee Report of the Directors
Details of the directors’ and from the date of this Annual as well as the Group’s strategic the company financial statements → the Group financial statements 3. during the financial year to which Directors' Report secretary’s share options at the end Report, and considered the Group's goals. It is based on a number of in accordance with IFRSs as adopted and the Company financial this report relates, conducted of the financial year are set out in net debt position and capital cautious assumptions concerning by the EU and as applied by the statements, prepared in a review of the arrangements the report of the Remuneration commitments, available committed macro growth and stability in our Irish Companies Act 2014. The accordance with the applicable or structures that the directors Committee contained in this Annual banking facilities and other relevant key markets, and continued access financial statements are required by set of accounting standards, give have put in place to ensure Report. As at 21 February 2020, information, including the economic to capital to support the Group’s law to give a true and fair view of a true and fair view of the assets, material compliance with the there have been no changes in the conditions currently affecting the ongoing investments. The strategic the assets, liabilities and financial liabilities, financial position and Company’s Relevant Obligations. directors’ and secretary’s interests in building environment generally and plan is subject to stress testing position of the Group and company profit or loss of the Group and shares since 31 December 2019. the Group’s Strategic Plan. On the which involves flexing a number of and of the profit or loss of the Group Company; and Audit Information basis of this review the directors the main assumptions underlying for that period. In preparing those → the Report of the Directors Each of the directors have taken all Conflicts Of Interest have concluded that there are no the forecast in severe but reasonable financial statements, the directors includes a fair review of the the steps that they should or ought None of the directors have any direct material uncertainties that would scenarios. Such assumptions are are required to: development and performance to have taken as a director in order or indirect interest in any contract or cast significant doubt over the rigorously tested by management of the business and the position to make himself or herself aware arrangement subsisting at the date Company’s and the Group’s ability and the directors. It is reviewed → select suitable accounting of the Group and Company, of any relevant audit information hereof which is significant in relation to continue as a going concern. For and updated annually and was policies and then apply them together with a description of the and to establish that the Group’s to the business of the Company this reason, the directors consider considered and approved by the consistently; principal risks and uncertainties statutory auditors are aware of that or any of its subsidiaries nor in the it appropriate to adopt the going Board at its meeting in October 2019. → make judgements and estimates that they face. information. So far as the directors share capital of the Company or any concern basis in preparing the that are reasonable and prudent; are aware, there is no relevant of its subsidiaries. financial statements. In making this assessment, the information of which the Group’s → state whether applicable IFRSs They are also satisfied in compliance directors have considered the statutory auditors are unaware. have been followed, subject to with Provision 27 of the 2018 UK Financial Instruments Viability Statement resilience of the Group, taking any material departures disclosed Corporate Governance Code: In the normal course of business, In accordance with Provision 31 of account of its current position Auditor and explained in the financial the Group has exposure to a variety the 2018 UK Corporate Governance and the principal risks facing the During 2019, the Board carried out GroupKingspan plc — &Annual Report Financial Statements 2019 statements; and → that the Annual Report and of financial risks, including foreign Code, the directors are required business as outlined in the Risk & financial statements, taken as an audit tender process, details → prepare the financial statements currency risk, interest rate risk, to assess the prospects of the Risk Management Report contained a whole, is fair, balanced and of which are more particularly on the going concern basis unless liquidity risk and credit risk. The Company, explain the period over in this Annual Report, and the understandable and provides set out in the Report of the Audit it is inappropriate to presume Company’s financial risk objectives which we have done so and state Group’s ability to manage those the information necessary Committee contained in this Annual that the Company, and the and policies are set out in Note 19 whether we have a reasonable risks. The risks have been identified for shareholders to assess the Report. As a result of this process, Group as a whole, will continue of the financial statements. expectation that the Company will using a top-down and bottom- Group’s position, business model the Company’s auditors, KPMG in business. be able to continue in operation and up approach, and their potential and strategy. Chartered Accountants, will, in Political Donations meet liabilities as they fall due over impact was assessed having regard accordance with Section 383(2) of The directors are responsible for Neither the Company nor any of its this period of assessment. to the effectiveness of controls Directors’ Compliance Statement the Companies Act 2014, continue keeping accounting records which subsidiaries have made any political in place to manage each risk. In The directors acknowledge that in office and will retire following the disclose with reasonable accuracy at donations in the year which would The directors have assessed the assessing the prospects of the Group they are responsible for securing conclusion of the audit for the 2019 any time the financial position of the be required to be disclosed under prospects of the Group over the such potential impacts have been the Company’s compliance with its financial year, with the Board then Group and the Company and which the Electoral Act 1997. three-year period to February 2023. considered as have the mitigating relevant obligations in accordance appointing EY as Group external enable them to ensure that the factors in place. with Section 225(2)(a) of the Irish auditor with effect for the financial financial statements comply with the Subsidiary Companies The directors concluded that three Companies Act 2014 (the “Act”) year ending 31 December 2020. Irish Companies Act 2014 and Article The Group operates from 159 years was an appropriate period Based on this assessment the (described below as the “Relevant 4 of the IAS Regulation. manufacturing sites, and has for the assessment, having had directors have a reasonable Obligations”). On Behalf Of The Board operations in over 70 countries regard to: expectation that the Group will They are responsible for safeguarding worldwide. be able to continue in operation In accordance with Section 225 (2) Gene M. Murtagh, the assets of the Group and hence → the Group’s rolling Strategic Plan and meet its liabilities as they fall (b) of the Act, the directors confirm Chief Executive Officer for taking reasonable steps for the The Company’s principal subsidiary which extends to 2023; due over the three-year period of that they have: prevention and detection of fraud undertakings at 31 December 2019, → the Group’s long-term funding their assessment. Geoff Doherty, and other irregularities. country of incorporation and nature commitments, some of which fall 1. drawn up a Compliance Policy Chief Financial Officer of business are listed in the Principle to be repaid during the period; Directors’ Responsibility Statement setting out the The directors are responsible for Subsidiary Undertakings section of Statement Company’s policies (that are, 21 February 2020 → the inherent short-cycle nature the maintenance and integrity this Annual Report. Each of the directors whose names in the opinion of the directors, of the construction market of the corporate and financial and functions are set out in the appropriate to the Company) including the Group’s order bank information on the Company’s The Company does not have any Board section of this Annual Report in respect of the compliance by and project pipeline; and website. Legislation in the Republic branches outside of Ireland. confirm their responsibility for the Company with its Relevant → the potential impact of macro- of Ireland governing the preparation preparing the Annual Report and the Obligations; Outlook economic events and political consolidated and company financial and dissemination of financial uncertainty in some regions such statements may differ from The Board fully endorses the outlook statements in accordance with 2. put in place appropriate as the UK and Middle East. legislation in other jurisdictions. “Looking Ahead” expressed in applicable Irish law and regulations. arrangements or structures that, the Chief Executive’s Review in in the opinion of the directors, In accordance with Transparency this Annual Report. It is recognised that such future Company law in Ireland requires provide a reasonable assurance (Directive 2004/109/EC) Regulations assessments are subject to a level the directors to prepare financial of compliance in all material 2007 and the Transparency Rules of Significant Events Since Year-end of uncertainty that increases with statements for each financial year. respects with the Company’s
the Financial Regulator, the directors 92 There have been no significant time, and therefore future outcomes Under that law the directors have to Relevant Obligations; and events since the year-end. cannot be guaranteed or predicted prepare the consolidated financial confirm that to the best of their with certainty. statements in accordance with knowledge: Going Concern International Financial Reporting — The directors have reviewed budgets The Group Strategic Plan is approved Standards (IFRSs) as adopted by
and projected cash flows for a by the Board, building upon the the European Union (EU). The 93 period of not less than 12 months divisional management plans directors have elected to prepare Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information Directors' Report Product BENCHMARK Designwall 2000 and Designwall 4000 featuring QuadCore™ @ technology.
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@ 95 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements
Australia Financial Statements Mullum Mullum Stadium — Insulated Panels: Rainscreen facade in Shingle and Evolution FINANCIAL STATEMENTS
Independent Auditor’s Report 98 Notes to the Financial Statements Consolidated Income Statement 102 1 Statement of Accounting Policies 109 2 Segment Reporting 117 Consolidated Statement of Comprehensive Income 102 3 Employees 119 4 Finance Expense And Finance Income 120 Consolidated Statement of Financial Position 103 5 Profit For The Year Before Income Tax 120 Consolidated Statement of Changes in Equity 104 6 Directors’ Remuneration 121 7 Income Tax Expense 121 Consolidated Statement of Cash Flows 106 8 Earnings Per Share 122 Company Statement of Financial Position 107 9 Goodwill 123
Company Statement of Changes in Equity 108 10 Other Intangible Assets 124 GroupKingspan plc — &Annual Report Financial Statements 2019 11 Property, Plant and Equipment 125 Company Statement of Cash Flows 108 12 Investments in Subsidiaries 126 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 PB 5 Year Summary 156 96 — 97 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements Financial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
1 Opinion: our opinion on Basis for opinion Group audit matters Goodwill €1,506.9 million Based on evidence obtained, we found Materiality for the Company financial (2018: €1,391.0 million) that the key assumptions used by statements as a whole was set at €13.2m the financial statements We conducted our audit in accordance Warranty provisions €109.7 million management were appropriate, and (2018: €13.0m), determined with reference is unmodified with International Standards on Auditing Refer to page 85 (Report of the Audit (2018: €104.3 million) supported management’s conclusion that to a benchmark of Company’s total assets (Ireland) (“ISAs (Ireland)”) and applicable Committee), page 111 (accounting policy) We have audited the Group and Refer to page 85 (Report of the Audit no impairment of goodwill was required. of which it represents 1% (2018: 1%). law. Our responsibilities under those and Note 9 to the financial statements. Company financial statements of Committee), page 114 (accounting policy) standards are further described in the We report to the Audit Committee all Kingspan Group plc (“the Company”) and Note 20 to the financial statements. The key audit matter Company audit matter for the year ended 31 December 2019, Auditor’s Responsibilities section of our corrected and uncorrected misstatements There is a risk in respect of the Investment in subsidiaries €1,201.4 which comprise the Consolidated report. We believe that the audit evidence The key audit matter we identified through our audit in excess recoverability of the Group’s significant Income Statement, the Consolidated we have obtained is a sufficient and million (2018: €1,191.0 million) of €500,000 (2018: €500,000), in addition The Group’s business involves the sale of goodwill balance if future cash flows are Statement of Comprehensive Income, appropriate basis for our opinion. Our Refer to page 111 (accounting policy) and to other audit misstatements below that products under warranty, some of which not sufficient to recover the carrying value the Consolidated Statement of Financial audit opinion is consistent with our report Note 12 to the financial statements. threshold that we believe warranted use new technology and applications. of the Group’s goodwill; this could occur Position, the Consolidated Statement to the Audit Committee. reporting on qualitative grounds. Accordingly, the Group has recorded if demand is weak or due to the nature of Changes in Equity, the Consolidated The key audit matter We were appointed as auditor by the significant warranty provisions which are of the cost base in certain markets. We The structure of the Group’s finance Statement of Cash Flows, the Company The investments in subsidiary directors on 17 June 2011. The period of inherently judgemental in nature. These focus on this area due to the inherent function is such that certain transactions Statement of Financial Position, the undertakings are carried in the total uninterrupted engagement is the 9 provisions are required in order for the uncertainty involved in forecasting and and balances are accounted for by the Company Statement of Changes in Company’s financial statements at financial years ended 31 December 2019. Group to record an appropriate estimate discounting future cash flows, which rely central Group finance team, with the Equity, the Company Statement of Cash cost less impairment. Impairments are We have fulfilled our ethical responsibilities of the ultimate costs of repairing and on the management’s assumptions and remainder accounted for in the Group’s Flows and the related notes, including determined by reference to the subsidiary under, and we remained independent of replacing product that is ascertained to estimates of future trading performance, reporting components. We performed the accounting policies in note 1. The undertakings’ fair value. the Group in accordance with, ethical be faulty. which are the basis of the assessment comprehensive audit procedures, including financial reporting framework that has requirements applicable in Ireland, of recoverability. How the matter was addressed those in relation to the significant risks GroupKingspan plc — &Annual Report Financial Statements 2019 been applied in their preparation is Irish How the matter was addressed including the Ethical Standard issued in our audit set out above, on those transactions and Law and International Financial Reporting by the Irish Auditing and Accounting in our audit How the matter was addressed balances accounted for at Group. The In this area our audit procedures included, Standards (“IFRS”) as adopted by the Supervisory Authority (“IAASA”) as applied Our audit procedures included, among in our audit Group audit team carried out the audit of among others, assessing the carrying European Union and, as regards the to listed public interest entities. No non- others, assessing: management’s the Company financial statements. Our audit procedures in this area included, value of subsidiaries for any objective Company financial statements, as applied audit services prohibited by that standard approach to identifying, recording and among others, assessing the Group’s indicators of impairment. In respect of components, based on our in accordance with the provisions of the were provided. monitoring potential claims; consideration impairment models for each CGU and assessment of the financial significance of Companies Act 2014. of the nature and basis of the provision Based on the results of our testing, we evaluating the assumptions used by each of the Group’s 274 components, we and the range of potential outcomes; found management’s assessment that no In our opinion: 2 Key audit matters: our the Group in the model, specifically the determined that there were: assessment of risks of correspondence in relation to specific cash flow projections, perpetuity rates impairment is required to be reasonable. > the financial statements give a true material misstatement claims; progress on individual significant and discount rates. We compared the > 51 components ‘full scope and fair view of the assets, liabilities claims; and relevant settlement history of Group’s assumptions, where possible, to 3 Our application of components’ where audits of the and financial position of the Group Key audit matters are those matters claims and utilisation of related provisions. externally derived data and performed materiality and an overview financial information of those and Company as at 31 December 2019 that, in our professional judgment, were We considered the rollout of new our own assessment in relation to key of the scope of our audit components were performed; and of the Group’s profit for the year of most significance in the audit of the technology and products and challenged model inputs, such as projected economic then ended; financial statements and include the Materiality for the Group financial > 15 components ‘specific scope the Group’s assumptions in relation to growth, competition, cost inflation most significant assessed risks of material statements as a whole was set at components’ where audit procedures > the Group financial statements potential failure rates, considering past and discount rates. We examined the misstatement (whether or not due to €22.3 million (2018: €19.5 million). over specified financial statement have been properly prepared in failure rates and related settlements sensitivity analysis performed by Group fraud) identified by us, including those captions were performed, due to the accordance with IFRS as adopted by where necessary. We substantively tested management and performed our own This has been calculated using a which had the greatest effect on: the risk of potential misstatement of the the European Union; material movements in the provision and sensitivity analysis in relation to the key benchmark of Group profit before overall audit strategy; the allocation of Group financial statements caused by considered the accounting for movements assumptions. We compared the sum of taxation (of which it represents 5% > the Company financial statements resources in the audit; and directing the errors in those captions; and in the provision balances and the related the discounted cash flows to the Group’s (2018: 5%)), which we have determined, have been properly prepared in efforts of the engagement team. These disclosures for compliance with IAS 37. market capitalisation. We also assessed in our professional judgement, to be > 208 components where the audit accordance with IFRS as adopted by matters were addressed in the context of whether the disclosures in relation to one of the principal benchmarks within procedures comprised analytical the European Union, as applied in our audit of the financial statements as a Based on evidence obtained, we the key assumptions and in respect of the financial statements relevant to review procedures to ensure that our accordance with the provisions of the whole, and in forming our opinion thereon, found that management’s process the sensitivity of the outcome of the members of the Company in assessing initial assessment that there were Companies Act 2014; and and we do not provide a separate opinion for identifying and quantifying impairment assessment to changes in financial performance. no significant risks of misstatement on these matters. warranty provisions was appropriate > the Group and Company financial and that the resulting provision is not those key assumptions were appropriate. of the Group financial statements in statements have been properly We continue to perform procedures over materially misstated. those components was appropriate. prepared in accordance with the acquisition accounting. However, given requirements of the Companies the number of significant acquisitions Act 2014 and, as regards the Group has reduced we have not assessed this The coverage we obtained was as follows: financial statements, Article 4 of the as one of the most significant risks in our IAS Regulation. current year audit and, therefore, it is not Full scope Specific scope Other separately identified in our report thisyear. components components components In arriving at our audit opinion above, the % % % key audit matters, in decreasing order of Profit before tax 78 12 10 audit significance, were as follows: Revenue 70 16 14 Total assets 82 13 5 98 — 99 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements Financial Statements INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF KINGSPAN GROUP PLC OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT OPINION AND CONCLUSIONS ARISING FROM OUR AUDIT
The audits undertaken for Group reporting 5 We have nothing to report on > the directors’ explanation in the > based on the work undertaken The Companies Act 2014 also requires Auditor’s responsibilities purposes at the key reporting components the other information in the directors’ report of how they have for our audit, in our opinion, the us to report to you if, in our opinion, Our objectives are to obtain reasonable were all performed to component Annual Report assessed the prospects of the Group, description of the main features of the Company has not provided the assurance about whether the financial materiality levels. These component over what period they have done so internal control and risk management information required by section 5(2) to The directors are responsible for the statements as a whole are free from materiality levels were set individually and why they considered that period systems in relation to the financial (7) of the European Union (Disclosure of other information presented in the material misstatement, whether due to for each component and ranged from to be appropriate, and their statement reporting process for preparing the Non-Financial and Diversity Information Annual Report together with the financial fraud or error, and to issue our opinion in €10,000 to €7,350,000. Detailed audit as to whether they have a reasonable Group financial statements, and by certain large undertakings and groups) statements. The other information an auditor’s report. Reasonable assurance instructions were sent to the component expectation that the Group will be information relating to voting rights Regulations 2017 for the year ended comprises the information included in the is a high level of assurance, but does not auditors in all of these identified locations. able to continue in operation and and other matters required by the 31 December 2018 as required by the directors’ report, Business and Strategic guarantee that an audit conducted in These instructions covered the significant meet its liabilities as they fall due European Communities (Takeover Bids European Union (Disclosure of Non- Report and the Other Information Report. accordance with ISAs (Ireland) will always audit areas to be covered by these audits over the period of their assessment, (Directive 2004/EC) Regulations 2006 Financial and Diversity Information by detect a material misstatement when (which included the relevant key audit The financial statements and our auditor’s including any related disclosures and specified for our consideration, certain large undertakings and groups) it exists. Misstatements can arise from matters detailed above) and set out the report thereon do not form part of the drawing attention to any necessary are consistent with the financial (amendment) Regulations 2018. fraud, other irregularities or error and information required to be reported to the other information. Our opinion on the qualifications or assumptions. statements and have been prepared The Listing Rules of the Euronext Dublin are considered material if, individually Group audit team. financial statements does not cover the in accordance with the Act; and and the London Stock Exchange require us or in aggregate, they could reasonably other information and, accordingly, we Other corporate Senior members of the Group audit team > based on our knowledge and to review: be expected to influence the economic do not express an audit opinion or, except governance disclosures were directly responsible for the audit of understanding of the Company and decisions of users taken on the basis as explicitly stated below, any form of We are required to address the > the directors’ statement, set out on 21 full scope components and 6 specific its environment obtained in the of the financial statements. The risk of assurance conclusion thereon. following items and report to you in the page 92, in relation to going concern scope components. In respect of the other course of our audit, we have not not detecting a material misstatement following circumstances: and longer-term viability; 30 full scope components and 9 specific Our responsibility is to read the other identified any material misstatements resulting from fraud or other irregularities scope components carried out by other information and, in doing so, consider > Fair, balanced and understandable in that information. > the part of the Corporate Governance is higher than for one resulting from error, GroupKingspan plc — &Annual Report Financial Statements 2019 component auditors (all KPMG member whether, based on our financial (set out on pages 92 to 93): if we have Statement on page 90 relating to as they may involve collusion, forgery, > the Corporate Governance firms), senior members of the Group statements audit work, the information identified material inconsistencies the Company’s compliance with intentional omissions, misrepresentations, statement contains the information audit team: therein is materially misstated or between the knowledge we acquired the provisions of the UK Corporate or the override of internal control and may required by the European Union inconsistent with the financial statements during our financial statements Governance Code and the Irish involve any area of law and regulation > participated in planning calls to (Disclosure of Non-Financial and or our audit knowledge. Based solely on audit and the directors’ statement Corporate Governance Annex not just those directly affecting the ensure that the audit instructions Diversity Information by certain that work we have not identified material that they consider that the Annual specified for our review; and financial statements. were understood; large undertakings and groups) misstatements in the other information. Report and financial statements Regulations 2017. > certain elements of disclosures in the A fuller description of our responsibilities > inspected the audit workpapers taken as a whole is fair, balanced Based solely on our work on the other report to shareholders by the Board of is provided on IAASA’s website at https:// in respect of significant audit risk and understandable and provides We also report that, based on work information we report that, in those Directors’ remuneration committee. www.iaasa.ie/getmedia/b2389013-1cf6- areas; and the information necessary for parts of the directors’ report specified undertaken for our audit, all of the 458b-9b8f-a98202dc9c3a/Description_ shareholders to assess the Group’s other information required by the > participated in closing conference for our review: of_auditors_responsiblities_for_audit.pdf position and performance, business Act is contained in the Corporate 8 Respective responsibilities calls, during which the results of > we have not identified material model and strategy; Governance Statement. the audit were discussed by local 9 The purpose of our audit misstatements in the directors’ report Directors’ responsibilities management, the local audit team, > Report of the Audit Committee (set As explained more fully in their statement work and to whom we owe or other accompanying information; 6 Our opinions on other matters Group management and the Group out on pages 82 to 87): if the section set out on page 92 to 93, the directors our responsibilities audit team. > in our opinion, the information given of the Annual Report describing prescribed the Companies Act are responsible for: the preparation Our report is made solely to the in the directors’ report is consistent the work of the Audit Committee 2014 are unmodified Based on the above procedures, the of the financial statements including Company’s members, as a body, in with the financial statements; does not appropriately address Group audit team was satisfied with the We have obtained all the information and being satisfied that they give a true and accordance with section 391 of the matters communicated by us to the coverage obtained and the audit work > in our opinion, the directors’ report explanations which we consider necessary fair view; such internal control as they Companies Act 2014. Our audit work has Audit Committee; performed in respect of each component. has been prepared in accordance with for the purpose of our audit. determine is necessary to enable the been undertaken so that we might state preparation of financial statements that the Companies Act 2014. > Statement of compliance with UK In our opinion, the accounting records of to the Company’s members those matters are free from material misstatement, 4 We have nothing to Corporate Governance Code (set the Company were sufficient to permit we are required to state to them in an Disclosures of principal risks and whether due to fraud or error; assessing report on going concern out on page 90): if the directors’ the financial statements to be readily auditor’s report and for no other purpose. longer-term viability the Group and Company’s ability to statement does not properly disclose and properly audited and the Company’s To the fullest extent permitted by law, we We are required to report to you if: continue as a going concern, disclosing, Based on the knowledge we acquired a departure from provisions of the UK statement of financial position is in do not accept or assume responsibility as applicable, matters related to going > we have anything material to add or during our financial statements audit, Corporate Governance Code specified agreement with the accounting records. to anyone other than the Company and concern; and using the going concern draw attention to in relation to the we have nothing material to add or draw by the Listing Rules of Euronext Dublin the Company’s members, as a body, for basis of accounting unless they either directors’ statement in note 1 to the attention to in relation to: and the London Stock Exchange for our audit work, for our report, or for the 7 We have nothing to report on intend to liquidate the Group or the financial statements on the use of the our review. opinions we have formed. > the directors’ statement of risk and other matters on which we are Company or to cease operations, or going concern basis of accounting risk management on pages 36 to We have nothing to report in required to report by exception have no realistic alternative but to do so. with no material uncertainties that 39, concerning the disclosures of these respects. The Companies Act 2014 requires us may cast significant doubt over the principal risks, describing these risks In addition, as required by the Companies to report to you if, in our opinion, the Group and Company’s use of that and explaining how they are being Act 2014, we report, in relation to disclosures of directors’ remuneration and basis for a period of at least twelve managed and mitigated; months from the date of approval of information given in the Corporate transactions required by sections 305 to the financial statements; or > the directors’ confirmation within the Governance Statement on pages 62 to 312 of the Act are not made. report of the Audit Committee on 67, that: Conall O’Halloran > the related statement under the page 82 that they have carried out Listing Rules (Euronext Dublin and the a robust assessment of the principal for and on behalf of KPMG London Stock Exchange) set out on Chartered Accountants,
risks facing the Group, including those 100 page 92 is materially inconsistent with that would threaten its business Statutory Audit Firm our audit knowledge. model, future performance, solvency 1 Stokes Place and liquidity; and St. Stephen’s Green We have nothing to report in — these respects. Dublin 2 Ireland 101 21 February 2020 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements Financial Statements CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2019 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
Note 2019 2018 Note 2019 2018 €m €m €m €m
REVENUE 2 4,659.1 4,372.5 ASSETS Cost of sales (3,304.3) (3,158.0) NON-CURRENT ASSETS Goodwill 9 1,506.9 1,391.0 GROSS PROFIT 1,354.8 1,214.5 Other intangible assets 10 93.2 111.1 Operating costs, excluding intangible amortisation (857.7) (769.3) Financial asset 8.2 8.2 Property, plant and equipment 11 965.2 850.5 TRADING PROFIT 2 497.1 445.2 Right of use assets 16 121.6 - Intangible amortisation (21.9) (22.2) Derivative financial instruments 19 27.3 27.4 Retirement benefit assets 31 9.2 7.4 OPERATING PROFIT 475.2 423.0 Deferred tax assets 21 14.1 15.6 Finance expense 4 (23.7) (19.5) 2,745.7 2,411.2 Finance income 4 2.9 1.4 CURRENT ASSETS Inventories 13 557.6 524.9 PROFIT FOR THE YEAR BEFORE INCOME TAX 5 454.4 404.9 Trade and other receivables 14 794.2 798.6 Income tax expense 7 (76.6) (69.1) Derivative financial instruments 19 - 0.2 Cash and cash equivalents 190.9 294.5 PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 377.8 335.8 1,542.7 1,618.2 TOTAL ASSETS 4,288.4 4,029.4 Attributable to owners of Kingspan Group plc 369.4 330.9
Attributable to non-controlling interests 28 8.4 4.9 LIABILITIES GroupKingspan plc — &Annual Report Financial Statements 2019 377.8 335.8 CURRENT LIABILITIES Trade and other payables 15 768.9 779.8 EARNINGS PER SHARE FOR THE YEAR Provisions for liabilities 20 58.0 47.5 Basic 8 204.6c 184.0c Lease liabilities 16 25.6 - Derivative financial instruments 19 0.1 - Diluted 8 202.9c 182.3c Deferred consideration (including contingent consideration) 18 - 59.5 Interest bearing loans and borrowings 17 3.1 53.2 Current income tax liabilities 72.9 78.8 928.6 1,018.8 NON-CURRENT LIABILITIES Gene M. Murtagh Geoff Doherty 21 February 2020 Retirement benefit obligations 31 24.3 20.5 Chief Executive Officer Chief Financial Officer Provisions for liabilities 20 51.7 56.8 Interest bearing loans and borrowings 17 848.3 967.0 Lease liabilities 16 96.7 - CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 Deferred tax liabilities 21 31.9 40.8 Deferred contingent consideration 18 186.5 136.6 Note 2019 2018 1,239.4 1,221.7 €m €m TOTAL LIABILITIES 2,168.0 2,240.5 Profit for the year 377.8 335.8 NET ASSETS 2,120.4 1,788.9 EQUITY Other comprehensive income: Share capital 23 23.8 23.7 Share premium 24 95.6 95.6 Items that may be reclassified subsequently to profit or loss Capital redemption reserve 0.7 0.7 Exchange differences on translating foreign operations 61.0 4.0 Treasury shares 25 (11.8) (12.7) Effective portion of changes in fair value of cash flow hedges (0.2) 0.3 Other reserves (259.6) (273.2) Retained earnings 2,221.6 1,916.2 Items that will not be reclassified subsequently to profit or loss EQUITY ATTRIBUTABLE TO OWNERS OF KINGSPAN GROUP PLC 2,070.3 1,750.3 Actuarial (losses)/gains on defined benefit pension schemes 31 (0.2) 0.9 NON-CONTROLLING INTEREST 28 50.1 38.6 Income taxes relating to actuarial (losses)/gains on defined benefit pension schemes 21 - (0.2) TOTAL EQUITY 2,120.4 1,788.9 Total other comprehensive income 60.6 5.0
Total comprehensive income for the year 438.4 340.8
Attributable to owners of Kingspan Group plc 430.2 337.1 Gene M. Murtagh Geoff Doherty 21 February 2020 Attributable to non-controlling interests 28 8.2 3.7 Chief Executive Officer Chief Financial Officer 438.4 340.8 102 — 103 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements Financial Statements ------4.2 0.9 0.3 4.0 0.9 (0.6) (0.2) (0.2) (0.2) 13.2 61.0 12.4 Total Total Total Total (78.0) (23.0) (22.7) (68.4) (29.4) (35.4) Equity Equity 377.8 438.4 335.8 340.8 (106.9) (119.9) 1,788.9 2,120.4 1,568.0 1,788.9 ------Non- Non- Interest Interest Controlling Controlling Controlling Controlling ------4.2 0.9 0.3 5.2 (1.2) 0.9 €m €m €m €m €m €m Total Total Total Total the Parent the the Parent the Attributable Attributable Attributable Attributable to Owners of Owners of to to Owners of Owners of to Earnings Earnings Retained Retained Retained Retained Put Put Option Option Option Option Reserve Reserve Liability Liability ------2.5 - (77.6) - 13.2 (77.6) (0.6) (0.4) - -- (26.7) (22.7)- - (49.4) - (63.8)- (26.7) (110.2) (22.7) - 369.4 3.7 3.3 - - --- 369.4- - - 8.4 - - (0.2) 61.2 - (0.2) ------(0.2) - 369.2 (0.2) 430.2 - 8.2 ------(68.3) 12.4 (68.3) (0.1) -- (24.5) (35.4)- - (59.9) - (58.1)- (24.5) (114.9) (35.4) - (4.9) 330.9 (5.0) ------330.9---- 4.9 - -- - 0.9 - (0.2) 331.6 (0.2) 337.1 3.7 - Reserve Reserve Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 Revaluation Revaluation Revaluation Revaluation Based Based Share Share Share Share Reserve Reserve Payment Payment Payment Payment Flow Flow Flow Flow Cash Cash Reserve Reserve Hedging Hedging ------13.1 - 1.7 (12.8) - - 11.3 ------2.0 ---- (0.2) ------12.3 - (2.0) (8.6) - - - - 2.9 7.3 ------1.7 ---- 0.3------Reserve Reserve Translation Translation Translation Translation Shares Shares Treasury Treasury Treasury Treasury ------1.5 (0.6) ------0.9 ------61.2 ------61.2 (0.2) ------1.3 ----- 1.3 ------5.2 - - 5.2 - 0.3 - Reserve Reserve Capital Capital Capital Capital Redemption Redemption Redemption Redemption Share Share Share Share Premium Premium ------0.1 - 0.1 - 0.1 - 0.1 - €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m €m 23.7 95.6 0.7 (12.7) (172.0) 0.5 36.9 0.7 (139.3) 1,916.2 1,750.3 38.6 23.8 95.6 0.7 (11.8) (110.8) 0.3 38.9 0.7 (188.7) 2,221.6 2,070.3 50.1 23.6 95.6 0.7 (14.0) (177.2) 0.2 35.2 0.7 (79.4) 1,642.7 1,528.1 39.9 23.7 95.6 0.7 (12.7) (172.0) 0.5 36.9 0.7 (139.3) 1,916.2 1,750.3 38.6 Share Share Share Share Capital Capital 104 — 105 FOR THE YEAR ENDED 31 DECEMBER 2019 DECEMBER YEAR31 ENDED THE CHANGES FOR EQUITY IN OF STATEMENT CONSOLIDATED FOR THE YEAR ENDED 31 DECEMBER 2018 DECEMBER YEAR31 ENDED THE CHANGES FOR EQUITY IN OF STATEMENT CONSOLIDATED Transactions with owners recognised directly in equity recognised directly owners with Transactions based compensation share Employee based compensation share on employee Tax options share or lapsing of Exercise shares of Repurchase Dividends Balance at 1 January 2019 January 1 Balance at interests: with non-controlling Transactions Arising on acquisition movement value Fair owners with Transactions year the income for comprehensive Total year for the Profit income: Other comprehensive loss or profit to subsequently reclassified be may that Items hedging in equity Cash flow year - current impact- tax operations foreign on translating differences Exchange Items that will not be reclassified subsequently to profit or loss or profit to subsequently reclassified be not will that Items Actuarial losses on defined benefit pension scheme actuarial losses on defined to benefit relating Income taxes pension scheme year the income for comprehensive Total DecemberBalance2019 at 31
Balance at 1 January 2018 January 1 Balance at in equity recognised directly owners with Transactions based compensation share Employee based compensation share on employee Tax options share or lapsing of Exercise shares of Repurchase Dividends
Transactions with non-controlling interests: with non-controlling Transactions Arising on acquisition movement value Fair owners with Transactions year the income for comprehensive Total year for the Profit income: Other comprehensive loss or profit to subsequently reclassified be may that Items hedging in equity Cash flow year - current impact- tax operations foreign on translating differences Exchange loss or profit to subsequently reclassified be not will that Items Actuarial gains on defined benefit pension scheme actuarial gains on defined to benefit relating Income taxes pension scheme year the income for comprehensive Total DecemberBalance2018 at 31 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements Financial Statements CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 COMPANY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
Note 2019 2018 Note 2019 2018 €m €m €m €m
OPERATING ACTIVITIES ASSETS Profit for the year 377.8 335.8 NON-CURRENT ASSETS Add back non-operating expenses: Investments in subsidiaries 12 1,201.4 1,191.0 Income tax expense 7 76.6 69.1 Depreciation of property, plant and equipment 5 114.5 76.0 CURRENT ASSETS Amortisation of intangible assets 10 21.9 22.2 Amounts owed by group undertakings 14 128.7 112.7 Impairment of non-current assets 11 0.2 5.2 Cash and cash equivalents 0.1 0.1 Employee equity-settled share options 13.1 12.3 Finance income 4 (2.9) (1.4) TOTAL ASSETS 1,330.2 1,303.8 Finance expense 4 23.7 19.5 Profit on sale of property, plant and equipment 5 (3.3) (4.9) LIABILITIES Movement of deferred consideration (0.6) 0.8 CURRENT LIABILITIES Changes in working capital: Amounts owed to group undertakings 15 61.3 - Inventories 5.8 4.7 Payables 15 0.2 0.2 Trade and other receivables 57.3 (33.0) Trade and other payables (57.5) 30.6 TOTAL LIABILITIES 61.5 0.2
Other: NET ASSETS 1,268.7 1,303.6 GroupKingspan plc — &Annual Report Financial Statements 2019 Change in provisions 1.7 (5.8) Pension contributions 31 (1.2) (0.8) EQUITY
Cash generated from operations 627.1 530.3 Equity attributable to owners of Kingspan Group plc Income tax paid (87.2) (75.0) Share capital 23 23.8 23.7 Interest paid (19.5) (17.0) Share premium 24 95.6 95.6 Net cash flow from operating activities 520.4 438.3 Capital redemption reserve 0.7 0.7 Treasury shares 25 (11.8) (12.7) INVESTING ACTIVITIES Retained earnings 26 1,160.4 1,196.3 Additions to property, plant and equipment (161.0) (144.2) Proceeds from disposals of property, plant and equipment 6.7 12.9 TOTAL EQUITY 1,268.7 1,303.6 Purchase of subsidiary undertakings 22 (142.2) (461.0) Purchase of financial asset - (8.2) Payment of deferred contingent consideration in respect of acquisitions 18 (59.7) (3.1) Interest received 2.8 1.4 Net cash flow from investing activities (353.4) (602.2) Gene M. Murtagh Geoff Doherty 21 February 2020 FINANCING ACTIVITIES Chief Executive Officer Chief Financial Officer Drawdown of loans 29 7.8 445.0 Repayment of loans and borrowings 29 (181.6) (92.7) Payment of lease liability 16 (31.8) - Proceeds from share issues 0.1 0.1 Repurchase of shares 25 (0.6) - Dividends paid to non-controlling interest 28 (0.4) (0.1) Dividends paid 27 (77.6) (68.3) Net cash flow from financing activities (284.1) 284.0
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 29 (117.1) 120.1 Effect of movement in exchange rates on cash held 13.5 (2.2) Cash and cash equivalents at the beginning of the year 294.5 176.6
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 190.9 294.5 106 — 107 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 Share Capital Treasury Retained Shareholders’ Capital Premium Redemption Shares Earnings Equity 1 STATEMENT OF ACCOUNTING POLICIES Reserves €m €m €m €m €m €m General information Comparative information has been identified as leases. Contracts that were Kingspan Group plc is a public limited represented where necessary, to not identified as leases under IAS 17 and Balance at 1 January 2019 23.7 95.6 0.7 (12.7) 1,196.3 1,303.6 company registered and domiciled in present the financial statements on a IFRIC 4 were not reassessed. Therefore, Ireland. Its registered number is 70576 and consistent basis. the definition of a lease under IFRS 16 has Shares issued 0.1 - - - - 0.1 the address of its registered office is at been applied only to contracts entered Changes in Accounting Policies Repurchase of shares -- - (0.6) - (0.6) Dublin Road, Kingscourt, Co Cavan. into or changed on or after 1 January 2019. Employee share based compensation -- - 1.5 13.1 14.6 and Disclosures The Group’s principal activities comprise Transition Dividends paid -- - - (77.6) (77.6) New and amended standards and the manufacture of insulated panels, rigid interpretations effective during 2019 The Group adopted the new insulation boards, architectural facades, Transactions with owners 0.1 - - 0.9 (64.5) (63.5) standard by applying the modified data and flooring technology, daylighting IFRS 16 Leases retrospective approach. and ventilation systems and water and IFRS 16 is effective for accounting periods Profit for the year -- - - 28.6 28.6 At transition, for leases classified as energy solutions. The Group’s Principal beginning on or after 1 January 2019, operating leases under IAS 17, lease Subsidiary Undertakings are set out and the Group adopted IFRS 16 with Balance at 31 December 2019 23.8 95.6 0.7 (11.8) 1,160.4 1,268.7 liabilities were measured at the present on page 153 to 155. effect from 1 January 2019. IFRS 16 sets value of the remaining lease payments, out the principles for the recognition, COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018 Statement of compliance discounted at the applicable incremental measurement, presentation and disclosure borrowing rate as at 1 January 2019. All The consolidated and Company financial of leases for both the lessee and the Share Share Capital Treasury Retained Shareholders’ right of use assets were measured at the statements have been prepared in lessor. For lessees, IFRS 16 eliminates the Capital Premium Redemption Shares Earnings Equity accordance with International Financial amount of the lease liability on adoption,
classification of leases as either operating GroupKingspan plc — &Annual Report Financial Statements 2019 Reserves adjusted by the amount of any prepaid or Reporting Standards (IFRSs) and their leases or finance leases and introduces a €m €m €m €m €m €m accrued interest payments. interpretations issued by the International single lessee accounting model whereby Accounting Standards Board (IASB) as all leases are accounted for as finance Previously under IAS 17 operating lease Balance at 1 January 2018 23.6 95.6 0.7 (14.0) 1,242.6 1,348.5 adopted by the EU and those parts of leases, with some exemptions for short- rentals were charged to the Income the Companies Acts 2014, applicable term and low-value leases. It also includes Statement on a straight-line basis over Shares issued 0.1 - - - - 0.1 to companies reporting under IFRS and an election which permits a lessee not the term of the lease. Repurchase of shares ------Article 4 of the IAS Regulation. to separate non-lease components (e.g. Employee share based compensation -- - 1.3 12.3 13.6 The Group availed of the recognition maintenance) from lease components Dividends paid -- - - (68.3) (68.3) The Company has availed of the exemption exemption for short-term and low-value and instead capitalise both the lease cost in Section 304 of the Companies Act 2014 leases and used hindsight when determining and associated non-lease cost. Transactions with owners 0.1 - - 1.3 (56.0) (54.6) and has not presented the Company the lease term if the contract contains Income Statement, which forms part of The standard primarily affects the options to extend or terminate the lease. Profit for the year -- - - 9.7 9.7 the Company’s financial statements, to its accounting for the Group’s operating The Group also elected not to separate non- members and the Registrar of Companies. leases. The application of IFRS 16 results in lease components from lease components Balance at 31 December 2018 23.7 95.6 0.7 (12.7) 1,196.3 1,303.6 the recognition of additional assets and and instead capitalise both the lease cost Basis of preparation liabilities in the Consolidated Statement of and associated non-lease cost. The financial statements have been Financial Position and in the Consolidated The Group has also availed of the practical prepared on a going concern basis, Income Statement it replaces the expedient which allows for a single discount COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 under the historical cost convention, as straight-line operating lease expense with rate to be applied to a portfolio of leases modified by: a depreciation charge for the right of 2019 2018 with reasonably similar characteristics. > measurement at fair value of share use asset and an interest expense on the €m €m based payments at initial date of award; lease liabilities. The Group had a small number of finance leases under IAS 17. For these leases, the > certain derivative financial The incremental borrowing rate is the rate OPERATING ACTIVITIES carrying amount of the asset and liability instruments and deferred contingent of interest that the lessee would expect to Profit for the year after tax 28.6 9.7 at 1 January 2019 were recognised at the consideration recognised and incur on funds borrowed over a similar term Net cash flow from operating activities 28.6 9.7 equivalent carrying amount under IAS 17 measured at fair value; and and security to obtain a comparable value immediately before that date. > recognition of the defined benefit to the right of use asset in the relevant FINANCING ACTIVITIES liability as plan assets less the Change in receivables (13.3) 57.2 economic environment. The Group’s On 1 January 2019 €127.9m of leases were present value of the defined weighted average incremental borrowing recognised as liabilities on adoption of the Change in payables 61.3 - benefit obligation. Repurchase of shares (0.6) - rate pertaining to these leases is 3%. standard and €128.8m capitalised as right Exercise or lapsing of share options 1.5 1.3 The accounting policies set out below of use assets. During 2019, depreciation Definition of a lease Proceeds from share issues 0.1 0.1 have been applied consistently to all years on the right of use assets was €30.0m Dividends paid (77.6) (68.3) presented in these financial statements, Previously, the Group determined and associated lease rentals decreased by Net cash flow from financing activities (28.6) (9.7) unless otherwise stated. at contract inception whether an €31.8m leading to an increase in operating arrangement was or contained a lease profit of €1.8m. The interest charge on These consolidated financial statements CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 0.1 0.1 under IFRIC 4 Determining Whether the associated leases was €3.8m and the have been prepared in Euro. The Euro is the Net increase in cash and cash equivalents - - an Arrangement contains a Lease. The aggregate impact of IFRS 16 on profit presentation currency of the Group and the Group now assesses whether a contract before tax was a decrease of €2.0m. The functional and presentation currency of CASH AND CASH EQUIVALENTS AT END OF YEAR 0.1 0.1 is or contains a lease based on the new adoption of IFRS 16 reduced the 2019 the Company. definition of a lease. Under IFRS 16, a EPS by 1 cent. While IFRS 16 had no net The Group uses a number of Alternative contract is, or contains a lease if the impact on cash and cash equivalents at Performance Measures (APMs) throughout contract conveys a right to control the use the end of 2019, it had an impact on the 108 these financial statements to give assistance of an identified asset for a period of time cashflow statement in respect of profit, to investors in evaluating the performance of in exchange for consideration. depreciation and finance expense by
amounts outlined above, offset by the — the underlying business and to give a better On transition to IFRS 16, the Group payment of lease liabilities of €31.8m. understanding of how management review elected to apply the practical expedient 109 and monitor the business on an ongoing to grandfather the assessment of which Further details outlining the impact on the basis. These APMs have been defined and transactions are leases. It applied IFRS financial statements on transition to IFRS explained in more detail on page 148 to 150. 16 only to contracts that were previously 16 is outlined in note 16. BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 are remeasured when there are changes IFRIC 23 Uncertainty over income The point of recognition arises when Transaction costs are expensed to the Goodwill is subject to impairment testing the Group satisfies a performance Income Statement as incurred. on an annual basis and at any time during The Group recognises right of use assets in the assessment of whether an tax treatment obligation by transferring control of a the year if an indicator of impairment representing its right to use the underlying extension option is reasonably certain to IFRIC 23 is effective for accounting periods promised good or service to the customer, Put options held by non-controlling is considered to exist. The goodwill assets and lease liabilities representing be exercised or a termination option is beginning on or after 1 January 2019, and which could occur over time or at a interest shares impairment tests are undertaken at a its obligation to make lease payments reasonably certain not to be exercised or the Group adopted IFRIC 23 with effect point in time. Invoicing occurs at the Any contingent consideration is consistent time each year. Impairment is at the lease commencement date. The where there is a change in future lease from 1 January 2019. IFRIC 23 sets out how point of final delivery of the product or measured at fair value at the date of determined by assessing the recoverable right of use assets are initially measured payments as a result of a change in an to determine taxable profits and losses, tax performance obligation, at which point acquisition. Where a put option is held amount of the cash generating unit at cost, and subsequently measured at index or rate. bases, unused tax losses, unused tax credits a right is established for unconditional by a non-controlling interest (“NCI”) in to which the goodwill relates. Where cost less accumulated depreciation and and tax rates when there is uncertainty The Group has applied judgement to consideration as control passes to the a subsidiary undertaking, whereby that the recoverable amount of the cash impairment losses. over income tax treatments under IAS 12 determine the lease term of contracts customer. Typically, payment terms are 30 party can require the Group to acquire generating unit is less than the carrying Income Taxes. Where the Group considers it Lease liabilities are measured at the that include termination and extension days from the end of the month in which the NCI’s shareholding in the subsidiary amount, an impairment loss is recognised is probable that an uncertain tax treatment present value of the future lease options. If the Group is reasonably certain the invoice is raised. at a future date, but the NCI retain in the Income Statement. Impairment will not be accepted by a tax authority it payments, discounted at the Group’s to exercise such options, the relevant present access to the results of the losses arising in respect of goodwill are not is measured using either the most likely incremental borrowing rate. Subsequent amount of right of use assets and lease Research and Development subsidiary, the Group applies the present reversed following recognition. amount method or the expected value to the initial measurement, the lease liabilities are recognised. The Group has Expenditure on research and development access method of accounting to this method, as appropriate. The adoption On disposal of a subsidiary, the attributable liabilities are increased by the interest cost also applied judgement in determining the is recognised as an expense in the arrangement. The Group recognises a and application of IFRIC 23 did not have a amount of goodwill, not previously written and reduced by lease payments made. incremental borrowing rate, the basis of period in which it is incurred. An asset is contingent consideration liability at fair material impact on the Group. off, is included in the calculation of the which is set out above. recognised only when all the conditions value, being the Group’s estimate of the The right of use assets and lease liabilities profit or loss on disposal. set out in IAS 38 Intangible Assets are met. amount required to settle that liability Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 and a corresponding reserve in equity. Any Intangible Assets Business Combinations The new standards, amendments to standards and interpretations are as follows: subsequent remeasurements required due (other than goodwill) Business combinations are accounted for to changes in fair value of the put liability Intangible assets separately acquired Effective Date – periods using the acquisition method as at the estimation are recognised in the Put are capitalised at cost. Intangible beginning on or after date of acquisition. Option Reserve in equity. assets acquired as part of a business In accordance with IFRS 3 Business Goodwill combination are capitalised at fair value IFRS 16: Leases (13 January 2016) 1 January 2019 Combinations, the fair value of consideration as at the date of acquisition. Goodwill arises on business combinations IFRIC 23: Uncertainty over income tax treatment (7 June 2017) 1 January 2019 paid for a business combination is measured and represents the difference between Following initial recognition, intangible as the aggregate of the fair values at the the fair value of the consideration and assets, which have finite useful lives, The following amended standards and interpretations do not have a significant impact on the Group’s consolidated financial statements: date of exchange of assets given and the fair value of the Group’s share of the are carried at cost or initial fair value liabilities incurred or assumed in exchange for identifiable net assets of a subsidiary at less accumulated amortisation and Effective Date – periods control. The assets, liabilities and contingent the date of acquisition. accumulated impairment losses. beginning on or after liabilities of the acquired entity are measured at fair value as at the acquisition date. The Group measures goodwill at the The amortisation of intangible assets is Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards 1 January 2019 When the initial accounting for a business acquisition date as: calculated to write off the book value of combination is determined, it is done so on intangible assets over their useful lives on Amendments to IAS 19: Plan amendment, curtailment or settlement 1 January 2019 > the fair value of the consideration a provisional basis with any adjustments a straight-line basis on the assumption of Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures 1 January 2019 transferred; plus to these provisional values made within zero residual value. Amortisation charged Amendments to IFRS 9: Prepayment Features with Negative Compensation 1 January 2019 > the recognised amount of any 12 months of the acquisition date and are on these assets is recognised in the Amendments to References to Conceptual Framework in IFRS Standards. 1 January 2020 non-controlling interests in the effective as at the acquisition date. Income Statement. Definition of Material (Amendments to IAS 1 and IAS 8) 1 January 2020 acquiree; plus Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) 1 January 2020 To the extent that deferred consideration > if the business combination is The carrying amount of intangible assets is payable as part of the acquisition cost achieved in stages, the fair value of is reviewed for indicators of impairment Basis of consolidation transactions, are eliminated in preparing Insulation Boards, Water & Energy, and is payable after one year from the the pre-existing equity interest in the at each reporting date and is subject The Group consolidated financial the consolidated financial statements. Data & Flooring and Light & Air. acquisition date, the deferred consideration acquiree; less to impairment testing when events or statements incorporate the financial Unrealised losses are eliminated in the is discounted at an appropriate interest > the net recognised amount (generally changes of circumstances indicate that the Revenue recognition statements of the Company and its same manner as unrealised gains, but only rate and, accordingly, carried at net fair value) of the identifiable assets carrying values may not be recoverable. present value (amortised cost) in the acquired and liabilities assumed. subsidiary undertakings. to the extent that there is no evidence The Group uses the five-step model as The estimated useful lives are as follows: of impairment. prescribed under IFRS 15 on the Group’s Group Statement of Financial Position. The Following initial recognition, goodwill is revenue transactions. This includes discount component is then unwound as an Customer relationships 2 - 6 years Subsidiaries measured at cost less any accumulated Segment reporting the identification of the contract, interest charge in the Consolidated Income Trademarks & Brands 2 - 12 years Subsidiaries are entities controlled by impairment losses. the Group. The Group controls an entity The Group’s accounting policy for identification of the performance Statement over the life of the obligation. Patents 8 years As at the acquisition date, any goodwill Technological know how when it is exposed to, or has the rights identifying segments is based on internal obligations under same, determination Where a business combination agreement acquired is allocated to each of the cash and order backlogs 5 - 10 years to, variable returns from its involvement management reporting information of the transaction price, allocation of provides for an adjustment to the cost generating units expected to benefit from the with the entity and has the ability to that is routinely reviewed by the Board of the transaction price to performance of a business acquired contingent on Amortisation methods, useful lives and combination’s synergies. The cash generating affect those returns through its power Directors, which is the Chief Operating obligations and recognition of revenue. future events, other than put options residual values are reviewed at each Decision Maker (CODM) for the Group. units represent the lowest level within the over the entity. Typically, individual performance held by non-controlling interests, the reporting date and adjusted as necessary. The measurement policies used for the Group which generate largely independent obligations are specifically called out in Group accrues the fair value of the Subsidiaries are included in the Group segment reporting under IFRS 8 are the cash inflows and these units are not larger the contract which allows for accurate additional consideration payable as a financial statements from the date on same as those used in the consolidated than the operating segments (before recognition of revenue as and when liability at acquisition date. This amount is which control over the entity is obtained financial statements. Segment results that aggregation) determined in accordance with and cease to be consolidated from the performances are fulfilled. reassessed at each subsequent reporting
IFRS 8 Operating Segments. 110 are reported to the CODM include items date with any adjustments recognised in date on which control is transferred out directly attributable to a segment as well as the Income Statement. Goodwill is tested for impairment at the of the Group. those that can be allocated on a reasonable same level as the goodwill is monitored If the business combination is achieved
basis. Unallocated items comprise mainly — Transactions eliminated by management for internal reporting corporate assets, finance income and in stages, the fair value of the acquirer’s on consolidation purposes, which is at the individual cash expenses and tax assets and liabilities. previously held equity interest in the generating unit level. 111 Intragroup transactions and balances, acquiree is re-measured at the acquisition and any unrealised gains arising from such The Group has determined that it has five date through the Income Statement. operating segments: Insulated Panels, BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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)
Foreign currency Transactions and balances as qualifying net investment hedges, Changes in deferred tax assets or liabilities Impairment losses are recognised in Retirement benefit obligations are recognised as a component of tax the Income Statement. Following the Transactions in foreign currencies are which is recognised in the Statement of The Group operates defined contribution Functional and presentation currency income or expense in profit or loss, recognition of an impairment loss, the translated into the functional currency Comprehensive Income. and defined benefit pensions schemes. The individual financial statements of except where they relate to items that depreciation charge applicable to the at the exchange rates at the date of the each Group company are measured Goodwill and fair value adjustments arising are recognised in other comprehensive asset or cash generating unit is adjusted Defined contribution pension schemes transaction. Monetary assets and liabilities and presented in the currency of the on the acquisition of a foreign entity income or directly in equity, in which case to allocate the revised carrying amount, denominated in foreign currencies are The costs arising on the Group’s defined primary economic environment in which are initially translated at the exchange the related deferred tax is also recognised net of any residual value, over the translated to the functional currency at the contribution schemes are recognised in the company operates, the functional rate at the date of acquisition and then in other comprehensive income or remaining useful life. exchange rates at the reporting date. All the Income Statement in the period in currency. The Group financial statements subsequently these assets and liabilities are equity, respectively. currency translation differences on monetary Assets under construction are carried at which the related service is provided. are presented in Euro, which is the treated as part of a foreign entity and are assets and liabilities are taken to the Income cost less any recognised impairment loss. The Group has no legal or constructive Company’s functional currency. translated at the closing rate. Grants Statement, except when deferred in equity Depreciation of these assets commences obligation to pay further contributions Grants are initially recognised as deferred when the assets are ready for their in the event that these plans do income at their fair value when there is a intended use. not hold sufficient assets to provide Exchange rates of material currencies used were as follows: reasonable assurance that the grant will retirement benefits. be received, and all relevant conditions Leases (Note 16) have been complied with. Defined benefit pension schemes Average rate Closing rate Upon adoption of IFRS 16 the accounting 2019 2018 2019 2018 Capital grants received and receivable in policy for the year ended 31 December The Group’s net obligation in respect Euro = respect of property, plant and equipment 2019 is as follows: of defined benefit plans is calculated Pound Sterling 0.877 0.885 0.852 0.898 are treated as a reduction in the cost separately for each plan by estimating the The Group recognises right of use assets US Dollar 1.120 1.181 1.121 1.144 of that asset and thereby amortised to amount of future benefit that employees GroupKingspan plc — &Annual Report Financial Statements 2019 representing its right to use the underlying Canadian Dollar 1.485 1.530 1.461 1.557 the Income Statement in line with the have earned in return for their service in assets and lease liabilities representing Australian Dollar 1.610 1.580 1.600 1.620 underlying asset. the current and prior periods, discounting Czech Koruna 25.669 25.648 25.414 25.711 its obligation to make lease payments that amount and deducting the fair value Polish Zloty 4.297 4.260 4.260 4.299 Revenue grants are recognised in at the lease commencement date. The of any plan assets. the Income Statement to offset the right of use assets are initially measured Hungarian Forint 325.31 318.78 330.52 321.02 The calculation is performed annually by Brazilian Real 4.415 4.307 4.512 4.435 related expenditure. at cost, and subsequently measured at cost less accumulated depreciation and a qualified actuary using the projected Property, Plant and Equipment impairment losses. unit credit method. When the calculation Property, plant and equipment is results in a benefit to the Group, the Depreciation is provided on a straight line measured at cost less accumulated recognised asset is limited to the total of Foreign operations > Work in progress and finished goods Deferred tax basis over the period of the lease, or useful are carried at cost consisting of direct depreciation and accumulated any unrecognised past service costs and The Income Statement, Statement Deferred tax is recognised on all life if shorter. the present value of economic benefits of Financial Position and Cash Flow materials, direct labour and directly temporary differences at the reporting impairment losses. Lease liabilities are measured at the available in the form of any future refunds Statement of Group companies that have attributable production overheads date. Temporary differences are defined Depreciation is provided on a straight line present value of the future lease from the plan or reductions in future a functional currency different from that and other costs incurred in bringing as the difference between the tax bases basis at the rates stated below, which payments, discounted at the applicable contributions to the plan. of the Company are translated as follows: them to their existing location of assets and liabilities and their carrying are estimated to reduce each item of and condition. amounts in the consolidated financial incremental borrowing rate. Subsequent Remeasurements of the net defined > Assets and liabilities at each reporting property, plant and equipment to its statements. Deferred tax assets and to the initial measurement, the lease benefit liability or asset, which comprise date are translated at the closing rate Net realisable value represents the residual value by the end of its useful life: liabilities are not subject to discounting liabilities are increased by the interest cost actuarial gains and losses, the return at that reporting date. estimated selling price less costs to and are measured at the tax rates that and reduced by lease payments made. on plan assets (excluding interest) > Results and cash flows are translated completion and appropriate marketing, Freehold 2% to 2.5% on cost are expected to apply in the period in and the effect of the asset ceiling, at actual exchange rates for the year, selling and distribution costs. buildings The right of use assets and lease which the asset is realised or the liability are recognised immediately in other or an average rate where this is a Plant and 5% to 20% on cost liabilities are remeasured when there are A provision is made, where necessary, is settled based on tax rates and tax laws comprehensive income. reasonable approximation. machinery changes in the assessment of whether in all inventory categories for obsolete, that have been enacted or substantively an extension option is reasonably slow-moving and defective items. Fixtures and 10% to 20% on cost The Group determines the net interest All resulting exchange differences enacted at the reporting date. certain to be exercised or a termination expense on the net defined benefit liability are recognised in the Statement of fittings Income tax Deferred tax liabilities are recognised for option is reasonably certain not to be or asset by applying the discount rate Comprehensive Income and accumulated Computer 12.5% to 33% on cost exercised or where there is a change in used to measure the defined benefit Income tax in the Income Statement all taxable temporary differences (i.e. as a separate component of equity, the equipment future lease payments as a result of a obligation at the beginning of the annual represents the sum of current income differences that will result in taxable Translation Reserve. Motor vehicles 10% to 25% on cost change in an index or rate. The Group period to the then net defined benefit tax and deferred tax not recognised in amounts in future periods when the applies judgement when determining liability or asset, taking into account any On disposal of a foreign operation, any other comprehensive income or directly carrying amount of the asset or liability is Freehold land is stated at cost and is the lease term where renewal and changes in the net defined benefit liability such cumulative retranslation differences, in equity. recovered or settled). previously recognised in equity, are not depreciated. termination options are contained in the or asset during the period as a result of Deferred tax assets are recognised in lease contract. reclassified to the Income Statement as Current tax The estimated useful lives and residual contributions and benefit payments. respect of all deductible temporary Net interest expense and other expenses part of gain or loss on disposal. Current tax represents the expected tax values of property, plant and equipment Prior to 1 January 2019 the policy was differences (i.e. differences that give related to defined benefit plans are payable or recoverable on the taxable rise to amounts which are deductible in are determined by management at as follows: Inventories the time the assets are acquired and recognised in profit or loss. profit for the year using tax rates and laws determining taxable profits in future periods Leases are classified as finance leases Inventories are stated at the lower of cost subsequently, re-assessed at each that have been enacted or substantively when the carrying amount of the asset wherever substantially all of the risk and When the benefits of a plan are changed and net realisable value. reporting date. These lives are based on enacted, at the reporting date and taking or liability is recovered or settled), carry- rewards of ownership of the asset have or when a plan is curtailed, the resulting historical experience with similar assets Cost is based on the first-in, first-out into account any adjustments from forward of unused tax credits and unused transferred to the lessee. All other leases change in benefit that relates to past across the Group. principle and includes all expenditure prior years. Liabilities for uncertain tax tax losses to the extent that it is probable are classified as operating leases. service or the gain or loss on curtailment treatments are recognised in accordance incurred in acquiring the inventories and that taxable profits will be available against In accordance with IAS 36 Impairment of is recognised immediately in profit or loss. with IFRIC 23 and are measured using Assets held under finance leases are bringing them to their present location which to offset these items. Assets, the carrying values of property, The Group recognises gains and losses on either the most likely amount method or capitalised at the inception of the lease and condition. plant and equipment are reviewed at the settlement of a defined benefit plan the expected value method - whichever The carrying amounts of deferred tax in the Statement of Financial Position at each reporting date to determine whether when the settlement occurs. > Raw materials are valued at assets are subject to review at each the lower of its fair value and the present
better predicts the resolution of — there is any indication of impairment. the purchase price including the uncertainty. reporting date and reduced to the extent value of the minimum lease payments An impairment loss is recognised transport, handling costs and net of that future taxable profits are considered and are depreciated over their useful lives whenever the carrying value of an asset 113112 trade discounts. to be inadequate to allow all or part of with any impairment being recognised in or its cash generating unit exceeds its any deferred tax asset to be utilised. the Income Statement. recoverable amount. BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 Derivative financial instruments are If the hedge no longer meets the criteria Financial Assets Borrowing costs Non-controlling interest A provision is recognised in the Statement recognised initially at fair value and for hedge accounting, the adjustment to On initial recognition, a financial asset is Borrowing costs directly attributable to Non-controlling interests represent the of Financial Position when the Group has a thereafter are subsequently remeasured the carrying amount of the hedged item is classified as measured at amortised cost qualifying assets, as defined in IAS 23 portion of the equity of a subsidiary not present constructive or legal obligation as at their fair value. Fair value is the amortised on an effective interest basis to or fair value with any movement being Borrowing costs, are capitalised during attributable either directly or indirectly to a result of a past event and it is probable amount for which an asset could be the Income Statement with the objective reflected through other comprehensive the period of time that is necessary to the parent company and are presented that an outflow of economic benefit will exchanged, or a liability settled, between of achieving full amortisation by maturity income or the income statement. complete and prepare the asset for its separately in the Income Statement and be required to settle the obligation and knowledgeable willing parties in an arm’s of the hedged item. intended use. Other borrowing costs are within equity in the Statement of Financial On initial recognition of an equity the amount of the obligation can be length transaction. The fair value of these expensed to the Income Statement in the Position, distinguished from shareholders’ Cash flow hedge investment that is not held for trading, estimated reliably. instruments is the estimated amount period in which they are incurred. equity attributable to owners of the the Group may irrevocably elect to present that the Group would receive or pay to The effective part of any gain or loss parent company. A specific provision is created when a terminate the swap at the reporting on the derivative financial instrument subsequent changes in the investment’s Share Based Payment Transactions claim has actually been made against fair value in other comprehensive income. date, taking into account current is recognised in other comprehensive The Group grants equity settled share Accounting Estimates the Group or where there is a known This election is made on an investment- interest and currency exchange rates income and presented in the Cash based payments to employees through and Judgements issue at a known customer’s site, both by-investment basis. and the current creditworthiness of the Flow Hedge Reserve in equity with the the Performance Share Plan and the In the process of applying the Group’s relating to a product or service supplied swap counterparties. ineffective portion being recognised The Group applies the simplified approach Deferred Bonus Plan. accounting policies, as set out on pages in the past. In addition, a risk-based within Finance Income or Finance Expense for expected credit losses (ECL) under 108 to 116, management are required provision is created where future claims The Group designates all of its derivatives The fair value of these equity settled in the Income Statement. If a hedge of IFRS 9 Financial Instruments, which to make estimates and judgements are considered incurred but not reported. in one or more of the following types transactions is determined at grant a forecasted transaction subsequently requires expected lifetime losses to that could materially affect the Group’s The warranty provision is based on of relationships: date and is recognised as an employee results in the recognition of a financial be recognised from initial recognition reported results or net asset position. historical warranty data and a weighting expense in the Income Statement, with i. Fair value hedge: Hedges the exposure asset or a financial liability, the associated of receivables. Trade receivables are GroupKingspan plc — &Annual Report Financial Statements 2019 of all possible outcomes against their the corresponding increase in equity, Notwithstanding that the areas below to movements in fair value of gains and losses that were recognised considered for impairment on a case by associated probabilities. on a straight line basis over the vesting represent estimation and judgement recognised assets or liabilities that are directly in other comprehensive income case basis, when they are past due or period. The fair value at the grant date at the end of the reporting period, the Specific provisions will generally be attributable to hedged risks. are reclassified into profit or loss in the when objective evidence is received that is determined using a combination of directors are satisfied that none of these aged as a current liability, reflecting the ii. Cash flow hedge: Hedges the Group’s same period or periods during which the a specific counterparty may default. the Monte Carlo simulation technique areas have a significant risk of resulting assessment that a current liability exists exposures to fluctuations in future asset acquired or liability assumed affects Trade receivables are written-off when and a Black Scholes model, excluding the in a material adjustment to the carrying to replace or repair product sold on foot cash flow derived from a particular profit or loss. For cash flow hedges, other there is no reasonable expectation of impact of any non-market conditions. amounts of assets and liabilities within of an accepted valid warranty issue. risk associated with recognised assets than those covered by the preceding recovery. In the event recoveries are made, Non-market vesting conditions are the next financialye ar. Only where the liability is reasonably or liabilities or forecast transactions. statements, the associated cumulative these are recognised in the Consolidated included in the assumptions about the certain not to be settled within the next iii. Net investment hedge: Hedges the gain or loss is removed from other Income Statement. The areas where key estimates and number of options that are expected to 12 months, will a specific provision be exchange rate fluctuations of a net comprehensive income and recognised judgements were made by management vest. At each reporting date, the Group categorised as a long-term obligation. investment in a foreign operation. in the Income Statement in the same Financial Liabilities and are material to the Group’s reported revises its estimates of the number of Risk-based provisions will generally be period or periods during which the hedged Financial liabilities held for trading are results or net asset position, are At inception of the transaction, the Group options that are likely to vest as a result of aged as a non-current liability, reflecting forecast transaction affects profit or measured at fair value through the profit as following: documents the relationship between non-market conditions. Any adjustment the fact that no warranty claim has yet loss. The ineffective part of any gain or and loss, and all other financial liabilities the hedging instruments and hedged from this revision is recognised in the been made by the customer. loss is recognised immediately in the are measured at amortised cost unless Impairment (Note 9) items, including the risk management Income Statement with a corresponding Income Statement. the fair value option is applied. The Group is required to review assets for Provisions which are not expected to give objectives and strategy in undertaking adjustment to equity. objective evidence of impairment. rise to a cash outflow within 12 months of the hedge transactions. The Group also Hedge accounting is discontinued when Finance Income Where the share based payments give It does this on the basis of a review of the the reporting date are, where material, documents its assessment, both at a hedging instrument expires or is sold, Finance income comprises interest income rise to the issue of new share capital, the budget and rolling 5 year forecasts (4 year determined by discounting the expected inception and on an ongoing basis, as to terminated or exercised, or no longer on funds invested and any gains on proceeds received by the Company are strategic plan, as approved by the Board, future cash flows. The unwinding of the whether the derivatives that are used in qualifies for hedge accounting. The hedging instruments that are recognised credited to share capital (nominal value) plus year 5 forecasted by management), discount is recognised as a finance cost. hedging transactions are highly effective cumulative gain or loss at that point in offsetting changes in fair values or cash remains in other comprehensive income in the Income Statement. Interest income and share premium (where applicable) which by their nature are based on a Dividends flows of hedged items. and is recognised when the transaction is recognised as it accrues using the when the share entitlements are exercised. series of assumptions and estimates. effective interest rate method. Where the share based payments give The Group has performed impairment Final dividends on ordinary shares are occurs. If a hedged transaction is no Fair value hedge rise to the re-issue of shares from treasury tests on those cash generating units recognised as a liability in the financial longer expected to occur, the net Finance Expense shares, the proceeds of issue are credited which contain goodwill, and on any assets statements only after they have been Any gain or loss resulting from the re- cumulative gain or loss recognised in other Finance expense comprises interest to share premium. where there are indicators of impairment. approved at the Annual General Meeting measurement of the hedging instrument comprehensive income is transferred to payable on borrowings calculated using The key assumptions associated with of the Company. Interim dividends on to fair value is reported in the Income the Income Statement in the period. The Group does not operate any cash- the effective interest rate method, these reviews are detailed in Note 9. This is ordinary shares are recognised when they Statement, together with any changes settled share based payment schemes or Net investment hedge fair value gains and losses on hedging an area of estimation and judgement. are paid. in the fair value of the hedged asset share based payment transactions with or liability that are attributable to the Any gain or loss on the hedging instruments that are recognised in the cash alternatives as defined in IFRS 2. Guarantees & warranties (Note 20) Cash and cash equivalents hedged risk. The gains or losses of a instrument relating to the effective Income Statement, the net finance cost of the Group’s defined benefit pension Certain products carry formal guarantees Cash and cash equivalents principally hedging instrument that are in hedge portion of the hedge is recognised in other Treasury Shares scheme, lease interest and the discount of satisfactory functional and aesthetic comprise cash at bank and in hand and relationships with borrowings are included comprehensive income and presented in Where the Company purchases its own component of the deferred consideration performance of varying periods following short term deposits with an original within Finance Income or Finance Expense the Translation Reserve in equity. The gain equity share capital, the consideration which is unwound as an interest charge their purchase. Local management maturity of three months or less. in the Income Statement. In the case or loss relating to the ineffective portion is paid is deducted from total shareholders’ in the Income Statement over the life of evaluate the constructive or legal of the related hedged borrowings, any recognised immediately in either Finance equity and classified as treasury shares the obligation. obligation arising from customer feedback Derivative financial instruments gain or loss on the hedged item which is Income or Finance Expense in the Income until such shares are cancelled or reissued. and assess the requirement to provide for Derivative financial instruments, attributable to the hedged risk is adjusted Statement. Cumulative gains or losses Where such shares are subsequently sold any probable outflow of economic benefit principally interest rate and currency against the carrying amount of the remain in equity until disposal of the net or reissued, any consideration received arising from a settlement. This is an area swaps, are used to hedge the Group’s hedged item and is also included within investment in the foreign operation at is included in share premium account. of estimation and judgement. foreign exchange and interest rate Finance Income or Finance Expense in the which point the related differences are No gains or losses are recognised on the risk exposures. Income Statement. reclassified to the Income Statement as purchase, sale, cancellation or issue of part of the overall gain or loss on sale. treasury shares. — 115114 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 Leases (Note 16) Income taxes (Note 7) 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 (Note 14) The Group has applied judgement to The Group is subject to income tax in monitored and strategic decisions are made on the basis of segment operating results. The Group provides credit to customers determine the lease term of contracts numerous jurisdictions. Significant and as a result there is an associated risk that include termination and extension judgement is required in determining the Operating segments that the customer may not be able to pay options. If the Group is reasonably certain worldwide provision for income taxes. The Group has the following five operating segments: outstanding balances. Trade receivables to exercise such options, the relevant There are many transactions for which the are considered for impairment on a case amount of right of use assets and lease ultimate tax determination is uncertain. Insulated Panels Manufacture of insulated panels, structural framing and metal facades. by case basis, when they are past due liabilities are recognised. The Group has The Group recognises liabilities based on Insulation Boards Manufacture of rigid insulation boards, building services insulation and engineered timber systems. at the reporting date or when objective also applied judgement in determining the estimates of whether additional taxes Light & Air Manufacture of daylighting, smoke management and ventilation systems. evidence is received that a specific incremental borrowing rates. will be due. Once it has been concluded Water & Energy Manufacture of energy and water solutions and all related service activities. counterparty may default. that a liability needs to be recognised, the Data & Flooring Manufacture of data centre storage solutions and raised access floors. Business Combinations (Note 22) liability is measured based on the tax laws Under IFRS 9 the Group uses an allowance Business combinations are accounted that have been enacted or substantially matrix to measure Expected Credit Loss for using the acquisition method which enacted at the end of the reporting period. Analysis by class of business (ECL) of trade receivables from customers. requires that the assets and liabilities The amount shown for current taxation Loss rates are calculated using a “roll Segment revenue and disaggregation of revenue assumed are recorded at their respective includes an estimate for uncertain tax rate” method based on the probability fair values at the date of acquisition. The treatments where the group considers it Insulated Insulation Light Water & Data & Total of a receivable progressing through application of this method requires certain probable that uncertain tax treatments Panels Boards & Air Energy Flooring successive chains of non-payment to estimates and assumptions relating, in will not be accepted by tax authorities €m €m €m €m €m €m write-off. The rates are calculated at a particular, to the determination of the fair and the estimate is measured using either GroupKingspan plc — &Annual Report Financial Statements 2019 business unit level which reflects the risks values of the acquired assets and liabilities the most likely amount method or the associated with geographic region, age, Total revenue – 2019 3,031.9 876.9 327.7 208.1 214.5 4,659.1 assumed at the date of acquisition. expected value method as appropriate, mix of customer relationship and type Total revenue – 2018 2,823.1 864.1 291.8 202.9 190.6 4,372.5 prescribed by IFRIC 23. Where the final tax of product purchased. This is an area For intangible assets acquired, the Group outcome of these matters is different from of estimation. bases valuations on expected future cash Disaggregation of revenue 2019 the amounts that were initially estimated, flows. This method employs a discounted Point of Time 3,025.2 834.4 202.3 207.4 186.1 4,455.4 such differences will impact the income tax Valuation of inventory (Note 13) cash flow analysis using the present value Over Time & Contract 6.7 42.5 125.4 0.7 28.4 203.7 and deferred tax provisions in the period in Inventories are measured at the lower of of the estimated cash flows expected to 3,031.9 876.9 327.7 208.1 214.5 4,659.1 which such determination is made. cost and net realisable value. The Group’s be generated from these intangible assets policy is to hold inventories at original using appropriate discount rates and Deferred tax assets are recognised Disaggregation of revenue 2018 cost and create an inventory provision revenue forecasts. The period of expected to the extent that it is probable that Point of Time 2,816.8 831.8 190.4 201.6 166.2 4,206.8 where evidence exists that indicates cash flows is based on the expected useful future taxable profit will be available Over Time & Contract 6.3 32.3 101.4 1.3 24.4 165.7 net realisable value is below cost for a life of the intangible asset acquired. against which the unused tax losses 2,823.1 864.1 291.8 202.9 190.6 4,372.5 particular item of inventory. Damaged, and unused tax credits can be utilised. Measurement of deferred contingent slow-moving or obsolete inventory are The Group estimates the most probable The disaggregation of revenue by geography is set out in more detail on page 118. consideration and put option liabilities typical examples of such evidence. This is amount of future taxable profits, using related to business combinations require The segments specified above capture the major product lines relevant to the Group. an area of estimation. assumptions consistent with those assumptions to be made regarding employed in impairment calculations, The combination of the disaggregation of revenue by product group, geography and the timing of revenue recognition capture the profit forecasts and discount rates used and taking into consideration applicable key categories of disclosure with respect to revenue. Typically, individual performance obligations are specifically called out in the to arrive at the net present value of the tax legislation in the relevant jurisdiction. contract which allow for accurate recognition of revenue as and when performances are fulfilled. Given the nature of the Group’s potential obligations. The Group has These calculations also require the use product set, customer returns are not a significant feature of our business model. No further disclosures are required with respect to considered all available information of estimates. disaggregation of revenue other than what has been presented in this note. in arriving at the estimate of liabilities associated with deferred contingent Deferred Contingent Consideration Inter-segment transfers are carried out at arm’s length prices and using an appropriate transfer pricing methodology. As inter- consideration obligations. This is an area (Note 18) segment revenue is not material, it is not subject to separate disclosure in the above analysis. For the purposes of the segmental of estimation and judgement. analysis, corporate overheads have been allocated to each division based on their respective revenue for the year. Measurement of put option liabilities require assumptions to be made regarding Segment result (profit before net finance expense) profit forecasts and discount rates used to arrive at the net present value of the Insulated Insulation Light Water & Data & Total Total potential obligations. The Group has Panels Boards & Air Energy Flooring 2019 2018 considered all available information €m €m €m €m €m €m €m in arriving at the estimate of liabilities associated with put option obligations. Trading profit – 2019 316.1 117.1 25.2 14.2 24.5 497.1 This is an area of estimation. Intangible amortisation (13.1) (4.9) (2.9) (0.9) (0.1) (21.9)
Operating profit – 2019 303.0 112.2 22.3 13.3 24.4 475.2
Trading profit – 2018 281.8 105.1 21.5 14.2 22.6 445.2 Intangible amortisation (12.2) (4.4) (4.4) (1.2) - (22.2)
Operating profit - 2018 269.6 100.7 17.1 13.0 22.6 423.0 Net finance expense (20.8) (18.1) Profit for the year before tax 454.4 404.9 Income tax expense (76.6) (69.1)
Net profit for the year 377.8 335.8 — 117116 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) 2 SEGMENT REPORTING (continued)
Segment assets 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 Insulated Insulation Light Water & Data & Total Total regions are highlighted separately on the basis of materiality. Panels Boards & Air Energy Flooring 2019 2018 There are no material dependencies or concentrations on individual customers which would warrant disclosure under IFRS 8. The €m €m €m €m €m €m €m individual entities within the Group each have a large number of customers spread across various activities, end-uses and geographies.
Assets – 2019 2,495.9 832.2 348.0 191.8 188.2 4,056.1 Assets – 2018 2,231.7 782.2 331.2 180.3 166.3 3,691.7 3 EMPLOYEES a) Employee numbers Derivative financial instruments 27.3 27.6 The average number of persons employed by the Group in the financial year was: Cash and cash equivalents 190.9 294.5 Deferred tax asset 14.1 15.6 2019 2018 Number Number Total assets as reported in the Consolidated Statement of Financial Position 4,288.4 4,029.4 Production 9,046 8,235 Segment liabilities Sales and distribution 2,895 2,623 Management and administration 2,588 2,611 Insulated Insulation Light Water & Data & Total Total Panels Boards & Air Energy Flooring 2019 2018 14,529 13,469
€m €m €m €m €m €m €m GroupKingspan plc — &Annual Report Financial Statements 2019 b) Employee costs, including executive directors Liabilities – 2019 (831.4) (194.4) (80.2) (64.2) (41.5) (1,211.7) Liabilities – 2018 (755.0) (179.2) (73.2) (58.2) (35.1) (1,100.7) 2019 2018 €m €m Interest bearing loans and borrowings (current and non-current) (851.4) (1,020.2) Derivative financial instruments (current and non-current) (0.1) - Wages and salaries 651.2 579.5 Income tax liabilities (current and deferred) (104.8) (119.6) Social welfare costs 78.0 68.9 Pension costs - defined contribution (note 31) 20.1 15.5 Total liabilities as reported in the Consolidated Statement of Financial Position (2,168.0) (2,240.5) Share based payments and awards 13.1 12.3
Other segment information 762.4 676.2 Actuarial losses/(gains) recognised in other comprehensive income 0.2 (0.9) Insulated Insulation Light Water & Data & Total 762.6 675.3 Panels Boards & Air Energy Flooring €m €m €m €m €m €m c) Employee share based compensation The Group currently operates a number of equity settled share based payment schemes; two Performance Share Plans (PSP) Capital investment – 2019 * 135.7 36.8 11.8 4.5 4.0 192.8 and a Deferred Bonus Plan, which was introduced in 2015. The details of these schemes are provided in the Report of the Capital investment – 2018 * 160.8 87.9 22.7 7.1 2.8 281.3 Remuneration Committee.
Depreciation included in segment result – 2019 (70.9) (24.2) (8.3) (6.1) (5.0) (114.5) Performance Share Plan (PSP) Depreciation included in segment result – 2018 (49.8) (15.9) (4.8) (2.4) (3.1) (76.0) Number of PSP Options Non-cash items included in segment result – 2019 (7.6) (2.7) (0.7) (0.8) (1.3) (13.1) 2019 2018 Non-cash items included in segment result – 2018 (7.4) (2.5) (0.5) (0.8) (1.1) (12.3) Outstanding at 1 January 2,149,827 2,498,209 * Capital investment also includes fair value of property, plant and equipment and intangible assets acquired in business combinations. Granted 539,988 552,325 Forfeited (76,361) (65,266) Analysis of segmental data by geography Lapsed (10,781) (6,636) Exercised (649,562) (828,805) Republic of United Rest of Americas Others Total Outstanding at 31 December 1,953,111 2,149,827 Ireland Kingdom Europe €m €m €m €m €m €m Of which, exercisable 399,257 478,945
Income Statement Items The Group recognised a PSP expense of €12.9m (2018: €11.7m) in the Income Statement during the year. All PSP options are Revenue – 2019 176.0 891.8 2,286.7 990.9 313.7 4,659.1 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 Revenue – 2018 156.0 938.2 2,092.3 887.6 298.4 4,372.5 €44.99 (2018: €38.96). The weighted average contractual life of share options outstanding at 31 December 2019 is 2.6 years (2018: Statement of Financial Position Items 3.5 years). The weighted average exercise price during the period was €0.13 (2018: €0.13). Non-current assets – 2019 * 64.0 411.4 1,415.8 605.4 207.7 2,704.3 The fair values of options granted under the PSP scheme during the current and prior year were determined using the Black Scholes Non-current assets – 2018 * 52.7 375.2 1,227.0 524.5 188.8 2,368.2 Model or the Monte Carlo Pricing Model as appropriate. The key assumptions used in the model were as follows:
Other segmental information Capital investment – 2019 15.2 18.2 106.3 49.1 4.0 192.8 Capital investment – 2018 6.0 23.9 204.8 27.8 18.8 281.3 —
* Total non-current assets excluding derivative financial instruments and deferred tax assets. 119118 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 2019 2018 Share price at grant date €38.80 €35.55 €m €m Exercise price per share €0.13 €0.13 Expected volatility 30% 26% Audit of Group (KPMG Ireland) 0.8 0.8 Expected dividend yield 1.3% 1.2% Audit of other subsidiaries (other KPMG offices) 1.8 1.8 Risk-free rate (0.07%) 0.08% 2.6 2.6 Expected life 3 years 3 years
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 2019 2018 conditions such as Total Shareholder Return and non market conditions such as the Earnings Per Share of the Group. Market €m €m 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 Tax compliance and advisory services (KPMG Ireland) 0.1 0.3 Group and peer company share prices over the previous 3 years. The Report of the Remuneration Committee sets out the current Tax compliance and advisory services (other KPMG offices) 0.8 0.6 companies within the peer group. 0.9 0.9 Deferred Bonus Plan
As set out in the Report of the Remuneration Committee, the Deferred Bonus Plan (DBP) is intended to reward incremental 6 DIRECTORS’ REMUNERATION GroupKingspan plc — &Annual Report Financial Statements 2019 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 2019 2018 participants for two years without any additional performance conditions. These shares vest after two years but are forfeited if the €m €m 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 Fees 0.6 0.7 remain outstanding at 31 December 2019. A charge of €0.2m was recognised in the Income Statement for 2019 (2018: €0.6m). Other emoluments 6.3 6.0 Pension costs 0.8 0.7 4 FINANCE EXPENSE AND FINANCE INCOME 7.7 7.4 Performance Share Plan expense 3.2 2.8 2019 2018 10.9 10.2 €m €m A detailed analysis of directors’ remuneration is contained in the Report of the Remuneration Committee. Aggregate gains of €8.0m Finance expense (2018: €7.8m) were realised with respect to share options exercised by directors during the financialyear. Lease interest 3.8 - Deferred contingent consideration fair value movement 0.1 0.3 7 INCOME TAX EXPENSE Bank loans 2.4 2.7 Private placement loan notes 17.2 16.7 2019 2018 Fair value movement on derivative financial instrument 2.6 (3.1) €m €m Fair value movement on private placement debt (2.5) 2.5 Other interest 0.1 0.4 Tax recognised in the Consolidated Income Statement 23.7 19.5 Current taxation: Finance income Current tax expense 83.2 72.2 Interest earned (2.9) (1.4) Adjustment in respect of prior years (0.2) (5.4) Net finance cost 20.8 18.1 83.0 66.8 Deferred taxation: No costs were reclassified from other comprehensive income to profit during the year (2018: €nil). Origination and reversal of temporary differences (6.6) 1.5 Effect of rate change 0.2 0.8 5 PROFIT FOR THE YEAR BEFORE INCOME TAX (6.4) 2.3
2019 2018 Income tax expense 76.6 69.1 €m €m
The profit before tax for the year is stated after charging /(crediting): Distribution expenses 224.6 202.1 Product development costs (total, including payroll) 31.9 30.5 Depreciation 114.5 76.0 Amortisation of intangible assets 21.9 22.2 Foreign exchange net gains 0.7 (1.7) Profit on sale of property, plant and equipment (3.3) (4.9) 120 — 121 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 2019 the Group: 2018 €m €m 2019 2018 €m €m At 1 January 1,391.0 1,095.7 Additions relating to acquisitions (Note 22) 92.5 296.8 Net exchange movement 23.4 (1.5) Profit for the year 454.4 404.9 Carrying amount 31 December 1,506.9 1,391.0 Applicable notional tax charge (12.5%) 56.8 50.6 At 31 December Cost 1,574.6 1,458.7 Expenses not deductible for tax purposes 9.0 5.1 Accumulated impairment losses (67.7) (67.7) Net effect of differing tax rates 15.3 16.3 Utilisation of unprovided deferred tax assets (1.5) (0.8) Carrying amount 1,506.9 1,391.0 Other items (3.0) (2.1)
Total income tax expense 76.6 69.1 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 GroupKingspan plc — &Annual Report Financial Statements 2019 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 Operating Segments. 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%. 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. The methodology used to determine the recognition and measurement of uncertain tax positions is set out in Note 1 ‘Statement of Accounting Policies’. Cash generating units Goodwill (€m) The total value of deductible temporary differences which have not been recognised is €29.7m (2018: €31.4m) consisting mainly of 2019 2018 2019 2018 tax losses forward. €1.3m of the losses expire within 10 years while all other losses may be carried forward indefinitely. Insulated Panels 6 6 918.3 827.2 No provision has been made for tax in respect of temporary differences arising from unremitted earnings of foreign operations Insulation Boards 1 1 235.7 232.5 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) Light & Air 1 1 178.0 174.2 have not been recognised for withholding tax that would be payable on unremitted earnings of €219.6m (2018: €177.2m) in Water & Energy 1 1 83.8 78.7 certain subsidiaries. Data & Flooring 2 2 91.1 78.4 8 EARNINGS PER SHARE Total 11 11 1,506.9 1,391.0
2019 2018 Significant goodwill amounts €m €m 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: The calculations of earnings per share are based on the following: Profit attributable to ordinary shareholders 369.4 330.9 Panels Panels Panels Insulation Boards Light North America Western Europe Joris Ide & Air Number of Number of 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 shares (‘000) shares (‘000) 2019 2018 Goodwill (€m) 181.1 173.4 225.5 146.0 415.6 410.8 235.7 232.5 178.0 174.2 Discount rate (%) 8.2 10.0 6.7 8.1 6.7 8.1 6.7 8.1 6.5 8.0 Weighted average number of ordinary shares for the calculation of basic earnings per share 180,586 179,840 Dilutive effect of share options 1,489 1,696 Excess* 722.0 335.7 1,976.4 1,655.1 576.2 489.5 1,812.1 854.0 279.1 132.8 Weighted average number of ordinary shares for the calculation of diluted earnings per share 182,075 181,536 * Excess of value-in-use over carrying amount (€m) 2019 2018 € cent € cent 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. Basic earnings per share 204.6 184.0 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 Diluted earnings per share 202.9 182.3 further disclosures have been provided for these CGUs. Adjusted basic earnings per share 215.0 193.5
Adjusted diluted earnings per share 213.2 191.7
Adjusted basic earnings reflects the profit attributable to ordinary shareholders after eliminating the impact of the Group’s 122 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. 123 The number of options which are anti-dilutive and have therefore not been included in the above calculations is nil (2018: nil). BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 Land and Plant Motor Total Goodwill acquired through business combinations has been allocated to the above CGUs for the purpose of impairment testing. buildings machinery vehicles Impairment of goodwill occurs when the carrying value of the CGU is greater than the present value of the cash that it is expected and other to generate (i.e. the recoverable amount). The Group reviews the carrying value of each CGU at least annually or more frequently if equipment there is an indication that a CGU may be impaired. €m €m €m €m 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 As at 31 December 2019 excludes any future acquisition activity. They include assumptions regarding future organic growth with cash flows after year 5 Cost 634.1 1,386.2 42.8 2,063.1 assuming to continue in perpetuity at a general growth rate of 2% (Panels LATAM 4%), reflecting the relevant CGU inflation, but Accumulated depreciation and impairment charges (200.9) (871.7) (25.3) (1,097.9) 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. Net carrying amount 433.2 514.5 17.5 965.2
The value in use calculation represents the present value of the future cash flows, including the terminal value, discounted at a At 1 January 2019, net carrying amount 401.0 436.2 13.3 850.5 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 Acquisitions through business combinations (Note 22) 12.4 13.1 - 25.5 are based on the Group’s estimated weighted average cost of capital, adjusted for risk, and are consistent with external sources Additions 29.9 125.2 9.5 164.6 of information. Disposals (1.1) (1.9) (0.4) (3.4) The cash flows and the key assumptions used in the value in use calculations are determined based on the historical performance Reclassification (0.1) (0.1) 0.2 - of the Group, its strong current financial position as well as management’s knowledge and expectation of future trends in the Depreciation charge for year (14.4) (64.8) (5.3) (84.5) industry. Expected future cash flows are, however, inherently uncertain and are therefore liable to material change over time. The key Impairment charge for year (0.1) (0.1) - (0.2) assumptions used in the value in use calculations are subjective and include projected EBITDA margins, net cash flows, discount rates Effect of movement in exchange rates 5.6 6.9 0.2 12.7 GroupKingspan plc — &Annual Report Financial Statements 2019 used and the duration of the discounted cash flow model. At 31 December 2019, net carrying amount 433.2 514.5 17.5 965.2 Sensitivity analysis Sensitivity analysis was performed by adjusting cash flows, the discount rate and the average operating margin of each division by Land and Plant Motor Total over 25% and by reducing the long-term growth rate to zero. Each test resulted in a positive recoverable amount for each CGU under buildings machinery vehicles each approach. Management believes, therefore, that any reasonable change in any of the key assumptions would not cause the and other carrying value of goodwill to exceed the recoverable amount, thereby giving rise to an impairment. equipment €m €m €m €m 10 OTHER INTANGIBLE ASSETS As at 31 December 2018 Customer Patents & Other Total Cost 583.7 1,245.4 36.3 1,865.4 Relationships Brands Intangibles Accumulated depreciation and impairment charges (182.7) (809.2) (23.0) (1,014.9) €m €m €m €m Net carrying amount 401.0 436.2 13.3 850.5 Cost At 1 January 2019 48.7 127.8 33.9 210.4 At 1 January 2018, net carrying amount 337.5 355.3 10.5 703.3 Acquisitions (Note 22) 1.4 0.1 1.2 2.7 Acquisitions through business combinations (Note 22) 47.8 44.9 1.0 93.7 Net exchange difference 0.2 2.1 0.5 2.8 Additions 34.9 102.8 6.6 144.3 At 31 December 2019 50.3 130.0 35.6 215.9 Disposals (4.6) (2.8) (0.6) (8.0) Reclassification (0.7) - 0.7 - Accumulated amortisation Depreciation charge for year (12.7) (58.5) (4.8) (76.0) At 1 January 2019 23.4 54.0 21.9 99.3 Impairment charge for year (0.1) (5.1) - (5.2) Charge for the year 6.1 11.7 4.1 21.9 Effect of movement in exchange rates (1.1) (0.4) (0.1) (1.6) Net exchange difference 0.1 1.1 0.3 1.5 At 31 December 2019 29.6 66.8 26.3 122.7 At 31 December 2018, net carrying amount 401.0 436.2 13.3 850.5
Net Book Value as at 31 December 2019 20.7 63.2 9.3 93.2 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. Customer Patents & Other Total The Group has no material investment properties and hence no property assets are held at fair value. Relationships Brands Intangibles €m €m €m €m
Cost At 1 January 2018 27.7 109.2 30.0 166.9 Acquisitions (Note 22) 21.2 18.8 3.3 43.3 Net exchange difference (0.2) (0.2) 0.6 0.2 At 31 December 2018 48.7 127.8 33.9 210.4
Accumulated amortisation At 1 January 2018 17.9 43.4 15.3 76.6 Charge for the year 5.4 10.5 6.3 22.2 124 Net exchange difference 0.1 0.1 0.3 0.5 At 31 December 2018 23.4 54.0 21.9 99.3 —
Net Book Value as at 31 December 2018 25.3 73.8 12.0 111.1 125
Other intangibles relate primarily to technological know how and order backlogs. BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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
2019 2018 2019 2018 €m €m €m €m
Company Current Trade payables 404.9 397.5 At 1 January 1,191.0 1,180.7 Accruals 316.3 341.1 Share options and awards 10.4 10.3 Deferred income 6.4 7.0 Income tax & social welfare 29.6 19.9 At 31 December 1,201.4 1,191.0 Value added tax 11.7 14.3
The share options and awards addition reflects the cost of share based payments attributable to employees of subsidiary 768.9 779.8 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 2019 2018 €m €m 2019 2018 €m €m Company Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 Raw materials and consumables 433.2 415.1 Current Work in progress 20.3 19.6 Amounts owed to group undertakings 61.3 - Finished goods 169.6 149.2 Payables 0.2 0.2 Inventory impairment allowance (65.5) (59.0) 61.5 0.2
At 31 December 557.6 524.9 The amounts due to group undertakings are unsecured, interest free and are repayable on demand. A total of €2.7bn (2018: €2.6bn) of inventories was included in the Income Statement as an expense. This includes a net income 16 LEASES 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 A new accounting standard, IFRS 16 Leases, was adopted with effect from 1 January 2019. The standard requires leases which were recoverability of carrying amounts. 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 No inventories have been pledged as security for liabilities entered into by the Group. 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 14 TRADE AND OTHER RECEIVABLES aggregate impact of IFRS 16 on profit before tax was a decrease of €2.0m. Right of use asset 2019 2018 €m €m Land and Plant, Motor Total buildings machinery vehicles 2019 Amounts falling due within one year: and other Trade receivables, gross 770.3 791.5 equipment Expected credit loss allowance (54.0) (56.4) €m €m €m €m
Trade receivables, net 716.3 735.1 At 1 January 2019 102.1 12.7 14.0 128.8 Other receivables 45.1 32.1 Additions 4.8 1.1 8.2 14.1 Prepayments 32.8 31.4 Arising on acquisitions 6.0 0.2 0.1 6.3 Remeasurement 2.6 - - 2.6 794.2 798.6 Terminations (1.6) (0.1) (0.8) (2.5) Depreciation charge for the year (17.4) (4.8) (7.8) (30.0) The maximum exposure to credit risk for trade and other receivables at the reporting date is their carrying amount. Effect of movement in exchange rates 2.0 0.1 0.2 2.3
The Group uses an allowance matrix to measure Expected Credit Loss (ECL) of trade receivables from customers. The simplified At 31 December 2019 98.5 9.2 13.9 121.6 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.
2019 2018 €m €m
Company
Amounts falling due within one year: Amounts owed by group undertakings 128.7 112.7 128.7 112.7 — The amounts due from group undertakings are unsecured, interest free and are repayable on demand. 127126 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) 17 INTEREST BEARING LOANS AND BORROWINGS (continued) Lease liability Analysis of Net Debt
2019 2019 2018 €m €m €m
At 1 January 2019 127.9 Cash and cash equivalents 190.9 294.5 Additions 14.0 Derivative financial instruments 27.3 27.4 Arising on acquisitions 6.2 Current borrowings (3.1) (53.2) Remeasurement 2.5 Non-current borrowings (848.3) (967.0) Terminations (2.5) Deferred consideration - (30.0) Payments (31.8) Interest 3.8 Total Net Debt (633.2) (728.3) Effect of movement in exchange rates 2.2
At 31 December 2019 122.3 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 Split as follows: 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 Current liability 25.6 June 2022. No amount was drawn on either of the facilities as at 31 December 2019. The Group had no committed bilateral bank Non-current liability 96.7 facilities at year end, however, a green loan of €50m had been agreed but was undrawn. Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 At 31 December 2019 122.3 More details of the Group’s loans and borrowings are set out in Note 19. Reconciliation of IAS 17 operating lease commitments and IFRS 16 lease liability 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 2019 used for transactional hedging are not included in the definition of net debt. Lease liabilities recognised due to the implementation of €m IFRS 16 and deferred contingent consideration have also been excluded from the calculation of net debt.
Operating lease commitment at 31 December 2018 as disclosed in the Group’s Annual Report 151.5 18 DEFERRED CONSIDERATION Impact of discounting (19.9) Recognition exemption for short term and low value assets (1.0) 2019 2018 Adjustments as a result of alignment of extension and termination options with accounting policies (2.7) €m €m
Lease liabilities recognised at 1 January 2019 127.9 At 1 January 196.1 117.5 Deferred consideration arising on acquisitions (note 22) - 30.0 The €0.9m difference between the opening right of use asset and lease liability relates to lease prepayments. Deferred contingent consideration arising on acquisitions (note 22) 2.0 1.4 Movement in deferred contingent consideration arising from fair value adjustment (0.5) 1.1 17 INTEREST BEARING LOANS AND BORROWINGS Put liability arising on current year acquisitions (note 22) 26.7 24.5 Movement in put liability arising from fair value adjustment 22.7 35.4 2019 2018 Amounts paid (59.7) (3.1) €m €m Effect of movement in exchange rates (0.8) (10.7)
Current financial liabilities At 31 December 186.5 196.1 Bank loans 2.8 52.8 Lease obligations per banking covenants 0.3 0.4 Split as follows: Current liabilities - 59.5 3.1 53.2 Non-current liabilities 186.5 136.6
186.5 196.1 2019 2018 Analysed as follows: €m €m Deferred consideration - 30.0 Deferred contingent consideration 11.3 38.9 Non-current financial liabilities Put liability 175.2 127.2 Private placements 840.9 835.9 Bank loans (unsecured) 5.1 127.3 186.5 196.1 Lease obligations per banking covenants 2.3 3.8
848.3 967.0 128 — 129 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) 19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (continued) For each acquisition for which deferred contingent consideration has been provided, an annual review takes place to evaluate if the The following are the carrying amounts and contractual maturities of financial liabilities (including estimated interest payments): payment conditions are likely to be met. Carrying Contractual Within 1 Between Between Greater During the year the Group paid €30m of deferred consideration relating to the Synthesia business which was acquired in 2018 (2018: amount cash flow year 1 and 2 2 and 5 than 5 €nil). In addition, the Group paid €29.7m of deferred contingent consideration relating to the Isoeste business which was acquired in 2019 years years years 2017 (2018: €nil). €m €m €m €m €m €m During the prior year the Group paid €3.1m of deferred contingent consideration relating to the PAL business which was acquired in 2014. Non derivative financial instruments The deferred contingent consideration arising on current year acquisitions relates to Group Bacacier SAS. Bank loans 7.9 7.9 2.8 2.5 2.5 0.1 Private placement loan notes 840.9 919.0 20.4 237.3 329.7 331.6 The put liability arising on current year acquisitions is recognised with respect to the potential amounts payable to the 15% Lease obligations per banking covenants 2.6 2.6 0.3 0.1 - 2.2 shareholders of Group Bacacier SAS. Lease liabilities 122.3 148.0 30.2 24.6 43.3 49.9 The amount of the deferred contingent consideration and put liability that have been recognised are arrived at by the application of Trade and other payables 762.5 762.5 762.5 - - - a range of outcomes and associated probabilities in order to determine the carrying amounts. Deferred consideration ------Deferred contingent consideration 186.5 193.4 - 28.4 155.9 9.1 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. Derivative financial liabilities / (assets) Interest rate swaps used for hedging: The put option in the shareholders’ agreement with non-controlling shareholders of Isoeste is exercisable from 2023. The Carrying values (0.7) - - - - - undiscounted expected cash outflow is estimated to be €118.6m (2018: €96m). Net inflows - 0.8 0.4 0.4 - - The put option in the shareholders’ agreement with non-controlling shareholders of PanelMET is exercisable from 2022. The GroupKingspan plc — &Annual Report Financial Statements 2019 undiscounted expected cash outflow is estimated to be €9.1m (2018: €12.2m). Cross currency interest rate swaps used for hedging: The put option in the shareholders’ agreement with non-controlling shareholders of Kingspan Jindal is exercisable from 2022. The Carrying value (26.6) - - - - - undiscounted expected cash outflow is estimated to be €26.8m (2018: €25.8m). - outflow - 93.4 (0.2) 93.6 - - There are two put options in the shareholders’ agreement with non-controlling shareholders of Group Bacacier SAS. The first option - inflow - 127.1 6.0 121.1 - - 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 Foreign exchange forwards used for hedging: estimated to be €10.5m. Carrying value assets ------Carrying value liabilities 0.1 - - - - - For the purposes of the fair value assessments all of the put option liabilities are valued using the option price formula in the - outflow - 7.2 7.2 - - - shareholders’ agreement and the most recent financial projections. These are classified as unobservable inputs. - inflow - 7.0 7.0 - - - 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 Carrying Contractual Within 1 Between Between Greater to these call options. amount cash flow year 1 and 2 2 and 5 than 5 2018 years years years 19 FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS €m €m €m €m €m €m
Financial Risk Management Non derivative financial instruments In the normal course of business, the Group has exposure to a variety of financial risks, including foreign currency risk, interest Bank loans 180.1 180.1 52.8 3.3 123.4 0.6 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 Private placement loan notes 835.9 930.5 20.0 20.0 357.1 533.4 economic impact of an adverse event on the Group’s performance. Meetings are held on a regular basis to review the result of the Lease obligations per banking covenants 4.2 4.2 0.4 1.7 - 2.1 risk assessment, approve recommended risk management strategies and monitor the effectiveness of such policies. Lease liabilities ------The Group’s risk management strategies include the usage of derivatives (other than for speculative transactions), principally Trade and other payables 772.8 772.8 772.8 - - - forward exchange contracts, interest rate swaps, and cross currency interest rate swaps. Deferred consideration 30.0 30.0 30.0 - - - Deferred contingent consideration 166.1 173.1 29.6 - 131.3 12.2 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 Derivative financial liabilities / (assets) long-term and short-term debt, cash and cash equivalents, to enable it to meet its liabilities when due. Interest rate swaps used for hedging: Carrying values (0.3) - - - - - The Group’s core funding is provided by a number of private placement loan notes totalling €840.9m. The notes have a weighted Net inflows - 0.4 0.1 0.1 0.2 - 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 Cross currency interest rate swaps used for hedging: June 2019 an additional 3 year bank facility of €300m was arranged, which was undrawn at year end. Subsequent to the year end the Carrying value (27.1) - - - - - Group arranged a bilateral ‘Green Loan’ of €50m to fund the Group’s Planet Passionate initiatives. - outflow - 104.1 3.1 3.4 97.6 - - inflow - 136.0 6.2 6.2 123.6 - 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 Foreign exchange forwards used for hedging: period to 31 December 2019. Carrying value assets (0.2) - - - - - The Group also has in place a number of uncommitted bilateral working capital facilities to serve its working capital requirements. Carrying value liabilities ------These facilities total €43m (2018: €44m) and are supported by a Group guarantee. Core funding arrangements arise from a wide and - outflow - 4.7 4.7 - - - varied number of institutions and, as such, there is no significant concentration of liquidity risk. - inflow - 4.8 4.8 - - - 130
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. — 131 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 Before the impact of hedging transactions 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. As at 31 December 2019 Weighted average Total At fixed At floating Under 5 Over The range of outcomes are set out in Note 18. effective interest rate interest rate interest rate years 5 years €m €m €m €m €m 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. Bank loans 2.0% 7.9 7.9 - 7.8 0.1 Loan notes 2.4% 840.9 840.9 - 522.4 318.5 Market Risks 848.8 848.8 - 530.2 318.6 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 Total At fixed At floating of the Group’s foreign currency risk management strategy is to manage and control market risk exposures within acceptable interest rate interest rate parameters. As set out below the Group uses derivatives to manage foreign exchange risk. Transactions involving derivatives are €m €m €m carried out in accordance with the Treasury policy. The Group seeks to apply hedge accounting, where practicable, to manage volatility in profit or loss. EUR 666.3 666.3 - Transaction risk USD 178.3 178.3 - Apart from transaction risk on debt, this arises where operating units have input costs or sales in currencies other than their Other 4.2 4.2 - functional currencies. These exposures are internally hedged as far as possible. Group policy is to hedge up to a maximum of 75% of a 848.8 848.8 - forecast exposure. Material exposures are hedged on a rolling 12 months basis. The Group’s principal exposure relates to GBP and USD, GroupKingspan plc — &Annual Report Financial Statements 2019 with less significant exposures to certain central European currencies. After the impact of hedging transactions In addition, where operating entities carry monetary assets and liabilities at year end denominated other than in their functional As at 31 December 2019 Weighted average Total At fixed At floating Under 5 Over currency, their translation at the year-end rates of exchange into their functional currency will give rise to foreign currency gains and effective interest rate interest rate interest rate years 5 years losses. The Group seeks to manage these gains and losses to net to nil. €m €m €m €m €m 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. Bank loans 2.0% 7.9 7.9 - 7.8 0.1 Loan notes 2.1% 840.9 699.4 141.5 522.4 318.5 Translation risk This exists due to the fact that the Group has operations whose functional currency is not the Euro, the Group’s presentational 848.8 707.3 141.5 530.2 318.6 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 Total At fixed At floating 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 interest rate interest rate common with many other international groups, the Group does not currently seek to externally hedge its translation exposure. €m €m €m Sensitivity analysis for primary currency risk EUR 691.3 691.3 - A 10% volatility of the EUR against GBP and USD in respect of transaction risk in the reporting entities functional currency would GBP 105.1 - 105.1 impact reported after tax profit by €4.9m (2018: €14.5m) and equity by €4.9m (2018: €14.3m). USD 48.2 11.8 36.4 US Dollar Loan Notes Other 4.2 4.2 - 848.8 707.3 141.5 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 The weighted average maturity of debt is 4.5 years as at 31 December 2019 (2018: 5.0 years). 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 December2019.
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. 132 — 133 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 At 31 December, the exposure to credit risk for trade receivables by geographic region was as follows:
As at 31 December 2018 Weighted average Total At fixed At floating Under 5 Over 2019 2018 effective interest rate interest rate interest rate years 5 years €m €m €m €m €m €m €m Rest of Europe 322.9 340.8 Bank loans 0.9% 180.1 180.1 - 179.5 0.6 ROI & UK 236.9 244.8 Loan notes 2.4% 837.3 837.3 - 325.8 511.5 Americas 149.8 152.7 Others 60.7 53.2 1,017.4 1,017.4 - 505.3 512.1 770.3 791.5
Total At fixed interest At floating At 31 December, the exposure to credit risk for trade receivables by customer type was as follows: €m rate interest rate €m €m 2019 2018 €m €m EUR 838.8 838.8 - USD 174.8 174.8 Insulated Panels customers 493.6 496.4 Other 3.8 3.8 - Insulation Boards customers 151.8 153.2 1,017.4 1,017.4 - Other 124.9 141.9 770.3 791.5 GroupKingspan plc — &Annual Report Financial Statements 2019 After the impact of hedging transactions The Group uses an allowance matrix to measure Expected Credit Loss (ECL) of trade receivables from customers. The ECL simplified As at 31 December 2018 Weighted average Total At fixed At floating Under 5 Over approach has been adopted. effective interest rate interest rate interest rate years 5 years Loss rates are calculated using a roll rate method based on the probability of a receivable progressing through successive chains of €m €m €m €m €m 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. Bank loans 0.9% 180.1 180.1 - 179.5 0.6 Loan notes 2.1% 835.9 698.7 137.2 324.4 511.5 The following table provides the information about the exposure to credit risk and ECL’s for trade receivables as at 31 December 2019.
1,016.0 878.8 137.2 503.9 512.1 Weighted Gross Loss average loss carrying allowance rate amount Total At fixed At floating % €m €m interest rate interest rate €m €m €m Current (not past due) 1% 512.4 5.7 1-30 days past due 2% 146.4 3.4 EUR 863.3 863.3 - 31-60 days past due 6% 41.0 2.6 GBP 102.0 - 102.0 61-90 days past due 16% 12.2 1.9 USD 46.9 11.7 35.2 More than 90 days past due 69% 58.3 40.4 Other 3.8 3.8 - 770.3 54.0 1,016.0 878.8 137.2
The following table provides the information about the exposure to credit risk and ECL’s for trade receivables as at 31 December 2018. 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). Weighted Gross Loss Credit risk average loss carrying allowance Credit risk encompasses the risk of financial loss to the Group of counterparty default in relation to any of its financial assets. The rate amount Group’s maximum exposure to credit risk is represented by the carrying value of each financial asset: % €m €m
2019 2018 Current (not past due) 1% 538.7 6.1 €m €m 1-30 days past due 2% 148.2 3.3 31-60 days past due 7% 39.0 2.8 Cash & cash equivalents 190.9 294.5 61-90 days past due 15% 13.0 2.0 Trade receivables 770.3 791.5 More than 90 days past due 80% 52.6 42.2 Derivative financial assets 27.3 27.6 791.5 56.4 Financial asset 8.2 8.2 Loss rates are based on actual credit loss experience over an appropriate diverse sample of trading periods. Trade receivables are Trade receivables arise from a wide and varied customer base spread across various activities, end users and geographies, and as written off when there is no reasonable expectation of recovery. 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. — 135134 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 carrying amounts of financial liabilities presented in the Statement of Financial Position relate to the following measurement categories as defined in IFRS 9: The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Financial Financial Financial Derivatives Total 2019 2018 liabilities liabilities liabilities designated €m €m in fair value measured measured at as hedging hedge at fair value amortised cost instruments Balance at 1 January 56.4 51.1 €m €m €m €m €m Arising on acquisition 1.1 10.8 Written off during the year (7.3) (9.5) 2019 Net remeasurement of loss allowance 2.9 4.3 Current: Effect of movement in exchange rates 0.9 (0.3) Borrowings - - 3.1 - 3.1 Leases liabilities - - 25.6 - 25.6 At 31 December 54.0 56.4 Trade payables - - 404.9 - 404.9 Accruals - - 316.3 - 316.3 There are no material trade receivables written off during 2019 (2018: €nil) which are still subject to enforcement activity. Derivative financial instruments - - - 0.1 0.1 The decrease in the expected credit loss allowance during 2019 reflects the reduction in the gross carrying amount of trade receivables. Deferred consideration - - - - - Deferred contingent consideration - - - - - Cash & cash equivalents - - 749.9 0.1 750.0
On the Group’s cash and cash equivalents and derivatives, counterparty risk is managed by dealing with banks that have a minimum GroupKingspan plc — &Annual Report Financial Statements 2019 credit rating and by spreading business across a portfolio of 9 relationship banks. Non current: Borrowings 36.3 - 812.0 - 848.3 Financial instruments by category Lease liabilities - - 96.7 - 96.7 The carrying amount of financial assets presented in the Statement of Financial Position relate to the following measurement Deferred contingent consideration - 186.5 - - 186.5 categories as defined in IAS 39: 36.3 186.5 908.7 - 1,131.5
2019 Financial Loans and Derivatives Total 2018 asset receivables designated Current: as hedging Borrowings - - 53.2 - 53.2 instruments Lease liabilities - - - - - €m €m €m €m Trade payables - - 397.5 - 397.5 Accruals - - 341.1 - 341.1 Current: Deferred consideration - 30.0 - - 30.0 Trade receivables - 716.3 - 716.3 Deferred contingent consideration - 29.5 - - 29.5 Other receivables - 45.1 - 45.1 - 59.5 791.8 - 851.3 Cash and cash equivalents - 190.9 - 190.9 Derivative financial instruments - - - - Non current: - 952.3 - 952.3 Borrowings 35.2 - 931.8 - 967.0 Lease liabilities - - - - - Non Current: Deferred contingent consideration - 136.6 - - 136.6 Derivative financial instruments - - 27.3 27.3 35.2 136.6 931.8 - 1,103.6 Financial asset 8.2 - - 8.2 8.2 - 27.3 35.5 Fair value hierarchy Financial assets and liabilities recognised at fair value are analysed between those based on quoted prices in active markets for 2018 Financial Loans and Derivatives Total identical assets or liabilities (Level 1), those involving inputs other than quoted prices that are observable for the assets or liabilities, asset receivables designated either directly or indirectly (Level 2); and those involving inputs for the assets or liabilities that are not based on observable market as hedging data (Level 3) as set out in note 18. instruments €m €m €m €m 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). Current: All derivatives entered into by the Group are included in Level 2 and consist of foreign currency forward contracts, interest rate swaps Trade receivables - 735.1 - 735.1 and cross currency interest rate swaps. Other receivables - 32.1 - 32.1 Cash and cash equivalents - 294.5 - 294.5 As at 31 December 2019 As at 31 December 2018 Derivative financial instruments - - 0.2 0.2 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 - 1,061.7 0.2 1,061.9 €m €m €m €m €m €m
Non Current: Financial Assets Derivative financial instruments - - 27.4 27.4 Interest rate swaps - 27.3 - - 27.4 - Financial asset 8.2 - - 8.2 Foreign exchange contracts for hedging - - - - 0.2 -
8.2 - 27.4 35.6 136 Financial Liabilities It is considered that the carrying amounts of the above financial assets approximate their fair values. Deferred contingent consideration - - 11.3 - - 38.9
Deferred consideration - - - 30.0 - - — Put option - - 175.2 - - 127.2
Foreign exchange contracts for hedging - 0.1 - - - - 137 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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: 2019 2018 €m €m Balance Settlement Fair value Arising on Translation Balance 01 Jan movement acquisition adjustment 31 Dec 2019 2019 Guarantees and warranties €m €m €m €m €m €m At 1 January 104.3 101.0 Arising on acquisitions (Note 22) 1.8 9.4 Provided during year 54.4 38.2 Deferred contingent consideration 38.9 (29.7) (0.5) 2.0 0.6 11.3 Claims paid (29.5) (27.4) Put option liabilities 127.2 - 22.7 26.7 (1.4) 175.2 Provisions released (23.3) (16.7) 166.1 (29.7) 22.2 28.7 (0.8) 186.5 Effect of movement in exchange rates 2.0 (0.2) At 31 December 109.7 104.3 The principal movements in Level 3 liabilities in 2018 are set out in the table below: Current liability 58.0 47.5 Balance Settlement Fair value Arising on Translation Balance Non-current liability 51.7 56.8 1 Jan movement acquisition adjustment 31 Dec 109.7 104.3 2018 2018 €m €m €m €m €m €m 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 Deferred contingent consideration 43.0 (3.1) 1.1 1.4 (3.5) 38.9 carried in respect of the expected costs of settling warranty and guarantee claims which arise. Both the number of claims and Put option liabilities 74.5 - 35.4 24.5 (7.2) 127.2 GroupKingspan plc — &Annual Report Financial Statements 2019 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. 117.5 (3.1) 36.5 25.9 (10.7) 166.1 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. 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 For the non-current element of the provision, the Group anticipates that these will be utilised within three years of the reporting date. assets and liabilities, no reclassifications and no transfers between levels of the fair value hierarchy used in measuring the fair value of Discounting of the non-current element has not been applied because the discount would be immaterial. the financial instruments. The Group is not engaged in any material litigation. 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. 21 DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets and liabilities arising from temporary differences and unused tax losses after offset are as follows: As at 31 December 2019 As at 31 December 2018 Carrying Fair Carrying Fair 2019 2018 amount Value amount Value €m €m €m €m Level €m €m Level Deferred tax assets 14.1 15.6 Private placement loan notes 840.9 902.3 2 835.9 889.0 2 Deferred tax liabilities (31.9) (40.8)
Capital Management Policies and Procedures Net Position (17.8) (25.2) The Group employs a combination of debt and equity to fund its operations. As at 31 December the total capital employed in the Deferred tax arises from differences in the carrying value of items such as property, plant and equipment, intangibles, pension Group was as follows: obligations, and other temporary differences in the financial statements and the tax base established by the tax authorities. 2019 2018 The movement in the net deferred tax position for 2019 is as follows: €m €m Balance Recognised Recognised Recognised Translation Arising on Balance Net Debt 633.2 728.3 1 Jan in profit in equity in other adjustment acquisitions 31 Dec Equity 2,120.4 1,788.9 2019 or loss comprehensive 2019 income Total Capital Employed 2,753.6 2,517.2 €m €m €m €m €m €m €m
The Board’s objective when managing capital is to maintain a strong capital base so as to maintain the confidence of investors, Property, plant and creditors and the market. The Board monitors the return on capital (defined as total shareholders’ equity plus net debt), and equipment (45.8) 5.0 - - (0.6) - (41.4) targets a return in excess of 20% together with a dividend level that is compatible with industry norms, but which also reflects any Intangibles (29.4) 3.0 - - (0.2) (0.2) (26.8) exceptional market conditions. Other temporary differences 40.8 (0.2) 1.7 - 0.1 0.1 42.5 Pension obligations 0.8 0.3 - - (0.1) (0.1) 0.9 The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and Unused tax losses 8.4 (1.7) - - 0.3 - 7.0 the advantages and security afforded by a sound capital position. The Group actively manages foreign currency and interest rate (25.2) 6.4 1.7 - (0.5) (0.2) (17.8) 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. 138 There were no changes to the Group’s approach to capital management during the year. — 139 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) 22 BUSINESS COMBINATIONS (continued) The movement in the net deferred tax position for 2018 is as follows: 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 Balance Recognised Recognised Recognised Translation Arising on Balance existing business. 1 Jan in profit in equity in other adjustment acquisitions 31 Dec In the post-acquisition period to 31 December 2019, the businesses acquired during the current year contributed revenue of €38.7m 2018 or loss comprehensive 2018 and trading profit of €2.0m to the Group’s results. income €m €m €m €m €m €m €m 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 Property, plant and €509.5m respectively. equipment (40.6) (4.2) - - - (1.0) (45.8) The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to €40.6m. The fair Intangibles (24.9) 6.1 - - (0.1) (10.5) (29.4) value of these receivables is €39.5m, all of which is recoverable, and is inclusive of an aggregate impairment provision of €1.1m. Other temporary differences 35.8 (5.9) 0.9 - 0.5 9.5 40.8 Pension obligations 0.9 - - (0.2) 0.1 - 0.8 There is €2.7m of goodwill (2018: €nil) which is expected to be deductible for tax purposes. Unused tax losses 6.6 1.8 - - - - 8.4 The Group incurred acquisition related costs of €2.4m (2018: €3.3m) relating to external legal fees and due diligence costs. These (22.2) (2.2) 0.9 (0.2) 0.5 (2.0) (25.2) 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 22 BUSINESS COMBINATIONS 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. 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 Prior year acquisitions completed during the year were as follows: In the prior year, the Group acquired 100% of the share capital of Synthesia Group (“Synthesia”), 100% of the share capital of Balex GroupKingspan plc — &Annual Report Financial Statements 2019 In November 2019, the Group acquired 85% of the share capital of Group Bacacier SAS a French integrated profiling and insulated Metal sp. z.o.o. (“Balex”), 100% of the share capital of Vestfold Plastindustri AS and Vestfold Plastindustri Eiendom AS, 51% of the panel distributor. The total consideration, including debt acquired amounted to €122.0m, representing the maximum amount of share capital of Jindal Mectec Private Limited, the assets of H2Enviro, an Australian water tanks business and two smaller bolt-on identifiable consideration, comprising of €120.0m paid in cash on completion and €2.0m in deferred contingent consideration. European businesses. Put options are also in place over the remaining 15% of the business, the details of which are set out in note 18. The fair values as recognised at 31 December 2018 of the acquired assets and liabilities at acquisition are set out below: The Group also made a number of smaller acquisitions during the year for a combined cash consideration of €22.2m: Synthesia Balex Other Total > the purchase of 100% of the share capital of WeGo Floortec GmbH, a German manufacturer of access floors; €m €m €m €m > 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. Non-current assets The table below reflects the fair value of the identifiable net assets acquired in respect of the acquisitions completed during the year. Intangible assets 31.5 7.9 3.9 43.3 Any amendments to fair values will be made within the twelve month period from the date of acquisition, as permitted by IFRS 3, Property, plant and equipment 42.8 42.3 8.6 93.7 Business Combinations. Deferred tax asset 3.3 0.7 2.8 6.8
Bacacier Other* Total Current assets €m €m €m Inventories 49.1 30.0 4.8 83.9 Trade and other receivables 70.4 18.1 4.2 92.7 Non-current assets Intangible assets 1.9 0.8 2.7 Current liabilities Property, plant and equipment (including Right of Use assets) 25.2 6.6 31.8 Trade and other payables (59.6) (23.4) (28.5) (111.5) Deferred tax asset - - - Provisions for liabilities (5.6) (0.9) (2.9) (9.4)
Current assets Non-current liabilities Inventories 29.2 2.1 31.3 Retirement benefit obligation - - - - Trade and other receivables 33.7 5.8 39.5 Deferred tax liabilities (7.9) (1.8) 0.9 (8.8) 124.0 72.9 (6.2) 190.7 Current liabilities Trade and other payables (36.6) (6.3) (42.9) Total identifiable assets Provisions for liabilities (0.3) (1.5) (1.8) Non-controlling interest arising on acquisition (Note 28) - - 4.9 4.9 Non-current liabilities Goodwill 119.4 124.7 52.7 296.8 Trade and other payables (3.6) (1.4) (5.0) Total consideration 243.4 197.6 51.4 492.4 Deferred tax liabilities - (0.2) (0.2) 49.5 5.9 55.4 Satisfied by: Cash (net of cash acquired) 213.4 197.6 50.0 461.0 Total identifiable assets Deferred contingent consideration 30.0 - 1.4 31.4 243.4 197.6 51.4 492.4 Non-controlling interest arising on acquisition (Note 28) (3.7) - (3.7) Goodwill 76.2 16.3 92.5 In the post-acquisition period to 31 December 2018, the acquired businesses contributed revenue of €416.3m and trading profit of Total consideration 122.0 22.2 144.2 €35.0m to the Group’s results. 140 Satisfied by: The full year revenue and trading profit had the acquisitions taken place at the start of the year, would have been €4,522.7m Cash (net of cash acquired) 120.0 22.2 142.2 and €449.5m. Deferred contingent consideration 2.0 - 2.0 The Group incurred acquisition related costs of €3.3m (2018: €3.6m) relating to external legal fees and due diligence costs. These — 122.0 22.2 144.2 costs have been included in operating costs in the Income Statement. 141 *Included in Other are certain immaterial remeasurements of prior year accounting estimates. BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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 In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual 2019 2018 Income Statement to the Annual General Meeting and from filing it with the Registrar of Companies. The Company’s profit for the €m €m financial year was €28.6m (2018: €9.7m).
Authorised 250,000,000 Ordinary shares of €0.13 each 27 DIVIDENDS (2018: 250,000,000 Ordinary shares of €0.13 each) 32.5 32.5 2019 2018 €m Issued and fully paid €m Ordinary shares of €0.13 each Opening balance – 182,171,120 (2018: 181,342,315) shares 23.7 23.6 Equity dividends on ordinary shares: Shares allotted – 614,102 (2018: 828,805) shares 0.1 0.1 2019 Interim dividend 13.0 cent (2018: 12.0 cent) per share 23.6 21.7 2018 Final dividend 30.0 cent (2017: 26.0 cent) per share 54.0 46.6 Closing balance – 182,785,222 (2018: 182,171,120) shares 23.8 23.7 77.6 68.3 Proposed for approval at AGM There were no adjustments to the authorised share capital during the year (2018: nil). Final dividend of 33.5 cent (2018: 30.0 cent) per share 60.6 54.1 Details of share options exercised are set out in Note 3 to the financial statements. This proposed dividend for 2019 is subject to approval by the shareholders at the Annual General Meeting and has not been included 24 SHARE PREMIUM 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 GroupKingspan plc — &Annual Report Financial Statements 2019 2019 2018 the Register of Members at close of business on 27 March 2020. €m €m 28 NON-CONTROLLING INTEREST At 1 January 95.6 95.6 2019 2018 At 31 December 95.6 95.6 €m €m
At 1 January 38.6 39.9 25 TREASURY SHARES Profit for the year attributable to non-controlling interest 8.4 4.9 Consideration paid Arising on acquisition (Note 22) 3.7 (4.9) Dividends paid to minorities (0.4) (0.1) 2019 2018 Share of foreign operations’ translation movement (0.2) (1.2)
No. of Consideration Total No. of Consideration Total At 31 December 50.1 38.6 shares paid shares paid € €m € €m 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. At 1 January 1,969,143 6.40 12.7 2,019,750 6.89 14.0 Repurchase of shares 15,718 40.50 0.6 - -- Further details are provided in Note 22. Shares issued (77,035) (18.63) (1.5) (50,607) 25.10 (1.3) 29 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT At 31 December 1,907,826 6.21 11.8 1,969,143 6.40 12.7 2019 2018 Nominal value €m €m
2019 2018 Movement in cash and bank overdrafts (117.1) 120.1 No. of Nominal Total No. of Nominal Total Drawdown of loans (7.8) (445.0) shares value shares value Repayment of loans and borrowings 181.6 92.7 € € € € Decrease /(increase) in deferred consideration 30.0 (30.0) Change in net debt resulting from cash flows 86.7 (262.2) Translation movement - relating to US dollar loan (5.0) (5.5) At 1 January 1,969,143 0.13 255,988 2,019,750 0.13 262,567 Translation movement – other 13.5 (1.9) Repurchase of shares 15,718 0.13 2,043 - -- Derivative financial instruments movement (0.1) 5.2 Shares issued (77,035) 0.13 (10,015) (50,607) 0.13 (6,579) Net movement 95.1 (264.4) At 31 December 1,907,826 0.13 248,016 1,969,143 0.13 255,988 Net debt at start of the year (728.3) (463.9)
During the year, the Company issued 77,035 treasury shares in satisfaction of obligations falling under share schemes. Net debt at end of the year (633.2) (728.3) The Company holds 1.0% (2018: 1.1%) of the issued ordinary share capital as treasury shares. Lease liabilities of €122.3m are excluded from net debt. 142 — 143 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) A reconciliation of liabilities arising from financing activities is set out below. 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. Balance Repayments Deferred Drawdowns / Non cash Balance In general, actuarial valuations are not available for public inspection; however, the results of valuations are advised to members of 1 Jan Consideration Receipts movements 31 Dec the various schemes. 2019 2019 The extent of the Group’s obligation under these schemes is sensitive to judgemental actuarial assumptions, of which the principal €m €m €m €m €m €m ones are set out below. It is not considered that any reasonable sensitivity analysis on these assumptions would materially alter the scheme obligations. Bank loans and borrowings 184.3 (181.6) - 7.8 - 10.5 Loan notes 835.9 - - - 5.0 840.9 2019 2018 Derivatives (27.4) - - - 0.1 (27.3) Deferred Consideration 30.0 - (30.0) - - - Life expectancies Life expectancy for someone aged 65 - Males 21.6 21.9 1,022.8 (181.6) (30.0) 7.8 5.1 824.1 Life expectancy for someone aged 65 - Females 23.3 23.8 Life expectancy at age 65 for someone aged 45 - Males 22.9 23.3 A reconciliation of liabilities arising from financing activities in 2018 is set out below. Life expectancy at age 65 for someone aged 45 - Females 24.8 25.4
Balance Repayments Deferred Drawdowns / Non cash Balance Rate of increase in salaries 0% - 2.75% 0% - 2.75% 1 Jan Consideration Receipts movements 31 Dec Rate of increase of pensions in payment 0% -1.9% 0% - 2.1% 2018 2018 Rate of increase for deferred pensioners 1.9% 2% - 2.2% €m €m €m €m €m €m Discount rate 0.7% - 2.0% 1.2% - 2.8% GroupKingspan plc — &Annual Report Financial Statements 2019 Inflation rate 1.5% - 2.65% 1.5% - 3.2% Bank loans and borrowings 7.3 (92.7) - 270.0 (0.3) 184.3 Loan notes 655.4 - - 175.0 5.5 835.9 Derivatives (22.2) - - - (5.2) (27.4) Movements in net liability recognised in the Statement of Financial Position Deferred Consideration - - 30.0 - - 30.0 2019 2018 €m €m 640.5 (92.7) 30.0 445.0 - 1,022.8 Net liability in schemes at 1 January (13.1) (13.6) 30 GUARANTEES AND OTHER FINANCIAL COMMITMENTS Acquired (2.7) - Employer contributions 1.2 0.8 (i) Guarantees and contingencies Recognised in income statement (0.7) (1.1) Recognised in statement of comprehensive income (0.2) 0.9 The Group’s principal debt facilities are secured by means of cross guarantees provided by Kingspan Group plc. These include drawn Foreign exchange movement 0.4 (0.1) private placement notes of US$200m and €662.5m and undrawn banking facilities of €751m.
(ii) Future capital expenditure Net liability in schemes at 31 December (15.1) (13.1) Capital expenditure in subsidiary entities, approved by the directors but not provided in the financial statements, is as follows: Defined benefit pension income/expense recognised in the Income Statement 2019 2018 €m €m 2019 2018 €m €m Contracted for 24.7 49.7 Not contracted for 48.2 20.9 Current service cost (0.4) (1.3) Settlements of scheme obligations (0.3) (0.1) 72.9 70.6 Transfer - 0.3
Total, included in operating costs (0.7) (1.1) 31 PENSION OBLIGATIONS
The Group operates defined contribution schemes in each of its main operating locations. The Group also has a number of defined Movement on scheme obligations (2.0) (1.8) benefit schemes in the UK and mainland Europe. Interest on scheme assets 2.0 1.8 Defined contribution schemes Net interest expense, included in finance expense (Note 4) - - 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 145144 the year (2018: €0.8m). BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Independent Auditor’s Report Financial Statements Notes to the Financial Statements 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) 31 PENSION OBLIGATIONS (continued)
Analysis of amount included in other comprehensive income 2019 2018 €m €m 2019 2018 €m €m Changes in present value of scheme assets during year At 1 January 71.1 76.9 Actual return less interest on scheme assets 6.1 (4.2) Acquired through business combination - - Experience gain arising on scheme liabilities 0.1 - Interest on scheme assets 2.0 1.8 Actuarial gain arising from changes in demographic assumptions 1.6 0.4 Employer contributions 0.1 0.1 Actuarial (loss)/gain arising from changes in financial assumptions (8.0) 4.7 Benefits paid (2.1) (1.7) Settlement (0.2) (0.2) (Loss)/gain recognised in other comprehensive income (0.2) 0.9 Actual return less interest 6.1 (4.2) Effect of movement in exchange rates 4.0 (0.8) The cumulative actuarial loss recognised in other comprehensive income to date is €18.5m (2018: €18.3m). Transfer - (0.8) In 2019, the actual return on plan assets was a gain of €8.1m (2018: loss of €2.4m). At 31 December 81.0 71.1 Asset Classes and Expected Rate of Return The assets in the scheme at each year end were as follows: 32 RELATED PARTY TRANSACTIONS 2019 2018
The principal related party relationships requiring disclosure under IAS 24 Related Party Disclosures relate to (i) transactions between GroupKingspan plc — &Annual Report Financial Statements 2019 group companies, (ii) compensation of key management personnel and (iii) goods and services purchased from directors. Asset Classes as % of Total Scheme Assets (i) Transactions between subsidiaries and associates are carried out on an arm’s length basis. Equities 41.2% 53.0% Bonds (Corporates) 0.4% 0.3% The Company received dividends of €20.0m from subsidiaries (2018: €nil), and there was a net decrease in the intercompany Cash 0.4% 0.2% balance of €45.3m (2018: €55.2m decrease). Liability Driven Investment (LDI) 58.0% 46.5% 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. 100% 100% (ii) For the purposes of the disclosure requirements of IAS 24 Related Party Disclosures, the term “key management personnel” The net pension liability is analysed as follows: (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 2019 2018 Remuneration Committee, the directors, other than the non-executive directors, serve as executive officers of the Group. €m €m 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 Equities 33.4 37.5 to other key management personnel (2018: €0.92m). Bonds (Corporates) 0.3 0.2 Cash 0.4 0.2 (iii) The Group purchased legal services in the sum of €125,947 (2018: €114,533) from McCann FitzGerald Solicitors, a firm in which Property 7.1 - Mr John Cronin is a partner. Liability Driven Investment (LDI) 39.8 33.2 Fair market value of plan assets 81.0 71.1 33 POST BALANCE SHEET EVENTS Present value of obligation (96.1) (84.2) There have been no material events subsequent to 31 December 2019 which would require adjustment to or disclosure in this report. Deficit (15.1) (13.1) 34 APPROVAL OF FINANCIAL STATEMENTS Analysed between: The financial statements were approved by the directors on 21 February2020. Funded schemes’ surplus 9.2 7.4 Unfunded obligations (24.3) (20.5)
(15.1) (13.1)
Related deferred tax (asset) (0.9) (0.8)
2019 2018 €m €m
Changes in present value of defined benefit obligations At 1 January 84.2 90.5 Acquired through business combination 2.7 - Current service cost 0.4 1.3 Interest cost 2.0 1.8
Benefits paid (3.2) (2.4) 146 Settlement 0.1 (0.1) Actuarial losses/(gains) 6.3 (5.1)
Effect of movement in exchange rates 3.6 (0.7) — Transfer - (1.1) 147 At 31 December 96.1 84.2 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Alternative Performance Measures Shareholder Information Principal Subsidiary Undertakings Group Five Year Summary Financial Statements — 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. OTHER 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. INFORMATION Dilution is attributable to the weighted average number of share options outstanding at the end of the reporting period. 2019 2018 Financial Statements Reference €m €m
Profit attributable to ordinary shareholders Note 8 369.4 330.9 Intangible amortisation Note 2 21.9 22.2 Intangible amortisation tax impact Note 21 (3.0) (5.1) 388.3 348.0
ALTERNATIVE PERFORMANCE MEASURES Weighted average number of shares (‘000) Note 8 180,586 179,840 The Group uses a number of metrics, which are non-IFRS measures, to monitor the performance of its operations. Adjusted earnings per share 215.0 cent 193.5 cent 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 Weighted average number of shares for dilutive the business on an ongoing basis. calculation (‘000) Note 8 182,075 181,536 The principal APMs used by the Group are defined as follows: Adjusted diluted earnings per share 213.2 cent 191.7 cent Trading profit Kingspan GroupKingspan plc — &Annual Report Financial Statements 2019 This comprises the operating profit as reported in the Income Statement before intangible asset amortisation and non trading items. Free cash flow This equates to the Earnings Before Interest, Tax and Amortisation (“EBITA”) of the Group. Trading profit is used by management as it Free cash flow is the cash generated from operations after net capital expenditure, interest paid, income taxes paid and lease excludes items which may hinder year on year comparisons. payments and reflects the amount of internally generated capital available for re-investment in the business or for distribution to shareholders. 2019 2018 Financial Statements Reference €m €m 2019 2018 Financial Statements Reference €m €m Trading profit Note 2 497.1 445.2
Trading margin Net cash flow from operating activities Consolidated Statement of Cash Flows 520.4 438.3 Measures the trading profit as a percentage of revenue. Additions to property, plant, equipment and intangibles Consolidated Statement of Cash Flows (161.0) (144.2) 2019 2018 Financial Statements Reference €m €m Proceeds from disposals of property, plant and equipment Consolidated Statement of Cash Flows 6.7 12.9 Trading Profit Note 2 497.1 445.2 Interest received Consolidated Statement of Cash Flows 2.8 1.4 Total Group Revenue Note 2 4,659.1 4,372.5 Lease payments Consolidated Statement of Cash Flows (31.8) - Trading margin 10.7% 10.2% Free cash flow 337.1 308.4 Net interest The Group defines net interest as the net total of finance expense and finance income as presented in the Income Statement. The Return on capital employed (ROCE) impact of IFRS 16 is excluded from the calculation which is consistent with the terms and conditions of the covenants as set out in ROCE is the operating profit before interest and tax expressed as a percentage of the net assets employed. The net assets employed the Group’s external borrowing arrangements. reflect the net assets, excluding net debt, at the end of each reporting period. 2019 2018 2019 2018 Financial Statements Reference €m €m Financial Statements Reference €m €m
Finance Expense Note 4 23.7 19.5 Net Assets Consolidated Statement of Financial Position 2,120.4 1,788.9 Finance Income Note 4 (2.9) (1.4) Net Debt Note 17 633.2 728.3 Less lease interest (IFRS 16) Note 4 (3.8) - 2,753.6 2,517.2 Net Interest 17.0 18.1
Operating profit before interest and tax Consolidated Income Statement 475.2 423.0
Return on capital employed 17.3% 16.8% 148 — 149 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Alternative Performance Measures Shareholder Information Principal Subsidiary Undertakings Group Five Year Summary Financial Statements 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 SHAREHOLDER 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. INFORMATION 2019 2018 Financial Statements Reference €m €m
Net Debt Note 17 633.2 728.3
EBITDA The Group defines EBITDA as earnings before finance costs, income taxes, depreciation, amortisation and the impact of IFRS 16. The Annual General Meeting Company Information The Annual General Meeting of Kingspan Group plc was incorporated on 14 August 1979. It is an Irish domiciled company 2019 2018 the Company will be held at the and the registered office is Kingspan Group plc, Dublin Road, Kingscourt, Co. Cavan, A82 Financial Statements Reference €m €m InterContinental Hotel, Ballsbridge, XY31, Ireland. The registered company number of Kingspan Group plc is 70576. Dublin 4 on Friday 1 May 2020 at Trading profit Condensed Consolidated Income Statement 497.1 445.2 10.00 a.m. Share Registrar Depreciation Consolidated Statement of Cash Flows 114.5 76.0 Administrative enquiries about the holding of Kingspan Group plc shares should be Notice of the 2020 AGM will be Lease liability payments Consolidated Statement of Cash Flows (31.8) - directed to: made available to view online at www.kingspan.com/agm2020 EBITDA 579.8 521.2 The Company Registrar: You may submit your votes electronically Computershare Investor Services (Ireland) Limited, GroupKingspan plc — &Annual Report Financial Statements 2019 by accessing Computershare’s website: 3100 Lake Drive, Net debt: EBITDA http://www.eproxyappointment.com/ Citywest Business Campus, 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 Dublin 24, terms and conditions of the covenants as set out in the Group’s external borrowing arrangements. You will be asked for your Shareholder D24 AK82. Reference Number (SRN), Control Number, and PIN, all of which will have 2019 2018 Financial Calendar been sent to shareholders in advance of Financial Statements Reference €m €m the meeting. To be valid, your proxy vote Preliminary results announced: 21 February 2020 must be received by Computershare no Annual General Meeting: 1 May 2020 Net Debt Note 17 633.2 728.3 later than 10.00 am on Wednesday 29 Payment date for 2019 final dividend: 7 May 2020 EBITDA 579.8 521.2 April 2020 (48 hours before the meeting). Ex dividend date: 26 March 2020 Record date: 27 March 2020 Net Debt: EBITDA times 1.09 1.40 Amalgamation of Half-yearly financial report: 21 August 2020 Shareholding Accounts Trading update: 16 November 2020 Working capital Shareholders who receive duplicate sets Working capital represents the net total of inventories, trade and other receivables and trade and other payables, net of of Company mailings due to multiple Bankers transactional foreign currency derivative excluded from net debt. accounts in their name should write to the Company’s Registrar to have their Bank of America Merrill Lynch HSBC Bank plc accounts amalgamated. ING Bank NV BNP Paribas 2019 2018 Commerzbank AG Danske Bank AS Financial Statements Reference €m €m Warning to Shareholders KBC Bank NV Ulster Bank Ireland DAC
Many companies have become aware Bank of Ireland Trade and other receivables Note 14 794.2 798.6 that their shareholders have received Inventories Note 13 557.6 524.9 unsolicited phone calls or correspondence Trade and other payables Note 15 (768.9) (779.8) Solicitors concerning investment matters. These are Foreign currency derivatives excluded from typically from overseas based “brokers” McCann FitzGerald, Allen & Overy LLP, net debt Note 19 (0.1) 0.2 who target shareholders offering to Riverside One, One Bishops Square,
sell them what often turn out to be Sir John Rogerson’s Quay, London, Working capital 582.8 543.9 worthless or high-risk shares in US or UK Dublin 2, E1 6AD, investments. They can be very persistent Ireland. England. Working capital ratio and extremely persuasive. Shareholders Measures working capital as a percentage of October to December turnover annualised. The annulations on turnover reflects the are therefore advised to be very wary Stockbrokers current profile of the Group rather than a partial reflection of any acquisitions completed during the period. of any unsolicited advice, offers to buy shares at a discount or offers of free Goodbody, Bank of America Merrill Lynch, Ballsbridge Park, 2 King Edward St, 2019 2018 company reports. Ballsbridge, Farringdon, Financial Statements Reference €m €m Please note that it is very unlikely Dublin 4, London, that either the Company or the Ireland. EC1A 1HQ, Working capital 582.8 543.9 Company’s Registrar, Computershare, England. October - December turnover annualised 4,877.0 4,711.6 would make unsolicited telephone calls to shareholders and that any Auditor Working Capital ratio 11.9% 11.5% such calls would relate only to official documentation already circulated to KPMG, 150 shareholders and never in respect of Chartered Accountants & Statutory Auditor, investment “advice”. 1 Stokes Place, St Stephen’s Green, — If you are in any doubt about the veracity Dublin 2,
of an unsolicited phone call, please Ireland. 151 call either the Company Secretary or the Registrar. BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Alternative Performance Measures Shareholder Information Principal Subsidiary Undertakings Group Five Year Summary Financial Statements Information Required By any transfer of a certificated share unless authority that was conferred on them — The European Communities accompanied by the share certificate at the Annual General Meeting held on 3 (Takeover Bids (Directive and such other evidence of title as may May 2019. The directors are also currently 2004/25/EC)) Regulations 2006 reasonably be required. The registration authorised on the issue of new equity for PRINCIPAL The information required by Regulation of transfers of shares may be suspended cash to disapply the strict statutory pre- 21 of the above Regulations as at at such times and for such periods (not emption provisions that would otherwise 31 December 2019 is set out below. exceeding 30 days in each year) as the apply, provided that the disapplication SUBSIDIARY Directors may determine. is limited to the allotment of equity Rights and obligations attaching to securities in connection with (i) any rights Transfer instruments for certificated the Ordinary Shares issue or any open offer to shareholders, or UNDERTAKINGS shares are executed by or on behalf of (ii) the allotment of shares not exceeding The Company has no securities in issue the transferor and, in cases where the in aggregate 5% of the nominal value conferring special rights with regards share is not fully paid, by or on behalf of of the Company’s issued share capital, control of the Company. the transferee. Transfers of uncertificated or (iii) for the purpose of financing (or shares may be effected by means All Ordinary Shares rank pari passu, and refinancing) an acquisition or other capital of a relevant system in the manner the rights attaching to the Ordinary investment of a kind contemplated by provided for in the Companies Act, 1990 Shares (including as to voting and the UK Pre-emption Group not exceeding (Uncertificated Securities) Regulations, transfer) are as set out in the Company’s in aggregate 5% of the nominal value of 1996 (the “CREST Regulations”) and Articles of Association (“Articles”). The the Company’s issued share capital. Both the rules of the relevant system. The Articles of Association also contain the these authorities expire on 1 May 2020 Directors may refuse to register a transfer rules relating to the appointment and unless renewed and resolutions to that List of principal subsidiary and joint venture companies and the percentage shareholding held by Kingspan of uncertificated shares only in such removal of directors, rules relating to the effect are being proposed at the Annual Group plc, either directly or indirectly, pursuant to Section 314 of the Companies Act 2014: circumstances as may be permitted or amending the Articles of Association, General Meeting to be held on 1 May 2020. the powers of the Company’s directors required by the CREST Regulations. The Company may, subject to the
and in relation to issuing or buying GroupKingspan plc — &Annual Report Financial Statements 2019 Rules concerning the appointment back by the Company of its shares. A Companies Acts and the Articles, and replacement of the directors and copy of the Articles may be found on purchase any of its shares and may either % Shareholding Nature of Business % Shareholding Nature of Business amendment of the Company’s Articles www.kingspan.com or may be obtained cancel or hold in treasury any shares on request to the Company Secretary. Unless otherwise determined by ordinary so purchased, and may re-issue any resolution of the Company, the number such treasury shares on such terms and IRELAND UNITED KINGDOM Holders of Ordinary Shares are entitled of Directors shall not be less than two or conditions as may be determined by the to receive duly declared dividends in cash more than 15. directors. The Company shall not make Aerobord Limited 100 Manufacturing Ecotherm Insulation 100 Sales & Marketing or, when offered, additional Ordinary market purchases of its own shares unless (UK) Limited Subject to that limit, the shareholders Kingscourt Trustee 100 Trustee Company Shares. In the event of any surplus arising such purchases have been authorised by a in general meeting may appoint any Company Limited Euroclad Group Limited 100 Manufacturing on the occasion of the liquidation of the special resolution passed by the members person to be a director either to fill a Kingspan Century Limited 100 Manufacturing Fuel Tank Shop Limited 100 Sales & Marketing Company, shareholders would be entitled of the Company at a general meeting. At vacancy or as an additional director. The to a share in that surplus pro rata to their the Annual General Meeting held on 3 May Kingspan ESB Designated 50 Sales & Marketing Joris Ide Limited 100 Manufacturing directors also have the power to co-opt holdings of Ordinary Shares. 2019, shareholders passed a resolution Activity Company additional persons as directors, but any Kingspan Access 100 Manufacturing giving the Company, or any of its Holders of Ordinary Shares are entitled director so co-opted is under the Articles Kingspan Holdings 100 Management & Floors Limited to receive notice of and to attend, speak subsidiaries, the authority to purchase up required to be submitted to shareholders (Irl) Limited Procurement Kingspan Group Limited 100 Holding Company and vote in person or by proxy, at general to 10% of the Company’s issued Ordinary for re-election at the first annual general Kingspan Holdings (North 100 Holding Company meetings having, on a show of hands, Shares. At the Annual General Meeting to Kingspan Industrial 100 Manufacturing meeting following his or her co-option. America) Limited one vote, and, on a poll, one vote for be held on 1 May 2020, shareholders are Insulation Limited The Articles require that at each annual being asked to renew this authority. each Ordinary Share held. Procedures and Kingspan Holdings 100 Holding Company Kingspan Insulation Limited 100 Manufacturing deadlines for entitlement to exercise, and general meeting of the Company one- (Overseas) Limited third of the directors retire by rotation. Miscellaneous Kingspan Light & 100 Sales & Marketing exercise of, voting rights are specified in Kingspan Holdings Limited 100 Holding Company the notice convening the general meeting However, in accordance with the There are no agreements between Air Limited in question. There are no restrictions on recommendations of the UK Corporate shareholders that are known to Kingspan Insulation Limited 100 Manufacturing Kingspan Limited 100 Manufacturing voting rights except in the circumstances Governance Code, the directors have the Company which may result in Kingspan International 100 Finance Company Kingspan Services 100 Management & where a “Specified Event” (as defined in resolved they will all retire and submit restrictions on the transfer of securities or Finance Unlimited (UK) Limited Procurement the Articles) shall have occurred and the themselves for re-election by the voting rights. Company Directors have served a Restriction Notice shareholders at the Annual General Kingspan Timber 100 Manufacturing Certain of the Group’s banking facilities Kingspan Light & 100 Sales & Marketing on the shareholder. Upon the service Meeting to be held on 1 May 2020. Solutions Limited include provisions that, in the event of a Air Limited of such Restriction Notice, no holder of The Company’s Articles may be amended change of control of the Company, could Kingspan Trustee 100 Trustee Company the shares specified in the notice shall, by special resolution (75% majority of oblige early prepayment of the facilities. Kingspan Limited 100 Manufacturing Company Limited for so long as such notice shall remain votes cast) passed at general meeting. Certain of the Company’s joint venture Kingspan RE Limited 100 Property Company Kingspan Water & 100 Manufacturing in force, be entitled to attend or vote at arrangements also contain provisions Kingspan Securities 100 Finance Company Energy Limited any general meeting, either personally or Powers of directors including powers in that would allow the counterparty to 2016 Designated by proxy. relation to issuing or buying back by the terminate the agreement in the event of KSP Europe Limited 100 Finance Company Activity Company Company of its shares a change of control of the Company. The Holding and transfer of ordinary shares Tanks Direct Limited 100 Sales & Marketing Under its Articles, the business of the Company’s Standard Share Option Scheme Kingspan Securities 100 Finance Company The Ordinary Shares may be held in Company shall be managed by the and Performance Share Plan each contain 2017 Designated either certificated or uncertificated form directors, who exercise all powers change of control provisions which allow Activity Company AUSTRALIA (through CREST). of the Company as are not, by the for the acceleration of the exercise of share Kingspan Securities Limited 100 Finance Company Kingspan Insulated 100 Manufacturing Companies Acts or the Articles, required options/awards in the event of a change of Panels Pty Limited Save as set out below, there is no Kingspan Securities 100 Finance Company requirement to obtain the approval of to be exercised by the Company in control of the Company. general meeting. No. 2 Limited Kingspan Insulation 100 Manufacturing 152 the Company, or of other shareholders, There are no agreements between the Pty Limited Kingspan Tate Limited 100 Sales & Marketing for a transfer of Ordinary Shares. The The directors are currently authorised to Company and its Directors or employees Kingspan Water & 85 Manufacturing Directors may decline to register (a) any issue a number of shares equal to the providing for compensation for loss of KSP Property Limited 100 Property Company Energy Pty Limited — transfer of a partly-paid share to a person authorised but as yet unissued share office or employment (whether through of whom they do not approve, (b) any
capital of the Company on such terms resignation, purported redundancy or Tate Asia-Pacific 100 Sales & Marketing 153 transfer of a share to more than four joint as they may consider to be in the best otherwise) that occurs because of a Pty Limited holders, (c) any transfer of a share on interests of the Company, under an takeover bid. which the Company has a lien, and (d) BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Alternative Performance Measures Shareholder Information Principal Subsidiary Undertakings Group Five Year Summary Financial Statements
% Shareholding Nature of Business % Shareholding Nature of Business % Shareholding Nature of Business % Shareholding Nature of Business
AUSTRIA FINLAND MEXICO SPAIN Kingspan GmbH 100 Sales & Marketing Kingspan Insulation Oy 100 Manufacturing Kingspan Insulated 100 Manufacturing Huurre Iberica S.A. 100 Manufacturing Kingspan Oy 100 Sales & Marketing Panels S.A. DE C.V. Kingspan Insulation S.A. 100 Manufacturing BELGIUM Kingspan Shaped 100 Manufacturing NETHERLANDS Argina Technics NV 100 Manufacturing FRANCE Solutions SL Brakel Aero NV 100 Manufacturing Comptoir du Batiment 100 Manufacturing Hoesch Bouwsystemen B.V. 100 Sales & Marketing Kingspan Suelo 50 Sales & Marketing Technicos S.L. isomasters NV 62.5 Manufacturing et de L'Industrie SAS Kingspan (MEATI) B.V. 85 Holding Company Synthesia Technology 100 Manufacturing Joris Ide NV 100 Manufacturing ECODIS SAS 100 Manufacturing Kingspan B.V. 100 Sales & Marketing Europe SLU Kingspan Access 100 Manufacturing Groupe Bacacier SAS 85 Manufacturing Kingspan Holding 100 Holding Company Teczone Española S.A. 100 Manufacturing Floors Europe NV Isocab France SAS 100 Manufacturing Netherlands B.V. Kingspan Door 100 Manufacturing Joris Ide Auvergne SAS 100 Manufacturing Kingspan Insulation B.V. 100 Manufacturing SWEDEN Components SA Joris Ide Sud Ouest SAS 100 Manufacturing Kingspan Light + Air NL B.V. 100 Manufacturing Kingspan AB 100 Sales & Marketing Kingspan Insulation NV 100 Manufacturing Kingspan S.a.r.l. 100 Sales & Marketing Kingspan Light + Air 100 Manufacturing Production NL B.V. Kingspan Insulation AB 100 Sales & Marketing Kingspan NV 100 Sales & Marketing Profinord S.a.r.l. 100 Manufacturing Epur SA 100 Manufacturing Kingspan Unidek B.V. 100 Manufacturing Societe Bretonne 100 Manufacturing TURKEY
de Profilage SAS GroupKingspan plc — &Annual Report Financial Statements 2019 BRAZIL NEW ZEALAND Kingspan Yapi 85 Manufacturing Elemanlari A.S. Kingspan-Isoeste 51 Manufacturing GERMANY Kingspan Limited 100 Manufacturing Construtivos Essmann Gebäudetechnik 100 Manufacturing Isotérmicos S/A. UKRAINE GmbH NORWAY Balex Metal LLC 100 Sales & Marketing Joris Ide Deutschland 100 Manufacturing Kingspan AS 100 Sales & Marketing CANADA GmbH Vestfold Plastindustri AS 100 Manufacturing UNITED ARAB EMIRATES Kingspan Insulated 100 Manufacturing Kingspan Access 100 Manufacturing Panels Limited Floors GmbH PANAMA Kingspan Insulated Panels 85 Manufacturing Vicwest Inc. 100 Manufacturing Manufacturing LLC Kingspan GmbH 100 Property Company Huurre Panama S.A. 50 Manufacturing Kingspan Insulation LLC 90 Manufacturing Kingspan Insulation 100 Manufacturing Synthesia Technology S.A. 100 Manufacturing CHILE Gmbh & Co. KG Synthesia Technology S.p.A. 100 Sales & Marketing Kingspan Services 100 Sales & Marketing UNITED STATES PERU Deutschland GmbH ASM Modular Systems Inc. 100 Manufacturing Synthesia Technology S.A.C. 100 Sales & Marketing COLOMBIA STG Beikirch GmbH 100 Manufacturing CPI Daylighting Inc. 100 Manufacturing PanelMET S.A.S. 51 Manufacturing Kingspan Holding GmbH 100 Holding Dri-Design Inc. 94.67 Manufacturing POLAND Kingspan Insulated 100 Manufacturing Balex Metal Sp. Z o.o. 100 Manufacturing CROATIA HUNGARY Panels Inc. Essmann Polska Sp. Z o.o. 100 Sales & Marketing Kingspan D.O.O. 100 Sales & Marketing Kingspan Kereskedelmi Kft. 100 Manufacturing Kingspan Insulation LLC 100 Manufacturing Kingspan Environmental 100 Manufacturing Kingspan Light & Air LLC 100 Manufacturing Sp. Z o.o. CZECH REPUBLIC INDIA Morin Corporation 100 Manufacturing Kingspan Sp. Z o.o. 100 Manufacturing Balex Metal S.R.O. 100 Sales & Marketing Kingspan Jindal 51 Manufacturing Pre-insulated Metal 100 Manufacturing Private Limited Technologies Inc. Kingspan A.S. 100 Manufacturing ROMANIA Tate Access Floors Inc. 100 Manufacturing LATVIA Joris Ide S.R.L. 100 Manufacturing DENMARK Balex Metal SIA 100 Manufacturing Kingspan S.R.L. 100 Sales & Marketing Kingspan A/S 100 Sales & Marketing Kingspan SIA 100 Sales & Marketing Pursuant to section 316 of the Companies Act 2014, a full list of Kingspan Insulation ApS 100 Sales & Marketing RUSSIA subsidiaries will be annexed to the Company’s Annual Return to be filed in the Companies Registration Office in Ireland. LITHUANIA Kingspan LLC 100 Manufacturing ESTONIA Balex Metal UAB 100 Sales & Marketing Kingspan Insulation OÜ 100 Sales & Marketing SERBIA Kingspan UAB 100 Sales & Marketing Kingspan D.O.O. 100 Sales & Marketing — 155154 BusinessBusiness & Strategic & Strategic Report Report SustainabilitySustainability Report Report Directors'Directors' Report Report FinancialFinancial Statements Statements OtherOther Information Information
Alternative Performance Measures Shareholder Information Principal Subsidiary Undertakings Group Five Year Summary — 5 YEAR SUMMARY
2019 2018 2017 2016 2015
Results (amounts in €m) Revenue 4,659.1 4,372.5 3,668.1 3,108.5 2,774.3 Trading profit 497.1 445.2 377.5 340.9 255.9 Profit before tax 454.4 404.9 346.5 314.0 232.0 Operating cashflow 627.1 530.3 362.5 377.1 382.5
Equity (amounts in €m) Gross assets 4,288.4 4,029.4 3,235.6 3,004.6 2,549.1 Working capital 582.8 543.9 477.8 382.7 301.8 Total shareholder equity 2,120.4 1,788.9 1,568.0 1,471.5 1,293.8 Net debt 633.2 728.3 463.9 427.9 328.0
Ratios Net debt as % of total shareholders’ equity 29.9% 40.7% 29.6% 29.1% 25.4% Current assets / current liabilities 1.66 1.59 1.65 1.56 1.43 Net debt / EBITDA 1.09 1.40 1.05 1.06 1.04
Per Ordinary Share (amounts in €cent) Earnings 204.6 184.0 159.0 143.8 106.7 Operating cashflows 347.3 294.9 202.1 212.3 217.1 Net assets 1,174.2 994.7 876.7 828.4 734.2 Dividends 46.5 42.0 37.0 33.5 25.0
Average number of employees 14,529 13,469 11,133 10,396 8,595 37.0 33.5 25.0 42.0 46.5 159.0 377.5 143.8 497.1 106.7 184.0 255.9 445.2 340.9 204.6 3,108.5 3,668.1 2,774.3 4,372.5 4,659.1 2017 2017 2017 2017 2015 2015 2015 2015 2018 2018 2018 2018 2016 2016 2016 2016 2019 2019 2019 2019
Revenue Trading Profit EPS DPS (€m) (€m) (cent) (cent) 156 Business & Strategic Report Sustainability Report Directors' Report Financial Statements Other Information
Dublin Road Kingscourt Co Cavan Ireland A82 XY31
Tel: +353 42 969 8000 Email: [email protected] www.kingspan.com Design: www.reddog.ie