Investors in the Cavan-based building products group, Kingspan, will be hoping that all the skeletons have finally fallen out of its closet. Just as the ghost of the royalties controversy had faded into the past, last week's revelation of possible insider share dealing by people connected with Mr Brendan Murtagh, a founding director, reared its ugly head. The two incidents, of course, are unconnected. But some might think it points to a particular type of malaise in the company. In this context, it is perhaps worth recalling the royalty incident, which, it may be forgotten, is still being paid for. The four executive directors - Mr Eugene Murtagh, Mr Brendan Murtagh, Mr Eoin McCarthy and Mr Dermot Mulvihill - had been receiving substantial tax-free payments from a royalty company. The four, for example, had received a royalty payment of £1 million between them in 1994. That contrasted sharply with the group's pre-tax profit of £4.7 million and dividend payment of £0.8 million.

What was wrong about that transaction, however, was not the size, nor even that it was tax-free. What stuck out was the assurance, in the annual report, that "there had not been any contract or arrangement with the company, or any subsidiary, in which a director of the company was materially interested". Following robust criticism, the company proposed a compromise, to which the shareholders agreed. This involved the company buying the royalty company, Thermal Product Developments, and paying the four directors £4.3 million tax-free between them, over a four-year period, in lieu of the directors' patent rights to certain Kingspan products. The payments under that scheme should be finalised next year. Those same four directors continued to fill their coffers this year when they raised £27 million in June through the placing of some of their shares at 310p per share. With the share price down to 200p, those institutions must now be feeling quite sick, and the last thing they wanted to see was any cloud over hanging the company. Indeed, they badly needed good news to enhance the group's share rating. But they welcomed the latest statement from the company, on the share dealings, because of its clarity and the detail it carried. That statement, which was well-publicised, said Mr Brendan Murtagh had resigned as a director because "he could have been responsible for a breach of confidentiality" over his group's talks with Hewetson, a British company, which subsequently received a recommended bid from Kingspan.

"While Mr Brendan Murtagh may inadvertently have disclosed confidential information to his sons, he did not encourage them to deal in Hewetson's shares, nor did he envisage that they would do so," the statement said.

The deals were made in the name of the wife, Ms Nicky Shiers, of one of his sons, Mr Alan Murtagh, and in the name of a close friend, Ms Kathryn McFadden, of another son, Mr Fergal Murtagh, after Kingspan had begun due diligence and signed a confidentiality agreement with Hewetson. When Mr Brendan Murtagh became aware of the dealings, he advised his sons to arrange for the sale of the shares. These dealings are now being investigated by the London Stock Exchange and, if it considers there is a case to be answered, details will be sent to the British Department of Trade and Industry, which can bring criminal proceedings in the event of insider trading. However, the company's lucid statement was not complete. It did not mention that Mr Murtagh's sons, who worked in junior positions in Kingspan, are to be "suspended" from their positions on January 1st, with no lump-sum payment. That information was only revealed following queries from this newspaper.

While the share dealings could have serious implications for the four people directly connected to the transactions, they do not have any financial implications for Kingspan. The big regret about the share dealings disclosure is that it has diverted attention from an important acquisition. If the acquisition of Hewetson is successful, it will represent Kingspan's first takeover of a publicly-quoted company. Kingspan has been one of the fastest-growing groups, with earning per share rising from 3.6p in 1995 to a prospective 17.5p for this year. Hewetson's future also looks good. While its brokering firm, Beeson Gregory, has lowered its sales forecasts because of an expected downturn in the economy, it has upgraded profit estimates to £5.3 million for 1998/9 and to £6.4 million for 1999/2000, due to better margins. On that basis, the acquisition should add around 1p to group earnings next year.

Past events should not impede the group's onward march.