TIDMNXR
RNS Number : 7706C
Norcros PLC
15 June 2023
15 June 2023
Norcros plc
Results for the year ended 31 March 2023
Record revenue and underlying operating profit and a strong
financial position
Norcros, a market leading supplier of high quality and
innovative bathroom and kitchen products, today announces its
results for the year ended 31 March 2023.
Financial Summary
% change
2023 2022 2023 v 2022
Revenue GBP441.0m GBP396.3m +11.3%
----------- ---------- -------------
Revenue constant currency LFL (1) +1.5%
----------- ---------- -------------
Underlying operating profit(2) GBP47.3m GBP41.8m +13.2%
----------- ---------- -------------
Underlying profit before taxation(2) GBP41.8m GBP39.3m +6.4%
----------- ---------- -------------
Diluted underlying EPS(2) 37.4p 38.2p -2.1%
----------- ---------- -------------
Underlying operating cash flow(2) GBP44.8m GBP28.6m +56.6%
----------- ---------- -------------
Operating profit GBP27.5m GBP36.2m -24.0%
----------- ---------- -------------
Underlying net (debt)/cash(2) (GBP49.9m) GBP8.6m
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Dividend per share 10.2p 10.0p +2.0%
----------- ---------- -------------
1 LFL - Like for like after adjusting for Grant Westfield,
acquired 31 May 2022
2 Definitions and reconciliations of alternative performance
measures are provided in note 5
Highlights
-- Resilience of the Group's business model in challenging market conditions
-- Strong execution of strategy
-- Record full year revenue of GBP441.0m (2022: GBP396.3m),
11.3% higher than prior year on a reported basis and 1.5% higher on
a constant currency like for like basis after adjusting for Grant
Westfield
-- Record underlying operating profit(2) of GBP47.3m, 13.2%
higher than prior year (2022: GBP41.8m)
-- Underlying net debt(2) of GBP49.9m (2022: net cash of GBP8.6m)
-- Underlying ROCE(2) of 18.5% (2022: 23.9%)
-- Diluted underlying EPS(2) of 37.4p (2022: 38.2p)
-- Progressive dividend at 10.2p for the year (2022: 10.0p)
-- The acquisition of Grant Westfield completed in May 2022,
successfully integrated and performing strongly
Current trading
-- Group revenue in the two months to the end of May 2023 was
1.3% ahead of the strong prior year comparator on a reported basis
and 3.6% below on a constant currency like for like(3) basis (UK
+1.3%, SA -12.7%) with South Africa impacted by electricity supply
interruptions, which are being actively managed. Market conditions
are likely to remain uncertain. However, the Board is confident
that our market leading brands and strong execution of strategy
will continue to deliver outperformance, leading to further
progress and market share gains in line with its expectations in
the year ahead.
3 Adjusted for Grant Westfield and Norcros Adhesives
David McKeith, Chair, commented:
"I am pleased to report another record performance for the Group
with results at the top end of market expectations. Norcros has
continued to demonstrate resilience and growth in market share
despite challenging conditions. The Group's business model and
strategy have proven to be highly effective through a sustained
period of macroeconomic uncertainty."
There will be a presentation today at 9.00am for analysts at the
offices of Hudson Sandler, 25 Charterhouse Square, London, EC1M
6AE. The supporting slides will be available in the investor
section of the Norcros website at www.norcros.com later in the
day.
Enquiries
Norcros plc Tel: 01625 547700
Thomas Willcocks, Chief Executive
Officer
James Eyre, Chief Financial Officer
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Charlie Jack
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:
o Triton - Market leader in the manufacture and marketing of
showers in the UK
o Merlyn - The UK and Ireland's No.1 supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors
o Multipanel - Grant Westfield is a leading manufacturer of
high-end waterproof bathroom wall panels
o Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
o Croydex - A market leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and
accessories
o Abode - A leading niche designer and distributor of high
quality kitchen taps, bathroom taps, and kitchen sinks
o Johnson Tiles - The leading manufacturer and supplier of
ceramic tiles in the UK
-- Based in South Africa, Norcros operates under four brands:
o Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitaryware,
showers and adhesives
o Johnson Tiles South Africa - Manufacturer of ceramic and
porcelain tiles
o TAL - The leading manufacturer of ceramic and building
adhesives
o House of Plumbing - Market leading supplier of specialist
plumbing materials
-- Norcros is headquartered in Wilmslow, Cheshire and employs
around 2,400 people. The Company is listed on the London Stock
Exchange. For further information please visit the Company website:
www.norcros.com
Chair's Statement
Overview
I am pleased to report another record performance for the Group
with results at the top end of market expectations. Norcros has
continued to demonstrate resilience and growth in our markets
despite challenging conditions. The Group's business model and
strategy have proven to be highly effective through a sustained
period of macroeconomic uncertainty.
Group revenue for the year was GBP441.0m (2022: GBP396.3m),
11.3% higher than the prior year on a reported basis and 1.5%
higher on a constant currency like for like basis.
Underlying operating profit was at a record level of GBP47.3m
(2022: GBP41.8m), 13.2% ahead of the prior year, reflecting the
contribution from Grant Westfield and further market share
gains.
The Group finished the year with net debt of GBP49.9m (2022: net
cash of GBP8.6m), the year on year movement reflecting the
successful acquisition of Grant Westfield, partially offset by
strong cash generation in the period.
Strategy
Notwithstanding the macro challenges in recent years of Brexit,
COVID-19, the war in Ukraine and the UK "mini budget" in September
2022, we have made strong strategic progress, and our focused
growth strategy continues to be valid and relevant. Our performance
during the period demonstrates our focus upon sustaining a pre-tax
return on underlying capital employed of 15% over the economic
cycle and this continues to be key in how we evaluate opportunities
and deploy capital . We made the decision to close our UK Adhesives
business during the year, and whilst this was a difficult decision,
it will improve the Group's financial performance going forward.
Our business model, strategy and core capabilities including
sustainable product design and innovation, well developed sourcing
partnerships, and market leading customer service have again
delivered excellent results. The business will continue to drive
market share growth in our existing businesses while taking
advantage of further acquisition opportunities in what remain
fragmented markets.
Dividend
For the year ended 31 March 2023, the Board is recommending a
final dividend of 6.8p (2022: 6.9p) per share. When combined with
the interim dividend of 3.4p (2022: 3.1p) per share, which was paid
on 10 January 2023, this will make a total dividend for the year of
10.2p (2022: 10.0p) per share, a 2.0% increase on the previous year
whilst maintaining a prudent level of dividend cover.
Environmental, social and governance (ESG)
The Board is committed to embedding sustainability within our
business strategy. We are proud of our history of environmental and
social leadership, our achievements in setting industry leading
standards in our products, and the support we provide to the
communities in which we live and work.
I am pleased we have made significant progress this year. We
have extensively updated our ESG strategy around eight priority ESG
themes which are commented on in detail in the Annual Report and
Accounts, finalised a 2040 Net Zero Transition Plan and made
enhancements to our emissions and energy data collection process.
We are pleased to have further developed our report aligned to the
recommendations of the Task Force on Climate-related Financial
Disclosures ("TCFD"), which outlines our approach to managing
climate-related risks and opportunities across the Group.
Pension scheme
The net position relating to our UK defined benefit pension
scheme (as calculated under IAS 19R) remains in a surplus of
GBP14.9m at 31 March 2023 (2022: GBP19.6m). Deficit repair
contributions were GBP3.8m in the year.
The pension scheme is mature, with an average member age of 78,
and experienced a reduction in member numbers in the year from
6,002 to 5,641. We remain confident that our pension obligations
continue to be appropriately funded and well managed. The Group
recognises that the pension scheme is a key stakeholder, and the
Group and the Trustee continue to work constructively together.
Board changes and senior management appointments
In January 2023, I was appointed Acting Board Chair until the
Group appoints a new Non-executive Director as Board Chair and we
are pleased to confirm that, as announced, Steve Good will be
appointed a Director from 1 July 2023 and will become Board Chair
Designate from that date. Steve Good will be seeking election at
the AGM and if elected he will assume the Board Chair role at the
conclusion of the AGM. I will not be seeking re-election at the
AGM.
Thomas Willcocks was appointed to the Board as Chief Executive
Officer with effect from 1 April 2023 following Nick Kelsall's
retirement. Thomas joined Norcros in 2006 and was promoted to
Managing Director of Norcros South Africa in 2009 and has overseen
the sustained and profitable growth of our South African business.
On 1 August 2021, Thomas became our Group Business Director - UK
before joining the Board. I have worked closely with both Nick and
Thomas as we have developed and grown the Norcros business, and it
has been a pleasure to be able to stand back and recognise the
success achieved. I would like to thank Nick for his focused and
determined leadership over this time and wish him and his family
the very best in his retirement. Nick has handed over to an
experienced team led by Thomas and James Eyre (CFO), which is
testament to his development of the Norcros business and team
throughout his tenure.
Stefan Allanson was appointed to the Board on 1 January 2023 as
a Non-Executive Director and Chair (Designate) of the Audit and
Risk Committee. Stefan is the Chief Financial Officer of MJ Gleeson
plc and has held senior finance roles at Keepmoat Ltd, Tianhe
Chemicals Ltd, The Vita Group Ltd and Honda Motor Company.
The Board composition can be found in our Annual Report and
Accounts.
The Group executive committee comprises our CEO (Thomas
Willcocks), CFO (James Eyre) and Group Counsel and Company
Secretary (Richard Collins). The search for a replacement Group
Business Director - UK, who will also join the executive committee,
is well advanced.
Governance
As Acting Board Chair, one of my primary responsibilities is
ensuring that the Group continues to operate to the highest
standards in all governance and risk management aspects. 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
always maintained. Transparency is central to this objective, and
you will find more detail about our approach and further progress
over the last year in the Corporate Governance section in our
Annual Report and Accounts.
People
Our employees are our most valuable asset. Given our
entrepreneurial, design and service led business model, the Group
remains committed to ensuring a safe and positive working
environment within an open, transparent and entrepreneurial culture
and de-centralised operating model. On behalf of the Board, I would
like to specifically thank the teams in each of our businesses who
have helped to deliver on the Group's strategic objectives over the
last twelve months. Recognising the central part that our people at
all levels play, I am pleased to announce that we have also created
the position of Chief People Officer. The position will help
accelerate the Group and individual businesses' development of our
internal talent and future recruitment. In further developing our
talented team, we remain committed to being the employer of choice
in our markets, including increasing our focus on ensuring that our
businesses attract and retain diverse and inclusive teams.
Current trading
Group revenue in the two months to the end of May 2023 was 1.3%
ahead of the strong prior year comparator on a reported basis and
3.6% below on a constant currency like for like basis (UK +1.3%, SA
-12.7%) with South Africa impacted by electricity supply
interruptions, which are being actively managed.
Summary and outlook
The Group has delivered another record performance despite the
ongoing economic challenges. The Board remains confident that our
highly experienced management teams, leading customer service
propositions and strong financial position, will drive further
market share growth in line with its expectations in the year
ahead.
Chief Executive Officer's Statement
Overview
I was delighted to join the Board from 1 April 2023 and would
like to thank my predecessor, Nick Kelsall, for his outstanding
commitment and leadership over a Norcros career spanning 30 years.
This well managed transition comes at a time when the business is
financially sound and has once again delivered record levels of
revenue and underlying operating profit.
Norcros has continued to build on the progress of recent years.
The performance in the current year reflects the strength of our
leading brands, supply chain infrastructure, stock availability ,
and financial strength.
Group revenue at GBP441.0m (2022: GBP396.3m) increased by 11.3%
on a reported basis and by 1.5% on a constant currency like for
like basis. The strong trading performance in the first half of the
year continued into the second half with further revenue growth in
the UK and a robust full year performance in South Africa.
Group underlying operating profit for the year increased by
13.2% to a record level of GBP47.3m (2022: GBP41.8m) reflecting the
increased revenue in the year and an operating margin slightly
ahead of last year at 10.7% (2022: 10.5%).
UK
Revenue in the UK was GBP295.8m for the year (2022: GBP256.7m),
15.2% higher than the prior year on a reported basis and broadly in
line on a like for like basis. A resilient trade sector in the
period offset softer demand in the retail sector, which was
particularly impacted by customer destocking in the first half of
the year.
All businesses, other than the UK Adhesives division, performed
well in the year with particularly strong performances at Triton
and Merlyn. Our UK businesses continued to capitalise on their
strong market positions and excellent customer service. We have
successfully developed our portfolio in the year. On 31 May 2022,
we completed the acquisition of 100% of the share capital of
Granfit Holdings Limited and its subsidiaries including Grant
Westfield Limited, trading as Multipanel. Grant Westfield is a
quality business with a strong track record of profitability and
cash generation. Since the acquisition, the business has been
successfully integrated and made a strong contribution to the Group
through its complementary range of waterproof bathroom panels. In
addition, we have also taken decisive action at our UK Adhesives
division, announcing the closure of this small but loss making
business. Against a backdrop of lower current and uncertain
short-term demand for our locally produced tiles, we have made the
decision to impair the carrying value of the assets at Johnson
Tiles. Further detail can be found in the Financial overview.
UK underlying operating profit for the year was another record
at GBP37.2m (2022: GBP30.9m) with an improved underlying operating
margin of 12.6% (2022: 12.0%). Underlying operating profit growth
was supported by the contribution from Grant Westfield.
Operating cash flow was higher than the prior year driven by the
increased level of operating profit and higher underlying operating
cash conversion supported by our continued focus on working
capital.
South Africa
Revenue in South Africa increased by 4.7% on prior year on a
constant currency basis, and by 4.0% on a Sterling reported basis,
to GBP145.2m (2022: GBP139.6m). All divisions delivered revenue
growth on the prior year.
This revenue growth was mainly driven by robust demand in the
housebuilding sector and the full year impact of the expansion of
our House of Plumbing branch portfolio. An exceptional performance
over the first half was diluted by heightened levels of
loadshedding (electricity rationing), especially in the fourth
quarter and we continue to manage this in the current year. The
breadth of our revenue channels once again benefitted our
performance.
South African underlying operating profit for the year was
robust at GBP10.1m (2022: GBP10.9m), reflecting our market leading
positions and share growth in a difficult market, particularly in
the second half of the year. Underlying operating margin was 7.0%
(2022: 7.8%). We are accustomed to the higher levels of variability
in this developing market and have a proven experienced team with a
track record in this region.
Operating cash flow was lower than prior year largely as a
result of continued investment into working capital (primarily
inventory) to support our service levels and stock
availability.
Strong financial position
The Group continues to have a strong balance sheet with net debt
of GBP49.9m (2022: net cash of GBP8.6m). The year on year movement
reflects the acquisition of Grant Westfield and planned investment
into working capital in the year of GBP13.3m to further support
business growth and customer service, with a resultant underlying
operating cash inflow of GBP44.8m (2022: GBP28.6m) in the year.
The Group has extended its GBP130m multicurrency revolving
credit facility ("RCF") for a further year. The facility has a
three year and seven month term to October 2026, with a further
year extension available. It also includes the option for an
uncommitted accordion facility of GBP70m. The Group therefore
remains well positioned to progress its growth strategy.
Following the acquisition of Grant Westfield in May 2022,
leverage at the 2023 year end is circa 1.0x EBITDA on a pre-IFRS 16
basis.
Strategy
In April 2018 the business 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. The previous timescale of 2023 was extended to 2025
reflecting the COVID-19 disruption. This growth strategy has
delivered strong organic and acquisition driven growth at above
targeted returns:
-- Group revenue increased by 11.3% to GBP441.0m, supported by
the acquisition of Grant Westfield on 31 May 2022.
-- On a Sterling reported basis, Group revenue derived outside of the UK was 40.6%.
-- Group underlying return on capital employed was 18.5% on a pre-IFRS 16 basis.
The Group's strong performance and the decisive response to the
inflationary and supply chain challenges and market conditions
continue to demonstrate the resilience of our business model and
the effectiveness of our strategy.
Norcros has a strong and scalable position in the bathroom and
kitchen product markets. The markets in our existing and adjacent
geographies remain 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 further acquisitions or organic growth opportunities as they
arise. Norcros' proven record of growing existing and carefully
selected acquired businesses remains a core business strength.
Sustained investment in our in-house new product development
programmes 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)
remained high at 24% (2022: 29%) but short of our demanding target
of 30% mainly due to the COVID-19 related disruption to supply
chains. Our vitality rates are nonetheless market leading and we
continue to invest in our pipeline as new product launches return
to pre-COVID-19 levels.
ESG
Sustainability is a key priority for the Group and we continue
to work closely with our businesses to drive progress in line with
our previously mentioned updated ESG strategy.
Further progress was made in the year as we continue the journey
to net zero. For the first time, we have set scope 1, 2 and 3
carbon emissions targets. Data collection, measurement and
visibility will continue to be developed internally and with our
partners. Further details of our ESG strategy can be found in our
Annual Report and Accounts.
Our well developed social and governance programs are detailed
in the Annual Report and Accounts, with a notable example being our
SAFE bathrooms initiative in underprivileged South African
schools.
Summary and outlook
Norcros has made excellent progress in our markets despite the
challenging conditions and again delivered record results. Our
Group performance demonstrates the strength of our business model
and the calibre and support of all our employees. Our businesses,
both in the UK and South Africa, continue to make strong progress,
gain market share and benefit from the ongoing development of our
leading brands, supply chain infrastructure and stock availability.
Grant Westfield has been an excellent addition to our portfolio and
has performed well in the year.
Our UK businesses performed well with strong second half growth
year on year. The market leading positions and continuing excellent
service levels, ensured that key retail customers were retained
with new account wins. The trade and specification sector
demonstrated ongoing resilience and continues to represent an
important opportunity for the group, including the recently
acquired Grant Westfield business, going forward.
Our South African business has continued to deliver revenue
growth, notwithstanding the challenging market conditions
experienced in the second half of the year. The business remains in
a strong competitive position to grow market share, particularly in
bathrooms.
The markets in which we operate in the UK and South Africa
remain fragmented and attractive for organic and acquisitive growth
opportunities. Our acquisition in the year of Grant Westfield
demonstrates the Group's ability to capitalise on growth
opportunities and leverage off the existing Group businesses, and
especially our broad and well established distribution
channels.
In summary, we have ended the year strongly, outperforming our
markets and, once again, delivered record levels of revenue and
underlying operating profit. While market conditions remain
uncertain, especially in South Africa, the Board believes that the
Group's proven business model and highly experienced management
teams will continue to deliver market share growth in line with its
expectations in the year to 31 March 2024.
Business performance
2023 2022
GBPm GBPm
-------------------------------- ----- -----
Revenue 441.0 396.3
-------------------------------- ----- -----
Operating profit 27.5 36.2
IAS 19R administrative expenses 1.6 1.7
Acquisition related costs 8.4 4.8
Exceptional operating items 9.8 (0.9)
-------------------------------- ----- -----
Underlying operating profit 47.3 41.8
-------------------------------- ----- -----
2023 2022
GBPm GBPm
-------------------------------------------------- ----- -----
Revenue - UK 295.8 256.7
Revenue - South Africa 145.2 139.6
-------------------------------------------------- ----- -----
Revenue - Group 441.0 396.3
-------------------------------------------------- ----- -----
Underlying operating profit - UK 37.2 30.9
Underlying operating profit - South Africa 10.1 10.9
-------------------------------------------------- ----- -----
Underlying operating profit - Group 47.3 41.8
-------------------------------------------------- ----- -----
Underlying operating profit margin - UK 12.6% 12.0%
Underlying operating profit margin - South Africa 7.0% 7.8%
-------------------------------------------------- ----- -----
Underlying operating profit margin - Group 10.7% 10.5%
-------------------------------------------------- ----- -----
2023 2022
GBPm GBPm
-------------------------------------------------------- ------ ------
Underlying operating profit 47.3 41.8
Depreciation of right of use assets 4.6 4.1
Lease costs (6.4) (5.7)
Depreciation and underlying amortisation (owned assets) 5.0 5.2
-------------------------------------------------------- ------ ------
Underlying EBITDA (pre-IFRS 16) 50.5 45.4
Net working capital movement (13.3) (23.6)
IFRS 2 charge 1.2 1.1
Operating profit impact of IFRS 16 1.8 1.6
Depreciation of right of use assets 4.6 4.1
-------------------------------------------------------- ------ ------
Underlying operating cash flow 44.8 28.6
-------------------------------------------------------- ------ ------
2023 2022
-------------------------------------- ----- -----
Basic underlying earnings per share 38.0p 38.9p
Diluted underlying earnings per share 37.4p 38.2p
-------------------------------------- ----- -----
Business review - UK
In the UK, full year revenue was 15.2% higher than the prior
year on a reported basis at GBP295.8m (2022: GBP256.7m) reflecting
the contribution from Grant Westfield, market share gains and
selling price increases to recover higher input costs.
On a like for like basis, full year revenue was broadly in line
with the strong prior year comparator with growth in the second
half of the year of 3.3%.
Over the year, our UK businesses delivered a strong performance,
benefiting from the diverse customer base and an increased focus on
the trade and specification sector. Compared to the strong prior
year comparator, the retail sector was impacted by softer demand
and some customer destocking in the first half. The market did
improve in the second half of the year and we are well positioned
to continue to grow market share.
The trade sector, where we enjoy market leading positions,
proved resilient with a particularly strong fourth quarter. Sales
to national and independent merchants and housebuilders were
robust. Representing a smaller proportion of our revenue, export
was lower year on year reflecting softer first half demand in our
export markets.
New product development remains a focus at all of our UK
businesses. This core in-house strength is a key driver in our
strategy to grow our brands' long-term leading market
positions.
Strong progress has been made on our ESG strategy with a number
of businesses achieving the Environmental Management Standard ISO
14001 in the year, a key milestone on the path to net zero. We have
also set targets and KPIs to align our businesses to our ESG
strategic priorities. Further detail is included in the ESG section
of our Annual Report and Accounts.
Underlying operating profit for the year grew by GBP6.3m to a
record level of GBP37.2m (2022: GBP30.9m) with an operating margin
of 12.6% (2022: 12.0%). This increase in profitability mainly
reflected the contribution from Grant Westfield and the return to
profitability at Johnson Tiles in the period.
Operating cash conversion was significantly ahead of the prior
year supported by our continued focus on working capital.
Triton
Revenue at Triton, the UK's market leader in showers, was
GBP63.7m (2022: GBP60.1m), 6.0% higher than the prior year
reflecting market share gains in the period driven by our market
leading sustainability programme.
Triton has benefited from strong retail sales over the last
three years by ensuring excellent product availability and
maintaining high customer service levels. Second half retail
revenue was particularly strong after experiencing some destocking
in the first half from larger retail customers. Full year retail
sector revenue was up by 4.6% compared to the prior year.
Trade sector revenue was 11.7% higher than the prior year,
reflecting the strengthening of our team in this market segment,
with growth continuing in contract business and Triton taking share
in the social housing and local authority market. Export revenue
also recovered in the second half albeit full year revenue was 2.5%
behind the prior year reflecting first half customer
destocking.
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 the DuElec (R) range of dual outlet
electric showers and the introduction of new finishes.
Proud to be manufactured in Britain for almost 50 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 its
environmental credentials. Investment in brand and marketing
campaigns continued with the "Every Drop Makes a Difference" theme,
raising awareness about the efficiency and sustainability benefits
of electric showers. The campaign achieved a Special Recognition in
Driving Behaviour Change Award from the Bathroom Manufacturers
Association and was Highly Commended at the HVAC Industry Energy
Savings Awards. Triton's Enrich electric shower also won the
inaugural Screwfix sustainability award. During the year Triton
achieved Carbon Neutral status and continued to work towards its
target to be net carbon zero by the end of 2035.
Triton again delivered an underlying operating profit ahead of
the prior year.
Merlyn
Merlyn, the UK and Ireland's number one supplier of shower
enclosures and trays to the residential, commercial and hospitality
sectors, performed strongly and recorded revenue of GBP57.5m (2022:
GBP58.3m), slightly behind the strong prior year comparator. The
business continued to grow its market share, leveraging its leading
position in the UK through its leading design, quality product
offering, stock availability and exceptional customer service.
UK revenue was in line with the prior year. The retail sector
improved in the second half, driven by new customer wins and
organic growth, with revenue finishing the year broadly in line
with the prior year.
Trade revenue increased by 2.0% with growth across a number of
existing customers, in addition to a number of new contracts
including Vistry and Larkfleet, offset by slightly reduced sales to
national merchants. Merlyn renewed agreements with all of the major
buying groups and national merchants in the year. Exports decreased
by 12.7% in the year reflecting customer destocking in Ireland and
France.
New product development remains an integral component of
Merlyn's growth strategy with the successful launch of the Sleek
modern shower enclosure range. Further investment in Merlyn's
online presence was reflected in the launch of the new Merlyn
website with a new "find your perfect solution" feature.
Recognising the strength of the brand, Merlyn was shortlisted at
the BKU Awards for Shower Brand of the Year after winning the
prestigious award plus Best Sales Representative in 2022. Merlyn
has further developed its environmental credentials during the year
and has now, amongst other initiatives, eliminated the use of
single use plastics with fully recyclable alternatives.
Merlyn recorded underlying operating profit ahead of the prior
year.
Grant Westfield
Grant Westfield, our recently acquired market leading
manufacturer of high end waterproof bathroom wall panels, recorded
revenue for the ten months post acquisition in line with
expectations at GBP39.5m, ahead of the equivalent prior year
period.
The business was successfully integrated in the first half of
the year and has continued to develop, working with other Norcros
businesses on several customer and channel opportunities. This
collaboration has resulted in a new and developing relationship
with Topps Tiles. The majority of Grant Westfield's revenue is
through the trade channel with a small level of export revenue.
Sales through the national merchants such as City Plumbing,
Wolseley Group and Travis Perkins were strong. The online channel
is growing and has performed well.
The Multipanel Tile collection, which was successfully launched
post acquisition, has been well received and has reinforced the
reputation of Grant Westfield for product innovation and quality.
It is the only tile effect panel manufactured in the UK. The
business achieved the Environmental Management standard ISO 14001
in the year.
Grant Westfield delivered an underlying profit performance in
line with expectations.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, recorded revenue of GBP42.3m for the year
(2022: GBP43.9m), 3.6% lower than the strong prior year
comparator.
In the UK, our retail sector revenue was impacted in the period
with revenue 14.7% lower than the prior year, albeit performance
improved significantly in the second half of the year. The trade
sector performed robustly, with revenue up 9.4% on prior year. This
was driven by continuing to work with all existing key customers
along with several contract wins, particularly in the second half
of the year, such as The Cocoa Works, apartments at Silverstone and
with Berkeley Homes. Export revenue was broadly in line with the
prior year. Reduced sales in Ireland were offset by strong sales in
the Middle East in the second half of the year.
Following the successful launch of the Arrondi range which was
created in partnership with Conran and Partners and won a Red Dot
Design award, the business continued to invest in new product
development with further market leading launches in the flush
plate, frames, and cistern markets.
Vado generated an underlying operating profit ahead of prior
year.
Croydex
Croydex, our market leading, innovative designer, manufacturer,
and distributor of high quality bathroom furnishings and
accessories, recorded revenue of GBP25.5m (2022: GBP27.0m) for the
period, 5.6% lower than the strong prior year comparator.
Pleasingly, performance in the second half was ahead of prior year
as a result of operational improvements.
Retail sector revenue in the first half of the year was
significantly impacted by customer destocking and whilst the second
half improved significantly, full year revenue was 22.1% behind the
prior year. E-commerce sales were soft in the first half against a
strong comparator of the prior year but were stronger at the end of
the year including new listings with Dunelm online. The trade
sector continued to perform well with strong sales across the
national and independent merchants. Revenues were 16.3% ahead of
the prior year. Export sales were below prior year by 7.7% largely
as a result of reduced demand from the USA.
Underlying operating profit was marginally behind the prior year
albeit the second half was ahead of the prior year.
Abode
Abode, our leading designer and distributor of high quality hot
water taps, bathroom mixers, kitchen sinks and taps, recorded
revenue of GBP17.7m for the year (2022: GBP18.9m), a 6.3% decrease
on prior year largely reflecting a strong prior year comparator and
the exit from some low margin business in the year.
The business continued to benefit from its strong market
positions with key customers, which were further developed in the
year with the launch of the loyalty scheme "Abode Accumulate". The
business has continued to grow market share over the period and
retail growth has been supported by MasterChef champion Shelina
Permalloo who became a brand ambassador in the year. Her "Cook with
Pronteau" features have increased awareness of the Abode Pronteau
hot water taps helping drive market share gains in this attractive
segment.
Abode celebrated its 20th anniversary in the year and achieved
Carbon Neutral status as a result of its focus on developing
sustainable products that provide customers with "water the way you
want it", sustainably. Abode has a strong new product pipeline
going into the new financial year.
Underlying operating profit was higher than prior year as a
result of an improved customer mix and a strong focus on
operational efficiencies.
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 GBP35.3m (2022: GBP34.2m), 3.2%
higher than the prior year.
Trade sector revenue was up 14.0% on the prior year. Johnson
Tiles' strong relationships with the national house developers
continued, including Barratt, David Wilson, Persimmon, Charles
Church, Redrow and Countryside. Major projects in the commercial
and public specification sectors included Buckingham Palace and the
National Portrait Gallery. Retail sector revenue was down 9.3% on
the prior year, driven primarily by the continued exit of lower
margin product categories. Export revenue, a small contributor to
the overall business, was 25.0% below prior year due to reduced
revenues on low margin products in the Middle East and France.
Johnson Tiles has developed a market leading position on
sustainability over many years focusing strongly on recycling
energy, water, and waste. The business achieved Gold status at the
Supply Chain Sustainability School and became the first tile
factory in the world to achieve BES 6001 (Responsible Sourcing in
Construction).
The business returned to profitability in the year after
incurring a significant energy related loss in the prior year,
testament to the experience and focus of our team's early
intervention. However, against a backdrop of uncertain and
potentially lower demand for our locally produced tiles, a decision
has been taken to impair the carrying value of the associated
assets. Further detail can be found in the Financial overview.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and
stone adhesives and ancillary products recorded revenue of GBP14.3m
(2022: GBP14.3m), in line with prior year.
As mentioned earlier, we have taken the difficult but necessary
decision to close the business. The revenue of GBP14.3m (2022:
GBP14.3m) and the loss in the year of GBP2.7m have been included in
the underlying results for the current and prior year. An
exceptional restructuring cost of GBP4.8m has also been recognised
in the year in relation to the costs associated with the closure.
Further detail can be found in the Financial overview.
Business review - South Africa
Revenue for the year increased by 4.7% on prior year on a
constant currency basis, and increased by 4.0% on a Sterling
reported basis to GBP145.2m (2022: GBP139.6m) compared to the
strong prior year comparator.
Revenues on a constant currency basis increased year on year
across all South African divisions, and the business continued to
take market share by capitalising on its leading market positions
and excellent customer service. Market conditions in the second
half of the year were more challenging as energy supply constraints
increased. The local management team have actively managed the
impact of these energy interruptions. The businesses are well
invested in terms of backup power generation. Market share growth
continues to be driven by new product development and accelerated
growth into the bathroom and plumbing channels.
Underlying operating profit for the year was GBP10.1m (2022:
GBP10.9m), the reduction largely reflecting a record prior year
comparator and reduced retail demand as consumer renovation spend
has been replaced in the short term by domestic energy backup and
saving projects. Cash generation was below prior year due to lower
underlying operating profit and further investment in both working
capital and capital expenditure. The business remains in a strong
competitive position and is 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 GBP17.9m (2022: GBP16.5m), an 8.5% increase on
a reported basis and 9.1% higher on a constant currency basis.
Strong levels of manufacturing output continued during the year
as productivity and efficiency initiatives delivered a good
performance against a backdrop of energy and water supply
challenges. Whilst demand in the retail sector has reduced in the
second half of the year, this has been offset by resilient demand
in the housebuilding sector, where the business holds a leading
market position.
The new product development pipeline remains an important growth
driver, with an increasing focus on sustainability. Products were
specified and installed in leading developments across the country,
including in a number of quality residential developments developed
by national market leaders Central Development Properties and
Balwin Properties in Johannesburg, Cape Town, and Durban.
Underlying operating profit was ahead of the prior year.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
sanitaryware and bathroom fittings, recorded revenue of GBP75.5m
(2022: GBP75.5m), in line on a reported basis and 0.5% higher on a
constant currency basis.
Market share gains were driven though further improvements in
operations leading to better than market stock availability. The
business also continues to benefit from the focus on the bathroom
sector, offering a compelling one-stop-shop for retail and
commercial customers. The two private label bathroom ranges, Nuvo
and Evox, continue to grow revenue at higher margins, benefitting
from the international supply chain synergies. The introduction of
quality bathroom furniture is performing well.
A growing number of alternative floor covering installations
were completed in the year and the appeal and demand for our
alternative coverings continues to grow. The larger commercial
contracts sector remains subdued but we continue to make progress
supplying national and regional housebuilders and growing our
position as the specialist partners of choice for commercial
customers in retail and hospitality.
Tile Africa currently operates from thirty-three owned stores
and two franchise stores. No new Tile Africa stores were opened in
the year as we focused on store upgrades (bathrooms and alternative
flooring) and investing in our value for money stores under the
HomeXpress sub-brand. This process has been completed with five
stores moving into this category. A full upgrade of our Tile Africa
Store in Nelspruit was successfully completed incorporating a full
bath store within a store and alternative floor section.
Tile Africa's underlying operating profit was in line with the
prior year.
TAL
TAL, our market leading adhesives business, recorded revenue of
GBP22.5m (2022: GBP22.5m), in line with the prior year on a
reported basis and a 0.9% increase on a constant currency
basis.
TAL has retained all its key accounts albeit large commercial
new build projects remained subdued, which impacted demand for
TAL's high specification rapid setting adhesives and system-driven
construction products. Retail sales were impacted by lower consumer
confidence and considerable competitor activity, including new
capacity, in the market.
Notwithstanding market conditions, TAL remains the leading brand
in South Africa, with the business supplying market leading
products and technical expertise to several construction projects
during the year, including a new mall in Pretoria North, Marino
Mall in Ermelo, Midlands Mall in Kwazulu-Natal, refurbishment of
schools and hospitals in Mahikeng and Kwazulu-Natal and the Setari
residential apartments in Cape Town.
TAL's underlying operating profit was below the prior year.
House of Plumbing
House of Plumbing, our market leading supplier of specialist
plumbing materials into the specification and commercial sector,
recorded full year revenue of GBP29.3m (2022: GBP25.1m), 16.7%
higher than the prior year on a reported basis and 17.7% higher on
a constant currency basis.
The business has leveraged its increased national footprint to
deliver revenue growth despite the softer commercial projects
sector. House of Plumbing now operates eight branches with focus on
providing expert technical advice and consistent stock availability
with the business planning to continue to extend its geographical
footprint.
During the year, House of Plumbing supplied several landmark
projects, including Unilim Student Housing in Mankweng, Coca Cola
Factory in Durban, Ekangala Housing Project, Frimax Factory in
Tongaat and the University of Venda.
House of Plumbing's underlying operating profit was marginally
lower than the prior year.
Financial overview
2023 2022
GBPm GBPm
-------------------------------- ----- -----
Revenue 441.0 396.3
-------------------------------- ----- -----
Underlying operating profit 47.3 41.8
IAS 19R administrative expenses (1.6) (1.7)
Acquisition related costs (8.4) (4.8)
Exceptional operating items (9.8) 0.9
-------------------------------- ----- -----
Operating profit 27.5 36.2
Net finance costs (5.8) (3.2)
-------------------------------- ----- -----
Profit before taxation 21.7 33.0
Taxation (4.9) (7.3)
-------------------------------- ----- -----
Profit for the year 16.8 25.7
-------------------------------- ----- -----
Revenue
Group revenue at GBP441.0m (2022: GBP396.3m) increased by 11.3%
on a reported basis and by 1.5% on a constant currency like for
like basis after adjusting for Grant Westfield, acquired on 31 May
2022.
Underlying operating profit
Underlying operating profit increased by 13.2% to GBP47.3m
(2022: GBP41.8m). Our UK businesses recorded an underlying
operating profit of GBP37.2m (2022: GBP30.9m), and our South
African businesses recorded an underlying operating profit of
GBP10.1m (2022: GBP10.9m). Group underlying operating profit margin
was 10.7% (2022: 10.5%).
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of
administering the UK defined benefit pension scheme and are
reflected in the Income Statement under IAS 19R. Costs of GBP1.6m
are lower than the prior year (2022: GBP1.7m) largely as a result
of the additional fees incurred in the prior year relating to the
triennial actuarial valuation.
Acquisition related costs
A cost of GBP8.4m (2022: GBP4.8m) has been recognised in the
year and is analysed as follows:
2023 2022
GBPm GBPm
------------------------------ ----- -----
Intangible asset amortisation 6.2 3.7
Advisory fees 1.4 1.1
Deferred remuneration 0.8 -
------------------------------ ----- -----
8.4 4.8
------------------------------ ----- -----
Intangible asset amortisation has increased from GBP3.7m to
GBP6.2m following the acquisition of Grant Westfield.
The advisory fees relate to the costs incurred in relation to
acquisition activity.
In accordance with IFRS 3, a proportion of the contingent
consideration is treated as remuneration, and, accordingly, is
expensed to the Income Statement as incurred. In the current year
this represents a cost of GBP0.8m in relation to the Grant
Westfield acquisition.
Exceptional operating items
An exceptional operating charge of GBP9.8m (2022: credit of
GBP0.9m) has been recognised in the year.
2023 2022
GBPm GBPm
--------------------------------- ----- -----
Restructuring costs 4.8 -
Impairment 5.0 -
Release of UK property provision - (0.9)
--------------------------------- ----- -----
9.8 (0.9)
--------------------------------- ----- -----
Norcros Adhesives
The exceptional restructuring cost charge of GBP4.8m was
incurred in relation to the aforementioned restructuring programme
implemented at Norcros Adhesives. GBP4.8m (of which circa GBP2m
represents the gross cash cost) represents a provision for the
costs associated with closure including the write down of current
and non-current asset values and costs such as redundancy. As a
result of realisations on assets, the net impact on cash is not
expected to be material.
The revenue of GBP14.3m, representing approximately 3% of Group
revenue (2022: GBP14.3m) and the loss in the year of GBP2.7m
(following a small loss in the prior year) have been included in
the underlying results for the current and prior year.
Johnson Tiles
The Group reviews all cash generating units to determine whether
any of the assets related to our operations are impaired. These
reviews are performed by comparing the estimated future cash flows
generated by the divisions with the carrying value of the assets
generating those cash flows. The future cash flows are sensitised
for items including reduced margins, increasing energy costs and
working capital variances to illustrate a value in use for the
business. As a result of these reviews and a reduction in demand
for our locally produced tiles, tangible and right of use assets
within the Johnson Tiles UK business have been impaired with a
non-cash impairment charge of GBP5.0m recognised as an exceptional
item in the income statement.
During the prior year, the release of UK property provision
related to the settlement of a legacy onerous property lease and
the release of the surplus provision.
Finance costs
2023 2022
GBPm GBPm
---------------------------------------------- ----- -----
Interest payable on bank borrowings 3.7 0.8
Interest on lease liabilities 1.8 1.7
Amortisation of costs of raising debt finance 0.3 0.2
Discounting of contingent consideration 0.6 -
Discounting of property lease provisions - 0.1
---------------------------------------------- ----- -----
Finance costs 6.4 2.8
---------------------------------------------- ----- -----
IAS 19R finance (credit)/cost (0.6) 0.4
---------------------------------------------- ----- -----
Net finance costs 5.8 3.2
---------------------------------------------- ----- -----
Net finance costs for the year of GBP5.8m compares to GBP3.2m in
2022. This movement is mainly due to the increase in the level of
borrowings in the year relating to the Grant Westfield acquisition
and the increase in Bank of England base rates in the UK.
The Group has recognised a GBP0.6m IAS 19R interest credit in
respect of the UK defined benefit pension scheme surplus (2022:
cost of GBP0.4m) due to the surplus throughout the year.
Underlying profit before tax
Underlying profit before tax was GBP41.8m (2022: GBP39.3m),
mainly reflecting the increase in underlying operating profit noted
above, partially offset by the increased interest costs.
Taxation
The tax charge for the year of GBP4.9m (2022: GBP7.3m)
represents an effective tax rate for the year of 22.6% (2022:
22.1%). The increase in the effective tax rate mainly relates to
the increase in non-deductible acquisition related costs in
2023.
The standard rates of corporation tax in the UK, South Africa
and Ireland in the period were 19% (2022: 19%), 28% (2022: 28%) and
12.5% (2022: 12.5%) respectively.
Dividends
In light of the strong performance in the year, the Board
recommends a final dividend of 6.8p per share (2022: 6.9p). This,
combined with the interim dividend of 3.4p per share (2022: 3.1p)
results in a total dividend of 10.2p per share (2022: 10.0p). The
total dividend is equivalent to a dividend cover of 3.7 times,
broadly in line with the year ended 31 March 2022 (3.8 times). The
cash cost of the total dividend is GBP9.1m.
This final dividend, if approved at the Annual General Meeting,
will be payable on 4 August 2023 to shareholders on the register on
30 June 2023. The shares will be quoted ex-dividend on 29 June
2023. 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 14 July 2023.
Balance Sheet
The Group's Balance Sheet is summarised below.
2023 2022
GBPm GBPm
------------------------------------------------- ------ ------
Property, plant and equipment 24.8 29.0
Right of use assets 20.0 19.9
Goodwill and intangible assets 167.1 90.3
Deferred tax (15.0) (9.4)
Net current assets excluding cash and borrowings 80.6 68.2
Pension scheme surplus 14.9 19.6
Lease liabilities (24.7) (24.0)
Other non-current assets and liabilities (7.4) (1.9)
Net (debt)/cash (49.9) 8.6
------------------------------------------------- ------ ------
Net assets 210.4 200.3
------------------------------------------------- ------ ------
Total net assets increased by GBP10.1m to GBP210.4m (2022:
GBP200.3m). Net current assets increased by GBP12.4m largely
reflecting the cash investment into working capital to support
business growth.
Property, plant and equipment decreased by GBP4.2m to GBP24.8m
and included additions of GBP5.4m (2022: GBP5.3m) and acquired
assets of GBP1.1m. The Group recognised an impairment charge of
GBP4.1m (2022: GBPnil), the depreciation charge was GBP4.9m (2022:
GBP5.1m) and foreign exchange losses were GBP1.7m (2022: gain of
GBP0.8m) relating to assets held in South Africa.
Right of use assets increased by GBP0.1m to GBP20.0m (2022:
GBP19.9m), reflecting the acquisition of Grant Westfield offset by
the impairment of Johnson Tiles assets. Lease liabilities of
GBP24.7m (2022: GBP24.0m) increased by GBP0.7m.
The deferred tax liability increased by GBP5.6m to a liability
of GBP15.0m (2022: liability of GBP9.4m). The increase is mainly
the result of the deferred tax arising on acquired intangibles.
Pension schemes
On an IAS 19R accounting basis, the gross defined benefit
pension scheme valuation of the UK scheme showed a surplus of
GBP14.9m compared to a surplus of GBP19.6m last year. The present
value of scheme liabilities decreased by GBP83.3m primarily due to
an increase in the discount rate to 4.90% (31 March 2022: 2.75%)
and benefit payments made in the period. The value of scheme assets
decreased by GBP88.0m largely due to benefit payments made in the
period and reduced asset valuations.
As agreed at the 2021 triennial valuation, deficit repair
contributions are GBP3.8m per annum from 1 April 2022 to March 2027
(increasing with CPI, capped at 5%, each year).
The Group's contributions to its defined contribution pension
schemes were GBP4.0m (2022: GBP3.7m).
Cash flow and net debt
Underlying operating cash flow was GBP16.2m higher than in the
prior year at GBP44.8m (2022: GBP28.6m).
2023 2022
GBPm GBPm
-------------------------------------------------------- ------ ------
Underlying operating profit 47.3 41.8
Depreciation and underlying amortisation (owned assets) 5.0 5.2
Depreciation of right of use assets 4.6 4.1
Lease costs (6.4) (5.7)
-------------------------------------------------------- ------ ------
Underlying EBITDA (pre-IFRS 16) 50.5 45.4
Net working capital movement (13.3) (23.6)
IFRS 2 charge add-back 1.2 1.1
Lease costs 6.4 5.7
-------------------------------------------------------- ------ ------
Underlying operating cash flow 44.8 28.6
-------------------------------------------------------- ------ ------
Underlying operating cash conversion 89% 63%
-------------------------------------------------------- ------ ------
The main drivers of the improvement in underlying operating cash
flow were the increased level of underlying operating profit and a
continued focus on working capital. Underlying operating cash
conversion in the year was 89% of underlying EBITDA (2022:
63%).
2023 2022
GBPm GBPm
------------------------------------------------------------- ------ -----
Underlying operating cash flow 44.8 28.6
Cash flows from exceptional items and acquisition related
costs (3.3) (1.7)
Pension fund deficit recovery contributions (3.8) (3.3)
------------------------------------------------------------- ------ -----
Cash flow generated from operations 37.7 23.6
Net interest paid (5.5) (2.5)
Taxation (7.7) (6.5)
------------------------------------------------------------- ------ -----
Net cash generated from operating activities 24.5 14.6
Acquisition of subsidiary undertaking (net of cash acquired) (78.3) -
Capital expenditure (6.0) (5.4)
Dividends (9.2) (9.1)
Share transactions 18.1 0.1
Principal element of lease payments (4.6) (4.7)
Exchange movement (2.9) 1.6
Movement in costs of raising finance (0.1) 1.0
------------------------------------------------------------- ------ -----
Net cash movement (58.5) (1.9)
Opening net cash 8.6 10.5
------------------------------------------------------------- ------ -----
Closing net (debt)/cash (pre-IFRS 16) (49.9) 8.6
------------------------------------------------------------- ------ -----
Cash generated from operating activities was GBP9.9m higher than
the prior year at GBP24.5m, largely due to the GBP16.2m increase in
underlying operating cash flows, partially offset by higher
interest payments.
Cash flows from exceptional items and acquisition related costs
in the current year primarily relate to the advisory fees for the
acquisition of Grant Westfield.
Capital expenditure at GBP6.0m (2022: GBP5.4m) includes
investment in new product programmes, store upgrades, IT systems
and manufacturing facilities.
The Group ended the year with net debt of GBP49.9m (2022: net
cash of GBP8.6m) on a pre-IFRS 16 basis after a net cash outflow of
GBP58.5m. Net debt inclusive of IFRS 16 lease liabilities was
GBP74.6m (2022: GBP15.4m).
Funding and liquidity
The Group extended its multicurrency revolving credit facility
by a further year in the period. The Group has committed banking
facilities of GBP130m (plus a GBP70m uncommitted accordion) with a
maturity date of the facility of October 2026 with a further year
extension available.
Principal Risks and Uncertainties
Risk management remains 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 objective of our risk
management framework is to support the business in meeting its
strategic and operational objectives through the identification,
monitoring and mitigation of risks within clearly defined risk
appetite levels for each risk category.
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 they do not comprise all the risks that the Group may
face, and are not listed in any order of priority.
-- Strategic risks, include the risks associated with a
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
information technology and cyber security.
-- Financial risks, include the risks associated with exchange
rates, 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
UK-adopted international accounting standards, 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 (Acting Board Chair and Non-Executive
Director), Thomas Willcocks (Chief Executive Officer), James Eyre
(Chief Financial Officer), Alison Littley (Non-Executive Director)
and Stefan Allanson (Non-Executive Director).
Thomas Willcocks
Chief Executive Officer
James Eyre
Chief Financial Officer
Consolidated income statement
Year ended 31 March 2023
2023 2022
Notes GBPm GBPm
----------------------------------------------------- ----- ----- -----
Continuing operations
Revenue 2 441.0 396.3
----------------------------------------------------- ----- ----- -----
Underlying operating profit 47.3 41.8
IAS 19R administrative expenses (1.6) (1.7)
Acquisition related costs 3 (8.4) (4.8)
Exceptional operating items 3 (9.8) 0.9
----------------------------------------------------- ----- ----- -----
Operating profit 27.5 36.2
Finance costs 4 (6.4) (2.8)
IAS 19R finance credit/(cost) 0.6 (0.4)
----------------------------------------------------- ----- ----- -----
Profit before taxation 21.7 33.0
Taxation (4.9) (7.3)
----------------------------------------------------- ----- ----- -----
Profit for the year to equity holders of the
Company 16.8 25.7
----------------------------------------------------- ----- ----- -----
Earnings per share attributable to equity holders
of the Company
Basic earnings per share:
From profit for the year 6 19.1p 31.8p
----------------------------------------------------- ----- ----- -----
Diluted earnings per share:
From profit for the year 6 18.8p 31.2p
----------------------------------------------------- ----- ----- -----
Weighted average number of shares for basic earnings
per share (millions) 88.1 80.9
Alternative performance measures
----------------------------------------------------- ----- ----- -----
Underlying profit before taxation (GBPm) 5 41.8 39.3
Underlying earnings (GBPm) 5 33.5 31.5
Basic underlying earnings per share 6 38.0p 38.9p
Diluted underlying earnings per share 6 37.4p 38.2p
----------------------------------------------------- ----- ----- -----
Consolidated statement of comprehensive income
Year ended 31 March 2023
2023 2022
GBPm GBPm
----------------------------------------------------------- ------ -----
Profit for the year 16.8 25.7
------------------------------------------------------------ ------ -----
Other comprehensive income and expense:
Items that will not subsequently be reclassified to
the Income Statement
Actuarial (losses)/gains on retirement benefit obligations (5.6) 27.5
Items that may be subsequently reclassified to the Income
Statement
Cash flow hedges - fair value (loss)/gain in year (2.9) 3.0
Foreign currency translation of foreign operations (8.3) 3.6
------------------------------------------------------------ ------ -----
Other comprehensive (expense)/income for the year (16.8) 34.1
------------------------------------------------------------ ------ -----
Total comprehensive result for the year attributable
to equity holders of the Company - 59.8
------------------------------------------------------------ ------ -----
Items in the statement are disclosed net of tax.
Consolidated balance sheet
At 31 March 2023
2023 2022
GBPm GBPm
-------------------------------------- ------- -------
Non-current assets
Goodwill 107.9 61.2
Intangible assets 59.2 29.1
Property, plant and equipment 24.8 29.0
Pension scheme asset 14.9 19.6
Right of use assets 20.0 19.9
--------------------------------------- ------- -------
226.8 158.8
-------------------------------------- ------- -------
Current assets
Inventories 103.9 100.6
Trade and other receivables 83.3 71.1
Derivative financial instruments - 1.6
Cash and cash equivalents 29.0 27.4
--------------------------------------- ------- -------
216.2 200.7
-------------------------------------- ------- -------
Current liabilities
Trade and other payables (99.2) (102.4)
Lease liabilities (6.1) (5.7)
Current tax liabilities (0.9) (2.7)
Derivative financial instruments (2.0) -
Provisions (4.5) -
--------------------------------------- ------- -------
(112.7) (110.8)
-------------------------------------- ------- -------
Net current assets 103.5 89.9
--------------------------------------- ------- -------
Total assets less current liabilities 330.3 248.7
--------------------------------------- ------- -------
Non-current liabilities
Financial liabilities - borrowings (78.9) (18.8)
Lease liabilities (18.6) (18.3)
Deferred tax liabilities (15.0) (9.4)
Other non-current liabilities (6.2) (0.3)
Provisions (1.2) (1.6)
--------------------------------------- ------- -------
(119.9) (48.4)
-------------------------------------- ------- -------
Net assets 210.4 200.3
--------------------------------------- ------- -------
Financed by:
Share capital 8.9 8.1
Share premium 47.6 30.3
Retained earnings and other reserves 153.9 161.9
--------------------------------------- ------- -------
Total equity 210.4 200.3
--------------------------------------- ------- -------
Consolidated cash flow statement
Year ended 31 March 2023
2023 2022
Note GBPm GBPm
------------------------------------------------------- ---- ------ ------
Cash generated from operations 7 37.7 23.6
Income taxes paid (7.7) (6.5)
Interest paid (5.5) (2.5)
------------------------------------------------------- ---- ------ ------
Net cash generated from operating activities 24.5 14.6
------------------------------------------------------- ---- ------ ------
Cash flows from investing activities
Purchase of property, plant and equipment and
intangible assets (6.0) (5.4)
Acquisition of subsidiary undertakings net of
cash acquired 8 (78.3) -
------------------------------------------------------- ---- ------ ------
Net cash used in investing activities (84.3) (5.4)
------------------------------------------------------- ---- ------ ------
Cash flows from financing activities
Proceeds from issue of ordinary share capital 18.1 0.1
Principal element of lease payments (4.6) (4.7)
Drawdown of borrowings 114.0 25.0
Repayment of borrowings (54.0) (23.0)
Dividends paid to the Company's shareholders (9.2) (9.1)
------------------------------------------------------- ---- ------ ------
Net cash generated from/(used in) financing activities 64.3 (11.7)
------------------------------------------------------- ---- ------ ------
Net increase/(decrease) in cash and cash equivalents 4.5 (2.5)
Cash and cash equivalents at the beginning of
the year 27.4 28.3
Exchange movements on cash and cash equivalents (2.9) 1.6
------------------------------------------------------- ---- ------ ------
Cash and cash equivalents at the end of the year 29.0 27.4
------------------------------------------------------- ---- ------ ------
Consolidated statement of changes in equity
Year ended 31 March 2023
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 2021 8.1 30.2 (0.1) (1.5) (16.4) 128.1 148.4
Comprehensive income:
Profit for the year - - - - - 25.7 25.7
Other comprehensive
income:
Actuarial gain on
retirement benefit
obligations - - - - - 27.5 27.5
Fair value gain on
cash flow hedges - - - 3.0 - - 3.0
Foreign currency
translation adjustments - - - - 3.6 - 3.6
-------------------------- -------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
income for the year - - - 3.0 3.6 27.5 34.1
Transactions with
owners:
Shares issued - 0.1 - - - - 0.1
Dividends paid - - - - - (9.1) (9.1)
Value of employee
services - - - - - 1.1 1.1
-------------------------- -------- -------- -------- -------- ----------- --------- -------
At 31 March 2022 8.1 30.3 (0.1) 1.5 (12.8) 173.3 200.3
Comprehensive income:
Profit for the year - - - - - 16.8 16.8
Other comprehensive
expense:
Actuarial loss on
retirement benefit
obligations - - - - - (5.6) (5.6)
Fair value loss on
cash flow hedges - - - (2.9) - - (2.9)
Foreign currency
translation adjustments - - - - (8.3) - (8.3)
-------------------------- -------- -------- -------- -------- ----------- --------- -------
Total other comprehensive
expense for the year - - - (2.9) (8.3) (5.6) (16.8)
Transactions with
owners:
Shares issued 0.8 17.3 - - - - 18.1
Dividends paid - - - - - (9.2) (9.2)
Value of employee
services - - - - - 1.2 1.2
-------------------------- -------- -------- -------- -------- ----------- --------- -------
At 31 March 2023 8.9 47.6 (0.1) (1.4) (21.1) 176.5 210.4
-------------------------- -------- -------- -------- -------- ----------- --------- -------
Notes to the preliminary statement
Year ended 31 March 2023
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 premium segment of
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
statement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 31 March 2023. The
financial information set out above does not constitute the
Company's statutory financial statements for the periods ended 31
March 2023 or 31 March 2022 but is derived from those financial
statements. Statutory financial statements for 2023 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
UK-adopted International Accounting Standards and with the
accounting policies set out in the Annual Report and Accounts
consistently applied to all periods.
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 including
current macroeconomic factors in the context of the current
operating environment.
The Group, in acknowledging its TCFD requirements, has also
considered climate risks in the financial statements. 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 acquisition of Grant Westfield was also reflected in
the assessment. The financial model was then stress tested by
modelling the most extreme but plausible scenario, that being a
global pandemic similar in nature to COVID-19. 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
six-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 headroom against our key banking financial covenants
during the twelve-month period under assessment. 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 implausible 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 twelve 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
Year ended 31 March 2023
South
UK Africa Group
GBPm GBPm GBPm
----------------------------------------------- ------- ------- -------
Revenue 295.8 145.2 441.0
----------------------------------------------- ------- ------- -------
Underlying operating profit 37.2 10.1 47.3
IAS 19R administrative expenses (1.6) - (1.6)
Acquisition related costs (8.2) (0.2) (8.4)
Exceptional operating items (9.8) - (9.8)
----------------------------------------------- ------- ------- -------
Operating profit 17.6 9.9 27.5
----------------------------------------------- ------- ------- -------
Finance costs (5.8)
----------------------------------------------- ------- ------- -------
Profit before taxation 21.7
Taxation (4.9)
----------------------------------------------- ------- ------- -------
Profit for the year 16.8
----------------------------------------------- ------- ------- -------
Net debt excluding lease liabilities (49.9)
----------------------------------------------- ------- ------- -------
Segmental assets 340.5 102.5 443.0
Segmental liabilities (195.6) (37.0) (232.6)
Additions to goodwill 47.7 - 47.7
Additions to tangible, intangible and right of
use assets 5.9 3.7 9.6
Depreciation and amortisation 10.8 5.0 15.8
----------------------------------------------- ------- ------- -------
Year ended 31 March 2022
South
UK Africa Group
GBPm GBPm GBPm
---------------------------------------------- ------- ------- -------
Revenue 256.7 139.6 396.3
---------------------------------------------- ------- ------- -------
Underlying operating profit 30.9 10.9 41.8
IAS 19R administrative expenses (1.7) - (1.7)
Acquisition related costs (4.6) (0.2) (4.8)
Exceptional operating items 0.9 - 0.9
---------------------------------------------- ------- ------- -------
Operating profit 25.5 10.7 36.2
---------------------------------------------- ------- ------- -------
Finance costs (3.2)
---------------------------------------------- ------- ------- -------
Profit before taxation 33.0
Taxation (7.3)
---------------------------------------------- ------- ------- -------
Profit for the year 25.7
---------------------------------------------- ------- ------- -------
Net cash excluding lease liabilities 8.6
---------------------------------------------- ------- ------- -------
Segmental assets 252.9 106.6 359.5
Segmental liabilities (116.9) (42.3) (159.2)
Additions to tangible and right of use assets 4.0 4.4 8.4
Depreciation and amortisation 8.0 5.0 13.0
---------------------------------------------- ------- ------- -------
The split of revenue by geographical destination of the customer
is below:
2023 2022
GBPm GBPm
-------------- ----- -----
UK 262.0 222.4
Africa 147.5 141.9
Rest of World 31.5 32.0
-------------- ----- -----
441.0 396.3
-------------- ----- -----
No one customer had revenue over 10% of total Group revenue
(2022: none).
3. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below:
2023 2022
Acquisition related costs GBPm GBPm
---------------------------------- ----- -----
Intangible asset amortisation (1) 6.2 3.7
Advisory fees (2) 1.4 1.1
Deferred remuneration (3) 0.8 -
---------------------------------- ----- -----
8.4 4.8
---------------------------------- ----- -----
1 Non-cash amortisation charges in respect of acquired intangible assets.
2 Professional advisory fees incurred in connection with the
Group's business combination activities.
3 In accordance with IFRS 3, a proportion of the contingent
consideration is treated as remuneration, and, accordingly, is
expensed to the Income Statement as incurred. In the current year
this represents a cost of GBP0.8m in relation to the Grant
Westfield acquisition.
2023 2022
Exceptional operating items GBPm GBPm
------------------------------------- ----- -----
Restructuring costs (1) 4.8 -
Impairment (2) 5.0 -
Release of UK property provision (3) - (0.9)
------------------------------------- ----- -----
9.8 (0.9)
------------------------------------- ----- -----
1 The exceptional restructuring cost charge of GBP4.8m was
incurred in relation to the restructuring programme implemented at
Norcros Adhesives. GBP4.8m represents a provision for the costs
associated with closure including the write down of current and
non-current asset values and costs such as redundancy. Due to
realisations of assets, the net impact on cash is not expected to
be material.
2 As a result of demand uncertainty, the Johnson Tiles tangible
and right of use assets have been impaired with a non-cash
impairment charge of GBP5.0m recognised as an exceptional item in
the income statement.
3 The UK property provision related to the only remaining
surplus and legacy onerous property lease at Groundwell, Swindon.
In the prior year, the Group reached agreement with the landlord to
exit the lease early. A cash settlement payment of GBP1.3m
including dilapidation obligations was made in the prior year and
the remaining GBP0.9m of the related provision was released as an
exceptional operating item.
4. Finance costs
2023 2022
GBPm GBPm
---------------------------------------------- ----- -----
Interest payable on bank borrowings 3.7 0.8
Interest on lease liabilities 1.8 1.7
Discounting of contingent consideration 0.6 -
Amortisation of costs of raising debt finance 0.3 0.2
Property lease discount - 0.1
---------------------------------------------- ----- -----
Finance costs 6.4 2.8
---------------------------------------------- ----- -----
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, discounting of contingent
consideration, 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 to
reflect the assets in both the opening and
closing capital employed balances, 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 IFRS 16 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. IFRS 16 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
2023 2022
GBPm GBPm
----------------------------------------------------------- ----- -----
Profit before taxation 21.7 33.0
Adjusted for:
- IAS 19R administrative expenses 1.6 1.7
- acquisition related costs (see note 3) 8.4 4.8
- exceptional operating items (see note 3) 9.8 (0.9)
- amortisation of costs of raising finance 0.3 0.2
- property lease discount - 0.1
- discounting of contingent consideration 0.6 -
- IAS 19R finance (income)/cost (0.6) 0.4
----------------------------------------------------------- ----- -----
Underlying profit before taxation 41.8 39.3
----------------------------------------------------------- ----- -----
Taxation attributable to underlying profit before taxation (8.3) (7.8)
----------------------------------------------------------- ----- -----
Underlying earnings 33.5 31.5
----------------------------------------------------------- ----- -----
(b) Underlying EBITDA
2023 2022
GBPm GBPm
----------------------------------------------- ----- -----
Operating profit 27.5 36.2
Adjusted for:
- IAS 19R administrative expenses 1.6 1.7
- acquisition related costs (see note 3) 8.4 4.8
- exceptional operating items (see note 3) 9.8 (0.9)
----------------------------------------------- ----- -----
Underlying operating profit 47.3 41.8
- depreciation and amortisation (owned assets) 5.0 5.2
- depreciation of leased assets 4.6 4.1
- lease costs (6.4) (5.7)
----------------------------------------------- ----- -----
Underlying EBITDA (pre-IFRS 16) 50.5 45.4
----------------------------------------------- ----- -----
Consolidated Cash Flow Statement
(a) Underlying operating cash flow
2023 2022
GBPm GBPm
---------------------------------------------------- ----- -----
Cash generated from operations (see note 7) 37.7 23.6
Adjusted for:
- cash flows from exceptional items and acquisition
related costs (see note 7) 3.3 1.7
- pension fund deficit recovery contributions 3.8 3.3
---------------------------------------------------- ----- -----
Underlying operating cash flow 44.8 28.6
---------------------------------------------------- ----- -----
Consolidated Balance Sheet
(a) Underlying capital employed and underlying return on capital
employed
2023 2022
GBPm GBPm
----------------------------------------------- ------ ------
Net assets 210.4 200.3
Adjusted for:
- pension scheme asset (net of associated tax) (11.2) (14.7)
- right of use assets (IFRS 16) (20.0) (19.9)
- lease liabilities (IFRS 16) 24.7 24.0
- cash and cash equivalents (29.0) (27.4)
- financial liabilities - borrowings 78.9 18.8
----------------------------------------------- ------ ------
253.8 181.1
Foreign exchange adjustment 1.3 (1.7)
Adjustment for acquisitions 58.2 -
----------------------------------------------- ------ ------
Underlying capital employed 313.3 179.4
----------------------------------------------- ------ ------
Average underlying capital employed 246.3 168.3
----------------------------------------------- ------ ------
Underlying operating profit (pre-IFRS 16) 45.5 40.2
----------------------------------------------- ------ ------
Underlying return on capital employed 18.5% 23.9%
----------------------------------------------- ------ ------
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 2023 the potential dilutive ordinary
shares amounted to 1,370,679 (2022: 1,504,604) as calculated in
accordance with IAS 33.
The calculation of EPS is based on the following profits and
numbers of shares:
2023 2022
GBPm GBPm
-------------------- ----- -----
Profit for the year 16.8 25.7
-------------------- ----- -----
2023 2022
Number Number
------------------------------------------------------- ---------- ----------
Weighted average number of shares for basic earnings
per share 88,129,432 80,887,240
Share options 1,370,679 1,504,604
------------------------------------------------------- ---------- ----------
Weighted average number of shares for diluted earnings
per share 89,500,111 82,391,844
------------------------------------------------------- ---------- ----------
2023 2022
---------------------------- ----- -----
Basic earnings per share:
From profit for the year 19.1p 31.8p
---------------------------- ----- -----
Diluted earnings per share:
From profit for the year 18.8p 31.2p
---------------------------- ----- -----
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share have also been
provided which reflects underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
2023 2022
GBPm GBPm
--------------------------------- ----- -----
Underlying earnings (see note 5) 33.5 31.5
--------------------------------- ----- -----
2023 2022
-------------------------------------- ----- -----
Basic underlying earnings per share 38.0p 38.9p
Diluted underlying earnings per share 37.4p 38.2p
-------------------------------------- ----- -----
7. Consolidated cash flow statement
(a) Cash generated from operations
The analysis of cash generated from operations is given
below:
Continuing operations
2023 2022
GBPm GBPm
------------------------------------------------------------- ----- ------
Profit before taxation 21.7 33.0
Adjustments for:
- IAS 19R administrative expenses included in the Income
Statement 1.6 1.7
- acquisition related costs included in the Income Statement 8.4 4.8
- exceptional items included in the Income Statement 9.8 (0.9)
- finance costs included in the Income Statement 6.4 2.8
- IAS 19R finance (credit)/cost included in the Income
Statement (0.6) 0.4
- cash flows from exceptional items (3.3) (1.7)
- depreciation of property, plant and equipment 4.9 5.1
- underlying amortisation 0.1 0.1
- depreciation of right of use asset 4.6 4.1
- pension fund deficit recovery contributions (3.8) (3.3)
- IFRS 2 charges 1.2 1.1
------------------------------------------------------------- ----- ------
Operating cash flows before movement in working capital 51.0 47.2
Changes in working capital:
- increase in inventories (3.0) (22.7)
- increase in trade and other receivables (3.1) (5.1)
- (decrease)/increase in trade and other payables (7.2) 4.2
------------------------------------------------------------- ----- ------
Cash generated from operations 37.7 23.6
------------------------------------------------------------- ----- ------
(b) Analysis of underlying net cash/(debt)
Current Non-current Underlying
Cash borrowings borrowings net cash/(debt)
GBPm GBPm GBPm GBPm
------------------------- ----- ----------- ----------- ----------------
At 1 April 2021 28.3 - (17.8) 10.5
Cash flow (2.5) - (2.0) (4.5)
Non-cash finance costs - - 1.0 1.0
Other non-cash movements - - - -
Exchange movement 1.6 - - 1.6
------------------------- ----- ----------- ----------- ----------------
At 31 March 2022 27.4 - (18.8) 8.6
Cash flow 4.5 - (60.0) (55.5)
Non-cash finance costs - - (0.1) (0.1)
Other non-cash movements - - - -
Exchange movement (2.9) - - (2.9)
------------------------- ----- ----------- ----------- ----------------
At 31 March 2023 29.0 - (78.9) (49.9)
------------------------- ----- ----------- ----------- ----------------
Non-cash finance costs relate to the movement in the costs of
raising debt finance in the year.
8. Business combinations
On 31 May 2022, the Group acquired 100% of the ordinary share
capital of Granfit Holdings Limited and subsidiaries (Grant
Westfield), a market leading designer, manufacturer and supplier of
waterproof bathroom panels in the UK. The business was acquired due
to its compelling strategic fit with our existing portfolio of
businesses and its opportunities for sustainable growth. Full
details of the acquisition are provided on the Group's website (
www.norcros.com ).
The following table summarises the consideration paid for Grant
Westfield and the fair value of the assets acquired and the
liabilities assumed:
GBPm
--------------------------- ------
Consideration
Net cash paid 78.3
Cash acquired 38.4
Contingent consideration 4.5
121.2
-------------------------- ------
GBPm
------------------------------------------------ ------
Recognised amounts of identifiable assets and
liabilities
Intangible assets 35.5
Property, plant and equipment 1.1
Right of use assets 2.0
Inventories 4.7
Trade and other receivables 11.0
Cash 38.4
Trade and other payables (7.8)
Current tax liabilities (0.3)
Deferred tax liability (9.1)
Lease liabilities (2.0)
Total identifiable net assets 73.5
------------------------------------------------- ------
Goodwill 47.7
Total 121.2
------------------------------------------------- ------
The Group has determined the fair values of Grant Westfield's
assets and liabilities with intangible assets (excluding goodwill)
recognised of GBP35.5m representing the brand and customer
relationships. The values of these intangibles are calculated using
assumptions on the expected future profitability of the acquired
business. A deferred tax liability of GBP9.1m has also been
recognised mainly arising from the recognition of acquired
intangible assets.
In most business combinations there is an element of cost which
cannot be allocated against the individual assets and liabilities
acquired. This residual amount is recognised as goodwill and is
supported by a number of factors which do not meet the criteria
required for them to be treated as intangible assets. In this case
the most significant elements relate to Grant Westfield's unique
product portfolio and its knowledgeable workforce. It is not
expected at this stage that any of the goodwill will be deductible
for tax purposes.
Total costs relating to the transaction of GBP3.0m have been
expensed to the Consolidated Income Statement and included within
acquisition related costs of GBP1.4m recognised in the year ended
31 March 2023 and the remaining GBP1.6m recognised in prior
years.
Trade and other receivables of GBP11.0m is the net of GBP11.2m
of gross contractual receivables and a GBP0.2m provision for
doubtful debts.
The contingent consideration of GBP4.5m to the previous
shareholders is dependent on the financial performance of Grant
Westfield over the next three years. To the extent that certain
profit and cashflow performance criteria are met cash payments
ranging from GBPnil to GBP7.0m (on an undiscounted basis) will be
paid in the year ended 31 March 2026.
In addition, as part of the transaction a long-term incentive
scheme has been put in place for key Grant Westfield management
staff which is also dependent on the financial performance of Grant
Westfield over the next three years. The maximum amount and current
expectation is that GBP3.0m will be payable in cash under this
scheme which will be treated as deferred remuneration and included
within acquisition related costs in the Consolidated Income
Statement.
The revenue and profit after tax included in the Consolidated
Statement of Comprehensive Income since 31 May 2022 contributed by
Grant Westfield are GBP39.5m and GBP3.4m respectively. On a
pro-forma basis, Grant Westfield's revenue and profit after tax
contribution had it been part of the Group from the beginning of
the period, would have been GBP47.5m and GBP4.2m respectively.
The net cash outflow from the transaction reported within
investing activities was as follows:
GBPm
---------------------------------------------------------- -------
Cash consideration 116.7
Cash acquired (38.4)
---------------------------------------------------------- -------
Net cash outflow reported in the Consolidated Statement
of Cash Flow 78.3
---------------------------------------------------------- -------
In addition to the above, a cash outflow of GBP3.0m relating to
costs incurred in respect of the transaction has been included
within cash generated from continuing operations, such that the
total net cash outflow from the acquisition in the period was
GBP81.3m. Net proceeds from the equity raise were GBP18.1m
resulting in an overall impact of the acquisition on net debt of
GBP63.2m.
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