Kingspan shares have fallen 40 cents to €3.90 after the company issued what the market interpreted as a veiled profit warning about its US business. The Cavan building materials group reported a 15 per cent rise in pre-tax profits to €67.5 million (£53.5 million) for the year to end-December 2000, results that were in line with market expectations. But chairman and chief executive Mr Eugene Murtagh warned that a longer and deeper "downturn" than expected in the US would affect growth prospects of recent acquisition, Tate, acquired last year for a total of $120 million (€133 million). The raised access floors specialist would have accounted for 32 per cent of group turnover if it was included for 2000. Tate's data centre market would be volatile in the immediate term because of the vulnerability of the technology and telecommunications sectors, Mr Murtagh said.

Rationalisation and consolidation is likely in this section of the market. "Tate will be adjusting its expectations in the short term from this sector but not in the high rise market which will remain the main focus," Mr Murtagh said. Kingspan's remaining businesses, including Hewetson in the UK, should not be adversely affected, he said.

Following the announcement, Davy analyst Mr Florence O'Donoghue reduced his 2001 pre-tax profits and earnings per share before goodwill forecasts from €86.4 million to €83.2 million and from 40.8 cents to 39.5 cents. ABN Amro analyst Mr Damien Roddy cut his earnings per share after goodwill forecast from 36.9 cents to 35.3 cents. Mr Murtagh said current performance was ahead of last year and in line with expectations. Following capital investment of €31 million in 2000, the group will invest to add further capacity this year. A new composite panel facility is planned for mainland Europe, probably in Benelux or Germany. Shareholders will get a 45 per cent increase in dividends for 2000. The final dividend of 2.27 cents per share will bring the total dividend to 3.62 cents. As the owner of about 24 per cent of the group, Mr Murtagh will get dividends of €1.46 million. Mr Murtagh said the dividend increase "was in line with group policy to bring dividend cover close to the industry average and is consistent with the commitment to increasing shareholder value while conserving resources to fund expansion plans".

Dividends were covered 8.4 times by profits, down from 10.9 times in 1999. Group turnover for 2000 was 24.4 per cent ahead at €662.6 million with currency translation accounting for €35.3 million of the increase. A geographic breakdown shows a 22 per cent rise in sales in the Republic to €97.6 million, a 27 per cent increase in Britain and Northern Ireland to €455.8 million and a 12 per cent rise in mainland Europe to €89.5 million. Operating profit was up 18 per cent at €76.8 million with margins down to 11.59 per cent from 12.21 per cent. Turnover growth came from increased market penetration and product development, Mr Murtagh said. On the construction business, Mr Murtagh maintained the dynamics of the market should favour Kingspan because its products were designed to reduce capital and running costs and are focused on meeting functional needs.

Earnings per share were 12 per cent ahead at 30.4 cents held back by increases in net interest costs and an increase in the effective tax rate. Free cash flow per share was up 68 per cent to 33.2 cents. Capital expenditure during the year included new production lines for composite panels and rigid insulation boards and raised access floor. Gearing was 60 per cent at December 31st 2000, down from 72 per cent at end 1999 while interest was covered 8.3 times by profits, compared with 10.9 times a year earlier.