Cube UK Report (19 Apr 2021) – Inflation and real growth at Kingspan

Cube UK Report (19 Apr 2021) – Inflation and real growth at Kingspan

Hi folks,

I’m pleased to say that Roland is back this week and will be helping out a few days every week (hopefully) for the next month.

For now, let’s catch up on the latest RNS announcements of interest:

  • Kingspan
  • Churchill China
  • D4T4


  • Stock data should display here.
Market cap €13.8 billion
RNS Trading Statement
Writer disclosure No position.

Let’s check out the progress at this large building materials group.

Shares are up 2.5%:

The Group had a strong first quarter both in terms of sales and order intake. Group sales of €1.28bn for the three-month period to 31 March were 24% ahead of prior year (+22% underlying). Significant raw material inflation is a key feature of the current trading environment and the associated recovery effort is ongoing and on track, albeit with a lag.

I note that sales for FY December 2020 were up compared to 2019. So it’s not a case of weak comparatives making it easy to produce a big bounce in the current year.

The reference to inflation is interesting – and I suspect that it’s playing a role, as Kingspan will need to pass on price increases to customers (though later in the statement, the company says it’s trying “limit any impact” on end markets).

Geographically, the growth appears to be spread across every region.

Digging into the categories:

  • Insulated panels +25% (+27% underlying)
  • Insulation boards +12% (+13% underlying). A new acquisition is going to boost this.
  • Light and Air +65% (+8% underlying). Boosted by an acquisition. Reference to “natural air ventilation” may be relevant for buildings which will want to be more ventilated post-Covid?
  • Data & Flooring +11% (+14% underlying), Water & Energy +21% (+17% underlying).

Net debt at the end of Q1 say at €352 million. €2 billion of available liquidity (cash plus undrawn facilities).


The Group’s trading outlook for the second quarter is positive with ongoing strong momentum across most key markets. Furthermore, raw material inflation, and indeed availability of same, is increasingly a challenge and we are doing our utmost to limit any impact on our own end markets. We have a strong backlog on hand which augurs well for the period ahead although in the current environment we are cautious about looking too far forward.

My view

This company is doing about €500 million of operating profit per year, and appears to be on a strong upward trajectory. Pandemic or no pandemic, the need for construction materials is persistently strong. The geographic diversification available here is another bonus for shareholders.

There’s a lot to like. The shares are priced for continued success, which I consider likely.


Churchill China

  • Stock data should display here.
Market cap £164 million
RNS Preliminary Results
Writer disclosure No position.

This is a ceramics manufacturer widely regarded among small-cap investors as a high-quality outfit. It has (had!) a lovely trend of growing profits that stretches back over a decade.

The company itself has a heritage going back over 200 years.

The Covid-19 crisis has left its mark, however. Hospitality was shut down by many governments, resulting in the closure of Churchill’s markets.

Some key points about the 2020 performance:

  • revenues down 46%
  • due to negative operational gearing, adjusted operating profit collapsed from £11.2 million to just £0.9 million.
  • Profit before tax fell to almost nothing (£0.1 million) after one-off redundancy costs and other costs associated with reducing output.
  • cash fell from £15.6 million to £14 million. I think this is an excellent result in a year of crisis.

The dividend policy will be reviewed later this year, but for now there won’t be any:

The Board recognises the importance of dividend income to shareholders and our approach remains that the owners of our business should receive an appropriate return for their investment. However we do not believe that it is currently appropriate to declare a final dividend for 2020. While our financial position continues to be robust, the level of certainty attributable to the expected recovery in our markets has not yet reached a position which would support the re-commencement of distributions.

Recent trading

There are some signs of recovery – one would hope so!

Despite the level of government restrictions on worldwide hospitality markets in the fourth quarter of 2020 and the first quarter of 2021, there is now growing evidence from enquiries, order levels and sales that activity levels are recovering across our markets.

My view

I have a lot of trust in this business – it’s the sort of company which I would be comfortable owning for the long-term.

At the current valuation, the recovery is priced in. So I wouldn’t be in a hurry to buy – but I’d also be in no rush to sell! Companies like this don’t come along very often.


D4T4 Solutions

  • Stock data should display here.
Market cap £141 million
RNS Trading Update
Writer disclosure No position.

This aim-listed data management/data analytics company has an update for FY March 2021:.

Following a strong second half to the financial year, Group revenue and adjusted profit before tax* are expected to be approximately £22.8 million and £4.2 million respectively, both ahead of the Board’s prior expectations, comfortably so at the adjusted pre-tax profit level.

I see that D4T4 shares are up 10% today – no surprise there! It looks like the consensus forecast was for adjusted pre-tax profit at £3.5 million, so this is a significant beat.

The good news continues:

As we move into FY22 the Group now benefits from record levels of recurring revenue with year-end annual recurring revenue (ARR**) up by 11% year on year to £10.6 million (2020: £9.6 million).

Recurring revenue is growing faster than revenue as a whole – a hint that the quality of the overall financial performance is improving.

Cash has improved to £14.2 million, with no debt, and no Covid-related government supports needed or used.

My view – I know that this company is respected by excellent investors, and I can see some of the attractions. Given the valuations attached to companies in this space, I’m surprised the market cap isn’t higher already!


That will do it for today – thanks for dropping by. Roland will be here tomorrow.

If you have Gold Membership, I recommend checking out Joel’s thoughts on retirement planning as an investor. After some great gains in the markets over the past while, it looks like plenty of investors have started to think carefully about their big-picture goals!




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