For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231116:nRSP6211Ta&default-theme=true
RNS Number : 6211T Norcros PLC 16 November 2023
16 November 2023
Norcros plc
Results for the six months ended 30 September 2023
Robust performance - share gains reflecting the strength and positioning of
our market leading brands
Norcros is a market leading group of brands providing design led, high quality
bathroom and kitchen products. The Group today announces its results for the
six months ended 30 September 2023.
Financial Summary
6 months to 6 months to % change 2023 v 2022
30 September 2023 30 September 2022
Revenue £201.6m £219.9m (8.3%)
Revenue constant currency LFL(1) (4.1%)
Underlying operating profit(2) £21.4m £22.0m (2.7%)
Underlying profit before taxation(2) £18.1m £19.9m (9.0%)
Diluted underlying EPS(2) 15.6p 17.8p (12.4%)
Operating profit £15.3m £16.1m (5.0%)
Underlying net debt(2) (£46.6m) (£58.9m)
Interim dividend per share 3.4p 3.4p
Highlights
· Robust trading performance with further market share growth
driven by successful new product launches and best in class service levels
· Revenue of £201.6m (2022: £219.9m) and underlying operating
profit of £21.4m (2022: £22.0m) with a record UK performance at £18.7m
· Excellent cash generation at 121% of underlying EBITDA and low
leverage at 1.0x underlying EBITDA
· Successful launch of market leading sustainable products across
our brands
· Interim dividend of 3.4p per share, reflecting the Board's
confidence in the Group's prospects
· Good progress in the refinement and execution of strategic
priorities
Thomas Willcocks, Chief Executive Officer, commented:
"We have delivered a robust first half performance against a challenging
macroeconomic backdrop. Although market conditions remain uncertain, we are
confident that the ongoing refinement and execution of our strategy, backed by
the strength of our design led market leading brands, will continue to deliver
market share gains for the year ending 31 March 2024. We continue to expect
full year underlying operating profit to be in line with market
expectations(3)."
There will be a presentation today at 9.00 am GMT 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
(http://www.norcros.com/) later in the day.
(1) LFL (like for like) basis, adjusted for Grant Westfield (acquired 31 May
2022) and Norcros Adhesives
(2) Definitions and reconciliations of alternative performance measures are
provided in note 3
(3) Norcros compiled market consensus for the year to 31 March 2024, as at 16
November 2023, is for an underlying operating profit of £43.4 million
Enquiries
Norcros plc Tel: 01625 547700
Thomas Willcocks, Chief Executive Officer
James Eyre, Chief Financial Officer
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Sophie Miles
Notes to Editors
Norcros is a design and service led bathroom and kitchen business with market
leading brands operating primarily in the UK and South Africa.
In the UK, Norcros operates under seven brands: Triton, Merlyn, Multipanel
(Grant Westfield), Vado, Croydex, Abode and Johnson Tiles.
In South Africa, Norcros operates under four brands: Tile Africa, House of
Plumbing, TAL and Johnson Tiles.
Norcros is headquartered in Wilmslow, Cheshire and employs around 2,400
people. The Company is listed on the London Stock Exchange. For further
information, please visit the Company website: http://www.norcros.com
(http://www.norcros.com)
OVERVIEW OF RESULTS
The Board is pleased to report another robust set of results for the six
months ended 30 September 2023. Market share growth and targeted cost
management saw the Group deliver an underlying operating profit of £21.4m for
the period (2022: £22.0m). Group operating margins increased to 10.6% (2022:
10.0%), reflecting the successful execution of our strategy and improvements
made to our business portfolio. Cash generation was excellent at 121% of
underlying EBITDA, benefiting from the focus on working capital in the period.
The UK business delivered a strong performance with revenue of £143.9m (2022:
£142.8m), 0.8% above the prior year, and just 0.8% below on a like for like
basis, adjusting for the acquisition of Grant Westfield and closure of Norcros
Adhesives. Our brands, which include market leaders Triton, Merlyn, and Grant
Westfield, again demonstrated our proven ability to profitably grow share
through the cycle, driven by our in-house product design capabilities and
market leading service levels.
Our South African business performed resiliently despite heightened energy
disruption which adversely impacted market demand in the period. Revenue of
£57.7m (2022: £77.1m) was down 11.0% on a constant currency basis and 25.2%
lower on a reported basis. Our experienced management team are adept at
managing these challenges by controlling costs and leveraging our brands and
financial strength to take share from weaker competitors.
The Group results are a testament to the strength of our design led market
leading brands and their positioning in the more resilient mid-to-premium
market segment. Our individual brands all employ in-house, sector specialist
new product development teams, with a quarter of our revenue coming from
products launched in the last 36 months. Significant and successful launches
in H1 included ENVi® (Triton), Pure (Grant Westfield) and Zone (Vado). These
products are increasingly focused on making a positive difference to the
environment. Although our brands operate separately, we do collectively take
advantage of our scale to deliver revenue and cost synergies, driving
sustained market share growth. Given the strength of and continued investment
in our model we are confident that we will continue to deliver profitable
market share growth as we consolidate what remain fragmented and attractive
bathroom and kitchen product markets.
Results
Group revenue for the 26-week first half was £201.6m (2022: £219.9m), an
8.3% decrease on the prior year on a reported basis and 4.1% below the prior
year on a constant currency like for like basis. The robust performance driven
by the strength of our brands, their market positioning, and the benefits of
our ongoing investment in new product development, enabled the Group to
deliver further market share gains.
Underlying operating profit was £21.4m (2022: £22.0m), reflecting the lower
revenue in the period. The underlying operating profit margin improved to
10.6% (2022: 10.0%).
Operating profit was £15.3m (2022: £16.1m) after deducting acquisition
related costs of £3.9m (2022: £4.9m). Acquisition related costs represent
amortisation of acquired intangibles of £3.3m (2022: £3.1m), acquisition
related advisory fees of £0.1m (2022: £1.5m) and deferred remuneration of
£0.5m (2022: £0.3m). An exceptional cost of £1.4m was recognised in the
period in relation to the costs associated with a reduction in manufacturing
capacity at Johnson Tiles (UK). IAS 19R administration expenses were £0.8m
(2022: £1.0m) in the period.
Underlying profit before taxation was £18.1m (2022: £19.9m), reflecting the
increase in bank interest costs to £2.5m (2022: £1.2m) primarily due to
higher bank base rates. IFRS 16 interest costs in the period on lease
liabilities were £0.8m (2022: £0.9m). The application of IFRS 16 had a
£0.1m improvement on underlying profit before taxation (2022: nil impact).
Profit before taxation was £11.7m (2022: £14.0m).
Diluted underlying earnings per share were 15.6p (2022: 17.8p), predominantly
impacted by the reduction in underlying profit before taxation.
The Group generated an underlying operating cash inflow of £27.4m (2022:
£16.1m), reflecting our continued focus on working capital. Capital
expenditure was £4.2m in the first half (2022: £3.3m), with focused
investment in new product development, systems, and our facilities.
Financial Position
Group net debt (pre-IFRS 16) was £46.6m at the half year (31 March 2023:
£49.9m), reflecting a continued focus on working capital. Inclusive of IFRS
16 lease liabilities, net debt was £68.9m (31 March 2023: £74.6m). The Group
remains in a strong financial position with leverage at circa. 1.0x EBITDA and
significant headroom within its committed £130m RCF financing facility
maturing October 2026. IFRS 16 has no impact on cash flow nor on the Group's
existing bank covenants.
Pension Scheme
The gross surplus relating to our UK defined benefit pension scheme as
calculated under IAS 19R has increased from £14.9m at 31 March 2023 to
£15.7m. This increase in the surplus is primarily due to an increase in the
discount rate to 5.60% (31 March 2023: 4.90%), offset by a reduced value of
assets. The Group's UK defined benefit pension scheme obligations continue to
be appropriately funded and well managed.
Dividend
The Board recognises the importance of dividends to shareholders and is
declaring an interim dividend of 3.4p (H1 2022: 3.4p) per share, reflecting
the robust first half performance and its confidence in the Group's prospects.
The dividend is payable on 16 January 2024 to shareholders on the register on
1 December 2023. The shares will be quoted ex-dividend on 30 November 2023.
NORCROS UK OPERATING REVIEW
Our UK business achieved first half revenue of £143.9m (2022: £142.8m),
representing growth of 0.8% on a reported basis and achieved a record level of
underlying operating profit in the period. On a like for like basis, adjusting
for Grant Westfield (acquired on 31 May 2022) and Norcros Adhesives in the
period, revenue was just 0.8% lower than the previous year. Reductions in
volume were broadly offset by price increases.
Triton, Merlyn, and Grant Westfield all performed strongly, driven by new
product launches, excellent stock availability and outstanding customer
service. Vado's performance was impacted by a delay in new product launches,
although the second quarter was stronger than the first. Our other UK brands
continued to grow market share and performed in line with our expectations.
RMI remains the largest component in the UK market. Our market leading brands
are positioned in the mid-premium RMI segment which has remained relatively
resilient in the period. Despite the well reported reduction in new
housebuilding activity, we continue to take market share and there remains a
significant shortage of homes in the UK.
Whilst representing a smaller proportion of the business, UK based export
revenue was higher than the prior year, driven by higher sales in Ireland,
France, and the Middle East.
As a result of the above, and the improvements made to our brand portfolio, UK
underlying operating profit for the year was 14.7% higher, increasing by
£2.4m to £18.7m (2022: £16.3m), with the operating margin increasing to
13.0% (2022: 11.4%). Operating cash conversion was significantly ahead of the
prior year, supported by our continued and successful focus on working
capital.
Our UK business is well placed to continue growing market share and winning
new customers in our target market segments by leveraging our strong new
product development pipeline, Group relationships and superior customer
service.
NORCROS SOUTH AFRICA OPERATING REVIEW
In South Africa, Norcros delivered revenue of £57.7m (2022: £77.1m), 11.0%
lower on a constant currency basis due to materially higher levels of energy
rationing adversely impacting consumer confidence and demand. All our
operations, including our retail stores, are equipped to handle energy
interruptions and as a result can and do remain open during energy
'loadshedding'. Our ongoing focus on product development and customer service
continued to drive market share gains in the period.
TAL, our market leading adhesive business in South Africa, posted a strong
performance leveraging our brand strength, and our leading technical support
capabilities to grow share in the period. Johnson Tiles and Tile Africa were
negatively impacted by the market slowdown, particularly in the new
housebuilding sector, where both have leading positions. As a result, both
businesses saw revenue behind the record prior year levels. House of Plumbing
revenue was in line with the previous year despite the challenging market
conditions, reflecting market share gains.
As a result of the above, underlying operating profit for the year was £2.7m
(2022: £5.7m), with the operating margin at 4.7% (2022: 7.4%). Operating cash
was below the prior year reflecting the difficult trading conditions,
partially offset by proactive working capital management.
Our South African business is resilient and will continue to focus on taking
market share from weaker competitors. In addition, the business will look to
further advance its House of Plumbing national roll out program. Going
forward, we envisage energy supply constraints to stabilise over time and
benefit from higher levels of private energy generation.
STRATEGIC PRIORITIES
In June this year, we communicated our strategic priorities, namely, Portfolio
Development, Organic Growth, Operational Excellence and ESG. We have made
early but meaningful progress in all four areas in the first half of this
year.
1. Portfolio Development
Norcros has, over the last ten years, successfully grown our share of the
bathroom and kitchen markets in our core geographies, both organically and
through carefully selected acquisitions. As markets and categories develop, we
will continue to assess the performance of our individual brands and ensure
that our capital allocation is aligned accordingly.
During the period, the UK adhesives business was closed in line with our
communicated plan. We have also recently announced the decision to reduce the
capacity of our Johnson Tiles (UK) plant by circa 50% in response to lower UK
tile demand. Our most recent acquisition, Grant Westfield, is performing well
with strong new channel growth. This again demonstrates our ability to
introduce acquired businesses to our blue-chip customer base, including in
this case, Wickes, Topps Tiles and Screwfix.
A core component of our strategy is consolidating what remain attractive but
fragmented bathroom and kitchen product markets through targeted earnings
accretive acquisitions. We have a well-developed acquisition pipeline and we
will continue to assess strategically compelling opportunities.
2. Organic Growth
Our focus on driving market share growth in our businesses has three
underlying drivers, namely new product development (increasingly in
sustainable products), cross-selling and market leading customer service. Our
new product vitality index is 25% (proportion of turnover from products
launched in the last three years) with standout launches in the period
including:
o Triton launched ENVi®, a world first in showering. The ENVi® is the
first of Triton's next generation 'behind the wall' sustainable electric
shower offering, including control and user feedback on water and energy
costs.
o Grant Westfield updated its Tile Collection and launched the new Pure
Collection. The business was nominated for two awards for the Tile Collection
(Best KBB Product at the BKU Awards and Best Surface Product at the KBB Focus
Awards).
o VADO launched the patented recessed Zone shower valve in multiple
finishes. Zone is the industry's first recessed all-flush thermostatic valve
with push button and temperature dial control, the perfect solution for a
minimal aesthetic with easy-to-clean benefits.
In addition, we continue to build processes to enhance our ability to
cross-sell and leverage our extensive broad channel base across our brands and
to drive market share growth.
3. Operational Excellence
Norcros' commitment to customer service is core to what we do every day. Our
operational platforms, and especially the data, required to ensure that our
customers stay ahead as their routes to market evolve and multiply, will
remain key areas of focus and investment.
Over the last six months, the Group has invested in new ERP and Customer
Service systems across several of our UK and SA businesses. This ongoing and
targeted investment in our operations will continue to drive efficiency gains
and further develop our compelling service offering.
Additionally, we continued to drive our Group wide programme of improvement of
our warehousing and logistics capabilities. In the period, we have made
further investments to help drive operating efficiencies, cost savings and
enhance service levels.
4. Environment, Social and Governance
Norcros views corporate responsibility and sustainability standards as a
distinct source of competitive advantage. As set out in our 2023 Annual
Report, our key ESG focus areas are our people, environment, innovative and
sustainable products, and governance. These themes underpin our strategic
growth and operational performance plans. Over the last two years, we have
invested in our ability to better measure the impact that we have across these
focus areas. Importantly, these measurements are being used to prioritise our
investment as we look to play our part in creating a fairer and more
sustainable world. Progress over the last six months includes:
o Submitting our carbon emission targets for validation by the Science Based
Targets Initiative and completing our first disclosure to the Climate
Disclosure Project.
o Triton, Vado, Merlyn and Abode achieving Carbon Neutral status. We
recognise that carbon neutrality is a first of several steps towards achieving
our Net Zero target.
o Accelerating the launch of sustainable products, including ENVi® (Triton)
and Pure (Grant Westfield). Triton won the Planet Mark Best Sustainability
Campaign award for understanding its responsibility and tackling it with
authenticity.
o Leveraging our ability to measure and record our activities to support our
suppliers and customers in meeting their ESG commitments. We have been awarded
'engaged supplier' status with several customers helping cement our long term
value in these relationships.
o Our people focused ESG priority is accelerated talent and DE&I
development. We have appointed Helen Gopsill as Norcros Chief People Officer
to lead this.
o Investing meaningfully in the communities we live and work in, including
our flagship safe toilet initiative in South African schools.
Investing in ESG is not only the right thing to do but makes commercial sense
and underpins our long-term strategic growth plan.
SUMMARY
Norcros has developed a leading and growing position in the bathroom and
kitchen product markets and segments that we compete in. The growth
opportunities in these fragmented markets remains significant. We are
confident that our proven and evolving business model positions us well to
take advantage of these opportunities and that we will continue our strong
record of sustainable and profitable growth.
Thomas
Willcocks
James Eyre
Chief Executive
Officer
Chief Financial Officer
16 November
2023
Condensed consolidated income statement
Six months to 30 September 2023
Notes 6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Revenue 201.6 219.9 441.0
Underlying operating profit 21.4 22.0 47.3
IAS 19R administrative expenses (0.8) (1.0) (1.6)
Acquisition related costs 4 (3.9) (4.9) (8.4)
Exceptional operating items 4 (1.4) - (9.8)
Operating profit 15.3 16.1 27.5
Finance costs 7 (3.9) (2.3) (6.4)
IAS 19R finance credit 0.3 0.2 0.6
Profit before taxation 11.7 14.0 21.7
Taxation 6 (2.4) (3.0) (4.9)
Profit for the period attributable to equity holders of the Company 9.3 11.0 16.8
Earnings per share attributable to equity holders of the Company
Basic earnings per share:
From profit for the period 5 10.4p 12.6p 19.1p
Diluted earnings per share:
From profit for the period 5 10.3p 12.4p 18.8p
Weighted average number of shares for basic earnings per share (millions) 5 89.2 87.1 88.1
Alternative performance measures
Underlying profit before taxation (£m) 3 18.1 19.9 41.8
Underlying earnings (£m) 3 14.1 15.8 33.5
Basic underlying earnings per share 5 15.8p 18.1p 38.0p
Diluted underlying earnings per share 5 15.6p 17.8p 37.4p
Condensed consolidated statement of comprehensive income
Six months to 30 September 2023
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 9.3 11.0 16.8
Other comprehensive income and expense:
Items that will not subsequently be reclassified to the Income Statement
Actuarial losses on retirement benefit obligations (0.5) (9.4) (5.6)
Items that may be subsequently reclassified to the Income Statement
Cash flow hedges - fair value gain/(loss) in year net of taxation 1.7 2.8 (2.9)
Foreign currency translation adjustments (2.9) (2.4) (8.3)
Other comprehensive expense for the period (1.7) (9.0) (16.8)
Total comprehensive income for the period attributable to equity holders of 7.6 2.0 -
the Company
Items in the statement are disclosed net of tax.
Condensed consolidated balance sheet
At 30 September 2023
Notes At At At
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Non-current assets
Goodwill 107.5 108.1 107.9
Intangible assets 56.6 68.0 59.2
Property, plant and equipment 24.3 30.3 24.8
Pension scheme asset 12 15.7 8.2 14.9
Right of use assets 17.9 21.4 20.0
222.0 236.0 226.8
Current assets
Inventories 97.2 112.7 103.9
Trade and other receivables 78.6 80.0 83.3
Derivative financial instruments - 5.3 -
Cash and cash equivalents 8 32.6 31.1 29.0
208.4 229.1 216.2
Current liabilities
Trade and other payables (91.9) (114.0) (99.2)
Lease liabilities (6.3) (5.7) (6.1)
Current tax liabilities (1.0) (1.9) (0.9)
Derivative financial instruments - - (2.0)
Provisions - - (4.5)
(99.2) (121.6) (112.7)
Net current assets 109.2 107.5 103.5
Total assets less current liabilities 331.2 343.5 330.3
Non-current liabilities
Financial liabilities - borrowings 8 (79.2) (90.0) (78.9)
Lease liabilities (16.0) (19.7) (18.6)
Deferred tax liabilities 6 (14.7) (17.3) (15.0)
Other non-current liabilities (6.9) (0.5) (6.2)
Provisions (2.9) (1.5) (1.2)
(119.7) (129.0) (119.9)
Net assets 211.5 214.5 210.4
Financed by:
Share capital 9 8.9 8.9 8.9
Share premium 47.6 47.6 47.6
Retained earnings and other reserves 155.0 158.0 153.9
Total equity 211.5 214.5 210.4
Condensed consolidated statement of cash flow
Six months to 30 September 2023
Notes 6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Cash generated from operations 10 23.6 11.6 37.7
Income taxes paid (2.6) (4.3) (7.7)
Interest paid (3.3) (2.1) (5.5)
Net cash generated from operating activities 17.7 5.2 24.5
Cash flows from investing activities
Purchase of property, plant and equipment and intangible assets (4.2) (3.3) (6.0)
Acquisition of subsidiary undertakings net of cash acquired - (78.3) (78.3)
Net cash used in investing activities (4.2) (81.6) (84.3)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital - 18.1 18.1
Purchase of treasury shares (0.8) - -
Principal element of lease payments (2.3) (2.4) (4.6)
Drawdown of borrowings - 71.0 60.0
Dividends paid to the Company's shareholders (6.1) (6.1) (9.2)
Net cash (used in)/generated from financing activities (9.2) 80.6 64.3
Net increase in cash and cash equivalents 4.3 4.2 4.5
Cash and cash equivalents at beginning of the period 29.0 27.4 27.4
Exchange movements on cash and cash equivalents (0.7) (0.5) (2.9)
Cash and cash equivalents at end of the period 32.6 31.1 29.0
Alternative performance measures
Underlying operating cash flow 3 27.4 16.1 44.8
Condensed consolidated statements of changes in equity
Six months to 30 September 2023 (unaudited)
Ordinary Share Hedging Reserve Translation Retained Total
share premium Treasury £m reserve earnings £m
capital £m reserve £m £m
£m £m
At 31 March 2023 8.9 47.6 (0.1) (1.4) (21.1) 176.5 210.4
Comprehensive income:
Profit for the period - - - - - 9.3 9.3
Other comprehensive income/(expense):
Actuarial loss on retirement benefit obligations - - - - - (0.5) (0.5)
Fair value gain on currency hedges - - - 1.7 - - 1.7
Foreign currency translation adjustments - - - (2.9) - (2.9)
Total other comprehensive income/(expense) - - - 1.7 (2.9) (0.5) (1.7)
Transactions with owners:
Purchase of treasury shares - - (0.8) - - - (0.8)
Dividends paid - - - - - (6.1) (6.1)
Value of employee services - - - - - 0.4 0.4
At 30 September 2023 8.9 47.6 (0.9) 0.3 (24.0) 179.6 211.5
Six months to 30 September 2022 (unaudited)
Ordinary Share Hedging Reserve Translation Retained Total
share premium Treasury £m reserve earnings £m
capital £m reserve £m £m
£m £m
At 31 March 2022 8.1 30.3 (0.1) 1.5 (12.8) 173.3 200.3
Comprehensive income:
Profit for the period - - - - - 11.0 11.0
Other comprehensive income/(expense):
Actuarial loss on retirement benefit obligations - - - - - (9.4) (9.4)
Fair value gain on currency hedges - - - 2.8 - - 2.8
Foreign currency translation adjustments - - - - (2.4) - (2.4)
Total other comprehensive income/(expense) - - - 2.8 (2.4) (9.4) (9.0)
Transactions with owners:
Shares Issued 0.8 17.3 - - - - 18.1
Dividends paid - - - - - (6.1) (6.1)
Value of employee services - - - - - 0.2 0.2
At 30 September 2022 8.9 47.6 (0.1) 4.3 (15.2) 169.0 214.5
Year ended 31 March 2023 (audited)
Ordinary Share Hedging Reserve Translation Retained Total
share premium Treasury £m reserve earnings £m
capital £m reserve £m £m
£m £m
At 31 March 2022 8.1 30.3 (0.1) 1.5 (12.8) 173.3 200.3
Comprehensive income:
Profit for the year - - - - - 16.8 16.8
Other comprehensive income:
Actuarial loss on retirement benefit obligations - - - - - (5.6) (5.6)
Fair value loss on cash flow hedges - - - (2.9) - - (2.9)
Foreign currency translation adjustments - - - - (8.3) - (8.3)
Total other comprehensive expense - - - (2.9) (8.3) (5.6) (16.8)
Transactions with owners:
Shares issued 0.8 17.3 - - - - 18.1
Dividends paid - - - - - (9.2) (9.2)
Value of employee services - - - - - 1.2 1.2
At 31 March 2023 8.9 47.6 (0.1) (1.4) (21.1) 176.5 210.4
Notes to the accounts
Six months to 30 September 2023
1. Accounting policies
General information
The principal activity of Norcros plc ("the Company") and its subsidiaries
(together "the Group") is the provision of design led, high quality 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 16 November 2023 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 2023 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34,
'Interim financial reporting'.
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
2023, which has been prepared in accordance with IFRS as adopted by the UK.
The Annual Report and Accounts was approved by the Board on 14 June 2023 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 2023. 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.
Risks and uncertainties
The principal risks and uncertainties affecting the Group, together with the
approach to their mitigation, remain as set out on pages 40 to 44 in the 2023
Annual Report, which is available on the Group's website (www.norcros.com
(http://www.norcros.com) ). The principal risks stated were: pandemics
(including Covid-19), acquisition risk, environmental, social and governance
(ESG), staff retention and recruitment, market conditions, loss of key
customers, competition, reliance on production facilities, loss of a key
supplier, information technology and cyber security risk, exchange rate risk,
funding and liquidity risk and pension scheme risk.
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 judgements
The preparation of condensed consolidated interim financial information
requires management to make judgements, 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 judgements 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
2023.
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.
Notes 6 months to 30 September 2023 (unaudited)
UK South Group
£m Africa £m
£m
Revenue 143.9 57.7 201.6
Underlying operating profit 18.7 2.7 21.4
IAS 19R administrative expenses (0.8) - (0.8)
Acquisition related costs 4 (3.8) (0.1) (3.9)
Exceptional operating items 4 (1.4) - (1.4)
Operating profit 12.7 2.6 15.3
Finance costs (net) (3.6)
Profit before taxation 11.7
Taxation 6 (2.4)
Profit for the period 9.3
Net debt 8 (46.6)
Notes 6 months to 30 September 2022 (unaudited)
UK South Group
£m Africa £m
£m
Revenue 142.8 77.1 219.9
Underlying operating profit 16.3 5.7 22.0
IAS 19R administrative expenses (1.0) - (1.0)
Acquisition related costs 4 (4.8) (0.1) (4.9)
Operating profit 10.5 5.6 16.1
Finance costs (net) (2.1)
Profit before taxation 14.0
Taxation 6 (3.0)
Profit for the period 11.0
Net debt 8 (58.9)
Notes Year ended 31 March 2023 (audited)
UK South Group
£m Africa £m
£m
Revenue 295.8 145.2 441.0
Underlying operating profit 37.2 10.1 47.3
IAS 19R administrative expenses (1.6) - (1.6)
Acquisition related costs 4 (8.2) (0.2) (8.4)
Exceptional operating items 4 (9.8) - (9.8)
Operating profit 17.6 9.9 27.5
Finance costs (net) (5.8)
Profit before taxation 21.7
Taxation 6 (4.9)
Profit for the period 16.8
Net debt 8 (49.9)
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 and
finance costs relating to pension schemes
Underlying taxation Taxation on underlying profit before tax
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 share Underlying earnings divided by the weighted average number of shares for basic
earnings per share
Diluted underlying earnings per share Underlying earnings divided by the weighted average number of shares for
diluted earnings per share
Underlying EBITDA Underlying EBITDA is derived from underlying operating profit before
depreciation and amortisation excluding the impact of IFRS16 in line with our
banking covenants
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 net (debt)/cash Underlying net (debt)/cash is the net of cash, capitalised costs of raising
finance and total borrowings. IFRS16 lease commitments are not included in
line with our banking covenants
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 annual bonus and long-term incentives earned by the
Directors. 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 to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Profit before taxation 11.7 14.0 21.7
Adjusted for:
IAS 19R administrative expenses 0.8 1.0 1.6
Acquisition related costs 3.9 4.9 8.4
Exceptional operating items 1.4 - 9.8
Amortisation of costs of raising finance 0.3 0.2 0.3
Discounting of contingent consideration 0.3 - 0.6
IAS 19R finance income (0.3) (0.2) (0.6)
Underlying profit before taxation 18.1 19.9 41.8
Taxation attributable to underlying profit before taxation (4.0) (4.1) (8.3)
Underlying earnings 14.1 15.8 33.5
(b) Underlying EBITDA
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Operating profit 15.3 16.1 27.5
Adjusted for:
IAS 19R administrative expenses 0.8 1.0 1.6
Acquisition related costs 3.9 4.9 8.4
Exceptional operating items 1.4 - 9.8
Underlying operating profit 21.4 22.0 47.3
Depreciation and amortisation (owned assets) 2.1 2.5 5.0
Depreciation of leased assets 2.2 2.4 4.6
Lease costs (3.1) (3.3) (6.4)
Underlying EBITDA (pre-IFRS 16) 22.6 23.6 50.5
Condensed Consolidated Statement of Cash Flow
Underlying operating cash flow
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Cash generated from continuing operations (note 10) 23.6 11.6 37.7
Adjusted for:
Cash flows from exceptional items and acquisition related costs 1.8 2.6 3.3
Pension fund deficit recovery contributions 2.0 1.9 3.8
Underlying operating cash flow 27.4 16.1 44.8
4. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs is shown below.
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Acquisition related costs
Intangible asset amortisation(1) 3.3 3.1 6.2
Advisory Fees(2) 0.1 1.5 1.4
Deferred remuneration(3) 0.5 0.3 0.8
3.9 4.9 8.4
1 Non-cash amortisation charges in respect of acquired intangible
assets.
2 Professional advisory fees incurred in connection with the Group's
business combination activities.
3 Deferred consideration payable to the divisional employees of the
acquired business is required to be treated as remuneration, and, accordingly,
is expensed to the Income Statement as incurred over the period of the related
agreement.
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2023 2023
(unaudited) (unaudited) (audited)
£m £m £m
Exceptional Operating Items
Restructuring costs1 1.4 - 4.8
Impairment(2) - - 5.0
1.4 - 9.8
1 The exceptional restructuring cost in the current year relates to
the aforementioned restructuring in Johnson Tiles. In the prior year,
exceptional restructuring costs of £4.8m were incurred in relation to the
restructuring programme implemented at Norcros Adhesives. This £4.8m
represented a provision for the costs associated with closure including the
write down of current and non-current asset values and costs such as
redundancy.
2 As a result of demand uncertainty, the Johnsons Tiles tangible and
right of use assets were impaired in the prior year with a non-cash impairment
charge of £5.0m recognised as an exceptional item in the income statement.
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 period, 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 to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Profit for the period 9.3 11.0 16.8
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Number Number Number
Weighted average number of shares for basic earnings per share 89,170,488 87,121,128 88,129,432
Share options 1,370,636 1,443,078 1,370,679
Weighted average number of shares for diluted earnings per share 90,541,124 88,564,206 89,500,111
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Basic earnings per share:
From profit for the period 10.4p 12.6p 19.1p
Diluted earnings per share:
From profit for the period 10.3p 12.4p 18.8p
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 to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Underlying earnings for the period (note 3) 14.1 15.8 33.5
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Basic underlying earnings per share 15.8p 18.1p 38.0p
Diluted underlying earnings per share 15.6p 17.8p 37.4p
6. Taxation
Taxation comprises:
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Current
UK taxation 1.1 1.3 1.8
Overseas taxation 1.6 2.0 4.6
Prior year adjustment - - (0.7)
Total current taxation 2.7 3.3 5.7
Deferred
Origination and reversal of temporary differences (0.3) (0.3) (0.8)
Total tax charge 2.4 3.0 4.9
Current tax expense is recognised based on management's estimate of the
weighted average annual income tax rate expected for the full financial year.
In the Spring Budget 2021, the Government announced that from 1 April 2023 the
corporation tax rate would increase to 25% and this rate increase is reflected
in the above estimates.
The movement on the deferred tax account is as shown below:
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Deferred tax liability at the beginning of the period (15.0) (9.4) (9.4)
Credited to the Consolidated Income Statement 0.3 0.3 0.8
Credited to other comprehensive income - 2.5 2.7
Deferred tax liability recognised on acquisition - (10.7) (9.1)
Deferred tax liability at the end of the period (14.7) (17.3) (15.0)
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Accelerated capital allowances (0.4) (0.1) (0.4)
Other timing differences 3.0 1.3 3.2
Deferred tax liability relating to intangible assets (13.4) (16.5) (14.1)
Deferred tax liability relating to pension surplus (3.9) (2.0) (3.7)
Deferred tax liability at the end of the period (14.7) (17.3) (15.0)
7. Finance costs
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Finance costs
Interest payable on bank borrowings 2.5 1.2 3.7
Interest on lease liabilities 0.8 0.9 1.8
Amortisation of costs of raising debt finance 0.3 0.2 0.3
Discounting of deferred consideration 0.3 - 0.6
Finance costs 3.9 2.3 6.4
8. Borrowings
At At At
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Non-current
Bank borrowings (unsecured):
- bank loans 80.0 91.0 80.0
- less: costs of raising finance (0.8) (1.0) (1.1)
Total borrowings 79.2 90.0 78.9
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
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Not later than one year - - -
After more than one year:
- between one and two years - - -
- between two and five years 80.0 91.0 80.0
- costs of raising finance (0.8) (1.0) (1.1)
Total borrowings 79.2 90.0 78.9
The Group has a multicurrency £130m revolving credit facility (plus a £70m
uncommitted accordion facility) with four lenders. The facility has a maturity
date of October 2026 with a further one-year extension option available to
October 2027.
Net debt
The Group's net debt is calculated as follows:
At At At
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Cash and cash equivalents 32.6 31.1 29.0
Total borrowings (79.2) (90.0) (78.9)
Net debt (46.6) (58.9) (49.9)
9. Called up share capital
At At At
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Issued and fully paid
89,274,204 (September 2022: 89,271,813, March 2023: 89,274,204) ordinary 8.9 8.9 8.9
shares of 10p each
In the prior year 8,088,700 ordinary shares were issued as an equity placing
ahead of the Grant Westfield acquisition resulting in a share premium of
£17.2m. 133,078 ordinary shares of 10p were also issued to satisfy vesting of
options under the Company's SAYE and DBP share schemes.
10. Consolidated Cash Flow Statements
(a) Cash generated from operations
6 months to 6 months to Year ended
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Profit before taxation 11.7 14.0 21.7
Adjustments for:
- IAS 19R administrative expenses included in the Income Statement 0.8 1.0 1.6
- acquisition related costs included in the Income Statement 3.9 4.9 8.4
- exceptional operating items included in the Income Statement 1.4 - 9.8
- cash flows from exceptional items and acquisition related costs (1.8) (2.6) (3.3)
- depreciation of property, plant and equipment 2.0 2.4 4.9
- underlying amortisation 0.1 0.1 0.1
- depreciation of right of use assets 2.2 2.4 4.6
- finance costs included in the Income Statement 3.9 2.3 6.4
- pension fund deficit recovery contributions (2.0) (1.9) (3.8)
- IAS 19R finance income included in the Income Statement (0.3) (0.2) (0.6)
- IFRS2 Charges 0.4 0.2 1.2
Operating cash flows before movements in working capital 22.3 22.6 51.0
Changes in working capital:
- decrease/(increase) in inventories 4.2 (8.3) (3.0)
- decrease/(increase) in trade and other receivables 3.1 0.1 (3.1)
- decrease in trade and other payables (6.0) (2.8) (7.2)
Cash generated from operations 23.6 11.6 37.7
Cash flows from exceptional items and acquisition related costs 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
Net cash and current borrowings Non-current borrowings Underlying net cash/ Lease Liabilities Net debt
(debt)
£m £m
£m £m
£m
At 1 April 2023 29.0 (78.9) (49.9) (24.7) (74.6)
Cash flow 4.3 - 4.3 3.1 7.4
Non-cash finance costs - (0.3) (0.3) (0.8) (1.1)
Other non-cash movements - - - (0.8) (0.8)
Exchange movements (0.7) - (0.7) 0.9 0.2
At 30 September 2023 32.6 (79.2) (46.6) (22.3) (68.9)
Net cash and current borrowings Non-current borrowings Underlying net cash/ Lease Liabilities Net debt
(debt)
£m £m
£m £m
£m
At 1 April 2022 27.4 (18.8) 8.6 (24.0) (15.4)
Cash flow 4.2 (71.0) (66.8) 3.3 (63.5)
Non-cash finance costs - (0.2) (0.2) (0.9) (1.1)
Other non-cash movements - - - (4.3) (4.3)
Exchange movements (0.5) - (0.5) 0.5 -
At 30 September 2022 31.1 (90.0) (58.9) (25.4) (84.3)
Net cash and current borrowings Non-current borrowings Underlying net cash/ Lease Liabilities Net debt
(debt)
£m £m
£m £m
£m
At 1 April 2022 27.4 (18.8) 8.6 (24.0) (15.4)
Cash flow 4.5 (60.0) (55.5) 6.4 (49.1)
Non-cash finance costs - (0.1) (0.1) (1.8) (1.9)
Other non-cash movements - - - (7.2) (7.2)
Exchange movements (2.9) - (2.9) 1.9 (1.0)
At 31 March 2023 29.0 (78.9) (49.9) (24.7) (74.6)
11. Dividends
A final dividend in respect of the year ended 31 March 2023 of £6.1m (6.8p
per 10p ordinary share) was paid on 4 August 2023.
On 16 November 2023, the Board declared an interim dividend in respect of the
year ended 31 March 2024 of 3.4p per 10p ordinary share. This dividend is
payable on 16 January 2024 to shareholders on the register on 1 December 2023
and is not reflected in this condensed consolidated interim financial
information. The shares will be quoted ex-dividend on 30 November 2023.
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 21 December 2023.
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 scheme is closed to new members
and future accrual with effect from 1 April 2013, although active members
retain a salary link.
The valuation used for IAS 19R disclosures has been produced by Isio, 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 2023. Scheme
assets are stated at their market value at 30 September 2023.
(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
2023 2022 2023
Discount rate 5.60% 5.25% 4.90%
Inflation rate (RPI) 3.30% 3.55% 3.25%
Inflation (CPI) 2.60% 2.75% 2.55%
Salary increases 2.85% 3.00% 2.80%
The amounts recognised in the Condensed Consolidated Balance Sheet are
determined as follows:
At At At
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£m £m £m
Total market value of scheme assets 275.4 287.3 299.9
Present value of scheme liabilities (259.7) (279.1) (285.0)
Pension surplus 15.7 8.2 14.9
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 2024.
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 149 to 152 of the Group's 2023 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 2023 Annual
Report. There have been no material changes in the risk management process or
in any risk management policies since the year end.
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
presented on our website www.norcros.com.
By order of the Board
Thomas
Willcocks
James Eyre
Chief Executive Officer
Chief Financial Officer
16 November 2023
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR DDBDBDDBDGXU