TIDMNXR
RNS Number : 3982B
Norcros PLC
10 June 2021
10 June 2021
Norcros plc
Results for the year ended 31 March 2021
Very strong recovery from a period of unprecedented
uncertainty
Norcros, a market leading supplier of high quality and
innovative bathroom and kitchen products, today announces its
results for the year ended 31 March 2021.
Financial Summary
2021(2) 2020 % change as % change constant
reported currency like
for like (3)
Revenue GBP324.2m GBP342.0m -5.2% +0.7%
---------- ----------- ------------ ------------------
Underlying operating profit(1) GBP33.8m GBP32.3m +4.6%
---------- ----------- ------------ ------------------
Underlying profit before
taxation(1) GBP30.6m GBP28.8m +6.3%
---------- ----------- ------------ ------------------
Diluted Underlying EPS(1) 31.1p 28.2p +10.3%
---------- ----------- ------------ ------------------
Underlying operating cash
flow(1) GBP65.8m GBP38.4m +71.4%
---------- ----------- ------------ ------------------
Operating profit GBP24.9m GBP17.8m +39.9%
---------- ----------- ------------ ------------------
Underlying net cash/(debt)(1) GBP10.5m (GBP36.4m)
---------- ----------- ------------ ------------------
Dividend per share 8.2p 3.1p
---------- ----------- ------------ ------------------
(1) Definitions and reconciliations of alternative performance
measures are provided in note 5
(2) Year to 31 March 2021: 52 weeks (Year to 31 March 2020: 53
weeks)
(3) Like for like adjusts prior year revenue for period
pro-rating of number of weeks
Highlights
-- Very strong recovery from a period of unprecedented
uncertainty with second half revenue growth of 19.5% on a constant
currency like for like basis
-- Full year revenue of GBP324.2m (2020: GBP342.0m). 0.7% higher
than prior year on a constant currency like for like basis
-- Underlying operating profit of GBP33.8m, 4.6% higher than prior year (2020: GBP32.3m)
-- Operating profit of GBP24.9m (2020: GBP17.8m)
-- Strong cash generation in the year of GBP46.9m has
significantly strengthened the balance sheet with net cash of
GBP10.5m (2020: net debt of GBP36.4m)
-- Underlying ROCE above strategic target rate at 18.2% (2020: 16.4%)
-- Diluted underlying EPS of 31.1p, 10.3% higher than prior year (2020: 28.2p)
-- Reinstatement of dividend at 8.2p for the year (2020: 3.1p)
Current trading
-- Strong trading momentum has continued into April and May 2021
with Group revenue ahead of the comparable period in 2019 by
approximately 23%
David McKeith , Acting Chair, commented:
"Norcros has recovered very strongly from a period of
unprecedented global disruption and uncertainty caused by the
COVID-19 pandemic. The resilience of the Group's business model and
strategy is proving to be highly effective; this was particularly
evident in the last financial year as we outperformed the market in
the most unpredictable trading environment we have ever experienced
. The Board is confident that this outperformance can be sustained.
"
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
Sophie Miles
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 and 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 2,100 people. The Company is listed on the London Stock
Exchange. For further information please visit the Company website:
http://www.norcros.com
Chair's Statement
Overview
Norcros has recovered very strongly from a period of
unprecedented global disruption and uncertainty caused by the
COVID-19 pandemic. The resilience of the Group's business model and
strategy is proving to be highly effective; this was particularly
evident in the last financial year as we outperformed the market in
the most unpredictable trading environment we have ever
experienced.
Group revenue for the year was GBP324.2m (2020: GBP342.0m), 5.2%
lower than the prior year on a reported basis, 1.2% lower on a
constant currency basis and 0.7% higher on a constant currency like
for like basis after adjusting the prior year for period pro-rating
(53 weeks versus 52).
Underlying operating profit was GBP33.8m (2020: GBP32.3m), 4.6%
ahead of the prior year reflecting the strong recovery following
the significant impact of COVID-19 in the first quarter.
The Group finished the year with net cash of GBP10.5m (2020: net
debt of GBP36.4m), a significant achievement and a result of the
management team's relentless focus on cost and working capital
management throughout the year.
COVID-19
The unprecedented COVID-19 pandemic has had a significant impact
on our results for the year, especially in the first quarter, where
Group revenue was 58% of the prior year on a constant currency like
for like basis as 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.
As the lockdowns in our main markets eased at the end of the
first quarter, the Group's trading recovered strongly with second
half revenue at 120% of the prior year on a constant currency like
for like basis. This recovery reflected the strength of the Group's
market leading positions, and the rapid adaptation of our operating
facilities, supply chains and commercial sales channels in response
to the safe and effective working environments and modified working
procedures and processes required by COVID-19.
Strategy
Notwithstanding the recent challenges of COVID-19, our focussed
growth strategy remains valid and relevant. Our targets to grow
Group revenue to GBP600m with 50% derived outside of the UK whilst
sustaining a pre-tax return on underlying capital employed of more
than 15% over the economic cycle continue to govern how we evaluate
opportunities and deploy capital. The previous timescale of 2023
will be extended to 2025 reflecting the COVID-19 disruption. The
Group's very strong recovery in the second half of the year
demonstrates the resilience and effectiveness of our business model
and strategy. Whilst there is still a significant degree of
uncertainty around the post COVID-19 economic recovery we are
convinced of the validity and effectiveness of the strategy and
remain committed to these targets.
Dividend
The Group responded swiftly to the impact of the COVID-19
pandemic and the need to preserve cash by not paying a final
dividend in relation to the year ended 31 March 2020 nor an interim
dividend in relation to the year ended 31 March 2021. Based on the
improved trading performance in the second half of the year, the
further strengthening of the balance sheet and the current outlook
the Board believes that now is the right time to reinstate the
dividend and has therefore taken the decision to recommend a final
(and total) dividend of 8.2p per share for the year (2020 total:
3.1p). This is equivalent to a dividend cover of 3.8 times,
consistent with the year ended 31 March 2019. The Group will now
continue with its previous progressive albeit prudent dividend
policy which takes into account the Group's growth strategy, the
interests of other key stakeholders, the Group's cash generative
characteristics and its earnings growth.
Pension scheme
The net deficit relating to our UK defined benefit pension
scheme (as calculated under IAS 19R) has reduced to GBP18.3m at 31
March 2021 from GBP48.9m at 31 March 2020, primarily as a result of
the recovery from the initial COVID-19 impact on financial markets
and asset valuations in particular.
We remain confident that our pension obligations continue to be
appropriately funded and well managed. The Company recognises that
the pension scheme is a key stakeholder and in recognition of this,
and despite all of the necessary actions taken to conserve cash
during the year, met in full its obligations and paid GBP3.3m into
the scheme in the year in accordance with the agreement made with
the Trustee in June 2019 based on the triennial valuation dated 1
April 2018. The next triennial valuation dated 31 March 2021 is
currently underway. The Company and the Trustee continue to work
constructively together.
COVID-19 related support and restructuring actions
The unprecedented COVID-19 pandemic has had a significant impact
on the level of economic activity in our main markets, particularly
in the first quarter and disrupted our business operations. In
response to this, the Group claimed GBP5m of government assistance
from the Coronavirus Job Retention Scheme (CJRS) in the UK and
equivalent schemes in Ireland and South Africa to protect as many
jobs as long as possible and avoid large scale redundancies.
Notwithstanding, the Group had to implement several restructuring
programmes to further reduce its cost base resulting in a reduction
in employee numbers of approximately 200, incurring GBP2.4m of
costs, of which GBP2.0m are cash costs, with GBP1.6m being paid in
the year, and GBP0.4m are non-cash costs. Consequently, the Group
has repaid GBP0.7m of the CJRS in respect of employees who were
made redundant. In light of the continued COVID-19 uncertainty in
the Middle East the Group decided to close the Norcros Adhesives
Middle East operations which resulted in a further GBP1.4m of
restructuring costs consisting of GBP0.3m of cash costs and GBP1.1m
of non-cash costs.
Environmental, Social and Governance (ESG)
The Board is committed to high standards of corporate
responsibility, employee engagement and sustainability and
continues to prioritise a number of activities that look to reduce
the Group's impact on the environment and support the communities
in which we operate. During the year the Board has reaffirmed its
ESG principles and defined a set of building blocks which underpin
a new ESG reporting framework designed to improve our ESG
performance. Our environmental strategy has continued to develop
during the year with a number of initiatives including Triton's
pledge to be "net carbon zero by the end of 2025", Johnson Tiles
UK's progress on recycling and being "plastic free" and Abode's
innovative new "Swich water filter diverter" product. The Board
continues to focus on employee engagement and charitable
contributions in our local communities. Further details on our ESG
progress can be found in our Annual Report and Accounts.
Board changes
During the year, Martin Towers completed his term as Chair in
July 2020 and was succeeded by Mark Allen. Unfortunately, due to
his other business commitments, Mark tendered his resignation and
left the Board in April 2021. We wish Mark well in his other
current and future directorships. Having served on the Board for
eight years as a non-executive director, I have been appointed
acting Board Chair until the Group appoints a new Non-Executive
Director as Board Chair. A search is underway.
Shaun Smith has notified the Board of his wish to retire in
order to pursue a non-executive director career, which has been
accepted and the terms and timeframe agreed. Shaun will step down
as Chief Financial Officer at the end of July 2021 and therefore
will not be seeking re-election at our AGM. The Board thanks Shaun
for his valued contribution since joining Norcros in 2016. A
thorough recruitment process for a successor was undertaken, which
has resulted in James Eyre, our current Corporate Development and
Strategy Director, being appointed to the Board as Chief Financial
Officer with effect from 1 August 2021. James has been a member of
the Group's senior team since 2014, responsible for leading our
acquisitions. He is a Chartered Accountant and held senior finance
roles at AstraZeneca, Bank of Ireland and N M Rothschild prior to
joining Norcros. Shaun will remain employed by the Company until
his retirement at the end of December 2021 to ensure a smooth and
effective handover.
Governance
As acting Board Chair, one of my primary responsibilities is to
ensure that the Group continues to operate to the highest standards
in all aspects of governance and risk management. Our aim at
Norcros has always been to operate in line with our values and the
"Norcros DNA" which sets us apart from our competitors, while
ensuring that proper operating procedures and internal controls are
maintained at all times. Transparency is central to this objective
and you will find more detail about our approach and progress over
the last year in the Corporate Governance section of our Annual
Report and Accounts.
People
The Board's first priority throughout the COVID-19 pandemic has
been ensuring the safety and wellbeing of our employees and their
families. The Board expresses its thanks to our employees for their
commitment and contribution in ensuring a safe workplace and to the
strong outperformance achieved by the business in this
unprecedented year.
The Board continues to regard our employees as our most valuable
asset and in recognition of this the Group aims to create a safe
and positive working environment within an open, transparent and
entrepreneurial culture and decentralised operating model.
Summary
Our businesses adapted swiftly to the initial impacts of the
COVID-19 pandemic to ensure that they could operate safely and cost
effectively in the first half of the year. Our strong brands,
leading market positions and superior customer service, supported
by good stock availability, enabled us to capitalise on the strong
rebound in trading in our main markets to grow revenues and market
share in the second half.
The Group has successfully navigated an unprecedented period of
uncertainty and trading disruption. The actions taken to adapt to
the COVID-19 environment together with our leading brands, customer
service and stock availability have enabled us to take full benefit
of the market recovery, increasing like for like revenue and
underlying operating profit on prior year and ending the year in a
net cash position. These results have highlighted the effectiveness
and resilience of our Group strategy, business model and
employees.
Market conditions are likely to remain uncertain and challenging
albeit the Board is confident that the Group's highly experienced
management teams, resilient business model, increased financial
strength and focussed growth strategy will continue to drive
outperformance leading to further progress against our strategic
objectives in the year ahead.
Chief Executive Officer's Statement
Overview
Norcros has ended the year reporting constant currency like for
like revenue growth, underlying operating profit growth and a net
cash position after having successfully navigated the most
turbulent trading environment in recent memory.
The unprecedented COVID-19 pandemic led to national lockdowns in
the first quarter in our two main markets significantly reducing
the demand for our products during which time we mothballed our
facilities, operating our businesses effectively with a skeleton
staff working predominantly from their homes where possible. Since
the first lockdowns have eased, the resilience and flexibility of
our business model including our well established supply chains and
experienced management teams enabled the business to take full
benefit from the upturn in repair, maintenance and improvement
activity, and rapidly return to growth and increase our market
share.
Group revenue at GBP324.2m (2020: GBP342.0m) decreased by 5.2%
on a reported basis, by 1.2% on a constant currency basis, and
increased 0.7% on a constant currency like for like basis after
adjusting the prior year for period pro-rating (53 weeks versus
52). First quarter revenue was 58% of prior year on a constant
currency like for like basis due to the prevalent national
lockdowns and closure of our facilities. As our businesses reopened
second quarter revenue recovered to 97% of prior year on a constant
currency like for like basis, leaving the first half 17.3% lower
than the prior year on a similar basis. Revenue in the second half
was 19.5% higher than prior year on a constant currency like for
like basis as the market recovery strengthened further driven by
improved RMI and home renovation activity and our market share
gains.
Group underlying operating profit for the year increased by 4.6%
to GBP33.8m (2020: GBP32.3m) reflecting the significant profit
impact of the COVID-19 disruption in the first quarter partially
offset by GBP4.3m of Government job retention support and the
strong recovery in trading in the second half of the year.
Revenue in the UK was GBP220.2m for the year (2020: GBP225.4m),
2.3% lower than the prior year on a reported basis and 0.4% lower
on a like for like basis. Revenue was significantly impacted in the
first quarter, down 37.6% on prior year on a like for like basis,
due to the impacts of the COVID-19 pandemic associated lockdowns
and facility closures. Revenue recovered in the second quarter and
was 3.5% higher than prior year on a like for like basis as our
businesses benefitted from an uplift in RMI activity leading to
strong growth in the retail and online channels. During the second
half revenue grew further, 15.2% higher than prior year on a like
for like basis as we benefited from our brand leading market
positions, broad distribution channels, supply chain infrastructure
and stock availability, enabling us to capitalise on the strong
rebound in demand and to grow our market share further.
In the UK, Triton and Merlyn performed very strongly in terms of
revenue, operating profit and cash generation and gained further
market share. Triton, the UK's market leader in showers, recorded
revenue 14.3% higher than the prior year on a like for like basis
having quickly adapted to the changes in both supply and demand
conditions ensuring product availability and maintaining superior
customer service levels. Merlyn, the UK and Ireland's No. 1
supplier of shower enclosures and trays grew revenue by 3.8% on the
prior year on a like for like basis as it continued to enhance its
market leading position in the UK through its quality product
offering and customer centric service.
Further to the COVID-19 impact on demand, our UK businesses saw
significant disruption to global logistics networks in part related
to Brexit, but more significantly a result of global sea freight
container shortages with containers being stuck in UK and other
ports globally resulting in container shortages in Asia. This had a
significant impact on product delivery times and freight costs in
the final quarter. Brexit related disruptions and cost impacts had
been well planned for by our businesses and to date have not
significantly impacted our trading. We remain vigilant on the
progress of the EU-UK separation and continue to manage the risks
associated with any new or amended regulations or changes in duty
regimes as they arise.
UK underlying operating profit for the year was GBP26.9m (2020:
GBP24.4m), largely reflecting the strong recovery in the second
quarter, continued revenue growth in the second half of the year
and GBP3.5m of coronavirus job retention support from the UK and
Irish governments. The underlying operating margin for the year was
12.2% (2020:10.8%).
Revenue in South Africa increased by 3.2% on prior year on a
constant currency like for like basis, though lower by 10.8% on a
Sterling reported basis, to GBP104.0m (2020: GBP116.6m). The first
quarter performance was materially impacted by the COVID-19 related
nationwide lockdown and associated closure of our facilities, with
resultant revenue at 50% of the prior year on a constant currency
like for like basis. Our businesses recovered strongly in the
second quarter as our operations reopened and lockdowns ended with
revenue at 106.2% of the prior year on a constant currency like for
like basis, benefitting from the timely reopening of our facilities
in a COVID-19 safe and secure manner ahead of many of our
competitors, an improved export performance and excellent supply
chain management. These management actions enabled the businesses
to grow revenue further in the second half, increasing 29.2%
against prior year on a constant currency like for like basis, as
volumes reflected strong retail renovation demand and increased
commercial housebuilder activity.
Tile Africa, our leading retailer of wall and floor tiles,
sanitaryware and bathroom fittings, grew annual revenue by 11.8% on
a constant currency like for like basis driven by higher retail
demand from increased renovation activity in the market and
significantly improved operating disciplines and superior stock
availability.
South African underlying operating profit for the year was
GBP6.9m (2020: GBP7.9m), largely reflecting the translational
effect of the weaker Rand, 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 revenue in the second half.
Robust balance sheet and financial position
The Group has a strong balance sheet with net cash of GBP10.5m
(2020: net debt of GBP36.4m). This is a significant improvement on
prior year and reflected a strong cash performance from effective
cost and working capital management, with underlying operating
cashflow of GBP65.8m (2020: GBP38.4m) in the period.
The Group is in a strong financial position and has access to a
GBP120m committed RCF financing facility, maturing in November
2022, plus a GBP30m accordion facility.
Strategy remains valid - timescale extended due to COVID-19
In April 2018 we launched a refreshed strategy for growth and a
2023 vision for the Group, including an updated set of strategic
targets which were: to increase Group revenue to GBP600m by 2023;
to maintain revenue derived outside of the UK at approximately 50%
of Group revenue; and to sustain a pre-tax return on underlying
capital employed of more than 15% over the economic cycle. As was
the case in the prior year, execution of the strategy in the
current year has been significantly disrupted by the impact of
COVID-19. Notwithstanding, we have performed strongly against these
targets as detailed below:
-- Group revenue in the current year decreased by 5.2% to
GBP324.2m (2020: GBP342.0m, 2023 target: GBP600m) although on a
constant currency like for like basis revenue was 0.7% higher.
-- On a Sterling reported basis, reported Group revenue derived
outside of the UK was 41.6% (2020: 43.1%), and in constant currency
terms, from when the targets were set, 45.6% (2020: 44.8%).
-- Group underlying return on capital employed was 18.2% on a
pre-IFRS 16 basis (2020: 16.4%) and strongly exceeded our strategic
target of 15%.
The Group's very strong recovery from the COVID-19 pandemic in
the second half of the year continues to demonstrate the resilience
of our business model and the effectiveness of our strategy. In
light of the COVID-19 disruption over the year and the prior
financial year, the timing of the delivery of our strategic revenue
targets have been reassessed in the context of the economic
conditions in our main trading markets as they adapt to the post
COVID-19 environment. As a result, the timescale has been extended
to 2025. We believe this is a sensible and achievable timescale
given no further significant deterioration in the COVID-19
pandemic.
The UK bathroom and kitchen product market remains highly
fragmented with significant consolidation opportunities to either
broaden our product portfolio or further consolidate our current
offerings. The significant strength of the balance sheet means the
business is well-placed to take advantage of any acquisition or
organic growth opportunities as they arise.
Sustained investment in new product development will continue to
drive organic growth alongside our market leading brands, customer
service and best in class quality. Our product vitality rate, the
percentage of revenue in the period derived from new products
launched in the last three years, was, as expected, lower at 28%
(2020: 33%) mainly due to the COVID-19 related disruption to supply
chains and the temporary closure of retail showrooms during the
year. Our vitality rates are market leading and are expected to
increase this year as our new product launches are accelerated back
closer to pre-COVID-19 levels.
Summary and outlook
The Group has outperformed expectations, recovering very
strongly from a period of unprecedented disruption and uncertainty.
Our performance on all fronts is a testament to our business model
and our employees, particularly against the backdrop of challenging
markets as demand adjusts to the impact of the pandemic and Brexit.
It is particularly pleasing to see how well our businesses both in
the UK and South Africa responded, taking advantage of the growth
opportunities in the repair, maintenance and improvement segments
and continuing to gain market share, benefitting from their leading
brands, supply chain infrastructure and stock availability.
Whilst the COVID-19 pandemic has resulted in some short term
disruption against our strategic growth targets we remain committed
to these targets and are more convinced that many opportunities to
leverage our market positions and knowledge of the sector will
emerge in the medium term.
Market conditions are likely to remain uncertain and challenging
for some time yet. Whilst the recovery has been strong, especially
in residential markets in the UK, the full impact of the crisis is
difficult to ascertain at this stage given the current disruption
in our supply chain, increases in freight and input costs and the
implementation of price recovery measures and an expected
normalisation of consumer spending patterns. The South African
economy has also recovered strongly despite limited and stretched
government resources, although commercial activity has only just
started to recover to prior year levels. Whilst improved
infrastructure investment is high on the list of the South African
government's economic growth priorities, the impact of new COVID-19
variants and a slower vaccination roll-out programme will continue
to create uncertainty.
We have ended the year strongly, outperforming our expectations
and the markets in which we operate in recording revenue(*) ,
profit and cash generation growth on prior year whilst operating
within the constraints and disruption of the unprecedented COVID-19
pandemic. Pleasingly, this strong trading momentum has continued
into April and May with Group revenue ahead of the comparable
period in 2019 by approximately 23%.
The Group is in a strong financial position and is also stronger
relative to our competitors than pre COVID-19. Accordingly, the
Board remains confident that the Group's focussed strategy, highly
experienced management teams and market leading brands, supply
chain and customer service will continue to drive outperformance in
the current financial year.
(*) On a constant currency like for like basis
Business performance
2021 2020
GBPm GBPm
-------------------------------- ----- -----
Revenue 324.2 342.0
-------------------------------- ----- -----
Operating profit 24.9 17.8
IAS 19R administrative expenses 1.4 1.5
Acquisition related costs 3.7 4.0
Exceptional operating items 3.8 9.0
-------------------------------- ----- -----
Underlying operating profit 33.8 32.3
-------------------------------- ----- -----
2021 2020
GBPm GBPm
-------------------------------------------------- ----- -----
Revenue - UK 220.2 225.4
Revenue - South Africa 104.0 116.6
-------------------------------------------------- ----- -----
Revenue - Group 324.2 342.0
-------------------------------------------------- ----- -----
Underlying operating profit - UK 26.9 24.4
Underlying operating profit - South Africa 6.9 7.9
-------------------------------------------------- ----- -----
Underlying operating profit - Group 33.8 32.3
-------------------------------------------------- ----- -----
Underlying operating profit margin - UK 12.2% 10.8%
Underlying operating profit margin - South Africa 6.6% 6.8%
-------------------------------------------------- ----- -----
Underlying operating profit margin - Group 10.4% 9.4%
-------------------------------------------------- ----- -----
2021 2020
GBPm GBPm
-------------------------------------------------------- ----- -----
Underlying operating profit 33.8 32.3
Depreciation of right of use assets 4.0 4.5
Lease costs (5.3) (5.0)
Depreciation and underlying amortisation (owned assets) 5.4 6.8
-------------------------------------------------------- ----- -----
Underlying EBITDA 37.9 38.6
Net working capital movement 21.8 (4.8)
Share-based payments 1.0 0.1
Operating profit impact of IFRS16 1.3 0.5
Depreciation of right of use assets 4.0 4.5
Cash settlement of share options (0.2) (0.5)
-------------------------------------------------------- ----- -----
Underlying operating cash flow 65.8 38.4
-------------------------------------------------------- ----- -----
2021 2020
-------------------------------------- ----- -----
Basic underlying earnings per share 31.2p 28.4p
Diluted underlying earnings per share 31.1p 28.2p
-------------------------------------- ----- -----
Business review - UK
In the UK, full year revenue was 2.3% lower than the prior year
on a reported basis and 0.4% lower on a like for like basis at
GBP220.2m (2020: GBP225.4m). Revenue was significantly impacted in
the first quarter due to the impact of the COVID-19 pandemic and
associated lockdowns. Revenue in April 2020 was 35.0% of prior year
revenue, which over the quarter recovered to 62.4% of prior year on
a like for like basis. Revenue further recovered in the second
quarter and was 3.5% higher than prior year on a like for like
basis as our businesses benefitted from an uplift in RMI activity
leading to strong growth in retail and online channels. During the
second half, revenue grew further ahead with a 15.2% increase on
prior year on a like for like basis as we benefited from our
brands' leading market positions and superior customer service and
stock availability enabling us to capitalise on the strong rebound
in demand and grow market share.
Over the year our businesses delivered an extremely resilient
performance responding and adapting rapidly and effectively to the
testing external environment of the COVID-19 lockdowns, re-openings
and considerable supply chain disruption. During the first quarter,
in response to the COVID-19 pandemic and associated lockdowns we
suspended our main manufacturing and assembly operations and
furloughed approximately 70% of the workforce, continuing to
service our customers with a skeleton staff working predominantly
from their homes where possible. As the lockdowns eased at the end
of the first quarter, our UK facilities reopened ensuring COVID-19
safe and secure environments for all our workforce with our
manufacturing capacity aligned with our inventory levels and
demand. During this period, we redesigned our working and
manufacturing environments to ensure COVID-19 safe working and
adjusted shift patterns to better match customer and employee
requirements and adapted our sales and training approach to be
online based. During the year, circa 4% of the UK workforce tested
positive for COVID-19 with no cases of on-site transmission
evidenced. The appropriate steps were taken to reduce any
transmission risks in line with government guidelines and we
continue to ensure that every reasonable action is being taken to
provide a safe working environment for all our employees.
The end of the third quarter saw significant disruption to
global logistics networks significantly impacting product delivery
lead-times and costs. This disruption was in part related to
Brexit, but more significantly a result of global sea freight
container shortages with containers being stuck in UK and other
ports globally resulting in container shortages in Asia.
Underlying operating profit for the year was GBP26.9m (2020:
GBP24.4m) in the period, largely reflecting the strong recovery in
the second quarter and continued growth in the second half of the
year and the receipt of GBP3.5m of coronavirus job retention
support from the UK and Irish governments. This receipt is net of a
repayment of GBP0.7m of Coronavirus Job Retention Scheme support to
the UK government in relation to furloughed employees that were
made redundant as part of the COVID-19 related restructurings.
Triton
Revenue at Triton, the UK's market leader in showers, was
GBP54.5m (2020: GBP48.6m), 14.3% higher than the prior year on a
like for like basis. Triton recovered strongly from the first
quarter COVID-19 lockdown disruption and grew revenue and profits
across the remainder of the financial year by quickly adapting to
the changes in supply and demand, ensuring product availability and
maintaining customer service. As competitors struggled to react to
the challenging situation, Triton was able to build on its market
leading position taking an increasing market share in electric and
mixer showers.
Retail sector revenue was 26.9% higher than the prior year on a
like for like basis driven by a significant uplift in demand for
home renovation products and from customers with a strong online
presence and "click and collect" facilities. The classification of
showers as essential products supported customer demand and enabled
us to continue selling in periods of lockdown to meet orders.
Trade sector revenue in the first half of the year was 25.3%
lower than the prior year on a like for like basis as COVID-19
imposed restrictions impacted the contract building sector. Demand
recovered in the second half with revenue 27.3% higher than prior
year on a like for like basis with contracts in social housing and
local authorities recovering gradually. Trade sales ended the year
marginally lower on a like for like basis.
Triton's full year export revenue was 18.5% higher than the
prior year on a like for like basis benefitting from a similar
pattern of retail recovery in the key Irish market.
New products continue to be a key driver in maintaining Triton's
long-term leading market position where ongoing investment and new
product launches have proven successful. Notable revenue growth in
the year was delivered from Instaflow(TM) Water Heating and Quiet
Mark(TM) Pumped and Power Shower ranges.
Proud to be manufactured in Britain for over 45 years and a
member of the "Made in Britain" scheme since 2014, Triton is known
as a leader in electric shower innovation with a focus on their
environmental credentials. A number of initiatives are already in
place including zero waste to landfill, 99.9% recycled box
packaging, environmentally friendly fleet vehicles and 100%
recycling of used parts. During the year Triton started working
with the Carbon Trust(TM) and has set a target to be net carbon
zero by the end of 2025; Triton's 50th anniversary year.
Triton again delivered strong underlying operating profit along
with excellent cash conversion in the period.
Merlyn
Merlyn, the UK and Ireland's No. 1 supplier of shower enclosures
and trays to the residential, commercial and hospitality sectors
performed strongly and recorded revenue of GBP43.3m (2020:
GBP42.5m), growth of 3.8% on the prior year on a like for like
basis despite the impact of COVID-19 that reduced revenue in the
first quarter by 43.9%. The business continued to grow its market
leading position in the UK through its quality product offering and
customer centric service.
UK revenue grew by 4.4% on prior year on a like for like basis,
with a particularly strong performance in the trade sector where
revenue grew 6.0% on a like for like basis driven by growth across
a number of existing customers in addition to a number of new
contracts including Homes for Lambeth and Lendlease. The retail
sector revenue increased by 3.2% on a like for like basis in the
difficult COVID-19 trading environment which closed showrooms
across the country for large periods of the year.
Exports were in line with prior year on a like for like basis,
mainly reflecting the impact of COVID-19 lockdown measures in
Ireland which impacted the construction sector.
New product development remains a core component of Merlyn's
growth strategy with the launches of Arysto X, Arysto Colour and
slip resistant trays during the year. The future pipeline includes
an Arysto range extension, a next generation of shower trays, and
products with improved glass cleaning properties. Despite the
impact of COVID-19 on customer service levels, Merlyn won the NBG
Plumbing, Heating & Showroom Supplier of the Year award for the
third year running and the CCMA Customer Service Team of the
Year.
Merlyn has continued to progress its environmental credentials
during the year and has developed and tested a new eco-packaging
solution to eliminate the use of single use plastics with fully
recyclable alternatives. This will be utilised in all new product
launches going forward.
Merlyn recorded a strong performance with an underlying
operating profit ahead of last year and continued to deliver strong
cash conversion in the period.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of GBP38.2m for the year
(2020: GBP42.3m), 8.0% lower than the prior year on a like for like
basis. COVID-19 had a major impact on the business with revenue in
April 2020 at 23% of the prior year, recovering in the second half
with sales growth of 4.2% on prior year on a like for like
basis.
In the UK, retail sector revenue declined by 9.5% on prior year
on a like for like basis with a 21.5% decrease in the first half
recovering to a 2.5% increase in the second half as retailers found
ways to operate more effectively in the COVID-19 environment. Vado
gained a number of new contracts during the year including the
private label "@home shower" business with the Huws Gray Group and
IPG, PHG, H&B and Bathcom, all of which will drive further
channel growth in the current financial year.
Trade sector revenue was 10.1% lower than the prior year on a
like for like basis with a 23.6% decrease in the first half
recovering to a 3.4% increase in the second half as construction
activity rebounded after the first quarter lockdowns. Key contracts
with Countryside and Avant Homes were retained, continued growth
came through Berkeley Homes and new business was secured with CP
Hart which all helped to drive revenue growth in the second half of
the year.
Export revenue was in line with prior year on a like for like
basis with a 13.9% decrease in the first half recovering to a 9.1%
increase in the second half driven by strong sales in Europe, and a
number of project wins in Africa and the Middle East.
The investment in new product ranges has continued to support
revenue growth with the prior year launches of the "Individual
coloured range" supporting growth with high value developers and
the "Axces" range supporting the retention of contracts with
national housebuilders. Environmental and sustainability
credentials have been a major focus for new product launches this
year which has seen the introduction of a new range of water flow
restrictors that can be used in both high and low pressure systems
and the introduction of the "EcoTurn" range of cold start taps
reinforcing Vado's position at the forefront of driving market
trends.
Underlying operating profit was above the prior year combined
with improved cash generation in the period.
Croydex
Croydex, our market leading, innovative designer, manufacturer
and distributor of high-quality bathroom furnishings and
accessories, recorded revenue of GBP24.1m (2020: GBP23.7m) for the
period, 3.4% higher than the prior year on a like for like basis.
Revenue in the first half decreased by 10.6% on prior year on a
like for like basis and recovered in the second half growing by
16.7% on the prior year on a like for like basis.
Retail sector revenue was up 13.1% on prior year on a like for
like basis, with sales in the first half down 2.0%, with a recovery
in the second half, 26.3% higher than prior year on a like for like
basis. Increased online and e-commerce demand with digitally
enabled businesses such as Argos, Wayfair and Very outweighed the
reduced activity in our traditional High Street customers as town
and city centres remained significantly impacted by COVID-19
restrictions. Croydex has also grown revenues in the DIY sector
through Wickes, having won major rollouts within their 'take-away'
bathrooms and showroom business.
Trade sector revenue was down 9.0% on the prior year on a like
for like basis despite a strong performance in the second half with
sales level with prior year on a like for like basis, with the
recovery in demand from some of our more traditional merchants
being held back as they struggled to meet social distancing
rules.
Export sales grew 18.2% on prior year on a like for like basis
mainly driven by growth in the US from cabinet and mirror sales to
Home Depot.com and European growth from existing markets and a
launch of a new cabinet range in Spain.
Our ongoing new product development programme has played a major
role in driving new sales opportunities, the most significant being
a second half Wickes store and online rollout of 150 new products
including toilet seats, cabinets, and shower accessories. Further
new product launches included new cabinet designs introduced by El
Corte Ingles in Spain, illuminated mirrors for on-line Home Depot
in the US and "Flexi-Fix" toilet seats recently introduced into our
Italian customer base.
We continue to focus on our environmental and sustainability
credentials. A new packaging policy was developed and implemented
in the period to reduce the environmental impact of our packaging
in line with the UN environmental programme of sustainability. This
policy also includes an implementation plan for the reduction in
packaging, inclusion of more recycled content,
elimination/replacement of single use plastics and the use of
sustainable sources. We also introduced a range of products in the
US designed to conform with the American Disability Act. Underlying
operating profit was ahead of the prior year and cash generation
remained strong.
Abode
Abode, our leading designer and distributor of high-quality hot
water taps, bathroom mixers, kitchen sinks and taps, recorded
revenue of GBP15.0m for the year (2020: GBP14.8m), a 3.4% increase
on a like for like basis.
In a strong second half revenue was up 37.1% on prior year on a
like for basis recovering from a 21.7% decline in the first half
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 enhanced 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.
Continuing investment in product development and showcasing saw
the opening of a new showroom and in-house photographic studio at
our Barnsley head office alongside the launch of the 'Distinctly
Abode' collection, including Pronteau hot water taps, which is
differentiated from the main branded range to provide greater
retail exclusivity. The innovative Abode water filtration system
'Swich' won an Ideal Home Award for sustainability and the newly
launched 'Prothia' tap was commended for its steaming hot water tap
design.
Abode's flexible supply chain was further strengthened during
the year through the introduction of SMETA standards for ethical
trading with Abode also being accredited by 'Investors in People'
for employee engagement and people management processes.
Underlying operating profit and cash performance were both
higher than the prior year, reflecting the second half recovery in
revenue.
Johnson Tiles
Johnson Tiles, our UK market leading ceramic tile manufacturer
and a market leader in the supply of both own manufactured and
imported tiles, recorded revenue of GBP32.8m (2020 GBP41.7m), 19.8%
lower than the prior year on a like for like basis. This result was
significantly impacted by the COVID-19 pandemic with first half
revenues at 67.6% of prior year on a like for like basis. During
the first national lockdown in April, where demand dropped sharply
to 24% of prior year, the focus was on supporting commercial and
retail contracts and rapidly developing the factory outlet website.
Revenues recovered through the first half as the DIY retailers and
construction sites returned to a more normal level of operation.
This recovery continued into the second half where revenues were
93.1% of prior year on a like for like basis.
Trade sector revenue was down 19.8% on the prior year on a like
for like basis, with the second half recording a 3.9% decrease on
prior year on a like for like basis. The house developer sector
recovered strongly throughout the second half, but commercial
specifications, which are driven by the hospitality and retail
sectors, have been very slow to restart with the social housing
refurbishment market continuing to be impacted by the overhang from
the Grenfell cladding issue. We benefitted in the second half from
our strong position with the national house developers where we
have either exclusive supply or significant shares of the tile
supply to Barratt David Wilson, Persimmon, Charles Church, Redrow,
Countryside and Bellway. During the year we supplied a number of
major contracts in the period including the Royal Wharf Development
in London, Birmingham Airport Holiday Inn, Booking.com's UK
offices, the Clayton Hotel in Manchester and the Cardhu
distilleries offices.
Retail sector revenue was down 21.1% on prior year on a like for
like basis with the second half recording a 11.6% decrease on prior
year on a like for like basis with tiles not benefitting as much as
some categories from the general market DIY uplift. However, we
have still been successful in winning new space in both B&Q and
Wickes during the year and Johnson Tile's position as the only
remaining UK based tile manufacturer is expected to help us gain
future retail traction. In 2021 Johnson Tiles is celebrating both
its 120(th) year as a UK manufacturer of tiles and its heritage as
a designer and innovator in tiles.
Export revenue which accounts for approximately 8% of overall
revenue finished down 12.9% against prior year on a like for like
basis, with second half revenue level with the prior year on a like
for like basis. Strong performances in Bauhaus in Germany from new
ranges and project driven sales in the Middle East were offset by a
challenging performance with Leroy Merlin in France, with sales
being impacted by the COVID-19 lockdowns.
Johnson Tiles has taken a market leading position on
sustainability over many years in its manufacturing processes
including the recycling of kiln waste heat, scrap tiles and water.
In addition to this, during the year the business has become
plastic free eliminating over 100 tonnes a year of plastic from its
processes.
The business was profitable in the second half although for the
year it incurred an underlying operating loss due to the lower
revenues and the under recovery of fixed production costs whilst
production activities were curtailed in the first half, only fully
re-opening in mid-September. Cash generation in the year however
was a particularly strong feature, reflecting significantly reduced
inventory levels in the period.
Norcros Adhesives
Revenue at Norcros Adhesives, our UK manufacturer and supplier
of tile and stone adhesives and ancillary products, was 6.0% higher
than prior year on a like for like basis at GBP12.3m (2020:
GBP11.8m) despite the impact of COVID-19, with distributor
customers unable to open showrooms for several months. We
benefitted from our presence in the large multiples who were
classified as essential retailers and quickly implemented social
distancing measures, in addition to our growing specification
business, all of which helped revenues to recover from COVID-19
related disruption and ultimately exceed prior year
performance.
Trade sector revenue was 34.1% ahead of prior year on a like for
like basis reflecting Norcros Adhesives' ongoing focus on building
sales through the specification channel and was assisted by the
launch of two new levelling products in Screwfix.
Retail sector revenue was 1.7% ahead of prior year reflecting
the fast adaptation of the larger multiple customers to COVID-19
secure environments.
Our Middle East operations were severely impacted by COVID-19
with revenue 53.3% below prior year on a like for like basis with
ongoing lockdown conditions disrupting many projects. With the
growth expectations of the region significantly reduced and market
liquidity continuing to tighten further the decision was made to
close the business from 31 March 2021. Associated cash costs of
GBP0.3m and non-cash costs of GBP1.1m have been recognised as
exceptional restructuring costs.
New product initiatives in the period included the launch of our
novel "Rock Tite" fixing system for porcelain tiles, with the
technology also supplied as an own brand for the leading
distributor in the Landscape Market, Aquacut. Environmental
standards have been maintained in the year with the continued "Gold
Standard" accreditation from the Supply Chain Sustainability School
(which is partnered with the housebuilder Barratt). A small
underlying operating loss was recorded in the year which was an
improvement on the prior year and reflected higher revenue and the
benefits of new product introductions, price increases and product
reformulations.
Business review - South Africa
Revenue for the year increased by 3.2% on prior year on a
constant currency like for like basis, though a decline of 10.8% on
a Sterling reported basis to GBP104.0m (2020: GBP116.6m). The first
quarter performance was materially impacted by the COVID-19 related
nationwide lockdown which saw revenue decline to 50% of the prior
year on a constant currency like for like basis. Our four
businesses were closed during April, with our retail businesses
re-opening in May having implemented COVID-19 safe operating
procedures and we were fully operational by the end of June. The
businesses managed to recover strongly in the second quarter with
revenue at 106.2% of prior year on a constant currency like for
like basis benefitting from the timely reopening of our facilities
in our COVID-19 safe and secure manner ahead of many of our
competitors, an improved export performance and excellent supply
chain management. The second half saw revenue increase by 29.2%
against prior year on a constant currency like for like basis
driven by strong retail renovation demand, increased commercial
housebuilder activity, and improved export performance.
The COVID-19 pandemic has impacted our employees and their
families. Whilst there were no cases of transmission of the virus
at work, 8% of our colleagues have tested positive. Two employees
have sadly passed away and we offer their families our deepest
sympathies. The business has been proactive in the support provided
to all staff throughout the year with full access to our wellness
centre that extends to all aspects of well-being, including free
access to independent psychological support.
During the year we continued to focus on our communities and
have participated in a government-backed initiative "Project Yes"
(Youth Employment Service), to provide work experience for
unemployed young people nationwide with the hiring of 65 young
people spread across all four businesses. We continue to remain
actively involved in providing safe toilet facilities for
underprivileged schools.
Underlying operating profit for the year was GBP6.9m (2020:
GBP7.9m), the reduction in profits largely reflecting the
translational effect of the weaker Rand, the impact of COVID-19 in
the first quarter, 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 half. Cash
generation across the South African businesses was strong despite
the COVID-19 trading disruptions, driven by cost mitigation
measures and effective working capital management. The business
finished the year in a strong financial and competitive position,
well placed to continue to gain market share in its respective
markets.
Johnson Tiles South Africa
Johnson Tiles South Africa, our tile manufacturing business,
recorded revenue of GBP12.5m (2020: GBP14.0m) a 10.7% decrease on a
reported basis and 2.5% higher on a constant currency like for like
basis, a commendable performance given that the manufacturing plant
was closed for the first two and half months of the financial
year.
The business benefitted from the investment in inventory levels
coming into the lockdown period and an excellent performance from
the production team once the economy re-opened post-lockdown. These
actions, alongside targeted plant investments during the period
helped to drive improved manufacturing stability, throughput and
product quality, enabling the business to meet the increased demand
resulting from the strong recovery in housing renovations and in
the later part of the year from commercial housebuilders as
construction sites reopened. During the second half recovery our
products were specified and installed in a number of leading
developments across the country, including The Whisken and Sky City
residential developments in Johannesburg, and the Lotus Gardens
development in Pretoria.
Our New Product Development programme helped to support the
recovery in retail demand and is expected to continue to do so as
the recovery in the commercial sector gathers pace in the year
ahead.
Cash generation was strong and ahead of the prior year although
underlying operating profit was marginally lower than the prior
year reflecting the extended plant shutdown in the first
quarter.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
sanitaryware and bathroom fittings recorded revenue of GBP54.9m
(2020: GBP56.8m) a 3.3% decrease on a reported basis and 11.8%
higher on a constant currency like for like basis. The improvement
on prior year was driven by improved retail demand from increased
renovation activity and significantly better operating disciplines
and superior stock availability.
The commercial contracts sector was hardest hit by the COVID-19
lockdowns as this coincided with the start of the annual building
cycle. Despite the lower overall new build activity, Tile Africa
completed several large retail floor covering installations for
Pick n Pay, Boxer and Spar, with a noticeable pickup in activity in
the second half with other specialist projects completed or
underway including a dairy plant floor installation for Clover and
the Ridge mixed-housing development in Cape Town.
Tile Africa successfully launched a private label shower
enclosure range during the year with Merlyn's assistance, with
excellent initial sell-through being achieved. It was also
particularly pleasing to see bathroom ware growth in the year as
the business continues to benefit from the ability to directly
source product utilising the Group's wider supply chain
network.
Tile Africa currently operates from 32 owned stores and two
franchise stores. Ongoing capital investment in the business
majored on the flagship Greenstone branch upgrade completed this
year and the Ballito branch relocation completed recently, with
both developments including a bathroom store-within-a-store concept
and a bespoke alternative floorcoverings department.
Operating profit and cash were both significantly better than
the prior year.
TAL
TAL, our market-leading adhesive business, recorded revenue of
GBP19.1m (2020: GBP22.1m) a 13.6% decrease on a reported basis
albeit a 0.5% increase on a constant currency like for like basis.
Following the national lockdown in the first quarter there was a
sharp decline in large commercial new build projects with first
half revenue at 79.0% of the prior year on a constant currency like
for like basis. In the second half, the business grew 24.4% on the
prior year on a constant currency like for like basis reflecting
good operational planning on the timely re-opening of our
production facilities which allowed the business to meet strong
local and export retail demand, often at the expense of competitors
who struggled to re-open their operations efficiently.
TAL remains the preferred partner in the market in relation to
numerous technical projects with the business supplying
market-leading products and technical expertise into several
prestigious projects this year, including the redevelopment of an
uncovered swimming pool at the world class aquatics centre in King
Edward VII School, Johannesburg, the installation of a liquid
marble epoxy floor in the Quna Restaurant at the Saxon Hotel &
Spa in Johannesburg, the installation of an Olympic size swimming
pool for the University of the Western Cape, construction of Sky
City residential apartments and the first phase of the Munyaka
commercial housebuilding project.
Our new product development is focused on developing novel
fixing systems for coverings outside of our traditional tile market
and during the year we launched the Profix LVT adhesive for large
vinyl tile installations.
Cash generation was strong and ahead of the prior year despite
underlying operating profit being lower than the prior year,
reflecting the extended plant shutdown in the first quarter.
House of Plumbing
House of Plumbing, our market-leading supplier of specialist
plumbing materials into the specification and commercial segments,
recorded full year revenue of GBP17.5m (2020: GBP23.7m) 26.2% lower
than the prior year on a reported basis and 14.6% lower on a
constant currency like for like basis. The first half saw revenue
decline to 71.2% of prior year on a constant currency like for like
basis as the business was initially heavily impacted by COVID-19 as
the large commercial projects supplied by House of Plumbing took
longer to recover after lockdown. In the second half of the year
the business recovered to prior year revenue levels on a constant
currency like for like basis, with the fourth quarter seeing growth
of 17.8% over prior year on a constant currency like for like basis
against the prior year as new build project activity increased.
While there was a sharp decline in the number of large
commercial projects in the year, the management teams focus on
providing expert technical advice and consistent stock availability
resulted in new B2B and B2C business being gained. The business
also successfully opened our first new store post acquisition in
Polokwane as part of our plan to establish a comprehensive national
footprint. The business currently operates out of four branches,
with four new branches planned for the year ahead. During the year,
House of Plumbing supplied a number of landmark projects, including
the Wierda Road and Tree Tops apartment developments in
Johannesburg and The Capital Hill Hotel in Nelspruit.
Underlying operating profit and cash generation were lower than
the prior year reflecting the more marked disruption from COVID-19
on a number of large new build commercial projects.
Financial overview
2021 2020
GBPm GBPm
-------------------------------- ----- -----
Revenue 324.2 342.0
-------------------------------- ----- -----
Underlying operating profit 33.8 32.3
IAS 19R administrative expenses (1.4) (1.5)
Acquisition related costs (3.7) (4.0)
Exceptional operating items (3.8) (9.0)
-------------------------------- ----- -----
Operating profit 24.9 17.8
Net finance costs (6.4) (2.8)
-------------------------------- ----- -----
Profit before taxation 18.5 15.0
Taxation (3.5) (4.1)
-------------------------------- ----- -----
Profit for the year 15.0 10.9
-------------------------------- ----- -----
Revenue
Group revenue at GBP324.2m (2020: GBP342.0m) decreased by 5.2%
on a reported basis, by 1.2% on a constant currency basis, and
increased 0.7% on a constant currency like for like basis after
adjusting the prior year for period pro-rating (53 weeks versus
52).
Underlying operating profit
Underlying operating profit increased by 4.6% to GBP33.8m (2020:
GBP32.3m). Our UK businesses delivered underlying operating profit
of GBP26.9m (2020: GBP24.4m), and our South African businesses
generated an underlying operating profit of GBP6.9m (2020:
GBP7.9m). Group underlying operating profit margin was 10.4% (2020:
9.4%).
Underlying operating profit includes GBP3.3m 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 support received is
net of a GBP0.7m repayment, made in June 2021 of Coronavirus Job
Retention Scheme support received from the UK government in
relation to furloughed employees that were made redundant as part
of the COVID-19 related restructurings.
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of
administering the UK pension scheme and are reflected in the Income
Statement under IAS 19R. Costs of GBP1.4m are in line with prior
year (2020: GBP1.5m).
Acquisition related costs
A cost of GBP3.7m (2020: GBP4.0m) has been recognised in the
year and is analysed as follows:
2021 2020
GBPm GBPm
-------------------------------------------------- ----- -----
Deferred remuneration - 0.6
Intangible asset amortisation 3.7 3.7
Release of provision for contingent consideration - (1.1)
Advisory fees - 0.8
-------------------------------------------------- ----- -----
3.7 4.0
-------------------------------------------------- ----- -----
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 which
amounted to a cost of GBP0.6m in the prior year in relation to the
House of Plumbing acquisition. In the current year, this provision
has been released as the earn-out targets have not been met. We
have increased our property provision by an equivalent amount due
to the anticipated COVID-19 related loss of rental income on our
last remaining legacy onerous lease, which expires in June
2022.
In the prior year in relation to the House of Plumbing
acquisition, GBP1.1m of contingent consideration was released to
the income statement.
The advisory fees in the prior year relate to the costs incurred
in relation to acquisition activity that did not conclude.
Exceptional operating items
A net exceptional operating charge of GBP3.8m (2020: GBP9.0m)
has been recognised in the year.
2021 2020
GBPm GBPm
------------------------------- ----- -----
COVID-19 related restructuring 3.8 -
COVID-19 related impairment - 9.0
------------------------------- ----- -----
3.8 9.0
------------------------------- ----- -----
COVID-19 has significantly affected economic activity and
disrupted the business operations of the Group. The Group has
implemented several restructuring programmes during the period
which resulted in a reduction in employee numbers of approximately
200, and incurred GBP2.4m of costs, of which GBP2m are cash costs,
with GBP1.6m being paid in the year, and GBP0.4m are non-cash. In
light of the continued COVID-19 uncertainty and its impact on our
Adhesives business in the Middle East we have also decided to exit
the Adhesives market and close our small Adhesives Middle East
operation at the year-end which resulted in an additional GBP1.4m
of restructuring costs comprising GBP0.3m of cash costs and GBP1.1m
of non-cash costs.
During the prior year an exceptional charge of GBP9.0m was
incurred in relation to the impairment of tangible, intangible and
right of use assets within the Johnson Tiles UK business.
Net finance costs
2021 2020
GBPm GBPm
------------------------------------- ----- -----
Interest payable on bank borrowings (1.5) (1.6)
Interest on lease liabilities (1.7) (1.9)
Movement on fair value of derivative
financial instruments (2.0) -
Amortisation of costs of raising
debt finance (0.2) (0.2)
------------------------------------- ----- -----
Finance costs (5.4) (3.7)
Movement on fair value of derivative
financial instruments - 1.7
------------------------------------- ----- -----
Finance income - 1.7
------------------------------------- ----- -----
IAS 19R finance cost (1.0) (0.8)
------------------------------------- ----- -----
Net finance costs (6.4) (2.8)
------------------------------------- ----- -----
Net finance costs for the year of GBP6.4m compares to GBP2.8m in
2020. This increase is mainly due to the movement in the fair value
of foreign exchange contracts which is a GBP2.0m cost in the year
(2020: GBP1.7m income) in relation to expired forward foreign
exchange contracts. Forward foreign exchange contracts are now
accounted for under IFRS 9 hedge accounting, with the movement in
fair value recognised in the consolidated statement of
comprehensive income.
The Group has recognised a GBP1.0m interest cost in respect of
the defined benefit pension scheme liability (2020: GBP0.8m) which
increased by GBP0.2m principally reflecting the higher deficit at
the start of the year.
Underlying profit before tax
Underlying profit before tax was GBP30.6m (2020: GBP28.8m),
mainly reflecting the increase in underlying operating profit of
GBP1.5m noted above.
Taxation
The tax charge for the year of GBP3.5m (2020: GBP4.1m)
represents an effective tax rate for the year of 18.9% (2020:
27.3%). The decrease in the effective tax rate is mainly due to the
impact of the non-deductible impairment charge in the prior
year.
The standard rates of corporation tax in the UK, South Africa
and Ireland in the period were 19% (2020: 19%), 28% (2020: 28%) and
12.5% (2020: 12.5%) respectively.
Dividends
The Group responded swiftly to the impact of the COVID-19
pandemic and the need to preserve cash by not paying a final
dividend in relation to the year ended 31 March 2020 or an interim
dividend in relation to the year ended 31 March 2021. Based on the
improved trading performance in the second half the Board believes
that now is the time to reinstate its dividend and has therefore
taken the decision to recommend a final dividend of 8.2p per share
(2020: 3.1p). This is equivalent to a dividend cover of 3.8 times,
consistent with the year ended 31 March 2019. The cash cost of the
dividend is GBP6.6m.
The Group will now continue with its progressive albeit prudent
dividend policy which takes in to account the Group's growth
strategy, the interests of other key stakeholders, the Group's cash
generative characteristics and its earnings growth.
This final dividend, if approved at the Annual General Meeting,
will be payable on 30 July 2021 to shareholders on the register on
25 June 2021. The shares will be quoted ex-dividend on 24 June
2021. Norcros plc operates a Dividend Reinvestment Plan (DRIP). If
a shareholder wishes to use the DRIP the latest date to elect for
this in respect of this final dividend is 9 July 2021.
Balance Sheet
The Group's balance sheet is summarised below.
2021 2020
GBPm GBPm
------------------------------- ------- ------
Property, plant and equipment 2 8.0 29.0
Right of use assets 19.6 20.6
Goodwill and intangible assets 9 3.6 96.5
Deferred tax (0.5) 4.7
Net current assets excluding
cash and borrowings 44.0 67.5
Pension scheme liability (18.3) (48.9)
Lease liabilities ( 24.2) (25.1)
Other non-current assets and
liabilities ( 4.3) (3.5)
Net cash / (Net borrowings) 10.5 (36.4)
------------------------------- ------- ------
Net assets 1 48.4 104.4
------------------------------- ------- ------
Total net assets increased by GBP44.0m to GBP148.4m (2020:
GBP104.4m).
Property, plant and equipment reduced by GBP1.0m and included
additions of GBP2.5m (2020: GBP4.0m). The depreciation charge was
reduced to GBP5.2m (2020: GBP6.6m) due to the prior year impairment
of Johnson Tile assets and foreign exchange gains were GBP1.7m
(2020: loss of GBP3.2m).
Right of use assets decreased by GBP1.0m to GBP19.6m (2020:
GBP20.6m), reflecting the difference between additions or renewals
and right of use asset depreciation in the year. Lease liabilities
of GBP24.2m (2020: GBP25.1m) decreased by a similar amount.
The deferred tax asset decreased by GBP5.2m to a liability of
GBP0.5m (2020: asset of GBP4.7m). The decrease is mainly the result
of a movement in the pension deferred tax asset reflecting the
lower pension scheme deficit at 31 March 2021.
Pension schemes
On an IAS 19R accounting basis, the gross defined benefit
pension scheme valuation of the UK scheme showed a deficit of
GBP18.3m compared to a deficit of GBP48.9m last year. Whilst the
present value of scheme liabilities rose by GBP5.3m due to a
reduction in the discount rate to 2.05% (31 March 2020: 2.21%),
partially offset by changes in mortality assumptions, the value of
scheme assets increased by GBP35.9m due to the recovery from the
initial COVID-19 impact on financial markets and asset
valuations.
The triennial actuarial valuation for the Group's UK defined
benefit pension scheme as at 1 April 2018 reported an actuarial
deficit of GBP49.3m (2015: GBP73.5m) representing an 89% funding
level (2015: 84%). The deficit recovery plan was agreed with the
scheme Trustee, with a cash contribution of GBP3.3m per annum plus
CPI, payable for the 6.5 years to 30 September 2025. In line with
this agreement the Group made deficit recovery contributions of
GBP3.3m (2020: GBP3.3m) into its UK defined benefit pension scheme
during the year.
The Group's contributions to its defined contribution pension
schemes were GBP3.0m (2020: GBP3.5m).
Cash flow and net debt
Underlying operating cash flow was GBP27.4m higher than in the
prior year at GBP65.8m (2020: GBP38.4m).
2021 2020
GBPm GBPm
--------------------------------- ------ -----
Underlying operating profit 33.8 32.3
Depreciation and amortisation 5.4 6.8
Net working capital movement 21.8 (4.8)
IFRS 2 charge add-back 1.0 0.1
Depreciation of right of use
assets 4.0 4.5
Cash settlement of share options ( 0.2) (0.5)
--------------------------------- ------ -----
Underlying operating cash flow 65.8 38.4
--------------------------------- ------ -----
The main driver of the improved underlying operating cashflow
was a significant cash inflow from working capital including GBP3m
of Government approved VAT deferral which will be repaid in the
year to 31 March 2022. Underlying operating cash conversion in the
year was 174% of underlying EBITDA (2020: 99%).
2021 2020
GBPm GBPm
--------------------------------------------- ------- ------
Underlying operating cash flow 65.8 38.4
Cash flows from exceptional items and
acquisition related costs ( 2.5) (0.3)
Pension fund deficit recovery contributions (3.3) (3.3)
--------------------------------------------- ------- ------
Cash flow generated from operations 60.0 34.8
Net interest paid (3. 2) (3.5)
Taxation ( 3.5) (5.3)
--------------------------------------------- ------- ------
Net cash generated from operating activities 53.3 26.0
Capital expenditure ( 2.8) (4.8)
Acquisitions - (9.2)
Dividends - (7.0)
Share transactions 0.3 (0.8)
Principal element of lease payments (4.3) (3.8)
Other items 0.4 (1.8)
--------------------------------------------- ------- ------
Net cash generated/(spent) 46.9 (1.4)
Opening net debt ( 36.4) (35.0)
--------------------------------------------- ------- ------
Closing net cash/(debt) 10.5 (36.4)
--------------------------------------------- ------- ------
Cash generated from operating activities was GBP27.3m higher
than the prior year at GBP53.3m, largely due to the GBP27.4m
increase in underlying operating cash flows.
Cash flows from exceptional items and acquisition related costs
in the current year primarily relate to the costs of the COVID-19
related restructuring carried out in the year totalling GBP1.6m,
acquisition activity from the prior year that did not conclude,
totalling GBP0.5m, and costs related to our legacy onerous lease
totalling GBP0.4m.
Capital expenditure at GBP2.8m (2020: GBP4.8m) was lower due to
COVID-19 related cash conservation measures.
Acquisition expenditure of GBP9.2m in the prior period mainly
relates to the acquisition of the House of Plumbing.
The Group ended the year with net cash of GBP10.5m (2020: net
debt of GBP36.4m) on a pre-IFRS 16 basis after a net cash inflow of
GBP46.9m. Net debt inclusive of IFRS 16 lease liabilities was
GBP13.7m (2020: GBP61.5m).
Funding and Liquidity
The Group has committed banking facilities of GBP120m (plus a
GBP30m accordion) with a maturity date of the facility of November
2022.
As a result of the impact of the COVID-19 pandemic in the first
quarter, the Group agreed with its banking group a number of
covenant waivers at September 2020 and March 2021 together with a
new replacement Maximum Net Debt covenant of GBP95m, tested
quarterly until June 2021. The focus on cost alignment and cash
generation across the Group alongside the strong trading recovery
in the second half of the year has ensured that these covenant
waivers will not be required. The Group's improved liquidity
position was achieved without the need to raise funds from any
equity raises or accessing Coronavirus Business Interruption
Loans.
Principal Risks and Uncertainties
Risk management is a priority for the Group to help sustain the
success of the business in the future. There is a range of
potential risks and uncertainties which could have a material
impact on the Group's performance. The Board is responsible for the
Group's risk management and determining the Group's risk appetite.
Our risk management framework identifies the principal risks and
uncertainties that we consider may threaten the Group's business
model, future performance, solvency or liquidity.
The Board has carried out a robust assessment of the principal
risks and taken them into consideration when assessing the
long-term viability of the Company. The principal risks are listed
below and does not comprise all the risks that the Group may face,
and they are not listed in any order of priority.
-- Strategic risks, include the risks associated with the
Coronavirus (COVID-19) pandemic, future acquisitions, and the
Environmental, Social and Governance (ESG) agenda.
-- People risks, include the risks associated with staff retention and recruitment.
-- Commercial risks, include risks associated with market
conditions, the loss of key customers and competition.
-- Operational risks include the risks associated with the
reliance on production facilities, the loss of a key supplier and
cyber security.
-- Financial Risks, include the risks associated with
maintaining a suitable level of funding and liquidity and those
associated with managing the defined benefit pension scheme.
Further details on the principal risks including detailed
descriptions and mitigating actions are presented in the Annual
Report and Accounts.
Responsibility Statement
Each of the directors, whose names and functions are listed
below, confirms that, to the best of their knowledge:
-- The consolidated financial statements, prepared in accordance
with the applicable United Kingdom law and in conformity with IFRS,
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group and the undertakings included in the consolidation taken as a
whole; and
-- The business review includes a fair review of the development
and performance of the business and the position of the Group and
the undertakings included in the consolidation taken as a whole;
and
-- There have been no significant individual related party transactions during the year.
Directors: David McKeith (Chair), Nick Kelsall (Chief Executive
Officer), Shaun Smith (Chief Financial Officer), and Alison Littley
(Non-Executive Director).
Nick Kelsall
Chief Executive Officer
Shaun Smith
Chief Financial Officer
Consolidated income statement
Year ended 31 March 2021
2021 2020
Notes GBPm GBPm
-------------------------------------------------- ----- ----- -----
Continuing operations
Revenue 2 324.2 342.0
-------------------------------------------------- ----- ----- -----
Underlying operating profit 33.8 32.3
IAS 19R administrative expenses (1.4) (1.5)
Acquisition related costs 3 (3.7) (4.0)
Exceptional operating items 3 (3.8) (9.0)
-------------------------------------------------- ----- ----- -----
Operating profit 24.9 17.8
Finance costs 4 (5.4) (3.7)
Finance income 4 - 1.7
IAS 19R finance cost (1.0) (0.8)
-------------------------------------------------- ----- ----- -----
Profit before taxation 18.5 15.0
Taxation (3.5) (4.1)
-------------------------------------------------- ----- ----- -----
Profit for the year from continuing operations 15.0 10.9
-------------------------------------------------- ----- ----- -----
Earnings per share attributable to equity holders
of the Company
Basic earnings per share:
From profit for the year 6 18.6p 13.6p
-------------------------------------------------- ----- ----- -----
Diluted earnings per share:
From profit for the year 6 18.6p 13.5p
-------------------------------------------------- ----- ----- -----
Weighted average number of shares for basic
earnings per share (millions) 80.6 80.3
Alternative performance measures
-------------------------------------------------- ----- ----- -----
Underlying profit before taxation (GBPm) 5 30.6 28.8
Underlying earnings (GBPm) 5 25.1 22.8
Basic underlying earnings per share 6 31.2p 28.4p
Diluted underlying earnings per share 6 31.1p 28.2p
-------------------------------------------------- ----- ----- -----
Consolidated statement of comprehensive income
Year ended 31 March 2021
2021 2020
GBP m GBP m
--------------------------------------------------- ------ ------
Profit for the year 15.0 10.9
---------------------------------------------------- ------ ------
Other comprehensive income and expense:
Items that will not subsequently be reclassified
to the Income Statement
Actuarial gains/(losses) on retirement benefit
obligations 24.1 (14.8)
Items that may be subsequently reclassified to
the Income Statement
Cash flow hedges - fair value loss in year net
of taxation (1.5) -
Foreign currency translation of foreign operations 5.3 (9.2)
---------------------------------------------------- ------ ------
Other comprehensive income/(loss) for the year 27.9 (24.0)
---------------------------------------------------- ------ ------
Total comprehensive income/(loss) for the year 42.9 (13.1)
---------------------------------------------------- ------ ------
Items in the statement are disclosed net of tax.
Consolidated balance sheet
At 31 March 2021
2021 2020
GBP m GBP m
-------------------------------------- ------- -------
Non-current assets
Goodwill 60.8 60.1
Intangible assets 32.8 36.4
Property, plant and equipment 28.0 29.0
Right of use assets 19.6 20.6
Deferred tax assets - 4.7
--------------------------------------- ------- -------
141.2 150.8
-------------------------------------- ------- -------
Current assets
Inventories 78.1 78.9
Trade and other receivables 64.6 60.5
Derivative financial instruments - 2.0
Cash and cash equivalents 28.3 47.3
--------------------------------------- ------- -------
171.0 188.7
-------------------------------------- ------- -------
Current liabilities
Trade and other payables (95.4) (72.9)
Lease liabilities (5.4) (5.2)
Current tax liabilities (1.0) (1.0)
Derivative financial instruments (2.3) -
Financial liabilities - borrowings - (0.1)
--------------------------------------- ------- -------
(104.1) (79.2)
-------------------------------------- ------- -------
Net current assets 66.9 109.5
--------------------------------------- ------- -------
Total assets less current liabilities 208.1 260.3
--------------------------------------- ------- -------
Non-current liabilities
Financial liabilities - borrowings (17.8) (83.6)
Pension scheme liability (18.3) (48.9)
Lease liabilities (18.8) (19.9)
Deferred tax liabilities (0.5) -
Other non-current liabilities (0.3) (0.3)
Provisions (4.0) (3.2)
--------------------------------------- ------- -------
(59.7) (155.9)
-------------------------------------- ------- -------
Net assets 148.4 104.4
--------------------------------------- ------- -------
Financed by:
Share capital 8.1 8.1
Share premium 30.2 29.9
Retained earnings and other reserves 110.1 66.4
Total equity 148.4 104.4
--------------------------------------- ------- -------
Consolidated cash flow statement
Year ended 31 March 2021
2021 2020
Notes GBP m GBP m
------------------------------------------------------- ----- ------ ------
Cash generated from operations 7 60.0 34.8
Income taxes paid (3.5) (5.3)
Interest paid (3.2) (3.5)
------------------------------------------------------- ----- ------ ------
Net cash generated from operating activities 53.3 26.0
------------------------------------------------------- ----- ------ ------
Cash flows from investing activities
Purchase of property, plant and equipment and
intangible assets (2.8) (4.8)
Acquisition of subsidiary undertakings (including
payment of deferred consideration) net of cash
acquired - (9.2)
------------------------------------------------------- ----- ------ ------
Net cash used in investing activities (2.8) (14.0)
------------------------------------------------------- ----- ------ ------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 0.3 0.1
Principal element of lease payments (4.3) (3.8)
Purchase of treasury shares - (0.9)
Repayment of borrowings (66.0) -
Drawdown of borrowings - 25.0
Dividends paid to the Company's shareholders - (7.0)
------------------------------------------------------- ----- ------ ------
Net cash (used in)/generated from financing activities (70.0) 13.4
------------------------------------------------------- ----- ------ ------
Net (decrease)/increase in cash at bank and in
hand and bank overdrafts (19.5) 25.4
Cash at bank and in hand and bank overdrafts
at the beginning of the year 47.2 23.4
Exchange movements on cash and bank overdrafts 0.6 (1.6)
------------------------------------------------------- ----- ------ ------
Cash at bank and in hand and bank overdrafts
at the end of the year 28.3 47.2
------------------------------------------------------- ----- ------ ------
Consolidated statement of changes in equity
Year ended 31 March 2021
Ordinary
share Share Treasury Hedging Translation Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- -------- -------- -------- ----------- --------- -------
At 1 April 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 for the year - - - - (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
Comprehensive income:
Profit for the year - - - - - 15.0 15.0
Other comprehensive
(expense)/income:
Actuarial gain on
retirement benefit
obligations - - - - - 24.1 24.1
Fair value loss on
cashflow hedges - - - (1.5) - - (1.5)
Foreign currency translation
adjustments - - - - 5.3 - 5.3
----------------------------- -------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
income for the year - - - (1.5) 5.3 24.1 27.9
Transactions with
owners:
Shares issued - 0.3 - - - - 0.3
Dividends paid - - - - - - -
Settlement of share
option schemes - - 0.3 - - (0.5) (0.2)
Value of employee
services - - - - - 1.0 1.0
----------------------------- -------- -------- -------- -------- ----------- --------- -------
At 31 March 2021 8.1 30.2 (0.1) (1.5) (16.4) 128.1 148.4
----------------------------- -------- -------- -------- -------- ----------- --------- -------
Notes to the preliminary statement
Year ended 31 March 2021
1. Basis of preparation
The principal activities of Norcros plc ("the Company") and its
subsidiaries (together "the Group") are the design, manufacture and
distribution of a range of high quality and innovative bathroom and
kitchen products mainly in the UK and South Africa. The Company is
a public limited company which is listed on the London Stock
Exchange market of listed securities and is incorporated and
domiciled in the UK. The address of its registered office is
Ladyfield House, Station Road, Wilmslow, SK9 1BU.
The financial information presented in this preliminary
announcement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 31 March 2021. The
financial information set out above does not constitute the
Company's statutory financial statements for the periods ended 31
March 2021 or 31 March 2020 but is derived from those financial
statements. Statutory financial statements for 2021 will be
delivered following the Company's annual general meeting. The
auditors have reported on those financial statements; their report
was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The Group's results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
Going concern
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the Group's business
activities and the principal risks and uncertainties in the context
of the current operating environment.
A going concern financial assessment was developed on a
bottom-up basis by taking the output of the annual budgeting
process built up by individual businesses and then subjected to
review and challenge by the board. The financial model was then
stress tested by modelling an extreme but plausible scenario, one
of further national lockdowns as a result of a resurgent COVID-19
pandemic. This has been based on the actual impact of the COVID-19
pandemic on the Group, which at its peak saw a revenue reduction of
25% on the prior year over a 6 month period. The scenario also
incorporates management actions the Group has at its disposal
including a number of cash conservation and cost reduction measures
including capital expenditure reductions, dividend decreases and
restructuring activities.
The Group continues to exhibit sufficient and prudent levels of
liquidity and headroom against our facilities and key banking
financial covenants during the 12-month period under assessment
with net cash of GBP10.5m as at 31 March 2021. Reverse stress
testing has also been applied to the financial model, which
represents a further decline in sales compared with the reasonable
worst case. Such a scenario, and the sequence of events which could
lead to it, is considered to be unplausible and remote.
As a result of this detailed assessment, the Board has concluded
that the Company is able to meet its obligations when they fall due
for a period of at least 12 months from the date of this report.
For this reason, the Company continues to adopt the going concern
basis for preparing the Group financial statements. In forming this
view, the Board has also concluded that no material uncertainty
exists in its use of the going concern basis of preparation.
2. Segmental reporting
Continuing operations - year ended 31 March 2021
South
UK Africa Group
GBP m GBP m GBP m
----------------------------------------------- ------- ------- -------
Revenue 220.2 104.0 324.2
----------------------------------------------- ------- ------- -------
Underlying operating profit 26.9 6.9 33.8
IAS 19R administrative expenses (1.4) - (1.4)
Acquisition related costs (3.5) (0.2) (3.7)
Exceptional operating items (3.6) (0.2) (3.8)
----------------------------------------------- ------- ------- -------
Operating profit 18.4 6.5 24.9
----------------------------------------------- ------- ------- -------
Finance costs (net) (6.4)
----------------------------------------------- ------- ------- -------
Profit before taxation 18.5
Taxation (3.5)
----------------------------------------------- ------- ------- -------
Profit for the year from continuing operations 15.0
----------------------------------------------- ------- ------- -------
Net cash 10.5
----------------------------------------------- ------- ------- -------
Segmental assets 221.4 90.8 312.2
Segmental liabilities (125.6) (38.2) (163.8)
Additions to property, plant and equipment 1.6 0.9 2.5
Depreciation and amortisation 8.5 4.6 13.1
----------------------------------------------- ------- ------- -------
Continuing operations - year ended 31 March 2020
South
UK Africa Group
GBP m GBP m GBP m
----------------------------------------------- ------- ------- -------
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 (4.5) 0.5 (4.0)
Exceptional operating items (9.0) - (9.0)
----------------------------------------------- ------- ------- -------
Operating profit 9.4 8.4 17.8
----------------------------------------------- ------- ------- -------
Finance costs (net) (2.8)
----------------------------------------------- ------- ------- -------
Profit before taxation 15.0
Taxation (4.1)
----------------------------------------------- ------- ------- -------
Profit for the year from continuing operations 10.9
----------------------------------------------- ------- ------- -------
Net (debt) (36.4)
----------------------------------------------- ------- ------- -------
Segmental assets 270.8 68.7 339.5
Segmental liabilities (209.4) (25.7) (235.1)
Additions to property, plant and equipment 2.7 1.3 4.0
Depreciation and amortisation 10.2 4.8 15.0
----------------------------------------------- ------- ------- -------
The split of revenue by geographical destination of the customer
is below:
2021 2020
GBPm GBPm
-------------- ----- -----
UK 189.4 197.7
Africa 105.8 118.9
Rest of World 29.0 25.4
-------------- ----- -----
324.2 342.0
-------------- ----- -----
No one customer had revenue over 10% of total Group revenue.
3. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below:
2021 2020
Acquisition related costs GBP m GBP m
------------------------------------------------------ ------ ------
Deferred remuneration(1) - 0.6
Intangible asset amortisation(2) 3.7 3.7
Release of provision for contingent consideration (3) - (1.1)
Advisory fees(4) - 0.8
------------------------------------------------------ ------ ------
3.7 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 over
the period of the related agreement.
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 on 31 March 2020
with a subsequent release of the provision.
4 Professional advisory fees incurred in connection with the
Group's business combination activities.
2021 2020
Exceptional operating items GBP m GBP m
-------------------------------- ------ ------
COVID-19 related restructuring1 3.8 -
COVID-19 related impairment2 - 9.0
3.8 9.0
-------------------------------- ------ ------
1. Exceptional costs of GBP3.8m were incurred in the period in
relation to COVID-19 related restructuring programmes across the
Group as a result of the impact of COVID-19 on the economies we
trade in. The costs consist of GBP2.3m cash costs and GBP1.5m
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.
4. Finance costs and income
2021 2020
GBP m GBP m
----------------------------------------------------------- ------ ------
Interest payable on bank borrowings (1.5) (1.6)
Interest on lease liabilities (1.7) (1.9)
Movement on fair value of derivative financial instruments (2.0) -
Amortisation of costs of raising debt finance (0.2) (0.2)
Finance costs (5.4) (3.7)
Movement on fair value of derivative financial instruments - 1.7
----------------------------------------------------------- ------ ------
Finance income - 1.7
----------------------------------------------------------- ------ ------
Net finance (costs) (5.4) (2.0)
----------------------------------------------------------- ------ ------
5. Alternative performance measures
The Group makes use of a number of alternative performance
measures to assess business performance and provide additional
useful information to shareholders. Such alternative performance
measures should not be viewed as a replacement of, or superior to,
those defined by Generally Accepted Accounting Principles (GAAP).
Definitions of alternative performance measures used by the Group
and, where relevant, reconciliations from GAAP-defined reporting
measures to the Group's alternative performance measures are
provided below.
The alternative performance measures used by the Group are:
Measure Definition
---------------------------- ------------------------------------------------------
Underlying operating profit Operating profit before IAS 19R administrative
expenses, acquisition related costs and exceptional
operating items
---------------------------- ------------------------------------------------------
Underlying profit before Profit before taxation before IAS 19R administrative
taxation expenses, acquisition related costs, exceptional
operating items, amortisation of costs of
raising finance, net movement on fair value
of derivative financial instruments, discounting
of property lease provisions and finance costs
relating to pension schemes
Underlying taxation Taxation on underlying profit before tax
---------------------------- ------------------------------------------------------
Underlying earnings Underlying profit before tax less underlying
taxation
---------------------------- ------------------------------------------------------
Underlying capital employed Capital employed on a pre-IFRS 16 basis adjusted
for business combinations where relevant and
the average impact of exchange rate movements.
---------------------------- ------------------------------------------------------
Underlying operating margin Underlying operating profit expressed as a
percentage of revenue
---------------------------- ------------------------------------------------------
Underlying return on capital Underlying operating profit on a pre-IFRS
employed (ROCE) 16 basis expressed as a percentage of the
average of opening and closing underlying
capital employed.
---------------------------- ------------------------------------------------------
Basic underlying earnings Underlying earnings divided by the weighted
per share average number of shares for basic earnings
per share
---------------------------- ------------------------------------------------------
Diluted underlying earnings Underlying earnings divided by the weighted
per share 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 Cash generated from continuing operations
flow 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.
---------------------------- ------------------------------------------------------
Pro-forma underlying EBITDA An annualised underlying EBITDA figure used
for the purpose of calculating banking covenant
ratios
---------------------------- ------------------------------------------------------
Pro-forma leverage Net debt expressed as a ratio of pro-forma
underlying EBITDA
---------------------------- ------------------------------------------------------
Underlying profit and underlying earnings per share measures
provide shareholders with additional useful information on the
underlying performance of the Group. This is because these measures
are those principally used by the Directors to assess the
performance of the Group and are used as the basis for calculating
the level of the annual bonus and long-term incentives earned by
the Directors. Underlying ROCE is one of the Group's strategic key
performance indicators and is therefore provided so that
shareholders can assess the Group's performance in relation to its
strategic targets. Underlying EBITDA and underlying operating cash
flow are also used internally by the Directors in order to assess
the Group's cash generation. The term 'underlying' is not
recognised under IFRS and consequently the Group's definition of
underlying may differ from that used by other companies.
Reconciliations from GAAP-defined reporting measures to the
Group's alternative performance measures
Consolidated Income Statement
(a) Underlying profit before taxation and underlying
earnings
2021 2020
GBP m GBP m
----------------------------------------------------- ------ ------
Profit before taxation from continuing operations 18.5 15.0
Adjusted for:
- IAS 19R administrative expenses 1.4 1.5
- acquisition related costs (see note 3) 3.7 4.0
- exceptional operating items (see note 3) 3.8 9.0
- amortisation of costs of raising finance 0.2 0.2
- net movement on fair value of derivative financial
instruments 2.0 (1.7)
- IAS 19R finance cost 1.0 0.8
------------------------------------------------------ ------ ------
Underlying profit before taxation 30.6 28.8
------------------------------------------------------ ------ ------
Taxation attributable to underlying profit before
taxation (5.5) (6.0)
------------------------------------------------------ ------ ------
Underlying earnings 25.1 22.8
------------------------------------------------------ ------ ------
(b) Underlying EBITDA
2021 2020
GBP m GBP m
----------------------------------------------- ------ ------
Operating profit from continuing operations 24.9 17.8
Adjusted for:
- depreciation and amortisation (owned assets) 5.4 6.8
- depreciation of leased assets 4.0 4.5
- lease costs (5.3) (5.0)
- IAS 19R administrative expenses 1.4 1.5
- acquisition related costs 3.7 4.0
- exceptional operating items (see note 3) 3.8 9.0
------------------------------------------------ ------ ------
Underlying EBITDA 37.9 38.6
------------------------------------------------ ------ ------
Consolidated Cash Flow Statement
(a) Underlying operating cash flow
2021 2020
GBP m GBP m
---------------------------------------------------- ------ ------
Cash generated from operations (see note 7) 60.0 34.8
Adjusted for:
- cash flows from exceptional items and acquisition
related costs (see note 7) 2.5 0.3
- pension fund deficit recovery contributions (see
note 7) 3.3 3.3
Underlying operating cash flow 65.8 38.4
----------------------------------------------------- ------ ------
Consolidated Balance Sheet
(a) Underlying capital employed and underlying return on capital
employed
2021 2020
GBP m GBP m
--------------------------------------------------- ------ ------
Net assets 148.4 104.4
Adjusted for:
- pension scheme liability (net of associated tax) 14.8 39.7
- right of use assets (IFRS 16) (19.6) (20.6)
- lease liabilities (IFRS 16) 24.2 25.1
- Onerous lease provision (IFRS 16) (0.8) (1.4)
- cash and cash equivalents (28.3) (47.3)
- financial liabilities - borrowings 17.8 83.7
---------------------------------------------------- ------ ------
156.5 183.6
Foreign exchange adjustment 0.8 9.6
Adjustment for acquisitions - 7.2
---------------------------------------------------- ------ ------
Underlying capital employed 157.3 200.4
---------------------------------------------------- ------ ------
Average underlying capital employed 178.9 193.8
---------------------------------------------------- ------ ------
Underlying operating profit (pre-IFRS 16) 32.5 31.8
---------------------------------------------------- ------ ------
Underlying return on capital employed 18.2% 16.4%
---------------------------------------------------- ------ ------
6. Earnings per share
Basic EPS is calculated by dividing the profit attributable to
shareholders by the weighted average number of ordinary shares in
issue during the year, excluding those held in the Norcros Employee
Benefit Trust.
For diluted EPS, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potential dilutive
ordinary shares. At 31 March 2021 the potential dilutive ordinary
shares amounted to 201,781 (2020: 668,944) as calculated in
accordance with IAS 33.
The calculation of EPS is based on the following profits and
numbers of shares:
2021 2020
GBP m GBP m
-------------------- ------ ------
Profit for the year 15.0 10.9
--------------------- ------ ------
2021 2020
Number Number
------------------------------------------------------- ---------- ----------
Weighted average number of shares for basic earnings
per share 80,575,242 80,300,209
Share options 201,781 668,944
-------------------------------------------------------- ---------- ----------
Weighted average number of shares for diluted earnings
per share 80,777,023 80,969,153
-------------------------------------------------------- ---------- ----------
2021 2020
---------------------------- ----- ------
Basic earnings per share:
From profit for the year 18.6p 13.6p
----------------------------- ----- ------
Diluted earnings per share:
From profit for the year 18.6p 13.5p
----------------------------- ----- ------
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been
provided which reflects underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
2021 2020
GBP m GBP m
--------------------------------- ------ ------
Underlying earnings (see note 5) 25.1 22.8
---------------------------------- ------ ------
2021 2020
-------------------------------------- ----- ------
Basic underlying earnings per share 31.2p 28.4p
Diluted underlying earnings per share 31.1p 28.2p
--------------------------------------- ----- ------
7. Consolidated cash flow statement
(a) Cash generated from operations
The analysis of cash generated from operations is given
below:
Continuing operations
2021 2020
GBP m GBP m
----------------------------------------------------- ------ ------
Profit before taxation 18.5 15.0
Adjustments for:
- IAS 19R administrative expenses included in
the Income Statement 1.4 1.5
- acquisition related costs included in the Income
Statement 3.7 4.0
- exceptional items included in the Income Statement 3.8 9.0
- finance costs included in the Income Statement 5.4 2.0
- IAS 19R finance cost included in the Income
Statement 1.0 0.8
- cash flows from exceptional items (2.5) (0.3)
- settlement of share options (0.2) (0.5)
- depreciation of property, plant and equipment 5.2 6.6
- underlying amortisation 0.2 0.2
- depreciation of right of use asset 4.0 4.5
- pension fund deficit recovery contributions (3.3) (3.3)
- share-based payments 1.0 0.1
------------------------------------------------------ ------ ------
Operating cash flows before movement in working
capital 38.2 39.6
Changes in working capital:
- decrease/(increase) in inventories 3.8 (2.4)
- (increase)/decrease in trade and other receivables (5.0) 3.6
- increase/(decrease) in trade and other payables 23.0 (6.0)
------------------------------------------------------ ------ ------
Cash generated from operations 60.0 34.8
------------------------------------------------------ ------ ------
(b) Analysis of underlying net cash/(debt)
Non-current Underlying
Cash borrowings net cash/(debt)
GBP m GBP m GBP m
------------------------- ------ ----------- ----------------
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)
Cash flow (19.5) 66.0 46.5
Other non-cash movements - (0.2) (0.2)
Exchange movement 0.6 - 0.6
------------------------- ------ ----------- ----------------
At 31 March 2021 28.3 (17.8) 10.5
------------------------- ------ ----------- ----------------
Other non-cash movements relate to the movement in the costs of
raising debt finance in the year.
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END
FR FLFVDRVIAIIL
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June 10, 2021 02:00 ET (06:00 GMT)
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