TIDMNXR
RNS Number : 1829R
Norcros PLC
13 June 2018
13 June 2018
Norcros plc
Results for the year ended 31 March 2018
'Excellent progress towards our strategic objectives.'
Norcros, a market leading supplier of high quality and
innovative bathroom and kitchen products, today announces its
results for the year ended 31 March 2018.
Financial Summary
2018 2017 % change % change
as reported at constant
currency
Revenue GBP300.1m GBP271.2m +10.7% +8.6%
-------------- ------------- ------------- -------------
Underlying operating profit* GBP27.4m GBP23.8m +15.1%
-------------- ------------- ------------- -------------
Underlying profit before
taxation* GBP26.3m GBP22.9m +14.8%
-------------- ------------- ------------- -------------
Underlying diluted EPS* 29.5p 27.8p +6.1%
-------------- ------------- ------------- -------------
Underlying operating cash
flow* GBP31.0m GBP29.8m +4.0%
-------------- ------------- ------------- -------------
Operating profit GBP19.6m GBP16.8m +16.7%
-------------- ------------- ------------- -------------
Net debt GBP47.1m GBP23.2m
-------------- ------------- ------------- -------------
Dividend per share 7.8p 7.2p +8.3%
-------------- ------------- ------------- -------------
* Definitions of alternative performance measures are provided
in note 5.
Highlights
-- Ninth consecutive year of growth
-- Revenue up 10.7% at GBP300.1m (2017: GBP271.2m)
-- Underlying operating profit up 15.1% at GBP27.4m (2017:
GBP23.8m)
-- Group operating profit was GBP19.6m (2017: GBP16.8m)
-- Acquisition of Merlyn trading strongly, in line with
expectations and fully integrated
-- Further progress towards new strategic growth target
-- Strong cash conversion
-- Underlying ROCE at 18.0% (2017: 18.4%) - ahead of strategic
target
-- Full year dividend increased by 8.3% to 7.8p
Martin Towers, Chairman, commented:
"I am delighted to announce that Norcros has recorded its ninth
consecutive year of revenue and underlying operating profit growth
and has also continued to make excellent progress towards its
strategic objectives with the acquisition of the Merlyn business in
the year. The Group has delivered another strong performance
despite challenging market conditions, reflecting the successful
acquisition strategy and the sustained focus on driving organic
growth through market share gain. The resilience of the Group's
business portfolio including the recent acquisitions, together with
our well developed acquisition pipeline, gives me confidence that
we can continue to make strong progress in the current year towards
our new medium-term strategic objectives."
There will be a presentation today at 9.30 am for analysts at
the offices of Hudson Sandler, 25 Charterhouse Square, London, EC1M
6AE. The supporting slides will be available on the Norcros website
at http://www.norcros.com later in the day.
Enquiries
Norcros plc Tel: 01625 547700
Nick Kelsall, Group Chief Executive
Shaun Smith, Group Finance Director
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Notes to Editors
Norcros is a market leading supplier of high quality and
innovative bathroom and kitchen products with operations primarily
in the UK and South Africa.
-- Based in the UK, Norcros operates under seven brands:
-- Triton - Market leader in the manufacture and marketing of showers
in the UK
-- Merlyn - The UK and Ireland's No.1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors
-- Vado - A leading manufacturer and supplier of taps, mixer showers,
bathroom accessories and valves
-- Croydex - A market-leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and accessories
-- Abode - A leading niche designer and distributor of high quality
kitchen taps, bathroom taps, and kitchen sinks
-- Johnson Tiles - A leading manufacturer and supplier of ceramic
tiles in the UK
-- Norcros Adhesives - Manufacturer of tile & stone adhesives,
grouts and related products
-- Based in South Africa, Norcros operates under three brands:
-- Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitaryware,
showers and adhesives
-- Johnson Tiles South Africa - Manufacturer of ceramic and porcelain
tiles
-- TAL - The leading manufacturer of ceramic and building adhesives
-- Norcros is headquartered in Wilmslow, Cheshire and employs
around 2,100 people. The Company is listed on the London Stock
Exchange. For further information please visit the Company website:
http://www.norcros.com
Chairman's Statement
Overview
I am delighted to announce that Norcros has recorded its ninth
consecutive year of revenue and underlying operating profit growth,
with results in line with market expectations. The Group has also
continued to make excellent progress towards its strategic
objectives with the acquisition of the Merlyn business in the
year.
Group revenue for the year was GBP300.1m, 10.7% higher than the
prior year on a reported basis, 8.6% higher on a constant currency
basis and 4.4% higher on a like for like constant currency basis.
Underlying operating profit at GBP27.4m was 15.1% higher than the
prior year, mainly reflecting the continued improvement in
performance in our South African business, a first-time
contribution from Merlyn, which was acquired in November 2017 and
the improvement in performance at Triton partly offset by a lower
contribution from Johnson Tiles. This has resulted in a 6.1%
increase in underlying diluted earnings per share to 29.5p (2017:
27.8p).
Acquisition of Merlyn
The GBP59.1m acquisition of the Merlyn business, the UK and
Ireland's No. 1 supplier of shower enclosures and trays to the
residential, commercial and hospitality sectors, was the Group's
largest acquisition and a further key step towards achieving our
strategic goals. I have been encouraged by the seamless integration
into the Norcros Group and the strong trading performance since
being acquired.
The support for the Group's strategy from existing and new
shareholders was evident in the year as the Group successfully
raised GBP31.4m of new equity through an open offer and firm
placing and increased its banking facilities to GBP120m to provide
the appropriate funding structure for the Merlyn acquisition. The
Group remains in a strong financial position, with a continued
focus on cash generation in the year. Year end net debt at GBP47.1m
(2017: GBP23.2m) represents pro-forma leverage of 1.2 times
underlying EBITDA.
Dividend
The Board is recommending a final dividend for the year of 5.2p
(2017: 4.8p) per share. When combined with the interim dividend of
2.6p (2017: 2.4p) per share, which was paid on 12 January 2018,
this will make a total dividend for the year of 7.8p (2017: 7.2p)
per share, an 8.3% increase on the previous year.
Pension scheme
The net deficit relating to our UK defined benefit pension
scheme as calculated under IAS 19R has reduced to GBP48.0m at 31
March 2018 from GBP62.7m at 31 March 2017, primarily due to an
increase in the discount rate to 2.65% and lower inflation
expectations. We remain confident that our pension obligations
continue to be appropriately funded and well managed, with the
Company having paid GBP2.5m this year into the scheme in accordance
with the agreement made with the Trustee in March 2016. A new
triennial valuation dated 1 April 2018 and updated deficit recovery
plan will need to be agreed between the Trustee and Company in due
course and discussions are now underway.
Governance
As Chairman, one of my primary responsibilities is to ensure
that the Group operates to the highest standards in all aspects of
governance and risk management. Our aim at Norcros is to manage a
growing business effectively, while ensuring that proper operating
procedures and internal controls are maintained at all times.
Transparency is central to this objective and you will find more
detail about our approach and progress over the last year in the
Corporate Governance section of our Annual Report and Accounts.
People
We regard our employees as our most valuable asset and in
recognition of this the Group aims to create an environment in
which they can see their careers develop. On behalf of the Board I
would like to once more thank the Group's employees who have helped
to deliver upon the Group's strategic objectives and in particular
for their dedication and contribution over the last twelve months.
I would also like to welcome the management team and employees of
Merlyn to the Group.
Strategy update
The Group implemented its strategy for growth in 2013,
accompanied by a number of strategic targets. As detailed later,
the execution of the 2013 strategy has been highly successful
delivering improved returns for shareholders over the five-year
period. During the year the Board reviewed its strategy and
concluded that, whilst the current strategy has been successful, a
new "2023 Vision" for the Group and a refreshed set of strategic
targets to 2023 was appropriate which combined would provide the
strategic framework for the next phase of development of the Group.
In summary, the objectives of the 2018 strategy are to continue to
scale up the business through acquisitions and organically,
focussing on complementary markets with attractive returns on
capital and leveraging Group synergy opportunities.
The strategy has strong momentum, and this is reflected in the
challenging new strategic targets as follows:
- We aim to grow revenue to GBP600m by 2023 (previously GBP420m
by 2018);
- Maintain approximately 50% of Group revenue derived outside
the UK (no change); and
- Deliver an improved and sustainable ROCE of over 15%
(previously a 12-15% range) through the economic cycle.
The Board believes that our focus on being a leading supplier of
bathroom and kitchen products in selected geographies, offering
strong brands, contemporary designs with a reputation for quality,
outstanding service and innovation will deliver improved and
sustainable returns for shareholders.
Summary
The Group has delivered another strong performance in 2017/18
despite challenging market conditions and a weaker pound,
reflecting the successful acquisition strategy and the sustained
focus on driving organic growth through market share gain,
investment in new products, operational efficiency programmes and
geographic expansion. In addition, we have taken further steps
towards achieving our vision and strategic goals with the
acquisition of the Merlyn business during the year, which will
extend our product offering and provide opportunities to drive
additional revenue for the Group within our chosen sectors and
geographies. The resilience of the Group's business portfolio
including the recent acquisitions, together with our well developed
acquisition pipeline, give me confidence that we can continue to
make strong progress in the current year towards our new
medium-term strategic objectives.
Group Chief Executive's Statement
Overview
Building on our record of sustained progress over recent years,
Group revenue for the year increased by 10.7% to GBP300.1m (2017:
GBP271.2m), by 8.6% on a constant currency basis, and by 4.4% on a
like-for-like constant currency basis. Group underlying operating
profit was GBP27.4m compared to GBP23.8m in the prior year.
The execution of our growth strategy continued apace and in the
period we successfully completed our most significant acquisition
to date. Merlyn, the UK and Ireland's No. 1 supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors has immediately made a strong contribution to the group.
Additionally, Merlyn offers good synergistic opportunities for
cross selling and further channel development across our Group
businesses.
UK revenue for the year at GBP200.6m (2017: GBP182.3m) was 10.0%
ahead of the prior year and 3.6% higher on a like for like basis.
The like for like increase reflected the combination of strong
revenue growth in the UK portfolio excluding Johnson Tiles of 9.8%
and a decline in revenue of 11.5% in Johnson Tiles. UK underlying
operating profit for the year was GBP1.2m higher than the prior
year at GBP18.6m (2017: GBP17.4m) with an underlying operating
margin of 9.3% (2017: 9.5%). The improvement in profit in the year
mainly reflected the first time contribution from our newly
acquired Merlyn business, the improvement in performance at Triton,
partly offset by the decline in profitability in Johnson Tiles.
Whilst the actions to restructure the Johnson Tiles business in
2017 were completed successfully, market conditions in the second
half of the year proved more challenging than expected. As a
result, a further restructuring programme has commenced which will
involve the loss of up to 50 jobs. This has resulted in an
exceptional charge of GBP2.1m. Annualised savings are expected to
be at least GBP2.0m and we remain confident that this decisive
action will return the tile business back into profitability in the
current year.
Our South African business continued the sustained progress of
recent years with another year of strong growth. The combination of
market share gain and the appreciation of the Rand against Sterling
during the year resulted in reported revenue 11.9% ahead of the
prior year at GBP99.5m (2017: GBP88.9m). On a constant currency
basis revenue was 5.9% higher than last year. Underlying operating
profit for the year increased by 38% to GBP8.8m (2017: GBP6.4m),
including a GBP0.3m benefit from the stronger Rand. This reflected
market share gains, further supply chain improvements and timely
cost management. The return on sales was 8.8% (2017: 7.2%), a
considerable increase on last year. In Johnson Tiles SA, the new
product development programme and ongoing plant improvements
contributed to another year of operating profit growth. In TAL,
operational improvements in all three plants, together with market
share gains, delivered underlying operating profit growth in the
year. In Tile Africa, the expanded CX store programme and
improvements in sourcing and price management contributed towards
profit growth.
Group underlying operating profit at GBP27.4m (2017: GBP23.8m)
was 15.1% higher than the prior year, with Group underlying
operating margins increasing to 9.1% (2017: 8.8%). Underlying
operating cash flow improved to GBP31.0m (2017: GBP29.8m)
reflecting the improved underlying operating profit, a successful
inventory reduction programme at Johnson Tiles and growth related
working capital investment.
During the year the Group agreed a new GBP120m (plus a GBP30m
accordion) unsecured debt facility to support the acquisition of
Merlyn and provide the funding capacity for further acquisitions
and organic growth opportunities. This new facility will run for
four years to 2021 with the option to extend for an additional
year. Furthermore, to finance the Merlyn acquisition, the Group
successfully raised GBP31.4m of equity through the admission of
18,254,161 new ordinary shares.
The Group has a strong balance sheet with net debt of GBP47.1m
(2017: GBP23.2m), and pro forma leverage of 1.2 times underlying
EBITDA (2017: 0.8 times).
Strategy
In April 2018 we announced a refreshed strategy for growth, the
strategy builds on the 2013-2018 strategic initiatives and defines
a 2023 vision for the Group. The future performance of the group
will be measured against the key strategic targets set out in this
refreshed strategy.
The current year's performance is benchmarked against the
following three strategic targets established in 2013: to double
Group revenue to GBP420m by 2018; to maintain revenue derived
outside of the UK at approximately 50% of Group revenue; and to
sustain a pre-tax return on underlying capital employed of 12% to
15% over the economic cycle.
We have again made solid progress in the current year against
all three of these objectives. Group revenue in the current year
has increased by 10.7% to GBP300.1m with our progress against the
strategic target held back by the significant depreciation of the
Rand/Sterling exchange rate since the objective was established in
2013. In constant currency terms, Group revenue would have been
nearer to GBP330m.
On a Sterling reported basis, Group revenue derived outside of
the UK was 44.3% (2017: 42.8%). In constant currency terms, we are
in line with our target this year at 49.3% and remain focussed on
growing our current overseas markets and developing new ones to
support this important strategic intent.
Along with our existing business portfolio all the recently
acquired businesses have strongly contributed towards the Group
achieving an underlying return on capital employed of 18.0%
(2017:18.4%), which is ahead of our 2013 strategic target.
Our track record in acquiring quality businesses in our targeted
sectors and geographies, and our skill in seamlessly integrating
them into the Group and further developing them, together with our
growing pipeline of acquisition opportunities gives me confidence
that we will successfully deliver on our new 2023 vision and
strategic targets and continue to create value for our
shareholders. I am also encouraged by the growing number of
synergies and organic growth opportunities being progressed
throughout the expanded Group.
Summary and outlook
The Group has announced its 2023 vision and refreshed its
strategic targets to 2023. This provides an important framework for
all stakeholders as we continue to successfully grow and develop
the Group. Whilst the drivers of demand in our industry in the
medium term remain strong, the UK market in the short term remains
challenging. With the continued investment in our sales and
marketing initiatives and the decisive actions taken to realign our
operating costs and the further opportunities that the acquisition
of the Merlyn business brings, I am confident that our UK business
is well placed to grow further. Our South African business has
continued to deliver sustainable growth, and, notwithstanding the
political unrest prior to the election of the new President, the
medium-term outlook in South Africa remains positive, providing
opportunities for the Group to continue to grow its market share.
With our leading market positions, portfolio of strong brands,
continued new product investment, strong financial position and
self-help initiatives focused on market share gain and operational
improvement, the Board remains confident that the Group should
continue to make further progress for the year ending 31 March
2019.
Business performance
2018 2017
GBPm GBPm
--------------------------------- ------ ------
Revenue 300.1 271.2
--------------------------------- ------ ------
Operating profit 19.6 16.8
IAS 19R administrative expenses 1.4 2.0
Acquisition related costs 4.3 2.7
Exceptional operating items 2.1 2.3
--------------------------------- ------ ------
Underlying operating profit 27.4 23.8
--------------------------------- ------ ------
2018 2017
GBPm GBPm
--------------------------------------------------- ------ ------
Revenue - UK 200.6 182.3
Revenue - South Africa 99.5 88.9
--------------------------------------------------- ------ ------
Revenue - Group 300.1 271.2
--------------------------------------------------- ------ ------
Underlying operating profit - UK 18.6 17.4
Underlying operating profit - South Africa 8.8 6.4
--------------------------------------------------- ------ ------
Underlying operating profit - Group 27.4 23.8
--------------------------------------------------- ------ ------
Underlying operating profit margin - UK 9.3% 9.5%
Underlying operating profit margin - South Africa 8.8% 7.2%
--------------------------------------------------- ------ ------
Underlying operating profit margin - Group 9.1% 8.8%
--------------------------------------------------- ------ ------
2018 2017
GBPm GBPm
---------------------------------- ------ ------
Underlying operating profit 27.4 23.8
Depreciation 6.4 6.4
---------------------------------- ------ ------
Underlying EBITDA 33.8 30.2
Net working capital movement (2.8) (1.8)
Share-based payments 0.9 1.4
Cash settlement of share options (0.9) -
Underlying operating cash flow 31.0 29.8
---------------------------------- ------ ------
Business review - UK
In the UK, revenue increased in the year by 10.0% to GBP200.6m
(2017: GBP182.3m). This includes a first time contribution of
GBP11.7m from our newly acquired Merlyn business (acquired November
2017). On a like for like basis (excluding revenues from Merlyn),
total revenue was 3.6% higher than the prior year. Second half UK
like for like revenue declined by 0.8% compared to the 8.5% growth
seen in the first half. This was largely due to significantly lower
retail revenues at Johnson Tiles and a tough comparative period
last year. Johnson Tiles apart, second half UK like for like
revenue was 8.4% higher (H1 +11.4%). On a full year like for like
basis the UK businesses, excluding Johnson Tiles, grew total
revenues by 9.8% with strong growth in the trade and export
sectors.
Underlying operating profit grew by GBP1.2m to GBP18.6m (2017:
GBP17.4m) with an operating margin of 9.3% (2017: 9.5%). This
mainly reflected a first time contribution from Merlyn combined
with a strong performance from Triton which was partly offset by a
lower contribution from Johnson Tiles.
Triton
Revenue at Triton, our market leading UK domestic shower
business, was 8.4% higher at GBP52.8m (2017: GBP48.7m). Successful
brand investment and new product range launches resulted in revenue
growth in both the UK and Export markets, maintaining Triton's
brand and market leadership positions across its extensive customer
base.
UK revenue was 7.0% higher than the prior year overall, with
growth in the trade and retail sectors of 8.1% and 6.4%
respectively. This performance was achieved following significant
investment in a national TV, press, point of sale, online and
social media marketing campaign (# See you first thing Britain).
The campaign was a great success, with improved brand recognition
and growth from digital channels as consumers and the trade
increasingly moved to buying showers online.
Export revenue, which represents approximately 19% of overall
revenue, was 15.3% higher compared to the prior year. Export growth
was driven by the success of the T90SR silent pump electric shower
which has firmly established itself and is proving to be Ireland's
favourite shower.
Triton has continued to invest significantly in new product
ranges. Launches in the year include the new Omnicare product
designed for the care market, the new digital mixer family H(2)
OST, new shower accessories and an expanded mixer shower range with
accompanying bathroom mixer taps.
Triton was awarded two prestigious Home & Living awards by
the Daily and Sunday Express, Best Bathroom Supplier and Best of
British, new national awards celebrating the brightest and best
brands making a difference in the nation's homes. In the first
award the judges recognised Triton's design strength, service and
superb delivery capabilities, all great facets of the Brand. The
second award was in recognition of Triton's long standing and
ongoing support of British design and innovation and in particular
for the new H(2) OST digital mixer shower, which was recognised and
celebrated for its ground-breaking style, design and superb
features.
Pleasingly, Triton has cemented its position as a world class
manufacturer, achieving the ISO9001 (2015) standard, updated from
ISO9001 (2008) as well as continuing to meet ISO14001 and the
highest factory and product approvals and accreditations from BSI
and BEAB.
Triton again delivered strong underlying operating profits
higher than the previous year and excellent cash conversion.
Merlyn
Merlyn, the UK and Ireland's No. 1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors
recorded revenue of GBP11.7m for the period since acquisition on 23
November 2017, in line with the Board's expectations. For the
twelve-month period ended 31 March 2018, including the relevant
period prior to Norcros ownership, Merlyn grew revenue by 13.0%
compared to the prior year.
UK retail grew by 18.5% and instrumental to this growth has been
new product introductions including Mbox and Series 6 Frameless.
Merlyn has recently been awarded the prestigious Red Dot 2018
design award for its Arysto Eight infold shower door enclosure.
Additionally, Merlyn has increased sales with independent
retailers and buying groups, leading to it winning the Fortis
Buying Group Supplier of the Year award.
On a year on year basis, including pre-acquisition revenues, the
UK trade sector grew by 10.3% driven by further expansion in the
specification channel with major account wins including McCarthy
& Stone, Inhabit, Countryside Properties and Travis
Perkins.
Consistent with our other recent acquisitions, it is pleasing to
report that Merlyn has been integrated seamlessly into the Group.
The performance of Merlyn since acquisition has been very
encouraging, with the business generating an underlying operating
profit and cash performance in line with the Board's expectations.
We are also progressing potential Group synergies with new business
wins being the initial area of focus.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of GBP42.9m for the period
(2017: GBP37.2m), 15.3% higher than the prior year. Vado delivered
impressive growth in the UK, particularly in the specification
segment, as well as growth in export markets resulting from the
first full year of improved distribution arrangements in the Middle
East.
UK revenue was 14.1% higher than the prior year with continued
growth in both the trade and retail segments. UK trade sector
revenue grew by 16.8% against the prior year, which followed 28.0%
growth in the prior year, as Vado gained further share in the
specification segment. Contracts with several of its existing major
housebuilder clients were renewed and Vado products have been
specified for home developments with new clients such as Renaker,
Greystar and Springfield Homes. Vado was also awarded supplier of
the year to the Fortis merchants buying group again, further
recognising the continued investment in new product and customer
service initiatives.
UK retail revenue was 2.3% ahead of last year as Vado continued
to focus on increasing market share throughout its existing
network. Investment in an expanded sales team and the launch of
more consumer orientated marketing materials continues to
facilitate growth.
Export revenue was 18.4% higher than last year, with significant
growth achieved following changes made to Vado's distribution
strategy in the Middle East as highlighted last year. Significant
progress was also achieved in Africa, the Caribbean, New Zealand
and Hong Kong where our distributor has opened a dedicated Vado
showroom for architects and interior designers.
New product introductions continue to strengthen the Vado
portfolio with the launch of Omika, a premium collection of taps,
showers and accessories, designed by interior and product designer,
Jo Love. Significant upgrades were also made to Vado's bestselling
thermostatic shower valve to further develop sales of this key
product.
The Group has recently re-furbished its London showroom,
Material Lab, which now showcases Vado and Johnson Tiles products
to the architect and design community and has directly led to
multiple specification wins. Increased synergies between Vado and
Johnson Tiles sales teams are also being realised as a result of
the collaboration in this shared facility.
Underlying operating profit was lower than last year as the
business continued to invest in additional sales and marketing
initiatives and local warehousing infrastructure to maintain the
excellent revenue growth and market share gain momentum.
Croydex
Croydex, our market leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and
accessories, recorded revenue of GBP24.2m for the period (2017:
GBP24.7m) 2.0% lower than the prior year.
UK revenue was 9.9% lower than last year, with retail sector
revenue 15.9% lower and trade sector revenue 1.4% higher. The
retail revenue decline principally reflected reduced demand from a
major customer in the DIY sector, though there was promising growth
in a number of other retail and department stores for Croydex,
having rolled out a significant new branded offering across the
Tesco estate (approx. 600 stores) and an expanded product range in
John Lewis.
Trade revenue experienced modest growth as we commenced
implementation of a focussed specification sales strategy, winning
a number of national commercial specifications. A new relationship
with the major international sanitaryware brand ROCA also delivered
OEM cabinet sales in the UK with further opportunities to expand
internationally.
Export revenue, which accounts for approximately 17% (2017:
10.1%) of revenue, increased by 68% in the year, mainly from
continued growth in Germany and the USA. Additionally, Croydex have
penetrated the Italian market, with new ranges being rolled out
into the Italian DIY market, offering further opportunity for
geographic expansion.
Customer and market specific new products were rolled out
through the year, many incorporating Croydex IP and innovation,
which continues to attract customers offering them novel
problem-solving solutions to installation and useful functional
user benefits. Amongst these were new FlexiFix bathroom accessories
for the German and South African markets, HangNLock cabinets into
Germany and the USA, rust free metal bathroom storage products in
Italy and a range of new shower accessories and cabinets for the
Irish market. Domestic product development included new cabinets,
toilet seats and bathroom storage products many developed for both
the Croydex brand and for own label OEM customers.
Underlying operating profit performance was below last year
reflecting the overall decline in revenues, and further investment
in sales, marketing and development expenditure in the UK and
overseas markets. The business remained strongly cash
generative.
Abode
Abode, our leading niche designer and distributor of high
quality kitchen taps, bathroom taps and kitchen sinks, recorded
revenue of GBP12.8m for the period (2017: GBP10.6m), 20.8% higher
than the prior year.
The business grew revenue equally across branded retail,
contract and private label sectors as a result of new product
introductions and range enhancements. In particular, sales of the
patented Pronteau hot water taps have grown across all sectors.
Abode launched over 50 new branded products that were well received
by its trade customers, with the focus being on its growing kitchen
sink business. Amongst these new products were new Abode and
Pronteau branded products developed for launch into Wickes and
Benchmarx stores.
Underlying operating profit performance was ahead of last year,
with strong cash conversion.
Johnson Tiles
Johnson Tiles, the UK market leading ceramic tile manufacturer
and a market leader in the supply of both own manufactured and
imported tiles, recorded total revenue 11.5% lower at GBP47.1m
(2017: GBP53.2m). Revenue in the first half of the year was 1.6%
higher than the comparative period, but revenue in the second half
declined sharply (23.4%) reflecting much softer market conditions.
UK revenue was 10.0% lower than last year.
UK trade sector revenue was 4.5% lower than the prior year with
first half revenues down 0.8% and second half revenues down 8.3%.
The social housing market remains challenging as expenditure has
been diverted away from bathroom refurbishments, albeit we
continued to benefit from further growth with national and regional
house developers and bespoke specifications.
UK retail revenue was 15.7% lower than the previous year with
the decline in revenue of -36.2% in the second half much greater
than expected and in stark comparison to the growth experienced in
the first half of +9.8%. This decline reflected the expected loss
in revenue following the Kingfisher unified programme but the
slower than expected growth in new business secured with other
major DIY accounts reflecting the more challenging market
conditions in this sector.
Export revenue was 23.3% lower than the prior year mainly as low
margin business in the Middle East was exited.
Whilst the actions to restructure the tile business in 2017 were
completed successfully, including a significant reduction in stock
levels, market conditions in the second half of the year proved
more challenging than expected and the business remained loss
making. As a result, we have implemented a further restructuring
programme which will involve the loss of up to 50 jobs. This has
resulted in an exceptional charge of GBP2.1m. Annualised savings
are expected to be at least GBP2.0m and we remain confident that
this decisive action will return the tile business back into
profitability in the current year.
Johnson Tiles also continued to invest significantly in
developing the market for Cristal Grip during the course of the
year. The product is on display across all Leroy Merlin outlets in
France, on trial in Leroy Merlin stores in Italy and Spain and it
is expected that trials with another retailer in Germany will start
in the first half of this year.
Norcros Adhesives
Revenue at Norcros Adhesives, our UK manufacturer and supplier
of tile and stone adhesives and ancillary products, was 15.2%
higher at GBP9.1m (2017: GBP7.9m).
Domestic revenue was 11.0% above last year, reflecting increased
activity across existing trade and retail accounts, including
growth in Wickes following the contract win highlighted last year.
The manufacturing capacity upgrade was successfully completed in
the period to meet increased demand.
Our small Middle East operation continues to gain traction with
sales 67% ahead of last year. Brand development and market
credibility continues to build, and our business is aligned with a
number of stone fixers in the region. Recently, the business has
won the contract to supply materials to the prestigious Bahrain
Airport project, which commenced in the first quarter of this
financial year.
In relation to new product development, we successfully launched
the Pro Gyp-base product, which is unique in the market and
exploits a requirement for a fast-track method to allow tiling onto
gypsum-based screeds within seven days, and a new range of
efflorescence resistant grout. The Pro Gyp-base product is an
important step in our development of the resilient channel and has
enabled strategic partnerships to be formed with Barratt, Unilin
and Gypsol to provide a fixing system for soft flooring
finishes.
Underlying operating profit performance was marginally below
last year, reflecting the continued investment in the development
of the Middle East market and increasing sales and marketing
resource and initiatives in the UK.
Business review - South Africa
Our South African business continued the sustained progress of
recent years with another year of strong constant currency growth
with revenue 5.9% higher than last year. The Rand appreciated
against Sterling during the year with the average exchange rate
5.4% stronger at ZAR 17.32 (2017: ZAR 18.31), resulting in full
year reported revenue 11.9% ahead of prior year at GBP99.5m (2017:
GBP88.9m).
Underlying operating profit for the year improved by 38% to
GBP8.8m (2017: GBP6.4m) including a GBP0.3m benefit from the
stronger Rand. This reflected the market share gains, further
supply chain improvements and the strong management of costs. The
return on sales was 8.8% (2017: 7.2%), a considerable increase on
last year.
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business in
South Africa, recorded external revenues of GBP12.6m, 9.6% higher
than last year on a constant currency basis. On a reported basis
revenue was 16.7% ahead of the GBP10.8m achieved in the prior
year.
The business has again made good progress in both manufacturing
and sales and is in the process of increasing plant capacity by 10%
to support increased market demand.
A strong new product development programme has driven increased
demand from our independent customer base. This demand has been met
through increased plant throughput and lower demand from our export
market and Zimbabwe in particular.
The new product development programme and ongoing plant
improvements have helped deliver another year of operating profit
growth.
TAL
TAL, our market leading adhesives business in South Africa,
delivered strong growth with constant currency independent sector
revenue increasing 8.5% compared to prior year or 14.7% on a
reported Sterling basis to GBP24.2m (2017: GBP21.1m). This
reflected local market share gains which have been achieved through
targeted product introductions and broadening of the customer
base.
Operational improvements in all three plants, focussed training
programmes and procurement management have delivered a tangible and
sustained improvement in our manufacturing performance.
These improvements together with the market share gains
delivered underlying operating profit growth in the year. The
business also maintained its record of strong cash conversion.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
adhesives, showers, sanitaryware and bathroom fittings, delivered
strong constant currency growth with revenue 4.2% higher on a
constant currency basis, being 10.0% higher on a Sterling reported
basis, at GBP62.7m (2017: GBP57.0m).
Progress has been made in sourcing and pricing management which
drove improved margins. These benefits were particularly evident in
the taps and bathroom segments as the business continues to benefit
from the international sourcing infrastructure of Vado and Croydex.
These group synergies have been important in driving bathroom
store-within-a-store revenues and the business will continue to
invest in growing this segment in the year ahead.
Tile Africa now has 32 owned stores and two franchise stores.
Two new stores were successfully opened in the period, at Southgate
and Clearwater, both in the CX format. There are plans to open a
further two CX format stores in the next twelve to eighteen
months.
Underlying operating profit for the year was ahead of last year
and the business delivered strong cash conversion.
Financial overview
2018 2017
GBPm GBPm
------------------------------ ------ ------
Revenue 300.1 271.2
------------------------------ ------ ------
Underlying operating profit 27.4 23.8
IAS 19R administrative costs (1.4) (2.0)
Acquisition related costs (4.3) (2.7)
Exceptional operating items (2.1) (2.3)
------------------------------ ------ ------
Operating profit 19.6 16.8
Net finance costs (6.1) (5.3)
Profit before taxation 13.5 11.5
Taxation (3.6) (3.0)
------------------------------ ------ ------
Profit for the year 9.9 8.5
------------------------------ ------ ------
Revenue
Group revenue at GBP300.1m (2017: GBP271.2m) increased by 10.7%
on a reported basis, 8.6% on a constant currency basis, and 4.4% on
a constant currency like for like basis.
Underlying operating profit
Underlying operating profit increased by 15.1% to GBP27.4m
(2017: GBP23.8m). Our UK businesses delivered underlying operating
profit of GBP18.6m (2017: GBP17.4m), and our South African
businesses generated an underlying operating profit of GBP8.8m
(2017: GBP6.4m). On a constant currency basis, the improvement in
underlying operating profit in the South African businesses was
GBP2.1m. Group underlying operating profit margin was 9.1% (2017:
8.8%).
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of
administering the UK pension schemes and are reflected in the
Income Statement under IAS 19R. Costs of GBP1.4m (2017: GBP2.0m)
have decreased on prior year due to restructuring costs incurred in
2017 and the lower year-on-year running costs resulting from this
restructuring.
Acquisition related costs
A cost of GBP4.3m (2017: GBP2.7m) has been recognised in the
year and is analysed as follows:
2018 2017
GBPm GBPm
------------------------------ ----- ----
Deferred remuneration (0.3) 0.4
Intangible asset amortisation 2.2 1.2
Staff costs and advisory fees 2.4 1.1
------------------------------ ----- ----
4.3 2.7
------------------------------ ----- ----
In accordance with IFRS 3R, a proportion of the deferred
consideration payable to the former shareholders of certain
acquired businesses is required to be treated as remuneration, and,
accordingly, is expensed to the Income Statement as incurred. There
is a net credit of GBP0.3m in the year due to the release of
overprovisions in earlier years.
Exceptional operating items
A net exceptional operating charge of GBP2.1m (2017: GBP2.3m)
was recorded relating entirely to restructuring costs.
2018 2017
GBPm GBPm
-------------------- ---- ----
Restructuring costs 2.1 2.3
-------------------- ---- ----
In 2017 we implemented a restructuring programme at Johnson
Tiles UK designed to improve its operating performance and increase
manufacturing flexibility which resulted in a GBP2.3m exceptional
charge. Notwithstanding the benefits of this restructuring the
business remained loss making as market conditions proved more
challenging than expected. As a result, the Board has implemented a
further restructuring programme which will involve the loss of up
to 50 jobs and has resulted in a 2018 exceptional charge of
GBP2.1m.
Net finance costs
Net finance costs for the year of GBP6.1m (2017: GBP5.3m)
increased mainly due to the GBP0.9m non-cash charge increase
relating to the movement in the fair value of foreign exchange
contracts of GBP3.1m (2017: GBP2.2m). Bank interest payable of
GBP1.1m (2017: GBP0.9m) was higher than the previous year due to an
increased level of debt following the Merlyn acquisition.
In addition, the Group has recognised a GBP1.6m interest cost in
respect of the pension scheme liability (2017: GBP2.0m) which
reduced by GBP0.4m principally reflecting the lower interest rate
applied in the year.
Profit before tax
Underlying profit before tax was GBP26.3m (2017: GBP22.9m),
reflecting the increased underlying operating profit of GBP3.6m
noted above. Underlying profit before tax is reconciled as shown
below:
2018 2017
GBPm GBPm
-------------------------------------------------- ----- -----
Profit before taxation from continuing operations 13.5 11.5
Adjusted for:
- IAS 19R administrative expenses 1.4 2.0
- acquisition related costs (see Note 5) 4.3 2.7
- exceptional operating items (see Note 5) 2.1 2.3
- amortisation of costs of raising finance 0.3 0.2
- net movement on fair value of derivative
financial instruments 3.1 2.2
- IAS 19R finance cost 1.6 2.0
-------------------------------------------------- ----- -----
Underlying profit before taxation 26.3 22.9
-------------------------------------------------- ----- -----
Taxation
The tax charge for the year of GBP3.6m (2017: GBP3.0m)
represents an effective tax rate for the year of 26.7% (2017:
26.1%).
This increase in effective tax rate is mainly due to a higher
proportion of the Group's taxable profits being generated in South
Africa.
The standard rates of corporation tax in the UK and South Africa
were 19% (2017: 20%) and 28% (2017: 28%) respectively.
Dividends
As previously announced, it is the Board's intention to continue
a progressive yet prudent dividend policy subject to the Group's
earnings, cash flow and balance sheet position. As such the Board
is recommending a final dividend of 5.2p (2017: 4.8p) per share,
which, if approved, together with the interim dividend of 2.6p
(2017: 2.4p), makes a total dividend of 7.8p (2017: 7.2p) in
respect of the year ended 31 March 2018.
This final dividend, if approved at the Annual General Meeting,
will be payable on 2 August 2018 to shareholders on the register on
22 June 2018. The shares will be quoted ex-dividend on 21 June
2018.
Norcros plc operates a Dividend Reinvestment Plan (DRIP). If a
shareholder wishes to use the DRIP the latest date to elect for
this in respect of this final dividend is 6 July 2018.
Balance Sheet
The Group's balance sheet is summarised below.
2018 2017
GBPm GBPm
-------------------------------------------------- ------- -------
Property, plant and equipment 45.0 43.0
Goodwill and intangible assets 98.9 44.8
Deferred tax 4.0 11.0
Net current assets excluding cash and borrowings 58.0 53.0
Pension scheme liability (48.0) (62.7)
Other non-current assets and liabilities (6.2) (9.3)
Cash and borrowings (47.1) (23.2)
-------------------------------------------------- ------- -------
Net assets 104.6 56.6
-------------------------------------------------- ------- -------
Total net assets increased by GBP48.0m to GBP104.6m
(2017:GBP56.6m). The acquisition of the Merlyn business resulted in
an increase in goodwill and intangible assets of GBP56.2m and other
assets of GBP12.6m on acquisition.
Property, plant and equipment increased by GBP2.0m overall, and
included additions of GBP7.5m (2017: GBP7.9m) and acquisitions (the
Merlyn business) of GBP0.8m (2017: GBPnil). The depreciation charge
was GBP6.4m (2017: GBP6.4m) and exchange differences were GBP0.1m
(2017: GBP3.3m). The disposals in the year had no impact on net
book value which was the same in the prior year.
The deferred tax asset reduced by GBP7.0m to GBP4.0m (2017:
GBP11.0m). The decrease relates to a GBP4.3m deferred tax liability
recognised on the acquisition of Merlyn and a reduction in the
deferred tax asset of GBP2.5m reflecting the current year actuarial
gains in the pension plan.
Pension schemes
The gross defined benefit pension scheme valuation of the UK
scheme showed a deficit of GBP48.0m compared to a deficit of
GBP62.7m last year. Whilst the value of scheme assets reduced by
GBP4.8m in the year, the value of the liabilities fell by GBP19.5m,
which was due to the combination of a higher discount rate of 2.65%
(2017: 2.60%), lower inflation expectations and the latest
mortality improvement assumption.
The most recent triennial actuarial valuation for the Group's UK
defined benefit pension scheme was completed in March 2015 and
showed a deficit of GBP73.5m (2012: GBP61.9m) representing an 84%
funding level (2012: 85%). The increased deficit was driven
predominantly by historically low gilt yields. The current deficit
recovery plan was agreed with the Scheme Trustee, with a cash
contribution of GBP2.5m per annum starting in April 2016, and
increasing with CPI, for a period of ten years. A new triennial
valuation dated 1 April 2018 and updated deficit recovery plan will
need to be agreed between the Trustee and Company in due course and
discussions are now underway.
In line with the above agreement the Group made deficit recovery
contributions of GBP2.5m (2017: GBP2.5m) into its UK defined
benefit pension scheme during the year.
The Group's contributions to its defined contribution pension
schemes were GBP3.5m (2017: GBP3.1m).
Cash flow and net debt
Net debt increased by GBP23.9m in the year to GBP47.1m (2017:
GBP23.2m) primarily reflecting the acquisition of Merlyn (which was
partly debt funded). A summary of the movement in net debt is shown
below.
Underlying operating cash flow was GBP1.2m higher than in the
prior year at GBP31.0m (2017: GBP29.8m). Overall underlying cash
conversion in the year was 91.7% of underlying EBITDA (2017:
98.7%).
Cash generated from operating activities was GBP2.0m lower than
the previous year at GBP23.5m, largely due to the GBP3.2m increase
in outflows from exceptional items and acquisition related costs
partly offset by the GBP1.2m improvement in underlying operating
cash flows. Cash flows from exceptional items and acquisition
related costs primarily relates to costs related to the acquisition
of Merlyn and the restructuring costs at Johnson Tiles.
2018 2017
GBPm GBPm
----------------------------------------------------------------- ------- -------
Underlying operating cash flow 31.0 29.8
Cash flows from exceptional items and acquisition related costs (5.0) (1.8)
Pension fund deficit recovery contributions (2.5) (2.5)
Cash flow generated from operations 23.5 25.5
Net interest paid (1.1) (0.9)
Taxation (4.9) (1.9)
----------------------------------------------------------------- ------- -------
Net cash generated from operating activities 17.5 22.7
Capital expenditure (7.7) (8.0)
Acquisitions (59.1) (2.7)
Dividends (5.0) (4.2)
Issue of share capital 30.1 -
Other items 0.3 1.5
----------------------------------------------------------------- ------- -------
Movement in net debt (23.9) 9.3
Opening net debt (23.2) (32.5)
----------------------------------------------------------------- ------- -------
Closing net debt (47.1) (23.2)
----------------------------------------------------------------- ------- -------
Acquisition expenditure of GBP59.1m relates entirely to the
acquisition of Merlyn. In the previous year, outflows relating to
acquisitions included the final deferred consideration payment of
GBP2.5m to the former shareholders of Vado and GBP0.2m paid in
respect of the acquisition of Abode.
Capital expenditure at GBP7.7m (2017: GBP8.0m) included
investment in a kiln conversion at Johnson Tiles and a plant
upgrade for Norcros Adhesives. In South Africa, major items of
investment included the new store at Clearwater and other store
upgrades, mainly at Woodmead and Germiston together with investment
in new inspection machinery at JTSA.
Bank funding
In November 2017 the Group agreed an unsecured GBP120m revolving
credit facility plus a GBP30m accordion facility with Lloyds Bank
plc, HSBC Bank plc and Barclays Bank plc. The banking facility
matures in November 2021 with an option (subject to bank approval)
to extend for a further year.
Responsibility Statement
Each of the directors, whose names and functions are listed
below, confirms that, to the best of their knowledge:
The consolidated financial statements, prepared in accordance
with the applicable United Kingdom law and in conformity with IFRS,
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group and the undertakings included in the consolidation taken as a
whole; and
The business review includes a fair review of the development
and performance of the business and the position of the Group and
the undertakings included in the consolidation taken as a
whole.
Directors: Martin Towers (Chairman), Nick Kelsall (Group Chief
Executive), Shaun Smith (Group Finance Director), David McKeith
(Non-Executive Director) and Jo Hallas (Non-Executive
Director).
Nick Kelsall
Group Chief Executive
Shaun Smith
Group Finance Director
Consolidated income statement
Year ended 31 March 2018
2018 2017
Notes GBPm GBPm
-------------------------------------------------- ----- ----- -----
Continuing operations
Revenue 2 300.1 271.2
-------------------------------------------------- ----- ----- -----
Underlying operating profit 27.4 23.8
IAS 19R administrative expenses (1.4) (2.0)
Acquisition related costs 3 (4.3) (2.7)
Exceptional operating items 3 (2.1) (2.3)
-------------------------------------------------- ----- ----- -----
Operating profit 19.6 16.8
Finance costs 4 (4.5) (3.3)
IAS 19R finance cost (1.6) (2.0)
-------------------------------------------------- ----- ----- -----
Profit before taxation 13.5 11.5
Taxation (3.6) (3.0)
-------------------------------------------------- ----- ----- -----
Profit for the year from continuing operations 9.9 8.5
-------------------------------------------------- ----- ----- -----
Earnings per share attributable to equity holders
of the Company
Basic earnings per share:
From profit for the year 6 14.5p 13.9p
-------------------------------------------------- ----- ----- -----
Diluted earnings per share:
From profit for the year 6 14.1p 13.4p
-------------------------------------------------- ----- ----- -----
Weighted average number of shares for basic
earnings per share (millions) 68.0 61.1
Alternative performance measures
-------------------------------------------------- ----- ----- -----
Underlying profit before taxation (GBPm) 5 26.3 22.9
Underlying earnings (GBPm) 5 20.6 17.6
Basic underlying earnings per share 6 30.3p 28.8p
Diluted underlying earnings per share 6 29.5p 27.8p
-------------------------------------------------- ----- ----- -----
Consolidated statement of comprehensive income
Year ended 31 March 2018
2018 2017
GBPm GBPm
------------------------------------------------- ----- -----
Profit for the year 9.9 8.5
-------------------------------------------------- ----- -----
Other comprehensive income and expense:
Items that will not subsequently be reclassified
to the Income Statement
Actuarial gains/(losses) on retirement benefit
obligations 12.6 (5.2)
Items that may be subsequently reclassified
to the Income Statement
Foreign currency translation adjustments 0.4 8.5
-------------------------------------------------- ----- -----
Other comprehensive income for the year 13.0 3.3
-------------------------------------------------- ----- -----
Total comprehensive income for the year 22.9 11.8
-------------------------------------------------- ----- -----
Items in the statement are disclosed net of tax.
Consolidated balance sheet
At 31 March 2018
2018 2017
GBPm GBPm
-------------------------------------- ------- -------
Non-current assets
Goodwill 56.6 31.1
Intangible assets 42.3 13.7
Property, plant and equipment 45.0 43.0
Deferred tax assets 4.0 11.0
--------------------------------------- ------- -------
147.9 98.8
-------------------------------------- ------- -------
Current assets
Inventories 74.9 70.3
Trade and other receivables 64.4 56.8
Derivative financial instruments - 0.7
Cash and cash equivalents 25.8 37.5
--------------------------------------- ------- -------
165.1 165.3
-------------------------------------- ------- -------
Current liabilities
Trade and other payables (77.0) (72.0)
Derivative financial instruments (3.3) (0.8)
Current tax liabilities (1.0) (2.0)
Financial liabilities - borrowings (8.5) (30.9)
--------------------------------------- ------- -------
(89.8) (105.7)
-------------------------------------- ------- -------
Net current assets 75.3 59.6
--------------------------------------- ------- -------
Total assets less current liabilities 223.2 158.4
--------------------------------------- ------- -------
Non-current liabilities
Financial liabilities - borrowings (64.4) (29.8)
Pension scheme liability (48.0) (62.7)
Other non-current liabilities (1.3) (3.6)
Provisions (4.9) (5.7)
--------------------------------------- ------- -------
(118.6) (101.8)
-------------------------------------- ------- -------
Net assets 104.6 56.6
--------------------------------------- ------- -------
Financed by:
Share capital 8.0 6.1
Share premium 29.7 1.1
Retained earnings and other reserves 66.9 49.4
--------------------------------------- ------- -------
Total equity 104.6 56.6
--------------------------------------- ------- -------
Consolidated cash flow statement
Year ended 31 March 2018
2018 2017
Notes GBPm GBPm
-------------------------------------------------- ----- ------ ------
Cash generated from operations 7 23.5 25.5
Income taxes paid (4.9) (1.9)
Interest paid (1.1) (0.9)
-------------------------------------------------- ----- ------ ------
Net cash generated from operating activities 17.5 22.7
-------------------------------------------------- ----- ------ ------
Cash flows from investing activities
Purchase of property, plant and equipment and
intangible assets (7.7) (8.0)
Acquisition of subsidiary undertakings (including
payment of deferred consideration) net of cash
acquired (59.1) (2.7)
-------------------------------------------------- ----- ------ ------
Net cash used in investing activities (66.8) (10.7)
-------------------------------------------------- ----- ------ ------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 32.1 -
Costs of equity issue (1.6) -
Purchase of treasury shares (0.4) -
Costs of raising debt finance (0.6) -
Drawdown/(repayment) of borrowings 35.0 (6.0)
Dividends paid to the Company's shareholders (5.0) (4.2)
-------------------------------------------------- ----- ------ ------
Net cash generated from/(used in) financing
activities 59.5 (10.2)
-------------------------------------------------- ----- ------ ------
Net increase in cash at bank and in hand and
bank overdrafts 10.2 1.8
Cash at bank and in hand and bank overdrafts
at the beginning of the year 6.6 3.1
Exchange movements on cash and bank overdrafts 0.5 1.7
-------------------------------------------------- ----- ------ ------
Cash at bank and in hand and bank overdrafts
at the end of the year 17.3 6.6
-------------------------------------------------- ----- ------ ------
Consolidated statement of changes in equity
Year ended 31 March 2018
Ordinary
share Share Treasury Translation Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- -------- ----------- --------- -------
At 1 April 2016 6.1 1.1 - (15.2) 55.6 47.6
Comprehensive income:
Profit for the year - - - - 8.5 8.5
Other comprehensive income/(expense):
Actuarial loss on retirement
benefit obligations - - - - (5.2) (5.2)
Foreign currency translation
adjustments - - - 8.5 - 8.5
-------------------------------------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
income/(expense) - - - 8.5 (5.2) 3.3
-------------------------------------- -------- -------- -------- ----------- --------- -------
Transactions with owners:
Shares issued - - - - - -
Dividends paid - - - - (4.2) (4.2)
Value of employee services - - - - 1.4 1.4
-------------------------------------- -------- -------- -------- ----------- --------- -------
At 31 March 2017 6.1 1.1 - (6.7) 56.1 56.6
Comprehensive income:
Profit for the year - - - - 9.9 9.9
Other comprehensive income:
Actuarial gain on retirement
benefit obligations - - - - 12.6 12.6
Foreign currency translation
adjustments - - - 0.4 - 0.4
-------------------------------------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
income - - - 0.4 12.6 13.0
-------------------------------------- -------- -------- -------- ----------- --------- -------
Transactions with owners:
Shares issued 1.9 28.6 - - - 30.5
Dividends paid - - - - (5.0) (5.0)
Purchase of treasury shares - - (0.4) - - (0.4)
Cash-settled share options - - - - (0.9) (0.9)
Equity-settled share options - - 0.4 - (0.4) -
Value of employee services - - - - 0.9 0.9
-------------------------------------- -------- -------- -------- ----------- --------- -------
At 31 March 2018 8.0 29.7 - (6.3) 73.2 104.6
-------------------------------------- -------- -------- -------- ----------- --------- -------
Notes to the preliminary statement
Year ended 31 March 2018
1. Basis of preparation
The principal activities of Norcros plc ("the Company") and its
subsidiaries (together "the Group") are the design, manufacture and
distribution of a range of high quality and innovative bathroom and
kitchen products mainly in the UK and South Africa. The Company is
a public limited company which is listed on the London Stock
Exchange market of listed securities and is incorporated and
domiciled in the UK. The address of its registered office is
Ladyfield House, Station Road, Wilmslow, SK9 1BU.
The financial information presented in this preliminary
announcement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 31 March 2018. The
financial information set out above does not constitute the
Company's statutory financial statements for the periods ended 31
March 2018 or 31 March 2017 but is derived from those financial
statements. Statutory financial statements for 2018 will be
delivered following the Company's annual general meeting. The
auditors have reported on those financial statements; their report
was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The Group's results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
2. Segmental reporting
The Group operates in two main geographical areas: the UK and
South Africa. All inter-segment transactions are made on an arm's
length basis. The chief operating decision maker (being the Board)
assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate
costs are allocated to segments on the basis of external
turnover.
Continuing operations - year ended 31 March 2018
South
UK Africa Group
GBPm GBPm GBPm
----------------------------------------------- ------- ------- -------
Revenue 200.6 99.5 300.1
----------------------------------------------- ------- ------- -------
Underlying operating profit 18.6 8.8 27.4
IAS 19R administrative expenses (1.4) - (1.4)
Acquisition related costs (4.3) - (4.3)
Exceptional operating items (2.1) - (2.1)
----------------------------------------------- ------- ------- -------
Operating profit 10.8 8.8 19.6
----------------------------------------------- ------- ------- -------
Finance costs (net) (6.1)
----------------------------------------------- ------- ------- -------
Profit before taxation 13.5
Taxation (3.6)
----------------------------------------------- ------- ------- -------
Profit for the year from continuing operations 9.9
----------------------------------------------- ------- ------- -------
Net debt (47.1)
----------------------------------------------- ------- ------- -------
Segmental assets 239.4 73.6 313.0
Segmental liabilities (189.0) (19.4) (208.4)
Additions to property, plant and equipment 4.9 2.6 7.5
Depreciation 4.2 2.2 6.4
----------------------------------------------- ------- ------- -------
For the year ended 31 March 2018 no single customer accounted
for more than 10% of Group revenue. In the previous year revenue of
GBP31.9m was derived from a single customer which was attributable
to the UK segment.
Continuing operations - year ended 31 March 2017
South
UK Africa Group
GBPm GBPm GBPm
----------------------------------------------- ------- ------- -------
Revenue 182.3 88.9 271.2
----------------------------------------------- ------- ------- -------
Underlying operating profit 17.4 6.4 23.8
IAS 19R administrative expenses (2.0) - (2.0)
Acquisition related costs (2.7) - (2.7)
Exceptional operating items (2.3) - (2.3)
----------------------------------------------- ------- ------- -------
Operating profit 10.4 6.4 16.8
----------------------------------------------- ------- ------- -------
Finance costs (net) (5.3)
----------------------------------------------- ------- ------- -------
Profit before taxation 11.5
Taxation (3.0)
----------------------------------------------- ------- ------- -------
Profit for the year from continuing operations 8.5
----------------------------------------------- ------- ------- -------
Net debt (23.2)
----------------------------------------------- ------- ------- -------
Segmental assets 197.2 66.9 264.1
Segmental liabilities (188.2) (19.3) (207.5)
Additions to property, plant and equipment 4.6 3.3 7.9
Depreciation 4.3 2.1 6.4
----------------------------------------------- ------- ------- -------
3. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below:
2018 2017
Acquisition related costs GBPm GBPm
--------------------------------- ----- -----
Deferred remuneration(1) (0.3) 0.4
Intangible asset amortisation(2) 2.2 1.2
Advisory fees and staff costs(3) 2.4 1.1
--------------------------------- ----- -----
4.3 2.7
--------------------------------- ----- -----
1. In accordance with IFRS 3R, a proportion of the deferred
consideration payable to the former shareholders of certain
acquired businesses is required to be treated as remuneration, and,
accordingly, is expensed to the Income Statement as incurred. There
is a net credit of GBP0.3m in the year due to the release of
overprovisions in earlier years.
2. Non-cash amortisation charges in respect of intangible assets
recognised following certain recent acquisitions.
3. Costs of professional advisory fees and maintaining an
in-house acquisitions department incurred in connection with the
Group's business combination activities.
2018 2017
Exceptional operating items GBPm GBPm
---------------------------- ----- -----
Restructuring costs(1) 2.1 2.3
---------------------------- ----- -----
1. As recently announced, the Group commenced a further
restructuring of its UK tiles business in March 2018 at a cost of
GBP2.1m in order to reduce its cost base. In the previous year a
charge of GBP2.3m was made in relation to an earlier restructuring
of the UK tiles business.
4. Finance income and costs
2018 2017
GBPm GBPm
----------------------------------------------------------- ----- -----
Interest payable on bank borrowings 1.1 0.9
Amortisation of costs of raising debt finance(1) 0.3 0.2
Movement on fair value of derivative financial instruments 3.1 2.2
----------------------------------------------------------- ----- -----
Finance costs 4.5 3.3
----------------------------------------------------------- ----- -----
1. Included within the charge for the year is GBP0.1m for the
write-off of the unamortised costs relating to the old banking
facility which was replaced in November 2017.
5. Alternative performance measures
The Group makes use of a number of alternative performance
measures to assess business performance and provide additional
useful information to shareholders. Such alternative performance
measures should not be viewed as a replacement of, or superior to,
those defined by Generally Accepted Accounting Principles (GAAP).
Definitions of alternative performance measures used by the Group
and, where relevant, reconciliations from GAAP-defined reporting
measures to the Group's alternative performance measures are
provided below.
The alternative performance measures used by the Group are:
Measure Definition
------------------------- -----------------------------------------------------
Underlying operating Operating profit before IAS 19R administrative
profit expenses, acquisition related costs and exceptional
operating items
------------------------- -----------------------------------------------------
Underlying profit Profit before taxation before IAS 19R administrative
before taxation expenses, acquisition related costs, exceptional
operating items, amortisation of costs of raising
finance, net movement on fair value of derivative
financial instruments, discounting of property
lease provisions and finance costs relating to
pension schemes
------------------------- -----------------------------------------------------
Underlying taxation Taxation before tax associated with those items
listed as being excluded from underlying profit
before taxation
------------------------- -----------------------------------------------------
Underlying earnings Underlying profit before tax less underlying taxation
------------------------- -----------------------------------------------------
Underlying capital Capital employed adjusted for business combinations
employed where relevant and the average impact of exchange
rate movements
------------------------- -----------------------------------------------------
Underlying operating Underlying operating profit expressed as a percentage
margin of revenue
------------------------- -----------------------------------------------------
Underlying return Underlying operating profit expressed as a percentage
on capital employed of the average of opening and closing underlying
(ROCE) capital employed
------------------------- -----------------------------------------------------
Basic underlying earnings Underlying earnings divided by the weighted average
per share number of shares for basic earnings per share
------------------------- -----------------------------------------------------
Diluted underlying Underlying earnings divided by the weighted average
earnings per share number of shares for diluted earnings per share
------------------------- -----------------------------------------------------
EBITDA EBITDA is a measure commonly used by investors
and financiers to assess business performance and
is derived from operating profit before depreciation
and amortisation
------------------------- -----------------------------------------------------
Underlying EBITDA Underlying EBITDA reflects EBITDA as adjusted for
IAS 19R administrative expenses, acquisition related
costs and exceptional operating items
------------------------- -----------------------------------------------------
Underlying operating Cash generated from continuing operations before
cash flow cash outflows from exceptional items and acquisition
related costs and pension fund deficit recovery
contributions
------------------------- -----------------------------------------------------
Pro-forma EBITDA An annualised EBITDA figure used for the purpose
of calculating banking covenant ratios
------------------------- -----------------------------------------------------
Pro-forma leverage Net debt expressed as a ratio of pro-forma EBITDA
------------------------- -----------------------------------------------------
Underlying profit and underlying earnings per share measures
provide shareholders with additional useful information on the
underlying performance of the Group. This is because these measures
are those principally used by the Directors to assess the
performance of the Group and are used as the basis for calculating
the level of the annual bonus and long-term incentives earned by
the Directors. Underlying ROCE is one of the Group's strategic key
performance indicators and is therefore provided so that
shareholders can assess the Group's performance in relation to its
strategic targets. Underlying EBITDA and underlying operating cash
flow are also used internally by the Directors in order to assess
the Group's cash generation. The term 'underlying' is not
recognised under IFRS and consequently the Group's definition of
underlying may differ from that used by other companies.
Reconciliations from GAAP-defined reporting measures to the
Group's alternative performance measures
Consolidated Income Statement
(a) Underlying profit before taxation and underlying
earnings
2018 2017
GBPm GBPm
----------------------------------------------------------- ----- -----
Profit before taxation from continuing operations 13.5 11.5
Adjusted for:
- IAS 19R administrative expenses 1.4 2.0
- acquisition related costs (see Note 3) 4.3 2.7
- exceptional operating items (see Note 3) 2.1 2.3
- amortisation of costs of raising finance 0.3 0.2
- net movement on fair value of derivative financial
instruments 3.1 2.2
- IAS 19R finance cost 1.6 2.0
----------------------------------------------------------- ----- -----
Underlying profit before taxation 26.3 22.9
----------------------------------------------------------- ----- -----
Taxation attributable to underlying profit before taxation (5.7) (5.3)
----------------------------------------------------------- ----- -----
Underlying earnings 20.6 17.6
----------------------------------------------------------- ----- -----
(b) Underlying EBITDA
2018 2017
GBPm GBPm
-------------------------------------------- ----- -----
Operating profit from continuing operations 19.6 16.8
Adjusted for:
- depreciation 6.4 6.4
- IAS 19R administrative expenses 1.4 2.0
- acquisition related costs (see Note 3) 4.3 2.7
- exceptional operating items (see Note 3) 2.1 2.3
-------------------------------------------- ----- -----
Underlying EBITDA 33.8 30.2
-------------------------------------------- ----- -----
Consolidated Cash Flow Statement
(a) Underlying operating cash flow
2018 2017
GBPm GBPm
---------------------------------------------------- ----- -----
Cash generated from operations (see Note 7) 23.5 25.5
Adjusted for:
- cash flows from exceptional items and acquisition
related costs (see Note 7) 5.0 1.8
- pension fund deficit recovery contributions (see
Note 7) 2.5 2.5
Underlying operating cash flow 31.0 29.8
---------------------------------------------------- ----- -----
Consolidated Balance Sheet
(a) Underlying capital employed
2018 2017
GBPm GBPm
--------------------------------------------------- ------ ------
Net assets 104.6 56.6
Adjusted for:
- pension scheme liability (net of associated tax) 39.9 52.0
- cash and cash equivalents (25.8) (37.5)
- financial liabilities - borrowings 72.9 60.7
--------------------------------------------------- ------ ------
Capital employed 191.6 131.8
--------------------------------------------------- ------ ------
Foreign exchange adjustment (1.7) (3.5)
Adjustment for acquisitions (16.9) -
--------------------------------------------------- ------ ------
Underlying capital employed 173.0 128.3
--------------------------------------------------- ------ ------
6. Earnings per share
Basic and diluted earnings per share
Basic EPS is calculated by dividing the profit attributable to
shareholders by the weighted average number of ordinary shares in
issue during the year, excluding those held in the Norcros Employee
Benefit Trust.
For diluted EPS, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potential dilutive
ordinary shares. At 31 March 2018 the potential dilutive ordinary
shares amounted to 1,778,436 (2017: 2,042,900) as calculated in
accordance with IAS 33.
The calculation of EPS is based on the following profits and
numbers of shares:
2018 2017
GBPm GBPm
-------------------- ----- -----
Profit for the year 9.9 8.5
-------------------- ----- -----
2018 2017
Number Number
------------------------------------------------------- ---------- ----------
Weighted average number of shares for basic earnings
per share 68,043,628 61,098,476
Share options and warrants 1,778,436 2,042,900
------------------------------------------------------- ---------- ----------
Weighted average number of shares for diluted earnings
per share 69,822,064 63,141,376
------------------------------------------------------- ---------- ----------
2018 2017
------------------------------------------------------- ---------- ----------
Basic earnings per share:
From profit for the year 14.5p 13.9p
------------------------------------------------------- ---------- ----------
Diluted earnings per share:
From profit for the year 14.1p 13.4p
------------------------------------------------------- ---------- ----------
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been
provided which reflects underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
2018 2017
GBPm GBPm
--------------------------------- ----- -----
Underlying earnings (see Note 5) 20.6 17.6
--------------------------------- ----- -----
2018 2017
-------------------------------------- ----- -----
Basic underlying earnings per share 30.3p 28.8p
Diluted underlying earnings per share 29.5p 27.8p
-------------------------------------- ----- -----
7. Consolidated cash flow statement
(a) Cash generated from operations
The analysis of cash generated from operations is given
below:
Continuing operations
2018 2017
GBPm GBPm
--------------------------------------------------------- ----- -----
Profit before taxation 13.5 11.5
Adjustments for:
- IAS 19R administrative expenses included in the Income
Statement 1.4 2.0
- acquisition related costs included in the Income
Statement 4.3 2.7
- exceptional items included in the Income Statement 2.1 2.3
- finance costs included in the Income Statement 4.5 3.3
- IAS 19R finance cost included in the Income Statement 1.6 2.0
- cash flows from exceptional items and acquisition
related costs (5.0) (1.8)
- cash settlement of share options (0.9) -
- depreciation 6.4 6.4
- pension fund deficit recovery contributions (2.5) (2.5)
- share-based payments 0.9 1.4
--------------------------------------------------------- ----- -----
Operating cash flows before movement in working capital 26.3 27.3
Changes in working capital:
- increase in inventories (0.5) (5.1)
- decrease/(increase) in trade and other receivables 4.8 (3.7)
- (decrease)/increase in trade and other payables (7.1) 7.0
--------------------------------------------------------- ----- -----
Cash generated from operations 23.5 25.5
--------------------------------------------------------- ----- -----
(b) Outflow related to exceptional items and acquisition related
costs
This includes expenditure charged to exceptional provisions
relating to onerous lease costs, acquisition related costs
(excluding deferred remuneration) and other business
rationalisation and restructuring costs.
(c) Analysis of net debt
Net cash
and current Non-current
borrowings borrowings Net debt
GBPm GBPm GBPm
------------------------- ------------ ----------- --------
At 1 April 2016 3.1 (35.6) (32.5)
Cash flow 1.8 6.0 7.8
Other non-cash movements - (0.2) (0.2)
Exchange movement 1.7 - 1.7
------------------------- ------------ ----------- --------
At 31 March 2017 6.6 (29.8) (23.2)
Cash flow 10.2 (34.4) (24.2)
Other non-cash movements - (0.2) (0.2)
Exchange movement 0.5 - 0.5
------------------------- ------------ ----------- --------
At 31 March 2018 17.3 (64.4) (47.1)
------------------------- ------------ ----------- --------
Other non-cash movements principally relate to the movement in
the costs of raising debt finance in the year.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UUVNRWOANAAR
(END) Dow Jones Newswires
June 13, 2018 02:00 ET (06:00 GMT)
Norcros (LSE:NXR)
Historical Stock Chart
From Apr 2024 to May 2024
Norcros (LSE:NXR)
Historical Stock Chart
From May 2023 to May 2024