TIDMNXR
RNS Number : 4905Q
Norcros PLC
18 June 2015
18 June 2015
Norcros plc
Results for the year ended 31 March 2015
'Strong results and sixth consecutive year of growth.'
Norcros, the market leading supplier of innovative branded
showers, taps, bathroom accessories, tiles and adhesives, today
announces its results for the year ended 31 March 2015.
Financial Summary
2015 2014 % change % change
as reported at constant
currency
------------------------------ -------------- ---------- ------------- -------------
Revenue GBP222.1m GBP218.7m +1.5% +5.0%
------------------------------ -------------- ---------- ------------- -------------
Underlying* operating profit GBP17.0m GBP16.1m +5.8%
------------------------------ -------------- ---------- ------------- -------------
Underlying* profit before
tax GBP15.8m GBP14.6m +8.2%
------------------------------ -------------- ---------- ------------- -------------
Profit before tax GBP11.0m GBP5.8m +89.6%
------------------------------ -------------- ---------- ------------- -------------
Underlying operating cash
flow** GBP22.9m GBP20.3m +12.8%
------------------------------ -------------- ---------- ------------- -------------
Net debt GBP14.2m GBP26.9m -47.2%
------------------------------ -------------- ---------- ------------- -------------
Dividend per share 0.56p 0.51p +9.8%
------------------------------ -------------- ---------- ------------- -------------
*Underlying is before IAS 19R administrative expenses,
acquisition related costs and exceptional operating items and,
where relevant, before non-cash
finance costs
**Underlying operating cash flow is cash generated from
continuing operations before exceptional cash out flows and pension
fund deficit recovery
contributions
Highlights
-- Sixth consecutive year of growth
-- Strong cash generation - underlying operating cash flow 12.8% higher at GBP22.9m
-- Significant improvement in South African performance
-- Good progress on legacy issues
-- Net debt reduced to GBP14.2m from GBP26.9m
-- Underlying ROCE at 16.3% - ahead of strategic target
-- Full year dividend increased by 9.8%
Martin Towers, Chairman, commented:
"I am delighted that Norcros has recorded another year of
revenue and underlying operating profit growth, a feat that the
Group has now achieved for six consecutive years. I am especially
pleased that we have achieved an underlying ROCE of 16.3% in the
year, ahead of our strategic target of 12-15%, reflecting continued
improvements in our operational performance, and the benefit of
disposing of the non-core assets. I believe the Group is very well
placed to build on the excellent progress achieved this year, and
underpinned by our strong brands and leading market positions, I
look forward to the future with optimism."
There will be a presentation today at 9.30 am for analysts at
the offices of Hudson Sandler, 29 Cloth Fair, London, EC1A 7NN. The
supporting slides will be available on the Norcros website at
http://www.norcros.comlater in the day.
Enquiries
Norcros plc Tel: 01625 547700
Nick Kelsall, Group Chief Executive
Martin Payne, Group Finance Director
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Charlie Jack
Katie Matthews
Notes to Editors
-- Norcros is a leading supplier of high quality and innovative
showers, taps, bathroom accessories, ceramic wall and floor tiles
and adhesive products with operations primarily in the UK and
South Africa.
-- Based in the UK, Norcros operates under four brands:
-- Triton Showers - Market leader in the manufacture and marketing
of showers in the UK
-- Vado - A leading manufacturer and supplier of taps, mixer
showers, bathroom accessories and valves
-- Johnson Tiles - A leading manufacturer and supplier of ceramic
tiles in the UK
-- Norcros Adhesives - Manufacturer of tile and stone adhesives,
grouts and related products
-- Based in South Africa, Norcros operates under three brands:
-- Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitary
ware, showers and adhesives
-- Johnson Tiles South Africa - Manufacturer of ceramic and
porcelain tiles
-- TAL - The leading manufacturer of ceramic and building adhesives
-- Norcros is headquartered in Wilmslow, Cheshire and employs around
1750 people. The Company is listed on the London Stock Exchange.
For further information please visit the Company website: http://www.norcros.com/
Chairman's Statement
Overview
I am delighted to announce that Norcros has recorded another
year of revenue and underlying operating profit growth, a feat that
the Group has now achieved for six consecutive years. Group revenue
from continuing operations grew by 1.5% on a reported basis and
5.0% on a constant currency basis to GBP222.1m. Underlying
operating profit at GBP17.0m, was 5.8% higher than prior year
driven by a strong performance from our South African businesses,
the highlight of which was the significant improvement in
performance of Johnson Tiles South Africa. Also pleasing was the
strong cash management demonstrated across the Group with
underlying operating cash flow increasing to GBP22.9m (2014:
GBP20.3m).
Significant progress has been made during the year with the
resolution of a number of our legacy issues. The disposal of
Johnson Tiles Australia completed in May 2014 for GBP3.8m allowed
the Group to focus on its strategic geographies of UK, South Africa
and the Middle East. In the second half of the year we bought out
our lease commitments on the surplus property at Orgreave Drive,
Sheffield, and acquired the freehold for GBP3.4m, subsequently
disposing of this freehold along with our remaining surplus
freehold properties for GBP6.5m. These actions together with the
recent resolution of our contractual dispute with Morrisons and the
expiry of another onerous lease, means that the Group's legacy
property issues are now resolved in all material respects.
As a result of the strong operating cash generation, and the
proceeds from the disposals of the surplus property and Johnson
Tiles Australia, net debt reduced to GBP14.2m (2014: GBP26.9m),
representing leverage of just 0.6 x EBITDA (2014: 1.2 x
EBITDA).
In July 2014 we took advantage of favourable market conditions
and agreed a new unsecured GBP70m banking facility with Lloyds Bank
plc, Barclays Bank plc and HSBC Bank plc. The agreement also
includes a GBP30m accordion facility which gives us further scope
to fund growth through acquisition.
Dividend
The Board is recommending a final dividend for the year of
0.375p (2014: 0.34p) per share. When added to the interim dividend
of 0.185p (2014: 0.17p) per share which was paid on 7 January 2015,
this will make a total dividend for the year of 0.56p (2014: 0.51p)
per share, a 9.8% increase on the previous year.
People
The people who work for the Group are undoubtedly our key asset
and I am certain that the existing opportunities for long-term
growth will ensure that our employees find Norcros a place where
they will continue to enjoy rewarding careers. On behalf of the
Board I congratulate them all for delivering another year of strong
progress.
Summary
Notwithstanding the challenges in our markets, Norcros has
continued to deliver a creditable year on year improvement in its
trading performance in line with market expectations. At the same
time excellent progress has been made on the legacy issues combined
with strong cash generation resulting in a strengthening in the
Group's financial position.
As well as continuing to drive organic revenue growth we have
committed additional resource to progress suitable acquisitions in
support of our strategy of doubling revenue to GBP420m by 2018.
Whilst no further transactions have been concluded at the date of
this report, I remain confident that we are making good progress
towards this particular strategic target and that we will be able
to respond swiftly to realise opportunities as they arise.
I am especially pleased that we have achieved an underlying ROCE
of 16.3% in the year, ahead of our strategic target of 12-15%,
reflecting continued improvements in our operational performance,
and the benefit of disposing of our non-core assets.
I believe the Group is very well placed to build on the
excellent progress achieved this year, and underpinned by our
strong brands and leading market positions, I look forward to the
future with optimism.
Chief Executive's Review
Overview
Group revenue for the year increased by 1.5% to GBP222.1m (2014:
GBP218.7m) and by 5.0% on a constant currency basis.
The UK market has remained challenging, with continued growth in
the trade sector driven by continued improvements in new house
build and housing transactions, but with only limited improvements
in the retail sector impacted by sluggish consumer confidence
particularly at the lower and middle income groups. UK revenue for
the year at GBP149.1m (2014: GBP148.0m) was 0.7% ahead of the prior
year, with higher revenue at Triton, Vado and Norcros Adhesives
offsetting lower revenue at Johnson Tiles. UK underlying operating
profit for the year was marginally lower at GBP13.8m (2014:
GBP14.2m) with operating margins also slightly lower at 9.2%
(2014:9.6%). Vado and Norcros Adhesives showed good profit
progression in the year, and Triton maintained its strong
profitability despite increasing revenue investment in order to
develop new export markets. Johnson Tiles performance was impacted
by lower revenue as well as production inefficiencies during part
of the year which are now resolved.
I am particularly pleased to report a significantly improved
performance in our South African business where revenue was 15.1%
higher on a constant currency basis and 3.2% higher on a reported
basis. Underlying operating profit for the year in South Africa
increased by 68.7% to GBP3.2m (2014: GBP1.9m) despite a weaker
Rand, and operating margins improved from 2.7% to 4.4%. All three
businesses contributed to the improvement, with the benefits of the
self-help initiatives and new investment beginning to be realised.
In Johnson Tiles South Africa, exciting new product ranges have
gained good market acceptance following the successful installation
of our second inkjet printer, and together with continued
manufacturing efficiency improvements, enabled the business to
break even in the year, a significant improvement on last year. In
TAL, strong revenue growth and the benefits of investment in new
mixing and packaging equipment helped drive an improved
performance, and in Tile Africa, although we are still in the
initial phase of our roll-out programme, our exciting new CX store
format is driving a much improved retail performance.
Group underlying operating profit at GBP17.0m (2014: GBP16.1m)
was 5.8% higher than prior year, with Group underlying operating
margins also ahead at 7.6% (2014: 7.3%).
Strong cash conversion in our businesses combined with the
proceeds from the disposal of surplus property and Johnson Tiles
Australia resulted in closing net debt at GBP14.2m (2014: GBP26.9
m), and leverage of 0.6 times EBITDA (2014: 1.2 times). With a new
banking facility agreed in the year the Group is well placed to
capitalise on opportunities as they arise.
Strategy
As reported in March 2013, the Board set itself three strategic
targets. These are to double Group revenue to GBP420m by 2018, to
maintain revenue derived outside of the UK at approximately 50% of
Group revenue, and to sustain a pre-tax return on capital employed
of 12% to 15% over the economic cycle. We remain committed to these
targets and have made further progress towards achieving them.
The Group has continued to explore potential acquisitions and to
further support this activity we have hired an experienced senior
executive to solely focus on this key strategic initiative.
Concurrently, continued investment in new product development
programmes in our businesses is both generating organic revenue
growth and driving Group synergies. For example, the first Vado
branded electric shower range was recently launched into the
specialist bathroom boutique channel and a new brassware range
sourced directly from one of Vado's Chinese suppliers was recently
launched in our Tile Africa business in South Africa.
As announced last year, we completed the sale of our Australian
tiles business to Kim Hin Industries Berhad on 30 May 2014 which
resulted in a net cash inflow of GBP3.8m. We also completed the
lease exit and freehold acquisition of the property in Sheffield
for GBP3.4m, subsequently selling it and other surplus property to
Clowes Developments (UK) Ltd on 2 March 2015, which resulted in
proceeds after costs of GBP6.1m. The disposal of these non-core
assets is an excellent outcome for shareholders, reducing leverage
and allowing executive management to fully focus on its target
geographies of the UK, Africa and the Middle East.
Summary and outlook
Increasing UK commercial and domestic construction activity has
driven growth in the UK trade and specification markets and we
continue to grow strongly in this sector. The UK retail sector has
been very mixed but improving trends in consumer confidence and
forecast growth in RMI expenditure are both encouraging.
Notwithstanding the short term challenges, the medium-term outlook
in South Africa remains positive and the strong revenue and
self-help momentum in our South African businesses should ensure we
will make further progress in this year. With our strong brands,
leading market positions, continued new product investment and
self-help initiatives focused on market share gain, the Board
remains confident that the Group should continue to make further
progress for the year to 31 March 2016.
Business performance
2015 2014
GBPm GBPm
-------------------------------- ----- -----
Revenue 222.1 218.7
-------------------------------- ----- -----
Operating profit 10.6 12.8
IAS 19R administrative expenses 1.7 1.4
Acquisition related costs 2.2 0.7
Exceptional operating items 2.5 1.2
-------------------------------- ----- -----
Underlying operating profit 17.0 16.1
-------------------------------- ----- -----
2015 2014
GBPm GBPm
-------------------------------------------------- ----- -----
Revenue - UK 149.1 148.0
Revenue - South Africa 73.0 70.7
-------------------------------------------------- ----- -----
Revenue - Group 222.1 218.7
-------------------------------------------------- ----- -----
Underlying operating profit - UK 13.8 14.2
Underlying operating profit - South Africa 3.2 1.9
-------------------------------------------------- ----- -----
Underlying operating profit - Group 17.0 16.1
-------------------------------------------------- ----- -----
Underlying operating profit margin - UK 9.2% 9.6%
Underlying operating profit margin - South Africa 4.4% 2.7%
-------------------------------------------------- ----- -----
Underlying operating profit margin - Group 7.6% 7.3%
-------------------------------------------------- ----- -----
2015 2014
GBPm GBPm
------------------------------- ----- -----
Underlying operating profit 17.0 16.1
Depreciation 6.0 5.9
Underlying EBITDA 23.0 22.0
Net working capital movement (1.5) (2.6)
Share-based payments 1.3 0.9
Other non-cash items 0.1 -
------------------------------- ----- -----
Underlying operating cash flow 22.9 20.3
------------------------------- ----- -----
Business review - UK
United Kingdom
In the UK, revenue increased in the year by 0.7% to GBP149.1m
(2014: GBP148.0m). Continued good progress in Triton Showers and
Vado and a particularly strong performance in Norcros Adhesives was
partly offset by lower revenue in Johnson Tiles. Underlying
operating profit was lower at GBP13.8m (2014: GBP14.2m) with
margins also slightly lower at 9.2% (2014: 9.6%). This performance
reflects the mixed market conditions which have prevailed, with
gains in trade and specification markets offset by more challenging
retail and export environments.
Triton Showers
Triton Showers, our market leading UK domestic shower business,
grew revenue by 0.4% to GBP52.1m (2014: GBP51.9m). The UK shower
market remained challenging during the last year, although Triton's
main export market, Ireland, showed good growth.
UK revenue was 2.1% lower than the prior year. Despite some good
progress in specification sales, trade sector revenue was 4.7%
lower than prior year, driven by specific destocking in a small
number of key accounts. Retail sector revenue was in line with last
year, which given the contraction in the retail market in the year
was testament to Triton's leading position, the strength of its
consumer franchise and its reputation for quality, service and
innovation.
Triton's new Safeguard+ range of thermostatic electric showers,
which have been designed principally for the care market, have been
very well received during the year.
Export revenue, which represents approximately 15% of overall
revenue, was 17.3% higher compared to prior year. Triton's primary
export market is Ireland and our strong performance here reflects
the recovery in the Irish economy which is beginning to drive
increased activity in both the domestic and commercial construction
sectors. Increased revenue investment in the year has been focused
on and developing a range of electric showers that operate in a low
pressure, high ambient temperature environment. Testing is
progressing well, and when completed, the products will allow us to
realise opportunities in new export markets in the coming year.
Triton has again delivered a strong underlying operating profit
performance as well as excellent cash conversion.
After 23 years in the business, Lorna Fellowes will step down
from her role as Managing Director of Triton on 30 June 2015. Lorna
will take up a Group role with particular focus on business
development and acquisitions. David Tutton, Business Development
Director at Triton for the last twelve months, will become Managing
Director, and his experience in this role will ensure that the
success of Triton achieved during Lorna's tenure will continue.
Vado
Vado, our leading manufacturer of taps, mixer showers, bathroom
accessories and valves recorded revenue of GBP30.5m for the period
(2014: GBP29.1m), 4.7% higher than prior year. During the year Vado
continued its successful penetration of the UK market although
challenging conditions in its major export markets resulted in
revenue lower than the prior year.
UK revenue was 19.8% higher than the prior year with strong
performances in both the retail and trade sectors. UK retail
revenue was 20.9% higher, as a result of the continuing success of
the Vado Partnership Programme and growth with national buying
groups. During the year Vado has not only increased revenue through
established relationships with existing customers, but also
achieved preferred supplier status with new buying groups. UK trade
sales also grew considerably by 18.5% against the prior year,
similarly through growth via its existing customer base and also
winning new accounts, such as Avant Homes and Lovell.
Performance in our export markets was disappointing with a 15.8%
reduction in revenues against the previous year. This predominantly
reflected key customer destocking in the early part of the year
together with a number of construction projects being delayed in
the Middle East. However, additional sales resource has been
deployed in this area and new channels have been opened in India,
South America and the Far East which we expect to benefit from in
the coming year.
During the year, a new ERP system was successfully implemented
in order to provide the business with a strong platform to support
its continued growth. The new system is already yielding
operational improvements and enhanced business information.
In addition, we continue to make solid progress with a number of
Group wide synergy initiatives. These include the launch of the
first range of Vado electric showers into the specialist bathroom
boutique channel which has already has gained good momentum and a
joint project with Tile Africa, our leading specialist retailer in
South Africa, where we have recently introduced a new own label
range of brassware sourced from Vado's specialist supply base. In
the coming year, we plan to launch a range of high end Vado branded
brassware to complement our existing offer.
Underlying operating profit was in line with expectations and
ahead of last year with good cash generation.
Johnson Tiles
Johnson Tiles, the UK market leading ceramic tile manufacturer
and a market leader in the supply of both own manufactured and
imported tiles, saw revenue decrease by 3.2% to GBP59.7m (2014:
GBP61.7m).
UK revenue was 2.8% lower overall, although there were marked
differences in sector performance with a 9.6% increase in trade
revenue offset by an 11.9% reduction in retail revenue.
The trade sector has grown in the year as a result of increased
construction activity and additional specification business, the
latter aided by a reconfiguration of our product range in the year
and the introduction of new "on trend" colours. During the year,
the business was very proud to be involved in the supply of ceramic
poppies for the "Blood Swept Lands and Seas of Red" art and charity
fundraising installation at the Tower of London to commemorate the
beginning of World War I. A bespoke hand crafted manufacturing cell
was created for this project in the space of three weeks, and the
success of this project is testament to the skills and commitment
of our workforce.
The disappointing retail performance mainly reflects range
reviews at a number of our key customers which resulted in the
number of stocked lines being reduced. We have however made good
progress at other accounts such as Topps Tiles, introducing the
Minton Hollins range during the year which has been well
received.
Export revenue, which represents approximately 13% of overall
revenue, returned to growth in the second half of the year albeit
was 5.5% lower for the full year overall. The year's performance
reflected both lower revenue in the Middle East and the fact that
the prior year included the benefit of a number of large commercial
specifications such as the Waikiki Beach Hilton Hotel mural. The
second half performance also benefited from the restructuring of
our Middle East sales operation and the closure of our US
warehouse.
Manufacturing process improvements which reduced wastage over
the past two years eventually necessitated a change to our body
recipe to reduce the amount of recycled waste ceramic material
used. This change in recipe was implemented in July, but despite
significant off line testing, it resulted in significant disruption
and a reduction in production output in the year. Manufacturing
performance improved and returned to normal levels of efficiency in
the last two months of the year which has been maintained in this
financial year. This, coupled with the challenging retail
conditions, resulted in a small operating loss being recorded in
the year.
Norcros Adhesives
Norcros Adhesives, our UK manufacturer and supplier of tile and
stone adhesives and ancillary products, achieved another year of
very strong momentum gaining market share as revenue increased by
28.4% to GBP6.8m (2014: GBP5.3m).
The increase in share reflects further penetration into the DIY
multiples channel and increased sales resource targeted at the
specification sector. Tailored sales, marketing and promotional
initiatives targeted at each segment and our multi brand strategy
supported by our technical advice and excellent customer service
have proved highly successful.
Investment in new product development remains central to the
business and has continued with the launch of a range of new
adhesives and colour matched silicone which has received a good
initial response from the market. These products will further
support our position in the specification market. The reinforced
polymer technology used in these products is new to the market and
provides a degree of differentiation.
To support the growth of the business we have also invested in
both new plant and human resources with improvements in our
operational efficiency.
Another year of strong revenue growth and improved operational
efficiencies has resulted in underlying operating profits higher
than last year.
Business Review - South Africa
Our South African business recorded another year of double digit
growth with revenue 15.1% higher on a constant currency basis. The
average exchange rate for Sterling to Rand for the year was 11.6%
weaker at ZAR17.82 (2014: ZAR15.97), resulting in full year
reported revenue of GBP73.0m (2014: GBP70.7m), which was 3.2%
higher than prior year. Underlying operating profit for the year
improved substantially to GBP3.2m (2014: GBP1.9m) despite the
weaker Rand adversely impacting Sterling reported profits by
approximately GBP0.3m.
Johnson Tiles South Africa
Johnson Tiles South Africa continued to build on the excellent
progress of the last few years and achieved a break even operating
result in line with our expectations notwithstanding the disruption
from the legal strike action earlier in the year and the recent
national electricity load-shedding programme. As a result of the
ongoing likelihood of further electricity stoppages we have
invested in a standby diesel generator which will be installed in
quarter two of this year.
Independent sector revenue grew 9.5% in the year on a constant
currency basis albeit on a reported basis was 2.5% lower at
GBP10.3m (2014: GBP10.6m). The improvement in performance reflects
the second phase of our turnaround plan which is focused on
enhancing our product offer. After the successful installation of
our second inkjet printer our new product programme has delivered a
number of exciting new ranges of inkjet printed product that have
been well received in the market.
Given the significant improvements made in our manufacturing
operations over the last few years and more recently from the
market reaction to our improving product offer we remain confident
of making further progress in this financial year.
TAL
TAL, our market leading adhesives business in South Africa,
delivered another strong performance with constant currency revenue
growth of 11.7% compared to prior year or 0.3% growth on a reported
basis to GBP17.2m (2014: GBP17.1m). This strong revenue growth
reflected both market share gain in the domestic market as well as
strong growth in exports to sub-Saharan Africa with export revenue
19.1% higher than prior year.
Significant investment in plant and equipment, particularly new
mixers and packing heads at our main Olifantsfontein plant was
instrumental in driving improvements in plant efficiency during the
year. This was supplemented by investment in a new grout packaging
line which delivered both manufacturing and revenue benefits.
Underlying operating profit for the year was ahead of last year
driving good cash conversion in the business.
Tile Africa
Tile Africa, our leading retailer of wall and floor tiles,
adhesives, showers, sanitaryware and bathroom fittings, grew
revenue by 17.8% on a constant currency basis and 5.7% on a
reported basis to GBP45.5m (2014: GBP43.0m). In particular,
store-based retail revenue grew by 26.9% on a like-for-like basis
as a result of an improved in-stock position and our store upgrade
programme.
This year we have focused our efforts on improving performance
in our existing store portfolio. We launched our new CX store
format which has been developed to step up our overall retail
customer experience as well as to include our first bathroom
store-within-a-store concept. Our Garsfontein and Alberton stores
have been upgraded to this format with the initial results
exceeding our expectations.
During the second half of the year, we acquired our
strategically located franchise store in Port Elizabeth for a total
consideration of GBP0.3m, and two unprofitable stores were closed.
Due to delays in planning permission, no new stores were opened in
the year, but we expect to open new stores in Boksburg and
Southgate within the next twelve months. Tile Africa currently has
29 owned stores and four franchises.
Underlying profit showed good progress and was ahead of last
year.
Financial overview
2015 2014
Continuing operations GBPm GBPm
-------------------------------------------------------- ----- -----
Revenue 222.1 218.7
-------------------------------------------------------- ----- -----
Underlying operating profit 17.0 16.1
IAS 19R administrative costs (1.7) (1.4)
Acquisition related costs (2.2) (0.7)
Exceptional operating items (2.5) (1.2)
-------------------------------------------------------- ----- -----
Operating profit 10.6 12.8
Net finance income/(costs) 0.8 (7.0)
Exceptional finance costs (0.4) -
-------------------------------------------------------- ----- -----
Profit before taxation 11.0 5.8
Taxation (2.9) 4.3
-------------------------------------------------------- ----- -----
Profit for the year from continuing operations 8.1 10.1
-------------------------------------------------------- ----- -----
Profit/(loss) for the year from discontinued operations 0.1 (1.4)
-------------------------------------------------------- ----- -----
Profit for the year 8.2 8.7
-------------------------------------------------------- ----- -----
Revenue
Group revenue at GBP222.1m (2014: GBP218.7m) increased by 1.5%
on a reported basis and 5.0% on a constant currency basis.
Underlying operating profit
Underlying operating profit increased by 5.8% to GBP17.0m (2014:
GBP16.1m). Our UK businesses delivered underlying operating profit
of GBP13.8m (2014: GBP14.2m), and our South African businesses
generated an underlying operating profit of GBP3.2m (2014:
GBP1.9m). On a constant currency basis the improvement in
underlying operating profit in South African businesses was
GBP1.6m. Group underlying operating profit margins improved to 7.6%
(2014: 7.3%).
IAS 19R administrative costs
These costs represent the costs incurred by the Trustee of
administering the UK pension schemes and are reflected in the
income statement following the implementation of IAS 19R in the
previous year. Costs have risen to GBP1.7m (2014: GBP1.4m) largely
as a result of an increase in the levy charged by the Pension
Protection Fund.
Acquisition related costs
During the year, we have reclassified certain costs related to
business combination activities in line with emerging market
practice. Costs of GBP2.2m (2014: GBP0.7m) have been recognised in
the year and have increased principally due to a GBP0.8m higher
deferred remuneration charge related to Vado and GBP0.8m (2014:
GBPnil) incremental staff costs and external advisory fees. A full
breakdown is provided in note 3 below.
Exceptional operating items
A net exceptional operating charge of GBP2.5m (2014: GBP1.2m)
was recorded as shown in the table below. These are items of
expense or income which arise from transactions which occur outside
of the Group's normal operations.
2015 2014
GBPm GBPm
----------------------------------------- ------ ------
Profit on disposal of residual property (0.4) (0.5)
Sheffield lease surrender 2.5 -
Loss on disposal of property portfolio 1.5 -
Legal costs 0.3 0.2
Pension scheme settlement gain (1.7) -
Restructuring costs 0.3 1.5
2.5 1.2
----------------------------------------- ------ ------
A small parcel of land in Braintree was sold in the year
generating a profit of GBP0.4m. In the previous year a surplus
facility in South Africa was sold at a profit of GBP0.5m.
The Group acquired the freehold and exited its onerous lease in
connection with a property at Orgreave Drive, Sheffield in November
2014, leading to a charge of GBP2.5m. This property, together with
other surplus properties in Tunstall and Boston, were sold to
Clowes Developments (UK) Ltd for cash consideration of GBP6.5m in
March 2015 which led to a loss on disposal of GBP1.5m.
Legal costs of GBP0.3m (2014: GBP0.2m) related to the
contractual dispute with Morrisons regarding the disposal of part
of the surplus land in Tunstall. This dispute has subsequently been
settled in May 2015.
During the year we successfully implemented a number of
liability management initiatives in connection with the Group's UK
defined benefit pension scheme. These exercises led to a settlement
gain of GBP1.7m.
Restructuring costs relate principally to redundancies and asset
write-downs at the Group's businesses and was much higher in 2014
due to the actions taken by management to restructure the Johnson
Tiles business early in that year.
Operating profit for the year was GBP10.6m (2014: GBP12.8m).
Net finance income/(costs) and exceptional finance costs
Net finance income/(costs) decreased by GBP7.8m to income of
GBP0.8m (2014: GBP7.0m cost), although GBP7.0m of this increase
related to the movement on fair value of foreign exchange
contracts. Bank interest payable of GBP1.2m (2014: GBP1.5m) was
lower than last year and reflects the decrease in average net debt
and the lower interest margins agreed as part of the new banking
facility completed in July 2014. Also as a result of entering a new
banking facility, the remaining unamortised costs of raising debt
finance related to the old facility were written off which led to
an exceptional charge of GBP0.4m being recognised.
The Group has recognised a GBP1.1m interest cost in respect of
the pension scheme liability (2014: GBP1.3m) which decreased by
GBP0.2m principally due to the lower opening liability.
Profit before tax
Underlying profit before tax was GBP15.8m (2014: GBP14.6m),
reflecting the increased underlying operating profit of GBP0.9m
noted above and the lower bank interest payable of GBP0.3m.
Underlying profit before tax is reconciled as shown below:
2015 2014
GBPm GBPm
------------------------------------------------------------------ ------ -----
Profit before taxation from continuing operations 11.0 5.8
Adjusted for:
- IAS 19R administrative expenses 1.7 1.4
- acquisition related costs 2.2 0.7
- exceptional operating items 2.5 1.2
- amortisation of costs of raising finance 0.1 0.3
- amortisation of costs of raising finance - exceptional 0.4 -
- net movement on fair value of derivative financial instruments (3.3) 3.7
- discount on property lease provisions 0.1 0.2
- IAS 19R finance cost 1.1 1.3
------------------------------------------------------------------ ------ -----
Underlying profit before taxation 15.8 14.6
------------------------------------------------------------------ ------ -----
The Group reported profit before tax of GBP11.0m (2014:
GBP5.8m).
Taxation
The tax charge for the year was GBP2.9m (2014: credit of
GBP4.3m). In the previous year the remaining unrecognised deferred
tax assets in relation to both the UK and South African businesses
of GBP4.4m were recognised in respect of tax losses and capital
allowances, and consequently the current years charge represents a
more normalised tax charge.
The effective tax rate for the year was 26.6% which was broadly
in line with expectations, and is higher than the standard rate of
tax in the UK because of the geographic mix of profits and because
certain expenses, such as amortisation, are generally not allowable
for tax purposes. The standard rate of UK corporation tax reduced
to 21% from 1 April 2014 has reduced further to 20% from 1 April
2015. In South Africa the standard rate of tax is 28%, unchanged
from 2014.
Profit/(loss) from discontinued operations
On 30 May 2014, the Company completed a transaction to dispose
of 100% of the issued share capital of Norcros Industry (Pty)
Limited (NIPL), which owned its Australian tiles business, to Kim
Hin Industries Berhad (KHIB).
A loss of GBP1.6m relating to this sale was recognised in the
year to 31 March 2014, which, together with the results of the year
for NIPL of GBP0.2m, was disclosed within profit/(loss) for the
year from discontinued operations. Following the completion of the
transaction, the actual loss on disposal was GBP1.5m meaning that a
small profit of GBP0.1m has been recognised in the year to 31 March
2015.
Restatement of prior year results
As noted above, we have reclassified certain costs related to
business combination activities in line with emerging market
practice. In order to effect fair comparison, the results for the
year ended 31 March 2014 have been restated to conform to this
style of presentation, which is shown in note 8 below. The
restatement has no impact on operating profit or cash flows.
Earnings per share
Underlying diluted earnings per share amounted to 2.1p (2014:
2.8p). Excluding the effect of deferred tax assets recognised in
2014, underlying diluted earnings per share for that year would
have been 2.1p. Basic earnings per share were 1.4p (2014:
1.5p).
Dividends
As previously announced it is the Board's intention to continue
a progressive yet prudent dividend policy subject to the Group's
earnings, cash flow and balance sheet position. As such the Board
is recommending a final dividend of 0.375p (2014: 0.34p) per share,
which, if approved, together with the interim dividend of 0.185p
(2014: 0.17p), makes a total dividend of 0.56p (2014: 0.51p) in
respect of the year ended 31 March 2015.
This final dividend, if approved at the Annual General Meeting,
will be payable on 29 July 2015 to shareholders on the register on
26 June 2015. The shares will be quoted ex-dividend on 25 June
2015.
Balance sheet
The Group's balance sheet is summarised below.
2015 2014
GBPm GBPm
--------------------------------------------------------- ------ ------
Property, plant, equipment and investment properties 37.6 41.3
Goodwill and intangible assets 26.9 27.1
Deferred tax 13.8 11.6
Net current assets excluding cash, borrowings and assets
held-for-sale 37.6 36.7
Pension scheme liability (44.3) (21.8)
Other non-current assets and liabilities (4.7) (6.3)
Cash and borrowings (14.2) (27.4)
--------------------------------------------------------- ------ ------
Net assets before assets held-for-sale 52.7 61.2
--------------------------------------------------------- ------ ------
Assets held-for-sale - 4.3
--------------------------------------------------------- ------ ------
Net assets 52.7 65.5
--------------------------------------------------------- ------ ------
Property, plant, equipment and investment properties fell by
GBP3.7m, which was chiefly due to the sale of the surplus
investment property portfolio. Additions in the year were GBP6.9m
(2014: GBP4.3m).
Deferred tax increased principally as a result of the full
recognition of the increase in the pension scheme liability.
Pension schemes
The Group contributed GBP2.1m (2014: GBP2.1m) into its UK
defined benefit pension scheme during the year. This included
deficit recovery contributions of GBP2.1m (2014: GBP2.0m) as part
of the 2012 deficit recovery plan.
The gross defined benefit pension scheme valuation on the UK
scheme showed a deficit of GBP44.3m compared to a deficit of
GBP21.8m last year. The increase in the deficit reflects an
increase in the present value of scheme liabilities due to a lower
discount rate of 3.30% (2014: 4.30%) net of a higher than expected
return on scheme assets driven by rising equity markets.
The Plan has undertaken a number of liability management
exercises during the year which have resulted in a number of
benefits being settled and some changes to pension increases in
payment. The net impact of these exercises was to reduce the net
deficit by GBP1.7m which has been reflected in the Consolidated
Income Statement as an exceptional operating item as follows:
GBPm
-------------------------------------------------------------------------- ------
Liabilities extinguished on settlements 6.8
Assets distributed on settlements (4.4)
IAS 19R pension administration expenses - liability management exercises (0.7)
-------------------------------------------------------------------------- ------
Total 1.7
-------------------------------------------------------------------------- ------
The Group's contributions to its defined contribution pension
schemes were GBP2.6m (2014: GBP2.2m). The main reason for the
increase is due to the implementation of salary exchange scheme for
all UK employees with effect from 1 April 2014. This scheme has had
no overall impact on UK employment costs as the scheme operates by
employees electing to exchange a proportion of their salary for an
employer pension contribution.
Cash flow and net debt
Net debt decreased by GBP12.7m in the year to GBP14.2m (2014:
GBP26.9m). A summary of the movement in net debt is shown
below.
2015 2014
GBPm GBPm
---------------------------------------------------------- ------- --------
Underlying operating cash flow 22.9 20.3
Cash flows from exceptional items and acquisition related
costs (4.7) (4.4)
Pension fund deficit recovery contributions (2.1) (2.0)
Cash used in discontinued operations 0.1 (0.3)
---------------------------------------------------------- ------- --------
Cash flow generated from operations 16.2 13.6
Net interest paid (1.3) (1.6)
Taxation (0.5) (1.7)
---------------------------------------------------------- ------- --------
Net cash generated from operating activities 14.4 10.3
Capital expenditure (7.0) (4.2)
Purchase of investment property (0.9) -
Proceeds from sale of investment property 6.5 1.4
Acquisitions and disposals 3.3 0.1
Dividends (3.1) (2.8)
Costs of raising debt finance (0.7) (0.2)
Issue of share capital 0.2 0.4
Other items - (1.2)
---------------------------------------------------------- ------- --------
Movement in net debt 12.7 3.8
Opening net debt (26.9) (30.7)
---------------------------------------------------------- ------- --------
Closing net debt (14.2) (26.9)
---------------------------------------------------------- ------- --------
Underlying operating cash flow was GBP2.6m higher than in the
previous year at GBP22.9m, as a result of higher operating profits
and strong management of working capital. This represents excellent
cash conversion, being 99.6% of underlying EBITDA (2014: 92.3%).
The Group's working capital outflow was GBP1.5m (2014: GBP2.6m),
principally reflecting investment in inventory to improve the
in-stock position of products in Tile Africa stores.
Net cash generated from operating activities was GBP4.1m higher
than the previous year at GBP14.4m, largely due to improved
underlying operating cash flow, lower tax and interest payments and
lower outflows in respect of exceptional items.
The GBP0.9m purchase of investment property relates to the
freehold purchase of the property at Orgreave Drive, Sheffield.
This was subsequently sold together with the remaining surplus
investment properties in Tunstall and Boston resulting in net
proceeds of GBP6.1m. A small parcel of land in Braintree was also
sold in the first half of the year for GBP0.4m.
Acquisitions and disposals principally comprises a GBP3.8m
inflow resulting from the sale of the Australian tiles business in
May, net of GBP0.3m deferred consideration paid to the former
shareholders of Vado and the GBP0.2m cost of acquiring the Port
Elizabeth franchise store in South Africa.
Capital expenditure at GBP7.0m (2014: GBP4.2m) included a second
inkjet printer at Johnson Tiles South Africa, Tile Africa store
upgrades and improvements to mixers and packing heads at TAL. In
the UK, there was a new selection line at Johnson Tiles, a new
filling machine at Norcros Adhesives, a replacement ERP system at
Vado and continued investment in tooling for new product in Triton
Showers.
Bank funding
In July 2014 the Group agreed a new unsecured GBP70m revolving
credit facility plus a GBP30m accordion facility with Lloyds Bank
plc, Barclays Bank plc and HSBC Bank plc. The new banking facility
has been secured to July 2019, and at current levels of net debt
and leverage is expected to reduce interest costs by approximately
GBP0.2m per annum. As a consequence, non-cash financing costs of
GBP0.4m relating to the old facility were expensed to the income
statement as exceptional finance costs. A cash outflow of GBP0.7m
was incurred in the period in relation to the costs of the new
facility.
Responsibility Statement
Each of the directors, whose names and functions are listed
below, confirms that, to the best of their knowledge:
The consolidated financial statements, prepared in accordance
with the applicable United Kingdom law and in conformity with IFRS,
as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Group and the undertakings included in the consolidation taken as a
whole; and
The business review includes a fair review of the development
and performance of the business and the position of the Group and
the undertakings included in the consolidation taken as a
whole.
Directors: Martin Towers (Chairman), Nick Kelsall (Group Chief
Executive), Martin Payne (Group Finance Director), David McKeith
(Non-Executive Director) and Jo Hallas (Non-Executive
Director).
N. P. Kelsall
Group Chief Executive
M. K. Payne
Group Finance Director
Consolidated income statement
Year ended 31 March 2015
2015 2014*
Notes GBPm GBPm
--------------------------------------------------------------------------- ------ ------ -------
Continuing operations
Revenue 2 222.1 218.7
--------------------------------------------------------------------------- ------ ------ -------
Underlying** operating profit 2 17.0 16.1
IAS 19R administrative expenses (1.7) (1.4)
Acquisition related costs 3 (2.2) (0.7)
Exceptional operating items 3 (2.5) (1.2)
--------------------------------------------------------------------------- ------ ------ -------
Operating profit 2 10.6 12.8
--------------------------------------------------------------------------- ------ ------ -------
Finance costs 4 (1.4) (5.7)
Exceptional finance costs 4 (0.4) -
--------------------------------------------------------------------------- ------ ------ -------
Total finance costs 4 (1.8) (5.7)
Finance income 4 3.3 -
IAS 19R finance cost (1.1) (1.3)
--------------------------------------------------------------------------- ------ ------ -------
Profit before taxation 11.0 5.8
Taxation (2.9) 4.3
--------------------------------------------------------------------------- ------ ------ -------
Profit for the year from continuing operations 8.1 10.1
--------------------------------------------------------------------------- ------ ------ -------
Profit/(loss) for the year from discontinued operations 0.1 (1.4)
--------------------------------------------------------------------------- ------ ------ -------
Profit for the year 8.2 8.7
--------------------------------------------------------------------------- ------ ------ -------
Earnings per share attributable to equity holders of the Company
Basic earnings per share:
From continuing operations 6 1.4p 1.7p
From discontinued operations 6 - (0.2p)
--------------------------------------------------------------------------- ------ ------ -------
From profit for the year 6 1.4p 1.5p
--------------------------------------------------------------------------- ------ ------ -------
Diluted earnings per share:
From continuing operations 6 1.3p 1.6p
From discontinued operations 6 - (0.2p)
--------------------------------------------------------------------------- ------ ------ -------
From profit for the year 6 1.3p 1.4p
--------------------------------------------------------------------------- ------ ------ -------
Weighted average number of shares for basic earnings per share (millions) 6 592.2 584.0
Non-GAAP measures:
--------------------------------------------------------------------------- ------ ------ -------
Underlying** profit before taxation (GBPm) 5 15.8 14.6
Underlying** earnings (GBPm) 5 13.0 17.0
Basic underlying** earnings per share 6 2.2p 2.9p
Diluted underlying** earnings per share 6 2.1p 2.8p
*The prior year comparatives have been restated to reflect the
revised presentation of acquisition related costs (see note 8).
** Underlying is before IAS 19R administrative expenses,
acquisition related costs and exceptional operating items and,
where relevant, before non-cash finance costs less attributable
taxation.
Consolidated statement of comprehensive income and expense
Year ended 31 March 2015
2015 2014
GBPm GBPm
-------------------------------------------------------------------------- ------- ------
Profit for the year 8.2 8.7
Other comprehensive income and expense:
Items that will not subsequently be reclassified to the income statement
Actuarial (losses)/gains on retirement benefit obligations (18.8) 6.2
Items that may be subsequently reclassified to the income statement
Foreign currency translation adjustments (0.6) (9.5)
--------------------------------------------------------------------------- ------- ------
Other comprehensive expense for the year (19.4) (3.3)
--------------------------------------------------------------------------- ------- ------
Total comprehensive (expense)/income for the year (11.2) 5.4
--------------------------------------------------------------------------- ------- ------
Attributable to equity shareholders arising from:
Continuing operations (11.4) 7.7
Discontinued operations 0.2 (2.3)
--------------------------------------------------------------------------- ------- ------
(11.2) 5.4
-------------------------------------------------------------------------- ------- ------
Items in the statement are disclosed net of tax.
Consolidated balance sheet
At 31 March 2015
2015 2014
GBPm GBPm
---------------------------------------------------------------- ------- -------
Non-current assets
Goodwill 22.2 22.1
Intangible assets 4.7 5.0
Property, plant and equipment 37.6 36.9
Investment properties - 4.4
Deferred tax assets 13.8 11.6
----------------------------------------------------------------- ------- -------
78.3 80.0
---------------------------------------------------------------- ------- -------
Current assets
Inventories 52.2 50.2
Trade and other receivables 40.5 41.9
Derivative financial instruments 2.1 -
Cash and cash equivalents 5.6 3.9
Assets classified as held-for-sale - 6.2
----------------------------------------------------------------- ------- -------
100.4 102.2
---------------------------------------------------------------- ------- -------
Current liabilities
Trade and other payables (54.9) (52.3)
Derivative financial instruments (1.0) (1.8)
Current tax liabilities (1.3) (1.3)
Financial liabilities - borrowings (1.4) (0.8)
Liabilities associated with assets classified as held-for-sale - (1.9)
----------------------------------------------------------------- ------- -------
(58.6) (58.1)
---------------------------------------------------------------- ------- -------
Net current assets 41.8 44.1
----------------------------------------------------------------- ------- -------
Total assets less current liabilities 120.1 124.1
----------------------------------------------------------------- ------- -------
Non-current liabilities
Financial liabilities - borrowings (18.4) (30.5)
Pension scheme liability (44.3) (21.8)
Derivative financial instruments - (0.3)
Other non-current liabilities (1.4) (1.6)
Provisions (3.3) (4.4)
----------------------------------------------------------------- ------- -------
(67.4) (58.6)
---------------------------------------------------------------- ------- -------
Net assets 52.7 65.5
----------------------------------------------------------------- ------- -------
Financed by:
Share capital 6.0 5.8
Share premium 1.0 0.9
Retained earnings and other reserves 45.7 58.8
----------------------------------------------------------------- ------- -------
Total equity 52.7 65.5
----------------------------------------------------------------- ------- -------
Consolidated cash flow statement
Year ended 31 March 2015
2015 2014
Notes GBPm GBPm
-------------------------------------------------------------------------------------- ------ ------- ------
Cash generated from operations 7 16.2 13.6
Income taxes paid (0.5) (1.7)
Interest paid (1.3) (1.6)
-------------------------------------------------------------------------------------- ------ ------- ------
Net cash generated from operating activities 14.4 10.3
-------------------------------------------------------------------------------------- ------ ------- ------
Cash flows from investing activities
Proceeds from sale of investment property 6.1 -
Proceeds from sale of property, plant and equipment 0.4 1.4
Purchase of investment property (0.9) -
Purchase of property, plant and equipment (7.0) (4.2)
Acquisition of subsidiary undertakings (including payment of deferred consideration) (0.5) 0.1
Disposal of subsidiary undertakings net of cash divested 3.8 -
-------------------------------------------------------------------------------------- ------ ------- ------
Net cash generated from/(used in) investing activities 1.9 (2.7)
-------------------------------------------------------------------------------------- ------ ------- ------
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 0.2 0.4
Repayment of borrowings (12.1) (6.9)
Costs of raising debt finance (0.7) (0.2)
Dividends paid to the Company's shareholders (3.1) (2.8)
-------------------------------------------------------------------------------------- ------ ------- ------
Net cash used in financing activities (15.7) (9.5)
-------------------------------------------------------------------------------------- ------ ------- ------
Net increase/(decrease) in cash at bank and in hand and bank overdrafts 0.6 (1.9)
Cash at bank and in hand and bank overdrafts at the beginning of the year 3.7 6.4
Exchange movements on cash and bank overdrafts (0.1) (0.8)
-------------------------------------------------------------------------------------- ------ ------- ------
Cash at bank and in hand and bank overdrafts at end of the year 4.2 3.7
-------------------------------------------------------------------------------------- ------ ------- ------
Cash at bank and in hand and bank overdrafts at the end of the year comprises:
Cash at bank and in hand and bank overdrafts per the balance sheet 4.2 3.2
Cash at bank and in hand included within assets classified as held-for-sale - 0.5
-------------------------------------------------------------------------------------- ------ ------- ------
4.2 3.7
-------------------------------------------------------------------------------------- ------ ------- ------
The net increase in cash at bank and in hand and bank overdrafts
in the year from discontinued operations included in the above was
GBP3.9m (2014: decrease of GBP0.3m).
Consolidated statement of changes in equity
Year ended 31 March 2015
Ordinary Retained
share Share Translation earnings/
capital premium reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- ------- ----------- --------- ------
At 1 April 2012 5.8 0.2 5.8 59.3 71.1
Comprehensive income:
Profit for the year - - - 5.6 5.6
Other comprehensive
expense:
Actuarial loss on retirement
benefit obligations - - - (8.8) (8.8)
Foreign currency translation
adjustments - - (4.8) - (4.8)
------------------------------ -------- ------- ----------- --------- ------
Total other comprehensive
expense - - (4.8) (8.8) (13.6)
------------------------------ -------- ------- ----------- --------- ------
Transactions with owners:
Shares issued - 0.3 - - 0.3
Dividends paid - - - (2.5) (2.5)
Share option schemes
and warrants - - - 0.7 0.7
------------------------------ -------- ------- ----------- --------- ------
At 31 March 2013* 5.8 0.5 1.0 54.3 61.6
------------------------------ -------- ------- ----------- --------- ------
Comprehensive income:
Profit for the year - - - 8.7 8.7
Other comprehensive
expense:
Actuarial gain on retirement
benefit obligations - - - 6.2 6.2
Foreign currency translation
adjustments - - (9.5) - (9.5)
------------------------------ -------- ------- ----------- --------- ------
Total other comprehensive
(expense)/income - - (9.5) 6.2 (3.3)
------------------------------ -------- ------- ----------- --------- ------
Transactions with owners:
Shares issued - 0.4 - - 0.4
Dividends paid - - - (2.8) (2.8)
Share option schemes
and warrants - - - 0.9 0.9
------------------------------ -------- ------- ----------- --------- ------
At 31 March 2014 5.8 0.9 (8.5) 67.3 65.5
------------------------------ -------- ------- ----------- --------- ------
Notes to the preliminary statement
Year ended 31 March 2015
1. Basis of preparation
Norcros plc ("the Company") and its subsidiaries (together "the
Group") principal activities are the development, manufacture and
marketing of home consumer products in the UK and South Africa. The
Company is a public limited company which is listed on the London
Stock Exchange market of listed securities is incorporated and
domiciled in the UK. The address of its registered office is
Ladyfield House, Station Road, Wilmslow, SK9 1BU.
The financial information presented in this preliminary
announcement is extracted from, and is consistent with, the Group's
audited financial statements for the year ended 31 March 2015. The
financial information set out above does not constitute the
Company's statutory financial statements for the periods ended 31
March 2015 or 31 March 2014 but is derived from those financial
statements. Statutory financial statements for 2015 will be
delivered following the Company's annual general meeting. The
auditors have reported on those financial statements; their report
was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The Group's results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
2. Segmental reporting
The Group operates in two main geographical areas: the UK and
South Africa. All inter-segment transactions are made on an arm's
length basis. The chief operating decision maker (being the Board)
assesses performance and allocates resources based on geography and
accordingly segments have been determined on this basis. Corporate
costs are allocated to segments on the basis of external
turnover.
Continuing operations - year ended 31 March 2015
South
UK Africa Group
GBPm GBPm GBPm
---------------------------------------------------------- -------- ------- --------
Revenue 149.1 73.0 222.1
----------------------------------------------------------- -------- ------- --------
Underlying operating profit 13.8 3.2 17.0
IAS 19R administrative expenses (1.7) - (1.7)
Acquisition related costs (2.2) - (2.2)
Exceptional operating items (2.3) (0.2) (2.5)
----------------------------------------------------------- -------- ------- --------
Operating profit 7.6 3.0 10.6
----------------------------------------------------------- -------- ------- --------
Finance income (net) 0.4
----------------------------------------------------------- -------- ------- --------
Profit before taxation 11.0
Taxation (2.9)
----------------------------------------------------------- -------- ------- --------
Profit for the year from continuing operations 8.1
----------------------------------------------------------- -------- ------- --------
Net debt (14.2)
----------------------------------------------------------- -------- ------- --------
Segmental assets 124.3 54.4 178.7
Segmental liabilities (110.8) (15.2) (126.0)
Additions to property, plant and equipment 3.8 3.1 6.9
Proceeds from disposals of property, plant and equipment 0.4 - 0.4
Proceeds from disposals of investment property (net) 6.1 - 6.1
Loss on disposal of property, plant and equipment (0.1) - (0.1)
Depreciation 4.0 2.0 6.0
----------------------------------------------------------- -------- ------- --------
Revenues of GBP34.2m (2014: GBP35.9m) are derived from a single
customer. These revenues are attributable to the UK segment.
Continuing operations - year ended 31 March 2014*
South
UK Africa Group
GBPm GBPm GBPm
---------------------------------------------------------- -------- ------- --------
Revenue 148.0 70.7 218.7
---------------------------------------------------------- -------- ------- --------
Underlying operating profit 14.2 1.9 16.1
IAS 19R administrative expenses (1.4) - (1.4)
Acquisition related costs (0.7) - (0.7)
Exceptional operating items (1.6) 0.4 (1.2)
---------------------------------------------------------- -------- ------- --------
Operating profit 10.5 2.3 12.8
---------------------------------------------------------- -------- ------- --------
Finance costs (net) (7.0)
---------------------------------------------------------- -------- ------- --------
Profit before taxation 5.8
Taxation 4.3
---------------------------------------------------------- -------- ------- --------
Profit for the year from continuing operations 10.1
---------------------------------------------------------- -------- ------- --------
Net debt (26.9)
---------------------------------------------------------- -------- ------- --------
Segmental assets 125.3 50.7 176.0
Segmental liabilities (100.9) (13.9) (114.8)
Additions to property, plant and equipment 2.5 1.8 4.3
Proceeds from disposals of property, plant and equipment - 1.4 1.4
Loss on disposal of property, plant and equipment - (0.1) (0.1)
Depreciation 4.0 1.9 5.9
---------------------------------------------------------- -------- ------- --------
*The prior year comparatives have been restated to reflect the
revised presentation of acquisition related costs (see note 8).
3. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below.
2015 2014
Acquisition related costs GBPm GBPm
---------------------------------- ----- -----
Deferred remuneration(1) 1.1 0.3
Intangible asset amortisation(2) 0.3 0.4
Staff costs and advisory fees(3) 0.8 -
---------------------------------- ----- -----
2.2 0.7
---------------------------------- ----- -----
1 In accordance with IFRS 3R, a significant proportion of
deferred consideration payable to the former shareholders of Vado
is required to be treated as remuneration, and, accordingly, is
expensed to the income statement as incurred.
2 As a result of the acquisition of Vado, the Group has
recognised an intangible asset which is subject to a non-cash
amortisation charge.
3 Costs of maintaining an in-house acquisitions department and
professional advisory fees incurred in connection with the Group's
business combination activities.
2015 2014
Exceptional operating items GBPm GBPm
-------------------------------------------- ------ ------
Profit on disposal of residual property(1) (0.4) (0.5)
Sheffield lease surrender(2) 2.5 -
Loss on disposal of property portfolio(3) 1.5 -
Legal costs(4) 0.3 0.2
Pension scheme settlement gain(5) (1.7) -
Restructuring costs(6) 0.3 1.5
2.5 1.2
-------------------------------------------- ------ ------
1 A profit of GBP0.4m was generated in the year following the
sale of a small parcel of land in Braintree, UK, which had a net
book value of GBPnil. During the previous year the Group disposed
of a residual manufacturing facility in South Africa, generating a
profit of GBP0.5m.
2 The Group acquired the freehold and exited its onerous lease
in connection with the Orgreave Drive, Sheffield, property in
November 2014 for total consideration of GBP3.4m, of which GBP2.5m
was the cost of surrendering the lease and has been recognised as
an exceptional operating item. The remaining GBP0.9m related to the
purchase of the freehold.
3 The Group's remaining freehold surplus property portfolio was
sold to Clowes Developments (UK) Ltd for net proceeds of GBP6.1m,
being consideration of GBP6.5m net of GBP0.4m costs. This
transaction included the property in Sheffield, amongst others, and
led to a loss on disposal of GBP1.5m.
4 Legal costs related to the contractual dispute with a
subsidiary of Wm Morrison Supermarkets plc regarding the Highgate
site in Tunstall, UK.
5 During the year the Group undertook a liability management
exercise in connection with its principal UK defined benefit
pension scheme. This resulted in a settlement gain of GBP1.7m in
the year, net of costs of GBP0.7m.
6 Restructuring costs related to redundancies and asset
write-downs following the implementation of a programme of
restructuring initiatives throughout the Group's business
units.
4. Finance income and costs
2015 2014
GBPm GBPm
------------------------------------------------------------ ------ -----
Finance costs
Interest payable on bank borrowings 1.2 1.5
Amortisation of costs of raising debt finance 0.1 0.3
Movement on fair value of derivatives - 3.7
Unwind of discount on property lease provisions 0.1 0.2
------------------------------------------------------------ ------ -----
Finance costs 1.4 5.7
------------------------------------------------------------ ------ -----
Exceptional finance costs(1) 0.4 -
------------------------------------------------------------ ------ -----
Total finance costs 1.8 5.7
------------------------------------------------------------ ------ -----
Finance income
Movement on fair value of derivative financial instruments (3.3) -
------------------------------------------------------------ ------ -----
Total finance income (3.3) -
------------------------------------------------------------ ------ -----
Net finance (income)/costs (1.5) 5.7
------------------------------------------------------------ ------ -----
1 Following the refinancing of the Group's UK banking facilities
in July 2014, the unamortised costs relating to the previous
facility were written off in full.
5. Non-GAAP measures
Consolidated Income Statement
The Directors believe that underlying profit before taxation and
underlying earnings provide shareholders with additional useful
information on the underlying performance of the Group. Underlying
profit before taxation is defined as profit before taxation, IAS
19R administrative expenses, acquisition related costs, exceptional
operating items, amortisation of costs of raising finance, net
movement on fair value of derivative financial instruments,
discounting of property lease provisions and finance costs relating
to pension schemes.
2015 2014
GBPm GBPm
------------------------------------------------------------------ ------ -----
Profit before taxation from continuing operations 11.0 5.8
Adjusted for:
- IAS 19R administrative expenses 1.7 1.4
- acquisition related costs (see note 3) 2.2 0.7
- exceptional operating items (see note 3) 2.5 1.2
- amortisation of costs of raising finance 0.1 0.3
- amortisation of costs of raising finance - exceptional 0.4 -
- net movement on fair value of derivative financial instruments (3.3) 3.7
- discount on property lease provisions 0.1 0.2
- IAS 19R finance cost 1.1 1.3
------------------------------------------------------------------ ------ -----
Underlying profit before taxation 15.8 14.6
------------------------------------------------------------------ ------ -----
Taxation attributable to underlying profit before taxation (2.8) 2.4
------------------------------------------------------------------ ------ -----
Underlying earnings 13.0 17.0
------------------------------------------------------------------ ------ -----
EBITDA is a measure commonly used by investors and financiers to
assess business performance. Underlying EBITDA has been provided
which reflects EBITDA as adjusted for IAS 19R administrative
expenses, acquisition related costs and exceptional operating
items. The Directors consider that this measure provides
shareholders with additional useful information on the performance
of the Group.
2015 2014
GBPm GBPm
--------------------------------------------- ----- -----
Operating profit from continuing operations 10.6 12.8
Adjusted for:
- depreciation 6.0 5.9
- IAS 19R administrative expenses 1.7 1.4
- acquisition related costs (see note 3) 2.2 0.7
- exceptional operating items (see note 3) 2.5 1.2
Underlying EBITDA 23.0 22.0
--------------------------------------------- ----- -----
Consolidated Cash Flow Statement
Underlying operating cash flow is defined as cash generated from
continuing operations before cash outflows from exceptional items
and acquisition related costs and pension fund deficit recovery
contributions. The Directors believe that underlying operating cash
flow provides shareholders with additional useful information on
the underlying cash generation of the Group.
2015 2014
GBPm GBPm
-------------------------------------------------------------------------------- ----- -----
Cash generated from continuing operations (see note 7) 16.1 13.9
Adjusted for:
- cash flows from exceptional items and acquisition related costs (see note 7) 4.7 4.4
- pension fund deficit recovery contributions (see note 7) 2.1 2.0
-------------------------------------------------------------------------------- ----- -----
Underlying operating cash flow 22.9 20.3
-------------------------------------------------------------------------------- ----- -----
Consolidated Balance Sheet
Underlying capital employed is used to calculate underlying
return on capital employed, one of the Group's key performance
indicators, and reflects the value of the assets used to generate
underlying operating profit from continuing operations.
Consequently, adjustments are made to remove assets and liabilities
that do not impact underlying operating profit from continuing
operations and to remove the average impact of exchange rate
movements.
2015 2014
GBPm GBPm
----------------------------------------------------------------- ------ ------
Net assets 52.7 65.5
Adjusted for:
- assets and associated liabilities classified as held-for-sale - (4.3)
- pension scheme liability (net of associated tax) 35.4 17.4
- cash and cash equivalents (5.6) (3.9)
- financial liabilities - borrowings 19.8 31.3
----------------------------------------------------------------- ------ ------
Capital employed 102.3 106.0
----------------------------------------------------------------- ------ ------
- foreign exchange adjustment 0.1 (0.2)
----------------------------------------------------------------- ------ ------
Underlying capital employed 102.4 105.8
----------------------------------------------------------------- ------ ------
6. Earnings per share
Basic and diluted 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 2015 the potential dilutive ordinary
shares amounted to 23,032,985 (2014: 24,374,489) as calculated in
accordance with IAS 33.
The calculation of EPS is based on the following profits and
numbers of shares:
2015 2014
GBPm GBPm
--------------------------------------------------------- ----- ------
Profit for the year from continuing operations 8.1 10.1
Profit/(loss) for the year from discontinued operations 0.1 (1.4)
--------------------------------------------------------- ----- ------
Profit for the year 8.2 8.7
--------------------------------------------------------- ----- ------
2015 2014
Number Number
------------------------------------------------------------------ ------------ ------------
Weighted average number of shares for basic earnings per share 592,231,354 583,950,031
Share options and warrants 23,032,985 24,374,489
------------------------------------------------------------------ ------------ ------------
Weighted average number of shares for diluted earnings per share 615,264,339 608,324,520
------------------------------------------------------------------ ------------ ------------
2015 2014
------------------------------ ----- -------
Basic earnings per share:
From continuing operations 1.4p 1.7p
From discontinued operations - (0.2p)
------------------------------ ----- -------
From profit for the year 1.4p 1.5p
------------------------------ ----- -------
Diluted earnings per share:
From continuing operations 1.3p 1.6p
From discontinued operations - (0.2p)
------------------------------ ----- -------
From profit for the year 1.3p 1.4p
------------------------------ ----- -------
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share has also been
provided which reflects underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
2015 2014
GBPm GBPm
---------------------------------- ----- -----
Underlying earnings (see note 5) 13.0 17.0
---------------------------------- ----- -----
2015 2014
--------------------------------------- ----- -----
Basic underlying earnings per share 2.2p 2.9p
Diluted underlying earnings per share 2.1p 2.8p
--------------------------------------- ----- -----
In 2014 the Company recognised further deferred tax assets
totalling GBP4.4m. Excluding the impact of this, underlying basic
earnings per share would have been 2.2p in 2014 and underlying
diluted earnings per share would have been 2.1p in 2014.
7. Consolidated cash flow statement
(a) Cash generated from operations
The analysis of cash generated from operations split by
continuing and discontinued operations is given below.
Continuing operations
2015 2014
GBPm GBPm
-------------------------------------------------------------------------- ------ ------
Profit before taxation 11.0 5.8
Adjustments for:
- IAS 19R administrative expenses included in the Income Statement 1.7 1.4
- acquisition related costs included in the Income Statement 2.2 0.7
- exceptional items included in the Income Statement 2.5 1.2
- cash flows from exceptional items and acquisition related costs (4.7) (4.4)
- depreciation 6.0 5.9
- difference between current service costs and normal cash contributions - (0.1)
- pension fund deficit recovery contributions (2.1) (2.0)
- loss on disposal of property, plant and equipment 0.1 0.1
- finance costs 1.8 5.7
- finance income (3.3) -
- IAS 19R finance cost 1.1 1.3
- share-based payments 1.3 0.9
-------------------------------------------------------------------------- ------ ------
Operating cash flows before movement in working capital 17.6 16.5
Changes in working capital:
- increase in inventories (2.0) (5.7)
- increase in trade and other receivables (1.4) (1.9)
- increase in trade and other payables 1.9 5.0
-------------------------------------------------------------------------- ------ ------
Cash generated from continuing operations 16.1 13.9
-------------------------------------------------------------------------- ------ ------
Discontinued operations
2015 2014
GBPm GBPm
--------------------------------------------------------- ------ ------
Profit before taxation - 0.2
Adjustments for:
- depreciation - 0.1
--------------------------------------------------------- ------ ------
Operating cash flows before movement in working capital - 0.3
Changes in working capital:
- decrease/(increase) in inventories 0.4 (0.4)
- increase in trade and other receivables (0.1) (0.2)
- decrease in trade and other payables (0.2) -
--------------------------------------------------------- ------ ------
Cash generated from/(used in) discontinued operations 0.1 (0.3)
--------------------------------------------------------- ------ ------
Cash generated from operations 16.2 13.6
--------------------------------------------------------- ------ ------
(b) Outflow related to exceptional items and acquisition related
costs
This includes expenditure charged to exceptional provisions
relating to onerous lease costs, acquisition related costs
(excluding deferred remuneration) and other business
rationalisation and restructuring costs.
(c) Analysis of net debt
Cash included
within assets
held-for-sale Net cash Borrowings Net debt
GBPm GBPm GBPm GBPm
------------------------------------------ --------------- --------- ----------- ---------
At 1 April 2013 - 6.4 (37.1) (30.7)
Cash flow (0.3) (1.6) 6.9 5.0
Reclassification to assets held-for-sale 1.0 (1.0) - -
Other non-cash movements - - (0.4) (0.4)
Exchange movement (0.2) (0.6) - (0.8)
------------------------------------------ --------------- --------- ----------- ---------
At 31 March 2014 0.5 3.2 (30.6) (26.9)
Cash flow (0.5) 1.1 12.1 12.7
Other non-cash movements - - 0.1 0.1
Exchange movement - (0.1) - (0.1)
------------------------------------------ --------------- --------- ----------- ---------
At 31 March 2015 - 4.2 (18.4) (14.2)
------------------------------------------ --------------- --------- ----------- ---------
Other non-cash movements principally relate to the movement in
the costs of raising debt finance in the year.
8. Restatement of prior year comparatives
The Group has reclassified certain costs related to business
combination activities in line with emerging market practice such
that they are now presented as a separate line entitled
"Acquisition related costs" in the Consolidated Income Statement.
In order to effect fair comparison, the results for the year ended
31 March 2014 have been restated to conform to this style of
presentation.
2014 as IAS 19R
previously administrative Deferred Amortisation 2014 as
reported expenses remuneration of intangibles restated
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------------ ---------------- -------------- ---------------- ---------
Underlying operating profit 16.1 - - - 16.1
Non-underlying operating items (1.8) 1.4 - 0.4 -
IAS 19R administrative expenses - (1.4) - - (1.4)
Acquisition related costs - - (0.3) (0.4) (0.7)
Exceptional operating items (1.5) - 0.3 - (1.2)
--------------------------------- ------------ ---------------- -------------- ---------------- ---------
Operating profit 12.8 - - - 12.8
--------------------------------- ------------ ---------------- -------------- ---------------- ---------
The restatement has no impact on the Consolidated Balance Sheet
or Consolidated Cash Flow Statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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