Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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July 18, 2023

Fewer than 1 in 10 offices to meet 2030 energy targets | KGP

Company news

Kingspan Group (KGP, €69, £10,803m mkt cap)

Insulation and building envelope supplier. Acquisition. Agreement with Schramek to acquire c. 51% of the shares of Steico, with an option to acquire a further c. 10% in the future. Steico is the world leader in natural insulation and wood-based building envelope products, based in Germany and listed on the unofficial markets of several German Stock Exchanges. The initial consideration for the shares will be €35 per share, plus potential deferred consideration of up to a further €35 per share contingent on achievement of specified thresholds with a material uplift in profitability.  The initial consideration of approximately €251m will be satisfied on completion, with 25% of the consideration potentially being exchanged for new shares in Kingspan (subject to Kingspan share price at completion).  The consideration payable under the put and call option to acquire Schramek’s remaining c. 10% in Steico is for a capped amount based on a multiple of future earnings. Steico has four large production sites in Poland and France, including additional capacity nearing completion. It had audited operating revenues of €445m in the 12 months to 31 December 2022 and EBITDA of €90m.  As at June 2023, Steico guided to 2023 revenues of c. €378m at an EBIT margin of 8% – 10% (FY22,  14.6%). As at 31 December 2022, it had gross assets of €509m. The existing Steico executive management team will be retained in the business, and will continue to manage and develop the business. The acquisition is conditional on regulatory clearance, and is expected to complete in early 2024. Following completion, Steico will continue to maintain its listings on the German Stock Exchanges. Outlook: The acquisition is expected to be earnings neutral initially, based on Kingspan consensus EPS for 2023 and Steico guidance for 2023. “In addition to Steico’s existing ambitious growth plans, we anticipate significant long term leverage via the Kingspan sales channels”.


In other news …

Energy efficiency. Fewer than one in 10 UK offices would meet 2030 environmental regulations, Property Week (paywall). Just 8.3% of UK office space will satisfy new environmental standards set to be enforced from 2030, according to a report from Carter Jonas. The report also shows that only 11% of floorspace across 12 UK cities built since 2010 would currently meet new minimum energy efficiency standards (MEES) regulations that come into force in seven years’ time. MEES regulations from 1 April made it unlawful to let a property with an EPC rating below ‘E’ and the government intends to raise the minimum to ‘C’ by 2030. The property group assessed office stock in Birmingham, Bristol, Cambridge, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, London, Manchester, Newcastle and Oxford. The analysis found that only 31.6% of stock is band ’C’ or better, while 17% is in EPC rating bands ‘F’ and ‘G’, 55% is more than 30 years old and almost a quarter was built before 1950.

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