TIDMNXR
RNS Number : 0453F
Norcros PLC
12 November 2020
12 November 2020
Norcros plc
Results for the six months ended 30 September 2020
'Marked recovery and strong financial position.'
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 2020.
Financial Summary
Six months Six months % change % change
ended ended Constant
30 September 30 September Currency
2020 LFL(2)
26 Weeks 2019
27 Weeks
Revenue GBP135.3m GBP181.2m -25.3% -17.3 %
-------------- -------------- --------- ----------
Underlying operating profit(1) GBP12.8m GBP17.4m -26.4%
-------------- -------------- --------- ----------
Underlying profit before
taxation(1) GBP10.7m GBP15.6m -31.4 %
-------------- -------------- --------- ----------
Diluted Underlying EPS(1) 10.6p 15.1p -29.8 %
-------------- -------------- --------- ----------
Underlying operating cash
flow(1) GBP37.6m GBP20.0m 88.0 %
-------------- -------------- --------- ----------
Operating profit GBP7.4m GBP14.3m -48.3 %
-------------- -------------- --------- ----------
Net debt(1) GBP7.3m GBP41.1m
-------------- -------------- --------- ----------
Interim dividend per share - 3.1p
-------------- -------------- --------- ----------
(1) Definitions and reconciliations of alternative performance
measures are provided in note 3
(2) LFL (like for like) at constant currency and adjusting for
27 to 26-week period pro-rating
Highlights
-- Marked recovery in demand in the second quarter with 4.5%
constant currency like for like revenue growth on prior year
largely reflecting an uplift in RMI activity
-- Half year revenue of GBP135.3m (2019: GBP181.2m), 75% of
prior year revenue on a reported basis and 83% on a constant
currency like for like basis, principally a result of the impact of
COVID-19
-- Underlying operating profit of GBP12.8m (2019: GBP17.4m)
reflecting strong recovery in the second quarter underlining the
Group's resilience
-- Significant reduction in net debt to GBP7.3m (2019: GBP41.1m)
due to continued focus on cost alignment and cash preservation
-- Strong financial position with leverage, Net Debt: LTM EBITDA
of 0.2 times with significant liquidity and funding headroom
Nick Kelsall, Chief Executive Officer, commented:
"Our business and our employees have responded admirably to the
challenges of COVID-19 and we are grateful for their contribution.
The resilience and flexibility of our operating model including our
well established supply chains and excellent customer service have
ensured that we have emerged in a strong position as our markets
and customers have reopened. We have recovered strongly with second
quarter revenues increasing by 4.5% against prior year on a
constant currency like for like basis. Notwithstanding the ongoing
uncertainty as governments seek to control COVID-19, including the
current lockdowns, Norcros continues to be in a very strong
competitive and financial position. All our facilities are
operating and the vast majority of our customer base continue to
trade. Given this, its leading market positions, established
brands, broad distribution channels and experienced management team
the Group remains well positioned to sustain the strong progress
and recovery of the second quarter."
There will be a presentation today at 9.30 am for analysts via a
conference call. The supporting slides will be available on the
Norcros website at http://www.norcros.com later in the day.
Enquiries
Norcros plc Tel: 01625 547700
Nick Kelsall, Chief Executive
Officer
Shaun Smith, Chief Financial Officer
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Molly Streeton
Notes to Editors
Norcros is a market leading supplier of high quality and
innovative bathroom and kitchen products with operations primarily
in the UK and South Africa.
-- Based in the UK, Norcros operates under seven brands:
-- Triton - Market leader in the manufacture and marketing of showers in the UK
-- Merlyn - The UK and Ireland's No.1 supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors
-- Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
-- Croydex - A market-leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and
accessories
-- Abode - A leading niche designer and distributor of high
quality kitchen taps, bathroom taps, and kitchen sinks
-- Johnson Tiles - The leading manufacturer and supplier of ceramic tiles in the UK
-- Norcros Adhesives - Manufacturer of tile & stone adhesives, grouts and related products
-- Based in South Africa, Norcros operates under four brands:
-- Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitaryware,
showers and adhesives
-- Johnson Tiles South Africa - Manufacturer of ceramic and porcelain tiles
-- TAL - The leading manufacturer of ceramic and building adhesives
-- House of Plumbing - Market leading supplier of specialist plumbing materials
-- Norcros is headquartered in Wilmslow, Cheshire and employs
around 2,000 people. The Company is listed on the London Stock
Exchange. For further information please visit the Company website:
http://www.norcros.com
Overview of Results
The unprecedented COVID-19 pandemic has had a significant impact
on these results, especially so in the first quarter where the
lockdowns in our two main markets significantly reduced the demand
for our products due to the closure of the majority of our
customers. During this time, we mothballed our facilities,
safeguarding our employees, customers and suppliers whilst
continuing to operate our businesses effectively with a skeleton
staff working predominantly from their homes where possible. Since
the lockdowns have eased the resilience and flexibility of our
business model including our well established supply chains and
experienced management teams, have ensured that the Group has
emerged in a very strong competitive and financial position as our
markets and customers have reopened. We have undoubtedly gained
market share as we grew second quarter Group revenue by 4.5%
against prior year on a constant currency like for like basis.
Our UK business has performed strongly with revenue of GBP93.7m
(2019: GBP115.6m), reflecting second quarter revenue at 104% and
half year revenue at 84% of prior year on a like for like basis.
Merlyn, Triton and Vado experienced a marked recovery in the second
quarter with revenue ahead of prior year on a like for like basis
benefiting from their leading market positions, stock availability
and superior service.
Our South African business also continued to make good progress
with revenue of GBP41.6m (2019: GBP65.6m), reflecting second
quarter revenue at 106% and half year revenue at 79% of prior year
on a constant currency like for like basis. The performance
reflects a strong recovery in the Tile Africa business in the
retail renovation market.
Underlying operating profit was GBP12.8m (2019: GBP17.4m)
reflecting the impact of the COVID-19 pandemic in the first quarter
and the strength of the recovery in trading in the second
quarter.
Results
Group revenue for the 26-week first half (2019: 27 weeks) was
GBP135.3m (2019: GBP181.2m), 75% of prior year revenue on a
reported basis, 80% on a constant currency basis and 83% on a
constant currency like for like basis. First quarter revenue was
55% of prior year on a reported basis and 58% on a constant
currency basis. Second quarter revenue was 91% of prior year on a
reported basis, 97% on a constant currency basis and 105% on a
constant currency like for like basis.
Underlying operating profit was GBP12.8m (2019: GBP17.4m) and
includes GBP3.9m of UK Government assistance in respect of the
Coronavirus Job Retention Scheme and GBP0.2m and GBP0.8m
respectively from the Irish and South African governments in
relation to similar schemes. The application of IFRS 16 has
increased underlying operating profit by GBP0.5m (2019:
GBP0.3m).
Operating profit was GBP7.4m (2019: GBP14.3m) resulting from the
reduction in underlying operating profit and GBP2.4m of exceptional
restructuring costs, a result of actions taken to reduce costs to
offset the impact of the COVID-19 pandemic. Acquisition related
costs of GBP2.1m (2019: GBP2.2m) mainly relate to acquired
intangible amortisation. IFRS 19R administration expenses are
GBP0.9m (2019: GBP0.9m) in the period.
Underlying profit before taxation was GBP10.7m (2019: GBP15.6m)
reflecting the reduction in underlying operating profit and higher
interest charges in the current year of GBP1.2m (2019: GBP0.9m) on
the additional borrowings drawn down to secure the Group's
liquidity in this unprecedented period. These additional borrowings
have now been repaid. The application of IFRS 16 has reduced
underlying profit before taxation by GBP0.4m (2019: GBP0.6m), IFRS
16 interest costs on the lease liabilities were GBP0.9m (2019:
GBP0.9m).
Profit before taxation was GBP3.4m (2019: GBP13.3m). The
non-cash movement in the fair value of derivatives, mainly due to
the strengthening in the period of Sterling against the US dollar
from the year-end, was a loss in the current year of GBP1.3m (2019:
gain of GBP1.3m).
Diluted underlying earnings per share was 10.6p (2019: 15.1p),
principally reflecting the reduction in underlying profit before
taxation.
The Group generated an underlying operating cash flow of
GBP37.6m (2019: GBP20.0m) driven largely by a GBP19.9m inflow from
working capital (2019: GBP3.1m outflow) reflecting a significant
reduction in inventory and the deferral of VAT, rates and rent in
the period. Capital expenditure was GBP0.9m in the period (2019:
GBP3.1m) in line with COVID-19 related cash preservation actions.
Net debt was GBP7.3m at 30 September 2020 (30 September 2019:
GBP41.1m), representing pro-forma leverage of 0.2 times underlying
EBITDA compared to 0.9 times at 31 March 2020. Inclusive of IFRS 16
lease liabilities, net debt is GBP33.9m (2019: GBP70.8m). IFRS 16
has no impact on cash flow nor on the Group's existing bank
covenants.
COVID-19 Related Restructurings
The unprecedented COVID-19 pandemic has understandably had a
significant impact on our business and as our main economies emerge
from the first pandemic wave and some now face a second wave, the
shape of the recovery in the demand for our products remains
uncertain. In response to this, and as noted in our Annual Report
of 31 March 2020, the Group has implemented a number of
restructuring programmes during the period resulting in a reduction
in employee numbers of approximately 200, associated cash costs of
GBP2m, of which GBP1m remains to be paid, and GBP0.4m of non-cash
costs, generating over GBP3m of annualised savings.
Financial Position
As a result of the strong recovery in trading and the continued
focus on cost alignment and cash generation across the Group net
debt has reduced to GBP7.3m at the half year (2019: GBP41.1m). This
is a significant reduction on the GBP36.4m reported at the year end
and in leverage with Net Debt: LTM EBITDA of 0.2 times compared to
0.9 times at the year end. The Group is in a strong financial
position with significant headroom against all of the financial
covenants in its committed GBP120m RCF financing facility which
matures in November 2022, including the recently agreed GBP95m
maximum net debt covenant which remains in place until June
2021.
Pension Scheme
The gross deficit relating to our UK defined benefit pension
scheme as calculated under IAS 19R is unchanged at GBP48.9m (31
March 2020: GBP48.9m). The pension assets have increased in value
during the period to GBP398m at 30 September 2020 (31 March 2020:
GBP362m) as asset values recovered. The pension liabilities have
increased from GBP411m at 31 March 2020 to GBP447m at 30 September
2020 due to a reduction in the discount rate to 1.65% (31 March
2020: 2.21%) which was the result of a significant reduction in
bond yields and the increase in the RPI inflation rate assumption
to 2.90% (31 March 2020: 2.55%). No adjustment has been made for
any impact of COVID-19 on the scheme's mortality risk, which we
will continue to monitor.
Dividend
The Board believes that given the short term uncertainty
including the potential impact of the current lockdowns, optimising
the Group's funding and liquidity position needs to remain a key
focus and is therefore not proposing to declare an interim
dividend. The Board recognises the importance of dividends and will
consider recommending a final dividend for the full year subject to
the Group's continued strong trading performance, financial
position and outlook.
Operating Review
UK
Our UK business has recovered strongly from the COVID-19
lockdowns with half year revenue of GBP93.7m (2019: GBP115.6m), 81%
of prior year on a reported basis and 84% on a like for like basis.
In response to the COVID-19 pandemic and associated lockdowns we
suspended our main manufacturing and assembly operations during
March in a controlled way to safeguard our employees with c70% of
the workforce at its peak furloughed during the first quarter with
reported revenue of 62% of prior year. During this time we
continued to service our customers, particularly those with online
sales capabilities, with a skeleton staff working predominantly
from their homes where possible. As the lockdowns eased our UK
facilities reopened ensuring COVID-19 secure environments for all
our workforce with our manufacturing capacity aligned with our
inventory levels and demand. The second quarter witnessed a strong
recovery in demand with revenue at 96% of prior year on a reported
basis and 104% on a like for like basis as our businesses
benefitted from an uplift in RMI activity with strong growth in our
retail and online channels. Our leading market positions, strong
brands, stock availability and superior service meant we were able
to capitalise on the strong rebound in trading and grow market
share.
Underlying operating profit was GBP10.8m (2019: GBP12.5m) in the
period, largely reflecting the impact of COVID-19 on trading in the
first quarter, the receipt of GBP4.1m of coronavirus job retention
support from the UK and Irish governments and the strong recovery
in the second quarter.
Triton
Triton, the UK's market leader in showers, recorded revenue for
the first half of GBP23.3m (2019: GBP24.5m), 95% of prior year on a
reported basis and 99% on a like for like basis. Despite the
COVID-19 lockdown related disruption in the first quarter, Triton
increased market share and grew second quarter revenue by 7.6% on a
like for like basis on prior year, benefitting from the strength of
Triton's brand, stock availability and effective customer service,
as some competitors struggled to react to the challenging operating
environment.
Retail revenue for the first half in the UK was 18.2% higher on
a like for like basis reflecting a rapid post COVID-19 recovery of
sales driven by a significant uplift in demand for home renovation
products and an increase in online sales. Trade revenue for the
first half was significantly lower than the prior year, 75% of
prior year on a like for like basis with the contract, housing and
local authority business activity pausing during lockdown and
recovering more slowly than the retail channel.
Triton's export markets, mainly driven by the Irish retail
channel, experienced a similar recovery to UK retail with first
half revenue level with prior year on a reported basis and 4.3%
higher on a like for like basis.
Despite the COVID-19 related disruption revenue has increased on
prior year in key product categories: Instaflow(TM) Water Heating,
Quiet Mark(TM) approved pumped and power showers and shower
accessories; where ongoing investment and new product launches over
recent months has proven successful.
Triton's second quarter underlying operating profit was up on
prior year on a like for like basis and cash generation for the
half year remained strong with tight cost controls and lower
working capital, reflected a strong focus on customer cash
collection and the optimisation of inventory levels. Triton remains
in an excellent position with its robust and proven supply chain,
ongoing business responsiveness, flexibility and reliability to
ensure new customer and market opportunities are secured and
further market share growth is sustained into the second half.
Merlyn
Merlyn, the UK and Ireland's No. 1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors
performed strongly despite the COVID-19 disruption and recorded
first half revenue of 83% of prior year on a reported basis and 86%
on a like for like basis. Whilst trading in the first quarter
reduced to 56% of prior year, revenue recovered in the second
quarter to 116% on a like for like basis as Merlyn gained market
share as some UK competitors faced difficulty in both sourcing and
supplying enclosures and trays creating an opportunity for Merlyn
to capitalise on its superior stock availability and leading
customer service.
Retail revenue in the first half was 86% of prior year on a like
for like basis with second quarter growth of 12.7% against prior
year on a like for like basis reflecting a recovery driven by
increased renovation led demand and increasing market share with
Independent retailers and buying groups.
Trade revenue for the first half was 83% of prior year on a like
for like basis reflecting the closure of building sites in April
and May. Second quarter revenue however recovered strongly with
revenue 22.2% higher than the prior year on a like for like basis
reflecting the improved engagement with national merchants,
particularly Wolseley and Travis Perkins and a number of contract
wins and extensions in the specification sector including Hill
Partnership, Lendlease, McCarthy and Stone, Davidson Homes and
Countryside properties.
Merlyn's revenue in the period was bolstered by sales of the new
frameless Arysto X luxury enclosure alongside a new slip resistant
tray design, both having been launched at the March 2020 KBB
exhibition continuing the track record of market leading, customer
led product innovation.
Merlyn's second quarter underlying operating profit was up on
prior year with cash generation for the half year remaining strong.
Further growth in the second half will be driven by Merlyn's
continued market leading product offering and excellence in
customer service and supply chain.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of GBP16.1m for the half
year (2019: GBP21.1m), 76% of prior year on a reported basis and
79% on a like for like basis. The first quarter was significantly
impacted by the COVID-19 pandemic with revenue 53% of last year,
however there was a strong recovery in the second quarter with
revenue 3.8% up against prior year on a like-for-like basis driven
by the post COVID-19 lockdown recovery in demand. Vado remained
open throughout the lockdown and key sales staff continued to
support customers enabling the business to win contracts from other
manufacturers.
Retail revenue for the first half of the year was 78% of the
prior year on a like for like basis with second quarter revenue up
5.1% on prior year on a like for like basis reflecting increased
demand in home renovations and prior year second half product
launches.
In the trade sector revenue was 76% of the prior year on a like
for like basis with second quarter revenue up 4.5% on prior year on
a like for like basis as developers adapted to the COVID-19 safe
working practices and their customers capitalised on the Government
stamp duty holiday.
Export revenue for the first half, mainly into Western Africa
and the Middle East, was 89% of the prior year on a like for like
basis with second quarter revenue in line with prior year on a like
for like basis.
During the first half Vado continued to see strong revenue
growth from the ranges launched last year. The "Individual" range,
which capitalises on the significant demand for bathroom products
in coloured finishes, continued to perform strongly, "Booth and
Co", a traditional range, continued to grow, and the "Axces" range,
which is aimed at the higher-volume mid-market sector, won
opportunities during the period in social housing, student housing,
care homes and on new construction projects.
Vado's second quarter underlying operating profit was up on
prior year with strong cash generation in the half year. Further
product launches planned for the second half of the year will
further re-enforce Vado's position at the forefront of market
trends.
Croydex
Croydex, our market leading, innovative designer, manufacturer
and distributor of high-quality bathroom furnishings and
accessories, recorded first half revenue of GBP10.1m (2019:
GBP11.7m), 86% of prior year on a reported basis and 89% on a like
for like basis.
UK retail revenue for the first half of the year was 98% of the
prior year on a like for like basis with second quarter revenue up
7.7% on prior year on a like for like basis. Croydex's diverse
customer portfolio and e-Commerce strategy has continued to provide
good opportunities despite the COVID-19 lockdowns with
uninterrupted business to the grocery sector and increased online
demand with digitally enabled businesses such as Argos, Wayfair and
Very outweighing the reduced activity in our traditional High
Street customers as town and city centres remained significantly
impacted by COVID-19 restrictions.
UK trade revenue for the first half was 82% of the prior year on
a like for like basis with second quarter revenue in line with
prior year on a like for like basis. Recovery in demand from some
of our more traditional merchants was held back as they struggled
to meet social distancing demands.
First half export revenues were 94% of prior year on a like for
like basis mainly due to declining revenues in the US and harder
lockdowns in Italy being only partially offset by stronger
performances in Germany and a new customer furniture rollout in
Spain.
New product development continued during the period despite the
COVID-19 related disruption with 90 new SKUs due to be launched in
the second half of the year including a range of wall mounted
accessories, toilet seats and cabinets launched in Wickes during
October.
Croydex's second quarter underlying operating profit was up on
prior year, with cash generation for the half year remaining
strong. The outlook is positive with the diversification of its
customer base, online strategy development and continued product
development expected to further grow the business in the second
half.
Abode
Abode, our leading designer and distributor of high-quality hot
water taps, bathroom mixers, kitchen sinks and taps, recorded
revenue of GBP6.5m for the first half (2019: GBP8.6m), 76% of prior
year on a reported basis and 78% on a like for like basis.
Second quarter revenue recovered to 95% of prior year on a like
for like basis with distribution being strengthened through a new
partnership with national distributor PJH Group further extending
the retail display base. From a product perspective the Pronteau
steaming water tap proposition has been improved by the launch of a
second generation boiler at the KBB 2020 exhibition whilst the home
delivery of sinks was also expanded, supporting online sales with a
cost effective delivery of single ceramic sinks to consumers'
doorsteps.
Abode delivered a second quarter underlying operating profit in
line with prior year on a like for like basis in addition to an
improved cash performance during the half year. Abode has strong
new business momentum going into the second half of the year,
particularly with national merchants, and will launch with several
new customers including Screwfix.
Johnson Tiles
Johnson Tiles, our UK leading ceramic tile manufacturer and
market leading supplier of both own manufactured and imported tiles
recorded first half revenue of GBP14.0m (2019 GBP21.5m), 65% of
prior year on a reported basis and 68% on a like for like basis. As
a result of the COVID-19 pandemic Johnson Tiles' manufacturing
operations were closed at the end of March with circa 90% of
employees furloughed, partially reopening in a COVID-19 safe manner
in July, and fully reopening in mid-September albeit with a planned
reduction in manufacturing capacity. During this time Johnson Tiles
focussed on supporting both commercial and retail contracts, the
message 'we remain open for business' further reinforced through
the rapid development of the factory outlet website, which saw
increased revenue in the period compared to the traditional outlet
channel in the prior year period.
UK retail revenue for the first half of the year was 69% of
prior year on a like for like basis, recovering to 88% of prior
year in the second quarter on a like for like basis with revenue in
September further improving.
UK trade revenue was 65% of the prior year on a like for like
basis recovering to 89% of prior year in the second quarter on a
like for like basis. Trade demand is still to recover to prior year
levels as construction activity, especially social housing, is
still constrained due to COVID-19 restrictions on some
developments. A number of projects were still worked on in the
period including the Clayton Hotel in Manchester, Birmingham
Airport Holiday Inn, and the Royal Wharf development in London.
Johnson Tiles' recorded an underlying operating loss in the
first half of the year as its performance was impacted by lower
revenues and the under-recovery of fixed operating costs as
production levels were curtailed until mid-September.
Notwithstanding, cash generation was particularly strong,
reflecting significantly reduced inventory levels in the period. It
is expected that the recovery in revenues and the cost reduction
measures implemented in the period combined with the strong
customer service focus and market leading specification expertise
will ensure a return to profit in the second half.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and
stone adhesives and ancillary products, recorded first half revenue
of GBP5.6m (2019: GBP6.3m), 89% of prior year on a reported basis
and 92% on a like for like basis.
UK trade revenue for the first half was 13% higher than prior
year on a like for like basis and 33% higher in the second quarter
than prior year on a like for like basis reflecting Norcros
Adhesives' ongoing focus on building sales through the
specification channel.
UK retail revenue for the first half was 93% of prior year on a
like for like basis with 14.3% growth on prior year in the second
quarter on a like for like basis reflecting the fast adaption of
the larger customers to COVID-19 secure environments and Norcros
Adhesives' ability to maintain supply throughout the lockdown
period resulting in a number of new customer wins.
Middle East revenues for the first half were 33% of prior year
with ongoing COVID-19 lockdown conditions slowing many projects
with some paused completely.
Norcros Adhesives continues to drive new product development
with several new product launches in the period including a unique
fixing system for porcelain tiles, a new levelling product for use
on difficult substrates and a new Semi-Rapid adhesive range
offering control on setting times.
Norcros Adhesives delivered second quarter underlying operating
profit growth on prior year in addition to strong cash generation
in the first half. The continued penetration of the trade channel,
strong momentum in the retail channel and new product launches are
expected to drive further progress in the second half.
South Africa
Revenue for the half year was GBP41.6m (2019: GBP65.6m), 79% of
prior year on a constant currency like for like basis and 63% on a
Sterling reported basis. First quarter revenue was 50% of prior
year on a constant currency basis reflecting the COVID-19 lockdown
in this period where the business prioritised the safety of
employees and customers during which time a peak of circa 88% of
employees were furloughed. A phased reopening of the business
commenced in May and was fully operational by the end of June.
Retail demand recovered strongly resulting in second quarter
revenue growth of 6.2% on the prior year on a like for like basis
led by residential maintenance and renovations, whilst the
commercial development segment has not recovered at the same rate
given the longer lead times and increased safety requirements on
construction sites, although activity levels had picked up in
September.
Underlying operating profit was GBP2.0m (2019: GBP4.9m) in the
period, largely reflecting the impact of COVID-19 on first quarter
trading partially offset by the receipt of GBP0.8m of coronavirus
job retention support from the South African government and the
recovery in demand in the second quarter. Cash generation across
the South African businesses in the first half was very strong
driven by cost mitigation measures and effective working capital
management.
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business
delivered first half revenue of GBP4.8m (2019: GBP8.3m), 73% of
prior year on a constant currency like for like basis and 58% of
prior year on a Sterling reported basis. Second quarter revenue
recovered to 94% of prior year on a constant currency like for like
basis as manufacturing recommenced in the middle of June and
quickly returned to a high level of performance.
Underlying operating profit recovered strongly in the second
quarter, although below prior year reflecting the under recovery of
fixed costs and the lower revenue in the period. First half cash
generation was strong driven by lower working capital.
The business has a robust new product development pipeline with
a strong focus on tile and décor combinations such as the recently
launched Barista range. Johnson Tiles has also been specified into
several large commercial housing projects in the period including
the 19,000m(2) Lotus Gardens project in Tshwane and the 25,000m(2)
Kikuyu Lifestyle project.
TAL
TAL, our market leading adhesives business recorded revenue of
GBP7.9m (2019: GBP12.6m) 79% of prior year on a constant currency
like for like basis and 63% of prior year on a Sterling reported
basis. Second quarter revenue recovered to prior year levels on a
constant currency like for like basis reflecting a quick restart
after lockdown as TAL's manufacturing flexibility and efficiency
enabled the business to get into the market ahead of most of the
competitors, gaining market share in both local and export
markets.
Underlying operating profit for the period was lower than the
prior year as a result of lower revenue albeit recovered strongly
in the second quarter. Cash conversion in the period was
strong.
New product development has continued in the period with the
launch of a new large format tile adhesive and a luxury vinyl tile
wet layer adhesive in response to increased market demand.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
adhesives, showers, sanitaryware and bathroom fittings, recorded
first half revenue of GBP21.5m (2019: GBP31.7m), 85% of prior year
on a constant currency like for like basis and 68% of prior year on
a Sterling reported basis. Second quarter revenue recovered
strongly increasing by 16% on prior year on a constant currency
like for like basis reflecting higher demand in the retail
renovation market and the benefit of improved inventory management
and availability.
Underlying operating profit rebounded strongly in the second
quarter driven by the marked recovery in retail demand, with strong
cash generation for the first half as working capital levels were
reduced.
New product development continued in the period with range
extensions in the private label bath and plumb product category and
the development, with the assistance of the Merlyn team, of a
directly sourced range of shower enclosures for launch in the
second half of the year. Tile Africa continues to invest in its 32
owned and 2 franchise stores, with the Ballito branch planned to be
relocated in the second half year together with the retrofit of
several existing stores to allow them to better participate in our
bath and plumb and alternative covering range extensions.
House of Plumbing
House of Plumbing our market leading supplier of specialist
plumbing materials, recorded first half revenue of GBP7.4m (2019:
GBP13.0m), 71% of prior year on a constant currency like for like
basis and 57% of prior year on a Sterling reported basis. House of
Plumbing operates mainly in the large commercial project space
which was initially disproportionately impacted by COVID-19 as
these projects took longer to recover after lockdown. However, as
these projects are now picking up and with the opening of a new
branch in Polokwane towards the end of the period, second quarter
revenue recovered to 96% of prior year on a constant currency like
for like basis.
Underlying operating profit recovered in the second quarter,
however, it was below the prior year for the half year as the
commercial sector took longer to recover.
House of Plumbing, which now operates out of 4 branches in the
Gauteng and Limpopo provinces, will resume its growth plan in the
second half and expand the branch network nationally.
Summary and outlook
Our businesses have adapted swiftly to ensure that they operate
safely and cost effectively and have recovered strongly from the
initial impact of the pandemic. Notwithstanding the ongoing
uncertainty as governments seek to control COVID-19, including the
current lockdowns, Norcros continues to be in a very strong
competitive and financial position. All our facilities are
operating and the vast majority of our customer base continue to
trade. Given this, its leading market positions, established
brands, broad distribution channels and experienced management team
the Group remains well positioned to sustain the strong progress
and recovery of the second quarter.
Nick Kelsall Shaun Smith
Chief Executive Officer Chief Financial Officer
12 November 2020 12 November 2020
Condensed consolidated income statement
Six months to 30 September 2020
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
-------------------------------------------------- ------ -------------- -------------- -----------
Revenue 135.3 181.2 342.0
-------------------------------------------------- ------ -------------- -------------- -----------
Underlying operating profit 12.8 17.4 32.3
IAS 19R administrative expenses (0.9) (0.9) (1.5)
Acquisition related costs 4 (2.1) (2.2) (4.0)
Exceptional operating items 4 (2.4) - (9.0)
-------------------------------------------------- ------ -------------- -------------- -----------
Operating profit 7.4 14.3 17.8
Finance costs 7 (3.5) (1.9) (3.7)
Finance income 7 - 1.3 1.7
IAS 19R finance cost (0.5) (0.4) (0.8)
-------------------------------------------------- ------ -------------- -------------- -----------
Profit before taxation 3.4 13.3 15.0
Taxation 6 (0.9) (3.1) (4.1)
-------------------------------------------------- ------ -------------- -------------- -----------
Profit for the period from continuing operations 2.5 10.2 10.9
-------------------------------------------------- ------ -------------- -------------- -----------
Earnings per share attributable to equity
holders of the Company
Basic earnings per share:
From profit for the period 5 3.1p 12.7p 13.6p
-------------------------------------------------- ------ -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 5 3.1p 12.5p 13.5p
-------------------------------------------------- ------ -------------- -------------- -----------
Weighted average number of shares for basic
earnings per share (millions) 5 80.4 80.3 80.3
-------------------------------------------------- ------ -------------- -------------- -----------
Alternative performance measures
Underlying profit before taxation (GBPm) 3 10.7 15.6 28.8
Underlying earnings (GBPm) 3 8.6 12.3 22.8
Basic underlying earnings per share 5 10.7p 15.3p 28.4p
Diluted underlying earnings per share 5 10.6p 15.1p 28.2p
-------------------------------------------------- ------ -------------- -------------- -----------
Condensed consolidated statement of comprehensive income
Six months to 30 September 2020
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- -------------- -------------- -----------
Profit for the period 2.5 10.2 10.9
-------------------------------------------------- -------------- -------------- -----------
Other comprehensive income and expense:
Items that will not subsequently be reclassified
to the Income Statement
Actuarial (losses)/gains on retirement
benefit obligations (0.2) 2.1 (14.8)
Items that may be subsequently reclassified
to the Income Statement
Foreign currency translation adjustments 3.5 1.2 (9.2)
-------------------------------------------------- -------------- -------------- -----------
Other comprehensive income/(loss) for
the period 3.3 3.3 (24.0)
-------------------------------------------------- -------------- -------------- -----------
Total comprehensive income/(loss) for
the period 5.8 13.5 (13.1)
-------------------------------------------------- -------------- -------------- -----------
Items in the statement are disclosed net of tax.
Condensed consolidated balance sheet
At 30 September 2020
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
--------------------------------------- ------ -------------- -------------- -----------
Non-current assets
Goodwill 60.4 61.5 60.1
Intangible assets 34.7 38.9 36.4
Property, plant and equipment 28.1 41.3 29.0
Right of use assets 21.7 26.5 20.6
Deferred tax assets 6 4.7 - 4.7
--------------------------------------- ------ -------------- -------------- -----------
149.6 168.2 150.8
--------------------------------------- ------ -------------- -------------- -----------
Current assets
Inventories 68.9 83.9 78.9
Trade and other receivables 66.7 64.7 60.5
Derivative financial instruments 14 0.7 1.6 2.0
Cash and cash equivalents 8 30.4 22.4 47.3
--------------------------------------- ------ -------------- -------------- -----------
166.7 172.6 188.7
--------------------------------------- ------ -------------- -------------- -----------
Current liabilities
Trade and other liabilities (86.8) (77.7) (72.9)
Lease liabilities (6.0) (5.6) (5.2)
Current tax liabilities (1.0) (1.9) (1.0)
Financial liabilities - borrowings 8 - - (0.1)
--------------------------------------- ------ -------------- -------------- -----------
(93.8) (85.2) (79.2)
--------------------------------------- ------ -------------- -------------- -----------
Net current assets 72.9 87.4 109.5
--------------------------------------- ------ -------------- -------------- -----------
Total assets less current liabilities 222.5 255.6 260.3
--------------------------------------- ------ -------------- -------------- -----------
Non-current liabilities
Financial liabilities - borrowings 8 (37.7) (63.5) (83.6)
Pension scheme liability 12 (48.9) (29.0) (48.9)
Lease liabilities (20.6) (24.1) (19.9)
Other non-current liabilities (0.3) (1.9) (0.3)
Provisions (4.6) (3.2) (3.2)
--------------------------------------- ------ -------------- -------------- -----------
(112.1) (121.7) (155.9)
--------------------------------------- ------ -------------- -------------- -----------
Net assets 110.4 133.9 104.4
--------------------------------------- ------ -------------- -------------- -----------
Financed by:
Share capital 9 8.1 8.0 8.1
Share premium 29.9 29.9 29.9
Retained earnings and other reserves 72.4 96.0 66.4
--------------------------------------- ------ -------------- -------------- -----------
Total equity 110.4 133.9 104.4
--------------------------------------- ------ -------------- -------------- -----------
Condensed consolidated statement of cash flow
Six months to 30 September 2020
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
--------------------------------------------------- ------ -------------- -------------- -----------
Cash generated from operations 10 34.4 18.0 34.8
Income taxes paid (1.1) (2.9) (5.3)
Interest paid (2.0) (1.8) (3.5)
--------------------------------------------------- ------ -------------- -------------- -----------
Net cash generated from operating activities 31.3 13.3 26.0
--------------------------------------------------- ------ -------------- -------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment
and intangible assets (0.9) (3.1) (4.8)
Acquisition of subsidiary undertakings (including
payment of deferred consideration) net of
cash acquired - (9.4) (9.2)
Net cash used in investing activities (0.9) (12.5) (14.0)
--------------------------------------------------- ------ -------------- -------------- -----------
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital - - 0.1
Purchase of treasury shares - (0.9) (0.9)
Principal element of lease payments (1.9) (2.0) (3.8)
(Repayment)/drawdown of borrowings (46.0) 5.1 25.0
Dividends paid to the Company's shareholders - (4.5) (7.0)
--------------------------------------------------- ------ -------------- -------------- -----------
Net cash (used in)/generated from financing
activities (47.9) (2.3) 13.4
--------------------------------------------------- ------ -------------- -------------- -----------
Net (decrease)/increase in cash at bank and
in hand and bank overdrafts (17.5) (1.5) 25.4
Cash at bank and in hand and bank overdrafts
at beginning of the period 47.2 23.4 23.4
Exchange movements on cash and bank overdrafts 0.7 0.5 (1.6)
--------------------------------------------------- ------ -------------- -------------- -----------
Cash and cash equivalents net of overdrafts
at end of the period 30.4 22.4 47.2
--------------------------------------------------- ------ -------------- -------------- -----------
Alternative performance measures
Underlying operating cash flow 3 37.6 20.0 38.4
---------------------------------- ----- ----- -----
Condensed consolidated statements of changes in equity
Six months to 30 September 2020 (unaudited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- --------- --------- ----------- ------------ ---------- ------
At 31 March 2020 8.1 29.9 (0.4) (21.7) 88.5 104.4
Comprehensive income:
Profit for the period - - - - 2.5 2.5
Other comprehensive income/(expense):
Actuarial loss on retirement
benefit obligations - - - - (0.2) (0.2)
Foreign currency translation
adjustments - - - 3.5 - 3.5
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Total other comprehensive
income/(expense) - - - 3.5 (0.2) 3.3
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Transactions with owners:
Purchase of treasury shares - - - - - -
Settlement of share option - - - - - -
schemes
Dividends paid - - - - - -
Value of employee services - - - - 0.2 0.2
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
At 30 September 2020 8.1 29.9 (0.4) (18.2) 91.0 110.4
---------------------------------------- --------- --------- ----------- ------------ ---------- ------
Six months to 30 September 2019 (unaudited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- ----------- ------------ ---------- ------
At 31 March 2019 8.0 29.9 (0.3) (12.5) 100.6 125.7
Comprehensive income:
Profit for the period - - - - 10.2 10.2
Other comprehensive income:
Actuarial gain on retirement
benefit obligations - - - - 2.1 2.1
Foreign currency translation
adjustments - - - 1.2 - 1.2
------------------------------- --------- --------- ----------- ------------ ---------- ------
Total other comprehensive
income - - - 1.2 2.1 3.3
------------------------------- --------- --------- ----------- ------------ ---------- ------
Transactions with owners:
Shares issued - - - - - -
Dividends paid - - - - (4.5) (4.5)
Purchase of treasury shares - - (0.9) - - (0.9)
Settlement of share option
schemes - - 0.8 - (1.3) (0.5)
Value of employee services - - - - 0.6 0.6
------------------------------- --------- --------- ----------- ------------ ---------- ------
At 30 September 2019 8.0 29.9 (0.4) (11.3) 107.7 133.9
------------------------------- --------- --------- ----------- ------------ ---------- ------
Year ended 31 March 2020 (audited)
Ordinary
share Share Treasury Translation Retained
capital premium reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- --------- ----------- ------------ ---------- -------
At 31 March 2019 8.0 29.9 (0.3) (12.5) 100.6 125.7
Comprehensive income:
Profit for the year - - - - 10.9 10.9
Other comprehensive (expense):
Actuarial loss on retirement
benefit obligations - - - - (14.8) (14.8)
Foreign currency translation
adjustments - - - (9.2) - (9.2)
--------------------------------- --------- --------- ----------- ------------ ---------- -------
Total other comprehensive
(expense) - - - (9.2) (14.8) (24.0)
--------------------------------- --------- --------- ----------- ------------ ---------- -------
Transactions with owners:
Shares issued 0.1 - - - - 0.1
Dividends paid - - - - (7.0) (7.0)
Purchase of treasury shares - - (0.9) - - (0.9)
Settlement of share option
schemes - - 0.8 - (1.3) (0.5)
Value of employee services - - - - 0.1 0.1
---------------------------------
At 31 March 2020 8.1 29.9 (0.4) (21.7) 88.5 104.4
--------------------------------- --------- --------- ----------- ------------ ---------- -------
Notes to the accounts
Six months to 30 September 2020
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 12 November 2020 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 2020 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 2020, 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 25 June 2020 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 2020.
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 standards, amendments and interpretations are not
yet effective and have not been adopted early by the Group:
Applicable
for
financial
years
beginning
Standard or interpretation Content on or after
--------------------------- -------------------- -------------
IFRS 17 Insurance contracts 1 April 2021
--------------------------- -------------------- -------------
This standard is not expected to have a material impact on the
Group.
Risks and uncertainties
The principal risks and uncertainties affecting the Group,
together with the approach to their mitigation, remain as set out
on pages 30 to 35 in the 2020 Annual Report, which is available on
the Group's website (www.norcros.com). The principal risks are:
coronavirus (COVID-19) pandemic, cyber risk and data loss,
uncertainty surrounding Brexit, market conditions, exchange rate
risk, pension scheme risk, funding and liquidity, loss of key
customers, competition, reliance on production and assembly
facilities, loss of key supplier, staff retention and recruitment
and acquisition.
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
2020.
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
2020 (unaudited)
----------------------------------- ------
South
UK Africa Group
Notes GBPm GBPm GBPm
----------------------------------- ------ -------- ---------- -------
Revenue 93.7 41.6 135.3
----------------------------------- ------ -------- ---------- -------
Underlying operating profit 10.8 2.0 12.8
IAS 19R administrative expenses (0.9) - (0.9)
Acquisition related costs 4 (1.8) (0.3) (2.1)
Exceptional operating items 4 (2.2) (0.2) (2.4)
Operating profit 5.9 1.5 7.4
----------------------------------- ------ -------- ---------- -------
Finance costs (net) (4.0)
----------------------------------- ------ -------- ---------- -------
Profit before taxation 3.4
Taxation 6 (0.9)
----------------------------------- ------ -------- ---------- -------
Profit from continuing operations 2.5
----------------------------------- ------ -------- ---------- -------
Net debt 8 (7.3)
----------------------------------- ------ -------- ---------- -------
6 months to 30 September
2019 (unaudited)
South
UK Africa Group
Notes GBPm GBPm GBPm
Revenue 115.6 65.6 181.2
----------------------------------- ------ -------- --------- --------
Underlying operating profit 12.5 4.9 17.4
IAS 19R administrative expenses (0.9) - (0.9)
Acquisition related costs 4 (1.8) (0.4) (2.2)
Operating profit 9.8 4.5 14.3
----------------------------------- ------ -------- --------- --------
Finance income (net) (1.0)
----------------------------------- ------ -------- --------- --------
Profit before taxation 13.3
Taxation 6 (3.1)
----------------------------------- ------ -------- --------- --------
Profit from continuing operations 10.2
----------------------------------- ------ -------- --------- --------
Net debt 8 (41.1)
----------------------------------- ------ -------- --------- --------
Year ended 31 March 2020
(audited)
------------------------------------------------ ------ -----------------------------
South
UK Africa Group
Notes GBPm GBPm GBPm
------------------------------------------------ ------ -------- --------- --------
Revenue 225.4 116.6 342.0
------------------------------------------------ ------ -------- --------- --------
Underlying operating profit 24.4 7.9 32.3
IAS 19R administrative expenses (1.5) - (1.5)
Acquisition related costs 4 (4.5) 0.5 (4.0)
Exceptional operating items 4 (9.0) - (9.0)
------------------------------------------------ ------ -------- --------- --------
Operating profit 9.4 8.4 17.8
------------------------------------------------ ------ -------- --------- --------
Finance income (net) (2.8)
------------------------------------------------ ------ -------- --------- --------
Profit before taxation 15.0
Taxation 6 (4.1)
------------------------------------------------ ------ -------- --------- --------
Profit for the year from continuing operations 10.9
------------------------------------------------ ------ -------- --------- --------
Net debt 8 (36.4)
------------------------------------------------ ------ -------- --------- --------
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 operating profit (pre Operating profit before IAS 19R administrative
IFRS 16) expenses, acquisition related costs,
exceptional operating items and excluding
the impact of IFRS16
-------------------------------------------------
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 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 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
-------------------------------------------------
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.
-------------------------------------------------
Net debt Net debt 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 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 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 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------- -------------- -------------- -----------
Profit before taxation 3.4 13.3 15.0
Adjusted for:
IAS 19R administrative expenses 0.9 0.9 1.5
Acquisition related costs 2.1 2.2 4.0
Exceptional operating items 2.4 - 9.0
Amortisation of costs of raising finance 0.1 0.1 0.2
Net movement on fair value of derivative
financial instruments 1.3 (1.3) (1.7)
IAS 19R finance cost 0.5 0.4 0.8
-------------------------------------------- -------------- -------------- -----------
Underlying profit before taxation 10.7 15.6 28.8
Taxation attributable to underlying profit
before taxation (2.1) (3.3) (6.0)
-------------------------------------------- -------------- -------------- -----------
Underlying earnings 8.6 12.3 22.8
-------------------------------------------- -------------- -------------- -----------
Underlying profit before taxation, underlying earnings and
diluted underlying earnings per share (pre-IFRS 16 basis)
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------- -------------- -------------- -----------
Profit before taxation (pre-IFRS 16) 3.8 13.9 16.4
Adjusted for:
IAS 19R administrative expenses 0.9 0.9 1.5
Acquisition related costs 2.1 2.2 4.0
Exceptional operating items 2.4 - 9.0
Amortisation of costs of raising finance 0.1 0.1 0.2
Net movement on fair value of derivative
financial instruments 1.3 (1.3) (1.7)
IAS 19R finance cost 0.5 0.4 0.8
------------------------------------------------- -------------- -------------- -----------
Underlying profit before taxation (pre-IFRS
16) 11.1 16.2 30.2
Taxation attributable to underlying profit
before taxation (pre-IFRS 16) (2.2) (3.4) (6.3)
------------------------------------------------- -------------- -------------- -----------
Underlying earnings (pre-IFRS 16) 8.9 12.8 23.9
------------------------------------------------- -------------- -------------- -----------
Diluted underlying earnings per share (pre-IFRS
16) 11.0p 15.7p 29.5p
------------------------------------------------- -------------- -------------- -----------
(b) Underlying operating profit
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------ -------------- -------------- -----------
Underlying operating profit (pre-IFRS 16) 12.3 17.1 31.8
Adjusted for:
Lease costs (excluding onerous lease payments) 2.6 2.5 5.0
Depreciation of leased assets (2.1) (2.2) (4.5)
Underlying operating profit 12.8 17.4 32.3
------------------------------------------------ -------------- -------------- -----------
(c) Underlying EBITDA
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------ -------------- -------------- -----------
Operating profit 7.4 14.3 17.8
Adjusted for:
Depreciation and amortisation (owned assets) 2.6 3.5 6.8
Depreciation of leased assets 2.1 2.2 4.5
Lease Costs (excluding onerous lease payments) (2.6) (2.5) (5.0)
IAS 19R administrative expenses 0.9 0.9 1.5
Acquisition related costs 2.1 2.2 4.0
Exceptional operating items 2.4 - 9.0
------------------------------------------------ -------------- -------------- -----------
Underlying EBITDA 14.9 20.6 38.6
------------------------------------------------ -------------- -------------- -----------
Underlying EBITDA (pre-IFRS 16 basis)
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------------- -------------- -------------- -----------
Operating profit (pre-IFRS 16) 6.9 14.0 17.3
Adjusted for:
Depreciation and amortisation (owned assets) 2.6 3.5 6.8
IAS 19R administrative expenses 0.9 0.9 1.5
Acquisition related costs 2.1 2.2 4.0
Exceptional operating items 2.4 - 9.0
---------------------------------------------- -------------- -------------- -----------
Underlying EBITDA 14.9 20.6 38.6
---------------------------------------------- -------------- -------------- -----------
Condensed Consolidated Statement of Cash Flow
Underlying operating cash flow
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Cash generated from continuing operations
(note 10) 34.4 18.0 34.8
Adjusted for:
Cash flows from exceptional items and
acquisition related costs 1.5 0.4 0.3
Pension fund deficit recovery contributions 1.7 1.6 3.3
--------------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow 37.6 20.0 38.4
--------------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow (pre-IFRS 16 basis)
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Cash generated from continuing operations
(note 10) 34.4 18.0 34.8
Adjusted for:
Lease costs (excluding onerous lease
payments) (2.6) (2.5) (5.0)
Cash flows from exceptional items and
acquisition related costs 1.5 0.4 0.3
Pension fund deficit recovery contributions 1.7 1.6 3.3
--------------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow (pre-IFRS
16) 35.0 17.5 33.4
--------------------------------------------------- -------------- -------------- -----------
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
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------- -------------- -------------- -----------
Acquisition related costs
Deferred remuneration(1) 0.2 0.3 0.6
Intangible asset amortisation(2) 1.9 1.9 3.7
Release of deferred consideration(3) - - (1.1)
Advisory fees(4) - - 0.8
-------------------------------------- -------------- -------------- -----------
2.1 2.2 4.0
-------------------------------------- -------------- -------------- -----------
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 Contingent consideration in relation to the acquisition of
House of Plumbing was fair valued under IFRS 9 at 31 March 2020
with subsequent release of the provision
4 Professional advisory fees incurred in connection with the
Group's business combination activities.
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------- -------------- -------------- -----------
Exceptional operating items
COVID-19 related restructuring(1) 2.4 - -
COVID-19 related impairment(2) - - 9.0
2.4 - 9.0
----------------------------------- -------------- -------------- -----------
1. Exceptional costs of GBP2.4m were incurred in the period in
relation to COVID-19 related restructuring programmes across the
Group comprising of GBP2.0m in cash costs and GBP0.4m of non-cash
costs.
2. As at 31 March 2020 a one-off, non-cash impairment charge of
GBP9.0m was recognised in relation to the impact of COVID-19 on the
assets of Johnson Tiles UK.
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 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------- ---- -------------- -------------- -----------
Profit for the period 2.5 10.2 10.9
----------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Number Number Number
--------------------------------------- ---- -------------- -------------- -----------
Weighted average number of shares for
basic earnings per share 80,416,583 80,262,938 80,300,209
Share options 622,623 1,060,929 668,944
--------------------------------------------- -------------- -------------- -----------
Weighted average number of shares for
diluted earnings per share 81,039,206 81,323,867 80,969,153
--------------------------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
----------------------------- ---- -------------- -------------- -----------
Basic earnings per share:
From profit for the period 3.1p 12.7p 13.6p
----------------------------------- -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 3.1p 12.5p 13.5p
----------------------------------- -------------- -------------- -----------
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
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------ ---- -------------- -------------- -----------
Underlying earnings for the period (note
3) 8.6 12.3 22.8
------------------------------------------------ -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
--------------------------------------- ---- -------------- -------------- -----------
Basic underlying earnings per share 10.7p 15.3p 28.4p
Diluted underlying earnings per share 10.6p 15.1p 28.2p
--------------------------------------------- -------------- -------------- -----------
6. Taxation
Taxation comprises:
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------------- -------------- -------------- -----------
Current
UK taxation 0.6 1.7 1.7
Overseas taxation 0.3 1.4 2.9
Prior year adjustment - - -
--------------------------------------------------- -------------- -------------- -----------
Total current taxation 0.9 3.1 4.6
--------------------------------------------------- -------------- -------------- -----------
Deferred
Origination and reversal of temporary differences - - (0.5)
--------------------------------------------------- -------------- -------------- -----------
Total tax charge 0.9 3.1 4.1
--------------------------------------------------- -------------- -------------- -----------
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
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------------- -------------- -------------- -----------
Deferred tax asset at the beginning of the
period 4.7 0.8 0.8
Credited to the Consolidated Income Statement - - 0.5
(Charged)/credited to the Consolidated Statement
of Comprehensive Income - (0.3) 3.5
Acquisitions - (0.5) (0.4)
Exchange differences - - 0.3
-------------------------------------------------- -------------- -------------- -----------
Deferred tax asset at the end of the period 4.7 - 4.7
-------------------------------------------------- -------------- -------------- -----------
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------------ -------------- -------------- -----------
Accelerated capital allowances 0.2 (0.2) 0.4
Other timing differences (4.7) (4.8) (4.9)
Deferred tax asset relating to pension deficit 9.2 5.0 9.2
------------------------------------------------ -------------- -------------- -----------
Deferred tax asset at the end of the period 4.7 - 4.7
------------------------------------------------ -------------- -------------- -----------
7. Finance income and costs
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Finance costs
Interest payable on bank borrowings (1.2) (0.9) (1.6)
Interest on lease liabilities (0.9) (0.9) (1.9)
Amortisation of costs of raising debt finance (0.1) (0.1) (0.2)
Loss on fair value of derivative financial (1.3) -
instruments -
----------------------------------------------- -------------- -------------- -----------
Finance costs (3.5) (1.9) (3.7)
----------------------------------------------- -------------- -------------- -----------
Gain on fair value of derivative financial
instruments - 1.3 1.7
----------------------------------------------- -------------- -------------- -----------
Net finance costs (3.5) (0.6) (2.0)
----------------------------------------------- -------------- -------------- -----------
8. Borrowings
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -----------
Non-current
Bank borrowings (unsecured):
- bank loans 38.0 64.0 84.0
- less: costs of raising finance (0.3) (0.5) (0.4)
---------------------------------- -------------- -------------- -----------
Total non-current 37.7 63.5 83.6
---------------------------------- -------------- -------------- -----------
Current
Bank borrowings (unsecured):
- bank overdrafts - - 0.1
---------------------------------- -------------- -------------- -----------
Total borrowings 37.7 63.5 83.7
---------------------------------- -------------- -------------- -----------
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
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Not later than one year - - 0.1
------------------------------------------------ -------------- -------------- -----------
After more than one year:
- later than two years and not later than five
years 38.0 64.0 84.0
- costs of raising finance (0.3) (0.5) (0.4)
------------------------------------------------ -------------- -------------- -----------
37.7 63.5 83.6
------------------------------------------------ -------------- -------------- -----------
Total borrowings 37.7 63.5 83.7
------------------------------------------------ -------------- -------------- -----------
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 place up to
November 2022.
Net debt
The Group's net debt is calculated as follows:
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------- -------------- -------------- -----------
Cash and cash equivalents (30.4) (22.4) (47.3)
Total borrowings 37.7 63.5 83.7
--------------------------- -------------- -------------- -----------
Net debt 7.3 41.1 36.4
--------------------------- -------------- -------------- -----------
9. Called up share capital
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------------- -------------- -------------- -----------
Issued and fully paid
80,571,654 ordinary shares of 10p each 8.1 8.0 8.1
---------------------------------------- -------------- -------------- -----------
During the period 14,384 ordinary shares of 10p were issued to
satisfy vesting of options under the Company's SAYE schemes.
10. Consolidated Cash Flow Statements
(a) Cash generated from operations
6 months 6 months
to to Year ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------------------- ---- -------------- -------------- -----------
Profit before taxation 3.4 13.3 15.0
Adjustments for:
- IAS 19R administrative expenses included
in the Income Statement 0.9 0.9 1.5
- acquisition related costs included
in the Income Statement 2.1 2.2 4.0
- exceptional operating items included
in the Income Statement 2.4 - 9.0
- cash flows from exceptional items and
acquisition related costs (1.5) (0.4) (0.3)
- settlement of share options - (0.5) (0.5)
- depreciation of property, plant and
equipment 2.5 3.4 6.6
- underlying amortisation 0.1 0.1 0.2
- depreciation of right of use assets 2.1 2.2 4.5
- finance costs included in the Income
Statement 3.5 0.6 2.0
- pension fund deficit recovery contributions (1.7) (1.6) (3.3)
- IAS 19R finance cost included in the
Income Statement 0.5 0.4 0.8
- share-based payments 0.2 0.5 0.1
----------------------------------------------------- -------------- -------------- -----------
Operating cash flows before movements
in working capital 14.5 21.1 39.6
Changes in working capital:
- decrease/(increase) in inventories 12.0 (2.0) (2.4)
- (increase)/decrease in trade and other
receivables (5.5) 2.2 3.6
- increase/(decrease) in trade and other
payables 13.4 (3.3) (6.0)
----------------------------------------------------- -------------- -------------- -----------
Cash generated from operations 34.4 18.0 34.8
----------------------------------------------------- -------------- -------------- -----------
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 Non-current
borrowings borrowings Net debt
GBPm GBPm GBPm
-------------------------- ------------- ------------ ---------
At 1 April 2019 23.4 (58.4) (35.0)
Cash flow 25.4 (25.0) 0.4
Other non-cash movements - (0.2) (0.2)
Exchange movement (1.6) - (1.6)
--------------------------- ------------- ------------ ---------
At 31 March 2020 47.2 (83.6) (36.4)
--------------------------- ------------- ------------ ---------
At 1 April 2019 23.4 (58.4) (35.0)
Cash flow (1.5) (5.1) (6.6)
Exchange movement 0.5 - 0.5
--------------------------- ------------- ------------ ---------
At 30 September 2019 22.4 (63.5) (41.1)
--------------------------- ------------- ------------ ---------
At 1 April 2020 47.2 (83.6) (36.4)
Cash flow (17.5) 46.0 28.5
Other non-cash movements - (0.1) (0.1)
Exchange movement 0.7 - 0.7
--------------------------- ------------- ------------ ---------
At 30 September 2020 30.4 (37.7) (7.3)
--------------------------- ------------- ------------ ---------
11. Dividends
No final dividend in respect of the year ended 31 March 2020 was
proposed. No interim dividend for the year ended 31 March 2021 is
proposed.
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
Isio (formerly 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 2020. Scheme assets are
stated at their market value at 30 September 2020.
(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
2020 2019 2020
---------------------- -------------- -------------- ----------
Discount rate 1.65% 1.90% 2.21%
Inflation rate (RPI) 2.90% 3.10% 2.55%
Inflation (CPI) 1.95% 2.10% 1.60%
Salary increases 2.20% 2.35% 1.85%
---------------------- -------------- -------------- ----------
The amounts recognised in the Condensed Consolidated Balance
Sheet are determined as follows:
At At At
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------- -------------- -------------- -----------
Total market value of scheme assets 397.9 418.4 361.9
Present value of scheme liabilities (446.8) (447.4) (410.8)
------------------------------------- -------------- -------------- -----------
Pension deficit (48.9) (29.0) (48.9)
------------------------------------- -------------- -------------- -----------
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 2021.
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
109 of the Group's 2020 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
2020 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
2020 2019 At 31 March 2020
-------------------------- -------------------------- ------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
Forward foreign exchange
contracts:
- current 0.7 - 1.6 - 2.0 -
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
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).
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 2020 Annual
Report.
By order of the Board
N. P. Kelsall S. M. Smith
Chief Executive Officer Chief Financial Officer
12 November 2020 12 November 2020
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.
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.
END
IR BRBDBRXBDGGB
(END) Dow Jones Newswires
November 12, 2020 02:00 ET (07:00 GMT)
Norcros (LSE:NXR)
Historical Stock Chart
From Mar 2024 to Apr 2024
Norcros (LSE:NXR)
Historical Stock Chart
From Apr 2023 to Apr 2024