Good morning, everybody. I'm joined here by Geoff and Catriona to go to our interim results for 2020. We're just going to take a step back from the pandemania if we can, and start our discussion on slide number three, which is titled "Our Mission." Many of you will know that for a long time, years now, that our ambition has been to accelerate a net zero emissions built environment. We are well on track in doing that, and we'll discuss just how in a moment. In terms of the output of what that has done, just take a look on the right-hand side of this slide. These are real hard numbers.
In the year just gone by, we delivered insulation materials that over the life of buildings will save 172 million tons of CO2, and that's in one year over an approximate 40-year life of a building. Next, on net zero carbon, there's been an over 90% reduction in the energy intensity per Euro of revenue in our business since 2012, which is really an enormous reduction in a relatively short few years. In terms of circularity, 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 million plastic bottles, most of which went back into insulation materials.
We, as you know, have an ambition to bring that up to 1 billion within the next five years, much of which will be in our QuadCore 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 billion lumens of natural light annually, which is the equivalent to about 1 million homes in bulb language. That, again, is an annual amount of daylight or savings from what would otherwise have been powered obviously by electricity. Over in our water and energy business, so far we've delivered systems that have saved in excess of 75 billion liters of rainwater that obviously otherwise would have been had 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. On slide number four, we talk all the time about the envelope. Our entire business is about maximizing our exposure to energy conservation via 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, 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, global leader by a stretch. It's 64% of our business. That's an exterior semi-structural product that's obviously on the outside of the building that incorporates insulation types, much like what's in the insulation board.
Again, very large part of our business and something that has very significant scope, both organically and inorganically, to continue to grow globally. Our data and flooring business is 5%, water and energy, 5%, light and air, that we've just talked about, is 8% and growing very satisfactorily at the moment. Industrial insulation, we remain embryonic there with global revenue of about EUR 150 million in a market that's about EUR 5 billion. Plenty of scope for the organization to grow in that area. Equally, I'd say that's the point when it comes to insulated flat roofing, which again, we would have a sub-EUR 100 million presence worldwide via our insulated panel presently, but huge scope in the future to take a global position in this area. 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.
Slide five just highlights some of the mega trends 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. Just take a couple of points to highlight, one of which being an aging workforce and labor shortages more generally around the globe. 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. Another issue that's really, I think, come to the fore in the first half of this year has been change in types of industry. A piece of research highlighted that the % of retail that's done online has doubled in the first half of 2020 versus the previous year.
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 plays very well into the type of solutions that Kingspan has. Another key area of concern is clearly energy and climate change. Buildings contribute to 30% of global greenhouse gas emissions and permanently efficient building envelopes and ultra-high performance insulation are a key solution for that. Obviously averting a climate change to the 1.5 degree scenario is very important for that, and I'm just going to hand back to Gene to talk about that in a bit more detail.
Thanks, Catriona. 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 increase in global temperatures. Whether that's achievable or not is yet to be seen, but that's what's deemed to be kind of a maximum level by 2050. Independently, it's been assessed that that's entirely impossible to be achieved without the envelope being a critical part of that path. 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 that's going to be flowing through it. The envelope is critical here, and buildings have to reduce energy consumption worldwide by 30%, actually over the next 10 years. In order to do that, deep retrofitting is critical.
We've talked about this for some time. We're probably retrofitting at a pace of about 1% per annum globally, and that needs to increase fourfold if we're remotely able to achieve this level of reduction. This is why the envelope is 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. Right the way from incorporation of synthetic mineral fiber into some of our products, right across the right-hand side where our most optimum insulation product is OPTIM-R. Now, as you go across this slide, the products effectively get thinner. They get thinner to build, thinner to transport, much lighter to install, et cetera.
Our emphasis as a business from an innovation perspective is all focused on the right-hand side of this, and indeed, we will be expanding that portfolio of installations as we go forward. To understand the context of why thickness is important, I will just hand you back to Catriona.
Thanks, Gene. This is a particular example of a building that Kingspan was quoting for, and it just highlights how Kingspan innovates to really provide solutions for our customers and solutions to some of the megatrends that are driving the construction industry. This is an example comparing two products that Kingspan do make, so a QuadCore insulated panel and a synthetic mineral fiber insulated panel, and just some of the comparatives of how we add value to our customers. Some of the ones that we just highlighted, a 25% lower panel system cost, so a real value proposition even from the first instance. Just something so obvious as almost 300 fewer trucks to site. It goes back to Gene'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.
It's a very clear advantage to using an ultra-performance material.
Just following up on that space point, just look at an office application. That was a large industrial building application. Again, understanding the additional square footage or the additional rentable floor space that can be created out of having thinner materials, the returns are actually extraordinary the higher up you go. In this instance, for an additional development cost of EUR 142,000, there's a capitalized additional space value of almost EUR 1.8 million, with giving a return in excess of 1,000%. That's a fully backed up case study, again, a particular project. I suppose the importance in a material as we go forward, which is why our whole developmental emphasis is there, is they're going to become more and more critical on multiple fronts.
Just to talk a little bit about it, the Planet Passionate agenda program that we launched last December. Just as it's not a token ESG effort, 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. The 12 of these are monitored and measured annually, and there's hard targets annually for the business. A number of projects are already 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. Much of this is actually underway. 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. Underway at the moment is a very large Kooltherm plant in Sweden, which is all about conversion growth against traditional systems in the Nordics. We've just installed and commissioned a K-Roc insulated 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 Bacacier site that we acquired late last year. We're effectively going to develop a group hub which will cover insulation board, panels, profiles, and online retail activity. Really it'll be a showcase for the entire group product portfolio, and that'll be done by 2022 near Clermont in France.
In terms of Russia and forget where the dot 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 would produce QuadCore, That complements our existing K-Roc panel plant in St. Petersburg. If we move across the Atlantic, we're in the process of completing a new insulated panel line in southern Brazil, That's on top of one that was completed last year. Our business there is growing extraordinarily well. Between next year and 2022, we will be installing a further line in the north of the country. That will have us ending up with six facilities, obviously totally pan-regional presence. Again, that's all of us supporting the organic growth in that region.
Finally, here in the northeast of the U.S., under the All Weather Insulated Panels brand, we're developing a site in Pennsylvania, and that ought to host a QuadCore insulation board plant as well in time. That's under construction as we speak. All in all, history is history, but over the last 20 odd years or so, we've grown at a compound of 17%. Can't promise we'll be able to continue that, but it's been encouraging so far. That takes us into the here and now. Just in summary, on page 15, this is the H1 that you'll have all seen this morning. Revenue, I think predictably down, but probably not down as much as anticipated. Down 8% to EUR 2.1 billion. Trading profit similarly down 13% to just over EUR 200 million. Our basic EPS down 15% to short at EUR 0.80.
Now I'm going to hand you over to Geoff to give you some color on those numbers.
Thanks, Gene. I'm now on slide 16 just to deal with, in the first instance, the financial highlights for the period. As Gene has outlined, our sales in the first half were down 8% versus the first half of last year. Trading profit down 13% to EUR 200 million. I'll come to the bridge of those two changes in a second. Our earnings per share down 15% to EUR 0.798. No interim dividend declared for the first half. That follows on from our decision to cancel last year's final dividend. 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, EUR 260 million of free cash. Again, I'll come to the component 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. Debt was EUR 438 million 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 0.79x at the end of June. Our effective tax rate broadly in line with the first half of last year, 16.9%. 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 trajectory of profit in the first half of each year. Next to 2019, the first half 2019, which was a record half year for Kingspan, this is the next best at EUR 200 million.
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 did lean on margins, particularly through the months of April and May. Notably, in insulated panels, QuadCore continued to progress well, comprising 12% of our insulated panel revenues in the first half of 2020, compared to 8% in the first half of 2019. That continues to go well. In insulation boards, a strong trading margin of 13.2%, broadly in line with last year's full year margin performance. Kooltherm 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.
Light and air, 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%, up on last year's full year number. Some good initiatives there on cost containment, but also a positive trading experience, particularly in Australia. Good to see that coming through. Data and flooring had a very strong first half, particularly in the data center segment. The trading margin of 12.8%, and that has continued into the early part of the second half. In terms of the bridge of both the revenue and profit performance, that's set out on slide 18. In overall terms, sales were down by 8%. Currency impacted negatively to the tune of about 1% or EUR 18.6 million. Acquisitions contributed EUR 142 million or 6% to sales in the period.
That was principally the Bacacier, which was acquired in our insulated panel division very late last year, and the Colt daylighting business coming into daylighting into the second quarter. Underlying sales were down by 13% or EUR 294 million half- year on half- year. From a profit perspective overall profit was down by 13%. In terms of the bridge, currency impacted modestly by EUR 1.5 million or 1%. Acquisitions contributed EUR 9.4 million or 4%, and underlying trading profit was down by 16% or at EUR 38 million in the period. The free cash flow performance is set out on slide 19 and by any measure or comparison, a very strong performance. It's EUR 260 million, 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 2020.
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. This year, because of the constrained trading environment through April and May in many markets, working capital reduced. EUR 95 million was the inflow this year. That compares just by way of comparison, we had an outflow of EUR 72 million of working capital in the first half of last year and an outflow of EUR 92 million in the first half of 2018. The other driver of it was the working capital to sales ratio, which is the key metric that we use to manage working capital through the business. That was 11.6% in the first half of 2020, which compares to 13.1% in the first half of 2019.
Over the course of the year, our working capital investment or divestment will be 12% of whatever the sales growth or decline is in that period. All that's happened this year really is, it's happened in an atypical way in the first half of the year. Interest was EUR 10 million of an outflow. Corporation tax, EUR 14.9 million. That's again, a little bit lower than would have been budgeted but will flow in the second half of the year. We would have expected to have paid out about EUR 50 million in the first half, but that will follow through the second half of the year. Our capital expenditure, EUR 58.7 million in the first half. All of that combined to give a free cash performance of EUR 260 million. The reconciliation of net debt is set out on the next page.
Beyond free cash acquisitions, the outflow there was EUR 42 million. The principal acquisition made in the period was Colt. As well as the cash dimension to that, we also assumed a pension liability in respect of that business. That's factored into the acquisition returns for that particular business. FX and other movements were about EUR 23 million. Our net debt, a little under EUR 438 million at the end of June. Our return on capital performance is set out on slide 21. Broadly comparable with last year's full year, just a nudge under 17%. It remains at those levels. The sales by geography set out on page 22. You'll see just in terms of the constituents of our sales, the U.K., 17% of our business in the first half of 2020, compared to 20% in the first half of 2019.
Mainland Europe, 56% first half 2020 versus 53% in the first half of last year. In overall terms, the U.K. actually declined by 22% half-year on half-year. It's also worth highlighting in the rest of world piece, Ireland is a very modest part of our business, but actually Ireland sales declined by 35% in the half-year. An outlier to the negative from that perspective. In overall terms, our global sales decreased by 8% across the. The strength of our balance sheet is set out on the next page. Just by way of recap on our funding arrangements, we have a EUR 300 million revolving credit facility, which we arranged in June 2019. That was undrawn at half-year end. Similarly, the principal EUR 450 million RCF was undrawn at the end of June 2020.
We entered into a bilateral green loan for EUR 50 million, which we drew in February of this year. That's to fund the Planet Passionate program internally across the business. We've total available cash balances and committed undrawn facilities of about EUR 1.2 billion, and the weighted average maturity of debt facilities is three point eight years. Just before handing back to Gene, a note on the dividend. We've highlighted that we haven't declared an interim dividend. The cash dividend this year will be nil for 2020. The reason for 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. It strikes us that in that context, it's a timely period for us to assess how we remunerate shareholders into the future.
Broadly this year, if we had operated our dividend policy, approximately EUR 90 million would have been paid to shareholders by way of dividends. 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. We will complete that exercise before the end of, or at the announcement of our 2020 financial results. With that, I'll hand back to Gene.
Great, Geoff. Thank you very much. We've got copious detail on all of the divisions here, which we don't propose going through. No doubt we'll deal with them in the Q&A session as we get to that. Before we go there, let's just move to 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 of the pandemic unfold.
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 market, 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. We've been fortunate enough to be at the forefront of many of those developments. Actually, we believe we're just at the very early stages of that curve as that industry evolves. That's all positive, as indeed is the whole policy area. 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.
We'd have little doubt about that. Even in the context of the various stimulus packages that will be unveiled globally, we'd be fairly certain that retrofitting, and insulation and energy conservation will feature very highly amongst those. 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. It's completely inevitable that across the hill, a fundamental demand for most sectors is likely to be curtailed. What that means, you're all probably in a far better position to judge than us. You can take it 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. Ladies and gentlemen, if you would like to ask a question, you may do so by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure you are unmuted locally. We have a question from Robert Eason of Goodbody. Your line is now open. Please go ahead.
Good morning, everyone.
Hi, Robert.
Hope all is well with everyone. Just a few questions from myself. Firstly, just on gross margins. If you look at a group level, very impressive performance in the first half up 70 basis points against the backdrop of the decline in sales. Can you just go kind of through the various dynamics around that in terms of where the improvement 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? I get a sense from a corporate perspective, not many corporates have been focused on pricing too much in April, May, June, July. It was all about just making sure your business was opening up in the right fashion. Just a general discussion around there.
Just also just on M&A, obviously another further two deals announced today. What is the environment for M&A like? More to the point in terms of like, is there much stress out there in terms of businesses getting into the cash flow issues? What are multiples doing? Obviously, the stock market is going one way, but what are multiples like on the ground? They're my kind of general areas of questions. Thank you.
Okay, Robert. Just on the gross margin side. We've gone through a period of reasonably low raw materials. 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 QuadCore product range has increased, in absolute terms, 50% year-on-year. It's gone from 8% penetration to 12 in the panels business across the world, and that's been a clear positive for margins as well. Kooltherm, similarly in the insulation business, has had a very positive period, and that all goes to it. Equally, you'll have noticed from the access or from the data and flooring business, that it's been growing strongly, and the margin delivery from that business is quite superior actually, particularly on the data end. That's all worked in our favor.
In terms of raw materials going forward, 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 most of the sectors worldwide, but most predominantly the automotive is under enormous pressure. You'll know from your own analysis of various steel companies that there's, to be honest, maybe at a level of desperation. That's going to drive inflation in that material, let's say short term. Also on the chemical side, in typical fashion, MDI is yo-yoing around the place. It was way up a 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. As usual, there'll be some lag involved in that. That might pressurize our margins, I'd say particularly in the fourth quarter of this year as we try to recover it.
Thank you, Robert. We have a question from Arnaud Lehmann 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 trend in the order book? 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 consolidation of postponements of projects? Qualitatively, do you think you can grow your underlying volumes into H2 or into 2021, or the economies are just not strong enough for that? That's my first question. My second question, sorry to be annoying, but would you mind giving us the split between volume and price mix effects for the divisions in the first half? Thank you.
Okay, Arnaud. In terms of the order book, the order book globally, and this really relates to insulated panels because it's the one that gives us most visibility, is broadly similar to what it was this time last year. It varies clearly region by region. I'd say well up in Germany, well up in France, well up in the U.S. In other areas, Spain naturally under pressure, the U.K. under pressure, Canada particularly poor. The picture varies country by country, but broadly it's similar. In terms of order intake for Q3 so far, it's very slightly behind prior year. I'd say broadly in line, but slightly behind prior year, which would give us some comfort for the next kind of three to four months of delivery. Beyond that, honestly, at the present time, it's very hard to judge.
Now, Geoff will deal with the volume pricing in a second. Before we do that, Robert, to cut you short there on the M&A question. In terms of stress out there, no is the answer. We haven't really seen that so far. As a result, we've not seen multiples revert to anything reasonable. 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.
Arnaud, just on your question about the price volume dynamic in the first half of the year, I think it's worth highlighting that given that 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 our boards were down 18%. 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.
Okay.
Thank you, Arnaud. We now have a question from Flor O'Donoghue of Davy. Your line is now open. Please go ahead.
Thank you very much. Good morning, everyone. Just a couple from Davy. First one is just relating to your looking ahead comments in the statement. You are mentioning about your growing exposure to the areas like data technology, next gen auto, online logistics, et cetera. You might just give us a sense of your kind of exposure in terms of group revenues or non-rev revenues to these kind of areas, what it is and maybe where it has come from in the last few years. Just I suppose 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 that I have is just going back to M&A, I guess more technical than anything else.
Just can you give us an estimate of the full year M&A spend on top of the EUR 42 million in H1? Maybe also, if you could elaborate a little bit on the two recent deals that have kind of been announced on the panel side, just in terms of the kind of the snapshot of both businesses. Finally, maybe just one for Geoff in terms of CapEx, what CapEx guidance for this year now looks like. Thank you.
All right, Flor. Just in terms of the fast-growing areas like data tech, et cetera, we'd estimate at around that exposure to that entire area we've outlined there at around 25% for the group. That 25% and growing, I guess is what we'd 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. That's a very key part of our strategy going forward. In terms of Green Deal, I'd say that's an evolving picture, particularly in the context of the IPCC we talked about. I don't think there's anything ultra hard we can point towards there, it's evolving and evolving in the right direction by country.
From an M&A perspective, we're committed, between Colt and the others, we're committed to approximately EUR 220 million of spend this year so far.
Yeah, just on CapEx Flor, somewhere in the region of EUR 110-EUR 120 for this year.
Great. Just those two businesses, the two recent ones in Europe, just a kind of a profile of what they do, where does it fit in, if that's okay?
Yeah, sure. Indeed, absolutely. On TeraSteel for it's a mix of an insulated panel business and a profiling business, both separate. It's manufacturing in Romania and Serbia. With plans to develop beyond there in panels and on profiles. It's got effectively a kind of a hub-and-spoke type model, which is Romania based. Part of that business will be integrated into our Central Eastern European panels business. The profiling side will plug into the [Arcadia] business team. The Trimo business is Slovenia based, but that's really a bit of a distraction because it's actually been quite a successful global brand. The vast majority of its revenue, in fact, is way out of that region. Strong in Germany, very strong in the Netherlands and the U.K. In fact, the brand stretches well beyond that in specifications.
It's a fiber core panel, a very high standard for that material. We'll continue to focus it on that. It would also be our intention to have that team to introduce a QuadCore product offering to that team over time because they've got very strong spec channels. That's the situation with both of those.
Sorry, on the Trimo one, there's also a small manufacturing site in Serbia as well.
Thank you very much.
Thank you, Flor. We have a question from Gregor Kuglitsch of UBS. Your line is now open. Please go ahead.
Hi, good morning. Hope all three of you are doing well.
Yeah, thank you.
Just a few questions. Some are a little bit nitty-gritty, some are a little bit bigger picture. Maybe starting with the bigger picture one. 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 sort of product categories, the slide four. Basically, you called out roofing membranes and industrial insulation as an area of growth, obviously. I think you haven't done very much there. I'd like to understand, I suppose, where we are there and 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 either the valuations don't work or there's no real businesses up for sale that are interesting in that area. That would be question one.
Question two is just maybe quickly on earnings, just going back to the first half. Can you just remind us, I think you did put a salary cut in place for a number of employees. Were those actually implemented or did you kind of reverse them as actually trading improved? Perhaps things didn't pan out as badly as they ended up as you perhaps expected in early April. If you could quantify that sort of temporary, I don't know if you furloughed, but certainly you took sort of temporary salary cuts, to what extent that kind of benefited. Just a clarification point on the dividend. The dividend, are you saying that the EUR 90 million that you would have otherwise paid, you're basically reviewing to return, I don't know, as a special, as a one-off or buyback or whatever because you didn't pay it?
Are you signaling a broader payout ratio, kind of ongoing revision, if you want, going forward? I didn't quite understand what you were trying to get at.
We'll try and clarify that. On the bigger picture there on the envelope, and where the gaps are. I suppose what we've been outlining is the opportunity, the bigger strategic longer term opportunity. We are growing, actually quite satisfactorily at an organic level in both of those segments. 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. We'll always stand by our discipline in terms of pricing on these fronts.
If you like, 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. You can take it, they're still very much center of our thinking, and we will get there eventually. From the salary cut point of view, senior team took 50. The vast majority of the rest of the business, although not all worldwide, took 40. That was designed around, obviously we were in the teeth of the crisis at the time. We had no idea how long it would last. At the time, we said we were implementing for two months, which is what we did. We resumed normal activity from the 1st of June. Everything is back to normal.
In terms of the dividend, just to be clear, there won't be one this year. What's under consideration is how we will return money to shareholders in the future. That can take various forms, as you know. We will indeed return money to shareholders. It's not that we're abandoning that policy. It's just what shape it takes is what's under consideration.
Thank you.
Thank you, Gregor. We have a question from Yves Bromehead of Exane BNP Paribas. Your line is now open. Please go ahead.
Good morning, Gene, Geoff, and Catriona.
Hey, Yves.
Just a few questions on my side. The first one is really on the product development. I really enjoyed your introduction on your product side and the further towards the kind of energy-saving argument. I'm just thinking more broadly, I think you exposed a few times on your fiber-free A1 rated panels, and I didn't see anything on that product side. I just wanted to know how is that going?
Yeah.
Is it progressing well, and what's the revenue potential here? Also on your solar panels.
Yeah.
Just trying to understand here what is the demand pattern in the next few years.
Yeah.
That's my first question. Then my second one, again, on strategy, you remain quite active on the M&A front. 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? Two, are you happy with your end market exposure, or do you want to increase your renovation exposure given the Green Deal argument, I guess? Number three, I think Alcelor mentioned that it was looking to divest sandwich panel division. Would this be too difficult from an antitrust perspective? Thank you so much.
Okay. A fair few things in there, Yves. Actually, apologies for omitting to talk about the innovation side. You're right, there actually was a note on the geographic slide about the Alcelor plant, which we will be constructing in the U.K. That development, so again, that's Alcelor, which will be an A1 rated non-fiber insulation material. We're working on two tracks. One is a high insulation performance, one is a performance more relative to styrene or mineral fiber, and they both have fundamentally different characteristics and cost bases. Now, the development of these has been fundamentally interrupted purely as a result of actual travel restrictions. They're kind of reliant on a significant amount of international collaboration, and it's just not been possible to get our folks to meet them and them us, et cetera. We're getting it slowly back on track.
It's our expectation that 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. We haven't, by any stretch, taken our focus off that. In terms of the potential for us, it really depends on how markets evolve, how the messaging around QuadCore and Kooltherm in particular is understood longer term. That really is an education piece around, I think a lot of the noise and confusion around the subject of combustibility. The potential, I would still say, for QuadCore and Kooltherm is much more. Where there is an absolute demand for A1, we intend to be able to offer this as well as some synthetic mineral fiber products that we have within the range. In terms of PV, we call that the PowerPanel.
The development of that is nearing completion. We expect to be putting that product through external testing during quarter one of next year. We will have a reasonable-sized pilot plant in operation around mid-year next year, and that'll be based in Holywell in the U.K. Again, this is going to be combining PV with an insulated panel. 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, at what price, and what quantities, but as you look ahead, it's kind of almost unthinkable that you'd be building large-scale roofs in five years' time that don't have some form of solar integrated into them.
We think there's a tremendous opportunity of having that as a one-fix insulate and generate all in one piece insulated panel, and that's what we're after. That development has been going actually pretty much according to plan. From an M&A perspective, we're going to keep plugging away as the well-tested and proven formula of bolting on businesses. That's going to continue. Whether or not we could do something transformative, I guess the firepower is there to do so. It's really about the opportunities and the valuations. We're open to all, and naturally, we'll be looking with a more cautious eye at the present time at all these opportunities.
Yeah, we're open to considering all kinds of ideas. Whether or not that brings us more into renovation or not, that would be desirable, I have to say. That could be the case, particularly when you look at the roofing-type applications where renovation is, generally speaking, the larger part of the revenue. You mentioned Arcelor Construction. Not for us for multiple reasons, I suppose is the best thing to say about that.
Thank you so much.
Thank you. Yves, 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.
Hi, Rajesh.
Got three, please. First one is on margins. The margins for the boards business for H1 was less impacted compared to the panels business. If you could provide some color on what the key reasons behind that are, and how do you see those pan out for the full year. 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, if you can provide a bit more color there, it would be great. The last one, again, a bit more on the long-term focus. With policymakers focusing more on renovation, does that mean over the medium to long term, we could see a shift in Kingspan's end markets towards renovation, 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. I think it would be fair to say that we did have a bit of a tailwind there from an input perspective. 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 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. Again, having regard to the progress that we're making on the likes of QuadCore, in any kind of a stable environment, we ought to see the panel margin move beyond the 10%, at least into Q3. They're the principal margin drivers.
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 territory for us at all because it isn't. Maybe just less buoyant than it's been for the last six or nine months. Canada, to be honest, has been more our issue over the last three or four months. It's reacted very negatively, and we think it's going to be slow enough to pull itself out of this. That obviously taints the overall North American picture. We should point out as well here that there's a number of new entrants beginning to show up in the North American market.
Between this year and next, we'd expect there to be more than likely three to four 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. From a renovation perspective, I think that will grow gradually both across boards and panels. Perhaps we do acquire something that's got more of a renovation tint to it. Outside of that, I'd say that the movement will be gradual.
Great. Thank you very much.
Thank you, Rajesh. We have a question from Seonyoung Oh Yang of Omfidel 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.
Great. Thank you. 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 U.K., you have a pretty high penetration rate in insulation boards. With the British stimulus on renovation, I'm just wondering the EUR 2 billion investment they're announcing for the next six months, how will that translate to Kingspan's accounts? What's the magnitude of the positive impact? The second is on the Nordics. You are assuming a very steep increase in the market penetration for the next five years. I'm just wondering, can you provide a little bit more color in the Nordics market, outlook-wise? My second question is on the circularity.
I understand that you use a lot of plastic bottles in your products when you're manufacturing them. As for your products itself, are they recyclable at the end of the use stage, or they have to be breakdown in some sense, which is non-recyclable? I'm just trying to understand the circularity of your own products. That's all. Thank you.
Yes. Absolutely. You're very welcome. Maybe we'll start with the last question. Our products are totally circular, and we're just working on our old scheme there, which we'll inform you much more about at the next results out.
If you take our panels and boards, not only are they recyclable, but actually far more impressively, they're reusable. After life, these products don't actually disintegrate or turn to dust or whatever, like a lot of alternative materials do. We have countless examples of where our products are actually being reused in buildings, obviously of a lower standard, and they go on to live another life, which to be honest, is far more material and more impressive than it is to take it through a recycling process. In terms of recycling, the steel which is taken off the panel is 100% recyclable.
The product itself can either be pelletized and taken in hard form back into the foam, or indeed it can 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. Beyond that, in fact, the foam of our products are used for multiple other reimagined applications, and they go from floors to countertops to kitchens, et cetera. 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 to have insulation 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. We would see a tremendous opportunity to convert multiple applications across to advanced materials, which of course is why we're building our plant in Sweden, and that of course complements three existing facilities that we have already in Finland. In terms of the U.K.'s EUR 2 billion, jeez, we'd love to get as much of that as possible, it's very difficult for us to put a number on how much of that whole initiative is going to accrue to Kingspan. You can take it'll clearly be advantageous.
Okay. I see. Thank you very much.
Thank you, Seonyoung. We now have a question from Brijesh Singh of HSBC. Your line is now open. Please go ahead.
Thank you. Good morning, guys. I have one question probably left, and just probably if you can give me a little more flavor on how each end market have performed in the last three months and what you see in July and August. Related to that, whether if you can split that between new and renovation, whether there's any anomalies or performed fairly similarly.
Okay. In terms of end markets, Brijesh, we'll just go through some of the major ones. North America, well, Americas in total, I'd say that the U.S. for us has been a very strong contributor during the first six months. 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. Brazil as an activity level, has actually been an excellent contributor to the group. What's affecting us there obviously is exchange rates in more recent times, although they've recovered somewhat. At an activity level, volume has grown actually very significantly in that region, and we expect that not to be necessarily interrupted into next year. Closer to home in the U.K., 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 deltas that we saw in the second quarter. Pipeline looks reasonable, but honestly, we'd be unsure as to how executable that pipeline is. There's still all sorts of uncertainty around the U.K., but it has been improving. 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 Kingspan at least, and continues to be the case. Spain, I'd say not surprisingly, has been a tough market. Again, it has been recovering, I'd say quite well in the last four to six weeks, but still trailing last year.
Will you be able to split that among the end markets like commercial, industrial, or data centers? Are you seeing any differentiating growth numbers there?
For sure. On kind of large scale service industry, industrial, we're seeing that strong. The data market we're seeing very strong, in fact, is what I'd say. Probably the residential side of our business is probably the lower growth area so far.
Okay. Thank you. Thank you very much.
Okay.
Thank you, Brijesh. We have a question from Manish Baria of Société Générale. Your line is now open. Please go ahead.
Yes. Good morning. Thanks for the opportunity. My first question is, when you talk about this 1% renovation rate, does it mean 1% of building goes for renovation, or it means 1% of energy saved of total energy used in the buildings? This is the first question. The second question is also a market level question. Can you provide the split of building insulation demand in Europe by new build and renovation? When I say market level insulation, I mean to include all material, be it glass wool, mineral wool, or plastic, or all the materials. If you can provide that. Yeah.
Yeah. No, we mean 1% of buildings, broadly speaking, get renovated annually, so one in 100. That there will be significant political effort, as I say, to increase that dramatically, as we said in the earlier slide, to increase that fourfold, or else we're on a hiding to nothing in terms of the 1.5 degree target. Overall, in Europe, the market for insulation is probably about 60/40. About 60% new build, 40% retrofit. For our business, actually, it's less. We're probably more kind of a 70/30 business favoring new build.
Okay. Maybe if I can add one more. On your dividend policy or the shareholder remuneration policy, you had talked about the buyback. What is the criteria for buyback? Do you look at really the valuation of the Kingspan business and when you do buyback, when it is cheap? Because the share price of the Kingspan has gone up, so probably it has become less attractive from the buyback point of view. Why at this point when the share price are high, you are looking at buybacks right now?
Well, we're actually not necessarily looking at buyback now. What we're saying this morning is that we're 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. We don't have that policy today, but we will when we announce our results next year. We'd have to take into account all of those aspects in terms of how we might think about payouts going forward. No announced policy today.
Okay. Yeah. Thanks a lot.
Thank you, Manish. We now have a question from Pierre Rousseau of Barclays. Your line is now open. Please go ahead.
Yes, good morning, everyone. Thank you for taking my question. The first one is on your balance sheet. It shows a pension benefit obligation increase by about EUR 300 million. That seems quite high compared to your acquisition activities. I was wondering if you could give more details on that specifically. The second question would be on stimulus potential outside of Europe specifically, because we all hear a lot about the Green Deal, et cetera. It would be useful to hear also what happens in other geographies. Thank you.
Yeah, just on the pension piece, actually, the net pension liability that we acquired in respect of the Colt Group's acquisition was about EUR 10 million on acquisition. What you've quoted there is the liability piece and doesn't include the assets that were acquired as part of the scheme. The net position is about EUR 10 million, which answers that one. Green Deal, next one.
On the Green Deal, I suppose you've spoken a fair bit about that already, Pierre. Let's see. We've heard lots about Green Deals in the past as well. Let's just see how it evolves. We haven't much color to add to that for you to be honest.
If I may just-
Go on.
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, outside of Europe it's less clear what could happen. If you could give some details, that would be helpful.
Yeah. That's what I'm saying, that we don't have any specific detail on that except there's 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, obviously in North America, that will swing enormously one way or the other. That goes for many other regions. There's nothing hard and fast as of yet.
Okay. Thank you.
Okay, Ruby, I think that's it.
We have one final question if you have time.
Great. Okay.
Yep.
Is from Cedar Ekblom of Morgan Stanley. Your line is now open. Please go ahead.
Thanks very much. I've got two 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? If so, could you talk about how you would grow that considering the technical nature of the products that you sell? Do they fit well within distribution sales channels? The second question would be a perspective from you on where you see the greatest benefit as it relates to energy efficiency in 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?
Yeah. Sure. Absolutely. 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. That, if you like, is well worn and something that could easily be expanded. The insulated panel, not so. It's a 99.9% direct channel, and whether that's for renovation or new build, we would expect that 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 buildings, they'll be brought in in electrical form.
The issue really is the ability for a grid to handle that. That's where the trade-off has to happen between the fabric and insulation. 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. 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 first place to start.
When I mean electrical, I'm actually meaning more sort of electrical components within the building, more efficient HVAC equipment, the stuff that the capital goods companies are essentially 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.
Yeah. Well, the returns for the envelope are the most compelling of all.
Okay. Perfect. Thanks.
There's just no question about that. We actually get rid of energy in the first place for relatively little cost. On average, in an average house, you're probably going to spend about EUR 2,000 if you do a proper job on insulating it, and the return from that is extraordinary.
Great. Thanks very much.
Thank you. Thanks to everybody. That ends our call, and no doubt we'll be speaking to a good number of you over the coming days.