TIDMNXR
RNS Number : 4026H
Norcros PLC
15 November 2018
15 November 2018
Norcros plc
Results for the six months ended 30 September 2018
'Robust performance in a challenging market environment'
Norcros, a market leading supplier of high quality and
innovative bathroom and kitchen products, today announces its
results for the six months ended 30 September 2018.
Financial Summary
Six months Six months % change % change
ended 30 ended 30 as reported at constant
September September currency
2018 2017
Revenue GBP162.6m GBP145.0m +12.1% +13.3%
----------- ----------- ------------- -------------
Underlying* operating
profit GBP15.2m GBP11.7m +29.9%
----------- ----------- ------------- -------------
Underlying* profit before
tax GBP14.2m GBP11.5m +23.5%
----------- ----------- ------------- -------------
Profit before tax GBP15.2m GBP7.4m +105.4%
----------- ----------- ------------- -------------
Diluted underlying EPS* 13.9p 14.0p -0.7%
----------- ----------- ------------- -------------
Interim dividend per share 2.8p 2.6p +7.7%
----------- ----------- ------------- -------------
Net debt GBP53.5m GBP20.8m
----------- ----------- ------------- -------------
* Definitions of alternative performance measures are provided
in note 3
Highlights
-- Revenue increased by 12.1% and 13.3% on a constant currency basis
-- Underlying operating profit increased by 29.9% to GBP15.2m
-- Merlyn performed strongly, in line with our expectations
-- Triton's strong momentum sustained
-- Johnson Tiles UK returned to profit following restructuring
-- South Africa revenue increased by 7.1% on a constant currency basis
-- Return on sales increased to 9.3% (2017: 8.1%)
-- Interim dividend increased by 7.7% to 2.8p per share
Martin Towers, Chairman, commented:
"I am pleased to report a robust set of results for the six
months ended 30 September 2018 in what has been a challenging
market environment. This performance continues to demonstrate the
strength of our market positions, our leading brands and the
financial resilience of our diversified business model. The Board
remains confident that these attributes will continue to drive
market outperformance and will enable the Group to make further
progress in line with its expectations for the year to 31 March
2019."
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 547 700
Nick Kelsall, Group Chief Executive
Shaun Smith, Group Finance Director
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Nelly Akpaka
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:
o Triton - Market leader in the manufacture and marketing of
showers in the UK
o Merlyn - the UK and Ireland's No. 1 supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors
o Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
o Croydex - A market-leading, innovative designer, manufacturer
and distributor of high-quality bathroom furnishings and
accessories
o Abode - A leading niche designer and distributor of
high-quality kitchen taps, bathroom taps and kitchen sinks
o Johnson Tiles - A leading manufacturer and supplier of ceramic
tiles in the UK
o Norcros Adhesives - Manufacturer of tile & stone
adhesives, grouts and related products
-- Based in South Africa, Norcros operates under three brands:
o Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitary ware,
showers and adhesives
o Johnson Tiles South Africa - Manufacturer of ceramic and
porcelain tiles
o 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
I am pleased to announce a robust set of results for the six
months ended 30 September 2018 against a backdrop of a challenging
market environment. These results continue to demonstrate the
resilience of the Group's diversified portfolio and the strength of
its market leading positions and brands. The Group has delivered a
strong performance in line with the Board's expectations.
Market conditions in the UK retail sector and a number of export
markets were particularly challenging. However, given the
increasing focus on the UK trade segment and the contribution from
Merlyn, UK revenue grew by 16.5% in the first half. In South
Africa, despite the general economic slow down and technical
recession, constant currency revenue increased by 7.1% in the
period.
Underlying operating profit increased by GBP3.5m to GBP15.2m
(2017: GBP11.7m). In the UK, underlying operating profit was
GBP11.4m (2017: GBP7.4m), reflecting the contribution from the
Merlyn acquisition, a return to profit at Johnson Tiles UK
following the restructuring and a strong performance from Triton
building on the benefits from last year's national TV advertising
campaign. Our South African business, in a challenging political
and economic environment, delivered an underlying operating profit
of GBP3.8m (2017: GBP4.3m), reflecting the weaker Rand as well as
the impact from the planned shutdown at our manufacturing plant at
Johnson Tiles South Africa (JTSA) to effect a 10% increase in
capacity. We will begin to realise the benefits of this in the
second half.
Results
For the six-month period to 30 September 2018, Group revenue
increased by 13.3% on a constant currency basis from GBP145.0m to
GBP162.6m and on a reported basis, due to the weaker Rand relative
to Sterling, increased by 12.1%. On a like for like constant
currency basis Group revenue was 0.3% lower. This performance
reflected strong organic revenue growth of 4.4% in the Group,
excluding the significantly lower revenue from Johnson Tiles UK
which was anticipated and largely due to the Kingfisher unified
programme as previously reported.
Underlying operating profit increased 29.9% to GBP15.2m (2017:
GBP11.7m) principally reflecting the contribution from the Merlyn
business (acquired November 2017), the return to profitability at
Johnson Tiles UK and the strong performance at Triton. The return
on sales was 9.3% (2017: 8.1%).
Operating profit increased to GBP12.6m (2017: GBP9.8m) resulting
from the improvement in underlying operating profit offset partly
by higher acquisition related costs of GBP1.9m (2017: GBP1.2m)
reflecting increased intangible amortisation related to the Merlyn
acquisition.
Underlying profit before taxation increased by 23.5% to GBP14.2m
(2017: GBP11.5m) reflecting the improvement in underlying operating
profit partly offset by increased bank interest payable following
the Merlyn acquisition.
Profit before taxation was GBP15.2m (2017: GBP7.4m). The
non-cash movement in the fair value of derivatives is mainly due to
the weakening of Sterling against the US dollar, resulting in a
credit of GBP4.3m being recognised in the period, compared with a
charge of GBP1.3m in the prior period. The IAS 19R finance cost was
GBP0.6m compared with GBP0.8m, reflecting the lower pension
deficit.
Diluted underlying earnings per share were 0.7% lower at 13.9p
(2017: 14.0p), reflecting the short-term impact of the increased
number of shares in issue and the additional financing costs
related to the Merlyn acquisition.
Financial
The Group generated an underlying operating cash flow of
GBP11.4m (2017: GBP16.2m). This mainly reflected additional
investment in inventory due to planned new product launches, new
business wins and lower than expected revenues in a number of
export markets. Capital expenditure at GBP3.6m (2017: GBP4.1m)
included investment in the capacity expansion at JTSA, two store
upgrades in TAF and new product development. Net debt at 30
September 2018 was GBP6.4m higher than at 31 March 2018 at
GBP53.5m, representing pro-forma leverage of 1.4 times underlying
EBITDA. Cashflow management remains a key focus in the Group.
Pension scheme
The gross deficit relating to our UK defined benefit pension
scheme as calculated under IAS 19R has reduced from GBP48.0m at 31
March 2018 to GBP28.8m at 30 September 2018, primarily due to a
0.3% increase in the discount rate to 2.95% (31 March 2018: 2.65%)
reflecting an increase in bond yields. We remain confident that our
pension obligations continue to be appropriately funded and well
managed, with the Company due to pay GBP2.6m this year into the
scheme in accordance with the agreement made with the Trustee in
April 2016 based on the triennial valuation dated 1 April 2015. A
new triennial valuation dated 1 April 2018 together with an updated
deficit recovery plan is in the process of being agreed with the
Trustee.
Dividend
The Board is declaring an interim dividend of 2.8p per share
reflecting the strong first half performance and its confidence in
the Group's prospects. This represents an increase of 7.7% over the
interim dividend from the previous year of 2.6p per ordinary share.
The dividend is payable on 11 January 2019 to shareholders on the
register on 30 November 2018. The shares will be quoted ex-dividend
on 29 November 2018.
Brexit
The impact of Brexit on the Group remains an important short
term consideration for our businesses with potential consequences
ranging from increases in cost prices, additional tariffs, lower
consumer confidence levels and supply chain disruption. We have
identified specific risks relevant to our business and prepared
mitigation plans which are well developed. However, at this stage,
the high level of uncertainty of both the financial and political
implications of Brexit make the success of mitigation activities
difficult to predict.
Operating review
UK
Our UK businesses achieved revenue of GBP109.9m (2017:
GBP94.3m), representing growth of 16.5% in the six-month period to
30 September 2018. This includes a contribution of GBP19.5m from
the Merlyn business (acquired November 2017). On a like for like
basis (excluding revenues from Merlyn), total revenue was 4.1%
lower than the prior year. This was largely due to significantly
lower retail revenues at Johnson Tiles, which was anticipated and
mainly due to the Kingfisher unified programme as previously
reported. Johnson Tiles apart, first half UK like for like revenue
was 2.5% higher. Underlying operating profit grew by GBP4.0m to
GBP11.4m (2017: GBP7.4m) with an operating margin of 10.4% (2017:
7.8%). This mainly reflected the contribution from the Merlyn
acquisition, combined with a return to profit at Johnson Tiles
following the restructuring, and a strong performance from
Triton.
Triton
Our market leading shower operation, Triton, recorded revenue
9.8% higher for the six-month period to 30 September 2018; with
revenue of GBP26.9m (2017: GBP24.5m). Pleasingly this was achieved
by building on the growth of 7.0% from the last financial year and
reflects growth in both our UK and export markets.
UK revenue was 10.7% higher than the prior year, with growth in
the Retail, Online and Trade segments reflecting new product
introductions, continued strong promotional activity and range
listing gains across major national customers. With a continued
strong performance across its UK customer base, Triton further
strengthened its market and brand leading position in showering.
This was achieved through best in class customer service, the
continued introduction of innovative new products and increased
consumer awareness driven by the consumer and trade brand marketing
campaign, 'See you first thing Britain'.
Triton continued to grow its business in Ireland and other
export markets with export revenue up 6.1% on the prior year driven
by the addition of new product lines and range improvements.
Triton delivered strong underlying operating profit growth in
the first half 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
continued to perform strongly and recorded revenue of GBP19.5m for
the period, growth of 13.4% on the prior year when it was not under
Norcros ownership.
Trade sector revenue grew 20% with the specification channel
being the main driver in addition to revenue growth from contracts
awarded in the prior year. In the wider trade sector, Wolseley are
extending the Merlyn product offering and the product is now being
displayed in City Plumbing Supplies showrooms. A major account win
with Bloor Homes was also secured in the period.
UK retail revenue grew 9.4% in the period driven by the rollout
of new product ranges including Merlyn Black, Series 6 Frameless
and Arysto Six & Eight, in addition to strong revenue growth
with independent retailers and buying groups. Ireland performed
strongly with 12% revenue growth on the prior year. During the
period, Merlyn were awarded "Supplier of the Year" by both the PHG
buying group and Graham Plumbing Merchants.
Merlyn has invested further in the period, with additional sales
resource to target the specification and housebuilder segments, and
in customer service and training. The growing emphasis on the
bathroom within the home together with a premiumisation trend has
led to an increasing share of revenue with Merlyn's top customers.
Merlyn achieved ISO14001:2015 certification and was recommended for
ISO45001 certification in the period, further enhancing its quality
credentials. Merlyn continues to pursue several Group synergy
initiatives including new accounts and procurement savings.
Merlyn contributed an underlying operating profit and cash
generation in line with the Board's expectations.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of GBP19.7m for the period
(2017: GBP20.8m), 5.3% lower than the prior year. UK revenue grew
by 6.0% with particularly strong progress in the trade sector where
Vado achieved 15% growth in its specification business with
contract renewals completed with several key specification clients.
Export revenue declined by 35% on the prior year where the markets
for non-Vado branded products were more challenging despite seeing
Vado branded products demonstrating strong growth.
Investment in new product has been maintained in the period,
with the launch of Sensori, an exciting collection of digital
showers that is part of a joint new product development initiative
with Triton. Market reaction has been positive, providing Vado with
an excellent platform to increase share in this growing product
category. Additionally, Vado launched 12 new showering products in
the period including the Horizon range that features innovative
cross spray technology. A strong new product pipeline continues to
give further scope for growth.
Despite lower revenue, underlying operating profit was in line
with the previous year reflecting tight control of the overhead
base in the period.
Croydex
Croydex, our market leading, innovative designer, manufacturer
and distributor of high-quality bathroom furnishings and
accessories, recorded revenue of GBP10.8m (2017: GBP12.3m) for the
period, 12.2% lower than the prior year.
UK revenue was 12.1% lower reflecting the challenging UK retail
environment. Revenue performance was significantly impacted by the
performance and subsequent change in ownership of the Homebase
Bunnings business, a major customer of Croydex. The withdrawal of
trade credit insurance meant that trading was negligible in the
second quarter as the Group actively reduced its exposure. The
Group has recently recommenced trading on a significantly reduced
credit limit and is continuing to work with Homebase and the trade
credit insurers to reintroduce cover and a higher credit limit.
Offsetting this to a degree was a robust performance in the trade
sector where revenue grew by 5.4% over last year, driven by growth
from National merchant groups and new product listings at Screwfix.
Additionally, Croydex benefitted from a focussed approach to
on-line and E-Commerce channels, with UK revenues growing
significantly.
Underlying operating profit was markedly lower than last year
reflecting the reduction in UK revenue, albeit cash generation
remained strong.
Abode
Abode, our niche designer and distributor of high-quality hot
water taps, bathroom brassware, kitchen taps and sinks, recorded a
12.3% increase in revenue to GBP7.3m for the period (2017:
GBP6.5m).
The business grew revenue across trade, retail and export
sectors reflecting a comprehensive programme of new product
introductions and range enhancements. The Pronteau hot water tap,
which was first introduced in 2016, continues to be a great success
and has benefited from range extensions and further innovations
expanding the offer. Continued marketing investment in retail
displays has expanded the retail footprint to over 900 showroom
displays across the UK & Ireland including John Lewis stores.
The business also rolled out Abode and Pronteau branded products to
Wickes and Benchmarx stores in the latter part of the previous
financial year, and the early results are encouraging.
Underlying operating profit was ahead of last year reflecting
the strong revenue growth.
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 revenue 21.7% lower than the same period
last year at GBP20.2m (2017: GBP25.8m).
UK retail revenue was 35.7% lower than last year due principally
to the previously reported and anticipated impact of the Kingfisher
unification programme. In the retail sector new ranges introduced
in Wickes in the prior year performed well with revenue with this
account increasing by 5%.
UK trade sector revenue was 11.6% lower than last year,
resulting from a combination of softer market conditions, a decline
in the social housing market as budgets have been diverted away
from bathroom refurbishments and the exit of marginal business. The
Johnson Tiles service model, coupled with extensive specification
expertise, has led to good progress with a number of key customers
and the supply to several major contracts including: Royal Wharf in
London, Trinity Way in Manchester, Tottenham Hotspur's new stadium
and the Manchester Business School.
Softer market conditions in France and the planned exiting of
low margin projects in the Middle East impacted export revenue,
which was 8.0% lower than last year.
As previously reported, a major restructuring programme was
announced at the start of the period. The restructuring has been
executed in line with the plan whilst maintaining operational
efficiency and improving customer service levels. It is pleasing to
report that the actions to cut costs and exit low margin business,
have improved gross margins and that the business has returned to
profitability.
Johnson Tiles continued to invest significantly in developing
the market for Cristal Grip during the year. The product continues
to be sold through all Leroy Merlin outlets in France and has been
rolled out to 50 Bauhaus stores in Germany in the period. It is
also being tested by a number of UK retailers as a display
mechanism for showroom displays.
Johnson Tiles returned to profit and cash generation in the
period.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and
stone adhesives and ancillary products, recorded revenue 25.0%
higher than the prior year at GBP5.5m (2017: GBP4.4m).
Revenue grew by 31% in the retail sector, largely reflecting
share gains in Wickes and Travis Perkins in the period. UK trade
revenue was 7.7% ahead of last year, reflecting growth in B&Q
Tradepoint and growth in the direct fixer segment.
Our Middle East operation continues to gain strong momentum with
revenue doubling and has supplied a number of major projects in the
region including the prestigious Bahrain Airport, Mansion Villas,
Meydan Hotel and Viceroy Dubai.
The business has successfully renewed both its ISO9001 and
ISO14001 accreditations to the latest (2015) standards in the
period, maintained Gold Standard from the Supply Chain
Sustainability School (which is partnered with the housebuilder
Barratts) and has won an industry award from The Tile Association
relating to the best environmental initiative for the third
successive year.
Underlying profit was lower than the previous year reflecting
investment in selling resource and new business development in both
the UK and the Middle East. This investment and the associated
increase in revenue is expected to benefit profitability in the
second half.
South Africa
Norcros South Africa has delivered a resilient performance in a
difficult trading environment. Following a period of political and
policy uncertainty, both in South Africa and internationally, South
Africa has experienced lower levels of public and private sector
investment which contributed to the country slipping into a
technical recession in the first half of the year. Despite this,
our revenue grew by 7.1% in constant currency and by 3.9% on a
Sterling reported basis to GBP52.7m in the six-month period
compared with GBP50.7m in the prior year. The average exchange rate
during the period was ZAR 17.64 (2017: ZAR 17.11). Underlying
constant currency operating profit for the period was lower than
the prior year reflecting the impact of a planned and
non-comparable plant shutdown at JTSA which enabled a capacity
expansion and plant upgrade programme.
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business in
South Africa, has delivered strong independent revenue growth of
38.6% in constant currency from new and existing customers
reflecting the well-developed new product development pipeline. On
a Sterling reported basis, revenue was 33.9% higher at GBP7.9m
(2017: GBP5.9m). The revenue growth has been driven through both
retail and commercial segments, with good growth into the
commercial housebuilder segment.
The plant upgrade and expansion programme was successfully
completed in the period and will add necessary capacity and improve
plant stability in key areas.
Although underlying operating profit in the period was impacted
by the planned factory shutdown it is expected that the higher
plant capacity and associated revenue growth will deliver full year
operating profit growth.
TAL
Our market leading adhesive business in South Africa, TAL,
delivered constant currency independent sector revenue growth of
5.0% in the period, despite a general slowdown in the market. On a
Sterling reported basis revenue was 2.4% higher at GBP12.6m (2017:
GBP12.3m). TAL supplied several prestigious projects including the
Mams Mall in Gauteng and the Acornhoek Mall in Mpumalanga. Work has
also recently commenced on a commercial development called "The
Mark" in Sandton, Gauteng.
Our TAL Laboratory in Olifantsfontein was awarded the ISO 17025
accreditation, becoming the first tile adhesive laboratory in
Africa to be awarded this certification.
Notwithstanding the tough market conditions, further progress in
manufacturing efficiencies and careful control of overheads has
helped TAL marginally increase operating profit and maintain an
excellent level of cash conversion.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
adhesives, showers, sanitaryware and bathroom fittings, recorded
revenue 2.2% higher on a constant currency basis benefitting from
the launch of new tile ranges and excellent bathroom and tap
category growth, driven in part by access to the wider-group supply
chain. On a Sterling reported basis revenue was 0.9% lower at
GBP32.2m (2017: GBP32.5m). Our recent entry into commercial
bathroom fitting specifications has seen our products specified in
sizeable projects, such as in the Marriot Hotel in Pretoria. Our
ability to provide a one-stop-shop in the specification sector in
terms of bathroom and kitchen floors, walls and fittings will
provide further opportunities for growth.
Tile Africa upgraded two stores during the period
(Pietermaritzburg and Polokwane South) and closed one store in
Pinetown which had reached the end of its lease. Tile Africa
currently has 31 owned stores and 2 franchise stores. A new store
in Polokwane North will be opened in the second half of this year,
and a further two stores are planned in the next financial
year.
Underlying operating profit was slightly above last year,
reflecting the increased revenue as well as the benefit of the cost
savings implemented in the second half of last year.
Summary and outlook
The Group has delivered a substantial increase in underlying
operating profit in the six months to 30 September 2018 against the
backdrop of a challenging trading environment in our key markets.
This growth reflects the successful integration and performance of
the recently acquired Merlyn business, the return to profitability
of the Johnson Tiles UK business, the strong performance of our
market leading Triton business and share gains in a number of our
other brands. The robust performance in the first half continues to
demonstrate the strength of our market positions, our leading
brands and the financial resilience of our diversified business
model. The Board remains confident that these attributes will
continue to drive market outperformance and will enable the Group
to make further progress in line with its expectations for the year
to 31 March 2019.
Martin Towers
Chairman
15 November 2018
Condensed consolidated income statement
Six months to 30 September 2018
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
-------------------------------------------------- ------ -------------- -------------- -----------
Continuing operations
Revenue 162.6 145.0 300.1
-------------------------------------------------- ------ -------------- -------------- -----------
Underlying operating profit 15.2 11.7 27.4
IAS 19R administrative expenses (0.7) (0.7) (1.4)
Acquisition related costs 4 (1.9) (1.2) (4.3)
Exceptional operating items 4 - - (2.1)
-------------------------------------------------- ------ -------------- -------------- -----------
Operating profit 12.6 9.8 19.6
Finance costs 7 (1.1) (1.6) (4.5)
Finance income 7 4.3 - -
IAS 19R finance cost (0.6) (0.8) (1.6)
-------------------------------------------------- ------ -------------- -------------- -----------
Profit before taxation 15.2 7.4 13.5
Taxation 6 (3.2) (1.9) (3.6)
-------------------------------------------------- ------ -------------- -------------- -----------
Profit for the period from continuing operations 12.0 5.5 9.9
-------------------------------------------------- ------ -------------- -------------- -----------
Earnings per share attributable to the
owners of the Company
Basic earnings per share:
From profit for the period 5 15.1p 8.9p 14.5p
-------------------------------------------------- ------ -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 5 14.9p 8.7p 14.1p
-------------------------------------------------- ------ -------------- -------------- -----------
Weighted average number of shares for basic
earnings per share (millions) 5 80.1 61.5 68.0
-------------------------------------------------- ------ -------------- -------------- -----------
Alternative performance measures
Underlying profit before taxation (GBPm) 3 14.2 11.5 26.3
Underlying earnings (GBPm) 3 11.2 8.9 20.6
Basic underlying earnings per share 5 14.0p 14.5p 30.3p
Diluted underlying earnings per share 5 13.9p 14.0p 29.5p
-------------------------------------------------- ------ -------------- -------------- -----------
Condensed consolidated statement of comprehensive income
Six months to 30 September 2018
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------- -------------- -------------- -----------
Profit for the period 12.0 5.5 9.9
--------------------------------------------- -------------- -------------- -----------
Other comprehensive income and expense:
Items that will not subsequently be
reclassified to the income statement
Actuarial gains on retirement benefit
obligations 15.9 9.0 12.6
Items that may be subsequently reclassified
to the income statement
Foreign currency translation adjustments (5.1) (3.7) 0.4
--------------------------------------------- -------------- -------------- -----------
Other comprehensive income for the
period 10.8 5.3 13.0
--------------------------------------------- -------------- -------------- -----------
Total comprehensive income for the
period 22.8 10.8 22.9
--------------------------------------------- -------------- -------------- -----------
Items in the statement are disclosed net of tax.
Condensed consolidated balance sheet
At 30 September 2018
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
--------------------------------------- ------ -------------- -------------- -----------
Non-current assets
Goodwill 56.3 30.9 56.6
Intangible assets 40.3 13.0 42.3
Property, plant and equipment 42.8 42.3 45.0
Deferred tax assets 6 0.7 9.4 4.0
--------------------------------------- ------ -------------- -------------- -----------
140.1 95.6 147.9
--------------------------------------- ------ -------------- -------------- -----------
Current assets
Inventories 79.8 71.2 74.9
Trade and other receivables 65.7 54.8 64.4
Derivative financial instruments 14 1.0 0.3 -
Cash and cash equivalents 8 22.0 17.9 25.8
--------------------------------------- ------ -------------- -------------- -----------
168.5 144.2 165.1
--------------------------------------- ------ -------------- -------------- -----------
Current liabilities
Trade and other liabilities (75.0) (73.3) (77.0)
Derivative financial instruments 14 - (1.7) (3.3)
Current tax liabilities (2.5) (1.5) (1.0)
Financial liabilities - borrowings 8 - (8.8) (8.5)
--------------------------------------- ------ -------------- -------------- -----------
(77.5) (85.3) (89.8)
--------------------------------------- ------ -------------- -------------- -----------
Net current assets 91.0 58.9 75.3
--------------------------------------- ------ -------------- -------------- -----------
Total assets less current liabilities 231.1 154.5 223.2
--------------------------------------- ------ -------------- -------------- -----------
Non-current liabilities
Financial liabilities - borrowings 8 (75.5) (29.9) (64.4)
Pension scheme liability 12 (28.8) (52.1) (48.0)
Other non-current liabilities (1.1) (3.7) (1.3)
Provisions (3.4) (3.6) (4.9)
--------------------------------------- ------ -------------- -------------- -----------
(108.8) (89.3) (118.6)
--------------------------------------- ------ -------------- -------------- -----------
Net assets 122.3 65.2 104.6
--------------------------------------- ------ -------------- -------------- -----------
Financed by:
Ordinary share capital 9 8.0 6.2 8.0
Share premium 29.7 1.4 29.7
Retained earnings and other reserves 84.6 57.6 66.9
--------------------------------------- ------ -------------- -------------- -----------
Total equity 122.3 65.2 104.6
--------------------------------------- ------ -------------- -------------- -----------
Condensed consolidated statement of cash flow
Six months to 30 September 2018
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
------------------------------------------------ ------ -------------- -------------- -----------
Cash generated from operations 10 8.7 12.9 23.5
Income taxes paid (1.9) (2.5) (4.9)
Interest paid (1.1) (0.2) (1.1)
------------------------------------------------ ------ -------------- -------------- -----------
Net cash generated from operating activities 5.7 10.2 17.5
------------------------------------------------ ------ -------------- -------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (3.6) (4.1) (7.7)
Proceeds on disposal of property, plant - -
and equipment 0.1
Acquisition of subsidiary undertakings
(including payment of deferred consideration) (2.0) - (59.1)
Net cash used in from investing activities (5.5) (4.1) (66.8)
------------------------------------------------ ------ -------------- -------------- -----------
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital - 0.4 32.1
Costs of equity issue - - (1.6)
Purchase of treasury shares (1.1) - (0.4)
Costs of raising debt finance - - (0.6)
Drawdown of borrowings 11.0 - 35.0
Dividends paid to equity shareholders (4.1) (3.0) (5.0)
------------------------------------------------ ------ -------------- -------------- -----------
Net cash used in financing activities 5.8 (2.6) 59.5
------------------------------------------------ ------ -------------- -------------- -----------
Net increase in cash at bank and in hand
and bank overdrafts 6.0 3.5 10.2
Cash at bank and in hand and bank overdrafts
at beginning of the period 17.3 6.6 6.6
Exchange movements on cash and bank overdrafts (1.3) (1.0) 0.5
------------------------------------------------ ------ -------------- -------------- -----------
Cash at bank and in hand and bank overdrafts
at end of the period 22.0 9.1 17.3
------------------------------------------------ ------ -------------- -------------- -----------
Alternative performance measures
Underlying operating cash flow 3 11.4 16.2 31.0
---------------------------------- ----- ----- -----
Condensed consolidated statements of changes in equity
Six months to 30 September 2018 (unaudited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- --------- ----------- ------------ ---------- ------
At 31 March 2018 8.0 29.7 - (6.3) 73.2 104.6
Comprehensive income:
Profit for the period - - - - 12.0 12.0
Other comprehensive (expense)/income:
Actuarial gain on retirement
benefit obligations - - - - 15.9 15.9
Foreign currency translation
adjustments - - - (5.1) - (5.1)
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Total other comprehensive
(expense)/income - - - (5.1) 15.9 10.8
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Transactions with owners:
Purchase of treasury shares - - (1.1) - - (1.1)
Settlement of share option
schemes - - 0.8 - (1.4) (0.6)
Dividends paid - - - - (4.1) (4.1)
Value of employee services - - - - 0.7 0.7
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
At 30 September 2018 8.0 29.7 (0.3) (11.4) 96.3 122.3
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Six months to 30 September 2017 (unaudited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings/ Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- --------- ----------- ------------ ----------- ------
At 31 March 2017 6.1 1.1 - (6.7) 56.1 56.6
Comprehensive income:
Profit for the period - - - - 5.5 5.5
Other comprehensive income/(expense):
Actuarial gain on retirement
benefit obligations - - - - 9.0 9.0
Foreign currency translation
adjustments - - - (3.7) - (3.7)
---------------------------------------- --------- --------- ----------- ------------ ----------- ------
Total other comprehensive
expense/(income) - - - (3.7) 9.0 5.3
---------------------------------------- --------- --------- ----------- ------------ ----------- ------
Transactions with owners:
Shares issued 0.1 0.3 - - - 0.4
Dividends paid - - - - (3.0) (3.0)
Value of employee services - - - - 0.4 0.4
---------------------------------------- --------- --------- ----------- ------------ ----------- ------
At 30 September 2017 6.2 1.4 - (10.4) 68.0 65.2
---------------------------------------- --------- --------- ----------- ------------ ----------- ------
Year ended 31 March 2018 (audited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings/ Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ----------- ------------ ----------- ------
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 loss on retirement
benefit obligations - - - - 12.6 12.6
Foreign currency translation
adjustments - - 0.4 - 0.4
------------------------------- --------- --------- ----------- ------------ ----------- ------
Total other comprehensive
income/(expense) - - - 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 accounts
Six months to 30 September 2018
1. Accounting policies
General information
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 incorporated in England as a public company
limited by shares. The shares of the Company are listed on the
London Stock Exchange market of listed securities. The address of
its registered office is Ladyfield House, Station Road, Wilmslow,
SK9 1BU, UK.
This condensed consolidated interim financial information was
approved for issue on 15 November 2018 and does not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and has neither been audited nor reviewed.
Basis of preparation
This condensed consolidated interim financial information for
the six months to 30 September 2018 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting', as
adopted by the European Union.
The Directors consider, after making appropriate enquiries at
the time of approving the condensed consolidated interim financial
information, that the Company and the Group have adequate resources
to continue in operational existence and, accordingly, that it is
appropriate to adopt the going concern basis in the preparation of
the condensed consolidated interim financial information.
The condensed consolidated interim financial information should
be read in conjunction with the Annual Report and Accounts for the
year ended 31 March 2018, which has been prepared in accordance
with IFRS as adopted by the European Union. The Annual Report and
Accounts was approved by the Board on 13 June 2018 and delivered to
the Registrar of Companies. The report of the external auditor on
the financial statements was unqualified.
Accounting policies
The principal accounting policies applied in the preparation of
this condensed consolidated interim financial information are
included in the financial report for the year ended 31 March 2018.
These policies have been applied consistently to all periods
presented.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to the expected total annual profits
or losses.
New standards, amendments to standards and interpretations
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year beginning 1 April 2018.
The Group has adopted the following new standards, amendments
and interpretations now applicable.
Applicable for
financial years
beginning on
Standard or interpretation Content or after
--------------------------- -------------------------------------- -----------------
IFRS 9 Financial instruments: classification 1 April 2018
and measurement
IFRS 15 Revenue from contracts with customers 1 April 2018
Amendment to IFRS 2 Share-based payments 1 April 2018
Amendment to IAS 40 Investment properties 1 April 2018
Annual improvements Various 1 April 2018
2014-2016
--------------------------- -------------------------------------- -----------------
As at 1 April 2018, the Group adopted IFRS 9 'Financial
instruments' and IFRS 15 'Revenue from contracts with customers.
Apart from these standards, the same accounting policies,
presentation and methods of computation are followed in the
condensed set of financial statements as applied in the Group's
latest annual audited financial statements. None of the new or
revised standards adopted in the current period have had a material
impact on the Group's financial statements.
The following standards, amendments and interpretations are not
yet effective and have not been adopted early by the Group:
Applicable for
financial years
beginning on
Standard or interpretation Content or after
--------------------------- ------------------------------------ -----------------
Amendment to IAS 28 Investments in associates and joint 1 April 2019
ventures
IFRS 16 Leases 1 April 2019
IFRS 17 Insurance contracts 1 April 2021
--------------------------- ------------------------------------ -----------------
Other than for IFRS 16, the potential impacts of which continue
to be assessed by the Group, none of these standards or
interpretations are expected to have a material impact on the
Group. Under IFRS 16 the present distinction between operating and
finance leases will be removed, resulting in all leases being
recognised on the Balance Sheet except for those with a very low
value. At inception, a right-of-use asset will be recognised
together with an equivalent liability reflecting the discounted
lease payments over the estimated term of the lease. Whilst the
overall cost of using the asset over the lease term should be the
same, it is likely that the weighting of the charge between periods
may differ due to the requirement to distinguish between the lease
and non-lease elements of the agreement. Adoption of this standard
will result in an increase in gross assets and gross
liabilities.
Risks and uncertainties
The principal risks and uncertainties affecting the Group,
together with the approach to their mitigation, remain as set out
on pages 27 to 30 in the 2018 Annual Report, which is available on
the Group's website (www.norcros.com). The principal risks are:
cyber risk and data loss, uncertainty surrounding Brexit, market
conditions, foreign currency exchange risk, pension scheme
management, loss of key customers, competition, reliance on
production facilities, loss of key supplier, availability of raw
materials/components/energy and supply chain failure, staff
retention and recruitment, interest rate risk and acquisition
risk.
The Chairman's Statement in this interim statement includes
comments on the outlook for the remaining six months of the
financial year.
Forward-looking statements
This interim statement contains forward-looking statements.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to be correct. Due to
the inherent uncertainties, including both economic and business
risk factors underlying such forward-looking information, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Accounting estimates and judgments
The preparation of condensed consolidated interim financial
information requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing the condensed consolidated interim financial
information, the significant judgments made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
consolidated financial statements for the year ended 31 March
2018.
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, which is
considered to be the Board, assesses performance and allocates
resources based on geography as each segment has similar economic
characteristics, complementary products, distribution channels and
regulatory environments.
6 months to 30 September
2018 (unaudited)
----------------------------------- ------
South
UK Africa Group
Notes GBPm GBPm GBPm
----------------------------------- ------ -------- --------- --------
Revenue 109.9 52.7 162.6
----------------------------------- ------ -------- --------- --------
Underlying operating profit 11.4 3.8 15.2
IAS 19R administrative expenses (0.7) - (0.7)
Acquisition related costs 4 (1.8) (0.1) (1.9)
Operating profit 8.9 3.7 12.6
----------------------------------- ------ -------- --------- --------
Finance income (net) 2.6
----------------------------------- ------ -------- --------- --------
Profit before taxation 15.2
Taxation 6 (3.2)
----------------------------------- ------ -------- --------- --------
Profit from continuing operations 12.0
----------------------------------- ------ -------- --------- --------
Net debt 10 (53.5)
----------------------------------- ------ -------- --------- --------
6 months to 30 September
2017 (unaudited)
South
UK Africa Group
Notes GBPm GBPm GBPm
Revenue 94.3 50.7 145.0
----------------------------------- ------ -------- --------- --------
Underlying operating profit 7.4 4.3 11.7
IAS 19R administrative expenses (0.7) - (0.7)
Acquisition related costs 4 (1.2) - (1.2)
Operating profit 5.5 4.3 9.8
----------------------------------- ------ -------- --------- --------
Finance costs (net) (2.4)
----------------------------------- ------ -------- --------- --------
Profit before taxation 7.4
Taxation 6 (1.9)
----------------------------------- ------ -------- --------- --------
Profit from continuing operations 5.5
----------------------------------- ------ -------- --------- --------
Net debt 10 (20.8)
----------------------------------- ------ -------- --------- --------
Year ended 31 March 2018
(audited)
------------------------------------------------ ------ -----------------------------
South
UK Africa Group
Notes 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 (4.3) - (4.3)
Exceptional operating items 4 (2.1) - (2.1)
------------------------------------------------ ------ -------- --------- --------
Operating profit 10.8 8.8 19.6
------------------------------------------------ ------ -------- --------- --------
Finance costs (net) (6.1)
------------------------------------------------ ------ -------- --------- --------
Profit before taxation 13.5
Taxation 6 (3.6)
------------------------------------------------ ------ -------- --------- --------
Profit for the year from continuing operations 9.9
------------------------------------------------ ------ -------- --------- --------
Net debt 10 (47.1)
------------------------------------------------ ------ -------- --------- --------
There are no differences from the last Annual Report in the
basis of segmentation or in the basis of measurement of segment
profit or loss.
3. 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 profit Operating profit before IAS 19R administrative
expenses, acquisition related costs
and exceptional operating items
-------------------------------------------------
Underlying profit before taxation Profit before taxation before IAS 19R
administrative 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 operating margin Underlying operating profit expressed
as a percentage of revenue
-------------------------------------------------
Basic underlying earnings per Underlying earnings divided by the
share weighted average number of shares for
basic earnings per share
-------------------------------------------------
Diluted underlying earnings per Underlying earnings divided by the
share weighted average 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 flow Cash generated from continuing operations
before cash outflows from exceptional
items and acquisition related costs
and pension fund deficit recovery contributions
-------------------------------------------------
Underlying profit and 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 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
Condensed Consolidated Income Statement
(a) Underlying profit before taxation and underlying earnings
6 months 6 months Year ended
to to
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------------- -------------- -------------- -----------
Profit before taxation 15.2 7.4 13.5
Adjusted for:
IAS 19R administrative expenses 0.7 0.7 1.4
Acquisition related costs 1.9 1.2 4.3
Exceptional operating items - - 2.1
Amortisation of costs of raising finance 0.1 0.1 0.3
Net movement on fair value of derivative financial
instruments (4.3) 1.3 3.1
IAS 19R finance cost 0.6 0.8 1.6
---------------------------------------------------- -------------- -------------- -----------
Underlying profit before taxation 14.2 11.5 26.3
Taxation attributable to underlying profit before
taxation (3.0) (2.6) (5.7)
---------------------------------------------------- -------------- -------------- -----------
Underlying earnings 11.2 8.9 20.6
---------------------------------------------------- -------------- -------------- -----------
(b) Underlying EBITDA
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------- -------------- -------------- -----------
Operating profit 12.6 9.8 19.6
Adjusted for:
Depreciation 3.4 3.1 6.4
IAS 19R administrative expenses 0.7 0.7 1.4
Acquisition related costs 1.9 1.2 4.3
Exceptional operating items - - 2.1
--------------------------------- -------------- -------------- -----------
Underlying EBITDA 18.6 14.8 33.8
--------------------------------- -------------- -------------- -----------
Condensed Consolidated Statement of Cash Flow
(a) Underlying profit before taxation and underlying earnings
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Cash generated from continuing operations (note
10) 8.7 12.9 23.5
Adjusted for:
Cash flows from exceptional items and acquisition
related costs 1.4 2.0 5.0
Pension fund deficit recovery contributions 1.3 1.3 2.5
--------------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow 11.4 16.2 31.0
--------------------------------------------------- -------------- -------------- -----------
4. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below.
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -----------
Acquisition related costs
Deferred remuneration(1) - 0.2 (0.3)
Intangible asset amortisation(2) 1.8 0.6 2.2
Advisory fees and staff costs(3) 0.1 0.4 2.4
---------------------------------- -------------- -------------- -----------
1.9 1.2 4.3
---------------------------------- -------------- -------------- -----------
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.
2 Non-cash amortisation charges in respect of acquired intangible assets.
3 Professional advisory fees incurred in connection with the
Group's business combination activities and the costs of
maintaining the in-house acquisitions department. During the period
to 30 September 2018 the costs of the in-house acquisitions
department have been recognised in underlying operating profit.
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------- --------------- --------------- -----------
Exceptional operating items
Restructuring costs(1) - - 2.1
- - 2.1
--------------- --------------------------------------------- -----------
1 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
5. Earnings per share
Basic and diluted earnings per share
Basic earnings per share (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.
The calculation of EPS is based on the following profits and
numbers of shares:
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------- -------------- -------------- -----------
Profit for the period 12.0 5.5 9.9
----------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
Number Number Number
----------------------------------------------- -------------- -------------- -----------
Weighted average number of shares for basic
earnings per share 80,112,526 61,458,138 68,043,628
Share options and warrants 915,632 1,921,999 1,778,436
Weighted average number of shares for diluted
earnings per share 81,028,158 63,380,137 69,822,064
----------------------------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
----------------------------- -------------- -------------- -----------
Basic earnings per share:
From profit for the period 15.1p 8.9p 14.5p
----------------------------- -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 14.9p 8.7p 14.1p
----------------------------- -------------- -------------- -----------
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share have also been
provided which reflect underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------- -------------- -------------- -----------
Underlying earnings for the period (note 3) 11.2 8.9 20.6
--------------------------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
--------------------------------------- -------------- -------------- -----------
Basic underlying earnings per share 14.0p 14.5p 30.3p
Diluted underlying earnings per share 13.9p 14.0p 29.5p
--------------------------------------- -------------- -------------- -----------
6. Taxation
Taxation comprises:
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------- -------------- -------------- -----------
Current
UK taxation 1.7 0.8 1.0
Overseas taxation 1.4 1.4 2.5
--------------------------------------------------- -------------- -------------- -----------
Total current taxation 3.1 2.2 3.5
--------------------------------------------------- -------------- -------------- -----------
Deferred
Origination and reversal of temporary differences 0.1 (0.3) 0.1
--------------------------------------------------- -------------- -------------- -----------
Total tax charge 3.2 1.9 3.6
--------------------------------------------------- -------------- -------------- -----------
Current tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes relate
to the same fiscal authority. Deferred tax is calculated in full on
temporary differences under the liability method.
The movement on the deferred tax account is as shown below:
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- -------------- -------------- -----------
Deferred tax asset at the beginning of the
period 4.0 11.0 11.0
(Charged)/credited to the income statement (0.1) 0.3 (0.1)
Charged to the statement of comprehensive income (3.2) (1.9) (2.6)
Acquisitions - - (4.3)
-------------------------------------------------- -------------- -------------- -----------
Deferred tax asset at the end of the period 0.7 9.4 4.0
-------------------------------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------ -------------- -------------- -----------
Accelerated capital allowances 0.2 1.1 0.2
Tax losses - - 0.1
Other timing differences (4.4) (0.6) (4.4)
Deferred tax asset relating to pension deficit 4.9 8.9 8.1
------------------------------------------------ -------------- -------------- -----------
0.7 9.4 4.0
------------------------------------------------ -------------- -------------- -----------
7. Finance income and costs
6 months 6 months Year ended
to to
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Finance costs
Interest payable on bank borrowings 1.0 0.2 1.1
Amortisation of costs of raising debt finance 0.1 0.1 0.3
Movement on fair value of derivative financial
instruments - 1.3 3.1
Total finance costs 1.1 1.6 4.5
------------------------------------------------ -------------- -------------- -----------
Finance income
Movement on fair value of derivative financial 4.3 -
instruments -
------------------------------------------------ -------------- -------------- -----------
Total finance income 4.3 - -
------------------------------------------------ -------------- -------------- -----------
8. Borrowings
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -----------
Non-current
Bank borrowings (unsecured):
- bank loans 76.0 30.0 65.0
- less: costs of raising finance (0.5) (0.1) (0.6)
---------------------------------- -------------- -------------- -----------
Total non-current 75.5 29.9 64.4
---------------------------------- -------------- -------------- -----------
Current
Bank borrowings (unsecured):
- bank overdrafts - 8.8 8.5
---------------------------------- -------------- -------------- -----------
Total borrowings 75.5 38.7 72.9
---------------------------------- -------------- -------------- -----------
The fair value of bank loans equals their carrying amount as
they bear interest at floating rates.
The repayment terms of borrowings are as follows:
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Not later than one year - 8.8 8.5
------------------------------------------------ -------------- -------------- -----------
After more than one year:
- later than two years and not later than five
years 76.0 30.0 65.0
- costs of raising finance (0.5) (0.1) (0.6)
------------------------------------------------ -------------- -------------- -----------
75.5 29.9 64.4
------------------------------------------------ -------------- -------------- -----------
Total borrowings 75.5 38.7 72.9
------------------------------------------------ -------------- -------------- -----------
The Group has an unsecured GBP120m revolving credit facility
with a GBP30m accordion facility with Lloyds Bank plc, Barclays
Bank plc and HSBC Bank plc. The banking facility is in force up to
November 2021 with an option to extend for one year (subject to
bank approval).
Net debt
The Group's net debt is calculated as follows:
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------- -------------- -------------- -----------
Cash and cash equivalents (22.0) (17.9) (25.8)
Total borrowings 75.5 38.7 72.9
--------------------------- -------------- -------------- -----------
Net debt 53.5 20.8 47.1
--------------------------- -------------- -------------- -----------
9. Called up share capital
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------- -------------- -------------- -----------
Issued and fully paid
80,292,082 ordinary shares of 10p each 8.0 6.2 8.0
---------------------------------------- -------------- -------------- -----------
During the period 20,505 and 90,159 ordinary shares of 10p were
issued to satisfy vestings of options under the Company's SAYE and
deferred bonus plan schemes respectively.
10. Consolidated Cash Flow Statements
(a) Cash generated from continuing operations
6 months 6 months Year ended
to to
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------------ -------------- -------------- -----------
Profit before taxation 15.2 7.4 13.5
Adjustments for:
- IAS 19R administrative expenses included
in the above 0.7 0.7 1.4
- acquisition related costs included in the
above 1.9 1.2 4.3
- exceptional operating items included in the
above - - 2.1
- cash flows from exceptional items and acquisition
related costs (1.4) (2.0) (5.0)
- settlement of share options - - (0.9)
- depreciation 3.4 3.1 6.4
- pension fund deficit recovery plan contributions (1.3) (1.3) (2.5)
- finance costs 1.1 1.6 4.5
- finance income (4.3) - -
- IAS 19R finance cost 0.6 0.8 1.6
- share-based payments 0.7 0.7 0.9
------------------------------------------------------ -------------- -------------- -----------
Operating cash flows before movements in working
capital 16.6 12.2 26.3
Changes in working capital:
- increase in inventories (7.5) (2.9) (0.5)
- (increase)/decrease in trade and other receivables (4.2) 0.2 4.8
- decrease/(increase) in trade and other payables 3.8 3.4 (7.1)
------------------------------------------------------ -------------- -------------- -----------
Cash generated from continuing operations 8.7 12.9 23.5
------------------------------------------------------ -------------- -------------- -----------
Cash flows from exceptional items includes expenditure charged
to exceptional provisions relating to onerous lease costs,
acquisition related costs (excluding deferred remuneration) and
other business rationalisation and restructuring costs.
(b) Analysis of net debt
Cash
and
overdrafts Debt Total
GBPm GBPm GBPm
-------------------------- ------------ ------- -------
At 1 April 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)
--------------------------- ------------ ------- -------
At 1 April 2017 6.6 (29.8) (23.2)
Cash flow 3.5 - 3.5
Other non-cash movements - (0.1) (0.1)
Exchange movement (1.0) - (1.0)
--------------------------- ------------ ------- -------
At 30 September 2017 9.1 (29.9) (20.8)
--------------------------- ------------ ------- -------
At 1 April 2018 17.3 (64.4) (47.1)
Cash flow 6.0 (11.0) (5.0)
Other non-cash movements - (0.1) (0.1)
Exchange movement (1.3) - (1.3)
--------------------------- ------------ ------- -------
At 30 September 2018 22.0 (75.5) (53.5)
--------------------------- ------------ ------- -------
11. Dividends
A final dividend in respect of the year ended 31 March 2018 of
GBP4.1m (5.2p per 10p ordinary share) was paid on 2 August
2018.
On 15 November 2018 the Board declared an interim dividend in
respect of the year ended 31 March 2019 of 2.8p per 10p ordinary
share. This dividend is payable on 11 January 2019 to shareholders
on the register on 30 November 2018 and is not reflected in this
condensed consolidated interim financial information. The shares
will be quoted ex-dividend on 29 November 2018. Norcros 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
interim dividend is 14 December 2018.
12. Retirement benefit obligations
(a) Pension costs
Norcros Security Plan
The Norcros Security Plan (the "Plan"), the principal UK pension
scheme of the Group's UK subsidiaries, is funded by a separate
trust fund which operates under UK trust law and is a separate
legal entity from the Company. The Plan is governed by a Trustee
board which is required by law to act in the best interests of the
Plan members and is responsible for setting policies together with
the Company. It is predominantly a defined benefit scheme with a
modest element of defined contribution benefits.
The valuation used for IAS 19R disclosures has been produced by
KPMG, a firm of qualified actuaries, to take account of the
requirements of IAS 19R in order to assess the liabilities of the
scheme at 30 September 2018. Scheme assets are stated at their
market value at 30 September 2018.
(b) IAS 19R, 'Retirement benefit obligations'
The principal assumptions used to calculate the scheme
liabilities of the Norcros Security Plan under IAS 19R are:
At At At
30 September 30 September 31 March
2018 2017 2018
---------------------- -------------- -------------- ----------
Discount rate 2.95% 2.70% 2.65%
Inflation rate (RPI) 3.20% 3.15% 3.10%
Inflation (CPI) 2.20% 2.15% 2.10%
Salary increases 2.45% 2.40% 2.35%
---------------------- -------------- -------------- ----------
The amounts recognised in the Condensed Consolidated Balance
Sheet are determined as follows:
At At At
30 September 30 September 31 March
2018 2017 2018
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------- -------------- -------------- -----------
Total market value of scheme assets 398.9 402.6 399.6
Present value of scheme liabilities (427.7) (454.7) (447.6)
------------------------------------- -------------- -------------- -----------
Pension deficit (28.8) (52.1) (48.0)
------------------------------------- -------------- -------------- -----------
(c) Events after the balance sheet date
On 26 October, the High Court issued a judgment involving the
Lloyds Banking Group's defined benefit pension schemes, whereby it
concluded the schemes should be amended to equalise pension
benefits for men and women in relation to guaranteed minimum
pension benefits. At this early stage our initial assessment is
that similar to many other defined benefit pension schemes, the
Norcros Security Plan is impacted by this judgement and we are
working with the trustees of our pension plan and our advisers to
understand the extent to which the judgment increases our pension
plan liabilities. This increase has not been reflected in our
interim results and any adjustment necessary is expected to be
recognised in the second half of the financial year ending 31 March
2019.
13. Related party transactions
The remuneration of executive and non-executive Directors will
be disclosed in the Group's Annual Report for the year ending 31
March 2019.
14. Financial risk management and financial instruments
Financial risk factors
The Group's operations expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk and
energy price risk); credit risk; and liquidity risk. An explanation
of these risks and how the Group manages them is set out on page 94
of the Group's 2018 Annual Report. The interim financial
information does not include all financial risk management
information and disclosures required in annual financial
statements; they should be read in conjunction with the Group's
2018 Annual Report. There have been no material changes in the risk
management process or in any risk management policies since the
year end.
Derivative financial instruments carried at fair value through
profit and loss
At 30 September At 30 September
2018 2017 At 31 March 2018
-------------------------- -------------------------- ------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
Forward foreign exchange
contracts:
- current 1.0 - 0.3 (1.7) - (3.3)
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
The above financial instruments are classified as level 2
instruments based on the hierarchy defined in IFRS 7. Consequently,
fair value measurements are derived from inputs other than quoted
prices included in level 1 that are observable for the assets or
liabilities, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
The fair value of the following financial assets and liabilities
approximate their carrying amount:
-- trade and other receivables;
-- cash and cash equivalents; and
-- trade and other payables.
Statement of Directors' responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim financial
reporting', as adopted by the European Union and that the Interim
Report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
interim financial information and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
and any changes in the related party transactions disclosed in the
last Annual Report.
The Directors of Norcros plc and their respective
responsibilities are as listed in the Norcros plc 2018 Annual
Report.
By order of the Board
N. P. Kelsall S. M. Smith
Group Chief Executive Group Finance Director
15 November 2018 15 November 2018
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
IR GMMMMRDVGRZM
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