Kingspan's results likely to outperform market expectations

First half results at building materials specialist, Kingspan, are likely to outperform market expectations, thanks to a strong construction sector, a statement from the company indicated yesterday.

In an upbeat trading statement issued to the markets, Cavan-based Kingspan said: "The rate of organic led growth in all of the group's main products, in all of its targeted geographical markets, is ahead of the same period last year and ahead of expectations.

"This is on the back of construction markets in Britain and Ireland that are performing stronger than had been expected. The other markets in which the group operates are in line with expectations." The British and Irish markets account for 75 per cent of Kingspan's sales.

The statement, signed by Kingspan chairman, Mr Eugene Murtagh, added that the group also had the benefit of additional manufacturing capacity as a result of substantial capital investment across all product sectors. The group is scheduled to publish its results for the first six months of 2004 on September 7th next.

According to last year's interims, Kingspan had pre-tax profits of €28.3 million in the first six months of 2003, an increase of 6.2 per cent on the previous year when adjusted for currency movements. Its sales in the same period topped €380 million. It made a profit of €65.4 million in 2003.

The markets responded positively to the statement. In Dublin, where the company has its main listing, over one million shares changed hands yesterday.

The stock opened at €4.85, and touched highs of €5 before lunch. It closed last night at €4.98, up 2.68 per cent on its opening quote.

Stockbrokers' analysts reacted by increasing their forecasts for Kingspan's 2004 earnings. Mr Robert Eason upgraded the stock from "add" to "buy". He said that following the statement, Goodbody was revising its full year earnings per share (EPS) forecasts upwards by 5 per cent to 42 cent.

Mr Eason said that Goodbody had also revised up forecasts for subsequent years by between 4 per cent and 5 per cent. The stockbroking firm now expects profit before tax to reach €79.7 million this year.

Mr Eason said that in addition, a cyclical upturn in non-residential building markets and the benefit of substantial investment in extra capacity, double-digit earnings growth was a realistic medium-term target.

On that basis, he argued that the company could be reasonably valued at between 12 and 13 times earnings, which implied a 12-month share price target of €6. That represents a 24 per cent premium on yesterday's price.

Mr John Sheehan of NCB Stockbrokers increased his EPS forecast from 39.6 cent to 41.5 cent for this year and to 44.6 cent next year.

However, he reduced its rating to "accumulate" from "buy" on the basis of stock price performance.