Earnings Call: H1 2020

Aug 21, 2020

Good morning, everybody. I'm joined here by Jeff and Katrina, to go to our interim results for 2020. And we're just going to take a step back from the pandemia if we can and start our discussion on slide number 3, which is titled our mission. So many of you will know that for a long time, years now that our ambition has been to accelerate a net 0 emissions built environment. And we are well on track in doing that, and we'll discuss just how in a moment. But in terms of the outputs, of what that has done. Just take a look on the right hand side of this slide. So these are real hard numbers. In the year, just gone by, we delivered insulation materials that over the life of buildings will save 172,000,000 tons of CO2. And that's in 1 year over an approximate 40 year life the building. Next, on net zero carbon, there's been an over 90% reduction in the energy intensity per per euro of revenue in our business since 2012, which is a really an enormous reduction in a relatively short few years. In terms of circularity, and we'll be expanding this subject much more, in our next issue. This goes way beyond simple recycling, but in the context of bringing plastic into our process, in the year just gone by, we upcycled almost 400,000,000 plastic bottles, most of which went back into insulation materials. And we, as you know, have an ambition to bring that up to 1,000,000,000 within the next 5 years, much of which will be in our quad core product in the future as well. In terms of our daylighting business, we're currently installing capacity here in Ireland, in fact, that will create 9,000,000,000 lumens of natural life, light annually, which is the equivalent to about 1,000,000 homes. In bold language. And that again is an annual amount of daylight or savings from what would otherwise be powered, obviously, by electricity. And then over in our Water And Energy business, so far, we've delivered systems that have saved in excess of 75,000,000,000 liters of rainwater that obviously otherwise would have been to be taken from the water systems around the world. This is predominantly in Australia incidentally, but it's an area of our business that we're, considering expanding much more globally. Now on Slide number 4, we talk all the time about the envelope. Our entire business is about maximizing our exposure to energy conservation fire the envelope of a building. Again, this is well expanded, but there are some gaps in our portfolio, which we'll talk about. Our board business, and that's insulation boards used in roofs walls, floors and any kind of application you can think of. Accounts for 18% of our group revenue and we're a global leader in that high performance insulation business. Our insulated panel business, again, drove the leader by a stretch, 64% of our business. That's an exterior semi structural product that's on the, obviously, on the outside of the building that incorporates installation types much like what's in the installation board. Again, very large part of our business and something that's a very significant scope, both organically and inorganic continue to grow globally. Our data and flooring business, is 5% Water And Energy 5 lies in air that we've just talked about is 8% and growing, growing very satisfactorily at the moment. Industrial insulation, we remain embryonic there with global revenue of about $450,000,000 in a market that's about $5,000,000,000. So plenty of scope for the organization to grow in that area. And equally, I'd say that's the point when it comes to insulated flat roofing. Which, again, we would have a sub-one hundred million presence worldwide by our insulated panel presently, but huge scope in the future, to take a global position in this area. And again, this is all about maximizing our exposure to the envelope and we'll come to the context of why that's important, more broadly. And slide 5 does highlight some of the megatrends that are driving the business and changing the way buildings are constructed now and into the future and the types of buildings that are being constructed now and into the future. Let's just take a couple of points to highlight, 1 of which been an aging workforce and labor shortages generally, more generally around the globe. So speed of build and ease of construction is something that's become a greater priority in terms of the consideration of the types of materials being used. And another issue that's really, I think, come to the floor in the first half of this year has been a change in types of industry a piece of research highlighted that's the percentage of retail that's done online is doubled in the first half of twenty twenty versus the previous year. And that's a trend we're seeing not only in the change in retail, but in the evolution of the automotive industry, the consumption of data, and the types of buildings that are being constructed for that type of industry pays very well into the type of solutions that Kingspan have Another key area of concern is clearly energy and climate change. Buildings contributed 30% of global greenhouse gas emissions and terminally efficient building envelopes and ultra performance installation are a key solution for that. And then obviously, averting a climate change of the 1.5 degree scenario is very important for that, and it's going to hand back to Jean to talk about that in a bit more detail. Thanks, Katrina. So the IPCC is the international panel for climate change, which has, I suppose, set a target of a maximum of 1.5 degrees C of increasing global temperatures. Whether that's achievable in us is yet to be seen, but that's what seemed to be kind of a maximum level by 2050. Now independently, it's been assessed that that's entirely impossible to be achieved without the envelope being a critical part of that path. So we can have as much renewable power as we like, but unless we're actually conserving in the first place, the grid will not be able to handle, the level of electricity is going to be flowing through it. So the envelope is critical here and buildings have to reduce energy consumption worldwide by 30% actually over the next 10 years. And in order to do that, deep retrofitting is critical. So we've talked about this for some time. We'll probably retro at a pace of about 1% per annum globally. And that needs to increase fourfold if we're remotely able to achieve this this level of reduction. So this is why the envelope was an absolute criticality and features at least as highly as renewable power generation does in the first place. In terms of the context of our own business and products, we provide as broad a spectrum of solutions as possible to be able to achieve these results. So right away from incorporation static mineral fiber into some of our products, right across right hand side where our most optimum installation product is optimal. As you go across this slide, the products effectively get thinner. So they get thinner to build, thinner to transport, much lighter to install, etcetera. So our emphasis of the business from an innovation perspective is all focused on the right side of this. And indeed, we'll be expanding that portfolio of installations as we go forward. To understand the context of why thickness is important, I'll just hand you back to Katrina. Thanks, Jean. It's just this is a particular example of a building that Kingstown was quoting for, and it just highlights and how Kingstone innovates that really provides solutions for our customers and solutions for some of the megatrends that are driving the construction industry. So this is an example comparing two products that Kingstone do make, so, a quad core insulated panel and a synthetic mineral fiber insulated panel, just some of the comparatives of how we add value to our customers. So some of the ones that we just highlighted, 25% lower channel system costs. So, real value proposition, even from the first instance, And just something so obvious as 300 fewer trucks desire, almost 300 fewer trucks design. It goes back to Jean's point about lighter thinner materials. And just the amount of energy and carbon that goes into having those trucks on the road or just congestion on-site makes a very clear advantage to using an ultra performance material. And then just following up on that just look at an office application. So that was a large industrial building application. So again, understanding the additional square footage or the additional a rentable floor space that can be created out of having thinner materials. The returns are actually extraordinary, the higher up you go. So in this instance, for an additional development cost of 142 odd 1000 there's a capitalized additional space value of almost 1,800,000, with giving a return of in excess of 1000%. And that's a fully backed up, pre backed up case study, again, a particular project. So the I suppose the important inter material as we go forward, which is why our whole developmental emphasis is there, is going to become more and more critical on multiple fronts. And then just to talk a little bit about it, plan of passionate agenda program that we launched last December, and just as it's not a token ESG efforts. This is something that's deeply embedded into the business and has been, for a long time, hard targets around energy, carbon, circularity and water. And the 12 of these are monitored and measured annually, and this hard target is annually for the business And a number of projects have already been, are underway this year, and we look forward to talking about them in more detail as we go through the years through this program. Perfect. On Slide 11, we've got our global organic expansion mapped out. And much of this is actually underway to just to pick out a few, for example, naturally some of them have been delayed due to the interruptions, that we've been experiencing more recently. But underway at the moment is a very large cool term plant in Sweden, which is all about conversion growth against traditional systems in the Nordics. And we've just installed and commissioned a Kiroc insulate a panel line in Hungary. In France, there'll be significant development there over the next number of years, which will be based out of the Baccassier site that we acquired late last year, we're effectively going to develop a group hub, which will cover insulation board, panels, profiles, an online retail activity. So really, it could be a showcase for the entire group product portfolio. And that will be done by 2022 near Caremark in France. We're in terms of Russia and forget where the data is on the map there. It's not in Siberia. It's more in Southern Russia. We're literally now in the process of starting a PIR insulated panel line, which in time will produce quad core and that complements our existing KROG panel plant in St. Petersburg. And then if we move across the Atlantic, we're in the process of completing a new insulated skyline in Southern Brazil. And that's on top of one that was completed last year. Our business there is growing extraordinarily well. And between next year 22, we will be installing a further line, in the north of the country. And that will have us ending up with 6 facilities obviously totally pan regional presence, and again, that's all of it supporting the organic growth in that region. And then finally, here in the Northeast of the U. S, under the all weather insulated panel brand, we're developing a site in Pennsylvania. And that ought to host a quad core insulation board plant as well in time. So that's under construction as we speak. All in all, history history is history, but over the last 20 odd years or so, we've grown as a compound of 17%. Can't promise, we'll be able to continue that, but it's been encouraging so far. And then that takes us into, into the hearing now. So just in summary on page 15, this is the H1 that you'll have all seen this morning. So revenue, I think, predictably down, but probably not down as much as anticipated. So down 8% to $2,100,000,000 trading profit, similarly down 13% to just over $200,000,000 and our basic EPS stands 15% to short of $0.80. So now I'm going to hand you over to Jeff to give you some color on those numbers. Thanks, Jean. I know on slide 16, just to deal with, in the first instance, the financial highlights for the period. So as Jean has outlined, our sales first half were down 8% versus the first half of last year trading profit down 13% to $200,000,000, and I'll come to the bridge of those 2 changes in a second. Our earnings per share down 15% to 0 point 7 $9.8. The no interim dividend declared for the 1st half, and that follows on from our decision to cancel last year's final dividend. And I'll deal with our dividend separately in a second, a very strong, free cash flow performance in the period more than triple the comparative number, 1,000,000 of free cash. And again, I'll come to the components of that and what drove it. A significant reduction year on year in net debt despite both the organic and indeed acquired development agenda of the business So debt was born from 38,000,000 at the end of June. Our trading margin at 9.7% and we look at that by division. Shortly. Our net debt to EBITDA at 0.79 times at the end of June, our effective tax rate broadly in line with the first half of last year, 16.9%. And our return on capital employed at just under 17%. Just on the next page to look at the margin profile by division. And also on the left hand side of that page, you see the, the trajectory of of profit in the first half of each year. So next to 2019, the first half twenty nineteen, which was a record half year, for KingSpan, this is the next best at $200,000,000. By division in terms of trading margin, insulated panels margin was 9.3% compared to 10.1% in the first half of last year. Naturally, as we worked our way through, lockdowns in certain markets and the negative operating leverage associated with that that did lean on margins, particularly through the month of April and May, notably in insulated panels, QUALCOR continued to progress well. Comprising 12% of our insulated panel revenues in the first half of twenty twenty compared to 8% in the first half of twenty nineteen. So that continues to to go well. In installation boards, a strong trading margin of 13.2% broadly in line with last year's full year margin performance. Cool term continues to progress well. Also in the second quarter, fairly accommodating raw material markets as well that impacted positively on that margin in boards through the second quarter. Lysoneer, which is very much a second half weighted business, delivered a trading margin of 4.4% in line with the first half of last year. Water and energy, at 7.4 percent, up on last year's full year number, some good initiatives there on cost containment, but also a positive trading experience, particularly in Australia, and good to see that coming through. Data and flooring had a very strong first half, particularly in the data center segment. So the trading margin of 12.8 percent and, that has continued into the early part of the second half. In terms of the, the bridge of the, both the revenue and profit performance that's set out on slide 18, So in overall terms, sales were down by 8%. Currency impacted negatively to the tune of about 1% $18,600,000. Acquisitions contributed $142,000,000 or 6% to sales in the period. And that was principally the Casier, which was acquired in our insulated panel division very late last year, and the cold daylighting business coming into, daylighting into the second quarter. Underlying sales were down at 13 percent or $294,000,000 half year on half year. From a profit perspective, overall, profit was down by 13%. The in terms of the bridge, currency impacted modestly by $1,500,000 or 1% acquisitions contributed $9,400,000 or 4 percent and underlying trading profit was down by 16% or at 38,000,000 in the period. The free cash flow performance is set out on Slide 19. And by any measure or comparison, a very strong performance, 260,000,000 which is a record first half free cash performance. The single biggest driver, clearly EBITDA, but also working capital which was a reduction in the first half of twenty twenty ordinarily in a normal trading year working capital increases in our business because typically our June balance sheet is bigger than our December balance sheet when you bear in mind the seasonality in the construction cycle. And this year, because of, of constrained trading environment through, April, May, in many markets, working capital reduced. So 95,000,000 was the inflow this year. That compares just by way of comparison. We had an outflow of 72,000,000 of working capital in the first half of last year and an outflow of $92,000,000 in the first half of twenty eighteen. The other driver of it was the working capital to sales ratio, which is the key metric that we used to manage working capital through the business. That was 11.6% in the first half of twenty twenty. Which compares to 13.1% in the first half of twenty nineteen. Over the course of the year, our working capital investment, our divestment will be 12% of whatever the sales growth or decline is in that period. So all that's happened this year really is, it's happened in an atypical way in the first half of the year. Interest was 10,000,000 of an outflow, tax, corporation tax, 14,900,000 That's again, a little bit lower than what had been budgeted, but will flow in the second half of the year. We would have expected to have paid out about $50,000,000 in the first half but that will follow through the second half of the year. Our capital expenditure $58,700,000 in the first half. So all of that combined to give a free cash performance of $260,000,000 the reconciliation of net debt instead out on the next page. So beyond free cash, acquisitions, the outflow there was $42,000,000. The principal acquisition made in the period was called as well as the cash dimension to that. We also assume the pension liability in respect of that business. So that's factored into the acquisition returns for that particular business. And FX and other movements were about 23,000,000 So our net debt, a little under $438,000,000 at the end of June. Our working capital performance set or sorry, our return on capital set out on Slide 21. So broadly with last year's full year at nochunder17%. So it remains at those levels. The sales by geography, set out on page 22. So you'll see just in terms of the constituents of our sales the UK 17% of our business in the first half of twenty twenty compared to 20% in the first half of twenty nineteen. Mainland Europe, 56% first half twenty versus fifty three percent in the first half of last year. In overall terms, the UK actually declined by 22% half year on half year And it also works out. I think the rest of world peace, Ireland is a very modest part of our business, but actually, Ireland sales declined by 35% in the half year. So an outlier is a negative from that perspective. But in overall terms, our global sales decreased by strength of our balance sheet is set out on the next page. And just by way of recap on our funding arrangements, we have a a $300,000,000 revolving credit facility, which we arranged in June 2019. That was undrawn at half year end. Similarly, the principal 450,000,000, RCF was undrawn at the end of June 2020. We entered into a bilateral green loan for $50,000,000, which we grew in February of this year. That's to fund the planet Passionus program internally across the business. So we've total available cash balances and committed undrawn facilities of about 1,200,000,000 and the weighted average maturity is of debt facilities is 3.8 years. And just before handing back to Jean, a note on the dividend, we've highlighted that we haven't declared an interim dividend And so the cash dividend this year will be nil for 2020. The reason we're not declaring a dividend at the interim stage is just in light of the context and backdrop that we're all operating through in this particular year. And it strikes us that in that context, it's a timely period for us to assess how we, remunerate shareholders into the future. So broadly this year, if we had operated our, dividend policy, approximately 90,000,000 would have been paid to shareholders by way of dividend And the question we're now posing, which we'll engage with shareholders on, is there a better way to give that money back to shareholders over time by way of policy whether that's buyback or some revised dividend policy. So we will complete that exercise before the end of or at the announcement of our 2020 financial results. So with that, I'll hand back to James. Great, Jeff. Thank you very much. We've got copious detail on all of the divisions here, which we don't propose going through. But no doubt we'll deal with them in the Q and A session as we get to that. But before we go there, let's just move slide 30, which is titled Outlook, very difficult to have an Outlook at the present time. It has to be said, Naturally, we would harbor some nervousness about late this year and into 2021, as really the effects pandemic unfold. Now as against that, and it's been a really important part of our delivery so far this year, the business has become increasingly exposed to the data markets, to the general tech sector, to online logistics and very interestingly to the automotive sector, which although you might be thinking that's all negative, there's a huge transition going on in the automotive sector, which requires entirely different facilities, not just for batteries, but for car assembly. And we've been fortunate enough to be at the forefront of many of those developments. And actually, we believe we're just at the very early stages of that curve as that industry evolves. So that, that's all positive. As indeed, it's the whole policy area. So we've talked about the IPCC targets. How important the envelope is for that, and that is going to increasingly get dialed into national legislation. And we'd have little doubt about that. And even in the context of various stimulus packages that will be unveiled globally, we'd be fairly certain that retrofitting insulation and energy conservation will feature very highly amongst those. Now having said all that, it's very hard to think that the effects of the pandemic are going to be positive. Generally speaking around the world, what we've experienced so far is the pandemic itself by and large economies have been, or society, at least, has been shielded from this. But it's completely inevitable that across the hill, fundamental demand from most sectors is likely to be curtailed. Now what that means, you're all probably in a far better position to judge than us But you can take that as a business, we'll be able and ready to respond to whatever kind of situation we're faced with. That ends the formal presentation and, Ruby, we're now prepared to open it to the floor. Excellent. Thank you. We have a question from Good morning, everyone. Hi, Robert. Good morning, everyone. Just a few questions from myself. Firstly, just on gross margins, and if you look at a group level, very impressive performance in the first half of 70 bps against the backdrop of the decline in sales. Can you just go kind of through the various dynamics around that in terms pretty improvements is coming from? And how should we think about that as we go into the second half in the context of raw material costs and also just the general pricing environment on the ground because I get a sense from a corporate perspective not many corporates have been focused on pricing too much in April, May, June, July was all about just making sure your business was opening up in in the right fashion, but just a general discussion around there. And just also just on M and A, obviously another for the 2 deals announced today. What is the environment for M And A like and it's more to point in terms of, like, is there much stress out there in terms of businesses getting into cash flow issues. What are multiples doing? Obviously, the stock market is going one way. What are multiples like on the ground? And so there are my kind of general areas of questions. Okay, Robert. So just on the gross margin side, so we've gone to a period of reasonably low raw material. And to some extent, we've been able to harness that within the business. That's been in favor of margins. I'd say equally, the quad core product range has increased in absolute terms 50% year on year. So it's come from 8% penetration to 12% in the panels business across the world. And that's been a clear positive for margins as well. Cool term, similarly in the insulation business at a very positive period, and that all goes to it. And equally you'd have noticed from the access or from the data and flooring business, but it's been growing strongly and the margin delivery from that business is quite superior actually. Particularly on the data end. So that's all worked in, it's in our favor. Now in terms of raw materials going forward, and steel, steel is likely to harden up further. And I think that's more out of pure necessity than market demand. Obviously, the demand for steel across multiple sectors worldwide, but most predominantly, the automotive is under enormous pressure. And you'll note from your own analysis various steel companies that there's, to be honest, maybe at a level of desperation. So that's going to drive, inflation in that material, let's say, short term. But also on the chemical side, in typical fashion, MDI is yo yoing around the place. So it was way up couple of years ago, it hit its absolute low probably earlier this year, and we're seeing a bit of a bounce in that now. Again, that probably could rise 30% or 40% over the next couple of quarters. That's clearly going to put pressure on us to recover that's, but as usual, there'll be some lag involved in that. So that might pressurize our margins, I'd say, particularly in the fourth quarter of this year as we try to recover. Thank you. Robert, we have a question from Arnaud Lehman of Bank of America. Your line is now open. Please go ahead. Thank you very much, and good morning. I guess, two questions on my side. Firstly, would you mind commenting a little bit more on the trends in the order book? I mean, I appreciate the visibility is not very high for 2021 yet. But as far as Q3 and maybe early Q4 are concerned, are you seeing any, meaningful cancellation of what's most four months of projects. So qualitatively, do you think you can grow your underlying volumes into into H2 or into 2021 or the economies are just not strong enough for that, that's, my first question. And my second question, sorry to be annoying, but would you mind giving us this split between volume and pricemix effects for the division in the first half? Okay. I don't know. The, in terms of the order book, the order book globally, and this really relates to insulated panels because one that gives us most visibility is broadly similar to what it was this time last year. Now it varies clearly region by region, I'd say, well up in Germany, well up in France, well up in the U. S. But in other areas, you don't stay naturally under pressure, the UK under pressure, Canada, particularly poor. So the picture varies country by country, but broadly, it's similar. And in terms of order intake for Q3 so far, it's very slightly behind prior year. So I'd say broadly in line, but slightly behind prior year, which would give us some comfort for the next kind of 3 to 4 months of delivery. And beyond that, honestly, at the present time, it's very hard to, to judge. Now, Jeff, Jeff will deal with the volume pricing and second. But before we do that, Robert, to cut you short there on the M and A question, in terms of stress out there, no, knows the answer. We haven't really seen that so far. And as a result, we've not seen multiples revert to anything reasonable. So I think a little like the valuations you're seeing in the public markets, there's not been a downshift in the private market either. And Arnaud, just on your question about the price volume dynamic in the first half of the year, I mean, I think it's worth highlighting that Given the market mix that we had through the first half of the year, being locked out of certain markets for a pronounced period in certain cases, the product mix that we have in different geographies around the world. That price mix dynamic can vary quite significantly from market to market. In overall terms, our underlying sales and panels were down 12% and on board, we're down 18%. And you can take it that the principal driver of that was volume, rather than price. That really was the key dynamic Thank you very much. Thank you. We now have a question from Flore O'Daghu of Davy. First one is just, just relating to your looking ahead comments in the statements. You're mentioning about your growing exposure to the areas like data, technology, next gen auto, online logistics, etcetera. You might just give us a sense of your kind of exposure in terms of group revenues or non res revenues to these kind of areas, what it is and maybe where it's come from in the last few years. And just as opposed to extend that question then, just, be interested to hear your views on, the kind of green deal suggestions that are out there and the possible impact on the business. Second question then I have is just going back to M and A. I guess, more technical than anything else, just, can you give us an estimate of the full year M and A spend on the on top of the 42,000,000 indicate 1. And maybe also, if you could elaborate a little bit on the, on the two recent deals that that have kind of been announced on the panel side, just in terms of the kind of the snapshot of all businesses. And then finally, maybe just one for Jett in terms of CapEx, what CapEx guidance for this year now looks like? Alright, Flora. So just in terms of the fast growing areas like data tech, etcetera, we'd estimate at around that exposure to that entire area we've outlined there at around 25% for the group. But 25% and growing, I guess it's what we say. As you know, many of these are global accounts And once we can get in and provide the proper product and service to them, we tend to get the opportunity to follow them around the world. So that's that's a very key part of our strategy going forward. In terms of green deals, I'd say that's an evolving picture particularly in the context of the ROTCC we talked about. So I don't think there's anything, ultra hard we can point towards there, but it's evolving, evolving the right direction by country. And from an M and A perspective, we're committed in between Colt and the others, we're committed to approximately $220,000,000 of spend this year so far. Yes. And just on CapEx, Laura, somewhere in the region of 110 to 120 for this year. Great. And just those, those two businesses, the 2 recent ones in Europe, just kind of a profile of what they do, where they fit in, if that's okay. Yes, sure, indeed. Absolutely. On Terrace Day for, it's a mix of an insulate panel business and a profiling business, both separate. It's manufacturing in Romania and Serbia and with plans to develop beyond there in panel on profiles, it's got a, effectively, a kind of a yaris hub and spoke type model, which is Romania based. So that is part of that business will, be integrated into our Central Eastern European Panels business, and the profiling side will plug into the ROC to, business team. And then the tremor business is Slovenia based, but that's really a bit of a distraction because it's it's actually been quite a successful global brand. So the vast majority of its revenue in fact is way out of that region. So strong in Germany, very strong in the Netherlands and the UK. And in fact, the brand stretch is well beyond that and specifications. It's a, it's a fiber cord panel, a very high standard for that material, and we'll continue to focus on that. And it would also be an intention to have that team to introduce the quad core product offering to that team over time, because they've got very, very strong spec channels. So that's the, that's the situation we've worked with us. Sorry, on the Trimble 1, there's also a small manufacturing site in Serbia. As well. We have a question from Gregor Kuglitsch of UBS. Your line is now open. Please go ahead. 3 of you are doing well. Just a few questions, some are a little bit, some are a little criticreties, some of the bigger picture. So maybe starting with the bigger picture 1. So I remember a few years back, you'd obviously already called out some of the areas. I think remind myself the slide number of the product categories. The Slide 4, But basically, you called out roofing membranes and industrial insulation as an area of growth. Obviously, I think you haven't done very much there. So I'd like to understand, I suppose, where we are there, what the opportunities really are. I guess from an acquisition standpoint or whether In the end, you've concluded you have to do this organically because basically out of the valuations don't work, there's no real business stuff for sale. That are interesting in that area. So that would be question 1. Question 2 is just maybe quickly on earnings, just going back to the 1st half. Can you just remind us, I think you did put a salary cut in place for the for number of employees where those actually implemented, or did you kind of reverse them as actually trading improves? Because perhaps things can pan out as badly as they ended up as you perhaps expected in April, early April. So just and if you could quantify that sort of temporary, I don't know if you've furloughed, but certainly you took sort of temporary costs to what extent that kind of benefited? And then just a clarification point on the dividend, So the dividend, are you saying that the $90,000,000 that you would have otherwise paid, you're basically reviewing to return don't know, is it special as a one off or buyback or whatever, because you didn't pay it, or are you signaling a broader payout ratio kind of ongoing revision, if you want, going forward? Or is that I just didn't quite understand what you were trying to clarify that. So on the bigger picture there on the envelope, and where the gaps are, I suppose what we've been outlining is the opportunity, the biggest strategic longer term opportunity and we are growing, actually quite satisfactorily, are at an organic level in both of those segments. And, but you're right, in order for us to have a meaningful position in these globally, it's going to require, acquisitions in both areas. To be honest, there hasn't really been a satisfactory number of opportunities out there that we'd be able to transact at a sensible multiple. And we'll all will stand by our discipline in terms of pricing on these fronts. So if you like that, it's probably been a lack of a pipe and those that were available were not going to provide us with a reasonable return. And that's the only reason why we haven't really advanced further there. Which you can take, if there's still a very much center of our thinking, and we'll get there eventually. From the salary code point of view, senior team took 50, the vast majority of the rest of the business, although not all worldwide top 40, that was designed around, obviously, we're in the teeth of the crisis at the time. We had no idea how long it would last, but at the time, we said we were implementing for 2 months. Which is what we did. And, we resumed normal activity from the 1st June. So everything is back to to normal. And in terms of the dividend, just to be clear, there won't be one this year. And what's under consideration is how we will return money to shareholders in the future. And that can take various forms, as you know, and we will indeed return money to shareholders not that we're abandoning that policy. It's just what shape it takes is what's under consideration. Thank you, Gregor. We have a question from Ives Broomhead of Exane BNP Paribas. Your line is now open. Please go ahead. Just a few questions on my side. The first one is really an important development. I really enjoyed your introduction on your product side and the product towards the kind of energy saving argument. But I'm just thinking more broadly, I think you exposed a few times on your fiber free aerated panels and I didn't see anything on that product side. So I just wanted to know how is that going, if you're progressing well, and what's the revenue potential here? But also on your solar panel, just trying to understand here what is the demand pattern in the next few years? That's my first question. And then my second one, again, on strategy, you remain quite active on the M and A front. And with such a considerable amount of cash for firepower. I guess I've got a few questions. One is could you now look at more transformative deals 2, are you happy with your end market exposure? Or do you want to increase your renovation exposure given the Greenville arguments, I guess? And number 3, I think Afzalov mentioned that it was looking to divest a sandwich panel division would be too difficult from an antitrust perspective. Thank you so much. Okay. Fair few things in there, Eve. Actually, apologies for a minute to talk about the innovation side. And you're right. There actually was a note on the geographic slide about the Alpha Core plant, which we will be constructing in, in the, in the UK. So that development, that's, so again, that's alphago, which is, will be an A1 rated non fiber insulation material. We're working on 2 tracks. 1 is a high insulation performance One is a performance more relative to, Styrene or Mineral Fiber and they both are fundamentally different characteristics and cost basis. Now the development of these has been fundamentally interrupted, purely as a result of actual travel restrictions. So they're kind of reliant on a significant amount of international collaboration, and we've it's just not been possible to get get our folks to meet them and them us, etcetera. But we're getting it slowly back on track. It's our expectation that we will we have a product for testing during the first half of next year and that we will have an operating facility, probably it's looking like 2022 now. So we haven't, by any stretch taking our focus off that. In terms of the potential for us, It really depends on how markets evolve, how the messaging around quad core and cool term in particular is understood longer term. And that really is an education piece around the I think a lot of the noise and confusion around the subject of combustibility. So like the potential I would still say for QUALCO and CoolCarm is much more. But where there is an absolute demand for A1, we intend to be able to offer this as well as as you know, some synthetic mineral fiber products that we have within the range. In terms of PV, we call that the power panel The development of that is nearing completion. And we expect to be putting that product through, external testing during quarter 1 next year, and that we will have a reasonable sized pilot plant in operation around midyear next year that to be based in Hollywood in the UK. So again, this is going to be a combining, PV with an insulated panel. And I know we've been saying this for a long time, but we believe that we are now entering a phase where solar integration will become a really fundamental part of every roof. It's hard to know exactly to what extent of what price and what quantities was. As you look ahead, it's kind of almost unthinkable you'd be building large scale roofs in 5 years' time that don't at some form of solar integrated into them. And we think there's a tremendous opportunity of having that as a a one fix insulate and generate all in one piece insulated panel. And that's what we're after. So that's been, that development has been growing actually pretty much according to plan. From an M and A perspective, we're going to keep plugging away as a, the well tested and proven formula of bolting on businesses But that's going to continue whether or not we could do something transformative. I guess, I guess, the firepower is there to do so. It's really about the opportunities, and the valuations. So we're open to all. And naturally, we'll be looking at what a more cautious at the present time with all these opportunities. But yet, we're open to considering all kinds of ideas. And whether or not that brings us more into renovation or not, that would be desirable, I have to say. And that could be the case, particularly when you look at the the roofing type applications. So our renovation is, is generally speaking, the larger part of the revenue. You mentioned our slow construction not for us for multiple reasons. I suppose it's the best thing to say about that. Thank you. Inez, we now have a question from Rajesh Patki of JP Morgan. Your line is now open. Please go ahead. Thank you. Good morning, everyone. Hope everyone is well. First one is in margins. The margins for the boats business for H1 was, less impacted compared to the panel's business, if you could provide some color on what the key reasons behind that are? And how do you see those fan out for the full year. And the second one is on the North American business. If you could talk a bit about the trends there, I think you mentioned some slowdown recently, but if you can provide a bit more color there, it would be great. And the last one, again, a bit more, on the long term focus with policy makers focusing more on renovation. Does that mean, over the medium to long term could see a shift in king's pants end markets, towards generation, which is currently only 20% of the group. Thank you. Just on the margin piece, Rajesh, in both boards and panels, in boards, it was 13.2% in the first half of the year. Think it would be fair to say that we did have a bit of a tailwind there from an input perspective. And as we outlined earlier, with prices moving and increasing through the second half of the year. It's going to be difficult to replicate that into the second half at that level panels, panels margin was below 10% in the first half of the year. The principal driver of that really was the negative volume in the months that were most constrained. So again, having regard to the progress that we're making on the likes of Quadcor in any kind of a stable environment, we ought to see the panel margin move beyond the 10% in the, at least into Q3. So they're the principal margin drivers. Then in terms of North America, yes, we're seeing the U. S. Slow down a little. That's not to say it's entering negative tariffs for us at all because it isn't, but maybe just less buoyant than it's been for the last 6 or 9 months. Canada, to be honest, has been more our issue, over the last 3 or 4 months. It's reacted very negatively, and we think it's gonna slow enough to pull itself out of this. So that obviously changed our overall North American picture. We should point out as well here that there's a there are a number of new entrants, beginning to show up in the North American markets. So between this year and next, we'd expect there to be more than likely 3 to 4 new facilities, which will pop up in the U. S. Probably focused on the lower end of the market. We'd expect, but nonetheless, we anticipate them coming. And from a renovation perspective, I think that will grow gradually, both across boards and panels. And perhaps we do acquire something that's got more of a, more of a renovation into us, but outside of that, I'd say that the movement will be gradual. Thank you, Rajesh. We have a question from Xin Young of On Fidel Investment Research. Your line is now open. Please go ahead. Sorry, just finding it very hard to hear you there. Hi. Can you hear me better now? Yes. Yes. Yes. Great. Thank you. So I've got two questions. The first one is if I look at the penetration, I'm trying to understand how the penetration growth is going to translate into revenues given the government stimulus For example, if I look at the UK, you have a pretty high penetration rate in installation boards. And with the British stimulus on renovation, I'm just wondering the 2,000,000,000 investment they're announcing for the next 6 months, how will that translate to Kingstone accounts? Like what kind of what's the magnitude of the positive impact? And then the second is on the Nordics. You are assuming a very steep increase in the market penetration for the next 5 years. I'm just wondering why I'm just wondering, can you provide a little bit more color in the Nordic mix market like outlook wise? And then my second question is on the secularity. I understand that you use a lot of plastic bottles in your products when you're manufacturing them. But then as for your product itself, are they recyclable at the end of their at the end of the use date or they have to be, break down in some sense, which is non recyclable. I'm just trying to understand than the specularity of your own products. That's all. Thank you. Yes, absolutely. You're very welcome. Maybe we'll start with the last question. So our products are totally circular. And we're just working on our old scheme there, which will inform you much more about, let's say, next results out. If you take our panels and boards, not only are they recyclable, but actually far more impressively, they're reusable. So after life, these products, don't actually disintegrate or turn to dust or whatever like a lot of alternative materials do. So we have countless examples of where our products are actually being reused in buildings, obviously, are the lower standard, and they go on to live another life, which to be honest is far more material and more impressed than it is to take it through a recycling process. In terms of recycling, the steel, which has taken off the panel is 100% recyclable, and the product itself can either be taken in a pelletized and taken in hard form back into the foam. R and D that can be go through a glycolysis process to bring it back into a polyol, which is an area we're focusing on significantly at the moment. And then reintroduce it as a raw material. And beyond that, in fact, the form of our products are used for multiple other re imagined applications and they go from floors to countertops to kitchens, etcetera. So there's a whole wider picture there that's actually truly circular, and we'll have a much more comprehensive picture to show you next time out. From a Nordic penetration perspective, advanced insulation is something that's relatively embryonic in that region. It's dominated by very inefficient thick materials. It's not uncommon of installation of a half a meter thick which is pretty extraordinary when you consider the amount of wasted space and wasted value and everything, not to mention the relative performances of those products. So we would see a tremendous opportunity to convert multiple applications across to Advanced Materials, which of course is why we're we're building our plant in Sweden. And that, that, of course, complements 3 existing facilities that we have already in, in Finland. Now in terms of the UK's 2,000,000,000 gs, look, we go together as much as that as possible, but it's very difficult for us to put a number on how much of that whole initiative is going to, going to accrue to Kingstown. Which you can take, it could clearly be advantageous. Okay. I see. Thank you very much. Thank you, Sonia. We now have a question from Briesh Sheer of HSBC. Your line is now open. Please go ahead. Thank you. Good morning, guys. I have one question probably left and this is probably if you can give me a little more flavor on how end markets of each end market have performed in the last 3 months and what you see in July August and related to that, whether if you can split back between new and renovation, whether there's any anomalies or performed fairly similarly. Okay. And in terms of end markets, Bria, the the we'll just go through some of the major ones. North America North America will Americas in total. Let's say that the U. S. For has been a very strong contributor during the 1st 6 months. And we expect it will be for the second, but probably just at a lesser level. Canada has been weak. It's improving, but still weak. And Brazil has an activity level, has actually been an excellent contributor to the group. What's affecting us there obviously is exchange rates more recent times with those that have recovered somewhat. But at an activity level, volume was growing actually, very significantly in that region. And we expect that not to be necessarily interrupted into next year. Closer to home in the UK, we've had a very tough second quarter order intake has improved more recently. It's still trailing last year, but not by anything like the Delta's that we saw in the second quarter. Pipeline looks reasonable, but honestly, we'd be unsure as to how how executable that pipeline is. Still all sorts of uncertainty around the UK, but it has been improving. France, France for us has been I'd say with the exception of April, it's been a very strong market for KingSpan this year, and we'd anticipate that to continue. So Benelux probably less. So Germany, very strong for King's fan at least and continues to be the case. And Spain, I'd say, not surprisingly, has been a tough market, but again, it has been recovering, I'd say quite well in the last 4 to 6 weeks, but still trailing last year. And would it, will you be able to take that among the end markets like commercial industrial or data centers for the renew? Are you seeing any different differentiating cargoes numbers there? For sure. So on kind of large scale, service industry industrial, we're seeing that, strong. And the data market, we're seeing a very strong, in fact, is what I'd say. Probably the residential side of our businesses, probably the, the lower growth area so far. Okay. Thank you. Thank you very much. Okay. Thank you, Priesh. We have a question from Manesh Barriah of Societe Societe Generale. Your line is now open. Please go ahead. Yes. Good morning. Thanks for the opportunity So my first question is, when you talk about the 1% renovation rate, so does it mean 1% of building goes for innovation or it means 1% of energy saved of total energy used in the buildings? So this is the first question. The second question is also market level question. So can you provide the split of building insulation demand in Europe by new build and renovation. So when I say a market level insulation, I mean to include all material, be it class rule, mineral rule or plastic or all the materials. So if you can provide that, yeah? Yes. No, we mean 1% of buildings, broadly speaking, get renovated annually to 1 100 and and that there will be significant political efforts as yet to increase that dramatically. And as you said in the earlier slide, to increase that fourfold. Or else we're on a height into Milton in terms of the 1.5 degree target. Overall, in Europe, the market for insulation is probably about sixty-forty, about 60% newbuild, 40 retrofit. But for our business, actually, it's less. So we're probably more kind of a seventy-thirty business favoring newbuild. Okay. And maybe if I can add one more. So on your dividend policy or the sale, the shareholder remuneration policy, you have talked about the buyback. I mean, so what is the criteria for buy do you look at really the valuation of the Kingspan business and when do you do buyback when it is cheap? Because the share price of the Kingspan has gone up of probably it has become less attractive from both the buyback point of view. So why at this point when the separator, how you are looking at buybacks right now? Well, we're actually not necessarily looking at buyback now. What we've really, what we're saying this morning is that were in a year where we have, not had any dividend for very understandable reasons. It strikes us that it's timely for us to assess what our policy might be going forward. So we don't have that policy today, but we will when we announce our results next year. And, we'd have to take into account all of those aspects in terms of how we might think about payouts going forward. So no announced policy today. Okay. Yeah. Thanks a lot. Thank you. Manish, we now have a question from Pierre Russo of Barclays. The first one is on your balance sheet. It shows a benefit obligation in pension benefit obligation increased by about CHF 300,000,000. That seems quite high compared to your acquisition activity. So I was wondering if you could give more details on that specifically. The second question would be on stimulus potential but outside of Europe specifically, because we will hear a lot about the green deal to try to track. So it would be useful to hear also what happens in other geographies. Yes. Just on the pension piece, actually, the net pension liability that we acquired in respect of the Kohl's acquisition was about $10,000,000 on acquisitions. So what you quoted there is the liability piece, and doesn't include the assets that were acquired as part of the scheme So the net position is about, is about $10,000,000, which answers that one. And then green deal? Next question. On the green deal, I suppose you've spoken a fair bit about that already, Pierre. It's, Let's see. We've heard lots of green deals in the past as well. So let's just see how it evolved. We have much color to add to that view, to be honest. So if I may just follow-up on the last one, it was more about the stimulus outside of Europe. We hear a lot about the green deal, but outside of Europe, it's less clear could happen. So you should give some details. That would be helpful. Yes. And that's what I'm saying. We don't have any specific detail on that, except there's a lot of, a lot of talk that it's going to form a significant part of any major stimulus package, I'd say, depending on the outcome of the election of in North America, that will swing enormously one way or the other. And that goes for many other regions, but there's nothing there's nothing hard in the past as of yet. Okay. Thank you. We have one final question if you have time. Great. Okay. Yes. Is from Cedar Exulum of Morgan Stanley. Your line is now open. Please go ahead. Thanks very much. I've got 2 final questions, gentlemen. The first one is on your distribution channels. Your desire to grow your renovation exposure as a percentage of the group, does that require that distribution is a bigger percentage of your sales channels? And if so, could you talk about how you would grow that considering the technical nature of the products that you sell? Do they fit wells within distribution sales channels? And then the second question would be a perspective from you on where you see the greatest benefits as it relates to energy efficiency and buildings, the electrical side of things versus the material side of things. You guys are obviously exposed to this. You do a lot of work on it. When you talk to your customers, how do they think about delivering the energy, renovation or the energy savings between those two components? Yes, sure. Absolutely. From a, yes, if the renovation side of our business grows, does that expose us more to, the requirement to have distribution? I would say in the case of our insulation board business, yes, but that's a well worn track. In terms of how suitable our products are for that, already a significant portion of our insulation board actually goes through distribution of one form or another. So that's, that, if you like, is well worn and something could easily be expanded. The insulated panel, not so. So there's a it's a 99.9% direct channel whether that's for renovation or newbuild, we would expect that to, to remain the case. In terms of, if you like, the trade off, between electricity and conservation, that really goes back to our earlier point. The more renewables, if you like, that are brought into into buildings, they'll be brought in electrical farm. The issue really is the ability for a grid to handle that And that's where the trade off has to happen between the fabric and insulation. And so we're, if you like, we're in an entirely different space than the power generation. We're at the front end of all that where we're decreasing the need for power in the first place. And really, we believe that there will be more of an emphasis on the envelope first, going forward than necessarily on renewable power generation. It's a very obvious 1st phase. When I mean electrical, I'm actually meaning more sort of electrical components within the building. So more efficient HVAC, equipment, the stuff that the capital goods companies are keep pushing as their contribution to building energy efficiency. I don't know when you talk to customers, how much of a benefit they think they get from a more efficient building envelope versus more efficient electrical systems within the actual building itself? Yes. The returns for the envelope are the most compelling of all. Perfect. Thank you. There's just no question. No question about that. We actually get rid of energy in the first place for relatively liquid costs. Like on average, in an average house, you're probably going to spend about if you do a proper job on insulating it. And the return from that is extraordinary. Great. Thanks very much. Thank you. Thanks, everybody. So that's that ends our call and no doubt we'll be speaking to a good number of you over the coming days.