TIDMNXR
RNS Number : 4016P
Norcros PLC
17 November 2016
17 November 2016
Norcros plc
Results for the six months ended 30 September 2016
'A robust performance demonstrating the Group's resilience'
Norcros, the market leading supplier of innovative branded
showers, taps, bathroom accessories, tiles and adhesives, today
announces its results for the six months ended 30 September
2016.
Financial Summary
2016 2015 % change % change
as reported at constant
currency
----------------------- ---------- ---------- ------------- -------------
Revenue GBP128.8m GBP118.7m +8.5% +9.2%
----------------------- ---------- ---------- ------------- -------------
Underlying* operating
profit GBP11.0m GBP9.9m +11.1%
----------------------- ---------- ---------- ------------- -------------
Underlying* profit
before tax GBP10.5m GBP9.4m +11.7%
----------------------- ---------- ---------- ------------- -------------
Profit before tax GBP7.7m GBP7.0m +10.0%
----------------------- ---------- ---------- ------------- -------------
Underlying operating
cash flow** GBP16.0m GBP13.3m +20.3%
----------------------- ---------- ---------- ------------- -------------
Diluted underlying
EPS* 12.9p 11.8p +9.3%
----------------------- ---------- ---------- ------------- -------------
Net debt GBP27.5m GBP29.2m
----------------------- ---------- ---------- ------------- -------------
Interim dividend
per share 2.4p 2.2p +9.1%
----------------------- ---------- ---------- ------------- -------------
* 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 means cash generated from
continuing operations before exceptional cash flows and pension
fund deficit recovery contributions
Highlights
-- Resilient first half performance
-- Revenue increased by 9.2% on a constant currency basis
-- Underlying operating profit increased by 11.1% to GBP11.0m
-- Return on sales in South African business increased to 7.2% (2015: 4.9%)
-- Profit before tax increased by 10.0% to GBP7.7m
-- Strong underlying operating cash generation: 113% of underlying EBITDA
-- Net debt reduced by GBP5.0m since 31 March 2016
-- Interim dividend increased by 9.1% to 2.4p per share
Martin Towers, Chairman, commented:
"I am pleased to announce a robust performance for the six
months ended 30 September 2016 which demonstrates the resilience of
the Group's business portfolio. The recent acquisitions of Croydex
and Abode have been fully integrated into the Group and are
delivering performances in line with the Board's expectations, and
we remain on course to deliver on our strategy of growing the Group
both organically and through complementary acquisitions.
With our strong brands, leading market positions and continued
self-help initiatives focused on market share gain the Group is
well positioned to make further progress. Given the encouraging
performance in the first half of the year, the Board expects the
Group to achieve underlying operating profit in line with its
expectations for the year to 31 March 2017."
There will be a presentation today at 8.00 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.com later in the day.
ENQUIRIES:
Norcros plc Tel: 01625 547 700
Nick Kelsall, Group Chief Executive
Shaun Smith, Group Finance Director
Hudson Sandler Tel: 0207 796 4133
Nick Lyon
Charlie Jack
Fern Duncan
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 six brands:
o Triton Showers - Market leader in the manufacture and
marketing of showers in the UK
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 - A leading manufacturer and supplier of ceramic
tiles in the UK
o Norcros Adhesives - Manufacturer of tile & stone
adhesives, grouts and related products
-- Based in South Africa, Norcros operates under three brands:
o Tile Africa - Chain of retail stores focused on ceramic and
porcelain tiles, and associated products such as sanitary ware,
showers and adhesives
o Johnson Tiles South Africa - Manufacturer of ceramic and
porcelain tiles
o TAL - The leading manufacturer of ceramic and building
adhesives
-- Norcros is headquartered in Wilmslow, Cheshire and employs
around 2,150 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
I am pleased to announce a robust performance for the six months
ended 30 September 2016 demonstrating the resilience of the Group's
business portfolio and the successful execution of the Group's
strategy. The recent acquisitions of Croydex and Abode have been
seamlessly integrated into the Group and are performing in line
with the Board's expectations and we remain on course to deliver on
our strategy of growing the Group both organically and through
complementary acquisitions.
The uncertainty in the UK following the vote to leave the
European Union has brought another dynamic into what was already a
challenging market. In South Africa, growth of the economy as a
whole has slowed as a result of high inflation and the uncertain
political situation. However, our businesses have continued to
implement self-help initiatives in response to these challenges
enabling the Group to deliver a set of results significantly ahead
of last year and in line with the Board's expectations.
Underlying operating profit rose by 11.1% to GBP11.0m (2015:
GBP9.9m) and the return on sales improved to 8.5% (2015: 8.3%). In
the UK, underlying operating profit of GBP8.0m (2015: GBP8.0m) was
in line with the prior year, with the additional contributions from
Croydex and Abode offsetting the reductions at Triton and Johnson
Tiles. Our businesses in South Africa continued to perform
strongly, with each business improving on the previous year
resulting in underlying operating profit 57.9% higher at GBP3.0m
(2015: GBP1.9m).
Working capital and cash management remain a key area of focus
for the Group, and this, combined with strong underlying EBITDA,
resulted in underlying operating cash generation of GBP16.0m (2015:
GBP13.3m), representing 113% of underlying EBITDA (2015: 104%). Net
debt at GBP27.5m was GBP5.0m lower compared to GBP32.5m at 31 March
2016 and represents leverage of 1.0 times underlying proforma
EBITDA.
Results
Revenue for the six month period to 30 September 2016 at
GBP128.8m (2015: GBP118.7m) was 9.2% higher on a constant currency
basis compared to the prior year, and 8.5% higher on a Sterling
reported basis. On a like for like basis (excluding revenues from
Abode for the whole period and Croydex for quarter one) revenue
decreased on a constant currency basis by 0.2% and 0.8% on a
Sterling reported basis.
Underlying operating profit rose by 11.1% to GBP11.0m (2015:
GBP9.9m) reflecting the incremental contribution from the Croydex
and Abode acquisitions and the substantially improved performance
of our South African businesses.
Operating profit of GBP8.8m was in line with the prior period.
There were no exceptional operating items in the period (2015:
GBP2.3m income) and acquisition related costs were GBP1.3m lower
than the comparative period, mainly because last year reflected the
costs of acquiring Croydex and the final year of the Vado earn out.
Administrative expenses in relation to the pension scheme were
GBP0.1m higher at GBP0.9m (2015: GBP0.8m).
Underlying profit before taxation increased by 11.7% to GBP10.5m
(2015: GBP9.4m) principally reflecting the higher underlying
operating profit.
Profit before taxation for the period was GBP7.7m (2015:
GBP7.0m). Interest arising from the pension deficit was GBP0.3m
higher at GBP1.0m (2015: GBP0.7m) due to the increase in the
liability but was more than offset by the fact that the movement in
the fair value of derivative instruments was GBP0.5m of income in
the period, as opposed to a cost of GBP0.5m in the previous
year.
Diluted underlying earnings per share were 9.3% higher at 12.9p
(2015: 11.8p), reflecting the improvement in underlying
earnings.
Financial
It is pleasing to report that the Group's ability to deliver
strong cash conversion continued in the six months to 30 September
2016 with underlying operating cash generation of GBP16.0m (2015:
GBP13.3m), representing 113% of underlying EBITDA for the period
(2015: 104%). There was a working capital inflow of GBP1.2m in the
period which compared to a GBP0.2m outflow in the prior period,
with increases in inventory and receivables being offset by an
increase in payables. A pension deficit recovery payment of GBP1.2m
(2015: GBP1.1m) in the period (as part of the GBP2.5m plus CPI per
annum contribution agreed with the Trustee in 2016) and cash
outflows relating to exceptional items and acquisition related
costs of GBP1.0m (2015: inflows of GBP0.7m) resulted in net cash
generated from continuing operations of GBP13.8m (2015: GBP12.9m).
Investment in capital expenditure in the period amounted to GBP4.0m
(2015: GBP3.2m) representing 1.3 times depreciation (2015: 1.1
times).
Net debt at 30 September 2016 was GBP5.0m lower at GBP27.5m
representing 1.0 times underlying proforma EBITDA, even though
during the period the final GBP2.5m Vado deferred consideration
payment was made.
Pension scheme
The gross deficit relating to our UK defined benefit pension
scheme as calculated under IAS 19R has increased from GBP55.7m at
31 March 2016 to GBP97.8m at 30 September 2016. This increase was
principally a result of a 1.3% reduction in the discount rate to
2.25% (31 March 2016: 3.55%) reflecting lower bond yields following
the outcome of the EU referendum. The calculation of the deficit is
particularly sensitive to the movement in bond yields which are at
historic low levels. It is estimated that a 0.1% increase in bond
yields would reduce the deficit by circa GBP6.0m.
Whilst the increase in the deficit has been significant it has
not impacted the ultimate holding company, Norcros plc, which has a
strong balance sheet and significant distributable reserves, in
excess of GBP100m at 31 March 2016. Following completion of the
2015 triennial actuarial valuation and the subsequent agreement
with the Trustee of the recovery plan, the Company continues to pay
GBP2.5m per annum plus CPI into the scheme.
Dividend
The Board is declaring an interim dividend of 2.4p per share
reflecting the strong first half performance and its confidence in
the Group's prospects. This represents an increase of 9.1% over the
interim dividend from the previous year of 2.2p per ordinary share.
The dividend is payable on 12 January 2017 to shareholders on the
register on 16 December 2016. The shares will be quoted ex-dividend
on 15 December 2016.
Operating review
UK
For the six months ended 30 September 2016 total revenue in our
UK businesses was 8.8% ahead of the prior period at GBP86.9m (2015:
GBP79.9m). On a like for like basis (excluding revenues from Abode
entirely and Croydex for quarter one), total revenue decreased by
5.0%. Underlying operating profit at GBP8.0m was in line with last
year and represents a return on sales of 9.2% (2015: 10.0%). The
retail market, particularly in view of the uncertainty surrounding
the implications of the EU referendum, has remained extremely
challenging, and whilst like for like trade sector revenues were
also lower than the prior period, the decline was less marked due
to the increased investment our businesses have made in this market
sector over recent years.
Triton
Our market leading shower operation, Triton Showers, recorded
revenue 12.6% lower for the six month period to 30 September 2016
of GBP22.9m (2015: GBP26.2m) reflecting significant destocking
across a number of its major customers which was particularly
pronounced ahead of the recent national merchant restructuring
announcements.
UK revenue was 14.2% lower than last year. The destocking
impacted the overall size of the UK electric and total UK shower
segments. By contrast the UK mixer shower segment grew, reflecting
the demand in private new house build, and the increased relative
competitiveness of the product. Notwithstanding these mixed market
conditions and destocking, Triton maintained its leading UK market
position overall and grew its market share over the last twelve
months in both the electric and mixer shower segments. This was
achieved through best in class customer service and the continued
introduction of innovative new products with a focus on the 'ease
of installation, affordable style and value for money'.
Export revenue was 4.5% lower than the comparative period.
Export markets account for around a fifth of Triton's overall
revenue with Eire being the principal export market. In May 2016
Triton introduced the revolutionary T90SR into the Irish market,
the world's first truly silent pumped electric shower. Revenue in
the period was held back as customers destocked in anticipation of
the launch. Importantly, early consumer feedback has been very
promising which will benefit the second half of the year and cement
Triton's market leading position. Triton has also continued to
invest in and develop new export business in Latin America. A new
low pressure electric shower range has been specifically developed
and following a successful trade show in São Paulo, Brazil, in
April 2016, Triton received both strong levels of interest and
initial orders for this exciting new product from across the
region.
Despite a challenging first half, Triton continued to generate
good margins, although underlying operating profit was below last
year reflecting the reduction in revenue. Nevertheless, we are
confident that we will make progress in the second half year as we
benefit from recent cost reduction actions and the continued
investment in new product and markets.
Vado
Our leading manufacturer of taps, mixer showers, bathroom
accessories and valves, Vado, recorded revenue of GBP16.6m for the
period (2015: GBP15.9m), 4.4% higher than the prior year. UK
revenue was 14.3% higher than the prior year, with growth in both
the retail and trade segments. Vado continued to benefit from the
recent increase in sales and marketing investment into the
specification sector with sales to housebuilders and hotel groups
showing significant growth. Further growth was also achieved in the
retail sector as Vado continued to focus its sales strategy on the
independent merchant and boutique retail sectors.
The double-digit revenue growth in the UK more than offset the
slower start to the year in our export business where revenue was
19.1% lower than the same period last year. This decline
principally reflected some disruption following a change to our
distribution arrangements in the Middle East with the appointment
of Alshaya Enterprises as the exclusive distributor of Vado
products throughout the GCC. Alshaya have a long-established
presence in the region and we are confident that this change will
yield a return to growth in the second half of the year.
Investment in new product remains a key focus with three new
ranges set to launch in the second half of the year. The recent
appointment of a senior product and marketing executive will ensure
strong momentum in this important area. It is pleasing to report
that a re-alignment of our pricing architecture and ranging of Vado
products in Tile Africa stores has yielded a significant
improvement in revenues.
Underlying operating profit was in line with the same period
last year.
Croydex
Croydex, our market-leading, innovative designer, manufacturer
and distributor of high quality bathroom furnishings and
accessories, recorded revenue of GBP12.2m for the period (2015:
GBP5.8m (3 months contribution)). Whilst not under Norcros
ownership for the first quarter of 2015, revenue for the whole of
the comparative period was GBP10.9m, and consequently grew by 11.9%
year on year.
UK revenue at GBP11.4m was 10.7% like for like higher than the
same period last year driven by the excellent total service
proposition that Croydex provide across a wide range of product
categories and channels. This service proposition is further
enhanced through the strength of the Croydex brand and through
continual product innovation with recent examples including Sit
Tight toilet seats, Flexi-Fix accessories and the "5 year Rust
Free" guarantee on wire ware storage. The investment in our digital
platform, both promoting the Croydex brand and strengthening
relationships with our customers, is helping to drive sales both
online and offline with our traditional customers.
Export sales of GBP0.8m were GBP0.2m higher than the prior
period, also reflecting the benefits of product innovation and the
strength of our product offer and service proposition. Currently
Germany and the USA are our key markets. Growing our export
business is a key focus and it is pleasing to report that we have
had an encouraging take up following the launch of a range of
Croydex products into South Africa through the Group's Tile Africa
retail network.
The business has again made solid progress in the period and
continues to generate a level of underlying profit and cash in line
with the Board's expectations.
Abode
Abode, our niche designer and distributor of high quality
kitchen taps, bathroom taps, and kitchen sinks, which was acquired
on 31 March 2016, recorded revenue of GBP5.6m for the period,
broadly in line with our expectations.
Whilst it was not under Group ownership in the comparative
period, revenue was 2.2% higher than the prior year. Abode's
customers are predominantly based in the UK and include a number of
well-known names such as John Lewis, AGA Rangemaster and Howdens.
During the period since acquisition the business has secured
several new accounts including Homebase, Bathstore and Astracast
and is well placed to continue to grow revenues in the second half
of the year. New products such as the 'Pronteau' hot water tap have
been well received by the market.
Consistent with our other recent acquisitions it is pleasing to
report that Abode has seamlessly been integrated into the Group.
The performance of the business since acquisition has been highly
encouraging, with the business generating an underlying profit and
cash performance in line with the Board's expectations. We are also
progressing the potential synergies available through working with
other Group businesses with access to new export markets and
alternative sourcing opportunities being the initial areas of
focus.
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 9.0% lower than the same period
last year at GBP25.4m (2015: GBP27.9m).
UK revenue was 10.0% lower than the comparative period last
year, with the reduction principally attributable to the retail
sector which was 16.4% below prior year. Subdued demand in the DIY
sector, particularly since the EU referendum, combined with a
number of retailers deciding to import more tiles directly
themselves and our withdrawal from some lower margin ranges were
the key factors behind this. Trade sector revenue was 3.9% below
the same period last year principally reflecting a lower level of
activity in the social housing refurbishment sector where available
funding remains tightly controlled. Notwithstanding this, we
continued to make good progress in the private specification
sector, particularly with local and national housing developers
such as Barratt David Wilson, Persimmon, Redrow and McCarthy &
Stone and we continued to maintain our share of the commercial
contracts market including the IBIS Manchester and the Darwin
Shopping Centre in Shrewsbury specifications.
Export revenue was in line with the previous period with good
project-led growth in the Middle East offsetting weak market
conditions in France.
Operationally, the business continued to perform robustly,
though the reduction in revenue resulted in underlying operating
profit lower than the prior period. A number of new business
opportunities including an innovative tile fixing product are being
progressed which will benefit the business in the second half of
the year.
Norcros Adhesives
Norcros Adhesives, our manufacturer and supplier of tile and
stone adhesives and ancillary products, recorded revenue 2.4%
higher at GBP4.2m (2015: GBP4.1m). Whilst revenue into the UK trade
sector held up, UK retail revenue was lower than last year, though
this was more than offset by securing some new project business in
the Middle East where a local sales presence was recently
established. Our position in this important market is now beginning
to gain traction, with the development of a meaningful project
pipeline which should benefit the remainder of the year.
The business has successfully renewed both its ISO 9001 and ISO
14001 accreditations in the period and managed a smooth transition
to a new ERP system which went live at the beginning of the year.
Our focus on new product development has continued, with a new
moisture suppressant, Pro DPM, to be launched in the second half of
the year together with a new range of tile backer boards.
Focus on input costs, particularly around transport and product
formulation, has enabled the business to deliver an underlying
operating profit performance in line with expectations and
marginally ahead of the same period last year.
South Africa
Our South African businesses continued to perform strongly and
reported revenue 10.0% higher than prior year on a constant
currency basis and 8.0% higher on a Sterling reported basis at
GBP41.9m (2015: GBP38.8m). Underlying operating profit at GBP3.0m
was 57.9% higher than the previous period (2015: GBP1.9m). This
strong performance builds on the momentum of previous years and
represents a significantly higher return on sales of 7.2% (2015:
4.9%), with all three businesses improving on the level of
underlying operating profit achieved in the comparative period.
Johnson Tiles South Africa
Our tile manufacturing business, Johnson Tiles South Africa,
achieved independent sector revenue of GBP5.3m (2015: GBP5.4m),
which was equal to the prior year on a constant currency basis, but
1.9% lower on a reported Sterling basis.
Given the business is operating at its maximum level of
manufacturing capacity we are having to carefully balance the
placing of output across our customer base and at the same time
grow volumes of our higher value added larger format tiles. Coupled
with a continued focus on plant efficiencies and cost reductions
the business generated an underlying operating profit ahead of the
prior year. We are continuing to progress a number of capacity
expansion options albeit no commitment to significant capital
investment has been made.
TAL
Our market leading adhesive business, TAL, delivered constant
currency independent sector revenue growth of 8.6% in the period,
or a 7.4% increase on a Sterling reported basis to GBP10.1m (2015:
GBP9.4m) reflecting particularly strong progress in the sub-Saharan
export markets where revenue grew by 10.9%. We have continued to
invest in manufacturing efficiencies and improved procurement and
are also pleased that our main plant in Olifantsfontein was awarded
the ISO 14001 certification during the period.
We have continued to drive profitability, through a combination
of revenue growth and further operational efficiencies, resulting
in another strong underlying operating profit and cash performance
in the period.
Tile Africa
Revenue at our leading retailer of wall and floor tiles,
adhesives, showers, sanitaryware and bathroom fittings, Tile
Africa, increased significantly by 12.8% on a constant currency
basis compared to the prior year, and by 10.4% on a Sterling
reported basis to GBP26.5m (2015: GBP24.0m).
The CX format stores continue to perform strongly with key
learnings being retrofitted across the balance of the portfolio,
with our bathroom store-within-a-store feature contributing ahead
of expectations. A significant part of our growth has resulted from
improved ranging and pricing as we continue to procure exclusive
ranges directly from source. Our ability to leverage off Vado's
sourcing infrastructure in China has been particularly advantageous
and we have recently launched a new range of Croydex products which
will extend this offering in the second half of the year.
Our new store in Boksburg, which was opened in March 2016, is
trading ahead of expectations. A second new store in Southgate is
scheduled to open in the second half of the year. We have developed
a good new store pipeline and anticipate opening five new stores
over the next 36 months. During the period two small
underperforming franchise stores were closed. Tile Africa now
operates through 30 corporate and two franchise stores.
Our Tile Africa business continued to make solid progress in the
period generating an improvement in underlying operating profit and
cash compared to the prior year.
Summary and outlook
I am encouraged by the Group's performance in the first half of
the year which demonstrates the underlying resilience of our
business portfolio approach and the success of our acquisitive
growth strategy. In the UK, notwithstanding the softer market
conditions following the EU referendum and the lower like for like
revenues, the UK business delivered the same level of underlying
profitability as in the comparative period.
In South Africa the decisive management action taken in previous
years to address the operational challenges is now bearing fruit,
with each of our three businesses contributing towards a
substantial improvement in underlying operating profit.
With our strong brands, leading market positions and continued
self-help initiatives focused on market share gain the Group is
well positioned to make further progress. Given the encouraging
performance in the first half of the year, the Board remains
confident that the Group will achieve underlying operating profit
in line with its expectations for the year to 31 March 2017.
Martin Towers
Chairman
17 November 2016
Condensed consolidated income statement
Six months to 30 September 2016
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
--------------------------------------- ------ -------------- -------------- -----------
Continuing operations
Revenue 128.8 118.7 235.9
--------------------------------------- ------ -------------- -------------- -----------
Underlying operating profit 11.0 9.9 21.3
IAS 19R administrative expenses (0.9) (0.8) (1.7)
Acquisition related costs 4 (1.3) (2.6) (5.2)
Exceptional operating items 4 - 2.3 2.3
--------------------------------------- ------ -------------- -------------- -----------
Operating profit 8.8 8.8 16.7
Finance costs 7 (0.6) (1.1) (1.1)
Finance income 7 0.5 - 1.2
IAS 19R finance cost (1.0) (0.7) (1.4)
--------------------------------------- ------ -------------- -------------- -----------
Profit before taxation 7.7 7.0 15.4
Taxation 6 (1.6) (1.6) (2.4)
--------------------------------------- ------ -------------- -------------- -----------
Profit for the period from continuing
operations 6.1 5.4 13.0
--------------------------------------- ------ -------------- -------------- -----------
Earnings per share attributable
to the owners of the Company
Basic earnings per share:
From profit for the period 5 10.0p 9.0p 21.4p
--------------------------------------- ------ -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 5 9.7p 8.7p 20.8p
--------------------------------------- ------ -------------- -------------- -----------
Weighted average number of shares
for basic earnings per share
(millions) 5 61.0 60.1 60.6
--------------------------------------- ------ -------------- -------------- -----------
Non-GAAP measures
Underlying profit before taxation
(GBPm) 3 10.5 9.4 20.4
Underlying earnings (GBPm) 3 8.1 7.3 17.3
Basic underlying earnings per
share 5 13.2p 12.2p 28.5p
Diluted underlying earnings per
share 5 12.9p 11.8p 27.8p
--------------------------------------- ------ -------------- -------------- -----------
Condensed consolidated statement of comprehensive income
Six months to 30 September 2016
6 months 6 months Year ended
to to
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------- -------------- -------------- -----------
Profit for the period 6.1 5.4 13.0
-------------------------------------- -------------- -------------- -----------
Other comprehensive income
and expense:
Items that will not subsequently
be reclassified to the income
statement
Actuarial (losses)/gains on
retirement benefit obligations (35.0) 1.6 (9.7)
Items that may be subsequently
reclassified to the income
statement
Foreign currency translation
adjustments 5.8 (6.0) (6.1)
-------------------------------------- -------------- -------------- -----------
Other comprehensive expense
for the period (29.2) (4.4) (15.8)
-------------------------------------- -------------- -------------- -----------
Total comprehensive (expense)/income
for the period (23.1) 1.0 (2.8)
-------------------------------------- -------------- -------------- -----------
Items in the statement are disclosed net of tax.
Condensed consolidated balance sheet
At 30 September 2016
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (restated)*
Notes GBPm GBPm GBPm
--------------------------------------- ------ -------------- -------------- -------------
Non-current assets
Goodwill 30.8 29.5 30.4
Intangible assets 14.2 12.2 14.8
Property, plant and equipment 41.6 37.5 38.2
Deferred tax assets 6 16.2 11.2 10.0
--------------------------------------- ------ -------------- -------------- -------------
102.8 90.4 93.4
--------------------------------------- ------ -------------- -------------- -------------
Current assets
Inventories 68.6 56.3 60.1
Trade and other receivables 52.8 43.6 50.9
Derivative financial instruments 15 3.1 1.0 2.5
Cash and cash equivalents 8 8.0 7.8 5.9
--------------------------------------- ------ -------------- -------------- -------------
132.5 108.7 119.4
--------------------------------------- ------ -------------- -------------- -------------
Current liabilities
Trade and other liabilities (70.7) (60.5) (64.7)
Derivative financial instruments 15 (0.4) (0.3) (0.1)
Current tax liabilities (1.9) (1.4) -
Financial liabilities - borrowings 8 (1.8) (4.5) (2.8)
--------------------------------------- ------ -------------- -------------- -------------
(74.8) (66.7) (67.6)
--------------------------------------- ------ -------------- -------------- -------------
Net current assets 57.7 42.0 51.8
--------------------------------------- ------ -------------- -------------- -------------
Total assets less current liabilities 160.5 132.4 145.2
--------------------------------------- ------ -------------- -------------- -------------
Non-current liabilities
Financial liabilities - borrowings 8 (33.7) (32.5) (35.6)
Pension scheme liability 12 (97.8) (42.4) (55.7)
Other non-current liabilities (3.4) (2.1) (3.0)
Provisions (3.1) (3.2) (3.3)
--------------------------------------- ------ -------------- -------------- -------------
(138.0) (80.2) (97.6)
--------------------------------------- ------ -------------- -------------- -------------
Net assets 22.5 52.2 47.6
--------------------------------------- ------ -------------- -------------- -------------
Financed by:
Ordinary share capital 9 6.1 6.1 6.1
Share premium 1.1 1.0 1.1
Retained earnings and other
reserves 15.3 45.1 40.4
--------------------------------------- ------ -------------- -------------- -------------
Total equity 22.5 52.2 47.6
--------------------------------------- ------ -------------- -------------- -------------
* The balance sheet at 31 March 2016 has been restated to
reflect measurement period adjustments in respect of business
combinations.
Condensed consolidated statement of cash flow
Six months to 30 September 2016
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Notes GBPm GBPm GBPm
---------------------------------------- ------ -------------- -------------- -----------
Cash generated from operations 10 13.8 12.9 18.5
Income taxes refunded/(paid) 0.4 (0.6) (1.0)
Interest paid (0.8) (0.5) (0.9)
---------------------------------------- ------ -------------- -------------- -----------
Net cash generated from operating
activities 13.4 11.8 16.6
---------------------------------------- ------ -------------- -------------- -----------
Cash flows from investing activities
Purchase of property, plant and
equipment (4.0) (3.2) (6.6)
Acquisition of subsidiary undertakings
(including payment of deferred
consideration) net of cash acquired (2.7) (20.5) (23.6)
Net cash used in from investing
activities (6.7) (23.7) (30.2)
---------------------------------------- ------ -------------- -------------- -----------
Cash flows from financing activities
Net proceeds from issue of ordinary
share capital - - 0.1
(Repayment)/drawdown of borrowings (2.0) 14.0 17.0
Dividends paid to equity shareholders (2.7) (2.2) (3.6)
---------------------------------------- ------ -------------- -------------- -----------
Net cash (used in)/generated
from financing activities (4.7) 11.8 13.5
---------------------------------------- ------ -------------- -------------- -----------
Net increase/(decrease) in cash
at bank and in hand and bank
overdrafts 2.0 (0.1) (0.1)
Cash at bank and in hand and
bank overdrafts at beginning
of the period 3.1 4.2 4.2
Exchange movements on cash and
bank overdrafts 1.1 (0.8) (1.0)
---------------------------------------- ------ -------------- -------------- -----------
Cash at bank and in hand and
bank overdrafts at end of the
period 6.2 3.3 3.1
---------------------------------------- ------ -------------- -------------- -----------
Non-GAAP measures
Underlying operating cash flow 3 16.0 13.3 20.4
-------------------------------- ----- ----- -----
Condensed consolidated statements of changes in equity
Six months to 30 September 2016 (unaudited)
Ordinary Retained
share Share Treasury Translation earnings/
capital premium reserve reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- --------- ------------ ----------- -------
At 31 March 2016 6.1 1.1 - (15.2) 55.6 47.6
Comprehensive income:
Profit for the period - - - - 6.1 6.1
Foreign currency translation
adjustments - - - 5.8 - 5.8
------------------------------ --------- --------- --------- ------------ ----------- -------
Other comprehensive expense:
Actuarial loss on retirement
benefit obligations - - - - (35.0) (35.0)
------------------------------ --------- --------- --------- ------------ ----------- -------
Total other comprehensive
income/(expense) - - - 5.8 (28.9) (23.1)
------------------------------ --------- --------- --------- ------------ ----------- -------
Transactions with owners:
Dividends paid - - - - (2.7) (2.7)
Share option schemes and
warrants - - - - 0.7 0.7
------------------------------ --------- --------- --------- ------------ ----------- -------
At 30 September 2016 6.1 1.1 - (9.4) 24.7 22.5
------------------------------ --------- --------- --------- ------------ ----------- -------
Six months to 30 September 2015 (unaudited)
Ordinary Retained
share Share Treasury Translation earnings/
capital premium reserve reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- --------- ------------ ----------- ------
At 31 March 2015 6.0 1.0 (0.1) (9.1) 54.9 52.7
Comprehensive income:
Profit for the period - - - - 5.4 5.4
Actuarial gain on retirement
benefit obligations - - - - 1.6 1.6
------------------------------ --------- --------- --------- ------------ ----------- ------
Other comprehensive expense:
Foreign currency translation
adjustments - - - (6.0) - (6.0)
------------------------------ --------- --------- --------- ------------ ----------- ------
Total other comprehensive
(expense)/income - - - (6.0) 7.0 1.0
------------------------------ --------- --------- --------- ------------ ----------- ------
Transactions with owners:
Dividends paid - - - - (2.2) (2.2)
Share option schemes and
warrants 0.1 - (0.1) - 0.7 0.7
------------------------------ --------- --------- --------- ------------ ----------- ------
At 30 September 2015 6.1 1.0 (0.2) (15.1) 60.4 52.2
------------------------------ --------- --------- --------- ------------ ----------- ------
Year ended 31 March 2016 (audited)
Ordinary Retained
share Share Treasury Translation earnings/
capital premium reserve reserve (losses) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- --------- ------------ ----------- -------
At 31 March 2015 6.0 1.0 (0.1) (9.1) 54.9 52.7
Comprehensive income:
Profit for the year - - - - 13.0 13.0
Other comprehensive expense:
Actuarial loss on retirement
benefit obligations - - - - (9.7) (9.7)
Foreign currency translation
adjustments - - - (6.1) - (6.1)
------------------------------ --------- --------- --------- ------------ ----------- -------
Total other comprehensive
expense - - - (6.1) (9.7) (15.8)
------------------------------ --------- --------- --------- ------------ ----------- -------
Transactions with owners:
Shares issued 0.1 0.1 (0.1) - - 0.1
Dividends paid - - - - (3.6) (3.6)
Share option schemes and
warrants - - 0.2 - 1.0 1.2
------------------------------ --------- --------- --------- ------------ ----------- -------
At 31 March 2016 6.1 1.1 - (15.2) 55.6 47.6
------------------------------ --------- --------- --------- ------------ ----------- -------
Notes to the accounts
Six months to 30 September 2016
1. Accounting policies
General information
The Company is a public limited company which is listed on the
London Stock Exchange and incorporated and domiciled in the UK.
This condensed consolidated interim financial information was
approved for issue on 17 November 2016. This condensed consolidated
financial information does not comprise statutory accounts within
the meaning of Section 434 of the Companies Act 2006 and has been
neither audited nor reviewed.
Basis of preparation
This condensed consolidated interim financial information for
the six months to 30 September 2016 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting', as
adopted by the European Union.
The Directors consider, after making appropriate enquiries at
the time of approving the condensed consolidated interim financial
information, that the Company and the Group have adequate resources
to continue in operational existence and, accordingly, that it is
appropriate to adopt the going concern basis in the preparation of
the condensed consolidated interim financial information.
The condensed consolidated interim financial information should
be read in conjunction with the Annual Report and Accounts for the
year ended 31 March 2016, which has been prepared in accordance
with IFRS as adopted by the European Union. The Annual Report and
Accounts was approved by the Board on 14 June 2016 and delivered to
the Registrar of Companies. The report of the external auditor on
the financial statements was unqualified.
Accounting policies
The principal accounting policies applied in the preparation of
this condensed consolidated interim financial information are
included in the financial report for the year ended 31 March 2016.
These policies have been applied consistently to all periods
presented.
Taxes on income in the interim periods are accrued using the tax
rate that would be applicable to the expected total annual profits
or losses.
New standards, amendments to standards and interpretations
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year beginning 1 April 2016.
The Group has adopted the following new standards, amendments
and interpretations now applicable. None of these standards and
interpretations has had any material effect on the Group's results
or net assets.
Applicable
for
financial
years
beginning
Standard or interpretation Content on or after
--------------------------- ---------------------------------- -------------
Amendment to IFRS Consolidated financial statements 1 April 2016
10
Amendment to IFRS Joint arrangements 1 April 2016
11
Amendment to IFRS Disclosure of interests in 1 April 2016
12 other entities
IFRS 14 Regulatory deferral accounts 1 April 2016
Amendment to IAS Presentation of financial 1 April 2016
1 statements
Amendment to IAS Property, plant and equipment 1 April 2016
16
Amendment to IAS Separate financial statements 1 April 2016
27
Amendment to IAS Investments in associates 1 April 2016
28 and joint ventures
Amendment to IAS Intangible assets 1 April 2016
38
Amendment to IAS Agriculture 1 April 2016
41
Annual improvements Various 1 April 2016
to IFRSs 2014
--------------------------- ---------------------------------- -------------
The following standards, amendments and interpretations are not
yet effective and have not been adopted early by the Group:
Applicable
for
financial
years
beginning
Standard or interpretation Content on or after
--------------------------- -------------------------------------- -------------
Amendment to IAS Statement of cash flows 1 April 2017
7
Amendment to IAS Income taxes 1 April 2017
12
IFRS 9 Financial instruments: classification 1 April 2018
and measurement
IFRS 15 Revenue from contracts with 1 April 2018
customers
IFRS 16 Leases 1 April 2019
--------------------------- -------------------------------------- -------------
Other than for IFRS 16, the financial impact of which has yet to
be assessed, none of these standards or interpretations is expected
to have a material impact on the Group.
Risks and uncertainties
The principal strategic level risks and uncertainties affecting
the Group, together with the approach to their mitigation, remain
as set out on pages 24 to 27 in the 2016 Annual Report, which is
available on the Group's website (www.norcros.com), apart from the
addition of a risk concerning the potential effect of the UK's exit
from the European Union.
In summary the Group's principal risks and uncertainties
are:
-- market conditions;
-- loss of key customers;
-- competition;
-- reliance on production facilities;
-- loss of key supplier, availability of raw
materials/components/energy, and supply chain failure
-- staff retention and recruitment;
-- foreign currency exchange risk;
-- interest rate risk;
-- performance against banking covenants;
-- pension scheme management;
-- exit of the UK from the European Union
-- acquisition risk.
Exit of UK from the European Union
Although the outcome of the referendum on 23 June 2016 resulted
in a vote for an exit from the European Union, the full scope of
the political and legal implications is still unclear. As exit
negotiations are being completed, this has resulted in uncertainty
in many of our UK and European markets and a weakening of the value
of Sterling relative to other currencies, principally the US Dollar
and the Euro, which is likely to have an impact on the cost of
imports. The Board continues to monitor and respond to the
situation as the position is clarified.
The Chairman's Statement in this interim statement includes
comments on the outlook for the remaining six months of the
financial year.
Forward-looking statements
This interim statement contains forward-looking statements.
Although the Group believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Due to the inherent uncertainties, including both economic and
business risk factors underlying such forward-looking information,
actual results may differ materially from those expressed or
implied by these forward-looking statements.
The Group undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Accounting estimates and judgments
The preparation of condensed consolidated interim financial
information requires management to make judgments, estimates and
assumptions that affect the application of accounting policies and
the reported amount of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing the condensed consolidated interim financial
information, the significant judgments made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
consolidated financial statements for the year ended 31 March
2016.
2. Segmental reporting
The Group operates in two main geographical areas: the UK and
South Africa. All inter-segment transactions are made on an arm's
length basis. The chief operating decision maker, which is
considered to be the Board, assesses performance and allocates
resources based on geography as each segment has similar economic
characteristics, complementary products, distribution channels and
regulatory environments.
Continuing operations
-
6 months to 30 September
2016 (unaudited)
----------------------------------- ------
South
UK Africa Group
Notes GBPm GBPm GBPm
----------------------------------- ------ -------- ---------- --------
Revenue 86.9 41.9 128.8
----------------------------------- ------ -------- ---------- --------
Underlying operating profit 8.0 3.0 11.0
IAS 19R administrative expenses (0.9) - (0.9)
Acquisition related costs 4 (1.3) - (1.3)
Operating profit 5.8 3.0 8.8
----------------------------------- ------ -------- ---------- --------
Finance costs (net) (1.1)
----------------------------------- ------ -------- ---------- --------
Profit before taxation 7.7
Taxation 6 (1.6)
----------------------------------- ------ -------- ---------- --------
Profit from continuing operations 6.1
----------------------------------- ------ -------- ---------- --------
Net debt 10 (27.5)
----------------------------------- ------ -------- ---------- --------
Continuing operations
-
6 months to 30 September
2015 (unaudited)
South
UK Africa Group
Notes GBPm GBPm GBPm
Revenue 79.9 38.8 118.7
----------------------------------- ------ -------- ---------- --------
Underlying operating profit 8.0 1.9 9.9
IAS 19R administrative expenses (0.8) - (0.8)
Acquisition related costs 4 (2.6) - (2.6)
Exceptional operating items 4 2.3 - 2.3
----------------------------------- ------ -------- ---------- --------
Operating profit 6.9 1.9 8.8
----------------------------------- ------ -------- ---------- --------
Finance costs (net) (1.8)
----------------------------------- ------ -------- ---------- --------
Profit before taxation 7.0
Taxation 6 (1.6)
----------------------------------- ------ -------- ---------- --------
Profit from continuing operations 5.4
----------------------------------- ------ -------- ---------- --------
Net debt 10 (29.2)
----------------------------------- ------ -------- ---------- --------
Continuing operations
-
Year ended 31 March
2016 (audited)
------------------------------------- ------ --------------------------
South
UK Africa Group
Notes GBPm GBPm GBPm
------------------------------------- ------ ------- -------- -------
Revenue 163.0 72.9 235.9
------------------------------------- ------ ------- -------- -------
Underlying operating profit 17.2 4.1 21.3
IAS 19R administrative expenses (1.7) - (1.7)
Acquisition related costs 4 (5.2) - (5.2)
Exceptional operating items 4 2.3 - 2.3
------------------------------------- ------ ------- -------- -------
Operating profit 12.6 4.1 16.7
------------------------------------- ------ ------- -------- -------
Finance costs (net) (1.3)
------------------------------------- ------ ------- -------- -------
Profit before taxation 15.4
Taxation 6 (2.4)
------------------------------------- ------ ------- -------- -------
Profit for the year from continuing
operations 13.0
------------------------------------- ------ ------- -------- -------
Net debt 10 (32.5)
------------------------------------- ------ ------- -------- -------
There are no differences from the last Annual Report in the
basis of segmentation or in the basis of measurement of segment
profit or loss.
3. Non-GAAP measures
Condensed Consolidated Income Statement
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------------ -------------- -------------- -----------
Profit before taxation from continuing
operations 7.7 7.0 15.4
Adjusted for:
IAS 19R administrative expenses 0.9 0.8 1.7
Acquisition related costs 1.3 2.6 5.2
Exceptional operating items - (2.3) (2.3)
Amortisation of costs of raising debt
finance 0.1 0.1 0.2
Net movement on fair value of derivative
financial instruments (0.5) 0.5 (1.2)
IAS 19R finance cost 1.0 0.7 1.4
------------------------------------------ -------------- -------------- -----------
Underlying profit before taxation 10.5 9.4 20.4
Taxation attributable to underlying
profit before taxation (2.4) (2.1) (3.1)
------------------------------------------ -------------- -------------- -----------
Underlying earnings 8.1 7.3 17.3
------------------------------------------ -------------- -------------- -----------
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, exceptional finance costs, 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.
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------------- -------------- -------------- -----------
Operating profit from continuing operations 8.8 8.8 16.7
Adjusted for:
Depreciation 3.1 2.9 5.5
IAS 19R administrative expenses 0.9 0.8 1.7
Acquisition related costs 1.3 2.6 5.2
Exceptional operating items - (2.3) (2.3)
--------------------------------------------- -------------- -------------- -----------
Underlying EBITDA 14.1 12.8 26.8
--------------------------------------------- -------------- -------------- -----------
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 these measures provide
shareholders with additional useful information on the performance
of the Group.
Condensed Consolidated Statement of Cash Flow
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Cash generated from continuing operations
(note 10) 13.8 12.9 18.5
Adjusted for:
Cash outflows/(inflows) from exceptional
items and acquisition related costs 1.0 (0.7) (0.2)
Pension fund deficit recovery contributions 1.2 1.1 2.1
--------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow 16.0 13.3 20.4
--------------------------------------------- -------------- -------------- -----------
Underlying operating cash flow is defined as cash generated from
continuing operations before cash outflows from exceptional items
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.
4. Acquisition related costs and exceptional operating items
An analysis of acquisition related costs and exceptional
operating items is shown below.
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -----------
Acquisition related costs
Deferred remuneration(1) 0.2 1.2 2.5
Intangible asset amortisation(2) 0.6 0.3 0.9
Staff costs and advisory fees(3) 0.5 1.1 1.8
---------------------------------- -------------- -------------- -----------
1.3 2.6 5.2
---------------------------------- -------------- -------------- -----------
1 Consideration payable to the former shareholders of Vado,
Croydex and Abode which is required to be treated as remuneration
and, accordingly, is expensed to the income statement as
incurred.
2 Non-cash amortisation charges in respect of intangible assets
recognised following the acquisitions of Vado, Croydex and
Abode.
3 Costs of maintaining an in-house acquisitions department and
professional advisory fees incurred in connection with the Group's
business combination activities.
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------- --------------- -------------- -----------
Exceptional operating items
Legal claim(1) - (1.9) (1.9)
Pension scheme settlement gain(2) - (0.4) (0.4)
- (2.3) (2.3)
--------------------------------------------------- -------------- -----------
1 A legal claim relating to the land at the Highgate site in
Tunstall, UK was settled in the prior year. Under the terms of the
settlement with Wm Morrison Supermarkets plc the Group received a
payment of GBP2.0m. Costs in connection with the claim of GBP0.1m
were incurred in the prior year.
2 The Group undertook a number of liability management exercises
in 2015 in connection with its principal UK defined benefit pension
scheme. This resulted in a settlement gain of GBP0.4m being
recognised in the prior year.
5. Earnings per share
Basic and diluted earnings per share
Basic earnings per share (EPS) is calculated by dividing the
profit attributable to shareholders by the weighted average number
of ordinary shares in issue during the 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.
The calculation of EPS is based on the following profits and
numbers of shares:
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------- -------------- -------------- -----------
Profit for the period 6.1 5.4 13.0
----------------------- -------------- -------------- -----------
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Number Number Number
----------------------------------- -------------- -------------- -----------
Weighted average number of shares
for basic earnings per share 60,962,939 60,126,284 60,590,559
Share options and warrants 1,719,646 1,902,048 1,639,137
Weighted average number of shares
for diluted earnings per share 62,682,585 62,028,332 62,229,696
----------------------------------- -------------- -------------- -----------
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
----------------------------- -------------- -------------- -----------
Basic earnings per share:
From profit for the period 10.0p 9.0p 21.4p
----------------------------- -------------- -------------- -----------
Diluted earnings per share:
From profit for the period 9.7p 8.7p 20.8p
----------------------------- -------------- -------------- -----------
Basic and diluted underlying earnings per share
Basic and diluted underlying earnings per share have also been
provided which reflect underlying earnings from continuing
operations divided by the weighted average number of shares set out
above.
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------ -------------- -------------- -----------
Underlying earnings for the period
(note 3) 8.1 7.3 17.3
------------------------------------ -------------- -------------- -----------
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
------------------------------------- -------------- -------------- -----------
Basic underlying earnings per share 13.2p 12.2p 28.5p
Diluted underlying earnings per
share 12.9p 11.8p 27.8p
------------------------------------- -------------- -------------- -----------
6. Taxation
Taxation comprises:
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------------------- -------------- -------------- -----------
Current
UK taxation 1.1 0.5 (0.8)
Overseas taxation 0.5 - -
Deferred
Origination and reversal of temporary
differences - 1.1 3.2
--------------------------------------- -------------- -------------- -----------
Taxation 1.6 1.6 2.4
--------------------------------------- -------------- -------------- -----------
Current tax expense is recognised based on management's estimate
of the weighted average annual income tax rate expected for the
full financial year.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes relate
to the same fiscal authority. Deferred tax is calculated in full on
temporary differences under the liability method.
The movement on the deferred tax account is as shown below:
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (restated)
GBPm GBPm GBPm
------------------------------------- -------------- -------------- ------------
Deferred tax asset at the beginning
of the period 10.0 13.8 13.8
Charged to the income statement - (1.1) (3.2)
Credited/(charged) to the statement
of comprehensive income 6.2 (0.4) 1.1
Acquisitions - (0.8) (1.3)
Exchange movement - (0.3) (0.4)
------------------------------------- -------------- -------------- ------------
Deferred tax asset at the end of
the period 16.2 11.2 10.0
------------------------------------- -------------- -------------- ------------
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (restated)
GBPm GBPm GBPm
---------------------------------------- -------------- -------------- ------------
Accelerated capital allowances 0.6 2.6 0.9
Tax losses 0.7 2.5 1.1
Other timing differences (1.7) (2.4) (2.0)
Deferred tax asset relating to pension
deficit 16.6 8.5 10.0
---------------------------------------- -------------- -------------- ------------
16.2 11.2 10.0
---------------------------------------- -------------- -------------- ------------
7. Finance income and costs
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Finance costs
Interest payable on bank borrowings 0.5 0.5 0.9
Amortisation of costs of raising
debt finance 0.1 0.1 0.2
Movement on fair value of derivative 0.5
financial instruments - -
Finance costs 0.6 1.1 1.1
-------------------------------------- -------------- -------------- -----------
Finance income
Movement on fair value of derivative
financial instruments (0.5) - (1.2)
-------------------------------------- -------------- -------------- -----------
Total finance income (0.5) - (1.2)
-------------------------------------- -------------- -------------- -----------
8. Borrowings
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
---------------------------------- -------------- -------------- -----------
Non-current
Bank borrowings (unsecured):
- bank loans 34.0 33.0 36.0
- less: costs of raising finance (0.3) (0.5) (0.4)
---------------------------------- -------------- -------------- -----------
Total non-current 33.7 32.5 35.6
---------------------------------- -------------- -------------- -----------
Current
Bank borrowings (unsecured):
- bank overdrafts 1.8 4.5 2.8
---------------------------------- -------------- -------------- -----------
Total borrowings 35.5 37.0 38.4
---------------------------------- -------------- -------------- -----------
The fair value of bank loans equals their carrying amount as
they bear interest at floating rates.
The repayment terms of borrowings are as follows:
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
Not later than one year 1.8 4.5 2.8
-------------------------------------- -------------- -------------- -----------
After more than one year:
- between one and two years - - -
- later than two years and not later
than five years 34.0 33.0 36.0
- costs of raising finance (0.3) (0.5) (0.4)
-------------------------------------- -------------- -------------- -----------
33.7 32.5 35.6
-------------------------------------- -------------- -------------- -----------
Total borrowings 35.5 37.0 38.4
-------------------------------------- -------------- -------------- -----------
In July 2014 the Group agreed an unsecured GBP70m revolving
credit facility with a GBP30m accordion facility with Lloyds Bank
plc, Barclays Bank plc and HSBC Bank plc. The banking facility is
in force for five years to July 2019.
Net debt
The Group's net debt is calculated as follows:
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
--------------------------- -------------- -------------- -----------
Cash and cash equivalents (8.0) (7.8) (5.9)
Total borrowings 35.5 37.0 38.4
--------------------------- -------------- -------------- -----------
Net debt 27.5 29.2 32.5
--------------------------- -------------- -------------- -----------
9. Called up share capital
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
----------------------------------- -------------- -------------- -----------
Issued and fully paid
61,259,666 ordinary shares of 10p
each 6.1 6.1 6.1
----------------------------------- -------------- -------------- -----------
10. Consolidated Cash Flow Statements
(a) Cash generated from continuing operations
6 months 6 months Year
to to ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
-------------------------------------------- -------------- -------------- -----------
Profit before taxation 7.7 7.0 15.4
Adjustments for:
- IAS 19R administrative expenses
included in the above 0.9 0.8 1.7
- acquisition related costs included
in the above 1.3 2.6 5.2
- exceptional operating items included
in the above - (2.3) (2.3)
- cash inflows/(outflows) from exceptional
items and acquisition related costs (1.0) 0.7 0.2
- depreciation 3.1 2.9 5.5
- pension fund deficit recovery
plan contributions (1.2) (1.1) (2.1)
- loss on disposal of property,
plant and equipment - - 0.1
- finance costs 0.6 1.1 1.1
- finance income (0.5) - (1.2)
- IAS 19R finance cost 1.0 0.7 1.4
- share-based payments 0.7 0.7 1.2
-------------------------------------------- -------------- -------------- -----------
Operating cash flows before movements
in working capital 12.6 13.1 26.2
Changes in working capital:
- increase in inventories (4.9) (4.4) (7.2)
- increase in trade and other receivables (1.2) (1.0) (4.9)
- increase in payables 7.3 5.2 4.4
-------------------------------------------- -------------- -------------- -----------
Cash generated from continuing operations 13.8 12.9 18.5
-------------------------------------------- -------------- -------------- -----------
Cash flows from exceptional items includes expenditure charged
to exceptional provisions relating to onerous lease costs,
acquisition related costs (excluding deferred remuneration) and
other business rationalisation and restructuring costs.
(b) Analysis of net debt
Cash
and
overdrafts Debt Total
GBPm GBPm GBPm
-------------------------- ------------ ------- -------
At 1 April 2015 4.2 (18.4) (14.2)
Cash flow (0.1) (17.0) (17.1)
Other non-cash movements - (0.2) (0.2)
Exchange movement (1.0) - (1.0)
--------------------------- ------------ ------- -------
At 31 March 2016 3.1 (35.6) (32.5)
--------------------------- ------------ ------- -------
At 1 April 2015 4.2 (18.4) (14.2)
Cash flow (0.1) (14.0) (14.1)
Other non-cash movements - (0.1) (0.1)
Exchange movement (0.8) - (0.8)
--------------------------- ------------ ------- -------
At 30 September 2015 3.3 (32.5) (29.2)
--------------------------- ------------ ------- -------
At 1 April 2016 3.1 (35.6) (32.5)
Cash flow 2.0 2.0 4.0
Other non-cash movements - (0.1) (0.1)
Exchange movement 1.1 - 1.1
--------------------------- ------------ ------- -------
At 30 September 2016 6.2 (33.7) (27.5)
--------------------------- ------------ ------- -------
11. Dividends
A final dividend in respect of the year ended 31 March 2016 of
GBP2.7m (4.4p per 10p ordinary share) was paid on 28 July 2016. On
17 November 2016 the Board declared an interim dividend in respect
of the year ended 31 March 2017 of GBP1.5m (2.4p per 10p ordinary
share). This dividend will be paid on 12 January 2017 and is not
reflected in this condensed consolidated interim financial
information.
12. Retirement benefit obligations
(a) Pension costs
Norcros Security Plan
The Norcros Security Plan (the "Plan"), the principal UK pension
scheme of Norcros plc subsidiaries, is funded by a separate trust
fund which operates under UK trust law and is a separate legal
entity from the Company. The Plan is governed by a Trustee board
which is required by law to act in the best interests of the Plan
members and is responsible for setting policies together with the
Company. It is predominantly a defined benefit scheme with a modest
element of defined contribution benefits.
The valuation used for IAS 19R disclosures has been produced by
KPMG, a firm of qualified actuaries, to take account of the
requirements of IAS 19R in order to assess the liabilities of the
scheme at 30 September 2016. Scheme assets are stated at their
market value at 30 September 2016.
(b) IAS 19R, 'Retirement benefit obligations'
The principal assumptions used to calculate the scheme
liabilities of the Norcros Security Plan under IAS 19R are:
At At At
30 September 30 September 31 March
2016 2015 2016
---------------------- -------------- -------------- ----------
Discount rate 2.25% 3.80% 3.55%
Inflation rate (RPI) 3.00% 3.00% 2.90%
Inflation (CPI) 2.00% 2.00% 1.90%
Salary increases 2.25% 2.25% 2.15%
---------------------- -------------- -------------- ----------
The amounts recognised in the Condensed Consolidated Balance
Sheet are determined as follows:
At At At
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBPm GBPm GBPm
------------------------------------- -------------- -------------- -----------
Total market value of scheme assets 403.7 367.8 365.9
Present value of scheme liabilities (501.5) (410.2) (421.6)
------------------------------------- -------------- -------------- -----------
Pension deficit (97.8) (42.4) (55.7)
------------------------------------- -------------- -------------- -----------
13. Business combinations
On 31 March 2016, the Group acquired 100% of the ordinary share
capital of Abode Home Products Limited (Abode), a leading niche
designer and distributor of high quality kitchen taps, bathroom
taps and kitchen sinks. Full details of the acquisition are
provided on the Group's website (www.norcros.com) and on page 104
of the Group's 2016 Annual Report.
The consideration payable in respect of the acquisition was as
follows:
GBPm
------------------------- -----
Consideration
Cash 3.7
Deferred consideration 1.1
------------------------- -----
4.8
------------------------ -----
In accordance with the sale and purchase agreement, an exercise
to review the completion balance sheet at the date of acquisition
was undertaken and following this a payment of GBP0.2m was made in
line with the Group's expectations. This payment has been disclosed
in the Condensed consolidated statement of cash flows within
investing activities. There have been no changes to the estimate of
the remaining deferred consideration payable in the period.
Due to the fact that the acquisition took place on the last day
of the previous accounting period it was not possible for the Group
to finalise the fair values of Abode's assets and liabilities.
Accordingly, the amounts stated in the 2016 Annual Report were
provisional and principally reflected the reported balances of
Abode, as adjusted where possible to comply with the accounting
policies of the Group.
The Group has now reviewed the identifiable net assets of Abode
and has identified the following measurement period
adjustments:
Provisional Measurement Revised
amounts period amounts
recognised adjustments recognised
GBPm GBPm GBPm
-------------------------------- ------------ ------------- ------------
Intangible assets - 2.6 2.6
Property, plant and equipment 0.4 - 0.4
Inventories 1.1 - 1.1
Trade and other receivables 2.5 - 2.5
Cash 0.6 - 0.6
Trade and other payables (2.5) - (2.5)
Current tax liabilities (0.2) - (0.2)
Deferred tax liability - (0.5) (0.5)
Total identifiable net assets 1.9 2.1 4.0
--------------------------------- ------------ ------------- ------------
Goodwill 2.9 (2.1) 0.8
Total 4.8 - 4.8
--------------------------------- ------------ ------------- ------------
The principal adjustment that has been made in the measurement
period is to recognise intangible assets of GBP2.6m. Deferred tax
at the prevailing rate of 20% as of the date of acquisition has
been applied where appropriate resulting in the recognition of a
deferred tax liability of GBP0.2m. Due to the complex nature of
these assets, it was not possible to reliably measure their value
in the time available before publishing the 2016 Annual Report, and
for this reason they have been recognised subsequent to the period
of acquisition.
The impact of the measurement period adjustments in respect of
prior periods is as follows:
At 31 At 31
March March
2016 as 2016 as
reported restated
Goodwill 32.5 30.4
Intangible assets 12.2 14.8
Deferred tax assets 10.5 10.0
Total non-current assets 93.4 93.4
Total assets less current
liabilities 145.2 145.2
----------------------------- ---------- ----------
There was no impact on the Condensed consolidated statement of
comprehensive income and expense. As the acquisition took place on
31 March 2016 no restatement of the comparative financial
information at 30 September 2015 is required.
14. Related party transactions
The remuneration of executive and non-executive Directors will
be disclosed in the Group's Annual Report for the year ending 31
March 2017.
15. Financial risk management and financial instruments
Financial risk factors
The Group's operations expose it to a variety of financial
risks: market risk (including currency risk, interest rate risk and
energy price risk); credit risk; and liquidity risk. An explanation
of these risks and how the Group manages them is set out on page 94
of the Group's 2016 Annual Report. The interim financial
information does not include all financial risk management
information and disclosures required in annual financial
statements; they should be read in conjunction with the Group's
2016 Annual Report. There have been no changes in the risk
management process or in any risk management policies since the
year end.
Derivative financial instruments carried at fair value through
profit and loss
At 30 September At 30 September At 31 March
2016 2015 2016
-------------------------- -------------------------- ------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited)
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
Forward foreign exchange
contracts:
- current 3.1 (0.4) 1.0 (0.3) 2.5 (0.1)
-------------------------- ------------ ------------ ------------ ------------ ---------- ------------
The above financial instruments are classified as level 2
instruments based on the hierarchy defined in IFRS 7. Consequently,
fair value measurements are derived from inputs other than quoted
prices included in level 1 that are observable for the assets or
liabilities, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
The fair value of the following financial assets and liabilities
approximate their carrying amount:
-- trade and other receivables;
-- cash and cash equivalents; and
-- trade and other payables.
Statement of Directors' responsibilities
The Directors confirm that this condensed consolidated interim
financial information has been prepared in accordance with
International Accounting Standard 34, 'Interim financial
reporting', as adopted by the European Union and that the Interim
Report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
interim financial information and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- material related party transactions in the first six months
and any changes in the related party transactions disclosed in the
last Annual Report.
The Directors of Norcros plc and their respective
responsibilities are as listed in the Norcros plc 2016 Annual
Report.
By order of the Board
N. P. Kelsall S. M. Smith
Group Chief Executive Group Finance Director
17 November 2016 17 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDBDBUDBBGLL
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